Annual Report 2007Leasing Company Limited will be held at the Banquet Hall of the Bangladesh-China Friendship Conference Centre (BCFCC), Agargaon, Sher-E-Bangla Nagar, Dhaka on Tuesday,

Annual Report 2007

UNITED LEASING COMPANY LIMITED

CONTENTS PAGE

Notice of the Meeting 1

Company Information 2

Company Milestones 4

Chairman's Statement 5

Board of Directors' Report 11

Report on the activities of Audit Committee 21

Progress at a Glance 22

Auditors' Report to the Shareholders 24

Balance Sheet 26

Profit and Loss Account 28

Statement of Changes in Equity 29

Cash Flow Statement 30

Notes to the Accounts 31

Proxy Form 53


Notice is hereby given that the Nineteenth Annual General Meeting of the shareholders of United Leasing Company Limited will be held at the Banquet Hall of the Bangladesh-China Friendship Conference Centre (BCFCC), Agargaon, Sher-E-Bangla Nagar, Dhaka on Tuesday, March 25, 2008 at 11:00 a.m. to transact the following business:

1. To receive and adopt the Directors' Report and Audited Accounts for the year ended December 31, 2007.

2. To declare Dividend for 2007.

3. To elect Directors as per Articles of Association of the Company.

4. To consider the appointment of Auditors for 2008 and fix their remuneration.

5. Approval of issuance of Bonds.

6. Authorization for issuance of Bonds and Debentures.

BY ORDER OF THE BOARD

Dated : Dhaka February 13, 2008 COMPANY SECRETARY

1. A shareholder entitled to attend and vote at the meeting may appoint a proxy to attend and vote in his/her stead. The proxy form must be affixed with a revenue stamp of Tk 8.00 and submitted to the Registered Office of the Company no later than 48 hours before the day of the Annual General Meeting.

2. February 28, 2008 is the Record Date.

3. Shareholders are requested to submit their queries on the Directors' Report and Audited Accounts, if any, at the Registered Office of the Company by Sunday, March 23, 2008.

Notes :

NOTICE OF THE NINETEENTH ANNUAL GENERAL MEETING

1


Board of Directors

Chairman

Directors

Independent Director

Managing Director

Company Secretary

Imran Ahmed :

P. A. Leggatt, MBE : Lawrie Group Plc, U.K.

A. Rouf : Macalms Bangladesh Trust

S. Aziz Ahmad : Surmah Valley Tea Company Limited

M. M. Alam : The Allynugger Tea Company Limited

M. A. Azim : The Chandpore Tea Company Limited

M. Moyeedul Islam : United Insurance Company Limited

M. Abdul Wahed

Syed Ehsan Quadir

M. Ataul Hoque

Nominated by

Lawrie Group Plc, U.K.

COMPANY INFORMATION

2


Registered Office

Branches

Jessore

Gazipur

Bogra

Auditors

Legal Advisor

Camellia House22 Kazi Nazrul Islam AvenueDhaka - 1000PABX : (880-2) 9669006Fax : (880-2) 9662596Website : www.ulc.com.bd E-mail : [email protected]

Ispahani Building31 Sheikh Mujib RoadAgrabad Commercial AreaPABX : (880-31) 714882Fax : (880-31) 713729E-mail : [email protected]

41 M.K. Road (2nd Floor)Telephone : (880-421) 68425, 68426E-mail : [email protected]

Islam Plaza (3rd Floor) Joydevpur Chowrasta ChandanaTelephone : (880-2) 9257255E-mail : [email protected]

Saha Complex (2nd Floor), JhawtolaKabi Nazrul Islam Road Telephone : (880-051) 69873 E-mail : [email protected]

Hoda Vasi Chowdhury & Co. Chartered Accountants

Orr, Dignam & Co.

Chittagong

COMPANY INFORMATION

3


Incorporation and c 1989

Public issue and trading of shares on Dhaka Stock Exchange 1994

Increase of authorised capital 2000

Issue of securitized zero coupon bond 2005

Commencement of factoring operation 2005

Public deposit mobilization started 2005

Commencement of home loan 2007

Chittagong Branch 1994

Jessore Branch 2005

Gazipur Branch 2006

Bogra Branch 2006

ommencement of operation

Branches opened

COMPANY MILESTONES

4


CHAIRMAN'S STATEMENT

Dear Shareholders:

Economy

Financial Institutions

I am pleased to welcome you on behalf of the Board of Directors to the 19th Annual General Meeting of United Leasing Company Limited.

It is my great privilege to brief you on the Company, the market we operated in and the Company's activities during the year 2007. I would also take this opportunity to update you on contingencies and events happening after the balance sheet date as well as our future strategies.

The Country achieved a GDP growth of 6.5% in FY 2006-07 despite the natural disasters. This was slightly lower than 6.7% achieved in FY 2005-06.

The growth in agricultural sector was significantly lower than last year due to flood and shortage of various inputs.

The industry maintained its previous year's growth rate of 9.5%. Service sector registered an increased rate of 6.7% over 6.5% in FY 2005-06.

The inflation reached a very high level of 11.59 % at the year end. This was caused by high fuel and food prices both in international and domestic markets. The two natural disasters caused huge loss of food production which made the domestic food prices unstable.

Though the market mood was sluggish, the sector continued to grow during FY 2006-07 and the outstanding portfolio of the total sector reached Tk 76.6 billion this year from 63.0 billion in FY 2005-06, registering a growth of 21.59% compared to 22.33% in the previous year.

Finance Ordinance 2007 stopped depreciation claim on leased assets which will have significant adverse impact on the cash flow of Financial Institutions who operate mainly in the leasing industry. Financial institutions are now endeavoring to diversify their business portfolio.

Change in country's political scenario at the beginning of 2007 slowed down the private sector credit growth to some extent. Commercial Bank lending rates, call rates, yields on treasury bills and bonds however remained stable throughout the year due to excess liquidity in the banking sector.

Commercial Banks continue to remain the major source of funding for most of the financial institutions at a rate dictated by the lenders. Despite adequate liquidity in the banking sector the borrowing cost remained high. Diversification of funding source could also not make any significant headway as public issue of bonds is not feasible because of high issue cost. Finance Ordinance 2007, however, fully exempted tax on interest earned against investment in zero coupon bonds which can attract investments because of the tax incentive.

Remittances from workers abroad and export earnings grew by --- and ----% respectively. Imports increased by ----%. The year ended with a foreign exchange reserve of $ 5.51 billion.

5


Company Performance

Collection

Treasury Operation

Human Resources

Risk Management and Internal Restructuring

Equipment leasing remains the core business of the company. Factoring of accounts receivable and SME financing show promise, however their contribution to the current year's financial results are not significant. In December 2007, the Company added home loan in its products basket as a commitment to further diversification of its operation.

Company's operating revenue increased by 25.87% over the previous year whilst profit before tax increased by 12.53% to Tk 201 million. Revenue from long term activities increased by 25.55% whereas revenue from short term activities increased by 33.37%. Operating cost increased by 26.55% which was mainly due to 25.36% increase of financial expenses over last year. Earning per share increased by 16.95% to Tk 69 from Tk 59 in 2006.

During the year the Company disbursed Tk 3,108 million against assets financing and long term loan registering a growth of 9.36% over previous year.

The Company continues to maintain a proactive approach towards timely collection and gave top priority to control bad and doubtful assets. The collection department was reorganized and structured to enable it to raise early alert for possible defaults. During 2007 ULC was able to maintain the recovery ratio at 94% as in the earlier years even in adverse economic and political situations.

Company's loan and deposit portfolio stood at Tk 5.7 billion at the end of the year 2007, the major portion of which consisted of long-term loans from banks, and multilateral agencies.

During the year the Company obtained Tk 780 million long term loans from banks and Tk 199 million from Bangladesh Bank refinancing schemes. In its pursuit of diversification of funding sources, the Company mobilized Tk 407 million from individual depositors.

During the year the lending rates of the commercial banks remained high as in the previous years despite the excess liquidity. Call loan rate remained stable throughout the year.

The Company continues to provide a stimulating and challenging work environment for our human resources. To ensure the successful product diversification and meet the challenge of providing quality services to our geographically expanded customer base, we strengthened our workforce. We offered them competitive compensation and trained them to harness their full potential. Training for 1,180 man days was arranged for the staff locally as well as abroad.

The Company's credit risk management capabilities were further improved. Separate Credit and Credit Risk Administration departments were created with distinct responsibilities besides the Operations (Credit Administration) and Collection departments that already existed.

ULC continued to develop its risk management system as we are convinced that an efficient and effective risk management system is fundamental to our growth in our current and future business segments.

6


The Internal Control and Compliance department has also been strengthened with the segregation of Internal Audit functions and Compliance functions. A separate marketing team was created during the year to deliver better service to its expanded retail customer base.

Significant effort was devoted to articulate risk management policies. Process guidelines and manuals were also developed to ensure operational consistency and better internal monitoring and control.

Subsequent to the balance sheet date, the Directors recommended cash dividend of Tk 20.00 per share and one bonus share for every ten shares held. There are no circumstances in the Company of which non-disclosure would affect the ability of the users of the financial statements to make proper evaluation and decisions.

The economic growth in terms of real GDP of 6.2% and gross domestic investment of 26.2% has been projected for FY08. The outlook is, however, subject to several downside risks. The rising inflationary pressures, the high global oil prices, local under-pricing of energy products, infrastructure constraints are some of the impediments. The socio-political conditions particularly in view of the up-coming general election will also play a vital role.

Despite the uncertainties, we expect that Company's business will grow in 2008 in line with Company's strategy to diversify the client base. The emphasis will be on expanding the lease/loan portfolio in the unexplored market of the country. Collection efforts will continue to be one of the main focuses of the Company in the year 2008.

To mobilize additional funds the Company is planning to issue zero coupon bonds for private or public placement during the early part of 2008. Initial steps in this regard, including getting the Company rated by a reputable rating agency, are underway. Article 179(7) of our Memorandum and Articles of Association authorizes the Board of Directors to raise funds by issuing bonds and debentures, however, the Securities and Exchange Commission is asking for approval from shareholders in general meeting even for private placement which we intend to do in this AGM.

We offer special thanks to our valued customers, shareholders, regulators, lenders and the international agencies for their continuous support and cooperation.

I take this opportunity to thank my colleagues in the Board of Directors of the Company for their contribution during the year.

The employees of the Company deserve special mention for their dedication and hard work.

Sincerely,

Imran Ahmed Chairman

Post Balance Sheet Date Events

Outlook

Issuance of bonds and debentures

Acknowledgement

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Dear Shareholders:

Principal Activities

Financial Results

Dividend

The directors have the pleasure in submitting their 19th annual report of your Company together with the audited financial statements for the year ended December, 31 2007 and auditors' report thereon.

The principal activities of the Company are:

- Long term financing in the form of lease, term loan and home loan

- Short term financing in the form of factoring of accounts receivable and short term revolving loan.

Home loan product was introduced at the end of 2007 as a part of its product diversification commitment.

The Company's before and after tax profit for the year 2007 were Tk 201.30 million and Tk 144.54 million compared to Tk 178.89 million and Tk 123.23 million respectively in the previous year.

The financial results are summarized below:

2007 2006Taka Taka

Total revenue 930,406,431 755,041,250Expenditure 729,101,679 576,146,876Profit before tax 201,304,752 178,894,374Tax expense 56,765,899 55,669,000Profit after tax 144,538,853 123,225,374Retained earnings 8,840,699 21,615,325Available profit 153,379,552 144,840,699Profit transferred to statutory reserve 50,000,000 - Profit available for appropriation 103,379,552 144,840,699

Directors' recommendation for appropriation:

Proposed cash dividend 42,000,000 42,000,000Proposed bonus share 21,000,000 -Transfer to general reserve 35,000,000 94,000,000Un-appropriated profit carried forward 5,379,552 8,840,699

103,379,552 144,840,699

Board of Directors of the Company is pleased to recommend cash dividend of Tk 20.00 per ordinary share i.e. a total of Tk 42 million for 2.1 million ordinary shares for the year ended December 31, 2007. The Board also recommended the distribution of one bonus share for every ten shares held at record date.

BOARD OF DIRECTORS' REPORT

11


Plan for Utilization of Undistributed Profit

Directors

Auditors

Board Meeting and Attendance

Shareholding Pattern

The undistributed profit will be utilized to invest in lease assets and meet contingencies under section 100 of the Schedule 1 of the Companies Act 1994.

As all of you are aware, Mr. A. S. M. O. Subhan who was the Chairman of the Company passed away on Tuesday, July 17, 2007.

We recall with gratitude his important pivotal role in the formation of the Company and his active association since its inception. As the Chairman of the Board of Directors and more closely as the Chairman of the Executive Committee, he rendered invaluable service and guidance to the Company in managing its affairs. Late Mr. Subhan's tireless effort and priceless contribution made the Company as one of the leading financial institutions of the country.

Let us pray for the peace and salvation of the departed soul.

The Board earlier accepted the withdrawal of nomination of Mr. Imran Ahmed, a Director of the Company from Duncan Brothers (Banagladesh) Ltd and simultaneously accepted his nomination from Lawrie Group Plc of the U.K. to represent them in the Company's Board. He is eligible for re–election.

Following the death of Mr. A. S. M. O. Subhan, Mr. Imran Ahmed was unanimously elected as Chairman of the Board by the Directors.

As per Articles 154, 155, and 156 of the Articles of Association of the Company, three directors namely Mr. P. A. Leggatt, MBE representing Lawrie Group Plc of U. K., Mr. M. M. Alam representing The Allynugger Tea Company Limited and Mr. M. A. Azim representing The Chandpore Tea Company Limited retire by rotation from the office and are eligible for re-election.

Hoda Vasi Chowdhury & Co., Chartered Accountants who have served as Auditors of the Company for three consecutive years retire and are ineligible for re-appointment as per the Rules issued by Bangladesh Bank and Securities and Exchange Commission. A new auditor, therefore, is required to be appointed by the shareholders for the year 2008 in the 19th Annual General Meeting.

During the year, six (6) Board Meetings were held. The attendance of the Directors is shown in Annexure – 1

The shareholding pattern as per clause 1.4 (K) of the SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 is shown in Annexure – 2.

12


Statement of Directors on Financial Reports

Key Operating and Financial Data

Corporate Governance Compliance Report

a) The financial statements together with the notes thereon have been drawn up in

conformity with the Companies Act, 1994 and Securities and Exchange Rules, 1987. These

statements present fairly the Company's statement of affairs, the result of its operation,

cash flow, and statement of changes in equity.

b) Proper books of accounts of the Company have been maintained.

c) Appropriate accounting policies have been consistently applied in preparation of the

financial statements except those referred to in the financial statements and that the

accounting estimates are based on reasonable and prudent judgment.

d) The International Accounting Standards, as applicable in Bangladesh, have been followed

in preparation of the financial statements.

e) Internal control system is sound in design and has been effectively implemented and

monitored.

f) There are no significant doubts about the ability of the Company to continue as a going

concern.

Company's summarized key operating and financial data for last five years is shown in Annexure – 3.

Pursuant to the clause 5 of the SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006, we attach the Company's compliance status as Annexure - 4.

For and on behalf of the Board of Directors

Imran Ahmed February 06,2008 Chairman

13


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14

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Bgivb Avn‡g`‡deª“qvix 06, 2008 ‡Pqvig¨vb


16

420,000

60

60

Name of DirectorsA. S. M. O. Subhan 2Imran Ahmed 6P. A. Leggatt 2M. Moyeedul Islam 6A. Rouf 5S. Aziz Ahmad 5M. A. Wahed 5M. M. Alam 6M. A. Azim 5Syed Ehsan Quadir 6

Leave of absence was granted in all cases of non attendance.

Annexure-2

Meetings attended

Shareholding Pattern as on December 31, 2007

Shareholdings of Parent/Subsidiary/Associated companies and other related parties

Board Meeting and AttendanceAnnexure-1

Lawrie Group Plc, U.K.

United Insurance Co. Ltd.

Surmah Valley Tea Co. Ltd.

The Chandpore Tea Co. Ltd.

The Allynugger Tea Co. Ltd.

National Brokers Ltd.

Duncan Brothers (Bangladesh) Ltd.

Macalms Bangladesh Trust

Octavius Steel & Co. of BD Ltd.

The Lungla (Sylhet) Tea Co. Ltd.

Camellia Duncan Foundation

Amo Tea Co. Ltd.

Chittagong Warehouses Ltd.

The Mazdehee Tea Co. Ltd.

Duncan Products Ltd.

Name of shareholders420,000

203,400

173,748

126,470

106,250

39,000

21,000

20,248

15,000

12,181

8,130

1,290

1,251

1,250

1,248

Number of shares % of holdings

Shareholdings of the Directors, CEO, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children

Shareholding of Executives : Nil

10% and above shareholdings of the Company

20.00

9.69

8.27

6.02

5.06

1.86

1.00

0.96

0.71

0.58

0.39

0.06

0.06

0.06

0.06

Name of shareholders Number of shares % of holdings

Syed Ehsan Quadir

Khurshid Ara Rouf (Wife of Mr. A. Rouf, nominated director)

-

-

Name of shareholders Number of shares % of holdings

Lawrie Group Plc, U.K. (Sponsor) 20

17


Key Operating and Financial Data

Operating Result

Balance Sheet

Financial Ratios

Number of Branches

Number of Employees

Revenue

Expenses

Profit before tax

Provision for tax

Profit after tax

Total investment portfolio

Total assets

Net current assets

Financial liabilities

Total Liabilities

Shareholders equity

No. of shares outstanding (in million)

1Debt-equity ratio 2Current Ratio

3Return on equity (%)

Expenses per taka profit after tax (Taka) 4Financial expenses coverage (times)

5Net asset value per share 5Earning per share (Taka)

5Cash dividend (Taka per share)

Stock dividend (bonus share)

1. Debt-equity ratio is the ratio between total debt and total equity.

2. Current ratio is the ratio between current assets and current liabilities.

3. Return on equity is the ratio between net profit and average equity.

4. Financial expenses coverage is the ratio between profit before interest plus depreciation & tax and financial expenses.

5. Net asset value per share, earning per share and cash dividend have been calculated based on shares outstanding at the end of the year 2007 and accordingly restated for the previoius years.

Annexure-3

931

729

202

57

145

7,177

7,896

277

5,488

6,859

1,037

2.1

6.6

1.07:1

14.7

5.0

1.4

494

69

20

10:1

4

89

2007

755

576

179

56

123

6,084

6,284

(513)

3,872

5,349

935

2.1

5.7

0.9:1

13.8

4.7

1.4

445

59

20

-

4

85

2006 2005 2004 2003

678

409

269

90

179

5,137

5,418

730

3,351

4,562

856

1.4

5.3

1.39:1

22.6

2.3

1.9

408

85

21.3

2:1

3

67

617

331

286

132

154

4,450

4,974

674

3,103

4,250

724

0.7

5.9

1.33:1

23.0

2.2

2.2

345

73

20

1:1

1

47

552

315

237

127

110

3,601

4,301

315

2,329

3,689

612

0.7

6.0

1.2:1

19.2

2.9

2.0

291

53

18.3

-

1

42

(Taka in Million)


18

Status of Compliance of Corporate Governance Annexure-4

1.1 Yes

One

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

1.2 (i)

1.2 (ii)

1.3

1.4 (a)

1.4 (b)

1.4 (c)

1.4 (d)

1.4 (e)

Board's size

Number of independent director

Appointment of independent director

Chairman of the Board and CEO

FS present fairly its state of affairs,

results of its operations, cash flows &

changes in equity

Proper books of accounts maintained

Appropriate accounting policies

consistently applied in FS preparation

& accounting estimates are based on

reasonable & prudent judgment

lASs, as applicable in Bangladesh,

followed in FS preparation & any

departure adequately disclosed

The system of internal control

sound in design & effectively

implemented & monitored

No significant doubt upon its ability

to continue as a going concern

Reporting of significant deviations from

last year in operating results

Key operating & financial data of at

least preceding three years

Dividend declared

Number of Board meeting held &

attendance reporting

Pattern of shareholding

Appointment of CFO, Head of Internal

Audit & Company Secretary

Requirement to attend Board Meetings

Yes

1.4 (f)

1.4 (g)

1.4 (h)

1.4 (i)

1.4 (j)

1.4 (k)

2.1

2.2

TitleCondition

No.

Yes

Yes

Explanation for non-compliance/

commentsNot compliedComplied

Compliance status

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-


19

Audit Committee

Composition of Audit Committee

Appointment of Audit Committee members

Service & tenure of Audit Committee members

Selection of the Chairman of Audit Committee

Qualification of the Chairman of Audit Committee

Reporting of Audit Committee

Report on conflicts of interest

Suspected or presumed fraud or irregularity or material defect in the internal control system

Suspected infringement of laws

Any other matter

Reporting to the Authorities

Reporting to the Shareholders & General Investors

Appraisal or valuation services or fairness opinions

Financial information system design and implementation

Book-keeping or other services related to accounting records or financial statements

Broker-dealer services

Actuarial services

Internal audit services

Any other services

Explanation for non-compliance/

commentsNot compliedCompliedTitle

Condition No.

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

-

-

-

-

Yes

No such incidence

No such incidence

No such incidence

No such incidence

No such incidence

No such incidence

-

-

-

-

-

3.00

3.1 (i)

3.1 (ii)

3.2 (i)

3.2 (ii)

3.3.1 (i)

3.3.1 (ii) (a)

3.3.1 (ii) (b)

3.3.1 (ii)(c)

3.3.1 (ii) (d)

3.3.2

3.4

4.00 (i)

4.00 (ii)

4.00 (iii)

4.00 (iv)

4.00 (v)

4.00 (vi)

4.00 (vii)

3.1 (iii)

Compliance status

Yes

-

-

-

-

-

-

-

--

-

-

-

-

-

-

-

-


20

REPORT ON THE ACTIVITIES OF AUDIT COMMITTEE

During 2007, the audit committee met three times and discharged the following responsibilities:

- Reviewed the Company's draft financial statements for the year ended on December 31, 2006 and recommended that the statements be adopted by the Board.

- Reviewed the half yearly financial statements ended on June 30, 2007.

- Reviewed the Management Report of the external auditors on the Company's internal control.

- Reviewed the Bangladesh Bank's Inspection Report on the inspection carried out by its teams.

- Reviewed the policy statement and guidelines on Internal Control and Compliance and recommended their adoption by the Board.

- Reviewed quarterly reports on internal control and compliance.

- Placed the Audit Committee Reports to the Board of Directors.

The audit committee comprised of:

Mr. M. Moyeedul Islam ChairmanMr. M. Abdul Wahed (Independent Director) MemberMr. S. Aziz Ahmad MemberMr. Ataul Hoque Secretary

Managing Director of the Company, Mr. Syed Ehsan Quadir, attended the meetings of the audit committee by invitation.

February 06, 2008

M. Moyeedul Islam Chairman

Audit Committee


21


22


23

Amount in Taka

Amount in Taka

We have audited the accompanying Balance Sheet of the United Leasing Company Limited as of December 31, 2007 and the related Profit and Loss Account, Statement of Changes in Equity and Statement of Cash Flow together with the Notes 1 to 49 for the year then ended. The preparation of these financial statements is the responsibility of the Company's management. Our responsibility is to express an independent opinion on these financial statements based on our audit.

We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on 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 the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the Company's affairs as on December 31, 2007 and of the results of its operations and its cash flow for the year then ended and comply with the Financial Institutions Act 1993, the Companies Act 1994, the Securities and Exchange Rules 1987, the rules and regulations issued by the Bangladesh Bank and other applicable laws and regulations.

We also report that:

a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof;

b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

c) the Company's Balance Sheet and Profit and Loss Account together with the annexed notes 1 to 49 dealt with by the report are in agreement with the books of account;

d) the financial statements have been prepared in accordance with generally accepted accounting principles in Bangladesh;

e) the expenditure incurred and payments made were for the purpose of the Company's business;

f) the financial statements have been drawn up in conformity with the rules and regulations issued by the Bangladesh Bank to the extent applicable to the Company;

g) adequate provisions have been made for leases and advances considered to be doubtful;

h) the financial statements conform to the prescribed standards set in the accounting regulations issued by the Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh;

i) the records and the statements submitted by the branches have been properly maintained and consolidated in the financial statements;

j) the information and explanations required by us have been received and found satisfactory;

k) the Company has followed the instructions issued by the Bangladesh Bank in the matters of lease/advance classification, provisioning and suspension of interest; and

l) the Company has complied with the relevant laws pertaining to reserves and maintenance of liquid assets.

Hoda Vasi Chowdhury & Co.Dhaka, February 06, 2008 Chartered Accountants

AUDITORS' REPORT TO THE SHAREHOLDERS


24

Financial Statements


2007 2006Notes Taka Taka

Share capital 3 210,000,000 210,000,000Share premium 4 3,750,000 3,750,000Reserve and surplus:Statutory reserve 5 200,000,000 -General reserve 6 485,000,000 600,000,000Dividend equalization reserve 70,000,000 70,000,000Retained earnings

Proposed cash dividend 42,000,000 42,000,000Proposed bonus share 21,000,000 -Balance 5,379,552 8,840,699

1,037,129,552 934,590,699

Secured long term loans 7.2.1 884,647,526 975,128,018Unsecured long term loans 7.2.2 362,673,744 355,286,116

1,247,321,270 1,330,414,134

Deposits against long term financing 8 261,172,637 218,199,472Term deposits 9 1,084,979,730 53,596,429Finance lease obligation 10 177,796 1,404,826Deferred liability – employee gratuity 2,896,513 2,692,346Deferred tax liability 11 391,147,476 430,482,376

1,740,374,152 706,375,4494,024,824,974 2,971,380,282

12 20,296,431 19,916,520

13 - 472,640

14 165,400,000 163,600,000

Net lease receivables–net of current maturity 15.2 3,051,203,487 2,801,311,912Advance for leases 16 151,509,254 40,862,924

3,202,712,741 2,842,174,836

Stock on hires – net of current maturity 17 72,073,585 50,012,299Advance for acquisition of stock on hires 18 14,784,359 26,507,598

86,857,944 76,519,897

Term finance – net of current maturity 19 652,398,745 666,758,134

Sources of Funds

Shareholders' equity

Long term loans–net of current maturity

Long term liabilities–net of current maturity

Total

Application of Funds

Property, plant and equipment

Intangible assets

Investments

Lease receivables

Stock on hires

Term finance

BALANCE SHEET AS AT DECEMBER 31, 2007


26


32 (380,000,000) (287,670,951)

Cash and cash equivalents 20 842,455,770 254,917,772Accounts receivable and advances 21 387,732,917 356,858,151Short term finance 22 296,739,989 205,648,246Net lease receivables 15.2 1,858,678,094 1,495,257,888Stock on hires 17 124,255,959 274,495,436Term finance 19 639,218,124 214,916,265

4,149,080,853 2,802,093,758

Current maturity of deposits against financing 8 124,075,363 199,659,726Current maturity of long term loans 23 712,643,406 1,143,475,407Current maturity of term deposits 9 2,443,466,887 1,344,650,233Accrued expenses and payables 24 286,441,596 207,696,317Short term loans 25 128,064,792 325,152,147Provision for current taxation 26 148,255,008 52,154,209Interest suspense account 27 27,265,105 38,523,678Unclaimed dividend 1,709,583 1,172,835

3,871,921,740 3,312,484,552277,159,113 (510,390,794)

4,024,824,974 2,971,380,282

The annexed notes 1 to 49 form an integral part of these financial statements.

Syed Ehsan Quadir A. Rouf M. Ataul Hoque

Managing Director Director Company Secretary

Auditors report to the shareholdersSee annexed report of date


Provision for doubtful assets

Current assets

Total current assets

Current liabilities and related provisions

Total current liabilities Net current assets Total


27


Income from long term financing activities 28 889,361,082 708,368,393Income from short term financing activities 29 41,168,104 30,868,253

930,529,186 739,236,646

Financial expenses 30 541,926,190 432,295,281Administrative expenses 31 88,313,867 79,311,892Provision for doubtful assets 32 92,329,049 58,931,980Depreciation on property, plant and equipment 12.1 6,059,933 5,135,083Amortization on intangible assets 13 472,640 472,640

729,101,679 576,146,876

201,427,507 163,089,770

Non-operating profit/(loss) (122,755) 15,804,604201,304,752 178,894,374

Tax expenses 33 56,765,899 55,669,000144,538,853 123,225,374

50,840,699 136,415,325Less: Issuance of bonus share - 70,000,000

Dividend paid for previous year 42,000,000 44,800,0008,840,699 21,615,325

153,379,552 144,840,699

Transfer to statutory reserve 50,000,000 -Transfer to general reserve 35,000,000 94,000,000

68,379,552 50,840,699

34 69 59

The annexed notes 1 to 49 form an integral part of these financial statements.



Auditors report to the shareholdersSee annexed report of date


Operating revenue

Operating expenses

Operating profit

Profit for the year before tax

Net profit for the year after tax

Profit brought forward from previous year

Profit available for appropriation

Appropriation

Retained earnings carried to Balance Sheet

Earning per share (Par value Tk. 100)

PROFIT AND LOSS ACCOUNTFor the year ended December 31, 2007


28

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29

2007 2006Taka Taka

Receipts from operational and non-operational revenue 978,293,328 689,113,467Interest payments (475,952,331) (394,307,035)Payments to employees and suppliers (88,319,581) (75,694,963)

414,021,416 219,111,469

(Increase)/decrease in operating assets:Lease receivables (723,958,111) (527,762,413)Stock on hires 139,901,430 (74,755,472)Long term finance (409,942,470) (156,554,871)Short term finance (91,091,743) 53,254,815Accounts receivables 17,053,446 (115,469,268)

Increase/(decrease) in operating liabilities:Deposit against long term financing (32,611,198) (17,218,714)Liabilities for other finance (19,771,027) 18,533,484Term deposits 2,130,199,955 810,192,540

1,423,801,698 209,331,570Income tax paid (77,225,629) (7,838,198)

1,346,576,069 201,493,372

Purchase of property, plant and equipment (7,054,000) (17,260,361)Sale proceeds of property, plant and equipment 491,401 25,457,122Investment in shares - (118,600,000)

(6,562,599) (110,403,239)

Receipts of long term loans 978,582,000 553,156,000Repayment of long term loans (1,112,506,865) (797,414,282)Repayment of debentures (380,000,000) (43,333,333)Net draw down/(payment) of short term loan (197,087,355) 165,337,026Dividend paid (41,463,252) (44,477,118)

(752,475,472) (166,731,707)

587,537,998 (75,641,574)

254,917,772 330,559,346

(Note -20) 842,455,770 254,917,772

Cash from Operating Activities

Operating profit before changes in operating assets/liabilities

Net cash from operating activities before income tax

Net cash provided by operating activities

Cash from Investing Activities

Net cash provided by investing activities

Cash from Financing Activities

Net cash provided by financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at January 01

Cash and cash equivalents at December 31

CASH FLOW STATEMENT For the year ended December 31, 2007


30

NOTES TO THE ACCOUNTS For the year ended December 31, 2007

1. General Information

1.1 Domicile and legal form

1.2 Nature of operations and principal activities

2. Significant Accounting Policies

2.1 Measurement bases

2.2 Preparation and presentation criteria of Financial statements

2.3 Accounting for leases

United Leasing Company Limited was incorporated on April 27, 1989 as a public limited company under the Companies Act 1913 (currently 1994) is domiciled in Bangladesh. It was granted license under the Financial Institutions Act, 1993. The shares of the Company are quoted on the Dhaka Stock Exchange Limited since 1994 and are transacted in dematerialized form through Central Depository Bangladesh Limited from October 14, 2004. The Company has its registered office situated at Camellia House, 22 Kazi Nazrul Islam Aveneu, Dhaka.

The company provides financial services to cater the needs of its diverse client base which includes lease finance for acquiring assets for industrial and commercial use, term loans for meeting long term funding requirement, and factoring of accounts receivables for short-term working capital management. The Company offers various investment opportunities of predefined tenure ranging from six months to ten years.

The financial statements of the Company have been prepared on historical cost convention in compliance with the Bangladesh Accounting Standards (BAS).

The financial statements have been prepared on a going concern basis following accrual basis of accounting except for cash flow statement and the disclosures have been made in conformity with Bangladesh Accounting Standards, the Companies Act 1994, the Financial Institutions Act 1993, the Securities and Exchange Commission Rules 1987, Guidelines from Bangladesh Bank and the Listing Regulation of Dhaka Stock Exchange.

Some assets and liabilities required the use of estimates and assumptions at the balance sheet date of the Directors' best knowledge of current events and actions; actual results may differ from those estimates.

Following Bangladesh Accounting Standards (BAS) 17, accounting for lease transactions have been recorded under finance lease method since all the risks and rewards incidental to ownership are substantially transferred to the lessee as per agreement. Accordingly the aggregate lease receivables including un-guaranteed residual value throughout the primary lease term are recorded as gross lease receivables while the excess of gross lease receivables over the total acquisition cost constitutes the unearned lease income.

The unearned lease income is amortized to revenue over the primary lease term yielding a constant rate of return over the period. Initial direct costs, if any, in respect of lease are charged in the year in which such costs are incurred.


31

2.4 Accounting for investment

2.5 Property, plant & equipment and depreciation

2.6 Intangible assets

Investment in Associate

Investment in associate is shown at cost. When an indication of impairment exists, the carrying amount of the investment is assessed and written down to its recoverable amount.

Other non-current investments

Other non-current investments are shown at cost and adjusted for any diminutionin value, which are other than temporary.

All property, plant and equipment are initially stated at cost and depreciated over their expected useful lives. The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the asset to the location and condition for its intended use inclusive of duties and non-refundable taxes.

Fixed asset acquired under finance lease is accounted for at the lower of present value of minimum lease payments under the lease agreements and the fair value of asset. The related obligation under the lease is accounted for as liability. Finance charges are allocated to accounting period in manner so as to provide a constant rate of charge on the outstanding liability.

Subsequent cost related to property, plant and equipment is capitalized only when it increases the future economic benefit from the asset. All other expenditures are recognized as expenses as and when they are incurred.

An item of property, plant and equipment is de-recognized on its disposal. The gain or loss arising from de-recognition of an asset is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Items of property, plant and equipment are depreciated based on straight-line method throughout the estimated span of useful life ranging from five to ten years. Additions are depreciated for the full year irrespective of the date of acquisition of assets at the applicable rates while no depreciation is charged on any item in the year of its disposal. Depreciation is calculated on the cost of fixed asset in order to write off such amount over the estimated useful lives of such assets. The rates of depreciation used are as follows:

- Furniture & fixture 12.5%- Office equipment 15%- Electrical equipment 20%- Motor vehicle 20%

Software is generally charged off as revenue expenditure but considering the ability of generation of future economic benefits and the cost incurred to procure software, sometimes it is shown as intangible asset, which is amortized on a straight-line basis over a period of five years.


32

2.7 Revenue recognition

2.8 Interest suspense account

Lease income

The excess of gross lease rentals receivable over the cost of the leased asset represents the total unearned income at the time of execution of lease. The unearned income is allocated over the period of lease on a pattern reflecting a constant return on the net investment. In case of structured lease, finance income is recognized on the basis of lease structure. Earned finance income due over ninety days is not recognized as revenue rather it is recognized as interest suspense. Suspended interest is recognized as income on cash basis when it is received.

Hire purchase income

Finance income against hire purchase arrangement is allocated to the income statement over the hire purchase period to give a constant periodic rate of return on net receivable. Income from hire purchase arrangement outstanding over ninety days is not recognized as revenue rather it is recognized as interest suspense. Suspended interest is recognized as income on cash basis when it is received.

Income from long term and short term finance

Income from long and short term finance is recognized as revenue when the interest is accrued. Interest outstanding over ninety days is not recognized as revenue rather it is recognized as interest suspense. Suspended interest is recognized as income on cash basis when it is received.

Income from bonds

Income from bonds is recognized on accrual basis.

Income from dividend

Dividend income from investment in equity shares is recognized during the period in which they are declared in Annual General Meeting irrespective of receipt. Dividend income from preference shares is recognized on accrual basis considering the establishment of right to receive the same.

Income from bank deposits

Interests from short term deposits and fixed deposits are recognized on accrual basis taking into account the principal outstanding and the effective rate over period of maturity. Income from deposits are booked against the financial expenses.

Fee based income

Fee based income is recognized as revenue when it is received.

Interest income outstanding over ninety days is not recognized as revenue rather it is recognized as interest suspense account as per Bangladesh Bank's guidelines. Suspended interest is recognized as revenue when it is received.


33

2.9 Borrowing cost

2.10 Account receivable

2.11 Provision for doubtful assets

2.12 Income taxes

2.13 Provision for accrued expenses

Borrowing costs are recognized in the profit and loss account in the period on which they are incurred.

Account receivables at the balance sheet date are stated at amounts which are considered realizable. Specific allowance is made for receivables considered to be doubtful for recovery.

Provisions, specific and general, are made on the basis of year end review by the management as per policy of the Company and of guidelines contained in Bangladesh Bank's FID circulars. Specific provisions are made where the repayment of identified leases / loans are in doubt and reflect an estimate of the amount of loss anticipated and the general provision is made for the inherent risk of losses. Provisions are applied to write off leases / loans, in part or in whole, when they are considered wholly or partly irrecoverable.

A minimum appropriate general provision for unclassified leases and loans to the extent of 2% of the outstanding receivables is provided. The Company maintains full provision against leases and loans in case of payments outstanding for over six months irrespective of the status of classification. The Company also maintains special provision for regular leases and loans where management has doubt about recovery.

Current tax

Current tax expense is provided on estimated taxable profit for the year at the tax rate applicable for the year.

Deferred tax

Deferred taxation is provided in full, using the liability method, on temporary differences arising between tax bases of assets and liabilities and carrying amounts in the financial statements. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Tax rate prevailing at the Balance Sheet date is used to determine deferred tax.

Provisions have been recognized in the balance sheet as follows:

a. when the Company has a present obligation, legal or constructive as a result of a past event,

b. when it is probable that an outflow of resources embodying economic benefits will be required to settle that obligation; and

c. when a reliable estimate can be made of the amount of the obligation.


34

2.14 Contingent liabilities and contingent assets

2.15 Cash and cash equivalents

2.16 Employee benefits

2.17 Impairment of assets

The Company does not recognize contingent liability and contingent asset but discloses the existence of contingent liability in the financial statements. A contingent liability is a probable obligation that arises from past events whose existence will be confirmed by occurrence or non-occurrence of uncertain future events not within the control of the Company or a present obligation that is not recognized because outflow of resources is not likely or obligation cannot be measured reliably.

Cash and cash equivalents consist of cash in hand, bank balances and deposits held at call with banks and financial institutions and short term liquid investments that are readily convertible to known amount of cash which are likely to be affected by an insignificant risk of change in value.

Short term employee benefits

Salaries, bonuses, allowances and non-monetary benefits are accrued in the financial year in which the associated services are rendered by the employees of the Company.

Post-employment benefits

Provident fund

A contributory Provident Fund is operated by the Company on equal participation from both parties, the Company and the employee. The Fund is recognized by the National Board of Revenue and is administered by a Board of Trustees.

Gratuity fund

An unfunded gratuity scheme is maintained by the Company to retain and motivate its employees for long term retention. Gratuity scheme is applicable for all its permanent employees who have completed their length of service at least for five years without any break. Provision for gratuity is made annually considering all its eligible employees available at the end of the year.

Other long term benefits

The Company operates a group life insurance scheme for all of its permanent employees. It maintains a health insurance scheme for all of its permanent employees, which include their spouse and children.

The carrying amounts of the property, plant and equipment and intangible assets are reviewed at each balance sheet date or whenever there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of the asset or its cash-generating unit exceeds its recoverable amount. Impairment losses, if any, are recognized in the profit and loss account.


35

2007 2006Taka Taka

10,000,000 ordinary shares of Tk. 100 each 1,000,000,000 1,000,000,000

700,000 ordinary shares of Tk. 100 eachfully paid-up in cash 70,000,000 70,000,000

1,400,000 ordinary shares of Tk. 100 each issued as bonus 140,000,000 140,000,000

210,000,000 210,000,000

No. of shares Percentage

2007 2006 2007 2006

(i) Sponsors - Foreign 420,000 420,000 20.00 20.00- Domestic 278,400 278,400 13.26 13.26

33.26 33.26

(ii) Financial institutions and companies - Foreign 421,189 421,189 20.06 20.06- Domestic 426,392 446,304 20.30 21.25

40.36 41.31

(iii) General public - Domestic 554,019 534,107 26.38 25.43Total 2,100,000 2,100,000 100.00 100.00

3. Share Capital

3.1 Authorized

3.2 Issued, subscribed and paid-up

3.3 The year end composition of shareholding is as follows:

2.18 Related party disclosure

2.19 Earning per share

2.20 Events after the balance sheet date

2.21 Proposed dividend

The Company transacts with related parties. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related party transactions have been disclosed under note 46.

Earning per share has been calculated in accordance with BAS 33 “Earning Per Share” and shown on the face of Profit and Loss Account. Basic earning per share is calculated by dividing the net profit attributable to shareholders by the average number of ordinary shares in issue during the financial year. Retrospective recognition has been given in previous year's figure for issuance of bonus shares during the financial year.

Events after the balance sheet date are those events that occur between the balance sheet and the date when the financial statements are authorized for issue. All material events occurring after the balance sheet have been considered in these financial statements.

Dividend proposed by the Board of Directors for the year shall be recognized and to be accounted for after approval by the shareholders in the Annual General Meeting.


36

3.4

4. Share Premium

5. Statutory Reserve

6. General Reserve

7. Long Term Loans

7.1 Maturity grouping of long term loans

A range distribution schedule of outstanding shares as at December 31, 2007 is given below as required by Regulation 37 of the Listing Regulation of Dhaka Stock Exchange Limited:

Number of Total number Percentage of No. of shares Shareholders of shares total holdings Less than 500 3,631 364,007 17.33500 to 5,000 210 224,268 10.685,001 to 10,000 6 38,140 1.8210,001 to 20,000 8 118,829 5.6620,001 to 30,000 3 64,268 3.0630,001 to 40,000 2 74,780 3.5640,001 to 50,000 - - - 50,001 to 100,000 2 185,840 8.85100,001 to 1,000,000 5 1,029,868 49.04Total 3,867 2,100,000 100.00

Share premium of Tk. 50 per share over the par value of Tk. 100 per share received against the issue of 75,000 shares in 1994 amounting to Tk. 3,750,000.

2007 2006Taka Taka

Balance at January 01 - -Transfer from general reserve 150,000,000 -Transfer from current year profit 50,000,000Balance at December 31 200,000,000 -

Opening balance at January 01 600,000,000 506,000,000Transfer to statutory reserve (150,000,000) -Appropriation from current year's profit 35,000,000 94,000,000Balance at December 31 485,000,000 600,000,000

Balance at January 01 2,473,889,541 2,762,781,484Received during the year 978,582,000 553,156,000Repaid during the year (1,492,506,865) (842,047,943)Balance at December 31 1,959,964,676 2,473,889,541

Payable on demand - -Up to 1 month 36,184,301 39,517,294Over 1 month but within 3 months 160,497,069 565,784,354Over 3 months but within 1 year 515,962,036 887,205,217Over 1 year but within 5 years 1,121,964,819 836,694,758Over 5 years 125,356,451 144,687,918

1,959,964,676 2,473,889,541


37

2007 2006Taka Taka

7.2.1 Secured long term loans

Pubali Bank Limited 289,999,999 377,684,947BRAC Bank Limited 216,875,000 39,395,438Mercantile Bank Limited 200,000,000 -Commercial Bank of Ceylon Limited 188,888,896 85,555,558Uttara Bank Limited 174,401,430 195,329,696Standard Chartered Bank 104,988,085 115,439,158Citibank N.A. 101,818,190 152,620,858Trust Bank Limited 51,174,704 75,548,097BASIC Bank Limited 50,000,000 47,424,403Sonali Bank Limited 43,636,352 101,818,176Bank Alfalah Limited 27,785,685 43,148,696Southeast Bank Limited - 35,497,470Investment Corporation of Bangladesh–debenture - 50,000,000Eastern Bank Limited – debenture - 100,000,000Dhaka Bank Limited - 112,057,198Prime Bank Limited - 263,982,222Gross total 1,449,568,341 1,795,501,917Less: Current maturity 564,920,815 820,373,899Secured long term loans-net of current maturity 884,647,526 975,128,018

In 2007, the Company arranged term loans from BASIC Bank Limited, BRAC Bank Limited,

Commercial Bank of Ceylon Limited and Mercantile Bank Limited.

The loans are secured by first charge on all present and future floating assets of the

Company ranking pari-passu among the lenders. During the year, the Company also

obtained short term loans from Standard Chartered Bank and Citibank N.A. In addition,

the Company availed counterveiling loan from Standard Chartered Bank which is secured

against hypothecation of assets leased to Standard Chartered Bank.

7.2.2 Unsecured long term loans

Bangladesh Bank (SERP) 267,108,000 138,575,333Kreditanstalt Fiir Wiederaufbau (KfW) 208,106,168 226,420,860CBSF – matching credit 35,182,167 83,391,431BRAC Bank Limited – debenture - 100,000,000Mercantile Bank Limited – debenture - 100,000,000National Life Insurance Co. Ltd. – debenture - 30,000,000Gross – total 510,396,335 678,387,624Less: Current maturity 147,722,591 323,101,508Unsecured long term loans-net of current maturity 362,673,744 355,286,116

7.2 Nature and source of long term loans


38

2007 2006Taka Taka

This represents advance rental and security deposits received from clients at the inception of allowing any lease/loan facility to the clients, adjustable or refundable at the end of the facility.

Non-interest bearing deposit 271,660,895 207,637,198Interest bearing deposit 113,587,105 210,222,000Deposit against financing 385,248,000 417,859,198Less: Current maturity 124,075,363 199,659,726Deposit against financing - current maturity 261,172,637 218,199,472

These represent deposits from individuals and institutions under the Company's term

deposit schemes for a period of not less than six months for institutions and one year for

individuals. The Company started term deposit mobilization from individuals at the end of

2005. From the previous year's experience and clients' instructions, annual profit term

deposits from individuals with auto renewal instructions have been shown as non-current

liability.

Balance at January 01 1,398,246,662 588,054,122Received during the year 3,462,944,564 1,786,781,876Repaid during the year (1,332,744,609) (976,589,336)Balance at December 31 3,528,446,617 1,398,246,662Less: Current maturity 2,443,466,887 1,344,650,233Term deposits - net of current maturity 1,084,979,730 53,596,429

Finance lease obligation comprises the liability arisen from asset taken under finance lease from different financial institutions.

Balance at January 01 3,201,910 4,874,996Received during the year - -Repaid during the year (1,880,951) (1,673,086)Balance at December 31 1,320,959 3,201,910Less: Current maturity 1,143,163 1,797,084

Finance lease obligation–net of current maturity 177,796 1,404,826

Within one year 1,143,163 1,797,084Between one to five years 177,796 1,404,826After five years - -

1,320,959 3,201,910

8. Deposits against Financing

9. Term Deposits

10. Finance Lease Obligation

10.1 Maturity grouping of finance lease obligation

net of


39

11. Deferred Tax Liability/(Asset)

12. Property, Plant and Equipment

12.1 Statement of property, plant and equipment is as follows:

12.2 Sale/disposal of property, plant and equipment is as follows:

Deferred tax liability/(asset) has been arising due to difference in the carrying amount of the asset/liabilities and its tax base. The depreciation against leased assets on finance lease has been withdrawn in the Finance Ordinance 2007; as a result there will be no further tax deferment on account of depreciation. The balance of deferred tax liability related to leased assets will be depleted following the expiry of lease agreements.

The net movement on the deferred tax account is set out below:

2007 2006Taka Taka

Balance at January 01 430,482,376 384,732,376Added/(deducted) during the year (39,334,900) 45,750,000Balance at December 31 (Note - 33) 391,147,476 430,482,376

Furniture & Office Electrical Motor Fixture equipment equipment vehicle Total

Cost

Balance at January 01, 2007 11,668,363 187,343 12,235,806 11,129,300 35,220,812

Addition 2,357,031 10,000 2,986,969 1,700,000 7,054,000

Disposal/adjustment (636,243) - (2,113,399) (925,000) (3,674,642)

Balance at December 31, 2007 13,389,151 197,343 13,109,376 11,904,300 38,600,170

Accumulated depreciation

Balance at January 01, 2007 2,756,870 145,301 7,481,171 4,920,950 15,304,292

Charge for the year 1,563,428 15,295 2,100,350 2,380,860 6,059,933

Disposal/adjustment (487,137) - (2,018,349) (555,000) (3,060,486)

Balance at December 31, 2007 3,833,161 160,596 7,563,172 6,746,810 18,303,739

WDV at December 31, 2007 9,555,990 36,747 5,546,204 5,157,490 20,296,431

WDV at December 31, 2006 8,911,493 42,042 4,754,635 6,208,350 19,916,520

Furniture & Electrical Motor Fixture equipment vehicle Total

Cost 636,243 2,113,399 925,000 3,674,642

Accumulated depreciation (487,137) (2,018,349) (555,000) (3,060,486)

Book value 149,106 95,050 370,000 614,156

Sale proceeds 73,701 157,550 260,150 491,401

Profit/ (loss) on disposal (75,405) 62,500 (109,850) (122,755)

Buyer Outsider/ Outsider/ Outsider:Employee Employee Water Comm. Eng.

Mode of disposal Competitive quotation for all


40

13. Intangible Assets

14. Investments

14.1 Investment in associate company

14.2 Investment in shares

14.3 Investment in bonds

The Company acquired and installed a lease & accounting software in 2003. It was decided to amortize the acquisition cost over a period of five years (Taka 472, 640 each year) up to 2007.

2007 2006Taka Taka

Investment in associate company (Note-14.1) 68,600,000 68,600,000Investment in shares: (Note -14.2)

Ordinary shares of United Insurance Co. Ltd. 16,800,000 15,000,000Preference shares of BRAC Bank Limited 50,000,000 50,000,000

Investment in bonds(Note – 14.3) 30,000,000 30,000,000165,400,000 163,600,000

This represents the cost of acquiring 686,000 shares in the year 2006 of Duncan Properties

Limited, representing 49% equity. Duncan Properties Limited is a private limited company

under the Companies Act 1994, incorporated on November 10, 2005. The Company owns

a land of 41 decimal at 20, Kazi Nazrul Islam Avenue, Dhaka 1000. The objective of the

Company is mainly to carry on management of immovable properties, purchase

immovable properties, construct building thereon and dispose properties.

United Insurance Company Limited

The Company subscribed 60,000 ordinary shares of United Insurance Company Limited, a

listed public limited company, @ Tk 250 per share in 2001. In 2007 three bonus shares

werereceived for every ten shares held and accounted for @ Tk 100 per share. Thus total

number of ordinary shares reached to 78,000. Per share market price in Dhaka Stock

Exchange at December 31, 2007 was Tk 847.

BRAC Bank Limited

The Company subscribed 500,000 cumulative redeemable preference shares bearing 9%

dividend issued by BRAC Bank Limited as per share subscription agreement made on

January 31, 2006 between United Leasing Company Limited and BRAC Bank Limited.

ULC Securitization Trust 2005-A

As per Trust deed dated February 7, 2005 between United Leasing Company Limited (ULC)

and Investment Corporation of Bangladesh (ICB) a Trust in the name of “ULC

Securitization Trust 2005-A” was formed and ULC sold lease receivable of

Tk 400 million to the Trustee (ICB) to issue Asset Backed Zero-Coupon Bonds.

Thereafter the Trustee issued 37 Class A and 3 class B Bonds of Tk 10 million each of which

ULC purchased 3 class B bonds as credit enhancement to secure the interest of class A

bond holders. Any loss due to non-collection of lease receivable in respect of class-A bonds

held by the investors will be adjusted against the amount of class B bonds held by United

Leasing Company Limited.


41

Out of the total Tk 370 million of Class A Bond, Tk 285 million has already been redeemed and balance of Tk. 85 million will be redeemed by January 2009. The redemption of the Class B Bond will start from January 2009.

2007 2006Taka Taka

Gross lease receivable 6,271,328,326 5,551,841,892Less: Unearned finance income 1,361,446,745 1,255,272,092Net lease receivable 4,909,881,581 4,296,569,800

Within one year 2,520,728,596 2,095,005,853Between one to five years 3,750,599,730 3,373,894,525After five years - 82,941,514

6,271,328,326 5,551,841,892

Balance at January 1 4,296,569,800 3,730,959,890Disbursement during the year 2,146,954,088 2,033,649,443Realization during the year (1,533,642,307) (1,468,039,533)Balance at December 31 4,909,881,581 4,296,569,800Less: Current maturity 1,858,678,094 1,495,257,888Net lease receivable-net of current maturity 3,051,203,487 2,801,311,912

Within one year 1,858,678,094 1,495,257,888Between one to five years 3,051,203,487 2,725,962,049After five years - 75,349,863

4,909,881,581 4,296,569,800

General machinery 1,087,115,733 1,101,025,493Industrial machinery 2,463,955,628 1,838,192,744Motor vehicles 1,271,341,090 1,264,982,537Others 87,469,130 92,369,026

4,909,881,581 4,296,569,800

This represents disbursements made to clients for procuring leased assets and quarterly capitalized interests on disbursements. On execution of leases, advances are transferred to lease finance.

15. Lease Receivables

15.1 Maturity grouping of gross lease receivables

15.2 Net lease receivable

15.3 Maturity grouping of net lease receivables

15.4 Asset-type wise net lease receivable

16. Advance for Leases


42

2007 2006Taka Taka

Balance at January 01 324,507,735 276,233,314Disbursement during the year 182,952,608 284,482,782Realization during the year (311,130,799) (236,208,361)Balance at December 31 196,329,544 324,507,735Less: Current maturity 124,255,959 274,495,436Stock on hire-net of current maturity 72,073,585 50,012,299

Within one year 124,255,959 274,495,436Between one to five years 72,073,585 50,012,299After five years - -

196,329,544 324,507,735

This represents disbursements made to clients for procuring assets under stock on hire and quarterly capitalized interests on disbursements. On execution of stock on hire, advances are transferred to Stock on hires.

Balance at January 01 881,674,399 694,716,306Disbursement during the year 668,389,625 441,050,000Realization during the year (258,447,155) (254,091,907)Balance at December 31 1,291,616,869 881,674,399Less: Current maturity 639,218,124 214,916,265Term finance-net of current maturity 652,398,745 666,758,134

Within one year 639,218,124 214,916,265Between one to five years 652,398,745 562,215,821After five years - 104,542,313

1,291,616,869 881,674,399

17. Stock on Hires

17.1 Maturity grouping of outstanding stock on hires

18. Advance for Acquisition of Stock on Hires

19. Term Finance

19.1 Maturity grouping of outstanding term finance


43

2007 2006Taka Taka

Cash in hand 29,500 29,500

Balance with banks and financial institutions:

Current deposit– local currency Bangladesh Bank 54,296,057 26,658,739Standard Chartered Bank 31,157,827 23,545,473 One Bank Limited 2,787,545 2,518,397The Hong Kong & Shanghai Banking Corp. Ltd. 1,418,336 2,990,092Pubali Bank Limited 322,005 312,031Dhaka Bank Limited 204,352 1,572,041Trust Bank Limited 198,487 -Bank Alfalah Limited 58,191 64,820Uttara Bank Limited 77,991 4,460The City Bank Limited 32,526 33,146United Commercial Bank Limited 21,384 25,124Commercial Bank of Ceylon 18,926 -Eastern Bank Limited 9,770 -BRAC Bank Limited 9,450 46,490Shahjalal Islami Bank Limited 6,753 1,178,102Dutch Bangla Bank Limited 2,000 324,213Sonali Bank Limited 1,250 1,250Southeast Bank Limited 719 715,891Citibank N.A. - 147,543Prime Bank Limited - 61,341

90,623,569 60,199,153Short term deposit – local currencyDutch-Bangla Bank Limited 15,174,126 2,666,745Commercial Bank of Ceylon Limited 2,944,300 13,249Citibank N.A. 1,952,034 1,200,681Standard Chartered Bank 897,328 -Southeast Bank Limited 677,047 555,442Eastern Bank Limited 157,866 14,142

21,802,701 4,450,259Fixed deposit Dhaka Bank Limited 630,000,000 76,733,981Bank Alfalah Limited 50,000,000 10,000,000Dutch Bangla Bank Limited 50,000,000 -Southeast Bank Limited - 52,504,879One Bank Limited - 51,000,000

730,000,000 190,238,860842,455,770 254,917,772

The Company requires maintaining cash with Bangladesh Bank current account equivalent to 2.5% of term deposits excluding deposits from banks and financial institutions.

Required reserve 51,595,635 24,964,619Actual reserve held 54,296,057 26,658,739Surplus 2,700,422 1,694,120

20. Cash and Cash Equivalents

20.1 Cash reserve requirement (CRR)


44

2007 2006Taka Taka

The Company requires maintaining statutory liquidity equivalent to 5% of total liabilities excluding loans and deposits from banks and financial institutions, which includes 2.5% CRR.

Required reserve 156,137,159 94,929,657Actual reserve held 842,455,770 254,917,772Surplus 686,318,611 159,988,115

On demand 112,455,770 64,678,912Not more than three months 130,000,000 134,799,937More than three months but not more than six months 550,000,000 55,438,923More than six months but not more than one year 50,000,000 -

842,455,770 254,917,772

Advances, deposits & prepayments (Note-21.1) 7,416,246 10,289,542Accrued income receivable (Note-21.2) 93,282,856 119,706,977Accounts receivables (Note -21.3) 156,183,428 173,236,874Advance corporate tax (Note – 21.4) 130,850,387 53,624,758 387,732,917 356,858,151

These represent amount advanced against advance rent, prepaid expenses and deposit with T & T, advance against salary, deposit with ICB for bond issuance etc. The advances, deposits and prepayments are considered good but not secured.

Advances 6,111,896 6,745,497Deposits 817,500 817,500Prepayments 486,850 2,726,545 7,416,246 10,289,542

Accrued income on long term activities 82,130,441 110,881,406Accrued income on short term activities 5,330,156 7,064,071Accrued income on bank deposits 5,822,259 1,761,500

93,282,856 119,706,977

Receivable against terminated lease/loans 150,796,416 144,862,222Other receivables 5,387,012 28,374,651

156,183,428 173,236,873

Full provision has been made for receivable against terminated lease/loans while the other receivables are considered good but not secured.

This represents tax deducted at source in favour of the Company and advance tax paid by the Company. Advance tax will be adjusted against provision for tax after final assessment of tax.

20.2 Statutory liquidity requirements (SLR)

20.3 Maturity grouping of balance with banks and financial institutions

21. Accounts Receivable and Advances

21.1 Advances, deposits & prepayments

21.2 Accrued income receivable

21.3 Accounts receivable

21.4 Advance corporate tax


45

2007 2006Taka Taka

Short term finance consists of short term revolving loan and factoring of accounts receivables. Loan against term deposits represent loan taken by individual deposit holders against their respective term deposits.

Short term finance 283,793,604 203,983,246Loan against term deposits 12,946,385 1,665,000

296,739,989 205,648,246

Secured long term loans (Note – 7.2.1) 564,920,815 820,373,899Unsecured long term loans (Note – 7.2.2) 147,722,591 323,101,508

712,643,406 1,143,475,407

This is made up of the followings:Liabilities for expenses 253,895,181 155,378,876Liabilities for other finance 32,546,415 52,317,441

286,441,596 207,696,317

Liabilities for expenses represent accrued but not paid interest on loans and borrowings, term deposits, security deposits and administrative expenses.

Liabilities for other finance comprise advance rental from clients, accrued capital expenditure and current portion of finance lease obligation.

Short term loan – secured Standard Chartered Bank 120,000,000 120,000,000Citibank N.A. - 100,000,000

120,000,000 220,000,000

Bank overdrafts Commercial Bank of Ceylon Ltd - 85,152,147Citibank N.A. 8,064,792 -

8,064,792 85,152,147

Call loans – unsecuredBRAC Bank Limited - 20,000,000

- 20,000,000128,064,792 325,152,147

22. Short Term Finance

23. Current Maturity of Long Term Loans

24. Accrued Expenses and Payables

25. Short Term Loans


46

2007 2006Taka Taka

Balance at January 01 52,154,209 42,235,209Provision made for the year 96,100,799 9,919,000Balance at December 31 148,255,008 52,154,209

This represents interest income on lease, hire purchase, term loan and short term loan outstanding over ninety days as per Bangladesh Bank's guidelines. The detail is as follows:

Lease 14,467,602 33,306,686Term finance 12,284,909 4,730,273Hire purchase 282,335 480,401Short term finance 230,259 6,318

27,265,105 38,523,678

Lease finance 653,588,560 562,620,394Term finance 153,845,840 83,349,182Hire purchase 59,308,543 38,283,629Long term investment 22,618,139 24,115,188

889,361,082 708,368,393

Short term finance 22,416,358 23,649,297Factoring of accounts receivables 17,787,451 2,285,389Bill discounting 40,957 4,836,714Loan against term deposits 923,338 96,853

41,168,104 30,868,253

Interest on loans (Note – 30.1) 273,138,607 354,513,271Interest on deposits 300,813,461 113,216,125Direct deposit expenses 2,026,874 1,296,605Finance charges on capital lease 345,841 554,007

576,324,783 469,580,008Interest income on bank deposits (34,398,593) (37,284,727)

541,926,190 432,295,281

Interest on bank loans 187,081,548 271,392,421Interest on loan from Bangladesh Bank 17,661,563 11,615,485Interest on KfW loan 21,509,982 23,128,664Interest on debenture 31,927,084 42,334,038Interest on call loan 14,958,430 6,042,663

273,138,607 354,513,271

26. Provision for Current Taxation

27. Interest Suspense Account

28. Income from Long Term Financing Activities

29. Income from Short Term Financing Activities

30. Financial Expenses

30.1 Interest on Loans


47

2007 2006Taka Taka

Salaries, bonus and allowances (Note-31.1) 47,609,289 37,629,101Rent, rates & taxes 11,944,489 11,504,787Traveling & conveyance 5,320,988 4,862,257Repair & maintenance 4,968,233 5,642,359Vehicle maintenance 3,046,674 3,369,313Legal & professional charges 2,556,802 2,874,038Communication 2,486,948 2,579,026Annual general meeting expenses 1,949,600 1,636,338Electricity, water & gas 1,886,917 2,025,672Business promotion expenses 1,264,165 1,013,030Printing & stationery 1,091,812 1,141,910Insurance charges 839,905 981,949Bank charges 721,362 718,302Office expenses 654,689 530,211Publicity & advertisement 631,478 686,545Medical expenses 502,239 1,043,244Fees & subscription 382,948 641,881Auditors' remuneration (Note – 31.2) 200,000 200,000Books & periodicals 116,429 106,029Directors' remuneration for attending board meeting 98,900 92,900Training expenses (Note -31.3) 40,000 33,000

88,313,867 79,311,892

Provident fund 3,114,755 2,435,672Pension fund - 986,633

3,114,755 3,422,305

Statutory audit fee 100,000 100,000Tax consultation fee 100,000 100,000

200,000 200,000

Total training expenses incurred Tk 1,601,757 (2006: Tk 821,249) out of which Tk 1,561,757 (2006: Tk 788,249) has been taken as assistance from KfW, a German development partner.

Balance at January 01 287,670,951 228,738,971Provision for the year 92,329,049 58,931,980Balance at December 31 (Note-32.1) 380,000,000 287,670,951

31. Administrative Expenses

31.1 Salary, bonus and allowances include contribution to:

31.2 Auditors' remuneration

31.3

32. Provision for Doubtful Assets


48

2007 2006Taka Taka

Lease 166,238,598 113,972,122Term finance 49,923,880 17,633,488Hire purchase 6,506,306 6,490,154Short term finance 5,934,800 4,112,965Investment in ZCB – class B 600,000 600,000Accounts receivable 150,796,416 144,862,222

380,000,000 287,670,951

Current tax 96,100,799 9,919,000Deferred tax expense/(income) (39,334,900) 45,750,000

56,765,899 55,669,000

The computation of EPS is given below:

Earnings attributable to the ordinary shareholders(Net profit after tax) 144,538,853 123,225,374

Weighted average number of ordinary shares Outstanding 2,100,000 2,100,000

Basic EPS 69 59

Remuneration 18,869,774 15,055,153Benefits 1,063,664 1,360,254

19,933,438 16,415,407

This includes an amount of Tk. 4,770,414 (2006: Tk. 4,690,340) paid to the Managing Director as remuneration and benefits.

Each Director is drawing Tk. 2,000 for attending each board meeting.

No remuneration has been paid to any Director for special services rendered.

Nothing is due from any of the Directors of the Company.

32.1 Segregation of provision for doubtful assets

33. Tax Expenses

34. Earning Per Share

35. Management Emoluments

36. Directors' Remuneration for Attending Board Meeting

37. Directors' Remuneration for Special Services

38. Receivable from Directors


49

2007 2006Taka Taka

Lease & Hire purchase: Contract 2,698,071,897 2,259,984,117Disbursement 2,440,186,499 2,334,141,202

Project/Term finance: Contract 692,626,144 424,550,000Disbursement 668,389,625 441,050,000

The number of employees engaged for the whole year or part thereof who received yearly

remuneration of Tk. 36,000 or above were 99 (2006:88). The number of employees with

the company at December 31, 2007 was 89 persons.

During the year the Company imported machinery in foreign currencies equivalent to Taka 54.7 million (2006: Tk. 175 million).

Letter of Credit 50,000,000 38,455,110Letter of Guarantee:Bank & other Financial Institutions 71,089,162 200,000

121,089,162 38,655,110

Capital expenditure commitment 201,790 Nil

Lease commitment outstanding at December 31 359,734,405 227,127,610

The Board of Directors has recommended a cash dividend of Tk 20.00 per ordinary share

i.e. a total of Tk 42 million for 2.1 million ordinary shares and one bonus share for every ten

shares held for the year ended December 31, 2007.

An amount of Tk. 7,491,022 equivalent to GBP 53,539 (2005: Tk. 8,009,354 equivalent to GBP 61,499.01) was remitted to non-resident shareholder as dividend for the year 2006.

There were no foreign currency monetary transactions during the reporting year that would give rise to gains or losses in the profit and loss account.

39. Contract and Disbursement

40. Number of Employees

41. Import of Machinery

42. Contingent Liabilities

42.1

42.2

42.3

43. Proposal of Dividend

44. Dividend Remitted to Non-resident Shareholders

45. Foreign Currency Transactions


50

46. Related Party Transactions

47. Reporting Currency and Level of Exactitude

48. Comparative Information

49. Authorized for Issue of the Financial Statements

The Company in normal course of business has entered into transactions with other

entities that fall within the definition of related party contained in the Bangladesh

Accounting Standard 24. The Company believes that the terms of related party

transactions are not significantly different from those that could have been obtained from

third parties. The significant related party transactions during the year are as follows:

Balance as on Nature of December 31,2007

Name of the related party Relationship transactions Receivable/ (Payable)Taka

The Lungla (Sylhet) Tea Co. Ltd. Common Directors Lease financing 10,115,112

Duncan Products Limited -Do- -Do- 389,343

United Insurance Co. Ltd. Sponsor Shareholder -Do- 1,231,501

Amo Tea Co. Ltd. Common Directors Term deposit (83,807,931)

The Mazdehee Tea Co. Ltd. -Do- -Do- (5,367,828)

The Chandpore Tea Co. Ltd. -Do- -Do- (1,106,534)

United Insurance Co. Ltd. Sponsor Shareholder -Do- (5,000,000)

Duncan Properties Limited Associate Company -Do- (16,856,250)

United Insurance Co. Ltd. Sponsor Shareholder Insurance * 484,678

* Paid during 2007

The figures in the financial statements have been stated in Bangladesh Taka and have been rounded off to the nearest integer.

Last year's figures and account titles have been rearranged, wherever necessary, to conform current year's presentation.

The Board of Directors of the Company has authorized these financial statements for issue on February 06, 2008.




51


Note

I hereby record my attendance at the NINETEENTH ANNUAL GENERAL MEETING of the

UNITED LEASING COMPANY LIMITEDCamellia House

22 Kazi Nazrul Islam Avenue, Dhaka-1000

PROXY FROM

I/We

ofbeing a Member of United Leasing Company Limited do hereby appoint

Mr/Ms

of

or (failing him/her)Mr/Ms

ofas my/our proxy, to vote for me/us and on my/our behalf at the Nineteenth Annual General Meeting of the Company to be held on March 25, 2008 and at any adjournment thereof or at any ballot to be taken in consequence thereof.

Signed this day of 2008

Signature of Proxy

Signature of Shareholder

Folio/BO ID No.

No. of Shares

RevenueStamp Tk 8/-

N.B.: IMPORTANT

(1) This Form of Proxy, duly completed, must be deposited at least 48 hours before the meeting at the Company's Registered Office. Proxy is invalid if not signed and stamped as explained above.

(2) Signature of the Shareholder should agree with the Specimen Signature registered with the Company and Depository Register.

UNITED LEASING COMPANY LIMITEDCamellia House

22 Kazi Nazrul Islam Avenue, Dhaka-1000

ATTENDANCE SLIP

Company being held on Tuesday, March 25, 2008 at Bangladesh-China Freindship Conference Centre, Dhaka.

Name of Member/Proxy Signature

Folio/BO ID No. Dated

N.B.:Shareholders attending the meeting in person or by Proxy are requested to complete the attendance slip and deposit the same at the entrance of the meeting hall.


53

Documents

Annual Report 2007Leasing Company Limited will be held at the Banquet Hall of the Bangladesh-China Friendship Conference Centre (BCFCC), Agargaon, Sher-E-Bangla Nagar, Dhaka on Tuesday,