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Transmittal
All Shareholders
Bangladesh Securities and Exchange Commission
Registrar of Joint Stock Companies & Firms
Dhaka Stock Exchange Limited
Chittagong Stock Exchange Limited

Subject: Annual Report for the year ended on December 31, 2013.

Dear Sir (s),

We are delighted to enclose a copy of the Annual Report 2013 together with the Audited Financial
Statements including Balance Sheet as at December 31, 2013 and Income Statement, Cash Flow
Statement for the year ended on December 31, 2013 along with notes thereon of Mercantile Bank
Limited for kind information and record.

Yours sincerely,

S. Q. Bazlur Rashid
Senior Executive Vice President and
Company Secretary

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Contents
52 Economic Impact Report
54 Segment Reporting
55 Chairman's Message
59 Managing Director & CEO's Review
64 Directors' Report
88 Management Discussion and Analysis (MDA)
101 Disclosure on Basel II
115 CRO's Report on Risk Management
121 Certificate Regarding Compliance of BSEC Notification
122 Directors' Responsibility for Internal Control
& Financial Reporting
123 Report on Corporate Governance
8 Notice of the 15th Annual General Meeting 133 Compliance Report on BSEC Notification
9 Vision and Mission 139 Compliance of Board Meeting
9 Strategic Objectives 140 Shareholding Pattern
10 Core Values 141 Report on Audit Committee
10 New Technology 142 Media Highlights
11 Corporate Philosophy 144 Sustainability Report
11 Corporate Priorities 146 Report on Green Banking
12 Way Forward 148 Human Resources
12 Business Ethics 151 Report on Corporate Social Responsibility
13 Code of Conduct 159 MBL Album
14 Corporate Profile
163 CFO's Statement
15 Credit Rating
165 Auditors' Report
16 MBL Milestones
168 Signing of Financial Statements 2013
17 Sponsors of the Bank
169 Financial Statements-MBL
20 Board of Directors
244 Financial Statements-OBU
21 Directors' Profiles
249 Financial Statements- MBSL
28 Corporate Structure
259 Financial Statements-Mercantile
29 MBL Organogram
Exchange House (UK) Limited
30 Management Team
34 Head Office & Branch Network
42 Our Coverage
43 Financial Highlights
44 Graphical Presentation
46 Market Performance
47 Financial Calendar
48 Products & Services

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Disclosure Index
The following disclosure checklist will help the reader to indentify the key section of annual report 2013:

Particulars Ref. Page No.

Corporate Objectives, Values & Structure
 Vision and Mission 9
 Overall strategic objectives 9
 Core values and code of conduct/ethical principles 10, 12, 13
 Profile of the Company 14-15
 Directors' profiles and their representation on Board of other companies & Organization Chart 21-29, 235-238
Management Report/ Commentary and analysis including Directors’ Report / Chairman’s
Review/ CEO’s Review etc.
 A general review of the performance of the company 56, 60, 67-75, 89-93
 Description of performance of various activities/products/segments of the Bank and its 43-45, 54, 94-100
Group companies during the period under review
 A brief summary of the Business and other Risks facing the organization and steps taken 115-120
to effectively manage such risks
 A general review of the future prospects/outlook. 57, 63, 75, 100
 Information on contribution of the Bank to its responsibilities towards the staff (including health & safety) 61, 100, 148-150
 Information on Bank's contribution to the national exchequer & to the economy 62, 100, 145
Sustainability Reporting
 Corporate Social Responsibility (CSR) Initiatives 57, 62, 151-158
 Environment related Initiatives 153-155
 Environmental & Social Obligations 153
Disclosure of Accounting Policies and General Disclosure
 Disclosure of adequate and properly worded accounting policies relevant to assets, liabilities, income
and expenditure in line with best reporting standards
 Any specific accounting policies 189-201
 Impairment of Assets
 Changes in accounting policies/ Changes in accounting estimates

Segment Information
 Comprehensive segment related information bifurcating segment revenue, segment results and
segment capital employed
 Availability of information regarding different segments and units of the entity as well as non-segmental
entities/units
 Segment analysis of-
54
 Segment Revenue
 Segment Results
 Turnover
 Operating profit
 Carrying amount of Net Segment assets

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Standard Disclosure Index

Particulars Ref. Page No.

Horizontal/Vertical Analysis including following
 Operating Performance (Income Statement)
 Total Revenue
 Operating Profit
 Profit Before Tax 43
 Profit after Tax
 EPS
 Statement of Financial Position (Balance Sheet)
 Shareholders’ Fund
 Property Plant & Equipment 43
 Net Current assets
 Long Term Liabilities/ Current Liabilities
Profitability/Dividends/ Performance and Liquidity Ratios
 Gross Profit Ratio
 Earning before Interest, Depreciation and Tax
 Price earning ratio
 Current Ratios 43
 Return on Capital Employed
 Debt Equity Ratio

Statement of Value Added and Its Distribution

 Government as Taxes 52
 Shareholders as dividend 53
 Employees as bonus/remuneration 52
 Retained by the entity 52-53
 Economic value added 53
Additional Disclosures
 Human Resource Accounting 150
Specific Disclosures
 Disclosure of Ratings given by various rating agencies for Instruments issued by/of the Bank 15, 119
 Details of Advances portfolio Classification wise as per the direction issued by the central bank of the
respective contries

 Disclosure for Non Performing assets-

 Movements in NPA 207-208
 Sector-wise breakup of NPA
 Movement of Provisions made against NPA
 Details of accounts restructured as per regulatory guidelines
 Maturity Pattern of Key Assets and Liabilities (ALM) 161, 175, 182
 Classification and valuation of investments as per regulatory guidelines/Accounting Standards 197-202, 239

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Particulars Ref. Page No.

Business Ratio / Information
 Statutory Liquidity Reserve (Ratio) 196
 Net interest income as a percentage of working funds / Operating cost efficiency Ratio 43
 Return on Average Asset 43
 Cost / income Ratio 43
 Net Asset Value per Share 43
 Profit per employee 150
 Capital Adequacy Ratio 43
 Cash Reserve Ratio / Liquid Asset Ratio 196
 Dividend Cover Ratio 43
 Gross Non-Performing assets to Gross advances/ Non-Performing Loans (assets) to Total Loans (assets) 43
Details of credit concentration / Sector vise exposures
The break-up of ‘Provisions and contingencies’ included in the Profit and Loss Account 217-218
Disclosure under regulatory guidelines (Market Discipline- Pillar 3 Disclosures under Basel-II) 101-114
Disclosure in respect of assets given on operating & finance lease 188
Bank's Network: List of Branches or Centers 34-40

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Annual General Meeting
Notice is hereby given to all members of Mercantile Bank Limited (the "Company") that the 15th Annual
General Meeting of the member's i.e. shareholders of the Company will be held on June 12, 2014,
Thursday at 11 a.m. in the Ball Room, Pan Pacific Sonargaon, Dhaka to transact the following
business and adopt necessary resolutions:
Agenda:
01. To receive, consider and adopt the Profit and Loss Account of the Company for the year ended
on December 31, 2013 and the Balance Sheet as at that date together with Reports of the
Auditors and Directors thereon;
02. To declare Dividend out of the profits for the year ended on December 31, 2013;
03. To elect/re-elect Directors;
04. To approve the appointment of Independent Directors;
05. To appoint Auditors of the Company for the term until conclusion of the next Annual General
Meeting and to fix their remunerations;
06. To transact any other business with the permission of the Chair.

By order of the Board

S. Q. Bazlur Rashid
Dated: 20 May, 2014 Senior Executive Vice President and
Dhaka, Bangladesh Company Secretary

Notes:

(a) The Record Date was scheduled on the April 09, 2014.

(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 12% (twelve percent) stock dividend and 8% (eight
percent) cash dividend for the year ended on December 31, 2013 to be considered in the AGM.

(e) The proxy form duly filled in and signed by the Member and stamped, must be submitted at the
Registered Office 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 rectified through their respective Depository Participants.

(g) As per Bangladesh Securities and Exchange Commission Circular No. SEC/CMRRCD/2009-
193/154 dated 24.10.2013 there will be no arrangement for gift or entertainment at the
Annual General Meeting.

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Profile
Background Subsidiaries

Mercantile Bank Limited incorporated as a Private MBL has 2 (Two) subsidiaries namely Mercantile Bank
Commercial Bank on May 20, 1999. Subsequently, it Securities Limited (MBSL) and Mercantile Exchange House
commenced business on June 02, 1999 with a vision for (UK) Limited. MBSL formed on 27 June 2010 to deal with
being finest corporate citizen. MBL enlisted in Dhaka Stock stock dealing and broking. MBSL started its commercial
Exchange (DSE) and Chittagong Stock Exchange (CSE) on operation on September 14, 2011 through obtaining stock
February 16, 2004 and February 26, 2004 respectively. MBL dealer and broker license from concerned authorities.
is the output of some visionary entrepreneurs' dream of
Mercantile Exchange House (UK) Limited, another subsidiary
contributing directly to the economy by catering various
company of MBL incorporated as private limited company on
banking needs to all segments of people living home and
December 01, 2010. It commenced its business operation at
abroad.
Birmingham in UK on December 06, 2011. Currently, it is
operating with two branches; one in Birmingham and another
Principal Activities in London with a view to providing faster, easier and safer
MBL has been able to establish itself as a leading third remittance services to the Bangladeshi expatriate living and
generation private commercial bank by dint of its prudent working in UK.
policy guidelines coupled with proper execution, wider range
of banking products and excellent customer services. The Network
core activities of the Bank are to provide all kinds of
MBL has broad network coverage across the country. It has
commercial banking services including deposits mobilization,
91 (Ninety One) branches including 5 (Five) SME/Krishi
providing loans, discounting bills, foreign exchange business,
branches as on December 31, 2013. The Bank has 2 (Two)
off-shore banking, treasury function, card business and
mobile banking. MBL caters card services to its customers by Off-shore Banking Units (OBU) operating at Gulshan and
VISA dual prepaid card, VISA Dual Hajj Card, Credit Card Chittagong EPZ areas. MBL has 120 ATM booths and 20
and Debit card, and International/ Dual cards with various CDMs (Cash Deposits Machine) as on December 2013
up-to-date facilities. MBL is continuously expanding its ATM covering important locations across the country. Mercantile
network and inking contract with the other banks with a view Bank Securities Limited (MBSL), a subsidiary company of
to making its card service more attractive and convenient to MBL dealing with stock and broking has 7 (seven) branches
all. Except these, MBL is also providing other services across the country. Mercantile Exchange House (UK)
through its (02) two subsidiary companies. Limited, another fully owned subsidiary company of MBL is

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facilitating inflow of remittance with 2 (two) branches in Shareholding Composition

Birmingham and London, UK.
Total 659,961,341ordinary shares of the Bank were
Number of Employees 1,814 outstanding as on December 31, 2013. Share holding
Number of Branches 91
position as on same date is as under:
Number of ATMs 120
Number of Credit Cards 5,500 Ownership
Composition
Number of Debit & Prepaid Cards 70,000 Number of Shares % of Total Shares

Total Assets (BDT in Million) 144,841.87 Sponsors/Directors 261,490,541 39.62

Number of Subsidiaries 02 Government - -

Financial Institution 50,713,132 7.68
Foreign - -
Capital Base
General Public 347,757,668 52.69
MBL is maintaining strong capital adequacy ratio as per new Total 659,961,341 100.00
risk based capital adequacy framework i.e. Basel II. Capital
adequacy ratio of the Bank remained far above compared to
Credit Rating
minimum requirement as on December 31, 2013. The Bank
has taken numerous initiatives including issuance of bonus MBL has strong and stable credit rating over the last couple
shares, right share, retention of profit, corporate client's credit of years. Credit Rating Information and Services Limited
rating etc. in a bid to attain strong capital adequacy ratio. To (CRISL) has reaffirmed the long term rating of MBL to 'AA-'
further raise the capital fund and therefore capital adequacy and short term rating to 'ST-2' based on its financial up to
ratio MBL has taken initiatives to issue subordinated bond December 31, 2013 and other qualitative and quantitative
worth BDT 3,000.00 million by June, 2014. information up to the date of rating. CRISL also placed the
Bank with "Stable Outlook".

December Capital Adequacy Minimum Basis of Date of Rating Rating

2013 Ratio (as per Basel II) Requirement Information Rating Long Term Short Term Company
Solo 11.43% 10% 2012 18 June, 2013 AA- ST-2 CRISL
Consolidated 11.47% 10% 2013 6 May, 2014 AA- ST-2 CRISL

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Milestones
May 20, 1999
Incorporation of the Bank

June 02, 1999

Commencement of Business

October 29, 2000

Opening of 10th Branch

July 03, 2002

Opening of 15th Branch

June 30, 2003

Publication of Prospectus for IPO
December 30, 2009
October 21-22, 2003 Opening of 50th Branch
Subscription for Shares

December 30, 2010

December 24, 2003 Opening of 65th Branch
Opening of 20th Branch

March 20, 2011

February 16, 2004 Commencement Operation of Off-shore Banking Unit
Listed in Dhaka Stock Exchange

September 14, 2011

February 26, 2004 Separate Operation of Mercantile Bank Securities Limited (MBSL)
Listed in Chittagong Stock Exchange

December 29, 2004 December 06, 2011

Opening of Mercantile Exchange House (UK) Limited, Birmingham Branch
Opening of 25th Branch

December 17, 2007 December 29, 2011

Opening of 40th Branch Opening of 75th Branch

November 24, 2008 September 20, 2012

Opening of 42nd Branch Opening of Mercantile Exchange House (UK) Limited, London Branch

June 06, 2009 December 27, 2012

Mercantile Bank Brokerage House Operation Opening of 86th Branch

December 29, 2013

Opening of 91th Branch

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Directors
Chairman M. Amanullah

Md. Shahabuddin Alam

Vice Chairman
Md. Tabibul Huq

Md. Anwarul Haque

Dr. Mahmood Osman Imam, MBA, FCMA, Independent Director
Mohd. Selim
M. S. Ahsan
Directors Alhaj Akram Hossain (Humayun)
A. S. M. Feroz Alam
Md. Abdul Hannan
Morshed Alam, M.P
Alhaj Mosharref Hossain
Md. Abdul Momin Khan Lohani, FCA, Independent Director

Managing Director & CEO M. Ehsanul Haque

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Improt Export
(BDT in Million) 113,434.10 100,685.60 (BDT in Million)
81,311.80 81,477.10
89,524.10 95,008.70 71,671.50
59,404.20
60,592.50
46,298.60

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Remittance Book Value Per Share

15,792.80
(BDT in Million) (BDT)
19.90
12,434.70 19.44 19.05
17.88
17.65
7,150.00
5,108.10
5,061.30

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Market Price Per Share Earning Per Share

(BDT) (BDT)
58.05
4.10
3.49
39.50 3.07 3.00
34.80
2.26
19.10 16.70

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Spread Cost Income Ratio

45.25% 45.17%
5.35%
4.86% 4.70%
4.31%
4.23% 42.62%
41.66%
40.38%

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

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Agreement signing for disbursement of agriculture credit Agreement signing for disbursement of agriculture credit

Signing Ceremony with Meghna Life Insurance Co. Ltd. Training session at MBTI

Anti-Money Laundering workshop Art Competition arranged by MBL

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Report