The cover presentation of Mercantile Bank Limited Annual Report 2011 focuses on different effi ciency traits that it beholds. Likewise a tree with the proper integration of eco-aspects, Mercantile Bank Limited carries on its operations in a balanced manner. The theme line is hence chosen, “Living Green | Banking Green” accordingly as we have correlated the natural sustenance with our business harmony.

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Letter of Transmittal

All ShareholdersSecurities and Exchange CommissionRegistrar of Joint Stock Companies & FirmsDhaka Stock Exchange LimitedChittagong Stock Exchange Limited.

Subject: Annual Report for the year ended on December 31, 2011.

Dear Sir(s),

We are delighted to enclose a copy of the Annual Report 2011 together with the Audited Financial Statements including Balance Sheet as at December 31, 2011 and Income Statement, Cash Flow Statement for the year ended on December 31, 2011 along with notes thereon of Mercantile Bank Limited for kind information and record.

Yours sincerely,

S. Q. Bazlur RashidExecutive Vice President andCompany Secretary

04 Notice of 13th Annual General Meeting

05 Vision, Mission and Objectives

06 Core Values

07 MBL Timeline

08 Credit Rating

09 Sponsors of Bank

12 Board of Directors

13 Directors’ Profi le

21 Corporate Structure

22 Management Team

24 Head Offi ce & Branch Network

32 Our Coverage

33 Performance Indicators

36 Economic Impact Report

38 Message from the Chairman

43 From the Desk of Managing Director & CEO

49 Directors’ Report

87 Disclosure on Risk Based Capital Requirement Under Pillar-3 of Basel II

103 Managing Director & CEO’s Report on Risk Management

115 Report on Corporate Governace

126 Compliance Report on SEC Notifi cation

129 Report of Audit Committee

131 Report on Corporate Social Responsibility

139 Report on Human Capital

143 Report on Customer Service

150 MBL Album

156 Auditors’s Report

159 Signing of Financial Statements 2011

160 Financial Statements-MBL

237 Financial Statements-OBU

243 Financial Statements- MBSL

253 Financial Statements-Mercantile Exchange House (UK) Limited

Table

ofContents

Notice of the 13th AnnualGeneral Meeting

Notice is hereby given to all members of Mercantile Bank Limited (the “Company”) that the 13th Annual General Meeting of the member’s i.e. shareholders of the Company will be held on March 28, 2012, Wednesday at 11.00 a.m. in the Winter Garden, Ruposhi Bangla Hotel, Dhaka to transact the following business and adopt necessary resolutions:

Agenda:01. To receive, consider and adopt the Profi t and Loss Account of the

Company for the year ended on December 31, 2011 and the Balance Sheet as at that date together with Reports of the Auditors and Directors thereon;

02. To declare Dividend out of the profi ts for the year ended on December 31, 2011;

03. To elect/re-elect Directors;

04. To appoint Auditors of the Company for the term until conclusion of the next Annual General Meeting and to fi x their remunerations;

05. To transact any other business with the permission of the Chair.

By order of the Board

S. Q. Bazlur RashidExecutive Vice President and

Company Secretary

Notes:(a) The Record Date is scheduled on the March 06, 2012 (Tuesday).

(b) The Shareholders’ name appearing in the Register of Members of the Company or in the Depository on the Record Date will be eligible to attend the AGM and receive the dividend.

(c) Any member of the Company eligible to attend and vote at the General Meeting may appoint a proxy to attend and vote on his/ her behalf.

(d) The Board of Directors have recommended stock dividend @ 23% (twenty three percent) for the year ended on December 31, 2011 to be considered in the AGM.

(e) The proxy form duly fi lled in and signed by the Member and stamped, must be submitted at the Registered Offi ce of the Company at least 72 hours before the meeting.

(f) Members are requested to notify the changes of address, if any, well in time. For BO Account Holders, the same to be rectifi ed through their respective Depository Participants.

Dated : March 08, 2012Dhaka, Bangladesh

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Our Vision, Mission and Our Objectives

Visionwould make fi nest corporate citizen.

Missionwill become most caring, focused for equitable growth based on diversifi ed deployment of resources and nevertheless would remain healthy and gainfully profi table Bank.

ObjectivesStrategic objectives• to achieve positive Economic Value Added (EVA)

each year.• to be market leader in product innovation.• to be one of the top three Financial Institutions in

Bangladesh in terms of cost effi ciency.• to be one of the top fi ve Financial Institutions

in Bangladesh in terms of market share in all signifi cant market segments we serve.

Financial objectives• to achieve 20% return on shareholders’ equity or

more, on average.

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Core Values

For the customersproviding with caring services by being innovative in the development of new banking products and services.

For the shareholdersmaximizing wealth of the Bank.

For the employeesrespecting worth and dignity of individual employees devoting their energies for the progress of the Bank.

For the communitystrengthening the corporate values and taking environ-ment and social risks and reward into account.

adopting the state-of-the art technology in banking operations.

CustomersShareholders

Employees

Community

New technology

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MBL Timeline

May 20, 1999 Incorporation of the BankJune 02, 1999 Commencement of Business

October 29, 2000 Opening of 10th BranchJuly 03, 2002 Opening of 15th Branch

June 30, 2003 Publication of Prospectus for IPOOctober 21-22, 2003 Subscription for SharesDecember 24, 2003 Opening of 20th Branch

February 16, 2004 Listed in Dhaka Stock ExchangeFebruary 26, 2004 Listed in Chittagong Stock Exchange

December 29, 2004 Opening of 25th BranchDecember 05, 2006 Opening of 30th BranchDecember 17, 2007 Opening of 40th BranchNovember 24, 2008 Opening of 42nd Branch

June 06, 2009 Mercantile Bank Brokerage House OperationOctober 22, 2009 Opening of 45th Branch

December 30, 2009 Opening of 50th BranchAugust 02, 2010 Opening of 55th Branch

December 30, 2010 Opening of 65th BranchSeptember 14, 2011 Seperate Operation of Mercantile Bank Securities Ltd. (MBSL)December 06, 2011 Mercantile Exchange House (UK) LimitedDecember 29, 2011 Opening of 75th Branch

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Credit Rating

Mercantile Bank Limited (MBL) was rated by Credit Rating and Information Services Limited (CRISL) on the basis of Financial Statements as on December 31, 2010. The summary of the rating is presented below:

CRISL has reaffi rmed the Long Term rating of Mercantile Bank Limited to ‘AA-’ (Pronounced as double A minus) and short Term rating to ‘ST-2’ with ‘Stable Outlook’ based on fi nancials up to December 31, 2010 and other qualitative and quantitative information up to the date of rating.

The Long Term rating implies that Banks rated in the category ‘AA-’ are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profi le and without signifi cant problems. Risks are modest and may vary slightly from time to time because of economic conditions.

Short Term rating of ‘ST-2’ indicates high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small.

Note: Credit Rating Report for the year 2010 has been presented here; the same for the year 2011 is yet to be received from the Credit Rating Agency. However, the Report would be disclosed to the users within stipulated time of the regulators.

AA-

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Sponsors of the Bank

whose dreams, aspirations andefforts came into reality.‘

‘

Md. Abdul Jalil, M.P

Dr. Toufi que Rahman Chowdhury

Engr. Mohd. Monsuruzzaman

Md. Anwarul Haque

Golam Faruk Ahmed

Md. Mizanur Rahman Chowdhury

Alhaj S.M. Shakil Akhter

Alhaj Tara Meah Khan(Deceased)

Subrota Narayan Roy

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M. S. Ahsan

Bilkis Begum

A. S. M. Feroz Alam

Jamshed R Khan(Deceased)

Alhaj Akram Hossain (Humayun)

M. Amanullah

Md. Tabibul Huq

Md. Abdul Hannan Mohd. Selim

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Feroza Begum

A. K. M. Shaheed Reza

Jalaluddin Ahmed Yeamin

S. M. Shafi qul Islam (Mamun)

Nargis Anwar

Morshed Alam

Md. Nasiruddin Choudhury

Morzina Khan Monzu Md. Shahabuddin Alam

Board of Directors

ChairmanMd. Abdul Jalil, M.P

Vice ChairmanMorshed AlamMohd. Selim

DirectorM. S. AhsanAlhaj Akram Hossain (Humayun)Md. Anwarul HaqueDr. Toufi que Rahman ChowdhuryGolam Faruk AhmedEngr. Mohd. MonsuruzzamanBilkis BegumMd. Tabibul HuqA. S. M. Feroz AlamM. AmanullahA. K. M. Shaheed RezaMd. Nasiruddin ChoudhuryMd. Shahabuddin AlamSyed Muhammed Abbdul Mannan, M.PAlhaj Mosharref HossainIsrat JahanM. A. Khan Belal

Dr. Matiur Rahman, M.P

Managing Director & CEOA.K.M. Shahidul Haque

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Directors’ Profile

Mr. Md. Abdul Jalil, M.P, was born on January 21, 1941 in a respectable Muslim family at Naogaon. He had his schooling in the local educational institutions and fi nally got admitted into Dhaka University in the year 1960 and obtained B.A (Hons.) in Political Science in 1963 and got his Master Degree in the year 1964. He went to London to study Law. While studying Bar-at-law in Lincons Inn, London, he came back to the country at the call of Bangabandhu Sk.Mujibur Rahman, father of the nation and took part in the independent movement and liberation war of Bangladesh.

On returning home he joined his family’s jute trade at Naogaon. He is associated with his business companies M/s. Jalil Traders and M/s Fayez Uddin Cold Storage Ltd. - one of the largest cold storage facilities in North Bengal.

Apart from being a businessman of repute he is also a prominent personality in Bangladesh. He was the General Secretary of Bangladesh Awami League.

He visited many countries of the world representing Bangladesh, Mercantile Bank as well as in individual capacities. He has notable contributions in the socio-economic development of the country and founded many organizations relating to Education, Culture, Sports, etc.

Mr. Jalil was the Commerce Minister in the previous government during 1996-2001 and contributed substantially in formulating trade and commercial policies of the country.

He founded Mercantile Bank Limited on 02 June 1999 and since inception he is the founder Chairman of the Board of Directors.

Md. Abdul Jalil, M.PChairman

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M. S. AhsanDirector

Mr. M. S. Ahsan (Date of Birth: June 01, 1960) comes of a respectable Muslim family of Begumgonj, Noakhali. Mr. Ahsan obtained the Master Degree from Dhaka University. He has established himself as an icon in the business sector of the country and the proud owner of the “Ahsan Group”. He is also the Chairman of AG Property Development, AG Agro Industries, Regent Holding Development Ltd., Capital Holding and Development Corporation, AG Pet Ltd., Shawdesh Builders Ltd., Home Apparels Ltd., Raima Fashion Ltd., AG Ceramics Ltd., RNS Corporation and Friends Traders. He is the Director of National Credit Ratings Ltd. Mr. Ahsan is also actively associated with many other Educational and Social Institutions as donor/ founder.

Morshed AlamVice Chairman

Mr. Morshed Alam is one of the most renowned & widely known business and industrial entrepreneur of the country. He was declared CIP for the year 1996-97, 2000-01 & 2009-10 by the Ministry of Commerce, Government of the People’s Republic of Bangladesh, for his remarkable contribution in business arena. He has also been awarded National Export Trophy for Exports for the year 1997-98, 2006-07 and also for 2009-10.

With perception and technical expertise he has become a leading entrepreneur of the country. He is founder of the Bengal Group of Industries, which consists of Bengal Plastic Industries Ltd., Bengal Poly Paper Sack Ltd., Bengal Overseas Corporation Ltd., Bengal Chemical & Synthetic Products Ltd., Romania Food & Beverage Ltd., Bengal Adhesive & Chemicals Products Ltd., Bengal Concept & Holdings Ltd., Power Utility BD Ltd., Romania Agrovat Ltd., Bengal Windsor Thermoplastic Ltd., Bengal Corrugated Carton Ind Ltd., Poly Cord Ltd., Bengal Polymer Wears Ltd. and Bengal Multimedia Ltd. He is the Chairman of RTV and Director of Desh General Insurance Company Ltd., Director of United Hospital Ltd., Director of people University of Bangladesh and also Chairman of Executive Committee of National Life Insurance Company Ltd.

Mr. Alam is a philanthropist. He is founder of Morshed Alam High School at Nateswar, Noakhali, life donor of Kazi Nagar Madrasha and Bazra High School at Noakhali and Motijheel Ideal High School, Dhaka.

Mohd. SelimVice Chairman

Mr. Mohd. Selim is a renowned businessman of the country. He was born in a respectable Muslim family in Shariatpur District. He has specialized himself in trading business. After graduation he devoted himself fully to business and he is the proprietor of ‘Sumon Cloth Store” a large cloth store in Ramna Bhaban, Dhaka and also proprietor of Central Plaza at Eastern Plaza. He is the Chairman of Synthia Securities Limited (Member of Dhaka Stock Exchange Limited). He is the Sponsor of Global Insurance Limited. He has also made notable contribution in socio-cultural activities. He is life member of Shariatpur Zilla-Kalyan Samity, life member of Greater Faridpur Kalyan Samity, trustee member, ‘Shariatpur Shikhha Kalyan Trust’ and Vice Chairman of Bangladesh Shop Owners’ Association. Donor Member of Purba Madaripur College.

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Alhaj Akram Hossain (Humayun)Director

Alhaj Akram Hossain (Humayun) was born on July 1, 1952 in a respectable Muslim family of Dagonbhuiyan, Feni. He is a commerce graduate and one of known Freedom Fighter of Bangladesh Liberation War. He is the Founder President of Bangladesh Paper Importers Association and also Founder President of Greater Noakhali Paper Merchant Somity. Apart from the aforementioned affi liation, he is General body Member of FBCCI, Bangladesh; Founder Member of All Community Club, Dhaka. Mr. Hossain is a well known philanthropist for his outstanding contribution for the betterment of the society. Among his various affi liations the notable ones are Founder and present Chairman of Managing Committee, Rajapur High School and College; Founder and present Chairman of Managing Committee of Shindurpur Khaja Ahmad Biddya Niketon. He is the Founder of Al-haj Shamsul Haque Miyah Adarsha Academy and Shakentapur Primary School. He is life member of Feni Heart Foundation and Feni Diabetic Somity. He is also member of Trustee Board of Feni University (Proposed). His business affi liation are Chairman of FARS Group of Company, Chairman & Managing Director of Fars Holdings & Associates Ltd.; Fars Hotels & Resorts Ltd.; Akram Traders; Pubali Paper Stores; Indigo Packing & Accessories.

Md. Anwarul HaqueDirector

Mr. Md. Anwarul Haque was born on 3rd January,1951 in a respected Muslim family in Dhaka. He is a renowned businessman of the country. He obtained the B.Sc. Engg (Civil) Degree and is engaged in business since last 32 years in different sectors like Construction, Real Estate, Export & Import and Trading. His business affi liation is versatile and diversifi ed. He is Managing Director of Living Plus Ltd. He is Director of Marga Net One Ltd., Premier Leasing & Finance Ltd., Holiday Travels Ltd, Premier Leasing Securities Ltd. and Mercantile Bank Securities Ltd. He is also associated with Securities Broking & Management Ltd. He is a Sponsor Shareholder of Global Insurance Ltd. His association with the above-mentioned well-reputed organization makes him a forward looking and progressive-businessman who has already reached an enviable height. Furthermore, he has deep affi nity and also attachment with various socio-cultural activities.

Dr. Toufi que Rahman ChowdhuryDirector

Dr. Toufi que Rahman Chowdhury was born on March 25, 1955 in a respectable Muslim family in Sylhet. He is a Sponsor Director and former Chairman of Mercantile Bank Ltd. Currently he is the Chairman of Mercantile Bank Securities Limited. Dr. Chowdhury is the Founder Chairman of Board of Trustee of Metropolitan University, Sylhet, Bangladesh (www.metrouni.edu.bd). He is the Managing Director of Firstlead Securities Ltd. and Vice Chairman of National Credit Ratings Ltd. (www.ncrbd.com) Prior to becoming a Director, he served over twenty years at various Senior Management Level in different Commercial Banks in Bangladesh.

He is also associated with a number of socio-cultural & educational organizations and actively participating in human rights movement.

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Bilkis BegumDirector

Mrs. Bilkis Begum was born on August 17, 1948 and was appointed Director in the fi rst Board of Directors of Mercantile Bank Ltd. in 1999 and continued up to September 2000. Subsequently she has been elected Director on May 28, 2006 of the Bank.

Golam Faruk AhmedDirector

Mr. Golam Faruk Ahmed was born on April 07, 1953 in a respectable Muslim family at Dhaka. After graduation he started his business career. He is proprietor of M/s Ahmeds, dealing in Seafood as exporter and a buying agent for last 20 years. He is a Sponsor Director of Mercantile Bank Ltd. Apart from this he is Chairman of Peoples Insurance Co. Ltd. and Director of Popular Life Insurance Co. Ltd. He is also Advisor of Global Insurance Ltd. Now, he is also the Honorary Consular of Kingdom of Belgium in Bangladesh.

In his social activities he is a Life Member, Dhaka Club Ltd.; Donor Member, Uttara Club Ltd.; Gulshan Club Ltd.; Honorary Member, British Regional Club, UK.

Engr. Mohd. MonsuruzzamanDirector

Engr. Mohd. Monsuruzzaman is a renowned businessman in Civil Engineering Construction. He was born in respectable Muslim family in Moulvi Bazar District, Molvibazar. He successfully completed his B.Sc. Engg.(Civil) from BUET in 1977. His keen perception in construction and planning at fi eld level made him an established contractor in business area.

In his early days of profession, he was consultant engineer in ‘Monu River Project’ under Water Development Board. Subsequently he was a successful construction engineer in construction of many roads, bridges and buildings in Bangladesh and abroad (Middle East). He is the sole proprietor of M/S Mohd. Monsuruzzaman. He is director of the Firstlead Securities Ltd. and Shareholder of National Credit Ratings Ltd., Corporate member of Chittagong Stock Exchange; Fellow member of Institute of Engineers Bangladesh; Member of Moulvi Bazar Chamber of Commerce & Industries and also Member of Board of Governors of Metropolitan University, Sylhet.

He is associated with various socio-cultural activities. He is also member of Rotary Club of Moulvi Bazar Central & Moulvi Bazar Club; Life member of Shah Mostafa College- Moulvi Bazar, Kashinath Alauddin High School-Moulvi Bazar & Shilpakala Academy of Moulvi Bazar. He has widely traveled in USA, Canada, Japan, KSA, UAE, Nepal, India, Singapore, Malaysia, Thailand, Denmark, Sweden and France.

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Md. Tabibul HuqDirector

Mr. Md. Tabibul Huq was born on 19th August 1952. He obtained Bachelor of Science in Electrical Engineering from BUET in 1975 (Session 1972-73).

He joined Bangladesh Army and passed out from BMA in February 1976. He was awarded the Chief of Army Staff’s cane for outstanding performance in BMA. He served for 4 years in Bangladesh Army and was released as Captain. During Army service, he obtained higher training in telecommunication equipment on 1977 in Germany.

He served in East Malaysia as transmission engineer in Hydro Electric power project in 1979-80. He obtained management training in Europe.

Started own business in 1981 and established Creative Engineers Ltd. of which, he is the Managing Director & presently enjoying franchise of Schindler and Escalators from Switzerland, MAAN, B&W Diesels Ltd. of Germany and U.K. At present, he is employer of more than 400 people including management & non-management staff. He is also Managing Director of Creative Paper Mills Limited, producing 200TPD of white writing & printing and craft linear.

A. S. M. Feroz AlamDirector

Mr. A.S.M Feroz Alam was born on December 01, 1960 in respectable Muslim family of Patuakhali. He is a renowned businessman of the country.

He has traveled about 65 countries for business purpose and can speak in seven languages. He is the Managing Director of Bengal Trading Ltd. He is Sponsor of Premier Leasing & Finance Ltd. and Chairman of Premier Leasing Securities Ltd. He is the Director of National Television Ltd. (RTV).

M. AmanullahDirector

Mr. M. Amanullah is the Chairman of renowned business house Aman Group of Companies, which comprises of many business companies in the country’s Textile, Financial, Chemical, FMCG, Educational and IT sectors. He is the Chairman of Aman Spinning Mills Ltd., Mousumi Enterprises Ltd., Arena Consumer Product Ltd., Arena Industries Ltd., Arena Securities Ltd., Arena HRI Limited, Samp Limited. He is a Shareholder of Global Insurance Ltd. Besides of the business activities Mr. M. Amanullah involved himself for the welfare of the society. He is the Founder Chairman of Aman Group Foundation. He is a member of the Governing body of the Presidency University. For his outstanding contribution in the fi nancial and educational sector Mr. M. Amanullah has honored many times by different organizations. In the year 2000 he received Shorojini Naidu Gold Medal from the then President of Bangladesh Justice Shahabuddin Ahmed for his contribution in the Banking and Insurance sector. He was awarded with Deshbandhu Chittaranjan Das Gold Medal in 2002 also for the contribution he made in the Banking and Insurance Sector of the country. In the year 2004 he received Atish Dipankar Gold Medal Award from the then President of Bangladesh Dr. Iajuddin Ahmed for his contribution towards the society.

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Md. Shahabuddin AlamDirector

Mr.Md. Shahabuddin Alam is one of the renowned entrepreneurs of the country. He comes from a respectable Muslim family of South Halishahar, Chittagong. He is the Chairman of S.A. Group of Industries which consists of Shamannaz Condensed Milk Ltd., Shamannaz Dairy & Food Products Ltd., S. A. Pulp & Paper Products Ltd., South Eastern Tank Terminal Ltd., South Eastern Oil Refi nery Ltd., S.A. Consumer products Ltd., S.A. Salt Industries Ltd., S.A. Beverage Ltd., Sharija Cement Ltd., South Eastern Paper Mills, S.A Properties Ltd., S.A. Power Generation Ltd., S.A. Tank Tirminal Ltd., Sarija Oil Refi nery Limited and Managing Director of S.A. Oil Refi nery Ltd., Samannaz Super Oils Ltd., Laila Vanaspati Products Ltd., S.A. Condensed Milk Ltd. and S.A. Telecom System Ltd.

His contribution towards the society are quite remarkable. He is founder member of Independent University of Bangladesh, Vice Chairman of Bangladesh Vegetable Oil Refi ners & Vanaspati Manufacturers Association, Member of Chittagong Club Ltd., Chittagong Samity, Dhaka, Lions Club of Chittagong City and Lions Blood Bank. He is also a widely traveled person and visited USA, UK, KSA, Thailand, Singapore, Malaysia, Hong Kong, India, Holland, etc.

A. K. M. Shaheed RezaDirector

Mr. A. K. M. Shaheed Reza is a reputed businessman and entrepreneur of the country. He has a diverse business profi le and established himself as a prominent business personality in the fi eld of Textile and Garments industry. He has also established himself in the fi nancial sector of the country.

After obtaining Master Degree in Management, Mr. Reza joined National Bank Limited in 1986. He left the service in 1993 to utilize his experiences already gathered and to become one of the successful businessmen of the country. As a Banker, always he tried his best to advise bankers to serve customers as professional. It proves his professional effi ciency.

Mr. Reza has served as the Chairman of Executive Committee & Audit Committee of Mercantile Bank Limited. Currently he is the Vice Chairman of Mercantile Bank Securities Ltd. and Member of the Board of Directors of Mercantile Bank Limited.

He was the Chairman of Global Insurance Ltd. Currently he is the Chairman of Allure Apparels Ltd., Fashion Plus Ltd., Reza Fabrics Ltd. & Reza Fashions Ltd. He is the Director of National Credit Ratings Ltd. He is the Proprietor of Fashions Exports.

Also he inspires people to establish career in entrepreneurship. He is the current Chairman of Standing Committee on International Affairs, Trade Bodies and Development Partners, FBCCI and active Member of Feni Chamber of Commerce & Industry. He has notable contributions in the socio-economic development of the country and as such he established various organizations for the welfare of the country.

Apart from contribution of fi nancial sector, Mr. Reza is associated with many others social, cultural, religious, educational organizations. Basically, he is a dedicated person for vulnerable group of the country those are facing diffi culties to survive their existence in the society. Always he insists poor and meritorious students to acquire knowledge for their future development. He is the Chairman of Managing Committee of Dholia High School, Bagerhat High School and Thakurhat Govt. Primary School, Feni. He is also the Founder of Progati Balika Bidda Niketon, Feni. He is a life Member of Diabetic Association and Heart Foundation Feni. For more information Please visit: http://www.rezagroup-bd.com

Md. Nasiruddin ChoudhuryDirector

Mr. Md. Nasiruddin Choudhury is a businessman and entrepreneur of the country. His versatile and diversifi ed business affi liation and keen perception in construction and real estate has made him a leading businessman in the trade. After obtaining B. Sc. Engg (Civil) degree he has been engaged in business for almost 35 years. His affi liations mainly consist of construction, real estate, export and import, trading and travel business.

Md. Nasiruddin Choudhury is the Managing Director of Technocon Limited-which is a renowned construction company at home and abroad. He is the Director of Premier Leasing & Finance Ltd., Delta Hospital Ltd., Premier Leasing Securities Ltd., Mercantile Bank Securities Ltd., and Securities Broking and Management Ltd. He is the Managing Partner of Manner Associates Ltd. and Techno-Con. To add new horizon to his business affi liation he has also engaged himself as Chairman of Holiday Travels Limited- a fi rm that deals in travel and tourism business.

His contributions toward socio-cultural and professional activities are quite remarkable. He is fellow member of Institute of Engineers, Bangladesh and donor member of Gulshan Club, Dhaka, permanent member of Dhaka Club Limited and life member of Dhanmondi Recreation Club Limited.

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Syed Muhammed Abbdul Mannan M.P Director

Mr. Syed Muhammed Abbdul Mannan is a businessman and entrepreneur of the country. His versatile and diversifi ed business affi liation and keen perception in construction and real estate has made him a leading businessman in the trade. After obtaining B. Sc. Engg(Civil) he has been engaged in business for almost 32 years. His affi liations mainly consist of construction, real estate, export and import, trading and travel business.

Mr. Mannan is elected as a Member of Parliament in 2008. Mr. Mannan is the Chairman of Piu De Fashionova Ltd, Vice-Chairman of Premier Leasing & Finance Ltd., Director of Delta Spinners Ltd., Delta Hospital Ltd., F.M. Properties Ltd., Premier Leasing Securities Ltd., and Mercantile Bank Securities Ltd. Managing Director Techno-Foki (Bangladesh) Ltd. and Sponsor Shareholder of Global Insurance Ltd.

His contributions towards socio-cultural and professional activities are remarkable. He is donor member of Gulshan Club Ltd., life member of Kurmitola Golf Club Ltd., member of Board of Governors of Bangladesh Enterprise Institute (BEI) and President, Singair Samity.

Alhaj Mosharref HossainDirector

Alhaj Mosharref Hossain was born on January 07, 1940 in a respectable Muslim family at Chhagalnaya, Feni. He had his schooling in the local educational institutions.

Alhaj Mosharref Hossain is one of the leading businessmen of the country, especially in trading. He is Proprietor of M. H. Traders a renowned business house engaged in paper trading. Apart from being a businessman of repute he is also a prominent personality in Bangladesh. He is also a Director of Toka Ink (BD) Ltd. and Managing Director of Bulbul Printers. He is the Founder and Director of Hossainya Hefje Quaran Madrasa & Atimkhana, Chhagalnaya, Feni.

Israt JahanDirector

Mrs. Israt Jahan was born on March 01, 1982 in a respectable Muslim family. She is the Director of Board of Directors of Mercantile Bank Limited. She is a Sponsor Shareholder of Global Insurance Ltd.

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A.K.M. Shahidul HaqueManaging Director & CEO

Mr. A.K.M. Shahidul Haque was born on 31st March, 1953 in a respectable Muslim family at Kishorgong. He obtained Master Degree with honors from Dhaka University in 1974. He then joined Rupali Bank as Probationary Offi cer in 1977 and worked in different capacities including Head of number of Branches.

In the year 1986 he joined National Bank Limited and worked in Inspection, Credit and Law & Recovery Divisions for almost nine years. In the year 1995 he joined Prime Bank Limited as Assistant Vice President and worked there as Head of Human Resources Division and also as Head of Branch and was promoted to the rank of Vice President.

His association with Mercantile Bank Limited started since its inception in the year 1999 as Senior Vice President. He was Head of Human Resource, Credit and International Division and also Incharge of Main Branch and Company Secretary. He was promoted to the rank of Deputy Managing Director of the Bank in April, 2004. At present, he is Managing Director of the Bank.

During his versatile banking career he proved himself competent, enthusiastic, capable and worthy to perform strenuous job of a banker. His rich experience and diversifi ed merit is a valuable possession of MBL. In addition to the above, he participated in various training programs, seminars, workshops both at home and abroad which has widened his experience as a banker. He has traveled a number of countries including USA, UK, UAE, KSA, Bahrain, Singapore, Malaysia, China, India, and Nepal. Mr Haque attended various Workshops, Seminers and Symporiums at home and abroad. Among those, a recent one, in the name & style ‘Leadership and innovation workshop’ conducted by Judge Business School, Cambridge University, UK is quite notable.

M. A. Khan BelalDirector

Mr. M.A. Khan Belal was born on 2nd November, 1958 in a respectable Muslim family of Begumgonj, Noakhali. Mr. Belal obtained M.Sc(Chemistry) from Dhaka University.

Mr. Belal has a high academic background and commendable experience in the fi eld of Trade, Industry, Shipping, Banking and other business arena in Bangladesh. Shamrat Group of Companies Limited is a one of the leading Group of Companies in Bangladesh. He is the Chairman of M/s Shamrat Prince Spining Mills Ltd., Bang Tai Ceramic Ltd and Shamrat Electronics. He is the Managing Director of Shamrat Cold Storage Ltd., Shamrat ICE & Fish Processing Plant, Shamrat Commercial Co. Ltd., Shandhya Hotel (Residential), Shamrat Shiping Lines, Shamrat Commercial Enterprise, Morzina Money Changer, B.M.S Travels, and Prince Trade International.

Mr. Belal always engaged himself with social, cultural, religious, educational organizations. He is the founder of ‘Al Haj Aman Ullah Khan ideal Kindergarten’, Al Haj Aman Ullah Khan Hafezee Madrasha, Chairman of ‘Podi para Fazil Madrasha, Noakhali, Gopalpur Ali Hyder High School, Vice Chairman of ‘Kachihata Dakhil Madrasha, Noakhali, ‘K.M Alim Madrasha’ Noakhali. He is also the member of Executive Committee of Shidashshari University College, Premier Lions Club International, Noakhali District Somitee. Life Member of Bangladesh Red Crescent Society Somittee, Advisor of ‘Begumgonj Jubo Kolyan Somittee, Mohammadan Sporting Club, Dhaka. Donor of Gopal Pur Post Offi ce valuable land. Chairman Shah Tarik Ullah Madrasha, Donor member of char Zaheria Dakil Madrasha.

Mr. Belal donated various sector like orphanages, School, Mosque, Madrasha, Sports etc.

Dr. Matiur Rahman, M.PDirector

Dr. Matiur Rahman, was born on 1st November, 1946 in a respectable Muslim family at Tangail District. He obtained MBBS degree from Dhaka, D-card from Austria, Ph.D. from USA, FRCP from Ireland and FACC from USA. He is a renowned physician in Bangladesh and engaged with Lab Aid Hospital since inception as Head of Cardiology.

He is elected as Member of parliament in 2008. He is the Chairman of Bangladesh Mutual Securities Ltd. and partner of Muhi Enterprise and Monte Carlo Holdings Ltd. His contribution towards the society are quite remarkable.

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Executive Committee

M. S. Ahsan, Chairman Golam Faruk Ahmed, Member Bilkis Begum, Member A. S. M. Feroz Alam, Member M. Amanullah, Member A. K. M. Shaheed Reza, Member Md. Shahabuddin Alam, Member

Audit Committee

Alhaj Akram Hossain (Humayun), Chairman Md. Anwarul Haque, Member Mohd. Selim, Member Md. Nasiruddin Choudhury, Member Mrs. Israt Jahan, Member

Managing Director & CEO

A.K.M. Shahidul Haque

Chief Financial Offi cer

Monindra Kumar Nath

Company Secretary

S. Q. Bazlur Rashid

Auditors

Ahmed Zaker & Co., Chartered Accountants K. M. Hasan & Co., Chartered Accountants

Tax Advisor

K. M. Hasan & Co., Chartered Accountants

Corporate Structure

22 annual report

Management Team

Mr. A.K.M. Shahidul HaqueManaging Director & CEO

Deputy Managing Directors

2. Mr. Md. Abdul Jalil Chowdhury Deputy Managing Director

3. Mr. Monindra Kumar Nath Deputy Managing Director & CFO

4. Mr. M A Yousuf Khan Deputy Managing Director

5. Mr. Md. Quamrul Islam Chowdhury Deputy Managing Director

6. Mr. Choudhury Moshtaq Ahmed Deputy Managing Director

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Management TeamHead Office

8. Md. Abdus Salam Senior Executive Vice President Head of Board Audit Division

9. S.Q. Bazlur Rashid Executive Vice President Company Secretary and Head of Human Resources Division

10. Mohammad Ismail Executive Vice President Head of Corporate Banking Division

11. Khandakar Fahim Uddin Ahmed Executive Vice President Head of CAMRCD

12. Md. Sadruzzaman Executive Vice President Head of SME Financing Division

13. Md. Shoaib Ahmed Executive Vice President Head of CRMD

14. Md. Sayeed Hossain Executive Vice President Head of ICCD

15. Javed Islam Executive Vice President Head of Consumer, Retail and Card Division

16. Engr. Md. Rafi qul Hoque Bhuiyan Senior Vice President Head of IT Division

17. Dr. Md. Nurul Islam Senior Vice President Head of General Services Division

18. Shamim Ahmed Senior Vice President Head of International Division

19. A. K. M. Atiqur Rahman Senior Vice President Head of Risk Management Division

20. Md. Shafi et Wahed Senior Vice President Head of IT Business Team

21. Md. Golam Kibria Senior Vice President Head of Financial Administration Division

22. Shah Syed Abdul Bari Senior Vice President Head of GBD & CAMLCO

23. Md. Shawkat Jahan Khan Senior Vice President Head of Treasury Division

24. Md. Nurul Haque Gazi Vice President NRB Division

25. K. M. Abdur Razzaque Vice President Head of Public Relation Division

26. Farhad Malik First Vice President Head of Mobile Banking Division

27. Purbani Roy First Vice President Marketing Division

28. Jahangir Javed First Vice President Treasury Back Offi ce

29. Liaquat Fazlur Rashid First Vice President Agriculture Credit, Department

30. Md. Abdul Alim First Vice President Head of Research & Planning Division

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Rabiul HussainPrincipal, MBTI

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Head Office & Branch Network

Zonal Offi ce Mishkat Arcade (Level -1) 21/1, Agrabad C/A, ChittagongPhone : 031-2529445, 716421 723181, 721772Mobile : 01713-384491Fax : 031-716459

Head Offi ce

61, Dilkusha Commercial AreaDhaka-1000, BangladeshPABX : 9559333, 9553892, 9561140Fax : 88-02-9561213Swift : MBLBBDDHE-mail : it@mblbd.comWebsite: www.mblbd.com

Divisions of the Bank

Board Audit DivisionBoard DivisionCard and Mobile Banking DivisionCorporate Banking DivisionCredit Administration DivisionCredit Risk Management DivisionFinancial Administration Division

Dhaka Division

Main Branch61, Dilkusha C/ADhaka-1000Phone : 9559333, 9571618Mobile : 01711-535958Fax : 88-02-9554410HOB: Md. Quamrul Islam Chowdhury, DMD

Training InstituteSwadesh Tower, Level-641/6, Purana Paltan LaneDhaka-1000Phone: 7174016, 7172282Fax: 9571096

General Banking DivisionGeneral Services DivisionHuman Resources DivisionInternal Control & Compliance DivisionInternational DivisionIT DivisionRisk Management Division

Law & Recovery DivisionMarketing & Branches DivisionNRB DivisionResearch & Planning DivisionSME & Retail Banking DivisionTreasury (Back Offi ce) DivisionTreasury (Front Offi ce) Division

Dhanmondi BranchSima BlossomHouse No. 390 (Old), 03 (New)Road No. 27 (Old), 16 (New)Dhanmondi R/A, Dhaka -1209Phone : 9130500, 9142691Mobile : 01755-500192Fax : 88-02-8126768HOB: Syed Ahmadul Karim, EVP

Karwan Bazar BranchDhaka Trade Centre99, Kazi Nazrul Islam AvenueKawran Bazar C/A, Dhaka- 1215 Phone : 8112440, 8141910Mobile : 01711-535953Fax : 88-02-8126882HOB: Ahmedul Haque, EVP

Banani BranchAwal Centre, (2nd Floor) 34, Kemal Ataturk AvenueBanani C/A, Dhaka-1213Phone : 8816473, 8816474 Mobile : 01711-535954Fax : 88-02-8827807HOB: Abdullah Md. Zaki Hasan, SVP

Mohakhali BranchRed Crescent Concord Tower, 17, Mohakhali C/ A (2nd Floor)Dhaka-1212Phone : 9888346, 9891520Mobile : 01711-535957Fax : 88-02-9895797, 9863215HOB: Md. Zakir Hossain, SVP

Joypara BranchSamabay Super MarketJoypara Bazar, Dohar, DhakaPhone : 06223-56193Mobile : 01711-535949Fax : 06223-56163 HOB: Mohammad Faruque Ahmmed, AVP

Nayabazar Branch25/1, Zinda Bahar (1st Lane)Nawab Akhtar Uddin MansionNayabazar, Dhaka-1100Phone : 7393827, 7393655Mobile : 01711-535956Fax : 88-02-7390869HOB: Abu Syed Md. Mohiuddin, VP

Board Bazar BranchBoard Bazar, GazipurPhone : 9291604, 9293639Mobile : 01711-535950Fax : 88-02-9291660HOB: Delwar Hossain, FVP

Mirpur BranchRokeya Sarani, Razia Plaza (1st Floor)184, Shenpara ParbotaMirpur - 10, Dhaka- 1216 Phone : 9008852, 9015661, 8034577Mobile : 01711-535955Fax : 88-02-8034577HOB: F. M. Nawaz Ali, VP

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Uttara BranchHouse- 10(A), Road- 7/DSector- 9, Uttara Model TownUttara, Dhaka -1230Phone : 8955879, 8958177Mobile : 01711-535942Fax : 88-02-8955881HOB: Md. Abdul Halim, FVP

Ashulia BranchBhuiyan Complex, Jamgora BazarAshulia, Savar, DhakaPhone : 7790491Mobile : 01711-535948Fax : 88-02-7790708HOB: Md. Ata Rabbani Chowdhury, FVP

Elephant Road BranchOsman Plaza75, Elephant Road, Dhaka-1205 Phone : 8618732, 9677364Mobile : 01713-044832Fax : 88-02-9669458HOB: Md. Abul Bashar, VP

Satmasjid Road BranchHouse No. 35 (Old), 82/A (New)Road 8/A (New), Satmasjid RoadDhanmomdi, Dhaka-1209Phone : 8112463-4, 9141148Mobile : 01713-039792Fax : 88-02-9139183HOB: Arif Md. Shahedul Haque, VP

Motijheel BranchMalek Mansion128, Motijheel C/A, Dhaka-1000Phone : 7161923-4, 9570131Mobile : 01819-260289Fax : 88-02-7161925, 9561178HOB: A B M Eradul Islam, VP

Konabari BranchMotiur Rahman PlazaKonabari UnionGazipur Sadar, GazipurPhone : 9298484-5Mobile : 01713-044846Fax : 88-02-9298486HOB: Md. Abul Bashar Khan, FVP

Hemayetpur BranchHatem Ali Complex, Singair Road Hemayetpur, Savar, DhakaPhone : 7741532, 7741533Mobile : 01713-452995Fax : 88-02-7741531HOB: Md. Fakruzzaman Chowdhury, FVP

Gulshan BranchHosna CenterSuit No-103-109(1st Floor)106, Gulshan Avenue, Dhaka-1212Phone : 8835276-7, 9897879Mobile : 01713-045296Fax : 88-02-8835614HOB: Md. Nazrul Hossain, SEVP

Bijoynanar BranchAkram Centre 3/3-C & 3/3-D (Old)212 (New) S.S. Nazrul Islam SaraniPaltan, Dhaka-1000Phone : 7117830, 7117834Mobile : 01713-068127Fax : 88-02-7117114HOB: Shah Md. Sohel Khurshid, SVP

Bhojeswarbazar BranchBhojeswar BazarNaria, ShariatpurMobile : 01713-384497 01715-375405HOB: A.B.M. Shafi qur Rahman, FAVP

Moghbazar Branch331 (Old), 227 (New)Outer Circular Road (1st Floor)Ramna, Dhaka-1227Phone : 8333016, 8333017Mobile : 01711-643281Fax : 88-02-8333018HOB: Ahsanul Haq Chowdhury, SVP

Green Road Branch151/6, Green Road, DhakaPhone : 8157266, 9136809, 9136822Mobile : 01730-013453Fax : 88-02-8157155HOB: Md. Abdul Awal, FVP

Mazar Road BranchHazrat Shah Ali Girls High School & CollegeMarket Complex, Mazar RoadMirpur-1, Dhaka-1216Phone : 8035529, 8060752Mobile : 01730-328681Fax : 88-02-8035529HOB: Md. Moshaddeque Hossain FVP

Engineers’ Institute BranchThe Institution of Engineers, Bangladesh8/A, Ramna, Dhaka-1000Phone : 7110651, 7110684Mobile : 01711-535946Fax : 88-02-7110610HOB: Md. Mahmood Alam Chowdhury, SVP

Pragati Sarani BranchGreen Orlando, 42/4, Progati SaraniBaridhara, DhakaPhone : 8411503, 8411501-2Mobile : 01730-318186Fax : 88-02-8411504HOB: Farook Iqbal, VP

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Demra SME/Krishi BranchMatuail New Market Bhabon,Konapara, Demra, DhakaPhone : 02-7542908, 7542911Mobile : 01714-075533Fax : 88-02-7542904HOB: Md. Rezaul Karim, AVP

Narayanganj BranchH R Plaza, 64 (Old), 90 (New)Bangabandhu Road, NarayangonjPhone : 02-7648241, 7648243Mobile : 01713-20243Fax : 88-02-7648244HOB: A. K. M. Hassanuzzaman, FVP

Mymensing BranchAli Plaza, 64 Choto Bazar,MymensinghPhone : 091-63313, 63326Mobile : 01730-340791Fax : 88-091-63316HOB: Md. Zillur Rahman, AVP

Dholaikhal BranchChisti Bhaban, 72 Lal Mohon Shaha Street Dholaikhal, DhakaPhone : 02-7124478, 7122987Mobile : 01730-709985Fax : 88-02-7117927HOB: Md. Faizur Rahman Mazumder, VP

Aganagar BranchAganagar, South KeranigonjDhakaPhone : 02-7763658, 7763657Mobile : 01730-340794Fax : 88-02-7763659HOB: Al Mansur, AVP

Ring Road BranchChoice A J Golden Tower, 2/1, Ring RoadShyamoli, DhakaPhone: 02-9103329Mobile: 01730-373896HOB: Md. Kabir Hossain, AVP

Imamganj Branch Mohammad Hossain Complex 169 Imamganj 3, Moulvi Bazar Road Ward – 67, Chakbazar, DhakaPhone: 02-7312970Mobile: 01755-533142 HOB: Kamruzzaman, VP

Damudya Branch Damudya Bazar Damudya , ShariatpurPhone: 06023-56204 FAX: 06023-56201Mobile: 01755-533146 HOB: Md. Arifur Rahman, PO

Rampura Branch Circle Alam’s Height, Holding # 375West Rampura, DIT RoadWard – 22, Rampura, Dhaka – 1219Phone: 02-8322584, 02-8333697FAX: 02-8322797Mobile: 0175-5533149HOB: Md. Moniar Rahman, VP

Khatunganj Branch599, Ramjoymohajan LaneKhatunganj, ChittagongPhone : 031-626101, 626102Mobile : 01711-723051, 01711-724147Fax: 88-031-635514HOB: Anwar Hossain, VP

Agrabad BranchMishkat Arcade (Level -1) 21/1, Agrabad C/A, ChittagongPhone : 031-2529445, 716421, 723181, 721772Mobile : 01713-384491Fax : 031-716459HOB: Nanda Dulal Bhattacharjee, EVP

Jubliee Road BranchKamal Chamber (2nd Floor)61, Jubilee Road, Kotwali, ChittagongPhone : 031-621018, 624819Mobile : 01711-724874Fax : 88-031-626072HOB: Md. Mahibbul Karim, SVP

Jhilongja BranchHotel Sea Palace Ltd.Kalatoli Road, Cox’s BazarPhone : 0341-62234Mobile : 01713-103662Fax : 88-0341-63734HOB: Anupam Kumar Paul, AVP

Madam Bibir Hat BranchBhatiary, ShitakundChittagongPhone : 031-2780465, 2780465Mobile: 01713-105062, 01730-076127Fax : 88-031- 2780686HOB: Mrinal Paul, VP

O R Nizam Road Branch191, CDA AvenueEast Nasirabad, Chittagong.Phone : 031-657512, 2550876Mobile : 01713-103663Fax : 88-031-716459HOB: Jashim Uddin, FVP

Chittagong Division

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Feni Branch105, S.S. Kaiser RoadFeni Sadar, FeniPhone : 0331-63558, 63559Mobile : 01713-452994Fax : 88-0331-63557HOB: Abu Yusuf Md. Abdullah Haroon, FVP

Chowmuhani BranchSomobay Bhaban (2nd Floor)Karimpur Road, ChowmuhaniBegumgonj, NoakhaliPhone : 0321-52960, 52966Mobile : 01713-036991Fax : 88-0321-52966HOB: Mohammed Masudul Hasan, FVP

Comilla Branch1042/945, Jhawtola, ComillaPhone : 081-65275Mobile : 01713-384498Fax : 88-081-65276HOB: Md. Abu Sakin, FVP

Dagonbhuiyan BranchMizan Tower, 273, Basurhat RoadDagonbhuiyan, FeniPhone : 03323-79105, 79160Mobile : 01730-328684Fax : 88-03323-79106HOB: Md. Sana Ullah, FAVP

Sheikh Mujib Road Branch304, SK Mujib RoadChittagongPhone : 031-2514235, 2514236Mobile : 01730-013454Fax : 88-031-2514235HOB: Syed Mahbubul Haq, VP

Faridgonj BranchSaima Abdullah PlazaChandra RoadFaridgonj Bazar, ChandpurPhone : 08422-64378Mobile : 01730-318187HOB: A T M Monjurul Karim, FAVP

Patia SME/Krishi BranchRahman Mansion,1284/1 Club RoadPatiya, ChittagongPhone : 03035-56185Mobile : 01713-161483, 01730-620813 Fax : 88-03035-56579HOB: Md. Abu Taher, PO

Chittagong EPZ BranchS A TowerAirport Road, ChittagongPhone : 031-740682-3, 742217Mobile : 01730-318185Fax: 031-740684HOB: Zahedul Islam, VP

Amishapara SME/Krishi BranchAziz Supar Market (1st Floor)Amishapara Bazar, ShonaimuriNoakhaliMobile : 01730-320812HOB: Kamrul Islam Zabed, PO

Rangamati BranchHotel Green Castle1 Pathorghata, Reserve BazarKotoali, RangamatiPhone : 0351-61267-8Mobile : 01730-709986Fax : 88-0351-61275HOB: Debabrata Das, AVP

Rajnagar SME/Krishi BranchDhonia, BaluaFeni Sadar, FeniPhone : 0331-73782, 73783 Mobile : 01711-303711Fax : 88-0301-73784HOB: Md. Shahadat Hossain, PO

Banglabazar BranchBaroichotol, 1 BegumganjNoakhaliPhone : 0321-53305, 0321-56631Mobile : 01730-709987Fax : 88-0321-53164HOB: Md. Shahjahan, FAVP

Maijdi Court Branch1st & 2nd Floor, Honey Dew Point, 10, Abdul MalekUkil Sarak, Maiji Court, NoakhaliMobile: 01730-709983Fax: 0321-71712HOB: M A Malek Patwari, FVP

Ashuganj BranchAziz Plaza(1st & 2nd Floor), Char Chartola,Brahmmanbaria Mobile: 01755-533145HOB: Md. Shamsul Alam Siddique, FVP

A K Khan Moor BranchAnjuman Tower, A K Khan More, Zakir Hossain Road Holding # 827 Feroz Shah Colony, Pahartali, ChittagongPhone: 031-2773369, 031-2773367 Mobile: 01755-533140Fax: 88-031-2773368HOB: Md. Jamal Uddin, FVP

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Sapahar BranchSapahar, Sapahar, NaogaonPhone : 07432-74081Mobile : 01713-068096Fax : 88-07243-74080HOB: Md. Ruhul Amin Siddiqui, PO

Bogra BranchBarogola, Bogra SadarBograPhone : 051-69840Mobile : 01713-044835Fax : 88-051-69190HOB: A.H.M. Kawsarul Islam, AVP

Chapainwabganj Branch 1st & 2nd Floor, 65,66,67 Jhilim RoadChapainawabgonj-6300 Ward # 02, Chapainawabgonj Sadar ChapainawabgonjPhone: 0781-51707 Mobile: 01730-709982HOB: Syed Saiful Islam, AVP

Shishahat BranchShisha Khorpa BazarDag # 294(SA), 267(RS), Khatian # 88 (RS)PRO: 37/1 (RS), J.L. No 175Khorpa, Porsa, Naogaon Mobile: 01713365092, 01755-533141HOB: Md. Abdur Razzak, PO

Naogaon BranchMain Road, ChakdevNaogaonPhone : 0741-63331, 69181-2Mobile : 01711-419057Fax : 88-0741-63230HOB: A S M Zakir Hossain, FVP

Rajshahi BranchJODIAC PlazaShaheb Bazar, RajshahiPhone : 0721-771214, 772562Mobile : 01711-419079Fax : 88-0721-771215HOB: Md. Zahangir Alam, FVP

Dinajpur BranchDinajpur Plaza, GoneshtolaSadar Upazilla, DinajpurPhone : 0531-61217Mobile : 01730-328682Fax : 88-0531-61218HOB: Md. Nazmul Kabir, AVP

Thakurgaon BranchAfsar Uddin Chowdhury Plaza Holding # 1195-00, Asrompara College Road, ThakurgaonPhone: 0561-61367Mobile: 01755533143FAX: 0561-61368HOB: Md. Hazrat Ali, FAVP

Rangpur BranchPress Club ComplexStation Road, RangpurPhone : 0521-51299, 51323Mobile : 01713-201636Fax : 88-0521-51110HOB: Md. Abdul Matin, AVP

Debiganj BranchHolding no - 1892, Debiganj Bazar, Debiganj, Panchagarh Phone: 05654-56151Mobile: 01755-533147Fax: 88-05654-56152HOB: Md. Ali Haider Chowdhury, PO

Nilphamari Branch Bari Plaza (1st & 2nd Floor), Bara Masjid Sarak Road, Nilphamari Phone: 0551-62007Mobile: 01755-533144Fax: 88-0551-62008HOB: Md. Mamunur Rashid, AVP

Rajshahi Division

Rangpur Division

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Jessore BranchA. Ali Complex45, R. N. Road, JessorePhone : 0421-62933Mobile : 01713-452667Fax : 88-0421-65392HOB: B.M. Saifuzzaman, AVP

Khulna BranchKastury Plaza73, KDA Avenue, C/A, KhulnaPhone : 041-813561-2Mobile : 01711-343080Fax : 88-041-813563HOB: Mohammad Salah Uddin, AVP

Kushtia Branch1st Floor, A. Hamid Market01, Aruapara By-laneNawab Sirajuddoula Road, Kushtia Road, KushtiaPhone: 071-72411, 72413 Fax: 071-72412 Mobile: 01730-709984HOB: Md. Ashraf-Bin-Azher, FAVP

Khulna Division

Patuakhali BranchHolding No. 0063-01, Natun Bazar02 Patuakhali Sadar, PatuakhaliPhone : 0441-62979, 62971Mobile : 01730-340790HOB: Kazi Sohel, AVP

Barisal Branch141, Sadar Road, BarisalPhone : 0431-2176209Mobile : 01713-384496Fax : 88-0431-2176208HOB: Md. Humayun Kabir, AVP

Barisal Division

Moulvibazar Branch152-2 (1st Floor), Court Road, MoulvibazarPhone : 0861-62871, 62872Mobile : 01713-068126Fax : 88-0861-62873HOB: Golam Moula, AVP

Sylhet BranchLaldighirpar, SylhetPhone : 0821-723650, 723651Mobile : 01711-922810Fax : 88-0821-723722HOB: Imam Kabir Chowdhury, SVP

Beanibazar BranchZaman Plaza, Beanibazar, SylhetPhone : 08223-56180Mobile : 01713-384495Fax : 08-223-56181HOB: Md. Rezaul Haque Chowdhury, FAVP

Nobigonj SME/ Krishi BranchSky Light Tower, Sherpur RoadNobigonj, Hobigonj.Phone: 08328-56307Mobile : 01711-064825HOB: Syed Moniruzzaman, SEO

Sunamganj Branch Zaman Complex Arpin nagar (Old Bus Stand) Holding No. 52-01, Ward No. - 06, Sunamgonj Municipality, SunamgonjHOB: Md. Zainul Abedin, FVP

Sylhet Division

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Sylhet BranchAl-Hamra Shopping City (5th Floor)1052-00, Zinda Bazar, Sylhet-3100Phone : 0821-711565Fax : 0821-711571

Dhaka BranchSwadesh Tower, Level-441/6 Purana Paltan LaneDhaka-1000Phone : 9563876, 7119932Fax : 88-02-7119078

Mirpur BranchRokeya Sarani, Razia Plaza (1st Floor)184, Shenpara ParbotaMirpur - 10, Dhaka- 1216Phone : 02-9014640Fax : 88-02-9014680

Uttara Branch22 Sonargaon Janapath, Sector-9Uttara Model Town, Dhaka-1230Phone : 02-8959047, 8962645Fax : 88-02-8961798

Khulna BranchRupsha Plaza73, KDA Avenue, C/A, KhulnaPhone : 0417-31396Fax : 88-0417-31397

CEPZ BranchS A Tower (1st Floor), Airport Road,South Halishahar, Chittagong-4100Phone : 031-740683, 751534Fax : 88-031-751533

Branches

Head offi ceSwadesh Tower, Level-441/6 Purana Paltan LaneDhaka-1000Phone : 9563876, 7119078Fax : 88-02-7119078CEO: Choudhury Moshtaq Ahmed, DMD

Mercantile Exchange House (UK) LimitedBirmingham Branch Unit-2, 421 Coventry RoadSmall Heath, Birmingham, B10 OJS, UKTel: +44121-771-0546Fax: +44121-771-4675Cell: +447949902426E-mail: mercantileexchangeuk@mblbd.comManager & Operation Director : Khandakar Mahbub Murshed

Mercantile Bank Securities Limited

Mercantile Exchange House (UK) Limited

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Management TeamOther Executives of The Bank

Executive Vice Presidents

MD. RABIUL ISLAM

Senior Vice Presidents

FAISAL AHSAN CHOWDHURYNIRANJAN CHANDRA GOPEMD. SAYEDUZZAMAN CHOWDHURYMOHAMMAD IQBAL REZWAN

Vice Presidents

MD. RASHAD KAMAL (on leave)KAWSER UDDIN AHMEDABDUS SALAM SHAIKHMD.FARUQUE AHMEDA. K. M. MINHAJUL ISLAMMD. JAMAL HOSSAINMD. SHAFIQUL ISLAMMD. KHURSHID ANWAR

First Vice Presidents

MD. FAIZ AHSANLUTFUL HAIDAR CHOWDHURYSHAH NAWAZ SIDDIQUEMD. ENAYET ULLAHMOYNUL ISLAMKABIR AHMEDMD. REZWANUL KARIMABU ASGHAR GHOLAM HARUNISAIFUL ALAMTANUSREE MITRAGOLAM MOHAMMED ZAIDIMD. SHAHIDUL ISLAMMESBAH UDDIN AHAMEDMD.SHAHADAT HOSSAIN KHANMAHMUDA AKHTERMIR FAUZIA RAHMANMD. NURUL ALAM

FARID AHMEDZAREEN AHMEDMD. MASUM ALIALOK KUMAR BISWASMAHMOOD HASAN

Assistant Vice Presidents

SYED EZAZUR RAHMANMUHAMMAD LUTFUL HAIDERK. M. ANOWARUL ISLAMM. FERDOUS CHOWDHURYMAHMUDA KHATUN MUNNYM. ASHIK AREFIN HOSSAINMD. ABUL HOSSAINMD. ALIULLAHMD. FARID UDDIN AHMED BHUIYANBASUDEB PAULMD. MAHBUBUR RAHMANKAZI MD. SAFAYET KABIRMD. MOSTAFIZUR RAHMANFERDAUSI SULTANAMD.MYNUL HOSSAIN KABIRSHANAZ BEGUMHARUNUR RASHIDSHARINA QUDDUSASADUZZAMAN PAVELLOPITA MANNANSANJIB KUMAR SARKARMD. SHAHJAHAN AMINTASHFEEN SALEHFATEMA SAIDA YASMINMD.SHAIFUL ALAM CHOUDHURYMUHAMMAD FAYAZUR RAHMAN BISWASA.I.M. MOSTAFAMOHAMMAD MAHTAB UDDINPRATAP KUMAR DESHMUKHYASURAYA NASRIN

ZIHAN AL FUADSHAHNEWAZSHAMIM AHMEDABU SAYED MD. ASADUL ISLAMMD. A. KUDDUS KAZIDEBOJYOTI MAJUMDARMD. NASIM ALAMSARDAR MOHAMMAD ZOBAYARASHISH KUMAR LASKERMD. GIAS UDDINMD. HUMAYUN KABIR BHUIYANMUHAMMAD SAIFUL KARIMSAYEDA SULTANAZIA UDDIN AHMEDMD. ATIQUR RAHMANMD. ABDUL MANNANMD. ANISUR RAHMANMD. AKRAM HOSSAINJANNATUL MAWATAPASH CHANDRA PAULMD. EKHLASUL MOULAABU SALEH MD. IBRAHIMDEEN MOHAMMAD KHANDIPAK KUMAR CHAKRABORTYMD. SAZZADUR RAHMANASISH KUMAR PAULMD. MIZANUR RAHMANMD. SALAHUDDIN KHANMOHAMMAD REZAUL KARIMMD. SHAHEEN REZASAYED MD. MOHARAM HOSSAINMUHAMMAD SHARIF-UR-RAHMANMUNSHI MD. ASIF REZATARAFDER SUSHIL KUMARMD. ZAHED HOSSAINASHFA KHANAM

Our Coverage

32 annual report anaaaaa

* The Green shaded districts represent our branch network coverage in the country.

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Performance Indicators

1999

2011

Each Year, achieving a steady and sustainable growth overcomming whatever hurdles on our way, has been adopted as MBL’s culture and norms

‘

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34 annual report

Particulars 2007 2008 2009 2010 2011

Income Statement

Interest Income 4,450.90 5,604.36 6,741.69 7,669.42 10,719.69

Interest Expenses 3,159.30 4,045.97 4,755.90 5,176.00 8,022.13

Net Interest Income 1,291.60 1,558.39 1,985.79 2,493.42 2,697.56

Non-Interest Income 1,110.05 1,273.14 1,506.12 2,282.39 3,404.69

Non-Interest Expenses 1,016.51 1,250.02 1,580.21 1,928.69 2,600.57

Net Non-Interest Income 93.54 23.12 -74.09 353.70 804.12

Profi t before Provision and Tax 1,385.14 1,581.51 1,911.70 2,847.12 3,501.68

Profi t after Provision before Tax 1,198.83 1,281.68 1,662.78 2,435.93 3,004.17

Profi t after Tax 540.50 615.88 807.52 1,425.34 1,734.17

Balance Sheet

Authorized Capital 3000.00 3000.00 8,000.00 8,000.00 8,000.00

Paid-up Capital 1,498.90 1,798.68 2,158.42 4,072.21 4,968.10

Shareholders' Equity 2,929.30 3,470.09 4,296.25 7,185.69 9,659.33

Total Capital Fund 3,387.17 4,131.21 4,995.43 8,684.32 10,700.90

Deposits 39,348.00 49,538.35 58,033.47 75,629.14 102,262.02

Loans and Advances 31,877.86 43,419.36 48,295.55 66,377.70 79,999.80

Investments 7,099.97 6,264.71 9,664.72 10,937.20 24,645.38

Fixed Assets 593.20 683.00 1,032.83 1,647.58 2,711.32

Total Assets 44,940.54 55,928.72 66,166.52 87,140.11 116,553.01

Foreign Exchange Business

Import 40,380.10 56,528.80 60,592.50 89,524.10 95,008.70

Export 32,670.10 43,108.50 46,298.60 59,404.20 81,311.80

Remittance 3,510.40 4,722.90 5,061.30 5,108.10 7,150.00

BIS Capital Measure *

Total Risk Weighted Assets 29,036.56 40,634.58 47,685.71 95,158.50 100,952.70

Core Capital (Tier I) 2,929.30 3,470.92 4,236.52 7,100.80 8,906.50

Supplementary Capital (Tier II) 457.87 660.29 758.91 1,583.52 1,794.40

Tier I Capital Ratio 10.09% 8.54% 8.89% 7.46% 8.82%

Tier II Capital Ratio 1.58% 1.63% 1.59% 1.67% 1.78%

Capital Adequacy Ratio 11.67% 10.17% 10.48% 9.13% 10.60%

Credit Quality

Non-performing Loans (NPLs) 893.99 1,242.47 1,252.05 1,187.81 2,084.62

Provision for unclassifi ed Loan 361.03 438.20 518.50 749.00 889.63

Provision for classifi ed Loan 563.85 578.20 629.70 617.53 712.42

% of NPLs to Total Loans and Advances 2.80% 2.96% 2.59% 1.78% 2.61%

(BDT in Million)

35annual report

www.mblbd.com

Particulars 2007 2008 2009 2010 2011

Common Share Information **

Share Price (BDT) 415.61 348.25 395.00 58.05 34.80

No. of Shares Outstanding ('000) 14,988.98 17,986.78 21,584.13 407,220.10 496,809.20

Earning per Share (EPS-Before Split) (BDT) 30.05 28.53 30.67 41.04 34.90

Earning per Share (EPS-After Split) (BDT) 3.01 2.85 3.07 4.10 3.49

Dividend per Share (BDT) 20.00% 20.00% 22.00% 22.00% 23.00%

Cash - - - - -

Stock 20.00% 20.00% 22.00% 22.00% 23.00%

Dividend Yield (%) 4.81% 5.74% 5.57% 3.79% 6.61%

Dividend Payout Ratio 66.56% 70.10% 71.73% 54.09% 63.90%

Market Capitalization (BDT Million) 6,229.57 6,263.89 8,525.73 23,639.12 17,288.96

Book Value per Share 195.43 192.92 199.05 17.65 19.44

Market Value Book Value multiple 2.13 1.81 1.98 3.29 1.79

Price Earning Multiple (Times) 13.83 12.21 12.88 14.14 9.97

Operating Performance Ratio

Net Interest Margin (NIM) 3.52% 3.72% 3.58% 3.59% 2.93%

Net Non-interest Margin 0.25% 0.05% -0.13% 0.51% 0.87%

Earning base in Assets 88.35% 91.84% 91.02% 90.31% 90.57%

Operating Effi ciency Ratio 75.09% 77.00% 76.82% 71.39% 75.21%

Cost Income Ratio 42.33% 44.15% 45.25% 40.38% 42.62%

Credit Deposit Ratio 81.02% 87.65% 83.22% 87.77% 81.68%

Cost of Deposit 8.75% 9.19% 8.81% 7.94% 9.63%

Yield on Loans and Advances 12.80% 13.24% 13.12% 12.80% 13.86%

Spread 4.05% 4.05% 4.31% 4.86% 4.23%

Return on Assets 1.20% 1.10% 1.22% 1.64% 1.49%

Return on Equity 18.45% 17.75% 18.80% 19.84% 17.95%

Return on Investment 10.98% 10.46% 8.75% 8.41% 7.09%

Equity Multiple (Times) 15.34 16.12 15.40 12.13 12.07

Other Information

No. of Branches 41 42 53 65 75

No. of Employees 945 1,115 1,303 1,526 1,668

No. of Correspondence Relationship 584 586 590 589 638

All fi gures except BIS Capital Measure are representing MBL (SOLO) only, not consolidated.

* BIS Capital Measure has been computed as per Basel I (up to 2009) and later as per Basel II capital Accord. All the fi gures of BIS Capital Measures shown in 2011 are based on Consolidated Return. * *The shareholders of the Bank in its 7th EGM held on October 31, 2011 have unanimously resolved to split face value of ordinary shares from BDT 100 to BDT 10 each. Relevant data of 2010 are restated accordingly.

81.6

8%

Number of Branches

36 annual report

Economic Impact ReportEconomic Impact refers to the effect of a policy, program, project, activity or event on the economy. Economic impact is usually measured in terms of changes in economic growth (output or value added) and associated changes in jobs (employment) and income (wages). We can understand how a bank adds value to the society by analyzing the economic impact. These impacts can be summarized into three broad categories, i.e.

i) Direct Impactii) Indirect Impact iii) Induced Impact

Direct Impacts

Direct Impacts are the initial, immediate economic activities (jobs and income) generated by the banks fi nancial transaction. Direct impacts associated with the development coincide with the fi rst round of spending in the economy. Bank’s direct contribution to the economy is resulted from the creation of employment opportunities, payment of tax to the Government, increase value to shareholders etc.

Indirect Impact

Indirect Impacts are the production, employment and income changes occurring through a bank’s normal course of operation. Bank generates indirect impact by addressing the defi ciency of capital in the economy by creating savings habit among the people, improvement of socio-economic and environmental performance in client’s organizations through lending etc.

Induced Impact

Induced Impacts are the effects of spending by the households in the local economy as the result of direct and indirect effects from an economic activity (i.e. project, event, etc.). The induced effects arise when employees who are working for the bank spend their new income in the community.

Banks generate wealth by means of their fi nancial services to the society. Like other organizations bank distribute the wealth among all the stakeholders in different forms. Shareholders will accrue wealth and receive a dividend in return for the risk of the equity investment, depositors and investors receive interest for risks undertaken on their investments, borrowers obtain credit facilities at prevailing competitive rates in the industry, employees receive compensation and other benefi ts for the contribution made to its institution, the underprivileged portion of the society reap the benefi t of the Corporate Social Responsibility maintained by the banking industry whilst the Government earns tax revenue.

Total value added by MBL, during the year 2011, was BDT 4,426.80 million as against BDT 3,492.18 million in 2010. Bank’s direct contribution to the economy was BDT 1,250.00 million in 2011 against BDT 1,010.59 million of 2010 in the form of corporate income tax. The Bank contributed BDT 1,292.01 million for its total 1,668 offi cials in 2011 as against that of BDT 932.98 million in 2010. The Bank also added value for its shareholders amounting to BDT 1,133.34 million in 2011.

In the year 2011, the Bank mobilized total deposits of BDT 102,262.02 million and aided the economy in meeting its growth target by deploying BDT 79,999.80 million as loans and advances to different sectors of the economy. Apart from these, the Bank mediated in import and export business, which have made international trade easier and secured.

Value added statement shows how much value (wealth) has been created by a Bank through utilization of its capacity, capital, manpower, and other resources, and how it is allocated among different stakeholders (employees, lenders, shareholders, government, etc.) as well as reinvested for the replacement of assets and further expansion of the bussiness of the Bank in an accounting period.

Value Added Statemtntsfor the year ended 31 December, 2011

BDT in million

Particulars 2011 2010

Income from Banking Services 14,124.38 9,951.81

Less: Cost of services & Supplies (9,200.08) (6,048.43)

Value added by Banking Services 4,924.30 3,903.38

Provision for loans &off-balancesheet items

(497.50) (411.20)

Total Value Added 4,426.80 3,492.18

37annual report

www.mblbd.com

Economic Value Added Statement

Economic Value-Added (EVA) is the surplus generated by an Bank after meeting an equitable charge towards providers of capital. It is the post-tax return on capital employed (adjusted for the tax shield on debt) less the cost of capital employed. Companies which earn higher returns than cost of capital create value, and companies which earn lower returns than cost of capital are deemed harmful for shareholder value. Shareholders/Equity pro-viders are always conscious about their return on capi-tal invested. As a commercial banking company, MBL is deeply concern for delivery of value to all of our Share-holders/Equity providers.

(BDT in million)

Distributon of value addition 2011 2010

To Employees 1,292.01 932.98

To Statutory Reserve 600.83 487.19

To Mercantile Bank Foundation - 24.00

To Government as Income Tax 1,250.00 1,010.59

Provision for Deferred Tax 20.00 -Depreciation 130.61 99.26

Retained Earning 1,133.34 938.16

Total 4,426.80 3,492.18

Capital Charges = Shareholders’ Equity X Required Rate of Return (10%)

Require Rate of Return = 8% (First Year’s Return on Government Shanchay Patra) + 2% (Risk Premium)

(BDT in million)

Particulars 2011 2010

Shareholders equity 9,659.33 7,185.69

Total Income 14,124.38 9,951.81

Total Expense (10,622.70) (7,104.69)

Corporate Tax (1,270.00 ) (1,010.59)

Capital Charges (965.93 ) (718.57)

Econmic Value Addition 1,265.75 1,117.96

(BDT in million)

2011 2010

Market value of total equity 17,288.96 23,639.16

Book value of total equity 9,659.33 7,185.69

Market value added 7,629.63 16,453.47

Total Number of Share Outstanding; 496,809,200 (40,722,066) Market Value Per Share: BDT 34.80 (580.50) * Previous Year’s Figure (befor split) in brackets.

Merket Value added Statement

Merket value added (MVA) shows the difference between the market value of a company and the capital contributed by investors (both bondholders and shareholders). In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity during a period of time. A high Merket Value Added indicates that the company has created substantial wealth for the equity holders. The share market value of the Bank stood at BDT 17,288.96 million whereas the book value of the share stood at BDT 9,659.33 million, resulting a Market Value Added of BDT 7,629.63 million as of December 31,2011.

38 annual report

Message from the Chairman

Bismillahir Rahmanir Rahim

Assalamualaikum

Dear Shareholders, Respected members of the Board and the dedicated MBL Team,

It gives me immense pleasure to welcome you all, on behalf of the Board of Directors, in the 13th Annual General Meeting (AGM) of Mercantile Bank Limited (MBL). I would like to express our heartiest gratitude and sincere thanks for your continuous support and co-operation which, has helped us achieve the greater success in almost all arenas of our business amid this highly competitive banking industry scenario. Without your kind collaboration and advice, it would have been simply impossible for us to attain strong footing in the business arena and stamp our name as a bank of ‘high reputation’ in the banking industry of Bangladesh.

World Economy in 2011—“Slowing Growth, Rising Risks”

In 2011, the global economy has passed an edgy new phase. Global activities have weakened and become more uneven, confi dence has fallen sharply, and saggy risks are growing. Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year. Japan was struck by the devastating Great East Japan earthquake and tsunami combined with swelling turmoil in some oil-producing countries. At the same time, the handover from public to private demand in the U.S. economy stalled, the euro zone encountered major fi nancial turbulence, global markets confronted a major sell-off of risky assets, and there are growing signs of spillovers to the real economy.

The Bank remained fi nancially strong by dint of its resolute focus on the vision of becoming country’s fi nest corporate citizen

‘ ‘

39annual report

www.mblbd.com

The structural problems facing the crisis-hit advanced economies have proven even more intractable than expected, and the process of devising and implementing reforms even more complicated. The outlook for these economies is thus for a continuing, but weak and bumpy, expansion. Prospects for emerging market economies have become more uncertain again, although growth is expected to remain fairly robust, especially in economies that can counter the effect on output of weaker foreign demand with less policy tightening.

Recent projections indicate that global growth will moderate to about 3.4% over the year 2011, from more than 5% in 2010. Real GDP in the advanced economies is projected to expand at an anemic pace of about 1.2% in 2012 and 1.9% in 2013, helped by a gradual unwinding of the temporary forces that have held back activity during much of the second quarter of 2011. However, this assumes that European policymakers contain the crisis in the euro zone periphery and U.S. policymakers strike a judicious balance between support for the economy and medium-term fi scal consolidation, and volatility in global fi nancial markets does not escalate. Moreover, the removal of monetary accommodation in advanced economies is now expected to pause. Under such a scenario, emerging capacity constraints and policy tightening, much of which has already happened, would lower growth rates in emerging and developing economies to a still very solid pace of about 6 % in 2012. In view of the slow pace of global demand rebalancing, high commodity prices, and the modest growth outlook for advanced economies, long-term interest rates for key sovereigns are likely to stay low. This may foster risk taking in other economies–– previous episodes of money recycling on a massive scale have rarely been without fi nancial accidents. Unless policies are strengthened, especially in advanced economies, nothing beyond a weak and bumpy recovery is in the cards.

Bangladesh Economy in 2011

Although the economy of Bangladesh grew at a rate of 6.66% in FY 2010-11, it faced serious macroeconomic challenges in 2011. Higher infl ation remained as a major concern throughout the year. Price hike in the international market, increase in domestic demand, petroleum price raise in the domestic market as well as massive government borrowing from the banking system add fuel to the fl ame of infl ationary pressure. The foreign exchange reserve faced downward trend and fall below USD 10 billion because of excessive import, slowdown in remittance and decline in foreign aid disbursement. As a result, domestic currency depreciated against all the major currencies of the world. The bearish trend in the Capital Market was another matter of real concern. For

the banking industry of Bangladesh, 2011 was really a challenging year. Higher demand of credit against low deposits growth rate, huge borrowing by government from the banking channel and a cautious monetary policy resulted in tight liquidity position in the industry.

Performance of the Bank in 2011

In the backdrop of the challenging environment of 2011, MBL focused on core banking business, made good growth in profi tability and maintained a sound asset quality. The Bank remained fi nancially strong by dint of its resolute focus on the vision of becoming country’s fi nest corporate citizen and also emphasizing its’ focus on commercial banking and fi nancing business, SME, Retail Consumer and relentless pursuit of providing excellent and need-based customer service.

The Bank mobilized deposits of BDT 102,262.02 million as at December 31, 2011 compared to BDT 75,629.14 million till 2010. Total loans and advances stood at BDT 79,999.80 million at the end of 2011, which was BDT 66,377.70 million at the end of 2010. Import business stood at BDT 95,008.70 million in 2011 compared to BDT 89,524.10 million in 2010. Export business stood at BDT 81,311.80 million in 2011 as against BDT 59,404.20 million in 2010. The Bank collected foreign remittance of BDT 7,150.00 million in 2011 compared to BDT 5,108.10 million in 2010.

In 2011, the Bank was able to make pre-tax profi t of BDT 3,004.17 million as compared to 2,435.93 in 2010, indicating 23.33% growth. Net profi t available for appropriation stood at BDT 1,734.12 million in 2011. Earnings per Share (EPS) stood at BDT 3.49. Non Performing Loan (NPL) ratio stood at 2.61% in 2011.

MBL made adequate provision against classifi ed loans. Specifi c provision made is signifi cantly higher than last year. Adequate provision made the Bank stronger than before. Tier-1 Capital stood at BDT 8,906.50 million at the end of 2011 compared to that of BDT 7,100.80 million at the end of 2010. Tier-2 Capital reached to BDT 1,794.40 million at the end of December 2011 as compared to that of BDT 1,583.52 million at the end of 2010. Return on Assets (ROA) was 1.49% as on December 31, 2011 and Return on Equity (ROE) was 17.95% as on December 31, 2011. Consolidated Capital Adequacy Ratio (CAR) of the bank stood at 10.60% against minimum requirement of 10.00% as per Basel II Capital Accord in December, 2011. Net Interest Margin (NIM) stood at 2.93% at the end of 2011 suggesting a healthy growth in Net Interest Income.

40 annual report

Corporate Governance Practice

Backed with a strong and experienced Board, befi tting its aspiration to become a leading bank of prominence, the Board of Directors remains committed to ensure the highest standards of corporate governance throughout the organization with the objectives of safeguarding the interests of all stakeholders and enhancing the shareholders’ value and fi nancial performance of the Bank.

The Board of MBL always takes strategic decisions emphasizing good corporate governance to protect the interests of the Shareholders and other stakeholders at large, increasing their confi dence and establishing their trust. They always guides the Bank towards the goal set by the Shareholders, ensuring highest standards of integrity, accountability, transparency, ethics and professionalism of the management dealing with banking business. For smooth functioning of the Bank, two supporting committees of the Board precisely, Executive Committee and Audit Committee are retentlessly providing guidence and direction to the Management since the inception of the Bank.

MBL discloses all material facts to the Stakeholders for taking their timely economic decisions. MBL, depending on the structure, size, and location of the Branches and strength of its manpower, has delegated duties and powers to the Management. The Bank has appointed Chief Financial Offi cer (CFO) to look after the overall fi nancial affairs meticulously. Company Secretary has also been appointed to provide advices to the Board of Directors/Management and to comply with statutory requirements.

We fi rmly believe that, sound control culture has been established within the Bank. External Auditors are appointed by the Shareholders in the AGM. They audit the accompanying Financial Statements of the Bank and provide opinion whether the Financial Statements refl ect the true and fair views and have been prepared in accordance with applicable rules and regulations. For an effective control system, separate and independent Divisions, namely Internal Control & Compliance Division (ICCD) and Board Audit Division are functioning within the Bank. Internal Audit team of the Bank conducts their regular audit functions based on different manuals, instructions, guidelines and procedures laid down by regulatory bodies and the Board of the Bank time to time. The Board undertakes prompt actions to protect the Bank and shareholders wealth based on internal audit reports.

CSR Programs

We, as a Corporate citizen also have a vital role to play in the community and MBL since its inception cares for all of its stakeholders along with the community people. MBL believes that CSR is fundamental to attain long-term sustainability and business growth. CSR plays an important role in promoting the image of the Bank locally and internationally too. Accordingly, MBL integrates social, environmental and economic issues into its values and operations. MBL operates its banking activities in economically, environmentally and socially sustainable manner in line with the Bank’s Vision and Mission Statement. Looking forward, to enable us to prosper and for the sake of betterment of all the communities we touch, we have set up the Mercantile Bank Foundation in 2000. The Bank is legally bound to contribute each year 1% of its operating profi t or BDT 4.00 million (which one is maximum) to Mercantile Bank Foundation and indeed it is our immense pleasure to announce that the actual amount contributed towards betterment of the society often exceeds the promised fi gure (1% of operating profi t or BDT 4.00 million, whichever is higher) by manifolds. The foundation will cover all aspects of human well-being – from social and medical welfare and community development to heritage preservation and environment conservation. The Foundation awards some famous personalities of the country each year for their outstanding contributions in the society. MBL Foundation supports the writers and publishers by purchasing their books and distributing these to different educational institutions on the occasion of national and historical days. The Foundation supports in establishing hospitals, clinics, etc. for the improvement of the health sector, donates one time fi nancial endowment to the poor artiste, literature-patron and fatal disease-affected poor patients, supports the poor parents for arranging their daughter’s marriage, aids poor but bright students for continuing their studies. From 2011, the Foundation has started providing Education Scholarships to poor but meritorious students in the name, ‘MBF Education Scholarship’. This year, fi nancial support has been given to 384 students of J.S.C, S.S.C and H.S.C level of the country. The goal of the foundation is to do nothing less than transform lives, and underlying all its activities is the principle of sustainability.

MBL is trying to enrich economic and indicators of society by creating employment opportunity, helping the underprivileged people and ensuring environment friendly society. MBL always shares the misery of the distressed people. The Bank continuously strives to assist the victims of natural disaster by providing fi nancial help in rehabilitation and rescue purposes.

41annual report

www.mblbd.com

Customers Service

We know Customers’ needs are varied with the change of time and technology; hence, MBL always emphasize on customer service excellence and provides technology based real service to attract the potential customers and also retain the existing customers. Quality service is the responsibility of every staff and uniformity of action is maintained at all level. The Bank always remained very competitive in offering services to the customers and redesigned its products to meet the customers need. MBL each year has been increasing its branch and ATM network to provide the banking services to mass people. Number of correspondent relationships is augmented and agreements with foreign exchange remittance companies are being signed every year to facilitate the expatriates to remit their hard-earned money to the doorsteps of the benefi ciary easily and quickly. Services through alternative delivery channels were expanded and many services are now available to our customers through the channels. Research & Planning Division regularly conducts surveys and studies on business related issues which helped the management to take decisions more appropriately and provide services to customers effi ciently. The Bank arranged syndication loans for its customers and also participated in the syndication loans arranged by other banks and fi nancial institutions. Emphases are given on SME & agro-based fi nancing, the two most potential sectors for expansion of business. MBL participated in various road shows along with the regulators for building awareness and developing skills. The direct interactions with customers helped to nurture and cement our relationship. Undivided attention has been paid to our customers to provide them prompt service. The Bank used to train its offi cial for providing better services to its Customers.

Human Resources Development

In MBL, we consider our employees as a resource, an asset, that provides competitive advantage to the organization, and on whom organizational success is leveraged as the Bank is always prepared and committed to play strategic HR Management. To establish the perfect strategic HR, MBL has developed the linking human resources to strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, fl exibility and competitive advantage. Employees of the Bank play signifi cant role in providing better customer service. A brilliant and well-organized offi cer can win the heart of a customer by delivering on time services and which, eventually create a strong, encouraging and ever-lasting business relationship with him. “Effi ciency is our Strength”- is the MBL’s theme against Human Capital.

MBL expects that they will ensure their effi ciency in delivering customer service. The effi cient work force of Mercantile Bank acts as the fundamental pillar to reach the Bank at today’s height of success. MBL always emphasizes to satisfy both the customers and employees offering better facilities than other commercial banks, such as viable remuneration package, training facilities at home and abroad, and other fringe benefi ts. MBL has formulated its Human Resources Policy calibrating with recruitment procedures, pay and benefi ts, training and development, disciplinary and grievance etc. Each year, MBL recruits new employees, fresh and experienced as well to meet the customers’ ever-increasing demand and to support the ever changing business scenario.

Future Outlook & Challenges

The 2011 fi nancial year has been a challenging one for the Bank and many of its customers. While the resources sector has performed well, other parts of the economy have been subject to headwinds including fragile consumer and corporate confi dence, political uncertainty, a continuous currency devaluation and mayhem in Capital market. Ongoing offshore instability continues to impact the domestic economy and has the potential to place further upward pressure on wholesale funding costs for domestic banks.

The 2011 fi nancial year has been characterized by subdued credit growth and intense competition. At this stage there is nothing to suggest that the 2012 fi nancial year will see any material improvement in this front. Nor it is clear what the catalyst will be for a meaningful revival in consumer and corporate confi dence which is a prerequisite to stronger demand for credit. Infl ation continues to be a worry. Complaints about the cost of living are already being heard from consumers; these are augmented by rise in prices of consumer items on both the world and domestic markets.

Against all these backdrops, the Bank will continue to operate in a disciplined and prudent manner with a focus on driving productivity initiatives which will deliver sustainable improvements in business performance. The Bank’s priority is to maintain a robust and stable fi nancial and operating platform, which will enable us to support our customers and provide superior returns to shareholders. We intend to continue fi ght like the strongest contender as we always are. We will refocus our priorities on organic growth, our capacity to respond to change, loyalty to our values, and maintaining our solid expertise in risk management and operational effi ciency.

While, we have no doubt that the 2012 fi nancial year will be a challenging one for the Bank and its customers, we

The Bank will continue to operate in a disciplined and prudent manner with a focus on driving productivity initiatives which will deliver sustainable improvements in business performance ‘ ‘

42 annual report

are nonetheless very optimistic about the Bank’s future and its ability to continue to deliver superior returns to its stakeholders. While we have much to celebrate about the achievements of the last 12 years, we also have much to look forward to. As the Bank enters a new era, we have a stable and strong organization with a business franchise which is the envy of many of our peers.

However, despite these obvious advantages, we cannot afford to be complacent in the face of a rapidly changing domestic and global competitive environment. In fact, we will need to be increasingly innovative and nimble if we are to take advantage of the opportunities which will inevitably accompany both these changes. Looking forward, our decisions from the inception to invest heavily in technology, human capital and productivity initiatives, have placed us in a strong position. Our challenge now, is to ensure that as an organization we optimize these investments for the benefi t of our customers and our shareholders.

Acknowledgement

At the conclusion, I express my heartfelt thanks and appreciation to all at various level of the Management along with the other staffs for the time given and effort to achieve the goal of the Bank. The confi dence that the shareholders and clients have reposed on us has always been the source of our strength. We are grateful to them for their continuous support and co-operation. We are thankful to the Government of the People’s Republic of Bangladesh, Governor of the Bangladesh Bank, Securities and Exchange Commission, Dhaka Stock Exchange, Chittagong Stock Exchange, our respected Shareholders, valued Customers, Patrons and Well-wishers for keeping their faith and trust on us to go ahead.

I sincerely thank Ahmed Zaker & Co. and K. M. Hasan & Co for carrying out the external audit professionally and advising us on various compliance issues relating to International Accounting Standards and Bangladesh Accounting Standards. Finally, I wish to thank my colleagues in the Board for their important contribution to the Bank’s strategic thinking and most for their strong leadership in view of the current edgy operating environment. Their relentless support and commitment during the year were worthy of deep appreciation.

We believe Mercantile Bank Limited is in great shape and well poised to meet the challenges of the upcoming years and we are convinced that we will play a vital role in building the society by fi nancing the economy and helping clients turn their dreams into reality. At MBL, our number one goal is to fulfi ll this important role, RESPONSIBILITY.

Allah Hafi z.

With warm regards,

Md. Abdul Jalil, M.P

43annual report

We believe that, true success does not consist in profi t maximization rather in doing something for the deprived part of the society. With a view to performing CSR activities, MBL has established a Foundation namely Mercantile Bank Foundation Just a year after its incorporation

‘ ‘

From the Desk of Managing Director and CEO

Dear Shareholders,

At the outset of my speech, I would like to retrospect on the satisfactory performance of our Bank in almost every sphere of banking business amidst the multidimensional national and international challenges confronted by the banking industry over the whole time period of immediate past year 2011.

Birds Eye view on World Economy

The world economy has entered into a very diffi cult phase characterized by signifi cant downside risks and fragility. The fi nancial turmoil generated by the intensifi cation of the fi scal crisis in Europe has spread to both developing and high-income countries, and is generating signifi cant threat to the global economy. Capital fl ows to developing countries have declined by almost half as compared with last year, Europe appears to have entered recession, and growth in several major developing countries including Brazil, India, and to a lesser extent Russia, South Africa and Turkey has slowed partly in reaction to domestic policy tightening. As a result, despite relatively strong activity in the United States and Japan, global growth and world trade have slowed sharply.

The global economy is now expected to expand by 3.40% and 4.00% in 2012 and 2013 respectively—a downward revision of about 0.75% point relative to the September 2011 World Economic Outlook (WEO). Overall, activity in the advanced economies is now projected to expand by 1.50% on average during 2012–13. During 2012–13, growth in emerging and developing economies is expected to average 5.50%, a signifi cant slowdown from the 6.75% growth registered during 2010–11.

44 annual report

Bangladesh Economy

Although the economy of Bangladesh achieved 6.66% GDP growth in FY 2010-11 but it faced macroeconomic challenges in 2011. Infl ation was a continuous threat over the year and soared to a 13-year high of 11.97 percent in September, 2011. Price hike in the international market, Increment of demand in domestic market, upward revision of petroleum price in the domestic market and more importantly huge government borrowing from the banking system added fuel in the fl ame of infl ationary pressure. During the fi rst fi ve month of current fi scal year 2011-12, the government borrowed more than BDT 190 billion which is higher than the total borrowing target of BDT 189.75 billion in the same fi scal.

The country’s foreign exchange reserve fall bellow USD 10 billion in September, 2011 after it has climbed up to a landmark of USD 10 billion in November 2009. The foreign exchange reserve faced downward trend due to excessive rise in import, slowdown in remittance and decline in foreign aid disbursement. Consequently, domestic currency depreciated gradually against all noted currency of the world.

Capital Market, on the other hand was another cause of concern for the economy over the year 2011. After reaching a record high at the beginning of the year, then both the DSE and CSE plunged. And the downward trend in the capital market sustained for the rest of the year 2011. Both the bourses were shaded by almost 100% in terms of the benchmark general index.

The Banking Industry of Bangladesh faced the pinch of liquidity crunch in 2011. Higher growth of credit compared to deposits growth rate, indiscriminate borrowing of government from the banking channel and cautious monetary policy triggered the edgy liquidity situation. Moreover, the deadline set by Bangladesh Bank to bring down the AD ratio within the regulatory requirement compelled the industry to attract deposits even at a more competitive rate. Besides, the banking industry entered into the arena of 10 percent CAR as per Basel II accord from July 2011. All these incidents really made the situation challenging for the banking business.

However, amidst all these multidimensional macro- economic and banking challenges, MBL performed remarkably well and subsequently achieved positive growth in almost all business arenas during 2011 and such growth has been made possible by the heartiest effort and the excellent customer services of our offi cers and executives along with the dynamic business polices of our Board of Directors.

We express our heartiest gratitude to all valued clients, patrons, well-wishers and honorable shareholders for their continuous support and co-operation, which has facilitated our path towards growth and goal.

On the occasion of 13th Annual General Meeting of MBL, we feel proud to report the Bank’s performance during the year 2011, its prospects and potential challenges in the year to come.

2011: A year of sustainable growth

MBL has strengthened its position as one of the leading fi nancial institutions and maintained satisfactory growth across its all Business Units. We took a strategy to ensure sustainable growth by adhering to compliance in all spheres of its operations and pursuing versatile sources of revenue. The Bank remained focused in all key areas like capital adequacy, quality asset growth and strong liquidity thereby ensuring sound revenue. Operating Profi t of the Bank increased to BDT 3,501.68 million in 2011, displaying 23% increment compared to that of 2010. Profi t before tax increased to BDT 3,004.17 million in 2011 from BDT 2,435.93 million in 2010. This momentum in profi t is the testimony of our Bank’s solid performance in every sphere of banking business and confi dence kept by our customer towards our effi ciency.

Balance Sheet Position

Amidst a cautious monetary policy and disciplined fi nancial system, the balance sheet of the Bank marked a signifi cant growth with 35.22% and 20.52% in Deposits and Loans & Advances respectively in 2011 over that of 2010. At the end of the year 2011, total deposit of the Bank stood at BDT 102,262.02 million against that of BDT 75,629.14 million till 2010. Loans and Advances on the other hand, which are well diversifi ed, increased to BDT 79,999.80 million at the end of 2011 as against that of BDT 66,377.70 million up to December 2010. Total Assets of the Bank marked 33.75 % growth and stood at BDT 116,553.01 million at the end of 2011 as compared to that of BDT 87,140.11 million during 2010. Total Shareholders’ Equity increased to BDT 9,659.33 million in 2011 experiencing 34.42% growth over 2010.

Contribution in International Business

MBL made a noteworthy contribution in facilitating the Import and Export of the Economy. The Import Business of the Bank grew by 6.13% in 2011 over 2010. Whereas, Export business, grew by 36.88% during the same time period. The Bank recorded BDT 95,008.70 million as import business at the end of the year 2011 against that

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of BDT 89,524.10 million up to December 2010. Export business stood at BDT 81,311.80 million till December 2011 against that of BDT 59,404.20 million at the end of 2010. In the year under review, the Bank also handled BDT 7,150.10 million as remittance from overseas.

Attractive Deposits & Loan Products

Considering the demand of our potential as well as existing customers, MBL has launched several deposit and advance products, which have drawn huge public attention. Among the deposit products- Monthly Savings Scheme, Family Maintenance Deposit Scheme, Double Benefi t Deposit Scheme, Quarterly Benefi t Savings Scheme, Advanced Benefi t Savings scheme, 1.5 Times Benefi t Scheme and Consumer Credit Scheme, Special Deposits Scheme and among the Loan products ‘Shopnow Nibash’- Home Loan, ‘Sonar Tori’- Car Loan, ‘Akangkha’- Overseas Employment Loan, ‘Chaka’- SME Loan and ‘Anonna’- Women Entrepreneurs SME Loan have attained a praise-worthy popularity among the people at home and abroad.

Effi ciency in MBL Card Services

MBL started its credit card operation in 2002 with Q-Cash proprietary cards and in June 2006, VISA Brand Card was launched. The Bank extends various services to the customers to meet the modern and assorted needs of the customers. VISA dual prepaid card, VISA Dual Hajj Card, Credit Card and Debit card have introduced in the Bank with various up-to-date facilities such as withdrawal through Pay Order, SMS alert services, Issuance of supplementary card, longer interest free period etc. Call center of the Bank provides 24 hours service to its cardholders. The Bank is alert to the potential risk of credit card fraud and unauthorized use of card. Procedure and policies to combat credit card fraud are regularly reviewed and updated to minimize the risk of loss to credit card customers. At the end of December 2011, MBL earned BDT 2.54 million net revenue from card business. Bank’s International/ Dual cards are highly acceptable all over the world. MBL is continuously expanding its ATM network and inking contact with the other banks with a view to making these services more attractive and convenient to all.

Agriculture: The Prioritized area of Financing

Agriculture is reckoned as the backbone of our economy. Realizing the such importance of agriculture, MBL is continuously fi nancing in the Agriculture sector with the aid from Bangladesh Bank, different fi nancial institutions and NGOs. To facilitate Agriculture Credit, the Bank has already launched Agriculture Credit Department and has already inaugurated 18 rural branches and 5 SME/Krishi branches in the remote areas of the country and in upcoming days the Bank will launch more rural branches in unbanked areas of outside the divisional cities and upazilas. The Bank is working under a refi nance agreement with Bangladesh Bank and fi nancing the farmers in arrangement with ACI motors to purchase Sonalika tractors. Besides, MBL is also associated with various NGOs and other organizations like, BURO-Bangladesh; Integrated Development Foundation (IDF), Chittagong; Nowzuwan, Chittagong to disburse agricultural loans to the farmers.

Small and Medium Enterprises (SME) Financing

SME is the engine of growth in a labor intensive economy like Bangladesh. It creates more employment opportunity and thereby increasing the purchasing power as well as aggregate demand. However, despite increasing focus and consequent policy efforts on such a crucial Small and Medium Enterprises (SME) sector in Bangladesh, fl ourishing of this thriving sector is not up to the mark because of fund crisis. Considering the importance and needs of the economy, MBL has given adequate priority in this sector by offering affable lending products and services so that SME can aspire to opportunities of growth and wealth creation. So far, our growth in this arena of business is praiseworthy. At the end of 2011, total SME fi nancing of the Bank stood at BDT 3,833.56 million against BDT 3,386.13 million in 2010 registering 13.21% growth in 2011 over 2010.

Our Comparative Advantages

Since inception, we have created positive image in the banking industry by dint of our distinct product and services and thereby attaining comparative advantages in the industry. From the very beginning, we have emphasized on excellent customer services, technological sophistication, innovation of new products and services, bolstering human capital, effi cient use of capital and fi nally ensuring the benefi t of all stakeholders. To be more specifi c:

Small and Medium Enterprises (SME) are the engine of growth in a labor intensive economy like Bangladesh

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Sustainable Growth

The vision of the Bank is “Would make fi nest corporate citizen”. And our core priorities are strong expense management and to show our ability to execute business strategies effi ciently against our goal. To sum up, we want to maximize our profi t and minimize the non-performing assets in order to attain sustainable growth.

Excellence in Customers Services

We do believe that customers are the main stakeholders of the Bank. That is why we always try to satisfy our customers while remaining compliant to the regulatory bodies. Our goal is to make fi nancial matters better and easier for our clients. The Bank provided greater value to its customers by developing a wide range of products and services. The Bank has always remained competitive in offering services to the customers and is continuously redesigning its products to meet ever changing customer needs. Having a deep knowledge of our customers and their growing needs are key to our business success. Our customer group ranges from individuals, organizations and small business covering all sectors of Corporate, SME and Retail businesses. The Bank is not only providing services but also taking steps to expand these sectors by participating actively in various trade shows organized in the country.

Sophisticated Technology

Technological sophistication is the precondition for attaining sustainable growth in the age of today’s modern banking arena. As such, we are putting due emphasis on strengthening our IT division and at the same time continuously providing more and more IT based products to our customers. From the beginning, MBL has adopted the modern hardware and software technologies to make the services easier and quicker to the customers. We have introduced on-line banking and SMS banking services for our customers. We are providing 24 hours banking services to our clients through SMS banking and ATM booths across the country. For Core Banking Solution the Bank has selected “TEMENOS T24”, a world class proven technology platform, which is likely to be implemented this year. After implementation of the system the entire service of the Bank would become automated as a replacement of the traditional system. Our endeavor to upgrade continuously its core banking platform and invest in suitable software and hardware is ongoing – ensuring not only its alignment with technology but also to bring effi ciency to its operations and ensure customer satisfaction to the extent of highest degree.

Human Capital Development

We fi rmly believe that Human Resources is the most valuable asset for the Bank and the success and failure in banking operations depend largely on the quality of the people who works with the clients. So, it is our continuous endeavor to establish an open and enabling environment where our people can work with self respect, dignity and scope of showing creativity and effi ciency. We believe that our investments in Human Resource development are keys to sustainable growth and profi t thereof. The Bank has a talented work force for its operational activities. We nurture that talent even more effectively through continuous and need based training in both home and abroad. Bank plans to hire, develop and retain its Human Resources based with the right level of skills and talent to meet current and future needs. In recruiting fresh graduates we follow competitive job exams, which eventually ensure the effi cient human capital of the Bank.

Corporate Social Responsibility (CSR)

Business organizations are now regarded as “Corporate Citizens” and as a result they are striving to play their responsibilities in this regard. We believe that, true success does not consist in profi t maximization rather in doing something for the deprived part of the society. With a view to performing CSR activities, MBL has established a Foundation namely Mercantile Bank Foundation Just a year after its incorporation. Each year one percent of the operating profi t or BDT 40 Lakh, which one is higher, is contributed to this Foundation. “MBF Education Scholarship-2010” is the indication of MBL’s attempt to stand beside the meritorious but poor students of the society. In 2010, MBL, from its foundation provided scholarship among the numerous poor but meritorious students across the country under the category of JSC, SSC and HSC. As a part of fostering the creative and constructive works, MBL each year on its founding anniversary award some noted intellectual personalities of the society for their outstanding performance in the respective fi eld. Besides, the activities of the Foundation and the Bank are found in the areas of health and education, natural disaster, development of sports, talent development, capacity development in banking sector etc. In the year 2011, MBL donated BDT 49.40 million for CSR activities.

MBL Subsidiaries

Considering the demand of the markets and our total commitment to support and serve the customers from different angle, MBL launched two Subsidiaries namely Mercantile Bank Securities Limited (MBSL) and

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Mercantile Exchange House (UK) Limited. MBSL formed on 27 June 2010, to deal with stock dealing and broking and as a subsidiary it started its separate operation from 14 September 2011. Till now, MBSL has 7 branches and in order to make this service available all over the country, it has been decided for further expansion of branch network of the securities. With a view to providing faster, easier and superior remittance services to the Bangladeshi expatriate living and working in UK, MBL has launched exchange house in UK in the name and style ‘Mercantile Exchange House (UK) Limited’, which commenced its business operation at Birmingham in UK on December 06, 2011. We believe that such endeavor will widen the opportunity of the Bank to serve the customer from different aspect with utmost care.

Commitment to Government

MBL has contributed signifi cantly to the governments effort in collection of revenue and we are proud that we are one of the largest taxpayers in the country and therefore, an important source of revenue for the Government of Bangladesh. As per law, Bank deducts income taxes at sources, VAT and excise duty from various payments and services and deposits the same to government exchequer. Besides, Bank also pays income tax on its earnings. In 2011, the Bank has made a provision of BDT 1,250.00 million for the National Exchequer.

Basel II Capital Standard

Risk Based Capital Adequacy (Basel II) refers to the assessment of adequate capital required to address various types of risks inherent with banking business. Basel II came into effect in the banking industry of Bangladesh from January 01, 2009. After parallel run with Basel I during 2009, Basel II came into force fully from January 01, 2010. Following two stages of MCR i.e. 8% in January-June of 2010, and 9% in July – June 2011, the banking industry is currently facing 10% MCR.

Mercantile Bank believes that Basel II is not merely a quarterly reporting system rather it is a new risk management technique for the banks. Therefore, MBL is committed to implement Basel II properly and for this purpose MBL has formed Basel II Implementation Unit and Supervisory Review Process (SRP) team to ensure smooth and timely adoption of Basel II Accord. For better risk management MBL has also formed a separate Risk Management Unit for identifi cation and measurement of risk of the Bank and relates the risk to capital adequacy of the Bank. Currently, Bank’s consolidated CAR is 10.60% which is higher than the minimum requirement of 10.00%.

Green Banking

Green Bank refers to an ethical, social responsible and a sustainable bank. Green Banking is to provide innovative green products to support the activities that are not hazardous to environment and help to conserve the environment. It aims to use the resources of a bank with responsibility avoiding spoilage and giving priority to environment and society. We have established a separate Green Banking unit and a lot of measures have been adopted including green fi nancing, created awareness among the employees for effi cient use of water, electricity and paper, giving preference to preservation of eco system while fi nancing commercial projects and reuse of equipments aiming to turn our Bank as Green Bank.

Network Expansion

Bearing our slogan of “evsjvi e¨vsK” we want to reach the people with our banking services no matter whether they are urban or rural. For that, we are continuously expanding our network across the country. In 2011, we have launched 10 new branches. As a result, at the end of 2011, we have 75 branches including 5 SME/Krishi branches and two subsidiary i.e. Mercantile Bank Securities Limited with 7 branches and Mercantile Exchange House (UK) Limited with single branch. We aspire to augment the number of branches of MBL to 90 and branches of MBSL to 15 across the country by the end of the year 2012. Apart from these, we have planned to increase the number of ATM booth across the country for meeting the demand of 24 hours cash withdrawal facilities of our customers. We are hopeful to inaugurate more Exchange Houses in this year across the world to facilitate remittance arrangement. More Remittance Agreement with various Overseas Companies from different parts of the World will be signed to strengthen our business network in the global fi nancial market and to facilitate remittance fl ow.

Challenges in 2012 and Our Preparation to Confront

The year 2012 will be a more challenging year for the Banking Industry of Bangladesh. Government borrowing from the banking channel is likely to continue in 2012. As a result, private sector might face fund crisis due to crowding out effect which will adversely impact the private investment as well as total output. Moreover, the increased government borrowing, upward revision of energy prices, further depreciation of domestic currency would aggravate the existing infl ationary pressure of the economy in 2012. Besides, the unavailability of gas and power may continue to adversely affect investments growth and employment.

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Pressure in Balance of Payment (BOP) is unlikely to mitigate very soon as probability of getting a momentum in remittance and export earning within a short time period is almost nil because European as well as the US economy is facing fresh downturn. Furthermore, there are possibilities that Non-performing Loan (NPL) of Banks may rise with major export sectors coming under price, deferment orders and reduced demand threats in the international market. Consequently, depreciation of domestic currency against dollar may be intensifi ed even in 2012. Collapse in capital market is another cause of concern for the economy. Although, the prime minister of our country has already intervened this market to stabilize it, but bringing the retail investors’ confi dence in the capital market will remain a big challenge in 2012. Political stability, another crucial factor for economic growth will also be a challenge for the government in the coming years. So, the year 2012 might be a very crucial one for the banking industry.

Now a days, our banking industry is more competitive and the concept of typical banking has already been evaporated. Modern and technology-based banking has taken the place of traditional banking. Again, all the banks are handling similar products and hence, quality services and effi cient management is really an important matter for achieving sustainable growth and leading position in the industry. In 2012, this phenomenon is also expected to be increased further.

In order to be successful in the backdrop of this ever-changing and competitive arena, taking the ongoing stiff competition of the industry as challenge, we fi rmly believe, we have prepared ourselves accordingly. Our strategy is to continue to do the business that we do well. Better management of our exposure in corporate/commercial business and diversify our industry wise portfolio within this segment; Expansion of business into areas of potentialities like Agriculture, Retail and SME business; Further expansion in micro fi nance with NGOs; venturing of new and innovative ideas; Continued focus on IT development for effi cient customer service and expand to larger customer base; Continue our efforts in mobilization of remittances with an ever increasing network of exchange houses both at home and abroad; Intensify the growth of low and no-cost deposit; Effectively manage our costs to standardized cost income ratio at global best practice levels; Pursue multiple sources of revenue for the Bank, like non-interest, fee based income and Treasury Products; Strengthen our Primary Dealers (PD) operations to optimize spin-off earnings- are some measures with which, we are concentrating to accelerate.

We are relentlessly working to provide our customer with quality and quick services. Moreover, we have come forward with sophisticated technology and new products as per requirements of our clients. Our offi cials are well equipped with contemporary knowledge regarding banking and economy. As a result, they can foresight the future and devise the potential strategies to ensure “Risk Return Trade off” .

Acknowledgement

On behalf of the management of the Bank, I express my deepest appreciation and heartiest thanks to the Government of the People’s Republic of Bangladesh, Governor and Other offi cials of Bangladesh Bank, Securities and Exchange Commission (SEC), Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Registrar of Joint Stock Companies and Firms for their cordial help and assistance, valuable guidelines and cooperation provided to the Bank from time to time.

I do fi rmly believe that we have a dedicated, devoted and hardworking team who can make the dream true by meeting fi nancial and operational objectives of the Bank as well as the needs and expectations of our customers and people of the country. I would like to thank the MBL team for their passion and heartiest efforts to attain our corporate vision, mission and strategic objectives while ensuring that our core value remains consistent. My sincere note of gratitude goes to our dynamic Board of Directors for their valuable guidance, prudent and very timely decisions to direct the Bank to today’s glorious

position and establish MBL as truly a “evsjvi e¨vsK”.

A.K.M. Shahidul Haque

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We have a nurtured and superb quality of human capital along with a prudent management to lead them towards goal. The Bank would indeed be able to maintain its pride as a Bank of stable growth and wealth maximization

Directors’ Report ‘

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Dear Shareholders,

On behalf of the Board of Directors of MBL, I have the great pleasure to present the 13th Annual Report of the Bank which consists of audited Balance Sheet, Profi t and Loss Account, Cash Flow Statement, and Statement of Changes in Equity and Assets Liabilities Maturity Analysis as on December 31, 2011. In this grand occasion, I am also placing a brief review of various business operations of the Bank during 2011 along with the current trend of World as well as Bangladesh Economy.

World EconomyThe world economy has entered a very diffi cult phase characterized by signifi cant downside risks and fragility. The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated. Global output is projected to expand by 3.40% in 2012 —a downward revision of about 0.75 % point relative to the September 2011 World Economic Outlook (WEO). This is largely because the euro area economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fi scal consolidation. Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening internal demand.

Advanced economies are projected to expand by 1.20 and 1.90% in 2012 and 2013 respectively. During 2012–13, growth in emerging and developing economies is expected to average 5.75%—a signifi cant slowdown from the 6.75% growth registered during 2010–11. This refl ects the deterioration in the external environment, as well as the slowdown in domestic demand in key emerging economies. However, developing Asia is still projected to grow most rapidly at 7.5% on average during 2012–13.

Commodity prices generally declined in 2011, in response to weaker global demand. Oil prices, however, is likely to be go up following the ongoing geopolitical risks; put embargo on oil exporting country Iran by European Union. These risks are expected to remain elevated for some time, and oil prices will ease only marginally in 2012. For non-oil commodities, improving supply conditions and slowing global demand are expected to cause further price declines. Non-oil commodity prices are projected to fall by 14% in 2012. Infl ation is projected to fall to about 1.5% in the course of this year, down from a peak of about 2.75% in 2011.

The on-going crisis in the world economy will adversely hit the underdeveloped and developing countries which depend largely on the developed countries for their export earnings. In addition to trade effects, a signifi cant periphery in high-income Europe would tend to reduce incomes in host-countries for developing world migrants and as a result, reduce remittances, a major source of foreign currency.

In concluding remarks the current environment can be characterized by fragile fi nancial systems, high public defi cits and debt and interest rates close to the zero bound which provides fertile ground for self-perpetuating pessimism and the propagation of adverse shocks, the most critical of which is a worsening of the crisis in the euro area. In this setting, there are three requirements for a more resilient recovery: sustained but gradual adjustment; ample liquidity and easy monetary policy, mainly in advanced economies; and restored confi dence in policymakers’ ability to act.

Bangladesh EconomyThe Economy of Bangladesh experienced a mixed bag of good news and bad news during the year 2011. The good news came from the phenomenal Export growth achieved over the FY 2010-11. On the other hand, the bad news came from several macroeconomic imbalances which signal trouble for the economy in the short term while undermining growth prospects over the medium to long term.

Exports fl ourished in FY2011 with 41.47% growth thus prompting employment generation and output in manufacturing sector. Gross Domestic Product (GDP) growth was 6.66% in FY2011 which appeared very close to targeted level of GDP growth i.e. 6.70%. However, some internal and external variables including lax monetary and credit policies of past three years, depreciation of domestic currency, upward revision of petroleum price in the local market, ineffi ciency in supply chain, price hike in international market for both petroleum and non petroleum goods pushed the Infl ation at double digit fi gure almost all over the year 2011.

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7.00% GDP growth target has been set for the Fiscal Year 2011-12. But some macro economic imbalances like, persistent instability in the stock market, rapid depreciation of Taka, a growing subsidy bill in the budget, rising public sector defi cits, diffi culties in foreign fi nancing, fi scal imbalances caused by the attempts to solve the energy crisis with high cost generation options, among others appear to cast dark shadows over achieving the targeted 7.00% GDP growth.

Gross Domestic Product (GDP)The economy attained 6.66% GDP growth in FY2010-11, whereas GDP growth was 6.07% in FY2009-10. In FY 2010-11 volume of total GDP in terms of current market price stood at BDT 7,874.95 billion which is 13.42% higher than that of last year.

Sector wise Contribution in GDPIn terms of sector wise contribution in GDP during FY2011, service sector contributed 49.72%, while contribution of Agriculture and Industry was 19.95% and 30.33% respectively.

Infl ationHigher infl ation leads to macroeconomic imbalances over the year 2011. Point-to-Point infl ation exhibited double digit fi gure almost all over the year. Point to Point infl ation, in December 2011 increased to 10.63% just from 9.04% in January of 2011. On the other hand, twelve months average infl ation increased to 10.71% in December, 2011 from 8.14% in January of the same year. Revision of petroleum price in the domestic market, higher government borrowing from the fi nancial market, depreciation of domestic currency along with the price hike in the international market for both food and non food products aggravated the infl ationary pressure at the end of the year 2011.

* Targeted level of GDP growth

Broad MoneyBroad money (M2) has increased by 17.78 % in November 2011 compared to the corresponding month of 2010 and reached to BDT 4,648.24 billion. Among the components of M2, currency outside banks was BDT 585.69 billion whereas amount of Deposits (Demand and Time) was BDT 4,062.55 billion as on November 2011.

Exports

The sharp turnaround in world output growth in 2010, from negative growth of 2009, provided much needed stimulus to market exports. In Bangladesh Economy, surge in export growth emerged from July of FY 2010-11 and securing a record 41.47% growth in Export earnings. However, in the calendar year 2011 pace of export earnings growth moderated and amounted to USD 24.44 billion compared to USD 19.18 billion in 2010, indicating 27.38% growth in Export earnings in 2011 over 2010. This substantial export growth is mainly attributes to the RMG sector which contributes almost 75% of our export earnings.

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ImportsImport payments during FY2010-11 showed 41.79%, signifi cant jump from just 5.37% growth in the preceding FY2009-10. However, in the calendar year 2011 Import Cost lost its pace and stood at USD 36.23 billion compared to USD 27.82 billion in the year 2010 indicating 30.26% growth in year 2011 over 2010.

Balance of Payments (BOP)Trade balance recorded a higher defi cit of USD 3.10 billion during July-October, FY2011-12 compared to the defi cit of USD 1.83 billion during July-October, FY2010-11. However, current account balance recorded a minor defi cit of USD 0.37 billion in the same time period due to inward remittance infl ow. The overall balance of BOP showed a defi cit of USD 0.38 billion during July-October of FY 2011-12 against the defi cit of USD .52 billion during July- October of FY 2010-11.

RemittancesRemittance Growth decreased a little bit to 6.03% in FY2010-11 from 13.40% growth in FY2009-10. However, in comparison with calendar year, Remittance infl ow increased to 10.57% in 2011, from just 2.78% growth in the year 2010. At the end of 2011, total remittance infl ow reached to USD 12.17 billion from USD 11.00 billion in 2010.

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Foreign Exchange MarketForeign Exchange reserve reduced by almost USD 1.53 billion with in a year i.e. from USD 11.17 billion in December 2010 to Just USD 9.63 billion in December 2011. The foreign exchange reserve faced downward trend due to excessive rise in import mainly for feeding quick rental power plant, slowdown in remittance caused by Middle East turmoil, decline in foreign aid disbursement and sluggish export growth. Consequently, domestic currency depreciated nearly 20 % in 2011 over 2010.

Prospect of Bangladesh Economy in FY2011-12Growing political tension about the oil rich IRAN following the Economic Ban imposed by European Union would certainly make the petroleum price volatile in the world market. The costly petroleum products will aggravate the infl ationary pressure further. Moreover, the volatile as well as costly petroleum price will increase the import cost and thereby put more pressure on the country’s BOP and

ultimately further depreciation of domestic currency. All these imply that ongoing infl ationary pressure will sustain over the year 2012.

The economy achieved more than 40% growth in both Export earnings and Import cost. But following the ongoing world economic crisis as well as the disinclination of Bangladesh Bank for opening unnecessary and luxurious goods will impede 40% or more Export and Import earnings in 2012. Outfl ow of Bangladeshi worker in abroad is also unlikely to achieve desired pace in 2012.

The economy has set GDP growth target to 7.00% for FY2011-12. Achievement of this level of GDP growth seems to be diffi cult following the ongoing mild recession in the world economy, very dismal picture in Foreign Direct Investment (only USD 1 billion in FY-2011), crowding out effect resulting from high government borrowing, tight monetary policy announced by BB, crisis in power sector and last but not the least, upcoming political uncertainty in the said time period.

Business Review

Deposits & Deposit Mix

Deposit is the major source of fund for Commercial Banks. All the banks wants that they have suffi cient deposits to expand their business with a continuously increasing trend. So, now-a days, “Deposit mobilization” has become a challenging task for the commercial banks. In 2011, the Bank mobilized total deposits of BDT 102,262.02 million compared to that of BDT 75,629.14 million up to 2010 end. The growth rate is 35.22%. Competitive interest rates, attractive deposit products, deposit mobilization efforts of the Bank, superior customer services along with the confi dence reposed by the customers on the Bank contributed to the notable growth in deposits. The Bank evolved a number of attractive deposit schemes to cater to the requirement of small and medium savers. This improved not only the quantum of deposits; but also brought about qualitative changes in the deposits structure.

Deposit Mix

(BDT in million)

Type Amount Percentage (%)

Deposit Under Schemes 35,319.71 34.54%

Fixed Deposits 38,875.50 38.02%

Savings Deposits 5,929.74 5.80%

Current Deposits 3,440.81 3.36%

Short Notice Deposits 2,221.59 2.17%

Other Deposits 16,474.67 16.11%

Total 102,262.02 100.00%

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Loans and Advances

Total loans and advances of the Bank stood at BDT 79,999.80 million as on December 31, 2011 against that of BDT 66,377.70 million at the end of December 2010. The Bank recorded 20.52% growth in loans and advances. Major sectors where the Bank extended credit includes trade and commerce, garments industries, large

and medium scale industries, construction, Agriculture and related sectors, Hospital and Medical Services, Telecommunication, Solar Energy, Effl uent Treatment Plant (ETP), Bio-gas etc. Besides, Bank continued its support to Small and Medium Enterprises (SME) and expanded credit facilities to them through its SME unit.

Sector Wise Loans & Advances Mix (BDT in million)

Sectors/Segments Volume Percentage (%)

Trade Finance 9,758.35 12.20%

Exports (RMG) 12,338.92 15.42%

Engineering (Iron and Steel/Electrical) 8,357.69 10.45%

SME 3,833.56 4.79%

Food, Beverage, Edible Oil, etc 7,503.61 9.38%

Agriculture 679.81 0.85%

Hospital and Medical Services 1,768.18 2.21%

Textile (Linkage Industry) 2,255.94 2.82%

Housing 1,329.11 1.66%

Transportation 1,106.46 1.38%

Pharmaceuticals 1,642.77 2.05%

Telecommunication 226.50 0.28%

Others 30,174.73 36.50%

Total 79,999.80 100.00%

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Import TradeMBL has exhibited quality fi nancing while facilitating import trade in 2011. During the year, the Bank handled a total of 23,296 Letters of Credit amounting to BDT 95,008.70 million compared to 26,067 Letters of Credit amounting to BDT 89,524.10 million in the year 2010. Current growth rate 6.13% based on the previous year. The Bank is engaged in opening Letter of Credit in different sectors including machineries, garments & accessories, rice, wheat, sugar, CDSO, vegetable oil, cement clinkers, hot roll steel, raw cotton, ships-breaking etc.

Export TradeThe Bank handled total 22,501 export bills worth BDT 81,311.80 million in 2011 as against that of 22,344 export bills and BDT 59,404.20 million in 2010. Current growth rate is 36.88% based on the preceding year. The focal point of the Bank in export fi nancing was garments industry, the lone driving force of the economy of Bangladesh in single biggest source of foreign exchange and employment provider of the country. Other notable items were jute & jute goods, leather, handicrafts, tea, frozen food & fi sh products.

Treasury Operation and Fund ManagementTreasury exerts its all out efforts to mobilize the investable/surplus fund effectively and effi ciently to earn profi t. Treasury operation of our Bank deals with funding operation, managing the liquidity, exchange positions, foreign exchange dealings etc. In 2011, the Bank generated revenue of BDT 987.00 million from money market operations and BDT 684.29 million from secondary capital market as compared to BDT 831.52 million and BDT 87.93 million in 2010 from money market and secondary capital market respectively. The duty of treasurer also includes maintaining Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR) with the Bangladesh Bank. Treasury Services of our Bank provides integrated working capital management, money market operations and investment activities.

Earning Base in AssetsEarning base in Total Assets of the Bank was 90.57% in 2011 as compared to 90.31% in 2010. The ratio indicates effi cient utilization of resources to earn revenues.

Earning Basis in Assets

(BDT in million)

Particulars 2010 2011

Total Assets 87,140.11 116,553.01

Earning Assets 78,694.47 105,563.50

Non-earning Assets 8,445.64 10,989.51

% of Earning Assets in total Assets 90.31% 90.57%

% of Non-earning Assets in total Assets 9.69% 9.43%

Asset PortfolioThe Bank’s total assets as on December 31, 2011 amounted to BDT 116,553.01 million as compared to BDT 87,140.11 million at the end of December 2010. Among the total assets outstanding in 2011, loans and advances constituted 68.64%, investments 21.15%, cash 5.96%, balances with other banks 0.55% and other assets 3.70% as against that of 76.17%, 12.55%, 5.60%, 1.04%, and 4.64% respectively in the end 2010.

Asset Portfolio(BDT in million)

In 2011

Components Amount % of Total

Loans and Advances 77,999.80 68.64%

Investments 24,645.38 21.15%

Cash 6,946.10 5.96%

Balance with other Banks 643.86 0.55%

Other Assets (including Fixed Assets) 4,317.88 3.70%

Total 116,553.01 100.00%

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Capital

The Authorized Capital of the Bank was BDT 8,000.00 million of 800,000,000 Ordinary Shares of BDT 10 each as on December 31, 2011. Paid-up Capital of the Bank was BDT 4,968.09 million of 496,809,200 Ordinary Shares, face value of BDT 10 each and listed both in Dhaka and Chittagong Stock Exchange. The shares of the Bank are trading at prices higher than the book value.

Statutory Reserve

During the period under review the Bank transferred BDT 600.83 million to Statutory Reserve as 20% of the

profi t after provisions before tax as per section 24 of the Bank Company Act, 1991. The total amount of Statutory Reserve stood at BDT 2,643.39 million at the end of 2011.

Capital Adequacy

As per the guidelines of Bangladesh Bank, the Bank has implemented Basel II successfully in the Bank. The consolidated Capital Adequacy Ratio (CAR) of the Bank is 10.60% as on December 31, 2011 against the minimum requirement of 10%. However, CAR in terms of SOLO basis is 10.52% as on December 31, 2011 against 9.13% in December, 2010.

Consolidated Capital Adequacy (BDT in million)

Core Capital (Tier I) 8,906.53

Paid-up Capital 4,968.09

Statutory Reserve 2,643.39

Retained Earnings 1,197.59

Minority interest in subsidiaries 51.77

Dividend Equalization Fund 45.68

Supplementary Capital (Tier II) 1,794.40

General Provision 1,300.22

Revaluation Reserve for Fixed Assets 321.81

Revaluation Reserve for equity Investment 82.00

Revaluation Reserve for Securities 90.37

Total Capital 10,700.93

Total Risk-Weighted Assets 100,952.70

BIS Ratio Minimum Requirements Actual

Tier I 5.0% 8.82%

Tier II - 1.78%

Tier III - -

Total 10.00% 10.60%

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Shareholders’ EquitySince the issuance of IPO in 2003, the number of total shareholders is increasing day by day. At the end of 2011 number of shareholders increased to 41,427 which were 40,283 in previous year.

Year No. Of Shareholders

2003 3,118

2004 4,459

2005 5,199

2006 5,868

2007 6,692

2008 8,246

2009 12,416

2010 40,283

2011 41,4272011

Contribution to National Exchequer and Economy

The Bank has made provision of BDT 1,250.00 million for corporate tax in 2011 against that of BDT 1,010.59 million in 2010. The Bank has also contributed to the economy by generating employment of 1,668 full time offi cials till 2011

end. In the intermediation process, the Bank mobilized resources of BDT 102,262.02 million from the surplus economic unit and deployed BDT 79,999.80 million in 2011. The Bank has made signifi cant contribution to the growth of Readymade Garments sectors by handling huge amount of export Letters of Credit.

Acquisition of IDLC SharesIn the year 2005 Mercantile Bank Ltd. acquired 1,50,000 sponsor shares of IDLC Finance Limited.

Dividend Received From IDLC Finance Limited:

Year % Dividend Received by MBLCash Dividend (BDT) Stock Dividend

2005 37.50% 5,625,000.00 NIL2006 5.00%, 33.33% B 750,000.00 50,0002007 15%, 25% B 2,250,000.00 37,5002008 15%, 20% B 2,812,500.00 37,5002009 10%, 100% B 2,250,000.00 225,0002010 35%, 65%B 15,750,000.00 292,500Total 29,437,500.00 642,500

The Face value of share of the company has been denominated from Tk. 100 to Tk. 10 as on 01.12.2011

Capital Gain:

Mercantile Bank Ltd received 50,000 shares as stock dividend of IDLC Finance Limited in the year 2006. In the year 2007 we realized capital gain of Tk. 59,650,000.00 after completion of sale of 50,000 bonus shares.

Total Receipt:

From the fi nancial year 2005 to 2010 we have received

cash dividend of Tk. 29,437,500.00 along with capital gain from sale of 50,000 shares Tk. 59,650,000.00. Total receipt from IDLC investment stood at Tk. 89,087,500.00.

Present Holding:

At present Mercantile Bank Ltd is holding 7,425,000 ordinary shares of IDLC FINANCE LIMITED, which is 7.50% of the total paid up capital of the said Non-Banking Financial Institutions.

No of Shareholders

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Purchase of LandGulshan:

Land measuring 1 bigha 2 chattaks located at Gulshan Plot # 3, Block # CWN (C), Gulshan Avenue, Gulshan, Dhaka-1212, have been purchased during the year 2005 for Bank’s own use. The land is under litigation and possession of the land is yet to be taken. In this connection, a provision has been made as per Bangladesh Bank’s instruction.

Rajshahi Branch:

Ground Floor and 1st Floor measuring 10502.72 sft fl oor space (Ground fl oor and 1st fl oor 5251.36 sft each) has been purchased on 17.12.2007 of a 07 storied Commercial Building named ‘ZODIAC Plaza’ at ZODIAC Plaza, 88 Saheb Bazar (Zero Point), Rampur, Boalia, Rajshahi for our Rajshahi Branch premises.

Green Road Branch:

Ground Floor and 1st Floor measuring 4,578 sft (2,423 sft + 2,155 sft) including 02 (two) units of Car Parking has been purchased on 18.06.2008 of a 09 storied Commercial Building named: Gazi Tower located at 151/6, Green Road, Dhaka on Plot No. CS-171 (p), SA-248, JL-262, Mouza-Rajabazar, District-Dhaka for our Green Road Branch premises.

Satmasjid Road Branch:

A Plot of Land measuring 10 (ten) Khatas along with 02 storied Building has been purchased on 29.07.2009 located at Plot No. 735 (Old), 82/A (New), Satmasjid Road (old), Road No. 8/A (New), Dhanmondi Residential Area, Dhaka-1209 for our Sat Masjid Road Branch premises.

Bijoynagar Branch:

First fl oor measuring 8,328.59 sft has been purchased on 30.07.2009 of a 15 storied Commercial Building named: Akram Centre located at 3/3 C & 3/3 D, Purana Paltan (Old), 212 Shahid Sayed Nazrul Islam Sarani (New), Dhaka-1000 for shifting of our Bijoynagar Branch premises.

Progati Sharani Branch:

Ground fl oor measuring 3,891.00 sft and entire 1st Floor measuring 4,921.00 sft totaling 8,812.00 sft along with 03 (three) Car Parking space at Basement has been purchased on 06.12.2009 of a 09 storied Commercial Building named: “Green Orlando” for our Progati Sharani Branch premises located at 42-4, Progati Sharani, Baridhara, Dhaka.

Khulna Branch:

Ground Floor, 1st Floor and 2nd fl oor measuring more or less 7,463.42 sft (2,400 sft + 2,400 sft + 2,663.42 sft) has been purchased on 31.08.2010 of a 07 storied Commercial Building named: Rupsha Plaza for our Khulna Branch premises located at 73, KDA Avenue Commercial Area, Khulna. At present the ground fl oor and 1st fl oor of Rupsha Plaza are using for our Khulna Branch premises and 2nd fl oor is used by Khulna Branch of Mercantile Bank Securities Ltd.

Gulshan Branch:

First Floor (Suite No. 103-109) measuring total 9,275 sft including 08 (eight) units of Car Parking spaces at basement-2 has been purchased on 09.09.2010 of the 06 storied Commercial Building named: “Hosna Center” at Plot No. 02, Block CES (A), 106 Gulshan Avenue, Gulshan, Dhaka-1212 for shifting of our Gulshan Branch premises.

Ring Road Branch:

First Floor measuring 5,500 sft along with 03 (three) units of Car Parking spaces on the Basement fl oor has been purchased on 06.01.2011 of a 15 storied Residential cum Commercial Building named: “CHOICE A J Golden Tower” located at 2/1, Ring Road, Shyamoli, Dhaka for our proposed Ring Road Branch premises.

Dhanmondi Branch:

First fl oor measuring 7,395 sft along with 03 units of car parking at Basement of a 14 storied Commercial Building named, “Sima Blossom”, Holding No. 390 (old), Road No. 27 (old), Dhanmondi, Dhaka-1209. has been purchased on 26.10.2011 for shifting of our Dhanmondi Branch premises.

Banani Branch (On going process):

First fl oor measuring 6,565 sft along with 02 car parking spaces at Basement Level-02 of a Commercial Building named, “Banani DCC Unique Complex”, Plot No. 44, Kamal Ataturk Avenue, Banani, Dhaka-1213 for shifting of our Banani Branch premises. Obtaining required permission from Bangladesh Bank is under process.

Branch NetworkThe Bank commenced its business on June 2, 1999. The fi rst branch was opened at Dilkusha Commercial Area in Dhaka on the inauguration day of the Bank. At the end of 2011, the number of branches of the Bank stood at 75, including 5 SME/Krishi branches, of which 53 branches are located at major trade centers of the country while remaining 22 branches are at the rural areas of the country.

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2009 2010 2011Board of Directors 20 20 20Executive Committee 51 48 40Audit Committee 14 10 13

Board of DirectorsIn the 12th Annual General Meeting (AGM) held on April 11, 2011-

a. Mr. Md. Mizanur Rahman Chowdhury, a sponsor director of the Bank retired from the Board.

b. Mr. M. A. Khan Belal, elected as a member of the Board for holding Sponsor’s share of the Bank.

c. Dr. Matiur Rahman, M.P representing public shareholders of the Bank was re-elected in the said AGM.

Board and Committee Meetings

20 (twenty) meetings of the Board of Directors, 40 (forty) meetings of the Executive Committee and 13 (thirteen) meetings of the Audit Committee of the Board were held during the year 2011.

Corporate and Financial ReportingBank is a fi nancial institution that acts as an intermediary between depositors and borrowers. Thus, Bank’s Corporate and Financial Reporting must be transparent to all the stakeholders including depositors, borrowers and regulators. Mercantile Bank is very much compliant for Corporate and Financial Reporting as per Regulators’ requirements. The Board of Directors of the Bank confi rms compliance with the fi nancial reporting framework for the followings:

• The Financial Statements prepared by the Management of the Bank present fairly its state of affairs, the results of its operations, cash fl ows and changes in equity;

• Proper books and accounts of the Bank have been maintained;

• Appropriate accounting policies have been consistently applied in the preparation of Financial Statements and accounting estimates are based on reasonable and prudent judgment;

• International Accounting Standards, as applicable in Bangladesh, has been followed in preparation of Financial Statements and any departure, therefore, has been adequately disclosed;

• The system of Internal Control is sound in design and has been effectively implemented and monitored;

• There are no signifi cant doubts upon the Bank to continue as a going concern.

External AuditorsAhmed Zaker Co., Chartered Accountants and K. M. Hasan & Co., Chartered Accountants are presently engaged as Auditors of the Bank. The Audit Firm: Ahmed Zaker Co., Chartered Accountants will be completing 3 (three) years as External Auditors and the other Auditor, K. M. Hasan & Co., Chartered Accountants will be completing fi rst year successfully at the end of 2011. As per the guidelines of Bangladesh Bank and Securities and Exchange Commission, Ahmed Zaker Co., Chartered Accountants will not be eligible for reappointment for further term. The distinguished Shareholders will decide the appointment / re-appointment of 2 (two) Audit Firms as External Auditors of the Bank in the AGM.

Research and Planning: Innovation and Market DevelopmentExcellence in banking operation depends largely on a well equipped and effi cient Research and Development Division. In the highly competitive industry, a bank has to explore new or improved avenues of products and services, line of businesses in order to consolidate and make upswing in its growth cycle and this is where the role of research and development come into play and contribute for the greater interest of the bank. Sensing the signifi cance of Research and Development activities in banking, MBL has established a core Research and Planning Division (RPD) furnished with skilled persons from the very inception of the Bank. RPD conducted number of surveys and studies on business related issues which helped the management to take decisions more appropriately and provide services to customers more effi ciently. Some of the initiatives which have assisted the management are mentioned below:

• Product development studies and development of new products;

• Market monitoring, tracking of product performances and product re-engineering;

• Analyze the world and local economic situation and convey the scenario to the management of the Bank.

• Successful adoption of Basel II Capital Accord in the Bank.

• National monetary review;

• Study on performance of branches of MBL;

60 annual report

• Publication of ‘Insight’, a quarterly newsletter of RPD on macro economy, global fi nance and banking related issues to translate market insight into business need;

• Success stories evaluation of peer banks;

• Arranging Focus Group Discussions or Mini Group Discussions for identifying new scopes and opportunities for business of the Bank.

Foreign remittance During the year 2011, MBL has strengthened its position in mobilizing inward foreign remittance from Non-Resident Bangladeshis (NRB) living and working in different parts of the world. The bank has strategic alliance with leading exchange companies and banks in USA, United Kingdom, UAE, Kuwait, Bahrain, Canada, Italy, France etc. Moreover, for prompt & safe distribution of this hard earned money to their near and dear ones in every corner of the country, we have made an arrangement with Bangladesh Post Offi ce and with some other local agencies. In 2011, the bank handled total inward foreign remittance of BDT 7,150 million compared to BDT 5,108.10 million in 2010 registering a growth of 39.97%.

Correspondent RelationshipThe Bank has established correspondent relationship across the world with a number of foreign banks. The number of correspondent banks stood at 638 as on December 31, 2011 across 67 countries. Through its correspondent relationship network, MBL continues to follow needs and business opportunities of its clients. The bank maintains 32 Nostro accounts in 6 major international currencies with reputed international banks in all the major fi nancial centers around the world, for settlement of trade fi nance and all other customer driven transactions denominated in foreign currency. MBL also enjoys suffi cient credit lines from correspondent banks for add confi rmation to LC to facilitate international trade. We continuously emphasizing and trying to develop and improve the relationship with correspondent banks.

Mercantile Exchange House (UK) LimitedWith permission from Bangladesh Bank and registration of Financial Services Authority, UK, MBL opened its fi rst own Exchange House in Birmingham, UK in the name and style, ‘Mercantile Exchange House (UK) Limited’, a fully owned subsidiary of MBL, started its operation from December 06, 2011. Very soon, MBL will open the second branch of ‘Mercantile Exchange House (UK) Limited’ in London, UK. Within a very short span of time, the company has been able to create satisfactory customer base through effi cient and professional service to Bangladeshi expatriates living in the UK. Opening

of the fully owned subsidiary in UK has added a new dimension to the bank’s remittance operation widening its global reach for remittance services.

Offshore BankingIn 2011, MBL has started its ‘Offshore Banking’ operation to cater the banking requirement of non-resident customers through its Gulshan and Chittagong Export Processing Zone (CEPZ) branches. Offshore banking acts as a unique solution for banks across the globe to carry out international banking business involving foreign currency denominated assets and liabilities taking the advantages of low or non-existent taxes/levies and higher return on investment.

Information TechnologyMBL is continuously making investments to serve its customers and other associates through modern technology based banking system to cope with the ever changing behavior of the present world. The role and importance of Information Technology in the banking industry cannot be forsaken. Technological innovation is adding value continuously. Banking operations of the branches have been computerized to minimize costs and risks and to optimize benefi ts and increase overall effi ciency for improved services. The Bank has successfully launched SMS Banking to reduce the operating cost for the Bank. The Bank has taken necessary steps to establish its Core Banking Solution ‘TEMENOS T24’. This will make bank’s MIS system more robust, prompt and user friendly. Banks have started moving into “paperless banking” as part of “Green Banking” and MBL cherishes the idea by accelerating the pace of automation empowered by IT Division, which will not only reduce transaction and hardware costs signifi cantly, but also a greater extent of scalability will be introduced and the resources exploitation will be maximized to save energy.

Financial Product and Services

The Bank has launched a sound number of attractive fi nancial products and services to accommodate the requirement of several classes’ people since its foundation. Among them Monthly Savings Scheme (MSS), Monthly Benefi t Deposit Scheme (MBDS), Double Benefi t Deposit Scheme (DBDS), Special Saving Scheme (SSS), Quarterly Benefi t Deposit Scheme, 1.5 Time Benefi t Deposit Scheme, Advance Benefi t Deposit Scheme, Consumer Credit Scheme, Small Loan Scheme, Lease Finance Scheme, Overseas Employment Loan Scheme, Personal Loan Scheme, Car Loan Scheme, Home Loan Scheme, Agriculture Loan and SME Loan have received wide acceptance among the people. Our Bank evolved a number of attractive deposit schemes accommodate the requirement of small and medium savers.

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Deposit Products

Monthly Saving Scheme (MSS)

Monthly Saving Scheme is one of the most popular deposit product in different communities, that introduced to attract small savers for building up their habit of savings and thereby build up a healthy capital base for the economy. The monthly installments are in various sizes and one can adopt the schemes for a period of 03 years, 05 years, 08 years or 10 years. Investor gets a lump sum (principal plus interest) at the maturity of the scheme. Installment amount should be deposited within the fi rst 10 days of each month. In case of failure, 5% of monthly installment will be charged as late payment fee, which will be added with the installment amount. In case of premature encashment, interest will be paid at Savings rate. The incumbent depositor can get a loan facility of maximum 80% of his deposited amount. At the end of 2011 BDT 20,960.47 million was deposited in this scheme against that of BDT 17,529.95 million in 2010.

Monthly Benefi t Deposit Scheme

Under this scheme, depositor will get a certain sum of money in each month proportion to his/her deposit during the entire tenure. Benefi t starts right from the fi rst month of opening an account under this scheme and continues upto fi ve years. On maturity, the principal amount is paid back. Objectives of this scheme are: help the retired persons for investing their retirement benefi ts, Create investment opportunities for Non-Resident Bangladeshi, etc. Minimum deposited amount is BDT 50,000 or its multiples and the tenure is fi ve (05) years. This scheme is also known as “Family Maintenance Deposit Scheme (FMD)”. Under this scheme total amount of BDT 2,383.63 million was deposited upto the end of 2011.

Double Benefi t Deposit Scheme (DBDS)

The main attraction of DBDS is that, the deposited amount will be double in tenure of 6 (Six) years. Minimum deposited amount should be BDT 10,000 or its multiples.

In case of premature encashment interest will be paid on Saving A/C Rate. Loan may be granted up to maximum 80% of the deposited amount, but minimum principle amount must be BDT 20,000. At the end of 2011 total amount of BDT 10,750.11 million was deposited under this scheme.

Quarterly Benefi t Deposit Scheme

The ‘Quarterly Benefi t Deposit Scheme’ will be maintained for a period of 3 (three) years and the minimum amount of deposit is BDT 50,000.00 (fi fty thousand) or its multiples. Interest will be paid on quarterly basis. Benefi ts start right from the fi rst quarter of opening the scheme. On maturity, principal amount will be paid back. Savings account is needed to maintain this scheme. Loan may be granted up to maximum 80% of the forced encashment value on the date of loan processing. During the period of continuation of loan, quarterly benefi ts will be credited only to loan account. Under this scheme total amount of BDT 153.90 million was deposited upto the end of 2011.

1.5 Time Benefi t Deposit Scheme

Under this scheme, deposited amount reserved for 4.25 years (or 51 months) and the minimum amount of deposit is BDT 50,000.00 (fi fty thousand) or its multiples. After 4.25 years maturity, 1.5 times of the deposited amount will be paid back to the account holder. In case of premature encashment interest will be paid on Saving A/C Rate. However, no interest shall be paid if premature encashment takes place before expiry of 1 (one) year. Loan may be granted up to maximum 80% of the deposited amount. At the end of 2011, total amount of Deposit under this scheme was BDT 249.30 million

Advance Benefi t Deposit Scheme

Under Advance Benefi t Deposit Scheme, one can deposit a certain amount of money for two years. The depositor will receive the benefi t on yearly basis. The benefi t amount of fi rst year will be received in advance at the time of deposit. On maturity, the depositor will get back the principal amount with the benefi t amount of second year. That means Interest is paid in two phases, fi rst phase paid initially and second phase paid after maturity. Loan may be granted up to maximum 70% of deposit. This is also known as “Agrim Munafa Amanat Prokolpo (AMAP)”.

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Special Saving Scheme (SSS)

For further strengthening of the deposit base of the Bank and meet the different nature of demand of the depositors MBL have developed new deposit product namely,

“Special Savings Scheme (SSS)”. “¯^cœ bq, ev¯—e.....” is the central motto of this new product. After maturity (i.e. 10 years) Bank pays more than three (03) times of deposited amount to the customers. Under Special Saving Scheme, Deposited amount reserved for 10 years and the minimum amount of deposit is BDT 50,000.00 (fi fty thousand) or its multiples. The effective Interest Rate offered to customers will be 12.25% as compounded yearly. In case of pre-mature encashment, customer can get interest more than running Savings and SND interest rate. Under this scheme, total amount of BDT 580.90 million was deposited upto the end of 2011.

Loan ProductsConsumer Credit Scheme

Consumers’ Credit Scheme is one of the popular areas of collateral-free fi nance of the Bank. People with limited income can avail of credit facility to buy household goods including computer and other consumer durables. Total exposure under this scheme stood at BDT 34.71 million at the end of 2011.

Lease Finance

This scheme has been designed to assist and encourage the genuine and capable entrepreneurs and professionals for acquiring capital machineries, medical equipments, computers, vehicle and other items. Flexibility and easier term and conditions of this scheme have attracted the potential entrepreneurs to acquire equipments of production and services and repay gradually from earnings on the basis of ‘Pay as you earn’. Total exposure under this scheme was BDT 763.30 million at the end of 2011.

SME Loan Scheme

Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide fi nancial assistance to new or experienced entrepreneurs to invest in small and medium scale industries with a comparatively low rate of interest as the same is assisted by the Bangladesh Bank with refi nancing facilities. BDT 3,833.56 million was disbursed under this scheme till the end of 2011.

Personal Loan Scheme

Personal Loan Scheme has been introduced to extend credit facilities to cater the needs of low and middle-income group for any purpose. Government and semi-government offi cials, employees of autonomous bodies,

banks and other fi nancial organizations, multinational companies, reputed private organizations and teachers of recognized public and private schools, colleges and universities are eligible for this loan. Total Loans and Advances under this scheme stood BDT 436.64 million at the end of 2011.

Car Loan Scheme

Car Loan Scheme has been introduced to enable middle-income people to purchase Cars/SUVs/Jeeps. Government and semi-government offi cials, employees of autonomous bodies, banks and other fi nancial organizations, multinational companies, reputed private organizations, teachers of recognized public and private universities and businessmen are eligible for this loan.

Home Loan Scheme

To meet the growing need of housing for middle and lower-middle income people, MBL has introduced Home Loan Scheme. We also support the Bangladesh Bank’s Home Loan Refi nance Scheme. The Scheme will also boost up the growth of housing sector. Such loan shall be available for purchase or construction of new apartments for self-residing purpose.

Overseas Employment Loan Scheme

Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi youths seeking employment aboard but unable to meet the expenses to reach the workplace from their own sources. The ultimate objectives of the scheme are to promote skilled / semi-skilled manpower to different countries across the world as well as to provide support to Government Policy considering priority of this sector. By availing loan under this scheme, the active youths of middle and lower middle class can get overseas employment by avoiding borrowing from the illustrious class or village ‘mohajon’ at a very high cost or selling their paternal properties. The scheme will also help fetching foreign currency for the country as well as fulfi ll the Bank’s commitment to encourage Micro-lending for poverty alleviation, improve the quality of life and thereby contribute to socio economic development of the country.

Financial Review

Operating Profi t

The operating profi t of the Bank stood at BDT 3,501.67 million in 2011 as against BDT 2,847.12 million in 2010. Net Interest Income of the Bank stood at BDT1710.55 million in 2011 as against BDT 1,661.90 million in 2010.

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Total IncomeTotal income increased to BDT 14,124.38 million in 2011 from BDT 9,951.81 million in 2010. Interest income accounted for 75.89%, exchange gains 4.92%, commission 5.27% and other income 13.92% to total income in 2011 as against 77.07%, 5.75%, 6.32% and 10.86% respectively in 2010.

Interest Income

Interest income increased from BDT 7,669.42 million in 2010 to BDT 10,719.69 million in 2011. Interest on loans and advances accounted for 90.12%, interest on Treasury bill and Bond 9.21% and Other Interest Income 0.67% in 2011.

Operating Profi t(BDT in million)

Total Interest Income 10,719.69Less: Interest Expenses 8,022.13Net Interest Income 2,697.56Add: Non- Interest Income 3,404.69Total Operating Income 6,102.25Less: Non Interest Expenses 2,600.57Operating profi t 3,501.67

Total Income(BDT in million)

Components Amount % of TotalInterest Income 10,719.69 75.89%Exchange Gains 695.00 4.92%Commission 744.02 5.27%Other Income 1,965.67 13.92%Total 14,124.38 100.00%

Interest Income(BDT in million)

Components Amount % of Total

Interest on Loans and Advances 9,660.50 90.12%

Interest on Treasury Bill & Bond 987.01 9.21%

Other Interest Income 72.18 0.67%

Total 10,719.69 100.00%

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Interest Expenses

Interest expenses moved up from BDT 5,176.00 million in 2010 to BDT 8,022.13 million in 2011.

Interest Expenses(BDT in million)

Components Amount % of Total

Interest on Deposits 7,992.01 99.62%

Interest on Refi nance BB 29.92 0.37%

Other Overseas Account 0.20 0.00%

Total 8,022.13 100.00%

Net Interest IncomeNet interest income increased from BDT 2,493.42 million in 2010 to BDT 2,697.56 million in 2011. Gross interest income of the Bank amounted to BDT 10,719.69 million and interest expenses amounted to BDT 8,022.13 million in 2011.

Net Interest Margin (NIM)

Bank’s net interest margin, which is derived from net interest income divided by average earning assets, was 2.93% in 2011.

Non-Interest Income

Non-interest income increased from BDT 2,282.39 million in 2010 to BDT 3,404.69 million in 2011. Among the constituents of Not-Interest Income, Exchange gains contributed 20.41%, commission 21.84%, income on investment 20.10%, and other non-interest income 37.64%, in 2011 as against 25.05%, 27.57%, 3.86% and 43.52% respectively in 2010.

Non-interest Income

(BDT in million)

Components Amount % of Total

Exchange gains 695.00 20.41%

Commission 744.02 21.84%

Income on Investment 684.29 20.10%

Other non-interest income 1,281.39 37.64%

Total 3,404.69 100.00%

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Total Expenses

The total expenses of the Bank stood at BDT 10,622.70 million during 2011 as compared to BDT 7,104.69 million during 2010. Interest expenses accounted for 75.52%, salaries and allowances 12.16%, rent, rates, taxes

etc. 2.65%, depreciation and repairs 1.53%, stationary, printing and advertisements 1.17%, postage, stamp and telecommunication 0.58%, and other expenses 6.39% of total expenses in 2011 as against 72.85%, 13.13%, 3.24%, 1.69%, 1.64%, 0.71% and 6.74% respectively in 2010.

Total Expenses(BDT in million)

Amount % of Total

Interest Expenses 8,022.13 75.52%

Salaries and Allowances 1,292.01 12.16%

Rent, Rate, Taxes etc 281.87 2.65%

Depreciation and Repairs 162.32 1.53%

Stationery, Printing & Advertising 124.06 1.17%

Postage, Stamp and Telecommunication 61.82 0.58%

Other Expenses 678.48 6.39%

Total Expenses 10,622.70 100.00%

Non-interest Expenses

Non-interest expenses moved up from BDT 1,928.69 million in 2010 to BDT 2,600.57 million in 2011. Salaries and allowances 49.68%, rent, rates, taxes etc. 10.84%, depreciation and repairs 6.24%, stationary, printing

and advertisements 4.77%, postage, stamp and telecommunication 2.38%, and other expenses 26.09% of total expenses in 2011 as against 48.37%, 11.93%, 6.24%, 6.05%, 2.60% and 24.81% respectively in 2010.

66 annual report

Net Profi t before TaxAfter transferring all provisions, net profi t before tax increased to BDT 3,004.17 million in 2011 as against BDT 2,435.93 million in 2010 showing 23.33% growth over 2010 during the period under review.

Provision for Income TaxProvision against current year tax was BDT 1,250.00 million in 2011 as against BDT 1,010.59 million in 2010 showing 23.76% growth in 2011 over 2010.

Non-interest Expenses(BDT in million)

Amount % of Total

Salaries and Allowances 1,292.01 49.68%

Rent. Rate, Taxes etc 281.87 10.84%

Depreciation and Repairs 162.32 6.24%

Stationery, Printing & Advertising 124.06 4.77%

Postage, Stamp and Telecommunication 61.82 2.38%

Other Expenses 678.48 26.09%

Total Expenses 2,600.57 100.00%

Profi t after TaxProfi t after tax earned by the Bank in 2011 was BDT 1,734.17 million as against that of BDT 1,425.34 million in 2010.

Profi t after Tax(BDT in million)

Interest Income 10,719.69Interest Expenses 8,022.13 Net Interest Income 2,697.56Non- Interest Income 3,404.69 Non Interest Expenses 2,600.57 Net Non interest Income 804.12Profi t Before Provision & Tax 3,501.67ProvisionsProvision Un-classifi ed Loans 143.00 Provision Classifi ed Loans 315.20 Provision for Off-Balance Sheet Items 39.30 Profi t before Tax 3,004.17Provision for Taxation & Deferred Tax 1270.00Profi t after Tax 1,734.17

DividendThe Board of Directors recommended 23% dividend for the year 2011. The Bank paid out 22% stock dividend to the shareholders in 2010.

Earning Per Share (EPS)Since the inception and enlistment in Stock Exchange, the Bank has been making positive EPS. Earning per share (after split) was BDT 3.49 as on December 31, 2011.

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Operating Effi ciency Ratio

2010 2011

Total Expenses 7,104.69 10,622.70

Total Income 9,951.81 14,124.38

Operating Effi ciency Ratio 71.39% 75.21%

Outlook 2012

Since the year 2011 was a nail biting tensed period for all involved in banking business, due to reign of recession and economic mayhem across the globe and sign of recovery still too frail and fragile to be taken into consideration; the year 2012 will be the year of cautious move and calculative risk. However, the Bank will stick to its fundamental task of doing business in a socially and environmentally sustainable manner. We are quite confi dent of implementing the core banking solution, TREMONOS T 24, from this year. Nonetheless, this year would bring forth intense competition among the banks as the investment opportunity would be concise due to BB’s contractual monetary policy. Moreover, dearth of liquidity and hefty government borrowing from the banking and public sector as well, would make the liquidity situation more edgy. Our aim is to collect the small savings of lower-middle class through innovative and attractive scheme deposit products and simultaneously we would go for the class banking through ‘Priority Banking’. With the advent of state of art technology we will be able to earn supremacy in terms of Customer Service by providing them satisfaction to all visible angles.

Since, Interest Rate Risk is supposed to be the greatest threat due to rise in interest rate in the market along with fi lthy competition, we would emphasize on procuring No-Low cost deposits through vigorous campaign all the year round and would be able to retain and attract potential customers by rendering services to the extent of highest possible degree. Just after couple of year after inception, we have attained strong footing in terms dealing with foreign currency and the trend would remain the same and thereby International Trade and Remittance from Bangladeshi expatriates will also be emphasized.

To be compliant with Basel II Capital Accord, we would strengthen our capital base. Customer Credit Rating will be the top priority in case of asset marketing. Non-interest based income i.e. income from ancillary services will be

given due attention to remain stable in terms of income generation and providing continuous value addition for the shareholders. We have a nurtured and superb quality of human capital along with a prudent management to lead them towards goal. The Bank would indeed be able to maintain its pride as a Bank of stable growth and wealth maximization.

AcknowledgementsMercantile Bank Limited has gained the confi dence of its clients within a short span of its operation. This success is primarily attributed to its teamwork, prompt and prudent decision-making, effi cient and cordial services, economic use of resources and introduction of new fi nancial products and technologies. The continued endeavors of the Management and Staff of the Bank under wise guidance and timely support of the Board of Directors have substantially contributed to success of the Bank. The Board of Directors take this opportunity of expressing its hear-felt appreciation and gratitude to the Government of the People’s Republic of Bangladesh, Bangladesh Bank, Securities & Exchange Commission, Dhaka Stock Exchange limited, Chittagong Stock Exchange limited and Registrar of Joint Stock Companies and Firms for their cooperation, valuable guidance and advice provided to the Bank from time to time. The Board of Directors also expresses deep appreciation to the Management and all members of staff for their dedicated and effi cient services and also to the clients, sponsors, shareholders, stakeholders, patrons and well-wishers, whose continued support and patronage have facilitated our path towards the glory achieved, so far, by the Bank.

On behalf of the Board of Directors,

Md. Abdul Jalil, M.PChairman

Operating Effi ciency Ratio Operating Effi ciency Ratio stood at 75.21% in 2011 as against 71.39% in 2010. This measures how much operating expenses are incurred to generate operating revenues.

68 annual report

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wcÖq †kqvi‡nvìviMY,

cwiPvjbv cl©‡`i c¶ †_‡K e¨vs‡Ki 13Zg evwl©K cÖwZ‡e`b I 31†k wW‡m¤^i, 2011 Gi wbixw¶Z Avw_©K cªwZ‡e`b Dc¯’vcb Ki‡Z †c‡i Avwg AZ¨š— Avbw›`Z| GB Avw_©K cÖwZ‡e`‡b i‡q‡Q w¯’wZcÎ, jvf ¶wZ wnmve, Zvij¨ cÖevn weeiYx, g~jab cwieZ©b weeiYx Ges Zvij¨ msµvš— weeiYx| Avwg 2011 mv‡j e¨vs‡Ki Kvh©µ‡gi msw¶ß ch©v‡jvPbv Zy‡j aiwQ Ges GKB mv‡_ wek¦ A_©‰bwZK cwiw¯’wZi †cÖw¶‡Z evsjv‡`‡ki A_©bxwZi mvwe©K Ae¯’v Dc¯’vcb Kivi cÖqvm e¨³ KiwQ|

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DbœZ we‡k¦i 2012 I 2013 mv‡ji cÖe„w×i cÖv°jb Kiv n‡q‡Q h_vµ‡g 1.2% I 1.9%| 2012-13 A_©eQ‡i BgvwR©s I Dbœqbkxj †`kmg~‡ni cÖe„w× 5.75% cwiKwíZ n‡q‡Q, hv 2011-12 mv‡ji 6.5% n‡Z D‡jø L‡hvM¨ nv‡i Kg| GB wPÎ mvgwMÖK wek¦ A_©bxwZi AebwgZ cwiw¯’wZiB cÖwZ”Qwe| Z‡e, Gwkqvi Dbœqbkxj †`k¸‡jv Zv‡`i m‡e©v”P A_©‰bwZK cªe„w×i aviv A¶ybœ †i‡L 7.5% nv‡i cÖe„w× AR©b K‡i P‡j‡Q|

wek¦ evRv‡i Pvwn`v n«vm cvIqvq mvgwMÖK cY¨`ª‡e¨i g~j¨ n«vm †c‡jI wek¦ ivRbxwZ Ry‡o Pjgvb Aw¯’iZvi Kvi‡Y †Z‡ji g~‡j¨i EaŸ©MwZ eRvq wQj, hv 2012 mv‡jI GKB iKg _vK‡e e‡j aviYv Kiv n‡”Q| Ab¨vb¨ c‡Y¨i g~‡j¨ wKQyUv axiMwZ‡Z n‡jI 14% ch©š— n«vm cv‡e e‡j Avkv Kiv hv‡”Q| wek¦ gyj¨ùxwZ 1.5%-G ‡b‡g Avm‡e e‡j aviYv Kiv n‡”Q, hv 2011 mv‡j wQj m‡ev©”P 2.75%|

Pjgvb wek¦ A_©‰bwZK g›`v AbybœZ I Dbœqbkxj †`k¸‡jv‡Z wei“c cÖwZwµqv m„wó Ki‡e, †h‡nZz GBme †`kmg~n i“ßvwb Av‡qi Rb¨ Zv‡`i Dci wbf©ikxj| ZvB †UKmB cÖe„w× wbwðZ Kivi j‡¶¨ we‡k¦i wewfbœ †`‡k cÖe„w× mnvqK c¨v‡KR MÖnY Ae¨vnZ ivL‡Z n‡e Ges GKB mv‡_ Zvij¨ cªevn wbwðZK‡í mnR gy`ªvbxwZ MÖnY Ki‡Z n‡e|

evsjv‡`‡ki A_©bxwZ2011 mvj evsjv‡`‡ki A_©bxwZi Rb¨ wQj GKwU wgkª eQi| GKw`‡K †hgb GeQi MZ eQ‡ii Zzjbvq ißvwb Av‡q we¯§qKi cÖe„w× AwR©Z n‡q‡Q, †Zgwb mgwóK A_©bxwZi m~PK mg~n Ry‡o Pjgvb Aw¯’wZkxjZv `xN©‡gqv‡` †`‡ki cªe„wׇK ksKvq †d‡j‡Q|

2011 A_©eQ‡i ißvwb Av‡q cÖe„w× wQj 41.47%, hv mvgwMÖK A_©bxwZi cÖe„w× Ges †eKviZ¡ `~ixKi‡Y f~wgKv †i‡L‡Q| GKB mgq wRwWwc cÖe„w×i nvi wQj 6.66%, hv cÖv°wjZ 6.7% Gi KvQvKvwQ| Z_vwc, ‰ewk¦K I Avf¨š—ixY A_©bxwZ Ry‡o Pjgvb bvbv Aw¯’iZv, weMZ eQi ¸‡jvi Pjgvb wkw_j gy`ªv Ges FY bxwZgvjv, Avf¨š—ixY gy`ªvi Aeg~j¨vqb, R¡vjvwb †Z‡ji g~j¨e„w×, Ach©vß †hvMvb, Avš—©RvwZK evRv‡i wbZ¨ c‡Y¨i g~j¨e„w×mn bvbv Kvi‡Y mgMÖ 2011 mvj Ry‡oB g~j¨ùxwZi nvi wQj 10 kZvs‡ki †ewk|

2011-12 A_©eQ‡i evsjv‡`‡ki A_©bxwZi cÖe„w×i cwiKíbv †bqv n‡q‡Q 7.00%| hw`I eQi Ry‡o †kqvi evRv‡i Pjgvb Aw¯’iZv, UvKvi g~j¨gv‡bi `ª“Z Aeg~j¨vqb, ev‡R‡U f~Z©ywK wej e„w×, ivR¯^ NvUwZ DˇivËi e„w×, ˆe‡`wkK mvnvh¨ n«vm, we`y¨r NvUwZi Avï mgvavb K‡í AwaK e¨‡q cvIqvi cø v›U ¯’vcb mn bvbvwea Kvi‡Y cÖv°wjZ 7.00% nv‡i wRwWwc cÖe„w× AR©b wb‡q mskq m„wó n‡q‡Q|

wRwWwc cªe„w×

2010-11 A_©eQ‡ii wRwWwc cÖe„w×i cwigvY 6.66%, hv 2009-10 A_©eQ‡i wQj 6.07%| eZ©gvb evRvi g~‡j¨ †gvU wRwWwci cwigvY 7,874.95 wewjqb, hv c~e©eZ©x eQ‡ii Zzjbvq 13.42% †ekx|

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g~j¨ùxwZ

2011 mv‡j D”P gyj¨ùxwZi Kvi‡Y mvgwMÖK mgywóK A_©bxwZ Ry‡oB wQj bvbv Aw¯’iZv| gyj¨ùxwZi GB Pvc mgwóK A_©bxwZi fvimv‡g¨i Rb¨ cÖwZeÜK| cÖvq cy‡iv 2011 mvj Ry‡oB c‡q›U-Uz-c‡q›U g~j¨ùxwZi nvi wQj 10 kZvs‡ki †ewk| 2011 mv‡ji wW‡m¤^‡i c‡q›U-Uz-c‡q›U gyj¨ùxwZi cwigvY wQj 10.63%, hv GKB eQ‡ii Rvbyqvix gv‡m wQj 9.04%| Ab¨w`‡K, evwl©K Mo gyj¨ùxwZ 2011 mv‡ji Rvbyqvix gv‡mi 8.14% †_‡K e„w× †c‡q GKB eQ‡ii wW‡m¤^i gv‡m 10.71% G `uvwo‡q‡Q| Avf¨š—ixY evRv‡i R¡vjvwb †Z‡ji g~j¨e„w×, miKvi KZ„©K AwaK gvÎvq FY MÖnY, UvKvi g~j¨gv‡bi Aeg~j¨vqb mn wek¦ evRv‡i Lv`¨ I Lv`¨ ewn©f~Z c‡Y¨i g~j¨ e„w× †`kxq A_©bxwZ‡Z gyj¨ùxwZi Pvc‡K Z¡ivwš^Z K‡i‡Q|

gy`ªv cwiw¯’wZ

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(*cÖv°wjZ)

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wRwWwc‡Z LvZIqvix Ae`vb wRwWwc‡Z LvZIqvix Ae`vb we‡ePbvq ‡mev Lv‡Zi Ae`vb 49.72% Ges K…wl I wkí Lv‡Zi Ae`vb h_vµ‡g 19.95% I 30.33%|

*

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Avg`vwb

2010-11 A_©eQ‡i Avg`vwb e¨‡q cÖe„w× wQj 41.79%, hv 2009-10 A_©eQ‡i wQj gvÎ 5.37%| Z‡e 2011 cwÄKv e‡l© Avg`vwb e¨‡qi cÖe„w× wKQyUv n«vm †c‡q 30.26% G `vwo‡q‡Q| 2011 mv‡j ‡gvU Avg`vwb e¨‡qi cwigvY `uvovq 36.23 wewjqb gvwK©b Wjvi, hv 2010 mv‡j wQj 27.82 wewjqb gvwK©b Wjvi|

evwYR¨ fvimvg¨

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†iwgU¨vÝ

2010-11 A_©eQ‡i †iwgU¨vÝ cÖev‡ni cÖe„w× wQj 6.03%, hv 2009-10 A_©eQ‡i wQj 13.40%| Z‡e 2011 cwÄKv e‡l© †iwgU¨vÝ cÖev‡ni cÖe„w× 2010 mv‡ji 2.78% †_‡K †e‡o 10.57% G DbœxZ nq| 2011 mv‡ji †k‡l †iwgU¨vÝ cÖev‡ni cwigvY `uvovq 12.17 wewjqb gvwK©b Wjvi, hv 2010 mv‡ji †k‡l wQj 11.00 wewjqb|

‰e‡`wkK gy`ªv evRvi2011 mv‡ji †k‡l †`‡ki ˆe‡`wkK gy`ªvi wiRvf© cÖvq 1.53 wewjqb gvwK©b Wjvi K‡g 9.63 wewjqb gvwK©b Wjv‡i Ae¯’vb K‡i, hv 2010 mv‡ji †k‡l wQj 11.17 wewjqb gvwK©b Wjvi| Avg`vwb evwY‡R¨ D‡j L‡hvM¨ cÖe„w× Ges ga¨cÖv‡P¨ Aw¯’iZvi Kvi‡Y †iwgU¨vÝ cÖevn gvÎv K‡g hvIqvq ‰e‡`wkK gy`ªvi wiRv‡f©i Dci †bwZevPK cÖfve †d‡j, hvi d‡j 2011 mv‡ji †kl bvMv` gvwK©b Wjv‡ii wecix‡Z evsjv‡`kx UvKvi cÖvq 20% Aeg~j¨vqb mvwaZ n‡q‡Q|

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evsjv‡`‡ki A_©bxwZi m¤¢vebv: A_©eQi 2011-12wek¦e¨vcx µgvMZ ivR‰bwZK Aw¯’iZv e„w× cvIqv Ges ga¨cÖv‡P¨i †Zj mg„× †`k Biv‡bi cÖwZ BD‡ivcxq BDwbqb KZ…©K wb‡lavÁv Av‡ivc wbwðZ fv‡eB wek¦evRv‡i R¡vjvwb †Z‡ji g~j¨‡K Amnbxq K‡i Zzj‡e| hvi d‡j g~j¨ùxwZ cwiw¯’wZ Av‡iv bvRyK n‡q DVvi AvksKv i‡q‡Q| djkÖ“wZ‡Z Avg`vwb e¨q evo‡e, †`‡ki evwYwR¨K fvimv‡g¨i Dci Pvc e„w× cv‡e, †mB mv‡_ AvksKv i‡q‡Q Avf¨š—ixY gy`ªvi Av‡iv Aeg~j¨vq‡bi| Gme Kvi‡Y, 2012 mv‡j g~j¨ùxwZi EשgyLx cÖebZv eRvq _vKvi m¤¢vebvB †ekx|

2010-11 A_©eQ‡i evsjv‡`‡ki A_©bxwZ‡Z ißvwb Avq Ges Avg`vwb e¨q Dfq †¶‡ÎB 40 kZvs‡ki Dci cÖe„w× AwR©Z

n‡q‡Q| Z‡e wek¦ Ry‡o GL‡bv Pjgvb g›`v Ges evsjv‡`k e¨vsK KZ…©K AcÖ‡qvRbxq I wejvm eûj c‡Y¨i Avg`vwb wbi“rmvwnZ Kivi Kvi‡Y ‡`‡ki cÖvq 40% ißvwb Avq Ges Avg`vwb e¨q evavMÖ¯’ n‡e| †iwgU¨vÝ cÖev‡ni †¶‡ÎI m‡š—vlRbK cÖe„w×i m¤¢vebv Kg|

2011-12 A_©eQ‡i wRwWwci cÖe„w× cÖv°jb Kiv n‡q‡Q 7%| Pjgvb wek¦ A_©‰bwZK g›`v, ˆe‡`wkK wewb‡qvM (GdwWAvB) Gi Ki“Y Ae¯’v (2011 A_©eQ‡i gvÎ 1 wewjqb gvwK©b Wjvi), miKvi KZ„©K AwaK gvÎvq FY MÖnYRwbZ A_©bxvwZ‡Z µvDwWs AvDU cÖfve, evsjv‡`k e¨vsK KZ…©K †NvwlZ ms‡KvPbkxj gy`ªvbxwZ, R¡vjvwb I we`y¨r NvUwZ Ges m¤¢ve¨ ivR‰bwZK Aw¯’iZv wRwWwci GB cÖe„w× AR©b A‡bKUvB AwbwðqZvq †d‡j w`‡q‡Q|

AvgvbZ wgkªY(wgwjqb UvKv)

weeiY cwigvY kZKiv (%)cÖK‡íi AvIZvq M„nxZ AvgvbZ 35,319.71 34.54%¯’vqx AvgvbZ 38,875.50 38.02%mÂqx AvgvbZ 5,929.74 5.80%PjwZ AvgvbZ 3,440.81 3.36%GmGbwW AvgvbZ 2,221.59 2.17%Ab¨vb¨ AvgvbZ 16,474.67 16.11%‡gvU 102,262.02 100.00%

e¨emvwqK weeiYxAvgvbZevwYwR¨K e¨vsK¸‡jvi Znwe‡ji cÖavb Drm n‡”Q AvgvbZ| e¨emv m¤cÖmvi‡Yi R‡b¨ Avgvb‡Zi cÖe„w× AZ¨vek¨K| ZvB, mv¤ú&ªwZK mg‡q evwYwR¨K e¨vsK¸‡jvi Rb¨ ch©vß AvgvbZ msMÖn Kiv GKwU eo P¨v‡jÄ n‡q `vwo‡q‡Q| e¨vsK 2011 mv‡j 102,262.02 wgwjqb UvKv AvgvbZ msMÖn K‡i‡Q, hv 2010 mv‡j wQj 75,629.14 wgwjqb UvKv| cÖe„w×i nvi 35.22%| cÖwZ‡hvwMZvg~jK my‡`i nvi, AvKl©Yxq mÂq cÖKí, e¨vs‡Ki AvgvbZ msMÖ‡ni Kvh©Ki cÖ‡Pôv, DrK…ó MÖvnK †mev Ges m‡e©vcwi e¨vs‡Ki Dci MÖvnK‡`i Av¯’v Avgb‡Zi GB D‡j L‡hvM¨ cÖe„w× AR©‡b Ae`vb †i‡L‡Q| e¨vsK, ¶z`ª I gvSvwi mÂqKvix‡`i Rb¨ †ek wKQy AvKl©Yxq mÂq cÖKí Pvjy K‡i‡Q| GB mÂq cÖKí mg~n ïay Avgvb‡Zi cwigvYB e„w× K‡iwb, Avgvb‡Zi ¸YMZ gv‡biI cwieZ©b NwU‡q‡Q|

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FY31 †k wW‡m¤^i, 2011 ch©š— e¨vs‡Ki †gvU FY I AwMÖ‡gi cwigvY wQj 79,999.80 wgwjqb UvKv hv 31 †k wW‡m¤^i, 2010 G wQj 66,377.70 wgwjqb UvKv| e¨vsK FY I AwMÖ‡gi †¶‡Î 20.52% cÖe„w× AR©b K‡i‡Q| e¨vs‡Ki A_©vqbK…Z cÖavb LvZ mg~n n‡”Q

e¨emv I evwYR¨, ˆZix †cvlvK wkí, gvSvwi I e„nr wkí, wbg©vY wkí, K…wl, nvmcvZvj I wPwKrmv †mev LvZ, †Uwj‡hvMv‡hvM, †mŠi kw³, BwUwc, ev‡qvM¨vm BZ¨vw`| GQvovI e¨vsK, Gm.Gg.B BDwbU Gi gva¨‡g ¶z`ª I gvSvwi wkí Lv‡Z FY cÖ`vb Ae¨vnZ †i‡L‡Q|

LvZ Abyhvqx FY I AMÖx‡gi wgkªY(wgwjqb UvKv)

LvZ cwigvY kZKiv (%)‡UªW dvBb¨vÝ 9,758.35 12.20%ißvwb (AviGgwR) 12,338.92 15.42%cÖ‡KŠkj ( †jvnv, ÷xj/ ˆe`y¨wZK) 8,357.69 10.45%¶z`ª I gvSvwi wkí 3,833.56 4.79%Lv`¨, cvbxq I ‡fvR¨ †Zj 7,503.61 9.38%K…wl 679.81 0.85%nmwcUvj I ¯^v¯’¨ ‡mev 1,768.13 2.21%†U·UvBj 2,255.94 2.82%M„nvqY 1,329.11 1.66%‡hvMv‡hvM 1,106.46 1.38%dvg©vwmDwUK¨vj 1,642.77 2.05%‡UwjKwgDwb‡Kkb 226.50 0.28%Ab¨vb¨ 30,174.73 36.50%‡gvU 79,999.80 100.00%

Avg`vwb evwYR¨gv‡K©›UvBj e¨vsK, Avg`vwb evwb‡R¨ FY cÖ`v‡bi †¶‡Î me©`vB F‡Yi ¸YMZgv‡bi wel‡q ¸i“Z¡ cÖ`vb K‡i Avm‡Q| 2011 mv‡j e¨vsK 23,296 wU FYc‡Îi gva¨‡g 95,008.70 wgwjqb UvKv FY cÖ`vb K‡i‡Q, hv 2010 mv‡j wQj 26,067 wU FYc‡Îi wecix‡Z 89,524.10 wgwjqb UvKv| MZ eQ‡ii Zyjbvq cÖe„w×i nvi 6.13%| e¨vsK †h mg¯— cY¨ mvgMÖxi Avg`vwb FYcÎ Ly‡j‡Q †m¸‡jv n‡jv-g~jabx hš¿cvwZ, Mv‡g©›Um G‡·mwiR, Pvj, Mg, wPwb, wmwWGmI, Dw™¢¾ †Zj, wm‡g›U wK¬sKvm©, nU ‡ivj ÷xj, KuvPv Zzjv, RvnvR fv½v wkí BZ¨vw`|

ißvwb evwYR¨2011 mv‡j e¨vsK 22,501 wU ißvwb e¨emv cwiPvjbv K‡i‡Q hvi cwigvY 81,311.80 wgwjqb UvKv, hv 2010 mv‡j wQj 22,344 wU e¨emvi wecix‡Z 59,404.20 wgwjqb UvKv| MZ eQ‡ii Zyjbvq G‡¶‡Î cÖe„w×i nvi 36.88 %| e¨vs‡Ki ißvwb evwY‡R¨i g~j ‡¶Î wQj ‰Zwi †cvlvK wkí, hv evsjv‡`‡ki ˆe‡`wkK gy`ªv AR©‡bi I Kg©ms¯’v‡bi e„nËg Drm| Ab¨vb¨ ißvwb mvgMÖxi g‡a¨ i‡q‡Q cvU I cvURvZ mvgMÖx, Pvgov, n¯— wkíRvZ mvgMÖx, Pv, wngvwqZ Lv`¨, gvQ BZ¨vw`|

74 annual report

‡gvU m¤ú‡` Avq‡hvM¨ m¤ú`(wgwjqb UvKv)

weeiY 2010 2011‡gvU m¤ú` 87,140.11 116,553.01DcvR©b m¶g m¤ú` 78,694.47 105,563.50DcvR©b A¶g m¤ú` 8,445.64 10,989.51‡gvU m¤ú‡` DcvR©b m¶g m¤ú` m¤ú‡`i cwigvb 90.31% 90.57%‡gvU m¤ú‡` DcvR©b A¶g m¤ú` m¤ú‡`i cwigvb 9.69% 9.43%

m¤ú`31†k wW‡m¤^i 2011 ch©š— e¨vs‡Ki †gvU m¤ú‡`i cwigvY wQj 116,553.01 wgwjqb UvKv, hv 2010 mv‡ji †k‡l wQj 87,140.11 wgwjqb UvKv| †gvU m¤ú‡`i 68.64% FY I AwMÖg, 21.15% wewb‡qvM, 5.96% bM`, 0.55% Ab¨vb¨ e¨vs‡Ki mv‡_ iw¶Z AvgvbZ Ges Ab¨vb¨ m¤ú` 3.70% hv 2010 mv‡ji †k‡l wQj h_vµ‡g 76.17%, 12.55%, 5.60%, 1.04% I 4.64%|

mswewae× wiRvf©e¨vsK †Kv¤úvbx AvBb 1991 Gi 24 bs avivbyhvqx Avgv‡`i e¨vsK 2011 mv‡j Ki c~e© gybvdvi 20% mswewae× wiRvf© ‡i‡L‡Q hvi cwigvY 600.83 wgwjqb UvKv| 2011 mv‡ji wiRvf© ivLvi ci e¨vs‡Ki †gvU mswewae× wiRv‡f©i cwigvY `uvwo‡q‡Q 2,643.39 wgwjqb UvKv|

m¤ú`(wgwjqb UvKv)

weeiY cwigvY kZKiv (%)FY I AwMÖg 77,999.80 68.64%wewb‡qvM 24,645.38 21.15%bM` 6,946.10 5.96%Ab¨vb¨ e¨vs‡Ki mv‡_ iw¶Z AvgvbZ 643.86 0.55%Ab¨vb¨ (¯’vqx m¤ú` mn) 4,317.88 3.70%†gvU 116,553.01 100.00%

‡UªRvwi Kvh©µg I Znwej e¨e¯’vcbv

Znwej I Zvij¨ e¨e¯’vcbv, ‰e‡`wkK gy`ªv e¨e¯’vcbv BZ¨vw`i mv‡_ Avgv‡`i e¨vs‡Ki †UªRvwi Kvh©µg RwoZ| 2011 mv‡j e¨vsK gvwb gv‡K©U †_‡K 987.00 wgwjqb I †m‡KÛvix †kqvi e¨emv †_‡K 684.29 wgwjqb UvKv gybvdv AR©b K‡i‡Q, hv 2010 mv‡j wQj gvwb gv‡K©U †_‡K 831.52 wgwjqb I †m‡KÛvix †kqvi e¨emv †_‡K 87.93 wgwjqb UvKv| evsjv‡`k e¨vs‡Ki mv‡_ i¶Yxq bM` Znwe‡ji AbycvZ (Cash Reserve Ratio) Ges Zij m¤ú`

AbycvZ (Statutory Liquidity Ratio) GmGjAvi i¶v KivI †UªRvwi Kvh©µ‡gi g‡a¨ c‡o| e¨vs‡Ki †UªRvwi wefvM gvwb gv‡K©U Ges wewb‡qvM Kvh©µ‡gi mv‡_ mwµq fv‡e RwoZ|

‡gvU m¤ú‡` Avq‡hvM¨ m¤ú‡`i AbycvZ2011 mv‡j e¨vs‡Ki †gvU m¤ú‡` Avq‡hvM¨ m¤ú‡`i AbycvZ wQj 90.57%, hv 2010 mvj ch©š— wQj 90.31%| GUv Avq DcvR©‡b m¤ú‡`i Dchy³ e¨envi wb‡`©k K‡i|

75annual report

www.mblbd.com

g~jab2011 mv‡ji 31†k wW‡m¤^i ch©š— e¨vs‡Ki Aby‡gvw`Z g~jab n‡”Q cÖwZwU 10 UvKv wn‡m‡e 800,000,000 wU †kqv‡ii 8,000.00 wgwjqb UvKv| GKB mg‡q e¨vs‡Ki cwi‡kvwaZ g~jab wQj cÖwZwU 10 UvKv g~‡j¨i 496,809,200 wU †kqv‡ii 4,968.09 wgwjqb UvKv| e¨vs‡Ki †kqvi XvKv I PÆMÖvg Dfq óK G·‡P‡ÄB ZvwjKvfy³| Dfq G·‡P‡ÄB e¨vs‡Ki †kqvi †ePv‡Kbv n‡”Q Ges †kqv‡ii evRvi g~j¨ eyK f¨vjy A‡c¶v †ewk|

gyjab ch©vßZvevsjv‡`k e¨vs‡Ki wb‡`©kbvq e¨vsK g~jab ch©vßZv wbiƒc‡Y mdjZvi mv‡_ e¨v‡mj-2 ev¯Íevqb K‡i‡Q| wW‡m¤^i 2011 †k‡l e¨vs‡Ki Kb‡mvwj‡W‡UW g~jab ch©vßZv wQj 10.60%, †hLv‡b b~¨bZg g~jab ch©vßZvi AbycvZ n‡”Q 10%| †mv‡jv Abymv‡i, 31 wW‡m¤^i, 2011 †k‡l e¨vs‡Ki g~jab ch©vßZvi AbycvZ 10.52%, hv 2010 mv‡j wQj 9.13%|

Kb‡mvwj‡W‡UW gyjab ch©vßZv(wgwjqb UvKv)

weeiYwUqvi -1 g~jab 8,906.53 cwi‡kvwaZ g~jab 4,968.09 mswewae× wiRvf© 2,643.39 wi‡UBÛ Avwb©sm 1,197.59 gvB‡bvwiwU B›Uv‡i÷ Bb mvewmwWqvwiR 51.77wWwf‡W›U BK¨vjvB‡Rkb dvÛ 45.68 wUqvi-2 g~jab 1,794.40 ‡Rbv‡ij cÖwfkb 1,300.22 cybg©yj¨vwqZ m¤ú` (¯’vqx m¤ú`) wecix‡Z ms¯’vb 321.81 cybg©yj¨vwqZ m¤ú` (BKzBwU) wecix‡Z ms¯’vb 82.00cybg©yj¨vwqZ m¤ú` (wmwKDwiwU) wecix‡Z ms¯’vb 90.37 †gvU g~jab 10,700.93 †gvU SuywK-wfwËK m¤ú` 100,952.70g~jab ch©vßZv b~¨bZg cÖ‡qvRb eZ©gvbwUqvi-1 5.0% 8.82%wUqvi-2 - 1.78%wUqvi-3 - -†gvU 10.00% 10.60%

eQi †kqvq‡nvìv‡ii msL¨v2003 31182004 44592005 51992006 58682007 66922008 8,2462009 12,4162010 40,2832011 41,427

‡kqvi‡nvìv‡ii msL¨v2003 mv‡j AvBwcI Bmy¨ Kivi ci †_‡K †gvU †kqvq‡nvìv‡ii msL¨v w`b w`b †e‡oB P‡j‡Q| 2011 mv‡ji †k‡l †gvU †kqvi †nvìv‡ii msL¨v wQj 41,427, hv Zvi Av‡Mi eQi A_©vr 2010 mv‡ji †k‡l wQj 40,283| 2003 mvj †_‡K 2011 mvj ch©š— †gvU †kqvi‡nvìv‡ii cwigvb wQj wbgœiƒct

76 annual report

RvZxq †KvlvMvi I A_©bxwZ‡Z Ae`vb

e¨vsK 2011 mv‡j K‡c©v‡iU U¨v· wnmv‡e 1,250.00 wgwjqb UvKv ms¯’vb †i‡L‡Q, hv 2010 mv‡j wQj 1,010.59 wgwjqb UvKv| ZvQvov e¨vsK 2011 mv‡ji wW‡m¤^i ch©š— †gvU 1,668 Rb c~Y©Kvjxb Kg©KZ©v wb‡qvM K‡i Kg©ms¯’vb m„wói gva¨‡gI A_©bxwZ‡Z Ae`vb †i‡L‡Q| A_©‰bwZK ga¨¯’ZvKvix wnmv‡e e¨vsK mgv‡Ri D×„Ë Ask †_‡K 2011 mvj ch©š— 102,262.02

wgwjqb UvKv mÂq msMÖn K‡i‡Q Ges 79,999.80 wgwjqb UvKv wewb‡qvM K‡i‡Q| ZvQvov e¨vsK ißvwb FYc‡Îi gva¨‡g †`‡ki Mv‡g©›Um Lv‡Z ¸i“Z¡c~Y© Ae`vb †i‡L‡Q|

AvBwWGjwm Gi †kqvi µq

2005 mv‡j gv‡K©›UvBj e¨vsK AvBwWGjwm dvBb¨vÝ wjwg‡UW Gi 1,50,000 wU ¯úÝi †kqvi µq K‡iwQj|

K¨vwcUvj †MBb

gv‡K©›UvBj e¨vsK 2006 mv‡j AvBwWGjwm dvBb¨vÝ n‡Z ‡evbvm jf¨vsk wn‡m‡e 50,000 †kqvi jvf K‡i| 2007 mv‡j G¸‡jv weµq K‡i e¨vsK 59,650,000.00 (cuvP †KvwU wQqvbeŸB j¶ cÂvk nvRvi) UvKv gybvdv AR©b K‡i|

‡gvU MÖnY

2005 mvj n‡Z 2010 ch©š— e¨vsK bM` jf¨vsk wn‡m‡e 29,437,500.00 (`yB †KvwU PyivbeŸB j¶ mvBwÎk nvRvi cuvPk) UvKv Ges 50,000 †evbvm †kqvi weµq K‡i 59,650,000.00 (cuvP †KvwU wQqvbeŸB j¶ cÂvk nvRvi) UvKv gybvdv AR©b K‡i| AvBwWGjwm d¨vBb¨vÝ wjt G wewb‡qvM K‡i GLb ch©š— e¨vs‡Ki Av`vqK…Z gybvdv 89,087,500.00 (AvU †KvwU beŸB j¶ mvZvwk nvRvi cuvPkZ UvKv|

wewb‡qv‡Mi eZ©gvb Ae¯’v

eZ©gv‡b gv‡K©›UvBj e¨vs‡Ki wbKU †gvU 7,425,000 wU †kqvi iw¶Z Av‡Q, hv AvBwWGjwm Gi †gvU cwi‡kvwaZ g~ja‡bi 7.50%|

Rwg µq ¸jkvb

2005 mv‡j e¨vsK wbR¯^ e¨env‡ii Rb¨ ¸jkvb _vbvi Aš—M©Z 1 weNv 2 QUvK Rwg µq K‡i hvi cøU bs 3, eø K bs wmWweø DGb (wm), ¸jkvb G¨vwfwbD, ¸jkvb, XvKv -1212 | RwgwUi `Lj GLbI cvIqv hvqwb Ges welqwU Av`vj‡Z wePvivaxb| G ‡cÖw¶‡Z evsjv‡`k e¨vs‡Ki wb‡`©kbv Abyhvqx cÖwfkb Kiv Av‡Q|

ivRkvnx kvLv

2007 mv‡ji 17B wW‡m¤^i Zvwi‡L ivRkvnx †Rjvi ivgcyi, †evqvwjqv, 88 mv‡ne evRvi (wR‡iv c‡q›U) Gi 7 Zjv evwYwR¨K feb ‡RvwWqvK cø vRv, †hLv‡b Avgv‡`i ivRkvnx kvLv Aew¯’Z, Zvui cª_g I wØZxq Zjv µq Kiv nq hvi †gvU AvqZb 10,502.72 eM©dzU|

MÖxb‡ivW kvLv

Avgv‡`i MÖxb‡ivW kvLvi Rb¨ 2008 mv‡ji 18B Ryb Zvwi‡L XvKv †Rjvi Aš—©MZ 151/6 MÖxb †iv‡Wi cø U bs- wmGm-171 (wc), GmG-248, †RGj-262, ‡gŠRv-ivRvevRvi Gi 9Zjv wewkó MvRx UvIqv‡i 2wU Mvox cvwK©s myweav mn cÖ_g I wØZxq Zjv µq Kiv nq hvi AvqZb h_vµ‡g 2,423 I 2,155 eM©dzU|

mvZgmwR` †ivW kvLv

mvZgmwR` †ivW kvLvi Rb¨ 2009 mv‡ji 29†k RjvB Zvwi‡L XvKv †Rjvi Aš—©MZ mvZgmwR` †ivW (cyivZb), †ivW bs 8/G (bZzb), avbgwÛ AvevwmK GjvKvi cøU bs. 735 (cyivZb), 82/G (bZzb) wØZj feb mn 10 KvVv Rwg µq Kiv nq|

weRq bMi kvLv

weRq bMi kvLvi Rb¨ 2009 mv‡ji 29†k RjvB Zvwi‡L XvKv †Rjvi Aš—©MZ cyivbv cëb (cyivZb), 212, knx` bRi“j Bmjvg miwY (bZzb) Gi 3/3 wm Ges 3/3 wW Gi 15 Zjv wewkó AvKivg ‡m›Uv‡ii wØZxq Zjv µq Kiv nq, hvi AvqZb me©‡gvU 8,328.59 eM©dzU|

AvBwWGjwm †_‡K M„nxZ jf¨vskmvj % jf¨vsk gv‡K©›UvBj e¨vsK KZ„©K M„nxZ jf¨vsk

bM` ÷K2005 37.50% 5,625,000.00 -2006 5.00%, 33.33% we 750,000.00 50,0002007 15%, 25% we 2,250,000.00 37,5002008 15%, 20% we 2,812,500.00 37,5002009 10%, 100% we 2,250,000.00 2,25,0002010 35%, 65% we 15,750,000.00 2,92,500‡gvU 29,437,500.00 642,500

77annual report

www.mblbd.com

cÖMwZ miwY kvLv

3wU Mvox cvwK©s Gi myweav mn (‡eR‡g›U) 9 Zjv wewkó MÖxb Aij¨v‡Ûv (42-4, cÖMwZ miwY, evwiaviv, XvKv) evwYwR¨K fe‡bi wbP Zjv hvi AvqZb 3,891 eM©dzU I mgMÖ wØZxq Zjv hvi AvqZb 4,921 eM©dzU, AÎ e¨vs‡Ki cÖMwZ miwY kvLvi Rb¨ 6B wW‡m¤^i 2009 Bs Zvwi‡L µq Kiv nq|

Lyjbv kvLv

i“cmv cø vRv, 73, †KwWG G¨vwfwbD, evwYwR¨K GjvKv, Lyjbv Gi wbP Zjv, 2q I 3q Zjv hvi AvqZb h_vµ‡g 2,400 eM©dzU, 2,400 eM©dzU I 2,663.42 eM©dzU, AÎ e¨vs‡Ki Lyjbv kvLv I wmwKDwiwU‡Ri Lyjbv kvLvi Rb¨ µq Kiv nq|

¸jkvb kvLv

8wU Mvox cvwK©s myweav mn (‡eR‡g›U) ‡nvmbv †m›Uvi, cøU bs 02, eø K wmBGm (G), 106 ¸jkvb G¨vwfwbD, ¸jkvb, XvKv-1212 Gi cÖ_g †d¬vi (my¨BU bs 103-109) hvi AvqZb 9,275 eM©dzU, AÎ e¨vs‡Ki ¸jkvb kvLvi Rb¨ µq Kiv nq|

wis‡ivW kvLv

3wU Mvox cvwK©s Gi myweav mn (‡eR‡g›U) P‡qR G ‡R †Mv‡ìb UvIqvi, 2/1, wis‡ivW, k¨vgjx, XvKv Gi cÖ_g †d¬vi hvi AvqZb 5,500 eM©dzU, AÎ e¨vs‡Ki wis‡ivW kvLvi Rb¨ µq Kiv nq|

avbgwÛ kvLv

3wU Mvox cvwK©s Gi myweav mn (‡eR‡g›U) mxgv eømg, †nvwìs bs 390 (cyivZb), moK 27 (cyivZb), avbgwÛ, XvKv-1209 Gi cÖ_g †d¬vi hvi AvqZb 7,395 eM©dzU, AÎ e¨vs‡Ki avbgwÛ kvLvi Rb¨ 26.10.2011 Zvwi‡L µq Kiv nq|

Rwg µ‡qi Pjgvb cÖKí

AÎ e¨vs‡Ki ebvbx kvLv eZ©gvb wVKvbv n‡Z `ywU Mvwo cvwK©s myweav mn (†eR‡g›U) cøU bs-44, Kvgvj AvZvZzK© G¨vwfwbD, ebvbx, XvKv-1213 wVKvbv¯’ evwYwR¨K feb ebvbx wWwmwm BDwbK Kg‡cø· G (6,565 eM©dzU) ¯’vbvšÍ‡ii Rb¨ evsjv‡`k e¨vs‡K Kiv AbvcwË Av‡e`b cÖwµqvaxb Av‡Q|

kvLv

e¨vsK 2iv Ryb, 1999 G e¨emvwqK Kvh©µg ïi“ K‡i| e¨vs‡Ki D‡Øvabx w`‡b w`jKzkv evwYwR¨K GjvKvq cÖ_g kvLv †Lvjv nq| 2011 mv‡ji †k‡l 5wU Gm.Gg.B/K…wl kvLvmn e¨vs‡Ki †gvU kvLvi msL¨v `uvwo‡q‡Q 75wU hvi g‡a¨ 53 wU kvLv †`‡ki cÖavb cÖavb evwYR¨ †K‡›`ª Aew¯’Z Ges Aewkó 22wU kvLv cjø x A‡j Aew¯’Z|

cwiPvjbv cl©`

2011 mv‡ji 11B GwcÖj AbywôZ e¨vs‡Ki 12Zg evwl©K mvaviY mfvq-

K) cwiPvjK wnmv‡e `vwqZ¡ cvjb Kivi ci e¨vs‡Ki cwiPvjbv cl©` ‡_‡K D‡`¨v³v cwiPvjK- Rbve †gvt wgRvbyi ingvb †PŠayix Ae¨vnwZ †bb|

L) Rbve Gg. G. Lvb †ejvj cwiPvjK wnmv‡e wbe©vwPZ nb|

M) mvaviY †kqvi‡nvìvi‡`i ga¨ †_‡K Rbve gwZDi ingvb, Gg.wc cwiPvjK wn‡m‡e cybivq wbe©vwPZ nb|

cwiPvjbv cl©` I KwgwU mfv 2011 mv‡j cwiPvjbv cl©‡`i 20 (Kuywo) wU, wbe©vnx KwgwUi 40 (Pwjø k) wU Ges AwWU KwgwUi 13 (†Zi) wU mfv AbywôZ nq|

K‡c©v‡iU I Avw_©K cÖwZ‡e`b

‡h‡nZy Avw_©K cÖwZôvb wn‡m‡e e¨vsK mÂqKvix I wewb‡qvMKvixi g‡a¨ ga¨¯’Zv K‡i _v‡K, ZvB mswkø ó bxwZ wba©viK, mÂqKvix I wewb‡qvMKvixmn e¨vs‡Ki mKj †÷K‡nvìviMY e¨vs‡Ki wbKU GKwU ¯^”Q K‡c©v‡iU I Avw_©K cÖwZ‡e`b cªZ¨vkv K‡i _v‡K| gv‡K©›UvBj e¨vsK wbqš¿bKvix ms¯’v wba©vwiZ MvBWjvBb Abyhvqx K‡c©v‡iU I Avw_©K cÖwZ‡e`b †ck Ki‡Z e× cwiKi| cwiPvjbv cl©‡`i cwiPvjKMY Avw_©K cÖwZ‡e`b cÖYq‡b wbgœwjwLZ welqmg~n cwicvjb K‡i _v‡Kb:

gv‡K©›UvBj e¨vs‡Ki e¨e¯’vcbv KZ…©c¶ KZ…©K cÖ¯‘ZK…Z Avw_©K cÖwZ‡e`‡b ¯^”QZv eRvq †i‡L Gi Kvh©µ‡gi djvdj, A‡_©i cÖevn Ges g~ja‡bi cwieZ©b Dc¯’vcb Kiv;

e¨vs‡Ki wnmve wbKvk h_vh_fv‡e msi¶Y Kiv cÖKvwkZ Avw_©K cÖwZ‡e`b h‡_vchy³fv‡e wnmv‡ei bxwZgvjvi mv‡_ msMwZ †i‡L weP¶YZv I `~i`wk©Zvi mv‡_ Kiv;

evsjv‡`‡k cÖ‡hvR¨ Avš—R©vwZK G¨vKvDw›Us ó¨vÛvW© Abyhvqx Avw_©K cÖwZ‡e`b cÖ¯‘Z Kiv Ges Zb¥‡a¨ †Kvb e¨wZµg n‡j Zv h_vh_fv‡e cÖKvk Kiv;

Avf¨š—ixY wbqš¿Y c×wZ cÖMvpfv‡e wba©viY Kiv Av‡Q, hv h_vh_fv‡e cÖ‡qvM I cwicvjb;

fwel¨r Pjvi c‡_ e¨vs‡Ki `¶Zvi wel‡q †Kvb D‡j L‡hvM¨ mskq †bB|

2009 2010 2011cwiPvjbv cl©` 20 20 20wbe©vnx KwgwU 51 48 40AwWU KwgwU 14 10 13

78 annual report

ewnt wbix¶K Avn‡g` RvwKi GÛ †Kvs, PvU©vW© G¨vKvD›U¨v›U Ges ‡K. Gg. nvmvb GÛ †Kvs, PvU©vW© G¨vKvD›U¨v›U, eZ©gv‡b e¨vs‡Ki ewnt wbix¶K wnmv‡e wb‡qvwRZ Av‡Q| wbix¶v cÖwZôvb, ‡K. Gg. nvmvb GÛ †Kvs, PvU©vW© G¨vKvD›U¨v›U, 1(GK) eQi a‡i e¨vs‡Ki wbix¶K wnmv‡e wb‡qvwRZ Av‡Qb Ges Avn‡g` RvwKi GÛ †Kvs, PvU©vW© G¨vKvD›U¨v›U 3(wZb) eQi a‡i e¨vs‡Ki wbix¶K wnmv‡e wb‡qvwRZ i‡q‡Q| GgZve¯’vq, evsjv‡`k e¨vsK Ges wmwKDwiwUR GÛ G·‡PÄ Kwgk‡bi wb‡`©kbv Abyhvqx Avn‡g` RvwKi GÛ †Kvs, PvU©vW© G¨vKvD›U¨v›U AvMvgx eQi e¨vs‡Ki wbix¶K wnmv‡e `vwqZ¡ cvjb Ki‡Z cvi‡eb bv| m¤§vwbZ †kqvi‡nvìviMY 2wU wbix¶K dvg©‡K wb‡qvM/cybtwb‡qv‡Mi e¨vcv‡i evwl©K mvaviY mfvq wmØvš— MÖnY Ki‡eb|

M‡elYv Ges Dbœqbt fwel¨‡Z wewb‡qvMe¨vs‡Ki Kvh©µ‡gi `¶Zv eûjvs‡k `¶ Ges hy‡Mvc‡hvMx M‡elYv Ges Dbœqb wefv‡Mi Dci wbf©i K‡i| M‡elYvag©x Kvh©Kªg e¨vs‡Ki e¨emvi †¶‡Î m¤¢ve¨ mgm¨v I m¤¢vebv wPwýZ K‡i †mB Av‡jv‡K cÖ‡qvRbxq e¨e¯’v Mªn‡Yi Rb¨ h_vh_ KZ©„c¶‡K civgk© cÖ`vb K‡i _v‡K| AwaKš‘, GB ai‡Yi Kvh©Kª‡gi gva¨‡g e¨vs‡Ki we`¨gvb cY¨ ¸wji mgm¨v wbY©q K‡i Zv wKfv‡e Av‡iv MÖvnK evÜe Kiv hvq †m e¨vcv‡i e¨e¯’v MÖnY Kiv m¤¢e nq| Avi ZvB M‡elYv Kvh©µ‡gi Rb¨ cÖ‡qvRb h_v_© wewb‡qvM Ges eûwea wel‡q cÖwkw¶Z Kg©xevwnbx| M‡elYv I Dbœqb wefv‡Mi cÖ‡qvRbxqZv Abyfe K‡i gv‡K©›UvBj e¨vsK cÖwZôvjMœ †_‡KB M‡elYv I cwiKíbv wefvM cÖwZôv K‡i‡Q Ges G w`‡K cÖ‡qvRbxq ¸i“Z¡ w`‡q Avm‡Q| M‡elYv I cwiKíbv wefvM e¨vs‡Ki e¨emv m¤c©wKZ bvbv wel‡q cwiPvjKMY‡K AewnZ K‡ib, hv Zv‡`i‡K h_vh_ wm×vš— wb‡Z Ges `¶ MÖvnK †mev cÖ`v‡b mnvqZv K‡i| Zb¥‡a¨ D‡j L‡hvM¨ n‡”Q-

e¨vswKs ‡mev msµvš— M‡elYv Ges bZzb cY¨ D™¢veb;

D™¢vweZ ‡mevi evRvi Ges Kvh©KvwiZv ch©v‡jvPbv Ges cÖ‡qvRb Abyhvqx cwieZ©b mvab;

wek¦ Ges Avf¨š—ixY A_©‰bwZK Ae¯’v m¤ú©‡K ch©v‡jvPbv Kiv Ges cwiPvjbv cl©`‡K AewnZKiY;

e¨vs‡K h_vh_fv‡e SuywK wfwËK g~jab e¨e¯’vcbv Ôe¨v‡mj-UzÕ cwiMÖnY wbwðZ Kiv;

RvZxq gy`ªvbxwZ ch©v‡jvPbv;

e¨vs‡Ki ˆÎgvwmK msev` ey‡jwUb ÔBbmvBUÕ cÖKvk Kiv;

kvLvmg~‡ni e¨emvwqK mvdj¨ ch©v‡jvPbv;

mgmvgwqK e¨vsKmg~‡ni e¨emvwqK mvdj¨ ch©v‡jvPbv;

e¨vs‡Ki e¨emvwqK my‡hvM I m¤¢vebvi bZyb w`Mš— D‡b¥vP‡bi j‡¶¨ cÖ‡qvRbvbyhvqx mfv, Av‡jvPbvi Av‡qvRb Kiv|

‡iwgU¨vÝ2011 mv‡j e¨vsK Zvi †iwgU¨vÝ e¨emv m¤cÖmvi‡Yi j‡¶¨ bvbv c`‡¶c MÖnY K‡i‡Q| hy³ivóª, hy³ivR¨, Avie-AvwgivZ, Kz‡qZ, evnvivBb, KvbvWv, BZvwj Ges d«vÝ mn †hme ‡`‡k evsjv‡`kx bvMwi‡Kiv Kv‡R wb‡qvwRZ, †m me ‡`‡k e¨vsK wbqwgZ wewfbœ G·‡PÄ †Kv¤úvbxi mv‡_ ‡iwgU¨vÝ Pzw³ m¤úbœ K‡i P‡j‡Q| ZvQvov †`‡ki cÖZ¨š— A‡ji gvby‡li Kv‡Q we‡`‡k Kg©iZ bvMwiK‡`i KóvwR©Z A_© `ª“Z I wbivc‡` †cuŠQv‡bvi j‡¶¨ e¨vsK evsjv‡`k WvK wefvM I Ab¨vb¨ ¯’vbxq G‡RwÝi mv‡_ GK‡hv‡M KvR K‡i P‡j‡Q| 2011 mv‡j e¨vsK me©‡gvU 7,150.00 wgwjqb UvKvi †iwgU¨vÝ e¨emv cwiPvjbv K‡i‡Q, hv 2010 mv‡j wQj 5,108.10 wgwjqb, cÖe„w×i cwigvY 39.97%|

K‡imc‡Û›U m¤úK©e¨vsK †ek wKQy we‡`kx e¨vs‡Ki mv‡_ K‡imc‡Û›U e¨vswKs m¤úK© ¯’vcb K‡i‡Q| 2011 mv‡ji 31†k wW‡m¤^i ch©š— e¨vsK 67wU †`‡k me©‡gvU 638wU e¨vs‡Ki mv‡_ K‡imc‡Û›U e¨vswKs m¤úK© ¯’vcb K‡i‡Q| Gme e¨vs‡K MÖvnK‡`i myweav‡_© 6wU cÖavb ˆe‡`wkK gy`ªvq 32wU b‡óªv wnmve cwiPvjbv Kiv n‡q _v‡K| e¨vsK wewfbœ we‡`kx e¨vs‡Ki mv‡_ K‡imc‡Û›U m¤ú©K Øviv Zvi MÖvnK‡`i µgea©gvb ˆe‡`wkK evwY‡R¨ mnvqZv cÖ`vb K‡i _v‡K| MÖvnK‡`i DbœZ †mev cÖ`v‡b Avgiv wbijmfv‡e KvR K‡i hvw”Q|

gv‡K©›UvBj G·‡PÄ nvDR (BD‡K) wjwg‡UWevsjv‡`k e¨vsK Ges hy³iv‡R¨i mswkø ó KZ„©c‡¶i cÖ‡qvRbxq AbygwZ cÖvwßi ci, gv‡K©›UvBj e¨vsK B‡Zvg‡a¨B kZ fvM mZ¡vwaKv‡i hy³iv‡R¨i evwg©snv‡g “Mercantile Exchange House (UK) Limited” bv‡g GKwU wbR¯^ Exchange House Pvjy K‡i‡Q, hv 06 wW‡m¤^i, 2011 n‡Z Kvh©µg ïi“ K‡i‡Q| kxNÖB hy³iv‡R¨i jÛ‡b Gi wØZxq kvLvi Kvh©µg ïi“ n‡e| AwZ Aí mg‡qi gv‡SB “Mercantile Exchange House (UK) Limited” `¶ MÖvnK †mevi gva¨‡g hy³iv‡R¨i cÖevmx evsjv‡`kx‡`i gv‡S mvov †dj‡Z m¶g n‡q‡Q| Avgiv wek¦vm Kwi, “Mercantile Exchange House (UK) Limited” gv‡K©›UvBj e¨vs‡Ki †iwgU¨vÝ e¨emvq bZzb w`M‡š—i m~Pbv K‡i‡Q|

Ad‡kvi e¨vswKs2011 mv‡j gv‡K©›UvBj e¨vsK evsjv‡`‡k emevmiZ we‡`kx bvMwiK‡`i cÖ‡qvRbxq e¨vswKs †mev cÖ`v‡bi j‡¶¨ Zvi ¸jkvb Ges PÆMÖvg Bwc‡RW kvLvi gva¨‡g Ad‡kvi e¨vswKs Kvh©µg ïi“ K‡i‡Q| Gi gva¨‡g e¨vsK bvbvgyLx Avš—©RvwZK e¨vswKs evwYR¨ cwiPvjbv Ki‡Z m¶g n‡e|

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Z_¨ cÖhyw³cwiewZ©Z we‡k¦i mv‡_ Zvj wgwj‡q e¨vs‡Ki MÖvnK‡`i me©vaywbK e¨vswKs †mev cÖ`v‡bi j‡¶¨ e¨vsK G Lv‡Z wbqwgZ wewb‡qvM K‡i hv‡”Q| e¨vswKs †mevi AvaywbKvq‡b cÖhyw³i f~wgKv Ab¯^xKvh©| e¨q I SuywK Kgv‡Z Ges DbœZ †mev mn mvwe©K `¶Zv e„w× Ges gybvdv m‡e©v”PKi‡Yi Rb¨ kvLvmg~‡ni e¨vswKs Kvh©µg‡K Kw¤úDUvivBR&W Kiv n‡q‡Q| MÖvnK‡`i DbœZ †mev w`‡Z e¨vsK GmGgGm e¨vswKs †mev Pvjy K‡i‡Q| ZvQvov, MÖvnK‡`i cÖK„Z AbjvBb e¨vswKs myweav cÖ`v‡bi Rb¨ e¨vsK †Kvi e¨vswKs mjy¨kb mdUIq¨vi ‘TEMENOS T24’ Pvjy Kivi e¨vcv‡i hveZxq e¨e¯’v MªnY K‡i‡Q, hv e¨vs‡Ki †mev cÖ`vb m¶gZv e„w× I `ª“Z Ki‡e| Avgiv ‘Green Banking’Kg©m~Pxi Ask wn‡m‡e ‘Paperless Banking’ Kvh©µg ïi“ K‡iwQ, hv e¨vs‡Ki m¤ú‡`i myô e¨envi wbwðZ Kivi cvkvcvwk e¨q ms‡KvP‡bI f~wgKv ivL‡e|

e¨vs‡Ki Avw_©K cÖKímg~ne¨vsK ïi“ †_‡KB †ekwKQy AvKl©Yxq Avw_©K cÖKí Pvjy K‡i‡Q| Zvig‡a¨ gvwmK mÂq cÖKí, d¨vwgwj †gBb‡U‡bÝ mÂq cÖKí, wظY e„w× AvgvbZ cÖKí, we‡kl mÂq cÖKí, ‰ÎgvwmK gybvdv AvgvbZ cÖKí, †`oMyY e„w× AvgvbZ cÖKí, AwMÖg cÖe„w× AvgvbZ cÖKí, KbRygvi †µwWU ¯‹xg, Ges jxR dvBb¨vÝ ¯‹xg, IfvimxR Ggcø q‡g›U †jvb ¯‹xg, Kvi †jvb ¯‹xg, †nvg †jvb ¯‹xg I GmGgB †jvb RbM‡Yi gv‡S e¨vcK mvov RvwM‡q‡Q|

mÂq cÖKígvwmK mÂq cÖKígvwmK mÂq cÖKí, wewfbœ m¤cÖ`v‡qi gvby‡li gv‡S GKwU RbwcÖq mÂq cY¨ hvi cÖavb D‡Ïk¨ n‡”Q ¶z`ª mÂqx‡`i gv‡S m‡qi Af¨vm M‡o †Zvjvi gva¨‡g †`‡ki A_©bxwZ‡Z ch©vß g~jab M‡o †Zvjv| GB cÖK‡íi Aax‡b GKRb e¨w³ cÖwZgv‡m GKwU wbw`©ó cwigvb A_© Rgv K‡i wZb, cuvP, AvU A_ev `k eQi ci AvKl©Yxq cwigvY A_© †c‡Z cv‡ib| †gqv` c~wZ©i ci Rgv`vbKvix gybvdvmn Avmj UvKv D‡Ëvjb Ki‡Z cvi‡eb| cÖK‡íi gvwmK wKw¯—i A_© cÖwZ gv‡mi cÖ_g 10 w`‡bi g‡a¨ Rgv w`‡Z n‡e| AcviMZvq gvwmK wKw¯—i 5% wej¤^ wd wnmv‡e gvwmK wKw¯—i mv‡_ Rgv w`‡Z n‡e| †gqv` c~wZ©i c~‡e©B GB cÖKí fv½v‡bvi †¶‡Î MÖvnK mÂqx nv‡i my` jvf Ki‡eb| Dchy³ †¶‡Î MÖvnK Zvi RgvK…Z A‡_©i 80 % ch©š— FY myweav jvf Ki‡Z cvi‡eb| 2011 mv‡ji ‡k‡l GB cÖK‡íi Aax‡b e¨vs‡Ki RgvK„Z A‡_©i cwigvY wQj 20,960.47 wgwjqb UvKv, 2010 Gi †k‡l hv wQj 17,529.95 wgwjqb UvKv|

gvwmK gybvdv AvgvbZ cÖKígvwmK gybvdv AvgvbZ cÖK‡íi Aax‡b cuvP eQ‡ii Rb¨ GKwU wbw`©ó cwigvY A_© Rgv †i‡L Rgv`vbKvix gvwmK wfwˇZ RgvK…Z A‡_©i wbw`©ó Abycv‡Z gybvdv Zz‡j wb‡Z cvi‡eb| G cÖK‡íi Aax‡b wnmve †Lvjvi wVK cÖ_g gvm †_‡KB gybvdv cÖ`vb ïi“ nq Ges gybvdv cuvP eQi mgq ch©š— cÖ`vb Kiv nq| ‡gqv` c~wZ©‡Z MÖvnK‡K Zvi g~j UvKv †diZ ‡`Iqv nq| GB cÖK‡íi D‡Ïk¨ n‡”Q: AemicÖvß bvMwiK‡`i‡K Zv‡`i AemiKvjxb cÖvß †cbkb wewb‡qv‡M mnvqZv Kiv, cÖevmx evsjv‡`kx‡`i R‡b¨ wewb‡qvM myweav m„wó Kiv BZ¨vw`| GB cÖK‡íi AvIZvq me©wbgœ 50,000.00 ev Gi ¸wYZK nv‡i 5 eQ‡ii R‡b¨ UvKv Rgv ivL‡Z nq| ÔgvwmK gybvdv AvgvbZ cÖKíÕ, Òd¨vwgwj †gBb‡Ub¨vÝ AvgvbZ cÖKíÓ wnmv‡eI cwiwPZ | 2011 mv‡ji ‡k‡l GB cÖK‡íi AvIZvq e¨vs‡Ki RgvK„Z A‡_©i cwigvY wQj 2,383.63 wgwjqb UvKv|

wظY e„w× AvgvbZ cÖKíGB cÖK‡íi cÖavb AvK©lY n‡jv, wewb‡qvMK…Z UvKv Qq eQ‡i wظY nq| GB cÖK‡íi AvIZvq me©wbgœ 10,000.00 ev Gi ¸wYZK nv‡i UvKv Rgv ivL‡Z nq| †gqv` c~wZ©i c~‡e© fv½v‡bvi †¶‡Î MÖvnK mÂqx nv‡i my` jvf Ki‡eb| MÖvnK Zvi RgvK…Z A‡_©i 80 kZvsk ch©š— FY myweav jvf Ki‡Z cvi‡eb, Z‡e G‡¶‡Î g~j UvKv b~¨bZg 20,000.00 n‡Z n‡e | 2011 mv‡ji ‡k‡l GB cÖK‡íi AvIZvq e¨vs‡Ki RgvK„Z A‡_©i cwigvY wQj 10,750.11 wgwjqb UvKv|

‰ÎgvwmK gybvdv AvgvbZ cÖKíG cÖK‡íi Aax‡b me©wbgœ 50,000.00 ev Gi ¸wYZK nv‡i UvKv wZb eQ‡ii Rb¨ Rgv ivLv nq| Rgv`vbKvix wZb gvm Aš—i Aš—i

80 annual report

gybvdv Zyj‡Z cv‡i| GB cÖK‡íi AvIZvq wnmve †Lvjvi cÖ_g wZb gvm ci †_‡KB gybvdv cÖ`vb ïi“ nq| ‡gqv` †k‡l g~j UvKv †diZ †`Iqv nq| GB cÖK‡í wewb‡qv‡Mi †¶‡Î MÖvnK‡K GKwU mÂqx wnmve Lyj‡Z nq| MÖvnK Zvi RgvK…Z A‡_©i 80 kZvsk ch©š— FY myweav jvf Ki‡Z cvi‡eb Ges G mgqUyKz‡Z Mªvn‡Ki ˆÎgvwmK gybvdv Zvi FY wnmv‡e Rgv n‡e| 2011 eQ‡ii ‡k‡l GB Lv‡Z e¨vs‡Ki RgvK„Z A‡_©i cwigvY `vwo‡q‡Q 153.90 wgwjqb UvKv|

‡`o¸Y e„w× AvgvbZ cÖKíGB cÖK‡íi Aax‡b me©wbgœ 50,000.00 ev Gi ¸wYZK nv‡i UvKv 4.25 eQ‡ii R‡b¨ Rgv ivLv nq| 4.25 eQi ci A_¨©vr †gqv` c~wZ©‡Z MÖvnK‡K Zvi wewb‡qvMK…Z UvKvi †`o¸Y cwigvY A_© cÖ`vb Kiv nq| †gqv` c~wZ©i c~‡e© fv½v‡bvi †¶‡Î MÖvnK mÂqx nv‡i my` jvf Ki‡eb| Z‡e, GK eQ‡ii c~‡e© fv½v‡bvi †¶‡Î MÖvnK †Kvb my` AR©b Ki‡eb bv| MÖvnK Zvi RgvK…Z A‡_©i 80 kZvsk ch©š— FY myweav jvf Ki‡Z cvi‡eb| 2011 eQ‡ii ‡k‡l GB Lv‡Z e¨vs‡Ki RgvK„Z A‡_©i cwigvY 249.30 wgwjqb UvKvq `uvwo‡q‡Q|

AwMÖg cÖe„w× AvgvbZ cÖKíAwMÖg cÖe„w× AvgvbZ cÖK‡íi Aax‡b AvgvbZKvix `yB eQ‡ii Rb¨ GKwU wbw`©ó cwigvb UvKv Rgv ivL‡Z cvi‡eb| G †¶‡Î RvgvbZKvix evrmwiK gybvdv jvf K‡i _v‡K| GB cÖK‡íi AvIZvq RvgvbZKvix cÖ_g eQ‡ii gybvdv wnmve †Lvjvi cÖ_g w`‡bB Zyj‡Z cv‡i| †gqv` †k‡l g~j UvKvi mv‡_ wØZxq eQ‡ii gybvdv cÖ`vb Kiv nq| MÖvnK Zvi RgvK…Z A‡_©i 70 kZvsk ch©š— FY myweav jvf Ki‡Z cvi‡eb| G cÖKíwU ÓAwMÖg gybvdv AvgvbZ cÖKíÓ bv‡gI cwiwPZ|

we‡kl mÂq cÖKíe¨vs‡Ki Avgvb‡Zi wfwË Av‡iv gReyZ Ki‡Z Ges †mB mv‡_ wewfbœ †kªYxi Rbmvavi‡Yi Pvwn`v c~i‡bi j‡¶¨ 2011 mv‡j gv‡K©›UvBj e¨vsK bZyb mÂq cY¨ D™¢veb K‡i, hv Òwe‡kl mÂq cÖKíÓ bv‡g cwiwPZ| Ò¯^cœ bq, ev¯—e..... 10 eQ‡i RgvK…Z UvKv wZb¸‡bi †ewkÓ GB ‡køvMv‡b gv‡K©›UvBj e¨vsK we‡kl mÂq cÖKí w`‡”Q MÖvnK‡`i KóvwR©Z UvKvi Dci AvKl©Yxq I wbwðZ D”P gybvdv| b~¨bZg 50,000 UvKv ev Gi ¸wbZK nv‡i RgvK…Z UvKv 10 eQ‡i wZb¸‡Yi ‡ewk nq| GgbwK †gqv`c~wZ©i Av‡M fv½v‡bvi †¶‡ÎI mÂqx I GmGbwW wnmv‡ei †_‡K AwaK nv‡i gybvdv cÖ`vb Kiv nq| 2011 eQ‡ii ‡k‡l GB Lv‡Z e¨vs‡Ki RgvK„Z A‡_©i cwigvY 580.90 wgwjqb UvKvq `uvwo‡q‡Q|

FY cÖKíKbRygvi †µwWU ¯‹xgRvgvbZgy³ A_©vq‡bi †¶‡Î KbRygvi †µwWU ¯‹xg e¨vs‡Ki GKwU AvKl©Yxq cÖKí| mxwgZ Av‡qi †jvKRb GB FY MÖnY K‡i M„nmvgMÖx †hgb: Kw¤úDUvi Ges Ab¨vb¨ AvmevecÎ µq Ki‡Z cv‡ib| 2011 mv‡ji ‡k‡l GB Lv‡Z e¨vs‡Ki cÖ`vbK„Z A‡_©i cwigvY wQj 34.71 wgwjqb UvKv|

jxR dvBb¨vÝ wkí D‡`¨v³v‡`i g~jab, hš¿cvwZ, wPwKrmv miÄvg, Kw¤úDUvi Ges Ab¨vb¨ mvgMÖx msMÖ‡n mn‡hvwMZv I Drmvn w`‡Z GB cÖKíwU cÖYqb Kiv n‡q‡Q| GB cÖK‡íi kZ©vejx mnRZi Kiv n‡q‡Q, hv‡Z m¤¢vebvgq wk‡íi D‡`¨v³viv Drcv`‡bi Rb¨ cÖ‡qvRbxq hš¿cvwZ msMÖn Ki‡Z cv‡i Ges ÔAvq †_‡K `vq †kvaÕ GB bxwZi wfwˇZ µgvš^‡q M„nxZ FY cwi‡kva Ki‡Z cv‡i| 2011 mv‡ji ‡k‡l GB Lv‡Z e¨vs‡Ki cÖ`vbK„Z F‡bi cwigvY wQj 763.30 wgwjqb UvKv|

¶z`ª I gvSvwi wkí A_©vqb cÖKíe¨vsK bZyb I AwfÁ wkí D‡`¨v³v‡`i mnvqZvi Rb¨ ¶z`ª I gvSvwi wkí A_©vqb cÖKí cÖYqb K‡i‡Q| G cÖK‡íi gva¨‡g evsjv‡`k e¨vs‡Ki cybt A_©vqb myweavi AvIZvq bexb I AwfÁ D‡`¨v³v‡`i mnR k‡Z© Zzjbvg~jKfv‡e Kg my‡` FY cÖ`vb Kiv nq| 2011 mv‡ji ‡k‡l GB Lv‡Z e¨vs‡Ki cÖ`vbK…Z F‡Yi cwigvY wQj 3,833.56 wgwjqb UvKv|

cv‡m©vbvj †jvb ¯‹xg wbgœ I ga¨weË gvby‡li †h †Kvb cÖ‡qvR‡b F‡Yi Pvwn`vi K_v we‡ePbv K‡i cv‡m©vbvj †jvb ¯‹xg Pvjy Kiv n‡q‡Q| miKvix I Avav-miKvix Kg©KZ©v, ¯^vqËkvwmZ cÖwZôvb, e¨vsK I Avw_©K cÖwZôvb, eûRvwZK †Kv¤úvbxi Kg©KZ©vMY Ges ¯^bvgab¨ miKvix ev †emiKvix K‡jR I wek¦we`¨vj‡qi wk¶K/wkw¶KvMY‡K GB ¯‹x‡gi AvIZvq FY cÖ`vb Kiv nq| 2011 mv‡ji ‡k‡l GB cÖK‡íi AvIZvq e¨vs‡Ki cÖ`vbK„Z F‡bi cwigvY wQj 436.64 wgwjqb UvKv|

Kvi †jvb ¯‹xgga¨weË gvby‡li Mvox µ‡qi AvKv•¶vi K_v we‡ePbvq †i‡L Kvi †jvb ¯‹xg Pvjy Kiv n‡q‡Q| miKvix I Avav-miKvix Kg©KZ©v, e¨vsK I Avw_©K cÖwZôv‡bi Kg©KZ©v, eûRvwZK †Kv¤úvbx‡Z PvKzixiZ e¨w³, miKvix I †emiKvix wek¦we`¨vj‡qi Kg©iZ wk¶K/wkw¶KvMY Ges e¨emvqx‡`i-†K GB ¯‹x‡gi Aax‡b FY cÖ`vb Kiv nq|

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cwiPvjb gybvdv(wgwjqb UvKv)

weeiY cwigvYmy` Avq 107,19.69ev`t my` e¨q 8,022.13bxU my` Avq 2,697.56‡hvMt my` ewnf©yZ Avq 3,404.69‡gvU cwiPvjb Avq 6,102.25ev`t my` ewnf©yZ e¨q 2,600.57cwiPvjb gybvdv 3,501.67

IfviwmR Ggcø q‡g›U †jvbIfviwmR Ggcø q‡g›U †jvb ¯‹x‡gi AvIZvq we‡`‡k Kv‡Ri D‡Ï‡k¨ hvIqvi e¨q wbe©vn Kivi Rb¨ †h †Kvb evsjv‡`kx bvMwiK GB FY myweav MÖnY Ki‡Z cvi‡eb| GB cÖK‡íi cÖavb D‡Ïk¨ n‡”Q wewfbœ †`‡k Rbkw³ ißvwb‡K DrmvwnZ Kiv Ges GB Lv‡Zi cÖe„w× AR©‡b miKvwi cÖ‡Póv‡K mn‡hvwMZv Kiv| GB cÖKí ïay ga¨ I wbgœ-ga¨e„Ë †kªYxi †jvK‡`i we‡`k hvIqvi Rb¨ MÖvg¨ gnvR‡bi Kv‡Q Pov my‡` Rwg/evwo eÜK ev wewµ K‡i we‡`k hvIqv‡KB †iva Ki‡e bv Dciš‘, †`‡ki ˆe‡`wkK gy`ªv cÖevn‡K e„w× Ki‡e, ¶z`ª FY `vwi`ªZv `~ixKi‡Y I Rxeb hvÎvi gvb Dbœq‡b mnvqZv Ki‡e Ges Av_©-mvgvwRK Dbœq‡b ¸i“Z¡c~Y© Ae`vb ivL‡e|

M„n FY cÖKíga¨g Ges wbgœ ga¨g Av‡qi gvby‡li µgea©gvb evm¯’v‡bi Pvwn`v c~i‡Yi Rb¨ evsjv‡`k e¨vs‡Ki †nvg †jvb widvBb¨vÝ ¯‹x‡gi AvIZvq gv‡K©›UvBj e¨vsK M„n FY cÖKí Pvjy K‡i‡Q| GB cÖKí nvDwRs †m±‡ii AMÖMwZ‡Z Z¡ivwš^Z Ki‡e| wbR¯^ emev‡mi Rb¨ bZzb GcvU©‡g›U µq ev wbg©v‡Yi Rb¨ GB FY myweav cvIqv hv‡e|

Avw_©K weeiYx

cwiPvjb gybvdv

31†k wW‡m¤^i, 2011 †k‡l e¨vs‡Ki cwiPvjb gybvdvi cwigvb `vuwo‡q‡Q 3,501.67 wgwjqb UvKv, hv 2010 mv‡j wQj 2,847.12 wgwjqb UvKv| 2011 mv‡j e¨vs‡Ki bxU my` Av‡qi cwigvY wQj 1,710.55 wgwjqb UvKv, hv 2010 G wQj 1,661.90 wgwjqb UvKv|

‡gvU Avq(wgwjqb UvKv)

weeiY cwigvY %my` Avq 10,719.69 75.89%G·‡PÄ ‡MBb 695.00 4.92%Kwgkb 744.02 5.27%Ab¨vb¨ 1,965.67 13.92%†gvU 14,124.38 100.00%

‡gvU Avq2011 mv‡j e¨vs‡Ki †gvU Avq wQj 14,124.38 wgwjqb UvKv, hv 2010 mv‡j wQj 9,951.81 wgwjqb UvKv| †gvU Av‡qi 75.89% my`, 4.92% G·‡PÄ †MBb, 5.27% Kwgkb Ges 13.92% Ab¨vb¨, hv 2010 mv‡j wQj h_vµ‡g 77.07%, 5.75%, 6.32% Ges 10.86%|

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my` Avq

2010 mv‡j e¨vsK 7,669.42 wgwjqb UvKv my` Avq AR©b K‡iwQj, hv 2011 mv‡j e„w× †c‡q 10,719.69 wgwjqb UvKvq `uvwo‡q‡Q| †gvU my` Av‡qi g‡a¨ FY Ges AwMÖ‡gi Dci my` 90.12%, ‡UªRvix wej I e‡Ûi Dci my` 9.21% Ges Ab¨vb¨ e¨vs‡K iw¶Z Avgvb‡Zi Dci my` 0.67%|

my` Avq(wgwjqb UvKv)

weeiY cwigvY %FY Ges AwMÖ‡gi Dci my` 9,660.50 90.12%‡UªRvix wej I e‡Ûi Dci my` 987.01 9.21%Ab¨vb¨ my` Avq 72.18 0.67%‡gvU 10,719.69 100.00%

my` e¨q

2011 mv‡j e¨vs‡Ki my` e¨q 2010 Gi 5,176.00 wgwjqb UvKv n‡Z †e‡o 8,022.13 wgwjqb UvKvq `uvwo‡q‡Q|

my‡`i bxU gvwR©b e¨vs‡Ki my‡`i bxU gvwR©b hv bxU my` Avq Ges †gvU DcvR©b¶g m¤ú‡`i m¤ú©K n‡Z wbYx©Z nq, 2011 mv‡j wQj 2.93% |

my` e¨q(wgwjqb UvKv)

weeiY cwigvY %Avgvb‡Zi Dci my` 7,992.01 99.62%evsjv‡`k e¨vsK cybtA_©vqb cÖK‡íi my` 29.92 0.37%Ab¨vb¨ my` 0.20 0.00%‡gvU 8,022.13 100.00%

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bxU my` Avq2011 mv‡j e¨vs‡Ki bxU my` Avq 2010 mv‡ji 2,493.42 wgwjqb UvKv †_‡K e„w× †c‡q 2,697.56 wgwjqb UvKvq `uvwo‡q‡Q| 2011 mv‡j my` †_‡K e¨vs‡Ki †gvU Avq n‡q‡Q 10,719.69 wgwjqb UvKv Ges my` eve` e¨q n‡q‡Q 8,022.13 wgwjqb UvKv|

my` ewnf~©Z Avq my` ewnf~©Z Avq 2010 mv‡ji 2,282.39 wgwjqb UvKv †_‡K e„w× ‡c‡q 2011 mv‡j 3,404.69 wgwjqb UvKv n‡q‡Q| †gvU my` ewnf~©Z Av‡qi 20.41% G·‡PÄ †MBb, 21.84% Kwgkb, †kqvi wewb‡qvM †_‡K 20.10%, Ges Ab¨vb¨ my` ewn©f~Z Avq 37.64% hv, 2010 mv‡j h_vµ‡g 25.05%, 27.57%, 3.86% Ges 43.52% wQj|

my` ewn©f~Z Avq (wgwjqb UvKv)

weeiY cwigvY %G·‡PÄ †MBb 695.00 20.41%Kwgkb 744.02 21.84%wewb‡qvM †_‡K Avq 684.29 20.10%Ab¨vb¨ 1,281.39 37.64%‡gvU 3,404.69 100.00%

‡gvU e¨q

2011 mv‡j e¨vs‡Ki †gvU e¨q 10,622.70 wgwjqb UvKv, hv 2010 mv‡j wQj 7,104.69 wgwjqb UvKv | †gvU e¨‡qi g‡a¨ 75.52% my`, 12.16% †eZb I fvZv, 2.65% fvov, †iU, Ki BZ¨vw`, 1.53% AePq I †givgZ, 1.17% †ókbvwi, gy`ªY I weÁvcb,

0.58% WvK, ÷¨v¤ú I †Uwj‡hvMv‡hvM Ges Ab¨vb¨ e¨q 6.39% hv 2010 mv‡j h_vµ‡g 72.85%, 13.13%, 3.24%, 1.69%, 1.64%, 0.71% I 6.74% wQj|

‡gvU e¨q(wgwjqb UvKv)

weeiY cwigvY %my` e¨q 8,022.13 75.52%†eZb I fvZv 1,292.01 12.16%fvov, †iU I Ki 281.87 2.65%AePq I †givgZ 162.32 1.53%†ókbvwi, gy`ªY I weÁvcb 124.06 1.17%WvK, ÷¨v¤ú, I †Uwj‡hvMv‡hvM 61.82 0.58%Ab¨vb¨ e¨q 678.48 6.39%†gvU 10,622.70 100.00%

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my` ewnf©~Z e¨q2011 mv‡j e¨vs‡Ki my` ewnf~©Z e¨q wQj 2,600.57 wgwjqb UvKv, hv 2010 mv‡j wQj 1,928.69 wgwjqb UvKv | †gvU my` ewnf~©Z e¨‡qi 49.68% †eZb I fvZv msµvš—, 10.84% fvov, †iU, Ki BZ¨vw`, 6.24% AePq I †givgZ, 4.77% †ókbvix, gy`ªY

I weÁvcb, 2.38% WvK, ÷¨v¤ú I †Uwj‡hvM‡hvM Ges Ab¨vb¨ 26.09% hv 2010 mv‡j h_vµ‡g 48.37%, 11.93%, 6.24%, 6.05%, 2.60% I 24.81% wQj|

my` ewnf~©Z e¨q (wgwjqb UvKv)

weeiY cwigvY %‡eZb I fvZv 1,292.01 49.68%fvov, ‡iU I Ki 281.87 10.84%AePq I †givgZ 162.32 6.24%†ókbvix, gy`ªY I weÁvcb 124.06 4.77%WvK, ÷¨v¤ú I †Uwj‡hvMv‡hvM 61.82 2.38%Ab¨vb¨ 678.48 26.09%‡gvU 2,600.57 100.00%

Ki c~e© bxU gybvdv

me©cÖKvi ms¯’vb ivLvi ci 2011 mv‡j Ki c~e© bxU gybvdvi cwigvb `uvovq 3,004.17 wgwjqb UvKv, hv 2010 mv‡j wQj 2,435.93 wgwjqb UvKv| Ki c~e© bxU gybvdvi †¶‡Î 2010 mv‡ji Zyjbvq 2011 mv‡j 23.33% cÖe„w× AwR©Z n‡q‡Q|

K‡ii Rb¨ cÖwfkb

2011 mv‡j Ki eve` ms¯’vb ivLv nq 1,250.00 wgwjqb UvKv, hv 2010 mv‡j wQj 1,010.59 wgwjqb UvKv| A_©©vr, G‡¶‡Î 2010 mv‡ji Zzjbvq 2011 mv‡j 23.76% †ewk Ki eve` ms¯’vb ivLv nq|

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Ki cieZx© gybvdv 2011 mv‡j e¨vsK 1,734.17 wgwjqb UvKv Ki cieZx© gybvdv AR©b K‡i‡Q, hv 2010 mv‡j wQj 1,425.34 wgwjqb UvKv|

Ki cieZx© gybvdv(wgwjqb UvKv)

my` Avq 10,719.69my` e¨q 8,022.13bxU my` Avq 2,697.56my` ewnf~©Z Avq 3,404.69my` ewnf~©Z e¨q 2,600.57bxU my` ewnf~©Z Avq 804.12Kic~e© gybvdv 3,501.67ms¯’vbA‡kªYxweb¨vwmZ F‡Yi wecix‡Z ms¯’vb 143.00 †kªYx web¨vwmZ F‡Yi wecix‡Z ms¯’vb 315.20 DØ„Ë cÎ ewnf©yZ AvB‡U‡gi wecix‡Z ms¯’vb 39.30 Ki c~e© gybvdv 3,004.17Ki eve` ms¯’vb (wejw¤^Z Ki mn) 1,270.00Ki cieZx© gybvdv 1,734.17

jf¨vsk

e¨vs‡Ki cwiPvjbv cl©` 2011 mv‡ji Rb¨ 23% †evbvm †kqvi jf¨vsk mycvwik K‡i‡Q| e¨vsK 2010 mv‡j 22% †evbvm †kqvi cÖ`vb K‡iwQj|

‡kqvi cÖwZ Avq÷K GKª‡PÄ G Aš—f©y³ nIqvi ci †_‡K GLb ch©š— e¨vsK †kqvi cÖwZ abvZ¥K Avq AR©b K‡i Avm‡Q| AewnZ g~j¨ cwieZ©‡bi ci e¨vs‡Ki †kqvi cÖwZ Avq 31 †k wW‡m¤^i, 2011 ‡k‡l wQj 3.49 UvKv|

cwiPvjbv `¶Zv AbycvZ2011 mv‡j cwiPvjbv `¶Zv AbycvZ `uvwo‡q‡Q 75.21%, hv 2010 mv‡j wQj 71.39%| GB AbycvZ e¨vsK KZUv `¶Zvi mv‡_ KvR m¤úbœ K‡i‡Q Zv wb‡`©k K‡i|

cwiPvjbv `¶Zv AbycvZ 2010 2011

‡gvU e¨q 7,104.69 10,622.70‡gvU Avq 9,951.81 14,124.38cwiPvjbv `¶Zv AbycvZ 71.39 % 75.21 %

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2012 Gi Kvh©µgwek¦Ry‡o Pjgvb A_©‰bwZK g›`v Ges g›`v KvwU‡q A_©‰bwZK cybi“×v‡i Avkvbyi“c MwZi mÂvi bv nIqvq cy‡iv 2011 mvjB wQj e¨vswKs e¨emvi Rb¨ GKwU ksKvi eQi| 2012 mvj GB Lv‡Zi Rb¨ mwVK SuywK e¨e¯’vcbv bxwZ Ges weP¶Y c`‡¶c MÖn‡Yi eQi| ZvB e¨vsK eive‡ii g‡ZvB mvgvwRK Ges cwi‡ekMZ †UKmB cÖhyw³‡Z e¨emvwqK Kg©KvÛ cwiPvjbvi gva¨‡g Zvi my`„p Ae¯’vb AviI mym-snZ Kivi cªqvm Pvwj‡q hv‡e| 2012 mv‡ji g‡a¨ Avgv‡`i ‡Kvi e¨vswKs mjy¨kb, ‘TEMENOS T24’ cy‡ivcywi fv‡e Kvh©µg ïi“ Kivi e¨vcv‡i Avgiv Avkvev`x| Z_vwc, evsjv‡`k e¨vsK KZ…©K M„nxZ ms‡KvPbg~jK gy`ªvbxwZi Kvi‡Y wewb‡qvM myweav mxwgZ n‡q covi AvksKv i‡q‡Q, hv e¨vsK ¸‡jvi gv‡S cÖwZ‡hvwMZv ZxeªZi Ki‡e| GKB mv‡_ weivRgvb Zvij¨ msKU Ges miKvi KZ„©K e¨vsKmn wewfbœ LvZ n‡Z AwaK gvÎvq FY MÖn‡Yi Kvi‡Y GB msKU Av‡iv NYxf~Z nevi AvksKv i‡q‡Q| Avgv‡`i j¶¨ n‡”Q e¨vs‡Ki wewfbœ AvKl©Yxq mÂq cÖK‡íi gva¨‡g ¶z`ª I gvSvwi mÂqKvix‡`i RgvK…Z ¶z`ª, ¶z`ª mÂq msMÖn Kiv Ges ax‡i ax‡i ‘Priority Banking’ Gi w`‡K GwM‡q hvIqv| Avgiv wek¦vm Kwi, Avgv‡`i `¶ MÖvnK‡mevi Øviv MÖvnK‡`i m‡ev©”P mš—ywó wbwð‡Zi gva¨‡g Avgiv G‡¶‡Î mvdj¨ AR©‡b m¶g n‡ev|

‡h‡nZz my‡`i D”P nvi AvMvgx w`b¸‡jv‡Z eo SuywK n‡q †`Lv w`‡Z cv‡i, ZvB e¨vsK ‘No Cost‘ Ges ‘Low Cost’ AvgvbZ msMÖ‡n m‡e©v”P ¸i“Z¡ Av‡ivc K‡i‡Q Ges MÖvnK‡`i m‡ev©”P mš—ywó wb-wðZ K‡i we`¨gvb MÖvnK‡`i a‡i ivLv Ges m¤¢ve¨ bZyb MÖvnK m„wó Ki‡Z e× cwiKi| e¨vsK Zvi Kvh©µg ïi“i ci Aí mg‡qi gv‡SB ˆe‡`wkK gy`ªv e¨emvq mvdj¨ AR©b K‡i‡Q Ges GB aviv eRvq ivL‡Z memgqB Avš—©RvwZK evwYR¨ Ges cÖevmx Avq msMÖ‡n †Rvi ZrciZv Pvwj‡q _v‡K|

Basel-II Capital Accord mwVKfv‡e cwicvjb Kivi j‡¶ Avgiv evsjv‡`k e¨vs‡Ki wb‡`©kbv Abyhvqx Avgv‡`i Capi-tal Base ‡K Av‡iv kw³kvjx Kivi cÖ‡qvRbxq c`‡¶c MÖnY K‡iwQ| FY cÖ`v‡bi †¶‡Î Credit Rating Gi Dci me©v‡c¶v ¸i“Z¡v‡ivc Kiv n‡q‡Q| e¨vs‡Ki Av‡qi aviv eRvq ivL‡Z Ges †kqvi‡nvìvi‡`i f¨vjy e„w×i Rb¨ my` ewn©f~Z Avq e„w× Kivi Dci h_vh_ ¸i“Z¡ cÖ`vb Kiv n‡q‡Q| Avgv‡`i weP¶Y cwiPvjbv †KŠkj Ges `¶ Kg©xevwnbxi mnvqZvq e¨vsK Zvi m¤ú` e„w× Ges cÖe„w×i aviv eRvq ivL‡Z m¶g n‡e e‡j Avgiv `„pfv‡e wek¦vmx|

K…ZÁZv gv‡K©›UvBj e¨vsK Kvh©µ‡gi ïi“ †_‡KB MÖvnK‡`i gv‡S `„p Av¯’v AR©‡b m¶g n‡q‡Q| e¨vs‡Ki Kg©xevwnbxi mw¤§wjZ cÖ‡Pôv, `ª“Z Ges mg‡qvc‡hvMx wm×vš— MÖnY, Avš—wiK †mev cÖ`vb, m¤ú‡`i Dchy³ e¨envi Ges bZzb bZzb cÖKí D™¢veb BZ¨vw` e¨vcvi¸‡jv e¨vs‡Ki mvd‡j¨i †cQ‡b KvR K‡i‡Q| cwiPvjbv cl©‡`i cÖvÁ cwiPvjbv Ges e¨vs‡Ki Kg©KZ©v-Kg©Pvix‡`i wbijm cÖ‡Póvi d‡j e¨vsK B‡Zvg‡a¨ D‡j L‡hvM¨ AMÖMwZ AR©b K‡i‡Q| e¨vs‡Ki cwiPvjbv cl©` Avš—wiK K…ZÁZv cÖKvk Ki‡Q evsjv‡`k miKvi, evsjv‡`k e¨vsK, wmwKDwiwUR GÛ GKª‡PÄ Kwgkb, XvKv ÷K GKª‡PÄ, PÆMÖvg ÷K GKª‡PÄ I †iwR÷vi Ae R‡q›U ÷K †Kv¤úvwbR G¨vÛ dvg©m Gi cÖwZ, Zv‡`i mwVK I mg‡qvc‡hvMx wb‡`©kbv Ges civgk© cÖ`vb K‡i mnvqZvi R‡b¨|

e¨vs‡Ki cwiPvjbv cl©` e¨vs‡Ki mKj Kg©KZ©v-Kg©Pvix‡`iI Awfb›`b Rvbv‡”Q| Zv‡`i Avš—wiK cÖ‡Pôv Ges MÖvnK, c„ô‡cvlK, †kqvq‡nvìvi I kyfvbya¨vqx‡`i Ae¨vnZ mg_©b Ges mn‡hvwMZvq GB mvdj¨ AR©b m¤¢e n‡q‡Q|

cwiPvjbv cl©‡`i c‡¶

†gvt Avãyj Rwjj, Gg.wc†Pqvig¨vb

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Disclosure on Risk Based Capital RequirementUnder Pillar-3 of Basel IIfor the year ended 31 December, 2011

The aim of introducing Market Discipline in the revised capital framework is to establish more transparent and more disciplined fi nancial market so that stakeholders can assess the position of a bank regarding holding of assets and to identify the risks relating to the assets and capital adequacy to meet probable loss of assets

‘

‘

88 annual report

Overview

The Basel Committee on Banking Supervision published a framework for international convergence of capital measurement and capital standards commonly termed as Basel II which replaced the original 1988 Basel I accord. In Bangladesh, Risk Based Capital Adequacy for Banks’ (Revised regulatory capital framework in line with Basel II) came into force fully from January 2010 Following the BRPD circular # 20 on December 29, 2009 after parallel existence with Basel I during the year 2009.

Mercantile Bank has implemented Basel II effectively and effi ciently. Because it believes that Basel II is not merely a reporting system but a principle on which overall banking business runs.With a view to facilitating the way of implementation, the Bank has formed a high powered committee under the heading of Basel II implementation Unit. This committee forecast the future; follow up the overall implementation status and way out the probable solution to cope with the international best practices and to make the bank’s capital more risk sensitive as well as more shock resilient. The Bank has also formed a Supervisory Review Process (SRP) team to participate the dialogue with the Supervisory Review Evaluation Process (SREP) team of BB for measuring the adequate capital requirement.

The Basel II principle stands on the following three pillars:

Pillar-I: Minimum Capital Requirement

Banks must hold minimum regulatory capital against Credit, Market and Operational Risk inherent with Banking Business.

Pillar-II: Supervisory Review Process (SRP)

SRP basically deals with other risks faced by a bank not covered in pillar-1. The key principle of SRP is that banks have a process for assessing overall capital adequacy in relation to their risk profi le and a strategy for maintaining their capital at an adequate level. The assessment of adequate capital would be the outcome of the dialogue to be held between the bank’s SRP and Bangladesh Bank’s SREP team.

Pillar-III: Market Discipline

The purpose of Market Discipline in the Revised Capital Adequacy Framework is to complement the minimum capital requirement and the supervisory review process. The aim of introducing Market Discipline in the revised

capital framework is to establish more transparent and more disciplined fi nancial market so that stakeholders can assess the position of a bank regarding holding of assets and to identify the risks relating to the assets and capital adequacy to meet probable loss of assets.

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Pillar OneMinimum Capital Requirements

Minimum Capital Requirement for-

Credit RiskStandardized approach•

Foundation IRB Approach•

Advanced IRB Approach•

Market RiskStandardized Approach•

Internal VAR Models•

Operational RiskBasic Indicator Approach•

Standardized Approach • (Alternative) .

Pillar TwoSupervisory Committee

Process for assessing overall capital adequacy in relation • to risk profi le.

Strategy for maintaining capital at an adequate level.•

Formation of Supervisory Review Process (SRP) Team.•

Process document i.e. Internal Capital Adequacy Assess-• ment Process (ICAAP) for assessing overall risk profi le and a strategy for maintaining adequate capital.

Agree an internal assessment process with the regulator • through active dialogue between Bank’s SRP and BB’s SREP team.

Pillar ThreeMarket Discipline

To complement the minimum capital requirement and the • supervisory review process.

Disclosure of key information relevant to a wider scope • of risks managed by the Bank

Establish more transparent and more disciplined fi nancial • market

Encompasses the Bank’s management of capital.•

Basel II Principle: 3 Pillars

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$

90 annual report

Disclosure Framework

The following detailed qualitative and quantitative disclosures of the Bank are furnished to provide our stakeholders with consistent and understandable disclosure framework to evaluate the Bank’s performance as on December 31, 2011 in accordance with BRPD circular # 35 on December 29, 2010.

a) Scope of application

Qualitative Disclosures

(a) The name of the corporate entity in the group to which the guidelines applies.• Mercantile Bank Limited (MBL)

(b) An outline of difference in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities with in the group (a) that are fully consolidated ; (b) that are given a deduction treatment ; and (c) that are neither consolidated nor deducted (e.g. where the investment is risk-weighted).

MBL, the leading third generation private commercial bank incorporated on May • 20, 1999 and commenced business on June 02, 1999. It was listed in DSE and CSE on February 16, 2004 and February 26, 2004 respectively. MBL has 75 branches at on reporting date i.e. December 31, 2011. The Bank has two subsidiaries namely Mercantile Bank Securities Ltd and Mercantile Exchange House (UK) Limited and a Off-shore Banking Unit to pace up the international trade especially in Export Processing Zone.

Mercantile Bank Securities Ltd

Mercantile Bank Securities Ltd (MBSL), a subsidiary company of MBL had been formed on 27 June 2010 to deal with stock dealing and broking. MBSL has started its commercial operation seperately from 14 September 2011 through obtaining stock dealer and broker license from the Securities and Exchange Commission. The main operation of the subsidiary is to buy and sell off securities listed with Dhaka and Chittagong Stock Exchange or approved by Securities and Exechange Commission for its customer and equity loan is extended to the customers against their equity for investment in the listed companies.

Mercantile Exchange House (UK) Limited

Mercantile Exchange House (UK) Limited, a fully owned subsidiary company of MBL incorporated as private limited company with companies for England and Wales under registration no. 07456837 on December 01, 2010. The company commenced its business operation at Birmingham in UK on December 06, 2011. Mercantile Exchange House is committed to provide faster, easier and safer remittance services to the Bangladeshi expatriate living and working in UK. It also ensures reliable and secured remittance services at the door step of their near and dear ones living in Bangladesh.

Off-shore Banking Unit (OBU)

MBL obtained the Off-shore Banking Unit permission vide letter no. BRPD (P-3) 744 (114)/2010-1743 dated May 04, 2010. The commencement of operation of this unit is from March 20, 2011. Presently, the Bank has 2 (two) units in operation in Bangladesh. The Off-shore Unit is governed under the rules and guidelines of Bangladesh Bank. The principle activities of the OBU are to provide all kinds of commercial banking services to its customers through its branches in Bangladesh.

(c) Any restriction, or other major impediments, on transfer of funds or regulatory capital within the group.

Not applicable.•

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b) Capital Structure

Qualitative Disclosures (a) Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in Tier 1 or in Tier 2.

Conditions for calculating the Tier 1 capital, Tier 2 capital and Tier 3 capital set by • BB is as under:

a) The amount of Tier 2 capital will be limited to 100% of the amount of Tier 1 Capital.b) 50% of revaluation reserves for fi xed assets and securities eligible for Tier 2 Capital.c) 10% of revaluation reserves for equity instruments eligible for Tier 2 Capital.d) Subordinated debt shall be limited to a maximum of 30% of the amount of Tier 1 Capital.e) Limitation of Tier 3: A minimum of about 28.50% of Market risk needs to be supported by Tier 1 Capital. Supporting of Market Risk from Tier 3 Capital shall be limited up to maximum of 250% of a Bank’s Tier 1 Capital that is available after meeting credit risk capital requirement.

In order to obtain the eligible regulatory capital for the purpose of calculating • Capital Adequacy Ratio (CAR), the following deductions are required from bank’s Tier 1 capital:

a) Value of Intangible Assets i.e. Goodwill shown as assets.b) Shortfall in provisions required against classifi ed assets.c) Shortfall in provisions required against investment in shares.d) Remaining defi cit on account of revaluation of investments in securities after netting off any other surplus on the securities.e) Reciprocal/Crossholding of bank’s capital/subordinated debt.f) Unauthorized amount of share holding.g) Investments in subsidiaries which are not consolidated.

Quantitative Disclosures

(b) The amount of Consolidated Tier 1 capital, with separate disclosure of:

(c) Total amount of Consolidated Tier 2 and Tier 3 capital 179.44

(d) Other deductions from capital -

(e) Consolidated Total Eligible Capital 1,070.09

(BDT in Cr.)Paid Up Capital 496.81Non-repayable Share Premium account -Statutory Reserve 264.34General Reserve -Retained Earning 119.76Minority Interest in Subsidiaries 5.17Non-Cumulative Irredeemable Preferences Shares -Dividend Equalization Account 4.57Others (If any item approved by Bangladesh Bank) -

Tier 1 Capital Tier 2 Capital

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c) Capital Adequacy

Qualitative Disclosures (a) A summary discussion of the Bank’s approach to assessing the adequacy of its capital to support current and future activities.

RWA & CAR

MBL has adopted Standardized Approach for computation of Capital Charge for Credit Risk and Market Risk while Basic Indicator Approach for Operational Risk. Total Risk Weighted Assets (RWA) of the Bank is determined by multiplying the capital charge for market risk and operational risk by the reciprocal of the minimum capital adequacy ratio i.e. 10% as on December 2011 and adding the resulting fi gures to the sum of risk weighted assets for credit risk. Total RWA is then used as denominator while total Eligible Regulatory Capital as on numerator to derive Capital Adequacy Ratio i.e.

CAR = Eligible Regulatory Capital x 100

RWA

Strategy to achieve the required Capital Adequacy

The Bank’s policy is to manage and maintain its capital with the objective of ensuring strong capital adequacy ratio in line with Basel-II. For the said purpose, MBL has already taken numerous steps including revaluation of its fi xed assets, and issuance of Subordinated Debt (Bond) worth to BDT 100 crore is likely to be accomplished very soon. Besides, MBL has emphasized on the credit rating of its corporate customers in order to reduce the RWA and thereby achieve adequate capital adequacy ratio. Corporate customers of the Bank are continuously encouraged to conduct their credit rating only by any of the Bangladesh Bank approved External Credit Assessment Institutions (ECAIs) i.e. CRISL, CRAB, ECRL, NCRL and ACRSL. As on December 2011, a signifi cant number of corporate party has conducted their credit rating by BB Approved ECAIs

Quantitative Disclosures (b)

(BDT in Cr.)Capital Requirement for Credit Risk 874.88

(c) Capital Requirement for Market Risk 61.32(d) Capital Requirement for Operational Risk 73.32(e) Total and Tier 1 capital ratio

For the consolidated group• Total 10.60%Tier 1 8.82%

For stand alone• Total 10.52%Tier 1 8.74%

Total Consolidated Capital Fund as on December, 2011

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d) Credit Risk

Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to credit risk, including:

Defi nition of past due and impaired (for accounting purposes);

As per guideline of Bangladesh Bank, All Loans and Advances are grouped into • 4 (four) categories namely Continuous Loan, Demand Loan, Fixed Term Loan and short term Agricultural Credit for the purpose of Loan Classifi cation. As per relevant BB guideline, depending on the type, the entire loan/amount of unpaid installments will be treated as overdue from the following date/after six month of the expiry day. Any continuous credit, Demand loans or a Term Loan which remain overdue for a period of 3 months or more, will be treated as Special Mentioned Account. If the past due loans/defaulted installment/irregular loans remains for 6/12 months or more it will be termed as Sub-standard. Again, if the past due loans/defaulted installment/irregular loans remains for 9/12/18/36 months or more it will be treated as Doubtful and for 12/18/24/60 months will be treated as Bad/Loss.

Description of approaches followed for specifi c and general allowances and statistical methods;

Specifi c and General provisions are maintained according to the relevant BB • guideline. For Example, 1% or 2% or 5% provision is maintained against good loans, 5% against SMA loans, 20% against sub-standard, 50% against doubtful and 100% against bad/loss loans after deducting the amount of interest expenses and value of eligible securities from the outstanding balance of classifi ed accounts.

Discussion of the Bank’s credit risk management policy;

The Bank manages its credit risk in the following manner:

Creating Credit Risk Awareness CultureStrong emphasis is given to create credit risk awareness among all lending employees within the Bank. Awareness programs have been conducting regularly to create a risk-conscious culture and empower them with the capability to identify, control and manage Credit Risks more effectively.

Consulidated CAR as on December, 2011

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Qualitative Disclosures Approved Credit Policy by the Board of DirectorsThe Board of Directors has approved the Credit Policy for the Bank where major policy guidelines, growth strategy, exposure limits (for particular sector, product, individual company and group) and risk management strategies have been described/stated in detail. Credit Policy is regularly updated to cope up with the changing global, environmental and domestic economic scenarios. Separated Credit Risk Management Division (CRMD) CRMD has been segregated from Credit Administration Division in line with Central Bank’s Guidelines. CRMD assess credit risks and suggest mitigations before recommendation of every credit proposal while Credit Administration confi rms that adequate security documents are in place before disbursement. Formation of Law and Recovery TeamA strong Law and Recovery Team has been formed to monitor the performance of the loans & advances, identify early signs of delinquencies in portfolio, and take corrective measures to mitigate risks, improve loan quality and to ensure recovery of loans in a timely manner including legal actions. Independent Internal Audit and Direct Access to Board /Audit CommitteeInternal Control and Compliance Division (ICCD) independently verifi es and ensures, at least once in a year, compliance with approved lending guidelines, Bangladesh Bank guidelines, operational procedures, adequacy of internal control and documentation procedures. ICCD directly reports to the Board/Audit Committee the overall quality, performance, recovery status, risks status, adequacy of provision of loan portfolio for information, overall observation and guidance.Large Loan limit and Credit Facility on business ConsiderationCentral Bank’s instructions are strictly followed in determining Single Borrower/Large Loan limit. The Bank watchfully avoids name lending. Credit facility is allowed absolutely on business consideration after observing due diligence. In all cases, viability of business, credit requirements, and security offered, cash fl ow and risks level are meticulously and professionally analyzed.Credit Quality and Portfolio Diversifi cation5Cs principles of Credit i.e. Character, Capacity, Capital, Conditions and Collateral are followed professionally in the credit evaluation stage. Evaluation of repayment ability, characteristics of fi nancial discipline, fi nancial health of the borrowers and other qualitative and quantitative information are gathered and credit facilities are allowed in a manner so that Bank’s optimum asset quality is ensured. Signifi cant concentration of credit is carefully avoided to minimize risk. Credit Lines are segregated focusing on regulatory guidelines.Early Warning SystemPerformance of loans is regularly monitored to trigger early warning system to address the loans and advances whose performance show any deteriorating trend. It enables the Bank to grow its credit portfolio with ultimate objective to protect the interest of depositors and shareholders.Provision & Suspension of InterestIf any loan is classifi ed as ‘Sub-standard’ and ‘Doubtful’, interests accrued on such loan are credited to Interest Suspense Account, instead of crediting the same to Income Account. In case of rescheduled loans the unrealized interest, if any, are credited to Interest Suspense Account, instead of crediting the same to Income Account. As soon as any loan or advance is classifi ed as ‘Bad/Loss’ neither any interest is calculated nor any interest is credited against those accounts.

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Qualitative Disclosures Lending Process in MBL

Lending Process of the Bank followed by the credit offi cials starting from stage-1 to stage-4 as mentioned in the Bank’s approved lending guidelines are shown below:

Credit Approval ProcessCredit approval process encompasses pre-approval evaluation, approval and post approval evaluation. All signifi cant loans are approved at Head Offi ce level by the Credit Committee while experienced Senior Offi cers at Branches are given authority to approve loans with lower risk exposure. Flow Chart of Credit Approval Process of the Bank has been demonstrated below:

Risk Assets PortfolioTo mitigate the Credit Risk, the Bank diversifi es its loan exposure to different sectors confi rming the Central Bank’s requirements. Retail, SME, Consumer, Trading and Agricultural Loan get the priority for lending diversifi cations.

Stage 4Loan Recovery

(Remedial Management)

Credit Application Recommended byRelationship Offi cer

lationship Offi cer/ Branch Manager

Head of Corporate & Head ofCredit Risk Management

Managing Director & CEO

Executive Committee of the Board

Stage 3Loan Administration

(Reviews, Re-approvals)

Stage 2Credit Evaluation

(Sound Lending Principles/Credit Analysis)

Stage 1Business Development

(Marketing)

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Qualitative Disclosures Counterparty Credit RatingProper initiatives have been taken to rate the borrowers’ of the Bank. As per Central Bank’s guidelines, Corporate Clients have been requested to be rated immediately by BB Approved (ECAIs) duly recognized by the Central Bank. A signifi cant number of corporate clients have already conducted their credit rating by ECAIs following the persuasion of the Bank and we are sanguine of getting almost 70% of our corporate customers to be rated by the end of the year 2012.

NPL ManagementThe Bank measures its loan portfolio in terms of payment arrears. The impairment levels on the loans and advances are monitored regularly. Loans and Advances are written off to the extent that (i) Five years have been passed since termed as Bad/Loss and 100% provision has also been kept against this loan (ii) there is no realistic prospect of recovery and (iii) against which legal cases are pending as per Central Bank’s guidelines. Detail records for all such write off accounts are meticulously maintained and followed up.

Methods used to measure Credit RiskAs per the directives of Bangladesh Bank, ‘The Standardized approach’ is applied by the Bank to measure its Credit Risk.

Quantitative Disclosures (b) Total gross credit risk exposures broken down by major types of credit exposure.

Total Gross Credit Risk exposures broken down by major types of credit • exposure as on December, 2011 is as under:

(c) Geographical distribution of exposure, broken down in signifi cant areas by major types of credit exposure.

Geographical Distribution of total exposure as on December, 2011 is as • under:

Particulars (BDT in Cr.) ( % of Total)Claim on Corporate 4,630.49 58.08

Claim on SME 980.93 12.30

Past Due Claim 220.91 2.77

Claim on CRM 576.82 7.23

Staff Loan 87.25 1.09

Claim on Retail 68.00 0.85

Claim on HBLRES 83.32 1.05

Claim on HBLCOM 167.20 2.10

Claim on Consumer 126.70 1.59

Claim on Bank & NBFI 665.96 8.35

Margin Loan 365.23 4.58

Total 7,972.80 100.00

Division (BDT in Cr.) (% of Total)Dhaka 5,762.90 72.28

Chittagong 1,577.97 19.79

Rajshahi 402.01 5.04

Sylhet 84 .65 1.06

Khulna 46.37 0.58

Barisal 39.83 0 50

Rangpur 59.07 0.74

Total 7,972.80 100.00

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Quantitative disclosure (d) Industry or counterparty type distribution of exposures, broken down by major types of credit exposure.

Industry type Distribution of total exposure as on December, 2011 is as • under:

(e) Residual contractual maturity breakdown of the whole portfolio, broken down by major types of credit exposure.

Residual contractual maturity breakdown of total exposure as on • December, 2011 is as under:

(f) By major industry and counter party type: (BDT in Cr.)

Amount of impaired loans and if available, past due loansprovided separately. -Specifi c and general provisions; 173.54Charges for specifi c allowances and charge-offs during the periods -

Industry (BDT in Cr.) (% of Total)Textile 225.59 2.83

Agriculture 67.98 0.85

SME 383.36 4.81

Pharmaceuticals 164.28 2.06

Information Technology 79.24 0.99

Telecommunication 22.65 0.28

Garments 1,233.89 15.48

Trading and Others 5,795.81 72.69

Total 7,972.80 100.00

Particulars (BDT in Cr.) (% of Total)UP to 1 Month 1,524.22 19.12

Over 1 Month Up to 3 Month 1,129.81 14.17

Over 3 Month Up to 12 Month 2,542.07 31.88

Over 1 year Up to 5 Years 1,987.88 24.93

Over 5 Years 788.83 9.89

Total 7,972.80 100.00

Total Risk Exposure broken down by major types of credit exposures

Geographical Distribution of total Exposure

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Quantitative disclosure

(g) (BDT in Cr.)Gross non-performing assets (NPAs): 208.46

Non-performing Assets (NPAs) to Outstanding Loans & Advances 2.61%

Movement of Non Performing AssetsOpening balance 227.72

Additions 63.40

Reductions 82.66

Closing balance 208.46

Movement of specifi c provisions for NPAsOpening balance 77.45

Recoveries of amount from pre-written off 0.23

Provisions made during the period 9.23

Write-off 15.67

Write-back of excess provisions -

Closing balance 71.24

Qualitative Disclosure

(a) The general qualitative disclosure requirement with respect to equity risk, including:Differentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons.

MBL’s total equity share holding comprises of two purposes i.e. capital gain and other • strategic reason like equity participation and investment diversifi cation. MBL is the director of IDLC fi nances Ltd and sole purpose of such investment is not capital gain, rather maintain relationship as well as diversify its investment portfolio.

Discussion of important policies covering the valuation and accounting of equity holdings in the banking book. This includes the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation as well as signifi cant changes in the practices.

Quoted shares are recorded at cost prices and after every quarter end if the total • cost of entire portfolio is higher than the market value, provision is maintained to the extent of differential amount of cost and market value of the portfolio as per terms and condition of regulatory authority. On the other hand, unquoted share is valued at cost price or book value as per latest audited accounts.

e) Equities: Disclosure for Banking Book Positions

Residual Contractual maturity breakdown of whole portfolio Industry wise distribution of Total Exposure

15.48%72.69%

2.83% 0.85%4.81% 2.06%

0.99%0.28%

9.89%

19.12%

14.17%

31.88%

24.93%

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Qualitative Disclosure

(a) The general qualitative disclosure requirement including the nature of IRRBB and key assumptions, including assumptions regarding loan prepayments and behavior of non-maturity deposits, and frequency of IRRBB measurement.

Interest rate risk in the banking book arises from mismatches between the future • yield of an assets and their funding cost. Assets Liability Committee (ALCO) monitors the interest rate movement on a regular basis. MBL measure the Interest Rate Risk by calculation Duration Gap i.e. a positive Duration Gap affect bank’s profi tability adversely with the increment of interest rate and a negative Duration Gap increase the bank’s profi tability with the reduction of interest rate.

Quantitative Disclosure

(b) The increase (decline) in earnings or economic value ( or relevant measure used by management) for upward and downward rate shocks according to management’s method for measuring IRRBB, broken down by currency (as relevant)

Interest Risk-Increase in Interest Rate (As on December 31, 2011): (BDT in • million) Where applicable.

Quantitative Disclosure

(b) Value disclosed in the balance sheet of investment, as well as the fair value of those in-vestments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value.

(c) The cumulative realized gain (losses) arising from sales and liquidations in the reporting periods.

(d)

(e) Capital requirements broken down by appropriate equity groupings, consistent with the bank’s methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulating capital requirements.

Specifi c Risk• - Market value of investment in equities is BDT 141.05 cr. Capital Requirement is 10% of the said value which stand to BDT 14.11 cr.

General Risk• - Market value of investment in equities is BDT 141.05 cr. Capital Requirement is 10% of the said value which stand to BDT 14.11 cr.

(BDT in Cr.)Quoted shares 59.03 • Unquoted shares 61.87•

(BDT in Cr.)Realized gain (losses) from equity investments • Total unrealized gains (losses) 82.02• Total latent revaluation gains (losses) -• Any amount of the above included in tier 2 Capital. 8.20 •

Minor Shock Moderate Shock Major Shock

Magnitude of Shock 1.00% 2.00% 3.00%Duration Gap (Years) 0.28 0.28 0.28

Total Regulatory Capital 1,070.09 1,070.09 1,070.09

Risk Weighted Assets 10,095.27 10,095.27 10,095.27 CAR 10.60% 10.60% 10.60%

Revised Capital (After Shock) 1,041.34 1,012.60 983.85

Revised RWA 9,970.95 9,970.95 9,970.95

Revised CAR (%) 10.44% 10.16% 9.87%

f) : Interest Rate Risk in the Banking Book ( IRRBB)

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g) : Market Risk

Qualitative Disclosure

(a) Views of BOD on trading/investment activitiesAll the Market Risk related policies/guidelines are duly approved by BOD. The BOD sets limit • and review and update the compliance on regular basis aiming to mitigate the Market risk.

Methods used to measure Market risk

Market Risk is the probability of losing assets in balance sheet and off-balance • sheet position arising out of volatility in market variables i.e. interest rate, exchange rate and prices of securities. In order to calculate the market risk for trading book purposes the Bank uses Standardized (rule based) Approach where capital charge for interest rate risk, price and foreign exchange risk is determined separately.

Market Risk Management SystemA Policy for managing Market Risk has been set out by the Board of Directors of the Bank where clear instructions has been given on Loan Deposit Ratio, Whole Sale Borrowing Guidelines, Medium Term Funding, Maximum Cumulative Outfl ow, Liquidity Contingency Plan, Local Regulatory Compliance, Recommendation / Action Plan etc. Treasury Division and International Division mainly manage the Market Risk with the help of Asset Liability Committee (ALCO) and Asset Liability Management (ALM) Desk in the following fashion:

Interest Rate Risk Management• Treasury Division reviews the risks of changes in income of the Bank as a result of movements in market interest rates. In the normal course of business, the Bank tries to minimize the mismatches between the duration of interest rate sensitive assets and liabilities. Effective Interest Rate Risk Management is done as under:

Market Analysis• Market analysis over interest rate movements are reviewed by the Treasury Division of the Bank. The type and level of mismatch interest rate risk of the Bank is managed and monitored from two perspectives, being an economic value perspective and an earning perspective.

Gap Analysis• ALCO has established guidelines in line with central Bank’s policy for the management of assets and liabilities, monitoring and minimizing interest rate risks at an acceptable level. ALCO in its regular monthly meeting analyzes Interest Rate Sensitivity by computing GAP i.e. the difference between Rate Sensitive Assets and Rate Sensitive Liability and take decision of enhancing or reducing the GAP according to prevailing market situation aiming to mitigate interest rate risk.

Foreign Exchange Risk Management• Risk arising from potential change in earnings resulted from exchange rate fl uctuations, adverse exchange positioning or change in the market prices are considered as Foreign Exchange Risk. Treasury and International Division manage this risk in the following fashion:

Continuous Supervision•

Bank’s Treasury Division manages and controls day-to-day trading activities under the supervision of ALCO that ensures continuous monitoring of the level of assumed risks. Treasury Division monitors the foreign exchange price changes and Back Offi ce of the Treasury Division verifi es the deals and passes the entries in the books of account.

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Treasury Back Offi ce separated from Treasury Front Offi ce•

Treasury Back Offi ce is conducting its operation in separate locations apart from the Treasury Front Offi ce. Treasury Back Offi ce is responsible for currency transactions, deal verifi cation, limit monitoring and settlement of transactions independently. Treasury Back Offi ce gathers the market rates from an independent source other than dealers of the same organization, which helps to avoid any confl ict of interest.

Mark-to-Market Method for Approved Securities and Foreign Exchange • Revaluation

All foreign exchange reserves and balances along with approved securities are revalued at Mark-to-Market method according to Bangladesh Bank’s guidelines. Such valuation are made after specifi c time interval as prescribed by Bangladesh Bank.

Nostro Accounts

Nostro accounts are maintained by the Bank with various currencies and countries. These Accounts are operated by the International Division of the Bank. All Nostro accounts are reconciled on monthly basis. The management reviews outstanding entry beyond 30 days for settlement purpose. The Management sets limits for handling Nostro accounts transactions including time limits for settlements of transactions and time and amount limits for items which are investigated after receipt of the account statements. Nostro accounts are verifi ed by the external auditors twice in a year (half yearly basis) and reports are to be submitted to Bangladesh Bank.

Equity Risk Management• Equity Risk is the risk of loss due to adverse change in market price of equities held by the Bank. Equity Risk is managed by the following fashion:Investment Portfolio ValuationMark-to-Market valuations of the share investment portfolio is followed in measuring and identifying risk. Mark-to-Market valuation is done against a predetermined cut loss limit. Diversifi ed Investment to minimize Equity RiskMBL minimizes the Equity Risks by Portfolio diversifi cation as per investment policy of the Bank. A high powered committee has been formed headed by Deputy Managing Director of the Bank to reduce the risk by taking prudent decision while involved in Equity Investment.Margin Accounts are monitored very closelyWhere Margin loan is allowed, security of investment, liquidity of securities, reliability of earnings and risk factors are considered and handled professionally.

Quantitative Disclosure

(b) The capital requirements for; (BDT in Cr.)Interest rate risk; 20.10

Equity position risk; 28.21

Foreign Exchange risk 13.02

Commodity risk. -

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g) : Operational Risk

Qualitative Disclosure

(a) Views of BOD on System to Reduce Operational RiskAll the policies/guidelines including Internal Control and Compliances and Board • audit are duly approved by BOD. Audit Committee of the Board directly oversees the activities of internal control and compliances aiming to check all types of lapses and irregularities inherent with operational activities of the Bank and thereby may create a notable downfall risk for the Bank.

Performance Gap of Executives and StaffsThe BOD of the Bank is always keen to provide a competitive, attractive and handsome • remuneration package for its employees. Apart from the aforesaid, the recruitment policy of the Bank is always bestow to sort out fresh graduate from the reputed universities and nurture them until transformation to a ‘Human Capital’ of highest quality. Besides, the Bank’s name and fame as top tier Bank of the country acts as moral boosting factor for the employees. An accommodating, welcoming, co-operative and congenial work atmosphere motivates its employees to act as a family towards achievement of goal. As such, there exists no performance gap in the Bank.

Potential External EventsNo potential external events have been detected yet at the time of reporting of the • capital accord.

Policies and Processes for Mitigating Operational RiskOperational Risks results from inadequate or failed internal process, people and • systems or from external events. Within the Bank, Operational Risk may arise from negligence and dishonesty of the employees, lack of management supervision, inadequate operational control, lack of physical security, poor technology, lack of automation, non- compliance of regulatory requirements, internal and external fraud etc. Operational Risk Management Framework has been designed to provide a sound and well-controlled operational environment and thereby mitigate the degree of operational risk.

Approach for calculating capital charge for operational riskOperational Risk is defi ned as the risk of loss resulting from inadequate or failed internal • processes, people and system or from external events. The Bank use Basic Indicator Approach for calculating capital charge against operational risk i.e. 15% of average positive annual gross income of the Bank over the last three years.

Quantitative Disclosure

(b) The capital requirements for (BDT in Cr.)Operational risk 73.32

MBL adopted strong and integrated Risk Management strategies for the long-term sustainability of the Bank’s business. Managing material risks has been treated as a normal job as other business functions, embedding strong and proactive risk culture within the Bank which adds high values to the effective Risk Management

Managing Director & CEO’s Reporton Risk Management Report

‘

‘

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Risk management is relatively new and emerging practice as far as Bangladeshi banks are concerned and has been proved that it is a mirror of effi cient corporate governance of a fi nancial institution. Globalization and signifi cant competition between foreign and domestic banks, survival and optimizing returns are very crucial for banks and fi nancial institutions. However, selecting the effi cient customer and providing innovative and value added fi nancial products and services are another paramount factors. In a volatile and dynamic market place for achieving sustainable business growth and shareholder’s value, it is essential to develop a link between risks and rewards of all products and services of the bank. Hence, the banks should have effi cient risk management framework to mitigate all internal and external risks.

The presence of accurate measures of bank-wide risk management practice increase shareholder’s returns and allow the risk-taking behavior of bank to be more closely aligned with strategic objectives. Bank-wide risk management practice should aim to enhance the drivers of shareholder’s value such as: -

• Growth; • Risk adjusted performance measurement; • Consistency of earnings; and

Quality and Transparency of Management •

The important steps of the effi cient framework of banking concern should ensure all risks are identifi ed, prioritized, quantifi ed, controlled and managed in order to achieve an optimal risk-reward profi le. This entails ideal and dedicated coordination of risk management across the bank’s various business units. However, the approach to monitoring and enforcing the adherence of business units within the bank may vary. The factors that infl uence this decision are: -

• The feasibility decisions of the business unit. • The regulatory requirements in respect of the business

unit. • The cost of effective monitoring and controlling

steps.

BOARD AND SENIOR MANAGEMENT OVERSIGHTOur Board of Directors has the overall responsibility of ensuring that adequate structures, policies and procedures are in place for risk management and that they are properly implemented. Board approves our risk management policies and also sets limits by assessing our risk appetite, skills available for managing risk and our risk bearing capacity. To ensure that risk taking

remains within limits set by Senior Management/Board of Directors, any material deviation to the risk management policies and tolerances are reported to the senior management/Board that in turn must trigger appropriate corrective measures.

MBL’S RISK MANAGEMENT STRATEGIESMBL adopted strong and integrated Risk Management strategies for the long-term sustainability of the Bank’s business. Managing material risks has been treated as a normal job as other business functions, embedding strong and proactive risk culture within the Bank which adds high values to the effective Risk Management. Comprehensive risk management policies and sophisticated risk process are required for systematic identifi cation, measurement, monitoring and control of all business risks. Risk Management Approach is emphasized strongly believing that Bank’s overall fi nancial soundness can be ensured only Bank-wide risk management process communicating concise risk management standards to all concerned offi cials through adequate policies, directives, operating procedures and training programs.

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MANAGING CREDIT RISK

Risk of loss arising from a borrower who does not make payments as promised is credit risk. For most banks, loans are the largest and most obvious source of Credit Risk; however, Credit Risk could stem from activities both on and off balance sheet.

MBL has prepared its Credit Policy in May 2000 and circulated the same to the branches/divisions rapid for compliance. In order to cope with the fast changing scenario of dynamic global economy, liberalization and globalization and in the light of the directives/suggestions of the Focus Group of Bangladesh Bank, the Credit Policy of MBL is used to revised from time to time. All Executives/Offi cers of the branches as well as Head Offi ce especially, entrusted with the responsibility of credit marketing, approval processing, credit monitoring, recovery and compliance are thoroughly conversant with the contents of the Credit Policy for meticulous compliance and any willful deviation or malpractice of the sade credit policy usually dealt with severe disciplinary action.

LENDING GUIDELINES

MBL considers the following general principles for lending to customers on a basis consistent with the global operational objectives and business strategies of the Bank:

a) The Bank shall provide suitable credit services and products for the markets in which it operates;

b) Loans and advances shall normally be fi nanced from customers deposit and not out of temporary funds or borrowing from other Banks;

c) Credit facility will be allowed in a manner, which will in no way compromise with Banks standards of excellence;

d) All Credit extension must comply with the requirements of Bank’s Memorandum and Articles of Association, Banking Companies Act 1991 as amended from time to time / Bangladesh Bank’s instructions and other applicable rules and regulations;

e) A prudent banker should always adhere to the following principles of lending funds to his customer: e.g. (1) Background, character and capability of the borrowers, (2) Purpose of the facility, (3) Term of facility, (4) Safety, (5) Security, (6) Profi tability, (7) Source of repayment, (8) Diversity.

ASSESSMENT OF CREDIT PROPOSALMBL conducts a thorough Credit and Risk assessment for all types of credit proposals. The result of the assessment is presented in the preseribed Credit Appraisal Form that originates from the Branches and then it is forwarded to Corporate Banking Division (CBD) alongwith their recommendations. The Relationship Managers (RM) of the Corporate Banking Division conducts assessment with due diligence on new borrowers, existing borrowers for enhancement of existing credit lines/ sanction of new credit facilities, principals and guarantors. After proper analysis, CBD forwards it to Credit Risk Management (CRM), Division with their proper recommendation. CRM Division places the credit proposal as received from the branches as per standard format with their necessary observation/recommendation before the management for consideration to approve and/or to place the same before the EC/Board for fi nal approval.

CREDIT RISK GRADING PROCESSCredit Risk Grading (CRG) is conducted at the branch level to assess the risk grade. The concerned Credit Offi cer / RM clearly indicates the risk grade (as per the fi nding) in the specifi c column of credit appraisal form so that the authority can take decision on the matter based on risk grading .

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LENDING PROCESSCredit Offi cer, at the outset, identifi es market for potential business opportunities (Stage-1). Having identifi ed the potential borrowers, he then evaluates the credit proposal (stage-2). Once the loan has been approved, monitoring and review is essential (Stage-3). If the borrower fails to fulfi ll his obligations, the Credit Offi cer has to study the possible remedial action needed for recovery. (Stage-4).

Evaluation of Credit Proposal

MBL operates within sound and well-defi ned criteriaon for new credits as well as the expansion of existing credits. Before allowing a credit facility, MBL undertakes an assessment of risk profi le of the customer/transaction, which includes Credit assessment of the borrower’s industry, and macro economic factors; the purpose of credit and source of repayment; the track record / repayment history of borrower; repayment capacity of the borrower; proposed terms and conditions and covenants; adequacy and acceptability of collaterals; Approval from appropriate authority etc.

Credit Administration and Disbursement

Credit Administration Division has been segregated from Credit Risk Management Division (CRMD) in line with Central Bank’s Core Risk Management Guidelines. CRMD assesses credit risks and suggests mitigations before

recommendation of every credit proposal. MBL’s Credit Administration Division performs following Signifi cant activities prior to approval of disbursement of a credit facility:

Documentation

Credit Administration Division ensures completeness of documentation (loan agreements, guarantees, transfer of title of collaterals etc.) in accordance with approved terms and conditions. Outstanding documents are tracked and followed up to ensure timely execution and receipt.

Credit Disbursement

Credit Administration Division ensures that the loan application has proper approval before entering facility. Disbursement is being allowed only after completion of covenants, and receipts of collateral holdings.

Credit Monitoring

The credit monitoring process in the Bank is assigned with Credit Administration Division. Head of Credit Administration Division reports the exceptional list of assets on daily basis on the following categories:

• Past due (which are not paid or renewed at maturity) principal or interest payments, past due trade bills, account excesses and breach of loan covenants;

• Conpliance of Loan terms and conditions, timely submission of fi nancial statements and any covenant breaches or exceptions are to be referred to the CRM and the RM team for timely follow-up.

• Timely corrective action is taken to address fi ndings of any internal, external or regulatory inspection/audit.

• All borrower relationships/loan facilities are reviewed and approved through the submission of a Credit Application at least annually.

Early Alert Process

Early identifi cation, prompt reporting and proactive management of Early Alert Accounts are prime credit responsibilities of all Credit Offi cers / RM and are undertaken on a continuous basis. An Early Alert report is completed by the Credit Offi cer / RM and is sent to the competent authority for any account that is showing signs of deterioration within seven days from the identifi cation of weaknesses. The Risk Grade is updated as soon as possible and no delay to be made in referring problem accounts to the Monitoring, Recovery and Compliance Division for assistance in recovery.

Stage 1Business Development

(Marketing)

Stage 2Credit Evaluation

(Sound Lending Principles/Credit Analysis)

Stage 3Loan Administration

(Reviews, Re-approvals)

Stage 4 Loan Recovery

(Remedial Management)

Lending Process in MBL

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Collateral and Security Documents

MBL’s Credit Administration Division ensures that all security documents are kept in a fi reproof safe under dual control. Registers for documents are maintained to keep track of their movement. Procedures have been established to track and review relevant insurance coverage for certain facilities/collateral. Physical checks on security documents are conducted on a regular basis.

Setting Exposure Limit

MBL has developed its own limit structure while remaining within the exposure limits set by Bangladesh Bank. MBL sets the limit based on the credit strength of the obligor, genuine requirement of credit, economic conditions and the institution’s risk tolerance. Credit limits are reviewed regularly at least annually or more frequently if obligor’s credit quality deteriorates. BB’s instructions are strictly followed in determining Single borrower/Large Loan limit. No credit facility is allowed simply considering the name and reputation of the key person of the borrowing company.

Credit Recovery

Each Branch of the Bank maintains a diary/card in prescribed format in which the due date of expiry of credit facility is recorded, a notice is sent to the borrower reminding him of the due date of repayment and making a formal demand for repayment/renewal as the case may be. Vigorous follow up action is thereafter taken by issuing repeated reminders and putting pressures on the borrower by calling on him personally. In other words, all out efforts are taken to recover the advance on its expiry. The branches however, still makes constant efforts to recover the advance if necessary, through legal process. Before fi ling of the suit, Head Offi ce approval is indeed obtained.

Monitoring of Non-Performing Loans

On a quarterly basis, a Classifi ed Loan Review Report (CLR) to be prepared by the Recovery Unit Account Manager to update the status of the action / recovery plan, review and assess the adequacy of provisions and modify the Bank’s strategy as deems appropriate. The Head of Credit will approve CLR for NPLs upto 15% of the Bank’s Capital; Managing Director & CEO will approve CLR for NPLs in excess of 15% of the Bank’s capital. The CLRs for NPLs above 25% of capital shall be approved by Executive Committee of the Board of Directors with an intimation to the Board. At present, all the rescheduling / write off proposals are being approved by the Executive Committee of Board of Directors / Board of Directors.

MANAGING MARKET RISK

Market risk is the risk, wherein, the value of a portfolio, either an investment portfolio or a trading portfolio, decreases due to the change in value of the market risk factors. The four standard market risk factors are stock prices, interest rates, foreign exchange rates, and commodity prices. The associated market risks are:

• Equity risk, the risk that stock or stock indexes prices and/or their implied volatility will change.

• Interest rate risk, the risk that interest rates (e.g. Libor, Euribor, infl ation, Yield curve on both goverment securities as wall as earnning assets, etc.) and/or their implied volatility will change.

• Currency risk, the risk that foreign exchange rates (e.g. EUR/USD, EUR/GBP, etc.) and/or their implied volatility will change.

• Commodity risk, the risk that commodity prices (e.g. corn, wheat, rice, crude oil, etc.) and/or their implied volatility will change.

ALCO’S RESPONSIBILITIES IN RISK MANAGEMENT

Asset Liability Committee (ALCO) of MBL is responsible for Balance Sheet Management or more specifi cally Balance Sheet Risk Management. ALCO ensures that risk management is not confi ned to collection of data. Rather, ensures that detailed analysis of assets and liabilities is carried out so as to assess the overall balance sheet structure and risk profi le of the Bank. ALCO covers the entire balance sheet/business of the bank while carrying out the periodic analysis. Major responsibilities of the ALCO include:

To keep an eye on the structure /composition of • bank’s assets and liabilities and decide about product pricing for deposits and advances;

Decide on required maturity profi le and mix of • incremental assets and liabilities;

Articulate interest rate view of the bank and deciding • on the future business strategy;

Review and articulate funding policy;•

Decide the transfer pricing policy of the Bank;•

Evaluate market risk involved in launching of new • products.

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A. MANAGING INTEREST RATE RISK

Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a loan or a bond, due to variability of interest rates. Bank’s lending, funding and investment activities give rise to Interest Rate Risk. The immediate impact of variation in interest rate is on Bank’s net interest income, while a long term impact is on Bank’s net worth since the economic value of Bank’s assets, liabilities and off-balance sheet exposures are affected.

Banks face many types of interest rate risk:

Basis risk

The risk presented when yields on assets and costs on liabilities are based on different bases, such as the London Interbank Offered Rate (LIBOR) versus the U.S. prime rate. In some circumstances different bases will move at different rates or in different directions, which can cause erratic changes in revenues and valuation.

Yield curve risk

The risk presented by differences between short-term and long-term interest rates. Short-term rates are normally lower than long-term rates, and banks earn profi ts by borrowing short-term money (at lower rates) and investing in long-term assets (at higher rates). But the relationship between short-term and long-term rates can shift quickly and dramatically, which can cause erratic Mark to Market due to valuation method.

Repricing risk

The risk presented by assets and liabilities that reprice at different times and rates. For instance, a loan with a variable rate will generate more interest income when rates rise and less interest income when rates fall. If the loan is funded with fi xed rated deposits, the bank’s interest margin will fl uctuate.

Option risk

The risk presented by optionalities embedded in some assets and liabilities. For instance, mortgage loans present signifi cant option risk due to prepayment speeds that change dramatically when interest rates rise and fall. Falling interest rates will cause many borrowers to refi nance and repay their loans, leaving the bank with uninvested cash when interest rates have declined. Conversely, rising interest rates cause mortgage borrowers to repay slower, leaving the bank with more loans based on prior, lower interest rates. Option risk is thus diffi cult to measure and control.

Model risk

The risk presented by mathematical models used to price asset and liabilities not directly quoted on the market. Interest rate pricing models are based on reasonable assumptions about the behaviour of interest rates that may fail in particular market conditions.

MBL’S INTEREST RATE RISK MANAGEMENT STRATEGIES

MARKET TREND ANALYSISTreasury Division of the Bank regularly reviews trend of market movements. The type and level of mismatch and Interest Rate Risk of the Bank is managed and monitored from two perspectives, being an economic value perspective and an earning perspective.

INTEREST RATE SENSITIVITY ANALYSISALCO, in its regular monthly meeting analyzes Interest Rate Sensitivity by computing Static GAP i.e. the difference between Rate Sensitive Assets and Rate Sensitive Liability and takes decision of enhancing or reducing the GAP according to prevailing market situation in order to mitigate interest rate risk. ALCO has established guidelines for monitoring and minimizing Interest Rate Risk at an acceptable level. These guidelines and actions are taken in adherence to the policies issued by Bangladesh Bank from time to time.

B. MANAGING FOREIGN EXCHANGE RISK

Foreign Exchange Risk or exchange rate risk is a form of fi nancial risk that arises from the potential change in the exchange rate of one currency in relation to another. Investors or businesses face an exchange rate risk when they have assets or operations across national borders or if they have loans or borrowings in a foreign currency.

In the foreign exchange business, banks also face the risk of default of the counter parties or settlement risk. While such type of risk crystallization does not cause principal loss, banks may have to undertake fresh transactions in the cash/spot market for replacing the failed transactions. Thus, banks may incur replacement cost, which depends upon the currency rate movements. Banks also face another risk called time-zone risk, which arises out of time lags in settlement of one currency in one center and the settlement of another currency in another time zone. Foreign Exchange Transactions with counter parties situated outside Bangladesh also involve Sovereign or Country Risk.

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Equity Price Risk

Specifi c Risk General Risk

MBL’S FOREIGN EXCHANGE RISK MANAGEMENT STRATEGIES

MBL has formulated Policies and Manuals with • a view to reducing the Foreign Exchange Risk. Treasury Division of the Bank manages and controls day-to-day trading activities under the supervision of ALCO that ensures continuous monitoring of the level of assumed risks.

In MBL, FOREX Risk is minimal, as all the transactions • are carried out on behalf of the customers, i.e. MBL’s foreign exchange trading exposures are principally derived from customer driven transactions.

All foreign exchange transactions are revalued at • Mark-to-Market method according to Bangladesh Bank’s guidelines. The position maintained by the Bank at the end of day is always within the stipulated limit prescribed by Bangladesh Bank.

All Nostro accounts are reconciled on monthly basis. • The management reviews outstanding entry beyond 30 days for settlement purpose. The Management sets limits for handling Nostro accounts transactions, including time limits for settlements of transactions and amount limits for items which are investigated after receipt of the account statements. Nostro accounts are verifi ed by the external auditors and reports are submitted to Bangladesh Bank.

C. MANAGING EQUITY PRICE RISK

Equity price risk is the risk that one’s investments will depreciate because of stock market dynamics causing one to lose money. Equity Price Risk may be systematic or unsystematic. The former refers to sensitivity of portfolio’s value to changes in overall level of equity prices, while the later is associated with price volatility that is determined by organization specifi c characteristics.

One may get dividend–which are payable at the discretion of management and one may get capital appreciation in the form of a rising share price, but whether the payment of dividends is an option for management is directly dependent on the company’s performance (profi tability); and a rising share price depends on the market’s assessment of the company’s performance. So, the value of investment rides on the company’s ability to be successful and profi table. Thus an investment in equity instrument bears risk beyond the control of the investor

MBL’S EQUITY PRICE RISK MANAGEMENT STRATEGIES

INVESTMENT IN DIVERSIFIED PORTFOLIO

MBL has formulated Investment Policy. MBL minimizes the Equity Price Risk by Prudent portfolio diversifi cation as per Investment Policy.

INVESTMENT PORTFOLIO VALUATION

MBL follows Mark-to-Market valuations in valuing investment portfolio of the Bank. Mark-to-Market valuation is done against a predetermined cut loss limit. As at December 31, 2011, there was no Equity Price Risk on share investment, as the market value of shares were higher than the cost price.

MONITORING ACCOUNTS EFFICIENTLY

Where Margin loan is allowed, security of investment, liquidity of securities, reliability of earnings and risk factors are considered professionally.

MANAGING LIQUIDITY RISK

Liquidity Risk is the potentiality for loss to an institution arising from either its inability to meet its obligations or to fund increases in assets as they fall due without incurring unacceptable cost or losses. Liquidity risk is considered a major risk for banks. It arises when the cushion provided by the liquid assets are not suffi cient enough to meet its obligation.

Liquidity Risk Management involves not only analyzing banks’ on and off-Balance Sheet positions to forecast future cash fl ows, but also how the funding requirement would be met. The later involves identifying the funding market the bank has access, understanding the nature of those markets, evaluating banks current and future use of the market and monitor signs of confi dence erosion.

MBL’s Board of Directors ensures that the Bank has necessary Liquidity Risk Management framework and Bank is capable of confronting uneven liquidity scenarios. Senior management of the Bank implements sound policies and procedures, keeping in view the strategic direction and risk appetite specifi ed by Board of Directors. Usually, Liquidity Risk Management is performed by the ALCO of the Bank. ALCO is comprised of senior management from each key area of the Bank that assumes and manages liquidity risk.

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MBL’S LIQUIDITY RISK MANAGEMENT STRATEGIES

MBL has set some strategies to manage the Liquidity Risk exposed to it:

Assets and Liabilities Mix

MBL’s strategy outlines the mix of assets and liabilities to maintain liquidity. Liquidity Risk Management and Asset/Liability Management have been integrated to avoid steep costs associated with having to rapidly reconfi gure the asset liability profi le from maximum profi tability to increased liquidity.

Diversifi cation and Stability of Liabilities

MBL has specifi ed guidance relating to funding sources and ensures that it has diversifi ed sources of funding for day-to-day liquidity requirements. To comprehensively analyze the stability of funding sources, MBL has identifi ed

Fund that would stay with the Bank under any • circumstances;

Fund that run-off gradually if problems arise; and•

That run-off immediately at the fi rst sign of • problems.

Cash Flow Projections

A cash fl ow projection estimates a bank’s infl ows and outfl ows and thus net defi cit or surplus (GAP) over a time horizon. In the short term, Bank’s fl ow of funds is estimated more accurately and also such estimates are of more importance as these provide an indication of actions to be taken immediately. MBL calculates daily GAP for next one or two weeks, monthly Gap for next six month or a year and quarterly thereafter. While making an estimate of cash fl ows, MBL gives attention on following aspects:

The funding requirement arising out of off- Balance • sheet commitments also need to be accounted for;

Many cash fl ows associated with various products • are infl uenced by interest rates or customer behavior. Banks need to take into account behavioral aspects instead of contractual maturity. In this respect past experiences could give important guidance to make any assumption;

Some cash fl ows may be seasonal or cyclical;•

Management should also consider increases or • decreases in liquidity that typically occur during various phases of an economic cycle.

Liquidity Ratios and Limits

MBL uses various ratios to maintain liquidity. These ratios are also used to create limits for liquidity management. Ratios are used in conjunction with more qualitative information about borrowing capacity, such as the likelihood of increased requests for early withdrawals, decreases in credit lines, decreases in transaction size, or shortening of term funds available to the Bank. MBL calculates Cash Flow Ratios and Limits, Liability Concentration Ratios and Limits and other Balance Sheet Ratios. Last but the not least MBL has a Board approved ‘Liquidity Contingency Plan’ to confront stressed Liquidity position.

MANAGING OPERATIONAL RISK

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It is a very broad concept which focuses on the risks arising from the people, systems and processes through which a company operates. It also includes other categories such as fraud risks, legal risks, physical or environmental risks.

The following lists the offi cial Basel II defi ned event types with some examples for each category:

1. Internal Fraud - misappropriation of assets, tax evasion, intentional mismarking of positions, bribery

2. External Fraud- theft of information, hacking damage, third-party theft and forgery

3. Employment Practices and Workplace Safety - discrimination, workers compensation, employee health and safety

4. Clients, Products, & Business Practice- market manipulation, antitrust, improper trade, product defects, fi duciary breaches, account churning

5. Damage to Physical Assets - natural disasters, terrorism, vandalism

6. Business Disruption & Systems Failures - utility disruptions, software failures, hardware failures

7. Execution, Delivery, & Process Management - data entry errors, accounting errors, failed mandatory reporting, negligent loss of client assets

MBL’s Board of Directors and Senior Management have established an organizational culture that places a high priority on effective operational risk management and adherence to sound operating controls. Senior management transforms the strategic direction given by the Board through operational risk management policy.

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A. MANAGING INTERNAL CONTROL AND COMPLIANCE RISK

Effective Internal Control plays an important role in preventing and detecting fraud and protecting the assets of the shareholders. MBL ensures effi ciency and effectiveness in operational activities; reliability, completeness and timelines of fi nancial disclosures and compliance with applicable laws & regulations through its effective internal control system.

MBL’s Board of Directors in its 74th meeting held on October 22, 2005 has approved Internal Control Manual of the Bank with detailed procedure and guideline for conducting audit and inspection and checklist keeping inconformity with Bangladesh Bank guideline through Core Risk Management. The Manual has prepared by the Bank with a view to keep the Bank, Human Resources, and Customers of the Bank free from risks as far as possible.

MBL’S INTERNAL CONTROL AND COMPLIANCE RISK MANAGEMENT STRATEGIES

MBL complies with all rules and regulations set by the regulatory bodies. All guidelines received from the regulatory authorities are properly circulated among the Divisions and Branches. MBL regularly monitors the implementation status of regulatory guidelines. Records are examined and reconciled regularly to ensure that transactions are properly processed and approved.

According to the Central Bank’s guideline, the Bank has formed separate Internal Control and Compliance Division for an effective internal control system. Compliance Unit of ICCD ensures that Bank complies with all regulatory requirements of the legislative bodies in conducting its business. It also maintains liaison with the regulatory bodies and informs the other divisions/department of the Bank regarding regulatory changes. Monitoring Unit of ICCD monitors the operational performance of different branches of the Bank and reports to the Head of ICCD if any major deviation is found. Audit and Inspection Unit of ICCD recommends to the Head of ICCD for sending audit & inspection team to any Branch/Division in case of any major deviation is found in that particular Branch/ Division.

SEGREGATION OF DUTIES

Duties of the Board of Directors and Management have been segregated in such a way so that an individual person has not get the absolute control over key function of the Bank, which in due course propels the sound control culture within the Bank. The Board of Directors provides proper governance, guidance and

oversight to the Management in performing their duties. The Managing Director & CEO having with the Senior Management support designs and implement the internal control framework within the Bank. He discharges his duties by providing leadership and direction to the Senior Management and the Senior Management, in turn, assigns responsibility for establishment of more specifi c internal control policies and procedures to the Offi cials responsible at the branch level.

INSPECTION BY BANGLADESH BANK

The Central Bank conducts inspection on the activities of the Bank after every regular intervals. Inspection Report is placed before the Board for review and appropriate actions where necessary. The Board of Directors suggests the Management for improvement, if deems appropriate.

TRAINED UP EMPLOYEES

MBL regularly arranges training programs to ensure effective control process is functioning properly. The employees become aware of the regulations that are necessary to accomplish their jobs.

B. MANAGING MONEY LAUNDERING RISK

Bangladesh Bank through BRPD Circular No. 17 dated October 07, 2003 advised the scheduled commercial banks operating in the country to put in place effective risk management system which includes, among others, Money Laundering Risk Management, since money laundering, a criminal act recognized all over the world, has very severe consequences in the economy, security and the society.

MBL’S ANTI-MONEY LAUNDERING POLICY

MBL has formulated its own Anti-Money Laundering Policy, which includes Senior Management commitment to the anti-money laundering program. The Management has evolved such a culture for the Bank so that all the employees strictly adhere to each and every provision of Money Laundering Prevention Act. All employees of the Bank irrespective of the positions and capacities they hold are accountable to the top management and regulatory body for their activities which might directly or indirectly relate to money laundering.

STATEMENT FROM THE MANAGINGDIRECTOR & CEOThe Managing Director & CEO of the Bank, on annual basis, sends a statement of compliance policy in this regard to all employees of the Bank which, at minimum, contains the following:

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i. That each and every employee of the Bank is required to comply with applicable laws and regulations and maintain ethical standards ;

ii. That all activities being carried out by our Bank are in conformity with laws, regulations in force and instructions of Bangladesh Bank issued from time to time.

iii. That there is a well defi ned reporting procedure for compliance with Money Laundering Prevention Program of the Bank.

iv. That complying with relevant laws, rules and regulations is the individual responsibility of each employee working in the Bank. It should be made clear that ignorance of any of the provisions of law, rules, regulations is no excuse for non- compliance.

v. That customer’s identity is appropriately established by the offi cers rendering services to him either in liability or in asset viewpoint and also for other ancillary services. KYC procedures should be followed meticulously in this regard.

ASSIGNED RESPONSIBILITIES TO INDIVIDUALS

Account Offi cer/ Offi cers involved in Account opening.

Perform due diligence on prospective clients prior opening an account• Proper identifi cation of account holder and the transactions relating to the account• Ensure all required documentations are completed• Complete the KYC Profi le for the new customer• Ongoing monitoring of customer‘s KYC profi le and transaction profi le (TP)• Present any suspicion to the Supervisor, Head of Branch and BAMLCO•

Customer Service Offi cer To support the account offi cer in respect of the above• To perform the jobs of Account Offi cer in his absence.•

Operations Manager To ensure that all control points are taken into account prior to taking place of any • transaction.To exercise ongoing due diligence in respect of trends of transactions on • customers’ accounts.To update customer transaction profi le in the ledger.•

BAMLCO Manages the transaction monitoring process• Reports any suspicious transaction to the Head of Branch/CAMLCO• Provide AML training to Branch staff• Update policy and communicate to all staff•

Head of Branch Ensures that the AML program is effective within the branch• First point of contact for any AML issues•

Internal Control & Compliance Offi cer Perform AML Risk Assessment for the Business• Perform periodic quality assurance on the AML program• Communicate updates in AML laws and internal policies•

CAMLCO Implements and enforces Bank’s anti-money laundering policies• Reports suspicious clients to Bangladesh Bank on the Bank’s behalf• Informs Head of Branches/BAMLCOs of required actions (if any)•

Managing Director &CEO Overall responsibility to ensure that the Bank has an AML program in place and that • it is working effectively

INDIVIDUAL RESPONSIBILITIES FOR MANAGING MONEY LAUNDERING RISK

BANK’S ANTI-MONEY LAUNDERING PROCESS Know Your Customer Procedures

Each concerned offi cer performs due diligence on all prospective clients prior to opening an account. This process is completed by fi lling in the documentation requirements (Account Application, Bank References, Source of funds and Identifi cation for example) and also

a ‘Know Your Customer’ profi le which is used to record a client’s source of wealth, expected transaction activity at its most basic level. Once the identifi cation procedures have been completed and the client relationship is established, the concerned offi cers monitors the conduct of the relationship/account to ensure that it is consistent with the nature of business stated when the relationship/account was opened.

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Record Keeping

MBL keeps the records of its customer relationship and transactions. Where there has been a report of a suspicious activity or the Bank is aware of a continuing investigation into money laundering relating to a client or a transaction, records relating to the transaction or the client are retained until confi rmation is received that the matter has been settled.

Recognition and Reporting of Suspicious Transactions

A suspicious transaction will often be one that is inconsistent with a customer’s known, legitimate business or personal activities or with the normal business for that type of customer. Therefore, the fi rst key to recognition is knowing enough about the customer’s business to recognize that transaction, or series of transactions, is unusual.

The concerned offi cers refrain from carrying out transactions which they know or suspect to be related to money laundering until they have apprised the Bangladesh Bank. Where it is impossible in the circumstances to refrain from executing a suspicious transaction before reporting to the Bangladesh Bank or where reporting it is likely to frustrate efforts to pursue the benefi ciaries of a suspected money laundering operation, they apprise the Bangladesh Bank immediately afterwards.

Formation of ‘‘Complain Compliance Unit’’

As per Central Bank’s instruction, a complain and suggestion Box is placed to our all branches in order to collect complain from customers whatever the acts of Bank’s offi cal dissatisfy any of our customers, the matter is seriously taken into consideration by our CAMALCO and Chief Compliance Offi cer. Chief Compliance Offi cer upon receipt of any complain, investigate the matter and place the issue to Senior Management for settlement or disciplinary action, whichever deems fi t.

MANAGING INFORMATION TECHNOLOGY RISK

IT risk is the business risk associated with the use, ownership, operation, involvement, infl uence and adoption of IT within an enterprise. Risks surrounding Information Technology, such as network failure, lack of skills, hacking and viruses and poor system integration have the potential to have a negative impact on an organization.

INFORMATION TECHNOLOGY RISK MANAGEMENT STRATEGIES

MBL has formulated clear policies and procedures, arranged training programs, defi ned roles and responsibilities of all relevant offi cials with a view to maintain IT risk effectively. MBL has formed an IT Audit Team as per the Central bank’s guidelines, which conducts audit at branch and divisional levels following the prescribed guidelines. It also solves the unsettled issue and also suggests to the higher Management for needful action. MBL’s IT Division has segregated job descriptions and responsibilities to minimize IT Risk by forming a number of teams such as: IT Systems, Operation & Administration, IT Maintenance & Support, IT Network & Administration, IT Compliance & Services etc.

MBL has taken steps to improve the branch automation and delivery channels to provide more convenient and effi cient service to the customers. The Bank has taken all branches to automation. MBL is going to launch a Core Banking Software, namely “TEMENOS T24” as an integral part of full automation process. Recently, the same has reached its fi nal implementation and test drive stage.

MBL protects and secured its data in various ways. Data is kept in secured place prescribed by the Bank’s policy. The Bank implemented a disaster recovery site that would be activated in case of disaster, which brought and restored data in authenticated way. IT Division takes necessary initiatives to conduct training courses for the Bank’s employees. Trainings are being conducted time to time enabling the employees to handle the IT Risk in an effi cient manner.

C. MANAGING MARKETING RELATED RISK

Operational Risk may also arise from marketing activities of the Bank. Marketing encompasses all aspects of the promotion and branding of the Bank, including image management, product promotion and advertising. There are signifi cant risks associated with marketing activities that could damage the reputation of the Bank. For example, the Bank offers free travel thorough its marketing campaign to increase the sales volume of cards and the Bank has failed to meet the needs of such promotion, and then the damage of the reputation of the Bank will be enormous. Bank in operating its marketing activities ensures:

proper promotional activities have been taken not • affecting the image of the Bank;

Appropriate but not excessive use of marketing • entertainment;

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Proper procedures in awarding any external • contract;

Objective campaign and advertisement.•

D. MANAGING HUMAN CAPITAL RELATED RISK

Risk may be arise within the Bank from failure to recruit the right people in the right place, inappropriate means of recruitment, failure to provide feedback to the employees on performance, over-reliance on key personnel, inappropriate training and development, inappropriate payments made to the staff morally degraded and to commit fraud or error etc. To minimize the above-mentioned risks arising from human capital, the Bank has formulated and adopted a Human Resource Policy focusing on the following key areas:

Recruitment procedures

Pay scale and fringe benefi ts for the employees• Training and Development• Disciplinary and grievance etc.•

HR Policy of the Bank has been formulated having a strategic imperative for recruiting the best people from the society, as we have the intention to achieve comparative advantage by using our human asset effi ciently. MBL brings people from different academic backgrounds which act as a source of creativity and effi ciency. Fresh graduates are recruited through comprehensive written test and Viva voce. The Bank have signed an arrangement with the Institute of Business Administration (IBA), Dhaka University for conducting written and viva tests in recruiting fresh graduates as probationary offi cer.

MBL Training Institute has been established and renovated afterward to train the employees of the Bank. A well-resourced library has been equipped for the trainees in the MBL Training Institute. The Training Institute has fi xed a target with 3 dimensions- fi rstly, to bring all the employees in the ‘Training Net’; secondly, to make all the training ‘Need-based’; thirdly, to create second line of defense in essential areas of Bank to counter damaging impact of indispensability. To fulfi ll the said target, the Training Institute starts (a) preparation of data base for all offi cials, (b) complete basic training for the offi cials (c) move the fresher through short orientation courses.

MANAGING RISKS UNDER BASEL II ACCORDThe Basel Committee on Banking Supervision published a framework for international convergence of capital measurement and capital standards commonly termed as Basel II which replaced the original 1988 Basel I accord. In Bangladesh, Risk Based Capital Adequacy for Banks’

(Revised regulatory capital framework in line with Basel II) came into force fully from January 2010 Following the BRPD circular # 20 on December 29, 2009 after parallel existence with Basel I during the year 2009. The Basel II principle stands on the following three pillars i.e. Pillar-1: Minimum Capital Requirement, Pillar-2: Supervisory Review Process and Pillar-3: Market Discipline.

Under Minimum Capital Requirement Banks must hold minimum regulatory capital against Credit, Market and Operational Risk inherent with Banking Business. For managing Credit Risk MBL has taken a lot of effective actions including counter party credit rating conducted by External Credit Assessment Institution (ECAIs) recognized by Bangladesh Bank, preference to the rated party for entertainment of new/renewal loan proposal, portfolio diversifi cation etc. For managing Market Risk a Policy has been set out by the Board of Directors of the Bank where clear instructions have been given on Loan Deposit Ratio, Whole Sale Borrowing Guidelines, Medium Term Funding, Maximum Cumulative Outfl ow, Liquidity Contingency Plan, Local Regulatory Compliance, Recommendation /Action Plan etc. Treasury Division and International Division mainly manage the Market Risk with the help of Asset Liability Committee (ALCO) and Asset Liability Management (ALM) Desk. And fi nally, Operational Risk Management Framework has been designed to provide a sound and well-controlled operational environment and thereby mitigating the degree of operational risk. MBL has successfully managed all these risks and currently maintaining consolidated 10.60% Capital Adequacy Ratio (CAR) against the minimum requirement of 10.00% as on December 31, 2011.

Under pillar 2 or Supervisory Review Process of Basel II capital Accord, adequate capital requirement of the Bank is to be determined after evaluation and dialogue between Supervisory Review Process (SRP) team of the Bank and Supervisory Review Evaluation Process (SREP) team of Bangladesh Bank. Bank’s own assessment and SREP team’s review will be linked up during this dialogue. Therefore, besides the Basel II implementation unit, the Bank has formed a well designated SRP team aiming to successful implementation of Basel II capital accord in the Bank.

Pillar 3 or Market Discipline is to complement the minimum capital requirement and the supervisory review process. As per the guideline of Bangladesh Bank, MBL has furnished a broad disclosure framework and reveals it to the Bank’s Annual Report as well as Webside so that stakeholders of MBL can assess the position regarding holding of assets and to identify the risks relating to the assets and capital adequacy.

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Corporate Governance is the process of practicing accuracy, accountability, smart stewardship, effective internal control, customary corporate behavior in an organization. It is the means, by which an organization is operated and controlled. It protects the interests of all stakeholders of an organization. Good Corporate Governance should be ensured in the banks, as they deal with huge public money and interests of the depositors. Fairness, Transparency, Accountability and Responsibility are the minimum standard of acceptable corporate behavior today. At MBL, the Board is committed to maintaining high standards of corporate governance with a view to enhancing stakeholder value, increasing investor confi dence, establishing customer trust and building a competitive organization to pursue the Bank’s corporate vision to be a fi nancial services leader in the country. The Board’s fundamental approach in this regard is to ensure that the right executive leadership, strategy and internal controls for risk management are well in place. Additionally, the Board is committed to achieving the highest standards of business integrity, ethics and professionalism across all of the Bank’s activities.

A key objective of our governance framework is to ensure compliance with applicable legal and regulatory requirements and with best governance practice as set out in the concerned Securities and Exchange Commission’s Notifi cation. MBL also examines developments in corporate governance standards of leading and reputable organizations and institutions in the region and around the world to ensure that its approach in Bangladesh and in countries the Bank has presence is in line with the latest international best practices.

The Board continuously reviews its governance model to ensure its relevance and ability to meet the challenges of the future.

To ensure Corporate Governance, MBL always sticks to the principles, which cover the following areas:

• Board of Directors, its formation, roles and responsibilities;

• Delegation of fi nancial, business and administrative power to the Management;

• Accountability and Internal Control;

• Transparent and neutral Audit Function;

• All-out compliance in Legal Matters;

• Effective Communication with the Stakeholders.

The Board informs the shareholders on the application of its corporate governance model for the fi nancial year ended on 31 December 2011, as set out hereunder.

Report on Corporate Governance

The purpose of this Corporate Governance Statement is to provide stakeholders with an important insight into the corporate governance practices of the Bank

‘ ‘

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THE BOARD OF DIRECTORS

Composition of the Board

MBL’s Board of Directors currently comprises 22 (twenty two) members, including the Managing Director & CEO. It is well-structured with a Chairman and two Vice Chairmen. Mr. Md. Abdul Jalil, M.P is the Chairman, while Mr. Morshed Alam and Mr. Mohd. Selim are the Vice Chairmen of the Board.

The Board is committed to ensure diversity and inclusiveness in its deliberations. The Directors bring to the Board a wealth of knowledge, experience and skills in the key areas of accountancy, law, international business operations and development, fi nance and risk management, amongst others.

Appointment of Board Members and their Remuneration

There is a formal and transparent procedure for the appointment of Directors to the Board. The members of the Board are appointed each year in the Annual General Meeting (AGM) by the Shareholders of the Bank. The members of the Board are appointed in compliance with Central Bank’s Guidelines and other applicable rules of the country. As per Bangladesh Bank’s Guidelines, the Board of Directors is paid remuneration as they compensate their valuable time and efforts.

Board Meetings and Agenda

Board meetings are normally held to discuss and decide on major corporate, strategic and operational issues, as well as to evaluate major investment opportunities. The consent of the Board is normally given by majority votes at Board meetings. The agenda and materials for each Board meeting are provided to the Directors well in advance of the Board meeting for their convenience to take preparation on the agenda. They are provided substantial input and comments on agenda items. The Board Agenda is prepared by the Company Secratary as per directives of the Chairman of the Board. All Board papers are organized and circulated by the Company Secretary of the Bank. In 2011, 20 (twenty) Board Meetings were held wherein; policies and major business strategic decisions were formulated.

Role and Responsibilities of the Board of Directors

MBL’s Board of Directors, the prime policy making Body always remains concerned to protect the interests of all Stakeholders, including the Depositors. The Board has the responsibility to periodically review and approve the overall strategies, business, organization, and signifi cant policies of the Bank. The Board also sets the Bank’s core values and adopts proper standards to ensure that

the Bank operates with integrity and complies with the relevant rules and regulations.

Key Responsibilities of the Board of Directors

The Board has a formal schedule of matters reserved for its decision which include, amongst others, the following:

• Determine the objectives and goals of the Bank; formulate strategies and work plans to achieve the goals;

• Determine the Key Performance Indicators for the Managing Director & CEO and other Executives in formulating annual plan of the Bank and apprise the performance indicators time to time;

• Approve policies, strategies and action plans for recovery of loans, rescheduling, interest rebates and write off abiding by existing laws and regulations;

• Formulate policy for risk management and scrutinize the implementation status of the policy;

• Review the report presented by the Audit Committee, regarding the implementation status of recommendation made by the Bangladesh Bank’s inspection team, internal auditors and the external auditors;

• Formulate and approve policy regarding appointment, promotion, transfer, Code of Conduct, human resources development and job rules;

• Concentrate on suffi cient training facilities for improving the effi ciency of the employees, ensure that information systems and technology are suffi cient to operate banking activities effectively and maintain competitiveness

• Approve the Budget and Financial Statements of the Bank; review the achievement of Budget and modify the Budget as per varying economic and business environment;

• Review the income-expense, liquidity management, past due claims, capital base and its adequacy, maintenance of provisions, and initiatives of loan recovery including legal actions;

• Formulate and approve purchase policy; Capital Plan of the Bank;

• Ensure that the Bank complies with all relevant laws and regulations, including Central Bank’s Guidelines, Dhaka and Chittagong Exchange’s Listing Regulations and Securities & Exchange Commission’s Notifi cations;

• Approve the minutes of Executive Committee, which is formed to resolve on regular business issues

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and also approve the minutes and fi ndings of Audit Committee, which is formed in order to ensure compliance at Head Offi ce and Branch level in every aspects so that Stakeholders’ right is protected to the extent of highest degree.

• Ensure the Codes of Corporate Governance, codes of best business practice, emphasizing importance on effective operating infrastructures and system of control;

• Ensure fi nancial transparency, integrity of accounting and sustainable corporate behavior are in right place;

• Appoint External Auditors, Consultants, and other Advisors, after having approval in the AGM of the Shareholders;

• Encourage and ensure the Bank’s active participation in Corporate Social Responsibility activities; etc.

Role and Responsibilities of the Chairman of the Board and the Managing Director & CEO

In line with the best practices and to ensure appropriate supervision of the Management, the roles and responsibilities of the Chairman and the CEO are separated with clear division of responsibilities, defi ned and documented as approved by the Board. This distinction allows for a better understanding and distribution of jurisdictional responsibilities and accountabilities. The clear hierarchical structure with its focused approach and delegated authority limits also facilitates effi ciency and expedites decision-making.

Chairman

Mr. Md. Abdul Jalil, is the Chairman of MBL. The Chairman leads the Board and is also responsible for the effective performance of the Board. The Chairman continuously works together with the rest of the Board members in setting the policy framework and strategies to align the business activities driven by the senior management with the Bank’s objectives and aspirations, and monitors its implementation.

The Chairman ensures orderly conduct and proceedings of the Board, where healthy debate on issues being deliberated is encouraged. The Chairman takes the lead to ensure the appropriateness and effectiveness of the succession-planning program for the Board and senior management levels. He also promotes a healthy working relationship with the CEO and provides the necessary support and advice as appropriate. He continues to demonstrate the highest standards of corporate governance practices and ensures that these practices are regularly communicated to the stakeholders.

Managing Director & CEO

Mr. A.K.M Shahidul Haque is the Managing Director & CEO of MBL. As CEO, he has been delegated certain responsibilities by the Board and is primarily accountable for overseeing the day-to-day operations to ensure the smooth and effective operation of the Bank. Furthermore, he is responsible for mapping the medium to longer term plans for Board approval, and is accountable for implementing the policies and decisions of the Board, as well as coordinating the development and implementation of business and corporate strategies, specifi cally by making sure that they are carried through to their desired outcomes, especially in the institution of remedial measures to address identifi ed shortcomings. He is also responsible for developing and translating the strategies into a set of manageable goals and priorities, and setting the overall strategic policy and direction of the business operations, investment and other activities based on effective risk management controls.

The CEO ensures that the fi nancial management practice is performed at the highest level of integrity and transparency for the benefi t of the shareholders and that the business and affairs of the Bank are carried out in an ethical manner and in full compliance with the relevant laws and regulations. His other responsibilities include ensuring that whilst the ultimate objective is maximizing total shareholders return, social and environmental factors are not neglected, and also developing and maintaining strong communication programs and dialogues with the shareholders, investors, analysts as well as employees, and providing the effective leadership to the organization. He is also responsible for ensuring high management competency as well as the emplacement of an effective management succession plan to sustain continuity of operations. The CEO, by virtue of his position as a Board member, also functions as the intermediary between the Board and the management.

Role of the Company Secretary

Mr. S. Q. Bazlur Rashid, Executive Vice President is the Company Secretary of the Bank, who provides advices to the Board of Directors and the Management. He is responsible for advising the Board on issues relating to corporate compliance with the relevant laws, rules, procedures and regulations affecting the Board and the Bank, as well as best practices of governance. He is also responsible for advising the Directors of their obligations and duties to disclose their interest in securities, disclosure of any confl ict of interest in a transaction involving the Bank, prohibition on dealing in securities and restrictions on disclosure of price sensitive information.

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The Securities and Exchange Commission issued a Notifi cation for all listed companies in order to improve Corporate Governance in the interest of the investors and capital market on ‘Comply or Explain’ basis. The Company Secretary keeps the records of the Bank’s compliance/non-compliance status of the conditions imposed by SEC which has been shown in the Compliance Report on SEC Notifi cation.

BOARD COMMITTEESAs per Bangladesh Bank’s guidelines, all banks have to form an Executive Committee and an Audit Committee of the Board to take decisions on urgent matters of the banks. Without Executive Committee and Audit Committee, Banks cannot form any other Committee or Sub Committee of the Board.

MBL’s Board of Directors has formed 2 (two) Committees i) Executive Committee and ii) Audit Committee, complying

with Central Bank’s guidelines. The Board delegates some of its governance responsibilities to the following Board Committees, which operate within clearly defi ned terms of references, primarily to assist the Board in the execution of its duties and responsibilities. Although the Board has granted such discretionary authority to these Board Committees to deliberate and decide on certain operational matters, the ultimate responsibility for fi nal decision on all matters lies with the entire Board.

Executive Committee-its Composition and Role

Executive Committee (EC) of the Board has been formed with 7 (seven) members from the Board. EC decides upon all routine and day-to-day operational functioning of the Bank beyond delegated power of the Management. In the year 2011, 40 (forty) meetings of Executive Committee were held. The Composition of Executive Committee is as follows:

Among others, Executive Committee according to its Charter discharges the following duties:

• Decides upon all routine and day-to-day operational functioning of the Bank beyond the power delegated to the Management.

• Ensures implementation of policies, as per approval from the Board of Directors.

• Reviews the policies and guidelines issued by the Central Bank regarding credit, foreign exchange, treasury and other operations of the Bank.

• Approves the credit proposals as per the approved policy of the Board of Directors.

Audit Committee-its Composition and Role

The Audit Committee is authorized by the Board to investigate any activities within its Terms of Reference and has unrestricted access to both the internal and external auditors and members of the senior management of the Bank. Audit Committee plays its role according to its Charter, approved by the Board of Directors. Present Audit Committee constituted by the Board with 3 (three) members on April 11, 2011. Subsequently, the Board of Directors in its 181st meeting held on 04 July, 2011 re-constituted the Audit Committee with 5 (fi ve) members from the Board. In the year 2011, 13 (thirteen) meetings of Audit Committee were held. The Composition of the Audit Committee is as follows:

SI No. Composition of Executive Committee Position

1 Mr. M. S. Ahsan Chairman

2 Mr. Golam Faruk Ahmed Member

3 Mrs. Bilkis Begum Member

4 Mr. A. S. M. Feroz Alam Member

5 Mr. M. Amanullah Member

6 Mr. A. K. M. Shaheed Reza Member

7 Mr. Md. Shahabuddin Alam Member

SI No. Composition of Audit Committee Position

1 Alhaj Akram Hossain (Humayun) Chairman

2 Mr. Md. Anwarul Haque Member

3 Mr. Mohd. Selim Member

4 Mr. Md. Nasiruddin Choudhury Member

5 Mrs. Israt Jahan Member

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The Audit Committee of the Board plays signifi cant role in proper functioning of the Bank, some of which are as follows:

• Reviews the implementation status of guidelines, provided by Bangladesh Bank and other regulatory bodies;

• Reviews Bank’s own policies and procedures; such as Credit Policy, Foreign Exchange Policy, Human Resources Policy etc.;

• Reviews the Bank’s audited and un-audited Financial Statements, discusses and exchanges views with the External Auditors and Tax consultants on the adequacy of disclosures of Financial Statements;

• Reviews the corrective measures taken by the Bank’s Management as recommended by the Board Audit Division, Internal Control and Compliance Division, Bangladesh Bank’s Inspection Team and External Auditors relating to defi ciencies in internal control or other similar issues;

• Reviews whether Internal Control strategies recommended by the Board of Directors have been implemented by the Management;

• Reviews the Human Resource management and evaluates whether the Management is setting the appropriate compliance culture by communicating the importance on Internal Control;

• Reviews the audit plan of Bank’s internal audit and inspection;

• Reviews the internal audit report of Head Offi ce and Branches.

Salient Features of the Audit Committee Charter

MBL’s Board of Directors has set some salient features for its Audit Committee Charter, such as:

• The Audit Committee should be composed of at least 3 (three) members from the Board;

• The Chairman of the Audit Committee should have professional knowledge and relevant fi nancial expertise;

• The Chairman of the Board of Directors shall not be a member of the Audit Committee;

• Audit Committee meetings must be held quarterly to monitor internal and external audits;

• Audit Committee must prepare reports on all meetings for the Board of Directors and report annually to Shareholders;

• The Managing Director & CEO or the Chairman of the Board may be invited to attend on the Audit Committee meetings as and when required.

MANAGEMENT COMMITTEES

MBL has formed a number of committees with a view to support the management in carrying out banking operation smoothly. Management Committee (MANCOM), Asset Liability Committee (ALCO), Basel II Implementation Unit, Risk Management Committee, ICAAP Preparation Committee, Management Reporting System (MRS) Committee, Share Investment Committee, Credit Assessment Committee, Purchase Committee have been supporting the Bank’s management in discharging its duties effi ciently and effectively.

MANAGEMENT COMMITTEE (MANCOM)

As per directives of Bangladesh Bank and for setting a strong internal control framework, each bank must have an effective ‘Management Committee (MANCOM)’, which is responsible for overall management of the Bank. MANCOM is considered the highest decision and policy making authority of the Bank and MBL’s MANCOM consists of all Corporate Level Executives and Divisional and Departmental Heads. Meetings of MANCOM are presided over by Managing Director & CEO of the Bank. MANCOM sits twice in a month preferably, fi rst and third Mondays of each month or, any suitable day of every alternative week. Managing Director may invite other Executives from Branches inside or outside of Dhaka city. MBL’s MANCOM is comprised of following members:

Composition of MANCOM Position

Managing Director & CEO Chairman

Deputy Managing DirectorsMembers

All Heads of Divisions, Departments and Corporate Level Executives at Head Offi ce

Head of Public Relations Division Member Secretary

Responsibilities of MANCOM

MANCOM of the Bank is primarily responsible to:

• Formulate procedures to identify, measure, monitor and control all risks;

• Assign clear responsibility, authority and reporting relationship;

• Monitor adequacy and effectiveness of the internal control system;

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• Review overall effectiveness of the control system of the Bank;

• Recommend/ rectify alternatives in case of any deviation from desired goal.

ASSET LIABILITY COMMITTEE (ALCO)Asset Liability Committee (ALCO) is mainly accountable for managing the market risks. The results of Balance Sheet analysis along with recommendations are placed before ALCO meeting to aid the decision making process of the Senior Management. In each ALCO meeting following issues are addressed:

• Review of actions taken in previous ALCO;

• Review of the assets’ and liabilities’ pricings;

• Review of interest rate structure in different economic scenarios;

• Liquidity risk related to the Balance Sheet;

• Economic and market scenario.

Composition of ALCO

Composition of MBL’s ALCO is as follows:

Composition of ALCO Position

Mr. A.K.M. Shahidul Haque Managing Director & CEO Chairman

Mr. Md. Abdul Jalil Chowdhury Deputy Managing Director

Members

Mr. Monindra Kumar Nath Deputy Managing Director & CFO

Mr. M. A. Yousuf Khan Deputy Managing Director

Mr. Md. Quamrul Islam Chowdhury DMD and Head of Main Branch

Mr. Chowdhury Moshtaq Ahmed Deputy Managing Director

Mr. Khandakar Fahim Uddin Ahmed EVP and Head of CAMRCD

Mr. Md. Sadruzzaman EVP and Head of SME

Mr. Md. Shoaib Ahmed EVP and Head of CRMD

Mr. Javed Islam EVP and Head of Consumer and Retail

Mr. Md. Rafi qul Haque Bhuiyan SVP and Head of IT

Mr. Shamim Ahmed SVP and Head of ID

Mr. Golam Kibria SVP and Head of FAD

Mr. Md. Abdul Alim FVP and Head of RPD

Mr. Md. Shawkat Jahan Khan SVP and Head of Treasury Member Secretary

SUPERVISORY REVIEW PROCESS (SRP) TEAM

Under Pillar-2 of Basel-II (Supervisory Review Process), all banks are required to design their own Supervisory Review Process to ensure maintenance of adequate capital to fully cover all risk exposures. As per Guidelines on Supervisory Review Evaluation Process, the level of Capital Adequacy will be determined after evaluation and dialogue between Bangladesh Bank and the SRP Team

of the Bank. The assessment of capital adequacy will be the outcome of a dialogue between the Bank’s own SRP Team and BB’s Supervisory Review Evaluation Process (SREP) Team. Bank’s own assessment and SREP Team’s review will be linked up during this dialogue.

Composition of SRP Team

SRP Team of MBL has been formed comprising of the following Senior Offi cials:

Composition of SRP Team Position

Managing Director & CEO Chairman

Deputy Managing Directors

Members

Head of Credit Risk Management Division

Head of Credit Administration Division

Head of Internal Control and Compliance Division

Head of Risk Management Division

Head of Financial Administration Division

Head of Treasury Division

Head of Research and Planning Division Member Secretary

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Functions of the SRP Team

BB’s SREP Team will arrange dialogue to evaluate Minimum Capital Requirements (MCR) against Credit, Market and Operational risks; Risks not fully covered under MCR (e.g. Residual Risks deriving from risk mitigation techniques, securitization risk, and model risk); Risks which to be covered under SRP (Credit concentration risk, Country risk, Interest rate risk in the banking book, Liquidity risk, Settlement risk, Reputation risk, Strategic risk, Other material risks, etc.); Risks deriving from external factors (such as, change in economic and regulatory environment); Adequate capital against comprehensive risks of the Bank. SRP Team of the Bank will attend on the dialogue arranged by BB’s SREP Team.

BB’s SREP Team will also evaluate the Bank’s SRP fi ndings. In the SRP fi ndings capital allocation against each category of risks is to be disclosed. SRP Team of the Bank will discuss and allocate capital against above-mentioned Risks. SRP Team of the Bank will also describe the assessment procedures for these risks and rationale for selecting any particular method and discuss the assessment techniques used (model based, scenario analyses, and stress testing) and quantitative results of each risk. SRP Team will discuss and explain present challenges faced by the Bank to improve the risk management framework and will develop action plans with suitable timeline to adopt/develop the sophisticated advanced techniques or assessment and measurement of all material risks.

BASEL II IMPLEMENTATION UNIT

Bangladesh Bank has implemented Basel II Capital Standard in the banking sector solely from January 2010. MBL has formed a Committee, namely ‘Basel II Implementation Unit’. The Committee acts for successful adoption of Basel II.

Functions of Basel II Implementation Unit

In its each meeting, Basel II implementation Unit discusses the implementation progress of Basel II Capital Accord. Moreover, it

• Reviews the Total Risk Weighted Assets (RWA) of the Bank;

• Reviews the current total Capital Fund (Core and Supplementary) of the Bank;

• Assesses the Capital requirement of the Bank;

• Formulate the strategies to raise the capital to cope with Basel II, if required;

• Reviews the Capital Adequacy Ratio and compare with the Standard set by Bangladesh Bank;

• Ensures timely submission of Basel II Report to Bangladesh Bank;

• Takes initiatives for corporate clients rating of the Bank;

• Recommends the Management to raise Capital, if necessary;

• Arranges training programs for the Reporting Offi cers of the Branches so that they can prepare Basel II report effi ciently and precisely.

Composition of Basel II Implementation Unit

Basel II Implementation Unit has been formed with the following members:

Composition of Basel II Implementation Unit Position

Mr. A.K.M. Shahidul Haque Managing Director & CEO Chairman

Mr. Md. Abdul Jalil Chowdhury Deputy Managing Director

Members

Mr. Monindra Kumar Nath Deputy Managing Director & CFO

Mr. M. A. Yousuf Khan Deputy Managing Director

Mr. Md. Quamrul Islam Chowdhury DMD and Head of Main Branch

Mr. Md. Abdus Salam SEVP and Head of Board Audit

Mr. Md. Shoaib Ahmed EVP and Head of CRMD

Mr. Md. Rafi qul Haque Bhuiyan SVP and Head of IT

Mr. Md. Golam Kibria SVP and Head of FAD

Mr. Md. Shawkat Jahan Khan SVP and Head of Treasury

Mr. Md. Abdul Alim FVP and Head of Research and Planning Member Secretary

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ICAAP PREPARATION COMMITTEE

MBL has formed ‘ICAAP Preparation Committee’ to prepare the Internal Capital Adequacy Assessment Process for the Bank. The Committee is supposed to assess the overall capital adequacy of the Bank in relation to risk profi le. The Committee clearly bears primary

responsibility for ensuring that MBL has adequate capital to support its risks.

Composition of ‘ICCAP Preparation Committee’ of the Bank is as follows:

Committee for Management Reporting System (MRS)

MBL has formed a committee as per Central Bank’s requirement, namely, ‘Committee for Management Reporting Systems (MRS)’. MRS fulfi lls the following objectives:

• Collection of information from the internal as well as external sources against any product of the Bank which is apparently found ineffective or unacceptable to the ultimate user;

• Identify the actual weakness / defects for taking appropriate decision by the Management/ Board of Directors;

• Locate the reason of weak performance of any of the branches through collection of relevant information of other banks of the same locality;

• Other internal/external issues may be raised by the Committee to the Management/ Board of Directors for proper solution.

PURCHASE COMMITTEE

A Purchase Committee is functioning with a group of executives headed by a senior most Executive to examine the procurement procedure of goods, services or works whether it has been placed on the basis of actual requirement and maintained necessary formalities as per guidelines of the purchase policy. Among others, the followings are the main responsibilities of Purchase Committee of the Bank:

• To evaluate the proposal (s) received and fi nd out the effectiveness of each proposal;

• To prepare a report on the basis of evaluation of the purchase proposal (s) with recommendation and send

to concerned division for obtaining approval from the competent authority against procurement of goods, services or works;

• To supervise the entire activities against procurement.

INVESTMENT COMMITTEE

With a view to achieve diversifi cation in asset portfolio and generating a healthy revenue (as income from buy/sale of shares through secondary market), MBL has formed an Investment Committee, which is primarily responsible to take investment decision in shares.

Responsibilities of Investment Committee

• The Committee will sit for meeting at least once in a week, or as and when necessary after having consent from the Chair;

• The Committee will take primary decision for investment in shares;

• The Committee will ensure compliance of investment policy while maintaining portfolio of shares;

• The Member Secretary will prepare a weekly report on status of investment and report the same to Managing Director & CEO through Chairman;

• The Committee will determine buy range, sale range and loss limit for every share in the portfolio and Member Secretary will convey the same to the Front Offi ce.

RISK MANAGEMENT COMMITTEE

MBL has formed a separate Risk Management Committee as per Bangladesh Bank’s circular letter no DOS (EW) 1164/14 (Mercantile) 2009-457 dated June 10, 2009.

Composition of ICAAP Preparation Committee Position

Mr. Md. Abdus Salam SEVP and Head of Board Audit Chairman

Mr. Md. Shoaib Ahmed EVP and Head of CRMD Vice Chairman

Mr. A.K.M Atiqur Rahman SVP and Head of Risk Management

MembersMr. Md. Golam Kibria SVP and Head of Financial Administration Division

Mr. Md. Shawkat Jahan Khan SVP and Head of Treasury Division

Mr. Md. Abdul Alim FVP and Head of Research & Planning

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Composition of Risk Management Committee PositionMr. A.K.M. Shahidul Haque Managing Director & CEO ChairmanMr. Md. Abdul Jalil Chowdhury Deputy Managing Director

Members

Mr. Monindra Kumar Nath Deputy Managing Director & CFOMr. M. A. Yousuf Khan Deputy Managing DirectorMr. Md. Shoaib Ahmed EVP and Head of CRMDMr. Md. Sayeed Hossain EVP and Head of ICCDMr. Md. Rafi qul Haque Bhuiyan SVP and Head of ITMr. Md. Golam Kibria SVP and Head of FADMr. Shah Syed Abdul Bari SVP and Head of GBMr. Md. Shawkat Jahan Khan SVP and Head of Treasury Mr. Md. Abdul Alim FVP and Head of Research and PlanningMr. A. K. M. Atikur Rahman SVP and Head of Risk Management Div. Member Secretary

The responsibilities of the Risk Management Committee for risk oversight include, amongst others, the following:

• To develop and foster a risk aware culture within the Bank;

• To review and approve risk management strategies, risk frameworks, policies, risk tolerance and risk appetite limits;

• To review and assess adequacy of risk management policies and framework in identifying, measuring, monitoring and controlling risks and the extent to which they operate effectively;

• To ensure the infrastructure, resources and systems are in place for risk management. The Staff responsible for implementing risk management systems perform those duties independently of the fi nancial institution’s risk taking activities;

• To review and approve model risk management and validation framework.

ACCOUNTABILITY AND INTERNAL CONTROL

Accountability

Accountability is central to the concept of good corporate governance. Accountability mainly arises from the Agency Relationship among the Stakeholders. The Management team is subject to check and balance which ensures that management’s action is reviewed by the Board. Due to agency relationship, agents are accountable to the principals to carry out their assigned duties with due care in the interest of the principals. MBL’s Board of Directors is accountable to the Shareholders (owners of the Bank). The Management is accountable to the Board for their activities.

MBL’s Board of Directors Responsibilities in preparing Financial Statements

MBL Board of Directors ensures that the fi nancial statements of the Bank refl ect a true and fair view of the state of affairs of the Bank as at the end of the accounting period and of the profi t and loss and cash fl ow for the period then ended. In preparing the fi nancial statements, the Directors have applied suitable accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent. The Directors have also ensured that all applicable accounting standards have been followed and fi nancial statements are prepared on a going concern basis as the Directors have a reasonable expectation, having made enquiries that the Bank has adequate resources to continue in operational existence for the foreseeable future.

The Directors also have responsibility for ensuring that the Bank keeps accounting records which disclose with reasonable accuracy the fi nancial position of the Bank and which enable them to ensure that the fi nancial statements comply with the provisions of the Companies Act, 1994. The Directors generally have the duty to take such steps as are reasonably open to them to safeguard the assets of the Bank to prevent and detect fraud and other irregularities.

Accountability in Disclosure of Material Facts

The Board has a Fiduciary Responsibility and takes it upon itself to present to the shareholders and the public at large, a clear, balanced and meaningful evaluation of the Bank’s fi nancial position, performance and prospects. In order to meet the Fiduciary Responsibility expected of the Board, the Board with the assistance of the Audit Committee oversees the fi nancial reporting process and the quality of the Bank’s fi nancial statements to ensure that the reports present a true and fair view of the Bank’s

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performance. The Board also ensures that the fi nancial treatment of the consolidated accounts under the Bank is based on the more stringent requirements and that the fi nancial statements of MBL are in compliance with Generally Accepted Accounting Principles (GAAP), Bangladesh Accounting Standards (BAS), Bangladesh Financial Reporting Standards (BFRS), Bangladesh Bank’s Circulars, Schedule of Bank Companies Act of 1991, the Companies Act-1994, the Securities and Exchange Rules-1987 and other applicable laws and regulations.

The scope of the disclosure includes a review of the main sources of revenue by business activity and geography, past year performance analysis and fi nancial adequacy, together with detailed explanation of the changes in the Balance Sheet and Profi t and Loss Statement, to facilitate better understanding of the Bank’s operations. In addition to the Audited Report, the Bank also releases its unaudited quarterly fi nancial results on a timely basis. These are also accessible on MBL’s website.

Accountability in Maintaining Confi dentiality of Information

Information of the customers, prospective customers, suppliers, shareholders and employees is kept confi dential. Information is used solely for corporate purposes and never to be discussed with or divulged to unauthorized people including family, friends and acquaintances. Examples of confi dential information broadly include: (a) customer’s account or business details, (b) shareholder’ holding or transaction details, (c) employees’ job records, pay perquisites, benefi ts tax issues etc. (d) suppliers’ price, sales strategy etc. (e) Internal documents like strategy papers, Product Program Guidelines(PPG) etc.

Internal Controls

MBL’s Board of Directors has established a management structure that clearly defi nes roles, responsibilities and reporting lines for Internal Control and Compliance. The Board has overall responsibility for maintaining sound internal control systems that cover fi nancial controls, operational compliance controls and risk management to ensure that shareholders’ investments, customers’ interests and the Bank’s assets are safeguarded.

The systems of internal controls are continuously reviewed to ensure that they are working via the ongoing review through internal audit process. The Audit Committee (AC) regularly evaluates the effectiveness and adequacy of the Bank’s internal control systems by reviewing the actions taken on internal control issues identifi ed in reports prepared by Bank Internal Audit during its monthly meetings. The AC also reviews audit recommendations and management’s responses to these recommendations.

Related party transactions are enclosed in the Notes of the Financial Statements. Lending to the members of the Board or Controlling Shareholders is strictly prohibited by the Bank Memorandum and Articles of Association since inception.

Internal Control on key Risks faced by the Bank and Risk Management Policies

There exists risk in every transactions of a bank. So, Risk Management is important in fi nancial sector. Bangladesh Bank has identifi ed six Core Risks and provided guidelines to identify and thereafter minimize the risks. The Board of Directors of the Bank formulated policies for identifying, measuring and controlling the risks involved with banking activities. The Board makes sure that employees have been assigned responsibilities for managing risks, and proper training has been provided to enable them to understand and identify risks as well.

AUDIT FUNCTIONIn the case of fi nancial audits, a set of fi nancial statements are said to be true and fair when they are free of material misstatements - a concept infl uenced by both quantitative (numerical) and qualitative factors. Traditionally, audits were mainly associated with gaining information about fi nancial systems and the fi nancial records of a company or a business. However, recent auditing has begun to include non-fi nancial subject areas, such as safety, security, information systems performance, and environmental concern and compatibility.

Internal Audit FunctionBoard Audit Function

A separate Audit Division, namely, Board Audit Division has been formed within the Bank. Mr. Md. Abdus Salam, Senior Executive Vice President is working now as the Head of the Division. Board Audit Division reviews the compliance status of Policy Guidelines of the Board of Directors of the Bank and also of the regulators. It also reviews the business performance of the Bank. Board Audit Division visits the Branches and Other Divisions of the Bank for verifi cation and inspection purpose.

Internal Control and Audit Function Compliance

For an effective control system, a separate and independent Internal Control and Compliance Division (ICCD) has been established in the Bank. ICCD provides assurance to the Bank’s Management that systems are operating effectively; internal controls are effective; laid down procedures are followed; fi nancial and other information being produced is sound and reliable.

The Bank, by its Internal Audit team conducts regular audit functions on the business activities of the Bank based on different manuals, instructions, guidelines and

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procedures laid down by the Bank as well as regulatory bodies from time to time. The main objectives of this internal audit/inspection are to minimize the Operational Risks of the Bank.

Direct Access of ICCD to the Board of Directors and the Audit Committee of the Bank

MBL’s ICCD has a broad scope of work to investigate at all levels. It is independent from the Management, with a direct access to the Board of Directors and the Audit Committee of the Board. ICCD has the authority to propose initiatives and changes directly to the Board of Directors. Accordingly, The Board of Directors formulates policy for the Bank.

IT Audit

MBL is fully dependent on Information Technology, and a number of inherent risks such as data collapse, data loss, data modifi cation, unauthorized access to data etc may arise within the Bank. IT Audit Team has been formed as per the Central Bank’s Guidelines to identify the inherent risks and manage those risks in an effective and effi cient manner. IT Audit Team follows the prescribed guidelines, solves the unsettled issues and also suggests to the higher Management for needful action.

External Audit Funtion

External Auditors

Ahmed Zaker & Co. and K. M. Hasan & Co. have been appointed as the External Auditors of the Bank in the 12th AGM of the Shareholders. They audit the Financial Statements of the Bank namely, Balance Sheet, Profi t and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Statement of Liquidity Analysis and explanatory notes to fi nancial statements. External Auditors are entitled to require from the Bank’s offi cers and employees such information and explanation as they think necessary for the performance of their duties as External Auditors. Bank employees provide them accurate, timely information or explanations as and when required by the External Auditors.

Central Bank’s Inspection

Bangladesh Bank conducts comprehensive inspection at Head Offi ce and Branches of the Bank. Central Bank’s Inspection Team exchanges their views with the Bank’s External and Internal Auditors regarding Financial Operation, Treasury Operation, IT Operation, and various process of the audit. Inspection report of the Central Bank is reviewed by the Board of Directors and corrective actions are taken regarding lapses mentioned in the report.

COMPLIANCE AND REGULATORY MATTERSCompliance with relevant Rules and Regulations

MBL runs its business activities in full compliance with relevant rules and regulations. While conducting its operation, the Bank follows strictly Bank Companies Act, 1991, The Companies Act, 1994, Central Bank’s Guidelines, Securities and Exchange Rules -1987, Dhaka and Chittagong Stock Exchange Listing Rules, Bangladesh Accounting Standards (BAS), Bangladesh Financial Reporting Systems (BFRS), IAS/IFRS guidelines, SAFA & CAPA guidelines, BIS and UCPDC.

Environmental Promotion

MBL concentrates on environment preservation by fi nancing Projects in the fi eld of renewable energy, organic agriculture across the entire value chain including health food shops and environment technology such as recycling companies and nature conservation projects. MBL always encourages projects which take care of following points while fi nancing them viz., (a) sustainable development and use of renewable natural resources (b) protection of human health, bio-diversity, occupational health and safety, effi cient production, delivery and use of energy (c) pollution prevention and waste minimization.

COMMUNICATION WITH STAKEHOLDERSCommunication with Shareholders

MBL takes critically its corporate responsibility to provide shareholders with the information necessary to form an informed opinion of the Banks performance. Press releases, interim and fi nal results announcements, interim and annual reports, and other information of interest to shareholders are uploaded to Company’s corporate website www. mblbd.com. Half Yearly and Annual Reports of the Bank are also sent to shareholders within the respective deadlines stipulated by the regulatory bodies.

Communication with Employees

To enhance mutual understanding and promote cooperation at all levels, the Board of Directors and the senior management of the Bank always maintains communication with the employees; discuss matters such as safety and the work environment, as well as broader issues relating to staff welfare.

Communication with the General Public

The Bank’s website www.mblbd.com serve as a easy access for key information source for business, fi nancials and other relevant information about the businesses of the Bank. In addition, from time to time, the Bank publishes reports and information brochures which set out specifi c aspects of the Bank’s operations for the general public.

Compliance Report on SEC NotificationThe Securities and Exchange Commission has issued a notifi cation for all listed companies in order to improve Corporate Goverance in the interest of the investors and capital market on ‘Comply or Explain’ basis. Status report on compliance with the conditions imposed by SEC is given below in prescribed format:

126 annual report

Condition No.

TilteCompliance Status

Complied Non Complied

Explaination for non-compliance with the

condition

www.mblbd.com

Serial no. Composition of the BoardNumber of Meeting : 2011

Held Attended

01 Mr. Md. Abdul Jalil, M.P 20 20

02 Mr. Morshed Alam 20 13

03 Mr. Mohd. Selim 20 19

04 Mr. M. S. Ahsan 20 19

05 Mr. Alhaj Akram Hossain (Humayun) 20 18

06 Mr. Md. Anwarul Haque 20 17

07 Dr. Toufi que Rahman Chowdhury 20 11

08 Mr. Golam Faruk Ahmed 20 09

09 Engr. Mohd. Monsuruzzaman 20 20

10 Mrs. Bilkis Begum 20 16

11 Mr. Md. Tabibul Huq 20 12

12 Mr. A. S. M. Feroz Alam 20 12

13 Mr. M. Amanullah 20 20

14 Mr. A. K. M. Shaheed Reza 20 20

15 Mr. Md. Nasiruddin Choudhury 20 17

16 Mr. Md. Shahabuddin Alam 20 08

17 Mr. Syed Muhammed Abbdul Mannan, M.P 20 12

18 Alhaj Mosharref Hossain 20 16

19 Mrs. Israt Jahan 20 11

20 Mr. M. A. Khan Belal* 15 14

21 Dr. Matiur Rahman M.P 20 11

22 Mr. A.K.M. Shahidul Haque 20 20

Compliance of Section 1.4 (j)Board meeting held during 2011 and attendance by each Director:

* Elected as Director as on April 11, 2011. Directors who could not attend meeting were granted leave of absence by the Board.

127annual report

The Pattern of ShareholdingParent/Subsidiary/Associated companies and other related parties : Nil•

Directors, Chief Executive Offi cer, Company Secretary, Chief Financial Offi cer, Head of Internal Audit.•

SL Name Shares Held% of

HoldingName of Spouses

Shares Held

% of Holding

01 Directors

Mr. Md. Abdul Jalil, M.P 2,481,390 0.50% Rena Jalil 1,097,510 0.22%

Mr. Morshed Alam 13,854,210 2.79% Bilkis Nahar 1,242,930 0.25%

Mr. Mohd. Selim 12,838,250 2.58% Farida Begum 1,240,490 0.25%

Mr. M. S. Ahsan 11,900,510 2.40% Farah Ahsan Nill Nill

Mr. Alhaj Akram Hossain (Humayun) 10,782,810 2.17% Ferdousi Begum 1,242,930 0.25%

Mr. Md. Anwarul Haque 7,861,050 1.58% Nargis Anwar 1,429,800 0.29%

Dr. Toufi que Rahman Chowdhury 1,293,200 0.26% Nazifa Khanam Chowdhury 122,000 0.02%

Mr. Golam Faruk Ahmed 5,266,150 1.06% Khurshida Ahmed 405,820 0.08%

Engr. Mohd. Monsuruzzaman 2,593,620 0.52% Sultana Ferdausi Bagum 639,370 0.13%

Mrs. Bilkis Begum 2,614,330 0.53% R.A. Howlader 15,450 0.00%

Mr. Md. Tabibul Huq 8,918,890 1.80% Mahmuda Huq Nill Nill

Mr. A. S. M. Feroz Alam 24,360,000 4.90% Yoko Inamori Nill Nill

Mr. M. Amanullah 30,000,000 6.04% Tazneen Aman 332,120 0.07%

Mr. A. K. M. Shaheed Reza 1,377,190 0.28% Zobeda Begum 90,180 0.02%

Mr. Md. Nasiruddin Choudhury 6,273,540 1.26% Khaleda Shahzadi 1,242,930 0.25%

Mr. Md. Shahabuddin Alam 18,151,290 3.65% Yeasmin Alam 1,242,930 0.25%

Mr. Syed Muhammed Abbdul Mannan, M.P 3,494,030 0.70% Farida Mannan 1,222,760 0.25%

Alhaj Mosharref Hossain 11,891,360 2.39% Feroza Begum 1,574,380 0.32%

Mrs. Israt Jahan 883,480 0.18% Md. Abdul Hanan 12,631,950 2.54%

Mr. M. A. Khan Belal 4,556,600 0.92% Morzina Khan Monzu 1,226,350 0.25%

Dr. Matiur Rahman, M.P 722,710 0.15% Rehana Chowdhury Nill Nill

02. Chief Executive Offi cer- Mr. A.K.M. Shahidul Haque Nil

03. Company Seccretary- S.Q. Bazlur Rashid Nil

04. Chief Financial Offi cer- Monindra Kumar Nath Nil

05. Head of Internal Audit- Md. Sayeed Hossain Nil

Executives ( top fi ve salaried employees of the company, other than the Directors, Chief Executive Offi cer,• Company Secretary, Chief Financial Offi cer and Head of Internal Audit :

Sl DESIGNATION NAME SHARE HELD

01 Deputy Managing Director Mr. Md. Abdul Jalil Chowdhury Nil

02. Deputy Managing Director Mr. Monindra Kumar Nath Nil

03 Deputy Managing Director Mr. M. A. Yousuf Khan Nil

04 Deputy Managing Director Mr. Md. Qumrul Islam Chowdhury Nil

05 Deputy Managing Director Mr. Choudhury Moshtaq Ahmad Nil

Shareholders holding ten percent or more voting interest in the company: Nil•

128 annual report

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The Audit Committee, constituted by the Board of Directors of the Bank on April 11, 2011 consisting three members:

Review the Bank’s Financial Statement- Balance • Sheet, Profi t & Loss Accounts, Cash Flow Statement, Statement of Changes in Equity, Liquidity Statement and related explanatory Notes as on December 31, 2010.

Comprehensive Inspection Program of the Bank for • June 30, 2011.

Achievements of the Audit Committee of Board • of Directors as per Terms of Reference (TOR) of Bangladesh Bank BRPD circular# 12, dated December 23, 2002.

Comprehensive Inspection Reports of different • branches of the Bank conducted by the Internal Audit and Inspection Team from time to time and the status of compliance thereof.

Review the Bank’s March 31, 2011, 1st Quarterly Un-• Audited Financial Statement- Balance Sheet, Profi t & Loss Accounts, Cash Flow Statement & Statement of Changes in Equity and Liquidity Statement.

Recommendation for appointment of External • Auditors in Annual General Meeting (AGM) of the bank.

During the year ended December 31, 2011, the Audit Committee of the Board of Directors conducted 13 (thirteen) meetings in which among other things, the following issues were discussed/evaluated/reviewed and provided guidelines and necessary instructions:

Subsequently, the Board of Directors in its 181st meeting held on July 04, 2011 re-constituted the Audit Committee with the fi ve following members of the Board of Directors:

Name Designation Educational Qualifi cation

Alhaj Akram Hossain (Humayun) Chairman B.Com

Md. Anwarul Haque Member B.Sc. Engg.

Md. Nasiruddin Choudhury Member B.Sc. Engg.

Name Designation Educational Qualifi cation

Alhaj Akram Hossain (Humayun) Chairman B.Com

Md. Anwarul Haque Member B.Sc. Engg.

Mohd. Selim Member B.A

Md. Nasiruddin Choudhury Member B.Sc. Engg.

Mrs. Israt Jahan Member Graduate

Report of Audit Committee

130 annual report

Review the implementation of Risk-based Audit as • per Bangladesh Bank requirement.

Review the Bank’s Un-Audited Financial Statement- • Balance Sheet, Profi t & Loss Accounts, Cash Flow Statement, Statement of Changes in Equity, Liquidity Statement and related explanatory Notes as on June 30, 2011.

Review the Health Report-2010 of the Bank.•

Management Audit Report and summary of the • fi ndings as detected by M/s Basu Banerjee Nath & Co. and Ahmed Zaker & Co. Chartered Accountants Firm.

Information regarding business as well as profi t • status of different Branches of Chittagong Zone as on August, 2011.

Review the Bank’s September 30, 2011, 3rd • Quarterly Un-Audited Financial Statement- Balance Sheet, Profi t & Loss Accounts, Cash Flow Statement & Statement of Changes in Equity and Liquidity.

Review whether Internal Control strategies • recommended by the Board of Directors have been implemented by the Management.

Review the corrective measures taken by the • Management, regarding the reports about defi ciencies in Internal Control or other similar issues detected by the Board Audit Division, Internal Audit & Inspection Division, Bangladesh Bank Inspection Team and External Auditors and subsequently inform the Board of Directors on a regular basis.

Discussed and exchanged views with the • representative of External Auditors and Tax consultant on the adequacy of disclosures of fi nancial statements in compliance with Bangladesh Accounting System (BAS).

Review the revision of Delegation of Power: i) • Financial and ii) Administrative of the Bank and suggest certain amendments.

Alhaj Akram Hossain (Humayun)

Chairman, Audit Committee

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In 2011, near about BDT 49.40 millon was incurred for CSR activities. The major arenas of CSR activities of MBL included...

Nation-wide education Scholarship • program for poor but meritorious students.

Rehabilitation to Disaster affected people•

Arts & Culture.•

Health & Medical Service.•

Environmental and Regional Rural • Development.

Sustaining and Nurturing National • Heritage, Traditional Value and Norms.

Report on Corporate Social Responsibility

132 annual report

Corporate Social Responsibility (CSR) refers to a form of corporate self-regulation integrated into a business model. This includes monetary donations and aid given to societies and impoverished communities of all over the country. Earlier CSR reports often focused on philanthropy as a driver of the same. That notion has been supplanted by a broad commitment of protecting and improving the lives of workers and the communities in which companies do business. Now, CSR reports typically address issues impacting virtually every area of operations: governance and ethics; worker hiring, opportunity and training; responsible purchasing; supply chain policies; energy & environmental impact. As the days progress, CSR is increasingly becoming an elemental part of a large number of companies around the world. It is becoming foremost, crucial, integrated and fundamental activities of Corporate bodies round the globe.

Corporate Social Responsibility (CSR) is a concept that frequently overlaps with similar approaches such

as corporate conscience, corporate citizenship, social performance, sustainable responsible business and is also linked to the concept of Triple Bottom Line Reporting (TBL), which is used as a framework for measuring an organization’s performance against economic, social and environmental parameters. CSR is titled to aid an organization’s mission as well as a guide to what the company stands for and its will to contribute for achieving sustainability in the society. In general, CSR is commonly described by its promoters as aligning a company’s activities with the social, economic and environmental expectations of its “stakeholders”. The goal of CSR is to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere too.

Report on Corporate Social Responsibility

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CSR Activities in MBL

CSR is an intregral part of MBL culture. Through different projects we presume to contribute to the community, but our main focus is to help millions of underprivilleged children and poor people in Bangladesh. MBL has always been active in social responsible projects since the inception. Basically, we deem CSR as MBL’s most static business model which is socially responsible and environmentally sustainable wherein, ‘socially responsible’ refers to the activities those are benefi cial for the society and ‘environmentally sustainable’ refers to our activities conducive to the environment. MBL is fully dedicated and motivated with this notion.

CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as at local community and society at large. For instance, the CSR defi nition used by Business for Social Responsibility is: “Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business”. The rationale for CSR has been articulated in a number of ways. In essence, it is about building sustainable businesses, which need healthy economies, markets and communities. The key drivers for CSR are:

• Enlightened self-interest - creating a synergy of ethics, a cohesive society and a sustainable global economy where markets, labors and communities are able to function mutually befi tted well together.

• Social investment - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business.

• Transparency and trust -usually, business has low ratings of trust in general public perception. There is increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas.

• Increased public expectations of business - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment.

CSR plan of MBL is mainly about the awareness of actions in support of environmentally sustainable societal development. Different organizations have framed different defi nitions of CSR although there is considerable common ground between them. MBL consider CSR as how companies manage the business processes

to produce an overall positive impact on society and environment. CSR is integrated into our operations, is part and parcel of our business and is also actively pursued at every level of the Bank. Our obligation to Corporate Social Responsibility ensures remaining true to our tradition of honesty; maintain a long-term point of view to make economically sound, environmentally responsible and socially supportive decisions. In line with this view, MBL has always been keen to deploy its resources not only towards maximizing economic profi tability, but also to offer better quality of life to both our internal and external stakeholder groups. MBL Corporate Social Responsibility, overseen by the MBL Foundation, has over the years aided us to ensure that our funding to many corporates all over the country been never void of fi ve key philanthropy pillars: community outreach, the arts, education, medical research, and the environment.

“Building a Sustainable Society”A more common platform of CSR is ‘Philanthropy’. MBL believes that CSR is indeed a fundamental part of the long-term business and sustainable growth and success, which plays an important role in promoting values both locally and internationally. There is no dilemma, through our day-to-day business operations; we are adding values to the society and the economy. Ultimate goal of CSR activities of MBL is “Building a Sustainable Society”. In line with Bank’s Vision and Mission Statement, CSR activities have been fully integrated into the business initiatives, which ultimately acts as a catalyst to build up an ever-lasting warm relationship with all the stakeholders and society people. The Bank promotes CSR activities, apart from its own fund, through Mercantile Bank Foundation, which acts as a helping hand to the distressed people of the country. Investment in CSR programs is always supported and encouraged by the Board of Directors. Through “CSR Desk”, the Management reports to the Board and Regulatory Bodies on CSR activities and is responsible to implement a specifi c line of approving authority, control and monitoring for fi nancial support of such activities.

In the sprit of corporate citizenship, MBL is set to fulfi ll its social obligations through a broad range of versatile activities. Our CSR activities are focused to encourage our culture and uphold our tradition; extending a helping hand to the deprived and the destitute; victims of natural calamities and the disabled. Even we extend our hands of cordial co-operation to the meritorious poor students. A signifi cant contribution of BDT 49.4 million has been made by MBL under CSR in 2011, along with many other CSR initiatives in the offering, which demonstrates our

134 annual report

commitment to the Community people as well as to the principles of a good “Corporate Citizen”. Sector-wise contribution of the Mercantile Bank Limited under CSR activities in 2011 has been furnished beneath:

Mercantile Bank Foundation

MBL believes that, true success does not consist in profi t maximization only rather in doing something for the betterment of deprived part of the society. With this vision, MBL has established a foundation in the name and style, “Mercantile Bank Foundation” in 2000, just after a year of its inception, to work for the distressed and disabled people. Actually, the Foundation has been promoting a dialogue between the Bank and its community people. Since the inception, MBL Foundation took part in several social welfare activities.

MBL contributes 1% of its Operating Profi t or BDT 4.00 million, which one is maximum, to the Mercantile Bank Foundation every year, and from this amount, the Foundation cares the distressed and disabled people of the country. Since inception, the foundation has been awarding some noted intellectual personalities of the society for their outstanding performance and contribution in their respective fi elds. In 2011, Mercantile Bank Foundation (MBF) launched a new scholarship program, “MBF Education Scholarship”. Under this program, MBL provided scholarship among the meritorious but poor students who have secured a considerable brilliant results in JSC, SSC and HSC in 2010 across the country despite oppressed by the inevitable fate accompanied by the poverty. Furthermore, the funding policy has focused on fi ve major areas: Community outreach, Health & Medical research, Education, Arts & Culture, development of Sports. MBL runs numerous philanthropy programs all over the country, and Mercantile Bank Foundation is forever destined to “do good” and even better in the days to come.

Objectives of Mercantile Bank Foundation

Mercantile Bank Foundation has been formed with the aim of achieving some underlying objectives including:

To take possible initiatives in increasing social well-• being and alleviating poverty from the country.

To support the education by establishing new • educational institutions, providing stipends/ scholarship to the poor but brilliant students.

To provide awards to the Scholars in eleven • signifi cant arenas for their outstanding contribution, as they uphold nation’s pride brightly even accross the geographical boundaries. These arenas are:

Bengali Language and Literature

Education

Culture

Liberation War based Research

Economics and Economics related Research

Healthcare

Science and Technology

Industry and Commerce

Journalism

Agriculture based Research and Development

Sports

To assist research activities on Bengali Literature • through Bangla Academy.

To support the writers and publishers through • purchasing their books and distributing these to different educational institutions on the occasion of national and historical days.

To assist the unemployed young to make them self-• suffi cient.

To assist the rootless and distressed orphans and • mentally retarded children through taking appropriate steps for their mental perfection and self-support.

To support in establishing hospitals, clinics, etc. • for the improvement of the health sector, to donate one time fi nancial endowment to the poor artiste, literature-patron, for ailing fatal disease-affected poor patients, to support the poor father for arranging his daughter’s marriage, and to help poor but bright students.

Sectors (BDT in Millions)

Education 11.80

Health 14.10

Disaster Management 9.20

Sports 1.90

Art & Culture 4.80

Others 7.60

Total 49.40

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MBF Education Scholarship ProgramMercantile Bank, for the fi rst time in this year launched a Scholarship program in the name and style, “MBF Education Scholarship-2010” for the meritorious but poor students across the country under the category of JSC, SSC and HSC. MBF Education Scholarship program is an explicit expression of MBL’s motive towards building the nation through extending hands of assistance to the future generation of the country.

In the light of corporate citizenship, Mercantile Bank is set to fulfi ll its social obligations through a broad range of

activities. Among them, MBL presumed that, education is the foremost tool for social change. As CSR activities, MBL foundation has continued the major contribution in Education & Research purpose. In 2011, MBL, from its foundation provided scholarship among the numerous poor but meritorious students who have successfully passed (with minimum CGPA of 4.50) J.S.C/S.S.C/H.S.C in 2010 across the country and really in need of fi nancial assistance to continue their studies further. The tenure of the Scholarship is 1 (One) year. The details information of the scholarship is as under:

Mercantile Bank Award-2011Arenas Scholars Rewarded

Bengali Language and Literature Dr. Mustafa Nur Ul Islam

Education Dr. Sirajul Islam Chowdhury

Culture Rafi qun Nabi

Liberation War based Research Shahriar Kabir

Economy and Economic Research Dr. Binayek Sen

Healthcare National Professor Brig. Dr. Abdul Malek

Science and Technology Dr. Maksudul Alam

Commerce and Industry Abdulla Hel Bari

Journalism Kamal Lohani

Sports Musa Ibrahim

Liberation War Lt. Col. (Rtd.) Kazi Nuruzzzaman (posthumous)

Category Money Awarded Per Month

J.S.C BDT 750

S.S.C BDT 1,000

H.S.C BDT 1,500

Mercantile Bank Award-2011

MBL always has encouraged the motive in mind to build an ever-lasting warm relationship with the customers, employees, fi nance providers, regulatory bodies and the community people at large. Keeping this motive in mind, the Bank always cares all of its stakeholders and the community people since its inception. Mercantile Bank Foundation has been established to act as a helping hand to the community people and Bank’s commitment towards CSR. From foundation, MBL each year on its founding anniversary award some noted intellectual personalities of the society for their outstanding performance in their respective fi elds.

In continuation, during 2011, the Foundation of the Bank provides awards to 11 (eleven) Scholars for their outstanding contribution in eleven areas under the heading “Mercantile Bank Award-2011”. The Award includes a Gold Medal (2 Vori), a Crest and one time fi nancial endowment worth BDT 1.00 lakh. Hon’ble Finance Minister of Government of Bangladesh, Abul Maal Abdul Muhith was the Chief Guest of the program, while Dr. Atiur Rahman, Hon’ble Governor of Bangladesh Bank was present as Special Guest. Md. Abdul Jali, M.P, Hon’ble Chairman of the Bank presided over the program. The Scholars who have been honored with Mercantile Bank Award-2011 are as under:

136 annual report

MBL’s Responsibilities to Society People

MBL Foundation receives requests for fi nancial aid from disabled people, disaster victims and various organizations including educational and professional institutions and charities. In response to these requests, the Foundation comes forward and provides fi nancial assistance to these people and institutions every now and then.

MBL as a legal corporate entity is fully aware of its responsibility about how its operational activities impact on its stakeholders, the economy, the society, its staff and last but not least, the environment. Conducting business in an ethical way, creating opportunities for business and economic growth, empowering people to fulfi ll their aspirations, ensuring protection of environment while fi nancing businesses along with supporting the distressed people of the society are the focal point of the CSR policy of MBL. In discharging the CSR responsibilities, the Bank contributes on the areas of education, health, employment, professional development, art & culture, disaster management and contribution to the national exchequer as well.

Community outreach: a helping hand for populations at-risk

MBL is fully committed to providing opportunities for the economically disadvantaged communities by fostering economic development and supporting local communities. The Bank strives to assist the victims of natural disaster by providing fi nancial help in rehabilitation and rescue purposes.

Distribution of Winter Clothes among the Poor People

MBL has distributed winter clothes among the distressed people of the cold affected areas of the country. About 36,750 pieces of new winter clothes like Blankets, Shawls, Quilts and Sweaters worth BDT 6.00 million has been distributed with the co-operation of the Local Peoples’ Representatives in the different cold affected areas of the country.

MBL continues Financial Support to BDR Mutiny-affected Families

BDR mutiny in February, 2009 caused an irretrievable loss to the nation. MBL has widened its arms to share the sufferings of the revolt-affected families. In continuation, this year also MBL donated BDT 0.96 million to two BDR mutiny-affected families.

Health and MedicalDonation to Ivy Rahman Blood Bank

MBL has donated BDT 1 million for purchasing Hematology Analyzer for Cell Screening to Sheikh Hasina Institute of Transfusion Medicine and Ivy Rahman Blood bank, USTC Project. Hon’ble Chairman of the Bank Md. Abdul Jalil, M.P, handed over the cheque to National Professor, Nurul Islam and Professor Dr. Mujibur Rahman.

Division wise information of scholarship awardees:•

Division NameNumber of students

J.S.C. S.S.C. H.S.C. Total

Dhaka 26 29 25 80

Rajshahi 25 22 26 73

Rangpur 17 15 18 50

Chittagong 27 23 19 69

Sylhet 5 7 7 19

Khulna 18 21 20 59

Barisal 10 11 13 34

Total 128 128 128 384

Total amount of Disbursment (one Year):•

Category Numer of StudentsDisbursement (BDT)

Per Student Total

J.S.C 128 9,000.00 1,152,000.00

S.S.C 128 12,000.00 1,536,000.00

H.S.C 128 18,000.00 2,304,000.00

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MBL Donated an Ambulance to Shahid Monsur Ali Medical College

MBL has donated an ambulance to Shahid Monsur Ali Medical College. Md. Abdul Jalil, M.P, Hon’ble Chairman of MBL, handed over the Ambulance to Dr. Jamal Uddin Chowdhury, Chairman of Shahid Monsur Ali Medical College.

Donation to Liver Foundation

MBL has donated BDT 1.11 million to Liver Foundation of Bangladesh for purchasing 2 (two) medical equipments. Md. Abdul Jalil, M.P, Hon’ble Chairman of MBL handed over the Cheque to Prof. Mohammad Ali, Secretary General of Liver Foundation of Bangladesh.

Education: teaching the young and spreading knowledge Donation to Metropolitan University, Sylhet

MBL has donated BDT 1 million for development of the Library of Metropolitan University, Sylhet. A.K.M. Shahidul Haque, Managing Director & CEO of MBL handed over the donation cheque to Professor Abdul Aziz, Vice-Chancellor, Metropolitan University, Sylhet.

MBL Donated a Bus to NSTU

MBL has donated a 52 seated Bus to Noakhali Science and Tecnology University (NSTU). Md. Abdul Jalil, M.P, Hon’ble Chairman of MBL, handed over the Bus to A. K. M. Sayedul Haque Chowdhury, Vice Chancellor of NSTU.

The Arts: preserving cultural heritage and sponsoring the performing artsAs a recognized benefactor of culture, MBL takes some non-profi t initiatives every year. Cultural institutions have been donated to organize cultural events in different times. Moreover, the Bank supports the writers, musicians and other performers in their inventive and creative activities. In 2011, as earlier, MBL contributes to organize and celebrate different cultural and traditional festivals.

Celebration of Bangla New Year-1418

MBL has celebrated the Bangla New year-1418 as it has been doing since inception. All its offi ces were decorated to a colorful festive look. Customers in the Branches

were invited to share the joy of festival and they were entertained with sweets as a traditional ritual. This kind of participation enhance the relationship and social bondage. Apart from that, MBL also donated to various cultural and educational institutes to celebrate the Bangla New Year-1418.

Traditional Games and Sports

MBL always encourages the development of games and sports of the country. In different times, the Bank has contributed to organize a variety of traditional games and sports. In 2011, the Bank contributes to different institutions/clubs to arrange games and sports such as,

Bangladesh Martial Arts Association for arranging • WUKF Tournament;Soccer Club, Feni; etc.•

Professional DevelopmentFrom the inception, each year MBL has been supporting the various Professional bodies. Some professional institutions that MBL donates in 2011 are:

Bangladesh Photo Journalists Forum;• The Dhaka University Alumni Association;• The Chittagong Press Club;• Bangladesh Paper Merchants Association;• Jahangirnagar University Club;• Association of Bankers Bangladesh.•

Playing our part in the EconomyThe Bank has contributed to the economy by generating employment of over 1668 full time employees. It also plays an imperative role in creating job opportunities by fi nancing to the productive sectors. The Bank recruits a number of fresh graduates and experienced offi cers every year. In 2011, a total of 113 fresh graduates and 43 experienced bankers have joined with MBL Family. In the intermediation process, the Bank mobilized resources of BDT 102,262.02 million from the surplus economic unit and deployed BDT 79,999.80 million in 2011 to defi cit group. Following table depicts the Bank’s performance in terms of deposit mobilization, its deployments, international business, inward foreign remittance and employments as at December 31 of 2011 and 2010:

(BDT in million)

Contribution to Economy In 2011 In 2010

Mobilization of Deposit (BDT in million) 102,262.02 75,629.14

Deployment of Loans and Advances (BDT in million) 79,999.80 66,377.70

Export Business (BDT in million) 81,311.80 59,404.20

Import Business (BDT in million) 95,008.70 89,524.10

Inward Foreign Remittance (BDT in million) 7,150.00 5,108.10

Employment (in numbers) (BDT in million) 1,668 1,526

138 annual report

Contribution to the National Exchequer

The Bank plays its responsibility to the Government of Bangladesh paying corporate tax regularly. As per tax law, the bank deducts at source income tax, VAT, excise duty from various payments and services for ultimate credit to government exchequer. This year, 42.50% Tax is

to be paid to the National Exchequer from its operation profi t. The Bank has made provision of BDT 1,250.00 million for corporate tax in 2011 against BDT 1,010.59 million in 2010.

Care to Environment: Encouraging New thinking about Environmental Challenges

The core business model of MBL explicitly expresses its sustainability to words enviroment and unveils its ecofriendly motives i.e. not to harm or damage ‘Green Life Belt’ of ‘Mother nature’ which eventually ensures a pollution free breathing atmosphere for our future generations. Our aim is to minimize any harmful affects and consider the development and implementation of environmental standards to achieve this to be of great importance. MBL have established a separate unit to turn our Bank as a ‘Green Bank’. A lot of measures have been adopted including green fi nancing, creating awareness among the employees for effi cient use of water, electricity and paper, giving preference to eco friendly while fi nancing and reuse of equipments. Green Banking is to provide innovative green products to support the activities that are not hazardous to environment and help to conserve the environment. MBL always try to manage the impact of operations and develop initiatives to improve its environment conducive footprint.

Involving Employees in the CSR approach

As a “Corporate Citizen”, Mercantile Bank Limited is striving to play its responsibility in this regard. The involvement of employees in the CSR approach is one of the most effective ways to CSR awareness. In the new CSR strategy, we have developed activities to keep employees up-to-date with our CSR goals and principles. We believe that they will put their knowledge to both at work place and in their private lives.

Raising CSR awareness among the Group’s employees

MBL arranged a full day workshop program to raise the awareness of its employees regarding key CSR issues and its policies in this area. To build on this training, environmental awareness-raising actions have been set up locally.

Informing and encouraging dialogue

MBL’s employees are also kept updated about day-to-day CSR events, and are invited to exchange on new issues and the Group’s actions in this area.

(BDT in million)

Particulars Year 2011 Year 2010

Payments to National Exchequre as Corporate Tax 1,250.00 1,010.59

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To most people, ‘Capital’ means a bank account, DSE listed stock, or large number of businesses in the commercial area. These are all forms of Capital in the sense that they are assets that yield income and other useful outputs over long periods of time. But such tangible forms of Capital are not the only type of Capital. Academic qualifi cation, training, experience, punctuality, honesty etc are also Capital. As these raise earnings, improve qualifi cation or add to a person’s good habits over much of his lifetime. These are called “Human Capital” because people cannot be separated from their knowledge, skills or standards in the way they can be separated from their fi nancial and physical assets.

Of course, formal education is not the only way to invest in Human Capital. Workers also learn and are trained outside school, college or university especially on the job. Even university graduates are not fully prepared for the job market when they leave universities and must be fi tted into their jobs through formal and informal training programs. The amount of on-the-job training ranges from an hour or so at simple jobs like dishwashing to several years at complicated tasks like engineering in an auto plant. Education and training are the most important investments in Human Capital.

Human Capital is the economic value that an employee provides to an employer. The assessment of this value is related to the body of skill, knowledge and experience that the employee possesses. Factors such as formal education and participation in ongoing training related to

MBL has a strong focus on imparting training towards enhancement of the skills and competencies of the employees to take over the challenge of modern banking

Report On Human Capital

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the workplace also help to enhance the Human Capital that the employee represents. As one of the basic factors of invention, Human Capital is essential to the operation of just about any type of business. Employing individuals who have the necessary expertise, judgment and ability to function within their assigned roles allows the business to operate at maximum effi ciency. This, in turn, increases the potential of earning profi t and remaining successful for long period. A failure to identify individuals with the necessary combination of skills, experience, knowledge and education can undermine the efforts of even a well-organized company.

MBL’s Human Capital “Effi ciency is our Strength” - bearing this slogan in mind, MBL has formulated a talented and effi cient human capital by recruiting bright fresh graduates, knowlegeable experienced bankers and providing intensive training to the existing employees. MBL fi rmly believes that human resources, the key factor of MBL’s strength are effi cient enough to handle the challenges of modern banking. Total Manpower of the Bank over the last three years’ is shown in the following table:

Manpower December 31, 2011 December 31, 2010 December 31, 2009

Executives (in number) 189 160 124

Offi cers & Staff (in number) 1,479 1,366 1,179

Total 1,668 1,526 1,303

Graphical outlook indicates that new employees’ recruitment status of MBL follows an increasing trend.

Fostering Employee’s Performance

MBL’s management strategy is a multi-pronged one; that includes compelling employee value proposition with a competitive reward package. MBL provides every facility to its employees, which has propelled the Bank to reach today’s stratum. Bank offers adequate fi nancial and non-fi nancial benefi ts for the employees of the Bank to ensure a better life style. Such as

Attractive compensation package• Festival and incentive bonus• Fair promotion • Annual increment• Career growth opportunities• Training and Workshop (In-house and Foreign)• Hygienic work environment• Health care facilities• A variety of loan facilities at a lower interest rate•

Retirement benefi t• Disability benefi t• Provident fund• Gratuity fund• Leave fare assistance•

MBL is fully committed to offering its staffs a hygienic work environment where they can identify and develop their skills with optimal advantage. Centralized Human Resource Management is the paraphernalia to achieve the goal. MBL always offer very attractive salary package in the industry. Bank provides ‘Incentive Bonus’ to the employees to encourage them in performing better in the days to come. In addition, MBL gives ‘Festival Bonus’ amounting equal to basic pay to the employees to celebrate their festivity.

MBL is playing a more active role in shaping the future and the success of our “Employee’s”. It thus provide more targeted, ongoing support not only to the Bank’s individual divisions/branches but to each of its employees.

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Title Year-2011 Year-2010

Executives (in number) 32 15

Offi cers and Staffs (in number) 172 329

Total 204 344

Human Resource development is the most important part for attracting organizational sustainability, growth, development and expansion. As a part of MBL’s investments in Human Capital, it has formulated Human Resources Policy including a strategic imperative for recruiting the best people from the society. MBL recruits fresh graduates from different academic backgrounds of renowned universities, which act as a source of creativity.

Fresh graduates are recruited through comprehensive written test and Viva voce conducted by The Institute of Business Administration (IBA), University of Dhaka. MBL also recruits each year experienced bankers from the industry, who has sound banking knowledge and expertise. Bank’s recruitment in 2011 and 2010 are as follows:

Trained, skillful, experienced employees are the most important strategic resource in a more competitive business environment. MBL has a strong focus on imparting training towards enhancement of the skills and competencies of the employees to take over the challenge of modern banking. Suffi cient opportunities have been made available in the Bank for the employees at all levels to develop their competencies. The Bank always gives its employees an opportunity to increase their talents and skills by taking them in ‘Training Net’. Substantial resources for the training purpose of its employees have been spent to make them more customary and more effi cient. On the job training along with class room training for the fresh recruits has been introduced in the Bank. In-house trainings and foreign trainings are given to the employees. Seminars and workshops on contemporary important topics are also organized in Bank.

Mercantile Bank always give the high priorities to investment in Human Capital. A number of initiatives have been taken for knowledge enhancement of the employees. The Bank also encourages the employees to get professional degrees. Bank provides cash money incentive to the employees who achieve “Banking Diploma”. As well, classroom trainings are also arranged for the employees to make them up-to-date with the changing customers’ requirements. The Bank has established Training Institute in the name and style “Mercantile Bank Training Institute (MBTI)” comprises of experienced and talented faculty members. Internal and external resource persons with unanimous fame and reputation are invited to lead the class sessions at MBTI. It has full-furnished dormitories for providing homely comfort to the trainees participating from distant regions of the country, equipped with modern training amentities namely, state of art projectors for slide presentation, updated computers for instilling real fi eld experience to the trainees

New Recruitment Year-2011 YEAR-2010

Fresh Graduates (in number) 113 293

Experienced Bankers (in number) 43 67

Best quality Human Capital

Skill Development for the Employees

MBL gives ‘Provident Fund’ benefi ts to the permanent employees in accordance with Bank’s Service Rule. The Bank provides ‘Gratuity Fund’, which was approved by the National Board of Revenue. MBL’s Employees’ ‘Welfare Fund’ is subscribed by monthly contribution of the employees. The Bank also contributes to the Fund. The Fund has been established to provide coverage in the event of accidental death or permanent disabilities, a portion of retirement benefi t & stipend to the employees’ children.

MBL is confi dent of proving itself as a branded employer over the long term in the market. That’s why; the Bank provides the employees various incentives such as cash money incentives, promotion. Besides, the Bank provides fair promotion facility to the employees. The Head of all Divisions and Branches send Annual Confi dential Report (ACR) of their fellow subordinates to the Head of Human Resources Division (HRD). Every year Bank’s offi cial is promoted based on their annual performance. Executive and offi cers who had been awarded promotion in 2011 and 2010 are:

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in the arena of Modern Information Technology and a Library enriched with valueable books covering all possible arenas of economy, corporate fi nance, accounting, practicing laws and banking operations including internationally reputed overseas newspaper and magagines; -all are superbly arranged and professionally handled with a view to enhancing and sharing the knowledge, theoretical perception and to quench the versatile knowledge thirst of trainees.

Since there is no alternative to training for acquiring the required effi ciency and professional excellence, MBTI was

busy throughout the year to focus on creating awareness about the best principles and practices in banking through imparting training on different aspects of banking. With a view to achieving professional excellence in Banking, MBTI conducts various courses, workshops covering all diverse courses for banking, fi nance, managements, laws etc. mainly for offi cers and executives of the Bank. During 2011, the MBTI fulfi ll its yearly target by training a large number of employees through different training programs.

Every year, MBTI sets a target to conduct various training program for in house employees covering different sectors of the Bank. Besides, conventional banking related trainings, the MBTI also arranged, facilitated and conducted various Executive Development Programs, workshops, seminers for the improvements in banking challenges in twenty-fi rst century. The Training Institute has fi xed a target with three main dimensions-

to bring all the employees in ‘Training Net’,•

to make all the training ‘Need-based’,•

to create subsequent line of defense in essential • areas of Bank to counter damaging impact of indispensability.

MBTI’S ACHIEVEMENT IN 2011

MBTI’S TARGET FOR TRAINING PROGRAMS- 2012

Total Courses Conducted Total Sessions Offi cers Trained Days Utilized

57 1,195 2,237 239

Total Courses to be Conducted Total Sessions Offi cers to be Trained Days to be Utilized

57 1,260 2,100 252

The MBTI is committed to develop the Human Resources, the main driving force of the Bank through structured modular training programs. In 2011, MBTI conducted a massive number of training programs for the in house employees on different modules such as,

MODULE-WISE TRAINING CONDUCTED BY MBTI

Training Expense Incurred by MBTIIn 2011 and 2010, MBTI of the Bank has incurred the following training expense:

Amount in BDT

Particulars Year-2011 Year-2010Total Training Expense 33,58,632.00 28,62,924.00Per Employee Training Expense 1,501.00 2,094.00

Modules No. of ParticipantsGeneral Banking 89Credit Risk analysis 147Foreign Trade and Foreign Exchange 117Anti Money Laundering 730Returns and Statements 59CIB Reporting 65Basel-II Implementation 29Asset Liability Management 29Basic Training for the fresh recruits 160Others 812Total 2,237

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Today, banking sector is seen as a catalyst in economic growth of a country and, lot is expected from the banking fraternity. The concept of banking, which was earlier restricted to accepting of deposits from public for the purpose of lending to the intended, has also undergone sea change. Today the banking sector is seen as a vehicle for all inclusive economic growth, social responsibility and equiv-distribution of national resources. Because of the changed roles envisaged for the banking sector, the structure of banking activities are also changing. These changes have brought in enormous competition among banks. Each bank now wants to grow up its service vertically as well as horizontally so as to keep its identity in the industry. To keep pace with national developments in fi nancial sectors, the banking services are changing. It is now universal banking with several objectives to meet the economical and social goals of the country.

These changes have made the customers central point for banks. Today banks are wooing existing customers, potential customers by offering new facilities, products and services in order to retain/increase their base in market. The way the banking has changed, so has the customer. The customer of today is not what he or she was couple of decades ago. Today the customer is more knowledgeable, demanding, analytical and aware of his rights. Now a day, banks realize the importance of

Customer Service and its potential to help them acquire new customers retain existing ones and maximize their lifetime value. At this point, close relationship with customers will require a strong coordination between desk offi cer and Branch manager to provide a long-term retention of selected customers.

Customers Generally, a customer (also known as a client) is usually used to refer to a potential buyer or user of the products of an individual or organization. A customer may also be a viewer of the product or service. Customers are the judges of any organization and they vote with their money, or their feet. They judge the Company based on their cumulative experiences of the product, the service and the people. There exists an intense competition in the banking industry in attracting and retaining customers by enhancing their level of satisfaction. MBL, as a member of this competitive industry gives due importance on attracting the potential customers and retaining its existing customers by understanding their insights and meeting their requirements. “A person becomes a client of a bank when an account is opened for him, and at the same time a contract is formed complying the terms and conditions placed by that particular bank.” Customer also has a more generalized meaning as in customer service

Report on Customer Service

MBL believes that, customers are the key factor behind achieving today’s strong position in the Banking Industry. That is why, MBL never leaves any stone unturned to satisfy its existing and potential customers through superior customer services

‘

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and a less commercialized meaning in not-for-profi t areas. When we talk about customer service, we tend to think it as a very simple issue of customer satisfaction. However, it is very complex issue because customers of a bank comes from all walks of life, such as

1) From poorest to richest.2) From Youngest to oldest.3) From Illiterate to highly educated.4) From Individuals to Corporate.5) People from all regions, religion, caste, age, service,

profession etc.6) People from different backgrounds, culture,

temperament and ego levels.All customers from different backgrounds have different expectations. Unless the service standards fi t to each person’s expectations, he will not be satisfi ed. Therefore, one has to understand each type of customer thoroughly to be able to provide customer specifi c services.

CUSTOMER SERVICESThere exists a strong competition in the banking industry in attracting and retaining the effi cient customer services. Simply, Customer Service is the provision of service to customers before, during and after purchasing a banking product. ‘Customer Service’ is a series of activities designed to enhance the level of customer satisfaction, that is, the feeling that a product or service has met the customer expectation. Its importance varies by products, industry and customer.

Success of an organization especially service oriented industry like banking industry depends largely on its human resources. MBL believes that, customers are the key factor behind achieving today’s strong position in the Banking Industry. That is why, MBL never leaves any stone unturned to satisfy its existing and potential customers through superior customer services.

HUMAN RESOURCESThe entire process of customer services is dependent on the human resources, products quality, quick service, different delivery channels, customer feedback, modern technology, Market study etc.

Only a brilliant and well-organized offi cer can win the

heart of a customer by delivering on time services and which, eventually create a strong, encouraging and ever-lasting business relationship with him. A long term good relationship with the customers would propel a bank to a fi nest and sustainable corporate citizen. Sensing the importance of Human Resources, MBL always focuses on nurturing the skills and competencies of the employees at various levels by arranging traing in home and abroad. In this way, the effi cient work force of Mercantile Bank acts as the fundamental pillar to reach the Bank today’s zenits of success.

ACQUIRE MASS COMMUNITY UNDER MBL UMBRELLA

Since the inception of the Bank in 1999, we were strong-minded to provide not only the group people, but also the mass community all over the country. Having a deep knowledge of our customers and their rising needs are key to our business success. Our customer group ranges from individuals, organizations and small & medium business covering all sectors of Corporate, SME and Retail businesses. Our goal is to make fi nancial matters better and easier for our clients. During the last twelve years of operation, the Bank provided greater value to its customers by developing a wide range of netwark, products and services.

Branch Network

Bearing our slogan of “evsjvi e¨vsK” we want to reach the people with our modern banking services no matter whether they are urban or rural people. For that, from the beginning, every year we are continuously expanding our branch network across the country. In continuation of Branch opening, in 2011, we have launched 10 new branches. As a result, at the end of 2011 we have 75

branches including 5 SME/Krishi branches. Following the Central Bank’s Instructions, MBL emphasizes on expanding its banking network in rural, semi-urban and urban areas as well to bring more people under banking networks. We desire to expand the number of branches to 90 across the country by the end of the year 2012.

Particulars As on December 31, 2011 As on December 31, 2010

Number of Branches 75 65

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Attractive Products/services

During the last twelve years of operation, the MBL provided greater value to its customers by developing a wide range of products and services, which has drawn huge public attention. Mercantile Bank has always remained competitive in offering services to the customers and is continuously redesigning its products to meet customer needs.

(a) Deposit Products:

Basic structure of deposit products is to attract the customer by offering attractive interest rate on funds. From the beginning, depending upon the needs of different set of customers MBL formulated various types of deposit schemes such as, Monthly Saving Scheme (MSS), Family Maintenance Deposit Scheme, Double Benefi t Deposit Scheme (DBDS), Quarterly Benefi t Savings Scheme, Advanced Benefi t Savings scheme, 1.5 Times Benefi t Deposit Scheme, Special Saving Scheme (SSS), which have drawn immense attention of the customers.

(b) Loan & Advance Products:

MBL’s loan & advance products differ depending upon the demand of the customers. Among them ‘Shopnow Nibash’- Home Loan, ‘Sonar Tori’- Car Loan, ‘Akangkha’- overseas employment Loan, Education Loan, Doctors Loan, House Fernishing Loan and ‘Chaka’- SME Loan and ‘Anonna’ Women Entrepreneurs SME Loan, ‘Nabanno’-Agriculture Loan etc are most popular.

(c) Other Services:

Apart from deposit and advances, MBL offer various other facilities/services including remittances, investment services, fund management, fi nancial advisory services, bill payment services etc. to serve the multidimensional purposes of its customers.

ATM Booth Service

MBL is continuously increasing the number of ATM booth across the country for meeting the demand of 24 hours cash withdrawal facilities of its customers. During 2011, 12 more ATM Booths have been unlocked at different

commercially signifi cant places in the country to serve the customers, to save their time and thus making their banking needs hassle free. Total number of ATM booths of the Bank has been increased to 31 as on 31st December 2011. Besides, arrangements have been signed with different banks and fi nancial institutions to share their ATM Booths to make our customers’ life comfortable.

Exchange House

MBL opened its fi rst own Exchange House in United Kingdom namely “Mercantile Exchange House (UK) Limited”. Mercantile Exchange House (UK) Limited, a fully owned subsidary company of Mercantile Bank, has commenced its business oparation at Birmingham in UK on December 06, 2011. Mercantile Exchange House is committed to remit the hard earned money of the Bangladeshi expatriates at the doorstop of their near and dears safely and quickly. The proposed London branch of Mercantile Exchange House (UK) Limited is expected to be opened soon. We are planning to launch more Exchange Houses in some other prospective countries to facilitate improved remittance services to the Bangladeshi expatriates living and working in different parts of the world.

Remittance Service

MBL always maintains strong network with the Overseas Exchange Companies which ensures better remittance services. At the end of 2011, bank has entered into Remittance Arrangement with about 25 Overseas Exchange Companies in different parts of the world like UK, USA, Canada, Italy, UAE, Kuwait, Qatar, Oman and Bahrain. Recently we have tied up with global reputed Money Transfer Company ‘MoneyGram International’ and ‘Placid Express’. MBL has given much more emphasis on foreign inward remittance since its inception. In this line, more Remittance Agreement with different Overseas Companies from different parts of the World will be signed to support our business network in the global fi nancial market and to facilitate remittance fl ow. The infl ow of inward foreign remittances of bank is increasing

Graphical outlook represents the Branch expansion of MBL

es

146 annual report

signifi cantly. In 2010 we fetched total remittance of around BDT 510.00 crore while last year we received BDT 715.50 crore.

Foreign Correspondents

Mercantile Bank Limited is serving its customers with satisfaction in foreign trade business (i.e. export, import, ramittance etc.) through its sturdy correspondent banking network across the globe. The bank has been maintaining smooth correspondent relationship with 638 top ranked and best rated banks of the world having sound fundamentals and also making effort to expand its correspondent network to facilitate its increasing foreign trade business. Foreign correspondents play a vital role through advising L/Cs, adding confi rmation, settlement of payments, realizing export proceed etc. Commerzbank AG, JP Morgan Chase Bank, Wells Fargo Bank NA, Standard Chartered Bank, Bank of Tokyo Mitshubishi Ltd, HSBC, Mashreqbank Psc, Habib Bank AG, UBAF, Unicredito Italiano Spa etc. are some major names of Foreign Correspondents of MBL.

Capital Market Service

In view of the demand of the markets and our total commitment to support and serve the customers from different angle, MBL commenced operations of its Brokerage House, namely “Mercantile Bank Brokerage House”, as a part of Capital market Operations in 2009. After two years operation, in 2011 MBL Brokerage house has been switched into MBL subsidiary namely “Mercantile Bank Securities Limited (MBSL)” as per the regulatory requirement. MBSL has seven branches at the end of 2011. More branches of the securities will be opened in different commercially hubs of the country, which will contribute a lot to ensure expansion of sound capital market in Bangladesh. The service of MBSL is designed to provide customers with necessary support profi tably in the stock market.

SERVICE PROCESSToday’s customer is short of time and feels uncomfortable when the process involved in getting the product or service is lengthy and cumbersome. The customer wants very simple processes to get his work done. MBL belives that, the processes for any product or service should be at the minimum and at one go. Our effi cient work force always maintains a warm relationship with customers and serves them warmly and quickly as early as possible. Our high management team always follow up, the processes devised for getting the services are very customer friendly, easy to understand and complete. Considering customer’s demands and expectation, MBL take the following initiatives to become its service quick and comfortable.

Help Desk

Only superior Customer services of the bank can make the difference and thereby can ensure retention of customers and instill brand loyalty to them as well. In this line of view, MBL has resolved to introduced a “Help Desk” at branch level aiming to upgrade its customer services to a level of excellence. The Help Desk is placed at a suitable place near the entrance of the branch so that customers can locate the same easily. Skiled desk offi cer has been appointed to this desk, which is well conversant with various services provided by different desks of the branch.

SME Dedicated Desk

Following the Central Bank’s Instructions, MBL has set up an independent SME Desk namely “SME Dedicated Desk” in almost every Branches of the Bank to provide better service to the Small and Medium Entrepreneurs. Credit Offi cers have been appointed to work in SME Desk. Even at the branch level, a signboard has been displayed in front of the designated desk because different level of customers can easily fi nd out the SME Desk and receive their desired service quickly.

Woman Entrepreneur’s Dedicated Desk

According to “Small & Medium Enterprise (SME) Credit Policy and Program” of Bangladesh Bank, every branches of the bank have established an autonomous “Woman Entrepreneurs’s Dedicated Desk” at branch level and have displayed a signboard in front of the designated desk. The aim of establishing this desk is to provide quicker & better service to woman entrepreneurs. Skilled and effi cient desk offi cers have been appointed to this desk.

Developing the Skills of the employees

Trained and skillful employees are the most important strategic resource in a competitive business environment. MBL has a strong focus on imparting training towards enhancement of the skills and competencies of the employees to take over the challenge of modern banking. Bank always gives its employees suffi cient opportunity to increase their talents and skills by taking them in ‘Training Net’. Every employee has been given enough information and power to make customer-pleasing decisions so that he/she never has to say, “I don’t know”. With a view to achieving professional excellence in Banking, MBTI conducts various courses, workshops covering all diverse courses for banking, fi nance, managements, laws etc. mainly for desk offi cers and executives of the Bank. In-house training and foreign training are given to the employees. Seminar and workshop on important topics are also organized in the Bank.

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BUSINESS EXPANSION AND VALUE CREATIONWe believe that our motto, our loyalty, effort and hard work are the determinable factors of success and truly

become, “evsjvi e¨vsK”. MBL has strengthened its position as one of the leading fi nancial institutions and maintained satisfactory positive growth across its Business Units. This has been possible by the heartiest effort and the excellent customer services of our offi cers. Our inventive work force always maintains a warm relationship with customers and serves them warmly. We have already introduced a variety of attractive products to meet up the multidimensional needs of our customers. The Bank is not only providing services but also took steps to expand these sectors by participating in various trade shows organized in the country.

Professionally Serving the Customers

MBL believes that professional customer service drives a bank’s reputation up and accordingly employees have been trained to offer customer service professionally. The Bank conveys the message to all employees that providing professional service is important to make the customers happy enough and it is the spirit to build and uphold a warm relationship with them. In serving the customers, the employees of MBL always keep in mind the following points:

Providing the True Customer Service•

Serving the Customers to attain their loyalty •

Serving the Customers honestly•

Customers are always Right•

Rapid Rectifi cation of Service-Shortcomings

MBL always welcome its Customers to talk and listens to them cautiously. The Head of Branches are concerned of any types of shortcomings faced by the customers. Suggestions from the customers are taken for rapid improvement of the service standard. In every Branch, ‘Complain Box’ has been setup to get written complains from customers to reap the benefi ts of good customer service. After getting feedback/complains, immediate steps are taken to rectify the errors and improve the service as well.

Locker Service

Locker Service usually refers to the service where a customer can safe deposit his/her valuable possessions safely in a strongly built Iron Box (Locker) kept beside or in the Vault of the Branch and the Banker along with the customer holds the key to open the Iron Box. Thus, safety measures are kept as no single person can open the LOCKER. MBL provide its Locker Services by following branches of the Bank:

01 Dhanmondi Branch

02 Banani Branch

03 Rajshahi Branch

04 Uttara Branch

05 Elephant Road Branch

06 Gulshan Branch

07 Bijoynagar Branch

08 Satmasjid Road Branch

09 Feni Branch

10 Moghbazar Branch

11 Jessore Branch

12 Progoti Sarani Branch

13 Mirpur Branch

Serving the Small and Medium Entrepreneurs

MBL has been serving the Small and Medium Entrepreneurs from early 2006. A separate Division, namely, “SME Division” has been formed in the Bank. SME Service Centers, which are recently converted to SME/Krishi Branches as per Bangladesh Bank’s Guideline, have been opened in different commercially important places. Through SME/Agriculture Branch all types of banking services will be offered to the customers except foreign exchange transactions. Thus, the Bank is serving the Small and Medium Entrepreneurs and expatriates. The Bank has set up SME Desk in almost every Branches of the Bank with a view to providing better service to the Small and Medium Entrepreneurs. Credit Offi cers have been appointed to work in SME Desk. By the end of 2011, the number of SME/Krishi Branches stood at 5 (fi ve). MBL contemplates to open more SME/Krishi Branches in the year 2012 to serve the Small and Medium Entrepreneurs and the farmer community.

Agriculture Based Finance

Agriculture is the backbone of our economy. Realizing such importance of agriculture, MBL is continuously fi nancing the Agriculture sector with the help of Bangladesh Bank, different fi nancial institutions and NGOs. To facilitate agriculture credit, the Bank has already launched Agriculture Credit Department and has already inaugurated 14 rural branches and 5 SME/Krishi branches in the remote areas of the country, and in upcoming days the Bank will launch more rural branches in unbanked areas of outside the divisional cities and upazilas. The Bank is working under a refi nance agreement with Bangladesh Bank. The Bank is fi nancing the farmers in arrangement with ACI motors to purchase Sonalika tractors. Besides, MBL is also associated with various NGOs and other organizations like, BURO-Bangladesh; Integrated Development Foundation (IDF), Chittagong;

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Nowzuwan, Chittagong to disburse agricultural loans to the farmers.

MBL intends to extend its banking network to the rural and urban areas as well. Following the Central Bank’s Instructions, MBL emphasizes on expanding its banking network in rural and semi-urban areas to bring more people under banking networks.

Core Banking Software

MBL is going to launch its own Core Banking Software, namely “TEMENOS T24” for its Banking operations. This new software will enable MBL to deliver most modern technology based services to the customers effi ciently which eventually make customers transactions more convenient. MBL has already signed an agreement in this regard with Data Soft Systems Bangladesh Limited.

Off Shore Banking

Mercantile Bank Limited is operating two off-shore Banking Units as a separate business unit under the rules and Guidelines of Bangladesh Bank as per their vide letter no. BRPD (P-3)744(114)/2010-1743 DATED 04/05/2010. The Bank has commenced operation of these units on July 04, 2010 at its Gulshan Branch, Dhaka and CEPZ Branch, Chittagong. Defying the odds in the global fi nancial market, MBL OBUs has scored a sizeable profi t in the fi rst year of its operation. We hope these units will play a vital role in the foreign trade business and facilitate the valued customers by maximizing their benefi t.

School Banking

To educate the young generation on banking, familliarize them with banking transactions and to give opportunity to young generation for small savings, school banking program needs to be speedy introduced in the country. Bangladesh Bank has also advised the banks to introduce school banking program. Taking all the issues into consideration and to provide banking service to the young generation (students of school & college), MBL introduced new phase of banking name as “School Banking” program. The laws, rules and regulation of Bangladesh, usual customers & practice of Banks and guidelines of BB will be applicable for opening and maintaining the account. The cccpunt will be opened and operated by guardian/parent of the student.

Green Banking

Green Banking is to provide innovative green products to support the activities that are not harmful to environment and help to conserve the environment. It aims to use the resources of a bank with responsibility avoiding spoilage and giving priority to environment and society. Green banking saves costs, minimizes the

risk, enhance banks reputations and contribute to the common good of environmental sustainability. It serves both the commercial objective of the bank as well as its corporate social responsibility. MBL have established a separate Green Banking unit and aiming to turn our Bank as ‘Green Bank’ a lot of measures have been adopted including green fi nancing, creating awareness among the employees for effi cient use of water, electricity and paper, giving preference to eco friendly while fi nancing and reuse of equipments. Banks can concentrate on environment by Projects in the fi eld of renewable energy (wind energy, solar energy & hydro-electric projects), organic agriculture across the entire value chain including health food shops and environment technology such as recycling companies and nature conservation projects.

DELIVERY CHANNELS TO MEETING DEMAND OF CUSTOMERSCustomer satisfaction is also dependent upon the alternative delivery channels used by banks in providing the services. Today’s customer wants effortless, effi cient, secure, simple and dependable channels of delivery, whether it is through humans or technology driven channels. MBL provide alternative banking channels such as Online Banking, Mobile Banking, SMS Banking, Cards & ATM Banking etc. to its customers with greater fl exibility in their banking requirements. Bank has been continuously trying to meet up the alternative banking products’ requirements of the customers. Besides, MBL updated its own websites with a regular interval.

On-line Banking Service

Now-a-days, On-line banking is the basic needs of every customer. To fulfi l the coustomers demand, now on-line is available for all the customers of the Bank, which has been activated in all the Branches of the Bank. By using On-line banking system customers can easily made their transactions over the Internet in a very short time. It saves the time and efforts of the customers. MBL is getting ready to switch on the electronic fund transfer facilities so that the customers of the Bank could enjoy the advantage of the new features in banking area.

Mobile Banking

Like in many other countries, people in Bangladesh started believing in mobile banking. With the approval of Bangladesh Bank, MBL is going very speedy to introduce mobile banking throughout the country. In Mobile Banking system, basic mobile handsets are being used as bank accounts and will serve as a wallet for the transaction of money, especially for the un-banked people. As 99 percent of the people of Bangladesh are under the mobile phone network, almost all will have access to the formal fi nancial channel. If the banks can reach out to the un-

149annual report

www.mblbd.com

Particulars As at December 31, 2011 As at December 31, 2010 Growth over 2010

Debit Card Holder 25,223 18,455 36.67%

Credit Card Holder 8,600 7,177 19.83%

Prepaid Card Holder 52 45 15.56%

Total 33,875 25,677 31.93%

banked people, the dream of more people having bank accounts can be fulfi lled. For successful launching of the mobile fi nancial services, MBL has renovated its Card Division and renamed it as “Card and Mobile Banking Division”. A Mobile Banking Team is working under the “Card and Mobile Banking Division” to successful initiation of Mobile Banking Service.

SMS Banking

Short Message Service (SMS) is one of the most modern banking services. MBL provides endless efforts to serve the clients adhering modern technology. Using SMS from the Mobile Phone, clients can easily avail the banking services, which is convenient, safe, low-cost, fast and available round the clock. After withdrawal of cash from the ATM Booths, customers receive an instant SMS from the Card Division. In addition to that MBL SMS Banking offers the followings services to the customers:

Access to account balance in any time •

Last 3 transaction inquiries•

Cheque leaf status inquiry in any where•

MBL Cards and ATM Banking

MBL has launched a variety of card products to meet the modern and varying needs of the customers. VISA dual prepaid card, VISA Dual Hajj Card, Credit Card and Debit card have been launched by the Card Division of the Bank. VISA dual prepaid card is especially useful for students and casual tourists who don’t have any bank account with the Bank. Card division’s Call center of the Bank provides 24 hours service to its cardholders. MBL Cardholder could also enjoy the following benefi ts:

No withdrawal fee if withdrawal is made using MBL • Booth, but Cash withdrawal fee is BDT 10 only if withdrawal is made using any other Q-cash ATM Booth;Acceptability of the International/Dual Card all over • the world;Credit Facility for maximum 45 days free of interest;• A Principal Cardholder (local) may apply for more • than one supplementary Card;Advance against Credit Card up to 50% of the card • limit;Overdraft facility is up to 80% of Credit Card Limit;• Payment of Utility Bills•

Automated Teller Machine (ATM) is a computerized device that provides fi nancial services to the customers in a public place without the need of human resource clerk or bank’s teller. MBL each year has been expanding the ATM Booth to reach the banking services to mass

people. In continuation of Booth opening, the Bank has reaching the number of Booths to 65 by the end of 2011. ATMs enable card holders from other banks can get their account balance and withdraw cash, even if the card is issued by a foreign bank.

Particulars As at December 31, 2011 As at December 31, 2010 Growth over 2010

ATM Booths 38 31 22.58%

150 annual report

MBL Album

Corporate

12th Annual General Meeting (AGM) of the Bank Shareholders’ participation in 12th AGM of the Bank

7th Extra Ordinary General Meeting (EGM) of the Bank

MBL received ‘The Most Respected Company Awards-2010’

Annual Business Conference-2011

Half Yearly Business Conference-2011

MBL Events

151annual report

www.mblbd.com

12th Anniversary program of MBL is being celebrated by cutting cakes at the Head Offi ce

Awardees of Mercantile Bank Awards-2011

Opening of Shishahat Branch of MBL Opening of Sunamganj Branch of MBL

MBL arranged a Customer Night program on its 12th Anniversary to recognize its top customers

Press conference on the eve of 12th Anniversaryof MBL

152 annual report

CSR (MBL Foundation Education Scholarship 2010)

Scholarship Distributing Ceremony at Dhaka Region

Scholarship Distributing Ceremony at Chittagong Region

Scholarship Distributing Ceremony at Sylhet Region

Scholarship Distributing Ceremony at Feni Region

Scholarship Distributing Ceremony at Khulna Region

Scholarship Distributing Ceremony at Rangpur Region

153annual report

www.mblbd.comwww.mblbd.com

CSR (Other Activities)

A bus was donated by MBL to Noakhali Science and Technology University (NSTU)

MBL donated BDT 1.1 million to Liver Foundation of Bangladesh for purchasing

medical equipments

MBL distributed winter clothes among the distressed people of the cold affected areas

of the country

MBL distributed winter clothes among the distressed people of the cold affected areas

of the country

Donation of BDT 1 million to the Society for the Welfare of Autistic Children.

MBL donated an ambulance to Shahid Monsur Ali Medical College as part of CSR

154 annual report

Business & Service

Inauguration of Mercantile Exchange House (UK) Ltd., Birmingham Branch

Launching Ceremony of Offshore Banking Services

Launching Cermony of MBL School Banking

Signing Ceremony to provide mobile based banking services through the Union Parishad Information services Centre (UISC) with Access to

Information (A2I), a Prime Minister’s offi ce initiative supported by UNDP and Local Government Division of Bangladesh Government.

New Product Launching Ceremony

MBL disbursed SME Loan in Cox’s Bazar

155annual report

www.mblbd.comwww.mblbd.com

Human Development

Certifi cate Awarding Ceremony for the Probationary Offi cers of MBL

A workshop on Stress Testing and SRP Guideline at MBL Head offi ce

“Basic Training Course” arranged for theTrainee Assistant Offi cers of the Bank

A Training Program on “Prevention of Money Laundering” arranged for the offi cers of the

Branches of Chittagong Zone

A training session in Mercantile BankTraining Institute

Certifi cate Awarding Ceremony for procurement of deposits

156 annual report

Auditors’ Report

157annual report

www.mblbd.com

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS

OFMERCANTILE BANK LIMITED

We have audited the accompanying consolidated fi nancial statements of Mercantile Bank Limited (“the bank”), and its subsidiaries as well as fi nancial statements of Mercantile Bank Limited (“the Bank”) as of December 31, 2011 which comprise the balance sheet, profi t and loss account, statement of cash fl ows, statement of changes in equity and statement of liquidity analysis for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements

Management of the Bank is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance with Bangladesh Financial Reporting Standards along with Rules & Regulation Issued by the Bangladesh Bank. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements.

The fi nancial statements comprise of the Bank’s two subsidiaries namely, Mercantile Bank Securities Limited and Mercantile Exchange House (UK) Limited. Total assets and total revenue of the Bank’s one subsidiary Mercantile Exchange House (UK) Limited has been translated from GBP using the foreign exchange rates referred in Note no.1.11.3. These fi nancial statements of the subsidiaries have been audited by other auditors whose reports have been furnished to us and our opinion, in so far as it

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing

‘‘

158 annual report

relates to the amounts included in respect of the Bank’s subsidiaries, is based solely on the reports of the other auditors.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Financial Statements referred to above which have been prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial

Reporting Standards (BFRS) in the form prescribed by Bangladesh Bank vide Circular # 14 dated June 25, 2003 give a true and fair view of the state of the affairs of the Bank as of December 31, 2011 and of the results of its operations and its cash fl ows for the year then ended and comply with Bank Company Act 1991, Companies Act 1994, the Securities and Exchange Rules 1987 and rules and regulations issued by the Bangladesh Bank and other applicable laws and regulations.

Report on Other Legal and Regulatory Requirements

We also report that;

I. we have obtained all information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verifi cation thereof and found them satisfactory;

II. in our opinion, proper books of account as required by law were kept by the Bank so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

III. the records and statements submitted by the branches have been properly maintained and consolidated in the Financial Statements;

IV. the Balance Sheet , Profi t and Loss Account dealt with by this report are in agreement with the books of account and returns;

V. the Financial Statements have been drawn up in conformity with Bank Company Act 1991 and in accordance with the accounting rules and regulations issued by Bangladesh Bank and the Financial Statements conform to the prescribed standards set in the accounting regulations issued by Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh.

VI. the fi nancial position of the Bank as on December 31, 2011 and the profi t for the year then ended have been properly refl ected in the fi nancial statements, and the Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) as applicable in Bangladesh;

VII. adequate provisions have been made for advances, investments and other assets which are, in our opinion, doubtful of recovery;

VIII. the expenditures incurred during the year were for the purposes of the business of the Bank;

IX. Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) with Bangladesh Bank have been maintained as per rule;

X. as far as it was revealed from our test checks, the existing rules and regulation for loan sanctioning and disbursements have been followed properly;

XI. it appeared from our test checks that the internal control system was satisfactory and adequate to prevent probable frauds and forgeries;

XII. adequate capital of the Bank, as required by law, has been maintained during the year under audit;

XIII. we were not aware of any other matters, which are required to be brought to the notice of the shareholders of the Bank;

XIV. 80% of the Risk Weighted Assets have been reviewed spending over 4520 man-hours.

K. M. Hasan & Co.Chartered AccountantsPlace: DhakaDate: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate: February 19, 2012

K M H & C

Signing Ceremony of theFinancial Statement 2011

160 annual report

Financial StatementsFinancial Statements

161annual report

www.mblbd.com

Amount in TakaNotes 31.12.2011 31.12.2010

PROPERTY AND ASSETSCash 3(a) 6,948,621,454 4,877,118,983 Cash in hand (Including Foreign Currencies) 815,067,987 725,743,332 Balance with Bangladesh Bank & Sonali Bank 6,133,553,467 4,151,375,651 (Including Foreign Currencies)

Balance with other Banks and Financial Institutions 4(a) 662,821,502 908,549,740 In Bangladesh 518,861,081 336,299,571 Outside Bangladesh 143,960,421 572,250,169

Money at Call and Short Notice 5(a) - - Investments 6(a) 24,875,376,497 10,937,201,791 Government 23,348,847,110 9,565,346,007 Others 1,526,529,387 1,371,855,784

Loans and Advances 7(a) 79,728,024,718 66,377,697,326 Loans, Cash Credit, Overdraft etc. 73,532,937,989 60,868,739,469 Bills Purchased and Discounted 6,195,086,729 5,508,957,857

Fixed Assets Including Premises, Furniture and Fixtures 8(a) 2,753,125,268 1,647,581,148 Other Assets 9(a) 1,687,314,226 2,391,960,482 Non Banking Assets - -

Total Assets 116,655,283,665 87,140,109,470

LIABILITIES AND CAPITALLiabilities Borrowings from other Banks, Financial Institutions 10(a) 5,976,762,994 864,043,691 and AgentsDeposits and Other Accounts 11(a) 94,054,156,826 73,739,392,053 Current Accounts and Other Accounts 11.1(a) 12,822,034,650 13,101,835,627 Bills Payable 11.2(a) 1,107,180,337 919,953,615 Savings Bank Deposits 11.3(a) 5,929,735,523 5,238,953,971 Fixed Deposits 11.4(a) 38,875,499,490 25,865,957,124 Deposits Under Schemes 11.5(a) 35,319,706,826 28,612,691,716

Other Liabilities 12(a) 6,893,475,581 5,350,988,463 Total Liabilities 106,924,395,401 79,954,424,207 Capital/Shareholders' EquityPaid-up Capital 13.1 4,968,092,000 4,072,206,600 Statutory Reserve 14(a) 2,643,393,554 2,042,559,084 Other Reserve 15(a) 870,039,141 130,563,476 Surplus in Profi t & Loss Account 16(a) 1,197,589,941 940,356,103

9,679,114,636 7,185,685,263 Non Controlling Interest 16(b) 51,773,629 - Total Shareholders' Equity 9,730,888,265 7,185,685,263 Total Liabilities & Shareholders' Equity 116,655,283,665 87,140,109,470

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

CONSOLIDATED BALANCE SHEETAS AT DECEMBER 31, 2011

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

&K M H & C

162 annual report

CONSOLIDATED OFF- BALANCE SHEET ITEMSAS AT DECEMBER 31, 2011

Amount in Taka

Notes 31.12.2011 31.12.2010

OFF- BALANCE SHEET ITEMS

A CONTINGENT LIABILITIES 17

Acceptances and Endorsements 17.1 17,598,275,000 13,851,903,585

Letters of Guarantee 17.2 6,059,769,002 5,660,663,008

Irrevocable Letters of Credit 17.3 16,585,475,576 17,331,871,105

Bills for Collection 17.4 147,818,597 38,644,396

Other Contingent Liabilities 17.5 1,557,027,293 1,106,457,238

Total 41,948,365,468 37,989,539,332

B OTHER COMMITMENTS

Documentary credits and short term trade related transactions - -

Forward assets purchased and forward deposits placed - -

Undrawn note issuance and revolving underwriting facilities - -

Undrawn formal standby facilities, credit lines and other

commitments - -

Total - -

TOTAL OFF- BALANCE SHEET ITEMS INCLUDING

CONTINGENT LIABILITIES ( A+B ) 41,948,365,468 37,989,539,332

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

163annual report

www.mblbd.com

Amount in Taka

Notes 2011 2010

Interest Income 19(a) 9,760,577,255 6,837,900,076

Less: Interest Paid on Deposits, Borrowings etc. 21(a) 8,022,591,397 5,176,002,117

Net Interest Income 1,737,985,858 1,661,897,959

Investment Income 20(a) 1,671,292,448 919,447,774

Commission, Exchange and Brokerage 22(a) 1,455,620,438 1,201,048,112

Other Operating Income 23(a) 1,304,435,120 993,417,661

4,431,348,006 3,113,913,547

Total Operating Income 6,169,333,864 4,775,811,506

Salaries and Allowances 24(a) 1,306,411,768 932,982,480

Chief Executive's Salary and Fees 25(a) 6,300,000 4,627,258

Directors' Fees 26(a) 3,864,431 4,538,100

Rent, Taxes, Insurances, Electricity etc. 27(a) 285,322,125 230,052,874

Legal Expenses 28(a) 10,249,884 14,559,219

Postage, Stamps, Telecommunication etc. 62,044,104 50,082,585

Stationery, Printings, Advertisements etc. 29(a) 124,703,829 116,660,521

Auditors' Fees 941,024 750,000

Depreciation and Repair of Fixed Assets 30(a) 165,990,792 120,290,064

Other Expenses 31(a) 671,335,241 454,142,496

Total Operating Expenses 2,637,163,197 1,928,685,597

Profi t before Provision 3,532,170,667 2,847,125,909

Provision against Classifi ed Loans 12.5(a) 315,200,000 20,000,000

Provision against Un Classifi ed Loans 143,000,000 230,500,000

Other Provision 39,300,000 160,700,000

Total Provision 497,500,000 411,200,000

Total Profi t before Taxes 3,034,670,667 2,435,925,909

Provision for Taxation 12.4(a) 1,258,943,330 1,010,587,500

Provision for Deferred Tax 20,000,000 -

Net Profi t after Taxation 1,755,727,337 1,425,338,409

Retained Surplus brought forward from previous year 44,470,703 2,202,876

1,800,198,040 1,427,541,285

Appropriations

Statutory Reserve 600,834,470 487,185,182

Non Controlling Share of Profi t 16(b) 1,773,629 -

Retained Surplus 16(a) 1,197,589,941 940,356,103

1,800,198,040 1,427,541,285

Earning Per Share* (EPS) 32 3.53 2.87

* Earning Per Share (EPS) has been calculated by using weighted average number of share outstanding and previous year's EPS has been restated accordingly.

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED DECEMBER 31, 2011

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

164 annual report

CONSILIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2011

AMOUNT IN TAKA

2011 2010

A. Cash Flows from Operating Activities (35,504,648) 1,254,326,787

Interest Received 7,416,665,100 5,915,992,883

Interest Paid (6,022,291,197) (3,288,697,888)

Fees and Commission Received 744,016,176 629,216,027

Payment to the Employees (1,306,411,768) (932,982,480)

Payment to Suppliers (124,703,829) (116,660,521)

Income Tax Paid (742,779,130) (952,541,234)

Received from other operating activities 2,683,721,396 1,645,258,454

Exchange Gain 695,000,785 571,832,085

Other Operating Income 1,988,720,611 1,073,426,369

Payment for other operating activities (1,071,771,264) (779,780,338)

Rent, Taxes, Insurances and Electricity (285,322,125) (230,052,874)

Legal Expenses (10,249,884) (14,559,219)

Postage, Stamps and Telecommunication (62,044,104) (50,082,585)

Auditors' Fees (941,024) (750,000)

Repair and Maintenance (31,714,455) (21,027,806)

Chief Executive's Salary and Fees (6,300,000) (4,627,258)

Directors' Fees (3,864,431) (4,046,250)

Other Expenses (671,335,241) (454,634,346)

Operating profi t before changes in Operating Assets and LiabilitiesIncrease / Decrease in Operating Assets and Liabilities

1,576,445,484 2,119,804,903

(26,940,673,152) (10,864,325,207)

Trading Securities (Treasury Bills & Bonds) (13,590,345,760) (171,594,769)

Loans and Advances to other Banks - -

Loans and Advances to Customer (13,350,327,392) (10,692,730,438)

Other Assets (Item-wise) 11,829,991 (674,534,963)

Suspense Account (Note 9.1) 10,191,675 (23,341,008)

Demand Draft paid without Advice 35,833 5,865,934

Advance Rent (75,535,482) (24,915,454)

Advance Deposits (542,485) (251,070)

Stock of Stationery 2,835,760 (16,454,576)

Stamps in Hand 5,156 (448,379)

Premium on Bond (3,210,232) (347,179)

Clearing Adjustment Account (16,348,043) (107,388,013)

On Line Client Adjustment Account 5,124,845 -

Adjusting Account Debit (Note 9.2) 89,272,964 (507,255,218)

26,969,971,194 10,377,768,137

Deposit from other Banks 5,112,719,303 (978,782,030)

Deposit from Customers 20,314,764,773 11,709,608,580

Other Liabilities on account of Customers - -

Other Liabilities 1,542,487,118 (353,058,413)

Net Cash Received from Operating Activities 1,617,573,516 958,712,870

Continued to Next Page

165annual report

www.mblbd.com

AMOUNT IN TAKA

2011 2010

B. Cash Flows from Investing Activities

Sale proceeds of Fixed Assets - -

Dividend Received 16,261,493 7,922,279

Purchase/ Sale of Property, Plant and Equipment (550,731,564) (714,018,363)

Purchase/ Sale of Shares 75,326,274 (1,682,863,213)

Other Investment activities 667,344,514 -

Net Cash from Investing Activities 208,200,717 (2,388,959,297)

C. Cash Flows from Financing Activities

Receipts from Issue of Loan Capital and Debt Securities - -

Paid for Repayment of Loan and Debt Securities - -

Received by Issue of Right Share - 1,438,942,300

Dividend Paid - -

Net Cash from Financing Activities - 1,438,942,300

D. Net Increase/(Decrease) of Cash & Cash Equivalent (A+B+C) 1,825,774,233 8,695,873

Effects of Exchange Rate changes on Cash and Cash Equivalent

E. Opening Cash and Cash Equivalent 5,785,668,723 5,776,972,850

F. Closing Cash and Cash Equivalent (D+E) note-16.A 7,611,442,956 5,785,668,723

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

166 annual report

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hart

ered

Acc

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ants

P

lace

: Dha

ka

Dat

e: F

ebru

ary

19, 2

012

Ahm

ed Z

aker

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o.

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Feb

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Aud

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hare

hold

ers

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nnex

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t on

even

dat

e

&K

MH

&C

Dr.

Mat

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Rah

man

, M.P

Dire

ctor

Mo

hd. S

elim

Dire

ctor

Md

. Ab

dul

Jal

il, M

.PC

hairm

anA

.K.M

. Sha

hid

ul H

aque

Man

agin

g D

irect

or a

nd C

EO

167annual report

www.mblbd.com

Up to 01 Month 01-03 Months 03-12 Months 01-05 Years More than 05 years

Total

TAKA TAKA TAKA TAKA TAKA TAKA

Cash in hand 6,948,621,454 - - - - 6,948,621,454

Balance with other Banks and

Financial Institutions

61,898,590 237,809,399 200,186,706 143,960,421 18,966,386 662,821,502

Money at Call and Short Notice

- - - - - -

Investments 696,387,717 439,296,744 3,220,560,349 10,183,915,321 10,335,216,366 24,875,376,497

Loans and Advances

15,242,177,774 11,298,178,430 25,689,553,725 19,881,569,185 7,616,545,604 79,728,024,718

Fixed Assets including premises,

furniture and fi xtures

- - 1,105,544,120 812,578,954 835,002,194 2,753,125,268

Other Assets 497,684,762 608,439,305 418,507,311 162,682,848 - 1,687,314,226

Non-banking Assets

- - - - - -

Total Assets 23,446,770,296 12,583,723,878 30,634,352,211 31,184,706,729 18,805,730,550 116,655,283,665

Borrowing from Bangladesh Bank,

other Banks, Financial Institutions

and Agents 5,370,000,000 - 606,762,994 - - 5,976,762,994

Deposits 16,099,260,071 10,459,822,700 24,307,896,524 28,089,547,925 13,990,449,269 2,946,976,489

Other accounts 1,107,180,337 - - - - 1,107,180,337

Provision and other liabilities

- 1,827,550,810 3,104,431,147 1,646,714,115 314,779,508 6,893,475,581

Total Liabilities 22,576,440,408 12,287,373,510 28,019,090,665 29,736,262,040 14,305,228,777 106,924,395,401

Net Liquidity Gap 870,329,888 296,350,368 2,615,261,546 1,448,444,689 4,500,501,773 9,730,888,265

Consolidated Liquidity StatementAssets and Liability Maturity AnalysisAs at December 31, 2011

The following assumptions have been applied in preparing the maturity analysis:

i) Balance with other Banks and Financial Institutions, Money at Call and Short Notice are on the basis of their maturity .ii) Investments are on the basis of their maturity.iii) Loans and Advances are on the basis of their maturityiv) Fixed Assets including premises, furniture and fi xtures are on the basis of their useful life .v) Other Assets are on the basis of their adjustment.vi) Borrowing from Bangladesh Bank, other Banks, Financial Institutions and Agents are on the basis of their payment .vii) Deposits and other accounts are on the basis of their maturity and payment . viii) Provision and other liabilities are on the basis of their adjustment .

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

168 annual report

BALANCE SHEETAS AT DECEMBER 31, 2011

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

Amount in Taka

Notes 31.12.2011 31.12.2010

PROPERTY AND ASSETS

Cash 3 6,946,104,482 4,877,118,983

Cash in hand (Including Foreign Currencies) 3.1 812,551,015 725,743,332

Balance with Bangladesh Bank & Sonali Bank 3.2 6,133,553,467 4,151,375,651

(Including Foreign Currencies)

Balance with other Banks and Financial Institutions 4 643,855,116 908,549,740

In Bangladesh 4.1 499,894,695 336,299,571

Outside Bangladesh 4.2 143,960,421 572,250,169

Money at Call and Short Notice 5 - -

Investments 6 24,645,376,621 10,937,201,791

Government 6.4 23,348,847,110 9,565,346,007

Others 6.5 1,296,529,511 1,371,855,784

Loans and Advances 7 79,999,799,464 66,377,697,326

Loans, Cash Credit, Overdraft etc. 7.A 73,804,712,735 60,868,739,469

Bills Purchased and Discounted 7.B 6,195,086,729 5,508,957,857

Fixed Assets Including Premises, Furniture and Fixtures 8 2,711,318,595 1,647,581,148

Other Assets 9 1,606,559,609 2,391,960,482

Non Banking Assets - -

Total Assets 116,553,013,887 87,140,109,470

LIABILITIES AND CAPITAL

Liabilities

Borrowings from other Banks, Financial Institutions and Agents 10 5,976,762,994 864,043,691

Deposits and Other Accounts 11 94,102,832,878 73,739,392,053

Current Accounts and Other Accounts 11.1 12,870,710,702 13,101,835,627

Bills Payable 11.2 1,107,180,337 919,953,615

Savings Bank Deposits 11.3 5,929,735,523 5,238,953,971

Fixed Deposits 11.4 38,875,499,490 25,865,957,124

Deposits Under Schemes 11.5 35,319,706,826 28,612,691,716

Other Liabilities 12 6,814,084,739 5,350,988,463

Total Liabilities 106,893,680,611 79,954,424,207

Capital/Shareholders' Equity

Paid-up Capital 13.1 4,968,092,000 4,072,206,600

Statutory Reserve 14 2,643,393,554 2,042,559,084

Other Reserve 15 870,039,141 130,563,476

Surplus in Profi t & Loss Account 16 1,177,808,581 940,356,103

Total Shareholders' Equity 9,659,333,276 7,185,685,263

Total Liabilities & Shareholders' Equity 116,553,013,887 87,140,109,470

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

169annual report

www.mblbd.comOFF- BALANCE SHEET ITEMS AS AT DECEMBER 31, 2011

Note Amount in Taka

31.12.2011 31.12.2010

OFF- BALANCE SHEET ITEMS

CONTINGENT LIABILITIES (A) 17

Acceptances and Endorsements 17.1 17,598,275,000 13,851,903,585

Letters of Guarantee 17.2 6,059,769,002 5,660,663,008

Irrevocable Letters of Credit 17.3 16,585,475,576 17,331,871,105

Bills for Collection 17.4 147,818,597 38,644,396

Other Contingent Liabilities 17.5 1,557,027,293 1,106,457,238

Total 41,948,365,468 37,989,539,332

OTHER COMMITMENTS (B)

Documentary credits and short term trade related transactions - -

Forward assets purchased and forward deposits placed - -

Undrawn note issuance and revolving underwriting facilities - -

Undrawn formal standby facilities, credit lines and other commitments - -

Total - -

TOTAL OFF- BALANCE SHEET ITEMS INCLUDING

CONTINGENT LIABILITIES ( A+B ) 41,948,365,468 37,989,539,332

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

Ah &K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

170 annual report

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2011

Amount in Taka

Notes 2011 2010

Interest Income 19 9,732,681,382 6,837,900,076

Less: Interest Paid on Deposits, Borrowings etc. 21 8,022,131,491 5,071,998,071

Net Interest Income 1,710,549,891 1,765,902,005

Investment Income 20 1,671,292,448 815,443,728

Commission, Exchange and Brokerage 22 1,439,016,961 1,201,048,112

Other Operating Income 23 1,281,385,842 993,417,661

4,391,695,251 3,009,909,501

Total Operating Income 6,102,245,142 4,775,811,506

Salaries and Allowances 24 1,292,014,793 932,982,480

Chief Executive's Salary and Fees 25 6,300,000 4,627,258

Directors' Fees 26 3,051,400 4,538,100

Rent, Taxes, Insurances, Electricity etc. 27 281,873,775 230,052,874

Legal Expenses 28 10,249,884 14,559,219

Postage, Stamps, Telecommunication etc. 61,816,538 50,082,585

Stationery, Printings, Advertisements etc. 29 124,064,567 116,660,521

Auditors' Fees 707,059 750,000

Depreciation and Repair of Fixed Assets 30 162,320,527 120,290,064

Other Expenses 31 658,174,251 454,142,496

Total Operating Expenses 2,600,572,794 1,928,685,597

Profi t before Provision 3,501,672,348 2,847,125,909

Provision against Classifi ed Loans 12.5 315,200,000 20,000,000

Provision against Un Classifi ed Loans 12.5 143,000,000 230,500,000

Other Provision 12.5 39,300,000 160,700,000

Total Provision 497,500,000 411,200,000

Total Profi t before Taxes 3,004,172,348 2,435,925,909

Provision for Taxation 12.4 1,250,000,000 1,010,587,500

Provision for Deferred Tax 20,000,000 -

1,270,000,000 1,010,587,500

Net Profi t after Taxation 1,734,172,348 1,425,338,409

Retained Surplus brought forward from previous year 44,470,703 2,202,876

1,778,643,051 1,427,541,285

Appropriations

Statutory Reserve 600,834,470 487,185,182

Retained Surplus 1,177,808,581 940,356,103

1,778,643,051 1,427,541,285

Earning Per Share* (EPS) 32 3.49 2.87

* Earning Per Share (EPS) has been calculated by using weighted average number of share outstanding and previous year's EPS has been restated accordingly.

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

171annual report

www.mblbd.comSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2011

Amount in Taka

2011 2010

A. Cash Flows from Operating Activities (47,904,378) 1,254,326,787

Interest Received 7,388,769,227 5,915,992,883

Interest Paid (6,021,831,291) (3,288,697,888)

Fees and Commission Received 744,016,176 629,216,027

Payment to the Employees (1,292,014,793) (932,982,480)

Payment to Suppliers (124,064,567) (116,660,521)

Income Tax Paid (742,779,130) (952,541,234)

Received from other operating activities 2,644,410,625 1,645,258,454

Exchange Gain 695,000,785 571,832,085

Other Operating Income 1,949,409,840 1,073,426,369

Payment for other operating activities (1,053,930,303) (779,780,338)

Rent, Taxes, Insurances and Electricity (281,873,775) (230,052,874)

Legal Expenses (10,249,884) (14,559,219)

Postage, Stamps and Telecommunication (61,816,538) (50,082,585)

Auditors' Fees (750,000) (750,000)

Repair and Maintenance (31,714,455) (21,027,806)

Chief Executive's Salary and Fees (6,300,000) (4,627,258)

Directors' Fees (2,725,000) (4,046,250)

Other Expenses (658,500,651) (454,634,346)

Operating profi t before changes in Operating Assets and Liabilities Increase / Decrease in Operating Assets and Liabilities

1,542,575,944 2,119,804,903

(27,405,603,241) (10,864,325,207)

Trading Securities (Treasury Bills & Bonds) (13,783,501,103) (171,594,769)

Loans and Advances to other Banks - -

Loans and Advances to Customer (13,622,102,138) (10,692,730,438)

Other Assets (Item-wise) 505,603,623 (674,534,963)

Suspense Account (Note 9.1) 10,191,675 (23,341,008)

Demand Draft paid without Advice 35,833 5,865,934

Advance Rent (75,535,482) (24,915,454)

Advance Deposits (542,485) (251,070)

Stock of Stationery 2,835,760 (16,454,576)

Stamps in Hand 5,156 (448,379)

Premium on Bond (3,210,232) (347,179)

Clearing Adjustment Account 477,425,589 (107,388,013)

On Line Client Adjustment Account 5,124,845 -

Adjusting Account Debit (Note 9.2) 89,272,964 (507,255,218)

26,939,256,404 10,377,768,137

Deposit from other Banks 5,112,719,303 (978,782,030)

Deposit from Customers 20,363,440,825 11,709,608,580

Other Liabilities on account of Customers - -

Other Liabilities 1,463,096,276 (353,058,413)

- -

Net Cash Received from Operating Activities 1,581,832,730 958,712,870

Continued to Next Page

172 annual report

Amount in Taka

2011 2010

B. Cash Flows from Investing Activities

Sale proceeds of Fixed Assets - -

Dividend Received 16,261,493 7,922,279

Purchase/ Sale of Property, Plant and Equipment (550,731,564) (714,018,363)

Purchase/ Sale of Shares 75,326,274 (1,682,863,213)

Other Investment activities 681,601,943 -

Net Cash from Investing Activities 222,458,146 (2,388,959,297)

C. Cash Flows from Financing Activities

Receipts from Issue of Loan Capital and Debt Securities - -

Paid for Repayment of Loan and Debt Securities - -

Received by Issue of Right Share - 1,438,942,300

Dividend Paid - -

Net Cash from Financing Activities - 1,438,942,300

D. Net Increase/(Decrease) of Cash & Cash Equivalent (A+B+C) 1,804,290,875 8,695,873

Effects of Exchange Rate changes on Cash and Cash Equivalent

E. Opening Cash and Cash Equivalent 5,785,668,723 5,776,972,850

F. Closing Cash and Cash Equivalent (D+E) note-16.A 7,589,959,598 5,785,668,723

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

173annual report

www.mblbd.com

STA

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K. M

. Has

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.C

hart

ered

Acc

ount

ants

P

lace

: Dha

ka

Dat

e: F

ebru

ary

19, 2

012

Ahm

ed Z

aker

& C

o.

Cha

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ed A

ccou

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: Dha

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ate:

Feb

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y 19

, 201

2

Aud

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’ Rep

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e S

hare

hold

ers

to s

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nnex

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t on

even

dat

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&K

MH

&C

Dr.

Mat

iur

Rah

man

, M.P

Dire

ctor

Mo

hd. S

elim

Dire

ctor

Md

. Ab

dul

Jal

il, M

.PC

hairm

anA

.K.M

. Sha

hid

ul H

aque

Man

agin

g D

irect

or a

nd C

EO

174 annual report

Up to 01 Month 01-03 Months 03-12 Months 01-05 Years More than 05 years

Total

TAKA TAKA TAKA TAKA TAKA TAKA

Assets:

Cash in hand 6,946,104,482 - - - - 6,946,104,482

Balance with other Banks and

Financial Institutions 61,898,590 237,809,399 200,186,706 143,960,421 - 643,855,116

Money at Call and Short Notice

- - - - - -

Investments 466,387,841 439,296,744 3,220,560,349 10,183,915,321 10,335,216,366 24,645,376,621

Loans and Advances 15,242,177,774 11,298,178,430 25,689,553,725 19,881,569,185 7,888,320,350 79,999,799,464

Fixed Assets including premises,

furniture and fi xtures - - - 1,212,578,954 1,498,739,641 2,711,318,595

Other Assets 497,684,762 530,439,481 418,507,311 159,928,055 - 1,606,559,609

Non-banking Assets - - - - - -

Total Assets 23,214,253,449 12,505,724,054 29,528,808,091 31,581,951,936 19,722,276,357 116,553,013,887

Liabilities:

Borrowing from Bangladesh Bank,

other Banks, Financial Institutions

and Agents 5,370,000,000 - 606,762,994 - - 5,976,762,994

Deposits 16,099,260,071 10,908,498,752 24,307,896,524 28,089,547,925 13,590,449,269 92,995,652,541

Other accounts 1,107,180,337 - - - - 1,107,180,337

Provision and other liabilities

- 1,389,169,064 3,104,431,147 1,646,714,115 673,770,413 6,814,084,739

Total Liabilities 22,576,440,408 12,297,667,816 8,019,090,665 29,736,262,040 14,264,219,682 106,893,680,611

Net Liquidity Gap 637,813,041 208,056,238 1,509,717,426 1,845,689,896 5,458,056,675 9,659,333,276

Liquidity StatementAssets and Liability Maturity AnalysisAs at December 31, 2011

The following assumptions have been applied in preparing the maturity analysis: i) Balance with other Banks and Financial Institutions, Money at Call and Short Notice are on the basis of their maturity . ii) Investments are on the basis of their maturity.iii) Loans and Advances are on the basis of their maturityiv) Fixed Assets including premises, furniture and fi xtures are on the basis of their useful life .v) Other Assets are on the basis of their adjustment.vi) Borrowing from Bangladesh Bank, other Banks, Financial Institutions and Agents are on the basis of their payment .vii) Deposits and other accounts are on the basis of their maturity and payment .viii) Provision and other liabilities are on the basis of their adjustment .

These Financial Statements should be read in conjunction with the annexed notes (1 to 41)

K. M. Hasan & Co.Chartered Accountants Place: Dhaka Date: February 19, 2012

Ahmed Zaker & Co.Chartered AccountantsPlace: DhakaDate:February 19, 2012

Auditors’ Report to the Shareholders to see annexed report on even date

&K M H & C

Dr. Matiur Rahman, M.PDirector

Mohd. SelimDirector

Md. Abdul Jalil, M.PChairman

A.K.M. Shahidul HaqueManaging Director and CEO

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Explanatory notes to the Financial StatementsFor the period ended 31 December 2011

1.1 Status and Nature of the company:Mercantile Bank Limited (“the Bank”) was incorporated in Bangladesh as a Public Company Limited by shares under the Companies Act, 1994 as on May 20, 1999 and subsequently obtained Banking operation license from Bangladesh Bank under the Bank Company Act 1991 and commenced commercial operation on June 02, 1999. The Bank went for public issue of shares in the year 2003 and its shares are listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). Presently the Bank has 75 Branches, including 5 SME/Krishi Branches and two subsidiary companies.

1.1.1 Principal Activities

The principal activities of the Bank are to provide all kind of commercial banking activities and encompass a wide range of services including accepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping, collections, issuing guarantees, acceptances and letters of credit to its customers through its branches in Bangladesh.

1.1.2 Mercantile Bank Securities Limited (a subsidiary company of Mercantile Bank)

In line with Bangladesh Bank directives, Mercantile Bank Securities Ltd (MBSL), a subsidiary company of Mercantile Bank Limited has been formed on 27 June 2010 to deal with stock dealing and broking. MBSL has started its commercial operation from 14 September 2011 through obtaining stock dealer & broker license from the Securities and Exchange Commission (SEC). The main operation of the subsidiary is to buy and sell off securities for its customer and margin loan is extended to the customers against their margin for investment in the listed companies. The required margin level is monitored daily and margin loan is provided as per established guideline. Financial Statements of the Company are shown in Annexure-I.

1.1.3 Mercantile Exchange House (UK) Limited

Mercantile Exchange House (UK) Limited was incorporated as private limited company with Companies for England and Wales under registration no. 07456837 on 1 December 2010. The company is a wholly owned subsidiary company of Mercantile Bank Limited incorporated in Bangladesh, which is also the company’s ultimate holding company. Earlier on 17 June 2010, Mercantile Bank Limited got the permission from Bangladesh Bank for opening a fully owned subsidiary in UK. Mercantile Exchange House (UK) limited obtained Money Laundering registration on 21 February 2011 issued by HM Customs and Excise.

Mercantile Bank Limited (“the Bank”) was incorporated in Bangladesh as a Public Company Limited by shares under the Companies Act, 1994 as on May 20, 1999 and subsequently obtained Banking operation license from Bangladesh Bank under the Bank Companies Act 1991 and commenced commercial operation on June 02, 1999

‘

‘

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The company got registration from Financial Services Authority (FSA) on 7 October 2010 as Small Payment Institution to carry out Money Service business under Payment Services Regulations 2009. The company started its commercial operation on 6 December 2011 at its Birmingham Offi ce, UK. Financial Statements of the company are shown in Annexure-J

1.1.4 Off-shore Banking Unit (OBU)

The Bank obtained the Off-shore Banking Unit permission vide letter no. BRPD(P-3)744(114)/2010-1743 dated 4 May 2010. The commencement of operation of this unit is from 20, March 2011. Presently the bank has 3 (three) units in operation in Bangladesh. The Off-shore Unit is governed under the rules and guidelines of Bangladesh Bank. Separate Financial Statements of Off-shore Unit are shown in Annexure-H. The principal activities of the OBU are to provide all kinds of commercial banking services to its customers through its branches in Bangladesh.

1.2 Signifi cant Accounting Policies:1.2.1 Basis of Preparation of Financial Statements

The Financial statements of the Bank are prepared on going concern basis under historical cost convention and in accordance with fi rst schedule of Bank Companies Act of 1991 as amended on June 25, 2003 section 38 (4), Bangladesh Bank Circulars, Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and other laws and rules applicable in Bangladesh.

1.2.2 Basis of Consolidation

The consolidated fi nancial statements include the fi nancial statements of Mercantile Bank Limited, Mercantile Bank Securities Limited, Mercantile Bank Exchange House (UK) limited and Off-Shore Banking Unit made up to the end of the fi nancial year. The consolidated fi nancial statements have been prepared in accordance with Bangladesh Accounting Standard 27: Consolidated Financial Statements and Accounting for Investments in Subsidiaries. The consolidated fi nancial statements are prepared to a common fi nancial year ending 31 December 2011.

Transactions eliminated on consolidation

All intra-group transactions, balances, income and expenses are eliminated on consolidation. Profi t and loss resulting from transactions between group are also eliminated on consolidation.

1.2.3 Statement of Cash Flows

The Statement of Cash Flows has been prepared in accordance with the Bangladesh Accounting Standards-7, “Statement of Cash Flows” under direct method as recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation & Policy Department of Bangladesh Bank.

1.2.4 Liquidity Statement

The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per the following basis:

I. Balance with other Banks and fi nancial institutions, money at call and short notice etc. are on the basis of their maturity term;

II. Investments are on the basis of their respective maturity;

III. Loans and advances/ investments are on the basis of their repayment schedules;

IV. Fixed assets are on the basis of their useful lives;

V. Other assets are on the basis of their realizations/ amortizations;

VI. Borrowing from other Banks, fi nancial institutions and agents, etc are as per their maturities/ repayment terms;

VII. Provisions and other liabilities are on the basis of their payments/ adjustments schedule;

VIII. Deposits and other accounts are on the basis of their maturity term and past trend of withdrawal by the depositors.

1.2.5 Reporting Period

These fi nancial statements cover a calendar year from January 01, 2011 to December 31, 2011.

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1.2.6 Use of Estimates and Judgements

The preparation of Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual result may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimates are revised and in any future period affected.

1.3 Revenue Recognition:1.3.1 Interest Income

In terms of provisions of the BAS-18 “Revenue”, the interest income is recognized on accrual basis using effective interest rate. Interest on loans and advances ceases to be taken into income when such advances are classifi ed, such interest amount is then kept in interest suspense account.

1.3.2 Investment Income

Interest income on investments is recognized on accrual basis using effective interest rate as per BAS-18 “Revenue”. Capital gain on investments in shares is recognized as income and credited to investment income in the profi t and loss statement as per BAS-39 “Financial Instruments: Recognition and Measurements”. Capital Gain is recognized when it is realized.

1.3.3 Fees and Commission Income

Fees and Commission income arisen on services provided by the Bank are recognized on a cash receipt basis. Commission charged to customers on letters of credit and letters of guarantee is credited to income at the time of effecting the transactions in accordance with BAS-18 “Revenue”.

1.3.4 Dividend Income on Shares

Dividend income on shares is recognized during the period in which it is declared and right to receive is established as per BAS-18 “Revenue”.

1.3.5 Interest Paid and Other Expenses

In terms of the provisions of BAS-1 “Presentation of Financial Statements” interest and other expenses are recognized on accrual basis.

1.4 Reconciliation of Inter-Bank and Inter-Branch Account:Accounts with regard to inter-bank (in Bangladesh and outside Bangladesh) are reconciled regularly and there are no material differences, which may affect the fi nancial statements signifi cantly. Un-reconciled entries/ balances in inter-branch transactions as on the reporting date are not material.

1.5 Assets and Basis of their Valuation:1.5.1 Cash and Cash Equivalents

Cash and cash equivalents include notes and coins in hand, unrestricted balances held with Bangladesh Bank and highly liquid fi nancial assets which are subject to insignifi cant risk of changes in their fair value, and are used by the Bank management for its short term commitments.

1.5.2 Loans and Advances

a) Loans and advances are stated in the balance sheet on gross basis.

b) Interest is calculated on a daily product basis but charged and accounted for on accrual basis. Interest on classifi ed loans and advances is kept in suspense account as per Bangladesh Bank instructions and such interest is not accounted for as income until realized from borrowers. Interest is not charged on bad and loss loans as per guidelines of Bangladesh Bank. Records of such interest amounts are kept in separate accounts.

c) Commission and discounts on bills purchased and discounted are recognized at the time of realization.

d) Provision for loans and advances is made on the basis of year-end review by the management following instructions contained in Bangladesh Bank BCD Circular no. 34 dated November 16, 1989, BCD Circular no. 20 dated December 27, 1994, BCD Circular no. 12 dated September 04, 1995, BRPD Circular no. 16 dated December 06, 1998, BRPD

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Circular no. 9 dated May 14, 2001, BRPD Circular no.02 of February 2005, BRPD Circular no. 09 of August 2005 and BRPD Circular no. 17 dated December 06, 2005. The classifi cation rates are given below:

A. For Unclassifi ed Loans and Advances

i) All unclassifi ed loans (other than loans under Consumer fi nancing and Special Mention Account) 1%

ii) Unclassifi ed loans and Consumer Financing for Housing and Professionals (to set up business) 2%

iii) Margin Loan Account 2%

iv) Unclassifi ed loans (Short term Agricultural & Micro Credit) 5%

v) Outstanding amount of loans kept in the ‘Special Mention Account’ after netting off the amount of Interest Suspense

5%

B. For Classifi ed Loans and Advances

i) Specifi c Provision on substandard loans and advances 20%

ii) Specifi c Provision on doubtful loans and advances 50%

iii) Specifi c Provision on bad/loss loans and advances 100%

e) Loans and advances are written off to the extent that (i) there is no realistic prospect of recovery, (ii) and against which legal cases are pending as per guidelines of Bangladesh Bank. These write off, however, will not undermine / affect the claim amount against the borrower. Detailed memorandum records for all such write off accounts are meticulously maintained and followed up.

1.6 Valuation of Assets

I. Property, Plant and Equipment

a) All fi xed assets are stated at cost less accumulated depreciation as per BAS-16 “Property, Plant and Equipment”. The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use inclusive of inward freight, duties and non-refundable taxes.

b) The bank recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefi t embodied with the item will fl ow to the company and the cost of the item can be measured reliably. Expenditure incurred after the assets have been put into operation, such as repairs and maintenance is normally charged off as revenue expenditure in the period in which it is incurred.

c) Depreciation is charged on Fixed Assets at the following rates on reducing balance method from the date of acquisition, other than the Vehicles on which straight-line method is applied.

d) Name of Assets Rate

Land and land development Nil

Building 2.5% p.a.

Furniture and Fixtures 10% p.a.

Offi ce Equipment 20% p.a.

Vehicles 20% p.a.

Books 20% p.a.

e) Depreciation on assets addition during the year is charged from the month of addition.

f) On the month of disposal of fi xed assets no depreciation is charged. The cost and accumulated depreciation of disposed assets are eliminated from the fi xed assets schedule and gain or loss on such disposal is refl ected in the income statement.

g) Useful life and method of depreciation of fi xed assets are reviewed periodically. If useful lives of assets do not differ signifi cantly as it was previously estimated, Bank management does not consider re-estimating of depreciation of its assets by the meantime.

I. Investments

All investment in securities is initially recognized at cost, being fair value of the consideration given, including acquisition charges associated with the investment. Premiums are amortized and discounts accredited, using the effective yield method is taken to discount income as per BAS-32 “Financial Instruments: Presentations” and BAS-39 “Financial Instruments: Recognition and Measurements”. The valuation methods of investments include:

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Held To Maturity (HTM)

HTM consists the Government approved securities in the mode of Treasury Bond & Bills which are classifi ed accordingly as per Bangladesh Bank DOS Circular # 5 dated May 26, 2008. These securities bear fi xed coupon payments and are revalued annually on amortized cost method as directed by Bangladesh Bank. The change in revaluation of the securities is refl ected in the Changes in Equity Statement.

Held For Trading (HFT)

HFT securities are the trading book securities of the Bank; classifi ed as per Bangladesh Bank DOS Circular # 5 dated May 26, 2008. These securities are freely tradable, if desired. Securities held in this category are revalued weekly as per Mark to Market basis and the gain or loss arising out of such valuation is refl ected on the Reserve for Revaluation Account.

Investment in listed securities

These securities are bought and held primarily for the purpose of selling them in future or held for dividend income. These are reported at cost. Unrealized gains or losses are not recognized in the profi t and loss account.

Investment in unlisted securities

Investment in unlisted securities is reported at cost under cost method. Adjustment is given for any shortage of book value over cost for determining the carrying amount of investment in unlisted securities.

All investments are stated as per following basis:

Investment Class Initial Recognition

Measurement after initial recognition

Recording of changes

Govt. T-Bond (HTM) Cost Amortized Cost Increase or decrease in value of equity

Govt. T-Bill (HFT) Cost Fair Value Loss to P&L, gain to revaluation through P&L

Govt. T-Bond (HFT) Cost Fair Value Do

Share (Quoted) Cost At cost or market price whichever is lower at balance sheet date

Loss to P&L but no unrealized gain booking

Share (Un-Quoted) Cost Cost None

Prize bond Cost Cost None

1.6.1 Leasing

Leases are classifi ed as fi nance lease whenever the terms of the lease transfer substantiality all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases as per BAS- 17.

The Bank as lessor:

Amount due from leases under fi nance leases are recorded as receivables at the amount of the bank’s net investment in the leases. Finance Leases income is allotted to accounting periods so as to refl ect a constant periodic rate to return on the Bank’s net investment outstanding in respect of the leases as per BAS-17.

The Bank as lessee:

Assets held under fi nance leases are recognized as assets of Bank at their fair value at the date of acquisition or if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Balance Sheet as a Finance Lessee Obligation. Lease payments are apportioned between fi nance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income as per BAS-17.

Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets.

1.7 Basis for Valuation of Liabilities and Provisions:

1.7.1 Provision for Taxation

Provision for current income tax has been made as prescribed in the Finance Act, 2011 on the accounting profi t made by the Bank after considering some of the add backs to income and disallowances of expenditure as per income tax laws in compliance with BAS-12 “ Income Taxes”.

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1.7.2 Deferred Taxation

Deferred tax liabilities are the amount of income taxes payable in future periods in respect of taxable temporary differences. Deferred tax assets are the amount of income taxes recoverable in future periods in respect of deductible temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences of timing differences arising between the carrying values of assets, liabilities, income and expenditure and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date.

1.7.3 Dividend Payments

Final dividend is recognized when the shareholders approve it and right to receive of dividend is established to the shareholder.

1.7.4 Statutory Reserve

Bank Companies Act 1991 requires the Bank to transfer 20% of its current year’s profi t before tax to reserve until such reserve make equals to its paid up capital. Accordingly, Bank has transferred requisite portion of current year’s profi t to the statutory reserve account.

1.7.5 Provision for Contingent Assets and Liabilities

A provision is recognized in the balance sheet when the Bank has a legal or constructive obligation as a result of a past event and it is probable that an outfl ow of economic benefi t will be required to settle the obligations, in accordance with the BAS -37 “Provisions, Contingent Liabilities and Contingent Assets”.

1.7.5.1 Off-Balance Sheet Items & Provisions

Off-balance sheet items have been disclosed under contingent liabilities and other commitments as per Bangladesh Bank guidelines. As per BRPD Circular # 10, dated September 18, 2007, Banks are required to maintain provision @1% against off balance sheet exposures (L/C and Guarantee) effective from December 2008.

1.7.5.2 Provision for Nostro Accounts

As per instruction contained in the circular letter No. FEPD (FEMO)/ 01/ 2005-677 dated 13 September 2005 issued by Foreign Exchange Policy Department of Bangladesh Bank, Bank is not required to make provision regarding the un-reconciled debit balance of nostro account as on the reporting date in these fi nancials.

1.8 Benefi ts to the Employees:

The retirement benefi ts accrued for the employees of the Bank as on reporting date have been accounted for in accordance with the provisions of Bangladesh Accounting Standard-19, “Employee Benefi t”. Bases of enumerating the retirement benefi t schemes operated by the Bank are outlined below:

1.8.1 Provident Fund

Provident fund benefi ts are given to the permanent employees’ of the Bank in accordance with Bank’s service rules. Accordingly, a trust deed and provident fund rules were prepared. The Commissioner of Income Tax, Taxes Zone -3, Dhaka has approved the Provident Fund as a recognized provident fund within the meaning of section 2(52), read with the provisions of part - B of the First Schedule of Income Tax Ordinance 1984.

The recognition took effect from June 02, 1999. The Fund is operated by a Board of Trustees consisting of six members (03 members from the management side and other 03 members from the Board of Directors including Managing Director) of the Bank. All confi rmed employees of the Bank are continuing their contribution @10% of their basic salary as subscription to the Fund. The Bank also similarly contributes equal amount of the employees’ contribution. Interest earned from the investments is credited to the members’ account on yearly basis.

1.8.2 Gratuity Fund

The Bank has started providing Gratuity fund, which was approved by the National Board of Revenue on October 05, 2006. The Fund is operated by a Board of Trustees consisting of 7 (seven) members of whom 03 members are taken from the Board of Directors including Managing Director of the Bank.

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1.8.3 Welfare Fund

Mercantile Bank Limited Employees’ welfare fund is subscribed by monthly contribution of the employees. The Bank also contributes to the Fund from time to time. The Fund has been established to provide coverage in the event of accidental death or permanent disabilities, a portion of retirement benefi t & stipend to the employees’ children. Disbursement from the fund is done as per prescribed rules for employees’ welfare fund.

1.8.4 Incentive Bonus

Mercantile Bank Limited started a scheme under the name and style “Incentive Bonus” for imperative motivation to all the employees working in the Bank. The criterion of payment of incentive bonus does not exceed 10% of disclosed net profi t of the bank as per section 30(j) of Income Tax Ordinance, 1984. This bonus amount is distributed amongst the employees on annual basis based on their individual job performance.

1.9 Earnings Per Share

The company calculates Earning Per Share (EPS) in accordance with BAS-33 “Earning per Share” which has been shown on the face of the Profi t and Loss account and the computation of EPS is elaborated in Note-32.

Basic earnings per share have been calculated in accordance with BAS 33 “Earnings per Share” which has been shown on the face of the profi t and loss account. This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding during the year.

1.10 Memorandum Items

Memorandum items are maintained to have control over all items of importance and for such transactions where the Bank has only a business responsibility and no legal commitment. Stock of travelers’ cheque, savings certifi cates, wage earners bonds and other fall under the memorandum items.

1.11 Offsetting Financial Instruments

Financial assets and fi nancial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously as per BFRS-7 “Financial Instruments: Disclosures”.

1.12 Foreign Currency Transactions:1.12.1 Foreign Currency

Foreign Currency Transactions in foreign currencies are converted into equivalent BDT applying the ruling rate at the date of such transactions as per BAS-21 “The Effects of Changes in Foreign Exchange Rates”. Foreign currencies balances held in US dollar are converted into Taka at weighted average rate of inter bank market as determined by Bangladesh Bank on the closing date of every month. Balance held in foreign currency other than US dollar are converted into equivalent US dollar at buying rates of New York closing of the previous day and converted into Taka equivalent.

1.12.2 Commitments

Commitments for outstanding forwarded foreign exchange contracts disclosed in these fi nancial statements are translated at contracted rates. Contingent commitments for letter of credits and letter of guarantee denominated in foreign currencies are expressed in BDT terms at the rate of exchange ruling on the balance sheet date.

1.12.3 Exchange Rate

Foreign currency are translated into taka currency at the following rates:

USD 1= Tk.81.853, GBP 1= Tk. 123.922, EURO 1= Tk. 106.986 and JYEN 1= Tk.1.052 as on 31 December 2011.

Other foreign currency related transactions have been converted by using the rate of exchange prevailing on the dates of such transactions.

1.13 Risk ManagementThe risk of Mercantile Bank Limited is defi ned as the possibility of losses, fi nancial or otherwise. The risk management of the Bank covers core risk areas of banking viz. credit risk, liquidity risk and market risk that includes foreign exchange risk, interest rate risk, equity risk, operational risk and reputation risk arising from money laundering incidences. The prime objective of the risk management is that the Bank evaluates and takes well calculative business risks and

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thereby safeguarding the Bank’s capital, its fi nancial resources and profi tability from various business risks through its own measures and through implementing Bangladesh Bank’s guidelines and following some of the best practices as under:

1.13.1 Credit Risk

It arises mainly from lending, trade fi nance, leasing and treasury businesses. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the Bank. The failure may result from unwillingness of the counter party or decline in his / her fi nancial condition. Therefore, the Bank’s credit risk management activities have been designed to address all these issues. The risk of Mercantile Bank Limited is defi ned as the possibility of losses, fi nancial or otherwise.

The risk management of the Bank covers core risk areas of banking viz. credit risk, liquidity risk and market risk that includes foreign exchange risk, interest rate risk, equity risk, operational risk and reputation risk arising from money laundering incidences. The prime objective of the risk management is that the Bank evaluates and takes well calculative business risks and thereby safeguarding the Bank’s capital, its fi nancial resources and profi tability from various business risks through its own measures and through implementing

Bangladesh Bank’s guidelines and following some of the best practices as under: Accounts with regard to inter-bank (in Bangladesh and outside Bangladesh) are reconciled regularly and there are no material differences which may affect the fi nancial statements signifi cantly. Fees and commission income arisen on services provided by the Bank are recognized on a cash receipt basis. Commission charged to customers on letters of credit and letters of guarantee is credited to income at the time of effecting the transactions. However, the fi nal profi t is determined and to be paid to the depositors. In terms of the provisions of BAS-1 “Presentation of Financial Statements” interest and other expenses are recognized on accrual basis. Interest income on investments is recognized on accrual basis. Capital gain on investments in shares is also included in investment income. Capital gain is recognized when it is realized. The Bank has segregated duties of the offi cers / executives involved in credit related activities. A separate Corporate Division has been formed at Head Offi ce, which is entrusted with the duties of maintaining effective relationship with the customers, marketing of credit products, exploring new business opportunities, etc. Moreover, credit approval; administration, monitoring and recovery functions have been segregated.

For this purpose, three separate units have been formed within the credit division. These are (a) Credit Risk Management Unit (b) Credit Administration Unit and (c) Credit Monitoring and Recovery Unit. Credit Risk Management Unit is entrusted with the duties of maintaining asset quality, assessing risk in lending to a particular customer, sanctioning credit, formulating policy / strategy for lending operation, etc. Adequate provision has been made on classifi ed loans are shown in note-12.5.1.

A thorough assessment is done before sanction of any credit facility at Credit Risk Management Unit. The risk assessment includes borrower risk analysis, fi nancial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility, etc. The assessment process starts at Corporate Division by the Relationship Manager / Offi cer and ends at Credit Risk Management Unit when it is approved / declined by the competent authority. Credit approval authority has been delegated to the individual executives. Proposals beyond their delegation are approved / declined by the Executive Committee and / or the Management of the Bank.

In determining Single borrower / large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of Bank’s and Regulatory polices. Loans are classifi ed as per Bangladesh Bank’s guidelines.

1.13.2 Liquidity Risk

The object of liquidity risk management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due. To this end, the Bank is maintaining a diversifi ed and stable funding base comprising of core retail and corporate deposits and institutional balance (Note- 11). Management of liquidity and funding is carried out by Treasury Department under approved policy guidelines. Treasury front offi ce is supported by a very structured mid offi ce and Back offi ce. Asset Liability Committee (ALCO) monitors the Liquidity management on a regular basis. A written contingency plan is in place to manage crisis situation.

1.13.3 Market Risk

The exposure of market risk of the Bank is restricted to foreign exchange risk, interest rate risk and equity risk.

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1.13.4 Foreign Exchange Risk

Foreign exchange risk is defi ned as the potential change in earnings due to change in market prices. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying L/C commitments and other remittance requirements. No foreign exchange dealing on Bank’s account was conducted during the year.

Treasury Department independently conducts the transactions and the back offi ce of treasury is responsible for verifi cation of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Mark-to-Market rate as determined by Bangladesh Bank at the month-end. All Nostro accounts are reconciled on a monthly basis and the management for its settlement reviews outstanding entry beyond 30 days. The position maintained by the bank at the end of day was within the stipulated limit prescribed by the Bangladesh Bank.

1.13.5 Interest Rate Risk

Interest rate risk may arise either from trading portfolio and non-trading portfolio. The trading portfolio of the Bank consists of Government Treasury bills and Treasury Bonds with maturity varied from 1 to 20 years. The short-term movement in interest rate is negligible or nil. Interest rate risk of non-trading business arises from mismatches between the future yield of an asset and its funding cost. Asset Liability Committee (ALCO) monitors the interest rate movement on a regular basis.

1.13.6 Reputation Risk Arising from Money Laundering Incidences

Money laundering risk is defi ned as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering. For mitigating the risks, the Bank has a designated Chief Compliance Offi cer at Head Offi ce and Compliance Offi cers at branches, who independently review the transactions of the accounts to verify suspicious transactions. Manuals for prevention of money laundering have been established and Transaction profi le has been introduced. Training is continuously given to all the category of Offi cers and Executives for developing awareness and skill for identifying suspicious activities / transactions.

1.13.7 Operational Risk

Operational risk may arise from error and fraud due to lack of internal control and compliance. Management through Internal Control and Compliance Division controls operational procedure of the Bank. Internal Control and Compliance Division undertakes periodical and special audit of the branches and departments at the Head Offi ce for review of the operation and compliance of statutory requirements. The Audit Committee of the Board subsequently reviews the reports of the Internal Control and Compliance Division.

1.13.8 Guideline on Information & Communication technology

To effectively manage the IT operational risk in the wise level, the Bank is going to introduce a Centralized MIS that will reduce the operational risk. This information system will assist in collecting, analyzing and tracking of operational risk and forecast the trend. The implementation of this information system will be linked from the branches to the central database. In the future the information will be easily accessible by senior management and is expected to be important source of information of strategic decision-making process based on a comprehensive database. It is to be declared that the Bank is fully complaint according to the guideline of Central Bank’s IT policy.

1.13.9 Information System Audit

Information Systems audit is a part of the overall audit process, which is one of the facilitators for good corporate governance. IT audit is basically “the process of collecting and evaluating evidence to determine whether a computer system (information system) safeguards assets, maintains data integrity, achieves organizational goals effectively and consumes resources effi ciently.”

To comply the ICT Guideline of Bangladesh Bank and to ensure the smooth operation of business, an independent “IT Audit & Security” Department has been formed in May 2007. The main aim of the department is to identify the inherent risks and vulnerabilities associated with the use of IT operated banking system PC Bank 2000, other duties are to implement controls to mitigate the risks and provide recommendations for improvement in controls for reducing risks. Internal IT Audit provides an objective means of reviewing the risks faced by the Bank in relation to use of Information Technology and assesses whether they are being controlled/mitigated in an effective and effi cient manner; provides an assessment of the Bank’s IT control against ‘Guideline on ICT for Scheduled Banks by Bangladesh Bank. Internal IT Audit has carried out audit most of the branches during the year 2011.

184 annual report

Internal Control and Compliance contains self -monitoring mechanisms, and actions are taken to correct defi ciencies as they are identifi ed. Even with effective internal control, no matter how well designed, has inherent limitations including the possibility of the circumvention or overriding of controls and therefore can provide only reasonable assurance with respect to fi nancial statement preparation. Further, because of changes in conditions, internal control effectiveness may vary over time. MBL has taken all-out efforts to mitigate all sorts of risk as per guidelines issued by Bangladesh Bank. As a part of robust risk management process, the Bank has formulated a comprehensive Credit Risk Management Policy to address credit risk.

1.14 Events after Reporting PeriodAs per BAS-10 “Events after Reporting Period” are those events favorable and unfavorable, that occurs between the end of the reporting period and the date when fi nancial statements are authorized for issue. Two types of events can be identifi ed:

Those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after • balance sheet date): and

Those that are indicative of conditions that arose after the reporting period (Non-adjusting events after balance • sheet date).

Events after Reporting Period relate to proposed dividend as mentioned in Note-41.

1.15 Components of Financial Statements:

As per BAS-1 “Presentation of Financial Statements” and as recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation and Policy Department of Bangladesh Bank the Financial Statement includes;

I. Statement of Financial Position (Balance Sheet) as at 31 December, 2011.

II. Statement of Comprehensive Income (Profi t & Loss account) for the year ended 31 December, 2011.

III. Statement of Changes in Equity for the year ended 31 December,2011.

IV. Statement of Cash Flows for the year ended 31 December, 2011.

V. Liquidity Statement as at 31 December, 2011 and

VI. Signifi cant Accounting Policies and Explanatory Notes to the Financial Statements for the year ended 31 December, 2011.

1.16 Comparative:

Financial statements are presented as per BAS-1 “Presentation of Financial Statements” and previous year’s fi gure have been restated due to changes in some accounting policies as per BAS-8 “Accounting Policies, Changes in Accounting Estimates and Errors”.

2.0 General

I. Wherever considered necessary, previous year’s fi gures have been rearranged for the purpose of comparison;

II. Figures appearing in the Financial Statements have been rounded off to the nearest Taka.

III. The expenses, irrespective of capital or revenue nature, accrued / due but not paid have been provided for in the books of the bank.

2.1 Supplier Payment Policy

MBL always adheres to well set payment polices for all suppliers and explains them in details about the payment method and system and reviews process before providing work order. Bills are paid according to the payment terms and VAT and other taxes & duties are deducted from bills as per law. As of December 31, 2011 there is no legal case fi led by the Bank or fi led against the Bank by any supplier so far information gathered from the Bank authority.

2.2 Rating

Credit Rating and Information Services Limited (CRISL) has carried out the credit rating of Mercantile Bank Limited (MBL) based on the fi nancial performances and other relevant operation and activities of the Bank. The summary of their credit ratings on MBL has been submitted on 29 May, 2011.

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CRISL rated the Mercantile Bank Limited to “AA-” (Pronounced as Double A Minus) in the long term. The above gradation has been done in consideration with its fi nancial viability and consequent improvement in asset quality, capital adequacy, stable source of fund, diversifi ed product lines etc. Financial institutions rated in this category are adjudged the fi nancial institution that is subservient to have high safety to timely repayment of fi nancial obligations. It means Bank rated in the category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicate a corporate entity a sound credit profi le without signifi cant problems. Risks are modest and may vary slightly from time to time because of economic conditions.

CRISL rated the Mercantile Bank Limited to ST-2 in the short term. This rate shows High Grade of the Bank which indicates high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. The long-term rating is valid for only one year and short-term rating is for six months.

2.3 Offsetting:

No assets or liability has been offset or reduced by any other assets unless a legal right of set-off exists and the offsetting represents the expectation as to the realization or settlement of the asset or liability.

2.4 Approval of the Financial Statements:

The Board of Directors of the bank in its 194th meeting held on February 19, 2012 has approved the fi nancial statements for the year ended 31 December, 2011.

Amount in Taka

31.12.2011 31.12.2010

3 CASH 3.1 Cash in hand

In local currency 790,596,192 688,875,944

In foreign currency 21,954,823 36,867,388

812,551,015 725,743,332

3.2 Balance with Bangladesh Bank and Sonali Bank Ltd.

(Including foreign currencies)

Bangladesh Bank

In local currency 5,441,023,302 3,327,817,046

In foreign currencies 574,169,407 657,321,179

6,015,192,709 3,985,138,225

Sonali Bank Ltd.

Sonali Bank Ltd., (As an agent of Bangladesh Bank) - Local Currency 118,360,758 166,237,426

6,133,553,467 4,151,375,651

6,946,104,482 4,877,118,983

3.3 Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR)

Statutory Liquidity Requirement (SLR) have been maintained on the basis of 19% of total time and demand liabili-ties and in accordance with the Section 33 of the Bank Companies Act, 1991 and Bangladesh Bank’s (Central Bank) subsequent BCD Circular #.13 dated May 24, 1992, BRPD Circular # 12 dated September 06, 1998; BRPD Circular # 12 dated September 20, 1999; BRPD Circular # 22 dated November 06, 2003 , BRPD Circular #12 dated August 25, 2005, DOS Circular # 03 dated June 01, 2010 and MPD Circular # 04 dated December 01, 2010 The Statutory Liquidity Requirement includes 6% Cash Reserve Requirement (CRR) calculated on the bank’s total demand and time liabilities and maintained on a fortnight average basis in the Current Account maintained with the Bangladesh Bank and rest 13% is to be maintained in the form of Securities which include Treasury Bills, Government Treasury Bonds, Bangla-desh Bank Bills and other securities approved by the Bangladesh Bank, such as, T&T Bonds and also Balance held with Sonali Bank Ltd., Cash in hand and Vault, Balance of FC Clearing Account maintained with Bangladesh Bank. Both the reserves are maintained by the Bank in excess of the statutory requirements, as shown below:

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Amount in Taka

31.12.2011 31.12.2010

a) Cash Reserve Requirement (CRR): 6% of Average Demand and Time Liabilities:

Required Reserve 5,046,762,000 3,729,276,490

Actual Reserve held with Bangladesh Bank (note-3.2) 5,441,023,302 3,864,926,000

Surplus 394,261,302 135,649,510

b) Statutory Liquidity Requirement (SLR): 19% of Average Demand and Time Liabilities:

Required Reserve (including CRR) 17,434,269,000 12,882,955,000

Actual Reserve held (note-3.5) 30,294,951,592 14,442,464,990

Surplus 12,860,682,592 1,559,509,990

3.4 Maturity grouping of cash

Maturity-wise Groupings (Inside and Outside Bangladesh)

Payable on Demand 6,946,104,482 4,877,118,983

Up to 1(one) Month - -

Over 1(one) Month but not more than 3 (three) Months - -

Over 3 (three) Months but not more than 1 (one) Year - -

Over 1 (one) Year but not more than 5 (fi ve) Years - -

Over 5 (fi ve) Years - -

6,946,104,482 4,877,118,983

3.5 Held for Statutory Liquidity Ratio

Cash in hand (note-3.1) 812,551,015 725,743,332

Balance with Bangladesh Bank and its agent bank(s) (note-3.2) 6,133,553,467 4,151,375,651

Government securities (note-6. ii) 3,558,748,490 1,427,034,171

Government bonds (note-6. ii) 19,790,098,621 8,138,311,836

30,294,951,592 14,442,464,990

3 (a) CONSOLIDATED CASH AND CASH EQUIVALENTS

Cash in hand (Including foreign currencies)

Mercantile Bank Ltd. 812,551,015 725,743,332

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited 2,516,972 -

Off-shore Banking Unit - -

815,067,987 725,743,332

Balance with Bangladesh Bank and Sonali Bank Ltd.

(Including foreign currencies)

Mercantile Bank Ltd. 6,133,553,467 4,151,375,651

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

6,133,553,467 4,151,375,651

6,948,621,454 4,877,118,983

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Amount in Taka

31.12.2011 31.12.2010

4. BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS

4.1 In Bangladesh

Current Accounts

Sonali Bank Ltd. 24,334,353 36,157,291

Agrani Bank Ltd. 37,564,237 41,758,347

61,898,590 77,915,638

Short Notice Deposits Accounts

National Bank Ltd. 7,717,004 17,985,332

Trust Bank Ltd. 12,602,600 28,965,110

Arab Bangladesh Bank Ltd. 3,389,770 2,246,237

National Credit and Commerce Bank Ltd. 388,341 373,262

Janata Bank Ltd. 95,661,798 27,454,140

Prime Bank Ltd. - 1,550

Eastern Bank Ltd. 21,801 21,487

Dutch Bangla Bank Ltd. - 4,703

Pubali Bank Ltd. 6,515,448 11,276,082

Rupali Bank Ltd. 4,693,947 12,659,641

The City Bank Ltd 100,000,000 -

United Commercial Bank Ltd. 2,279,144 4,458,507

Bangladesh Commerce Bank 997,725 1,000,000

Southeast Bank Ltd. 3,541,821 1,931,293

237,809,399 108,377,344

MBL Brokerage House - 6,589

299,707,989 186,299,571

Financial Institutions

BIFC 50,000,000 -

Prime Financial investment ltd. 186,706 -

GSP FinanceCompany (BD) Ltd. 50,000,000 50,000,000

Uttara Finance & Investment Company Ltd. 100,000,000 100,000,000

200,186,706 150,000,000

Sub Total 499,894,695 336,299,571

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4.2 Outside Bangladesh (Nostro Accounts)Currency Amount Rate

Standard Chartered Bank, New York USD 212.82 81.8529 17,420 219,012

Mashreq Bank, New York USD 321.48 81.8529 26,314 209,445,590

Citibank N.A., New York USD 139.12 81.8529 11,387 61,344

HSBC, New York USD 95.78 81.8529 7,840 85,996

Wachovia Bank, New York USD 376,544.53 81.8529 30,821,262 20,111,362

Commerzbank, Frankfurt USD 37,243.12 81.8529 3,048,458 3,298,418

Standard Chartered Bank ,London GBP 241.90 128.1612 31,002 42,961,848

The Bank of Tokyo Mitsubishi Ltd., Tokyo J YEN 5,148,567.00 1.0519 5,415,778 12,094,185

Citibank N.A., Mumbai ACU 125.97 81.8529 10,311 10,674,509

Arab Bangladesh Bank Ltd., Mumbai ACU 1,173.97 81.8529 96,093 157,463

Commerzbank, Frankfurt EURO 520.52 106.9858 55,688 457,950

Standard Chartered Bank, Frankfurt EURO 4,992.17 106.9858 534,091 844,679

Unicredito Italiano, Milan EURO 16,216.65 106.9858 1,734,951 20,139,140

Hatton National Bank, Colombo ACU 275.36 81.8529 22,539 960,717

Bank of Bhutan, Phuentsholing ACU 292.55 81.8529 23,946 827,244

United Bank of India, Kolkata ACU 433.42 81.8529 35,477 1,233

Sonali Bank, Kolkata ACU 61.00 81.8529 4,993 826,045

Nepal BD Bank Ltd., Kathmandu ACU 8,243.61 81.8529 674,763 21,369,495

Standard Chartered Bank, Mumbai ACU 71.87 81.8529 5,883 87,515,368

HSBC, Mumbai ACU 632.62 81.8529 51,782 10,438,508

HSBC, Karachi, Pakistan ACU 25.43 81.8529 2,082 39,495,537

ICICI, Mumbai ACU 1,067,906.78 81.8529 87,411,267 19,294,880

Habib Bank AG Zurich CHF 25,705.48 87.6322 2,252,628 3,092,676

Mashreq Bank, Mumbai ACU 347.10 81.8529 28,411 31,556,159

BNL, Italy EURO 2,409.38 106.9858 257,769 323,392

Habib American Bank USD 53,530.51 81.8529 4,381,627 30,340,679

ICICI, Hongkong USD 53,877.41 81.8529 4,410,022 5,655,439

JP Morgan Chase Bank Canada CAD 27,511.83 80.2637 2,208,201 -

JP Morgan Chase Bank NY USD 3,674.70 81.8529 300,785

Habib Metropolitan Bank ACU 930.28 81.8529 76,146 -

Standard Chartered Bank, Kolkata ACU 18.39 81.8529 1,505 1,301

143,960,421 572,250,169

643,855,116 908,549,740

4.3 Maturity-wise Groupings (Inside and Outside Bangladesh)

Payable on Demand 299,707,989 186,299,571

Up to 1(one) Month - -

Over 1(one) Month but not more than 3 (three) Months 143,960,421 572,250,169

Over 3 (three) Months but not more than 1 (one) Year 200,186,706 150,000,000

Over 1 (one) Year but not more than 5 (fi ve) Years - -

Over 5 (fi ve) Years - -

643,855,116 908,549,740

Amount in Taka

31.12.2011 31.12.2010

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4 (a) CONSOLIDATED BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS

In Bangladesh

Mercantile Bank Ltd. 499,894,695 336,299,571

Mercantile Bank Securities Ltd. 18,966,386 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

518,861,081 336,299,571

Outside Bangladesh (Nostro Accounts)

Mercantile Bank Ltd. 143,960,421 572,250,169

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

143,960,421 572,250,169

662,821,502 908,549,740

5. MONEY AT CALL AND SHORT NOTICE

Financial Institutions - - - -

5 (a) CONSOLIDATED MONEY AT CALL AND SHORT NOTICE

Mercantile Bank Ltd. - -

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

- -

6. INVESTMENTS

Government Securities (Note- 6.2.) 23,348,847,110 9,565,346,007

Other Investments (Note- 6.5) 1,296,529,511 1,371,855,784

24,645,376,621 10,937,201,791

6.1 Investment classifi ed as per Bangladesh Bank Circular:

Held for trading (HFT) 10,586,837,035 1,427,034,171

Held to Maturity (HTM) 12,627,938,332 -

Other securities 134,071,744 -

23,348,847,110 1,427,034,171

6.2 Investment classifi ed as per nature: a) Government Securities:

28 days treasury bills - 1,427,034,171

91 days treasury bills 238,751,761 -

182 days treasury bills 860,914,101 -

364 days treasury bills 2,459,082,627 -

3,558,748,490 1,427,034,171

Amount in Taka

31.12.2011 31.12.2010

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b) Government Bond

5 Years Treasury Bond 8,602,292,325 3,005,545,418

10 Years Treasury Bond 6,826,304,191 3,636,401,126

15 Years Treasury Bond 2,457,099,466 760,570,655

20 Years Treasury Bond 1,902,138,938 733,727,337

Prize Bonds 2,263,700 2,067,300

19,790,098,621 8,138,311,836

Total (a+b) 23,348,847,110 9,565,346,007

Other Investments (Note- 6.5) 1,296,529,511 1,371,855,784

24,645,376,621 10,937,201,791

Note:- Value of Securities for the year 2011 are also adjusted with the values determined by Mark to Market method.

6.3 Maturity Grouping of Government Investments

Payable on Demand 2,263,700 2,067,300

Up to 1(one) Month 464,124,141 478,363,999

Over 1(one) Month but not more than 3 (three) Months 439,296,744 39,665,393

Over 3 (three) Months but not more than 1 (one) Year 3,220,560,349 1,585,691,323

Over 1 (one) Year but not more than 5 (fi ve) Years 10,183,915,321 2,695,724,547

Over 5 (fi ve) Years 9,038,686,856 4,763,833,445

23,348,847,110 9,565,346,007

6.4 Types of Government Securities

A. Held to Maturity (HTM) Securities

Give detail

5 Years Treasury Bond 5,828,790,270 1,055,116,742

10 Years Treasury Bond 2,973,002,558 891,844,673

15 Years Treasury Bond 2,293,309,067 117,788,896

20 Years Treasury Bond 1,532,836,436 248,808,044

12,627,938,332 2,313,558,355

B. Held for Trading (HFT) Securities

Give detail

91 days treasury bills 238,751,761 478,363,999

182 days treasury bills 860,914,101 149,728,401

364 days treasury bills 2,459,082,627 798,941,771

5 Years Treasury Bond 2,773,502,054 1,855,966,833

10 Years Treasury Bond 3,853,301,633 2,744,556,452

15 Years Treasury Bond 163,790,399 642,781,759

20 Years Treasury Bond 237,494,458 484,919,293

10,586,837,035 7,155,258,509

C. Other investment

Encumbered Treasury Bond (lien with Bangladesh Bank) 131,808,044 94,461,843

Prize Bonds 2,263,700 2,067,300

134,071,744 96,529,143

Total (A+B+C)) 23,348,847,110 9,565,346,007

Amount in Taka

31.12.2011 31.12.2010

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6.5 Other Investments A. Investment in shares

a) Unquoted

Central Depository Bangladesh Ltd. 5,138,890 4,000,000

Dhaka Stock Exchange Ltd. - 8,100,000

Chittagong Stock Exchange Ltd. - 156,500,000

SWIFT 1,575,829 1,575,829

Mercantile Bank Securities Ltd. 600,000,000 600,000,000

M B L Mutual Fund - 200,000,000

Mercantile Exchange House UK Ltd, 124 -

Market Stablization Fund Asset Management Co. Ltd. 2,000,000 -

I T C L 10,000,000 10,000,000

618,714,843 980,175,829

b) Quoted

Al-Arafah Islami Bank Ltd 2,074,410 1,344,000

Atlas Bangladesh 858,517 -

Bank Asia Ltd. 10,029,928 -

Beximco Ltd. 30,947,879 272,034

Beximco Pharmaceuticals Ltd. 152,745 152,745

The City Bank Ltd. 3,880,736 -

Eastern Bank Ltd. 5,164,616 -

EXIM Bank Ltd. 5,077 5,077

IDLC Finance Ltd. 136,887,000 136,887,000

Islami Bank Bangladesh Ltd. 10,582,107 -

Jamuna Oil 19,277,638 10,868,277

Khulna Power Company Ltd. 2,518,396 1,452,407

Lafarge Surma Cement 65,033 55,033

Lanka Bangla Finance Ltd. 22,634,202 13,483,750

MBL 1st Mutual Fund 200,000,000 -

MI Cement Ltd. 4,437,399 3,608,921

Navana CNG 3,488,726 -

National Bank Ltd. 5,729,116 -

Prime Finance & Investment Ltd. 8,517,764 5,098,149

Phoenix Finance & Investment Ltd. 51,850 200,000

Pubali Bank Ltd. 1,330,400 -

RAK Ceramics Ltd. 12,980,620 11,348,876

Social Islami Bank Ltd. 3,868,613 -

Southeast Bank Ltd. 1,520,180 -

Square Pharmaceuticals Ltd. 14,508,607 -

Summit Power Company Ltd. 86,999,885 86,999,885

United Commercial Bank Ltd. 11,031 9,681

Uttara Bank Ltd. 1,792,193 -

590,314,668 271,785,835

1,209,029,511 1,251,961,664 BondsIDLC Finance Ltd. 37,500,000 69,894,120

N B L Subordinated Bond 50,000,000 50,000,000

87,500,000 119,894,120

1,296,529,511 1,371,855,784

Amount in Taka

31.12.2011 31.12.2010

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6.6 (i) Disclosure regarding outstanding Repo

Counterparty name Agreement date Reversal dateAmount (1st

leg cash consideration)

Bangladesh Bank 29/12/2011 1/1/2012 7,027,429,218

Standard Chartered Bank 29/12/2011 1/1/2012 211,464,797

7,238,894,015

(ii) Disclosure regarding outstanding Reverse Repo

Counterparty name Agreement date Reversal date Amount

(iii) Disclosure regarding overall transaction of Repo and Reverse Repo

NIL

Counterparty nameMinimum outstanding

during the year Minimum

outstanding Daily average outstanding

Security sold under Repo

I) with Bangladesh Bank 4,618,602,712 14,193,223,229 7,887,248,259

ii) with other banks & FIs 202,214,384 3,124,623,116 976,296,877

Security purchased under Reverse Repo

I) From Bangladesh Bank - - -

ii) From other banks & FIs - - -

6 (a) CONSOLIDATED INVESTMENTS

Investment - Government Securities

Mercantile Bank Ltd. 23,348,847,110 9,565,346,007

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

23,348,847,110 9,565,346,007

Other Investments

Mercantile Bank Ltd. 1,296,529,511 1,371,855,784

Mercantile Bank Securities Ltd. 830,000,000 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

2,126,529,511 1,371,855,784

Less: Inter Company Transaction 600,000,124 -

1,526,529,387 1,371,855,784

24,875,376,497 10,937,201,791

7. LOANS AND ADVANCES

Loans, Cash Credit and Overdraft etc. (Note A) 73,804,712,735 60,868,739,469

Bills Purchased and Discounted (Note B) 6,195,086,729 5,508,957,857

79,999,799,464 66,377,697,326

Amount in Taka

31.12.2011 31.12.2010

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7.A. Loans, Cash Credit and Overdraft, etc.

Loan General 2,245,172,419 2,586,633,954

Term Loan 16,020,429,747 13,656,815,170

Time Loan 7,090,865,345 5,177,498,814

Small and Medium Enterprise 3,833,560,990 3,386,327,344

Consumers Finance 1,116,805,688 848,203,956

Loan Against Trust Receipt 10,415,283,805 8,423,557,495

Home Loan 12,228,424 13,777,364

Packing Credit 706,187,340 770,551,192

House Building Loan 2,707,174,919 2,204,932,192

Lease Finance 763,298,609 407,343,962

Hire Purchase 3,676,215,065 3,223,175,137

EDF Loan 1,501,573,458 1,267,254,701

Payment Against Documents 998,961,520 349,456,620

Cash Credit (Hypo) 5,877,030,722 5,348,883,105

Overdraft 14,762,052,222 8,821,550,874

Personal Loan 436,637,552 444,185,440

Consumers Credit Schemes 34,713,417 43,701,591

Other Credit Schemes 17,935,878 18,394,247

Staff Loan 665,471,627 597,360,425

Credit Card 243,308,290 197,478,139

Agricultural Credit 679,805,698 52,288,405

Margin Loan Account - 3,029,369,342

73,804,712,735 60,868,739,469

7.B. Bills Purchased and Discounted

Payable in Bangladesh 4,874,592,417 3,384,591,815

Payable outside Bangladesh 1,320,494,312 2,124,366,042

6,195,086,729 5,508,957,857

7.1 Net loans, advances and leases/ investment

Gross performing loans, advances and leases/ investment (note-7) 79,999,799,464 66,377,697,326

Less:

Non-performing loans, advances and leases/ investment (note-7.13(x)) 2,084,618,000 1,187,809,000

Provision for loans, advances and leases/ investment (note-12.5.1) 1,610,161,055 1,366,531,008

3,694,779,055 2,554,340,008

76,305,020,409 63,823,357,318

7.2 Residual maturity grouping of loans, advances and leases/ Investments

including bill purchased and discounted

Up to 1(one) Month 15,242,177,774 14,073,082,723

Over 1(one) Month but not more than 3 (three) Months 11,298,178,430 11,721,900,757

Over 3 (three) Months but not more than 1 (one) Year 25,689,553,725 16,710,845,454

Over 1 (one) Year but not more than 5 (fi ve) Years 19,881,569,185 17,018,915,384

Over 5 (fi ve) Years 7,888,320,350 6,852,953,008

79,999,799,464 66,377,697,326

Amount in Taka

31.12.2011 31.12.2010

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7.3 Loans and Advances (Broad Categories)

In Bangladesh 79,999,799,464 66,377,697,326

Loans and Advances 52,402,331,182 46,290,961,528

Leases / Investments 763,298,609 407,343,962

Cash Credits 5,877,030,721 5,348,883,105

Bill Purchased and Discounted 6,195,086,729 5,508,957,857

Overdraft 14,762,052,222 8,821,550,874

Outside Bangladesh - -

79,999,799,464 66,377,697,326

7.3.1 Residual maturity grouping of loans and advances

Up to 1(one) Month 10,734,878,113 13,986,346,925

Over 1(one) Month but not more than 3 (three) Months 9,321,905,680 1,721,900,757

Over 3 (three) Months but not more than 1 (one) Year 4,578,440,593 6,710,845,454

Over 1 (one) Year but not more than 5 (fi ve) Years 19,878,786,446 17,018,915,384

Over 5 (fi ve) Years 7,888,320,350 6,852,953,008

52,402,331,182 46,290,961,528

7.3.2 Residual maturity grouping of leases / investments

Lease rental receivable within 1 year 297,686,457 173,800,090

Above 1 year but within 5 years 586,144,095 326,549,780

Above 5 years 88,457,639 21,050,400

Total Lease rental receivable 972,288,191 521,400,270

Less: Unearned interest receivable 208,989,582 114,056,309

763,298,609 407,343,961

7.3.3 Residual maturity grouping of cash credit

Up to 1(one) Month 1,123,419,371 1,151,248,864

Over 1(one) Month but not more than 3 (three) Months 575,754,337 1,179,535,370

Over 3 (three) Months but not more than 1 (one) Year 4,177,857,014 3,018,098,871

Over 1 (one) Year but not more than 5 (fi ve) Years - -

Over 5 (fi ve) Years - -

5,877,030,722 5,348,883,105

7.3.4 Residual maturity grouping of bill purchased and discounted

Up to 1(one) Month 3,104,918,108 2,789,159,915

Over 1(one) Month but not more than 3 (three) Months 1,976,182,749 2,297,291,209

Over 3 (three) Months but not more than 1 (one) Year 1,113,985,872 422,506,733

Over 1 (one) Year but not more than 5 (fi ve) Years - -

Over 5 (fi ve) Years - -

6,195,086,729 5,508,957,857

Amount in Taka

31.12.2011 31.12.2010

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7.3.5 Residual maturity grouping of overdraft

Up to 1(one) Month 2,518,355,784 1,786,689,704

Over 1(one) Month but not more than 3 (three) Months 1,490,827,128 6,886,409,445

Over 3 (three) Months but not more than 1 (one) Year 10,752,869,310 422,506,733

14,762,052,222 9,095,605,882

7.4 Signifi cant Concentration of Credit

Advances to Directors and Others - -

Advances to Managing Director and Chief Executive - -

Advances to Customers 28,722,227,837 28,491,534,381

Industry-wise 50,612,100,000 37,288,802,520

Staff Loan 665,471,627 597,360,425

79,999,799,464 66,377,697,326

7.5 Geographical Location-wise break-up

Urban

Dhaka 56,100,422,603 47,930,978,787

Chittagong 14,974,454,845 10,169,677,799

Rajshahi 3,856,263,346 314,236,021

Sylhet 690,094,133 3,173,520,517

Khulna 463,692,314 662,890,460

Rangpur 590,716,849 740,628,112

Barisal 398,276,676 229,326,692

77,073,920,766 63,221,258,388

Rural

Dhaka 1,800,357,342 1,554,528,753

Chittagong 805,262,079 1,309,477,368

Rajshahi 163,860,987 135,420,825

Sylhet 156,398,290 157,011,992

2,925,878,698 3,156,438,938

79,999,799,464 66,377,697,326

7.6 Sector wise break-up of Loans :

Garments 12,338,915,803 11,211,457,626

Trading 9,758,353,153 14,139,002,191

Engineering (Iron & Steel, Electrical Equipment etc.) 8,357,686,230 6,250,729,996

Contractor Finance 1,262,835,064 1,212,560,453

Leasing Company 2,022,700,000 1,728,400,000

Housing 1,329,111,219 1,289,709,451

Food, Food product, Beverage, Edible oil etc. 7,503,611,682 3,027,162,523

Pharmaceuticals 1,642,771,179 834,656,985

Tele- communication 226,497,641 214,754,733

Transport 1,106,455,548 874,457,765

Leather & Leather Product 275,260,005 -

Textile 2,255,942,470 1,394,711,146

Information Technology 792,364,979 338,272,785

Hospital & Medical Service 1,768,183,271 1,549,544,719

Amount in Taka

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196 annual report

Paper, Paper Production & Publication 849,604,140 714,929,444

Plastic & Plastic Materials 1,434,622,495 942,694,415

Storage 710,920,612 821,797,747

Glass & Glass Product 3,818,596 4,118,596

Agriculture 679,805,698 52,288,405

SME Loan 3,833,560,990 3,386,132,018

Credit Card 243,308,290 197,478,000

Consumer Loan 2,188,273,583 1,513,470,465

Others 19,415,196,816 14,679,367,863

Total 79,999,799,464 66,377,697,326

7.7 Loan and Advances allowed to each customer exceeding 10% of Bank’s total capital:

Total Loans and Advances 15,679,737,000 11,240,635,000

No. of Customers 23 24

Classifi ed amount thereon nil nil

Measures taken for recovery nil nil

The amount represents the sum of total loan allowed to each customer exceeding BDT 868.44 million which is computed @ 10% of closing total Capital Fund.

7.8 Details of Large loan and advances

Number of clients with outstanding amount exceeding 10% of total capital of the Bank is 23. Total capital of the Bank was Taka 8,684.40 million as at 30 June 2011.

Name of Capital Out standing Total Branch

Funded Non-funded

DBL Group 562,909,000 1,668,804,000 2,231,713,000 Main

Azmat Group 405,491,000 909,824,000 1,315,315,000 Main

City Group 725,584,000 - 725,584,000 Main

Natural Group 307,326,000 920,347,000 1,227,673,000 Main

Jamuna Group 1,150,026,000 2,094,966,000 3,244,992,000 Main

United Group 71,280,000 454,878,000 526,158,000 Main

Nitol Motors Group 660,434,000 55,137,000 715,571,000 Main

Interstoff Group 748,719,000 1,188,830,000 1,937,549,000 Dhanmondi

Abul Khair Group 1,254,542,000 1,732,083,000 2,986,625,000 Agrabad

TK Group 456,471,000 733,794,000 1,190,265,000 Agrabad

Sunmar Group 703,182,000 950,993,000 1,654,175,000 Agrabad

Habib Group 869,876,000 - 869,876,000 Agrabad

BSRM Group 407,618,000 1,119,086,000 1,526,704,000 Jubliee Road

Starlight Group 754,360,000 2,258,744,000 3,013,104,000 Mohakhali

Bangla Trade Group 1,031,336,000 126,136,000 1,157,472,000 Mohakhali

Rising Group 783,035,000 362,869,000 1,145,904,000 Banani

Loadster Fashion 1,013,528,000 132,094,000 1,145,622,000 Banani

KDS Group 682,220,000 739,465,000 1,421,685,000 Khatungonl

PHP Group 616,545,000 613,010,000 1,229,555,000 Khatungonl

S Alam Super Edible - 1,483,805,000 1,483,805,000 Khatungonl

Deshbandhu 1,139,019,000 232,314,000 1,371,333,000 Motijheel

Purbani Ratan Spinning 676,227,000 21,657,000 697,884,000 Motijheel

Hotapara Garments 660,009,000 370,585,000 1,030,594,000 Uttara

15,679,737,000 18,169,421,000 33,849,158,000

Amount in Taka

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7.9 Loans & Advances Classifi ed as per Bangladesh Bank Circular

Unclassifi ed 77,915,181,464 65,189,888,326

Sub-Standard 661,537,000 226,774,000

Doubtful 831,907,000 113,948,000

Bad & Loss 591,174,000 847,087,000

79,999,799,464 66,377,697,326

Details of Loans and Advances as follows:(Figure in “000”)

Status of loans and advances

Year2011 2010

Mix %Outstanding

Amount (Taka)Mix %

OutstandingAmount (Taka)

Unclassifi ed loans and advances :

Unclassifi ed ( including staff loan) 97.24% 77,790,659 97.91% 64,990,788

Special Mention Account 0.16% 124,522 0.30% 199,100

Total unclassifi ed loans and advances : 97.39% 77,915,181 98.21% 65,189,888

Classifi ed loans and advances :

Substandard 0.83% 661,537 0.34% 226,774

Doubtful 1.04% 831,907 0.17% 113,948

Bad/loss 0.74% 591,174 1.28% 847,087

Total classifi ed loans and advances : 2.61% 2,084,618 1.79% 1,187,809

Total loans and advances : 100% 79,999,799 100% 66,377,697

7.9.1 Base for Provision

SMA 120,600,000 189,883,000

Base for Provision

Sub-Standard 478,147,000 178,320,000

Doubtful 579,056,000 77,902,000

Bad & Loss 327,257,000 536,328,000

1,384,460,000 792,550,000

7.10 Nature wise Loans & Advances

Continuous 18,202,244,000 14,729,262,000

Demand Loan 32,409,461,000 26,286,212,000

Term Loans up to 5 ( fi ve) years 15,364,097,837 15,270,083,326

Term Loans above 5 (fi ve) years 13,358,525,000 9,494,780,000

Term Loans above 5 (fi ve) years - Staff Loan 665,471,627 597,360,000

79,999,799,464 66,377,697,326 7.11 Provision for Loans and Advances

General Provision (including SMA) 889,631,000 749,000,000

Specifi c Provision (Classifi ed Loans and Advances)

Sub-standard 95,629,000 36,000,000

Doubtful 289,528,000 40,000,000

Bad/ Loss 327,257,000 541,531,008

Amount in Taka

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198 annual report

Total 1,602,045,000 1,366,531,008

Required Provision for Loans and Advances 1,602,645,000 1,358,233,000

Total Provision Maintained (Note-12.5.1) 1,610,161,055 1,366,531,008

Excess/(Short) Provision 7,516,055 8,298,008

Provision for Loans and Advances:(Figure in “000”)

Status of Loans and advances Outstanding Base for Provision % Provision

Amount (Taka) Provision Amount (Taka)

Unclassifi ed loans and advances :

Unclassifi ed ( SMEF, & other credit) 70,890,528 70,890,528 1% 708,905

Unclassifi ed ( HF, LP & BH/MBS/SDS against share) 4,567,871 4,567,871 2% 91,357

Unclassifi ed (other than HF, LP & short term agri. Loan) 1,666,788 1,666,788 5% 83,339

Unclassifi ed ( staff loan)) 665,472 665,472.00 0% -

-

Special Mention Account 124,522 120,600 5% 6,030

Total unclassifi ed loans and advances : 77,915,181 77,911,259 889,631

Classifi ed loans and advances :

Substandard 661,537 478,147 20% 95,629

Doubtful 831,907 579,056 50% 289,528

Bad/loss 591,174 327,257 100% 327,257

Total classifi ed loans and advances : 2,084,618 1,384,460 712,414

Total loans and advances : 79,999,799 79,295,719 1,602,045

7.12 Provision for Off-balance Sheet Exposures

Particulars of Off-balance Sheet Exposures Base Rate 1% Amount

for Provision Amount

Acceptances and endorsements less margin 17,598,275,000 175,982,750

Letter of guarantee less margin 6,059,769,002 60,597,690

Letter of credit less margin 16,585,475,576 165,854,756

Bills for collection 147,818,597 1,478,186

other contingent liabilities

Required provision on Off-balance Sheet Exposures 40,391,338,175 403,913,382 403,913,382

Total Provision maintained 408,221,000

Excess/(short) provision - 4,307,618

7.13 Particulars of Loans and Advances

i) Loans considered good in respect of which the Bank Company is fully secured 75,661,553,180 62,678,940,569

ii) Loans considered good for which the Bank holds no other Security than the debtors personal security

1,151,519,105 1,469,400,000

iii) Loans considered good and secured by the personal security

of one or more parties in addition to the personal security

of the debtors 436,637,552 444,187,332

iv) Loans adversely classifi ed; provision not maintained there against - -

77,249,709,837 64,592,527,901

Amount in Taka

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v) Loans due by directors or executives of the Banking Company or any of them taken either severally or jointly with any other person (Staff Loan)

665,471,627 597,360,425

vi) Loans due by companies or fi rms in which the directors of the Bank Company are interested as directors, partners or managing agents or in case of private companies, as members.

- -

vii) Maximum total amount of advances, including temporary advances made at any time during the year to directors or managers or offi cers of the Banking Company or any of them either separately or jointly with any other person (Staff Loan)

665,471,627 597,360,425

viii) Maximum total amount of advances, including temporary advances granted during the year to the companies or fi rms in which the directors of the Banking Company are interested as directors, partners or managing agents or in the case of private companies, as members

- -

ix) Due from other Banking Companies - -

x) Total amount of Classifi ed Advances on which interest is not credited to income 2,084,618,000 1,187,809,000

a. Movement of classifi ed Loans and Advance

Opening balance January 01, 2011 1,187,809,000 1,252,052,000

Increase/ (Decrease) during the year 896,809,000 (64,243,000)

2,084,618,000 1,187,809,000

b. Amount of provision kept against Loan Classifi ed as 'Bad/Loss' on the reporting date of Balance Sheet

328,000,000 617,531,008

c. Interest creditable to the Interest Suspense Account 349,832,197 248,068,674

xi) Amount of written off loans:

Opening Balance 1,106,457,238 1,018,448,330

Amount written off during the year 463,804,633 177,403,237

Amount Recovered / Adjustment (13,234,578) (89,394,329)

Cumulative Balance 1,557,027,293 1,106,457,238

7.14 Listing of Assets Pledged as Security/ Collaterals

Nature of the Secured Assets:

Fixed Assets 67,765,344,000 44,781,450,000

Cash & Quasi-Cash 14,789,448,000 8,732,508,000

Others 7,631,573,000 16,755,721,000

90,186,365,000 70,269,679,000 7.15 Suits Filed by the bank Branch wise details

Main Branch 1,001,895,125 202,966,802

Dhanmondi Branch 122,382,833 85,677,575

Motijheel Branch 17,742,100 11,214,567

Nayabazar 49,984,468 -

Kawran Bazar 185,663,023 -

Amount in Taka

31.12.2011 31.12.2010

200 annual report

Rajshahi Branch 29,319,457 10,180,256

Noagaon Branch 230,642,727 216,591,046

Agrabad Branch 372,238,870 200,456,414

Sylhet Branch 78,203,253 36,845,874

Comilla Branch 23,625,914 23,625,914

Khatungonj Branch 1,877,834 378,592

Shapahar - -

Jubliee Road 5,682,222 -

Green Road 627,800 -

Banani Branch 241,429,082 203,897,015

2,361,314,708 991,834,055

7 (a) CONSOLIDATED LOANS AND ADVANCES

Loans and Advances

Mercantile Bank Ltd. 73,804,712,735 60,868,739,469

Mercantile Bank Securities Ltd. 3,652,293,862 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

77,457,006,597 60,868,739,469

Less: Inter Company Transction 3,924,068,608 -

73,532,937,989 60,868,739,469

Bills Purchased and Discounted

Mercantile Bank Ltd. 6,195,086,729 5,508,957,857

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit 187,692,710 -

6,382,779,439 5,508,957,857

187,692,710 -

Less: Inter Company Transaction 6,195,086,729 5,508,957,857

79,728,024,718 66,377,697,326

8. FIXED ASSETS INCLUDING PREMISES, FURNITURE AND FIXTURES At cost less accumulated depreciation (Annexure-A)

FREE HOLD PROPERTIES

Land 1,310,444,376 373,086,459

Building 728,491,708 679,648,204

Furniture & Fixtures 343,531,054 314,705,258

Offi ce Equipment 235,588,568 204,892,053

Vehicles 51,045,992 47,578,289

Books 149,121 171,007

2,669,250,819 1,620,081,270

LEASE HOLD PROPERTIES

Vehicles 9,463,295 -

ATM 32,604,481 27,499,878

42,067,776 27,499,878

2,711,318,595 1,647,581,148

Amount in Taka

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8 (a). CONSOLIDATED FIXED ASSETS INCLUDING PREMISES, FURNITURE AND FIXTURES -

Mercantile Bank Ltd. 2,711,318,595 1,647,581,148

Mercantile Bank Securities Ltd. 36,124,570 -

Mercantile Exchange House (UK) Limited 5,280,423 -

Off-shore Banking Unit 401,680 -

2,753,125,268 1,647,581,148

N. B. Fixed assets of the Bank specially Land have been revalued by a professional valuation fi rm M/s Jarip O Paridarshan. Gain arisen from such revaluation is duly accounted for.

9 OTHER ASSETS

Suspense Account (Note 9.1) 283,688,047 293,879,722

Demand Draft paid without Advice 25,917 61,750

Advance Rent 245,814,830 170,279,348

Advance Deposits 1,987,715 1,445,230

Stock of Stationery 27,382,798 30,218,558

Stamps in Hand 1,422,751 1,427,907

Premium on Bond 4,589,235 1,379,003

Clearing Adjustment Account 16,348,043 -

On Line Client Adjustment Account (5,124,845) -

Adjusting Account Debit (Note 9.2) 814,761,572 904,034,536

Mercantile Exchange House UK. Ltd. 11,035,428 -

Mercantile Bank OBU Unit 187,692,743 -

Mercantile Bank General Account 16,935,375 709,437,178

Brokerage House Customer Account - 279,797,250

1,606,559,609 2,391,960,482

9.1 Suspense AccountAdvance against TA/DA 609,990 255,010

Demand Draft cancelled - 90,000

Advance against new branches - 85,613,078

Encashment of PSP/BSP 31,124,373 12,356,104

Others 251,953,684 195,565,530

283,688,047 293,879,722 9.2 Adjusting Account Debit

Accrued interest 580,272,442 389,419,934

Other accruals (Note - 9.2.1) 234,489,130 514,614,602

814,761,572 904,034,536

9.2.1 Other accruals

Other Receivable 3,465,371 1,500,407

Fees Receivable 10,000 -

Prepaid Insurance Premium 2,128,940 1,745,514

Discount Receivable 199,619,398 494,405,691

Protested bill 12,934,077 -

Prepaid Expenditure Others 16,331,344 16,962,990

234,489,130 514,614,602

Amount in Taka

31.12.2011 31.12.2010

202 annual report

9.3 Mercantile Bank General Account

Mercantile Bank General Account represents outstanding inter-branch and Head Offi ce transactions (Net) originated but yet to be responded by the Balance Sheet date. However, the un-respondent entries of 31.12.2011 (position on 19.02.2012) are given below:

Numbers of Un-respondent entries Un-respondent entries (Amount - BDT)

Dr. Cr. Dr. Cr.

Up to 3 Months 21 16 1,365,000 3,477,000

Over 3 Months but within 6 Months - - - -

Over 6 Months but within 1 Year - - - -

Over 1 Year but within 5 Years - - - -

21 16 1,365,000 3,477,000

9 (a) CONSOLIDATED OTHER ASSETS

Mercantile Bank Ltd. 1,606,559,609 2,391,960,482

Mercantile Bank Securities Ltd. 78,564,858 -

Mercantile Exchange House (UK) Limited 1,185,062 -

Off-shore Banking Unit 1,004,697 -

1,687,314,226 2,391,960,482

10. BORROWINGS FROM OTHER BANKS, FINANCIAL INSTITUTIONS

AND AGENTS

Inside Bangladesh - Interest bearing

Call Deposits

State Bank of India 70,000,000 -

Dutch Bangla Bank Ltd. 300,000,000 -

Sonali Bank Ltd. 3,000,000,000 -

HSBC Bank Ltd. 200,000,000 250,000,000

Bank Alfalah Ltd. 200,000,000 -

BASIC Bank Ltd. 150,000,000 -

United Commercial Bank Ltd. 350,000,000 -

Janata Bank Ltd. 1,000,000,000 -

DBH 100,000,000 -

5,370,000,000 250,000,000

Other Borrowings

Bangladesh Bank Refi nance 606,762,994 614,043,691

606,762,994 614,043,691

Outside Bangladesh - -

5,976,762,994 864,043,691

10.1 Security wise grouping

Secured Borrowing 606,762,994 614,043,691

Unsecured Borrowing 5,370,000,000 250,000,000

5,976,762,994 864,043,691

Amount in Taka

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10.2 Nature of repayment

Repayable on Demand 5,370,000,000 250,000,000

Others 606,762,994 614,043,691

5,976,762,994 864,043,691

10.3 Maturity grouping of borrowings from other banks, fi nancial institutions and agents

Up to 1(one) Month 5,370,000,000 250,000,000

Over 1(one) Month but not more than 3 (three) Months - -

Over 3 (three) Months but not more than 1 (one) Year 606,762,994.00 614,043,691

Over 1 (one) Year but not more than 5 (fi ve) Years - -

Over 5 (fi ve) Years - -

5,976,762,994 864,043,691

10 (a) CONSOLIDATED BORROWINGS FROM OTHER BANKS, FINANCIAL INSTITUTIONS Inside BangladeshMercantile Bank Ltd. 5,976,762,994 864,043,691 Mercantile Bank Securities Ltd. 3,924,068,608 - Mercantile Exchange House (UK) Limited - - Off-shore Banking Unit 187,692,710 -

10,088,524,312 864,043,691 Outside BangladeshMercantile Bank Ltd. - - Mercantile Bank Securities Ltd. - - Mercantile Exchange House (UK) Limited - - Off-shore Banking Unit - -

- - 10,088,524,312 864,043,691

Less: Inter Company Transaction 4,111,761,318 - 5,976,762,994 864,043,691

11. DEPOSITS AND OTHER ACCOUNTS

A. Deposits Received from Banks (Note- A-1) - 750,000,000

B. Other than Bank 94,102,832,878 72,989,392,053

Payable on Demand (Note- B-1) 12,210,202,042 11,596,691,281

Time Deposits (Note - B-2 ) 81,892,630,836 61,392,700,772

94,102,832,878 73,739,392,053

Maturity Analysis (Deposits received from other than Banks)

Repayable on Demand 6,877,912,898 3,246,933,558

Repayable within 01 Month 19,328,527,510 16,830,847,023

Repayable over 01 (one) Month but within 03 (three) Months 11,758,498,752 8,271,687,351

Repayable over 03 (three) Months but within 01 (one) Year 18,957,896,524 15,876,439,629

Repayable over 01 (one) Year but within 05 (fi ve) Years 23,589,547,925 19,799,292,559

Repayable over 05 (fi ve) Years but within 10 (ten) Years 13,589,578,954 8,963,321,618

Unclaimed Deposits 10 (ten) Years and above 870,315 870,315

94,102,832,878 72,989,392,053

Amount in Taka

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204 annual report

A-1 Deposits received from Banks

Sonali Bank Ltd. - 650,000,000

National Bank Ltd. - 100,000,000

- 750,000,000

Maturity wise Grouping

Repayable within 01 Month - -

Repayable over 01 (one) Month but within 03 (three) Months - 750,000,000

Repayable over 03 (three) Months but within 01 (one) Year - -

Repayable over 01 (one) Year but within 05 (fi ve) Years - -

Repayable over 05 (fi ve) Years but within 10 (ten) Years - -

Unclaimed Deposits 10 (ten) Years and above - -

- 750,000,000

B-1 Payable on Demand

Current Deposits 3,440,809,343 4,089,927,457

Saving Deposits (9%) - (Note 11.3) 533,676,197 471,505,857

Foreign Currency Deposits (non interest bearing ) 380,940,831 315,455,609

Security Deposit Receipt 82,064,589 24,761,530

Bills Payable (Note-11.2) 1,107,180,337 919,953,615

Sundry Deposits (Note - 11.6) 2,522,412,349 2,249,295,977

Foreign Currency held against Back to Back L/C 4,143,118,396 3,525,791,236

12,210,202,042 11,596,691,281

B- 2 Time Deposits

Saving Deposits (91%) - (Note 11.3) 5,396,059,326 4,767,448,114

Fixed Deposits (Note-11.4) 38,875,499,490 25,115,957,124

Short Term Deposits 2,221,586,121 2,822,009,832

Deposits Under Schemes (Note-11.5) 35,319,706,826 28,612,691,716

Foreign Currency Deposits (interest bearing ) 17,876,000 -

Non Resident Taka Deposit 58,294,882 73,863,671

Deposit Under Q-cash 3,608,191 730,315

81,892,630,836 61,392,700,772

11.1 Current Accounts & Other Accounts

Current Deposits 3,440,809,343 4,089,927,457

Short Term Deposits 2,221,586,121 2,822,009,832

Non Resident Taka Deposits 58,294,882 73,863,671

Foreign Currency Deposits 398,816,831 315,455,609

Deposit Under Q-cash 3,608,191 730,315

Security Deposit Receipt 82,064,589 24,761,530

Sundry Deposit 2,522,412,349 2,249,295,977

Foreign Currency held against Back to Back L/C 4,143,118,396 3,525,791,236

12,870,710,702 13,101,835,627

Amount in Taka

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11.2 Bills Payable

Demand Draft 52,944,452 35,078,830

Pay Order 1,052,665,071 881,212,135

Pay Slip 1,570,814 3,662,650

1,107,180,337 919,953,615

Maturity wise Grouping Bills Payable

Repayable within 01 Month 1,107,180,337 919,953,615

Repayable over 01 (one) Month but within 03 (three) Months - -

Repayable over 03 (three) Months but within 01 (one) Year - -

Repayable over 01 (one) Year but within 05 (fi ve) Years - -

Repayable over 05 (fi ve) Years but within 10 (ten) Years - -

Unclaimed Deposits 10 (ten) Years and above - -

1,107,180,337 919,953,615

11.3 Savings Bank Deposits

As per BRPD Circular No. 03 of 07 July 1997, total saving bank deposits amount is distributed into:

9% of total Savings Bank Deposits (Demand Deposits) 533,676,197 471,505,857

91% of total Savings Bank Deposits (Time Deposits) 5,396,059,326 4,767,448,114

5,929,735,523 5,238,953,971

11.4 Fixed Deposits

Customer Deposits 38,875,499,490 25,115,957,124

Bank Deposits - 750,000,000

38,875,499,490 25,865,957,124

11.5 Deposits Under Schemes

Monthly Savings Scheme 20,960,470,934 17,529,949,463

Double Benefi t Deposit Scheme 10,750,116,348 7,672,519,699

Family Maintenance Deposit Scheme 2,383,631,000 1,902,752,500

Special Savings Scheme 580,889,947 679,700,764

Pension and Family Support Scheme 235,896,036 234,704,674

Quarterly Benefi t Deposit Scheme 153,900,120 281,747,600

One & Half Time Benefi t Scheme 249,300,492 284,929,639

Advance Benefi t Deposit Scheme 5,501,949 26,387,377

35,319,706,826 28,612,691,716

11.6 Details of Sundry Deposit

Sundry Creditors 148,053,422 155,323,591

Withholding Tax - IT 45,129,488 39,306,792

Withholding Tax - Excise Duty 61,527,265 47,274,420

Withholding Tax - VAT 23,706,278 18,082,202

Margin on Letter of Guarantee 358,335,973 261,742,634

Margin on L/C 973,819,478 965,921,121

Margin on FDBP/IBP 46,750,260 29,615,122

Margin on Inward bill collection 7,234,000 2,114,323

Other Margin Account 11,383,324 5,141,310

Sale proceeds of PSP/BSP 101,100,000 114,000,000

Amount in Taka

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Advance deposit against lease 9,366,892 8,979,792

FC held against back to back L/C - 92,495,201

Security deposit 6,226,699 7,595,286

FC TT/DD payable 6,856,305 6,630,669

Payable to provident fund - 6,601,936

Payable to employee welfare fund 13,715 280,421

Export bill agency commission 99,774,094 72,934,004

Export bill reserve margin 74,347,326 91,666,610

Other sundry deposit 548,787,830 323,590,533

2,522,412,349 2,249,295,967

11 (a). CONSOLIDATED DEPOSITS AND OTHER ACCOUNTS

Current and other accounts 12,822,034,650 13,101,835,627

Bills Payable 1,107,180,337 919,953,615

Savings Bank Deposits 5,929,735,523 5,238,953,971

Fixed Deposits 38,875,499,490 25,865,957,124

Deposits Under Schemes 35,319,706,826 28,612,691,716

94,054,156,826 73,739,392,053 11.1 (a). Current and other accounts

Deposits Received from Banks

Mercantile Bank Ltd. - 750,000,000

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

- 750,000,000

Other than Bank

Mercantile Bank Ltd. 12,870,710,702 13,101,835,627

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

12,870,710,702 13,101,835,627

Less: Inter Company Transactions 48, 676,052 -

12,822,034,650 13,101,835,627 11.2 (a). Bills Payable

Demand Draft 52,944,452 35,078,830

Pay Order 1,052,665,071 881,212,135

Pay Slip 1,570,814 3,662,650

1,107,180,337 919,953,615

Maturity wise Grouping Bills Payable

Repayable within 01 Month 1,107,180,337 919,953,615

Repayable over 01 (one) Month but within 03 (three) Months - -

Repayable over 03 (three) Months but within 01 (one) Year - -

Repayable over 01 (one) Year but within 05 (fi ve) Years - -

Repayable over 05 (fi ve) Years but within 10 (ten) Years - -

Unclaimed Deposits 10 (ten) Years and above - -

1,107,180,337 919,953,615

Amount in Taka

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11.3 (a). Savings Bank Deposits

As per BRPD Circular No. 03 of 07 July 1997, total saving bank deposits amount is distributed into:

9% of total Savings Bank Deposits (Demand Deposits) 533,676,197 471,505,857

91% of total Savings Bank Deposits (Time Deposits) 5,396,059,326 4,767,448,114

5,929,735,523 5,238,953,971

11.4. (a) Fixed Deposits

Customer Deposits 38,875,499,490 25,115,957,124

Bank Deposits - 750,000,000

38,875,499,490 25,865,957,124

11.4.1(a). Fixed Deposits - Maturity wise Grouping

Repayable within 01 Month 2,902,762,750 2,009,276,570

Repayable over 01 (one) Month but within 03 (three) Months 3,514,678,952 3,013,914,855

Repayable Over 03 (three) Months but within 01 (one) Year 10,589,542,569 8,790,584,993

Repayable Over 01 (one) Year but within 05 (fi ve) Years 21,868,515,219 11,302,180,706

Repayable Over 05 (fi ve) Years but within 10 (ten) Years - -

Unclaimed Deposits for 10 (ten) Years and above - -

38,875,499,490 25,115,957,124

11.5 (a) Deposits Under Schemes

Monthly Savings Scheme 20,960,470,934 17,529,949,463

Double Benefi t Deposit Scheme 10,750,116,348 7,672,519,699

Family Maintenance Deposit Scheme 2,383,631,000 1,902,752,500

Special Savings Scheme 580,889,947 679,700,764

Pension and Family Support Scheme 235,896,036 234,704,674

Quarterly Benefi t Deposit Scheme 153,900,120 281,747,600

One & Half Time Benefi t Scheme 249,300,492 284,929,639

Advance Benefi t Deposit Scheme 5,501,949 26,387,377

35,319,706,826 28,612,691,716

12. OTHER LIABILITIES

Provision for Gratuity (Note-12.1) - -

Provision for Fixed Assets (Note-12.2) 85,000,000 85,000,000

Provision for Off Balance Sheet Items (Note-12.3) 408,221,000 368,921,000

Provision for Incentive Bonus 211,591,313 169,212,513

Provision for Current Tax (Note-12.4.1) 1,266,091,689 758,870,819

Provision for Deferred Tax (Note-12.4.2) 49,850,345 29,850,345

Provision for Loans and Advances (Note-12.5.1) 1,610,161,055 1,366,531,008

Adjusting Account Credit (Note-12.6) 1,438,706,902 874,685,746

Interest Suspense Account (Note-12.7) 349,782,211 248,068,674

Provision for Audit fees 772,500 500,000

Foreign Currency held against EDF L/C 1,351,305,251 765,064,644

Unrealised Loss on Share 6,049,413 6,049,413

Provision for Foundation - 24,000,000

Brokerage House Client Account - 158,552,839

Amount in Taka

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Reserve from revaluation on HFT securities - 453,666,222

Clearing Adjustment A/C - 17,637,382

Exchange Equalization Account(Note-12.8) - -

Lease Payable (Note-12.9) 36,553,060 24,377,858

6,814,084,739 5,350,988,463

12.1 Provision for Gratuity

Provision held at the beginning of year - -

Provision made during the year 130,000,000 20,000,000

130,000,000 20,000,000

Transferred to savings Account for Gratuity 130,000,000 20,000,000

- -

12.2 Provision for Fixed Assets

Provision held at the beginning of the year 85,000,000 85,000,000 Add: Provision made during the year - -

85,000,000 85,000,000

Provision was made for land as per instruction of Bangladesh Bank vide letter no. DBI-1(vigilance) / 5050 (15)/ 2006-400 dated 20 March 2006.

12.3 Provision for Off Balance Sheet Items

Provision held at the beginning of the year 368,921,000 208,221,000

Add: Provision made during the year 39,300,000 160,700,000

408,221,000 368,921,000

12.4 Provision for Tax including Deferred Tax

Provision held at the beginning of the year 4,749,065,755 3,738,478,255

Add: Provision made during the year 1,250,000,000 1,010,587,500

Add:Deferred Tax Provision 20,000,000 -

Total provision 6,019,065,755 4,749,065,755

Less: Tax paid during the year 742,779,130 952,541,234

5,276,286,625 3,796,524,521

Less: Advance Tax paid up to last year 3,960,344,591 3,007,803,357

Balance held at the end of the year 1,315,942,034 788,721,164

Current Tax liabilities for the current and prior periods have been measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date (BAS - 12; Para - 46).

12.4.1 Tax liabilities

Provision held at the beginning of the year 4,719,215,410 3,708,627,910

Add: Provision made during the year 1,250,000,000 1,010,587,500

5,969,215,410 4,719,215,410

Less: Advance tax paid 4,703,123,721 3,960,344,591

1,266,091,689 758,870,819

Amount in Taka

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12.4.2 Deferred Tax liabilities

Provision held at the beginning of the year 29,850,345 29,850,345

Add: Provision made during the year 20,000,000 -

49,850,345 29,850,345

12.4.(a) CONSOLIDATED TAX PROVISION

Mercantile Bank Ltd. 1,250,000,000 1,010,587,500

Mercantile Bank Securities Ltd. 8,943,330 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

1,258,943,330 1,010,587,500

12.5 Provision made during the year

Profi t before Provision 3,501,672,348 2,847,125,909

Less :

Provision against Un Classifi ed Loans (note-7.11) 143,000,000 230,500,000

Provision against Classifi ed Loans (note-7.11) 315,200,000 20,000,000

Other Provision (Off Balance Sheet Items) (note-7.12) 39,300,000 160,700,000

497,500,000 411,200,000

Operating Revenue after Provision 3,004,172,348 2,435,925,909

Total Profi t before Taxes 3,004,172,348 2,435,925,909

Provision for current year Tax 1,250,000,000 1,010,587,500

Deferred Tax (Bangladesh Accounting Standard-12) 20,000,000 -

Income Tax Provision made for the year 1,270,000,000 1,010,587,500

Net Profi t after Taxation 1,734,172,348 1,425,338,409

12.5.1 Provision for Loans and Advances

Provision against Classifi ed Loans (Specifi c Provision) 718,161,055 617,531,008

Provision against Unclassifi ed Loans (General Provision) 892,000,000 749,000,000

1,610,161,055 1,366,531,008

Movement of Provision against Classifi ed Loans and Advances (Specifi c Provision)

Provision held at the beginning of the year 617,531,008 629,700,099

Fully Provided Debts written off (214,569,953) (93,084,024)

Recoveries of amounts previously written off - 60,914,933

Specifi c Provision for the year - -

Recoveries and Provisions no longer required - -

Net Charge to Profi t and Loss Account 315,200,000 20,000,000

Provision held at the end of the year 718,161,055 617,531,008

Provision against Unclassifi ed Loans

Provision held at the beginning of the year 749,000,000 518,500,000

Addition during the year 143,000,000 230,500,000

892,000,000 749,000,000

Provision at the end of the year 1,610,161,055 1,366,531,008

Amount in Taka

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12.6 Adjusting Account Credit

Interest Provision 1,278,834,646 523,300,183

Other Provision 159,872,256 351,385,563

1,438,706,902 874,685,746

12.7 Interest Suspense Account

Opening Balance as at January 01, 2011 248,068,674 186,389,803

Add: Amount transferred during the year 258,396,075 134,504,871

506,464,749 320,894,674

Less: Amount recovered during the year 69,365,000 36,592,000

Less: Amount written off during the year 87,317,538 36,234,000

156,682,538 72,826,000

Balance at the end of the year 349,782,211 248,068,674

12.8 Exchange Equalization Account

Balance as on January 01, 2011 - 2,322,375

Less: Transferred to Profi t and Loss A/C as per BRPD circular # 15 dated April 26, 2010. - 2,322,375

- -

12.9 Obligation Under Finance Lease (Lease Payable)

Lease Rental Payable within 1 year 24,377,858 36,034,686

Above 1 year but within 5 years 12,175,202 -

Total Lease Rental Payable 36,553,060 36,034,686

Less: Finance Charge Payable - 11,656,828

36,553,060 24,377,858

12(a) CONSOLIDATED OTHER LIABILITIES

Mercantile Bank Ltd. 6,814,084,739 5,350,988,463

Mercantile Bank Securities Ltd. 67,499,942 -

Mercantile Exchange House (UK) Limited 10,928,894 -

Off-shore Banking Unit 962,006 -

6,893,475,581 5,350,988,463

13. CAPITAL

AUTHORISED CAPITAL

800,000,000 Ordinary shares of Taka 10 each 8,000,000,000 8,000,000,000

13.1 Issued, Subscribed and Fully Paid-up Capital

Total 496,809,200 Ordinary shares (89,588,540 Ordinary shares during 2010) of Tk 10 each were issued, subscribed and fully paid up at the end of December 31 , 2011.

Opening balance as at January 01, 2011 4,072,206,600 564,765,000

Right Share - 1,438,942,300

Issued for other than Cash ( Bonus Share) 895,885,400 2,068,499,300

4,968,092,000 4,072,206,600

Amount in Taka

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13.2 History of paid-up capital

Accounting year Declaration No. of share Value in capital Cumulative

1999 Initial 24,500,000 245,000,000 245,000,000

2000 Bonus 3,185,000 31,850,000 276,850,000

2001 Bonus 2,768,500 27,685,000 304,535,000

2002 Bonus 1,523,000 15,230,000 319,765,000

2003 IPO 31,976,500 319,765,000 639,530,000

2003 Bonus 15,988,250 159,882,500 799,412,500

2004 Bonus 19,985,310 199,853,100 999,265,600

2005 Bonus 19,985,310 199,853,100 1,199,118,700

2006 Bonus 29,977,960 299,779,600 1,498,898,300

2007 Bonus 29,977,960 299,779,600 1,798,677,900

2008 Bonus 35,973,550 359,735,500 2,158,413,400

2009 Bonus 47,485,090 474,850,900 2,633,264,300

2010 Right Share 143,894,230 1,438,942,300 4,072,206,600

2010 Bonus 89,588,540 895,885,400 4,968,092,000

Total 496,809,200 4,968,092,000

13.3 Particulars of Fully Paid-up Share Capital

2011 2010 2011 2010

No. of Shares No. of Shares ( % ) ( % )

Sponsor 200,657,920 21,131,400 40.39% 51.89%

Financial Institutions 91,607,340 3,986,882 18.44% 9.79%

General Public 204,543,940 15,603,784 41.17% 38.32%

496,809,200 40,722,066 100.00% 100.00%

13.4 Classifi cation of Shareholders by Holding as on December 31, 2011

No. of Share No. of Shares ( % ) of Holdings

Holders

1 to 499 Shares 8,464 1,473,429 0.30%

500 to 5,000 Shares 27,609 44,640,710 8.99%

5,001 to 10,000 Shares 2,734 20,033,141 4.03%

10,001 to 20,000 Shares 1,364 19,101,680 3.84%

20,001 to 30,000 Shares 390 9,658,610 1.94%

30,001 to 40,000 Shares 210 7,350,040 1.48%

40,001 to 50,000 Shares 111 5,169,880 1.04%

50,001 to 100,000 Shares 226 16,221,850 3.27%

100,001 to 1,000,000 Shares 243 75,261,910 15.15%

1,000,001 to 99999999 Shares 76 297,897,950 59.96%

41,427 496,809,200 100.00%

13.5 Capital Adequacy Ratio

According to section 13 (2) of the Bank Companies Act, 1991 and BRPD circulars nos. 01, 14, 10, 05 and 35 dated January 08, 1996, November 16, 1996, November 25, 2002, May 14, 2007 and December 29, 2010 respectively, required capital based on RWA of the Bank at the end of the year as on December 31, 2011 was Taka 10,095,270,000 against available core capital of Taka 8,906,529,374 and supplementary capital of Taka 1,794,400,446 which comes to total capital of Taka 10,700,929,820 resulting a surplus capital / equity of Taka 605,659,820 at that date.

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Tier – I (Core Capital)

Paid up Capital 4,968,092,000 4,072,206,600

Statutory Reserve 2,643,393,554 2,042,559,084

Retained Earnings 1,197,589,941 940,356,103

Non Controlling Interest 51,773,629 -

Dividend Equalization Fund 45,680,250 45,680,250

8,906,529,374 7,100,802,037

Tier –II (Supplementary Capital)

General Provision 1,300,221,000 1,117,921,000

Exchange Equalization Account - -

Revaluation Reserve for Fxied Assets 321,805,978

Revaluation Reserve for Equity Investment 82,000,000 196,300,000

Revaluation Reserve for securities 90,373,468 269,300,000

1,794,400,446 1,583,521,000

A. Total Capital 10,700,929,820 8,684,323,037

B. Total Risk Weighted Assets 100,952,700,000 95,158,500,000

C. Required Capital based on Risk Weighted Assets (10% on B) 10,095,270,000 8,564,265,000

D. Surplus/ (Defi ciency) (A - C) 605,659,820 120,058,037

Capital Adequacy Ratio (%) 10.60% 9.13%

2010 2011

Capital Requirement Required Held Required Held

( % ) ( % )

Tier - I 4.5% 7.46% 5.0% 8.82%

Tier -II 4.5% 1.67% 5.0% 1.78%

Tier-III 0% 0.00% 0% 0.00

Total 9% 9.13% 10% 10.60%

13.6 CAPITAL ADEQUACY RATIO (CAR)

There remains a surplus of Tk. 605.65 million on capital and reserve fund of the bank as per requirement of section 13A of Bank Companies Act, 1991 and BRPD circular No 09 dated December 31, 2008 respectively details of which are placed below :

(a) Required Capital (10% of Risk weighted Assets) 10,095,270,000 8,564,265,000

(b) Actual Capital: 10,700,929,820 8,684,323,037

i) Core Capital (Total Shareholders' Equity) 8,906,529,374 7,100,802,037

ii) Supplementary 1,794,400,446 1,583,521,000

General provision 1,300,221,000 1,117,921,000

Exchange Equalization Account - -

Revaluation Reserve for Fixed Assets 321,805,978 -

Revaluation Reserve for Equity Investment 82,000,000 196,300,000

Revaluation Reserve for securities 90,373,468 269,300,000

Surplus/ Defi ciency (b-a) 605,659,820 120,058,037

Amount in Taka

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13(a) CONSOLIDATED CAPITAL

Mercantile Bank Ltd. 4,968,092,000 4,072,206,600

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

4,968,092,000 4,072,206,600

14. STATUTORY RESERVE

Opening Balance, as at January 01, 2011 2,042,559,084 1,555,373,902

Transferred during the year from Profi t & Loss A/C 600,834,470 487,185,182

Closing Balance 2,643,393,554 2,042,559,084 This has been made according to Sec. 24 of Bank Companies Act 1991 and shall be maintained until it equals to Paid-up Capital.

14(a) CONSOLIDATED STATUTORY RESERVE

Mercantile Bank Ltd. 2,643,393,554 2,042,559,084

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

2,643,393,554 2,042,559,084

15. OTHER RESERVES

A. Dividend Equalization Fund

Balance on January 01, 2011 45,680,250 45,680,250

Add: Addition During the Year - -

45,680,250 45,680,250

B. Adjustment for Approved Securities HTM

The above amount represents the adjustment made of approved securities held for adjusting against Treasury Bond held for Statutory Liquidity Reserve Requirements (SLR).

Balance on January 01, 2011 84,883,226 59,730,413

Add: Last Years Adjustment (48,108,203) 25,152,813

36,775,023 84,883,226

C. Reserve from revaluation

HFT securities 143,971,913 -

Revaluation Reserve for Fixed Assets 643,611,955 -

787,583,868 -

Total other reserves (A+B+C) 870,039,141 130,563,476

Amount in Taka

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15 (a) CONSOLIDATED OTHER RESERVES

Mercantile Bank Ltd. 870,039,141 130,563,476

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

870,039,141 130,563,476

16. RETAINED EARNINGS / MOVEMENT OF PROFIT AND LOSS ACCOUNT

Balance on January 01, 2011 940,356,103 477,053,776

Less: Bonus Share issued (2010) 895,885,400 474,850,900

Retained Earnings 44,470,703 2,202,876

Add: Profi t before Income Tax 3,004,172,348 2,435,925,909

3,048,643,051 2,438,128,785

Less: Statutory Reserve 600,834,470 487,185,182

2,447,808,581 1,950,943,603

Less: Provision for Income Tax 1,250,000,000 1,010,587,500

1,197,808,581 940,356,103

Less: Provision for Deferred Tax 20,000,000 -

Balance as on December 31, 2011 1,177,808,581 940,356,103

16 (a) CONSOLIDATED SURPLUS IN PROFIT AND LOSS ACCOUNT

Mercantile Bank Ltd. 1,177,808,581 940,356,103

Mercantile Bank Securities Ltd. 21,283,549 -

Mercantile Exchange House (UK) Limited (1,946,560) -

Off-shore Banking Unit 444,371 -

1,197,589,941 940,356,103

16(b) Non Controlling Interest

Non Controlling Share Capital 50,000,000 -

Share of Profi t 1,773,629 -

51,773,629 -

16.A (1) CASH AND CASH EQUIVALENT

Cash 6,946,104,482 4,877,118,983

Balance with other Banks and Financial Institutions 643,855,116 908,549,740

7,589,959,598 5,785,668,723

CONSILIDATED CASH AND CASH EQUIVALENT

Cash 6,948,621,454 4,877,118,983

Balance with other Banks and Financial Institutions 662,821,502 908,549,740

7,611,442,956 5,785,668,723

Amount in Taka

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17 CONTINGENT LIABILITIES

17.1 ACCEPTANCES AND ENDORSEMENTS

Back to Back Bills 11,265,235,500 10,066,462,000

Back to Back Bills (EDF) - -

Banker's Liabilities PAD (DEF) 6,333,039,500 3,785,441,585

17,598,275,000 13,851,903,585

17.2 LETTER OF GUARANTEES

Money for which the Bank is contingently liable in respect of guarantees are given favouring:

Directors - -

Government 3,687,922,510 2,969,033,000

Bank and other Financial Institutions 334,807,130 653,449,000

Others ( Note-17.2.1) 2,037,039,362 2,038,181,008

6,059,769,002 5,660,663,008

17.2.1 LETTER OF GUARANTEES OTHERS

Local 1,977,078,360 1,736,638,008

Foreign 59,961,002 301,543,000

2,037,039,362 2,038,181,008

17.3 LETTER OF CREDIT

Inland 48,714,000 110,284,000

General 11,994,194,776 10,505,826,338

Back to Back L/C 4,542,566,800 6,715,760,767

16,585,475,576 17,331,871,105

17.4 BILLS FOR COLLECTION

Outward Bills for Collection 30,052,597 38,644,396

Outward Foreign Bills for Collection 117,766,000 -

147,818,597 38,644,396

17.5 OTHER CONTINGENT LIABILITIES

Banker's Liabilities (BLW) 1,557,027,293 1,106,457,238

1,557,027,293 1,106,457,238

Amount in Taka

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18 INCOME STATEMENT

Income:

Interest, Discount and Similar Income 10,719,688,339 7,669,416,863

Dividend Income 16,261,493 7,922,279

Fees, Commission and Brokerage 744,016,176 629,216,027

Gain less losses arising from Dealing Securities - -

Gain less losses arising from Investment Securities - -

Gain less losses arising from dealing in Foreign Currencies 695,000,785 571,832,085

Income from Non-banking Assets - -

Other Operating Income 1,949,409,840 1,073,426,369

Profi t less losses on interest rate changes - -

Sub. Total 14,124,376,633 9,951,813,623

Expenses:

Interest, fees and commission 8,022,131,491 5,176,002,117

Losses on Loans and Advances - -

Administrative expenses 1,301,366,193 937,609,738

Other operating expenses 1,168,600,529 891,813,601

Depreciation on banking assets 130,606,072 99,262,258

Sub. Total 10,622,704,285 7,104,687,714

Operating Profi t before Provision 3,501,672,348 2,847,125,909

19 INTEREST INCOME

Interest from Banks & other Financial Institutions (Note-19.1) 65,928,453 59,571,309

Interest from F.C. Clearing Account 6,247,943 4,251,099

Interest from Loans and Advances (Note-19.2) 9,660,504,986 6,774,077,668

9,732,681,382 6,837,900,076

19.1 Interest received from Banks & other Financial Institutions

Interest from Call Loan 3,979,069 5,962,264 Interest from Other Banks 61,948,910 53,598,263 Interest from Reverse REPO - - Interest from Q-cash Settlement Deposits 474 10,782

65,928,453 59,571,309

19.2 Interest from Loans and Advances

Loan General 574,226,266 155,629,900

Term Loan 1,795,266,098 1,349,643,667

Time Loan 750,560,086 361,123,620

Loan Against Trust Receipt 1,389,588,952 1,156,825,063

Packing Credit 55,094,278 46,011,835

Lease Finance 90,627,151 51,964,017

Hire Purchase 500,112,749 391,834,447

Payment Against Documents 125,626,647 81,742,382

Cash Credit (Hypo) 803,223,267 556,136,335

Overdraft 1,562,977,368 1,070,775,339

Consumers Credit 139,333,834 93,448,730

Amount in Taka

2011 2010

217annual report

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House Building Loan 355,677,603 514,849,886

Staff Loan 31,748,954 27,901,411

EDF Loan 21,206,047 3,663,239

Bill Purchase and Discounted 874,629,045 511,538,310

S M E 530,311,547 345,615,187

Other Credit Schemes 1,077,078 938,056

Personal Loan 59,218,016 54,436,244

9,660,504,986 6,774,077,668

19 (a). CONSOLIDATED INTEREST INCOME

Mercantile Bank Ltd. 9,732,681,382 6,837,900,076

Mercantile Bank Securities Ltd. 169,952,933 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit 1,004,697 -

9,903,639,012 6,837,900,076

Less: Inter Company Transaction 143,061,757 -

9,760,577,255 6,837,900,076

20 INVESTMENT INCOME

Interest on Investments (Note-A) 987,006,957 727,512,741

Income on Investment in Shares (Note-B) 684,285,491 87,930,987

1,671,292,448 815,443,728

A Interest on Investments

Interest on Treasury Bills 50,800,726 54,750,271

Interest on Treasury Line - -

Interest on Treasury Bonds 911,356,109 664,941,390

Interest on Bangladesh Bank Bill - -

Interest on T & T Bonds - -

Interest on Zero Coupon Bond 24,850,122 7,821,080

Interest on DBBL Bond - -

987,006,957 727,512,741

B Income on Investment in Shares

Gain on sale of Shares 668,023,998 80,008,708

Dividend on Shares 16,261,493 7,922,279

684,285,491 87,930,987

20 (a). CONSOLIDATED INVESTMENT INCOME

Mercantile Bank Ltd. 1,671,292,448 919,447,774

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

1,671,292,448 919,447,774

Amount in Taka

2011 2010

218 annual report

21 INTEREST PAID ON DEPOSITS & BORROWINGS ETC.

Interest on Deposits 7,992,012,029 5,046,336,418

Interest on Refi nance BB 29,917,594 22,355,423

Interest on Secondary Treasury Bill Purchased - -

Interest on Borrowings - -

Interest on Overseas Accounts 201,868 3,306,230

8,022,131,491 5,071,998,071

21 (a) CONSOLIDATED INTEREST EXPENSES

Mercantile Bank Ltd. 8,022,131,491 5,176,002,117

Mercantile Bank Securities Ltd. 143,061,757 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit 459,906 -

8,165,653,154 5,176,002,117

Less: Inter Company Transction 143,061,757 -

8,022,591,397 5,176,002,117

22 COMMISSION, EXCHANGE & BROKERAGE

Commission 744,016,176 629,216,027

Exchange (Note-22.1) 695,000,785 571,832,085

1,439,016,961 1,201,048,112

Commission income arises on services provided by the Bank and recognized on a cash receipt basis. Commission charged to customers on letter of credit and letter of guarantee are credited to income at the time of effecting the transactions.

22.1 ExchangeGains arising from Dealing Securities - -

Less: losses - -

Gains arising from Investment Securities - -

Less: losses - -

Gains arising from Foreign Trade Business (including dealings) 827,400,732 572,351,996

Less: losses 132,399,947 519,911

695,000,785 571,832,085

22 (a). CONSOLIDATED COMMISSION, EXCHANGE & BROKERAGE

Mercantile Bank Ltd. 1,439,016,961 1,201,048,112

Mercantile Bank Securities Ltd. 16,565,805 -

Mercantile Exchange House (UK) Limited 37,672 -

Off-shore Banking Unit - -

1,455,620,438 1,201,048,112

23 OTHER OPERATING INCOME

Other Charges on L/C 57,099,946 54,075,972

Services & other Charges 68,258,646 50,886,549

Income from Rent of Locker 3,051,184 2,474,348

Telephone, Telex and E-mail Charges 6,016,258 8,844,550

Amount in Taka

2011 2010

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On Line Client Fees 29,455,196 23,536,560

ATM Card 15,625,828 8,511,211

VISA Card 58,317,274 52,376,067

Co-Brand Services 1,924,365 -

BLW 3,044,813 2,482,220

Discount 205,906,301 28,554,627

Gain on Sale and revaluation of Securities 386,798,790 207,241,912

Gain on Sale on Assets 4,936,000 -

Miscellaneous Earnings (Note-23.1) 440,951,241 554,433,645

1,281,385,842 993,417,661

23.1 Miscellaneous Earnings

Postage Charge Recovery 23,788,540 26,067,699

SWIFT Charge Recovery 37,602,166 34,404,867

Incidental Charge 80,021,853 76,125,988

Brokerage House Income (pre-separation income) 135,673,758 281,908,732

Foreign Correspondence Charge 47,275,233 38,934,501

Others 116,589,691 96,991,858

440,951,241 554,433,645

23.(a) CONSOLIDATED OTHER OPERATING INCOME

Mercantile Bank Ltd. 1,281,385,842 993,417,661

Mercantile Bank Securities Ltd. 23,049,278 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

1,304,435,120 993,417,661

24 SALARIES & ALLOWANCES

Basic Salary 537,758,643 446,028,355

Bonus (Festival and Incentive) 284,931,850 220,600,557

Bank's Contribution to Employees Provident Fund 47,951,122 38,440,369

House Rent 159,935,169 112,141,871

Conveyance Allowance 30,087,324 14,238,369

Medical Allowance 109,141,544 53,552,363

Dearness Allowance 121,469,301 42,582,168

Overtime Allowance 386,800 366,250

Other Allowances 353,040 5,032,178

1,292,014,793 932,982,480

24(a). CONSOLIDATED SALARIES & ALLOWANCES

Mercantile Bank Ltd. 1,292,014,793 932,982,480 Mercantile Bank Securities Ltd. 14,396,975 - Mercantile Exchange House (UK) Limited - - Off-shore Banking Unit - -

1,306,411,768 932,982,480

Amount in Taka

2011 2010

220 annual report

25 CHIEF EXECUTIVE’S SALARY AND ALLOWANCES

Salary 3,600,000 2,777,419

Other allowances 2,700,000 1,849,839

6,300,000 4,627,258

25 (a). CONSOLIDATED CHIEF EXECUTIVE SALARIE AND FEES

Mercantile Bank Ltd. 6,300,000 4,627,258

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

6,300,000 4,627,258

26 DIRECTORS’ FEES

Director Fees 2,725,000 4,046,250

Director Fees VAT 326,400 491,850

3,051,400 4,538,100

26 (a). CONSOLIDATED DIRECTORS’ FEES

Mercantile Bank Ltd. 3,051,400 4,538,100

Mercantile Bank Securities Ltd. 400,000 -

Mercantile Exchange House (UK) Limited 413,031 -

Off-shore Banking Unit - -

3,864,431 4,538,100

27 RENT, TAXES, INSURANCE, LIGHTING ETC.

Rent 165,945,548 137,828,908

Rates, Taxes & Excise Duty 587,490 486,493

Insurance 77,590,056 58,103,481

Lighting, Gas & Water 37,750,681 33,633,992

281,873,775 230,052,874

27 (a). CONSOLIDATED RENT, TAXES, INSURANCE, LIGHTING ETC.

Mercantile Bank Ltd. 281,873,775 230,052,874

Mercantile Bank Securities Ltd. 2,895,536 -

Mercantile Exchange House (UK) Limited 552,814 -

Off-shore Banking Unit - -

285,322,125 230,052,874

28 LEGAL EXPENSES

Legal Fees & Charges 10,015,681 13,918,460

Stamps & Notary Public Expenses 234,203 640,759

10,249,884 14,559,219

Amount in Taka

2011 2010

221annual report

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28(a) CONSOLIDATED LEGAL EXPENSES

Mercantile Bank Ltd. 10,249,884 14,559,219

Mercantile Bank Securities Ltd. - -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit - -

10,249,884 14,559,219

29 STATIONERY, PRINTING AND ADVERTISEMENT

Printing & Stationery 36,887,015 41,741,160

Advertisement 70,171,594 59,791,956

Computer Expenses 17,005,958 15,127,405

124,064,567 116,660,521

29(a) CONSOLIDATED STATIONERY, PRINTING AND ADVERTISEMENT

Mercantile Bank Ltd. 124,064,567 116,660,521

Mercantile Bank Securities Ltd. 197,729 -

Mercantile Exchange House (UK) Limited 441,533 -

Off-shore Banking Unit - -

124,703,829 116,660,521

30 DEPRECIATION AND REPAIR OF FIXED ASSETS

Depreciation on Fixed Assets (Note-30.1) 130,606,072 99,262,258

Repairs & Maintenance 31,714,455 21,027,806

162,320,527 120,290,064

30.1 Depreciation on Fixed Assets (Annexure - A)

Lease Hold Property 121,158,398 20,351,401

Free Hold Property 9,447,674 78,910,857

130,606,072 99,262,258

30 (a). CONSOLIDATED DEPRECIATION AND REPAIR OF FIXED ASSETS

Mercantile Bank Ltd. 162,320,527 120,290,064

Mercantile Bank Securities Ltd. 3,569,845 -

Mercantile Exchange House (UK) Limited - -

Off-shore Banking Unit 100,420 -

165,990,792 120,290,064

31 OTHER EXPENSES

Bank Charges 3,900,730 4,979,174

Other Charges 7,224,687 10,069,997

Donation 24,702,305 34,626,096

Car Expenses 80,603,647 63,465,465

Discount & Commission Paid 2,312 669,583

Amount in Taka

2011 2010

222 annual report

Training Expenses 9,483,022 9,129,062

Securities & Cleaning 118,700,020 87,380,552

Subscription 2,893,347 5,271,392

Entertainment Expenses 30,879,649 28,936,433

Travelling Expenses 20,589,247 17,947,049

Conveyance, Carriage & Freight 6,023,920 5,314,152

Business Development 52,593,347 29,390,011

Liveries & Uniforms 3,289,385 1,985,396

Medical Expenses 199,560 2,086,807

Newspapers and Magazines 1,088,195 1,394,643

Cook Servant 240,000 138,871

Loss on sale on Property 243,866 -

Interest Expenses Lease 5,447,966 1,557,670

Q-cash/ATM Cards/VISA Cards 17,756,614 15,930,482

House Furnishing 6,107,712 6,983,171

Leave Encashment 83,835,767 39,978,124

Gratuity 130,000,000 20,000,000

Credit Rating Fees 345,000 418,000

Listing Fees 45,489 26,336

Value Adjustment - 3,896,953

Howla charges 1,281,932 2,529,983

Laga charges 6,781,887 18,212,917

Miscellaneous Expenses (Note-31.1) 43,914,645 41,824,177

658,174,251 454,142,496

31.1 Miscellaneous Expenses

Laundry & Cleaning 1,673,202 1,225,639

Photocopy 554,356 681,882

Cash Carying Charge 4,731,404 3,645,857

Nursery 921,820 865,942

Sundry Expenses 36,033,863 35,404,857

43,914,645 41,824,177

31 (a). CONSOLIDATED OTHER EXPENSES

Mercantile Bank Ltd. 658,174,251 454,142,496

Mercantile Bank Securities Ltd. 12,703,101 -

Mercantile Exchange House (UK) Limited 457,889 -

Off-shore Banking Unit - -

671,335,241 454,142,496

32 EARNING PER SHARE (EPS)

Net Profi t after tax 1,734,172,348 1,425,338,409

Number of Ordinary Shares outstanding 496,809,200 40,722,066

Weighted Average no. of Share Outstanding 496,809,200 496,809,200

Earning Per Share (EPS) 3.49 2.87

CONSOLIDATED EARNING PER SHARE (EPS) 3.53 2.87

Note: EPS has been calculated in accordance with BAS-33. Previous year’s fi gures have been restated for the issue of 89,588,540 Bonus Share (for 2010) during the year.

Amount in Taka

2011 2010

223annual report

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33 NUMBER OF EMPLOYEESThe number of employees engaged for the entire period who received a total remuneration of BDT 36,000 or above were 1737. Break-up of No. of employees as per salary range wise:

Salary range in Taka No. of Employees

0 to 20,000 147

20,001 to 50,000 1017

50,001 to 100,000 313

100,001 to 200,000 253

200,001 and above 7

1737

34 RELATED PARTY DISCLOSURE (BAS-24) 34.1 Name of Directors and their interest in the Bank and different entities-shown in annexure-B. 34.2 Signifi cant contracts where Bank is a party and herein Directors have interest:

Nature of contract Name of Director and related by

Remarks

Lease agreement with Mrs. Rena Jalil, Wife of Mr. Md. Abdul Jalil

Mr. Md. Abdul Jalil, Chairman of the Bank, Husband of Mrs. Rena Jalil.

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2009-3322 dated 14.09.2009

Lease agreement with Mr. M. S. Ahsan, Director of the Bank

Mr.M. S. Ahsan, Director of the Bank

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2006-3776 dated 22.11.2009

Lease agreement with Arena Industries Ltd. where Mrs. Tazneen Aman, Director of the said Company.

Mr. M. Aman Ullah, Director of the Bank, Husband of Mrs. Tazneen Aman

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2006-3776 dated 22.11.2006

Lease agreement with Mr. Md. Shahabuddin Alam, Director of the Bank

Mr. Md. Shahabuddin Alam, Director of the Bank

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2009-2706 dated 29.07.2009

Lease agreement with Mr. Md. Abdul Hannan, Sponsor of the Bank

Ms. Israt Jahan, Director of the Bank, Wife of Mr. Md. Abdul Hannan.

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2009-4159 dated 10.11.2009

Lease agreement with Mr. M. S. Ahsan Director of the Bank

Mr. M. S. Ahsan, Director of the Bank

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2010-313 dated 31.01.2010

Lease agreement with Mrs. Begum Rownak Afza, Mother of A. K. M. Shaheed Reza

A. K. M. Shaheed Reza, Director of the Bank. Son of Mrs. Rownak Afza

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2010-1202 dated 31.03.2010

Lease agreement with Mr. Md. Baharul Ahsan, Brother of M. S. Ahsan

Mr. M. S. Ahsan, Director of the Bank, Brother of Md. Baharul Ahsan

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2010-1814 dated 06.05.2010

Lease agreement with Mr. Mohd. Selim Director of the Bank

Mr. Mohd. Selim, Director of the Bank

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2011--3260 dated 25.08.2011

Lease agreement with Mr. Alhaj Akram Hossain (Humayun) Director of the Bank

Mr. Alhaj Akram Hossain (Humayun), Director of the Bank

The lease agreement was approved by the Bangladesh Bank vide its letter no.BRPD(P-3)745(44)/2011--3455 dated 25.09.2011

Lease agreement with Mr. Md. Abdul Hannan, Sponsor of the Bank

Ms. Israt Jahan, Director of the Bank, Wife of Mr. Md. Abdul Hannan.

The lease agreement was apporved by the Bangladesh Bank vide letter no BRPD (P-3) 745 (44)/2011-4574 dated 01.12.2011

Lease agreement with Mr. M. S. Ahsan Director of the Bank

Mr. M. S. Ahsan, Director of the Bank

The lease agreement was apporved by the Bangladesh Bank vide letter no BRPD (P-3) 745 (44)/2010-3888 dated 20.10.2011

224 annual report

34.3 Shares issued to Directors & Executives without consideration or exercisable at discount: Nil

34.4 Related Party Transaction:

Transaction with related Party Nature of transaction Amount in taka

Mercantile Bank Securities Ltd. Loan (SOD) 3,781,006,851

34.5 Lending Policies to related Parties :

Lending to related parties is effected as requirements of Section 27 (1) of Bank Companies Act 1991

34.6 Loan and Advances to Directors and their related concern : Nil

34.7 Business other than Banking business with any related concern of the Directors as per Section 18 (2) of Bank Companies Act 1991 : Nil

34.8 Investments in the Securities of Directors and their related concern : Nil

35 RECONCILIATION OF INTER BANK/BOOKS OF ACCOUNTS Books of Accounts with regards to inter-bank (in Bangladesh and outside Bangladesh) are reconciled and there are no material differences, which may affect the fi nancial statements signifi cantly.

36 LAND UNDER LITIGATIONA Land is included under free hold properties - land (Note-8), located at Gulshan, Plot # 3, Block # CWN (C), Gulshan Avenue, Gulshan, Dhaka-1212, Municipality Holding # 105, Gulshan Avenue, Gulshan. Area of land is 1 bigha 2 chattaks purchased in the year 2005 for Bank’s own use as per decision of the Board of Directors in its 73rd meeting held on August 23, 2005. The land is under litigation and possession of the land is yet to be taken. In this connection a provision has been made as per Bangladesh Bank’s instruction (Note-12.2).

37 AUDITORS’ WORK-HOUR :The Joint External Auditors of the Bank M/S K M Hasan & Co., Chartered Accountants and M/S Ahmed Zaker & Co, Chartered Accountants worked more than 4520 man-hours at the bank’s Head Offi ce and some Branches. During the period of audit, they cover 80% the audit of the Bank’s risk weighted assets as on the reporting date.

38 STATEMENT OF LIQUIDITYThe Liquidity Statement has been prepared in accordance with the remaining maturity grouping of the value of the assets and liabilities as on December 31, 2011 and under the guidelines of Bangladesh Bank BRPD Circular No.14 dated June 25, 2003.

39 “RESTATEMENTS’’Wherever considered necessary, Previous year’s fi gures have been rearranged for the purpose of comparison with current period’s presentation without any impact on the profi t and value of assets and liabilities as reported in the Financial Statements.

40 AUDIT COMMITTEEThe Audit Committee, re-constituted by the Board of the Bank on July 04, 2011 is presently formed with fi ve members of the Board of Directors:

Name Designation Educational qualifi cation

Alhaj Akram Hossain (Humayun) Chairman B.Com

Md. Anwarul Haque Member B.Sc. Engineering

Mohd. Selim Member B.A.

Md. Nasir Uddin Chowdhury Member B.Sc. Engineering

Mrs. Israt Jahan Member Graduate

225annual report

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From the beginning of the year to December 31, 2011, the Audit Committee of the Board conducted 13 (Thirteen) meetings. Among others, the Committee discussed the following issues and provided guidelines and necessary instructions:

Comprehensive Inspection Program of the Bank for the year, 2011. Performance of the ICC Division: a summary report of audit 2010. Health report of the bank for the year - 2010. Achievements of the Audit Committee of Board of Directors as per terms of reference (TOR) of Bangladesh Bank

BRPD circular#12 dated December 23, 2002. Comprehensive Inspection Reports of different branches of the Bank conducted by the Internal Audit and

Inspection Team from time to time and the status of compliance thereof. Follow-up the recovery of Loans and Advances. Review of the plan for training on Credit Risk Management for the executives and offi cers engaged in credit

operation towards implementation of Bangladesh Bank guidelines. Terms of reference of the audit committee of board of directors. Gradation of the branches of the bank. Information memo in respect of expenditure account: insurance. Review of Financial Statements for the year ended on December 31, 2011. Review of traveling allowances and daily allowances (foreign and local) rules. Review of code of conduct and ethical guidelines for all employee of the bank Review of existing Human Resources- the tangible strength for the growth of the Bank.

41 EVENTS AFTER THE REPORTING PERIOD (BAS-10)

PROPOSED DIVIDEND

The Board of Directors of the Bank has recommended for Stock Dividend 23% of the paid up capital for the year 2011.

226 annual report

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907,

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5,7

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60

8,5

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73

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14,

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32,

604,

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Furn

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-

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ce E

qui

pm

ent

-

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Tota

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5

7,23

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9

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Gra

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otal

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STA

TE

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NT

OF

FIX

ED

AS

SE

TS

AS

AT

DE

CE

MB

ER

31,

201

1A

nnex

ure-

A

227annual report

www.mblbd.com

Ann

exur

e-B

SL

No

.N

ame

and

ad

dre

ssD

esig

natio

nN

o. o

f S

hare

s he

ld in

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ank

Nam

e o

f Fi

rms/

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mp

anie

s in

whi

ch in

tere

sted

as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t, g

uara

nto

r, em

plo

yee

etc.

Po

siti

on

(as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t,

gua

rant

or,

emp

loye

e et

c.)

Nat

ure

and

Val

ue o

f in

tere

st in

the

fi rm

/ co

mp

anie

s in

whi

ch

inte

rest

ed.

201

1 (F

V-T

k.10

) 2

010

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12

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56

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01.

MD

. AB

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L JA

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se N

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nd fl

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Cha

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anag

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100.

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RS

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e C

hairm

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,210

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5,59

11.

Ben

gal P

last

ic In

dus

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s Lt

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2. B

enga

l Pol

y P

aper

Sac

k Lt

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3. B

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l Ove

rsea

s C

orpo

ratio

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Ben

gal C

hem

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& S

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P

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gal A

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s P

rod

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.7.

Ben

gal C

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pt &

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ding

s Lt

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Pow

er U

tility

BD

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.9.

Nat

iona

l Tel

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. (R

TV)

10. R

oman

ia A

grov

at L

td11

. Ben

gal W

ind

sor

Ther

mop

last

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td12

. Ben

gal C

orru

gate

d C

arto

n In

d. L

td13

. Pol

y C

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14. B

enga

l Pol

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Wea

rs L

td15

. Ben

gal M

ultim

edia

Ltd

.

Cha

irman

& M

D,, ,, ,, ,, ,, ,, ,, ,,

Cha

irman

& M

DC

hairm

an,, ,, ,, ,, ,,

44.1

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33.3

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33.3

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25.0

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42.8

6%20

.83%

17.0

0%17

.00%

36.3

6%30

.00%

26.0

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03.

MO

HD

. SE

LIM

158-

160

Mot

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l C/A

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21.

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on C

loth

Sto

re2.

Syn

thia

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uriti

es L

td.

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entr

al P

laza

4. G

lob

al In

sura

nce

Ltd

.

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prie

tor

Cha

irman

Pro

prie

tor

Sp

onso

r S

hare

hold

er

100.

00%

35.0

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0.00

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04.

M. S

. AH

SA

N

121

Mot

ijhee

l C/A

, (G

roun

d

Floo

r),

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on B

ima

Bha

van,

D

haka

100

0

Cha

irman

E

C &

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irect

or

11,9

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109,

75,4

521.

M/S

Frie

nd T

rad

ers

2. M

/S R

aim

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RN

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orp

orat

ion

4. S

haw

des

h To

wer

5. A

G P

rope

rty

Dev

elop

men

t Ltd

.6.

AG

Cer

amic

Ltd

.7.

AG

Agr

o In

dus

trie

s Lt

d.

8. N

atio

nal C

redi

t Rat

ings

Ltd

.

Pro

prie

tor

Man

agin

g D

irect

orP

rop

rieto

rP

rop

rieto

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hairm

anC

hairm

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hairm

anD

irect

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100.

00%

50.0

0%10

0.00

%10

0.00

%60

.00%

70.0

0%70

.00%

7.00

%

228 annual report

Ann

exur

e-B

SL

No

.N

ame

and

ad

dre

ssD

esig

natio

nN

o. o

f S

hare

s he

ld in

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ank

Nam

e o

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mp

anie

s in

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tere

sted

as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t, g

uara

nto

r, em

plo

yee

etc.

Po

siti

on

(as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t,

gua

rant

or,

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loye

e et

c.)

Nat

ure

and

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ue o

f in

tere

st in

the

fi rm

/ co

mp

anie

s in

whi

ch

inte

rest

ed.

201

1 (F

V-T

k.10

) 2

010

(FV-

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12

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56

7

05.

ALH

AJ

AK

RA

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OS

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N)

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irman

A

C &

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10,7

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am T

rad

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2. F

ars

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Far

s H

otel

s &

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orts

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er5.

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am T

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ter

7. In

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prie

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Man

agin

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100.

00%

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00%

50.0

0%

06.

MD

. AN

WA

RU

L H

AQ

UE

Ap

artm

ent-

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ctor

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ing

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arga

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. 3.

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bal

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4. P

rem

ier L

easi

ng &

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ance

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Hol

iday

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vels

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.6.

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mie

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ecur

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agem

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erca

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k S

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agin

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irect

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onso

r S

hare

hold

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irect

orD

irect

or

80.0

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85%

35.0

0%0.

40%

07.

DR

. TO

UFI

QU

E R

AH

MA

N

CH

OW

DH

UR

Y“K

arak

anan

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ilim

a –5

6,

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liap

ara,

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ikgh

at, S

ylhe

t-31

00.

Dire

ctor

1,29

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td.

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etro

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an U

nive

rsity

3. N

atio

nal C

redi

t Rat

ings

Ltd

.4.

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cant

ile B

ank

Sec

uriti

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td.

Man

agin

g D

irect

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hairm

an, B

oard

of T

rust

eeV

ice

Cha

irman

Cha

irman

10.0

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19.0

0%

08.

GO

LAM

FA

RU

K A

HM

ED

Hou

se #

24

A, F

lat

# A

2,

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shan

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haka

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ctor

5,26

6,15

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72,6

361.

M/S

. Ahm

eds

2. P

eopl

es In

sura

nce

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Ltd

3. P

opul

ar L

ife In

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nce

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Glo

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nsur

ance

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.

Pro

prie

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Cha

irman

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viso

r

100.

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09.

EN

GR

. MO

HD

. M

ON

SU

RU

ZZ

AM

AN

23

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t:M

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ctor

2,59

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d. M

onsu

ruzz

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atio

nal C

redi

t Rat

ings

Ltd

.3.

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tlead

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uriti

es L

td.

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prie

tor

Sha

reho

lder

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ctor

100.

00%

1.00

%10

.00%

10.

BIL

KIS

BE

GU

M

Hou

se-2

4, R

oad

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Sec

tor-

13,

Utt

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Mod

el T

own

Dha

ka.

Dire

ctor

2,61

4,33

02,

38,8

80

N/A

N/A

N/A

229annual report

www.mblbd.comA

nnex

ure-

B

SL

No

.N

ame

and

ad

dre

ssD

esig

natio

nN

o. o

f S

hare

s he

ld in

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ank

Nam

e o

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mp

anie

s in

whi

ch in

tere

sted

as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t, g

uara

nto

r, em

plo

yee

etc.

Po

siti

on

(as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t,

gua

rant

or,

emp

loye

e et

c.)

Nat

ure

and

Val

ue o

f in

tere

st in

the

fi rm

/ co

mp

anie

s in

whi

ch

inte

rest

ed.

201

1 (F

V-T

k.10

) 2

010

(FV-

Tk.

100)

12

34

56

7

11.

MD

. TA

BIB

UL

HU

Q

Am

in C

ourt

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/AD

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ctor

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8,89

07,

31,0

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ativ

e E

ngin

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ativ

e P

aper

Mill

s Lt

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agin

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irect

orM

anag

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ctor

40.0

0%22

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12.

A. S

. M. F

ER

OZ

ALA

M

Kris

hnac

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-2Fl

at N

o. 3

/BH

ouse

# 2

77, R

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lock

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, Bas

hund

hara

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Dha

ka, B

angl

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h.

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ctor

24,3

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0021

,28,

106

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enga

l Tra

din

g Lt

d.

2. P

rem

ier L

easi

ng &

Fin

ance

Ltd

.3.

Pre

mie

r Lea

sing

& S

ecur

ities

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.

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agin

g D

irect

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pon

sor

Dire

ctor

100.

00%

6.09

%0.

40%

13.

M. A

MA

NU

LLA

HH

ouse

No.

06, R

oad

No.

80,

G

ulsh

an-2

, Dha

ka.

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ctor

30,0

00,0

0025

,40,

000

1. A

man

Sp

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ng M

ills

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Mou

sum

i Ent

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rises

Ltd

.3.

Are

na C

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mer

Pro

d. L

td.

4. A

rena

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ustr

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Are

na S

ecur

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.6.

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na H

RI L

imite

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p L

imite

d8.

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bal

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ranc

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Cha

irman

’

’

’’

’

’

’’

’

’

’’

Sha

reho

lder

4.99

%50

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30%

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14.

A. K

. M. S

HA

HE

ED

RE

ZA

36

Gre

en R

oad

, Dha

nmon

di,

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ka-1

205.

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ctor

1,37

7,19

01,

37,0

651.

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re A

pp

arel

s Lt

d.

2. F

ashi

on P

lus

Ltd

. 3.

Rez

a Fa

bric

s Lt

d.

4. G

lob

al In

sura

nce

Ltd

.5.

Fas

hion

Exp

orts

6.

Rez

a Fa

shio

ns L

td.

7. N

atio

nal C

redi

t Rat

ings

Ltd

.8.

Mer

cant

ile B

ank

Sec

uriti

es L

td.

Cha

irman

Cha

irman

Cha

irman

Sha

reho

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Pro

prie

tor

Cha

irman

Dire

ctor

Vic

e C

hairm

an

40.0

0%30

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25.0

0%0.

16%

100.

00%

25%

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15.

MD

. NA

SIR

UD

DIN

C

HO

UD

HU

RY

“Kal

pan

eer”

, Ap

t. N

o-3A

, H

ouse

No.

35,

Roa

d N

o. 1

0/A

(N

ew),

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nmon

di R

/A,

Dha

ka-1

205.

Dire

ctor

6,27

3,54

05,

14,2

251.

Tec

hnoc

on L

td.

2. M

anar

Ass

ocia

tes

Ltd

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Pre

mie

r Le

asin

g &

Fin

ance

Ltd

.4.

Glo

bal

Insu

ranc

e Lt

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Tec

hno-

Con

6. H

olid

ay T

rave

ls.

7. D

elta

Hos

pita

l Ltd

. 8.

Pre

mie

r Le

asin

g S

ecur

ities

Ltd

.9.

Mer

cant

ile B

ank

Sec

uriti

es L

td10

. Sec

uriti

es B

roki

ng &

M

anag

emen

t Lt

d

Man

agin

g D

irect

orM

anag

ing

Par

tner

D

irect

orS

pon

sor

Sha

reho

lder

Man

agin

g P

artn

erC

hairm

anD

irect

orD

irect

or

Dire

ctor

80.0

0%80

.00%

2.91

%1.

05%

50.0

0%35

.00%

2.30

%0.

40%

230 annual report

Ann

exur

e-B

SL

No

.N

ame

and

ad

dre

ssD

esig

natio

nN

o. o

f S

hare

s he

ld in

B

ank

Nam

e o

f Fi

rms/

Co

mp

anie

s in

whi

ch in

tere

sted

as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t, g

uara

nto

r, em

plo

yee

etc.

Po

siti

on

(as

pro

pri

eto

r, p

artn

er, d

irec

tor,

man

agin

g a

gen

t,

gua

rant

or,

emp

loye

e et

c.)

Nat

ure

and

Val

ue o

f in

tere

st in

the

fi rm

/ co

mp

anie

s in

whi

ch

inte

rest

ed.

201

1 (F

V-T

k.10

) 2

010

(FV-

Tk.

100)

12

34

56

7

16.

MD

. SH

AH

AB

UD

DIN

ALA

MS

A G

roup

of I

ndus

trie

sFi

nlay

Hou

se

(3rd

fl oo

r), A

grab

ad C

/A,

Chi

ttag

ong.

Dire

ctor

18,1

51,2

9014

,61,

860

1. S

.A. O

il R

efi n

ery

Ltd

.2.

Sam

anna

z S

uper

Oils

Ltd

3. L

aila

Van

asp

ati P

rod

ucts

Ltd

. 4.

S.A

. Con

den

sed

Milk

Ltd

. 5.

Sha

man

naz

Con

dens

ed M

ilk L

td.

6. S

ham

anna

z D

airy

& F

ood

P

rod

ucts

Ltd

.7.

S. A

. Pul

p &

Pap

er P

rodu

cts

Ltd.

8. S

outh

Eas

tern

Tan

k Te

rmin

al L

td.

9. S

.A. T

elec

om S

yste

m L

td.

10. S

outh

Eas

tern

Oil

Refi

ner

y Lt

d.11

. S.A

. Con

sum

er p

rodu

cts

Ltd.

12. S

.A. S

alt

ind

ustr

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231annual report

www.mblbd.comA

nnex

ure-

B

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232 annual report

Inve

stm

ent

in S

hare

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Dec

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Ann

exur

e-C

233annual report

www.mblbd.com

Adjustment for Approved Securities HTM:As on Dec 31, 2011

Annexure-D

As per Bangladesh Bank’s DOS Circular Letter # 5 dated May 26, 2008 all Government securities holding by scheduled banks with effect from July 1, 2008 must be segregated into HTM (Held to Maturity) and HFT (Held for Trading). HTM securities are to be amortized at the end of each year and any increase/decrease due such amortization is to be adjusted in the changes in equity system. HFT securities are to be revalued weekly as per Mark to Market method. Any increase/decrease due to such valuation (Mark to Market) cannot be taken into Profi t and Loss Account until sale or maturity rather the same is to be transferred to reserve for Revaluation Accounts.

(Amount in BDT)

Market Adjustment on Approved Securities (HTM)

Balance as on January 1,2011 84,883,226.42

Less : Adjustment due to Bond sale 58,254,700.00

Add. Adjustment of Amortization of HTM securities 10,146,496.27

Balance as on December 31,2011 36,775,022.69

Reserve for Revaluation (for HFT securities)

Balance as on January 1,2011 453,666,221.99

Add adjustment during the year in Mark to market Method on Treasury Bond 39,105,799.23

Add adjustment during the year in Mark to market Method on Treasury Bill

Less adjustment due to sale & Repo (outright sale) 348,800,108.00

Balance as on December 31,2011 143,971,913.22

(Market adjustment on Treasury Bond is reported as per DOS circular no.220 Dated. 08 December ,2010.)

234 annual report

Maturity Analysis of Other AssetsAs on Dec 31, 2011

Annexure-E

ParticularsUp to 01MonthTaka

01-03Months

Taka

03-12Months

Taka

01-05YearsTaka

More than05 years

Taka

Total

Taka

1 2 3 4 5 6 7

Suspense Account (Note 9.1) 221,258,791 58,162,204 4,267,052 - - 283,688,047

Demand Draft paid without Advice 25,917 - - - - 25,917

Advance Rent 2,952,650 28,274,585 54,659,540 159,928,055 - 245,814,830

Advance Deposits 1,987,715 - - - - 1,987,715

Stock of Stationery 2,800,000 9,400,000 15,182,798 - - 27,382,798

Stamps in Hand 1,422,751 - - - - 1,422,751

Premium on Bond 4,589,235 - - - - 4,589,235

Clearing Adjustment Account 16,348,043 - - - - 16,348,043

On Line Client Adjustment Account

(5,124,845) - (5,124,845)

Adjusting Account Debit (Note 9.2) 234,489,130 235,874,521 344,397,921 - - 814,761,572

Mercantile Bank General Account 16,935,375 - - - - 16,935,375

Others - 198,728,171 - - - 198,728,171

497,684,762 530,439,481 418,507,311 159,928,055 - 1,606,559,609

235annual report

www.mblbd.com

Annexure-F Compliance of Bangladesh Financial Reporting Standards (BFRS) and Bangladesh Accounting Standards (BAS)

Name of the BFRS BFRS no Status

Firsttime Adoption of Bangladesh Financial Reporting Standards 1 N/A

Share Based Payment 2 N/A

Business Combinations 3 N/A

Insurance Contract 4 Applied

Non-current Assets Head for Sale and Discontinued Operations 5 N/A

Exploration for and Evaluation of Mineral Resources 6 N/A

Financial Instruments: Disclosures 7 Applied

Operating Segments 8 Applied

Name of the BAS BAS no Status

Presentation of Financial Statements 1 Applied

Inventories 2 Applied

Cash Flow Statements 7 Applied

Accounting Policies, changes in Accounting Estimates and Errors 8 Applied

Events after Reporting Period 10 Applied

Construction Contracts 11 N/A

Income Taxes 12 Applied

Property, Plant and Equipment 16 Applied

Leases 17 Applied

Revenue 18 Applied

Employee Benefi ts 19 Applied

Accounting for Government Grants and Disclosure of Government Assistance 20 N/A

The Effects of Changes in Foreign Exchange Rates 21 Applied

Borrowing Costs 23 Applied

Related Party Disclosures 24 Applied

Accounting and Reporting by Retirement Benefi t Plans 26 Applied

Consolidated and Separate Financial Statements 27 Applied

Investment in Associates 28 N/A

Interests in Joint Ventures 31 N/A

Financial Instruments: Presentations 32 Applied

Earnings per Shares 33 Applied

Interim Financial Reporting 34 Applied

Impairment of Assets 36 Applied

Provisions, Contingent Liabilities and Contingent Assets 37 Applied

Intangible Assets 38 N/A

Financial Instruments: Recognition and Measurements 39 Applied

Investment Property 40 Applied

Agriculture 41 N/A

236 annual report

Ann

exur

e-G

H

ighl

ight

s o

f M

erca

ntile

Ban

k Li

mit

ed

(Tak

a in

mill

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237annual report

Financial Statements ofOff-shore Banking Unit (OBU)

Mercantile Bank LimitedFor the Year ended on 31 December 2011

Annexure-H

238 annual report

Offshore Banking Unit Balance SheetAs at Decemebr 31, 2011

Particulars 31.12.2011 31.12.2011 Notes USD Taka

Property and Assets:

Cash:

Cash in Hand

Balance with Bangladesh Bank

Balance With other Banks and Financial Institutions

In Bangladesh

Outside Bangladesh

Maoney at Call and Short Notice:

Investments

Loans and Advances:

Loans, Cash Credit, Overdraft etc.

Bills Purchased and Discounted 3 2,293,049.00 187,692,710

Fixed Assets including Premises, Furniture and Fixtures 4 4,907.34 401,680

Other Assets 5 12,274.42 1,004,697

Non-Banking Assets -- --

Total Assets: 2,310,230.76 189,099,087

Liabilities and Capital :

Liabilities:

Borrowings from Other Banks, Financial institutions and Agents: 6 2,293,049.00 187,692,710

Bangladesh Bank and Other Banks in Bangladesh

Outside Bangladesh

Deposit and Other Accounts:

Current Deposits and Other Accounts

Fixed Deposits

Other Liabilities 7 11,752.86 962,006

Total Liabilities 2,304,801.86 188,654,716

Capital/Shareholders' Equity

Retained earnings brought forward from profi t & loss Account 5,428.90 444,371

Total Liabilities and Shareholders' Equity: 2,310,230.76 189,099,087

239annual report

www.mblbd.comOffshore Banking Unit Profi t and Loss AccountFor the year ended Decemebr 31, 2011

Particulars 2011 2011

Notes USD Taka

Interest Income 8 12,274.42 1,004,697

Less: Interest paid on Deposits, Borrowings etc. 9 5,618.69 459,906

Net Interest Income 6,655.73 544,791

Investment Income

Commision, Exchange and Brokerage

Other Operating Income

Total Operating Income 6,655.73 544,791

Salary and Allowances

Rent, Taxes, Insurances, Electricity etc.

Postage, Stamps, Telecommunication etc.

Depreciation and repair of Fixed Assets 10 1,226.83 100,420

Other Expenses

Profi t before Provision 5,428.90 444,371

Provision against Classifi ed Loans

Provision against Unclassifi ed Loans - -

Other Provision

Total Provision

Total Profi t before Taxes 5,428.90 444,371

Provision for Taxation - -

Net Profi t after Taxation 5,428.90 444,371

Retained Surplus brought forward from previous year

Effect of changes in Exchange rate

Retained Earnings carried forward from previous year

Retained earnings transferred to central operation 5,428.90 444,371

240 annual report

Off-Shore Banking Unit Statement of Cash FlowsFor The Year Ended December 31, 2011

2011 2011

USD BDT

A. Cash Flows from Operating Activities

Interest Received 12,274.42 1,004,697

Interest Paid (5,618.69) (459,906)

Fees and Commission Received - -

Payment to the Employees - -

Payment to Suppliers - -

Income Tax Paid - -

Received from other operating activities - -

Payment for other operating activities - -

Cash generated from operating activities before changes in operating in operating assets and liabilities

6,655.73 544,791

Increase / Decrease in Operating Assets and Liabilities

Loans and Advances to other Banks - -

Loans and Advances to Customer (2,293,049.00) (187,692,710)

Other Assets (12,274.42) -1,004,697

Other Liabilities 11,752.86 962,006

(2,293,570.56) (187,735,401)

Net Cash Received from Operating Activities (2,286,914.83) (187,190,610)

B. Cash Flows from Investing Activities

Purchase/ Sale of Property, Plant and Equipment (6,134.17) (502,100)

Other Investment activities - -

Net Cash used in Investing Activities (6,134.17) (502,100)

C. Cash Flows from Financing Activities

Borrowing from Mercantile Bank Ltd 2,293,049.00 187,692,710

Net Cash from Financing Activities 2,293,049.00 187,692,710

D. Net Increase/(Decrease) of Cash & Cash Equivalent (A+B+C) - -

Effects of Exchange Rate changes on Cash and Cash Equivalent - -

E. Opening Cash and Cash Equivalent - -

F. Closing Cash and Cash Equivalent (D+E) - -

241annual report

www.mblbd.com

1. Background Information

1.1 Mercantile Bank Limited is operating Off-shore Banking Unit (OBU) by obtaining permission from Bangladesh Bank vide its letter no. BRPD(P-3)744(114)/2010-1743 dated 4 May 2010, as a separate business unit under the Rules and Guidelines of Bangladesh Bank. The Bank commenced operation of this unit from 20 March 2011 at its Gulshan, Dhaka and CEPZ, Chittagong Branches.

2. Signifi cant Accounting Policy

2.1 Basis of Accounting:

The Unit maintains its accounting records in USD form which accounts are prepared according to the Bank Companies Act 1991, Bangladesh Financial Reporting Standards (BFRS), Bangladesh Accounting Standards (BAS) and other applicable directives issued by Bangladesh Bank.

2.2 Common Expenses:

a. Establishment expenses have not been separately accounted for in the Financial Statements

b. Provision for taxation, loans & advances and Off-balance sheet items have not been separately accounted for in the Financial Statements These are accounted for in the central accounts of Mercantile Bank Limited.

Off-shore Banking Unit Notes to the Financial StatementsFor the year ended 31 December 2011

2011 2011

USD BDT

3 Loans & Advances

3.1 Loans, Cash credit and Overdraft etc. - -

3.2 Bill purchased and Discounted 2,293,049.00 187,692,710

2,293,049.00 187,692,710

4 Fixed Assets including Premises, Furniture and Fixtures

Software 4,398.13 360,000

Computer, Printer & Peripherals 1736.04 142,100

6,134.17 502,100

Less : Accumulated Depreciation 1,226.83 100,420

4,907.34 401,680

5 Other Assets

Interest Receivable 12,274.42 1,004,697

12,274.42 1,004,697

6 Borrowing from other Banks, Financial Institutions and Agents

In Bangladesh - -

Mercantile Bank Limited 2,293,049.00 187,692,710

Bangladesh Bank - -

Outside Bangladesh - -

2,293,049.00 187,692,710

7 Other Liabilities

Accrued Interest 5,618.69 459,906

Payable to Head Offi ce 6,134.17 502,100

11,752.86 962,006

242 annual report

2011 2011

USD BDT

8 Interest Income

Interest on Advances 12,274.42 1,004,697

Interest on Money at Call and Short Notice - -

Interest on fund placement with ID, HO - -

Interest on foreign Currency Balances - -

12,274.42 1,004,697

9 Interest paid on Deposit, Borrowings etc.

Interest on Deposit - -

Interest on Borrowings 5,618.69 459,906

Discount - -

Interest on REPO - -

5,618.69 459,906

10 Depreciation and repair on Fixed Assets

Furniture, fi xtures, fi ttings etc. - -

Equipment & Machineries 1,226.83 100,420

Offi ce Equipments - -

1,226.83 100,420

243annual report

Mercantile Bank Securities LimitedAuditor’s Report and Audited Financial Statements

For the year ended 31 December 2011

Annexure-I

244 annual report

Auditor’s ReportTo the Shareholders of Mercantile Bank Securities Limited

We have audited the accompanying fi nancial statements of Mercantile Bank Securities Limited which comprise the Statement of Financial Position as of 31 December 2011, Statement of Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended and a summary of signifi cant accounting policies and other explanatory information.

Management Responsibilities for the Financial Statements

Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with Bangladesh Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements referred to above give a true and fair view of the fi nancial position of Mercantile Bank Securities Limited as on 31 December 2011 and of the results of its operations and its cash fl ows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply with the Companies Act 1994, the Securities and Exchange Act 1993, the Securities and Exchange Rules 1987, conditions and regulations issued by the Securities and Exchange Commission and other applicable laws and regulations.

We also report that:

(a) our examination and checking of records, relevant books of accounts, registers, schedules and fi nancial statements were suffi cient to enable us to form an informed and assessed opinion on the authenticity and accuracy of the fi nancial statements;

(b) we have obtained all the information, explanations and documents as required by us; (c) the company’s management has followed relevant provisions of laws and rules in managing the affairs of the

company. Proper books of accounts, records and other statutory books have been properly maintained;(d) the statement of fi nancial position and the statement of comprehensive income are in agreement with the said

books of account maintained by the company and examined by us; and(e) the expenditure incurred and payments made were for the purpose of the company’s business for the year.

ACNABINChartered Accountants

Dhaka,01 February 2012

245annual report

www.mblbd.com

31.12.2011

Notes Amount in

SOURCES OF FUND Taka

Share Capital 3 650,000,000

Retained Earnings 4 23,057,178

673,057,178

APPLICATION OF FUND

Property, Plant & Equipment 5 36,124,569

Membership at Cost 6 830,000,000

Current Assets (a) 7 3,798,501,159

Advances, Deposits & Prepayments 8,309,559

Advance Income Tax 64,893,198

Accounts Receivable 5,362,101

Margin Loan to Clients 3,652,293,863

Balance with other Bank 67,642,438

Current Liabilities (b) 3,991,568,550

Accounts Payable 8 3,991,550,850

Deposit and Other Accounts 9 17,700

Net Current Assets (a-b) (193,067,391)

673,057,178

Mercantile Bank Securities LimitedStatement of Financial Position As at 31 December 2011

The annexed notes form an integral part of the Statement of Financial Position.

This is the Statement of Financial Position referred to in our separate report of even date.

Dhaka,01 February 2012

ACNABINChartered Accountants

Dr. Toufi que Rahman ChowdhuryChairman

A.K.M. Shahidul HaqueDirector

Choudhury Moshtaq AhmedChief Executive Offi cer

246 annual report

Dhaka,01 February 2012

ACNABINChartered Accountants

Notes Amount in

Taka

Operating Income 186,518,738

Brokerage Commission 10 16,565,805

Other operating income 11 169,952,933

Less: Operating Expenses 12 20,108,777

Net Income from Operation 166,409,961

Add: Other Income 13 23,049,278

Total Income 189,459,239

Less: Offi ce & Administrative Expenses 14 14,396,975

Profi t before Financial Expenses 175,062,264

Less: Financial Expenses 15 143,061,757

Net Profi t before Tax 32,000,507

Less: Provision for Income Tax 8,943,329

Net Profi t after Tax 23,057,178

The annexed notes form an integral part of the Statement of Comprehensive Income.

Mercantile Bank Securities LimitedStatement of Comprehensive IncomeFor the year ended 31 December 2011

This is the Statement of Comprehensive Income referred to in our separate report of even date.

Particulars Share Capital Retained Earnings Total Taka

Opening Balance 650,000,000 - 650,000,000

Net Profi t for the year

- 23,057,178 23,057,178

Balance as at 31 December 2011 650,000,000 23,057,178 673,057,178

Mercantile Bank Securities LimitedStatement of Changes in EquityFor the year ended 31 December 2011

Dr. Toufi que Rahman ChowdhuryChairman

A.K.M. Shahidul HaqueDirector

Choudhury Moshtaq AhmedChief Executive Offi cer

247annual report

www.mblbd.comMercantile Bank Securities LimitedCash Flow StatementFor the year ended 31 December 2011

2011

Amount in Taka

a. Cash Flows from Operating Activities

Interest on Margin Loan Received 169,943,818 Brokerage Commission Received 16,565,805 Account Opening Income Received 66,100 Service Charge Income Received 17,594,942 Other Income Received 5,397,351 Operating Expenses Paid (151,112,675)Administrative & General Expenses Paid (23,429,181)Cash generated from operating activities before changes in operating assets and liabilities 35,026,160

Increase / (Decrease) in Operating Liabilities

MBL Loan 3,781,006,851 Interest Payable on MBL Loan 143,061,757 Payable to Clients 57,873,113 Other Liabilities 683,500

(Increase) / Decrease in Operating Assets

Receivable from DSE (5,362,101)Receivable from Client (3,652,293,863)Advance Income Tax (64,893,198)Advance, Deposit & Prepayment (8,118,163)

251,957,896 Net cash fl ow from operating activities 286,984,056

b. Cash Flows from Investing Activities

Purchase of Property, Plant & Equipment (39,150,222)DSE Membership (650,000,000)CSE Membership (180,000,000)Net cash used in investing activities (869,150,222)

c. Cash Flows from Financing Activities

Proceeds from issue of Share Capital 650,000,000 Net cash fl ow from fi nancing activities 650,000,000

Net surplus in cash & bank balance for the year (a+b+c) 67,833,834

Cash & Bank Balance at the beginning of the year -

Cash & Bank Balance at the end of the year 67,833,834

248 annual report

1. Background Information

Mercantile Bank Securities Limited was incorporated on 27 June 2010 to facilitate development of sound capital market and to provide higher, better and diversifi ed services to a wide range of customers. MBSL is offering high quality products and services at a competitive rate. It is a subsidiary company of Mercantile Bank Limited. Now the company is a member of both DSE and CSE.

Mercantile Bank Securities Limited offers full-fl edged international standard brokerage service with margin loan facility. MBSL is also a full service Depository Participant (DP) of Central Depository Bangladesh Ltd. (CDBL). The brokerage service is designed to provide customers with necessary support and profi tability in the stock market. The main objective of Mercantile Bank Securities Limited is to act as a full-fl edged high standard brokerage service with margin loan facility services.

The company started operations since 14 September 2011 as the brokerage licenses of Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. were transferred to the company from Mercantile Bank Limited on that date.

2. Signifi cant Accounting Policies

2.1 Basis of Presentation of Financial Statements

The fi nancial statements of Mercantile Bank Securities Limited have been prepared under the historical cost convention applying accrual basis in accordance with Bangladesh Financial Reporting Standards.

2.2 Property, Plant & Equipment and Depreciation

Property, Plant and Equipment are stated in the fi nancial statements at cost less accumulated depreciation. Full year’s depreciation is charged on assets if purchased during fi rst half of the year and half year’s depreciation is charged when the assets are purchased during second half of the year. Reducing Balance Method of Depreciation is followed for charging depreciation on assets. Rates of depreciation are as under:

Name of Assets Rate of Depreciation

Method

Vehicles 20.00% Straight Line

Offi ce Equipment & Machineries 20.00% Reducing Balance

Furniture & Fixtures 10.00% Reducing Balance

Books 20.00% Reducing Balance 2.3 Revenue Recognition Revenue is recognized only when it is probable that the economic benefi ts associated with the transaction will fl ow to the entity. Revenue during the year are recognized as follows:

-Brokerage commission is recognized as income when selling or buying order is executed; -Interest income on STD account is recognized when the respective banks credited the entity’s accounts; and

-Interest income on margin loan is calculated on quarterly basis. 2.4 General Figures appearing in these accounts have been rounded off to the nearest Taka.

Mercantile Bank Securities LimitedNotes to the Financial StatementsFor the year ended 31 December 2011

249annual report

www.mblbd.com

31.12. 2011

Amount in Taka

3. Share Capital

Authorized Capital

20,000,000 Ordinary shares of Taka 100 each. 2,000,000,000

3.1 Issued, Subscribed and Fully Paid-up Capital

6,500,000 Ordinary Shares of Taka 100 each fully paid-up. 650,000,000

4. Retained EarningsNet profi t before tax for the year 32,000,507

Less: Provision for Tax 8,943,329

23,057,178

5. Property, Plant & Equipment

A. CostOpening balanceAdd: Addition during the year

-

39,150,222

39,150,222

B. Accumulated DepreciationOpening balanceAdd: Charged during the year

-

3,025,653

3,025,653

C. Written Down Value (A-B) 36,124,569

A schedule of Property, Plant and Equipment is given in Annexure - A

6. Membership at CostDhaka Stock Exchange Ltd. 650,000,000

Chittagong Stock Exchange Ltd. 180,000,000

830,000,000

7. Current Assets Margin Loan to Clients 3,652,293,863

Advance, Deposits & Prepayments (Note: 7.1) 8,309,559

Advance Income Tax 64,893,198

Accounts Receivable (Note: 7.2) 5,362,101

Balance with other Bank (Note: 7.3) 67,642,438

3,798,501,159

7.1 Advance, Deposits & Prepayments

Advance Deposits 4,000

Suspense Account (Petty Cash) 191,396

Advance Rent 7,954,600

Prepaid Expenses 159,563

8,309,559

250 annual report

31.12. 2011

Amount in Taka

7.2 Accounts Receivable

Stock Exchange Clearing A/c 5,362,101

7.3 Balance with other Bank

Name of Bank Account No.Mercantile Bank Limited 0101-11100080508 17,172,602 One Bank Limited 001-0025413008 962,418 One Bank Limited 001-0026458005 18,003,968 Mercantile Bank Limited 0101-11100085071 31,237,032 Mercantile Bank Limited 0101-13100002230 266,418

67,642,438

8. Accounts Payable

Payable to Clients 57,873,113 Audit Fees 115,000 CDBL Charges 550,800 Provision for Current year Tax 8,943,329 Interest Payable on MBL Loan A/c 143,061,757 MBL Loan A/c SOD 3,781,006,851

3,991,550,850

9. Deposits and Other Accounts

Sundry Deposits 17,700

10. Commission, Exchange & Brokerage

Brokerage Commission 16,565,805

11. Other Operating Income (Interest Income)

Interest from Banks and Other Financial Institutions 9,115 Interest from Loans and Advances 169,943,818

169,952,933

12. Operating Expenses

Rent, Taxes, Insurance, Lighting Etc. (Note: 12.1) 2,895,536 Stationary, Printing and Advertisement (Note: 12.2) 197,729 Depreciation and Repair of Fixed Assets (Note: 12.3) 3,569,845 Other Operating Expenses (Note: 12.4) 13,445,667

20,108,777

12.1 Rent, Taxes, Insurance and Lighting etc.

Rent 2,459,350 VAT on Rent 53,538 Insurance 113,837 Lighting, Gas & Water 268,811

2,895,536

12.2 Stationery, Printing and Advertisement

Printing & Stationery 145,184 Computer Expenses 52,545

197,729

251annual report

www.mblbd.com

31.12. 2011

Amount in Taka

12.3 Depreciation and Repair of Property, Plant & Equipment

Depreciation: Furniture & Fixture 889,379 Offi ce Equipment 1,955,193 Vehicles 181,080

3,025,652 Repair & Maintenance 544,193

3,569,845

12.4 Other Operating Expenses

Bank Charges 22,266 Directors Fees 400,000 Audit Fees 115,000 Other Charges 37,770 Rates, Taxes & Excise Duty 34,778 Stamps & Notary Public Expenses 30,706 Security and Cleaning 2,031,607 Entertainment Expenses 1,643,502 Telephone Bill 210,276 Conveyance, Carriage & Freight 64,290 Postage Charges 5,080 Traveling Expenses 227,565 Online Fees 701,035 SEC Fees 4,000 Haowla Charges 223,334 Laga Charges 795,497 Miscellaneous Expenses 6,898,961

13,445,667

13. Other Income

Service Charge 17,594,942 Margin Documentation Fees 66,100 Miscellaneous Earnings 5,388,236

23,049,278

14. Offi ce & Administrative Expenses

Basic Salary 6,687,169 Bonus 1,467,000 Car Allowances 280,000 House Rent 1,706,118 Conveyance Allowances 464,406 Medical Allowances 1,219,313 House maintenance Allowances 654,856 Utilities Allowance 654,856 PF Bank Contribution 442,324 Furniture Allowance 12,333 Leave Fair Assistance 808,600

14,396,975

15. Interest Paid on Deposits & Borrowings Etc.

Interest on MBL Loan A/C 143,061,757

252 annual report

Par

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253annual report

Report of the Directors and Financial Statements for the period 1 December 2010 to 31 December 2011

for

Mercantile Exchange House (UK) Limited

Annexure-J

254 annual report

Page

Company Information 255

Report of the Directors 256

Report of the Independent Auditors 257

Profi t and Loss Account 258

Balance Sheet 258

Cash Flow Statement 259

Notes to the Financial Statements 260

Notes to Profi t and Loss Account 262

Mercantile Exchange House (UK) LimitedContents of the Financial StatementsFor the period 1 December 2010 to 31 December 2011

255annual report

www.mblbd.com

DIRECTORS:

M A Jalil A. K. M. S Haque G F Ahmed K M Murshed

SECRETARY:

Mrs. S Amina

REGISTERED OFFICE:

491 Coventry Road Small Heath Birmingham West Midlands B10 0JS REGISTERED NUMBER:

07456837 (England and Wales)

SENIOR STATUTORY AUDITOR:

MUJIBUR RAHMAN FCA

AUDITORS:

KWSR & CO. Chartered Accountants 136 Merton High Street London SW19 1BA

Mercantile Exchange House (UK) LimitedCompany InformationFor the period 1 December 2010 to 31 December 2011

256 annual report

The directors present their report with the fi nancial statements of the company for the period 1 December 2010 to 31 December 2011.

INCORPORATION

The company was incorporated on 1 December 2010 and commenced trading on 6 December 2011

PRINCIPAL ACTIVITYThe principal activity of the company in the period under review was that of money remittance.

DIRECTORS

The directors who have held offi ce during the period from 1 December 2010 to the date of this report are as follows:

M A Jalil- appointed 1 December 2010A. K. M. S Haque- appointed 1 December 2010G F Ahmed – appointed 1 December 2010K M Murshed – appointed 28 Septemnber 2011

All the directors who are eligible offer themselves for election at the forthcoming fi rst Annual General Meeting.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The directors are responsible for preparing the Report of the Directors and the fi nancial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare fi nancial statements for each fi nancial year. Under that law the directors have elected to prepare the fi nancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the fi nancial statement unless they are satisfi ed that they give a true and fair view of the state of affairs of the company and of the profi t or loss of the company for that period. In preparing these fi nancial statements, the directors are required to:

- select suitable accounting policies and then apply them consistently;- make judgments and accounting estimates that are reasonable and prudent;- prepare the fi nancial statements on the going concern basis unless it is inappropriate to presume that the company

will continue in business.

The directors are responsible for keeping adequate accounting records that are suffi cient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the fi nancial position of the company and enable them to ensure that the fi nancial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defi ned by Section 418 of the Companies Act 2006) of which the company’s auditors are unaware and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

AUDITORS

The auditors, KWSR & Co Chartered Accountants, will be proposed for re-appointment at the forthcoming Annual General Meeting.

This report has been prepared in accordance with the special provision of Part 15 of the Companies Act 2006 relating to small companies.

ON BEHALF OF THE BOARD:

……..........………………..K M Murshed – Director

Date: 13.02.2012

Mercantile Exchange House (UK) LimitedReport of the DirectorsFor the period 1 December 2010 to 31 December 2011

257annual report

www.mblbd.com

Although the company is entitled to exemption from under Section 477 of the Companies Act 2006 for the period ended 31 December 2011 the management decided to prepare the audited set of accounts as the parent company require an audited accounts.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors’ Responsibilities set out on page two, the directors are responsible for the preparation of the fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the fi nancial statements

An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the directors; and overall presentation of the fi nancial statements.

Opinion on fi nancial statements

In our opinion the fi nancial statements:

- give a true and fair view of the state of the company’s affairs as at 31 December and of its loss for the period then ended;

- have been property prepared in accordance with United Kingdom Generally Accepted Accounting Practice applicable to smaller Entities; and

- have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Report of the Directors for the fi nancial year for which the fi nancial statements are prepared is consistent with the fi nancial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006

requires us to report to you if, in our opinion:

- adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or

- the fi nancial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors’ remuneration specifi ed by law are not made ; or - we have not received all the information and explanations we require for our audit; or- the directors were not entitled to prepare the fi nancial statements in accordance with the small companies regime

and take advantage of the small companies’ exemption in preparing the Report of the Directors.

……..............……………………………………………

MUJIBUR RAHMAN FCA (Senior Statutory Auditor)for and on behalf of KWSR & Co Chartered Accountants

136 Merton High Street, LondonSW19 1BA

Date: 13th February 2012

Mercantile Exchange House (UK) LimitedReport of the Independent Auditors to the Shareholders

258 annual report

Notes £

TURNOVER 304

Administrative expenses 16,012

OPERATING LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 2 (15,708)

Tax on loss on ordinary activities 3 -

LOSS FOR THE FINANCIAL PERIOD (15,708)

The notes form part of these fi nancial statements

Mercantile Exchange House (UK) Limited Balance SheetDecember 31, 2011

Notes £ £

FIXED ASSETS

Tangible assets 4 42,611

CURRENT ASSETS

Debtors 5 9,563

Cash at bank and in hand 20,311

29,874

CREDITORS

Amounts falling due within one year 6 4,430

NET CURRENT ASSETS 25,444

TOTAL ASSETS LESS CURRENT LIABILITIES 68,055

CREDITORS

Amounts falling due after more than one year 7 83,762

NET LIABILITIES (15,707)

CAPITAL AND RESERVES

Called up share capital 8 1

Profi t and loss account 9 (15,708)

SHAREHOLDERS' FUNDS (15,707)

The notes form part of these fi nancial statements

Mercantile Exchange House (UK) Limited Profi t and loss Accountfor the period 1 December 2011 to 31 December 2011

259annual report

www.mblbd.comMercantile Exchange House (UK) LimitedCash Flow StatementFor the period from 1 December 2010 to 31 December 2011

Amount

£

A. Cash Flow from Operating Activities

Commission Received 304

Remittances received from customer 27,274

Payment for Operating Activities

Remittances transferred to Mercantile Bank Ltd. (26,457)

Wages (906)

Director's Wages (3,034)

Rent (4,461)

Water Rates (11)

Electricity (59)

Telephone (253)

PPS & Advertising (3,563)

Travel Expenses (544)

Bank Charges (50)

Bank Commission (20)

Laundry & Cleaning (83)

Sundry Expenses (181)

(12,044)

Increase in Prepaid expenses

Rent Deposit (4,800)

Rent Advance (4,763)

Net Cash Flow from Operating Activities- (A) (21,607)

B. Cash Flow from Investing Activities Capital Expenditure

Leasehold Additions (2,894)

Improvement (38,000)

Fixture & Fittings (145)

Net Additions to the Assets- (B) B (41,039)

C. Cash Flow from Financing Activities

Proceeds from Mercantile Bank Ltd 91,500

Paid to Mercantile Bank Ltd (8,543)

C 82,957

Opening Cash @ 1st December 2011 -(D) 0

Closing Cash @ 31-12-2011(A+B+C+D) 20,311

260 annual report

The fi nancial statements have been prepared in accordance with the special provisions of part 15 of the Companies Act 2006 relating to small companies and with the Financial Reporting Standard for smaller Entities (effective April 2008)

The fi nancial statements were approved by the Board of Directors on 13 February 2012 and were signed on its behalf by:

…………………………K M Murshed – Director

The notes form part of these fi nancial statements

Mercantile Exchange House (UK) Limited Balance Sheet – continued31 December 2011

Mercantile Exchange House (UK) Limited Notes to the Financial Statementsfor the period 1 December 2011 to 31 December 2011

1. ACCOUNTING POLICIES

Accounting convention

The fi nancial statements have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective April 2008).

Turnover

Turnover represents net invoiced sales of services, excluding values added tax.

Tangible fi xed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual values of each asset over its estimated useful life.

Deferred tax

Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date.

2. OPERATING LOSS

The operating loss is stated after charging:

£

Auditors' remuneration 960

Directors' remuneration and other benefi ts etc 3,333

3. TAXATION

Analysis of the tax charge

No liability to UK corporation tax arose on ordinary activities for the period.

261annual report

www.mblbd.comMercantile Exchange House (UK) LimitedNotes to the Financial Statements- continuedfor the period 1 December 2010 to 31 December 2011

4. TANGIBLE FIXED ASSETS

Land and buildings

Plant and machinery etc

Totals

£ £ £

COST

Additions 2,894 39,717 42,611

At 31 December 2011 2,894 39,717 42,611

NET BOOK VALUE

At 31 December 2011 2,894 39,717 42,611

5. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

£

Other debtors 9,563

6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

£

Trade creditors 11

Taxation and social security 795

Other creditors 3,624

4,430

7. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

£

Other creditors 83,762

8. CALLED UP SHARE CAPITAL

Allotted issued and fully paid:

Number: Class: Nominal value: £

1 Ordinary 1 1

9. RESERVES

Profi t and Loss account

£

Defi cit for the period (15,708)

At 31 December 2011 (15,708)

10. RELATED PARTY DISCLOSURES

Subsidiary Information:

Mercantile Exchange House (UK) Limited is the 100% subsidiary of Bangladeshi Bank' Mercantile Bank Ltd'. Mercantile Bank Ltd owns 100% Shares of Mercantile Exchange House (UK) Ltd.

Directors Interest:

Directors do not own any share of the Mercantile Exchange House (UK) Ltd.

262 annual report

Mercantile Exchange House (UK) Limited Profi t and Loss Accountfor the period 1 December 2010 to 31 December 2011

£ £

Fees Received 304

Expenditure

Rates and water 327

Light and heat 151

Directors' salaries 3,333

Wages 1,402

Telephone 337

Advertising & PPS 3,563

Traveling 544

Rent 4,461

Household and cleaning 83

Sundry expenses 181

Accountancy 600

Auditors' remuneration 960

15,942

(15,638)

Finance costs

Bank charges 50

Bank commission 20

70

NET LOSS (15,708)