In the Name of God

CONTENTS

MANAGEMENT REPORT 7

Managing Director’s Statement 8

Board of Directors 11

Financial and Performance Highlights 12

Economic Challenges of Iran 14

Islamic Banking Principles and Practices 20

International Banking Services 24

E-banking Services 28

Bank Generalities 30 Introduction 30 Establishment History 30 Headquarters 30 Composition of the Board of Directors 32 Organizational Chart 33 Affiliates 34 Shares in OTC Market 38 Branch Network 39 Vision 40 Mission 41 Achievements 42 Human Capital 44 Key Financial Ratios 45

Risk Management 46

Anti-money Laundering 50

Audit and Compliance 52

REPORT OF THE INDEPENDENT AUDITOR 56

FINANCIAL STATEMENTS 63

Message from CEO

international sanctions and the ongoing recession in Iran’s economy, has demonstrated an outstanding growth and strong performance by adopting a wise and targeted approach. Our financial results for the fiscal year (20th March, 2014–20th March, 2015) illustrate the progress we have made. For the full year, the bank reported total shareholders’ equity of IRR 7,957 billion as compared to IRR 6,659 billion (an 19.5% increase). The bank’s total assets grew by 49.1% reaching IRR 117,038 billion and our EPS showed a 70.3% increase. In the same period, granted credit facilities were up 150 % reaching IRR 58, 924 billion while total deposits stood at IRR 85,934 billion showing 30.3% growth. For the upcoming year, we are determined to further promote the Day brand in the domestic and Managing international markets by expanding branch network and strengthening efficient correspondent banking relations, presenting new banking products and services, asserting an active presence in the primary capital markets, identifying quick yield investment opportunities, enhancing the volume of foreign Director’s exchange operations, improving existing hardware and software systems in order to enhance the quality of our services etc., Statement Meanwhile, I would like to point out that the entire information presented through this annual report is the actual performance of the bank and its affiliated companies and is a clear indication of our commitment to safeguard our stakeholders’ interests, in full compliance with the bank’s Commercial Code and its Articles of Association. “In the name of God, the Compassionate, the Merciful” To conclude, I would like to take this precious opportunity to express my profound gratitude and “All We Have Achieved are His Blessings” deepest appreciation, both to our colleagues, for their continued hard work and professionalism toward building such a proactive environment, and certainly to our clients, for their continued loyalty and ever- increasing support. On behalf of Day Bank’s Board of Directors, I am honored to present this annual report including the report of the Board of Directors, presented and approved by in the Annual Shareholders Meeting, Dr. Ahmad Shafizadeh together with the report of legal inspector and independent auditor, on the single and consolidated financial statements for the bank and the group of its affiliates, to our distinguished shareholders for Managing Director the fiscal year ending 20th March, 2015 and to proudly announce that Day Bank, in spite of the severe and Member of the Board

8 Annual Report 2014 2015 9 Members of the Board of Directors

Board of Directors

Ali Akbar Arab Mazar Ahmad Shafizadeh Chairman of the Board Managing Director and Member of the Board

Mohammad Ali Movarej Member of the Board

10 Annual Report 2014 2015 11 Overview

Financial and Performance Highlights

)all figures are IRR in Millions( )all figures are IRR in Millions( 2012-13 2013-14 2014-15 a) information on financial activity during the year: a) information on financial activity during the year: Joint income from granted facilities 1,821,035 3,991,386 Joint income from granted facilities 10,237,655 Other joint incomes 1,540,820 6,273,321 Other joint incomes 6,057,532 Solitary incomes 1,325,993 1,687,286 Solitary incomes 6,595,602 On-account interest of deposits (2,362,960) (9,075,353) On-account interest of deposits (16,594,034) Net income of the year 1,155,484 1,351,659 Net income of the year 2,398,375 b) information on financial position at the year’s end: b) information on financial position at the year’s end: Total assets 43,064,628 78,510,977 Total assets 117,038,912 Total facilities granted 14,852,318 23,558,807 Total facilities granted 58,924,399 Total investments 1,622,083 1,959,020 Total investments 2,432,204 Total tangible fixed assets 2,581,321 5,106,213 Total tangible fixed assets 5,044,318 Total deposits 32,804,544 65,943,143 Total deposits 85,934,525 Total liabilities 36,756,926 71,851,615 Total liabilities 109,081,175 Share capital 5,000,000 5,000,000 Share capital 5,000,000 Total shareholders’ equity 6,307,702 6,659,362 Total shareholders’ equity 7,957,737 c) rate of return (percent): c) rate of return (percent): Return on assets 4.13% 2.22% Return on assets 2.5% Return of shareholders’ equity 20.7% 20.85% Return of shareholders’ equity 32.82% d) information on each share outstanding: d) information on each share outstanding: Number of shares outstanding on AGM 5,000,000,000 5,000,000,000 Number of shares outstanding on AGM 5,000,000,000 Predicted earnings per share – IRR 196 270 Predicted earnings per share – IRR 460 Dividend per share – IRR 248 270 Dividend per share – IRR 480 Diluted earnings per share – IRR 297 270 Diluted earnings per share – IRR 480 Final value per share on report’s approval date – IRR 1,294 1,895 Final value per share on report’s approval date – IRR 2,101 Book value per share – IRR 1,262 1,331 Book value per share – IRR 1,591 e) other information: e) other information: Number of branches in Tehran Province 38 48 Number of branches in Tehran Province 48 Number of branches in other provinces 23 32 Number of branches in other provinces 32 Number of branches being equipped or waiting for licence 30 11 Number of branches being equipped or waiting for licence 11 Number of staff at the year’s end 671 743 Number of staff at the year’s end 925

12 Annual Report 2014 2015 13 Overview

Economic Challenges of Iran

One of the most crucial steps in defining organizational strategies and setting objectives is to comprehend sanctions and their related issues influenced all economic equations. However, the prospects of a the actual environment in which it is operating. This acquaintance is a significant prerequisite for positive outcome for nuclear talks, and the possibility of withdrawal from Iran’s blocked foreign currency identifying the opportunities and challenges facing the organization. Needless to point out that there resources, helped the government not to need fiat money and to avoid its result, which is money supply are many environmental variables that affect organizations, and each variable has its own level of growth. The decrease in money supply growth rate continued until the end of the year. influence on each individual organization. Therefore, analyzing environmental variables surronding an In order to control the money supply growth and eventually inflation, the government focused on the organization is of utmost importance from the perspective of that organization. most effective factor, i.e. monetary base. Day Bank, as a young bank that seeks glory, is operating in a turbulent economic environment, like any Growth in the amount of banks’ debts to the Central Bank was the main factor in the growth of other pioneer organization requires a comprehensive knowledge of its competitive environment; as a monetary base in 2014-15. The newfound discipline in the government’s monetary system helped the result, based on a well-prepared plan, the bank prepares analytical reports on its peripheral environment Central Bank to control the government’s debts to the Central Bank as well as the other contributing and take steady steps towards paving the value creation grounds. factors to the monetary base. In the course of banks debts to the Central Bank in 2014-15, private Much theoretical and practical research conducted on the economic environment analyzation and the banks’ debts increased while state banks’ debts decreased. effects of macroeconomic variables on banks. Nonetheless, what influenced the money market more than anything else in 2014-15, were controversies surrounding money supply growth rate, banking interest rate, bad debts of banking system and important repercussions that Iran nuclear talks has on economy particularly on domestic banks. Interest Rate

Based on economic theories, inflation rate should determine the interest rate. During 2014-15, although a decline in inflation rate was expected, not only the interest rate did not come down, but also the banks Money Supply engaged in a competition to raise it. It should be stated that in a healthy economy, the interest rate is not adjusted with the inflation rate but the causality direction is vice versa. In other words, interest rate is a policy making tool that can affect the inflation rate. This formula in Iran is understood reversely. When Controlling money supply growth was one of the most important events of the money market in 2014- country’s economy faces low money supply, absorption of the money supply by financial institution is 15. A decrease in money supply growth rate [in 2014-15] when government faced a budget deficit turned into the sole way of doing business. Brokers tried their most tempting proposals to absorb as was a noteworthy achievement. Money supply growth decreased in rate from around 35 percent to much of the money supply as possible, in addition, illegal institutions that are rarely supervised, made 22 percent per year. Innately, this rate did not lead to a jump in prices from a monetary base, although doing business for banks extremely difficult.

14 Annual Report 2014 2015 15 Overview

Sanctions Capital Market

Another important factor that influenced country’s economy in 2014-15, was the issue of sanctions Capital market did not have an encouraging year in 2014-15. A year in which stock exchange results and pursuing negotiations to remove them. Expansion of foreign currency activities, re-opening the were not satisfactory and cost shareholders their capital by a return rate of minus 20.8 percent. SWIFT and the abolition of prohibition of financial transactions between Iranian banks and European Reasons that contributed to a 21% decline in TEPIX in 2014-15 include: financial institutions, could open one of the knots that has contributed to the crisis in economy and banking system of Iran. Following the heating up of the disagreements over Iran’s nuclear activities, • Stock traders’ indecisiveness about nuclear talks on March 17, 2007 and at the end of the office hours, CBI’s SWIFT network disconnected because of • Increase in interest rate European sanctions. • Sanctions influencing the return rate of some industries Although sanctions did not interrupt international transactions of Iranian banks, but nonetheless • Falling oil prices imposed, enormous expenses on banking and foreign currency operations. Some of the banks • A change in stock traders’ approach to oscillation deprived of SWIFT services were able to transfer money by renting phone and fax lines from their fellow banks in Dubai, Turkey and China, or according to Turkey’s PA report, use unsanctioned Iranian • Shareholders quitting and a drop in the market’s money supply banks as intermediatory. But in this way, works were done slowly and with high expenses. Additionally, sanctioning the Iranian banks, made western banks withdraw from doing any sort of banking transaction In 2014-15, out of 241 trading days, the transaction was positive in 117 days and negative in 124 days. with them. This matter gravely influenced banks in 2014-15. The highest and lowest recorded amount for the index was 79013 and 61533 respectively.

16 Annual Report 2014 2015 17 Foreign Exchange Rate

Foreign exchange rate stabilized in 2014-15. The absence of extreme fluctuations in exchange rate and its relative stability, specially the approach of the State’s official exchange rate to the free market exchange rate indicated the control over this section, and prevented the inflationary effects of this in short term.

18 Annual Report 2014 2015 19 Overview

Islamic Banking Principles and Practices

The Islamic Banking system has enjoyed favorable growth and attracted the attention of many investors or “contracting party”. This contract is applied in the fields of mine and industry, agriculture, housing, and bankers around the world. Instead of paying “a fixed interest”, which is forbidden in Islamic law, commerce and public services. When the bank acts as an agent, it accepts to carry out a particular Islamic banking shares its profit and loss with customers. In this system, although the banks offer their work under a mutual contract with the applicant. Regarding the special conditions of the undertaking, clients on account interest, this is rate may vary depending on the bank’s performance by the end of the bank, then, embarks on assigning the executive operation of the accepted task, wholly or partly, to the fiscal year. another party under a second contract in order to fulfill its obligation. Based on this system, a bank has a close link with its clients and they make joint projects to sell to a third party. What is focused in Islamic banking is the objective of Fixed Usury Free Banking for establishing social justice, which tends to be the first objective of Islamic economic system. In fact, in Legal Partnership usury-free banking system, the focus is the applicant’s purpose. For each contract, a special technique Legal Partnership is a contract under which the bank provides part of the capital of new joint-stock is devised, in a way that firstly, the clients and the bank are not forced to pay or receive interest and companies or buys part of their stocks, hence sharing in the profit of these companies. secondly the profitability levels of the contract are also considered. In the Islamic banking system, the banking transactions have, therefore, been presented in the form of contracts. The current Islamic contracts in Usury Free Banking are: Civil Partnership

Civil Partnership is a contract under which facilities for the development of productive, commercial and Mozarebeh service activities are provided. This contract is the combination of legal or natural persons’ shares in cash or kind and in common for profit making as per the contract. Regarding their applicability, the Mozarebeh is a defined contract in the civil law under which the necessary facilities are granted to applicants can take advantage of these facilities. To conduct this transaction, purpose of transaction, business people. In Mozarebeh, one of the parties (owner) provides the funds, stipulating that the other necessary capital for partnership, collaterals, the goods price, approximate expenses, total price, party (agent) uses it for trading and both parties share the related profit. selling price and selling method, and profit sharing ratio of bank to applicant should be indicated.

Je’aleh Installment Sale Je’aleh is a contract based on which the customer is obliged to pay a certain sum plus a defined A contract under which the bank delivers goods to the customer at a set price, a part or whole of which commission in return for a certain action , according to the contract. The acting party is called “agent” would be received on predetermined maturity through equal or unequal installments.

20 Annual Report 2014 2015 21 Overview

Ghardh Al Hassaneh Salaf

Under this contract, the bank as a lender pays a specific amount to legal or natural persons as the borrower Salaf is forward purchasing of produced goods for specific amount. According to Usury Free Law and as per specified regulations. The borrower’s repayment obligation is equal to the received amount plus to partly provide the working capital of production units, banks purchase the goods produced by the its commission. The portion of each bank to grant Ghardh Al Hassane, the maximum payable amount customer as per their request whether the owner is natural or legal. Banks are allowed to purchase the (facilities) to each applicant, and the commissions are annually specified by Central Bank of Iran. goods, which are produced solely by the units, cannot be easily spoiled and can be quickly traded. Mozare’eh Discounting

Under Mozare’eh contract, the Bank gives a farmland to the customer for a specified duration. The According to the discounting contract, banks discount the documents and drafts of production, trade customer works on the land and the related profits are shared. and service units. Lease to Own Mosaghat

Under this contract, it is agreed that the lessee, if complying with the terms of the contract, will obtain Mosaghat is a contract between a garden owner and another party who receives some of the product the ownership of the leased upon completion of the contract. in return for maintaining and harvesting the garden.

22 Annual Report 2014 2015 23 Overview

International Banking Services

FOREX Trading Services Wire Transfer (Remittance)

In line with presenting modern and quality banking services to our dear compatriots at the international Wire transfer is a method of electronic funds transfer from one person or institution (entity) to another. level and with an specific approach on the importance of international banking operations in today’s A wire transfer can be made from one bank account to another bank account or through a transfer of world, Day Bank hereunder introduces some of its foreign exchange services. cash at a cash office. By applying international banking standards and using modern technologies, while moving in the path Day Bank transfers funds securely to many international destinations. of electronic banking, Day Bank has focused on presenting a full range of foreign exchange services in order to fulfill its important role in this industry. We are ready to render all foreign exchange services in our FOREX Branches and to facilitate the flow of trade in line with macro policies of the government for expansion of non-oil exports. Trade Finance (Documentary Letters of Credit)

Foreign Currency Accounts Documentary letters of credit are undertakings made by an issuing bank, either at the request of an applicant or on its own behalf, to pay a specified amount in an agreed currency to a beneficiary, provided that the beneficiary presents the required shipping documents within a time limit. Day Bank offers the following foreign currency accounts to its clients: Day Bank, in compliance with the Central Bank of the Islamic Republic of Iran´s FOREX Regulations and By-laws, is prepared to provide documentary letters of credit available by sight or deferred payment. We are also ready to advise credits and negotiate requested documents. Term Savings Current Deposit Day Bank is ready to accept applications for issuance of documentary letters of credit. All credits are Account Account Accounts handled according to the latest version of the UCP.

Savings and current accounts are not entitled to any interest distribution. Interest distribution for term deposit foreign currency accounts is made at the end of their term.

24 Annual Report 2014 2015 25 Overview

Documentary Collections

A documentary collection is a process, in which the seller instructs his bank to forward shipping delivery of goods or services.. The duration of the guarantee may extend to the final delivery date plus documents related to the export of goods to the buyer’s bank (collecting Bank) with a request to a grace period. present these documents to the buyer for payment or acceptance, indicating when and on what conditions these documents can be released to the buyer. It is easier and quicker to set up and doesn’t entail the expense of a Documentary letters of Credit. We are ready to handle documentary collections Performance Bond Guarantees for both exporters and importers. This type of guarantee is required to protect against non-performance of the seller’s obligations and assures the good performance at the outcome.

Guarantees Tender Guarantees A tender guarantee (bid bond) is used for participation in international tenders, such a guarantee covers the organizers’ expenses in case when a participant revokes its bid or does not accept the offer.

Guarantees are tools to assure the execution of international contracts. Day Bank Facilitates the international trade experience of its customers by the various types of guarantee documents. Some of the guarantees issued are as follows: Retention Money Guarantees Depending on the contract, a portion of the contract value may be held back by the buyer as the work is approaching the end. The seller may be able to release this “retained money” by presenting a Advance Payment Guarantees retention money guarantee to the buyer. It is used when the contract provides for advance payment to be made to the seller, and it guarantees that the advance payment will be returned to the buyer if the seller does not fulfill its obligations on

26 Annual Report 2014 2015 27 Overview

E-Banking Services

New methods in providing banking services, which has a close relationship with information and Telephone Banking communication technology, is one of the most important factors in creating competitive advantage for Day Bank has enabled easy access to banking services through telephone banks and attracting customers and satisfying them. Service industries such as banks, which pay great lines without any need for accessing its branches physically. attention to the effect of customer satisfaction on his/her commitment and retention, should employ new methods to attract more customers. Card Services As part of its objective to raise customer satisfaction and in order to Meanwhile, having an efficient banking system is the most important requirement for e-business facilitate access to banking services, Day Bank has issued various cards development and entry into markets. In addition, due to technological advances and the increasing as well as taken on extensive installation and initiation of ATM & POS. By need for individuals to use electronic banking services in order to save time and create security in trade, using these cards, customers will be able to withdraw funds or benefit addressing advanced and efficient banking system and paying attention to electronic banking seem from other 24-hour services through any bank. necessary. The rapid development of the informatics industry has made major changes in the form of money and resource transfer systems in the field of banking and new concept of banking named electronic banking has emerged. The term electronic banking refers to “the provision of information or services by a Mobile Banking This service enable the customers to perform online banking tasks, such as monitoring account balances, transferring funds between accounts, bill bank to its customers, via a computer or a smart phone. Considering the importance of electronic banking payment etc., by the use of a smart phone or a cellular device, while they and its possible relationship with customer satisfaction, Day Bank has provided its customers with the are away from their home computer. following electronic services:

Online Banking Online banking is at the center of modern technology for providing banking services. Day Bank has been able to make use of the internet in order to meet the needs of its respected customers for online access to banking Number of E-Banking Equipment & Cards services. Online banking allows customers to conduct financial transactions and have access to a variety of banking services. 2012-13 2013-14 2014-15 ATMs 645 785 797 SMS Banking Easy access to banking services is crucial in the modern world. In this POSs 43,411 44,138 41,809 regard, Day Bank provides valuable services to its customers, including Debit cards 529,617 1,109,667 1,163,619 SMS banking. The bank’s respected customer will have round-the-clock Credit cards 746 1972 2420 access to banking services by simply accessing a telephone line. Gift cards 267,739 434,495 509,719

28 Annual Report 2014 2015 29 Overview

Bank Generalities

Introduction Day Bank is in its fifth year as an active bank. The bank is managed within the confines of the State’s current laws and regulations and CBI’s circulars and guidelines, as well as articles of association of the Bank’s Monetary and Credit Council and the acts of general meetings and the board of directors.

Establishment History Day Bank (Public- Joint Stock Company) was established according to article 98 of the Law of the Third Economic, Social and Cultural Development Plan of Islamic Republic of Iran approved in March 2000, and conforms with The Banking and Monetary Act of Iran approved in 1972, The Law for Usury Free Banking and based on Law of Establishment of Non-State Banks passed on April 9, 2000. Upon warrants no. 87/131296 dated March 16, 2009, and no. 1389/31783 dated May 5, 2010 issued by Central Bank of Islamic Republic of Iran, and warrant no. 10751 dated December 21, 2009 issued by Securities and Exchange Organization, Day Bank was registered with State Organization for Registration of Non-Commercial Companies and Entities under no. 374111 and national code 10320237706. The bank’s Operation Licence no. 89/41065 was issued by the Central Bank of Islamic Republic of Iran on May 18, 2010. Day Bank has also been registered with Iran Fara Bourse Company on May 4, 2011, with registration no. 10751.

Headquarters The bank’s headquarters is located at no. 45, Parvin St., Valieasr St.Tehran, Iran

30 Annual Report 2014 2015 31 Overview Branch Virtual Branch Branch Central Management Supervisions and Deputy Affairs Internal Executive Executive and Physical and Physical Engineering Logistic and Logistic Protection Dept. Protection Logistic Dept. Logistic Properties Dept. Properties Engineering and Engineering Administrative Discipline Administrative Affairs Deputy Resource Resource Human Resources Resources Managerial Employees’ Affairs Dept. Affairs Development Development Services Dept. Development Dept. Development Training and Human Training and Management and Management Human Resources Human Resources Dept. Liquidity Stock Affairs Stock Treasury and of Accounting General OfceGeneral Management Dept. Financial Affairs and Affairs Financial Securities Dept. Financial Deputy Financial Dept. Deputy Method Branches Projects and Projects Development Development Organization and Organization Statistics and Statistics Research and Research Development Development Improvement Dept. Improvement Planning Dept. Planning Committee Consultants Commissions Supreme RiskSupreme Deputy Committees and Committees Foreign Foreign Supreme Audit and Audit Supreme International International Treasury and Compliance Committee Compliance Foreign Affairs Affairs Foreign Anti-Money LaunderingAnti-Money Relations Dept. Relations Management Committee Operations Dept. Operations Accounting Dept. Accounting Foreign Exchange Foreign Composition of the Board of Directors and International Risk The final composition of the board of directors as last published in the national newspaper is as Dept. Lundering Lundering Anti-Money Department Management follows; some changes have taken place in the composition of the board of directors, and will take Security Dept. effect after the internal elections. Af liates Subsidiaries and Board of DirectorsBoard Managing Director Dept. Dept. Social Center Central Relations Relations Customer Customer Secretariat Legal personality Representative Designation General Website and Website Management Sphere Dept. Sphere Networks Dept. Correspondence Management Kowsar Agricultural Investment Co. Ali Akbar Arab Mazar Chairman of the board (Private Joint Stock Corporation) Management Of ce Management Vice Managing Director Vice

Ayat-e Mehr-e Isar Civil Co. (Private Joint Mohammad Ali Mo- Board Member Affairs Sentence Sentence Lawsuits and Lawsuits Legal and Legal Registration Registration Legal Dept. Legal Contracts Dept. Contracts Stock) varej Implementation Dept. Bonyad Shahid Ahmad Shafizadeh Board Member & CEO Development Dept. Dept. Center for Studies Studies for Center and Islamic Banking Cultural Affairs Affairs Cultural Communication Advertising and General Public General Public Relations Dept. Relations Dept. Dept. and Affairs Internal Deputy Inspection Shareholder Composition and the Bank’s Capital Executive Internal Audit Internal Audit Internal Audit Audit Internal and Inspection Gharz-al-hasana Fund

Type of shareholder Number of Number of Percent Dept. shares persons Private Corporate Corporate Collections Credit Dept. Credit Credit and Credit Banking Dept. Banking Dept. Marketing Dept. rganizational Chart Legal personalities over 1 percent 1,385,227,016 27.70 12 Deputy Marketing

Legal personalities under 1 percent 316,685,094 6.33 128 O Dept.

Children of martyrs and veterans 2,525,588,059 50.51 721,554 Investment Deputy Assemblies Opportunities Investment Investment Affairs Dept. Affairs Identication Dept. Identication Companies and Companies Investment and Investment Natural persons 772,499,831 15.45 44,328 Affairs Corporate Total 5,000,000,000 100 766,022 Dept. Dept. Network IT and e-banking Information Information Network and Website Dept. Website Services Dept. Software Dept. Hardware Dept. Hardware Basic Data Dept. Basic Data Communication e-banking Dept.

32 Annual Report 2014 2015 33 Affiliates

Name Operation Name Operation

• Offering technical, engineering and construction services, Operation in capital market including: implementing all kinds of domestic and international commercial operations including import and export • Bonds • Trading industrial, agricultural, construction and road • OTC construction machinery • Online transactions Day Bank Brokerage Co. • Trading or acquiring goods or real estate assets under any • Commodities exchange kind of contract and transaction, and agreed upon conditions • Consultations on offering and acceptance Didar Iranyian Co. to provide, keep, maintain and exploitation of administrative, • Investment funds service and support units (contracting & research) • Other activities related to Securities and Exchange Organization • Implementation of all related legal activities and signing deals with natural and legal personalities • Design, supervision and management including research and implementation of production, construction, industrial, mineral Day Exchange Co. • Foreign currency and exchange services and agricultural projects • Cash trading of foreign currencies, gold and silver coins and transferring foreign currencies according to regulations Buali Investment Co. • Investing in corporate stock, trading stock, trading coinage, investing in investment funds or other bonds and securities, trading physical assets, receiving financial facilities and import • Investment and participation in construction of housing complexes, and export investment and participation in civil activities, investment, Omran Va Maskan Abad participation and performing civil and general projects, investment Day Co. and participation in construction of factories for manufacturing Day Leasing Co. • Purchase of goods and real estate and leasing them to applicants construction materials, trading materials and equipment related according to rental or installment contracts, and granting facilities to construction domestically and internationally, receiving facilities by the company according to rental or installment contracts for from banks and financial institutions and investing in other disposition corporate stock

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Name Operation Name Operation

• Discovering valuable areas and gentrifying with an economic • Offering justification plans (technical, economical, financial and approach legal) for proposals, projects and operations as well as supervising • Participation in different kinds of projects, production, service, them Tose’eye Donyaye construction, civil, civil infrastructure, subway, recycling and Day Iranian Financial • Conducting research (technical, economical and sociological) Shahre Kohan Co. urban environment and management, and asset management and Accounting and offering different services including financial management inside and outside the company with or without participation Services Co. from personalities, domestic or international • Offering different managerial and consultation services needed by financial, economic and commercial institutions and personalities • Offering services needed by natural and legal persons regarding production, new investments, development, project planning and • Internal auditing of bank branches and other credit institutions budgeting, credit analysis, credit allocation, preparing justification • Internal auditing for management performance of headquarters reports and designing managerial systems to facilitate the increase of productivity • Participation with domestic and international companies and financial institutions and establishment or participation in new companies • Direct investment and participation in production, service, mineral Royaye Roze Kish and commercial projects Tejarat Gostar-e Investment Co. Fardad • Export, import, and sale of all legal commercial goods including • Trading goods, import and export, trading stock , securities and raw material, minerals, capital and consumer goods, and using bonds, investing in financial and monetary markets existing exemptions regarding company’s location (Kish Island)

• Performing all direct insurance activities, acquiring reinsurance Day Insurance Co. domestically or internationally, accepting reinsurance from Omid Bonyan Day Insurance Services domestic or international insurance institutions, investing from • Offering legal insurance services capital, provisions and reserves according to High Council of Insurance regulations

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Shares in OTC Market Branch Network

According to the act of extraordinary general meeting of shareholders on January 15, 2011, and At the end of 2014-15 [financial year] there are 91 branches, active and ready to offer services to following board of directors’ act on February 22, 2011, administrative proceedings for acceptance customers, out of which 80 have already been authorized by CBI and 11 are in the process of getting of the bank’s shares in OTC market were in order. Finally, on May 4, 2011, after observing all the the necessary authorizations. necessary conditions of acceptance, Day Bank’s trademark, entered Iran’s OTC market rate list as 23rd ticker symbol (4th company in 2nd market), with “Day” as symbol. Tehran Province has 48 permitted branches and 6 branches are getting permission. Also, in other cities there are 32 permitted branches and 5 branches are getting permission. During 2014-15, 1,631 million shares with the total value of 2,967 IRR in billions were traded.

)all figures are IRR( Year 2011 2012 2013 2014 Year 2011 2012 2013 2014 2015 Tehran branches 48 54 54 54 Day Bank’s market value of equity per share 1470 1190 2025 1890 1620 Provinces branches 23 37 37 37 Total 71 91 91 91 Index Price (IRR)

1000 3,000

900 2,500 800

700 2,000 600

500 1,500

400 1,000 300

200 500 100

0 0 Jul-12 Jul-12 Jul-12 Apr-12 Apr-12 Apr-12 Oct-12 Oct-12 Oct-12 Jan-12 Jan-12 Jan-12 Jun-12 Jun-12 Jun-12 Feb-12 Feb-12 Feb-12 Mar-12 Mar-12 Mar-12 Mar-12 Mar-12 Mar-12 Mar-12 Sep-12 Sep-12 Sep-12 Nov-12 Nov-12 Nov-12 Dec-12 Dec-12 Dec-12 Aug-12 Aug-12 Aug-12

OTC Market Index (left Axis) Day Bank Share Price (Right Axis)

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Vision Mission

Achieving the Highest Standards in Iran’s Banking Continuous Value Creation to Preserve the Interests Industry of Stakeholders by Rendering a Variety Financial Services

Employing Rendering Deploying Rendering An integrated Creating Expanding Optimizing brilliant and highest quality modern exceptional financial value for the business in the financial qualified services technologies services to group and beneficiaries corporate sources and employees in banking and global VIP clients a reputable specially the and private human capital, to preserve industry banking and managing partner in respected banking era customer the interests to achieve standards assets in a rendering shareholders and investing orientation of clients, clients to achieve professional monetary in profitable and deploying society and satisfaction the highest environment and financial areas modern shareholders productivity services to technologies and growth protect the beneficiaries’ interest

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Achievements

2014-15 was undoubtedly the year of statuettes, medallions and letters of praise and • Medallion for the Day Bank’s CEO as the Chosen Manager in Heroic Economic Figures; appreciation for Day Bank, all of which indicate persistence of a harmonious team in September 25, 2014 climbing to the summits of glory. • Statuette and Letter of Appreciation from 12th International Conference on Public Relations; October 19, 2014 • Presentation of Statuette of Hero of Industry and Economy and Letter of Appreciation to the bank’s CEO; January 12, 2015 • Raising Organizational and Financial Health International Certificate; December 1, 2014 • Grade B from European Association for People Management; January 18, 2015 • ISO 10002:2004 Quality Management – Customer Satisfaction; December 15, 2014 • Finishing 1st among 100 superior corporations for the highest growth in the rate of sale; • Progress in Human Capital and Organizational Health Management Certificate; December February 18, 2015 20, 2014 • Finishing 66th among Iran’s 100 superior corporations; February 18, 2015 • ISO 9001:2008 Quality Management Systems – Requirements • Two-stars Letter of Appreciation for Organizational Excellence; February 23, 2015 • Letter of Praise from Resistance Economy Festival • Presentation of the Golden Star of Supporter of Public Relations to the bank’s CEO; May 18, 2014 • Golden Statuette of Iran’s Public Relations; June 28, 2014 • Selected Manager of 2014-15 for the bank’s CEO; July 1, 2014 • Statuette of Supporter of National Football League’s Best Players; August 2, 2014 • Best essay on Electronic Administration; August 12, 2014 • Statuette and Letter of Appreciation from 7th International Conference on Electronic Administration; August 12, 2014 • Grade A for Day Bank’s Brokerage from Securities and Exchange Organization; August 27, 2014 • Eminent National Manager for the bank’s CEO; September 24, 2014

42 Annual Report 2014 2015 43 Overview

Human Capital Key Financial Ratios

The bank’s policy is to employ young, qualified, elite and highly educated employees with good )all figures are IRR in millions( reputation in order to maintain the staff and line ratio. the statistics of the staff and line employees at 2012-13 2013-14 2014-15 the end of 2013-14 [financial year] is as follows: Indicators of Return on shareholders’ equity 20.7% 22.85% 32.82% Composition of the bank’s line and staff personnel respectively, both in Tehran and in other cities: Profitability Return on assets 4.14% 2.22% 2.5% Granted facilities to total deposits 45.27% 35.73% 68.6% Description Tehran Other cities Total Granted facilities to total assets 34.50% 30.01% 50.35% Average granted facilities by branch 247,539 294,485 736,555 Line personnel 363 267 630 Indicators of Average absorbed deposits by branch 546,742 824,289 1,074,182 Staff personnel 295 - 295 Performance Total income to average assets 16.78% 19.66% 23.41% Total 658 267 925 Administrative expenses to average 2.77% 1.89% 2.5% assets Capital adequacy ratio 24.20% 17% 8% Staff personnel Number of branches and counters 91 91 91 Indicators of ATMs 645 785 797 Development Line personnel POSs 43,411 44,138 41,809 32% Total incomes per capita 6,986 16,086 24,747 Indicators of Absorbed deposits per capita 54,202 88,752 92,902 Human Capital Facilities granted per capita 22,135 31,708 63,702 productivity Total assets per capita 64,180 105,667 126,529 68% )Human capital (number 671 743 925 Customers Commitments 1,214,893 1,493,448 5,168,237 to letters of Guarantee

44 Annual Report 2014 2015 45 Overview

Risk Management

The function of risk management in the identification, assessment and prioritization of risks to minimize profits and thus will be held accountable for them the probability of adverse effects is well proven in the banking industry. In this regard, Central Bank of Islamic Republic of Iran has obliged all Iranian public and privately owned banks to implement complete • Based on the aforementioned principles, Day Bank has identified the effective risks on the and wide-ranging risk management solutions. firm’s function, as follows: Having recognized that it is not possible to eliminate the risks involved in banking operations completely, Day Bank has taken necessary measures to manage and minimize such risks. Risk management at this bank, is based on the following principles: i. Resource Supply Fluctuations Risk In order to reduce such risks, Day Bank carry out numerous measures such as identifying the • Preserving fame, good reputation and credit intact: the value of Day Bank’s brand is dependent behavior of our major clients, lobbying to maintain our major clients who demonstrate more on its fame and credit. Keeping this acquired fame and credit is of vital importance for all the stable behavior patterns, offering attractive packages to retain and attract more sustainable employees. deposits, constantly evaluating the market in order to identify additional means of supplying • Independent and integrated supervision: risk management is a structured process based resources, etc. on identifying, measuring, assessing, monitoring, and managing the potential risks involved. Therefore, our Risk Management Unit acts as an independent body. ii. Products & Service Quality Risk • Complying with laws and regulations: Day Bank bounds itself to follow and respect laws, regulations and related instructions, as well as religious laws In order to sustain the quality of our products and services, Day Bank constantly monitor quality related expenses, create a system of quality management, provide our staff with • Sustaining financial strength: In order to confine the effects of undesirable factors on the specialized and general trainings regarding our service and product quality, carry out regular Bank’s capital and income, Day Bank will control all the risks. internal audits and test new products and services prior to their introduction to our customers.

• Transparency in risk reporting: transparency is crucial for accepted risks. Because only through this transparency, the executive directors and managers will be able to comprehend iii. Foreign Currency Exchange Risk the risks fully and therefore, can create the balance between goals and risks. Some of the ways in which Day Bank manage the risks involved in the fluctuations of foreign • Management accountability: different existing divisions in the bank will each accept different currency rates include: having the backing of foreign currency assets in order to cover with risks. Each division’s manager will be responsible for actively managing the related risks and

46 Annual Report 2014 2015 47 Overview

our foreign currency inabilities, carrying out value at risk (VaR) measurements, complying with its control. Main measures taken to neutralize such potential risks are, applying Basel II the instruction limit guidelines of the Central Bank of Islamic Republic of Iran (CBI) in reference recommendations, being constantly up-to-date with the CBI’s instructions and circulars, etc. with the volume of foreign currency transactions, etc.

vii. Commercial Risk iv. Interest Risk Taking advantage of control systems in identifying customers, constantly measuring the Interest rate fluctuations can lead to a deduction in a bank’s income. Indeed, many international performance of competitors, thoroughly researching new markets in which the Bank intends banks have faced liquidity shortages in spite of adequate liquidity, as a result of interest rate to penetrate, creating backup systems in order to reduce the risk of losing data in the event fluctuations. Some of the measures taken by Day Bank to minimize interest risk includes: of cyber attacks or natural disasters, constantly evaluating global and domestic market measuring and monitoring interest rates and their impacts on the Bank’s income and assessing conditions, are some of the measures taken by Day Bank in order to manage commercial the changes in the value of granted credit facilities as a result of interest rate fluctuations, etc. risks.

v. Customer Response to Services &Products Risk viii. Liquidity Risk

In order to minimize the risk of losing customers, Day Bank aim to achieve customer Liquidity risk occurs when a bank fails to meet its short-term obligations. The main objective satisfaction and loyalty by offering them a wide variety of banking products and services, of liquidity risk management is to provide adequate coverage for obligations arising from any while carrying out periodical opinion ratings in order to measure customer satisfaction and form of expected and/or unexpected changes in the bank’s balance sheet items. Hence, Day constantly measuring the quality of our products and also carrying out market research in Bank has established the Asset/ Liability Management Committee, which is responsible to order to find and respond to customer needs. monitor liquidity risk. The Bank also constantly retains its liquid assets at an adequate level and monitors its deposits whilst also offering a wide variety of deposit accounts as a measure to minimize the risk concentration of deposits on any one a few particular accounts. vi. Regulatory Changes Risk

This risk involves external factors, which can affect the bank’s income and are beyond

48 Annual Report 2014 2015 49 Overview

Anti-Money Laundering

The statement from the Basel Committee on Banking Supervisions (1998) and its subsequent • Designing, installing and putting into operation mechanized systems in connection with the amendments and guidelines of the Central Bank of Iran places particular emphasis on fighting money customers’ account transactions and ways for keeping their records in compliance with the laundering and the necessity of reducing risk in banks and financial institutions. The statement requirements of the Law for Preventing Money Laundering emphasizes Know Your Customer (KYC) - a set of due diligence principles designed to help banks • Making periodic inspections of the executive departments with a view to ensuring that the prevent unsolicited partnership in suspicious financial transactions. Owing to a deep understanding criteria for the prevention of money laundering are being properly implemented and that the of the harmful effects of money laundering in the economy, and in alignment with Islamic teachings, supervisory checklists are being drawn up which strongly forbid any money laundering-related related activity, Day Bank is fully aware of the need for all bank employees to acquire thorough knowledge of money laundering and the techniques that • Submitting the periodic performance reports to the Financial Affairs Department and the criminals use. To achieve as much transparency as possible, Day bank views preventing and fighting Central Bank money laundering as one of its essential priorities. In order to implement anti-money laundering rules • Replying to the enquiries made by the Financial Affairs Department and the law-enforcement and regulations, Day Bank has established the anti-money laundering department to apply and and judicial authorities about the people’s accounts with the Bank, depending on the case enforce the AML instructions over services and products, as well as cooperating and communicating • Submitting daily data to the Financial Affairs Department about the cash payments exceeding with related supervisory and regulatory bodies. The unit employs experienced personnel and cutting- the specified amounts edge technology and is ultimately responsible for monitoring activities throughout the branch network and investigating suspicious cases. • Submitting reports to the Financial Affairs Department on the suspicious transactions The most important activities of the Anti-Money Laundering Department include: • Identifying the bank’s customers in Due Diligence Check • Monitoring branch operations continuously and identifying gaps in regulatory control • Establishing specialized committee for localizing the anti-money laundering instructions; drawing up comprehensive anti-money laundering instructions and practicable patterns for the • Reporting suspicious cases and responding to enquiries received from the Suspicious Bank’s executive departments Transactions Report (STR) system • Organizing training courses with a view to enhance the technical knowledge of the colleagues • Controlling customers and their transactions in the foreign currency section at the headquarters, departments and branches

50 Annual Report 2014 2015 51 Overview

Supreme Audit and Compliance Committee

The Supreme Audit and Compliance Committee was established to assist the board of directors in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, Consider the effectiveness of the bank’s internal control system; the audit process and to guarantee Bank’s adherence to rules and regulations set out by financial supervisory bodies and the Central Bank of Iran. Understand the scope of Internal and External Auditors’ review of internal The most important activities and responsibilities of the Supreme Audit and Compliance Committee control over financial reporting, and obtain reports on significant findings and

are as follows: Internal Control recommendations

Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, recent professional and regulatory pronouncements, and understand their impact on the financial statements;

Review with Management and the External Auditors the results of the audit, including any difficulties encountered;

Review the annual financial statements, and consider whether they are Have final authority to review and approve the annual audit plan and all major complete, consistent with information known to committee members, and changes to the plan; reflect appropriate accounting principles;

Review other sections of the annual report and related regulatory filings before At least once per year, review the performance of the internal auditor and release and consider the accuracy and completeness of the information; concur with the annual compensation and salary adjustment; Financial Financial Statements

Review with Management and the External Auditors all matters required to be Review of the effectiveness of risk management and internal control systems – communicated to the committee under generally accepted auditing Standards; financial , operational and compliance controls; Internal Audit

Understand how management develops interim financial information, and the The committee meets with the Bank’s legal department to discuss any legal nature and extent of internal and external auditor involvement; matter which could significantly impact the financial statements;

52 Annual Report 2014 2015 53 Review the External Auditors’ proposed audit scope and approach, including coordination of audit effort with internal audit;

Review the performance of the External Auditors, and exercise final approval on the appointment or discharge of the Auditors;

External Audit On a regular basis, meet separately with the External Auditors to discuss any matters that the Committee or Auditors believe should be discussed privately;

To submit comprehensive annual reports to the Board of Directors or the Supreme Risk Management Committee at the end of each fiscal year and to prepare a concise report on compliance,

To examine rules and regulations, objectives, policies, bylaws, circulars and instructions as well as any amendments and changes thereto, in order to enforce these properly and to identify any obstacles that hinder full compliance with such rules and regulations in all units and branches;

To publish compliance guidelines and manuals and to identify compliance needs in each department in line with the compliance policies;

To be included in the annual financial statements and to be used in reports submitted to the CBI and other supervisory bodies; Compliance

To study and assess new banking products in view of compliance with banking rules and practice.

To develop the Bank’s compliance system and extract the requirements from the laws and regulations governing the banking industry in accordance with the Bank’s ethical and operational codes;

54 REPORT OF THE INDEPENDENT AUDITOR Report Of The Independent Auditor

Hoshiyar Behmand & Co. Member of IACPA Qualified Opinion No.114, Ghaem Magham Farahani St., In our opinion the financial statements referred to above present fairly the financial position of Group Independent Auditor’s Report Tehran,Iran Postal Code: 15815-1619 and Day Bank (Public Joint - Stock Company) as at March 20, 2015, and its financial performance To the Annual General Meeting of Shareholders Phone/Fax: 021-88843704-5 and cash flows for the year then ended, in all important aspects are in accordance with the accounting Day Bank (Public Joint - Stock Company) Email: [email protected] standards.

Emphasis on Matter 5. Explanations on the purchase of a land property with construction permit (based on expert opinion) and its sale based on expertised work to Shahr Bank and identification of its relevant profit are given in note 7-4 on the financial statements. According to adjusted trading contracts, presentation of construction permit has been the original seller’s commitment to Day Bank and Report on the Financial Statements also Day Bank is committed to preset an updated valid construction permit along with the property to the buyer. As to the aforementioned permit, based on a mutual agreement both parties’ commitments are being pursued. Introduction 6. During the current financial year, the subsidiary Day Exchange’s prior years’ claims regarding 1. We have audited the consolidated financial statements of the Group and Day Bank (Public Joint the exchanged currencies’ sums in December 2011 have been transferred to Day Bank. These - Stock Company) comprising of the statement of financial position as at March 20, 2015 and claims have been settled by the debtors through purchase of recommended land properties the related profit and loss statement and the statement of cash flow for the year ended March (price being decided by an official expert of Justice Administration). The remaining amount of 20, 2015, together with the explanatory notes 1 to 60. theses purchased properties’ prices will be payable after a select jury has paid the claimants and therefore their dispossession. Necessary explanations regarding this are reflected in notes 18-2 and 26-4 on financial statements. Responsibility of the Board of Directors for the Financial Statements 7. As given in note 16-3-1 on the financial statements, a) ownership of 4 items of land properties 2. The bank’s Board of Directors is responsible for the preparation of the financial statements in purchased have not been transferred to the Bank, and b) the subsidiary Didar Iranyian’s compliance with accounting standards. This responsibility includes designing, implementing and ownership of investments in real estate, and also land properties sold, are not officially maintaning the internal controls required for preparing the financial statements in a manner that transferred to the company or the concerned buyers; besides, the properties purchased from they can be free of material misstatement, whether due to fraud or error. Real Estate Organisation and Shahre Atieh Investment Company (representing Shahr Bank), citing agreements and trade contracts adjusted with relevant parties, have been bought or in some cases sold. Besides, investing in land properties are without justification reports approved Auditor’s Responsibility by the board of directors concerning reasons, rate, time and the retrieval of the investments. 8. Tax situation of Group and Main Company is given in note 28 on the financial statements. For 3. Our responsibility is to express an opinion on these financial statements based on our audit, in the Bank’s 2014-15 performance and exertion of legal exemption, tax savings have not been accordance with auditing standards. Those standards require that we comply with ethical re- included in accounts; its certainty remains to be decided after taxation authorities’ proceedings quirements and plan and perform the audit to obtain reasonable assurance about whether the and publishing of definite amount of tax liability. financial statements are free from material misstatements. 9. According to the Cabinet’s Act dated February 15, 2015, concerning amendment of the by-law Auditing involves following procedures to obtain audit evidence about the amounts and other disclo- for Deposit Guarantee Fund’s amount and receiving order of fee, numbered H48367T/100998 sures in the financial statements. The procedures selected depend on the auditor’s judgment, e.g. dated July 24, 2013 by the Cabinet, initial payment of the Deposit Guarantee Fund’s fee for about the risk assessment of material misstatement in the financial statements. In order to assess the Bank will be 2 percent of the minimum capital promulgated by CBI (4,000 billion IRR), and those risks, internal controls relevant to the preparation and presentation of the financial statements also the annual fee for the first year will be equal to 0.25 percent of the average daily balance examined for designing the appropriate audit procedures, not judging the effectiveness of entity’s of all deposits after reduction of statutory reserve up to the Fund’s guarantee limit, and for the internal controls. Auditing also includes evaluation of the properness of used accounting policies and second year on, it will be based on a percentage of the average daily balance of all deposits reasonableness of accounting estimates made by the Board of Directors, as well as overall presen- after reduction of statutory reserve up to the Fund’s guarantee limit. Regarding this, as reflected tation of the financial statements. in note 18-3 on the financial statements, 100 billion IRR has been paid. We believe that the audit evidence we have obtained is sufficient and appropriate to formulate our Our opinion has not been modified due to the contents of paragraphs 5 to 9. audit opinion. We are also responsible for assuming the duties of legal inspector, thus reporting to the Annual Gen- Other matters eral Meeting of shareholders any case of non-complience of legal obligations stipulated in Commer- 10. Consolidated financial statements of Group and Day Bank (Public Joint - Stock Company) cial Code as Amended and the Bank’s Articles of Association or any other significant issues. for the financial year ended March 20, 2014 have been audited by another audit firm and in their report dated July 6, 2014 concerning the aforementioned financial statements; the opinion expressed has been “conditional”.

58 Annual Report 2014 2015 59 Report Of The Independent Auditor

11. Reports prepared by official and selected experts, along with the Board’s resolutions and the 16. Constituted ground rules and provisions that have not been observed concerning executive subsidiary in charge of assessing the bonds securing the granted facilities to customers, as well guidelines for disclosure of companies information registered with Securities and Exchange Or- as issued letters of guarantee and opened domestic letters of credit, and also the land properties ganization, are as follows: purchased, have been used as our supporting documents for the audit conducted. 16-1- Briefly examined interperiodic Bank’s financial statements for six month in 2014-15, and three of its subsidiaries have been sent with delay, and also briefly examined interperiodic finan- Report on Other Legal and Regulatory Requirements cial statements for six month in 2014-15, for two subsidiaries has not been sent to the afore- Report on Other Duties of Legal Inspector mentioned organization. 16-2- According to the minutes of the Board of Directors meeting dated October 22, 2014, audit committee in conformation with Securities and Exchange Organization’s obligations has 12- Cases of non-complience of legal obligations stipulated in Commercial Code as Amended and been formed, but as of this report’s date, its members’ specifications have not been sent to the provisions of the Bank’s Articles of Association are as follows: organization. In the meantime, necessary actions to activate the internal auditing unit regarding 12-1. Provisions of the article 11 in Articles of Association regarding the prohibition of pur- the said obligation are taking place. Additionally, as of this report’s date, the Board of Directors’ chase of the Bank’s shares by companies that the Bank has influence on or effective control over, annual report concerning internal controls has not been presented. as stated in note 32 on the reported financial year’s statements, has not been observed. 17- In the implementation of article 33 of the anti-money laundering executive guideline by 12-2. Provisions of the article 55 and attachment to article 56 in Articles of Association regard- the auditors, observing the provisions of the said law and the by-law and the related executive ing the management of the Bank by a group of managers, including Board of Directors, Executive guideline in the framework of related reference notified checklists and the auditing standards Board and the delegation of Board of Directors’ authority in executional matters to the Executive have been evaluated by us. We have not come across significant cases that the said rules and Board has not been observed. regulations have not been observed. 12-3. Minutes of the Extraordinary General Meeting held on December 29, 2013 in which the Board members were appointed, has not been registered with Company Registration General Office by the time of the report, therefore the contents of the article 106 of the Commercial Code Hoshiyar & Behmand Co. as Amended has not been observed. In addition, natural persons have been represented by the Hamind Yazdanparasti 800912 legal personalities of the Board (article 110 of the Commercial Code as Amended) with delay. In this regard, completion of the composition of the Board members is necessary (It should be stat- Abbas Hoshi 800899 ed that according to article 64 of the new Articles of Association, Board members must be only selected among natural persons.) July 9, 2015 12-4. Provisions of the article 71 of the Articles of Association regarding receiving security shares (minimum of 10,000 shares) applicable to Board members have not been observed.

13. Transactions mentioned in note 57-1 on the financial statements, as all the transactions covered in article 129 of the Commercial Code as Amended made during the financial year, reported and disclosed to us by the Board of Directors, have been evaluated. Aforementioned transactions have been performed based on ordained formalities by the said law, regarding earning the per- mit from the Board of Directors without participation of the concerned manager in the voting process. We have not come across evidence indicating that these transactions made against the company’s routine activities or in unfair business conditions.

14. We have evaluated the Board of Directors’ activity and situation report, subject matter of article 232 of the Commercial Code as Amended, which was adjusted for presentation to the General Meeting of shareholders. In our inquiries, we have not come across significant cases indicating presented information in the report conflicts texts and documents presented by the Board.

Report on Other Legal and Regulatory Responsibilities of Inspector 15. Cases of bank’s operations inconsistent with The Banking and Monetary Act and The Law of Usury Free Banking as well as contents of CBI’s circulars (circulars presented to us) concerning the reported year, upon CBI’s order will be presented to the bank in a separate report.

60 Annual Report 2014 2015 61 FINANCIAL STATEMENTS Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Consolidated Statement of Financial Position at March 20, 2015 Consolidated Statement of Financial Position at March 20, 2015

(Restated) (Restated) March 20, March 20, March 20, March 20, Assets Note Liabilities and Shareholder’s Equity Note 2015 2014 2015 2014 Assets: IRR in Millions IRR in Millions Liabilities: IRR in Millions IRR in Millions

Cash 5 1,618,377 1,039,231 Due to CBI 19 11,369,379 868,770 Due from CBI 6 11,053,114 11,146,840 Due to banks and credir institutes 20 14,476,024 6,710,894 Due from other banks and financial Inst. 7 18,557,894 28,887,065 Sight deposits 21 2,682,521 4,092,265 Facilities granted 8 56,372,915 21,887,359 Savings deposits 22 306,165 138,915 Commercial accounts receivable 9 6,058,143 3,848,427 Term investment deposits 23 81,819,828 61,093,152 Other accounts receivable 10 5,360,738 2,291,002 Other deposits 24 851,726 315,177 Participation certificates 11 0 500,000 Commercial accounts and notes payable 25 13,984,902 2,413,713 Investments 12 21,110,235 6,266,843 Other accounts and notes payable 26 2,432,598 1,338,888 Inventory 13 47,063 1,623 Downpayments 27 19,885 11,885 Orders and down payments 14 119,522 22,979 Tax payable 28 82,513 142,840 Long term investments in affiliated Co. 15 46,755 65,131 Dividend payable 29 42,003 92,603 Tangible fixed assets 16 6,775,467 6,815,661 Provision for termination benefits 30 35,039 19,422 Intangible assets 17 266,909 22,495 Other assets 18 8,871,541 1,221,016 Total liabilities 128,102,583 77,238,524 Shareholders’ equity: 31 5,000,000 5,000,000 Capital 32 (47,240) 0 Main share in ownership of the subsidiary Legal reserve 33 1,009,894 640,142 Retained earnings 1,929,837 667,488 Total assets 136,258,673 84,015,672 Total equity of main enterprise 7,892,491 6,307,630 commitments to letters of credit 53 532,305 705,818 Minority share 34 263,600 469,518 commitments to letters of guarantee 53 5,168,237 1,493,448 8,156,091 6,777,148 Other customer commitments 53 1,314,359 20,508 Total equity Total liabilities and shareholders’ equity 53 136,258,674 84,015,672 Commitments to letters of credit 53 532,305 705,818 Commitments to letters of guarantee 53 5,168,237 1,493,448 Other commitments 1,314,359 20,508

64 Annual Report 2014 2015 65 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Statement of Financial Position at March 20, 2015 Statement of Financial Position at March 20, 2015

(Restated) (Restated) March 20, March 20, March 20, March 20, Assets Note Liabilities and Shareholder’s Equity Note 2015 2014 2015 2014 Assets: IRR in Millions IRR in Millions Liabilities: IRR in Millions IRR in Millions

Cash 5 738,802 388,225 Due to CBI 19 11,369,379 868,770 Due from CBI 6 11,053,114 11,146,840 Due to banks and financial institutes 20 9,267,448 4,187,782 Due from other banks and financial institutions 7 18,557,894 28,887,065 Sight deposits 21 2,723,588 4,112,538 Facilities granted 8 58,924,399 23,558,807 Savings deposits 22 306,165 138,915 Other accounts receivable 10 10,617,322 5,858,548 Term investment deposits 23 82,053,046 61,376,513 Participation certificates 11 0 500,000 Other deposits 24 851,726 315,177 Investments 12 2,432,204 1,959,020 Other accounts and notes payable 26 2,478,665 744,957 Orders and down payments 14 98,571 10,547 Tax payable 28 0 90,281 Tangible fixed assets 16 5,044,318 5,106,213 Dividend payable 29 0 0 Intangible assets 17 255,086 9,162 Provision for termination benefits 30 31,157 16,682 Other assets 18 9,317,203 1,086,551 Total liabilities 109,081,175 71,851,615 Shareholders’ equity: Capital 31 5,000,000 5,000,000 Legal reserve 33 918,399 558,643 Retained earnings 2,039,338 1,100,719 Total assets 117,038,912 78,510,978 Total shareholders’ equity 7,957,737 6,659,362 commitments to letters of credit 53 532,305 705,818 Total liabilities and shareholders’ equity 117,038,912 78,510,978 commitments to letters of guarantee 53 5,168,237 1,493,448 Commitments to letters of credit 53 532,305 705,818 Other customer commitments 53 1,314,359 20,508 Commitments to letters of guarantee 53 5,168,237 1,493,448 Other commitments 53 1,314,359 20,508

66 Annual Report 2014 2015 67 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Consolidated Statement of Profit or Loss for the Financial Year Ended March 20, 2015 Consolidated Statement of Cash Flow for the Financial Year Ended March 20, 2015

(Restated) (Restated) Note 2014-15 2013-14 Note 2014-15 2013-14 Joint incomes: IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Income on credit facilities granted 35 9,856,757 3,631,242 Operating activities: Income on participation certificates 36 191,294 71,695 Net cash (outflow) inflow through operating activities 49-1 (17,906,998) 9,620,948 Income on investments and deposits 37 5,882,721 5,760,676 Return on investments and interest paid for financing: Total joint income 15,930,772 9,463,613 Dividends received 674,121 361,514 Subtracted by: On account profit of investment deposits 38 (16,495,791) (9,050,734) Received amount for investment deposits and participation papers 122,603 75,963 Difference between on-account & definite interest of investment Dividends paid to main shareholders (1,999,131) (1,266,383) 38-1 0 0 deposits Dividends paid to minority shareholders 0 (17) Depositors’ share of income (16,495,791) (9,050,734) Commission paid (15,573) (8,996) Bank’s share of joint incomes (Including Lawyer’s fees) (565,019) 412,879 Profit paid for financial facilities (515,656) (482,619) Non-joint incomes: Net cash outflow of return on investments and interest paid for (1,733,636) (1,320,538) Commission income 39 345,333 243,698 financing Income through service provission 40 657,596 482,941 Taxation: Foreign currency transactions gain 41 147 33,711 Corporate taxes paid (61,051) (249,116) Other incomes and expenses 42 10,707,552 8,819,343 11,710,628 9,579,692 Investment activities: Total incomes 11,145,609 9,992,571 Sums paid for investments and participation certificates (2,476,128) (344,126) Expenses: Sums paid for the purchase of tangible fixed assets (324,404) (2,771,127) General, administrative & organizational expenses 43 (2,310,889) (1,345,860) Proceeds from the sale of investments and participation certificates 14,767 680,103 Doubtful debts expenses 44 (1,491,838) (194,461) Proceeds from the sale of tangible fixed assets 8,620,332 7,118,808 Cost services provided 45 (4,209,604) (6,117,726) Sums paid for the purchase of intangible assets (248,032) (1,861) Financial expenses 46 (454,448) (461,721) Net cash inflow from investment activities 5,586,535 4,681,797 Commission expense 47 (101,940) (111,732) Total expenses (8,568,718) (8,231,499) Net cash (outflow) inflow before financial activities (14,115,151) 12,733,091 Income before calculation of Groups’ share from affiliated companies’ Financial activities: 2,576,891 1,761,072 income Receipts from capital increase 0 60,000 Group’s share of subsidiaries’ income 15 23,819 51,438 Receipts from financial facilities 648,200 1,066,926 Income before tax deduction 2,600,710 1,812,510 Repayment of financial facilities (558,800) (696,650) Tax 28 (724) (242,915) Ownership of stock by subsidiaries exchanges 0 789 Net income 2,599,986 1,569,595 Minority interest 58,587 116,637 Net cash inflow from financial activities 89,400 431,065 Basic and diluted earnings per share 54 511 291 Net cash (outflow) inflow (14,025,751) 13,164,156 Movements in consolidated retained earnings Foreign currency fluctuations 173 31,367 Net profit 2,599,986 1,569,595 Net (decrease) increase in cash (14,025,577) 13,195,523 Retained earnings at the beginning of the year 955,432 606,600 Cash balance at the beginning of the year 26,475,196 13,127,438 Prior years adjustments 48 (101,234) (86,923) Cash balance at the beginning of acquired company 0 152,234 Retained earnings at the beginning of the year – adjusted 854,198 519,677 Cash balance at the end of the year 50 12,449,618 26,475,196 Retained earnings of the subsidiary acquired during the year 224 0 Last years earnings per share – assembly approved (1,100,000) (1,000,000) Non-cash transactions 51 3,844,286 3,549,059 (1,100,000) (480,323) Profit available for allocation 2,354,408 1,089,273 Profit allocation: Legal reserve 33 (359,817) (235,075) (359,817) (235,075) 1,994,591 854,198 Minority interest of subsidiaries’ retained earnings 34 (64,755) (186,710) Retained earnings at the end of the year 1,929,836 667,488

Since the integral parts of the comprehensive statement of profit and loss are limited to the profit and prior period adjustments, this statement has not been presented

68 Annual Report 2014 2015 69 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Statement of Profit or Loss for the Financial Year Ended March 20, 2015 Statement of Cash Flow for the Financial Year Ended March 20, 2015

(Restated)

Note 2014-15 2013-14 Note 2014-15 2013-2014 Joint incomes: IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Income on credit facilities granted 35 10,237,655 3,991,386 Operating activities: 49-2 (17,632,837) 16,300,243 Income on participation certificates 36 191,294 71,158 Net cash (outflow) inflow from operating activities Income on investments and deposits 37 5,866,238 16,295,187 6,202,163 Return on investments and interest paid for financing: 673,590 348,948 Subtracted by: Dividends received (1,100,000) (1,007,460) On account profit of investment deposits 38 (16,594,034) (9,075,353) Dividends paid (426,410) (658,512) Difference between on-account & definite interest of investment Net cash outflow from return of investments and interest paid 38-1 0 0 deposits for financing Depositors’ share of income (16,594,034) (9,075,353) Taxation: (90,281) (67,608) Bank’s share of joint incomes (Including Lawyer’s fees) (298,848) 1,189,354 Corporate taxes paid Non-joint incomes: Investment activities: (229,584) (444,729) Commission income 39 345,333 243,664 Sums paid for investments and participation certificates 0 (2,720,055) Foreign currency transaction gain 41 4,636 28,447 Sums paid for the purchase of tangible assets 0 656,863 Other incomes 42 6,245,634 1,415,175 Proceeds from the sale of investments and participation certif- 3,997,812 24,329 6,595,602 1,687,286 icates Total incomes 6,296,754 2,876,640 Proceeds from the sale of tangible fixed assets (247,618) (185) Expenses: Sums paid for the purchase of intangible assets 3,520,611 (2,483,777) General, administrative & organisational expenses 43 (2,004,415) (1,151,442) Net cash (outflow) inflow from investment activities (14,628,917) 13,090,346 Doubtful debts expenses 44 (1,487,166) (171,155) Net cash (outflow) inflow 4,636 28,447 Financial expenses 46 (304,117) (372) Foreign currency fluctuations (14,624,281) 13,118,793 Commission expense 47 (102,681) (111,731) Net (decrease) increase in cash 25,790,737 12,671,944 Total expenses (3,898,379) (1,434,700) Cash balance at the beginning of the year 50 11,166,456 25,790,737 Income before tax deduction 2,398,375 1,441,940 Cash balance at the end of the year 51 3,844,286 3,549,059 Tax 28 0 (90,281) Non-cash transactions Net income 2,398,375 1,351,659

Earnings per share – IRR 480 270 Movements in consolidated retained earnings Net profit 2,398,375 1,351,659 Retained earnings at the beginning of the year 1,201,374 1,051,339 Prior years adjustments 48 (100,655) (84,432) Retained earnings at the beginning of the year- Adjusted 966,907 Last years earnings per share – assembly approved (1,100,000) (1,000,000) 719 (33,093) Profit available for allocation 2,399,094 1,318,566 Profit allocation: Legal reserve 33 (359,756) (217,847) (359,756) (217,847) Retained earnings at the end of the year 2,039,338 1,100,719

Since the integral parts of the comprehensive statement of profit and loss are limited to the profit and prior period adjustments, this statement has not been presented

70 Annual Report 2014 2015 71 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to the Financial Statements for the Financial Year Ended March 20, 2015 Notes to the Financial Statements for the Financial Year Ended March 20, 2015

1- Generalities 11. Accepting and keeping objects of value, notes and securities and renting safe deposit box to customers 1-1- Background: 12. Foreign Currency operations such as exchange, transfer, granting or receiving facilities as Group consists of Day Bank and its companies. Day Bank (Public Joint Stock Company) is well as issuance of bills of exchange established and managed according to article 98 of the Law of the Third Economic, Social and 13. Services related to managed funds Cultural Development Plan of Islamic Republic of Iran approved in March 2000, and conforms with 14. To guarantee the redemption of issued securities of legal personalities, state and non-state The Banking and Monetary Act of Iran approved in 1972, The Law for Usury Free Banking and based 15. Issuing or supplying Islamic financial papers in IRR or foreign currency, domestically and on Law of Establishment of Non-State Banks passed on April 9, 2000. It is also in compliance with internationally CBI’s regulations and Commercial Code Upon warrants No. 87/131296 dated March 16, 2009, No. 1389/31783 dated May 5, 2010 issued by Central Bank of Islamic Republic of Iran, and warrant No. 16. Implementing customers’ continious orders 10751 dated December 21, 2009 issued by Securities and Exchange Organization, Day Bank was 17. Offering consultation to customers about financial services, investment and asset management registered with State Organization for Registration of Non-Commercial Companies and Entities under 18. Implementing trusteeship, administration, proxy and representation of customers according the No. 374111 and national code 10320237706. The bank’s Operation Licence No. 89/41065 was to related laws and regulations issued by the Central Bank of Islamic Republic of Iran on May 18, 2010. The bank’s headquarters 19. Investing through buying shares, participation certificates, foreign securities and sukuk is located at Parvin Alley, Valieasr St, Tehran. Day Bank has also been accepted at Iran Fara Bourse Company on May 4, 2011, under the registration No. 10751. 20. Buy and sale of properties, in compliance with provisions of Central Bank of Islamic Republic of Iran 1-2- Main Activities: 21. Generating all kinds of insurance coverage for bank’s assets with insurance companies and According to article (3) of Articles of Association: entities Conforming to the Banking and Monetary Act of Iran, The Law for Usury Free Banking and other 22. Establishing, generating and keeping agency relationship with domestic and foreign banks related laws, and supervising provisions for legal banking activities and other acts of Monetary and 23. Releasing goods from customes Credit Council as well as CBI’s orders, through gaining the required permits, the bank is authorized to conduct the following activities: 24. Collection of notes receivable 1. Taking deposits 25. Sale of bill and stamp duty 2. Issuance of certificate of deposit 26. Implementation of other legal operations after affirmation of Central Bank of Islamic Republic of Iran 3. Offering checking accounts and its related services according to legal provisions regulating issuance of checks. 4. Interbanking operations 5. Credit operations specified in the Law for Usury Free Banking and relayed by-law 6. Offering various payment tools 7. Receiving, paying and transferring sums (IRR or foreign currency) 8. Operating as a representative for collecting sums, various city service bills, deposits and the like 9. Opening various letters of credit and issuance of letters of guarantee 10. Offering e-banking services including issuance of various e-cards

72 Annual Report 2014 2015 73 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

1-3- Branches: equity under “stock owned by subsidiaries” heading. The bank’s number of branches for financial year, ended March 20, 2015 is as follows: 3-4- Financial year for the subsidiaries match that of the parent company (except for Buali Investment Co., Omran Va Maskan Abad Day Co., Tejarat Gostare Fardad Co. and Day Iranian Co. which their March 20, 2015 March 20, 2014 financial year ends February 19, as well as Bank Day Brokerage which its financial year ends September Active Being equiped and opened Total Total 22.) Tehran branches 48 6 54 54 Provience branches 32 5 37 37 4- Significant accounting policies 80 11 91 91 Presented financial statements have been prepared based upon accounting standards. Summary of the significant accounting policies applied are as follows:

1-4- Human capital: 4-1- Investment Day Bank authorities thoroughly believe that long lasting success and continuous achievements are Group consolidated Parent company basicaslly reached by the creative human resources. Therefore the Bank gives great importance to employ the most qualifies individuals. Evaluation method: The following table indicates the Average number of employees during the financial year ended Long-term investments: March 20, 2015 is as follows: Investment in subsidiaries Consolidation Cost (less provision for included in consolidation permanent decrease in value of investment) Group Parent Company Investment in affiliated Equity Cost (less provision for March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 companies permanent decrease in value of investment) 1105 913 925 743 Other long-term investments Cost (less provision for Cost (less provision for permanent decrease in value of permanent decrease in value of investment) investment) Current investments: Marketable investments Lower of cost or net realizable Lower of cost or net realizable 2- Basis for preparation of financial statements value of investment portfolio value of investment portfolio Consolidated financial statements are prepared and adjusted based on historical cost, and in certain Other current investments Lower of cost or net realizable Lower of cost or net realizable circumstances current values are used as well. value of each investment value of each investment

3- Basis for consolidation Revenue recognition method: 3-1- Consolidated financial statements are the summation of items on Day Bank’s financial state- Investment in subsidiaries Consolidation Upon approval of dividend by ments and the Group’s subsidiaries included in consolidation, after elimination of intercompany included in consolidation investee’s AGM transactions and balance, as well as unproven profit or loss arising from transactions between them. (up to authorization of financial statements) Investment in affiliated Equity Upon approval of dividend 3-2- The results of operations of the subsidiaries acquired during the year will be reflected in the companies by investee’s AGM (up to consolidated statement of profit or loss from the date of when their effective control were assumed. authorization of financial statements) 3-3- Parent company’s shares acquired by subsidiaries will be included in the accounts by the final Other long-term and current Upon approval of dividend by Upon approval of dividend by price and reflected in the consolidated statement of financial position as decreasing the shareholders’ investments investee’s AGM (up to SFP date) investee’s AGM (up to SFP date)

74 Annual Report 2014 2015 75 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

4-2- Tangible fixed assets: 4-3- Intangible assets 4-2-1- Tangible fixed assets are registered based on final cost. Expenses for improvements and 4-3-1- Intangible assets are registered in accounts based on their cost. According to CBI’s circular dated March 7, 2007, goodwill won’t depreciate. Operating and administrative software will مب/fundamental repairs that considerably increase the capacity or useful life of fixed assets, or resulting 2946 in fundamental improvement in quality of their efficiency, are counted as capitalized expenses and will be depreciated in a straight line during a 5 year period; other intangible assets are excluded from be depriciated during their remained useful life. Expenses for maintenance and trivial repairs that try depreciation. to keep and amend the required economic interest of the commercial units measured with primary 4-3-2- Intangible assets at SFP date, will be calculated and reflected in the statement of financial evaluated operational standards of the asset will be perceived as current expenses and included in position based on their cost, after reduction of depreciation and decrease in retained earnings for the year’s profit or loss. each individual asset.

4-2-2- Fixed assets are depriciated in accordance with the rules stipulated in article 151 of the Direct Taxation Act, using the following rates and methods. 4-4- Realization of income from credit facilities, fines and commissions According to Department of Banking Research and Regulation’s circular 772/MB dated July 18, 2005 and citing the Monetary and Credit Counsil’s resolution in meeting 1044 on July 16, 2005 that will follow, the method for realization of bank’s income is accrual. Based on aforementioned method, Fixed assets Group consolidated Parent company granted facilities in compliance with Islamic contracts (Oghoud), will be calculated and included in Buildings %7 Reducing balance accounts based on the minimum of expected income predicted in related contracts. Improving and renovating 3,4 and 5 years Straight line branches

Installations 8% and 20% Reducing balance Type of income Basis for recognition of income Computer equipment 3,5 and 10 years Straight line Income from facilities granted: Security and safety 3,4,6 and 10 years Straight line Instalment sale contracts, hire purchase, On time period or financial year’s end, equipment (communication ju’alah, debt purchase and gharz-al-hasanah whichever comes first and electronics) Civil participation contracts, mudarabah, Salaf On financial year’s end based on related Banking equipment i.e. ATMs 5 years Straight line contracts contract and POSs Issued letters of guarantee commission Upon issuance of letters of guarantee Furniture and fixtures 10 years Straight line Other banking services commission Upon service presentation Motor vehicles 25% Reducing balance

4-5- Basis for calculating the depositors’ share of joint income 4-2-3- For the fixed assets acquired during the month and used, depreciation will be calculated Based on CBI’s executive guideline No. 87/126331 dated March 9, 2009 concerning the method form the start of the next month and included in the accounts. In cases which assets subjected to of depositors’ interest calculation, and in order to comply with executive guidelines of articles 13 depreciation are ready to use, but are not used in a while for any reason whatsoever, its depreciation and 14 of The Law of Usury Free Banking regarding the distribution of acquired interest between will be equal to 30% of the depreciation rate reflected in the chart above. the bank and its depositors in relation to duration and the amount of investment deposits, after the 4-2-4- Tangible fixed assets at SFP date, will be calculated and reflected in the statement of financial reduction of statutory reserve deposited with the Central bank of I.R.I. Income from the bank’s joint position based on their cost, after reduction of depreciation and decrease in retained earnings for activities are distributed between the bank and its depositors and the statement of profit or loss is each individual asset. also prepared and adjusted based on this.

76 Annual Report 2014 2015 77 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

4-6- Classification of granted facilities 4-9- Foreign currency exchange Based on “guideline of classification of assets of credit institutions” approved by Monetary and Foreign currency monetary items are converted into IRR reference exchange rate prevailing at SFP Credit Council (subject matter of CBI’s Department of Banking Research and Regulations’ circular date, and non-monetary items that are recorded based on foreign currencies in historic cost, are no. 2823/MB dated February 24, 2007), granted facilities regarding the time of delayed payment are converted into IRR reference exchange rate prevailing at the transaction’s date. Any differences classified in one of the classifications below: arising from foreign currency monetary items’ liquidation or exchange are recognized as gain or loss • Current (maximum 2 months past due) of the year. • Past due (between 2 to 6 months past due) • Bad debt (between 6 to 18 months past due) • Doubtful debt (more than 18 months past due) 4-10- Goodwill Accounting for business combination of acquired companies is performed based on acquisition 4-7- Provision for doubtful debts method. Surplus of the total cost of investment in subsidiaries included in consolidation, and associate companies included in application of equity method, divided by group’s share of fair value of assets and their liabilities, will be recognized as goodwill at the time of acquisition, and depreciated According to “instructions on how to calculate the reserve requirements of credit institutions” during 20 years in straight-line method. Goodwill arising from acquisition of associate companies will approved by Monetary and Credit Council (subject matter of CBI’s Department of Banking Research be reflected in the consolidated statement of financial position as part of carrying value of long-term .dated April 19, 2012), there’s a provision that is calculated investments in associate companies مب/and Regulation’s circular no. 91/27270 and reflected in the accounts as described below: • General provision is at least equal to 1.5 % of facilities’ balance, except for facilities’ balance for which a special provision has been provided. 4-11- Leasing services revenue • Special provision, in relation to facilities’ balance for past due, bad debts and doubtful debts, Leasing services revenue is recognized according to contract rate for the installments due, for each after the consideration of collateral value for each case, is calculated with decided ratios, as year, and recorded in the accounts. described below:

4-12- Didar Iranyian Company’s revenue Percent Main activities of the company include offering technical, engineering and construction services, Past due 10 performing of all kinds of legal commercial operations domestically and internationally, such as export Bad debt 20 and import, and also trading industrial, agricultural and construction machinery, and the revenue is Doubtful debts regarding the result of assessing customer's ability to pay 50 to 100 recognized at the end of each year and recorded in the accounts. Facilities that are past due for 5 years or more 100 4-13- Omran Va Maskan Abad Day Company’s revenue Main activities of the company include investment and participation in building housing complexes, implementation of housing and commercial construction as well as construction of cultural buildings, According to the aforementioned circular, in order to calculate the special provision for all the facilities and the revenue is recognized at the end of each year and recorded in the accounts. that are past due for 5 years or more, the total balance of the facility without reduction of collateral value should be the basis for calculation in a way that during 5 years an amount equal to 100 % of facility balance are reflected in the accounts.

4-8- Provision for termination benefits A provision, equivalent to one month of the last known salary for each full year of service is provided in the accounts to cover staff’s termination benefits.

78 Annual Report 2014 2015 79 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

5- Cash 7- Due from other banks and financial institutions Cash balance as on Statement of Financial Position date is as follows: Group and Parent Company

Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions )Sight deposits with domestic banks (foreign currency 363,144 13,115 Cash-Iranian Rials 673,033 332,646 672,404 330,888 )Sight deposits with domestic banks (IRR 29,231 246 Deposited cash balance 705,892 645,791 0 0 )Term deposits with domestic banks (IRR 10,044,047 24,322,801 10,073,278 24,323,046 Floats 171,931 1,798 0 0 Net receivable amount for issued checks- other banks 1,901,472 1,365,717 Cash-Foreign currency 64,701 57,066 64,701 57,066 Interbanking account/ Khedmat Plan 0 33,919 Cash in transit – Didar Iraniyan Co. 0 1,549 0 0 Net dues from other banks for ACH and RTGS 0 151,267 Petty cash 2,713 154 1,697 271 Facilities granted to other banks 0 3,000,000 Coinage 107 227 0 0 Total 1,618,377 1,039,231 738,802 388,225 Dues from Shahr Bank 6,220,000 0 18,557,894 28,887,065

6- Due from the Central Bank 8- Facilities granted

Group and Main Company Parent company March, 20, March 20, 2014 March 20, 2015 March 20, 2014 2015 IRR in Millions IRR in Millions Future years’ Provision Legal reserve 11,043,114 10,072,080 Balance – IRR profit and for doubtful Net – IRR in Net- IRR in in Millions commission _ debts – IRR in Millions Millions Current account No. 26850/50 with CBI 0 1,074,760 IRR in Millions Millions Other 10,000 0 Civil participation 57,558,433 0 )1,342,921( 56,215,512 22,368,282 11,053,114 11,146,840 Mudarabah 671,480 0 )389,092( 282,388 548,946 Gharz-al-Hasanah 198,402 0 )3,448( 194,954 66,891 Installment sales 846,924 )227,568( )11,369( 607,987 412,118 Ju’alah 558,123 )143,335( )6,520( 408,268 121,053 L/G debtors 245,636 0 )115,236( 130,400 1,605 Credit cards 7,012 0 )458( 6,554 1,921 L/C debtors - IRR 1,094,757 0 )16,421( 1,078,336 37,991 61,180,767 )370,903( )1,885,465( 58,924,399 23,558,807

80 Annual Report 2014 2015 81 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

9- Accounts and notes receivable-trade 10- Other accounts receivable

Group and Parent Company Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Property Organization of Municipality – Didar Iranyian 1,024,176 339,271 Due from legal persons 1,830,554 1,979,241 1,076,931 1,940,494 Notes receivable 1,346,115 1,119,165 Due from Group’s subsidiaries 3,343 23,806 7,036,337 2,911,766 Bad notes being collected 0 1,275 Dividends 80,352 72,070 767,862 794,316 Expected notes receivable 400,393 131,996 Due from affiliated persons 3,198,454 167,564 1,523,868 160,884 Due from companies for brokage- selling shares 0 2,837 Staff’s current and on-account 188,535 40,444 187,330 48,654 Due from companies invested in (EPS) 68,145 61,209 Other 59,500 7,877 24,994 2,434 Farrokh-naz Tejarat-e Kish (Day Foreign Exchange Services) 0 1,742,286 5,360,738 2,291,002 10,617,322 5,858,548 Stock exchange clearing house 1,495 168,934 Due from customers 327,422 371,726 Shahre Atiyeh Investment Co. 2,218,150 0 Shazand Petrochemical Company (Arak) 43,586 0 11- Participation bonds Kala Avar Company 67,528 0 Hasan Bidarian – Zarandieh land property sale 298,124 0 Group and Parent Company Heshmat Rezamandifard – remainder of Qobadian land property sale 12,795 0 March 20, 2015 March 20, 2014 Gannjine Atiyeh Co. – remainder of Haqiqat-talab land property sale 63,078 72,524 IRR in Millions IRR in Millions Customer debts from share acquisition 240,519 19,224 0 500,000 Other 71,914 35,504 Sukuk bonds 0 500,000 6,183,440 4,065,951 Future years’ secured income unfulfilled )43,900( )65,558( Long-term allotment of accounts and notes receivable )53,419( )128,660( Provision for doubtful debts )27,978( )23,306( 6,058,143 3,848,427

82 Annual Report 2014 2015 83 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

12- Investments 14- Orders and downpayments

Group Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 Decrease IRR in Millions IRR in Millions IRR in Millions IRR in Millions Final cost in retained Net Net Downpayment for goods 377 3,879 0 0 earnings Downpayment for services 2,459 4,192 0 0 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Sarmast Commercial Co. 972 0 0 0 Stock Exchange and Fara Bourse 1,810,495 (513,419) 1,297,076 1,730,524 shares acquired Mr. Saninezhad 2,500 0 0 0 Investment in real estate 18,795,970 0 18,795,970 4,270,999 Saruj Technical Engineering Co 7,867 0 0 0 Investment in gold market 0 0 0 3,708 Shah Muhammadi Mehr Parvar 213 0 0 0 Investment funds 93,184 0 93,184 96,736 Association of Leasing Companies 100 0 0 0 Total investment in securities 20,699,649 (513,419) 20,186,230 6,101,966 Downpayment for tax 77,161 2,654 73,750 0 Securities and deposits 0 0 0 24,310 Downpayment for insurance 8,632 5,542 8,576 5,453 Down payments on investments 865,849 0 865,849 70,000 Other downpayments 19,241 6,712 16,245 5,094 Other investment companies 58,155 0 58,155 70,566 119,522 22,979 98,571 10,547 21,623,654 (513,419) 21,110,235 6,266,843

13- Inventories 15- Investment in affiliated companies

Group Parent Company Group and Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Inventories 47,063 1,623 0 0 Balance at the beginning of 47,063 1,623 0 0 65,131 264,649 financial year On-account capital increase 36,500 36,500 Diposed of during the year (38,735) (287,456) Share of affiliated companies 23,819 51,438 gains Decrease in investment value (39,960) 0 46,755 640,043

84 Annual Report 2014 2015 85 Financial Statements 7,384 9,794 3,461 66,391 43,489 51,043 45,442 15,077 61,589 14,222 30,684 51,043 15,077 20,491 242,814 212,414 March 2014 4,113,010 2,221,216 6,755,142 6,815,661 20, 2014 5,070,645 5,106,213 3,680,475 1,016,757 March 20, March in Millions 7,564 77,482 15,356 66,199 18,958 12,568 Millions 162,128 208,240 3,328 March Book Value – IRR Book Value 20, 2015 3,985,543 2,221,429 6,554,658 6,775,467 76,560 19,608 39,719 18,959 12,568 157,545 976,862 184,256 0 2015 4,847,493 5,044,318 3,554,912 Book Value – IRR in Book Value March 20, March 3,113 48,827 10,674 18,582 0 266,930 136,469 635,159 635,159 150,565 end 6,049 1,235 the year’s 48,394 13,011 Balance at 465,145 465,145 141,052 104,839 150,564 end 0 0 the year’s Balance at (340) (123) (3,374) (4,583) (7,944) 0 0 0 0 0 (37,194) (53,558) (53,558) ) 30 ( ) 7,944 ( depreciation Sold assets’ ) 45,168 ( ) 45,168 ( ) 37,194 ( accumulated tion 0 Sold - deprecia assets’ ac - cumulated 1,931 2,185 7,250 19,614 57,147 41,583 0 173,285 302,995 302,995 year 2,152 1,041 4,520 57,147 89,756 19,331 41,583 215,530 during the 215,530 Depreciation the year 0 - Deprecia tion during 0 1,522 8,489 32,588 83,905 11,455 Accumulated depreciation – IRR in Millions Accumulated depreciation 194 130,839 116,925 385,723 385,723 3,897 8,491 83,905 52,277 29,093 beginning 294,783 294,783 116,925 the year’s Balance at Accumulated depreciation – IRR in Millions Accumulated depreciation beginning the year’s Balance at 84,781 10,676 26,030 12,568 126,309 298,597 169,523 208,240 end 3,985,543 2,488,358 7,189,818 7,410,626 4,563 25,657 52,731 12,568 298,597 124,953 169,523 184,256 the year’s Balance at end 5,312,639 5,509,463 3,554,912 1,081,702 0 0 0 0 0 0 the year’s Balance at 0 0 0 0 0 0 0 1,914 3,854 29,945 12,337 48,050 ) 60 ( (48,050) changes and other ) 276,080 ( year Movements ) 6,569,695 ( ) 6,569,695 ( ) 6,293,555 ( 0 0 0 during the Sold assets (1,693) (8,159) (1,954) (30,400) (24,951) 364 908 year (276,080) Sold 3,684 4,387 1,218 1,555 assets (6,475,137) (6,793,423) (6,818,374) 45,541 288,747 163,765 during the year 6,468,855 6,678,161 6,167,992 assets Acquired during the 364 1,555 3,463 5,544 3,893 Cost – IRR in Millions 0 0 0 0 19,454 45,541 412,383 187,749 Cost – IRR in Millions 6,347,670 6,794,326 7,027,617 3,854 1,914 Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) 48,050 29,945 12,337 the year ) 48,050 ( Acquired assets during Movements 8,906 98,979 18,283 54,944 45,442 15,077 167,968 326,719 3,655 90,681 18,119 39,176 20,491 15,077 4,113,010 2,352,055 7,140,864 7,201,383 Notes to Financial Statements for the Financial Year Ended March 20, 2015 Ended March Year the Financial for Statements Financial to Notes 20, 2015 Ended March Year the Financial for Statements Financial to Notes 167,968 296,319 5,365,429 5,400,997 3,680,475 1,069,035 beginning the year’s Balance at beginning the year’s Balance at Unit description Buildings and installations & ex - Branch renovation penses Computer equipment Safety and security equip - ment Banking equipment Vehicles Furniture and fixtures Capital downpayments capital items Stored Buildings and installations & expenses Branch renovation Vehicles Computer equipment Banking equipment Safety and security equipment Furniture and fixtures Capital downpayments capital items Stored Total 16- Tangible fixed assets 16- Tangible as follows: tangible fixed assets are table of the Group’s 16-1- The cost and accumulated depreciation as follows: tangible fixed assets are Company’s table of the Parent 16-2- The cost and accumulated depreciation Land Total Land

86 Annual Report 2014 2015 87 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

17- Intangible assets 19- Due to CBI

Group Parent Company Group and Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR IRR Goodwill 173,748 0 173,748 0 Due to CBI 11,369,379 868,770 The right to use public services 5,571 5,608 5,449 5,449 11,369,379 868,770 Right of stock exchange brokage 10,146 10,146 0 0 Other intangible assets – mostly 77,445 6,741 75,889 3,713 software 266,909 22,495 255,086 9,162 20- Due to banks and financial institutions

Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 18- Other assets IRR in Millions IRR in Millions IRR in Millions IRR in Millions Investment deposits-other banks 9,070,211 4,501,253 9,070,211 3,849,221 Balance for other assets is as follows: Net SHETAB transactions 197,237 338,561 197,237 338,561 Sina Bank 213,500 250,000 0 0 Group Parent Company EN Bank 228,000 228,000 0 0 March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 Saman Bank 89,400 4,200 0 0 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Sepah Bank 224,658 224,658 0 0 Long-term accounts receivable 54,006 129,011 0 0 Ansar Bank 252,000 221,000 0 0 Confiscated collateral assets 8,022,946 5,120 8,022,946 5,120 Karafarin Bank 212,877 212,329 0 0 Membership deposits 100,000 50 100,000 50 Shahr Bank 715,000 666,400 0 0 Right to print stamps and checks 3,079 3,372 3,079 3,372 Askariye Credit Institution 2,850,410 241,315 0 0 Security deposits on leased 623,639 1,062,359 1,123,639 1,057,259 Kowsar Credit Institution 1,300,000 0 0 0 premises 15,353,293 6,887,716 9,267,448 4,187,782 Day Bank’s savings fund 50,000 0 50,000 0 Future years’ interest and (877,269) (176,822) 0 0 Day Bank’s storage balance 15,539 20,750 15,539 20,750 commission Other 2,332 354 2,000 0 14,476,024 6,710,894 9,267,448 4,187,782 8,871,541 1,221,016 9,317,203 1,086,551

88 Annual Report 2014 2015 89 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

21- Demand deposits 24- Other deposits

Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 Group and Parent Company IRR in Millions IRR in Millions IRR in Millions IRR in Millions March 20, 2015 March 20, 2014 Current accounts – IRR 1,810,216 1,895,262 1,851,283 1,915,535 IRR IRR Current accounts –FX 330 377 330 377 Cash deposits for letters of guarantee–IRR 638,377 174,305 Sold banknotes 538,938 2,196,626 538,938 2,196,626 Advances received for letters of credit 181,691 140,789 Outward payment order-FX 333,037 0 333,037 0 Other 31,658 83 2,682,521 4,092,265 2,723,588 4,112,538 851,726 315,177

22- Savings deposits 25- Accounts and notes payable-trade Group and Parent Company Repayment Absorbed de- Group of deposits March 20, 2014 posits during March 20, 2015 during fiscal March 20, 2015 March 20, 2014 fiscal year year IRR IRR IRR in Millions IRR in Millions IRR in Millions IRR in Millions Notes payable 666,434 815,881 Savings deposits (IRR) 137,554 28,008,962 (27,861,062) 285,454 Sums payable for Bank and Municipality contract 4,014,447 501,309 Savings deposits 1,259 367,539 (348,087) 20,711 Real estate sellers – Didar Iranyian Co. and Emad Co. 8,519,292 571,154 (foreign currency) Hossein Ilbeigi and Mitra Baratchi – purchase of commercial and Youth savings deposits 299,804 0 102 708 (810) 0 administrative units (Javaneh-ha) Claims of customers and sellers of goods and services 481,509 475,543 138,915 28,377,209 (28,209,959) 306,165 Other units 3,417 49,826 13,984,902 2,413,713 23-Term investment deposits

Group Parent Company March 20, 2015 March 20, 2014 March 20, 2015 March 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Long-term investment deposits 48,178,916 7,209,790 48,178,916 7,209,790 Long-term investment deposits 15,127 13,851 15,127 13,851 (foreign currency) Regular short-term investment 33,614,091 53,787,445 33,847,309 54,070,806 Special 6 month short-term 9,153 61,095 9,153 61,095 investment Special short-term investment 2,541 20,971 2,541 20,971 81,819,828 61,093,152 82,053,046 61,376,513

90 Annual Report 2014 2015 91 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

26- Accounts and notes payable-others 27- Advances received This title includes: Group Parent Company Group March 20, March 20, March 20, March 20, March 20, 2015 March 20, 2014 2015 2014 2015 2014 IRR IRR IRR in Millions IRR in Millions IRR in Millions IRR in Millions Advances received for real estate 19,885 11,885 Notes payable 25,571 1,182 0 0 19,885 11,885 Bonyad Shahid 159,420 102,602 138,735 104,495 Frozen deposit 118,487 149,477 118,487 149,477 Provision for real estate transfer 283,459 70,903 234,462 51,762 28- Tax payable Customers – issuance of stump and 96,169 36,522 119,046 36,522 gift cards Sellers of goods and services 1,052 7,328 381 11,221 Group Parent Company Tax income 40,427 5,120 5,648 11,403 March 20, March 20, March 20, March 20, 2015 2014 2015 2014 Seller of Kamranieh land property 885,619 0 885,619 0 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Buali Investment Co. 0 0 102,977 0 Balance at the beginning of 142,840 149,041 90,281 67,608 Day Exchange Co. 0 0 178,106 0 financial year Tejarat Gostar Fardad Co. 0 0 12,464 0 Business operation tax during 724 242,915 0 90,281 Ahab Co. 17,500 17,500 17,500 17,500 financial years Deposits payable 21,722 513,579 20,234 8,866 Payment during the financial year (61,051) (249,116) (90,281) (67,608) Current of staffs & Board of Directors 1,904 2,012 51 1,484 Balance at the end of financial year 82,513 142,840 0 90,281 Insurance premium 5,047 4,271 4,222 2,093 Provision for payable expenses 570,575 375,525 462,957 305,087 Fund, ATM and POS overrun 5,535 4,529 5,535 4,529 NWW, Tavanir and NIGC- received bills 9,792 8,699 9,792 8,699 not paid Interest payable 19,019 0 19,019 0 Other 171,301 39,639 143,430 31,818 2,432,598 1,338,888 2,478,665 744,957

92 Annual Report 2014 2015 93 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

29- Dividend payable 31-2- Capital Adequacy

Financial year Financial year Group Parent Company ended March 20, ended March 20, Balance at Dividends March 20, March 20, Approved March 20, 2015 2014 Description March 20, payable 2015 2014 dividends 2015 2014 during year IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Paid-up capital 5,000,000 5,000,000 Legal reserve 918,399 558,643 Financial years ended March 42,003 92,603 0 1,100,000 )1,100,000( 0 Retained earnings 719 1,201,374 20, 2015 Total capital 5,919,118 6,760,017 42,003 92,603 0 1,100,000 )1,100,000( 0 Increased by: General provision for doubtful debts and investments 837,080 347,977 Decreased by: Amounts in excess of 1.25% of risk weighted assets 0 0 30- Provision for termination benefits Total complementary capital 837,080 347,977 Total capital base before deductions 6,756,198 7,107,993 Deductions from capital base: Group Parent Company Investments in other banks and credit institutions 53,977 0 Financial year Financial year Financial year Financial year Capital base 6,702,221 7,107,993 ended March ended March ended March ended March Total risk weighted assets 88,476,726 42,892,498 20, 2015 20, 2014 20, 2015 20, 2014 Capital adequacy ratio 8 17 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Balance at the beginning of financial 19,422 9,591 16,682 8,508 year Payments during the year (4,799) (2,437) (2,236) (1,034) Financed provision 20,417 12,268 16,711 9,208 Balance at the end of the year 35,039 19,422 31,157 16,682

31- Capital 31-1- Capital of the bank at the time of establishment was 2,000 IRR in billions (including 2,000,000,000 shares with the face value of 1,000 IRR for each), which has been raised in two stages to 5,000 IRR in billions (including 5,000,000,000 shares with the face value of 1,000 IRR for each). Thus the last registered and paid share capital of the bank is 5,000 IRR in billions divided into 5,000 million shares outstanding.

94 Annual Report 2014 2015 95 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

32- Parent company shares in ownership of the subsidiary 35- Income on credit facilities granted

Group Parent Company 2014-15 2013-14 2014-15 2013-14 Financial year ended March Financial year ended March 20, 2015 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions No. of shares IRR in Millions No. of shares IRR in Millions Income on credit facilities granted 8,670,674 3,282,734 9,051,572 3,642,878 Omran Va Maskan Abad Day Co. 23,707,794 39,711 0 0 Warranty amount 1,186,083 348,508 1,186,083 348,508 Tejarat Gostare Fardad Co. 4,131,055 7,529 0 0 9,856,757 3,631,242 10,237,655 3,991,386 27,838,849 47,240 0 0

36- Income on participation bonds 33- Legal reserve 36-1- Participation bonds have the APR of 20 and their income property until the end of the reported financial year will be as follows: Group Parent Company Financial year Financial year Financial year Financial year Group Parent Company Note ended March ended March ended March ended March 2014-15 2013-14 2014-15 2013-14 20, 2015 20, 2014 20, 2015 20, 2014 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Income on participation bonds 191,294 71,695 191,294 71,158 Balance at the beginning of 640,142 340,796 558,643 340,796 financial year Transfer from allocable profit 33-1 359,817 235,075 359,756 217,847 Balance at the end of financial 999,959 575,870 918,399 558,643 37- Income on investments and deposits year Adjustments during the year 9,935 64,272 0 0 Group Parent Company 1,009,894 640,142 918,399 558,643 2014-15 2013-14 2014-15 2013-14 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Investments income: 0 0 623,449 727,795 Dividend of subsidiaries 274,889 215,631 50,141 61,152 34- Minority interest Dividend of investments 274,889 215,631 673,590 788,947 0 380,947 0 380,947 Income from sale of priority cases of Financial year Financial year 412,449 342,670 (2,735) 222,361 housing facilities ended March 20, ended March 20, 2015 2014 Gain (loss) on the sale of investments 0 12,860 0 0 IRR in Millions IRR in Millions Income from civil participation contract (203,665) (114,737) (203,665) (107,792) Share of capital 142,201 244,210 Loss on decrease in investment value 483,673 837,370 467,190 1,284,462 Share of legal reserve 14,694 25,255 Difference between fair & book value assets 41,950 13,343 Deposits’ income: 5,290,355 4,856,426 5,290,355 4,850,821 Share of retained earnings 64,755 186,710 Income from term investment deposits 108,693 66,880 108,693 66,880 263,600 469,518 with domestic banks Income from legal reserve 5,399,048 4,923,306 5,399,048 4,917,701 5,882,721 5,760,676 5,866,238 6,202,163

96 Annual Report 2014 2015 97 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

38- On Account Profit of Investment Deposits 39- Commission income Group Parent Company Commision incomes through rendering services are as follows: Rate 2014-15 2013-14 2014-15 2013-14 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Group Parent Company Short-term deposits 10 10,587,648 6,429,826 10,685,891 6,454,445 2014-15 2013-14 2014-15 2013-14 One-year deposits 22 2,574,581 64,211 2,574,581 64,211 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Two-years deposits 22 148,309 110,478 148,309 110,478 Issued letters of guarantee 79,787 21,939 79,787 21,939 Three-years deposits 22 3,313 4,502 3,313 4,502 1.5/1000 commission for plan 51,627 20,522 51,627 20,522 Four-years deposits 22 312 1,466 312 1,466 assessment Five-years deposits 22 3,181,090 2,313,320 3,181,090 2,313,320 Receipts from SHETAB system 143,219 144,616 143,219 144,616 Certificate of two-years investment Collateral assessment 29,518 6,513 29,518 6,513 20 0 126,333 0 126,333 deposits Card issuance and renewal 4,784 11,365 4,784 11,365 Profit paid in foreign currency 538 598 538 598 Check issuance 6,899 6,177 6,899 6,177 16,495,791 9,050,734 16,594,034 9,075,353 Letters of credit 20,434 21,748 20,434 21,748 Other banking services 9,065 10,817 9,065 10,783 345,333 243,698 345,333 243,664 38-1- The difference between on-account and definite interest of investment deposits The difference between on-account and definite interest of customers’ investment deposits according 40- Income through service provision to circulars No. MB/1799 dated January 8, 2004, 88 /22243 dated April 26, 2009 and 126331 /87 Income from sales of goods and services is as follows: dated March 9, 2009 of the CBI has been calculated as follows:

Parent Company Group 2014-15 2013-14 2014-15 2013-14 IRR in Millions IRR in Millions IRR in IRR in IRR in Millions Millions Millions Sale of iron waste and agricultural products 81,687 0 Day Leasing Co. – car sales and lease Facilities granted to persons and companies 35,594,228 14,055,441 500,465 425,417 commission Facilities granted to banks 1,089,423 1,557,692 Day Bank Brokerage – stock exchange Investments 1,893,202 1,753,032 14,085 44,744 Deposits with banks 19,682,552 22,103,783 commission Participation bonds 483,671 336,623 POSs rent and maintainance 60,007 11,181 Total 58,743,076 39,806,571 Other 1,352 1,599 Decreased by: 657,596 482,941 Depositors’ resources 77,238,366 47,147,604 Legal reserves )10,334,879( )6,373,371( Net depositors’ resources 66,903,487 40,774,234 Bank resources )8,160,411( )5,179,526( Profit of facilities granted 10,237,655 3,596,368 41- Foreign currency transactions Profit of participation papers 191,294 71,158 Profit of investments 467,190 1,284,463 41-1- Gains on foreign currency transactions are as follows: Profit of deposits 5,290,355 4,850,821 Total joint income 16,186,494 9,802,810 Group Parent Company Depositors’ share of income 16,186,494 9,802,810 2014-15 2013-14 2014-15 2013-14 Legal reserve’s reward related to deposits 104,139 66,880 Depositors’ interests 16,390,633 9,869,690 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Decreased by: Gain on foreign currency exchange 0 33,711 4,478 28,447 Fees (2.5%) )1,930,959( )1,178,690( Gain on foreign currency purchase and 147 0 158 0 Definite interest 14,359,673 8,691,000 sale On-account interest paid to depositors during the financial year )16,593,496( )9,075,353( 147 33,711 4,636 28,447 Under (over) payment to depositors 2,233,823 )384,353(

98 Annual Report 2014 2015 99 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

42- Other incomes and expenses Group Parent Company 2014-15 2013-14 2014-15 2013-14 Group Parent Company IRR in Millions IRR in Millions IRR in Millions IRR in Millions 2014-15 2013-14 2014-15 2013-14 Other administrative expenses: 0 885 0 885 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Establishment costs 1,484 2,982 0 0 Claim receipts 1,704,714 0 1,704,714 0 Bourse and Fara Bourse facilities 252,633 165,790 248,946 162,665 Participation in contracts’ benefits 416,155 343,807 268,534 220,194 Rent expense 46,596 52,562 39,225 43,765 Net profit of selling fixed assets 8,769,114 8,157,972 4,146,594 1,076,663 Advertisement 299,305 257,938 217,224 175,624 Lease income 81,849 84,014 66,009 84,014 Asset depreciation 47,282 26,424 47,201 26,322 Sale of services – Buali Investment 6,748 4,652 0 0 Tele-communications 1,943 8,007 0 2,678 Co. Registration expenses 128,810 73,728 108,229 67,002 Increase (decrease) in investment (349,567) 3,503 0 0 value Contracted services 13,732 5,720 9,319 4,486 Dividends, bank deposits and Consultation fees 6,366 1,191 2,500 2,000 29,853 194,339 0 0 participation papers Audit fees 30,630 11,116 30,630 11,116 Other 48,687 31,055 59,783 34,305 Facility assessment 4,159 2,942 3,992 2,837 10,707,552 8,819,343 6,245,634 1,415,175 Membership fees 666,426 246,026 664,359 269,473 e-banking and IT 34,978 24,080 31,613 20,624 Catering, entertainment and formalities 27,854 15,910 25,994 14,432 43- General, adiministrative and organizational expenses Utilities 5,205 3,509 5,205 3,509 Education and research 40,361 23,241 36,998 18,062 Group Parent Company Maintenance and repair 16,998 10,691 14,539 9,564 2014-15 2013-14 2014-15 2013-14 Water, power and energy 4,723 2,903 4,059 1,721 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Transportation 3,473 2,803 1,134 2,736 Personnel expenses: Insurance expense 36,911 6,155 3,740 155 Salaries, wages and benefits 468,136 332,726 413,834 235,830 Borad of directors’ presence fee and Unemployment insurance and 89,440 9,549 19,805 12,193 40,173 22,310 36,731 21,193 rewards employer’s share Other 1,759,309 954,152 1,514,712 851,849 Termination and furlough benefits 22,142 2,833 18,723 12,536 2,310,889 1,345,860 2,004,415 1,151,442 Mission assignments 4,602 804 4,264 647 New-year gifts and rewards 16,527 33,034 16,153 29,389 551,580 391,707 489,705 299,595 44- Doubtful debts expenses

Group Parent Company Rate 2014-15 2013-14 2014-15 2013-14 IRR in Millions IRR in Millions IRR in Millions IRR in Millions General provision for doubtful debts 44-2 493,775 148,944 489,103 125,638 Special provision for doubtful debts 44-1 998,063 45,517 998,063 45,517 1,491,838 194,461 1,487,166 171,155

100 Annual Report 2014 2015 101 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

45- Cost of services provided 48-Annual adjustments

Group Parent Company Group 2014-15 2013-14 2014-15 2013-14 2014-15 2013-14 IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions IRR in Millions Cost of Day Leasing Co.’s services 475,998 276,444 Error corrections (101,234) (86,923) (100,655) (84,432) Financing the operation concerning the contract between Bank and 177,279 114,867 (101,234) (86,923) (100,655) (84,432) Municipality Cost of real estate sold by Didar Iranyian Co. 3,432,524 5,708,108 Cost of iron waste and agricultural products sold by Didar Iranyian Co. 62,327 0 Rent and fee for installation and maintenance of POSs 56,451 2,861 49- Reconciliation of Group’s profit before tax with cash flow arising from operating Other 5,025 15,446 activities: 4,209,604 6,117,726 Group 2014-15 2013-14 IRR in Millions IRR in Millions IRR in Millions 46- Financial expenses Profit before tax 2,600,710 1,812,510 Financial expenses are as follows: Depreciation expenses 299,305 257,938 Decrease in investment value expenses 203,725 114,737 Group Parent Company Other incomes and expenses 477,276 69,499 Doubtful debts expenses 1,491,838 194,461 2014-15 2013-14 2014-15 2013-14 Termination benefits expenses 17,481 12,268 IRR in Millions IRR in Millions IRR in Millions IRR in Millions Dividends from investments (671,148) (789,048) Profit of facilities received from the 431,267 452,357 296,626 37 Profit from exchanging foreign currency (4,636) (28,447) banks Profit from selling investments and participation bonds 2,735 (674,465) Banking services commision 3,859 5,226 0 335 Profit from selling tangible fixed assets (8,769,114) (8,157,972) expenses (4,351,827) (7,188,521) Loans’ delay penalties 11,830 4,139 0 0 Net increase (decrease) in operating liabilities: Other 7,491 0 7,491 0 Sight and transactional deposits (1,221,702) (201,,903) 454,448 461,721 304,117 372 Short-term investment deposits and the like (20,293,869) 37,339,755 Long-term investment deposits and the like 40,970,403 (3,999,252) Commercial accounts payable 16,176,156 (2,904,804) Operating advances received (41,300) (19,355) 47- Commission expenses Financial facilities received 4,129,195 0 Operative portion of other liabilities 18,903,738 992,170 Paid commisions include following accounts: 58,622,622 31,206,611 Net increase (decrease) in operating assets: Group Parent Company Legal reserve (971,034) (6,137,656) 2014-15 2013-14 2014-15 2013-14 Facilities granted (33,852,543) (11,900,950) IRR in Millions IRR in Millions IRR in Millions IRR in Millions Accounts receivable (5,033,084) 899,741 Downpayments (1,012) 99,474 SHETAB commission 101,446 109,639 102,187 109,639 Inventories (44,299) 1,406,812 Other commissions 494 2,093 494 2,092 Operative portion of other assets (32,275,822) 1,235,437 101,940 111,732 102,681 111,731 (72,177,793) (14,397,142) Net cash inflow from operating activities (17,906,998) 9,620,948

102 Annual Report 2014 2015 103 Financial Statements

Day Bank (Public Joint Stock Company) Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015 Notes to Financial Statements for the Financial Year Ended March 20, 2015

49-2- Reconciliation of Parent Company’s profit before tax with net cash inflow (outflow) 50- Increase in cash arising from operating activities: Net cash increase in cash reflected in the statement of cash flows is as follows: Group 2014-15 2013-14 Group and Parent Company IRR in Millions IRR in Millions IRR in Millions 2014-15 2013-14 Profit before tax on income 2,398,375 1,441,940 IRR in Millions IRR in Millions Depreciation expenses 217,224 176,624 Cash balance 738,803 388,226 Doubtful debts expenses 1,487,166 171,155 Current account with CBI 0 1,074,760 Termination benefits expenses 16,711 9,208 Sight deposits with domestic banks 10,330,698 24,336,162 Decrease in investment value expenses 203,665 107,792 Total cash balance of Day Bank 11,069,501 25,799,148 Dividends from investments (673,590) (788,948) Increased by: Profit from exchanging foreign currency (4,636) (28,447) Cash balance of subsidiaries with other banks 1,380,117 676,047 Profit from selling investments and participation bonds 2,735 (674,465) Group’s cash balance 12,449,618 26,475,195 Profit from selling tangible fixed assets (4,146,594) (1,076,663) (498,943) (661,804) Net increase (decrease) in operating liabilities: 51- Non-cash transactions Sight and transactional deposits (1,221,702) (201,,903) Group and Parent Company Short-term investment deposits and the like (20,293,869) 37,339,755 2014-15 2013-14 Long-term investment deposits and the like 40,970,403 (3,999,252) IRR in Millions IRR in Millions Operative portion of other liabilities 17,858,670 1,681,377 Acquisition of fixed assets in exchange for 3,844,286 3,549,059 37,313,502 34,819,977 receivables Net increase (decrease) in operating assets: 3,844,286 3,549,059 Statutory reserve (971,034) (6,137,656) Facilities granted (33,852,543) (11,877,644) Operative portion of other assets (19,623,820) 157,371 52- Capital commitments and possible debts (54,447,397) (17,857,929) 52-1- capital commitments: Net cash flow from operating activities (17,632,837) 16,300,243 52-1-1- Group’s capital commitments are confined to the parent company and is without capital commitments. 52-2- possible debts: 52-2-1- Except for guarantee issued for Bonyad Shahid’s credit facility for 5,000 IRR in Billion granted by Kowsar Credit Institution, the bank is without possible debt subject matter of article 235 Commercial Code Amended approved in 1968, by SFP date.

104 Annual Report 2014 2015 105 Day Bank (Public Joint Stock Company) Notes to Financial Statements for the Financial Year Ended March 20, 2015

53- Under the line items (customer commitments)

Group and Parent Company Note 2014-15 2013-14 IRR in Millions IRR in Millions Commitments to issued letters of guarantee - IRR 5,168,237 1,493,448 Commitments to letters of credit – IRR 53-1 532,305 705,818 Other customer commitments 53-2 1,314,359 20,508 7,014,901 2,219,774

54- Basic and diluted earnings per share

Group and Parent Company 2014-15 2013-14 IRR in Millions IRR in Millions Share capital 5,000,000,000 5,000,000,000 Ownership of stock by subsidiary (25,779,537) 0 Diluted weighted average shares 4,974,220,463 5,000,000,000 The year’s net income 2,599,986 1,569,595 Subtracted by: Minority interest of the net income (58,587) (116,637) 2,541,399 1,452,958 Basic and diluted earnings per share: 511 291

55- Legal obligations Allocation of at least 10% of 2014-15’s net income in compliance with commercial laws amendment act, clause 90. Board of directors suggestion: Earnings per share: according to the board of director’s report to the annual general meeting.

56- Post SFP date events Between the statement of financial position date and financial statements’ approval date, no extraordinary event needing confession nor reflection in financial statements has happened.

106