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Annual Report 2014 Mercantil Banco Universal a subsidiary of Mercantil Servicios Financieros

The Mercantil Culture The guiding principles behind 90 years of service

On March 23, 1925 in Caracas, an important group of Venezuelan entrepreneurs founded the Banco Neerlando Venezolano. A year later, it changes its name to Banco Mercantil y Agrícola. Today, the Mercantil brand is well-known in Venezuela and internationally through the development of banking, insurance and wealth management businesses. Mercantil has experienced nine decades of sustained growth, while remaining committed to the betterment of the communities, where it has presence, its institutions, people, and more than five million customers. As part of this commitment, Mercantil has focused on introducing innovative technologies, generating employment opportunities, caring for the well-being and professional development of more than 9,500 employees, as well as supporting the communities and organizations involved in social development. Beyond the development of its multiple facilities, branches network, infrastructure and technology, Mercantil is its people, who embrace shared principles and values, which have remained unchanged, and represent a reference in the entrepreneurial performance of Mercantil. On the occasion of this 90th anniversary, we have decided to develop a document that present the Mercantil Culture and Commitment, which are not new ideas, but take part of the daily activities of all in Mercantil. These Culture has remaineded in time and represents the way we are, our guideline, our way of action and performance. This 2014 Annual Report, which is introduced at the Annual Shareholders Meeting on the 90th anniversary of the Mercantil foundation, presents the Culture and the Commitment that incorporate the guiding principles, which have been, and continue to be in the organization, and in addition summarizes the way Mercantil does business, widely recognized by clients, employees and related people. Mercantil Banco is a subsidiary of Mercantil Servicios Financieros, a financial service corporation, engaged in banking, insurance and wealth management businesses in Venezuela, with presence in nine countries in the Americas and Europe. Its shares are traded on the Caracas Stock Exchange and its ADR on the OTC markets of the United States of America. Its major subsidiaries include: Mercantil Banco Universal, Mercantil Seguros and Mercantil Merinvest in Venezuela, Mercantil Commercebank in the United States, Mercantil Bank (Panamá) in Panama, and Mercantil Bank (Schweiz) AG in Switzerland. Mercantil is one of the 1,000 largest companies in the world according to Forbes Magazine (2014).

Banco Universal

Annual Report 20 14

CONTENTS

Presentation 4 Financial Highligths 5 Board of Directors and Administration 6 Notice of Ordinary General Shareholder’s Meeting 7 Board of Directors’ Report 9 Financial Statements consolidated with Foreign Subsidiaries 24 Statutory Auditors’ Report 25 Financial Statements 26 Economic Climate 29 Strategic Positioning 31 Management Discussion and Analysis 35 Business Management Report 43 Quality of Service and Operating Efficiency 53 Human Resources 57 Risk Management 59 Credit Ratings 65 Prevention and Control of Money Laundering and Terrorism Financing 67 Internal Auditing 69 Social Commitment 71 Corporate Governance 75 Awards and Acknowledgments 81 International Offices and Corporate Contacts 83 Mercantil Banco Universal 90 years at the service of Venezuela 85 Banco Universal

Mercantil Banco Universal, founded in 1925, with 89 years of financial activity, is one of Venezuela's leading institutions in the financial system with Bs 24,256 million (US$ 3,860 million) 1 in equity. It is the main subsidiary of Mercantil Servicios Financieros in Venezuela and the country’s foremost and most comprehensive financial services provider with presence in 9 countries in the Americas and Europe. Mercantil Banco Universal offers its customer base a wide range of quality financial products and services in different market segments, thereby reaffirming its mission to “ fulfill the needs of our customers by providing excellent financial products and services, attain the aspirations of our employees, support the development of the communities where Mercantil has presence and add value for our shareholders through a long term outlook”. At December 31, 2014, Mercantil Banco Universal ranks as the leading bank in the private financial system in terms of loans to the tourism, manufacturing and agricultural sectors, with market shares of 14.2 %, 15.3 % and 15.3 % respectively. It is also the first bank in Venezuela in terms of savings deposits with 20.7 % of the domestic market. Mercantil Banco Universal’s products are offered mainly in Venezuela, through a nationwide network of channels which at December 31, 2014 consisted of 265 branches, 1,192 ATMs of which 158 are multifunctional, and 61,004 points of sales, made up of physical, merchant and e-commerce points of sale, in addition to round-the clock access to telephone and online banking. At the close of the year the Mercantil Aliado network serves the banking needs of the masses through 247 correspondent service desks and trading points in communities across the length and breadth of Venezuela. To complement these services and assist its customers overseas, Mercantil Banco Universal has one agency in the United States (Coral Gables, Florida), a branch in Curaçao, and five representative offices located in Bogota, Lima, Mexico City, Sao Paulo and New York. Since its inception, Mercantil Banco Universal has played an active role in the development of the different markets where it operates by financing trade, agriculture and industry. Throughout Fundación Mercantil, the Bank affirms its social commitment towards the country by playing an important role in the ongoing development of different sectors of the community.

(1) Dollar figures are given for reference only. This information is converted at the period-end exchange rate of Bs 6.2842/US$ 1. Exchange control has been in place in Venezuela since February 2003 .

4 Report Financial Highlights

Consolidated Results December 31 December 31 December 31 December 31 December 31 December 31 (In thousands of Bs and millons of US$, except percentages and other indicators) 2014 2014 2013 2012 2011 2010 Year Ended US$ (1) bolivars bolivars bolivars bolivars bolivars Balance Sheet (1) Total Assets 45,812 287,892,974 183,030,629 104,514,153 67,351,251 46,270,966 Loan Portfolio (Net) 25,877 162,619,332 89,809,279 57,755,945 41,974,923 26,703,385 Deposits 41,069 258,083,275 162,756,924 92,499,400 59,558,134 40,279,612 Shareholders’ Equity 3,860 24,255,805 16,557,049 9,233,354 6,127,715 4,583,203

Income Statement (2) Net Interest Income 3,045 19,133,827 11,645,946 7,352,170 4,881,317 3,156,934 Margin of Financial Intermediation 3,293 20,692,510 13,641,789 8,777,427 5,918,691 4,099,624 Personal and Operating Expenses 1,679 10,549,964 6,660,194 4,507,740 3,179,210 2,439,037 Income Before Income Tax 1,501 9,431,474 6,529,414 3,853,463 2,389,662 1,555,381 Net Income 1,501 9,430,660 6,525,812 3,395,032 2,142,731 1,360,621 Profitability Indicators (%) Net Interest Income / Average Financial Assets (NIM) 10.9 10.8 11.1 10.9 10.2 Other Operating Income / Total Income 19.9 26.2 24.6 29.6 35.6 Net Income / Average Equity (ROE) 50.1 52.8 46.4 42.7 34.1 Net Income / Average Assets (ROA) 4.0 4.5 4.0 3.8 3.3 Capital Adequacy Indicators (%) Equity / Risk-Weighted Assets (regulatory minimum 12 %) (3) 16.5 19.0 17.7 16.0 17.6 Leverage Indicators (%) Equity / Assets (regulatory minimum 8 %) (3) 9.7 10.9 9.8 10.1 11.2 Loan Portfolio Quality Indicators (%) Past-Due and Non-Performing Loans / Gross Loan Portfolio 0.3 0.4 0.6 0.7 0.9 Allowances for Loan Losses / Past-Due + Non-Performing Loans 1,352.9 914.5 611.5 615.6 489.1 Allowances for Loan Losses / Gross Loan Portfolio 3.5 3.9 3.9 4.1 4.2 Efficiency Indicators (%) Operating Expenses / Average Total Assets 3.3 3.5 4.1 4.4 4.8 Operating Expenses / Total Income 32.2 31.8 35.8 36.0 40.7

Liquidity Indicators (%) Cash and Due from Banks / Deposits 29.0 27.4 29.1 21.7 27.2 Cash and Due from Banks and Investment Portfolio / Deposits 46.3 55.1 48.4 40.3 45.4

Other Indicators (%) Total Loan Portfolio / Deposits 65.3 57.4 65.0 73.5 69.2 Financial Assets / Total Assets 73.8 75.4 74.2 81.0 75.6 Financial Assets / Deposits 82.4 84.8 83.9 91.6 86.9 Number of Employees Employees in Venezuela 7,247 7,275 7,195 6,965 6,644 Employees Abroad 9 10 10 10 10 Banking Distribution Network Branches in Venezuela (4) 264 265 268 271 273 Automatic Teller Machines (ATM) 1,350 1,408 1,367 1,309 1,319 Point of Sale Terminals (POS) (5) 50,902 53,387 48,671 42,719 40,427 Mercantil Aliado Network Correspondent Service Desks 125 128 106 60 38 Correspondent Trading Points 122 188 186 117 83

Market Share (%) (6) Loan Portfolio 14.1 14.0 14.6 15.9 14.5 Deposits + Other demand liabilities 11.7 12.1 11.5 11.9 11.7

(1) Figures in US$ converted at the exchange rate at the close of December 31, 2014: Bs 6.2842/US$ 1 (controlled) (2) Figures in US$ converted at the average exchange rate for the period Bs 6.2842/US$ 1 (controlled) (3) In accordance with the standards of the Superintendency of Banking Sector Institutions (SUDEBAN - for its abbreviation in Spanish) (4) Excludes internal branch for employees at Edificio Mercantil (Caracas) (5) Physical Points of Sale (POS) (6) Over Venezuela Operation

5 Banco Universal Board of Directors

Principal Directors Gustavo Vollmer A. Administration Chairman Gustavo Vollmer A. * Nelson Pinto A. Chairman Executive President Nelson Pinto A. * Gustavo A. Marturet M. 2 / 3 Executive President Alfredo Travieso P. 1 / 2 Nerio Rosales Rengifo * Eduardo Mier y Terán 1 /3 Global Executive Director Víctor J. Sierra A. 2 Roberto Vainrub A. 1 / 3 Rosa M. de Costantino * Personal Banking and Wealth Management Manager Alternate Directors Alejandro González Sosa 2 Luis A. Marturet M. 1 Luis Alberto Fernandes * Carlos Zuloaga T. 3 Chief Legal Counsel 3 Gustavo Galdo C. Alfonso Figueredo D. * Gustavo Machado C. 1 Chief Financial Officer Claudio Dolman C. 2 Nerio Rosales Rengifo Fernando Figueredo M. * Chief Risk Officer Secretary Guillermo Ponce Trujillo Philip Henríquez S. * Corporate Banking Manager Alternate Secretary Rafael Stern S. Rodolfo Gasparri G. * Principal Statutory Auditor Francisco De León Operations and Technology Manager Manuel Martínez Abreu Luis Calvo Blesa * Alternate Umberto Chirico Human Resources Statutory Auditor Gladis Gudiño and Corporate Communications Manager Carlos Tejada G. * Legal Counsel Luis Alberto Fernandes Commercial Banking Manager

Alternate Legal Counsel Paolo Rigio C. Guillermo Ponce Trujillo Board of Directors Secretary

Rafael Stern S. Board of Director Alternate Secretary

José Felipe Bello C. Audit Manager

Anahy Espiga Strategic Planning Manager

Luis M. Urosa Z. Corporate Compliance Manager

Juan Livinalli M. Money Laudering Prevention and Compliance Officer and Terrorist Financing

Note: The Audit, Compesation and Risk Committees were created 1 Member of the Audit Committe * Member of the Executive Committe pursuant to provision in the By-laws and in accordance with a 2 Member of the Compensation Committe resolution by the Board of directors. These commitees are made up of independent Directors and are attended by the President and the 3 Member of the Risk Committe Executive President (ex-officio).

6 Report Notice of Ordinary General Shareholders’ Meeting

MERCANTIL, C.A., BANCO UNIVERSAL Subscribed and Paid-In Capital Bs 268,060,233 Caracas - Venezuela

The Board of Directors hereby convenes an Ordinary General Shareholders’ Meeting to be held at the Company’s principal office, located at Avenida Andrés Bello N° 1, Edificio Mercantil, on March 20, 2015 at 8:00 in the morning, in order to:

1. Consider the Board of Directors’ Report and the Bank’s Audited Financial Statements at December 31, 2014, in light of the Statutory Auditors’ Report .

2. Appoint the Principal members and their Alternates to the Board of Directors as established in the Bylaws and set the remuneration of all the members of said Board .

3. Consider the “Proposal submitted by the Board of Directors for the consideration by the Ordinary General Shareholders Meeting on March 20, 2015, on the appointment of the Customer and User Ombudsman of Mercantil, C.A., Banco Universal and its Alternate”.

N.B. The shareholders are hereby informed that: a) the Board of Directors Report, the Statutory Auditors Report, the Financial Statements audited by “Espiñeira, Pacheco y Asociados”; b) the “Letter to Management and/or Memorandum of Internal Control” and, c) the “Proposal submitted by the Board of Directors for consideration by the Ordinary General Shareholders Meeting on March 20, 2015 to appoint the Customer and User Ombudsman of Mercantil, C.A., Banco Universal and its Alternate,” will be available for review twenty-five days prior to the Shareholders’ Meeting, at the office of the Secretary of the Board of Directors of the Company, Avenida Andrés Bello N° 1, Edificio Mercantil, piso 35, Caracas. In accordance with the company bylaws, the Shareholders are hereby informed that each group of Common Class "A" shares that represents at least twenty per cent (20 %) of the subscribed capital of said shares, has the right to propose and designate one Principal Director and its Alternate as it may correspond.

Caracas, February 19, 2015

On behalf of Mercantil, C.A., Banco Universal

Guillermo Ponce Trujillo Secretary of the Board of Directors

7 Banco Universal

Board of Directors’ Report

Caracas, February 19, 2015

Dear Shareholders:

We are pleased to submit the consolidated results and main activities of Mercantil, C.A. Banco Universal for the second half of 2014 as well as for the whole year.

This report has been made in compliance with Article 20 of Resolution 063. 11 of the Superintendency of Banking Sector Institutions (Sudeban), dated February 18, 2011, setting forth the “Standards establishing the Guidelines and Requisites to be submitted by the Meetings of Shareholders of Banking Institutions, Currency Exchanges, and Border Exchange Operators”.

Financial and Economic Situation

The Bank's financial statements for 2014 included in this Report which consolidate the activities of its branch and agency abroad and its subsidiaries, were prepared in accordance with the standards of the Superintendency of Banking Sector Institutions. The Board of Directors finds that the presentation of the Bank's financial situation and its affiliates, the income from its operations, and the statements of changes in equity and cash flows presented in the financial statements, are reasonable. The financial statements have been examined by the Bank's external auditors Espiñeira, Pacheco y Asociados who have found them to be reasonable and whose report is attached hereto. The consolidated financial statements are presented in inflation-adjusted values as supplemental information.

During the year the Bank posted Bs 9,431 million in net annual income, Bs 3,505 million of which corresponds to the first half of the year and Bs 5,926 million to the second. The results presented reflect a sustained improvement in net interest income and control over operating expenses. They compare favorably with the Bs 6,526 million in income registered in 2013.

In addition, in accordance with the various rules on banking activity, during the year the Bank paid Bs 4,318 million in contributions to official agencies, representing 30.4 % of the Bank's expenses.

Total assets reached Bs 287,893 million, up 57.3 % from Bs 183,031 million in December 2013 and 28 % more than the Bs 224,950 million registered at the end of June 2014. Shareholders' equity totaled Bs 24,256 million, a year-on-year increase of 46.5 % from 16,557 million, and 32.8 % up from Bs 18,263 million at the end of June 2014.

9 Banco Universal At the close of 2014, total deposits were Bs 258,083 million, up 58.6 % from Bs 162,757 million in December 2013, and up 27.8 % from Bs 202,014 million in June 2014.

Another important point is the acquisition of Securities in 2014, following a requirement by the executive branch of the Venezuelan government, known as Valores Bolivarianos para Vivienda (Bolivarian Housing Securities) for Bs 9,705 million, which amounted to Bs 26,167 million in accumulated investments and accounted for 58.8 % of the Bank's total investments. As of December 31, 2013, these investments amounted to Bs 16.745 million and represented 37.2 % of the Bank's total investments.

In 2014, Bs 1,099,046,955.20 in cash dividends were paid out, at the rate of Bs 4.10 per share.

In its recent evaluation issued in December 2014, Fitch Ratings affirmed Mercantil Banco's short-term national ratings of “F1+(ven)” and adjusted its long-term national rating to “AA- (ven)”, which is the best national rating granted to any private financial institution. Also, Fitch Ratings adjusted its international risk ratings to “CCC” for long term, “C” for short term and “ccc” for Viability rating. These risk rating adjustments responds to a modification made by Fitch Ratings, in December 2014, to the sovereign risk rating of Venezuela. Mercantil Banco s international risk ratings are largely dependent on the country risk. ’

Statement on Credit Risk Reports

The credit risk reports on the proportionality of the guarantees on the loan portfolio and contingent portfolio indicate that 67.5 % of them are backed by some type of collateral (the inclusion of liens on vehicle titles would bring this percentage to 70 %).

More than 98 % of the loans to the SME and Middle Market segments are guaranteed by some type of collateral, while 88 % of the loans to the Affluent segment are collateralized. There is some type of collateral for 58.5 % of the loans to Corporate segment, in view of the size of those companies and their level of solvency.

The conclusion reached after reviewing the credit risk is that the proportionality and type of collateral received on the loan portfolio and contingent portfolio are both adequate and sufficient, and within the guidelines established in the Bank's credit risk policies.

The guarantees also coincide with the maturities of the loans.

10 Report Approval of Asset and Liability Operations

During the second half of the year, the Board of Directors, complied with the provisions of Article 31[3] of the Law on Banking Sector Institutions repealed in November, 2014, which attributed to the Board of Directors the obligation to decide whether or not to approve individual asset and liability operations that exceed 2 % of its equity. During the second half of the year, the Board considered, approved and/or ratified the exposures of its clients that exceed 2 % of the equity, including economic groups and individual borrowers in different economic sectors, for a total of 28 clients and Bs 13,871 million, representing 8.23 % of the gross loan portfolio at December 31, 2014.

The Board of Directors, in keeping with its own approved methodology in respect of liability operations - in other words total deposits - decided to add to its list of potential clients another group of clients that might eventually exceed said 2 % considering their past behavior. Hence at December 31, 2014 there are 428 clients, 34 professional counterparts with credit facilities and 26 correspondent banks.

It is worth to mention that in light of the application of a new Decree with the Force of Law of the Law on Banking Sector Institutions, published in the Official Gazette of the Bolivarian Republic of Venezuela No. 6,154, dated November 19, 2014, the Board of Directors’ approval of asset transactions was conditioned to those exceeding 5 % of equity, wheras the mandatory approval of liabilities was removed.

Comparative Financial Statements for the last two years and Distribution of Earnings

Included as an integral part of this report are the comparative financial statements for the Bank over the last two years, reflecting the distribution of profits and showing the changes or variations in its financial position.

Loan Portfolio - Participation in the Country’s Productive Sectors through the Percentage of the Loan Portfolio

At the close of 2014, the Bank's gross loan portfolio increased to Bs 168,461 million. This was 81.2 % more than at the close of 2013 and 32.5 % more than at June 30, 2014.

At December 31, 2014, 0.3 % of loans were nonperforming, versus an average of 0.5 % for the Venezuelan financial system. The coverage ratio of loan loss provisions over past-due and nonperforming loans rose to 1,352.7 %, versus 931.3 % in June 2014 and 913,7 % in December 2013.

Loan portfolio growth in the second half of 2014 was mainly driven by the credit card, agricultural, manufacturing and commercial portfolios, which increased 61.1 %, 35.8 %, 26.6 %, and 19.5 %, respectively.

11 Banco Universal This solid gross loan portfolio growth maintains the Bank on third position in the financial system in this segment and closed the year with a 14.1 % share of the financial system's market (14 % at the close of 2013). The Bank preserved the second position within the private financial system with 20.3 %. The gross loan portfolio is mainly broken down as follows: 35.2 % commercial loans (initially to finance working capital), 23.0 % credit card products (including parallel line of credits), 16.4 % agricultural loans and 10.5 % manufacturing loans. Loans to the production sectors in Venezuela at December 31, 2014 are broken down as follows:

ACTIVITY In Millions of Bolivars Percentage (%) Agriculture, fishery and forestry 27,602 16.4 Mining and petroleum 751 0.4 Manufacturing industry 17,651 10.5 Electricity, gas and water 384 0.2 Construction 6,328 3.8 Wholesale and retail, restaurants and hotels 50,553 30.0 Transportation, storage and communications 1,752 1.0 Financial establishments Insurance, real estate and business services 47,611 28.3 Community, social and personal services 6,029 3.6 Other activities 9,801 5.8 TOTAL PORTFOLIO 168,461 100.0

By law the banks are required to allocate a proportion of the loan portfolio to the agricultural, microenterprise, mortgage, tourism and manufacturing sectors. Those loans account for 35.8 % of the Bank's gross loan portfolio at December 31, 2014 and grew Bs 27,650 million (84.9 %) year on year. At December 31, 2014, the Bank exceed the required compulsory loan portfolio measurements at that date, calculated on the portfolio balances at the dates established according to the standards, excepting the mortgage sector. Compliance by sector is summarized in the following table:

SECTOR REQUIRED (%) ACHIEVED (%) Microenterprise 3 4.09 Tourism 4.25 5.06 * Agriculture 25 38.21 ** Manufacturing 10 18.99 Mortgage 20 15.16 ***

* Includes Bs 207 million Class "B" shares of Sociedad de Garantías Recíprocas para la Pequeña y Mediana Empresa del Sector Turismo, S.A., in accordance with the regulations on compliance with the compulsory tourism loan portfolio. ** Includes Bs 1,580 million in Agricultural Bonds issued by the Venezuelan state and government entities, in accordance with the regulations on compliance with the compulsory agricultural portfolio. *** Includes Bs 7,975 million in Securities issued by the Fondo Simón Bolívar para la Reconstrucción S.A.

12 Report The microenterprise sector continued to consolidate its various portfolio sub-segments during the second half of 2014, achieving 98.9 % year-on-year growth to Bs 5,195 million. At the end of the second half of 2014 compliance was 4.09 %, which exceeds the regulatory requirement of 3 % by Bs 1,381 million.

The approved and cleared tourism sector portfolio grew 112.7 % and 90.7 % year on year, respectively. The tourism portfolio is broken down as follows: 86 % accommodation, 11.9 % tourism transportation, 0.7 % travel agencies, 0.9 % restaurants, and 0.5 % theme parks. Since 2013, the Bank amounted Bs 207 million Class “B” shares from Sociedad de Garantías Recíprocas para la Pequeña y Mediana Empresa del Sector Turismo (Sogatur), which adds up to the compulsory portfolio compliance. It registered 5.06 % compliance versus a required 4.25 %. This result for the sector makes the Bank first in the private financial system.

The agricultural loan requirement established 25 % as minimum percentage to be complied with at the close of 2014, and the actual percentage achieved was 38.2 %, reflecting a year- on-year growth of 93.2 % (not including agricultural bonds). Some additional considerations for measuring this portfolio have already been established, however modified again in 2014: (a) "Financing of Strategic and Non-strategic Items", measured quarterly, complying with the minimum and maximum distributions envisaged both for strategic (minimum 75 % / achieved 89.9 %), non-strategic items (maximum 5 % / achieved 0.3 %) and agribusiness investment and trade (maximum 20 % / achieved 9.9 %); (b) attention to “New Borrowers”, achieving 706 “New Borrowers” versus 262 requiered; and (c) a proportion of the Medium and Long-Term Portfolio, achieving 21.8 % compared to the minimum 20 %.

In addition, under the guidelines issued by the executive branch, the Bank has Bs 1,580 million in Agricultural Bonds which are added to the portfolio and count towards the compulsory requirement.

The manufacturing portfolio totaled, at the close of 2014, Bs 17,651 million, achieving a surplus of Bs 8,358 million over the minimum requirement of Bs 9,294 (achieved 18.99 % / requiered 10 %), also complying with the sub-segments: 1) Strategic Sectors (achieved 127.5 % / minimum requiered 60 %); SME, Joint Ventures, Community and State Enterprises (achieved 73.4 % / minimum requiered 40 %). For the first review held on September, according with the regulation, a surplus of Bs 7,502 million over the minimum requirement of Bs 7,436 million was registered (achieved 16.1 % / requiered 8 %), also complying with the sub-segments.

The Bank's manufacturing portfolio accounts for 15.3 % of the financial system, reaching the second place within the Venezuelan financial system as a whole and first in the private banking system with 28.1 %. The resolution applied was passed in July.

During 2014 demand for loans through the mortgage portfolio to build a primary residence under the regulations of the Ministry of Ecosocialism, Habitat and Housing remained low, which affected the mandatory compliance set for this portfolio.

13 Banco Universal Demand for these loans has been slowing down since 2011 and has also led to a drastic drop in the inventory of homes under construction, which in turn has prevented the Bank from granting sufficient loans for a primary residence to comply with this segment's compulsory mortgage portfolio.

In response of the situation, the Bank carried out several marketing campaigns through digital media, press and radio in 2014 to promote the purchase of housing in the secondary market, in order to partially offset the abovementioned new primary housing deficit. As a result, the mortgage portfolio at December 31, 2014 achieved 91.8 % of compliance from housing adquisition. The high inflationary effect in the price of existing housing during 2014 was among the difficulties faced to achieve this goal. This prevented the placement of loans to many potential buyers who were unable to complete the required initial payment to materialize the housing purchase.

Nevertheless, the mortgage portfolio at December 31, 2014 was 15.16 % versus a 20 % requirement, amounting to Bs 14,091 million. This bring Mercantil Banco as the first bank among larger banking institutions in Venezuela with the highest compliance rate in 2014. Notably, as established by the Resolution No. 31 issued on June 14, 2014 by the Ministry of Ecosocialism, Habitat and Housing, this figure included the acquisition of Bs 7,975 million in securities issued by the Simon Bolivar Fund for Reconstruction, S.A.

Report on Complaints and their Solutions

On average, 97 million transactions were carried out per month in the second half of 2014 through the Bank's different channels, 11 % more than during the previous six months. On the other hand, the total average monthly volume of complaints in the second half of 2014 amounted to 10,099 cases , of which 98 % are financial and 0,5 % corresponds to complaints that customers filed with Sudeban. The average monthly volume of complaints in the second half of 2014 rose 9 % (802) compared to the first half of the year and 57 % of them were declared as having merit. The average time taken to resolve customer complaints regarding debit and credit cards and deposit accounts remained in five days as in the previous six month.

Regarding to fraud prevention in the form known as “El Cambiazo” (The Exchange), consisting of a deceitful substitution of debit cards to customers, when making any ATM transaction, comprehends the inclusion of notifications in such Mercantil Banco’s ATM network and website, aimed at keeping customers informed and aware of this fraud. In addition, The “Monitor Plus” tool showed significant progress during 2014. Thus, the CISM (“Customer Information Service Manager”) module was implemented during the second half of 2014, in order to start using it as of 2015. This module allows to manage relations contact and communication with customers through notifications via messages (SMS) of unusual events or potential frauds, providing customers the opportunity to reject any consumption, by

14 Report activating security mechanisms, such as blocking actions and credit card transfers. For Mercantil Online Banking, the antifraud monitoring was also maintained, through the Transaction Guard tool, which guarantees a safe operation by evaluating the origin of the connection, the IP ("Internet Protocol") from which the customer connectes and the employed authentication elements, among other aspects of interest for the prevention of frauds. During that semester, it was also kept the Online Banking challenging Q&A pattern as in the rest of the year, through an one-time password (OTP), which is introduced by the customer in the automated system of the Bank (IVR). These tools are part of a set of authentication means for a secure banking.

According to the management report for the second half of 2014, the Customer and User Ombudsman handled slighly less complaints than in the fisrt half of the year, totalling 2014 10,012 complaints versus 11,504 in 2013. This shows that the actions implemented by the Bank of internal systems adjustments, staff induction and customers campaigns for the proper handling of mobilization instruments have resulted effective.

The 5,200 claims handled (of which 404 were reffered) included claims for Bs 42,910,383.05, of which 192 cases were declared to have merit. The Bank was required to pay out Bs 2,064,939.67 to customers. A total of 4,604 complaints were declared without merit.

The Bank keeps detailed records of all complaints, claims and how they were processed and resolved.

Distribution of Electronic Channels and Banking Centers

At the close of the second half of 2014 the Bank had 265 branches, 1,350 ATMs, 247 Mercantil Aliado active service points operating through correspondent trading desks and trading points, with 36 offices with Mercantil Vía Rápida fast-track service areas equipped with 158 multifunctional facilities. At the close of December 2014, there are 61,004 points of sale which include physical points and Cestaticket Accor Services Electronic Meal Voucher points in 42,828 establishments. The point of sales network service is provided to customers through the Inversiones Platco, C.A. affiliate.

Capital Adequacy Ratio Position The equity/risk-weighted assets ratio was 16.5 % (regulatory minimum 12 %).

Report of the External Auditors

As stated above, the financial statements for 2014 included in this report have been examined by the Institution's external auditors Espiñeira, Pacheco y Asociados who find them to be reasonable and whose report is attached hereto.

15 Banco Universal Liquidity, Solvency, Efficiency and Profitability Indicators

The liquidity ratio, calculated by dividing total cash and due from banks by total deposits, was 29 %; and calculated by dividing total cash and due from banks plus investments by total deposits was 46.3 %, compared with 27.4 % and 55.1 % respectively in December 2013, and 25 % and 48.2 % respectively in the first half of 2014. The Capital Adequacy Ratio, that results from dividing equity by total assets minus investments held in government securities, was 9.7 % (minimum requirement 9 %). The consolidated efficiency ratio calculated by dividing operating expenses by average assets was 3.3 %, compared to 3.5 % in 2013, and 3.3 % in the first half of 2014; while the efficiency ratio, calculated by dividing operating expenses by total net income was 32.2 %, compared to 31.8 % in 2013 and 34.9 % in the first half of 2014. The ROE indicator was 50.1 %, versus 52.8 % in 2013 and 40.8 % in the first half of 2014; and the ROA indicator was 4 %, versus 4.5 % in 2013 and 3.4 % in the first half of 2014.

Internal Audit Report including the Audit Report on Compliance with ML/FT Standard

The internal auditor issued a report for the second half of 2014, expressing his opinion on the result of his examination, which the Board took into consideration for its work in that area.

The work of the Audit unit was mainly addressed at testing the efficacy of the Bank’s internal controls, assessing management execution in the compliance of said controls in diverse areas, comprising Prevention and Control of Money Laundering and Terrorism Financing (ML/FT), in keeping with the guidelines of the Internal Audit Operating Plan approved by the Board of Directors' Audit Committee, issuing periodic progress reports of this Audit Committee to the Executive Committee and Integral Risk Committee, including audit testing to evaluate significant risk exposure, follow-up of corrective/preventive action and efficacy of the Internal Control environment.

This report aims at the Internal Audit reviews of the Bank s units and processes, with special attention on risks, adequate corporate governance a’nd timely supervision, strategic objectives based on operability, management and control activities and policies and procedures compliance in accordance with Sudeban s recommendations and instructions. ’ It also refers to the reviews on Prevention and Control of Money Laundering and Terrorism Financing (ML/FT), with a total of 245, covering central processes, technological tools and branch offices. The Bank got an Excellent average rating, showing its full compliance with Sudeban Resolution 119-10, containing all the provisions of the regulations on the Management and Inspection of risks related to crimes involving Money Laundering and Terrorism Financing.

16 Report Communications by Sudeban related to Provisions, Observations, Recommendations or Initiatives regarding the Institution's Operation

During the second half of 2014, the Bank continued to take steps to bring its activities in line with the provisions and timelines established in the rules issued during that period. The Board of Directors is responsible for examining those provisions and resolving matters related thereto. A set of Decrees, regulating banking activities were issued by the National Executive Branch, within the framework of the Enabling Act, among them: the Banking Sector Institutions Organic Law, a Partial Reform to the Central Bank of Venezuela Law, the Foreign Exchange Regime and Foreign Exchange Crimes Law, the Tourism Investment and Credit Law; a Reform to the Income Tax Law, the Tax Organic Code, a Reform to the Value Added Tax (VAT) Law, a Reform to the Organic Law on Science, Technology and Innovation, and to the Promotion and Development of Small and Medium Industry and Socially Owned Units Law.

Another set of legislative acts particularly related to the financial sector were also issued. Among them are: the general regulations on Internal Audit Units in the Banking Sector Institutions; the ones referring to the functions and responsibilities of the External Auditor, Audits and Banking Sector Institutions’ Audited Reports; general criteria and guidelines to be considered on transactions made through SICAD II; monthly reports on foreign currency accounts and wire transfer origin from SICAD II; a partial Reform on the guidelines to process SICAD II operations; ratification of The Banking Security Standards, the duty to provide to the Public Ministry information about bank customers in real time in accordance with Article 291 of the Criminal Organic Procedure Code; the compulsory percentage of the manufacturing loan portfolio for the 2014 financial year; the methodology to be applied by Financial Operators for improvements and refurbish loans with the Mortgage Portfolio Compulsory Savings Fund for Housing (FAOV - for its abbreviation in Spanish) resources and main housing purchase and self-construction with the Voluntary Savings Fund for Housing (FAVV - for its abbreviation in Spanish) and Compulsory Savings Fund for Housing (FAOV) resources; the scope of the instructions to the sale of foreign currency from credit and debit cards consumptions and cash advance in Venezuela against overseas accounts and line of credits; and the submission term for the adjustment plan to the new Banking Sector Institutions Law.

Through its internal control system the Bank constantly monitors these provisions closely to ensure compliance and so safeguard its reputation for operating with integrity and professionalism. The Corporate Compliance business unit reports directly to the Chairman of the Board and helps the Business and Support units to identify standards that are related to their own particular activities.

17 Banco Universal In the second half of 2014, the Bank also received visits from Sudeban to inspect the Quality of Service provided at branches and Customer Service Points and by the Ombudsman for Bank Clients and Users and by Prevention and Control of Money Laundering and Terrorism Financing (PCML/TF) units, concerning the “Know your Customer” policy application, some of them linked to Sicad II operations. During that period other Public Administration bodies, among them the Foreign Currency Administration System (CENCOEX), National Council for Persons with Disabilities (CONACPDIS), Body of Scientific, Penal and Criminal Investigations (CICPS) and National Institute for Occupational Prevention, Safety and Health (INSAPSEL) made inspection visits in their areas of competence.

In compliance with the provisions of paragraph 5 of Article 30 and Article 32 of the Decree with Rank, Value and Force of Law on Banking Sector Institutions, the Bank Board Directors is responsible for examining and resolve the content and compliance o’f several official communications from SUDEBAN, mainly concerning the inspections visits carried out by the agency during the year. These official communications included its respective remarks and recommendations.

Acknowledgements Dr. Gustavo J. Vollmer Herrera, who was a member of the Board of Directors for 47 years, 13 of which was President of the Mercantil Banco, passed away on November 2, 2014 in Caracas, at age 91. His example of honesty, competence, working, solidarity, modesty, closeness, kindness and sound ethical principles shown throughout his career represents Dr. Vollmer Herrera’s contribution and legacy to Mercantil, leaving a deep footprint. With his performance, he mostly contributed to forge the “Mercantil Culture”, characterized by, among other qualities, its adherence to ethical principles, transparency, responsibility, solidarity and community commitment. As Dr. Vollmer Herrera’s passing is deeply mourned, the Board of Directors wishes to stand out all of his personal qualities, valuable contribution and accurate advice from whom they received for many years.

90 th Anniversary On March 23, the Mercantil Banco subsidiary will be celebrating 90 years of its foundation. During its existence, this subsidiary has preserved the ethical principles that encouraged its creation, by always focusing on an excellent customer service, strengthening itself as a strong and innovative institution of reference in the Venezuelan financial system, establishing its mission “To fulfill the needs of our customers by providing excellent financial products and services, attain the aspirations of our employees, support the development of the communities where Mercantil has presence and add value for our shareholders through a long term outlook." To celebrate such a significant and important date, several institutional events and activities are scheduled, all year long.

18 Report Products and Services

During the second half of 2014, Mercantil Banco continued to offer products and services to suit the needs of its more than 4,600,000 customers, of which around 116,608 were incorporated.

Mercantil Banco ranks second in the financial system with a market share of 18.4 %, due to continued promotional activities and adjustments on the credit limits.

Likewise, through products cross-selling initiatives, the first and/or second credit cards were granted to 163,000 customers who fulfilled the established evaluation and risk parameters, which represented Bs 5,869 million exposure during the second half.

Additionally, 3,488 New Professional Credit Cards were issued during that term distributed among students of Universidad Monteávila, Universidad Metropolitana and Universidad Católica Andrés Bello, to support the academic community strategy.

On the other hand, the Special Account in Foreign Currency product, required for all SICAD II operations, totaled 147,274 open accounts for both individuals and businesses as of December 2014.

The consolidation process to include the unbanked sector of the population and support the communities continued in the Majorities Banking segment, through the Mercantil Aliado network, operating in low-income areas in 15 states throughout the country and the Capital District. These network operations are steadily growing in product placement. The Tarjeta Efectivo (Cash Card) reflected a 76.61 % growth, reaching a total of 174,685 Cards, while Microenterprise Loans registered a 98.90 % increase, totaling Bs 5,195 million with 17,386 active borrowers at the end of the year.

Following on with the strategy to enhance customer service, the passbook updating option was incorporated on the multifunctional equipments in the Mercantil Vía Rápida fast-track self-service areas. At the close of the period, 4.9 million transaction were carried out through Mercantil Vía Rápida. 53.6 % of the total transacciones managed through branch offices were processed through Mercantil Vía Rápida.

Between June and October, 2014, the “0” Choice for product suspension and additional alternatives for monitoring alert were incorporated in the Centro de Atencion Mercantil Automated System, in the Automatic Affiliation Charge option for Credit Card Payment.

Mercantil Online Banking continued to garner preference among customers, reaching at year end more than 1,270,000 users in Mercantil Personal Online Banking and more than 66,000 affiliated groups on Mercantil Business Online Banking, which carried out a total of 618 million transacctions during the year, representing more than 53 % of the transactions carried out through all channels.

19 Banco Universal The distribution of transactions by channels over the same term is shown as follows:

TRANSACTIONS PARTICIPATION CHANNELS (in millions of Bolivars) (%) POS 212 18 ATMs Network 130 11 Mercantil Móvil 130 11 Branches 65 6 Call Center 16 1 Mercantil Business and Personal Online Banking 618 53

During the second half of the year, Mercantil Personal Online Banking incorporated the Activation and Deactivation of services, Wire Transfers to Own International Account and Venezuelan Central Bank Fund Availability Inquiry for Special Foreign Currency Account functionalities. Mercantil Business Online Banking incorporated the SICAD II Foreign Currency Purchase Inquiries and Order Taking and migrated the platform of the “Invoice Collection” product, which included improved functionalities for the settlement of collecting societies and local technological attention. The new Internet fuctionality of “Pronto Credito Empresarial” product, addressed to the Corporate Banking segment is now in use. At the end of December, 115 credits for Bs 150 million were cleared. At year end, @MercantilBanco, the Bank’s Twitter account, which recently turned two years- old in January, 2015, accounted for 180,000 followers. Around 22,400 approaches were served through @MercantilBanco. This account is ranked as the fourth most followed account in the banking system and second one in the banking sector with reference to the “Klout” influence indicator, in charge of measuring the account-followers interaction, with a score of 66 points. This is considered a positive number in social networks and is recognized at corporate levels. In September, The Venezuelan Standardization and Quality Certification Institute (Fondonorma) ratified quality certificates under the ISO 9001:2008 standards on the following lines of service: Mercantil Call Center (CAM), Mercantil Online Banking, ATM network, Corporate Client Securities, Application for and Printing and Delivery of Credit Cards, Home Delivery of Checkbooks, Préstame instant loans, Employee Benefit Trust Funds, nationwide Branch Teller services and Mercantil Vía Rápida fast-track facilities regional head offices and "A" category offices). Mercantil Banco is the first financial institution with the highest number of certified lines of service, which allow to assure quality on products and services offered.

Awards and Acknowledgements The AméricaEconomía magazine ranked the Bank on the 23rd place among its 250 Latin American Banks Ranking, climbing 7 places compared to last year. This ranking includes state- owned banks, which are ranked according to their asset size by the end of June 2014 .

20 Report Likewise, the Bank was the leading institution in the banking segment of the Venezuelan companies with the best image ranking. The study was published by the well-known P&M magazine on its latest anniversary edition, according to a study by Datanálisis, a polling firm.

In addition to these acknowledgements, granted to the Bank, are considered those received during the first half of 2014. For instance, “Venezuela's Best Trade Finance Provider in 2014”, “Best Consumer Internet Banks in Venezuela” and “Best Information Security Initiatives in Latin America” awards granted by the Global Finance magazine, the “Data Integrity 2013 Award for Latin America” from MasterCard Worldwide and the first place of preference on the Gerente 2014 Brands ranking in the banking sector, for the seventh consecutive year.

Prevention and Control of Money Laundering and Terrorism Financing

Prevention of money laundering and control of terrorism financing remains a priority for the Bank. This is why it continues to implement the Program to Prevent Money Laundering and Terrorism Financing at every level, using appropriate internal control and oversight mechanisms. The Bank is also intensifying its staff training programs to stress the importance of applying the “Know your Customer” policy as it is considered the best and most effective means of preventing money laundering and corruption in general.

In order to comply with money laundering regulations, the Bank has in place a well-structured "Comprehensive System for the Prevention of Money Laundering and the Control of Terrorism Financing" as well as Operational and Follow-Up Plans, and Monitoring and Oversight Plans.

Social Commitment

The Bank's 'social investment in 2014, carried out both directly and through Fundación Mercantil which it sponsors, totaled Bs 52.5 million, and was addressed at different programs, projects and initiatives undertaken by well-known social development and educational organizations in Venezuela.

The Bank earmarked 61 % of the contributions to elementary and higher educational institutions, especially entrepreneurship and scholarship programs, giving the youngsters the opportunity to keep on developing their college and high school studies; and 39 % to social development institutions, that foster health prevention programs in the communities, child and youngsters care social programs and those institutions that disseminate art and culture.

During the year, it is underlined in Venezuela the consolidation of the Fundación Mercantil and Asociación Fe y Alegría alliance, which is part of the development and strengthening of the “Give Your School a Helping Hand“ program, with more than 30 years of existence. Among the objectives of this alliance are rehab and maintenance of school facilities, raising school maintenance awareness and sense of compromise and create participatory forums with the educative communities. More than 22 educational centers throughout the nation were served in 2014, with more than 12,000 students being directly benefitted.

21 Banco Universal The corporation continued to strengthen the Online Donation Program “Un Aporte por Venezuela”, through which the Bank along with the Fundación Mercantil makes its internet platform available to social institutions allowing them to disseminate information about their work to clients who can make donations to them via electronic transfers. In addition, programs supporting culture are strengthened through the exhibition activities of Espacio Mercantil, a place of dissemination and promotion of the Venezuelan art historiography. Lastly, it is important to mention the growing participation of Mercantil's Volunteers and their families active involvement in several activities in Venezuela, among them, the tree planting and housing building programs in alliance with the Universidad Simon Bolivar and Organización Techo, respectively. One of Mercantil's corporate values is “to be an integral institution and an important factor in the development of the communities and places in which it is involved.”

Development and Working Environment There is a continuity in the application of compensation policies that benefit and support workers preserving and improving their economic conditions. These policies, for which The Bank has a leading position in the financial sector, joined with the development of permanent retention, education and training programs, allow to improve the staff professional training and to maintain a continuous knowledge process. All of these is complemented with the development of several activities that encourage areas of closeness and recreation with the workers, on which their family groups actively participate throughout the country. Relations between bank officials and employees have continued to evolve within the traditional spirit of harmony and cooperation and the Board of Directors wishes to acknowledge them for their efficiency and dedication to their work. During the half, a number of Alternate Directors attended Board meetings, either standing in for Principal Directors in their absence, or as invitees. On the occasion of the Chairman’s and the Executive President’s temporary absences, some of the Executive President’s functions were delegated to members of the Executive Committee.

Yours sincerely,

Gustavo Vollmer A. Nelson Pinto Alves Gustavo A. Marturet Alfredo Travieso P. Eduardo Mier y Terán Víctor Sierra A. Roberto Vainrub A.

22 Report Our Culture Soundness Capital Ratio Evolution “Strength and Soundness above all else”

30,000 70 % Mercantil Banco implements policies related to credit, risk and liquidity, as well as solvency and 57.8 % 60 % financial strength indicators that ensure the 25,000 24,256 soundness of the institution. 50 % 45.9 % These policies have been maintained and strengthened over time to align them with the 20,000 40 % best practices in the industry both domestically and internationally 30 % 15,000 16,557 20 % Capital Ratio Evolution Mercantil Banco Universal has been kept within 11.1 % 10,000 9.9 % 9.0% 9.9 % 9.1 % 8.8 % 8.4% 10 % international standards of well-capitalized in millions of Bs banks over nine decades. In the 9,233 0 % beginning, between 1926 and 1930s, 5,000 4.8 % 6,128 Equity accounted for half of its 4,583 -10 % assets. Afterwards it was getting stabilized, as its credit 353 0.013 0.02 0.09 4.61 operations grew. 0 -20 % 1926 1930 1960 1990 2000 2010 2011 2012 2013 2014

Shareholder’s Equity Capital Adequacy Indicators (Equity / Assets)

Gross Loan Portfolio versus Past-Due Gross Loan Portfolio versus Past-Due and Non-Performing Loans ratio Mercantil Banco Universal maintains a and Non-Performing Loans ratio customer base that, over time, has shown a highly satisfactory loan performance. The 180,000 20 % 168,518 excellence of our customers has allowed us to maintain an optimal quality portfolio. 160,000

15 % 140,000

120,000

10 % 100,000 93,420 6.66 % 98 % Mercantil Banco Universal employees 80,000 agree that “Mercantil is a solid and stable 5 % 60,000 3.59 % 60,099 organization”. in millions of Bs 43,788 0.34 % 2014 Organizational Climate and Engagement Survey 40,000 0.86 % 0.67 % 0 % 0.31 % 0.18 % 0.64 % 0.42 % 0.26 % 20,000 27,875

0.01 0.02 0.21 45.37 1,788 0 -5 % 1926 1930 1960 1990 2000 2010 2011 2012 2013 2014

Gross Loan Portfolio Past-Due and Non-Performing Loans / Gross Loan Financial Statements Consolidated with Foreign Subsidiaries (*) (In accordance with the Superintendency of Banking Sector Institutions -SUDEBAN)

Consolidated Balance Sheet (In Bolivars) December 31 June 30 Assets 2014 2014 Cash and Due from Banks 74,865,588,236 50,497,947,706 Investments in Securities 44,287,992,721 46,576,041,790 Loan Portfolio 162,619,332,439 123,279,963,409 Interest and Commissions Receivable 2,170,590,311 1,797,782,305 Investments in Subsidiaries, Affiliates and Branches 449,474,708 424,848,511 Assets Available for Sale 22,636,071 3,877,627 Property and Equipment 920,047,356 669,988,878 Other Assets 2,557,706,075 1,713,090,122 TOTAL ASSETS 287,893,367,917 224,963,540,348 Liabilities Deposits 258,084,540,921 202,019,275,738 Deposits and Liabilities with BANAVIH 375,258 739,195 Other Borrowings 268,163,402 155,706,456 Other Liabilities from Financial Intermediation 4,061,038 6,670,997 Interest and Commissions Payable 63,195,292 31,305,535 Accruals and Other Liabilities 5,217,227,356 4,486,590,389 TOTAL LIABILITIES 263,637,563,267 206,700,288,310 Shareholders’ Equity 24,255,804,650 18,263,252,038 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 287,893,367,917 224,963,540,348

Consolidated Statement of Income (In Bs) December 31 June 30 PERIOD ENDED 2014 2014 Interest Income 16,741,731,153 11,421,360,952 Interest Expense 5,262,208,120 3,795,574,605 Net Interest Income 11,479,523,033 7,625,786,347 Income from Financial Assets Recovered 152,220,262 145,240,991 Expenses from Uncollectibles and Devaluation of Financial Assets 1,902,223,521 893,778,959 Net Interest Margin 9,729,519,774 6,877,248,379 Other Operating Income 4,017,704,847 2,599,042,156 Other Operating Expenses 1,528,112,758 1,006,520,070 Financial Intermediation Margin 12,219,111,863 8,469,770,465 Operating Expenses 5,920,521,034 4,625,466,105 Cross Operating Margin 6,298,590,829 3,844,304,360 Income from realizable goods 46,337,421 43,424,917 Miscellaneous Operating Income 222,563,917 197,905,043 Expenses from realizable goods 2,848,863 836,042 Miscellaneous operating expenses 602,536,496 424,145,298 Net Operating Margin 5,962,106,808 3,660,652,980 Extraordinary Income 0 0 Extraordinary Expenses 35,623,180 34,554,336 Gross Income before Tax 5,926,483,628 3,626,098,644 Income Tax 721,382 121,201,528 NET INCOME 5,925,762,246 3,504,897,116

Application of Net Income Retained Earnings 5,925,762,246 3,504,897,116 LOSEP Fund 59,856,184 36,626,320

(*) Comparative Financial Statements for the last four quarters and Appropriation of Net Income, pursuant to Article 20[D] of the Standards establishing the Guidelines and Requisites to be submitted by the Meetings of Shareholders of Banking Institutions, Currency Exchanges, and Border Exchange Operators.

24 Report

Financial Statements (In accordance with the standars of the National Securities Superintendency)

Balance Sheet For Operations Consolidated with For Operations Consolidated with (in Bolivars) in Venezuela Overseas branches in Venezuela Overseas branches Assets December 31 December 31 June 30 June 30 2014 2014 2014 2014 Cash and Due from banks 74,773,739,699 74,865,588,236 50,410,147,565 50,497,947,706 Cash 4,323,074,680 4,323,074,680 2,739,677,801 2,739,677,801 Central Bank of Venezuela 66,235,156,563 66,235,156,563 43,118,281,307 43,118,281,307 Venezuelan Banks and other Financial Institutions 290,000 290,000 290,000 290,000 Foreign Banks and other Financial Institutions 510,114,920 601,963,457 598,057,769 685,857,301 Head Office and Branches 0 0 0 0 Pending Cash Items 3,705,103,536 3,705,103,536 3,953,840,688 3,953,841,297 (Allowance for Cash and Due from banks) 0 0 0 0

Investments Securities 43,634,837,603 44,287,992,721 46,323,837,174 46,576,041,790 Central Bank of Venezuela and Overnight 1,188,775,000 1,188,775,000 7,487,822,000 7,487,822,000 Investments in Trading Securities 0 0 0 0 Investments in Securities Available for Sale 16,292,728,396 16,845,890,167 18,113,390,216 18,276,289,403 Investments in Securities held-to-maturity 5,755,356,716 5,755,356,716 5,761,060,584 5,761,060,584 Restricted Investments 189,564,274 289,557,621 11,602,025 100,907,454 Investments in Other Securities 20,208,413,217 20,208,413,217 14,949,962,349 14,949,962,349 (Allowance for Investments Securities) 0 0 0 0

Loan Portfolio 162,564,282,251 162,619,332,439 122,815,365,124 123,279,963,409 Current 167,524,542,973 167,580,573,699 126,119,259,514 126,586,702,116 Rescheduled 500,986,234 500,986,234 540,771,377 540,771,377 Past Due 435,910,057 435,910,057 462,267,640 462,267,640 In Litigation 56,019 56,019 204,595 204,595 (Allowance for Losses on Loan Portfolio) (5,897,213,032) (5,898,193,570) (4,307,138,002) (4,309,982,319)

Interest and Commissions Receivable 2,159,182,238 2,170,590,311 1,794,762,551 1,797,782,305 Interest Receivable on cash and Due froms Banks 0 2,253 0 1,136 Interest Receivable on Investments Securities 599,964,109 611,233,037 743,330,634 745,021,484 Interest Receivable on Loan Portfolio 1,495,049,967 1,495,186,859 1,017,830,846 1,019,158,614 Commissions Receivable 88,417,268 88,417,268 55,392,215 55,392,215 Interest Receivable on Other Accounts Receivable 30,552 30,552 108,371 108,371 (Allowance for Interest Receivable on Loan Portfolio and Other) (24,279,658) (24,279,658) (21,899,515) (21,899,515)

Investments in Subsidiaries, Affiliates and Branches 1,185,015,578 449,474,708 1,150,754,013 424,848,511 Invesments in Subsidiaries and Affiliates 449,491,830 449,491,830 424,865,633 424,865,633 Invesments in Branches 735,540,870 0 725,905,502 0 (Allowance for Invesments in Subsidiaries, Affiliates and Branches) (17,122) (17,122) (17,122) (17,122)

Assets Available for Sale 22,636,071 22,636,071 3,877,627 3,877,627 Property and Equipment 920,047,356 920,047,356 669,988,878 669,988,878 Other Assets 2,556,195,064 2,557,706,075 1,704,725,996 1,713,090,122

Total Assets 287,815,935,860 287,893,367,917 224,873,458,928 224,963,540,348

Contingent Debtor Accounts 2,619,615,291 2,619,615,291 1,897,050,319 1,897,050,319 Assets Received in Trust 20,688,548,760 20,688,548,760 16,850,891,288 16,850,891,288 Special Trust Services 12,527,177 12,527,177 15,326,827 15,326,827 Debtor Accounts from Other Special Trust Services (Régimen Prestacional de Vivienda y Hábitat ) 0 0 0 0 Other Debtor Accounts (Housing Mutual Fund) 0 0 0 0 Other Debtor Memorandum Accounts 429,295,677,844 429,295,677,844 330,473,420,718 330,561,587,317 Other Debtor Control Accounts 9,832,276 9,832,276 10,851,683 10,851,683

Nelson Pinto A. Alfonso Figueredo Davis Isabel Pérez Sanchis Gustavo Vollmer A. Executive President Chief Financial Officer Corporate Comptroller President

26 Report Financial Statements (In accordance with the standars of the National Securities Superintendency)

Balance Sheet For Operations Consolidated with For Operations Consolidated with (in Bolivars) in Venezuela Overseas branches in Venezuela Overseas branches Liabilities December 31 December 31 June 30 June 30 2014 2014 2014 2014 Total Deposits 258,022,405,977 258,084,540,921 201,934,781,323 202,019,275,738 Demand Deposits 174,692,960,589 174,735,696,082 138,890,047,952 138,940,627,936 Non-Interest Bearing Cheking Accounts 83,614,527,247 83,655,678,689 64,359,978,518 64,410,367,604 Interest Bearing Cheking Accounts 77,384,718,564 77,386,302,615 67,027,935,255 67,028,126,153 Checking accounts in accordance with Exchange Agreement Nº 20 227,562,130 227,562,130 360,589,187 360,589,187 Demand deposits and certificates 13,466,152,648 13,466,152,648 7,141,544,992 7,141,544,992 Other Demand Deposits 4,431,357,875 4,432,222,968 3,973,094,637 3,973,117,286 Obligations for Money Desk Operations 0 0 0 0 Saving Deposits 78,111,913,789 78,120,225,622 58,369,816,510 58,382,775,574 Time Deposits 520,245,035 522,884,401 508,937,417 511,575,862 Securities Issued by the Bank 0 0 0 0 Restricted Customer Deposits 265,928,689 273,511,848 192,884,807 211,179,080 Rigths and participation investment securities 0 0 0 0 Obligations to Central Bank of Venezuela 0 0 0 0 Deposits and Liabilities with BANAVIH 375,258 375,258 739,195 739,195 Borrowings 255,595,002 268,163,402 155,706,456 155,706,456 Borrowings from Venezuelan Financial Institutions, Up to 1 Year 116,740,735 116,740,735 123,100,665 123,100,665 Borrowings from Venezuelan Financial Institutions, More Than 1 Year 0 0 0 0 Borrowings from Overseas Financial Institutions, Up to 1 Year 138,854,267 151,422,667 32,605,791 32,605,791 Borrowings from Overseas Financial Institutions, More Than 1 Year 0 0 0 0 Other Borrowings, Up to 1 Year 0 0 0 0 Other Borrowings, More Than 1 Year 0 0 0 0 Other Liabilities for Financial Intermediation 4,061,038 4,061,038 6,670,997 6,670,997 Interest and Commissions Payabler 63,154,127 63,195,292 31,265,285 31,305,535 Expenses Payable on Customer Deposits 62,806,139 62,813,788 31,144,646 31,184,896 Expenses Payable on Obligations to the BCV 0 0 0 0 Expenses Payable on Deposits and Liabilities with BANAVIH 0 0 0 0 Expenses Payable for Other Financing Obtained 347,988 381,504 120,639 120,639 Expenses Payable for Other Borrowings 0 0 0 0 Expenses Payable for Other Obligations 0 0 0 0 Expenses Payable for Subordinated Debt 0 0 0 0

Other Liabilities 5,214,539,808 5,217,227,356 4,481,043,634 4,486,590,389 Subordinated Debt 0 0 0 0 Obligations Convertible to Capital 0 0 0 0

Total Liabilities 263,560,131,210 263,637,563,267 206,610,206,890 206,700,288,310 Shareholders’ Equity

Nominal Capital Stock par value 268,060,233 268,060,233 268,060,233 268,060,233 Convertible Bonds 0 0 0 0 Paid-in Surplus 35,833 35,833 35,833 35,833 Capital Reserves 278,782,642 278,782,642 277,442,341 277,442,341 Equity Adjustments (1,035,863) (1,035,863) (1,003,358) (1,003,358) Retained Earnings 22,869,096,766 22,869,096,766 16,944,674,821 16,944,674,821 Unrealized Gain on Investments Available for Sale 840,865,039 840,865,039 774,042,168 774,042,168

Total Shareholders’ Equity 24,255,804,650 24,255,804,650 18,263,252,038 18,263,252,038

Total Liabilies and Shareholders’ Equity 287,815,935,860 287,893,367,917 224,873,458,928 224,963,540,348

Nelson Pinto A. Alfonso Figueredo Davis Isabel Pérez Sanchis Gustavo Vollmer A. Executive President Chief Financial Officer Corporate Comptroller President

27 Banco Universal Financial Statements (In accordance with the standars of the National Securities Superintendency)

Income Statement For Operations Consolidated with For Operations Consolidated with (in Bolivars) in Venezuela Overseas branches in Venezuela Overseas branches Semestre finalizado December 31 December 31 June 30 June 30 2014 2014 2014 2014 Interest Income 16,723,494,683 16,741,731,153 11,410,521,712 11,421,360,952 Income From Cash and Due From Banks 565,305 568,390 406,973 410,988 Income From Investment Securities 1,749,917,032 1,765,715,808 1,951,657,320 1,957,542,462 Income From Loan Portfolio 14,876,443,096 14,878,877,705 9,418,606,004 9,423,556,087 Income From Other Account Receivable 24,267,023 24,267,023 19,169,352 19,169,352 Income From Investment in Subsidiaries, Affiliates, and Branches 0 0 0 0 Income From Head Office and Branches 0 0 0 0 Other Interest Income 72,302,227 72,302,227 20,682,063 20,682,063 Interest Expenses 5,262,082,746 5,262,208,120 3,795,534,600 3,795,574,605 Expenses From Customer Deposits 5,240,360,501 5,240,382,142 3,649,492,495 3,649,532,500 Expenses From Obligations to Central Bank of Venezuela 0 0 0 0 Expenses From Deposits and Liabilities with BANAVIH 0 0 0 0 Expenses From Other Borrowings 718,757 822,490 1,445,406 1,445,406 Expenses From Other Liabilities From Financial Intermediation 18,619,452 18,619,452 140,332,538 140,332,538 Expenses From Subordinated Debt 0 0 0 0 Expenses From Other Obligations 0 0 0 0 Expenses From Head Office and Branches 0 0 0 0 Other Interest Expenses 2,384,036 2,384,036 4,264,161 4,264,161 Net Interest Expenses 11,461,411,937 11,479,523,033 7,614,987,112 7,625,786,347 Income From Financial Assets Recovered 149,758,871 152,220,262 144,672,530 145,240,991 Expenses From Uncollectible and Devaluation of Financial Assets 1,901,656,961 1,902,223,521 893,778,959 893,778,959 Provision for Loan Portfolio and Other Accounts Receivable, Losses 1,901,656,961 1,902,223,521 893,778,959 893,778,959 Provision for Cash and Due from Banks 0 0 0 0 Net Financial Margin 9,709,513,847 9,729,519,774 6,865,880,683 6,877,248,379 Other Operating Income 4,027,674,870 4,017,704,847 2,601,975,760 2,599,042,156 Other Operating Expenses 1,520,434,774 1,528,112,758 1,004,847,351 1,006,520,070 Financial Intermediation Margin 12,216,753,943 12,219,111,863 8,463,009,092 8,469,770,465 Personnel and Operating Expenses 5,916,539,497 5,920,521,034 4,619,751,874 4,625,466,105 Salaries and Employee Beneficts 2,231,015,545 2,231,015,545 1,895,475,672 1,895,475,672 Operating Expenses 2,103,606,516 2,107,588,053 1,446,393,003 1,452,107,234 Fees Paid to The Deposit Guaranted and Banking Protection Fund (Fogade) 1,458,116,054 1,458,116,054 1,182,820,850 1,182,820,850 Fees paid to The Superintendency of Banks and Other Financial Institutions 123,801,382 123,801,382 95,062,349 95,062,349 Gross Operating Margin 6,300,214,446 6,298,590,829 3,843,257,218 3,844,304,360 Income From Realizable Goods 46,337,421 46,337,421 43,424,917 43,424,917 Income From Special Programs 0 0 0 0 Miscellaneous Operating Income 219,264,712 222,563,917 197,905,043 197,905,043 Expenses From Realizably Goods 2,848,863 2,848,863 836,042 836,042 Expenses From Depreciation, Amortization, and Devaluation of Miscellaneous Goods 0 0 0 0 Miscellaneous Operating Expenses 601,582,290 602,536,496 423,191,093 424,145,298 Net Operating Margin 5,961,385,426 5,962,106,808 3,660,560,043 3,660,652,980 Extraordinary Income 0 0 0 0 Extraordinary Expenses 35,623,180 35,623,180 34,554,336 34,554,336 Gross Income Before Tax 5,925,762,246 5,926,483,628 3,626,005,707 3,626,098,644 Income Taxes 0 721,382 121,108,591 121,201,528 Net Income 5,925,762,246 5,925,762,246 3,504,897,116 3,504,897,116

Application of Net Income Legal Reserve 0 0 0 0 Profit Sharing 0 0 0 0 Board of Directors 0 0 0 0 Officers and Employees 0 0 0 0 Other Capital Reserves 0 0 0 0 Retained Earnings 5,925,762,246 5,925,762,246 3,504,897,116 3,504,897,116 LOSEP Fund 59,856,184 59,856,184 36,626,320 36,626,320

Nelson Pinto A. Alfonso Figueredo Davis Isabel Pérez Sanchis Gustavo Vollmer A. Executive President Chief Financial Officer Corporate Comptroller President

28 Report Economic Climate

Venezuela Venezuelan economic results during 2014 continued affected by restrictions in external money supply, enhanced by oil prices decline during the second half of the year, resulting in an important restrain to economic growth and price stability. Taking into consideration the figures published during the the first three quarters of the year, the Venezuelan economic outlook slowed down significantly from 1.5 % growth during the same period in 2013 to 4 % decline of total GDP, on which oil activities grew at 0.3% and non-oil activities dropped to 3.8 %. The fastest-growing sectors continue to be non-tradable, among them, Financial Institutions and Insurance Companies (14.2 %), Communications (5.0 %), General Government Services (1.7 %), and Community, Social and Personal Services (0.2 %). By contrast, the remaining businesses registered drops in: Trade (10.8 %), Construction (10.0 %), Manufacturing (9.2 %), Transportation (8.2 %), Mining (7.2 %), Agriculture (3.9%), Real Estate Services (1.9 %), and Electricity and Water (1.1 %).

Despite this decline in growth, the labor market picked up, with open unemployment closing at 5.5 % vs. 5.6 % in December 2013 (7.0 % vs. 7.5 % on average), partly due to the net creation of 441,170 jobs, at the close of 2014. Public sector employment decreased in 77,577 jobs, which were more than offset by the creation of 518,747 jobs in the private sector, of which nearly 26 % were formal activities.

For the first three quarters of the year, global aggregated demand (domestic plus exports) also slowed down significantly, from -0.9 % in the same period of 2013 to -8.2 %, both in its domestic demand (-8.4 %) and exportations (-6.1 %). The remaining domestic spending components declined, with the exception of public consumer spending (+0.8 %): household spending (3.3 %), gross fixed capital formation (17.9 %) and inventories (28.5 %). From the

Summary of Economic Performance 2013 2014 aggregate supply side, the drop in local production was intensified by the significant Percentage Variation of Gross Domestic Product % 1 contraction of imports in 17.4 %, which is added Total 1.5 -4.0 to the reduction registered in the same period of Oil Sector 1.0 0.3 Non-Oil Sector 1.7 -3.8 2013 (5.6 %), totaling a total contraction of 22 %

Exchange Rate Bs/US$ in the last 2 years. End of Períod 6.30 13.90 The performance of the aggregated supply and Average 5.80 14.66 demand, and particularly the current Exchange Rate Variation % End of Períod 46.51 % 120.6 % mechanism used to finance the public consumer Average 34.90 % 152.7 % spending, explains the significant rise in Inflation (Caracas) % 2 inflation in 2014 which, from a year-on-year Cumulative Variation 52.7 64.7 variation (November to November), was 60.1 % Annualized Variation 25.2 70.4 from 52.8 % in 2013. Interest Rates. End of Period Average Lending Rates (6 main banks) 15.6 19.2 The external sector has also experienced a 90 day Time Deposits (6 main banks) 14.7 14.5 negative performance up to September 2014, (1) Cumulative figures for the third quarter of each year. (2) Figures as of November of each year. compared to the same period of 2013. Source: Central Bank of Venezuela (BCV) and in-house calculations.

29 Banco Universal The value of oil exports decline in more than US$ 6,000 million, as a result of the average price declining from US$ 101.5/barrel in 2013 to US$/91.5 barrel in 2014 (-5.9 %) and the 89,000 barrels/day decline in oil exports (estimated implicitly from the balance of payments). Total imports also underwent into a contraction, both in the case of public oil imports (US$ 2,327 million), and private non-oil imports (in US$ 5,142 million) since public non-oil imports slightly increased (US$ 213 million). As a result, the balance of goods increased its surplus in US$ 1,179 million in 2014, to calculate a significant external saving of US$ 28,344 million in three quarters. Nevertheless, after adjusting the structural deficit in the balance of income, services and current transfers (-US$ 18,435 million) and the capital and financial account (-US$ 7,525 million), plus Errors and Omissions (-US$ 3,189 million), for the sixth year running, the global statement of the balance of payments reflected a US$ 805 million deficit (considerably lesser than the US$ 3,305 million gap in 2013). The international reserve levels closed at US$ 21,340 million during the third quarter of the year, similar to 2013. In the last quarter of the year, the international reserves increase 3.4 % (+US$ 718 million) to US$ 22,058 at the end of 2014. The fiscal policy nominally grew at 53 % up to December 2014, once the accumulated inflation in the same period was deducted, an inter-annual decrease of 1.2 % in real terms was implied. This relative expenditure and income abatement, which is estimated to have increased around 45 % in nominal terms establishes a fiscal deficit from the Central Government around 2.7 points of GDP (-2 % in 2013). The injection of considerable sums of money of fiscal origin, credits to PDVSA by the issuing institution, banking credits, less available foreign exchange, maintenance of restrictions to capital flows and the absence of the issuances of dollar-denominated debt securities paid in bolivars in the domestic market explained the significant monetary expansion in 2014 of 64 % (69.7 % in 2013), which after taking the effect of inflation into account, led to a -2.1 % decline in payment systems in real terms (+7.2 % in 2013). The lending rates of the Commercial and Full-Service Banks averaged on 17.2 % in 2014, above the 15.6 % registered in 2013. The deposit rates, which are measured based on savings and term deposits averaged 13.9 % and 14.7 %, almost identical to last year's figures. Significantly faster-growing inflation remained real interest rates negative. On average, the real lending rate was -28.7 % (-24.2 % in 2013) and the real deposit rate was -30.4 % (-25.0 % in 2013) taking term deposits as a benchmark.

30 Report Strategic Positioning

During 2014, a detailed review and analysis process of all major strategic definitions, guiding Mercantil business activities, was conducted. During this process, the texts of Mercantil’s Mission and Vision strategic definitions were reviewed, and the Culture and Commitment concepts were set, which integrate all Mercantil principles and values. They include new

Mission distinguishing elements of Mercantil performance in the development and implementation of its activities. To fulfill the needs of our customers by providing excellent financial products Our Culture and services, attain the aspirations of Soundness : “Strength and Soundness above all else”. our employees, support the development Long-term thinking and vision : “The strategy is based on a long-term outlook, with tactical of the communities where Mercantil decisions and permanently striving to achieve the desired results”. has presence and add value for our Respect and Care for Employees : “The well-being, motivation, recognition and individual shareholders through a long term development of our employees are permanent goals for the organization”. outlook. Mercantil brand is the focal point : “The brand image is the organization. The public presence is of the organization as a whole and not of its individual members. The corporate profile is Vision guided by the strategy”. To be a financial services organization Compliance : “Strict and timely adherence to all applicable laws, regulations, rules and policies”. of reference* in the area of banking, in Ethical Behavior : “Zero tolerance for unethical behavior and transparency in all the markets we serve. communications and information”. Multinational : “We are an international organization with Venezuelan roots”. (**) Reference : Resilience : “We continuously adapt to changing environments and circumstances with dignity To be recognized and respected for our strength, ethical behavior, dynamism, and integrity”. innovation, quality of service and for Good citizenship : “Our behavior reflects the solidarity and commitment to the community”. being the best place to wor k. Corporate Governance : “Respect for the organization’s corporate governance structure”.

Our Commitment • To be the best financial services provider as measured by the degree to which customers’ needs and expectations are met, through products and services considered by them as the best in the market. • To be a leading and innovative institution that anticipates the needs of the customers and competitors actions. • To be recognized for its quality and excellence. • To have the best and most capable human resources that are committed to working as a team. • To maintain a prudent risk management combined with an excellent asset and liability management. • To maintain a continuous focus on increasing operational efficiency across the organization, leveraging on technology as a competitive advantage .

31 Banco Universal Mercantil keeps focusing on the development of integral and differentiated value proposals for each customers segment. Efforts are maintained to increase financing to the productive sectors and the SME segments, in line with the risk parameters established throughout the institution. A constant supply of comprehensive products and services was made available to meet customers' needs and the supply of electronic and self-service products was expanded in an endeavor to enhance the quality of service through the installation of new self-service facilities and the increase of Mercantil Móvil functionalities, reflected in the transactions growth registered in these two distribution channels. The company also continued to execute its plan to grow the Mercantil Aliado network, focused on the Majority Banking segment to promote the development of low-income communities and attract new clients. Emphasis is on improving efficiency through the ongoing improvement of processes and an improved quality of products and services. All of this has been undertaken in strict compliance with the regulations applicable in the countries where we operate, with strong capitalization following the principles of transparency and sound management that are key to Mercantil’s strategic positioning, the nature of the institution, and its day-to-day activity.

32 RAenpuoartl Our Culture Long-Term Thinking and Vision “The strategy is based on a long-term outlook, with tactical decisions and permanently striving to achieve the desired results”

Since Mercantil’s inception, its founders and successors always had a long-term business vision. Mercantil’s steadfast commitment to Venezuela and the close relationship with its customers, employees and vendors is grounded Customers of three generations in creating strong partnerships, adding value Mercantil Banco has a clear long-term and serving as a pillar and support for all to business vision. Go along with its grow collectively and individually. customer in their development have served as pillars in their relationship. Mercantil has maintained a relationship for three generations with Marrone family. For Nicola Marrone (father), Marco Marrone (son) and Mauricio Marrone (grandson) the reciprocal trust that has grown with the institution is crucial to its daily operations and future plans.

Banking oriented to people and small and medium enterprises An important landmark in Mercantil’s development process was the decision of acquiring Interbank Banco Universal in the year 2000; a fact that complemented Mercantil`s strength.

96 % of Mercantil Banco Universal employees agree that “At Mercantil, we make decisions thinking about the future of the organization.” 2014 Organizational Climate and Engagement Survey Our Culture Respect and Care for Employees “The well-being, motivation, recognition and individual development of our employees are permanent goals for the organization”

The employees of Mercantil Banco are its greatest asset and the commitment to their well-being and personal and professional development is a permanent strategic priority. This is demonstrated year after year in the company’s compensation policies, training opportunities, and employee engagement initiatives, bringing together employees and their families closer to Mercantil. Through our employees and their contributions to the organization, Mercantil communicates their own culture guidance.

Training program of reference in Venezuela In 1966, Mercantil initiated its Credit Training Courses, supported by the experience of the Chase Manhattan Bank. The comprehensive credit program is a tradition in the company and a reference in the country in the quality of professionals training.

A Labor Relationship with Identity Cordiality and respect are fundamental values at Mercantil. These three members of the same family, who have created a 40-year relationship with the Bank, state that “our co-workers are people like us.” 93 % of Mercantil Banco Universal employees agree that “At Mercantil, trust Pedro Reyes (uncle), who is currently the Customer and User Ombudsman and respect are the guiding principles of how of Mercantil, joined the bank in employees are treated”. 1975; Nelson Lehmann (father) did it so in 1982, when the Bank purchased the Diners Club 2014 Organizational Climate and Engagement Survey franchise. Today, he is retired from Mercantil. And in 1991, Elsy Lehmann (daughter and niece) has developed her Human Resources career since then. Management Discussion and Analysis

Balance Sheet A summarized Balance Sheet at December 31, 2014, 2013 and 2012 is presented below and the main variations when comparing December 2014 with December 2013 are commented on: Summary of the Consolidated

Balance Sheet Dec. 2014 vs. Dec. 2013 Dec. 2014 vs. Dec. 2012 Year ended December 31 December 31 December 31 December 31 Increase/ Increase/ (In thousands of Bs and millons of US$ 2014 2014 2013 2012 (Decrease) (Decrease) except percentages) US$ (1) bolivars bolivars bolivars bolivars % bolivars %

Total Assets 45,812 287,892,974 183,030,629 104,514,153 104,862,345 57.3 183,378,821 175.5

Cash and Due from Banks 11,913 74,866,697 44,543,920 26,893,624 30,322,777 68.1 47,973,073 178.4

Investment Portfolio 7,085 44,523,248 45,067,501 17,870,462 (544,253) (1.2) 26,652,786 149.1

Loan Portfolio (net) 25,877 162,619,332 89,809,279 57,755,945 72,810,053 81.1 104,863,387 181.6

Deposits 41,069 258,083,275 162,756,924 92,499,400 95,326,351 58.6 165,583,875 179.0

Shareholders’ Equity 3,860 24,255,805 16,557,049 9,233,354 7,698,756 46.5 15,022,451 162.7

Historic figures presented in accordance will the standars of the Superintendency of Banks and Other Financial Institutions.

The Audited Financial Statements and their notes, which include the summary of the accounting standards used, are included in this report.

Total Assets At December 31, 2014 Mercantil Banco Universal’s total consolidated assets were Bs 287,893 million (US$ 45,812 million) 1 , which represents Bs 104,862 million (57.3 %) and Bs 183,379 million (175.5 %) more than in December 2013 and 2012 respectively. The loan portfolio remained the principal component (56.5 %) of total assets, cash and due from banks accounts for 26.0 %, while the investment portfolio accounts for 15.5 % at the end of the half. Mercantil Banco Universal ranks third in the Venezuelan private financial system at December 31, 2014 in terms of total assets, with 11.6 % of the market. The largest market share held by an institution in Venezuela's financial system is 17.6 % and the country’s four largest banks account for 56.8 % of the market .

(1) Dollar figures are given for reference purposes only; balance sheet figures are converted at the period-end exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

35 Banco Universal Cash and Due from Banks At December 31, 2014, cash and due from banks reached Bs 74,867 million (US$ 11,913 million) 1 , reflecting Bs 30,323 million (68.1 %) and Bs 47,973 million (178.4 %) growth compared to December 2013 and 2012 respectively, mainly due to the increase in the balances in the Venezuelan Central Bank, driven by the total deposit growth. The liquidity ratio, calculated by dividing total cash and due from banks by total deposits was 29.0 %, and the liquidity ratio calculated by dividing total cash and due from banks plus investments, by total deposits was 46.3 %, compared with 27.4 % and 55.1 % respectively in December 2013 .

Investments in Securities

Investments in Securities Dec. 2014 vs. Dec. 2013 Dec. 2014 vs. Dec. 2012 by Issuer December 31 December 31 December 31 Increase/ Increase/ Year ended 2014 2013 2012 (Decrease) (Decrease) (In thousands of Bs except percentages) bolivars bolivars bolivars bolivars % bolivars %

Venezuelan Central Bank (BCV) 1,188,775 9,753,685 4,075,597 (8,564,910) (87.8) (2,886,822) (70.8)

Venezuelan State and Government Entities 42,987,197 35,037,610 13,537,974 7,949,587 22.7 29,449,223 217.5

U.S. Government and U.S. Government-backed Agencies 102,892 143,634 163,267 (40,742) (28.4) (60,375) (37.0)

Others 244,384 132,572 93,624 111,811 84.3 150,760 161.0

Total Investments 44,523,248 45,067,501 17,870,462 (544,253) (1.2) 26,652,786 149.1

At December 31, 2014 investments in securities totaled Bs 44,523 million (US$ 7,085 million) 1, similar to Bs 45,068 million registered in December 2013 and higher than Bs 26,653 million (149.1 %) recorded in December 2012. Also at December 31, 2014 total investments in securities were made up of: 96.6 % in securities issued or guaranteed by the Venezuelan state and government agencies; 2.7 % in deposit certificates issued by the Venezuelan Central Bank with maturities less than 30 days; 0.5 % in securities issued by the Venezuelan and international private sectors, and 0.2 % in securities issued by the U.S. government and guaranteed agencies, among others.

Government bonds issued by the Venezuelan state account for 0.6 times the Bank's equity and 5.8 % of its assets.

At December 31, 2014, in line with a regulation issued by the Venezuelan National Executive branch, the Bank purchased Bs 26,167 million in Mortgage Securities, Participation Certificates, Agricultural Bonds and Stocks, accounting for 58.8 % of its investment portfolio and 1.1 times its shareholders' equity (Bs 16,745 million, representing 37.2 % of its investment portfolio and 1.0 times its shareholders' equity at December 31, 2013).

(1) Dollar figures are given for reference purposes only; balance sheet figures are converted at the period-end exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

36 Report Loan Portfolio

At December 31, 2014 net loans totaled Bs 162,619 million (US$ 25,877 million) 1, reflecting Loan Portfolio year-on-year growth of Bs 72,810 million (81.1 %) and Bs 104,863 million (181.6 %) compared By Business Segment to December 2013 and 2012 respectively. At the close of December 2014, Mercantil Banco Universal is the leading bank in Venezuela's private financial system in terms of loans to the 180,000 160,000 tourism, manufacturing and agricultural sectors with 14.2 %, 15.3 % and 15.3 % of the market,

s 140,000 r 40 % a v

i respectively. It ranks second in terms of gross loans with a market share of 14.1 %. It is

l 120,000 o b

f 100,000 o

s 13 % Venezuela's third bank in terms of mortgages with a market share of 6.6 %. Loan portfolio n

o 80,000 i

l 47 % l i

M 60,000 quality remains very favorable, with a ratio of past-due and nonperforming loans to gross 42 % 15 % 40,000 47 % 15 % 20,000 38 % loans of 0.3 %, compared to 0.5 % for the Venezuelan financial system as a whole. 43 % 0 Dec. 2012 Dec. 2013 Dec. 2014 99.4 % of Mercantil Banco’s loan portfolio is outstanding at December 31, 2014. The allowance for losses on loan portfolio covers 1,352.9 % of past-due and nonperforming loans (914.5 % Individuals and 611.5 % at December 31, 2013 and 2012 respectively). Large Corporations Small and Medium Enterprises (SMEs)

Loan Portfolio (2) Quality December 31 December 31 December 31 Year ended System 2014 2013 2012 Average bolivars bolivars bolivars Past Due + Non-Performing Loans / Gross Loans (%) 0.5 0.3 0.4 0.6

Allowance for Loan Losses / Past Due + Non-Performing Loans (%) 604.7 1,352.7 913.7 611.1

(2) Calculated on operations in Venezuela

Gross Loans Classified

by Status December 31 December 31 December 31 Year ended 2014 2013 2012 (In thousands Bs except percentages) bolivars %%bolivars bolivars %

Current 167,580,574 99.4 92,479,759 99.0 59,223,813 98.6 Reestructured 500,986 0.3 545,128 0.6 492,243 0.8 Past Due 435,910 0.3 389,596 0.4 373,454 0.6 In Litigation 56 0.0 5,180 0.0 9,761 0.0

Total 168,517,526 100.0 93,419,663 100.0 60,099,271 100.0

(1) Dollar figures are given for reference purposes only; balance sheet figures are converted at the period-end exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

37 Banco Universal At December 31, 2014 the full-service banks must earmark a minimum nominal percentage of 62.3 % for loans to the agricultural, microenterprise, mortgage, tourism and manufacturing sectors. Mercantil Banco Universal’s level of compliance is as follows:

At December 31, 2014 Maximum Balance Annual (In Thousands Achieved Required Interest Activity of Bolivars) % % Rates % Calculation basis Agriculture (a) 27,602,484 38.21 25.0 13 Average gross loans at December 31, 2013 and 2013.

Microenterprise 5,195,148 4.09 3.0 24 Gross loans at June 30, 2014. Between Mortgage (b) 6,116,783 15.16 20.0 4.66 y 10.66 Gross loans at December 31, 2013

(c) Tourism 3,660,742 5.06 4.25 7.02 ó 10.02 Average gross loans at December 31, 2013 and 2012.

(d) Manufacturing 17,650,616 18.99 10.0 16.20 ó 18 Gross loans at December 31, 2013.

60,225,773 81.51 62.25

a) In July 2012, Petroleos de Venezuela, S.A. (PDVSA) and in May 2012, the Fondo de Desarrollo Nacional Fonden, S.A., issued Non-Convertible Bearer Bonds to strengthen and finance the agricultural mission Great Agricultural Mission Venezuela (Gran Misión Agro-Venezuela) through the Ezequiel Zamora Fund, which totalled Bs 1,580 million. In April 2009 the executive branch approved the issuance of government debt bonds to finance the Integral Agricultural Development Plan Project 2009-2010. These emissions can be attributed to the compulsory agricultural loan portfolio up to a maximum of 30% of the required portfolio in accordance with the Ministry of Agriculture and Lands aproval in July 2012. The total amount of the agricutural loan portfolio adding these investments amounted to Bs 29,183 million at December, 31 2014. From the total amount of the compulsory agricultural loan portfolio to be maintained, at least 75% must be allocated to financing strategic items for which compliance percentages for specific activities were set, a maximum of 5% for non-strategic items and 20% for agribusiness investment and marketing. Similarly, medium and long term credits should be placed in a minimum percentage of 20% of total agricultural loan portfolio. At December, 31 2014 the Bank has allocated 89.86% to strategic items, 0.26% to non-strategic items and 9.88% to agribusiness investment and marketing. Also, at December 31, 2014 medium and long term credits are held representing 21.78% of the total agricultural loan portfolio. b) At December 31, 2014 the Bank has Bs 18,081 million in Bolivarian Housing Securities issued by Fondo Simón Bolívar para la Reconstrucción, S.A., to finance the Great Venezuelan Mission (Gran Misión Venezuela) of which Bs 7,975 million are attributed to the compulsory agricultural loan portfolio of 2014. The total amount of the mortgage loan portfolio adding these investments amounted to Bs 14,091 million at December, 31 2014. c) At December 31, 2014 the Bank complies with the minimum percentage requiered for tourism sector in 5.06% (includes Bs 207 million SOGATUR shares). In November 2014 the Tourism Sector Credit Law came into effect, which repealed the measure of segment classification of loan applicants; the total amount of the tourism loan portfolio by adding these investments amounted to Bs 3,868 million. d) In June 2013 the Ministry of Industries and the Ministry of Finance established the activities that must be financed through the full-service banks' manufacturing portfolio, which must earmark 60% of the total funds to strategic development sectors, and a minimum 40% for financing small and medium industries, joint ventures, community companies and state companies.

Total Deposits At December 31, 2014, total deposits were Bs 258,083 million (US$ 41,069 million) 1 , reflecting Deposits by Business Segment increases of Bs 95,326 million (58.6 %) and Bs 165,584 million (179.0 %) compared with December 2013 and 2012 respectively. Demand deposits were the main component of total deposits, which

270,000 reached Bs 174,734 million, 60.6 % up from the previous year and 240,000 representing 67.7 % of total deposits. Savings deposits rose Bs 28,053

s 27 % r

a 210,000 v i

l million (56.0 %) and time deposits Bs 42 million (8.8 %) compared to o 180,000 b

f o the previous period.

s 150,000 29 %

n 26 % o i l

l 120,000 i At year end Mercantil Banco Universal was the leading institution in the M 29 % 90,000 25 % country's private banking system with 20.7 % of savings deposits, and 60,000 24 % 44 % 30,000 51 % 45 % the third in terms of total deposits including demand liabilities with 11.7 % 0 of the market. Dec. 2012 Dec. 2013 Dec. 2014

Small and Me dium E n terprises (SMEs) Large Corporation Individuals

(1) Dollar figures are given for reference purposes only; balance sheet figures are converted at the period-end exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

38 RAenpuoartl Shareholders’ Equity

Shareholders’ Equity was Bs 24,256 million (US$ 3,860 million) 1 at December 31, 2014, reflecting increases of Bs 7,699 million (46.5 %) and Bs 15,022 million (162.7 %) compared with December 2013 and 2012 respectively. The year-on-year increase includes mainly Bs 9,431 million in accumulated net income in 2014, a Bs 1,099 million decrease corresponding to cash dividends paid, and Bs 633 decline from adjusting investments available for sale to their market value.

For Mercantil Banco Universal, the equity/assets ratio as of December 31, 2014 is 9.7 % 2 (minimum requirement 9 %) and the equity/risk-weighted assets ratio is 16.5 % (minimum requirement 12 %) according to the standards of the Superintendency of Banking Sector Institutions (10.9 % and 19.0 % at December 31, 2013 and 9.8 %; and 17.7 % at December 31, 2012 respectively).

Income Statement

Net Income Dec. 2014 Vs. Dec. 2013 Dec. 2014 Vs. Dec. 2012 Year ended December 31 December 31 December 31 December 31 Increase/ Increase/ (In thousands of Bs and millions of US$, 2014 2014 2013 2012 (Decrease) (Decrease) except percentages) US$ (1) bolivars bolivars bolivars bolivars % bolivars % Interest Income 4,486 28,191,405 16,676,251 10,720,754 11,515,154 69.1 17,470,651 163.0 Income Expense 1,441 9,057,578 5,030,305 3,368,584 4,027,273 80.1 5,688,994 168.9 Net Interest Income 3,045 19,133,827 11,645,946 7,352,170 7,487,881 64.3 11,781,657 160.2 Income from Financial Assets Recovered 47 297,461 187,102 128,319 110,359 59.0 169,142 131.8 Provision for Loan Portfolio Losses and other Accounts Receivable Losses 445 2,796,003 1,704,815 823,864 1,091,188 64.0 1,972,139 239.4 Net Financial Margin 2,647 16,635,285 10,128,233 6,656,625 6,507,052 64.2 9,978,660 149.9 Other Income, net 532 3,346,153 3,061,375 1,704,578 284,778 9.3 1,641,575 96.3 Operating Expenses 1,679 10,549,964 6,660,194 4,507,740 3,889,770 58.4 6,042,224 134.0 Taxes 0 814 3,602 458,431 (2,788) (77.4) (457,617) (99.8) Net Income for the year 1,501 9,430,660 6,525,812 3,395,032 2,904,848 44.5 6,035,628 177.8

(1) Dollar figures are given for reference purposes only; balance sheet figures are converted at the exchange rate at the end of the period of Bs 6.2842/US$ . income statement figures are converted at the average exchange rate for the period of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003. (2) Obtained by dividing equity by total assets minus investments in securities issued or guaranteed by the Venezuelan government and public entities.

39 Banco Universal Net Interest Income

In 2014 net interest income was Bs 19,134 million (US$ 3,045 million) 1 representing increases of Bs 7,488 million (64.3 %) and Bs 11,782 million (160.2 %) compared to the margins for the years ended December 31, 2013 and 2012 respectively. The increase compared to the end of 2013 is mainly due to a higher volume of financial assets and liabilities. Mercantil Banco Universal's net interest income/average financial assets ratio at December 31, 2014 was 10.9 % compared to 10.8 % the previous year. Interest income totaled Bs 28,191 million, recording a 69.1 % year-on-year increase. Financial expenses were Bs 9,058 million, 80.1 % more than in 2013.

Evolution of Net Interest Income

12.0 % 25,000 11.1 % 10.8 % 10.9 % 11.0 % s

r 20,000 10.0 % a v i

l 9.0 % o b 15,000 8.0 % f o

s 7.0 % n o

i 10,000 6.0 % l l i 4.1 % 5.0 % Net Interest Income M 3.5 % 5,000 3.3 % 4.0 % Net Interest Income/Average Financial Assets 3.0 % 7,352 11,646 19,134 Operating Expenses/Total Average Assets 0 2.0 % 2012 2013 2014

T he f inancial intermediation ratio (loans to deposits) was 65.3 %, at the close of 2014 (57.4 % and 65.0 % at December 31, 2013 and 2012 respectively).

Loan Portfolio Provision

During 2014, loan portfolio losses were Bs 2,796 million (US$ 445 million) 1 , up Bs 1,091 million (64.0 %) and Bs 1,972 million (239.4 %) compared to December 31, 2013 and 2012 respectively. The accumulated provision climbed to Bs 5,898 million as of December 31, 2014 and covers 1,352.9 % of past-due and nonperforming loans.

(1) Dollar figures are given for reference purposes only; income statement figures are converted at the average exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

40 Report Other Income, net

Other Income, net, in 2014 reached Bs 3,346 million (US$ 532 million) 1 , representing increases of Bs 285 million (9.3 %) and Bs 1,642 million (96.3 %) compared to December 31, 2013 and 2012 respectively. The year-on-year increase is mainly due to:

• Bs 1,512 million (84.4 %) growth of earnings from commissions on credit and debit cards, net of expenses for commissions for using points of sale and ATMs, generated by the increase in the volume of operations during the year.

• Bs 57 million (58.4 %) growth of income from commission on trust funds.

• Bs 46 million (6.3 %) decline in earnings from the sale of investments in securities as a result of trading in securities issued by the Venezuelan state. This activity was worth Bs 675 million in net earnings in 2014.

• Bs 958 million (107.2 %) decrease in earnings from exchange difference due to the exchange rate set by the Venezuelan Central Bank for the valuation of assets and liabilities in foreign currency (adjusted from Bs 4.2893/US$ to Bs 6.2842/US$) in 2013.

• Bs 253 million (54.1 %) rise in expenses for assets available for sale, provision for assets and operating expenses, among others.

Operating Expenses

Operating and Personnel expenses in 2014 reached Bs 10,550 million (US$ 1,679 million) 1 , representing increases of Bs 3,390 million (58.4 %) and Bs 6,042 million (134.0 %) compared to December 31, 2013 and 2012 respectively. The year-on-year increase is mainly due to:

• Bs 1,183 million (40.2 %) rise in personnel expenses. This increase in expenses is due to the application of compensation and benefits according to the market. Assets per employee grew from Bs 25.1 million in 2013 to Bs 39.7 million in 2014.

• Bs 1,222 million (74.6 %) rise in expenses for contributions to regulatory agencies.

• Bs 1,484 million (71.4 %) increase in general and administrative expenses. This increase is primarily due to Bs 338 million (61.2 %) in expenses to outsource services such as securities transportation, surveillance, and others, Bs 636 million (111.8 %) in expenses for depreciation of property and equipment, amortization of intangibles, etc., Bs 175 million (48.6 %) in taxes and contributions, and Bs 336 million (56.2 %) in general administrative expenses.

In 2014, the efficiency ratio measured by calculating operating expenses as a percentage of average assets, was 3.3 %, compared to 3.5 % in 2013; while the efficiency ratio, measured by calculating operating expenses as a percentage of total income was 32.2 %, versus 31.8 % in 2013. The number of employees have kept at the same level for the last 3 years. Personnel and operating expenses are affected by inflation in Venezuela which was 68.5 % over the last 12 months.

(1) Dollar figures are given for reference purposes only; income statement figures are converted at the average exchange rate of Bs 6.2842 / US$ 1. Exchange control has been in place in Venezuela since February 2003.

41 Banco Universal Taxes and Contributions

For the year ended December 31, 2014 Mercantil Banco Universal and its subsidiaries reported a significant volume of expenses for various types of taxes and contributions.

Operations in Venezuela generated: Bs 467 million in Value Added Tax, Bs 531 million in Municipal Taxes, Bs 2,641 million in contributions to the Deposit Guarantee and Banking Protection Fund, Bs 219 million in contributions to the Superintendency of Banking Sector Institutions, and Bs 390 million in contributions to the National Community Council Fund. Mercantil Banco, C.A. Universal and its subsidiaries also complied with other contributions provided for in the pertinent legislation.

Total contributions to the various official entities totaled Bs 4,318 million, accounting for 30.4 % of the Bank's expenses (Bs 2,614 million and 28.1 as of December 31, 2013 respectively).

42 Report Business Management Report

Personal Banking and Wealth Management

Personal Banking has a portfolio of over 4.4 billion clients served by 265 branches, 126 Affluent segment officers , 929 Mass Market segment officers, 9 Private Banking segment advisors and 53 Majorities Banking segment officers, offering different financial products and services to Mercantil customers.

Personal Banking s deposits closed at Bs 117,460 million and represent 60.4 % growth compared to the e’nd of December 2013. These performance is explained by 74.6 % increase in non interest bearing demand deposits and 56 % growth of savings deposits at the end of 2014. Personal Banking contributed with 46.7 % of Mercantil Banco Universal s total deposit growth of Bs 94,644 million, at the close of 2014. ’

Personal Banking’s loan portfolio grew 96.5 % at December 2014 to Bs 68,372 millions. Credit cards and its parallel credit lines were a determining factor in the loan portfolio growth, showing a 124 % increase (Bs 21,826 million). Loans aimed to individuals increased by 87 % (Bs 3,016 million), as a result of an attention-focused strategy in niche customers. Personal Banking contributed with 44.5 % of Mercantil Banco Universal’s total loan portfolio growth of Bs 75,491 million at the end of 2014.

During 2014, Credit Card business growth strategy consisted of promotional activities and adjustments on credit limits. These actions were instrumental for the Bank to rank second in the financial system with a market share of 18.4 % at December 2014.

This strategy was supported by cross-selling initiatives. The first and/or second credit cards were granted to 163,000 customers who fulfilled the established evaluation and risk parameters. Additionally, 3,488 New Professional Credit Cards were issued and distributed in several universities, to support the academic Community Strategy.

The consolidation process to include the unbanked sector of the population and support the communities continued in the Majorities Banking segment, through the Mercantil Aliado network, operating in low-income areas in 15 states throughout the country and the Capital District. As a result of this strategy, these network operations continues steadily growing in product placement. The Tarjeta Efectivo (Cash Card) reflected a 76.61 % growth, reaching a total of 174,685 Cards, while Microenterprise Loans registered a 98.9 % increase, totaling Bs 5,195 million at the end of the year. These volume of loan portfolio allowed the compliance of the microenterprise compulsory loan with 4 % reached, while the regulatory requirement is 3 % at the close of the year.

During 2014, Mercantil Banco, through its Trust Services Unit continued focusing its efforts on services enhancing and launching of two new products: Occupational Contingency Trust and Escrow Trust, keeping its leadership in the trust market and framed in an optimizing strategy of income on assets under management. Compared to 2013, the volume of customer assets increased 40 % and income from services grew 59 %.

43 Banco Universal The Securities Market Business, during 2014, focused on providing better services and technological improvements to customers for its participation on the exchange market through SICAD II. The simplification and automatization of the order registering process provided an important contribution to the Mercantil Securities Account growth, which totaled 164,785 customers, allowing their participation in the primary and secondary securities market, increasing securities custody management in 17.5 % and income in 17.8 % at the close of the year.

On the other hand, the Special Account in Foreign Currency product (Covenant Nº 20), required for all SICAD II operations, totaled 147,274 open accounts for both individuals and businesses as of December 2014.

At the close of 2014, Mercantil held 454 campaigns to promote products and services as well as the use of electronic channels, with a volume of over 42 million messages sent.

Between June and October, 2014, the “0” Choice for product suspension and additional alternatives for Monitoring Alert were incorporated in the Centro de Atencion Mercantil Automated System, in the Automatic Affiliation Charge option for Credit Card Payment .

Mercantil Online Banking continued to consolidate itself as the banking method preferred by clients, reaching at year end more than 1,210,000 users, equivalent to 576 million transactions, representing over 44 % of the transactions made in all channels in 2014.

During the second half of the year, Mercantil Personal Online Banking incorporated the Activation and Deactivation of services, Wire Transfers to Own International Account and Venezuelan Central Bank Fund Availability Inquiry for Special Foreign Currency Account functionalities.

44 Report Commercial Banking

Commercial Banking has more than 176,000 clients at year end, representing 46 % of Mercantil Banco Universal s total loan portfolio. It is broken down as follows: 59 % for Small and Medium Entreprises (SME’) segment, with 92 % of customers, and 41 % for the Middle Market segment with 8 % of the rest of the customers.

At the close of December 2014, Commercial Banking loan portfolio in Venezuela registered a strong 74 % growth compared to 2013, totaling Bs 77,746 million, of which Bs 31,957 million corresponds to the Middle Market Banking segment, showing 50 % year-on-year increase, and Bs 45,789 million corresponds to the Small and Medium Enterprise sector, with 96 % increase, compared to the end of 2013. This result was supported by the continued strategies of supporting and promoting SME segments through a program to finance working capital under competitive conditions. Commercial loans was the product with a higher contribution to the loan portfolio growth, showing Bs 19,000 million increase (70 % vs Dec. 13).

Currently, Mercantil Banco Universal complies with five compulsory loan portfolios, which accounted for 36 % of the Bank s gross loan portfolio. Commercial Banking is responsible for the agricultural, tourism and ma’nufacturing sectors, and cooperates with the microcredit and mortgage sectors. At December 31, 2014 the Bank registered Bs 27,755 million (85 %) year-on- year growth to Bs 60,467 million. Commercial Banking represents 51 % of these compulsory loan portfolios with Bs 30,581 million.

Commercial Banking's deposits grew Bs 26,000 million (62 % vs December 2013) to more than Bs 69,000 million which accounts for 30 % of the Bank's total deposits. The main factors of this growth are current account products which grew Bs 24,500 million (59 % vs December 2013).

As part of the deposits strategy, Commercial Banking has focused its efforts in boosting the sales of products that lead the higher use of electronic channels, through the sales force and communications campaigns for customers. These resulted, at the end of 2014, in the reduction of branches transactions in 13 % compared to 2013, the 51 % of the operations carried out through Mercantil Business Online Banking are wire transfers, payments of services and domestic taxes, payments to suppliers and collections for afilliated payments transaccions, among others.

At the close of 2014, 66,500 customers of Mercantil Business Online Banking make use of the new security scheme based on a physical device called "Token" to access to this channel. This facilitates mobility and encourages use of this more secure channel. In addition, the Bank continued boosting the sale of “Círculo de Seguridad” product, reinforcing the security of issued checks, reaching 2,651 companies at the close of 2014.

In 2014, Mercantil Business Online Banking transactions reached 73 % (70 % at end 2013) of a total of more than 59 million transactions made by customers of Commercial Banking via Internet and branches offices, reaching around 44 million transactions and 74,500 active companies at end of December .

45 Banco Universal Mercantil Banco Universal is characterized by offering innovative financial solutions tailored to its customers needs. In November, a new functionality by Internet called “Pronto Credito Empresarial” was launched for the Commercial Banking segment. This is the first loan installments for working capital available and self-managed through Mercantil Business Online Banking.

Mercantil Banco Universal has continued supporting SMEs by taking part in the last four editions of Mercantil Banco and Confederación Venezolana de Industriales (Conindustria) agreement, which has remained in force since 2003. The V Convention, covering the 2014- 2016 period was signed last September.

Mercantil Banco Universal has allocated Bs 4,225,423 as a contribution to the five editions of the agreement, benefiting 310 companies through training programs in the areas of Competitiveness / Family Business (Coninpyme), Energy efficiency, Quality and technological innovation.

In addition, the Mercantil-Consecomercio agreement signed in October 2011, has brought great benefits, as a support to the European Union's Al-Invest program aimed to SME. Since 2012, the "Organize and grow your business" program is imparted with an effective business plan, which allows SMEs to improve their competitiveness, streamline processes, develop their financial plan and clarify key aspects of their market.

This agreement has served 200 companies, with a total cost of Bs 1,200,000, of which Consecomercio has contributed with Bs 792,000 from the European Union funds for Al-Invest IV program. Beneficiary companies have contributed with Bs 204,000, and Mercantil Banco Universal has provided other Bs 204,000.

46 Report Corporate Banking

Corporate Banking Global Corporate and Investment Banking Loan Portfolio In 2014 Corporate and Investment Banking continued to offer a wide variety of quality financial 2014 products and services to more than one thousand economic groups through different corporate segments in Venezuela.

The Corporate and Investment Banking loan portfolio posted 66 % year-on-year growth to Bs 22,287 million, distributed among the different segments.

At year end, total deposits plus investments sold under repurchase agreement registered 50 % growth to Bs 73,521 million compared to December 2013, distributed between the Corporate and Investment Banking segments.

Corporate/Oil & Gas 95 % Financial Institutions 3 % Corporate Banking in Venezuela Institutional Banking 2 % Total deposits from corporate clients were 43 % higher at year end compared to 2013 (Bs 61,406 Bs 22 ,287 millions million). These volumes continue to reflect a growing accumulation of funds by our clients whose cash management is influenced to a large extent by inflation levels and market conditions

for their collecting processes.

The loan portfolio continued its upward trend, rising 64 % during the year (Bs 21,188 million). Corporate Banking An increased support to customer’s needs in the agricultural, as well as, manufacturing sector, Total Deposits + Investment sold and investors in the tourism sector has been sustained. As a result, Corporate Banking continued under repurchase agreement contributing to Mercantil Banco Universal’s compulsory loan portfolio. 2014

Financial Institutions and International Relations

The Financial Institutions segment in Venezuela continues adapting to the changing market. The segment's strategic focus has been on rationalizing the counterparts that are necessary in the money and capital market in terms of Banks and Insurance companies. Much effort has been devoted to cross selling products and services to our current customer base, producing Bs 762 million in assets and Bs 8,568 million in liabilities respectively.

Corporate/Oil & Gas 84 % Financial Institutions 12 % Institutional Banking Institutional Banking 4 % At the close of 2014, deposits by Mercantil Banco Universal's Institutional Banking segment Bs 73,521 milli on s totaled Bs 3,547 million, representing 1.2 % of the institution's total deposits. It should be noted that government deposits account for 0.8 % of the Venezuelan financial system.

With that level of penetration, Mercantil Banco Universal serves more than 157 different government and state entities, including Petróleos de Venezuela (PDVSA), offering a wide range of products: payroll services and payments to suppliers, domestic tax collection, investment trust funds, managed funds, and pension funds.

47 Banco Universal Corporate Products Unit

During 2014, Corporate Products continued with the strategy of quality of services and customer attention in order to consolidate customers’ relationship. The Corporate Products Unit met customers’ needs, through its Corporate Service model, offering an efficient and customized service.

Corporate Products continued with its strategy to divert transactions towards electronic channels with the sale of specialized products, increasing cross-selling products per corporate client. In addition, a new functionality was implemented to allow customers to set up foreign currency requests in an automated way in the Alternative Foreign Exchange System (SICAD II) through Mercantil Business Online Banking. Additionally, a new platform was deployed with utilities and bill payment capabilities offering to collecting companies to gather collections online with a totally automated account reconcilement processes.

Likewise, the Corporate Products unit continued participating on promoting events and sponsorship of companies within this segment, which has consolidated Mercantil’s image as a partner in some essencial areas aimed at reinforcing corporate responsibility, and confirming their commitment with the country’s enterpreneurial culture, by sustaining their backing in new companies development initiative.

48 Report Finance

Liquidity

The behavior of the economy in 2014 was characterized by a recomposition of the excess of liquidity in the financial system. At the close of the year, it was distributed as follows: 61.0 % for the privately owned banks and 37 % for the state-owned banks. The ratio of excess liquidity over reserves in the financial system rose Bs 33,525 million in nominal terms, 32 % more than at the close of December 2013 (Bs 105,534 million) to Bs 139,059 million. The trend showed a rise in monthly average surplus of Bs 103,652 million, 36.52 % more than the average registered for the same period in 2013 (Bs 75,924 million).

Mercantil Banco Universal registered similar levels of excess liquidity to reserve ratio, compared to December 2013 (Bs 12,000 million). Three periods were distinguished during 2014, two of liquidity concentration and one of sustained reduction. As of November, liquidity grew at 173 %.

35 ,00 0 180 ,00 0 160 ,00 0 30 ,00 0 140 ,00 0 25 ,00 0 120 ,00 0 20 ,00 0 +49% 100 ,00 0 15 ,00 0 -81 % 80 ,00 0 60 ,00 0 10 ,00 0 40, .00 0 5,00 0 20 ,00 0 +17 3 0 0 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ------l l t t r r r r c c c c y v y v n n n p p g g b b n n u u c c a a p p e a a e e e e e o u o u u e e a a j j u u j j j j j o o - - a a f f s s d d d d n n - - - - - a a - - - - m m - - - - - m m - - - - - 8 - - - 4 - 1 - - 7 3 7 2 6 6 1 4 0 1 0 8 1 2 5 0 7 5 3 9 0 2 1 4 1 5 2 0 2 1 9 1 1 1 3 0 2 0 2 0 2 0 2 3 2 0 1 1 0 2 0

Financial System Excess Liquidity / MBU Reserve requirements Financial System Excess Liquidity / Financial System Reserve requirements

Monetary Policy

The Venezuelan Central Bank's monetary policy in 2014 had a net contractionary effect on money supply.

At the close of December, the net amount of open market operations was Bs 83,314 million, 57.36 % higher than at the close of 2013 (Bs 52,944 million). Mercantil considerably reduced its participation in these operations, representing 1.4 % of the system.

49 Banco Universal Interbank Market

The negociations in the overnight market were considerably higher than the ones registered in previous years, due to the above mentioned excess liquidity reductions, as a result of the SICAD and the issuance of Bolivarian Securities. Transactions in the overnight market averaged Bs 2,794.8 million daily, versus Bs 228.4 million in 2013. This was 1,124 % increase in traded volume. Mercantil participated in this market lending an average of Bs 15.2 million.

Overnight Market

12,000.00 20.00 % 11,000.00 18.00 % 10,000.00 16.00 % 9,000.00 14.00 % 8,000.00 12.00 % 7,000.00 10.00 % 6,000.00 12.00 % 5,000.00 10.00 % 4,000.00 8.00 % 3,000.00 6.00 % 2,000.00 4.00 % Financial System Overnight Volume 1,000.00 2.00 % Financial System Average Rate 0.00 0.00 % 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ------l l r r t r r t c v y c g b v p n n y g b p n n u c a u c p a e p a o e j a a e e u o u j a e e u u j j j o f a j o f a s d s a d n a n m m m m

The maximum overnight rates was observed in July which reached 16.60 % and higher daily amounts than Bs 5,000 million. However, as of November 11 there was a sharp slowdown as a result of the increase in excess of liquidity. Meanwhile, Mercantil Banco Universal kept the level of rates consistent with the market's behavior.

50 Report Domestic Borrowing Venezuelan Public Debt and Compulsory Investments

The Government maintained its borrowing strategy by investing significant amounts of domestic public debt to finance spending and generate additional income for the National Treasury. In contrast with previous years, securities auctions were held until May 22. The total amount of the Public Debt Bonds (DPN - for its abbreviation in Spanish) issued in 2014 was Bs 82,832 million, of which Bs 41,800 million were assigned through public auctions, and Bs 41,031 million through direct allocation to state-owned banks and other public agencies. Mercantil Banco Universal participated actively in the total amount auctioned in the primary market with average yields of 15.31 % compared to 13.27 % for the financial system as a whole, maintaining its strategy to optimize the net interest income. In the secondary market, the Bank acquired DPN Bonds belonging to the mid-long yield curve.

Like the previous year, the absence of auctions in dollars prevailed.

Regarding compulsory investments, special financing operations were conducted as of May, through the Simón Bolívar Reconstruction Fund, under Petroleos de Venezuela (PDVSA), in the order of Bs 56,768 million, which was below Bs 15,665 million (21.82 %) to 2013 volume (Bs 71,768 million). Mercantil Banco Universal was also allocated with a total of Bs 7,974 million, sustaining a 14 % of the total amount invested, very close to 2013 share.

Compulsory Investments in millions of bolivars

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 System MBU - 2012 2013 2014

51 Banco Universal Customer orientation The is always present in the commitment of their clients ’well-being. Our Culture Ever since the 60s, the Mercantil brand was committed to its role of training and customers advice. Mercantil Brand is the focal point “The brand image is the organization. The public presence is of the organization as a whole and not of its individual members. The corporate profile is guided by the strategy”

Throughout our history, the Mercantil brand has exemplified the corporate and institutional image of the organization.

92 % of the Mercantil Banco Universal employees New Corporate Identity agree that “At Mercantil, the organization is On November 6, 2007, Mercantil launched a new graphic corporate above the individual role”. identity, highlighting the features of 2014 Organizational Climate and Engagement Survey being a sound, dynamic and visionary corporation. Quality of Service and Operating Efficiency

During 2014, Mercantil Banco Universal, through the Operations and Technology unit, improved customer service quality by shoring up the distribution channels used to sell products and services and enhanced security on the prevention of fraud and efficiency processes levels by promoting the use of electronic channels for banking transactions.

Network of Branches At the close of 2014, Mercantil Banco has 265 offices nationwide. As a result of the initiative to encourage the use of electronic channels, the volume of transactions carried out at branches dropped from 6 % to 5 % of total transactions handled in the various channels in 2014. This initiative led to an improvement in the service provided to our customers, making it easier to comply with the waiting times stipulated by the regulatory entity.

The Bank continued to expand its network of devices for the self-management of teller transactions through the Vía Rápida fast-track facility. At December 2014, the Bank has 158 multifunctional self-service facilities in 36 locations (Principal Office, Tolón, El Rosal, Centro Plaza, Bello Monte, Las Garzas, Barquisimeto, Av Lara, La Concordia, La Lagunita, Plaza República, Puerto Ordaz, C.C. Orinokia, Cima Barinas, Sambil San Cristóbal, La Cascada, Sambil Maracaibo, Sambil Barquisimeto, C.C.C.T. II, Guarenas, Valencia Norte, Maturín, Mérida, Girardot, Valera, Galerías el Recreo, Cabimas, Paseo Orinoco, Cumaná, Sambil Valencia, C.C. Buenaventura Acarigua, and Sambil Paraguaná, C.C. Santa Fe, Cagua, San Fernando de Apure and 4 de Mayo). They can be used to deposit cash and checks as well as to pay credit cards and cash withdrawal. At the close of the year, these facilities handled an accumulated level of 9,378,142 transactions at year end. 54 % of transactions carried out at branches with these self-service areas were orientated to these fast-track areas.

ATM Network At the end of 2014, the ATM network has 1,192 ATMs in 589 locations, of which 265 are located in branches offices. During the year, more than 128 million transactions were carried out through this network. One of the initiatives intended to improve the network's quality of service was the implementation of the monitoring and management tool to increase this service's levels of availability. New cash withdrawal limits were established for customers, which enables the execution of transactions. In addition, the functionality of sending the receipt of transactions via e-mail was incorporated, to facilitate customer transaction reconciliation processes.

53 Banco Universal Points of Sale Network At the end of 2014, Mercantil Banco has a network of 61,004 points of sale made up of physical, merchant and e-commerce points of sale, with average monthly availability levels of 99.67 %. Historically, the points of sale channel is one of the fastest growing channels whose operations grew 21.14 % in 2014, moving from 175 to 212 milllion transactions compared to 2013.

Mercantil Aliado Channel At the close of 2014, Mercantil Banco has 247 customer service banking points for the majorities banking segment, through 125 correspondent trading desks and 122 trading points, which processed more than 1.8 million transactions from the Majority Banking segment customers. New services were incorporated to this channel during this period as prepaid and postpaid TV service (Direct TV), credit card payment and Tarjeta Efectivo (Cash Card) recharge through Mercantil Personal Online Banking In order to broaden its service offer.

Mercantil Móvil Channel

In 2014, the Mercantil Móvil channel carried out 87,750,424 transactions, reflecting 62.08 % growth compared to 2013. 90 % of the total operations were made through the available App for Ipads and Android tablets an Android, IOS and Blackberry Smartphones. The remaining devices were served through Mercantil Móvil Internet.

Additionally, Mercantil Banco Universal initiated the development of new functionalities to be available in 2015, for instance: Móvil Payment, inquiere status of requests and appointments of Foreign Exchange Control operations (CENCOEX), affiliation to Mercantil Móvil SMS service, among others.

At the end of 2014, the volume of alerts and notifications through Mercantil Móvil Channel totaled 42,614,795 messages and 83.27 % of them corresponded to fraud alerts for the purpose of prevention.

ISO 9001:2008 Quality Management System The Venezuelan Standardization and Quality Certification Institute (Fondonorma) maintains the ISO 9001:2008 certification of nine Mercantil Banco Universal lines of service and expanded the scope of Vía Rápida fast-track self-service. The maintenance and renewal audit was carried out by the quality certification organization in September 2014 and confirmed the strength of Mercantil's Management System.

54 Report The nine lines of service certified under ISO 9001:2008 that comply with the standard's requisites are: • Attention to customer requests for services and transactions via Mercantil's Call Center (CAM). • Processing of transactions through the ATM network. • Attention to requests for services and transactions via online banking. • Instant cash loans for Mercantil cardholders (Préstame). • Employee Trust Fund Service. • Ordering and nationwide home delivery of checkbooks . • Corporate client service for fixed-income securities. • Credit Cards in the nationwide branch network. • Attention to and processing of banking transactions at commercial office teller desks nationwide (regional head offices and "A" category offices). The scope of the latter was extended to include the Vía Rápida fast-track self-service facility (Deposits, Credit Cards and Cash Withdrawal). The ratification of Fondonorma's certifications of Mercantil Banco Universal in accordance with ISO 9001:2008 for nine lines of service and the inclusion of the certification of the Mercantil Vía Rápida self-service areas, acknowledge the quality of service which the institution satisfies the financial needs of its clients in an environment of constantly improving processes.

Customer Complaints The total average monthly volume of complaints in 2014 amounted to 10,099 cases, of which 98 % are financial. 57 % of financial and non-financial complaints were declared as having merit. The average time taken to resolve customer complaints regarding debit and credit cards and deposit accounts is five days. The volume of requests received from government agencies regarding complaints, was 0.5 % of monthly average admitted complaints, during 2014. During the second half of 2014, Mercantil Banco Universal implemented notifications in ATMs and the website of the Bank, aimed at keeping customers informed and prevented. In order to reinforce the most important security aspects related to the protection of customers information, the Bank has continued to execute informative campaigns in Mercantil O’ nline Banking website updated to address and attack the changing methods of fraud that predominate nowadays.

55 Banco Universal Relevant Projects

During 2014, Mercantil Banco Universal continue with the implementation of the new phases of the multichannel integral monitoring tool in the area of electronic fraud prevention. These allows to detect in a timely manner fraud patters, allowing to take actions in order to mitigate its occurrence in credit cards, debit cards and deposit account transactions. For Mercantil Online Banking, the antifraud monitoring was also maintained, through the Transaction Guard tool, which guarantees a safe transaction with a montly average of 10,943 alerts for the Personal Online Banking and 1,605 for the Business Online Banking.

As a measure to reinforce security of Business Online Banking, the distribution and activation process of Token device was concluded, which replaces the Digital Certificate. This piece of hardware that generates a one-time password (OTP), enables new passwords to be generated every time a customer logs on to Business Online Banking. This method mitigates the risk of users compromising their passwords through the use of mathematical algorithms that strengthen the authentication process.

In addition, and complying with the precepts of the regulatory body, during 2014 Mercantil Banco applied the dollar account opening program and foreign currency purchase orders to provide customer with alternate options to purchase foreign currencies. Similarly, in order to comply with Circular Letter No. 104 of the BCV, the adequacy and production models of check was made with security standard and unique features for the Venezuelan Banking system, which will allow reducing counterfeit fraud.

Mercantil has created a Level 3 alternate contingency center, as a precautionary measure, in order to guarantee the operational continuity in the event of failures or physical damages. This facility enables to operate distributed platforms of critical services, in order to guarantee their availability in case of a contingency. In addition, a recovery center of critical services was incorporated in the event of a disaster for the total loss of the central processing. This center will be fully operative in 2015.

56 RAenpuoartl Human Resources

Mercantil Banco’s human capital activities were mainly orientated to strengthen staff retention, maintain and improve commitment to and from employees and organizational climate, foster opportunities for the individual development of employees, as well as their levels of personal and family well-being. All the above in strict fulfillment of the statutory and contractual obligations, enhancing efficiency levels and developing new opportunities for rapprochement with the staff.

At December 31, 2014, the Bank has 7,247 employees who represent 0.4 % year-on-year decrease. The Assets/Employee ratio is now Bs 39,7 million (Bs 25.2 million in 2013). It is important to point out that the self-management tool of Human Resources processes, developed in the Somos Mercantil portal, were reinforced, enabling more than 234,000 transactions to be carried out during the year (37.7 % more than the previous year).

During the year, the Bank implemented a series of initiatives to help its employees strengthen both their income and their social benefits. New compensation mechanisms were introduced that allowed optimizing the monthly income of workers and strengthened and expanded financing plans for reasonable expenses, most notably those for home purchase and refurbishment.

To develop talent, during 2014 a wide range of activities and training events were held, through which 163,500 hours of training was given to over 77,800 participants at a total investment of Bs 25,1 million, focused on technical and generic competencies, and regulatory and compliance techniques. This was implemented nationwide and included both e-learning and on-site training in 43 cities across the country (30 % more than in 2013). Employees were encouraged to develop their potential by applying for any of the 500 job vacancies which are now more widely visible through the new internal job application system.

In order to strengthen the relationship with workers and their families, over 50 special integration and rapprochement events were held nationwide, achieving the participation of more than 40,600 people, all of them linked with the Bank’s employees

In the area of compliance, the Bank maintained its Labor Solvencies, and the external and internal audits conducted reflect its compliance with the pertinent legal and accounting regulations. Also in 2014 more than 95 % of the staff underwent the medical and occupational assessments carried out periodically by the company.

57 Banco Universal With no labor conflictivity issues in 2014 Mercantil Banco was able to sustain the traditionally respectful and harmonious relationship between the company, its unions and the employees.

All management's actions and activities were fundamental in the improvement of every dimension of the Organizational Climate and employees’ engagement survey. In 2014, the study was applied, with the support of the well-known international consulting firm Aon Hewitt. This survey extend the scope of the last study by including the employees’ engagement levels. The results showed that 90 % of the Bank’s employees (9 of each 10) are engaged with Mercantil, a level that widely exceeds the average of the best companies in Latin America (81 %) listed by Aon Hewitt. From the perspective of the indicator used in previous surveys, 92 % of Mercantil Banco’s employees consider that Mercantil Banco Universal is a great place to work.

Finally, in terms of quality of life of employees and their families, the following actions were executed in 2014: Recreativo Plan with the participation of 1,187 children of employees with an investment of Bs 12.6 million, the Sports School for employees’ children, Sports Tournaments, Special Days (tax declaration, I.D. card issuances, driver’s license renewals, health days, training courses, videos and conferences to promote the development of values), People at Mercantil on the Move event for the promotion of a healthy lifestyle (project submitted to the National Anti-Drug Office) and guided visits to the Espacio Mercantil.

58 Report Risk Management

At Mercantil Banco Universal, risk management is one of the main strengths of its competitive strategy. During 2014, the Risk Management unit continued to strive to implement best practices within the tolerance limits set by the Board of Directors at the upper management of the Bank. This effort is designed to strengthen a risk culture throughout the organization by consolidating corporate values and the search for excellence.

Credit Risk

The breakdown of global credit risk exposure at December 2014 is given below and includes direct, contingent and issuer risk by country and type of customer:

Breakdown of Credit Risk by Country

35 %

30 %

25 %

20 %

15 %

10 % S P

O 5 % N S O

C 0 % R E V E G G N R I C C E D N O O T E F O N O

R A A I D V V R N E M A G L I E E Z P V A

L P R R A E E O O U L O I N

A N S O M M B S D E T T R T C N S A C A L U H H E E A A Venezuela E I A I I N N N N A A E E T T T E E N K R R T T E E S S S S L L U.S. Other Countries

In 2014, Mercantil Banco Universal’s consolidated risk exposure was Bs 177.18 billion, a year- on-year increase of 75.5 %. Venezuela is still the region with the highest total risk exposure, accounting for 99.5 % of the total.

During 2014, the Other Businesses segment increased its participation by 3 basic points of the total credit risk distribution, accounting for 27.6 %; the Individual segment which increased by 4.8 basic points, totaling 24 %; while the Government segment decreased their participation by 5.3 basic points, accounting for 7.8 %; and the BCV segment decreased its participation by 2.4 basic points reaching 23.2 %. The rest of the portfolio did not show significant changes.

59 Banco Universal The distribution of Mercantil’s loan portfolio consolidated by clients’ economic activity is shown below:

Breakdown of Mercantil's Loan Portfolio consolidated by economic activity

ELECTRICY, GAS AND WATER 0.3 %

NO SPECIFIED ACTIVITIES 1.0 %

MINING EXPLOTATION AND HYDROCARBONS 2.1 %

TRANSPORTATION, WAREHOUSING, AN TELECOMUNICATION 5.1 %

CONSTRUCTION 5.5 %

SOCIAL AND PERSONAL COMMUNITY SERVICES 7.1 %

AGRICULTURE HUNTING, FORESTRY AND FISHERY 12.5 %

MANUFACTURING INDUSTRIES 17.0 %

FINANCIAL INSTITUTIONS, INSURANCE AND OTHERS 22.6 %

WHOLESALE AND RETAIL STORES, RESTAURANTS AND HOTELS 26.8 %

0.0 %5.0 % 10 .0 % 15 .0 % 20 .0 % 25 .0 % 30 .0 %

The following four economic activities make up 78.9 % of the loan portfolio: Wholesale and Retail, Restaurants and Hotels 26.8 %; Financial Establishments, Insurance, Real Estate and Business Services 22.6 % (includes consumer loans); Manufacturing Industry 17 %, and Agriculture, Hunting, Forestry and Fishery 12.5 %. The fastest-growing economic activity in relative terms in 2014 was the Manufacturing Industry, which grew 58 basic points. At the close of 2014, the 20 largest debtors represented 4.9 % of total loan portfolio for this period. Risk concentration is constantly monitored according to credit risk management practice, through portfolio analysis, revisions of exposure limits and policy making.

60 Report Operational Risk

Mercantil sees operational risk management as fundamental to attain its objectives, with the view of the financial activity dynamism and considering the various sources of this type of risk, both internal and external. This is undertaken by keeping an integrated focus to meet the expectations of stakeholders and within the framework of the rules of the regulatory entities.

Operational risk management follows the comprehensive approach that characterizes it, always aiming to combine qualitative and quantitative aspects obtained from preventive risk analysis, and in due time attention to them through the establishment of corrective actions to mitigate any weaknesses detected.

During 2014, the organization identified and assessed operational risks detected in its critical processes, and provided the information necessary for decision-making.

In response to the risks identified, a fundamental part of operational risk management involves following up with action plans, particularly plans designed to prevent high-frequency risks involving electronic fraud and to mitigate risks derived from data security violations. Robust policy programs are available to cover high severity or catastrophic risks and business continuity plans have been strengthened, preparing the Organization to respond effectively in the event of such threats.

The comparative study of the behavior of operational risk events over time is a daily management task. Using information gathered on events around the world, risks are quantified and scenarios analyzed to help calculate economic capital, set objectives, and control expected losses.

Making employees aware of operational risk is key to good prevention and mitigation, which is why the Bank constantly maintains available the “Operational Risk” online training course, in order to strengthen even more risk culture within the organization.

Market Risk

An institution is subject to market risk when the market conditions deteriorate and affect the liquidity and value of the financial instruments in its investment portfolios or contingent positions, resulting in a loss for that institution. For Mercantil Banco, there are two basic fundamental types of market risk: Price Risk and Liquidity Risk.

Each market factor and its effect on the organization’s risk profile is measured daily. To accomplish this, Mercantil has a technological infrastructure and early warning systems in place. Treasury unit employs this technology to monitor and track market risk. It then produces a series of reports for Treasury risk-taking units and the corresponding management levels.

61 Banco Universal Mercantil’s analyses use different methodologies to gauge market risk: Value at Risk (VaR), Financial Margin Sensitivity due to interest rate changes (Repricing Gap, Risk Gains), Liquidity Gap and a series of other effective risk management measures and ratios, under normal market conditions as well as under stress conditions.

The Market Risk unit is responsible for establishing and certifying the models for measuring market risk. Each of the parameters that support these models is periodically reviewed and compared using backtesting studies.

The Market Risk Unit is permanently monitoring the following activities: Market Risk in Trading activities in the Fixed-Income in bolivars Securities Market, Trading in the Securities Market in bolivars, Market Risks in Positioning Activities, Price Risk in Interest-Rate Mismatch and Liquidity Risk Positions.

62 Report Our Culture Compliance

“Strict and timely adherence to all applicable laws, regulations, rules and policies”

At Mercantil Banco, the respect for and permanent compliance with legal and regulatory requirements, as well as the adherence to international best practices, is a fundamental premise for the company’s actions as a business organization. In addition, Mercantil maintains internal units devoted to the compliance function responsible for monitoring and managing the Bank’s compliance with applicable laws and regulations, including the prevention of money laundering and terrorist financing.

98 % of Mercantil Banco Universal employess agree that “At Mercantil, we fully comply with the regulations and laws”. 2014 Organizational Climate and Engagement Survey Our Culture Ethical Behavior “Zero tolerance for unethical behavior and transparency in all communications and information”

Mercantil Banco maintain a Code of Ethics that upholds a set of principles and values that serve as a guide for decision-making and to conduct the company’s business activities. The Code of Ethics also sets forth fundamental obligations for employees, such as integrity, loyalty, efficiency, camaraderie, honesty and respect for the law, that guide daily activities. 95 % of the Mercantil Banco Universal Similarly, the Board is empowered, from an ethical standpoint, employess agree that “The Code of Ethics of to resolve conflicts of interest. Mercantil determines our way of life here”. 2014 Organizational Climate and Engagement Survey Credit Ratings

During 2014, Mercantil, C.A., Banco Universal’s credit rating review was held. The following table shows a summary of the current credit ratings of Mercantil, C.A., Banco Universal’s credit rating assigned by Fitch Ratings The risk ratings for Mercantil Banco Universal are sustained by its sound balance sheet, strong franchise, stable deposit base and adequate risk management. It also highlights the experience of its management in a challenging operating environment. According to Fitch Ratings’ scale Mercantil Banco national ratings reflects “Very High Credit Quality”, being the best ratings given to a private financial institution in Venezuela. The international ratings are limited by the operating environment therefore are largely dependent on the country risk for Venezuela.

Mercantil Banco Universal

Mercantil Banco Universal Fitch Ratings National Rating Long Term AA- (Ven) Short Term F1+ (Ven) International Ratings Long Term (Foreign and local currency ) CCC Short Term (Foreign and local currency ) C Viability ccc

65 Banco Universal Our Culture Multinational

“We are an international organization with Venezuelan roots”

The Founders’ Vision March 23, 1925 In the articles of association of Banco Neerlando-Venezolano (today, Mercantil Banco), its shareholders set the direction of the institutition of “develop overseas banking and commercial activities”. (An excerpt of the March 23, 1925 articles of association). This international outlook was present since its of Mercantil Banco Universal employees inception through the Dutch Caribbean islands Curacao, Aruba 97 % and Bonaire, with which there was a fluid trade. Later and over agree that “I understand that meeting the time, it evolved and today Mercantil Banco has representative customers’ expectations is a top priority for our offices in Bogota, Lima, Mexico, Sao Paulo and New York. In the organization”. late 70's, the Bank opened a branch in Curacao and from the 80s began operations with an office in Miami, United States. 2014 Organizational Climate and Engagement Survey Prevention and Control of Money Laundering and Terrorism Financing (ML/TF)

The mission of Mercantil’s Prevention and Control of Money Laundering and Terrorism Financing (ML/TF) Unit is to promote, at all levels of the Organization and as part of its good Corporate Governance, a culture of compliance with the statutory and regulatory requirements on the prevention and control of money laundering and terrorism financing (ML/TF) of the Superintendency of Banking Sector Institutions (Resolutions 119.10 and 136.3) and the Law Against Organized Crime and Terrorism Financing. This involves supporting the organization through a systematic, professional approach in order to detect, monitor and manage reputational risk due to ML/TF by providing data, analysis and recommendations to guarantee its adherence to the regulations and the best international practices on the matter. These include the recommendations of the Financial Action Task Force (GAFI), the Caribbean Financial Action Task Force (GAFIC), the Wolfsberg Principles, to which the Bank joined in the year 2003, and the Customer Due Diligence for Banks document of the Basel Committee on Banking Supervision of the Bank for International Settlements. Pursuant to the provisions of current legislation, Mercantil Banco Universal has created and developed a “Comprehensive AML/FT System” comprised by an AML/FT Compliance Officer who reports directly to the Board of Directors, a multidisciplinary committee, an AML/FT Unit and Compliance staff responsible for areas susceptible to ML/TF risks. There is also an Annual Operational Plan, an Evaluation and Control Program, a Code of Ethics, a Manual of ML/FT Risk Management Policies, a Training Program, and a risk-based approach to prevention, monitoring, detection and control of unusual or suspicious activities liable to involve ML/TF which should, in its opinion, be reported to the authorities. During 2014, Its action continued to focus on strengthening ML/TF risk management processes in line with Resolution 119.10 of the Superintendency of Banking Sector Institutions and the Law Against Organized Crime and Terrorism Financing; strengthening coverage and minimizing ML/TF risks by approving and setting policies, constantly updating the Manual of ML/FT Risk Management Policies and Procedures; appointing 28 compliance staff in the areas susceptible to risk; implementing new administrative and operational monitoring and control processes; training staff with special emphasis on the people responsible for handling risk sensitive information and acquiring state-of-the-art technology, all of which has enabled it to have an efficient and effective structure, with a highly professional risk management level, interacting with the rest of the units within a climate of ongoing improvements. The “Know your Customer” policy is crucial to the timely detection of operations presumed to involve ML/TF, whose AML/FT processes are reviewed on a regular basis by the Superintendency of Banking Sector Institutions and by the External and Internal Auditors. Staff training on ML/TF Prevention and Control was undertaken through an extensive program of training courses and workshops for 6,992 employees. The unit maintains fluid and effective communication with the regulatory body.

67 Banco Universal Our Culture Resilience “We continuously adapt to Pioneers in electronic changing environments and customer service channels circumstances with dignity Over the years, Mercantil has adapted to the evolution of the and integrity” banking business and adopt new technologies that have provided greater efficiency and comfort to our customers. Examples of which are the development of ATMs, automated call center, Internet banking and mobile banking.

Over 90 years, Mercantil Banco has responded to and anticipated changes. This ability, also known as resilience, has enabled the organization to find solutions to adverse and dynamic business environments, or to adapt business processes effectively to achieve efficient and productive solutions that benefit customers, employees and other stakeholders.

One example of this has been the accelerated evolution of new technologies. Mercantil has mostly pioneered the introduction of state-of-the-art technologies in the banking sector.

Increase utilization of much 76 % of Mercantil Banco Universal employees faster channels agree that “This organization provides me with In order to make easier and more the support I need to create ideas that will help automated transactions, in 2012 the Mercantil Vía Rápida fast-track the organization to be more sucessful”. service areas were launched. 2014 Organizational Climate and Engagement Survey Internal Auditing

Mercantil Banco Universal’s Internal Audit Unit carries out an independent and objective assurance and consultation activity designed to add value to the Bank's operations and contribute to the efficacy and efficiency of the risk management, internal control and Corporate Governance processes. The Bank’s audit process consist of three fundamental stages related to the annual planning, conducting the audits and communicating their results on an or going basis and in accordance with the provisions of the Law on the National Financial System; Law on Banking Sector Institutions, prudential standards issued by Sudeban and other regulatory agencies; with special attention to Resolution 119.10 of Sudeban included in the Standards for Adequate Integral Risk Management and ML/TF Risk Management; Resolution 136.03 of the Integral Risk Management System; Internal Policy and Procedure Manuals; Corporate Mandate (ISO 9001:2008 and Guidelines for Auditors ISO 9001:2002); Declarations on Internal Audit Standards and Procedures N° 1 and 2 (DNAI-1 “The Internal Audit Report ” and DNAI-2 “Internal Audit Work Documentation”) issued by the Federation of Associations of Certified Public Accountant (CPA) of Venezuela; International Standards for the professional practice of Internal Auditing of the Institute of Internal Auditors (IIA), among others. Its main function is to support the Board of Directors through the Board of Directors' Audit Committee to safeguard Mercantil's assets, providing in a timely manner information, analysis and recommendations on internal control in various areas: financial, operational, accounting, branch network, ATMs, information technology, assets under management, taxation, regulatory and quality, in order to ensure that it operates lawfully and in accordance with the policies, standards and procedures established by the Organization. The Internal Audit unit reports directly to the Board of Directors' Audit Committee, and administratively to the Chairman and is made up of six Audit Departments that oversee: central processes, systems, taxation, branch network, assets under management and quality management. In order to strengthen its role and comply with the SUDEBAN Resolution 064.14, Mercantil Banco Universal’s Internal Audit unit executed a series of actions related to change the design and shape of the reports to be issued, such as: strengthening teamwork through integration activities, adecuacy of auditable universe, communication plan of the internal audit role to the institution, review of management indicators, configuration of AutoAudit system and definition of the consultant role in the Tributary Audit unit, in order to create value and boost risk approach in fulfillment of the business objective.

BRANCHES (General + AML/CFT) 266 Internal Audit Unit assessed the operational effectiveness and efficiency of risk management GENERAL 73 processes and contributed to reinforce Mercantil’s QUALITY 64 internal controls. AML/CFT 15 During 2014, all efforts were addressed to review units, FOLLOW-UP 10 branch offices, processes and technological components,

SPECIALS 7 giving priority to more relevant and risky aspects. The

0 50 100 150 200 250 300 abovementioned coverage is summarized below.

69 Banco Universal Our Culture Good Citizenship “Our behavior reflects the solidarity and commitment to the community” Mercantil’s commitment is present both in a direct manner, as well as through Fundación Mercantil, along with its own initiatives and support to the work of various communities’ organizations serving education, social development, health and culture.

People at Mercantil: Helping hands to the community Throughout Mercantil‘s history, its workers and family have played an active role in a set of social, educational and environmental preservation actions.

33 years generating culture on school maintenance The “Give Your School a Helping Hand program” was created by Mercantil in 1982. Since then, it contributes with the quality of elementary and higher education through the rehab and maintenance of school facilities, with the active participation of students, teachers and communities. In 1995 the of Mercantil Banco Universal program obtained a Unesco recognition, 95 % considering it a unique program of its employees agree that “This is a socially and kind in Venezuela. environmentally responsible organization”. 2014 Organizational Climate and Engagement Survey Social Commitment

Mercantil Banco Universal's social investment in 2014 carried out both directly and through Fundación Mercantil which it sponsors, totaled Bs 52.5 million (61 % up that allowed to serve 550,000 people, representing a 32 % more than in 2013) and was addressed mainly at different programs, projects and initiatives undertaken by well-known social development and educational organizations in Venezuela. Contribution were broken down as follows: 62 % for elementary and higher educational institutions, especially entrepreneurship, inclusion and culture maintenance programs, giving the youngsters the opportunity to continue their college and high school studies; and 38 % to social development organizations that foster in the communities improvements in their quality of life, through health prevention, care for children, young and elderly, as well as those organizations that disseminate art and culture.

Mercantil’s Contributions Fostering Education Year 2014 Elementary Education and Job Training

During the year, it is highlighted the consolidation of the Fundación Mercantil and Asociación Fe y Alegría alliance, which is part of the development and strengthening of the Give Your

School a Helping Hand program, with more than 30 years of existence. Among the objectives of this alliance are rehab and maintain school facilities, raising school maintenance awareness

and sense of compromise and create participatory forums with the educative communities “contributing to social structure integration that is present in the Fe y Alegria schools”. During

2014, more than 22 educational centers throughout the nation were served, with more than 12,000 students being directly benefited. Working together with the Catholic Schools Association of Venezuela (AVEC - for its Education 62 % abbreviation in Spanish), different contributions were also given to consolidate the school Social Development 19 % Healthcare 8 % infrastructure in Caracas, San Carlos, Cojedes State, and Barquisimeto, Lara State, benefiting Religious Institutions 6 % 1,165 students. Ongoing support for different scholarship programs, aimed at children from Culture 5 % low-income sectors and underprivileged young people who have been excluded from the formal education system, especially those aimed at training them in technical areas that enable them to enter to the job market. These are some of the beneficiary institutions: A.C. Alianza para el Conocimiento Instituto Venezolano Suizo; Fundación para el Desarrollo de la Educación (FUEDUCA); Asociación Superación por medio de la Tecnología (SUPERATEC); Fundación Santo Domingo (training of geriatric nursing auxiliaries); Fundación Alzheimer (caretakers’ training for domicilliary attention) and Asociación Civil Damas Salesianas (La Milagrosa - Baruta).

71 Banco Universal Higher Education During 2014, the Bank made important contribution to programs and initiatives of different education institutes involved in the academic and professional development of undergraduate (Bachelor and Advanced Vocational University degrees), and postgraduate (4th level) students. These are some of the universities and foundations that received this support: Universities Católica Andres Bello; Zulia; Simon Bolivar; Central de Venezuela; Metropolitana; Nacional Experimental del Táchira; Fundación IESA; Católica del Tachira; Católica Santa Rosa and Fundación Pygmalion (UCV). These contributions went to fund scholarships awarded to needy students for school fees and for academic-student development activities; equipping laboratories, libraries and multiple use rooms, as well as to improve physical infrastructure.

Social Development and Healthcare During 2014, Mercantil continued to support the work of social and health organizations involved in programs aimed at the child, youth and senior citizen population; social entrepreneurship promotion, fight drug abuse, early pregnancy prevention, help people with disabilities, as well as nutritional support for children and people living in extreme poverty. These are some of the institutions covered: VenAmCham's Social Alliance; Fundación Ideas; United Nations Children's Fund (Unicef); Centro de Servicio de Acción Popular (Cesap); AC Red de Casas Don Bosco; Asociación Civil Buena Voluntad; Asilo La Providencia; Salud y Familia, Alianza para una Venezuela sin Drogas, Autismo en Voz Alta ; Por La Caracas Posible; Centro Comunal Catia; Comedores Madre Teresa de Calcuta; Fondo de Protección del Niño y el Adolescente; Sociedad Venezolana para Niños y Adultos Autistas (Sovenia); Fundación de Instituciones Privadas de Asistencia al Niño (Fipan); Fundación Amigos del Adolescente (Fundamad); Asociación Nacional Contra la Parálisis Cerebral (Anapace); Asociación Benéfica Cristiana Promotora de Desarrollo Integral (ABC-Prodein); Asociación Provida Venezuela (Provive); Un Techo para mi país; among others. Mercantil contributes towards the health sector by supporting institutions that run specialized research programs, comprehensive medical care as well as preventive and hospital programs for children, young people and adults in Venezuela. These include: the Friends of Children with Cancer Foundation; Cardioamigos Foundation; Laparokids Foundation; Jacinto Convit Foundation; Hospital JM de Los Rios; Stop VIH, /AIDS Porlamar; Centro de Salud Santa Inés; Sociedad Anticancerosa de Venezuela; Maracaibo Pediatric Hospital; Operación Sonrisa; Hospital San Juan de Dios de Mérida and Centro Médico Docente La Trinidad (Community Medicine).

72 Report Culture, Quality of Life and Environment In 2014, Mercantil continued to promote activities aimed at conserving and protecting the environment, as well as those activities that foster national artistic talent in music, literature and plastic arts. In the environmental area, the support given to La Salle Society of Natural Sciences is highlighted Cultural institutions were also supported by Mercantil. These include Fundación Camerata de Caracas; Organización Venezuela Viva; Museo de Arte Contemporáneo del Zulia (Maczul); Fundación Pro Música de Cámara; Museo Sefardí; Fundación Museo de Arte Colonial; Fundación Francisco Herrera Luque; Fundación Vinicio Adames; Fundación John Boulton; Camerata de Caracas; Lagunillas Autonomous Municipality Major’s Office (Mural Work: “Lagunillas Waters saved from Fire”) and Fundación Festival Caribe. Espacio Mercantil has been active disseminating the Collection of Works of Art orientated to preserve, research and exhibit the Venezuelan art to the community.

Support for the Social Work of Religious Institutions In 2014, Mercantil continued to support religious institutions which are involved in social work and which also develop and strengthen training programs for the priesthood. Particularly, the Venezuelan Episcopal Conference outstands among these institutions through the Family Apostolate and the strengthening of the Mercantil Solidarity Fund- Caritas alliance, aimed at attending those affected families by natural disasters; in addition to contributions to the Venezuelan Archidiocese and Diocese; John Paul II Foundation for Ecclesiastical Education; Fundación Amigos del Seminario (Fundasem); Asociación Civil Bien Mutuo and Asociación de Formadores Integrales (Afin).

Online Donations Program: “Un Aporte por Venezuela” The corporation continued to strengthen the Online Donation Program in Venezuela “Un Aporte por Venezuela”, through which the Mercantil Banco Universal subsidiary along with the Fundación Mercantil makes its internet platform available to social institutions allowing them to disseminate information on their work to clients who can make donations to them via electronic transfers. Special mention and recognition are due to Mercantil Volunteers’ active and growing participation, along with their families in a variety of activities. Among this activities are the Tree Planting Day carried out with the Universidad Simón Bolívar, which is a contribution to minimize the global warming problem, as well as housing construction, in alliance with Techo Venezuela Organization. One of Mercantil's corporate values is “to be an integral institution and an important factor in the development of the communities and places in which it is involved.”

73 Banco Universal Our Culture Corporate Governance

“Respect for the organization’s corporate governance structure.”

Mercantil’s corporate governance structure is derived from its articles of incorporation. The governance structure is composed of the Shareholder’s Meeting; followed by the Board of Directors, Audit, Risk and Compensation Board Committees; Executive Committee; Chairman; Executive President; Internal Auditor and Compliance Officer.

Mercantil’s Shareholders meetings have been over time an event where fundamental decisions of the organizations corporate and financial life are analyzed and approved.

98 % of Mercantil Banco Universal employees agree that “Mercantil is a serious and honest institution”. 2014 Organizational Climate and Engagement Survey Corporate Governance

Mercantil Banco Universal was incorporated as a bank in Venezuela in 1925. Its main shareholder is Mercantil Servicios Financieros whose shares are listed on the Caracas Stock Exchange and also are traded over-the-counter market in the United States through a Level 1 ADR program. The Bank’s Corporate Governance structure is based on the company bylaws, the Law on Banking Sector Institutions, the Code of Commerce and the standards issued by the Superintendency of Banking Sector Institutions (Sudeban). The Board of Directors and the Bank's management keep up with the changing regulations through analysis and study of this area so the Corporation is able to adapt its Corporate Governance structure to current best practices in order to guarantee its appropriate transparency and efficiency, based on the highest professional and ethical principles that characterize its permanent and close relationship with its shareholders, customers, creditors and employees.

Since 2009, the innovative initiative of the creation and development of the unit in charge of Compliance was undertaken, which is responsible for independently detecting and managing the risk of compliance with regulatory obligations through adequate policies, methodologies and procedures, to strengthen the business model, eliminating or reducing exposure to associated risks.

As planned, during 2014, implementation of this unit’s Strategic Agenda progressed with the development of the phases planned for this period.

All the Bank’s activities are undertaken in accordance with the strictest ethical and professional principles. The Bank has a Code of Ethics which encompasses a series of ethical principles and values that guide its decision-making process and activities. The Code of Ethics includes our fundamental duties such as probity, loyalty, efficiency, co-fraternity, honesty, sincerity, dignity and law abidance. It also establishes standards whose purpose is to regulate the treatment of any conflicts of interest that may arise, complementing the provisions of the company bylaws in this area. The bylaws stipulate how such situations should be handled and ban Board Members from taking part in discussions on any matters in which they, or their partners in civil or mercantile companies have a personal interest. Directors are required to remain outside the meeting room until a final decision is reached.

The Bank’s governance structure is composed of the Shareholders’ Meeting, followed by the Board of Directors, with its Audit, Risk and Compensation Committees, the Executive Committee, the Chairman and the Executive President, the Internal Auditor and the Compliance Officer.

75 Banco Universal Board of Directors

It is essential for the Board of Directors to be efficient so that it can act in the interests of the company, which are ultimately those of the community at large and its shareholders, creditors, client and employees in particular. The Board has responsibility for defining corporate strategies, determining business policies and establishing and controlling the strategic direction of the institution. It also supervises the management of the organization’s different business and support areas. It also evaluates results by comparing them against previously approved plans and strategies, performance in previous years, and the performance of the banking system in general.

The majority of the Directors on the Board are independent from the Administration, in keeping with best corporate governance practices. This further demonstrates the Bank’s commitment to comply with international management standards. The Directors are highly qualified and well-versed in business and finance, ensuring optimum performance of their functions.

The Board of Directors is made up of seven directors and their corresponding alternates. The Board appoints the Chairman and Executive President, who must be Directors, from among its members, and these positions may be held by the same person. The Board meets once a month and whenever else its Chairman deems necessary.

To ensure better transparency and control over management procedures, the company bylaws have provided, since 1981, the creation of the Compensation and Audit Committees whose functions are governed thereby. At an Ordinary Shareholders’ Meeting held in January 2006, the shareholders approved a proposal submitted by the Board of Directors to amend the company bylaws giving the Risk Committee legal status, which had already been agreed by the Board at its May 31, 2001 meeting. These Committees are comprised mainly of Directors who are independent from the Administration.

Additionally, in accordance with its traditional interest in adhering to best corporate governance practices, the Audit Committee approved the bylaws governing its performance. This document details the purpose of the Committee, as well as its functions and its responsibilities. There members should undertake an annual compliance evaluation with them It also states that its members must be independent from Management, adding that at least of them must have considerable accountancy or financial management experience.

76 Report Board of Directors Audit Committee The Committee is made up as follows: The Committee has responsibility for reviewing and discussing accounting and management policies, the Eduardo Mier y Terán opinions and reports of the Bank’s internal and external auditors, establishing reserves, reviewing the Financial Statements and their Notes and formulating recommendations on matters incumbent upon it (Coordinator) to the Board. It also approves the engagement and remuneration of the external auditors. In 2014 the Roberto Vainrub Audit Committee met seven times. The main topics reviewed were: Consideration of the Bank's financial Alfredo Travieso P. statements, opinions of the external auditors on the financial statements and their corresponding notes; Gustavo Machado C. observations by the external auditors on internal control; analysis and establishment of loan portfolio provisions and other provisions and allowances; contributions payable to the Deposit Guarantee Fund and Luis A. Marturet M. Banking Protection Fund (FOGADE), Sudeban and the Community Councils; report on internal auditing Gustavo J. Vollmer A. (Ex officio) activities; report on antimoney laundering and terrorism financing activities; report on external auditing Nelson Pinto (Ex officio) activities planned for 2015; proposal on fees of external auditors in 2015; additional fees of external auditors in 2014; review of new disclosures contained in the notes to the financial statements; consideration and follow up of the process for electing the Bank's external auditors pursuant to the provisions of the Law on Banking Sector Institutions and the prudential standards issued in that regard; external auditors report on the contents and scope of the Superintendency resolution of the "General Rules on the functions and responsibilities of the external auditor, audits and audited reports of the Banking Sector Institutions”.

Board of Directors Risk Committee The Committee is made up as follows: The Risk Committee approves Mercantil’s risk profile, policies and limits. It also optimizes the use of capital Gustavo A. Marturet M. to support the approved risk profile. In 2014, the Risk Committee met twelve times. The main topics reviewed were: Results of reviews of the loan portfolios of the following units and segments: Multinational Corporate, (Coordinator) Large Corporations, SME, Constructions, Long-Term Mortgage, Affluent, Financial Institutions, Oil and Gas, Roberto Vainrub A. Microcredits, Credit Cards, Agricultural, National Corporate, Tourism, Curaçao branch, Automotive, Middle Eduardo Mier y Terán Market; review plan 2014; adjustments on general provisions methodology; questionnaire on Integral Risk Management; reports on Market Risk, Credit Risk and Operational Risk; budget of treasury unit activities Gustavo Galdo C. and Market Risk limits; proposals on provisions; methodology for approving liability operations that exceed Carlos Zuloaga T. 2 % of the Bank's equity; recommendations on clients to include in the corresponding list; reports on the project to set up a Central Alternate Data Processing Center; adjustment and follow up of credit risk limits Gustavo J. Vollmer A. (Ex officio) for Venezuela; adjustment and follow up of Cross Border limits; follow up of Stress Test for the investment Nelson Pinto (Ex officio) portfolio; summary of the trading activity; considerations on the proportionality of collateral received on the loan and contingent portfolios; review limits for Individual Borrower and Economic Group, Loan and Capital Commitment Committee, Board of Directors; Risk-Adjusted Return on Capital (RAROC) Methodology for the investment portfolio; reports on potential impacts on liquidity through the SICAD II foreign exchange scheme; Liquidity Risk-associated methodologies, short-term liquidity limits and early alerts; considerations on the Venezuelan and PDVSA sovereign debt risk assessment companies’ evaluation effects; appointment of the Comprehensive Risk Committee and Credit and Capital Engagement Committee Members; LGD and EAD calculation methodologies validation.

Board of Directors Compensation Committee The Committee is made up as follows: This committee is responsible for setting the Bank’s policy on pay and benefits, approving the remuneration of the Chairman and senior management and informing the Board of Directors accordingly. Alfredo Travieso P. In 2014, the Compensation Committee met eight times. The main topics reviewed were: Mercantil Banco (Coordinator) Universal's semi-annual reports; short-term management incentive programs; consideration of per diems Gustavo A. Marturet M. of board members; analysis of staff movement during the year; impact of national minimum wage; establishment of annual wage policy; situation of Mercantil Complementary Pension Scheme (Plan Víctor Sierra Complementario de Pensiones de Jubilación Mercantil); actuarial assumptions and adjustment of Claudio Dolman minimum pension under the scheme; results of the survey on the organizational climate; considerations Alejandro González S. on the base compensation payable to Senior Management and the Executive Committee; considerations on the payment structure of the variable compensation; considerations on key staff protection measures; Gustavo J. Vollmer A. (Ex officio) special compensation action in favor of the general staff. Nelson Pinto (Ex officio)

77 Banco Universal Executive Committee The Committee is made up as follows: The bank has an Executive Committee with a Chairman and an Executive President plus nine senior Gustavo Vollmer A. - Chairman managers from the organization’s Business and Support areas, which guarantees the timely Nelson Pinto Alves – Executive President implementation of the Bank’s decisions and strategies. The committee meets weekly and holds extraordinary meetings as required. It is responsible for evaluating options and making recommendations Nerio Rosales Rengifo on policy, objectives, strategies and organization and submitting to the Board of Directors for Luis Calvo Blesa consideration, as well as guiding management in its effort to implement the policies adopted. It is also Rosa Delgado de Costantino responsible for evaluating the outcome of their implementation. Luis Alberto Fernandes Alfonso Figueredo Fernando Figueredo M. Rodolfo J. Gasparri Philip Henríquez S. Carlos Tejada G.

Chairman of the Board of Directors The Chairman of the Board is the President of the Bank. Along with the Executive President and the other Board members he is responsible for conducting the Bank's activities and business and has general executive powers. He also chairs the Meetings of Shareholders, the Board of Directors and the Executive Committee, providing guidance and advice on policies, objectives, strategies to be followed and major decisions; as well as supervising and ensuring that the decisions and policies of the Board of Directors and the Executive Committee are carefully executed. Additionally, he is responsible for exercising the functions assigned to him by the Board of Directors and for representing the Bank before political and administrative authorities and other public and private entities. The Chairman stands in for the Executive President during temporary his absences, exercising the same powers and attributions. The Secretariat and the Audit business units which report directly to the Board of Directors, come under the Chairman where administrative matters are concerned. The Corporate Compliance business unit reports directly to the Chairman.

Executive President The Executive President is responsible for the executive management and coordination of the Bank and for submitting policies, objectives, strategies and major decisions to the consideration of the Chairman, the Board of Directors and the Executive Committee and informing them of the financial situation of the Bank and the results of its operations. He is responsible for executing or delegating the execution of the decisions adopted by the Board of Directors and the Executive Committee, and for designing, establishing and developing the Bank's organizational structure, appointing general managers, consultants and advisers to office and, if necessary, removing them from office. He represents the Bank before political and administrative authorities and government entities, bodies corporate or individuals. The Executive President stands in for the Chairman during his temporary absences, exercising the same powers and attributions.

78 Report Internal Audit Manager In accordance with the regulations in force, the Bank has an Internal Audit Manager who, together with the Audit Committee, is responsible for reviewing the Bank's performance.

The Internal Audit Manager leads the Internal Audit business unit, which works with the Audit Committee to design Mercantil’s internal audit plan. This plan is executed throughout the year. The results of the internal audits are reviewed and discussed periodically by the Audit Committee and the Board of Directors so that any corrective action may be taken.

Compliance Officer for the Prevention of Money Laundering and Terrorism Financing In accordance with the regulations on the matter, the Bank has a Compliance Officer in charge of Prevention of Money Laundering and Terrorism Financing who chairs the Committee on the Prevention and Control of Money Laundering and Terrorism Financing and is responsible for designing the AML/FT Annual Operating Plan, coordinating and supervising the Committee of the AML/FT unit, coordinating staff training activities, on matters related to prevention and control of money laundering and terrorism financing, and maintaining institutional relations with the regulatory agencies on this matter. The Compliance Officer also advises the Audit Committee and Board of Directors on compliance with their anti-money laundering and antiterrorism financing obligations under the legislation in force.

Disclosure of Information The Bank prepares and publishes its financial statements monthly as of the end of the preceding month, in compliance with the standards of the regulatory bodies. On the occasion of Shareholders’ Meetings, the Bank also makes available to shareholders a detailed report of its activities, and the semi-annual and annual financial statements for the immediately preceding periods; this information is prepared in accordance with Sudeban and disclosed to the general public and the Superintendency of Banking Sector Institutions. The Bank’s financial information is also available on its website: www.bancomercantil.com.

79 Banco Universal Interior of the branch office of Mercantil Banco in San Francisco, Caracas

80 Report Awards and Acknowledgments

In 2014, Mercantil Banco Universal received various acknowledgments by prestigious publications and institutions.

• In January, Global Finance magazine selected Mercantil Banco Universal as "Venezuela's Best Trade Finance Provider in 2014”, for the ninth year running. Global Finance's selection process took into consideration the volume of transactions, range of global coverage, customer services, competitiveness in prices, development of new businesses and technological innovation.

• In June, Mercantil Banco Universal ranks, for the seventh consecutive year, as the first bank in the Gerente Magazine’s ranking of the Top 100 brands in Venezuela with higher preference index in 2014, with 29 % of preference rate, based on a survey conducted to Venezuelan executives in various economic sectors.

• In July, Mercantil Banco Universal received the Data Integrity 2013 Award for Latin America granted by MasterCard Worldwide, acknowledging the quality of the information for authorizing, exchanging and clearing card transactions. MasterCard uses a Data Integrity Monitoring Program to follow up transactions sent by member financial institutions in order to reward the most efficient ones, for showing the highest increases in their operating quality indexes. With this award, MasterCard Worldwise acknowledged Mercantil’s commitment with its transactions quality to its customers’ benefit.

• In July, Global Finance magazine announced the winners of the “World’s Best Internet Banks”, having selected Mercantil Banco Universal in the category per country as “Best Consumer Internet Banks in Venezuela” and also in the regional category as “Best Information Security Initiatives in Latin America”. Global Finance considered the strategy for attracting and servicing online customers, growth of online customers, breadth of products offerings, benefits gained from Internet initiatives and web site design and functionality.

• In November, Mercantil Banco Universal was the leading institutions in the banking segment of the ranking of Venezuelan companies with the best image. The study was published in the anniversary edition of the well-known P&M magazine, according to a study by Datanálisis, a polling firm. “This research applied a methodology based on the addition of individual perceptions and a list of characters that consumers associate with a company,” quoted the publication.

• In December, Mercantil Banco Universal was ranked at 23rd place among the 250 Latin American Banks of the AméricaEconomía magazine, up 7 places in relation to last year. The ranking includes state-owned banks, which are ranked according to asset size by the close of June 2014.

81 Banco Universal From 1951 to 1983, Banco Mercantil (today Mercantil Banco Universal) was located in the centric corner of San Francisco in Caracas. International Offices and Corporate Contacts

Corporate Contacts International Offices

MERCANTIL , C.A. B ANCO UNIVERSAL Agency and Branch Representative Offices Avenida Andrés Bello, N° 1, Edificio Mercantil Caracas 1050, Venezuela UNITED STATE BOGOTÁ Phone: (58-212) 503.1111 CORAL GABLES , A GENCY Av. 82, Nº 12-18, 8 th floor, Ofc. 805 Telex 27002/27003 BMERVC 220 Alhambra Circle, Coral Gables Edificio Interbolsa, La Cabrera Bogotá, P.O. Box 789, Caracas 1010-A Venezuela Fl. 33134, U.S.A. D.C. Colombia [email protected] Phone: (1-305) 460.8500 Phone: (57-1) 635.0035 www.mercantilbanco.com Fax: (1-305) 460.8595 Fax: (57-1) 623.7701 Twitter: @mercantilbanco Telex: 681278 BMER UW [email protected] Call Center (CAM): [email protected] Phone: 0-500-600 2424/ 0-500-503 2424 LIMA (58-212) 600.2424-(58-212) 503 2424 CURAÇAO Edificio Banco de Comercio CURAÇAO BRANCH Av. Canaval y Moreyra 452, 15 th -17 th floors Abraham Mendez Chumaceiro Boulevar 1 San Isidro, Lima 27, Perú. CORPORATE COMMUNICATIONS Willemstad, Curaçao. Phone: (511) 442.5100 Av. Andrés Bello, N° 1, Edificio Mercantil Phone: (5999) 432.3000 Fax: (511) 442.5100 Ext. 237 14 th floor, Caracas 1050, Venezuela Fax: (5999) 461.1974 / 432.5049 [email protected] P.O. Box 789, Caracas 1010-A [email protected] Phone: (58-212) 503.1670 MÉXICO [email protected] Eugenio Sue N° 58, Colonia Polanco Chapultepec, Delegación Miguel Hidalgo C.P. 11560, México, D.F. Phone: (52-55) 5282.2300 Fax: (52-55) 5280.9418 [email protected]

NEW YORK 11 East 51st. Street, New York NY, 10022-5903, U.S.A. Phone: (1-212) 891.7479 Fax: (1-212) 891.7419 [email protected]

SAO PAULO Av. Paulista, N° 1842, 3° andar, CJ. 37 Edf. Cetenco Plaza, Torre Norte-Cep 01310-200 Sao Paulo, SP, Brasil Phone: (55-11) 3285.4647 - 3284.0206 Fax: (55-11) 3289-5854 [email protected]

83 Banco Universal 84 Report Mercantil Banco Universal: 90 years at the service of Venezuela

The Banco Neerlando-Venezolano was founded in La Gran Casa de Camejo

On March 23, 1925 , an important group of Venezuelan entrepreneurs founded the Banco Neerlando Venezolano, today the Mercantil Banco Universal. Located at Gran Casa de Camejo, on the a central Caracas street corner that bore the same name as the property, the Bank began its operations on April 3 of the same year, with a share capital of Bs 3,200,000 and a payroll of 16 employees, under the management of its first Board of Directors, chaired by Francisco A. Guzmán Alfaro. Since its inception, all related activities to real estate transactions and business, and international banking and trading connections, particularly with the Netherlands and other Northern European countries, complete the complex relationship process its founders had set up as one of the organization’s goals. It is referred to in the bylaws of the institution.

Banco Mercantil y Agrícola: Boosting the country’s agricultural sector

In 1926 , Banco Neerlando Venezolano, as it was then called, changed its trading name to Banco Mercantil y Agrícola and increased its capital to Bs 8 million. Aware at the time of the importance of agriculture for the country, the Board of Directors (anticipating changes in legislation) decided to stimulate production through agricultural credits, positioning itself as a prominent financial institute in this important sector;.a leadership that is still preserved in Venezuela’s financial system. It noted that in 1927 , the former Banco Mercantil y Agrícola was one of the four financial institutions in Venezuela authorized to issue its own paper money acceptable as legal tender. Ten years later, in 1936 , the Bank began its geographic expansion in the country by opening an office in the city of Valencia, Carabobo state, becoming the first branch of the institution outside Caracas. In 1947 , the Bank listed its shares on the Caracas Stock Exchange, and after 20 years of operations, it began to diversify its services in loans for car purchases, positioning itself as a pioneer in the Venezuelan financial system in the electronic processing system of data.

85 Banco Universal Growth and expansion: the head office of San Francisco

In 1951 , the Bank had 14 branches, 9 of which were located in the Caracas Metropolitan Area and 5 in the provinces. That same year, the Bank acquired the land occupied by the then known Pan Grande Bakery located on the San Francisco corner in Caracas, where a building marked as No. 5 was constructed. The new head office was opened on April 25 of the same year. At the end of the 60s, the Bank had 28 branches and agencies throughout the country to meet its operational expansion and, therefore, to offer a better service to all its customers and general public. In 1962 , Banco Mercantil y Agricola associated with the Chase Manhattan Bank, N.A, in the United States, institution that acquired 49 % of the Bank’s shares. This participation was subsequently reduced to less than 20 %, due to changes in the Venezuelan legislation, which limited the percentage of foreign ownership in Venezuelan banks. In 1980, the remaining share was then acquired by a group of Venezuelan investors. In 1972 , Mercantil signed the first Statutory Benefits Trust Fund Agreement, making it a pioneer in this field in Venezuela. In 1975 , In order to meet the needs of its customers in other countries, the Bank began to expand its international presence by opening representative offices in New York, London and Frankfurt. Within the framework of this expansion process, in 1981 it set up a branch in Panama and opened Latin American Representative Offices in Bogota and Lima.

Banco Mercantil: Multinational company with Venezuelan roots

In 1982 , the Bank changed its name to Banco Mercantil, C.A. and expanded its portfolio of services to include personal, consumer and travel loans. It acquired a franchise from Diners Club de Venezuela, C.A. giving it the exclusive right to manage and issue Diners credit cards directly. In 1982 , it opened a branch in Curaçao and representative offices in Sao Paulo and Quito opens.

Avenida Andrés Bello Nº 1: New head office, new corporate identity

In 1983 , after three decades at the Esquina de San Francisco address in Caracas, its head office moved to the current Avenida Andrés Bello N° 1 and the Institution adopted a new corporate identity. In 1987 , Mercantil was the leader in electronic banking services with its ABRA 24 ATMs, and in 1988 the institution was one of the top three private banks in Venezuela with the broadest national and international presence. Ever since it was created, the Bank has supported social development organizations by contributing to their institutional programs. Permanent support is given to these initiatives through Fundación Banco Mercantil which was created in 1987 to develop and promote programs involving the community, such as the “Give your School a Helping Hand” program for Venezuela’s elementary schools which it has been running since 1982. In 1991 , the Bank launched its third credit card, Visa Mercantil, on the market, in addition to Master Card and Diners. This positioned Mercantil as the leader in the credit card business, making it the only bank to hold franchises for 3 out of the 4 credit cards in the Venezuelan market. That same year the representative office in Mexico City was opened.

86 Report In 1996 , the Bank changed its status from a commercial bank to a full-service bank to offer its clients a comprehensive mix of products and services, in particular medium and long-term financing options. En 1997 , the Bank was again at the forefront of technology, becoming the pioneer in Internet banking in Venezuela when its website www.bancomercantil.com and its Mercantil Online Banking service were launched. Subsequently, the Mercantil Business Online Banking is incorporated.

Mercantil Servicios Financieros is constituted

That year, in order to give the Institution a new corporate structure, enhance its competitiveness and take advantage of the Venezuelan financial sector’s opportunities for growth, Mercantil Servicios Financieros was created and Banco Mercantil became its principal subsidiary. Over the years Mercantil Banco Universal’s Internet banking service has grown and new functionalities and types of transaction have gradually been added. These include payments with virtual cards (e-card) which Mercantil pioneered in the market. In 2000 , Mercantil acquired Interbank, C.A. Banco Universal in a merger. With this process, Mercantil expanded its presence in Venezuela by incorporating Interbank’s offices and large widespread nationwide network of banking centers.

Mercantil Banco Universal: Soundness, Vision and Dynamism

In 2007 , a new brand strategy was developed and changed its name to Mercantil Banco Universal under a new corporate graphic identity, which is identified by the Mercantil Empower reflecting three Mercantil brand attributes: soundness, vision and dynamism, and positioned its brand promise: “Empowering your world”. In 2008 , an important project got started, in order to offer products and services in areas that lacked banking services in Venezuela. This network of service points is called Mercantil Aliado orientated to serve the majorities banking segment. This concept consists of correspondent desk and correspondent trading points located in densely populated areas along the Venezuelan territory. In 2009 , the Bank introduced the chip technology on its ATM network and debit cards, within its high technology guidelines in rendering services. In this way, it allowed to increase security in all its customers base transactions. In 2010 , on the occasion of Mercantil Banco Universal eighty-fifth anniversary celebration, the Espacio Mercantil was opened. A place dedicated to art and culture with the aim of expanding ties with the Venezuelan community. In 2011 , Mercantil Banco Universal concludes the incorporation process of the Chip technology in all its credit and debit cards, ATMs and points of sale network. Mercantil Banco Universal is the first institution of the Venezuelan financial system to implement this valuable security mechanism for its customers. In addition, the Bank offered to its credit cardholders a fully automated loan authorization system called Préstame Mercantil with the use of Online Banking facilities. In 2012 , Mercantil Banco Universal starts the installation of new self-service areas "Mercantil Vía Rápida” fast-track service, continuing with the strategy in favor of promoting the use of electronic channels to process transactions and self-management. Additionally, the Mercantil Móvil service was introduced, in order to enable customers to access the Online Banking through Smartphones. In 2013 , Mercantil’s presence in social networks started with its @MercantilBanco Twitter account, basically aimed at informing and guiding on services, products and various Bank’s activity, creating a new direct communication channel with the customers.

87 Banco Universal In 2014 , a new product called “Pronto Credito Empresarial” was launched for the Commercial Banking segment. This is the first loan installments for working capital available and self-managed through Internet.

Mercantil Culture and Compromise: Our way of doing businesses

Since its foundation, Mercantil Banco Universal has been an institution guided by its Culture and Commitment which uniquely distinguishes its way of doing businesses. Mercantil Employees, the organization’s most valuable asset, are also guided by a Code of Ethics that represent the principles and values shared by all. The development of human capital and talent has always been a strategic priority. Mercantil Banco Universal employees consider the organization an excellent place to work in Venezuela, which is confirmed through on-going employee surveys related to employee engagement, organizational climate, open communication, and independent evaluations. The results confirm that Mercantil Banco Universal is one of the best companies in the industry, in Venezuela and Latin America. In addition, Mercantil Banco Universal has traditionally maintained close relationships with its employees and their trade unions. True to its vision, 90 years after Mercantil Banco Universal was established, the organization continues to support the economic and social development of Venezuela and communities where it has a presence. The corporate Culture and Compromise passed down by its founders remain unchanged, and are the primary reason millions of customers trust Mercantil Banco Universal.

General Production: Corporate Communications Management Artwork Photography: Walter Otto, Drones Venezuela, Organización Mercantil. Graphic Design: Arte Impreso H.M., C.A. Caracas, Venezuela, July 2015.

Avenida Andrés Bello Nº 1. Edificio Mercantil Caracas 1050, Venezuela. Phone: (58-212) 503.1111 www.bancomercantil.com 20 14