SCHWEIZ - Banco Mercantil

Annual Report 2 0 0 8
Mercantil Bank Schweiz
a Subsidiary of Mercantil Servicios Financieros

Annual Report 2 0 0 8
Contents
Board of Directors and Management
Board of Directors’ Report
Report of the Group Auditors and Consolidated
Financial Statements as of December 31, 2008
Report of the Statutory Auditors and Parent Company
Financial Statements as of December 31, 2008

Board of Directors
Management
Board of Directors and Management
1) 2)
Dr. Thomas E. Krayenbühl
Chairman
Dr. Kurt Sieger 1)
Vice-Chairman
Peter Huwyler 1)
Director
Gustavo A. Marturet
Director
J. Guillermo Villar
Director
Joaquín Fischer
General Manager
Brigitte Manns
Vice-President Private Banking
Sandra Righetti
Vice-President Operations and IT
Thomas Ita
Vice-President Finance
Internal Audit Internal Audit Department
Mercantil Servicios Financieros
External Auditors PricewaterhouseCoopers Ltd, Zurich
Adress Talacker 42, P.O.Box 9758, CH-8036 Zurich
Tel: + 41 - 433 444 555; Fax: + 41 - 433 444 550
Swift: BAMR CH ZZ
Website: www.mercantilsuiza.com
1) These members of the Board fulfil the independence criteria stipulated in margins nos. 20-24 of FINMA circular 08/24.
2) The Chairman of the Board is also member of the Audit Committee due to the limited number of independent members of the Board with
accounting background.

Board of Directors’ Report
During 2008, the global economy experienced a rapid downturn and financial
institutions around the world felt its considerable impact. Although
conditions were challenging, Mercantil Bank (Schweiz) AG faced this market
situation proactively. Key initiatives were aimed at offsetting reduced
interest margins and underwriting risks. While the financial results were
somewhat affected, these assertive practices allowed the Bank to maintain
a good asset quality in its credit and investment portfolio and continue to
serve the credit needs of its customers.
Private Banking business showed a positive trend due to increased volume
in foreign exchange transactions and higher fee income. The Bank implemented
a long-term strategy to increase the share of wallet of existing customers,
to broaden the client base and to take advantage of opportunities
that will emerge in an uncertain and changing market.
Corporate Banking and Treasury activities were managed in response to
the credit risk quality concerns by an unfavorable trend in interest margins.
Loan loss reserves are adequate to cover potential deterioration of assets
in an unpredictable market. The Bank increased the number of corporate
and commercial clients, mainly for clearing services.
Total consolidated assets decreased by CHF 26 million or approximately 7
percent to CHF 356 million, in comparison with CHF 382 million in 2007.
Capital at the Bank’s consolidated level is CHF 56.6 million or a leverage
ratio of 15.9%, while for the parent company only, the ratio is 38%. The conservative
financing approach of the Bank is the foundation that supports
its solid reputation in the industry and its capacity to respond quickly to
business opportunities.

The year 2009 will continue to be challenging for the world economy at
large. Our prudent risk management practices will enable us to maintain
a strong balance sheet and continue increasing our customer base. We remain
confident that our human resources and operational infrastructure
will allow us to continue serving the needs of our customers and show our
appreciation for their trust in our financial institution.
Zurich, March 12, 2009
Dr. Thomas Krayenbühl, Chairman
Dr. Kurt Sieger, Vice Chairman
Peter Huwyler
Gustavo A. Marturet
J. Guillermo Villar

MERCANTIL BANK (SCHWEIZ) AG
ZURICH
Report of the Group Auditors
to the General Meeting of Shareholders
Consolidated Financial Statements 2008
14 April 2009/00593800001/15/SMN/HEX
With offices in Aarau, Basel, Berne, Chur, Geneva, Lausanne, Lugano, Lucerne, Neuchâtel, Sitten, St. Gallen, Thun, Winterthur, Zug and
Zurich, PricewaterhouseCoopers AG is a provider of auditing services and tax, legal and business consultancy services.
PricewaterhouseCoopers AG is a member of a global network of companies that are legally independent of one another; the network is
represented in some 150 countries throughout the world.

Report of the group auditors
to the general meeting of
MERCANTIL BANK (SCHWEIZ) AG
ZURICH
Report of the statutory auditor on the consolidated financial statements
PricewaterhouseCoopers AG
Birchstrasse 160
8050 Zürich
Phone +41 58 792 44 00
Fax +41 58 792 44 10
www.pwc.ch
As statutory auditor, we have audited the consolidated financial statements of MERCANTIL BANK
(SCHWEIZ) AG, which comprise the balance sheet, income statement, statement of cash flows
and notes, for the year ended 31 December 2008.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with accounting rules for banks and the requirements of Swiss
law. This responsibility includes designing, implementing and maintaining an internal control
system relevant to the preparation and fair presentation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error. The Board of Directors is further
responsible for 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 consolidated financial statements based on our
audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor’s judgment, 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
the internal control system relevant to the entity’s preparation and fair presentation of the
consolidated 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 system. An audit also includes evaluating the appropriateness of the accounting
policies used and the reasonableness of accounting estimates made, as well as evaluating the
overall presentation of the consolidated financial statements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2008 give a
true and fair view of the financial position, the results of operations and the cash flows in
accordance with accounting rules for banks and comply with Swiss law.
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act
(AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances
incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we
confirm that an internal control system exists which has been designed for the preparation of
consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG
Martin Schmidt Alex Henzi
Audit expert
Auditor in charge
Zürich, 14 April 2009
Enclosure:
- Consolidated financial statements (balance sheet, income statement, cash flow statement and
notes)

Financial Statement
Consolidated Balance Sheet
in CHF 31.12.2008 31.12.2007 Change
Assets
Liquid funds 224'893 379'212
Money market instruments - 60'997'440
Due from banks 220'810'539 222'373'187
Due from customers 106'250'033 81'927'627
Financial investments 13'620'067 3'776'106
Fixed assets 1'777'082 2'067'545
Accrued income and prepaid expenses 3'243'996 2'989'304
Other assets 9'708'279 7'574'440
Total assets 355'634'889 382'084'861
Total due from non-consolidated holdings and shareholder 9'371'634 7'002'392
Liabilities and shareholder's equity
Due to banks 4'068'768 11'207'249
Due to customers, other 289'802'997 307'478'353
Accrued expenses and deferred income 2'005'041 3'103'977
Other liabilities 920'653 864'160
Valuation adjustments and provisions 2'270'294 2'961'167
Share capital 45'500'000 45'500'000
Legal reserves 230'000 200'000
Retained earnings 10'169'026 8'970'698
Consolidated net profit for the year 668'110 1'799'257
Total liabilities and shareholder's equity 355'634'889 382'084'861
-154'319
-60'997'440
-1'562'648
24'322'406
9'843'961
-290'463
254'692
2'133'839
-26'449'972
2'369'242
-7'138'481
-17'675'356
-1'098'936
56'493
-690'873
-
30'000
1'198'328
-1'131'147
-26'449'972
Total due to non-consolidated holdings and shareholder - - -
Off-Balance Sheet Transactions
Contingent liabilities 4'530'391 12'190'517 -7'660'126
Irrevocable commitments 590'000 418'000 172'000
Derivative instruments
- contract value 64'646'580 73'978'266 -9'331'686
- positive replacement value 9'706'578 7'574'162 2'132'416
- negative replacement value 741'133 611'754 129'379
Fiduciary transactions 85'912'858 55'834'480 30'078'378

Consolidated Income Statement
in CHF 2008 2007 Change
Ordinary operating income and expense
Interest income
Interest and discount income 15'551'462 19'618'436 -4'066'974
Interest and dividend income on financial investments 589'718 466'475 123'243
Interest expense -9'488'710 -12'473'674 2'984'964
Net interest income 6'652'470 7'611'237 -958'767
Income from commission and services
Commission income on lending activities 246'192 331'564 -85'372
Commission income on asset management 3'111'828 2'627'040 484'788
Commission income on other services 427'689 229'811 197'878
Commission expense -1'391'608 -1'221'697 -169'911
Net commission income 2'394'101 1'966'718 427'383
Income from trading operations 940'851 186'704 754'147
Other ordinary income
Results from sale of financial investments - - -
Other ordinary income 2'120 3'248 -1'128
Other ordinary expense -453'068 -371'767 -81'301
Total other ordinary income -450'948 -368'519 -82'429
Total operating income 9'536'474 9'396'140 140'334
Operating expenses
Personnel expenses -4'591'269 -4'154'724 -436'545
Other operating expenses -3'419'727 -3'126'602 -293'125
Total operating expenses -8'010'996 -7'281'326 -729'670
Gross profit 1'525'478 2'114'814 -589'336
Consolidated net income for the year
Gross profit 1'525'478 2'114'814 -589'336
Depreciation and write-offs of non-current assets -807'164 -535'856 -271'308
Valuation adjustments, provisions and losses -618'794 -315'232 -303'562
Subtotal 99'520 1'263'726 -1'164'206
Extraordinary income 649'745 617'800 31'945
Extraordinary expenses - - -
Taxes -81'155 -82'269 1'114
Consolidated net income for the year 668'110 1'799'257 -1'131'147

Consolidated statement of cash flows
in CHF 2008 2007
Source Application Balance Source Application Balance
of funds of funds of funds of funds
Consolidated net profit for the year 668'110 - 1'799'257 -
Depreciation and write-offs of non-current assets 807'164 - 535'856 -
Valuation adjustments and provisions - 542'050 - 448'172
Consolidated translation adjustments - 570'929 - 808'619
Accrued income and prepaid expenses - 254'692 70'618 -
Accrued expenses and deferred income - 1'098'936 283'318 -
Other assets - 2'133'839 - 3'959'322
Other liabilities 56'493 - 682'891 -
Net cash flows from operating results 1'531'767 4'749'269 3'217'502 3'371'940 5'216'113 1'844'173
Share capital - - 12'000'000 -
Capital increase costs - - - -
Net cash flows from equity transactions - - - 12'000'000 - 12'000'000
Fixed assets - 516'701 - 296'859
Software - - - 814'895
Net cash flows from investment activities - 516'701 516'701 - 1'111'754 1'111'754
Due to customers, other - 1'151'610 - 3'302'382
Money market instruments - - 1'418'750 -
Due from banks 4'611'680 - - 4'611'680
Due from customers 15'817'111 - 14'849'395 -
Financial investments - 4'981'065 1'855'985 -
Medium and long term operations (>1 year) 20'428'791 6'132'675 14'296'116 18'124'130 7'914'062 10'210'068
Due to banks - 7'138'481 3'483'638 -
Due to customers, other - 16'523'746 22'728'234 -
Money market instruments 60'997'440 - 2'593'807 -
Due from banks - 3'049'032 - 65'302'679
Due from customers - 40'139'517 14'941'943 -
Financial investments - 4'862'896 2'362'570 -
Short term operations 60'997'440 71'713'672 10'716'232 46'110'192 65'302'679 19'192'487
Net cash flows from banking operations 81'426'231 77'846'347 3'579'884 64'234'322 73'216'741 8'982'419
Decrease / Increase in cash position 154'319 - - 61'654
Change in liquid funds 154'319 - 154'319 - 61'654 61'654
Total source of funds / application of funds 83'112'317 83'112'317 - 79'606'262 79'606'262 -

Notes to the consolidated financial statement
1. Information on business activities and number of employees
General information
Mercantil Bank (Schweiz) AG, until January 27, 2000,
operating under the name BMS Finanz AG, was
incorporated in May 1988 in Zurich. Its activities in the
areas of trade finance, private banking and fiduciary
transactions are focused on Latin America and
complemented by the banking activities of its wholly
owned subsidiaries Mercantil Bank & Trust Ltd., Grand
Cayman and MBS Advisory Services Ltd., British
Virgin Island.
It is intended to continue intensifying the expansion of
the private banking activities for the clientele of the
Grupo Mercantil Servicios Financieros (MSF). For this,
the group continues to invest in its banking software
and electronic banking facilities to support and
enhance the range of services offered to its customers.
It is also intended to continue developing the traditional
trade finance activities between Europe, Asia and Latin
America.
Balance Sheet transactions
Short-term financial investments with European banks
and trade financing for Latin American banks as well
as short-term lending to Latin American and US
corporate borrowers, largely related to preliminary and
supplementary trade financing, represent the major
assets of the group. Investments in securities of Latin
American and European borrowers complement the
group’s balance sheet business. Exposures with
maturities of over one year are entered but limited to
the group’s net equity.
Funding is obtained through customer deposits and
also through credit lines from major European banks.
Income from commissions and services
Income from commissions and services results mainly
from letter of credit transactions as well as from the
issuance of guarantees, from custody fees, brokerage
and other service fees related to fiduciary investments
of private customers.
Other activities
For investment and also for liquidity purposes, the
group maintains an investment portfolio consisting
mainly of fixed income securities of Latin American and
European borrowers.
Risk Control
The Board of Directors discussed during its meeting as
of February 3, 2009 the relevant risks the Group is
facing. Relevant risks are market, liquidity, credit,
operational and other risks. The basis for the
assessment of the risks was the business rationale
and strategy of the business generating the risks, the
risk appetite of the group and the nature of the risk, its
magnitude of a potential misstatement and the
likelihood of the risk occurring. Additionally, the
predefined risk reducing measures and the internal
controls (including financial reporting) were included in
the evaluation.
The Board of Directors took also into consideration the
monitoring of internal controls, the correct treatment of
the risk recognition and the valuation effects of
relevant risks on the financial reporting.
For detailed information regarding risk management
we refer to the explanations below.
Risk Management
The analysis and control of risks is performed in close
cooperation with the Risk Management Group of our
parent company (MSF) in Caracas.
Credit approval is based on requirements as to quality,
collaterals, limits and credit authority as laid down in
the internal risk policy. All credit risk positions,
including those from derivative instruments, are limited
and monitored continuously by a credit line system
based on counterparty and country risk.
Foreign exposures are entered into and monitored in
compliance with the internal risk policy. The
assessment procedure, except for exposures in
industrialized countries (Category 1), where country
risk is negligible, is based on the rating of the
Interagency Country Exposure Committee (ICERC)
and on the Group’s own internal rating system. The
internal evaluation is based on economic trends and
political and social developments and derived from
various group-internal and external sources
(Categories 2 – 6).

The risk provisioning requirements for country risk and
counterparty risk are calculated independently on the
basis of an internal rating process.
Liquidity and interest rate risks are monitored and
managed on a consolidated basis.
Foreign exchange risks are to a large extent restricted
by internal limits for open currency positions.
Derivative financial instruments are used exclusively to
hedge open foreign exchange positions and interest
rate risks.
When trading securities for customers, the group does
not engage in open positions from which market risks
could arise.
All other operating risks, especially those related to the
internal organization and information systems, are
monitored through internal policies and directives.
The Board of Directors and Senior Management are
regularly informed of the risks related to asset value,
financial position, liquidity, earnings and operations
through a management information system.
Outsourcing
Mercantil Bank (Schweiz) AG has outsourced the
operation of its banking system to PriBaSys AG in
Zurich and the operation of SWIFT and SIC to Biveroni
Batschelet Partners AG in Baden. These outsourcing
arrangements were set up under detailed Service
Level Agreements according to the regulations of the
Swiss Financial Market Supervisory Authority (FINMA).
All personnel of the service providers are placed under
the group secrecy act, which safeguards the
requirements of confidentiality.
Personnel
The group employed 31 persons including part-time
employees. It also receives support from the head
office and affiliates in areas such as internal audit, loan
review, IT, and credit and country risk analysis.

2. Accounting and valuation principles
General principles
The Group’s accounting and valuation principles
comply with the Swiss Code of Obligations, the Bank
Law, and guidelines of the Swiss Financial Market
Supervisory Authority (FINMA).
Consolidation principles
Besides the figures of Mercantil Bank (Schweiz) AG,
the consolidated financial statements include the
financial statements of Mercantil Bank and Trust Ltd,
Grand Cayman and MBS Advisory Services Ltd.,
British Virgin Islands which are fully consolidated.
The capital is consolidated using the purchase method,
i.e. at the time of acquisition.
Upon elimination of intercompany transactions, the
assets, liabilities, income and expenses of the
subsidiaries are included in the relevant line items in
the consolidated financial statements.
Translation differences resulting from the consolidation
are included in the line item “currency translation
differences”, which is part of the capital resources.
The consolidated financial statements reflect a true
and fair view of the net assets as well as of profitability
and the financial situation.
Accounting and booking of transactions
All transactions are recorded in the Group’s balance
sheet on a trade date basis, except for forward
transactions, which are reported from the trade date as
off-balance sheet items and from the settlement date in
the balance sheet. All transactions are valued from the
trade date onward.
Foreign currency translation
Transactions in foreign currencies are translated at
daily exchange rates. Foreign currency positions, with
the exception of participations, are converted at the
exchange rates prevailing at the year-end closing date.
Resulting conversion profits and losses are included in
the income statement. Participations are valued at the
exchange rates prevailing at the time of the purchase.
In the event of a decline in the value of such an
investment, giving due account also to the fluctuation
of exchange rates, a valuation adjustment is made.
Assets and liabilities of group companies are
translated using the exchange rate as at the balance
sheet date, and income and expenses at the average
exchange rate of the year. The difference arising from
the use of different exchange rates is directly
recognized in capital resources and disclosed as
currency translation difference.
The following exchange rates were used as at the
balance sheet date (major currencies):
2008 2007
USD 1.0597 1.1248
EUR 1.4880 1.6573
The balance sheet of the subsidiaries carrying its
books in USD was translated using the above
mentioned exchange rate as at the balance sheet date,
and the income statement was translated using the
average rate for the year of 1.0822/USD (2007: 1.20).
General valuation principles
Each item reflected in the balance sheet is valued
individually.
Cash, Due from Money Market Instruments, Due
from banks, Deposits
They are stated at their nominal value, or at historical
cost, less specific valuation adjustments for doubtful
receivables. Money market instruments are adjusted
for discounts. Unearned discounts on money market
instruments are accrued over their life within the
corresponding balance sheet item.
Due from customers
Doubtful receivables, i.e. loans for which it is unlikely
that the customer will be able to comply with its future
obligations, are valued individually and the impairment
of value is covered by a specific provision. Off-balance
sheet transactions, such as firm commitments,
guarantees and derivative financial instruments are
also included in this valuation. Loans are classified as
impaired at the latest when a borrower is in arrears
with payments of capital and/or interest for a period of
over 90 days. Interests in arrears for a period of over
90 days are considered overdue. Overdue interest and
interest of which collection is considered at risk are not
reflected as income but directly allocated to valuation
adjustments and provisions. Loans are placed on a
non-accrual status when the collectibility of their
interest is considered doubtful to the extent that an
accrual would be imprudent.

The amount of the impairment is measured by the
difference between the book value of the loan and the
estimated collectible amount, considering the
counterparty risk and the net value from the execution
of any collateral. If the process of execution is
expected to take longer than a year, then a present
value calculation is made of the expected cash flows to
be generated from the execution process. Specific
provisions are deducted directly from the
corresponding asset item.
Loans that are believed to be entirely or partially
uncollectible or for which the group consents to their
remission, are charged off against the provision for
loan losses. Recoveries of previously charged-off
amounts are directly credited to the provision for loan
losses.
A general provision for loan losses is made, based on
set rates per credit rating category, to cover for not yet
recognizable loan loss risks inherent in the credit
portfolio.
Doubtful receivables are classified again at full value if
payments of outstanding capital and interest are
resumed according to the contractual terms and also
credit standing criteria are fulfilled.
Financial investments
Fixed income securities held as available for sale are
valued at the lower of cost or market. The net balances
of value adjustments are made through “Other
Ordinary Income” or “Other Ordinary Expense”,
respectively. Write-ups are recognized up to the
acquisition costs, provided the market value which had
fallen below the acquisition cost recovers again. Such
value adjustment is recognized as described above.
Debt securities acquired with the intention to hold them
to maturity are recorded using the accrual method, i.e.
premiums or discounts are accrued over their
remaining life. Interest-related gains or losses from
sale before maturity or prepayment are deferred and
accrued over the remaining life, i.e., until the original
maturity. Value reductions or subsequent increases,
resulting from credit rating are treated as “available for
sale” in the income statement.
Buildings and participations acquired from the credit
business earmarked for disposal are registered as
financial investments and valued at the lower of cost or
market, i.e. at the lower of acquisition cost or
liquidation value.
Other fixed assets / Software
Other fixed assets and Software are stated at cost plus
value-creating investments less depreciation computed
on a straight line basis over their expected useful life –
of 3 years for software, IT and communication
systems, 5 years for furniture, and installations in new
premises over the duration of the lease contract.
Valuation adjustments and provisions
Specific valuation adjustments and provisions are
created for all recognizable risks both on and offbalance
sheet. Valuation adjustments and provisions
which are no longer required in the reporting period are
reversed affecting income.
Specific valuation adjustments and provisions are
directly deducted from the corresponding asset item.
General provisions for default risks as well as other
risks are recorded under this balance sheet position.
Employee benefit obligation
The group maintains two defined contribution pension
plans for its employees in Switzerland. The group
bears the expenses of the pension plans of all its employees
as well as their survivors in accordance with
the Swiss social security law. The benefit obligations
as well as the coverage capital are disincorporated into
legally independent pension funds or foundations of
insurance companies. The organization, management
and financing of the pension plans conform to the legal
regulations, to the articles of the funds as well as to
current pension regulations.
For each pension plan the group has to assess, according
to Swiss GAAP FER 16, if a possible credit or
debit balance of a plan can result in economical gains
or losses. The financial statement of the pension fund
provides the basis for the annual assessment.
The group records its contributions as employer in
“personnel expenses” in the same period in which the
contributions are paid.
Taxes
Tax expenditure is calculated on basis of the actual
profit of the individual group companies.
Contingent liabilities, irrevocable commitments
Contingent liabilities and irrevocable commitments are
stated at their nominal value. Provisions for recognizeable
risks are created and recorded under “valuation
adjustments and provisions” on the liability side.
Derivative financial instruments
Derivative financial instruments are recorded at
nominal value in the off-balance sheet.
Gains or losses arising from hedge instruments are
reflected in the same income item as that of the
hedged underlying transaction.

3. Information on the Balance sheet
3.1 Listing of collateral of loans and off-balance sheet transactions
in CHF 1000 Type of collateral
Total
Loans
Mortgage collateral
Other
collateral
Without
collateral
Due from customers - 43'109 63'141 106'250
Total loans 31.12.2008 - 43'109 63'141 106'250
Previous year 20'240
Off-balance sheet transactions
29'940 31'748 81'928
Contingent liabilities - 3'872 658 4'530
Irrevocable commitments - - 590 590
Total off-balance sheet transactions 31.12.2008 - 3'872 1'248 5'120
Previous year - 11'830 779 12'609
in CHF 1000 Gross
outstanding
Doubtful loans as per 31.12.2008 6'464
Previous year 148
3.2 Financial investments
in CHF 1000
Estimated
recovery amount
of collaterals
Net
outstanding
Specific
provision
4'769 1'695 588
- 148 148
Book value Fair value
31.12.2008 31.12.2007 31.12.2008 31.12.2007
Debt securities 12'873 2'942 12'253 2'942
- of which valued at accrual method 12'873 2'942 12'253 2'942
- of which valued at lower of cost or market - - - -
Shares 747 834 747 835
Total financial investments 13'620 3'776 13'000 3'777
3.3 Fixed assets
in CHF 1000 Historical Accumula- Book value
Fixed assets
Other fixed assets 2'176 1'037
Software 2'613 1'684
Total fixed assets 4'789 2'721
Cost ted depre- previous Invest- Disinvest- Depreciation/ Book Value
ciation year ments ment Write-offs 31.12.2008
1'139 50
929 466
2'068 516
- 261 928
- 546 849
- 807 1'777
Fire insurance value of other fixed assets 970
2008

3.4 Other Assets and Other Liabilities
in CHF 1000
Other
Assets
Replacement value from derivative financial
instruments
Contracts as own trader
- Trading position 335
- Balance sheet structure management 9'372
Total derivative financial instruments 9'707
Other
Liabilities
Other
Assets
741
572
- 7'002
741
7'574
Other
Liabilities
Indirect Taxes 1
7
- 45
Sundry accounts - - - -
Other assets and liabilities - 173
- 207
Total other assets and other liabilities 9'708
3.5 Disclosure of liabilities to own pension plans
31.12.2008 31.12.2007
The group’s employees are entitled to a legally independent personnel pension fund with two different plans. One plan covers
the obligatory benefits according to the Swiss pension fund law, while the second plan covers all the non-obligatory benefits.
Both plans are defined contribution plans. As in the previous year, the group had no further obligations towards these pension
plans and there were no reserves from employer’s contributions.
The group’s employees are insured at a collective foundation for pension services in the scope of an affiliation agreement. The
contracts cover all retirement, invalidity and death benefits. A possible shortage of the pension fund, causing a future liability for
the group, is covered by existing reserves.
3.6 Valuation adjustments and provisions, reserves for general banking risks
in CHF 1000 Balance
previous year
Valuation adjustments and
provisions for credit and
country risks 3'109
Specific
usage
-148
Recoveries,
doubtful interest,
currency
differences
-103
921
New creation
charged to
income
statement
601
7'574
Reversals
credited to
income
-601
612
-
612
864
Balance
current year
Valuation adjustments and
provisions for investments - - - - - -
Other Provisions (operating loss) - - - - - -
Total valuation adjustments and
provisions 3'109
less: set-offs with investments
Total valuation adjustments and
-148
provisions as of balance sheet 2'961
-148
148
-103
10
601
-599
-601
2'858
2'858
-588
2'270

3.7 Schedule of share capital and disclosure of shareholders
in CHF 1000
Capital structure
Nominal
amount
Shareholder's equity 45'500
Number of
shares
45'500
Capital with
dividend rights
45'500
Nominal
amount
45'500
Number of
shares
45'500
Capital with
dividend rights
Significant shareholders and shareholder groups
with voting rights
31.12.2008 31.12.2007
Nominal Share in % Nominal Share in %
Holding Mercantil Internacional, C.A., Caracas, Venezuela 45'500
100% 45'500
100%
Shareholder of Holding Mercantil Internacional, C.A.:
Mercantil Servicios Financieros, C.A., Caracas, Venezuela 45'500
31.12.2008 31.12.2007
100% 45'500
Mercantil Servicios Financieros (MSF) is a financial holding registered on the Caracas Stock Exchange. The capital structure of MSF
is comprised of A (58%) and B (42%) shares, with B shares having limited voting rights. Its shares are held primarily by Venezuelan
investors. Approximately 39% of the B shares are owned through an American Depositary Receipt (ADR) program, therefore MSF does
not have information who the holders of the ADR's are. Shareholders with ownership of over 5%, as known to MSF are:
- Vadesa Group (4.1% A shares; 15.7% B shares); 9.0% participation
- Gustavo J. Vollmer Group (11.1% A shares; 4.6% B shares); 8.4% participation
- Travieso Sanchez Group (7.6% A shares; 3.4% B shares); 5.8% participation
- Altamis B.V. (9.4% A shares; 0.3% B shares); 5.6% participation
- Gustavo A. Marturet Group (8.3% A shares; 1.1% B shares); 5.2% participation
45'500
100%

3.8 Statement of changes in shareholder's equity
in CHF 1000 31.12.2008 31.12.2007
Shareholder's equity at beginning of current year
Share capital 45'500 33'500
Capital Reserves 200 169
Retained earnings (incl. Currency translation differences) 8'971 7'374
Consolidated net profit 1'799 2'437
Total shareholder's equity at beginning of current year (before profit distribution) 56'470 43'480
+ Capital increase - 12'000
- Capital increase costs - -
+ Consolidated net profit for the year 668 1'799
+ Currency translation adjustments -571 -809
Total shareholder's equity at end of current year (before profit distribution) 56'567 56'470
Thereof:
Share capital 45'500 45'500
Capital Reserves 230 200
Retained earnings (incl. currency translation differences) 10'169 8'971
Consolidated net profit 668 1'799
On the basis of the legal provision the capital reserves may not be distributed.

3.9 Maturity structure of current assets, financial investments and liabilities
in CHF 1000
Current assets and financial investments
at sight redeemable
by
notice
within
3 months
within
3-12
months
within
1-5 years
after
5 years
Liquid funds 225 - - - - - 225
Money market instruments - - - - - - -
Due from Banks 46'994 42'854 89'953 41'010 - - 220'811
Due from Customers 6'974 - 58'326 38'316 2'634 - 106'250
Financial investments
Total current assets and
3 - 3'726 2'955 1'804 5'132 13'620
financial investments 31.12.2008
54'196 42'854 152'005 82'281 4'438 5'132 340'906
Previous year 24'327 640
Current liabilities
209'118 110'351 21'845 3'172
Total
369'453
Due to banks 168 - 3'901 - - - 4'069
Due to customers, other 62'675 10'682
Total current liabilities 31.12.2008 62'843 10'682
Previous year 45'075 6'609
Maturity
152'834 63'504 108 - 289'803
156'735 63'504 108 - 293'872
205'684 60'057 1'260 - 318'685
3.10 Disclosure of amounts due from and due to affiliated companies as well as
loans and exposures to directors and senior executives
in CHF 1000 31.12.2008 31.12.2007
Due from affiliated companies 32'321
Due to affiliated companies 175
Loans to directors and senior executives 19
Transactions with related parties
Transactions with related parties such as securities transactions, international payments, placement of funds and deposits
are made under conditions as they would apply with third parties.
18'689
127
70

3.11 Balance sheet by domestic and foreign origin (by domicile)
in CHF 1000
Assets
Domestic Foreign Domestic Foreign
Liquid Funds 225 - 379 -
Money market instruments - - 4'621 56'376
Due from banks 23'406 197'405 12'875 209'498
Due from customers 1'454 104'796 1'789 80'139
Financial investments 1
13'619 1 3'775
Fixed assets 1'777 - 2'068 -
Accrued income and prepaid expenses 929 2'315 696 2'294
Other assets 250 9'458 571 7'003
Total assets 28'042 327'593 23'000 359'085
Liabilities
31.12.2008 31.12.2007
Due to banks - 4'069 4'851 6'356
Due to customers, other 550 289'253 317 307'161
Accrued expenses and deferred income 449 1'556 570 2'535
Other liabilities 736 185 864 -
Valuation adjustments and provisions 1'154 1'116 1'214 1'747
Share capital 45'500 - 45'500 -
Legal reserves 230 - 200 -
Retained earnings (losses) 1'384 8'785 847 8'124
Consolidated net profit (loss) for the year 42 626 573 1'226
Total liabilities 50'045 305'590 54'936 327'149

3.12.1 Geographical analysis of assets (by domicile)
in CHF 1000
31.12.2008 31.12.2007
Amount in % Amount in %
Europe 102'940 28.9% 117'577 30.8%
Switzerland 28'042 7.9% 23'002 6.0%
Other west European countries 74'898 21.1% 94'575 24.8%
North-America 41'328 11.6% 77'474 20.2%
Latin-America 211'220 59.5% 181'411 47.5%
Argentina 8'928 2.5% - 0.0%
Bahamas - 0.0% 5'401 1.4%
Brazil 44'961 12.6% 33'407 8.7%
Cayman Islands 2'334 0.7% 2'409 0.6%
Chile 7'736 2.2% 15'747 4.1%
Colombia 5'284 1.5% 19'001 5.0%
Costa Rica 20'611 5.8% 9'730 2.5%
Dominican Republic 5'373 1.5% 5'624 1.5%
Ecuador 1'060 0.3% 1'146 0.3%
El Salvador 10'809 3.0% 7'255 1.9%
Guatemala 14'806 4.2% 17'685 4.6%
Mexico 19'903 5.6% 19'294 5.0%
Panama 6'171 1.7% 8'184 2.1%
Peru 31'719 8.9% 14'378 3.8%
St. Lucia 22 0.0% - 0.0%
Trinidad and Tobago 2'967 0.8% - 0.0%
Venezuela 26'323 7.6% 16'940 4.6%
Virgin Islands (British) 2'213 0.6% 1'470 0.4%
Virgin Islands (USA) - 0.0% 3'740 1.0%
Other 147 0.0% 5'623 1.5%
Total assets 355'635 100.0% 382'085 100.0%

3.12.2 Breakdown of exposure by country of risk and by rating categories
in CHF 1000
31.12.2008 31.12.2007
Amount in % Amount in %
Category 1 168'186 46.6% 210'301 53.3%
Austria - - 8'784 2.2%
Belgium 2 - 3 -
Canada - - 6'186 1.6%
France - - 13'802 3.5%
Germany 49'063 13.6% 33'406 8.5%
Great Britain 4'811 1.3% 768 0.2%
Italy 5'033 1.4% 9'198 2.3%
Luxembourg 950 0.3% 13'099 3.3%
Netherlands 4'769 1.3% - -
Norway - - 5'622 1.4%
Spain 26'873 7.4% 12'553 3.2%
Sweden 1'491 0.4% 5'612 1.4%
Switzerland 29'496 8.2% 33'189 8.4%
USA 42'051 11.7% 58'988 15.0%
Virgin Islands (British) 3'647 1.0% 9'091 2.3%
Category 2 34'314 9.5% 42'919 10.9%
Chile 7'736 2.1% 15'747 4.0%
Mexico 23'611 6.6% 21'951 5.6%
Russia - - 5'221 1.3%
Trinidad and Tobago 2'967 0.8% - -
Category 3 89'871 24.9% 82'053 20.7%
Brazil 40'192 11.1% 47'356 12.0%
Costa Rica 10'756 3.0% 9'730 2.5%
Panama 6'992 1.9% 10'027 2.5%
Peru 31'719 8.8% 14'369 3.6%
South Africa 212 0.1% 571 0.1%
Category 4 19'091 5.3% 26'256 6.7%
Colombia 5'845 1.6% 19'001 4.9%
El Salvador 13'246 3.7% 7'255 1.8%
Category 5 and 6 49'293 13.7% 33'165 8.4%
Cayman Islands 6'189 1.7% 112 -
Dominican Republic 5'373 1.5% - -
Guatemala 14'806 4.1% 17'675 4.5%
Venezuela 22'925 6.4% 15'132 3.8%
Others - - 246 0.1%
Total 360'755 100.0% 394'694 100.0%

3.13 Balance sheet by currencies
in CHF 1000
Assets
CHF EUR USD other
Liquid Funds 167 32 26 -
Money market instruments - - - -
Due from banks 217 90'347 127'943 2'304
Due from customers - 2'357 103'891 2
Financial investments 1
12'559 1'060 -
Fixed assets 1'777 - - -
Accrued income and prepaid expenses 262 624 2'358 -
Other assets 15 253 9'440 -
Total balance sheet effective assets 2'439 106'172 244'718 2'306
Claims from transactions related to forex spot,
forward and option transactions 48'935 16'071 11'268 262
Total assets 51'374 122'243 255'986 2'568
Liabilities
Currencies
Due to banks - 11 4'058 -
Due to customers, other 875 111'764 174'923 2'241
Accrued expenses and deferred income 384 833 788 -
Other liabilities 180 315 426 -
Valuation adjustments and provisions 1'154 - 1'116 -
Share capital 45'500 - - -
Legal reserves 230 - - -
Retained earnings (losses) 1'384 1 8'784 -
Consolidated net profit for the year 42 - 626 -
Total balance sheet effective liabilities 49'749 112'924 190'721 2'241
Claims from transactions related to forex spot,
forward and option transactions 2'661 9'626 63'986 263
Total liabilities 52'410 122'550 254'707 2'504
Net position per currency -1'036 -307 1'279 64

4. Information on Off-Balance Sheet Transactions
4.1 Analysis of contingent liabilities
in CHF 1000 31.12.2008 31.12.2007 Change
Guarantees to secure credits and similar 4'530
12'191
Guarantees for warranty and similar - - -
Irrevocable commitments 590
Total contingent liabilities 5'120
4.2 Outstanding derivative instruments
in CHF 1000 positive
replacement value
Foreign exchange
Forward contracts with maturity under 1 year 9'707
- thereof trading instruments 335
- thereof hedging instruments 9'372
Total 31.12.2008 9'707
Previous year 7'574
- thereof trading instruments 572
- thereof hedging instruments 7'002
4.3 Analysis of fiduciary transactions
418
12'609
negative
replacement value
-7'661
172
-7'489
Contract
Volume
741
64'647
741
16'709
- 47'938
741
64'647
612
73'978
612
26'040
- 47'938
in CHF 1000 31.12.2008 31.12.2007 Change
Fiduciary placements with third party banks 21'886
Fiduciary placements with affiliated banks 64'027
Total fiduciary transactions 85'913
14'483
41'351
55'834
7'403
22'676
30'079

5. Information on the Income Statement
5.1 Income from trading activities
in CHF 1000 31.12.2008 31.12.2007 Change
Foreign exchange 941 187 754
Total trading income 941 187 754
5.2 Personnel expenses
in CHF 1000 31.12.2008 31.12.2007 Change
Salaries and allowances 3'869 3'457 412
Contributions to pension funds 278 263 15
Social security contributions 327 307 20
Other personnel expenses 117 128 -11
Total personnel expenses 4'591 4'155 436
5.3 Other operating expenses
in CHF 1000 31.12.2008 31.12.2007 Change
Expenses for premises 299 273 26
Expenses for IT, machinery, furniture
vehicles and other equipment 1'561 1'213 348
Other operating expenses 1'560 1'641 -81
Total other operating expenses 3'420 3'127 293
5.4 Tax expenses
Tax expenditure includes current income and annual capital tax and is calculated on the actual income
(after offsetting potential tax losses) as well as on the actual taxable capital.
5.5 Comments to extraordinary income and expenses, to significant reversals
of general banking risks and of freed valuation adjustments and reserves
The extraordinary income of TCHF 650 resulted from the following:
- Reversal of general banking risk provision of TCHF 599.
- Recovery of a written off position of TCHF 51.

6. Disclosure according to capital adequacy ordinance
6.1 Information on eligible capital and capital requirements
in CHF 1000 31.12.2008
Eligible capital 56'567
Total amount of eligible capital 56'567
Credit risk 14'807
Non-Counterparty risks 889
Market risks 1'138
Operational risks 1'311
Value adjustments and provisions recognised as liabilities -136
Total amount of capital requirements 18'009

MERCANTIL BANK (SCHWEIZ) AG
ZURICH
Report of the Statutory Auditors
to the General Meeting of
Shareholders for the year 2008
14 April 2009/00593800001/12/SMN/HEX
With offices in Aarau, Basel, Berne, Chur, Geneva, Lausanne, Lugano, Lucerne, Neuchâtel, Sitten, St. Gallen, Thun, Winterthur, Zug and
Zurich, PricewaterhouseCoopers AG is a provider of auditing services and tax, legal and business consultancy services.
PricewaterhouseCoopers AG is a member of a global network of companies that are legally independent of one another; the network is
represented in some 150 countries throughout the world.

Report of the statutory auditors
to the general meeting of
MERCANTIL BANK (SCHWEIZ) AG
ZURICH
Report of the statutory auditor on the financial statements
PricewaterhouseCoopers AG
Birchstrasse 160
8050 Zürich
Phone +41 58 792 44 00
Fax +41 58 792 44 10
www.pwc.ch
As statutory auditor, we have audited the financial statements of MERCANTIL BANK (SCHWEIZ)
AG, which comprise the balance sheet, income statement and notes, for the year ended
31 December 2008.
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance
with the requirements of Swiss law and the company’s articles of incorporation. This responsibility
includes designing, implementing and maintaining an internal control system relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error. The Board of Directors is further responsible for 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 Swiss law and Swiss Auditing Standards. Those standards
require that we 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 judgment,
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 the internal control
system relevant to the entity’s preparation 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 system. An audit also includes
evaluating the appropriateness of the accounting policies used and the reasonableness of
accounting estimates made, 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.
Opinion
In our opinion, the financial statements for the year ended 31 December 2008 comply with Swiss
law and the company’s articles of incorporation.

Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act
(AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances
incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we
confirm that an internal control system exists which has been designed for the preparation of
financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law
and the company’s articles of incorporation. We recommend that the financial statements
submitted to you be approved.
PricewaterhouseCoopers AG
Martin Schmidt Alex Henzi
Audit expert
Auditor in charge
Zürich, 14 April 2009
Enclosures:
- Financial statements (balance sheet, income statement and notes)
- Proposed appropriation of the available earnings

Financial Statement
Balance Sheet
in CHF 31.12.2008 31.12.2007 Change
Assets
Liquid funds 224'893 379'212 -154'319
Money market instruments - 4'809'323 -4'809'323
Due from banks 51'171'933 25'457'295 25'714'638
Due from customers 36'138'161 50'056'593 -13'918'432
Financial investments 2'855'161 833'531 2'021'630
Participations 19'433'002 19'433'002 -
Fixed assets 1'777'082 2'067'545 -290'463
Accrued income and prepaid expenses 1'116'458 847'599 268'859
Other assets 9'937'312 7'574'440 2'362'872
Total assets 122'654'002 111'458'540 11'195'462
Total due from non-consolidated holdings and shareholder 9'622'345 7'210'236 2'412'109
Liabilities and shareholder's equity
Due to banks 4'214'056 12'135'652 -7'921'596
Due to customers, other 64'225'470 45'923'025 18'302'445
Accrued expenses and deferred income 431'405 569'739 -138'334
Other liabilities 5'472'323 4'501'634 970'689
Valuation adjustments and provisions 1'154'335 1'214'252 -59'917
Share capital 45'500'000 45'500'000 -
Legal reserves 230'000 200'000 30'000
Retained earnings 1'384'238 841'175 543'063
Net profit 42'175 573'063 -530'888
Total liabilities and shareholder's equity 122'654'002 111'458'540 11'195'462
Total due to non-consolidated holdings and shareholder 145'290 928'406 -783'116
Off-Balance Sheet Transactions
Contingent liabilities 4'530'391 12'190'517 -7'660'126
Irrevocable commitments 590'000 418'000 172'000
Derivative instruments
- contract value 69'925'349 73'978'266 -4'052'917
- positive replacement value 9'935'611 7'574'162 2'361'449
- negative replacement value 5'292'804 4'249'228 1'043'576
Fiduciary transactions 374'841'733 355'682'698 19'159'035

Income Statement
in CHF 2008 2007 Change
Ordinary operating income and expense
Interest income
Interest and discount income 4'136'134 5'118'312 -982'178
Interest and dividend income on financial investments 250'967 149'515 101'452
Interest expense -686'832 -873'031 186'199
Net interest income 3'700'269 4'394'796 -694'527
Income from commission and services
Commission income on lending activities 246'192 331'564 -85'372
Commission income on asset management 2'024'473 1'686'688 337'785
Commission income on other services 999'075 756'860 242'215
Commission expense -132'273 -96'351 -35'922
Net commission income 3'137'467 2'678'761 458'706
Income from trading operations 843'759 197'625 646'134
Other ordinary income
Participation income 633'960 568'400 65'560
Other ordinary income 2'120 1'818 302
Other ordinary expense -195'578 - -195'578
Total other ordinary income 440'502 570'218 -129'716
Total operating income 8'121'997 7'841'400 280'597
Operating expenses
Personnel expenses -4'591'269 -4'154'724 -436'545
Other operating expenses -2'631'187 -2'503'898 -127'289
Total operating expenses -7'222'456 -6'658'622 -563'834
Gross profit 899'541 1'182'778 -283'237
Net income for the year
Gross profit 899'541 1'182'778 -283'237
Depreciation and write-offs of non-current assets -807'164 -535'856 -271'308
Valuation adjustments, provisions and losses -77'692 -9'390 -68'302
Subtotal 14'685 637'532 -622'847
Extraordinary income 108'645 17'800 90'845
Extraordinary expenses - - -
Taxes -81'155 -82'269 1'114
Net income for the year 42'175 573'063 -530'888
Distribution of profit
Net profit for the year 42'175 573'063 -530'888
Retained profit brought forward 1'384'238 841'175 543'063
Balance sheet profit 1'426'413 1'414'238 12'175
Allocation of profit
Allocation to legal reserves -3'000 -30'000 27'000
Retained profit brought forward 1'423'413 1'384'238 39'175

Notes to the parent financial statement
1. Information on business activities and number of employees
General information
Mercantil Bank (Schweiz) AG, until January 27, 2000,
operating under the name BMS Finanz AG, was
incorporated in May 1988 in Zurich. Its activities in
the areas of trade finance, private banking and
fiduciary transactions are focused on Latin America
and complemented by the banking activities of its
wholly owned subsidiaries Mercantil Bank & Trust
Ltd., Grand Cayman and MBS Advisory Services
Ltd., British Virgin Island.
It is intended to continue intensifying the expansion
of the private banking activities for the clientele of the
Grupo Mercantil Servicios Financieros (MSF). For
this, the bank continues to invest in its banking
software and electronic banking facilities to support
and enhance the range of services offered to its
customers. It is also intended to continue developing
the traditional trade finance activities between
Europe, Asia and Latin America.
Balance Sheet transactions
Short-term financial investments with European
banks and trade financing for Latin American banks
as well as short-term lending to Latin American and
US corporate borrowers, largely related to
preliminary and supplementary trade financing,
represent the major assets of the bank. Investments
in securities of Latin American and European
borrowers complement the bank’s balance sheet
business. Exposures with maturities of over one year
are entered but limited to the bank’s net equity.
Funding is obtained through customer deposits and
also through credit lines from major European banks.
Income from commissions and services
Income from commissions and services results
mainly from letter of credit transactions as well as
from the issuance of guarantees, from custody fees,
brokerage and other service fees related to fiduciary
investments of private customers.
Other activities
For investment and also for liquidity purposes,
Mercantil Bank (Schweiz) AG maintains an investment
portfolio consisting mainly of fixed income
securities of Latin American and European
borrowers.
Risk Assessment
The Board of Directors discussed during its meeting
as of February 3, 2009 the relevant risks the bank is
facing. Relevant risks are market, liquidity, credit,
operational and other risks. The basis for the
assessment of the risks was the business rational
and strategy of the business generating the risks, the
risk appetite of the bank and the nature of the risk, its
magnitude of a potential misstatement and the
likelihood of the risk occurring. Additionally, the
predefined risk reducing measures and the internal
controls (including financial reporting) were included
in the evaluation.
The Board of Directors took also into consideration
the monitoring of internal controls, the correct
treatment of the risk recognition and the valuation
effects of relevant risks on the financial reporting.
For detailed information regarding risk management
we refer to the explanations below.
Risk Management
The analysis and control of risks is performed in
close cooperation with the Risk Management Group
of our parent company (MSF) in Caracas.
Credit approval is based on requirements as to
quality, collaterals, limits and credit authority as laid
down in the internal risk policy. All credit risk positions,
including those from derivative instruments,
are limited and monitored continuously by a credit
line system based on counterparty and country risk.
Foreign exposures are entered into and monitored in
compliance with the internal risk policy. The assessment
procedure, except for exposures in industrialized
countries (Category 1), where country risk is
negligible, is based on the rating of the Interagency
Country Exposure Committee (ICERC) and on the
Group’s own internal rating system. The internal evaluation
is based on economic trends and political and
social developments and derived from various groupinternal
and external sources (Categories 2 – 6).

The risk provisioning requirements for country risk
and counterparty risk are calculated independently
on the basis of an internal rating process.
Liquidity and interest rate risks are monitored and
managed on a consolidated basis.
Foreign exchange risks are to a large extent restricted
by internal limits for open currency positions.
Derivative financial instruments are used exclusively
to hedge open foreign exchange positions and
interest rate risks.
When trading securities for customers, Mercantil
Bank (Schweiz) AG does not engage in open
positions from which market risks could arise.
All other operating risks, especially those related to
the internal organization and information systems,
are monitored through internal policies and
directives.
The Board of Directors and Senior Management are
regularly informed of the risks related to asset value,
financial position, liquidity, earnings and operations
through a management information system.
Outsourcing
Mercantil Bank (Schweiz) AG has outsourced the
operation of its banking system to PriBaSys AG in
Zurich and the operation of SWIFT and SIC to
Biveroni Batschelet Partners AG in Baden. These
outsourcing arrangements were set up under detailed
Service Level Agreements according to the
regulations of the Swiss Financial Market
Supervisory Authority (FINMA). All personnel of the
service providers are placed under the bank secrecy
act, which safeguards the requirements of
confidentiality.
Personnel
Mercantil Bank (Schweiz) AG employed 31 persons
including part-time employees. It also receives
support from the head office and affiliates in areas
such as internal audit, loan review, IT, and credit and
country risk analysis.

2. Accounting and valuation principles
General principles
The Bank’s accounting and valuation principles
comply with the Swiss Code of Obligations, the Bank
Law, and guidelines of the Swiss Financial Market
Supervisory Authority (FINMA).
Accounting and booking of transactions
All transactions are recorded in the balance sheet on
a trade date basis, except for forward transactions,
which are reported from the trade date as off-balance
sheet items and from the settlement date in the
balance sheet. All transactions are valued from the
trade date onward.
Foreign currency translation
Transactions in foreign currencies are translated at
daily exchange rates. Foreign currency positions,
with the exception of participations, are converted at
the exchange rates prevailing at the year-end closing
date. Resulting conversion profits and losses are
included in the income statement. Participations are
valued at the exchange rates prevailing at the time of
the purchase. In the event of a decline in the value of
such an investment, giving due account also to the
fluctuation of exchange rates, a valuation adjustment
is made.
The following exchange rates were used as at the
balance sheet date (major currencies):
2008 2007
USD 1.0597 1.1248
EUR 1.4880 1.6573
General valuation principles
Each item reflected in the balance sheet is valued
individually.
Cash, Due from Money Market Instruments, Due
from banks, Deposits
They are stated at their nominal value, or at historical
cost, less specific valuation adjustments for doubtful
receivables. Money market instruments are adjusted
for discounts. Unearned discounts on money market
instruments are accrued over their life within the
corresponding balance sheet item.
Due from customers
Doubtful receivables, i.e. loans for which it is unlikely
that the customer will be able to comply with its future
obligations, are valued individually and the impairment
of value is covered by a specific provision.
Off-balance sheet transactions, such as firm
commitments, guaranties and derivative financial
instruments are also included in this valuation. Loans
are classified as impaired at the latest when a
borrower is in arrears with payments of capital and/or
interest for a period of over 90 days. Interests in
arrears for a period of over 90 days are considered
overdue. Overdue interest and interest of which
collection is considered at risk are not reflected as
income but directly allocated to valuation adjustments
and provisions. Loans are placed on a non-accrual
status when the collectibility of their interest is
considered doubtful to the extent that an accrual
would be imprudent.
The amount of the impairment is measured by the
difference between the book value of the loan and
the estimated collectible amount, considering the
counterparty risk and the net value from the
execution of any collateral. If the process of
execution is expected to take longer than a year,
then a present value calculation is made of the
expected cash flows to be generated from the
execution process. Specific provisions are deducted
directly from the corresponding asset item.
Loans that are believed to be entirely or partially
uncollectible or for which the bank consents to their
remission, are charged off against the provision for
loan losses. Recoveries of previously charged-off
amounts are directly credited to the provision for loan
losses.
A general provision for loan losses is made, based
on set rates per credit rating category, to cover for
not yet recognizable loan loss risks inherent in the
credit portfolio.
Doubtful receivables are classified again at full value
if payments of outstanding capital and interest are
resumed according to the contractual terms and also
credit standing criteria are fulfilled.

Financial investments
Fixed income securities held as available for sale are
valued at the lower of cost or market. The net
balances of value adjustments are made through
“Other Ordinary Income” or “Other Ordinary
Expense”, respectively. Write-ups are recognized up
to the acquisition costs, provided the market value
which had fallen below the acquisition cost recovers
again. Such value adjustment is recognized as
described above.
Debt securities acquired with the intention to hold
them to maturity are recorded using the accrual
method, i.e. premiums or discounts are accrued over
their remaining life. Interest-related gains or losses
from sale before maturity or prepayment are deferred
and accrued over the remaining life, i.e., until the
original maturity. Value reductions or subsequent
increases, resulting from credit rating are treated as
“available for sale” in the income statement .
Buildings and participations acquired from the credit
business earmarked for disposal are registered as
financial investments and valued at the lower of cost
or market, i.e. at the lower of acquisition cost or
liquidation value.
Investments in subsidiaries
The investments in subsidiaries are reflected at
historical cost in Swiss Francs.
Other fixed assets / Software
Other fixed assets and Software are stated at cost
plus value-creating investments less depreciation
computed on a straight line basis over their expected
useful life – of 3 years for software, IT and
communication systems, 5 years for furniture, and
installations in new premises over the duration of the
lease contract.
Valuation adjustments and provisions
Specific valuation adjustments and provisions are
created for all recognizable risks both on and offbalance
sheet. Valuation adjustments and provisions
which are no longer required in the reporting period
are reversed affecting income.
Specific valuation adjustments and provisions are
directly deducted from the corresponding asset item.
General provisions for default risks as well as other
risks are recorded under this balance sheet position.
Employee benefit obligation
Mercantil Bank (Schweiz) AG maintains two defined
contribution pension plans for its employees in
Switzerland. The bank bears the expenses of the
pension plans of all its employees as well as their
survivors in accordance with the Swiss social security
law. The benefit obligations as well as the coverage
capital are disincorporated into legally independent
pension funds or foundations of insurance
companies. The organization, management and
financing of the pension plans conform to the legal
regulations, to the articles of the funds as well as to
current pension regulations.
For each pension plan the bank has to assess,
according to Swiss GAAP FER 16, if a possible credit
or debit balance of a plan can result in economical
gains or losses. The financial statement of the
pension fund provides the basis for the annual
assessment.
The bank records its contributions as employer in
“personnel expenses” in the same period in which the
contributions are paid.
Taxes
Tax expenditure is calculated on basis of the actual
profit of the individual group companies.
Contingent liabilities, irrevocable commitments
Contingent liabilities and irrevocable commitments
are stated at their nominal value. Provisions for
recognizable risks are created and recorded under
“valuation adjustments and provisions” on the liability
side.
Derivative financial instruments
Derivative financial instruments are recorded at
nominal value in the off-balance sheet.
Gains or losses arising from hedge instruments are
reflected in the same income item as that of the
hedged underlying transaction.

3. Information on the Balance sheet
3.1 Disclosure of liabilities to own pension plans
The bank’s employees are entitled to a legally independent personnel pension fund with two different plans. One plan covers
the obligatory benefits according to the Swiss pension fund law, while the second plan covers all the non-obligatory benefits.
Both plans are defined contribution plans. As in the previous year, the bank had no further obligations towards these pension
plans and there were no reserves from employer’s contributions.
The bank’s employees are insured at a collective foundation for pension services in the scope of an affiliation agreement. The
contracts cover all retirement, invalidity and death benefits. A possible shortage of the pension fund, causing a future liability for
the bank, is covered by existing reserves.
3.2 Valuation adjustments and provisions, reserves for general banking risks
in CHF 1000 Balance
previous year
Valuation adjustments and
provisions for credit and
country risks 1'362
Specific
usage
-148
Change in
definition of
purpose, reclassification
Recoveries,
doubtful interest,
currency
differences
- -2
New creation
charged to
income
statement
60
Reversals
credited to
income
-60
Balance
current year
Valuation adjustments and
provisions for investments - - - - - - -
Other Provisions (operating loss) - - - - - - -
Total valuation adjustments and
provisions 1'362
less: set-offs with investments
Total valuation adjustments and
-148
provisions as of balance sheet 1'214
-148
Doubtful loans of CHF 1'166M are specifically provisioned with CHF 58M.
148
- -2
-58
60
-60
1'212
1'212
-58
1'154

3.3 Schedule of share capital and disclosure of shareholders
in CHF 1000
Capital structure
Nominal
amount
Shareholder's equity 45'500
Number of
shares
45'500
Capital with
dividend rights
45'500
Nominal
amount
45'500
Number of
shares
45'500
Capital with
dividend rights
Significant shareholders and shareholder groups
with voting rights
31.12.2008 31.12.2007
Nominal Share in % Nominal Share in %
Holding Mercantil Internacional, C.A., Caracas, Venezuela 45'500
100% 45'500
100%
Shareholder of Holding Mercantil Internacional, C.A.:
Mercantil Servicios Financieros, C.A., Caracas, Venezuela 45'500
31.12.2008 31.12.2007
100% 45'500
Mercantil Servicios Financieros (MSF) is a financial holding registered on the Caracas Stock Exchange. The capital structure of MSF
is comprised of A (58%) and B (42%) shares, with B shares having limited voting rights. Its shares are held primarily by Venezuelan
investors. Approximately 39% of the B shares are owned through an American Depositary Receipt (ADR) program, therefore MSF does
not have information who the holders of the ADR's are. Shareholders with ownership of over 5%, as known to MSF are:
- Vadesa Group (4.1% A shares; 15.7% B shares); 9.0% participation
- Gustavo J. Vollmer Group (11.1% A shares; 4.6% B shares); 8.4% participation
- Travieso Sanchez Group (7.6% A shares; 3.4% B shares); 5.8% participation
- Altamis B.V. (9.4% A shares; 0.3% B shares); 5.6% participation
- Gustavo A. Marturet Group (8.3% A shares; 1.1% B shares); 5.2% participation
3.4 Statement of changes in shareholder's equity
in CHF 1000 31.12.2008 31.12.2007
Shareholder's equity at beginning of current year
Share capital 45'500
Legal reserve 200
Retained earnings 1'414
Total shareholder's equity at beginning of current year (before profit distribution) 47'114
45'500
100%
33'500
169
872
34'541
+ Capital increase - 12'000
+ Net profit for the year 42
573
Total shareholder's equity at end of current year (before profit distribution) 47'156
Thereof:
Share capital 45'500
Legal reserve 230
Retained earnings 1'426
47'114
45'500
200
1'414

3.5 Disclosure of amounts due from and due to affiliated companies as well as
loans and exposures to directors and senior executives
in CHF 1000 31.12.2008 31.12.2007
Due from affiliated companies 10'886
Due to affiliated companies 168
Loans to directors and senior executives 19
Transactions with related parties
Transactions with related parties such as securities transactions, international payments, placement of funds and deposits
are made under conditions as they would apply with third parties.
5'035
120
70

3.6 Breakdown of exposure by country of risk and by rating categories
in CHF 1000
31.12.2008 31.12.2007
Amount in % Amount in %
Category 1 49'325
38.7% 69'979
Austria - - 2'486
Belgium 2
- 3
France - - 2'139
Germany 2'163
1.7% 7'218
Great Britain 1'103
0.9% 768
Italy 271
0.2% 2'900
Luxembourg 950
0.7% 1'198
Spain 69
0.1% 123
Switzerland 21'565
16.9% 15'818
Virgin Islands (British) 3'647
2.9% 9'155
USA 19'555
15.3% 28'171
Category 2 7'083
Chile 1'166
Mexico 3'480
Trinidad and Tobago 2'437
Category 3 14'987
Brazil 5'404
Costa Rica 1'166
Panama 2'647
Peru 5'558
South Africa 212
Category 4 2'999
Colombia 562
El Salvador 2'437
56.4%
2.0%
-
1.7%
5.8%
0.6%
2.3%
1.0%
0.1%
12.7%
7.4%
22.8%
5.5% 9'982
8.0%
0.9% - -
2.7% 9'982
8.0%
1.9% - -
11.7% 7'674
6.2%
4.2% 2'812
2.3%
0.9% 1'125
0.9%
2.1% 3'166
2.5%
4.3% - -
0.2% 571
0.5%
2.3% - 0.0%
0.4% - -
1.9% - -
Category 5 and 6 53'380
41.8% 36'433
29.4%
Cayman Islands 26'157
20.5% 19'605
15.9%
Dominican Republic 2'936
2.3% - -
Guatemala 2'861
2.2% 2'715
2.2%
Venezuela 21'426
16.8% 13'867
11.1%
Others - - 246
0.2%
Total 127'774
100.0% 124'068
100.0%

4. Information on Off-Balance Sheet Transactions
4.1 Outstanding derivative instruments
in CHF 1000 positive
replacement value
Foreign exchange
Forward contracts with maturity under 1 year 9'936
- thereof trading instruments 564
- thereof hedging instruments 9'372
Total 31.12.2008 9'936
Previous year 7'574
- thereof trading instruments 572
- thereof hedging instruments 7'002
4.2 Analysis of fiduciary transactions
negative
replacement value
5'293
741
4'552
5'293
4'249
612
3'637
Contract
Volume
69'925
21'987
47'938
69'925
73'978
26'040
47'938
in CHF 1000 31.12.2008 31.12.2007 Change
Fiduciary placements with third party banks 149'451
Fiduciary placements with affiliated banks 225'391
Total fiduciary transactions 374'842
94'367
261'316
355'683
55'084
-35'925
19'159

5. Information on the Income Statement
5.1 Income from trading activities
in CHF 1000 31.12.2008 31.12.2007 Change
Foreign exchange 844
Total income from trading operations 844
5.2 Tax expenses
Tax expenditure includes current income and annual capital tax and is calculated on the actual income
(after offsetting potential tax losses) as well as on the actual taxable capital.
5.3 Comments to extraordinary income and expenses, to significant reversals
of general banking risks and of freed valuation adjustments and reserves
The extraordinary income of TCHF 109 resulted from the following:
- Reversal of general banking risk provision of TCHF 58.
- Recovery of a written off position of TCHF 51.
198
198
646
646

Mercantil Bank (Schweiz) AG
Talacker 42,
CH-8001 Zurich, Switzerland
P.O. Box 9758
CH-8036 Zurich, Switzerland
Phone: 41 - 433 444 555 Master
Fax: 41 - 433 444 550
www.mercantilsuiza.com