1

Asset Management and Private Equity

IN THIS ISSUE:

• Market uptrend regains intensity with increased volume

• First-half corporate results are generally solid

• A pickup in foreign deals

• An overview of one of the largest iron ore companies: Golgohar

MONTHLY NEWSLETTER

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

OCTOBER 2016

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IRAN EQUITY MARKETS OCTOBER 2016

II IndiciesMARKET AT A GLANCEImproved market sentiment,higher volumes and equityinflows suggest a renewedupward trend that began inmid-September.

Solid company H1 reports andcompany guidance upgradesgave new impetus to the trend;other factors included moveshigher in select commodities,the nearing of the planned FXunification, and the gradualimprovement in macro data.The Average Daily TradeVolume (ADTV) almostdoubled to $135m comparedto $73m in September. As inSeptember, retail activity(59%) surpassed that ofinstitutions (41%). The mostactive sectors were auto,refineries, base metals, metalproducts and investmentcompanies, togethercomprising 49.8% of the valuetraded (19.2%, 10.8%, 7.5%,6.2% and 6.1%, respectively).The larger banks remainsuspended due to delayedAGMs and CBI-led reforms.Based on our screening of 378companies, H1(a) corporateresults conveyed the followingheadline industry trends: Ironore, tyres and base metalsprovided the most bullishguidance, increasing full-yearprofit forecasts by 22%, 14%and 13%, respectively;whereas other miners, tilesand ceramics, and cementspublished the most negativeoutlooks, downgrading profitforecasts 20%, 15% and 9%,respectively.

II TEDPIX Index & P/E Ratio

All market data represents the period from October 1 to October 29, 2016.a) H1 period corresponds to Iranian calendar year which is from March to September 2016Sources : Tehran Stock Exchange, Bloomberg, MSCI, Griffon Asset Management Team.

As of the date of this report, 1 USD = 35,878 IRR (The average free market exchange rate for the period Oct 1 to Oct 29 2016).

II Market Capitalisation

Monthly traded value (million $)

5.85.6

6.2

7.2

7.57.5

7.4

6.9

7.37.4

7.2

55,000

60,000

65,000

70,000

75,000

80,000

85,000

5.00

5.50

6.00

6.50

7.00

7.50

8.00

Ind

ex

P/E

Ra

tio

P/E Ratio Index

671 514

2,314 3,905

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

2,570

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

1,144

TSE Farabourse

92,437 16,797

1,427

Market Cap

(million $)

Value traded (million $)

TSE Farabourse Frontier Market Emerging Market

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

3.9% 2.7% 0.8% -0.2%

80,341 839 499 911

27.6% 20.4% -6.2% 13.2%

30.2% 22.8% -1.5% 14.7%

7.5x 8.7x 13.0x 12.4x

10.6% 9.4% 4.3% 2.6%

810

820

830

840

490

495

500

505

Past month

monthlyperformance

Past 12

months

Last close

77,000

78,400

79,800

81,200

Year to date

890

900

910

920

930

P/E

Div. Yield

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IRAN EQUITY MARKETS OCTOBER 2016

II Sector Performance SECTOR NEWS

Petrochemicals

Total, France's oil giant, isexpected to sign a $2 billioncontract with the Persian GulfPetrochemical IndustriesCompany (the largest listedcompany on the TSE) to build apetrochemical complex forolefin production in Iran. Olefinis a synthetic compound usedin a wide variety of productsincluding vehicle interiors,carpeting and wallpaper.

Autos

The Industrial Development &Renovation Organization ofIran (IDRO) and Renault signeda strategic agreement tocreate a new joint venture. TheFrench automotive group willbe the majority shareholder. In2015, Renault’s sales to Iranincreased by 56.1% (versus2014) to a total of 51,500vehicles, for a market share of4.8%. The joint venture willinclude an engineering andpurchasing centre which willwork with and supportdomestic auto parts suppliers.The manufacturing plant willhave an initial productioncapacity of 150,000 vehicles ayear, which will be added toRenault’s current (domestic JV)capacity of 200,000 vehicles.Renault has been present inIran since 2003 through a jointventure with Iran Khodro andSaipa.

II Top Gainers and Losers

As of the date of this report, 1 USD = 35,878 IRR (The average free market exchange rate for the period Oct 1 to Oct 29 2016).

All market data represents the period from October 1 to October 29, 2016.

Sources : Financial Tribune, Mehr News, Tehran Stock Exchange , Griffon Asset Management.

Best Performing sectors Worst Performing sectors

Leather 20.6% Sugar & by-products -6.6%

Metallic ore 19.3% Metal products -5.0%

Cements, limes & plasters 14.9% Electric machines -4.7%

IT & computers 13.2% Oil & gas extraction -3.2%

Rubber & tire 13.0% Telecommunication -1.6%

Lia co. 96.0% Arfa Iron & Steel -21.4%

Chemicals Base metals

Pegah Golestan 82.5% Isfahan Sugar -16.3%

Food stuff excl. sugar Sugar & by-products

Ardekan Ceramic 71.4% Hegmatan Sugar -16.2%

Ceramics & tiles Sugar & by-products

Asan Pardakht Persian 46.2% Shahd -14.4%

IT & computers Sugar & by-products

Kordestan Cement 45.7% Neyshabour Sugar -14.1%

Cements, limes & plasters Sugar & by-products

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IRAN EQUITY MARKETS OCTOBER 2016

In the first half of this year,production at IKCO and Saipa(the two largest vehiclemanufacturers, togetherrepresenting 91% of domesticproduction) has grown 10.6%and 28.5%, respectively, yearon year.

Cement

Due to the ongoing oversupply(and depressed domestic andexport demand) in the cementsector, companies are agreeingto cap production and reducediscounts offered to buyers.October saw the first notableuptick in the price of cement.

Engineering

An agreement between Iran’sMAPNA Group & Iran RailroadOrganisation was made jointlywith Siemens for theprocurement andmanufacturing of 50 diesel and70 electric locomotives.Siemens is to supply thecomponents andmanufacturing technology andthe agreement is expected toenable the transfer oftechnology to MAPNA.

IPO

This month there was an IPO inthe payment service providers(PSP) industry. Asan PardakhtPersian (free float 8%, marketcapitalization $285m, forwardP/E of 6.8x) was listed on theTSE and was trading 46%higher as of the close of the 29October session.

All market data represents the period from October 1 to October 29, 2016.a) The shares have been suspended until such time that the AGM is reset.Sources : cement association, Mehr News, Tehran Stock Exchange, Griffon Asset Management.

II Top 10 companies by market capitalisation

II USD/IRR Exchange rate

USD/IRR 36,080 +360

+1.0%

USD/IRR 31,750+291

+0.92%

Market Cap

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

Khalij Fars Petrochem 6,949 4,950 3.1% 2.9% 5,836 4,427

Chemicals 6.0%

TCI 3,960 2,305 -3.7% 42.9% 2,394 1,550

Telecoms 3.4%

MCI 3,866 34,220 -0.4% 44.0% 34,910 23,428

Telecoms 3.3%

Marun Petrochemical 3,283 29,650 -0.9% 5.7% 32,784 27,879

Chemicals 2.8%

Bank Mellat 2,733 1,896 →(a) 0.0% 22.3% 2,046 1,506

Banking 2.4%

Mobarakeh Steel 2,663 2,305 -3.7% 42.9% 2,394 1,550

Base metals 2.3%

MAPNA Group 2,580 9,100 →(a) 0.0% 33.8% 9,890 6,330

Engineering 2.2%

NICICO 2,484 1,842 10.8% 79.5% 1,842 996

Base metals 2.1%

Ghadir Investment 2,413 1,938 3.0% 21.2% 2,360 1,599

Conglomerates 2.1%

Tapico 2,383 1,770 →(a) 0.0% -9.4% 2,335 1,733

Chemicals 2.1%

1-month

Price va lues in IRR

Golgohar and TEDPIX — last 2 years

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IRAN EQUITY MARKETS OCTOBER 2016

Golgohar Mining & Industrial Co. (Kegol)Symbol: GOLG1 Exchange: TSE Listed since: 2004 Last close: IRR 1,920 90-day change: ↑ 13%

Market cap.: $1,618m P/E (16-17E)(a): 8.0x 12-month return: 26%↑

Enterprise value: $1,760m 5-yr (avg.) dividend payout ratio: 96% EV/revenue (16-17E)(a): 2.4x

% of market (TSE): 1.5% Dividend yield (16-17E)(a): 12.3% EV/EBITDA (16-17E)(a): 6.6x

Free float: 20% Avg. daily trade value: $412K ROCE (hist.): 18%

Shares outstanding: 30bn 52-wk high / low (IRR): 2,129/1,308 ROE (hist.): 17%

The Golgohar Mining & Industrial Company was established in 1991to produce iron ore concentrate and iron ore pellets for steel companies. The company’s market share of iron ore concentrate is about 30% in Iran. It is one of the two biggest iron ore mining companies in Iran, the other being Chadormalu Mining and Industrial Company; but Golgohar’s mines are newer, and its reserves less depleted, than Chadormalu’s. Its cost of goods sold (COGS) comprises mainly extraction costs (paid to contractors), government royalties and utility costs; it recently adopted an assertive negotiation policy to better manage contractor extraction costs. Most steel producers in Iran use the electric arc furnace (EAF) method (which makes greater use of iron ore), as opposed to the blast furnace method. Because Iran’s government plans to significantly increase domestic steel production to from 31m tonnes to 55m tonnes by 2025, demand for iron ore concentrate and pellets is expected to accelerate. Golgohar, which currently has the capacity to produce 12.5 million tonnes of concentrate annually, plans to increase this capacity by 2m tonnes in 2017. Although Golgohar’s iron ore pellets are sold in the domestic market, it expects to export up to about 50% of its iron ore concentrate (to take advantage of better pricing in the global market). Its main revenue driver is the domestic bloom price; the prices of concentrate and pellets are announced annually and set as a fixed percentage of Khuzestan Steel Company’s (2nd largest steel producer in Iran) bloom price (currently concentrate is set at 13% and pellet at 21.5% of the bloom price). Golgohar does not own mines and pays an annual royalty to Iran’s government for a long-term licence (royalty fees are based on the degree of value-add of the product and expressed as a percentage of the concentrate price).

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

Production

(Thousand tonnes)7,792 8,175 10,787 12,500 14,500

Revenue 891.8 737.9 521.2 738.9 936.0

% of growth -12.6% -17.3% -29.4% 41.8% 26.7%

EBITDA 451.3 271.8 155.3 266.6 380.5

% of growth -36% -40% -43% 72% 43%

EBITDA margin 51% 37% 30% 36% 41%

Net Income 476.5 269.8 164.2 203.4 305.9

% of growth -29% -43% -39% 24% 50%

NI margin 53% 37% 32% 28% 33%

Net Debt (57.1) 101.4 141.6 66.5 (27.5)

Capex 183.9 235.2 124.0 54.5 41.1

Dividend 465.4 278.6 160.4 198.6 298.7

Financial Overview ($m) Company Overview

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

All share prices are adjusted for corporate actions.

a) Actual results.

b) Griffon Asset Management forecasts.

Sources: Company Financial Statements, Griffon asset management team.

Revenue and EBITDA margin Cash Flow

51%

37%30%

36%41%

0%

20%

40%

60%

80%

100%

0

150

300

450

600

750

900

1,050

2013A 2014A 2015A 2016E 2017E

$ (m

illio

n)

Revenue EBITDA Margin

(600)

(400)

(200)

0

200

400

600

2013A 2014A 2015A 2016E 2017E

$ (m

illio

n)

Operating Investing Financing

1000

1500

2000

2500

3000

3500

10/25/2014 4/13/2015 9/30/2015 3/18/2016 9/4/2016

Kegol TEDPIX rebased

Page| 6

Disclaimer

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

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

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

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

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

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

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

(Continued on the next page)

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

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

Page| 7

Disclaimer (Continued)

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

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

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

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

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

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

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

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

Griffon CapitalUnit 101,No. 38, Golfam Street,Africa Boulevard,Tehran, IranIran

T: +98 21 26231278F: +98 21 26231275

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