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Bank Refah

Annual Report

(2000-2001)

Agenda

	Bank Profile
	Highlights
	Corporate Banking
	Retail Banking
	Officials Holidays
	Board of Directors
	Organizational Chart
	The Chairman’s Statement
	Islamic Banking in Iran
	Overview of Bank Refah
	Financial Review

Bank Profile

Background

Bank Refah, with over 41 years of experience in extending banking services, is among the top six commercial banks of Islamic Republic of Iran. It was founded in June 1960 with an initial investment of 400 million rials. By 2000, its capital assets increased to 500 billion rials. With an approved increase of 300 billion rials, total assets are anticipated to reach 895 billion rials in 2001.

Operations and Services

Bank Refah offers a diverse and innovative range of services, which includes speedy local currency and foreign exchange payments through the SWIFT system, all kinds of accounts, trading foreign currencies at the market rate, opening L/Cs through SWIFT and granting export and import facilities. It also extends loans, offers financial services to exporters prior to and after exports and offers considerable facilities to manufacturing, housing, industrial, services, commercial, agricultural and export sectors.

Aims and Facilities

Bank Refah is committed to:

	Customer-oriented banking, for which it received the ISO 9001:2000 certificate for quality management.
	Offering valuable prizes to interest-free (Qarz-al-Hassaneh) deposit accounts and other special services.
	Expanding its mechanized networks.
	Increasing productivity and offering electronic banking services, visa card, Refah tele-fax bank, etc.
	Offering all banking services according to Islamic rules.

Staff and Branches

Presently, there are over 1,200 branches of Bank Refah in Tehran and other cities. Bank Refah has 7,865 male and female employees, a majority with BA and MA, as well as high capability and proficiency.

Highlights

Financial Highlights:

Staff and Structure:

Bank Refah’s Core Shareholders:

	Social Security Organization
	Government of Islamic Republic of Iran
	Other Institutional and Individual Investors
	Bank Refah’s Standing
	The first bank in the Middle East to receive the ISO 9001:2000 certificate for quality management
	The bank with the highest growth in resources
	The premier bank recognized for winning client satisfaction
	The first semi-state bank
	1,500% growth in foreign exchange transactions
	2,000% rise in stock exchange activities
	The best commercial bank due to its growth in resources and expenditure during 1999-2001.

Awards

	Crystal appreciation prize for undertaking reforms was presented by President Khatami
	Crystal honor prize for providing distinguished services to publishers
	ISO 9001:2000 certificate for its quality management system

Corporate Banking

Bank Refah’s Legal Partnership
Through Purchase of Shares (2000-2001)

Bank Refah’s Investments in Shares (2000-2001)

1. Lavizan Development Company
2. Khouzestan Pipe Manufacturing
3. Iran Technology Development

Bank Refah’s Direct Partnership

1. Tabriz-Zanjan Freeway (Pvt. Ltd.)
2. Pars Fireproof Production
3. Fuse Manufacturing
4. Bank Refah Stock Exchange Agency
5. Hospitals

Total Investment & Legal Partnership

	1999-2000: 3,754,247,303
	2000-2001: 5,656,314,325

Retail Banking

Upscale Clients in Metropolitan Cities

	Social Security Organization
	Pasteur Institute of Iran
	Medical Service Organization
	Red Crescent Society
	Blood Transfusion Organization

Provision of All Islamic Banking Services

Current Qarz-al-Hassaneh Account

1. Real Persons
2. SSO
3. Other Organizations
4. Foreign Exchange

Qarz-al-Hassaneh Account

1. Real Persons
2. Housing
3. Others
4. Foreign Exchange

Short-Term Deposit Account

1. Real Persons
2. SSO
3. Foreign Exchange

Long-Term Deposit Account

1. Real Persons
2. Savings of Bank’s Staff
3. SSO
4. Foreign Exchange

	Deposits of Guarantees
	L/Cs’ Advance Payment
	Different Checks
	Others

Investment Banking

Laws of Islamic Republic of Iran do not allow banks to have direct investments in national projects. Hence, Bank Refah is not active in this regard.

Official Holidays in Iran
(2000-2001)

Normal weekend for banks, government offices and public organizations in the Islamic Republic of Iran is Thursday and Friday. However, many organizations are open half-day on Thursday.

Note: All religious holidays are based on the Lunar Islamic Calendar and National Holidays on the solar calendar. Hence, within one solar year some religious holidays are observed twice. Religious holidays are subject to change depending upon the official sighting of the moon.

Board of Directors

Dr. Parviz Ahmadi Chairman of the Board & Managing Director   Heshmatollah Gharibi Member of the Board   Heidar Mostakhdemin Hosseini Member of the Board Mohammad Reza Taheri Member of the Board   Farrokh Malekvand Fard Member of the Board

Organizational Structure

Click on the chart to get a larger picture

The Chairman’s Statement

With 41 years of expertise in offering banking services and distinguished by people’s trust, deposits and its own high capabilities, Bank Refah aims to implement the government’s macroeconomic policies by offering invaluable services, especially with regard to non-oil exports and agro-industrial production. Apart from pursuing its organizational expansion plan, Bank Refah has devised a five-year operational program within the framework of the Third Economic Development Plan (2000-2005) and predicts a significant growth rate in its resources and expenditure.

By utilizing the experiences of senior experts, worldwide scientific achievements, young and educated manpower and regular training courses, along with the expansion of its banking network, Bank Refah offers the most satisfactory services to its customers.

For the first time in Iran, Bank Refah established the Mobile-Current Account, which enables any payment/receipt from the same current account in any branch of its network, and also launched the Telephone-Banking System.

Bank Refah has been considerably active in the cultural field as well. It was awarded the Crystal Prize at the 12th Tehran International Book Fair for its excellent services and assistance to publishers. It ranked first amongst the country’s commercial banks and was commended for its remarkable endeavors by officials, especially President Seyyed Mohammad Khatami. Bank Refah has had the best record among all Iranian banks in terms of growth of deposits and implementation of a client-oriented banking system.

Among Bank Refah’s other achievements is gaining the ISO 9001:2000 certificate. The German DQS, which awarded Bank Refah the quality management certificate, was surprised to see that an Iranian bank had succeeded in compiling a quality management system. They asserted that Bank Refah was the first bank in the entire Middle East to be awarded the 2000 edition of an ISO series certificate.

In fact, the speed and quality of its services are serving as publicity tools for Bank Refah.

Granting Facilities

Facilities and credits worth 5,145 billion rials were allocated to the following economic sectors by March 2000: agriculture (14.6%), industry & mines (24.9%), housing (34%), trade & services (15.4%) and export (11.1%). These facilities, which amounted to 6,513 billion rials by March 2001 and showed an increase of 24.6% compared to the previous year, were as follows: agriculture (13.93%), industry & mines (25.53%), housing (31.31%), trade & services (23.63%) and export (5.60%).

Network

Bank Refah has also pursued its network’s expansion. To meet its manpower needs in different sectors, the bank employed an educated, young workforce of 1,300 during 1999-2000 and 979 during 2000-2001 through interviews, training courses and tests. As a result, the number of personnel increased to 7,875 in 1,200 branches and offices by March 2001.

By March 2000, the bank’s foreign exchange turnover rose to $530 million and by March 2001 to $1.57 billion.

Training

To increase the know-how and capabilities of its staff, Bank Refah’s Training Department held about 239 courses equivalent to 200,000 man/hour in 1999-2000 and about 322 courses equivalent to 282,162 man/hour in 2000-2001 in Tehran and other provincial offices across the country. Holding applied and special courses, which increased by more than 200% in 1999-2000 and by 193.6% during 2000-2001, did not prevent officials from organizing general training courses.

In fact, Bank Refah has the best personnel structure from the educational point of view among the country’s commercial banks. The bank’s mechanization program enhances the materialization of its objectives in the shortest possible time.

SWIFT

One of the important activities of Bank Refah in respect of providing customers with better, faster and inexpensive services was membership of the worldwide SWIFT network. Bank Refah’s site, equipped with the latest software and hardware, was connected to the SWIFT line on September 5, 1999. It is online with more than 156 correspondent banks all around the world.

Special Services

Another important activity of Bank Refah is offering services to over 26 million members of Social Security Organization. This involves a monthly average of 459,183-rial pension payments totaling 55,101 million rials and a monthly average of 1,017,473-rial insurance premium payments worth over 12,209 million rials from employers subject to Labor Law.

Absorbing people’s small, inactive capital and directing them toward productive activities will increase production and generate employment. Facilities granted from the administered fund increased by 56.4% in 1999-2000 to reach 1,104 million rials. These registered a 21.3-% increase during 2000-2001, amounting to 1,339 million rials. This clearly shows the extent of the bank’s cooperation with the Social Security Organization, which holds the bank’s majority shares.

Bank Refah also provides services to Ministry of Labor, Ministry of Health, more than 40 medical universities, Pasteur Institute of Iran, Institute of Nutrition & Food Industries, Welfare Organization, Medical Service Organization, Red Crescent Society, Blood Transfusion Organization, hospitals, pharmacies, clinics, as well as doctors and medical students.

Promoting the transactions of shares of manufacturing units in the Tehran Stock Exchange is the most pivotal economic policies of the government. In this direction, Bank Refah established its TSE branch, which traded shares worth 355.6 billion rials during 1999-2000 and 903.7 billion rials during 2000-2001. In fact, Bank Refah is the only bank in the country that trades shares in the capital cities of all provinces.

Given its positive banking indicators, Bank Refah was selected as the best commercial bank of the country due to its growth in resources and expenditures during 1999-2001.

In view of the above, we expect Bank Refah to consistently improve its efficiency and provide quality services. We also hope our esteemed customers and representatives will find Bank Refah as a more reliable and helpful partner.

Parviz Ahmadi

Chairman of the Board
&
Managing Director

Islamic Banking in Iran

In August 1983, the final version of the Law of Non-Usury Banking was approved and became operative on March 1984. For this reason, every year August 24-September 30 is marked as “Banking Week” in Iran.

The law consists of five chapters:

1. Banking System in Iran
2. Resource Mobilization
3. Resource Allocation
4. Controlling Exports and Imports
5. Others

A Brief Review of the Law of Non-Usury Banking

According to this law, some commercial banking terms are defined as follows:

Bank is defined as an institution, which accepts deposits and grants loans to real and legal persons. The most important activities of the banks under the Islamic banking regulation are as follows:

1. Beneficial activities such as granting Qarz-al-Hassaneh loans (money loaned without interest)
2. Offering facilities and services without interest and fees such as current account services
3. Granting facilities with banking fees such as guarantees of receiving drafts
4. Participating in profitable activities such as opening different accounts of Qarz-al-Hassaneh, Short-Term & Long-Term Deposits, Mozarebeh, Civil & Legal Partnership, Direct Investment, Forward Loan, Joaleh, Mozareah, Mosaqat, etc.

Qarz-al-Hassaneh Account: This refers to a current or deposit account, which is a kind of bilateral contract between bank and real or legal persons to accelerate money transaction. According to Article 16 of the Law of Non-Usury Banking, Qarz-al-Hassaneh loan is granted for the following:

• Procuring equipment and facilities for beginning work
• Improving agricultural, processed and industrial products
• Meeting essential needs

Four types of Qarz-al-Hassaneh deposit account are as follows:

1. General Qarz-al-Hassaneh Deposit Account
2. Specific Qarz-al-Hassaneh Deposit Account
3. Youth Qarz-al-Hassaneh Deposit Account
4. Agricultural Qarz-al-Hassaneh Deposit Account

	Short-Term Deposit Account: An account wherein 50,000 rials are deposited for at least three months with an interest rate of 7%.
	Long-Term Deposit Account: The interest rate for this account is 14% for 1-year deposit, 15% for 2-year deposit, 16% for 3-years deposite and 17% for 4 years.
	Mozarebeh: An agreement on the basis of which the account holder is required to provide the capital and the agent utilizes it in a business to share the gained interest. It is of three types:

1. Local – Commercial Mozarebeh
2. Import Mozarebeh
3. Export Mozarebeh

	Civil Partnership: This refers to merging of cash and non-cash capitals of real and legal persons without considering any cut-off period in order to gain interest as per the agreement. This is the earliest form of Islamic contract in the Islamic banking system.
	Legal Partnership: This facility pertains to providing some part of the capital of new incorporated companies or buying a share of existing companies to help develop economic sectors.
	Lease-Ownership: It is a kind of leasing contract at the end of which the tenant will own the leased subject. It facilitates development of production and service sectors.
	Forward Loan: This implies purchasing manufactured products in advance on the basis of the given price.
	Joaleh: It refers to paying an amount for undertaking a given business by an agent. It is a kind of short-term credit facility for developing production, commercial and service projects.
	Mozareah: It is one of the credit facilities for meeting short-term financial needs in the agricultural field. It is a kind of agreement between the owner and the farmer, based on which the produce will be divided equally between the parties to this agreement.
	Mosaqat: Again, it is a kind of credit facility in the agricultural field for protecting trees and producing fruits to gain equal shares for both parties.
	Buying Debits: It is one of the short-term facilities to help meet the financial needs of production, commercial and service companies up to one year.
	Direct Investment: This refers to providing capital to implement production and development projects.
	Installment Sales: It is payment of the initial capital to facilitate repayment of equal or unequal installment.
	Guarantee: It is a kind of agreement according to which one person undertakes to pay another’s debits. There are seven types of guarantees:

1. Guarantee for Tender
2. Performance Bond Guarantee
3. Advance Payment Guarantee
4. Guarantee for Restoration of Deficit of Guarantee Payment
5. Customized Guarantee
6. Guarantee of Payment
7. Other Guarantees

Overview of Bank Refah

Ever since its foundation in June 1960, Bank Refah embarked on utilization of modern technologies in extending banking services in all fields to its customers nationwide. As a result, it now ranks among the six major Iranian commercial banks.

All of the Bank Refah’s provincial central branches provide their customers with stock trading services.

Bank Refah also takes 2% of the shares amounting to DM 2,000,000 of Europaisch-Iranische Handelsbank AG, which is the financial institute to accept deposits of and provide facilities to Iranians overseas. Its central office is in Hamburg, Germany.

History of Bank Refah at a Glance

Services & Facilities

In Iran, Bank Refah is in charge of handling the banking affairs of Social Security Organization, which is a very large institution with huge financial resources. It covers the organization’s subsidiaries, including 120 manufacturing units that supply 51% of the country’s cement, 26% of tiles and 36% of medicines. These subsidiaries have a total annual turnover of 20,000 billion rials.

Given its high potential for providing other services, Bank Refah currently offers online banking facility in 85 branches, in addition to telephone banking and all modern services. It plans to expand its online services network to cover all branches by the end of 2001. This will allow a customer to benefit from banking services at any branch throughout the country.

In tandem with Iran’s policy to boost non-oil and techno-engineering services exports, the bank offers financial services to exporters prior to and after exports and also provides them with foreign exchange facilities.

Bank Refah is active in facilitating domestic and foreign trade, services, production, industry, agriculture, export, import, housing and other transactions. In line with the government’s economic policies, it has placed attraction of the people’s surplus cash and directing the same toward productive sectors on top of its agenda.

General Activities

Bank Refah, as a commercial bank, is authorized to undertake all banking operations and services.

General Services

Opening Different Accounts in Rials and Other Valid Currencies:

Deposits

	Current Qarz-al-Hassaneh Account
	Qarz-al-Hassaneh Deposit Account
	Short-Term Deposit Account
	Long-Term Deposit Account

Facilities

	Mozarebeh
	Forward Loans
	Joaleh
	Guarantee
	Others

Foreign Exchange Facilities:

	Promoting international foreign exchange activities and correspondent relationship with over 156 banks all over the world
	Presenting foreign exchange facilities and services to researchers and physicians participating in research seminars
	Handling import and export letters of credit
	Clearing letter of warranty for exporters of technical services
	Issuing different types of foreign exchange letter of guarantee
	Processing foreign exchange draft through SWIFT promptly
	Making payment of foreign exchange draft
	Opening foreign exchange accounts of external and internal origin
	Paying interest on foreign exchange time deposit accounts at the LIBOR rate
	Granting facilities in local currency at the credit deposit rate
	Providing different types of consultative banking services
	Purchasing foreign exchange at the agreed rate
	Selling foreign exchange to passengers travelling overseas
	Granting export facilities without limits
	Selling foreign exchange to officials of Health Ministry and Social Security Organization.

Special Services

	Collecting provincial checks in less than 48 hours
	Purchasing shares and credit deposits through different branches
	Selling share papers
	Providing various types of banking services in round-the-clock branches
	Accepting secured and traveling checks issued by other banks
	Subscribing shares of different companies and institutions
	Granting long-term credit facilities for construction of hospitals and clinics
	Handling the financial affairs of medical books forum
	Accepting checks and time draws of other banks as trust deposit
	Granting facilities to university teachers and professors for purchasing automobile and computer
	Providing new services of Accompanying Current Account, Telephone Bank, Check Fax, Supervising Trusted Box, and Atieh Box
	Issuing foreign exchange credit card (Visa Card).

Bank Deposits (1998-2001)

Bank’s Allocation to Economic Sectors (1999-2001)

Refah Tele-fax Bank

Bank Refah offers new facilities in conventional services. All its branches inform:

Current Account

1. The balance by telephone
2. The last cash flow by fax (25 at the maximum)
3. The last three cash flow by telephone
4. The cash flow by typing check number
5. The statement of check being deposited in another bank account

Qarz-al-Hassaneh Deposit Account

1. The balance by telephone
2. The last cash flow by fax
3. The last three cash flow by telephone

Short-Term Deposit Account

1. The balance by telephone
2. The last cash flow through fax (25 at the maximum)
3. The last three cash flow by telephone
4. The amount of interest being paid to the account

Long-Term Deposit Account

The amount of interest being paid to the account, as well as the type and number of credit account

Code-Changing

Code-changing possibility for customers in all above-mentioned accounts

Bank Refah Business Card

	Visa card, as an ideal instrument for all foreign exchange transactions, is a new service provided by Bank Refah. The following are invaluable services and facilities provided by this card:
	No need to carry cash
	Control on expenditures
	Emergency services
	High quality traveling services in over 20,000 hotels with 5% to 50% discount in price, and the possibility of cashing through 400,000 auto-transfer machine (ATM) with the Visa Card
	High quality information services
	Issuance of Boarding Pass while traveling by the following airlines:

British Airways, Delta Airlines, Deutsche BA, Northwest Airlines, Lufthansa, United Airlines, American Airlines

	Helps exchange currencies
	High security and insurance in the case of theft, fire and accidents.

Other Characteristics of Refah Visa Card

	The amount of this credit card is 1,000 up to 10,000 euros.
	The bank is permitted to debit its customers’ account for the amount of the credit card while holding a minimum amount as balance.

Bank Refah Round-the-Clock Branches

Bank Refah operates the following round-the-clock branches all over the country:

Major SWIFT Correspondence of Bank Refah

* Bank Refah has correspondent links with over 156 banks through SWIFT worldwide.

Financial Reviews

Balance Sheet

On March 20,2001

Statement of Profit and Loss

For Fiscal Year Ended in March 20,2001

Statement of Cash Flow

On March 20,2001

Back

Bank Refah was founded in June 1960, in accordance with Note 39 of the previous year's Budget Law, with the aim of providing welfare and facilities in order to meet the workers' needs. Its initial investment of 400 million I.R.R. was designated by Social Security Organization. In 1979, following the bill on administration of banking affairs and nationalization of the banks, Bank Refah was considered as a commercial bank and in July 1993, it was being supported by S.S.O owning 46% shares of the bank.