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BANK MELLAT, HEAD OFFICE: TEHRAN – IRAN ISTANBUL TURKEY MAIN BRANCH, ANKARA AND IZMIR BRANCHES

2011 ANNUAL REPORT

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TABLE OF CONTENTS

I.I.I.I. GENERAL PRINCIPLES OF THE ANNUAL REPORT

II.II.II.II. CONTENTS OF THE ANNUAL REPORT

a)a)a)a) Introduction

1.1.1.1. Brief Financial Data

2.2.2.2. Historical Development of the Branch

3.3.3.3. Partnership Structure of the Branch

4.4.4.4. Changes in the Capital and the Partnership Structure During the Financial Year

5. Titles of Real and Legal Persons, holders of Qualified Shares, and Details relating to their Shares

6.6.6.6. Remarks by the Chairman and Members of Board of Directors, General Manager and Deputy

General Manager of the Branch regarding their Shares, if any

7.7.7.7. Remarks by the Board of Directors’ Chairman and the General Manager about the Operating

Period and their Anticipations for the Future

7.1.7.1.7.1.7.1. Remarks by the Chairman of the Board of Directors

7.2.7.2.7.2.7.2. Remarks by the General Manager

8.8.8.8. Remarks regarding the Staff, Number of Branches, Branch Service Type, Scope of Activities and Its

Position in the Sector

b) Details about Management and Institutional Management Practices

1.1.1.1. Board of Directors

2.2.2.2. Senior Management

3.3.3.3. Data pertaining to the Operations performed pursuant to the Provisions of the Regulation on

Banks' Internal Systems, and to the Managers of the Internal Systems Departments

4. Other Committees

5.5.5.5. Data pertaining to Human Resources Practices

6.6.6.6. Data pertaining to the transactions made by the Branch with the Branch risk group

6.1. Data pertaining to the loans that the Branch allows to be used by the Branch risk group

6.2. Data pertaining to the deposits held by the Branch risk group

6.3. Data pertaining to the loans used through the Branch risk group

6.4. Data pertaining to the futures or option contracts or other similar contracts signed between the

Branch and the Branch risk group

6.5.6.5.6.5.6.5. Data pertaining to the benefits offered to the senior management

7.7.7.7. Data pertaining to the Scope of Activities subject to Support Services and to the Entities or

Institutions Providing such Service

c) Financial Data and Assessments relating to Risk Management

1.1.1.1. Assessment of the Audit Committee regarding the process of Internal Control, Internal Audit and

Risk Management System and Data pertaining to the Operations during the Financial Year

1.1.1.1.1.1.1.1. Operations of the Internal Control Department

1.2.1.2.1.2.1.2. Operations of the Internal Audit Department

1.3.1.3.1.3.1.3. Risk Management Operations

1.4.1.4.1.4.1.4. Compliance Operations

1.5.1.5.1.5.1.5. General Assessment

2.2.2.2. Independent Audit Report


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3. Data pertaining to the Financial Structure

3.1. Assessment pertaining to the Financial Position, Profitability and Solvency

4. Data pertaining to the Risk Management Policies in place by Risk Types

4.1. Principles and Policies for the Credit Risk Management

4.2.4.2.4.2.4.2. Principles and Policies for the Operational Risk Management

4.3.4.3.4.3.4.3. Principles and Policies for the Liquidity Risk Management

4.4.4.4.4.4.4.4. Principles and Policies for the Market Risk Management

5.5.5.5. Data pertaining to the Rating Points and Contents

6.6.6.6. Brief Financial Data for 5-year Period including the Reporting Period (thousand TRY)

7.7.7.7. Turkish Translation of the Annual Report for Bank Mellat Tehran – Iran


2011 ANNUAL REPORT

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I.I.I.I. GENERAL PRINCIPLES OF THE ANNUAL REPORT

1. Reporting Period : 2011 2. Title of the Branch

: Bank Mellat Tehran – Iran Istanbul Turkey Main Branch

3. Bank Mellat Head Office is located at

: Taleghani Avenue. No: 327 – Tehran - Iran

Address of the Branch in Turkey : Büyükdere Cad. Binbirçiçek Sok No.1 34330 1. Levent - / IstanbulTurkey

4. Phone

: (0212) 279 80 15

5. Fax

: (0212) 284 62 14

6. Website

: www.mellatbank.com

7. E-mail

: [email protected]

II.II.II.II. CONTENTS OF THE ANNUAL REPORT

a) Introduction

1. Brief Financial Data

Balance Sheet (Thousand TRY)

Increase/ (Decrease) PRIMARY ACCOUNTS 2011 2010

Amount ( %)

Cash and Banks 2.834.366 550.743 2.283.623 414,64

Loans 585.529 1.119.411 -533.882 -47,69

Marketable Securities 109.828 154.884 -45.056 -29,09

Other Assets 9.926 9.614 312 3,25

Total Assets 3.539.649 1.834.652 1.704.997 92,93

Deposits 3.091.768 462.709 2.629.059 568,19

Credits Received 225.112 41.548 183.564 441,81

Provisions (Tax and Other) 14.696 6.810 7.886 115,80

Other Liabilities 50.864 1.223.458 -1.172.594 -95,84

Shareholder’s Equity 157.209 100.127 57.082 57,01

Total Liabilities 3.539.649 1.834.652 1.704.997 92,93


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Income Statement (Thousand TRY)

Increase/ (Decrease) PRIMARY ACCOUNTS 2011 2010

Amount ( %)

Net Interest Income 58.877 21.665 37.212 171,76

Fees and Commissions (net) 26.126 15.162 10.964 72,31

Other Income (net) 5.439 4.693 746 15,90

Total Income 90.442 41.520 48.922 117,83

Other Operating Expenses -11.089 -7.856 -3.233 41,15

Provision for Loans and Other

Receivables -5.414 -587 -4.827 822,32

Profit Before Tax 73.939 33.077 40.862 123,54

Provision for Taxes -15.410 -6.699 -8.711 130,03

Net Profit 58.529 26.378 32.151 121,89

2. Historical Development of the Branch

Bank Mellat is a state-owned bank that was established in 1980 in Iran as a result of nationalizing 10

private banks. The size of the Bank assets is $57.556M whereas the shareholder’s equity amounts to

$2.284M as of 22 March 2011. The bank has branches in Turkey, Armenia and Korea, and subsidiary

banks in UK, Germany and Malaysia. The branches and banks outside Iran mainly aim at acting as an

intermediary for any foreign trade transaction between Iran and the third countries, especially the abovementioned countries. The branch was allowed to operate as a foreign bank branch established

in Turkey according to the Council of Ministers’ resolution dated 5 February 1981 and number

82/2406.

Started operating on 16 April 1982, Bank Mellat has three branches in Turkey- the main branch being

in Istanbul and the others in Ankara and Izmir.


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1.1.1.1. Partnership Structure of the Branch

The partnership structure of Bank Mellat Tehran Iran, holder of the whole branch capital, is as

follows:

Shareholder Share Percentage

(%)

Equity shares (Public shares) 30,00

The Government of the Islamic Republic of Iran 20,00

The Social Security Institution of Iran 9,99

Saba Tamin Investment Company 6,54

Personnel Shares 3,96

Bank Mellat Staff Future Trust Fund 3,52

Other Shares traded in the Stock Exchange 25,99

Total 100,00

2.2.2.2. Changes in the Capital and the Partnership Structure During the Financial Year

No change occurred in the paid capital and the partnership structure of the Branch during the current period.

3. Titles of the Real and Legal Persons, holders of Qualified Shares, and Details relating to their Shares

Bank Mellat located at Tehran, Iran acts as the Controlling Equity Owner (100%) of the Branch.

4.4.4.4. Remarks by the Chairman and Members of Board of Directors, General Manager and Deputy General Manager of the Branch regarding their Shares, if any

The chairman and members of the board of directors, general manager and deputy general

managers hold no share.


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5.5.5.5. Remarks by the Board of Directors’ Chairman and the General Manager regarding the Operating Period and their Anticipations for the Future

5.1.5.1.5.1.5.1. Remarks by the Chairman of the Board of Directors

The branch mainly aims at acting as an intermediary for the foreign trade transactions between the

Republic of Turkey and the Islamic Republic of Iran and providing the banking services which the

entities and institutions in both countries need to this end. This objective naturally includes providing

support to finance the said foreign trade transactions.

The progress in the foreign trade volume between the two countries is vital for the branch pursuant

to this objective. I am more than pleased to mention that the foreign trade volume between the two

countries has been gradually increasing in the past years. This trend also continued in 2011 and the

export volume, import volume and total foreign trade volume increased by ca. 18%, 65% and 50%

respectively to exceed $16bln compared to the previous year. It is estimated that it will further increase in the next years.

There was a rapid growth in the Branch assets particularly from the last quarter of 2010 due to the

developments occurred in mid-2010 as well as the increase in the foreign trade volume. It continued

until the early third quarter of 2011. As a result, the growth in the branch balance sheet was well

beyond the sector average in 2011. I would like to underline three pleasing points as to the growth

of the Branch. First, the assets quality was maintained during such rapid growth and there was no

negative events regarding the matter. Secondly the growth was achieved in those fields which the

Branch targeted, was focused on and gave priority to. Lastly the operating expenses were kept under

control during such growth. Considering all of the above, 2011 was an extraordinary and exceptional period for the Branch.

The branch management aims at a sustainable and stable return on equity without compromising

the assets quality in terms of financial performance. From this perspective the results of 2011 are

quite satisfactory. I must underline that this is not a sustainable result. Such growth will probably

slow down in the upcoming periods and the current size of balance sheet may start shrinking as of

the end of 2011; and naturally financial performance indicators will be back to ordinary levels as a

result.

I would like to thank to all the employees for their valuable contributions to those satisfactory results

achieved in 2011 and wish them a continued success.


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5.2.5.2.5.2.5.2. Remarks by the General Manager

The branch has been going through a rapid growth process since the third quarter of 2010. High,

rapid growth necessitates the Branch management to use all resources, monetary, human and

technological resources most properly and accurately. Accordingly it is vital to identify the priority areas of growth in resource allocation for growth as well as the timing for expansion to occur in that

area. Making decisions on those issues before the sustainability of growth becomes clear would pose

the risk of some serious problems and waste of resources in the upcoming periods. Therefore as the

management is aware that such rapid growth is not persistent and would not be sustainable it has

based its efforts and plans upon more realistic and reasonable grounds, focused on avoiding any

negative event that may occur.

The growth in 2011 was achieved in such operational areas that the bank has long been focused on

within the frame of its business strategies and risk management policies. In other words the growth

was achieved without deviating or compromising in any manner from the business strategies and risk management policies. It is also notable to mention that our fund resources were diversified to a

certain extent in terms of both currency and customer category in the same period.

If the developments that occurred during the year are addressed in figures, it would give a better

idea about the abovementioned issues. The total assets and the shareholder’s equity increased by

92,93 and 57,01% respectively in the current year. In line with those developments there were

similar increases in the income accounts of the Branch. Net interest income and net fee and

commission revenues of the Branch increased by 171,76 and 72,31% respectively compared to the

previous year. On the contrary the increase in operating expenses remained at 41,15%. Net profit

increased by 121,89% as a result of all those positive developments.

I must admit that this increase will slow down in the upcoming periods and there may be a decrease

in total assets depending upon the volume of the demand for financing from time to time. Naturally

those changes will also be reflected to the income and operating accounts. The management closely

monitors those possibilities and takes the same into consideration for its plans and decisions for the

upcoming periods.

I would like to thank to all my colleagues for those satisfactory results achieved and I rest assured

that they will continue exerting efforts to the same extent in the upcoming periods as well.


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6.6.6.6. Remarks regarding the Staff, Number of Branches, Branch Service Type, Scope of Activities and Its Position in the Sector

The branch offers various banking activities. The scope of activities of the branch mainly includes acting as an intermediary for trade with the Islamic Republic of Iran and financing those transactions

if required.

The Bank has 3 branches in Turkey, including the Main branch. It provides all the banking services

through the branches as a part of the permission granted. It is engaged in opening deposit accounts

in Turkish Lira and foreign exchange, making money transfers worldwide, acting as an intermediary

for cashing checks or clearing bills and as an exchange dealer and meeting any kind of cash and non-cash demands for loan, particularly acting as an intermediary for export and import transactions. As

the ongoing policies require, the branch operates with a higher capital adequacy ratio compared to

the sector average as a result of the fact that the loans are largely secured through pecuniary

guarantee.

The Branch has 55 employees as of 31 December 2011 (31 December 2010: 51)


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b) Details about Management and Institutional Management Practices

1.1.1.1. Board of Directors

The branch operates as the Turkish branch of the bank that was founded abroad. The vision, mission,

short and long term strategic objectives of the branch are defined by the Board of Directors

established according to the Banking Law no. 5411, Article 23 with such powers and responsibilities

of an executive board.

The Board of Director, consisted of four members, meets at least four times a month to regularly

review the policies and strategies defined depending upon the changing conditions. The Board of

Directors of the Branch also acts as the credit committee.

All written proposals and requests regarding the agenda are submitted to the approval of the Board of Directors together with all the necessary documents at the meeting; those approved by the Board

of Directors are informed to the authorities to be implemented following the meeting. The proposals

approved by the Board of Directors are then formalized as a resolution and introduced to be signed

by the Chairman and Members of the Board of Directors no later than the last day of the month the

meeting is held.

The curriculum vitae and work experiences of the Board of Directors’ members are as follows:

SAEED GHAFFARI – Chairman of the Board of Directors

Saeed Ghaffari graduated from Islamic Azad University in Iran. He started his professional career as

the head of foreign exchange and worked as (in order) a deputy manager, deputy general manager

and general manager for foreign exchange, and general director for international transactions and he

currently works as a deputy general manager in charge of international transactions at Bank Mellat Iran. He has been working as the Chairman of the Board of Directors for Bank Mellat Istanbul Turkey

Main Branch since 30.09.2011.

YOUNES HORMOZI SHEIKH TABAGH – General Manager and Member of the Board of Directors

Younes Hormozi Sheikh Tabagh graduated from Allameh Tabatabee University in Iran. He started his

banking career in 1976 and worked as the head of loans, deputy director for foreign exchange

accounting, director for foreign exchange accounting, accounting director for Istanbul Branch, deputy

director general for foreign affairs, and director general for financial affairs. Younes Hormozi Sheikh

Tabagh, who worked as General Manager from March 2003 to 2008, worked as the Chairman of the

Board of Directors until 30.09.2011 and then he was appointed as General Manager.

KERAMATALLAH AHMADZADEH – Deputy General Manager and Board of Directors’ Member

Keramatallah Ahmadzadeh is a graduate of Iran Higher Institute of Banking. He started his

professional career in banking in 1989 and worked as deputy head and head of foreign transactions

and deputy branch manager. He started to work at the branch in October 2008 and has been working

as a Member of the Board of Directors since 30.09.2011.


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AHMET ARIÖZ – Member in charge of Internal Systems fulfilling the tasks of the Audit Committee

Ahmet Ariöz, a graduate of Ankara University, Faculty of Political Sciences, worked as an Auditor at T.

İş Bankası between 1973/06 - 1988/07. Then he worked as a Deputy Manager at T. Is Bank Galata

Branch between 7.1988 and 11.1989, Deputy General Manager at Faisal Finans Kurumu between

12.1989 and 11.1992, Deputy General Manager at Kıbrıs Yatırım Bankası between 01.1993 and

12.1995, Deputy General Manager at Derbank between 01.1996 -05.1996 and as supervisor at our

bank between 1996 and 1999. He has been acting as a Member of Board of Directors and Deputy

General Manager since 1999. He has been a member of the Board of Directors in charge of Internal

Systems fulfilling the tasks of the Audit Committee since 2006.

2.2.2.2. Senior Management

General Manager is responsible for the management and operation of the Branch and the

departments according to the rules and the principles on risk management as defined by the Board

of Directors. Details about senior management are as follows:

YOUNES HORMOZI SHEIKH TABAGH – General Manager

Mentioned in section, Board of Directors.

KERAMATALLAH AHMADZADEH – Deputy Director General


AHMET ARIOZ- Deputy General Manager


AHMAD JAMEHDOR - Deputy General Manager

Ahmad Jamehdor is a graduate of Ankara Academy of Economical and Commercial Sciences,

Department of Banking and Insurance. He started his professional career in banking at our bank in

1985 and worked at several departments such as current accounts, remittances, accounting, human

resources, and financial affairs. He was appointed as the Deputy General Manager in May 2009. He

acts as Deputy General Manager in charge of Financial Control, Treasury, Information Systems,

Human Resources and Administrative Affairs.

3.3.3.3. Data pertaining to the Operations performed pursuant to the Provisions of the Regulation on Banks' Internal Systems, and to the Managers of the Internal Systems Departments

Internal Audit, Internal Control and Risk Management systems are under auspices of the Board of

Directors subject to the supervision of the member in charge of internal systems with no executive

tasks. The member in charge of internal systems is liable to communicate any issue that may have an

adverse affect on the operations of the Branch to the Board of Directors by means of such reports he

regularly receives from independent auditing firm and internal control, internal audit and risk

management departments.


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Internal Audit, Internal Control and Risk Management Departments operate pursuant to the

Regulations approved by the Board of Directors. The Organization Chart for Internal Systems is as

follows:

Professional details about the line managers working at the internal systems of the branch are as follows:

Necmi Sevinç, Internal Audit Department: He has Bachelor’s degree and 15 years of experience in banking. He joined the branch in January 2010 and was assigned as line manager on 22.03.2010.

Durdu Yılmaz, Internal Control Department: Durdu Yılmaz has Bachelor’s degree and 21 years of experience in banking. Yılmaz joined the Branch in December 2008.

Yusuf Çağala, Risk Management Department: Yusuf Çağala has Bachelor’s degree and 32 years of experience in banking. He has been working at the Branch for more than five years.

Murat Etiler, Legal Organization and System Department: He has Bachelor’s degree and 21 years of experience in banking. He has been working at the Branch for almost four years.

4. Other Committees

Names, tasks, powers and members of various committees available at the branch are listed in the

following chart:

The committees established pursuant to the regulations as specified under the Banking Law no. 5411

and respective legislation have been structured according to those regulations and every measure to

allow them to work independently have been taken.

Assets & Liabilities Committee

Assets & liabilities committee, consisted of the deputy general managers led by the General Manager, is responsible for evaluating the monetary conditions and defining the policies regarding

RISK MANAGEMENT DEPARTMENT Yusuf ÇAĞALA

INTERNAL CONTROL DEPARTMENT Durdu YILMAZ Mert İNCİ

INTERNAL AUDIT DEPARTMENT Necmi SEVİNÇ Ş. Süheyl HAMAVİOĞLU

LEGISLATION , ORGANIZATION AND SYSTEM - EXPERT Murat ETİLER

MEMBER OF THE BOARD OF MANAGERS RESPONSIBLE FROM INTERNAL SYSTEMS Ahmet ARIÖZ


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maturity coherence between assets and liabilities, maintaining the interest rate difference, foreign

exchange position and liquidity pursuant to those conditions. The Committee held 53 meetings and

adopted 53 resolutions during the year.

Executive Committee of Information Technologies The Executive Committee of Information Technologies is consisted of the Deputy General Manager in

charge of Information Systems, Member of the Board of Directors in charge of Internal Systems,

Information Technologies Director, Internal Control and Risk Management officials led by the

General Manager. The Committee held 2 meetings and adopted 2 resolutions during the year.

The Committee was established to fulfill the following tasks:

• To ensure the Information Technologies are consistent with the Bank’s scale and operations and the quality of the solutions offered and the strategic objectives

• To approve the policies regarding the management, sustainability, maintaining the information

security and confidentiality in Information Technologies

• To assess the risks that may occur due to the use of Information Technologies and approve the

action plans designed for minimizing the risk levels due to Information Technologies

• To approve the resource needs prioritized in line with the strategies for Information Technologies

• To evaluate the findings identified as a result of internal and independent audits regarding

overall information technologies controls and application controls and approve the actions to be

taken

• To evaluate the risk analysis results of the Information Technologies support services received

and the reports submitted for the adequacy of support services organizations

• To evaluate the incidents identified regarding the breach of data security and make decisions to

be implemented, create an “emergency response team” if required

• To evaluate the results of the tests conducted to ensure business continuity and data security

• To evaluate the current developments in information technologies and data security and the

feasibility of the same at the Bank

• To evaluate the complaints that may occur regarding Information Technologies and the services provided based upon the same

• To assess and approve the investments and projects regarding Information Technologies

Remuneration Committee

The Committee, established upon the Board of Directors’ resolution dated 27.12.2011 with a view to

conduct the tasks and activities on monitoring and auditing the Bank’s payroll practices on behalf of

the Board of Directors, consists of two members where Saeed Ghaffari, Chairman of the Board of Directors, and Ahmet Arıöz act as the chairman and member of the committee respectively upon the

same resolution.

The Remuneration Committee meets at least twice a year not to exceed six-month periods and

report the results of its activities and the committee’s opinions regarding other issues it deems

important to the Board of Directors.

The Committee is responsible for monitoring and auditing the practices regarding the remuneration

management on behalf of the Board of Directors, ensuring the salaries and benefits are consistent

with the Branch's ethical values, internal balances and strategic objectives, evaluating the remuneration policy and practices within the frame of risk management, reviewing the remuneration


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policies and presenting to the Board of Directors the proposals identified based upon the needs and

fulfilling any other task as specified under the applicable legislation and such tasks assigned by the

Board of Directors in this respect within the scope of consistency with the principles of corporate

management.

Risk Committee

The committee’s scope of activities is as follows:

• To devise the risk management strategies and policies to be pursued and submit the same for

the approval of the Board of Directors,

• To discuss and make a decision on those items brought up by the Risk Management,

• To define the limits of primary risks that the branch is exposed to, monitor the breach of limit,

suggest proposals for eliminating such breach to the Board of Directors,

• To suggest proposals on such amendments in the risk policies to the Board of Directors,

• To monitor the process of identifying, defining, measuring and managing the risks to be met by

the Risk Management Department and make any correspondence regarding the same,

• To monitor the process of ensuring the accuracy and reliability of the risk measurement method

and results.

The committee is consisted of the Member of the Board of Directors in charge of Internal Systems,

Deputy General Manager and Vice General Manager and Line Manager for Risk Management led by

the General Manager. The Committee held 13 meetings and adopted 13 resolutions during the year.

Audit Committee

The Audit Committee is responsible for the following:

• To supervise the efficiency and adequacy of the Bank’s internal systems , operation of those

systems and accounting and reporting systems in line with the respective legislation and the

Bank’s policies and the integrity of the data produced,

• To conduct the initial assessment necessary in choosing the independent auditing firms and

those firms to provide valuation and support services and regularly monitor the activities of those firms chosen by the Board of Directors,

• To report to the Board of Directors regarding the operation of the Internal Systems and the

departments included in the internal systems, the activities of and the policies and regulations

pertaining to the same, submit the committee's opinions and suggest proposals for the

foregoing,

• To evaluate the information and reports received from the departments within the internal

systems and independent auditing firms regarding their activities,

• To prepare the branch’s financial reports according to the respective legislation, regulations and

standards,

• To ask for information, documentation or reports from all the departments of the Branch,

contracted support services and independent auditing firms when necessary, and get

consultancy services from any entity or organization specialized in the respective field subject to

the consent of the Board of Directors,

• To fulfill any other task as specified under the respective legislation and those tasks assigned by the Board of Directors in this respect,

• To inform and report to the Board of Directors the committee’s findings, opinions and proposals regarding the results of the committee’s activities and the measures to be taken with a view to


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conduct the operations of the Branch according to the respective legislation and the policies of

the Branch in a permanent and safe manner and any other item considered important by the

committee,

Under the respective legislation Ahmet Arıöz was assigned as the respective member of the Board of

Directors to fulfill the tasks of the said committee on 09.11.2006 and still holds the office.

Purchasing Committee The committee is responsible for purchasing and selling movable property and software in line with

the Bank's needs. It concluded 37 purchasing transactions during the year.

5.5.5.5. Data pertaining to Human Resources Practices

Probation period for any contracted personnel to be employed at the branch is two months whereas it

is four months for the personnel to be employed as a union member. Those employees who are

understood to be useful for the Branch during the probation period will become a member of the

permanent staff upon the respective line manager’s proposal. Line managers will submit their demands

regarding whether the employment contract of the staff subject to probation period is to be

maintained in such timeframe that their demand will be received by the personnel department at least

10 days before the end of such period. Employment contract of those who are understood to be of no

use for the Branch during the probation period will be terminated upon the respective line manager’s

proposal by the General Manager without dismissal notice or compensation.

Promotion means passing from a current title to a higher title for the Branch staff. In case of promotion

the remuneration will also change to begin with the clerks. The following will be necessary for the staff

for promotion:

• Completing a particular term of office at the current position,

• Having a positive record,

• Being equipped with such skills and competency as required by the higher title,

• A vacant position in the higher title,

• Passing any examination to be taken when necessary.

In order to be promoted to a higher tile the branch staff should have served at their current position for

at least

• 3 years for university graduates, and

• 4 years for high school graduates.

However the term of office may be extended up to one year at most pursuant to the powers.


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6.6.6.6. Data pertaining to the transactions made by the Branch with the Branch risk group

6.1. Data pertaining to the loans that the Branch allows to be used by the Branch risk group

2011 2010 Credit Risk of the Branch Risk Group

Cash Non-Cash Cash Non-Cash

Loans and Other Receivables Opening Balance 621.744 16.172 152.648 6.330

Balance at the end of year 2.638.501 16.092 621.744 16.172

Interest and Commission Incomes 101.312 6.156 11.480 1.901

Notes: 1. Risk group is defined in paragraph 2 of article 49 of the Banking Law number 5411. 2. The above information also covers the receivables from the banks as well as the loans given.

6.2. Data pertaining to the deposits held by the Branch risk group

Deposit of the Branch Risk Group 2011 2010

Beginning oPeriod 347.620 51.503

End of Period 2.953.541 347.620

Deposit Interest Expenses 91.973 913

Notes: 1. Risk group is defined in paragraph 2 of article 49 of the Banking Law number 5411. 2. A sum as much as TRY 157.604 thousand out of the deposit amounting to TRY 2.953.541 thousand included in the Deposit – Risk Group line in the balance sheet is owned by Iran Central Bank as of 31 December 2011.

6.3. Data pertaining to the loans used through the Branch risk group

Loans Used of the Branch Risk Group 2011 2010

Beginning of Period 1.093.273 186.055

End of Period 225.112 1.093.273

Deposit Interest Expenses 5.170 15.292 Notes: 1. Risk group is defined in paragraph 2 of article 49 of the Banking Law number 5411. 2. The sum, TRY 225.112 thousand, includes the loans taken out from Iran Central Bank as of 31 December 2011. 3. December 2010: TRY 41.548, the remaining TRY 1.051.725 thousand includes those pecuniary guarantees recognized in other liabilities account received from Bank Mellat Iran Main Branch to allow to be used against loan.

6.4. Data pertaining to the futures or option contracts or other similar contracts signed between the

Branch and the Branch risk group


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As of 31 December 2011 the Branch has no futures or option contracts made with the risk group or other similar contracts.

6.5. Data pertaining to the benefits offered to the senior management:

A payment of TRY 1,474 thousand was made to the senior management of the Branch as of 31 December 2011 (31 December 2010: TRY 1,245 thousand).

7.7.7.7. Data pertaining to the Scope of Activities subject to Support Services and to the Entities or Institutions Providing such Service

NA

c) Financial Data and Assessments relating to Risk Management

1. Assessment of the Audit Committee regarding the process of Internal Control, Internal Audit and Risk Management System and Data pertaining to the Operations during the Financial Year

1.1.1.1.1.1.1.1. Operations of the Internal Control Department

Internal control operations reviewed on regular basis at every level of the Branch and the practices,

policies and procedures defining those operations are renewed depending upon the needs and

integrity between the said operations and internal control system is ensured within the structure of

the internal control system configured with a view to keep those risks associated with the financial

and operational activities of the Branch under control and at a reasonable level and avoid the same. Work flows regarding the branch operations include the necessary steps and points properly and

completely. The employees at any level ensure that the processes for performing the operations are

conducted efficiently, properly, accurately and safely, and functional division of tasks, processing,

authorization powers and limits, information systems controls, controls following a transaction and

other transaction-specific controls are in place. The said operational and internal control structure

also plays an important role in performing the processes and controls pertaining to the accounting

and financial reporting systems more safely and effectively.

The main framework of the internal control operations structured within the internal control system consists of the data and communication relating to the controls for the operational performance and

the financial reporting systems and compliance controls.

Internal control department acting under auspices of the board of directors’ member in charge of

internal systems aims at optimally contributing to the reliability, efficiency, and robustness of the

internal control systems that constitute the control structure of the Branch in terms of the structure

and operation of the internal control system as well as the consistency of the same with the

legislation and standards on continuous basis. The activities of the internal control department that

is responsible for reviewing, monitoring, and evaluating the efficiency of the controls for the Branch

operations and reporting the result to the respective persons are structured in such manner to cover the headquarters departments and branches.

Any finding, opinion and proposal regarding the internal control activities will be disclosed to those

employees performing the activities and the respective process owners in the first place, and a

contribution will be made to the implementation of any measure or solution which would improve

the processes or activities pertaining to the internal control system. All those efforts are continuously


2011 ANNUAL REPORT

15

monitored by the internal control officers as well as those who perform the activities on regular basis

and assessments relating to the activities are reported to the senior management.

The results of the internal control activities are also monitored and evaluated by the Board of Directors and the board member in charge of fulfilling the tasks of the audit committee on regular

basis.

The headquarters departments and branches will be subject to a physical site visit quarterly, at least

four times a year, as executed by the internal control department. Internal control operations are

performed based on the principle of testing the control steps and points on work flows in terms of

the banking processes.

1.2.1.2.1.2.1.2. Operations of the Internal Audit Department

Internal Audit Department of Bank Mellat operates under auspices of the board member in charge of internal systems. Internal audit department is responsible for auditing all the activities carried out by

all the headquarters departments and branches including internal control, risk management, legal

and Masak compliance in accordance with the law and other respective legislation and in-house

strategies, policies, principles and objectives. The department which audits the banking processes

and information systems is also engaged with preliminary investigation, inquiry and investigation

activities if necessary.

The reports arranged as a result of the efforts of the department which includes one auditor and

assistant auditor will be submitted to the Board of Directors and respective departments through the

audit committee depending upon the importance and priority of the situation and the measures taken for any finding will be monitored by the internal audit department. The board of directors can

closely monitor the efforts of the department thanks to the periodic operating reports submitted by

the board member in charge of fulfilling the tasks of the audit committee.

In 2011 the information systems were subject to an audit according to the risk-oriented annual plan

determined within the frame of the banking processes carried out by a total of three branches and

the headquarters departments, and COBIT.

1.3.1.3.1.3.1.3. Risk Management Operations

The risk management process and the functions included in this process are among the priority

responsibilities of the Board of Directors. The risk management department operating under

auspices of the Board of Directors which is a functional part of the risk management function

together with the Risk Committee and the Assets & Liabilities Committee exerts efforts for the

consistency with Basel II regulations on capital adequacy in line with current international practices.

The Board of Directors closely monitors the efforts of those committees and the risk management

department and continuously evaluates whether the results are consistent with the objective

defined.


2011 ANNUAL REPORT

16

1.4.1.4.1.4.1.4. Compliance Operations

Compliance is a main and priority task for the executives and employees at any level at the Branch.

Such kind of operations can be classified into legal compliance, compliance to banking operations

and compliance to the prevention of Crime Revenue Laundering, which are included in the responsibilities of the internal audit department, internal control department and compliance officer

respectively.

The results of the compliance operations are also monitored and evaluated by the senior

management of the Branch on regular basis.

1.5.1.5.1.5.1.5. General Evaluation

Considering the risk groups in general, the most important risk that the branch was exposed to in

2011 was the credit risk which rapidly increased, as in 2010. However the increase was due to intra-

group transactions entirely.

Interest rate risk maintained its weight in the market risk following the credit risk, and a minor

currency risk took place at a negligible level. The most important risk group following the credit risk

was non-financial operational risks.

2.2.2.2. Independent Audit Report

BANK MELLAT, HEAD OFFICE:

TAHRAN-IRAN

İSTANBUL TURKEY MAIN, ANKARA

AND İZMİR BRANCHES

INDEPENDENT AUDITOR’S

REPORT,

UNCONSOLIDATED FINANCIAL

STATEMENTS AND NOTES

FOR THE YEAR ENDED

DECEMBER 31, 2011

Translated into English from the Original Turkish Report

CONVENIENCE TRANSLATION OF

THE INDEPENDENT AUDITOR’S REPORT

ORIGINALLY PREPARED AND ISSUED IN TURKISH

To the Board of Managers of Bank Mellat Merkezi: Tahran-İran İstanbul Türkiye Merkez, Ankara ve İzmir Şubeleri:

We have audited the accompanying unconsolidated balance sheet of Bank Mellat Merkezi: Tahran-

İran İstanbul Türkiye Merkez, Ankara ve İzmir Şubeleri (“the Branch”) as at December 31, 2011 and the related statements of income, cash flows and changes in equity for the year then ended and

a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

The Branch’s Board of Managers is responsible for the preparation and fair presentation of the financial statements in accordance with the regulation on “Procedures and Principles Regarding

Banks’ Accounting Practices and Maintaining Documents” published in the Official Gazette dated November 1, 2006 and numbered 26333 and Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”) and other regulations, circulars, communiqués and pronouncements in respect of accounting and financial reporting made by Banking Regulation and

Supervision Agency (“BRSA”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial

statements that are free from material misstatement, whether due to fraud or error; selecting and

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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 the regulation on “Licensing and Operations of Audit Firms

in Banking” published in the Official Gazette no: 26333 on November 1, 2006 and the International Standards on Auditing. We planned and performed our 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 judgement, including the consideration of the effectiveness of internal control and appropriateness of accounting policies applied relevant to the

entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independent Auditor’s Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the

financial position of Bank Mellat Merkezi: Tahran-İran İstanbul Türkiye Merkez, Ankara ve İzmir Şubeleri as at December 31, 2011 and the results of its operations and its cash flows for the year

then ended in accordance with the prevailing accounting principles and standards set out as per the

Article 37 of the Banking Act No: 5411, and other regulations, communiqués and circulars in respect of accounting and financial reporting and pronouncements made by BRSA.

Additional paragraph for English translation:

The effect of the differences between the accounting principles summarized in Section 3 and the

accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not

been quantified and reflected in the accompanying financial statements. The accounting principles

used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank’s financial position and results of its operations in accordance with accounting principles generally

accepted in such countries of users of the financial statements and IFRS.

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED

Müjde Şehsuvaroğlu

Partner, SMMM

İstanbul, April 24, 2012

THE UNCONSOLIDATED FINANCIAL REPORT OF

BANK MELLAT MERKEZİ: TAHRAN-İRAN İSTANBUL TÜRKİYE MERKEZ, ANKARA VE İZMİR ŞUBELERİ AS OF DECEMBER 31, 2011

Headquarter’s Address : Taleghani Avenue. No: 327 Tehran-Iran

Turkey Main Branch Address : Büyükdere Cd. Binbirçiçek Sk. No.1 34330 1.Levent-İstanbul/Türkiye

Telephone : (0212) 279 80 15

Fax : (0212) 284 62 14 Website : www.mellatbank.com

E-mail address : [email protected]

The year end unconsolidated financial report designed by the Banking Regulation and Supervision Agency in

line with Communiqué on Financial Statements to be Publicly Announced and the Related Policies and Disclosures consists of the sections listed below:

· GENERAL INFORMATION ABOUT THE BRANCH

· UNCONSOLIDATED FINANCIAL STATEMENTS OF THE BRANCH

· EXPLANATIONS ON THE CORRESPONDING ACCOUNTING POLICIES APPLIED IN THE

RELATED PERIOD

· INFORMATION ON FINANCIAL STRUCTURE OF THE BRANCH

· EXPLANATORY DISCLOSURES AND FOOTNOTES ON UNCONSOLIDATED FINANCIAL

STATEMENTS

· OTHER EXPLANATIONS

· INDEPENDENT AUDITOR’S REPORT

The unconsolidated financial statements and the explanatory footnotes and disclosures, unless otherwise indicated, are prepared in thousands of Turkish Lira, in accordance with the Communique on Banks’ Accounting Practice and Maintaining Documents, Turkish Accounting Standards, Turkish Financial

Reporting Standards, related communiqués and the Banks’ records, have been independently audited and presented as attached.

Saeed Ghaffari Younes Hormozi Sheikh Tabagh

Keramatallah Ahmadzadeh

Ahmet Arıöz

Chairman of the Board

of Managers

Member of the Board of

Managers and General Manager


Managers and Vice General Manager


Managers and Internal Systems Executive

Information related to responsible personnel for the questions can be raised about financial statements:

Name-Surname / Title : Yener Bozkurt / Accounting Department Chief

Phone No : (0212) 279 80 15

Fax No : (0212) 284 62 14

SECTION ONE

GENERAL INFORMATION I. History of the Branch, including its establishment date, initial legal status and amendments to legal status, if any 1 II. Explanation about the Branch’s shareholding structure, shareholders who individually or jointly have power to control the

management and audit directly or indirectly, changes regarding these subjects during the year, if any, and information about the controlling group of the Branch 1

III. Explanation about the Branch’s chairman and members of the board of managers, members of the audit committee, president and executive vice presidents, any changes, and the information about the Branch shares they hold 2

IV. Information on shareholders having qualified shares 2 V. Brief information on the Branch’s services and areas of operation 2

SECTION TWO

UNCONSOLIDATED FINANCIAL STATEMENTS I. Balance sheet (Statement of financial position) 3 II. Statement of off balance sheet contingencies and commitments 5 III. Statement of income 6 IV. Statement of profit and loss accounted for under equity 7 V. Statement of changes in shareholders’ equity 8 VI. Statement of cash flows 10 VII. Profit distribution table 11 VIII. Consolidated financial statements of the Branch’s Headquarters 12

SECTION THREE

EXPLANATIONS ON ACCOUNTING POLICIES I. Explanations on the basis of presentation 13 II. Explanations on strategy of using financial instruments and explanations on foreign currency transactions 14 III. Explanations on investments in associates and subsidiaries 14 IV. Explanations on forward transactions, options and derivative instruments 14 V. Explanations on interest income and expense 14 VI. Explanations on fee and commission income and expenses 15 VII. Explanations on financial assets 15 VIII. Explanations on impairment on financial assets 17 IX. Explanations on offsetting financial instruments 17 X. Explanations on sales and repurchase agreements and securities lending transactions 17 XI. Explanations on assets held for resale and related to discontinued operations and explanations on liabilities related with these assets 17 XII. Explanations on goodwill and other intangible assets 17 XIII. Explanations on tangible fixed assets 18 XIV. Explanations on leasing transactions 18 XV. Explanations on provisions and contingent commitments 18 XVI. Explanations on obligations related to the employee rights 19 XVII. Explanations on taxation 19 XVIII. Explanations on borrowings 20 XIX. Explanations on issuance of share certificates 20 XX. Explanations on acceptances 21 XXI. Explanations on government grants 21 XXII. Explanations on profit reserves and profit appropriation 21 XXIII. Explanations on earnings per share 21 XXIV. Explanations on related parties 21 XXV. Explanations on cash and cash equivalent assets 21 XXVI. Explanations on segment reporting 21 XXVII. Reclassifications 23 XXVIII. Other information 23

SECTION FOUR

INFORMATION RELATED TO FINANCIAL STRUCTURE OF THE BRANCH I. Explanations on capital adequacy ratio 24 II. Explanations on credit risk 27 III. Explanations on market risk 31 IV. Explanations on operational risk 32 V. Explanations on currency risk 32 VI. Explanations on interest rate risk 34 VII. Explanations on liquidity risk 37 VIII. Explanations on presentation of financial assets and liabilities at their fair values 38 IX. Explanations on activities carried out on behalf and account of other parties and Fiduciary Assets 39

SECTION FIVE

EXPLANATORY DISCLOSURES AND FOOTNOTES ON UNCONSOLIDATED FINANCIAL STATEMENTS

I. Explanations and notes related to assets 40 II. Explanations and notes related to liabilities 50 III. Explanations and notes related to off balance sheet accounts 56 IV. Explanations and notes related to income statement 59 V. Explanations and notes related to changes in shareholders’ equity 63 VI. Explanations and notes related to statement of cash flows 64 VII. Explanations and notes related to the Branch’s risk group 65 VIII. Explanations related to the domestic, foreign, off-shore branches and foreign representatives of the Branch 66 IX. Explanations and notes related to subsequent events 66

SECTION SIX

OTHER EXPLANATIONS I. Other explanations on the Branch’s operations 67

SECTION SEVEN

EXPLANATIONS ON INDEPENDENT AUDITOR’S REPORT I. Explanations on independent auditor’s report 67 II. Explanations and notes prepared by independent auditor 67

BANK MELLAT MERKEZİ: TAHRAN-İRAN İSTANBUL TÜRKİYE MERKEZ, ANKARA VE İZMİR ŞUBELERİ NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2011 Unless otherwise stated amounts are expressed in thousands of Turkish Lira (“TL”).

1

SECTION ONE

GENERAL INFORMATION

I. HISTORY OF THE BRANCH, INCLUDING ITS ESTABLISHMENT DATE, INITIAL LEGAL STATUS AND AMENDMENTS TO LEGAL STATUS, IF ANY:

Bank Mellat Merkezi: Tahran-İran İstanbul Türkiye Merkez, Ankara ve İzmir Şubeleri (“the Branch”), which is based in Tehran, Iran, established its branches in Istanbul, Ankara and Izmir on 18 August 1981, 23 February 1984 and 16 January 1992, respectively. The branches are registered under the scope of Foreign Capital Encouragement Law No. 6224, which permits the transfer of distributable profits to the Headquarter. The branches started operations after getting the approval from the Treasury Undersecretariat in April 1982, May 1985 and October 1992, respectively.

II. EXPLANATION ABOUT THE BRANCH’S SHAREHOLDING STRUCTURE, SHAREHOLDERS WHO INDIVIDUALLY OR JOINTLY HAVE POWER TO CONTROL THE MANAGEMENT AND AUDIT DIRECTLY OR INDIRECTLY, CHANGES REGARDING THESE SUBJECTS DURING THE YEAR, IF ANY, AND INFORMATION ABOUT THE CONTROLLING GROUP OF THE BRANCH:

The shareholding structure of the main shareholder of the Branch – Bank Mellat Tahran, Iran, is as follows:

Shareholders Share

Percentage (%)

Justice share recipients (provincial investors) (*) 30,00

Islamic Republic of Iran 20,00

Social Security Organisation of Iran 9,99

Saba Tamin Investment Co. 6,54

Personnel shares 3,96

Bank Mellat’s staff future security fund 3,52

Other Shares Quoted on Stock Exchange 25,99

Total 100,00

(*) These shares have been distributed to the provinces of Iran and investment firms have been

established within the provinces to be able to manage the shares. This was proclaimed to BRSA with the correspondance dated on August 16, 2011.



2

GENERAL INFORMATION (Continued)

III. EXPLANATION ABOUT THE BRANCH’S CHAIRMAN AND MEMBERS OF THE BOARD OF MANAGERS, MEMBERS OF THE AUDIT COMMITTEE, PRESIDENT AND EXECUTIVE VICE PRESIDENTS, ANY CHANGES, AND THE INFORMATION ABOUT THE BRANCH SHARES THEY HOLD:

Title Name Responsibility Education Level

Chairman of the Board of Managers: Saeed Ghaffari Chairman Under Graduate Members of Board of Managers:

Younes Hormozi Sheikh Tabagh General Manager

Under Graduate

Keramatallah Ahmadzadeh Vice General Manager. Under Graduate Ahmet Arıöz Vice General Manager Under Graduate Assistant General Managers: Ahmet Arıöz Vice General Manager

Internal Control and Responsible of Audit Risk Management

Under Graduate

Keramatallah Ahmadzadeh

Vice General Manager Import, Export and Transactions Banking

Under Graduate

Ahmad Jamehdor

Vice General Manager Financial Controlling and Planning Human Resources Treasury

Under Graduate

The individuals above do not possess shares in the Branch.

IV. INFORMATION ON SHAREHOLDERS HAVING QUALIFIED SHARES:

Name/Commercial title Share amounts Share percentage Paid-in capital Unpaid portion Justice share recipients (provincial investors) 16.097 %30,00 16.097 - Islamic Republic of Iran 10.731 %20,00 10.731 - Other Shares Quoted on Stock Exchange 13.944 %25,99 13.944 - Other 12.883 %24,01 12.883 -

V. BRIEF INFORMATION ON THE BRANCH’S SERVICES AND AREAS OF OPERATION:

The Branch operates in banking services and its core business activity is financing the commercial activities between The Republic of Turkey and Islamic Republic of Iran.

As of December 31, 2011, the Branch has 55 employees (December 31, 2010: 51 employees).

BANK MELLAT MERKEZİ: TAHRAN-İRAN İSTANBUL TÜRKİYE MERKEZ, ANKARA VE İZMİR ŞUBELERİ UNCONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 Unless otherwise stated amounts are expressed in thousands of Turkish Lira (“TL”).

2

SECTION TWO UNCONSOLIDATED FINANCIAL STATEMENTS

I. BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

ASSETS Note Curremt Period

31 December 2011 Previous Period

31 December 2010

TL FC Total TL FC Total

I. CASH AND BALANCES WITH CENTRAL BANK (I-a) 12.915 176.897 189.812 10.622 151.085 161.707

II. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Net) (I-b) - - - - - -

2.1 Trading Financial Assets - - - - - - 2.1.1 Public Debt Securities - - - - - - 2.1.2 Share Certificates - - - - - - 2.1.3 Trading Derivative Financial Assets - - - - - - 2.1.4 Other Marketable Securities - - - - - - 2.2 Financial Assets Designated at Fair Value through Profit or Loss - - - - - - 2.2.1 Public Debt Securities - - - - - - 2.2.2 Share Certificates - - - - - - 2.2.3 Loans - - - - - -

2.2.4 Other Marketable Securities - - - - - - III. BANKS (I-c) 137.444 2.443.592 2.581.036 119.019 236.016 355.035 IV. MONEY MARKETS 63.518 - 63.518 34.001 - 34.001

4.1 Interbank Money Market Placements 63.518 - 63.518 34.001 - 34.001 4.2 Receivables from Istanbul Stock Exchange Money Market - - - - - - 4.3 Receivables from Reverse Repurchase Agreements - - - - - -

V. AVAILABLE-FOR-SALE FINANCIAL ASSETS (Net) (I-d) 84.855 24.973 109.828 133.883 21.001 154.884 5.1 Share Certificates - - - - - - 5.2 Public Debt Securities 80.551 - 80.551 103.659 - 103.659

5.3 Other Marketable Securities 4.304 24.973 29.277 30.224 21.001 51.225 VI. LOANS AND RECEIVABLES (I-e) 71.993 513.536 585.529 8.464 1.110.947 1.119.411 6.1 Loans and Receivables 66.309 513.536 579.845 8.335 1.110.947 1.119.282

6.1.1 Bank’s Risk Group 21.288 182.665 203.953 40 420.301 420.341 6.1.2 Public Debt Securities - - - - - - 6.1.3 Other 45.021 330.871 375.892 8.295 690.646 698.941 6.2 Non-Performing Loans 7.653 - 7.653 172 - 172

6.3 Specific Provisions (-) (1.969) - (1.969) (43) - (43) VII. FACTORING RECEIVABLES - - - - - -

VIII. HELD-TO-MATURITY SECURITIES (Net) (I-f) - - - - - - 8.1 Public Debt Securities - - - - - - 8.2 Other Marketable Securities - - - - - - IX. INVESTMENTS IN ASSOCIATES (Net) (I-g) - - - - - - 9.1 Consolidated Based on Equity Method - - - - - - 9.2 Unconsolidated - - - - - - 9.2.1 Financial Investments in Associates - - - - - - 9.2.2 Non-Financial Investments in Associates - - - - - - X. SUBSIDIARIES (Net) (I-h) - - - - - - 10.1 Unconsolidated Financial Subsidiaries - - - - - - 10.2 Unconsolidated Non-financial Subsidiaries - - - - - -

XI. ENTITIES UNDER COMMON CONTROL (JOINT VENT.) (Net) (I-i) - - - - - -

11.1 Consolidated Based on Equity Method - - - - - - 11.2 Unconsolidated - - - - - - 11.2.1 Financial Joint Ventures - - - - - - 11.2.2 Non-Financial Joint Ventures - - - - - - XII. FINANCIAL LEASE RECEIVABLES (Net) (I-j) - - - - - - 12.1 Financial Lease Receivables - - - - - - 12.2 Operating Lease Receivables - - - - - - 12.3 Other - - - - - - 12.4 Unearned Income ( - ) - - - - - - XIII. HEDGING DERIVATIVE FINANCIAL ASSETS (I-k) - - - - - -

13.1 Fair Value Hedge - - - - - - 13.2 Cash Flow Hedge - - - - - - 13.3 Foreign Net Investment Hedge - - - - - -

XIV. TANGIBLE ASSETS (Net) (I-l) 8.695 - 8.695 8.905 - 8.905 XV. INTANGIBLE ASSETS (Net) (I-m) 86 - 86 - - - 15.1 Goodwill - - - - - - 15.2 Other 86 - 86 - - - XVI. INVESTMENT PROPERTY (Net) (I-n) - - - - - - XVII. TAX ASSET (I-o) 468 - 468 427 - 427

17.1 Current Tax Asset - - - - - - 17.2 Deferred Tax Asset 468 - 468 427 - 427

XVIII. ASSETS HELD FOR RESALE AND RELATED TO DISCONTINUED OPERATIONS (Net) (I-p) - - - 25 - 25

18.1 Held for Sale Purposes - - - 25 - 25

18.2 Related to Discontinued Operations - - - - - - XIX. OTHER ASSETS (I-r) 650 27 677 236 21 257

TOTAL ASSETS 380.624 3.159.025 3.539.649 315.582 1.519.070 1.834.652

The accompanying explanations and notes form an integral part of these financial statements.


4

I. BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

LIABILITIES Note

Curremt Period


31 December 2010

TL FC Total TL FC Total

I. DEPOSITS (II-a) 230.268 2.861.500 3.091.768 189.536 273.173 462.709

1.1 Deposits of Bank’s Risk Group 208.383 2.745.158 2.953.541 166.719 180.901 347.620

1.2 Other 21.885 116.342 138.227 22.817 92.272 115.089

II. TRADING DERIVATIVE FINANCIAL LIABILITIES (II-b) - - - - - -

III. FUNDS BORROWED (II-c) - 225.112 225.112 - 41.548 41.548

IV. MONEY MARKETS - - - - - -

4.1 Funds from Interbank Money Market - - - - - -

4.2 Funds from Istanbul Stock Exchange Money Market - - - - - -

4.3 Funds Provided Under Repurchase Agreements - - - - - -

V. MARKETABLE SECURITIES ISSUED (Net) - - - - - -

5.1 Bills - - - - - -

5.2 Asset Backed Securities - - - - - -

5.3 Bonds - - - - - -

VI. FUNDS - - - - - -

6.1 Borrower Funds - - - - - -

6.2 Other - - - - - -

VII. SUNDRY CREDITORS 848 41.082 41.930 34.112 1.173.332 1.207.444

VIII. OTHER LIABILITIES (II-d) 5.607 3.327 8.934 488 15.526 16.014

IX. FACTORING PAYABLES - - - - - -

X. FINANCIAL LEASE PAYABLES (Net) (II-e) - - - - - -

10.1 Financial Lease Payables - - - - - -

10.2 Operational Lease Payables - - - - - -

10.3 Other - - - - - -

10.4 Deferred Financial Lease Expenses ( - ) - - - - - -

XI. HEDGING DERIVATIVE FINANCIAL LIABILITIES (II-f) - - - - - -

11.1 Fair Value Hedge - - - - - -

11.2 Cash Flow Hedge - - - - - -

11.3 Foreign Net Investment Hedge - - - - - -

XII. PROVISIONS (II-g) 2.650 3.294 5.944 1.383 1.175 2.558

12.1 General Loan Loss Provision 1.661 3.269 4.930 98 1.175 1.273

12.2 Restructuring Provisions - - - - - -

12.3 Reserve for Employee Rights 618 - 618 529 - 529

12.4 Insurance Technical Provisions (Net) - - - - - -

12.5 Other Provisions 371 25 396 756 - 756

XIII. TAX LIABILITY (II-h) 8.752 - 8.752 4.252 - 4.252

13.1 Current Tax Liability 8.752 - 8.752 4.252 - 4.252

13.2 Deferred Tax Liability - - - - - -

XIV. PAYABLES RELATED TO ASSETS HELD FOR SALE

AND DISCONTINUED OPERATIONS (Net) (II-i) - - - - - -

14.1 Held for Sale - - - - - -

14.2 Discontinued Operations - - - - - -

XV. SUBORDINATED LOANS (II-j) - - - - - -

XVI. SHAREHOLDERS' EQUITY (II-k) 157.209 - 157.209 100.127 - 100.127

16.1 Paid-in capital 53.655 - 53.655 53.655 - 53.655

16.2 Capital Reserves (930) - (930) 517 - 517

16.2.1 Share Premium - - - - - -

16.2.2 Share Cancellation Profits - - - - - -

16.2.3 Marketable Securities Valuation Differences (II-l) (930) - (930) 517 - 517

16.2.4 Tangible Assets Revaluation Differences - - - - - -

16.2.5 Intangible Assets Revaluation Differences - - - - - -

16.2.6 Revaluation differences of investment property - - - - - -

16.2.7 Bonus Shares from Investments in Associates, Subsidiaries and Joint Ventures (Business Partners) - - - - - -

16.2.8 Hedging Funds (Effective Portion) - - - - - -

16.2.9

Accumulated valuation differences from assets held for sale

and from discontinued operations - - - - - -

16.2.10 Other Capital Reserves - - - - - -

16.3 Profit Reserves 1.301 - 1.301 1.301 - 1.301

16.3.1 Legal Reserves - - - - - -

16.3.2 Status Reserves - - - - - -

16.3.3 Extraordinary Reserves 1.301 - 1.301 1.301 - 1.301

16.3.4 Other Profit Reserves - - - - - -

16.4 Profit or (Loss) 103.183 - 103.183 44.654 - 44.654

16.4.1 Prior Years’ Income or (Loss) 44.654 - 44.654 18.276 - 18.276

16.4.2 Current Year Income or (Loss) 58.529 - 58.529 26.378 - 26.378

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 405.334 3.134.315 3.539.649 329.898 1.504.754 1.834.652



5

II. STATEMENT OF OFF-BALANCE SHEET CONTINGENCIES AND COMMITMENTS

Note Curremt Period


31 December 2010 TL FC Total TL FC Total A. OFF-BALANCE SHEET COMMITMENTS (I+II+III) 2.201 66.586 68.787 1.234 104.530 105.764 I. GUARANTEES AND WARRANTIES (IV-a-2, 3) 2.024 66.586 68.610 1.072 104.530 105.602 1.1. Letters of Guarantee 1.373 19.206 20.579 380 77.105 77.485 1.1.1 Guarantees Subject to State Tender Law - - - - - - 1.1.2 Guarantees Given for Foreign Trade Operations - - - - - - 1.1.3 Other Letters of Guarantee 1.373 19.206 20.579 380 77.105 77.485 1.2. Bank Acceptances - - - - - - 1.2.1 Import Letter of Acceptance - - - - - - 1.2.2 Other Bank Acceptances - - - - - - 1.3. Letters of Credit 288 9.442 9.730 641 27.425 28.066 1.3.1 Documentary Letters of Credit 288 9.442 9.730 - 8.044 8.044 1.3.2 Other Letters of Credit - - - 641 19.381 20.022 1.4 Prefinancing Given as Guarantee - - - - - - 1.5. Endorsements - - - - - - 1.5.1 Endorsements to the Central Bank of the Republic of Turkey - - - - - - 1.5.2 Other Endorsements - - - - - - 1.6 Securities Issue Purchase Guarantees - - - - - - 1.7 Factoring Guarantees - - - - - - 1.8 Other Guarantees 350 37.938 38.288 38 - 38 1.9 Other Collaterals 13 - 13 13 - 13 II. COMMITMENTS (IV-a-1) 177 - 177 162 - 162 2.1. Irrevocable Commitments 177 - 177 162 - 162 2.1.1 Forward Asset Purchase Commitments - - - - - - 2.1.2 Forward Deposit Purchase and Sales Commitments - - - - - - 2.1.3 Share Capital Commitments to Associates and Subsidiaries - - - - - - 2.1.4 Loan Granting Commitments - - - - - - 2.1.5 Securities Underwriting Commitments - - - - - - 2.1.6 Commitments for Reserve Deposit Requirements - - - - - - 2.1.7 Commitments for Cheques 177 - 177 162 - 162 2.1.8 Tax and Fund Liabilities from Export Commitments - - - - - - 2.1.9 Commitments for Credit Card Limits - - - - - - 2.1.10 Commitments for Credit Cards and Banking Services Promotions - - - - - - 2.1.11 Receivables from Short Sale Commitments of Marketable Securities - - - - - - 2.1.12 Payables for Short Sale Commitments of Marketable Securities - - - - - - 2.1.13 Other Irrevocable Commitments - - - - - - 2.2. Revocable Commitments - - - - - - 2.2.1 Revocable Loan Granting Commitments - - - - - - 2.2.2 Other Revocable Commitments - - - - - - III. DERIVATIVE FINANCIAL INSTRUMENTS (IV-b) - - - - - - 3.1. Hedging Derivative Financial Instruments - - - - - - 3.1.1 Transactions for Fair Value Hedge - - - - - - 3.1.2 Transactions for Cash Flow Hedge - - - - - - 3.1.3 Transactions for Foreign Net Investment Hedge - - - - - - 3.2. Trading Transactions - - - - - - 3.2.1. Forward Foreign Currency Buy/Sell Transactions - - - - - - 3.2.1.1 Forward Foreign Currency Transactions-Buy - - - - - - 3.2.1.2 Forward Foreign Currency Transactions-Sell - - - - - - 3.2.2. Swap Transactions Related to Foreign Currency and Interest Rates - - - - - - 3.2.2.1 Foreign Currency Swap-Buy - - - - - - 3.2.2.2 Foreign Currency Swap-Sell - - - - - - 3.2.2.3 Interest Rate Swap-Buy - - - - - - 3.2.2.4 Interest Rate Swap-Sell - - - - - - 3.2.3. Foreign Currency, Interest Rate and Securities Options - - - - - - 3.2.3.1 Foreign Currency Options-Buy - - - - - - 3.2.3.2 Foreign Currency Options-Sell - - - - - - 3.2.3.3 Interest Rate Options-Buy - - - - - - 3.2.3.4 Interest Rate Options-Sell - - - - - - 3.2.3.5 Securities Options-Buy - - - - - - 3.2.3.6 Securities Options-Sell - - - - - - 3.2.4. Foreign Currency Futures - - - - - - 3.2.4.1 Foreign Currency Futures-Buy - - - - - - 3.2.4.2 Foreign Currency Futures-Sell - - - - - - 3.2.5. Interest Rate Futures - - - - - - 3.2.5.1 Interest Rate Futures-Buy - - - - - - 3.2.5.2 Interest Rate Futures-Sell - - - - - - 3.2.6 Other - - - - - -

B. CUSTODY AND PLEDGES RECEIVED (IV+V+VI) - 4.071 4.071 182 2.384 2.566 IV. ITEMS HELD IN CUSTODY - 3.986 3.986 182 2.315 2.497 4.1 Customer Fund and Portfolio Balances - - - - - - 4.2 Investment Securities Held in Custody - - - - - - 4.3 Checks Received for Collection - 3.986 3.986 182 2.315 2.497 4.4 Commercial Notes Received for Collection - - - - - - 4.5 Other Assets Received for Collection - - - - - - 4.6 Assets Received for Public Offering - - - - - - 4.7 Other Items Under Custody - - - - - - 4.8 Custodians - - - - - - V. PLEDGES RECEIVED - 85 85 - 69 69 5.1 Marketable Securities - - - - - - 5.2 Guarantee Notes - 85 85 - 69 69 5.3 Commodity - - - - - - 5.4 Warranty - - - - - - 5.5 Immovable - - - - - - 5.6 Other Pledged Items - - - - - - 5.7 Pledged Items-Depository - - - - - - VI. ACCEPTED INDEPENDENT GUARANTEES AND WARRANTIES - - - - - - TOTAL OFF-BALANCE SHEET COMMITMENTS (A+B) 2.201 70.657 72.858 1.416 106.914 108.330



6

III. STATEMENT OF INCOME

INCOME AND EXPENSE ITEMS Note

Current Period 1 January 2011 -

31 December 2011

Previous Period 1 January 2009 -

31 December 2010

I. INTEREST INCOME (III-a) 168.275 40.946

1.1 Interest on Loans (III-a-1) 68.007 28.932

1.2 Interest Received from Reserve Requirements - -

1.3 Interest Received from Banks (III-a-2) 88.955 5.723

1.4 Interest Received from Money Market Transactions 514 312

1.5 Interest Received from Marketable Securities Portfolio (III-a-3) 10.794 5.971

1.5.1 Trading Financial Assets - -

1.5.2 Financial Assets at Fair Value Through Profit or Loss - -

1.5.3 Available-for-sale Financial Assets 10.794 5.971

1.5.4 Held-to-Maturity Investments - -

1.6 Financial Lease Income - -

1.7 Other Interest Income 5 8

II. INTEREST EXPENSE (III-b) (109.398) (19.281)

2.1 Interest on Deposits (III-b-4) (102.255) (3.689)

2.2 Interest on Funds Borrowed (III-b-1) (7.143) (15.592)

2.3 Interest Expense on Money Market Transactions - -

2.4 Interest on Securities Issued (III-b-3) - -

2.5 Other Interest Expenses - -

III. NET INTEREST INCOME (I + II) 58.877 21.665

IV. NET FEES AND COMMISSIONS INCOME 26.126 15.162

4.1 Fees and Commissions Received 26.246 15.197

4.1.1 Non-cash Loans 22.249 13.089

4.1.2 Other 3.997 2.108

4.2 Fees and Commissions Paid (120) (35)

4.2.1 Non-cash Loans - -

4.2.2 Other (120) (35)

V. DIVIDEND INCOME (III-c) - -

VI. TRADING INCOME/(LOSS) (Net) (III-d) 4.675 4.086

6.1 Trading Gains / (Losses) on Securities - 30

6.2 Trading Gains/(Losses) on Derivative Financial Instruments - -

6.3 Foreign Exchange Gains / (Losses) 4.675 4.056

VII. OTHER OPERATING INCOME (III-e) 764 607

VIII. TOTAL OPERATING INCOME (III+IV+V+VI+VII) 90.442 41.520

IX. PROVISION FOR LOAN LOSSES AND OTHER RECEIVABLES (-) (III-f) (5.414) (587)

X. OTHER OPERATING EXPENSES (-) (III-g) (11.089) (7.856)

XI. NET OPERATING INCOME/(LOSS) (VIII+IX+X) 73.939 33.077

XII. EXCESS AMOUNT RECORDED AS INCOME AFTER MERGER - -

XIII. GAIN / (LOSS) ON EQUITY METHOD - -

XIV. GAIN / (LOSS) ON NET MONETARY POSITION - -

XV. PROFIT/(LOSS) FROM CONTINUED OPERATIONS BEFORE TAXES (XI+…+XIV)

(III-h) 73.939 33.077

XVI. PROVISION FOR TAXES ON INCOME FROM CONTINUING OPERATIONS (±) (III-i) (15.410) (6.699)

16.1 Current Tax Provision (15.219) (6.830)

16.2 Deferred Tax Provision (191) 131

XVII. NET PROFIT/LOSSES FROM CONTINUING OPERATIONS (XV±XVI) 58.529 26.378

XVIII. INCOME FROM DISCONTINUED OPERATIONS - -

18.1 Income on assets held for sale - -

18.2 Income on sale of associates, subsidiaries and entities under common control (Joint vent.)

- -

18.3 Income on other discontinued operations - -

XIX. LOSS FROM DISCONTINUED OPERATIONS (-) - -

19.1 Loss from assets held for sale - -

19.2 Loss on sale of associates, subsidiaries and jointly controlled entities (Joint vent.) - -

19.3 Loss from other discontinued operations - -

XX. PROFIT /LOSSES BEFORE TAXES FROM DISCONTINUED OPERATIONS (XVIII-XIX)

- -

XXI. PROVISION FOR INCOME TAXES FROM DISCONTINUED OPERATIONS (±) - -

21.1 Current Tax Provision - -

21.2 Deferred Tax Provision - -

XXII. NET PROFIT/LOSSES FROM DISCONTINUED OPERATIONS (XX±XXI) - -

XXIII. NET PROFIT/LOSSES (XVII+XXII) (III-j) 58.529 26.378

Earnings/(Loss) per share 1,0908 0,4916



7

IV. STATEMENT OF PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY

PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY Current Period


31 December 2010

I. ADDITIONS TO THE MARKETABLE VALUATION DIFFERENCES FROM THE AVAILABLE FOR

SALE FINANCIAL ASSETS (1.863) 69

II. TANGIBLE ASSETS REVALUATION DIFFERENCES - -

III. INTANGIBLE ASSETS REVALUATION DIFFERENCES - -

IV. CURRENCY TRANSLATION DIFFERENCES FOR FOREIGN CURRENCY TRANSACTIONS - -

V. PROFIT OR LOSS ON CASH FLOW HEDGE DERIVATIVE FINANCIAL ASSETS (Effective part of the

fair value differences) - -

VI. THE EFFECT OF CORRECTION OF ERRORS AND CHANGES IN ACCOUNTING POLICIES - -

VII. EFFECTS OF CHANGES IN ACCOUNTING POLICY AND ADJUSTMENT OF ERRORS - -

VIII. OTHER PROFIT AND LOSS ACCOUNTED FOR UNDER EQUITY ACCORDING TO TAS - -

IX. DEFERRED TAX RELATED TO VALUATION DIFFERENCES 362 (25)

X. NET PROFIT OR LOSS ACCOUNTED DIRECTLY UNDER SHAREHOLDERS’ EQUITY (I+II+...+IX) (1.501) 44

XI. CURRENT YEAR PROFIT/LOSS 54 58

1.1 Net change in fair value of marketable securities (transfer to profit-loss) 54 58 1.2 Reclassification of cash flow hedge transactions and presentation of the related under income statement

1.3 Reclassification of foreign net investment hedge transactions and presentation of the related part under income

statement

1.4 Other

XII. TOTAL PROFIT/LOSS RELATED TO THE CURRENT PERIOD (X-XI) (1.447) 102



8

V. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

PRIOR PERIOD

01.01.2010-31.12.2010 Note Paid-in Capital

Adjustment to Share

Capital Share

Premiums

Share

Cancellation

Profits Legal

Reserves Status

Reserves

Extraord

inary

Reserves Other

Reserves

Current Period

Net

Income/(Loss)

Prior Period

Net Income/

(Loss)

Marketable

Securities

Value

Increase

Fund

Tangible and

Intangible

Assets

Revaluation

Fund

Bonus

Shares From

Investment

in Associates

and

Subsidiaries

Hedging

Transactions

Funds

Held for

Resale/

Discontinued

Operations

Revaluation

Fund

Total Shareholders

’Equity

I. Prior Period Begining Balance 53.655 - - - - - 1.301 - - 18.276 415 - - - - 73.647

II Adjustments According to TAS 8 - - - - - - - - - - - - - - - -

2.1 The Effect of Correction of Errors - - - - - - - - - - - - - - - -

2.2 The Effects of Changes in Accounting Policy - - - - - - - - - - - - - - - -

III. New Balance (I+II) 53.655 - - - - - 1.301 - - 18.276 415 - - - - 73.647

Changes during the period

IV. Increase/Decrease due to the Merger - - - - - - - - - - - - - - - -

V. Marketable Securities Valuation Differences (V-a) - - - - - - - - - - 102 - - - - 102

VI. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - -

6.1 Cash Flow Hedge - - - - - - - - - - - - - - - -

6.2 Foreign Investment Hedge - - - - - - - - - - - - - - - -

VII. Tangible Assets Revaluation Differences - - - - - - - - - - - - - - - -

VIII. Intangible Assets Revaluation Differences - - - - - - - - - - - - - - - -

IX.

Bonus Shares Obtained from Associates,

Subsidiaries and Entities Under Common

Control (Joint vent.) - - - - - - - - - - - - - - - -

X. Foreign Exchange Differences - - - - - - - - - - - - - - - -

XI. The Disposal of Assets - - - - - - - - - - - - - - - -

XII. The Reclassification of Assets - - - - - - - - - - - - - - - -

XIII. Effect of the Changes in Investment in

Associates’ Equity to the Bank’s Equity - - - - - - - - - - - - - - - -

XIV. Capital Increase - - - - - - - - - - - - - - - -

14.1 Cash Increase - - - - - - - - - - - - - - - -

14.2 Internal Resources - - - - - - - - - - - - - - - -

XV. Share Premium - - - - - - - - - - - - - - - -

XVI. Share Cancellation Profits - - - - - - - - - - - - - - - -

XVII. Paid in-capital Adjustment Difference - - - - - - - - - - - - - - - -

XVIII. Other - - - - - - - - - - - - - - - -

XIX. Current Year Income or Loss - - - - - - - - 26.378 - - - - - - 26.378

XX. Profit Distribution (V-c) - - - - - - - - - - - - - - - -

20.1 Dividend Paid - - - - - - - - - - - - - - - -

20.2 Transfers to Reserves (V-b) - - - - - - - - - - - - - - - -

20.3 Other - - - - - - - - - - - - - - - -

Period End Balance (I+….+XIV) 53.655 - - - - - 1.301 - 26.378 18.276 517 - - - - 100.127



9

V. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

CURRENT PERIOD

01/01/2011 – 31/12/2011 Note Paid-in Capital

Adjustment

to Share

Capital

Share

Premiums

Share

Cancellation

Profits

Legal

Reserves

Status

Reserves

Extraordinary

Reserves

Other

Reserves

Current Period

Net

Income/(Loss)

Prior

Period

Net

Income/

(Loss)

Marketable

Securities

Value

Increase

Fund

Tangible

and

Intangible

Assets

Revaluation

Fund

Bonus

Shares From

Investment

in Associates

and

Subsidiaries

Hedging

Transactions

Funds

Held for

Resale/

Discontinued

Operations

Revaluation

Fund

Total

Shareholders

’ Equity

I. Prior Period End Balance 53.655 - - - - - 1.301 - 26.378 18.276 517 - - - - 100.127

Changes during the period - - - - - - - - - - - - - - - -

II. Increase/Decrease due to the Merger - - - - - - - - - - - - - - - -

III. Marketable Securities Valuation Differences (V-a) - - - - - - - - - - (1.447) - - - - (1.447)

IV. Hedging Funds (Effective Portion) - - - - - - - - - - - - - - - -

4.1 Cash Flow Hedge - - - - - - - - - - - - - - - -

4.2 Foreign Investment Hedge - - - - - - - - - - - - - - - -

V. Tangible Assets Revaluation Differences - - - - - - - - - - - - - - - -

VI. Intangible Assets Revaluation Differences - - - - - - - - - - - - - - - -

VII.

Bonus Shares Obtained from Associates,

Subsidiaries and Entities Under Common

Control (Joint vent.)

- - - - - - - - - - - - - - - -

VIII. Foreign Exchange Differences - - - - - - - - - - - - - - - -

IX. The Disposal of Assets - - - - - - - - - - - - - - - -

X. The Reclassification of Assets - - - - - - - - - - - - - - - -

XI. Effect of the Changes in Investment in

Associates’ Equity to the Bank’s Equity

- - - - - - - - - - - - - - - -

XII. Capital Increase - - - - - - - - - - - - - - - -

12.1 Cash Increase - - - - - - - - - - - - - - - -

12.2 Internal Resources - - - - - - - - - - - - - - - -

XIII. Share Premium - - - - - - - - - - - - - - - -

XIV. Share Cancellation Profits

XV. Paid in-capital Adjustment Difference - - - - - - - - - - - - - - - -

XVI. Other - - - - - - - - - - - - - - - -

XVII. Current Year Income or Loss - - - - - - - - 58.529 - - - - - - 58.529

XVIII. Profit Distribution (V-c) - - - - - - - - (26.378) 26.378 - - - - - -

18.1 Dividend Paid - - - - - - - - - - - - - - - -

18.2 Transfers to Reserves (V-b) - - - - - - - - - - - - - - - -

18.3 Other - - - - - - - - (26.378) 26.378 - - - - - -

Period End Balance (I+….+XIV) 53.655 - - - - - 1.301 - 58.529 44.654 (930) - - - - 157.209



10

VI. STATEMENT OF CASH FLOWS

STATEMENT OF CASH FLOWS Note

Current Period 1 January –

31 December 2011

Previous Period 1 January –

31 December 2010

A. CASH FLOWS FROM BANKING OPERATIONS

1.1 Operating Profit before changes in operating assets and liabilities 38.052 27.906

1.1.1 Interest received 105.220 34.155

1.1.2 Interest paid (55.764) (12.059)

1.1.3 Dividend received - -

1.1.4 Fees and commissions received 26.378 15.197

1.1.5 Other income 803 637

1.1.6 Collections from previously written-off loans and other receivables 52 -

1.1.7 Payments to personnel and service suppliers (6.179) (3.959)

1.1.8 Taxes paid (14.353) (5.506)

1.1.9 Other (18.105) (559)

1.2 Changes in operating assets and liabilities 2.102.737 515.211

1.2.1 Net (increase) / decrease in trading financial assets - -

1.2.2 Net (increase) / decrease in fair value through profit/loss financial assets - -

1.2.3 Net (increase) / decrease in banks 1 -

1.2.4 Net (increase) / decrease in loans 515.893 (888.198)

1.2.5 Net (increase) / decrease in other assets (71) (52)

1.2.6 Net increase in bank deposits 1.058.396 206.825

1.2.7 Net increase / (decrease) in other deposits (105.144) 130.430

1.2.8 Net (decrease) in funds borrowed 189.446 13.216

1.2.9 Net increase / (decrease) in payables - -

1.2.10 Net increase in other liabilities 444.216 1.052.990

I. Net cash provided from banking operations 2.140.789 543.117

B. CASH FLOWS FROM INVESTING ACTIVITIES

II. Net cash provided from investing activities 44.217 (122.344)

2.1

Cash paid for purchase of entities under common control, associates and subsidiaries (Joint Vent.) - -

2.2

Cash obtained from sale of entities under common control, associates and subsidiaries (Joint Vent.) - -

2.3 Fixed assets purchases (164) (196)

2.4 Fixed assets sales 1 7

2.5 Cash paid for purchase of investments available-for-sale (76.447) (137.172)

2.6 Cash obtained from sale of investments available-for-sale 120.880 15.017

2.7 Cash paid for purchase of investment securities - -

2.8 Cash obtained from sale of investment securities - -

2.9 Other (53) -

C. CASH FLOWS FROM FINANCING ACTIVITIES

III. Net cash provided from financing activities - -

3.1 Cash obtained from funds borrowed and securities issued - -

3.2 Cash used for repayment of funds borrowed and securities issued - -

3.3 Capital increase - -

3.4 Dividends paid - -

3.5 Payments for finance leases - -

3.6 Other - -

IV. Effect of change in foreign exchange rate on cash and cash equivalents 31.250 1.611

V. Net increase in cash and cash equivalents (I + II + III + IV) 2.216.256 422.384

VI. Cash and cash equivalents at beginning of the period (VI-a) 550.576 128.192

VII. Cash and cash equivalents at end of the period (V + VI) (VI-a) 2.766.832 550.576



11

VII. PROFIT DISTRIBUTION TABLE

Current Period

1 January – 31 December 2011

Previous Period

1 January – 31 December 2010

I. DISTRIBUTION OF CURRENT YEAR INCOME

1.1 Current Year Income 73.939 33.077

1.2 Taxes And Duties Payable (-) (15.410) (6.699)

1.2.1 Corporate Tax (Income tax) (15.219) (6.830)

1.2.2 Income withholding tax - -

1.2.3 Other taxes and duties (191) 131

A. NET INCOME FOR THE YEAR (1.1-1.2) 58.529 26.378

1.3 Prior Year Losses (-) - -

1.4 First Legal Reserves (-) - -

1.5 Other Statutory Reserves (-) - -

B. NET INCOME AVAILABLE FOR DISTRIBUTION [(A+(1.3+1.4+1.5)] 58.529 26.378

1.6 First Dividend To Shareholders (-) - -

1.6.1 To Owners Of Ordinary Shares - -

1.6.2 To Owners Of Preferred Shares - -

1.6.3 To Owners Of Preferred Shares (Preemptive Rights) - -

1.6.4 To Profit Sharing Bonds - -

1.6.5 To Holders Of Profit And Loss Sharing Certificates - -

1.7 Dividends To Personnel (-) - -

1.8 Dividends To Board Of Directors (-) - -

1.9 Second Dividend To Shareholders (-) - -



1.9.3 To Owners Of Preferred Shares (Preemptive Rights) - -



1.10 Second Legal Reserves (-) - -

1.11 Statutory Reserves (-) - -

1.12 Extraordinary Reserves - -

1.13 Other Reserves - -

1.14 Special Funds - -

II. DISTRIBUTION OF RESERVES

2.1 Distributed Reserves - -

2.2 Second Legal Reserves (-) - -

2.3 Dividends To Shareholders (-) - -






2.4 Dividends To Personnel (-) - -

2.5 Dividends To Board Of Directors (-) - -

III. EARNINGS PER SHARE

3.1 To Owners Of Ordinary Shares 1,0908 0,4916

3.2 To Owners Of Ordinary Shares ( % ) - -

3.3 To Owners Of Preferred Shares - -

3.4 To Owners Of Preferred Shares ( % ) - -

IV. DIVIDEND PER SHARE

4.1 To Owners Of Ordinary Shares - -

4.2 To Owners Of Ordinary Shares ( % ) - -

4.3 To Owners Of Preferred Shares - -

4.4 To Owners Of Preferred Shares ( % ) - -

Note: As of date of these financial statements, profit distribution for 2011 has not been defined yet.



12

VIII. CONSOLIDATED FINANCIAL STATEMENTS OF THE BRANCH’S HEADQUARTER

As at 20 March 2011, the financial statements issued by the Headquarters of the Branch have been

independently audited. The Headquarters of the Branch has not issued financial statements as at December 31, 2011 and December 31, 2010.

BANK MELLAT ( IRAN )

CONSOLIDATED COMPARATIVE BALANCE SHEET

(THOUSANDS OF USD)

CURRENT PERIOD PRIOR PERIOD

(20 March 2011) (20 March 2010) (*)

Cash and cash equivalents 733.563 448.660

Central bank 7.094.295 5.723.923

Other assets 49.728.064 39.411.278

Total Assets 57.555.922 45.583.861

Deposits 39.836.262 31.557.323

Other liabilities 15.435.266 12.338.093

Shareholders’ equity 2.284.394 1.688.445

Total Liabilities 57.555.922 45.583.861

BANK MELLAT ( IRAN )

CONSOLIDATED COMPARATIVE INCOME STATEMENT

(THOUSANDS OF USD)

CURRENT PERIOD PRIOR PERIOD

(20 March 2011) (20 March 2010)

Total income 3.561.169 2.541.135

Interest expense on deposits (2.258.535) (1.794.130)

Other income 1.323.036 1.095.124

Total net income 2.625.670 1.842.129

Total expenses (1.968.973) (1.456.456)

Profit before tax 656.697 385.673

Taxes payable (118.301) (83.305)

Net Profit 538.396 302.368

(*)Restatements have been made.



13

SECTION THREE

EXPLANATIONS ON ACCOUNTING POLICIES I. EXPLANATIONS ON THE BASIS OF PRESENTATION:

The preparation of the financial statements and related notes and explanations in accordance with the Turkish Accounting Standards and Regulation on the Accounting Applications for Banks and Safeguarding of Documents:

The Branch maintains its books of accounts in Turkish lira in accordance with the Banking Act No. 5411 (“Banking Act”), which is effective from November 1, 2005, the Turkish Commercial Code and Turkish tax legislation.

The financial statements are prepared in accordance with the “Regulation on the Principles and Procedures Regarding Banks’ Accounting Application and Keeping Documents” published in the Official Gazette No.26333 dated November 1, 2006, which refers to “Turkish Accounting Standards” (“TAS”) and “Turkish Financial Reporting Standards” (“TFRS”) issued by the “Turkish Accounting Standards Board” (“TASB”) and additional explanations and notes to accounting and financial reporting principles (all “Turkish Accounting Standards” or “TAS” ) published by the Banking Regulation and Supervision Agency (“BRSA”). The format and content of the financial statements to be disclosed to the public and related notes to these financial statements have been prepared in accordance with the “Communiqué Regarding Financial Statements to be disclosed to the Public and Related Disclosures” published in the Official Gazette No.26430 dated February 10, 2007. Statutory Decree No: 660, which has been become effective and published in the Official Gazette on 2 November 2011, and the Additional Clause 1 of the Law No: 2499 were nullified and accordingly, Public Oversight, Accounting and Audit Standards Institution (the “Institution”) was established. As per Additional Article 1 of the Statutory Decree, applicable laws and standards will apply until new standards and regulations be issued by the Institution and will become effective. In this respect, the respective matter has no effect over the ‘Basis of The Preparation of Financial Statements” Note disclosed in the accompanying financial statements as of the reporting date.

The financial statements have been prepared in TL, under the historical cost convention and in accordance with inflation accounting except for the financial assets and liabilities carried at fair value.

The accounting policies and valuation methods adopted in the presentation of these financial statements are in accordance with TAS. These accounting policies and valuation methods are explained in Notes II. to XXVIII.



14

EXPLANATIONS ON ACCOUNTING POLICIES (Continued)

II. EXPLANATIONS ON STRATEGY OF USING FINANCIAL INSTRUMENTS AND FOREIGN

CURRENCY TRANSACTIONS:

The Branch’s operation scope involves all commercial banking operations and business lines described

in the banking legislation.

The Branch invests the funds obtained through fixed rate deposits, loans from Head Office and cash

guarantees to short-term, high interest bearing and relatively low risk bank placements and credit for

banks. The Branch manages the liquidity risk by providing sufficient cash and cash equivalent sources for its current and contingent liabilities. In this context, the Branch aims at ensuring a liquidity structure

which matches liabilities due.

The Branch protects itself from interest rate risk, currency risk and price fluctuations by its investments

in short-term placements and provides cash collaterals.

The Branch takes a position according to the currency basket of the Central Bank of the Republic of

Turkey (“CBRT”) in order to hedge itself against possible foreign exchange risks. The Branch with the

change in the currency system to floating currency, limits the total foreign currency position in accordance with the legal limits because of the increasing uncertainties in the changing currency path.

As of December 31, 2011, rates used for conversion of foreign currency balances into Turkish lira are

TL1,8889 for USD, TL2,4438 for Euro and TL0,0243 for Yen.

III. EXPLANATIONS ON INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES:

As of December 31, 2011 and December 31, 2010, the Branch has no investments in associates and

subsidiaries.

IV. EXPLANATIONS ON FORWARD TRANSACTIONS, OPTIONS AND DERIVATIVE

INSTRUMENTS:

Derivative instruments are measured at fair value on initial recognition and are subsequently

re-measured at their fair values. The accounting method for the income or loss arising from derivative

instruments depends on the derivative being used for hedging purposes or not and depends on the type of the item being hedged. As of December 31, 2011, the Branch has no derivative instruments that

qualify for hedge accounting.

The Branch has no forward transactions, options or other derivative instruments.

V. EXPLANATIONS ON INTEREST INCOME AND EXPENSE:

Interest income and expenses are recognised in the income statement on an accrual basis using the

effective interest method.

The Branch, ceases accruing interest income on non-performing loans according to the related

regulation.



15


VI. EXPLANATIONS ON FEE AND COMMISSION INCOME AND EXPENSES:

All fees and commission income/expenses are recognised on an accrual basis, except for certain commission income and fees for various banking services which are accounted for as income at the time

of collection. Borrowing fees and commission expenses paid to other financial institutions are

recognised as operational costs and recorded using the “effective interest method”. Contract based fees or fees received in return for services such as the purchase and sale of assets on behalf of a third party or

legal person are recognised as income at the time of collection.

VII. EXPLANATIONS ON FINANCIAL ASSETS:

The Branch classifies and accounts its financial assets as “Fair value through profit or loss”, “Available- for-sale”, “Loans and receivables” or “Held-to-maturity”. Sales and purchases of the financial assets mentioned above are recognised at the “settlement dates”. The appropriate classification of financial assets is determined at inception according to Branch management’s purpose of purchase.

a. Financial assets at fair value through profit or loss:

This category has two sub categories: “Trading financial assets” and “Financial assets designated at fair value through profit or loss at initial recognition.”

Trading financial assets are financial assets which were either acquired for generating a profit from

short-term fluctuations in prices or dealers’ margin, or are financial assets included in a portfolio in which a pattern of short-term profit making exists.

Trading financial assets are initially recognised at fair value and are subsequently re-measured at

their fair value. However, if fair values cannot be obtained from the fair market transactions, it is accepted that the fair value cannot be measured reliably and financial assets are measured using the

official prices announced by the CBRT. All gains and losses arising from these evaluations are

recognised in the income statement. Interest earned while holding financial assets is reported as interest income and dividends received are included separately in dividend income.

Derivative financial instruments are classified as trading financial assets unless they are not designated as hedge instruments.

The Branch has no financial assets designated as financial assets at fair value through profit or loss.



16


VII. EXPLANATIONS ON FINANCIAL ASSETS (Continued)

b. Loans and receivables:

Financial assets that are originated by the Branch by providing money, services or goods to

borrowers are categorised as loans and receivables. Loans and receivables originated by the Branch are carried initially at cost and subsequently recognised at the amortised cost value calculated using

the “effective yield method”. If the collectibility of any receivable is identified as limited or doubtful by the management through

assessments and estimates, the Branch provides general and specific provisions for these loans and

receivables in accordance with the “Communiqué Related to Principles and Procedures on Determining the Qualifications of Banks’ Loans and Other Receivables and the Provision for These Loans and Other Receivables” published in the Official Gazette dated November 1, 2006,

No.26333 and the “Communiqué regarding the changes in the Communiqué Related to Principles and Procedures on Determining the Qualifications of Banks’ Loans and Other Receivables and the Provision for These Loans and Other Receivables” published in the Official Gazette No. 27119 dated January 23, 2009. The Branch makes its general provision calculations appropriate in accordance with the regulations published on June 18, 2011 and May 28, 2011 in Official Gazette

numbered 27968 and 27947 respectively.

Provision expenses are deducted from the net income of the period. Uncollectible receivables are

written-off after all the legal procedures are finalised. If there is a subsequent collection from a

receivable that was already provisioned in the previous years, the recovery amount is deducted from specific provisions and included in the income statement.

c. Held-to-maturity financial assets:

Held-to-maturity financial assets are assets that are not classified under “loans and receivables” with fixed maturities and fixed or determinable payments where management has the intent and ability to hold the financial assets to maturity. Held-to-maturity financial assets are initially

recognised at cost, and subsequently carried at amortised cost using the “effective yield method”; interest earned whilst holding held-to-maturity securities is reported as interest income. Interest income from held-to-maturity financial assets is reflected in the income statement.

There are no financial assets that were previously classified as held-to-maturity but which cannot be subject to this classification for two years due to the contradiction of classification principles.

The Branch has no financial assets that are classified as held-to-maturity as of December 31, 2011 and December 31, 2010.

d. Available-for-sale financial assets:

Financial assets available-for-sale consists of financial assets other than “Loan and receivables”, “Held-to-maturity” and “Financial assets at fair value through profit or loss”. Debt securities

classified as available-for-sale financial assets are subsequently remeasured at fair value. Unrealised gains and losses arising from changes in the fair value of securities classified as

available-for-sale are recognised in shareholders’ equity as “Marketable securities value increase fund”, unless there is a permanent decline in the fair values of such assets or they are disposed of. When these securities are disposed of or impaired, the related fair value differences accumulated in

the shareholders’ equity are transferred to the income statement.



17


VIII. EXPLANATIONS ON IMPAIRMENT OF FINANCIAL ASSETS:

Where the estimated recoverable amount of the financial asset, being the present value of the expected

future cash flows discounted based on the “effective interest method”, or the fair value if one exists is lower than its carrying value, then it is concluded that the asset under consideration is impaired. A

provision is made for the diminution in value of the impaired financial asset and it is charged against the

income for the year.

The principles regarding the accounting of provisions of loans and receivables are explained in detail in

Note VII.b. of this section.

IX. EXPLANATIONS ON OFFSETTING FINANCIAL INSTRUMENTS:

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when the Branch has a legally enforceable right to offset the recognised amounts and there is an intention to

collect/pay related financial assets and liabilities on a net basis or to realise the asset and settle the

liability simultaneously.

X. EXPLANATIONS ON SALES AND REPURCHASE AGREEMENTS AND SECURITIES LENDING TRANSACTIONS:

The Branch does not have any sales and repurchase agreements and securities lending transactions as of December 31, 2011 and December 31, 2010.

Securities subject to repurchase agreements (“repo”) are classified as “Fair value difference through profit or loss”, “Available-for-sale” and “Held-to-maturity” according to the investment purposes of the Branch and measured according to the portfolio to which they belong. Funds obtained from repurchase

agreements are accounted under “Funds Provided under Repurchase Agreements” in liabilities and the difference between the sale and repurchase price is accrued over the life of repurchase agreements using the “effective interest method”.

Funds given against securities purchased under agreements (“reverse repo”) to resell are accounted under “Receivables from Reverse Repurchase Agreements” in the balance sheet. The difference between the purchase and determined resell price is accrued over the life of repurchase agreements

using the “effective interest method”.

XI. EXPLANATIONS ON ASSETS HELD FOR RESALE AND RELATED TO DISCONTINUED OPERATIONS AND EXPLANATIONS ON LIABILITIES RELATED WITH THESE ASSETS:

The Branch has no assets held for sale and discontinued operations and any related liabilities as at the balance sheet date (31 December 2010: TL 25).

Assets held-for-resale consist of tangible assets that were acquired due to non-performing receivables, and are accounted in the financial statements in accordance with the “Communiqué Regarding the Principles and Procedures for the Disposals of Immovables and Commodities Acquired due to

Receivables and for Trading of Precious Metal” published in the Official Gazette dated November 1, 2006, No.26333.

XII. EXPLANATIONS ON GOODWILL AND OTHER INTANGIBLE ASSETS:

The Branch has no goodwill as at December 31, 2011 and December 31, 2010.

Intangible assets consist of softwares. The intangible assets are amortized in their useful lifes, in 3 years, on a straight-line basis (31 December 2011: None).



18


XIII. EXPLANATIONS ON TANGIBLE FIXED ASSETS:

Property and equipment is measured at its cost when initially recognised and any directly attributable

costs of setting the asset in working order for its intended use are included in the initial measurement. Subsequently, property and equipment is carried at cost less accumulated depreciation and impairment,

if any.

Depreciation is calculated over of the cost of property and equipment using the straight-line method.

The expected useful lives are stated below:

Buildings 50 years

Furniture, fixture and vehicles 5 years

The depreciation charge for items remaining in property and equipment for less than an accounting

period at the balance sheet date is calculated in proportion to the period the item remained in property

and equipment.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written-

down immediately to its recoverable amount and the impairment for the diminution in value is charged to the income statement.

Gains and losses on the disposal of property and equipment are determined by deducting the net book value of the property and equipment from its sales revenue.

Expenditures for the repair and renewal of property and equipment are recognised as expense. The capital expenditures made in order to increase the capacity of the tangible asset or to increase its future

benefits are capitalised over the cost of the tangible asset. The capital expenditures include the cost

components which are used either to increase the useful life or the capacity of the asset or the quality of the product or to decrease the costs.

There are no pledges, mortgages or purchase commitments on property and equipment as of December 31, 2011 and December 31, 2010.

XIV. EXPLANATIONS ON LEASING TRANSACTIONS:

The Branch has no leasing transactions as of December 31, 2011 and December 31, 2010.

XV. EXPLANATIONS ON PROVISIONS AND CONTINGENT COMMITMENTS:

Provisions and contingent liabilities are accounted in accordance with “Turkish Accounting Standard for Provisions, Contingent Liabilities and Contingent Assets” (“TAS 37”).

Provisions are recognised when the Branch has a present legal or constructive obligation as a result of

past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The provision

for contingent liabilities arising from past events should be recognised in the same period of occurrence

in accordance with the matching principle. When the amount of the obligation cannot be estimated and there is no possibility of an outflow of resources from the Branch, it is considered that a “contingent” liability exists and it is disclosed in the related notes to the financial statements.



19


XVI. EXPLANATIONS ON OBLIGATIONS RELATED TO EMPLOYEE RIGHTS:

a. Defined Benefit Plans:

Under the Turkish Labour Law, the Branch is obliged to pay a certain employment termination benefit to the employees who have been retired or whose employment is terminated other than the

reasons specified in the Turkish Labour Law.

In accordance with “Turkish Accounting Standard for Employee Rights” (“TAS 19”) the reserve for employment termination benefits is calculated by using Projection Method based on personnel

service completion time and previous experience gained. The reserve for employment termination

benefits is discounted by the rate of return of the goverment bonds at the balance sheet date.

The Branch has no employees who are members of any foundation or likewise corporations.

b. Defined Contribution Plans:

In accordance with the law the Branch is obliged to pay a contribution fee to Social Security

Institution (“SSI”) on behalf of the employees. The Branch has no other payment obligations to employees or “SSI”. These contribution fees are reflected to personnel expenses at the date of

accrual.

c. Short-Term Benefits to Employees:

Vacation fees defined as “Short-Term Benefits to Employees” in accordance with “Turkish Accounting Standard for Employee Rights” (“TAS 19”) are accrued in the periods that they were entitled to and they cannot be discounted.

XVII. EXPLANATIONS ON TAXATION:

a. Current tax:

“Corporate Tax Law” (“New Tax Law”) No.5520 was taken into effect after being published in the Official Gazette dated June 21, 2006 No.26205. Many clauses of the “New Tax Law” are effective from January 1, 2006. According to this Law, the corporate tax rate is 20% (2010: 20%). Corporate

tax is calculated on the total income of the Bank after adjusting for certain disallowable expenses,

exempt income (eg. gain on subsidiaries, investment incentives) and investments and other allowances *eg. research and development expenses). No further tax is payable unless the profit is

distributed.

Dividends paid to non-resident corporations, which have a place of business in Turkey or are

resident corporations, are not subject to withholding tax. Otherwise, dividends paid are subject to

withholding tax at the rate of 15% after July 23, 2006. An increase in capital via issuing bonus shares is not considered as profit distribution and thus does not incur withholding tax.

.



20


XVII. EXPLANATIONS ON TAXATION (Continued)

a. Current Tax (Continued)

Corporations are required to pay advance corporate tax quarterly at a rate of 20% on their corporate

income. Advance tax is declared by the 14th and paid by the 17th day of the second month following each calendar quarter end. Advance tax paid by corporations is for the current period is

credited against the annual corporation tax calculated on their annual corporate income in the

following year. Despite the offset, if temporary prepaid tax remains, this balance can be refunded or used to offset any other financial liabilities to the government.

A 75% portion of the capital gains derived from the sale of equity investments and immovable

properties held for at least two years is tax exempt, if such gains are added to paid-in capital or held

in a special account under shareholders’ equity for five years.

In Turkey, there is no procedure for a final and definitive agreement on tax assessments.

Companies file their tax returns until the twenty fifth day of the following fourth month after the closing of the accounting year to which they relate.

Tax returns are open for five years from the beginning of the year following the date of filing

during which period the tax authorities have the right to audit tax returns, and the related

accounting records on which they are based, and may issue re-assessments based on their findings.Under the Turkish Corporate Tax Law, losses can be carried forward to offset against

future taxable income for up to five years. Tax losses cannot be carried back to offset profits from

previous periods.

b. Deferred tax:

The Branch calculates and accounts for deferred income taxes for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in these financial

statements in accordance with “Turkish Accounting Standard for Income Taxes” (“TAS 12”). In the deferred tax calculation, the enacted tax rate, in accordance with the tax legislation, is used as of the balance sheet date.

Deferred tax liabilities are recognized for all resulting temporary differences whereas deferred tax

assets resulting from temporary differences are recognized to the extent that it is probable that

future taxable profit will be available against which the deferred tax assets can be utilized. The calculated deferred tax assets and deferred tax liabilities are presented on a net basis in these

financial statements.

XVIII. EXPLANATIONS ON BORROWINGS:

Trading financial liabilities and derivative instruments are valued at the fair value and other financial liabilities are carried at amortised cost using the “effective interest method”.

XIX. EXPLANATIONS ON ISSUANCE OF SHARE CERTIFICATES:

Direct transaction costs regarding the issuance of share certificates are recorded under shareholders’ equity after eliminating the tax effects. The Branch has no share certificates issued in 2011 and 2010.



21


XX. EXPLANATIONS ON ACCEPTANCES:

Avalized drafts and acceptances are the contingent liabilities of the Branch and are included in the off-

balance sheet commitments. The Branch has no acceptances and avalized drafts as of December 31, 2011 and December 31, 2010.

XXI. EXPLANATIONS ON GOVERNMENT GRANTS:

The Branch has no government grants at as of December 31, 2011 and December 31, 2010.

XXII. EXPLANATIONS ON PROFIT RESERVES AND PROFIT APPROPRIATION:

Retained earnings are available for profit distribution, subject to the written permission of BRSA.

XXIII. EXPLANATIONS ON EARNINGS PER SHARE:

Earnings per share disclosed in the income statement is calculated by dividing net profit for the year to

the weighted average number of shares outstanding during the period concerned.

December 31, 2011 December 31, 2010

Distributable Net Profit to Ordinary Shares 58.529 26.378

Weighted Average Number of Issued Ordinary Shares (Thousand) 53.655 53.655

Earnings Per Share (Disclosed in full TL for nominal shares) 1,0908 0,4916

In Turkey, companies can increase their share capital by making a pro-rata distribution of shares “bonus shares” to existing shareholders from retained earnings. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in

respect of bonus shares issued without a corresponding change in resources by giving them a retroactive effect for the year in which they were issued and for each earlier period.

XXIV. EXPLANATIONS ON RELATED PARTIES:

For the purpose of these financial statements, shareholders, key management personnel and board members together with their families and companies controlled by/affiliated with them, and associated

companies are considered and referred to as related parties in accordance with “Turkish Accounting Standard for Related Parties” (“TAS 24”). The transactions with related parties are disclosed in detail in Note VII of Section Five.

XXV. EXPLANATIONS ON CASH AND CASH EQUIVALENTS:

For the purposes of the cash flow statement, cash includes cash, effectives and demand deposits

including balances with the Central Bank; and cash equivalents include interbank money market placements and time deposits at banks with original maturity periods of less than three months.

XXVI. EXPLANATIONS ON SEGMENT REPORTING:

Informations related with areas of operations of the bank prepared in line with the organizational and

internal reporting structure of the branch and in accordance with “Turkish Financial Reporting Standards related with Segment Reporting” (“TFRS 8”) are disclosed.



22


XXVI. EXPLANATIONS ON SEGMENT REPORTING (Continued)

The Branch manages its banking operations through three strategic business units: Retail banking, Corporate and Commercial banking and Treasury operations.

Retail banking provides deposits and loans to individual and small business customers. Other products

and services include foreign currency exchange, cheques and bills and money orders.

Corporate and Commercial banking provided corporate and commercial customers financial solutions

and banking services. Products and services include FC and TL loans, foreign trade finance, domestic and international non-cash credit line facilities such as letters of credit and guarantees, foreign exchange

and deposits.

Treasury operations are managed by the Treasury Department. The Treasury Department has

transactions such as purchases-sales of domestic marketable securities and TL and FC placement transactions.

Informations about the operating segments as of December 31, 2011 are presented on the table below.

Retail

Banking

Corporate and

Commercial Banking Treasury Other (*)

Total operations

of the Branch

December 31, 2011

Interest Income 6 68.006 100.263 - 168.275

Net Fees and Commissions Income - 26.126 - - 26.126

Other Operating Income and Trading Income/(Loss) (Net) - 5.439 - - 5.439

Operating Revenue 6 99.571 100.263 - 199.840

Interest Expense (420) (9.862) (99.116) - (109.398)

Other Operating Expense and Provision for Loan Losses and Other Receivables (900) (12.603) (3.000) - (16.503)

Operating Expense (1.320) (22.465) (102.116) - (125.901)

Operating Profit (1.314) 77.106 (1.853) - 73.939

Profit Before Tax - - - - 73.939

Corporate Tax - - - - (15.410)

Minority Rights - - - - -

Net Profit - - - - 58.529

Segment Assets (*) 5.684 579.845 2.944.194 9.926 3.539.649

Investment in Associates and Subsidiaries - - - - -

Total Assets 5.684 579.845 2.944.194 9.926 3.539.649

Segment Liabilities(*) 9.517 328.762 3.020.531 23.630 3.516.040

Shareholders’ Equity - - - 157.209 157.209

Total Liabilities 9.517 328.762 3.020.531 180.839 3.539.649

(*) “Segment Assets” in “Other” column include tangible assets amounting to TL 8.695, intangible assets amounting to TL 86, tax assets amounting to TL 468 and other assets amounting to TL 677; “Segment Liabilities” in the “Other” column include other liabilities amounting to TL 8.934, provisions amounting to TL 5.944 and tax liability amounting to TL 8.752.



23


XXVI. EXPLANATIONS ON SEGMENT REPORTING (Continued)

Retail

Banking

Corporate and

Commercial Banking Treasury Other (*)

Total operations

of the Branch

December 31, 2010

Interest Income 11 28.929 12.006 - 40.946

Net Fees and Commissions Income - 15.162 - - 15.162

Other Operating Income and Trading Income/(Loss) (Net) - 4.693 - - 4.693

Operating Revenue 11 48.784 12.006 - 60.801

Interest Expense (395) (18.886) - - (19.281)

Other Operating Expense and Provision for Loan Losses and Other Receivables (497) (6.291) (1.655) - (8.443)

Operating Expense (892) (25.177) (1.655) - (27.724)

Operating Profit (881) 23.607 10.351 - 33.077

-

Profit Before Tax - - - - 33.077

Corporate Tax - - - - (6.699)

Minority Rights - - - - -

Net Profit - - - - 26.378

Segment Assets (*) 129 1.119.282 705.627 9.614 1.834.652

Total Assets 129 1.119.282 705.627 9.614 1.834.652

Segment Liabilities(*) 6.063 1.705.638 - 22.824 1.734.525

Shareholders’ Equity - - - 100.127 100.127

Total Liabilities 6.063 1.705.638 - 122.951 1.834.652

(*) “Segment Assets” in “Other” column include tangible assets amounting to TL 8.905, tax assets amounting to TL 427, assets held for resale amd related to discontinued operations amounting to TL 25 and other assets amounting to TL 257; “Segment Liabilities” in the “Other” column include other liabilities amounting to TL 16.014, provisions amounting to TL 2.558 and tax liability amounting to TL 4.252.

XXVII. RECLASSIFICATIONS

There are no reclassifications to the previous years’ financial statements in order to be in conformity with the financial statements as of 31 December 2011.

XXVIII. OTHER INFORMATION None.



24

SECTION FOUR

INFORMATION RELATED TO FINANCIAL STRUCTURE OF THE BRANCH

I. EXPLANATIONS ON CAPITAL ADEQUACY RATIO:

The capital adequacy ratio of the Branch is 31,80% (December 31, 2010: 28,92%), which is higher than the minimum required ratio stipulated in the legislation.

The capital adequacy ratio of the Bank is calculated in accordance with the “Regulation Regarding the Measurement and Evaluation of Banks’ Capital Adequacy Ratio” and “Regulation Regarding Banks’ Shareholders Equity” published as of November 1, 2006 and “Regulation Regarding the Amendments on Regulation Regarding the Measurement and Evaluation of Bank’ Capital Adequacy Ratio” published as of October 10, 2007 and March 22, 2008 (together referred as “Regulation Regarding Capital

Adequacy”). The following tables show the details of “risk weighted assets” and the calculation of “shareholders’ equity” for the capital adequacy ratio calculation.

Information related to capital adequacy ratio:

Risk Weights (1)

%0 %10 %20 %50 %100

Amount subject to credit risk

Balance sheet items (Net) 2.999.773 - 73.238 11.866 352.149

Cash 25.117 - - - -

Matured marketable securities - - - - -

The Central Bank of the Republic of Turkey 95.503 - - - -

Domestic, foreign banks, foreign head offices and branches 2.363.291 - 72.882 - 77.347

Interbank money market placements 63.500 - - - -

Receivables from reverse repurchase transactions - - - - -

Reserve requirements with the CBRT 69.192 - - - -

Loans 375.374 - - 11.864 187.823

Non-performing receivables (Net) - - - - 5.684

Lease receivables - - - - -

Available-for-sale financial assets - - - - -

Held-to-maturity investments - - - - -

Receivables from the disposal of assets - - - - -

Sundry creditors - - - - 225

Interest and income accruals 27 - 356 2 71.934

Investments in associates, subsidiaries and joint ventures (Net) - - - - -

Fixed assets - - - - 8.695

Other assets 7.769 - - - 441

Off-balance sheet items 41.684 - 7 18.779 395

Non-cash loans and commitments 41.684 - 7 18.779 395

Derivative financial instruments - - - - -

Non-risk weighted accounts - - - - -

Total Risk Weighted Assets 3.041.457 - 73.245 30.645 352.544

(1) There are no assets weighted with 150% and 200% risk.



25

INFORMATION RELATED TO FINANCIAL STRUCTURE OF THE BRANCH (Continued)

I. EXPLANATIONS ON CAPITAL ADEQUACY RATIO (Continued)

Summary information about the capital adequacy ratio:

December 31, 2011

December 31, 2010

Amount subject to credit risk “ASCR” 382.516 226.598

Amount subject to market risk “ASMR” 69.238 81.900

Amounts subject to operational risk “ASOR” 57.777 40.817

Shareholders’ equity 162.053 101.011

Shareholders’ equity /(ASCR+ASMR+ASOR) *100 31,80 28,92

Information about the shareholders’ equity items:

CORE CAPITAL December 31, 2011 December 31,2010

Paid-in capital 53.655 53.655

Nominal capital 53.655 53.655

Capital Commitments (-) - -

Inflation adjustment to share capital - -

Share premium - -

Share cancellation profits - -

Legal reserves - -

First legal reserve (Turkish Commercial Code 466/1) - -

Second legal reserve (Turkish Commercial Code 466/2) - -

Other legal reserve per special legislation - -

Status reserves - -

Extraordinary reserves 1.301 1.301

Reserves allocated by the General Assembly - -

Retained earnings 1.301 1.301

Accumulated loss - -

Foreign currency share capital exchange difference - -

Inflation adjustment of legal reserves, status reserves and extraordinary reserves - -

Profit 103.183 44.654

Current year profit (net) 58.529 26.378

Prior year profit 44.654 18.276

Provisions for possible risks (up to 25% of core capital) - -

Profit on disposal of associates, subsidiaries and immovables to be transferred to share capital - -

Primary subordinated loans up to 15% of core capital - -

Uncovered portion of loss with reserves (-) - -

Current period loss (net) - -

Prior periods loss - -

Special costs (-) -

Prepaid expenses (-) (*) - (80)

Intangible Assets (-) (86) -

Deferred tax asset amount exceeding 10% of core capital (-) - -

Limit exceeding amount regarding the third clause of the article 56 of the Law (-) - -

Total Core Capital 158.053 99.530

(*) According to the amendment on Communique on Equity of Banks published in the Official Gazette dated March 10, 2011 and numbered 27870, prepaid expenses are not deducted from shareholders’ equity and are included in the “Other Assets” account which is in 100% risk group.



26


I. EXPLANATIONS ON CAPITAL ADEQUACY RATIO (Continued)


SUPPLEMENTARY CAPITAL

General Provisions 4.930 1.273

45% of the movables revaluation fund - -

45% of the immovables revaluation fund - -

Bonus shares of investment in associates, subsidiaries and joint ventures - -

Primary subordinated loans that are not considered in the calculation of core capital - -

Secondary subordinated loans - -

45 % of Marketable Securities valuation fund (930) 233

From associates and subsidiaries - -

From financial Assets Available for Sale (930) 233

Inflation adjustment of Capital Reserve, Profit Reserve and Prior Years’ Income or Loss (Except inflation adjustment of Legal Reserves, Status Reserves and Extraordinary Reserves) - -

Total Supplementary Capital 4.000 1.506

TIER III CAPITAL - -

CAPITAL 162.053 101.036

DEDUCTIONS FROM THE CAPITAL - 25

Investments in Unconsolidated Financial Institutions (Domestic, Foreign) and Banks in which 10% or more equity interest is exercised - -

Investments in Financial Institutions (Domestic, foreign) and Banks, in which less

than 10% equity interest is exercised and that exceeds 10% of the total core and supplementary capital of the Bank - -

The Secondary Subordinated Loans extended to Banks, Financial Institutions (Domestic or Foreign) or Significant Shareholders of the Bank and the Debt Instruments That Have Primary or Secondary Subordinated Loan Purchased From Them - -

Loans extended as contradictory to articles 50 and 51 of the Law - -

The Net Book Value of Bank’s Immovables That Are Over 50% of Shareholders’ Equity and Immovables or Commodities That Are Received on behalf of the Receivables From Customers and are to be Disposed of Accordingly with Banking Law article 57 as they have been Held for More Than Five Years From the Acquisition Date - 25

Other - -

TOTAL SHAREHOLDERS' EQUITY 162.053 101.011



27


II. EXPLANATIONS ON CREDIT RISK:

a. Credit risk is monitored by reference to credit risk ratings and managed by limiting the aggregate risk to banks with high credibility rate and other financial institutions. The Branch requires

additional guarantees from the real persons and entities that the Branch extends loans to who were

assessed as high risk after performing detailed risk ratings on individual loans.

The credit worthiness of borrowers is monitored regularly. Audited information is obtained for the

new rendered loans if possible. Unaudited information is examined in detail by loan department.

b. At December 31, 2011, the Branch has no forward and option contracts or any other similar

agreements.

c. At December 31, 2011, the Branch has been faced with an insignificant amount of credit risk exposure.

d. The Branch subjects the non-cash loans which are reimbursed, to the same risk weight as the loans which are passed due but not collected. Credit risk is defined broadly for contracts and positions

bearing all types of cash and non-cash counterparty risk, and managed accordingly.

Rescheduled or restructured loans are monitored by the Branch according to the risk management

and monitoring principles of the Branch. The financial conditions and commercial operations of the

related customers are continuously analysed where interest and capital payments according to new payment plans are closely monitored.

e. The Branch’s transactions in foreign countries with regard to banking operations and credit facilities are mainly held with corporations based in Islamic Republic of Iran, where the head office

of the Branch is also based.

f. The Branch is not active in international banking market.

g. 1. The proportion of the largest 100 cash loan balances in the total cash loan portfolio of the Branch is 100% (December 31, 2010: 100%).

2. The proportion of the largest 100 non-cash loan balances in the total non-cash loan portfolio of the Branch is 100% (December 31, 2010: 100%).

3. The proportion of the cash and non-cash loan balances in the total assets and non-cash loans is 27% (December 31, 2010: 63%).

h. The general loan loss provision amount provided for credit risk is TL4.930 thousand (December 31, 2010: TL1.273 thousand).



28


II. EXPLANATIONS ON CREDIT RISK (Continued)

i. Distribution of the credit risk according to users and geographical regions:

Loans granted to real

persons and corporate

entities

Loans granted to

Banks and other

financial Instutitions Marketable Securities (1)

Other Loans (2)

Off Balance Sheet (2)

December

31, 2011

December

31, 2010

December

31, 2011

December

31, 2010

December

31, 2011

December

31, 2010

December

31, 2011

December

31, 2010

December

31, 2011

December

31, 2010

Loans

concentration

according to the

type of

borrowers

Private Sector 19.197 9.030 - 16.938 29.277 51.225 - - 51.493 72.682

Public Sector - - - 80.551 103.659 - - - -

Banks - - 566.137 1.093.285 - - 2.644.554 355.035 16.269 32.485 Individual

Customers 195 158 - - - - - - 1.025 597

Share certificates - - - - - - - - - -

Total 19.392 9.188 566.137 1.110.223 109.828 154.884 2.644.554 355.035 68.787 105.764

Information

according to

geographical

concentration

Domestic 19.392 9.188 - - 84.855 133.883 228,502 196.827 52.695 73.452 European Union

Countries - - - - - - 3.467 2.918 - - OECD Countries (3)

- - - - - - 18 3.017 - - Off-shore

banking regions - - - - - - - - - -

USA, Canada - - - - - - - - - -

Other Countries - - 566.137 1.110.223 24.973 21.001 2.412.567 152.273 16.092 32.312

Total 19.392 9.188 566.137 1.110.223 109.828 154.884 2.644.554 355.035 68.787 105.764 (1)

Consists of available-for-sale financial assets. (2)

Transactions defined as loans according to the article number 48 of the law number 5411 other than those on the first three columns of the UCA.

(3) OECD Countries other than EU countries, USA and Canada

j. Information according to geographical concentration:

Assets Liabilities Non-cash loans

Capital

Expenditures Net profit

December 31, 2011

Domestic 436.984 58.226 52.518 - 58.529 European Union Countries 3.467 - - - - OECD Countries (1) 18 969 - - - Off-shore Banking Regions - - - - - USA, Canada - - - - - Other Countries 3.099.179 3.323.245 16.092 - - Associates, Subsidiaries and Joint ventures - - - - - Unallocated Assets/liabilities (2) - - - - -

Total 3.539.649 3.382.440 68.610 - 58.529

December 31, 2010 Domestic 511.835 47.529 73.290 - 26.378 European Union Countries 2.918 - - - - OECD Countries (1) 3.017 815 - - - Off-shore Banking Regions - - - - - USA, Canada - - - - - Other Countries 1.316.882 1.686.181 32.312 - - Associates, Subsidiaries and Joint ventures - - - - - Unallocated Assets/liabilities (2) - - - - -

Total 1.834.652 1.734.525 105.602 - 26.378 (1) OECD Countries other than EU countries, USA and Canada (2)

Unallocated assets/liabilities which could not be distributed according to a consistant principle



29



k. Information on amounts that are exposed to credit risk:


Balance sheet items that are exposed to credit risk:

Bank placements 2.581.036 355.035

Loans and advances to customers 585.529 1.119.411

-Corporate 585.334 1.119.253

-Consumer 195 158

Trading Securities - -

-Public Securities - -

-Share certificates - -

-Other marketable securities - -

-Derivative financial instruments - -

Investment Securities 109.828 154.884

-Public Debt Securuties 80.551 103.659

-Share certificates - -

-Other marketable securities 29.277 51.225

Receivables from financial leasing - -

Other assets 677 257

Credit risk exposures relating to off-balance sheet items:

Financial guarantees 68.597 105.589

Loan commitments and other credit related liabilities 13 13

l. Loans and other receivables past due:

December 31, 2011 Corporate Loans Consumer Loans Total

Past due up to 30 days 2.565 - 2.565

Past due 30-60 days - - -


Total 2.565 - 2.565


Past due up to 30 days - - -



Total - - -



30



m. Sector concentrations for cash loans:


TL (%) FC (%) TL (%) FC (%)

Agricultural - - - - - - - -

Farming and raising livestock - - - - - - - -

Forestry - - - - - - - -

Fishing - - - - - - - -

Manufacturing - - - - - - - -

Mining - - - - - - - -

Production - - - - - - - -

Electric, gas and water - - - - - - - -

Construction 12.278 18,52 - - - - 5.170 0,47

Services 53.837 81,19 513.536 100,00 4.445 53,33 1.088.840 98,01

Wholesale and retail trade 1.235 1,86 - - - - - -

Hotel, food and beverage services - - - - - - - -

Transportation and telecommunication - - - - - - - -

Financial Institutions 52.602 79,33 513.536 100,00 4.445 53,33 1.088.840 98,01

Real estate and renting services - - - - - - - -

Self-employment services - - - - - - - -

Education services - - - - - - - -

Health and social services - - - - - - - -

Other 194 0,29 - - 3.890 46,67 16.937 1,52

Total 66.309 100,00 513.536 100,00 8.335 100,00 1.110.947 100,00



31


III. EXPLANATIONS ON MARKET RISK:

The Branch defines the market risk as the fluctuations in its portfolio value with the changes in the parameters such as market prices, interest rate, currency rates and prices of common stocks. The

measurement of market risk is significant for the Branch.

The Branch considers currency risk and interest rate risk as the main components of market risk. The

table below shows how the market risk as of December 31, 2011 and 2010 is calculated in accordance

with the Section 3 of the “Regulation Regarding Measurement and Evaluation of the Bank’s Capital Adequacy Ratio”, published in the Official Gazette No.26333 dated November 1, 2006, namely

“Calculation of Market Risk with Standard Method”.

a. Information on Market Risk:

December 31,

2011

December 31,

2010

(I) Capital to be Employed for General Market Risk - Standard Method 858 923

(II) Capital to be Employed for Specific Risk - Standard Method 2.342 4.098

(III) Capital to be Employed for Currency Risk - Standard Method 2.339 1.531

(IV) Capital to be Employed for Commodity Risk - Standard Method - -

(V) Capital to be Employed for Settlement Risk - Standard Method - -

(VI) Capital to be Employed for Market Risk Due to Options - Standard Method - -

(VII) Total Capital to be Employed for Market Risk for Banks Applying Risk Measuring Model - -

(VIII) Total Capital to be Employed for Market Risk (I+II+III+IV+V+VI+VII) 5.539 6.552

(IX) Amount Subject to Market Risk 12,5xVIII) or (12,5xVII) 69.238 81.900

b. Market risk table of calculated market risk during the month ends:


Average Maximum Minimum Average Maximum Minimum

Interest Rate Risk 54.634 74.675 39.200 2.188 5.021 300

Share Certificates Risk - - - - - -

Currency Risk 25.744 29.650 19.500 1.303 1.531 1.089

Commodity Risk - - - - - -

Settlement Risk - - - - - -

Option risk - - - - - -

Total Amount Subject to Risk 80.378 104.325 58.700 3.491 6.552 1.389



32


IV. EXPLANATIONS ON OPERATIONAL RISK:

The Bank calculates the amount subject to operational risk based on “Basic Indicator Method” by using 2010, 2009 and 2008 year-end gross income balances of the Bank, in accordance with Section 4 of the “Regulation Regarding Measurement and Evaluation of Banks’ Capital Adequacy Ratio” effective from June 1, 2007, published in the Official Gazette No. 26333 dated November 1, 2006, namely “The Calculation of the Amount Subject to Operational Risk”. As of December 31, 2011, the total amount subject to operational risk is TL57.777 thousand (December 31, 2010: TL40.817 thousand) and the

amount of the related capital requirement is TL4.622 thousand (December 31, 2010: TL3.265 thousand).

V. EXPLANATIONS ON CURRENCY RISK:

Since floating exchange rates have been implemented, the Branch monitors its net foreign currency position continuously. The Branch does not have derivatives or net foreign currency investments to

hedge its currency risk.

The Branch is taking a position according to the foreign currency basket of the CBRT to avoid foreign

exchange risk. Foreign currency asset and liability management on price, liquidity and credit risks are performed in order to carry on profitability in the framework of the Branch’s targeted risk and return profile. Measurable and manageable risks are taken on the basis of the prudential ratios.

The Branch’s foreign exchange bid rates as of the date of the financial statements and for the last five

days prior to that date are presented below:

USD EUR JPY AED

December 31, 2011 TL 1,8889 TL 2,4438 TL 2,4340 TL 0,5168


December 28, 2011 TL 1,8897 TL 2,4702 TL 2,4278 TL 0,5156 December 27, 2011 TL 1,8847 TL 2,4633 TL 2,4158 TL 0,5152



The simple arithmetical averages of the Branch’s foreign exchange bid rates for the last thirty days are:

USD: TL1,8578

Euro: TL2,4515 100 Japanese Yen: TL2,3824

AED : TL0,5168

Sensitivity for currency risk:

The sensitivity of the Branch for a possible change in exchange rates has been analized. In the table

below, a 10% change in USD, Euro and Japanese Yen has been projected.

Change in Exchange Rates Impact on Profit / Loss (1)


USD 10% increase 532 201

10% decrease (532) (201)

Euro 10% increase 1.752 1.316

10% decrease (1.752) (1.316)

Yen 10% increase 15 19

10% decrease (15) (19)

(1) Before tax amounts have been presented.



33


V. EXPLANATIONS ON CURRENCY RISK (Continued)

Information on the Branch’s currency risk:

Euro USD Yen Other FC Total

December 31, 2011

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central

Bank of the Republic of Turkey 164.485 12.363 - 49 176.897

Banks 1.019.288 5.446 935 1.417.923 2.443.592

Financial Assets at Fair Value Through Profit or Loss - - - - -

Interbank Money Market Placements - - - - -

Available-for-Sale Financial Assets 24.973 - - - 24.973

Loans and Receivables 389.535 - - 125.235 514.770

Investments in Associates, Subsidiaries and Joint Ventures - - - - -

Held to Maturity Securities - - - - -

Hedging Derivative Financial Assets - - - - -

Tangible Assets - - - - -

Intangible Assets - - - - -

Other Assets 27 - - - 27

Total Assets 1.598.308 17.809 935 1.543.207 3.160.259

Liabilities

Bank Deposits 1.265.877 8.865 784 1.535.667 2.811.193

Foreign Currency Deposits 46.264 3.474 2 567 50.307

Funds from Interbank Money Market - - - - -

Borrowings 225.112 - - - 225.112

Marketable Securities Issued - - - - -

Sundry Creditors 40.991 83 - 8 41.082

Hedging Derivative Financial Liabilities - - - - -

Other Liabilities 2.551 63 - 738 3.352

Total Liabilities 1.580.795 12.485 786 1.536.980 3.131.046

Net On-Balance Sheet Position 17.513 5.324 149 6.227 29.213

Net Off Balance Sheet Position

Financial Derivative Assets - - - - -

Financial Derivative Liabilities - - - - -

Non-Cash Loans 28.447 201 - - 28.648

December 31, 2010

Total Assets 837.827 97.844 10.961 575.904 1.522.536

Total Liabilities 824.670 95.832 11.146 571.931 1.503.579

Net On-Balance Sheet Position 13.157 2.012 (185) 3.973 18.957

Net Off Balance Sheet Position - - - - -

Financial Derivative Assets - - - - -

Financial Derivative Liabilities - - - - -

Non-Cash Loans 104.039 491 - - 104.530

The table above summarizes the Branch’s exposure to foreign currency exchange rate risk, categorised by currency. Foreign currency indexed assets, classified as Turkish lira assets according to the Uniform

Chart of Accounts, are considered as foreign currency assets for the calculation of net foreign currency

position. Therefore, as of December 31, 2011, foreign currency indexed loans amounting to TL1.234 thousand (December 31, 2010: TL3.466 thousand) that is recorded on the TL column in the balance

sheet has not been included in the table above. Besides, general loan loss provision amounting to

TL3.269 thousand (December 31, 2010: TL1.175 thousand) has also not been included in the table above.



34


VI. EXPLANATIONS ON INTEREST RATE RISK

“Interest rate risk” is defined as the impact of interest rate changes on interest-sensitive assets and liabilities of the Branch.

The Branch evaluates interest rate in two dimensions. This is maturity risk originating from the differences of maturity structures and repricing risk originating from the fluctuations of net interest

margin. Interest rate risk is managed using natural hedges that arise from offsetting interest rate sensitive

assets with interest rate sensitive liabilities.

Interest rate sensitivity of assets, liabilities and off-balance sheet items (based on repricing dates):

December 31, 2011 Up to 1

Month

1 – 3

Months

3 – 12

Months

1– 5

years

Over 5

years

Non

Interest

Bearing Total

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central Bank of the Republic of Turkey - - - - - 189.812 189.812

Banks 397.757 690.612 1.364.012 - - 128.655 2.581.036

Financial Assets at Fair Value Through Profit or Loss - - - - - - -

Interbank Money Market Placements 63.518 - - - - - 63.518

Available-for-Sale Financial Assets 12.908 7.242 36.754 52.924 - - 109.828

Loans and Receivables 117.276 200.187 260.985 1.397 - 5.684 585.529

Held to Maturity Securities - - - - - - -

Other Assets (1) 88 - 354 - - 9.484 9.926

Total Assets 591.547 898.041 1.662.105 54.321 - 333.635 3.539.649

Liabilities

Bank Deposits 496.717 805.536 1.702.479 - - 22.428 3.027.160

Other Deposits 3.668 12.308 2.131 - - 46.501 64.608

Funds From Interbank Money Market - - - - - - -

Sundry Creditors - - - - - 41.930 41.930

Marketable Securities Issued - - - - - - -

Funds Borrowed From Other Financial Institutions 25.226 175.002 24.884 - - - 225.112

Other Liabilities (2) 6.645 7.928 146 - - 166.120 180.839

Total Liabilities 532.256 1.000.774 1.729.640 - - 276.979 3.539.649

Balance Sheet Long Position 59.291 - - 54.321 - 56.656 170.268

Balance Sheet Short Position - (102.733) (67.535) - - - (170.268)

Off-Balance Sheet Long Position - - - - - - -

Off-Balance Sheet Short Position - - - - - - -

Total Position 59.291 (102.733) (67.535) 54.321 - 56.556 -

(1)

“Other Assets’’ line includes Deferred Tax Assets, Tangible Assets, Assets Held for Resale and Other Assets. (2)

Shareholders’ equity is presented under “Other liabilities” item in the “Non interest bearing” column.



35


VI. EXPLANATIONS ON INTEREST RATE RISK (Continued)

December 31, 2010 Up to 1

Month

1 – 3

Months

3 – 12

Months

1 – 5

years

Over 5

years

Non-Interest

Bearing Total

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central Bank of the Republic of Turkey 10.485 - - - - 151.222 161.707

Banks and Other Financial Institutions 117.439 2.004 - - - 235.592 355.035

Financial Assets at Fair Value Through Profit or Loss (Net) - - - - - - -

Interbank Money Market Placements 34.001 - - - - - 34.001

Available-for-Sale Financial Assets (Net) - 53.011 69.801 32.072 - - 154.884

Loans and Receivables 28.443 84.907 988.880 17.052 - 129 1.119.411

Held to Maturity Securities (Net) - - - - - - -

Other Assets (1) 102 - 114 - - 9.398 9.614

Total Assets 190.470 139.922 1.058.795 49.124 - 396.341 1.834.652

Liabilities

Bank Deposits 1.001 100.435 - - - 291.359 392.795

Other Deposits 2.065 6.912 1.925 - - 59.012 69.914

Funds from Interbank Money Market - - - - - - -

Sundry Creditors 20.647 58.095 972.990 - - 155.712 1.207.444

Marketable Securities Issued - - - - - - -

Funds Borrowed From Other Financial Institutions 20.726 - 20.822 - - - 41.548

Other Liabilities (2) 16.010 3.760 - 41 - 103.140 122.951

Total Liabilities 60.449 169.202 995.737 41 - 609.223 1.834.652

Balance Sheet Long Position 130.021 - 63.058 49.083 - - 242.162

Balance Sheet Short Position - (29.280) - - - (212.882) (242.162)

Off-Balance Sheet Long Position - - - - - - -

Off-Balance Sheet Short Position - - - - - - -

Total Position 130.021 (29.280) 63.058 49.083 - (212.882) -

(1)

“Other Assets’’ line includes Deferred Tax Assets, Tangible Assets, Assets Held for Resale and Other Assets. (2)

Shareholders’ equity is presented under “Other liabilities” item in the “Non interest bearing” column.

Sensitivity for interest rates

T

The table above presents the possible effects of a change in interest rates by (+) 1% ve (-) 1% on current year profit and loss and shareholder’s equity as of December 31, 2011 and 2010.

31 December 2011 31 December 2010

Change in Interest Rate

PL

Effect

Equity

Effect

PL

Effect

Equity

Effect (+) %1 62.118 (545) (850) (379)

(- ) %1 (62.118) 544 866 759



36


V. EXPLANATIONS ON INTEREST RATE RISK (Continued)

Effective average interest rates for monetary financial instruments:

Interest rates in the below tables are the weighted average rates of the related balance sheet items.

December 31, 2011 Euro USD Yen TL

% % % %

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central Bank of the Republic of Turkey - - - -

Banks 3,73 2,87 2,57 6,44

Financial Assets at Fair Value Through Profit / Loss - - - -

Interbank Money Market Placements - - - 5,00

Available-for-Sale Financial Assets 8,17 - - 8,56

Loans and Receivables 8,67 - - 11,75

Held to Maturity Securities - - - -

Liabilities

Bank Deposits 3,30 - - 8,73

Other Deposits 3,56 1,75 - 6,88

Funds From Interbank Money Market - - - -

Sundry Creditors - - - -

Marketable Securities Issued - - - -

Funds Borrowed From Other Financial Institutions 2,85 - - -

December 31, 2010 Euro USD Yen TL

% % % %

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central Bank of the Republic of Turkey - - - 5,00

Banks 0,75 2,05 - 6,45

Financial Assets at Fair Value Through Profit / Loss - - - -

Interbank Money Market Placements - - - 1,50

Available-for-Sale Financial Assets 8,16 - - 7,95

Loans and Receivables 5,82 - 2,59 9,84

Held to Maturity Securities - - - -

Liabilities

Bank Deposits - - - 6,30

Other Deposits 3,29 2,58 - 7,50

Funds From Interbank Money Market - - - -

Sundry Creditors 3,05 - 2,62 7,62

Marketable Securities Issued - - - -

Funds Borrowed From Other Financial Institutions 2,09 - - -



37


VII. EXPLANATIONS ON LIQUIDITY RISK:

Liquidity risk arises from the mismatching of maturities of assets and liabilities. The Branch balances

the maturities of the related assets and liabilities, keeps the mismatch of maturities under control. Major

objective of the Branch’s asset and liability management is to ensure that sufficient liquidity is available to meet the Branch’s commitments to customers and to satisfy the Branch’s own liquidity needs.

The most important funding resources of the Branch for long-term and short-term liquidity needs are the

Tehran Headquarters and other banks.

Breakdown of assets and liabilities according to their outstanding maturities:

Demand Up to 1

Month 1 – 3

Months 3 – 12

Months 1 – 5

years Over 5

years

Unclassified (1)

Total

December 31, 2011

Assets

Cash (Cash in Vault, Effectives, Cash in Transit, Cheques Purchased) and Balances with the Central Bank of the Republic of Turkey 94.418 95.394 - - - - - 189.812

Banks 128.655 397.757 690.612 1.364.012 - - - 2.581.036

Financial Assets at Fair Value Through Profit or Loss - - - - - - - -

Interbank Money Market Placements - 63.518 - - - - - 63.518

Available-for-sale Financial Assets - 12.908 7.242 36.754 52.924 - - 109.828

Loans and Receivables - 117.276 200.187 260.985 1.397 - 5.684 585.529

Held-to-maturity Securities - - - - - - - -

Other Assets (1) - 88 - 354 - - 9.484 9.926

Total Assets 223.073 686.941 898.041 1.662.105 54.321 - 15.168 3.539.649

Liabilities

Bank Deposits 118.277 400.868 805.536 1.702.479 - - - 3.027.160

Other Deposits 49.310 859 12.308 2.131 - - - 64.608

Funds Borrowed From Other Financial Institutions - 25.226 175.002 24.884 - - - 225.112

Funds From Interbank Money Market - - - - - - - -

Marketable Securities Issued - - - - - - - -

Sundry Creditors 41.930 - - - - - - 41.930

Other Liabilities (2) 2.297 6.645 7.928 146 - - 163.823 180.839

Total Liabilities 211.814 433.598 1.000.774 1.729.640 - - 163.823 3.539.649

Net Liquidity Gap 11.259 253.343 (102.733) (67.535) 54.321 - (148.655) -

December 31, 2010

Total Assets 362.110 215.174 123.083 1.054.631 70.127 - 9.527 1.834.652

Total Liabilities 506.083 60.449 169.202 995.737 41 - 103.140 1.834.652

Net Liquidity Gap (143.973) 154.725 (46.119) 58.894 70.086 - (93.613) - (1)

Assets that are necessary for banking activities and that cannot be liquidated in the short-term, such as tangible assets,

investments, subsidiaries, stationary, pre-paid expenses and non-performing loans, are classified in this column.

(2) Shareholders’ Equity is presented under the “Other Liabilities” item in the “Unallocated” column.



38


VII. EXPLANATIONS ON LIQUIDITY RISK (Continued)

Breakdown of financial liabilities according to their remaining contractual maturities:

December 31, 2011

Demand and

Up to 1 month 1-3 Months

3-12

Months

1-5 Years

Above 5

years Total

Liabilities

Deposit 569.786 822.471 1.736.645 - - 3.128.902

Funds Borrowed From Other Financial Institutions 25.257 175.967 25.197 - - 226.421

Total 595.043 998.438 1.761.842 - - 3.355.323

December 31, 2010

Demand and

Up to 1 month 1-3 Months

3-12

Months

1-5 Years

Above 5

years Total

Liabilities

Deposit 350.724 108.519 1.952 - - 461.195

Funds Borrowed From Other Financial Institutions 20.749 - 21.017 - - 41.766

Sundry Creditors (1) 20.668 58.416 999.272 - - 1.078.356

Total 392.141 166.935 1.022.241 - - 1.581.317

(1) Sundry Creditors include cash guarantees amounting to TL1.051.725 thousand that have been obtained from Bank Mellat Iran Head Office in return for granting loans.

VIII. EXPLANATIONS ON PRESENTATION OF FINANCIAL ASSETS AND LIABILITIES AT

THEIR FAIR VALUES:

The expected fair value of the demand deposits represents the amount to be paid upon request. The

expected fair value of loans and receivables are determined by calculating the discounted cash flows using the current market interest rates for the fixed loans with fixed interest rates.

The expected fair value of loans and receivables are determined by calculating the discounted cash flows using the current market interest rates for the fixed loans with fixed interest rates. For the loans

with floating interest rates, it is assumed that the carrying value reflects the fair value.

The following table summarises the carrying values and fair values of some financial assets and

liabilities of the Branch. The carrying value represents the acquisition costs and accumulated interest

accruals of corresponding financial assets or liabilities.

Carrying Value Fair Value

December 31,

2011 December 31,

2010

December 31,

2011

December 31,

2010

Financial Assets 3.276.393 1.629.330 3.276.356 1.650.902

Banks 2.581.036 355.035 2.581.036 355.112

Available-for-sale Financial Assets 109.828 154.884 109.828 154.884

Loans and Receivables 585.529 1.119.411 585.492 1.140.906

Financial Liabilities 3.358.810 1.711.701 3.358.810 1.711.701

Bank Deposits 3.091.768 462.709 3.091.768 462.216

Funds Borrowed From Other Financial Institutions 225.112 41.548 225.112 41.598

Sundry Creditors 41.930 1.207.444 41.930 1.208.178



39


VIII. EXPLANATIONS ON PRESENTATION OF FINANCIAL ASSETS AND LIABILITIES AT

THEIR FAIR VALUES (Continued)

TFRS 7, “Financial Instruments: Disclosures”, requires classification of line items at fair value presented at financial statements according to the defined levels. These levels depend on the

observability of data used during fair value calculations. Classification for fair value is as follows:

Level 1: Assets or liabilities with prices recorded (unadjusted) in active markets

Level 2: Assets or liabilities that are excluded in the Level 1 of recorded prices directly observable by

prices or indirectly observable derived through prices observable from similar assets or liabilities

Level 3: Assets and liabilities where no observable market data can be used for valuation

According to these classification principles stated, the Group’s classification of financial assets and liabilities carried at their fair value are as follows:

December 31, 2011 Level 1 Level 2 Level 3 Total

Financial Assets at Fair Value Through Profit or (Loss) (Net) - - - -

Public Debt Securities - - - -

Share Certificates - - - -

Trading Derivative Financial Assets - - - -

Available-for-Sale Financial Assets (Net) 84.855 - 24.973 109.828

Public Debt Securities 80.551 - - 80.551

Other Marketable Securities(1) 4.304 - 24.973 29.277

Total Assets 84.855 24.973 109.828

Trading Derivative Financial Liabilities - - - -

Hedging Derivative Financial Liabilities - - - -

Total Liabilities - - - -

IX. EXPLANATIONS ON ACTIVITIES CARRIED OUT ON BEHALF AND ACCOUNT OF

OTHER PARTIES AND FIDUCIARY ASSETS

The Bank does not perform buying transactions on behalf of customers, and gives custody, administration and advisory services. The Bank does not deal with fiduciary transactions.



40

SECTION FIVE

EXPLANATIONS AND NOTES RELATED TO UNCONSOLIDATED FINANCIAL

STATEMENTS

I. EXPLANATIONS AND NOTES RELATED TO ASSETS:

a. Information related to cash and the account of the Central Bank of the Republic of Turkey

(the “CBRT):

1. Information related to cash and the account of CBRT:

December 31, 2011

December 31, 2010

TL FC TL FC

Cash 3.265 21.852 134 7.395

The CBRT 9.650 155.045 10.488 143.690

Other - - - -

Total 12.915 176.897 10.622 151.085

2. Information related to the account of the CBRT:

December 31, 2011

December 31, 2010

TL FC TL FC

Demand Unrestricted Account (1) 109 - 2 -

Time Unrestricted Account - - - -

Time Restricted Account 9.541 85.853 10.486 39.234

Reserve Requirement - 69.192 - 104.456

Total 9.650 155.045 10.488 143.690

(1) The TL reserve requirement booked as average has been classified in “Central Bank Demand Unrestricted

Account” based on the correspondence with BRSA as of January 3, 2008.

3. Information on reserve requirements:

As of December 31, 2011 the reserve for deposits at the Central Bank of Turkey for Turkish Lira are implemented within an interval from 5% to 11% depending on the maturity of deposits and

reserve rates for the foreign currency liabilities are within an interval from 9% to 11% depending

on the maturity of deposits.With the changes in the “Communique on Reserve Requirements”, at most 40% of required reserves on TL liabilities could be maintained as foreign currency and at

most 10% could be maintained as standard gold, required reserves on precious metal deposit

accounts in FC liabilities could be maintained as standard gold, at most 10% of required reserves on FC liabilities other than precious metal deposit accounts could be maintained as standard gold in

CBRT accounts.

b. Information on financial assets at fair value through profit or loss:

As of December 31, 2011, the Branch does not have any financial assets at fair value through profit

or loss (December 31, 2010: None).

c. Information on banks:

1. Information on banks:

December 31, 2011

December 31, 2010

TL FC TL FC

Banks

Domestic 42.954 26.528 119.019 43.964

Foreign 13.776 67.331 - 5.918

Head Quarters and Branches Abroad 80.714 2.349.733 - 186.134

Other Financial Institutions - - - -

Total 137.444 2.443.592 119.019 236.016



41

EXPLANATIONS AND NOTES RELATED TO UNCONSOLIDATED FINANCIAL STATEMENTS

(Continued)

I. EXPLANATIONS AND NOTES RELATED TO ASSETS (Continued):

c. Information on banks (Continued):

2. Information on foreign banks account:

Unrestricted Amount Restricted Amount December 31,

2011 December 31,

2010 December 31,

2011 December 31,

2010 EU Countries 3.757 5.918 - - USA, Canada 26.656 - - -

OECD Countries (1) - - - - Off-Shore Banking Regions - - - - Other 50.694 - - - Total 81.107 5.918 - -

(1)

OECD countries except EU countries, USA and Canada.

d. Information on available-for-sale financial assets, net:

1. As of December 31, 2011 there are no available for-sale-financial assets subject to repo

transactions (December 31, 2010: None).

2. As of December 31, 2011 there are no available-for-sale financial assets given as collateral/blocked amount (December 31, 2010: None).

3. Information on available-for-sale financial assets:

December 31, 2011

December 31, 2010

Debt Securities 109.828 154.884

Quoted on Stock Exchange 84.855 103.659

Not Quoted 24.973 51.225

Share Certificates - -

Quoted on Stock Exchange - -

Not Quoted - -

Impairment Provision (-) - -

Total 109.828 154.884

e. Information on loans:

1. Information on all types of loans and advances given to shareholders and employees of the Branch:

December 31, 2011

December 31, 2010

Cash Non-cash Cash Non-cash

Direct Loans Granted to Branch’s Shareholders - - - -

Corporate Shareholders - - - -

Real Person Shareholders - - - -

Indirect Loans Granted to Branch’s Shareholders - - - -

Loans Granted to Branch’s Employees 197 14 146 65

Total 197 14 146 65



42


(Continued)


e. Information on loans (Continued):

2. Information on the first and second group loans, other receivables and loans that have been restructured or rescheduled and other receivables:

Standard Loans and Other Receivables Loans and Other Receivables Under Close

Monitoring

Loans and other

receivables

Restructured or

Rescheduled

Loans and other

receivables

Restructured or

Rescheduled

Non Specialised Loans 579.845 - - -

Discount and Purchase Notes 431.222 - - -

Export Loans - - - -

Import Loans - - - -

Loans Granted to Financial Sector 134.911 - - -

Foreign Loans - - - -

Consumer loans 199 - - -

Credit cards - - - -

Precious Metal Loans - - - -

Other 13.513 - - -

Specialised Loans - - - -

Other Receivables - - - -

Total 579.845 - - -

3. Loans according to their maturity structure:

Standard Loans and Other Receivables

Loans and Other Receivables Under

Close Monitoring

Loans and other

receivables

Restructured or

Rescheduled

Loans and other

receivables

Restructured or

Rescheduled

Short-term Loans and Other

Receivables 578.390 - - -

Non-specialised Loans 578.390 - -



Medium and Long-term

Loans and Other Receivables 1.455 - - -

Non-specialised Loans 1.455 - - -





43


(Continued)



4. Information on consumer loans, consumer credit cards, personnel loans and personnel credit cards:

Short-term

Long and medium

term Total

Consumer Loans - TL 2 - 2

Housing loans - - -

Automotive loans - - -

Consumer loans - - -

Other 2 - 2

Consumer Loans - FC indexed - - -

Housing loans - - -



Other - - -

Consumer Loans - FC - - -

Housing loans - - -



Other - - -

Consumer Credit Cards – TL - - -

With installment - - -

Without installment - - -

Consumer Credit Cards – FC - - -



Personnel Loans - TL - 197 197

Housing loans - - -


Consumer loans - 1 1

Other - 196 196

Personnel Loans – FC indexed - - -

Housing loans - - -



Other - - -

Personnel Loans-FC - - -

Housing loans - - -



Other - - -

Personnel Credit Cards – TL - - -



Personnel Credit Cards – FC - - -



Overdraft-TL (Real Person) - - -

Overdraft-FC (Real Person) - - -

Total Consumer Loans 2 197 199



44


(Continued)



5. Information on commercial installment loans and corporate credit cards:

Short Term

Medium and

Long Term

Total

Interest and

Income

Accruals

Commercial Loans with Installment Facility -

TL - - - -

Real Estate Loans - - - -

Automobile Loans - - - -

Personal Need Loans - - - -

Other - - - -

Commercial Loans with Installment Facility –

FC Indexed - - - -




Other - - - -

Commercial Loans with Installment Facility –

FC - - - -




Other - - - -

Corporate Credit Cards – TL - - - -

Installment - - - -

Non – Installment - - - -

Corporate Credit Cards – FC - - - -

Installment - - - -

Non – Installment - - - -

Overdraft Accounts – TL (Legal Entities) - - - -

Overdraft Accounts – FC (Legal Entities) - - - -

Total - - - -

6. (i) Information on loans by types and specific provisions:


Standart loans 579.646 199 579.845

Non-Performing loans 7.653 - 7.653

Specific Provisions (-) (1.969) - (1.969)

Total 585.330 199 585.529


Standart loans 1.119.124 158 1.119.282

Non-Performing loans 172 - 172

Specific Provisions (-) (43) - (43)

Total 1.119.253 158 1.119.411



45


(Continued)



(ii) Fair value of collaterals (Loans and advances given to customers):


Watch listed - - -

Non-Performing loans 49.088 - 49.088

Total 49.088 - 49.088


Watch listed - - -

Non-Performing loans 250 - 250

Total 250 - 250

7. Loans according to type of borrowers:

December 31, 2011

December 31, 2010

Public - -

Private 579.845 1.119.282

Total 579.845 1.119.282

8. Distribution of domestic and foreign loans: Loans are classified according to the locations of the customers.

December 31, 2011

December 31, 2010

Domestic Loans 444.934 385.840

Foreign Loans 134.911 733.442

Total 579.845 1.119.282

9. Loans granted to investments in associates and subsidiaries:

As of December 31, 2011 there are no loans granted to investments in associates and subsidiaries (December 31, 2010: None).



46


(Continued)



10. (i) Specific provisions provided against loans:


Loans and other receivables with limited collectibility - -

Loans and other receivables with doubtful collectibility (24) -

Uncollectible loans and other receivables (1.945) (43)

Total (1.969) (43)

(ii) Provisions related to loans:

Corporate Loans

January 1, 2011 43

Allowance for impairment 1.959

Amount recovered during the period (7)

Loans written off during the period as uncollectible (26)

Exchange differences -

December 31, 2011 1.969

Corporate Loans

January 1, 2010 15

Allowance for impairment 28

Amount recovered during the period -

Loans written off during the period as uncollectible -

Exchange differences -

December 31, 2010 43

11. Information on non-performing loans (Net):

11(i) Information on loans and other receivables rescheduled or restructured from non-

performing loans:

The Branch has no loans and other receivables rescheduled or restructured from non-performing loans.

11(ii) Information on the movement of total non-performing loans:

III. Group IV. Group V. Group

Loans and Other

Receivables with Limited

Collectibility

Loans and Other

Receivables with

Doubtful Collectibility

Uncollectible Loans and

Other Receivables

December 31, 2010 - - 172

Additions (+) 7.357 195 -

Transfers from other categories of non-performing loans (+) - 7.357 7.357

Transfers to other categories of non-performing loans (-) (7.357) (7.357) -

Collections (-) - - (45)

Write-offs (-) - - (26)

Corporate and commercial loans - - -


Credit cards - - -

Others - - -

December 31, 2011 - 195 7.458

Specific provisions (-) - (24) (1.945)

Net Balance on Balance Sheet - 171 5.513



47


(Continued)



11. Information on non-performing loans (Net) (Continued):

11(iii) Information on non-performing loans granted as foreign currency loans:

The Branch has no foreign currency loans and other receivables in non-performing loans.

11(iv) Information on non-performing loans according to user groups:

III. Group IV. Group V. Group

Loans and Other

Receivables with

Limited Collectibility

Loans and Other

Receivables with

Doubtful Collectibility

Uncollectible Loans

and Other

Receivables

December 31, 2011 (Net) - 171 5.513

Loans to real and legal persons (Gross) - 195 7.458

Specific provisions (-) - (24) (1.945)

Loans to real and legal persons (Net) - 171 5.513

Banks (Gross) - - -

Specific provisions (-) - - -

Banks (Net) - - -

Other loans and receivables (Gross) - - -


Other loans and receivables (Net) - - -

December 31, 2010 (Net) - - 129

Loans to real and legal persons (Gross) - - 172

Specific provisions (-) - - (43)

Loans to real and legal persons (Net) - - 129

Banks (Gross) - - -


Banks (Net) - - -

Other loans and receivables (Gross) - - -


Other loans and receivables (Net) - - -

12. The policy followed for the collection of uncollectible loans and other receivables:

Uncollectible loans and other receivables are aimed to be liquidated through the collection of

collaterals and legal procedures. The policy of the Branch regarding the writing-off the non –

performing loans is as writing-off the ones that are proved as uncollectible.

f. Information on held-to-maturity securities:

As of December 31, 2011 and December 31, 2010, the Branch has no held-to-maturity securities.

g. Information on investments in associates (Net):

As of December 31, 2011 and December 31, 2010, the Branch has no investments in associates.



48


(Continued)


h. Information on subsidiaries (Net):

As of December 31, 2011 and December 31, 2010, the Branch has no subsidiaries.

i. Information on joint ventures:

As of December 31, 2011 and December 31, 2010, the Branch has no joint ventures.

j. Information on finance lease receivables (Net):

As of December 31, 2011 and December 31, 2010, the Branch has no finance lease receivables.

k. Explanations on hedging derivative instruments:

As of December 31, 2011 and December 31, 2010, the Branch has no hedging derivative instruments.

l. Explanations on property and equipment:

Immovables Vehicles

Other Tangible

Fixed Assets Total

December 31, 2010

Cost 10.533 311 533 11.377

Accumulated depreciation (2.135) (104) (233) (2.472)

Net book value 8.398 207 300 8.905

December 31, 2011

Net book value at beginning of the

year 8.398 207 300 8.905

Additions - - 164 164

Disposals, net - - (139) (139)

Transfers - - (96) (96)

Depreciation (162) (62) (94) (318)

Depreciation, Disposals - - 139 139

Depreciation, Transfers - - 40 40

Closing net book value 8.236 145 289 8.695

Cost at year end 10.533 311 462 11.281

Accumulated depreciation at year end (2.297) (166) (148) (2.611)

Closing net book value 8.236 145 314 8.695

m. Explanations on intangible assets: Software Total

31 December 2011

Net book value at beginning of the

year - -

Additions 53 53

Disposals, net (18) (18)

Transfers 121 121

Depreciation (48) (48)

Depreciation, Disposals 18 18

Depreciation, Transfers (40) (40)

Closing net book value 86 86

Cost at year end 156 156

Accumulated depreciation at year end (70) (70)

Closing net book value 86 86



49


(Continued)


n. Explanations on investment property:

As of December 31, 2011 and December 31, 2010, the Branch has no investment immovables.

o. Explanations on deferred tax asset:

The Branch has no fiscal loss that can be deducted from current tax liability. Assets and liabilities,

which are calculated over the temporary differences arising between applied accounting policies and valuation principles and tax legislation are accounted as TL468 thousand (December 31, 2010:

TL427 thousand) on net basis to deferred tax assets.

December 31, 2011 December 31, 2010 Tax Base Deferred Tax Tax Base Deferred Tax

Property, equipment and intangibles, net 1.352 270 1.433 287

Reserves for employment termination benefit 618 124 529 106

Court case provision 371 74 171 34

Total deferred tax asset - 468 - 427

Total deferred tax liability - - - -

Deferred Tax Asset, net - 468 - 427

p. Explanations on assets held for resale:

None (December 31, 2010: TL25 thousand).

r. Explanations on other assets:

Other assets amount to TL677 thousand (December 31, 2010: TL257 thousand) and do not exceed 10% of the total balance sheet, excluding off-balance sheet commitments.



50


(Continued) II. EXPLANATIONS AND NOTES RELATED TO LIABILITIES:

a. Information on deposits

1. Information on maturity structure of the deposits:

There are no deposits with seven days notification and accumulative deposits.

(i) December 31, 2011:

Demand

Up to 1

Month 1 – 3 Months

3 – 6

Months

6 month – 1

year

1 year and

over Total

Saving Deposits 121 109 20 3 - 2 255

Foreign Currency Deposits 35.223 568 4.956 1.418 27 8.116 50.308

Residents in Turkey 16.425 272 4.552 515 - 246 22.010

Residents Abroad 18.798 296 404 903 27 7.870 28.298

Public Sector Deposits - - - - - - -

Commercial Deposits 13.931 - - - - - 13.931

Other Institutions Deposits 37 - 77 - - - 114

Gold Vault - - - - - - -

Bank Deposits 118.277 41.070 28.248 126.562 2.518.626 194.377 3.027.160

The CBRT - - - - - - -

Domestic Banks - - - - - - -

Foreign Banks 118.277 41.070 28.248 126.562 2.518.626 194.377 3.027.160

Special Finance Institutions - - - - - - -

Other - - - - - - -

Total 167.589 41.747 33.301 127.983 2.518.653 202.495 3.091.768

(ii) December 31, 2010:

Demand

Up to 1

Month 1 – 3 Months

3 – 6

Months

6 month –

1 year

1 year and

over Total

Saving Deposits 270 80 2 3 10 - 365

Foreign Currency Deposits 56.078 1.355 1.664 1.113 6.671 - 66.881

Residents in Turkey 20.055 400 683 361 203 - 21.702

Residents Abroad 36.023 955 981 752 6.468 - 45.179


Commercial Deposits 2.489 3 - - - - 2.492

Other Institutions Deposits 175 - - - - - 175

Gold Vault - - - - - - -

Bank Deposits 291.370 1.001 100.425 - - - 392.796

The CBRT - - - - - - -

Domestic Banks 10 - - - - - 10

Foreign Banks 291.351 1.001 100.425 - - - 392.777

Special Finance Institutions 9 - - - - - 9

Other - - - - - - -

Total 350.382 2.439 102.091 1.116 6.681 - 462.709



51


(Continued) II. EXPLANATIONS AND NOTES RELATED TO LIABILITIES (Continued):

a. Information on deposits

2. Information on saving deposits insurance:

(i) Information on saving deposits under the guarantee of the saving deposits insurance fund

and amounts exceeding the limit of the deposit insurance fund:

Under the Guarantee of

Deposit Insurance

Exceeding the Limit of Deposit

Insurance

December 31,

2011

December31,

2010

December 31,

2011

December 31,

2010

Saving Deposits 228 203 27 163

Foreign Currency Saving Deposits 2.941 2.672 6.375 3.063

Other Deposits in the Form of Saving Deposits - - - -

Foreign Branches’ Deposits under Foreign Authorities’ Insurance - - - -

Off-Shore Banking Regions’ Deposits under Foreign Authorities’ Insurance - - - -

(ii) Saving deposits which are not under the guarantee of deposit insurance fund:

None (December 31, 2010: None).

(iii) Saving deposits which are not under the guarantee of saving deposit insurance fund of real persons:

December 31,

2011

December 31,

2010

Foreign Branches’ Deposits and other accounts - -

Saving Deposits and Other Accounts of Controlling Shareholders and Deposits of their Mother, Father, Spouse, Children in care

- -

Saving Deposits and Other Accounts of President and Members of Board of Directors, CEO and Vice Presidents and Deposits of their Mother, Father, Spouse, Children in care

519 241

Saving Deposits and Other Accounts in Scope of the Property Holdings Derived from Crime Defined in Article 282 of Turkish Criminal Law No:5237 dated 26.09.2004

- -

Saving Deposits in Deposit Bank Which Established in Turkey in Order to Engage in Off-shore Banking Activities Solely

- -

b. Information on trading derivative financial liabilities:

As of December 31, 2011 and December 31, 2010, the Branch has no trading derivative financial liabilities.

c. Information on borrowings:

1. Information on banks and other financial institutions:

December 31, 2011

December 31, 2010

TL FC TL FC

Borrowings from the CBRT - - - -

From Domestic Bank and Institutions - - - -

From Foreign Banks, Institutions and Funds - 225.112 - 41.548

Total - 225.112 - 41.528



52



c. Information on borrowings (Continued):

2. Information on maturity structure of borrowings:

December 31, 2011

December 31, 2010

TL FC TL FC

Short-term - 225.112 - 41.548

Medium and Long-term - - - -

Total - 225.112 - 41.548

The funding sources of the Branch are deposits and borrowings. Major funding sources are

loans borrowed from the Headquarters and other Iranian financial institutions. Besides, as of December 31, 2011, in return for granting loans, the Branch has received cash guarantees from

Bank Mellat Iran Head Office amounting to TL2.755.384 thousand (December 31, 2010:

TL1.051.725 thousand). The amount which had been previously recorded under sundry creditors on the balance sheet, has been recorded under deposit account since May 27, 2011

according to the correspondence with BRSA dated on May 13, 2011.

d. Information on other liabilities:

Other liabilities amount to TL8.934 thousand (December 31, 2010: TL16.014 thousand) and do not

exceed 10% of the total balance sheet.

e. Information on financial leasing agreements:

As of December 31, 2011 and December 31, 2010, the Branch has no financial lease payables.

f. Information on hedging derivative financial liabilities:


g. Information on provisions:

1. Information on general loan loss provisions:


General Loan Loss Provisions

Provisions for Group I Loans and Receivables 1.913 900

Provisions for Group II Loans and Receivables - -

Provisions for Non Cash Loans 34 198

Other 2.983 175

Total 4.930 1.273

2. Information on reserve for employee rights:

The provision for employee rights has been calculated by estimating the present value of the future probable obligation of the Branch arising from the retirement of its employees. TAS 19

requires actuarial valuation methods to be developed to estimate the enterprise’s obligation for such benefits. Accordingly, the following actuarial assumptions were used in the calculation of the total liability.


Discount rate (%) 4,66 4,66

Rate for the Probability of Retirement (%) 94 96



53



g. Information on provisions (Continued):

2. Information on reserve for employee rights (Continued):

The principal actuarial assumption is that the maximum liability will increase in line with

inflation. Thus, the discount rate applied represents the expected real rate after adjusting for

the effects of future inflation. As the maximum liability is revised semi-annually, the maximum amount of TL2.805,04 (January 1, 2011: TL2.623,23) effective from January 1,

2011 has been taken into consideration in calculating the reserve for employment termination

benefits.

Movements in the reserve for employment termination benefits during the periods are as follows:

December 31, 2011

December 31, 2010

Prior Period Ending Balance 395 372

Provisions Recognised During the Period 75 80

Paid During the Period - (57)

Balance at the End of the Period 470 395

In addition as of , the Branch has provided a provision for unused vacation rights amounting to TL148 thousand (December 31, 2010: TL134 thousand).

3. Information on Provisions Related with Foreign Currency Difference of Foreign Indexed Loans:

As of December 31, 2011, the Branch has provision related to foreign currency difference of foreign indexed loans amounting to TL63 thousand (December 31, 2010: None).

4. Specific provisions for non-cash loans that are non-funded and non-transformed into cash:

As of December 31, 2011, the Branch has no specific provision for non-cash loans

(December 31, 2010: None).

5. Information on other provisions:

(i) Information on provisions for possible risks:

As of December 31, 2011 and December 31, 2010, the Branch has no provisions for possible risks.

(ii) Other provisions if they exceed 10% of total provisions:

In the second quarter of 2007 some employees and previous employees of the Branch

sued the Branch claiming their employee benefits related to previous periods. As of

December 31, 2011 the Branch had prudently provided a provision amounting to TL371 thousand (31 December 2010: TL171 thousand, the remaining TL585 thousand provision

is composed of the disciplinary punishment of Ministry of Finance). The remaining provision amounting to TL25 thousand is provided for imdemnified cash loans.

Mentioned provisions are classified in the balance sheet under “Other Provisions”.



54



h. Information on tax payable:

1. Information on current tax payable:

(i) Information on taxes payable:

December 31, 2011

December 31, 2010

Corporate Tax Payable 7.928 3.760

Taxation of Marketable Securities 46 180

Property Tax - -

Banking Insurance Transaction Tax (BITT) 546 130

Foreign Exchange Transaction Tax - -

Value Added Tax Payable 9 8

Other 129 101

Total 8.658 4.179

(ii) Information on premium payables:

December 31,2011

December 31, 2010

Social Security Premiums – Employee 35 27

Social Security Premiums – Employer 53 41

Bank Social Aid Pension Fund Premiums – Employee - -

Bank Social Aid Pension Fund Premiums – Employer - -

Pension Fund Membership Fees and Provisions – Employee - -

Pension Fund Membership Fees and Provisions – Employer - -

Unemployment Insurance – Employee 2 2

Unemployment Insurance – Employer 4 3

Other - -

Total 94 73

2. Information on deferred tax liability:

As of December 31, 2011 the Branch has no deferred tax liability (December 31, 2010: None).

i. Information on liabilities for property and equipment held for sale and related to

discontinued operations:


j. Explanations on subordinated loans:

The Branch has no subordinated loans as of December 31, 2011 and December 31, 2010.

k. Information on shareholders’ equity:

1. Presentation of paid-in capital:

Since the entity has the status of a branch, paid-in capital is not received in exchange for

shares.



55



k. Information on shareholders’ equity (Continued):

2. The amount of paid-in capital, explanation on whether the registered share capital system is used, if this system is used the amount of registered share capital:

Capital system Paid-in capital Ceiling

Registered Share Capital 53.655 53.655

3. Information on share capital increases and their sources; other information on increased capital shares in current period:


4. Information on share capital increases from capital reserves in current period:


5. Information on capital commitments, the general purpose and the estimated sources needed for

these commitments until the end of the fiscal year and the subsequent interim period:


6. Information on income, profitability and liquidity of the Group by taking into consideration prior period indicators and uncertainities and their possible effects on shareholders’ equity:

There is no adverse change expected in the profitability and liquidty of the Branch.

7. Summarised information about privileges given to shares representing the capital:


l. Information on marketable securities value increase fund:

December 31, 2011

December 31, 2010

TL FC TL FC

From Investments in Associates, Subsidiaries and Joint Ventures - - - -

Valuation Difference (930) - 517 -

Foreign Currency Difference - - - -

Total (930) - 517 -



56


(Continued)

III. EXPLANATIONS AND NOTES RELATED TO OFF BALANCE SHEET ACCOUNTS:

a. Explanations on off-balance sheet commitments:

1. Type and amount of irrevocable commitments:

As of December 31, 2011, all commitments of the Branch are irrevocable. The Branch’s commitments for cheques is TL177 thousand (December 31, 2010: TL162 thousand).

2. Type and amount of probable losses and obligations arising from off-balance sheet items:

The Branch has no probable losses arising from off-balance sheet items. Obligations arising

from the off-balance sheet are disclosed in “Off-balance sheet commitments”.

(i). Non-cash loans including guarantees, bank avalized and acceptance loans, collaterals that

are accepted as financial commitments and other letters of credit:


Bank acceptance loans - -

Letters of credit 9.730 28.066

Other guarantees 38.301 51

Total 48.031 28.117

(ii). Revocable, irrevocable guarantees and other similar commitments and contingencies:


Revocable letters of guarantee 855 43

Irrevocable letters of guarantee 12.108 5.956

Letters of guarantee given in advance 7.616 71.486

Guarantees given to customs - -

Other letters of guarantees - -

Total 20.579 77.485

3. (i). Total amount of non-cash loans:

December 31, 2011

December 31, 2010

Non-cash Loans Given for the Purpose of Obtaining Cash Loans - -

With Original Maturity of 1 Year or Less Than 1 Year - -

With Original Maturity of More Than 1 Year - -

Other Non-cash Loans 68.610 105.602

Total 68.610 105.602



57


(Continued)

III. EXPLANATIONS AND NOTES RELATED TO OFF BALANCE SHEET ACCOUNTS

(Continued):

a. Explanations on off-balance sheet commitments (Continued):

(ii) Information on sectoral risk concentrations of non-cash loans:

December 31, 2011

December 31, 2010

TL (%) FC (%) TL (%) FC (%)

Agricultural - - - - - - - -

Farming and Raising livestock. - - - - - - - -

Forestry - - - - - - - -

Fishing - - - - - - - -

Manufacturing 2 0,10 1.256 1,89 4 0,37 1.328 1,27

Mining - - - - - - 31 0,03

Production 2 0,10 1.256 1,89 4 0,37 1.297 1,24

Electric, Gas and Water - - - - - - - -

Construction - - 654 0,98 - - 550 0,53

Services 880 43,48 10.357 15,55 54 5,13 65.407 62,57

Wholesale and Retail Trade 800 39,53 9.465 14,21 - - 65.209 62,38

Hotel, Food and Beverage - - - - - - - -

Transportation and Telecommunication - - 37 0,06 - - 31 0,03

Financial Institutions - - 855 1,28 - - 167 0,16

Real Estate and Leasing Services - - - - - - - -

Self-Employment Services - - - - - - - -

Education Services - - - - - - - -

Health and Social Services 80 3,95 - - 54 5,13 - -

Other 1.142 56,42 54.319 81,58 1.014 94,50 37.245 35,63

Total 2.024 100,00 66.586 100,00 1.072 100,00 104.530 100,00

(iii). Information on non-cash loans classified in Group I and Group II:

December 31, 2011 Group I Group II

TL FC TL FC

Non- Cash Loans

Letters of Guarantee 1.373 19.206 - -

Bank Acceptances - - - -

Letters of Credit 288 9.442 - -

Endorsements - - - -

Underwriting Commitments - - - -

Factoring Guarantees - - - -

Other Commitments and Contingencies 363 37.938 - -

Total 2.024 66.586 - -

December 31, 2010 Group I Group II

TL FC TL FC

Non- Cash Loans

Letters of Guarantee 380 77.105 - -

Bank Acceptances - - - -

Letters of Credit 641 27.425 - -

Endorsements - - - -

Underwriting Commitments - - - -

Factoring Guarantees - - - -

Other Commitments and Contingencies 51 - - -

Total 1.072 104.530 - -



58


(Continued)

III. EXPLANATIONS AND NOTES RELATED TO OFF BALANCE SHEET ACCOUNTS

(Continued):

a. Explanations on off-balance sheet commitments (Continued):

(iv). Maturity distribution of non-cash loans:

December 31,2011 (1)

Indefinite Up to 1 year 1-5 Years Above 5 years Total

Letter of Credit - 9.730 - - 9.730

Letter of Guarantee 20.523 56 - - 20.579

Other 38.301 - - - 38.301

Total 58.824 9.786 - - 68.610

December 31, 2010 (1)

Indefinite Up to 1 year 1-5 Years Above 5 years Total

Letter of Credit 128 27.938 - - 28.066

Letter of Guarantee 61.869 15.616 - - 77.485

Other 51 - - - 51

Total 62.048 43.554 - - 105.602

(1) The distribution is based on the original maturities.

b. Explanations on derivative financial instruments:

The Branch has no derivative financial instruments as of December 31, 2011 and December 31,

2010.

c. Explanations on contingent liabilities and assets:

In the second quarter of 2007 some employees and previous employees of the Branch sued the

Branch claiming their employee benefits related to previous periods. As of December 31, 2011 the Branch had prudently provided a provision amounting to TL371 thousand (31 December 2010:

TL171 thousand, the remaining TL585 thousand provision is composed of the disciplinary

punishment of Ministry of Finance). The remaining provision amounting to TL25 thousand is provided for imdemnified cash loans. Mentioned provisions are classified in the balance sheet

under “Other Provisions”.

d. Explanations on activities carried out on behalf and account of other parties:

The Branch does not carry out trading, custody and fund management services on behalf of others and on their account.



59


(Continued)

IV. EXPLANATIONS AND NOTES RELATED TO ON INCOME STATEMENT:

a. Information on interest income:

1. Information on interest income on loans:

December 31, 2011

December 31, 2010

TL FC TL FC

Short-Term Loans 4.193 63.266 80 27.737

Medium and Long-Term Loans 45 353 6 1.109

Interest on Non-Performing loans - 150 - -

Premiums Received from the Resource Utilisation Support Fund - - - -

Total 4.238 63.769 86 28.846

2. Information on interest income on banks:

December 31, 2011

December 31, 2010

TL FC TL FC

From the CBRT - - 43 -

From Domestic Banks 5.697 176 4.008 1.653

From Foreign Banks 271 30 - 19

Headquarters and Branches Abroad 4.635 78.146 - -

Total 10.603 78.352 4.051 1.672

3. Information on interest income on marketable securities:

December 31, 2011

December 31, 2010

TL FC TL FC

From Trading Financial Assets - - - -

From Financial Assets at Fair Value Through Profit or Loss - - - -

From Available-for-Sale Financial Assets 8.871 1.923 4.740 1.231

From Held-to-Maturity Investments - - - -

Total 8.871 1.923 4.740 1.231

4. Information on interest income received from investments in associates and subsidiaries:

The Branch has no interest income received from investments in associates and subsidiaries as

of December 31, 2011 and December 31, 2010.



60


(Continued)

IV. EXPLANATIONS AND NOTES RELATED TO ON INCOME STATEMENT (Continued):

b. Information on interest expense:

1. Information on interest expense on borrowings:

December 31, 2011

December 31, 2010

TL FC TL FC

Banks - 7.143 205 15.387

The CBRT - - - -

Domestic Banks - - - -

Foreign Banks - 5.170 - 300

Headquarters and Branches Abroad - 1.973 205 15.087

Other Institutions - - - -

Total - 7.143 205 15.387

2. Information on interest expense given to investments in associates and subsidiaries:

The Branch has no interest expense given to investments in associates and subsidiaries as of

December 31, 2011 and December 31, 2010.

3. Interest expense on Securities Issued:

The Branch has no interest expense given to securities issued as of December 31, 2011 and

December 31, 2010.

4. Maturity structure of the interest expense on deposits:

There are no deposits with seven days notification and accumulative deposits.

Demand

Deposits

Time Deposit

Up to 1

Month Up to 3

Month Up to 6

Month Up to 1

Year

More

than 1

Year Total

TL

Bank Deposits 1.866 1.140 - 5.313 - 2.998 11.317

Saving Deposits - 9 1 - - - 10


Commercial Deposit - - - - - - -

Other Deposits - - - - - - -

Total 1.866 1.149 1 5.313 - 2.998 11.327

FC

Foreign Currency Deposits 19 16 56 35 33 248 407

Bank Deposits 90.319 - 202 - - - 90.521

Gold Vault - - - - - - -

Total 90.338 16 258 35 33 248 90.928

Grand Total 92.204 1.165 259 5.348 33 3.246 102.255

c. Explanations on dividend income:




61


(Continued)


d. Explanations on trading loss/income (Net):

December 31, 2011

December 31, 2010

Income 10.439 6.001

Income from Capital Market Transactions - 30

Derivative Financial Transactions - -

Other - 30

Foreign Exchange Gains 10.439 5.971

Loss (-) (5.764) (1.915)

Loss from Capital Market Transactions - -

Derivative Financial Transactions - -

Other - -

Foreign Exchange Loss (5.764) (1.915)

Net Income / Loss 4.675 4.086

e. Explanations on other operating income:

There are no extraordinary items included in other operating income.

f. Provision expenses related to loans and other receivables of the Branch:

December 31, 2011

December 31, 2010

Specific Provisions for Loans and Other Receivables

1.984 27

III. Group Loans and Receivables 9 -

IV. Group Loans and Receivables 40 -

V. Group Loans and Receivables 1.935 27

General Provision Expenses 3.430 552

Provision Expense for Possible Risks - -

Marketable Securities Impairment Expense - 8

Financial Assets at Fair Value Through Profit or Loss - -

Available-for-sale Financial Assets - 8

Investments in Associates, Subsidiaries and Held-to-Maturity Securities Value Decrease - -

Investments in Associates - -

Subsidiaries - -

Joint Ventures - -

Held–to-maturity Securities - -

Other - -

Total 5.414 587



62


(Continued)


g. Information related to other operating expenses:

December 31, 2011

December 31, 2010

Personnel Expenses 6.179 3.959

Reserve for Employee Termination Benefits 82 80

Bank Social Aid Provision Fund Deficit Provision - -

Impairment Expenses of Fixed Assets - -

Depreciation Expenses of Fixed Assets 318 309

Impairment Expenses of Intangible Assets - -

Goodwill Impairment Expenses - -

Amortization Expenses of Intangible Assets 48 -

Impairment Expenses of Equity Participations for Which Equity Method is Applied - -

Impairment Expenses of Assets Held for Resale - -

Depreciation Expenses of Assets Held for Resale - -

Impairment Expenses of Fixed Assets Held for Sale - -

Other Operating Expenses 1.177 1.251

Operational Leasing Expenses - -

Maintenance Expenses 73 49

Advertisement Expenses 19 21

Other Expenses 1.085 1.181

Loss on Sales of Assets - -

Other 3.285 2.257

Total 11.089 7.856

h. Explanations on profit and loss from continuing operations before tax:

Profit and loss before tax consists of net interest income amounting to TL58.877 thousand (December 31, 2010: TL21.665 thousand), net fee and commission income amounting to TL26.126 thousand (December 31, 2010: TL15.162 thousand) and total other operating expense amounting TL11.089 thousand (December 31, 2010: TL7.856 thousand).

i. Explanations on tax provision:

1. Explanations on calculated current tax income or expense and deferred tax income or expense:

As of December 31, 2011, the Branch has a current tax expense of TL15.219 thousand (December 31, 2010: TL6.830 thousand) and deferred tax expense of TL191 thousand (December 31, 2010: TL131 thousand income).

2. Explanations on deferred tax income or expense arising from the temporary differences occurred or closed:

The Branch calculated net deferred tax expense of TL191 thousand (December 31, 2010: deferred tax income of TL131 thousand) due to the occurrence of temporary differences.

3. Explanations on reflection of temporary difference, financial loss, diminution of tax and exceptions on income statement:

As of December 31, 2011, the Branch has TL191 thousand deferred tax expense due to the occurrence of temporary differences (December 31, 2010:TL131 thousand income).

j. Explanations on net income/loss for the period:

To understand the Branch’s current year performance, the characteristics of income or expense items arising from common banking transactions, and the dimension and recurrence of these transactions are not required.

k. Other items do not exceed 10% of the total income statement.



63


(Continued)

V. EXPLANATIONS AND NOTES RELATED TO CHANGES IN SHAREHOLDERS’ EQUITY:

a. Explanation on profit distributions:

Retained earnings of the Branch can be distributed through the permission of the BRSA.

b. Amounts transferred to legal reserves:


c. Information on capital increase:


d. Explanations on available-for-sale financial assets:

“Unrealised gain/loss” arising from changes in the fair value of securities classified as available-for-sale are not recognised in current year profit or loss statement but recognised in the “Marketable securities value increase fund” account under shareholders’ equity, until the financial assets are derecognised, sold, disposed of or impaired.



64


(Continued)

VI. EXPLANATIONS AND DISCLOSURES ON STATEMENT OF CASH FLOWS:

a. Information on cash and cash equivalents:

1. Components of cash and cash equivalents and the accounting policy applied in their

determination:

Cash and effectives together with demand deposits at banks including the CBRT are defined as “Cash”; interbank money market placements and time deposits in banks with original maturities less than three months are defined as “Cash Equivalents”.

2. Effect of a change on the accounting policies: None.

3. Reconciliation of cash and cash equivalent items with balance sheet and cash flow statements:

(i). Information on cash and cash equivalents at the beginning of the year:


Cash 516.576 57.157

Cash and Effectives 7.529 425

Demand Deposits in Banks 509.047 56.732

Cash Equivalents 34.000 40.497

Interbank Money Market Placements 34.000 -

Time Deposits in Banks - 40.497

Total Cash and Cash Equivalents 550.576 97.654

The total amount from the operations the in prior period gives the total cash and cash

equivalents amount at the beginning of the current period.

(ii). Information on cash and cash equivalents at the end of year:


Cash 2.703.332 516.576

Cash and Effectives 25.117 7.529

Demand Deposits in Banks 2.678.215 509.047

Cash Equivalents 63.500 34.000

Interbank Money Market Placements 63.500 34.000

Time Deposits in Banks - -

Total Cash and Cash Equivalents 2.766.832 550.576

b. Information on cash and cash equivalent assets of the Branch that is not available for free use

due to legal restrictions or other reasons:


c. Explanations on the other cash flow items and effect of changes in foreign exchange rates on

cash and cash equivalents:

Decrease in the “Other” item amounting to TL18.105 thousand (December 31, 2010:TL559 thousand decrease) which is classified under “Cash flows from banking operations”consists mainly of items such as fees and commissions, foreign exchange gains/losses and other operating expenses

excluding personnel expenses.

The effect of changes in the foreign currency rates on the cash and cash equivalents is calculated

approximately TL31.1250 thousand as of December 31, 2011 (December 31, 2010:TL1.611 thousand).



65


(Continued)

VII. EXPLANATIONS AND NOTES RELATED TO BRANCH’S RISK GROUP:

The volume of transactions relating to the Branch’s risk group, outstanding loan and deposit transactions and profit and loss of the period:

1. December 31, 2011:

Investments in

associates, subsidiaries and

joint ventures

Direct and indirect

shareholders of the Branch

Other real and legal persons

that have been included in

the risk group

Branch’s Risk Group (1), (2) Cash Non-Cash Cash Cash Non-Cash Cash

Loans and Other Receivables

Balance at the Beginning of the Period - - - - 621.744 16.172

Balance at the End of the Period - - - - 2.638.501 16.092 Interest and Commission

Income Received - - - - 101.312 6.156 (1)

Defined in the 49th article of subsection 2 of the Banking Act No. 5411. (2)

The information in table above includes banks as well as loans.

2. December 31, 2010:

Investments in

associates, subsidiaries and

joint ventures

Direct and indirect


Other real and legal persons

that have been included in

the risk group

Branch’s Risk Group (1), (2)

Cash Non-Cash Cash Cash Non-Cash Cash

Loans and Other Receivables


Balance at the End of the Period - - - - 621.744 16.172 Interest and Commission

Income Received - - - - 11.480 1.901 (1)

Defined in the 49th article of subsection 2 of the Banking Act No. 5411. (2)

The information in table above includes banks as well as loans.

3. Information on deposits of the Branch’s risk group:

Branch’s risk group (1)

Investments in Associates,

Subsidiaries and Joint

Ventures

Direct and Indirect

Shareholders of the Branch

Other Real and Legal Persons

That Have Been Included in

the Risk Group

Deposit

December 31,

2011

December 31,

2010

December 31,

2011

December 31,

2010

December 31,

2011

December 31,

2010


Balance at the End of the Period (2) - - - - 2.953.541 347.620

Interest Expense on Deposits - - - - 91.973 913 (1)

Defined in the Subsection 2, article 49 of the Banking Act No. 5411. (2)

As of December 31, 2011, the TL2.755.384 thousand of the TL2.953.541 thousand included in balance sheet Deposits

– Risk Group is composed of Bank Mellat Head Office. TL157.604 thousand is composed of Iran Central Bank.



66


(Continued)

VII. EXPLANATIONS AND NOTES RELATED TO BRANCH’S RISK GROUP (Continued):

The volume of transactions relating to the Branch’s risk group, outstanding loan and deposit transactions and profit and loss of the period (Continued):

4. Information on borrowings from the Branch’s risk group:

Branch’s risk group (1) Associates and subsidiaries

Direct and indirect


Other items that have been

included in the risk group(2)

Borrowings

December 31,

2011

December 31,

2010

December 31,

2011

December

31, 2010

December 31,

2011

December 31,

2010

Beginning of the Period - - - - 1.093.273 186.055

End of the Period - - - - 225.112 1.093.273

Interest Expense - - - - 5.170 15.292

(1) Defined in the 49th article of subsection 2 of the Banking Act No. 5411.

(2) Includes loans obtained from Iran Central Bank amounting to TL225.112 thousand (December 31, 2010: TL41.548

thousand, the remaining amount TL1.051.725 thousand includes cash guarantees obtained from Bank Mellat Iran Head Office in return for granting loans which has been classified under sundry creditors on the balance sheet).

5. Information on forward and option agreements and other similar derivative transactions with the

Branch’s risk group:

The Branch has no forward and option agreements and other similar derivative transactions as of

December 31, 2011 and December 31, 2010.

6. Information on benefits provided to key management:

As of December 31, 2011, benefits provided to the Branch’s key management amount to TL1.474 thousand (December 31, 2009: TL1.245 thousand).

VIII. EXPLANATIONS RELATED TO THE DOMESTIC, FOREIGN, OFF-SHORE BRANCHES

AND FOREIGN REPRESENTATIVES OF THE BRANCH:

Number

Number of

Employees

Domestic Branch 3 55

Country of

Incorporation

Foreign Rep. Offices - - -

Total Assets

Statutory Share

Capital

Foreign Branch - - - - -

Off-Shore Banking Region Branch - - - - -

IX. EXPLANATIONS AND NOTES RELATED TO SUBSEQUENT EVENTS:

None.



67

SECTION SIX

OTHER EXPLANATIONS AND NOTES

I. OTHER EXPLANATIONS ON THE BRANCH’S OPERATIONS:

According to the correspondence with BRSA dated on May 13, 2011 and numbered 11803, receivable

and payable transactions between the Branch and Bank Mellat Iran Head Office have to be followed

under “Foreign Head Office and Branches” account. The Branch classified its transactions with Bank Mellat Head Office to mentioned accounts in accordance with the correspondence.

SECTION SEVEN

EXPLANATIONS ON INDEPENDENT AUDITOR’S REPORT

I. EXPLANATIONS ON INDEPENDENT AUDITOR’S REPORT:

The unconsolidated financial statements as of December 31, 2011 have been audited by DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. (a member of Deloitte Touche Tohmatsu

Limited).

The independent auditor’s report is presented preceding the financial statements.

II. EXPLANATIONS AND NOTES PREPARED BY INDEPENDENT AUDITOR:

None.


2011 ANNUAL REPORT

1

3. Data pertaining to the Financial Structure

Net period profit of Bank Mellat Turkey amounts to TRY 58.529 thousand. The shareholder’s equity

and total assets amount to TRY 157.209 thousand and TRY 3.539.649 thousand respectively as of 31

December 2011.

3.1. Assessment pertaining to the Financial Position, Profitability and Solvency

The profitability ratios are as follows as of 31 December 2011:

Profit Before Tax/ Total Assets 73.939 / 3.539.649 2,09%

Profit Before Tax/ Total Shareholder’s

Equity 73.939 / 157.209 47,03%

Profit Before Tax/ Paid-In Capital 73.939 / 53.655 137,80%

Bank Mellat has enough cash and cash-equivalent resources to meet its liabilities.

4. Data pertaining to the Risk Management Policies in place by Risk Types

The risk management system of the Branch is comprised of the norms, principles, policies, procedures,

applications and controls developed in order to reasonably secure the achievement of the targets set,

and the identification of the limits and limitations related to various risks.

The risk management system intends to measure, evaluate and monitor any loss that may arise due to

the risks which the Branch is exposed to, minimize any expected loss and reduce the frequency and

intensity of any unexpected loss.

The Board of Directors is authorized to define the norms and principles, policies, procedures, practices

and limits regarding the risk management system. The Board of Directors may delegate such power to

the board members, the committees to be established and the senior line managers provided that the

scope and limitations are defined in writing.

Due to its activities the Branch is primarily exposed to credit and operational risks followed by liquidity

and market risks at a less significant level.

The risk management policies of the Branch were not changed in 2011, and the Branch started to use

several new financial products such as contribution to syndication loan and purchasing bank bills.

4.1. Principles and Policies for the Credit Risk Management

The power of extending a loan rests with the Board of Directors. The Board of Directors may

delegate the power of extending loans to the General Manager under the provisions of the Banking

Law and respective legislation.

The Board of Directors is authorized to define the scope and terms of loan operations.

Foreign trade, especially credit facility for export transactions, is the most significant credit operation

of the Branch. These transactions have priority in case of allocation and extension.

Though it is not common, a loan may be granted for financing of other issues taking into account risk

profit balance, security and similar factors.


2011 ANNUAL REPORT

2

Even though it is not possible to absolutely avoid concentrating in any product or sector in the

Branch credit risk in terms of target transaction types and target customer mass, the Branch is

careful and prudent to distribute the credits to a large customer group in a balanced manner.

As a principle, the credits are issued against a valid security. Any asset other than those which can be

converted into cash easily and rapidly with an operational market and a reduced possibility of a

decrease in value whose value can be defined avoiding any doubt will not be accepted as a security.

No credit will be allocated to or allowed to be used by such persons or companies without a

reasonable operational background who/which have failed to submit any necessary information or

document in full or within the timeframe specified whose management and/or owner lacks sufficient

knowledge, capability or transparency where it is not possible to get sufficient information about

them.

In credit resolutions the requesting entity’s reliability and reputation, legal status, the sector in which

it operates, past activities, repayment capacity, robustness of its financial structure and capacity to

sustain such robustness should be taken into account as well as the securities and guarantees to be

obtained.

Credit pricing is determined depending upon the risk category, and the risk profit balance is

observed in each credit transaction. Risk category serves as a basic criterion in determining the credit

price.

A counter policy coherent with the credit risk categories that takes into consideration any change in

the risk categories is applied by the Branch.

Sector and group limits and sub-limits are monitored and reported on a daily basis.

4.2.4.2.4.2.4.2. Principles and Policies for the Operational Risk Management

Operational risk is defined as a risk of loss that arises out of insufficient or unsuccessful internal

processes, people and systems, or external events. Operational risks with a potential of causing

significant losses may result in loss such as system interruptions or problems, business conduct

patterns and in-house fraud.

The types of operational events do not have equal risk weights at the Branch. The types of events for

the operational risk principles, policies and practices are defined considering the risk weight that is

deemed to apply for the Branch. Underwriting method is used to reduce the risk in case it is

appropriate and feasible for the types of events. The main principles, policies and measures

regarding the operational risk management of the Branch are as follows:

In all the activities of the Branch the powers and responsibilities of those who decides and/or

approves that the bank may be a party to any banking transaction and of those who are in charge of

executing, performing and concluding the transaction are separate and will remain separate.

Approval of any kind of banking transaction and actual performance of such transaction are strictly

separated from one other.

Those who are authorized to have any purchase/selling and investment/borrowing relationship with

any addressee and determine the price, maturity and similar terms about such relationship will not

be entitled to perform the operational functions regarding the said transactions or approve the

transactions made.

In addition to the separation of approval and performance tasks, operational transactions are subject

to different approval limits in terms of transaction value. General Manager is entitled to set different

limits for different kinds of transactions and determine the codes of practice relating to the same.

The operational activities of the Branch are supported with an effective information processing

system giving a warning not to allow any potential risk to turn into an actual risk while strengthening

the operational productivity and reliability and enhancing the control efficiency.


2011 ANNUAL REPORT

3

The branch takes necessary measures to ensure that the employees follow the progress in legislation

and practices and are informed about the same in a timely manner, the content and scope of the

amendments are understood and the effect of the same on the activities are communicated to the

employees. Those efforts are supported through in-house and external training events. The

adequacy and extent of the efforts exerted are regularly monitored by means of compliance controls

conducted.

The branch has an internal audit and internal control organization structure according to the scope

and frequency of those controls to be conducted. Sufficient number of employees with appropriate

qualifications is employed at those departments as is required for the job performed.

Internal control activities are supplementary to the daily operational activities of the Branch, and

internal control activities mainly aim at minimizing the operational risk. To that end the internal

control efforts are exerted with such scope and as frequent as required.

The internal control efforts and the frequency and quality of internal control activities are evaluated

and controlled. Moreover internal audit department exerts efforts on any development, trend or

priority issue or necessary measures to be taken with respect to the operational risks.

Risks and problems that may arise due to unexpected events are managed within the frame of an

“Emergency Plan”.

Improvements in the internal volume of the branch are subject to digitization by periods. In this way

the work load on the operational staff, trends about the work load, relationship between work force

and failure, deficiency or contradiction are all analyzed, and the results are assessed and necessary

precautions are taken.

Defects, failures, deficiencies and contradictions stated in the internal control, internal audit and

independent audit reports are eliminated as soon as possible after the submission date of such

reports. The trends about defects, failures, deficiencies and contradictions, and the progress in

eliminating them are reported to the Board of Directors quarterly.

4.3.4.3.4.3.4.3. Principles and Policies for the Liquidity Risk Management

Liquidity Risk, defined as the failure to meet the payment obligations in full or in a timely manner as

there is not enough or proper cash or cash inflow to meet the cash outflow in full or in a timely

manner as a result of an imbalance in cash flow, is managed within the frame of the following

principles and policies.

Liquidity risk is taken into account in all assets allocation resolutions, including the credits.

Liquidity management is performed in terms of the currency of the capital used.

While determining the maturity for the credits obtained from the Foreign Headquarters and

Branches and Other Foreign Banks, the maturity pattern of the Branch's assets are taken into

consideration.

Concentrations on asset and fund maturities are avoided; attention is paid to spreading the

maturities in a balanced manner throughout a particular year.

It is prudently ensured that any liquidity deficit or surplus that may arise by maturity segments is

controllable in size.

4.4.4.4.4.4.4.4. Principles and Policies for the Market Risk Management

General market risk refers to the possibility of loss that the Branch may be exposed to due to

currency risk, specific risk, commodity risk or clearing risk. The following principles and policies are

observed in this respect:

It is agreed that the Branch will not be actively engaged in trading activities, will have no securities or

commodities position for trading purposes or will not use any derivative financial instruments.


2011 ANNUAL REPORT

4

The Branch does not invest in financial assets other than the Governmental Debt Securities and/or

TR Central Bank liquidity securities, although it is rare, it acquires assets representing indebtedness

with satisfactory returns where strong, domestic or foreign entities act as an addressee with a robust

security.

Structural interest risk which the Branch may be exposed to is kept within acceptable limits. It is

ensured that the bank’s interest incomes are minimally affected by means of keeping such deficits

sensitive to interest in shorter maturity segments.

The Branch is exposed to clearing risk to a limited extent due to foreign exchange selling and

purchase transactions made within the scope of the management of foreign exchange position, and

due to marketable securities purchase transactions made within the scope of liquidity management.

The limits are assigned to the addressees upon the Board of Directors’ resolution due to clearing risk.

Clearing risk is kept under control and reduced through operational methods implemented.

The rules and restrictions on the direction, extent and composition of the Branch’s foreign exchange

position may be transferred to the Assets & Liability Committee, Risk Committee or the General

Manager.

The Board of Directors and the committee in charge frequently review the principles and policies

regarding the management of currency risk within the frame of economic developments in Turkey

and in the world and make any amendment they deem fit.

5.5.5.5. Data pertaining to the Rating Points and Contents

The branch has no rating notes.

6.6.6.6. Brief Financial Data for 5-year Period including the Reporting Period (thousand TRY)

Balance Sheet

ASSETS ITEMS 2011 2010 2009 2008 2007

Cash in reserve 189.812 161.707 30.975 21.250 18.305

Banks 2.644.554 389.036 97.316 89.375 64.546

Loans 585.529 1.119.411 226.950 181.724 105.021

Marketable Securities 109.828 154.884 30.167 23.878 19.226

Other Assets 9.926 9.614 9.601 9.655 10.758

Total Assets 3.539.649 1.834.652 395.009 325.882 217.856

LIABILITIES ITEMS

Deposits 3.091.768 462.709 124.809 71.469 43.288

Credits Received 225.112 41.548 21.755 26.519 36.324

Provisions (Tax and Other) 14.696 6.810 3.967 4.082 3.737

Other Liabilities 50.864 1.223.458 170.831 168.643 93.438

Shareholder’s Equity 157.209 100.127 73.647 55.169 41.069

Total Liabilities 3.539.649 1.834.652 395.009 325.882 217.856


2011 ANNUAL REPORT

5

Income Statement

PRIMARY ACCOUNTS 2011 2010 2009 2008 2007

Net Interest Income 58.877 21.665 15.827 10.301 8.059

Fees and Commissions (net) 26.126 15.162 9.846 7.566 5.570

Other Income (net) 5.439 4.693 2.810 4.930 1.375

Total Operating Income 90.442 41.520 28.483 22.797 15.004

Other Operating Expenses -11.089 -7.856 -5.541 -4.693 -4.533

Provision for Loans and Other

Receivables -5.414 -587 -72 -432 -7

Profit Before Tax 73.939 33.077 22.870 17.672 10.464

Provision for Taxes -15.410 -6.699 -4.594 -3.672 -2.020

Net Profit 58.529 26.378 18.276 14.000 8.444

Other Details

Total Number of Personnel 55 51 51 50 49

Total number of Branch 3 3 3 3 3

7.7.7.7. Turkish Translation of the Annual Report for Bank Mellat Tehran – Iran

1

Annual Report-2010/11

2

Annual Report - 2010/11


Message from the Chairman...........................................................................6

Bank’s History...............................................................................................7

Chairman & Board Members............................................................................8

Organization Chart.........................................................................................9

Strategic Planing of the Bank........................................................................10

PART 1: Bank Mellat at a Glance

Bank at a Glance..........................................................................................12

Bank's Position Among the Commercial Banks..................................................13

PART 2: Management Report

Human Resources.........................................................................................20

Infrastructures........................................................................................22

E-Banking.............................................................................................23

International Banking Operations...................................................................26

Contribution in the Large-scale Projects...........................................................30

Bankig Products...........................................................................................33

Trend of the Bank's Shares in the Stock Market...............................................36

Corporate Governance..................................................................................39

Risk Managment..........................................................................................40

Research & Development Projects..................................................................44

Developing Scientiic & Research Activities.....................................................45

Part 3: Financial Statements

The Independent Auditor's Report..................................................................49

Financial Statements of the Group and Bank Mellat........................................51

3

4


5


Message from the Chairman


Global economy passed 2010 in confrontation of

governments’ policies in the political economy area,

so that with implementing less tight monetary

policies and redeeming bonds, while wealthy

countries experienced deep budget deicits, and the emerging markets experienced inlationary speed, production and employment increased

in many wealthy countries, but not suficient to retain pre crisis levels.

Despite these confrontations, global economy

managed to post a growth by 5% In 2010, well above the expected 3%. Moreover, Chinese economic growth rank fell to the sixth in the world

and the world’s highest level of the GDP growth

(more than 16%) was posted in the Middle East, representing fall of the classic economic powers

and emerging new capacities and opportunities

in this strategic region.

Meanwhile,1389(2010/11) should be called as the milestone of the Iranian economic history,

for the successful implementation of the sub-

sidies restructuring plan, through a method-

ological process, the recognition cycle of the various social classes based on their income and

redistribution of the subsidies in the Iranian economy was accomplished and appreciated by

credible international and regional economic institutes.

Multilateral development of the banking system of the country, including behavior,

operations, branches network and infrastructure can undoubtedly be regarded as the key factor in

implementing the subsidies restructuring plan and interaction of the banking system in managing

liquidity and other implications of this plan is appreciable. Thus, during 1389(2010/11) liquidity of Iranian economy reached 2,949,573 billion Rials at 20/03/2011 compared to 2,355,889 billion Rials at 20/03/2010, having experienced a growth by 25.2%.In the year 1389(2010/11) Bank Mellat managed to improve its ranking in various operational areas of the banking system thanks to unrelenting efforts of its committed staff and support

of its shareholders, leading to increasing its share of the country’s liquidity, one percent in the

total resources of the banking system and three percent in the bank guarantees, increasing its

operations by 40 % and raising EPS from 294 Rials to 411 Rials.This annual report features some of the operational facts of the bank during the year 1389(2010/11) in three parts of Bank Mellat at a glance, management report, inancial statements.Finally, while thanking the Almighty for His blessings, I would like to express my gratitude towards

my committed colleagues, distinguished shareholders and valued customers who paved the way

for the valuable achievements of the Bank during this year through their trust and loyalty.

Ali Divandari

Message from the Chairman

6


7

Bank Mellat was established on 22/07/1980 out of merger of 10 private banks by virtue of the resolution dated 20/12/1979 of the General Assembly of Banks, by virtue of article 17 of the act on administering Banks, and was registered under number 38077 in the companies’ registrar. Announcement of policies of article 44 of the constitution, led Bank Mellat to get enlisted in the group of the companies to be privatized, having caused the management of the Bank to arrange for setting up special committee to prepare the Bank for entering stock exchange.So, by virtue of the resolution number T /68985 dated 24/07/2007 of the honorable Council of Ministers and to decisions made in the extraordinary general meeting of Banks dated 05/04/2008, legal structure of the Bank was converted to public joint stock company leading to its getting listed in the Tehran Stock Exchange within the Banks, inancial institutions section on 10/02/2009 as the irst state owned Bank and 448th

listed company , and ultimately 5% of its stock was introduced to set the price on 18/02/2009.

Head ofice:No 276, Taleghani Ave., Tehran, Iran Tel: (98 21) 82961Fax: (98 21)8296 2700Website: www.bankmellat.irEmail: [email protected] Contact Center: Tehran: 1556 provinces: (021) 82488Shares affairs department: No 1443, shares affairs department, Financial Division, Vali-e-Asr Ave., Tehran 1591614311 Iran. Email: [email protected] Tel: (98 21) 6697 0058-9Fax:( 98 21) 6697 0053

Bank’s History

8


Chairman and Members of the Board of Directors

According to the resolution dated 13/07/2009 of the ordinary annual general meeting,

Members of the Board of Directors of the Bank were elected as the following table.

Also, according to resolution of the Board of Directors, Dr. Ali Divandari was elected

as the Chairman & Managing Director of the Bank.

Name Position Representing Incumbency period

Starting Ending

Dr. Ali DivandariChairman &

Managing DirectorGovernment of the

I.R. of Iran21/07/2009 21/07/2011

Abdolkarim Ghavamifar

Board MemberGovernment of the I.R. of Iran and provincial

investment brokerage Co.21/07/2009 21/07/2011

Younes Hormozi Board Member Beh Pardakht Mellat Co. 21/07/2009 21/07/2011

Mohammad Reza Saroukhani

Board MemberProvincial investment

brokerage Co.21/07/2009 21/07/2011

Mohsen Fadavi Board MemberSaba Tamin

investment Co.21/07/2009 21/07/2011

Mohsen Fadavi Mohammad Reza SaroukhaniYounes Hormozi Abdolkarim Ghavamifar

Dr. Ali Divandari

9


Organization Chart

Board of Directors

Chairman &

Managing Director

Dr. Ali Divandari

Vice Chairman &

Deputy Chairman

in Credit Affairs

Audit Committee

Risk Committee

Deputy Chairman in Human Resources Affairs

Deputy Chairman in Executive Affairs



Deputy Chairman in Planning Affairs

Deputy Chairman in ICT Affairs

Deputy Chairman inInvestment & subsidiaries

Affairs

Director General ofFinancial Affairs

Director General ofInternational Affairs

Director Generalof irst region

Director Generalof second region

Director Generalof third region

Director Generalof fourth region

Director General of ifth region

Director General of sixth region

Corporate Governance Executive Board

General Manager of Security Division

General Manager of the Independent Main Branch

General Meeting

Secretariat Ofice & Public Relations Division

10


Vision, Mission, Strategy and Targets

Vision& Mission Strategy Target

Streamlining economic

activities in trade, industry &

agriculture

Enhancing

operational indicators

-Retaining and enhancing competitive position of

the bank

-Optimal management of customers deposits,

optimizing allocations portfolio and adjusting over

due loans

-Increasing profitability and other incomes

- Expanding rendering letter of guarantee and

foreign currency services

-Optimizing branches network

Thriving to be a proactive

Iranian bank

Expanding

information and

communications

technology

-Enhancing quality and speed of rendering banking

services

-Customers access to on line services

-Moving toward electronic banking

-Responding to the new needs of customers and

rendering new services and products

-Developing IT infrastructure and network

Creating unique added value

for the customers

Enhancing quality of

services

- Standardizing rendering services

-Decentralizing and vesting authorities to expedite

rendering services

-Evaluating performance and strategic control on

key activities

Providing society with effective

services

Human resources

development

- Enhancing human resources recruiting &

retaining methods to increase customers

satisfaction

-Enhancing educational structure of human

resources

-Training, improving and empowering human

resources

-Increasing staff participation in decision

makings through implementing suggestion and

participation system

-Institutionalizing and expanding scientific attitude

in the bank through developing scientific and

research activities

Providing quality services in the

money market

Customer relationship

management

- Identifying and attracting key customers

-Streamlining customers access to banking

services, leading to increasing customers

satisfaction

-Customer care

11


PART 1

Bank Mellat at a Glance

12


Bank Mellat at a Glance

Financial Highlights

DescriptionAmounts in

billion Rials

Capital

(16 bn * 1000-Rial shares )16,000

Assets 704,484

Resources 496,142

Allocation of Resources 421,318

Income 60,021

Expenses 51,955

Profit before tax 8,066

Net Profit 6,584

Earning per share

(with 13,100 billion Rials capital)502 Rials

Earning per share

(with 16,000 billion Rials capital)411 Rials

E-banking systems

Internet Banking

Integrated system to follow SHETAB-based transactions

Credit application management system

Virtual training system

Shareholders’ information system

Internet shopping based on NGFS switch

Customers’ credit rating system

Electronic payment of gas price in the gas stations

Providing financial services to the capital

market in line with online trade

Branches and human resources

Number of branches 1,820

Number of employees 23,895

Deploying electronic technology

ATM 2,796

Branch POS 3,463

Shop POS 259,413

Advanced digital subscriber line 5,443

Cards issued based on their nature

Card type Number Market share

Access card 10,292,715 12.5%

Gift card 7,833,423 38.7%

Students card 32,195 38.7%

Guilds card 1,522,706 38.7%

Physicians

card8,673 38.7%

Transport card 1,215 38.7%

Total 19,690,927 38.7%

Number of accounts

Account nature Number

Mellat electronic current

account3,594,806

Non-interest bearing saving

deposit22,066,823

Electronic short term deposit 7,675,637

Electronic long term deposit 4,437,894

Total 37,775,160

13


Bank’s Position Among the Commercial Banks

1)Bank’s National Position

According to the latest rating announced by the Industrial Management Institute of the

country, Bank Mellat managed to increase its position for one grade through its desirable

performance and ranked the 7th among 100 top companies of the country.

Bank’s competitive position among the domestic banks is as follows:

Ranking the irst among the commercial banks in terms of staff per capita in absorbing resources;Ranking the irst among the commercial banks in terms of branch per capita in absorbing resources;Ranking the irst among the commercial banks in decreasing NPL to allocated resources ratio;Ranking the irst among the commercial banks in absorbing foreign currency deposits;Ranking the irst among the commercial banks in absorbing foreign currency resources;Ranking the irst among the commercial banks in decreasing balance of NPLs and bad debts;Ranking the irst among the commercial banks in terms of staff per capita in absorbing four core deposits;Ranking the irst among the commercial banks in terms of branch per capita in absor -

ing four core deposits;Ranking the irst among the commercial banks in terms of balance of non-interest bea -

ing current deposits in local currency;Ranking the second among the commercial banks in absorbing long and short term deposits;Ranking the second among the commercial banks in allocated resources;Ranking the second among the commercial banks in terms of letters of guarantee issued;Ranking the second among the commercial banks in terms of letters of credit issued;Ranking the second among the commercial banks in absorbing four core deposits in

local currency.

2-Bank’s position among the commercial banks

Bank’s position among the commercial banks in terms of absorbing and allocation of

resources has been as follows:

Bank’s share of total resources market

Bank’s share of total facilities market

Amounts in billion Rials

Year Bank MellatOther private banks

State-owned banks

Total deposits Bank’s share

2009/10 279,878 920,206 793,132 1,993,216 14%

2010/11 385,782 1,096,087 986,177 2,468,046 16%

Year Bank MellatOther private banks

State-owned banks

Total facilities Bank’s share

2009/10 278,882 807,967 1,102,943 2,189,792 13%

2010/11 329,018 1,014,907 1,269,254 2,613,179 13%

Amounts in billion Rials

14


Bank’s share from total liquidity of the country

Bank’s share from total resources of the commercial banks

2010/112009/10

2010/112009/10

Bank Mellat 14%

Other banks 86%

Bank Mellat 13.4%

Other banks 86.6%

Bank Mellat 25%

Banking system 75%

Bank Mellat 23.9%

Banking system 76.1%

15


Bank’s share from total facilities granted by the banking system

Bank Mellat 23.3%

Other banks 76.7%

Bank Mellat 31.5%

Other banks 68.5%

Bank Mellat 21.1%

Other banks 78.9%

Bank Mellat 22.3%

Other banks 77.7%

2010/112009/10

2010/112009/10

Bank’s share from total participative contracts

16


2010/112009/10

2009/10 2010/11

Bank Mellat 27.3%

Other banks 72.7%

Bank Mellat 23.9%

Other banks 76.1%

Bank Mellat 30.3%


Bank Mellat 38.0%


Bank’s share from total LGs issued by the banking system

Bank’s share from total LCs issued by the banking system

17


Bank Mellat 27.2%

Other banks 72.8%

Bank Mellat 26.3%

Other banks 73.7%

Bank Mellat 27.2%

Other banks 72.8%

Bank Mellat 26.3%

Other banks 73.7%

2009/10 2010/11

2009/10 2010/11

Bank’s share from total cards issued by the banking system

Bank’s share from the ATM market

18


19


PART 2

Management Report

20


Human Resources

Any organization depends on its human resources capabilities to accomplish their duties

and adapt with the changing environment to achieve their targets. Training and

empowering human resources enable organizations to continue their activities

and increase their eficiencies in line with the changes. In this context, Bank Mellat as a leading economic enterprise considers empowering

human resources the main drive for its business, considering the key role of human

resources in the Banking industry and creating motivation and participating spirit among

the staff, has ever more concentrated on investing in its human resources. Currently the

Bank enjoys 23,895 employees.

Composition of human resources based on education

PHD MA BA Associate Diploma Under

diploma Total

Head quarters 4 228 1,128 90 868 104 2,422

Line 1 304 6,740 1,856 11,266 1,306 21,473

Grand Total 5 532 7,868 1,946 12,134 1,410 23,859

26000

25000

24000

23000

22000

21000

20000

19000

18000

2006/7 2007/8 2008/9 2009/10 2010/11

Comparison of human resources during 2006/7-2010/11

21


Distribution of employees by years of service on 20/03/2011

Human Resources

Below 5 years 8.1%5-10 years 27.3%10-15 years 24.9%15-20 years 18.9%20-25 years 20.5%Over 25 years 0.3%

2011

Distribution of employees by education on 20/03/2011Distribution of employees by age on 20/03/2011

Under diploma 5.9%

Diploma 50.8%

Associate 8.1%

BA 32.9%

MA 2.2%

PHD 0.1%

Under 25 years old 0.7%

25-35 years old 40.3%

35-45 years old 44 %

45-55 years old 14.9%

Over 55 years old 0.1 %

22


Improving security of the banking systems

considering daily increasing dependence of the banking services to the IT and ever in-

creasing tendency of the customers to the e-banking services, and in line with retaining

and increasing security of the IT based banking systems following measures have been

adopted:

Securing network infrastructure via purchasing and installing hardware and software

security equipment

Implementing infrastructural services for integrated management of the network

Creating secure communication channel for internet banking service, using credible

certiicate of SSL;Implementing information security management systems and attempting to get ISO

27001 for internet banking service; Conducting periodic security evaluations on the Bank’s website and internet banking system;Conducting periodic security inspections from ATMs and shop-based POSs;Observing security considerations in outsourced activities of IT area services and

software products;Improving knowledge of the customers and culture building in the IT area via posters,

brochures, etc.;Launching principal, back up and emergency computer sites of the Bank,

Providing hardwares and softwares for the Bank.

Infrastructures

23


Services rendered to the customers in the e-banking area can be assessed in internet

banking, mobile banking, and telephone banking areas as follows:

A-Internet banking

All electronic account holders of the Bank can use various following services in this

area upon activating internet banking services in the respective branch and going to

the internet banking option in the website www.bankmellat.ir:

•Remittance: customers can enjoy this service to transfer funds into their or others accounts to save time without going to the branch. Possibility of creating seven kinds of

remittances in the banking system is the distinctive feature of this service compared to the

other banks. These include internet remittances, group remittances, regular remittances,

SAHAB remittances, interbank remittances, interbank SATNA remittances and regular in-

terbank SATNA remittances. Meanwhile, customers can safely transfer up to 2 billion Rials

using electronic signature of the bank. Also, creating group remittances up to 5 billion Rials in 999 records is the other advantage of electronic signature of the Bank.

•Check: users of internet banking can enjoy services such as conirming check amount, making inquiry and observing checkbooks situation, observing situation of drawn

checks, replenishing account for bounced check and its report.

•Paying bills and buying charge for credit SIM cards: in this service, besides paying bills and buying charge for credit SIM cards, users can trace the situation and date of

payment of their bills via the new service of making inquiry of the paid bills.

•Facilities: apart from paying their installments and receiving reports on their indirect debts, users can repay installments of other customers where the user can repay installments of

others just by entering the facilities code.

•Opening various accounts (non-interest bearing, short term deposit, long term deposit, or special short term deposit), receiving statement of the last 200 or more transactions, making inquiry of the L/G, balance of SHETAB based cards, producing

IBAN for core accounts of the Bank, calculating principal and proit of the facilities, etc are among other services provided in the internet banking system. In line with

increasing internet banking services and related risks, it is necessary to take certain

measures to ensure security of the system; so, the following steps have been taken in this respect:

•Indicating the date and time of the user’s last entry to the system•Indicating the last date of changing the password

E - Banking

24


•All the customers who do not change their password in the last three months period will be identiied and will be provided with the password changing form at the irst instance of entering the site. This will happen until they change the password.Given above, provision of some 40 vari ous services via internet banking leave little

space for the customers to refer to the branches to handle their daily banking

affairs.

B-Mobile banking

This system has been introduced in line with better serving the customers in order

to use services of the core based accounts just via mobile phones without referring

to the branches or even internet.

Mobile banking services can be activated in two areas of mobile banking and SMS

banking. Customers can refer to the account opening branch, get the service

activated, receive the password and after 24 hours enter Mellat mobile bank site,

receive the exchange switch as well as the conforming software.

Customers can receive various financial and non financial services including account

balance, last 3 transactions, paying bills, and buy credit SIM card charge.

Meanwhile, they can remit funds up to 10 million Rials among core accounts of the

Bank or remit up to 30 million Rials in the SAHAB system using banking remittance

services. It is noteworthy that there is no limitation for transferring funds between

the customer’s own accounts. They can also conirm the check amount or cancel it, make inquiry about the situation of a check and inactivating the card, in the check

and card services area.

The most important service provided for the Mellat electronic current accounts of

the Bank is announcing early morning balance via SMS which is very popular. While,

customers can send relevant SMS (speciic number) to 200033 to get account balance, last 3 transactions, any speciic transaction, or pay their bills.

C-Telephone banking

Customers the Bank can refer to the account opening branch, get the service activated,

receive the four digit password and after 24 hours dial 8132 and receive services such

as account balance, last 3 transactions, make inquiry about the situation of a check,

send fax, pay bills, and transfer funds between the their own accounts.

The signiicance of this service is that the customers can handle their accounts and meet their primary needs with the least possible facilities such a ixed line.The customers can also get other services in the check and facilities areas as well

as inactivating special services. It is now also possible to create IBAN code via

telephone banking.

E - Banking

25


Composition and number of domestic & foreign branches

Location 2010/11 2009/10

Tehran 307 347

Other provinces 1,509 1,468

Foreign branches 4 4

Total 1,820 1,819

2010/11

Tehran 16.9

Other provinces 82.9

Foreign branches 0.2

Tehran 19.1

Other provinces 80.7

Foreign branches 0.2

2009/10

2000

1950

1900

1850

1800

1750

1700

1650

1600

2006/7 2007/8 2008/9 2009/10 2010/11

Number of branches during 2006/7-2010/11

26


International Banking Operations

Letters of credit

In line with the foreign currency policies

of the country and despite the sanctions,

Bank Mellat managed to issue about

seven billion dollars of letters of credit

during 1389 (2010/11).The income derived out of the respective

operations; such as issuing, honoring, etc. amounted to 1,252 billion Rials.

Letters of Guarantee

Issuance of the letters of guarantee

constitutes one of the major activities of the

Banking system that is aimed at developing

and streamlining presence of the market

participants in foreign trade.

A total number of 481 letters of guarantee

worth 591 million dollars were issued in 1389 (2010/11) the commissions of which amounted to 24 million dollars.

1200

1000

800

600

400

200

0

12000

10000

8000

6000

4000

2000

0

30

25

20

15

10

5

0

1200

1000

800

600

400

200

0

11

17

2426

24

765

991959

1.181

1.252

9.421

11.327

9.622

6.3786.888

591

830

414

816

493

2006/7 2007/8 2008/9 2009/10 2010/11

2006/7 2007/8 2008/9 2009/10 2010/11 2006/7 2007/8 2008/9 2009/10 2010/11

2006/7 2007/8 2008/9 2009/10 2010/11

L/C’s issued during 2006/7-2010/11(amounts in bn dollars)

L/G’s issued during 2006/7-2010/11(amounts in mn dollars)

Commissions received from issuingL/C’s during 2006/7-2010/11

(amounts in bn Rials)

Commissions received from issuing andextending L/G’s during 2006/7-2010/11

(amounts in mn dollars)

27



During 1389 (2010/11) total number of 24 sets of documents of the export deferred letters of credit and drafts totaling 3,673,330 Euro has been discounted by the branches.

Also a total number of 77 sets of documents of the import deferred letters of credit

and drafts including 60,131,155 Euro, 635,141,069 Dirham, and 611,621,314 Korean won have been discounted, resulting in 3,234,757 Euro, 58,250,738 Dirham, and 55,215,811 won proit respectively.

currency number amount discount profit

export

Euro 23 3,673,330 91,953

AED 1 2,780,000 164,413

import

Euro 16 60,131,155 3,234,757

AED 60 635,141,069 58,250,738

WON 1 611,621,314 55,215,811

L/C’s and drafts discounted during 1389 (2010/11)

Foreign exchange transactions

1389 (2010/11) amount in USD

placements 3,391,602,163

deposits 1,126,604,129

1389 (2010/11) amount in thousand USD amount in thousand IRR

profit of FOREX 12,220 126,648,000

profit of foreign exchange operations 480 4,975,000

total 12,700 131,623,000

28



Currently, Bank Mellat has four foreign branches (Seoul in South Korea; Istanbul, Izmir and Ankara in Turkey), as well as 3 subsidiaries (Persia International Bank PLC, in London; Mellat Bank CJSC in the Republic of Armenia and FEE Bank in Malaysia). The Bank also holds a 26.30 % stake in Europaisch-Iranische HandelsBank AG, in Hamburg, Germany as an associated Bank.

Expanding and enhancing international business and supporting Iranian businessmen to

improve export and import situation are among the targets set by the Bank to increase

its contribution in the international trade.

Proit (loss) and capital of foreign branches & subsidiaries during 2007/08 -2009/10

Profit (loss) of foreign branches &

subsidiariesBranch/ subsidiary

Capital of foreign branches

& subsidiaries

2009/10 2010/11 2010/11 2009/10

36.7 46 Seoul Branch 40 39

12.2 17 Turkey Branches 34.8 36

48.9 63 Total 74.8 75

(0.98) 2.4 Mellat Bank Yerevan 18.8 14.5

13 6 PIB, London 85.2 81

16.3 28 EIH, Hamburg 122 116.7

28.3 36.4 Total 226 212.2

77.2 99.4 Grand total 300.8 287.2

(amounts in mn dollars)

29


Foreign Branches & Subsidiaries


Branches Subsidiaries

Seoul Branch

The Keumkang Tower

13/14th Floors 889-13 Daechi-Dong

Gangnam-GU, Seoul 135-280,Korea

Tel: +82 (2) 558 4448 (9 lines)

Fax: 557-4448. Telex: K36019-Mellat

Swift: BKMTKRSE

Website: www.bankmellat.co.kr

Persia International Bank PLC

6 Lothbury, London EC2R 7HH

Tel: +44 (207)606 8521 (10 lines)

Fax: +44 (207)606 2020

Telex: 885426

Swift: PIBPGB2L

Website : www.persiabank.co.uk

Istanbul Branch

Buyukdere Caddes Binbir Cicek Sok No.1

34330 Levent, Istanbul, Turkey

Tel: +90(212)2798015 PBX

Telex: 26023, 26502 MELT TR

Fax: +90 (212) 2846214-2846657-2964483-2964503

Swift: BKMTTRIS

Website : www.mellatbank.com

Persia International Bank (Dubai)

4th Floor, The Gate Building, P.O.Box 119871

Dubai, UAE

Tel: +9714 362 0811 (5LINES)

Fax: +9714 362 0812

Swift: PIBPAEAD

Ankara Branch

Ziya Gokalp Bulvari No. 12, Kizilay, Ankara, Turkey

P.O.Box: 79106425 Kizilay, Ankara

Tel :+90 (312) 4354800-4331204 – 4340141

Fax :+90 (312) 4321726

Telex: 46915 BMEL TR.

Swift: BKMTTRIS 100

Bank Mellat Yerevan

#6 Amiryan Str. P.O.Box: 375010 P/N 24 Yerevan,

Republic of Armenia

Tele: (+37410) 581354, 581523

Fax: 540885. Telex: 243303 MLTAR AM

Swift: BKMTAM 22

Website: www.mellatbank.am

Izmir Branch

Cumhuriyet Bulvari No. 88/A

P.K.710 3521 Konak, Izmir, Turkey

Tel: +90 (232) 4417400

Fax: + 90 (232) 4417636

Telex: 53053 BMIZ TR.

Swift: BKMTTRIS200

First East Export Bank (P.L.C)

Kuala Lumpur Office : Level 8 Pavilion Kl, Jalan

Bukit Bintang, 55100 Kuala Lumpur, Malaysia

Tel: + 603 9205 7722

Fax: +603 9205 7727

Swift: FEEBMYKA

Website: www.fee-bank.com

30


Contribution in the Large-scale Projects

1-Imam Khomeini Oil Reinery Company(PJSC) in Shazand•Project location: Arak, Markazi province,•Nature of the project: completing and developing the reinery in 2 phases including increasing 80,000 b/d in production capacity (from 169,100 b/d to 249,100 b/d) as well as optimizing products of the reinery•Granted facilities: issuing bonds for 3,670 billion Rials•Contract conclusion date: 22/02/2011

2-Bandar Abbas Oil Reinery Company•Project location: Bandar Abbas, Hormozgan province,•Nature and capacity : completing and developing Bandar Abbas oil reinery in 2 phases including increasing 88,000 b/d in production capacity (from 232,000 b/d to 320,000

b/d) as well as optimizing products of the reinery•Granted facilities: issuing bonds for 1,500 billion Rials•Contract conclusion date: 14/02/2011

3-In line with executing resolution number 206926 of the cabinet of ministers

in the market control task force, in order to support subsidies restructuring

plan and tackling its contingent effects, the Bank allocated 10,000 billion Rials

85% of which was paid to the companies introduced by the ministry of com-

merce as follows:

SEQ subject of the facilities requested paid

1 supporting subsidies restructuring plan 6,300 6,300

2 purchasing basic goods 1,800 1,800

3 market adjustment scheme (fruits and date) 950 125

4 retail chain stores 500 140

5 others (trade infrustructure, supporting industrial bakeries, etc.) 450 60

total 10,000 8,425


31



4- in execution of note ‘L’ to article 3 of the budget law for the year 1389 (2010/11), in order to implement national and provincial commitments in laying gas pipelines, taking

gas to cities and villages, implementing Mehr housing scheme, major subscribers and

taking gas to more cities and villages, strengthening and reconstruction of facilities, total

facilities amounting to 4,976 billion Rials were granted to gas companies of 280provinces

as well as Iranian Gas Engineering and Development Company as the following table:

Granted facilityCompanySEQ

180,000Azarbayjane-sharghi province gas company1

50,000Azarbayjane-gharbi province gas company2

80,000Ardebil province gas company3

150,000Ilam province gas company4

100,000Bushehr province gas company5

350,000Tehran province gas company6

100,000Charmahal-o-bakhtiari province gas company

7

395,000 Khorasan-e-razavi province gas company8

115,000 Khorasan-e-shomali province gas company9

100,000 Khorasan-e-jonubi province gas company10

256,000 Khuzestan province gas company11

(amounts in mn Rials)

32



Granted facilityCompanySEQ

85,000 Zanjan province gas company12

27,000 Semnan province gas company13

137,000 Sistan-o-baluchestan province gas company14

193,000 Fars province gas company15

35,000Ghazvin province gas company16

36,000 Ghom province gas company17

82,000 Kordestan province gas company18

275,000 Kerman province gas company19

170,000 Kermanshah province gas company20

45,000Kohkiluyeh-o-boyerahmad province gas company

21

175,000Golestan province gas company22

35,000Gilan province gas company23

80,000 Lorestan province gas company24

63,000Mazandaran province gas company25

40,000 Hamedan province gas company26

60,000 Hormozgan province gas company27

62,000Yazd province gas company28

1,500,000Iranian Gas Engineering and Development Company

29

4,976,000Total

(amounts in mn Rials)

33


Banking Products

System for electronic payment of gas price

Electronic payment of gas price has been made possible in two ways by gas smart card:

1-Paying via the bank card connected to the gas smart card of the driver: currently,

cards issued by Bank Mellat, as well as bank Sepah, bank Sarmayeh and bank Pasargad

can be used for this purpose,

2-Paying via wallet of the gas smart card:

This is possible by charging the wallet of the gas smart card using all SHETAB member card

It is noteworthy that the Bank Mellat electronic wallet software has been installed on all

smart gas cards of the cars in the country (19 million cards) and all these cards can be used for payment of gas price in either above way. Also 1590 gas stations were equipped with banking system and 2,646 gas stations were equipped with the wallet system by

the end of 1389(2010/11).

Developing accounts management system

In line with rendering diversiied services to the customers and managing funds of various companies, organizations, institutions, etc., the irst ofice banking system abbreviated as accounts management system was launched. This system will bring

about inancial transparency and optimal funds management for big organizations with various accounts, high turnover and lot of customers.

It is noteworthy that besides report taking from the above system, services such as

special payment and funds transfer from this system will soon be launched. Using special

payment service, customers can enter the beneiciary’s data and sending it to the core banking system by them; while, they can transfer funds between their accounts with Bank Mellat via funds transfer service.

Currently, accounts management system has been launched in 100 companies

and organizations such as charity organizations and institutions giving service to

subscribers, universities, medical sciences universities and their subsidiaries, insurance

companies, food, cement, steel, distribution, and oil industries.

Developing internet shopping system

Considering high welcome of the internet shopping system by the customers and using

website of the Bank by 1000 acceptors, including universities, scientiic and educational centers, law irms, etc. the Bank decided to implement instant remittance of fund to their accounts. As per this unique service, the transactions amount is credited to the

acceptors account once debited from the customer’s account.

Also, in line with ever more development of the system and rendering better services to

the customers and increasing potentials of meeting the transactions, necessary steps

have been taken to optimize the internet payment switch of the Bank and the new NGFS

34


Banking Products

switch has been designed, implemented and put into operation with a distinctive

structure.

Developing internet banking system

In line with decreasing reference of the customers to get services, the following new

services have been developed in the internet banking area:

-Opening time deposits(long term/special short term)-Servicing installments

-Interbank remittances

-Report of the drawn checks situation

-Connecting/cutting sub-accounts to/from access card

-Online viewing of transactions without limitation

Commercial banking system

Commercial banking system has been designed for legal entities in order to provide

them with the existing services of the internet banking as well as other special services

such as managing users, group payment of bills, access to diversiied comprehensive reports, other calculative services, etc.

E-payment for online trading of stock

The year 1389 (2010/11) was the year of development, vibrancy and improvement in the stock and capital market of the country. The Bank has contributed by rendering a

service as e-payment for online trading of stock, which was acclaimed by the market

participants as changing the stock market and provided the market with speed,

transparency and conidence.Using this service, the investors can remit their trading orders online anywhere just by

connecting to internet, without referring to brokerage companies.

In this system, when the user orders to buy stock, the trade amount together with the

respective commissions will be blocked in his account and will be credited to the account

of the brokerage company. It is also possible to online credit the user’s account when

selling shares. Positive reaction and high welcome by the market participants from this

new system has led to increase the number of the customers and volume of funds

transferred via this system.

date number of customers blocked transaction

(ordered)transaction led to

remittance (deal done)primary

register

activated number amount number amount

20/03/2011 2,571 2,030 20,536 258,507,319 8,777 72,917,949

(amounts in 000 Rials)

35


Developing quantity and quality of shop based POSs

The Bank has taken steps to develop quantity and quality as well as create added value

of shop based POSs in order to penetrate in all market guilds and guide the customers

to use e-banking instruments. This has led to retaining and enhancing performance and

share of the Bank from the POSs in the banking system.

It is noteworthy that more than 207,000 POSs has been installed in the various guilds

by the end of 1389 (2010/11).The salient features making the Bank’s POSs establish its competitive edge and get

highly welcomed by the customers are as follows:

Instant credit of funds to the acceptor’s account

Possibility of connection between POS and customer’s PC

Multi- account POSs: POS capable of simultaneous remittance of funds to several accounts

Percentage POSs: POS capable of simultaneous remittance of funds to several accounts

with requested percentages

GPRS POSs: a suitable option for mobile businesses

Providing instant conirmation of POSs transactionsPossibility of receiving the remittance code

Providing special credit package for POS acceptors

Possibility of paying bills, charging credit SIM card, viewing account statement, etc.

Incentive scheme for granting awards to POS acceptors as well as cardholders using

POSs

Rendering the above services and incentive scheme for POSs has led to increase in

number and volume of POS transactions as illustrated bellow:

Mellat helpmate scheme

In line with the customer care and performing face to face marketing, Bank Mellat has

inaugurated Mellat helpmate scheme in select branches. In this context, the Mellat

helpmate is ready to:

-Deal with the customers’ questions in all banking areas, including foreign exchange,

local currency, credit, e-banking and conventional banking

-Provide the customers with information on the new banking services and how to use

e-banking services

-guide the customers on the issues such as introducing forms, showing the relevant

counter, etc. in order to expedite and streamline rendering services to them

36


Trend of the Bank’s Shares in the Stock Market

Trend of transactions and shares price

Bank’s Shares got listed in Tehran Stock Exchange in the Banks and other monetary and

inancial institutions group on 10/02/2009 under ‘webmellat’ symbol and its trend during the last three years has been as follows:

Financial

year ending

on

Traded shares

Value of the

shares traded

(million Rials)

the Days

symbol

was open

Market value

(million Rials)

Share

price

(Rials)

Capital

(billion Rials)

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 13,100

Total yield of each share during 2010/11 has been 87.5 %

showing a growth by 98 % over the previous year

500

400

300

200

100

0

50

144

203

279

502

2600

2400

2200

2000

1800

1600

1400

1200

1000

2006/7 2007/8 2008/9 2009/10 2010/11

Trend of the realised EPSwith 13,100 bn Rials capital

(amounts in Rials)

Trend of price of the Bank’s shares from IPO until 16/03/2011(amounts in Rials)

2009/0

2/1

8

2009/0

3/0

8

2009/0

3/3

0

2009

/04/

1520

09/0

5/02

2009

/05/

172009/0

6/0

6

2009/0

6/2

1

2009/0

7/0

7

2009/0

8/0

2

2009/0

8/1

7

2009/0

9/0

1

2009/0

9/1

9

2009

/10/

052009/1

0/2

1

2009/1

1/0

7

2009

/11/

252009/1

2/1

4

2010/0

1/0

2

2010/0

1/1

7

2010/0

2/0

1

2010/0

2/2

1

2010/0

3/0

8

2010/0

3/3

1

2010/0

4/1

7

2010

/05/

0220

10/0

5/25

2010/0

6/1

2

2010/0

6/2

8

2010/0

8/0

2

2010/0

8/1

7

2010/0

9/0

4

2010/0

9/2

0

2010/1

0/0

6

2010/1

0/2

3

2010/1

1/0

7

2010/1

1/2

3

2010/1

2/0

8

2010/1

2/2

6

2011/0

1/1

0

2011/0

1/2

6

2011/0

2/1

3

2011/0

3/0

1

2011/0

3/1

6

37


Comparing performance of the Group and Bank Mellat with the previous year

Performance of the Group and Bank Mellat

Indicator 20/03/2011 20/03/2010

Total income 60,020,731 44,970,688

Total expenses 51,955,119 40,284,512

Earnings before tax 8,065,612 4,686,166

Tax 1,481,149 1,019,650

Net profit 6,584,643 3,666,516

EPS- Rial (with 13,100 bn Rials capital) 502 279

EPS- Rial (with 16,000 bn Rials capital) 411 -

1387 1388 1389 1390

203279

411

203

279

411

185

249277

350

2008/9 2009/10 2010/11 2011/12

Realisation of EPS with 16,000 bn Rials capital(amounts in Rials)

Realised

Projected


38


List of the companies in which the bank has more than 20% stake

Major investments

SEQ Company Stake

(%)

Cost price

(million Rials)Nature of business

1 Mellat bank Yerevan, CJSC 100 198,286 Banking services

2 Kheradmandan investment Co. 99.9 8,496Investing and related

services

3 Bank Mellat brokerage Co. 99.9 14,988Investing and related

services

4 Bank Mellat printing Co. 99.9 58,796Printing and binding

services

5 Mellat Behsazan Co. 99.9 149,984

Designing and

producing software and

related services

6Mellat Behsaz mosharekatha

Co.99.9 809,878

Investing in the listed

companies shares

7 Mellat construction Co. 99.9 50,000Implementing

construction projects

8 Mellat leasing Co. 98.7 98,700Investing and related

services

9 Mellat Ta’amin sarmayeh Co. 96 960,000Investing and related

services

10 Mellat exchange Co. 79.9 23,999Foreign currency

exchange services

11Kish Oil & Gas Int’l

Development Co.76 38,000

Oil ,Gas &

petrochemicals

12 Persia International Bank PLC 60 677,880 Banking services

13Europaisch-Iranische

HandelsBank26.3 1,059,064 Banking services

14 Alborz insurance Co. 20 520,289 Insurance services

39


Corporate Governance

In line with improving corporate governance and realizing supervisory responsibilities in

the inancial reporting process, establishing internal controls system, auditing process and other related affairs, the auditing committee has been established to ensure realiza-

tion of the following targets:

1-Existence of eficient internal controls system,2-Correctness of inancial statements and reporting process,3-Observance of rules and regulations as well as the Bank’s policies and the codes of

conduct,

4-Establishment, viability, and eficiently supporting the internal auditing committee,5-Observance of independence, professional competency and performance of the independent and internal auditing.

Also, in order to assess implementing and applying risk management across the Bank,

in order to prevent contingent losses during banking operations, the risk committee has

been established comprising inancial and operational risks unit, credit risk unit, and compliance unit(to monitor and ensure compliance of data and processes with the

governing rules and regulations)

Audit

committee

Internal

audit unit

Risk

management

unit

Compliance

risk unit

Corporate

governance

High

committee of

risk management

40


Risk Management

Analyzing the Bank’s risk

As “proit seeker organizations’’ banks are organized to create proit for their shareholders and depositors. Since risk taking is inevitable for gaining proit, banks are called “risk taking machines’’. In this context, there is a ground for risk

for a variety of reasons, among which are:

Diversity of banking operations

Different nature of banking operations

Situation and limitation of the bank’s capital

Situation of depositors and their abundance

Difference between the bank’s and depositors’ interests

Due date of assets (loans) and liabilities (deposits)Difference in the inancial situation of loan takersDealing most of the bank’s staff with inancial resourcesPosting a lot of inancial operations and transferring a lot of money

In this context, credit risk, liquidity risk, market risk, operational risk, etc. are being

monitored and managed in the high committee for risk management that is under

supervision of the board of directors of the Bank.

The Bank has taken major steps to identify and manage operational risks via concluding

contracts with the Auditing Organizations of the country for operational auditing as well

as establishing internal auditing committee in the Bank and increasing inspections especially

from branches through regional ofices and monitoring and inspections division. Also, in order to mitigate information technology risk, the Bank tries to adapt itself with the

latest changes in the information technology area.

High committee for risk management

The high committee for risk management was established based on the resolution of the

board of directors of the Bank on 20/08/2008. The committee consists of 8 members,

including one board member, ive top executive oficers, and two academic experts in the inancial and banking areas. The principal targets and duties of the committee includes supervising performance of the risk management of the Bank in various risk

areas, advising the board on risk management, ensuring of proper practice of risk

management in the Bank and enhancing staff knowledge of risk.

41


Risk Management

Risk management

Risk management unit was established as per organization chart approved in 1389

(2010/11). The main duty of this unit includes timely identifying, assessing, and controlling potential risks in order to prevent or minimizing the losses and continuous

assessing and enhancing codes of conduct.

Risk management unit of the Bank includes four sub units comprising credit risk

management unit, inancial risk management unit, operational risk management unit and compliance risk management unit.

Compliance risk management unit

According to directive dated 27/04/2009 of the Central Bank of the Islamic Republic of

Iran, in order to retain operational security in the Bank, the compliance risk management

unit was established and inaugurated as per charter approved by the board in 1389

(2010/11) with an integrated organization chart independent of other units. Function of this unit includes arranging for and monitoring observance of the rules and regulations

in order to retain stability of banking operations and prevent the risks through which the

Bank may face legal penalty or punishments , regulatory disciplines , incur signiicant losses or damage its reputation.

Risk management

units

Financial

risk

Compliance

risk

Credit riskOperational

risk

42


Total facilities granted at the end of 1389 (2010/11) experienced a growth by 28% over the previous year; while, due to proper management of the credit portfolio of the Bank, value at risk decreased by 6.93%. In fact, despite considerable growth in granted facilities, the value at risk ratio has reduced as shown in the chart.

Value at risk

Yearprovision for

Operational risk

provision for

comprehensive risk

provision allocated in

the Bank

Comprehensive risk

coverage rate

1388(2009/10) 2,951 23,608 17,210 73%

1389 (2010/11) 3,525 28,200 26,079 92%

The results of the calculations made for the inancial year 1389 (2010/11) based on the basic indicator as per operational risk standards and Basel II regulations shows a growth

by 19 % in comprehensive risk coverage rate over the previous year. The Bank managed to cover 92% of its comprehensive risk, while it was 73% in the previous year.

400

300

200

100

0

278

387

%100

%80

%60

%40

%20

%0

73,0

92,0

2009/10 2010/11

2009/10 2010/11

Granted facilities (1000 bn Rials)

Value at risk (%)

Comprehensive risk coverage (%)

Uncovered risk (%)


43


Implemented measures to improve investments portfolio

Optimal management of investments portfolio in the listed companies

Implementing capital investments in the idle properties of the Bank in order to create

more added values

Completing chain value of the Bank’s services by establishing Mellat insurance, leasing

and exchange companies

Establishing Taamin Sarmayeh company in order to expand services range

Financial

Engineering &

risk management

services

Taamin

Sarmayeh

Underwriting

and inanceservices

Customizedbanking

Engineering

services for

industrial &

construction

projects

Financial &valuationservices

Asset and

funds

management

44


Developing internet shopping

Rendering special services to the insurance companies

Empowering provincial and regional marketers

Internet application for guilds credit package

Designing credit application management system

Implementing Mellat gift scheme (for card holders & acceptors)Mellat customers club, in order to introduce new banking products

Mellat advantageous scheme in line with developing non face to face services

Mellat contact center (software support & answering to customers)Developing special services to the NIOPDC

Rendering special services to the stock exchange brokerage companies and trading stock via internet

Installing POSs for the agents introduced by SAIPA Company

Taking model from new products & services of the top American, European and Islamic banks across the world

Empowering Mellat helpmates in order to train, answer, and guiding customers and marketing

Rendering special services to social security fund to complete e-banking services

Gas smart card (Electronic payment of gas price in the gas stations)Developing internet banking (phase 3) to render services in loans, group SATNA, ACH, and SSSS areas.

Special payment to streamline payment customers of companies and organizations without drawing check

Developing accounts management system via optimizing its features based on the customers’ needs as well as e-banking and I T divisions and changes in the core banking system based on the key customers’ needs

Research & development projects

45


Developing scientiic & research activities

The recent inancial crisis, reactions, behaviors, and conditions of inancial institutions during inancial crisis and how to escape its effects, beside the recent forecasts for future global

inancial crises, indicates that competition focus of the banks and inancial institutions has shifted from operational activities to

theoretical ones.

In this context, given the rapid technological

developments and similarity of the banking

products, on the one hand, the banks

play more role than mere funds transfer

intermediary leading to more diversi-

ied expectations of the customers from these economic institutions; on the other hand, development of the branch network

by the competitor who are seriously looking

for more market share, beside necessity of

managing risks associated with these devel-

opments, has made research & development

as the only factor of viability and dynamism.

Bank Mellat, as a strategy oriented leading

private Bank in the Banking industry of the

country, having been aware of the role of R&D

long before getting privatized, had attempted

to detect bottlenecks, diagnose, ind solutions, take feedbacks, etc. via developing scientiic & research activities; thus, to steer the Bank through deepening R&D and knowledge

management. So, considering strategic tar-

gets of the Bank, it has deined the research plans in a timely manner.

In this context, the research and planning

center of the Bank has put certain researches

in its agenda in line with creating value and

stabilizing it for all stakeholders in all opera-

tional areas including planning, human re-

sources, inancial, credit, economic, market-ing, etc., enjoying the eminent academic and

banking igures to achieve projected strategic targets and main mission of the Bank.

46


Projects of the research and planning center

Planning group

Analyzing performance of regional ofices in operational plan Analyzing operational plan from the Bank’s perspective

Feasibility study of implementing business intelligence in line with developing co -

petitiveness of the Bank

Assessing the relation between corporate commitment and quality of services in the

selected branches of Tehran regional ofices

Optimal allocation of resources group

Diagnosing current credit system of the Bank

Assessing factors affecting credit velocity and providing corrective approaches

Data mining creditworthy customers data and providing approaches for developing

credit theory

Human resources group

Devising strategic plan for human resources of the Bank

Productivity group

Assessing relations between IT and productivity in the Bank

Assessing factors affecting productivity in the branches, emphasizing on Tran quest

measuring model

Diagnosing e-banking helpmate scheme and comparing it with similar projects in

the other banks

Financial assessments group

Designing cost-beneit assessment pattern for the special services required by customers

Providing approaches to improve capital adequacy of the Bank

Assessing market making of the Bank’s share in the stock exchange

Designing ALM system in different levels of the Bank, regional ofices and branchesUnifying provision of liquidity reports across the Bank

Economic assessment group

Providing a model to inancially & economically organize assets of the BankAssessing cost-beneit of the surprise schemes of the Bank for attracting resources comparing contracts used in the upstream sector of the oil industry and comparing

it with conventional ones

47


Projects of the research and plan-ning center

Assessing conditions of transport

industry

Assessing conditions of electricity

industry

Assessing conditions of petroleum

industry

Assessing conditions of cement industry

Assessing conditions of gas industry

Assessing conditions of reinery industries

Assessing conditions of petrochemical

industry

Marketing and advertising group

Devising the strategic plan for

marketing and advertising of the Bank

Computer and IT group

Assessing approaches to implement

CRM in the Bank

Providing a model to implement

knowledge management in the Bank

Evaluating E-banking technology in

Iran

Evaluating SWIFT as infrastructure

if the financial industry for secure

transmission of messages

48


PART 3:

Financial Statements

49


Ministry of Finance and Economic Affairs

Auditing Organization

The independent auditor and legal inspector’s report To the ordinary gen-

eral meeting of shareholders

Bank Mellat

1.This organization has audited the accompanying consolidated balance sheet of the

group and bank Mellat as of march 20th 2011, the related statements of proit and loss, comprehensive statements of proit and loss and consolidated cash lows of the group and bank Mellat for the year then ended, together with accompanying notes from 1 to

59. These inancial statements are the responsibility of the bank’s management and responsibility of this organization is to express its opinion on these inancial statements based on its audit and report on the points that are noncompliant with the legal require-

ments set by the monetary and banking act, usury – free banking act, amendment to the

commercial code and provisions of the bank’s articles of association.

2.This organization has conducted its audit based on auditing standards. Those auditing

standards require this organization to plan and perform the audit to obtain reasonable

assurance as to whether the inancial statements are free from material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and

disclosures in the inancial statements. The audit also includes assessing the accounting principles and policies used and signiicant estimates made by the board of directors, as well as evaluating the overall inancial statements presentation. This organization believes that the conducted audit provides a reasonable basis for its opinion.

3.During the previous years, the bank had posted a provision of 4,174.8 billion Rials for dues

to the banks retirement and disability fund, and in the inancial year under report, while servicing 3,700 billion Rials of the said dues, it posted a provision of 1,500 billion Rials in the accounts to compensate for the deicit of the required provisions. According to Article 31 of the Articles of association of banks’ staff retirement & disability fund, the deicit of the Fund’s resources and the share of each member bank in the inancial year under report had to be calculated and announced by the fund’s managers, the result of which has not been

announced till date of preparation of this report. Based on the existing evidences and data,

The Independent Auditor’s Report

50


however, calculations suggest deicit of the Fund’s resources and the Bank’s obligation to ad-

just its accounts so much as its stake, the inal amount of which depends on the inal result of the respective calculations to get emerged and released by the Fund.

4.In the opinion of this organization, except for the implications of the issue raised in

the above clause 3, the accompanying inancial statements give a true and fair view, in all material respects, of the inancial position of the group and bank Mellat at march 20th 2011 and the results of its operations and its cash low for the year then ended in accordance with the accounting standards.

5.Provisions of article 53 of the Bank’s Articles of Association concerning setting legal reserve out of the net proit, contradicts provisions of the monetary and banking act of the country.

6.In compliance with the provisions of Article 240 of the amendment to the Commercial Code,

attention of general meeting of the shareholders is drawn to the implications of the above clause 3.

7.The transactions indicated in part A of note 56-2 to the inancial statements have been assessed as all transactions subject to article 129 of the amendment to the Commercial

Act, that have been conducted during the year under report and have been reported by

the board of directors of the bank to this organization. Provisions of article 129 based on

obtaining approvals of the board of directors and refrain of the interested director from

standing for balloting have been observed in conducting the above states transactions.

Moreover, this organization has not noticed any evidence denoting deviation from

reasonable commercial conduct and usual banking practice in these transactions.

8.The board of director’s report on the operation and general condition of the bank

which has been operated to be presented to the annual general meeting of shareholders

has been assessed by this organization. With respect to the assessments made and

considering the provisions of the accompanying notes this organization has not noticed

any material cases indicating contradiction between the information of the said report

and the documents presented by the board of directors.

11/07/2011

Auditing organization

Alireza Fakhr Shafaee Bahram Sadughianzadeh

The Independent Auditor’s Report

51


Bank Mellat (Public Joint Stock Company)Notes to the consolidated inancial statements For the inancial year ending March 20th

2011

The ordinary general meeting of shareholders

We are honored to enclose herewith the consolidated inancial statements together with the inancial statements of the bank for the inancial year ending March 20th

2011. The inancial statements are composed of the following elements:

A- The principal consolidated inancial statements of the Group: Consolidated balance sheet

Consolidated proit & loss account Changes in consolidated retained earnings (Loss) account Comprehensive consolidated proit & loss account Consolidated cash low statement

B- the principal inancial statements of Bank Mellat: Balance sheet

Proit & loss account Changes in retained earnings (Loss) Comprehensive proit & loss account Cash low statement

C- Accompanying notes:

History of the bank’s operations

Accounting Convention

Summary of Signiicant Accounting Policies Notes to the inancial statements and other information The consolidated inancial statements of the Group and inancial statements of bank Mellat have been prepared in accordance with the accounting standards and have

been approved by the board of directors of the bank on 02/07/2011.

Consolidated Financial Statements of the Group & Bank Mellat

Members of the board of directors Representative Position Signature

Dr. Ali Divandari - Chairman & Managing Director (Singed)

Mohammad Reza Saroukhani - Executive Board Member (Singed)

Abdolkarim Ghavamifar - Non Executive Board Member (Singed)

Behpardakht Younes Hormozi Non Executive Board Member (Singed)

Saba Taamin co. Mohsen Fadavi Non Executive Board Member (Singed)

52


ASSETS Note March 20th 2011 March 20th 2010

Million Rials Million Rials

Cash 6 8,978,805 5,491,595

Dues from the Central Bank 7 86,834,176 70,060,817

Dues from Banks & Credit Institutions 8 78,622,191 83,378,261

Dues from the Government 9 11,459,873 17,183,528

Loans & Advances to the Public Sector 10 24,434,209 13,083,012

Loans & Advances to the Subsidiaries 11 8,650,621 2,304,730

Loans & Advances to Other Parties 12 335,732,605 264,778,230

Dues from L/Cs & Time Drafts 13 90,791,753 73,801,707

Participation Bonds & the Like 14 11,682,018 5,882,092

Investments & Partnerships 15 7,107,143 4,562,964

Tangible Fixed Assets 16 16,125,753 13,979,164

Intangible Assets 17 1,191,480 1,158,486

Other Assets 18 22,873,860 3,408,446

Total Assets 704,484,487 559,073,032

CONTINGENT LIABILITIES : 53

Liabilities for L/Cs 102,825,307 116,839,934


Other Liabilities 61,778,339 50,183,046

Managed Funds & the Like 3,427,033 3,372,669

Total 246,332,397 226,260,672


Consolidated Balance Sheet

As at March 20th 2011

(Restated)

53



LIABILITIES & SHAREHOLDERS’ EQUITY Note March 20th 2011 March 20

th 2010


Dues to the Central Bank 20 7,882,212 24,136,240

Dues to Banks & Credit Institutions 21 39,106,879 31,573,071

Sight Deposits 22 155,957,618 124,315,156

Saving Deposits & the Like 23 41,654,278 28,512,688

Time Investment Deposits 24 258,901,811 203,759,160

Other Deposits 25 31,082,145 28,678,853

Tax due 26 5,257,683 1,822,110

Provisions & Other Dues 27 7,192,422 7,312,348

Acceptances & Endorsements 28 92,174,369 74,925,591

Dividend due 29 256,407 593,495

Severance provisions 30 2,896,042 2,328,671

Items in transit 19 33,692,475 9,284,318

Total Liabilities 676,054,341 537,241,701

Shareholders’ equity

Capital (13,100 million shares, 1000 Rials each) 31 13,100,000 13,100,000

On account Capital Increase 31 2,900,000 0

Reserves 32 4,521,650 2,878,613

Exchange Translation Gain (Loss) 33 235,370 328,989

Exchange Translation Reserve 34 928,665 928,665

Retained Earnings (Loss) 6,136,641 3,902,834

Total Shareholders' Equity 27,822,326 21,139,101

Minority Interest 35 607,820 692,230

Total Liabilities& Shareholders’ Equity 704,484,487 559,073,032


Party to Liabilities for L/Cs 102,825,307 116,839,934

Party to Liabilities for L/Gs 78,301,718 55,866,023

Party to Other Liabilities 61,778,339 50,182,046

Party To Managed Funds & The Like 3,427,033 3,372,669

Total 246,332,397 226,260,672

Consolidated Balance Sheet

as at March 20th 2011

(Restated)

54


A-Income from both Bank & depositors resources: Note March 20th

2011 March 20th

2010


Profit from granted facilities 36 42,237,032 30,977,720

Profit from investments & partnerships 37 1,351,673 1,423,115

Joint Incomes 43,588,705 32,400,825

Deductions:

Partial payment on profit paid to depositors 38 (27,644,463) (21,960,157)

Surplus paid to depositors 39 0 0

Profit Paid to Depositors 27,644,463) (21,960,157)

Bank’s profit shares & fees received 15,944,242 10,440,678

B- Income from bank’s own resources:

Profit & Late Payment Charges Received 40 7,820,790 7,471,238

Commissions received 41 4,798,678 3,561,110

Other Incomes 42 3,812,558 1,537,495

Total incomes gained from bank’s own resources 16,432,026 12,569,843

Bank’s total income 32,376,268 23,010,521

C- Expenses:

Administrative & general expenses 43 (14,755,317) (11,585,414)

Doubtful loans expenses 44 (5,513,181) (3,531,071)

Financial expenses 45 (3,410,236) (2,720,238)

Other expenses 46 (631,922) (487,632)

Bank’s total expenses (24,310,656) (18,324,355)

Profit before tax deduction 8,065,612 4,686,166

Less: tax (1,481,149) (1,019,650)

Net profit 6,584,463 3,666,516

Minority interest 17,592 60,741

Earnings per share (with 13,100 billion Rls capital) 58 502 279

Earnings per share (with 16,000 billion Rls capital) 58 411 -

Changes in Consolidated Retained Earnings (Loss) Account

Net profit(loss) 6,584,463 3,666,516

Retained earnings at the beginning of year 3,620,599 4,031,873

Yearly adjustments 47 429,884 (333,653)

Adjusted retained earnings at the beginning of the year 4,050,483 3,698,220

Attributable profit 10,634,946 7,364,736

Profit allocation:

Legal reserve (1,175,964) (946,098)

Approved dividend 48 (3,309,980) (2,368,155)

Total deduction (4,485,944) 3,314,253

Retained earnings at the end of year 6,149,002 4,050,483

Minority interest 12,361 147,649

Majority interest 6,136,641 3,902,834

Consolidated Proit & Loss Accountfor the Financial Year Ending on March 20th 2011


(Restated)

55


Note March 20th 2011 March 20th 2010


Net profit 6,584,463 3,666,516

Exchange translation gain (loss) 33 235,370 328,989

Comprehensive profit of the

financial year6,819,833 3,995,505


Profit (loss) recognized from the

previous financial year 7,249,717 3,661,852

Minority interest from comprehensive

profit of the financial year17,592 60,741

Comprehensive Consolidated Proit & Loss Account

for the Financial Year Ending on March 20th

2011


56


Note March 20th

2011 March 20th

2010


Operating activities:

Net cash inflow (outflow) out of operating activities 49 30,969,499 16,366,774

Investments yield & profit paid for financing:

Profit received(dividend, selling shares, bonds profit) 2,287,339 1,632,575

profit paid for financing (3,410,247) (2,403,261)

Payable dividend (3,647,068) (1,774,648)

Net cash inflow (outflow) out of Investments yield &

profit paid for financing(4,769,976) (2,545,334)

Income tax:

Income tax (including tax prepayment) (2,484,972) (2,122,294)

Investment activities:

Funds paid for investments and legal partnerships (1,114,000) (1,114,000)

Funds received from desposing investments and legal

partnerships306,159 29

Funds paid for purchasing tangible fixed assets (937,190) (1,356,722)

Funds received from desposing tangible fixed assets 151,833 259,983

Net cash inflow (outflow) out of Investment activities (3,466,364) 2,210,710

Net cash inflow (outflow) before financing activities 20,248,187 9,488,436

Financing activities:

Funds gained from capital increase 2,900,000 0

Receiving (settling) OSF facilities 4,013,259 4,593,279

Receiving (settling) external facilities 34,208 (880,609)

Receiving (settling) facilities from the central bank (2,621,936) (13,848,130)

Receiving (settling) facilities from domestic banks 0 (502,332)

Net cash inflow (outflow) out of financing activities 4,325,531 (10,637,792)

Net cash increase(decrease) 24,573,718 (1,149,356)

Cash balance at the beginning of the year 51 6,863,194 8,012,550

Cash balance at the end of the year 31,436,912 6,863,194

Non-cash transactions 52 593,880 847,509


(Restated)

Consolidated Cash Flow Statement

For the Financial Year Ending on March 20th 2011

57


ASSETS Note March 20th 2011 March 20th 2010


Cash 6 7,887,133 5,296,956

Dues from the Central Bank 7 86,834,176 70,060,817

Dues from Banks & Credit Institutions 8 77,172,486 80,298,136

Dues from the Government 9 11,459,873 17,183,528

Loans & Advances to the Public Sector 10 24,434,209 13,083,012

Loans & Advances to the Subsidiaries 11 8,650,621 2,304,730

Loans & Advances to Other Parties 12 334,072,012 262,630,580

Dues for L/Cs & Time Drafts 13 90,791,753 73,801,707

Participation Bonds & the Like 14 12,075,204 6,232,457

Investments & Partnerships 15 7,861,554 5,332,101

Tangible Fixed Assets 16 16,067,563 13,914,075

Intangible Assets 17 1,191,480 1,158,486

Other Assets 18 22,933,263 5,486,523

Total Assets 701,431,327 556,783,108



Liabilities for L/Gs 77,693,878 55,258,183

Other Liabilities 59,027,339 47,431,046

Managed Funds & the Like 2,427,033 3,372,669

Total 242,973,557 221,859,652


(Restated)

Non-consolidated Balance Sheetas at March 20

th 2011

58


LIABILITIES & SHAREHOLDERS’ EQUITY Note March 20th 2011 March 20th 2010


Dues to the Central Bank 20 7,882,212 24,136,240

Dues to Banks & Credit Institutions 21 37,443,652 30,657,602

Sight Deposits 22 155,878,268 125,238,025

Saving Deposits & the Like 23 41,654,278 28,512,688

Time Investment Deposits 24 258,901,811 203,759,160

Other Deposits 25 30,891,975 26,849,401

Tax Due 26 5,257,683 1,822,110

Provisions & Other Dues 27 7,322,413 7,900,917

Acceptances & Endorsements 28 74,925,591 92,174,369

Dividend Due 29 593,495 256,407

Severance Provisions 30 2,328,671 2,896,042

Items in Transit 19 9,284,318 33,692,475

Total Liabilities 536,008,218 674,251,585

Shareholders’ equity

Capital (13,100 million shares, 1000 Rials each) 31 13,100,000 13,100,000

On-account capital increase 31 2,900,000 0

Reserves 32 4,519,477 2,876,064

Exchange Translation Gain (Loss) 33 228,830 192,667

Exchange Translation Reserve 34 928,665 928,665

Retained Earnings (Loss) 5,502,770 3,667,494

Total Shareholders' Equity 27,179,742 20,774,890

Total Liabilities& Shareholders’ Equity 701,431,327 556,783,108


Party to Liabilities for L/Cs 102,825,307 115,797,754

Party to Liabilities for L/Gs 77,693,878 55,258,183

Party to Other Liabilities 59,027,339 47,431,046

Party To Managed Funds & The Like 2,427,033 3,372,669

Total 242,973,557 221,859,652


(Restated)

Non-consolidated Balance Sheetas at March 20

th 2011

59



A-Income from both bank’s & depositors resources: Million Rials Million Rials

Profit from granted facilities 36 42,237,032 30,977,720

Profit from investments & partnerships 37 1,351,673 1,423,115

Joint Incomes 43,588,705 32,400,835

Deductions:

On-acount profit of saving deposits 38 (27,644,463) (21,960,157)

Surplus paid to depositors 39 0 0

Profit Paid to Depositors (27,644,463) (21,960,157)

Bank’s profit shares & fees received 15,944,243 10,440,678

B- Income from bank’s own resources:

Profit & Late Payment Charges Received 40 7,649,916 7,307,087

Commissions received 41 4,760,465 3,439,608

Other Incomes 42 3,783,578 1,509,040

Total incomes gained from bank's own resources 16,193,959 12,255,734

Bank's total income 32,138,201 22,696,412

C- Expenses:

Administrative & general expenses 43 (14,587,162) (8,422,903)

Doubtful loans expenses 44 (5,513,181) (5,041,289)

Financial expenses 45 (3,369,665) (3,088,024)

Other expenses 46 (630,225) (442,797)

Bank's total expenses (24,100,233) (16,995,012)

Profit before tax deduction 8,037,968 3,586,129

Less: tax (1,447,999) (865,505)

Net profit 6,589,969 2,720,624Earning per share (Rial) 58 503 208

58 412 -

Changes in the non-consolidated Retained Earnings (Loss) Account

Net profit(loss) 6,589,969 3,735,501

Retained earnings at the beginning of year 3,246,910 3,589,247


Adjusted retained earnings at the year beginning 3,677,494 3,256,247

Attributable profit 10,267,463 6,991,748

Profit allocation:

Legal reserve (1,607,594) (946,098)

Approved dividend 48 (3,157,100) (2,368,155)

Total deduction (4,764,694) (3,314,253)

Retained earnings at the end of year 5,502,770 3,677,494


Non-consolidated Proit & Loss Accountfor the Financial Year Ending on March 20th 2011 (Restated)

60




Net profit 6,589,969 3,735,501

Exchange translation gain (loss) 33 228,830 192,667

Comprehensive profit of the

financial year 6,818,799 3,928,168


Profit (loss) recognized from

the previous financial year 7,249,383 3,595,168


Comprehensive Non-consolidated Proit & Loss Accountfor the Financial Year Ending on March 20

th 2011

61





Operating activities:

Net cash inflow (outflow) out of operating activities 49 29,249,752 16,178,230

Investments yield & profit paid for financing:

Profit received(dividend, selling shares, bonds) 2,366,760 1,633,917

Profit paid for financing (3,369,665) (2,343,477)

Payable dividend (3,494,188) (1,774,648)

Net cash inflow (outflow) out of Investments yield &

profit paid for financing(4,497,093) (2,484,208)

Income tax:

Income tax (1,948,820) (2,020,499)

Investment activities:

Funds paid for investments and legal partnerships (2,972,440) (1234,077)

Funds received from disposing investments and

legal partnerships306,159 29

Funds paid for purchasing tangible fixed assets (931,097) (1,350,998)

Funds received from disposing tangible fixed assets 144,692 264,800

Net cash inflow (outflow) out of Investment activities (3,452,686) (2,320,246)

Net cash inflow (outflow) before financing activities 19,351,153 9,353,277

Financing activities:

Funds gained from capital increase 2,900,000 0

Receiving (settling) OSF facilities 4,013,259 4,593,278

Receiving (settling) external facilities 34,208 (877,708)

Receiving (settling) facilities from the central bank (2,621,936) (13,848,130)

Receiving (settling) facilities from domestic banks 0 (505,232)

Net cash inflow (outflow) out of financing activities 4,325,531 (10,637,792)

Net cash increase(decrease) 23,676,684 (1,284,515)

Cash balance at the beginning of the year 51 6,668,556 7,953,071

Cash balance at the end of the year 30,345,240 6,668,556

Non-cash transactions 52 593,880 847,509

Non-consolidated Cash Flow Statementfor the Financial Year Ending on March 20th 2011 (Restated)

62


Geographical distribution March 20th 2011 March 20th 2010

Tehran 307 347

Other provinces 1,501 1,460

Free trade zones 8 8

Overseas 4 4

Total 1,820 1,819

Notes to the Consolidated Financial Statementsfor the Financial Year Ending on March 20th 2010

1- History of the bank’s operations

1-1 Generalities

According to resolution dated 20/12/1979 of the General Assembly of Banks, bank

Mellat was established on 22/07/1980 out of merger of the following banks and was

registered under number 38077 in the companies’ registrar ofice: Tehran, Daryoush, Beinolmelal Iran, Omran, Farhangian, Bimeh Iran, Pars, Tejarat

Khareji, Iran-o-Arab, and Etebarat Taavoni va Tozie According to decisions made in the extraordinary general meeting of banks dated

05/04/2008 and the resolution number T /68985 dated 24/07/2007 of the honorable Council of Ministers, the legal structure of the bank was converted to public joint stock

company leading to its getting listed in Tehran Stock Exchange in the banks, inancial institutions section on 10/02/2010, and ultimately 5% of its stock was introduced in an IPO on 18/02/2010. Presently, 20% of its stock belongs to the government, while the rest belongs to the private sector.

The bank’s head ofice lies in Tehran and according to note 15-1-4 bank Mellat group comprises bank Mellat, Persia International Bank PLC, in London and Mellat Bank

CJSC in the Republic of Armenia.

1-2 Core business

According to article 2 of the articles of association, the core business of the bank

includes conducting banking operations within the framework of the monetary and

banking regulations of the country. The core business of Persia International Bank

PLC and Mellat Bank CJSC are banking activities.

1-3 Number of branches

Number of branches of the bank at the end of 1388 (2010/10) is as follows:


63


Group Bank Mellat

Geographical distribution March 20th 2011 March 20th 2010 March 20th 2011 March 20th 2010

Head office 2,168 2,210 2,168 2,210

Tehran branches 4,875 5,623 4,875 5,623

Other Provincial branches 16,598 16,548 16,598 16,548

Other 356 356 254 254

Total 23,997 24,737 23,895 24,635

1-4 Employment proileThe average number of employees of the bank during 1388 (2009/10) has been as follows:

2- Accounting ConventionFinancial statements of the Bank have been prepared under historical cost

convention and current values have also been applied when necessary.

3- Consolidation Bases

Consolidated inancial statements have been resulted from consolidation of inancial statements of the bank Mellat and its subsidiaries after removing inter group transactions,

balances and unrealized profit (loss) thereof.

4- Summary of Signiicant Accounting Policies

4-1- Investments

4-1-1 Evaluation Method

4-1-1-1 Long-lived assets are evaluated based on cost price less the provisioning for

impairment loss of each. Long-lived assets in the subsidiaries and other investments

in the consolidated inancial statements are evaluated based on consolidation, equity method, and cost price less the provisioning for impairment loss of each investment

respectively.

4-1-1-2 Liquid current assets in the financial statements of the bank and its

subsidiaries are evaluated at the least cost price and net market of all assets, and

other current assets in the inancial statements of the bank and its subsidiaries are evaluated at their least cost price and net market value of each asset


64


4-1-2- Income Recognition Method

4-1-2-1 Proit from investment in the subsidiaries and afiliated companies are rec-ognized in the inancial statements of the bank at the date of approval of their inancial statements by the general meeting of shareholders (till the date of approval of the inancial statements of the bank). Proit from investment in the subsidiaries and afiliated companies are recognized via consolidation and equity method respectively in the

inancial statements of the group.4-1-2-2 Proit from investment in the other companies, current or long term, are Recognized at the date of approval of their inancial statements by the general meeting of shareholders (till the balance sheet date).

4-2- Tangible Fixed Assets

4-2-1-Tangible Fixed Assets, except the one indicated in 4-2-2 below, are posted

based on cost price. The repairs and improvements leading to considerable increase

in the capacity or estimated useful life of the ixed assets or essentially improve their utility are charged as capital expenses and depreciated during the remaining useful

life of the underlying asset. Maintenance expenses incurred in partial repairing and

retaining economic interests of the business unit as per initially evaluated performance

standards, are considered as current expenses and carried to the proit (loss) of the period under report.

4-2-2- by virtue of article 62 of the third ive- year development plan, the premises of the bank were revaluated at the end of 1383(2004/05) and registered in the books for 11,543 billion Rial and the resulted surplus, i.e. 10,637 billion Rial, has been added to the capital increase account of the government in the bank.

4-2-3- According to the resolution adopted in 1077th session of the Money & Credit Council

on 17.02.2007, depreciation of ixed assets are recorded as per depreciation chart of article 151 of direct taxes law based on the following rates and depreciation methods:


Asset Depreciation rate Depreciation Method

Premises & installations 7% Declining

Automobiles 25% Direct line

Computer systems software 5 years Direct line

PC hardware 3 years Direct line

ATM 5 years Direct line

POS 5 years Direct line

Furniture 10 years Direct line

Sorter 6 years Direct line

Tele-communication equipment 3 years Direct line

Module 4 years Direct line

65


4-2-3-1 According to the note 10 of the code of conduct for depreciation, based on

article 151 of direct taxes law, depreciation rate for the buildings revaluated at the end of 1383 (2004/05)has been charged at 3.5% using declining method.4-2-4 Tangible ixed assets of the PIB are depreciated within 3 years using direct line method.

4-3- Good Will of the business units of the Bank

By virtue of article 62 of the third ive- year development plan, good will of the business units of the Bank were registered in the books based on the revaluated

prices in 1383(2004/05). According to the resolution adopted in 1077th session

of the Money & Credit Council depreciation of ixed assets are recorded as per depreciation chart of article 151 of direct taxes law. So, no depreciation has been calculated for the good will since beginning of 1385 (2006/07).

4-4- Consolidated Good Will

Business units are accounted based on their acquisition method. Surplus of cost price

of acquired investments in the subsidiaries and afiliated companies over the group’s stake in the net fair value of their recognized assets and liabilities at the acquisition date

is recognized as good will and depreciated within 20 years using direct line method.

The good will derived from acquiring assets in the afiliated companies is posted as book value of long term investment in the afiliated companies in the consolidated balance sheet.

4-5- Income Recognition

According to directive number MB /772 dated 18/07/2005 of studies and regulation department of the Central Bank of the Islamic Republic of Iran and by virtue of the

resolution adopted in 1044th session of the Money & Credit Council on 16/07/2005, All incomes of the Bank are recognized based on accrual assumption basis and

relected in the inancial statements.

According to the above stated method incomes of the Bank are recognized as follows:

Nature of income Recognition method

Profit from granted facilitiesBased on duration, outstanding debt and least

expected profit

Late payment charges of installmentsBased on duration, over due installments volume

and Late payment charges rate

Commission of letters of guarantee At the issue date of letters of guarantee

Commission of other banking services At the time of rendering services


66


4-6- Basis for determining Depositors’ Proit Share from Joint Income By virtue of the usury-free banking Act ratiied on 30/08/1983 and its executive directives, and with due regard to the directives number 1799 dated 08.01.2004 of

the Central Bank of the Islamic Republic of Iran, the proits derived from granting facilities, investment in stock and participation bonds that are recognized according to the prevailing

accounting convention, is considered as joint income and the depositors’ proit share will be determined in proportion to their net resources invested in the granted facilities.

4-7- Foreign Currency Translation

4-7-1 Domestic Accounts

According to the accounting standards on translation of foreign currency assets and

liabilities, the translation difference of the year under report has been posted to the

current proit (loss) account.

4-7-2 Foreign Branches and Subsidiaries

All foreign currency monetary and non-monetary items (except shareholders’ equity) of the foreign branches and subsidiaries are translated in the market rate at the

balance sheet date and shareholders’ equity is translated in the market rate at the

creation date (historical rates). Proit (loss) items are translated at the average market rate on the transaction date.

The difference arisen from translation of the balance sheets of foreign branches and

subsidiaries is posted in the shareholders’ equity.

4-8- Assets ClassiicationAccording to the resolution adopted in 1074

th and 1077

th session of the Money &

Credit Council, loans granted by the bank are classiied based on the delay period, customer’s solvency, and the situation of the customer’s industry as follows:

1- Outstanding

2- Overdue

3- Non performing

4- Doubtful

4-9- Provisions for Doubtful Loans

According to the resolutions adopted in 1074th

on 30.12.2006 and 1077th

dated

17.02.2007 sessions of the Money & Credit Council, provisions for doubtful loans are

calculated and posted in the books as follows:

4-9-1 Since beginning of 1385(2006/07) general provisions are calculated equal to 1.5% of the balance of total loans, except those for which speciic provisions have been made.


67


4-9-2 Speciic provisions are calculated and charged to the accounts proportionate to the category of the over due loans and thereafter they lose collateral coverage as follows:

4-10- Severance Pay Reserve

The provisions for the staffs’ severance pay is calculated as one- month of their last

salary and beneits for each year of service and considered in the accounts.

4-11- Staff Leave Repurchase Reserve

The reserve for the staff reserved leave for the previous years and current year is cal-

culated based on 15 days of their salary and beneits and considered in the accounts.

4-12- Dues from the Government

The mandatory facilities granted under former Management & Planning Organization

of the state, are regarded as dues from the government under following conditions:

a-Non performing loans due to customer’s insolvency, inadequate collaterals, or

failure of the bank in collecting the debt;b-The overdue loans relating to performing acquiring capital assets;c-Loans granted to ministries and government organizations.

5- Severance Pay LiabilitiesThe present value of the staffs’ severance pay liabilities with respect to their years

of service (including working, retired and pensioner staff) are calculated based on actuary assumptions and provisions are made proportionately.

6- Cash

Category Provisions

Overdue loans 10 %

Non performing loans 20 %

Doubtful loans, given assessing customer's solvency 50-100 %

Loans that 5 years or more have passed from their maturity 100 %


Bank MellatGroup

March 20th 2010March 20th 2011March 20th 2010March 20th 2011

million Rialsmillion Rialsmillion Rialsmillion Rials

5,067,6606,453,3625,262,2997,545,034Cash

12,93959,56612,93959,566Under collection (Rials)

216,3571,374,205216,3571,374,205Foreign currency

5,296,9567,887,1335,491,5958,978,805Total

68


6-1 The cash and those under collection have been adequately insured against risks of theft, ire and accidents.

7- Dues from the Central BankDues from the Central Bank are as follows:

Bank Mellat

March 20th 2010March 20th 2011

million Rialsmillion Rials

38,680,62448,884,897Legal reserves with the Central Bank

30,090,13914,768,550Deposit in foreign currency with the Central Bank

1,064,09921,911,718Dues from the Central Bank

158,083717,071Legal reserves of the foreign branches

65,667549,735Current account of foreign branches with the

central bank of hosting country

2,2052,205Prepayment for purchasing foreign currency

70,060,81886,834,176Total



million RialsRate (%)million RialsRate (%)

18,383,02216 & 1515,443,15216 & 15.5Short term and one

year deposits

13,687,20517 & 1019,621,26917 & 10Sight and non-interest

bearing deposits

6,017,77810 & 12 & 1312,988,45610 & 11Long term and 2-5

year deposits

506,06417734,84617L/G and housing

deposits

86,5551797,17417L/Cs Prepayment

38,680,62448,884,897Total

7-1 Legal reserves deposited with the Central Bank have been determined as per

note 3 to article 14 of the monetary and banking act and rate set by the Money &

Credit Council and ratiied by the central bank. The breakdown of the legal reserves is as follows:

69


8- Dues from Banks & Credit Institutions


9- Dues from the GovernmentDues from government amount to 11,459,873 million Rials as follows:

Bank Mellat

March 20th 2010 March 20th 2011

Balance Balance Profit Principal


21,838,92838,603,72323,229,58015,364,143Dues from the government (gross)

Less:

(4,655,400)(4,283,221)(4,283,221)0Profit for the following years of mandatory loans pledged by government

0(22,860,629)(13,170,602)(9,690,027)Dues settled

17,183,52811,459,8735,785,7575,674,116Total

Bank MellatGroup

March 20th 2010 March 20th 2011March 20th 2010March 20th 2011


370,81753,489370,81753,489Cash with domestic banks after clearing

15,908,35019,571,39217,656,87021,021,097Sight deposit in foreign currency

11,046,7757,273,42812,378,3807,273,428Term deposit in foreign currency

4,517,0023,810,2134,517,0023,810,213Loans to the domestic banks

8,058,3289,528,1778,058,3289,528,177Loans to the Iranian banks

26,826,38934,499,90026,826,38934,499,900Bank checks under collection

13,638,3602,492,98413,638,3602,492,984deposit with banks

80,366,02177,229,58383,446,14678,679,288Sub total

Less:

(67,885)(57,097)(67,885)(57,097)General provisions for

doubtful loans

80,298,13677,172,48683,378,26178,622,191Total

70



9-1 in execution of note ‘S’ to article 3 of the single bill of the budget law for the year 1389 (2010/11), the amounts of 17,567,918 million Rials dues to the OSF and 5,292,711 million Rials dues to the privatization organization were set off against dues from the government.

10- Loans & Advances to the Public SectorLoans & Advances to the Public Sector amounting to 24,434,209 Million Rials are as follows:

Loans & advances to the

public sector

Mandatory loans to the

public sector

Total loans & advances to

the public sector

March 20th 2011 March 20th 2010 March 20th 2011 March 20th 2010 March 20th 2011 March 20th 2010

Million Rials Million Rials Million Rials Million Rials Million Rials Million Rials

Loans in

IRR(net)1,302,886 2,619,366 1,809,409 2,874,067 3,112,295 5,493,433

Loans in FC

(net)17,926,592 912,803 0 0 17,926,592 912,803

Receivables

for L/Cs paid

in IRR

42,481 67,735 0 0 42,481 67,735

Receivables

for L/Cs paid

in FC

588,590 3,987,994 0 0 588,590 3,987,994

Receivable

Late payment

charges

76,206 930,853 0 0 76,206 930,853

Receivable

profit 3,059,922 1,854,392 0 0 3,059,922 1,854,392

Other 248 588 0 0 248 588

Less:

provisions for

doubtful loans

(344,984) (121,675) (27,141) (43,111) (372,125) (164,786)

Total 22,651,941 10,252,056 1,782,268 2,830,956 24,434,209 13,083,012

71


11- Loans & Advances to the Subsidiaries

Bank Mellat


Net Net Provisions

Profit for the

following

years

balanceNature of the loan

million Rialsmillion Rialsmillion Rialsmillion Rialsmillion Rials

1,161,5511,254,337(177,688)(483,391)1,915,416Installment sales

951,5950000Forward

19,673216,449(22,131)0238,580Hire- purchase

116,534856,686(87,599)0944,285Receivables for L/Cs in foreign currency

3,75514,463(1,479)015,942Joaleh

51,6226,308,686(645,081)06,953,767Civil partnership

2,304,7308,650,621(933,978)(483,391)10,067,990Total


10-1 Loans granted to the public sector are classiied by their period, customer’s solvency, and situation of the customer’s industry as follows:

Category Loans & Advances and housing

loans to the Public Sector

Mandatory

Loans to the

Public Sector

Total

Outstanding 9,008,591 5,452,655 14,461,246

Overdue 3,200,278 0 3,200,278

Non performing 1,910,244 0 1,910,244

Doubtful 5,197,924 36,642 5,234,566

Less: provisions for

doubtful loans(344,984) (|27,141) (372,125)

Grand total 18,972,053 5,462,156 24,434,209

72



11-1 as per directive of the Money & Credit Council above stated loans are

classified as follows:

Bank Mellat

March 20th 2011

Total DoubtfulNonperformingOverdueOutstanding


1,915,416208148,3501,906,844Installment sales

238,580000238,580Hire purchase

944,285322,32300621,962

Receivables for

L/Cs in foreign

currency

15,94200015,942Joaleh

6,953,7671,290,21707815,662,769Civil partnership

10,0679901,612,748149,1318,446,097Sub total

Less:

(483,391)---(483,391)Profit for the

following years

(126,691)---(126,691)General provisions

(807,287)(806,374)0(913)0Specific provisions

8,650,621806,374148,2187,836,015Total

73



Bank MellatGroup

March 20th 2010 March 20th 2011March 20th 2010 March 20th 2011


99,968,98086,987,31699,968,98086,987,508Installment sales

1,448,085761,5301,448,085761,530Joaleh

5,668,8014,596,6765,668,8014,596,676Hire purchase

4,737,20425,8394,737,20425,839Forward

12,894,76727,494,59712,894,76727,494,597Profit sharing

85,603,911152,982,20785,603,911152,982,207Civil partnership

14,183,35212,862,19114,183,35212,862,191Non-interest bearing

12,182,97310,579,63812,183,97310,579,638Receivables for L/Cs

1,296,5991,600,7991,296,5991,600,799Receivables for L/Gs

12,374,68916,452,88812,374,68916,452,888foreign currency loans

8,535,26811,108,2968,535,26811,108,296Loans granted by foreign

branches

001,923,5561,005,894Loan and advance to

customers

3,734,9518,620,0353,959,0459,274,542Other loans

262,630,580334,072,012264,778,230335,732,605Total

12- Loans & Advances to Other Parties

74



12-1 Loans & advances granted to the other parties by the bank are as follows:

Bank Mellat


Net Net Provisions

Profit for the

following

years

balance


99,968,98086,987,3168,606,62020,562,932116,156,868Installment sales

1,448,085761,53072,537225,1901,059,257Joalei

5,668,8014,596,676416,5051,069,0006,082,181Hire purchase

4,737,20425,8391,900-27,739Forward

12,894,76727,494,5972,021,229-29,515,826Profit sharing

85,603,911152,982,20711,246,285-164,228,492Civil partnership

14,183,35212,862,191945,547-13,807,738Non-interest

bearing

12,183,97310,579,638777,748-11,357,386Receivables for

L/Cs

1,296,5991,600,799117,681-1,718,480Receivables for

L/Gs

12,374,68916,452,8881,268,822806,78318,528,493foreign currency

loans

8,535,26811,108,296816,611011,924,907

Loans granted

by foreign

branches

3,734,9518,620,035633,68909,253,724Other loans

262,630,580334,072,01226,925,17422,662,905383,661,091Total

75



12-2 as per directive of the Money & Credit Council, above stated loans are classiied as follows:

Bank Mellat

March 20th 2011

Total DoubtfulNonperformingOverdueOutstanding


116,156,86810,009,7826,239,0112,538,30397,369,772Installment sales

1,059,257118,72959,27212,487868,769Joalei

6,082,181697,970348,44273,4084,962,361Hire purchase

27,7393,0621,52932222,826Forward

29,515,8263,259,2811,627,108342,78924,286,648Profit sharing

164,228,49217,612,5602,793,4612,987,285140,835,186Civil partnership

13,807,73800013,807,738Non-interest bearing

11,357,3863,140,867008,216,519Receivables for L/Cs

1,718,48077,15001,641,465Receivables for L/Gs

15,528,4932,664,708557,520430,49114,875,774foreign currency

loans

11,924,90702,039,14109,885,766Loans granted by

forein branches

9,253,7240009,253,724Other loans

283,661,09137,582,97413,665,4846,385,085326,026,548Sub-total

Less:

(22,663,904)000(22,663,904)Profit for the

following years

(4,532,689)000(4,532,689)General provisions

(22,392,486)(19,522,351)(2,370,233)(499,902)0Specific provisions

334,072,01218,061,62311,295,2515,885,183298,829,955Total

76



12-3 Loans & advances to the other parties by the pledged collateral:


million Rialsmillion RialsCollateral

103,197,231133,460,174Building

78,915,530102,057,323Machineries

106,356,193127,477,580Check and promissory note

12,146,06115,707,891Participation bonds

2,906,2544,958,123Other assets

303,521,269383,661,091Total

13- Dues for L/Cs & Time Drafts

Bank Mellat



74,925,59192,174,368Dues from L/Cs & time drafts

Less:

(1,123,884)(1,382,615)General provisions for doubtful loans

73,801,70790,791,753Total

77



14- Participation Bonds & the LikeThis entry includes balance of participation bonds and securities as follows:

Bank MellatGroup



2,763,429916,6002,763,429916,600Public participation bonds

2,917,7371,373,6052,917,7371,373,605Private participation bonds

551,2919,784,999577,5769,801,776Securities

6,232,45712,075,2046,258,74212,091,981Sub-total

Less:

--(376,650)(409,963)PIB's bonds with the bank

--5,882,09211,682,018Total

15- Investments & Partnerships

Bank MellatGroup



5,332,1017,861,5545,439,1307,983,310Investments &

partnerships

00(876,166)(876,167)Less: investments in

the subsidiary

5,332,1017,861,5544,562,9647,107,143Total

78



15-1 Investments & partnerships of the bank are as follows:



739,7681,210,246Investment in the listed companies

Legal partnerships & direct investments:

257,004387,590Legal partnerships

2,246,6753,256,670direct investments

3,243,4473,644,260Sub-total

2,365,7043,012,440Foreign Investment

5,609,1517,866,946Sub-total

Less:

(277,050)(5,392)Impairment provision

5,332,1017,861,554Total

15-1-1 Investment in the listed companiesInvestments in the listed companies are as follows:

March 20th

2010March 20th 2011

Cost priceMarket

priceCost price

Nominal

valueStake # of shares


0513,920520,28980,0002080,000,000Alborz insurance Co.

0360,277156,05676,90016.676,900,088Asia insurance Co.

0181,607100,47750,2650.1150,265,000

Iran

telecommunications

Co.

739,768467,496433,4240--Other companies

739,7681,523,3001,210,246207,165--Sub-total

(264,657)000Impairment

provision

475,1111,523,3001,210,246207,165Book value of the

listed share

79



15-1-2 Investment in the other companiesInvestment in the other companies is as follows:


Net Cost priceNet Impairment provision

Cost priceStake %# of shares


18,91425,91400000Ahwaz sugar Co.

107,813107,813107,8120107,81310.245,918,820Refah chain

stories

100,000100,000100,0000100,00010100,000,000Amin finance Co.

23,15723,277179,657120179,77729.37,859,000Other companies

249,884257,004387,470120387,590Total


Net Cost priceNet Impairment

provisionCost priceStake %# of shares


809,878809,878809,8780809,87899.9849,796,000Mellat Behsaz

mosharekatha Co.

98,44099,990148,4341,550149,98499.99,998,960Mellat Behsazan Co.

50,00050,00050,000050,00099.94,999,952Mellat construction Co.

58,79662,39658,7963,60062,39699.96,499,936Mellat printing Co.

14,98814,98814,988014,98899.914,988,000Mellat brokerage Co.

10,99910,99911,000011,00054.91,099,998Tehran-Saveh free way Co.

1,073,7251,073,7251,073,72501,073,72515.42,310,000,000Mehr-e-Iran gharz-al-

hasaneh Co.

23,99923,99923,999023,99979.923,999,100Mellat exchange Co.

2,0002,0002,00002,000102,000,000Banks surplus assets sales Co.

98,70098,70098,700098,70098.798,700,000Mellat leasing Co.

00960,000960,00096960,000,000Bank Mellat finance Co.

2,241,5252,246,6753,251,5205,1503,256,670Total

15-1-3 Direct investmentDirect Investment in the other companies is as follows:

15-1-3-1 As the assets, liabilities, incomes and expenses of the subsidiaries account for less than 1% of the bank’s accounts, they have not been consolidated

80


15-1-4 foreign investments include:


# shares Stake% Cost priceCurrency

typeCost price

Impairment

provisionsNet Cost price Net

In foreign currency Million Rials Million Rials Million Rials Million Rials Million Rials

EIH Bank 81,508,952 26.31 92,031,154 EURO 1,059,064 0 1,059,064 924,327 924,327

Swift Co, 26,325

Less

than

0,001

39,107 EURO 248 0 248 248 248

Persia Int’l

Bank (PIB)60,000,000 60 60,000,000 EURO 677,880 0 677,880 677,880 677,880

Mellat Bank

Armenia6,850,000 100 6,850,000,000 Dram 198,286 0 198,286 198,286 198,286

Other 205,480 - 142,820 1,076,962 123 1,076,839 564,963 564,840

Total 3,012,440 123 3,012,317 2,365,704 2,365,581

16- Tangible ixed assetsTangible ixed assets of the group and the Bank are as follows:

Cost price Accumulated depreciation Book value

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Million

Rials

Balance on

March 20th

2010

acquired

assets

Disposed

assetsadjustments

Balance on

March 20th

2011

Balance

on March

20th 2010

Financial

year

depreciation

Depreciation

of … assetsadjustments

Balance

on March

20th 2011

Balance

on March

20th 2011

Balance

on March

20th 2010

Group 18,305,49 904,196 (135,383) 2,240,203 21,314,510 4,326,330 930,641 (69,388) 1,174 5,188,757 16,125,753 13,979,164

Bank

Mellat18,239,845 898,103 (129,272) 2,199,762 21,208,438 4,325,770 909,859 (98,044) 3,290 5,140,875 16,067,563 13,914,075


81


16-1 The ratio of net ixed assets and foreclosed collaterals to the shareholders equity has been calculated after deducting retained earnings and earnings before interest and tax deduction as follows:

million Rials

Net fixed assets 14,286,880

Plus:

foreclosed collaterals 445,078

Sub-total 14,731,958

Shareholders’ equity 27,179,742

Less:

Retained earnings (5,502,770)

Total 21,676,972

Ratio 67.96%

16-2- Tangible ixed assets of the bank are as follows:


Cost price- million Rials Accumulated depreciationmillion Rials

Book value million Rials

Asset

Balance at the

beginning of year

Assets acquired during iscal year

Assets disposed during iscal year

Transfers & other changes

Balance at the end of

year

Balance at the

beginning of year

Depreciation of inancial

year

Accumulated depreciation of disposed

assets

Transfers & other changes

Balance at the end of

year

March 20th 2011

March 20th 2010

Land 616,079 - - (40,386) 575,693 575,693 616,079

Building & installations

12,860,512 55,728 (14,882) 557,635 13,458,993 2,970,120 444,587 (4,870) (7,567) 3,402,270 10,056,723 9,890,392

Computer equipment

1,220,321 380,139 (27,591) 265,389 1,838,258 369,214 330,109 (27,800) - 671,523 1,166,734 851,107

Vehicles 113,740 - (13,738) 23,584 123,585 64,461 17,760 (12,155) (4) 70,062 53,523 49,278

Furniture 1,069,897 228,663 51,685) 25,635 1,277,510 921,975 117,403 (53,219) 1,051 987,210 285,303 147,923

Total 15,880,549 664,530 (107,896) 831,857 17,269,040 4,325,770 909,859 (98,044) (6,520) 5,131,064 12,137,976 11,554,779

Assets in the process of completion

1,649,939 1,117,866 - (438,900) 2,148,905 2,148,905 1,469,940

Orders & capital prepayments

538,282 842,076 (21,376) (95,109) 1,263,873 1,263,873 538,282

Capital items at warehouse

351,074 477,311 - (311,576) 516,809 516,809 351,074

Total 2,359,259 2,437,253 (21,376) (845,585) 3,929,587 3,929,587 2,359,296

Grand Total 18,239,845 3,101,783 (129,272) (13,728) 21,198,628 4,325,770 909,859 (98,044) (6,520) 5,131,064 16,067,563 13,914,075

82



17- Intangible Assts


million Rials million Rials

Good will 1,191,480 1,158,486

Good will 1,191,480 1,158,486

17-1 the above good will is mainly related to 326 branch ofices of the Bank

18- Other Assets

Bank MellatGroup



3.848.15516.888.0791.736.86416.798.801Interim debtors (in Rial)

13.917199.46913.917199.469Interim debtors (in foreign currency)

61.3383.681.78361.3383.681.783Interim debtors abroad

0019.62121.083Commercial debtors

3.923.41020.769.3311.831.74020.701.136Sub-total

1.029.0381.588.7571.029.0381.588.757Foreclosed collaterals

362.059495.821362.059495.821Receivable commissions

156.274107.409156.276109.137General warehouses

80.53586.03894.12693.102Other

5.551.31623.047.3563.473.23922.987.953Sub-total

Less:

(64.592)(113.892)(64.592)(113.892)Provisions for doubtful loans

(201)(201)(201)(201)Provisions for impairment of

investment in general warehouses

5.486.52322.933.2633.408.44622.873.860Total

83



18-1 Interim debtors in Iranian Rial include the following items:

18-1-1 The privatization organization’s debt for 5,292,711 million Rials is related to the government’s liability to the Bank, which has been decided to be settled through assigning shares of companies.

Bank MellatGroup



1.602.7686.470.16176.8536.470.161

On-account payments

and dues from

companies

328.8741.131.599177.6951.097.191Tax prepayment

522.6511.238.594522.6511.238.594Participation bonds

profit

05.292.71105.292.711Privatization

organization’s debt

1.393.8622.755.014959.6652.700.144Other items

3.848.15516.888.0791.736.86416.798.801Total

84


19- Items in Transit Items in Transit on the balance sheet date are as follows:

March 20th

2011

March 20th

2010

March 20th

2011

March 20th

2010

Receivables Receivables Payables Payables

Million Rials Million Rials Million Rials Million Rials

Head office account

(local currency)114.381.970 195.452.183

Head office account

(local currency)118.969.409 221.090.431

Head office account

(foreign currency)50.700.479 49.866.312

Head office account

(foreign currency)52.304.644 51.136.751

Internal receivable

(local currency)15.292.377 30.325.609

Internal payables

(local currency)46.440.950 19.629.656

Internal receivable

(foreign currency)513.403 1.855.406

Internal payables

(foreign currency)66.432 3.740

Internal receivable

(foreign branches)24.710 17.881

Internal payables

(foreign branches)1.013.455 12.553

Foreign currency sight

deposits of foreign

branches with each other

1.227.692 30.410

Payment orders at the

counters of the branches

(local currency)

183 45.094

Capital paid to foreign

branches(foreign currency)723.592 723.592

Capital of the foreign

branches723.592 723.592

Surplus resources 2.406.938 1.745.171Time deposit of the head

office9.402.275 4.120.434

Dues from the head office 12.364.242 9.176.540Surplus resources of the

free zones branches2.406.938 1.745.171

197.635.403 289.223.104 231.327.878 298.507.422

Items in transit 33.692.475 9.284.318 0 0

231.327.878 298.507.422 231.327.878 298.507.422


85


19-1 Internal Receivables include the following items:



4.788.1452.500.302Internal accounts between bank's units

1.074.2261.813.122Mellat card of ATM

06.283.433Paid to clearing house (RTGS) for departments

2.557.4512.575.691Core unit

21.905.7872.122.829Other items

30.325.60915.292.377Total


19-1-1 Internal accounts between bank’s units include the following items:



1,240,41835.168Local payment orders

1,066,186566.035Honoring payment orders issued by other units

2,481,5411.899.099Revolving account of the branches

4,788,1452.500.302Total

19-2 Internal payables include the following items:



3.108.4161.512.382Internal accounts between bank's units

435.260942.133Participation bonds profit

011.334.294Transferring funds to Mellat electronic current account

9.393.7548.620.562Clearing house

014.465.257Funds remitted to the current account number 20400

1.213.0581.151.068Subsidy of land and housing

1.116.943877.604SMEs subsidy

4.362.2257.537.650Other items

19.629.65646.440.950Total

86



20- Dues to the Central BankDues to the Central Bank amounting to 7,882,212 million rials are as follows:

Bank Mellat



75,28345.120Dues to the Central Bank for foreign currency

exchange difference- non exempt cases

7,748,7825.126.846Facilities received from the Central Bank

16,540,35120.553.610Facilities received from the OSF

24,364,41625,725,576Sub-total

(228,176)(275,446)

Less: funds received from the Central

Bank as difference of managed float rate of

foreign currency

0(17,567,918)Settling facilities received from the OSF

against government’s debt

24,136,2407,882,212Total

20-1 In execution of the directive No. TB 54/4, dated 12/05/2002 of the credits & banking information departments of the Central Bank of I.R. of Iran, the account for facilities received out of the OSF was created and upon negotiation of the documents, the advance funds of L/Cs issued out of the OSF are transferred to this account.

Bank Mellat


million Rialsmillion RialsContract number

Contract subject

126,082126,0813,253Covering finance L/Cs foreign currency difference

1,000,0001,000,0003343Facilities paid to agricultural services holding company

4,622,7002,000,7653425 & 3370Dues from the government

2,000,0002,000,0003395Mehr housing scheme

7,748,7825,126,846Total

20-2 Facilities received from the Central Bank are as follows:

87



21- Dues to Banks & Credit Institutions

Bank MellatGroup



128,98356,835128,98356,835

Non-interest bearing

current accounts(after

clearing)

1,818,0862,409,0071,818,0862,409,007


current account of non

bank credit institutions

5,048,80211,768,8345,048,80211,768,834foreign currency sight

deposit of local banks

2,802,8305,870,1812,802,8305,870,181foreign currency sight

deposit of foreign banks

20,345,19713,047,21320,345,19713,047,213foreign currency time

deposit of local banks

52,22386,43152,22386,431Dues to foreign banks for

foreign currency loans

461,4814,250,1511,376,9505,868,378Deposits of other banks

30,657,60237,443,65231,573,07139,106,879Total

21-1 the amount of 86 billion Rials dues to foreign banks is for the foreign currency inance loans received for repairing and reconstruction of broken down buildings in some of the provinces and its interest rate is Libor + 2.5%.

20-3 in execution of note ‘S’ to article 3 of the single bill of the budget law for the year 1389 (2010/11), the outstanding amounts of 17,567,918 million Rials of dues to the OSF has been traded off against dues from the government.

88



Bank MellatGroup



75,764,90498,495,04575,764,90498,495,045Non-interest bearing current

accounts

23,962,71120,606,03723,962,71120,606,037Non-interest bearing foreign

currency current accounts

15,210,36115,777,19515,210,36115,777,195Bank checks sold

1,916,6602,524,0731,916,6602,524,073Civil partnership joint account

5,206,8576,704,5315,206,8586,704,531Interim payables in Rials

1,628,19110,062,9171,628,19110,062,917Interim payables in Foreign

currencies

106,528198,227106,528198,227Interim payables abroad

446,042428,617516,001428,617Payable profit and commissions

995,7711,081,6262,9491,160,976Other items

125,238,025155,878,268124,315,156155,957,618Total

22- Sight deposit Sight deposits at the balance sheet date are as follows:

89



23- Saving Deposits & the Like

Saving deposits & the like are as follows:

24-Time Investment Deposits

Time Investment Deposits are as follows:

Bank Mellat



18.764.65927.641.218Non-interest bearing saving accounts

9.452.68013.821.549Non-interest bearing saving accounts in foreign

currencies

295.349191.511Other

28.512.68841.654.278Total

Bank Mellat



98,509,481133.683.421Time Investment Deposits

76,601,51894.383.947Short term Investment Deposits

19,234,99017.189.737Special short term Investment Deposits

304,566344.934Civil servants savings (staff share)

306,682347.632Civil servants savings (government's share)

8,546,95612.776.467Time Investment Deposits in foreign currencies

254,967175.673Time Investment Deposits of foreign branches

203,759,160258.901.811Total

90



25- Other Deposits

Bank MellatGroup



18.87528.17718.87528.177Advances received from private customers for the L/Cs

13.635.06211.760.06613.635.06211.760.066Advances received for the L/Cs from governmental customers in foreign currency

8.578.90812.564.1018.578.90812.564.101Advances received for the L/Cs from private customers in foreign currency

3.300.9364.794.0783.300.9364.794.078Cash collateral for L/Gs received from private customers in Rial

764.9021.150.235764.9021.150.235Cash collateral for L/Gs in foreign currency

539.027588.145539.027588.145Advance payment for local L/Cs received from private customers

11.6917.1731.841.143197.343Other deposits

26.849.40130.891.97528.678.85331.082.145Total

26-Tax Due

Bank MellatGroup



2.749.0941.822.1102.791.7541.822.110Balance at the beginning of the year

960.5151.447.9991.019.6501.481.149Reserves for year operation tax

133.0003.936.394133.0004.439.396Tax adjustments

(1.770.499)(1.267.381)(1.770.499)(1.267.381)Paid during the year

2.072.1105.939.1222.173.9056.475.274Sub-total

(250.000)(681.439)(351.795)(1.217.591)Less: Tax advance payments

1.822.1105.257.6831.822.1105.257.683Balance at the end of the year

91



yearStated

profit (loss)

Taxable

income

taxMarch 20th

2011

March 20th

2010

Recognition

method

Declared Recognized Definite SettledReserve

balance

Reserve

balance

2006/08 3,101,060 2,257,394 564,348 2,014,815 0 644,869 1,532,790 663,431 Books review

2007/09 3,586,130 2,957,800 665,505 3,099,633 0 665,505 2,434,128 448,164 Books review

2008/10 4,730,490 2,162,290 960,515 2,659,536 0 436,310 524,205 960,515

2009/11 8,037,968 6,435,554 1,447,999 0 0 0 1,447,999 0

Total 5,939,122 2,072,110

Less: Tax advance payment

(681,439) (250,000)

Grand total 5,257,683 1,822,110

26-1 26-1 Bank’s tax has been announced deinite by tax authorities by the end of 1385(2006/07).Summary of the tax status of the bank for its operations from 1386(2007/08) up to end of 1389 (March 20th 2011) is as follows:

26-2 According to the tax recognition notice number 2223/251/081 dated 22/07/ 2009 for the operations of financial year 2007/08, the amount of 2,015 bil-lion Rials tax liability was announced to the Bank, and in execution of reg-

ulations of Article 239 of Direct Tax Act, the Bank objected the taxable in-

come and recognized tax, filing a petition in the tax dispute settlement board.

26-3 Considering contingent liability to the tax organization, there exist adequate pro-

visions in the other reserves entry besides the provisions taken in the payable tax entry.

26-4 According to the tax recognition notice number 1462 dated 28/06/

2010 for the operations of financial year 2008/09, the amount of 3,100 bil-

lion Rials tax liability was announced to the Bank, and in execution of reg-



26-5 According to the tax recognition notice number 561 dated 15/06/ 2011 for the operations of financial year 2009/10, the amount of 2,660 bil-

lion Rials tax liability was announced to the Bank, and in execution of reg-



92



27- Provisions & Other DuesProvisions & Other Dues are as follows:

Bank MellatGroup



10,19010,18810,19010,188Deficit of profit paid to

depositors

2,37916,8032,37916,803Other provisions of

foreign branches

503,812503,812503,812503,812provisions for 40% stated

profit

4,174,7921,974,8234,174,7921,974,823Banks' pension fund

1,067,2511,272,8801,067,2511,272,880Staff leave repurchase

provisions

2,142,4933,543,9071,930,5743,823,879Other provisions

7,900,9177,322,4137,688,9987,602,385Total

(376,650)(409,963)Less: PIB's bonds held

with the bank

7,312,3487,192,422Total

27- 1 With regard to the Bank’s debt to the Banks’ pension fund, 3,700 billion Rials has been settled in the current year, while , 1,500 billion has been posted in con-cerning staff retirement beneits obligations based on the calculations made by the actuary, as detailed in the Note (43-1) in the current year, as relected in the ac-count of admin, And general costs,

93



27- 2 Other provisions are as follows:

Bank MellatGroup



59,227124,39359,227124,393Administrative

expenses provisions

208,127361,587208,127361,587Staff expenses

provisions

675,013794,367675,013794,367


deposits rewards

provisions

1,200,1262,263,560988,2072,543,532Tax provisions of the

previous years

2,142,4933,543,9071,930,5743,823,879Total

28- Acceptances & Endorsements

Bank Mellat



56,538,98566,433,146Acceptances & endorsements of

deferred L/Cs & B/Es

6,434,8809,689,479Refinance loans received from foreign

banks

11,951,72616,051,744Refinance loans received from foreign

branches of the bank

74,925,59192,174,369Total

94



29- Dividend Due

Balance on

March 20th 2011

Dividend paid during

1389 (2010/11)

Dividend paid during

1388(2009/10)

Dividend paid up to beginning

of 1387(2008/09)

Approved

dividendFinancial year


0225,738419,229225,738644,9671386(2007/08)

256,407111,3501,859,24302,227,0001387(2008/09)

03,157,100003,157,1001388(2009/10)

256,4073,494,1882,278,472225,7386,029,067Total

30- Severance Provisions

Changes in the severance provisions are as follows:

31-Capital

31-1 the bank’s capital was 33,500 million Rials at its inception (including 33,500,000 share each having a face value of 1,000 Rials) that has been gradually increased to 13,100,000 million Rials by the end of 1389 (2010/11) within the following stage, and inally increased to 16,000,000 million Rials on 26/04/2011.

Bank Mellat



1,393,9702,328,671Balance at the beginning of the year

981,668567,436Provisions for the financial year

(46,967)(65)Paid during the financial year

2,328,6712,896,042Balance at the end of the year

Capital increase methodNew capital amount

Capital increase amount

Capital increase(%)

Capital increase date


Revaluation of fixed assets 605,000571,5001,70601/09/1993

Special participation bonds under

third 5-year development plan1,239,000634,000104.801/09/2001

Fixed assets revaluation &

translation of foreign exchange

assets and liabilities

13,100,00011,861,000957.310/08/2005

Cash contribution by the

shareholders16,000,0002,900,00022.126/04/2011

95



31-3 Funds received as on-account for the capital increase of 2,900,000 million

Rials has been relected in the interim accounts of 1389 (2010/11) and upon get-ting it registered at the Companies Registrar on 26/04/ 2011, the Bank’s capital has

increased to 16,000,000 million Rials.

31-3- capital adequacy ratio that is derived from core capital of the bank divided by

the risk weighted assets has been calculated on the balance sheet date as follows:



1,891,5001,891,500Paid up capital

4,442,0282,805,812Legal reserve

1,234,9441,191,584Other reserves

5,502,7703,677,494Retained earnings

13,071,2429,566,390Total Tier 1 capital

16,051,87615,193,991General provisions & revaluated fixed assets reserves

(2,980,634)(5,627,601)Less: tier 2 capital adjustments

13,071,2429,566,390Total tier 2 capital

(2,963,630)(924,327)Less: Investments

23,178,85518,208,454Core capital after deduction of investments

329,984,553287,160,909Total risk weighted assets(note 31-4)

7.02%6.34%Capital adequacy Ratio

31-3-1 Considering restatement of igures used as calculation basis for capital ad-

equacy ratio of 1388(2009/10), the said ratio has been changed to 6.34% from the 7.67% calculated in the previous year.31-3-2 Considering the capital increase that has been posted in the bank’s capital account

on 26/04/ 2011, the capital adequacy ratio will eventually increase to 8.7% from 7.02%.

96

Annual R

eport - 2

010/1

1


Assets Conversion

quotient Risk

quotientRisk weighted assetsAssets

Conversionquotient

Riskquotient

Risk weighted assets

Million Rials%%Million RialsMillion Rials%%Million Rials

7,864,705-005,319,627-00 Cash

59,566-2011,91312,939-202,588Items in transit

101,059,065-0088,528,114-00Dues from the Central Bank

100,768,550-0076,239,913-00Governmental facilities

916,600-003,173,072-00 Government participationbonds

12,372,584-202,474,5179,719,354-201,943,871Accounts receivable

91,472,859-2018,294,57280,347,985-2016,069,597 Facilities granted to banksand other credit institutes

17,819,611-10017,819,6117,851,513-1007,851,513Investments

44,510,392-5022,255,19622,515,477-5011,257,739Net loans and lease pur-chase & housing facilities

197,201,225-100197,201,225191,756,577-100191,756,577Other loans and facilities

22,854,748-10022,854,74816,017,438-10016,017,438Net fix assets and good will

33,292,127-10033,292,12730,934,090-10030,934,090 Other assets

77,446,58020203,097,86392,443,80220203,697,752Dues for L/Cs after deduct-ing prepayments

25,021,95220201,000,87824,610,5892020984,424 dues for less than 1-year guarantees after deductingcash deposit

46,727,613505011,681,90326,581,28150506,645,320Dues for over 1-year guarantees after deducting cashdeposit

779,388,177329,984,553676,051,781287,160,909Total Risk-Weighted Assets

31-4- Risk weighted assets

Con

solid

ate

d F

inan

cia

l Sta

tem

en

ts o

f the G

rou

p &

Ban

k M

ella

t

97


33- Exchange Translation Gain (loss)

In execution of articles A-4 and C-4 of the directive number MB/1844 dated 19/01/2004

of the Central Bank of the Islamic Republic of Iran, foreign exchange translation of assets

and liabilities of foreign branches has resulted in 229 billion Rials and relected in the shareholder’s equity on the balance sheet.

Bank MellatGroup



192,667228,830328,989235,370Foreign exchange trans-

lation profit(loss)

32- Reserves

Balance of reserves is as follows:

Bank MellatGroup



2,753,1824,360,7752,753,1824,360,775Internal legal reserves

52,63081,25355,17983,426External legal reserves

3,1373,1373,1373,137Other internal legal reserves

30,19651,64630,19651,646 Other external legal reserves

36,91922,66636,91922,666External revaluation reserves

2,876,0644,519,4772,878,6134,521,650 Total reserves

Bank Mellat



928,665928,665Foreign exchange translation of assets and liabilities

34- Exchange translation reserve


34-1 the above 928 billion Rials is related to the years prior to the bank’s privatization

and has been created by virtue of article 136 of the General Calculation Law.

98



35- Minority Interest

35-1 Minority interest is related to private sectors shareholders’ 40% stake in the PIB plc.

36- Proit from the loans granted

Group



1,105,7481,105,748Capital

369,12330,904Retained earnings(loss)

255,706382,898foreign exchange translation profit(loss)

1,730,5771,519,550

40%40%

692,230607,820Minority interest

Group



12,745,8988,725,535Installment sales

253,862345,253Joaleh

562,003667,107Hire purchase

210

5078,535Forward

1,091,9643,301,505Profit sharing

7,133,68417,991,522Civil partnership

309,5812,500,504Public mandatory ordinary loans

193,113168,584Inter- bank loans profit

162Factoring

8,297,1078,528,425Delay payment charges

30,977,72042,237,032Total

99



37- Proit from Investments and PartnershipsMarch 20th 2010March 20th 2011


Profit derived from investments:

128,166329,553Profit derived from investment in listed companies

(197,358)(136,828)Impairment of the investments in listed companies

(69,192)192,725Net profit (loss) derived from investments in listed companies

Profit derived from placements:

309,222407,608Legal reserves profit

1,183,085751,340Profit derived from investment in bonds

1,492,3071,158,948Sub total

1,423,1151,351,673Total

38- On-account Proit of Saving Deposits

38-1 On-account proit of saving deposits is as follows:

Bank Mellat



2,219,9413,535,659One-year deposits

444,768581,441Two- year deposits

270,086462,986Three- year deposits

68,991158,278Four- year deposits

8,513,50514,309,989Five- year deposits

5,806,7025,379,762Profit of short term deposits

2,902,2661,962,536Profit of special short term deposits

1,733,8981,253,812Profit of One-year investment certificates of deposit

21,960,15727,644,463Total

Bank Mellat


Definite (%) On-account (%)

96Ordinary short term and housing deposits

-8Special short term (4-month)

1211Special short term (6-month)

1211Special short term (9-month)

14.514One –year deposits

1919One –year certificate of deposit

15.514.5Two- year deposits

1615Three- year deposits

1716Four- year deposits

17.517Five- year deposits

100



39- Surplus Paid to Depositors

Difference between deinite and on-account proit of saving deposits of the customers has been calculated based on directive number MB/22243 dated 26/04/2010 of the

Central Bank of the Islamic Republic of Iran.



186,316,644280,757,545Average loans granted

2,269,0483,512,258Average investments

5,008,2516,743,650Average participation bonds

193,593,943291,013,453Total

Less: net resources of depositors

66,407,63587,109,036Average short term

21,534,99417,615,832Average special short term

24,579,75934,212,920Average one-year

2,858,1813,843,928Average two-year

1,660,3952,942,967Average three-year

388,7539940,172Average four-year

50,867,91279,067,157Average five-year

168,297,629225,786,012Total average investment deposits

(20,022,067)(25,869,203)Total average legal reserves of investment deposits

(148,275,562)199,916,809Net resources of depositors

45,318,38191,096,644Bank's resources

30,977,72042,237,032granted loans profit

1,183,085751,340participation bonds profit

(69,192)192,725profit derived from investment

32,091,61343,181,097Total joint income

24,004,85929,665,414Depositors' profit share

236,837280,027Reward for legal reserves of investment deposits

24,241,69629,945,441Deposits profit

(2,281,539)(2,300,978)Retaining fee received

21,960,15727,644,463profit payable to depositors

(21,960,157)(27,644,463)on-account profit paid to depositors during the year (note 38)

00Deficit(surplus) profit paid to depositors

39-1 According to the resolution of the board of directors of the Bank, the retaining

fee has been calculated as 1.01% of the average investment deposits.

101



40- Proit and Late Payment Charges Received

41- Commissions Received

Bank MellatGroup



838,4811,091,474838,4811,091,474Profit(foreign branches)

4,950,9464,039,3134,688,5624,022,314Late payment charges received from other claims

312,123468,285312,123468,285Late payment charges received from foreign cur-rency private loans

302,3421,019,882302,3421,019,882Profit received from foreign currency private loans

594,174741,431516,470662,010Profit received from foreign currency invest-ments & placements

309,021289,531813,260556,825Other profits

7,307,0877,649,9167,471,2387,820,790Total

Bank MellatGroup



1,181,0781,292,9671,181,0781,292,967Commission of issued L/Cs

763,079949,810763,079949,810Commission of issued guarantees

85,45565,50185,45565,501Commission of utility bills

413,807629,320413,807629,320Commission of inter-bank wire transfers (SHETAB)

281,323393,569281,323393,569Commission of non interest bearing facilities

156,406159,677156,406159,677Commission of foreign branches

66,53864,44866,53864,448Commission of governmental accounts

5118,3595118,359Commission of facilities for broken down cars

19,77937,98019,77937,980Commission of current accounts (bounced checks)

0216,9770216,977Commission of insurance services

26,54424,65926,54424,659Commission of P/Os in local & foreign currencies

31,47845,16831,47845,168Commission of rectifying effects of bad checks

21,84833,65721,84833,657Commission of projects expert fees

33,91849,09133,91849,091Commission of preparation of credit information report

0235,2540235,254Commission of securities sales agency ship

358,349444,027479,852482,241Other Bank Services

3,439,6084,760,4653,561,1104,798,678Total

102



42- Other Incomes

42-1 Miscellaneous incomes are as follows:

42-1-1 Proit derived from selling ixed assets are as follows:

Bank Mellat



18,22913,116Post, Telegraph & Telephone

327,7607,710Profit derived from disposing fixed assets

31,525354,214Incomes derived from issuing warrants

0188,764Profit of C/Ds purchased from other banks

11,51313,329Incomes derived from rentals

144,951598,348Other

533,9781,175,481Total

Bank MellatGroup



262,572118,220262,572118,220Result of internal foreign exchange

19,08533,03119,08533,031Result of foreign exchange of foreign branches

687,0312,425,153601,8022,375,680Result of translation of foreign currency accounts

533,9781,175,481647,6621,253,935Miscellaneous incomes

6,37431,6926,37431,692Miscellaneous incomes of foreign branches

1,509,0403,783,5781,537,4953,812,558Total

43- Administrative and General Expenses

Bank MellatGroup


million RialsmillionRialsmillion Rialsmillion Rials

7,628,26210,184,1427,869,37910,352,297Staff expenses

3,716,0354,403,0203,716,0354,403,020Other administrative expenses

11,344,29714,587,16211,585,41414,755,317Total

103



43-1 Staff expenses include the following items:

43-1-1 the amount of 1,500,000 million Rials has been posted in the accounts for the staff retirement beneits expenses (actuary).

Bank Mellat



1,179,2001,506,341Salary and wages

2,294,5692,865,789Allowances

410,567460,928Welfare, groceries, health

1,292,0561,160,024Saving and retirement

383,792561,620Staff retiring expenses

01,500,000Liabilities for staff retiring benefits

253,682218,894New year's gift and reward

981,668605,124Severance reward

707,2541,076,028Incentives

79,422153,764Repurchasing staff leaves

46,05275,631Staff expenses of foreign branches

7,628,26210,184,142Total

104



43-2 Administrative expenses include the following items:

44- Doubtful Loans Expenses

Bank Mellat


million Rials million Rials

Specific doubtful loans expenses 3,749,878 2,347,790

General doubtful loans expenses 1,763,303 1,183,281

Total 5,513,181 3,531,071

Bank Mellat



1,144,4311,625,461Contractual services

141,613198,168Consumable items

115,248143,857Telecommunications

91,047133,442Leasing premises and tax

97,688128,310Water, electricity and fuel

67,007100,302Business trips and missions

230,652241,687Calculators

772,642906,545Depreciation expenses

986,629811,801Other expenses

69,078113,447Administrative expenses of foreign branches

3,716,0354,403,020Total

105



44-1 Considering note 4-9-2, Speciic doubtful loans provisions has been calculated as follows:

Bank Mellat

Over due loans Non performing

loansdoubtful loans Total

million Rials million Rials million Rials million Rials

Balance at the year end 6,394,216 13,665,498 39,196,722 59,256,436

Less: collaterals value, applying coefficients

Saving & investment

deposits(34,175) (36,485) (120,410) (191,070)

Participation bonds (54,200) (80,400) (211,500) (346,100)

Properties & machinery (1,297,691) (1,697,448) (1,369,682) (4,364,821)

Balance of Specific

provisions basis5,008,150 11,851,165 37,495,130 (54,354,445

Basis quotient for

calculation of specific

provisions

10% 20% 50-100% -

Specific provisions

quotients for non

performing loans

500,15 2,370,233 20,328,726 22,199,774

Specific provisions

quotients for non

performing loans of the

last year

(525,028) (3,298,721) (15,626,147) (19,449,896)

Expenses of specific

provisions for non

performing loans

(24,213) (928,488) 4,702,579 2,749,878

106



44-2 Considering note 44-1, general doubtful loans provisions has been calculated as follows:

March 20th 2011

million Rials

Balance of the loans granted on March 20th 2011 498,263,777

Less:

Balance of the loans for which specific provisions have been posted (59,256,436)

Balance of basis for general provisions basis 439,007,341

Basis quotient general provisions calculation 1.5 %

General provisions for non performing loans 6,585,110

General provisions for non performing loans of the last year (4,821,807)

Expenses of general provisions for non performing loans 1,763,303

45-Financial Expenses

Group Bank Mellat

March 20th 2011 March 20th 2010 March 20th 2011 March 20th 2010


Expenses of the loans received

2,519,859 2,116,120 2,498,197 2,056,337

Banking services commissions expenses

890,377 604,118 871,468 584,346

Total 3,410,236 2,720,238 3,369,665 2,640,683

107



Group Bank Mellat



Income tax reserve for the previous years

(451,474) (333,000) (451,474) (333,000)

Yearly adjustments of

the other items881,358 (653) 882,058 0

Total 429,884 (333,653) 430,584 (333,000)

46- Other Expenses

46-1 as per article 2 of the directive on granting prizes to non interest bearing saving

accounts approved on 534th session of the Money & Credit Council dated 06/08/1984, the maximum amount that can be allocated to this purpose would be determined by

the Money & Credit Council.

47- Yearly Adjustments Yearly adjustments include the following items

Group Bank Mellat



Other expenses 631,922 487,632 630,225 484,347

47-1 Yearly adjustments of the other items are mainly due to recognition of recon-ciliation of SAEE and SANJESH systems and adjustments of proit of the previous years.

48- Approved Dividend

Out of the amount of 3,309,980 million Rials, the amount of 3,157,100 million Rials accounts for distribution of 241 Rials dividend per share to the shareholders and the

residual belongs to the shareholders of the group.

108



49- Net Cash Inlow (Outlow) out of Operating ActivitiesProit reconciliation before tax deduction or net cash inlow (outlow) out of operating activities is as follows:

Group Bank Mellat


Operating activities: million Rials million Rials million Rials million Rials

Profit before tax 8,065,612 4,686,166 8,037,968 4,696,016

Depreciation expenses 930,641 780,193 909,859 775,179

Investments impairment losses 136,828 197,358 136,828 197,358

Profit derived from investments & legal partnerships

(8,225) (390,226) (7,710) (327,760)

Profit and commissions paid to loans received (2,287,339) (943,400) (2,366,760) (1,050,048)

Exchange translation profit 3,410,247 (2,437,734 3,369,665 2,377,949

Severance pay expenses 567,371 934,701 567,371 934,701

Total 10,815,135 7,702,526 10,647,221 7,603,395

Net increase (decrease) in operational liabilities:

Dues to the Central Bank (17,645,351) (145,155) (17,645,351) (145,155)

Dues to Banks & Credit Institutes 7,571,749 15,277,581 6,823,990 20,011,741

Sight Deposits 31,642,462 38,080,464 30,640,243 38,074,863

Saving Deposits & the Like 13,141,590 7,816,120 13,141,590 7,816,120

Time Investment Deposits 55,142,651 55,807,719 55,142,651 55,807,719

Other Deposits 2,403,292 2,753,522 4,042,574 3,948,105

Provisions & Other Dues 4,743,802 132,935 3,393,710 167,722

Items in transit 24,408,157 (6,837,393) 24,408,157 (6,837,393)

Acceptances & Endorsements 17,248,778 20,960,432 17,248,778 20,960,432

Total 138,657,130 134,846,225 137,196,342 139,804,154

Net increase (decrease) in operational assets:

Dues from the Central Bank 4,558,328 (30,246,436) 4,558,328 (30,246,436)

Dues from Banks & Credit Institutes 4,438,742 (27,145,715) 2,808,322 (31,706,507)

Dues from the Government 5,723,655 (3,003,644) 5,723,655 (3,003,644)

Loans & Advances to the Public Sector (11,351,197) (2,635,749) (11,351,197) (2,635,749)

Loans & Advances to the other parties (70,954,375) (36,440,120) (71,441,432) (36,914,647)

Loans & Advances to the subsidiaries (6,345,891) (1,710,911) (6,345,891) (1,710,911)

Participation Bonds & the Like (5,799,926) (2,565,866) (5,842,747) (2,589,373)

Operational stake in other assets (21,782,056) (1,787,511) (19,712,803) (1,776,027)

Dues from L/Cs & Time Drafts (16,990,046) (20,646,025) (16,990,046) (20,646,025)

Total (118,502,766) (126,181,977) (118,593,811) (131,229,319)

Cash inflow (outflow) out of operational activities

30,969,499 16,366,774 29,249,752 16,178,230

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49-1 As per note to the attachment number 3 of the standard number 2 of accounting,

due to the fact that operational proit is not recognized in the sample proit &loss ac-count of Money Credit Council, so in the above reconciliation statement proit before tax deduction has been selected to adapt with cash inlow (outlow) due to operational activities. It is understood that in this case the items that are separately categorized in

the other main entries, have been considered in converting proit before tax deduction to net cash low out of operational activities.

50- Comparison of Credit Exposure & Performance in 1389(2010/11)

50-1 The above note has been disclosed considering the target set in article 7 of Poli-cymaking- supervisory package of the central bank, concerning allocation of 80% of the resources in various economic sectors.

51- Net decrease in cash

Net decrease in cash relected in the cash low statement is as follows:

Group Bank Mellat Group Bank Mellat

March 20th 2011 March 20th 2010 March 20th 2011 March 20th 2010Changes during

2010/11

Changes during

2010/11

million Rials million Rials million Rials million Rials million Rials million Rials

Cash 8,97,805 5,491,595 7,887,133 5,296,956 3,487,210 2,590,177

Current account with the Central Bank

21,911,718 1,064,099 21,911,718 1,064,099 20,847,619 20,847,619

Current account with the hosting central bank

549,735 65,667 549,735 65,667 484,068 484,068

Balance with the domestic banks after clearing

53,489 370,817 53,489 370,817 (317,328) (317,328)

Balance of domestic banks with us after clearing

(56,835) (128,984) (56,35) (128,983) 72,149 72,148

Cash balance at the end of the year 31,436,912 6,863,194 30,345,240 6,668,556 24,573,718 23,676,684


Economic Sector Exposure (%) Performance (%)

Agriculture & water 20 4

Industry & Mine 29.6 28

Construction & Housing 16 14

Services & Business 8 33

Export 6.4 1

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53- Contingent liabilities

Group Bank Mellat



Liabilities for issued L/Cs 102,285,307 116,839,934 102,825,207 115,797,754

Liabilities for L/Gs and acceptances in local and foreign currency

78,301,718 55,866,023 77,693,878 55,258,183

Other Liabilities 61,778,339 50,182,046 59,027,239 47,431,046

Managed Funds & The Like

3,427,033 3,372,669 3,427,033 3,372,669

Total 246,332,397 226,260,672 242,973,557 221,859,652

53-1 Breakdown of liabilities for issued L/Cs is as follows:

Group Bank Mellat



Bank's liabilities for the issued L/Cs 97,103,370 113,759,817 97,103,370 112,745,111

Branches liabilities for L/Cs issued at

the counters of foreign branches 304,949 422,076 304,949 422,076

Liabilities for the locally issued L/Cs 5,289,715 2,499,917 5,289,715 2,477,619

Branches liabilities for L/Cs issued

by the other domestic banks at the

counters of and confirmed by foreign

branches

127,273 158,124 127,273 152,948

Total 102,285,307 116,839,934 102,825,207 115,797,754


Bank Mellat

March 20th 2011

million Rials

Foreclosure of 94 properties against bank's claims 593,880

Total 593,880

52- Non cash transactions Major non cash transactions of the bank are as follows:

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Group Bank Mellat



Liabilities for L/Gs and acceptances in

local currency50,116,096 31,427,834 49,774,152 31,085,890

Liabilities for L/Gs and acceptances in

foreign currency 21,227,784 16,901,143 21,043,895 16,717,254

Branches liabilities for the issued L/Gs 824,774 657,629 817,619 65,474

Bank's Liabilities for C/Gs issued in

foreign currency 6,133,064 6,879,417 6,058,212 6,804,565

Total 78,301,718 55,866,024 77,693,878 55,258,183

Group Bank Mellat



Liabilities for the contracts concluded

with the management and planning

organization

25,103,517 24,259,774 23,773,586 22,929,843

Liabilities for the contracts concluded in

foreign currency536,771 1,278,305 466,694 1,208,228

Liabilities for the contracts concluded

for transactions20,340,381 14,018,564 19,571,877 13,250,060

Liabilities for the rescheduling contracts 2,771 4,590 2,519 4,338

Liabilities for underwriting bonds 15,790,611 10,620,611 15,208,375 10,038,375

Liabilities for credit cards 4,288 202 4,288 202

Total 61,778,339 50,182,046 59,027,339 47,431,046

53-3 Breakdown of other liabilities is as follows:

53-2 Liabilities for L/Gs and acceptances are as follows:


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53-4 Managed funds and the like are as follows:

Group Bank Mellat



Loans granted out of managed funds 2,611,855 2,811,883 2,611,855 2,811,883

Unallocated managed funds 448,080 546,489 448,080 546,489

Loans granted out of inter bank funds 11,830 12,602 11,830 12,602

Loans granted out of special non

interest bearing deposits355,213 1,695 355,213 1,695

Unallocated special non interest

bearing deposits55 0 55 0

Total 3,427,033 3,372,669 3,427,033 3,372,669


54- Contingent Liabilities and debtsThe bank has had no other contingent liabilities and capital debt at the balance sheet date.

55- Post balance sheet date eventsNo material event has occurred after the balance sheet date.

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Subsidiary Affiliation nature Transaction descriptionTransaction

amountBalance of

debt

A- Transactions subject to article 129 of the amendment to commercial act million Rials million Rials

Mellat Behsazan Co.

Joint board member

Procuring software, after sales services and advance payments

358,411 25,937

Tarh & Adisheh Behsaz Mellat Co

Affiliated to Mellat Behsaz mosharekatha Co.

Collecting non performing loans

30,748 1,130

Tarh & Adisheh Behsaz Mellat Co

Affiliated to Mellat Behsaz mosharekatha Co.

Facilities 1,386,803 1,386,803

Other subsidiaries

Affiliated to Mellat Behsaz mosharekatha & Behsazan Cos.

Leasing, after sales services and facilities

236,354 91,251

Mellat printing Co. Board memberPrinting, magazines, deposits , and leasing

46,840 23,832

Mellat exchange Co.

Board member Leasing 564 280

Mellat leasing Co. Board member Leasing 162 0

Mellat leasing Co. Board member Facilities 1,732,275 1,969,696

56- Transactions with the Subsidiaries

56-1 The group had no transactions with the subsidiaries on the balance sheet date.

56-2 The Bank’s transactions with the subsidiaries during the year under report are as follows.


56-3 fair value of the above transactions has no material difference with the trans-action amount.56-4 Other subsidiaries include Behsaz Mofarrah Co., Mellat Beh Pardakht Co., Shaghayegh software engineering Co. and Mellat Behsazan services Co.

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57- Retained Earnings at the end of the Year

Bank Mellat

million Rials

Legal mandate:Distributing at least 10% of the net profit of

1389(2010/11) as per article 90 of the amendment to commercial act 658,997

Proposal of the board of directors (based on 16,000 million shares) 4,800,000


58. Earnings Per Share

Earnings per share have been calculated as follows:

Group Bank Mellat Bank Mellat



Pre-tax profit 8.065.612 4.686.166 8.037.968 4.696.016

Tax effect (1.481.149) (1.019.650) (1.447.999) (960.515)

Profit after tax deduction 6.584.463 3.666.516 6.589.969 3.735.501

Number of shares (million) 13.100 13.100 13.100 13.100

Earnings per share (Rial) 502 279 503 285

Basic earnings per share with

16,000 million shares (Rial)411 412

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59- Foreign Currency Position

Monetary assets and liabilities and foreign currency liabilities at the end of the year

are as follows:

USD EURO GBP AED CHF CAD JPY AUD SKR DKR

Cash 66,888,553 36,001,602 1,785,812 12,480,212 407,250 5,470 0 0 0 0

Dues from other banks & institutes

486,539,481 1,834,391,072 43,203,734 575,706,210 2,137,455 0 9,155,329,725 0 17,396,067 8,213,390

Loans & advances

431,843,078 6,344,978,144 45,820 7,689,831,620 5,886,256 0 41,002,932,539 0 0 98,226,515

Other 1,261,069,106 2,944,385,513 4,746,289 5,066,757,447 9,920,097 8,254 33,645,992,596 270 18,951 61,691,193

Total FC Assets

2,246,340,218 11,159,756,331 49,781,655 13,344,775,489 18,351,058 13,724 83,804,254,860 270 17,415,018 168,131,098

Received deposits

979,689,693 3,819,997,498 37,685,447 3,712,982,786 2,249,366 1,028,092 2,908,417,789 1,496,022 3,817,163 51,426

Received facilities

0 729,605,354 34,877 5,367,705,400 1,169,357 0 7,037,962,894 0 0 0

Other 1,193,320,126 6,119,796,685 3,131,370 4,800,075,834 7,250,326 101,626 38,673,610,081 763,970 32,796,728 98,235,484

Total FC Liabilities

2,173,009,819 10,732,399,537 40,851,694 13,880,764,020 10,669,049 1,129,718 48,619,990,764 2,259,992 35,613,891 98,286,910

FC position

73,330,399 427,356,794 8,929,961 (535,988,531) 7,682,009 (1,115,994) 35,184,264,096 (2,259,722) (18,198,873) 69,844,188

Liabilities for L/Cs

190,560,919 5,826,409 4,180,578 2,447,976,936 1,285,742 0 4,394,950,210 0 10,932,000 1,423,606

Liabilities for L/Gs

224,082,735 1,210,546,423 72,301 183,930,858 0 426,226 0 0 0 0


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Designer: Nasrin JabbariEditor: Malek Beikmohamadi

Translator: Asghar Donyadideh

Secretariat Ofice & Public Relations Division......................................

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[email protected]