IN THE NAME OF GOD www.bankmellat.ir www.bankmellat.ir

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Managing Director’s Message ...... 3 Bank Mellat’s Background ...... 6 Managing Director and Board Members ...... 7 Organizational Chart ...... 8 Private Banking ...... 9 Bank Mellat at One Glance ...... 11 Bank Mellat’s position among the commercial banks ...... 13 Bank Mellat’s growing performance in the Iranian year 1390 (year ended March 2012 ,19) compared to the previous fiscal year Manpower ...... 15 Electronic banking ...... 17 Composition and number of branches inside and outside the country ...... 19 Bank Mellat’s Participation in National Big Projects ...... 21 Changes in the Bank’s Capital ...... 99 Status of bank Mellat’s shares at stock exchange ...... 25 Financial and tax performance of the bank and Group ...... 26 Bank Mellat’s Financial Ratios ...... 27 Group’s Financial Ratios ...... 28 Corporate governance ...... 29 Facilities Value at Risk Exposure ...... 31 Credit Risk Coverage ...... 32 Information disclosure quality rank ...... 32 Research and Planning Institute’s Projects ...... 34 Completing the bank’s value chain ...... 34 Mellat Financial Group ...... 35 Report of Independent Auditor and Legal Inspector to Ordinary General Meeting of Shareholders of Bank Mellat (Public Joint Stock) ...... 36 Explanatory notes of consolidated financial statements for the fiscal year ended March 2012 ,19 ...... 45

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Managing Director’s Message

The economic developments of the world in 2011, mainly included the critical conditions of the Euro Zone, high budget deficit in European countries, increase of financing rate (long-term bonds), strengthened outlook for decline of economic growth in such newly-emerged countries including China, along with major crises in the world’s large economies. Thus, as it was expected that these crises to influence on other economies as well as on financial markets and such commodities as oil and precious metals, in- ternational trade as well as the decision-making and investing system in different countries based on the degree of their contiguity with these crises, we witnessed a 2% decrease in the world economic growth. In confrontation with these crises, Iran executed a contractionary monetary policy, following which we witnessed deep changes in monetary and nominal variables of economy. So that besides indication of these policies in the relative prices and increase of vol- ume of liquidity to Rls. 3,521 thousand billion, the liquidity growth reduced by 6% compared to the Iranian year 1389 (year ended March 20, 2011). This issue indicates the difficulty in preserving the improving the bank’s competitive position compared to the years in which different policies and conditions governed the international and national economy. In the Iranian year 1390 (year ended March 19, 2012), despite the external conditions as explained above, Bank Mellat, while trying to preserve the administrative health, could improve its distinguished position in the banking system in terms of resources, con- sumptions, e-banking, international banking, etc., thanks to the unrivaled efforts of its devoted colleagues and our valued share- holders; in a way that following the company’s capital increase by 25% and improvement of many of the rations, it could realize its financial performance with a positive EPS of Rls. 350. In addition, in the current year, Bank Mellat, considering the importance of the bank’s companies in the performance and comple- tion of the value chain, formed new holdings and by monitoring their performance, could start a new season in the bank’s perfor- mance and Mellat Group. And we expect that we can witness they can have better results in next years. The intensification of competition in banking industry, taking into account the entrance of new competitors, will lead the profit margin of the most important income channel of the bank, i.e. micro-banking to be exposed to threats, so by applying a strategic approach in the Iranian year 1391 (year ended March 20, 2013), the bank has entered in other financial banking businesses such as corporate banking, trade banking and private banking. The pioneer banks in advanced countries, by having a precise and updated knowledge from the needs of the financial markets and deep understanding of the customers’ needs and providing necessary grounds, have been able to meet these needs properly and conquer a remarkable share of these markets. Obtaining a new position in the market and success in the existing competitive situation, will need business models to be developed, in order to integrate all income channels of the bank in interaction with each other.

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The realization of this strategy and achieving a sustainable success requires setting of a comprehensive plan on the development of new business lines, segmentation of the market related to each of them, introducing the market mix and services in each of them, and designing a structural pattern and managerial systems appropriate for the new business model. In the comprehensive banking model, we look for presenting an extensive range and full series of financial products and services in order to meet various and increasing needs of our customers.

In this pattern, based on their needs and requests, the customers are classified into 4 groups: The customer groups have basic differences with each other; not only their required products and services but also their desirable sale channels and the marketing activities carried out with Private Customers respect to every individual group, are different. These activities encompass many marketing duties such as product design and production, its Corporate customers distribution through suitable channels, pricing, promotional activities, market segmentation, Business customers etc. which is carried out in a different way for every individual group of customers.

Basically, in the development plan, the bank intends to change its general approach from prod- Micro customers uct-orientation to customer-orientation and create long-term value-making communication with customers of different segments. Presenting separated financial statements based on customer groups is among the most important specifications of the compre- hensive banking. Based on this type of separated reports, the bank can:

1) make more safe decisions regarding the presentation of services to the customers, development of its products and services, etc. 2) upon presentation of this type of financial reporting, the financial transparency will increase and the possibility for appropriately responding the shareholders and depositors will be provided, 3) investments will be made in high profitable and economically justified sections and in general the bank’s investment section will be managed with a target-oriented approach. 4) With classification of the customers and management of each section, the credit risk and as a result the deferred items will be significantly reduced. 5) considering the fact that in the comprehensive banking model, responding to the customers’ financial needs will be secured, as a result the bank’s penetration and market share will increase. 6) With the execution of the comprehensive banking system, we will move from micro-banking, along with affiliated companies who all run independent businesses, towards a comprehensive bank with the features resulting from integration of Mellat Group, who provides valuable financial services for the target customer sections in all markets in which it runs business and as a result the bank’s value chain will be applied in this model. 7) In this model the products and services will be designed and presented based on the needs of every individual customer group. So it is anticipated that the share of bank’s income from the customers’ money wallet, specially in the commission incomes will have a high increase. 8) With the execution of comprehensive banking, the special budgeting of resources and responsibility assessment from the tradi- tional budgeting model, which was only based on cost, will be developed into budgeting based on a developed plan. 9) Finally, with the execution of this model, the bank’s and customer’s interests will be bonded in a rational and efficient way and it will set the ground for all-inclusive development of bank mellat.

At the end, by appreciating the God’s favor, I should express my thanks to all my dedicated colleagues, valued shareholders and dear customers who provided the ground for achieving valuable achievements of bank mellat in the reported year by their trust and loyalty. Ali Divandari

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History of Bank Mellat

Bank Mellat was established on Dec. 20, 1979 following the merger of 10 private banks, consisting of Tehran, Daryoush, Iran International, Omran, Iran Insurance, Irano-Arab, Pars, Cooper- ative and Distribution Credits, Foreign Trade and Farhangian banks, who operated before the Islamic revolution, and after 7 months of this merger, it was registered with Department for Registration of Companies under Reg. No. 38077. Later, the em- ployees of these 10 banks celebrated their activity with a new countenance and a strong structure and under a single flag, namely Bank Mellat. After merger, Bank Mellat started its activ- ity with a capital equal to Rls. 5.33 billion and it was not late until it was listed as one of the successful banks of the Islamic Republic of Iran and stood first in many banking areas. The in- telligent steps taken by the managers and employees of Bank Mellat during 30 years of effective bank activity and being pio- neer in presenting modern services and professional effort for keeping pace and competing with the world’s banks, made the bank to be qualified for privatization and being listed at Stock Exchange Organization, according to Principle 44 of the Islam- ic Republic of Iran’s Constitutional Law. Consequently, on the strength of Resolution No. 37925T/68985, passed by the board of ministers at their meeting dated July 24, 2007, and the de- cision of the extraordinary general meeting of the banks, the legal status of Bank Mellat was changed to a public joint stock company on April 5, 2008, and on Feb. 10, 2009, it was placed in the signboard of the main hall of Tehran Stock Exchange Organ- ization as the 448th company under the section of banks, credit institutes and other monetary entities and on Feb. 18, 2009, 5% of its shares was presented in the Stock Exchange in order to discover the share price.

Central Office: No. 276, corner of Forsat St., Ayatollah Taleghani Ave, Tehran, Iran Tel: +98 (21) +82961 Website: www.bankmellat.ir Fax: +98 (21) 82962700 Email: [email protected]

Mellat Contact Center: Tehran Tel: +98 (21) 1556 Other Cities: +98 (21) 82488

Department of Shareholders’ Affairs General Department of Financial Affairs, after Enghelab Cross- roads, Valiasr Ave., Tehran, Tel: +98 (21) 66970058 ~9 Postal Code: 1591614311 Fax: +98 (21) 66970053 Email: [email protected]

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History of bank mellat

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Managing Director and Board Member

Dr. Ali Divandari

Alireza Lagzaei Mohsen Fadavi Dr. Ali Khorsandian Mohammadreza Saroukhani

According to the Resolution passed by the ordinary general meeting dated July 21, 2011, the following people were appointed as directors of the bank. Also according to the board of directors’ decision, Dr. Ali Divandari was appointed as managing director of the bank:

Term of Office Full Name Position Representing Remarks Starting on Ending on

Managing director Dr. Ali Divandari Private Sector 21/07/2011 21/07/2013 Executive and Board Member Mohammadreza Board Member and Khoozestan Province 21/07/2011 21/07/2013 Executive Saroukhani Chairman Investment Co. Board Member and Government of Islamic Non Dr. Ali Khorsandian 21/07/2011 21/07/2013 Vice Chairman Republic of Iran Executive

Mohsen Fadavi Board Member Saba Tamin Investment Co. 21/07/2011 21/07/2013 Executive

Alireza Lagzaei Board Member Fars Province Investment Co. 21/07/2011 21/07/2013 Executive

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Organizational Chart

Auditing Committee

Risk Committee

Auditing Directorate

Risk Management

Deputy of Finance Deputy of International Affairs Deputy of Credit Manager of Dist. 1 Affairs Deputy of Human Resources Independent Deputy of Branches Central Office Executive Affairs Directorate General Meeting Central Independent Branch Board of Directors

Manager of District 2 Affairs Deputy of Cities Executive Affairs Managing Vice Managing Director Manager of District 3 Director Affairs (Dr. Divandari)

Deputy of Projects and Planning

Deputy of Information and Communication Technology

Deputy of Investments and Subsidiaries

Department of Anti Money Laundering

Director General of Management’s Office and Public Relations

Director General of Security Affairs

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Private Banking

The Most Efficient Method to Create Value for Customers Four years after privatization, Bank Mellat, by taking long steps, has been able to change its business model and reduced its gap with the banking models of the best banks of the world and open new horizons in the banking industry for the national banking system. In today’s world, because of strong competition and the complexities of banking business environment, we can no more rely on old methods, models and tools in order to create value for customers, shareholders and society. Private banking, by focusing on products and services in the area of wealth and asset management, protects the wealth and assets of the entrepreneurs and investors against economic fluctuations and steps forwards in making the optimal use of the financial and economic resources of our country, by using wealth in the most appropriate investment opportunities. Presenting such services, while strengthening the present valuable customers’ relation with the bank, will better the bank’s situation in terms of number of valuable customers.

Private banking includes a wide range of banking and financial services. It meets all needs of the customers who require to develop private banking skills in order to master a wide range of subjects including business banking, investment banking, legal issues, accounting and assets management and portfolio management.

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Most important services of private banking are as follows:

Common bank products and services with a different method of presentation, Investment account services Asset management services Deposit management services Consulting services, Customers’ special services, including cooperation with and execution of the customers’ nonbanking requests,

In the private banking model, the products and services are customized for the customer based on his needs, requests and specific conditions. Presenting these services will generate new incomes for the bank. In private banking business model, customers pay commissions, and in this way new income channels are created for the bank and while reducing the risk, the bank will gain a signif- icant income. This finally leads to more improvement of the position of bank’s shares in the capital market. Bank mellat is trying to combine the fundamentals of the private banking, inspired from the world’s top banks, with the principles of Islamic banking and the Iranian disposition and liking and design a set of private “Iranian-Islamic” banking services. In 2013, a set of new services called “private banking” will be added to the bank’s business portfolio, which will undoubtedly satisfy the custom- ers, create more value for the shareholders, more efficient use of resources for the society and more-than-before elevation of Bank Mellat’s image.

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Bank at a Glance

Bank Group Full Name Year ended Year ended Year ended Year ended Year ended Year ended March ,19 March ,20 March ,20 March ,19 March ,20 March ,20 2012 2011 2011 2012 2011 2011 A) Performance data (In Rls. Million)

Operating income 65,869,858 53,809,109 41,205,787 91,192,458 84,691,383 41,491,441

Operating profit 28,841,627 22,794,981 16,317,807 29,554,266 23,463,263 16,523,905

Non-operating gains 7,665,640 5,973,557 2,987,922 8,405,404 6,110,808 3,073,987

Net profit after deduction 7,008,809 6,589,970 3,735,501 8,067,494 7,079,745 3,666,516

Prior period adjustments 372,418 803,002 (333,000) 317,058 740,469 (333,653)

Cash from operating activities 28,046,909 11,579,110 16,178,230 39,158,369 12,924,389 16,366,774

B) Balance Sheet Information (in Rls. Million)

Assets 777,758,324 671,156,264 556,783,108 778,448,282 672,760,124 559,073,032

Liabilities 731,286,346 643,604,103 536,008,218 730,392,456 643,863,632 537,241,701

Registered Capital 20,000,000 16,000,000 13,100,000 20,000,000 16,000,000 13,100,000

Minority Interest 893,259 678,734 692,230

Shareholders’ Equity 46,471,978 27,552,161 20,774,890 48,054,826 28,896,492 21,139,101

C) Return Rates (%)

Return on Assets (ROA) 0/97 1/2 0/85 1/1 1/3 0/85

Return on Equity (ROE) 16/2 29/2 22/6 18/6 30/0 22/0

D) Stock Information

Number of shares at the time of holding general meeting 20,000 16,000 13,100 20,000 16,000 13,100

First EPS (in Rials) *350 231 239 350 231 239

Final EPS (in Rials) 347 294 249 347 294 249

Actual EPS (in Rials) 350 412 288 403 441 278

Cash EPS (in Rials) 200 80 241 200 80 241

Last share price on report approval date (in Rials) 1,561 2,199 1,599 1,561 2,199 1,599

Book value per share 2,324 1,699 1,553 2,402 1,739 1,578

Price to actual EPS ratio (times) 4/46 6/28 5/48 3/87 6/28 5/48

EPS based on the capital consisting of 16,000 million shares

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Number of E-Banking Number of E-Banking Customers Number of E-Banking Customers Customers Description Number Description Number

Mellat Electronic Current Mobile banking customers 246,614 Internet banking 3,858,441 Account (JAAM) Electronic savings Internet banking customers 425,942 SIAM Portal (Gha zolhassaneh) 15,669,543 interest-free account Telephone banking customers Term Loan Application Electronic 1,812,415 Management System short-term deposit 9,798,106

Total 2,484,971 Virtual Training System Electronic term deposit 5,334,000

NGFS Switch-based on-line purchasing Special short-term deposit 45,614

Customers’ assessment system Total 34,705,704

Electronic payment of fuel price in Number of Cards Issued gas stations Presenting financial services to capi- Description tal market in line with online trading Electronic Technology Utilization

Debit cards 16,706,597 Description Number Status of Branches and Manpower Credit cards 32,650 ATM 316

Pre-paid cards 21,939,857 Number of branches 1,792 POS in Branches 6,021

Total cards issued 38,679,104 Number of personnel 23,014 POS in stores 318,352

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Bank’s Position among Commercial Banks

According to the announcement of Industrial Management Institute (IMI), in the Iranian year 1390 (year ended March 19, 2012) Bank Mellat, with its desirable performance, obtained the 8th rank among 100 top companies of the country. Considering Bank Mellat’s achievement in the fiscal year ended March 19, 2012, in preparation of the consolidated financial statements of Bank Mellat group, in IMI’s rating for the Iranian year 1391 (year ended March 20, 2013), Bank Mellat is projected to be ranked above all other banks and among the 4 Top Companies of the country.

Bank’s Achievements in Iranian Year 1390 (Year Ended March 19, 2012)

Top Entity with Respect to Improved Administrative Health In an assessment process for Iranian Administrative Health Management Award, the Ministry of Justice selected Bank Mellat as one of Ten Top selected organizations in the Administrative Health Management Evaluation System. First Rank in POS Terminals among 9 Top Banks of the Country In terms of changes in the number of terminals, the number of transactions and the share from total amount of the banks’ transac- tions in POS terminals, Bank Mellat obtained the first rank among 9 Top Banks of the country. First Bank Receiving ISMS Certificate In the year ended March 19, 2012, Bank Mellat, as the first Iranian bank, received Information Security Management System (ISMS) Certificate based on ISO27001:2005 for internet banking services. Top Iranian Bank in Opening Customer Club based on Internet Banking Services In the Fifth Electronic Banking Conference, Bank Mellat was introduced as and received the award of the top Iranian bank in open- ing customer club based on electronic banking services. Bank Mellat’s Fifth Rank among Iranian top 100 companies. According to the announcement of Industrial Management Institute of Iran, in the Iranian year 1390 (year ended March 19, 2012) Bank Mellat could stand in the 8th place among Top 10 companies of the country. Bank Mellat ascends to the Iranian Top 10 sites As reported by Alexa website, Bank Mellat’s website is the only bank website among the Top Ten websites of the country. In addi- tion to presenting banking services, Bank Mellat has provided such other services as access to electronic banking portals, mellat customer club, loan application management system, electronic payment of bills, customer satisfaction assessment, etc, for its customers.

Bank’s Competitive Status among the Commercial Banks

First rank among the big commercial banks in terms of staff per capita in attracting resources, First rank among the big commercial banks in terms of branch per capita in attracting resources, First rank among the big commercial banks in terms of balance of short term deposits, First rank among the big commercial banks in terms of staff per capita in attracting domestic currency (Rials) deposits First rank among the big commercial banks in terms of branch per capita in attracting domestic currency (rials) deposits First rank among the big commercial banks in terms of growth in issuance of letters of guarantee Second rank among the big commercial banks in terms of balance of domestic currency (Rials) deposits, Second rank among the big commercial banks in terms of balance of long-term deposits, Second rank among the big commercial banks in terms of balance of Gharzolhassaneh (Interest-free) Domestic Currency (Rials) Current Account Deposits, Second rank among the big commercial banks in terms of balance of consumptions, Second rank among the big commercial banks in terms of opening L/Cs Second rank among the big commercial banks in terms of issuance of letters of guarantee

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Table below shows the bank’s position among Iranian commercial banks in terms of resources and consumptions:

Share from Total Market of Commercial Banks’ Resources in Domestic and Foreign Currencies

Other Figures in Rls. Billion Year Bank Mellat Commercial Total Resources bank,s share from total Banks resources (%) 1389 (year ended March 2011 ,20) 496,142 1,483,229 1,979,371 25.1

1390 (year ended March 2012 ,19) 572,490 1,748,929 2,321,419 24.7

Share from Total Market of Commercial Banks’ Consumptions in Domestic and Foreign Currencies

Other Figures in Rls. Billion Year Bank Mellat Commercial Total Resources bank,s share from total Banks resources (%) 1389 (year ended March 2011 ,20) 421,318 1,462,622 1,883,740 22.4

1390 (year ended March 2012 ,19) 491,072 1,670,008 2,161,080 22.7

Share from Total Market of Commercial Banks’ Resources in Domestic and Foreign Currencies

Other Figures in Rls. Billion Year Bank Mellat Commercial Total Resources bank,s share from total Banks resources (%) 1389 (year ended March 2011 ,20) 378,700 1,247,410 1,626,110 23.3

1390 (year ended March 2012 ,19) 436,159 1,469,106 1,905,265 22.9

Share from Total Market of Commercial Banks’ Resources in Domestic and Foreign Currencies

Other Figures in Rls. Billion Year Bank Mellat Commercial Total Resources bank,s share from total Banks resources (%) 1389 (year ended March 2011 ,20) 1,816 11,146 12,962 14.0

1390 (year ended March 2012 ,19) 1,792 11,033 12,825 14.0

Share from Total Market of Commercial Banks’ Resources in Domestic and Foreign Currencies

Other Figures in Rls. Billion Year Bank Mellat Commercial Total Resources bank,s share from total Banks resources (%) 1389 (year ended March 2011 ,20) 23,895 122,664 146,559 16.3

1390 (year ended March 2012 ,19) 23,014 117,291 140,305 16.4

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Bank Mellat’s Growing Performance in the Iranian Year 1390 (Year ended March 2012 ,19) Compared to Previous Fiscal Year The bank’s performance and the level of achievement to the set goals compared with the previous fiscal year is as follows:

Totally 15.6% growth of resources in Rials and foreign currency,

15.2% growth in Rial deposits,

10.2% growth in foreign exchange resources,

13.7% growth of Gharzolhassaneh (Interest-Free) Savings Resources,

33% growth in long-term deposits,

16.6% growth in Rial resources,

9.8% growth in short-term deposits,

42.6% growth in foreign exchange term savings deposits,

17.98% growth in bank’s consumptions,

29.9% growth in balance of letters of guarantee issued in foreign currencies and Rials,

24.9% growth in balance of letters of guarantee issued in foreign currencies,

15.5% growth in bank’s assets,

38% growth in the amount of commissions received,

14% growth in the amount of income from joint activities,

48% growth in the amount of income from non-joint activities,

23% growth in the total income,

6.3% growth in EPS

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Manpower

In management science, workforce is classified within technology. In other words, workforce is one of the most valuable assets of an organization, and with a target-oriented training, it can steer and manage the four principles of planning, organization, control and supervision on all components of the system. This view helps us to mix and put into practice such valuable element with other system elements so that the organization’s outputs are presented more and more efficiently.

Among the banks who operate in an economic and competitive environment, Bank Mellat is known as one of the most successful financial entities, as it maintains qualified and knowledgeable workforce. Such qualification and knowledge have been obtained from work challenges and efforts throughout many years of learning and experiencing and feeling the need to change. That is why the apex of Bank Mellat’s managerial pyramid has entrusted with full confidence the important duties and execution of various banking projects to the body and base of the workforce pyramid; a confidence that has been so far resulted in honor and proud.

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Comparison of the Number of Employees during Iranian Years 1386 (Year ended March 2008 ,19) to 1390 (Year ended March 2012 ,19)

24987 24963 25000 ...... 24635 ...... 23895 23014 Number of Employees, by Years of Service, at the end of the Iranian 20000 ...... Year 1390 (year ended March 2012 ,19) – In Percent

15000 ...... Less than 5 years 3%

10000 ...... 5 to 10 years 23% 10 to 15 years 23% 5000 ...... 15 to 20 years 24% 20 to 25 years 22% 0 ...... Above 25 years 5% 1386 1387 1388 1389 1390

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Electronic Banking

Comparison of the number of ATM in the Iranian Years 1389 (year ended Comparison of the Number of Cards Issued in the Iranian Years 1389 (year March 2011 ,20) and 1390 (year ended March 2012 ,19) ended March 2011 ,20) and 1390 (year ended March 2012 ,19)

3.200 35

3.100 30

3.00 20

2.900 15

In Million 2.800 In Million 10

2.700 5

2.600 0 1389 1390 1389 1390

Number 2,796 3,117 Number 24,085,381 31,895,672

Comparison of the number of ATM & POS Transactions in the Iranian Years Comparison of the Number of E- Banking and Mobile Banking Customers 1389 (year ended March 1390 & )2011 ,20 (year ended March 2012 ,19) on March 2012 ,19 1.4 300 1.2 250 1.0 200 0.8 150 0.6

100 In Million In Million 0.4 50 0.2 0 1389 1390 0.0 ATM 109,388,609 211,149,848 1389 1390 POS 107,609,675 271,284,386 Number 1,275,622 928,931

Comparison of the number of ATM and POS Transactions in the Iranian Years Comparison of the Number of POSs in the Iranian Years 1389 (year ended 1389 (year ended March 2011 ,20) and 1390 (year ended March 2012 ,19) March 2011 ,20) and 1390 (year ended March 2012 ,19) 400.000 1.200.000 350.000 1.000.000 300.000 800.000 250.000

600.000 200.000

400.000 In Million 150.000 In Million 200.000 100.000 50.000 0 1389 1390 0 ATM 116,615 197,785 1389 1390 POS 193,858 944,591 Number 207,388 339,100

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Major E-Banking Activities in the Iranian Year 1390 (Year ended March 19, 2012)

1- Establishing a safe infrastructure for transaction services, 2- Producing the first national electronic payment switch based on mainframe, 3- All-inclusive development of electronic payment in payment cards, ATMs, Internet, Mobile Banking, and specially in the POSs, by using the (MegaNec) lines throughout the country, 4- Improving the infrastructure for POSs connection, by using the (MegaNec) lines throughout the country, 5- Improving the bandwidth of all branches to at least 128 Kbytes and desks to 64 Kbytes and inter-provincial offices to 40 Mbytes. 6- Equipping more than 2000 gas stations with telecommunication lines,

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Combination and Numbers of Branches Inside and Outside the Country

Regions 1390

Tehran 309

Other Cities 1483

Branches Overseas 4

Total 1796

Year ended March 2012 ,19

Tehran Branches 17.2% Branches in other cities 82.6% Branches overseas 0.2%

Comparison of the Number of Branches during the years 1385 (Year ended March 2007 ,20) to 1390 (Year ended March 2012 ,19)

2000 ......

1950 ......

1900 ......

1850 ......

1800 ......

1750 ......

1700 ......

1650 ......

1600 ...... 1385 1386 1387 1388 1389 1390

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Bank’s Participation on Some Big Projects

As one of the largest commercial banks of the country, Bank Mellat plays a significant role in different sections of Iran’s economy. This role has been realized through relying on the financial capacity, maintaining a professional expertise team and a state-of-the- art technology in the area of IT and widespread branch network throughout the country. In such areas as supporting different walks of life and the national production, Bank Mellat has always been a pioneer and stood first among all other banks who operate in private banking. In achieving its high objectives and strategic planning, Bank Mellat has always maintained a special position and prestige in accepting the social responsibilities and promoting the level of production, increasing and improving the economic growth and being in line with the government’s goals.

Bank’s Major Capabilities in Credit Section Financing huge projects in such areas as energy, oil and gas, dam construction, main metals, etc. Acting as top agent of National Development Fund in terms of volume of foreign exchange resources allocated, Supporting Iranian entities’ products by expediting and facilitating the grant of various loans and reducing the interest rate, Granting various loans to elites, university professors, specialists and judges, Financing Mehr House Construction Projects, granting special house procurement loans, renovation of houses in urban old texture, replacing worn-out cars, renovation of transportation fleet, Creating job opportunities by granting self-business and home job Gharzolhassaneh (Interest-Free) Loans, Granting an extensive number of Gharzolhassaneh (interest-free) marriage loans, Reducing bank risks through establishing credit assessment, eligibility & capacity assessment and personal beneficiary systems, Paying loans for POS users with the goal of improving electronic payments,

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Bank’s Participation in Some Enormous Projects

Provincial Branch Line Name of Client/ Project Subject Directorate / Site Location

1 Khousheh Dasht Tehran Food industries Nasim Shahr, Dist. -6Tehran

2 Darvishi Hotel Hotel Holy Mashhad- Khorasan Razavi

3 Hotel Alef Hotel Mahmoud Abad/Mazandaran

4 Hamedan Eram- Fun Fair Recreational Hamedan

5 Shapour Khast Hotel Hotel Lorestan

6 Hotel Ghalamian Hotel Khorasan Razavi

7 Yasin Hospital Hospital Yazd

8 Kashmar Zohreh Tile Tile and ceramics Dist. 5

9 Nasr Ghazvin Hotels Hotel Ghazvin

10 Hormozgan Steel Steel Central Independent Branch

11 Dehloran Cement Cement Vali-Asr Crossroads

12 Doudeh Fam Co. Carbon Black Vanak Tak Branch

13 Khorasan Water and Wastewater Civil and construction Khorasan

14 Setareh Complex Hotel Hotel Fars

15 Silo Khosheh Talaei Sana Silo Markazi Province

16 Abdolali Moghimi Hotel Hotel Chahar Mahal and Bakhtiari

17 Oil Products Development Fund Oil products transportation Dist. -6Tehran

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18 Kermanshah Water Park Recreational Kermanshah

19 Mahtab Ghom Welfare Complex Co. On-the-Way Rest Area Ghom Province Branches Directorate

20 Gilan Sabz Cement (Rial Facilities) Cement Gilan

21 Gilan Sabz Cement (Syndicate Loan, Rials) Cement Dist. -2Tehran (Gilan)

22 Kourosh Zanjan Hospital Hospital Zanjan

23 Nik Hakhamanesh Hotel Hotel Fars

Arasham Poyesh Polymer 24 Petrochemical Gilan (Foreign Exchange Facilities, Euro)

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Changes in Bank’s Capital

At the end of the Iranian fiscal year 1390 (year ended March 19, 2012), changes in bank’s capital since the date of its establishment, are as follows:

Amount of Date of Capital Capital Increase Increased Capital Capital Increased Out of Increase Rate (%) (In Rls. Million)

01/09/1993 1.076 571,500 Reevaluation of fixed assets

Special participation bonds, subject of Art. 93 of 01/09/2001 104.8 634,000 Development Third Plan Act Reevaluation of fixed assets and reserve for translation 10/08/2005 957.3 11,861,000 of foreign exchange assets and liabilities

26/04/2011 22.1 2,900,000 Cash contributions of shareholders

24/06/2012 25 4,000,000 Retained profit

It is worth mentioning that according to minutes of the extraordinary general meeting dated Jan. 29, 2012, the bank’s capital has increased from Rls. 16,000 billion to Rls. 20,000 billion.

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Status of Bank’s Shares at Stock Exchange

Transactions and Share Price

On Feb. 10, 2009, Bank Mellat’s shares were placed in Tehran Exchange Signboard under the subcategory of banks, credit institu- tions and other monetary entities with the transactional symbol “VEBMELLAT” and the status of transactions of Bank Mellat in the past 4 years are as follows:

Number of Number of Value of Days the Bank’s Year Ended Transacted Transacted Transactional Market Value Share Price Capital (Rls. Shares in Rls. Symbol was (Rls. Million) (Rls.) Million) Shares Million Open for Transactions

20/03/2009 767,109,765 806,208 19 13,899,100 1,061 13,100

20/03/2010 12,688,046,721 12,795,624 231 17,881,500 1,365 13,100

20/03/2011 4,841,923,339 3,830,556 225 33,312,000 2,082 16,000

19/03/2012 1,923,293,338 4,057,988 228 31,220,000 1,561 20,000

Share Price (Rls.)

2,082

1,561 1,365

1,061

2009 2010 2011 2012

Further, Bank Mellat’s capital increase out of retained profit at the amount of Rls. 4,000 billion was registered with Tehran Depart- ment for Registration of Companies and Non-Commercial Institutes on June 24, 2012 and the bank’s capital increased to Rls. 20,000 billion.

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Financial and Operating Performance of the Bank and Group

Figures in Rls. Million Bank Group Description Year ended Year ended Year ended Year ended Year ended Year ended March ,19 March ,20 March ,20 March ,19 March ,20 March ,20 2012 2011 2011 2012 2011 2011 1) Items of Profit and Loss Statement

A) Main revenues

Income from joint activities 49,626,598 43,588,706 14 74,581,202 74,214,631 0.4

Income from non-joint activities 23,908,900 16,193,959 48 25,116,660 16,587,560 51

B) Expenses

Administrative, general & actuarial expenses 20,955,892 14,587,162 44 20,995,971 14,771,888 42

Expense of profit paid (and cost of goods 32,021,551 27,644,463 16 56,504,276 57,807,608 (2) sold and services rendered for the Group)

Expense of doubtful debts 7,319,343 5,513,181 33 7,319,343 5,513,181 33

Other expenses 703,427 630,225 12 703,545 631,922 11

C) Financial expenses 5,006,680 3,369,665 49 5,133,916 3,420,512 50

D) Pre-tax income 7,528,606 8,037,968 (6) 8,940,811 8,657,081 3

E) Net profit 7,008,809 6,589,970 7 8,067,494 7,079,745 14

2) Changes in Investments

Changes in fixed assets *14,925,707 2,186,482 583 15,493,538 2,179,583 611

Changes in book value of total investments 16,297,165 2,529,453 545 14,486,443 2,544,179 470 in shares of other companies

Changes in other assets 4,212,408 17,446,740 (75) 6,990,136 19,465,414 (64)

Changes in bank’s generating assets 85,342,703 97,650,314 (12) 80,064,571 90,505,870 (11)

3) Changes in capital structure

Changes in shareholders’ equity 18,919,817 6,404,852 196 19,158,334 6,683,225 187

Changes in long-term payables 65,348,719 72,391,429 (9) 64,747,473 72,391,429 (10)

Distribution of profit 700,880 4,800,000 (85) 700,880 4,800,000 (85)

4) Changes in Liquidity

Main resources of liquidity 562,574,110 482,856,605 17 558,787,063 480,925,377 17

Major cash consumptions 480,921,260 419,827,737 15 475,495,906 417,003,946 14

Out of the said amount, the amount of Rls. 13,100,000 million pertains to the reevaluation of fixed assets.

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Bank’s Financial Ratios

Figures in Percent

FY Ended FY Ended FY Ended Title Description March ,19 March ,20 March 2012 2011 2010 ,20

A) Activity Ratios Bank Mellat’s resources

Bank’s share from total resources of big Iran’s large commercial banks’ resources commercial banks Net facilities 24.7 25.1 15.8 Deposit resources Net facilities to deposit resources Past due and deferred receivables 107.7 107.2 101.1 Overdue and deferred receivables to net Net facilities Deposits in reported 4.6 4.4 1.3 facilities year – deposits in previous year Deposits in previous year Facilities in Deposits Growth Rate reported year- facilities in previous year 15.9 26.6 37.2 Facilities in previous year 16.4 44.7 17.0 Granted facilities growth rate Shareholders’ equity Total assets Equity Ratio Cash on hand + cash in-transit 6.2 4.3 3.8

B) Liquidity Ratios

Resources subject to statutory deposit Minimum Cash Ratio Cash inflow from operations 1.4 1.5 1.4 Net profit 3.7 2.4 4.5 Profit Liquidity Ratio Total resources Number of branches Resources to branches per capita (Rls. Billion) 31,182 26,571 21,280 Deposit Number of staff Employees deposit per capita (Rls. Billion) Expense of doubtful debts + operating expenses 1,879 1,539 1,442

C) Profitability Ratios

Gross income from operating activities Efficiency Ratio Net profit 75.6 78.8 67.2 Shareholders’ equity 16.8 Shareholders’ Equity Ratio Net profit 16.8 24.5 Total assets Return on Assets Ratio 1.04 1.05 0.66 Net profit in reported year – net profit in previous year Net profit in previous year Net Profit Growth Ratio 14.0 93.1 32.8 Commission on services Total income Share of commission on services from 6.6 5.3 5.9 bank’s total income Net profit

D) Stock Market Ratios

Total number of shares EPS 403 412 279 Distributable profit

DPS Total number of shares 200 80 241

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Group’s Financial Ratios

Figures in Percent

FY Ended FY Ended FY Ended Title Description March ,19 March ,20 March 2012 2011 2010 ,20

A) Activity Ratios bank mellat’s resources

Bank’s share from total resources of big Iran’s large commercial banks’ resources commercial banks Net facilities 24.7 25.1 15.8 Deposit resources Net facilities to deposit resources Past due and deferred receivables 107.7 107.2 101.1 Overdue and deferred receivables to net Net facilities Deposits in reported 4.6 4.4 1.3 facilities year – deposits in previous year Deposits in previous year Facilities in Deposits Growth Rate reported year- facilities in previous year 15.9 26.6 37.2 Facilities in previous year 16.4 44.7 17.0 Granted Facilities Growth Rate Shareholders’ equity Total assets Equity Ratio Cash on hand + cash in-transit 6.2 4.3 3.8

B) Liquidity Ratios

Resources subject to statutory deposit Minimum Cash Ratio Cash inflow from operations 1.4 1.5 1.4 Net profit 3.7 2.4 4.5 Profit Liquidity Ratio Total resources Number of branches Resources to branches per capita (Rls. Billion) 31,182 26,571 21,280 Deposit Number of staff Employees deposit per capita (Rls. Billion) Expense of doubtful debts + operating expenses 1,879 1,539 1,442

C) Profitability Ratios

Gross income from operating activities Efficiency Ratio Net profit 75.6 78.8 67.2 Shareholders’ equity 16.8 Shareholders’ Equity Ratio Net profit 16.8 24.5 Total assets Return on Assets Ratio 1.04 1.05 0.66 Net profit in reported year – net profit in previous year Net profit in previous year Net Profit Growth Ratio 14.0 93.1 32.8 Commission on services Total income Share of commission on services from 6.6 5.3 5.9 bank’s total income Net profit

D) Stock Market Ratios

Total number of shares EPS 403 412 279 Distributable profit

DPS Total number of shares 200 80 241

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30 31 www.bankmellat.ir www.bankmellat.ir

Corporate Governance

In order to establish a corporate governance system, the following structures have been es- tablished in the bank by the board of directors, with the goal of increasing the effectiveness of the board of directors’ duties, transparency, accountability, implementing proper supervision, complying with rules and regulations and controlling the risk:

Internal Audit Directorate

The bank’s Internal Audit Directorate is planned for the first time in Iran with the goal of carry- ing out duties according to the international professional requirements. To this end, the Inter- nal Audit Office of bank mellat (PLC) was approved by the bank’s board of directors. According to the internal audit charter, this office obtains its executive powers from the board of direc- tors and the auditing committee. The Internal Audit Directorate consists of a mangers and two deputies as deputy of banking operations and deputy of information technology.

Considering the end of identification, evaluation and prioritization of the bank’s operational processes, the comprehensive internal audit plan of the bank’s units and its subsidiaries was prepared and approved by the auditing committee. According to this plan, all departments and subsidiaries of the bank shall be completely audited within 3 years.

Risk Management

bank mellat’s risk management was established based on the board of directors’ resolution, and it started its activity as one of the important foundations of corporate governance. This Directorate provides comforting and impartial services with the goal of applying risk manage- ment professionally accepted concepts, principles and procedures, and it maintains a special organizational position in order to support shareholders.

This main foundation of corporate governance includes a manager and two deputies namely Deputy of Finance and Market and Deputy of Operations and Compliance and with an inde- pendent structure, it consists of five offices including Credit Risk Office, Financial Risk Office, Market Risk Office, Operational Risk Office and Compliance Risk Office.

Establishing risk management in mellat bank has been in line with achieving the strategic goals, efficiency and effectiveness of operations, quality of reporting and compliance with rules, codes, circulars and standards.

Risk management in bank mellat maintains an independent and integrated structure and op- erates under the supervision of the chairman of the board. This department addresses man- agement of credit, compliance, financial, operational and market risks in line with optimizing the capital use and maximizing the value of shareholders’ assets according to the standards and instructions of the Basel Committee.

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Facilities Value at Risk

The value at risk indicates the maximum expected loss in the asset or investment portfolio during a specified time period, under normal market conditions and at a specified confidence. This figure provides the management with useful and brief information about the asset or investment portfolio. As regards the Credit Risk Management in bank mellt, despite remarkable increase in the volume of credit facilities, the ratio of value at risk of the bank’s credit portfolio has decreased. In the banking system, this is consid- ered as an unparalleled achievement.

Comparison of the Growth of Facilities and Value at Risk Ratio

+% 15 480,921 419,827 -% 2 19 % % 17

March 20, 2011 March 19, 2012

Facilities (Rls. Billion) Value at Risk Ratio

The above graph shows that the amount of facilities in March 19, 2012 shows 15% growth compared to the amount of facilities in March 20, 2011. This is while the value at risk ratio of this section has decreased by 2% in comparison with the previous year, due to proper management of credit portfolio.

Credit Portfolio Value at Risk Coverage Credit Risk Cover

% 7/3 In order to cover the credit risk, the banks establish a specified reserve in compliance with pre-determined criteria and equal to part of the credit portfolio value at risk. Considering the general and special reserves provided in the accounts of Bank Mellat, the volume of credit portfolio value at / 2 / 4 risk in the year ended March 19, 2012 has increased by 7.3 per- 38 %

% 45 cent, reaching 45% in comparison with the preceding year. This level of credit risk cover is almost 100% above the average level of Iran’s banking system. March 20, 2011 March 19, 2012

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Bank’s Rank with respect to Data Disclosure Quality

In the year ended March 19, 2012, according to the assessment report issued by Stock Exchange Organization, the bank’s rating among the listed banks in terms of disclosure and proper dissemination of information is as follows:

Description Rank in the year ended Rank in the year ended March 2012 ,19 March 2011 ,20

Quality of information disclosure and dissemination 2 4

Number of days the bank’s transacting symbol was open for transaction 228 225

Number of transaction days 228 225

Volume of transactions to capital weighted average ratio (%) 12.02 30.26

The data related to the fiscal year ended March 19, 2012, is presented according to the official website of Tehran Stock Exchange.

Research and Planning Institute’s Projects

The most important projects of the Research and Planning Institute are as follows: 1- Concept development of new products and services in retail banking, 2- Concept development of new products and services in corporate banking 3- Concept development of new products and services in banking investment 4- Concept development of new insurance products and services 5- Analysis and study of Iran’s industries with an emphasis on companies listed at Tehran Stock Exchange,

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Completing the Bank’s Value Chain

Mellat Financial Group is the first financial and investment holding company affiliated to bank mellat. Incorporated with Tehran Stock Exchange Organization, the Group started its activity as a specialized holding company in the area of monetary and capital markets. The main performance of the company is to participate in projects and plans with high efficiency in different investment and economic sections, present broad financial services, including consulting, financing, organizing companies as well as to oper- ate in the primary and secondary markets.

In economic literature, four main foundations have been defined for financing the plans and projects, including: A) Government’s annual budgets B) Money market C) Capital market D) Foreign investment

Although there are high correlation between these foundations, but based on the type of governing economic system and the role of private and public sectors and the degree of an economy’s open situation, the above foundations have different shares in different economies for financing the plans and projects. Iran’s economy has also benefited from these foundations and set the necessary grounds for financing in proportion to its own developmental plans. There are principal steps taken in order to achieve this goal including: reducing the reliance on oil revenues, increasing the number and capital of the banks, defining new financial instruments and entities in the capital market and even revising the regulations and processes of absorbing foreign investments. In this line, and within its own outlook and mission and in order to have an effective participation in financing the big economic projects, Bank Mellat has tried to complete its value chain to set necessary ground for this important issue, as under the regulations governing the banking system, financing big projects has been always accompanied with numerous problems. Hence, with a comparative study and analysis of the structures and processes of many reliable foreign financial groups including the Hong Kong Fubon Financial Group Co., Japan’s Mizuho Financial Group, Japan’s Mitubishi Financial Group, US Citigroup and Iranian rival banks, following the approval of Bank Mellat’s board of directors and through restructuring and assigning one of the bank’s subsidiaries, the first financial and investment holding company of the country, namely Mellat Financial Group was put on the agenda in September 2011. At present, considering the short duration of the Group’s activity and the necessity of carrying out initial measures to forme, sys- temize and integrate all companies that are located within the financial market value chain, following submission of the plans, documentation, records and other necessary documents, this entity has been registered with Stock Exchange Organization as the first financial and investment holding company in Iran, so that in its long-term horizon, while stabilizing and improving the profit- ability and increasing the bank’s wealth, it can take steps in line with its outlook and in order to turn into a prominent financial and investment holding company in the following areas:

* Capital Market: investment activities in the secondary market, through broker agencies, stock transactions, securities and derivatives, * Primary Market: through banking activity, investment, buying and selling the companies and participating in profitable pro- jects with investment value, * Money Market: through participation in banking business, exchange and leasing activities, etc. * Insurance Market: Through carrying out insurance and underwriting services, * Goods and Services Market: Through developing commercial activities based on electronic trade, * Energy and Mines: Through participating in oil, gas and energy projects as well as exploiting the mines,

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Mellat Financial Group

Ma Tose Insurance Mellat Moein Leasing Kheradmandan Co.

Tadbirgaran Mellat Behsaz Exchange Co. Co.

Tarh va Mellat Andisheh Mellat Financial Broker Behsaz Co. Co. Group

Commercial Mellat Services Development Investment Co. Co.

Gharzol Stock hassaneh Exchange Bank Behsaz Portfolio Insurance Co. Services

Introduction of some of the subsidiaries:

Mellat Exchange Co. In the Spring 2008 and in order to facilitate the trading and transfer of paper money and exchange cash notes and also to establish an official and authorized network for meeting the customers’ needs inside and outside of the country, Mellat Exchange Company started its activity based on the regulations of Central Bank of the Islamic Republic of Iran and in compliance with the anti money laundering regulations. Therefore, Mellat Exchange Company mainly operates in such areas as buying and selling foreign exchange in cash, non-cash, and transfers, and other authorized exchange operations. Further, the company tries to carry out foreign currency transfers at the least possible time and lowest rates, through supporting the wide and safe banking and broker relations system network.

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On the other hand, buying and selling all currencies of the world at competitive prices in the market, changing sums of all cur- rencies into cash or noncash, issuance of customers’ money orders inside and outside of the country by the banking system and competent brokers, issuance of foreign exchange drafts by Mellat Exchange Brokers to all parts of the world, by presenting two types of certifications including APPLICATION and ACKNOWLEDGE for the applicants, possibility for depositing foreign currencies by the customers in all parts of the world to Mellat Exchange Company’s Broker Account and withdrawal of the same currency or its equivalence in Rials, providing facilities for customers to deposit Rial funds to Mellat Exchange Company’s Account and receive the same in foreign currency inside and outside of the country, remittance of cash funds through SATNA system to Mellat Exchange Company’s Account inside and outside of the country and issuance of money orders (equal to the sums deposited in foreign cur- rency) to different parts of the world, etc.

Mellat Leasing Company Mellat Leasing Company operates in an entirely specialized credit field of activity which is based on leasing, in which a contract is made by two or more natural or legal persons in order to exploit the main subject of endurable capital or consumable goods or its interests, which are capable of being leased. These type of contracts maintain very high capacity for presenting services to different economic sections in compliance with the standing rules and regulations of the country.

In order to operate this capacity, Mellat Leasing Company was established as a private joint stock company on 1 June 2009 and registered with Tehran Department for Registration of Companies and Industrial Properties (Non-trade Institutes) under Reg. No. 350287. With an initial capital of 100 billion Rials, the company ranks among those with high capital and is categorized within Group 3 of the Executive Instruction for Establishing, Operation and Supervision on Leasing Companies. The company can operate in all leasing areas.

During its short life of activity, by employing scientific and managerial mechanisms along with specialized workforce and creating constructive interaction, the company has been able to act as one of the effective companies in the area of leasing industry of the country and provide valuable services to our dear compatriots. At present, Mellat Leasing Company, as one of the active members of “Association of Iran’s Leasing Companies”, tries to provide services to different walks of life, by creating a logical relation between the producer and consumer, in order to take steps in elevating the production-oriented economy in the country.

In addition, payment of facilities for purchasing passenger cars, heavy and semi-heavy vehicles, mining and road construction machinery, manufacturing and industrial equipment, medical and hospital equipment and work offices are among the services provided by the company during its term of activity.

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Mellat Investment Company An investment company is one that operates as a liaison between the publisher of securities and shareholders and it can carry out such activities as brokerage, dealing, market making, consulting, portfolio management, share subscription, share commitment subscription and similar activities, with the license obtained from the organization. Bank Mellat Investment Company (Private Joint Stock) received its establishment license from High Board of Stocks and Securities, as the highest authority of the stock market on 30 Aug. 2010 and it was registered with Tehran Department for Registration of Companies and Non-Commercial Institutes on 18 Jan. 2011, in order to announce its presence in the investment banking industry as a financial institute. The philosophy and principal mission of Bank Mellat Investment Company is to present monetary, financial, credit and consulting services and products needed by the company’s potential and active customers in national and international money and capital markets with the goal of assisting the growth and elevation of all strategic beneficiaries of the company and by supporting skillful and effective forces, who have gathered in a value creating, creative and transcendental environment.

To this end, the company mainly operates in the following areas: 1) Finance and subscription commitment, 2) Providing sale consultancy services in bonds publishing process, 3) Committing subscription in publication of bonds, 4) Providing services for companies to become listed at stock exchange and off-exchange (Over-the-Counter) 5) Preparing and analyzing the feasibility study reports and business plans, 6) Valuation 7) Providing investment consultancy, 8) Providing consulting services for acquisition, merger, and restructure 9) Financial engineering and risk management, 10) Managing assets and cash on hand,

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Tadbirgaran Behsaz Mellat Company

Tadbirgaran Behsaz Mellat Co. (Private Joint Stock) was incorporated with Tehran Department for Registration of Companies and Industrial Property on 13 March 2010 under Reg. No. 369739 and National ID No. 10320202668, In order to improve the quality of banking services, optimize the process of granting facilities and carrying out expertise analyzes, to meet the customers’ needs, along with increasing the level of assurance from capital return and the power to repay the facilities and also reducing the bank’s credit and investment risk and as per Resolution No. 2895/21 dated 21 July 2009, passed by Bank Mellat’s board of directors.

The main missions of the company are as follows: Preparing credit expertise reports for the applicants of the facilities and commitments of the banks and financial and credit in- stitutes, evaluating the movable and immovable properties of the applicants of the facilities and commitments of the banks and financial and credit institutes, technical, economic and financial analysis of the plans and investments for the applicants who use the financial services of the banks and financial and credit institutes, and supervising and controlling the consumption of facilities including plans, investments and joint ventures. In addition, in order to expedite the company’s activities through the country and increase the customers’ satisfaction, besides the activity of the company’s central office in Tehran, the company’s branch offices in large provinces of the country including Khorasan Razavin, Esfahan, East Azarbayejan, Fars, Khoozestan and Alborz are already in operation.

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Tarh va Andisheh Behsaz Mellat Company

In today’s world, one of the major risks that financial institutes face with, is the risk of customers’ failure to repay the facilities on due dates. The recent example of this risk caused the biggest financial crisis of the world in 2008. Although such countries as USA and England are known as the pioneers of this industry, but as you can see, because this is a new industry, and the methods are very diversified and complicated, the recent global crisis began from the said countries. Although the industry of collecting receivables in the world’s economy dates back to 50 years ago, but the formation and devel- opment of this industry in our country has only a 6-year experience. Tarh va Andisheh Behsaz Mellat Company was established as the first specialized and professional company in this industry on April 9, 2007 and it was incorporated under Reg. No. 293899 with General Department for Registration of Companies and Non-Commercial Institutes as a private joint stock company. At present, the company provides services to Bank Mellat and other establishments and organizations through its 60 branch offices in the provincial centers and other cities of the country by using experienced and skillful staff members who have special qualifica- tions in legal, banking, disciplinary and judicial issues and those related its scope of activity.

Bank Mellat Broker Company

Bank Mellat Broker Company was incorporated as a private joint stock company on Oct 18. 1993 and it was registered with Tehran Department for Registration of Companies and Industrial Property under Reg. No. 100339. The company’s main activity in stock exchange includes: A) Accepting and transactions B) Acting as advisor for accepting and advisor for sale of securities at Stock Exchange and Off-Exchange, C) Managing assets In addition, the company operates in the commodity exchange through accepting and transacting the tradable commodities (pet- rochemicals, oil products, industrial and mineral products) as wells commodity futures contracts.

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Ma Insurance Company

In the world’s economy and finance, the insurance industry has been always known as a supplement of banking industry, so that since old times, the financial groups operate in both industries simultaneously. In Iran’s economy, large banks of the country have tried in recent years to establish insurance companies in order to complete the basket of their presentable services to the custom- ers. To this end, Ma (Mellat Iran) Insurance Company received its activity license from Central Insurance Company of the Islamic Re- public of Iran and it was established to carry out insurance activities with the goal of creating optimal combination of insurance portfolio, taking into account the capacities and facilities of the shareholders and the status of insurance industry in the country, standing among the 3 top private companies operating in the insurance industry in terms of volume of premiums produced in the first three years of activity and preserving micro and macro customers through presenting desirable and suitable insurance services in the threefold process of production, sale and after-sales services. The company provides such services as full cover of the policyholders against different risks and perils, risk management and pro- moting the policyholders’ organizational capability, managing damages and timely compensating of losses, providing technical and legal consultancies in the area of insurance, after-sales services, within the maintenance and taking care of the insurance indus- try and consulting and participating in investments, by using specialized and skillful professionals of this big industry. At present, the Ma insurance Company mainly focuses on carrying out all insurance activities in the fields of properties and liability, reinsurances and distribution of big risks in the national and international markets, creating and development of a wide sales net- work in the country, presenting modern insurance services in the sections of life and nonlife insurances by using modern methods, customer-orientation and trying to keep micro and macro customers through presenting insurance services at a desirable and sat- isfactory level and creating and developing peach of mind in the business environment of the society and the life of Iranian nation.

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MINISTRY OF ECONOMY AND FINANCE AUDIT ORGANIZATION

INDEPENDENT AUDITOR’S AND LEGAL INSPECTOR’S REPORT TO: ORDINARY GENERAL MEETING OF SHAREHOLDERS BANK MELLAT (PUBLIC JOINT STOCK)

Report on the Financial Statements Introduction We have audited the accompanying consolidated financial statements of the Group and Bank Mellat, which comprise the balance sheets as at March 19, 2012, and the related statements of income, comprehensive income and cash flows for the fiscal year then ended, and explanatory notes 1 to 62 to the financial statements.

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

Auditor’s Responsibility 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 appro- priate 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 qualified audit opinion on the consolidated financial statements of the Group and the Parent Company. As legal inspector, we are also responsible to report to the ordinary general meeting of shareholders matters of noncompliance with legal requirements as stipulated in the Commercial Law as Amended and the provisions of Bank’s Articles of Association and other necessary issues.

Basis of Qualified Opinion As regards the liability to Bank’s Staff Retirement and Disability Fund, in the current year and previous years, based on actuarial calculations with the efficiency rate of 25%, a provision amounting Rls. 11,165 billion has been provided in the accounts, of which Rls. 3,700 billion has been paid. Since the efficiency rate as mentioned above is much higher than the accessible rates, a deficit in the provision is absolutely evident, but determining its amount shall be subject to final results of related calculations to be specified and to be announced by the said Fund.

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Qualified Opinion on Consolidated Financial Statements of the Group and Parent Company In our opinion, except the effects of the matters as discussed in Paragraph 4, the financial statements mentioned above, present a fair view of the financial position of the Group and Bank Mellat (Public Joint Stock) on March 19, 2012, and financial performance and cash flows of the Group and the Bank for the fiscal year then ended, from all material respects, in accordance with Iranian -ac counting standards.

Emphasis of Matter As discussed in explanatory note 16-1 to the financial statements, at the end of reported fiscal year, according to the Resolution No. 47698T/M/90 dated Jan. 5, 2012, passed by the 5-Member Workgroup on Organizing Foreign Currencies Issues, the Central Bank withdrew the net amount of Rls. 2,537 billion from bank mellat’s account, which was recorded in the debit account of Central Bank and the issue is under examination by Central Bank. Our opinion has not been qualified as a result of the provisions of this Paragraph.

Other Explanatory Notes According to the Letter No. M/14958 dated Feb. 12, 2012, issued by Ministry of Economy and Finance, the calculation of interest from receivables from Government, the settlement of which shall be made with the shares transferred by Privatization Organiza- tion was stopped from Sept. 22, 2010 on wards; this is while according to Para. 6 of Rsolution No. T/258324 dated March 18, 2012, passed by the Board of Ministers, as of the date of notification of the said Resolution, the shareholders’ equity of the transferred entities shall belong to the transferee.

Report on Other Statutory and Regulatory Requirements of Bank Mellat (Public Joint Stock) The following are cases where the applicable circulars and resolutions in the banking system have not been complied with in the year ended March 19, 2012:

1 The prohibition to grant facilities to subsidiaries, subject of Note 4, Art. 15 of Iran’s Banking System Monetary and Credit Policies in the year ended March 19, 2012 has not been complied with. 2 The provisions of Art. 6 of Iran’s Banking System Monetary, Credit and Supervisory Policies in the year ended March 19, 2012 with respect to the prohibition on using by-installment civil partnership contracts have not been complied with. 3 The provisions of Circular No. 89/173772 dated Nov. 1, 2010 issued by Central Bank, concerning the provisions of Related Parties’ Facilities and Commitments Code have not been fully complied with. 4 The provisions of Directive No. 90/41478 dated May 16, 2011, issued by the Central Bank, concerning the execution of Anti Money Laundering Act, applicable in the banking system have not been complied with.

The provisions of Art. 53 of the Bank’s Articles of Association with respect to allocating legal reserve from net profit are not in com- pliance with the provisions of State Monetary and Banking Act.

The provisions of Art. 186 of Direct Taxation Act, regarding the payment of facilities after customer’s presentation of certificate of tax clearance, in some cases, have not been complied with.

Considering the provisions of Art. 240 of Commercial Act, as Amended, we draw the kind attention of general meeting of share- holders to the effects of Paragraphs 4 and 6 of this report on the EPS.

We have examined the transactions referred to in Para. A, explanatory note 61-1 of the financial statements, as all transactions subject to Article 129 of the Amendment to Commercial Code, carried out during the reported fiscal year and provided to us by the

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board of directors. Regarding those transactions, the provisions of the said Article stipulating that the board’s approval has to be obtained from the board and that the beneficiary director must not take part in voting, have been complied with. In addition, we did not come across any evidence showing that such transactions have not been carried out under reasonable business conditions and in the ordinary course of the bank;s operations.

We have examined the board of directors’ report on the activity and general status of the bank, prepared for submission to the gen- eral meeting of shareholders. Based on our examinations, we did not come across any material issue that would cause us to believe that the information contained therein do not match with the books and documents presented to us by the board of directors.

July 9, 2012

AUDIT ORGANIZATION Mahmoud Assefi Bahram Sadoughianzad

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BANK MELLAT (PLC) Explanatory Notes to the Consolidated Financial Statements FOR THE YEAR ENDED MARCH 19, 2012

To: The Ordinary General Meeting of Shareholders: Attached herewith please find the consolidated financial statements of the Group and Bank Mellat’s financial statements for the fiscal year ended March 19, 2012 (Esfand 29, 1390). The components of the financial statements are as follows:

A- Consolidated Financial Statements of the Group Page No. - Consolidated Balance Sheet 2 - Consolidated Income Statement 3 - Consolidated Retained earnings 4 - Consolidated Statement of Comprehensive Income 5 - Consolidated Statement of Cash Flow

B- Bank’s Financial Statements: Page No. - Balance Sheet 6 - Income Statement 7 - Retained earnings 7 - Comprehensive Income Statement 8 - Cash Flow Statement 9

C- Explanatory Notes - Bank’s History 10 - Basis of Financial Statements Preparation 11 - Significant Accounting Policies 12-15 - Notes to the financial statements and other financial information 14-64

The financial statements of the Group and bank mellat’s financial statements have been prepared according to the Iranian account- ing standards and approved by the Board of Directors at their meeting dated June 25, 2012. Members of the Board of Directors

Board Member Position Signature Ali Divandari Managing Director Mohammadreza Saroukhani Chairman and Board Member Mohsen Fadavi Board Member Alireza Lagzaei Board Member Ali Khorsandian Board Member

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Assets Note 19/03/2012 20/03/2011 Liabilities and Note 19/03/2012 20/03/2011 Shareholders’ Equity Rls. Million Rls. Million Rls. Million Rls. Million Cash 6 10,043,167 7,887,133 Due to Central Bank 20 52,611,231 48,990,960 Due from Central Bank 7 62,173,334 69,381,101 Payables to banks & credit institutes 21 45.339.445 37,443,652

Receivables from banks and credit 62,857,278 69,899,059 Sight deposits 22 156.827.760 151,408,541 institutes 8 Due from government 9 23,094,718 11,459,873 Savings deposits and corresponding 23 40.600.569 41,654,278

Facilities granted and receivables 10 111,096,739 77,907,199 Term investment deposits 24 321.864.835 258,901,811 from governmental sector Facilities granted to the Group’s companies 11 6,812,796 4,484,382 Other deposits 25 43,280,946 30,891,975 Facilities granted and receivables from third parties 12 363,011,725 337,436,156 Tax payable 26 1,811,873 5,026,664

Receivables for documentary credits and term bills of exchange 13 40,470,768 38,120,858 Reserves and other liabilities 27 15,065,909 7,553,432 in foreign currency

Participating bonds and other Payables for acceptance of docu- similar bonds 14 20,292,014 12,075,204 mentary credits and term bills of 28 41,087,074 38,701,379 exchange in foreign currency Investments and joint ventures 15 24,110,715 7,813,550 Dividends payable 29 0 256,407 Tangible fixed assets 16 30,993,270 16,067,563 Provision for staff termination benefits 30 3,351,989 2,896,042 Intangibles 17 1,176,525 1,211,317 In-transit items 19 9,444,715 19,878,963 Other assets 18 21,625,275 17,412,869 Total liabilities 731,286,346 643,604,103 Shareholders’ equity: Capital (20,000 million shares of Rls. 1,000 each) 31 16,000,000 16,000,000 On account for capital increase 31 4,000,000 0 Reserves 32 6,054,018 4,519,478

Surplus from reevaluation of tangible 0 fixed assets 33 13,100,000

Difference in translation of foreign 228,830 exchange assets and liabilities 34 291,019 Reserve from translation of assets and liabilities in foreign exchange 35 928,665 928,665 Retained earnings 6,098,276 5,875,188 Total shareholders’ equity 46,471,978 27,552,161

Total assets 777,758,324 671,156,264 Total liabilities and shareholders’ equity 777,758,324 671,156,264 Commitments: 51 Commitments: 51 Party to commitments for 83,783,839 102,825,307 Commitments for documentary credits 83,783,839 102,825,307 documentary credits 100,752,839 78,301,718 Commitments for letters of guarantee 100,752,839 78,301,718

Party to commitments for letters 80,087,839 61,778,339 Other commitments 80,087,839 61,778,329 of guarantee

3,079,064 3,427,033 Party to managed funds and corre- 3,079,064 3,427,033 Party to other commitments sponding Managed funds and corresponding 267,703,582 246,332,397 267,703,582 246,332,397 The accompanying notes form an integral part of the financial statements

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Restated Fiscal Year Ended Note Fiscal Year Ended March 19, 2012 March 20, 2011 Rls. Million Rls. Million Rls. Million A- Bank’s income from joint activities: Interest on facilities granted 35 47,626,654 41,398,728 Profit from investments and deposits 36 1,999,945 2,189,978 Total joint income 49,626,599 43,588,706 Less: Interest on account paid to investment deposits 37 (32,021,551) (27,644,463) Deficit (surplus) paid to depositors 38 (0) 0 Depositors’ share of profit (32,021,551) (27,644,463) Bank’s share of profit and income from attorney fees 17,605,048 15,944,243 B- Income from non-joint activities: Profit and penalty received 39 11,675,321 7,649,916 Commission Received 40 6,567,883 4,760,465 Other incomes 41 5,665,696 3,783,578 Total non-joint activities 23,908,900 16,193,959 Total income 41,513,948 32,138,202 C- Expenses: Administrative and general expenses 42 (15,465,892) (13,087,162) Expenses of doubtful debts 43 (7,319,343) (5,513,181) Expense of staff retirement benefits (actuary) 44 (5,490,000) (1,500,000) Financial expenses 45 (5,006,680) (3,369,665) Other expenses 46 (703,427) (630,225) Total expenses (33,985,342) (24,100,233) Pre-tax income 7,528,606 8,037,969 Less: Tax (519,797) (1,447,999) Net profit 7,008,809 6,589,970 Dividend per share (with Rls. 20,000,00 million capital) 57 350 329 Dividend per share (with Rls. 16,000,00 million capital) 412 Movement of Retained Earnings Net profit (loss) Retained profit at beginning of the year 47 5,502,770 Prior period adjustments 372,418 Retained profit (loss) at beginning of the year- adjusted Allotable profit Appropriation of profit: Legal reserve (1,505,721) Transfer to capital account as per the resolution passed by bank’s assembly (4,000,000) Approved dividend (1,280,000) The accompanying notes form an integral part of the financial statements

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Fiscal Year Ended Fiscal Year Ended Note March 19, 2012 March 20, 2011 Rls. Million Rls. Million

Net profit 7,008,810 6,589,969

Surplus from reevaluation of tangible fixed assets 33 13,100,000 0

Difference in reserve for translation of foreign currency assets and liabilities 34 62,188 36,163

Comprehensive profit of the fiscal year 20,170,998 6,626,132

Prior period adjustments 48 372,418 803,002

Comprehensive Profit (loss) recognized since the previous reporting 20,543,416 7,429,134

The accompanying notes form an integral part of the financial statements

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Year Ended Note Year Ended 19/03/2012 20/03/2011 Rls. Million Rls. Million Rls. Million

Operating Activities: 52-2 28,046,910 11,579,110

Net cash inflow from operating activities

Return on Investments and interest paid for financing:

Profit received (dividend, shares sold and interest on participating bonds) 2,626,191 2,366,760

Interest paid for financing (5,006,680) (3,369,665)

Dividends paid to shareholders (1,536,407) (3,494,188)

Net cash outflow from return on investments and interest paid on financing (3,916,896) (4,497,093)

Income tax:

Income tax paid (4,779,647) (1,948,820)

Investing activities:

Cash paid for acquisition of investments and joint ventures (2,118,386) (2,735,036)

Cash received from sale of investments and joint ventures 1,352,411 306,159

Cash paid for acquisition of tangible fixed assets (3.032.641) (950,934)

Cash received from sale of fixed assets 303,408 144,692

Net cash outflow from investing activities (3,495,208) (3,235,119)

Net cash inflow (outflow) prior to financing activities 15,855,159 1,898,078

Financing Activities:

Cash from capital increase 2,900,000

Financial facilities received (repaid) out of foreign exchange reserve account (10,957,481) 4,013,259

Financial facilities received (repaid) from overseas banks (36,821) 34,208

Financial facilities received (repaid) from central bank (3.000.000) (2,621,936)

Net cash inflow from financing activities (13,994,302) 4,325,531

Net cash (decrease) increase 1,860,857 6,223,609

Cash balance at beginning of year 54 12,892,165 6,668,556

Cash balance at end of year 54 14,753,022 12,892,165

Noncash transactions 55 1,923,261 593,880

The accompanying notes form an integral part of the financial statements

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Assets Note 19/03/2012 20/03/2011 Liabilities and Note 19/03/2012 20/03/2011 Shareholders’ Equity Rls. Million Rls. Million Rls. Million Rls. Million Cash 5 12,116,969 9,005,972 Due to Central Bank 18 52,611,231 48,990,960 Due from Central Bank 6 62,173,334 69,381,101 Payables to banks & credit institutes 19 46.172.697 39,017,708

Receivables from banks and credit 62.643.764 71,059,597 Sight deposits 20 155.471.699 151,238,234 institutes 7 Due from government 8 23.094.718 11,459,873 Savings deposits and corresponding 21 40.591.188 41,476,899

Facilities granted and receivables 9 111.096.739 77,907,199 Term investment deposits 22 319.491.232 257,129,424 from governmental sector Facilities granted and receivables from third parties 10 364,399,167 339,096,747 Other deposits 23 43,232,944 31,080,820 Receivables for documentary credits and term bills of exchange 11 40,470,768 38,120,858 Tax payable 24 2,117,909 5,382,860 in foreign currency

Participating bonds and other 12 20,875,060 12,150,048 Reserves and other liabilities 25 16,749,000 7,762,764 similar bonds

Payables for acceptance of docu- Investments and joint ventures 13 20,852,232 6,365,789 mentary credits and term bills of 26 41,087,073 38,701,379 exchange in foreign currency Tangible fixed assets 14 32,292,728 16,799,190 Dividends payable 27 8,035 258,939 Intangibles 15 1,246,359 1,218,443 Provision for staff termination benefits 28 3,414,732 2,944,682 Other assets 16 1,176,525 20,195,308 In-transit items 17 9,444,715 19,878,963 Total liabilities 730,392,455 643,863,632 Shareholders’ equity: Capital (20,000 million shares of Rls. 1,000 each) 29 16,000,000 16,000,000 On account for capital increase 29 4,000,000 0

Parent company’s shares owned by 30 (659,617) (2,404) the subsidiaries Reserves 31 6,287,168 4,666,913 Surplus from reevaluation of tangible fixed assets 32 13,100,000 0

Difference in translation of foreign 718,436 exchange assets and liabilities 33 594,566

Reserve from translation of assets 34 928,665 928,665 and liabilities in foreign exchange Retained earnings 6,910,785 5,906,148

Total parent company shareholders’ 47,161,567 equity Minority interest 35 28,217,758

Total assets 777,758,324 671,156,264 Total liabilities and shareholders’ equity 778,447,28 672,760,124 Commitments: 52 Commitments: 52 Party to commitments for 83,783,839 102,825,307 Party to commitments for 83,783,839 102,825,307 documentary credits documentary credits Party to commitments for letters 100,752,839 78,301,718 Party to commitments for letters of 100,752,839 78,301,718 of guarantee guarantee

Party to other commitments 80,087,839 61,778,339 Party to other commitments 80,087,839 61,778,339 Party to managed funds and corre- Managed funds and corresponding 3,079,064 3,427,033 sponding 3,079,064 3,427,033 267,703,582 246,332,397 267,703,582 246,332,397 The accompanying notes form an integral part of the financial statements

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Year Ended Note Year Ended 19/03/2012 20/03/2011 Rls. Million Rls. Million Rls. Million A- Income from joint activities: Interest on facilities granted 35 46,825,200 41,106,765 Income from goods sold and services provided 36 25,996,035 30,965,209 Profit from investments and deposits 37 1,659,965 2,142,660 Total joint income 74,481,201 74,214,633 Less: Cost of goods sold and services rendered 38 (24,791,948) (30,378,638) Interest on account paid to investment deposits 39 (31,712,328) (27,428,969) Surplus on account of share of profit paid to depositors 40 - - Depositors’ share of profit (56,504,276) (57,807,608) Group’s share from joint activities 17,976,925 16,407,026 B- Income from non-joint activities: Profit and penalty received 41 11,793,475 7,820,790 Commission Received 42 6,577,749 4,798,618 Other incomes 43 6,745,436 3,968,151 Total non-joint activities (56,504,276) 16,587,559 Total income 17,976,925 32,994,585 C- Expenses: Administrative and general expenses 44 (15,505,970) (13,271,888) Expenses of doubtful debts 45 (7,319,343) (5,513,181) Expense of staff retirement benefits (actuary) 46 (5,490,000) (1,500,000) Financial expenses 47 (5,133,916) (3,420,512) Other expenses 48 (703,545) (631,922) (34,152,775) (24,337,503) Pre-tax income 8,940,810 8,657,082 Tax (873,317) (1,577,336) Net profit 8,067,494 7,079,746 Minority interest 76,957 17,523 Dividend per share (with Rls. 20,000,00 million capital) 53 403 353 Dividend per share (with Rls. 16,000,00 million capital) - 441 Movement of Consolidated Retained Earnings Net profit 8,067,494 7,079,746 Retained profit at beginning of the year 5.605.083 2,881,142 Prior period adjustments 317,056 740,467 Retained profit at beginning of the year- adjusted 5,922,139 3,621,609 Allotable profit 13,989,633 10,701,355 Changes in minority interest from retained profit at beginning of the year 51 25,054 - Appropriation of profit: Legal reserve (1,569,065) (1,194,596) Other reserves (4,535) (21,797) Transfer to cost of the projects (73,750) (64,965) Approved dividend (1,300,097) (3,462,860) Transfer to the parent company’s capital account (4,000,000) - Transfer to capital account of subsidiaries (53,000) (35,000) (7,000,447) (4,779,218) 6,910,784 5,906,148 43 103,456 15,990 The accompanying notes form an integral part of the financial statements

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Fiscal Year Ended Fiscal Year Ended Note March 19, 2012 March 20, 2011 Rls. Million Rls. Million

Net profit 8,067,494 7,079,746

Surplus from reevaluation of tangible fixed assets 32 13,100,000 -

Difference in reserve for translation of foreign currency assets and liabilities 33 (123,800) 3,509,418

Comprehensive profit of the fiscal year 50 & 51 21,043,694 10,589,165

Prior period adjustments and changes in minority interest from retained profit 342,111 740,467

Comprehensive Profit recognized since the previous reporting 21,385,805 11,329,632

Minority interest from comprehensive profit of the fiscal year 70,681 994,706

The accompanying notes form an integral part of the financial statements

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Year Ended Note Year Ended 19/03/2012 20/03/2011 Rls. Million Rls. Million Rls. Million

Operating Activities: 52-1

Net cash inflow from operating activities 39,158,368 12,924,389 Return on Investments and interest paid for financing:

Profit received (dividend, shares sold and interest on participating bonds) 1,538,332 2,005,832

Interest paid for financing (5,133,916) (3,369,665)

Dividends paid to shareholders of the parent company (1,536,407) (3,494,188)

Dividends paid to minority shareholders (14,594) -

Net cash outflow from return on investments and interest paid on financing (5,146,585) (4,858,021) Income tax:

Income tax paid (5,183,327) (1,739,393) Investing activities:

Cash paid for acquisition of tangible fixed assets (3,802,031) (1,755,341)

Cash paid for acquisition of intangibles (27,915) (1,709)

Cash received from sale of tangible fixed assets 299.746 167,350

Cash paid for long-term investments and joint ventures (9,816,580) (2,845,745)

Cash from sale of investments 1,352,411 306,159

Net cash outflow from investing activities (11,994,369) (4,129,285)

Net cash inflow (outflow) prior to financing activities 16,834,087 2,197,690 Financing Activities:

Cash from capital increase

Financial facilities received (repaid) out of foreign exchange reserve account - 2,900,000

Financial facilities received (repaid) from overseas banks (10,957,481) 4,013,259

Financial facilities received (repaid) from central bank (36,821) 34,208

Changes in the parent company’s shares owned by subsidiaries (3.000.000) (2,621,936)

Financial facilities received by Group’s companies from other banks (657,213) (2,404)

Net cash inflow from financing activities 264,219 -

Net cash (decrease) increase (14,387,296) 4,323,127

Cash balance at beginning of year 54 2,446,791 6,520,817

Cash balance at end of year 54 13,797,484 7,276,667

Noncash transactions 55 16,244,275 13,797,484

2,826,306 593,880 The accompanying notes form an integral part of the financial statements

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