TFG 2013 Annual Report

ANNUAL REPORT

2013

People

Planet and Profit

www.tengerfinancialgroup.com

TenGer Financial Group - 2013 Annual Report 2


INTRODUCTION

4 Guiding Principles

5 About TenGer Financial Group

6 Shareholders

7 Corporate Snapshot

8 Financial Highlights

9 Chairman’s Statement

10 CEO’s Statement

11 Our Strategy

12 Our Approach

13 Management Discussion and Analysis

14 Key Performance Indicators

16 Funding

17 TFG Organization Structure

18 Institutional Development

18 Social and Environmental

Responsibility & Compliance

18 Human Capital

SOCIAL & ENVIRONMENTAL

RESPONSIBILITY

19 Eco Banking

SUBSIDIARIES

20 XacBank

21 XacLeasing

22 TenGer Insurance

23 TenGer Capital

24 TianRong MCC

25 XacSecurity

GOVERNANCE

26 Board of Directors

28 Corporate Governance Report

31 Executive Management Team

32 Recent History of TFG

33 Company Overview & Contacts

FINANCIAL INFORMATION

34 Auditor’s Statement

37 Statement of Comprehensive Income

38 Statement of Financial Position

39 Statement of Cash Flows

41 Statement of Changes in Equity

Table of Contents

4 TenGer Financial Group - 2013 Annual Report

OUR GUIDING

PRINCIPLES

People

Planet

Profit

OUR VISION

TenGer Financial Group is a family

of companies built to provide equi-

table access to inclusive financial

services. The Group will strive to

be a dynamic leader setting the

highest standards of Triple Bottom

Line mission in corporate govern-

ance, social and environmental

responsibility while returning fair

value to the Shareholders.

OUR MISSION

TenGer Financial Group’s mission

is to create synergies among our

affiliates in order to maximize

social and financial gains to our

Stakeholders. Business will be

driven by innovation and dyna-

mism in delivering premium quality

services and added value to our

Customers.


We are a diversified regional family of companies headquartered in

Ulaanbaatar, Mongolia. Our portfolio includes XacBank, XacLeasing,

TenGer Insurance, TenGer Capital, TianRong, and XacSecurity all

providing fair access to broad financial services to our customers.

We strive to meet all our customers’ financial needs and help them

succeed financially through banking, insurance, leasing, investing,

mortgage, and commercial and consumer finance.

TenGer Financial Group aims to build a transnational group of

companies to deliver a full range of financial services to people and

businesses. The Group will adhere to the highest norms of ethical

business conduct and environmental sustainability as one of its

mission pillars.

XacBank, the flagship subsidiary of TenGer Financial Group, has

maintained its leading positions in Mongolia as a transparent and

socially responsible banking institution.

TenGer Financial Group

Commercial Banking

Leasing Services

Physical Security

Investment Banking

Microcredit(China)

General Insurance

X.A.C NGO


Shareholders

Shareholder Composition

Shareholders Shares Stake

1 Mongolyn Alt Corporation (MAK) 3,316,985 20.000%

2 International Finance Corporation (IFC) 3,179,487 19.171%

3 ORIX Corporation 2,577,420 15.541%

4 European Bank for Reconstruction and

Development (EBRD) 1,929,475 11.634%

5 Ronoc Partners 1,683,342 10.150%

6 EIT Capital Management (ECM) 1,668,937 10.063%

7 Mercy Corps 1,254,180 7.562%

8 Triodos Fair Share Fund 618,680 3.730%

9 Open Society Forum 264,141 1.593%

10 UB Rotary Club 50,000 0.301%

11 Bold Magvan 16,968 0.102%

12 Ganbold Chuluun 15,372 0.093%

13 EIT LLC 9,657 0.058%

TOTAL 16,584,644 100.00%


As of December 31st, 2013


Corporate Snapshot

Name TenGer Financial Group LLC

Principles People, Planet and Profit

Purpose provide equitable access to inclusive financial services

Established October 2001

Location of Head Office Central Tower, Room 508, Great Chinggis Khan’s Square 2, SBD-8 Ulaanbaatar-14200, Mongolia

Board of Directors

Chairman: Chuluun Ganbold

Local: 4 out of 8

International: 4 out of 8

Female Board Members 3 out of 8 (38%)

Senior Management CEO: Bold Magvan

Managing Director: Amartuvshin Hanibal

Description of Business

diversified financial services holding company, banking, insurance, leasing, investment advisory, mortgage, and commercial and consumer finance

Number of Subsidiaries 6

Type of Company Limited liability company (private)

Currency Units Mongolian Togrog (₮ or MNT)

Total Assets MNT 1,876 billion or USD 1,130 million (as of December 31, 2013)

Number of Employees 1,894 (consolidated as of December 31, 2013)

2,087 (including those on maternity leave)

Average Age of Employees 31 years old

Employee Gender Balance 56% female and 44% male

Investor Relations

Contact Ashidmaa Dashnyam, VP, Investor Relations and Corporate Affairs

Email [email protected]

mailto:[email protected]


3,594 4,270

6,104 7,057

8,865

0

2,000

4,000

6,000

8,000

10,000

2009 2010 2011 2012 2013

Book Value per share

MNT 8,865

MNT

8.6

18.4

21.3

15.6

19.3

0

5

10

15

20

25

2009 2010 2011 2012 2013

%

19.3%

ROaE (ordinary shares)

5.9

10.8

13.1

11.412.5

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2009 2010 2011 2012 2013

Profit Margin

12.5%%

321 475

834

1,124

1,876

0

400

800

1,200

1,600

2,000

2009 2010 2011 2012 2013

Assets

MNT 1,876 BMNT B

10.3

8.3

10.910.4

7.8

2.0

4.0

6.0

8.0

10.0

12.0

2009 2010 2011 2012 2013

Capital Strength

7.8%%

2.4

6.7

12.915.9

25.0

0

5

10

15

20

25

30

2009 2010 2011 2012 2013

Profit after Tax

MNT B

MNT 25.0 B

Group Consolidated Financial Highlights (as of December 31)

USD 15.1 MM

EUR 10.9 MM

Core tier 1 ratio USD 1,130 MM

EUR 820 MM

USD 5.34

EUR 3.87

Operational

highlights

XacBank’s retail and SME business

process was revised (piloted in 4 UB

and 7 rural branches)

121 ATMs and 1,296 merchants are

online

XacBank’s call center is replaced

with interactive intelligence call

system

Tsevegjav Gumenjav was appointed

as the new CEO of XacLeasing

TenGer Insurance became 100%

subsidiary of TFG

TenGer Capital achieved operational

break-even point in 21 months since

its establishment

TianRong achieved operational

break-even point in 12 months since

its establishment

ORIX Corporation became a new

shareholder, Ronoc and MAK

became direct shareholders

EBRD provided a loan in MNT (USD

3 million) to fund financial leases

Signed USD 40 million debt financ-

ing with ADB

IFC & XacBank signed a currency

swap worth USD 50 million

Transferred MNT 3.2 billion worth of

pension fund from EIT to XacBank

Dec.31.2013 MNT/USD exchange rate: 1,659.34

Dec.31.2013 MNT/EUR exchange rate: 2,288.81

Highlights of 2013


Capital covered the losses of the previous years and started to earn

net income.

I am pleased to report that TianRong, our micro credit institution in

China, celebrated its first anniversary as a profitable entity. TianRong

exceeded our expectation in achieving the results ahead of the plan.

We hope that our Chinese venture will replicate the success of

XacBank, utilizing our substantial knowledge base in microfinance and

capitalizing on the economic growth in Xinjiang.

At the Group level, we continued to build our institutional capacity to

provide consolidated management and support for subsidiaries in

such areas as business development, risk management, financial

planning, legal compliance, corporate governance and human

resource management.

Last year, the ownership transformation process at TFG was success-

fully completed. Several of the shareholders of the Group exited by

selling their shares to the new investors and, at the same time,

indirect shareholders restructured their holdings in the Group. We,

thus, welcomed ORIX Corporation of Japan, Mongolyn Alt (MAK)

Corporation and Ronoc as our direct shareholders in the Group.

Additionally, TFG’s existing shareholder IFC signed an investment

agreement with TFG and two advisory agreements with its flagship

subsidiary – XacBank. The investment agreement increased IFC’s

equity stake in the Group, while the advisory agreements would

strengthen XacBank’s capacity.

As part of our compliance with the highest standards of personal and

professional ethics, all board directors refreshed their corporate

governance knowledge by enrolling in the director training programs

offered by the Mongolian Corporate Governance Development Center

and received certificates of training in 2013. Recognizing that trans-

parency and disclosure is not only part of good corporate governance

but is also a legal and regulatory requirement, the Board of the Group

focused also on improving disclosure and reporting by shareholders

on their ultimate beneficial holdings and interests.

Notwithstanding any changes in our shareholding structure, our main

focus is to maintain and enhance our good corporate governance cul-

ture. A diverse and balanced shareholding structure has always been

the driving force of the Group’s success. Building on its self-evaluation

of the previous year, the board of the Group is continuing to work

towards improving its structure, in order to ensure the most optimal

mix of skills and experience of directors. Following the ownership

transformation process at TFG, our board has changes in its composi-

tion. We saw several our long-standing board directors resign and

new directors come on the board.

I would like to wish to all of us – shareholders, stakeholders, board

and management – every success in our aspirations and endeavors

for this year. As always, I would like to remind that we have new mile-

stones to meet and more challenging tests to pass. I am confident

that, with our new strategic partnership, renewed board and stronger

management teams and capable professional staff at all of our Group

companies, we will continue to succeed and emerge as a powerful

financial group.

Sincerely yours,

Chuluun Ganbold

Chairman of the Boards of Directors

of TenGer Financial Group and XacBank

Dear Shareholders,

Board Directors and

Stakeholders,

I am pleased to address you once

again and report that in 2013 TenGer

Financial Group (“TFG” or the

“Group”) reached several important

milestones on its journey to leader-

ship and excellence in inclusive

financial services. The most

significant event was the ownership

transformation process at the Group

that lasted for two years and resulted in the entry of new strategic inves-

tors. With this change, the Group is positioned better than ever to grow

our existing businesses, become more competitive and expand into new

areas of business by capitalizing on knowledge, capital and network of

our new partners.

On behalf of the Board of Directors, I would like to congratulate the

team of TenGer Financial Group led by Chief Executive Officer Bold

Magvan and supported by the management teams of the Group’s sub-

sidiaries with a successful closing of 2013 and express my wholeheart-

ed gratitude for their dedication and efforts. I congratulate my fellow

board directors for their wise guidance of the Group. I extend my and

the entire board’s sincere appreciations to all our shareholders who

worked with the management and the board to complete the ownership

transformation.

Building on its consistent track record of growth, the Group continued to

deliver a strong performance, both operationally and financially, despite

strong headwinds and uncertain operating environment in 2013. The

Group’s consolidated assets grew to USD 1.1 billion (MNT 1.88 trillion),

an increase of 67 percent from the previous year, and net profit

amounted to MNT 25 billion, an increase of 57 percent compared to a

year earlier. Our book value has reached MNT 8,865.26 per share, a

robust 26 percent growth year-on-year.

Such growth would not have been possible without the contributions of

all our Group companies but first and foremost of XacBank. Our Bank

continued its transformation from a niche player to a universal bank of

systemic significance in Mongolia. A relentless focus on customers and

their needs enabled XacBank to earn the recognition of the Best Bank in

Mongolia by The Banker magazine. Aiming always to be in the forefront

of changes, XacBank has embarked on an ambitious plan to redesign

its operations and brand. The successful implementation of the retail

banking transformation will allow us to re-brand and differentiate

XacBank from the competition and make it a preferred bank for target

customer segments.

XacLeasing has refocused its attention to vendors and has become a

preferred partner for its customers. With a new CEO in place, XacLeas-

ing redesigned its sales and marketing processes with the focus on

building market share and strengthening relationships. Improved risk

management has also contributed to the performance of the company.

The profit amounted to MNT 1.7 billion an increase of 37 percent from

2012.

In 2013, we fully consolidated the ownership of TenGer Insurance by

completing the full acquisition of the remaining stake. TenGer Insurance

closed the year under review with a profit of MNT 831 an increase of

307 percent compared to the previous year. As a wholly-owned subsidi-

ary of the Group, TenGer Insurance will now play a much greater role in

differentiating the Group from competition by providing integrated risk

solutions to customers.

Our relatively new subsidiary of the Group, TenGer Capital, quickly

ramped up its advisory business last year. The company acted as an

exclusive advisor to the landmark acquisition in the healthcare sector.

TenGer Capital’s team hard work is making the company a valuable

contributor to the overall mission and objectives of the Group. TenGer

Chairman’s Statement


Dear Board,

Shareholders, and

Stakeholders of TenGer

Financial Group,

TenGer closed 2013 with MNT

1.88 trillion ($ 1.1 billion) in

consolidated assets, an increase

of 67% from the last year, which

was the second highest growth

rate over the last five years,

driven by expansion of XacBank,

the Bank of the Year for Mongolia by the Banker Magazine and

the Best Retail Bank by Global Finance and Banking Review. Net

loan and lease portfolio reached MNT 1,070 billion, an increase of

64% from the last year.

The consolidated overhead ratio was reduced to 60.4% in 2013.

Net profit totaled MNT 25 billion, an increase of 57% compared to

the last year, to reach RoE of 19.3% exceeding the previous

year’s 15.6%. The increase in profitability also stemmed from the

stronger performances of XacLeasing and TianRong and full ac-

quisition of TenGer Insurance, contributing 6.6%, 2.1% and 3.2%

of the Group’s profit, respectively. TenGer Capital record-

ed a profit, RoE 47%, and recouped its initial invest-

ment within 21 months since its establishment. As a

result, book value of TenGer per share rose by

25.6% from MNT 7,057.18 to MNT 8,865.26.

TenGer continued to focus on developing its IT

infrastructure, cross-selling and synergies, funding,

and human capital, for successful implementation of

the Group strategy for 2012-2016, while strengthening

institutional capacity of the Group. The Group level IT Steering

Committee assisted to select an international vendor to supply a

new accounting and reporting software to advance the accounting

and business intelligence of the Group. Operations of TenGer

Solutions were discontinued and its resources were integrated in-

to XacBank to avoid duplication of functions and increase efficien-

cy of limited resources.

The Group wide emphasis on cross sale resulted in 77% growth

in insurance revenue and 50% growth in number of the policies

sold by TenGer Insurance through XacBank, XacLeasing and

TenGer Capital. Referrals by TenGer Capital to XacBank resulted

in MNT 3.6 billion in interest revenues and fees. For now, a basic

CRM is functional and used by retail and corporate lines of the

Bank. ADB approved a 5 year, USD 40 million debt financing –

first ever ADB private sector loan endorsing to our Group. TenGer

adopted its Accounting policy, in accordance with the IAS for its

daily implementation and compliance.

To strengthen management capability, senior management

teams of the Group companies were fully staffed by attracting

pool of high caliber repats and expats. TenGer hired TAISHIR

Tumurbaatar (Mr), General Counsel, and ULAMBAYAR

Enebish (Ms), Chief Auditor for the Holding Company,

GANBAATAR Jambal (Mr), President, AART Jongejans (Mr),

Chief risk Officer, and Erdenebayar Ganzorig (Mr), CFO for Xac-

Bank. XacLeasing CEO PHILIPP Marxen was succeeded by

TSEVEGJAV Gumenjav (Mr), former CFO of XacBank and TFG.

I would like to thank Marxen and Ariuntulga Tserendavaa, ex

CEO of TGS for their sincere contribution and wish all the best

in their future endeavors.

Talent review exercises, coaching and leadership trainings, and

workshops for high potential staff were conducted for all Group

companies, and the certificates of CG training received by mem-

bers of the boards of directors and the executive management

team of the Group to continue TFG's good governance practice

and to comply with the Company Law of Mongolia. TenGer HR

policy framework was amended on conflict of political activities.

Middle and senior managers all disclosed nonpartisan status,

with few indicating as passive members of political parties and

affirmed to separate from local political representation. The

Compliance reporting system is functional within the frame-

work of the TFG Code of Corporate Governance, Code

of Ethics, Conflict of Interest policy, and complies with

requirements of the regulator. The Group actively

participated in inter-bank Working group of the Sus-

tainable Finance 2013 to promote the principles of

sustainable banking in Mongolia.

In 2013 TenGer Group companies were fully engaged

in an institutional transformation from loan product

based business processes and organization to a cus-

tomer focused & full banking service oriented business model.

This included redesigning and updating key business processes

and policies, branch restructuring, new rebranding, and upgrad-

ing existing IT platforms and technologies. All allowed for signifi-

cant progress in building a strong foundation for the future

growth of the Group.

I would like to sincerely thank our Shareholders, Board directors,

and colleagues for their team work and commitment to fulfill the

mission of TenGer.

With warmest regards,

Bold Magvan

Chief Executive Officer


Growth in

profit after tax of parent

57.2 %

CEO’s Statement


Long-term Trends in Mongolia

Economic Development

There is an increasing demand for financing of corporations,

individuals, retail and SMEs as the economy continues to develop and

national income rises. Given the geographical and segment reach our

subsidiaries, TenGer Financial Group is poised to benefit from and

contribute to the national growth.

Fueled by investments into mining and related sectors, Mongolia is

projected to be one of the fastest-growing economies in the world over

the next decade. Oyu Tolgoi is the 2nd largest copper reserve in the

world as well as rich deposits of coal, gold, iron ore, uranium, among

others. It is located next to China and in the heart of Asia, the fastest

growing region in the world and also heavy users of commodities.

Demand for Finance

is the leading financial services holding company

in Mongolia. TFG will strive to maximize synergies among


subsidiaries and ensure the highest standards of corporate governance in conducting

our operations through subsidiaries. TenGer believes that the mix of strong and reputable, domestic and

international shareholders coupled with solid corporate governance will enable the Group to grow in sustainable way.

Accounting for long-term trends and our competitive advantage, TenGer’s strategy involves:

Financial Service Package for Corporate Clients

With our unique origin of being a micro-finance institution, we will

continue building on our extensive experience to expand our SME

and retail clients.

TFG holds a unique position in Mongolia in its ability to provide a

broad spectrum of financial service solutions to current and

potential customers through its subsidiaries.

Expansion of the SME and Retail Client Base

Source: Bank of Mongolia (as of December 31st, 2013) Source: IMF, World Economic Outlook (October, 2013)

The Mongolian word “TenGer” represents the Sky

4,8925,493

6,1406,857

7,257 7,5168,234

8,747

2011 2012 2013 2014 2015 2016 2017 2018

Real GDP growth(MNT Billions)

-

2,000

4,000

6,000

8,000

10,000

12,000

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Banking Sector Loans Outstanding(MNT Billions)

Our Strategy


People, Planet & Profit

TenGer seeks to combine social and environ-mental performance with strong financial performance in its core business operations. TenGer has been a pioneer in the financial arena to grow into one of the most successful micro finance institutions in the world. XacBank, our flagship subsidiary, has developed into a univer-sal bank with systemic influence in Mongolia. Since 1998, TenGer has grown from a small local project to a major financial group, that provides financial services to the people of Mongolia and across the border.

Transparent Governance

TenGer Financial Group is committed to main-taining high standards of corporate governance to safeguard the interests of its shareholders and stakeholders and to enhance corporate val-ue and accountability.

In addition to the OECD Principles of Corporate Governance of 2003, TenGer’s corporate gov-ernance practices are based on the principles and certain recommended best practices as set out in the Corporate Governance Code, which was adopted by the Mongolian Financial Reg-ulatory Commission in 2007. To further strength-en its commitment and the principles of corpo-rate governance applicable within the Group companies, TenGer adopted the Group’s Code of Corporate Governance in May of 2011.

Our values, governance, and commitment to the triple bottom line guide us in delivering value to our stakeholders and shareholders

Foundational elements of our business management

Our Values

Respect: we value everyone’s opinion, work and concern

Excellence: we repeatedly do our best in everything we take on

Innovation: we consistently search for ways of doing things better

Sharing: we receive with others, including our society and the world

Teamwork: we stay in sync and stand for our wins and losses as one

Accountability: we take responsibility for all our actions and their outcomes

Integrity: we see honesty as the basis of our progress, we walk what we talk

Fortitude: we face any challenge with courage and see adversity as an opportunity

Our Approach


20.1 27.7

47.9

63.3

86.6

0

20

40

60

80

100

2009 2010 2011 2012 2013

Net Interest Income

MNT 86.6 billionMNT billions

195 326

549 651

1,070

0

200

400

600

800

1000

1200

2009 2010 2011 2012 2013

Loan Portfolio

MNT 1,070 billionMNT billions

Balance Sheet

As of December 31st, 2013, TenGer Financial Group’s consoli-

dated total assets stood at ₮1.88 trillion (USD 1.13 billion), an

increase of 67% from the previous year. Total assets’ growth was

largely financed with borrowed funds, followed by depositors’

growth and other banks.

The Group’s loan and lease portfolio grew 64% primarily in SME,

mortgage and micro segments respectively. Reflecting Xac-

Bank’s strategic shift toward a universal bank, the average loan

size increased 41%. The Group’s interest earning assets ratio

increased substantially over the year from 73% to 82%.

Borrowed funds increased 127% and were the primary source of

funding for loan growth. Various loan facilities, as mentioned in

the funding section, and Government deposits aimed at boosting

residential building construction and low interest rate mortgages

supported loan portfolio expansion.

Deposits had a steady growth of 25% despite uncertainties in the

banking sector, where Savings Bank went into state receivership.

XacBank’s increased its markets share in public deposits by 30

bsp to 7.3%. While there were growth in all accounts, time de-

posits contributed 70% of total public deposit growth to effectively

supplying a steadier funding base.

Income Statement

The Group ended the 2013 year with a net profit of ₮25.0 billion,

an increase of 57% from last year.

Reflective of XacBank’s strategic focus on becoming a universal

bank, portfolio yield compressed while the average loan size

increased as SME composed 52% (↑640 bsp YoY) of the loan

portfolio. Lower yield is compensated with higher net fees and

commission income, a significant increase of nearly 75% from

₮2.8 billion to ₮4.9 billion in 2013. Fee and commission income is

related to expanding trade finance and increased card related fee

from the expanding ATM network. Net earned insurance premi-

ums are now accounted for with the full acquisition of TenGer

Insurance this past year. The Group’s operating income sources

have slowly been diversifying from purely interest income, as net

interest income composed 86% of operating income versus 92%

in 2012.

In conjunction with a slowing Mongolian economy and a growing

loan portfolio, credit loss expenses rose noticeably during the past

year. In relative terms, XacBank’s NPL ratio increased only 10

bsp to 1.4%.

Reflecting managements’ focus on cost prudence in running their

operations, particularly on administrative expenses, the Group’s

overhead ratio (cost-to-income) reduced 657 bsp to 60.4%. While

improvements were made at almost all the subsidiaries, XacBank

achieved the largest nominal and percentage decrease.

With a full year of operation, TianRong and TenGer

Capital were both able to record a profit this year and

recoup its initial expenditures. TenGer Insurance’s

ROaE returned to its historical norm at 30% as the

winter season claims were much lower than the prior

year, when it first start insurance nationwide manda-

tory driver’s insurance. The achievements are reflect-

ed in the Group’s 370 bps increase in ROaE to 19.3%.

Growth in total assets

66.9 %

USD 52.2 MM

EUR 37.9 MM

USD 645 MM

EUR 467 MM

Management Discussion & Analysis


0.26

0.73 0.87

0.96

1.51

0.10

0.30

0.50

0.70

0.90

1.10

1.30

1.50

1.70

2009 2010 2011 2012 2013

MNT

Earnings per ordinary share

10.3

8.3

10.910.4

7.8

2

4

6

8

10

12

2009 2010 2011 2012 2013

Tier 1 Capital Ratio

%

0.91

1.68

1.98

1.61 1.70

0.0

0.5

1.0

1.5

2.0

2.5

2009 2010 2011 2012 2013

ROaA

%

8.6

18.4

21.3

15.6

19.3

0

3

6

9

12

15

18

21

24

2009 2010 2011 2012 2013

ROaE (ordinary shares)

%Measuring our

performance

The Group’s

management team

evaluates the finan-

cial operation of its

subsidiaries in line

with our business

plan, strategy and

historical perfor-

mance, using both

quantitative and

qualitative measures.

The following pages

are the key consoli-

dated high-level

financial indicators.

Capital deployment

Measure: (percentage) net profit after tax-

es attributable to shareholders divided by

average total shareholders’ equity.

Target: to maintain a return above 20%.

Outcome: return on average ordinary

shareholders’ equity was in line with the

target as prior year’s new subsidiaries

improved their financial results.

Measure: (percentage) net profit after

taxes divided by average total assets.

Target: to maintain a return above 1.5%.

Outcome: return on average assets was

above the target despite total assets

increasing 68%.

Sustainable shareholder return

Measure: (percentage) core tier 1 capital

comprising shareholders’ equity excluding

minority interest divided by total assets.

Target: to maintain a strong capital base

to support the development of the

business and meet regulatory capital

requirements at all times

Outcome: the Group’s leverage expand-

ed over the past year reflecting greater

funding from the Central Bank and foreign

financial institutions.

Measure: (Togrog) level of earnings

generated per ordinary share.

Target: to deliver consistent growth in

earnings per share

Outcome: earnings per share increased,

for the fourth straight year, that ultimately

enhanced shareholders’ value.

Key Performance Indicators


157

140

152

127

167

100

110

120

130

140

150

160

170

180

2009 2010 2011 2012 2013

Loans to Deposit Ratio

%

63

89

54

42

25

0

20

40

60

80

100

2009 2010 2011 2012 2013

Deposit Growth

%

77

71

63

67

60

50

55

60

65

70

75

80

2009 2010 2011 2012 2013

Overhead Ratio

%

8

6065

35

47

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013

Operating Income Growth

%

31

67 69

19

64

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013

Loan Growth

%

6169 66

58 57

0

10

20

30

40

50

60

70

80

2009 2010 2011 2012 2013

Loan to Asset Ratio

%

Key Performance Indicators continued

Positioning ourselves for success

Measure: (percentage) increase in

deposits by customers since last year.

Target: growth between 20% and 60%, a

range which is expected to fund future

business growth.

Outcome: while all deposit accounts

grew, time deposits contributed 70% of

total public deposit growth to effectively

supplying a steadier funding base.

Measure: (percentage) increase in net

operating income before impairment and

other credit risk charges since last year.

Target: to deliver consistent growth in

operating income from diverse sources.

Outcome: operating income increased

due to interest income, net fees &

commission, net FX gain and income from

insurance.

Measure: (percentage) total loan and

lease portfolio divided by total assets

Target: to have sufficient liquid assets to

buffer against uncertainties while attaining

target income.

Outcome: aside from higher regulatory

requirements, the Group has positioned a

greater amount of its assets in liquid

securities.

Measure: (percentage) operating

expense divided by operating income

prior to provision expense.

Target: to be below 50% by 2016.

Outcome: improving operational scale

and cost consciousness has improved the

ratio toward the long term target.

Measure: (percentage) increase in

total loan and lease portfolio since last

year.

Target: growth between 20% and 45%, a

range which is expected to support future

business income.

Outcome: our loan portfolio grew pre-

dominantly in SME followed by mortgage

and micro loans.

Measure: (percentage) total loan and

lease portfolio divided by deposits.

Target: to achieve a diversified funding

base from long term steady sources.

Outcome: Throughout most of the year,

borrowed funds, from Central Bank and

foreign financial intuitions, were the pri-

mary source of funding that contributed to

an increase in the ratio.

Generating growth


golian Togrog – equivalent to US$ 3 million to fund financial leas-es to small and medium-sized enterprises (SMEs) with a particu-lar focus on machinery, equipment and vehicles. The efforts of nearly two years have finally yielded in US$ 40 mil-

lion debt financing from the Asian Development Bank (ADB).

XacBank and XacLeasing clients will reap the benefits from this

ADB private sector first loan to be granted to our Group in 2014.

Incofin Investment Management fund from Belgium continued to

show their trust in our business growth through accepting the roll-

forward of US$ 3 million loan for another 3 years, thus supporting

the growth of SME clients of XacLeasing via Group lending.

A major milestone was achieved, when ХасBанк and Internation-al Financial Corporation, a member of World Bank (IFC) signed a first of its kind in the Mongolian financial market, a currency swap agreement of US$50 million in the last quarter of 2013. The swap agreement enables XacBank clients to choose from financing so-lutions in the local currency on a much broader and longer term perspective.

Capitalization

Financial services industry is capital intensive, especially in the

emerging economies, such as Mongolia with GDP growth in dou-

ble digits. The Group’s plan to raise new capital was supported

by the Board of Directors, with expected capital increase at Xac-

Bank and TenGer Insurance subsidiaries in 2014.

TenGer medium term strategy to complete the acquisition of the controlling stake in TenGer Insurance had materialized in full ownership of the insurance company by the Group, via success-ful share purchase in the second half of 2013. The regulators has been also welcoming to the new capital injection of MNT750 mil-lion into the company, aimed towards compliance with the man-datory capital level. The shareholders and Board on the other hand are keen to enhance the growth of the insurance subsidiary through wholeheartedly leveraging on the Group infrastructure and sales platform.

Financing and finding financial solutions

Our major subsidiary XacBank continued leading its way in the local financial sector by successfully launching US$9.8 million bond at Luxembourg institutional capital market through Swiss based Symbiotics fund, specialized in emerging, sustainable and inclusive finance. The issuance of this bond creates the first op-portunity for XacBank to enter the global market. Also it enhances reputation of XacBank and strengthens its market position. The bond proceeds together with additional US$3 million equivalent funding from Symbiotics are used towards strengthening the fu-ture growth of the bank micro, small and medium business clients. In summer, XacBank and Proparco, a subsidiary of the Agence Française de Développement (“AFD”), the investment and devel-opment finance institution of France have executed a credit facility agreement worth US$15 million. At the signing ceremony attend-ed by the Regional director of Proparco in North and South-east Asia along with the Ambassador of France to Mongolia and Pierre-Alain Pacaud noted on the importance of contributing to the fi-nancial integration of the disadvantaged members of the Mongoli-an population, through such financing facility, totally new to a first class actor like XacBank. In December 2013, XacBank and Oesterreichische Entwicklungsbank (OeEB, the Development Bank of Austria), a member of European Development Financial Institutions that specializes in the provision of long-term finance for the implementation of private sector projects in developing countries, signed a USD 15 million long term loan agreement. It is the first direct investment in Mongolia from OeEB. This loan increases the amount of sustainable funds which provide long-term growth to XacBank through directing them into micro, small and medium-sized enterprises (MSMEs). In September 2013, the European Bank for Reconstruction and Development (EBRD) and the Bank of Mongolia have taken a key step towards the development of the country’s local currency money and capital markets and have signed a Memorandum of Understanding under the EBRD’s Early Transition Countries (ETCs) Local Currency Lending Programme. XacLeasing became the very first financial institution in Mongolia to sign a loan agree-ment under this Programme. EBRD has provided a loan in Mon-

Xacbank and IFC Signed an International Swaps and

Derivatives Association (ISDA) Master Agreement

The Group continues to diversify its funding sources from international financial institutions.

XacBank and World Vision signed a cooperation

agreement to support the youth through sports

Funding

http://www.ebrd.com/pages/about/where/etc.shtml


Management Committees

The Group has several committees to facilitate the dissipation of

knowledge and integration of the Group’s mission with its

subsidiaries. It serves as a communication bridge for senior

management, of each company, to build a greater overall

synergy.

The Executive Committee (ECM) functions as the shareholders

of wholly-owned subsidiaries of TFG. ECM structure is adopted

within each subsidiaries.

Our Organization

At the holding company level, TenGer will implement the business

plan by setting the overall guidance of the Group, aligning our

affiliate companies to maximize synergies and ensuring best

practice in corporate governance. Our immediate focus will be on

assisting in institutional development, driving the implementation

of each division’s business plan, providing management support,

and exploring new investment opportunities that complement

TenGer’s existing investments and overall strategy. The Group

believes a blend of reputable local and international shareholders

along with solid corporate governance will enable us to reach our

goals.

TFG (Holding Company) LLC structure: Management Committee structure:

MD: Managing Director

VP: Vice President

HR: Human Resource

100% 100% 100%100% 51%80%

Commercial Banking

Leasing Services

Physical Security

Investment Banking

Microfinance (China)

General Insurance

The Group’s structure:

Group Risk Management

Committee

CRO, TenGer

Insurance

Risk Manager,

XacLeasing

Head of IRMD,

XacBank

MD, TFG (chair)

Executive Committee

Members (ECM)

VP, TFG

CEO, XacBank

CEO, XacLeasing

CEO, TenGer

Insurance

CEO, TianRong

CEO, XacSecurity

MD, TFG

CEO, TFG (chair)

Group Human

Resource Management

Committee

COO,

XacLeasing

COO,

TenGer Insurance

Deputy CEO,

XacSecurity

VP,

TenGer Capital

Head of HRD,

XacBank

HR,

TFG (chair)

Shareholders

Board of Directors

CEO

Executive

Committee VP / Investor Relations

& Corporate AffairsChief Auditor

Executive assistant

Office managerManaging Director

HR Officer

Risk Management

Officer

VP / Legal &

Compliance

Investment Analyst

Compliance Officer

Subsidiary Legal

Units

Group HR

Management

Committee

Investment Officer

VP / Human

Resources

VP / Finance

Director

Financial Analyst

Internal Auditor

Accountant

TFG Organization Structure

People

Planet

Profit


Overview

Having committed ourselves to corporate responsibility we adopt-

ed universal principles and standards for sustainability in our daily

management and operations, including the principles of the Unit-

ed Nations Global Compact, Global Reporting Initiative, Equator

Principles, IFC Performance Standards and Universal Principles

for Social Performance Management.

To achieve the triple bottom line goals, design and delivery of ser-

vices are transparent in its disclosure of the terms and conditions

in addition to satisfying clients’ needs.

In our lending policy, we monitor clients’ implementation of and

compliance with environmental and social laws and manage risk

on the Group’s side as well as for the wellbeing of customers. We

implement the Smart Campaign’s standards for client protection,

including the social mission where poverty reduction is viewed as

one of the social goals. In addition to financial performance, the

Group regularly discloses to the public and stakeholders its social

and environmental performance.

CSR initiatives and progress are anchored in our determination to

act ethically and responsibly in every aspect of our business – for

the planet, clients, our shareholders, our employees, and many

other stakeholders.

Both the Board members and new employees take an orientation

on TFG’s environmental and social vision and mission, as well as

the values and culture of the Group. They are required to comply

with the Code of Ethics and Conflict of Interest policy and regula-

tions on Anti-corruption and Non-partisan conduct of all employ-

ees. The Group’s Human Resources policy provides for safety at

work, nondiscrimination and prohibition of forced or child’s labor.

The Group’s codes, charters, policies and procedures integrate

external standards that apply to our activities. They are often de-

signed to exceed compliance with regulatory requirements by set-

ting even higher standards for the Group companies.

As one of the leading institutions in Mongolia, financially and in

social performance, we continue to strive for universal standards

and principles. To identify our weaknesses and prioritize areas of

improvement, we undergo an internal compliance audit to in-

crease social performance transparency (Planet Rating).

In order to improve our sustainability performance and leadership,

we are building sustainability- related systems and measurements

tools, and train the TFG managers to integrate sustainability is-

sues into strategy, operations and employee performance assess-

ments.

Together with other Mongolian banks, called to action to support

sustained economic development and signed a Joint Statement,

explicitly committing to integrate environmental and social respon-

sibilities into decisions and align our core business strategies with

social investments.

Social and Environmental

Responsibility & Compliance Human Capital

Overview

As of December 31, 2013 the Group had a total workforce of

1,894 full time employees, 74 part time and 194 on maternity

leave. XacBank employs 1,533 employees, XacSecurity 181,

TenGer Insurance 96, TianRong 39, XacLeasing 24, TenGer

Capital 5 and 16 at the holding company.

TenGer Financial Group is committed to building a values-driven

high performance culture where all employees are valued. The

Group remains committed to the merit policy to ensure alignment

between employee compensation and the business results,

where individual performance is assessed against annual finan-

cial and non-financial objectives summarized in scorecards.

The Group provides a competitive package of benefits, including

medical insurance and a pension plan, in addition to the manda-

tory government scheme. The Group’s pension plan is based on

years of service and individual salary, consisting of mandatory

monthly cash contributions, matched by the employer.

The Group management decided to discontinue the pension fund

management contract with EIT LLC fully owned MTND LLC. The

Group pension fund of MNT 3.2 billion received as of 1 October

2013 and all accounts transferred and placed at XacBank. After

full acquisition of TenGer Insurance its pensions brought in line

with the group plan.

TFG continued group-wide well-being program aiming to improve

employee personal wellbeing and health. The program contained

several initiatives that were organized consistently throughout the

year with the ultimate goal for happier and healthier employees.

Well-being activities promote active life style, sports, cultural and

social activities. Even though the participation is entirely on a vol-

untary basis turn-out rates were high.

Strict restrictions on political activity have been endorsed in June

2013 to ensure public confidence in the political impartiality of

TenGer Financial Group. It is important that the Group preserves

independent and nonpartisan character and being viewed as a

politically neutral body. The Group staff may not run for political

office or position associated with political party, engage in any

political activity while on duty or on Group premises, solicit or ac-

cept any political contributions nor sponsor political campaigns.

Group officers are subject to additional restrictions.

Institutional Development

People

Planet

Profit


2013 Achievements

In May 2013, XacBank signed an agreement with the International

Finance Corporation for consulting services to develop institutional

capacity in sustainable energy finance. IFC engineers reviewed poten-

tial areas for current XacBank SME clients to save on energy and

implement energy-efficiency, and executing training for employees. As

a shareholder in XacBank, IFC has committed itself to helping build

XacBank’s ability to provide finance options for reducing pollution and

energy use in Mongolia.

In November, the Department concluded another stage of its series of

eco product project partnerships – this time with the Clean Air Fund.

The partnership, which started in late 2012 and operated through 25

product centers, culminated in selling more than 17,700 additional en-

ergy efficient stoves and 4,192 low pressure boilers to ger district

households. XacBank has continued to distribute eco products, team-

ing with the Ulaanbaatar Clean Air Project (UB-CAP) in October 2013.

As with previous iterations of the project, the results of XacBank’s Eco

Product Program have surpassed expectations. Since the first project,

in which XacBank teamed with the Millenium Challenge Corporation

Mongolia, XacBank has distributed more than 125,000 improved

stoves and more than 17,000 ger blankets, achieving significant market

penetration and reaching more than 70% of ger district households.

The stoves distributed by XacBank and its partners reduce particulate

matter emissions by more than 85%, helping to mitigate the pollution in

the ger districts and the resulting health expenses, which some esti-

mates peg at USD 470 million per year. The average fuel savings for a

family using a product provided by one of XacBank’s Eco Product Pro-

grams is 46%, resulting in additional savings of roughly MNT 925,000

per family. In the course of 2013, XacBank products reduced an esti-

mated 368,000 tonnes of CO2 that would have otherwise been emitted

into Ulaanbaatar’s air.

To turn these emission reductions into sustainable revenue, XacBank

continued its partnership with MicroEnergy Credits and began the pro-

cess of surveys and audits required to submit the Bank’s eco product

project to the Gold Standard project registry. Registration with the Gold

Standard enables XacBank to sell its carbon offsets to buyers across

the globe in a voluntary carbon market. With the Clean Development

Mechanism market for offsets showing occasional volatility, XacBank is

ensuring that carbon offsets will remain a viable means of maintaining

financial sustainability for both the department and its associated pro-

jects by also registering with the Gold Standard. XacBank’s project has

already been validated under the UNFCCC’s Clean Development

Mechanism, but, by securing additional carbon revenue channels,

XacBank can cover ongoing operational expenses and support the

expansion of the Department’s efforts to address environmental issues

in the future.

Perhaps most significantly, the Eco Banking Department began dis-

bursing loans through its partnership with Deutsche Bank’s Global Cli-

mate Partnership Fund to SMEs and for mortgages in 2013. Working

with both XacBank’s SME Lending Department and XacBank’s Mort-

gage Department, Eco Banking has disbursed nearly USD 2 million for

the implementation of energy-efficient measures or the production of

energy-efficient materials and alternative fuel. The facility has gone to-

ward mortgages for energy-efficient houses or apartments, for the pro-

duction of insulated windows, for the production of improved construc-

tion materials, and for the production of biodiesel. All of these reduce

either the amount of energy used or directly reduce the amount of

emissions from a client or client’s customers, helping to reduce stress

on Ulaanbaatar’s electricity grid and environment. Moving forward,

XacBank is now working with the Mortgage Department further to begin

providing below-market interest rates for clients seeking mortgages

outside of Ulaanbaatar – provided that they move into an energy-

efficient house.

Eco Banking: Overview

XacBank’s focus on environmentally sustainable finance began in 2009

with the formation of the Eco Products Unit, a team that looked to use

finance to mitigate both the short- and long-term effects of the pollution

in Mongolia’s capital Ulaanbaatar (second-most polluted city in the

world). Borne out of XacBank’s “Triple Bottom Line” mission to people

and planet as well as the profit of the Bank’s shareholders, the Eco

initiative focused on addressing the primary contributor to Ulaanbaatar’s

pollution: household-level consumption of raw coal in the ger districts.

The ger districts are peri-urban areas that surround the capital and, in

addition to comprising approximately 60% of the city’s population,

produce up to 60% of the city’s total pollution.

Partnering with local and international donors, XacBank developed an

innovative model to combat air pollution. The Eco Products Unit estab-

lished sales and distribution centers centers (Product Centers) housed

in gers (traditional Mongolian felt tents) and governmental buildings

throughout the ger districts. These Product Centers used and displayed

the core energy-efficient technologies made available to the Mongolian

market by XacBank and its partners—efficient stoves and insulating ger

blankets made of high quality felt. With the marketing and distribution

covered by XacBank, donors could focus on providing subsidies to the

producers of products that would reduce air pollution, resulting in a

lower cost of these improved technologies to end users. For potential

clients with the lowest income, XacBank expanded access to these

energy-efficient products by developing flexible microloan products

offered at below-market rates.

To make this project sustainable with or without donor involvement,

XacBank partnered with MicroEnergy Credits, a US-based carbon

finance company to evaluate, bundle, and sell the carbon emission

reductions (or “offsets”) generated by the products distributed through

XacBank’s program. XacBank’s carbon finance program is anticipated

to generate more carbon emission reductions per year than any other

single project in Mongolia and will permit XacBank to continue and

expand its carbon-reducing projects even after donor involvement

ceases.

As a result of its success, the Eco Products Unit formed XacBank’s Eco

Banking Department in 2011. While Eco Banking continues to focus on

the distribution of energy-efficient products to reduce Ulaanbaatar’s air

pollution, it also has begun looking at a wide range of financial products

and services that can mitigate a multitude of environmental challenges

facing Mongolia. By signing an agreement with Deutsche Bank’s Global

Climate Partnership Fund for a facility geared toward emission reduc-

tions in late 2012, XacBank’s Eco Banking Department could expand its

loan products beyond microloans. XacBank now provides eco loans

across a spectrum of sectors, including energy generation, industrial

production, and waste and sanitation. These low-cost loans go to small

and medium enterprises looking to reduce energy consumption or emis-

sion by at least 20%, households seeking mortgages for energy-efficient

housing, and the implementation or production of renewable energy

measures.

Social and Environmental Responsibility

People

Planet

Profit


Overview

XacBank is one of Mongolia’s largest and systemically important Bank serving retail and corporate clients with a range of inclusive

banking, fair investment and other financial products and services. It operates all over the country serving more than 619 thousand

customers through its 100 retail and 4 business service branches as well as specialized banking outlets which includes over 2,315

AMAR mobile banking merchants and 49 Savings and Credit Cooperatives. The Bank aims to create a sustainable value for its share-

holders and institutional investors, while promoting a triple-bottom line vision and mission built around “People, Planet and Profit.”

XacBank is the undisputed leader in Corporate Governance, Transparency and Risk Management, and is best known for its world

standard Corporate Social Responsibility implementations. In 2013, both Moody’s and Fitch ratings affirmed the operational scope and

the credit capacity of XacBank at “B1” and “B” respectively.

The Bank’s goal is to be a client-focused organization that is more accessible, innovative, and able to strike quickly at the numerous

unique growth opportunities, in line with the tremendous economic growth prospect for Mongolia in the coming decade.

MNT billions 2011 2012 2013

Net Interest Income 45.3 60.0 80.7

Profit 12.1 15.2 24.4

Total Assets 818 1,078 1,811

Equity 83 98 122

% 2011 2012 2013

ROaE 22.0 16.9 22.4

NPL 1.2 1.3 1.4

Liquidity Ratio 31 42 44

CAR 20.8 19.5 16.5

Tier 1 capital ratio 14.4 13.0 11.2

Performance

At the end of 2013, total assets reached ₮1.81 trillion. This 68

percent growth from the previous year was principally funded by

significant increases in local borrowed funds. As a result, the

Bank’s gross loan portfolio expanded by 64 percent to reach

₮1.04 trillion.

Total liabilities rose ₮709 billion (72 percent), mainly through

deposits and borrowed funds to finance our growth. XacBank’s

deposit increase of 25 percent was one of the highest in the

banking sector. Borrowed funds expanded by ₮378 billion owing

to substantial influx of local and project funds from various pro-

grams by the Government.

Total capital amounted to ₮181 billion, consisting of subordinated

debt and equity, making XacBank one of the most well capital-

ized Banks in Mongolia with a Capital Adequacy Ratio of 16.5

percent.

Revenues attributable to short-term securities surged 77 percent

to reach ₮22 billion while non-interest income grew 116 percent

to ₮11.7 billion stemming from trade finance, card business and

active foreign currency trading for corporate clients.

General, personnel and administrative expenses were ₮54

billion, an increase of 23 percent from 2012. This growth in

operating expenses is directly linked to the expansion of banking

activities.

XacBank had an effective tax rate of 18.5 percent, one of the top

50 tax paying businesses in Mongolia, with a reported net profit

of ₮24.4 billion. Net interest income was the key driver of the 60

percent growth in net profit.

Q4:

long to TenGer Insurance

Active participation in price stabilization program and general stimulus

program by Government and Central Bank for affordable construc-

tion , construction raw material and mortgage financing

Introduced SMS transaction notification service for the first time

The Bank of Mongolia granted XacBank permission to engage in gold

related transactions

Issued the first bond in Luxembourg through Symbiotics Platform

Recognized as “Bank Of The Year Mongolia” by “The Banker” maga-

zine

Concluded the first securitization transaction of the “8% mortgage”

program with Mongolian Mortgage Corporation (MMC). ₮ 14.3 bln

mortgage pool sold to MMC

Q1:

Q2:

Q3:

2013 Major Events

Restructured retail banking area at HQ to create two different lines:

Retail Banking Division and Channel Management Division

Implemented XacLoyalty program to attract more current accounts

Electronic channel significantly expanded: 121 ATMs are on service

and more than 1,000 POS machines are on-line (5x increase)

Received USD 46 mln by EBRD syndication, USD 20 mln from DEG

and USD 15 mln from Proparco

Recognized as “Best Retail Bank Mongolia 2013” by Global Banking

and Finance Review

Actively participated with Government Housing Program “8% mort-

gage” and price stabilization program

Started selling insurance products to customer and has agreement

with 6 insurance companies. More than 90% of insurance sales be-

XacBank

People

Planet

Profit

New Photo

XacBank’s customers


Overview

XacLeasing was founded in 2007 as a wholly owned subsidiary of TenGer Financial Group with the aim of spearheading the develop-

ment of Mongolia’s leasing sector. The Company’s financial leasing services enabled entrepreneurs, micro, small and medium sized

enterprises throughout Mongolia to realize the benefits of leasing and provided access to equipment and machinery in order to gener-

ate revenue from their business operations.

XacLeasing’s primary aim is to develop financial leasing products that deliver new opportunities, friendly convenient customer service,

but most importantly alternative financial solution to traditional bank finance. As a result, the micro and SME lessees create new jobs,

promote domestic production, and positively contribute to the nation’s economic growth.

XacLeasing has constantly improved its outreach, profitability and operations supported by IFC, BIO, ORIX and Symbiotic technical

assistances as well as a network of reputable domestic and international funders. The Company’s lease portfolio includes virtually

every business sector, including manufacturing, construction, healthcare, trade, agriculture, mining and transportation.


Net Interest Income 1.31 2.87 3.50

Profit 0.39 1.26 1.73

Total Assets 18.1 26.0 29.8

Equity 5.9 7.2 8.9

ROaE % 12.4 19.4 21.8

ment and retention, redesigning and updating key business pro-cesses and policies as well as initiating a social and environmen-tal impact reporting framework.

While most banks and captive leasing companies are providing financial leasing, but XacLeasing is proud to be the only inde-pendent diversified leasing company operating in Mongolia. The dedicate team has concentrated on the development of the leas-ing market through advertising campaigns, cross training vendors and dealerships, and providing financial advice to micro and SME clients. Furthermore, the Company recognizes that chang-es and amendments in the financial leasing law are essential in the future development of the leasing sector. As a result, XacLeasing has initiated a discussion with the support of EBRD, Mongolian Bankers Association and Central Bank of Mongolia to make relevant changes in the law to clarify rights and responsibil-ities of the lessor and lessee, remove contradictions within exist-ing law, and possibly to include tax benefits.

Performance

Despite Despite uncertain and volatile economic developments in 2013, XacLeasing has delivered continuing profit growth in 2013, with net income of ₮1.73 billion, up 37.2 percent on the prior year. As a result, the Company has delivered RoE of 21.8 percent, the highest return on equity in our history. This result reflects the successful execution of our strategy, the benefits of solid financial management and maintaining strong operational efficiency. XacLeasing will continue to pursue a prudent financial strategy as well as investing in the future of our business in order to deliver RoE of above 24 percent for the next couple of years.

As of fiscal year end, net lease portfolio increased by ₮2.5 billion, or 13.7 percent compared to the previous year, totaling ₮21.1 billion. The Company took advantage of demand for equipment and machinery in the construction, road maintenance, manufac-turing, transportation and passenger automobile sectors. Total lease disbursements amounted to ₮16.5 billion in 2013.

While growth in 2013 has been slower than in years before due to stricter under writing policy from macro economic conditions, lack of availability of funds during peak season and high lease repayments from prior year disbursements. Approximately, 71 percent of year-end 2012 portfolio has been either repaid or pre-paid during the 2013 fiscal year.

During 2013, the Company focused on other areas of business including building institutional capacity, focusing on HR develop-

XacLeasing’s customers

Oct.

Nov.

Nov.

Dec.

policies as well as sales tactics for 2014.

ResponsAbility has extended USD 2.0 million loan

Development of social impact reporting As part of Symbiotic funding, consultant has started social and envi-

ronmental impact reporting framework in accordance with IRIS. The

management believes implementing S&E impact reporting will further

strengthen the Group mission of triple bottom lines.

EBRD provided USD 3.0 million equivalent funding in

local currency Signed a loan agreement with EBRD in MNT (equivalent to USD 3

million) to fund finance leases to SMEs with a particular focus on ma-

chinery, equipment and vehicles.

ADB approved USD 10.0 million funding Asian Development Bank approved a loan to XacLeasing through

TFG to support leasing for micro and SMEs in Mongolia

Mar.

Jul.

Aug.

Oct.

2013 Major Events

The Group appointed a new CEO, Tsevegjav Gumen-

jav The new XacLeasing Executive Committee has developed a strategy

and business plan to market position the Company by incorporating

key leasing fundamentals including focus on great customer service,

emphasis on asset specialization, simpler documentation, faster and

sound decision-making, competitive terms and conditions, and close

working relationship with quality vendors

MNT 4.0 billion loan agreement with XacBank

Business trip to ORIX Group Senior management met with ORIX’s executive team to discuss strat-

egy and future collaboration opportunities

Development of new scoring tool As part of BIO funding, consultants developed a Scoring Tool that will

be utilized as part of lease underwriting process. Also, consultancy

scope served as the stepping-stone for the updated lease and risk

XacLeasing

People

Planet

Profit


Overview

TenGer Insurance was established in 2001 by the initiative of Mongolia’s largest petro chemical company under the name Bat Insur-

ance. In 2010, the name was changed to TenGer Insurance, and the firm has grown into one of the leading insurance firms in Mongolia

with its nationwide presence. The company was also well known in the market by its old/second name “Prime General Insurance”.

The company has 20 branches throughout Mongolia serving both corporate and retail customers. Currently, the firm is engaged in

business activities with more than 300 insurance representatives. TenGer Insurance offers competitive and comprehensive insurance

products of various types, depending on the needs of the customers. Some of the products include coverage of property and equip-

ment, petrochemical products, auto vehicle, third party liability, cargo and passenger liability, personal accident, temporary disability,

comprehensive general liability to name a few.

In particular, TenGer Insurance is the leader in petrochemical and international transport insurances. Along with the firm’s strong

focuses on corporate services, TenGer Insurance is aiming to introduce an unique micro-insurance for low incomes individuals within

the country through its cooperation with leading micro finance institutions.


Gross Written Premiums 4.11 6.03 8.51

Profit .66 .20 .83

Total Assets 5.8 7.4 11.7

Equity 2.2 2.4 3.9

ROaE % 34.4 8.0 29.5

Other Highlights

The company has become a member of the Board of

Mongolian Insurers’ Association

According to the minimum statutory capital requirements, by

the Financial Regulatory Commission, the company has

called capital injection of ₮750 million. As a result, its paid

capital has reached ₮2,750 million and total equity notably

grew to ₮3.9 billion

The company was awarded by the Mongolian National

Chamber of Commerce and Industry for Good corporate

governance

The company successfully implemented Green ERP, a com-

prehensive human resource software, and made further

developments in its insurance core system

As actuarial is key in the insurance business, the company’s

second actuary has passed his second professional exam

Performance

TenGer Insurance ended the year with total assets of ₮ 11.7 bil-

lion, up 49% from the previous year. Primary changes include an

increase in short term investment by ₮ 1.9 billion (41%), cash

and equivalents by ₮ 390 million, reserve funds by ₮ 2.074 mil-

lion (41%), and an increase equity by ₮ 1.6 billion (67%).

Gross written premium reached ₮ 8.5 billion, an increase of 41%

compared to 2012. Cross selling of TenGer Insurance policies,

through XacBank and XacLeasing, increased notably in the sec-

ond half of the year.

Total claims paid for the year was ₮2 billion, increase of only

27%, due to sound risk management policy in products with high

loss ratio and diversification in portfolio.

The Company was more cost conscious over the past year and

have been able to reduce the expense ratio from 61% in 2012 to

57% this year. As result, the combined ratio reduced to 94%

from 96%.

Net income for the year was ₮ 831 million, an increase of 307%

from the prior year’s low base.

FY.

FY.

2013 Major Events

Year of operation expansion and growth GWP grew by more than 40% for the second consecutive year and

reached ₮ 8.5 billion, total asset's increase of 49% was an industry

high record among top performers. Market share in GWP reached

9.1% from 7.6%.

Ownership change TenGer Insurance officially became 100% subsidiary of TenGer

Financial Group in September 12, 2013.

FY.

Dec.

.

Implements our social responsibility successfully. Sponsored Mongolian Basketball Association, female football teams

and “BOOM – 2020”P participants, organized Science Conference

among students and offered job position to the outstanding students.

Awarded as a “Company with Good Corporate Gov-

ernance” National Governance Center and Mongolian National Chamber of

Commerce and Government selected TenGer Insurance as a compa-

ny with “Good Corporate Governance” for outstanding development

and effort to promote corporate governance.

2012 TenGer Insurance staff members

TenGer Insurance

People

Planet

Profit


Performance

TenGer Capital (“TGC” or “Company”) ended the fiscal year

2013 with net profit of MNT 100 million and has subsequently

recouped all expenditures since its inception. The financial per-

formance is a substantial improvement than the prior year’s net

loss of MNT -82 million. The Company’s operating income was

MNT 256 million, a 51x fold increase from the prior year, with an

overhead ratio of 55%. The result of this year’s effort has yielded

in a ROaE of 46.7%.

Investment Banking: In Q1, TGC advised and arranged for a

residential real estate developer a structured finance transaction

aimed at developing a 120-unit residential housing complex. The

innovative structure allowed the client to secure full funding for

the project as well as a partial offtake of completed units at pre-

determined price.

TenGer Capital provided support to Group companies. It acted

as financial advisor on the full acquisition of TenGer Insurance.

The team worked on the information memorandum and financial

model of XasLeasing. TGC also advised TianRong in preparing

their 5-years financial and business plan.

The Company has played various roles for companies in such

sectors as hospitality, telecom, food processing, logistics and

transportation.

In December, the Company organized a final negotiation session

between our hospital client and the strategic investor in Hong

Kong. The meeting resulted in the signing of the final Heads

of Agreement, which outlined the key aspects of the sales

purchase agreement, shareholders agreement, and intellectual

property agreement between the parties. As a result, TenGer

Q1.

Jul.

2013 Major Events

Apr.

4Q.

Affordable housing project completed TenGer was the financial advisory for a 120 residential housing pro-

ject designed to provide affordable housing for the employees of the

Group. XacBank was the commercial lender and will be the buyer of

the finished apartments at below the market rate.

Hired two new analysts

Received final approval from Group shareholders on

the full acquisition of TenGer Insurance TenGer Capital was the exclusive financial advisor performing the

valuation and negotiations with the selling party on the final price.

Final negotiation session concluded on the major

terms of agreement between our hospital client and

the strategic investor in Hong Kong TenGer Capital was the exclusive financial advisor representing the

selling party.

Capital was able to finish the year with positive results, reaching

break-even.

Brokerage: The brokerage arm of TGC executed trades worth

MNT 190 million in 2013 while opening 141 new client accounts.

The most active single client accounted for 69% of all trades exe-

cuted in Q4. During 2013, TGC produced research papers on

Remicon JSC, a listed producer of ready mixed concrete, and

APU JSC, the largest alcohol and beverage producer in Mongo-

lia.

Other: Concerning staff and internal operations, all members of

the staff has passed the local regulatory, Financial Regulatory

Commission, exam to be certified in the involvement of broker-

age service and financial advisory. Two new analysts joined the

firm in July as part of the investment banking team in addition to

assisting the weekly reports regarding information on the stock

exchange performance for security traders.

The Company expanded its network by signing cooperation

agreements with a partner firm in Hong Kong, private bank in

Switzerland and Central Asian investment and brokerage house

to widen its international investor base while supplying high quali-

ty investment projects from the Company local network and ex-

perience.

Overview

TenGer Capital is the investment banking unit of TFG offering clients services in corporate finance, sales and trading, advisory, mer-

gers and acquisition. The team is dedicated to advising Mongolian companies on their fundraising, expansion and investment strate-

gies. The company has established a broad network of relationships with foreign investors and advisors. TenGer Capital also plays a

crucial role in maintain relationships with local clients and promote synergies across Group companies.

TenGer Capital, along with other Group subsidiaries, participated in the informed

citizens about the financial markets such as opening a

TenGer Capital

People

Planet

Profit

MNT billions 2012 2013

Revenues 0.00 0.27

Profit (0.08) 0.10

Total Assets 0.19 0.32

Equity 0.16 0.27

ROaE % NA 47%


Overview

Urumqi TianRong Microcredit Company is a joint venture of between TenGer Financial Group, IFC, MAK, Xinjiang Longhaida and

Shanghai Junhe from China. TFG’s flagship subsidiary XacBank is a leading micro, small and medium enterprises finance provider in

Mongolia and a globally recognized microfinance bank. IFC has been a long-term partner of TFG and XacBank since 1999.

TianRong is the First Sino-Mongolia Micro Finance Institution that opened in September 2012 to provide loans worth more than $200

million to around 15,000 small businesses in the next couple of years.

Branch Expansion: To service all our clients and continue to sup-

port local entrepreneurs and small business owners in the com-

ing years, TianRong officially opened two new branches in 2013.

With the April opening of the Shangmaocheng branch, we made

it more convenient for small business owners and vendors in the

Shayibake district to find financial service. In November,

TianRong expanded further by opening its Xinshiqu branch.

Institutional Capacity Building: Mr. Tengis Damdinkhorol joined

TianRong in October as the new Chief Operating Officer and de-

parting COO Chen Yu coached and transferred her duties over to

him. Numerous training sessions were held, such as the three

days training of new staff, covering company policy, basic ac-

counting, lending practice, client screening and overdue client

management. In addition, basic legal training was taught at the

Xiao Xi Men branch, from a visiting lawyer, in dealing with over-

due clients and a branch managers’ training organized by Ji

Yuting, consultant from PlaNet Finance. The Company has en-

larged its staff by 7 personal to a total of 39, with a 56% women

composition.

Performance

At the end of 2013, TianRong had 575 active clients with a total

outstanding portfolio of nearly RMB 100 million. It’s a remarkable

increase compared to the prior year’s total disbursement of 34

loans and further evident in total loans composing 96% of total

assets versus 15% in 2012.

The vast majority of the loan portfolio composition was in “small”

and “micro” category of less than RMB 500,000. 77% of all active

loans are microloans of RMB 100,000 or less, while a further

21% are small loans of less than RMB 500,000.

Nearly 95% of the loan portfolio’s maturity is under 1 year and

100% of the loan portfolio is in RMB, due to the regulatory re-

strictions from the local regulators.

While it will take another full year of operations to accurately as-

sess the average portfolio yield, as of December yield on the

loan portfolio was 10.2%. Similarly, as the company continues

ramp up operations and accrue revenues, the overhead ratio has

continued to fall every month to 41% as of year-end.

The company started becoming profitable in June and was able

to recoup all its initial retained earning losses in August. The

company posted net profit of RMB 3.8 million (MNT 1.1 billion), a

significant increase from RMB -1.0 million.

top left: Anniversary Client Meeting, top right: Xinshiqu Branch Opening,

bottom left: Client Training, bottom right: Board Meeting

Jan.

Feb.

Apr.

May.

Jun.

Jul.

2013 Major Events

Aug.

Sep.

Oct.

Nov.

Dec.

The first client training is conducted for Uyghur borrowers, TianRong

organizes its first annual staff meeting for the staff and their families.

TianRong organizes red envelope promotion for the Spring Festival,

first year performance evaluation completed for all staff.

Second branch opens in Shangmaocheng, the number of active bor-

rowers reaches 100, Mr. Ganhuyag Chuluun visits TianRong.

TianRong receives assistance from Shanghai Junhe, IFC and Xac-

Bank, the second new staff training is organized.

TianRong becomes the largest microfinance institution in Xinjiang by

total number of clients, PlaNet Finance starts consulting TianRong.

Third BoD meeting held in Ulaanbaator, Mongolia, Chinese share-

holders visits XacBank and TFG, TianRong Board members and

management participate in company governance training organized

by TFG.

The number of active borrowers tops 300, TianRong starts up rela-

tions with an Urumqi orphanage, Mr. Zhang Yufei, CEO of Junhe visits

TianRong, first management retreat held.

TianRong celebrates its first anniversary with a number of events, in-

cluding a client meeting and an anniversary banquet.

TianRong disburses its 500th loan. Staff training is organized for a

number of topics, including legal training, dealing with overdue clients

and English training.

BoD meeting is held, with participants coming from Tenger, IFC, Jun-

he and Longhaida. Opening ceremony for new Xinshiqu branch held.

TianRong’s number of active clients tops 500.

Mr. Boldbaatar, from Xacbank visits and consults with TianRong.

TianRong holds its second annual winter retreat.

TianRong MCC

People

Planet

Profit

MNT billions 2012 2013

Net Interest Income 0.10 2.53

Profit (0.23) 1.06

Total Assets 22.3 28.4

Equity 22.2 28.2

ROaE % NA 3.9

Dec.31.2012 MNT/RMB exchange rate: 223.39

Dec.31.2013 MNT/RMB exchange rate: 274.17


Overview

XacSecurity was established in 2002 as the physical security unit of XacBank with the initial purpose of providing security services to

XacBank branches and Headquarter office. Following the adoption of Law on Security Service by the Parliament of Mongolia, the

security service industry requires a license by the relevant authorities in order to properly protect individuals and corporations. The firm

is routinely recognized among the best security companies by the Police Authority and Capital City Specialized Inspection Agency.

Currently, the firm has over 160 full-time staff that provides universal body, alarm and disaster mitigation service throughout TenGer

Financial Group and its customers. Its goal is to utilize their decade long experience with the aim of catering external companies and

government agencies.


Net Sales 1.09 1.52 1.75

Profit .05 .13 .01

Total Assets .18 .31 .32

Equity .18 .30 .31

The Company’s alarm and security engineering team expand-

ed over the past year to a technical unit. The computers and

equipment of the Alarm and Information Center was renewed,

implemented new technology and services in order to further

reach more locations.

New positions of security protection manager and human re-

source officer were established at the local level aiming to im-

prove protection service and implement human resources pol-

icies of the bank branches.

A “emergency protection” training was organized for directors

and members of emergency protection Units of TFG in collab-

oration with Emergency Department of Chingiltei District.

A fire protection simulation exercise was conducted at Xac-

Bank’s Ard branch, by the support of staff of Emergency De-

partment. During the simulation training, the staff received fire

alarm information, how to safely transfer the staff to safe loca-

tion, learned to provide first aid service and use the fire distin-

guisher.

The Company received a new certificate as a contracted se-

curity service from the Municipality Police Department.

Performance

73% of total income derived from physical security protection,

26% were from alarm protection and 1% consisted of alarm

equipment sales and income from money transportation. 98% of

net income was derived from services to XacBank.

Staff levels and grades have been revised and followed up since

15 January 2013. Therefore, all staff salary was increased by

20% in 2013 and total number of staff is reaching 180.

After coming to agreement last year, the company has started

importing state of the art alarm protection equipment this past

year to be sold them on the Mongolian market.

Other income from ХасBank consisted of 2%, which is from 25

alarm service contractors with the aim of increasing the figure up

to 50 in 2014. Majority of clients are located in already protected

buildings were a ХасBank branch is located.

The company’s alarm operational center has the capacity to con-

trol 400-500 alarming equipment. Currently, only 34% of total ca-

pacity is being utilized with 170 alarming equipment.

Other Highlights

To implement the Security Policy of TFG, security officers

were recruited who received professional guidance and train-

ing for the relevant subsidiary companies. XacBank’s branch

safety and security information is continously reported every

month to the management, security department and

collaborated to make necessary adjustment when its

necessary.

XacSecurity staff members

Q3.

Q4

28 different types of alarm equipment were purchased from PIMA

Alarms Systems Company of Israel. Radio communication for security

staff was improved through 20 mobile stations to be fully integrated

with our communication network.

Engineers travelled to 28 bank branches to renovate the alarm securi-

ty and camera systems with improved technology.

FY.

Q1.

2013 Major Events

Maintenance checkup is conducted monthly on the conditions of

alarm, security and fire protection throughout TenGer Financial Group

and its subsidiaries.

Rapid meetings for security staff have been held 11 times where in-

formation on city crime situation and other guidance were provided. 8

recommendations on safety and security activities during holidays

have been developed and distributed to the relevant security guard at

bank branches and cash centers.

XacSecurity

People

Planet

Profit


Erdenejargal Perenlei

Non-Executive Director

Appointed to the Board: 2005

Experience: Erdenejargal has been involved

with the Mongolian Foundation for Open

Society (Soros Foundation) in supervision of

programs for education, information, media

and public health. Since the transformation of

Soros Foundation into a national NGO in

2004, Erdenejargal has served the Executive Director and is now

actively involved in promoting citizen participation in decision

making through research-based advocacy. She is a 1982 gradu-

ate from the Rostov-na-Don University in psychology.

Current Appointments: Non-executive director on the Board of

Directors of TenGer Financial Group and XacBank and the

Executive Director of Open Society Forum in Mongolia.

Former Appointments: Erdenejargal started her career at the

State Committee (Ministry) of Labor and Social Welfare as a

labor economist in 1982-1988, a lecturer at the Government Insti-

tute of Management in 1988-1991, a researcher and later a chief

of Social Studies Unit at the Government Center for Public Policy

and Social Studies in 1991-1992, and an Executive Director of

Mongolian Development Foundation in 1992-1997.

Michael Madden



Experience: Michael is a successful

entrepreneur and a founder and managing

director of Ronoc, an investment and advisory

services business based in Dublin, Ireland.

He graduated in 1987 from the College of

Management Studies, Limerick, Ireland, with

a diploma in industrial engineering.


Directors of TenGer Financial Group and XacBank.

Former Appointments: Michael has been involved in the cards

and banking business in Eastern European markets for over 15

years working for American Express on different positions, start-

ing in 1988 as a quality assurance manager and becoming in

1998 a vice president for franchise markets EMEA, London, UK.

In 2003, Michael established Renaissance Credit - the third larg-

est consumer finance bank in Russia and has worked as the

founding CEO. In 2007, Michael founded Ronoc.

Chuluun Ganbold

Non-Executive Director, Chairman


Experience: Ganbold is the CEO of Email

Daily News LLC. He has an extensive 30-

year career and professional experience in

administration, public relations, business

consultancy and facilitation, mass media and

arts management. Ganbold is a graduate of

the Moscow University of Foreign Languages in Russia.

Current Appointments: Chairman of the Board of Directors of

TenGer Financial Group and XacBank, a member of the Board

of Directors of Oyu Tolgoi LLC and President of several NGOs.

Former Appointments: Founding member of X.A.C. (Golden

Fund for Development), the first NBFI in Mongolia and a prede-

cessor of XacBank. He formerly served as Advisor to the Prime

Minister of Mongolia, the Constitutional Court and in 1993-1995

as Director General of the World Mongolian Federation. Ganbold

is a founder of the Rotary movement in Mongolia.

Bold Magvan

Executive Director


Experience: Bold is a senior banking

professional with more than 20-year

expertise in public and private global finan-

cial institutions, including the World Bank and

the International Monetary Fund. He holds a

Master’s in International Affairs degree with a major in economic

policy management from the Columbia University, New York.

Current Appointments: CEO and an executive director of Ten-

Ger Financial Group, non-executive director on the Board of Di-

rectors of XacBank, president of the Mongolian Bankers Associ-

ation, Honorary Consul of the Republic of Iceland in Mongolia,

chairman of the boards of the Credit Information Bureau LLC and

Development Solutions NGO in Mongolia.

Former Appointments: From 1996 to 2000, Bold was the

Deputy Governor of the Bank of Mongolia (Central Bank),

Deputy Director at the Market Research Institute, CEO of the

Mongolian Export-Import Bank, member of the boards of the

International Investment Bank and the International Bank for

Economic Cooperation in the Russian Federation and advisor for

Da Afghanistan Bank (Central Bank), Islamic State of Afghani-

stan.

The Board of Directors


Richard Ranken



Experience: Richard is a senior advisor to

IFC in the East Asia and the Pacific Region

with membership on the boards of several

banks and private equity funds in Asia. He

has had a 30-year career with IFC and has

spent majority of this professional life working

in the former Soviet Union, Africa and most recently in East Asia.

Richard is a graduate of the Australian Institute of Company

Directors (GAICD).



Former Appointments: He headed IFC’s Advisory Services,

which privatized over 50,000 enterprises, introduced them

corporate governance standards, and played a leading role in

the financial sector development. As a director of IFC’s opera-

tions in Africa, he put in place a new strategy and team that built

IFC’s investment business to USD1.5 billion in 30 countries, with

concentration on SME and microfinance. Also, as a director of

East Asia and the Pacific, he focused IFC’s work on climate

change financing and related advisory services.

Sabina Dziurman



Experience: Sabina is a senior banker with

the financial institutions team of the European

Bank for Reconstruction and Development

(EBRD)’s office in London, UK since 2004.

She is responsible for developing and moni-

toring business and managing relations with

clients, regulatory authorities and governments. Sabina graduat-

ed from the Bedford College, London University, UK in 1976 with

BSc in Physiology and from the London Business School, UK in

1991 with a Masters of Business Administration.


Directors of TenGer Financial Group

Former Appointments: Sabina started her professional career

with Timsway Holidays in 1980, later serving as director. Be-

tween 1991-1993, Sabina was a manager for Central Europe

Trust Company in Russia, promoting and marketing CET ser-

vices and undertook project management. She later worked as

an independent consultant, for EBRD and DFID, training various

banks in the central Asia on policies and procedures on key is-

sues and risks.

Shuji Irie



Experience: Shuji is the Executive Officer of

the ORIX Corporation and Deputy Head of

Investment and Operation Headquarters.

Shuji Irie was born in 1963 graduated from

Waseda University, Faculty of Literature in

1985.



Former Appointments: Shuji Irie joined ORIX in April 2011 as

Deputy Head of the Investment Banking Headquarters. Before

joining ORIX, he worked for the Industrial Bank of Japan, Limited

(presently Mizuho Corporate Bank) and Mizuho Securities Co.,

Ltd. mainly in the field of Securitization and Real Estate since

1989. In September 2011 he was appointed Deputy Head of the

Investment and Operation Headquarters. In January 2013 he

was also appointed Executive Officer of the ORIX Corporation.

Tselmuun Nyamtaishir



Experience: Tselmuun is a vice president of

Mongolyn Alt MAK Corporation, one of the

largest mining companies in Mongolia. She is

in charge of the firm’s investments and

finance department. Tselmuun graduated in

2004 from Valparaiso University, Indiana,

USA with a Bachelor in Business Administration.

Current Appointments: Interim non-executive director on the

Board of Directors of TenGer Financial Group.

Former Appointments: She has worked throughout MAK’s

departments such as railway, social responsibility, procurement

and trading to support their strategy. Tselmuun started her career

at the Trade and Development Bank of Mongolia in 2005 .

Board of Directors continued


Board Composition

As of 2013 year end, the Board had 8 members, consisting of

one executive director, 6 shareholder-nominated non-executive

directors and one independent non-executive director.

The non-executive directors bring a wide range of business and

financial expertise, experience and independent judgment to the

Board and the executive management. Through active participa-

tion in board meetings and serving on board committees, all di-

rectors make various contributions to the effective guidance and

direction of the Company.

The members of the Board are not related to one another.

2013 Corporate Governance Report

The board of directors (the “Board”) of TenGer Financial Group (“TFG”, the “Group” or the “Company”) is pleased to present this Corporate Governance Report in the Group’s annual report for the period ended 31 December 2013.

Effective corporate governance has always been an important part of our identity at the Group and Group companies. TFG’s corporate governance practices are based on the principles and certain recommended global best practices. As a bank holding company, TFG is subject to governance rules and procedures issued from time to time by The Bank of Mongolia, the banking sector regulator. Continuing its good governance practice and to improve further its governance and functioning, TFG adopted a number of major policies and procedures, including a Code of Corporate Governance, Code of Conduct and Conflict of Interest Policy, a Related Party Transactions Policy, renewed Internal Rules of Procedure of the Board of Directors and a Board Direc-tor Selection and Nomination Policy. Together, these form the corporate governance framework based on equitable treatment of all shareholders, including minority and foreign shareholders, accountability at all levels, disclosure and transparency, and re-sponsibility before all stakeholders.

Results of 2013

During the year of 2013, the main focus has remained on main-taining and enhancing our good corporate governance culture. As part of our compliance with the highest standards of personal and professional ethics, all board directors refreshed their corpo-rate governance knowledge by enrolling in the director training programs offered by the Mongolian Corporate Governance De-velopment Center and received certificates of training in 2013.

Building on its self-evaluation of the previous year, the board of the Group continued to work towards improving its structure, in order to ensure the most optimal mix of skills and experience of directors. Following the ownership transformation process at TFG, the board had changes in its composition.

Recognizing that transparency and disclosure is not only part of good corporate governance but is also a legal and regulatory re-quirement, the Board of the Group focused also on improving disclosure and reporting by shareholders on their ultimate benefi-cial holdings and interests.

TFG will continue to review and enhance its corporate govern-ance practices to conform further to international best practices and to meet the requirements of the stock exchange of potential listing in the future and the rising expectations of shareholders and investors

Chuluun Ganbold Chairman, independent non-executive director

Bold Magvan Executive director, Chief Executive Officer of TFG

Shareholder-nominated non-executive directors are:

Erdenejargal Perenlei Non-executive director,

representing minority shareholders

Michael Madden Non-executive director,

representing Ronoc

Richard Ranken Non-executive director,

representing IFC

Sabina Dziurman Non-executive director,

representing EBRD

Shuji Irie Non-executive director,

representing ORIX

Tselmuun Nyamtaishir Non-executive director,

representing MAK

Corporate Governance Report


Chairman and Chief Executive Officer

The roles and duties of the Chairman and the Chief Executive

Officer of the Company are carried out by different individuals

and have been clearly defined in the Charter of TFG.

Key responsibilities

Appointment, election and retirement of directors

The board directors are elected at the annual general meeting of

shareholders for a term of 2 years with an option of re-election.

Upon expiry of this term, the directors are subject to retirement

or re-election by the shareholders. In the case of a vacancy on

the board, an interim director is appointed by the board until

election and approval at the next annual general meeting of

shareholders.

The procedures and process of nomination, appointment, elec-

tion, re-election and removal of a director are set out in the Char-

ter of TFG and the Board Director Selection and Nomination Pol-

icy. The board’s Governance, Nomination and Compensation

(“GNC) Committee is responsible for reviewing the board compo-

sition, developing and formulating the relevant procedures for

nomination and appointment of directors, monitoring the succes-

sion planning of directors and assessing the skills, expertise and

experience.

Non-executive directors Chuluun Ganbold, Richard Ranken and

Erdenejargal Perenlei were each elected for a 2-year term in

May 2012. In accordance with the Charter, these directors stand

for re-election at the AGM and the GNC Committee recommend-

ed them for re-election at the forthcoming annual general meet-

ing of shareholders.

Executive director Bold Magvan and non-executive director Mi-

chael Madden were re-elected by shareholders’ resolution in

April 2013 at the AGM for a 2-year term.

Tselmuun Nyamtaishir, appointed by the Board as interim direc-

tor in 2012, was elected as a non-executive director at the AGM

in 2013.

Non-executive directors Shuji Irie and Sabina Dziurman were

elected at a special shareholders’ meeting in December 2013 for

a 2-year term.

Training and Continuing Development

In 2013, a board director certification training on corporate gov-

ernance was organized for members of the boards of directors of

TFG and XacBank to continue TFG's good governance practice

and to comply as well with Article 75.8 of the Company Law of

Mongolia. The training session was conducted by the Mongolian

Corporate Governance Development Center (“CGDC”) and IFC.

7 directors out of 11 directors participated in the training session

and received the certificates of CG training. The Chairman of the

TFG and XB boards enrolled also in CG training and received a

training certificate.

In 2013, three members of the Executive Committee of TFG at-

tended the corporate governance trainings organized by CGDC

and obtained training certificates. As of today, all 8 members of

the TFG Executive Committee have certificates of training.

In addition, a special training session was organized for directors

and shareholder representatives of TianRong, the Group’s sub-

sidiary in China.

As part of measures to improve board functioning, service agree-

ments are drafted and signed with board directors.

Sessions on corporate governance and governance compliance

were organized to assist the board members of the Group’s sub-

sidiary companies with information and guidance necessary for

the board members to fulfill their duties and responsibilities.

Board meetings

The board conducts its business based on the Internal Rules of

Procedure of the Board and the Charter. The main form of board

functioning is a board meeting where the board issues its deci-

sions in the form of resolutions.

In 2013, the board held 4 regular quarterly meetings and one ex-

traordinary meeting. The board meetings were held on:

March 21, 2013

June 20, 2013

September 19, 2013

December 10, 2013 (Extraordinary)

December 11, 2013

All board meetings were held in Ulaanbaatar, Mongolia. The

details of directors’ attendance at the board and committee

Chairman - Chuluun Ganbold

Appointed in 2003

Ensuring the effective functioning of the Board

Leading the Board in the process of periodic reviews of the

performance of the executives

Setting agendas for board meetings

Encouraging the appropriate level of deliberation of all issues

and inputs from individual board members

Chief Executive Officer - Bold Magvan

Appointed in 2011

Implementing strategies, objectives and policies approved

and delegated by the board

The Company’s day-to-day management and operations

Developing strategies and business plans

Formulating the organizational structure, control systems,

internal processes and procedures.

Attendance

Number of meetings held 4

Chuluun Ganbold 4

Bold Magvan 4

Erdenejargal Perenlei 4

Michael Madden 3

Richard Ranken 4

Sabina Dziurman 2

Shuji Irie 2

Tselmuun Nyamtaishir 3

Corporate Governance Report continued


Major decisions made by the Board during 2013:

In 2013, the Board issued 27 resolutions, including 7 resolutions issued by way of written resolutions through online voting without holding a board meeting.

The board directors receive regular and appropriate information to enable them to make informed decisions. During the year un-der reporting, the notices and pre-reading papers for the board directors were all delivered at least 14 days prior to the board meetings to provide an opportunity to review and include matters on the agenda and give sufficient time to analyze the information and obtain, as necessary, independent professional advice.

The Group Finance Officer and other senior management attend all regular board meetings and, where necessary, other board and committee meetings to provide information and advice on business developments, financial and accounting matters, regu-latory compliance, corporate governance and other major as-pects of the Company.

In addition to these formal communications, the board directors are in regular informal communication with senior executives and this fosters an open dialogue and exchange of knowledge and experience between the management and the board.

The board had regular discussions with the executive manage-ment during the year on the Group’s strategy. An annual strategy discussion retreat was held at the time of the Q3 regular board meeting, during which the chief executives gave strategy presen-tations in each area of the Group’s businesses and had a de-tailed review session with the board on the Group’s strategy for 2014-2016.

Board Committees

The board has established standing committees to assist the

board to deliver its responsibilities. The board’s standing commit-

tees are:

Governance, Nomination and Compensation Committee

Investment Committee

The committees are governed by written charters approved by

the Board.

Governance, Nomination and Compensation Committee

(“GNC”)

The GNC Committee reviews and implements, among other

things, compensation and corporate governance across the

Group. In 2013, the GNC Committee had 4 regular meetings.

In 2013, the members of the GNC Committee were:

Chuluun Ganbold, Chair

Richard Ranken

Erdenejargal Perenlei

Sabina Dziurman

Bold Magvan

Secretary: Ashidmaa D (VP, Investor Relations and

Corporate Affairs, TFG)

Investment Committee

The Investment Committee reviews and provides recommenda-

tions on the investment proposals at the Group level. The Invest-

ment Committee met 2 times in 2013.

Corporate Governance Report continued

In 2013, the members of Investment Committee were:

Frank Streppel, Chair

Sarah Djari, Member

Michael Madden, Member

Tselmuun Nyamtaishir, Member

Shuji Irie, Member

Amartuvshin Hanibal, non-voting member from management

Bolor Tserendorj, non-voting member from management

Secretary: Tserendorj Natsagdorj, Investment Officer, TFG

The directors are responsible for financial reporting in respect of

financial statements. The directors are responsible for the prepa-

ration of financial statements of the Company with a view to en-

suring that the financial statements give a true and fair of the

state of affairs of the Group and that relevant regulatory require-

ments and applicable accounting standards are complied with.

The management provides explanation and information to the

Board to enable the directors to make an informed assessment

of the financial information and position of the Company put to

the Board for approval.

The consolidated audited financial statements of the Group for

2013 were reviewed and approved by the Board.

The Board has overall responsibility for the internal control sys-

tem of the Group and for reviewing its effectiveness. The Board

is also responsible for maintaining an adequate internal control

system to safeguard the interests of the shareholders and the

assets of the Company. The Chief Internal Auditor of the Group

reports to the Board’s Audit Committee.

TFG believes that effective communication with shareholders is

essential for enhancing shareholder involvement and investor

relations and understanding of the Group’s business perfor-

mance and strategies. TFG recognizes the importance of share-

holder involvement and participation by being sufficiently in-

formed of decisions concerning important corporate matters en-

suring at the same time proper exercise of shareholder rights and

effective and prompt shareholder decision making.

Annual general meetings of shareholders provide a forum for

communication between the shareholders, the board and the ex-

ecutive management.

As one of the measures to safeguard shareholders’ interests and

rights, separate resolutions are proposed at the shareholders’

meetings on each substantial issue. All resolutions put forward at

shareholders’ meetings are voted on by ballots and a tabulating

commission counts the ballots and announces the results of vot-

ing.

TFG recognizes the importance of safeguarding minority share-

holders’ rights. Although not specified in the governing docu-

ments, a board director can be nominated by minority sharehold-

ers.

Accountability and Audit

Internal Control

Communication with Shareholders and

Investor Relations

Shareholders’ Rights


Bold Magvan

CEO, Head of Executive Committee

Amartuvshin Hanibal

Managing Director

Zul Ganzorig

VP, Human Resources

Bat-Ochir Dugersuren

CEO, XacBank

Tsevegjav Gumenjav

CEO, XacLeasing

Tsogbadrah Galbadrah

CEO, TenGer Insurance

Enhbaatar Jambaldorj

CEO, XacSecurity

Munhsayhan Jargalsayhan

CEO, TianRong

For the year ended

December 31, 2013 Senior Executive Management of

TenGer Financial Group (Holding Company)

CEOs of the Group Companies

Taishir Tumurbaatar

General Counsel

Ulambayar Enebish

Chief Internal Auditor

Ashidmaa Dashnyam

VP, Investor Relations and

Corporate Affairs

Bold Magvan

CEO, TenGer Financial Group

Amartuvshin Hanibal

CEO, TenGer Capital

Management Team

Bolor Tserendorj

Finance Director


2011

January: Former XacBank CEO, Bold Magvan, becomes the

CEO of TFG

Crucial first steps were made to make TenGer a truly professional hold-

ing company with an active management function – among one of

them is the transfer of the CEO position from Ganhuyag Chuluun to

Bold Magvan.

December: Reorganization of the Group’s head office

Key focus was devoted on investment and risk management, treasury,

investor relations and corporate affairs, legal and compliance, internal

control and audit, and human resources.

The Group also produced its 5 year Business Plan as well update its

Vision and Mission statement to embrace the triple bottom line mission

and the highest standards of corporate governance and social

responsibility across the TenGer family companies.

December: XacBank becomes a systemic bank in Mongolia

Nearly 10 years after its inception, XacBank becomes the 4th largest

commercial bank in Mongolia in terms of total assets. The central bank

recognized XacBank’s significance in the financial sector and resulted

in them labeling XacBank as “systemically important institution”.

2012

March: TenGer Capital is established as the Group’s

investment banking arm

Through an 80% acquisition of Arta Invest, local brokerage and

advisory firm, the Group has extended its available services to

corporate as well as retail clients.

August: Urimqui TianRong MCC is established as the

Group’s China based microcredit company

The Group owns 51% along with its other shareholders: IFC, MAK,

Xinjiang Longhaida and Shanghai Junhe from China. The goal of the

firm is to utilize XacBank’s extensive experience in micro finance to

provide loans to the local market.

2013

August: ORIX Corporation became strategic shareholder of


ORIX Corporation of Japan, the third largest leasing group in the world,

has became a shareholder of TenGer Financial Group. The investment

exemplifies their trust in the Group and its management.

September: TenGer Insurance became 100% subsidiary of


After several rounds of negotiations with Petrovis, the full acquisition of

TenGer Insurance was finalized. With a fully integrated Group, all cross

sale synergies will accrue to the shareholders of TenGer Financial

Group.

2008

May: Change of name from XAC-GE Group to TenGer

Financial Group

The overwhelming majority of shareholders supported the name change at its annual meeting. “Tenger” means “sky” in Mongolian that is associated with greatness, eternity and endless boundaries. It is al-so a play of words that can be broken down as “Ten” and “Ger”, where ten is a number in English and “ger” stands for a nomadic round shaped tent, a family, or a home in Mongolian.

June: TenGer Solutions is established as the Group’s

software developer company

The firm was originally called Horus Nomadic Solutions that developed the mobile banking software “AMAR”. The aim was to develop and market a flexible and comprehensive mobile banking solution, geared toward banks and micro-finance institutions.

2009

January: Mol Bulak Finance joins the Group as its Kyrgyz

Republic based micro credit company.

The Group made a pilot investment in Mol Bulak Finance, acquired

30.5%, an institution that was established as a micro credit company

to provide micro loans to the rural areas of Kyrgyzstan.

August: Representative office was set up in China

A representative office was set up in Beijing, China to supply manage-

ment with timely updates on the microfinance market and regulatory

environment in China.

2010

April: Group exits from Mol Bulak Finance

Due to the firm’s rapid expansion and civil unrest in Kyrgyzstan, the

Group successfully exited from Mol Bulak Finance

May: Acquired 50% of TenGer Insurance

The Group acquired 50% of TenGer Insurance, one of the largest

insurance companies in Mongolia, from ECM (TFG shareholder). The

other major shareholder of TenGer Insurance is Petrovis, one of Mon-

golia’s largest fuel distributors.

TenGer Financial Group has its origin from the merger of two pioneering non-bank financial institutions of Mongolia, X.A.C. and Goviin Ehlel, in 2001. Below are the

significant recent events that occurred to our organization against the backdrop of the changing times.

Recent History of TFG


Location of Head Office Central Tower, Room 508, Great Chinggis Khan’s Square 2, SBD-8

Ulaanbaatar-14200, Mongolia

Website www.tengerfinancialgroup.com

Telephone (976-11) – 320341

TenGer Financial Group LLC

Established May 2007

Location of Head Office Mongol Insurance building, 2nd floor, Enkhtaivan avenue 13,

SBD-1, Ulaanbaatar-14210, Mongolia

Website www.xacleasing.mn

Telephone (976) - 7011-2061


XacLeasing LLC

Location of Head Office Post Branch 20A, PO Box-721, Ulaanbaatar-14200, Mongolia

Website www.xacbank.mn

Telephone (976-11) – 318185


XacBank LLC

Established 2007

Location of Head Office City Center, 11th floor, Altangerel street 5, SBD-8, Ulaanbaatar-

14200, Mongolia

Website www.tengerdaatgal.mn

Telephone (976-11) - 312234


TenGer Insurance LLC

Company Contacts

http://www.tengerfinancialgroup.com

http://www.xacleasing.mn

http://www.xacbank.mn

http://www.tengerdaatgal.mn


Established March 2012

Location of Head Office Central Tower, Room 508, Great Chinggis Khan’s Square 2, SBD-8

Ulaanbaatar-14200, Mongolia

Website www.tengercapital.mn

Telephone (976-11) - 7011-0637


TenGer Capital LLC

Established April 2002

Location of Head Office Mongol Insurance building, 3rd floor, Rm 304, Enkhtaivan avenue

13, SBD-1, Ulaanbaatar-14210, Mongolia

Website www.xacsecurity.mn

Telephone (976-11) - 318185

XacSecurity LLC

Established September 2012

Location of Head Office 11-A-4 and A-5, Hongshan New Century Plaza, No. 108 Xinhua Bei

Road, Tianshan District, Urumqi City, China

Telephone +86-991-8869-969

Urumqui Tianrong Micro-Credit LLC

Company Overview continued

http://www.tengercapital.mn

http://www.xacsecurity.mn


2013 MNT'000

2012 MNT'000

2013 MNT'000

2012 MNT'000

Interest and similar income 188,247,032 132,072,558 682,699 622,443

Interest and similar expenses (101,603,895) (68,733,284) (954,506) (344,723)

Net interest income 86,643,137 63,339,274 (271,807) 277,720 Fees and commission income 5,888,041 3,398,492 2,975,599 2,516,980

Fees and commission expenses (1,035,694) (623,519) - - Net fees and commission income 4,852,347 2,774,973 2,975,599 2,516,980

Net trading loss 2,739,208 2,318,960 123,574 (575,972)

Other operating income 6,871,267 367,800 (695,993) 157,988

Total operating income 101,105,959 68,801,007 2,131,373 2,376,716 Credit loss expense (9,965,146) (3,066,123) - -

Net operating income 91,140,813 65,734,884 2,131,373 2,376,716 Operating expenses (61,246,655) (46,103,722) (3,927,090) (3,589,369)

Amortisation of deferred grants 1,323,934 1,270,175 - -

Share of profit of an associate 308,009 102,028 - -

Profit before tax 31,526,101 21,003,365 (1,795,717) (1,212,653)

Income tax expense (6,025,326) (5,219,758) (68,024) (62,244)

Profit/(loss) for the year 25,500,775 15,783,607 (1,863,741) (1,274,897)

Attributable to: Equity holders of the parent

25,019,243

15,911,636

(1,863,741)

(1,274,897)

Non-controlling interests 481,532 (128,029) - -

25,500,775 15,783,607 (1,863,741) (1,274,897)

Other comprehensive income

Exchange differences on translation of

foreign operations, net of tax

4,967,017

487,876

-

-

Total comprehensive income, net of tax 30,467,792 16,271,483 (1,863,741) (1,274,897)

Attributable to:

Equity holders of the parent

29,986,260

16,399,512

(1,863,741)

(1,274,897)

Non-controlling interests 481,532 (128,029) - -

30,467,792 16,271,483 (1,863,741) (1,274,897)

Group Company


For the year ended December 31, 2013

Statement of Comprehensive Income


2013 MNT'000

2012 MNT'000

2013 MNT'000

2012 MNT'000

ASSETS Cash and balances with central bank

238,621,284 174,464,009 - -

Due from banks 132,389,522 163,677,693 899,935 481,155

Reverse repurchase agreements 29,991,255 3,498,061 - -

Derivative financial instrument 636,835 -

Financial investment - held-for-trading 458 80,056 - -

Financial investments - available-for-sale 15,500,694 546,116 - -

Financial investments - held-to-maturity 329,582,816 88,135,490 - -

Loans and advances to customers 1,069,901,579 650,844,727 7,929,182 6,951,609

Other assets 10,745,612 8,192,581 402,030 891,793

Properties held for sale 5,105,763 1,031,577 - -

Property and equipment 31,574,782 25,776,697 421,291 448,068

Intangible assets 10,756,059 4,746,717 - -

Investments in subsidiaries - - 80,409,839 72,030,379

Investments in an associate - 2,057,700 - 1,750,000

Deferred tax asset 1,027,166 677,103 - -

TOTAL ASSETS 1,875,833,825 1,123,728,527 90,062,277 82,553,004

LIABILITIES

Due to banks 141,706,978 55,931,724 - -

Repurchase agreements 162,428,300 63,004,615 - -

Due to customers 639,662,729 511,978,212 -

Derivative financial instrument 626,804 - - -

Written put option 2,226,068 1,761,536 761,350 676,858

Borrowed funds 684,994,007 302,146,544 16,980,050 7,713,767

Subordinated loans 58,637,886 48,864,226 - -

Deferred grants 1,957,277 1,576,638 - -

Finance lease liability - - 266,163 312,948

Other liabilities 22,983,390 9,428,578 958,629 920,623

Income tax payable 2,205,943 1,099,803 31,018 -

TOTAL LIABILITIES 1,717,429,382 995,791,876 18,997,210 9,624,196

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE GROUP AND OF THE COMPANY

Ordinary shares 16,584,644 16,584,644 16,584,644 16,584,644

Share premium 56,495,362 56,495,362 56,495,362 56,495,362

Other reserves 9,579,293 9,579,293 809,461 809,461

Retained profits/(accumulated losses) 58,912,934 33,893,691 (2,824,400) (960,659)

Foreign exchange revaluation reserve 5,454,893 487,876 - -

Equity attributable to equity holders of the parent 147,027,126 117,040,866 71,065,067 72,928,808

Non-controlling interests 11,377,317 10,895,785 - -

TOTAL EQUITY 158,404,443 127,936,651 71,065,067 72,928,808

TOTAL LIABILITIES AND EQUITY 1,875,833,825 1,123,728,527 90,062,277 82,553,004

Group Company


For the year ended December 31, 2013 Statement of Financial Position


2013 MNT'000

2012 MNT'000

2013 MNT'000

2012 MNT'000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 31,526,101 21,003,365 (1,795,717) (1,212,653)

Adjustments for:

Changes in fair value of held-for-trading financial instrument and financial derivative instrument

(381,046) 41,371 84,492 676,858

Loss/(gain) on disposal of property, plant and equipment 6,174 (3,957) 24,665 (2,833)

Gain/(loss) on disposal of intangible asset (4,517) - - -

Gain/(loss) on disposal of properties held for sale (9,819) - - -

Unrealised foreign exchange (gain)/loss (2,113,032) (44,655) 795,859 (4,092)

Credit loss on loans and advances to customers 9,825,769 3,031,578 - -

Credit loss on other assets 139,377 34,545 - -

Depreciation of property, plant and equipment 3,867,582 2,936,709 59,720 48,606

Amortisation of intangible assets 824,252 541,181 - -

Property and equipment written off 220 - 80 -

Recoveries of/impairment loss on foreclosed properties 325,322 (13,048) - -

Recoveries of/impairment loss on properties held for sale - - - -

Amortisation of deferred grants (1,323,934) (1,270,175) - -

Reversal of current and deferred income tax payable - (97,522) - (97,522)

Share of profit of an associate (308,009) (102,028) - -

Dividend income - - - -

Operating profit/(loss) before working capital changes 42,374,440 26,057,364 (830,901) (591,636)

Changes in operating assets:

Statutory deposit with Bank of Mongolia (24,441,404) (23,376,094) - -

Due from banks 20,100,764 (104,241) - -

Reverse repurchase agreements (26,493,194) (3,498,061) - -

Loans and advances to customers (375,845,886) (104,905,149) (46,067) (3,535,748)

Other assets 368,253 (3,346,536) 508,874 (519,095)

Properties held for sale (3,967,398) -

Changes in operating liabilities:

Due to banks 81,954,306 (6,485,611) - -

Repurchase agreements 99,423,685 14,182,028 - -

Due to customers 108,904,582 147,936,826 - -

Other liabilities 6,187,326 4,054,387 31,473 268,379

Cash generated/(used in) from operations (71,434,526) 50,514,913 (336,621) (4,378,100)

Income tax paid (5,270,867) (5,095,982) (37,005) (92,639)

Net cash flows generated/(used in) from operating

activities (76,705,393) 45,418,931 (373,626) (4,470,739)

Group Company



Statement of Cash Flows


2013 MNT'000

2012 MNT'000

2013 MNT'000

2012 MNT'000

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial investments (69,512,726) (24,315,604) - -

Proceeds from disposal of property, plant and equipment 320,105 421,355 37,000 153,619

Proceeds on disposal of intangible asset 6,600 - - -

Purchase of property, plant and equipment (9,066,237) (9,207,183) (94,688) (121,572)

Purchase of intangible assets (1,990,624) (1,105,823) - -

Acquisition of a subsidiary, net of cash acquired

238,257

-

Disposal of associates - - 1,750,000 -

Increase in investment in subsidiaries - - (8,379,460) (11,363,849)

Net cash flows used in investing activities (74,320,540) (33,968,998) (6,687,148) (11,331,802)

CASH FLOWS FROM FINANCING ACTIVITIES

Drawdown of borrowed funds 503,460,651 118,615,364 7,529,991 3,515,502

Drawdown of subordinated loans - 11,955,949 - -

Proceeds from issuance of ordinary shares - 22,284,373 - 11,252,683

Repayment of borrowed funds (165,082,378) (43,601,325) - -

Payment of finance lease liabilities - (23,416) (64,408) (23,416)

Dividends paid - (697,232) - -

Deferred grants received 1,704,573 2,136,771 - -

Net cash flows generated from financing activities 340,082,846 110,670,484 7,465,583 14,744,769

Net increase/(decrease) in cash and cash equivalents 189,056,913 122,120,417 404,809 (1,057,772)

Effect of exchange rate changes on cash and cash equivalents

24,529,717 3,781,184 13,971 59

Cash and cash equivalents brought forward 316,929,478 191,027,877 481,155 1,538,868

Cash and cash equivalents carried forward 530,516,108 316,929,478 899,935 481,155

Group Company

Statement of Cash Flows continued




Group Ordinary

shares MNT'000

Share

premium MNT'000

Other

reserves MNT'000

Retained

profits MNT'000

Foreign currency

translation reserve MNT'000

Total

MNT'000

Non-controlling

interest MNT'000

Total Equity

MNT'000

1 January 2012 14,932,723 46,894,599 11,340,829 17,982,055

- 91,150,206 - 91,150,206

Profit for the year - - - 15,911,636 - 15,911,636 (128,029) 15,783,607

Other comprehensive income - - - - 487,876 487,876 - 487,876

Total comprehensive income - - - 15,911,636 487,876 16,399,512 (128,029) 16,271,483

Issuance of ordinary shares 1,651,921 9,600,763 - - - 11,252,684 - 11,252,684

Written put option - - (1,761,536) - - (1,761,536) - (1,761,536)

Acquisition of subsidiaries - - - - - - 11,023,814 11,023,814

At 31 December 2012 and

1 January 2013 16,584,644 56,495,362 9,579,293 33,893,691

487,876 117,040,866 10,895,785 127,936,651

Profit for the year - - - 25,019,243 - 25,019,243 481,532 25,500,775

Other comprehensive income - - - - 4,967,017 4,967,017 - 4,967,017

Total comprehensive income - - - 25,019,243 4,967,017 29,986,260 481,532 30,467,792

At 31 December 2013 16,584,644 56,495,362 9,579,293 58,912,934 5,454,893 147,027,126 11,377,317 158,404,443

Company

Ordinary shares MNT'000

Share premium MNT'000

Other reserves MNT'000

Retained profits /(accumulated

losses) MNT'000

Total equity MNT'000

1 January 2012 14,932,723 46,894,599 809,461 314,238 62,951,021

Total comprehensive loss - - - (1,274,897) (1,274,897)

Issuance of ordinary shares 1,651,921 9,600,763 - - 11,252,684

At 31 December 2012 16,584,644 56,495,362 809,461 (960,659) 72,928,808

Total comprehensive loss - - - (1,863,741) (1,863,741)

Issuance of ordinary shares - - - - -

At 31 December 2013 16,584,644 56,495,362 809,461 (2,824,400) 71,065,067



Statement of Changes in Equity


GOLDEN FUND FOR

DEVELOPMENT ASSOCIATION

Central Tower, Room 508, Great Chinggis Khan’s Square 2, SBD-8 Ulaanbaatar-14200, Mongolia

www.tengerfinancialgroup.com (976-11) – 320341

http://www.tengerfinancialgroup.com

TFG 2013 Annual Report

Documents

Transcript of TFG 2013 Annual Report