payment channels for Iran TradeINSTEX and other alternatives

Aussenwirtschaftsforum Iran

Vienna, October 3, 2019

Part 1

The largest Market in Central Asia is Iran –the World’s Last Remaining Major Emerging

Economy

2

Arjan Capital Ltd

Arjan Capital Ltd, London

M&A, Corporate and Trade Advisory boutique,

authorised and regulated by the Financial Conduct Authority (FCA)

Capital Markets Advisory

M&A, part or full acquisition of assets

Trade Cashflow Management

International stock market listing

Investment structuring

Brokerage services

Trade Finance, Procurement, Factoring, Forfeiting Advisory

Procurement and Payment Handling

Trade Finance

Factoring & Forfeiting

Services and Research

Business Strategy & Market Access advisory

Partner search (finance, JV, sales, manufacturing)

Legal support

Technical & Operational support

Fiduciary services

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Arjan Capital 2019

• We continue to assist European mid- and large-cap companies, listed or private in

navigating complex markets, mainly in Central Asia, Africa and Latin America

• We are regulated by the UK FCA, the British Financial Conduct Authority

• We work extensively with Embassies in Iran and Chambers of Commerce in Europe

• This year we have..

• ..Recovered important amounts for a European listed company from an Iranian bank

in Europe

• ..foreign transactions for Swiss, German and UK companies

• ..Opened in Q1 2019 Arjan Capital Trading Company in Kabul, Afghanistan

• ..Exported industrial, medical and FMCG products from Switzerland, UK and

Germany

• ..Act as the Central Asia (-Stan and around) agents for mainly European companies

• We do NOT represent any US persons or companies or transact with them.

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Main trade concerns today

• Lack of international payment acceptance

• Local LC’s not accepted

• Situation is seriously worse than prior to 2015 and sadly still going the wrong way

• Is INSTEX dead before it is born? Current deals.

• Swiss payment vehicle still pending, waiting OFAC approval

• STFI* (The Iranian version of INSTEX), about as active as INSTEX?

• Any trades that have happened on any of these platforms?

• Our work and experience shows that for non-sanctioned goods, commercial private sector solutions work well, if professionally setup and with realistic expectations in time and cost.

*Iran’s Special Trade and Financial Institute

5

Options for doing business in Frontier Markets

Option

Size(turnover p.a.

with FM)

Import via sale to

3rd party European

importer

Direct import

to independent

distributor

Direct import

via own local

distributor

Assembly

in local country

Manufacture

in local country

Micro(≤ 2 million)

Giving away part of the

margin, and losing all of

the local issues

Depending on size of

individual transactionsUnlikely

Small(≤ 10 million)

As above; to be considered

for low margin productsMargins permitting

Depending on future

strategy

Depending on ability to

source local content

Medium(≤ 50 million)

Unlikely Depending on ability to

source local content

Depending on future

strategy

Large(> 50 million)

Unlikely

Yes,

if low volume sales per

product/distribution

channel

V Large(> 1 billion)

Unlikely

Yes,

if low volume sales per

product/distribution

channel

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Company formation and operation in various jurisdictions (UK, CH,

UAE, Estonia, Central Asia countries and others)

Stock market listing of

companies or funds

Fund/trust creation as an alternative to

hold assets

Selection of appropriate

banks

Setting up bank accounts

Advice to and structuring of

board of directors

Advice on shareholding structure for

ultimate beneficial

owner(UBO)

Advise on corporate structure

Screening CVs and proposing suitable board

members

On demand company management (operational or control only)

Corporate finance Trade finance Structured finance

As an option

Services offered

Arjan Capital in the International Media

3

Solutions we apply

• Lack of international payment acceptance –

• we handle exports for European companies, also ex works if required, hence no Iran exposure for the company any more

• We settle the sale and purchase as counter party

• Local LC’s not accepted – we accept local Iranian LC’s from acceptable banks and bridge finance the purchase

• Situation is seriously worse than before 2015 and still going the wrong way – strong US fear factor

• Is INSTEX dead before it is born? Current deals. – we are hesitant towards INSTEX, too much limelight

• Swiss payment vehicle still pending, waiting OFAC approval – approval does not seem imminent

• STFI* (The Iranian version of INSTEX), about as active as INSTEX? – same as the Swiss vehicle

• Any trades that have happened on any of these platforms? We don’t know of any

• Our work and experience shows that for non-sanctioned goods, commercial private sector solutions work well, if professionally setup and with realistic expectations in time and cost.

*Iran’s Special Trade and Financial Institute

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Latest additionArjan Capital Trading Company, Kabul

• Set up in early 2019 and clients already secured, eg:

• Swiss company in the engineering field – Arjan Trading Kabul acts as their official agent for Central Asia

• Caters to an array of markets

• Further trade set-ups in:• Germany• Switzerland• Turkey • UK• UAE

to support the handling of trade

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The Arjan Iran Book

• We will be releasing a book in Q1 2020 about adecade of navigating Iran and other complexmarkets

• For a free copy contact us at: book@arjancapital.com

Thank you

Senator h.c.

Andreas Schweitzer, MD

Arjan Capital Ltd,

London, UK

Office London: +44 207 323 64 26

+44 7881 782 041 (Mobile, Whatsapp, Signal, Telegram)

Iran +98 912 092 8513

as@arjancapital.com www.arjancapital.com

Bundessenat für Wirtschaft und Technologie®

German Federal Senate for Economy and Technology

1219INDUSTRIAL | FINANCIAL | LEGAL

Thank you

Background

More details hereafter

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Part 2

Current status of sanctions

• After American withdrawal from JCPOA, sanctions were re-imposed on:

• Banking/finance:- The acquisition of US dollar banknotes by the Iranian govt

- Significant transactions related to the purchase or sale of IRR

- The provision of underwriting services, insurance or reinsurance

- Transactions on foreign financial institutions with the Central Bank of Iran and other such designated Iranian institutions

• Natural resources:- Petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC)

- Iran’s trade in gold and other precious metals

- Direct or indirect sale of graphite, raw or semi-finished metals such as aluminium and steel

• Infrastructure- Software for integrating industrial processes

- Iran’s shipping industry and port operators

- Iranian nationals on the List of Specially Designated Nationals and Blocked Persons (SDN) List

- Iran’s automotive industry

Instex, STFI or Swiss payment vehicle

Source: The Washington Free Beacon , June 19, 2019

• Secretary of State Mike Pompeo has maintained the United States will uphold its sanctions on Iran,particularly if any banned transactions are conducted through INSTEX, the STFI, or any other body.

"There are items that are sanctioned and there are items that are… Those items that are subject tosanctions, we will do our best to enforce the American sanctions regime that… has been put in place.

But for those that aren't—for humanitarian goods, things that are permitted to move, whether theymove through INSTEX or through another mechanism—those are lawful and appropriate and arepermitted to continue under the sanctions laws that we’ve put in place. And so when we think aboutINSTEX, if it is aimed at facilitating the movement of goods that are authorized to move, it’sunproblematic.”

https://freebeacon.com/national-security/trump-admin-to-sanction-irans-last-european-lifeline/

• However, given that most big pharma/humanitarian companies are able to bringtheir products into Iran anyway, INSTEX might be considered superfluous

15

The latest on INSTEX

Source: https://on.rt.com/a2ls and Euronews

• News has been few and far between, which is telling

• But finally, this week, aides to EU High Representatives claimed that 8 more EU countries arejoining the original trio who set up INSTEX

• Names not mentioned but Sweden and Belgium are rumoured to be interested

• Iranian ministers have been claiming that the EU will contribute 15bn USD to INSTEX if Iranpromises to resume compliance with JCPOA

• But French foreign minister openly admits that this hinges on America not blocking the credit line

• Meanwhile the Supreme Leader has also been telling Iranians to give up hope on the Europeans

• Nothing changes the reality that INSTEX seems to be made for SMEs, as the big names all havetheir own channels… no significant trade has been made through INSTEX despite being set upmore than 6 months ago

Impact

• Worst-case scenario is return to the situation during the previous sanctionsregime when the clearing houses facilitated c. $40bn in trade p.a.

• This is how companies such as MTN, Henkel, etc. got money in and out - asophisticated system, but it works

• European and Asian firms of any meaningful size will not tolerate the risk ofviolating sanctions and will stop dealing with sanctioned entities

• These institutions, however, were already risk-averse and had minimizedtheir exposure to Iran, so the effect of the new sanctions will be marginal atbest

• Some foreign banks insulated from U.S. jurisdiction could create bespokefacilities to sustain trade with Iran, even if they are hit with sanctions

• There is precedent for this in China

Way forward

• More generally, these broad new Iran sanctions willencourage some countries to explore an array of alternativefinancial conduits to Iran, from barter to blockchain, toshield their banks and companies from U.S. jurisdiction

• Russia and China are already pioneering alternativepayment systems to stay outside of U.S. banks and currency,and these measures will likely accelerate that work andinternational interest

Case Study 1

Global market leader for paint

• Arjan Capital has an ongoing mandate with one of the world’s largest paint manufacturers to

advise them on the acquisition of an Iranian market leader in industrial and marine paints

• Arjan assists the international company on the buy-side throughout the process, providing the

following services:

• Sourcing target in Iran

• Overall coordination of the acquisition process

• Coordination with the seller and local authorities/regulators

• Preparation of target report and financials

• Preparation of LOI, Term sheet and Sales and Purchase Agreement (SPA)

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Case Study 2 (on hold)

One of the world leaders in the food sector

• Arjan was approached by the EU subsidiary of a US-listed very large cap company to assist them

in buying an Iranian company in the food sector

• The US-listed company is already selling to Iran under their OFAC license and decided to own

manufacturing capacity in Iran

• Arjan sourced the target company and assisted in the due diligence process, including ultimate

beneficial owner (UBO) and other relevant parties to ensure that the international company

remained sanctions compliant at all times

• Given the current political situation, this international company has put its Iran expansion

strategy on hold, and remains in contact with Arjan to understand the current situation

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Case Study 3

Leading European insurance company

• Arjan Capital assisted a leading European insurance company to establish a secure line of claim payments to Iran

• The case required to identify a large bank other banks are willing to deal with despite their Iran activity

• Formation of a new EU subsidiary being the new account owner.

• Additional complexities related to the highly regulated insurance market

• Arjan Capital sourced and secured a bank account with a leading European bank that will accept and make payment to Iran

• This solved our client’s problem in a wholly compliant and regulated manner

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M&A, Corporate and Trade Advisory Boutique authorised and regulated by the Financial Conduct

Authority in London

Private & Confidential

Q4 2019

Part 3

23

The New Silk

RoadCentral Asia and the

Caucuses

5

170m

No.1

Combined population

Its landmass is larger

than the European Union

The region has the largest

hydrocarbon reserves in the

world. It is also one of the

biggest producers of

Uranium, Copper, Gold,

Coal.

Strategic location and

young, well educated

populations are contributing

to strong economic growth.

Source: IMF

Central Asia is located at the heart of the

old Silk Road. In particular, cities like

Bukhara and Samarkand, were among

the world’s wealthiest cities and a global

centre of the arts and sciences.

Several centuries later, the region is once

again taking centre stage through

ambitious economic reforms in order to

take advantage of its location at the cross

roads between China, Europe, India and

Russia.

In particular, large investments from the

Chinese Belt and Road initiative, the

liberalisation of the economies and

attractive valuations offer a unique

investment opportunity.

Rich History, Bright Future:The Silk Road renaissance

Introduction to the “New Silk Road”

The Silk Road is a unique investment region, rich in history and natural resources, which for centuries comprised a network of trade routes that, prior to the dominance of maritime trade, connected leading kingdoms and empires.

For much of the past two millennia this region included some of the most sophisticated centres of culture, science, wealth and arts, with the Romans, Greeks, Egyptians, Mongols, Indians, and Chinese all trading goods and exchanged ideas along the Silk Road.

Today, the Silk Road is regaining prominence due to its extensive resources, improving infrastructure and technological upgrades. Its strategic position as a link between Europe and Asia, as well as its proximity to the world’s largest emerging economies, makes it a key beneficiary of the Chinese Belt and Road initiative.

Additionally, countries in the region have engaged in significant reforms, paving the way for foreign capital inflow, local entrepreneurship and technology adoption.

Given the intricacies of these countries and their respective market participants, global firms will often find themselves uninitiated and unequipped to operate successfully in the region. Thus, these global firms seek out proprietary investment/commercial opportunities, on a turnkey basis, wrapped in industrial, financial and legal support.

6

It is Arjan Capital’s strategic objective to facilitate market entry and trade for

global firms into the New Silk Road region

China’s “Belt and Road Initiative”

The Belt and Road Initiative is vast, encompassing countries that account for 29% of global GDP “By linking countries and regions that account for about 60% of the world’s population and 30%

of global GDP, the (Silk Road) is ‘a project of the century’”

- President Xi Jinping

China’s Belt and Road Initiative (BRI) seeks to expand maritime routes and land infrastructure networks connecting China with Asia, Africa and Europe, boosting trade and economic growth.

This modern version of the “Marshall Plan” seeks to secure China’s supply of raw materials, secure trade routes and open new markets. Its name was coined in 2013 by China’s President Xi Jinping; the Chinese Government is expected to invest in excess of $1tr on this initiative.

What is unfolding is the world’s largest development project, enabling local businesses to be more competitive globally; over the coming decade it is only likely to grow in scope.

The initiative now encompasses nearly 70 countries with over 4.8 billion people, which represents more than half the planet’s population. It covers economies worth a total sum US$ 21 trillion, accounting for 62 per cent of the world’s GDP and about 65 percent and 30 percent of global land- and maritime-based economic production respectively.

7

Why do business in the New Silk Road?

8

Strong domestic

growth

Rising exports

revenues from

natural resources

Infrastructure

investment

Favourable

demographics

Fuelling the Asian

demographic and

economic growth

Improving

governance

and rule of law

Liberalisation and

privatisations

Capital markets

development

Highly educated

and talented

workforce

Infrastructure

upgrades, Belt

and Road initiative

Positive GDP

growth trend

Growing

international

reserves

Increasing exports

and FDI

Financial

renaissance

as NPL’s are

restructured and

loan growth is

increasing

Low Debt/

GDP ratios

Improving legal

and operational

framework

Sound monetary

and fiscal policies

Lower correlation

to mainstream

markets

Under-

representation in

Index investing

Solid Growth

Drivers

Positive Structural

Changes

Improving Macro

FundamentalsLower Risk

Mergers, Acquisitions, Investments

10

29

Europe

Corporate

Finance

Europe Corporate Finance

In partnership with First Berlin, a leading independent research and securities brokerage house for European small and micro caps

12

First Berlin – Executive Summary• Established in 1998 to service European small and micro caps• Bring them to the attention of domestic as well as foreign institutional investors• Independent equity research and valuations provided for more than 270 companies

Strong Client Relationships• Long established client relationships• Coverage of more than 30 companies and several advisory mandates

Strong partners & representative customers• DZ Bank, Frankfurt; mwb fairtrade Wetpapierhandelsbank AG; Hauck & Aufhauser, Frankfurt; Donner &

Reuschel, Hamburg; Steubing AG, Frankfurt; Evenburgh Capital Consult GmbH; Resource Trading Group RTG Deutschland GmbH

International multilingual team• German, English, Hebrew, Irish, Indian, Russian, Spanish

Corporate Finance Consulting and Capital Markets

Corporate Finance Consulting

We advise companies, together with our partner First Berlin, on all possible aspects of corporate finance. With an extensive network of institutional investors, private equity firms, family offices etc, we are able to advise on how to raise equity or debt and organize investor access through roadshows and conferences. (First Berlin home page)

Capital Markets

We provide services to corporate clients in the primary and secondary markets together with our partner First Berlin. We help to execute block trades both for institutional investors and corporate clients. We also organize deal- or non-deal-related roadshows to raise capital and/or the profile and recognition of our corporate clients. Independent advice on potential carve-outs or the sale of business units can also be provided.

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Research

Research

Our partner First Berlin AG helps SMEs to raise their profile by supplying corporates with independent research. First Berlin provides independent equity research and market intelligence to banks, asset managers and other institutional investors on small and micro-cap companies in a variety of sectors. The principles of integrity, transparency and competence drive their research and provide the basis for a fair analysis and valuation of companies. For research reports, please follow this link (First Berlin Research)

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Comprehensive company reports and comments

Market and competition analysis

Company valuations

Stock recommendations

Pre-IPO valuations

Private Equity and Venture Capital valuations

International roadshows (Europe and US)

Research Distribution

Distribution targeted at investors in German SMEs

• Global distribution list of institutional investors for each industry sector with readership lists generated each month

• Research published on own online portal as well as on Bloomberg, Thomson Reuters, DGAP, Capital IQ, and FactSet

• Research reports read by over 2,5000 institutional investors i.e. banks, asset managers and investment brokers (including Fidelity and Invesco)

• Investment recommendations available through major financial portals (i.e. aktienchek.de, onvista.de, etc.)

• Reports cited in the financial media including Börsenzeitung, der Aktionär, €uro am Sonntag, Handelsblatt, FAZ, Witschaftswoche

15

Research Coverage

16

Example Transactions

17

36

The Arjan

Team

37

A Swiss national, Mr. Schweitzer is a CEO with expertise in start ups, SME’s and frontier

markets business development, Mr. Schweitzer has lead IPO processes across

renewable energy and innovative technologies sectors. Experienced in identifying

market opportunities, Mr. Schweitzer has a strong focus on capital raising, business

development and exit strategies.

Mr. Schweitzer serves as an advisor to the trade and commodity division of Metallco

International Ltd, a 40-year-old industrial merchant company specializing in

automotive/rail, power generation, offset- and counter trade. Since 2009, Mr. Schweitzer

has had an active presence in Central Asia, advising international industrial and

investment companies targeting those market as well as facilitating compliant industrial

and commercial activity.

In 2004, Mr. Schweitzer was Co-Founder and Vice-Chairman of a company that

developed a hydro-electronic power drive systems for mid-sized, on- and off-grid wind

turbines. Previously, Mr. Schweitzer created and managed a US$ 200 million market-

timing fund; and has held management positions at Jacobs Suchard (now Kraft Foods

Schweiz AG), in France, Panama, Switzerland, India and the UK.

Mr. Schweitzer has been a founding partner of startups and served in executive roles in

international banks European asset management firms including A. Sarasin & Cie

(1980-1983), now J.SafraSarasin, Jacobs Suchard AG (1984-90) and Kenk &

Schweitzer Associés (1990-1994). Mr. Schweitzer serves on a number of SME boards

of directors and is actively involved in the Young Presidents’ Organization (YPO).

Andreas Schweitzer – Managing

Director

EDUCATIONIMD, Lausanne, Switzerland 1995/96

London School of Economics 1981/82

ESC, Neuchatel, Switzerland

PROFESSIONAL MEMBERSHIPSYoung Presidents’ Organisation (YPO)

Member, Strategic Committee YPO Doing Business Globally Network YPO Doing Business in Iran Network

Founder & Chairman, YPO Renewable Energy Network

BOARD MEMBERSHIPS

Arjan Capital Ltd, London, UK

Acquarossa Terme SA, Switzerland

Investissements Mistral Ltd (UK & BVI)

LANGUAGESGerman, French, English, Spanish,

working knowledge of Italian

Honorary SenatorWirtschaftskomitee Deutschland e.V. (WBA)

Bundessenat für Wirtschaft und Technologie®

European senate to promote economy and technology

19

Arjan Team

20

Lanna GrigoriyanOperations

Andreas Schweitzer

CEO

Robin ButlerAnalyst

Mef BadaliResearch Desk

John HemmantCompliance Advisor

Masee SafiCentral Asia Desk

Contacts

Andreas SchweitzerManaging Director

Tel: +44 (0) 207 323 64 26Mob: +44 (0) 7881 782 041

Email: as@arjancapital.com

Masee SafiCentral Asia Desk

Tel: +44 (0) 207 323 64 21Mob: +44 (0) 7393 027 059

Email: as@arjancapital.com

Website: www.arjan.capital

21

Disclaimer

This document, any presentation made in conjunction herewith and any accompanying materials are preliminary and for

information only.

The information and views contained in this document are not intended to be complete and may be subject to change at any

time. No representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information or views in

this document and no liability for the accuracy and completeness of information is accepted by Arjan Capital Ltd and/or its

partners.

This document does not constitute an offer or invitation to enter into any type of financial transaction. It may not be reproduced

either in whole or in part, without the written permission of Arjan Capital Ltd.

The information contained in this report has been compiled by Arjan Capital Ltd, which is registered in England & Wales

8478733 and authorised and regulated by the FCA (FRN 681412). The activities of Arjan Capital Ltd are wholly sanctions

compliant and Arjan Capital Ltd does not engage in any activity that is prohibited by any and all sanctions regimes relating to

Islamic Republic of Iran.

The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession

this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these

restrictions could result in a violation of the laws of such jurisdiction.

This document is confidential and proprietary. It may not be transmitted to any person other than the original recipient to whom

it was delivered by Arjan Capital Ltd.

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