You are on page 1of 13

CORPORATE GOVERNANCECODE APPR.

OVED By the decision the Boardof Directors of of TenGerFinancial GroupLLC

thisl(day of lv,r'",t ,201 I Ddted l _ _ _ _ _ _ T -

[ , I I |-_; i '

CORPORATE GOVERNANCE CODE OF TENGER FINANCIAL GROUP LLC

Mongolia Ulaanbaatar,

:iT$, {ftil,
aatlt<tt( aloSr tit

Table of Contents PREAMBLE BACKGROUNDAND PROFILE PART I. COMMITMENT TO CORPOMTE GOVERNANCE L Definition and Principles 2. Internal CorporateDocumentation 3. General GovernanceStructure 4. Compliance with and Adherenceto Corporate Governance PART II. GOOD BOARD PMCTICES L At the SupervisoryBoard Level 2. At the ExecutiveBody Level 3. Interaction Betweenthe supemisoryBoard and ExecutiveBodies and the Role of the Corporate Secretary [if establishedJ PART III. SHAREHOLDER RIGHTS I. GeneralMeetingsof Shareholders 2. (Minority) ShareholderRightsProtection 3. Related Party Transactions 4. Dividend Policy PART IV. INFORMATION DISCLOSUREAND TMNSPARENCY L Disclosure Policies and Practices 2. Financial Reporting 3. Internal Audit and Control 4. The External Audit 5. Ownership Structure

3 3 4 4 4 5 6 6 6 9 9

t0 IO
]I II I] II I2 T2 I2 I3 13

#
Preamble The purposeof this Company Code of CorporateGovemance(hereinafter the Company Code) is to improve and systematize governance the Limited Liability Company the of <TenGer Financial Group> (hereinafter o'the Comp&try"), make its governance more transparent, demonstrate Company'scommitmentto good corporategovemance and the by developing and furthering : . . performance Responsible, and management; accountable, value-based Effective oversight,with executivebodiesthat act in the best interestsof the Company including minority shareholders, seekto enhance and its shareholders, and shareholder value in a sustainable manner;and Appropriate information disclosureand transparency well as an effective systemof as risk management internalcontrol. and

By adopting,following, andupdatingthe CompanyCode,the Company'scharter,and bylaws on a regularbasis,the Companyconfirmsits desireto demonstrably leadand promote good corporate governance.To foster the confidenceof its shareholders, employees, investors, the generalpublic, the CompanyCode goesbeyondthe established and legaland regulatoryframework in Mongolia today, and embraces both national and internationally governance principlesandpractices. recognized corporate The Company'sgoverningbodiesand employees understand this CompanyCode as their joint obligation,and accordingly,obligatethemselves ensurethat its provisionsand its to spirit are adheredto and acted upon throughoutthe Company and its subsidiaries and dependent companies. Background and Profile The Company'sMission and Vision arethe following: Vision:TenGerFinancialGroup is a family of companies built to provide equitable access to inclusive financial services.The Group will strive to be dynamic leader settingthe highest standardsof triple bottom line mission in corporate governance,social and environmental responsibility while returningfair valueto the Shareholder. Mission: TenGer Financial Group's mission is to createsynergiesamong its affiliates in orderto maximizeboth socialand financialgainsto our stakeholders. businesses will Our be driven by innovationand dynamismin deliveringpremium quality servicesand added valueto the customers. The Company's subsidiariesand affiliates operate in the following businesssectors: commercial banking, financial leasing, general insurance, software development and securitv.

Part I. Commitment to Corporate Governance 1. Definition and Principles The Company defines corporate governanceas a set of structuresand processesfor the direction and control of companies, which involves a set of relationshipsbetweenthe Company'sshareholders, Board of Directors,and executivebodies with the purposeof creatinglong-term shareholder value. It views corporategovernance a meansio improve as operationalefficiency, attractfinancing at a lower cost,and build a better reputation.Ii also views a sound system of governanceas an important contribution to the rule of law in Mongolia and an importantdeterminant the role of the Companyin a moderneconomy of and society. The Company Code sets out the Company'scorporategovernanceframework and is based Mongolianlegislation, Corporate on the Governance Codeapproved the Financial by RegulatoryCommission(FRC), as well as internationallyrecognizedbesi practicesand principles, suchasthe oECD Principles corporateGovernance. of The Company's corporate govemance framework is based on the following principles: ' Accountability:This CompanyCode establishes the Company'saccountability to all shareholders guidesthe Company'sBoard of Directors in seiting strategy, and ani guidingand monitoringthe Company'sexecutive management. ' Fairness: The Companyobligates itself to protectshareholder rights and ensure the equitable treatment all shareholders, of includingminority and foreign shlareholders. ' Transparency: The Companyis to ensure that timely and accurate disclosure is made on all material mattersregardingthe Company,including the financial situation, performance, ownership, and govemance the Company,in a mannereasilyaccessible of to interested parties. ' Responsibility:The Company recognizes the rights of other stakeholders as established laws and regulations,and encourages by co-operationbetween the Company and stakeholders creatingsustainable in and financially soundenterprises. The Company, its key officers and all employees act in accordancewith all applicablelaws and regulations,and, furthermore,shall comply with ethical standards of business conductas definedby this CompanyCodeand otherapplicable documents. 2. Internal Corporate Documentation

(&
, J

bo "** :
a,rarara! cloua rlr

This Company Code is principle-based.More specific corporate governancestructures, processes, practicesare regulatedin the Company'sCharterand the by-laws for the: and ' ' r . . . I . (GMS); GeneralMeetingof Shareholders Board of Directors; Executivemanagement; committees the Boardof Directors; Standing of Dividendpolicy; Risk management; management; Human resources and Informationdisclosure transparency. and

This set of internal corporatedocumentsfollows legal and regulatory requirements, and incorporates main provisionsof the CompanyLaw of Mongolia and internationally the practices. recognizedcorporategovernance 3. General GovernanceStructure The Companyhasthe following governingandotherbodies: . The GeneralMeeting of Shareholder. highestgoverningbody of the Company The in allowsthe shareholders participate the governance the Company; to of . The Board of Directors is responsible the strategicdirection of the Company, for and the guidance and oversightof management; Board of Directorsmay also establish the committees on audit, risk management, corporate governance, nominations and planningetc; remuneration, strategic . The Chief Executive Officer (CEO) and his/her team carry out the day-to-day management the Company and implementthe strategyset by the Board of Directors and of shareholders; ' The CorporateSecretaryensures that the governingbodies follow internal rules and externalregulationsto facilitate clear communicationsbetweenthe governing bodies,and actsas an adviserto directorsand seniorexecutives; . The Internal Auditor develops and monitors internal control proceduresfor the business operations the Company.The InternalAuditor reportsdirectly to the Board of of Directorsthrough the Audit Committee,and reportsadministrativelyto the Chief Executive Officer. 4. Compliance with and Adherence to Corporate Governance Policies and Practices The Company's Corporate Secretary is responsible for ensuring the development of, policies and practicesin the compliancewith, and periodic review of corporategovernance

$'
iar

Company. Part II. Good Board Practices The Company views a vigilant, professional, and independentBoard of Directors as essential for good corporate governance.The Board of Directors cannot substitute for talented professional managerso nor change the economic environment in which the Companyoperates.It can, however,influencethe performanceof the Companythrough its supervision,guidance,and control of management the interestsand for the benefit of tne in Company's shareholders.Executive bodies also play a crucial role in the governance process.The effective interaction betweenall governing bodies, and a clear separationof authoritiesis key to soundcorporategovernance. 1. At the Board of Directors Level a.AuIhorily. The Board of Directors' scopeof authority is set forth in the Company,s Charter,in conformity with relevant legislationand the recommendations the Corporate of Governance Code approvedby FRC. b. Size. The Board of Directors, upon the recommendationof its Govemance, Nominating and CompensationCommittee,recommends appropriatesize of the Board the of Directors.The Board of Directors' size is fixed in the Company'i charter.Achieving the neededquality and mix-of-skills will be the primary considerationin aniving at the ovirall number. c. Election. Term. and Dismissal. Directors are elected for a two-year term. The Company uses ordinary voting to elect its directors. The Board of Directors does not believe it is in the best interestsof the Companyor its shareholders introduceterm limits. to Experienceddirectors familiar with the Companyand the industry in which it operates are key to providing proper guidance.The GMS may only dismissall directors. d. Compositionand Independence. The compositionof the Board of Directors is determinedin such a way that combinesthe representatives various shareholder of groups, includingminority shareholders. The Board of Directors' composition,competencies, and mix-of-skills are adequate for oversight duties, and the developmentof the Company's direction and strategy.Each individual director has the experience,knowledge, qualifications, expertise,and integrity necessary effectively dischargethe Board of Directors duties and enhancethe Board's to ability to servethe long-term interestsof the Company and its shareholders. The Board of Directors has a broad range of expertisethat coversthe Company's main business, sector, and geographical areas. A full and complete set of information on the directors' qualifications is set forth and annually reviewed by the Board of Directors upon the recommendation its Governance, of Nominating and CompensationCommittee and fixed in the Company'sCharteror by-laws.

*-

Iq $ ff, ;qS;",.:
ClOur:lrl

fr'

.:

,, .{ s

.:,

'

#r-

llaAr(lr(

The law prohibits the CEO from being the Chairmanof the Board of Directors of the Company.However, it does not precludethe CEO to fulfill the duties of Chairmanof the Board of Directors of the subsidiariesand affiliates of the Company.To enhanceunbiased oversight,the Company believes that a non-executivedirector should chair the Board of Directors. of The Company's Board of Directors is composedof not more than25%o executive directorswho are employeesof the Company. To ensurethe impartiality of decisionsand to maintain the balanceof interestsamong 2 various groups of shareholders, (two) of the Board membersare independentdirectors. The Companydefinesthose directorswho have no material relationshipwith the Company beyond their directorship as independent. The Board of Directors ascertains which members are to be deemed independentduring its meeting. Criteria for determining Code approvedby FRC, shall be basedon the CorporateGovernance director independence complemented by other intemationally recognized definitions, and specified in the Company'sCharterand annualreport. e. Structureand Committees.The Company has establishedthe following Board of Directors'committees: . . . . Committee; Nominating and Compensation Governanceo Audit Committee; The InvestmentCommittee;and by Other committeesdeemednecessary the Board of Directors.

All committeeshave by-laws containing provisions on the scope of authority, competencies, composition, working procedures,as well as the rights and responsibilities members. of the committee Each committee is to provide provisional considerationof the most important issues that fall within the authority of the Board of Directors. After each of its meetings,the committeeshall report on the meetingto the Board of Direetors. The Board of Directors meetsaccordingto a fixed schedule, f. Working Procedures. set at the beginning of its term, which enablesit to properly dischargeits duties.As a rule, the Board of Directors shall meet at least4 (four) times a year. Detailed proceduresfor calling and conductingthe Board of Directors meetingsare defined in the Board of Directors' by-law. All directors are provided with a concise but comprehensiveset of information by the Corporate Secretary in a timely manner, concurrently with the notice of the Board meeting, but no less than 14 (fourteen) days is minutesof the prior beforeeachmeeting.This set of documents to include:an agenda; Board meeting; key performance indicators, including relevant financial and operational for and informationpreparedby the management; clear recommendations action.

'F:-i}$.3 ffi,rre
The Board of Directors keepsdetailedminutesof its meetingsthat adequately reflect Board discussions, signedby the Chairmanand the CorporateSecretary, and includevoting results on an individual basis. The Company keeps transcripts (verbatim reports) o? importantBoard decisions,suchas the approvalof extraordinarytransactions. g. Self-Evaluation.The Board of Directors conducts a yearly self-evaluation.This processis to be organizedby the Chairmanof the Board and the resultsare to be discussed by the full Board of Directors. Independentconsultantsmay also be invited to assistthe Board of Directors in this process. h. Training and Accessto Advisers. The Companyoffers an orientationprogram for new directorson the Company, its business, and other issuesthat will assistthem in dischargingtheir duties. The Company also provides generalaccessto training coursesto its directorsas a matter of continuousprofessionaleducation.The Board of Directors and its committeesshall also have the ability to retain independent legal counsel,accounting, or other consultants advisethe Board of Directorswhen necessary. to i. Remuneration.The remunerationof non-executivedirectors is competitive and is comprised of a meeting attendancefee and an additional fee for the membership of committeesor the Board of Directors itself. The remunerationpackageshall, however,not jeopardize a director's independence.Executive directors ire no1 paid beyond their executive remunerationpackage. The Board of Directors' Governance,Nominating and CompensationCommittee periodically reviews the remuneration paid to directors. All directors sign a contract with the Company. The Company publicly discloses the remuneration eachdirectoron an individualbasis. of j. Duties and Responsibilities.Directors act in good faith, with due care and in the best interestsof the Company and all its shareholders and not in the interestsof any particular shareholder on the basisof all relevantinformation. Each director is expectei to attendall Board of Directors and applicablecommitteemeetings. The Board of Directors must decide as to whether its directors can hold positions in the governingbodiesof other companies. The Companyshall not prohibit its directorsfrom serving on other Board of Directors. Directors are expected to ensure that other commitmentsdo not interferein the dischargeof their duties. Directors shall not divulge or use confidential or insider information about the Company. Directors shall abstainfrom actionsthat will or may lead to a conflict of interestwith the Company. When such a conflict exists, directors shall disclose information about the conflict of interests the other directorsand shall abstainfrom voting on suchissues. to 2. At the ExecutiveManagementLevel The Company understandsthat the day-to-day managementof the Company requires

i::i:*iil il iif l 'air \ i; i:

the from the CEO. It alsorecognizes challenge and complexityof running strongleadership a Companyand believesin teamwork,a collective ratherthan individual approach. a. Authority. The CEO carries out the Company's day-to-day management, implementingits goalsand objectives,and carrying out its strategy. b. Election.Term. and Dismissal.The Board of Directorsappointsthe CEO for a Nominating and Compensation Committee. specifiedterm proposedby the Governance, The Board of Directorsmay dismissthe CEO. Groundsinclude,amongotherthings, providing false information to the Board of Directors,willful neglect of his duties and responsibilities, convictionof a criminal act" or plan that Planning.The Board of Directorsis to adopt a succession c. Succession outlines how it will effectively deal with the temporary or perrnanentloss of senior the executives. assistin this process, CEO is to provide the Board of Directorswith a To list of individuals best suited to replacethe Company's key executives,including the positionof the CEO. d. Remunerationand Evaluation. The Board of Directors sets the amount of shall have a fixed and variable component, remuneration the CEO. The remuneration of and the latter is tied to key performanceindicators, in-line with the input into the and value. Company'slong-termdevelopment creationof shareholder The e. Dutiesand Responsibilities. CEO shall act in good faith and with due carein the best interestsof the Company and all its shareholders and not the interestsof a - on the basisof all relevantinformation. particular shareholder The CEO shall abstainfrom actionsthat will or may lead to a conflict betweenhis of bodies When sucha conflict exists,members the executive andthe Company'sinterests. to shalldisclose informationaboutthe conflict of interests the Board of Directors.and shall and voting on suchissues. abstain from deliberating 3. Interaction betweenthe Board of Directors and ExecutiveBodies and the Role of the Corporate Secretary Good corporategovernanceprovides for an open dialogue betweenthe Company's Board of Directorsand executivebodies.The Board of Directorsshall further have unrestricted plays a The CorporateSecretary and access the Company'smanagement its employees. to key, overallrole in facilitatingthis process. The Company's Corporate Secretary is employed on a full-time basis. The Corporate the Secretarypossesses necessaryqualifications and skills to ensure that the governing bodies follow intemal rules and external regulations; facilitates clear communications between the governing bodies in-line with the Company's charter, by-laws, and other internal rules; and keeps the Company's key officers abreast of the latest corporate

.'t-:.I.nr ,.,,:: ..,# :. ,:' r- l:.;':, l"'


;imi?;;i:ilfiTin

govemance developments. Part III. ShareholderRights All shareholders have the right to participate in the governanceand the profits of the company.All rights are regulated the company's charter and by-laws. in l. General Meetings of Shareholders The Companyhas a by-law for the GMS that providesa detaileddescriptionof all the procedures preparing,conducting,and making decisionsat the GMS. for a. Preparation.Every shareholderthat holds voting sharesis entitled to participate and vote during the GMS, and receiveadvancenotification, an agenda,as well as accurate, objective, and timely information sufficient for making an informed decision about the issues be decidedat the GMS. The Company'sexecutivebodieswill be responsible to for this process, which is to be implementedby the corporate Secretary. The Company has a fair and effective procedure for submitting proposals to the agendaof the GMS, including proposalsfor the nomination of the Board-of Directors members. The agendaof the GMS is not changedafter the Board of Directors approvesit. b. Conducting GMS. The Companytakesall the stepsnecessary facilitatethe the to participationof shareholders the GMS and vote on the agendaitems. in The venue of the GMS is easily accessiblefor the majority of shareholders. Registrationproceduresare convenient and allow for quick and iasy admittanceto the GMS. The Company's executivebodiesare to help shareholders exercisetheir voting rights in the event they are unable to physically attendthe GMS. The executivebodieswiit do so by providing shareholderswith a power of attorney form, based upon which the shareholder will have an opportunityto instructhis proxy on how to vote on agendaitems. The Companyensures that membersof the Board of Directors, executivebodies,and ExternalAuditor are presentduring the GMS to answerquestions.Each shareholder the has right to take the floor on matters on the agenda, and submit relevant proposals and 'fairly, questions.The chairman of the GMS conducts the meeting professionaliy, and expeditiously. . The Company has effective shareholdervoting mechanisms in place to protect minority shareholdersagainst unfair actions, as regulated in its Charter, Shareholders Agreementand by-law for the GMS. The proceduresfor counting votes at the GMS are transparent excludethe possibility of manipulatingvoting results. and c. Results. The voting results and other relevant materials are distributed to

l0

g'
' vz\ .u

, 'tsi;
arallclra caoua rll

shareholders, either at the end of the GMS or very soon after the GMS is held, as well as to the generalpublic by postingthem on the Company'swebsiteand publishingthem in the massmediain a timely manner. 2. (Minority) ShareholderRights Protection complaintsand effectively regulating The Companyhas a systemof registeringshareholder corporatedisputesthrough the Board of Directors. Minority shareholders have 2 (two) identifiable a. Board of Directors representation. representatives the Board of Directors. on policy in and enforceable b. Takeoverpolicy. The Companyhas a clearly articulated place that protects the rights of minority shareholders special circumstances, in such as a change ofcontrol. 3. Related Party Transactions When this is not possible,the Company The Companyavoids relatedparty transactions. including informationon discloses relevant informationon relatedparty transactions, all partiesandthe affiliation of directors andmembers othergoverning bodies. of the affiliated 4. Dividend Policy The Company has formally developed and follows a written dividend policy. The dividendpolicy: Company's . . . and predictable mechanism for Establishes a transparent, understandable, the determining amountof the dividends; Ensuresthat the dividend paymentprocedureis easyand efficient; and dividends. Provides the completeandtimely paymentof declared for

Part IV. Information Disclosureand Transparency Transparency, and timely and accurateinformation disclosureis a key corporate governance principle for the Company. 1. DisclosurePoliciesand Practices to The Companydiscloses and provideseasyaccess all materialinformation,includingthe financial situation,performance,ownership,and the govemancestructureof the Company to shareholders free of charge.The Board of Directors preparesand approvesa by-law on informationdisclosureand makes it publicly availableon the Company's website.The Company publishes a comprehensiveannual report that includes a co{porategovernance section,and preparesother reports, such as the prospectus,quarterly reports, and material factsreports. 11

The Companydisclosesits corporategovernance practices,corporateeventscalendar, and other material information on its websitein a timely manner. The Companytakes measures protect confidential information as defined in its byto law on informationdisclosure. Any informationobtained the Company'semployees by and the members the governingbodiesmay not be usedfor their personal of benefit. 2. Financial Reporting The Company keeps records and prepares a full set of financial statementsin accordance with InternationalFinancial Reporting Standards and disclosesthese in its regulatory filings, includingthe annualreport,and on its website. Detailed notesaccompanyfinancial statements that the usersof the statements so can properly interpretthe Company's financial performance. management A discussion and analysis(MD&A), as well as the opinionsof the ExternalAuditor, shall complement all financialinformation.The Companyalsoproduces consolidated accounts. 3. Internal Audit and Control a. The Internal Auditor. The Company has an office of the Internal Auditor who is responsible the daily internal control of the Company'sfinancesand operations. for The Internal Auditor is staffed by a highly respectedand reputableperson, and reports to the Board of Directors'Audit Committeefunctionallyand to the CEO. The InternalAuditor's authority, composition,working procedures, and other relevant mattersare regulatedin its by-law. b. The Board of Directors' Audit Committee.The Audit Committeeis to focus on two key areas:financial reporting, and internal and externalaudit. This committeeis to be chaired by an independent director and composedof non-executivedirectors,each of whom is recognizedfor his or her financial literacy. Its exact authority, composition, working procedures, and other relevantmattersare regulatedin its charter. 4. The External Audit An External Auditor audits the Company'sfinancial statements. The External Auditor is a publicly recognizedindependent auditing firm, where independent means independence from the Company, the Company's management, and major shareholders. The Company ensures that the Audit partner is periodically rotated. The remunerationof the auditor is disclosed to shareholders. The External Auditor is selectedby the GMS and/or the tsoard of Directors in accordancewith the Charter and Shareholders Agreement. 5.Ownership Structure

1.t A Z

The Company ensuresthat beneficial owners of five percent or more of the voting shares aredisclosed.

13