Institute of Finance and Economics

February 22, 2013

Randolph S. KoppaPresident, TDB

Consider this: TDB has issued USD300 million in three year senior

notes under its USD700 million EMTN Programme.

Bank of America Merrill Lynch and ING were the Lead Managers, Arrangers and Book Runners of this Reg S transaction.

Reissue price 99.68

Coupon 8.5% p.a.

Company HighlightsThe “International Face of Mongolia”

Only Mongolian Repeat Issuer with Proven Track

Record of Debt Repayment in the International Market

2007

US$75 mm

3-yr Senior

Notes

Fully Repaid

in 2010

2010

US$150 mm

3-yr Senior

Notes

2010

US$25 mm

5-yr

Subordinated

Notes

First Mongolian issuer in the international capital market

2012

US$ 300million 8.5% Unsecured Senior Notes

Under US$ 700 million EMNT Program

Banks

and

Others

15%

Asset

Manag

ers, 60

%

Private

Banks,

25%

Investor profile

Asia

, 60%

Europe

, 35%

Offshor

e

US, 5%

Geographic demand

Joint Arrangers /

Joint Book

Runners /

Joint Lead

Managers

Listing Stock Exchange Rated by

Consider also: Government of Mongolia has issued USD 1.5 billion in

5 and 10 year notes under its USD 5 billion GMTN programme.

Bank of America Merrll Lynch, Deutsche Bank, HSBC, J.P.Morgan and TDB Capital were Joint Lead Managers and the first four banks were the joint bookrunners of this Reg S/ 144A transaction

Reissue rates: 99.996 for the 5 year; 100 for the 10 year

Coupon 4.125% on USD 500 million of 5 year notes , and 5.125% on USD 1 billion of 10 year notes

Terms and meanings Bonds

Notes

Euro Medium Term Note

Reg S

144A

Book Runner

Listing

Discussion points Background

History

Development of the market

Analysis of TDB’s transaction

Analysis of the GoM sovereign transaction

Current conditions

Relevance for Mongolia

Origins Hungary 1956

USSR concerned about its USD in US banks

Soviet dollar holdings moved to Moscow Narodny Bank, a London, UK, chartered bank.

Telex address: “EURBANK”

MNB re-deposited funds in USA

Became known as Eurodollars

Loans in Eurodollars became Euroloans

Bonds in Eurodollars became Eurobonds

Other offshore currencies became Eurocurrencies

The Eurobond Market The Eurobond market is the market for long-term debt

instruments issued and traded in the offshore market.

Like the Eurocurrency market, differences in national regulation helped developed the Eurobond market, while increasing capital mobility and greater ease in telecommunications enabled it to flourish.

The Eurobond Market A Eurobond is offered for sale simultaneously in a

number of countries.

A domestic bond is an obligation of a domestic issuer, underwritten by a syndicate of domestic investment banks, denominated in domestic currency, and offered for sale in the domestic market.

A foreign bond is similar to a domestic bond except that the issuer is a foreign entity.

Historical Overview and Dimensions of the Eurobond Market The Interest Equalization Tax (IET) of 1963 taxed

purchases of foreign stocks and bonds issued or trading in the United States.

The IET was proposed as a temporary measure to reduce U.S. capital outflows and take pressure off the U.S. balance of payments.

However, it effectively closed down the Yankee bond market, and induced foreign borrowers to migrate offshore and set up a US$-bond market in London and Luxembourg.

Historical Overview and Dimensions of the Eurobond Market In 1965 and 1968, further policy measures were taken

to limit the direct foreign investments made by U.S. corporations.

These programs effectively forced U.S. multinationals offshore to meet the financing needs for their foreign projects.

When the stimulating U.S. regulations were scrapped in 1974, the Eurobond market volume first collapsed and then grew steadily, before surging during the 1980s.

Growth of the market UK controls on lending Sterling offshore 1957

US controls on interest rates, Reg Q, 1960s

US capital outflow controls 1960s

US trade deficits in 1970s and thereafter

Lack of reserve requirements and deposit insurance

Controls by Germany and other countries led to Euromarks, Euroyen,etc.

Historical Overview and Dimensions of the Eurobond Market Now, the annual volume of new issues often nears or

surpasses the annual volume of new U.S. corporate bond issues.

Increasingly too, Eurobonds have been issued in currencies other than the US$, and then combined with a currency swap to achieve lower cost funds in US$, etc.

At the same time, the market has grown in terms of bond maturities, issue size, and secondary market trading.

USD 70 trillion in funds available to invest

Full menu of bonds Eurobond

Yankee

Global

Samurai, Shogun

Bulldog

Kangaroo

Dim Sum, Panda

Airang, Kimchi

Matrioska

Kauri

Chinggis, Gobi, Takhi, Buuz ? USD by Mongolia issuer into the US and Euro markets

USD by non Mongolian issuer into Mongolia

MNT by non Mongolian issuer into Mongolian market

Maybe a first: Buuz Bonds: MNT bonds by Mongolian entity into investors outside Mongolia

Options for USD bond issuers Reg S

U.S concern over investor sophistication

Investors outside the U.S.

U.S. offshore investors accepted

Rule 144A

Issue may be sold to U.S onshore investors

Higher level of due diligence

Comparative Characteristics of Bond Issues in the International Bond Market

RegulatoryBodies

Securitiesand Exchange Commission

Official agency approval

Minimum regulatory control

U.S. Market Non-U.S. Market Eurobond Market

Disclosurerequirements

More detailed• High initial and ongoing expense• Onerous to non-US firms

Variable Determined by market practices

Issuing costs 0.50-1.00% Variable to 4.0% 0.50-2.0%

Rating requirements

Yes Usually not No, but commonly done

Comparative Characteristics of Bond Issues in the International Bond Market

Exchange listing

Usually not listed Listing is usual Listing is usual

U.S. Market Non-U.S. Market Eurobond Market

Queuing No queue Queuing is common No queue

Currency of denomination restrictions

United States does not restrict the use of US$

Part of queuing• Many countries have in the past or now restrict use of currency

No restrictions on use of US$ or C$

Speed of issuance

Relatively slow until Rule 415 on shelf registration

Variable Usually fast - bought deal leads to fast issuance

Comparative Characteristics of Bond Issues in the International Bond Market

Borrower / Issuer incentives

+ Large market,great depth

– Disclosure is costly toforeigners,speed

+ Local visibility,diversification offunding sources

– Markets may besmall, queuingmay prevail

+ Lower annualinterest expense,speed of placement

– Cannot sell issuein U.S. until seasoned

U.S. Market Non-U.S. Market Eurobond Market

Lender / Investor incentives

+ Great depth &liquidity, appealof standardizedinformation

– Reporting to taxauthorities, withholding taxprior to 1984

+ Diversifiedcurrencyportfolio

– Reporting totax authorities,withholdingtax may apply

+ Diversifiedcurrency portfolio,bearer bonds, nowithholding tax

– Less liquidity &informationdisclosures

Bond Investor

Bond Issuer

Structure of a Eurobond Syndication

Selling Group

Fiscal Agentor Trustee& Principal

Paying AgentUnderwriters

A Eurobond offering brings together the bond issuer and investor.

Intermediaries

The process is facilitated by intermediaries.

and then assembles other firms to share in the underwriting risks of the issue.

Finally, the management group organizes a group of firms to place the bonds with the ultimate investors.

ManagementGroup

The lead management group meets with the issuer to design the issue size, currency, maturity,coupon, etc...

More terms and jargon T+

Tighter

Syndicate

Sales

Trading

Guidance

Book building

Book subject

Oversubscribed

Revisiting TDB’s transactions Benchmark considerations

Type of investors

Depth of market

Liquidity

Revisiting the GoM transaction Maiden issue

Benchmark considerations

Depth of market

Liquidity

Considerations for Mongolia Non investment grade

Concerns over Foreign Investment Law

Concerns over China slowdown

Drop in commodity prices

Fiscal discipline

Exciting story with high growth economy

Democratic government

Improving rule of law

Current market conditions High volume of funds to invest

Low interest rates in U.S. and Europe

Risk free versus yield considerations

Market is fragile

Eurozone concerns

US economy

Record level of emerging market issues

Access to Markets; which ones? Sovereign

Mining

Infrastructure

Corporates

Banks

Questions?

Thank you!