Banco Nacional de Crédito, C.A., Banco...

Banco Nacional de Crédito, C.A., Banco Universal Report of Independent Accountants and Financial Statements June 30, 2013 and December 31, 2012

Espiñeira Pacheco y Asociados-

Report of Independent Accountants

To the Shareholders and Board of Directors of Banco Nacional de Crédito, C.A., Banco Universal

1) We have audited the balance sheets of Banco Nacional de Crédito, C.A., Banco Universal (the Bank) and its Curacao Branch (the Branch) at June 30,2013 and December 31,2012, and the related statements of income, changes in equity and cash flows for the six-month periods then ended. The preparation of these financial statements and their notes is the responsibility of Bank management. Our responsibility is to express an opinion on these financial statements based on our audits.

2) We conducted our audits in accordance with auditing standards generally accepted in Venezuela. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

3) The accompanying financial statements have been prepared in accordance with the accounting rules and instructions of the Superintendency of Banking Sector Institutions (SUDEBAN), which are of mandatory use for the Venezuelan banking system. As described in Note 2, these rules differ in certain material respects from accounting principles generally accepted in Venezuela.

4) As disclosed in Notes ii and 12, as a result of the acquisition and subsequent merger by absorption of Stanford Bank, S.A., Banco Comercial at June 30,2013, the Bank has recorded within other assets Bs 18,891,415 (Bs 19,756,671 at December 31,2012)) related to goodwill arising from the difference between the purchase price and the book value of Stanford Bank's assets and liabilities at the merger date and Bs 50,556,182 (Bs 52,754,278 at December 31,2012) of deferred charges after it was acquired by the Bank. In accordance with the Merger Plan and SUDEBAN instructions, these items will be amortized over 15 years as from June 8,2009 and January 1,2010, respectively.

: Espiñeira, Pacheco y Asociados (PricewaterhouseCoopers) Contadores Públicos. Avenida Principal de Chuao, Ed$cio PNC Apartado 1789. Caracas 101 0-A, Venezuela Teléfono: (0212) 700 6666. F a : (0212) 991 521 0. www.pwc.com/ve

0 2013. Espiira. Pacheca y Asociados (PticewaterbuseCoopers). Todos los derectic#l ceseivados. PwC se r d k a a la firma venezolana E s p i M , Pachsco y Asodados (PricewalerkuseCoopers) y en ocasiones podh raierirse a la red de firmas miembm de PwC. Cada f m miemh es una entidad legal separada Para más deiallw visite ~ ~ ~ ~ p w c . r n ~ R.I.': JMX)29977-3

In our opinion, the accompanying financial statements audited by us present fairly, in al1 material respects, the financial position of Banco Nacional de Crédito, C.A., Banco Universal and its Curacao Branch at June 30,2013 and December 31,2012, and the results of their operations and their cash flows for the six-month periods then ended, in conformity with the accounting rules and instructions of SUDEBAN.

Espi e a, Pacheco Asociados m I

c p 498 CNV C-841

NGomez

New Stamp

The accompanying notes are an integral part of the financial statements 1

Banco Nacional de Crédito, C.A., Banco Universal Balance sheet June 30, 2013 and December 31, 2012

June 30, December 31,

2013 2012

(In bolivars) Assets Cash and due from banks (Notes 3, 4 and 29) 8,194,764,113 5,703,778,981

Cash 965,871,322 737,253,973 Central Bank of Venezuela 5,969,097,848 4,350,091,834 Venezuelan banks and other financial institutions 115,073 123,110 Foreign and correspondent banks 457,288,556 95,261,299 Pending cash items 802,457,281 521,048,765 Provision for cash and due from banks (65,967) -

Investment securities (Note 5) 9,073,098,656 8,051,421,105

Deposits with the BCV and overnight deposits 1,000,000,000 1,010,939,000 Investments in available-for-sale securities 3,212,106,612 3,444,407,131 Investments in held-to-maturity securities 3,502,118,301 2,787,127,754 Restricted investments 61,535,201 16,422,282 Investments in other securities 1,297,338,542 792,605,344 (Provision for investment securities) - (80,406)

Loan portfolio (Note 6) 13,846,572,603 11,682,646,923

Current 14,081,151,227 11,941,485,358 Rescheduled 68,303,034 34,151,571 Overdue 25,784,640 21,421,120 (Allowance for losses on loan portfolio) (328,666,298) (314,411,126)

Interest and commissions receivable (Note 7) 238,436,811 197,536,983

Interest receivable on investment securities 135,965,808 120,626,364 Interest receivable on loan portfolio 113,180,702 103,527,566 Commissions receivable 969,185 890,821 (Provision for interest receivable and other) (11,678,884) (27,507,768)

Investments in subsidiaries, affiliates and branches (Note 8) - -

Available-for-sale assets (Note 9) 36,742,932 72,005,556

Property and equipment (Note 10) 572,400,466 488,059,504

Other assets (Notes 11 and 12) 268,543,791 233,808,348

Total assets 32,230,559,372 26,429,257,400 Memorandum accounts (Note 22)

Contingent debtor accounts 953,264,991 779,712,523 Assets received in trust 1,115,357,797 971,641,295 Debtor accounts from other special trust services (Housing Loan System) 604,664,307 479,233,604 Other debtor memorandum accounts 48,041,327,799 42,288,981,218

50,714,614,894 44,519,568,640


Banco Nacional de Crédito, C.A., Banco Universal Balance sheet June 30, 2013 and December 31, 2012


2013 2012

(In bolivars) Liabilities and Equity Customer deposits (Note 13) 29,448,071,932 24,286,435,309

Demand deposits 15,343,320,552 14,026,432,023

Non-interest-bearing checking accounts 11,842,510,017 11,403,462,235 Interest-bearing checking accounts 3,500,810,535 2,622,969,788

Other demand deposits 6,612,838,378 4,993,093,866 Savings deposits 6,109,109,755 4,596,193,615 Time deposits 1,283,861,833 572,293,969 Securities issued by the Bank 98,941,414 98,421,836

Borrowings (Note 14) 1,877,398 23,206,607

Venezuelan financial institutions, up to one year 1,340,569 1,125,280 Foreign financial institutions, up to one year 536,829 22,081,327

Other liabilities from financial intermediation (Note 15) 14,243,011 20,350,594

Interest and commissions payable (Note 16) 21,768,010 12,969,545

Expenses payable on customer deposits 21,417,156 12,347,352 Expenses payable on borrowings - 33,610 Expenses payable on other liabilities 350,854 588,583

Accruals and other liabilities (Note 17) 468,810,460 388,605,540

Total liabilities 29,954,770,811 24,731,567,595

Equity (Note 25) Capital stock 438,503,396 428,503,396 Convertible bonds (Note 24) 50,000,000 100,000,000 Paid-in surplus 123,638,064 74,377,322 Capital reserves 329,652,618 312,649,819 Retained earnings 819,922,673 570,919,744 Exchange gain from holding foreign currency assets and liabilities 431,509,292 133,767,875 Net unrealized gain on investments in available-for-sale securities (Note 5) 82,562,518 77,471,649

Total equity 2,275,788,561 1,697,689,805

Total liabilities and equity 32,230,559,372 26,429,257,400


Banco Nacional de Crédito, C.A., Banco Universal Income statement Six-month periods ended June 30, 2013 and December 31, 2012


2013 2012

(In bolivars) Interest income 1,502,026,878 1,284,884,477

Income from cash and due from banks 65,708 28,665 Income from investment securities 415,650,788 304,197,508 Income from loan portfolio 1,007,473,112 891,447,488 Income from other accounts receivable 78,822,668 89,188,607 Other interest income 14,602 22,209

Interest expense (491,264,802) (383,215,297)

Expenses from customer deposits 483,411,495 374,521,450 Expenses from borrowings (Note 14) 40,672 86,599 Expenses from convertible bonds (Note 24) 6,683,105 8,367,471 Other interest expense 1,129,530 239,777

Gross financial margin 1,010,762,076 901,669,180

Income from financial assets recovered (Note 6) 11,477,217 5,469,496 Expenses from uncollectible loans and other accounts receivable (Notes 6 and 7) (12,082,739) (51,409,571) Expenses from provision for cash and due from banks (65,967) -

Net financial margin 1,010,090,587 855,729,105

Other operating income (Note 19) 167,580,425 171,880,620 Other operating expenses (Note 20) (84,712,674) (61,174,890)

Financial intermediation margin 1,092,958,338 966,434,835

Operating expenses (769,627,930) (598,077,089)

Salaries and employee benefits (Note 2-j) 211,647,011 166,661,545 General and administrative expenses (Note 21) 388,490,808 317,327,240 Fees paid to the Social Bank Deposit Protection Fund (Note 27) 155,983,807 103,832,542 Fees paid to the Superintendency of Banking Sector Institutions (Note 28) 13,506,304 10,255,762

Gross operating margin 323,330,408 368,357,746

Income from available-for-sale assets (Note 9) 16,510,882 2,865,945 Sundry operating income (Note 19) 5,929,620 6,317,786 Expenses from available-for-sale assets (Note 9) (16,303,111) (15,087,539) Sundry operating expenses (Note 20) (37,433,301) (28,344,026)

Net operating margin 292,034,498 334,109,912

Extraordinary income 7,348,293 85,617 Extraordinary expenses (1,754,221) (4,637,838)

Gross income before tax 297,628,570 329,557,691

Income tax (Note 18) (4,827,163) (651,032)

Net income 292,801,407 328,906,659 Appropriation of net income

Legal reserve 58,560,281 65,781,332 Retained earnings 234,241,126 263,125,327

292,801,407 328,906,659 Provision for the Antidrug Law 2,961,735 3,347,542


Banco Nacional de Crédito, C.A., Banco Universal Statement of changes in equity Six-month periods ended June 30, 2013 and December 31, 2012

Exchange gain (loss) from holding Unrealized foreign gain (loss) on Paid-in Share premium Retained earnings currency investment capital Convertible and paid-in Capital Unappropriated Restricted Non-distributable assets and securities Total

stock bonds surplus reserves surplus surplus surplus Total liabilities (Note 5) equity

(In bolivars)

Balances at June 30, 2012 345,403,396 100,000,000 74,377,322 236,392,637 138,112,500 253,692,803 11,291,981 403,097,284 133,111,483 (33,929,480) 1,258,452,642

Capital increase (Note 25) 83,100,000 - - - (41,550,000) (41,550,000) - (83,100,000) - - - Exchange gain from holding foreign currency assets and liabilities (Notes 4 and 25) - - - - - - - - 656,392 - 656,392 Gain on sale of investments and adjustments of investments in available-for-sale securities to market value - - - - - - - - - 111,401,129 111,401,129 Net income - - - - 328,906,659 - - 328,906,659 - - 328,906,659 Appropriation to the legal reserve (Note 25) - - - 65,781,332 (65,781,332) - - (65,781,332) - - - Creation of the social contingency fund (Note 25) - - - 2,142,517 (3,869,534) - - (3,869,534) - - (1,727,017) Reclassification of net income of the Curacao branch (Note 25) - - - - (33,870,641) - 33,870,641 - - - - Reclassification to restricted surplus of 50% of net income for the period (Note 25) - - - - (114,627,343) 114,627,343 - - - - -

Reserve fund for convertible bonds (Note 24) - - - 8,333,333 (8,333,333) - - (8,333,333) - - -

Balances at December 31, 2012 428,503,396 100,000,000 74,377,322 312,649,819 198,986,976 326,770,146 45,162,622 570,919,744 133,767,875 77,471,649 1,697,689,805

Paid-in surplus (Note 25) - - 59,260,742 - - - - - - - 59,260,742 Capital stock increase through public offering of shares (Note 25) 10,000,000 - (10,000,000) - - - - - - - - Exchange gain from holding foreign currency assets and liabilities (Notes 4 and 25) - - - - - - - - 291,583,235 - 291,583,235 Exchange gain from holding foreign currency assets and liabilities according to SUDEBAN Notice No. SIB-II-GGIBPV-GIBPV2-17478 of May 30, 2013 (Note 25) - - - - (1,359,061) - - (1,359,061) 10,545,202 - 9,186,141 Adjustment according to SUDEBAN Notice No. SIB-II-GGIBPV-GIBPV2-17478 of May 30, 2013 (Note 25) - - - - - - (25,436,618) (25,436,618) - - (25,436,618) Reversal of exchange gain from holding foreign currency assets and liabilities corresponding to 2011 (Note 25) - - - - - - - - (4,387,020) (4,387,020) Maturity of convertible bonds (Note 24) - (50,000,000) - (50,000,000) 50,000,000 - - 50,000,000 - - (50,000,000) Gain on sale of investments and adjustments of investments in available-for-sale securities to market value - - - - - - - - - 5,090,869 5,090,869 Net income - - - - 292,801,407 - - 292,801,407 - - 292,801,407 Appropriation to the legal reserve (Note 25) - - - 58,560,281 (58,560,281) - - (58,560,281) - - - Creation of the social contingency fund (Note 25) - - - 2,192,518 (2,192,518) - - (2,192,518) - - - Reclassification of net income of the Curacao branch (Note 25) - - - - (8,459,168) - 8,459,168 - - - - Reclassification to restricted surplus of 50% of net income for the period (Note 25) - - - - (112,890,979) 112,890,979 - - - - -

Reserve fund for convertible bonds (Note 24) - - - 6,250,000 (6,250,000) - - (6,250,000) - - -

Balances at June 30, 2013 438,503,396 50,000,000 123,638,064 329,652,618 352,076,376 439,661,125 28,185,172 819,922,673 431,509,292 82,562,518 2,275,788,561

Net income per share (Note 2-n)

Six-month periods ended June 30, December 31,

2013 2012

Weighted average of outstanding shares 438,503,396 428,503,396 Income per share 0.668 0.768


Banco Nacional de Crédito, C.A., Banco Universal Cash flow statement Six-month periods ended June 30, 2013 and December 31, 2012

June 30, December 31, 2013 2012

(In bolivars) Cash flows from operating activities Net income 292,801,407 328,906,659 Adjustments to reconcile net income to net cash provided by (used in) operating activities Release of provision for investment securities (80,406) - Allowance for losses on loan portfolio 11,640,779 51,362,434 Provision for interest receivable and other 441,960 47,137 Provision for other assets 5,367,095 50,276 Depreciation of property and equipment and amortization of available-for-sale and other assets 59,545,178 51,428,552 Accrual for length-of-service benefits 34,996,359 19,346,451 Transfers to trust fund and payment of length-of-service benefits (27,836,946) (16,946,451) Income tax provision 416,950 2,516,165 Deferred tax asset 4,410,213 (1,865,133) Net change in Overnight deposits 10,939,000 (1,010,939,000) Interest and commissions receivable (22,040,800) (57,065,566) Other assets (66,341,089) (63,863,260) Accruals and other liabilities 66,796,363 111,081,440

Net cash provided by (used in) operating activities 371,056,063 (585,940,296)

Cash flows from financing activities Paid-in surplus 59,260,742 - Maturity and payment of convertible bonds (50,000,000) - Net change in Customer deposits 5,039,815,415 6,693,447,186 Borrowings (21,329,209) 21,441,424 Other liabilities from financial intermediation (22,071,703) (12,373,093) Interest and commissions payable 8,798,465 (677,404)

Net cash provided by financing activities 5,014,473,710 6,701,838,113

Cash flows from investing activities Loans granted during the period (11,205,312,712) (9,949,133,621) Loans collected during the period 9,132,203,558 7,810,714,378 Changes in equity (31,182,700) - Net change in Investments in available-for-sale securities 343,547,008 (1,694,684,682) Investments in held-to-maturity securities (550,195,630) (456,114,561) Restricted investments (39,527,918) (11,357) Investments in other securities (504,733,198) (19,522,215) Available-for-sale assets 19,586,667 (18,430,590) Property and equipment (103,867,056) (101,267,136)

Net cash used in investing activities (2,939,481,981) (4,428,449,784)

Cash and due from banks Net change in cash and cash equivalents 2,446,047,792 1,687,448,033

Effect of exchange fluctuations on cash and due from banks 44,937,340 -

At the beginning of the period 5,703,778,981 4,016,330,948

At the end of the period 8,194,764,113 5,703,778,981 Supplementary information on non-cash activities Write-off of uncollectible loans (principal) 10,817,837 14,907,130 Write-off of uncollectible loans (interest) 3,254,357 805,845 Reclassification of excess in (Notes 6 and 7) Allowance for losses on loan portfolio to provision for interest receivable and other - (5,742,176) Allowance for losses on loan portfolio to provision for contingent loans (275,159) (2,044,030) Provision for interest receivable and other to allowance for losses on loan portfolio 13,069,808 - Net change in unrealized gain (loss) on investments in available-for-sale securities 5,090,869 111,401,129 Creation of the social contingency fund 2,192,518 2,142,517 Equity adjustments from exchange fluctuations on (Note 25) Cash and due from banks 44,937,340 - Investments in available-for-sale securities 106,155,620 (281,598) Investments in held-to-maturity securities 164,794,917 (363,277) Restricted investments 5,585,001 - Interest receivable on investment securities 6,231,180 (11,517)

Loan portfolio 115,251,953 - Other assets 2,514,788 - Customer deposits (121,821,208) - Other liabilities from financial intermediation (15,964,120) - Accruals and other liabilities (5,557,034) - Loan portfolio 115,251,953 - Other assets 2,514,788 - Customer deposits (121,821,208) - Other liabilities from financial intermediation (15,964,120) - Accruals and other liabilities (5,557,034) -

Banco Nacional de Crédito, C.A., Banco Universal Notes to the financial statements June 30, 2013 and December 31, 2012

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1. Activities and regulatory environment

Banco Nacional de Crédito, C.A., Banco Universal (the Bank) was authorized to operate as a commercial bank in Venezuela in February 2003 under the name Banco Tequendama, C.A. and as a universal bank on December 2, 2004. Its business objective is to provide financial intermediation consisting in the procurement of funds for the purpose of granting credits or loans and investing in securities. The Bank is incorporated and domiciled in the Bolivarian Republic of Venezuela. Its legal address is: Avenida Vollmer, Torre Sur del Centro Empresarial Caracas, Urbanización San Bernardino, ZP 1010.

Most of the Bank’s assets are located in the Bolivarian Republic of Venezuela. At June 30, 2013, the Bank has 155 offices and external counters, a branch in Curacao, a main office, three regional offices and 2,806 employees.

The Bank’s shares are traded on the Caracas Stock Exchange (Note 25).

The Bank conducts transactions with related companies (Note 26).

The Bank’s financial statements at June 30, 2013 and December 31, 2012 were approved for issue by the Board of Directors on July 10 and January 9, 2013, respectively. In August 2003, the Superintendency of Banking Sector Institutions (SUDEBAN) issued Resolution No. 202-03 dated August 4, 2003, published in Official Gazette No. 37,748 on August 7, 2003, authorizing the Bank’s fiduciary operations. The Law on Banking Sector Institutions was issued by the Venezuelan government on December 28, 2010 and amended and reissued on March 2, 2011. According to the temporary provisions of the new Law, banks have a 135-day deadline to submit to SUDEBAN a plan to conform to the new legislation. On May 11, 2011, the Bank filed the Adjustment Plan with SUDEBAN. Through Notice No. SBI-II-GGIBPV-GIBPV2-15590 of June 3, 2011, SUDEBAN made some observations regarding the Adjustment Plan presented by Bank management and clarified certain issues set out in the Law. On December 21, 2011, the Bank informed SUDEBAN about its progress in the implementation of the Adjustment Plan and, exercising the right laid down in the aforementioned Law, requested a 180-day extension to comply with certain articles of the Law. Through Notice No. SIB-II-GGIBPV-GIBPV2-01873 of January 20, 2012, SUDEBAN granted the extension requested by the Bank. In July 2012, the Bank sent SUDEBAN a status report on the Adjustment Plan, which is in the final stages. Subsequently, through Notice No. SIB-II-GGIBPV-GIBPV2-29429 of September 17, 2012, SUDEBAN requested certain amendments to the Independent Auditors’ Limited Assurance Report issued by the Bank’s auditing firm concerning the Adjustment Plan in compliance with the Partial Reform of the Law on Banking Sector Institutions and requested its reissuance. In addition, SUDEBAN requested the certifications related to Articles 32, 34 and 37 of the Partial Reform of the Law on Banking Sector Institutions, signed by the Bank’s President and their attachments. On October 1, 2012, SUDEBAN received the certifications and the duly corrected report and issued its final statement through Notice No. SIB-II-GGIBPV-GIBPV2-38069 of November 23, 2012. The Bank’s activities are ruled by the Law on Banking Sector Institutions and the Stock Market Law, as well as the rules and instructions of SUDEBAN, the Higher Authority of the National Financial System (OSFIN), the Central Bank of Venezuela (Banco Central de Venezuela - BCV) and the Venezuelan Securities Superintendency (SNV). The Law of the National Financial System is aimed at regulating, supervising, controlling and coordinating the National Financial System in order to ensure that financial resources are used and


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invested for the public interest and for economic and social development with a view to creating a social and democratic State ruled by Law and Justice. The National Financial System is formed by the group of public, private and communal financial institutions and any other form of organization operating in the banking sector, the insurance sector, the stock market and any other sector or group of financial institutions that the policy-making body deems should form part of the system. Individuals and corporations that are users of the financial institutions belonging to the system are also included. The National Financial System establishes rules for citizens to participate in the supervision of the financial management and social controllership of the parties to the National Financial System, protects user rights, and promotes collaboration among the sectors of the productive economy, including the popular and communal sectors. Curacao Branch The banking activities of the Bank’s Curacao Branch (the Branch) are regulated by the Law of Banks of Curacao and St. Maarten. The Branch is not an economically independent entity and conducts transactions following the Bank’s guidelines. The Branch operates under an off-shore license granted by the Federal Control Office for the Credit Banking System of Curacao and St. Maarten and SUDEBAN in Venezuela. Capital assigned to the Branch has been contributed by the Bank (Note 8). Other laws that regulate the Bank’s activities are described below:

Agricultural Loan Law

The Agricultural Loan Law requires the People’s Power Ministry for the Economy and Finance and the

People’s Power Ministry for Agriculture and Land to jointly fix within the first month of each year the

minimum percentage of the loan portfolio to be earmarked by each universal bank to finance

agriculture.

On March 21, 2013, through joint Resolution No. 3283, the aforementioned ministries established the minimum percentages of the loan portfolio to be earmarked by each universal bank to finance agriculture during 2013. This percentage is calculated based on the gross loan portfolio at December 31, 2012 and 2011 of each universal bank, and must be applied as follows: 21% in February, March and April; 22% in May; 23% in June; 25% in July and August, 24% in September and October, 23% in November and; 22% in December (Note 6). The total amount of the quarterly agricultural loan portfolio of each public or private universal bank must be distributed as follows: Area Activity Percentage Strategic Primary agricultural production 49.00 minimum Agroindustrial investments 10.50 maximum Marketing 10.50 maximum

Non-strategic Primary agricultural production 21.00 maximum Agroindustrial investments 4.50 maximum Marketing 4.50 maximum

Total agricultural portfolio 100.00

This Resolution also established that commercial and universal banks must grant medium and long-term loans representing at least 10% of the total agricultural loan portfolio.


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This Resolution requires the number of new individual and company borrowers of the agricultural loan portfolio to be increased by 30% with respect to total agricultural borrowers at prior year end. Of this percentage, at least half must be individual borrowers. Universal banks must distinguish between agricultural loan borrowers maintained at prior year end and new borrowers for a given year subject to measurement. Moreover, the Resolution establishes how the total quarterly balance of each bank’s agricultural loan portfolio must be distributed among strategic and non-strategic areas (Note 6). According to the Resolution, only 5% of loans earmarked for strategic primary agricultural production may be granted without guarantees to borrowers meeting the following conditions: 1. Borrowers must be individuals who are small producers.

2. Borrowers may not have another current agricultural loan with any public or private universal bank

at the loan application date. 3. The primary production project must be viable. To comply with the aforementioned percentages, financial institutions may alternatively place funds with public banks or contribute them to the Fund for Social Agricultural Development (FONDAS) in the form of capital contributions to the Sociedad de Garantías Recíprocas para el Sector Agropecuario, Forestal, Pesquero y Afines, S.A. (S.G.R. SOGARSA, S.A.), provided that the receiving entity ultimately uses the funds to grant agricultural loans, in accordance with the terms and conditions approved by the Agricultural Loan Monitoring Committee. Any such funds that are not used directly by the receiving entity for agricultural loans may be returned at the Bank’s request after it has solved the loan deficit that motivated the contribution of funds in the first place, but in no event before the financial instrument agreed between the parties matures. Public and private universal banks that deposited or invested money in the previously mentioned institutions must inform SUDEBAN within the first 15 continuous days of the following month. Also, these banks must keep up to date and available to the regulatory body all files and information regarding these transactions. Law on Benefits and Payment Facilities for Agricultural Debts on Strategic Crops for Food Security and Sovereignty

The Law on Benefits and Payment Facilities for Agricultural Debts on Strategic Crops for Food Security

and Sovereignty was enacted on August 3, 2009. Subsequently, on September 17, 2009, April 1, 2011

and July 2, 2012, through a joint Resolution, the People’s Power Ministry for Planning and Finance and

the People’s Power Ministry for Agriculture and Land established the special terms and conditions for

debt restructuring and the procedures and requirements for filing and issuing response notices for

agricultural debt restructuring and relief requests.

Agricultural Aid Law

The Agricultural Aid Law was enacted on May 23, 2012 to meet the needs of producers, farmers and

fishermen who were affected by the floods that hit the country in late 2010.

Through Resolution No. 027.13 of March 18, 2013, SUDEBAN set forth the conditions for risk

management for restructured loans, as provided in the Agricultural Aid Law. In addition, through

Resolution No. 028.13 of March 18, 2013, SUDEBAN established the special terms and conditions

concerning information requirements, documentation, and the creation of provisions to cover risks

arising from agricultural loans.


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This Law will benefit individuals or legal entities that had received agricultural loans to sow crops, purchase raw materials, machinery, equipment and livestock, build and improve infrastructure, reactivate distribution centers and finance working capital in relation to the production of strategic crops.

The beneficiaries who received loans to finance the strategic crops defined under the Law shall be

granted partial or full debt relief by public and private banks.

Law for Creating, Supporting, Promoting and Developing the Microfinancial Business Sector This Law establishes that the Bank must earmark 3% of its gross loan portfolio at prior semester closing for microcredits or contributions to institutions that create, support, promote and develop the microfinancial and small business sector in Venezuela. Special Law for Home Mortgagor Protection This Law requires banks and other financial institutions regulated by the Law on Banking Sector Institutions to grant mortgage loans for acquisition, construction or subcontracted construction, enlargement or remodeling of primary residences, based on a percentage of their annual loan portfolio, excluding loans granted under the Housing Loan Law. Under this Law, loans will bear a social interest rate. The BCV, through an Official Notice, established special social interest rates applicable as from September 2011 for primary residence mortgages and construction loans, granted or to be granted from the financial institutions’ own resources as follows: a. The maximum annual social interest rate applicable to loans granted under the Special Law for

Home Mortgagor Protection is 11.42%.

b. The maximum annual social interest rate applicable to mortgage loans for the acquisition of primary residences, granted or to be granted from the financial institutions’ own resources varies between 4.66% and 9.16%, depending on the monthly family income.

c. The maximum annual social interest rate applicable to mortgage loans for the construction of primary residences, granted or to be granted from the financial institutions’ own resources, is 10.50%.

d. The maximum annual social interest rate applicable to mortgage loans for improvements to primary

residences varies between 1.40% and 2.40%, depending on the monthly family income.

e. The maximum annual social interest rate applicable to mortgage loans granted under the Housing Loan Law varies between 1.40% and 4.60%, depending on the monthly family income.

The People’s Power Ministry for Housing established that maximum monthly installments for mortgage

loan payments shall not exceed 35% of the monthly family income.

Mortgage loans may be granted for up to the full value of the real property pledged, based on its

appraisal value and the monthly family income.


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On February 13, 2013, the People’s Power Ministry for Housing fixed the minimum percentage of the annual gross loan portfolio to be earmarked by each universal bank from its own resources for mortgage loans at 20% (15% at December 31, 2012) for the construction, acquisition, improvement, expansion or subcontracted construction of primary residences. This percentage shall be calculated based on the gross loan portfolio at December 31 of the year preceding the year subject to measurement, distributed as follows: Required

Financed activity Monthly family income Market % Construction of housing Earmarked placements 8.58 Between one and six minimum salaries - 1.77 Between six and eight minimum salaries - 1.55 Between eight and fifteen minimum salaries - 1.10

Acquisition of primary residence Between one and six minimum salaries Primary 3.40 Between one and six minimum salaries Secondary 0.80 Between six and fifteen minimum salaries Primary 1.44 Between six and fifteen minimum salaries Secondary 0.36

Improvement and expansion of primary residence Between one and six minimum salaries - 0.75 Subcontracted construction of

primary residence Between one and six minimum salaries - 0.25

Total mortgage portfolio 20.00

The distribution of the percentage for the construction of residences shall be defined by the Higher Authority of the National Housing System.

The measurement of long-term mortgage loans for the acquisition of primary residences is calculated

based on: a) the balances of long-term mortgage loans granted at December 31 of the year preceding

the year subject to measurement and b) loans actually granted during the year preceding the year

subject to measurement. The measurement of short-term mortgage loans granted for construction of

primary residences is calculated based on actual payments made during the year preceding the year

subject to measurement.

On August 2, 2011, the People’s Power Ministry for Housing issued Resolution No. 121 containing the guidelines for granting loans for the subcontracted construction, expansion or improvement of primary residences. In addition, this Resolution establishes the financing conditions for each type of loan regardless of the source of funds. Some of these conditions are: maximum debt capacity of the loan applicant or co-applicant, required guarantees, and the general requirements for the loan applicant and co-applicant. On September 6, 2011, the People’s Power Ministry for Planning and Finance set the annual social interest rates at between 1.4% and 4.66%. On February 5, 2013, the People’s Power Ministry for Housing issued Resolutions Nos. 10 and 11 containing the guidelines for granting loans for the subcontracted construction, expansion or improvement of primary residences, as well as the rules for the creation and setting of payment terms for housing loans. Compliance with and distribution of the aforementioned percentages are measured at December 31 of each year. Tourism Law The Tourism Law was published in Official Gazette No. 39,251 on August 27, 2009. The Tourism Law requires the People’s Power Ministry for Tourism to fix within the first month of each year the percentage of the gross loan portfolio to be earmarked by banks to finance tourism, ranging between 2.5% and 7%. Short, medium and long-term loans must be included in the loan portfolio percentage.


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The interest rate may only be modified for the benefit of the loan applicant and loans shall be repaid in equal consecutive monthly installments. In addition, this Law establishes amortization periods between 5 and 15 years depending on the activities to be conducted by loan applicants. This Law also establishes special conditions in respect of terms, interest rates and subsidies, among others, for projects to be executed in tourist areas, potential tourist areas or endogenous tourist development areas. In addition, tourism guarantees are created within the National System for Reciprocal Guarantees for loans granted. The total balance of each bank’s tourism loan portfolio must be distributed as follows: Required Segment percentage

A 40 B 35 C 25

On February 25, 2013, the People’s Power Ministry for Tourism established at 4% (3% at December 31, 2012) the minimum percentage of the gross loan portfolio to be earmarked by each universal bank to finance tourism. This percentage is calculated based on the gross loan portfolio balance at December 31, 2012 and 2011 (December 31, 2010 and 2011 at December 31, 2012) and must be applied as follows: 2% at June 30, 2013 and 4% at December 31, 2013. Through a joint Resolution on April 13, 2010, published in Official Gazette No. 39,402, the People’s Power Ministries for Tourism and for Planning and Finance established the grace periods for tourism loans. These grace periods range from one to three years depending on the activity that is being financed. Loans for tourism projects to be developed in tourist areas will have the maximum grace periods considering the type of activity to be developed. Manufacturing loans

The Manufacturing Loan Law published on April 17, 2012 requires the people’s power ministries in

charge of finance and industries to jointly fix within the first month of each year, and with the binding

opinion of SUDEBAN and the BCV, the terms, conditions, periods and minimum percentage of the loan

portfolio to be earmarked by each universal bank to finance manufacturing activities. In no event may

the minimum percentage fall below 10% of each bank’s gross loan portfolio for the immediately prior

year.

BCV regulations

The BCV has established regulations on lending and deposit rates to be applied by banks and

restrictions on certain service fees, as well as establishing maximum rates to be charged for

commissions, fees or surcharges on each type of transaction. In addition, through Resolution No. 13-

03-02 of March 26, 2013, the BCV established that Banks may only charge their customers for

commissions established by this regulatory entity.

Regarding lending rates, the BCV established that banks may not charge for lending operations,

except for consumer loans, an annual interest or discount rate higher than the rate periodically set by

the BCV’s Board of Directors for discount, rediscount, repurchase and advance operations, reduced by

5.5%, except in the case of agricultural, tourism, manufacturing and mortgage loans for primary

residences (Note 6). As from June 5, 2009, the annual interest rate to be charged by the BCV on

discount, rediscount and advance operations, except as regards operations conducted under special

regimes, was set at 29.5%.


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Regarding deposit rates, the BCV established that the interest rate to be paid by banks on savings deposits, including liquid asset accounts, shall not be lower than 12.5% per annum. In addition, interest rates to be paid by banks on time deposits and certificates of deposit may not be lower than 14.5% per annum, regardless of their maturity. This rate will not be applicable to time deposits received by development banks whose main objective is to foster, finance or promote microfinancial activities when the depositor is another bank or financial institution. In addition, the BCV established that banks may not charge commissions, fees or surcharges to their customers for transactions, operations or services directly related to savings accounts. Banks may charge a commission amounting to the existing balance of dormant savings and current accounts that have been closed if it is below Bs 1. In addition, banks may not charge commissions, fees or surcharges for operations other than those published by the BCV. Through Resolution No. 12-09-02 of September 6, 2012, the BCV ratified that banks may only charge their customers up to Bs 5 for the second plus savings account books issued in the year. Likewise, banks may fix by mutual agreement with their customers the amounts to be charged for commissions, fees or surcharges for providing specialized products or services, as defined in this Resolution. However, the BCV must approve all amounts before collection. In July 2007, the Constitutional Chamber of the Supreme Tribunal of Justice ruled partly in favor of the lawsuit filed by the National Users’ and Consumers’ Alliance (ANAUCO) against the Venezuelan Banking Association (ABV), the National Banking Council (CBN), SUDEBAN and the BCV. As part of this process, the BCV established that banks may not charge an annual interest rate in excess of 29% or under 17% for credit card lending operations. Moreover, banks may not charge customers commissions, fees or charges for maintaining or renewing credit cards, collecting balances owed, issuing statements or issuing classic or similar credit cards, or for claims filed by credit card holders, whether legitimate or otherwise. Furthermore, the aforementioned Resolution requires banks to pay on amounts credited in excess of the total credit card debt or on any amounts in favor of the cardholder (except for prepaid instruments) annual interest not below that established by the BCV for savings deposits. The BCV established the maximum discount rates and commissions to be charged by banks to affiliated businesses for authorizing and processing point-of-sale operations through credit, debit and prepaid cards or any other financing or electronic payment instrument. Through Resolution No. 10-10-02 issued on June 30, 2011, the BCV reduced by 3 percentage points the 17% minimum legal reserve that banks are required to maintain at the BCV, as per the previous Resolution of October 26, 2010, provided that they use the available resources to purchase instruments issued within the framework of Venezuela’s Great Housing Mission. The terms and conditions of these investments will be as established by the BCV. Through Resolution No. 13-04-01 of April 26, 2013, the BCV ratified that the calculation of the legal reserve to be allocated by financial institutions that purchased dematerialized certificates of participation issued by the Simon Bolivar Fund 2013 will be made in conformity with terms established in Resolution No. 10-10-02. Through Resolution No. 10-06-01 published in June 2010, the BCV issued the rules for conducting exchange operations. According to these rules, the trading in bolivars of securities denominated in foreign currency issued or to be issued by the Bolivarian Republic of Venezuela, its decentralized agencies or any other issuer may only be conducted through the System for Transactions with Securities in Foreign Currency (SITME). These purchase and sale transactions in bolivars shall be conducted within a certain price band by universal banks, commercial banks, and savings and loan institutions following the terms and conditions established by the BCV. In August 2010, Resolution No. 10-08-01 was issued to allow the BCV’s participation in foreign currency trading operations.


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Subsequently, through Circular No. SBIF-II-GGNR-GNP-08555 of June 14, 2010, SUDEBAN decided to establish a regulatory exception for authorization requests provided for in the Accounting Manual for Banks, Other Financial Institutions, and Savings and Loan Entities (Accounting Manual) relating to the assignment of National Public Debt Bonds in foreign currency issued by the Bolivarian Republic of Venezuela, its decentralized agencies or any other issuer in circumstances other than those expressly described in the Accounting Manual. This regulatory exception only applies to held-to-maturity securities negotiated through SITME. To qualify for the exception, the transactions must be notified to SUDEBAN, which must receive documentation supporting the transactions together with the approval of the institution’s Treasury Committee or whoever may be acting in its stead (Note 5). Through Resolution No. 10-09-01, the BCV established that duly authorized universal banks may operate as brokers or intermediaries on the currency market and advertise this activity, in accordance with the BCV’s guidelines, terms and conditions. Through Resolution No. 13-03-01 of March 21, 2013, the BCV established that individuals residing in Venezuela will be allowed to have demand deposits in foreign currency in local banks. Through Resolution No. 13-07-01 of July 2013, the BCV set forth the general regulations for the Supplementary Foreign Currency Administration System (SICAD), which establish that foreign currency must be only traded by authorized financial institutions. The minimum and maximum amounts for the trade of foreign currency or securities in foreign currency will be determined in notices previously published.

Other regulations Law for the Advancement of Science, Technology and Innovation This Law establishes that the country’s major corporations will annually earmark 0.5% of gross income generated in Venezuela in the prior year. During the six-month period ended June 30, 2013, the Bank recorded expenses in this connection of Bs 4,983,275 (Bs 3,266,966 at December 31, 2012), included under sundry operating expenses (Note 20).

In December 2010, the Venezuelan government enacted the Reform of the Law for the Advancement of Science, Technology and Innovation, which became effective on December 16, 2010. This legal instrument creates the National Fund for Science, Technology and Innovation (FONACIT), which shall be responsible for managing, collecting, controlling, verifying, and quantitatively and qualitatively determining the contributions for science, technology and innovation and their applications. Likewise, the Reform indicates that taxpayers may apply to use the contributions to science, technology and innovation, provided that they develop annual projects, plans, programs and activities for the priority areas defined by the national authority responsible for matters related to science, technology and innovation and their applications and submit them within the third quarter of each year. Subsequently, also within the third first of each year, users of the contributions for science, technology and innovation must submit to FONACIT a technical and administrative report of the activities conducted in this connection during the prior year. The partial regulations of the Law for the Advancement of Science, Technology and Innovation were published on November 8, 2011. These regulations govern the contributions, financing and its results, and research, technology and innovation ethics, and require the payment and declaration of contributions within the second quarter after the closing of the period in which gross income was generated.


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Antidrug Law The Antidrug Law was published in Official Gazette No. 39,510 on September 15, 2010. This Law requires all private corporations, consortia and business-oriented public entities with 50 or more employees to contribute 1% of their annual operating income to the National Antidrug Fund (FONA) within 60 days of their respective year end. Companies belonging to economic groups will make contributions on a consolidated basis. The FONA shall use these contributions to finance plans, projects and programs for the prevention of illegal drug traffic. The contributions to the FONA shall be distributed as follows: 40% for prevention projects for the contributor’s employees and their families; 25% for child welfare protection programs; 25% for antidrug traffic programs and; 10% to finance the FONA’s operating costs. In addition, companies are required to employ rehabilitated individuals to facilitate their social reintegration. The Antidrug Law repeals the Law on Narcotic and Psychotropic Substances published in Official Gazette No. 38,337 on December 16, 2005, and its Partial Regulations of June 5, 1996, published in Official Gazette No. 35,986 on June 21, 1996. Resolution No. 004-2011 was published in Official Gazette No. 39,643 on March 28, 2011 to establish the regulations for payment of contributions and special contributions according to applicable laws. This Resolution also established that the Antidrug Law will be effective for periods beginning after September 15, 2010 when the Law was enacted, and for periods that began before that date the Law on Narcotic and Psychotropic Substances will apply. The Decree-Law for the creation of the National antidrug Fund was modified through Decree No. 9,359, published in Official Gazette No. 40, 095 on January 22, 2013. This modification is aimed to adapting and aligning the organizational structure of the Fund, as well as updating and adapting its attributions as a collection entity. For the six-month periods ended June 30, 2013 and December 31, 2012, the Bank recorded expenses in this connection of Bs 2,961,735 and Bs 3,347,542, respectively, included under sundry operating expenses (Note 20). Exchange Offenses Law A Reform of the Exchange Offenses Law was published on May 17, 2010 to include in the legal definition of foreign currency securities denominated in foreign currency or which can be traded in such. The Reform also grants the BCV exclusive control over foreign currency trading, regardless of the amount of the transaction, whether through money or the purchase of securities that are intended to be sold prior to their maturity date. Law against Organized Crime and Terrorism Financing The Law against Organized Crime and Terrorism Financing was published in Official Gazette No. 39,912 on April 30, 2012 to prevent, investigate, prosecute, typify and punish offenses involving organized criminal groups and terrorism. Sports and Physical Education Law The Sports and Physical Education Law was passed in August 23, 2011. This Law seeks to regulate physical education and the sponsorship, organization and management of sporting activities as public services. Companies subject to this Law must contribute 1% of their net income to the activities contemplated therein. The first Partial Regulations to this Law were published on February 28, 2012 to establish the method for declaring and paying this contribution, the former within 190 days of period end. Through Circular No. SIB-II-GGR-GNP-12159 of May 4, 2012, SUDEBAN established regulations on how this contribution must be paid and recorded.


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Resolution No. 015-13, published in Official Gazette No. 40,154 of April 25, 2013 extends the timeframe for filing and paying contributions to the National Sports and Physical Education Development Fund for 30 days as from May 1, 2013 for for-profit companies or organizations and for 25 days as from the same date for companies or organizations that had filed contributions until April 30, 2013. New Labor Law The new Labor Law (LOTTT) was published in Official Gazette No. 39,916 on May 7, 2012. This Law incorporates certain changes to the previous Labor Law (LOT) of June 19, 1997 and its reform of May 6, 2011, particularly with respect to the calculation of certain employee benefits, such as vacation bonus, profit sharing, maternity leave, and the retrospective accrual of length-of-service benefits. In addition, the new Law reduces working hours and extends job security for new parents. This Law became effective upon its publication in the Official Gazette. Through Notice No. SIB-II-GGR-GNP-38442 of November 27, 2012, SUDEBAN clarified that, in accordance with the Accounting Manual, banks must apply International Accounting Standards as supplemental guidance for issues not treated in said Accounting Manual, prudential regulations or prevailing accounting principles generally accepted in Venezuela issued by the Venezuelan Federation of Public Accountants (FCCPV), such as the liability arising from the new labor legislation. SUDEBAN also indicated that the methodology used to determine this liability must be applied consistently, must be contemplated in the Bank’s rules and policies, and must be approved by the Board of Directors. As reflected in Minutes No. 218 of the Board of Directors’ Meeting on February 6, 2013, the Bank will use a simplified calculation, which has been duly approved, to determine its liability with respect to length-of-service benefits. Such liability shall be the greater of the sum of 15 days of salary deposited quarterly in employee trust funds plus two additional days of salary for each year of service–amount that had already been recorded as salaries and employee benefits–and the sum of 30 days of salary for each year of service or fraction over six months, calculated based on the last salary earned by the employee. At June 30, 2013, the Bank has set aside a provision of Bs 12,285,537 in this connection (Bs 6,274,709 at December 31, 2012) (Note 17).

2. Basis of preparation The accompanying financial statements at June 30, 2013 and December 31, 2012 have been prepared based on the accounting rules and instructions of SUDEBAN included in the Accounting Manual, which differ in certain material respects from generally accepted accounting principles (VEN NIF) published by the FCCPV, of mandatory application in Venezuela as from January 1, 2008. VEN NIF are mainly based on International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), except for certain criteria concerning adjustments for inflation and the valuation of foreign currency assets and liabilities, among others. Through Resolution No. 648.10 of December 28, 2010, SUDEBAN deferred the presentation of consolidated or combined financial statements prepared under VEN NIF as supplementary information and established that, until otherwise stated, consolidated or combined financial statements and their notes must continue to be presented as supplementary information in accordance with generally accepted accounting principles in effect at December 31, 2007 (VEN GAAP). At June 30, 2013 and December 31, 2012, the main differences identified by management between the accounting rules and instructions of SUDEBAN and VEN NIF that affect the Bank are the following: 1) VEN NIF Adoption Bulletin No. 2 (BA VEN NIF 2) establishes criteria for applying International

Accounting Standard No. 29 (IAS 29), “Financial reporting in hyperinflationary economies” in Venezuela and requires that the effects of inflation on the financial statements be recognized in accordance with IAS 29, provided that inflation for the year exceeds one digit. SUDEBAN has stipulated that inflation-adjusted financial statements must be provided as supplementary information. For purposes of additional analysis, the Bank has prepared inflation-adjusted


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financial statements using the General Price Level (GPL) method. The inflation rate for the six-month period ended June 30, 2013 was 24.99% (11.70% for the six-month period December 31, 2012) (Note 34).

2) The Accounting Manual establishes that interest earned on overdue or in-litigation loans shall not

be recognized as income but shall be recorded under memorandum accounts, as shall all subsequent interest earned. VEN NIF establish that for financial instruments carried at amortized cost, the amount of the impairment is the difference between the instrument’s carrying amount and the present value of estimated future cash flows generated by the instrument, discounted at the original effective interest rate. Impairment exists when the present value of an instrument’s future cash flows is lower than the carrying amount, in which case interest income shall be recognized taking into account the discount rate applied to future cash flows for determining impairment losses.

3) The Accounting Manual establishes that loans whose original repayment schedule, term, or other

conditions have been modified at the request of the debtor must be reclassified within rescheduled loans. VEN NIF provide no specific guidance. However, they do state that impairment losses on financial assets carried at amortized cost shall be charged to the results for the period in which they are incurred. In addition, the Accounting Manual establishes that loans classified as overdue must be written off within 24 months after inclusion in this category. Loans in litigation must be fully provided for after 24 months in the in-litigation category. In addition, overdue monthly loan installments that have been repaid must be classified to the category to which they pertained before being classified as overdue. Likewise, when a debtor repays pending loan installments of a loan in litigation, thereby terminating the lawsuit, the loan must be reclassified to the category to which it pertained before being classified as in litigation or overdue. According to VEN NIF, accounts receivable are recorded based on their recoverable amount.

4) Assets received as payment are recorded at the lower of cost and market value and amortized using the straight-line method over one to three years. Idle assets must be written out of asset accounts after 24 months. In accordance with VEN NIF, assets received as payment are stated at the lower of cost and market value, and are classified as available-for-sale assets or investment property depending on their use. Investment properties are depreciated over their expected income-generating term.

5) The Accounting Manual establishes that property and equipment is initially recorded at acquisition or construction cost, as applicable. However, VEN NIF allows property and equipment to be revalued, and any increase in value is credited to equity under revaluation surplus.

6) Significant leasehold improvements are recorded as amortizable expenses and included under

other assets. According to VEN NIF, they must be shown as part of property and equipment. Gains or losses on the sale of personal and real property are shown in the income statement.

7) The Bank computes a deferred tax asset or liability in respect of temporary differences between

the tax bases and carrying amounts in the financial statements, except for provisions for losses on other than high risk or unrecoverable loans. A deferred tax asset is not recognized for any amount exceeding future taxable income. In accordance with VEN NIF, a deferred tax asset is recognized in respect of all temporary differences between the carrying amount of assets and liabilities and their tax bases, provided that its realization is assured beyond any reasonable doubt.


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8) The Bank presents convertible bonds as part of equity (Note 24). In accordance with VEN NIF, convertible bonds must be presented as a financial instrument forming part of the Bank’s liabilities.

9) Other assets include deferred expenses incurred by the Bank during the currency redenomination

process, which are amortized as from April 2008 using the straight-line method (Note 12). Other assets also include deferred personnel, general, administrative and operating expenses related to the acquisition of Stanford Bank, S.A., which will be amortized over 15 years as from January 1, 2010 (Note 11). In accordance with VEN NIF, these types of costs may not be deferred and must be recorded in the income statement as incurred.

10) In conformity with SUDEBAN rules, the Bank sets aside the general allowance for the loan

portfolio with a charge to the results for the period. VEN NIF require that these allowances be recorded as a restricted amount of retained earnings in equity, provided that they do not meet conditions established in IAS 37, “Provisions, contingent liabilities and contingent assets.”

11) At June 30, 2013 and December 31, 2012, the Bank, in conformity with SUDEBAN rules,

maintains a general 1% allowance of the loan portfolio balance, except for the balance of the microcredit portfolio, for which it maintains a general 2% allowance. VEN NIF require that the Bank first assess whether objective evidence of impairment exists individually for loans that are individually significant, or collectively for loans that are not individually significant. Impairment losses shall be recognized in the results for the period.

12) SUDEBAN rules require foreign currency balances and transactions to be measured at the

prevailing official exchange rate established by the BCV of Bs 6,2842/US$1 at June 30, 2013 (Bs 4,30/US$1 at December 31, 2012, except for foreign currency securities issued by the Bolivarian Republic of Venezuela or by state-owned companies, which are measured at the average exchange rate of securities traded through SITME the last day of each month. In conformity with VEN NIF, foreign currency transactions and balances shall be measured and recorded taking into consideration a comprehensive assessment of the entity’s financial position, its monetary position in foreign currency and the financial impact of the applicable exchange regulations. In addition, instructions issued by the FCCPV on this matter state that: - Foreign currency items shall be measured: a) at the official exchange rates established in the

different exchange agreements issued by the BCV and the Venezuelan government, or b) on the basis of best estimates of future cash flows in bolivars expected to be required or received to settle liabilities or realize assets at the transaction or balance sheet date, using the exchange or settlement mechanisms permitted under Venezuelan law (e.g., SITME).

- Assets in foreign currency required to be sold to the BCV shall be measured at the official

exchange rates established by the BCV. - Assets in foreign currency not required to be sold to the BCV shall be measured: a) on the basis

of the liabilities that are not reasonably expected to be settled with foreign currency purchased from the Venezuelan government at the official exchange rate, or b) on the basis of best estimates of future cash flows in bolivars expected to be received to realize these assets at the transaction or balance sheet date, using the exchange or settlement mechanisms permitted under Venezuelan law (e.g., SITME).

13) Investments in trading securities may not remain in this category for more than 90 days after they

have been classified. In conformity with VEN NIF, these investments may remain in this category indefinitely.


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14) In accordance with SUDEBAN rules, available-for-sale assets reclassified to the held-to-maturity category are recorded at their fair value at the reclassification date. Unrealized gains or losses are maintained separately in equity and are amortized over the investment’s remaining life as an adjustment to yield. In conformity with VEN NIF, the fair value of the investment at the reclassification date becomes the new amortized cost basis, and any gain or loss previously recognized in equity is accounted for as follows: a) gains or losses on fixed maturity investments, as well as any difference between the new amortized cost and value at maturity, are taken to profit and loss and amortized over the investment’s remaining life and; b) gains or losses on non-maturing investments will remain in equity until the asset is sold or otherwise disposed of, when it shall be recognized in profit or loss. Any subsequent impairment losses recorded in equity shall be recognized in the results for the period.

15) Discounts or premiums on held-to-maturity investments are amortized over the term of the

security with a debit or credit to gain or loss on investment securities under other operating income or other operating expenses, respectively. In conformity with VEN NIF, discounts or premiums must be accounted for as part of the security’s yield and, therefore, must be recognized under interest income.

16) Subsequent recoveries of permanent losses arising from impairment in the fair value of

investment securities do not affect the new cost basis. VEN NIF allow recovery of impairment losses on debt securities.

17) The Accounting Manual establishes timeframes to record provisions for bank reconciling items,

matured securities, pending items and accounts receivable forming part of other assets, loan interest suspension, interest receivable and derecognition of certain assets, among others. VEN NIF do not establish timeframes for creating provisions for these items; provisions are recorded based on best estimates of collection or recovery.

18) Other assets include the difference between the purchase price and the book value of Stanford Bank’s assets and liabilities, which will be amortized using the straight-line method over 15 years. According to VEN NIF, goodwill should not be amortized but tested for impairment annually or whenever events or circumstances indicate that the value of the respective reporting unit may be impaired. Impairment is determined by comparing the carrying amount of the cash generating unit to its recoverable amount, and if the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement.

19) At June 30, 2013 and December 31, 2012, other assets include deferred expenses of

Bs 1,104,637 and Bs 10,848,455, respectively, related to disbursements for the new chip-based credit and debit cards. These disbursements include advisory, training and other personnel expenses, advertising, and client education on the adequate use of electronic payment services, accommodation of physical spaces, and replacement of debit and credit cards. They will be amortized beginning January 2011 using the straight-line method (Note 12). In accordance with VEN NIF, these expenses may not be deferred but must be recorded in the income statement when incurred.

20) SUDEBAN established that gains and losses resulting from foreign exchange fluctuations must be

recorded in equity. Under VEN NIF, gains and losses resulting from foreign exchange fluctuations must be recorded in the income statement for the period in which they occur. During the six-month period ended December 31, 2012, the Bank recorded exchange fluctuations with regard to its foreign currency assets and liabilities of Bs 302,128,437 (Notes 4 and 25-c).


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21) For purposes of the cash flow statement, the Bank considers as cash equivalents cash and due from banks. VEN NIF consider as cash equivalents investments and deposits maturing within 90 days.

22) SUDEBAN established that expenses incurred in relation to the social contribution provided in

Article No. 48 of the Law on Banking Sector Institutions shall be recorded as a prepaid expense within other assets and amortized during the six-month period in which the contribution was paid. Under VEN NIF, this contribution must be expensed as incurred.

23) SUDEBAN established that expenses incurred in relation to the contribution under the Sports and Physical Education Law shall be expensed when paid. Under VEN NIF, this contribution must be expensed as incurred.

24) The Accounting Manual establishes that transfers between investment categories or sales of investments for reasons other than those established in said Accounting Manual must be authorized by SUDEBAN. The sale or transfer of held-to-maturity investments shall not be considered to be inconsistent with their original classification under the following circumstances: a) a significant deterioration in the issuer’s creditworthiness;

b) a change in tax law that eliminates or reduces the tax-exempt status of interest on the debt

security;

c) a major business combination or major disposition that necessitates the sale or transfer of the security to maintain the enterprise’s existing interest rate risk position or credit risk policy;

d) a change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of securities;

e) a significant increase by the regulator in the industry’s capital requirements and;

f) a significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes. Changes in circumstances and other events that are isolated, nonrecurring and unusual and that could not have been reasonably anticipated may cause an entity to sell or transfer held-to-maturity investments without calling into question the entity’s intent to hold other securities to maturity.

According to VEN NIF, if an entity sells or reclassifies more than an insignificant proportion of held-to-maturity investments before maturity, the entity may not classify any financial asset as held-to-maturity for two years from the date the sale or transfer occurred. In addition, any remaining held-to-maturity securities must be reclassified as available for sale and measured at fair value.

The accounting policies followed by the Bank are: a) Foreign currency Foreign currency transactions and balances are recorded at the official exchange rate in effect at the transaction date. Foreign currency balances at December 31 and June 30, 2012 are shown at the official exchange rate of Bs 6.2842/US$1 (Bs 4.30/US$1 at December 31, 2012), except for foreign currency securities issued by the Bolivarian Republic of Venezuela or by state-owned companies, which since October 2011 are recorded at the average implicit exchange rate of securities traded through SITME the last day of each month. At December 31, 2012, the SITME rate was Bs 5.30/US$1 (Note 4). Exchange gains and losses other than those resulting from the official currency devaluation are included in the results for the period (Note 25).


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The Bank does not engage in hedging activities in connection with its foreign currency transactions and balances. The Bank is exposed to foreign exchange risk. b) Translation of financial statements in foreign currency Assets, liabilities and income accounts of the Curacao Branch were translated at the official exchange rate of Bs 6.2842/US$1 at June 30, 2013 (Bs 4.30/US$1 at December 31, 2012), except for foreign currency securities issued by the Bolivarian Republic of Venezuela or by state-owned companies, which were translated at the average implicit exchange rate of securities traded through SITME the last day of each month. The adjustment resulting from translating the financial statements of the Branch into bolivars is shown in the income statement under other operating income at December 31, 2012 (Notes 19 and 25). c) Investment securities Investment securities are classified upon acquisition, based on their intended use, as overnight deposits, investments in trading securities, investments in available-for-sale securities, investments in held-to-maturity securities, restricted investments and investments in other securities. All transfers between different investment categories or sales of investments under circumstances other than those established in the Accounting Manual must be authorized by SUDEBAN. Deposits with the BCV and overnight deposits Excess liquidity deposited in overnight deposits and debt securities issued by Venezuelan financial institutions maturing within 60 days are included in this account. Investments in trading securities Investments in trading securities are recorded at fair value and comprise investments in debt and equity securities which may be converted into cash within 90 days of their acquisition. Unrealized gains or losses resulting from differences in fair values are included in the income statement. Gains and losses from fluctuations in the exchange rate are included in equity. These securities, regardless of their maturity, must be negotiated and written out of this account within 90 days of their classification, i.e., they may not remain in this category for more than 90 days. Investments in available-for-sale securities Investments in available-for-sale debt and equity securities are recorded at fair value and unrealized gains or losses, net of income tax, resulting from differences in fair value are included in equity. If investments in available-for-sale securities correspond to instruments denominated in foreign currency, the fair value will be determined in foreign currency and then translated at the official exchange rate in effect. Gains or losses from fluctuations in the exchange rate are included in equity. Permanent losses from impairment in the fair value of these investments are recorded in the income statement under other operating expenses for the period in which they occur. Any subsequent recovery in fair value is recognized as an unrealized gain, net of income tax, in equity (Note 5-a). These investments may not remain in this category for more than one year, except for securities issued and guaranteed by the Venezuelan government and investments in shares of mutual guarantee companies. Investments in held-to-maturity securities Investments in debt securities that the Bank has the firm intention and ability to hold until maturity are recorded at cost, which should be consistent with market value at the time of purchase, subsequently adjusted for amortization of premiums or discounts. Discounts or premiums on acquisition are amortized over the term of the securities as a credit or debit to other operating income and other


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operating expenses. The book value of investments denominated in foreign currency is adjusted at the exchange rate in effect at period end. Gain and losses from fluctuations in the exchange rate are included in equity. The Bank assesses at each balance sheet date, or sooner if circumstances require it, whether there is any objective evidence that a financial asset or group of financial assets is impaired. An impairment in the fair value of held-to-maturity and available-for-sale securities is charged to the results for the period when management considers that it is other than temporary. Certain factors identified as indicators of impairment are: 1) a prolonged period where fair value remains substantially below cost, 2) the financial difficulty of the issuer, 3) a fall in the issuer’s credit rating, 4) the disappearance of an active market for the security, and 5) the Bank’s intention and ability to hold the investment long enough to allow for recovery of fair value, among others. For the six-month periods ended June 30, 2013 and December 31, 2012, the Bank has identified no permanent impairment in the value of its investments (Note 5-b). Sales or transfers of investments in held-to-maturity securities do not affect the original intention for which these securities were acquired when: a) the sale occurs so close to their maturity date that interest rate risk is extinguished (i.e., changes in market interest rates will not significantly affect the realizable value of the investment) or b) the sale occurs after the entity has collected a substantial portion (more than 85%) of the outstanding principal at the transaction date, in addition to all other conditions established in the Accounting Manual. Restricted investments Restricted investments originating from other investment categories are measured using the same criteria used to record those investments from which they are derived. Securities or loans which the Bank contractually sells and commits to repurchase at an agreed date and price, i.e., for which the Bank acts as the reporting entity, are valued using the same criteria as for investments in trading securities. Investments in other securities Investments in other securities include investment trusts, as well as investments not classified under any other category. The Bank uses the specific identification method to determine the cost of securities and this same basis to calculate realized gains or losses on the sale of trading or available-for-sale securities. d) Loan portfolio Commercial loans and term, mortgage and credit card loan installments are classified as overdue if repayment is more than 30 days past due. In conformity with SUDEBAN rules, advances on negotiated letters of credit are classified as overdue if not repaid within 270 days after they were granted by the Bank. Furthermore, when any related installment is more than 90 days past due, the entire principal balance is classified as overdue. In addition, the entire balance of microcredits, payable in weekly or monthly installments, is considered past due if repayment of at least one weekly installment is 14 days overdue or one monthly installment is 60 days overdue. Rescheduled loans are those whose original repayment schedule, term, or other conditions have been modified based on a refinancing agreement and certain terms and conditions set out in the Accounting Manual. Loans in litigation are those in the legal collection process. Loans classified as overdue must be written off within 24 months after inclusion in this category. Loans in litigation must be fully provided for after 24 months in the in-litigation category. In addition, overdue monthly loan installments that have been repaid must be reclassified to the category to which they


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pertained before being classified as overdue. Likewise, when an individual repays pending loan installments of a loan in litigation, thereby terminating the lawsuit, the Bank must reclassify the loan to the category to which it pertained before being classified as in litigation or overdue. e) Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with SUDEBAN rules requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results may differ from those estimates. Below is a summary of the main estimates used in the preparation of the financial statements: Investment securities Investment securities and interest not collected 30 days after maturity date are provided for in full. Loan portfolio and contingent loans The Bank performs a quarterly review of at least 90% of its loan portfolio and contingent loans to determine the specific allowance for possible losses on each loan. This review takes into account factors such as economic conditions, client credit risk and credit history. Moreover, each quarter the Bank calculates an allowance for losses on loans not individually reviewed, equivalent to the risk percentage resulting from the specific review of loans. In addition, in accordance with SUDEBAN rules, the Bank maintains a general 1% allowance of the loan portfolio balance, except for the balance of the microcredit portfolio, for which it maintains a general 2% allowance, plus any additional general allowances deemed necessary. General or specific allowances may not be released without the authorization of SUDEBAN. Other assets The Bank assesses collectibility of items recorded under other assets using the same criteria, where applicable, as those applied to the loan portfolio. Furthermore, the Bank sets aside provisions for those items that require them due to their nature or aging.

Provision for legal and tax claims The Bank sets aside a provision for legal and tax claims considered probable and reasonably quantifiable based on the opinion of its legal advisors. Based on this opinion, management believes that the outcome of legal and tax claims outstanding at June 30, 2013 and December 31, 2012 will be favorable to the Bank (Note 30). However, this opinion is based on events to date; the outcome of these lawsuits could differ from that expected. f) Available-for-sale assets Personal and real property received as payment is recorded at the lower of assigned value, book value, market value or appraisal value not older than one year, and is amortized using the straight-line method over one to three years, respectively. The remaining available-for-sale assets are recorded at the lower of cost and realizable value. Gains or losses from the realization of available-for-sale assets are included in the income statement. Other available-for-sale assets and assets idle for more than 24 months must be written out of asset accounts. g) Property and equipment Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Significant leasehold improvements are recorded as amortizable expenses and included under other assets. Gains or losses on the sale of personal and real property are shown in the income statement.


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h) Deferred expenses Deferred expenses mainly include start-up, leasehold improvement, and software license costs. These expenses are recorded at cost, net of accumulated amortization. Amortization is calculated using the straight-line method over four years. Expenses incurred during the currency redenomination process related to advisory, training, travel and other personnel, advertising, software and security expenses will be amortized as from April 2008 using the straight-line method over one to six years (Note 12). Deferred expenses related to the Stanford Bank merger shall be amortized using the straight-line method over 15 years as from January 2010 (Notes 11 and 12). The difference between the purchase price and the book value of Stanford Bank’s assets and liabilities is amortized using the straight-line method over 15 years as from June 2009 (Notes 11 and 12). Deferred expenses related to the project for the new chip-based credit and debit cards will be amortized using the straight-line method over one to six years as from January 2011 (Note 12). i) Income tax The Bank’s tax year ends on December 31. The tax provision is based on management’s projection of tax results. The Bank records a deferred tax asset when, in the opinion of management, there is reasonable expectation that future tax results will allow its realization. In addition, according to the Accounting Manual, the amount by which the deferred tax asset exceeds tax expense for the year is not recognized (Note 18). j) Employee benefits Accrual for length-of-service benefits The Bank accrues for its liability in respect of length-of-service benefits, which are a vested right of employees, based on the provisions of the new Labor Law (LOTTT) (Note 1) and the prevailing collective labor agreement and deposits amounts accrued in a trust fund on behalf of each employee. The Bank does not have a pension plan or other post-retirement benefit programs for its employees; it does not grant stock purchase options. Profit sharing Under the collective labor agreement, the Bank is required to pay a share of its annual profits to its employees of up to 120 days of salary. Expenses incurred in this connection during the first six-month period of each year are paid in April and July, and the remaining liability in November. At June 30, 2013 and December 31, 2012, the Bank has recorded Bs 27,954,360 and Bs 23,684,119, respectively, in this connection, shown under salaries and employee benefits. Vacation leave and vacation bonus The LOTTT and the collective labor agreement grant each employee a minimum of 15 days of vacation leave each year and a vacation bonus based on length of service. The Bank accrues amounts accordingly (Note 17). k) Recognition of revenue and expenses Interest on loans, investments and accounts receivable is recorded as income when earned by the effective interest method, except: a) interest receivable more than 30 days overdue, b) interest on loans overdue or in litigation, or loans classified as real risk, high risk or unrecoverable, and c) overdue interest, all of which are recorded as income when collected. Interest collected in advance is included under accruals and other liabilities as deferred income and recorded as income when earned (Note 17).


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Interest on current and rescheduled loan portfolios collectible after six months or more is recorded as deferred income under accruals and other liabilities when earned and as income when collected. Commissions from loans granted are recorded as income upon collection under income from other accounts receivable. Income from financial leases and amortization costs of leased property are shown net in the income statement as interest income from the loan portfolio. Interest on customer deposits, liabilities and borrowings is recorded as interest expense when incurred using the effective interest method. l) Residual value Residual value is the estimated value of assets upon termination of the financial lease. The Bank recognizes residual value as income when collected. m) Assets received in trust Assets received in trust are valued using the same parameters used by the Bank to value its own assets, except for investment securities, which are shown at cost and subsequently adjusted for amortization of premiums or discounts. Any permanent impairment in the value of these investments is recorded in trust fund results for the period in which it occurs. During the six-month periods ended June 30, 2013 and December 31, 2012, no permanent losses were identified. n) Net income per share Basic net income per share has been determined by dividing net income for the six-month period by the weighted average of shares outstanding during the period.

o) Cash flows For purposes of the cash flow statement, the Bank considers as cash equivalents cash and due from banks. p) Use of financial instruments

The Bank is mainly exposed to credit, foreign exchange, market, interest rate and liquidity risks. Below

is the risk policy used by the Bank for each type of risk:

Credit risk The Bank assumes exposure to credit risk when a counterparty is unable to pay off its debts at maturity. The Bank monitors credit risk exposure by regularly analyzing payment capabilities of its borrowers. The Bank structures the level of credit risk by establishing limits for individual and group borrowers. The Bank requests fiduciary or mortgage guarantees, collateral or certificates of deposit after assessing specific borrower characteristics. Foreign exchange risk Foreign exchange risk arises from fluctuations in the value of financial instruments due to changes in foreign currency exchange rates. The Bank’s transactions are mainly in bolivars. However, when the Bank identifies short or medium-term market opportunities, investments might be deposited in foreign currency instruments, mainly in U.S. dollars. Market risk The Bank assumes exposure to market risk. Market risk arises from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements.


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The Bank evaluates market risk on a regular basis and the Board of Directors sets limits on the level of risk concentrations that may be assumed, which is regularly supervised.

Interest rate risk The Bank assumes exposure from the effects of fluctuations in market interest rate levels on its financial position and cash flows.

Interest margins may increase as a result of such changes but may diminish or lead to losses in the event of unexpected movements. The Bank analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Bank calculates the impact on profit and loss of a given interest rate shift.

Simulations are performed regularly. Based on various scenarios, the Bank manages its cash flow interest rate risk.

Liquidity risk The Bank reviews on a daily basis its available cash resources, overnight deposits, current accounts, maturing deposits and loans, as well as its guarantees and margins.

The Bank’s investment strategy is aimed at guaranteeing an adequate liquidity level. A large portion of

the investment portfolio includes securities issued by the Bolivarian Republic of Venezuela and other

highly liquid obligations.

Operational risk

The Bank considers exposure to operational risk arising from direct or indirect losses that result from

inadequate or defective internal processes, human error, system failures or external events.

The structure used by the Bank to measure operational risk is based on a qualitative and quantitative

approach. The first identifies and analyzes risks before related events occur; the second mainly relies

on the analysis of events and experiences gained from them. Fiduciary activities

The Bank acts as custodian, administrator and manager of third-party investments. As a result, in

certain cases, the Bank purchases and sells a wide range of financial instruments. These trust fund

assets are not included in the Bank’s assets. At June 30, 2013, trust fund assets amount to

Bs 1,115,357,797 (Bs 971,641,295 at December 31, 2012), shown under memorandum accounts

(Note 22).

3. Cash and due from banks

At June 30, 2013, the balance of the account with the BCV mainly includes Bs 2,773,548,022 in respect of the legal reserve deposit in local currency (Bs 3,070,135,180 at December 31, 2012) (Note 29). In addition, at June 30, 2013, the account with the BCV includes Bs 3,195,549,826 in respect of demand deposits held by the Bank at the BCV (Bs 1,279,956,654 at December 31, 2012). At June 30, 2013 and December 31, 2012, pending cash items relate to clearinghouse operations conducted by the BCV and other banks.


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4. Foreign currency assets and liabilities In February 2003, the Venezuelan government established an exchange control regime coordinated, managed and controlled by the Commission for the Administration of Foreign Currency (CADIVI). On January 8, 2010, the Venezuelan government and the BCV enacted Exchange Agreement No. 14 to introduce an exchange rate of Bs 2.60/US$1 applicable to priority imports, and Bs 4.30/US$1 applicable to all other imports. On December 30, 2010, the Venezuelan government and the BCV enacted Exchange Agreement No. 14 to eliminate, as from January 1, 2011, the two-tiered exchange rate system and reinstate a single exchange rate of Bs 4.2893/US$1 (purchase) and Bs 4.30/US$1 (sale). In January, July and August 2010, SUDEBAN established the guidelines for the accounting treatment of gains and losses resulting from the effect of the variation in the official exchange rate established in Exchange Agreement No. 14. These gains or losses shall be recorded in equity under exchange gain (loss) from holding foreign currency assets and liabilities. Furthermore, the SUDEBAN Resolution restricts the use of exchange gains to: a) cover any losses incurred until September 30, 2010 from the trading of Venezuelan Government National Public Debt Bonds through SITME; b) set aside provisions for contingencies or cover deficit balances and; c) increase capital. Through a Circular issued on January 4, 2011, the BCV informed commercial and universal banks participating in the System for the Electronic Custody of Securities (SICET) and the System for Collateral and Credit Lines (SIGALC) that secondary market transactions with Principal and Interest Covered Bonds (TICCs) would be settled at the exchange rate of Bs 4.30/US$1, and related coupons payable for interest due would be settled at the exchange rate in effect two bank days prior to the coupon starting date. Subsequently, on October 14, 2011, the BCV established that public-sector securities in foreign currency would be measured and recorded at the average value date exchange rate at the last day of each month for transactions conducted through SITME managed by the BCV. In January and October 2011, SUDEBAN established the guidelines for the accounting treatment of gains and losses resulting from the effect of changes in the official exchange rate established in Exchange Agreement No. 14 and Resolution No. 11-10-01. These gains shall be recorded in equity within exchange gain (loss) from holding foreign currency assets and liabilities. Furthermore, this Resolution restricts the use of exchange gains to: a) absorb operating losses or deficit maintained in equity accounts at June 30, 2011; b) cover deficit balances through asset contingency provisions, and make adjustments or record losses as determined by SUDEBAN until March 31, 2012; c) offset deferred expenses based on special plans approved by SUDEBAN until December 31, 2011, as well as costs and goodwill generated until March 31, 2012; d) absorb other losses incurred from applying the adjustment plan established in the temporary provisions of the Law on Banking Sector Institutions, approved by SUDEBAN, until March 31, 2012 and; e) increase capital stock when exchange gains are realized. On February 8, 2013, the Venezuelan government and the BCV amended Exchange Agreement No. 14 and established, as from that date, a single exchange rate of Bs 6.2842/US$1 (purchase) and Bs 6.30/US$1 (sale). Where certain conditions are met, some transactions will be liquidated at the official exchange rate established in Exchange Agreement No. 14 of Bs 4.30/US$1.


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Article No. 12 of this Exchange Agreement provides for the creation of the Office for the Optimization of the Currency Exchange System (OSOSC). This agency was created on February 8, 2013 through Decree No. 9,381, published in Official Gazette No. 40,108, with the task of designing, planning and executing the government’s currency exchange strategies to achieve maximum transparency and efficiency in the allocation of foreign currency among the country’s economic sector.

In addition, through an Official Notice published in Official Gazette No. 40,109 of February 13, 2013, the BCV informed financial institutions authorized to trade foreign currency-denominated securities for bolivars on the secondary market that, as from February 9, 2013, purchase or sale bids for securities will no longer be processed through SITME. The accounting effect for the Bank of measuring and recording its foreign currency balances at February 8, 2013 at the exchange rate of Bs 6.2842/US$1 was an increase in assets, liabilities and equity of Bs 323,617,692, Bs 21,489,255 and Bs 302,128,437, respectively. The Bank’s balance sheet with its Curacao Branch at June 30, 2013 and December 31, 2012 includes the following foreign currency balances denominated mainly in U.S. dollars and stated at the official exchange rates mentioned above: June 30, 2013 US$

Curacao Equivalent Bank Branch Eliminations Total in bolivars Assets Cash and due from banks Cash 1,687,767 - - 1,687,767 10,606,265 Foreign and correspondent banks 36,305,187 49,612,322 (13,149,524) 72,767,985 457,288,571 Provision for cash and due from banks (3,715) - - (3,715) (23,346) Investment securities 131,364,756 11,563,357 - 142,928,113 898,188,848 Loan portfolio, net of provision Current loan portfolio - 25,396,963 - 25,396,963 159,599,595 Outstanding letters of credit issued and negotiated 17,696,229 - - 17,696,229 111,206,642 Overdue letters of credit 2,171,700 - 2,171,700 13,647,397 Interest and commissions receivable 1,550,398 279,425 - 1,829,823 11,498,974 Investments in subsidiaries, affiliates and branches and agencies abroad 7,331,413 - (7,331,413) - - Property and equipment - 18,598 - 18,598 116,874 Other assets, net of provision 996,061 19,424 - 1,015,485 6,381,511

Total assets 199,099,796 86,890,089 (20,480,937) 265,508,948 1,668,511,331 Liabilities Customer deposits 10,506,523 78,997,651 (13,149,524) 76,354,650 479,827,892 Other liabilities from financial intermediation 2,266,480 - - 2,266,480 14,243,014 Interest and commissions payable - 24,389 - 24,389 153,265 Accruals and other liabilities 563,234 536,634 - 1,099,868 6,911,790

Total liabilities 13,336,237 79,558,674 (13,149,524) 79,745,387 501,135,961

Equity Assigned capital - 1,000,000 (1,000,000) - -

Total liabilities and equity 13,336,237 80,558,674 (14,149,524) 79,745,387 501,135,961 Other debtor memorandum accounts (Note 22) Foreign currency purchases 8,928,543 - - 8,928,543 56,108,750 Foreign currency sales (8,928,543) - - (8,928,543) (56,108,750)


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December 31, 2012 US$ Curacao Equivalent

Bank Branch Eliminations Total in bolivars

Assets Cash and due from banks Cash 999,005 - - 999,005 4,295,721 Foreign and correspondent banks 12,925,381 21,698,261 (12,469,855) 22,153,787 95,261,284 Investment securities 15,842,715 31,648,847 - 47,491,562 246,045,663 Loan portfolio, net of provision Current loan portfolio - 25,817,574 - 25,817,574 111,015,568 Outstanding letters of credit issued and negotiated 32,804,064 - - 32,804,064 141,057,475 Interest and commissions receivable 394,083 823,611 - 1,217,694 6,299,520 Investments in subsidiaries, affiliates and branches and agencies abroad 1,000,000 - (1,000,000) - - Property and equipment - 24,130 24,130 103,759 Other assets, net of provision 1,318,887 4,675 - 1,323,562 5,691,317

Total assets 65,284,135 80,017,098 (13,469,855) 131,831,378 609,770,307

Liabilities Customer deposits - 73,865,484 (12,469,855) 61,395,629 264,001,205 Borrowings 5,000,000 - - 5,000,000 21,500,000 Other liabilities from financial intermediation 4,732,694 - - 4,732,694 20,350,584 Interest and commissions payable 7,816 22,034 - 29,850 128,355 Accruals and other liabilities 2,183,354 527,268 - 2,710,622 11,655,675

Total liabilities 11,923,864 74,414,786 (12,469,855) 73,868,795 317,635,819

Equity

Assigned capital - 1,000,000 (1,000,000) - -

Total equity and liabilities 11,923,864 75,414,786 (13,469,855) 73,868,795 317,635,819

Other debtor memorandum accounts (Note 22) Foreign currency purchases 7,768,459 - - 7,768,459 33,404,374 Foreign currency sales (7,768,459) - - (7,768,459) (33,404,374)

At June 30, 2013, the Bank has a net monetary asset position in foreign currency of US$185,763,559, equivalent to Bs 1,167,375,357 (US$53,360,271, equivalent to Bs 243,071,748 at December 31, 2012), calculated based on the rules laid down by the BCV. This amount does not exceed the maximum limit set by the BCV, which at June 30, 2013 and December 31, 2012 is 30% of the Bank’s equity, equivalent to US$108,643,354 and US$118,132,119, respectively. At June 30, 2013 and December 31, 2012, the calculation of this limit includes convertible bonds of Bs 50,000,000 and Bs 100,000,000, respectively, since SUDEBAN allowed their inclusion in the Bank’s equity structure. At June 30, 2013, calculation of the net foreign currency position does not include balances of the Curacao Branch or TICCs with a par value of US$107,574,268 (US$90,489,793 at December 31, 2012), International Sovereign Bonds 2019, 2022, 2024 and 2031 (bonds issued by Petróleos de Venezuela, S.A. and International Sovereign Bonds 2019, 2022, 2024 and 2031 at December 31, 2012), with a par value of US$16,409,500 (US$16,629,500 at December 31, 2012) and interest receivable in connection with these securities of US$1,579,911 (US$1,437,137 at December 31, 2012), as they are not required for this calculation. At June 30, 2013 and December 31, 2012, the Bank has other liabilities from financial intermediation arising from letters of credit. During the six-month period ended June 30, 2013, the Bank recorded exchange gains and losses of Bs 14,778,437 and Bs 20,667,936, respectively (Bs 34,872,525 and Bs 19,346,900, respectively, during the six-month period ended December 31, 2012), arising from exchange fluctuations of the U.S. dollar with respect to other foreign currencies (Notes 19 and 20).


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During the six-month period ended June 30, 2013, the Bank recorded US$1,543,455, equivalent to Bs 9,699,380 (US$1,953,546, equivalent to Bs 8,400,248, at December 31, 2012) in respect of service fees, mainly from client transactions with CADIVI (Note 19).

5. Investment securities Investments in debt securities, shares and other have been classified in the financial statements based on their intended use as shown below: June 30, December 31, 2013 2012

(In bolivars) Investments Deposits with the BCV and overnight deposits 1,000,000,000 1,010,939,000 Available for sale 3,212,106,612 3,444,407,131 Held to maturity 3,502,118,301 2,787,127,754 Restricted 61,535,201 16,422,282 Other securities 1,297,338,542 792,605,344 Provision for investment securities - (80,406)

9,073,098,656 8,051,421,105

a) Investments in available-for-sale securities These investments are shown at fair value and comprise the following: June 30, 2013 Net Book value unrealized (equivalent Acquisition gain to fair Custodians of cost (loss) value) investments

(In bolivars) Securities issued or guaranteed by the Venezuelan goverment Vebonos, with a par value of Bs 964,461,560, annual yield at between 10.74% and 17.58%, maturing between August 2013 and January 2023. 1,058,166,242 47,953,292 1,106,119,534 (1) - (a) Fixed Interest Bonds (TIF), with a par value of Bs 1,531,900,935, annual yield at between 9.87% and 18%, maturing between April 2014 and February 2021 1,682,520,046 52,311,662 1,734,831,708 (1) - (a) Treasury Notes, with a par value of Bs 60,000,000, annual yield at between 1.76% and 2.37%, maturing between August and October 2013 57,883,991 1,735,682 59,619,673 (2) - (a) Principal and Interest Covered Bonds (TICC), payable in bolivars, with a reference par value of US$39,406,441, annual yield at between 5.3% and 8.6%, maturing between November 2013 and March 2019 (Note 4) 242,179,471 (14,977,762) 227,201,709 (2) - (a) Sovereign Bonds in foreign currency, with a par value of US$416,500, annual yield at between 11.75% and 12.75%, maturing between August 2022 and 2031 (Note 4) 2,549,598 41,895 2,591,493 (1) - (b) Global Bonds, with a par value of US$5,024,677, 9.25% annual yield, maturing in September 2027 (Note 4) 33,735,704 2,387,413 36,123,117 (1) - (a) , (b) and (d) Agriculture Bonds, with a par value of Bs 44,400,000, 9.1% annual yield, maturing in March 2014 (Note 6) 44,795,071 (395,071) 44,400,000 (1) - (a)

3,121,830,123 89,057,111 3,210,887,234

Bonds and debt securities issued by Venezuelan non-financial public- sector companies (Note 4) PDVSA Bonds issued by Petróleos de Venezuela, S.A., with a par value of US$140,000, annual yield at between 8.5% and 9%, maturing in November 2017 791,495 (13,586) 777,909 (1) - (b) and (c)

Equity in Venezuelan non-financial private-sector companies Common shares Sociedad de Garantías Recíprocas (SGR) del Estado Aragua, C.A., 10,128 common shares with a par value of Bs 10 each, 1.7% owned 101,280 6,063 107,343 (3) - (e) Sociedad de Garantías Recíprocas (SGR) del Estado Falcón C.A., 10,000 common shares with a par value of Bs 10 each, 2.77% owned 100,000 (47,437) 52,563 (3) - (e) S.G.R.- SOGAMIC, S.A., Sociedad de Garantías Recíprocas del Sector Microfinanciero, 17,500 common shares with a par value of Bs 10 each, 3.10% owned 175,000 65,858 240,858 (3) - (e) S.G.R.- SOGARSA, S.A., Sociedad de Garantías Recíprocas para el Sector Agropecuario Forestal Pesquero y Afines S.A., 3,000 shares with a par value of Bs 10 each, 0.028% owned 30,000 10,705 40,705 (3) - (e)

406,280 35,189 441,469

3,123,027,898 89,078,714 3,212,106,612

Unrealized loss on transfer of available-for-sale securities as per SUDEBAN Notice No. SIB-II-CCD-36481 (6,516,196)

82,562,518


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December 31, 2012 Net Book value unrealized (equivalent Acquisition gain to fair cost (loss) value)

(In bolivars) Securities issued or guaranteed by the Venezuelan government Vebonos, with a par value of Bs 842,494,085, annual yield at between 10.93% and 17.70%, maturing between April 2013 and May 2021 924,902,326 36,089,837 960,992,163 (1) Fixed Interest Bonds (TIF), with a par value of Bs 1,342,388,161, annual yield at between 9.90% and 18.00%, maturing between April 2014 and 2019 1,479,228,412 46,261,914 1,525,490,326 (1) Treasury Notes, with a par value of Bs 556,616,000, annual yield at between 0.92% and 3.54%, maturing between January and October 2013 550,331,973 3,765,717 554,097,690 (2) Principal and Interest Covered Bonds (TICC), payable in bolivars, with a reference par value of US$22,321,966, annual yield at between 5.25% and 8.63%, maturing between November 2013 and March 2019 (Note 4) 92,258,482 (5,402,292) 86,856,190 (2) Sovereign Bonds in foreign currency, with a par value of US$124,500, annual yield at between 7.75% and 12.75%, maturing between October 2019 and August 2031 (Note 4) 637,330 101,765 739,095 (1) Global Bonds, with a par value of US$33,707,800, annual yield at between 5.75% and 13.63%, maturing between September 2013 and 2027 (Note 4) 175,251,105 1,119,772 176,370,877 (1) Agriculture Bonds, with a par value of Bs 104,400,000, 9.10% annual yield, maturing between March 2013 and 2014 (Note 6) 104,836,096 (436,096) 104,400,000 (1)

3,327,445,724 81,500,617 3,408,946,341

Bonds and debt securities issued by Venezuelan non-financial public- sector companies (Note 4) Petrobonos issued by Petróleos de Venezuela, with a par value of US$512,000, fixed annual yield at between 5.13% and 8.00%, maturing between November 2013 and October 2016 2,490,894 257,137 2,748,031 (1) PDVSA bonds issued by Petróleos de Venezuela, S.A., with a par value of US$5,452,000, annual yield at between 5.25% and 12.75%, maturing between April 2017 and 2037 28,518,669 3,429,498 31,948,167 (1)

31,009,563 3,686,635 34,696,198

Bonds and debt securities issued or guaranteed by foreign countries (Note 4) Argentine Government National Public Debt Bonds, with a par value of US$103,900, maturing in October 2015 393,575 13,132 406,707 (1)

Equity in Venezuelan non-financial private-sector companies Common shares Sociedad de Garantías Recíprocas (SGR) del Estado Aragua, C.A., 10,128 common shares with a par value of Bs 10 each, 1.7% owned 101,280 6,063 107,343 (3) Sociedad de Garantías Recíprocas (SGR) del Estado Falcón C.A., 10,000 common shares with a par value of Bs 10 each, 2.77% owned 100,000 (47,437) 52,563 (3) S.G.R.- SOGAMIC, S.A., Sociedad de Garantías Recíprocas del Sector Microfinanciero, 17,500 common shares with a par value of Bs 10 each, 3.10% owned 175,000 (11,722) 163,278 (3) S.G.R.- SOGARSA, S.A., Sociedad de Garantías Recíprocas para el Sector Agropecuario Forestal Pesquero y Afines S.A., 3,000 shares with a par value of Bs 10 each, 0.028% owned 30,000 4,701 34,701 (3)

406,280 (48,395) 357,885

3,359,255,142 85,151,989 3,444,407,131

Unrealized loss on transfer of available-for-sale securities as per SUDEBAN Notice No. SIB-II-CCD-36481 (7,680,340)

77,471,649

(1) Estimated fair value is determined from trading operations on the secondary market per valuation screens or yield curves. The fair value of investments denominated in foreign currencies issued by the Venezuelan government is their equivalent amount in bolivars calculated at the SITME exchange rate.

(2) Value is determined based on the present value of estimated future cash flows in conformity with the Accounting Manual. The fair value of TICCs is their equivalent amount in bolivars at the official exchange rate.

(3) Equity value, considered as fair value, is based on unaudited financial statements.

Custodians of investments (a) Central Bank of Venezuela (b) Commerzbank (c) Morgan Stanley (d) Caja Venezolana de Valores, S.A. (e) Shares held in custody of private-sector companies, SGR del Estado Aragua, C.A, SGR del Estado Falcón, C.A, S.G.R. - SOGAMIC, S.A., S.G.R.

SOGARSA, S.A.


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Through Notice No. SIB-II-GGIBPV2-40535 of December 13, 2012, SUDEBAN informed the Bank that since the Reuters and Bloomberg services—which offer reference prices for all key global financial markets—do not provide reference prices for the Bank’s available-for-sale investments, the Bank must use similar services or, if unavailable, must apply the present value (yield curve) to measure its available-for-sale investments, as required by the Accounting Manual. The Bank followed these guidelines to measure its available-for-sale portfolio at June 30, 2013 and December 31, 2012. Through Notice No. SIB-II-CCD-36481 of November 12, 2012, SUDEBAN instructed the Bank to transfer the balances of non-convertible bearer bonds (2012 issue) issued by Fondo de Desarrollo Nacional FONDEN, S.A. for Bs 209,187,351 and those issued by Petróleos de Venezuela, S.A. for Bs 91,359,660 from the available-for-sale portfolio to the held-to-maturity portfolio, in conformity with Circular No. SIB-II-GGR-GNP-CCD-15075 of May 30, 2012. At December 31, 2012, the Bank calculated the fair value of the available-for-sale investments at the date of transfer and recorded an unrealized loss on these investments of Bs 7,680,340 in a separate equity account, which is being amortized until these securities mature. At December 31, 2012, the Bank has a balance of Bs 6,516,196 in this connection, as required by the Accounting Manual (Note 2). TICCs issued by the Bolivarian Republic of Venezuela, payable in local currency and referenced to the U.S. dollar at the official exchange rate of Bs 6.2842/US$1 (Bs 4.30/US$1 at December 31, 2012), have foreign exchange indexing clauses at variable quarterly yields.

At period end, the Bank records fluctuations in the market value of these investments as an unrealized gain or loss on investments in available-for-sale securities in equity. These unrealized gains or losses comprise the following: June 30, December 31, 2013 2012

(In bolivars) Unrealized gain Securities issued or guaranteed by the Venezuelan government in local currency 102,000,636 86,117,468 Securities issued or guaranteed by the Venezuelan government in foreign currency 2,429,308 1,221,537 Bonds and debt securities issued by Venezuelan non-financial public-sector companies - 3,686,635 Bonds and debt securities issued or guaranteed by foreign countries - 13,132 Equity in Venezuelan non-financial private-sector companies 82,626 10,764

104,512,570 91,049,536

Unrealized loss Securities issued or guaranteed by the Venezuelan government in local currency (395,071) (436,096) Securities issued or guaranteed by the Venezuelan government in foreign currency (14,977,762) (5,402,292) Bonds and debt securities issued by Venezuelan non-financial public-sector companies (13,586) - Equity in Venezuelan non-financial private-sector companies (47,437) (59,159)

(15,433,856) (5,897,547)

89,078,714 85,151,989

Unrealized loss on transfer of available-for-sale securities as per SUDEBAN Notice No. SIB-II-CCD-36481 (6,516,196) (7,680,340)

Net unrealized gain (loss) on available-for-sale securities 82,562,518 77,471,649


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Below is the classification of investments in available-for-sale securities according to maturity: Fair value June 30, December 31, 2013 2012

(In bolivars) Up to six months 169,259,750 623,926,558 Six months to one year 85,169,127 88,412,925 One to five years 1,196,766,130 1,422,197,947 Over five years 1,760,470,136 1,309,511,816 Without maturity 441,469 357,885

3,212,106,612 3,444,407,131

During the six-month period ended June 30, 2013, the Bank sold investments in available-for-sale securities amounting to Bs 8,351,636,510 (Bs 5,006,728,645 during the six-month period ended December 31, 2012), resulting in gains and losses of Bs 36,184,541 and Bs 25,037,948 (Bs 23,816,309 and Bs 7,744,273, respectively, during the six-month period ended December 31, 2012), shown under other operating income and other operating expenses, respectively (Notes 19 and 20).

At June 30, 2013, the Bank has Agriculture Bonds of Bs 44,400,000 (Bs 104,400,000 at December 31, 2012), considered as investments in the agricultural sector to meet the minimum legal percentage that it is required to earmark in this connection (Note 6). b) Investments in held-to-maturity securities Investments in held-to-maturity securities are shown at amortized cost and comprise debt securities that the Bank has the firm intention and ability to hold until maturity. These securities comprise the following:

June 30, 2013

Acquisition Amortized Fair Custodians of

cost cost value investments

(In bolivars)

Securities issued or guaranteed by the Venezuelan government Vebonos, with a par value of Bs 214,427,568, annual yield at between 10.72% and 12.85%, maturing between July 2013 and April 2018 182,851,435 184,863,096 226,941,147 (1)- (a) Fixed Interest Bonds (TIF), with a par value of Bs 1,278,837.836, annual yield at between 9.75% and 18%, maturing in October 2013 and 2020 1,476,334,958 1,404,087,920 1,405,255,789 (3) - (a) Sovereign Bonds in foreign currency, with a par value of US$15,993,000,

annual yield at between 7.75% and 8.25%, maturing between October 2019 and 2024 (Note 4) 136,229,265 125,127,429 79,759,604 (1 ) - (c) Principal and Interest Covered Bonds (TICC), payable in bolivars, with a reference

par value of US$68,167,827, annual yield at between 5.25% and 8.63%, maturing between November 2013 and March 2019 (Note 4) 410,585,913 423,393,425 409,632,241 (3) - (a)

2,206,001,571 2,137,471,870 2,121,588,781

Bonds and debt securities issued by Venezuelan non-financial public-sector companies Dematerialized Participation Certificate issued by Fondo Simón Bolívar para la Reconstrucción, S.A., with a par value of Bs 877,064,242, 3.75% annual yield, maturing in Mary 2015 877,064,242 877,064,242 877,064,242 (2) - (a) Global Bonds issued by La Electricidad de Caracas, C.A., with a par value of US$250,000, 8.5% annual yield, maturing in April 2018 (Note 4) 891,571 1,137,163 1,137,162 (1) - (c) Agriculture Bonds issued by Fondo de Desarrollo Nacional FONDEN, S.A., with a par value of Bs 440,000,000, 9.10% annual yield, maturing between April 2015 and July 2017 (Note 6) 433,859,980 427,951,043 427,950,994 (1) - (a) PDVSA Bonds issued by Petróleos de Venezuela, S.A., with a par value of US$2,316,900, annual yield at between 5.38% and 8.5%, maturing between November 2017 and April 2037 (Note 4) 14,557,048 14,274,304 14,274,527 (1 )- (b) and (c) Agriculture Bonds issued by Petróleos de Venezuela, S.A. with a par value of Bs 30,000,000, 9.1% annual yield, maturing in July 2015 (Note 6) 30,528,180 30,409,161 30,409,170 (1) - (a)

1,356,901,021 1,350,835,913 1,350,836,095


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June 30, 2013

Acquisition Amortized Fair Custodians of

cost cost value investments

(In bolivars)

Debt securities issued by foreign non-financial private-sector companies (Note 4)

AES Andre B.D. Dominicana, with a par value of US$200,000, 9.5% annual yield,

maturing in November 2020 1,344,819 1,322,706 1,322,706 (1) - (c) Telemovil Finance Co. Ltd., with a par value of US$200,000, 8% annual yield,

maturing in October 2017 1,319,682 1,296,571 1,296,571 (1) - (c) Cemex S.A.B., de C.V, with a par value of US$200,000, 9% annual yield,

maturing in January 2018 1,344,819 1,266,599 1,266,599 (1) - (c)

4,009,320 3,885,876 3,885,876

Debt securities issued by foreign financial private-sector companies (Note 4) Banco Bradresco S.A. Grand Cayman Branch, with a par value of US$250,000, 8.75% annual yield, maturing in October 2013 1,806,708 1,597,610 1,597,599 (1) - (c) Ford Motor Credit Company, with a par value of US$400,000, annual yield at between 7% and 8.7%, maturing between January 2014 and April 2015 2,802,753 2,591,280 2,591,280 (1) - (c) BBVA Bancomer S.A., with a par value of US$200,000, 6% annual yield, maturing in May 2022 1,275,693 1,271,586 1,271,587 (1) - (c) Braskem Finance LTD., with a par value of US$200,000, 7% annual yield, maturing in May 2020 1,316,540 1,300,708 1,300,707 (1) - (c) BanColombia, S.A., with a par value of US$200,000, 4.25% annual yield, maturing in January 2016 1,254,955 1,255,886 1,255,886 (1) - (c) International Cooperative UA, with a par value of US$100,000, 10.38% annual yield, maturing in September 2020 636,589 634,511 634,511 (1) - (c) Morgan Stanley, with a par value of US$200,000, 4.2% annual yield, maturing in November 2014 1,301,961 1,273,061 1,273,061 (1) - (c)

10,395,199 9,924,642 9,924,631

3,577,307,111 3,502,118,301 3,486,235,383

December 31, 2012 Acquisition Amortized Fair cost cost value

(In bolivars) Securities issued or guaranteed by the Venezuelan government Vebonos, with a par value of Bs 243,401,807, annual yield at between 10.92% and 12.97%, maturing between May 2013 and April 2018 225,910,920 227,871,434 244,399,348 (1) Fixed Interest Bonds (TIF), with a par value of Bs 1,303,837,836, annual yield at between 9.63% and 18.00%, maturing between May 2013 and

October 2020 1,506,334,958 1,446,570,344 1,449,568,728 (3) Sovereign Bonds in foreign currency, with a par value of US$15,993,000, annual yield at between 7.75% and 8.25%, maturing between October 2019 and 2024 (Note 4) 114,893,718 106,785,060 78,851,213 (1) Principal and Interest Covered Bonds (TICC), payable in bolivars, with a reference par value of US$68,167,827, annual yield at between 5.25% and 8.63%,

maturing between November 2013 and March 2019 (Note 4) 280,945,772 288,543,313 290,049,715 (3)

2,128,085,368 2,069,770,151 2,062,869,004

Bonds and debt securities issued by Venezuelan non-financial public-sector companies Dematerialized Participation Certificate issued by Fondo Simón Bolívar para la Reconstrucción, S.A., with a par value of Bs 233,458,108, 3.75% annual yield, maturing in May 2015 233,458,108 233,458,108 233,458,108 (2) Global Bonds issued by La Electricidad de Caracas, C.A., with a par value of US$250,000, 8.5% annual yield, maturing in April 2018 (Note 4) 610,063 747,022 950,300 (1) Agriculture Bonds issued by Fondo de Desarrollo Nacional Fonden, S.A., with a par value of Bs 350,000,000, 9.10% annual yield, maturing between April 2015 and July 2017 (Note 6) 373,028,500 370,299,431 365,534,650 (1) PDVSA Bonds issued by Petróleos de Venezuela, S.A., with a par value of US$2,316,900, annual yield at between 5.38% and 8.5%, maturing between November 2017 and April 2037 (Note 4) 12,010,219 12,011,158 12,081,422 (1) Agriculture Bonds issued by Petróleos de Venezuela, S.A. with a par value of

Bs 90,000,000, 9.1% annual yield, maturing between July 2015 and 2017 (Note 6) 91,359,660 91,319,812 91,359,660 (1)

710,466,550 707,835,531 703,384,140

Debt securities issued by foreign non-financial private-sector companies (Note 4)

AES Andre B.D. Dominicana, with a par value of US$200,000, 9.5% annual yield,

maturing in November 2020 920,200 908,129 935,250 Telemovil Finance Co. Ltd., with a par value of US$200,000, 8% annual yield,

(1)

maturing in October 2017 903,000 890,384 920,200 Cemex S.A.B., de C.V., with a par value of US$200,000, 9% annual yield, (1) maturing in January 2018 870,320 867,415 937,400

2,693,520 2,665,928 2,792,850 (1)


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December 31, 2012 Acquisition Amortized Fair cost cost value

(In bolivars) Debt securities issued by foreign financial private-sector companies (Note 4) Banco Bradresco S.A. Grand Cayman Branch, with a par value of US$250,000, 8.75% annual yield, maturing in October 2013 1,236,250 1,122,105 1,128,664 Ford Motor Credit Company, with a par value of US$400,000, annual yield at (1) between 7% and 8.7%, maturing between January 2014 and April 2015 1,917,800 1,802,396 1,921,919 BBVA Bancomer S.A., with a par value of US$200,000, 6% annual yield, (1) maturing in May 2022 872,900 870,658 894,400 Braskem Finance LTD., with a par value of US$200,000, 7% annual yield,

(1)

maturing in May 2020 900,850 892,208 971,800 BanColombia, S.A., with a par value of US$200,000, 4.25% annual yield,

(1)

maturing in January 2016 858,710 859,218 853,550 International Cooperative UA, with a par value of US$100,000, 10.38% annual yield, (1) maturing in September 2020 435,590 434,456 363,350 Morgan Stanley, with a par value of US$200,000, 4.2% annual yield, maturing in November 2014 890,874 875,103 878,954 (1)

7,112,974 6,856,144 7,012,637 (1)

2,848,358,412 2,787,127,754 2,776,058,631

(1) Estimated fair value is determined from trading operations on the secondary market or the present value of estimated future cash flows. The fair value of investments denominated in foreign currencies issued by the Venezuelan government is their equivalent amount in bolivars calculated at the SITME exchange rate.

(2) Shown at par value, which is considered as fair value.

(3) Estimated market value based on the present value of estimated future cash flows or yield curves.

Custodians of investments (a) Central Bank of Venezuela

(b) Commerzbank (c) Morgan Stanley

Below is the classification of held-to-maturity securities according to maturity: June 30, 2013 December 31, 2012 Amortized Fair Amortized Fair cost value cost value

(In bolivars) Less than one year 383,922,535 376,978,698 331,436,738 328,004,744 One to five years 2,878,186,098 2,930,519,997 2,251,255,979 2,282,153,705 Five to ten years 176,367,646 140,358,438 110,794,026 93,593,544 Over ten years 63,642,022 38,378,250 93,641,011 72,306,638

3,502,118,301 3,486,235,383 2,787,127,754 2,776,058,631

The Accounting Manual establishes that all sales of held-to-maturity securities for reasons other than those indicated in the Accounting Manual must be authorized by SUDEBAN (Note 2). On December 14, 2012, the Curacao Branch sold a held-to-maturity security for US$2,265,627, maturing on November 2, 2017, without SUDEBAN’s authorization. On January 9, 2013, the Bank informed SUDEBAN that the Branch had made an honest mistake and that when the Branch became aware of it, it immediately purchased another security of identical characteristics at the same sale price of the original security (97.825%), and recorded it in account 123 “held-to-maturity securities” at the new acquisition cost. The Bank also informed SUDEBAN that the gain on sale of US$465,099 was recorded in the liability account “other deferred income” until the security is paid at maturity (Note 17). Through Notice No. SIB-II-GGIBPV-GIBPV2-04502 issued on February 18, 2013, SUDEBAN informed the Bank that the transaction was duly noted while stressing the obligation to comply with the Accounting Manual as regards authorization from SUDEBAN for this type of transaction. At June 30, 2013, the Bank has agriculture bonds issued by Fondo Nacional de Desarrollo Nacional FONDEN, S.A. and Petróleos de Venezuela, S.A. for Bs 427,951,043 and Bs 30,409,161, respectively (Bs 370,299,431 and Bs 91,319,812, respectively, at December 31, 2012). Through Notice No. SIB-II-CCD-06140 of March 1, 2013, SUDEBAN informed the Bank that the maximum amount of agriculture


35

bonds that may be included in the agricultural loan portfolio, as per Notice No. 093 of July 31, 2012 issued by the People’s Power Ministry for Agriculture and Land, is Bs 473,381,100 (through Notice No. SIB-II-CCD-36481 of November 12, 2012, SUDEBAN established the maximum amount of Bs 358,981,100 at December 31, 2012). At June 30, 2013, the Bank has agriculture bonds issued by Fondo Nacional de Desarrollo Nacional FONDEN, S.A. and PDVSA for Bs 468,857,471 (Note 5-a) (Bs 357,191,917 at December 31, 2012), which may be computed as part of the agricultural loans that the Bank is required to grant (Note 6).

At June 30, 2013, the Bank has Dematerialized Participation Certificates issued by Fondo Simón Bolívar para la Reconstrucción, S.A. for Bs 877,064,242 (Bs 233,458,108 at December 31, 2012), which may be deducted from the legal reserve amount required of financial institutions (Note 29). The Bank has the ability and intention to hold these securities to maturity.

At June 30, 2013, unrealized losses of Bs 59,129,070 (Bs 32,698,628 at December 31, 2012) on held-to-maturity securities issued by the Bolivarian Republic of Venezuela are considered temporary since management believes that from the standpoint of the issuer’s credit risk, interest rate risk and liquidity risk, the decrease in these securities’ fair value is temporary. In addition, the Bank has the intention and ability to hold these securities to maturity. Accordingly, the Bank has identified no impairment in the value of these investments.

c) Overnight deposits These investments are recorded at realizable value, representing cost or par value and comprise the following: June 30, December 31, 2013 2012

(In bolivars) Certificate of deposit with the BCV, with a par value of Bs 1,000,000,000, annual yield at between 6% and 7%, maturing between July and August 2013 1,000,000,000 1,010,939,000

d) Restricted investments These investments are shown at par value, which is considered as fair value, and comprise the following: June 30, 2013 December 31, 2012 Amortized Fair Amortized Fair cost value cost value

(In bolivars) Other restricted investments Certificates of deposit

JP Morgan Chase Bank, with a par value of US$1,002,294 (Nota 4) 7,557,554 7,557,554 4,309,865 4,309,865 (1) PNC Bank, with a par value of US$1,611,945 (Note 4) 10,144,867 10,144,867 6,931,366 6,931,366 (1) Multibank, with a par value of US$1,540,000 (Note 4) 9,677,668 9,677,668 - - (1) Deutsche Bank, with a par value of US$4,196,507 (Note 4) 26,371,687 26,371,687 - - (1) Social Contingency Fund (Note 25) 7,783,425 7,783,425 5,181,051 5,181,051 (1)

61,535,201 61,535,201 16,422,282 16,422,282

(1) Par value is used as fair value. Securities denominated in foreign currency are shown at the official exchange rate.

At June 30, 2013 and December 31, 2012, the certificates of deposit with JP Morgan Chase Bank and PCN Bank are used as collateral to guarantee VISA and MasterCard credit card operations, respectively. At June 30, 2013, guarantee deposits of Multibank and Deutsche Bank are used to guarantee operations with letters of credit through SICAD.


36

e) Investments in other securities These investments are shown at par value and comprise the following: June 30, December 31, Custodians of 2013 2012 investments

(In bolivars) Liabilities from investment trusts issued by financial institutions Certificates of participation issued by Banco de Desarrollo Económico y Social de Venezuela (BANDES), with a par value of Bs 251,289,000, 3.75% annual interest, maturing in June 2014 251,289,000 251,289,000 (1) BCV

Other liabilities Special mortgage securities issued by Banco Nacional de Vivienda

y Hábitat (BANAVIH), with a par value of Bs 117,640,000, 2% annual yield, maturing in November 2021 117,640,000 117,640,000 (1) BCV Bolivarian Housing Securities issued by the Fondo Simón Bolívar para la Reconstrucción, S.A., with a par value of Bs 928,409,542 (Bs 418,557,594 at December 31, 2012), 4.66% annual yield, maturing in June and October 2020 928,409,542 418,557,594 (1) BCV

Deposits of the microfinancial sector Bancrecer S.A. Banco Microfinanciero, with a par value of Bs 5,118,750, 9.5% annual yield, maturing in January 2013 - 5,118,750 (1) BCV

1,297,338,542 792,605,344 (1) Par value is considered as fair value.

At June 30, 2013, the Bank has Bolivarian Housing Securities issued by Fondo Simón Bolívar para la Reconstrucción, S.A. for Bs 928,409,542 (Bs 418,557,594 at December 31, 2012). These securities were awarded progressively as follows: 40% in June 2012, 30% in August 2012 and 30% in November 2012. These deposits were imputed to the construction mortgage loan portfolio compliance (Note 6). The Bank has the intention and ability to hold these securities to maturity. In addition, these securities are guaranteed by the Bolivarian Republic of Venezuela. At June 30, 2013 and December 31, 2012, the Bank, acting as trustee, has certificates of participation for Bs 251,289,000 issued by Banco Nacional de Desarrollo Económico y Social de Venezuela (BANDES). These funds arise from the decrease by three percentage points in the legal reserve at June 30, 2011, and have been earmarked for programs under “Venezuela’s Great Housing Mission.” In September 2011, Petróleos de Venezuela, S.A. (PDVSA) signed an agreement to guarantee BANDES the availability of the resources needed to settle these liabilities. The Bank has the intention and ability to hold these securities to maturity. At June 30, 2013 and December 31, 2012, the Bank maintains special mortgage securities for Bs 117,640,000 with long-term mortgage loan guarantees issued by Banco Nacional de Vivienda y Hábitat, which were computed in the construction loan portfolio at December 31, 2011 (Note 6). The Bank has the intention and ability to hold these securities to maturity. At December 31, 2012, the Bank has deposits in the microfinancial sector for Bs 5,118,750 which are considered for compliance with the minimum percentage of the mandatory portfolios (Note 6). The Bank’s control environment includes policies and procedures to determine investment risks by entity and economic sector. At June 30, 2013, the Bank has investment securities issued or guaranteed by the Venezuelan government of Bs 8,997,311,467, representing 99.16% of its investment securities portfolio (Bs 8,019,673,815, representing 99.61 of its investment securities portfolio at December 31, 2012).


37

6. Loan portfolio The loan portfolio is classified by economic activity, guarantee, maturity and type of loan as follows:

June 30, 2013 Current Rescheduled Overdue In litigation Total

(In bolivars) Economic activity Wholesale and retail trade, restaurants and hotels 6,788,915,690 737,856 2,045,860 - 6,791,699,406 Financial businesses, insurance, real estate and services 973,759,566 - 17,803,500 - 991,563,066 Agriculture 1,901,032,060 66,769,501 1,827,032 - 1,969,628,593 Construction 1,083,808,153 92,889 19,044 - 1,083,920,086 Transportation, warehousing and communications 298,343,382 29,092 16,667 - 298,389,141 Utilities 431,430 - - - 431,430 Communal, social and consumer services 1,684,373,317 673,696 2,432,546 - 1,687,479,559 Manufacturing 438,545,690 - 1,639,991 - 440,185,681 Mining and oil 117,788,709 - - - 117,788,709 Sundry activities 794,153,230 - - - 794,153,230

14,081,151,227 68,303,034 25,784,640 - 14,175,238,901

Allowance for losses on loan portfolio 328,666,298

13,846,572,603 Guarantee

Endorsement 3,935,362,004 1,155,086 1,408,917 - 3,937,926,007 Real property mortgage 1,078,912,804 1,609,745 5,398,360 - 1,085,920,909 Other guarantees 208,048,792 50,000 209,351 - 208,308,143 Collateral 2,462,619,395 12,839,139 973,206 - 2,476,431,740 Pledge 112,253,724 549,999 128,556 - 112,932,279 Chattel mortgage 72,637,942 141,815 805,988 - 73,585,745 Written instruments 110,011,360 - - - 110,011,360 Non-possessory pledge 56,324,932 793,625 - - 57,118,557 Fiduciary 218,750 - - - 218,750 Unsecured 6,044,761,524 51,163,625 16,860,262 - 6,112,785,411

14,081,151,227 68,303,034 25,784,640 - 14,175,238,901

Maturity Up to 30 days 2,444,077,340 206,715 3,291,893 - 2,447,575,948 31 to 60 days 2,130,956,877 103,950 245,482 - 2,131,306,309 61 to 90 days 1,453,612,679 - 202,483 - 1,453,815,162 91 to 180 days 1,888,854,688 299,911 230,293 - 1,889,384,892 181 to 360 days 1,526,196,576 160,636 222,610 - 1,526,579,822 Over 360 days 4,637,453,067 67,531,822 21,591,879 - 4,726,576,768

14,081,151,227 68,303,034 25,784,640 - 14,175,238,901


38

December 31, 2012 Current Rescheduled Overdue In litigation Total

(In bolivars) Economic activity Wholesale and retail trade, restaurants and hotels 5,578,129,081 1,132,210 1,580,597 - 5,580,841,888 Financial businesses, insurance, real estate and services 962,996,601 - 5,444,213 - 968,440,814 Agriculture 1,331,877,119 31,712,524 12,547,361 - 1,376,137,004 Construction 850,558,262 232,222 19,044 - 850,809,528 Transportation, warehousing and communications 342,065,901 69,066 - - 342,134,967 Utilities 597,441 - - - 597,441 Communal, social and consumer services 1,503,467,171 1,005,549 1,804,461 - 1,506,277,181 Manufacturing 537,262,953 - 11,859 - 537,274,812 Mining and oil 118,331,474 - - - 118,331,474 Sundry activities 716,199,355 - 13,585 - 716,212,940

11,941,485,358 34,151,571 21,421,120 - 11,997,058,049

Allowance for losses on loan portfolio (314,411,126)

11,682,646,923 Guarantee Endorsement 3,784,890,441 10,361,158 3,229,842 - 3,798,481,441 Real property mortgage 1,241,874,261 4,351,389 8,429,109 - 1,254,654,759 Other guarantees 626,559,584 62,500 211,141 - 626,833,225 Collateral 1,722,474,019 13,754,916 6,277,908 - 1,742,506,843 Pledge 141,095,858 549,999 - - 141,645,857 Chattel mortgage 65,650,771 160,487 190,811 - 66,002,069 Written instruments 28,647,169 - - - 28,647,169 Non-possessory pledge 58,002,043 901,500 - - 58,903,543 Unsecured 4,272,291,212 4,009,622 3,082,309 - 4,279,383,143

11,941,485,358 34,151,571 21,421,120 - 11,997,058,049 Maturity Up to 30 days 1,869,822,654 607,045 3,344,116 - 1,873,773,815 31 to 60 days 1,393,516,796 33,333 217,897 - 1,393,768,026 61 to 90 days 1,085,061,212 34,822 33,332 - 1,085,129,366 91 to 180 days 1,967,254,518 107,996 3,480,637 - 1,970,843,151 181 to 360 days 1,358,558,401 1,142,138 246,613 - 1,359,947,152 Over 360 days 4,267,271,777 32,226,237 14,098,525 - 4,313,596,539

11,941,485,358 34,151,571 21,421,120 - 11,997,058,049

Below is a breakdown of the loan portfolio by type of loan: June 30, December 31, 2013 2012

(In bolivars) Type of loan Fixed term, includes US$23,091,412 (US$26,138,903 at December 31, 2012) (Note 4) 5,810,952,254 5,146,108,438 Installment 1,990,835,572 1,674,034,487 Agriculture 1,927,112,227 1,376,137,004 Mortgage 1,368,420,712 1,199,972,793 Manufacturing 1,136,628,457 895,657,250 Microcredits 506,641,116 402,364,815 Credit cards 362,109,092 278,157,962 Factoring and discounts, includes US$2,605,729 308,145,271 351,142,785 Financial leases 278,214,525 221,983,152 Tourism 219,207,819 191,218,350 Vehicles 135,433,223 111,280,267 Letters of credit, includes US$19,867,929 (US$32,804,067 at December 31, 2012) (Note 4) 124,854,033 141,057,488 Other (employee loans) 5,999,859 7,277,179 Checking accounts 684,741 666,079

14,175,238,901 11,997,058,049


39

Through Resolution No. 33,211 of December 22, 2011, SUDEBAN established the parameters to set aside provisions for loans or microcredits granted to individuals or corporations whose assets were subject to expropriation, occupation or intervention from the Venezuelan government, effective from December 1, 2011 to November 30, 2013. A modification of this Resolution was published in Official Gazette No. 39,924 of May 17, 2012. At June 30, 2013, the Bank applied the aforementioned Resolution to loans amounting to Bs 464,550,698 (Bs 350,189,668 at December 31, 2012). In addition, in accordance with SUDEBAN rules, at June 30, 2013, the Bank maintains a general allowance for losses on the loan portfolio of Bs 147,090,319 (Bs 124,251,971 at December 31, 2012), equivalent to 1% of the principal balance of the loan portfolio, except for the balance of the microcredit portfolio, for which it maintains a general 2% allowance (Note 2-d). Below is the movement in the allowance for losses on the loan portfolio: June 30, December 31, 2013 2012

(In bolivars) Balance at the beginning of the period 314,411,126 285,744,979 Provided in the period 11,640,779 51,362,434 Increase from exchange adjustment 637,581 - Write-offs of uncollectible loans (10,817,837) (14,907,130) Reclassification from (to) the provision for interest receivable and other (Note 7) 13,069,808 (5,742,176) Reclassification to the provision for contingent loans (Note 17) (275,159) (2,044,030) Other - (2,951)

Balance at the end of the period 328,666,298 314,411,126

At June 30, 2013, overdue and in-litigation loans on which interest is no longer accrued amount to Bs 25,784,640 (Bs 21,421,120 at December 31, 2012). In addition, at June 30, 2013, memorandum accounts include Bs 37,352,687 (Bs 11,754,285 at December 31, 2012) in respect of interest not recognized as income from loans on which interest is no longer accrued (Note 22). During the six-month period ended June 30, 2013, the Bank wrote off loans of Bs 10,950,753 (Bs 14,907,130 during the six-month period ended December 31, 2012) against the allowance for losses on the loan portfolio. At June 30, 2013, the Bank recovered loans written off in previous periods of Bs 11,477,217, shown in the income statement within income from financial assets recovered (Bs 5,469,496 during the six-month period ended December 31, 2012). In addition, during the six-month period ended December 31, 2012, the Bank received personal and real property worth Bs 21,827,760 (Note 9).


40

At June 30, 2013, the Bank maintains an agricultural loan portfolio for Bs 1,927,112,227 and agriculture bonds issued by the Venezuelan government for Bs 468,857,471 (Note 5-a and b), representing 24.48% of the average gross loan portfolio at December 31, 2012 and 2011 (at December 31, 2012, Bs 1,376,137,004 and Bs 461,591,917, respectively, representing 29.12% of the average gross loan portfolio at December 31, 2011 and 2010). The agricultural loan portfolio is distributed as follows: June 30, 2013 Balance Maintained Required Financed sector Activity Bs % % Strategic Primary agricultural production 1,310,941,124 68.03 49.0 minimum Agroindustrial investments 197,215,987 10.23 10.5 maximum Marketing 156,162,222 8.10 10.5 maximum Non-strategic Primary agricultural production 26,272,425 1.36 21.0 maximum Agroindustrial investments 167,674,604 8.70 4.5 maximum Marketing 68,845,865 3.57 4.5 maximum

Total agricultural portfolio 1,927,112,227 100.00 100.0 December 31, 2012 Balance Maintained Required Financed sector Activity Bs % % Strategic Primary agricultural production 932,229,990 67.75 49.0 minimum Agroindustrial investments 138,912,645 10.09 10.5 maximum Marketing 134,625,900 9.78 10.5 maximum

Non-strategic Primary agricultural production 28,420,797 2.07 21.0 maximum Agroindustrial investments 89,175,238 6.48 4.5 maximum Marketing 52,772,434 3.83 4.5

Total agricultural portfolio 1,376,137,004 100.00 100.0

Interest income for the six-month period ended June 30, 2013 includes Bs 1,138,136 (Bs 1,841,788 for

the six-month period ended December 31, 2012) for interest collected on loans overdue and in

litigation that had been deferred in previous periods.

At June 30, 2013, the Bank has Bs 222,250,688 in medium and long-term agricultural loans,

representing 11.53% of the total agricultural loan portfolio. Of this balance, Bs 108,872 is overdue

(Bs 303,835,476, representing 20.06% of the total agricultural loan portfolio, of which Bs 3,155,542 is

overdue at December 31, 2012).

At June 30, 2013, the Bank has 446 borrowers in the current agricultural loan portfolio (439 borrowers

at December 31, 2012), 67 are new borrowers, of which 35 are individuals (62 new borrowers, of which

44 are individuals at December 31, 2012).

At June 30, 2013, the Bank has granted microcredits of Bs 506,641,116 and has no deposits in microfinancial institutions (Note 5-e), representing 4.26% of its gross loan portfolio at December 31, 2012 (at December 31, 2012, Bs 402,364,815 and Bs 5,118,750 of deposits in microfinancial institutions, respectively, representing 4.15% of its gross loan portfolio at June 30, 2012). In addition, at June 30, 2013, the microcredit portfolio comprises 2,209 debtors (2,053 debtors at December 31, 2012) and 1,694 loans were granted during the period (2,676 loans during the six-month period ended December 31, 2012).


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At June 30, 2013, the Bank’s mortgage loan portfolio amounted to Bs 1,368,420,712

(Bs 1,199,972,793 at December 31, 2012) and it has special mortgage securities of Bs 928,409,542

(Note 5-e) (Bs 418,557,594 at December 31, 2012). At June 30, 2013, the Bank’s mortgage loan

portfolio comprises 2,480 debtors and 196 loans were granted during the period.

At June 30, 2013, effective disbursements and earmarked placements of mortgage loans amount to

Bs 1,078,321,156, equivalent to 9.07% of the gross loan portfolio at December 31, 2012. Compliance

percentages established in BANAVIH Form BANAVIH-GCVH-03/2011 for the six-month period ended

June 30, 2013 are as follows:

Balance Maintained Required Financed activity Monthly family income Market Bs % % Construction of housing Earmarked placements 509,851,946 4.29 8.58 Between one and six minimum salaries - 187,627 0.00 1.77 Between six and eight minimum salaries - 14,639,290 0.12 1.55 Between eight and fifteen minimum salaries - 201,414,399 1.69 1.10 Acquisition of primary residence Between one and six minimum salaries Primary 131,575,713 1.11 3.40 Between one and six minimum salaries Secondary 52,208,769 0.44 0.80 Between six and fifteen minimum salaries Primary 85,650,387 0.72 1.44 Between six and fifteen minimum salaries Secondary 82,793,025 0.70 0.36 Improvement and expansion of primary residence Between one and six minimum salaries - - - 0.75 Subcontracted construction of primary residence Between one and six minimum salaries - - - 0.25

Total mortgage portfolio 1,078,321,156 9.07 20.00

At December 31, 2012, the Bank’s mortgage loan portfolio comprises 2,408 debtors and 121 loans

were granted during the period. Compliance percentages of effective disbursements established in

BANAVIH Form BANAVIH-GCVH-03/2011 for the six-month period ended December 31, 2012 are as

follows:

Balance Maintained Required Financed activity Monthly family income Market Bs % % Construction of housing Earmarked placements 418,557,594 5.45 5.45 Between three and six minimum salaries - 11,004,245 0.14 1.78 Between six and eight minimum salaries - 75,619,831 0.98 1.56 Between eight and fifteen minimum salaries - 289,404,824 3.76 1.11 Acquisition of primary residence Between three and six minimum salaries Primary 75,647,345 0.98 2.20 Between three and six minimum salaries Secondary 27,153,690 0.35 0.70 Between six and fifteen minimum salaries Primary 148,033,907 1.93 0.75 Between six and fifteen minimum salaries Secondary 116,310,160 1.51 0.25 Improvement and expansion of Under or equal to five minimum primary residence salaries - - - 0.72

Subcontracted construction of primary residence Under five minimum salaries - - - 0.48

Total mortgage portfolio 1,161,731,596 15.10 15.00


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At June 30, 2013, the Bank has granted tourism loans for Bs 219,207,819, representing 2.24% of its average gross loan portfolio at December 31, 2012 and 2011 (Bs 191,218,350, representing 3.03% at December 31, 2012). The tourism loan portfolio is distributed as follows: June 30, 2013 Balance Maintained Required Segment Bs % % A 5,861,252 2.67 40 B 15,838,869 7.23 35 C 197,507,698 90.10 25

219,207,819 December 31, 2012 Balance Maintained Required Segment Bs % % A 1,613,116 0.84 40 B 12,153,500 6.36 35 C 177,451,734 92.80 25

191,218,350

At June 30, 2013, the tourism loan portfolio comprises 20 debtors and 4 new loans were granted during the period (17 debtors and 6 loans granted during the six-month period ended December 31, 2012). At June 30, 2013, the Bank has granted manufacturing loans for Bs 1,136,628,457, representing 9.56% of its gross loan portfolio at December 31, 2012 (at December 31, 2012, Bs 895,657,250, representing 11.65% of its gross loan portfolio at December 31, 2011). In addition, at June 30, 2013, the manufacturing loan portfolio comprises 164 debtors (128 debtors at December 31, 2012) and 244 new loans were granted during the period (605 loans during the six-month period ended December 31, 2012). The Bank’s control environment includes policies and procedures to determine credit risks by client and economic sector. Concentration of risk is limited since loans are granted to a variety of economic sectors over a broad customer base. At June 30, 2013 and December 31, 2012, the Bank does not have significant risk concentrations in respect of individual customers, groups of related companies or economic sectors. Subsequent event In addition to general and specific allowances established in SUDEBAN rules, through Resolution No. 1|103.13 of July 25, 2013, SUDEBAN laid out the rules regarding the countercyclical allowance, equivalent to 1% per month of the gross loan portfolio balance; and will be set aside as follows: 0.5% at September 30, 2013 and 1% at December 31, 2013.


43

7. Interest and commissions receivable Interest and commissions receivable comprise the following: June 30, December 31, 2013 2012

(In bolivars) Interest receivable on investment securities Available for sale 70.887.644 65.910.131 Held to maturity 49.239.518 47.257.850 Other securities 15.838.646 7.458.383

135.965.808 120.626.364

Interest receivable on loan portfolio Current 104.057.449 92.730.065 Rescheduled 333.060 367.978 Overdue 4.533.426 6.818.526 Microcredits 3.442.949 2.796.694 Agricultural 813.818 814.303

113.180.702 103.527.566

Commissions receivable Trust fund 969.185 890.821

250.115.695 225.044.751

Provision for interest receivable and other (11.678.884) (27.507.768)

238.436.811 197.536.983

The Bank has provisions for losses on interest receivable and other meeting the minimum requirements set by SUDEBAN. Below is the movement in the provision for interest receivable and other: June 30, December 31, 2013 2012

(In bolivars) Balance at the beginning of the period 27,507,768 22,524,300 Provided in the period 441,960 47,137 Increase from exchange adjustment 53,321 - Write-off of interest receivable on loans (3,254,357) (805,845) Reclassification (to) from the allowance for losses on loan portfolio (Note 6) (13,069,808) 5,742,176


During the six-month period ended June 30, 2013, the Bank wrote off interest receivable for Bs 3,254,357 (Bs 805,845 at December 31, 2012) against the provision for interest receivable and other.

8. Investment in subsidiaries, affiliates and branches In October 2008, the Bank requested authorization from SUDEBAN to open a branch in Willemstad, Curacao. SUDEBAN, through Notice No. SBIF-DSB-II-GGTE-GEE-07154 of May 18, 2009, and the Central Bank of Curacao and St. Maarten, through Communication No. Lcm/ni/2009-001159 of November 5, 2009, authorized the opening of this branch.


44

At a Board of Directors’ meeting on November 25, 2009, it was resolved to contribute US$1,000,000 to the new branch’s capital stock. This amount was fully paid in January 2010. Below is a summary of the financial statements of the Curacao Branch included in the Bank’s financial statements: Balance sheet

June 30, 2013 December 31, 2012 Equivalent Equivalent

US$ in bolivars US$ in bolivars

Assets Cash and due from banks 49,612,322 311,773,754 21,698,261 93,302,523 Investment securities 11,563,357 72,666,448 31,648,847 165,256,142 Loan portfolio 25,396,962 159,599,589 25,817,574 111,015,565 Interest and commissions receivable 279,425 1,755,963 823,611 4,210,882 Property and equipment 18,598 116,874 24,130 103,760 Other assets 19,424 122,064 4,675 20,101

86,890,088 546,034,692 80,017,098 373,908,973 Liabilities and Equity Customer deposits 78,997,651 496,437,038 73,865,484 317,621,586 Interest and commissions payable 24,388 153,265 22,034 94,746 Accruals and other liabilities 536,634 3,372,309 527,268 2,267,252

79,558,673 499,962,612 74,414,786 319,983,584

Assigned capital 1,000,000 6,284,200 1,000,000 4,300,000 Capital reserves 1,116,587 7,016,856 847,368 3,643,682 Retained earnings 4,816,958 30,270,728 3,740,076 41,518,943 Exchange gain from holding foreign currency assets and liabilities - - - 4,387,021 Unrealized gain on investments in available-for-sale securities 397,870 2,500,295 14,868 75,743

7,331,415 46,072,079 5,602,312 53,925,389

86,890,088 546,034,691 80,017,098 373,908,973

Income statement

June 30, 2013 December 31, 2012 Equivalent Equivalent

US$ in bolivars US$ in bolivars

Interest income 1,368,638 8,600,795 1,685,308 7,553,252 Interest expense (250,710) (1,575,512) (141,880) (610,083) Expenses from uncollectible and impaired financial assets - - (220,197) (946,845) Other operating income 554,393 3,483,916 1,091,832 29,062,977 Other operating expenses (205,228) (1,289,694) (106,985) (484,148) Operating expenses (115,751) (727,402) (154,438) (664,080) Sundry operating expenses (7,590) (47,697) - - Sundry operating income 3,405 21,398 10,927 46,989 Extraordinary expenses - - (16,571) (71,256) Income tax expense (1,056) (6,636) (3,759) (16,165)

Net income for the period 1,346,101 8,459,168 2,144,237 33,870,641

The equivalent amounts in bolivars shown in the above financial statements at June 30, 2013 have been translated at the official exchange rate of Bs 6.2842/US$1 (Bs 4.30/US$1 at December 31, 2012, except for securities issued by the Bolivarian Republic of Venezuela or by state-owned companies, which are shown at the average implicit exchange rate of securities traded through SITME on the last day of each month. At December 31, 2012, the SITME rate is Bs 5.30/US$1.


45

9. Available-for-sale assets Available-for-sale assets comprise the following: June 30, 2013 December 31, 2012 Accumulated Accumulated Cost amortization Net Cost amortization Net

(In bolivars) Real property received as payment 65,895,990 (29,506,181) 36,389,809 100,675,990 (29,186,294) 71,489,696 Idle construction in progress 650,945 (297,822) 353,123 650,945 (135,085) 515,860

66,546,935 (29,804,003) 36,742,932 101,326,935 (29,321,379) 72,005,556

During the six-month period ended June 30, 2013, the Bank recorded amortization expenses of Bs 15,675,957 (Bs 15,019,965 during the six-month period ended December 31, 2012), shown in the income statement under expenses from available-for-sale assets. In addition, at June 30, 2013, expenses from available-for-sale assets include Bs 627,154 (Bs 67,574 at December 31, 2012) in respect of expenses incurred from the sale of assets received as payment during the period. During the six-month period June 30, 2013, the Bank sold personal and real property received as payment with a book value of Bs 19,586,668, resulting in a gain on sale of Bs 16,510,882 (Bs 2,865,945 at December 31, 2012), shown in the income statement under income from available-for-sale assets. Below is the movement in the balance of available-for-sale assets for the six-month periods ended June 30, 2013 and December 31, 2012: Cost Balances at Balances at December 31, Disposals June 30, 2012 Additions and other 2013

(In bolivars) Real property received as payment (Note 6) 100,675,990 - (34,780,000) 65,895,990 Idle construction in progress 650,945 - - 650,945

101,326,935 - (34,780,000) 66,546,935 Accumulated amortization Balances at Balances at December 31, Disposals June 30, 2012 Additions and other 2013

(In bolivars) Real property received as payment (29,186,294) (15,513,220) 15,193,333 (29,506,181) Idle construction in progress (135,085) (162,737) - (297,822)

(29,321,379) (15,675,957) 15,193,333 (29,804,003)


46

Cost Balances at Balances at June 30, Disposals December 31, 2012 Additions and other 2012

(In bolivars) Real property received as payment (Note 6) 83,272,987 21,827,760 (4,424,757) 100,675,990 Personal property and equipment received as payment (Note 6) 137,040 - (137,040) - Idle construction in progress 126,352 989,264 (464,671) 650,945

83,536,379 22,817,024 (5,026,468) 101,326,935 Accumulated amortization Balances at Balances at June 30, Disposals December 31, 2012 Additions and other 2012

(In bolivars) Real property received as payment (14,881,794) (14,873,460) 568,960 (29,186,294) Personal property and equipment received as payment (59,654) (11,420) 71,074 - Idle construction in progress - (135,085) - (135,085)

(14,941,448) (15,019,965) (640,034) (29,321,379)

At June 30, 2013, the Bank did not receive real property received as payment; therefore, the delivery of information established under Article No. 103 of the Partial Reform of the Law on Banking Sector Institutions has not been applicable.

10. Property and equipment Property and equipment comprises the following: Useful June 30, 2013 December 31, 2012 life Accumulated Accumulated (Years) Cost depreciation Net Cost depreciation Net

(In bolivars) Land 29,356,256 - 29,356,256 29,356,256 - 29,356,256

Buildings and facilities 40 293,531,697 21,240,087 272,291,610 255,642,338 17,909,897 237,732,441 Computer hardware, includes US$10,329 (US$15,306 at December 31, 2012) (Note 4) 4 81,039,479 45,706,249 35,333,230 75,873,807 39,251,117 36,622,690 Furniture and equipment, includes US$8,269 (US$8,824 at Between December 31, 2012 (Note 4) 4 and 10 191,877,702 55,030,949 136,846,753 147,650,588 45,947,208 101,703,380 Vehicles 5 5,884,770 3,309,491 2,575,279 5,744,113 2,863,201 2,880,912 Equipment for Chip project 2,240,224 417,805 1,822,419 2,240,224 305,794 1,934,430 Construction in progress 93,587,530 - 93,587,530 77,242,006 - 77,242,006

697,517,658 125,704,581 571,813,077 593,749,332 106,277,217 487,472,115

Other property 587,389 - 587,389 587,389 - 587,389

698,105,047 125,704,581 572,400,466 594,336,721 106,277,217 488,059,504

During the six-month period ended June 30, 2013, the Bank recorded depreciation expenses of Bs 19,526,095 (Bs 17,026,945 during the six-month period ended December 31, 2012), shown in the income statement under general and administrative expenses (Note 21).

At June 30, 2013 and December 31, 2012, the balance of construction in progress is in respect of construction and remodeling work to the Bank’s main office and to existing and new agencies.


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Below is the movement in property and equipment for the six-month periods ended June 30, 2013 and December 31, 2012:

Cost Balances at Balances at December 31, Reclassifications June30, 2012 Additions Disposals and other 2013

(In bolivars)

Land 29,356,256 - - - 29,356,256 Buildings and facilities 255,642,338 3,301,237 (144,702) 34,732,824 293,531,697 Computer hardware 75,873,807 5,217,787 (140,035) 87,920 81,039,479 Furniture and equipment 147,650,588 29,790,008 (1,107,074) 15,544,180 191,877,702 Vehicles 5,744,113 220,597 (79,940) - 5,884,770 Equipment for Chip project 2,240,224 - - - 2,240,224 Construction in progress 77,242,006 100,898,807 (34,188,359) (50,364,924) 93,587,530 Other property 587,389 - - - 587,389

594,336,721 139,428,436 (35,660,110) - 698,105,047

Accumulated depreciation Balances at Balances at December 31, Depreciation Reclassifications June 30, 2012 expense Disposals and other 2013

(In bolivars) Buildings and facilities 17,909,897 3,330,190 - - 21,240,087 Computer hardware 39,251,117 6,455,132 - - 45,706,249 Furniture and equipment 45,947,208 9,149,164 (65,423) - 55,030,949 Equipment for Chip project 305,794 112,011 - - 417,805 Vehicles 2,863,201 479,598 (33,308) - 3,309,491

106,277,217 19,526,095 (98,731) - 125,704,581 Cost

Balances at Balances at June 30, Reclassifications December 31, 2012 Additions Disposals and other 2012

(In bolivars) Land 41,809,947 - - (12,453,691) 29,356,256 Buildings and facilities 190,256,366 5,735,984 - 59,649,988 255,642,338 Computer hardware 57,792,474 18,460,814 (2,490) (376,991) 75,873,807 Furniture and equipment 111,632,488 17,349,692 (138,781) 18,807,189 147,650,588 Vehicles 5,171,374 79,939 - 492,800 5,744,113 Equipment for Chip project 2,240,224 - - - 2,240,224 Construction in progress 83,629,501 62,824,706 (3,092,906) (66,119,295) 77,242,006 Other property 587,389 - - - 587,389

493,119,763 104,451,135 (3,234,177) - 594,336,721

Accumulated depreciation Balances at Balances at June 30, Depreciation Reclassifications December 31, 2012 expense Disposals and other 2012

(In bolivars)

Buildings and facilities 14,202,489 3,707,408 - - 17,909,897 Computer hardware 33,946,562 5,354,733 (50,178) - 39,251,117 Furniture and equipment 38,558,310 7,388,898 - - 45,947,208 Vehicles 2,399,307 463,894 - - 2,863,201 Equipment for Chip project 193,782 112,012 - - 305,794

89,300,450 17,026,945 (50,178) - 106,277,217


48

11. Acquisition and merger of Stanford Bank, S.A., Banco Comercial On February 18, 2009, SUDEBAN, with the approval of the BCV’s Board of Directors and the Higher Banking Council and as authorized through Official Gazette No. 39,123, resolved to take control of Stanford Bank, S.A., Banco Comercial (hereinafter Stanford Bank). At a Special Shareholders’ Meeting of Stanford Bank on April 29, 2009, it was resolved to issue 757,000 new common shares with a par value of Bs 100 each with a view to replenishing Stanford Bank’s capital stock, which had been approved at a Special Shareholders’ Meeting on March 5, 2009. These shares were fully subscribed by Banfoandes Banco Universal, C.A. On May 5, 2009, SUDEBAN, through Notice No. SBIF-DSB-06532, notified the Bank that it was qualified to participate in the auction for the acquisition of Stanford Bank to be held on May 8, 2009. Likewise, SUDEBAN, through Notice No. SBIF-DSB-06535 of the same date, informed the Bank that the auction winner would be awarded the following privileges: a) A 15-year term over which to amortize expenses incurred during the first six months of operations of

Stanford Bank, such as personnel, administrative and operating expenses.

b) Authorization to maintain the accounting classification of loans that require rescheduling due to Stanford Bank’s intervention resulting in a change of the original loan terms, provided that current credit conditions were maintained.

c) Reduction of requirements necessary for approval of the Merger Plan. d) Inclusion in the purchasing entity’s books of Stanford Bank’s assets and liabilities once SUDEBAN

authorized the merger. SUDEBAN would give such authorization within 120 days after the Merger Plan was submitted.

e) SUDEBAN would request the BCV’s cooperation to increase the credit line granted to the auction

winner under the Reciprocal Payment Agreement of ALADI member countries by Stanford Bank’s quota (US$3,500,000).

On May 8, 2009, the Bank won the bid to purchase Stanford Bank at an auction conducted at the headquarters of the People’s Power Ministry for the Economy and Finance offering Bs 240,007,777. On that same date, the Bank and Banfoandes signed a stock sale agreement that sets forth, among other things: - The sale price of the 757,000 common shares was set at Bs 75,700,000.

- Regarding the difference between the offering price and the share price, the Bank would: a) approve and pay Bs 121,973,325 to absorb Stanford Bank’s losses and b) approve capital contributions of Bs 42,334,452 and record them under contributions pending capitalization in Stanford Bank’s balance sheet.

- The Bank would conduct the merger by absorption of Stanford Bank under the terms set forth by SUDEBAN.

On May 14, 2009, Banfoandes sold and transferred 757,000 common shares of Stanford Bank to the Bank, with a par value of Bs 100 each. In addition, Stanford Bank’s Intervention Board, appointed by SUDEBAN through Resolution No. 139-09 of March 27, 2009, delivered Stanford Bank’s trial balance to the Bank at May 14, 2009.


49

Below is a summary of Stanford Bank’s (unaudited) balance sheet at May 14, 2009: (In bolivars) Assets Cash and due from banks 44,034,196 Investment securities 42,015,988 Loan portfolio 244,598,426 Interest and commissions receivable 10,260,148 Property and equipment 7,930,389 Other assets 12,522,149

Total assets 361,361,296 Liabilities and Equity Liabilities Customer deposits 326,110,212 Borrowings 39,837,565 Other liabilities from financial intermediation 24,177 Interest and commissions payable 413,842 Accruals and other liabilities 26,876,443

Total liabilities 393,262,239

Equity (deficit) (31,900,943)

Total liabilities and equity 361,361,296 Memorandum accounts Contingent debtor accounts 41,537,662 Assets received in trust 370,467 Other debtor memorandum accounts 829,373,870

The merger by absorption of Stanford Bank into the Bank was approved at a Special Shareholders’ Meeting of Stanford Bank held on May 14, 2009. Likewise, on May 21, 2009, SUDEBAN, through Resolution published in Official Gazette No. 39,183, resolved to cease the intervention of Stanford Bank after it was acquired by the Bank. Subsequently, at a Special Shareholders’ Meeting of the Bank on May 26, 2009, the merger by absorption of Stanford Bank, the Merger Plan and the merger balance sheet were approved. As a result of the merger:

- Stanford Bank’s capital stock, assets and liabilities would be transferred to the Bank under universal title, in conformity with the Venezuelan Code of Commerce.

- The Bank’s capital and number of shares would remain the same.

- Stanford Bank would cease to exist as established under Article No. 340 of the Venezuelan Code of Commerce.

At the aforementioned meeting, the Board of Directors was authorized to conduct the merger. On May 27, 2009, the Bank sent a communication to SUDEBAN that included the minutes of the Special Shareholders’ Meeting held on May 26, 2009, the Merger Plan and a request for authorization to make the merger effective at June 30, 2009. Subsequently, through Resolution No. 249.09 published in Official Gazette No. 39,193 on June 4, 2009, SUDEBAN authorized the merger by absorption of Stanford Bank into the Bank and indicated that the merger would become effective when the minutes were registered with the relevant Mercantile Registry. The merger became effective on June 8, 2009.


50

A summary of the assets and liabilities absorbed by the Bank on June 8, 2009 is shown below: (In bolivars) Assets Cash and due from banks 292,675,637 Investment securities 36,892,138 Loan portfolio 243,018,374 Interest and commissions receivable 14,362,791 Property and equipment 7,930,389 Other assets 13,200,492

Total assets 608,079,821

Liabilities Customer deposits 283,034,115 Other liabilities from financial intermediation 24,177 Interest and commissions payable 1,088,217 Accruals and other liabilities 109,883,205

Total liabilities 394,029,714

Total net assets 214,050,107

Through a communication sent to SUDEBAN on July 8, 2009, the Bank reported the balances of other assets related to goodwill arising from the difference between the purchase price and the book value of Stanford Bank’s assets and liabilities at the merger date, and expenses incurred from the merger date to June 30, 2009. The Bank also reported the balances of memorandum accounts related to unincurred projected expenses from July 1 to December 8, 2009, recorded in conformity with the Merger Plan authorized by SUDEBAN. Subsequently, through a communication sent to SUDEBAN on February 22, 2010, the Bank reported all expenses incurred from the merger date to December 8, 2009. Below is a breakdown of these balances: (In bolivars) Deferred expenses Salaries and employee benefits 9,688,352 General and administrative expenses 33,466,623 Other operating expenses and sundry operating expenses 5,648,964 Expenses from uncollectible loans and interest receivable 18,059,289

66,863,228


51

As a result of the purchase and subsequent merger by absorption of Stanford Bank, the Bank has recorded Bs 18,891,415 at June 30, 2013 under other assets (Bs 19,756,671 at December 31, 2012), related to goodwill arising from the difference between the purchase price and the book value of Stanford Bank’s assets and liabilities at the merger date, net of accumulated amortization of Bs 7,066,255 (Bs 6,200,999 at December 31, 2012), and deferred charges of Bs 50,556,182 (Bs 52,754,278 at December 31, 2012), net of accumulated amortization of Bs 15,386,664 (Bs 13,188,568 at December 31, 2012) (Note 12). The difference in the purchase price and deferred charges, in conformity with the Merger Plan submitted to SUDEBAN on May 11 and 13, 2009 and approved at a Special Shareholders’ Meeting on May 26, 2009, and following the instructions contained in Notice No. SBIF-DSB-06535 issued by SUDEBAN on May 5, 2009 detailing the privileges that would be awarded to the Stanford Bank auction winner, will be amortized over 15 years from June 8, 2009 and January 1, 2010, respectively.

12. Other assets Other assets comprise the following: June 30, December 31, 2013 2012

(In bolivars) Deferred expenses Leasehold improvements, net of amortization 62,386,450 46,166,311 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities, net of accumulated amortization of Bs 7,066,255 (Bs 6,200,999 at December 31, 2012) (Note 11) 18,891,415 19,756,671 Chip project expenses (Note 2) 1,104,637 10,848,455 Licenses 3,066,949 4,158,128 Operating system (software) 3,822,611 4,376,157 Currency redenomination expenses - 9,410 Other deferred expenses 214,233 329,114

89,486,295 85,644,246

Deferred expenses of Stanford Bank, net of accumulated amortization of

Bs 15,386,664 (Bs 13,188,568 at December 31, 2012) (Note 11)

General and administrative expenses 25,003,401 26,090,505 Expenses from uncollectible loans 13,845,455 14,447,432 Salaries and employee benefits 7,376,453 7,697,168 Other operating expenses and sundry operating expenses 4,330,873 4,519,173

50,556,182 52,754,278

140,042,477 138,398,524

Resale agreements with Agroinvest Casa de Bolsa de Productos Agrícolas, C.A., with a par value of Bs 56,867,535 and 13.5% annual yield 59,854,137 59,854,137 Guarantee deposits, includes US$19,424 (includes US$4,675 at December 31, 2012) (Note 4) 31,199,313 26,749,542 In-transit operations, includes US$38,300 and €6,700 (Note 4) 23,754,988 22,552,318 Stationery and office supplies 20,811,635 9,637,971 Advances to suppliers 18,157,306 7,147,655 Accounts receivable from the Mandatory Housing Savings Fund 14,852,312 10,321,068

Carried forward 308,672,168 274,661,215


52

June 30, December 31, 2013 2012

(In bolivars) Brought forward 308,672,168 274,661,215

Prepaid taxes 3,368,672 1,491,822 Contribution required under the Law for the Advancement of Science, Technology and Innovation 4,983,275 - Other sundry accounts receivable in local currency 6,923,280 6,127,287 Other prepaid expenses, includes US$20,195 at December 31, 2012 (Note 4) 5,621,043 3,623,299 Accounts receivable from employees 2,405,423 3,387,350 Prepaid insurance premiums, includes US$502,194 at December 31, 2012 (Note 4) 3,086,997 5,070,174 Other, includes US$7,854 (US$34,300 and €32,799 at December 31, 2012) (Note 4) 1,927,274 485,926 Credit card-related accounts receivable and balance offsetting, includes US$3,008 at December 31, 2012 (Note 4) 1,963,921 4,050,288 Time deposits with Banco Real, Banco de Desarrollo, C.A., with a par value of Bs 1,800,000 and 15% annual yield 1,845,000 1,845,000 Deferred income tax (Note 18) 410,311 4,820,524 Debit items pending reconciliation, includes US$703,830 and €9,080 at December 31, 2012 (Note 4) 2,474,147 3,286,382 Pending items 26,330 61,825

343,707,841 308,911,092

Provision for other assets (75,164,050) (75,102,744)

268,543,791 233,808,348

The Bank has a matured time deposit of Bs 1,800,000 and interest receivable of Bs 45,000 with Banco Real, Banco de Desarrollo, C.A., which is being liquidated by the Venezuelan government. The Bank has recorded a provision for the full amount of this deposit with a charge to the equity account exchange gain (loss) from holding foreign currency assets and liabilities, in conformity with SUDEBAN instructions contained in Notice No. SBII-DSB-II-GGI-G18-04461 of May 26, 2010 and Notice No. SBII-DSB-II-GGI-BPV-GIBPV2-13090 of August 6, 2010. The Bank has an expired resale agreement with Agroinvest Casa de Bolsa de Productos Agrícolas, C.A. for Bs 56,867,535 and interest receivable in this connection for Bs 2,986,602, secured by pledge bonds issued by a company whose assets have been preventively seized. The Bank recorded a provision for these amounts with a charge to the equity account exchange gain (loss) from holding foreign currency assets and liabilities, in conformity with SUDEBAN instructions contained in Notice No. SBII-DSB-II-GGI-G18-04461 of May 26, 2010 and Notice No. SBII-DSB-II-GGI-BPV-GIBPV2-13090 of August 6, 2010. Through a joint Resolution issued on July 29, 2011, the People’s Power Ministry for Planning and Finance and the People’s Power Ministry for Communes and Social Protection established the mechanisms to assign resources for financing projects developed by communal councils or other forms of social organization. In accordance with this Resolution, banks will earmark 5% of their gross pre-tax income to the National Communal Council Fund (SAFONACC) within 30 days of period end. On August 22, 2011, SUDEBAN issued Resolution No. 233-11 to require banks to record this social contribution as a prepaid expense forming part of other assets and to amortize it at a rate of 1/6 per month in the income statement within sundry operating expenses beginning in January or July, as appropriate to each six-month period. In January and July 2013, the Bank paid Bs 16,477,076 and Bs 14,881,097, respectively, in this connection (Note 20).


53

Deferred expenses comprise the following: June 30, 2013 December 31, 2012 Accumulated Book Accumulated Book

Cost amortization value Cost amortization value

(In bolivars) Leasehold improvements 90,982,980 28,596,530 62,386,450 102,887,328 56,721,017 46,166,311 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities 25,957,670 7,066,255 18,891,415 25,957,670 6,200,999 19,756,671 Chip project expenses 1,642,556 537,919 1,104,637 20,010,773 9,162,318 10,848,455 Licensees 6,010,611 2,943,662 3,066,949 8,511,651 4,353,523 4,158,128 Operating system (software) 5,398,810 1,576,199 3,822,611 8,693,371 4,317,214 4,376,157 Incorporation expenses - - - 411,463 411,463 - Currency redenomination expenses - - - 142,012 132,602 9,410 Other deferred expenses 459,521 245,288 214,233 3,959,948 3,630,834 329,114 Deferred expenses of Stanford Bank General and administrative expenses 32,613,131 7,609,730 25,003,401 32,613,131 6,522,626 26,090,505 Expenses from uncollectible loan portfolio 18,059,289 4,213,834 13,845,455 18,059,289 3,611,857 14,447,432 Salaries and employee benefits 9,621,462 2,245,009 7,376,453 9,621,462 1,924,294 7,697,168 Other operating expenses and sundry operating expenses 5,648,964 1,318,091 4,330,873 5,648,964 1,129,791 4,519,173

196,394,994 56,352,517 140,042,477 236,517,062 98,118,538 138,398,524

Through Resolution No. 262-10 of May 19, 2010, SUDEBAN modified the Accounting Manual to require the recording of disbursements made in connection with the project for the new chip-based credit and debit cards. These disbursements include licenses, software, training and other personnel expenses, accommodation of physical spaces, and replacement of debit and credit cards. The deadline for completing project stages is September 30, 2011. In addition, associated disbursements may be amortized beginning January 2011 using the straight-line method provided that the financial institutions have completed the project satisfactorily. The amortization terms are detailed below: Years Items Advisory 1 Advertising and client information 2 Training and other personnel expenses 2 Accommodation of physical spaces 3 Replacement of debit and credit cards 3 Licenses 6 Software 6

Subsequently, through Notice No. SIB-II-GGIR-GRF-31209 of September 29, 2011, SUDEBAN extended the deadline for project completion until December 31, 2011, maintaining the initial amortization benefit for project-related expenses. At June 30, 2013 and December 31, 2012, deferred expenses include Bs 1,104,637 and Bs 10,848,455, respectively, in this connection.

At June 30, 2013 and December 31, 2012, other sundry accounts receivable in local currency include

Bs 1,833,820 in respect of tax on financial transactions reimbursed to tax exempt clients, withheld by

the Bank and paid to the Tax Authorities. The Bank has set aside a provision for the full amount of this

balance.

At June 30, 2013 and December 31, 2012, in-transit operations include Bs 23,548,449 and

Bs 22,552,318, respectively, related to in-transit cash remittances from customer deposits, which clear

in the first days of July and January 2013, respectively.

At June 30, 2013 and December 31, 2012, guarantee deposits include Bs 26,416,646 and

Bs 26,417,005, respectively, related to real property purchased in Urbanización Campo Alegre,

Caracas, Venezuela.


54

The balance of pending items comprises the following: June 30, December 31, 2013 2012

(In bolivars) In-transit operations related to credit and debit cards - 965 Returned checks on credit card payments - 13,051 Shortfall 26,330 47,809

26,330 61,825

At June 30, 2013 and December 31, 2012, in-transit operations related to credit and debit cards are in respect of electronic offsetting, most of which clear in the first days of July and January 2013, respectively. Below is the movement in the provision for other assets: June 30, December 31, 2013 2012

(In bolivars) Balance at the beginning of the period 75,102,744 77,141,635 Provided in the period (Note 20) 5,367,095 50,276 Write-offs of unrecoverable accounts (5,305,789) (2,089,167)


Below is the movement in deferred expenses for the six-month periods ended June 30, 2013 and December 31, 2012: Cost Balances at Balances at December 31, June 30, 2012 Additions Disposals 2013

(In bolivars) Leasehold improvements 102,887,328 30,051,150 (41,955,498) 90,982,980 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities 25,957,670 - - 25,957,670 Chip project expenses 20,010,773 - (18,368,217) 1,642,556 Operating system (software) 8,693,371 324,640 (3,619,201) 5,398,810 Licenses 8,511,651 - (2,501,040) 6,010,611 Incorporation expenses 411,463 - (411,463) - Currency redenomination expenses 142,012 - (142,012) - Other deferred expenses 3,959,948 29,723 (3,530,150) 459,521 Deferred expenses of Stanford Bank General and administrative expenses 32,613,131 - - 32,613,131 Expenses from uncollectible loans 18,059,289 - - 18,059,289 Salaries and employee benefits 9,621,462 - - 9,621,462 Other operating expenses and sundry operating expenses 5,648,964 - - 5,648,964

236,517,062 30,405,513 (70,527,581) 196,394,994


55

Accumulated depreciation Balances at Balances at December 31, Amortization June 30, 2012 expense Disposals 2013

(In bolivars) Leasehold improvements 56,721,017 9,442,302 (37,566,789) 28,596,530 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities 6,200,999 865,256 - 7,066,255 Chip project expenses 9,162,318 9,743,818 (18,368,217) 537,919 Licenses 4,353,523 1,091,179 (2,501,040) 2,943,662 Operating system (software) 4,317,214 878,185 (3,619,200) 1,576,199 Incorporation expenses 411,463 - (411,463) - Currency redenomination expenses 132,602 9,410 (142,012) - Other deferred expenses 3,630,834 114,880 (3,500,426) 245,288 Deferred expenses of Stanford Bank General and administrative expenses 6,522,626 1,087,104 - 7,609,730 Expenses from uncollectible loans 3,611,857 601,977 - 4,213,834 Salaries and employees benefits 1,924,294 320,715 - 2,245,009 Other operating expenses and sundry operating expenses 1,129,791 188,300 - 1,318,091

98,118,538 24,343,126 (66,109,147) 56,352,517

Cost Balances at Balances at June 30, December 31, 2012 Additions Disposals 2012

(In bolivars) Leasehold improvements 75,683,234 27,511,336 (307,242) 102,887,328 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities 25,957,670 - - 25,957,670 Chip project expenses 19,480,937 1,033,383 (503,547) 20,010,773 Licenses 7,870,207 641,444 - 8,511,651 Operating system (software) 8,367,206 326,165 - 8,693,371 Incorporation expenses 411,463 - - 411,463 Currency redenomination expenses 142,012 - - 142,012 Other deferred expenses 3,712,428 247,520 - 3,959,948 Deferred expenses of Stanford Bank General and administrative expenses 32,613,131 - - 32,613,131 Expenses from uncollectible loans 18,059,289 - - 18,059,289 Salaries and employee benefits 9,621,462 - - 9,621,462 Other operating expenses and sundry operating expenses 5,648,964 - - 5,648,964

207,568,003 29,759,848 (810,789) 236,517,062

Accumulated depreciation Balances at Balance at June 30, Amortization December 31, 2012 expenses Disposals 2012

(In bolivars) Leasehold improvements 48,790,100 8,194,918 (264,001) 56,721,017 Difference between the purchase price and the book value of Stanford Bank’s assets and liabilities 5,335,743 865,256 - 6,200,999 Chip project expenses 3,160,477 6,001,841 - 9,162,318 Licenses 3,203,263 1,150,260 - 4,353,523 Operating system (software) 3,580,300 736,914 - 4,317,214 Incorporation expenses 411,463 - - 411,463 Currency redenomination expenses 121,310 11,292 - 132,602 Other deferred expenses 3,407,768 223,066 - 3,630,834 Deferred expenses of Stanford Bank General and administrative expenses 5,435,522 1,087,104 - 6,522,626 Expenses from uncollectible loans 3,009,881 601,976 - 3,611,857 Salaries and employee benefits 1,603,578 320,716 - 1,924,294 Other operating expenses and sundry operating expenses 941,492 188,299 - 1,129,791

79,000,897 19,381,642 (264,001) 98,118,538


56

Leasehold improvements include additions in the first semester of 2013 for Bs 30,051,150 (Bs 27,511,336 at December 31, 2012) mainly in respect of improvements to the Bank’s agencies. During the six-month period ended June 30, 2013, the Bank recorded amortization of deferred expenses of Bs 24,343,126 (Bs 19,381,642 during the six-month period ended December 31, 2012), shown in the income statement under general and administrative expenses (Note 21).

13. Customer deposits Customer deposits comprise the following: June 30, December 31, 2013 2012

(In bolivars) Demand deposits Non-interest-bearing checking accounts, include US$4,917,953 11,842,510,017 11,403,462,235 Interest-bearing checking accounts 3,500,810,535 2,622,969,788

15,343,320,552 14,026,432,023

Other demand deposits Public, State and Municipal Administration 368,557,578 540,723,467 Non-negotiable demand deposits, bearing annual interest at between 0.12% and 14.75%, maturing in July 2013, includes US$47,341 (US$2,346,989 at December 31, 2012) (Note 4) 5,634,123,587 4,102,707,821 Cashier’s checks 451,543,617 246,991,450 Advance collections from credit card holders 4,468,669 3,525,164 Advance deposits for letters of credit, include US$10,506,523 117,941,068 50,041,077 Trust liabilities (Note 22) 35,292,329 48,728,363 Housing Savings Fund liabilities (Note 22) 911,530 376,524

6,612,838,378 4,993,093,866

Savings deposits, bearing 12.5% annual interest for deposits in bolivars and 0.125% for deposits in U.S. dollars, includes US$35,088,802 and €11 (US$28,790,150 and €1,291 at December 31, 2012) (Note 4) 6,109,109,755 4,596,193,615 Time deposits bearing 14.5% annual interest for deposits in bolivars and between 0.01% and 3.50% for deposits in U.S. dollars (0.04% and 1.0295%, respectively, at December 31, 2012), includes US$25,794,031 (US$23,582,481 at December 31, 2012) with the following maturities (Note 4) Up to 30 days 263,399,674 161,116,668 31 to 60 days 455,098,350 115,293,563 61 to 90 days 456,703,012 160,491,416 91 to 180 days 33,910,315 63,490,370 181 to 360 days 14,750,482 11,901,952 Over 361 days 60,000,000 60,000,000

1,283,861,833 572,293,969

Securities issued by the Bank 98,941,414 98,421,836

29,448,071,932 24,286,435,309


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Deposits from the Venezuelan government and government agencies comprise the following: June 30, December 31, 2013 2012

(In bolivars)

Non-interest-bearing checking accounts 1,265,245,331 1,385,603,014 Interest-bearing checking accounts, at 0.25% annual interest 302,086,250 107,736,961 Savings deposits, at 12.5% annual interest 91,278,214 23,794,709 Non-negotiable demand deposits 368,557,578 540,723,467 Time deposits, at 14.5% annual interest 27,394,375 1,685,900

2,054,561,748 2,059,,544,051

At June 30, 2013 and December 31, 2012, securities issued by the Bank for Bs 98,421,414 and Bs 98,421,836, respectively, are in respect of the issue of commercial paper with a par value of Bs 100,000,000, according to the minutes of the Special Shareholder’s Meeting of September 28, 2011. This issue was approved by SUDEBAN through Notice No. SIB-11-GGIBPV-GIBPV2-40721 of December 2, 2011 and by the SNV through Resolution No. 070-2012 of June 21, 2012.

14. Borrowings Borrowings comprise the following: June 30, December 31, 2013 2012

(In bolivars) Borrowings from Venezuelan financial institutions, up to one year Demand deposits of financial institutions 1,340,569 1,125,280

Borrowings from foreign financial institutions, up to one year Demand deposits Checking account with Caracas International Banking Corporation, at 0.25% (Note 26) 536,829 581,327 Borrowings in foreign currency (Note 4) Loan from Bancaribe Curacao Bank N.V., for US$5,000,000, at 2.96% annual interest, maturing in January 2013 - 21,500,000

536,829 22,081,327

1,877,398 23,206,607

15. Other liabilities from financial intermediation

At June 30, 2013 and December 31, 2012, other liabilities from financial intermediation of US$2,266,480, equivalent to Bs 14,243,011, and US$4,732,694, equivalent to Bs 20,350,584, respectively, correspond to liabilities arising from operations with letters of credit (Note 4).


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16. Interest and commissions payable Interest and commissions payable comprise the following: June 30, December 31, 2013 2012

(In bolivars) Expenses payable on customer deposits Deposits in interest-bearing checking accounts 56,428 39,479 Non-negotiable demand deposits 12,263,850 8,282,852 Time deposits, includes US$24,389 (US$22,034 at December 31, 2012) (Note 4) 9,096,878 4,025,021

21,417,156 12,347,352

Expenses payable on borrowings Borrowings in foreign currency, includes US$7,816 (Note 4) - 33,610

Expenses payable on convertible bonds (Note 24) 350,854 588,583

21,768,010 12,969,545

17. Accruals and other liabilities

Accruals and other liabilities comprise the following: June 30, December 31, 2013 2012

(In bolivars) Pending items 200,647,385 168,989,747 Suppliers and other sundry payables 35,914,114 25,643,250 Deferred interest income, includes US$514,602 (US$501,643 at December 31, 2012) (Notes 2-k, 4 and 5-b) 41,187,523 39,575,038 Other provisions, includes US$2,689 (Note 30) 28,470,974 25,282,369 Labor contributions and withholdings payable, includes US$1,885 27,012,416 24,272,727 Accrual for length-of-service benefits (Notes 1 and 2-j) 23,548,164 9,755,631 Tax withholdings 19,306,494 19,330,299 Cashier’s checks 16,018,900 17,975,940 Profit sharing (Note 2-j) 14,354,893 63,807 Municipal and other taxes 11,833,239 14,694,600 Other employee expenses 8,693,062 701,128 Professional fees payable, includes US$8,000 (US$6,000 at December 31, 2012) (Note 4) 8,618,589 7,298,315 Vacation bonus (Note 2-j) 8,261,712 5,971,282 Provisions for contingent loans (Note 22) 8,072,284 7,797,125 Leases 5,919,082 4,571,291 Income tax provision, includes US$1,056 (US$7,873 at December 31, 2012) (Notes 4 and 18) 3,594,637 5,203,810 Contribution for the prevention of Money laundering 3,054,655 5,377,397 Accounts payable in foreign currency (US$482,040 at December 31, 2012) (Note 4) 2,055,062 2,072,771 Sports and Physical Education Law (Note 1) 1,681,564 3,497,861 Others, includes U$$11,341.70 465,800 447,641 Advertising 99,911 83,511

468,810,460 388,605,540

Deferred interest income mainly relates to loan interest collected in advance, commissions and deferred gain on sale of securities (Note 5-b). At June 30, 2013, other provisions include Bs 9,556,697 (Bs 6,450,000 at December 31, 2012) in connection with accounts payable to CADIVI on credit card transactions abroad from 2006 to 2009 and the first ten days of January 2010, recorded in conformity with CADIVI’s Notice No. PREVECPGSCO-00001 of January 2, 2012.


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At June 30, 2013, other provisions also include provision for municipal taxes, fines and interest of Bs 5,799,792; provision for ATM automation of Bs 5,430,248; provision for credit (Visa/Master Card) and debit cards of Bs 6,553,542; provision for payment to the Mecatronic service provider of Bs 800,000, and other provisions of Bs 330,695.

Resolution No. 040, published in January 2011 by the People’s Power Ministry for Planning and Finance and the SNV, requires individuals regulated by the SNV who publicly trade shares and securities registered with the National Securities Registry to make a special annual contribution of 1.5% to finance SNV operations, including maintenance fees, fees to public arbitrators and defenders, technical upgrades, and human resource development and education. In July 2011, the People’s Power Ministry for Planning and Finance and the SNV issued Resolution No. 121 to require SNV-regulated entities to pay 100 tax units for the special annual contribution. At December 31, 2011, the Bank maintained a provision of Bs 1,336,205 in this connection. On January 29, 2013, the Bank paid this contribution for the six-month period ended December 31, 2012, totaling Bs 9,000.

At June 30, 2013 and December 31, 2012, accounts payable in foreign currency are mainly in respect of interest payable to clients for intermediation of securities in foreign currency.

At June 30, 2013 and December 31, 2012, suppliers and other sundry payables are mainly in respect of accounts payable for services of Bs 25,861,531, pending claims, returns and credit cards of Bs 6,099,556 and other accounts payable of Bs 3,953,027.

Below is a breakdown of pending items: June 30, December 31, 2013 2012

(In bolivars) In-transit operations Suiche 7B transactions payable 96,804,174 20,536,712 Point-of-sale transactions payable 70,532,390 101,335,291 Collection of government and municipal taxes 18,684,971 22,186,155 Other 9,281,472 14,043,399 Other credit items pending reconciliation 1,890,797 1,600,243 Checks received from credit operations 1,849,242 329,960 Other pending items 966,402 1,138,573 Checking account overdrafts 252,054 - Cash surplus 236,848 33,640 Sanitas payroll discount 145,263 - Debt items in foreign currency pending reconciliation 2,999 - Private card transactions 773 4,119 Other credit items in foreign currency pending reconciliation, includes US$860,523 and €13,073 at December 31, 2012 (Note 4) - 3,774,563 Other credit items pending reconciliation (US$823,509 at December 31, 2012 (Note 4) - 3,547,749 Operations under ALADI Agreement - 458,943 Cirrus transactions payable - 400

200,647,385 168,989,747

Most in-transit operations cleared during January and July 2013. Point-of-sale transactions payable correspond to the use of points of sale of other financial institutions by Bank customers. Most of these transactions clear in the month following period closing. At June 30, 2013 and December 31, 2012, the account collection of government and municipal taxes includes national and municipal taxes paid by individuals and corporations to the Tax Authorities between July 2 and 3, 2013 and January 2 and 4, 2013, respectively.


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18. Taxes a) Income tax The Bank’s tax year ends on December 31. The main differences between income/loss recognized for accounting and tax purposes arise from provisions and accruals that are normally tax deductible in subsequent periods, tax-exempt income from National Public Debt Bonds and other securities issued by the Venezuelan government and the net effect of the annual inflation adjustment. Venezuelan Income Tax Law allows tax losses to be carried forward for three years to offset taxable income, except those arising from the annual inflation adjustment, which may be carried forward for only one year. During the six-month period ended June 30, 2013, the Bank estimated territorial tax losses of Bs 243,735,923 and extraterritorial tax gains of Bs 1,364,151, with an estimated income tax expense of Bs 410,311. Below is the reconciliation between book income and net tax loss for the six-month period ended June 30, 2013: (In bolivars) Statutory tax rate 34% Book income for the first semester of 2013 before tax 285,762,765 Difference between book income and taxable income Effect of the annual inflation adjustment (355,602,178) Nondeductible provisions Loan portfolio, net 14,025,667 Interest on loan portfolio and other (16,457,081) Other assets 29,793 Other provisions 7,124,600 Tax-exempt income, net of related expenses (254,443,293) Social contributions (286,494) Municipal taxes (3,202,280) Other effects, net 79,312,578

Territorial tax loss (243,735,923)

Tax loss from previous periods (116,896,412) Extraterritorial tax gain 1,364,151 Extraterritorial tax loss from previous periods -

At June 30, 2013, the Bank has tax loss carryforwards from the annual inflation adjustment of Bs 116,896,412, which may be used until 2013. At June 30, 2013, the Branch recorded estimated income tax of US$1,056 (US$7,783 at December 31, 2012). On June 27, 2013, the Curacao Tax Authorities approved the extension of Tax Ruling No. UR 11-1611 until December 31, 2015; according to this ruling, the Curacao Branch must calculate tax payable on the basis of 7% of the costs of its activities since the commencement of Branch operations, except for disbursement costs and interest on debt with a tax rate of 27.5% (34.5% at December 31, 2012). Disbursements include costs of services provided by third parties which are not considered part of the Branch’s activities, except for service fees, office and equipment leasing and telecommunication expenses, among others (Note 8).


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The tax expense comprises the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Income tax 416,950 2,516,165 Deferred income tax 4,410,213 (1,865,133)

4,827,163 651,032

b) Deferred income tax Bank management recognizes a deferred tax asset in its financial statements when there is reasonable expectation that future tax results will allow its realization. Furthermore, the Accounting Manual establishes, among other things, that the Bank may not recognize a deferred tax asset for any amount exceeding taxable income (Note 2-i). Bank management determined and evaluated the deferred tax asset recorded. The main differences between the tax base and the carrying amount at June 30, 2013 and December 31, 2012 relate to the provision for high-risk and uncollectible loans and interest receivable, property and equipment, deferred expenses and sundry provisions (Note 12). At June 30, 2013, the Bank maintains a deferred tax asset of Bs 410,311 (Bs 4,820,524 at December 31, 2012) in respect of the maximum amount allowed not exceeding taxable income. c) Transfer pricing According to transfer-pricing regulations, taxpayers that conduct transactions with related parties abroad are required to calculate income, costs and deductions applying the methodology set out in the Law. The Bank conducts transactions with related parties abroad. In June 2013, the Bank filed the transfer-pricing return (PT-99) for the year ended December 31, 2012.

19. Other operating income

Other operating income comprises the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Service fees (Notes 4 and 22) 105,002,320 100,023,366 Exchange gain (Notes 4 and 25-c) 14,778,437 34,872,525 Gain on sale of available-for-sale securities (Note 5-a) 36,184,541 23,816,309 Gain on sale of trading securities 80,405 - Income from amortization of discount on investments in held-to-maturity securities (Note 5-b) 5,922,605 8,107,825 Commissions on trust funds (Note 22) 5,612,117 5,060,595

167,580,425 171,880,620

Sundry operating income comprises the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Income from expenses recovered 4,347,848 5,901,945 Other 1,581,772 415,841

5,929,620 6,317,786


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20. Other operating expenses

Other operating expenses comprise the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Loss on sale of investments in available-for-sale securities (Note 5-a) 25,037,948 7,744,273 Amortization of premiums on held-to-maturity securities (Note 2-c) 24,118,925 23,095,231 Exchange loss (Note 4) 20,667,936 19,346,900 Service fees (Note 4) 14,887,865 10,988,486

84,712,674 61,174,890

Sundry operating expenses comprise the following: Six-month periods ended

June 30, December 31, 2013 2012

(In bolivars) Contribution to the National Fund for Communal Councils (Note 12) 16,477,076 9,479,052 Provision for other contingencies (Notes 17 and 30) 6,177,151 12,200,090 Provision for other assets (Note 12) 5,367,095 50,276 Contributions for science and technology programs (Note 1) 4,983,275 3,266,966 Contribution for the prevention of Money laundering (Note 1) 2,961,735 3,347,542 Provision for pending vacations 1,419,237 - Other 47,732 100

37,433,301 28,344,026

21. General and administrative expenses General and administrative expenses comprise the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Outsourced services 147,118,460 112,503,877 Maintenance and repairs 41,468,042 32,638,238 Leases 34,331,845 29,862,707 Taxes and contributions 29,087,547 24,264,264 Advertising 24,956,457 26,936,205 Amortization of deferred expenses (Note 12) 24,343,126 19,381,642 Transportation of valuables and communications 23,480,059 19,763,834 Depreciation and impairment of property and equipment (Note 10) 19,526,095 17,026,945 Stationery and office supplies 19,142,282 15,351,623 Sundry general expenses 15,527,469 11,806,259 Insurance 2,726,333 1,998,584 Public relations 2,273,959 1,848,811 Other 1,965,152 1,844,927 Legal fees 1,353,258 1,007,941 Utilities 1,190,724 1,091,383

388,490,808 317,327,240


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22. Memorandum accounts Memorandum accounts comprise the following: Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Contingent debtor accounts (Note 23) Guarantees granted 224,341,054 357,006,621 Credit card lines 384,722,495 339,798,212 Letters of credit issued but not negotiated 198,164,842 82,907,690 Investments in resale agreements 146,036,600 -

953,264,991 779,712,523 Assets received in trust 1,115,357,797 971,641,295 Debtor accounts from other special trust services (Housing Mutual Fund) 604,664,307 479,233,604

Six-month periods ended June 30, December 31, 2013 2012

(In bolivars) Other debtor memorandum accounts Assets held in custody, includes US$67,897,672 and €152,000 (US$68,071,658 and €152,000 at December 31, 2012) 7,299,075,891 2,650,010,151 Collections in foreign currency, includes US$12,975,787 (US$11,359,512 at December 31, 2012) 81,542,441 48,845,901 Guarantees received, includes US$41,258,554 (US$113,412,813 at December 31, 2012) 26,950,409,005 28,782,592,222 Lines of credit available 12,898,368,528 9,946,021,216 Uncollectible accounts written off 295,879,076 286,507,502 Deferred interest receivable on loans overdue and in litigation (Note 6) 37,352,687 11,754,285 Mortgage guarantees pending release 197,721,127 299,090,115 Securities held by other financial institutions, includes US$15,990,941 (US$35,162,441 at December 31, 2012) 100,490,271 151,198,496 Guarantees on collateral granted 30,192,341 15,116,783 Taxes receivable 1,616,964 1,616,964 Foreign currency purchases, includes US$30,452,999 and €188,680 (US$6,834,317 and €706,662 at December 31, 2012) (Note 4) 56,108,745 33,404,376 Foreign currency sales, includes US$6,834,317 and €738,160 (US$ 6,834,317 and € 706,662 at December 31, 2012) (Note 4) (56,108,745) (33,404,376) Guarantees in foreign currency, includes US$12,899,750 (US$21,899,750 at December 31, 2012) 136,807,301 94,168,925 Other 11,872,167 2,058,658

48,041,327,799 42,288,981,218

At June 30, 2013 and December 31, 2012, securities in custody of other financial institutions of Bs 100,490,271 and Bs 151,198,496 are held in Commerzbank. At June 30, 2013, in accordance with the Accounting Manual, the Bank has set aside a general and specific provision for contingent debtor accounts of Bs 8,072,284 (Bs 7,797,125 at December 31, 2012), shown under accruals and other liabilities (Note 17).


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Below is a breakdown of assets received in trust: June 30, December 31, 2013 2012

(In bolivars) Type of trust fund Administration 161,507,567 179,282,186 Length-of-service benefits 834,726,336 695,155,135 Investment 119,123,894 97,203,974

1,115,357,797 971,641,295

At June 30, 2013, combined trust fund assets include Bs 640,981,554 in respect of trust funds opened

by government agencies, representing 57.47% of total assets received in trust (Bs 570,314,047,

representing 58.70% at December 31, 2012). Combined trust fund accounts include the following balances, according to the financial statements of the trust: June 30, December 31,

2013 2012

(In bolivars)

Assets Cash and due from banks 35,292,329 48,728,363

Investment securities 645,480,765 577,919,123

Loan portfolio 421,988,600 333,351,073

Loans and advances to beneficiaries of length-of-service benefits 421,988,600 333,351,073

Interest and commissions receivable 12,596,097 11,642,730

Interest receivable on investment securities 12,596,097 11,642,730

Other assets 6 6

Total assets 1,115,357,797 971,641,295 Liabilities and equity Liabilities Other liabilities 4,147,958 4,411,537

Total liabilities 4,147,958 4,411,537

Equity Capital assigned to trusts 1,047,467,717 894,435,696

Retained earnings 63,742,122 72,794,062

Total equity 1,111,209,839 967,229,758

Total liabilities and equity 1,115,357,797 971,641,295

At June 30, 2013 and December 31, 2012, cash and due from banks includes Bs 35,292,329 and Bs 48,728,363, respectively, related to funds received from trust fund operations that are managed through checking accounts with the Bank, which are used to receive or pay all funds and earn 6% annual interest.


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Investment securities included in trust fund accounts, recorded at amortized cost, comprise the following: June 30, 2013 Fair Amortized market Cost cost value

(In bolivars) Securities issued or guaranteed by the Venezuelan government Vebonos, with a par value of Bs 384,106,488, annual yield at between 9.65% and 17.25%, maturing between August 2013 and January 2023 394,130,834 393,446,982 436,185,263 (1) Fixed Interest Bond (TIF), with a par value of Bs 229,451,600, annual yield at between 5.83% and 18.24%, maturing between April 2014 and February 2021 233,582,778 232,033,783 256,398,145 (1)

627,713,612 625,480,765 692,583,408

Debt securities issued by non-financial private-sector companies Debenture bonds FVI Fondo de Valores Inmobiliarios, with a par value of Bs 2,000,000, 10.99% annual yield, maturing in September 2017 20,000,000 20,000,000 20,000,000 (2)

647,713,612 645,480,765 712,583,408

December 31, 2012 Fair Amortized market Cost cost value

(In bolivars) Securities issued or guaranteed by the Venezuelan government Vebonos, with a par value of Bs 333,350,437, annual yield at between 10.93% and 17.70%, maturing between May 2013 and 2021 328,688,214 328,403,203 351,213,190 (1) Fixed Interest Bond (TIF), with a par value of Bs 227,055,625, annual yield at between 9.63% and 18.00%, maturing between May 2013 and August 2018 230,840,791 229,515,920 253,466,768 (1)

559,529,005 557,919,123 604,679,958

Debt securities issued by non-financial private-sector companies Debenture bonds FVI Fondo de Valores Inmobiliarios, with a par value of Bs 20,000,000, 11.26% annual yield, maturing in September 2017 20,000,000 20,000,000 20,000,000 (2)

579,529,005 577,919,123 624,679,958

(1) Fair value determined from trading operations on the secondary market or from the present value of estimated future cash

flows, adjusted by the amortization of premiums or discounts. (2) Corresponds to par value, which is considered as fair market value.

Below is the classification of investment securities according to maturity:

June 30, 2013 December 31, 2012 Fair Fair

Amortized market Amortized market cost value cost value

(In bolivars) Up to six months 3,994,118 4,200,000 2,586,648 2,656,375 Six months to one year 12,145,666 12,603,416 3,970,972 4,120,000 One to five years 370,679,709 412,594,278 275,855,823 297,164,161 Over five years 258,661,272 283,185,714 295,505,680 320,739,422

645,480,765 712,583,408 577,919,123 624,679,958

At June 30, 2013, interest receivable on investment securities amounts to Bs 12,596,097 (Bs 11,642,730 at December 31, 2012).


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At June 30, 2013 and December 31, 2012, loans and advances to beneficiaries of the length-of-service benefit trust fund are in respect of loans and advances granted to employees guaranteed by their length-of-service benefits deposited in the trust fund. These interest-free loans are in respect of length-of-service benefit trust fund plans of public and private-sector companies. At June 30, 2013, loans and advances to beneficiaries of the length-of-service benefit trust fund include Bs 43,584,556 (Bs 36,608,424 at December 31, 2012) from Bank employees, Bs 114,519,364 from private length-of-service benefit trust funds, and Bs 263,884,680 from government agencies (Bs 87,092,031 and Bs 209,650,618, respectively, at December 31, 2012). At June 30, 2013 and December 31, 2012, fiduciary remuneration payable to the Bank amounts to Bs 969,185 and Bs 890,821, respectively. In addition the commission paid by the trust fund and the trustors to the Bank during the six-month period ended June 30, 2013 amounted to Bs 5,612,117 (Bs 5,060,595 during the six-month period ended December 31, 2012) (Note 19). At June 30, 2013, length-of-service benefit trust funds in favor of Bank employees amount to Bs 89,079,789 (Bs 72,721,699 at December 31, 2012). Debtor accounts from other special trust services (Housing Loan System) and Housing Savings Fund Debtor accounts from other special trust services (Housing Loan System) and Housing Savings Fund comprise the following: June 30, December 31, 2013 2012

(In bolivars) Assets Cash and due from banks (Note 13) 911,530 376,524 Investment securities 410,822,110 315,472,933 Loan portfolio 177,531,206 152,515,420 Interest receivable 546,823 509,644 Other assets 14,852,637 10,359,083

Total assets 604,664,306 479,233,604

Liabilities Contributions to the Housing Savings Fund 358,716,890 275,021,140 Liabilities to BANAVIH 221,128,833 183,311,652

Total liabilities 579,845,723 458,332,792

Income 24,818,583 20,900,812

Total liabilities and income 604,664,306 479,233,604

Housing programs, direct subsidies, eligibility schemes, the Guarantee Fund and the Rescue Fund are subject to the Housing Loan Law. They are aimed mostly at families applying for housing loans through the Housing Mutual Fund. Financial institutions authorized by BANAHIV to act as financial operators receive monthly contributions from employers, employees and workers in the private and public sectors to be deposited in a Housing Mutual Fund account on behalf of each employee. These funds will be used to grant short and long-term mortgages for acquisition, construction or improvement of primary residences. At June 30, 2013, the Bank has an investment trust in BANAVIH for Bs 410,822,110 (Bs 315,472,933 at December 31, 2012) in respect of funds from deposits under the Housing Loan Law collected and transferred by the Bank, shown as investment securities in conformity with the Accounting Manual.


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According to the Housing Loan Law, monthly mortgage loan repayments will represent between 5% and 20% of the monthly family income. In addition, these loans will bear interest at the social interest rate set by the People’s Power Ministry for Housing. At June 30, 2013, the Bank has granted loans out of BANAVIH resources of Bs 177,531,206 (Bs 152,515,420 at December 31, 2012). These loans bear annual interest at between 4.66% and 8.55%. At June 30, 2013, the Housing Savings Fund has 1,827 debtors (1,697 debtors at December 31, 2012). During the six-month period ended June 30, 2013, the Bank recorded income of Bs 497,467 (Bs 599,017 during the six-month period ended December 31, 2012) from commissions charged to BANAVIH for the administration of resources related to the Mandatory Housing Savings Fund, shown under interest income.

23. Financial instruments with off-balance sheet risk Credit-related financial instruments The Bank has outstanding commitments related to letters of credit, guarantees granted and lines of credit to meet the needs of its customers. Since many of its credit commitments may expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Commitments to extend credit, letters of credit and guarantees granted by the Bank are recorded under memorandum accounts. a) Guarantees granted After conducting a credit risk analysis, the Bank provides guarantees to certain customers within their line of credit; they are issued to a beneficiary who may execute the guarantee if the customer fails to comply with the terms of the agreement. At June 30, 2013 and December 31, 2012, these guarantees earned annual commissions of 1%. These commissions are recorded monthly while the guarantees are in force. At June 30, 2013, Bank guarantees amount to Bs 224,341,054 (Bs 357,006,621 at December 31, 2012) (Note 22). b) Credit limits Credit limit contractual agreements are granted to customers subject to prior credit risk assessments and, if needed, obtention of any guarantee required by the Bank to cover risk for each customer. These agreements are for specific periods, provided that customers do not default on the terms set forth therein (Note 22). c) Letters of credit Letters of credit usually mature within 90 days, and are renewable. They are generally issued to finance a trade agreement for the shipment of goods from a seller to a buyer. At June 30, 2013 and December 31, 2012, the Bank charged a commission of between 0.5% and 2% on the amount of letters of credit. Unused letters of credit at June 30, 2013 amount to Bs 198,164,842 (Bs 82,907,690 at December 31, 2012) (Note 22). The Bank’s exposure to credit loss in the event of noncompliance by customers with terms for extended credit, letters of credit and written guarantees is represented by the notional contractual amounts of these credit-related instruments. The credit policies applied by the Bank for these commitments are the same as those for granting loans.


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In general, the Bank evaluates customer eligibility before granting credit. The amount of collateral provided, if required by the Bank, is based on customer credit assessment. The type of collateral varies, but may include accounts receivable, property and equipment and securities.

24. Convertible bonds At a Special Shareholders’ Meeting on July 19, 2006, a public offering of convertible bonds of up to Bs 50,000,000 was approved, as well as the general terms of the offering. The shareholders also resolved to create a reserve fund for payment of convertible bonds at maturity with a charge to unappropriated surplus. The fund will accrue Bs 2,083,333 quarterly until it reaches the total amount redeemable at maturity. The bond issue was authorized by SUDEBAN through Resolution No. 013-07 of January 22, 2007, published in Official Gazette No. 38,620 on February 6, 2007, and by the SNV through Resolution No. 045-2007 of April 3, 2007. In April 2007, the Bank completed the public offering of convertible bonds, traded as from May 2, 2007 at a par value of Bs 50,000,000, with annual nominal weighted average interest of the six main commercial and universal banks payable on a quarterly basis and maturing in April 2013. At a Special Shareholders’ Meeting on May 30, 2007, a second public offering of convertible bonds of up to Bs 50,000,000 was approved. Under the terms of the offering, a reserve fund will be created for payment of convertible bonds at maturity with a charge to unappropriated surplus amounting to Bs 4,166,667 quarterly. This fund will be created as from the closing of the six-month period following public offering commencement date. The bond issue was authorized by SUDEBAN through Resolution No. 367-07 of October 31, 2007, published in Official Gazette No. 38,809 on November 13, 2007, and by the SNV through Resolution No. 181-2007 of December 7, 2007. The second public offering of convertible bonds began at the end of December 2007, with annual nominal weighted average interest of the six main commercial and universal banks payable quarterly and maturing in December 2013. This offering was completed in March 2008. Bondholders may choose between receiving principal payments and converting their bonds into Bank shares by paying 1.5 times the equity value of the share at bond maturity. Convertible bonds of Bs 50,000,000 issued in 2007 matured on April 23, 2013. After expiration of the legal terms, none of the bondholders exercised their right to request conversion of bonds into Bank shares. According to the Stock Market Law, on April 23, 2013, the Bank deposited the funds in Caja Venezolana de Valores, S.A. to be distributed among the respective beneficiaries. According to the Accounting Manual, financial institutions shall include convertible bonds as part of their equity. SUDEBAN also authorized inclusion of these bonds as part of the Bank’s equity structure for the purpose of any computation required by this entity. At June 30, 2013 and December 31, 2012, bonds earned 14.50% annual interest (Note 16). During the six-month period ended June 30, 2013, interest expense in this connection amounts to Bs 6,683,105 (Bs 8,367,471 for the six-month period ended December 31, 2012).


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Bonds issued and placed comprise the following:

June 30, 2013 December 31, 2012 Amount Equity Amount Equity Bondholder Bs % Bs % Seguros Pirámide, C.A. 19,888,000 39.8 15,000,000 15.0 La Oriental de Seguros, C.A. 10,000,000 20.0 - - Fideicomiso Banco Provincial S.A. - Banco Universal 7,000,000 14.0 - - BOD Fideicomiso 5,000,000 10.0 - - Inversora Multinacional, C.A. 3,700,000 7.4 - - Fideicomiso Banco del Caribe, C.A. 2,500,000 5.0 - - Multinacional de Seguros, C.A. 1,200,000 2.4 12,000,000 12.0 Banco Sofitasa Banco Universal, C.A. 500,000 1.0 24,000,000 24.0 Banco Caroní Fideicomiso - - 16,000,000 16.0 Fideicomiso Banco Canarias - - 11,108,272 11.1 Del Sur Banco Universal, C.A. Fideicomiso - - 6,000,000 6.0 Caja de Ahorros de Jubilados y Pensionados del INOS - - 3,772,000 3.8 Unidad Corporativa de Mercados de Inversión - - 2,000,000 2.0 Unidad Educativa Colegio Las Colinas, C.A. - - 2,000,000 2.0 Other 212,000 0.4 8,119,728 8.1

50,000,000 100.0 100,000,000 100.0

25. Equity

a) Capital stock and authorized capital The Bank’s paid-in capital amounts to Bs 438,503,396 (Bs 428,503,396 at December 31, 2012), represented by 438,503,396 (428,503,396 common shares at December 31, 2012) non-convertible common shares of the same class with a par value of Bs 1 each, fully subscribed and paid-in. The Bank complies with the minimum capital required under the current legislation. At a Regular Shareholders’ Meeting on February 22, 2012, the Board of Directors was authorized to increase capital by Bs 10,000,000 through the public offering of non-convertible common shares with a par value of Bs 1, at a premium equivalent to 1.5 times the equity value of the share. Through Notice No. SIB-11-GGIBPV-GIBPV2-09791 of April 17, 2012, SUDEBAN ratified that the Bank should formally request authorization for the capital increase. Subsequently, through Notice No. SIB-II-GGR-GA-32152 of October 10, 2012, with the binding opinion of OSFIN, SUDEBAN authorized the aforementioned capital increase. On February 4, 2013, through Notice No. DSNV-0174-2013, the SNV authorized this capital increase. At June 30, 2013, the Bank received contributions for future capital increases of Bs 59,260,742. At a Regular Shareholders’ Meeting on March 30, 2011, it was resolved to declare cash dividends of Bs 14,100,000, which exceeds unappropriated surplus available for dividends of Bs 12,742,373 at December 31, 2010; it was also resolved to increase capital stock by the same amount. On May 25, 2011, the Bank requested SUDEBAN’s authorization to reduce the amount of cash dividends declared to Bs 12,742,373. Through Notice No. SIB-II-GGIBPV-GGIBPV2-17894 of June 23, 2011, SUDEBAN ordered the Bank to call a new Shareholders’ Meeting before July 31, 2011 to annul the aforementioned dividends declared and the capital stock increase. On July 27, 2011, the Bank requested SUDEBAN’s authorization to modify the method for dividend declaration and payment, and to increase capital stock to Bs 14,100,000 as follows: Bs 7,050,000 out of cash dividends declared with a charge to unappropriated surplus, and Bs 7,050,000 out of stock dividends, with a charge to restricted surplus. On August 12, 2011, SUDEBAN sent Notice No. SIB-II-GGIBPV-GIBPV2-24163 to the Bank agreeing on the aforementioned changes and asked the Bank to inform shareholders who express their will to participate in the share subscription and payment process with resources arising from cash dividends declared. The aforementioned dividends were approved at a Special Shareholders’ Meeting of August 31, 2011.


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At a Regular Shareholders’ Meeting on September 28, 2011, it was resolved to declare and pay dividends and a capital increase of Bs 28,000,000 as follows: Bs 14,000,000 in non-convertible common shares of the same class with a par value of Bs 1; and Bs 14,000,000 payable in cash, which may be converted into capital at shareholders’ will based on the agreed-upon term. Through Notice No. SIB-II-GGIBPV-GIBPV2-41061 of December 7, 2011, SUDEBAN informed the Bank that the requests submitted by the Special Shareholders’ Meeting held on August 31, 2011 and the Regular Shareholders’ Meeting of September 28, 2011 were pending authorization from OSFIN. On January 24 and 27, 2012, and upon authorization from OSFIN, SUDEBAN issued Notices Nos. SIB-II-GGR-GA-01547 and SIB-II-GGR-GA-02015, respectively, authorizing the aforementioned dividends and capital increases. On June 21, 2012, through Notices Nos. DSNV-1259-2012 and DSNV-1263-2012, the SNV authorized the capital increases approved at the Special Shareholders’ Meeting held on August 31, 2011 and the Regular Shareholders’ Meeting of September 28, 2011. In addition, the Bank capitalized these dividends on July 20 and August 6, 2012, respectively, in accordance with the terms of the notices published in the press. At a Regular Shareholders’ Meeting held on March 28, 2012, it was resolved to declare and pay dividends, and to increase capital to up to Bs 41,000,000 as follows: Bs 20,500,000 out of cash dividends paid with a charge to unappropriated surplus, and Bs 20,500,000 as stock dividends with a charge to restricted surplus. On May 14, 2012, SUDEBAN sent Notice No. SIB-II-GGIBPV-GIBPV2-13144 to the Bank agreeing on the aforementioned dividend declaration and payment. The Bank was also instructed to request authorization for the Bs 41,000,000 capital increase and await OSFIN’s opinion. On September 10, 2012, and upon authorization from OSFIN, SUDEBAN issued Notice No. SIB-II-GGR-GA-28712 authorizing the aforementioned capital increase. On November 6, 2012, through Notice No. DSNV-2082-2012, the SNV authorized the capital increase approved at a Regular Shareholders’ Meeting held on March 28, 2012. In addition, the Bank capitalized these dividends on December 11, 2012, in accordance with the terms of the notices published in the press. At a Regular Shareholders’ Meeting held on September 26, 2012, it was resolved to declare and pay dividends, and to increase capital to up to Bs 70,000,000 as follows: Bs 35,000,000 out of cash dividends paid with a charge to unappropriated surplus, and Bs 35,000,000 as stock dividends with a charge to restricted surplus. On December 27, 2012, SUDEBAN sent Notice No. SIB-II-GGIBPV-GIBPV2-42313 to the Bank agreeing on the aforementioned dividend declaration and payment. The Bank should await a ruling, with the binding opinion of OSFIN for the authorization of the aforementioned capital increase. To date, the Bank is awaiting approval from the regulatory entity.


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Shares subscribed by shareholders for the six-month periods ended June 30, 2013 and December 31, 2012 are identified as non-convertible common shares as follows:

June 30, 2013 December 31, 2012 Number of Equity Number of Equity shares % shares %

Shareholders Nogueroles Garcia, Jorge Luis 43,472,350 9.9138 42,480,904 9.9138 Nogueroles López, José María 28,044,485 6.3955 27,404,962 6.3955 Halabi Harb, Anuar 25,761,636 5.8749 25,174,135 5.8749 Alintio International, S.L. 21,881,319 4.9900 21,382,373 4.9900 Valores Torre Casa, C.A. 19,770,803 4.5087 18,968,066 4.4266 De Guruceaga López, Gonzalo Francisco 17,673,002 4.0303 17,269,838 4.0303 Curbelo Pérez. Juan Ramón 17,445,419 3.9784 17,047,566 3.9784 Zasuma Inversiones, C.A. 16,969,204 3.8698 16,582,309 3.8698 Sucesión Talayero Tamayo, Alvaro José 16,301,364 3.7175 15,929,736 3.7175 Inversiones Clatal, C.A. 14,404,837 3.2850 14,095,458 3.2895 Puig Miret, Jaime 10,590,296 2.4151 10,590,093 2.4710 Tamayo Degwitz, Carlos Enrique 9,103,331 2.0760 8,895,718 2.0760 García Arroyo, Sagrario 8,793,747 2.0054 8,593,100 2.0054 Inversiones Tosuman, C.A. 8,227,639 1.8763 8,040,101 1.8763 Teleacción A.C., C.A. 8,227,639 1.8763 8,040,097 1.8763 Kozma Ingenuo, Alejandro Nicolás 8,039,960 1.8335 8,040,097 1.8763 Kozma Ingenuo, Carolina María 8,039,960 1.8335 8,040,097 1.8763 Consorcio Toyomarca, S.A. (Toyomarca, S.A.) 6,147,818 1.4020 5,987,955 1.3974 Herrera de la Sota, Mercedes de la Concepción 5,494,009 1.2529 5,025,072 1.1727 Juan Huerta, Salvador 5,458,929 1.2449 5,458,940 1.2740 Benacerraf Herrera, Jorge Fortunato 5,025,249 1.1460 5,025,045 1.1727 Benacerraf Herrera, Andrés Gonzalo 5,025,249 1.1460 5,025,045 1.1727 Benacerraf Herrera, Mercedes Cecilia 5,025,249 1.1460 5,025,045 1.1727 Mouada, Chaar Chaar 5,023,056 1.1455 4,905,718 1.1448 Nogueroles García, María Montserrat 4,849,409 1.1050 4,738,838 1.1059 Inversiones Fernandez S.A. 4,704,703 1.0729 4,580,336 1.0680 Inversora Diariveca, C.A. 4,560,435 1.0400 4,456,399 1.0400 Cedeño, Eligio 4,500,799 1.0264 4,500,730 1.0503 Kozma Solymosy, Nicolás A. 4,492,467 1.0245 4,023,303 0.9389 Somoza Mosquera, David 4,385,034 1.0000 4,285,031 1.0000 Eurobuilding Internacional, C.A. 4,173,237 0.9517 4,078,234 0.9517 Fondo de Jubilaciones y Pensiones de la U.D.O. 3,701,407 0.8441 3,617,164 0.8441 Other 83,189,355 18.9712 81,195,891 18.9487

438,503,396 100.0000 428,503,396 100.0000

b) Capital reserves and retained earnings Based on the provisions set out in its bylaws and the Law on Banking Sector Institutions, the Bank makes an appropriation to the legal reserve every six months equivalent to 20% of its biannual net income until the reserve reaches 50% of its capital stock. Once the legal reserve reaches this amount, the Bank’s appropriation to the legal reserve will be 10% of its biannual net income until the reserve covers 100% of its capital stock. At June 30, 2013 and December 31, 2012, capital reserves include Bs 996,124 in respect of voluntary reserves. In addition, at June 30, 2013, this account includes Bs 45,833,333 for payment of convertible bonds (Bs 89,583,333 at December 31, 2012) (Note 24). Through Notice No. SIB-II-GGIBPV-GIBPV2-07778 issued on March 30, 2011, SUDEBAN informed the Bank that profit generated by Branch operations should be considered restricted surplus. During the six-month period ended June 30, 2013, the Bank reclassified Branch income of Bs 8,459,168.for the six-month period then ended (Bs 33,870,641 for the six-month period ended December 31, 2012).


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Through Notice No. SIB-II-GGIBPV-GIBPV2-17478 issued on May 30, 2013, SUDEBAN requested the Bank to make an adjustment of Bs 25,436,618, in connection with exchange gains of the Branch, through a debit to unappropriated surplus and a credit to investments in subsidiaries, affiliates and branches. Resolution No. 305.11 issued by SUDEBAN on November 28, 2011 was published in Official Gazette No. 39,820 on December 14, 2011. This Resolution relates to the “Regulations Governing the Social Contingency Fund” and establishes the guidelines to account for the social fund, in conformity with Article No. 47 of the Law on Banking Sector Institutions. On March 23, 2012, the Bank created the social fund through an investment trust fund with Banco Exterior, C.A. Banco Universal, in conformity with Resolution No. 305-11 published in the Official Gazette on December 14, 2011. The Bank made the respective accounting entries with a charge to restricted investments and a credit to cash maintained with the BCV. At June 30, 2013 and December 31, 2012, the Bank recorded the social contingency fund of Bs 2,192,518 and Bs 2,142,517, respectively, with a charge to unappropriated surplus and a credit to capital reserves. On July 12, 2013, the Bank transferred Bs 2,192,518 to the investment trust fund with Banco Exterior and made the accounting record with a debit to restricted investments and a credit to cash maintained at the BCV. In compliance with SUDEBAN Resolution No. 329-99, during the six-month period ended June 30, 2013, the Bank reclassified Bs 112,890,979 (Bs 114,627,343 at December 31, 2013) to restricted surplus, equivalent to 50% of income for the six-month period, net of appropriations to reserves and Branch income. At June 30, 2013 and December 31, 2012, restricted surplus amounts to Bs 439,661,125 and Bs 326,770,146, respectively. These amounts may be used for capital stock increase, but not for cash dividend distribution. Below is the movement in restricted surplus balances:

Resolution No. 329-99

(In bolivars) Balance at June 30, 2012 253,692,803 Capital stock increase (41,550,000) Appropriation of 50% of income for the period 114,627,343

Balance at December 31, 2012 326,770,146

Appropriation of 50% of income for the period 112,890,979

Balance at June 30, 2013 439,661,125

c) Exchange gain from holding foreign currency assets and liabilities Exchange gain from holding foreign currency assets and liabilities at June 30, 2013 and December 31, 2012 comprises the following: (In bolivars) Balance at June 30, 2012 133,111,483 Reclassification according to SUDEBAN Notice No. SIB-II-GGIBPV-GIPV2-32501 656,392

Balance at December 31, 2012 133,767,875

Exchange gain from holding foreign currency assets and liabilities (Note 4) 291,583,235 Exchange gain according to SUDEBAN Notice No. SIB-II-GGI-BPV-PV2-17478 of May 30, 2013 (Note 4) 10,545,202 Reversal of exchange gain for 2011 (4,387,020)

Balance at June 30, 2013 431,509,292


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Through Notice No. SIB-II-GGIBPV-GIBPV2-32501 of October 15, 2012, SUDEBAN informed the Bank that the effect of translation for the Bank’s consolidation with the Curacao Branch financial statements should not be recorded under exchange gain (loss) from holding foreign currency assets and liabilities. Accordingly, SUDEBAN requested the Bank to reverse the effect recorded under exchange gain (loss) from holding foreign currency assets and liabilities so as to show under this item the balance at December 31, 2011. Furthermore, SUDEBAN informed the Bank that section 152 “Investments in branches” of the Accounting Manual establishes the parameters for consolidating financial statements. On October 25, 2012, the Bank sent SUDEBAN the corresponding accounting vouchers. At December 31, 2012, other operating income includes Bs 23,321,669 in respect of the effect of translation for the Bank’s consolidation with the Curacao Branch financial statements (Notes 4 and 19). Through Notice No. SIB-II-GGI-BPV-PV2-17478 of May 30, 2013, SUDEBAN informed the Bank about the assessment of the position in foreign currency assets and liabilities at February 13, 2013, which resulted in exchange gains and losses, due to the adjustment of those positions to the new exchange rate. After the assessment was completed, SUDEBAN identified a difference of Bs 10,545,202 in respect of the results recorded by the Bank, since the exchange difference generated in account 152.01 (Capital assigned to branches abroad) was not considered and, therefore, SUDEBAN requested the Bank to make such record. d) Risk-based capital ratio Through Resolution No. 305-09 of July 2009, SUDEBAN establishes the following in connection with risk-based capital ratio: a) contributions pending capitalization and treasury stock are considered as primary equity (Tier 1); b) goodwill and investments in Venezuelan financial subsidiaries or affiliates must be deducted from the primary equity (Tier 1); and c) 50% of pending cash items, overnight deposits and deposits and credits related to microcredits, agriculture, manufacturing and tourism activities must be included into the risk category. Furthermore, this Resolution establishes a new 75% risk weighting applicable to overnight deposits in local currency. The minimum total risk-based capital and equity-to-total assets (solvency ratio) will be 12% and 8%, respectively. Ratios required and maintained by the Bank, in accordance with SUDEBAN rules, have been calculated based on its published financial statements, as indicated below: June 30, 2013 December 31, 2012 Required Maintained Required Maintained % % % % Total risk-based capital 12 16.18 12 13.83 Equity-to-total assets 8 9.08 8 8.36

Subsequent event On July 25, 2013, SUDEBAN issued Resolution No. 102-13 to change the capital adequacy ratio set out in Article 6 of Resolution No. 305-09 dated July 9, 2009. According to this resolution, banks must maintain a capital adequacy ratio of no less than 12%. To comply with the capital adequacy ratio, banks shall comply with the following adequacy schedule:

Percentage Semester %

December 2013 9 June 2014 10 December 2014 11 June 2015 11 December 2015 12 June 2015 12


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26. Balances and transactions with related companies In the ordinary course of business, the Bank conducts commercial transactions with related companies. Because of those relationships, certain transactions may have taken place on terms other than those that would characterize transactions between unrelated companies. A breakdown of the Bank’s balances and transactions with its related company Caracas International Banking Corporation is provided below: June 30, December 31, 2013 2012

(In bolivars) Assets Cash and due from banks Foreign and correspondent banks US$44,377 (US$44,757 at December 31, 2012) 278,871 192,453 Liabilities Borrowings (Note 14) Interest-bearing checking accounts, with 0.25% annual interest 536,829 581,327 Expenses for the period Interest expense Expenses from borrowings 2,190 4,429

27. Social Bank Deposit Protection Fund

Venezuelan financial institutions regulated by the Law on Banking Sector Institutions are required to pay fees to the Social Bank Deposit Protection Fund (FOGADE). Among other things, FOGADE guarantees customer deposits up to a given amount per depositor. Through Decree No. 7,207, published in Official Gazette No. 39,358 on February 1, 2010, the Venezuelan government set at 0.75% the monthly fee that banks must pay to FOGADE through monthly premiums equivalent to one-sixth of 0.75% of the total amount of customer deposits at the end of each semester prior to the payment date, calculated in accordance with instructions issued by FOGADE. This fee is shown under operating expenses. On January 21, 2013, the Venezuelan government published a Resolution in Official Gazette No. 40,094 to partially amend the regulations for payment of this contribution. FOGADE’s signature regulations were subsequently published in Official Gazette No. 40,099 on January 28, 2013.

28. Special fee paid to the Superintendency of Banking Sector Institutions The Law on Banking Sector Institutions requires Venezuelan banks and financial institutions regulated by this Law to pay a special fee to support SUDEBAN operations. The instructions for payment of fees by companies regulated by SUDEBAN and banks regulated by special laws were published in Official Gazette No. 40,089 on January 14, 2013. At June 30, 2013 and December 31, 2012, the biannual fee is 0.06% of the average of the Bank’s assets; it is payable monthly. This fee is shown under operating expenses.


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29. Legal reserve The BCV requires financial institutions to maintain a minimum legal reserve deposit at the BCV equal to a percentage of their placements, deposits, liabilities and investments assigned, excluding liabilities with the BCV, FOGADE and other financial institutions; liabilities arising from funds received from the Venezuelan government, local or foreign entities to finance special programs in the country (once these funds have been allocated); liabilities arising from funds received from financial institutions to finance and promote exports as required by Law (once these funds have been allocated); and liabilities in foreign currency resulting from its offices abroad and those resulting from transactions with other banks and financial institutions for which the latter have, in turn, created a reserve pursuant to the legal reserve regulations. Liabilities arising from resources provided by Mandatory Housing Savings Funds required under the Venezuelan Housing Loan Law and managed by financial institutions in trust funds will not be computed. In addition, through Resolution No. 12-05-02 published in Official Gazette No. 39,933 on May 30, 2012, the BCV reduced the legal reserve amount to be allocated by financial institutions that purchased dematerialized certificates of participation issued by the Simón Bolívar Fund by the balance of such certificates. For the six-month period ended December 31, 2012, the Bank purchased Bs 233,458,108 in this connection (Notes 5-b). Subsequently, through Resolution No. 13-04-01 published in Official Gazette No. 40,155 on April 26, 2013, the BCV reduced the legal reserve amount to be allocated by financial institutions that purchased dematerialized certificates of participation in 2013 issued by the Simón Bolívar Fund by the balance of such certificates. For the six-month period ended June 30, 2013, the Bank purchased Bs 877,064,242 in this connection (Note 5-b). The legal reserve must be maintained in legal tender, regardless of the currency of the transactions from which it originated (Note 3).

30. Contingencies At June 30, 2013, the Bank is defendant in the following legal proceedings: Labor and other The Bank received assessments from the National Institute for Socialist Education (INCES) in respect of special contributions amounting to Bs 28,156 (Bs 50,210 at December 31, 2012). In the opinion of Bank management and its external legal advisors, these matters should not have a material adverse effect on the Bank’s financial position and results of operations. The Bank has received legal claims from individuals in respect of length-of-service and other labor-related benefits amounting to Bs 66,118,143 at June 30, 2013 and December 31, 2012. In the opinion of Bank management and its external legal advisors, these claims are not well grounded in law and, therefore, should not have a material adverse effect on the Bank’s financial position and results of operations. Bank management and its legal advisors believe most of these assessments are not well grounded in law and, consequently, that the outcome of these claims will be favorable to the Bank. At June 30, 2013 and December 31, 2012, the Bank has set aside no provision in this connection. Except for the aforementioned assessments, management is not aware of any other pending tax, labor or other claim that may have a significant effect on the Bank’s financial position or result of operations.


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31. Maturity of financial assets and liabilities Below is a breakdown of the estimated maturity of financial assets and liabilities:

June 30, 2013 Maturity Beyond December 31, June 30, December 31, June 30, December 31, June 30, June

2013 2014 2014 2015 2015 2016 2016 Total

(In bolivars) Assets 8,194,764,113 - - - - - - 8,194,764,113 Cash and due from banks

Investment securities 551,874,134 426,438,163 40,846,954 505,635,743 246,423,629 902,463,131 6,399,416,902 9,073,098,656 Loan portfolio 7,943,896,800 1,472,764,930 567,890,601 842,314,707 469,555,375 714,735,323 2,164,081,165 14,175,238,901 Interest and commissions receivable 238,436,811 - - - - - - 238,436,811

16,928,971,858 1,899,203,093 608,737,555 1,347,950,450 715,979,004 1,617,198,454 8,563,498,067 31,681,538,481 Liabilities Customer deposits 29,373,321,450 14,750,482 - - - 60,000,000 - 29,448,071,932 Borrowings 1,877,398 - - - - - - 1,877,398 Liabilities from financial intermediation 14,243,011 - - - - - - 14,243,011 Interest and commissions payable 21,768,010 - - - - - - 21,768,010

29,411,209,869 14,750,482 - - - 60,000,000 - 29,485,960,351

December 31, 2012 Maturity Beyond June 30, December 31, June 30, December 31, June 30, December 31, December 2013 2013 2014 2014 2015 2015 2015 Total

(In bolivars) Assets Cash and due from banks 5,703,778,981 - - - - - - 5,703,778,981 Investment securities 1,710,655,834 365,600,419 51,627,666 154,558,495 431,921,560 95,917,734 5,241,219,803 8,051,501,511 Loan portfolio 6,323,514,358 1,359,947,152 552,193,293 532,447,709 657,967,591 522,170,869 2,048,817,077 11,997,058,049 Interest and commissions receivable 225,044,751 - - - - - - 225,044,751

13,962,993,924 1,725,547,571 603,820,959 687,006,204 1,089,889,151 618,088,603 7,290,036,880 25,977,383,292 Liabilities Customer deposits 24,214,533,357 11,901,952 - - - 60,000,000 - 24,286,435,309 Borrowings 23,206,607 - - - - - - 23,206,607 Liabilities from financial intermediation 20,350,594 - - - - - - 20,350,594 Interest and commissions payable 12,969,545 - - - - - - 12,969,545

24,271,060,103 11,901,952 - - - 60,000,000 - 24,342,962,055

32. Fair value of financial instruments

The estimated fair value of the Bank’s financial instruments, their book value, and the main assumptions and methodology used to estimate their fair values are shown below: June 30, 2013 December 31, 2012 Estimated Estimated Book fair Book fair value value value value

(In bolivars) Assets Cash and due from banks 8,194,764,113 8,194,764,113 5,703,778,981 5,703,778,981 Investment securities, net 9,073,098,656 8,981,036,126 8,051,421,105 8,040,432,388 Loan portfolio, net 13,846,572,603 13,846,572,603 11,682,646,923 11,682,646,923 Interest and commissions receivable, net 238,436,811 238,436,811 197,536,983 197,536,983

31,352,872,183 31,260,809,653 25,635,383,992 25,624,395,275 Liabilities Customer deposits 29,448,071,932 29,448,071,932 24,286,435,309 24,286,435,309 Interest and commissions payable 21,768,010 21,768,010 23,206,607 23,206,607 Other liabilities from financial intermediation 14,243,011 14,243,011 20,350,594 20,350,594 Borrowings 1,877,398 1,877,398 12,969,545 12,969,545

29,485,960,351 29,485,960,351 24,342,962,055 24,342,962,055


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Short-term financial instruments Short-term financial instruments, both assets and liabilities, are shown in the balance sheet at book value, which does not significantly differ from fair value due to their short-term maturity. These instruments include cash and due from banks, customer deposits with no fixed maturity and short-term maturity, short-term borrowings, other liabilities from financial intermediation with short-term maturity, and interest receivable and payable. Investment securities The fair value of investments in available-for-sale and held-to-maturity securities was determined using quoted market prices, reference prices determined from trading operations on the secondary market, the present value of estimated future cash flows and quoted market prices of financial instruments with similar characteristics (Note 5-a and b). Investments in other securities are shown at par value, which is considered as fair value (Note 5-e). Loan portfolio The Bank’s loan portfolio earns interest at variable rates that are reviewed regularly. In addition, allowances are made for loans with some risk of recovery. Therefore, in management’s opinion, the book value of the loan portfolio approximates its fair value. Customer deposits and long-term liabilities Customer deposits and long-term liabilities bear interest at variable rates, which are reviewed regularly. Therefore, management considers fair value to be equivalent to book value.

33. Legally established limits for loans and investments At June 30, 2013, the Bank has guaranteed loans with economic groups that individually exceed 10% of the Bank’s equity (no loans at December 31, 2012). At June 30, 2013 and December 31, 2012, the Bank does not maintain investments or loans exceeding the limits established in Article No. 99 of the Law on Banking Sector Institutions.


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34. Supplementary information - Inflation-adjusted financial statements The Bank’s inflation-adjusted financial statements, prepared in accordance with the General Price Level (GPL) method (Note 2), are provided below as supplementary information: Supplementary balance sheet June 30, 2013 and December 31, 2012 June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Assets Cash and due from banks 8,194,764,113 7,129,153,348

Cash 965,871,322 921,493,741 Central Bank of Venezuela 5,969,097,848 5,437,179,783 Venezuelan banks and other financial institutions 115,073 153,875 Foreign and correspondent banks 457,288,556 119,067,098 Pending cash items 802,457,281 651,258,851 (Provision for cash and due from banks) (65,967) -

Investment securities 9,073,098,656 10,063,471,239

Deposits with the BCV and overnight deposits 1,000,000,000 1,263,572,656 Investments in available-for-sale securities 3,212,106,612 4,305,164,473 Investments in held-to-maturity securities 3,502,118,301 3,483,630,980 Restricted investments 61,535,201 20,526,210 Investments in other securities 1,297,338,542 990,677,419 (Provision for investment securities) - (100,499)

Loan portfolio 13,846,572,603 14,602,140,390

Current 14,081,151,227 14,925,662,549 Rescheduled 68,303,034 42,686,049 Overdue 25,784,640 26,774,258 (Allowance for losses on loan portfolio) (328,666,298) (392,982,466)

Interest and commissions receivable 238,436,811 246,901,475

Interest receivable on investment securities 135,965,809 150,770,892 Interest receivable on loan portfolio 113,180,702 129,399,105 Commissions receivable 969,185 1,113,437 (Provision for interest receivable and other) (11,678,885) (34,381,959)

Investments in subsidiaries, affiliates and branches - -

Available-for-sale assets 53,524,388 104,601,488

Property and equipment 1,172,380,459 1,106,589,533

Other assets 414,391,049 421,249,759

Total assets 32,993,168,079 33,674,107,232


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Supplementary balance sheet June 30, 2013 and December 31, 2012 June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Liabilities and equity Customer deposits 29,448,071,932 30,355,615,493

Demand deposits 15,343,320,552 17,531,637,386

Non-interest-bearing checking accounts 11,842,510,017 14,253,187,448 Interest-bearing checking accounts 3,500,810,535 3,278,449,938

Other demand deposits 6,612,838,378 6,240,868,023 Savings deposits 6,109,109,755 5,744,782,399 Time deposits 1,283,861,833 715,310,232 Securities issued by the Bank 98,941,414 123,017,453

Borrowings 1,877,398 29,005,938

Venezuelan financial institutions, up to one year 1,340,569 1,406,487 Foreign financial institutions, up to one year 536,829 27,599,451

Other liabilities from financial intermediation 14,243,011 25,436,207

Interest and commissions payable 21,768,010 16,210,634

Expenses payable on customer deposits 21,417,156 15,432,955 Expenses payable on borrowings - 42,009 Expenses payable on other liabilities 350,854 735,670

Accruals and other liabilities 468,810,460 485,718,064

Total liabilities 29,954,770,811 30,911,986,336

Equity Inflation-adjusted capital stock 1,862,972,592 1,851,450,607 Convertible bonds 50,000,000 124,990,000 Paid-in surplus 250,429,638 193,671,380 Capital reserves 692,625,323 681,167,524 Retained earnings (512,703,775) (444,270,620) Exchange gain from holding foreign currency assets and liabilities 612,510,972 258,280,191 Net unrealized gain on investments in available-for-sale- securities 82,562,518 96,831,814

Total equity 3,038,397,268 2,762,120,896

Total liabilities and equity 32,993,168,079 33,674,107,232


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Supplementary income statement Six-month periods ended June 30, 2013 and December 31, 2012 June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Interest income 1,673,375,188 1,700,864,654

Income from cash and due from banks 68,050 36,843 Income from investment securities 463,233,909 402,112,998 Income from loan portfolio 1,123,328,228 1,180,245,847 Income from other accounts receivable 86,728,402 118,440,233 Other interest income 16,599 28,733

Interest expense (546,336,463) (507,055,952)

Expenses from customer deposits (537,374,168) (495,514,634) Expenses from borrowings (47,940) (109,639) Expenses from convertible bonds (7,617,030) (11,114,017) Other interest expense (1,297,325) (317,662)

Gross financial margin 1,127,038,725 1,193,808,702

Income from financial assets recovered 12,391,449 7,194,999 Expenses from uncollectible loans and other accounts receivable (13,593,027) (66,712,543)

Net financial margin 1,125,837,147 1,134,291,158

Other operating income 187,539,628 224,460,021 Other operating expenses (94,706,048) (80,555,633)

Financial intermediation margin 1,218,670,727 1,278,195,546

Operating expenses (896,842,290) (831,569,116)

Salaries and employee benefits 234,910,842 220,921,869 General and administrative expenses 472,150,416 459,241,082 Fees paid to the Social Bank Deposit Protection Fund 174,660,798 137,795,784 Fees paid to the Superintendency of Banking Sector Institutions 15,120,234 13,610,381

Gross operating margin 321,828,437 446,626,430

Income from available-for-sale assets 10,066,756 3,420,350 Sundry operating income 6,164,810 8,603,428 Expenses from available-for-sale assets (24,004,092) (23,193,869) Sundry operating assets (41,760,323) (37,693,938)

Net operating margin 272,295,588 397,762,401

Extraordinary income 4,630,741 725,909 Extraordinary expenses (1,956,541) (7,954,115)

Gross income before tax and loss from net monetary position 274,969,788 390,534,195

Income tax (5,042,143) (1,005,372)

Income before loss from net monetary position 269,927,645 389,528,823

Loss from net monetary position (298,652,763) (102,898,905)

Net income (loss) (28,725,118) 286,629,918


81

Supplementary statement of changes in equity Six-month periods ended June 30, 2013 and December 31, 2012 Exchange gain (loss) from Unrealized

Paid-in capital stock Share premium holding foreign gain (loss) on Inflation Convertible and paid-in Capital Retained currency assets investments Total Nominal adjustment Total bonds surplus reserves earnings and liabilities securities equity

(In constant bolivars at June 30, 2013, except nominal capital stock)

Balances at June 30, 2012 345,403,396 1,394,227,492 1,739,630,888 139,613,830 193,671,380 585,853,672 (521,379,989) 258,005,325 (47,370,246) 2,348,024,860

Capital increase 83,100,000 28,719,719 111,819,719 - - - (111,819,719) - - - Exchange gain from holding foreign currency assets and liabilities - - - - - - - 274,866 - 274,866 Gain on sale of investments and adjustment of investments in available-for-sale securities to market value - - - - - - - - 139,240,271 139,240,271 Effect of restating unrealized gain on investments in available-for-sale securities - - - - - - - - 4,961,789 4,961,789 Effect of restating convertible bonds - - - (14,623,830) - - - - - (14,623,830) Net income - - - - - - 286,629,918 - - 286,629,918 Appropriation to the legal reserve - - - - - 82,220,087 (82,220,087) - - - Creation of the social contingency fund - - - - - 2,677,932 (5,064,910) - - (2,386,978) Reserve fund for convertible bonds - - - - - 10,415,833 (10,415,833) - - -

Balances at December 31, 2012 428,503,396 1,422,947,211 1,851,450,607 124,990,000 193,671,380 681,167,524 (444,270,620) 258,280,191 96,831,814 2,762,120,896

Paid-in surplus - - - - 68,280,243 - - - - 68,280,243 Capital increase through public offering of shares 10,000,000 1,521,985 11,521,985 - (11,521,985) - - - - - Exchange gain from holding foreign currency assets and liabilities - - - - - - - 347,159,000 - 347,159,000 Exchange gain from holding foreign currency assets and liabilities according to Notice No. SIB-II-GGIBPV-GIBPV2-17478 of May 30, 2013 - - - - - - (1,618,099) 12,555,118 - 10,937,019 Adjustment according to SUDEBAN Notice No. SIB-II-GGIBPV-GIBPV2-17478 of May 30, 2013. - - - - - - (26,632,139) - - (26,632,139) Exchange loss from holding foreign currency assets and liabilities of 2011 - - - - - - - (5,483,337) - (5,483,337) Maturity of convertible bonds - - - (55,545,000) - (55,545,000) 55,545,000 - - (55,545,000) Gain on sale of investments and adjustments of investments in available-for-sale securities to market value - - - - - - - - 5,090,869 5,090,869 Effect of restating unrealized gain on investments in available- for-sale securities - - - - - - - - (19,360,165) (19,360,165) Effect of restating convertible bonds - - - (19,445,000) - - - - - (19,445,000) Net loss - - - - - - (28,725,118) - - (28,725,118) Appropriation to the legal reserve - - - - - 58,560,281 (58,560,281) - - - Creation of the social contingency fund - - - - - 2,192,518 (2,192,518) - - - Reserve fund for convertible bonds - - - - - 6,250,000 (6,250,000) - - -

Balances at June 30, 2013 438,503,396 1,424,469,196 1,862,972,592 50,000,000 250,429,638 692,625,323 (512,703,775) 612,510,972 82,562,518 3,038,397,268


82

Supplementary cash flow statement Six-month periods ended June 30, 2013 and December 31, 2012 June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Cash flows from operating activities Net income (loss) (28,725,118) 286,629,918 Adjustments to reconcile net income to net cash provided by (used in) operating activities Release of provision for investment securities (100,499) - Allowance for losses on loan portfolio 13,151,067 66,651,409 Provision for interest receivable and other 441,960 60,354 Provision for other assets 5,701,900 537,786 Depreciation of property and equipment and amortization of available-for- 112,610,165 109,488,699 sale and other assets Accrual for length-of-service benefits 38,423,739 25,669,944 Transfers to trust fund and payment of length-of-service benefits (30,793,163) (22,451,739) Income tax provision 631,930 3,336,602 Deferred tax asset 4,410,213 (2,331,230) Exchange gain from holding foreign currency assets and liabilities 359,714,118 274,864 Net change in Overnight deposits 263,572,656 (1,263,572,656) Interest and commissions receivable 21,092,512 (49,943,158) Other assets (30,824,644) (75,074,482) Accruals and other liabilities (25,445,269) 99,705,117

Net cash provided by (used in) operating activities 703,861,567 (821,018,572)

Cash flows from financing activities Paid-in surplus 68,280,243 - Maturity and payment of convertible bonds (55,545,000) - Effect of inflation on convertible bonds (19,445,000) (14,623,830) Net change in Customer deposits (907,543,560) 5,793,370,962 Borrowings (27,128,540) 26,541,499 Other liabilities from financial intermediation (11,193,196) (20,250,585) Interest and commissions payable 5,557,376 (2,842,394)

Net cash provided by (used in) financing activities (947,017,677) 5,782,195,652

Cash flows from investing activities Loans granted during the period (12,051,801,314) (12,907,879,038) Loans collected during the period 12,781,423,385 11,633,877,714 Changes in equity (33,733,576) 565,818 Net change in Investments in available-for-sale securities 1,078,788,565 (1,874,166,417) Investments in held-to-maturity securities (18,487,321) (229,885,250) Restricted investments (41,008,991) 2,385,710 Investments in other securities (306,661,123) 88,386,768 Available-for-sale assets 27,734,648 (24,416,442) Property and equipment (127,487,398) (128,246,057)

Net cash provided by (used in) investing activities 1,308,766,875 (3,439,377,194)

Cash and due from banks Net change in cash and cash equivalents 1,065,610,765 1,521,799,886

At the beginning of the period 7,129,153,348 5,607,353,462

At the end of the period 8,194,764,113 7,129,153,348 Loss from net monetary position In operating activities 264,786,762 191,820,746 In financing activities 6,099,276,715 2,593,300,168 In investing activities (4,640,036,347) (2,094,880,597) From holding cash (1,425,374,367) (587,341,412)

298,652,763 102,898,905


83

Supplementary cash flow statement Six-month periods ended June 30, 2013 and December 31, 2012 June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Supplementary information on non-cash activities Write-off of uncollectible loans (principal) 10,817,837 20,603,732 Write off of uncollectible loans (interest) 3,254,357 1,007,227 Reclassification of excess in Allowance for losses on loan portfolio to provision for interest receivable and other 13,069,808 (7,177,146) Allowance for losses on loan portfolio to provision for contingent loans (275,159) (1,713,510) Net change in unrealized gain (loss) on investments in available-for-sale securities (14,269,296) 144,202,062 Creation of the social contingency fund 2,192,518 2,677,932

14,790,065 159,600,297

Property and equipment Property and equipment comprises the following: June 30, 2013 December 31, 2012 Accumulated Accumulated Cost depreciation Net Cost depreciation Net

(In constant bolivars at June 30, 2013) Land 90,396,008 - 90,396,008 90,396,008 - 90,396,008 Buildings and facilities 743,921,734 (74,238,714) 669,683,020 698,565,295 (65,310,060) 633,255,235 Computer hardware 213,320,869 (162,570,867) 50,750,002 207,739,929 (152,162,537) 55,577,392 Furniture and equipment 470,792,890 (226,129,056) 244,663,834 420,437,820 (202,695,327) 217,742,493 Vehicles 15,252,788 (11,429,294) 3,823,494 15,107,034 (10,528,766) 4,578,268 Construction in progress 110,565,782 - 110,565,782 102,541,818 - 102,541,818

1,644,250,071 (474,367,931) 1,169,882,140 1,534,787,904 (430,696,690) 1,104,091,214

Other assets 2,498,319 - 2,498,319 2,498,319 - 2,498,319

1,646,748,390 (474,367,931) 1,172,380,459 1,537,286,223 (430,696,690) 1,106,589,533

Monetary assets and liabilities Monetary assets and liabilities, including amounts in foreign currency are, by their nature, shown in terms of purchasing power at June 30, 2013. The result from monetary position reflects the loss or gain resulting from maintaining a net monetary asset or net monetary liability position during an inflationary period and is shown separately in the income statement. Nonmonetary assets and liabilities These components (property and equipment, available-for-sale assets and deferred charges) have been restated based on their dates of origin and are shown at restated cost by the GPL method. Equity All equity accounts, except convertible bonds, have been restated based on their dates of origin and are shown in constant currency at June 30, 2013. Stock dividends are declared, as well as voluntary, statutory or similar reserves are dated based on their dates of origin as equity and not on their capitalization date. Cash dividends are adjusted based on the date they were declared.


84

Income statement Operating income and expenses have been restated by multiplying them by the factor obtained from dividing the NCPI at June 30, 2013 by the NCPI at the dates on which they were earned or incurred. Costs and expenses in respect of nonmonetary items have been adjusted based on the previously restated nonmonetary items to which they relate. Analysis of monetary result for the period An analysis of the monetary result for the period is provided below: Six-month periods ended June 30, December 31, 2013 2012

(In constant bolivars at June 30, 2013) Net monetary asset position at the beginning of the period 1,248,932,854 917,920,845

Transactions that increased net monetary position Income 1,894,168,572 1,945,269,361 Changes in equity 305,001,489 144,476,926 Sales price of available-for-sale assets 50,501,942 8,556,914

Subtotal 2,249,672,003 2,098,303,201

Transactions that decreased net monetary position Expenses 1,511,630,691 1,446,251,838 Additions to property and equipment, deferred charges and other 161,718,646 218,140,449

Subtotal 1,673,349,337 1,664,392,287

Estimated net monetary asset position at the end of the period 1,825,255,520 1,351,831,759

Net monetary asset position at the end of the period 1,526,602,757 1,248,932,854

Loss from net monetary position (298,652,763) (102,898,905)

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