1

Asset Management and Private Equity

IN THIS ISSUE:

• The market pulls back a little on lower volumes

• Currency weakens further at month end

• Commodity companies amongst main gainers

• An overview of methanol producer Fanavaran Petrochemicals

MONTHLY NEWSLETTER

Please see the important Sanctions Disclaimer on pages 6 and 7 of this document.

NOVEMBER 2016

Page| 2

IRAN EQUITY MARKETS NOVEMBER 2016

II IndiciesMARKET AT A GLANCEThe result of the US election sparked a modicum of volatility in the market; however, after a -1.8% Election Day sell-off, the TEDPIX recouped most of that loss as we approached month end. The markets’ short-term reaction is a reminder that the JCPOA is a multilateral deal (with the P5+1 group) reflected in a UN Security Council resolution, and not a deal with a single country.

November’s average daily trading volume (ADTV) was significantly lower versus last month due to national holidays: $68m versus October’s $135m. As happened last month, retail activity surpassed that of institutions (55.5% retail versus 44.5% institutional).

The most active sectors were Base Metals, Metal Ores Mining, Auto, Metal Products, Chemicals, Foods and Refineries, comprising 50.5% of total value traded (12.0%, 7.0%, 6.8%, 6.6%, 6.2%, 6.0% and 5.9%, respectively).

Toward the end of the month, there were several national holidays. The resulting high demand for foreign currency for travelling abroad –combined with lower liquidity in the FX market, the expectation of currency unification, and the US election results – all contributed to currency volatility and the sharp fall in the free USD/IRR market rate at month end.

II TEDPIX Index & P/E Ratio

All market data represents the period of November 1- November 27 2016.Sources : Tehran Stock Exchange, Bloomberg, MSCI, Griffon Asset Management Team.

$1 : 36,653 IRR is the monthly average free market exchange rate used for this report.

II Market Capitalisation

Monthly traded value (million $)

5.6

6.2

7.2

7.57.5

7.4

6.9

7.37.4

7.27.4

55,000

60,000

65,000

70,000

75,000

80,000

85,000

5.00

5.50

6.00

6.50

7.00

7.50

8.00

Ind

ex

P/E

Ra

tio

P/E Ratio Index

514

2,314 3,905

2,863 2,177 1,850 1,263 1,412 1,722 1,492

2,751

1,159

D J F M A M J J A S O N

954

TSE Farabourse

91,139 15,073

205

Market Cap

(million $)

Value traded (million $)

TSE Farabourse Frontier Market Emerging Market

(TEDPIX) (IFX) (MSCI FM) (MSCI EM)

-0.8% -0.9% -1.2% -5.4%

79,626 831 490 856

27.1% 20.3% -3.5% 5.1%

29.1% 21.5% -3.3% 7.8%

7.5x 8.6x 12.0x 12.3x

10.6% 9.4% 4.4% 2.5%

810

820

830

840

850

485

490

495

500

Past month

monthlyperformance

Past 12months

Last close

77,600

78,400

79,200

80,000

80,800

Year to date

810

840

870

900

930

P/E

Div. Yield

Page| 3

IRAN EQUITY MARKETS NOVEMBER 2016

II Sector Performance SECTOR NEWS

Steel and Mining

Steel producers continue to expand capacity and reduce Iran’s dependency on imports.

Mobarakeh Steel, the largest steel sheet and coil producer in Iran, now has 7.2m tonnes/yrin capacity, but plans to reach 10.3m tonnes/yr by Iranian year end (March 20 2017). Additionally, Isfahan Steel, Iran’s largest producer of structural steel, recently finished expansion projects and now has 3.6m tonnes/yrand 400,000 tonnes/yr of capacity in bloom and rail products, respectively.

Golgohar and Chadormalu, the two largest iron ore mining companies in Iran, are also significantly increasing production capacity this year to be able to provide more raw materials (iron ore concentrate, pellets and direct-reduced iron [DRI]) that the growing steel industry will demand.

Pharmaceuticals

The State has offered IRR 20 trillion (~$545m) in fixed income bonds (Murabaha) to pharmaceutical companies. This is as a result of the arrears owed to the pharmaceutical industry (manufacturers, distributors and importers) by the Ministry of Health and health insurance companies.

II Top Gainers and Losers

$1 : 36,653 IRR, is the monthly average free market exchange rate used for this report.

All market data represents the period November 1-27, 2016.Sources: The Syndicate of Iranian pharmaceutical Industry, Mine News, Tehran Stock Exchange , Griffon Asset Management.

Best Performing sectors Worst Performing sectors

Oil & gas extraction 17.3% Coal & lignite mining -13.4%

Insurance companies 12.7% Refineries -8.5%

Base metals 7.8% Agriculture -8.2%

Cements, limes & plasters 7.3% Investment companies -6.8%

Machinery 5.8% Motor vehicles -6.4%

Iranian Mineral Processing  84.2% Sina Chem. Ind. -26.2%

Base metals Chemicals

Ilam Cement 67.2% Nirou Moharreke -20.3%

Cement Motor vehicles

Asia Insurance 53.1% Vehicle Axle Manuf. -17.7%

Insurance companies Motor vehicles

Kimia Zanjan Co. 44.6% Iran Tractor Foundry -17.3%

Base metals Motor vehicles

Mahram Co. 41.8% Atye Damavand Inv. -17.1%

Food stuff excl. sugar Investment companies

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IRAN EQUITY MARKETS NOVEMBER 2016

PSP-IT

According to the Central Bank of Iran (CBI), the prerequisite infrastructure for the use of international credit cards in Iran is being prepared, and negotiations have commenced with international issuers. Informatics Services Corporation, the largest domestic company in electronic banking as well as payment and transfer systems, has been mandated to connect Iran’s payment ecosystem to the international card schemes (ICS).

IFRS

The Securities and Exchange Organisation (SEO) announced that all listed banks, credit institutions and insurance companies are required to provide their audited annual financial statements for the current financial year, based on both IFRS and Iranian accounting standards. This will also apply to listed companies with more than IRR 10 trillion (~$273m) in registered capital.

CBI and the Rial

The CBI’s governor explained that the recent weakness and volatility in the free market currency rate was due to increased seasonal travel (also see p. 2). Expectations are for market liquidity to be restored, volatility to diminish and currency unification to take place before Iranian year end.

All market data represents the period November 1-27, 2016.a) The shares have been suspended until such time that the AGM is reset and successfully concluded.Sources: SEO, CBI, Tehran Stock Exchange, Griffon Asset Management.

II Top 10 companies by market capitalisation

II USD/IRR Exchange rate

USD/IRR 38,000 +1,830

+4.82%

USD/IRR 32,092+293

+0.91%

Market Cap

(million $)Last price Year to date 52 w/h 52 w/l

Khalij Fars Petrochem 6,292 4,515 -7.6% -6.5% 5,836 4,300

Chemicals 5.4%

MCI 3,894 34,397 -0.04% 42.3% 34,910 23,428

Telecoms 3.3%

TCI 3,849 2,290 0.7% 40.5% 2,394 1,566

Telecoms 3.3%

Maroon Petrochemical 3,282 29,000 -2.4% 3.1% 32,784 27,879

Chemicals 2.8%

NICICO 2,968 2,100 18.5% 101.6% 2,100 996

Base metals 2.5%

Mobarakeh Steel 2,799 1,320 1.5% 29.4% 1,455 961

Base metals 2.4%

Bank Mellat 2,733 1,792 →(a) 0.0% 14.9% 2,046 1,506

Banking 2.3%

Ghadir Investment 2,693 1,327 -0.6% 15.5% 1,632 1,127

Conglomerates 2.3%

MAPNA Group 2,580 9,100 →(a) 0.0% 35.1% 9,890 6,330

Engineering 2.2%

Parsian Oil & Gas 2,392 2,083 2.1% 8.3% 2,833 1,882

Chemicals 2.0%

1-month

Price va lues in IRR

Fanavaran and TEDPIX — Last 2 Years

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IRAN EQUITY MARKETS NOVEMBER 2016

Fanavaran Petrochemical Co. (Shefan)Symbol: PFAN1 Exchange: TSE Listed since: 2007 Last close: IRR 15,015 90-day change: ↑ 39%

Market cap.: $389m P/E (16-17E)(b): 5.2x 12-month return: 8%↑

Enterprise value: $373m 5-yr (avg.) dividend payout ratio: 97% EV/revenue (16-17E): 1.5x

% of market (TSE): 0.4% Dividend yield (16-17E)(a): 17.4% EV/EBITDA (16-17E): 4.8x

Free float: 12% Average daily trade value: $27K ROCE (hist.): 74%

Shares outstanding: 950m 52-wk high / low (IRR): 15,015/10,255 ROE (hist.): 59%

Fanavaran Petrochemical Company is the third-largest methanol producer in Iran. It was established in 1998 and listed on the TSE in 2007. Globally, according to IHS, over 90 methanol plants have a combined production capacity of approximately 110 million tonnes, with Iran claiming 4.5% of world capacity. Fanavaran has a capacity of 1m tonnes, which equates to 20% and 0.9% domestic and international market shares, respectively. Iran is expected to be a low-cost swing producer in the global methanol market; Kaveh Petrochemical Company, the second-largest domestic methanol producer, is set to add 2 million tonnes of capacity to the global market soon.

In the last four years, Fanavaran’s capacity utilisation has increased from 79% to 98%, whilst freight costs have decreased by around 50%. The main drivers of revenue and costs are the prices of methanol and natural gas (feedstock). Because Fanavaran exports more than 75% of its output, its revenues are priced in dollars in international markets. The natural gas price has been formulated by the State and is currently 8.5 cents/m3.

TAPPICO, the major shareholder (it holds 49%), is a conglomerate comprising 32 management companies and subsidiaries in the oil and gas, petrochemical, rubber and cellulose industries.

2013A(a) 2014A(a) 2015A(a) 2016E(b) 2017E(b)

Production

(thousand tonnes)1,024,423 1,312,766 1,275,644 1,274,837 1,274,837

Revenue 315.7 324.6 276.7 254.8 278.0

% of growth 12.7% 2.8% -14.8% -7.9% 9.1%

EBITDA 179.0 110.7 61.8 77.5 78.4

% of growth -21% -38% -44% 25% 1%

EBITDA margin 57% 34% 22% 30% 28%

Net Income (NI) 204.7 131.7 71.1 75.1 76.9

% of growth 2% -36% -46% 6% 2%

NI margin 65% 41% 26% 29% 28%

Net Cash 127.1 64.6 16.1 12.9 20.1

Capex 6.5 1.9 1.0 6.1 6.7

Dividend 223.8 130.4 58.0 67.5 69.2

Financial Overview ($m) Company Overview

This is not a stock recommendation. The above is an introductory information overview. The reference currency rates are based on the yearly average of the free market exchange rates.

All share prices are adjusted for corporate actions.

a) Actual results.

b) Griffon Asset Management forecasts.

Sources: Company Financial Statements, Griffon Asset Management team.

Revenue and EBITDA Margin Cash Flow

0

5,000

10,000

15,000

20,000

25,000

11/27/2014 6/15/2015 1/1/2016 7/19/2016

Fanavaran TEDPIX rebased

57%

34%

22%30% 28%

0%

20%

40%

60%

80%

100%

0

50

100

150

200

250

300

350

2013A 2014A 2015A 2016E 2017E

$ (m

illio

n)

Revenue EBITDA Margin

(300)

(200)

(100)

0

100

200

300

2013A 2014A 2015A 2016E 2017E

$ (m

illio

n)

Operating Investing Financing

Page| 6

Disclaimer

Please read this disclaimer carefully as it contains importantinformation about the Griffon Iran Flagship Fund SP ("Fund"),a segregated portfolio of GIF SPC, its proposed investments inIran and the current international sanctions and restrictivemeasures in relation to Iran.

This newsletter is strictly private and confidential, has beenprepared by Griffon Asset Management ("InvestmentManager") and is being provided to investors in the Fund on aconfidential basis. This newsletter is for information purposesonly and should not be construed as investment advice. Allinformation provided herein is as of the date set forth on thecover page (unless otherwise specified) and is subject tomodification, change or supplement in the sole discretion ofthe Investment Manager. This information is neither completenor exact and is provided solely as reference material withrespect to the Fund.

This material does not constitute an offering of any security,product, service or fund, including the Fund, for which anoffer can be made only by the Fund’s Confidential PrivatePlacement Memorandum (the “Confidential Memorandum”).The terms and risk factors of the Fund are set out in itsConfidential Memorandum which is available to qualifiedprospective investors upon request. The contents hereof arequalified in their entirety by the Confidential Memorandumand subscription agreements of the Fund.

The purchase of shares in the Fund is suitable only forsophisticated investors for whom an investment in the Funddoes not constitute a complete investment program and whofully understand and are willing to assume the risks involvedin the Fund’s investment program. The Class A Shares ofthe Fund are subject to restrictions on redemption,transferability and resale as provided in the ConfidentialMemorandum and the Fund's constitutive documents. Thereis no secondary market for an investor’s shares in the Fundand none is expected to develop. There is no obligation on thepart of any person to register the shares under any statute.

The performance results of certain economic indices andcertain information concerning economic trends containedherein are based on or derived from information provided byindependent third party sources. The Investment Managerbelieves that such information is accurate and that thesources from which it has been obtained are reliable. TheInvestment Manager cannot guarantee the accuracy of suchinformation, however, and has not independently verified theassumptions on which such information is based.

No reliance may be placed for any purposes whatsoever onthe information contained in this newsletter or on itsaccuracy, completeness or fairness. No representation orwarranty, express or implied, is given by or on behalf of theFund, the Investment Manager or any of their respectiveaffiliates or partners with respect to the accuracy orcompleteness of the information contained in this newsletter.The aforementioned persons disclaim any and allresponsibility and liability whatsoever, whether arising in tort,contract or otherwise, for any errors, omissions orinaccuracies in such information or respective subsidiaries oraffiliates may differ significantly, positively or negatively, fromforward-looking statements made herein. Due to various risksand uncertainties, actual events or results or actualperformance may differ materially from those reflected orcontemplated in such forward-looking statements.

As a result, you should not rely on such forward-lookingstatements in making any investment decision.No representation or warranty is made as to theachievement or reasonableness of, and no reliance shouldbe placed on, such forward-looking statements. Nothing inthis newsletter should be relied upon as a promise orrepresentation as to the future.

(Continued on the next page.)

About Griffon CapitalGriffon Capital is an Iran-focused asset management and private equity group established to unlock value from the country’s public and private equity markets. Among Griffon’s primary objectives is to allow local and international institutional investors the ability to seamlessly access and maximise opportunities in Iran through purpose-built vehicles and investment products spanning traditional and alternative assets.The Group’s strength is rooted in a robust operating platform developed by leading international advisors and are supported by internationally recognised administrators and auditors. Our platform consists of a high calibre team with deep local market expertise and international financial pedigree blended at the board, management and execution levels. This includes a management team steeped in investment banking, wealth and asset management and corporate finance experience. Griffon is also distinguished by on the ground local research and primary thinking and a governance culture defined by global best practices in risk management, compliance and reporting.

Modaberan Homa is fully licensed and regulated by the Securities and Exchange Organization (SEO) of Iran.

Page| 7

Disclaimer (Continued)

Certain figures contained in this newsletter have beensubject to rounding adjustments. Accordingly, in certaininstances, the sum or percentage change of the numberscontained in this newsletter may not conform exactly to thetotal figure given.

This newsletter may include track record informationregarding certain investments made and/or managed by theInvestment Manager or its affiliates and/or certain otherpersons. Such information is not necessarily comprehensiveand potential investors should not consider such informationto be indicative of the possible future performance of theFund or any investment opportunity to which this documentrelates. The past performance of the Investment Manager orits affiliates is not a reliable indicator of, and cannot be reliedupon as a guide to, the future performance of the Fund.

The Fund will not accept investments from any US Persons(as defined in applicable legislation) or persons whoseconduct is subject to US economic sanctions (unless and untilsuch investments are authorised by the relevant USauthorities).

This newsletter is only addressed to and directed at: (a)persons in member states of the European Economic Area("Member States") who are "qualified investors" within themeaning of Article 2(1)(e) of the Prospectus Directive(Directive 2003/71/EC, as amended (including amendmentsby Directive 2010/73/EU to the extent implemented in therelevant Member State)) provided that the giving ordisclosing of this newsletter to such person is lawful underthe applicable securities laws (including any lawsimplementing Directive 2011/61/EU of the EuropeanParliament and of the Council of 8 June 2011 on AlternativeInvestment Fund Managers (the "AIFM Directive")) in therelevant Member State ("Qualified Investors"); (b) within theUnited Kingdom, to persons who (i) have professionalexperience in matters relating to investments and who fallwithin the definition of "investment professionals" in Article19(5) of the Financial Services and Markets Act 2000(Financial Promotion) Order 2005 (as amended) (the"Order"), or (ii) are persons who are high net worth entitiesfalling within Article 49(2)(a) to (d) of the Order, and/or (iii)persons to whom it may otherwise be lawfullycommunicated and (iv) are "qualified investors" as defined insection 86 of the Financial Services and Markets Act 2000, asamended; and (c) other persons to whom it may otherwiselawfully be communicated (all such persons referred to in (a)to (c) above together being referred to as "RelevantPersons"). This newsletter must not be made available topersons who are not Relevant Persons. No person should actor rely on this newsletter and persons distributing thisnewsletter must satisfy themselves that it is lawful to do so.No steps have been taken by any person in respect of anyMember State to allow the Shares to be marketed (as suchterm is defined in the relevant legislation implementing the

AIFM Directive) lawfully in that Member State. By acceptingthis newsletter you represent, warrant and agree thatyou are a Relevant Person.

The representative of the Fund in Switzerland is Hugo FundServices SA, 6 Cours de Rive, 1204 Geneva. The distributionof Class A Shares in Switzerland must exclusively be made toqualified investors. The place of performance for Class AShares in the Fund distributed in Switzerland is at theregistered office of the Hugo Fund Services SA.

On July 14, 2015, the P5+1, the European Union, and Iranreached a Joint Comprehensive Plan of Action ("JCPOA").Subsequently, following confirmation that relevant JCPOAcommitments had been delivered, certain of theinternational sanctions and restrictive measures relating toIran were eased or lifted on 'Implementation Day', 16January 2016, including the majority of previous EU and UNsanctions on Iran. While this represented a significantrelaxation of the sanctions in place against Iran, a number ofimportant restrictions remain in force (including certainsanctions which may affect financial and investment activity).

In particular, notwithstanding the relaxation of sanctions on'Implementation Day', certain categories of persons may beprohibited from investing in the Fund. The Fund andInvestment Manager's policy is to comply with all applicablesanctions, and not to engage in activity that would besanctionable under the sanctions applicable to non-USpersons. Before making or managing any investments inIranian securities, the Fund and the Investment Manager willput in place a robust compliance framework based onprofessional advice with a view to ensuring that its activitiesand investments are compliant with EU and applicable USsanctions and restrictive measures in force from time to timeregarding Iran.

It is the responsibility of the recipient of this newsletter tosatisfy itself as to its compliance with the legislation of anyrelevant jurisdiction or territory, including in particularregarding international sanctions and restrictive measures,and to assess the risk of the imposition of additionalsanctions (including under the JCPOA 'snapback' mechanism)that might affect any investment in the Fund or its valuationor liquidity. It is the responsibility of the reader to satisfythemselves that any business activities will not expose themto liability under the laws of any state to which they aresubject.