ANNUAL REPORT 2010

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Board of Directors Compensation Committee Members Gustavo Gustavo J. Vollmer H. (Coordinator) Alfredo Travieso P. Víctor Sierra Gonzalo Mendoza Luis Esteban Palacios W. Luis Alfredo Sanabria U. Claudio Dolman Gustavo Marturet (Ex oficio) Alejandro González Sosa (Ex oficio) Board of Directors Audit Committee Members LuiLuis A. Romero M. (Coordinator) Jonathan Coles W. Eduardo Mier y Terán Federico Vollmer A. Gustavo Machado C. Oscar Machado K. Carlos Zuloaga Travieso Miguel Ángel Capriles Capriles Luis Pedro España Gustavo Marturet (Ex oficio) Alejandro González Sosa (Ex oficio) Board of Directors Risk Committee Members GuGustavo J. Vollmer A. (Coordinator) Roberto Vainrub Miguel Ángel Capriles L. Gustavo Galdo Luis A. Marturet Carlos Hellmund B. Alberto Sosa S. Germán Sánchez Myles Francisco Monaldi Gustavo Marturet (Ex oficio) Alejandro González Sosa (Ex oficio) This Committee is responsible for setting the organization’s policy on pay and benefits, approving the remuneration of the President and senior management and informing the Board of Directors accordingly. In 2010 the Compensation Committee met nine times to review the following topics: semi-annual results of Mercantil and its subsidiaries in Venezuela and abroad; short and long-term management incentive programs of Mercantil and its subsidiaries in Venezuela and abroad; taxability of payments to staff for services rendered; considerations on per diems of Board members of Mercantil and its subsidiaries in Venezuela and abroad; analysis of staff movement during the year; consideration of interest rates of special financing programs for staff; consideration of consultancy fees on legal, fiscal and migratory issues; impact of national minimum wage policy; establishment of annual wage policy; results of negotiations on the 2010-2012 Collective Bargaining Agreement; reports on initiatives to rationalize staff expenses at subsidiaries in Venezuela and abroad; review of reports to be presented to the National Securities Superintendency for consideration; situation of Mercantil’s Complementary Pension Scheme (Plan Complementario de Pensiones de Jubilación Mercantil), actuarial results and adjustment of minimum pension under the Scheme; report on executive compensation and its benchmark positioning in the market; health financing program; aid plan for employees who lost their homes in the natural disasters; staff survey on risks in the workplace; Rules on Use of the Corporate Jet; mechanism for electronic queries on loans and advance on social benefits in trust fund; extension of deadline for the Share Purchase Program to June 30, 2011 to purchase shares under the Fourth Phase for the overseas subsidiaries. The Committee has responsibility for reviewing and discussing accounting and management policies, opinions and reports of the organization’s internal and external auditors, establishing Reserves, reviewing the Financial Statements and their Notes and formulating recommendations on matters incumbent upon it to the Board. It also approves the engagement and remuneration of the external auditors. In 2010 the Audit Committee met seven times to review the following topics: Consideration of the financial statements of Mercantil and its subsidiaries, opinions of the external auditors on those statements and the notes thereto; review of internal audit activities of Mercantil’s subsidiaries and activities connected with money laundering; consideration and approval of the fees of the external auditors; consideration of internal control aspects observed by the external auditors; Actuarial Assumptions Retirement Plan; progress on plans to issue financial statements according to IFRS standards. Approves Mercantil’s risk profile, policies and limits. It also optimizes the use of capital to support the approved risk profile. In 2010 the Risk Committee met seven times and dealt with the following topics: Consideration and setting of cross-border credit limits; consideration of adjustments and measures related to the credit risk policy, review of limits for individual borrowers and economic groups, provisions; status and management report on operational risk and market risk; follow up of the limits established for Venezuela; consideration of reports on results of loan portfolio reviews; establishment of market risk limits for different subsidiaries; valuation of investment portfolio; adjustment to counterpart risk limits on the occasion of the PDVSA 2017 Corporate Bond issue; Business Continuity Plan report; alternate computation center tests; considerations on SITME; situation of fraud events; situation of contingency energy saving plan; considerations on credits that exceeding the internal limits; adjustment of government structure in risk management as a result of the self-assessment of best risk practices based on the questionnaire of the Institute of International Finance’s Committee on Market Best Practices June 2008. Annual Report 2010 94
Executive Committee Mercantil has an Executive Committee comprising a President and Executive President plus ten senior managers from the organization’s Business and Support areas, which guarantees the timely implementation of Mercantil’s decisions and strategies. The Committee meets once a week and holds extraordinary meetings as required. It is responsible for evaluating options and formulating recommendations on policy matters, objectives, strategies and organization and submitting them to the Board of Directors for consideration, as well as assisting and guiding Management in its efforts to implement the policies adopted. It is also responsible for evaluating the outcome of their implementation. Chairman of the Board of Directors The Chairman of the Board of Directors is the President of the Company. He, or she, is responsible for steering the Company’s activities and its business, chairing Shareholders meetings, Board meetings and meetings of the Executive Committee, and providing them with assistance and guidance on setting policies, goals and strategies to be followed and on important decisions in accordance with the executive powers granted. He, or she, is also responsible for exercising the functions assigned by the Board of Directors and for representing the Company before political and administrative authorities and other public and private entities. The President stands in for the Executive President during temporary absences, exercising the same powers and attributions. The Audit Unit and the Secretariat, which report directly to the Board of Directors, report to the President on administrative matters. The Corporate Compliance Unit reports directly to the President. Executive President The Executive President is responsible for the executive management and coordination of the company; submitting to the consideration of the President, the Board of Directors and the Executive Committee any major policies, objectives, strategies and decisions and reporting to them periodically on the company's financial condition and results of operations. Other responsibilities include designing, establishing and developing the Company’s organizational structure and appointing and removing general managers, consultants and advisers as necessary. The Executive President stands in for the President during temporary absences, exercising the same powers and attributions. The following Global Business and Support Units report to the Executive President: Commercial and Personal Banking, Corporate and Investment Banking, Private Banking and Wealth Management, Finance, Insurance and New Business, International Operations, Operations and Technology, Risk Management, Legal Affairs, Strategic Planning, and Human Resources and Corporate Communications. The Executive President is also responsible for the executive coordination of all Mercantil’s subsidiaries. Mercantil Servicios Financieros 95
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ANNUAL REPORT 2010
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ANNUAL REPORT 2010 CONTENTS Mercant
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Mercantil is Venezuela’s leading
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Earnings Consolidated Balance Sheet
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Notice of Ordinary General Sharehol
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* Dollar figures are given for refe
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* Dollar figures are given for refe
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Adjustments to Reporting Lines At a
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Venezuela The Venezuelan economy co
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85th Anniversary During the second
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Special mention should be made of M
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Statutory Auditors’ Report To the
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Financial Statements (In accordance
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Consolidated Balance Sheet (In thou
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César PRIETO Calle caraqueña, aro
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Economic Climate Mercantil Servicio
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Summary of Economic Performance 200
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Mission To fulfill the needs of ind
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Management Discussion and Analysis
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Loan Portfolio by Business Segment
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Financial Margin Year Ended (In tho
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Distribution of Total Income Bs 7,4
Page 45 and 46: Summary of the Accounting Principle
Page 47 and 48: Business Management Report Commerci
Page 49 and 50: Commercial Banking Deposits Year 20
Page 51 and 52: Corporate Banking During 2010, the
Page 53 and 54: This made the team more consolidate
Page 55 and 56: In Venezuela, Mercantil Servicios d
Page 57 and 58: Excess Liquidity and Interbank Mark
Page 59 and 60: Available for Sale and Held to matu
Page 61 and 62: Quality of Service and Operating Ef
Page 63 and 64: Manuel CABRÉ Ávila desde San Bern
Page 65 and 66: Human Resources Many of the activit
Page 67 and 68: Risk Management Good risk managemen
Page 69 and 70: Distribution of Mercantil's loan po
Page 71 and 72: Trading in fixed-income securities
Page 73 and 74: Operational risk management in non-
Page 75 and 76: Performance of Subsidiaries Equity
Page 77 and 78: (1) Obtained from dividing sharehol
Page 79 and 80: Mercantil Commercebank Florida Banc
Page 81 and 82: Mercantil Merinvest, C.A. Consolida
Page 83 and 84: Credit Ratings Mercantil Servicios
Page 85 and 86: Prevention and Control of Money Lau
Page 87 and 88: * Prevention and Control of Money L
Page 89 and 90: Mercantil’s Social Contributions
Page 91 and 92: Pedro Ángel GONZÁLEZ Paisaje de G
Page 93 and 94: Corporate Governance Mercantil Serv
Page 95: Board of Directors The Board of Dir
Page 99 and 100: Pedro Ángel GONZÁLEZ Comenzando l
Page 101 and 102: Report of the Board of Directors of
Page 103 and 104: Mercantil Commercebank • In March
Page 105 and 106: Mercantil Banco Universal: 85 years
Page 107 and 108: In 1996 the Bank changed its status
Page 109 and 110: Mercantil’s principles and values
Page 111 and 112: Board of Directors Directors Gustav
Page 113 and 114: Gustavo Galdo C. President of Inver
Page 115 and 116: Executive Committee Gustavo Antonio
Page 117 and 118: MERCANTIL, C.A., BANCO UNIVERSAL Av
Page 119 and 120: T h e F i n e A r t s S o c i e t y
Page 121 and 122: Alberto EGEA LÓPEZ Ávila, hacia 1
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ANNUAL REPORT 2010

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