middle eastbank 21september 2016en.middleeastbank.ir/uploads/meb-fs-20160921-english.pdf · middle...

MIDDLE EAST BANK

(PUBLIC JOINT STOCK COMPANY)

REPORT OF THE INDEPENDENT AUDITOR

&

CONSOLIDATED FINANCIAL

STATEMENTS

21 SEPTEMBER 2016

TADVIN & COMPANYCertified Public AccountantsAuthorized byThe Securities & Exchange Organization

• TADVIN & COMPANYUnit 33, 8Th Floor, No. 38Bokharest StreetPostal Code: 15137555-11Tehran, IranPoBox: 15175/548

• Phone: (021)88102631-3Fax: (021)88728525E-mail: [email protected]

LIMITED REVIEW REPORT OF THE INDEPENDENT AUDITORSTO THE BOARD OF DIRECTORS OFMIDDLE EAST BANK (PUBLIC JOINT STOCK COMPANY)

Introduction

1. We have reviewed the accompanying consolidated financial statements of the Group andthose of Middle East Bank (Public Joint Stock Company) "the Parent Company", whichcomprise the balance sheets as at 21 September 2016 and the statements of investmentdeposits, income, changes in the shareholders' equity and cash flows for the six monthsfinancial period then ended together with the explanatory notes I to 53. The Board ofDirectors of the Parent Company is responsible for the preparation and presentation ofthese interim financial statements. Our responsibility is to express a conclusion on thisinterim financial statements based on our review.

Scope of Review

2. We conducted our review in accordance with the "Standard on Review Engagement2410" Accepted in Iran. A limited review of interim financial information consists ofmaking inquiries, primarily of persons responsible for financial and accounting matters,and applying analytical and other review procedures. A review is substantially less inscope than an audit conducted on the financial statements and consequently, does notenable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit and accordingly, we do not express such an audit opinion.

Basis for Qualified Conclusion

3. The financial statements under review have been prepared based on the template issuedby the Central Bank of Iran (CBI). These financial statements, in some cases, are notconsistent with the accounting standards, such as, classification of bank investmentdeposit owners' equity separately in the balance sheet, presentation of statement ofinvestment deposits as an essential statement, presentation of the statement of changes inthe shareholders' equity and not presenting the statement of retained earnings and non-financial information in the notes to the financial statements.

4. As stated in Note 11-1 to the financial statements, the balance of granted facilities andamounts receivable from non-governmental persons include facilities in foreigncurrencies amounting to IRR 16,022 million to the companies introduced and guaranteedby National Iranian Oil Company (NIOC) in accordance with the Economic Councilapproval and in line with Clause 12, Note 2 of the Budget Act of 2015, out of ForeignExchange Deposit of National Development Fund. Due to the guarantees andcommitment given by NIOC for repayment of these facilities in addition to negotiationswith CBI regarding exclusion of general provision for the mentioned facilities, noprovision has been made in the account in this respect. Should the necessary adjustmentsbe made, in accordance with the provision of Circular No. MB/2823 dated on 24February 2007 issued by CBI and the subsequent amendments thereon and also theaccounting policy disclosed in Note 7-7 to the financial statements, the loan facilities andamounts receivable from non-governmental persons and the income before tax would bedecreased each by IRR 240 billion.

mailto:[email protected]

TADVIN & COMPANYCertified Public AccountantsAuthorized byThe Securities & Exchange Organization

5. As stated in Note 22-1 to the financial statements, in accordance with the verdict given bythe Tax Dispute Settlement Committee, the income tax determined for 2014 is IRR 142billion in excess of the declared tax.-The Bank has made no provision in this respect andhas appealed against the verdict, the outcome of which has not yet been notified.Furthermore, income tax provision for 2015 and the current financial period under reviewhave been made based on the declared taxable income. Considering the tax authorities'approach in determining taxable income, the Bank will be held liable for these periods,the exact amount of which cannot be determined at present.

Qualified Conclusion

6. Based on our review, except for the effects of the matters described in paragraphs 3 to 5,nothing has come to our attention that cause us to believe that the aforementionedfinancial statements are not prepared, in all material respects, in accordance with theAccounting Standards Generally Accepted in Iran.

Other Matters

7. The rules and regulations determined by the Securities and Exchange Organization("SEO") has not been complied with in connection with the following matters:

7.1. The requirements of the provision of Article I0 of Disclosure Executive Instructionsfor publishers admitted by SEO ('the Instructions") in connection with submission ofa copy of minutes of Annual and Extra-ordinary General Meeting of the shareholdersto the Companies Registrar within 10 days of conclusion.

7.2. The requirement of the provision of paragraph 10 of Article 7 of the Instructions inrespect of submission of interim financial statements of Dadeh-Pardazan SimayeAftab Company (one of the subsidiaries) to SEO.

7.3. The requirement of the provision of Article 7 of the Instructions and notification No.94B/440/003 dated on IS March 2016 in respect of presentation of consolidatedinterim financial statements in the similar format to the template issued by SEO.

8. In compliance with the notification of the check-list of the internal controls governing thefinancial reporting approved by SEO, we have reviewed the related check-list. Based onour examinations, we have not come across any point indicating material weakness in theinternal controls governing financial reporting.

/f:) n'.,We 7Tadvin and CompanyIndependent Auditor29 November 2016

~~Jl>-~yMiddle East Bank

I

Consolidated Financial Statements(Audited)

Financial Period Ended 21 September 2016

Assets

Middle East 8ank{PJSqConsolidated balance sheet.s at 21 September 2016Interim financial report

Note 21 Sepl. 2016

lRR million

Uestalcd

19 Mllr. 2016

IRR million

CashDue nom oaRKS ana crean mstlIutlons

Credit facilities granted

InvestmentsDue from subsidiaries and associates

Other accounts receivable

Fixed assets

Intangible assets

Statutory deposit

Oth,er assets

Total nsscisLiabilities, interest and benefits of in\'cstmcnt deposit holders

and shareholders' equity

910

II

12

13

14

15

16

17

18

363,9725,}4T,T2~

47,076,688 I

5,903,989 .

167,875

644,174

2,083,171

853,737,

4,183,171 I

1,274,237 I

68.298.141 I

343.880Z,IJIS,'HSO

27.992,532

3,560,45 I

183,157

1,061,944

1,994,424

858,837

3,099,233

201,654

41,454.598

Liabilities:

Due to banks and credit institutions

Customers' current deposits

Dividends pn)'nblc

Income ta.x provision

Other liabililies and accruals

Stnffterminalion benefits

Total liabilities

"

19

20

21

22

2324

2,270~064'1,

6,833.599 I668,378 :,83,257 ,

1,446,503 :

53,271 ,

I 1.355,072 '

469,037

5,262,561

4,718

172,238

392.03937,423

6,338,016

15:~6:4,03 I .

! 369,717

50,973,748

r-- .. -

4,200.860

. 18,668,775• 984,004

L.:.....593,616 ;

Interest lind benefits of inveslment deposit holders:

Customers' investment deposits

Interest payable

Total interest and benefits of investment deposit holdersTotal liabilities and interest and henefits of investment depositholders

Shareholders' equity:

Share capitalParent's shares owned by subsidiaries

Share capital increase in progress

Legal reserveRetained earningsTotal equity anributable to equity holders of the Bank

Non-controlling interestsTotal equit),Totallillbilities, interest and henefits of investment depositholders nnd shareholders' equity

Letters of credit commitments

Issued guarantees commitments

Other commitments

Managed funds commitments

2526

27

28

45.1

45-2

45-3

45-4

III

II~.

III

62,328,820 II

4,000,000 I

I

(1,637)

252,440 I

639,334 :

'1,04(796:

5,931,933 :37,388 .

5,969,321 I

68,298,141

29,149,769

150,230

29,299,999

35,638,015

4,000,000

518,8761,265,291

5,784,167

32,416

5,8 I6,583

41,454,59H

2.507,746

16,750,179

957,530

70,154

Theaccolllp.nyingnoles.rc an inte:ralpa~c financial~Ia:~,:,ents.

. .... •..~.. ~.

Middle East BankCp,JSC)Consolidated income stntement

For the six months financial period ended 21 Septemher 2016Interim finnncial report

Restaled Restated

Period (61\1) ended 21 Sept. Period (61\1)Year ended

Description Note2016

ended 22 Sept. 19 Mar. 20162015

IRR million IRR million lRRmillion

Interest income on credit facilities granted and deposits 29 4,345,581 3,174,789

Interest expense 34 (3,122,401) (2,428,047)

Net interest income on credit facilities granted and deposits 1,223,180 746,742

IFees and commission income 35 295,942 I 207,643 482,480

Fees and commission expense 36 (12,917) I (3,922) (10,609)

Net fees and commission income 283,025 i 203,721 471,871

Ii

Net income (loss) from investment 30 70,415 I 94,176 325,925

Net foreign exchange transactions income 37 48,905 I 21,228 50,612

Total other operating income 119,320 , 115,404 376.537I1

Other income 38 120 r 1,020 1,216

Administrative and general expenses 39 (322,331) : (269,495) (600,257),Provision for bad and doubtful debts 40 (238,059) (39,445) (202,953),Finance costs 41

(81,; 13)1

(109)

Depreciation and amortization 42 (42,294) (137,087)

Profit before tax 983,9421 715,653 1,518,753

Income taxes 22 (83,632) (106,286) (145,889)

Net income after laxes 900,310 I 609,367 1,372.864

Profil attributable 10:

897,1221Profit attributable to shareholders of the parent company 608,676 1,366,662

Profit attributable 10 non-controlling interests 3,188 j 691 6,202

900,310 ; 609,367 1,372,864

Ers (Rials) 47 224 152 342

"'------,.

The accompanying notes arc an integral part of these financial statements.

Th. ~-"' •• ~._~_." ••• - - ;•• ~- -1--'....~...,'".~,.;,

2

,

Attachment ofthe audit report

Tadvin & Co,

6,716,893~:,~.

1Total rqtlily i

II

IRR million I5,849,185 I900,310 I

(J2.~2)1

iI,

- I35,604

Non'controlling

inll'1'l':St

IRRmiliion32,4163,188

6,681.289

IRR million5,816,769897,12102,602)

Totlll rquity.nributabll'lOrquily holdl'l"Sof

Ihl'Blink

2.162.413

Rl'tllinrd Tru.Jurynmings slock

IRR million IRRmilliOl1,297,893897,122(32,602)

IRR million

(o~gn Clll'Tl'!ley

trllnSActiondifTl'Tl'Tlcl"S (orforrign oprl'1llions

Capita! Premium ...". Olh..,. R"'"ll!tll'ioninc"",~in shirt res""'.1' rt$..,.,,1l'S of.sSl'tiPT"Oll.""' ~,

IRRmillion IRRmilliOlIRRmillioriRR milliOl IRRmillion518,876

Middle [:l.!rt B:mklP,JSqConsolidated !i'hltcmcnt of changes in rouitv

For .he !iixmonlhs finnndJlI perind rndoo 21 September 2016Intcrim finandJlI report

~ ~ .__ P_,_ri_od_~(_6_l\1tcnd~!.!!.~J1t20__1_6_ ._~ _r~-"-rlrttlt'sI Shirt' shares

tCIIpitlll O1O"Tledh).

sub$idillrif:!,

IRR million IRR million4,000,000Balance It 20 Mu. 2016

Net profitPrior years adjustments 43Othtr comprthmsivt Incomt (ntt of tax)ReVlluation ofasseuForeign cunmcy trlnsaclion difTcrenC%$for flnign opm.tionsTlx on other comprehensi~ incomeTotal othercomprehcnsh'c incomeTotal comprehen5i~ income

Noll'

252,440

(1,637)

28

21(1,637) 252.440

4000000 (I 637) 252440

Capital incrtlStShare capital inaease-RegisteredShare capitlll inaease-UnregisteredTrrasury stockPurdulsc of treasury stockSale oflrelsUry stockParcnt's shares O""IIed by sub5idiariesDistributionugal reserveOlherre~sStock dividendsDividendsTotalBalantt It 21 Sept. 2016

120,458

120,4!'8639334

(120,617)

( 1,000,000)(I,12(),617)1.041 796

252,440

0,637)

(159)

(1,000,000)(749,356)5:931 933

7,500

159

(5,875)1,78437.388

~'

(1:005.875)<747.572)5969,321 :

3

\

continued

Middle East Bank(PJSqColt'lolidated statl.'ment of chang" in equity

For tile Sillmonths financial period ended 21 September 2016Interim financial renurf

Balance at 21 Mar. 2015Net profitPrior years adjustmentsOthu comprehensive IlKome (net ortn)Revaluation of assetsForeign CtJITencytransaction differences forforeign operationsTax on other comprehensive incomeTotal other comprehensive incomeTotal comprehensive income

Parent'sCapital Premium

Note Share shares ownedincrease in dan

e.g., Othercapital by reserve reserves

subsidiariesprogress reserve

IRRmillion IRRmillion IRRmillion IRRmilliorIRR miliionlRRmillio!4,000,000 (456) 313,498

43

Period (6M) ended 22 Sept. 2015foreigo currelKy

Revaluation Inmsaction RelaiIKdof assets differences for earnings

foreign operationsIRRmillion IRRmillion IRRmillion

779,881608,616(35,114)

1353449

Treasurystock

IRRmillion

TOlal equityattributable toequity holders of

the BankIRRmillion

5,092,929608,616(35,114)

5666491

Non-controllinginterest

IRRmillion25,199

691

26490

Total equity

IRRmiIlion5,118,128609)61(35,114)

5692981

Capita! ilK~aseShare capital increase-RegisteredShare capita! increase_UnregisteredTreasury stockPurchase of treasury stockSale of treasury stockPa~nl'S shares owned by subsidiariesDistributionLegal reserveOther reservesStock dividendsDividendsTotalBalance at 22 Sept 2015

456 456 456

28 83,313 (83,313)

21 (640000) (640.000) P5l) (640351)

456 83.313 (123,313) (639544) (lSI) (639,895)

4000000 396811 630,136 5 026 947 26 139 5053086

continued

Note

Balance at 21 Mar. 2015Net profitPrior yearsadjustments 43OtMr comprehensive Income (net ohllI)Revaluationofassets

Middle East Bank(PJSqConsolidated statement of changl"s in equity

For the siJ(months financial period ended 21 September 2016Interim financial report

Yellr ended 19l\-far. 2016Parent's

Capital Premiumfo",ign currency

. Share shares owned incruse in share "" ..' Other Revaluation transaclioncapital by reserve reserves ofanets differences for

snbsidiariesprogress reserve foreign operations

IRRmillion IRRmillion IRRmilliOll IRRmiliiorIRR millionlRRmillior lRRmillion lRR million4,000,000 (456) 313,498

Total equityRetained Treasury attributable to Non-controlling Total equityearnings stock equity holders of interest

the BankIRRmillion IRRmillion IRR million IRRmillion IRRmil1ion

719,887 5,092,929 25,799 5,118,7281,366,662 1,366,662 6,202 1,372,864

(35,114) (35,114) (35,114)

Foreign currencytmnsaction differences forforeign operationsTax on other comprehensiveincomeTotal other comprehensiveincomeTotal comprehensiveincome 2111435 6424471 32001 6456478

Capital incruseShare capital in~se-RegisleredShare capital increase-UnregisteredTreasury stockPurchase of treasury stockSale of treasury stockParent's shares o1fDtdby subsidiariesDistributionLegal reserveOther reservesStockdividendsDividendsTotalBalance at 19 Mar. 2016

456 456 456

28 205.378 (206,144) (766) 766

21 (640000) (640,000) os I) (640)51)

456 205.378 (846,144) (6.(0,310) 41S 1639,8951

4,000,000 518,876 1,265,291 5,784,167 32,416 5,816,583

Middle East Bank(PJSqConsolidated statement of cash flows

For the six months financial period ended 2 t September 2016Interim financial report

Restated nesfafed

Operating activities:Cash flows from operating activities

Note

44

Period (6M) ended21 Sept. 2016

IRRmillion

405,457

Period (6M) ended22 Sept. 2015

IRR million

786,077

Year ended]9 Mltr. 20]6

IRR million

1,042,934

(6,392)

(638,282) (639,062)

(638,282) (645,454)

(122,626) (122,626)

(57,400) (147,425)

3,336

(19,859) (45,916)

3

(77,259) (190,002)

(52,090) 84,852

Interest paid for financing:Interest paid for financial facilitiesDividend paid

Net cash outflow from interest paid for financing

Income tax:Income tax paid

Investment activities:Purchase of tangible fixed asSetsSale of tangible fixed assetsPurchase of intangible assetsSale of intangible assets

Net cash outflow from investment activities

Net cash inflow(outilow) before financing activities

Financing activities:Capital increase

Issue of ordinary share capitalNet cash flows (used in) from financing activities

Net increase (decrease) in cashEffect of exchange rate fluctuations on cash

Cash at beginning of the yearCash at end of the year

(53,710)

(53,710)

(172,238)

(144,918)

(20,044)

2

(164,960)

14,549

111

2,500

2,611

17,160

2,932

9 343,880

9 363,972

(52,090)

4,596

246,655

199,161

84,852

12,373

246,655

343,880

The accompanying notes are an integral part of these financial statements.

6


Tadvin& co/c::--~-

Assets

Assets:

CashDue from banks and credit institutionsCredit facilities grantedInvestmentsDue from Subsidiarics and associatesOther accounts receivableFixed assetsIntangible assetsStatutory depositOthcr assetsTotnl assets

Middle EAt'lt RAnk(P.JSC>

Balance sheetI1S I1t 21 September 2016Interim finl1ncial report

Note

9

10

1\

12

13141516

17

18

21 Sepl. 2016

IRR million292,526 '

5,747.127

47.172,234,

5,932,062

519,139

514,844 :

1.995,840 :

852,229

4,183,171

1,191,661

68,400,833

Restated19Mar. 2016IRR million

318,494

2.171.078

28.091,620

3.648.680

276.661

890.127

1,906.471

857.238

3.099.233

118.221

41.377.823

Liabilities, interest nnd benefits of investment depositholders and shareholders' equity

Liabilities:

Due to banks and credit institutionsCustomers' current depositsDividends payableIncome tax:provisionOther liabilities and accrualsStafTtermination benefitsTotal liabilities

19 r--2-.i70:063 469.037

20 I 6,851.946 5.322,031

21 668,378 4,718

22 78,368 165,337

23 I 1,405,538 ; 377,391

24 44,588 31,462

11.318,881 6,369.976

Interest and benefits of investment deposit holders:

Customers. investment deposits

Interest payableTotal interest and benefits of investment deposit holdersTotal liabilities and interest and benefits of investmentdeposit holders

Shareholders' equity:Share capitalShare capital increase in progressLegal reserveRetained earningsTotal shareholders' equityTotal liabilities, interest and benefits of in"estmentdeposit holders and shareholders' equity

2526

27

28

r50,900,;;7o-

I 370,33 I

r 51.270.40 I

I 62,589,282

14,000,000

252,440

635,013

924,098

5,811,551

68,400,833 '

29,094.132

150.601

29,244,733

35,614,709

4.000,000

515.614

1,247,500

5.763.114

41,377,823

Letters of credit commitments 45-1 r-~}00'86~Issued guarantees commitments 45-2 18,668,775 i

Other commitments 45-3 l 984,004 ,Managed funds commitments 45.4 .59~,616 :'

••• -~,;~ ."., = '" ;";'"'T,.~""=m,""

2,507,74616.750,179957,5307 , 54

Middle Eost BonkeP.ISqStatement of In"pitment [)rnosit ••I'rrfonmlnre

for 'he six months financial mdod ended 21 September 2016Interim financial report

[)rscriplion,..---------------,Period (6M) ended 21 Sept. 2016 i

IRR million

RestatedPeriOlI (6M) ended22 Sepl. 2015IRR million

RestatedYenr ended 19Mnr.2016IRR million

Mutunllneome

Income from statutory deposit of investment deposits 3 I

Depositors' interest income

2,938,091 5.936.230

199,728 467,704

49.660 336)90

3,836.106 3,187,479 6,740,724

(828.m)! (686.821) (1,434.297)

3.007,591 i 2.500.658 5.306,427

i(408.471)! (242.263) (511.517)

.2,599,120 J 2,258.395 4,794,910,15,575 i 13,880 28,100

,

2.614,695 : 2.272.275 4,823,010,

..(2,859,746)1 (2,425,877) (4.885.992)

(245,051)1 (153.602) (62.982)I

(11.126)

629,359

3,217,873

l ._==_32

31

33

292930

Depositors' share of mutual income before deduction ofthe bank's charges

Dcpositors' sharc of mutual income

Bank's share of mutual income

The Bank's charges

Interest paid on account to investment deposits

O\'erpnld Interest to depositors

Loans interest income

Dcposils interest income

Net income (loss) from investments

Sum ofmutunl income

TIle accompMying notes are nn imegml pm"tof these financialstatements.

•

Middle Enst RankfP,JSClIncome ~tntem("nt

For the six months financial period ended 21 September 2016Interim financial o;port

Rcstated Hestnled

De:'icription Not~ Period (61\1) ended 21 S('llt. 2016 , P('rillli (6M) cntled Year ended 1922 Sell I, 2015 Mnr.2016

lRR million IRR million IRR million

Interest income on credit facilities granted and deposits 29 4,340,767 3.174,302 6,510,681

Interest expense 34 (3,125,928) I (2,433,002) (4,910,753)I

Net imerest income on credit facilities granted and deposits 1,214,839 I 741,300 1,599,928

Fees and commission income 35 233.979 174.996 390.259

Fees and commission expense 36 (12,917) (3,922) (9,872)

Net fees nnd commission income 221.062 I 171,074 380,387i1

49,660 INet income (loss) from investment 30 (\.1,126) 336,790

Net foreign exchange transactions income 37 46.285 21,231 50,355

Total other operating income 35,159 ; 70,891 387,145

IOther income 38 2,005 ! 3,420 6,303

Administrative and general expenses 39 (283,348)1 (246,857) (542,442)

Provision for bad and doubtful debts 40 (238,003)1 (39,094) (203,253)

Finance costs 41 (109)

Depreciation and nmoni7Jltion 42 L (76,974) (41,269) (132,716)

Profit before tax 874,740 659,465 1,495,243

Income taxes 22 (78,743) (104,620) (139,718)

Net Income after taxes 795.997 . 554,845 1,355,525

!,

•

9

IRR million IRR million1,279,371795,997(31,871)

Balance at 20 Mar. 2016Net profitPrior years adjustmentsOther comprehensil'c Income (net of tax)Rc\'aluation of assetsForeign currency transaction difTtrencesfor foreign operationsTax on other comprehensive incomeTotal other comprehensi\'e incomeTotal comprehensive income

Note

43

Middle East BankfP.JSClStatement of changes in equity

For the six months financial period ended 21 September 2016Inttrim financial renort

Period (61\1) ended 21 Stpt. 2016

Capilal Premiumforti~n currtn(')'

ShareiR('rtaSe in share

ugal Other Re\'aluation transadioncapital resen'e rtsen'es of asstts differenctS for

progress rtSC'n'tfortign openttions

lRR million IRRmiliion IRR millionlRR millionlRR milliot IRRmillion IRRmillion4,000,000 515,614

Retainedearnings

2,043,497

Treasury'stock

Total equity

IRR million5,794,985795,997(31,871)

6.559,111'

252,440

Capital increaseShare capital increase.RegistercdShare capital incrcasc.UnregisteredTreasury' stockPurchase of treasury stockSale of treasury stockDistributionLegal reserveOther reservesStock dividendsDividendsTotalBalance at 21 Sept. 2016

28

21

4.000.000252.440252.440

119,399

119.399635,013

10

(119,399)

( 1.000,000)(1,119.399)924.098

252,440

(1,000,000)(747.560)5.811.551

Middle East 8ank{PJSC)Statement of changes in equity

For the six months financial period ended 21 September 2016Interim financial report

continued

IRR million IRR milliorIRR million[RR milliOf IRR million311,494

5,602,434

IRR million5,081,448554,845(33,859)

Total equityTreasury

slock

IRRmillion

1,290,940

Retainedearnings

IRRmillion769,954554,845(33,859)

Revaluationof assets

Period (61\1) ended 22 Sept. 2015foreign currency

transactiondifferences for

foreign operalionslRRmillion

Otherreserves

Legalreserve

Premiumsharereserve

Capilalincrease inprogress

IRRmillion4,000,000

Share capital

43

Note

Balance at 21 Mar. 2015Net profitPrior years adjustmentsOther comprehensive Income (net of tax)Revaluation of assetsForeign currency transaction differences forforeign operationsTax on other comprehensive incomeTotal other comprehensive incomeTotal comprehensive income

Capital increaseShare capital increase-RegisteredShare capital increase-UnregisteredTreasury stockPurchase oftreasUlY stockSale of treasury stockDistributionLegal reserveOther reservesStock dividendsDividendsTotalBalance at 22 Sept. 2015

28

21

4000,000

83,227

83,227394,721

(83,227)

(640,000)(723,227)567,713

(640,000)(640,000)4,962,434

11

Treasurystock . Total equity

continued

Balance at 21 Mar. 2015Net profitPrior years adjustmentsOther comprehensive Income (net of tax)Revaluation of assets

Foreign currency transaction differences forforeign operations

Tax on other comprehensive incomeTotal other comprehensive incomeTotal comprehensive income

Note

43

Middle East Bank(PJSC)Statement of changes in equity


Year ended 19 Mar. 2016

Capital Premiumforeign currency

Share capital increase in shareLegal Other Revaluation transactionreserve reserves of assets differences for

progress reserveforeign operations

IRRmillion IRR million IRR million IRR million (RR millior IRRmillion IRRmillion4,000,000 JII,494

Retainedearnings

IRR million IRR miHion769,954

1,355,525(33,859)

2,091,620

IRRmillion5,081,4481,355,525(JJ,859)

6,403,114

Capital increaseShare capital increase-RegisteredShare capital increase-UnregisteredTreasury stockPurchase of treasury stockSale of treasury stockDistributionLegal reserveOther reservesStock dividendsDivide:1dsTotalBalance at 19Mar. 2016

28

21

4.000.000

12

204,120

204,120515,614

(204,120)

(640,000)(844,120)1,247,500

(640,000)(640,000)5,763,114

The accompanying notes are an inlegral part of these financial statemenls,

13

Middle East BankIPJSqNotes to the financial statements


1- Introduction1-1- Background

Middle East Bank (Public Joint Stock Company) - ("the Bank") was approved by theCentral Bank of Iran ("CBI") under approval number 91/184904 in October 2012 andregistered with Tehran Registrar of Companies under registration number 430795, in thesame month. The Bank also registered with Tehran Stock Exchange in July 2012 and itsshares were traded in the secondary market in January 2013. The Bank's Head Office islocated in N02, 5th St, Ahmad Qasir(Bucharest) Ave, Tehran, Iran.

1-2- Scope of the Bank activitiesAccording to clause No 2 of the Bank's articles of association, subject of Bank'sactivities are as follows:

Accept all kinds of bank deposits.

Issue bearer or registered certificate of deposits.

Grant credit Loans.

Open letters of credit and engage in all foreign exchange transactions.

Issue, purchase and sell participation bonds for itself or on behalf of others, underCBI's operative regulations.

Receive credit Loans from real or legal persons in according with the standingregulations.

Issue bank guarantees, endorse, accept and underwrite securities includingparticipation bonds.

Operate self-deposit boxes.

Grant Loans for the export of technical services.

Participate and invest directly or through acquisition of share from stock exchange inmanufacturing, commercial or service sectors, under CHI's operative regulations andusury-free banking law.

And ...

The object of the Bank is to provide funding resources by accepting deposits, credit andusing other financial instruments and applying these funds for granting of credit andinvesting in various sectors of economy.

14

TadVin&~

Middle East Bank(PJSC)Notes to the financial statements


1-3- Number of branchesThe number of the Bank's branches at 21 Sept. 2016 is as follows:

Branches-Tehran provinceBranches-other provinces

21 Sept. 20169413

19 Mar. 20169413

1-4- EmployeesThe average number of employees during the year is as follows:

Head oflice

Tehran branches

Other provinces' branches

21 Sept. 2016

180

97

53330

19 Mar. 2016

163

9645304

The number of staff employed at 21 Sept. 2016 was 333 person.

2- The Basis of financial statementsThe parent company (the Bank's) and the group's consolidated financial statements are prepared based on theIranian Accounting Standards and the Central Bank oflran's regulations. Details of accounting policies,including changes during the year, are included in notes 5 to 7.

2-1- Principles of consolidation

The consolidated financial statements incorporate the assets, liabilities and results of the subsidiaries controlledby the Bank. Subsidiaries are fully consolidated from the date on which the control commences and aredeconsolidated from the date control ceases. In preparing the consolidated financial statements all intergrouptransactions and balances are deleted. The subsidiaries consolidated are "Dadeh Pardazan Simaye Anftab Co."Middle East Bank Brokerage Co." and "Middle East Currency Exchange CO.".

The parent's shares owned by subsidiaries have been taken into account at cost.

3- Functional and presentation currency

These consolidated financial statements are presented in Iranian Rials which is the Bank's functional currency.All amounts have been rounded to the nearest million, except when otherwise indicated.

4- Use of judgments and estimatesAs the consolidated financial statements have been prepared based on CBI's regulation, the management hasnot made judgments and estimates over these regulations.

5- MeasurementThese consolidated financial statements are based on historical costs except investment listed shares.

6. Changes in accounting policiesThe Dank observe all accounting policies, mentioned in note 7,with consistency in all reporting periods in thefinancial statements.

15

Tadvin & Co.

7- Accounting policies

7.1- Investments


For the six months financial neriod ended 21 September 2016Interim financial report

Consolidated I ParentMeasurement:Long term investments:

Investment in subsidiaries ConsolidatedCost (less provision made for anypermanent reduction in their values)

Investment in associates Equity methodCost (less provision made for anyDcrmanent reduction in their values)

Cost (less provision made for anyCost (less provision made for any

Other long term investments permanent reduction in theirpermanent reduction in their values)

values)Short term investments:Investment in listed shares Market value IMarket val ueRevenue recoe:nition:

At the time in which payments ofdividends are approved in their

Investment in subsidiaries Consolidated annual general meetings(AGM's).(tili the date of financialstatements approval)

At the time in which payments ofdividends are approved in their

Investment in associates Equity method annual general meetings(AGM's).(tili the date of financialstatements approval)

At the time in which payments ofAt the time in which payments of

dividends are approved in theirdividends are approved in their

Other investments in shares annual genera) meetingsannual general meetings

(AGM's).(tililhe Balance sheet(AGM's).(tili the Balance sheet date)

date)

16

)

Tadvin& co./~

Middle East BankfPJSC)Notes to the financial statements


7-2- Tangible fixed assets

7-2-1- Tangible fixed assets, except land are stated at purchase cost. Major repairs and renovations which extend theuseful life of assets are capitalized whereas minor repairs are charged to the profit and loss account as incurred.

7-2-2- Depreciation of fixed assets is calculated based on section 151 of Iranian Direct Taxation Act of 1988 as amended (theTax Act) as follows:

AssetDepreciation Basis

Rate

Buildings 7% Reducing balance

Installations . 7% Reducing balance

Office furniture 10 years Straight line

Computer hardware 3&JOyears Straight line

Motor vehicles 25%&35% Reducingbalance

7-2-3- Fixed assets acquired during a month and put to use are depreciated starting the first date of following month. Assets notutilized immediately when ready to use, are depreciated at 30% of the above rates for the period they have been idle.

7.3 Intangible assets

Intangible assets except for goodwill are recorded at cost. No depreciation is provided for goodwill, the impairment test isdone at year end if needed. Computer software are depreciated on straight line basis.

7-4- Loan's interest, fee and penalty revenue recognitionAccording to eBl's monetary and banking regulations, recognition of loan's interest is based on accrual basis. Based onthese regulations, interest income for doubtful loans has to be taken into account on cash basis. Accordingly, the bank'srevenue recognition is as follows:

17

Tadvin & CO. /~-----



Loan's interest. fee and penalty,InterestCurrent loansPast due loansOutstanding and Doubtful debt

Penalty(Loan's rate)Current loansPast due loansOutstanding and Doubtful debt

Pcnalty(Over loan's rate)

Fee

Guarantee issuance

Other services

Revenue recognition

Accrual basisAccrual basisAccrual basis

Accrual basisAccrual basisCash basis

Cash basis

At the time of issuing guaranteewCashbasis

At the time ofperfofming services-Cashbasis

7-Sw According to Usury-Free Banking Law approved on 30 Aug. 1983 and its instructions and according to Cl3l regulations,mutual income, usage of mutual sources and dcpositors' share of mutual income arc calculated and its results are reported inthe statement of investmcnt deposits performance.

IS



7 -6- Classification of loans

Loans are classified in accordance with the eBl's regulations and based on time as below, customers'financial states and their industry and business. The classification of loan portfolio is as follows:

Classification

CurrentPast due

Outstanding

Doubtful

Principal & interest(PI) outstanding in

monthsPI<22<PI<6

6<PI<18

PI> 18

* Management has not applied any judgments over the CBl's regulations.

7 -7 - Provision for bad and doubtful loansProvisions for bad and doubtful debts are provided in accordance with the CBI's regulations as follows:

1- General provision- amounting to 1.5% of the total loan portfolio.

2- Specific provision- depending on the classification of the non-performing loans, the Bank isrequired to provide specific provisions, after allowing for the value of collaterals based III

below table:

Classification

Past due loansOutstandingDoubtful debt

Specific percentage

10%20%

50-100%

3- For loans that payment of its principal and interest are deferred more than 5 years, specific

provision is taken into account equal to IOO%(without allowing for collaterals' value).

Management has not applied any judgments over the CBI regulations.

19

Middle East Bank(PJSqNotes to the financial statements


7-8- Termination benefits

Staff termination benefits are provided at the rate of one month salary and other remunerations for each year of service.

7-9- Defined contribution plans

The employees are covered by social security fund so no defined contribution plans provision has taken in to account.

7-10- Foreign Currencies

Monetary assets and liabilities are converted at the official exchange rates, advised by the CBl, on a daily basis andexchange differences, if any, are provided in the accounts. Non-monetary assets and liabilities are recorded at thehistorical exchange rates prevailing at the time of recording transactions in the accounts.

8- "Others" in NotesThe "Others" in notes are insignificant and are less than 10% of the relevant Note's tolal balance.

20

Middle East Bank{p.ISClNotes to the financial stalements

For the six months financial period ended 21 September 2016Inlerim finnncial reporl

9- CB~hConsol ida frd.R rc In ssi Ii rd

Cash in hand.LCYCash in hand. FCYUnrestricted balances with CBIUnrestricted balances with other banks

9-39-4

~_21 Sept. 2016 .'lRR million

79,924184,467 .1,267 ~98,314' :363.972 t

19 Mar. 2016lRR million

89,456125,42966,13462,861343,880

IlareDt Co. -RethlSSifiedI 21 Sept. 2016 19.1\1ar.2016

II IRR million IRR million

79,586 ' 88,090148,335 I 125,429

I, 1,267, 66,1341 63,338 ' 38,841\ 292.526 . 318.494

9-1- Cash in hand in the Bank's branches is insured agninslthcft and fire.

9-2- Cash in hand-FCY included $ 2,576,370, € 1,766,710, CNY .1,000, AED 676,21 5,lNR 1,000 and TRY 1,000.

Consolidated19 Mar. 2016IRR million

66,134

9.3. Unrestricted balances with CBI

Unrestricted cum:nt deposits with CBI.LeVUnrestricted current deposits with CBI.FCY

121 S'pt, 2016

IIRR million, I

1,267i- ,------

1;267 I 66,134

Parent Co.21 Stpl. 2016 19 Mlle. 2016lRR million: IRR million

1,267! 66,1341 -

____ 1"",2••6=7,', 66.134

30,3627,57562,861

PartDt Co. -I{trlllssilitd9-4. Unrestricted balances with other banks

Unrestricted current deposits with other local banks.LCYUnrestricted current deposits with other local banks-FeyUnrestricted term deposits with other local banks.LCYUnrestricted current deposits with foreign banks. Fey

CODsolid aled- Ret lassifiedt 21 Sept. 2016 i 19 Mar. 2016IRR million I JRR million

18,096 , 24,924174 i

64,701 :15,343 ~98.314 _I

; 21 Srpt. 2016 i

, IRR million iI 3,~23 i44,372 :15,34363,338 1

19 Mllr. 2016IRR million

904

30,3627,57538,841

9-5- Restricted balances nrc classified in due from banks and financial institutions note.

21

Middle East Bank(P,JSClNotes to the finantial statemenls

For the six monlhs finaneinl period ended 21 September 2016Interim financial report

J 0- Due from banks Hnd credit institutions Consol id a ted-Rec!assi fied Par('ot Co .• '~('c1nssifi('d

Consolidn t('d. R('c111ssified

Due from cmDue from other banksTotal

10-'- Unrestricted balances are classified as cnsh.

10-2- Due from cm

Restricted current deposits with CBI.LCYRestricted current deposits with CBI.FCY

10-2-10-3

10-2-1

2. Sept. 2016lRR million I

406,18915,340,93815,747,127 ,

21 Sept. 2016 I

lRR million ~406,000 ,

1891406,1891

19 Mar. 2016IRR million

1.050.1831.108,3032.158,486

19 Mar, 2016IRR million

1,050,000183

1,050.183

2. S('pt. 20.6 'IRR million

406,189 ,5.340.9385,747,127

Pn r('nt Co. ~'Rt'c1nssificdr 21 Sept. 2016' 19 Mar. 2016IRR million IRR million

406.000 ! 1,050.000____ 1_8_9_: 183

406.189; 1,050,183

10-2-1 Above balance is provided for buying foreign currencies for a leiter of credit.

10-3- Due from other banks Co 0501 id a tt'd-Rcclllssi fit'd l'llr('nt Co. ~Rcdassificd

Restricted current deposits with other local banks-FCYRestricted term deposits with other local banks-LCYRestricted current deposits with foreign banks-FCY 10-3.)Other banks checksDue from other banks due to PAY A transactions

21 Sept. 20J6 j

IRR mi,llion ~226,283 I

,3,260,000 II

1,851,484

3,171 15.340.938 '


306,880600,000166,669

6134,693

1.108.303

21 S('pt, 2016IRR million "

226,2833,260,0001,851,484 :

3,1715.340.938


319,472600,000166,669

6134.693

1.120.895

10-3-1 Current deposits with foreign banks-Fey included € 16.6 M deposits from foreign investors and according to CIlI's regulation are exchanged infree euro rate in free market.

22

M;ddle East 8anklPJSClNotes to the financial statement.s

For the six months financial period ended 21 Sell. ember 2016

Interim financial report

11.1 - Classification of loans according to CBI's regulations is as below:

Parent Co.21 Sept. 2016

I Currenlloans Past due Outstandin J)oubtfulTotul

loans glaans debtIRR million IRR million IRR million IRR million IRRmillioll

Joalch 10,447 10,447

Mozarcbch 2,241,175 627,445 67,504 2,936,124

Moshnrekat Madani (civil partnership contract; 23,504,697 1,711,977 905,027 170,732 26,292,433I

Foreign currency facilities I 22,649,709 22,649,709I

Debtors for paid Lies1

235,503 235,503

Debtors for paid guarantees 1 25,505 95,029 120,534I

Debtors for paid credit cards 1 373 373,48,667,409 2,339,422 972,531 265,761 52,245,123

Less

Future interests (3,883,044) (3,883,044)

Deferred fcc and interest (128,159) (52,255) (8,999) (189,413)

Mozurebch received fund (5,648) (5,648)

Mosharckat Madani received fund (206,057) (206,057)

Net loans before provision for bad and;I 44,572,660 2,211,263 920,276 256,762 47,960,961

doubtful debt I

General provision for bad and Doubtful debt (443,353) (468) (93) (443,914)

Specific provision for bad and Doubtful debt (104,847) (140,153) (99,813) (344,813)

44,129,307 2,105,948 780,123 156,856 47,172,234

As subsidiaries loan balance is not significant, consolidatcd notc has not been presentcd in this part. The intragroup loans has bccn prescntedin nole 11-8.

24

• Middle EAH RankCPJSq

Notc!! to the finAnciAl statements

for the dx month~ finrlndAI period ended 21 September 2016

Interim finAncial [(:pori

11.2- Provision for bad nnd doubtful debts is os below:

PllrentCo.21 SepL 2016 19 Mar, ZOl6

Gmeral SpecificTotllll

Genernl SilecificTotAl

prm'ision prol'i!ion proli!inn Ilrol'isionIRR million IRR million IRRmillion j IRRmillion IRR million JRR million

Opening balllncc 424,101 126,623 550,724 ' 325,211 22,260 347,471Pro\'ision during lhe period 19.813 218,190 238,003 I 98,890 104,363 203,253Closing balaAcc 443.914 344,813 788,727 424 101 126,623 550.724

As subsidiaries 10M balance is nOIsignific:mt, consolidated notc hIlSnot been presented in lhis Pll~, TIle intragroup lom15litis been prescner:d in nOle 11.8.

11-). Foreign currency facilities

Doubtfuldebt

IRR mi11ionInlernnl resourcesCBI's resourcesNational de\'dopmen. fund

Currentloans

IRR million1,355,1761,581.430

16,021.94618.9~8,~5Z

1'1151due10llns

IRR million

Con!olidllted and Parent Co,21 SepL 2016OutstandinlZ

loansIRR million

Total

IRRmillion :1,355,176 I1,581,430 .

16,021.94618,958,5~Z

19 ;\1nr. 2016

Totol

IRR million731.212395.738

1 126.950

11-4- Clnssificnlion oflonns nccording to its mllturily and interest mle is os below:PArent Co.

ZI Sept, 2016

(h'er 24% 21-Z4% IS-ZI°/. 15-18% 12.1~% 12% and Ins

IRR million IRR million IRR million lRRmillion JRR million IRR million

21 Sept. 2016 nnd heron: 4,543,622 730,640 12,446 80,5512017 9,291,053 4,528,433 7.539.115 708,057 2,021,3612018 246 568,25 I2019 179 308 2,2962020 lind aner 312 186 17,145,133

13,834,680 5,259,671 8.120,177 788.608 308 19,168,790

19 Mar. 2016 23.859.215 1,848,359 500,513 410,119 384 1.473,030

Tolal

IRRmillion5,367,259 I

24,088,019 '568,497 :

2,788 .17,145,67147,172,23428,091,620

19 Mor. 2016

1'0101

IRRmillion27,253,994

105.291349

731.596390

28.091,620

As subsidiaries loan balance is not significDnl, consolidllted note hilSnOIbeen presenled in this port. The intmgroup IOMs hIlSbeen presentr:d in note 11.8.

II.S- Clnssilicntion oflollns according 10 its col1nlemls is ns below:I'lIrt'fllCo,

DepositsPnnicipnlioA bonds nnd sloct.:sStnnd-Illone legolly binding contrllctLond, building Dnd equipmentChecks lind promissory notes

tZl S•.•pt.2016:j IRR million I

I, 176,839 I190,201

I 27,530,169:i 12,621,870 I

I 6.653. ISS II 47,172.234 I

15

19 Mar, ZOl6IRRmiliion

214,525331,089

7,03',91612,459,6318048.459

28091 620

As $ubsidiuncs Iron bnhmcc is nol significant, consolidated note has no! hccn prcs('ntcd in this part. The imrngroup loans has been presented in nole 11-8.

26

Middle East 8ankfP.ISq

Notes to the finucial slstttments

for.he six months financial period ended 21 Stpttmbfr2016

Inttrim finstndtl rtnort

11-6-1- Loans' interest and penalty movement

.Partnt Co

MMhnn:kDt.'o",ignMadlml (civil Dtblors (or

Joaleb MOl.l1rebthpartnership Monbthe currenq' paid UCs(contntcts

facilities

IRRmillion IRRmillion IRR million IRRmillion IRR million IRRmillion

Lonn~' interest

Debtors forpaid

guarantttS

IRR million

Uebton forpaid crrdilcards

IRR million

Total

IRR million

Balance at 19 Mar. 2016

Increase during the year

Decrease during lhc year

Balance at 21 Sept. 2016

Lonns' penllllt)-.

Balance al 19 Mar. 2016

Increase during the year

Decrease during the year

Balance al21 sept. 2016

Lo21n~'inten:sl and penalt)-'

73.161 689.163 12,522

256.790 2,441.272 30.953

(231.026) (2.344.915) (13.691)

98.925 785,520 29.784

3.017 143,187 l7J

2 73,458 392,937 56 4.880 43,657 12

(2) (10,977) (244,))3) (56) (3,562) (39,791) (II)

65,498 292,010 1,318 4.439

774.846

2.729,015

(2.589.632)

914,229 .

,

146.777 !515,002 !(298,512)

363.266

Balllnce al19 Mu. 2016


76,178

164,423

832.350

1,077,530

12.522

29,784 1.318

573

4,439

921,623

1.277.495 ,

.As subsidiaries loan balance is not significant. consolidated note has not been presented in this part. The intragroup loans has been presented in notc 11-8

27

Middle East Bank(P.JSC)Notes to the financial statements

For the six months financial period ended 21 September2016Interim financial report

11.7. Classification of loans according to types of customerParent Co.

21 Sept. 2016 19 Mar. 2016Provision for Provision for

IGross balance bad and Net balance Gross balance bad and Net balancedoubtful loans doubtful loans

r IRR million IRR million IRR million IRR million IRR million IRR million

Natural persons 2,928,360 (66,486) 2,861,874 2,946,5 I7 (52,453) 2,894,064

Corporate customers 45,032,601 (722,24 I) 44,310,360 , 25,695,830 (498,274) 25,197,556

47,960,961 (788,727) 47,172,234 . 28,642,347 (550,727) 28,091,620

As subsidiaries loan balance is not significant, consolidated note has not been presented in this part. The intragroup loans has been presented innote 11-8.

11-8- Loans to subsidiaries ,--~--- '-.- .. -21 Sept. 2016 19 Mar. 2016

Provision for badInterest rate Current Non-performing and doublful Total Total

loans

% IRR million IRR million IRR million IRR million IRR million

Consolidated subsidiaries

Middle East Bank Brokerage Co. 15& 24 97,360 (1,460) 95,900 99,417

28

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<»0,

Tst •••••~,

JItm~"""""'*'"1I'm<ian~"nJ1~1Iran Cbnniad lldwln

Kha,~~Middle Eul RoIl1;Mun.1 tIJnds

MlUlIbnll ••n

I'1nionGulrf'l,t,~llndum;e•...-....,-ErI<t>ow50yar

K.rdln E<p1y F'tmdElT

MitJr,o....tMolal. ""'dopnmllmnrmml~nC...-Iron Kh<d'o l",mlllC<ll ""'\'I.,mmtYlJroml!TF

"" •.•.,M>tt>rItclISred

2."~1.21~

,.oJ(!

m .'16

:.192I,cU

"'"1"2.

""""

---- ----------)9.," 11,l1~' •••••:!'! 21••:1'1

~76l1 »<I_I\IfI 6J7,tm 'lloSlll

~----~---~~~~

9Z1..1n

':O,Ollll

'JOl.n7

,~'"721,mtl

'"''''

""''''"":.1181;1.

""

2.l,o.t2

~.610

'''''''''1.751

"W

IJ9:! ,

''''2.m:1,181"

I.D9J',,~2"17 }16--- -----------~~~~,,".I~~~~

~---~---~~~~

-m.mJl'\I,OlllI

901_731

,~'"m••,w••

OTC~,

7•••• l'ouniKmbl

Khof._~,,'<f>cmiaol

Tc!Ir ••• Oil Refinery

Middle H.II Mine! and M<ni~ ~ 0<

All-on Elm In,_

1.al-.n0i11lcfl •••• )

<>~

,

12-2. Investment in unlisted shares

Middle En~1 8nnkfP,ISClNote, lolbe finandAI !lnl('ment~

for the ~ix monlh~ finnndni prrjod endrd 21 Sentember 2016Interim finnvrinl [('oprt

Con~olidllled21 St!pt. 2016 191\1nr.2016

P~n:~nlng~I No. orshn~ - of

in,'~fmenl~C~I

Ac:c:umulnledd~c:r~nse in nook "llu~'lllu~

Kardan Investment BankMiddle East life Insumnce Co,Olhers

12.2.1

%658.333,000 32.9

: 240,400,000 20

I'--~--~~-----

IRR million524,844120,2004,230

649,274

IRR million IRR million524.844120.2004,230

649,274

IRR million444.577120.2004.230

569,007

Porcnl Co.21 S~III. 2016 19 Mnr. 2016

Percentnge Acc:umulntC'd! No. of ~hnrn or eMl dcc:r("nse in Book ,'nlue nook \'nlut'

in\'tstmenlS ,'nlu~% IRR million IRRllIiIlion IRR million IRRmillioli

Kardan Invcstment Bank 12.2.2 658.333.000 32.9 421.333 421,333 421,332

Middle East Bank Brokemge Co, 74,999,900 15 89.904 89,904 67.404

Dadeh Pardazane Simaye ARab Co. 12.2.3 l 30,000,000 100 10,500 10,500 10.500Middle Enst Bank Currency Exchange Co, 37,999,800 ., )8,000 38,000 38,000

Middle East Life Insumnce Co. 12.24 240,000,000 20 120.000 120,000 120,000679,737 679,737 657.236

12.2.1.The underwriting of Middle Enst Life Insumnce Co. has been completed in March of2016 and the Founders' Assembly has been held in August of2016. Receiving licenses from Centmllnsumnce oflsillmic Republic of Imn and Tehmn Stock Exchange are currently in progress.

12.2.2. At the b:lIance sheet dale 64% of in,'estmcnt in Kordan Investment Bank Co. has been paid.

12.2.3.A1 the balance shect date 35% of investment in Dadeh Pard:l7lln Simaye AOab Co. has been [l<1id.

I 2.2-4. At the balance sheet date 50% of investment in Middle Ens1 Life Insumncc Co. has been pnid.

30



12~3. Investment in securities with fixed income is as follows:

Issuer NoteConsolidated and Parent Co.

Type Interest income 21 Sept. 2016% IRRmillion


GovernmentalMinistry of Economic Affairs and FinanceMinistry of Roads and City PlanningConstruction & Development of Transportation InfrastructureIran National Oil Company 12-3-1Ministry of Economic Affairs and Finance ]2-3-2Other bonds with us

Participation BondParticipation BondParticipation BondParticipation BondIslamic t~easury bonds

18&20&21202021

923,129470,000435,000 '292,736 '2,026,742 •(882,380)

352,038170,000435,000291,3001,165,818(882,380)

Non-governmentalMiddle East Bank Ofogh mutual fundKardan mutual fundYekom Iranian mutual fundHami fixed income fundAmin Melat mutual fund

12-3-312-3-312-3-3

12-3-3

Investment unitsInvestment unitsInvestment units

17

19

20

207,255

985,59299,997300,064

4,858,135

57,037700,000191,040

2,479,853

12.3.].Nationallranian OJ] Company bonds(Face value IRR 300,000M) is issued in discount and its maturity date is on March 16,2019. Thedifference between market value and face value(IRR 7.264M) is amortized under the effective interest rate method.

]2-3-2-lslamic treasury bonds are zero-coupon bonds published by Ministry of Economic Affairs and Finance on behalf of the government.12-3-3- Interest rates in the table above are the rates that has guaranteed by mUlual funds.

13- Due from subsidiaries and associatesPllrcnt Co.

SubsidiariesAssociates

Consolidated21 Sept. 2016' 19 Mar. 2016IRR million' IRR million

. 167,~75l 183,157167.875 I 183,157

31

21 Sept. 2016IRRmillion

351,265167,874519.139


93,504183,157276,661

Middle East B.nk(PJSqNotes to the financial statements

For the six months financial period ended 21 September 2016Interim financial rcport

13-1. Due from subsidiaries and associates according to intergroup transactions is as follows:

Name of compau)'

Kardan Investment Bank

.Middle East Bank Brokerage Co.

Middle East Lire Insurance Co.

Middle East Bank Currency Exchange Co.

Dadeh Parda7.an Simaye Aftab Co.

Net Income

Name of company

Kardan Investment Bank

Middle East Bank Brokerage Co.

Middle East Life Insurance Co.

Middle East Bank CUITCncy Exchange Co.

Dadeh Parda7.an Simayc Aftab Co.

Parent Co.19 Mar. 2016

Sales of assets Purchase ofPurchase Dividends Dividends

and assets andof services

Prepaymentsreceivable payable

Other Totalin\'cstmepts investmentsIRR million lRRmillion IRR million IRRmillion IRRmiliion IRRmillion IRRmillion IRRmillion

167,875 167,875

15,000 232 15,232

15,282 15,282

16,625 359 16,984

60.429 859 61,288

75,711 199,SOO 1,450 276,661

Net Income

32

Middl£ Enst BonktPJSC)Notr:- to Ihr financinl statements

For thr six months Onancial nuiod ended 21 S£ntemb£r 2016Interim fintlOrial report

14- Other Rccounts recrh.'nbleConsotldatt'd

DividendsParticipation bonds interestStafTloanDebtors

14.1l

14.2114.3r

21 Sept. 2016IRRmillion

68,615100,892 !252,967221,700 .644,174

19 Mnr. 2016IRRmillion

45,9109,738

249,043757,2531,061,944

Parcnl Co .. 21 Sept. 2016 19 Mnr. 2016IRRmillion IRRmillion

68,615 45,910100,892 9,738252,967 249,043

__ ~92~,~37~0_ 585,436514,844 890.127

14-J~ Dividends receivable (except dividends from subsidiaries and associate) are as follows:Consolldaft'd and Parenl Co.

TSE and OTC com panic. ••Pension fundJam PetrochemicalImn Chemical IndustriesNational Development Investment GroupKhark Petrochem icalMokhabemtEnebatat SayarMazandamn CementIran TractorMiddle East Bank mutual fundGol GoharZagros PetrochemicalMines and Metals DevelopmentOthers

,21 Sept, 2016IRR million

15,695 i11,365 I

6,670 !

',737 I4064'

, I3,8'3 ,2,9'812,464 i2,275 :2,1351,900 :1,633 .1,0346,83268,615 '

19 Mar. 2016IRRmillion

15,695

6.6707.518

1,718

2,3391,320

3,1027.54845.910

14-2- In order to compensate the efTons of the Banks founders for the banking license receipt. create incentives and align theinterest of senior management with the bank's, the Founders' committee has agreed on financing resources for partinlpurchasing of the bank's shares. This amount is repaid from the loons which are allocated to them against the shares ascollateruls. The shares were mostly in the name of founders and the related debts is 96 billion IRR at the balance sheetriAl!".

14-3- Temporary debtors arc as follow:ConsolidAIl'd

; 21 Sept, 2016 19 Mllr. 2016IRR million IRRmillion

____ ',_"_'_: 506

Parent Co.; 21 Sept. 2016 19Mnr. 201(,IRRmillion IRRmillion

____ ',_"_'_ '06Related to loansLoans related costsNOI related to loansStatutory deposit interest receivableEmployee bonusesGuaruntee fees liquidity fundsAccrual interest from interbank mnrketBehdnsh ChemicalNavdis Rah Co.Participation bond's discount feeTamin Atiyeh khavanninneh Co.Pre-paid for purchasing goods and servicesImn Water and Power EngineeringHenkelKavoshgaran Etminan NazcrRahsa Bridge Dnd building Co.Samand investment Co.ImqomeeNia ventilation Co.Shine Technology Co.Kahrobn Gostnr Aria Co.Atlas Tcck Co. IClient's cash in Middle East Bnnk Brokernge C~Others [

18,594 i

18,500 I5,6115,4645,069 '4,i06l3,198 !2,8182,633 L

2,2672,1961,840140

,

I106,516,41,633 ~121,700 ;

6,477668

7,08669

4,9152,41322,138

2,0543,595

512,9506,1922,1632,1241,7891,098

164,02716,989757,253

18,59418,5005,6115,4645,0694,1063,1982,8182,6332,2672,1961,840140

18,81992,370

6,477668

7,08669

4.9152,41322,138

2.0543,595

512,9506,1922,1632,1241,7891,098

9.199585,436

33

Middlt EllSt Bllnk(PJSqNotes to lht financillJ staltments

For tht six months finnncial ptriod ended 21 Sepltmber 2016Inltrim financial report

continurd Parent Co,

Motor OfficeImpro\'emen

Project in CaptJ.La.d Buildings Installations Equipment U oflea!le Total,'chides rumiturt progress prcpa)'menb

proptr1)'

IRRmilJion IRR million IRRmillion IRRmillion IRRmillion IRRmillion IRRmillion IRR million IRRmillion IRRmillion

CostBalanct al21l\1ar. 2015 523,431 328,053 8,943 62,813 6,367 61,951 19,833 412,409 723,543 2,147,343

Additions 33,041 1,479 19.509 28.982 29,078 134 112,223

Increase (decrease) fromre"nluationDisposalsAdjustments 200.000 476,926 37,433 (211,834) (693,727) (191,202)Balancc at 19 Mar. 2016 723,431 804,979 46,376 95.854 7.846 81,460 48.815 229,653 29.950 2,068,364

Additions 2.289 2,192 4,300 12.669 133,023 154,473Increase (decrease) fromrevaluationDisposalsAdjustments 47,198 12.606 1,539 7,402 (52,033) (29,950) (13,238)Balance .•121 Sept. 2016 770.629 817.585 47,915 98.143 10,038 85,760 56,217 190,289 133.023 2,209,599

Aecumub.tNl dt"nr«iJltion Rnd attumulalrd dtcrt1lse in ,"'alue

Balance at 21 Mar. 2015D 26,589 618 19,452 1,296 7,191 9,822DO 64.968

Depreciation and decrease in50,076 4.055 19,862 1,519 6,996 14.417 96,925

value for the yearDisposalsAdjustments

Balanctat 19l\far, 2016 76,665 4.673 39,.)14 2.815 14,187 24,239 161,893

Additions D 26,074 2.186 11,494 874 4.300 6.938DO 51.866

DisposalsAdjustments

Balance at 21 Sept. 2016 102.739 6.859 50.808 3,689 18.487 31,177 213,759

Rook ,'ahu~Balanet at 21 Mar. 2015 523,431 301.464 8,325 43.361 5,071 54,760 JO,OIl 412,409 723.543 2.082,.)75

Balance at 19 Mar. 2016 723.431 728,314 41.703 56,540 5.031 67,273 24.576 229,653 29,950 1,906,471

BJilancc at 21 Stopt. 2016 770.629 714.846 41,056 47,.)35 6,349 67.273 25,040 190.289 133,023 1,995,840

15-1- The major increase in hllldand buildings(IRR 47.195M and IRR 3A02M) is rdmed 10 the recognition of the c:osIfor ~ building nexllo the he&domee loc:atedin Buelwesl street.

15-2. The ITlCmIsc in a!pex prepeymenls(IRR133.0231'01) is related 10 the parrillipayment for purdwing Afu!b building lI«Ording 10 the agreement in Mey 2. 2016 and the re$l(IRR 14.750M) win be pllid •..•ith transfer of o•..•.ners

15.3- The balmltt of project in progns is related 10 Elclliyeh building expenditurcs .ConSlruclionoflhis building is oomplc:tedand the necCUllJ)'steps 10 ob!llin the omifiCllleof oomplc:tionlife in prog=

1$-4- Fi"ed assm(IRR 6OO.3M)life insured ftgllinstpolential hazards ctllsed by fire, flood lind earthquake.

3S

Middle Enst IInnkfPJSqNotes on the financial statements


16- Intangible assetsConsolidated

Cood will SoftwareSoftware Right to usc Total

development puhlic scn'iccsIRRmillion IRRmillion IRRmillion IRRmillion IRR million

~Balance al21 Mar. 2015 493,485 8,012 166,061 2.691 670.249Additions 3,367 4,287 7,654Internal development 38,553 38,553

Increase (decrease) from revaluationDisposals (2) (2)Adjustments 180.000 199.862 (199,862) 180.000Balance at 19 Mar. 2016 673,485 211,241 4,752 6,976 896,454Additions 103 7 110Intcmnl development 7,623 7.623

Incrense (decrease) from revaluationDisposalsAdjustments 11,305 1,024 (1.024) 827 12,132n"lancc at 21 Sept. 2016 684,790 219,991 3,728 7,810 916,319

Accumulated amortization and accumulated decrease in \'aluc

Bahmer lit 21 Mar. 20t5 2,835 2.835Amorti7.ation for the year 34,782 34.782Value decrease lossDisposalsAdjustmentsBalance at 19 Mar. 2016 37,617 37,617Additions 24,965 C 24,965Value decrease lossDisposalsAdjustmentsBl\htnce nl21 Sept 2016 62,582 62,582

Book ,'alncUalancc at 21 Mar. 2015 493,485 5,177 166,061 2,691 667,414Ualance al 19 Mar, 2016 673,485 __ 173,624 4,752 6,976 858,837-Balance at 21 Sept 2016 684,790 ______ 157,4q9 3,728 7,810 853,737

36

,

Middle East BanklPJSqNotes on the financial statements


continuedParent Co.

Good will SoftwareSoftware Righi to use Total

development public servicesIRR million JRR million IRRmillion JRR million IRR million

QWBalance al 21 Mar. 20t5 493,485 5,697 166,061 2,663 667,906Additions 3,124 4,265 7,389Internal development 38,554 38,554Increase (decrease) from revaluation

DisposalsAdjustments 180,000 199,862 (199,862) 180.000Galnner at 19 Mar. 2016 673,485 208,683 4,753 6,928 893,849AdditionsInlemal development 7,624 7,624Increase (decrease) from revaluation

DisposalsAdjustments 11.305 1,024 (1,024) 827 12,132Balanu: at 21 Sept. 2016 684,790 217,331 3,729 7,755 913,605

IA('('unmlated amorti7.nfion and RC('lImulRied decreAse in valuelJalance al21 Mar. 2015 2,515 2,515Amortization for the yc.'lr 34,096 34,096Value decrease lossDisposalsAdjustments8alanct at 19 Mar. 2016 36,611 36,611Addilions 24,765 D 24,765Value decrease lossDisposalsAdjustments8alanct al21 Scpt.2016 61,376 61.376

nook \'alurDalnnf(" at 21 Mar. 20]5 493,485 3,182 166,061 2,663 66:;,391nalnncr at 19 Mar. 2016 673,485 172,072 .. 4,753 6,928 857,23MBalnncr at 21 S("pt. 2016 ~~ .. 684,790~ .~ . --'1'55,955 3,729 7,??~ 852,229L___ ~________________________

37

17. Statutory deposit

,Statutory deposit

Middle East Bank(P.JSClNotes on the financial statements

for the six months financial period ended 21 Sentember 2016Interim financial report

Consolidated and Parent Co.,21Sept. 2.016 19 Mar, 2.016

"

IRR ~iIlion"1 lRR million4,183,171 I 3,.099,233

17-1. Stntutory deposit has been deposited with CBI in accordance with paragraph 3 of Article J~of banking and monetary law.

18- Other assets Consolidated Parent Co.

,21 Sept. 2.016 19 Mar. 2.016 21 Sept. 2.016 19 Mar. 2.016IRRmillion I lRRmillion t lRR million ': IRR million

Term letters of credit debtors.LCY 18-1 . 37.0,1.0.0 I 2.837 • 37.0.1.0.0 , 2,837TCnTI letters of credit debtors-Fey IS-1 I 7.02,925 i.7.02.925 • •Non-operational lands and estates IS-2 , 9.6.oS') 9,5.06 I 9.6DS ' 9,5.06Rental deposits 1.02,4751 1.0.0,.0.0.0 101.475 i 99 •.0.0.0Consumablcs 2,4.01 J 1.6.01 2.4.01 : 1,6.01Tax stamps 395 I 47.0 395i 47.0Project in progress 18-3 74,2151 74.161 IAcquisition Goodwill(Net) 5.984 i 6,165 iOthers(4 items) 6.134 6,914 4,7571 4.S.o7

; . 1.274.237 , 201,654 1,191,661 J 118,221

18-1- Leners of credit debtors maturity is up to sis months in accordance \\;Ih CBl's regulations.

38

Tadvin&C~-_.

Middle East Bank(PJSC)Notes on the financial statements


18-2- Non-operational lands and estates

Balance at 20 Mar. 2016

Additions

Disposals

Accumulated decrease in value

Accumulated depreciation


r if Sepi: 20i61IRR million. I

11,202 ;

~47111,649 j

1(2,041 )

9,608 :

18M2-1- Real estates not related to Bank's activities in accordance with the articles of association are not classified in tangiblefixed assets' note and are presented in this section. This assets are calculated in Bank's fixed assets limit.

18-2-2- Rent income of these assets amounted to 2,400 lRR million has been presented in note 38.

18-3- The balance of project in progress of 74,215 IRR million is related to the cost of the core banking software in DSAaccounts and all direct and indirect costs including the management of executing the contract, gathering and analyzingthe bank's executive needs, localizing and implementing costs are recorded in project in progress account.

39

Middle East BankIPJSqNotes on the financinl statements

For the six months financial period cnded 21 September 2016Interim finnnciAI report

19- Due to banks and credit institutions Consolidated Parent Co.

;21 Sept. 2016 19 Ma •. 2016 21 Sept. 2016 19 M••. 2016i lRRmillion IRRmillion IRR million IRRmi1lion

Due to the Central bank of Iran ICurrent deposit-Fey 248,495 i 248,495 'Tcnn dcposit4FCY 1,598,287 400,526 1,598,287 400,526Due for purchasing foreign currency 19-1 I 321,993 . 1,693 321,993 1,693Due for overdraft penally 59 59

2.168.775: 402.278 2.168.775 402.278Due to other hanks I

Current deposits-Fey I 879 i 17.712 879 : 17,712Other bank's cheque ' 83,5951 83,595 :Others 16,815 I 49,047 16.814 49.047

101,289 I 66.759 101.288 66,7592.270.064 I 469.037 2.270.063 ' 469.037

19-~- Due for purchasing foreign currcncy(lRR 321.993M) is mostly because of purchase of cllrrencies • including EUR2,902,590 and $ 4,502,0000 in the last week of September and is settled until the financial statement approval date .

• Other banks investment deposits (IRR and other currencies) arc classified in Interest and benefits of investment depositholders based on their maturities as well as other investment deposits.

40

Middle Enst Bank(P,JSClNoles on the financial statements

}~orthe six months financial period ended 21 Septemher 2016Interim financial report

Consolidated21 Sept.2016: 19 MAr. 2016

\ IRR ~illion II IRR million

20-1 l 417,542 363,72420-2 I 6,502 i 4,44120-3 .1 2_,5_1_6_' 173.076

426.560 ; 541,241------

.'nrent Co.20- Customer current deposits

Natural personsCurrent depositsSaving depositsOthers

Corporate customersCurrent depositsSaving depositsOthers

20-1 i20-2 .20-3:

4.474,10' ;100,121 :

1.832.811 .6,407.0396.833.S99 :

3,070.66322.346

1,628.3114.721.3205,262.561

21 Sept 2016IRR million

417,542 •6,502 i

2,516 I

426.560 ;

4,489.216 I

102,9211.833,249 .6,425.3866,851.946


363,7244.441

173,076541.241

3.103.27148.907

1,628,6124,780.7905,322.031

Consolidated20.1- Current deposits

Current deposits-LCYOank chequesRemittance-FeyOthers-LCY

20-2- Saving deposits

2lSept.2016 IIRRmillion ,

3,407,154 I159,517

1,317,850 !'.128 ~

4.89] .649 ~

19 MAr. 2016IRR million

3,200,100108,272118,1697,846

3.434.387

Parent Co.2] Sept. 2016! 19 Mllr, 201(,

IRR million IRR million3.422,263 I 3,232,708159,517: 108.272

1,317,850: 118.169____ 7~,1_2_8_~ 7.846

4,906,758 : 3,466.995

Consolidnted Parent Co.

Saving deposits-FCY

21 Sept 2016 'IRR million

106,623

41

19 MAr. 2016IRR million

26.787

21 Sept 2016IRR million

109.423


53.348

20-3- Other deposits

Middle East BankCP,JSq

Notes on the financial statements

For the six montlis financial period ended 21 Sentember 2016Interim financial report

Consolidated Parent Co,

Guarantee issuing deposits -LCY

Gl13Umtee issuing deposits -FCY

Prepayments for LCs-LCY

Prepayments for Les-FCY

Total

21 Sept, 2016IRR million

1,471,30~ i28,893 "21.062 ;'314,067 i.

1,835,327 !

19 Mar. 2016IRRmillionJ,330,814

14,137

179,0]9

277,397

1,801,387

21 Seld. 2016IRRlllillion

1,471,743

28,893 121,0621314,067

1,835,765 '

19 Mar. 2016IRRmiliion1.331,115

14,137

179,039

277,397

1,80 I ,688

21- Dividends payableConsolidated and Parent Co.

Dividend Balance at 19 Paid dividend written-off byCapital increase Balance at 21

Dividend from dividendper share Mar. 2016 during the period staffloans receivables Sept. 2016

IRR IRRmillion IRR million IRR million IRRmillion IRRmillion IRR million

Year ended 20 March 2013 85 340,000 487 (14) 473

Year ended 20 March 2014 ISO 600,000 1,469 (18) I,4S I

Year ended 20 March 201 5 160 640,000 2,762 (78) 2,684

Year ended 19 March 2014 250 1.000,000 (53,600) (30,301) (252,329) 663,770

Total 4,7t8 (53,710) (30,301) (252,329) 668,378

42

!\fjdtl1r Ens! BnnldP.TsqNpt~ pn the finAnciA! ~tntement~

For th£ sb. months finAncill! MOpd r0tlN! 21 Sell'S'mber 2016Intr0m finllnciAI nm0rt

22- Income tn pro\;sion

Opening balanccProvision for the periodPrior years tnx adjustmentsPaid during the period

PrepaymentsOoslng b3lonct'

22.1. The 8Mk's tax position is as follows:

Consolidllted21 Sept, 2016,IRR million ~

144,914 :83,632 :27,324.!

(172.238);83,6J2 i(375)1

83.357 I

19 MilT: 2016IRRmillion

114,836145.88935.114

(122.626)173,213

(975)172.238

j 21 Sellt. 20!6 'IRRmillion

138,743 :78,743 :26,594 :

(165,337)!78,743 '(37S)~

78:368 '

I'nrent Co,19 Mnr. 2016IRR million

112,750139.71833,859

(120.015)166,312(975)

165337

Sept, 21,2016. !RR million i'oIar.201619

Fbcal Period Tn IRR millilln Melhod nftuse.\.~menlDnlll~profil TUIlbJc, ineo~ "ro,'hlon

Deelared AIIl!~sed Fioal Paidbnlnnce

PnwblGn bal.nrt'

20 Mnr, 2013 433,490 101,639 25,410 80.585 27,202 87,850 (60,648) (60,648) AS5esslm:nlof Booh

20 Mar, 2014 880,743 269,838 60,714' 134,825 147,955 147,955 87,242 Assessment of Books

20 Mar. 2015 961,266 563.750 112,750 331,144 112,750 Assessment of Books

19Mar, 2016 1,500,519 931.454 !39,7I8 79,070 60.648 139,718

2! Sept. 2016 874,738 393,712 78,743 78,743

78.743 166,312

Prepllyments (375) (975)

78:368 165,337

22.2- The Dallk income tnx for the 2013 fiscal year is final ond hos been settled,22.3. According to the filla! Dssessment for fiscal yearof2014 nnd lI11erthe revised decision of the tllXcommittee, the Bank has paid the t<l.'I(lISwell ns it has appealed to

Supreme tax Couneilllbout the c.1lculation of the tnxable income.22-4. B~k has made nil nppenl to issu,ing ~ ~sessment of2016 fiscal year to tnx commiuec. !RR 254.926M is nsscssed ns tllXfor 2016 finnndal yenr bytaK committee. B:mk appelll

lI8lt1QStasscs$lTlcmof tnx comml\lccs ISm progress,

"

Middle East Bank(PJSq

Notes on the financial statementsFor the six months financial period ended 21 September 2016


23- Other liabilities and accruals Consolidated Parent Co.

Debts for LCs-LCY 23-1Debls for LCs-FCY 23-1Payable fees and interestsSocial securityTaxProvision for staff leaveProvision for accrued expensesNational Jranian Oil Company-Bonds on creditContractors performance depositCustomers' prepayments for discount fee on bondsOthers

21 Sept. 2016IRR million

453,995750,0144,59623,5591,56910,2351,369

4,906133,69962,561

1,446,503


4,365

70824,8831,6108,51111,890262,1705,78948,89423,219392,039

21 Sept. 2016IRR million

453,995750,0144,59622,5851,26110,235

4,906133,69924.247

1,405,538


4.365

70824,113872

8,4348,222

262,1705,78948,89413,824377,391

23-1- Debts tor Les amounted to IRR 1,176 billion is related to the Les that their documents have been sent to the buyers and the Bnnk hns guaranteed thepayment in the maturity. Generally in the maturity date Bank will funding from the buyer and pays debts

44

Middle Eut Rl\nklP.JSq

Noleli on the finnndni IIlnlement!l

for the!!b month!! finAnciAl neriod endNI 2] Sentemher 20lG

!n!('rim finRnciRI report

24~ Sioff I~rminl'ltion benefitsConJolidalM PArent Co.

Opening balance

Paid during the yelIr

Provision for lhe year

Closing balance

25- Cuslomers innstmen! depollifJ

21 Sept. 2016t IRR million

37,423 ,

(817)116.665 I53,271

19 Mllr. 2016

IRR million

19.760(1,277)

18,940

37,423

: 21 Selll, 2016I 1RR million

31.462

<'99)13,725

44,588

19 1\1IIr,2016!RR million

17.073(1,126)

15,515

31,462

Long-lenn investment deposilSShort-teon in\'cstmcnl depositsShort-tenn specill1 investmenl depositsInterbnnk deposits

2S-[2S-125-125-\

ConsolidnlM Puren! Co.2) Sepl, 2016' 19 Mar. 2016 i 21 Sell I, 2016 ]9 Mllr. 2016

IRR million i IRR million IRRmillion IRR million33,977,995 13,400,359 33,977.995 13,400.359

15,371,876 i 14,483,752 14,569,915 12.974,926

102,160 ; 1,178,847 102,160 1.178,8471,152,000 , 86.811 2,250,000 1.540,000

50,604,031 29.149.769 ~0,900,O70 29.094,132

25-]~ Term investment deposits based on currency nre as follows:Con!lolidnlcd

25-1-1. According 10CBI's tegullliions. banks ore banned from 8ccepling leon deposils with more lhnn one yenr mnlurily. 111eamount oflerm deposits wilh more Ihnn 011year maturity is relined 10pre\'ious periods.

25-1-2- Three-year deposil-FCY(IRR 15.705 M- S SaOM) is used for lonns in note II-I.

"

Mlddls EnM Dnnk(P,'Sq

Nolf'S on thl:' financinl sllltrmsnis

for the six months finnncl!!1 p£rjod endsd 21 &n1embrr 2016

Intrrlm finnnd!!1 rl:n0rl

25,2- Tenn investmcOl dcposilS according 10 maturit)' nnd interest mleCon~o1idnttd

21 Sept. 2016

More Ihnn 19%..22%22%

IRR million IRRmillion

MaluTed 1,226,338201'.16 5,155,7462016-17 3.700 3,806,9982017.18 706,335 1,762,8762018.19 494,542 130,7152019.2020

1,204.577 12,082:67319Mar. 2016 1.325,192 16.013,703

Mort IhllJl 19"/.,.22%22%

: IRR million IRRmillion

Malllrtd i 1,226.33820'5-16 ! 5,1".7462016-17 3.700 3.806.9982017-18 706.335 1.762.87620111.19 494,542 130,7152019 ..2020

1.204,577 12.082,67319Mar. 2016 1.3I1S92 16.04Q.626

16%...19% 130/.,.16% 10"/.,.13% Less than 10"/0

IRRmillion 1RRmillion IRR million IRRmilfion

9,804,396 2,485,228 1,552,374 1,834,863162.294 37,962 824,127

3,757,532 714,536 438,469

'5,705,000

13,724.222 3.23'1'26 11'552.374 18.802,4!i99.21929 3!iM15 2,235,630

fllrsnt Co.

21 Sspt. 2016

160/.,.19"" 13%..16% 10%..13% Less than 10"/••

IRRmillion IRRmillion IRR million IRR million

9,804,398 2,781,265 1:552,374 1,834,863162,294 37,962 824,127

3,757,532 714;536 438,469

1'.705,000

13,714,224 3,5.]3.763 1.552.374 18.802.4599,186,029 3'9.0'5 2.236.870

19 MDT. 2016

Total TOltll

IRRmillion IRRmiliion

16.903,199 12,243,2376,180,129 391.2468,721.23' 13,036,2222,469,211 233,90116,330,2'7 2.598,'21

646,6-12

!iO,604,031 29.149,76929,149.769

19Mar. 2016

TOlal Total

IRR million IRR million

17,199,238 12,271,4006,180.129 391,2468,721,235 12,9'2,'1222,469.21 I 233,90116,330,2'7 2.'98.521

646.64250;900,070 29.094.13229.094,'32

Malllrtd dsposits v.ilh intSrtst rate of 19 1022 pen:snt. includss intsrbank deposits.

25.3. Movements of investments deposits-Ley

Co",olidalw Parsnt Co.

Balanes IIIPrincipal Balance at BalllOceat Principal Balance 01 21

19 Mllr. Nsw Deposits New Deposits2016

rspa)'rtlml 21 Sspt.2016 19M1lr.2016 repo)'lTlrnt Sept. 2016

IRR million IRR million IRRmillion IRR million IRR million IRR million IRRmillion IRR millionl.ong-term deposits

One.~nr deposits 9,226.013 8,658,046 4,066,225 13,817,834 ! 9,226,013 8,658,046 4,066,225 13,817,834

Two-year dsposils 200 200 20. 200Fi~ytar deposils 3.351.863 1'0,69' 3,201,168 1 3.351.863 1'0,69' 3,201,168

Short-tsrm deposits 14,569,936 194,1'8.307 192,204,726 16.523,5 I7 ,I 14.514,299 194,"8,307 191,8'3,050 16.819.556

Special short.term 1,165,675 103,622 1,17',381 93,916 1,165,675 103,622 1,175,381 93,9'6deposits

28,313,687 202,919:975 197,597,227 33,6J61'05 211,258.os0 202.919.975 197,245,551 33.932,414

••Attachment of

the audit report

Tadvin & Co.

Middle Enst DnnklP,lSCl

Noles on the finnnS'ial stnlements

For Ihe six months financial period ended 21 Sl'ptember 2016

Interim financial reporl

26- Interest p,,)'ahle

Cansalidnted

Balance at 19Prepaid The difference between Interesl pnid nnillnee at

Mar. 2016advance finallnlerest and during the 21 Sept. 2016Interest prepaid nd,'ancc interest period

IRR million IRR million lRR million IRR million lRR millionShon-tenn deposits 53,027 1,098,786 (1,083,547) 68,266Special short-tenn deposits 8,433 72,136 (80,426) 143One-year deposits 33,533 1,174,759 (1,175,391) 32,901Two-year deposits 2 2 (4)Five-year deposits 42,000 375,598 (386,989) 30,609Certificate or depositInterbank deposits 5.692 134,938 (140,051) 579Foreign currency deposits 7543 266.182 p6.506) 237.219

150,230 3,122,401 (2,902,9J4) 369,717

Parent Co.

"ala nee at 19Prepaid The difference belween Interest paid

"alanee lltMar.20J6

ad,'onee finnllnterest nnd during Ihe21 Sell!, 2016

Interest Iln=pnid advance interest period

lRR million IRR million IRR million lRR million IRR millionShari-term deposits 53.398 1,102,314 (1,086,832) 68,880Special shorl-tenn deposits 8,433 72,136 (80,426) 143One-year deposits 33,533 1,174,759 (1,175,391) 32,901Two-year deposits 2 2 (4)Five-year deposits 42.000 375,598 (386,989) 30,609Certificate or depositInterbnnk deposits 5,692 134,937 (140,050) 579Foreign currency deposits 7,543 266,182 (36,506) 237,219

150,601 3,125,928 (2,906,198) 370.331

47

Middle EnsfDnnkfr,ISC)No!" on the fjnnncill' ~lntement!j

for the lib;mgnths fjnnnci!!' period ended 2' Senlember 20'6Intuim fjn!!ncinlrfllorl

1 'to Shftre CIIpltalThe bnnk's cnpitol is IRR 4,000,000 million comprising 4,000 million shnrcs with n fnce value oflRR 1,000 per share,

~ 21 Sept. 2016 Tamin Atich Kh\"afI11ianeh(pri\'Pte Joint Slock)

l Percent/l.

• ,~:~ ~'~;~'~~"" __' -,::~.l.-JnhllJ1 Pnrs Engineering and Construction CO.

II %' f' More than 1%200,000,000 5,0 System Kcmat Fonoun Co, (Prh'llte Joint Sloek)

_''':0,''00,0;>00 __ ._'''-'_ N•••",.I r--n

19 :'I1l1r.2016Perccntll

No. of shnres ge ofshares

%200,000.000 5.0''';>,660,000 '.'160,000,000 _.0128.780.000 3.280,400,000 2.080,145,155 2.070,000.000 1.863,048.000 I.'59,267,458 1.555,000,000 'A55,000.000 'A53,990.000 L350,767,511 L346,555,410 1.243,000,000 1.141,205,000 1.0

41.182.256 1.040,000,000 1.040,000,000 1.040,000.000 1.0

1 'to \. Composition ofshllfdtolders lit balllnCt sheet dnle is os follows:

.•. ", -."More thon 1%S)"stem Keifilll Fonoun Co_ (Prh'ate Joint Stock)"' •....•.•,.--..Tosee SllJ1l1tiIn\'CWnenl Co. (Public Joint Slock)Nalul'lll personNnlul'lll perJOrlAlieh KhahM Investment Co, (Private Jo;nl Sloek)Nnlural pel'JOnNnturlll personPars Tousheh Investment Co.(Public Joinl Sloek)Natural personNll1url1l personNatuml penonNolul'lll personSam Group Co, (PriV1lle 10inl Stock)Nnturnl personNnturnl pcmI1lShnhrnk Snnaye Dllr)'3yi Sahel An'lUld (pri\'a1e Joint Stock)Sepzthan Industry Group (Public Joint Stoek)

Jahan P/ln Engineering lind Construction Co.

Othrn (Irss thlln I"I.)Corporate Investors (213 shareholders)Nnturtll ptt50ns (2275 shareholders)

160,000,000128,780,00080,400,00080.145.15570,000,00063,048,00059,267,458 '55,000,00055,000,00053,990,00046,555,41043,000,00041,205,00041,182,25640,000,00040,000,00040,000,000

464,996,4262,073,770,2954,000,000,000

'.03.22.02.01.8I.'1:5

I.''AL31.21.11.01.01.01.01.0

11.651.8

...-U2..j

Tosc;e Snnllli In\'emtnenl Co_ (Public Joint Slock)Nnlul'lll personNnluml personAtief, Khllhllll 'nvestment Co. (Privtlte Joint Stock)Nntural personNntural penonPIlr1 Tousheh Investment Co,(Public Joint Stock)Nnlurnl penonNoturnl pcrsonNnlUrl11 personNoordenll investment Co,(Public Joint Stock)Nnturnl personStlm Group Co. (PriVlllc Joint Stock)Nltturnl personNaturnl personShllhraJ;: SlUIa)'C D:tr}':I.yi SlIhel Ammd (Pri"otc Joint Stock)Sepntum lndustf)' Group (Public Joint Stock)Jahnn Pl1r$ Engineering end Construction Co.

Othen (1", Ibn" 1%)CorporPle lm'estors (206 shareholders)

Nnturnl pcrsons (2494 shareholders)

407,674,527

20803246834,000,000,IlOO

10,2

~~

TV. T. Accardin, 11le~inlIl). ~11lW:l:tina or AuJl'St2016. I aJpiul nllsctfrom .,000 IRR billion to ~,OOOlRR bi11im l'rom JhardloIdcn'l'l'Cri\llb!c:5 and wh Q; ~;rcc:d, Due to Board'. lIII):Iin, in ""fIUl 21116,urKlernlitin, ispubticiml and Iepl ~ i. beinl pm;elsctd. Allhe habnoc.~ dole, 2~l,HO IRR lIIi11ioft1or.hmholden' ~'llblclllnd _h h:ls I>eenu_ri:md 'llpl"e-eopil:ll 'llisctDCWUnl,

48

Middle East 8ank(PJSC)Notes on the financial statements

For the six months financial period ended 21 Septemher 2016Interim financial report

Consolidated28- Legal reserve

Opening balanceTransferred from net profitClosing balance

21 Sept. 2016IRRmillion I

518,876 .120,458 ,639.334.f


313,498205,378518,876

Parent Co,21 Sept. 2016 19 Mal: 2016IRR million IRR million

515,614 311,494____ 1l_9~,3_9_9_ 204, I 20

635,013 515,614~~~~~~~

According to Article 33 of the Money and Banking Regulation and Article 108 of the Bank's articles of association, 15 percent of net prolit is28-1- allocated to legal reserve annually. Annual allocation is compulsory till it equals the Bank's capital.

49

Midd's Elln BlnlifPJSON,lf'!'! ttl" finln"ill f1ltrmt"T1I'

For Ill" ri~monlh, fin_Mi.1 !!!'riod tndrd 21 &nffmMr 2016

!nlfrim finln",.1 Unon

l.tIaminct'lmeDqmitJ incomeTOlII

Lol<lU incomeDepcnitJ incomeT ••..•.I

%9-1- 1.0.". ma""e

1'-'J" .

Pt,ri2tU6MJ nldftl21 Sryt, 2016"l1fIUI1 Non-malull Tolll

IRR ",illion IRR m~lion IRR IIlmion3.217,173 "74.9~1 J,692,!l4 .6H,173 11)9-4 6S2.11';7

3.852&6 ~ 4,.J45$l11

'f'riod(/';Mlftldf'd 21 S!M, 2016"luluol Non-mc"'ll TIlt .•1

IRR million IRR ",i1);on lRR million3.217,173 474,941 3,692,Jl4629.3'9 11.'94 6479SJ

3,147.212 4'Jr~5 4,.J40,767

C""lOlidalcdPniod(OIHodnl 22 Sryt. 20U

MOlll11 NOfI-(llulul TOlII~~ lRRminioo

2,931,ll9O 19)32 2.951.622

---l!!2.!!1... ~ ~~~ 31141&9

rlmll Co,PniOd('~l!C1ldf'd 2Z Sfpt. 20U

Metlll! NOfI-(llutlJai Taul~ ~ IRRmiDion

2,911,0?0 19,B2 2.951,622

~ ---l!.2ll.. 216,6'0...1:.!l1!!!... ~ ~

\'afMldf'Ol" Mlr, 21116MlIlull NOIl_ulaa! TaUI

IRR million IRR million IRR millionS,936,230 74.37) 6,010,60346'>.226 32.374 5016011

640S456 106141 6JI2.203

\'ar mdcd 19 Mlr. 21116MIIlo.1 NOIl-mul1la! Tal.l

IRR mi1Iion IRR million IRR minionS,936,2)0 _ 14,,313 6,010,603"67100a 32,,314 SOO 071

6.4fl3,934 106.141 6.510.6U

Prriod(6M) mdal %1Sqlt.lnl6CUUIl.lidlled ud r.T1"lII Co.Pcri<>d(6MI ftllkd 21 SqIt. %1115 \'tar nuftotl19 Mlr. 11116

J~""Mo"...-cbdlMo,hard.c M.cIani (mil pllttl'lmhip eonlrK'U)M_I'=oltyPmlll,. from paid LCf;I'mo.b)'li-om "oMIl"""aa1=0".,

,""IRRmillion

'"%S6)612.439)27

US21-'21

4.!J3689,14\

_____ ---l!.3!L1.217J17J 111,.110

FCY(N.,.,. Riob FCV_ ,"" FCY (Non-T••• T•• TOlalT••• "'"IUd) M~. NOIl_uml! T••• "'atlJaI) M~.

N__ alT." ma",all

IRRmillio" IRIl.",illion ~ ~ IRRmi1lion IRRmiOion lIUtll1illi011 IRR ll1iDion ~ IRRmillion IRR",lI);on IRRmiltioo lRRmillion

'" 314.791 315,026 " " " ,<6 ,<6 ".2S6,561 256)61 343,129 }43,129 3"3,129 6ll,1l3 623,133 623,U3

2,439)27 43,735 2,4!J)62 ' 2.21S,221 2.2".221 2.2",221 4,IS1,6" 4,IS1.61S 11,260 4,161,115II II

S21)21 SII)21 31!l,611 31!l,611 319.611 1.1"',636 1.154,636 1.1'4,6364.936 4.!U6 ! 2,101 2,101. 2,101 19.410 19,410 19.410!'iI,I41 '9,141 ,.. ,.. ,.. 1,7S! 1.1S! 7,75211,J~3 ~ --.1!.ll!..: I~ 19' 1419S 1469 16,364 ---'-~ lS.1U ~ 3,UI

J.,)10.t\l3 161~11 ~ 2.'iI31,ll9O 11.063 2.9'6,1 Sl 1.469 2,9S1,622 ~ Sl.447 5,9111,677 21.\126 6.010,601

29.1.1 loan, ineome-FCY.mwnlCd lRR 314.791 M iJ rdalcd 10lflc 10_ plici from NIHow Dc.-c1opmClllF"nd ofln •• dq>osilJ19.1. DqmitJ I"""""

e.•••olidlltdPrriod16M> mdni 21 Sfp1. 2016 Pcriodf6~1) ••••drd !2 Smt. lOU \'nr M1lkd III Mlr,1016

Rio!. FCY (N•••••T••• Ri~1J FCY{Noo- T•• Rmll FCY(NOI'I- TOld

Morull N_olud Total mU1U1!) Mulual Non-mulod Told mUlUaI) Mlltud Noo-mlltod T0111 mONal)

IRRmillion IRRm~bon IRR",iIlio<I lRR",illion ~ IRR ",iD;.". IRR ",mioo IRR",illioo IRR ",~Iioo lRR",i1l..io<l IRR ",ilboo IRit ",iUioo IRR ",~bon IRR",iIlion IRR ",iUiOn"'eo;o" fl'Olll_ot~' cIcposit U~9-4 IU?-l I!)!N I~,n~ Is.n, 1',7., 31.207 31J07 31,.201

.} Incom" from I."", d.cposiu 13!,49S 13!,4~ In,.'s 113~1I llJ)1l 1,167 114,671 2J6,~62 !.J6.IG2 1,167 13!,02<J

Income from plll'lil:i;!••ioo bonlb and fMol 49M7I 49S,6n I !G.7001 IG.7G.l 232,364 2J2,,364income trQIrititl 49S,67~ 16,7001 232,,364

6~.173 ~ 6!'1.767 6!'2,767 ~ 1't'I' 216,0lI0 I 167 211161 4&1.226 ~ SOO4J3 -----u6T Sll1,6OlI

PIT1"lIIC••,Pniodf6Ml M1dni 11 StJlI,1DI6 Pf'riodf6MI nod"' 21 $gil.. 21l1!' \'nr""dC'IlI9 M••. 2016

Rioh Fey (N"". T•• Rial. FCY{NOII- Toto! Rill. FCYtNOII- T••Mulual N"""",olual TOlal mul1lall Mlltoal Non-mOloai TOld ",oloal) MlltIlal N••••••••lII•••1 Tolll mulllll)

IRR",illion IRR",abon IRR million IRR",illion ~ ~ IRRIl1,llio" IRRmiD;o" IRitmillion IRRmiDimI IRR",illioa ~ IRRmilli&D IRRmHJ;on IRR millionl_efl'Olllllllll~'d.qloIil 1')94 11)9-1 1.)9-1 1S,7I' IS,7., ",ns 31,207 JU01 31.207

.} Inco",e from ~ d.epoW 131.209 IH.209 131.20'1 113,024 ID,tl24 1,161 114,191 23',421 23S.421 1.161 236)9'Income from pltlil:ipllioo bonds and fi,cd

492,"0 492•.,0 16,7{).I 1(',104 232.276 232,276in«ImeleCllritil:, 4'12,ISO 16.104 232.216

6111,3~9 IIl_c94 6-17,95.) == 6-I735J ....l22oll!.. I,.ns 21S.S13 I.IH 21HID ~G1.100a ~ ~91'111 1.1/';7 500MB

Middle J::n! 8onk(PJSQNota 10'he Vnondn!,tntrmrn"

Fpc the ,i, month, Vnnndn' meigs! rnd", 21 Sm![1llbrr 2016Interim Dnondo! reoorS

JG- N'ct inromc (1m,) from in"n!mcnllCon,oIidatcd Pnrrn! Co,

Pcriod(6M) Pcriod(6:'o1) )'Cllr cndrd 19rrrlod(6:'o1) l'rriod(6M)

"mr endrd 1\1rnded 21 Sept rnded 22 Sq>t,

Mnc, 20'6. ' rndM! 21 Sep!, cndM! 22 Sept,M"r.20'6

2016 2015 20'6 20lSRilll(mutUllIl Riol(mutul!1) Riol (mulUll!) Rilll (mUlua1) Rilll(muluoll Riol (mutul!l)IRRmillion IRRmiliion IRR million IRRmiliion IRRmillion IRR million

"etrued income (Iou) from in,'nlmrnll

Dividend, 30.11. 122,2S9 ' 99,471 262,685 41,079 54,955 284,578

Income (1051)from 1Il1eofinveslrmnts 30.2r ()s,3S3) (5,295) () 509) ()S,7)3) (5,295) (]4557)

TOIIII,

86,906 I 94,176 259,176 ",., 49,660 270,021

Income (loss) from intrtlln (dtl:~ose) in ••.•Ine of Im.utm ••nts

Net inCQlTlt(I01J1)from incre= (dttrl'lISe) in ''ldue 3()'3 'of inveslInems (16491) 66,749 (]6472) 66,76')

1'111intome (loss) from in.'cstmcnts 70,,415 I 94,176 325,925 (11,126) 49,660 336.790

JO.l~ Dividends ore as follow:Coo,oIid.led I'II~nICo., J'crlod(6M) Pcriod(6M)

)'"ar endrd 19P"riod(6M) Ptriod(6i\1)

"mr "ntled '9• ended 21 Srpt, ended 22 Srp!, 1\"r.2016 "ndf'Ci21 Sq>l. rndrd 22 Srpt, Mot. 20161 2016 201.5 2016 2nl!'Rial (mllluol) Rial (mIllUllI) Rial (mllluo1) Rilll(mllluol) Rial (mutual) Rial (mulual)IRR million IRR million IRRmiJlion IRR million IRR million IRR million

Dadeh Pordnune Sirnaye Aftnb Co, 0<; 118 '18

Kordan In\'eltmrnt bank 80,266 45,084 171.015 (2,029) '65,&1\6

Middle EIl$IBank Curreney Exchange Co. '9.0'0

Middlc Ell$tBank Broktf1lge Co. 2,)85 '5,000

Di••.idtnd, rrom lrl\'tslll1tnlS In "nlislN! sh~rM 80,266 J 45,0&1\ 177,015 " 474 199,974

i

JIImPetrochemienl 11,365 ; 12,lIS 12,115 1',365 12,115 12,1IS

NDlionftlDevelopment Investment Group 5,737 I 7,51S 7,51S 5,737 7,5'S 7,5'S

Khnrk Petrochemical 4,064 ' 6,945 6,945 4,064 6,945 6,945i

Mokhaberat ),853 , ),762 3,762 3,S53 3,762 3.762

Ertebetatc sayar 2,95S ! 2,656 2,656 2,95S 2,656 2,656

IrllnTrl!C!or 2,275 : ',900 ',900 2,275 ',900 ',900

Middle Ell$lfund 2,135 : 2,339 2,135 2,))9

ZtIgrosPtlrochcmiclll I,'" I ),40) 3,403 1,633 ),40) 3.403

In.~menl m;no 1,034 ~ 3,102 ),'02 1,0)4 ),102 3.102

Khol'llSBIlPruochnnieal 780 i 9" 9" 780 9" 9)6

MllZI!!ldaranCcmml 746 1 1,718 1,71S 74' 1,718 1,718

OolOohllr 5S1 : 1,320 1.320 '" 1,320 1,320

Nalionallrllnian Copper Industries 510 I 204 204 "0 204 204

Pension Fund Inveslmen! 15,695 15,695

Other companies 4,352 6,808 20,057 3,352 6,902 18,991

Di••.itlrnd rrom bl\'t!lmtnl in li,ted shuts 42,023 ' 54,387 85,670 4',023 54,481 ",604

Tolll! J22,289 i 99,471 262,685 41,079 54,955 284,578

"

Mjdd1t f_1U1Bnnk<pjSQNOla lolht finnnrilli Itlllnntnli

For Ih~li. months finnnrilli mriOO tnds:d 21 Smrtmbt:r2016rnltrim finnnrini rmort

__ ~(~3,~61~'LI _

__ ~(~3~"••••'1 ~ 4!la24.719 ~ ~ ~

IM"mt (1oss) from p," "finYftf •••••••b-LCY{mufull)Nationllirlflillll CoppeJ IrtdustriesMo~hlbemH~lIUlcemmtFIB81:Kh~ C.cmemN.honllDevelopmenlln~1 GroupPmsiOll Fund lnvntmenlKhlfllzmi invesu'IIcnlMincsa:nd Mo:t,,1s~~lopnmIlln'~1De\~lopmml of Mines alld lndu$tries Middle &51Irml Khodro In''t:Slmcn1 DeYelopmenlEtc:l.1JborzD.mlvmd PO\\~ GmeTlhOll111lnT~or11m PCIl"OChemiQ)

Conlolidll~d

Pniod(6M) nHtrcl 21 Stopl. 2016

NO.m=t Sale •• tuc C~__ I

•••• TRR ••• ilIion IRR •••~lion IRRmillioa;

387,7!1 1I6 '" (299),2,117,164 4,140 5,Oll (891):

lO.496 " 2Il (16l):"".000 '" 1,017 (TIl)

1,100,000 2,959 2,9n (14)24,)21.952 16.297 41.226 f24.929);

3.231,522 4.715 3.900 SIS3,194,'10 3.••• 9,235 (5.791):

58.741 63 I7l (I12),1,446,729 &,359 7,272 1,0&7 ,

131,095 69 16' (9W<.000 312 297 lSi

4,750,100 10,888 13,751 (2,&63):2.542,152 21.664 23,386 (1,721)!

350 I

4'.pU19 1Jr~21 lO9aSS .~

Pmod{'M) •• dell2Z Sqlt. 21115

lneomc(k>n}

IR,RlIlill;"n

(266)

(5,029)(S.295)

Yellrnldrdl9MIl'. 2014

Incomr(iIlnlIPJlmillion

(52)

(266)

'"

PaTt'ntCo,

Prdod(6M) rn~ 21 &pl.2016

NO.lhom SDleulur ~ illc:omC(Iou)

•••• IRRmillion IRR ",inion IRRllIillion

387.78& 316 '" (299)2,&17,164 4,140 5,031 (191l'

30.496 " 2Il (16))500,000 '" 1,017 (772)

1,100,000 2,959 2.973 (14)24,321,951 16.297 41.226 (24,929)

3,231,522 4,715 '.900 liS:3,1>94,510 3.444 9,235 (S,791)

S8,741 63 '" (m)1,446,n9 8,359 un 1,087 :

138,095 69 I" (95)<.000 312 297 1S ~

4,7~,100 10,IU U.751 (2,863)2,542,152 21,664 23,386 (1,721)

Prriod'(6M) ended,12 &p1, 2015

lneomglon)IRR million

(266)

(S.029)(5.295)

\'nrmdrdl9Mor.2016

lllCOmgkmlIR.R",ill;".,

(S2)

(266)

'"

(14,664)(I4.~S7)

JO-J- Nn income (loss) from inc~ (detl'Cllc) in valw of investments in listtd shnres b 11 follo\\'5Conn&dllrd

Prrilld{6M)rn~ 21 &pI. 2016 P~riod('M) mde1l Ynr ftIdrd I'22&PI,201!l M•• ,2016

,396.SI0 ~ _

IlKomt (10") from mnUft (lh.CfU-R) 10 ,.ahtt ••rm'"6ImtnlJ: R1ah{mu!llll)

In,'eslJnmts in lilltd mares' portfolio

r ~,'I!DC

; IRRmiUion,

4!J,071

Madel '.1* ~llUl.miliion I1Ul.1IIillioll,

Inc:ome(!on)IRR miUion

Incom~Iou)rRR.",i11ion

66.749

P.rTftIC ••,

Prriod(6:'tt) tndf'd 21 Sept, 2016

8001 ..,.~ MorI..rr •.•* Inc:omCllosslIRRmiliion ~ llUl.mil\iorl

Prrilld(01) rnde1l22 Srpt. 201!'i

locomr(loIJlIRR •••inion

Ynrmdrd .,robr.21116

lftI'omqJoulIRRmillion

Inc.mt (1oss) from mcrult' (dKruR) In \ll~ "rlm'Htll'lH!n,~mm" inIi$ledJtwes'ponfolio .410.662 39A.190 ~ _ 66,769

Middle East BnnkfPISCIN(}Iu 10 Ihe fjnenfia! dal£rn ••nts

fo ••th ••six moulhs linancilll period £ndrd 21 Stpt ••mb •••.ZOl6!ll!ujm Onenda! "£Pgrt

31_ Bank' •• har ••ofrnulual incorn"B:mk's .hare ofmulual income is as follow.:

31_1_ B:mk's share ofmurual income

Dank's r••soure ••10 mulual u.al:",(40-2)

Poro''"t''Sc22%

Mulunl incom"

IRR mlllJon3.836,106

Bank'. shu ••ofmutual iurom ••IRR million

828.515

• Ifmutual u,"Scs are Icss th:m free resOurceS of!erm depo,its. b:mk's reSOUrcesand bank's .hare ofmulual income will be zero

31-2- Dislribution of mutual resources:md mutual "'ages belween b311kand deposllor.

D"scriber"riod(6M) ••nd ••d 21 s..pl. 2016

IRRmilli'ln

P••riod(6M) "nd ••d 22 s..pl. 20lS

IRR million

y ••a •.••nded 19 Mar. 2016

IRRmilli'l1l

Nole,

Avel1l8c ofmulual us"Ses( 31-2-1 )

Aver:llle ofdeposilors'!erm deposits(31-2-2)Ie•• : ~L'lu(Ol)' depa.it of term depositsTerm deposit's free resourceBank's share of mutual u.ages (Addwonal freeresourees from !erm deposits)

34,732,935

30)46.286(3 114906)

27231380

7.SIH~S

24,704,202

22,157,022(2.775,948)

19,381074

5,323.128

23,201,649(27409791

25,9Q 1,070 Weeklya,-cragc

W"eklyavern!\cWceklya\"ernge

20.460.670

5,5J0.40{)

* Bank's share of mutual usages is mulual usages minus f"'e "'S'lurc", of!erm deposils.lfthe total 'lfterm deposits' free re''lUreeS arc maN than mutual usagcs.lhc e~ecss is called e~eess of free re,ource,oflenn deposits

31-2-1- Avemge OfnWUlal usagc.

Period(6M) end ••d r ••riod(6M) ••nd ••d21 Stpl.ZOI6 22S~pt,201S

Vur ••nded 19Mor. ZOl6

Mutual uSige. items

Net usages related to I'lansNet usages related to participalion bondsNd usages related 10tenn deposit in 'lther banksNet usages rclalCd to investmentsTotal usage. relaled to mutual operation

Amountlaverage)IRRmiJlion

28,151.6654,142,591 .1,327,971I 110,708

34.132,935

AmounttlV ••rag ••lIRR nulhon

22,185,898563.151871,318

1,083 MJ524.704,202

Amounl(avcrage)IRRnlilli'ln

22,996,JU876,673

1,005,5451.112.524

25,991,070



31-2-2- Average of term deposits

Term deposits

One yearTwo yearFive yearShort term depositsShort term deposits from other banksSpecial short term depositsAverage of term deposits

Period(6M)ended 21 Sept.

2016AverageIRR million11,712,937

773,303,89413,406,7251,261,538661,115

30,346,286

Period( 6M) ended22 Sept. 2015AverageIRR million

9,625,00037,889

3,969,8278,335,43967,308121,559

22,157,022

Year ended 19Mar. 2016AverageIRR million8,924,58424,832

3,799,2169,514,411681,538257,068

23,201,649

31-3- Interest from statutory deposit ofterm deposits

Period(6M)Period(6M) ended Year ended 19

Description ended 21 Sept.22 Sept. 2015 Mar. 2016

2016IRR million IRR million IRR million

Average of statutory deposit of termdeposits 3,114,906 2,775,948 2,740,979Interest from statutory deposit(rate ~ 1%of average of resource) 15,575 13,880 28,100

32- The Bank's chargeThe Bank's charge was publishes in public newspaper on 6 May 2015, as 3 percent for financial periodended 22 sept. 2016 and is calculated base on that rate.Average of free resources of depositors *Rate = Bank's charge

408,47.1 = 3% * 27'231 '380*0.5

S4

Middle East Bank(P.JSClNotes '0 the financial statements

For the six months financial period ended 21 Sentember 2016Interim financial report

33. Injerest expenseConsolidated Partnt Co.

I Pe~iod(6M) i Period(6M) Year ended IPcriod(6M) , Period(6M) Year cndcllI ended 21 I cnlled 22 19 Mllr. I ended 21 ended 22 ]9 Mar.'It'Sep1.2016 • Sept 2015 2016 i Sep1.2016 ' Sept 2015 2016

I~Rmi"ion i IRRmillion IRRmillion !" IRRmillion IRRmillion IRRmillionShort tcrm 1,098,786 791,509 1.851,601 1,102,314 796,464 1,859,685Special short term . . 72,1361 9,869 50,357 72,136 ' 9.869 50,357Long term depositsOne year 1,174,759\ 1,080,714 1,945,571 1,174,759 i 1.080,714 1,945,571TwoYel'lr . 2 4,071 5,255 21 4,071 5,255Five Year . 375,598~ 457,245 859,594 375,598 i 457,245 859,59'Certificates of deposits 2,873 2,873 1 2,873 2,873

Interbankdeposit 134,938 ~ 74,641 162,657 134,937 I 74,641 162,657

2.856,219" 2,420.922 4.877,908 2.859,746 I 2.425,877 4.885.992

55

Middle EAst BnnklPJSqNote!! to thr financiAl .statement.~

t'or thr d" month!; financiAl prriod endm 21 Srp!rmher 2016!ntrrjm finAnciAl renor!

Con~o!idAtrd Part'n! Co.

Term deposits imere5t expense.LeYTenn deposits interest expense.Fey

IP,dod(6M) j Period{6M) Year ended IP,,'od(6M) , Period{6l\1) Ycar cntlet!ended 21 rnded 22 19l\1ar. ended 21 ended 22 19 Mnr.Sept. 2016 Sept. 2013 2016 Sept. 2016 Sept. 2015 2016,

I IRR million j IRR million IRR million IRR million IRR million IRR million44.1 I 2.856,219 2,420,922 4.877,908 2,859,746 2.425,1177 4,1185,992

266,182 7,125 24,160 266.182 1.125 24.7613,122.4{)1 ~ 2428047 4902,668 '3.12$,928 2,433002 4910153

34-1- Reconcilintion of income pllid on lIccount!o investment deposits Md term deposits interest expense.LCYParenl Co.IPeriod(6l\1) t Ptriod{6:'1) Year ended

ended 21 ended 22 19 Mar.~ Sent. 2016 ~ Sept. 2015 2016

I IRR million l IRR million IRR millionIncome paid on RCCOuntto investmenl deposits (nole 33) 2,859,146 2.425,871 4,885.992O\'Crpnid interest to depositors (245,051): (153,602) (62.982)Depositor's interest income: 2,614.6951 2,272,215 4,823,010. Overpaid inten:stto depositors 245,051 153,602 62,982Term deposib interest c~pen.,c.LCY 2.859,746 i 2425877 4885,992

35. FreJ and commission inromeComolldalcd PArcnl Co,IPtrlod{6M) I Perlod(6l\1) Year ended , l'eriod(6M) Perlod(6M) \'ellr entlet!

endro 21 conded 22 19 Mor. ended 21 ended 22 19Mnr,Srpt. 2016 - Sept, 2015 2016 Sepl.2016 Srpt. 2015 2016IRR million IRR million IRR million IRR million IRR million IRR million

On UCs issulUlCe 17,463 4,421 11,804 17,463 : 4,421 11,804On g\1l1rnnteesissullflce 154,931 135.523 285,097 154,931 135,523 285,097Foreign cUITCncyopemtion 6.660 7,453 13.879 6.660 7,453 13.879Mnnng,ed funds 3,368 3,368Onn:miUance I 2,342 1.057 16,145 2,342 1.057 2,632Collntcrnls Assessment , 1.452j 1,887 3,125 1.452 1,887 3,125Reviev.' ofcuslomr:rs credit files 2,1,452, 17,400 36,890 21,452 17,400 36.890Liquidity sunrnnlee fcc for mutml! funds 6,338 2,792 6,138 6,338 2,792 6,138Amin contrnci gunrnnlee fcc I '" "6 766 2591 '46 766PlIr1icipnlion and gU3rnntce fee ' 2,595 3,876 2,595 ' 3,876SHETAB 2,331 1,135 3,299 2,331 1.l35 3,299On shnre tmding t 34,140 18,890 57,694Income from cUlTCncycoxchnnse operntions 35-1 7,748,056 1,637.622 6,663,758Cost of currency exciulnge opcmtions 35.1 I (7,726,168») (1,625.344) (6,646,066)Other &cT\iees 20,723 4,261 26,075 14,788 2,782 22,753

29!li,942 j 207643 482.480 233,919 1749% 390,259

35.1, IntanC from llIIdam ofcvm:ncyexcl\:lns1: op:r:tiom relates to the purclmc llIIdIlIIc offorcign c~rby MiddleEm B=nk Currenc~' E:\I;hMt;c Co

S6

36- frn Rnd nlmmlilion npmtn

SHETAB commissionPOS U1U1S1'1c\ioncommissionCJCtlrins noll5e commissionPaid commission to brokeftl8"

Income (Joss) from foreign currency buy and scllIncome (loss) from foreign cxcho.ngc difference

lS- OtMrlnro~

Middle Ent P,mkfpjSQ

Ngtn In !be finnntiR! "Wmm',for thr Ii- mon!hJ finnncjn! ptdod endrd 21 SrP'Cmhs:r 2016

Intujm Qnentinl uPOrt

Con,o'hlllird Pll, .••n'C".

! Period(6M) Period(6:'o1) ended Yellr ended 19 ~ 'Perlod(6M) Period(6M) I'ndNi Yl'l!r endl'd 19iendrd 21 S~t. ns~ •. 20lS I\lIIr.2016 ended 21 Sept.22 Srp'. 2015 !\lllr.2016

2016 .1 ~ 2016, IRRmill10ll IRR miltion IRR million I IRR lTillion IRRlTilliOll IRRlTiliiOllI 617 i " '08

I617 J9 ''''12,139 ~ 3,800 un 12,13? j, 3,1100 8.~10

;61-11.069 I UJ(,?

" 92' llaJ 83 IRSU.917l ,'" 10.609 12,917 ~ 3.922 Q.I\72

Conlolidntrd P"ITn! Co.

, Period16M) I Period(6M) endrd Yttlr ended 19 ~ Pcriod(6:'o1) I Period(6M) ended Yenr ended 19ended 21 Sept .

• 12 Sept. 20lS I\br,2016 ended 11 Srp'.I 22 St'(lt. 2015 Mllr, 1016

. 2016 , 20161RR million '. IRR million IRRmilliOll IRR million IRR million IRR rrilllon

5.2$9 : 1.797 ",11611 2,(i3? 1.797 4,(,(.0

43,64(' ! 19.431 45.744 43.646 19.434 4~l,')~'4!!.90~ ; 212211 50.(,12 46!28~ 21.2) 1 5(1.3~5

ConlCtlidn!rd hn'fltC ••.

t Perlod(6:'o1) Period(6M) ended Ye.ar ended 19 ! Pcriod(6M) Pcriod(6M) ended Yur Mldtd 19cnded 11 Sept, ended 11 Sept.

201612 Srpt. 2015 Mar. 1016

101612 Srp'. 20lS I\tltr.2016

I IRR million I IRR trillion IRR trillion I IRR lTiUion i IRRrrilliOll IRR rriUion400 2,000 I 2,400 5.200

12' 1020 ." , , 020 1.10)t20, 1020 1 21(i 2 OO~ J 420 (i.)0)

Mlddlt !}atl 00nkCrJSQ

NOla 10lhe Qnnnd"I ttnlrrntnUfpc !ht eia mpmb, On!!ndel wried mdn! 21 Srnlnnbcr 20.6

!n'trim finnndn! Bnprt39- Admlnl,lnlivc nnd cenem! elJlC'n'u

PttSOOnel eXJlC'llst:SOthCf Ildmini"mion e:o<penst:S

'9-1,9-'

r Perlod(6M) ended I21 5l"nl. 2016

lRR million I201.878120.&n3n,J31~

Con'olldala!Pcriod(6M) ended

22 Scrt.20lSIRR million

120,3SI149,143269495

Yt8 •. ended 19M •••.. 2016IRR million

299,MO300,417600,251

!Period(6M) ended I21 Sent. 2016 I

I IRRmillion160,883 ,122,46S I

2S3')'!S

Puenleo,Period{6M) ended

22 S\ont. 2015IRR million

109,051!l1100246851

Ycarrnded19 Mor, 2016

IRR million275,&12266.630542442

39.1- The detail, of personnel elCpeDleJ are as follows:Con'o!lda'cd Parcnl Co.IPerlod(6M)endcd Period(6M) ended Year tnded 19 f Ptrlod{6M) toded Ptriod(6~1) ended Yf1Ir tlUll'd

21 Sep'. 2016 22 Stp'. 201S Mar.2016 21 Stpl, 2016 22 S"pl, 2015 19 Mar. 2016

IRR million ! IRR million IRR million IRRmiliion \ IRR million IRR million

Wagn. IIllaries and allowances 39-1-1 165,403 91,126 2n,061 128,552 16,831 234,500

InS\lranee cmplo~r quota 11,468 11,300 26,147 15,391 I 11,300 23.304

SIafl'~rminntion benefits 11,240 I 9.972 17,151 15,657 I 9,972 1S,514

Tro,"t'l Ifld mission I,~67 i ." 3,4]7 1,277 ! ." 2,434

O<hm 12 I20.J!781 1203SI 299 840 .60M3 109 051 275812

39-2- The details of olher adminimotion elCpeDst:Sore os follows:Conl0!idnfrd Pllrcnl Co,IPeriod(6M) cnded Ptriod(6~t) coded Yell" rndrd 19 , Ptrlod(6M) endrd I Ptriod(6M) toded Ycar tuded

21 Sepl. 2016 22 Sepl, 2015 l\hr.2016 21 St!pl. 2016 ~ 22 Sep'. 2015 19 Mnr, 2016

IRRmiliion IRRmiliion IRR million IRR million I IRR million IRR million

""', !l,211 IS.IOS 35,425 12,087/ 15,105 34,078

Training and rtStafCh 1,712 2,021 3.118 1,132 I 2,021 3,81SCommunications .&.478 6,869 12,593 4,478 : 6.869 12,237

Insurance CO$lS '" 1,.&96 2,821 734 ~ 1,496 2,791

Al,ldilllDd eon$llhing fee IMII 11,107 24.956 11,090 8,893 16,149

TnmspCll1alion 1,135 '" '.••• I,m I '" '.•••Power IIDdWaler 5.912 3,934 8,209 5,147 ; 3,934 1,046Repayment and maintenllllCC of '.... 22,550 11,469 29,368 I 22.195 11,248tanltible fixed .ssetsConnnnption items 10,328 6,750 18,9OS 9,438 ~ 6,678 11,920Board of dirtelOf$ bonus 10,300 2,400 9,700 10,000 ~ 2,400 9,600feepaymCl'11 30,S26 22,022 53,844 30,472 22,022 47,221Membership fcc io assotiations 39-2-1 741 40,523 91,253 571 ; 40,523 91,093

O<hm 21,946 , U,S28 254Sll 5,613 4826 9,863

120AliJ' 149143 300417 U216li i UUOO 266 6JO

39.2.1. The decrease in CO" ofmcmbersllip fee in ossoc:iations eompllfW with the previolls)ftr is related 10 die pa)1llCDl of die fim membcr$hip rec of Deposits GuvlUllee Fund in the previoul )'~ll'.

"

Middle EAH DnnkteJSqNot£s on lbf finnnclal stntemfnl

For tbe ~j!monlb, finnnciA! nrriod fndrd 21 Srlllrml!rr 2016Intedm finAnclnl rsnort

40. ProvbJon for blld lind dOllblful drbll

Specific provision for bad nnd doubtful debtsGeneral provision for bad nnd doubtful debts

Con~olldllll'd 1'lIrrlll Co.

Pedod(6M) Pedod(6M)Year entled

Perlod(6J\1) Period(6M)Yellr endel.!

ended 21 ended 2219 Mar. 2016

cnded 21 ended 2219 Mnr. 2016

SepL 1016 Srllt, lOIS I SrIII.2016 Srill. 201~, ERRmillion , IRR million IRR million IRR million IRR million IRR million

'0-1 218,190 ' 4,S7S 104,362,.

218,190 4,87S 104,363,'0-2 19.869 J 34,S70 98,S91 19,813 34,219 98.890

2JII,O!\9( 39,44S 2029S3 238,003 39094 203.2S3

40.1. Specific provision for bad lllIddoubtful debts is cttlculnted lISfollows:

B.IIIlllltelAM: lldjullrd collntrrnl's vnlnehmds lllld e5lnlesBMis for specific provision for b:ld and doublful deblsRmio for specific provision for bad nnd doubtful IOMs-%.Specific provision for bad Md doublful debts

Pllrent Co.

Perlod(6M)Yrnr ('ndedPerlod(6M) endrd 11 Stpl,1016 rnded 22

I Sept, 101519 Mar. 2016,

I Pn~ldill' loans OulStlndEn, Doublful debl Total 10UI.I 10lalk1nns

L IRRminion ERRminion IRRmillion IRRmillion IRRrrillion IIlRmilliof,2,211.263 920,27S 2S6.763 3d88,JO 1 IS7.634 1,199/188

l (1,J62.799) (219.512) (S7,137) (1,439.448) (46.334) !380 107)

I 1,048,464 700,763 199,626 II I 300 819,381

"'" "'" oSO-IOO%104,846 .140.1!U 99.814 344,813 22260 126.623

"-~~A~n~IRRmillion t

)2,391,7961

40.2. General provision for bod and doublful debls is ClI1cuhl.ttdns follows:

LoM b:lhlllQCM 19 Sept. 2016I.e»:()ahmce of 1000000SrnlltspecifiCpro"ision hIlSCll1cullllrdforBllSisfor generlll pro"i$ion for bad and doubtful drblsRlltio for general provision for bad lUIddoubtful 108Os'%General pro"ision for boo lIIIddoublful debu at 21 Sept. 2016Galeral provision for bltd and doublful deblsat 19 MllI". 2016General provision for bad nnd doubtful debts expense

I

fI

(2,791,)86)1

29)94,410 I'

'"443,914 \(424,IOI),IUI3 :

"


Tadviny

MIMlt En" Onnk/PJSQ1\'01" PO 1M linnod.,! !18Itrnt0l

For lht sl! mooth, lionnrinl Dtdpd tOdd 11 stpltmhrr 1016

In'tlim IinDoO.! .rnprl

A'. fi"lInn Ctl'U

I .J Ptrl(ld(6:'tt) tndtd

II Sl'pt, 2016

Tlnj;ible fi:\ed IISSCU'ckpr«lllIion'ntangible assets' Gmorti/.Dlion

i Pedod(6~1) tndtd :f 11 StpI.l016.' :

IRRmiliion

i PerilHl(6l\1) eoded ~1 11 Stpl.1D16 jI tRR mlilicm ,

I j6.169 I2',144 IRl,J13 I

PtdlHl(6~1) tIIdrtl22 Stpl.l015

IRR million

Co"",'ldlll~

PerilHl(6~1) mdtd21Stpt,1015

IRR million40.872

1.4224;2?4

Yurtodtd 19M.r.2016

lRRmill •.••

U"

,'urmdtd 19Mllr,1016

IRRmillionI02.j94,4.4?3 1

!?7 on

IRRmillionj2.209i4.7M

7f:'114

Pe,ilHl(6:'tt) todtdnStp,.IDIS

tRR millionJ'J.1l-l6

I.UJ41.2(,9

Ye••r ••od ••tl19 Mar, 1016

IRRmillJonIIltl,z1H,lm

In.71(.

Co••""lldlll!'d- R"lnrn1

IPtrilHl(61\1) mdtd I Ptriod{6/1li} mdrtl11 Stpt, 2016 11 Stp'.10'S

Errol correction:Retdpl or20'3 income 1m

P~m:m or 20 13 income IIt\

P"'-IDemono 14 irorome1MAdjusunem ror Deposit GUGrlIIIlcefund pro.ision in 20'SAdjustmenl ror Ilenrrnl pro.ision ror b:ld and doubtr...l debts in20'6

I

trII

IRRmillion

60.648 j

I(111.\17),>

(I.mi'. '(3,r;92)~

(31,601) ,

lRR ml11ian

61,172

m.1I4)

Yurmdtd 19Mnr.l016

IRR million

61,172

~.""(118.497)

0'.114)

P.fl"O'l CII,' RO"<la'l~

r Ptriod(6.\1)l'I1dtd Period(6M) ••••dnt YrIlrtnd"'"I'Sep'.1016 11 Stpt. 2015 19 1\lAr. 2016

I IRR million IRR millim IRR m~lion

I

I W,64S: (,1'-6411 611.6411

i (7.2M) (7.zM)

(117,142)1 (111.142) (117.141)

(1,311')

(3.892),

(31 ,871) (33.1\$9) (3J.llj'J)

In ordtr to pr=llIO llC(tU'Illepkture orrmMdal posllion lIOIIperfOrtn:ll'lCtmullS, lIllcolTlp3tall,'eiterm in rllWlcialSllIltrnents htI,'e been lllIjusltd. Thefdore some compmlll\'e ittrm do nol m:ueh"ilh those ofprel'iDus)'e:U'$ rrmneialllDltmmtS,

••

44. R«oncitiation of profit btforc ta,; nith t'llishfi01" from optratinr acrhitirll

Middll" En~tBank(PJSq

Nol~ to th~ finnncj:,Il\IJlt~ml"nts

For th~ sb. months finAncial "triod tnded 21 Stntt'mMr 2016Intt'rim finantinl rrnort

Consolidated ParentC".

Ptriod(6M) ended 21 Sept. 2016Period(6M) endtd Yt'nr ended J9

Period(6M) ended 21 Sept. 2016Ptriod(6l\1) tnded YtDr endtd

22 Stpt. 2015 Mar. 2016 22 Sept. 201 S 191\far.2016IRR million IRR million IRR million IRR million IRR million IRR million

Profit bc:fou lax 983.942 715,653 1,518,753 874,740 659,465 1,495,243Dcpm:iauon and amortizalion 81,313 42.294 137,087 76,97. .1,269 132,716Net increase (decrease) m provision of stllff

15,848 11,112 17,663 13,126 14,762 14,389tennination benefitsFUUlIlO:eoSlS 109 109Effect of ~changc mle fiuetwnion on ca~h (2,932) (4,5%) (12,373) (2,932) (4,596) (12,373)

1.078.171 764,463 1,661.239 961,908 710,900 1,630,084Net increll't' (dt<'realle) in operatinr liabilifi"Due 10banks and financinlm$lifUlions 1,807,312 1,230,886 238,069 1,801,026 1,080,340 231,784Customers' current deposits 1,571.038 56'!.539 2,468,433 1,529,915 173,013 2,510,627Other liabilities and pJl)\'isionS-Operllringportion 1.053,197 38.918 278,710 1,027,769 33,456 265.877Term mvestment deposils 21,454,262 940,410 7,064,151 21.805,938 938,9>4 6,991,082Interest payable on in\'estmcnt deposits 219,487 (23,707 -(87,940 219,730 (23,707 -(88,315

26,105,296 2,749,046 9,961,423 26,384,378 2,802,056 9,911,055NellncrcllSe (dtc'n'f1se) In optmfing .lssmDue from bank.5and fmancinl institutions (3,588,641) (446,397) (930,067) (3,576,049) (452,817) (942,657)Loom (19,114,346) (2,079,357) (6,569,662) (19.110,910) (2,084,357) (6,617,535)Jnvewnenl (2,351,554) 292,733 (2,092,324) (2,283,382) 283,733 (2,085,867)Due from Subsidiaries and associates 15,282 23,312 (89,990) (242,479) 26,566 (153,652)Other accounts reo:i\'llblc: 417,770 (140.387) (618,679) 375,283 (156,034) (516.982)Statulory deposit (1,083,938) (367.380) (207,789) (1,083,938) (367,380) (207,789)Other I$sea-cpc:nting portion (1,072,583) (9,956 nl,2l7 (1,073,440) '(25.318 (",793

(26,778,010) (2,727,432) (10,579,728) (26.994.915) (2,775.607) (10,567,275)Net cash innow from operating DCti\;ttes 405,457 786,077 1,042.934 351.,171 737,349 973.864

61

45-1-2- Letters afcredit-LeYCon~olidaled and Parent Co.

I~crlfltion

Oprning tmhlnceIssuro durin!! the yearPaid during the ycnrClosing bnlancc

~2] Stpt. 2016

IRR million370.000860,317(632.776)597541

19 l\1ar. 2016

IRR million21,704

432,628(84,332)370.000

61

Middle Enst 8nnk(P.JSqNotes to the financial statements


45-2- Issued guarantees commitments45.2.1- Gunrantees-FCY

Consolidated Rnd ])arcnt Co.21 Sept. 2016 19Mar. 2016

FCY IRR million' FCY IRRmillion

EURAEDUSDINRIQDCNYGBP

45-2-2- Guarantees-Ley

iI 45,030,448r . 3,198,598

t

. 22,360,69226,000,000

I. 1,382,718500. 4,990,143_' I6,5,QOO

1,576,60627,354.702,34912,194 :37,181 i

23,489 :6.719'

2,385,892

34,228.4743,198.59822.457.94826.000,000

2.402.718.5004.990,143165.000

1.161.54326.337679,12811.77865.69023.2297,110

1.974.815

957.530

19Mar. 2016IRR million

835,740121,790

Guarantees commitments-Ley

45-3. Other commitments

Commitments for bonds' guaranteeCommitments for AM IN contractsCommitments for credit cards

45-4- Managed funds

Loans paid from managed funds

Consolidated and Parent Co.21 Sept. 2016 19Mar. 2016IRR million IRR million16,282,883 I 14.775.364

Consolidated and Parent Co.HSept.2016 ,lRR million I

835,740 !

147,390 !,

.874, -----984,004,

Consolidated and Parent Co.21 Sept. 2016 19Mar. 2016IRR million lRR million

593,616 I 70,154~======

63

Middle East Bank(PJSC)

Notes to the financial statements


46- Capital commitments and contingent liabilities

The bank's ledgers have been audited by Social Security Organization auditors but the debt amountshave not been declared yet.

47- Earning per share

47-1- Basic earning per share

The calculation of basic earning per share has been based on the profit attributable to ordinaryshareholders and weighted-average number of ordinary shares outstanding. Weighted-averagenumber of ordinary shares (basic) is 4,000,000,000 shares.

48- Subsequent events

From the date of the balance sheet to the date of the approval of the financial statements, no.event which needed to be disclosed in financial statements has occurred

64



49~Bank risksBank faces the following types of risk:Credit riskLiquidity riskMarket riskOperational risk

.level of influence of risks on different types of banking is illustrated by the following chart

49-1- The relation between types of banking and the associated major risks.

Middle East Bank

Credit risk: no

Market risk: no

Liquidity risk: low

Operational risk: medium

49-2. Risk management structure is as follows:

Credit risk: low to medium

Market risk: low

Liquidity risk: low

Operational risk: medium

Risk Management in MEB consists of Risk Committee (Re) and risk department. The duties of the RC arc modeledbased on the Basel document entitled "Guidelines - corporate governance principles for banks", issued in October2014. The RC consists of five Board members and the head of risk department (or senior risk manager - SRM). SRMis responsible for reporting risk related matters to RC, discussing relevant information with members of the RC/Boardmembers, as well as executing various resolutions of Re.Risk department operates under the guidance of risk committee (RC) and carries the policies set forth by the RC. Therisk department is headed by the SRM and employs four additional risk analysts. The risk analysts and SRM share theduties of credit risk modeling, credit risk rating and liquidity risk measurements.

Senior risk manager

Administrative riskmanagement unit

65

Risk commitlee consistsof the head of the board,three other board

members, and risk seniormanager

Middle East Bank(PJSqNotes to the financial statements


49-3- Credit risk49-3-1- Credit risk definition

The Basel Committee on Banking Supervision (or BeBS) defines credit risk as the potential that a bank borrower, orcounter party, will fail to meet its payment obligations regarding the terms agreed with the .bank. It includes bothuncertainty involved in repayment of the bank's dues and repayment of dues on time.

49-3-2- ME Bank's policies regarding credit risk

MEB's credit extension policies ensure CBI's rules and regulations are properly implemented. MEB's primJry creditclients are incorporated entities with whom MEB develops and maintains strong long-term banking relationships.However, natural persons who manage their business activities personally and are not under a legal umbrella arewelcomed and treated as proprietorships. Obviously in such cases, Chamber of Commerce registration and a proper taxcode are necessities prior to extension of any loans. Concentration ofMEB 's credit is in short-term requirements of itsclients; namely inventory and receivable financing. Even international activities are limited to the importation of rawmaterials, spare parts and finished consumer goods. MEB occasionally arranges and participates in syndicatedguarantee loans when funding is provided through the capital market or State financed, National Development Fund.

The principles of Middle East Bank for extension of credit:

1- Knowing the client and hislher credibility. Credit measurement is performed such that it is an indicator of abilityand capacity of the client in paying back the loans. Making sure that the loan usage is monitored. and that theresources for repayment are identified and recognized by the bank.

2- The approved loans are valid for at most one year. The branches are required to periodically check the documentsand financial statements in order to make sure that documents are compliant with the loans' covenants.

3~ The interest rate charged, and the required collaterals depend on the clients credit worthiness and client's historywith the bank.

4- Bank makes sure that the collaterals are unencumbered and have high degree of liquid ability.

5- Clients' receivable checks from their own customers and identifying the validity of these checks confirms the clientsbusiness viability and these checks can be endorsed for collection by the bank. These receivable checks constilute onemethod of loan repayment.

66


Forthe six months financial period ended 21 September 2016Interim financial report

6- The level of activity of the deposit and current accounts of the borrower are periodically checked in order to veri I).'that the level of activity is conforming with the loan covenants.

7- The credit quality and operations of the client are periodically checked to make sure that the borrower is conformingwith loan covenants.8- The borrowers arc credit risk rated by the risk department. The capacity of the borrower is also evaluated and thenthe credit committees set loan conditions and collaterals accordingly.

9- For SMEs and corporate borrowers, at least three years of audited financial statements are required to obtain areasonably good credit risk rate.

10- Collateral quality and amount is dependent on the credit risk rate evaluation of the risk department Borrowerswith bad credit risk rate are required to provide substantially higher level of liquid, coli atera Is.

11- MEB has set its policy to maintain a minimum weighted average credit rating of B+ for its loan portfolio.12~In general, approval and extension oflarge credit loans are concentrated in MEB's headquarter.

13- It is the policy of the bank that after the Credit Department evaluates a borrower to be credit worthy, it must informthe risk department and provide all required information to risk department for proper credit risk rating. The credit riskrate should be taken in consideration for setting covenants and collaterals of the loan.

14- The. risk department periodically reports to the Risk Committee and to the Board. The reports discuss the portfolioconcentrations in credit risk, industry, borrower type, collaterals, etc.

49-3-3- Administrative units of risk department

The risk management department is an administrative unit; .it has no separate sub-units for specific risk types, instead,the risk analysts are assigned different tasks by the SRM and cover all risk types including credit risk.

49-3~4- Different levels of institutional authority to approve loans and commitments

In general, Middle East bank's credit issuance decision makings are centralized at the headquarter. Considering theamount of credit requested, approvals will be carried out by the following authorities:

1- Branches - for credits less than 4 billion Rials and commitments less than 8 billion Rials. Since ME Bank's strategyis to offer banking services to mostly corporate customers, Branch credit committees should use their authority in orderto attract, consolidate and expand depositor customers.

2- Central credit committee - for loans'less than 20 billion Rials and commitments less than 100 billion Rials.3- Supreme credit committee - for loans less than 150 billion Rials and commitments less than 300 billion Rials(combined loans and commitments must not exceed 400 billion Rials.4- The Board of directors - for loans more than 150 billion Rials and commitments marc than 300 billion Rials.

67

Middle East BanklPJSqNotes to the financial statements


49-3-5- Methods of mitigate credit riskCurrently, considering the lack of appropriate financial instruments, the only way to soothe the credit risk is to takecollaterals and guarantees at the discretion of the decision makers considering the analysis oftinancial statements andthe credit rate of the client performed by the risk management department, past behavior of the client, payment history,visiting the business site by account officers, and monitoring the consumption of the loan. Moreover, the presence ofseasoned lawyers afME Bank in charge of designing contracts and foHowing up law cases helps ME Bank to reducethe credit risk to a great extent.

49-3-6- Credit rating procedureMore than 90% of ME Bank's loan takers are legal persons and giving loan to natural persons are done based on theirbusiness activities.

Besides from complying with the CBI rules, all customers seeking loans and commitments must be assessed by riskdepartments in terms of credit risk and this assessment must be done independently of credit department. Credit riskscoring of the customers is carried out based on the following major elements: ]. Three years of financial statements 2-Risk management department's assessment of the customers' cash flow from operating activities 10 pay back theprincipal and interest portions of the loans. 3- Qualitative elements including competition ability and managerial ability4- Past payment behavior

The summary ofloans and commitment credit granting procedure to legal and natural persons running business is asfollows:

1- Submitting request, information, and the required documents through CARM system which is available at the bank'swebsite (http://carm.middleeastbank.ir),itincludes the company registration and management information. operation;]llicenses, history, and financial information.

2-After filling the required information by the customer, the relationship manager check the data and contact thecustomer for any additional information or corrections.

3- Having the case completed by the relationship manager, the case will be referred to risk department to find aprimary risk score.

4- The customers information gets processed by a computer program to produce the primary risk score.

5- The credit status of the customer is then analyzed more precisely by risk analysts to obtain the final risk score.

6- The risk score obtained by risk management department will playa key role for credit granting and specifyingcollaterals.

7- Loan granting process for natural persons is usually considered regarding a specified business activity. The need forworking capital and commitments is assessed. This kind of customers form less than 10% of our customers. Their taxdeclaration is the base of risk management department analysis.

8~The equity ratio of the customer must meet the CBl's standard.

68

http://carm.middleeastbank.ir,itincludes

Middle East BankfPJSqNotes to the financial statements

For the six months financiAl period ended 21 September 2016Interim financial report

49.3.7. Credit quality analysis

The quality of bank assets, including loans, commitments and investments, the type and amount of collaterals taken and adequacyof collaterals taken (loan to value ratio) is illustrated by the following tables from risk department point of view.

49-3-7-1- Analysis of credit quality of loans and funded commitments and investments based on the bank's internal credit rating

Credit quality analysis table regardless of the value of collaterals and on the basis of a review of financial statements, ability to payprincipal and interest on loans and payment behaviour of customers in the past is provided. Levell loans (low risk) are those inwhich customers have paid back completely with less thoo three days in average late payment and B or higher risk rate. Level 2loans (medium risk) are those in which customers had late payment in the past but for the current loan they have paid backcompletely without change in the asset class and in average have B- to CCC- risk score. Level 3 loans (high risk) are those whohave CC to C risk rate and all overdue loans. Level 4 loans (nearly doubtful) are those who have been "suspended" or "doubtful" ill21 Sept. 2016. For better comparison, the following table illustrates the loans and their correspondent collateral value.As for risk levels for commitments, the same risk level of the loan of that cuslomer has been used. As for investments,long-terminvestmens have been considerd as "low risk" and for short-term investment (TSE listed companies) "medium risk" has beenconsidered.

Credit quality analysis-IRR million

LOlln Investments Commitments

19,257,925

19 Mllr. 20168,866,930

9,828,730

562,265

22,869,635

21 Sept. 201613,343,037

9,029,784

496,814

19 Mar. 2016657,236

637,692

,21 Sept. 2016679,737

536,765

21 Sept. 2016 19 Milr. 2016level1 .1ow risk 20,907,953 16,926,675

level2 - medium risk 23,022,532 9,343,033 :

level 3 - high risk 3,830,847' 2,179,019:

level 4 - nearly doubtful 199,629 193,617 !Total gross amount 47,960,961 28,642,344 I 1,216,501 1,294,928.Provision for bad and doub (788,n7) (550,724) (142,574) (126,101)

Net book amount 47,172,234 28,091,620, 1,073,927 1,168,827'

• Investments include any securities with characteristics of property rights such as variety ofstocks.

49-3-7-2- Analysis of credit quality ofloans granted to customers based on asset classes

Loans

Current loansPast due loansOutstanding loansDoubtful debtTotal gross amountProvision for bad and doubNet book amount

21 Sept. 2016IRR million44,572,6602,211,263920,276,256,762

47,960,961(788,727)

47,172,234

19 Mar. 2016IRRmillion27,442,8571,005,87035,983157,634

28,642,344(550,724)28,091,620

69

Middle East Bank(PJSqNotes on the financial statements


49-3-7-3- Credit quality of participation bonds and etc.Analysis of credit quality

• 21 Sept. 2016I IRR million


GovernmentalMinistry of Roads and City PlanningGovernment's development projectsIslamic treasury bonds

Governmental companies bondsNational Iranian Oil CompanyNon-governmentalMiddle East Bank Ofogh mutual fundKardan mutual fundYekom Iranian mutual fundHami fixed income fundAmin Melat mutual fund

70

520945,2292,026,742,. 2,972,491

292,736

207,255

. 985,59299,997300,0641,592,9084,858,135

52074,138

1,165,8181,240,476

291,300

57,037700,000191,040

948,0772,479,853

Middle East BankfPJSqNotes on the financial statements

For the six months financial period en~ed21 September 2016Interim financial report

49-3-7-4- Types and amounts of customers' collaterals

602.423539,716462,6245,255,1733,865,95130,693

9,689,144

2702,413,980324,619

2,052.07012,917.73550,148,06118,753.31072,810,208179,866.037


489,739-649,819403,363 ~5,262,654:5,229,229 j18,237 I

Q,072,566 \,I

I

220 II2,088,404 ~

263,898 :2,104,751 I12,672,213 I

75,862,060 i25,032,836 ,77, 195,696 I216,345,685 :

r2is.pt.2016', IRR million

I

Collatcrals from corporate customers' loansParticipation bonds\sukukSharesUnlisted stocksDepositLand and real statesChecksPromissory notesStand-alone legally binding contract

Collaterals from natural persons' loansParticipation bondslsukukSharesDepositLand and real statesChecksPromissory notesStand-alone legally binding contract

Colla.erals' tylle

• Amount above are based on Bank's expert report.

71


For the six months financial period ended 21 Septemher 2016Interim financial renort

49-3-7-5~ Loans classification(net) according to collateral's market value is as below:

Descri ption .1'" ils;pt.":ioiti1 19 Mar. 2016IRRmillion , IRRmillion,

Loans to natural persons I50%> 887,0461 1,073,930

51-70% 28,6191 164,947

71-90% 531,2141 471,603

91-100% 377,621., 169,386

100%< 1,037,451 1,138,350

Loans to corporate customers

50%> . 30,133,957 i 12,623,929

51-70% . 572,260 1,277,962

71-90% 1,347,5051 852,51291-100% 1,433,730 ! 573,008100%< 10,822,83 I . 9,745,993

47,172,234 ' 28,091,620

* The amount of collateral's market value is based on CBl's regulations.

49-3-8- Credit risk concentrationMEB's credit risk management mostly concentrates on short-term loans that provide manufacturing, commercial orcontracting firms and business owners with their working capital. Furthermore, investment companies and stockbrokerage firms can get loan in order to facilitate their own customers investment activities in the condition that theybring all their banking activities to MEB. Generally, Future operational cash flow forecast must confirm firms' abilityto reimburse principal and interest of the loan received. Thus, credit risk management's concentration is in itsminimum level for personal loans, mortgages, consumption loans or long~term project financing. Although MEBmight contribute in national projects with other banks as syndication to ensure project's profitability.

At the moment, risk management department docs not rate individuals and brokerage firms based 011 financialstatements, but tries to cover the risk by substantiating customer's reputation, experience, history of its activity withMEB and other banks and obtaining guarantees. Risk management department is developing internal rating models tocover brokerae:e firms. leasinl! comoanies. investment comoanies. currencv exchange firms and individuals.On average, facility applicants have B+ or higher credit rate. Based on definition, at the moment customer with B+ orhigher credit rate has ability to reimburse received loans. Although bad economic situations of the country might causethese kind of customers face difficulties.

Collateral received from customers with credit rates lower than average arc much higher than those with credit rateshigher than average (B+ to AA). Amount of collateral based on credit rates ensure risk management they expected losswould be lower than one percent.

If loans or commitments concentration increases in a specific area, bank tries to control or decrease loans andcommitments in that area. Risk management department periodically prepares reports about loans concentration indifferent areas for risk committeelboard of directors

Risk acceptance amount in Middle East Bank differs based on the level of loans and deposits and other existing risks.For instance, if the loan to deposit ratio exceeds approximate level of 85%, bank tries to lower this ratio by carefullyselecting customers and maintaining its liquidity position at a favorable level. Also, if bank notices that average riskfactor of loans exceeds its usual level (based on capital adequacy ratio calculation in Basel JIJ), it prefers to give loansto customers with higher credit rates.Giving Loans and making commitments take place by considering relationships in any kind and by observing hugeLoans and commitments regulation approved by Money and credit counciL

72

Middle En" BnnkrPJSClNotes on the financial statements


49-3-8-1- Loan and investment distribution based on economic sectors and geography

Loans In\'cstment in stock..;

21 Sept. 2016 19 Mar. 2016 21 Sept. 2016 19 Mar. 2016

LRRMillion IRRMillioll IRRMillioll IRR Million

Book value 47,172.234, 28,091,620 1.073,927 1,168,827Amount or loans hased on economic sectorsIndustrial 10,975,693 9,889,208 441,106 ' 529,846Housing 5,109,408 4,338,082Commercial 11,403,835 10,026,729Services 12,237,280 2,827,287 749,633 ' 730,082Agriculture 609,028 512,728Mining 6,836,990 . 442,493 25,766 35,000Other 55,093Accumulated decrease in value (142,578) (126,101)

47,172,234 28,091,620 1,073,927 1,168,827Amount of loans/commitments insideloul<;ide of the countryInside the country 47,172,234 28,091,620 1,073,927 , 1.168,827Overseas

47,172,234 j 28,091.620 1,073,921 1,168,827

49.3-8-2- Loans according to profit sharing contracts and trading contracts

5,638,480111,055,470

116,706,272 :

Loans bllhmce al lhebullln"c sheet date

Trading contracts

profit sharing contracts

Natural personsCorporate customersNatural personsCorporate customers

r----. - - _..1 Loans increllse during the) pcriod

r Amoun' % of totall JRR Million Percentagc

12,322 0,0%0.0%4.8%95.2%

AmountIRR Million

9,61877

2,852,25644,310,28347,172,234

% orlolnlPcrcentngc0.0%0.0%6.0%93.9%

73

(PJSClMiddle Ens! BnnkNotes on the financial statements


49.3.9~ Managing non.performing loans

The committee of"Supcrvision and collection ofloans and receivablcs" meets evcry week to follow through with the status oftlleNon-perfonning loans. and the required legal actions in order to callcet bad loans and receivables. The commiucc members nrcthe managing director. the deputy to managing director, legal advisor to managing director. the nssisHml managing director incredit department, the managers of the credit depDrtment, the manager or finance dcpartmcnl, the manngcr of legal dcpanmcnl.and the manager of credit operations department. During the financial ycnr cnded Sept., 21,2016, this committee has met 24times.

TIle decisions made in this committee are sent 10 relevant acpartments to follow through. The loans and receivables that are latefor more than 60 days are categorized as overdue and are put on the committee's agenda for decision making.

When the following through with n non performing client docs not result in the desired collection or settlement, then the case issent to legal department for raising the case \llith the Judiciary for collection and possibly the liquidation of coJlaterals accordingto the: laws and regulations and as required.

49-3-9.1. Distribution of non performing loans based on economic sectors

Balance of non-performingloans

specific provision Net balance of non-performing loan~

Distribution of non perfonning lonnsIndustry'.IousingcommercialServicesAgricultureMineTotal

21 Sept. 20)6,IRR million I

,. 295,214:t 481,249'~ 2,001,293I 610,545

II 3,388;301 ~


210,26519,963

904,81864,442

1,199.488

21' Sept. 2016~IRR million:

I, (65,946)11(22,649):I (240,862)1I '(15,356),

(344,813)1

19 Mar. 2016lRR million

(12,905)(1,070)

(109,716)(2,932)

(126,623)

21 Sept. 2016i IRR million I

I 229,268 i

458,600 '1,760,431

595,189,

3,043,488 '

19~Ilu: 2016IRR million

197,36018,893

795,10261,510

1.072.865

74

Middle Enst BnnklPJSqNotes on the financial statements

For the six months financinl period ended 21 September 2016Interim financial report

49.3.) O. Capital nceded to co\'cr credit risk

The amount of capital needed to cover the credit risk of the assets is 4.584.633 million Rials and its calculations presented in (able49.3.10.1. Compared with base capital at the balance sheet date, Bank has IRR 1.418.392 M surplus in order to over credit risk.

49-3-10.] - Calculation for capital nceded to cover credit risk

21 Sept. 2016

Type orassel Assets And Risk Risk amount AllocntcdCommitments fuetor, capilal

JRR million % IRR million IRR millionDue from banks and financial institutions 5,404,276 20 1,080,855 86,468Non governmental participation bonds 1.592.908 100 1,592,908 127,433Investment in shares 1,073,927 100 1,073,927 85.914Accounts receivable 1,033,983 .100 1,033,983 82.719Loans that are guarantee with real Slates 9,481,826 50 4,740,913 379,273Other loans 38,479,135 100 38,479,135 3,078,331Net of fixed assets and goodwill 2,848,069 100 2,848,069 227,846Other assets 1,191,661 100 1,191,661 95,333Guaranty for non.govemmental participation bonds(Credi 417,870 100 417,870 33,430Commitments for guarantees issucd(Crcdit Conversion F 3,219,334 100 3,219,334 257,547Commilments for guarantees issued(Crcdit Conversion F 535,736 100 . 535,736 42,859Commitments for letter of credit issued(Crcdit Convcrsio 657,830 100 657,830 52,626Commitments for letter of credit issucd(Credit Conversio 288,292 100 288,292 23,063Other commitments(Credit Conversion Faclor 1:11 00%) 147,390 100 147,390 11.791

Total 66,372,235

75

57,307,903 4,584,633

\

JTadvin Ii. Co /

.-,./"

<pJSC)Middle East BankNotes on the financial statements


49-4- Liquidity risk49-4-1- Liquidity risk definition

Liquidity risk is caused by bank's inability to repay its short-term liability. Liquidity risk is usually intensifiedby the lack of enough assets with high liquidity and because of the inability to liquidate other assets fast torepay short-tenn liability.

49-4-2- Liquidity management policyIn order to control liquidity risk or be sure of the bank's ability to repay its short-term debt, its needed to definebank's asset management and resource collection.

MEB's asset management policy, as last years is based on giving short-term loans to firms and establishinglong-term relationships with corporate clients. For financial year ended Sept. 21, 2016, bank's short-term loansportfolio comprised 69% of its total asset. Major part of this portfolio was allocated to short-terms loans toprovide working capital for firms and individuals who run businesses for buying raw materials, sales on credit,etc. Corporate clients would be rated based on their financial reports, cash flows and ability to repay principaland interest of the given facility from their revenues. MEBls has a policy that states its investment on TSElisted companies must be at a minimum level. For financial year ended Sept. 21, 2016, these investmentscomprised 0.7% of total asset. Long-term investments comprises 1% of total asset and include investment onlife insurance company, brokerage firm, currency exchange company and investment company in order tofacilitate other financial needs of clients beside investment on an IT firm to develop bank's systems. Because ofthe economic situations, MEB has continued its conservative approach of liquidity management bymaintaining highly liquid assets (cash and cash equivalent, contribution bonds or other assets with activemarket) composing 14% of total asset. About 5% of banks asset consist affixed, intangible and other assetswhich are employed for bank's main operations.

MEB's resources are mainly collected from 3 sources: 1- Cash flows from corporate clients and individualsrelated to those clients 2- Custom~rs who have good long~term relationship with MEB for their assetmanagement and 3-0ther customers with low worth deposits. For financial year ended Sept. 21, 2016, 1600 outof35000 deposit customers supplied about 90% of banks resources. Major deposit customers have continuedtheir loyalty and close relationship with MEB.

76

Middle East BankfP,JSC)Notes on the financial statements


49-4-3- Administrative units for liquidity risk managementMEB's risk management department has one administrative unit and does not have different units for eachrisk of the bank. Risk department's experts cover other risks of the bank by switching responsibilitiesassigned by the senior risk manager.

49-4-4- Liquidity risk assessment methodologyLiquidity risk assessment is based on some traditional models and Basel3 models. Traditional models includeloans to deposits ratio, highly liquid assets to total assets ratio and liquidity gap ladder. Bascl3 models includeliquidity coverage ralio (LCR) and net stable funding ratio (NSFR). LCR indicates bank's ability to recoverdeposit outflow in crisis situation for a 3D-day period. According to Basel3, this ratio must be at least 100%and for financial priod ended 21 Sept. 2016, it is 77.1% in MES. NSFR is defined as the amount of resourcesbank assumes to be available in long-term per the amount bank needs to operate in long-term. This ratio mustat least be 100% which for MEB it is 134.8% for financial priod ended 21 Sept. 2016.

49-4-5- Liquidity risk control & monitoring proceduresTo ensure that the bank1s path is aligned with defined policics in 49-4-2 notc and to control liquidity risk andmanaging cost and resource, finance department every day provides the seniors managers of the bank with astatus report of deposits, given loans, bank's various assets and liabilities, assets profitability and cost ofresources. Every week costs and resources status would be reviewed with the presence of senior managers andbased on these reports decisions would be made in order to progress the affairs. In appropriate times, riskmanagement department prepares reports about calculation of liquidity gap, liquidity coverage ratio and netslab Ie funding ratio to senior managers and board of directors. Based on defined acceptable ratios includingliquidity ratios, necessary decisions would be made for liquidity management. For liquidity risk, thesedecisions include decrease or increase in loans amount which causes increase or decrease in bank's liquidassets. MEB tries loans to resources ratio not to be more than 85%. ,Incase ofliquidity gap, bank maintains asignificant positive balance for the period less than 3 months.

77

- ,

Middle East Bank(P.lSqNotes on the financial statements


49-4-5-1- Liquidity reserves

I>esc::ription

Duc from COlDue from other banks nnd financial statementsGovernmental bondsNon-governmental bonds

Investments in listed sharesTotal

49-4-5-2- Liquidity ratios:

Cash and cash equivalent to lolal assetsCash and cash equivalent to total depositsNClliquid assets to total deposits-Loans to total depositsLoans to long-tcnn depositsNon-maturity deposits to toml deposits ••

21 Stpt. 2016IRRmillion l

1,267 !291,259 "3,265.227 l,

1,592,908 ,394,190

5.<;44,851

At thr:beginning of the

period%

81028321446


66,'34252,3601,531,776948,077511,591

3,309,938

Ave

%

'101258218147

Max

%

1214910322360

MinAt the end ofthe pef"iod

% %

8 810 10I 455 83140 '141

36 36

Cash and cash equivalent include cash, bonds and etc. which havc active liquid market.

"Net liquid assets include cllSh, cash equivalent and investments which have active liquid market excluding other banks deposit, issueddebts securities and other linbilities with less than one month maturity.

uNon.maturity deposits include deposits which h~vc no contractual maturity like current dcposits. sa\'ing deposits and short.tcnn deposits.

78

(PJSClMiddle East BankNotes on the financial statements


49-4-5-3- Assets and liabilities gap anal)'sis

Non-specificmaturity

IRRmillion

More than5Years

IRR millionIRR million

Between I andYears 5

IRR million

Between J andMonths 3

Less than Imonth

IRR million

Book value

IRR million

Below table illustrates assets and liabilities according to their maturity that is possible to be \\~thdrawnor settledr - ----_. - - _. --- --- - 21 Sept.2016 --

Between 3Months and I

YearIRR million

Assets:Cash 292.526 292.526Due from banks and financial statements 5.747.127 5,747,127Loans and advances 47,172,234 9,838,121 18,951,004 1,226,162 17,156,947Investments 5.932.062 3,856,431 489,103 906,791 679,737Due from subsidiaries and associates 519,139 519,139Other accounts receivable 514.844 11.733 10,'287 130,200 196.320 69,386Tangible fixed assets 1,995,840Intangible assets 852.229Statutory deposit 4,183.171 2,091,586 1,089,914 71,678 733.231 196,762Other assets 1.191.661 821.871 251.153.60 3.099.00 115,537Total assets 68,400,833 22,659,395 20,302,359 2,439,381 18,993.289 1,061,422Liabilities:Due to banks and financial statements (2,270.063) (1,574,652) (695.411)Customer current deposits (6.851.946) (5,373,317) (352,507) (1.075.470) (50.652)Dividends payablc (668,378) (668,378)Provision for income tax (78.368) (78,368)Other liabilities and provisions (1.405,538) (1,116.223) (104,245) (38.635) (91.321)StaITtermination benefits (44,588)Customers investment deposits (50,900,070) (8.877,789) (9,643.372) (13.157.852) (19.221,057)Interest payable (370,331 ) (133,113) (230,752) (6.466)Total liabilities (62,589,282) (17,743,472) (11,026,287) (14,356,791) (19,363,030)Total shareholders' equit\' (5,811,551)Tot:'lllhibilities and shareholders' tquit" (68,400,833) (17,743,472) ( II ,026,287) (14,356,791) (19,363,030)Gap 4.915.923 9.276,072 (11.917.410) (369,741) 1,061.422Accumulatcd gap 4,915.923 14,191,995 2,274,585 1,904,844 2,966.266Gap to base capital ratio 103% 195% -250% -8% 22%Accumulated gap to base capital rntio 103% 298% 48% 40% 62%

96,918 ,1,995,840

852.229 ,

2,944.987

(55,114)(44,588)

(99,702)(5.811.'51)(5,911 ,253)(2,966,266)

-62%0%

79

Attachment ofthe audit report I

I

TadVin~



continued 19 Mar. 2016

Less than I Between I andBehveen 3

Between 1 and More thanBook value Months and I Non-specific

month 3 MonthsYear

5 Years 5Years maturity

IRR million IRR million IRR million IRR million IRR million IRRmillion IRR millionAssets:Cash 318,494 318,494Due from banks and financial statements 2,171,078 2,159,176 11,902Loans and advances 28,091,620 8,422,657 17,947,415 989,207 732,341Investments 3,648,680 2,625,485 291,300 74,658 657,237Due from subsidiaries and associates 276,661 276,661Other accounts receivable 890,127 521,930 13,700 66,205 199,946 41,589 46,757Tangible fixed assets 1,906,471 1,906,471Intangible assets 857,238 857,238Statutory deposit 3,099,233 1,598,576 190,465 1,016,142 292,781 1,269Other assets 118.221 2,474 115,747Total assets 41,377,823 15,646,318 18,454,782 2,350,689 1,299,726 815,842 2,810,466Liabilities:Due to hanks and fmancial statements (469,037) (162,383) (306,654)Customer current deposits (5,322,031 ) (4,031,785) (380,135) (856,647) (41,092) (12,372)Dividends payable (4,718) (4,718)Provision for income tax (165,337) (165,337)Other liabilities and provisions (377,391) (6,055) (266,840) (88,888) (15,608)Staff termination benefits (31,462) (31,462)Customers investment deposits (29,094,132) (6,228,722) (10,181,196) (9.138,903) (3,545,311)

Interest payable (150,601) (144,427) (6,174)

Total liabilities (35,614,709) (10,578,090) (11,140,999) (10,249,775) (3,586,403) (12,372) (47,070)Total shareholders' equity (5,763,114) (5,763,114)Total liabilities and shareholders' equity (41,377,823) (10,578,090) (11,140,999) (10,249,775) (3,586,403) (12,372) (5,810,184)Gap 5.068,228 7,313,783 (7.899,086) (2,286,677) 803,470 (2,999,718)Accumulated gap 5,068,228 12,382,011 4,482,925 2,196,248 2,999,718Gap to base capital ratio 106% 154% -165% -48% 17% -64%Accumulated gap to base capital ratio 106% 260% 95% 47% 64% 0%

80


For the six months financial period ended 21 September2016Interim financial report

49-4-5-4- Contractual maturity analysis of financial liabilities

81

Middle East Bank(PJSC)Notes on the financial statements


49-4-5-4-2- Below table illustrates foreign currency financial liabilities according to their maturity that mentioned in related contract

82



49-4-6- Program to cope with crisis (crisis testing)Middle East Bank, according to special circumstances of Iran economics during 2016 and recently years in whichMEB has been established, follow a high conservative policy to liquidity management and capital preservation. To beaware of these policies can be referred to 49-4-2 and 49-4-4 notes.

Accumulated gap for less that 3 months period is 14,467,039 million IRR which is 3.4 times the bank's capital. Thisindicates the liquidity status of bank for Jess than 3 months is relevant.

49-5- Market risk49~5-1-Market risk definition

Market risk in MEB raised from 3 causes: I-Change in short-term investments value of bank's stock portfolio, 2-Change in deposits and loans rates and 3-Change in foreign Currencies Exchange rates.

The equity stock portfolio of the bank is 0.7 percent of bank's total assets, however, its major portion is allocated tolisted corporates in TSE. The stock portfolio consists of 41 corporate shares (497,360 IRR Mi Ilion), 33 eorporatesare listed companies in Tehran Stock Exchange (432,527 IRR Million), 2 ETF(25,045 lRR Million) and others(39,788 IRR Million) are aTe companies.

However, during 6 months of 2016, interest rates have fallen as directed by the Central Bank oflran, but profitabilityof bank has not experienced any significant change. IRRBB comprised a non-significant portion of overall risks ofMEB because of the regulatory fixing of lending and deposits interest rates and an almost regulatory fixed flat yieldcurve. We have not observed any significant changes on profitability ratios due to regulatory changes on fixed rates ofdeposits and loans. However, regulatory interest rate risks remain where MEB may face loss of funds in case whereMEB abides by the eBi rules on fixed interest rates and other banks may deviate significantly from 'el3l rules.

83Attachment ofthe audit report

~Vin&Co.



Foreign exchange rate risk in MEB arises from the ofT~balancesheet commitments related to imports of goods. MEB did notengage in direct market related foreign exchange activities or related hedging activities. MEB docs not engage in profiting fromchanges to foreign currency exchange rates, however, occasionally, MEB would end up with open long or short positions in itsnonnal activities for servicing clients engaging in import/export or other foreign exchange activities.

49-5-2- Administrative units for mar-ket risk managementRisk management in MEB consists of integrated executive department and has not a separate unit for eaeh type of risk. Riskexperts by rotating in various responsibility that assigned by the senior risk management (SRM), in addition to market risk,cover other type of risks faced by bank.

49-5-3- Method of market risk calculationMarket risk arises from stock investment calculated by Basel HI and sharp model. According to Basel III, market risk can becalculated using the Yalue at Risk (VaR) methodologies. The "Yalue at Risk" calculation must be done based on 0.5%probability (one tail) using daily standard deviation and 10 days horizon time. Each bank must meet, on a daily basis, capitalrequirement illustrated as the higher of previous day's value at risk or an average of the daily value at risk in 60 working days.According to Basel III notes, the capital requirement equals to YaR Amount *(3 + X) with X between 0 and 1. Our estimate ofrisk-weight of the short-term equity investments using a Basel-III Yalue at Risk model is 247% (the standardized Basel-III riskweight for equity investment in acceptable equity exchanges is 300%). The annualized standard deviation of stock portfolioreturn is estimated to be II % and annualized return is estimated to be 17.9%. Assuming risk-free rate for term deposits to be16%, the risk premium for stock portfolio is estimated to be 1.9%. From the 1.9% risk premium and the standard deviation ofII % a Sharpe Ratio of 0.18 is calculated. The sharpe ratio 0.4 is too low (1.0 is considered ok), and considering the highercapital requirements for equity investments, MEB plans to further reduce its' short-term equity investment. The following tableshows the concentration ofMEB's investments in Tehran Stock Exchange (TSE).

49-5-4~ Stock and other market investment VaR .

YaR for stock investments and other market-oriented investments based on 10 days horizon time and 1% loss probability arecalculated by below 2 methodology: single asset and variance-covariance.

Calculating VaR based on variance-covariance methodology (10 days horizon time and 1% Loss Probability)

JRRMilliOJl

31,207

Impact onProfit and Loss

19. Mar. 2016PotentialChange inMarket PricePercent

(-6.1 , +6.1)IRR Million

23,242

Impact onProfit and Loss

21. Sept, 2016PotentialChange inMarket PricePercent

(-4.28, +428)Investmentin listed sharesInvestment in unlisted shares

Type of investments

Impuct onprofit lind loss

lRRMiJlioll73,820

19. Mllr. 2016Potentialchange inmarket pricePercent

(-14.4, +14.4)IRRMillioll

50,164

Impact onprofit and loss

(-9.7, +9.7)

Type of investments

Calculating YaR based on single asset methodology (IO days horizon time and I% Loss Probability)21. Sept, 2016

Potentialchange inmarket pricePercent

Investmentin listed stocksOther strategic long-term investments

84

49-5-5- Foreign Currency V.aR Analysis


For the six months financial neriod ended 21 September 2016Interim financial report

Status of assets and liabilities and foreign exchange commitments by the end 0[21 Sept. 2016 is as follows:

Dollar EuroEuro-rree British UAE Dirham Lira RialOmani Ko""an "'on Iraqi Dinar Yuan Swiss F•.•.ncmark.t Pound R" ••••

Cftsh 2,563,1I3 1,840,440 240,559 683,215 161,124 44,409,826 1,000 891,000Due from government 5,470 35,645,287 16,397,410 537,000 948,479 135,819 1,106,616,180 ]2,163,722 110,234,904 289,388Loans and advances 510,090,611 44,735,370 133,336,179 997,902InvestmentsDue from subsidiaries and associatesOther ftccounts receivable 16,512,515 2,931,204 2,467,716,174 25,000,000 772,217 70,355,966Tangible fixed assets,Intangible assetsStatutory depositOther assets 644,519Total assets-FCY 512659194 99378131 16,637,969 137487598 1.109603 135819 3,574,332 354 69,409,826 12,936,939 181,481,870 1187,289Due to banks and financial statements 51,832,781 83,342 997,902Customer current deposits 140,628 27,820,981 16,268,611 3,095,509 838,389 105,240,665 11,757,291 88,358,639 286,921Dividends payableProvision for Income TaxProvisions and other liabilities 507,020,625 17,314,916 2,059,121 50,947 3,470,039,683 974,687 91,746,455Customers investment deposits 2,655,097 1,587,765 131,385515Total liabilities and Interest and benefits of

509,816,350 98,556,443 16,268,611 136,540,146 921,7JI 50,947 3,575,280,348 12,731,978 180,105,094 1,284,823investment deposit holders.FCYNet assets (liabilities) at 21 Sept. 2016 2842844 821688 369358 94745J 187,872 84873 (947994) 69,409826 204962 1376776 2,467Foreign currency open position IRR

89,294 28,769 14,700 8,103 1,982 6,924 (27) 1,866 95' 646 79equivalent

Foreign currency open position to base1.9% 0,6% 0.3% O.l},'/<, 0.2% 0.0% 0.1% 0.c}''10 0,0% 0.0"10 0,0"10 0,0"10capital ratio

Net assets (liabilities) at 19 Mar. 2016 (200991) 797,099 163,300 239,996 85 098 69,409826 632 1,352,976 2724Commitments for letters ofcredit 71,526,531 877,901,556 209,753,974 160,625,280 361,724Commitments for guarantees issued 22,360,692 45,030,448 165,000 3,198,598 1,382,718,500 4,990,143 26,000,000Commitments for amount received fromNational Development Fund of Iran

Middle East Bank(P.JSqNotes on the financial statements


Method]: Single asset VaRAccording to foreign currencies single asset VaR methology, VaR for stock investments and other markct-oriented investments has been illustrated in the following table.Currency portfoilio of bank consists of II currency so that Var is calculated by single asset methodology. VaH.based on 10 days horizon time and 1% loss Plobability at21 Sept.,2016 has been calculated 20,794 IRRMillion. .Potential market price changes are calculated 10 days horizon time and t% loss probability

IRRMillion

lmpact on :profit and loss'

IRRMillion

Impact onprofit and loss

19 Mar. 2016potentialchange in

ma rkef pricePercent

i~~~ llSept. 2016u

-

Potentialt change in.l market price

Percent

Currency Type

USOCHFINRAEO

TRYIQOCNYKRWEUR

EUR - free marketOMR

(-.2,+.2)(-.03,+.03)(-.02,+.02)(-.002,+.002)(-.04,+.04)(-.05,+.05)(-.0 I ,+.0 I)(-.04,+.04)

. (-.03,+.03)! (-.09,+.09)~ (,<)(j4,+,(j04L_

[

18,2613

12

19

87 :89 '13i

1 I9491,331 '29

20.794

(-.05,+.05)(-.05,+.05)(-.03,+.03)(-.05,+.05)(-.07,+.07)(-.1,+.1)(-.03,+.03)(-.05,+.05)(-.07,+.07)

(-.05,+.05)

21

314

5

120

130

3471,080

301.750

86 Attachment ofthe audit report

TadVin&.~~

Notcs on the financial statementsFor the six months financial period end cd 21 September 2016


Method 2: value at risk using nriance-covariance methodAccording to the method of calculating the value at risk of foreign exchange assets in accordance with thevariance-covariance method, The value at risk to invest in stocks and other investments have a market price isprovided in the following table:The portfolio consists of 11 foreign exchanges that value at risk has been calculated. The value at risk offoreign exchange portfolio within 10 days and 99% confidence interval would he about 1.744 IRR Million.probable changes interval in market price within 10 days and 99% confidence for each foreign exchange hasbeen calculated separately and the diversification effect is deducted,

Currency Type

21 Sept. iOl6probablechanges in Yalue at riskmarket price

% IRRMHlion

19 Mal: 2016probablechanges in Yalue at riskmarket price

0/0 IRR Million

Value at risk.FCY portfolio (-.01,+.01) . 1,744 (-.02,+.02) 1,241

49-5-6- The amount of required capital to cover market risk using a single asset method:

Stock risk FOI"cigncxchan~c ,'isk

Measurement method

Historical simulation model

Yalue at risk( IOday')

IRRMiliion46,819

contingencyreserved

IRRMillion187,276

Yalue at risk(IOday')

IRR Million20,794

contingencyreserved

IRR Million83,174

Totalcontingencyreserved formarket risk

IRR Million270,450

The amount of required capital to cover market risk using variance-covariance method:

Stock Risk Foreign Fxchange Risk

Measurement method

Historical simulation model

Yalue at risk( IOday')

IRR Million20,622

contingencyreserved

IRRMiliion82,489

87

Yaluc at ris!'-(IOday')

IRRMillion1,744

contingency,'csel'Vcd

IRRMiliion6,978

TOIIiIcontingencyreserved formllrket risk

lRR Million89,467

iTadvin & Co /--



-49.5.' lntercst rate sensitive asset and liabilit)' gap analysis

- -"-----~- . "_._--- - .~._. _ .. _. - ---_.21 Sept. 2016

AmountMaturities up to

1-3 Month 3 Month-] Year 1-5 Year >5 Year Insensitive toone month rale

IRRMilIion IRRMillion IRR Million IRR Million IRRMiliion IRRMilIion IRRMillionAssetsCash 292.526 292.526Due from banks and financial statements 5,747,127 5,747.127Loans and advances 47.172,234 9,838,121 18,951.004 1,226'\62 17.156,947Investments 5.932.062 3,856,431 489,103 906,791 679,737Due from subsidiaries and associates 519,139 519.139Other accounts receivable 514,844 514,844Tangible fixed assets 1,995,840 1,995,840Intangible assets 852,229 852,229Statutory deposit 4,183,171 2,091.586 1,089,914 71,678 733,231 196,762Other assets 1,191.661 1,191.661 i

Total assets 68,400,833 15,786,138 20,040,918 1,786,943 18,796,969 876,499 11,113,366LiabilitiesDue to banks and financial statements (2,270.063) (1,474.243) (695,411) (100.409)Customer current deposits (6,851,946) (5,016,181 ) (1,835,765)Dividends payable (668,378) (668.378)Provision for income tax (78,368) (78,368)Other liabilities and provisions (1,405,538) (1,405,538)Staff termination benefits (44,588) (44,588)Customers investment deposits (50.900,070) (8,877,789) (9,643,372) (13,157,852) (19,221,057)Interest payable (370.331) (133,113) (230,752) (6,466)Total liabilities per maturitv (62,589,282) (15,50 I ,326) (10,569,535) (13,164,318) (19,221.057) (4,133,046)Shareholders' eguity (5,811,551) (5,811.551 )Total liabilities and shareholders' equitv (68,400,833) (15,501,326) (10,569,535) (13,164,318) (19,221,057) (9,944.597)Liquiditv gap 284,812 9.471.383 (11,377,375) (424.088) 876.499 1,168,769Cumul<ltive liquidity g.ap 284.812 9,756.195 (1.621.180) (2,045,268) (1,168,769)

88

Middle East Bank(P JSC)Notes on the financial statements


continued 19 Mar. 2016

AmountMaturities up

1-3 Month 3 Month-I Year 1~5Year >5 YearInsensitive to

to one month rateIRR Million IRR Million IRR Million IRRMillion IRR Million IRR Million IRR Million

AssetsCash 318,494 318,494Due from banks and financial statements 2,171,078 2,171,078Loans and advances 28,091,620 8,422,657 17,947,415 989,207 732,341Investments 3,648,680 2,625,485 365,958 657,237Due from subsidiaries and associates 276,661 276,661Other accounts receivable 890,127 890,127Tangible fixed assets 1,906,471 1,906,471Intangible assets 857,238 857,238Statutory deposit 3,099,233 1,529,625 182,249 972,312 280,152 1,214 133,681Other assets 118,221 118,221

Total assets 41,377,823 12,577,767 18,129,664 1,961,519 1,378,451 658,451 6,671,971LiabilitiesDue to banks and financial statements (469,037) (162,383) (306,654)Customer current deposits (5,322,031 ) (3,520,343) (1,801,688)Dividends payable (4,718) (4,718)Provision for income tax (165,337) (165,337)Other liabilities and provisions (377,391) (403) (305) (376,683)Stafftennination benefits (31,462) (31,462)Customers investment deposits (29,094,132) (6,228,722) (10,181,196) (9,138,903) (3,545,311 )Interest payable (150,601) (144,427) (6,174)Total liabilities per maturity (35,614,709) (l0,056,278) (l0,494,329) (9,138,903) (3,545,311 ) (2,379,888)Shareholders' equity (5,763,114) (5,763,114)Total liabilities and shareholders' equity (41,377,823) (10,056,278) (10,494,329) (9,138,903) (3,545,311) (8,143,002)Liquidity gap 2,521,489 7,635,335 (7,177,384) (2,166,860) 658,451 (1,471,031)Cumulative liquidity gap 2,521,489 10,156,824 2,979,440 812,580 1,471,031

89

Middle East BankIPJSClNotes on the financial statements


49-6- Operational risk49-6-1- Operational risk definition

Definition of operational riskPotential losses due from defined internal nank processes which are not well defined or are not. definedcompletely or are defined incorrectly.Samples of operational risk. are losses due to intentional or unintential breakdowns, losses due to banksoftware application bugs and errors, losses due to events outside the Bank, or losses due to legal issues.Loses due to strategic decisions or damages resulting from strategic decisions are not consideredoperational risk.

49-6-2- Administrative units for operational risk managementRisk management in MEB consists of risk committee (RC) and risk department. The duties of the RC arcmodeled based on the Basel document entitled "Guidelines - Corporate governance principles for banks".issued in October 2014. The RC consists offour board members and the head of risk department (orSenior Risk Manager - SRM). SRM is responsible for reporting risk related matters to RC, discussingrelevant information with members of the RC/Board members, as well as executing various resolutionsofRe.Risk department operates under the guidance of risk committee (RC) and carries the policies set forth bythe RC. The risk department is headed by the SRM and employs four additional risk analysts. The riskanalysts and SRM share the duties of credit risk modeling, credit risk rating and liquidity riskmeasurements.

49-6-3- Intentional and unintentional human errors preventive measureInternal audit, compliance department and risk management department each have control andmonitoring systems and report separately to board of directors on the implementation of the bank'sinternal rules, current issues, problems or process improvement methods.Human capital Management holds training courses to familiarize employees with the rules andregulations of the Bank.Also. all employees are required to sign a commitment to carry out tasks correctly in terms of moralityand in accordance with the Bank's rules and regulations.Managers are responsible for the errors of their own staff and the effectiveness of managers incontrolling the errors of their staffis examined in terms oflack of human errors.

49-6-4- Program to cope with crisis (crisis testing)The crises of banking operations can be divided into the following groups: The crisis due to failure ofinformation security systems, crisis due to failure of data communication lines, crisis due to physicaldamages to the Bank's information systems, crisis due to inaccessibility of the Bank's employees to theiractivity place for setting up banking systems. Middle East Bank has created replicated informationsystem in different buildings in Tehran and keeps several copies of the Bank's database in severallocation. The Bank also is setting a site for catastrophic events outside Tehran where information iscopied with a few hours delay.Additionally, Middle East Bank holds training courses and operational safety drills and exercises forcritical events.

90

Middle East Bank(PJSC)Notes on the financial statemcnts


49-6-5- Operational risk measurement methodThe risk weight for operational risk is measured using Base II, the "Standardized approach". 1nthis approach considering the type of clients who are mostly corporate client, the corporatebusiness factor of 18% is chosen. The average of last 3 years gross income is calculate and thenmultiplied by 12.5. The result is added to the total risk weights of other risks such as credit riskand market risk for foreign exchange risk weights.

49-6-6- Operational risk control & monitoring proceduresOperational risk management consultants and risk management department issue reports whichwould be reviewed in risk committee and board of directors committees and based on reportedrecommendations, necessary orders would be given by risk committee and bank's CEO in order toestablish better controls. Also internal audit, compliance and legal departments have their specificmonitoring's and make risk department aware of probable operational problems in the bank andrisk management department executes necessary arrangements to solve the problems bypresenting these reports to credit risk committee. Periodic reports of the result of implementingnew controls would be presented to risk committee and risk committee gives necessary orders toreduce operational risks

49-6-7- Necessary amount of capital to cover operational riskBased on Bank's method to measure operational risk, capital exposed to this risk is:

Measurementmethod

Standard Method

Capital exposedto operational

riskIRR Million

308,880

91

Middle East Bank{PJSqNotes on tbe financial statements

For tbe six months financial period ended 21 September 2016Interim financial report

49.7- Capital management49-7-1. Basic capital

Basic capital at balance sheet date is 6,003,025 million Rials and presented as follows:

Description rilScjii:2Oi ~ 19Mar. 2016

!.JRR million 1 IRR million,

Tire IPaid up capital .4,000,000 I 4,000,000Legal reserve , 635,013 ! 515,614Retained earnings

,924,098 i 1,279,374, .

,. 5,559,111 ; 5,794,988Tire II I I

General provision for bad and doubtful loans 443,914 ' 420,209Less: adjustment for ].25% of risk weighted assets i ILess: tier 11over tier I ,Total of Tire II , 443,914 , 420,209Base capital before deduction ! 6,003,025 i 6,215,197Less ,I. iInvestment in other banks as subsidiaries I i,Investment in other banks

;l

Base capital 6,003,025 j 6,215,197

The amount of basic capital for the year ended 20 Mar. 20 I5 is approved by CBI as 4,764,448million Rials in I Sep. 2015 .

92

Middle East 8anklP.ISqNotes on the financial statements


49-7-2- Capital allocationTotal of risk-weighted Assets and commilmcnts is 57,307,903 million Rials at balance sheet date.

21 Sept. 2016 19 Mar. 2016

Description Assets andRisk factor

Risk.wcighted assets Assets andRisk factor

Adjusted Assets andcommitments and commitments commitments commitments

IRRmillion % IRR million lRR million % IRR millionCash 227,921 - - 213,519 - -Statutory deposit 4,183.171 - - 3,099,233 - -Due from CSI 407,456 - - 1,116,317 - -Due from banks 5,404,276 20 1,080,855 1,159,736 20 231,947Governmental participation bonds 3.265,227 - - 1,531,776 - -Non.govemmcntal participation bonds 1,592,908 100 1"~92,908 948,077 100 948,077Investment in shares 1,073,927 100. 1,073,927 1,168,827 100 1,168,827Accounts receivable 1,033,983 100 ],033,983 1,166,788 100 1,166,788Loans guaranteed by real states 9,481,826 50 4,740,913 9,589,853 50 4,794,927Other loans and receivable 38,479,135 100 38,479,135 19,052,491 100 19,052,491Fixed assets and goodwill 2,848,069 100 2,848,069 2,763,709 100 2,763,709Other assets 1,191,661 100 1,191,661 118,221 100 118,221Guaranty for non-governmental participation bonds{Cre 417,870 100 417,870 417,870 100 417,870Commitments for guarantees issued{Crcdit Convcrsion f 3,219,334 100 3,219,334 2,980,951 100 2,980,951Commitments for guarantees issued{Crcdit Convcrsion F 535,736 100 535,736 250,087 100 250,087Commitments for letter of credit issucd(Credit Convcrsi 657,830 100 657.830 351,153 100 351,153Commitments for letter of credit issucd(Credil Conversi 288,292 100 288,292 147,772 100 1.47,772Other commitments{Credit Conversion Factor=tOO%) 147,390 100 147,390 121.790 100 121.790Total of adjusted Assets and commitments hascd on risk

93

57,.107,903 34.514,610

Middle East Bank(P JSC)Notes on the financial statements


49-7-3- Capital adequacy

Capital adequacy ratio for 6 months period ended 21, Sept., 2016 is 10.48%.

Base capitalRisk weighted assetsCapital adequacy ratio

21 Sept. 2016IRRmillion6,003,02557,307,90310.48%

19 Mar. 2016IRR million6,215,19734,514,61018.01%

49-7-4- Leverage ratioleverage ratio is total assets to shareholders' equity and for 6 months period ened 21, Sept., 2016is as below:

Total assetsTotal shareholders' equityLeverage ratio

94

21 Sept. 2016IRRmillion68,400,8335,811,551

11.77

19 Mar. 2016IRR million41,377,8235,763,114

7.18

TadVin&~~'

Middle East BankCPJSC)Notes on the financial statements


50. Operating segmentsSQ.I. Geographic<llconcentration ofm<ljor itcms of assets, liabilities and income

Assets are reported by location and income and liabilities are reported based on domicile of the bank's counterparty in geographicalareas

AssetsCashDue from banks and financial stalemcntsLoans and advancesInvcstmcntsDue from subsidiaries pnd associatesStatutory depositTangible fixed assetsIntangible fixed assets

TotalLiabilitiesDue 10 btlnks and finantiillstDtementsCustomer current depositsCustomers investment depositsInterest p:lynble

ToflllIncome

AsselSCashDue from banks and financial statemcntsLoans and advanceslnvestmentsDue from subsidiaries and associatesStatutory depositTangible fixed assetsIntllngible fixed assets

TotalLiabilitiesDue to banks and financial stntementsCustomer current depositsCustomers investment depositsInterest payableTotnlIncome

21 Sept. f016Iran. Germanv Turkey Switzerland India Othen Tolnl

IRRmillion IRR million IRR million IRRmillion lRRmillion IRRmillioll IRR million

277,183 525 11,263 417 3,138 292,526 !

3,895,642 855,390 574,563 355,371 51,700 14,461 5,747,127 I47,172,234 47,172,2345,932.062 5.932,062519,139 519.139

4.183.171 4.183.1711,995,840 1,995,840852.229 852.229

64,827,500 855,915 585,826 355,371 52.H7 17,599 66,694,328

(2,270,063) (2,270,063)

(6,851,946) (6,851,946)'

(50,900,070) (50,900,070)(370,331) (370,331)

(60,392,410) (60,392,410)4,623,036 4,623,036

19 Mar. 20J6._- Ir .•, 0 ••••••• T ••r •••.•. I ••••' •• '1 •••••••

IRR milliun IRR milliun IRR million IRRmilliun IRR mllllun IRRmllllun IKKmilliull

310,748 1,570 6.176 318,4942,004,580 30.817 123,779 11.902 2,171.07828,091,620 28.091.6203.648.680 3,64~,680276,661 276,661

3,099,233 3,099,2331.906,471 1,906,471857,238 857.238

40,195.231 1.570 30,817 123.119 18,078 40,369,475

(469,037) (469,031)(5,322.031 ) (5,322.031 )(29,094,132) (29,094,132)

(150,601) (i50,601)

(35,035,801) (l5,035,801)

7,294.388 7,294,388

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,. Attachment ofthe audit report

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