Design No.101

101

Design www.jenab.com No.

In The Name of God Annual Report 2 015 - 2 016

EDBI In Figures

for year ended for year ended Performance (USD Million) Change 20.03.2016 20.03.2015 Pre-tax Income 29.03 47.89 -39.38% Net Profit 28.51 23.08 23.53% Total Income 270.18 249.01 8.50% Total Expenses (241.15) (201.12) 19.90% Balance Sheet figures (USD Million) Total Assets 6,613.02 4,111.87 60.83% Total Liabilities 5,237.92 2,846.98 83.98% Total Equity 1,375.10 1,264.89 8.71% Key Ratios Return on Assets 0.40% 1.20% -66.67% Return on Equity 3.50% 5.80% -39.66% Capital Adequacy Core Capital Adequacy Ratio [Basel I] (percentage) 20.54% 31.60% -35.00% Branch Network and Subsidiaries Branches and Rep. Offices 40 40 0%

2 Contents EDBI In Figures 2 Contents 3 Bank's Board of Directors 6 Bank's Managers 7 Statement of Chairman 8 Group's Description 10

Group Profile 12 Organizational Chart 15

EDBI Today 16 Strategies 18

Performance Review 20 Results of Operation 22 Main Activities In the fiscal year 2015 - 2016 28 Some Financed Projects 32 Financial Review 38 INDEPENDENT AUDITOR’S REPORT 44 Financial Statements 50 Internal Controls & Risk Management 62 Social & Organizational Responsibilities 70 Group Network 78

EDBI's Contact Details 84 Annual Report 2015 - 2016

PERSPECTIVE - Islamic Exim Bank of the Region - Pioneer in presenting timely and cost-effective innovative banking services to the exporters - Equipped with the world’s state-of-the-art technologies - Enjoying financial and banking specialists at the international level and standing in a special position among financial and monetary entities inside and outside the country, - A safe backrest for Iranian exporters,

Mission - Providing all-inclusive support from development of Iran’s nonoil exports, - A trusted administrator of government’s policies in financing and facilitating national exports,

Bank’s Goal - Contributing to the “development of national exports and expansion of trade and economic transactions with other states”

Bank's Board of Directors

Annual Report 2015 - 2016

Hossein Eivazloo Board Member Ph.D. in Economics

Ali Salehabadi Chairman and Managing Director PHD in Financial Management

Saied Nikzad Larijani Board Member Ph.D. in Strategic Management

Mohammad j. Mazdeh Board Member Ms in Business Management

Morteza Akbari Board Member Ph.D. in Accounting

6 Bank's Managers

VALIOLLAH KHARAZI MANAGER OF FINANCE AFFAIRS

HAMID REZA MABOUDI MANAGER OF INTERNATIONAL AFFAIRS

REZA SAEDIFAR MANAGER OF CREDIT AFFAIRS

MOHAMMAD H. MEHRANI MANAGER OF COMMUNITY AND INFORMATION TECHNOLOGY

HABIB AHMADI MANAGER OF BRANCHES ADMINISTRATION

MOHSEN ASHRAFPOUR MANAGER OF COMMUNICATIONS MANAGING DIRECTOR’S AFFAIRS

ALI AHMADI MANAGER OF SECURITY

ABOLFAZL NOFERESTI MANAGER OF INSPECTION AND INTERNAL AUDIT

SEYED MORTEZA ZEKAVAT MANAGER OF PLANNING & PROCEDURES IMPROVEMENT

REZA GHARAEIPOUR MANAGER OF HUMAN RESOURCE AFFAIRS MANAGING DIRECTOR’S MESSAGE

With a look at expansion of international trade and supporting national production, as the two important and strategic targets in development of state nonoil exports, Export Development Bank of Iran (EDBI) has always orchestrated its activities to strengthen export-oriented production and play an axial role in achievement of general policies of resistive economy of the Islamic Republic of Iran, and it has taken effective measures in this regard. An overview of the credit performance of this state-owned financial entity, which is known as the Exim Bank of Iran, over the years of its activity shows that, despite some limitations in the route of international economic relations, EDBI’s share in financing state nonoil exports maintains an acceptable growth. In the credit rating conducted by Capital Intelligence (CI), EDBI’s long-term foreign currency rate in the Iranian year 1394 (year ended March 19, 2016) shows an improvement of two grades. This promotion first happened from B to B+ and then to BB-. In the year mentioned in this report, the volume of facilities granted by the bank amounts Rls. 57,889 billion; the figure was Rls. 44,741 billion in the last year. In addition, removal of existing barriers facing interbank relations in the area of EDBI’s international activities in this year created the conditions that in the documentary credits section, the bank experienced a growth and 130% and achieved the figure USD 618 million of credit and export bills of exchange. Moreover, in the area of import credit and bills of exchange, this figure has been reported as USD 2,160 million which shows a growth of 158% compared to the previous year. EDBI succeeded to receive a credit line of Rls. 6,800 billion from Central Bank in the year ended March 19, 2016, which figure shows a three-time increase compared to the previous year. Our bank’s strategic macro and mid-term goals emphasize on continuous increase of the share of knowledge-based products and number of customers who join EDBI Customer Club, with the bank’s support, and who use the special services of our bank, and our staff members are determined to constantly improve the Financing Effectiveness Index by EDBI. In this annual report, we also point out the arrangements made in order to establish and develop agency relationships with foreign banks, through which presenting trade finance services including foreign currency drafts, documentary credits and issuance of letters of guarantee as well as opening of accounts with international banking brokers and reduction of money transfer costs has been made possible.

8 Annual Report 2015 - 2016

Execution of a cooperation MoU with South Korean Exim Bank and negotiating for receiving refinance credit line from the said bank, the possibility of using Swiss BCP Bank’s 3-month refinance credit line for importing basic commodities and drugs, negotiating with Medio Banca Italy for receiving a USD 2 billion and negotiating with Turkish Exim Bank for receiving USD 350 million credit line with the management of Central Bank of the Islamic Republic of Iran, as well as membership in Association of Development Financial Institutions in Asia and the Pacific (ADFIAP), are all part of EDBI’s measures taken in 2015 in order to restitute the banking relations. Moreover, in the area of credit activities, as the most important services of EDBI in line with providing finance for national and macro projects, we can point out the Euro 83 million credit line granted to the project for construction of Armenia’s Elec- tric Power 3rd Transmission Grid, with the goal of exporting as to the said country, execution of contract with Russian banks in order to facilitate mutual trade, USD 334 million finance for construction and mobilization of Chabahar’s Shahid Rajaee Port Phase 1 and opening the biggest documentary credit of our bank’s history with the value of Euro 2,200 million for Bushehr Petrochemical project. On the other hand, our bank has taken widespread anti money laundering measures and compliance and carrying out duties assigned by the Financial Informa- tion Unit, in the reported fiscal year, and as an outcome of these measures, the bank could obtain the first rank among state-owned banks in the area of anti money laundering and compliance in the year ended March 19, 2016. Along with specialty measures in financing the country’s exports and in order to fulfill its organizational social responsibility, EDBI has operated an analytical news portal in the area of international trade, known as Exim News, which is already in operation and it is responsible for publication of specialized news and analyses in the area of export and also introducing local and international capacities for presence and activity of Iranian exporters of goods and services to relevant export and import businesses. EDBI’s high will and motivation along with its significant efforts in order to expand international interbank relations, especially in post-JCPOA period, have provided a suitable opportunity for nonoil exporters of the country and EDBI, to take more steps in order to flourish and improve our homeland’s economy in collaboration with the world’s financial establishments.

Ali Saleh Abadi Chairman and Managing Director Export Development Bank of Iran

9 Z Group's Description

Z Group Profile About EDBI

According to the approval made by the Extraordinary General Meeting of the Annual Report 2015 - 2016 Banks on July 10, 1991, the Export Development Bank of Iran has been founded on November 24, 1991 under registration number 86936 as a governmental bank. It plays a leading role in providing financial facilities as well as other banking and advisory services to Iranian exporters and their foreign clients. The Bank mainly focuses on the promotion of non-oil exports. According to the paragraph 3 of Article of Association, including 12 sub-section and one note, main activities of the Bank according to usury-free Banking Operation Act (enacted on August 30, 1983), are, extending export facilities in domestic and foreign currencies, correspondent banking operation, export financing by different credit lines, issuing bank guarantees, and other banking operations. The Bank offers comprehensive advice to its clients and abroad range of financial solutions. So that EDBI offers its clients a distinct value proposition combining a global reach with a structured advisory process and access to a broad range of sophisticated products and services. The Bank delivers innovative and integrated solutions in close collaboration with Asset Management. Despite the impact of some financial and non-financial crisis, the long term growth prospects of the wealth management sector remain intact. During its life, the Bank has intended to build a strong future for its business and stakeholders. As per content of the article of association, the Bank is mandated to carry out all banking transactions prescribed under the Usury-Free Banking Operations Act of 1983. The Bank is active in the cornerstone products such as deposits, credit cards, finance and investment in addition to its export-leading position in commercial lending, treasury management and advisory services. The Bank’s regulator is Central Bank of Islamic Republic of Iran (CBI) which is in charge of coordinating banking operations across sectors, reviewing the operations of individual banks and setting interest and exchange rates. As the regulator, CBI licenses and monitors financial services businesses to ensure that they operate efficiently, honestly and fairly. The Bank encompasses businesses providing a full range of financial services to the customers. By and large, the key activity areas of the Bank include: International Affairs which takes care of trade finance and foreign investment; Credit Affairs mainly responsible for extending facilities, credit control, appraisal and recovery; Finance Affairs in charge of treasury, funding, finance and liquidity; Branch Administration for monitoring branches operational activities and follow-up on their business achievements with the aim of increasing efficiency, productivity and profitability; Risk Management for looking into different risks including credit, market and operational; Logistics responsible for planning, personnel and supplies, together with the

12 fulfillment of the respective quantitative and qualitative objectives in risk, human resources and customer service; and Internal Audit Department responsible for monitoring internal control and summarizing reports for the Board. A properly functioning internal audit department is part of good corporate governance, as recognized by national and international codes on corporate governance. This department reviews the integrity of the systems by the use of computer assisted audit and other techniques. Head quartered in Tehran, the branch network includes 40 domestic branches, three of which located in the free trade zones.(located in KISH, CHABAHAR, QESHM) A wholly owned bank which has been established in Caracas, Venezuela. Based on the Bank's ambitious international expansion strategy, it aims at growing the business activities of its subsidiaries and to penetrate to new markets. The main subsidiaries and associates of the Bank are as follows:

Banco Internacional de Desarrollo,C. A. (Banco Universal) The wholly-owned subsidiary of the Bank as a Venezuelan universal bank has officially been registered in Venezuela on August 02, 2008 with the capital amounting to VEB 40,000,000,000 that is fully paid by EDBI as its sole shareholder.

EDBI Stock Brokerage The Bank offers corporate customers through its brokerage office at Tehran Stock Exchange several options for trading, asset management, underwriting, and investment advisory services with multi-channel electronic access including the internet. The Bank is determined to develop incrementally a complete range of investment banking services.

EDBI Exchange Brokerage In line with the sharp increase in the volume of Iran's foreign trade and gradual liberalization foreign exchange policies by the Central Bank of Iran, the Bank has introduced a highly acclaimed over-the-counter foreign exchange service, offering banknotes in all major and regional currencies.

EDBI aspires to foster its position as being the «Bank of Choice» for Iranian exporters. To support this vision, the Bank is committed:

To utilize advanced E-banking and other cutting-edge technology; To strengthen it’s financial base capital and improve other key ratios to maintain solid financial status;

13 To expand it's international banking network and presence; To maintain the highest standards of corporate governance and regulatory compliance; To entrench a disciplined risk and cost management culture; To optimize staff development through business driven trainings and profit related incentives; To contribute to the social and economic advancement of the communities in which it works by providing structured finance, risk management services and advice; To adjust proactively to new developments.

The organizational chart as well as more details on the Bank's operations will be followed on next pages. Organizational chart

15 EDBI Today At a Glance

The Bank complies with internationally accepted standards. It is committed to Annual Report 2015 - 2016 safeguarding the interests of its stakeholders. The Bank knows that transparent disclosures of its governance helps stakeholders assess the quality of the Bank and its management and assist them in making the best decision. During the challenging economic times, the Bank has been fully committed to offering services to its customers and building a foundation for growth. The Bank intends to be uniquely positioned to extend the relationship with its customers and generate profitable revenue growth. The Bank continues to grow its businesses as conditions improve. While revenue pools arising from lower oil price will be smaller, the Bank believes it will play a stronger role, with market-leading positions where the Bank chooses to compete. In addition to providing main banking products through modern computerized systems, the Bank remains committed to offering advisory services to the customers. A major activity across all departments of the Bank is to provide exporters and importers with comprehensive advice on possible financing options. More details on the Bank's performance will be found as follows:

EDBI's Performance To support its strategy, the Bank has had a consistent focus on main factors: the quality of its customer, its people and culture; and the communities in which it operates. The Bank expanded its ability to serve certain geographic and product markets. Significant EDBI's achievements include: Trade Advisory Services and Export Promotion: The Bank contributes effectively to the development of Iranian non-oil export within the macro framework set by the government as the main shareholder. A major activity across all departments of the Bank is to provide exporters and importers with comprehensive advice on possible financing options. The Bank also assists exporters in understanding trade inherent risks and in mitigation such risks by proper structuring of a transaction, using advanced financial tools. The customer relationship officers in the branch networks have received extensive training on multiple types of trade finance driven products and can serve the customers on case by case basis. The customers’ help-line is a permanent service of the Bank to respond to the growing demand of customers for having access to the updated information in field of trade and banking operations. Productivity and financial performance: The bank reported a net profit of RLS 862,159 million at the reporting date. Client centricity by best people: For speed, integrity, security and accuracy of transactions, the Bank employs the state-of-the-art technology at core of its banking operations. Hiring and appointments reflect EDBI's continued investment in its growth. The Bank developed and implemented a specific value proposition. As part of the

16 Bank's continued efforts to improve the advisory process and to better serve clients, the Bank has established a number of integrated programs aimed at attracting and retaining employees from a wide variety of backgrounds ranging from apprentices and high school graduates to university graduates and experienced professionals. Highly knowledgeable and experienced employees are the foundation of the Bank's success. In this regard, the Bank enjoys a system to assess the quality of performance measurement as a basis for determining whether the Bank's goals and objectives are achieved. So the performance targets are set for each management and actual performance assessed against these on a regular basis. Reasons for underperformance are also ascertained, and appropriate, changes made to the related compositions. Training and development: Improving the knowledgeable staff is one of the ED- BI's top priorities, as it fosters their commitments and develops employees' productivity. Combating terrorism financing: The Bank is fully subscribed to measures for combating terrorism financing and implementation of Anti Money Laundering (AML) policies. Having applied the related instructions, the Bank set itself apart by drawing up a legal and regulatory compliance program. This includes appointing a designated compliance officer, also being the board member, to be responsible for coordinating and overseeing the AML program. To track the progress and benchmark its performance, the Bank has defined a set of key performance indicators for growth, efficiency and performance, as well as risk and capital to be achieved across market cycles. Internal control and risk assessment: Some more formal review of internal control is carried out by establishing on internal audit department to monitor internal control and then summarize the reports for the board. In this line, the Bank enjoys the appropriate systems to manage the relevant risks. The internal audit department reviews the integrity of the systems by the use of computer assisted audit and other techniques to ensure that access to the system is restricted to those who should have access and to ensure that the system is producing exception reports as it should. The use of dummy data and false passwords might be used in such an assessment. The internal auditors also assist the Bank's management in performing review assignments covering, for example, human resources and treasury activities. Information Technology: The Bank's information system provides relevant and reliable information for financial and operating decisions. The core banking and trade innovation systems facilitate retail banking and trade finance services of the Bank. Online access to bank’s accounts and instant follow-ups of all trade finance transaction by customers have been made possible. For the year under review the Information Technology Department kept track of emerging technologies to pursue the overall IT strategy. Especially with regard to economic environment, the attention has been paid to weigh risks and returns of the new

17 technologies. However, decisions have been made concerning the areas of IT that could be carefully outsourced. Doing so was part of labor savings and cost cutting measures that the Bank was seeking to implement as part of its IT strategy. Annual Report All member staff is provided with on-line, real-time computer systems, which present 2015 - 2016 the required information as well as soft-ware to enable the employees to provide with the best services to the Bank's customers. Finding solutions for gaining control of business finances, payments, internet access to accounts also have been part of E-banking services. Additionally, mobile phone banking readily grants all customers access to current and savings accounts, receiving last transactions and periodic statement of accounts, paying utility bills, internet stock broking, among many others.

Strategies

The Bank pursues continuous strategic change in all organizational boundaries, and strives to adopt new strategies in five distinct fields of having greater market share, enhancing services, financial development, developing human capital and organizational growth. As part of market development strategies, the Bank has launched a smart marketing campaign to target the customers at each market segment and provide quality services, with zero deficiency. This has facilitated so far the presence in international markets in which the country has competitive advantage. To continue being a market player, the Bank invested on enhancing its corporate image and positioning itself as a prime financier of Iran’s non-oil exports both domestically and abroad. With respect to the service development strategies, the Bank planned for optimizing the mechanism for allocation of loans and other facilities to the customers. Besides, diversification of services and providing technical expertise and other banking advisory services were part of service proposition of the Bank. To facilitate the lean operations also the Bank capitalized on expansion of modern e-banking by utilizing the state-of-the-art information technologies for effective communication and real-time business exchanges to address the customer demands. Concerning financial development strategies, endeavors made to improve the financial structure as well as the liquidity management. Therefore the risk management tools were used and strict internal control policies implemented both on the mobilization and allocation of resources to attain improved financial performance. In addition, to have access to international financial resources abroad, the Bank planned for strategic alliance with partner international banks and or other financial institutions. As for the human capital development, the knowledge management division was set up in the Bank to foster spread of insights and experiences in the workplace, which can be transformed into new forms of knowledge for taking informed decision when encountering emerging issues. Moreover, enforcing the unique role the staff members can play in moving forward with the organizational goals is much dependent on the personal skills and expertise of the employees. Therefore, efforts made to ensure the staff members could enhance their personal and

18 the job related skills and to outperform in responding to the growing customer expectations. Concerning the organizational development, the Bank invested on improving the structure, systems, procedures, and methods in accordance with the banking industry standards. Enhancing the management information systems was among the strategies followed in order to ensure having integrated information systems, stringent network and information security as part of overall organizational development goals.

MAJOR FUTURE PLANS WITHIN THE STRATEGIES OF EXPORT DEVELOPMENT BANK OF IRAN

First Strategy: Development and Initiation of Diversified Banking Services and Modern Financial Instruments and Presenting Specialized Consultations to Customers Second Strategy: Intelligent Presence in Target Markets and Effective Interaction with Related Organizations Third Strategy: Organizing the Financial and Liquidity Structure and Improvement of Risk Management System Fourth Strategy: Regular Upgrade of the Systems, Procedures and Processes and Matching the Organizational Structure with Them Fifth Strategy: Strengthening the Position of Staff Members, Creating Satisfaction and Development of Professional Ethics Sixth Strategy: Deployment of Knowledge Management in the Organization and Improving the Manpower Capabilities Seventh Strategy: Improvement of Internal Control and Auditing Systems

19 Performance Review

Operational Review

EDBI with hard work and clear vision has developed the banking expertise and knowledge to benefit from the Bank's expansion strategy to grow its business ac- Annual Report cordingly at home and abroad. 2015 - 2016 The Bank's endeavors to facilitate the development of the national Iranian economy and enhance economic cooperation with foreign countries as a financial cata- lyst by providing financial facilities as well as other banking and advisory services to Iranian exporters of non-oil products and their counter parties all around the world. Main goals and achievements of the Bank include:

GOALS: Continue to improve the customer satisfaction; Continue to Iran's sound economic development by providing the optimum financing needed to boost non-oil export; Grow the Bank revenue; Engage with stakeholders to establish the environmental performance targets; Continue to implementation of Anti Money Laundering (AML) policies; Continuous training of the member staff.

Results of Operations This Bank recognizes the complex requirements of companies involved in industries such as manufacturing, agriculture, natural resources, construction, consulting and project management or companies that have significant investments in offshore companies. Based on its broad spectrum of commercial banking services offered at competitive rates, the Bank continued to treat its customers as teachers offering them expertise and advice in areas as diversified as: Trade finance, to support their export and import activities by advising or issuing the required letters of guarantee and letters of credit; Investment facilities, to finance new projects or extensions of existing ones; Financing, to help customers by providing them with a fully secured line of credit for short to long-term investments; Syndicated loans to industry, agriculture, tourism and new technologies; and ….

EDBI offers a range of financing solutions for Iran's export. The Bank has been fully committed to provide exporters with comprehensive advice on possible financing schemes. In any exporting or importing transactions, good banking services can place on a strain on the capabilities of customers to properly structure their transactions in order to mitigate the risks associated with international trade and business. The products provided by the Bank, help exporters to obtain the funds to fulfill export contracts, protect against risks of buyer non-payment and enable them to

22 offer financing to their buyers on competitive repayment terms. To assist export, the Bank provides guarantees, credit facilities and project finance. These products help exporters obtain the funds to fulfill export contracts, protect against risks of buyer non-payment and enable them to offer financing to their buyers on competitive repayment terms.

In addition to above instruments, payment services and bank transfers, forex operations and commercial banking activities like current, savings and deposit accounts, debit and credit cards, ATMs and point-of-sales operations, internet and mobile phone banking and brokerage services are offered.

Treasury Services Treasury services including correspondent banking, bank transfers, credit card, forex operation and payment services provide integrated working capital management and treasury solutions to the customers. Net interest income is driven from interest-bearing and non-interest bearing deposits and other liability management products. Deposit products provide a relatively stable source of funding and liquidity. The Bank fully guarantees the owners of term deposits for re-payment of their placements plus a minimum return on monthly basis. As for Gharz-al-Hassaneh (current) accounts, on the top of the guaranteed return, a slight commission is charged for the services provided. Under tenets of Islamic Banking in case financed activities provide a return in excess of the guaranteed return and the accrued commissions, the excess return is shared between the Bank and the depositors.

The customers based on their business type and activities continued to be benefited from an array of banking services like having plastic cards for their pur- chases at the point of sales as well as applying for internationally acquired credit and debit cards. The substantial increase issued local plastic cards reflects the success of the Bank in implementing export promotion policies in line with achieving its goals.

Trade Finance Services The Bank's international trade finance solutions and trade experts, through the extensive experience can advise the customers on: facilitating growth in foreign markets cost-effective methods of funding the customers' cash flows and working capital payment methods and documentation technology to manage the customers' trade finance transactions. Total amount of commissions generated from trade finance, treasury and other retail banking activities as well as the growth in net income from dealing in foreign currency contributed to a growth in operating profit.

23 Letters of Credit In line with the Bank's goal to improve customers' satisfaction arising from render- ing reliable services, the Bank recommends Letter of Credit as the most secure means of conducting international trade. To maximize the efficiency of L/Cs, the Annual Report Bank provides a wide variety of related services including confirmation, transfer 2015 - 2016 and back-to-back L/Cs. Enjoying dedicated and knowledgeable staffs well trained in trade finance enable the Bank to offer a solution for international trading companies to manage their currency transactions more effectively. The Bank performs the L/C operations electronically to save time and benefit from greater efficiency in document and communication flows.

Letters of Guarantee The Bank's exports program provides the solution for Iranian exporters by helping their foreign buyers obtain financing, mitigating the risk of buyer nonpayment and enabling exporters to acquire the funds to fulfill export contracts. To support these services, the Bank irrevocably commits itself to pay a certain amount of money in case of a third party’s contractual non-performance (third party being the ordering customer of the bank guarantee). The letters of guarantee issued by the Bank are the obligations independent of the contractual relationship between the applicants and the beneficiaries.

The applicants are mainly the engineering consulting firms and the exporters of techno-engineering services. Almost all types of guarantees are issued against the commitments of both the correspondent banks (Import L/G) and the customers (Export L/G). The aggregate amount of the Bank’s letters of guarantee operations for the year under review was amounted to USD 31 million and RLS 1287 million to mainly support Iranian techno-engineering service projects abroad.

Credit Facility The Bank reported an outstanding performance during the year under review, whereby extended facilities to reach USD 1,914.32 million as at 19.03.2016. Additionally a large amount of projects have been financed in order to generate the future economic value and bring about more export of goods and services of Iranian origin.

The Bank's export program provides the solution for Iranian exporters by helping their foreign buyers obtain financing, mitigating the risk of buyer nonpayment and enabling exporters to acquire the funds to fulfill export contracts. Having the right equipment and assets like raw material, spare parts and production line machines are crucial for the growth of any business. The Bank provides short and long-term funding for those importers who need facilities for manufacturing goods and services to be exported abroad. For the time when the customers (mainly exporters) require investment funding, the Bank's credit facilities are the ideal answers. The Bank remains fully committed

24 to provide exporters and importers with comprehensive advice on possible financing schemes. The Bank assists its customers in achieving their goals. The credit facility extended by the Bank is a fully secured line of credit for short to long -term investment. However, it is not designed for working capital purposes like an overdraft. The Bank helps its customers separate working capital from investment capital and enables them to run their business smoothly while also taking advantage of investment opportunities.

The following table illustrates the overall credit facilities extended in diferrent currencies for the year under review as comapared to the previous year.

2015-2016 2014-2015 Movement

Rial Billion USD Million Rial Billion USD Million Amount 23,244 1,145.67 24,247 677.71 -

Total(Rial Billion) 57,889 44,741 29.39%

Total (Equivalent in USD Million) 1,914.32 1,479.53 -

The graphs shown below indicate the overall credit facilities separetely to different sectors for the year under review. As it is indicated the credit facilities have mainly been allocated to industry sector. The other sectors i.e. commerce and services; corp and animal husbandry; constrction; transportation; and energy have respectively obtained the next rates in taking credit facilities. All the extended facilities (in different sectors) are in line with the Bank's strategies for non-oil export promotion.

Break Down of Financial Facilities The End of 19-03-2016

25 Export and Import Financing

The Bank intends to continue diversifying the credit portfolio and to expand extending medium and long term credit lines as well as financing customers' activi- Annual Report ties not only domestically but also abroad. 2015 - 2016 The trade finance transactions comprises export and import financing. In the meantime, financing falls within the categories of pre-shipment and post-shipment. With regard to pre-shipment financing scheme, working capitals are made available to Iranian exporters for purchase of machineries, equipments, raw materials to carry on with production, packaging, transportation and re-exportation in as much as covering manufacturing costs. Likewise, post-shipment financing has been a service of the Bank to enable exporters/contractors to sell Iranian goods and services on deferred payment basis. The exporters, at the request of buyer, receiving documentary credits on deferred payment basis have been assisted to have their bills of exchange discounted with the Bank. The buyers of Iranian goods and services have also been benefited from the buyer's credit agreements which are payable out of the Bank's own resources, Oil Reserve Fund and other export financing schemes. The buyer's credit line can be set up on ad hoc basis for foreign employers of major financial projects undertaken by Iranian contractors.

The Bank is going to expand syndicated financing both domestically and abroad. The Bank has already paid attention on handling transactions for the financing of selected projects, in cooperation with domestic and foreign banks. With respect to import financing the Bank has been providing facilities for manufacturing goods and services to be exported abroad as well as import of raw materials, spare parts and production line machineries.

Export Financing under Buyer's Credit Scheme The Bank wishes to maintain a strong position in the field of foreign trade financing and to continue to render to its customers abroad scale of products, from different range of technology under unique mechanism of buyer's credits. The Iranian exporters are going to export and foreign buyers ask from the Bank to grant the financing schemes. As an extra commercial advantage, Iranian exporters want to offer foreign buyers a payment deferral on favorable terms as regards the interest rate and terms. In the meantime, Iranian exporters would like to be paid immediately and definitively.

The Bank offers buyer's credit to Iranian exporters and their foreign buyers. The characteristics of this scheme are as follows: A credit facility granted by the Bank directly to foreign buyers (there is a financial contract separate from the commercial contract); At an attractive interest rate and with terms of between 2 and 8 years; With credit insurance against the risk of termination and non-payment (political and commercial risks) offered by the national Export Credit Agency (ECA);

26 With the possibility of a fixed interest rate for the entire duration of the credit facility (drawdown and repayment period).

Advantage of the Scheme for Exporters Extra commercial argument in dealing with their buyers; Exporters are paid immediately; All negotiations with the foreign buyers on the financial aspects of the transactions are taken care of for exporters by the Bank; All negotiations with the authorities are conducted by the Bank.

General Purpose Line of Credit The Iranian exporters of capital goods and/or related services often stand to gain a competitive advantage if they can offer deferred payment terms to the other parties i.e. the foreign buyers. Contrary to traditional financing techniques, under the supplier's credit or buyer's credit - whether or not these are insured by a national credit insurer, the terms and conditions can be negotiated and fixed in advance, in so called general purpose line of credit agreements. Agreements of this type allow new financing structures to be set up quickly and efficiently under the general purpose line of credit. A general purpose line of credit is set up as a framework agreement between foreign customers or buyers and EDBI for a specific overall amount. In this agreement, the conditions are set out for the financing of future purchase of capital goods. Specific deals can then be imputed to these agreements, which mean that they will be financed according to the terms and conditions set out under the general purpose line of credit. Deals can be imputed until the total amount of the general purpose line of credit is reached, the amount can be increased if necessary. Depending on the type of financing that is opted for, the stipulations generally correspond to those of traditional buyer's credit of financing, more specifically as regards repayment periods, interest rates, financial charges and the procedures to be followed. It is self-evident that, the foreign buyers must have relations with the foreign banks with which the general purpose line of credit are concluded. The amount of the general purpose line of credit is usually limited.

27 Main Activities In the fiscal year 2015- 2016

Most important activities of the bank, by different units, in the fiscal year 1394 Annual Report 2015 - 2016 (year ended March 19, 2016) are as follows:

1- International Activities 1-1- Statistical Report on EDBI’s Performance in International Ser- vices

1-1-1- Buyer Credit Performance Paying over USD 550 million of loans in the form of buyer credit in the year ended March 19, 2016 through 40 export documentary credits and collection notes,

2-1-1- Documentary Credit In the year ended March 19, 2016, the export credit and documentary bills of exchange amount USD 618 million, which shows a growth of 130% compared to the year ended March 20, 2015. In the year ended March 19, 2016, the volume of import credit and documentary bills of exchange amount USD 2,160 million, which shows a growth of 158% compared to the year ended March 20, 2015.

3-1-1- Foreign Currency Letters of Guarantee and Drafts In the year ended March 19, 2016, export letters of guarantee amount USD 6,700,000 In the year ended March 19, 2016, the issued foreign currency drafts amount USD 1,262 million and received foreign currency drafts amount USD 230 million

2-1- Review of the Regulations and Guidelines Review and approval of new Guideline for establishing agency relationships, Forming expert committee in order to facilitate foreign currency operations in the bank; Review of Guidelines for transfer of proceeds from documentary credits and buyer credit, Development of new Guideline for foreign currency trading in EDBI’s branches at the market rate in collaboration with the Bank’s exchange company,

3-1- Restitution of Banking Relations Establishing contacts with over 300 international banks, Establishing and restituting relations with approx. 90 foreign banks, Possibility to render foreign currency draft and documentary credits services with 65 countries,

28 4-1- Standardizing and Improving the Bank’s International Stand Bank’s rating by reliable international institutes, Improving the quality of annual reports, periodic reports to agents, bank’s image in international media, advertisement and website, Compliance with AML, CFT and FATF standards and frameworks and Basel Supervisory Committee 1, 2, 3 Operating the Compliance Department,

2- Anti Money Laundering and Compliance Agency Relationships Management in post-JCPOA Anti Money Laundering area, Inspecting the bank’s branches and examining their performance for anti money laundering, development of guidelines on identification of EDBI’s Iranian and foreign customers, Carrying on duties assigned by Financial Information Unit (M S-Project) and obtaining the first rank among state-owned banks after inspection of EDBI conducted by High Council of Anti Money Laundering and removing the weaknesses, Holding training courses on how customers are identified in order to diagnose the suspicious transactions, Receiving, examining and presenting Suspicious Transaction Reports (STR) and cash transactions reports (CTR) to Financial Information Unit, Presenting reports on “Compliance and Implementation of International Regulations on Anti Money Laundering with the Bank’s Internal Situation” titled “Bank’s Requirements in Creating, Establishing and Resuming Agency Relation- ships from Anti Money Laundering Point of View”. Establishing “Workgroup for Determination of Customers’ Level of Activity” and development of the draft on “Guidelines for Determination of Expected Level of Activity of EDBI’s Customers” Controlling persons who are banned from doing international transactions in the SWIFT system (Sanction Screening),

3- Credits Affairs Signing two foreign exchange deposit contracts amounting Euro 100 million and USD 80 million out of resources of National Development Fund, Signing three domestic currency deposit contracts amounting Rls. 400, 600 and 4,000 billion out of National Development Fund’s resources, Signing Agency Contract with the value of USD 672.5 million with National Development Fund, Receiving USD 200 million credit line from Central Bank in order to export technical and engineering services to Iraq;

29 Obtaining foreign currency credit line from Central Bank of the Islamic Republic of Iran, in order to execute the project “Electricity Transmission Line to Armenia” at the amount of Euro 83 million by Sanir Company, Depositing the amount of Rls. 150 million out of Cultural Heritage, Handicrafts Annual Report and Tourism Organization’s resources for paying tourism loans; 2015 - 2016 B) Allocation of Resources: Granting Rls. 58,000 billion of facilities in Iranian and foreign currencies compared to the year ended March 20, 2015, showing a growth of 29%, 42% growth in the value and 21% growth in the number of resolutions (facilities and obligations) issued by Central Credit Committee, C) Other Important Measures: Execution of major resolutions out of National Development Fund’s resources, USD 800 million Resolution of Saba Arvand Oil and Gas Company for Oil and Gas Joint Fields Development Project, USD 33.9 million Resolution of Aria Banader Iranian Company for Chabahar’s Shahid Beheshti Port Development Project, Euro 127 million Resolution of Mashhad Urban Train Co. for execution of Urban Underground Line 2, Obtaining restricted loan for Gachsaran Petrochemical Co. (Syndicate loan with Tejarat Bank) at the amount of USD 253 million (EDBI’s share: USD 172.5 million), Obtaining the agreement of National Development Fund with paying foreign currency facilities at the amount of USD 220.6 million to Salman Farsi Petro- chemical Co.;

4- Inspection and Internal Audit A) Inspection Periodic inspection of all branches (physically and non-physically) and sending related ad-hoc reports (over 10 cases) and forwarding to the Bank’s top managers and external authorities, Control and execution of guidelines for job promotion and bank’s outsourced contracts, B) Internal Audit Conducting periodic audit of branches and staff departments and presenting related reports, Presenting ad-hoc reports on “the process of recognition of provision for doubtful debts”, “study of the effects of changes in foreign currency parity rates”, “study of the discrepancy of payroll and reward payment operations intermediate account”, and “study of the adequacy of interbank check internal control system”, Presenting reports on latest changes implemented in the list of related parties to executive departments, Preparing and developing guidelines on “Processing of Customer Complaint”ac-

30 cording to the notification of Central Bank, Completing the system of “Improvement of Administrative System Health and Corruption Control” of State General Inspection Organization,

5) Financial Activities Preparing and submitting tax return for the year ended March 20, 2015, Preparing the Bank’s separate and consolidated financial statements for the year ended March 20, 2015 according to Iranian accounting standards, Receiving the auditor’s clean audit report and inspector’s report of the bank with respect to financial statements of the year ended March 20, 2015, Fulfillment of the bank’s financial obligations with respect to transactions and contracts concluded, Preparing current year and prior periods settlement of budget reports, Reviewing and improving preparation of reports on capital adequacy and money cost,

6- Branches and Marketing Operating EDBI Customer Club, Establishing and operating Armani Export Development Reserve Investment Fund, Holding specialized meetings with the presence of exporters, economic activists and provincial managers in Khoozestan, West Azarbayejan, Qazvin and Alborz Provinces in order to acquaint exporters with EDBI’s services,

7- Information and Communication Technology Customer Club Information System Development of CBRM (Customer Banking Relations Management) system, Providing infrastructure required for SWIFT System, Assessment of system security and infrastructure of in-bank projects and presenting security solutions for 13 systems for almost 26 times of assessment, Connecting to Commodity Stock Exchange System Phase 21, Internet tracking system for customers credit applications (RADA),

31 Some Financed Projects Some Financed Projects In line with its mission, EDBI provides finance for national export projects out of its resources, National Development Fund and in the form of syndicate loans. Some of the export macro proj- Annual Report ects of the country, which have been financed in 2015 - 2016 the year ended March 19, 2014, are as follows:

Construction of Petrochemical Unit in Bushehr Province This project is constructed as a complex con- sisting of sulfur sweetening and recovery unit, Ethane extraction unit, ethane cracker, linear heavy and light polyethylene, etc. in three separate parcels of land adjacent to South Pars Processing Units. We expect that the project will be completed in 4 years and will create job opportunities for 7,000 people and add approx. 1.7 billion US dollars to the country’s exports. The cost of investment for execution of the said project is 2.2 billion US dollars in the form of syndicate loan, and EDBI’s share is Euro 1.1 billion in this project.

Construction of Steel Complex in Yazd Province Considering the advantage of cheap natural gas in Iran, sponge iron pellets projects have increased in the country. EDBI has financed a project amounting Euro 52.5 million in Yazd Province out of National Development Fund’s resources.

Chabahar’s Shahid Beheshti Port Phase 1 Mobilization Project Chabahar port is very important regarding its strategic situation, because it is Iran’s only access point to the ocean. This project is ex- ecuted to ensure our country is able to export and import goods via water borders with the capacity of 6 million TEU containers, 9 million tons of multipurpose goods, 12 million tons of oil products and liquids and 1.3 million tons of bulk goods, achieved through construction of 6 multipurpose wharves, 10 container wharves, 3 oil wharves for in order to export liquids and 3 wharves for dry bulk goods. EDBI has financed

34 phase 1 of the project by allocating Rls. 334 million out of resources of National Develop- ment Fund.

Mashhad Subway Project The largest urban construction project is underway in eastern part of the country, by planning for construction of 125 km. of railroads in the city of Mashhad. EDBI has allocated resources out of National Development Fund to finance part of the costs of purchasing wagons and telecommunication, surveillance and security equipment of the project, amounting Euro 127 million.

Electric Power Generation Project in Gilan Province There is a project ongoing in Gilan Province for construction of combined cycle power plant, which will create more than 1000 direct job opportunities and above 10,000 indirect job opportunities. Euro 249 million has been already allocated to this project.

Construction of Liquid Sugar Plant The amount of Euro 99 million has been allocated to liquid sugar plant with the capacity of 280,000 tons per year out of resources of Na- tional Development Fund. In this project, liquid sugar is extracted from corn and wheat, thus reducing the need to import sugar beet and sugar and it is also a better substitute for sugar and regular lump sugar in food industries.

Steel Plant in Arvand Free Zone The project for production of steel wide slab with the capacity of one million and two hun- dred thousand tons in Arvand Free Zone will be operated until the year 2018, which can have 150 million US dollars of export. This USD 170 million project is financed out of resources of National Development Fund.

Petrochemical Project in Kordestan Province A Petrochemical Factory Project is underway in Sanandaj with the production capacity of

35 300,000 tons of light polyethylene. The value of the project is 240 million Euros and Rls. 3,000 billion, financed through a syndicate loan at the amount of Euro 215 million and Rls. 660 billion, Annual Report and the bank’s share is Euro 110 million and Rls. 2015 - 2016 220 billion.

Steel Ignots Production Development Project in Hormozgan Province The value of this project is Euro 133 million and Rls. 1,300 billion, and an approved amount of Euro 109 million is financed out of National De- velopment Fund’s resources.

Integrated Development of Karoon West Joint Oilfields Development Project, Khoozestan Province Karron West Joint Oilfields Integrated Develop- ment Project is underway with the capacity of production of 550,000 barrels per day. The approved budget for the project is USD 800 million, financed out of resources of National Devel- opment Fund.

Financial Review Consolidated balance sheet

19/03/2016 20/03/2015 Movement % Assets: RLS million RLS million Annual Report Cash 2,463,533 2,111,734 17% 2015 - 2016 Due from Central Bank 1,072,705 3,425,374 -69% Receivables from banks and credit institutes 54,943,328 25,250,244 118% Due from government 0 93,352 -100% Accounts and notes receivable 2,452,422 1,535,393 60% Inventory of goods and prepayments 302,183 234,131 29% Facilities granted to and due from govern- 20,342 120,683 -83% mental sector Facilities granted to and receivables from nongovernmental sector 127,837,231 81,478,226 57% Facilities granted for documentary credits 3,774 10,352 -64% and term bills of exchange Investments and joint ventures 3,074,259 2,546,935 21% Tangible fixed assets 6,274,859 5,649,207 11% Intangible assets 2,167,493 2,124,971 2% Goodwill 8,672 9,371 -7% Other assets 6,392,033 4,753,417 34% Total Assets: 207,012,834 129,343,390 60% Liabilities and Shareholders’ Equity Due to Central Bank 6,571,172 1,800,267 265% Due to banks and credit institutes and 55,855,513 27,726,361 101% government Accounts and notes payables 2,464,529 950,519 159% Dividend due (50% as government's share) 0 96,683 -100% Sight deposits 34,552,700 13,120,727 163% Saving deposits 3,830,478 2,707,113 41% Term investment deposits 50,318,613 33,436,251 50% Other deposits 1,718,946 1,683,670 2% Bank's liability for acceptance of documentary credits and term bills of exchange 8,458 18,862 -55% Provisions and other liabilities 2,825,931 469,047 502% Provision for staff termination benefits 421,447 339,518 24% Tax provision 252,670 4,189,685 -94% In-transit items 608,400 170,605 257% Total liabilities 159,428,857 86,709,308 84% Shareholders’ equity: Capital 25,167,000 25,167,035 0% Legal reserve 1,874,340 1,650,680 14% Capital reserve 188,076 170,803 10% Other reserves 15,242 15,242 0% Retained loss -2,740,142 -3,788,532 -28% Foreign exchange collections of export 64,546 41,622 55% petty cash –convertible to capital Result of changes from legal parities of 19,371,875 16,295,576 19% foreign exchange rate Minority interest 3,643,040 3,081,656 18% Total shareholders' equity 47,583,977 42,634,082 12% Total liabilities and shareholders' equity 207,012,834 129, 343,390 60%

40 The following graphs indicates the asset components of the Bank and the components of shareholders' equity for the year ended 19 March 2016:

Asset Componenets of Bank for the year ended 19 March 2016

41 Shareholders' Equity Components of Bank for the year ended 19 March 2016

Annual Report 2015 - 2016

It is the Bank's policy to provide transparent and meaningful disclosure in its financial statements. It strives to act with integrity, responsibility, fairness, transparency and discretion at all times in order to secure the trust of its shareholder, customers and employees, as well as other stakeholders. The Bank values the comments and concerns of the rating agencies, and it is one of the Bank's objectives to maintain and enhance the credit ratings assigned by them so one of the Bank's key objectives, last year, was to take concrete steps to help secure trust in the financial sector.

The information reflected on financial statements for the Iranian calendar year ended 19.03.2016 was audited by Audit Organization and was approved on the Annual General Meeting of Shareholders.

Independent Auditor's Report INDEPENDENT AUDITOR’S REPORT TO ANNUAL ORDINARY GENERAL MEETING OF SHAREHOLDERS EXPORT DEVELOPMENT BANK OF IRAN

Annual Report 2015 - 2016 Report on the Financial Statements Introduction 1- We have audited the accompanying consolidated financial statements of the Group and Export Development Bank of Iran, which comprise the balance sheets as at March 19, 2016 and the related statements of income, comprehensive income and cash flow statement for the fiscal year then ended, and explanatory notes 1 to 68 to the financial statements.

Directors’ Responsibility for Financial Statements 2- The Bank’s board of directors is responsible for preparation and fair presentation of these financial statements in accordance with Iranian financial accounting standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility 3- Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Iranian auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion 4- In our opinion, the financial statements mentioned above, present fairly, in all material respects, the financial position of the Group and Export Development Bank of Iran as at March 19, 2016, and financial performance and cash flows of the Group and the Bank for the fiscal year then ended, in accordance with Iranian accounting standards.

46 Emphasis of Matter 5- Without qualifying our opinion, we draw attention to Note Number 7-1 to the Financial Statements, 39 of Bank’s owned foreign currency deposit accounts (Nostro Accounts), which are held by foreign banks and Iranian banks (overseas branches) have been restricted for the Bank. The amount of those accounts to- taling to 6,285 billion Rials (72% of the said amount pertains to foreign currency deposits of two banks and in the two countries), and the Bank has provided the amount of 754 billion Rials provision for those accounts in the book of accounts, which only includes part of the deposits, and there is no possibility to use them. Measures are taking place in order to lift those restrictions, however we are uncertain about their final status.

6- Without qualifying our opinion, we draw attention to the status of settlement of balance of some facilities paid in previous years, as reflected in Explanatory Notes 11, 12 and 18 to the financial statements, pertaining to Sangab Co. (Sang Toudeh), SANIR (Ministry of Finance of Sri Lanka), Stratus International Co. (Ministry of Economy of Djibouti), Iran Tractor Mfg. Co. (pertaining to the construction of Tractor Mfg. Factory in Venezuela), Safa Pipe Mfg. Co., and two natural persons, totally Rls. 15,173 billion is not clear to us. Moreover, balance of the accounts of eight natural persons as reflected in the books, and four cor- responding banks shows prior period discrepancy of 2,312 billion Rials, pertaining to the pending items in the statements and the amount of 448 billion Rials, pertaining to the pending items recorded in the bank’s books, with the balances announced by them, and their status has not yet been specified. It is worth mentioning that the amount of bank’s provision for doubtful debts shows a growth of 20% compared with the previous year, and on balance sheet date it amounts 14,463 billion Rials, 61% of which comes from only 7 companies. Moreover, the bank’s noncurrent receivables including overdue, deferred and doubtful receivables, as reflected in the above explanatory note, constitutes approx. 17.5% of total receivables of the bank, showing an increase in these receivables.

7- Without qualifying our opinion, we draw attention to as reflected in Explan- atory Note 30-1 to the financial statements, the provision for income tax of the reported fiscal year is recorded in the book of accounts after deduction of incomes related to tax-exempt activities. According to the Law on Development of some Orders of State Development Plans, dated Oct. 26, 2015, stipulating the anticipation of exemption of revenues from translation of the reported bank’s assets and liabilities in foreign currency, and also some of the tax unacceptable expenses, making decision as to whether or not the tax provision is sufficient, is subject to examination and announcement by Ministry of Economy and Finance.

8- Without qualifying our opinion, we draw attention to Note 6-2 to the financial statements, the statement of the Bank’s current account which is held by Cen- tral Bank includes the amount of 3,261 billion Rials withdrawal as the difference

47 of changes in foreign currency translation rate. During the year ended March 19, 2012, the Bank has not recorded aforementioned amount in the book of accounts. Furthermore, the Central Bank has charged this current account for the amount of 601 billion Rials as overdraft penalty during the year ended March

Annual Report 20, 2013. It is worth mentioning that according to the latest follow-ups and 2015 - 2016 correspondences made, determination of the status and/or return of the aforementioned funds shall be subject to presentation of statement of foreign currency resources and consumptions by the bank, as required under the Instructions issued by the Central Bank, and also those accounts must be audited by independent auditors.

9- Without qualifying our opinion, we draw attention to the provisions of the Bylaw on Collection of Membership Fees in Deposits Fund, Resolution No. H48367T/100998 dated July 24, 2013, and Resolution No. H49837T/150501 dated March 1, 2015, passed by the Cabinet, the reported bank has paid its annual membership fee for 0.25% of the average of daily balance of all deposits of the previous year after deduction of statutory deposits up to the Fund’s guarantee limit for the first year. However, the membership fee for the second year (reported fiscal year), by the aforesaid Fund, as described in Explanatory Note 66 to the financial statements, has not yet been announced to the bank.

10- Without qualifying our opinion, we draw attention to as regards to the execution of the provisions of Executive Bylaw under Article 20 of the Law on Lifting Compet- itive Production Barriers and Improving the State Financial System, and also Res- olutions Nos. H/52080T/58955 dated Aug. 2, 2015 and H52427T/103551 dated Nov. 9, 2015 passed by the Cabinet, with respect to settlement of foreign exchange liabilities related to facilities granted out of Foreign Exchange Reserve Account (Explanatory Note 12-3-1), considering the requests of some customers for using the advantages anticipated in the abovementioned bylaws and also payment of part of liabilities, by customers, the measures taken in this respect are not complete and the final financial effects of compliance with the provisions of the above-said bylaws on the financial statements are not clear to us.

11- Without qualifying our opinion, we draw attention to the Explanatory Note 18 to the Financial Statements, in execution of Subsection 2, Section J, to Article 224 of the Fifth Development Five-Year Plan Act, the amount of 504 billion Rials is paid as advance dividend, and because the profit anticipated in the approved budget was not realized, an amount of 65 billion Rials thereof has been debited to the account of government as surplus paid, so that it shall be consequently settled.

AUDIT ORGANIZATION August 19, 2016 H. R. Asghari B. Sadoughianzadeh (Mordad 29th, 1395 Iranian Calendar)

Financial Statements

Annual Report 41,622 15,242 18,862 96,683 170,803 170,605 339,518 469,047 2015 - 2016 950,519 Rls. Million 3,081,656 1,650,680 4,189,685 1,683,670 2,707,113 1,800,267 (3,788,532) 16,295,576 25,167,035 86,709,308 33,436,251 13,120,727 27,726,361 20/03/2015 (Restated) 42,634,082 129,343,390 0 8,458 64,546 15,242 188,076 608,400 252,670 421,447 Rls. Million 3,643,040 1,874,340 2,825,931 1,718,946 3,830,478 2,464,529 6,571,172 (2,740,142) 19,371,875 25,167,000 50,318,613 34,552,700 55,855,513 159,428,857 19/03/2016 47,583,977 207,012,834 Total liabilities and shareholders' equity Total shareholders' equity Minority interest Result of changes from legal parities foreign exchange rate Foreign exchange collections of export petty cash –convertible to capital Retained loss Other reserves Capital reserve Legal reserve Shareholders’ equity: Capital Total liabilities In-transit items Tax provision Provision for staff termination benefits Provisions and other liabilities Bank's liability for acceptance of documentary credits and term bills exchange Other deposits Term investment deposits Saving deposits Sight deposits Dividend due (50% as government's share) Accounts and notes payables Due to banks and credit institutes government Due to Central Bank Liabilities and Shareholders’ Equity 9,371 10,352 93,352 120,683 234,131 Rls. Million 4,753,417 2,124,971 5,649,207 2,546,935 1,535,393 3,425,374 2,111,734 81,478,226 25,250,244 (Restated) 20/03/2015 129,343,390 0 8,672 3,774 20,342 302,183 Rls. Million 6,392,033 2,167,493 6,274,859 3,074,259 2,452,422 1,072,705 2,463,533 54,943,328 127,837,231 19/03/2016 207,012,834 Total Assets: Other assets Goodwill Intangible assets Tangible fixed assets Investments and joint ventures Facilities granted for documentary credits and term bills of exchange Facilities granted to and receivables from nongovernmental sector Facilities granted to and due from governmental sector Inventory of goods and prepayments Accounts and notes receivable Due from government Receivables from banks and credit institutes Due from Central Bank Cash Assets EXPORT DEVELOPMENT BANK OF IRAN Consolidated Balance Sheet At March 19, 2016

52 EXPORT DEVELOPMENT BANK OF IRAN Consolidated Income Statement For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015

Group’s Income: Rls. Million Rls. Million

A- Income from joint activities: Profit and penalty received and other joint income 4,774,016 3,900,397 Depositors' share of profit Depositors' interests (share of profit and bonus on statutory deposit) 584,712 411,592 Proxy fees for utilization of investment deposits (94,293) (73,317) Depositors' share of profit 49,419 338,275 Surplus paid to depositors 142,539 34,150 Advance payment to depositors, banks and credit institutes (632,958) (372,425) Bank's share of profit and income from proxy fees 4,141,058 3,527,972 Net income from subsidiaries 72,137 75,791

B- Income from non-joint activities Profit and penalty received 3,750,680 3,092,563 Commissions received 1,964,801 1,043,445 Other income from non-joint activities 749,791 131,495

Total non-joint income 6,465,272 4,267,503 Total income and sales 10,678,467 7,871,266

C- Expenses Interests paid (1,187,178) (1,138,667) Commissions paid (10,210) (12,248) General expenses (7,172,499) (5,658,720)

Total expenses (8,369,887) (6,809,635) Pre-tax income 2,308,580 1,061,631 Income tax (160,178) (853,845)

Consolidated net profit 2,148,402 207,786 Minority interest (577,761) (284,428)

53 EXPORT DEVELOPMENT BANK OF IRAN CONSOLIDATED RETAINED EARNINGS For the Fiscal Year Ended March 19, 2016

Annual Report 2015 - 2016 (Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Rls. Million

Net profit 2,148,402 207,786 Retained earnings at beginning of year 633,104 (1,422,377) Prior period adjustments (4,128,806) (180,311) Consolidated adjustments 131,106 0 Retained earnings at beginning of year-adjusted (3,364,596) (1,602,688) Distributable profit (1,216,194) (1,394,902)

Appropriation of profit: 50% as government's share of profit (438.939) (724,021) Legal reserve (251,294) (244,351) Capital reserve (12,680) (126,429) Approved dividend (251,187) (1,000,998) Capital increase 0 (5,000) Total (954,100) (2,100,799) Retained loss at end of year (2,170,294) (3,495,701) Retained earnings- minority interest 569,848 292,831

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Net profit of the year 2,148,402 207,786 Result of changes from exchange rate legal parities 3,076,299 (936,751) Comprehensive profit (loss) of the fiscal year 5,224,701 (728,965) Prior period adjustments (4,128,806) (180,311) Comprehensive profit (loss) recognized since the former reporting date 1,095,895 (909,276) Minority interest from comprehensive profit of the fiscal year 589,543 297,558

54 EXPORT DEVELOPMENT BANK OF IRAN CONSOLIDATED STATEMENT OF CASH FLOW For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Rls. Million

Operating Activities: Net cash inflow from operating activities 23,279,175 307,521

Return on Investments and interest paid for financing: Dividends received 234,142 231,272 Interest paid to Central Bank for facilities received (52,335) (216,016) Profit paid to government (600,428) (120,000) Profit paid to minority shareholders (9,000) (20,895) Net cash outflow from return on investments (427,621) (125,639)

Income tax: Income tax paid (4,095,852) (1,071,543)

Investing activities: Cash paid for acquisition of investments (533,582) (652,331) Proceeds from sale of investments 147,902 721,547 Cash paid for acquisition of tangible fixed assets (839,921) (1,088,041) Cash paid for acquisition of intangibles (46,908) (48,204) Proceeds from sale of tangible fixed assets 124,813 11,294 Net cash outflow from investing activities (1,147,696) (1,055,735) Net cash inflow (outflow) prior to financing activities 17,608,006 (1,945,396)

Financing Activities: Cash received for export foreign exchange petty cash 22,924 12,289 Net cash inflow from financing activities 22,924 12,289

Net cash increase (decrease): 17,630,930 (1,933,107) Cash balance at beginning of year 26,171,089 28,104,196 Cash balance at end of year 43,802,019 26,171,089 Noncash transactions 537,687 1,116,578

Annual Report 2015 - 2016 0 828 41,622 18,862 96,683 137,691 170,605 322,561 304,046 1,355,096 4,037,626 1,649,379 1,800,267 2,533,649 (4,322,435) 15,870,553 86,092,703 25,167,035 27,241,795 35,884,906 12,032,324 Rls. Million 20/03/2015 38,250,390 (Restated) 124,343,093 0 0 828 8,458 64,546 81,159 142,284 608,400 400,172 1,484,420 2,623,322 1,687,791 6,571,172 3,818,050 (4,028,539) 18,752,490 25,167,000 55,588,299 52,977,497 34,030,279 158,394,599 19/03/2016 41,583,029 Rls. Million 199,977,628 Total liabilities and shareholders' equity Total shareholders' equity Result of changes from legal parities foreign exchange rate Other reserves Retained loss Foreign exchange collections of export petty cash –convertible to capital Shareholders’ equity: Capital Legal reserve Capital reserve Total liabilities In-transit items Tax provision Provision for staff termination benefits Bank's liability for acceptance of documentary cred - its and term bills of exchange Provisions and other liabilities Due to banks and credit institutes government Term investment deposits Other deposits Accounts and notes payables Due to Central Bank Dividend due (50% as government's share) Sight deposits Saving deposits Liabilities and Shareholders’ Equity 0 0 0 10,352 93,352 120,683 3,427,294 2,021,299 4,130,697 6,688,791 3,395,046 1,993,324 79,357,627 23,104,628 20/03/2015 Rls. Million (Restated) 124,343,093 0 0 0 0 3,774 20,342 5,203,837 2,037,433 4,102,203 7,030,808 1,056,964 2,357,950 52,352,685 125,811,632 19/03/2016 Rls. Million 199,977,628 Total Assets: Assets Other assets Goodwill Intangible assets Tangible fixed assets Facilities granted for documentary credits and term bills of exchange Investments and joint ventures Due from Central Bank Receivables from banks and credit institutes Facilities granted to and due from governmental sector Facilities granted to and receivables from nongovernmental sector Cash Due from government Accounts and notes receivable Inventory of goods and prepayments EXPORT DEVELOPMENT BANK OF IRAN Balance Sheet At March 19, 2016

58 EXPORT DEVELOPMENT BANK OF IRAN Income Statement For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Rls. Million

A- Bank’s income from joint activities: Profit and penalty received and other joint income 4,540,822 3,616,672

Depositors' share of profit Depositors' interests (share of profit and bonus on statutory deposit) 580,197 409,870 Proxy fees for application of investment deposits (93,600) (73,126) Depositors' share of profit 486,597 336,744 Surplus paid to depositors 143,887 34,675 Advance paid to depositors, banks and credit institutes (630,484) (371,419) Bank's share of profit and income from proxy fees 3,910,338 3,245,253

B- Bank's income from non-joint activities Profit and penalty received 2,216,115 3,315,618 Commissions received 1,825,811 705,897 Other income from non-joint activities 217,926 263,216 Total non-joint income 4,259,852 4,284,731 Total bank’s income 8,170,190 7,529,984

C- Expenses Interests paid (1,119,830) (1,077,934) Commissions paid (6,961) (10,124) General expenses (6,165,521) (4,993,883)

Total expenses (7,292,312) (6,081,941) Pre-tax income 877,878 1,448,043 Income tax (15,719) (750,000)

Net profit 862,159 698,043

59 EXPORT DEVELOPMENT BANK OF IRAN RETAINED EARNINGS For the Fiscal Year Ended March 19, 2016

Annual Report 2015 - 2016 (Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Rls. Million Net profit 862,159 698,043 Retained earnings at beginning of year (250,264) (3,822,814) Prior period adjustments (4,072,171) (174,936) Retained earnings at beginning of year-adjusted (4,322,435) (3,997,750) Distributable profit (3,460,276) (3,299,707)

Appropriation of profit: 50% as Government’s share of profit (438,939) (724,021) Legal reserve (129,324) (179,707) Capital reserve 0 (119,000) (568,263) (1,022,728)

Retained loss at end of year (4,028,539) (4,322,435)

EXPORT DEVELOPMENT BANK OF IRAN COMPREHENSIVE INCOME STATEMENT For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls, Million Rls, Million Net profit of the year 862,159 698,043 Result of changes from exchange rate legal parities 2,881,937 (1,002,701) Comprehensive profit (loss) of the fiscal year 3,744,096 (304,658) Prior period adjustments (4,072,171) (174,936) Comprehensive profit recognized since the former reporting date (328,075) (479,594)

60 EXPORT DEVELOPMENT BANK OF IRAN CASH FLOW STATEMENT For the Fiscal Year Ended March 19, 2016

(Restated) Year Ended Year Ended 19/03/2016 20/03/2015 Rls. Million Rls. Million Rls. Million

Operating Activities: Net cash inflow from operating activities 22,170,576 1,779,587

Return on Investments and interest paid for financing: Dividends received 129,273 113,164 Interest paid to Central Bank for facilities received (52,336) (216,016) Profit paid to government (600,428) (120,000) Net cash outflow from return on investments (523,491) (222,852)

Income tax: Income tax paid (3,970,844) (425,000)

Investing activities: Cash paid for acquisition of investments (236,382) (17,945) Proceeds from sale of investments 147,902 3,553 Cash paid for acquisition of fixed assets (133,115) (438,638) Cash paid for acquisition of tangible fixed assets (16,134) (42,844) Proceeds from sale of tangible fixed assets 4,666 77,483 Net cash outflow from investing activities (233,063) (418,391) Net cash inflow prior to financing activities 17,443,178 713,344

Financing Activities: Cash received for export foreign exchange petty cash 22,924 12,289 Net cash inflow from financing activities 22,924 12,289

Net cash increase: 17,466,102 725,633 Cash balance at beginning of year 24,179,667 23,454,034 Cash balance at end of year 41,645,769 24,179,667 Noncash translations 253,537 1,102,581

61 Internal Controls and Risk Management

Internal Controls

In line with improvement of the execution of the principles of corporate governorship and in order to establish a powerful internal control system for timely identify- Annual Report 2015 - 2016 ing and reporting the weaknesses of internal control system to the senior officials of the bank and also preventing the occurrence of deficiencies, the internal audit office started its activity in 2012 as a subdivision of the Internal Inspection and Audit Directorate. According to its job description, as approved by the bank’s board of directors; is responsible for carrying out affairs as per the instructions and circulars issued by the Central Bank and other professional authorities such as Audit Organization. In order to increase the quality of internal audit reports, these reports are first controlled in three levels and then submitted to the senior authorities of the bank. In addition, aimed at increasing the efficiency of the internal audit reports, a matrix is prepared to follow-up the auditing issues (approved by the internal audit committee), by any of the issued reports. It is worth mentioning that for fulfillment of the objectives related to the comparative auditing, the compliance with regulations, rules, circulars and standards issued by the national legislative bodies, are carried out by the Inspection Unit, acting under the supervision of the Bank’s Inspection and Internal Audit Directorate.

Audit Committee: Upon the instruction of the Central Bank and according to its Circular No. 1172/ MB dated 2007, the internal audit committee, as one of the components of corporate governorship, has been officially defined in the bank’s organizational chart. The said committee holds meetings and studies the weaknesses set forth by the inspection and audit unit and presents practical solutions in order to remove them, according to the assigned job description, which have been developed and approved by the bank’s board of directors upon the instruction of the Central Bank and rec- ommendations of the Basel Committee and the principles of corporate governorship. It is worth mentioning that the secretary of the audit committee, which is the Head of the Internal Audit Office, is responsible for follow-up of the suggestions for amend- ments, preventive solutions and other decisions adopted in the Audit Committee and it is necessary to present reports on the measures taken in this respect to the members of the Committee on regular basis.

Anti-Money Laundering After establishment of the Anti-Money Laundering Department in the early 2012, serious measures have been taken in order to comply with the Anti Money Laun- dering and Terrorism Financing Regulations. These measures are classified in two sections: including the controlling and supervisory measures and infrastructural measures. During the period subject to this report, the measures taken by the Anti Money Laundering Unit of Export Development Bank of Iran, within the above two classes are as follows:

1- Training and Information Services: In this area, specialized on-the-job training courses have been held by official instruc-

64 tors for employees of Export Development Bank of Iran. Further, all employees of the Anti-Money Laundering Department and all members of Anti-Money Laun- dering High Committee have taken part in the international program AML/CBT held in the Financial Information and Anti-Money Laundering Institute and they have been granted the related international certificate. Moreover, a conference titled “Anti-Money Laundering, Necessities and Precautionary Measures for Mon- ey Laundering Control” was held for the Anti-Money Laundering authorities and customers of the bank.

2- International Activities: In this area, the status of the overseas units affiliated to the bank was reviewed and necessary solutions were presented, in respect of anti-money laundering activities. In addition, the AML/CFT questionnaire forms received from agent banks outside the country, were properly completed.

3- Customer Identification: The possibility for validation and verification testing of all customers’ data including the identity and contact information has been provided. When identifying the customers for the first time and in 3-month intervals, the customers’ information is now being verified.

4- Software Modifications and Adjustments: The customer transactions reporting application has been completed in order to produce transactions chain. Moreover, new features were added to the Anti-Mon- ey Laundering System in order to identify suspicious transactions and operations.

5- Reporting Suspicious Transactions and Operations: The bank’s employees are now able to systematically send online reports on suspicious transactions and operations to the Anti-Money Laundering Department.

RISK ANALYSIS REPORT In the Iranian Year 1394 (Year ended March 19, 2016)

Introduction Annual Report 2015 - 2016 Risk Management Today, financial risks are known as an inevitable reality that the banks may face with. These institutes must therefore adopt suitable policies in order to evaluate, measure and report the risks they may encounter, so that they can gain the necessary assurance as to their financial stability and health. The present report summarizes the evaluations made in order to measure and reflect the major risks EDBI has been faced with.

1- Credit Risk Credit risk is actually the most important risk threatening the banks. A credit risk roots from the customers’ inability or unwillingness to fulfill their obligations against the bank. In Export Development Bank of Iran (EDBI), credit risk is measured based on the customer’s risk history, nature of securities and other information concerning the present conditions of the customer. EDBI actively reviews and (if required) corrects the credit risk management procedures as well as its credit standards in order to ensure that they are consistent with the changing economic environment. As part of credit risk management process, the statistical models have been made, based on the historical information and details of the credit behavior of the customers.

A Summary of Credit Portfolio Risk in the Year Ended March 19, 2016 In order to analyze the credit risk and scenario by CR+1 method, the bank’s credit portfolio information from 1562 natural and legal customers of the bank, has been used. It is worth mentioning that the results obtained are based on customers’ financial information, and the information on classification of bank’s customers up to the end of the year ended March 19, 2016. Moreover, the risk of customers who have been secured by Iran Export Guarantee Fund, has been considered as zero.

In terms of total balance (facilities and obligations) the highest amount of facilities pertains to economic projects, In terms of total of current facilities (based on the bank’s internal ranking system), 22% of customers are located within the high-risk group, 41% in medium-risk group and 37% in low-risk group. In terms of combination of natural and legal customers, almost 98% of balance of facilities and over 99% of balance of obligations are allocated to legal customers, In sectional analysis, the highest balance of current facilities with 34% is in the infrastructure services and businesses section and the lowest thereof pertains to “agricultural and processing industries” section with approx. 8%.

66 Percentages of Balance of Current Facilities and Balance of Noncurrent Facilities Based on Risk

High Risk Medium Risk Low Risk Balance of current facilities 22% 41% 37% Balance of noncurrent facilities 38% 15% 47%

Total expected loss of the bank’s credit portfolio in the year ended March 19, 2016 is Rls. 15760 billion and the unexpected loss of the portfolio is estimated as Rls. 17,932 billion. Moreover, there is a high concentration in customers’ facilities, so that the bank’s first 20 customers constitute the biggest balance of facilities, i.e. 63%, and 75% of the bank’s total noncurrent receivables.

2- Market Risk Market risk is defined as: the loss from unexpected decrease of the net value of the financial entity’s assets as a result of fluctuations of the market price which may occur basically due to fluctuations in exchange and interest rates or stock prices. This type of risk is classified within high-risk group, in which price fluctuations will lead to profit or loss. Market risk is measured by VAR method. Capital required for covering the market risk for portfolio investment and other investments with market price is Rls. 1,153 billion and for bank’s foreign currency status is Rls. 2,061 billion, and totally the capital required for covering the market risk is Rls. 3,214 billion.

Capital reserve required for stock risk and Capital reserve required for Total capital reserve for other investments with market price foreign currency risk market risk (Rls. Billion) (Rls. Billion)

1153 2061 3214

3-Operational Risk The operational risk is defined as follows: the risk losses caused by inappropriate and inadequate internal processes, methods, people and systems and/or due to events outside of the credit institution. Operational risk consists of the following main elements: People Risk: Capabilities, competencies and motivations of people in the organization, Technology Risk: Failure of systems, system security, support plans and accident retrieval plans, IT related penalties, etc. Legal Risk: Documentation for transactions, securities, keeping the customer’s secrets, Reputational Risk: Shareholders’ and customers’ insight about the organization,

67 method of supervisor’s perception, Bank has to take measures in order to effectively manage those operational risks that are integral part of its important services, activities and systems. This management includes evaluation, measurement, reporting and controlling the opera- Annual Report tional risk. An standardized method was used in the year ended March 19, 2016 2015 - 2016 in order to estimate the operational risk of Export Development Bank of Iran. Capital reserve required for covering the operational risk, by making use of the aforesaid methods, is as follows:

Operational Risk Measurement Method Capital reserve required for covering operational risk (Rls. Billion) Standard Method 987

4- Capital Adequacy Capital adequacy ratio is an indicator for measuring the financial strength of a financial institute and it somehow shows the bank’s capacity to absorb liability and create risky assets and it is stated in the form of bank’s capital to weighted assets rate. According to the Instruction of Basel Committee, this ratio must be at least 8% for the banks. Details of calculation of capital adequacy ratio based on the Basel II approach is presented in the following table and based on the information of the fiscal year ended March 19, 2016:

Figures in Rls. Billion

Credit risk weighted assets 224,150 Market risk weighted assets 40,175 Operational risk weighted assets 12,337 Total risk weighted assets 249,512 Base capital 41,000 Capital adequacy ratio (Basel II) 15%

This ratio is much higher than the percentage proposed by Basel Committee, thus indicating the bank’s high ability in confronting with specific conditions and its strength against unexpected losses.

Social & Organizational Responsibilities

Apart from its role in financing the non-oil exports and other technical and engineering services, the Bank for the year reported strived to ethically conduct its Annual Report banking operations aligned with societal, stakeholders and other environmental 2015 - 2016 concerns. For that reason, engaging in a fair competition and marketing of the banking services received due attention. As part of its social responsibilities though, the Bank demonstrated ethical considerations when performing in a competitive environment and so devised mechanisms to optimize resource allocation and utilization for the sake of sustainable development. Meanwhile, the Bank in the year reported proved having fully adhered to its doc- umented code of ethics and practice, and deemed itself entirely accountable at all stages of banking operations undertaken either by its branch-network and or any other subsidiary in its entirety.

The Bank is aware that as well as contributing to the economic wellbeing of the nation, it should play a pivotal role to be of benefit to the environment in which it is operating and thus has adapted itself with the changing environmental demands.

Contributing to the charitable organizations, encouraging the staff to partake in the relief programs, raising funds for the humanitarian causes, holding seminars and other training programs that will assist the society having access to low-cost loans especially with respect to the Islamic banking products, partnering with the academic research institutions were also among the programs the Bank has been involved in, for the year reported.

A sound social environment is an important factor determining long-term business success. So the Bank takes requisite measures on this regard. For in- stance it supports the charitable organizations and projects around the world. The Bank also encourages its employees to engage in volunteering in order to benefit all the society.

The Bank has consistently focused on its impact on social activities as a whole. The Bank strives to act with integrity, responsibility, fairness, transparency and discretion at all times in order to secure the trust of its shareholder, customers and employees, as well as other stakeholders. All the Bank's employees comply rigorously with its code of conduct, which sets out core values such as integrity, responsibility and respect, as well as a commit- ment with sustainability.

Complying with Rules and Regulations The Bank fully adheres to the principles set out by Central Bank of Islamic Repub- lic of Iran. Iran's Central Bank periodically reviews the arrangements, strategies, processes and mechanisms implemented by the Bank to comply with the provi-

72 sions of the law and evaluate the risks to which the Bank is or might be exposed to. This review and evaluation is updated at least on an annual basis. The Bank's main corporate governance documents include the Articles of As- sociations, the Organizational Guidelines and Regulations, the Charters of the Board of Directors and of each of its committees. One of the Bank's key objectives last year was to take concrete steps to help restore trust in the financial sector. The Bank, therefore, engaged in an open and constructive dialogue with regulators to help shape the debate about how our industry should evolve.

Internal Audit & Risk Management Internal audit is part of the organizational control of the Bank; it is one of the methods used by the management to ensure the orderly and efficient running of the business as a whole and is part of the overall control environment. The Bank's internal audit helps management to manage the risks in relation to fraud and error, and exercise proper stewardship. A properly functioning internal audit department is part of good corporate governance, as recognized by international codes on corporate governance. The internal audit function is operated in order to assess the ongoing control as well as all the financial and non-financial risks that could keep the Bank from achieving planned objectives. Effective internal controls form the foundation for the Bank's system of risk management. The risk management function plays a central role in the Bank as it creates appropriate transparency providing a sound basis for management to define a suitable risk profile. Risk Management is instrumental in ensuring a prudent and intelligent approach to risk-taking that appropriately balances risk and return and optimizes the allocation of capital.

Community Involvement The Bank believes that a responsible approach to business is a decisive factor determining its long-term performance. To support its strategy, the Bank has consistently focused on key factors: the quality of its people and culture, its customers and the communities in which it operates. The Bank aims to make a pos- itive contribution to the community to which it belongs, in all the markets where it operates. It does so by taking initiatives and by providing financial supports to external projects that meet its requirements as regards community involvement.

Sustainable development programs of the Bank require contribution to the community and any related projects. As a member of community, the Bank sponsors many educational programs, competitions and undertook participating in national exhibitions and banking fairs. Advocating compliance programs and enhancement of business strategies are among other tasks of the Bank to achieve its set cooperate social responsibility

73 goals. These business strategies fully comply with laws that protect sustainability of financial activities and prevent the illicit banking operations. Activities requiring participation in charitable events for helping the people in disaster stricken areas were undertaken and all members of staff also encour- Annual Report aged for taking part. All these efforts made on the base of the assumption that 2015 - 2016 the Bank has a social responsibility for building a congruent society and creating value for the national economy. In this regard, the Bank will continue its efforts to promote a coordinated international approach to banking supervision.

The Environment The Bank has recently focused on its impact on the environment. In addition to several initiatives, for the year under report the Bank established a new environmental performance targets to achieve a reduction in electricity, gas and water usage. In wake of taking several policies, the Bank has competed to be pioneer among the Iranian banks on environmental issues through lowering energy consumption and raising employee awareness of these issues.

Social dialogue Holding seminars with the aim of making studies in Islamic banking, international corporate and trade finance in the Bank attracted a wide audience. The end result of these gatherings believed to be highly conducive to making business of banking decisions and arriving at new business models.

Code of Ethics The Bank strives to be well recognized as a reputable financial institution by aligning its financial performance with its ethical stance. The most important business ethics guidelines are contained in the code of conduct for employees, a uniform set of rules for all Bank's employees governing their professional conduct towards their employer, customers, colleagues and society as a whole. Specific rules are in place governing conduct in certain areas or activities. The codes include trust, integrity, quality and honestly, and employees are required to demonstrate these behaviors and comply with the codes whenever they are identified as representatives of the Bank.

Stakeholder Engagement The Board and management of the Bank believe that stakeholder engagement help them to understand what the stakeholder expect of the Bank. So, in order to achieve sustainable success, the Bank must continuously earn the trust of its stakeholders and acts as a reliable and professional partner at all times. The main stakeholders of the Bank include customers, government (as the sole shareholder), employees, regulators and media. The specific stakeholder engagement activities for the year under report included a review of how the Bank supports customers facing financial hardship. The

74 Bank also contributed to public policy-making process through regular engagement with regulators. The Bank's approach to the stakeholder engagement reflects its long-term goal to create relationships of integrity and mutual respect with all of its stakeholders. As a result the extent to which the Bank might exceed its obligations to stakeholders has seriously been taken.

Customer Satisfaction The Bank has been fully committed to provide exporters and importers with comprehensive advice on possible financing schemes. The expert advices enable the customers to properly structure their transactions in order to mitigate the risks associated with international trade and business. The customer satisfaction is the Bank's top priority. In this regard, the customer relationship officers in the branch networks have received extensive training on multiple types of trade finance driven products and can serve the customers on case by case basis. The customers’ help-line is a permanent service of the Bank to respond to the growing demand of customers for having access to the updated information in the field of trade and banking operations. The Bank's retail customer satisfaction at 96.6% in providing the on time services was recorded for the year under report. Electing EDBI as the best supporter in non-oil export sector by the related organizations for export promotion reflects the success of the Bank in implementing policies in line with achieving its goals.

Responsibility towards Employees The Bank devised mechanisms for better financial planning in order to create value for the public at large as well as serving the economic well being of the people. This so far included providing employment opportunities, enhancement of Islamic Banking, offering training and development plans and opportunities for its staff members in conjunction with organizing meetings and other social gatherings for their family members. The Bank's human resource is responsible for succession management, talent and competence, and for handling personnel issues. The human resource department is in charge of implementing the relevant policy and standards, and it takes additional initiatives adapted to social conditions. The Bank capitalizes on its workforce as an intangible asset and all training and development programs are tied to enhanced motivation within the Bank as well as employability in the career development program that each member of staff might personally pursue.

Recruiting- Attracting Junior Talent In this Bank where access to top talent is paramount to success, Human Re- sources consistently attract, retain and develop exceptional staff. The Bank also strives to create a stimulating working environment with challenging tasks and attractive career opportunities within multicultural teams. The Bank offers a safe workplace that attracts, retains and motivates high performance by stimulating

75 innovation, rewarding excellence and treating people with respect. Highly knowledgeable and experienced employees are the foundation of the Bank's success. The Bank has established a number of integrated programs aimed at attracting and retaining employees from a wide variety of backgrounds ranging Annual Report from apprentices and high school graduates to university graduates and experi- 2015 - 2016 enced professionals.

Employee Satisfaction Since employee motivation and satisfaction are the driving force behind much of the success of any corporate, the Bank regularly measures level of satisfaction and involvement by surviving its staff in the interest of building a relationship of honesty, integrity, and trust, among organization employees. The results are com- municated effectively and acted upon by the organization. Finally, the organization's managers need to track progress and communicate implementation successes and failures. The Bank uses the findings of the surveys to take specific measures. The surveys have revealed that employee satisfaction has improved in recent years. The results help line managers to identify the needs of their employees. At the same time, the results provide management with a representative picture of employee satisfaction.

Performance Measurement The performance targets are set for each management and actual performance assessed against these on a regular basis. Reasons for under performance are also ascertained and where appropriate, changes made to the relevant compositions. In this regard, the Bank enjoys a system to assess the quality of performance measurement as a basis for determining whether the Bank's goals and objectives are achieved. The performance review and reward management tries to achieve equity and fairness. Hence, through continual assessment and by modifying and making its remuneration policy more transparent, the Bank aims to increase its staffs' development potential and to pay them a fair salary. In line of the Bank's strategies, the human capital is planned to be rewarded in terms of outputs and against a set of specific objectives. Furthermore, to facilitate the employees’ development rather than responding to short-term needs, a training and development program has been introduced to plan for a fully fledged learning organization.

76 Group Network

Ahvaz Branch, 1316 Tel: +98 (61) 3220 2870 +98 (61) 3223 0264 +98 (61) 3223 0265 Fax: +98 (61) 3221 2537 +98 (61) 3220 2871 Swift: EDBIIRTHAWZ [email protected]

Arak Branch, 1330 Tel: +98 (86) 3222 6085 +98 (86) 3223 8201 +98 (86) 3223 8206 Fax: +98 (86) 3222 0214 Swift: EDBIIRTHARK [email protected]

Astara Branch, 1312 Tel: +98 (13) 4482 8195 +98 (13) 4482 8192 +98 (13) 4482 8194 Fax: +98 (13) 4482 8191

Group Network

[email protected] Group Network

Bushehr Branch, 1314 Ahvaz Branch, 1316 Tel: +98 (77) 3356 1888 Tel: +98 (61) 3220 2870 +98 (77) 3356 1818 +98 (61) 3223 0264 Fax: +98 (77) 3356 1900 +98 (61) 3223 0265 Swift: EDBIIRTHBSH Fax: +98 (61) 3221 2537 [email protected] +98 (61) 3220 2871 Swift: EDBIIRTHAWZ Chabahar Branch, 1323 [email protected] Tel: +98 (54) 3531 3390 +98 (54) 3531 3393 Arak Branch, 1330 +98 (54) 3531 3394 Tel: +98 (86) 3222 6085 Fax: +98 (54) 3531 3392 +98 (86) 3223 8201 +98 (54) 3531 3399 +98 (86) 3223 8206 Swift: EDBIIRTHCHA Fax: +98 (86) 3222 0214 [email protected] Swift: EDBIIRTHARK [email protected] Gorgan Branch, 1309 Tel: +98 (17) 3232 6999 Astara Branch, 1312 +98 (17) 3234 7260 Tel: +98 (13) 4482 8195 +98 (17) 3234 1301 +98 (13) 4482 8192 Fax: +98 (17) 3232 1066 +98 (13) 4482 8194 Swift: EDBIIRTHGOR Fax: +98 (13) 4482 8191 [email protected] Swift: EDBIIRTHAST [email protected] Hamedan Branch, 1317 Tel: +98 (81) 3825 6801 Ardabil Branch, 1334 +98 (81) 3827 7990 Tel: +98 (45) 3372 6841 Fax: +98 (81) 3825 6800 +98 (45) 3372 6848 Swift: EDBIIRTHHAM +98 (45) 3372 6852 [email protected] Fax: +98 (45) 3372 6840 Swift: EDBIIRTHARD Isfahan Branch, 1308 [email protected] Tel: +98 (31) 3222 5938 +98 (31) 3222 5551 Bandar Abbas Branch, 1324 +98 (31) 3222 8107 Tel: +98 (76) 3224 3100 Fax: +98 (31) 3221 4275 +98 (76) 3224 7601 +98 (31) 3221 4272 +98 (76) 3224 7604 Swift: EDBIIRTHISF Fax: +98 (76) 3224 7605 [email protected] Swift: EDBIIRTHBAN [email protected] Ilam Branch, 1335 Tel: +98 (84) 3338 3744 Bojnoord Branch, 1336 +98 (84) 3338 4674 Tel: +98 (58) 3222 0559 +98 (84) 3338 4675 +98 (58) 3222 7709 Fax: +98 (84) 3338 4678 Fax: +98 (58) 3222 0597 Swift: EDBIIRTHILA Swift: EDBIIRTHBOJ [email protected]

81 Kerman Branch, 1315 Fax: +98 (28) 3322 5975 Tel: +98 (34) 3223 0903 Swift: EDBIIRTHQAZ Tel: +98 (34) 3223 9197 [email protected] Fax: +98 (34) 3226 8447 Qeshm Branch, 1311 Annual Report Swift: EDBIIRTHKER 2015 - 2016 [email protected] Tel: +98 (76) 3524 2838 +98 (76) 3524 2830 Kermanshah Branch, 1320 +98 (76) 3524 2835 Tel: +98 (83) 3822 9696 Fax: +98 (76) 3524 2911 Fax: +98 (83) 3823 2891 Swift: EDBIIRTHQSH Swift: EDBIIRTHKRH [email protected] [email protected] Qom Branch, 1326 Khorramabad Branch, 1318 Tel: +98 (25) 3772 5735 Tel: +98 (66) 3340 5525 +98 (25) 3775 1012 +98 (66) 33405526 +98 (25) 3775 1015 +98 (66) 33405528 Fax: +98 (25) 3775 1011 Fax: +98 (66) 3340 5534 Swift: EDBIIRTHQOM Swift: EDBIIRTHKHO [email protected] [email protected] Rasht Branch, 1321 Kish Branch, 1328 Tel: +98 (13) 3332 3048 Tel: +98 (76) 4442 0792 +98 (13) 3334 5373 +98 (76) 4442 0794 Fax: +98 (13) 3332 0314 +98 (76) 4442 0798 Swift: EDBIIRTHRSH Fax: +98 (76) 4442 0793 [email protected] +98 (76) 4442 0795 Swift: EDBIIRTHKSH Sanandaj Branch, 1333 [email protected] Tel: +98 (87) 3362 4766 +98 (87) 3366 0441 Mashad Branch, 1306 Fax: +98 (87) 3362 4768 Tel: +98 (51) 3761 8550 Swift: EDBIIRTHSAN +98 (51) 3761 8011 [email protected] +98 (51) 3761 8014 Fax: +98 (51) 3768 6985 Sari Branch, 1303 Swift: EDBIIRTHMSH Tel: +98 (11) 3335 6490 [email protected] +98 (11) 3335 6493 +98 (11) 3335 6494 Orumiyeh Branch, 1313 Fax: +98 (11) 3336 4085 Tel: +98 (44) 3345 5332- 3345 5331 Swift: EDBIIRTHSAR Tel: +98 (44) 3345 5331 [email protected] Fax: +98 (44) 3348 0776 Swift: EDBIIRTHORU [email protected] Shahre Kord Branch, 1339 Tel: +98 (38) 3224 0900 Qazvin Branch, 1331 +98 (38) 3224 0902 Tel: +98 (28) 3324 5704 +98 (38) 3224 0904 +98 (28) 3324 5701 Fax: +98 (38) 3222 7257 +98 (28) 3324 5706 Swift: EDBIIRTHSHK

82 [email protected] Yasooj Branch, 1340 Tel: +98 (74) 3322 3337 Semnan Branch, 1332 +98 (74) 3322 9955 Tel: +98 (23) 3343 6024 +98 (74) 3322 9956 +98 (23) 3343 6034 Fax: +98 (74) 3323 5534 Fax: +98 (23) 3343 6025 Swift: EDBIIRTHYAS +98 (23) 3343 6033 [email protected] Swift: EDBIIRTHSEM [email protected] Birjand Branch,1337 Tel: +98 (56) 3234 2168 Shiraz Branch, 1305 +98 (56) 3234 2302 Tel: +98 (71) 3231 5770 +98 (56) 3234 2307 +98 (71) 3231 5512 Fax: +98 (56) 3234 2034 +98 (71) 3231 5519 Swift:EDBIIRTHBIR Fax: +98 (71) 3231 5520 [email protected] Swift: EDBIIRTHSHI [email protected] Karaj Branch, 1341 Tel: +98 (26) 3444 2244 Tabriz Branch, 1307 +98 (26) 3420 5201 Tel: +98 (41) 3334 0333 +98 (26) 3420 5209 +98 (41) 3335 7475 Fax: +98 (26) 3420 5210 +98 (41) 3335 7482 Swift: EDBIIRTHKRJ Fax: +98 (41) 3334 5078 [email protected] Swift: EDBIIRTHTAB [email protected] Tonkabon Branch, 1342 Tel: +98 (11) 5427 4588 Yazd Branch, 1302 +98 (11) 5427 4582 Tel: +98 (35) 3525 0666 +98 (11) 5427 4584 +98 (35) 3525 0188 Fax: +98 (11) 5427 4587 +98 (35) 3525 3377 Swift: EDBIIRTHTON Fax: +98 (35) 3525 5744 [email protected] Swift: EDBIIRTHYAZ [email protected] Tehran Branches Central Branch Zanjan Branch, 1319 Tehran, 1301 Tel: +98 (24) 3333 1001 Tel: +98 (21) 8872 9982 +98 (24) 3332 9810 +98 (21) 8871 6607 +98 (24) 3332 9816 +98 (21) 8871 6609 Fax: +98 (24) 3333 1003 Fax: +98 (21) 8870 7923 Swift: EDBIIRTHZAN +98 (21) 8871 6881 [email protected] Swift: EDBIIRTHCEN [email protected] Zahedan Branch, 1338 Keshavarz Blvd Branch Tel: +98 (54) 3321 8827 +98 (54) 3321 8823 Tehran, 1310 Fax: +98 (54) 3326 3984 Tel: +98 (21) 8896 3727 Swift: EDBIIRThzah +98 (21) 8896 3746 [email protected] +98 (21) 8896 3753

83 Fax: +98 (21) 8896 3728 EDBI's Contact Details Swift: EDBIIRTHBLV Board of Directors [email protected] Dr. Ali Saleh Abadi Mirdamad Branch Annual Report Chairman and Managing Director 2015 - 2016 Tehran, 1322 Tel: +98 21 8871 6916 Tel: +98 (21) 2226 2600 + 98 21 8871 6917 +98 (21) 2226 2601 Fax: + 98 21 8871 6978 +98 (21) 2226 2610 Email: [email protected] Fax: +98 (21) 2222 1404 +98 (21) 2226 2606 Mr. Mohammad Jafar Mazdeh Swift: EDBIIRTHMIR Board Member [email protected] Tel: +98 21 8870 2832 Fax: + 98 21 8870 2833 Tajrish Branch Email: [email protected] Tehran, 1325 Dr. Hossein Eivazlou Tel: +98 (21) 2270 8450 Board Member +98 (21) 2270 8442 Tel: +98 21 8870 2831 +98 (21) 2270 8449 +98 21 8870 2832 Fax: +98 (21) 2270 8441 Fax: + 98 21 8870 2833 Swift: EDBIIRTHTAJ Email: [email protected] [email protected]

Dr. Mir Saeed Nikzad Larijani Pamenar Branch Board Member Tehran, 1327 Tel: +98 21 8870 2837 Tel: +98 (21) 3311 5675 Fax: +98 21 8870 2836 +98 (21) 3392 5931 Email: [email protected] +98 (21) 3392 5935 Fax: +98 (21) 3311 7617 Dr. Morteza Akbari +98 (21) 3392 5939 Board Member Swift: EDBIIRTHPAM Tel: +98 21 8870 2839 [email protected] Fax: +98 21 8870 2836 Email: [email protected] Subsidiary Banco Internacional de Desarrollo C.A. (Ban- H/O Address: co Universal) No. 26, Tosee Tower, 15th St., Ahmad Ghasir Urb. El Rosal, Av. Francisco de Miranda, Edi- Ave., Tehran 1513835811 ficio Dozsa, Piso 8, C.P. 1060 Caracas, Ven- Islamic Republic of Iran ezuela Tel: (58212) 952 6563 Export Development Bank of Iran Fax: (58212) 952 8635 The Head Quarter: Swift: IDUNVECA web site: www.bid.com.ve Export Development Bank of Iran Tower, 15th [email protected] Street, Bucharest Ave. Argentina Square, [email protected] Tehran, Iran Tel: +98 (21) 8870 2140 Fax: +98 (21) 8870 0755 Telex: 226895 EDBI R SWIFT: EDBIIRTH Web: http://www.edbi.ir