the intelligent bank 2010, mr vali zarrabieh has been acting as the managing director of saman bank....

A N N U A L R E P O R T 2 0 0 9The Intelligent Bank

Saman Bank in Figures

Financial Summary (Rls. billion) 2009 2008 2007 2006 2005

Net interest income 976 836 952 381 428

Non-interest income 1,056 672 522 305 100

Net operating income 2,032 1,508 1,474 686 527

Operating expenses 1,153 1,045 961 427 284

Net profit 786 439 512 258 233

Balance Sheet Highlights (Rls. billion)Total assets 49,374 41,733 34,846 26,209 14,289

Total liabilities 49,374 41,732 34,846 24,954 13,443

Total deposits 40,072 34,167 29,583 22,370 11,810

Loans & receivables 34,243 27,341 23,989 15,269 9,784

Total shareholders’ equity 2,921 2,392 1,526 1,255 846

Growth HighlightsNumber of clients 792,038 645,566 496,442 360,557 223,919

Number of branches 106 97 75 54 38

Number of ATMs 390 256 183 107 65

Number of employees 1,506 1,456 1,160 890 633

Key RatiosCapital adequacy ratio 10.55% 9.97% 7.36% 7.96% 11.81%

Deposits / loans & receivables 117% 125% 123% 147% 121%

Loans & receivables / term deposits received 95.31% 87% 93% 89% 103%

Loans & receivables / total assets 69.40% 66% 69% 58% 68%

Return on assets 1.60% 1.05% 1.50% 0.98% 1.63%

Return on equity 26.9% 18% 34% 21% 28%

Term deposits / total assets 73% 76% 74% 66% 67%

Financial Highlights

The year 2009 in this report represents the time interval of 21 March 2009 to 20 March 2010.In this annual report, Rls. and CBI stand for the Iranian Rial and the Central Bank of Iran, respectively.

2005

2006

2007

2008

2009

500

2,00

0

2,50

0

3,00

0

3,50

0

Rls

. bill

ion

0

1,00

0

1,50

0

428100

284

381305

427

952522

961

836672

1,045

9761,056

1,153

846

1,255

1,526

2,392

2,921

Operating Expenses

Non-interest Income

Net Interest Income

Shareholders’ Equity

ManagementBoard of DirectorsManaging Director’s MessageTop Executive ManagementExecutive Directors

IRAN ECONOMIC FORUM & BANKING SYSTEMMacroeconomic IndicatorsBanking IndustryPrinciples of Islamic Banking

SAMAN BANKVision, Mission, Competences & OpportunitiesHistoryOperational PerformanceFinancial PerformanceE-BankingInternational BankingInvestment ActivitiesOrganisational ChartHuman ResourcesCorporate GovernanceRisk ManagementSubsidiariesOutlook

AUDITOR’S REPORT & FINANCIAL STATEMENTSIndependent Auditor’s ReportConsolidated Balance SheetConsolidated Profit & Loss AccountConsolidated Statement of Retained Profit & LossConsolidated Statement of Cash FlowsBalance SheetProfit & Loss AccountStatement of Retained Profit & LossStatement of Cash FlowsNotes to the Financial Statements

BRANCHES

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Mr Allahvirdi Rajaee SalmasiChairman of the BoardMr Rajaei Salmasi holds a Master’s Degree in Accounting from Petroleum Accounting College. He is one of the founders of Saman Eghtesad Credit Institution (Saman Bank). Being one of the founders, his career highlights include acting as CBI Deputy, Advisor to CBI Governor, Secretary General of the Tehran Stock Exchange, Advisor to Bank Saderat’s managing director, Managing Director of Saman Eghtesad Credit, Managing Director of Saman Bank until January 2007 and Board Member of Saman Financial Group.

Mr Iraj Niknejad Vice Chairman of the BoardMr Niknejad holds a Master’s Degree in Accounting from Petroleum Accounting College. He is one of the founders of the Bank. He has enjoyed a distinguished career as an independent auditor, accountant, auditor and financial advisor and manager of public joint-stock companies for more than 20 years as well as being Board Member of various manufacturing subsidiaries of the Yazdbaf Group enlisted with TSE. He is a member of the Iranian Association of Certified Public Accountants as well as the Iranian Institute of Certified Accountants.

Mr Mohammad ZarrabiehBoard MemberMr Zarrabieh holds a Bachelor’s Degree in Banking Science. He is one of the founders of Saman Bank. His professional experience includes serving as the Chairman of various subsidiaries of Yazdbaf Group, one of the largest private-sector industrial conglomerates in Iran. The Group is comprised of various high-profile companies such as Plastiran, Yazdbaf, Hamedan Glass, the Bahman Group and Pump Iran Industries.

Mr Reza Krishchi KhiabaniBoard MemberMr Krishchi graduated from the U.S. with a Bachelor’s Degree in Management Administration and Economics. He is one of the founders of the Bank. He also serves as the Managing Director of Krishchi Brokerage Company, one of the oldest brokerage firms in Iran, one which co-founded the Tehran Stock Exchange. Upon the sale of a strategic stake to Saman Bank, the firm was renamed Saman Brokerage.

BOARD OF DIRECTORS

Mr Iraj Niknejad Mr Mohammad Zarrabieh Mr Parviz Moshirzadeh Moayedi Mr Seyed Ali Salehi Amiri

Mr Sayeed Atashkary Board Member Mr Atashkary holds a Bachelor’s Degree in Commerce from Allameh Tabatabaei University and a Master’s Degree in Commercial Management from Emporia State University in Kansas. He held various executive positions in the Mobarakeh Steel Complex. He was also the Financial Deputy of the Iran National Steel Company and Board Member of the Iran Steel and Khuzestan Steel Complexes. He is also a professor at Isfahan Industrial University.

Mr Parviz Moshirzadeh Moayedi Substitute Board Member Mr Moshirzadeh graduated from Wales University with a Master’s Degree in Accounting. He is one of thefounders of the Bank and Saman Brokerage Co. He is also the Chairman of Saman Brokerage Co.

Mr Vali Zarrabieh Substitute Board Member & Managing Director Mr Zarrabieh holds a Master’s Degree in Finance from CASS Business School in London with a specialisation in corporate finance and the valuation of financial institutions, as well as an MBA from Manchester Business School with a specialisation in strategy. He is one of the founders of the Bank. Mr Zarrabieh is also a Board Member of the Saman Electronic Payment Company and a Board Member of the Saman Brokerage Co. He has a strong technical background, including an undergraduate degree in Electronic Engineering. Since June 2010, Mr Vali Zarrabieh has been acting as the Managing Director of Saman Bank.

Mr Seyed Ali Salehi Amiri Advisor to the Managing Director Mr Salehi Amiri is a graduate from Petroleum Accounting College with a Master’s Degree in Accounting. He is one of the founders of the Bank. He is a member of the Iranian Association of Certified Accountants and an official expert for the Justice Administration in the field of audit and accounting. Mr Salehi Amiri was previously a Board Member of Bank Melli, EN Bank, the Saman Credit Institution and the Managing Director of the Bank Melli Investment Co.

Mr Vali Zarrabieh Mr Reza Krishchi Khiabani Mr Allahvirdi Rajaee Salmasi Mr Sayeed Atashkary

ANNUAL REPORT 2009 | MANAGEMENT 02,03

In the past decade, Saman Bank has been one of the first privately owned financial groups in the Iranian banking industry to take important and positive initiatives with respect to the Iranian economy. Having had the privilege to serve our valuable clients and shareholders with our hard-working staff, we earned creditability and trust amongst domestic and international counterparts.

The pivotal direction and the main objective of our bank, as a privately owned financial institution, is to utilise and optimise the economic trends in our favour as well as have an active role in the economic development of Iran. Despite all the global economic pressures and crisis, our efforts have proven to be effective on a global level.

Compared to previous years, our bank experienced a very successful period in 2009. With the board of directors’ determination and close cooperation of shareholders, the Bank increased its capital from Rls. 900 billion to Rls. 1,800 billion. Despite the capital increase, our bank managed to earn Rls. 786 billion in net profit after tax at group level, resulting in Rls. 437 earnings per share. Moreover, the profit after tax of the Bank in 2009 increased to Rls. 833 billion from Rls. 460 billion in 2008.

In 2009, after diligent business and economic review and an accurate Iran economic forecast, we devised our strategy to have a greater focus on improving the capital adequacy ratio, our internal processes and structure; hence, we further improved the ranking of the Bank in terms of market share. Replacing the traditional internal procedures and organisational structures with more innovative practices, we further improved our decision making process while having a much more precise and transparent analysis of the market including our performance under various conditions. In addition, our executive procedures have become more transparent improving our corporate governance.

Managing Director’s Message

One of our policies for 2009 was to thoroughly evaluate and enhance the development of our branch network, both in terms of the quantity and quality of our services. In the course of 2009, many of our older branches were redesigned to provide a more comfortable and convenient environment for clients. Our qualitative focus was concentrated on providing comprehensive international banking services in more branches while keeping the focus on current retail and corporate banking services at all branches. Today, we can easily claim that all Saman branches are equipped with SWIFT network, resulting in suitable fund transfer and trade finance services.

In 2009, our bank devoted ever more attention to its investment banking and advisory services, the result of which was the development and launch of new products and services including the inception of Novin Saman Fixed-income Fund and Amin Global Investment Fund having net asset values of Rls. 1,034,747 and Rls. 1,185,110, respectively, which is a record in its market. The stated funds managed to gain a larger share of the market in a shorter period when compared to that of their rivals.

Furthermore, as part of our restructuring of internal processes for 2009, a particular attention was paid to training in order to improve our staff skills, expertise and knowledge with the aim of offering higher quality services to our clients, especially with respect to international banking services. On average, each staff received more than 39 hours of training, which undoubtedly will affect our service quality in the coming years.

Finally, as part of our core strategy to remain focused on investment in cutting-edge technology, we constantly optimise and improve our banking infrastructure, allowing the Bank to uphold its position as a pioneering bank in the market based on our third five-year plan. To sustain the Bank’s successful role as a pioneering player in electronic banking in the Iranian banking industry, as successfully succeeded in the past ten years, the investment and development in electronic banking remains as one of our main priorities.

I would like to extend my sincere gratitude and appreciation to all my colleagues who put their utmost effort in creating a real value for our clients and shareholders, and with their dedicated teamwork, managed to produce a healthy growth in balance sheet items, such as comparable growth in loans granted, return on investments, commission revenues and decrease in doubtful debts ratio, resulted in strong profitability. With God’s blessing, I believe that the devoted teamwork and great endeavors of our colleagues have guided us to the right track for securing a longer-term sustained financial benefit for our clients, shareholders and my colleagues in future to come.

I am obliged to express my sincere appreciation to our respectful Board Members, who are a team of highly professional and accomplished experts providing us with all the support and guidance required to cultivate the Bank’s development and growth in every aspect. I also extend my special gratitude to our valuable shareholders who entrusted and supported us to be where we are today.

We, the Saman Family, have committed ourselves to make significant contribution towards making our beloved clients’ life more fruitful and peaceful as well as helping our economy prosper.

Vali ZarrabiehManaging Director


Mr Vali Zarrabieh Managing Director(June 2010 - present)

Mr Zarrabieh holds a Master’s Degree in Finance from CASS Business School in London with a specialisation in corporate finance and the valuation of financial institutions as well as an MBA from Manchester Business School with a specialisation in strategy. He is one of the founders of the Bank. Mr Zarrabieh is also a Board Member of the Saman Electronic Payment Company and a Board Member of the Saman Brokerage Co. He has a strong technical background, including an undergraduate degree in Electronic Engineering. From January 2008 to June 2010, Mr Zarrabieh was the Deputy Managing Director and the Vice-President of the Retail & Corporate Banking of Saman Bank.

Mr Gholam Hassan Asgharzadeh Zaferani Former Managing Director (Jan. 2008 – June 2010)

Mr Zaferani is the former Managing Director of Saman Bank. He holds a Master’s Degree in International Banking from the Banking Science Institute. He is also the Chairman of the Saman Exchange Co. and a Board Member of the Saman Investment Co. He was previously a Board Member of Bank Melli Iran and Bank Melli Plc in London.

Mr Gholamali Kamyab VP – Finance & Administration(March 2008 - present)

Mr Kamyab holds a Bachelor’s Degree in Accounting from Tehran University as well as an MBA from the Bridgeport University (USA) with a specialisation in accounting. He is the former Director of the Foreign Transaction Debt Department of CBI and the former Managing Director of National Informatics Co. Presently, Mr Gholamali Kamyab is also a member of the Ecobank Accounting Association, which is based in Turkey.

Mr Ahmad Modjtahed VP – Research & Planning(March 2010 - present)

Mr Modjtahed is an economist. He earned his Ph.D from Iowa State University, USA. As a professor and researcher at Allameh Tabatabai University in Tehran, he has published a number of research papers and books. His professional experience includes the Presidency of the Monetary & Banking Research Academy (MBRA), Advisor to Governor of the Central Bank of Iran and Ministry of Economic Affairs and Finance. At present, Mr Ahmad Modjtahed is the Vice-President for Research & Planning at Saman Bank and the Chairman of Iranian Credit Bureau, holder of the Experian license for Iran.

Top Executive Management

Mr Javad Goharzad Director – Internal Audit & Saman Group Supervision Department(March 2007 - present)

Mr Goharzad holds a Bachelor’s Degree in Accounting from Tehran University and a Master’s Degree in Accounting from Azad University. He has been the Manager of Azmoon Auditing Institution, as well as an independent auditor, since 1990. He is also a member of IACPA & IICA and an authorised auditor of TSE. Additionally, Mr Goharzad is an official expert for the Ministry of Justice.

Mr Farshad Nowshadi Advisor to the Managing Director – Information Technology & Strategy(March 2005 - present)

Mr Nowshadi is part of Microsoft gold partner program and holds a Master’s degree in Philosophy (M.Phil.) from Sussex University (UK) with a specialisation in computing, communications and security. He has over thirty years of experience in technology with a proven track record of successfully bringing technological solutions to large organisations. Since 1990 Mr Nowshadi has been one of the key consultants to Reuters’ Financial Global Services as well as being a consultant to various international companies such as Microsoft. In addition, Mr Nowshadi authored a number of management technical publications for Learning Tree International, one of the world’s largest management training companies. As an advisor to Saman Bank’s Managing Director in the field of information technology and strategy, Mr Nowshadi advises the Bank to further sustain its technological innovation leadership in the Iranian banking sector.


Dr Reza Agha Babaee Director – Investment Banking & Advisory ServicesPhD. in Economic Science – Economic Development from Tehran University

Mr Mehdi GharhiDirector – Information & Communication Technology Division Bachelor’s Degree in Philosophy & Master’s Degree in Industrial Management from Tehran University

Mr Reza Heidari Director – Procedure & Workflow DivisionMaster’s Degree in Economic Science from Tehran University

Mr Seyed Morteza Hosseini NejadDirector – Research & Planning Division Master’s Degree in Economic Science from Shahid Beheshti University

Mr Gholam Abbas KhaksarDirector – National Branches DivisionMaster’s Degree in Commercial Management from Shahid Beheshti University

Mr Hossein Kourosh PasandidehDirector – Compliance Division Master’s Degree in Economic Science from Mazandaran University

Mr Khosrow Latifi AhvazDirector – Finance Division Master’s Degree in Accounting from Islamic Azad University

Mr Abbas Pak RuhDirector – Legal & Regulatory DivisionBachelor’s Degree in Law from Tehran University

Mr Mohsen Qadimi PourDirector – International Banking DivisionMaster’s Degree in English Language from Tehran University

Mr Ali Radnia Director – Logistics Division Bachelor’s Degree in Accounting from Allameh Tabatabaei University

Mr Ali Rahimian Director – Human Resources Division Bachelor’s Degree in Industrial Engineering from Azad University with a specialisation in industrial production

Mr Jalal Sanat KhaniDirector – Loan & Credit DivisionBachelor’s Degree in Industrial Management from Tehran University

Mrs Fereshteh Zarrabieh Director – Marketing & Public Relations Division Bachelor’s Degree in Science in Textile Industry from Amir Kabir University & Executive MBA (EMBA) from Industrial Management Institute with a specialisation in strategic marketing

Executive Directors

Iran Economic Forum& Banking System

Macroeconomic IndicatorsBanking Industry Principles of Islamic Banking

Iran Economic Forum & Banking SystemMacroeconomic IndicatorsThe two years leading up to 2009 posed immense challenges for the global economy and even more so in the financial services industry. The global economic meltdown over these two years led to the collapse of many financial institutions, thus impacting hugely on the quality of risk assets, liquidity position and deterioration in the market value of several classes of assets. Regrettably, Iran’s financial services were not exempted from the vagaries of the global economic meltdown, as has been evident in the capital and money markets. However, the recent approval of an ambitious energy price reform by the Iranian parliament could bring significant medium and long-term benefits by increasing economic efficiency and would help improve the macroeconomic outlook. In 2009, Iran ranked 112th in the world in terms of economic growth.

GDP – Iran’s economic performance has been strong in recent years, supported by high oil prices and expansionary fiscal and monetary policies. However, real GDP growth has slowed following the recent decline in oil prices, the non-oil fiscal position has become tighter, and the Banks’ financial situation has weakened.

GDP Growth Proj. 2009 Est. 2008 2007 2006 2005

At current prices (Rls. billion) 3,262,004 3,190,363 2,654,949 2,044,024 1,697,305

At current prices (US$ billion) 330.46 333.24 285.93 222.12 188.04

Real GDP growth (%) 1.82 2.27 7.83 5.85 4.66

Source: CBI, IMF.

Inflation – In 2009, the rate of inflation followed the declining trend of 2008. According to the IMF, tight monetary policy and continued real exchange rate appreciation succeeded in sharply reducing twelve-month end of period CPI inflation from almost 30% in October 2008 to about 13.5% in December 2009. The drop in international commodity prices and good harvest in 2009 have also contributed to the decline in inflation.

Exchange Rate – Iran’s exchange rate system used to be based on a multi-layered system where state and para-state enterprises would benefit from the preferred rate. However, in March 2002, the multi-tiered system was replaced by a single, unified market-driven exchange rate. In recent years, CBI with the assistance of the IMF has made the Rial gradually fully convertible to other currencies. As a first step, full convertibility was introduced as of January 1, 2003 in Iran’s Free Trade Zones. The official rates in December 2009 were Rls. 9,984 for US$ 1 and Rls. 14,349 for € 1.

Liquidity – According to the IMF, while the growth of broad money (M2) and credit was above 20% a year over the last three years, in the second half of 2008, in order to bring down liquidity growth, CBI restructured its lending facilities and issued high denomination CBI notes to replace commercial bank checks. Base money contracted in the first half of 2009 as banks repaid credit lines opened by CBI to facilitate the substitution of bank checks in 2008. Credit growth declined from 22.5% in September 2008 to 11% in September 2009 as real lending rates increased sharply and banks were reluctant to extend new loans in the light of the steady deterioration of their portfolios.

ANNUAL REPORT 2009 | Iran Economic Forum & Banking System 10,11

Government Sector – Considering worldwide financial crisis as well as decreasing oil prices, Iran’s hard currency revenues have decreased compared to a year ago. In 2008, the price of oil was US$ 128 per barrel whereas by December 2009 oil prices had dipped to US$ 70 (per barrel). Therefore, considering average oil prices at US$ 62 per barrel for the last three quarters of 2009, the Iranian government’s revenues were lower than expected. In 2010, Iran’s oil revenues are expected to be higher considering improvement in worldwide economic conditions and future oil prices.

Foreign Reserves – High oil prices in recent years allowed Iran to greatly increase its export earnings and amass nearly US$ 100 billion in foreign exchange reserves. But with Iran’s oil export price from March to December 2009 averaging just US$ 55 per barrel and with a slight decline in oil production over the past four years, the Iranian government is facing budget constraints, and Iran’s foreign exchange reserves dipped to US$ 81 billion at the end of 2009.

Fiscal Policy – The overall fiscal deficit on a cash basis was 2.7% in 2009 from 0.7% in 2008, owing mainly to lower oil revenues. The 2009 budget witnessed a decline in the non-oil primary fiscal deficit to about 16% of GDP, from 18% in 2008, mainly as a result of a further strengthening of tax administration and larger VAT registration that more than offset an increase in spending. There was no scope of fiscal stimulus due to the lack of access to external financing and limited OSF (Oil Stabilisation Fund) resources; thus the authorities accelerated their privatisation program to help finance the non-oil deficit.

Foreign Trade – In 2009, Iran’s total exports fell to US$ 77.4 billion due to lower oil prices, showing a decrease of 23% compared to the previous year. During the same period, total imports also fell by 12%.

US$ million Proj. 2009 Est. 2008 2007 2006

Trade balance 17,081 32,039 40,819 26,035

Exports 77,408 100,572 97,401 76,055

Oil & gas 59,240 81,855 81,764 62,011

- Crude oil 50,502 70,291 68,646 50,717

- Petroleum products & natural gas 8,738 11,564 13,118 11,294

Non-oil & gas 18,168 18,717 15,637 14,044

Imports -60,327 -68,533 -56,582 -50,020

Source: Islamic Republic of Iran’s Customs Administration, IMF.

Foreign Debt – Based on the latest available statistics, Iran’s foreign debt stood at US$ 22.1 billion in September 2009. The external debt profile of Iran consists of US$ 7.5 billion and US$ 14.6 billion in short-term and long-term debts respectively.

Capital Market – According to the World Bank, in line with developments in the PGCC (the Persian Gulf Cooperation Council) and global markets, Tehran’s stock market declined by 38% between its peak in July 2008 and April 2009, but it rebounded by 58% by November 2009. Despite restrictions to foreign portfolio investment, spillovers from neighboring stock markets have been significant in recent years, particularly from Saudi Arabia.

Due to continued economic sanctions, the country’s monetary sector has encountered many impediments in its international dealings. This, coupled with government policies aimed to reforming the banking system, created conditions that required highly experienced management at the helm.

During 2008, the interest rate on facilities offered by private banks on exchange contracts was reduced by 13%, compared to those of state-owned banks, who charge 12%. In addition, considering the unified interest rate regulation among private and state-owned banks imposed by CBI in 2008, the banking system entered a new stage of competition.

According to the data released by the Ministry of Economic and Assets Affairs, by 2010 the banks’ deposits reached Rls. 2,309,702 billion, which compared to the banks’ deposits in March 2009, indicate a 19% increase. The private banks’ share of total deposits was 23%, a 3% increase over the previous year. We may, therefore, draw the conclusion that even though the government imposed the unified interest rate on deposits in support of state-owned banks, the private banks still managed to gain an additional 3% market share. This fact is clear evidence of the growing confidence in private banks.

The total balance of the banking system at the beginning of 2010 was Rls. 1,951,381 billion. This figure at 19 March 2009 was Rls. 1,803,444 billion, indicating an 8% increase for the first three quarters of 2009. Overall, the state-owned and private banks’ shares of growth in lending were 9% and 5%, respectively.

By the beginning of 2010, the number of banks’ branches reached 17,255. The share of state-owned banks declined by 1%, whereas the share of private banks rose by 6% (49 branches), leading to an overall 0.3% growth in the banking system.

In 2009, the unsaturated electronic banking market, consisting of payment instruments and equipment (i.e. cards, ATMs, POS terminals, and branch terminals), telephone banking and internet banking continued its substantial growth. In the first three quarters, the banking industry’s total number of ATM cards grew by 27%, from 53 million to 67 million cards, and consequently the number of automated teller machines (ATMs) reached 15,556 ATMs, indicating a distribution of 4,047 and 4,308 ATM cards per ATM machine in 2008 and the end of 3rd quarter, respectively. During this period, the number of ATMs put into commission by the specialised and private banks also rose by 15% and 16% respectively; representing 10.4% of all active ATMs in the country’s banking industry. Commercial banks also enjoyed 21% growth in ATM installations. Furthermore, because of enticing promotions, customers’ inclination to purchase using their ATM cards boosted the number of POS and PINPAD terminals, which increased by 12% and 54% for private and state-owned banks, respectively.

State-owned Banks Private Banks Banking Industry

March 2009 Dec 2009 March 2009 Dec 2009 March 2009 Dec 2009

Total deposits (Rls. billion) 1,548,017 1,776,774 388,792 532,928 1,936,809 2,309,702

Loans granted(Rls. billion) 1,520,249 1,654,155 283,195 297,226 1,803,444 1,951,381

No. of ATMs 11,628 13,935 1,393 1,621 13,021 15,556

No. of ATM cards 43,127,738 55,658,427 9,574,551 11,371,992 52,702,289 67,030,419

No. of POS terminals 460,076 707,823 323,278 360,971 783,354 1,068,794

Banking Industry

The perceptions held about interest and profit constitute the most basic elements defining Islamic finance and, as such, Islamic financial institutions in Iran. In line with Iranian laws and regulations, banks raise resources mainly through the following two products:

Gharz-al-Hassaneh Accounts

Gharz-al-Hassaneh are current and savings accounts (as in the conventional banking system), except that they earn no interest. Holders of current accounts typically receive these accounts in combination with a cheque book. Savings accounts offer incentives (up to 4%), including one or several of the following: non-fixed prizes and bonuses in cash or in kind (usually run using a lottery), an exemption from or a discount on the payment of commissions and fees, and priority in use of banking facilities. Banks consider Gharz-al-Hassaneh accounts “their own resources” and are required to guarantee their full nominal value.

Term Deposits

Banks are authorised to accept various types of investment deposits ranging from short-term(6 months) to long-term (5 years). Although banks can use their capital plus Gharz-al-Hassaneh accounts, priority must be given to investment deposits – that is, depositor resources. The banks can also use a combination of their own and depositor resources to grant facilities to a customer. Iranian banks guarantee the owners of term deposits their capital plus a minimum return. On top of this guaranteed return, banks charge a commission for their service. In case the financed activities provide a return in excess of the guaranteed return and the bank’s commission, such excess return is shared between the bank and the depositors.

On the lending side, Iranian laws and regulations separate banking products into two categories: participation contracts and constant profit contracts.

Participation Contracts

Under this type of contract, the bank provides the whole or a part of the funding required by its customers for a specific economic activity. The profit that results from such economic activity is shared between the bank and the customer according to the terms of the related contract. These contracts consist of the following:

a. Civil partnership – Under civil partnership contracts, the bank provides funds to a customer (legal or natural person) for a specific economic activity. The customer co-invests in cash or in kind, and the related profit is shared. Civil partnership contracts can be in the fields of production, commerce or the service industry. Under the same scheme, the issuing of bonds is also permissible. Commercial banks are allowed to act as guarantors for both the government and private sector enterprises, and entities wishing to raise funds for projects and specific activities through the

issuance of bonds. Profits are paid quarterly.

b. Legal partnership – In a legal partnership, the bank provides part of the capital for a new company or buys shares of such a company. These contracts are possible in the fields of production, commerce and the service industry.

Principles of Islamic Banking

ANNUAL REPORT 2009 | Iran Economic Forum & Banking System 12,13

c. Mozarebeh – Under Mozarebeh contracts, one party (the bank) provides funds that the other party (the customer) uses for trading. Customers can be legal or natural entities. Usage of the funds is limited to the field of commerce.

d. Mozare’eh – Under Mozare’eh contracts, one party (the bank) gives farm land to the other party (the customer) for a specified duration. The customer works on the farm land, and the related proceeds are shared.

e. Mosaghat – Under Mosaghat contracts, the owner of trees in a garden (the bank) transfers the maintenance and harvesting of the trees to an agent (the customer), and the related proceeds are shared.

Constant Profit ContractsUnder this type of contract, the bank provides the whole or a part of the funding required by its customers for a specific economic activity. Unlike participation contracts, the bank’s profit is already fixed at the signing of the contract and before the commencement of the activity. As such, the bank’s profit has to be paid by the customer irrespective of the actual profit or loss derived from the funded economic activity.

a. Instalment sale – An instalment sale is a contract whereby one party (the bank) delivers goods to the other party (the customer) at a set price. The price is amortised, totally or partially, on predetermined maturity dates, through equal or unequal instalments.

b. Leasing conditional on ownership – In this particular type of leasing contract, it is agreed that the lessee, if complying with the terms of the contract, will obtain the ownership of the leased property upon the completion of the contract.

c. Forward sale (Salaf) – A forward sale is a contract whereby the bank purchases goods produced by the customer, paying the price in cash, and receives the goods in the future.

d. Je’aleh – Je’aleh refers to the obligation of a person (the customer) to pay a certain sum or fee in return for a certain favour according to the contract. Acting as an agent or as a contracting party if required, a bank may arrange a Je’aleh contract for the purpose of providing the facilities required to develop a business.

e. Discounting – Banks can discount drafts and notes.

Finally, banks are also allowed to use some of their own resources (including Gharz-al-hasaneh funds from customers) to make direct investments. Direct investment is not considered a ‘facility’ but works on the same principles as participation contracts.

Saman Bank

Vision, Mission, Competences & OpportunitiesHistoryOperational PerformanceFinancial PerformanceE-Banking International Banking Investment ActivitiesOrganisational ChartHuman ResourcesCorporate GovernanceRisk ManagementSubsidiariesOutlook

Saman BankVision, Mission, Competences & Opportunities

Vision

“To become Iran’s leading bank in creating value and new experiences through innovation for our customers, shareholders, employees and the community we live in.”

Mission

To achieve customer recognition for providing outstanding services;

To be the leading provider of innovative products and services based on Islamic banking principles;

To be a leader in technological innovation in banking based on the best global practices;

To be a truly universal bank by providing a full range of financial services to our customers; and

To deliver superior value to our shareholders and create a reputation for excellence with our employees, regulators and shareholders.

Competences

High-calibre staff with the ability to excel at teamwork, especially in the area of trade finance;

Pioneering in internet banking and other electronic banking services;

High-quality services;

Resourceful and diversified financial group that offers a complete package of financial services to its customers, swiftly and with a high level of quality;

Diversified channels for communicating with customers such as ATMs and POS machines, pin pads, telephone banking and internet banking; and

Flexibility and quick response time are the main characteristics of the Bank, and result from its lean organisation. This is a significant asset, especially if there is a need for a rapid reaction to unexpected changes.

Opportunities

Government privatisation policy is aligned with investment banking services offered by Saman Bank;

Government policy on the development of information technology represents an opportunitydue to the Bank’s appropriate infrastructure and capability in the electronic sector; and

High demand for facilities allows the Bank to be selective.

History

The Saman Eghtesad Financial and Credit Institute commenced operation in September 1999 with initial capital of Rls. 11 billion. After three years of prosperous activity, the Saman Eghtesad Financial and Credit Institute was transformed into a bank under the name “Saman Bank” and joined the banking system in September 2002 after increasing its capital to Rls. 200 billion and obtaining a banking license from CBI. By utilising up-to-date technology and relying on professional banking experts, Saman Bank began to revolutionise Iran’s traditional banking system through pioneering efforts to provide electronic banking.

Saman Bank started its activity with a capital of Rls. 200 billion. Since 29 August 2002, the Bank has successfully increased its capital in six stages in order to strengthen its financial standing. At present, the Bank’s capital stands at Rls. 1,800 billion. It is worth mentioning that 40.4% of the Bank is owned by legal entities and the remaining 59.6% by real persons.

Shareholder Composition (2009)Shareholder Entities Shares Ownership %

Real persons 1,480 1,073,297,192 59.6

Legal entities 53 726,702,808 40.4

Total 1,533 1,800,000,000 100

Major Shareholders Holding More than 5% Shares (2009)

ShareholderAt the Date of Balance Sheet

Shares held Percentage

Steel Employees’ Pension Fund 164,609,992 9.14

Iranian Copper Employees’ Pension Fund 148,143,992 8.23

Saman Bank’s Investment Co. 102,636,283 5.7

Saman Bank continues to serve its clients by offering innovative and tailor-made financial services and it is considered as a pioneer in innovative banking services.

Saman Bank has established various companies to utilise staff expertise and promote specialised businesses. These companies provide independent and profitable services and hence distinguish the Bank and its services. The Saman Financial Group is comprised of Saman Bank, the Saman Electronic Payment Co., the Saman Brokerage Co., the Saman Insurance Co., the Saman Exchange Co., the Saman Satellite Communication Co. and Iranian Credit Bureau & Scoring Co.

The Saman Financial Group has a great amount of potential to increase its market share and profitability. The expansion of electronic banking and the need to provide online banking services, higher cost of gasoline, as well as the higher market demand for various insurance products and services, are some of the developments that will definitely lead to greater prosperity for the Saman Financial Group. Although a short time has passed from the start of the aforementioned companies, some of these companies have actually been strongly positioned in their respective business markets. The presence of young, specialised and motivated personnel in the aforementioned companies and their diverse

ANNUAL REPORT 2009 | SAMAN BANK 16,17

services (especially as compared to those of their competitors) will surely secure profit stability for their shareholders. As our banking industry is gradually transitioning from traditional banking to modern banking, these companies will present new potential to generate new sources of revenue for the Bank.Detailed information on the Saman Bank’s subsidiaries, in which the Bank holds more than 10% interest, is presented in the below table:

No. Investee Company Activities

Capital ofInvestee Company(Rls. million)

% of Bank’s Ownership

20/03/2010

Bank’sShare Value

(Rls. million)

1Saman Exchange Co. (Private J.S.)

Purchase, sale and transfer of foreign currencies

50,000 71.00% 35,500

2Saman Satellite Communication Co. (Private J.S.)

Data transfer & satellite communication

54,000 64.81% 73,400

3 Saman Brokerage Co. Bourse market operation 10,000 48.99% 8,300

4Saman Electronic Payment Co.(Private J.S.)

Hardware & software for electronic payment instruments

50,000 48.00% 48,000

5Saman Insurance Co. (Private J.S.)

Insurance services 200,000 10.03% 22,182

6Iranian Credit Bureau & Scoring Co.

Provider of moderntechnology to the Iranian monetary and financial markets

5,000 98.00% 2,498

Operational Performance

Saman Bank performed better in 2009 than in the previous financial year. The improved performance was attributed to the more aggressive sales and marketing strategies during the year. These included forming strategic alliances with private and public companies and building on the strength of the Bank, which are the track record and the brand name for innovation. In addition, the Bank intensified its efforts to improve its overall performance by reducing operating cost, improving transparency, enhancing regulatory compliance and increasing market share through opening new branches as well as introducing new products to clients. In the course of 2009, Saman Bank not only maximised profit for its shareholders but also strengthened its core strategy in order to be more responsive to the challenges of the current Iranian banking sector. Compared to the previous year, the number of internet banking, telephone banking, and debit card users in 2009 showed increases of 49%, 42% and 31%, respectively.


2004

100,

000

200,

000

300,

000

400,

000

500,

000

600,

000

700,

000

800,

000

900,

000

2005

2006

2007

2008

2009

109,098

223,919

360,557

496,442

643,079

792,038

Number of Clients

2004

0 20 40 60 80 100

120

2005

2006

2007

2008

2009

24

38

54

75

97

106

Number of Branches

2004

100,

000

200,

000

300,

000

400,

000

500,

000

600,

000

700,

000

2005

2006

2007

2008

2009

41,852

108,281

213,033

331,912

462,154

606,814

Number of Credit Cards

2004

20,0

00

40,0

00

60,0

00

80,0

00

100,

000

120,

000

140,

000

160,

000

180,

000

2005

2006

2007

2008

2009

1,7523,271

5,0718,949

12,18520,013

48,08953,153

103,270105,452

155,463155,847

Number of Internet& Phone Banking Users

00 0

Number of Internet Banking Users

Number of Phone Banking Users

The 2009 financial year has been a successful one for us. We have achieved a very strong financial result and were able to weather the turmoil confronting the Iranian banking sector associated with the worldwide financial crisis and the tightening of banking sanctions.

Capital Structure

In 2009, Saman Bank’s capital position remained strong. Saman Bank’s total capital adequacy ratio as of 31 December 2009 was 10.60%. The bank ensures adherence to CBI and Basel II requirements by monitoring its capital adequacy against higher internal limits. At the balance sheet date, the total capital for Saman Bank was Rls. 1,800 billion.

Capital Increase

Date Percentage Amount (Rls. billion)

29 August 2002 - 200

27 November 2003 10 220

14 October 2004 36 300

7 March 2005 100 600

16 November 2005 25 750

8 October 2006 20 900

13 January 2010 100 1,800

This financial year, for the first time, the Bank’s capital adequacy ratio was calculated based on Basel II requirements. It is worth mentioning that Basel I requirements did not consider the operational and market risks.

Total Shareholders’ Equity

At the balance sheet date, the Bank’s total shareholders’ equity amounted to Rls. 2,921 billion, showing a 22.11% rise from the previous year. This increase was mainly due to funds collected for capital increase as well as minor changes to legal reserves.

500

1,00

0

1,50

0

2,00

0

2,50

0

3,00

0

3,50

0

2007

2008

2009

1,526

2,392

2.921

Total Shareholders’ Equity

Rls

. bill

ion

0

Financial Performance

Total Assets

For the fourth consecutive year, Saman Bank has grown close to 20% in total assets from the previous year. At 31 December 2009, the Bank’s assets totalled Rls. 49,374 billion, an increase of Rls. 7,641 billion or 18.3% over the previous year.

10,0

00

20,0

00

30,0

00

40,0

00

50,0

00

60,0

00

2007

2008

2009

34,846

41,733

49,374

Total Assets

Rls

. bill

ion

0

Total Liabilities

At the balance sheet date, Saman Bank’s total liabilities were Rls. 46,453 billion, indicating an increase of 18% from the previous year that can be mainly attributed to the increase in the value of term deposits held by the Bank.

5,00

0

10,0

00

15,0

00

20,0

00

30,0

00

35,0

00

40,0

00

45,0

00

25,0

00

50,0

00

2007

2008

2009

33,320

39,341

46,453

Total Liabilities

Rls

. bill

ion

0

Deposits

Total deposits increased from Rls. 34,167 billion on 31 December 2008 to Rls. 40,072 billion as of 31 December 2009, as the Bank’s client base continued to grow. The increase in total deposits was largely driven by demand for term deposits.

5,00

0

10,0

00

15,0

00

20,0

00

30,0

00

35,0

00

40,0

00

45,0

00

25,0

00

2007

2008

2009

29,583

34,167

40,072

Total Deposits

Rls

. bill

ion

0


Loans Granted & Receivables

Saman Bank had Rls. 34,243 billion in loans granted and receivables in 2009, an increase of 25.24% over the prior year.

5,00

0

10,0

00

15,0

00

20,0

00

25,0

00

30,0

00

35,0

00

40,0

00

2007

2008

2009

23,989

27,341

34,243

Loans Granted & Receivables

Rls

. bill

ion

0

Net Operating Income

In 2009, the Bank’s net interest income was Rls. 976 billion, showing an increase of 16.7% compared to the previous year. During the reporting period, the Bank’s non-interest income and net operating income grew by 57% and 35% respectively; these results reflect the strategic targeting of profitable growth in a competitive market and disciplined cost management.

500

1,00

0

1,50

0

2,00

0

2,50

0

2007

2008

2009

952522

1,474

836672

1,508

9751,056

2,031

Net Operating IncomeR

ls. b

illio

n

0

Net Operating Income

Non-interest Income

Net Interest Income

Profit before Tax

At the balance sheet date, the Bank’s profit before taxes was Rls. 878 billion, showing growth of 89.6% over the prior year as a result of capital increase.

100

200

300

400

500

700

800

900

100060

0

2007

2008

2009

512

463

878

Profit before Tax

Rls

. bill

ion

0

E-Banking

Saman Bank uses an integrated mix of electronic channels that includes online banking, telephone banking and SMS banking. The Bank also leverages on various electronic payment capabilities, including cross-border ATM services. By focusing on electronic banking as the core retail banking strategy, we aim to enhance our brand and value through alternate and electronic channels.

Presently, the Bank has become the government’s trusted source and executive arm on research for the implementation of electronic government. The Bank has entered agreements with the Ministry of Commerce, Iranian Heritage Organisation, Student Assessment Organisation, Iranian Aviation Organisation, Raja Railways to develop e-commerce, to provide worldwide online banking services to international and domestic tourists, to provide online University Entry Exam Enrolment and online airline and railway ticket purchases. Moreover, the Bank’s clients are also able to trade stocks online.

The Bank is also working closely with the Ministry of Commerce on important projects such as providing electronic coupon and online payment of electronic commerce and experimental Digital Certification Centre of Ministry of Commerce as well as macro-payment agent (the only PKI enabled bank in Iran) of B2B project in cooperation with Shahrvand and Mino companies. In 2009, the total number of various types of cards used by Saman Bank’s clients increased by 21.52%.

Type of Cards 2009 2008 Growth Rate

No. of chargeable & gift cards 1,318,411 1,122,196 17.48%

No. of credit cards 17,790 8,827 101.54%

No. of smart cards 7,460 7,175 3.97%

No. of debit cards 925,171 728,905 26.93%

10,0

00

20,0

00

30,0

00

40,0

00

50,0

00

60,0

00

2007

2008

2009

35,505

43,305

55,791

Number of POS Terminals

0

50 100

150

200

250

350

400

450

300

2007

2008

2009

183

261

399

Number of ATMs

0


International Banking

Saman Bank provides comprehensive forex services to individuals as well as major public and private corporations. The Bank has extensive expertise at analysing market developments and tailoring foreign currency products to fit a particular client’s needs. Through our representative offices overseas, the Bank’s global reach and local market knowledge provide powerful leverage for our clients’ importing and exporting.

At present, we have a wide correspondent network in a number of countries that enables us to execute clearing, banknote, and documentary business transactions as well as other banking operations efficiently and professionally.

The following are the types of forex services offered by Saman Bank: foreign currency exchange; opening forex account; opening of L/Cs; issuing forex letters of guarantee; international remittance; forex bills of exchange; and financing & re-financing of forex facilities.

In 2009, the number of L/Cs totalled 1,085 amounting to US$ 511 million, showing 11% and 20% increase in the number and value of L/Cs respectively compared to the previous year. In addition, the total number of forex letters of guarantees was 23 valued at US$ 62 million, showing a 3% rise in terms of value compared to the previous year. In the reporting period, the number of bills of exchange totalled 2,930 in the amount of US$ 264 million.

5,00

0

10,0

00

15,0

00

20,0

00

25,0

00

2008

2009

16,7854,940

19,9026,008.50

Remittances Drawn on Overseas Banks

0

Amount (US $ million)

Number

1,00

0

2,00

0

3,00

0

4,00

0

5,00

0

6,00

0

2008

2009

3,704475

5,6471,063.73

Remittances Drawn on Saman Bank

0


Number

In 2009, the number of L/Cs totalled 1,085 amounting to US$ 511 million, showing 11% and 20% increase in the number and value of L/Cs respectively compared to the previous year. In addition, the total number of forex letters of guarantees was 23 valued at US$ 62 million, showing a 3% rise in terms of value compared to the previous year. In the reporting period, the number of bills of exchange totalled 2,930 in the amount of US$ 264 million.

Investment Activities

The significant investment activities of Saman Bank in 2009 can be classified into the following four categories:

1. Investment Portfolio Management

On 21 December 2008, the Bank’s investment portfolio of TSE enlisted company stocks was formed with initial capital of Rls. 1 billion. Subsequently, on 20 February 2010, the core investment capital exceeded Rls. 70 billion and at the date of preparation of the balance sheet the portfolio value reached Rls. 80.5 billion.

2. Commencement of Saman Novin Fixed-income Fund

On 22 December 2009, Saman Novin Fixed-income Fund commenced operation with 37 branches aiming to absorb financial resources in today’s competitive market and creating a robust market management as well as underwriting new securities. During its 75 days of activities, the fund managed to absorb Rls. 300 billion in investment, which compared to other investment funds had a satisfactory result.

3. Amin Global Investment Fund

Designed to provide diverse products, this fund was introduced in 20 branches to service clients with diverse preferences.

4. Mortgage Backed Bonds

Saman Bank pioneered and devised the mortgage backed bonds in Iran and succeeded in obtaining the relevant license from SEO. Currently, the Bank is pursuing obtaining a license from CBI.


Organisational Chart

Bank’s General Assemblyy

Board of Directors

Managing Director & President

Board CommitteesInternal Audit &

Saman Group Supervision Division

Executive Committees Inspectors & Advisors

Deputy Managing Director

VP(International

Banking)

VP(Research &

Planning)

Loan & Credit Division

InternationalBanking Division Finance Division

Research &Planning Division

ComplianceDivision

InternationalInvestment &

Finance Division

Human Resources

Division

Procedure& Workflow

Division

Information &Communication

Technology Division

Marketing & Public Relations

Division

National Branches Division

Foreign Exchange

Operations Dept.LogisticsDivision

Legal & Regulatory

Division

Investment Banking &

Advisory Services

ForeignALM Unit

Saman Financial Group Dept.

Risk Dept.

Security Dept.

Private Banking Department

VP(Retail & Corporate

Banking)

VP(Finance &

Administration)

Human Resources

Our personnel, as the greatest asset, are a vital link allowing us to offer superior service to our clients; therefore, staff development continued to be paramount during 2009. We continue to place significant emphasis on empowering our staff by providing them with relevant training opportunities aimed at increasing efficiencies and improving financial performance. Management is ever mindful of the fact that the Bank’s staff members play a critical role in helping to achieve its financial objectives and for this reason the Bank’s human resource strategy specifically focuses on retaining its proficient employees.

Throughout 2009, staff recruitment and selection processes were enhanced significantly. This included refining the framework and methodology used to screen candidates, assess potential employees, and select the talents for specific job positions. We applied a wide range of recruitment and selection tools, including structured interviews, written communication skills and psychometric tests to identify the most suitable candidate with the attributes that most contribute to our long-term growth.

At human resources level, a number of steps were taken in 2009 to enhance the quality of our professional services. New internal standards were set to enable us to continue to attract, develop and retain a talented, motivated and diverse workforce. We strive to maintain our supportive work environment while ensuring the successful achievement of the Bank’s business strategy. We continue to offer the employees the best training programs available in Iran, with updated and specially-tailored courses to enhance operability, service quality and product knowledge. In 2009, the average number of personnel at each of our branches was 14, showing a decrease of less than 7% compared to that of the previous year.

In 2009, we cooperated with reputable organisations and institutes such as CBI, Industrial Management Organisation, Business Training Centre, Atieh Roshan Co., Monetary and Banking Research Academy, Euromoney Institute, Iranian Institute of Certified Accountants, Sharif University of Technology, and Shahid Beheshti University for our staff training. In 2009, training expenditure on a per capita basis was Rls. 1,226 thousand, showing an increase of 109% when compared to 2008.

Personnel Composition by Gender, Degree and Age (2009)

Age ProfilePostgraduates Undergraduate Primary Education & Diploma

Female Male Female Male Female Male

20 – 30 15 177 314 261 25 13

31 – 40 2 47 97 211 11 30

41 – 50 1 21 5 19 0 2

50 + 5 180 3 57 1 9

Total 23 425 419 548 37 54

Grand Total 448 967 91


20

0

400

600

800

1,00

0

1,20

0

1,40

0

1,60

0

MainOffices

TehranBranches

ProvincialBranches

Total

Personnel Composition by Location (2009)

Num

ber

of P

erso

nnel

0

398422

563600

495484

1,4561,506


Number

Type of Degrees Held by Personnel (2009)

Postgraduate

Udergraduate

Primary Education & Diploma

30%

6%

64%

Corporate Governance

Saman Bank operates in strict compliance with the rules, regulations and policies of CBI and all other relevant regulatory authorities as well as with the principles regarding corporate governance for banking organisations issued by the Basel Committee.

Bank’s Philosophy on Code of Governance

The Bank shall continue in its endeavour of enhancing its shareholders’ value by protecting their interests; it will ensure performance at all levels and maximise returns through the optimal use of resources in its pursuit of excellence. The Bank shall not only comply with statutory requirements but also voluntarily formulate and adhere to a set of strong corporate governance practices. The Bank believes in setting high standards with regard to ethical values and transparency, and is committed to preserving a disciplined approach to achieving excellence in all its spheres of activities. The Bank is also committed to following the best international practices. The Bank shall strive hard to best serve the interests of its stakeholders, a body comprised of shareholders, customers, the government and society at large.

General Assembly

Once a year, the annual general assembly provides shareholders with the opportunity to review the financial statements and other reports prepared by the Board of Directors, as well as the reports of the independent statutory auditor, and to vote on key issues.

Board of Directors

The Board of Directors is comprised of five permanent and two surrogate members, each elected by the annual general assembly for a two-year term. After the election of the Board of Directors, the board members appoint two individuals from among themselves to serve as Chairman and Vice-Chairman of the Board. The board meetings are held once a week or more frequently at the discretion of either the Chairman of the Board of Directors or the Managing Director, with each meeting requiring the established quorum prior to any resolutions being made effective. The Board of Directors is empowered to make key decisions with regard to the operations of the Bank.

Managing Director & President

The Managing Director & President acts as Saman Bank’s highest ranking executive. He is responsible for the daily operations of the Bank and determines the duties of the corporate executive body. He is supported in his activities by four vice-presidents, each responsible for different divisions of the Bank.

Independent Auditor

The accounts of Saman Bank are certified by KPMG Auditors. Each year, the mandate for the audit is reviewed by the General Assembly. The statutory auditor is granted rights, powers and responsibilities as described in the Commercial Code.

Audit Committee

This specialised committee is comprised of members appointed by the Board of Directors to assist the board with its supervisory duties (i.e. financial reporting, internal control systems, audit processes


and compliance with corporate regulations, policies and culture). The Audit Committee’s by-laws were prepared and approved by the board in August of 2007.

Internal Audit & Saman Group Supervision Division

Formed in 2007, this is a specialised professional department that is designated as an executive arm of the Audit Committee to assist the Committee in achieving the objectives set forth by the Audit Committee by-laws. The Internal Audit & Saman Group Supervision Division is technically under the supervision of the Audit Committee, and administratively speaking, it operates under the Board of Directors. In addition, within its determined scope of work, this department shall review and examine the Managing Director’s requirements and prepare the required reports.

The Internal Audit & Saman Group Supervision Division is fully authorised to periodically, randomly or continuously demand from any personnel of the Bank, its subsidiaries and, when required, its affiliated companies any data, information, document, financial statement, report, etc. and to examine and audit the performance of any or all of the aforementioned entities.

Both the Internal Audit and the Saman Financial Group’s Supervision departments serve under the supervision of the Internal Audit & Saman Group Supervision Division within the stipulated parameters. The Supervisory Management & Audit department is obliged to deliver a copy of its reports to the Bank’s Audit Committee, which in turn shall provide the Board of Directors and the Managing Director with a copy of that report.

Anti-Money Laundering Committee

In line with the guidelines of CBI, Saman Bank has created an Anti-Money Laundering Committee. The members are senior managers drawn from various units across the Bank in order to provide a multi-disciplinary approach. The skill sets drawn upon include knowledge of credit analysis, legal and regulatory issues, operations and technology as well as products and services.

The committee is responsible for the following:

Investigating accounts identified through internal or external information or by the Bank’s monitoring as engaging in unusual or suspicious activity;

Recommending new and modified anti-money laundering procedures and policies; and

Terminating account relationships suspected of being inconsistent with, or presenting unacceptable risk or being in violation of anti-money laundering laws and regulations.

Generally, the Anti-Money Laundering Policy of Saman Bank is designed to ensure that all employees and businesses of the Bank are well informed with respect to their customers and the nature of the transactions processed through their accounts.

In this context, the aims of Saman Bank are as follows:

To ensure compliance with national and international anti-money laundering laws and regulations;

To ensure observance regarding customer identification (“Know Your Customer” principles), obtaining and verifying information and record-keeping. It is incumbent upon the relationship manager to perform the requisite KYC due diligence involved in a new customer relationship. The policies also address the significance of thorough KYC procedures and monitoring of foreign correspondent bank relationships;

To enable recognition, investigation and reporting of suspicious activities to the concerned authorities; and

To protect the reputation and integrity of the Bank.

Furthermore, internal policies define the responsibility of each department within the Bank to perform its own assessment of risk regarding money-laundering activities and to develop risk-based policies and procedures, taking into consideration its services, customer characteristics and industry risk. Each department’s policies and procedures contain a system of internal controls to provide for proper record-keeping and reporting of suspected money laundering activities; this is reviewed and updated annually or as appropriate.

Last but not least, the effectiveness of Saman Bank’s anti-money laundering efforts depends upon the knowledge and vigilance of its employees. Accordingly, the Bank has started formalised anti-money laundering training for its personnel.


Risk Management

The dynamic growth of financial markets and the increased use of complex bank products brought about substantial changes in the business environment faced by credit institutions today. These challenges required functioning systems for the limitation and targeted control of each institution’s risk situation. In addition to describing methods for calculating regulatory capital requirements, the new regulatory capital framework (Basel II) also placed increased emphasis on risk management and integrated bank-wide management. It required banks to employ suitable procedures and systems in order to ensure their capital adequacy in the long term with due attention to all material risks. In the international discussion, the corresponding procedures were referred to collectively as the ICAAP (Internal Capital Adequacy Assessment Process). These guidelines were designed to assist practitioners in the implementation of an ICAAP. In this context, the selection and suitability of methods depends heavily on the complexity and scale of each individual institution’s business activities. Moreover, financial services and products offered in conformity with Islamic principles further challenge our banking system’s supervision and risk management. In today’s competitive global market, effective risk management play an important role in sustainable profitability and growth of Islamic banks.

In line with the modernisation of the Iranian banking system and CBI requirements, the High Committee of Risk Management was formed and “Risk Assessment & Control” and Compliance Divisions were mobilised in 2009. Subsequently, effective actions were taken concerning risk assessment and management. The significant summary of these actions are as follows:

In the previous year, the assessment and control of operational, credit, liquidity and market risks in compliance with Basel II Accord were placed on our agenda. Additionally, the Bank’s capital adequacy was, for the first time, calculated by applying the formula proposed by Basel II Accord. A brief report of the results obtained by the Risk Assessment & Control Division will follow:

Credit Risk

Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximise a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions. Banks should also consider the relationships between credit risk and other risks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organisation.

Based on Basel II Accord, capital required for the credit risk exposures is estimated considering two approaches of standardised approach and a more sophisticated internal ratings-based approach. As the latter approach is based on clients’ credit score and such system is yet to be implemented, the Credit Management Division uses the standardised approach to estimate the capital required to be held against credit risk. We estimate that such capital for the Bank at the end of this financial year to be Rls. 1,185,120 million.

Based on Credit Risk Management By-law, the highlight of Credit Risk Management Division is as follows:

a. Review of Clients’ Credit Rating Methods: The Bank plans to implement its internal client credit rating in 2010 to assess clients’ credibility. The Risk Assessment & Control Division must independently and periodically review the reliability of rating models used for clients’ credit rating assessment. In addition, credit rating system makes credit portfolio performance assessment feasible for credit risk management.

b. Prevention of Credit Risk Concentration: After due consideration to the proposed supervision policy package of CBI as well as assessing credit portfolio performance, limited structure regarding payment of facilities was drawn up in 2009. This limited structure is annually reviewed and any kind of violation is reported to Senior Risk Management Committee.

c. Supervision of Credit Basis: The credit basis varies depending on the nature of the credit, loan size, loan period and client’s credit score. Credit basis were reviewed in 2009 and will be enforced in 2010 after required modification.

d. Supervision and Control of Credit Risk: Risk exposures of the Bank are supervised by branch managers, annual and partial reviews by credit affair management, daily transactions review by internal auditors, annual audit, and risk review by Risk Assessment & Control Division.

e. Pricing of Credit Risk: Considering all limitations, the Bank intends to reduce the loan return rate of clients with higher credit score. This process will be achieved by using a matrix designed to determine the loan return rates based on the type of contract, type of collateral, industry and client’s credit score.

f. Management of Credit Portfolio: The Credit Risk Management Division consistently reviews the credit portfolio diversity through economic sector, geographic location, product type, collateral type and other parameters.

g. In addition, after extraction of the required data we will be able to analyse credit portfolio sensitivity and elasticity, introduced in Basel II Accord, to identify events and element exposing the Bank.

Liquidity Risk

Banks are responsible for the sound management of liquidity risk. They should establish a robust liquidity risk management framework that ensures they maintain sufficient liquidity, including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events, including those involving the loss or impairment of both unsecured and secured funding sources. Adequate liquidity is very essential to satisfy banks’ commitments and to exploit investment opportunities. On the one hand, having excess liquidity will lead to some assets remaining unproductive and impairing depositors and shareholders’ interests; whereas, on the other hand, insufficient liquidity will make banks more vulnerable against timely fulfilment of their commitments. Hence, the assessment of sufficient liquidity enables banks to withstand stress events as well as exploit them as investment opportunities. So


banks should have a sound process for identifying, measuring, monitoring and controlling liquidity risk. This process should include a robust framework for comprehensively projecting cash flows arising from assets, liabilities, and off-balance sheet items over an appropriate set of time horizons.

In 2009, for the first time, the monthly liquidity gap report was prepared by the Liquidity Risk Management and was reviewed by the Resources & Consumption Committee in order to further make the liquidity gap, resources, and consumptions more cost-effective. In 2010 and after compiling the required data, the Bank intends to prepare a more dynamic crisis probe and liquidity gap reports.

Market Risk

Market risk is the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices.

Due to the current limitations imposed on our foreign currency market and the Bank’s TSE listed stock portfolio, Saman Bank is exposed to risks associated with foreign currency and equity risks. Based on Basel II Accord, banks are permitted to calculate their capital requirement for market risk exposure by using standardised or internal model approaches. Starting in the fourth quarter of the financial year, Market Risk Management Division began to prepare monthly market risk reports for submission to the Resources & Consumption Committee enabling the committee to consistently monitor the market risk margins.

Operational Risk

Operational risk is defined by the Basel Committee as “The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” This definition itself raises two issues. First, it omits altogether basic business risk: the risk of loss attributable to the institution’s inability to reduce costs as quickly as revenues decline. Most institutions that attempt to allocate economic capital for operational risk find that this is the largest component. Second, it excludes the Basel Committee’s earlier attempt to include indirect costs and reputational risk.

Our bank has adapted the Basel II definition of operational risk. The Bank’s highest prioritised measures against this risk are: 1) to impose a risk-sensitive capital requirement for operational risk which would lead to enhancing the measurement and management of operational risk and discourage from substituting operational risk for credit or market risk and 2) to define risk exposure limits, supervise and plan for suitable approaches to reduce operating risk.

In 2009, the Bank’s capital adequacy ratio was calculated for the first time based on Basel II requirements. It is important to note that Basel I requirements do not take into consideration operational and market risks whereas these risks are accounted for in Basel II requirements. In the beginning of 2010, the Bank’s capital adequacy ratio was 13.09% in accordance with Basel II requirements.

Subsidiaries

The Saman Financial Group (SFG) is comprised of Saman Bank, the Saman Insurance Co., the Saman Brokerage Co., the Saman Exchange Co., the Saman Electronic Payment Co., the Saman Satellite Telecommunication Co. and Iranian Credit Bureau & Scoring Co. These seven entities operate independently and with the highest degree of professionalism. At the same time, there is close coordination of activities among the various companies in the group. This enables SFG to provide a comprehensive range of products and services in the areas of financial services, e-banking, and banking software, all catering to the special needs of each client.

SamanIranian CreditBureau & Scoring Co.

The company was registered on 20 October 2007 with initial registered capital of Rls. 100 million. After the ratification of Credit Development Rating System By-law by the parliament of I.R.I on 12 March 2008, the company which operates under licence from Experian Co. entered negotiations on agreements for credit rating projects of Saman Bank, Bank Melli Iran, and Parsian Bank. During the reporting period, the company showed a net loss of Rls. 15,052 million.

SamanBrokerage Co.

The owners of the Krishchi Brokerage Co., one of the oldest and most reputable brokerage companies in the Tehran Stock Exchange, were among the founding members of Saman Bank. In 2004, Saman Bank acquired a 49% share of the Krishchi Brokerage Co. and changed its name to Saman Brokerage Co.

The Saman Brokerage Co. continues to be one of the cornerstones of trading at the Tehran Stock Exchange. Its research-driven approach, coupled with seamless execution, generates premium returns for its customers. The Saman Brokerage Co. also puts great emphasis on gaining full understanding of the individual needs and objectives of its clients, resulting in highly personalised service.

The firm offers services in the following fields:

1. Investment and brokerage services:

Trading of listed securities;

Underwriting activities in the primary market; and

Asset management.

2. Consultancy services:

Listing advisory services;

Investment advisory services; and

Financial advisory services.


Despite unfavourable general conditions in Iran’s capital market, the Saman Brokerage Co. is determined to gradually broaden its range of services. In this context, the firm plans to:

Attract foreign portfolio investment; and

Attract new customers through the growing number of Saman Bank branches and through professional marketing.

In the financial year that ended on 22 September 2009, the Saman Brokerage Co. had an operating income of Rls. 939 million and a net loss of Rls. 1,605 million as the result of the recession in the country’s stock market.

SamanKish ElectronicPayment Co.

The Saman Kish Electronic Payment Co. started its operation in July 2003 with capital of Rls. 100 million. The company played a key role in putting Saman Bank at the forefront of e-banking in Iran. Immediately upon its inception, it started developing the most advanced and complete e-banking system in Iran and rolled out various online services and products for Saman Bank customers. Today, the Saman Bank website is the most comprehensive, user-friendly, and secure online banking platform in Iran.

This company is also in charge of the group’s endeavours related to POS systems, ATM machines, self-service kiosks, and other forms of electronic payment.

During the reporting period, the Saman Kish Electronic Payment Co. had Rls. 126,388 million in revenues and Rls. 11,034 million in net profit.

SamanExchange Co.

In line with the sharp increase in the volume of Iran’s foreign trade and the liberalisation of foreign exchange policies by the Central Bank of Iran, Saman Bank established a specialised foreign exchange company in January 2004 with share capital of Rls. 50 billion (approx. US$ 6 million). In addition to exchange services, it also affects transfers via swift and trades cheques and precious metals.

SamanInsurance Co.

The Saman Insurance Co., a member of the Saman Financial Group, started operation under the license for Central Insurance of Iran in March 2005 with capital of Rls. 200 billion (approx. US$ 22 million).

Saman Bank, the Saman Bank Investment Co., Saman Forex, the Pension Fund of the National Iranian Steel Co., the Pension Fund of the National Iranian Copper Industries Co., and a number of investors from the private sector are the founding members of the Saman Insurance Co.

The Saman Insurance Co. benefits from a combination of highly experienced Iranian insurance managers, international know-how and state-of-the-art software support. It offers a complete range of standard insurance products.

At the Saman Insurance Co., each client’s requirements are evaluated carefully to offer the best solution to specific requirements. A Loss Prevention Team also undertakes periodic inspection of insured assets and provides advice as to how to minimise risks.

Presently, the Saman Insurance Co. mainly focuses on the following areas:

Travel insurance;

Fire insurance as well as fire insurance in the wake of an earthquake, especially in Tehran;

Engineering insurance;

Transportation insurance; and

Life & group accident insurance.

The Saman Insurance Co. is striving to develop into a market leader in the insurance industry in Iran through the recruitment of talented and committed employees, intensive marketing, and the establishment of representative offices all across Iran taking advantage of Saman Bank branch facilities as well as the provision of tailored, modern insurance services.

During the reporting period, the company’s operating income was Rls. 509 billion, showing an increase of 26.3% over the prior year.

SamanSatelliteTelecommunication Co.

The Saman Satellite Telecommunication Co. was established by Saman Bank in February 2005 with capital of Rls. 500 million after the Iranian Telecommunication Co. laid the ground for private investment in the country’s fixed line network.

During the reporting period, the company’s income amounted to Rls. 70 billion with a net profit of Rls. 4,176 million.


Outlook

Saman Bank’s objectives and strategic plans for 2010 are as follows:

Sustainable profitability with emphasis on capital adequacy ratio growth

Increasing non-interest related revenue

Reducing risk by reducing credit

Improving asset quality (internal credit rating)

Increasing productive assets

The Bank’s macro objectives are influenced by a single strategic goal, which is “sustainable and tenable growth”. Sustainable growth in a financial institution can be summarised in capital adequacy. Capital adequacy improvement is achieved through core capital increase and/or reduction of risk weighted assets.

Increased Competiveness through Operational Proficiency in Service Rendering Process

Increasing the extent of use of electronic banking instruments

Reviewing the organisational process and reducing operation volume

Restructuring the organisation and intra-units communication

One of the three strategic approaches of companies is to achieve operational excellence. This means that the client would use the services with minimum cost such as price, time and quality support. The Bank studies show that as the population becomes younger and there is greater tendency toward the use of more technology related industries, time becomes of utmost importance. Meanwhile, clients prefer to choose a bank that would easily provide them with all desired services. That is the reason we pioneered and strive to further develop electronic banking. During the upcoming year, we will focus part of our efforts to review all service processes and further accelerate our services.

Improving the Bank’s Ranking in Terms of Market Share through Customer Loyalty

Implementing VIP Division

Identification and attraction of more profitable clients

Regular client satisfaction assessment

Penetrating new markets

Our bank is relatively a young bank, which helps it to maintain a sustainable market. With more than one million clients, one of our foremost objectives is to retain our present clients through client satisfaction and loyalty while attracting and servicing new clients. We aim to achieve this goal by providing a better service as well as carefully studying and servicing clients’ new demands and requirements and, by doing so, keep our competitive edge. To achieve this highly important objective, we will form a VIP division in 2010 and will identify and attract high profile clients who will receive distinctive service. At the same time, we intend to regularly survey our clients’ views, suggestions and constructive criticisms to improve our bank.

Additionally, we aim to penetrate new markets.

Operation Indexes 2009 2010 Growth(%)

Rials

Deposits (Rls. billion) 40,071 51,782 29

Loans & receivables (Rls. billion) 34,243 43,588 27

Letters of guarantee (Rls. billion) 1,953 4,500 130

Receivable ration (SAM) (%) 22 15 -32

Foreign Currency

Opening L/Cs & drafts (US$ million) 913 1,600 75

Forex letters of guarantee (US$ million) 70 150 114

Forex deposits (US$ million) 297 414 40

Loans & receivables (US$ million) 122 310 154

Expansion of Service Network

No. of branches 99 130 31

No. of personnel 1,505 1,624 8

No. of ATMs 390 500 28

E-banking

No. of debit cards 606,814 830,121 37

No. of credit cards 15,923 7,620 71

No. of coupons & gift cards 168,787 238,898 41

No. of internet banking clients 154,382 247,195 60

No. of telephone banking clients 149,898 230,297 54

It is worth mentioning that we are in the process of collecting information on each branch’s potential with respect to the set objectives as well as the Bank’s internal potential. Additionally, a Rls. 4,000 billion capital increase enables us to penetrate new markets and attract more high profile clients who will further strengthen our forex and electronic services.


AUDITOR’SREPORT& FINANCIALSTATEMENTS

Independent Auditor’s ReportConsolidated Balance SheetConsolidated Profit & Loss AccountConsolidated Statement of Retained Profit & LossConsolidated Statement of Cash FlowsBalance SheetProfit & Loss AccountStatement of Retained Profit & LossStatement of Cash FlowsNotes to the Financial Statements

Independent Auditor’s Reportto the Members of Saman Bank (Public Joint Stock Company)

We have audited the accompanying financial statements of Saman Bank (“the Bank”), which comprise the balance sheet as at March 20, 2010, the income and cash flow statements for the year then ended and a summary of significant accounting policies and other explanatory notes, for both the Bank and Saman Group (the consolidated entity). The consolidated entity comprises the Bank and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Statements

The directors of the Bank are responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in Iran. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Bayat RayanChartered Accountants

3 rd Floor 231 Motahari Ave.Tehran 1587618413Iran

P.O.Box: 14155-3739TehranIran

Telephone: (9821) 88504586/7/8Telefax: (9821) 88502045E-mail: [email protected]

1. The Bank’s Tax Position is as follows:

1-1 There is a difference between income tax payable as per the tax assessments raised by the Tax Authorities for the financial years ended March 2006, 2008 and 2009 and the corresponding provisions made by the Bank amounting to Rls. 325,000 million. The tax assessments have been protested by the Bank and the matter has been referred to the Tax Authorities for review. No provision has been made by the Bank for the above shortfall which would be payable if the assessments are not revoked.

1-2 The provision for 2010 income tax has been made on a similar basis as previous years. Given the Bank’s tax history, it is likely that the Tax Authorities will raise tax assessment in excess of amount provided by the Bank. The amount of additional tax liability, if any, cannot be determined at present.

Auditor’s Opinion

In our opinion, except for the effects on the financial statements of the matters referred to in paragraph 1 above, the accompanying financial statements present fairly, in all material respects, the financial position of Saman Bank and the consolidated entity as of March 20, 2010 and of their performance and cash flows for the year then ended in conformity with the Iranian Accounting Standards.

Tehran: June 28, 2010

ANNUAL REPORT 2009 | AUDITOR’S REPORT 42,43

Bayat Rayan Chartered Accountants

Note2010 2009

(Rls. million) (Rls. million)

Assets:

Cash 4 454,838 469,034

Balances with Central Bank 5 4,904,277 5,030,761

Due from other financial institutions 6 4,055,999 4,767,293

Loans 7 34,096,792 27,213,093

Participation bonds 8 1,538,800 609,825

Investments 9 115,259 134,928

Investments in associated entities 10 26,149 4,738

Tangible fixed assets 11 1,285,840 1,240,986

Intangible assets 12 1,183,788 1,227,790

Goodwill 13 28,069 31,566

Other assets 14 1,702,661 1,139,723

Total assets 49,392,472 41,869,737

Liabilities and equity:

Due to Central Bank 15 430,674 863,506

Due to other financial institutions 16 2,387,070 1,642,660

Deposits 17 38,906,412 33,042,568

Other deposits 18 1,158,345 1,116,461

Provision for income tax 20 96,149 27,388

Other liabilities 19 3,491,732 2,758,338

Staff termination benefits 21 35,503 22,285

Total liabilities 46,505,885 39,473,206

Share capital 22 1,800,000 900,000

Shares held by subsidiaries (7,752) (9,740)

Shareholders’ funds for capital increase 22 - 788,041

Legal reserve 23 389,064 270,597

Retained earnings 675,415 417,961

Parent entity total equity 2,856,727 2,366,859

Minority interest 29,860 29,672

Total shareholders’ equity 2,886,587 2,396,531

Total liabilities and shareholders’ equity 49,392,472 41,869,737

The accompanying notes on pages 50 to 70 are integral part of these financial statements.

Consolidated Balance Sheet as at March 20, 2010

Note2010 2009


Income:

Loan interest 24 5,315,058 4,705,983

Investments and deposits income 25 1,215,211 463,430

Forex 26 719,012 41,438,210

Others 27 362,996 293,473

Total income 7,612,277 46,901,096

Expenses:

Deposit interest 5,011,251 4,191,379

Other interest 28 52,803 111,655

Forex 26 597,959 41,153,905

Administration and general expenses 29 739,875 498,522

Financial expenses 679 4,102

Commission 30 148,710 137,353

Provision for doubtful debts 3-6 230,539 338,946

Total expenses 6,781,816 46,435,862

Operating profit 830,461 465,234

Profit from associated entities 2,550 (4,776)

Profit before tax 833,011 460,458

Income tax 20 (96,149) (27,278)

Net profit for the year 736,862 433,180

Attributable to:

Parent's shareholders 745,754 430,881

Minority interest (8,892) 2,299



Consolidated Profit and Loss Account for the financial year ended March 20, 2010

ANNUAL REPORT 2009 | FINANCIAL STATEMENTS 44,45

Note2010 2009


Assets:


Balance at beginning of the year 409,659 450,127

Prior year's adjustments 7,326 (25,658)

Dividends paid (359,509) (359,430)

Directors’ bonuses (9,348) (7,484)

Total 793,882 488,436

Transfer to legal reserve (118,467) (70,475)

Net profit available for distribution 675,415 417,961

Minority’s share of accumulated profits (4,634) 2,468

Consolidated Statement of Retained Profit & Loss for the financial year ended March 20, 2010

Note2010 2009


Operating activities:

Cash flow from operating activities 32 126,473 2,293,547

Dividends paid (359,509) (359,429)

Income tax paid (121,816) (7,649)

Total (354,852) 1,926,469

Investing activities:

Net increase in tangible fixed assets (163,622) (419,611)

Purchase of non-current assets 11,138 (344,594)

Net cash flow from investing activities (152,484) (764,205)

Financing activities:

Shareholders’ funds for capital increase 111,959 788,041

Interbank loans 60,996 (145,430)

Net cash flow (used in) from financing activities 172,955 642,611

Net increase (decrease) in cash 33 (334,381) 1,804,875

Cash at beginning of the year 33 3,994,664 2,189,789

Net profit for the year 33 3,660,283 3,994,664


Consolidated Statement of Cash Flows for the financial year ended March 20, 2010

Note2010 2009


Assets:

Cash 4 454,258 467,245

Balances with Central Bank 5 4,904,277 5,030,761

Due from other financial institutions 6 4,049,190 4,754,864

Loans 7 34,243,257 27,340,960

Participation bonds 8 1,538,800 609,825

Investments 9 259,052 257,851

Other assets 10 1,648,719 1,037,926

Tangible fixed assets 11 1,150,637 1,080,973

Intangible assets 12 1,125,696 1,152,223

Total assets 49,373,886 41,732,628

Liabilities and equity:

Due to Central Bank 15 430,674 863,506

Due to other financial institutions 16 2,387,070 1,638,760

Deposits 17 38,911,298 33,047,890

Other deposits 18 1,159,845 1,119,747

Other liabilities 19 3,437,519 2,625,438

Provision for income tax 20 91,973 23,700

Staff termination benefits 21 34,749 21,915

Total liabilities 46,453,128 39,340,956

Share capital 22 1,800,000 900,000

Shareholders’ funds for capital increase 22 - 788,041

Legal reserve 23 387,289 269,370


Total shareholders’ equity 2,920,758 2,391,672

Minority interest 49,373,886 41,732,628

Total shareholders’ equity:

L/C commitments 30 2,632,390 1,294,350

Guarantee commitments 30 1,703,639 1,217,956

Other commitments 30 1,318,869 1,148,489


Balance Sheet as at March 20, 2010


Note2010 2009


Income:

Loans interest 24 5,346,944 4,718,128

Investments and deposits income 25 1,224,336 466,347

Forex 26 103,747 221,890

Others 27 367,683 293,808

Total income 7,042,710 5,700,173

Expenses:

Deposit interest 5,011,370 4,192,535

Other interest 28 52,803 111,781

Administration and general expenses 29 716,546 468,291

Commission 30 148,696 134,924

Provision for doubtful debts 3-6 235,195 329,638

Total expenses 6,164,610 5,237,169

Profit before tax 878,100 463,004

Income tax 20 (91,973) (23,700)


Profit and Loss Account for the financial year ended March 20, 2010

Statement of Retained Profit & Loss for the financial year ended March 20, 2010

Note2010 2009


Income:


Balance at beginning of the year 431,151 453,064

Prior year's adjustments 3,110 (21,070)

Dividends paid (360,000) (360,000)

Directors’ bonuses (9,000) (7,200)

Total 851,388 504,098

Transfer to legal reserve (117,919) (69,837)

Net profit available for distribution 733,469 434,261


Note2010 2009


Operating activities:

Cash flow from operating activities 32 126,501 2,680,081

Dividends paid (360,000) (360,000)

Income tax paid (118,128) -

Net cash flow from operating activities (351,627) 2,320,081

Investing activities:

Net increase in tangible fixed assets (144,145) (408,653)

Purchase of non-current assets (4,734) (340,649)

Net cash flow from investing activities (148,879) (749,302)

Financing activities:

Shareholders’ funds for capital increase 111,959 788,041

Interbank loans 60,996 (145,430)

Net cash flow (used In) from financing activities 172,955 642,611

Net increase (decrease) in cash 33 (327,551) 2,213,390

Cash at beginning of the year 33 3,980,447 1,767,057

Cash at end of the year 33 3,652,896 3,980,447


Statement of Cash Flowsfor the financial year ended March 20, 2010


Notes to the financial statements for the financial year ended March 20, 20101. Background1.1. Saman Bank (Public Private Joint Stock Company – the Bank) was registered with Tehran

Registrar of Companies under registration number 154444 in August 1999. The Bank commenced operation initially as a credit institution but was issued a full banking license by the Central Bank of Iran (“CBI”) under the provision of the “Law for Establishment of Non-state Banks” in August 2002. The Bank initial share capital was Rls. 200,000 million.

1.2. The Bank’s activities are governed under the provisions of the “Monetary and Banking Law of Iran” of July 1972 and the Non-Usury Banking Law. The Bank undertakes all the banking activities recognised under the above laws and other CBI monetary and banking regulations.

1.3. The financial statements comprise the consolidated financial statements of the Group togetherwith the financial statements of the parent entity, the Bank.

1.4. The number of staff employed at the year-end was as follows:

Consolidated Parent Entity

2010 2009 2010 2009

Staff 1,598 1,549 1,506 1,456

1.5. The number of branches at the year-end was as follows:

Parent Entity

2010 2009

Branches 106 97

2. Principles of Consolidation

a) The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries controlled by the Bank. Subsidiaries are fully consolidated from the date on which control commences and are de-consolidated from the date control ceases.

b) The purchase method of accounting is used to account for the acquisition of the subsidiaries.

c) Goodwill on the acquisition of businesses being the excess of purchase consideration over the fair valueof the Group’s share of identifiable net assets of the acquired business is amortised over 10 years on a straight line basis.

d) The parent’s shares acquired by the subsidiaries are recorded at cost in the subsidiary’s accounts. These shares are deducted from the parent’s equity in the consolidated financial statements.

The subsidiaries subject to consolidation are:

Shareholding

Saman Exchange Co. 71%

Satellite Communication Co. 65%

Iranian Credit Rating Co. 98%

3. Summary of Significant Accounting PoliciesThe principal accounting policies adopted in the preparation of the financial statements are set out below:

3.1. Accounting convention The consolidated financial statements of the Group and the Bank have been prepared under the historical cost convention and in accordance with the Iranian Accounting Standard and the CBI’s monetary and banking regulations.

3.2. Foreign currencies

Monetary assets and liabilities are converted at the prevailing rate on a daily basis and exchange differences, if any, are provided in the accounts.

Non-monetary assets and liabilities are recorded at the historical rates at the time of recording transactions in the accounts.

3.3. Investment Long-term investments are valued at cost less provision made for any permanent reduction in their values.

Short-term liquid investments are valued at the lower of cost or market value at the portfolio level and othershort-term investments are valued at the lower of cost or market value for each investment.

3.4. Tangible fixed assetsTangible fixed assets are stated at cost and depreciated at the rates and bases in accordance with the Iranian Direct Taxation Act of 1988 as amended (the Tax Act) as follows:

Asset Depreciation rate Basis

Buildings 7 % and 12% Reducing balance

Fixture and fittings (including computer hardware) 3, 5 and 10 years Straight line

Motor vehicles 25% Reducing balance

ATM's and POS's, 5 years Straight line

Satellite installations 4, 5 and 10 years Straight line

Major repairs and improvements which extend the useful life of assets are capitalised whereas minor repairs are charged to the profit and loss account as incurred.

In accordance with the provisions of the Tax Act depreciation is charged from the month following the date when an asset is brought into use. When assets are not used during the year, depreciation

is charged at the rate of 30% of normal depreciation.

3.5. Intangible fixed assetsIntangible fixed assets are recorded at cost. Key money is not depreciated but computer software is depreciated on a straight line basis over 3 years.

3.6. Revenue recognitiona) Interest Income - Loan interest income is recognised on accrual basis.


b) Investment Income - Dividends approved by the subsidiaries’ Annual General Meetings (AGMs), prior to the Bank’s AGM, are recognised as income for the year whilst in case of other investments, income is only recognised if approved by the investee AGMs prior to the Bank’s year end.

3.7. Depositors share of profitUnder the CBI’s regulations, in addition to interest payable to depositors, they are also entitled to a share of profit of the Bank’s net interest and investment income. The Bank receives a commission from depositors based on total interest paid to them.

3.8. Provisions for doubtful debtsProvisions for bad and doubtful debts are provided in accordance with the CBI’s regulations as follows:

a) General provision - equal to 1.5% of the total loan portfolio.

b) Specific provision - depending on the severity of the non-performing loans including the period of irregularity, the Bank provides specific provision ranging from 10% to 100% of the shortfall in the balance of each loan after allowing for collaterals and general provision in (a) above.

3.9. Termination benefitsStaff termination benefits are provided at the rate of one month salary for each year of service.

4. CashThe details of cash balances are as follows:


2010 2009 2010 2009

(Rls. million) (Rls. million) (Rls. million) (Rls. million)

Vault 390,693 417,328 390,173 416,891

Foreign currencies 64,145 51,107 64,085 50,354

Others - 599 - -

Total 454,838 469,034 454,258 467,245

5. Balances with Central BankThe balance comprises:


2010 2009 2010 2009


Statutory deposit 4,285,659 4,624,764 4,285,659 4,624,764

Current account 298,820 125,422 298,820 125,422

Short term deposits 319,798 238,206 319,798 238,206

Others - 42,369 - 42,369

Total 4,904,277 5,030,761 4,904,277 5,030,761

6. Due from other Financial InstitutionsThe details of deposits with banks and credit institutions are as follows:


2010 2009 2010 2009


Current accounts - foreign banks 6-1 2,200,017 1,941,870 2,200,017 1,941,870

Current accounts - local banks 25,864 58,574 25,844 58,529

Term deposits - local banks 421,832 1,145,391 415,043 1,133,007

Forex deposits - local banks 6-2 85,962 91,145 85,962 91,145

Cheques drawn on us by other banks 1,322,324 1,530,313 1,322,324 1,530,313

Total 4,055,999 4,767,293 4,049,190 4,754,864

6.1. The details of forex deposits with local and foreign banks are as follows:

Foreign Banks 2010 2009

Currency (Rls. million) Currency (Rls. million)

US$ 671,346 6,602 66,577 647

Euro 76,553,389 1,033,471 109,453,985 1,385,578

GBP 13,630,152 205,161 3,974,621 54,186

UAE Dirham 340,564,947 912,033 134,606,056 356,168

A$ 223,271 2,027 373,873 2,401

Swiss Francs 1,497,542 13,960 933,092 7,680

SA Rials 26,250 69 26,250 68

Canadian $ 85,543 832 - -

Yen 237,421,827 25,862 1,368,663,225 135,142

Total 2,200,017 1,941,870

Local Banks2010 2009

Currency (Rls. million) Currency (Rls. million)

US$ 1,663,360 16,357 1,015,953 9,872

Euro 4,433,108 59,847 6,222,822 78,775

GBP 626,912 9,436 177,215 2,416

UAE Dirham 76,907 206 - -

A$ 12,748 116 12,748 82

Total 85,962 91,145


7. Loans

7.1. The details of loans net of provision for bad and doubtful debts are as follows:


2010 2009 2010 2009


Credit sales 813,225 912,074 813,225 912,845

Jealeh (service) contracts 376,512 529,277 397,603 529,898

Hire purchase 273,302 337,511 273,302 337,511

Salaf (future) contracts 24,778 107,647 24,778 107,647

Interest free laons 265,174 162,503 265,174 162,503

Mozarebeh (commercial transactions) contracts 10,174,542 9,727,398 10,230,626 9,793,904

Mosharekat Madani (civil partnership) contracts 17,703,667 11,836,605 17,772,957 11,881,126

Debt factoring 971,380 155,327 971,380 155,327

Foreign currency loans 88,745 28,663 88,745 28,663


2010 2009 2010 2009


Paid letters of credit 6,251 126,424 6,251 126,424

Doubtful letters of credit 449,466 1,040,791 449,466 1,056,239

Paid guarantees 32,333 36,366 32,333 36,366

Doubtful guarantees 58,963 265,978 58,963 265,978

Long term letters of credit and notes 2,858,454 1,946,529 2,858,454 1,946,529

Total 34,096,792 27,213,093 34,243,257 27,340,960

7.2. The analysis of loans by interest rate and maturity is as follows:

InterestMaturity

12% orless

12% to 15%

15% to 18%

18% to 21%

21% to 24%

24% or more

Total

Past-due 120,856 1,986 44,095 6,735 364,913 6,964,816 7,503,401

2 months to Y/e 20.03.2010

1,393 4 156 202 6,056 4,436,647 4,444,458

Y/e 20.03.2011 1,422,573 103,641 1,478 1,504,355 97,860 16,074,538 19,204,445

Y/e 20.03.2012 3,306 44,693 33,082 5,041 32,303 335,168 453,593

Y/e 20.03.2013 2,167 11,062 4,350 243,189 84,675 110,187 455,630

Y/e 20.03.2014 2,774 2,794 116,034 3,921 56,090 112,631 294,244

Y/e 20.03.2015 34,247 2,681 19,131 862 155,956 347,798 560,675

After 2015 398,591 66,335 228,077 14,009 368,378 268,776 1,344,166

Total 1,985,907 233,196 446,403 1,778,314 1,166,231 28,650,561 34,260,612

8. Participation BondsThe analysis of participation bonds by currency are as follows:


2010 2009 2010 2009

Rials 863,800 609,825 863,800 609,825

Forex 675,000 - 675,000 -

Total 1,538,800 609,825 1,538,800 609,825

The Rials bonds interest rate is 15.5% to 18% pa and forex bonds interest rate is 8% pa. In both cases interest is tax free.

9. InvestmentsThe details of investments are as follows:


2010 2009 2010 2009


Listed shares 60,917 10,123 60,917 10,123

Unlisted shares 39,342 124,805 183,135 247,728

Other 15,000 - 15,000 -

Total 115,259 134,928 259,052 257,851

10. Investments in Associated EntitiesThe movements is investments, goodwill and share of total assets in associated entities are as follows:

Share of Net Assets Goodwill Share of Total Assets

(Rls. million) (Rls. million) (Rls. million)

Opening balance 2,378 2,360 4,738

Additions 19,200 - 19,200

Share of associated entities earnings 2,550 - 2,550

Goodwill amortization - (339) (339)

Closing balance 24,128 2,021 26,149

11. Tangible Fixed AssetsThe details of tangible fixed assets are given in Appendix “A”.


12. Intangible AssetsThe details of intangible assets are as follows:


2010 2009 2010 2009


Key money 1,107,238 1,133,737 1,107,238 1,133,738

Software 13,015 13,394 12,737 13,094

Utility deposits 62,772 79,896 5,721 5,391

Others 763 763 - -

Total 1,183,788 1,227,790 1,125,696 1,152,223

13. Goodwill

Consolidated

2010 2009


Cost:

Opening balance 38,262 38,262

Additions during the year 411 -

Closing balance 38,673 38,262

Amortization:

Opening balance 6,696 2,870

Depreciation for the year 3,908 3,826

Closing balance 10,604 6,696

Net book value 28,069 31,566

14. Other AssetsThe details of other assets are as follows:

Note


2010 2009 2010 2009


Trade receivables 14-1 122,821 132,036 - -

Other receivables 14-2 189,765 152,447 193,769 151,120

Inventory 14-3 21,070 14,032 - -

Prepayments 15,703 16,715 - -

Others 14-4 1,353,302 824,493 1,454,950 886,806

Total 1,702,661 1,139,723 1,648,719 1,037,926

14.1. The details of trade receivables are as follows:


2010 2009 2010 2009


Rials receivables 134,471 118,629 - -

Forex receivables 1,133 25,056 - -

Total 135,604 143,685 - -

Provision for doubtful debts (12,783) (11,649) - -

Total 122,821 132,036 - -

14.2. The details of other receivables are as follows:


2010 2009 2010 2009


Dividends 9,314 10,782 13,616 14,013

Participation bonds income 17,118 6,370 17,118 6,370

Due from associated entities 97 29,926 3,890 31,631

Debt collection costs 80,149 59,926 80,149 59,926

Others 107,395 65,485 103,264 59,221

Total 214,073 172,489 218,037 171,161

Provision for doubtful debs (24,308) (20,042) (24,268) (20,041)

Total 189,765 152,447 193,769 151,120

14.3. The details of inventory is as follows:


2010 2009 2010 2009


Inventory 19,880 13,259 - -

Work in progress 1,190 773 - -

Total 21,070 14,032 - -


14.4. The details of other assets are as follows:


2010 2009 2010 2009


Rent prepayments 135,449 91,073 135,449 91,073

Income tax prepayments 164,984 63,951 164,984 63,951

Foreclosed collaterals 937,009 354,368 976,388 354,368

Contracts advances 35,335 53,856 97,604 116,169

Rent deposits 60,118 74,174 60,118 74,174

Others 20,407 187,071 20,407 187,071

Total 1,353,302 824,493 1,454,950 886,806

15. Due to Central BankThe balance of amounts due to CBI comprises:


2010 2009 2010 2009


Forex transactions 340,578 519,406 340,578 519,406

CBI's long term deposits - 315,000 - 315,000

Forex loans 90,096 29,100 90,096 29,100

Total 430,674 863,506 430,674 863,506

16. Due to the Other Financial InstitutionsThe details of amounts due to other financial institutions are as follows:


2010 2009 2010 2009


Local banks:

At call and term deposits - Rials 1,124,468 606,050 1,124,468 606,050

At call and term deposits - Forex 1,115,755 957,734 1,115,755 957,734

Foreign banks:

At call and term deposits - Forex 146,847 74,976 146,847 74,976

loan - 3,900 - -

Total 2,387,070 1,642,660 2,387,070 1,638,760

17. DepositsThe details of deposits are as follows:


2010 2009 2010 2009


At call 2,723,652 1,495,946 2,723,796 1,498,041

Non-interest bearing 259,774 184,476 259,774 184,476

Term 35,922,986 31,362,146 35,927,728 31,365,373

Total 38,906,412 33,042,568 38,911,298 33,047,890

17.1. The details of term deposits maturity and interest rates are as follows:

Type Interest rate% 2010 Interest rate% 2009

Short term 9 & 12 14,321,076 9 & 16 12,785,326

One year 14.5 5,308,545 17.25 13,286,155

2 years 15.5 680,362 17.5 568,536

3 years 16 453,491 18 467,925

4 years 17 168,772 18.5 131,934

5 years 17.5 14,995,482 19 4,125,497

Total 35,922,728 31,365,373

18. Other DepositsThe details of other deposits are as follows:


2010 2009 2010 2009


Guarantees issuing deposits 189,038 173,054 190,538 176,340

L/C cash advances 925,361 711,401 925,361 711,401

Drafts cash advances 26,984 28,640 26,984 28,640

Others 16,962 203,366 16,962 203,366

Total 1,158,345 1,116,461 1,159,845 1,119,747


19. Other LiabilitiesThe balance comprises:


2010 2009 2010 2009


L/C’s and drafts acceptance 2,889,170 1,976,172 2,889,170 1,976,172

Accrued interest - local depositors 328,977 414,655 328,984 414,661

Dividends 12,881 48,427 12,542 48,855

Others 260,704 319,084 206,823 185,750

Total 3,491,732 2,758,338 3,437,519 2,625,438

20. TaxationThe Bank’s tax position is as follows:

a) Financial years 2007, 2005 and prior years

The Bank’s tax liability for these years have been finalised and settled.

b) Financial year 2006

The 2006 income tax based on the declared profit was Rls. 10,197 million whilst the tax assessment issued by the Tax Authorities was Rls. 61,097 million. The Bank has protested the assessment and the matter is yet to be decided by the Tax Authorities. No provision has been made for any potential tax liability as the amount of tax cannot be determined.

c) Financial year 2008

The Bank made no tax provision for the year as there was no taxable income after allowing for tax exempt income. However the Tax Authorities raised a tax assessment amounting to Rls. 134,060 million. The Bank has protested the assessment and the matter is yet to be decided by the Tax Authorities. No provision has been made for any potential tax liability as the amount of tax cannot be determined.

d) Financial year 2009

The 2009 income tax based on the declared profit was Rls. 23,700 million whilst the tax assessment issued by the Tax Authorities was Rls. 168,495 million. The Bank has protested the assessment and the matter is yet to be decided by the Tax Authorities. No provision has been made for any potential tax liability as the amount of tax cannot be determined.

e) Financial year 2010

The Bank has made a tax provision of Rls. 91,973 million based on its declared profit; however the tax assessment is yet to be raised by the Tax Authorities for this year.

21. Staff Termination BenefitsMovements in staff termination benefits during the year were as follows:


2010 2009 2010 2009


Balance brought forward 22,285 15,973 21,915 15,565

Paid during the year (1,588) (3,539) (1,400) (3,189)

Provision of the year 14,806 9,851 14,234 9,539

Total 35,503 22,285 34,749 21,915

22. Share Capital

22.1. The Bank’s share capital was increased during the year from Rls. 900,000 million to Rls.1,800,000 million consisting 1,800 million share of Rls. 1,000 fully paid.

22.2. The composition shareholders at the balance sheet date was as follows:

No.Share Capital

(Rls. million)

Individuals 1,480 1,073,297

Legal entities 53 726,703

Total 1,533 1,800,000

23. Legal ReserveIn accordance with the provisions of the “Monetary and Banking Law”, banks are required to set aside 15% of net profit as legal reserve. The movements in the legal reserve during the year were as follows:


2010 2009 2010 2009


Balance at beginning of the year 270,597 200,121 269,370 199,533

Transfer during the year 118,467 70,476 117,919 69,837

Balance at end of the year 389,064 270,597 387,289 269,370


24. Loan InterestThe balance of loan interest income comprises:


2010 2009 2010 2009


Loan interest 5,227,372 4,178,763 5,259,204 4,190,571

Late payment penalties 87,686 527,220 87,740 527,557

Total 5,315,058 4,705,983 5,346,944 4,718,128

24.1. The analysis of loan interest by loan type is as follows:


2010 2009 2010 2009


Loan type:

Credit sales contracts 89,851 146,466 89,890 146,999

Mosharekat Madani contracts 3,001,816 1,745,882 3,015,797 1,754,906

Muzarabah contracts 2,024,613 2,088,086 2,042,392 2,089,975

Salaf contracts 1 268 1 268

Je'aleh contracts 59,274 127,455 59,307 127,817

Lease contracts 51,817 70,606 51,817 70,606

Total 5,227,372 4,178,763 5,259,204 4,190,571

25. Investments and Deposits IncomeThe details of investments and deposits income are as follows:


2010 2009 2010 2009


Participation bonds 307,426 34,141 307,426 34,141

Statutory deposit 44,375 42,369 44,375 42,369

Deposits with local banks (in Rials) 245,874 223,620 245,662 223,496

Investment valuation - (3,188) - (3,188)

Dividends and partnership income 41,162 11,352 42,632 12,969

Interest on other facilities 440,675 1,039 440,675 1,039

Interest of forex loans 133,652 140,871 141,519 142,295

Interest of forex deposits with local banks - 3,175 - 3,175

Interest of term deposit with foreign banks 568 10,051 568 10,051

Profit on sale of forex notes 1,479 - 1,479 -

Total 1,215,211 463,430 1,224,336 466,347

26. Forex Income Forex dealings are mainly carried out by Saman Exchange, a subsidiary of the Bank. The analysis of forex income and expenses are as follows:


2010 2009 2010 2009


Forex income:

Subsidiary 626,231 41,226,575 - -

Bank 92,781 211,635 103,747 221,890

Total 719,012 41,438,210 103,747 221,890

Forex expenses:

Subsidiary 597,959 41,153,905 - -

Bank - - - -

Total 597,959 41,153,905 - -

27. Other Income The details of other income are as follows:


2010 2009 2010 2009


Letters of credit and drafts 79,962 53,827 80,706 53,923

Guarantees 22,699 22,564 22,969 23,036

Inter-bank ATMs (SHETAB) 63,804 37,233 63,804 37,233

Forex commission 3,610 5,890 3,610 5,890

Cards issuing fees 1,655 2,085 1,655 2,085

Managed funds 124 234 124 234

Collateral valuation fees 5,356 3,633 5,356 3,633

Insurance and loan monitoring fees 179 366 179 366

Loan professional fees 22,251 19,181 22,349 19,181

Telecommunications 1,556 1,133 1,568 1,133

Profit on sale of fixed assets 72,535 45,397 72,535 44,526

Others 89,265 101,930 92,828 102,567

Total 362,996 293,473 367,683 293,807


28. Other Interest The details of other interest are as follows:


2010 2009 2010 2009


Forex term deposits 52,803 88,973 52,803 89,100

Central Bank - 22,682 - 22,681

Total 52,803 111,655 52,803 111,781

29. Administration and General Expenses The details of these expenses are as follows:


2010 2009 2010 2009


Personnel 279,350 197,731 269,682 187,630

Administration 460,525 300,791 446,864 280,661

Total 739,875 498,522 716,546 468,291

30. Commission The details of these expenses are as follows:


2010 2009 2010 2009


Brokers 1,657 280 1,657 280

Banks 6,109 1,523 6,109 1,523

Individuals 84,106 89,781 84,106 89,781

ATM Operator (SHETAB) 54,336 36,428 54,336 36,428

Others 2,502 9,341 2,488 6,912

148,710 137,353 148,696 134,924

31. Off Balance Sheet Items The details of off balance sheet items are as follows:

L/C Commitments:

Parent Entity

2010 2009


Commitments for L/Cs opened 2,342,945 1,194,493

Commitments for drafts 289,445 99,857

Total 2,632,390 1,294,350

Guarantee Commitments:2010 2009


Guarantees issued 1,703,639 1,217,956

Other Commitments:2010 2009


Other commitments 1,318,869 1,148,489

32. Cash Flow from Operating Activities The details of cash flow from operating activities are given in Appendix “B”.

33. Cash at End of the Year The details of balance of cash at the end of year are as follows:


2010 2009 2010 2009


Cash 454,838 469,034 454,259 467,245

Forex deposits with foreign banks 2,053,170 1,866,893 2,053,170 1,866,893

Current account with other banks 25,863 58,574 25,844 58,529

Forex current account with local banks 85,962 91,145 85,962 91,145

Current account with CBI 298,820 125,422 298,820 125,422

Short term deposit with CBI 11,000 201,000 11,000 201,000

Forex deposits with CBI 308,798 37,205 308,798 37,205

Forex current account with foreign banks 421,832 1,145,391 415,043 1,133,008

Balance at end of the Year 3,660,283 3,994,664 3,652,896 3,980,447


34. Contingent Liabilities Capital Commitments

34.1. Except for tax liabilities stated in Note 20, there are no known material contingencies at the balance sheet date.

34.2. The Bank’s capital commitments at the end of the year were in relation to renovation and repairof newly purchased branches in Tehran and other cities.

35. Post Balance Sheet Events There was no event after balance sheet date which would require adjustment to the financial state-ments.

36. Related Party Transactions The details of related party transactions are as follows:

Company nameCurrency

Facilities Rls. million US$ Euro AED

Saman Investment Co.Loans Commitments Other

---

---

115,773432,763374,067

---

Saman Insurance Co. Commitments 72 - - -

Saman Brokerage Co. Loans 58,013 - - -

Saman Electronic payment Co.Loans CommitmentsOther

23,94511,03635,690

---

---

---

Pelastiran Co. Loans Commitments

266,620-

--

1,120,8506,277,590

112,9401,565,157

Yazdbaf Co. Loans Commitments

240,79213,878

10,080,000-

8,400,000-

--

Tolombeh Iran Co. Commitments 17 - - -

Hamedan Glass Co. Commitments - - 670,724 -

Iran Barak Wool Spinning Co. LoansOther

226,36655

--

--

--

37. Capital Adequacy The Bank’s capital adequacy ratios are as follows:

Parent Entity

2010 2009


Tire I:

Paid up capital 1,800,000 900,000

Funds for future capital increase - 788,041

Legal reserve 387,289 269,370


Total tier I capital 2,920,758 2,388,562

Tire I I :

General provisions 455,401 425,813

Less: adjustments for 1.25% of risk weighted assets (62,929) (83,293)

Total tier I I capital 392,472 342,520

Base capital 3,313,230 2,731,082

Risk weighted assets 31,397,772 27,401,532

Capital adequacy ratio 10.55% 9.97%

The required minimum capital adequacy ratio is 8%.


Appendix “A”

Fixed AssetsThe details of fixed assets are as follows:

Consolidated

Land & Building

Office Furniture & Equipment

Motor Vehicles TotalCapex

PrepaymentsTotal

(Rls. million) (Rls. million) (Rls. million) (Rls. million) (Rls. million) (Rls. million)

Cost:

Balance at 20.03.2009 828,844 475,035 7,690 1,311,569 138,620 1,450,189

Additions 170,545 110,554 5 281,104 39,791 320,895

Adjustments (817) 7 0 (810) (6,379) (7,189)

Disposals (136,819) (60) 0 (136,879) 0 (136,879)

Balance at20.03.2010 861,753 585,536 7,695 1,454,984 172,032 1,627,016

Depreciation:

Balance at 20.03.2009 90,915 115,291 2,997 209,203 0 209,203

Depreciation of the year 57,590 89,514 21 147,125 0 147,125

Adjustments (7,775) (1,329) 1,113 (7,991) 0 (7,991)

Disposals (7,122) (39) 0 (7,161) 0 (7,161)

Balance at 20.03.2010 133,608 203,437 4,131 341,176 0 341,176

Net book value at 20.03.2010 728,145 382,099 3,564 1,113,808 172,032 1,285,840

Net book value at20.03.2009 737,929 359,744 4,693 1,102,366 138,620 1,240,986

Assets are insured against fire and earthquake.

Appendix “A”

Fixed AssetsThe details of fixed assets are as follows:

Parent Entity

Land & Building

Office Furniture & Equipment

Motor Vehicles

TotalCapex

PrepaymentsTotal

(Rls. million) (Rls. million) (Rls. million) (Rls. million) (Rls. million) (Rls. million)

Cost:

Balance at 20.03.2009 716,028 422,358 7,470 1,145,856 125,827 1,271,683

Additions 170,545 97,692 5 268,242 35,033 303,275

Adjustments (817) (817) (6,136) (6,953)

Disposals (95,998) (95,998) (95,998)

Balance at 20.03.2010 789,758 520,050 7,475 1,317,283 154,724 1,472,007

Depreciation:

Balance at 20.03.2009 80,188 107,661 2,861 190,710 - 190,710

Depreciation of the year 53,260 83,734 - 136,994 136,994

Adjustments (6,203) (1,244) 1,113 (6,334) (6,334)

Disposals

Balance at 20.03.2010 127,245 190,151 3,974 321,370 - 321,370

Net book value at 20.03.2010 662,513 329,899 3,501 995,913 154,724 1,150,637

Net book valueat 20.03.2009 635,840 314,697 4,609 955,146 125,827 1,080,973

Assets are fully insured against fire and earthquake.


Appendix “B”

Cash Flow from Operating Activities


2010 2009 2010 2009


Profit before tax 833,011 460,458 878,100 463,004

Adjusted for:

Profit on sale of fixed assets (72,535) (45,397) (72,535) (44,526)

Depreciation 156,170 99,185 141,759 91,753

Provision for termination benefits 13,218 6,313 12,833 6,350

Provision for loss in investment value - 3,188 - 3,188

Provision for bad and doubtful debts 230,539 338,946 235,195 329,638

Net cash from operating activities 1,160,403 862,693 1,195,352 849,407

Net increase (decrease) in operating liabilities:

Due to Central Bank (493,828) 629,173 (493,828) 629,173

Due to other financial institutions 672,540 1,563,784 676,439 957,734

Deposits 5,841,913 4,497,941 5,841,479 5,103,990

Other deposits 41,884 108,859 40,099 108,859

Other liabilities 710,065 (814,273) 789,100 (364,586)

Total 6,772,574 5,985,484 6,853,289 6,435,170

Net increase (decrease) in operating assets:

Balance with Central Bank 589,465 (720,145) 589,465 (720,145)

Loans (7,114,237) (3,813,921) (7,140,035) (3,669,836)

Participation bonds (928,975) (384,356) (928,975) (384,356)

Investments (1,743) (1,130) (1,201) (72,978)

Other assets (351,014) 364,922 (441,394) 242,819

Total (7,806,504) (4,554,630) (7,922,140) (4,604,496)

Cash inflow from operating activities 126,473 2,293,547 126,501 2,680,081


BRANCHESTehran Other Cities

BRANCHESTehran

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Afrigha (801) +98 21 88 88 1950 +98 21 88 77 3773 SABCIRTH8AF

Afrigha-Shomali (820) +98 21 88 88 9995 +98 21 88 77 3151 SABCIRTH8NA

Aghdasieh (808) +98 21 22 82 1918 +98 21 22 82 2223 SABCIRTH8AG

Arikeh Iranian (816) +98 21 22 35 9275 +98 21 22 35 3516 SABCIRTH8AI

Arjantin Sq. (826) +98 21 88 51 7420 +98 21 88 51 7381 SABCIRTH8AJ

Asef (858) +98 21 22 18 2988 +98 21 22 43 2692 N/A

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Baghe Ferdows (804) +98 21 22 74 5881 +98 21 22 74 0888 SABCIRTH8BA

Bazar (806) +98 21 55 57 6490 +98 21 55 57 6495 SABCIRTH8BZ

Bazar Kafasha (837) +98 21 55 15 1804 +98 21 55 61 6073 N/A

Bolvar Ferdows (845) +98 21 44 00 0282 +98 21 44 00 6826 N/A

Central (802) +98 21 66 95 9050 +98 21 66 96 4998 SABCIRTH8AL

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Dowlat (813) +98 21 22 76 4280 +98 21 22 76 0338 SABCIRTH8DT

Dr. Beheshti (832) +98 21 88 51 2603 +98 21 88 74 6699 SABCIRTH8BH

Dr. Fatemi (810) +98 21 88 98 2181 +98 21 88 98 2194 SABCIRTH8FA

Ekbatan-Mellat (827) +98 21 33 99 8003 +98 21 33 99 8009 N/A

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Elahiyeh (838) +98 21 26 20 3470 +98 21 22 02 7930 SABCIRTH8EL

Emam Khomeini Airport (846) +98 21 55 67 8408 +98 21 55 67 8412 N/A

Evin (861) +98 21 22 43 2419 +98 21 22 43 2426 SABCIRTH8EV

Farjam (853) +98 21 77 23 0744 +98 21 77 22 8362 N/A

Ghazvin Sq. (831) +98 21 55 48 1173 +98 21 55 48 1179 N/A

Gheitarieh (828) +98 21 22 23 4199 +98 21 22 23 4258 N/A

Hossein Abad Sq. (859) +98 21 22 95 9979 +98 21 22 95 9964 SABCIRTH8HA

Hyperstar (857) +98 21 44 16 7183 +98 21 44 16 7199 SABCIRTH8HS

Iran Zamin (815) +98 21 88 57 7605 +98 21 88 57 1215 SABCIRTH8IZ

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Jannat Abad (812) +98 21 44 49 5200 +98 21 44 49 5228 SABCIRTH8JA

Karaj Stock Exchange (903) +98 261 27 70 195 +98 261 27 70 196 N/A

Karaj, Jahanshahr (901) +98 261 44 66 113 +98 261 44 81 445 SABCIRTH9JK


Karaj, Tohid Sq. (902) +98 261 22 06 472 +98 261 22 54 862 SABCIRTH8KJ

Kargar-e-Shomali (833) +98 21 88 99 1346 +98 21 88 99 1350 SABCIRTH8NK

Lavasani (855) +98 21 22 81 6691 +98 21 22 81 6689 N/A

Mahan Airline Counter (851) +98 21 48 04 1145 N/A SABCIRTH8MN

Mirdamad (809) +98 21 22 92 4451 +98 21 22 91 1538 SABCIRTH8MD

Molavi (854) +98 21 55 15 4630 +98 21 55 15 4729 N/A

Molla Sadra (829) +98 21 88 06 9255 +98 21 88 06 9254 SABCIRTH8ML

Moniriyeh (839) +98 21 66 49 1073 +98 21 66 41 7117 N/A

Nabovat Sq. (841) +98 21 77 94 0426 +98 21 22 91 1538 SABCIRTH8NB

Nazi Abad (848) +98 21 55 33 3484 +98 21 55 33 3483 N/A

Park Saee-Vali Asr (835) +98 21 88 55 6965 +98 21 88 55 6966 SABCIRTH8PS

Pasdaran (805) +98 21 22 59 5657 +98 21 22 56 7540 SABCIRTH8PA

Piroozy (822) +98 21 33 32 3141 +98 21 33 32 3143 SABCIRTH8PR

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Sadeghie (807) +98 21 44 25 4518 +98 21 44 25 4517 SABCIRTH8SA

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Shahrak-Ekbatan (825) +98 21 44 63 6309 +98 21 44 65 6896 SABCIRTH8EK

Shahran (844) +98 21 44 31 2955 +98 21 44 30 3691 N/A

Shahr-e-Ray (818) +98 21 55 97 0742 +98 21 55 97 0730 N/A

Shahriar (904) +98 262 23 26 025 +98 261 32 68 962 SABCIRTH9SR

Si-e-Tir (849) +98 21 66 75 0412 +98 21 66 75 0236 SABCIRTH8ST

Tehran Pars-Falakeye 1 (836) +98 21 77 72 3250 +98 21 77 72 3255 SABCIRTH8FT

Tehran Pars-Falakeye 3 (834) +98 21 77 37 0368 +98 21 77 37 0441 SABCIRTH8TP

Tehransar (856) +98 21 44 51 3274 +98 21 44 51 7662 N/A

Terminal 2 (Mehr Abad Airport) (852) +98 21 44 65 9103 +98 21 44 66 2252 SABCIRTH8FM

Terminal 4 (Mehr Abad Airport) (843) +98 21 44 69 0118 +98 21 44 69 0118 N/A

Vanak Sq. (814) +98 21 88 20 5456 +98 21 88 20 5448 SABCIRTH8VN

Velenjak (823) +98 21 22 42 1227 +98 21 22 17 2590 SABCIRTH8VJ

Yaft Abad (817) +98 21 66 24 5459 +98 21 66 23 7110 SABCIRTH8YF

ANNUAL REPORT 2009 | BRANCHES 72,73

Other CitiesBranch Name Code Telephone Fax Swift Code

Ahwaz (9701) +98 611 39 20 747 +98 611 39 20 745 SABCIRTH9AH

Amol (9431) +98 121 22 30 750 +98 121 22 30 748 SABCIRTH9AM

Arak (9561) +98 861 22 14 404 +98 861 22 25 957 SABCIRTH9AK

Ardebil (9641) +98 451 22 52 601 +98 451 22 53 501 SABCIRTH9AR

Ardebil, Shariaty (9642) +98 451 22 54 091 +98 451 22 54 099 N/A

Babol (9421) +98 111 21 97 140 +98 111 21 97 148 SABCIRTH9BL

Bandar Abas (9121) +98 761 22 35 302 +98 761 22 35 330 SABCIRTH9BS

Birjand (9341) +98 561 44 45 065 +98 561 44 46 707 N/A

Bojnoord (9321) +98 584 22 47 347 +98 584 22 47 348 N/A

Bushehr (9141) +98 771 55 62 319 +98 771 55 62 325 SABCIRTH9BR

Elam (9261) +98 841 33 48 290 +98 841 33 48 257 N/A

Esfahan (803) +98 311 22 30 424 +98 311 22 30 428 SABCIRTH9ES

Esfahan, Chahar Bagh Bala (9522) +98 311 62 91 325 +98 311 62 91 329 SABCIRTH9CH

Esfahan, Zayanderood (9521) +98 311 62 82 572 +98 311 62 69 409 SABCIRTH9ZE

Ghazvin (9201) +98 281 33 57 305 +98 281 33 58 095 SABCIRTH9GH

Gonbad Kavus (9442) +98 172 22 40 612 +98 172 22 40 624 N/A

Gorgan (9441) +98 171 23 69 001 +98 171 22 69 012 SABCIRTH9GO

Hamedan (9221) +98 811 82 13 286 +98 811 82 13 289 SABCIRTH9HA

Hamedan, Khajeh Rashid (9222) +98 811 25 27 332 +98 811 25 27 338 N/A

Kerman (9501) +98 341 22 33 386 +98 341 22 67 960 SABCIRTH9KE

Kerman, Kowsar Sq. (9502) +98 341 24 66 897 +98 341 24 76 765 N/A

Kermanshah (9241) +98 831 72 59 959 +98 831 72 59 971 SABCIRTH9KM

Kish (9801) +98 764 44 52 261 +98 764 44 52 259 SABCIRTH9KI

Mashhad (9301) +98 511 84 44 460 +98 511 84 43 914 SABCIRTH9MA

Mashhad, Modares (9302) +98 511 22 50 006 +98 511 22 41 044 SABCIRTH9MM

Mashhad, Sajad Blv. (9303) +98 511 76 48 208 +98 511 76 74 046 SABCIRTH9SM

Orumieh (9621) +98 441 22 44 311 +98 441 22 40 392 SABCIRTH9OR

Orumieh, Sardaran (9622) +98 441 22 50 521 +98 441 22 27 846 SABCIRTH9SO

Qeshm (9821) +98 763 52 42 640 +98 763 52 42 650 SABCIRTH9QM

Qom (9001) +98 251 29 03 250 +98 251 29 16 616 SABCIRTH9QO

Rasht, Golsar (9401) +98 131 72 24 710 +98 131 72 24 713 SABCIRTH9RA


Sanandaj (9271) +98 871 32 45 427 +98 871 32 45 426 SABCIRTH9SN

Sari (9402) +98 151 32 59 763 +98 151 32 59 761 SABCIRTH9SY

Shiraz (9101) +98 711 23 19 521 +98 711 23 19 513 SABCIRTH9SH

Shiraz, Bazaar-e Vakil (9105) +98 711 22 33 835 +98 711 22 33 834 SABCIRTH9VS

Shiraz, Gas–Jam-e-Jam Roundabout (9102) +98 711 22 62 852 +98 711 22 74 834 SABCIRTH9FS

Shiraz, Ghasr-Dasht (9103) +98 711 64 71 670 +98 711 64 71 678 SABCIRTH9GS

Shiraz, Mirzaye Shirazi Blv. (9104) +98 711 62 39 093 +98 711 62 39 093 SABCIRTH9MI

Tabriz (9601) +98 411 33 73 800 +98 411 33 65 160 SABCIRTH9TA

Tabriz, 17 Shahrivar (9603) +98 411 55 73 670 +98 411 55 73 673 N/A

Tabriz, Bazaar (9605) +98 411 52 44 049 +98 411 52 42 623 SABCIRTH9BT

Tabriz, Shahryar (9604) +98 411 32 93 263 +98 411 32 93 260 SABCIRTH9TS

Tabriz, Vali-e-Asr (9602) +98 411 33 10 800 +98 411 33 19 864 SABCIRTH9VT

Tonekabon (9422) +98 192 42 10 261 +98 192 42 10 274 N/A

Yasooj (9251) +98 741 22 35 348 +98 741 22 35 375 N/A

Yazd (9541) +98 351 62 21 691 +98 351 62 69 525 SABCIRTH9YZ

Yazd, Jomhouri Sq. (9542) +98 351 52 48 202 +98 351 52 48 206 N/A

Zahedan (9131) +98 541 32 60 179 +98 541 32 33 633 SABCIRTH9ZN

Zanjan (9681) +98 241 32 20 654 +98 241 32 27 733 SABCIRTH9ZA

Zanjan, North Saadi (9682) +98 241 52 68 665 +98 241 52 68 681 N/A

ANNUAL REPORT 2009 | BRANCHES 74,75

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the intelligent bank 2010, mr vali zarrabieh has been acting as the managing director of saman bank....

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