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ANNUAL REPORT 2009

Vision
To be a world class bank dedicated to excellence and to surpass the
highest expectations of our customers and all other stakeholders.

Mission
• Set the highest industry standard for quality, across
all areas of our operation, on a sustained basis

• Optimize people, processes and technology to deliver


the best possible financial solutions to our customers

• Become the most sought after investment and

• Be recognized as the employer of choice

Core Values
• Honesty and integrity • Teamwork and collaborative spirit
• Commitment and dedication • Humility and mutual respect
• Fairness and meritocracy • Caring and socially responsible
Contents

02 Company Information Consolidated Balance Sheet and Profit and Loss


in US Dollars
03 Directors’ Profiles
136 Consolidated Balance Sheet in US Dollars
07 Directors’ Report to the Members
137 Consolidated Profit & Loss Account in
16 President & CEO Review US Dollars

19 Growth at a Glance Financial Statements of UBL

21 International Network 138 Auditors’ Report to the Members

23 Shari'ah Advisor's Report 139 Balance Sheet

25 Statement of Compliance with the Code of 140 Profit & Loss Account
Corporate Governance
141 Comprehensive Income
27 Review Report to the Members on Statement
of Compliance with Best Practices of Code 142 Cash Flow Statement
of Corporate Governance
143 Statement of Changes in Equity
28 Statement of Internal Controls
144 Notes to the Financial Statement of UBL
Consolidated Financial Statements of UBL & its
Subsidiary Companies 215 Annexure “A” to the Financial Statement
of UBL
30 Auditors’ Report to the Members
225 Annexure “B” to the Bank’s and Consolidated
31 Consolidated Balance Sheet Financial Statement

32 Consolidated Profit & Loss Account 254 Annexure “C” to the Financial Statement
of UBL
33 Consolidated Comprehensive Income
260 Annexure “D” to the Financial Statement
34 Consolidated Cash Flow Statement of UBL

35 Consolidated Statement of Changes in Equity 261 Categories of Shareholders

36 Notes to the Consolidated Accounts 262 Pattern of Shareholding

118 Annexure “A” to the Consolidated Accounts 263 Notice of 51st Annual General Meeting

129 Annexure “C” to the Consolidated Accounts 265 Statement of Material Facts

Form of Proxy

United Bank Limited


Company Information

Board of Directors
His Highness Sheikh Nahayan Mabarak Al Nahayan - Chairman
Sir Mohammed Anwar Pervez, OBE, HPk - Deputy Chairman
Mr. Omar Z. Al Askari - Director
Mr. Zameer Mohammed Choudrey - Director
Dr. Ashfaque Hasan Khan - Director
Mr. Muhammad Sami Saeed - Director
Mr. Amin Uddin - Director
Mr. Arshad Ahmad Mir - Director
Mr. Atif R. Bokhari - President & CEO

Audit Committee
Mr. Zameer Mohammed Choudrey - Chairman
Mr. Muhammad Sami Saeed - Member
Mr. Amin Uddin - Member
Mr. Aqeel Ahmed Nasir - Secretary

Acting Chief Financial Officer


Mr. Aasim Jawad

Company Secretary & Chief Legal Counsel


Mr. Aqeel Ahmed Nasir

Registered Office
13th Floor, UBL Building, Jinnah Avenue, Blue Area, Islamabad, Pakistan.

Head Office
State Life Building No.1, I.I. Chundrigar Road, Karachi - 74000, Pakistan.

Share Registrar
M/s. THK Associates (Pvt.) Limited, Ground Floor, State Life Building No. 3,
Dr. Ziauddin Ahmed Road, Karachi - Pakistan.

Auditors
M/s. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants

M/s. BDO Ebrahim & Co.


Chartered Accountants

Legal Advisors
M/s. Mehmood Abdul Ghani & Co.
Advocate

Contacts
UAN: 111-825-111
Contact Centre: 111-825-888
Website: www.ubl.com.pk

annual report 2009 02


Directors’ Profiles

H.H. Sheikh Nahayan Mabarak Al Nahayan In 2006 he received Sitara-e-Essar and was chosen as the
Chairman, Board of Directors Master Entrepreneur - UK at the Ernst & Young Entrepreneur
of the Year 2006 Awards.
His Highness Sheikh Nahayan Mabarak Al Nahayan is
Chairman of the Board of Directors of United Bank Limited He is also the Chairman of Bestway Foundation UK and
since October 19, 2002. Patron-in-Chief of Bestway Foundation Pakistan and a
charter member of the Duke of Edinburgh Awards Scheme.
He is a prominent member of the Royal Family of Abu Dhabi
and is also Federal Minister for Higher Education & Scientific
Research, UAE. In 2002, His Highness and other members Omar Z. Al Askari
of Abu Dhabi Group acquired 25.5% share as well as Director
management control of United Bank Limited. Sheikh Nahayan,
through the Abu Dhabi Group, has ownership in Bank Alfalah Mr. Omar Z. Al Askari is a Member of the Board of Directors
Limited and Warid Pakistan as well. of United Bank Limited since October 19, 2002. He is also
Chairman Board Risk Management Committee and Member
In addition to holding numerous educational and commercial of Board Human Resource & Compensation Committee of
positions, His Highness is a noted patron of the arts, UBL. He is also a Director of UBL Insurers Limited, the
supporting such diverse clubs and societies as the UAE United Bank Groups new venture in the financial services
Natural History Group and the Emirates Cricket Board. An area in Pakistan.
active philanthropist, he serves as Honorary Chairman of
the Future Center, a school for children with disabilities. He is one of the members of the Abu Dhabi Group and
Chairman & Chief Executive Officer of United Technical
Services, Abu Dhabi.

Sir Mohammed Anwar Pervez, OBE, HPk


Deputy Chairman

Sir Mohammed Anwar Pervez, OBE, HPk is the Deputy


Chairman of the Board of Directors of United Bank Limited
since October 19, 2002. He is also the Chairman of Bestway
(Holdings) Limited, UK and its subsidiaries, which include
Batleys Limited in UK, Bestway Cement in Pakistan and
Bestway Northern Limited in UK.

Sir Anwar began his career in food business in 1963 when


he opened a mini supermarket in London. He ventured into
the cash & carry business in 1976 and has been responsible
for growing Bestway into the second largest cash & carry
operator in the UK.

Sir Anwar was awarded the Order of the British Empire


(OBE) in 1992 and was conferred the title of Knight's Bachelor
in 1999. In 2000 he was awarded Hilal-e-Pakistan.

In 2005, Sir Anwar Pervez was voted winner of the prestigious


Grocer Cup for Outstanding Business Achievement by the
Institute of Grocery Distribution, UK.

03 United Bank Limited


Zameer M. Choudrey Muhammad Sami Saeed
Director Director

Mr. Zameer Mohammed Choudrey is a Member of the Board Mr. Muhammad Sami Saeed was appointed as a Member
of Directors of United Bank Limited since 19 October, 2002. of the Board of Directors of United Bank Limited by the
He is Chairman of the Board Audit Committee. He is also a Government of Pakistan with effect from 26 February 2008.
Director of UBL Insurers Limited. He is also a member of the Board Audit Committee of the
Bank. He did his M.A. from Punjab University in 1976 and
He is Chief Executive of Bestway Group, which is amongst post-graduation in Development Economics from the
the top 10 privately owned companies in UK. Its cash & University of Cambridge, UK, in 1986. He has done
carry operations are the 2nd largest in UK with annual professional courses in economic management and public
turnover in excess of £2 billion. finance from the IMF Institute, Washington and the Kennedy
School of Government, Harvard University, USA.
Zameer is a Chartered Accountant by profession. He joined
Bestway Group as a financial controller in 1984. In 1990, At present, he is Chairman of Planning & Development
he was promoted as the Group Finance Director. In 1995, Board, Government of the Punjab. Prior to this, he was
he was given additional responsibilities of business Additional Finance Secretary (Banking), Government of
diversification both in UK and Pakistan and was promoted Pakistan. He also worked as Joint Secretary/Additional
as Chief Executive of Bestway Cement. He was appointed Secretary in Prime Ministers Secretariat (2006-2008),
as the Group CEO in 2004. Secretary, Excise & Taxation Department (2002-2006),
Secretary Agriculture (1998-99) in Government of Punjab
He is a member of the Institute of Chartered Accounts of and Deputy Commissioner Faisalabad (1990-93). He joined
England & Wales and the Institute of Directors. the Civil Service of Pakistan (District Management Group)
in 1980.
Zameer is a trustee of Bestway Foundation UK and Chairman
of Bestway Foundation Pakistan. He is also a trustee of He also attended various international conferences and took
Grocers Benevolent Fund and Crimestoppers. part in bilateral negotiations in many countries as a member
of the Government of Pakistan delegation. In January 2007,
he attended World Economic Forum 2007 in Davos,
Switzerland, as a member of the Pakistan delegation headed
Dr. Ashfaque Hasan Khan by the Prime Minister of Pakistan.
Director

Dr. Ashfaque Hasan Khan has a PhD in Economics from


the prestigious Johns Hopkins University of USA. He is
currently working as Dean and Professor, National University
of Science & Technology (NUST). He also served in the
Ministry of Finance as Special Secretary Finance / Director
General, Debt Office. He was on the Board of Pak-Libya
Holding Company for six year (2001-07). He was appointed
as Director and Deputy Chairman of the Saudi Pak Industrial
and Agricultural Investment Company in July 2007 and
Director on the Board of United Bank Limited in October
2005. He is also Chairman of the Board Human Resource
and Compensation Committee of UBL.

In recognition of his outstanding contribution to the field of


economics and public policy the President of the Islamic
Republic of Pakistan has conferred upon him the award of
Sitara-e-Imtiaz.

annual report 2009 04


Amin Uddin Atif R. Bokhari
Director President & CEO

Mr. Amin Uddin has been appointed as a Member of the Mr. Atif R. Bokhari, currently President & CEO United Bank
Board of Directors of United Bank Limited with effect from Limited (UBL) is a career banker with extensive experience
5 March 2009. He is a Member of the Board Audit Committee in domestic and international banking. He started his banking
of UBL. He is also a Director of UBL Insurers Limited. career in 1985 with Bank of America, where he handled
diverse assignments over 15 years. Subsequent to leaving
He did Banking Management course in 1986-87 from McGill Bank of America in July 2000, Mr. Bokhari joined Habib Bank
University, Canada and B.A. (Economics and Statistics) from Limited wherein he was Head of Corporate and Investment
Punjab University. He also attended various international Banking.
professional training programs.
Mr. Bokhari was appointed President & CEO of UBL in May
He has 40 years experience in Pakistan, Middle East, Europe, 2004 (18 months after privatization). Since then UBL has
Africa and Canada. He worked in Ecobank Group a leading ventured into new diversified business and revenue streams
pan-African commercial banking group (1991-2002). He also namely consumer financing, E-commerce, asset management
worked in Bank of Credit and Commerce Intl. (1977-1990) and general insurance.
and Habib Bank Limited (1967-1977).
Mr. Bokhari holds the office of Chairman or Director in several
UBL Group companies. He is also a Director of First Women
Bank Limited. Mr. Bokhari is very actively involved with a
Arshad Ahmad Mir private sector program for the development of education in
Director Karachi. Specifically he is a Director for the envisaged
Karachi School for Business and Leadership affiliated with
Mr. Arshad Ahmad Mir, appointed as a Member of the Board the Judge Business School, Cambridge, UK. He has been
of Directors with effect from 26 October 2009, has over four appointed as Chairman of the Human Resource Committee
decades of extensive corporate experience in financial of the Institute of Bankers Pakistan, which is headed by the
services, oil industry, management consultancy, Governor State Bank of Pakistan. He is also a member of
manufacturing and wholesale distribution businesses. the Executive Committee of Pakistan Banks’ Association.

He has served with major corporate entities in areas of


general management, corporate planning, project
management, compliance and consultancy. Geographical
coverage of his corporate roles and responsibilities
encompass Pakistan, Middle East, Africa, UK & Europe.

Arshad Mir is a member of Institute of Chartered Accountants


and Institute of Bankers, UK. He has attended various
management courses and conferences including Advanced
Management Programme of London Business School.

He is also a Member of the Board Risk Management


Committee of the Bank.

05 United Bank Limited


Directors’ Report
to the Members
Directors’ Report to the Members
On behalf of the Board of Directors, I am pleased to present booked on equities. However, the key point to note is the
to you the 51st Consolidated Annual Report of United Bank declining trend in NPL formation and an increase in coverage
Limited for the year ended December 31, 2009. ratio from 68% to 71% in the subseqent quarters from June
2009.
Financial Highlights
Net interest income Net interest margin
Macro economic vulnerabilities continued in 2009, with the
first half of the year witnessing high inflation and interest 35.0 6.8%
rates, liquidity pressures and loss of business confidence.
However, gradual signs of stability have emerged with most 6.6%
33
key indicators reflecting positive trends including reduction 6.5%
32.5
in inflation, contained government borrowings, contraction
6.4%
in external imbalances and easing of the monetary policy
stance.

Rs Billion
30.0 29 6.2%
Despite this fragile operating enviorment, UBL has achieved 6.1%
profit after tax of Rs. 9.5 billion, which is 12% higher than 6.0%
the corresponding period last year translating into earnings 27.5
per share of Rs. 8.56 (December 2008: Rs. 7.51). The Board 5.8%
of Directors is pleased to recommend a cash dividend of
Rs. 2.50/- per share i.e. 25% and bonus issue of 10% for 25.0 5.6%
the year ended December 31, 2009. 2008 2009

Non-interest income continued its steady growth by 18% to


Dec-08 Dec-09
Rs. 13.0 billion which is a testatment to UBL's diverse income
15.0 14.4 streams. Even though fee and exchange income declined
14.1 year on year, this was offset by strong growth in capital
gains and derivatives income.
13.0
Fee and commission income decreased by 7% to Rs. 6.7
billion due to reduction in consumer and corporate lending,
however, this was partially compensated by higher commodity
Rs Billion

11.0
commission and income from increased trade activity.
9.5 Exchange income declined from Rs. 1.7 billion to Rs. 1.3
8.4 billion as we were able to capitalize on the significant
9.0 exchange rate volatility in 2008. This year our emphasis has
been more on servicing existing clientele where spreads
have reduced due to aggressive competition.
7.0
PBT PAT Capital gain increased to Rs. 697 million reflecting the strong
performance of the stock market in 2009 which was up 63%
Strong top line performance on a yoy basis. In addition, derivative income contributed a
Net interest income before provisions grew by 16% to healthy Rs. 1.7 billion to the non interest income.
Rs. 33.2 billion from the same period last year reflecting an
increase in Net Interest Margins of 40 basis points to 6.5% Non-interest income - 2009
in 2009 and 8% increase in average interest-earning assets.
The increase in benchmark rates and asset yields was Share of Other Income Free Income
associates 13% 52%
partially offset by the full year impact of 5% minimum rate 5%
Derivative
of return on savings deposits. Income
13%

Net provisions at Rs. 13.5 billion are up by 64% from the


corresponding period last year primarily due to higher
provisioning on the corporate and international portfolios.
Net provisions also include Rs. 1.1 billion impairment loss Capital Gain
5% Exchange Income Dividend Income
10% 2%

07 United Bank Limited


Strong grip on costs and efficiency Focus on liability management
With a strong focus on cost efficiencies, we have restricted Total deposits increased marginally by 2% to Rs. 504 billion
the increase in administrative expenses to only 7% over the primarily due to the Bank's conscious strategy of shedding
corresponding period last year. This is in spite of significant expensive deposits. Expensive deposits decreased by Rs.
inflationary pressures with average 2009 inflation coming in 27 billion to Rs. 197 billion at year-end 2009. As a result,
at 13.9%. Nearly half of this increase is attributed to increases the proportion of current and savings account deposits in
in premises expenses due to higher utilities and insurance total deposits (CASA) increased to 67% (Domestic CASA
expenses across our branch network. at 75%) at year-end 2009 from 59% at 2008. Deposits this
year saw a change in mix relying more on low cost deposits
Personnel costs are only up 12% which was a result of to form the deposit base. Domestic low cost deposit mix
headcount reduction by 979 (6%) to 14,254 due to efficiency improved from 60% in 2008 to 66% in 2009. As a result of
improvements, process restructuring initiatives and reduction shedding domestic high cost fixed deposits by 12%, our
in consumer lending. International operating expenses are market share decreased from 9.6% in December 2008 to
flat yoy in dollar terms. However, the impact of rupee 8.8% in December 2009.
devaluation accounts for nearly half of the increase in our
overall administration expenses. Given this backdrop, we Advances were rationalized during the year leading to a
have managed to achieve considerable cost efficiency during reduction in fresh lending to stand at Rs. 362 billion, lower
the year. by 4% as compared to the corresponding period last year.
Lending in the consumer and corporate portfolio was
Sustained business drivers controlled as a result of liquidity constraints, attributing to
Total assets have grown this year by Rs. 20 billion (up 3%) this decrease. The market share concurrently dropped from
to Rs. 640 billion over the corresponding period last year, 9.2% in December 2008 to 8.8% in December 2009.
with investments increasing by 20% to Rs. 138 billion.
Deposits grew by 2% to Rs. 504 billion. Whereas low cost The advances to deposits ratio decreased from 77% in
deposits increased by 14%, this was offset by a 12% reduction December 2008 to 72% in December 2009.
in expensive deposits. Advances have been rationalized by
4% to Rs. 362 billion. Deposits CASA

We were successful in maintaining a return on average 510 70.0%


assets (ROAA) of 1.5%. 67%

Spread analysis & Key Ratios 503 504 65.0%


Spreads and key operating ratios for the bank are shown
below:
59%
Rs Billion

495 60.0%
2009 2008 Change
Avg. interest earning assets 509 471 8% 492

Avg. interest bearing liabilities 522 491 6% 488 55.0%


Net interest margin 6.5% 6.1% 0.4%
Avg. yield on assets 10.3% 9.5% 0.9%
Avg. cost of funds 4.8% 4.4% 0.4% 480 50.0%
2008 2009
Return on avg. equity 17% 19% -1.9%
Return on avg. assets 1.5% 1.5% 0.0%
Earning per share (Rs.) 8.3 7.5 10%
International Operations
The scale and magnitude of the global economic uncertainty
Book value per share (Rs.) 54.8 39.4 39%
and the ensuing credit crunch of 2009 has been
Cost to income 53% 52% 2% unprecedented which resulted in all UBL presence countries
being impacted to varying degrees. During these adverse
conditions, UBL International placed special emphasis on
liquidity and asset quality.

annual report 2009 08


The foremost priority during the early months of 2009 was CAR Tier-l CAR
to maintain sufficient liquidity. Even though most regulators 14.0%
15.0%
had offered windows of liquidity assistance through different
measures, UBL branches sustained their operations by
generating deposits organically. In the latter half of the year,
branches were also able to rationalise their cost of funds by 12.5%
re-profiling their deposit base. 10.4%

Rs Billion
Asset quality remained a key strategic focus in 2009. UBL's 10.0% 9.5%
international corporate policy has been to deal selectively
with leading corporate names, hence, it was redeeming that
compared to the industry, our corporate books remained 7.5%
nearly clean. Loan losses were recorded in mortgages and
6.1%
retail unsecured assets. However, the level of the stress on
the retail portfolio was not as pronounced as feared. All
5.0%
countries prudently took provisions which was well within 2008 2009
each country's profit for the year.
Capital Adequacy strengthening remained a key business
The bank's loan books in 2009 shrank by intent, however objective in 2009 which resulted in our CAR increasing from
NRFF was maintained due to smarter costs and better yield 10.4% in Dec 2008 to 14.0% as at Dec 2009.
management. Our strategy for 2010 includes greater focus
on non-funded fee income, while asset build-up will be • Capital increased by 39% primarily due to an increase of
selective in corporate and retail banking. Rs. 18 billion in Tier-1 capital due to income retention and
improvement in revaluation of investments
Despite the uncertainty, our international operation network
remains a key competitive strength due to the geographical • Credit risk weighted assets decreased by Rs. 18 billion
risk diversification it brings to our portfolio. International (down 4%) primarily due to lower credit risk exposures
operations contributed 18% to the bank's profitability and and increased government lending
22% of the total assets. Profit before tax for the year declined
by 41% to Rs. 2.5 billion. Deposits at Rs. 100 billion decreased New impetus to Consumer business
by 4% while advances at Rs. 89 billion declined by 9%. The focus remained on the re-structuring of the consumer
loan initiation and collection and recovery functions. We
Strengthening Capital Adequacy invested in technology solutions enabling us to:

Dec-08 Dec-09 • Centralize operations thus reducing staff strength by 660


80 72
• Introduce statistical models for calculating the probability
of repayment from delinquent accounts which led to
improved collections
66
• Set the stage for ring fencing high risk portfolio and
52 segregating the low risk portfolio which will help restore
49 profitability to the consumer lending portfolio
Rs Billion

53

• Initiate work on developing application scoring model to


39 ensure profitable growth of the consumer business.
31
Core banking implementation on track
25 During the year 2009 our core banking software project
Total capital Tier-I capital Genesis has accomplished number of targeted milestones.
The Customer Services platform (CSP) module of Enterprise
Banking Suite has been implemented in 39 branches and
8 back office units across Pakistan. The Loan Origination
(LO) module has been successfully rolled out for UBL Drive,
UBL Address, UBL Cashline and UBL Businessline products.

09 United Bank Limited


The rollout for UBL Ameen and Credit card products will be Launch of UBL Wiz Card
completed by 1st quarter of 2010. The loan origination Following the success of UBL Wallet, we launched Pakistan's
module for Corporate /SME / Agri clients is being developed first Prepaid Debit card - UBL Wiz in early 2009. The concept
internally and is expected to be completed by 2nd quarter revolves around 'Pay now, buy later.' The prepaid debit card
of 2010 after which the implementation of Enterprise Banking works on the lines of the concept of prepaid mobile phone
Suite in overseas branches will commence. and internet cards with the customer acquiring a specific
denomination card from readily accessible locations all over
The targeted milestones for implementation of Core Banking Pakistan and using it till its expiry or deletion. The funds in
Suite (SYMBOLS) have been so far on track. Some of the the VISA prepaid card are used through purchase transactions
major milestones achieved during 2009 include completion or cash withdrawals by the customer.
of Gap Specifications, Functional Specifications and Factory
Acceptance Testing. The critical portion of Integration with 98,000 cards have been issued with a float of Rs. 124 million
the existing systems and the migration of data to the new during the year and additional features were introduced
CBS is underway. including ATM/Internet card sales through all online branches
and retail outlets and specific usage cards (Hajj-Umra-
The challenge ahead for Genesis project team is to do a Internet-Corporate-Remittance-FCY).
comprehensive end to end User Acceptance Testing exercise
and successfully rollout CBS in branches with minimum Home Remittances - Tezraftaar
disturbance to the customer service and Bank's existing With remittances on the rise, especially in the month of
working. The first branch is expected to Go Live in 2nd March when they saw record levels, we improved services
quarter of 2010. The implementation of Treasury modules to our customers by offering 'Tezraftaar cash payment over
will be done by 3rd quarter 2010. The remaining branches the counter.' Before this, home remittances were being
will be rolled out in a staggered manner. processed through Tezraftaar cell by either crediting
beneficiary account directly or issuance of Tezraftaar cheque
Key Developments during 2009 (encashable at any UBL counter up to Rs. 100,000). However
Branchless Banking there was a huge demand from originators to provide cash
Although ATMs, debit cards, net banking, call centre agents over the counter facility to the beneficiaries who do not have
& IVR banking are all forms of Branchless Banking, SBP any bank account. This service will be available at all UBL
latest regulations specifically defines it as “banking using branches in Pakistan and will allow beneficiaries to receive
retail agents”. The services that can be offered at retail agent cash over the counter.
locations include account opening, cash deposit, cash
withdrawal, utility bill payment, domestic and international In addition, UBL and Bank Albilad Saudi Arabia have joined
remittances and air time purchase. hands to facilitate remittance of funds from expatriate
Pakistanis living and working in Saudi Arabia. This partnership
The technologies that can be deployed to offer these services between UBL and Bank Albilad is an important step in
include mobile phones, cards and kiosks. This offers a huge solidifying the two banks’ relationship while at the same time
opportunity to enroll a very large majority of the currently improving the quality of service to customers. Tezraftaar
unbanked segment who are unbanked either because they Cash is a fast and dependable way to send money even for
cannot afford the current bank service charges or more those beneficiaries who do not have an account at UBL.
significantly they do not have any bank branch within easy The bank remains committed to enhancing its efforts in
reach. This also gives an opportunity to offer Government providing the highest standard of service to remitters and
to Consumer Cash disbursement (subsidies) services in a beneficiaries of remittances, to further strengthen its position
transparent and cost effective manner. as a leading institution for home remittances from Pakistani
expatriates.
UBL was granted permission to do a Pilot launch of
“Branchless banking” proposition in August 2009. The Pilot Disbursement to IDPs (Internally displaced persons)
was launched with 8 agents in early September and was UBL had the honor of being selected to assist the government
very successful. The number of agents included as a part in providing aid to approximately 268,000 families which
of the pilot has continued to grow and as of Dec 2009 the have been displaced in the war against militants in the
number stood at over 100. Based on the results of the Pilot, northern areas of Pakistan. An efficient and transparent
UBL was able to redefine operating processes and system financial assistance disbursement mechanism has been
structures. As required under the Branchless Banking devised in conjunction with NADRA to serve this purpose.
regulations, UBL applied for a license for “commercial launch” Around 250 UBL branches started the process of distributing
in Oct 2009 and expects to do commercial launch within Q1, cards for disbursement of Rs. 25,000 per family. To date,
2010. UBL has opened approximately 427,000 accounts against
which 335,000 cards have been activated and funds
amounting to almost Rs. 7 billion disbursed.

annual report 2009 10


Signature UBL Priority Banking and improving efficiencies, right sizing the consumer business,
In 2009, UBL launched 'Signature' as a separate brand building on our non fund income streams, risk management
which offers focused and personalized wealth management and restructuring of affected assets.
services for selected, high net-worth individuals at a secure
and convenient location. Statement under Section XIX of the Code of
Corporate Governance
Signature started operations with four UBL Priority Banking
The Board is committed to ensure that requirements of
lounges in Karachi, Lahore and Islamabad, on November
corporate governance set by Securities and Exchange
7, 2009, the day that marked UBL's Golden Jubilee. All four
Commission of Pakistan are fully met. The Group has adopted
exclusive lounges cater to the bank's current and potential
good Corporate Governance practices and the Directors are
high net-worth customers. Relationship Managers have been
pleased to report that:
trained to offer a range of financial products and services
designed to meet individual business and personal wealth
• The financial statements present fairly the state of affairs
management needs which also includes products of UBL
of the Group, the result of its operations, cash flows and
Insurers and UBL Fund Managers. 6 additional lounges are
changes in equity.
expected to be opened in the year 2010.
• Proper books of account of the Group have been
maintained
Cash Deposit Machine
• Appropriate accounting policies have been consistently
UBL deployed its first Cash Deposit Machine (CDM) in
applied in preparation of financial statements and
another milestone towards improving our service quality to
accounting based on reasonable and prudent judgment
our customers. The self service terminal will offer cheque
• International Accounting Standards, as applicable to Banks
and cash deposit functionality along with all other standard
in Pakistan have been followed in the preparation of the
card based transactions including cash withdrawals, funds
Accounts of financial statements without any departure
transfers and bill payments. The machine is aimed at
there-from
minimizing the need to visit branches.
• The system of internal control in the Group is sound in
design, and effectively implemented and monitored
Credit rating re-affirmed
• There is no reason whatsoever to doubt your Groups
The credit rating company JCR-VIS has re-affirmed the
ability to continue as a going concern
bank's long-term entity rating at AA+ and the ratings of our
• There has been no material departure from the best
four subordinated debt instruments at AA. The short-term
practice of Corporate Governance, in accordance with the
ratings remain at A-1+ which is the highest rating denoting
relevant regulations
the greatest certainty of timely payments by a financial
• The Board has appointed the following three Committees
institution.
with defined terms of references
The re-affirmation of our ratings is based on our diversified
o Board Risk Management Committee
deposit base, strong international operations and leading
o Board Human Resources & Compensation Committee
corporate and commercial segments in the domestic market.
o Board Audit Committee
All ratings for UBL have been assigned a Stable outlook.
• A summary of key operating and financial data of the last
Looking Ahead eight years is presented in the Annual Report under the
During the year, State Bank of Pakistan continued to gradually section “Growth at a glance”.
ease monetary policy by reducing the discount rate by 250 • The Group operates five post retirement funds Provident
bps from 15 percent at the start of the year to 12.5 percent Fund, Gratuity, Pension, Benevolent, and General Provident
in December 2009. These measures led to a substantial Fund and two benefit schemes Post Retirement Medical
decrease in inflation from as high as 24.7 percent in November and Compensated Absences. The details and asset values
2008 to 10.5 percent in December 2009. The lowering of are given in notes 36 of the audited financial statements
interest rates should provide impetus for future lending and of 2009. However only Gratuity and Provident Fund
should also improve asset quality, which were impacted by Schemes are available to staff who joined the bank post
the high borrowing rates. With the stock market registering privatization
a 63% yoy growth, narrowing current account deficits and
strengthening foreign exchange reserves, we expect the
Risk Management Framework
economy to continue to stabilize and recover in 2010.
The turmoil in the international financial sector provided an
opportunity to learn from the financial world's mistakes. The
For UBL the key focus areas in 2010 will be liability
crises led UBL towards increased focus on identifying and
management, acquisition of quality assets, controlling costs
reducing risk. Risk Management has simply been a practice

11 United Bank Limited


of systematically selecting cost effective approaches for Framework and policy. The Operational Risk Management
minimizing the effect of threat realization to any organization. (ORM) Framework provides operational risk management
Prime focus was given to development of Credit Strategy & approach/ infrastructure at the bank, ORM policies and
Asset Quality improvement which included corporate, procedures for risk identification, assessment, monitoring
commercial, consumer & international portfolio. Senior Risk and mitigation/ control and detailed roles and responsibilities
Management initiated active involvement with clients focusing of various stakeholders, etc. The ORM Framework has been
on efforts towards repayments, restructuring and asset sale. approved by the Board and is implemented across the bank.
It has not just been a regulatory compliance issue but has
also been an apparatus that has helped in dealing with the Market Risk unit has developed a framework that continuously
perils in the way of achieving organizational objectives. reviews policies, procedures and Product Process Manuals
for managing Market Risk of the bank and makes
Risk management required development of stringent policies recommendations to respective management committees
including International Policy, overall Risk Management for approval. During the year Market risk policy framework
Policy & Agri Policy for further strengthening lending and and investment policy were redefined whereby Treasury and
framework for maintaining and improving the quality of the IBG investments have also been catered to. Further, the
portfolio. Further, activities have been initiated to revise our unit also evaluates/ manages derivative products, model
Credit Policy for Corporate, Commercial & SME for better development/evaluation and assessment of market risk by
risk assessment and management. The formulation and performing sensitivity analysis.
approval of such policies involved board and senior
management to ensure accurate assessment of the risks. Similarly, MTM, Duration, PVBP, Convexity, limit
utilization/exceptions etc. are also being actively monitored
Research Cell has been strengthened and enhanced and and checked on a daily basis with reporting to respective
is aiding business sector by issuing business sector reports business units and to the Group Executive Risk Management
like Cement, Fertilizer, Telecom. Furthermore, regular in the form of a comprehensive MIS pack.
economic reviews & Forex updates are issued to keep all
the decision makers informed. Further monitoring systems Corporate Social Responsibility
were strengthened to aid better risk management systems, UBL's efforts were strategically aligned with its vision of
& automated E-CIB reporting. excellence in all areas of enterprise and its corporate values
founded on commitment, caring and meritocracy.
Consumer financing portfolios throughout the industry
continued to be stressed due to over-leveraged customers, This year as in previous years, the bank provided support
unstable political and economic conditions. However UBL amounting to Rs.46.2 million to reputable institutions, NGOs,
was the first in the market, from a risk management tool and not-for-profit organizations (NPOs) engaged in three
perspective to launch TRIAD (Behavior Scores). This was principal areas of activity i.e. education, health and community
yet another milestone for Credit Risk Management. UBL development. These institutions were selected on the basis
plans to implement Application Scoring which will enable of their demonstrated expertise in, and commitment towards
the risk decision makers to allocate limits / pricing facilities improving the quality of life of people in the less privileged
on the basis of the risk profile, using common demographic segments of society.
and behavioral denominators to identify and pursue low risk
prospects. Educational projects remained the primary focus of attention
in 2009. A major new initiative taken this year was for UBL
UBL has adopted standardized approach through automated to sign up as a “contributing sponsor” of the Karachi Education
calculator where credit is being monitored through Initiative (KEI), an NPO established to set up a world class
standardized approach whereas Market & Operational Risk School of Business and Leadership in Karachi. A total of
are near completion. Subsequently, the bank has developed Rs.100 million has been committed to KEI over 3 years
an Internal Capital Adequacy Assessment Process (ICAAP) (2009-2011), of which Rs.40 million has been disbursed in
as per the guidelines provided by SBP. This framework has 2009.
been approved by Bank's Board of Directors and submitted
to SBP. UBL has covered additional risks which are not Projects supported in the health sector included the Burns
covered under Pillar I and have projected satisfactory capital Centre in Karachi, a Marie Adelaide Leprosy Centre at Garhi
adequacy for the next six years. UBL will review the ICAAP Dupatta in Azad Kashmir as well as Shalimar Hospital in
framework on annual basis (financial year end i.e. December) Lahore. In the community development area, apart from
and changes/updates will be recommended to Basel II SOS Villages Pakistan, support was provided to two new
committee for onward submission to the Board of Directors. projects - a vocational training centre for women and a
For effective operational risk management, the bank has 'school sanitation and clean drinking water program' in
developed an Operational Risk Management (ORM) Gulshan-e-Iqbal town in Karachi.

annual report 2009 12


Value of Investments in Employee Retirement Benefit Funds
The following is the value of investments of provident, gratuity, pension and benevolent funds maintained by the Bank based
on latest audited financial statements as at December 31, 2008:

Amounts in '000
Employees' Provident Fund 2,280,037
Employees' Gratuity Fund 285,845
Staff Pension Fund 6,057,032
Staff General Provident Fund 1,204,455
Officers / Non-Officers Benevolent Fund 727,176

Meetings of the Board


During the year under report, the Board of Directors met five times. The number of meetings attended by each Director
during the year is shown below:

Name of the Director No. of meetings attended


His Highness Sheikh Nahayan Mabarak Al Nahayan, Chairman 02
Sir Mohammed Anwar Pervez, OBE, HPk, Deputy Chairman 05
Mr. Omar Z. Al Askari, Director 05
Mr. Zameer Mohammed Choudrey, Director 05
Dr. Ashfaque Hasan Khan, Director 05
Mr. Muhammad Sami Saeed, Director 05
Mr. Amin Uddin, Director (appointed w.e.f. 05-03-2009) 05
Mr. Arshad Ahmad Mir, Director (appointed w.e.f. 26-10-2009) 02
Mr. Atif R. Bokhari, President & Chief Executive Officer 05

Pattern of Shareholding
The pattern of shareholding as required u/s 236 of the Companies Ordinance, 1984 and Article (xix) of the Code of Corporate
Governance is given below:

Shareholders No. of Shares %of ordinary Shares


Bestway Group (BG) 345,777,568 31.07
Abu Dhabi Group (ADG) 283,787,098 25.50
State Bank of Pakistan 216,879,438 19.49
Government of Pakistan 3,049,591 0.27
Privatization Commission of Pakistan 1,559 0.00
General Public & others 127,020,572 11.41
NIT 1,083,332 0.10
Bank, DFI & NBFI 19,535,984 1.76
Insurance Companies 6,225,007 0.58
Modarabas & Mutual Funds 17,011,040 1.53
Securities & Exchange Commission of Pakistan 1 0.00
*International GDRs (non voting shares) 92,519,435 8.31
Total outstanding shares 1,112,890,625 100.00
*ADG also holds 4.8% additional shares in the form of GDRs.

13 United Bank Limited


The aggregate shares held by the following are:

a) Associated Companies, undertaking & related parties


No. of shares
1) Bestway (Holdings) Limited 202,522,894
2) Bestway Cement Limited 85,136,131
3) Al Jaber Transport & General Contracting 54,539,306

b) NIT 1,083,332

c) Directors / CEO / Executives Self Spouse & Children Total


1) H.H. Sheikh Nahayan Mabarak Al Nahayan 71,765,548 - 71,765,548
2) Sir Mohammed Anwar Pervez,OBE,HPk 56,757,421 - 56,757,421
3) Omar Z. Al Askari 13,634,825 - 13,634,825
4) Zameer Mohammed Choudrey 1,361,122 - 1,361,122
5) Atif R. Bokhari 348,634 - 348,634
6) Other Executives 1,142,167 858 1,143,025

d) Public sector Companies and Corporations 339,503

e) Banks, DFIs, NBFIs, Insurance Companies, Modaraba & Mutual Funds 42,772,031

f) Shareholders holding 10% or more voting interest


No. of Shares %
1) State Bank of Pakistan 216,879,438 19.4879
2) Bestway (Holdings) Limited 202,522,894 18.1979

All the trade in the share carried out during the year by the The Board of Directors, on the suggestion of the Board Audit
Directors, CEO, CFO, Company Secretary, their spouses Committee, recommended for the appointment of M/s Ernst
and minor children is reported as under: & Young Ford Rhodes Sidat Hyder, Chartered Accountants
and M/s BDO Ebrahim & Co., Chartered Accountants as
Name Purchase Sale external auditors for the next term.
Mr. Aameer Karachiwalla,
Chief Financial Officer -- 6,000 Conclusion
Mr. Aqeel Ahmed Nasir, In conclusion, I extend my thanks and appreciation to UBL
Company Secretary -- 14,465 shareholders and customers as well as to my fellow members
of the Board of Directors for their trust and support. We
acknowledge the efforts and dedication demonstrated by
our staff and would also like to express our earnest
Change in Directors appreciation to the Government and the State Bank of
We are pleased to announce that Mr. Amin Uddin and
Pakistan for their unfaltering support.
Mr. Arshad Ahmad Mir have been appointed as Directors
of UBL with effect from March 5, 2009 and October 26, 2009
For and on Behalf of the Board,
respectively.

Auditors
The present auditors M/s. Ernst & Young Ford Rhodes Sidat
Hyder, Chartered Accountants and M/s. BDO Ebrahim &
Co., Chartered Accountants retire and being eligible offer
themselves for re-appointment in the forthcoming Annual
Nahayan Mabarak Al Nahayan
General Meeting.
Chairman

Abu Dhabi
March 01, 2010

annual report 2009 14


President & CEO Review
President & CEO Review
From an overall perspective Pakistan's financial sector Non-interest income grew sharply by 18% to Rs.13.0 billion
remained under considerable strain in 2009. Increased benefiting from the bank's diversified income stream, but
macroeconomic vulnerabilities resulted in a slowdown in fee and commission income dropped 7% to Rs.6.7 billion
economic activity, and constrained repayment capacity of on account of lower consumer and corporate lending.
borrowers resulted in banks in the country and the region Exchange income suffered a decline in 2009 to Rs.1.3 billion
remaining susceptible to higher financial risk. after a spurt seen in 2008.

A great deal of energy was therefore consumed in reducing On the other hand, Capital Gain increased to Rs.697 million
the bank's exposure to market and business risks, primarily in 2009, higher by 63% on a year-on-year basis, as a
by raising management standards and creating adequate consequence of the strong performance of the stock market
provisions against non-performing loans (NPLs). At the same during the year. Derivative income also contributed Rs.1.7
time concerted efforts were made towards selectively growing billion to non-interest income.
the business both in the retail and corporate segments,
mobilizing deposits and also strengthening the bank's Retail Bank
operational capabilities in Pakistan and overseas. The Retail Bank, equipped with a comprehensive portfolio
of consumer and commercial banking products made steady
Our international business that is largely concentrated in the progress in 2009. The extensive network of over 1,100
Middle East did not remain completely insulated from the branches as well as other important customer touch-points
turbulence that characterized the economic environment of such as the contact centre, ATMs, phone-banking and net-
the region in 2009, but our strong business fundamentals and banking provided a strong platform for extending better
diverse customer-base helped mitigate any imminent risk. service to a wide variety of customers. The three pillars of
the Retail Banking organization i.e. Sales, Customer Services
Key Financials and Marketing & Product Management pooled in their
During the year the Group achieved consolidated profit after collective strength to provide the required technical, logistical,
tax of Rs. 9.5 billion, which was 12% higher than the organizational and manpower support.
corresponding period last year, translating into earnings per
share of Rs. 8.56 (December 2008: Rs.7.51). The rollout of UBL Wiz Prepaid Debit Cards launched in the
latter part of 2008 gained momentum in 2009, finishing ahead
Total deposits in rupee terms grew 2% to Rs. 504 billion as of target. Powered by the intrinsic strengths and global reach
at December 31, 2009 (2008: Rs. 492 billion). As part of a of VISA, Wiz Prepaid Debit Cards proved especially popular
strategy to improve the mix of expensive and low-cost amongst travellers and small businessmen. Variants launched
deposits, the former were reduced by Rs.27 billion to Rs.197 during the year included Wiz Internet / ATM cards as well as
billion. Domestic low cost deposits in total grew from 60% purpose designed cards for Hajj, Umra and Corporate usage.
in 2008 to 66% in 2009. Advances were more carefully
managed particularly in the consumer and corporate portfolios A major development during the year was the launch of
due to which total advances dropped 4% compared to last Signature UBL Priority Banking. Four Signature lounges were
year, to Rs. 362 billion. The advances to deposits ratio opened simultaneously, two in Karachi and one each in Lahore
decreased to 72% in December 2009 from 77% as at end- and Islamabad on November 7, 2009 the day that marked the
December 2008. fiftieth anniversary of the founding of UBL. Signature priority
banking is uniquely designed to meet the business and personal
Total assets improved by nearly 3% over last year to wealth management needs of high-potential, high-net-worth
Rs. 640 billion while return on average assets (ROAA) existing and prospective clients of UBL. Signature customers
remained steady at 1.5%. are entitled to receive priority service across the UBL branch
network as well as at Signature lounges.
Net interest income before provisions grew by 16% to
Rs. 33.2 billion reflecting a growth in net interest margin by Another outstanding achievement under Retail Bank in 2009
40 basis points to 6.5%, and a growth of 8% in average was its meticulous handling of the Internally Displaced Persons
interest-earning assets in 2009. The increase in benchmark (IDPs) Program. Under this program assigned exclusively to
rates and asset yields were partially offset by the 5% minimum UBL by the Government of Pakistan, the challenge was to
return on savings deposits applicable throughout the year develop and implement a transparent and foolproof mechanism
2009. for distributing financial aid to the IDPs of Swat and Malakand
Division. UBL Wallet VISA Debit Cards, preloaded with the
Significantly higher net provisions of Rs.13.5 billion, 64% allocated amount of Rs.25,000/= were issued to heads of
above last year, were created due to higher provisioning households of 268,000 identified families. Further top-ups
against corporate and international portfolios. This includes would be possible on these cards, in case of release of
Rs.1.1 billion impairment loss booked against equities. additional funds by the government. The list of recipients
However, a point to note is that a declining trend was seen came from the National Database and Registration Authority
in NPLs during the year and the coverage ratio improved (NADRA), and every card was issued after physical verification
from 68% to 71% after June 2009. of the beneficiaries' credentials by NADRA.

annual report 2009 16


Corporate Banking The focus for the current year 2010 is to successfully close
The Corporate Banking Group (CBG) remained true to its out the existing ongoing mandated transactions and build
positioning as a provider of strategic and structured financial a robust pipeline for the next year with the overarching goal
solutions. Backed by a high quality relationship management to establish a regional investment banking business with
team, CBG took advantage of its extensive reach to offer sustainable revenues and transaction pipeline.
innovative business services to top tier corporate sector clients
in the areas of Trade, Cash Management and general banking. Risk & Credit Policy
During 2009, the Risk & Credit Policy Group focused on
Focus on industry specific products and solutions for further strengthening the risk management framework based
collections and payments helped UBL maintain market on sound credit strategies and stringent policies to improve
leadership in Cash Management with over 45% market the asset quality of corporate, commercial, consumer and
share. The home remittance business achieved impressive international portfolios. Credit authority delegated to selected
growth crossing the US$ 900 million mark, as a result of senior managers ensured their active involvement with clients
geographical expansion into newer markets. and meticulous implementation of policies for credit
repayments, restructuring and asset sale.
Tezraftaar Cash, a hassle-free home remittance service
launched in 2009 to supplement the existing Tezraftaar product, The launch of TRIAD (Behavioural Scores) as a risk
allows cash payments of up to Rs. 500,000/= over-the-counter management tool in 2009 was a significant development
against remittances, from any branch of UBL. It is yet another which is expected to assist in making more informed decisions
aggressive step taken towards promoting and facilitating the particularly on consumer finance portfolios. Another tool called
State Bank's Pakistan Remittance Initiative (PRI). Application Scoring will be implemented in 2010, whereby
common demographic and behavioural denominators will be
Remittances through Western Union also grew in 2009 for used to help identify and tap low risk prospects.
the benefit of the families of Pakistani expatriates living in
urban, suburban and semi-rural areas. The standardized practice of using an automated calculator
for credit monitoring has been further strengthened by better
Investment Banking managing Market & Operational Risks. An Operational Risk
The Investment Banking Group (IBG) maintained its sector Management (ORM) Framework was implemented in 2009
leadership in the domestic market during 2009 whilst after approval from the Board, to ensure robust operational
continuing to build on its Middle East initiative. risk management through a process of risk identification,
assessment, monitoring and mitigation or control. In the
Debt Capital Markets & Syndications (DCM) remained a same manner, the Market Risk unit stepped up its review of
strong performer successfully concluding a record cumulative policies, procedures and product process manuals on the
deal value including leading the first circular debt tranche basis of which it makes recommendations to respective
for the Government of Pakistan, one of the largest transactions management committees. During 2009 the scope of the
in the corporate history of Pakistan. market risk policy framework and investment policy was
redefined to also cover Treasury and IBG investments.
Project & Structured Finance remained the largest contributor
to fee earnings for IBG for the fourth consecutive year. Focus In addition, an Internal Capital Adequacy Assessment Process
for the year was primarily on structuring and arranging pass- (ICAAP) developed as per SBP guidelines was ratified by
through funding gaps of the Bank's IPP assets and the Board and is submitted to SBP for information. This will
consolidating the project finance portfolio concentrating on help the bank to adequately handle its capital requirement
risk management and monitoring as various projects went for the coming years in an ongoing manner.
through their commissioning phases.
Human Resources
Equity & Advisory business streamlined its operations in During 2009, HR continued to reassign and relocate critical
2009 by restructuring its proprietary equity portfolio, which resources within the organization. As part of a larger renewal
allowed it to concentrate on fee-based businesses. The effort, 173 trained Cash Officers were absorbed into the
emphasis during the year was on developing and growing permanent cadre in Retail Banking Group keeping in view
a middle-market M&A business in the GCC, in conjunction their career progression. A batch of 16 Management Trainees,
with the IB-ME desk. recruited from top business schools by means of a meticulous
selection process, was provided comprehensive in-house
The year 2009, marked the first full year of UBL's investment training before being assigned to various functions and locations.
banking operations in the GCC. The primary objective for
the year was mandate acquisition. The results of the short Internal job postings that were advertised drew an
term strategy were successful with the awarded five mandates overwhelming response each time. Through a total of 276
during FY'2009 across the three core investment banking learning interventions 12,864 participants were provided
businesses for an accumulated value of over US$ 50 million. training with major focus on Retail Banking Group's
development needs.

17 United Bank Limited


The 2nd Charter of Demands Settlement successfully signed Within the E-Commerce area products introduced by UBL
with the two CBAs on May 25, 2009 and June 13, 2009. over the years such as Click N Remit, Click N Bank and
Industrial peace is progressing smoothly and harmony NRP Direct, have already had wide acceptance. The latter
continues to prevail. product, launched in 2008, allows overseas Pakistanis to
open an account in a UBL branch in Pakistan from anywhere
Digitization and archiving of personnel files was taken up in the world. On the NetBanking side, system upgrade is in
as a major initiative by HR Management for the digital progress to enable its use by corporate and SME customers
archiving of all employees' files. It will help in setting up a after which the service shall be made available to UBL
state of the art warehousing system. International.

Another major initiative was acquiring the Oracle Hyperion Core Banking Platform Implementation (Project Genesis)
Human Resource Budgeting & Planning software. This is a The rollout of Genesis, the most advanced core banking
special purpose planning module that makes headcount, technology platform in the world, acquired from SunGard
salary and compensation planning fast and efficient across Systems, began in the last quarter of 2009. Implementation
the enterprise. It simplifies the planning of workforce and of the Customer Services Platform (CSP) module of the
workforce related expenses such as bonuses, fringe benefits, Enterprise Banking Suite is well on target. The Loan
salary increases etc. Origination (LO) module has also been rolled out for consumer
products such as auto-loans, mortgages, personal and
The UBL HR Policy Manual was redesigned and revised to business running finance. UBL Ameen Islamic banking and
make policies more streamlined for uniformity and better credit card products will come within the scope of the LO
comprehension. module by the first quarter of 2010, by which time the
Enterprise Banking Suite shall also be implemented in
International overseas branches.
Markets in the Middle East the core of UBL International's
operations were severely affected by the Dubai debt crisis A major milestone achieved during 2009 in the implementation
in addition to global recession in 2009. Given the tumultuous of Core Banking Suite (CBS) called SYMBOLS was its
economic environment a three pronged strategy was adopted, integration with existing systems. Migration of data to the
focusing on liquidity management, asset quality management new CBS is in progress. Comprehensive testing will be
and expense control. undertaken alongside implementation, and the first domestic
branch is targeted to go live in the second quarter of 2010.
Regulators in several ME markets offered extraordinary support
to banks to tide over the liquidity crunch, but UBL chose to Conclusion
rely on its own organic deposit mobilization efforts and re- Business outlook for 2010, across Pakistan and the region,
profiling of its deposit base to tide over the problem. Within remains mixed. Given Pakistan's weak economic
the consumer portfolio, loan losses were recorded in mortgages fundamentals and the additional burden of war on its north-
and unsecured assets but the need for provisions did not western borders, the challenge is enormous. However, some
exceed profit delivery of any individual market. Corporate improvements in macroeconomic indicators have been in
business also remained relatively unscathed in 2009. evidence in 2009, and the worst phase of the fighting also
appears to be over. International business is expected to
During 2010 greater focus would be placed on non-funded show modest growth as well on account of the weak global
fee income, and selective asset growth would be aimed at economic recovery forecast for 2010.
retail and corporate businesses.
Nevertheless, better performance of the bank will be derived
Business Development & Strategic Initiatives from improving efficiency, developing non-fund income
UBL was granted approval for a Pilot launch of “Branchless streams, building asset value, better risk management and
Banking” by the SBP in August 2009. The service is designed optimizing the existing customer base. Fortunately, the bank
for delivery through authorized retail agents in addition to is equipped with a robust retail infrastructure and investments
mobile phones, cards and kiosks. The array of services made particularly in process reengineering and technology
proposed for launch would include basic banking services will pay dividends in 2010 and beyond.
such as account opening and cash withdrawals and deposits
as well as several value added services including remittances,
bill payments and purchase of mobile airtime.

The Pilot launch was initiated in September 2009 and over


100 agents were signed up by end-December 2009. Based
on lessons learned during the Pilot, operating processes
are being fine-tuned and system structure re-evaluated and Atif R. Bokhari
perfected. The bank has already applied for a license for President & CEO
commercial launch, as required under the Branchless Banking
regulations, and full-scale commercial launch is expected Karachi.
within the first half of 2010, subject to receipt of license. March 01, 2010

annual report 2009 18


Growth at a Glance

UBL Consolidated 2003 2004 2005

Equity (excl.surplus on revaluation) 12,925 16,379 21,351

Total Assets 225,387 282,248 358,056

Deposits 189,832 237,054 296,499

Advances 99,232 148,225 210,153

Pre-tax Profit / (Loss) 4,522 5,010 9,709

Number of staff (Bank's own staff) 8,881 9,287 9,445

OTHER PARENT COMPANY STATISTICS

Home Remittances 20,256 22,742 26,774

Trade Volume 144,738 189,461 285,041

Import 98,951 124,383 203,628

Export 45,787 65,078 81,412

Number of branches 1,077 1,072 1,058

Deposit Mix Advances


Rs. in Billions
Expensive Current 20
05
2009 - 31% 2009 - 31%
(2008 - 39%) (2008 - 28%) 09
210
20

362
2006

Total Deposits 255


2009 Total Advance
(Rs. 504 Billion)
Other
low cost 378
8

308
00

2009 - 2% 2 20
(2008 - 2%) 07
Saving
2009 - 36%
(2008 - 32%)

19 United Bank Limited


2006 2007 2008 2009 CAGR (2005-2009)

30,507 38,515 47,121 58,194 28%

435,835 546,796 620,707 640,450 16%

343,805 411,475 492,268 503,832 14%

254,670 308,271 377,945 362,080 15%

14,500 13,796 14,052 14,392 10%

9,871 9,532 9,041 8,738 -2%

38,843 48,299 58,565 101,927 40%

344,818 390,071 546,009 472,458 13%

259,221 286,863 422,958 335,764 13%

85,597 104,780 123,050 136,694 14%

1,059 1,095 1,136 1,138 2%

Pre-tax Profit / (Loss) Trade Volume


Rs. in Billions
Rs. in Billions
2009 14.4

123
2008 14.1
137

105
2007 13.8 86

81

2006 14.5

204 259 287 423 336


2005 9.7

2005 2006 2007 2008 2009


Export Import

annual report 2009 20


International Network
The full impact of the global financial crisis emerged in 2009 across the world, UAE
impacting all countries in varying degrees, including those with UBL presence.
Deira Branch
The bank in its overseas network adopted a three pronged approach: Liquidity Mohamed & Obaid Almulla Building,
Shop #1, Plot # 115-0108, Murshid Bazar,
Management, Asset Quality Management, and Expense Control. P. O. Box: 1000, Deira-Dubai, UAE
Tel: 009714-2267191 & 2267532
Regulators in all countries with UBL presence offered banks various facilities Fax: 009714-2269209
to overcome the liquidity crisis, however UBL did not have to resort to them.
The bank maintained its liquidity profile by mobilizing deposits organically. Bur Dubai Branch
Bank Street Building, Khalid Bin Waleed
Road, P. O. Box: 1367, Dubai, UAE
The Asset portfolio was under our constant scrutiny in every territory through Tel: 009714-3552040 & 3592515
proactive relationship management and prudent risk taking. Corporate Banking Fax: 009714-3515164
which is the mainstay of the bank in most of the overseas operations performed
satisfactorily, and the bank continued to do business with the top notch names Al-Barsha Sheikh Zayed Road
Branch
in its customer base. While the unsecured lending portfolio in Retail witnessed Show Room # 2, Al Faraidooni Building,
a marginal deterioration, the mortgages portfolio in the UAE suffered reversals Al Barsha First, Sheikh Zayed Road,
on account of the massive downturn in the real estate market. Overall lending P. O. Box: 3846, Dubai, UAE
was very closely monitored, with risk migration including prudent re-classification Tel: 009714-6085300 & 3403115
Fax: 009714-3403645
of loans being the major focus.
Sharjah Branch
Direct costs in International were sharply in focus, resulting in total expenditure Al-Majaz Building, King Faisal Street,
incurred in 2009 being at par with 2008. Interest income witnessed a slight P. O. Box: 669, Sharjah, UAE
increase through better management of yield and cost of funds, and margins Tel: 009716-5751115 (Dir.) &
5729444 (PABX)
were maintained. However, due to business slowdown and the impact of Fax: 009716-5721200
provisions, profitability was below 2008 levels. Provision taken was very much
within the profits generated by each territory during 2009. Muroor Road Branch
Shiekh Saeed Bin Tahnoon Al Nahyan
Building, Al Falah Street,
It was redeeming that in 2009 the franchise was rated satisfactory in every
P. O. Box: 3052, Abu Dhabi, UAE
territory by the respective Regulators. Tel: 009712-6323747 & 6391507
Fax: 009712-6315052

Sheikh Hamdan Road Branch


Ghamran Buti Al Qubaisi Building,
Opp. Hamdan Centre, Sheikh Hamdan
Bin Mohamed Road, P. O. Box: 2340,
Abu Dhabi, UAE
Tel: 009712-6271210 & 6272429
Fax: 009712-6272134

Musaffah Branch
Show Room # 3, M-14, Street 17,
Musaffah, P. O. Box: 237, Abu Dhabi,
UAE
Tel: 009712-5548777 & 5548778
Fax: 009712-5548779

Al-Ain Branch
Show Room # L 103 LE 488, Mohammed
Salem Owaida Jaber Al Khaily Building,
Ali Ibn Ibi Talib Street, Oud Al Toba,
P. O. Box: 1141, Al-Ain, UAE
Tel: 009713-7641221 & 7641780
Fax: 009713-7666175

21 United Bank Limited


BAHRAIN Aden Branch SUBSIDIARY
Aden Mall, Crater, P. O. Box: 104, Aden,
Republic of Yemen
Manama Branch
Tel: 009672-269191, 009672-269063
SWITZERLAND
Delmon Tower, 117, Block 304, Govt.
Fax: 009672-269065
Avenue, P. O. Box: 546, Manama, United Bank AG (Zurich)
Kingdom of Bahrain Feldeggstrasse 55, P. O. Box: 1176, 8034
Tel: 00973-1722-4030 USA Zurich, Switzerland
Fax: 00973-1722-9392 Tel: 0041 43 4991920
New York Branch Fax: 0041 43 4991933
Seef Branch 80 Broad Street, 24th Floor,
Addax Tower, Ground Floor, New York, N.Y.10004 - 2209, U.S.A. JOINT VENTURES
Road No.2806 & 2813, Block 428, Tel: 001-212-943-1275
Seef District, P. O. Box: 546, Fax: 001-212-9680557
Kingdom of Bahrain
UK
Tel: 00973-1756-0808
Fax: 00973-1758-7552
OBU - EPZ United National Bank Limited
2 Brook Street, London - W1S 1BQ, U.K.
EPZ Branch (Karachi) Tel: 0044 20 7290 8000
Muharraq Branch Fax: 0044 20 7290 3054
Export Processing Zone, Landhi Industrial
1127B, Road 10, Area 215,
Area, Mehran Highway, Landhi, Karachi
P. O. Box: 546, Muharraq,
Kingdom of Bahrain
Tel: 009221 35082301-3 OMAN
Fax: 009221 35082305
Tel: 00973-17-343488
Fax: 00973-17-344793 Oman United Exchange Co. LLC,
REPRESENTATIVE OFFICES (Muscat)
(i) Ruwi Branch
QATAR
IRAN P. O. Box: 889, Near Ruwi Police Station,
Postal Code 100, Ruwi, Muscat,
Corniche Main Branch Sultanate of Oman
Sh. Jasim Bin Jaber Al-Thani Building, Tehran Rep. Office
Tel: 00968 24794305, 24782048
Abdullah Bin Jassim Street, Unit # 1, 8th Floor, Nahid Tower, No.18,
Fax: 00968 24794344
P. O. Box: 242, Doha, Qatar Shahnazary Street, Madar Square,
Tel: 00974-4254444 Mirdamad Blvd., Tehran, Iran
Tel: 009821-22904150, 22904151 ii) Salalah Branch
Fax: 00974-4416669
Fax: 009821-22904152 P. O. Box: 2052, Postal code 211, Salalah,
Sultanate of Oman
Salwa Road Branch Tel: 00968 23290323
Salwa Road, Industrial Area, KAZAKHSTAN Fax: 00968 23290323
P. O. Box: 242, Doha, Qatar
Tel: 00974-4254464 Almaty Rep. Office iii) Sohar Branch
Fax: 00974-4506026 Suite 205, SAT Business Centre, 32A P. O. Box: 889, Postal code 100, Muscat,
Manasa Street, Bostandykski District, Sultanate of Oman
YEMEN Almaty, 050008, Republic of Kazakhstan Tel: 00968 26847021
Tel: 007-727-2378432 & 2378433 Fax: 00968 26847022
Fax: 007-727-2378432
Sana'a Branch
Dr. Mohammad Ahmed Othman Al-Absi
Building, Al-Zubairi Street, CHINA
P. O. Box: 1295, Sana'a,
Republic of Yemen Beijing Rep. Office
Tel: 009671-409947 (Dir.) & Room # 2110, The Exchange Beijing,
407540 (PABX) No.118, Jianguo Road, Chaoyang District,
Fax: 009671-408211 Beijing, 100022, Peoples Republic of
China
Hodeidah Branch Tel: 0086-10-65675560 & 65675579
Essam Al-Shami Building, Fax: 0086-10-65675560
Shahrah-e-Meena, P. O. Box: 3927,
Hodeidah, Republic of Yemen
Tel: 009673-201494 (Dir.) &
225560 (Gen.)
Fax: 009673-201153

annual report 2009 22


Shari'ah Advisor's Report

AsSalam Alaikum,

Alhamdulillah, the year 2009 was the third year of Islamic Shari'ah Audit
commercial banking for United Bank Limited. During the During the year 2009, Shari'ah Audit was carried out by the
year under review, the Bank has extended its product offering Shari'ah Audit, Compliance & Advisory department, to check
& has developed Islamic banking products and transactions the overall Shari'ah compliance of the bank's operation and
after due approval from the Shari'ah Advisory Panel/Shari'ah their adherence to the guidelines given by Shari'ah Advisor
Advisor/Shari'ah Department. and Shari'ah Advisory Panel. In the Audit, following operations
were reviewed:
Following were the major developments that took place
during the year: • Allocation of funds and Pool Management System

1. Product Development: During the year the Product • Weightages & profit sharing ratios
Development Department of the bank has developed
various Shari’ah compliant products and services including • Standard Agreements for Murabaha & Ijarah
Monthly Profit Ameen Certificate of Islamic Investment,
Ameen Visa Debit Card, Western Union and Shipping • Declarations, description of Assets, relevant purchase
Guarantee/Airway bill endorsement Product. invoices, sequence & order of the documents, and time
difference between purchases & declaration in Murabaha
2. Training: During the year training sessions & courses
were organized inclusive of orientations, and specialized • Treatment of ownership related cost & recovery of rentals
workshops that mainly aimed at enhancing the level of in Ijarah transactions
understanding of the Islamic Banking concepts and
products. Staff members were also nominated for various • Investment made in Sukuk & Syndicated Financing with
external training programs. reference to sukuk evaluation criteria as developed by
the Shari'ah Audit & Compliance Department
3. Information Technology: During the year IT department
has successfully migrated core banking solution for • Import Finance transactions and related documentation
Islamic banking operations in all UBL Ameen branches
and windows, thus enabling Ameen to connect with over • Other related documents and procedures followed by
900 online UBL branches across Pakistan. This will not different functional areas.
only enhance the brand image but will also increase the
Islamic Banking outreach. Charity
During the year total charity amounting to PKR 6.629 Million
Review of Assets was transferred to the Charity Account, and an amount of
The Bank's major financing activities during the year were PKR 5.506 million was disbursed after the approval of the
made in Murabaha, Ijarah & Diminishing Musharakah. Ijarah Shari’ah Advisor.
transactions constitute 44.63% of the total financing portfolio
while the percentage of Diminishing Musharakah/Musharakah Recommendation:
& Murabaha was 41.95% & 13.42% respectively. The Bank's Based on the review of various transactions we recommend
total financing portfolio reached PKR 1,152.52 million as of that:
December 31, 2009 compared to PKR 1,211.83 million in
December 2008. • The growth of the Islamic banking division entails the
importance of employees training related to the Islamic
Review of Liabilities banking products and services offered by the bank. More
On the liability side, the Bank offered different Shari’ah focus should be shifted towards proper training of staff,
Compliant deposit products based on the mode of Mudaraba
& Qard. The total deposits of the Bank reached to • The Bank should focus more on development and
PKR 2,208.418 million as at December 31, 2009 compared execution of customer awareness programs in the form
to PKR 1,992.257 million last year, showing a growth of of seminars and workshops regarding Islamic Banking
10.85%. We have not found anything that is contradictory and its products,
to the dictates of Shari'ah.

23 United Bank Limited


• The Corporate and Commercial Banking Departments
of the Bank should establish a system for executing
recommended process flow, physical checking and
verification of the goods in Murabaha & Ijarah transactions.

Conclusion
It is the responsibility of the Bank's management & employees
to ensure application of Shari'ah principles and guidelines
issued by the Shari'ah Advisory Panel and Shari'ah Advisor
from time to time and to ensure Shari'ah compliance in all
activities of the Islamic Banking Division.

Based on the review and management representations, in


our opinion the activities and transactions performed by the
Islamic banking division during the year comply with the
Principles and Guidelines of Islamic Jurisprudence, issued
and directed by the Shari'ah Advisory Panel and Shari'ah
Advisor of United Bank Limited.

And Allah Knows the Best.

___________________________
Mufti Ehsan Waquar Ahmad
Shari'ah Advisor

annual report 2009 24


Statement of Compliance with
the Code of Corporate Governance
Year ended December 31, 2009

This statement is being presented to comply with the Code 8. The meetings of the Board were presided over by the
of Corporate Governance (The Code)contained in the Chairman and, in his absence, by the Deputy Chairman
Regulation No. 37, XIII & 36 of Listing Regulations of Karachi, and in absence of Deputy Chairman by any other director.
Lahore & Islamabad Stock Exchanges for the purpose of The Board met at least once in every quarter. Written
establishing a framework of good governance, whereby a notices of the Board meeting, along with agenda and
listed company is managed in compliance with the best working papers, were circulated at least seven days
practices of corporate governance. before the meetings. The minutes of the meetings were
appropriately recorded and circulated. The Company
The Board of Directors has adopted the Code of Corporate Secretary and Chief Financial Officer attended the
Governance and applied the principles contained in the meetings of the Board of Directors.
Code in the following manner:
9. The appointments of Chief Financial Officer, Company
1. Except for the Chief Executive Officer, all other directors, Secretary and Head of Internal Audit including their
including Chairman and Deputy Chairman are non- remuneration and terms of employment have been
executive directors. approved by the Board.

2. The directors have confirmed that none of them is serving 10. As per the amendments in sub-clause (xiv) of Clause
as a director in more than ten listed companies, including 35 titled 'Orientation Courses' under Chapter XI,
this Bank. captioned 'Code of Corporate Governance' of Listing
Regulations, at least one director of the Bank is required
3. All the resident directors of the Bank are registered as to obtain certification under “The Board Development
taxpayers and none of them has defaulted in payment Series” program offered by the Pakistan Institute of
of any loan to a banking company, a DFI or an NBFI or, Corporate Governance by June 30, 2011 as mandated
being a member of a stock exchange, has been declared by the regulations.
as a defaulter by that stock exchange.
11. The directors' report for this year has been prepared in
4. During the year there was a casual vacancy on the compliance with the requirements of the Code and fully
Board of Directors which was filled by Mr. Amin Uddin describes the salient matters required to be disclosed.
who was appointed by the Board of Directors with effect
from March 5, 2009 and the Board of Directors in its 12. The financial statements of the Bank were duly endorsed
meeting held on 26 October 2009 have appointed by the Chief Executive Officer and Chief Financial Officer
Mr. Arshad Ahmad Mir as an Independent Director on before approval of the Board.
Board to meet the State Bank of Pakistan requirements
that at least 25% of the Board should constitute of 13. The directors, Chief Executive Officer and executives
independent directors.. do not hold any interest in the shares of the Bank other
than those disclosed in pattern of shareholding.
5. During the year 2009, the Board of Directors approved
and signed “Statement of Ethics and Business Practices” 14. The Bank has complied with all the corporate and
and obtaining the signature of employees is under financial reporting requirements.
process.
15. The Board has formed an audit committee. It comprises
6. The Board has developed a vision / mission statement, three members, all of whom are non-executive directors
overall corporate strategy and significant policies of the including the Chairman of the Committee.
Bank. A set of significant policies are maintained by the
Bank. 16. The meetings of the audit committee are held at least
once every quarter prior to approval of interim and final
7. All the powers of the Board have been duly exercised results of the Bank, as required by the Code. The terms
and decision on material transactions, including of reference of the committee have been formulated
appointment and determination of remuneration and and advised to the committee for compliance.
terms and conditions of employment of the Chief
Executive Officer have been taken by the Board.

25 United Bank Limited


17. The Board has set up an effective internal audit function.
Personnel of the Internal Audit Department are suitably
qualified and experienced for the purpose and are
conversant with the policies and procedures of the Bank
and they are involved in the internal audit function on
a full time basis.

18. The statutory auditors of the Bank have confirmed that


they have been given a satisfactory rating under the
Quality Control Review Program of The Institute of
Chartered Accountants of Pakistan, that they or any of
the partners of the firm, their spouses and minor children
do not hold shares of the Bank and that the firm and all
its partners are in compliance with International
Federation of Accountants (IFAC) guidelines on Code
of Ethics as adopted by the Institute of Chartered
Accountants of Pakistan.

19. The statutory auditors or the persons associated with


them have not been appointed to provide services other
than approved services and the auditors have confirmed
that they have observed IFAC guidelines in this regard.

20. We confirm that all other material principles contained


in the Code have been complied with.

For and on behalf of the Board of Directors

Nahayan Mabarak Al Nahayan


Chairman
Abu Dhabi
Date: 01 March 2010

annual report 2009 26


BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
2nd Floor, Block C Progressive Plaza
Lakson Square Building No.1 Beaumont Road
Sarwar Shaheed Road PO Box 15541
Karachi 74200 Karachi 75530

Review Report to the Members


on Statement of Compliance with Best Practices of
Code of Corporate Governance

We have reviewed the Statement of Compliance with the risks and controls, or to form an opinion on the effectiveness
best practices (the Statement) contained in the Code of of such internal controls, the Bank's corporate governance
Corporate Governance (the Code) for the year ended procedures and risks.
December 31, 2009 prepared by the Board of Directors of
United Bank Limited (the Bank) to comply with Regulation Further, the Listing Regulations require the Bank to place
G-1 of the Prudential Regulations for corporate / Commercial before the Board of Directors for their consideration and
Banking issued by the State Bank of Pakistan, Listing approval, related party transactions distinguishing between
Regulation No. 35 (Chapter XI) of the Karachi Stock Exchange transactions carried out on terms equivalent to those that
(Guarantee) Limited, Lahore Stock Exchange (Guarantee) prevail in arm's length transactions and transactions which
Limited and Islamabad Stock Exchange (Guarantee) Limited, are not executed at arm's length price recording proper
where the Bank is listed. justification for using such alternate pricing mechanism.
Further, all such transactions are also required to be
The responsibility for compliance with the Code is that of separately placed before the Audit Committee. We are only
the Board of Directors of the Bank. Our responsibility is to required and have ensured compliance of requirement to
review, to the extent where such compliance can be the extent of approval of related party transactions by the
objectively verified, whether the Statement reflects the status Board of Directors and placement of such transactions before
of the Bank's compliance with the provisions of the Code the Audit Committee. We have not carried out any procedures
and report if it does not. A review is limited primarily to to determine whether the related party transactions were
inquiries of the Bank's personnel and review of various taken at arm's length price or not.
documents prepared by the Bank to comply with the Code.
Based on our review nothing has come to our attention which
As part of our audit of the financial statements we are required causes us to believe that the Statement does not appropriately
to obtain an understanding of the accounting and internal reflect the Bank's compliance, in all material respects, with
control systems sufficient to plan the audit and develop an the best practices contained in the Code as applicable to
effective audit approach. We are not required to consider the Bank for the year ended December 31, 2009.
whether the Board's statement on internal control covers all

BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Audit Engagement Partner Audit Engagement Partner
Zulfiqar Ali Causer Shabbir Yunus

Karachi
Date : March 01, 2010

27 United Bank Limited


Annual Statement on Internal Controls - 2009
Internal Control system comprises of various inter-related All significant and material findings of the internal audit
components including Control Environment, Risk Assessment, reviews and audit reports of external auditors and regulators
Control Activities, Information & Communication and were reported to the Board Audit Committee, who actively
Monitoring. Control Environment is the foundation for the monitored implementation and rectification to ensure that
other components of internal control, providing discipline identified risks have been mitigated by the management to
and structure. safeguard bank's interest.

It is the responsibility of Bank's management to establish Business Process Reengineering / Centralization &
Internal Control System to maintain an adequate and effective Automation project PROXIMA is well underway. Most of its
Internal Control Environment. It's a process designed to initiatives have been implemented whereas country wide
identify and mitigate the risk of failure to achieve overall roll out of some is in process and centralization is helping
business objectives of the Bank. Internal controls and policies in strengthening the control environment.
are designed to provide reasonable assurance regarding
effectiveness and efficiency of the operation, reliability of Bank endeavors to follow the guidelines on Internal Controls.
financial information and compliance with applicable laws Testing of effectiveness of Internal Control Systems over
and regulations. Financial Reporting (ICFR) prevalent throughout the Bank
was carried out during the second half of the year. However,
Management ensures efficient and effective Internal Control none of the deficiencies identified had material impact on
System by carrying out risk assessment, identifying control, the reporting of Financial Statements.
reviewing pertinent policies/procedures, establishing relevant
control procedures and monitoring system. Bank's Internal Control System has been designed to provide
reasonable assurance to the bank's management and Board
Evaluation of Directors, however these systems may not entirely eliminate
Internal Audit Group continued to evaluate the implementation the risk of misreporting and failure of certain controls under
& efficacy of internal controls throughout the year. changing environment. Based upon the results achieved
from reviews and audits conducted during the year,
Compliance & Control Assurance Group also continued their management considers that the existing Control System is
review activities at the branch level at their defined adequate and has been effectively implemented and
frequencies. monitored, though room for improvement always exists.

Control deficiencies and weaknesses in the system identified


and reported by Internal & External auditors & Regulators
were reviewed regularly and necessary steps were taken to
correct the shortcoming and efforts were pooled in to curb
repetition.

M. Ejazuddin Atif R. Bokhari


Group Executive - Audit & Inspection President

annual report 2009 28


Financial Statements
BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
2nd Floor, Block C Progressive Plaza
Lakson Square Building No. 1 Beaumont Road
Sarwar Shaheed Road PO Box 15541
Karachi 74200 Karachi 75530

Auditors' Report to the Members


We have audited the annexed consolidated financial assurance about whether the above said statements are
statements comprising consolidated balance sheet of United free from any material misstatement. An audit includes
Bank Limited (the Bank) as at December 31, 2009 and the examining, on a test basis, evidence supporting the amounts
related consolidated profit and loss account, consolidated and disclosures in the above said statements. An audit also
statement of comprehensive income, consolidated cash flow includes assessing the accounting policies and significant
statement and consolidated statement of changes in equity estimates made by the management, as well as, evaluating
together with the notes forming part thereof, for the year the overall presentation of the above said statements. We
then ended. These financial statements include unaudited believe that our audit provides a reasonable basis for our
certified returns from the branches, except for forty eight opinion.
branches which have been audited by us and 17 branches
audited by auditors abroad. We have also expressed separate In our opinion, the consolidated financial statements present
opinion on the financial statements of United Bank Limited. fairly the financial position of the Bank and its subsidiary
The financial statements of United Executors and Trustees companies as at December 31, 2009 and the results of their
Company Limited and UBL Fund Managers Limited were operations, their cash flows and changes in equity for the
audited by BDO Ebrahim & Co., Chartered Accountants year then ended in accordance with approved accounting
while the financial statements of the remaining subsidiary standards as applicable in Pakistan.
companies were audited by other firms of auditors, whose
reports have been furnished to us and our opinion in so far The financial statements of the Bank for the year ended
as it relates to the amounts included for such companies, December 31, 2008 were audited by KPMG Taseer Hadi
is based solely on the report of such auditors. and Co., Chartered Accountants and Ernst & Young Ford
Rhodes Sidat Hyder, Chartered Accountants who had
These financial statements are responsibility of the Bank's expressed an unqualified opinion thereon vide their report
management. Our responsibility is to express our opinion dated March 12, 2009.
on these financial statements based on our audit.

We conducted our audit in accordance with the auditing


standards as applicable in Pakistan. These standards require
that we plan and perform the audit to obtain reasonable

BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Audit Engagement Partner Audit Engagement Partner
Zulfiqar Ali Causer Shabbir Yunus

Karachi
Date : March 01, 2010

annual report 2009 30


Consolidated Balance Sheet
As at December 31, 2009

Note 2009 2008


(Rupees in '000)

ASSETS
Cash and balances with treasury banks 6 61,252,772 50,143,570
Balances with other banks 7 14,049,990 14,540,306
Lendings to financial institutions 8 23,162,130 22,805,341
Investments 9 137,734,578 115,057,090
Advances
Performing 10 349,715,209 367,960,027
Non-performing - net of provision 10 12,364,387 9,985,339
362,079,596 377,945,366
Operating fixed assets 11 23,734,082 19,926,915
Deferred tax asset - net 12 649,814 2,164,148
Other assets 13 17,786,567 18,124,653
640,449,529 620,707,389

LIABILITIES
Bills payable 15 5,166,361 5,210,870
Borrowings 16 37,168,277 44,749,690
Deposits and other accounts 17 503,831,672 492,267,898
Sub-ordinated loans - unsecured 18 11,989,800 11,993,848
Liabilities against assets subject to finance lease 19 611 1,978
Deferred tax liability - net 12 - -
Other liabilities 20 14,974,445 17,087,441
573,131,166 571,311,725
NET ASSETS 67,318,363 49,395,664

REPRESENTED BY:
Share capital 21 11,128,907 10,117,188
Reserves 21,167,954 17,256,061
Unappropriated profit 23,617,875 17,703,327
Total equity attributable to the equity holders of the Bank 55,914,736 45,076,576
Minority Interest 2,279,691 2,044,589
58,194,427 47,121,165
Surplus on revaluation of assets - net of deferred tax 22 9,123,936 2,274,499
67,318,363 49,395,664

CONTINGENCIES AND COMMITMENTS 23

The annexed notes from 1 to 48 and annexures form an integral part of these consolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

31 United Bank Limited


Consolidated Profit And Loss Account
For the Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)

Mark-up / return / interest earned 25 61,495,472 52,763,249


Mark-up / return / interest expensed 26 28,323,272 24,247,281
Net mark-up / interest income 33,172,200 28,515,968

Provision against loans and advances - net 10.5 9,644,927 4,514,548


Provision against lendings to financial institutions 8 560,852 -
Provision for diminution in value of investments - net 9.3 1,187,460 1,871,587
Bad debts written off directly 10.6 1,485,976 1,367,553
12,879,215 7,753,688
Net mark-up / return / interest income after provisions 20,292,985 20,762,280

Non Mark-up / Interest Income


Fee, commission and brokerage income 6,736,356 7,242,892
Dividend income 214,727 191,376
Income from dealing in foreign currencies 1,275,914 1,656,939
Gain on sale of securities 27 699,275 201,176
Unrealized loss on revaluation of investments classified as
held for trading 9.4 (2,582) (10,682)
Other income 28 3,396,800 1,917,451
Total non mark-up / return / interest income 12,320,490 11,199,152
32,613,475 31,961,432
Non Mark-up / Interest Expenses
Administrative expenses 29 17,803,338 16,679,968
Other provisions / write offs - net 30 642,274 468,042
Workers' welfare fund 31 401,073 340,548
Other charges 32 64,552 292,377
Total non mark-up / interest expenses 18,911,237 17,780,935
Share of income / (loss) of associates 689,943 (128,446)
Profit before taxation 14,392,181 14,052,051

Taxation - Current 33 6,996,257 6,151,520


- Prior year 33 78,710 435,072
- Deferred 33 (2,170,738) (979,792)
4,904,229 5,606,800
Profit after taxation 9,487,952 8,445,251

Attributable to:
Equity shareholders of the Bank 9,521,546 8,355,757
Minority Interest (33,594) 89,494
9,487,952 8,445,251
(Rupees)
Earnings per share - basic and diluted 34 8.56 7.51

The annexed notes from 1 to 48 and annexures form an integral part of these consolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

annual report 2009 32


Consolidated Statement Of Comprehensive Income
For the Year Ended December 31, 2009

2009 2008
(Rupees in '000)

Profit for the year attributable to:


Equity shareholders of the Bank 9,521,546 8,355,757
Minority Interest (33,594) 89,494
9,487,952 8,445,251
Other comprehensive income:
Exchange differences on translation of net investment in
foreign branches and subsidiaries
- Equity shareholders of the Bank 2,003,138 4,288,728
- Minority Interest 351,725 (105,325)
Net gain / (loss) on cash flow hedges 108,028 (425,589)
Related deferred tax (liability) / asset on cash flow hedges (37,810) 148,956
2,425,081 3,906,770

Comprehensive income transferred to equity - net of tax 11,913,033 12,352,021

Surplus arising on revaluation of assets has been reported in accordance with the requirements of the Companies Ordinance,
1984 and the directives of the State Bank of Pakistan in a separate account below equity.

The annexed notes from 1 to 48 and annexures form an integral part of these consolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

33 United Bank Limited


Consolidated Cash Flow Statement
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 14,392,181 14,052,051
Less: Dividend income (214,727) (191,376)
Add / (Less): Share of (profit) / loss of associates (689,943) 128,446
13,487,511 13,989,121
Adjustments:
Depreciation 1,539,028 1,291,079
Amortization 185,985 156,997
Workers’ welfare fund 401,073 340,548
Provision for retirement benefits 605,672 59,009
Provision against loans and advances 9,644,927 4,514,548
Provision against lendings to financial institutions 560,852 -
Provision for diminution in value of investments 1,187,460 1,871,589
Reversal of provision in respect of investments disposed off during the year (1,208,711) -
Provision against off- balance sheet items 20,250 42,966
Gain on sale of fixed assets (31,829) (14,298)
Bad debts written-off directly 1,485,976 1,367,553
Unrealized loss on revaluation of investments classified as held for trading 2,582 10,682
Finance charges on leased assets 110 283
Provision against other assets 622,024 196,026
15,015,399 9,836,982
28,502,910 23,826,103
Decrease / (increase) in operating assets
Lendings to financial institutions (917,641) 1,976,382
Held-for-trading securities 526,935 (4,383,394)
Advances 4,734,867 (75,904,785)
Other assets (excluding advance taxation) 2,395,082 (5,620,707)
6,739,244 (83,932,504)
(Decrease) / increase in operating liabilities
Bills payable (44,509) (876,396)
Borrowings (7,581,413) (14,741,563)
Deposits and other accounts 11,563,774 80,792,770
Other liabilities (excluding current taxation) (1,902,164) 3,439,069
2,035,687 68,613,880
37,277,842 8,507,479
Staff retirement benefits paid (783,198) (231,466)
Income taxes paid (9,719,771) (7,250,980)
Net cash flow from operating activities 26,774,872 1,025,033

CASH FLOW FROM INVESTING ACTIVITIES


Net investment in securities (16,446,722) (8,264,808)
Dividend income received 457,237 188,251
Investments in operating fixed assets (1,595,660) (3,185,598)
Sale proceeds from disposal of property and equipment 174,458 138,396
Net cash flow on investing activities (17,410,687) (11,123,759)

CASH FLOW FROM FINANCING ACTIVITIES


Receipt of sub-ordinated loan - 6,000,000
Repayments of principal of sub-ordinated loans (4,048) (2,848)
Payments in respect of lease obligations (1,367) (1,566)
Dividends paid (1,094,748) (3,945,703)
Net cash (used in) / flow from financing activities (1,100,163) 2,049,883
Exchange adjustment on translation of net assets attributable to minority shareholders 351,725 (160,545)
Exchange differences on translation of net investment in foreign branches and subsidiaries 2,003,138 4,288,728

Increase in cash and cash equivalents 10,618,885 (3,920,660)

Cash and cash equivalents at beginning of the year 64,683,876 68,604,536

Cash and cash equivalents at end of the year 35 75,302,762 64,683,876

The annexed notes from 1 to 48 and annexures form an integral part of these consolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

annual report 2009 34


Consolidated Statement Of Changes In Equity
For The Year Ended December 31, 2009

Attributable to ordinary shareholders of the Bank


Capital reserves
Cash flow Unappro- Minority
Share General Exchange Reserve hedge priated Sub interest Total
capital reserve Statutory translation for issue reserve total
reserve profit
reserve ofshares
bonus

(Rupees in ‘000)
Balance as at December 31, 2007 8,093,750 3,000 8,716,409 2,857,933 - - 16,728,318 36,399,410 2,115,644 38,515,054

Final dividend for the year ended December 31, 2007


declared subsequent to the year end at Rs. 3.00 per share - - - - - - (2,428,125) (2,428,125) - (2,428,125)

Changes in equity for 2008

Interim cash dividend for the half year ended


June 30, 2008 declared end at Rs. 1.5 per share - - - - - - (1,517,578) (1,517,578) - (1,517,578)

Transfer to reserves for issue of bonus shares - - - - 2,023,438 - (2,023,438) - - -

Issue of bonus shares 2,023,438 - - - (2,023,438) - - - - -

Profit after taxation for the year ended


December 31, 2008 - - - - - - 8,355,757 8,355,757 89,494 8,445,251

Transfer from surplus on revaluation of fixed assets


to unappropriated profit - net of tax - - - - - - 255,017 255,017 - 255,017

Other comprehensive income - net of tax - - - 4,288,728 - (276,633) - 4,012,095 (105,325) 3,906,770

Preferred dividend relating to minority shareholders - - - - - - - - (55,224) (55,224)

Transfer to statutory reserve - - 1,666,624 - - - (1,666,624) - - -

Balance as at December 31, 2008 10,117,188 3,000 10,383,033 7,146,661 - (276,633) 17,703,327 45,076,576 2,044,589 47,121,165

Final dividend for the year ended December 31, 2008


declared subsequent to year end at Rs.1.00 per share - - - - - - (1,011,719) (1,011,719) - (1,011,719)

Changes in equity for 2009

Transfer to reserves for issue of bonus shares - - - - 1,011,719 - (1,011,719) - - -

Issue of bonus shares 1,011,719 - - - (1,011,719) - - - - -

Profit after taxation for the year ended


December 31, 2009 - - - - - - 9,521,546 9,521,546 (33,594) 9,487,952

Transfer from surplus on revaluation of fixed assets


to unappropriated profit - net of tax - - - - - - 254,977 254,977 - 254,977

Other comprehensive income - net of tax - - - 2,003,138 - 70,218 - 2,073,356 351,725 2,425,081

Ordinary dividend relating to minority shareholders - - - - - - - - (27,510) (27,510)

Preferred dividend relating to minority shareholders - - - - - - - - (55,519) (55,519)

Transfer to statutory reserve - - 1,838,537 - - - (1,838,537) - - -

Balance as at December 31, 2009 11,128,907 3,000 12,221,570 9,149,799 - (206,415) 23,617,875 55,914,736 2,279,691 58,194,427

Appropriations made by the Directors subsequent to the year ended December 31, 2009 are disclosed in note 46 of these consolidated financial statements.

The annexed notes from 1 to 48 and annexures form an integral part of these consolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

35 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

1. STATUS AND NATURE OF BUSINESS

The "Group" consists of:

- Holding Company

United Bank Limited, Pakistan (the Bank)

United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial
banking and related services. The Bank's registered office and principal office are situated at UBL building, Jinnah
Avenue, Blue Area, Islamabad and at State Life Building No. 1, I. I. Chundrigar Road, Karachi respectively. The
Bank operates 1,120 (2008: 1,119) branches including 05 (2008: 05) Islamic banking branches, 01 (2008: 01)
branch in Karachi Export Processing Zone (KEPZ) and 17 (2008: 17) branches outside Pakistan.

The Bank's Ordinary shares are listed on all three stock exchanges in Pakistan where as its Global Depository
Receipts (GDRs) are on the list of UK Listing Authority and London Stock Exchange Professional Securities Market.
These GDRs are also eligible for trading on the International Order Book System of the London Stock Exchange.
Further, the GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule
144A under the US Securities Act of 1933 and an offering outside the United States in reliance on Regulation S.

Subsidiary Companies

The Group is engaged in carrying out the following business activities:

- United National Bank Limited (UNBL), United Kingdom - 55 percent holding

UNBL is an authorised banking institution incorporated in the United Kingdom (UK) and regulated by the Financial
Services Authority (FSA). The Company was formed in 2001 from the merger of the UK branches of United Bank
Limited and National Bank Limited. The principal activities of the Company are to provide retail banking products
through its branch network in major cities of UK, wholesale banking and treasury services to financial institutions
and trade finance facilities to businesses of all sizes.

- United Bank AG Zurich, Switzerland - 100 percent holding

The United Bank AG (Zurich) is a commercial bank owned by United Bank Limited, Karachi. Founded in 1967,
its main activities are in credit operations and the related trade financing. In doing so, it supports its international
clientele in their import and export business with Pakistan, the rest of the sub-continent and the Gulf States.

- United Executors and Trustees Company Limited, Pakistan - 100 percent holding

United Executors and Trustees Company Limited ("the Company") was incorporated in Pakistan in 1965 as an
unlisted public limited Company. The Company is engaged in the business of trusteeship. The registered office
of the Company is situated at State Life Insurance Building No. 1, I.I. Chundrigar Road, Karachi. The Company
is a wholly owned subsidiary of United Bank Limited. Currently, the Company is engaged in the business of
investments in listed securities.

annual report 2009 36


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

- UBL Fund Managers Limited, Pakistan - 100 percent holding

UBL Fund Managers Limited was incorporated as a public limited company in Pakistan under the Companies
Ordinance, 1984 on April 03, 2001. The Company is licensed to carry out Asset Management and Investment
Advisory Services under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and
the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations). The principal
activities of the Company are floating and managing mutual funds and to provide investment advisory services. The
registered office of the Company is situated at 8th Floor, State Life Building No. 1, I. I. Chundrigar Road, Karachi.

2. BASIS OF PRESENTATION

In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic
modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related
modes of financing include purchase of goods by banks from their customers and immediate resale to them at
appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements
are not reflected in these consolidated financial statements as such but are restricted to the amount of facility actually
utilized and the appropriate portion of mark-up thereon. However, the Islamic Banking branches of the Group have
complied with the requirements set out under the Islamic Financial Accounting Standards issued by the Institute of
Chartered Accountants of Pakistan and notified under the provisions of the Companies Ordinance, 1984.

The financial results of the Islamic banking branches of the Bank have been consolidated in these financial statements
for reporting purposes, after eliminating intra branch transactions / balances. Key financial figures of the Islamic
banking branches are disclosed in note 45 to these consolidated financial statements.

3. STATEMENT OF COMPLIANCE

3.1 These consolidated financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS)
issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984,
the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by
the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP). Wherever the
requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the
SECP and the SBP differ with the requirements of IFRS or IFAS, the requirements of the Companies Ordinance, 1984,
Banking Companies Ordinance, 1962 or the requirements of the said directives prevail.

3.2 The SBP vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting
Standard 39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard
40, Investment Property (IAS 40) for banking companies till further instructions. Further, according to the notification
of SECP dated April 28, 2008, the IFRS - 7 "Financial Instruments: Disclosures" has not been made applicable for
banks. Accordingly, the requirements of these standards have not been considered in the preparation of these
consolidated financial statements. However, investments have been classified and valued in accordance with the
requirements of various circulars issued by SBP.

37 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

3.3 STANDARDS, AMENDMENTS AND INTERPRETATION NOT YET EFFECTIVE

The following revised standards, amendments and interpretations with respect to the approved accounting standards
as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or
interpretation:

Effective date (Accounting


Standard or Interpretation periods beginning on or after)

IAS 24 - Related Party Disclosures (Revised) January 01, 2011

IAS 32 - Financial Instruments: Presentation -


Classification of Rights Issues (Amendment) February 01, 2010

IFRS 2 – Share-based Payments: Amendments relating to Group


Cash-settled Share-based Payment Transactions January 01, 2010

IFRS 3 – Business Combinations (Revised) July 01, 2009

IAS - 27 Consolidated and Separate Financial


Statements (Amendment) July 01, 2009

IFRIC 14 - The Limit on Defined Benefit Assets, Minimum Funding


Requirements and their Interaction (Amendments) January 01, 2011

IFRIC 15 – Agreement for the construction of real estate October 01, 2009

IFRIC 17 – Distributions of Non-cash Assets to owners July 01, 2009

IFRIC 19 - Extinguishing Financial Liabilities with


Equity Instruments July 01, 2010

The Group considers that the above standards and interpretations are either not relevant or will have no material
impact on its financial statements in the period of initial application other than to the extent of certain changes or
enhancements in the presentation and disclosures in the financial statements to the extent that such presentation
and disclosure requirements do not conflict with the format of financial statements prescribed by the SBP for banks.

In addition to the above, amendments to various accounting standards have also been issued by the IASB as a result
of its improvement project in April 2009. Such improvements are generally effective for accounting periods beginning
on or after January 01, 2010. The Group expects that such improvements to the standards will not have any material
impact on the Group's financial statements in the period of initial application.

4. BASIS OF MEASUREMENT

4.1 Accounting convention

These consolidated financial statements have been prepared under the historical cost convention except that certain
assets have been stated at revalued amounts, certain investments have been stated at fair value and derivative
financial instruments are measured at fair value.

annual report 2009 38


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

4.2 Critical accounting estimates and judgements

The preparation of these consolidated financial statements in conformity with approved accounting standards requires
management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities
and income and expenses. It also requires management to exercise judgement in application of its accounting policies.
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects
only that period, or in the period of revision and future periods if the revision affects both current and future periods.

Significant accounting estimates and areas where judgements were made by the management in the application of
accounting policies are as follows:

i) classification of investments (notes 5.5 and 9)


ii) provision against investments (notes 5.5 and 9.3) and advances (notes 5.6, 10.5)
iii) income taxes (notes 5.9 and 33)
iv) staff retirement benefits (notes 5.11 and 37)
v) fair value of derivatives (notes 5.16 and 20.4)
vi) operating fixed assets, depreciation and amortization (notes 5.7 and 11)
vii) impairment (note 5.8)

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1 Basis of consolidation

- The consolidated financial statements include the financial statements of UBL - Holding Company and its subsidiary
companies - "the Group".

- Subsidiary companies are fully consolidated from the date on which more than 50% of voting rights are transferred
to the Group or power to control the company is established and are excluded from consolidation from the date
of disposal or when the control is lost.

- The financial statements of subsidiaries are prepared for same reporting period as the holding company using
consistent accounting policies.

- The assets and liabilities of subsidiary companies have been consolidated on a line by line basis and the carrying
value of investments held by the Bank is eliminated against the subsidiaries' share capital and pre acquisition
reserves in the consolidated financial statements.

- Minority interest represents that part of the net results of operations and of net assets of subsidiary companies
attributable to interests which is not owned by the Group.

- All material intra-group balances and transactions have been eliminated in full.

5.2 Change in accounting policy and disclosure

The accounting policies adopted in the preparation of these consolidated financial statements are consistent with
those followed in the preparation of previous financial year except for the following:

- IAS-1 Presentation of Financial Statements (Revised) effective January 01, 2009

The revised standard separates owner and non-owner changes in equity. The statement of changes in equity
includes only details of transactions with owners, with non-owner changes in equity presented as a single line.
In addition, the standard introduces the statement of comprehensive income: it presents all items of recognised
income and expense, either in one single statement, or in two linked statements. The Group has elected to present
two statements, an income statement and a statement of comprehensive income, rather than a single statement
of comprehensive income combining the two elements.

Further, surplus arising on revaluation of assets has been reported in accordance with the requirements of the
Companies Ordinance, 1984 and the directives of the State Bank of Pakistan in a separate account below equity.

39 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

5.3 Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement represent cash and balances with treasury banks
and balances with other banks in current and deposit accounts.

5.4 Lendings to / borrowings from financial institutions

The Group enters into repo and reverse repo transactions at contracted rates for a specified period of time. These
are recorded as under:

5.4.1 Sale under repurchase agreements

Securities sold subject to a re-purchase agreement (repo) are retained in the consolidated financial statements as
investments and the counter party liability is included in borrowings from financial institutions. The differential in sale
and re-purchase value is accrued over the period of the agreement and recorded as an expense.

5.4.2 Purchase under resale agreements

Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The
differential between the contracted price and resale price is amortized over the period of the agreement and recorded
as income.

Securities borrowed are not recognized in the consolidated financial statements, unless these are sold to third parties,
in which case the obligation to return them is recorded at fair value as a trading liability under borrowings from financial
institutions.

5.5 Investments

The Group classifies its investments as follows:

5.5.1 Held for trading

These are securities, which are either acquired for generating a profit from short-term fluctuations in market prices,
interest rate movements, dealers margin or are securities included in a portfolio in which a pattern of short-term profit
taking exists.

5.5.2 Held to maturity

These are securities with fixed or determinable payments and fixed maturity in respect of which the Group has the
positive intent and ability to hold to maturity.

5.5.3 Available for sale

These are investments, other than those in associates, that do not fall under the held for trading or held to maturity
categories.

5.5.4 Associates

Associates are all entities over which the Group has a significant influence but not control.

Investments in associates where the Group has significant influence are accounted for using the equity method of
accounting. Under the equity method, the investment in associate is initially recognised at cost and the carrying amount
is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of
acquisition. Increase / decrease in share of profit and loss of associates is accounted for in the consolidated profit
and loss account. The Group applies equity accounting method for its investment in mutual funds managed by UBL
Fund Managers that are categorized as associates.

annual report 2009 40


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

5.5.5 Investments other than those categorized as held for trading are initially recognised at fair value which includes
transaction costs associated with the investment. Investments classified as held for trading are initially recognised
at fair value, and transaction costs are expensed in the profit and loss account.

All purchases and sales of investments that require delivery within the time frame established by regulations or market
convention are recognised at the trade date. Trade date is the date on which the Group commits to purchase or sell
the investment.

In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified as 'held
to maturity', investments in subsidiaries and investments in associates (which qualify for accounting under the
International Accounting Standard - 28), are subsequently re-measured to market value. Surplus / (deficit) arising on
revaluation of quoted securities classified as 'available for sale', is taken to a separate account shown in the balance
sheet below equity. Surplus / (deficit) arising on revaluation of quoted securities which are classified as 'held for
trading', is taken to the profit and loss account.

Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities
is calculated with reference to the net assets of the investee company as per the latest available audited financial
statements. Investments classified as 'held to maturity' are carried at amortized cost.

Provision for diminution in the values of securities (except debentures, participation term certificates and term finance
certificates) is made after considering impairment, if any, in their value. Provision for diminution in value of debentures,
participation term certificates and term finance certificates is made as per the requirements of the Prudential Regulations
issued by the State Bank of Pakistan.

Profit and loss on sale of investments is included in income currently.

5.6 Advances

Advances are stated net of specific and general provisions. Specific provision against domestic advances is determined
on the basis of Prudential Regulations and other directives issued by the State Bank of Pakistan and charged to
the profit and loss account. General provision against consumer loans is made in accordance with the requirements
of the Prudential Regulations issued by the State Bank of Pakistan. General and specific provisions pertaining to
overseas and subsidiaries advances are made in accordance with the requirements of monetary agencies and
regulatory authorities of the respective countries. Advances are written off when there is no realistic prospect of
recovery.

5.7 Operating fixed assets and depreciation

5.7.1 Owned

Property and equipment, other than freehold land which is not depreciated and capital work-in-progress, are stated
at cost or revalued amount less accumulated depreciation and accumulated impairment losses (if any). Freehold land
is carried at revalued amount less impairment losses while capital work-in-progress is stated at cost less impairment
losses. Cost of property and equipment of foreign branches and subsidiaries includes exchange difference arising
on currency translation at the year-end rates of exchange.

Depreciation is calculated so as to write off the depreciable amount of the assets over their expected economic lives
at the rates specified in note 11.2 to these consolidated financial statements. The depreciation charge for the year
is calculated after taking into account residual value, if any, and using methods depending on the nature of the asset
and the country of its location. The residual values, useful lives and depreciation methods are reviewed and adjusted,
if appropriate, at each balance sheet date.

41 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in
the month of disposal.

Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that the net
carrying amount does not differ materially from their fair value.

Surplus arising on revaluation is credited to the surplus on revaluation of fixed assets account. Deficit arising on
subsequent revaluation of fixed assets is adjusted against the balance in the above-mentioned surplus account as
allowed under the provisions of the Companies Ordinance, 1984. The surplus on revaluation of fixed assets to the
extent of incremental depreciation charged on the related assets is transferred to unappropriated profit.

Gains and losses on sale of fixed assets are included in income currently, except that the related surplus on
revaluation of fixed assets (net of deferred taxation) is transferred directly to unappropriated profit.

Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs
and maintenance are charged to the profit and loss account as and when incurred.

5.7.2 Leased (Ijarah)

Assets leased out under 'Ijarah' are stated at cost less accumulated depreciation and accumulated impairment
losses, if any. Assets under Ijarah are depreciated over the period of lease term. However, in the event the asset
is expected to be available for re-ijarah, depreciation is charged over the economic life of the asset using straight
line basis.

Ijarah income is recognised on an accrual basis as and when the rental becomes due.

5.7.3 Intangible assets

Intangible assets having a finite useful life are stated at cost less accumulated amortization and accumulated
impairment losses, if any. Intangible assets are amortized from the month, when these assets are available for use,
using the straight line method, whereby the cost of the intangible asset is amortized on the basis of the estimated
useful life over which economic benefits are expected to flow to the Group. The residual value, useful life and
amortization method is reviewed and adjusted, if appropriate, at each balance sheet date.

Intangible assets having an indefinite useful life are stated at acquisition cost. Provisions are made for impairment
in the value of assets, if any. Gains and losses on disposals, if any, are taken to the profit and loss account.

5.8 Impairment

The carrying amount of assets are reviewed at each balance sheet date for impairment whenever events or changes
in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists,
and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable
amount. The resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued
assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not
exceed the surplus on revaluation of that asset.

The 'available for sale' equity investments are impaired when there has been a significant or prolonged decline in
the fair value below its cost. The determination of what is significant or prolonged requires judgment. In making this
judgment, the Group evaluates among other factors, the normal volatility in share price. In addition the impairment
may be appropriate when there is an evidence of deterioration in the financial health of the invested industry and
sector performance, changes in technology and operational / financial cash flows.

annual report 2009 42


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

5.9 Taxation

5.9.1 Current

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws
for taxation on income earned from local as well as foreign operations, as applicable to the respective jurisdictions. The
charge for the current tax is calculated using prevailing tax rates or tax rates expected to apply to the profits for the year
at enacted rates. The charge for the current tax also includes adjustments, where considered necessary relating to prior
years, arising from assessments made during the year.

5.9.2 Deferred

Deferred tax is recognized using the balance sheet liability method on all major temporary differences between the
amounts attributed to assets and liabilities for financial reporting purposes and amounts used for taxation purposes. In
addition, the Group also records deferred tax asset on available tax losses. Deferred tax is calculated at the rates that
are expected to apply to the period when the differences are expected to reverse, based on tax rates that have been
enacted or substantively enacted by the balance sheet date.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against
which the assets can be utilized.

The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.

The Group also recognizes deferred tax asset / liability on deficit / surplus on revaluation of fixed assets, cash flow hedge
reserve and securities which is adjusted against the related deficit / surplus in accordance with the requirements of the
revised International Accounting Standard (IAS) 12 Income Taxes.

5.10 Provisions

Provisions are recognized when the Group has a legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.

5.11 Staff retirement and other benefits

5.11.1 United Bank Limited (UBL)

The Bank operates the following staff retirement schemes for its employees

a) For employees who have not opted for the new scheme introduced in 1991

- approved funded pension scheme, introduced in 1986 (defined benefit scheme); and
- approved non-contributory provident fund in lieu of the contributory provident fund.

b) For new employees and for those who opted for the new scheme introduced in 1991

- approved contributory provident fund (defined contribution scheme); and


- approved gratuity scheme (defined benefit scheme).

In the year 2001, the Bank modified the pension scheme and introduced a conversion option for employees covered
under option (a) above to option (b). This conversion option ceased on December 31, 2003.

The Bank also operates a contributory benevolent fund for all its eligible employees (defined benefit scheme).

43 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Annual contributions towards the defined benefit schemes are made on the basis of actuarial advice using the
Projected Unit Credit Method.

For defined contribution plans, the Bank pays contributions to the Fund on a periodic basis. The Bank has no further
payment obligation once the contributions have been paid. The contributions are recognised as employee benefit
expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or
a reduction on the future payments is available.

Other benefits

a) Employees' compensated absences

The Bank makes provisions for compensated vested and non-vested absences accumulated by its eligible employees
on the basis of actuarial advice under the Projected Unit Credit Method.

b) Post retirement medical benefits (defined benefit scheme)

The bank provides post retirement medical benefits to eligible retired employees. Provision is made annually to meet
the cost of such medical benefit on the basis of actuarial advice under the Projected Unit Credit Method.

c) Employee motivation and retention scheme

The Bank operates a long term motivation and retention scheme for its employees with the objective to reward,
motivate and retain its high performing executives and officers. The liability of the Bank is fixed and determined each
year based on the performance of the Bank.

Actuarial gains and losses

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess
of the greater of 10% of the value of the plan assets or 10% of the defined benefit obligation at the end of the last
reporting year are charged or credited to income over the employees' expected average remaining working lives.
These limits are calculated and applied separately for each defined benefit plan.

Actuarial gains and losses pertaining to long term compensated absences are recognised immediately.

5.11.2 United National Bank Limited (UNBL)

UNBL operates a pension scheme (defined benefit scheme) for certain staff. This scheme is closed for new members.
The assets of the scheme are held separately from those of UNBL in independently administered funds. Pension
costs are assessed in accordance with the advice of the independent qualified actuary to recognize the cost of
pensions on a systematic basis over employees' service lives.

For defined contribution schemes, the amount charged to the profit and loss account is the contribution payable in
the year. Difference between the contribution payable in the year and contributions actually paid are shown as either
accruals or prepayments in the balance sheet. The asset is recognised only if it is probable that economic benefits
will be realised in future.

annual report 2009 44


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

5.11.3 UBL Fund Managers Limited (UFML)

Defined benefit plan

UFML operates an approved gratuity fund for all employees. Annual contributions to the Fund are made on the basis
of actuarial advice using the Projected Unit Credit Method. The net cumulative actuarial gains / losses, in excess
of the higher of the following corridor limits are recognised over the expected remaining average working lives of
employees on a straight line basis:

- 10% of the present value of the define benefit obligation (before deducting plan assets); or
- 10% of the fair value of plan assets.

Defined contribution plan

UFML operates an approved provident fund for all eligible employees.

5.12 Sub-ordinated debts

Sub-ordinated debt is initially recorded at the amount of proceeds received. Mark-up accrued on these debts are
recognised separately as part of other liabilities and is charged to profit and loss account over the period on accrual
basis.

5.13 Borrowings / deposits and their cost

a) Borrowings / deposits are recorded at the proceeds received.


b) Borrowing / deposits costs are recognised as an expense in the period in which these are incurred.

5.14 Revenue Recognition

Revenue is recognised to the extent that economic benefits will flow to the Group and the revenue can be reliably
measured. The following recognition criteria must be met before revenue is recognized.

5.14.1 Advances and investments

Mark-up / return on performing advances and investments is recognized on a time proportion basis over the term
of loans and advances. Where debt securities are purchased at premium or discount, those premiums / discounts
are amortized through the profit and loss account over the remaining period of maturity.

Interest or mark-up recoverable on non-performing advances and classified investments is recognized on receipt
basis. Interest / return / mark-up on rescheduled / restructured loans and advances and investments is recognized
as permitted by the regulations of the State Bank of Pakistan or overseas regulatory authorities of countries where
the branches and subsidiaries operate, except where in the opinion of the management, it would not be prudent to
do so.

5.14.2 Dividend income

Dividend income is recognized when the right to receive the dividend is established.

5.14.3 Fee, brokerage and commission

Fee, brokerage, commission and other income are recognized on an accrual basis.

45 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

5.15 Foreign currencies

5.15.1 Functional and presentation currency

Items included in the consolidated financial statements are measured using the currency of the primary economic
environment in which the Group operates. The financial statements are presented in Pakistani Rupees, which is
the Group's functional and presentation currency.

5.15.2 Foreign currency transactions

Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction
date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange
prevailing at the balance sheet date. Forward foreign exchange contracts and foreign bills purchased are valued
at forward rates applicable to their respective maturities.

5.15.3 Foreign operations

The assets and liabilities of foreign operations and subsidiaries are translated to rupees at exchange rates prevailing
at the balance sheet date. The results of foreign operations and subsidiaries are translated at the average rate of
exchange for the year.

5.15.4 Translation gains and losses

Translation gains and losses are taken to the profit and loss account, except those arising on the translation of net
investment in foreign branches and subsidiaries which are taken to capital reserve (Exchange Translation Reserve)
until the disposal of net investment, at which time these are recognised in profit and loss account.

5.15.5 Commitments

Commitments for outstanding forward foreign exchange contracts are disclosed in the consolidated financial statements
at contracted rates. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in
foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the date of transaction.

5.16 Financial instruments

5.16.1 Financial assets and liabilities

Financial instruments carried on the balance sheet include cash and bank balances, lendings to institutions,
investments, advances, certain receivables, bills payables, borrowings from financial institutions, deposits, sub-
ordinated loan and certain other payables. The particular recognition methods adopted for significant financial assets
and financial liabilities are disclosed in the individual policy notes associated with them.

5.16.2 Derivative financial instruments

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is
entered into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative
financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any
change in the fair value of derivative financial instruments is taken to the profit and loss account.

5.16.3 Hedge accounting

The Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit
risks, including exposures arising from forecast transactions. In order to manage particular risks, the Group applies
hedge accounting for transactions which meet the specified criteria.

annual report 2009 46


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

At inception of the hedge relationship, the bank formally documents the relationship between the hedged item and
the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and
the method that will be used to assess the effectiveness of the hedging relationship.

Also at the inception of the hedge relationship, a formal assessment is undertaken to ensure the hedging instrument
is expected to be highly effective in offsetting the designated risk in the hedged item. Hedges are formally assessed
each quarter. A hedge is regarded as highly effective if the changes in fair value or cash flows attributable to the
hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%.
For situations where that hedged item is a forecast transaction, the Group assesses whether the transaction is highly
probable and presents an exposure to variations in cash flows that could ultimately affect the profit and loss account.

(a) Fair value hedges

For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised
in the profit and loss account in other income. Meanwhile, the change in the fair value of the hedged item
attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised
in the profit and loss account in other income.

(b) Cash flow hedges

For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow
hedge is recognised initially in statement of changes in equity, and recycled to the profit and loss account in the
periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the hedging
instrument is recognised in the profit and loss account immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged
item is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the profit and
loss account.

5.16.4 Off setting

Financial assets and financial liabilities are set off and the net amount is reported in the consolidated financial
statements when there is a legally enforceable right to set off and the Group intends to either settle on a net basis,
or to realize the assets and to settle the liabilities simultaneously.

5.17 Segment Reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services
(business segment), or in providing products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those of other segments.

5.17.1 Business segments

(a) Corporate finance

Corporate banking includes services provided in connection with mergers and acquisition, underwriting, privatization,
securitization, research, debts (government, high yield), equity, syndication, IPO and secondary private placements.

(b) Trading and sales

It includes fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending
and repos, brokerage debt and prime brokerage.

47 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

(c) Retail Banking

It includes retail lending and deposits, banking services, trust and estates, private lending and deposits, banking
service, trust and estates investment advice, merchant / commercial / corporate cards and private labels and retail.

(d) Commercial banking

Commercial banking includes project finance, real estate, export finance, trade finance, factoring, leasing, lending,
guarantees, bills of exchange and deposits.

(e) Asset Management

It includes discretionary and non discretionary fund management activities in the form of pooled, segregated, retail,
institutional, private equity, open, close ended funds etc.

(f) Others

It includes results of support functions of the Bank and subsidiary which cannot be classified in any of the above
segments.

5.17.2 Geographical segments

The Group operates in four geographical regions being:

- Pakistan (Including Karachi Export Processing Zone)

- United States of America

- Middle East

- Asia Pacific

- Europe

5.18 Dividend and appropriation to reserves

Dividend and appropriation to reserves, except appropriations which are required by the law after the balance sheet
date, are recognised as liability in the consolidated financial statements in the year in which these are approved.

5.19 Earnings per share

The Group presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares
outstanding during the period / year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential
ordinary shares, if any. There were no convertible dilutive potential ordinary shares in issue at December 31, 2009.

annual report 2009 48


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
6. CASH AND BALANCES WITH TREASURY BANKS

In hand
Local currency 10,744,174 9,859,989
Foreign currency 3,011,705 4,996,252
13,755,879 14,856,241
With State Bank of Pakistan in
Local currency current account 6.1 18,937,149 14,324,727
Local currency deposit account 3,864 3,864
Foreign currency current account 6.2 2,809 2,656
Foreign currency deposit account 6.3 4,487,971 4,730,090
23,431,793 19,061,337
With other central banks in foreign currency current account 6.4 15,398,540 8,035,182
With National Bank of Pakistan in local currency current account 8,609,162 8,153,544
National Prize Bonds 57,398 37,266
61,252,772 50,143,570

6.1 The local currency current account is maintained with the State Bank of Pakistan (SBP) as per the requirements of
Section 36 of the State Bank of Pakistan Act, 1956. This section requires banking companies to maintain a local
currency cash reserve in current account opened with the SBP at a sum not less than such percentage of its time and
demand liabilities in Pakistan as may be prescribed by SBP.

6.2 This represents US Dollar Settlement Account maintained with SBP.

6.3 The foreign currency cash reserve comprises of an amount equivalent to at least 5% of the bank's foreign currency
deposits which is kept in a non-remunerative account. It also includes foreign currency cash reserve maintained with
SBP equivalent to at least 15% of the bank's foreign currency deposits, the return on this account is declared by SBP
on a monthly basis as at December 31, 2009 and carries mark-up at the rate of 0% (2008: 0.90%).

6.4 Deposits with other central banks are maintained to meet the minimum cash reserves and capital requirements
pertaining to the foreign branches and subsidiaries of the Group.

Note 2009 2008


(Rupees in '000)
7. BALANCES WITH OTHER BANKS

Inside Pakistan
In current accounts 26,715 -
In deposit accounts 7.1 124,151 380,835
150,866 380,835
Outside Pakistan
In current accounts 4,766,694 6,966,789
In deposit accounts 7.1 9,132,430 7,192,682
13,899,124 14,159,471
14,049,990 14,540,306

7.1 These carry mark-up at rates ranging from 0.12% to 11.5% (2008: 3.25% to 14.00%) per annum.

49 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
8. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings 8.2 1,110,610 2,800,780


Repurchase agreement lendings 8.3 17,941,216 15,639,163
Lendings to banks / financial institutions 8.4 4,671,156 4,365,398
23,722,982 22,805,341
Provision against lendings to financial institutions 8.5 (560,852) -
23,162,130 22,805,341

8.1 Particulars of lendings to financial institutions

In local currency 21,140,954 18,618,677


In foreign currencies 2,021,176 4,186,664
23,162,130 22,805,341

8.2 These are unsecured lendings carrying mark-up at rates ranging from 11.95% to 12.65% per annum (2008: 9.50%
to 15.65% per annum) and are due to mature latest by April 2010.

8.3 Securities held as collateral against repurchase agreement lendings

2009 2008
Held by Further Total Held by Further Total
Bank given as Bank given as
collateral / collateral /
sold sold
(Rupees in '000)
Market Treasury Bills 16,691,063 990,566 17,681,629 12,596,455 - 12,596,455
Pakistan Investment
Bonds 159,587 100,000 259,587 2,192,708 850,000 3,042,708
16,850,650 1,090,566 17,941,216 14,789,163 850,000 15,639,163

These carry mark-up at rates ranging from 10.75% to 12.35% per annum (2008: 6.00% to 16.00% per annum) and
are due to mature latest by March 2010.

8.4 These carry mark-up at rates ranging from 3.00% to 15.87% per annum (2008: 15.53% to 17.77% per annum)
and are due to mature latest by February 2014, where as lending pertaining to overseas operation carry mark-
up at rates ranging from 1.03% to 3.32% per annum (2008: 1.19% to 6.02% per annum) and are due to mature
latest by August 2010.

8.5 This represents provision made against lendings to overseas financial institutions with movement as follows:

Note 2009 2008


(Rupees in '000)
Opening balance - -
Charged during the year 560,852 -
Closing balance 560,852 -

annual report 2009 50


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

9. INVESTMENTS Note 2009 2008

Held by Given as Total Held by Given as Total


9.1 Investments by types Group collateral Group collateral
(Rupees in '000)
Held for trading securities

Market Treasury Bills 3,268,035 - 3,268,035 4,202,368 - 4,202,368


Pakistan Investment Bonds 438,505 97,306 535,811 15,929 - 15,929
Units of Mutual Funds 214,865 - 214,865 - - -
Government of Pakistan - Euro Bonds 76,206 - 76,206 - - -
Sukuk Bonds 15,719 - 15,719 81,450 - 81,450
Ordinary shares of listed companies - - - 348,506 - 348,506
4,013,330 97,306 4,110,636 4,648,253 - 4,648,253
Available for sale securities
Market Treasury Bills 35,572,747 3,978,323 39,551,070 33,775,219 13,841,226 47,616,445
Pakistan Investment Bonds 16,728,759 - 16,728,759 16,777,690 428,230 17,205,920
Foreign securities 12,740,879 - 12,740,879 15,272,429 - 15,272,429
Government of Pakistan Euro Bonds 3,870,557 - 3,870,557 5,734,927 - 5,734,927
Ordinary shares of listed companies 3,644,398 - 3,644,398 5,696,150 - 5,696,150
Government of Pakistan - Sukuks 3,470,000 - 3,470,000 1,100,000 - 1,100,000
Term Finance Certificates 1,948,702 - 1,948,702 2,172,450 - 2,172,450
Ordinary shares of unlisted companies 9.7 441,824 - 441,824 441,715 - 441,715
Cumulative preference shares 197,015 - 197,015 198,029 - 198,029
Units of mutual funds 191,299 - 191,299 211,583 - 211,583
Sukuk Bonds - - - 455,276 - 455,276
78,806,180 3,978,323 82,784,503 81,835,468 14,269,456 96,104,924
Held to maturity securities
Term Finance Certificates 25,289,199 - 25,289,199 4,915,803 - 4,915,803
Market Treasury Bills 11,611,110 - 11,611,110 1,263,178 - 1,263,178
Foreign securities 4,001,718 - 4,001,718 2,270,813 - 2,270,813
Sukuk Bonds 2,640,040 - 2,640,040 1,094,372 - 1,094,372
Pakistan Investment Bonds 2,497,301 - 2,497,301 4,339,104 - 4,339,104
Government of Pakistan - Guaranteed Bonds 1,485,057 - 1,485,057 1,485,444 - 1,485,444
Government of Pakistan - Euro Bonds 922,505 - 922,505 973,454 - 973,454
Government of Pakistan - Sukuks 30,000 - 30,000 - - -
Participation Term Certificates 26,838 - 26,838 38,205 - 38,205
Debentures 4,592 - 4,592 6,676 - 6,676
CDC SAARC Fund 421 - 421 395 - 395
Certificate of deposits - - - 4,091,750 - 4,091,750
CIRC Bonds - - - 2,900,000 - 2,900,000
48,508,781 - 48,508,781 23,379,195 - 23,379,195
Associates

United Growth and Income Fund 9.9.1 5,279,234 - 5,279,234 327,193 - 327,193
UBL Liquidity Plus Fund 9.9.2 749,831 - 749,831 - - -
United Composite Islamic Fund 9.9.3 539,012 - 539,012 338,024 - 338,024
United Stock Advantage Fund 9.9.4 305,297 - 305,297 142,766 - 142,766
United Islamic Income Fund 9.9.5 249,850 - 249,850 308,700 - 308,700
UBL Participation Protected Plan 9.9.6 170,136 - 170,136 138,887 - 138,887
Oman United Exchange Company, Muscat 9.9.7 71,399 - 71,399 72,307 - 72,307
UBL Insurers Limited 9.9.8 67,583 - 67,583 52,154 - 52,154
United Capital Protected Fund - I 9.9.9 90,299 - 90,299 75,500 - 75,500
United Money Market Fund 9.9.10 - - - 1,450,300 - 1,450,300
7,522,641 - 7,522,641 2,905,831 - 2,905,831
138,850,932 4,075,629 142,926,561 112,768,747 14,269,456 127,038,203
Provision for diminution in value of investments
including associate 9.3 (2,146,794) - (2,146,794) (2,188,792) - (2,188,792)
Investments (net of provisions) 136,704,138 4,075,629 140,779,767 110,579,955 14,269,456 124,849,411

Surplus / (deficit) on revaluation of available for


sale securities 22.2 (3,045,011) 2,404 (3,042,607) (9,671,910) (109,728) (9,781,638)
Deficit on revaluation of held for trading securities 9.4 (1,862) (720) (2,582) (10,682) - (10,682)
Total investments 133,657,265 4,077,313 137,734,578 100,897,363 14,159,728 115,057,090

51 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
9.2 Investments by segments

Federal Government Securities


Market Treasury Bills 48,577,758 51,818,813
Pakistan Investment Bonds 19,761,871 21,560,953
Government of Pakistan - Sukuk 3,500,000 1,100,000
Government of Pakistan - Euro Bonds 4,869,268 6,708,381
Government of Pakistan - Guaranteed Bonds 1,485,057 4,385,444
78,193,954 85,573,591
Foreign Securities
Government securities 11,381,356 5,197,561
CDC SAARC Fund 421 395
Other securities 11,213,698 17,604,286
22,595,475 22,802,242

Fully Paid-up Ordinary Shares


Listed companies 3,644,398 6,044,656
Unlisted companies 9.7 441,824 441,715
4,086,222 6,486,371

Preference Shares 197,015 198,029

Units of Mutual Funds 406,164 211,583

Term Finance Certificates


Unlisted 24,570,114 5,778,897
Listed 2,667,787 1,309,356
27,237,901 7,088,253
Sukuk Bonds 2,655,759 1,727,421
Debentures 4,592 6,676
Participation Term Certificates 26,838 38,205
29,925,090 8,860,555
Investments in associates 7,522,641 2,905,831

Total investments at cost 142,926,561 127,038,202

Provision for diminution in value of investments 9.3 (2,146,794) (2,188,792)

Investments (net of provisions) 140,779,767 124,849,411

Deficit on revaluation of available for sale securities 22.2 (3,042,607) (9,781,639)

Deficit on revaluation of held for trading securities 9.4 (2,582) (10,682)

Total investments 137,734,578 115,057,090

annual report 2009 52


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
9.3 Particulars of provision for diminution in value of investments:

9.3.1 Opening balance 2,188,792 351,508


Charged during the year 9.3.1.1 1,162,066 1,892,360
Impairment loss on associate 25,394 -
Reversed during the year - (20,773)
1,187,460 1,871,587
Reversal on disposal (1,208,711) -
Transfer - -
Written off during the year (20,747) (34,303)
Closing balance 2,146,794 2,188,792

9.3.1.1 This includes impairment loss in respect of equity securities / mutual funds held under available for sale category
of investment deferred as at December 31, 2008, in accordance with the BSD circular number 4 of SBP, dated
February 13, 2009. The said impairment loss is charged to the profit and loss account after taking into account
effects of price movements during the year.

9.3.2 Particulars of provision for diminution in value of investments by type

Available for sale securities


Ordinary shares of listed companies 1,834,711 1,883,398
Ordinary shares of unlisted companies 150,275 150,524
1,984,986 2,033,922
Held to maturity securities
Term Finance Certificates 104,985 109,989
Debentures 4,591 6,676
Participation Term Certificates 26,838 38,205
136,414 154,870
Associates 25,394 -
2,146,794 2,188,792
.
9.3.3 Particulars of provision for diminution in value of investments by segment

Fully Paid-up Ordinary Shares


Listed companies 1,834,711 1,883,398
Unlisted companies 150,275 150,524
1,984,986 2,033,922
Term Finance Certificates, Debentures and
Participation Term Certificates
Term Finance Certificates 104,985 109,989
Debentures 4,591 6,676
Participation Term Certificates 26,838 38,205
136,414 154,870
Associates 25,394 -
2,146,794 2,188,792
9.4 Unrealized loss on revaluation of held for trading securities

Market Treasury Bills 1,416 1,968


Pakistan Investment Bonds (4,422) (1,154)
Sukuks Bond - 8,865
Ordinary shares of listed companies - (20,361)
Mutual Funds 424 -
(2,582) (10,682)

53 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

9.5 Investments include certain approved / government securities which are held by the Bank to comply with the Statutory
Liquidity Requirement determined on the basis of the Bank's demand and time liabilities as set out under Section
29 of the Banking Companies Ordinance, 1962.

9.6 Investments include Rs.282 million (2008: Rs.282 million) held by the State Bank of Pakistan and National Bank
of Pakistan as pledge against demand loan, TT / DD discounting facilities and foreign exchange exposure limit
sanctioned to the Bank and Rs.5 million (2008: Rs.5 million) held by the Controller of Military Accounts (CMA) under
Regimental Fund Arrangements.

9.7 This includes the Group's subscription towards the paid-up capital of Khushhali Bank Limited amounting to Rs.200
million (2008: Rs.200 million). Pursuant to Section 10 of the Khushhali Bank Ordinance, 2000 strategic investors
including the Group cannot sell or transfer their investment before a period of five years that has expired on October
10, 2005. Thereafter, such sale / transfer would be subject to the prior approval of SBP. In addition, profit of Khushhali
Bank Limited cannot be distributed as dividend under clause 35(i) of the Khushhali Bank Ordinance, 2000.

However, SBP prepared a conversion structure for the Khushhali Bank Limited to operate as Micro Finance Bank
under Micro Finance Institution Ordinance, 2001 which was approved by the Ministry of Finance. Moreover, the
scheme of conversion was also approved by the shareholders of the Khushhali Bank Limited in Extra Ordinary
General Meeting held on December 17, 2007. Accordingly, an application for incorporation was submitted to the
SECP on February 15, 2008. The SECP has incorporated the Khushhali Bank Limited under Micro Finance Institution
Ordinance, 2001 and issued Certificate of Incorporation on February 28, 2008 under section 32 of Companies
Ordinance, 1984.

In a meeting between SBP and the Board of Directors of Khushhali Bank Limited held on June 12, 2008, it was
agreed that since Khushhali Bank Limited has a majority of private sector commercial banks as its shareholders
and is legally a private sector bank, it is required to be managed as a private sector institution.

In order to achieve the strategic restructuring of Khushhali Bank Limited, a consortium of commercial banks including
Group decided to completely divest their shareholding in Khushhali Bank Limited. Thereafter, the Consortium
appointed Advisors (financial, legal and accounting) for conducting preliminary due diligence for valuation and
preparing a data room for the prospective purchasers. Khushhali Bank Limited, on behalf of the Consortium of the
Commercial Banks has sought prior clearance / approval of the SBP for appointment of Advisors to conduct due
diligence of Khushhali Bank Limited.

SBP has conveyed it’s, in principle, no objection to the consortium of selling shareholders of Khushhali Bank Limited
for conducting due diligence / valuation of Khushhali Bank Limited subject to compliance with all the applicable
laws/rules/regulations etc. The due diligence / valuation is in the process of being carried out.

9.8 Information relating to investments in ordinary and preference shares / certificates of listed and unlisted companies
/ modarabas / mutual funds, term finance certificates, debentures and bonds, required to be disclosed as part of
the financial statements under State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006, is given in
Annexure 'A'. Details in respect of quality of available for sale securities are also disclosed in Annexure 'A' to these
consolidated financial statements.

annual report 2009 54


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
9.9 Investment in associates (Rupees in '000)

9.9.1 United Growth and Income Fund

Investment as at January 1 327,193 1,875,256


Investment / (redemption) during the year 2,984,094 (1,516,760)
Transfer 1,836,533 -
Share of profit 239,488 39,089
Dividend distribution (118,083) (51,675)
Share of unrealised surplus / (deficit) on assets 10,009 (18,717)
Balance as at December 31 5,279,234 327,193

Percentage holding as at 31 December 35.68% 3.03%

9.9.1.1 United Growth and Income Fund is an open ended mutual fund, listed on Karachi Stock Exchange. Being an open
ended mutual fund, the fund offers units for public subscription on a continuous basis. During the year United Money
Market Fund was merged with United Growth Income Fund and for every 100 units of UMMF 100.3782 units of
UGIF have been allocated.

9.9.1.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31, based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit
(Rupees in '000)

United Growth and Income Fund 2009 14,844,857 48,940 1,568,234 1,137,702

2008 10,868,720 58,697 1,388,782 1,116,975

2009 2008
9.9.2 United Liquidity Plus Fund (Rupees in '000)

Investment as at January 1 - -
Investment / (redemption) during the year 745,469 -
Share of profit 7,016 -
Dividend distribution (2,661) -
Share of unrealised surplus / (deficit) on assets 7 -
Balance as at December 31 749,831 -

Percentage holding as at 31 December 17.59% -

9.9.2.1 United Liquidity Plus Fund is an open ended mutual fund, listed on Islamabad Stock Exchange. Being an open
ended mutual fund, the fund offers units for public subscription on a continuous basis.

9.9.2.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31, based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit
(Rupees in '000)

United Liquidity Plus Fund 2009 4,267,245 3,571 218,554 187,547

55 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
9.9.3 United Composite Islamic Fund (Rupees in '000)

Investment as at January 1 338,024 636,896


Investment / (redemption) during the year 6,547 (66,953)
Share of (loss) / profit 189,412 (210,928)
Dividend distribution - (14,123)
Share of unrealised surplus / (deficit) on assets 5,029 (6,868)
Balance as at December 31 539,012 338,024

Percentage holding as at 31 December 66.83% 50.35%

9.9.3.1 United Composite Islamic Fund is an open ended mutual fund, listed on Islamabad Stock Exchange. Being an open
ended mutual fund, the fund offers units for public subscription on a continuous basis.

9.9.3.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31 based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit / (loss)
(Rupees in '000)

United Composite Islamic Fund 2009 808,306 1,704 394,105 360,516

2008 676,552 5,215 (335,537) (360,404)

2009 2008
9.9.4 United Stock Advantage Fund (Rupees in '000)

Investment as at January 1 142,766 398,903


Investment / (redemption) during the year 35,200 (62,591)
Share of profit / (loss) 121,231 (184,459)
Dividend distribution - (9,087)
Share of unrealised surplus / (deficit) on assets 6,100 -
Balance as at December 31 305,297 142,766

Percentage holding as at 31 December 16.04% 13.27%

9.9.4.1 United Stock Advantage Fund is an open ended mutual fund, listed on Karachi Stock Exchange. Being an open
ended mutual fund, the fund offers units for public subscription on a continuous basis.

9.9.4.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31 based on reviewed financial
statements are as follows:

Assets Liabilities Revenues Profit / (loss)


(Rupees in '000)

United Stock Advantage Fund 2009 1,951,232 47,966 904,450 835,578

2008 1,121,150 44,914 (1,188,310) (1,321,923)

annual report 2009 56


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
9.9.5 United Islamic Income Fund (Rupees in '000)

Investment as at January 1 308,700 254,100


(Redemption) / Investment during the year (83,852) 83,853
Share of profit 12,338 14,095
Dividend distribution (9,575) (22,800)
Share of unrealised surplus / (deficit) on assets 22,239 (20,548)
Balance as at December 31 249,850 308,700

Percentage holding as at 31 December 19.80% 24.40%

9.9.5.1 United Islamic Income Fund is an open ended mutual fund, listed on Islamabad Stock Exchange. Being an open
ended mutual fund, the fund offers units for public subscription on a continuous basis.

9.9.5.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31 based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit
(Rupees in '000)

United Islamic Income Fund 2009 1,265,397 3,652 172,447 71,325

2008 1,275,015 13,523 219,686 118,011

2009 2008
9.9.6 UBL Participation Protected Plan (Rupees in '000)

Investment as at January 1 138,887 -


Investment during the year - 200,000
Share of profit / (loss) 31,249 (61,113)
Balance as at December 31 170,136 138,887

9.9.6.1 UBL Participation Protected Plan is an opened ended administrative plan with the objective to earn potentially high
returns through dynamic asset allocation between equity and fixed income investments. The life of plan is 3 years.
UBL has invested Rs. 200 million in prior year.

57 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
9.9.7 Oman United Exchange Company (Rupees in '000)

Investment as at January 1 72,307 6,981


Share of profit - current year 22,586 22,317
Share of profit - prior year - 45,439
Dividend distribution (23,494) (2,430)
Balance as at December 31 71,399 72,307

Percentage holding as at 31 December 25.00% 25.00%

9.9.7.1 Oman United Exchange Company LLC is incorporated in Sultanate of Oman as a limited company and is primarily
engaged in money changing, issuing of drafts and the purchase and sale of travellers cheque.

9.9.7.2 The details of assets, liabilities, revenues and profits of the company as of December 31, based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit
(Rupees in '000)

Oman United Exchange Company 2009 340,644 55,048 173,265 87,134

2008 340,138 50,911 184,066 113,945

2009 2008
9.9.8 UBL Insurers Limited (Rupees in '000)

Investment as at January 1 52,154 46,350


Investment during the year 60,000 -
Share of (loss) / profit (44,571) 5,804
Balance as at December 31 67,583 52,154

Percentage holding as at 31 December 30.00% 30.00%

9.9.8.1 UBL Insurers Limited is an unquoted public company . The principal objective of the Company is to conduct general
insurance business.

9.9.8.2 The details of assets, liabilities, revenues and profits of the insurance company as at December 31, based on
unaudited financial statements are as follows:
Assets Liabilities Revenues Loss
(Rupees in '000)

UBL Insurers Limited 2009 824,430 599,154 264,095 (129,148)

2008 822,707 648,445 124,568 19,763

annual report 2009 58


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
9.9.9 United Capital Protected Fund - I (Rupees in '000)

Investment as at January 1 75,500 -


Investment during the year 1,122 80,075
Share of profit / (loss) 13,677 (4,575)
90,299 75,500
Impairment loss (25,394) -
Balance as at December 31 64,905 75,500

Percentage holding as at 31 December 11.61% 11.45%

9.9.9.1 United Capital Protected Fund (UCPF-1) is a closed ended mutual fund, listed on Islamabad Stock Exchange. The
fund offered units for public subscription during the current year.

9.9.9.2 The details of assets, liabilities, revenues and profits of the Fund as of December 31 based on reviewed financial
statements are as follows:
Assets Liabilities Revenues Profit / (Loss)
(Rupees in '000)

United Capital Protected Fund-I 2009 782,298 4,605 134,019 121,250

2008 664,503 8,093 19,060 (42,175)

2009 2008
9.9.10 United Money Market Fund (Rupees in '000)

Investment as at January 1 1,450,300 3,318,770


Investment during the year 352,526 (1,770,867)
Transfer (1,836,533) -
Share of profit 97,518 192,422
Dividend distribution (74,704) (219,518)
Share of unrealised surplus / (deficit) on assets 10,893 (70,507)
Balance as at December 31 - 1,450,300

Percentage holding as at 31 December - 30.27%

9.9.10.1 This has been merged in UGIF as referred in note 9.9.1.1

59 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note Performing Non-performing Total


2009 2008 2009 2008 2009 2008
10. ADVANCES (Rupees in '000)

Loans, cash credits,


running finances, etc.

In Pakistan 10.2 244,389,450 254,525,402 32,220,534 23,639,701 276,609,984 278,165,103


Outside Pakistan 89,370,415 98,431,349 5,028,007 3,194,288 94,398,422 101,625,637
333,759,865 352,956,751 37,248,541 26,833,989 371,008,406 379,790,740
Bills discounted and
purchased
(excluding government treasury bills)

Payable in Pakistan 11,607,055 11,104,578 2,400,013 1,297,385 14,007,068 12,401,963


Payable outside Pakistan 5,061,796 4,800,215 416,683 421,348 5,478,479 5,221,563
16,668,851 15,904,793 2,816,696 1,718,733 19,485,547 17,623,526
350,428,716 368,861,544 40,065,237 28,552,722 390,493,953 397,414,266
Financing in respect of
Continuous Funding
System (CFS) - 322,180 - - - 322,180

Advances - gross 350,428,716 369,183,724 40,065,237 28,552,722 390,493,953 397,736,446

Provision against advances 10.5


- Specific - - (27,700,850) (18,567,383) (27,700,850) (18,567,383)
- General (713,507) (1,223,697) - - (713,507) (1,223,697)
(713,507) (1,223,697) (27,700,850) (18,567,383) (28,414,357) (19,791,080)

Advances - net of provision 349,715,209 367,960,027 12,364,387 9,985,339 362,079,596 377,945,366

Performing Non-performing Total


2009 2008 2009 2008 2009 2008
10.1 Particulars of
advances - gross

10.1.1 In local currency 253,182,865 257,379,877 33,781,868 25,285,692 286,964,733 282,665,569


In foreign currencies 97,245,851 111,803,847 6,283,369 3,267,030 103,529,220 115,070,877
350,428,716 369,183,724 40,065,237 28,552,722 390,493,953 397,736,446

10.1.2 Short term 232,398,519 255,783,762 - - 232,398,519 255,783,762


Long term 118,030,197 113,399,962 40,065,237 28,901,328 158,095,434 142,301,290
350,428,716 369,183,724 40,065,237 28,901,328 390,493,953 398,085,052

10.2 This includes performing advances given under various Islamic financing modes amounting to Rs. 638.131 million
(2008: Rs.469.910 million).

10.3 Non-performing advances include advances having gross book value of Rs.1,596.136 million (2008: Rs.936.792
million) and net book value of Rs.919.006 million (2008: Rs.339.689 million) though restructured and performing
have been placed under non-performing status as required by the revised Prudential Regulations issued by the
State Bank of Pakistan, which requires monitoring for at least one year before any up gradation is considered.

annual report 2009 60


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

10.4 Advances include Rs. 40,065 million (2008: Rs. 28,553 million) which have been placed under non-performing status
as detailed below:
2009

Category of Classification Classified advances Provision Required Provision held


Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in ‘000)
Other Assets Especially
Mentioned * 386,517 923,161 1,309,678 - - - - - -
Substandard 3,802,275 1,474,283 5,276,558 891,498 368,571 1,260,069 891,498 368,571 1,260,069
Doubtful 6,007,332 1,696,401 7,703,733 2,651,589 848,206 3,499,795 2,651,589 848,206 3,499,795
Loss 24,424,423 1,350,845 25,775,268 21,602,032 1,338,954 22,940,986 21,602,032 1,338,954 22,940,986
34,620,547 5,444,690 40,065,237 25,145,119 2,555,731 27,700,850 25,145,119 2,555,731 27,700,850

2008

Category of Classification Classified advances Provision Required Provision held


Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in ‘000)
Other Assets Especially
Mentioned * 562,548 348,605 911,153 - - - - - -
Substandard 4,857,390 616,407 5,473,797 905,120 20,922 926,042 905,120 20,922 926,042
Doubtful 6,308,575 308,796 6,617,371 2,214,783 154,726 2,369,509 2,214,783 154,726 2,369,509
Loss 13,557,179 1,993,223 15,550,402 13,106,640 2,165,192 15,271,832 13,106,640 2,165,192 15,271,832
25,285,692 3,267,030 28,552,722 16,226,543 2,340,840 18,567,383 16,226,543 2,340,840 18,567,383

* The Other Assets Especially Mentioned category includes agricultural finance inside Pakistan and finances relating to
overseas subsidiaries.
10.5 Particulars of provision against advances
2009 2008
Note Specific General Total Specific General Total
(Rupees in ‘000)

Opening balance 18,567,383 1,223,697 19,791,080 16,031,324 1,369,649 17,400,973


Exchange adjustments 274,342 (10,910) 263,432 724,186 19,045 743,231

Charge / (Reversals)
Charge for the year 11,552,516 - 11,552,516 6,894,569 - 6,894,569
Reversals (944,245) (963,344) (1,907,589) (796,116) (214,675) (1,010,791)
10,608,271 (963,344) 9,644,927 6,098,453 (214,675) 5,883,778
Reversal of provision due to change
in Prudential Regulations - - - (1,369,230) - (1,369,230)
10,608,271 (963,344) 9,644,927 4,729,223 (214,675) 4,514,548
Transfers (464,064) 464,064 - (49,678) 49,678 -
Amounts written off 10.6 (1,285,082) - (1,285,082) (2,867,672) - (2,867,672)
Closing balance 27,700,850 713,507 28,414,357 18,567,383 1,223,697 19,791,080

10.5.1 General provision represents provision amounting to Rs. 569.195 million (2008: Rs. 1,082.499 million) against consumer
finance portfolio as required by the Prudential Regulations issued by State Bank of Pakistan and Rs. 144.311 million
(2008: Rs. 141.207 million) pertaining to overseas advances to meet the requirements of monetary agencies and
regulatory authorities of the respective countries in which the overseas branches and subsidiaries operate.

10.5.2 Particulars of provision against advances


2009 2008
Specific General Total Specific General Total
(Rupees in ‘000)

In local currency 24,327,702 569,195 24,896,897 16,226,543 1,082,499 17,309,041


In foreign currencies 3,373,148 144,312 3,517,460 2,340,840 141,198 2,482,038
27,700,850 713,507 28,414,357 18,567,383 1,223,697 19,791,079

61 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
10.6 Particulars of write-offs

10.6.1 Against provisions 10.5 1,285,082 2,867,672


Directly charged to profit and loss account 1,485,976 1,367,553
2,771,058 4,235,225

10.6.2 Write-offs of Rs.500,000 and above 10.7 1,588,946 2,982,367


Write-offs of below Rs.500,000 1,182,112 1,252,858
2,771,058 4,235,225
10.7 Details of loan write-offs of Rs.500,000 and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of
written-off loans or any other financial relief of five hundred thousand rupees or above allowed to a person during
the year ended December 31, 2009 is given in Annexure-"B" to these consolidated financial statements. These loans
are written off as a book entry without prejudice to the Bank's right of recovery against the customers.

Note 2009 2008


10.8 Particulars of loans and advances to executives, directors, (Rupees in '000)
associated companies etc.

Debts due by directors or executives of the Group or any of them


either severally or jointly with any other persons

Balance at beginning of year 1,057,982 987,054


Loans granted during the year 1,020,264 461,207
Repayments (555,826) (390,279)
Exchange adjustment 14,103 -
Balance at end of year 1,536,523 1,057,982

Debts due by companies or firms in which the directors of the


Group are interested as directors, partners or in the case of
private companies as members

Balance at beginning of year


- -
Loans granted during the year
- -
Repayments
Balance at end of year - -
- -
11. OPERATING FIXED ASSETS

Capital work-in-progress 11.1 1,006,331 1,010,404


Property and equipment 11.2 22,236,240 18,511,264
Intangible assets 11.3 491,511 405,247
23,734,082 19,926,915
11.1 Capital work-in-progress

Civil works 11.1.1 484,612 490,971


Equipment 202,119 284,421
Software 11.1.2 306,590 218,502
Advances to suppliers and contractors 13,010 16,510
1,006,331 1,010,404

11.1.1 This includes Rs. 297.430 million (2008: 224.967 million) paid in respect of construction of head office building.
11.1.2 This includes Rs. 221.56 million (2008: 101.903 million) paid in respect of the core banking software.

annual report 2009 62


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009
11.2 Property and equipment
2009
COST/REVALUATION ACCUMULATED DEPRECIATION Net book Annual
At January Additions / Surplus on Reversal of Exchange At December At January Charge for Reversal Exchange At value at rate of
01, 2008 (deletions) revaluation accumulated Adjustment 31, 2009 01, 2009 the year / due to Adjustment/ December December deprec-
depreciation / other (depreciation revaluation Other 31, 2009 31, 2009 iation %
adjustments on deletions) adjustments
(Rupees in ‘000)
Owned
Freehold land 1,502,746 1,724 332,426 - - 1,825,754 - - - - - 1,825,754 -
(11,142) - -
Leasehold land 10,092,131 9,470 3,328,235 - 1,793 12,802,015 307,447 305,640 - 63 1,052 12,800,963 1 - 3.33
(106,551) (523,063) (87,760) (523,063) (1,275)
Buildings on
freehold land 1,856,780 3,823 (363,272) - 418,915 1,908,294 68,027 29,340 - 56,232 145,647 1,762,647 5
(112) (7,840) (112) (7,840)
Buildings on
leasehold land 1,931,510 1,661 434,008 - 5,529 2,182,998 128,822 97,074 - 697 39,675 2,143,323 5
(5,240) (184,470) (1,965) (184,470) (483)
Leasehold
Improvement 1,169,850 305,714 - - 19,449 1,495,013 255,760 149,724 - 9,929 415,413 1,079,600 10
Furniture and
fixtures 917,948 107,900 - - 8,745 978,099 464,913 83,230 - 4,595 530,004 448,095 10
(28,986) (27,508) (22,734)
Electrical, office
and computer
equipment 3,377,168 808,870 - - 33,966 4,155,052 1,987,369 643,969 - 15,211 2,604,119 1,550,933 20-25
(52,476) (12,476) (42,430)
Vehicles 273,266 51,958 - - 2,697 268,342 142,353 58,744 - 2,161 159,287 109,055 20
(59,579) (43,971)
Assets held under
operating lease
Ijarah assets -
note 11.9 895,217 39,648 - - 810,456 153,297 170,285 - - 296,066 514,390 20 - 33.33
(104,750) (19,659) (27,516)
Finance lease
Vehicles 5,280 70 - - - 4,332 2,644 1,022 - - 2,852 1,480 20
(1,018) (814)
2009 22,021,896 1,330,838 4,094,669 - 491,094 26,430,355 3,510,632 1,539,028 - 88,888 4,194,115 22,236,240
(369,854) (363,272) (775,016) (227,302) (715,373) (1,758)

2008
COST/REVALUATION ACCUMULATED DEPRECIATION Net book Annual
At January Additions / Surplus on Other Exchange At At Charge for Other Exchange At value at rate of
01, 2008 (deletions) revaluation adjust- Adjustment December January the year / adjust- Adjustment December December deprec-
ments 31, 2008 01, 2008 (deprec ments 31, 2008 31, 2008 iation %
-iation
on deletions)
(Rupees in ‘000)
Owned
Freehold land 866,013 636,733 - - - 1,502,746 - - - - - 1,502,746 -

Leasehold land 10,333,042 - - - 253 10,092,131 700 305,272 1,277 198 307,447 9,784,684 1 - 3.33
(241,164)
Buildings on
freehold land 2,102,677 4,437 - - 20,757 1,856,780 32,446 20,788 124 20,755 68,027 1,788,753 5
(114,713) (156,378) (6,085)
Buildings on
leasehold land 1,889,369 57,375 - 5,487 1,959 1,931,510 27,509 98,975 787 1,558 128,822 1,802,688 5
(22,680) (7)
Leasehold
Improvement 766,665 340,191 - - 66,451 1,169,850 132,363 104,137 224 22,145 255,760 914,090 10
(3,457) (3,109)
Furniture and
fixtures 772,640 165,843 - 1,079 28,061 917,948 406,122 74,949 - 8,748 464,913 453,035 10
(1,775) (47,900) (1,478) (23,428)
Electrical, office
and computer
equipment 2,628,682 784,651 - 5,746 96,874 3,377,168 1,540,157 494,360 - 42,112 1,987,369 1,389,799 20-25
(70,403) (68,382) (70,347) (18,913)
Vehicles 300,114 89,370 - - 8,809 273,266 148,335 49,165 - 4,332 142,353 130,913 20
(105,826) (19,201) (50,546) (8,933)
Assets held under
operating lease
Ijarah assets -
note 11.9 307,473 659,038 - - - 895,217 14,944 142,380 - - 153,297 741,920 20 - 33.33
(71,294) (4,027)
Finance lease
Vehicles 5,261 19 - - - 5,280 1,591 1,053 - - 2,644 2,636 20

2008 19,971,936 2,737,657 - 12,312 223,164 22,021,896 2,304,167 1,291,079 2,412 99,848 3,510,632 18,511,264
(252,755) (114,713) (555,705) (129,507) (51,281) (6,085)

63 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009
11.3 Intangible assets
2009
Cost Accumulated Amortization Net book Annual
At January Additions / Other At December At January Charge for Other At value at rate of
01, 2009 (deletions) Adjustment 31, 2009 01, 2009 the year / adjust- December December amorti-
(amortisation ments 31, 2009 31, 2009 sation %
on deletion)
(Rupees in ‘000)
Software 783,858 268,895 8,144 1,052,072 378,611 185,985 4,790 560,561 491,511 25
(8,825) (8,825)

2008
Cost Accumulated Amortization Net book Annual
At January Additions / Other At December At January Charge for Other At value at rate of
01, 2008 (deletions) Adjustment 31, 2008 01, 2008 the year / adjust- December December amorti-
(amortisation ments 31, 2008 31, 2008 sation %
on deletion)
(Rupees in ‘000)
Software 547,733 245,533 - 783,858 217,386 156,997 12,786 378,611 405,247 25
(9,408) (8,558)

11.4 Revaluation of properties

During the year, the properties of the Group were revalued by independent professional valuers and the results of
the revaluation exercise were incorporated in the consolidated financial statements as at December 31, 2009. The
revaluation was carried out by M/s. Pirsons Chemicals Engineering (Private) Limited, M/s. Sadruddin Associates,
M/s. Maricon Consultants (Private) Limited, M/s. Engineering Pakistan International (Private) Limited, JRA Macdonald
Frics, Douglas Duff, O' Hearne & Pariners and Alex Smith & Co on the basis of professional assessment of present
market values and resulted in a surplus of Rs.4,139.592 million. Had there been no revaluation, the carrying amount
of revalued assets at December 31, 2009 would have been as follows:
(Rupees in '000)
Freehold land 1,484,906
Leasehold land 9,472,729
Buildings on freehold land 1,179,068
Buildings on leasehold land 1,679,280

2009 2008
(Rupees in '000)
11.5 Carrying amount of temporarily idle property 158,927 113,111

11.6 The gross carrying amount of fully depreciated assets that are still in use

Furniture and fixtures 251,347 248,176


Electrical, office and computer equipment 322,634 249,109
Vehicles 33,601 48,531
IT hardware 1,006,455 692,804
1,614,037 1,238,620

11.7 The balance under leasehold land includes an amount of Rs.2,174 million relating to surplus on properties for which
title was completed during the year on the basis of which valuation has been incorporated in the consolidated
financial statements.

11.8 Details of disposal of operating fixed assets

The information relating to operating fixed assets disposed off during the year is given in Annexure C and is an
integral part of these consolidated financial statements.

annual report 2009 64


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

11.9 The Islamic Banking Branches of the Group have entered into Ijarah transactions with customers during the year.
The significant Ijarah transactions have been entered in respect of vehicles.

The ijarah payments receivable from customers for each of the following periods under the terms of the respective
arrangements are given below:
Note 2009 2008
(Rupees in '000)
Not later than one year 270,864 266,347
Later than one year but not later than five years 436,129 672,047
Later than five years 3,020 20,875
710,013 959,269
12. DEFERRED TAX ASSET - NET

Deferred tax asset - net 12.1 649,814 2,164,148

12.1 Movement in temporary differences during the year

2009
At January Recognised Others At December
01, 2009 in profit 31, 2009
and loss
(Rupees in '000)
Deductible temporary differences on
- recognized tax losses on subsidiary 114,713 - (73,238) 41,475
- deficit on revaluation of investments 3,201,075 - (2,134,641) 1,066,434
- ijarah financing 118,653 (66,339) - 52,314
- workers' welfare fund 117,950 21,192 - 139,142
- derivative transactions 148,956 - (37,810) 111,146
- provision against off balance sheet items,
post retirement medical benefits and
advances 2,659,482 2,006,252 - 4,665,734
6,360,829 1,961,105 (2,245,689) 6,076,245
Taxable temporary differences on
- surplus on revaluation of fixed assets (3,972,755) 136,238 (1,439,383) (5,275,900)
- accelerated tax depreciation (223,926) 73,395 - (150,531)
(4,196,681) 209,633 (1,439,383) (5,426,431)

2,164,148 2,170,738 (3,685,072) 649,814

2008
At January Recognised Others At December
01, 2008 in profit 31, 2008
and loss
(Rupees in '000)
Deductible temporary differences on
- recognized tax losses on subsidiary 124,202 - (9,489) 114,713
- deficit on revaluation of investments 136,364 - 3,064,711 3,201,075
- ijarah financing 57,605 61,048 - 118,653
- workers' welfare fund - 117,950 - 117,950
- derivative transactions - - 148,956 148,956
- provision against off balance sheet items,
post retirement medical benefits and
advances 1,786,416 873,066 - 2,659,482
2,104,587 1,052,064 3,204,178 6,360,829
Taxable temporary differences on
- surplus on revaluation of fixed assets (4,199,162) 136,240 90,167 (3,972,755)
- accelerated tax depreciation (15,414) (208,512) - (223,926)
(4,214,576) (72,272) 90,167 (4,196,681)

(2,109,989) 979,792 3,294,345 2,164,148

65 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
13. OTHER ASSETS

Income / mark-up accrued in local currency 11,036,265 10,713,190


Income / mark-up accrued in foreign currency 361,643 1,011,123
11,397,908 11,724,313
Advance taxation - net of provision 13.1 2,333,036 -
Receivable from staff retirement funds 1,045,899 798,514
Suspense accounts 187,143 462,603
Stationery and stamps on hand 143,825 115,265
Advances, deposits, advance rent and other prepayments 805,474 885,981
Receivable from other banks against telegraphic
transfers and demand drafts 836,556 1,801,243
Unrealized gain on forward foreign exchange contracts 141,324 483,972
Unrealized gain on derivative financial instruments 24.2 499,671 466,859
Receivable on account of encashment of savings certificates 74,406 775,289
Advance against Murabaha 13.2 383,929 -
Receivable in respect of derivative transactions 124,977 416,075
Receivable against sale of securities 897,457 1,086,879
Non-banking assets acquired in satisfaction of claim 13.3 330,029 348,606
Receivable from minority shareholder 10,312 -
Others 1,208,513 1,232,829
20,420,459 20,598,428
Provision held against other assets 13.4 (1,546,703) (1,209,096)
Unrealized mark-up held in suspense account (1,087,189) (1,264,679)
Other assets (net of provisions) 17,786,567 18,124,653

13.1 The Income Tax assessments of the Bank for domestic branches up to tax year 2009 (financial year ended December
31, 2008) were filed under the provisions of Section 114 of the Income Tax Ordinance, 2001 (Ordinance) and are
deemed to be assessed under section 120 of the Ordinance, unless amended by the Commissioner of Income Tax.

For tax year 2009 (financial year ended December 31, 2008) subsequent to the balance sheet date, the taxation
authorities have issued an amended assessment order under section 122(5A) of the Ordinance determining further
tax liability of Rs. 960 million. The Bank will file an appeal before the Commissioner of Income Tax (Appeals) [CIT
(A)] against the said liability. The management is confident that the appeal will be decided in favour of the Bank.

For tax years 2004 to 2007 (financial year ended December 31, 2003 to 2006) the taxation authorities have issued
amended assessment orders under section 122(5A) of the Ordinance, which were further rectified under section
221 of the Ordinance determining additional tax liability of Rs.3,564 million. Appeals filed by the Bank before the
CIT (A) against these amended assessments have been decided, by allowing relief on certain issues. However, for
remaining issues appeals have been filed before the Income Tax Appellate Tribunal (ITAT), and hearing is still
pending. The return for the tax year 2003 was selected for audit under section 177 of the Ordinance and the amended
assessment order was passed, which has been contested before the CIT(A). The management is confident that
the appeals will be decided in favour of the Bank.

annual report 2009 66


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

In respect of Azad Kashmir Branches for the tax years 2005 to 2009 (financial years ended December 31, 2004 to
2008) were filed under the provisions of Section 120(1) read with section 114 of the Ordinance and in compliance
with the terms of agreement between the banks and the Azad Kashmir Council in May 2005. The returns so filed
qualify the statutory conditions to be termed as deemed assessment orders.

During the year, amendments were brought in through Finance Act 2009 regarding allowance of provision against
non performing loans and off balance sheet exposures applicable from Tax year 2010 (accounting year December
31, 2009) and onwards. The Bank has accounted for these in the tax computation for the period, therefore, in
accordance with the law, provision under the category of doubtful and loss category have been treated as allowed
subject to a maximum limit of 1% of gross advances, consequently a deferred tax asset of Rs. 1,589 million is
recognized relating to amounts allowed to be carried forward to future years. Based upon the legal opinion of the
tax advisor, the Bank is confident that these disallowances and any relating to prior periods, which approximates
to Rs.5,454 million, would be allowed to the Bank in future periods against available profits and hence, the same
has been carried forward as an tax asset in these financial statements.

13.2 This represents goods purchased for Murabaha which remained unsold at the balance sheet date.

Note 2009 2008


(Rupees in '000)
13.3 Market value of Non-banking assets acquired in satisfaction of claims 359,908 348,606

13.4 Provision against other assets

Opening balance 1,209,096 1,319,997


Exchange adjustments - 6,809
1,209,096 1,326,806

Charge for the year 361,391 209,325


Reversals (22,260) (13,299)
30 339,131 196,026
Transfers 126,552 -
Amounts written off (128,076) (313,736)
Closing balance 1,546,703 1,209,096

14. CONTINGENT ASSETS

There were no contingent assets as at the balance sheet date.


Note 2009 2008
(Rupees in '000)
15. BILLS PAYABLE

In Pakistan 4,944,903 4,690,304


Outside Pakistan 221,458 520,566
5,166,361 5,210,870

67 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
16. BORROWINGS

In Pakistan 32,604,252 38,967,725


Outside Pakistan 4,564,025 5,781,965
37,168,277 44,749,690

16.1 Particulars of borrowings with respect to currencies

In local currency 30,953,357 38,967,725


In foreign currencies 6,214,920 5,781,965
37,168,277 44,749,690

16.2 Details of borrowings from financial institutions

Secured

Borrowings from the State Bank of Pakistan under


- Export refinance scheme 16.3 14,666,570 12,804,867
- Long-term fixed finance 16.4 1,018,535 459,946
- Long-term financing under export oriented projects 16.5 3,705,568 3,820,223
- Locally manufactured machinery refinance scheme - 544
19,390,673 17,085,580
Repurchase agreement borrowings 16.6 5,066,098 14,284,138
24,456,771 31,369,718
Unsecured

Call borrowings 16.7 8,679,283 10,200,693


Overdrawn nostro accounts 688,082 2,116,282
Trading liabilities 96,586 598,007
Other borrowings 16.8 3,247,555 464,990
12,711,506 13,379,972
37,168,277 44,749,690

16.3 The Bank has entered into agreements with the State Bank of Pakistan (SBP) for extending export finance to
customers. As per the terms of the agreement, the Bank has granted SBP the right to recover the outstanding
amount from the Bank at the date of maturity of finances by directly debiting the current account maintained by the
Bank with SBP. These borrowings are repayable within six months latest by June 2010.

16.4 These borrowings have been made from SBP for providing financing facilities to exporters for adoption of new
technologies and modernizing their plant and machinery. These borrowings are repayable within a period ranging
from 3 years to 10 years.

16.5 These borrowings have been made from SBP for providing financing facilities to customers for import of machinery,
plant, equipment and accessories thereof (not manufactured locally) by export oriented units.

16.6 These repurchase agreement borrowings are secured against market treasury bills and Pakistan Investment Bonds and
carry mark-up at rates ranging from 11.50% to 12.40% per annum (2008: 9.00% to 15.00% per annum). These borrowings
are repayable latest by January 2010. The carrying value of securities given as collateral is given in note 9.1.

16.7 These are unsecured borrowings and carries mark-up at rates ranging from 11.0% to 12.6% per annum (2008:
10.50% to 17.00% per annum) and are repayable latest by May 2010, where as borrowing pertaining to overseas
operation carries mark-up at rates ranging from 0.5% to 0.6% per annum (2008: 1.25% to 5.80% per annum) and
are due to mature latest by January 2010.

16.8 This includes borrowing from an overseas bank for the development of Small and Medium Sized Enterprises (SMEs)
in Pakistan, carries mark-up at the rate of six months LIBOR + 1.2% and repayable by June 2013.

annual report 2009 68


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)
17. DEPOSITS AND OTHER ACCOUNTS

Customers
Fixed deposits 155,634,121 190,496,105
Savings deposits 179,752,604 157,389,124
Sundry deposits 4,643,923 4,957,358
Margin deposits 4,319,476 3,993,023
Current accounts - remunerative 2,820,934 2,185,756
Current accounts - non-remunerative 154,283,090 132,111,190
501,454,148 491,132,556
Financial Institutions
Remunerative deposits 1,529,551 903,419
Non-remunerative deposits 847,973 231,923
2,377,524 1,135,342
503,831,672 492,267,898

17.1 Particulars of deposits and other accounts

In local currency 368,267,813 350,849,396


In foreign currencies 135,563,859 141,418,502
503,831,672 492,267,898

18. SUB-ORDINATED LOANS - UNSECURED

Issue Tenor Rate % Maturity Frequency of 2009 2008


Date per annum principal
redemption
(Rupees in '000)

Term Finance August 8 years 8.45% August Semi Annual 1,996,160 1,996,928
Certificates - I 2004 2012

Term Finance March 8 years 9.49% March Semi Annual 1,999,640 1,999,720
Certificates - II 2005 2013

Term Finance September 8 years Kibor+1.70% September Semi Annual 1,997,600 1,998,400
Certificates - III 2006 2014

Term Finance February 10 years For the first five February Semi Annual 5,996,400 5,998,800
Certificates - IV 2008 years 6 months, 2018
Kibor+0.85%
and for the
remaining
term, 6 months
Kibor+1.35%
11,989,800 11,993,848

18.1 These represent listed Term Finance Certificates (TFCs) issued by the bank. The liability of the bank is subordinated
as to the payment of principal and profit to all other indebtedness of the bank (including deposits) and is not
redeemable before maturity without approval of the State Bank of Pakistan.

18.2 In case of Term Finance Certificate IV the bank has the right to exercise the call option after the period of 5 years
from the issue date.

69 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

19. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

These represent finance leases entered into with leasing companies for lease of vehicles. The rates of interest used
as discounting factor range from 11.5% to 14.5% per annum (2008: 11.5% to 14.5%) per annum. There is no financial
restriction in the lease agreements. The amount of future minimum lease payments, present value of minimum lease
payments and periods during which they become due are as follows:
2009
Minimum Finance Principal
lease charges for Outstanding
payments future periods
(Rupees in '000)
Not later than one year 509 (31) 478
Later than one year and not later than five years 137 (4) 133
646 (35) 611
Amount representing future finance charges (35) - -
611 (35) 611

2008
Minimum Finance Principal
lease charges for Outstanding
payments future periods
(Rupees in '000)
Not later than one year 1,606 (113) 1,493
Later than one year and not later than five years 516 (31) 485
2,122 (144) 1,978
Amount representing future finance charges (144) - -
1,978 (144) 1,978

At the end of lease period, the ownership of asset shall be transferred to the Group on payment of residual value.
The cost of operating and maintaining the leased asset is borne by the Group. These are secured by the demand
promissory notes and security deposits and the vehicles which have been obtained under leasing arrangements.

Note 2009 2008


20. OTHER LIABILITIES (Rupees in '000)
Mark-up / return / interest payable in local currency 7,015,580 6,791,850
Mark-up / return / interest payable in foreign currency 349,630 358,623
Accrued expenses 20.1 1,686,129 1,900,546
Branch adjustment account 529,977 495,047
Payable against purchase of securities 197,722 -
Payable under severance scheme 33,452 34,183
Unearned commission 221,434 120,028
Provision for taxation - net - 712,208
Provision against off - balance sheet obligations 20.2 682,141 651,697
Deferred liabilities 20.3 2,098,414 2,028,555
Unrealised loss on derivative financial instruments 24.2 557,414 1,295,867
Workers' welfare fund payable 741,609 340,536
Insurance payable against consumer assets 393,288 689,124
Payable on account of Government transaction - 1,506,101
Others 467,655 163,076
14,974,445 17,087,441

annual report 2009 70


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

20.1 This includes an accrual of Rs.216 million for the year ended December 31, 2009 (2008: Rs.338.551 million) in
respect of employee bonus scheme. The objective of the scheme is to reward, motivate and retain high performing
executives and officers of the Bank by way of bonus in the form of shares of the Bank. The liability of the Bank in
respect of this scheme is fixed and is approved each year by the Board of Directors of the Bank. The scheme for
each year is managed by a separate Trust formed for this purpose.
Note 2009 2008
(Rupees in '000)
20.2 Provision against off - balance sheet obligations

Opening balance 651,697 608,731

Charge / (Reversal) during the year 30 20,250 42,966


Transfers during the year 10,194 -
30,444 42,966
682,141 651,697

20.3 Deferred liabilities

Provision for post retirement medical benefits 37.1.4 1,147,095 1,219,400


Provision for gratuity - overseas 219,411 195,553
Provision for compensated absences 37.1.4 731,908 613,602
2,098,414 2,028,555

20.4 Unrealized loss on derivative financial instruments

Note Contract / notional amount Unrealised gain / (loss)


2009 2008 2009 2008
(Rupees in '000)
Derivatives held for trading
- Interest rate swaps 11,014,381 20,758,372 (187,593) (320,033)
- Cross currency swaps 36,372,837 15,948,869 143,894 (82,915)
- Swaptions 2,527,248 - (14,044) -
- Fx options 821,070 9,814,318 - -
- Commodity options - 39,545 - -
- Equity Indices - 355,943 - -
- Forward rate agreements - 850,000 - (1,457)
- Forward purchase contracts of
government securities - 10,065,070 - 5,848
- Forward sale contracts of
government securities - 8,611,020 - (4,864)
50,735,536 66,443,137 (57,743) (403,421)
Derivatives held for cash flow hedges
Interest rate swaps - - - (425,587)
20.4.1 50,735,536 66,443,137 (57,743) (829,008)

Note 2009 2008


(Rupees in '000)
20.4.1 Unrealized loss on derivative financial instruments - net
Unrealized gain on derivative financial instruments 13 499,671 466,859
Unrealized loss on derivative financial instruments 20 (557,414) (1,295,867)
24.2 (57,743) (829,008)

71 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

21. SHARE CAPITAL

21.1 Authorized Capital

2009 2008 2009 2008


(Number of shares) (Rupees in '000)
2,000,000,000 2,000,000,000 Ordinary shares of Rs.10 each 20,000,000 20,000,000

21.2 Issued, subscribed and paid-up capital

Fully paid-up ordinary shares of Rs.10 each

2009 2008 2009 2008


(Number of shares) (Rupees in '000)
Fully paid-up ordinary shares of Rs.10 each
518,000,000 518,000,000 Issued for cash 5,180,000 5,180,000
594,890,625 493,718,750 Issued as bonus shares 5,948,907 4,937,188
1,112,890,625 1,011,718,750 11,128,907 10,117,188

21.3 During the year 2007, the Bank was admitted to the official list of the UK Listing Authority and to the London Stock
Exchange Professional Securities Market for trading of Global Depository Receipts (GDRs), each representing four
ordinary equity shares issued by the Bank. The GDRs constitute an offering in the United States only to qualified
institutional buyers in reliance on Rule 144A under the U.S Securities Act of 1933 and an offering outside the United
States in reliance on Regulation S.

Holders of GDRs are entitled, subject to the provision of the depository agreement, to receive dividends, if any and
rank pari passu with other equity shareholders in respect of such entitlement to receive dividends. However, the
holders of GDRs have no voting rights or other direct rights of shareholders with respect to the equity shares
underlying such GDRs. Subject to the terms and restrictions set out in the offering circular dated June 25, 2007,
the deposited equity shares in respect of which the GDRs were issued may be withdrawn from the depository facility.
Upon withdrawal, the holders will rank pari passu with other equity shareholders in respect of voting powers. As
at December 31, 2009: 92,519,435 (2008: 143,078,641) GDR shares were in issue.

21.4 Major shareholders (holding more than 5% of total paid-up capital)


2009 2008
Number of Percentage of Number of Percentage of
shares held shareholding shares held shareholding
Name of shareholder
466,859 466,859
His Highness Shaikh Nahayan Mabarak Al Nahayan (1,295,867)
71,765,548 6.45% (1,295,867)
65,241,408 6.45%
H.E. Dr. Mana'a Saeed Al Otaiba (829,008)
61,356,720 5.51% (829,008)
55,778,837 5.51%
Bestway (Holdings) Limited 202,522,894 18.20% 128,989,257 12.75%
Sir Mohammed Anwar Pervez, OBE, HPk 56,757,421 5.10% 51,597,656 5.10%
Bestway Cement Limited 85,136,131 7.65% 77,396,483 7.65%
Government of Pakistan 216,879,438 19.49% 197,163,126 19.49%

As at December 31, 2009 Abu Dhabi Group held 30.30% (2008: 30.30%) shareholding (including GDRs) and Bestway
Group held 31.07% (2008: 31.07%) shareholding of the Bank.

annual report 2009 72


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
22. SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX

Surplus arising on revaluation of assets - net of tax :


Fixed assets
- Group's share 10,870,484 8,641,234
- Minority Interest 185,357 343,931
22.1 11,055,841 8,985,165
Securities 22.2 (1,976,173) (6,580,563)
Surplus / (Deficit) arising on revaluation of assets of associates 44,268 (130,103)
9,123,936 2,274,499
22.1 Surplus on revaluation of fixed assets

Surplus on revaluation of fixed assets at January 01 12,957,920 13,794,155

Revaluation of fixed assets booked during the year / adjustments 3,646,052 (282,191)
Exchange adjustment 146,055 (72,620)
Written off during the year (27,071) -
Transferred to unappropriated profit in respect of incremental
depreciation charged during the year (254,977) (255,017)
Related deferred tax liability of incremental depreciation charged
during the year (136,238) (136,240)
Related deferred tax liability of transfer of property during the year - (90,167)
16,331,741 12,957,920
Less: Related deferred tax liability on:
Revaluation as on January 1 3,972,755 4,199,162
Revaluation of fixed assets during the year 1,448,858 -
Written off during the year (9,475) -
Incremental depreciation charged on related assets (136,238) (136,240)
Reversal in respect of transfer of a property during the year - (90,167)
5,275,900 3,972,755
11,055,841 8,985,165
22.2 (Deficit) / surplus on revaluation of available-for-sale securities

Market Treasury Bills 20,995 (16,685)


Pakistan Investment Bonds (1,129,224) (3,293,999)
Quoted securities 95,326 (1,892,871)
Mutual fund units (2,302) (9,465)
Term Finance Certificates, Sukuk, other Bonds etc (41,213) (53,850)
Overseas securities (1,986,189) (4,514,768)
(3,042,607) (9,781,638)
Related deferred tax asset 1,066,434 3,201,075
(1,976,173) (6,580,563)

73 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)

23. CONTINGENCIES AND COMMITMENTS


23.1 Direct credit substitutes

Contingent liabilities in respect of guarantees given favouring

Government 10,831,974 12,738,399


Banking companies and other financial institutions 2,910,518 4,951,481
Others 7,396,201 8,642,081
21,138,693 26,331,961
23.2 Transaction-related contingent liabilities

Contingent liabilities in respect of performance bonds,


bid bonds, warranties, etc. given favouring
Government 77,448,985 60,706,466
Banking companies and other financial institutions 3,311,075 4,115,594
Others 18,521,775 17,061,793
99,281,835 81,883,853

23.3 Trade-related contingent liabilities

Contingent liabilities in respect of letters of credit opened favouring


Government 56,186,541 68,756,444
Banking companies and other financial institutions - 32,013
Others 62,787,741 73,606,990
118,974,282 142,395,447
23.4 Other contingencies

Claims against the Group not acknowledged as debts 20,670,923 17,230,872

23.5 Commitments in respect of forward lending

The Group makes commitments to extend credit in the normal course of its business but these being revocable
commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.
2009 2008
23.6 Commitments in respect of forward foreign exchange contracts (Rupees in '000)
Sale 47,499,455 55,616,766
Purchase 92,086,590 79,929,121
23.7 Other commitments
Interest rate swaps 11,014,381 20,758,372
Cross currency swaps 36,372,837 15,948,869
Swaption 2,527,248 -
FX Options - Purchased 410,535 9,814,318
FX Options - Sold 410,535 15,645,965
Commodity options - 39,545
Equity indices - 355,943
Forward rate agreements - 850,000
Forward purchase contracts of government securities - 10,065,070
Forward sale contracts of government securities - 8,611,020
23.8 Commitments in respect of capital expenditure 575,176 1,206,025

23.9 For contingencies relating to taxation refer note 13.1.

annual report 2009 74


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

24. DERIVATIVE INSTRUMENTS

“Derivative” means a type of financial contract the value of which is determined by reference to one or more
underlying assets or indices. The major categories of such contracts include forwards, futures, swaps and options.
Derivative also includes structured financial products that have one or more characteristics of forwards, futures,
swaps and options.

The Bank as an Authorized Derivative Dealer (ADD) is an active participant in the derivatives’ market of Pakistan.
Though the ADD license covers the below mentioned transactions only (permitted under Financial Derivatives
Business Regulations issued by SBP), but the Group offers a wide variety of derivative products to satisfy customers’
needs (specific approval for which is sought from SBP on transaction basis):

a. Foreign Currency Options


b. Forward Rate Agreements
c. Interest Rate Swaps
d. Cross Currency Swaps
e. Equity indices
f. Commodity options

These transactions cover both the aspects of market making and hedging.

The authority for approving policies lie with the BoD, who has delegated its powers to Market Risk Committee (MRC),
which runs the affairs in line with policies approved by the BoD.

With regard to derivatives, the Market Risk Committee (MRC) is authorized to:

- Review derivatives business with reference to market risk exposure and assign various limits in accordance with
the risk appetite of the Bank
- Review and approve the Derivatives Business Policy
- Review and sign off derivatives’ product programs
- Authorize changes in procedures and processes regarding derivatives and structured products

Overall responsibility for derivatives trading activity lies with Treasury and Capital Markets (TCM). Identifying and
quantifying market risk on derivatives, coordinating approvals on temporary or permanent market risk limits, formulation
of policies and procedures with respect to market risk arising from derivatives, formal monitoring of market and credit
risk exposure and limits and its reporting to the senior management and BoD is done by Treasury and Market Risk
(TMR). Treasury Operations (TROPS) records derivative activity in the Bank’s books, and handles its reporting to
SBP.

Derivative Risk Management

There are a number of risks undertaken by the Group, which need to be monitored and assessed. The “risk continuum”
includes:

75 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Credit Risk

This refers to the risk of non-performance or default by a party (a customer, guarantor, trade counterparty, third party,
etc.), resulting in a negative impact on the Group’s equity. There are two types of credit risk (Settlement and Pre-
Settlement risk) that are associated with derivatives transactions and monitored on a regular basis. To mitigate the
settlement risk, settlement is carried out by netting the amounts receivable and payable, i.e., net amount is either
received or paid. Further, for Pre-Settlement Risk, the Group has constituted Treasury Product Credit Committee
(TPCC) that is authorized to approve credit limits (based on internal obligor risk rating) for all derivative counterparties.
Credit exposure for each counterparty is calculated and monitored by an independent risk monitoring and control
department i.e. Treasury Middle Office.

Market Risk

Market risk exposure limits have been assigned in accordance with the risk appetite of the Group and are being
monitored on a daily basis, which include sensitivity limits, tenor limits, and notional limits. An exercise is under way
to model VaR structure, which will then help in deriving VaR limits.

Liquidity Risk

Derivative transactions, usually being non-funded in nature, do not involve funds therefore there is no specific risk
of liquidity.

The other aspect of liquidity refers to the availability of certain instruments or hedge in the market, which is very
much true in the local market, as interest rate derivatives have a unidirectional demand, and no perfect hedge is
available. The Group mitigates its risk, on one side, by limiting the portfolio in terms of tenor, notional, and sensitivity
limits, and on the other side it is running a short position in fixed income securities to partially cover the unfavourable
movement in interest rates.

Operational Risk

The human resources involved in the process of trading, settlement and risk management of derivatives are carefully
selected and subsequently trained to deal with the delicacies involved in the process. A state-of-the-art system has
been put in place which handles the derivative transactions. As each and every product / transaction is processed
in accordance with the product program or transaction memo, which contains in detail the accounting and operational
aspects of the transaction, it further mitigates the operational risk. In addition, Treasury Middle Office (TMO) and
Compliance and Control Department (CCD) are assigned with the responsibility of monitoring any deviation from
the policies and procedures. Group’s Audit and Inspection wing also reviews this function, which covers regular
review of systems, transactional processes, accounting practices, end-user roles and responsibilities.

UBL has installed a state-of-the-art derivatives system (SUPER DERIVATIVE), which provides an end-to-end
solution. Other than supporting the routine transactional process it also provides analytical tools to measure various
risk exposures and stress / sensitivity analysis.

Treasury Middle Office produces various reports for higher management (BoD, MRC etc.) on daily, monthly and ad-
hoc basis. These reports provide a quick look on derivatives business profile and various risk exposures.

Derivatives market in Pakistan, except for currency options, has a unidirectional demand, therefore the portfolio
structure, as regards interest rate derivatives, is liability dominant.

annual report 2009 76


Notes to and Forming Part of the Consolidated Financial Statements
77

For The Year Ended December 31, 2009


United Bank Limited

24.1 Product Analysis 2009


Interest rate swaps Cross currency swaps Swaptions FX options Commodity options Equity indices Forward rate agreements Forward purchase Forward sale contracts
contracts of of government securities
government securities
Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Total
of principal of principal of principal of principal of principal of principal of principal of principal of principal Notional
contracts contracts contracts contracts contracts contracts contracts contracts contracts
(Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees
in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000)
With Banks for

Hedging 8 7,740,900 4 14,571,600 - - 4 410,535 - - - - - - - - - - 22,723,035


Market Making 4 2,206,208 5 2,335,884 1 2,527,248 - - - - - - - - - - - - 7,069,340
12 9,947,108 9 16,907,484 1 2,527,248 4 410,535 - - - - - - - - - - 29,792,375
With other entities
Market Making 8 1,067,273 8 19,465,353 - - 4 410,535 - - - - - - - - - - 20,943,161

Total
Hedging 8 7,740,900 4 14,571,600 - - 4 410,535 - - - - - - - - - - 22,723,035
Market Making 12 3,273,481 13 21,801,237 1 2,527,248 4 410,535 - - - - - - - - - - 28,012,501
20 11,014,381 17 36,372,837 1 2,527,248 8 821,070 - - - - - - - - - - 50,735,536

2008
Interest rate swaps Cross currency swaps Swaptions FX options Commodity options Equity indices Forward rate agreements Forward purchase Forward sale contracts
contracts of of government securities
government securities
Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Total
of principal of principal of principal of principal of principal of principal of principal of principal of principal Notional
contracts contracts contracts contracts contracts contracts contracts contracts contracts
(Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees
in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000)
With Banks for

Hedging 9 7,987,105 8 11,217,419 - - 45 16,091,828 - - - - 1 250,000 - - - - 35,546,352


Market Making 10 7,678,036 1 1,958,250 - - 2 445,862 1 39,545 6 355,943 1 250,000 6 10,065,070 7 8,611,020 29,403,726
19 15,665,141 9 13,175,669 - - 47 16,537,690 1 39,545 6 355,943 2 500,000 6 10,065,070 7 8,611,020 64,950,078
With other entities
Market Making 21 5,093,231 6 2,773,200 - - 42 8,922,593 - - - - 2 350,000 - - - - 17,139,024

Total
Hedging 9 7,987,105 8 11,217,419 - - 45 16,091,828 - - - - 1 250,000 - - - - 35,546,352
Market Making 31 12,771,267 7 4,731,450 - - 44 9,368,455 1 39,545 6 355,943 3 600,000 6 10,065,070 7 8,611,020 46,542,750
40 20,758,372 15 15,948,869 - - 89 25,460,283 1 39,545 6 355,943 4 850,000 6 10,065,070 7 8,611,020 82,089,102
Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

24.2 Maturity analysis of derivatives

2009
Remaining Maturity No. of Notional Mark to market
contracts principal Negative Positive Net
(Rupees in '000)
Upto 1 Month 2 40,000 918 - (918)
1 to 3 Month 11 979,704 - 2,150 2,150
3 to 6 Month - - - - -
6 Month to 1 Year 7 1,225,196 8,367 21,138 12,771
1 to 2 Year 4 1,202,273 61,448 57 (61,391)
2 to 3 Year 2 6,975,000 32,171 119,516 87,345
3 to 5 Year 14 17,317,094 145,045 215,404 70,359
5 to 10 Year 6 22,996,269 309,465 141,406 (168,059)
Above 10 Year - - - - -
46 50,735,536 557,414 499,671 (57,743)

2008
No. of Notional Mark to market
Remaining Maturity contracts principal Negative Positive Net
(Rupees in '000)
Upto 1 Month 47 18,400,759 1,935 478 (1,457)
1 to 3 Month 32 22,986,230 3,666 - (3,666)
3 to 6 Month 26 2,854,281 900 - (900)
6 Month to 1 Year 15 1,593,368 13,051 - (13,051)
1 to 2 Year 17 3,811,299 45,382 13,941 (31,441)
2 to 3 Year 6 2,570,454 100,990 17,169 (83,821)
3 to 5 Year 20 21,887,726 579,607 351,021 (228,586)
5 to 10 Year 5 7,984,985 550,336 84,250 (466,086)
Above 10 Year - - - - -
168 82,089,102 1,295,867 466,859 (829,008)

2009 2008
(Rupees in '000)
25. MARK-UP / RETURN / INTEREST EARNED

On loans and advances


- Customers 45,565,230 40,541,372
- Financial institutions 648,980 921,491
46,214,210 41,462,863
On investments in
- Held for trading securities 735 -
- Available for sale securities 10,361,674 8,556,859
- Held to maturity securities 3,510,314 947,052
- Associates 18,532 2,091
13,891,255 9,506,002
On deposits with financial institutions 250,014 309,037
On securities purchased under resale agreements 1,115,663 1,413,574
Discount income 24,330 71,773
61,495,472 52,763,249

annual report 2009 78


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
26. MARK-UP / RETURN / INTEREST EXPENSED

On deposits 22,335,927 18,783,653


On securities sold under repurchase agreements 1,622,552 2,214,520
On other short - term borrowings 2,615,138 1,659,990
On long - term borrowings 1,514,905 1,348,166
Discount expense 234,750 240,952
28,323,272 24,247,281
27. GAIN ON SALE OF SECURITIES

Federal Government Securities


Market Treasury Bills 108,683 (10,229)
Pakistan Investment Bonds 46,290 (77,680)
154,973 (87,909)
Fully paid-up ordinary shares
Listed companies 331,362 325,856

Other securities 212,940 (36,771)


699,275 201,176
28. OTHER INCOME

Charges recovered from customers 1,162,018 934,344


Rent on properties 166,361 167,576
Income from dealing in derivatives 1,721,740 574,881
Others 346,681 240,650
3,396,800 1,917,451
29. ADMINISTRATIVE EXPENSES

Personnel Cost
Salaries, allowances etc. 29.1 7,586,763 7,280,683
Charge for compensated absences 37.1.8 418,143 155,189
Medical expenses 377,104 338,175
Contribution to defined contribution plan 517,083 135,957
Reversal in respect of defined benefit obligations (329,554) (232,138)
8,569,539 7,677,866
Premises Cost
Rent, taxes, insurance, electricity etc. 2,090,735 1,704,641
Depreciation 11.2 581,780 529,111
Repairs and maintenance 98,038 95,475
2,770,553 2,329,227

79 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
Other Operating Cost
Outsourced service charges including sales commission 1,313,164 1,842,756
Depreciation 11.2 957,249 761,968
Communications 764,049 710,330
Banking service charge 535,037 444,048
Advertisement and publicity 231,939 359,809
Legal and professional charges 233,312 335,168
Stationery and printing 354,134 306,536
Cash transportation charges 343,558 233,179
Travelling 178,392 200,861
Repairs and maintenance 294,519 212,541
Amortization 11.3 185,985 156,997
Insurance expense 174,956 124,774
Vehicle expenses 107,213 115,593
Office running expenses 152,455 115,425
Entertainment 98,112 91,771
Cartage, freight and conveyance 68,553 71,742
Training and seminar 53,887 74,093
Subscriptions 37,417 36,236
Auditors' remuneration 29.3 62,662 46,789
Sub-ordinated debt related costs 7,990 26,254
Brokerage expenses 19,772 7,742
Non-executive directors' fee and allowances 62,046 14,912
Donations 29.2 58,020 11,893
Finance charges on leased assets 110 283
Miscellaneous expenses 168,715 371,175
6,463,246 6,672,875

17,803,338 16,679,968

29.1 The Bank operates a short term employee benefit scheme which includes cash awards / bonus. Under the scheme,
the cash awards to all executives including the Chief Executive Officer is determined on the basis of employees'
evaluation and Bank's performance during the year. The aggregate amounts determined in respect of all executives
amounted to Rs.318.812 million (2008: Rs.168.884 million).
2009 2008
29.2 Donations exceeding Rs.0.1 million (Rupees in '000)
Karachi Education Initiative 40,000 3,000
Karachi City Police 9,793 -
Friends of Burns Center 1,728 1,440
Family Education Services Foundation 900 480
Marie Adelade Leprocy Center 850 850
Hisaar Foundation 550 -
Shalamar Hospital 545 -
Sun Development Foundation 483 -
SOS Childrens' Villages of Sindh 451 -
Institute of Business Administration 360 -
Lahore University of Management Sciences 315 315
Citizens Foundation - 2,200
Book Group - 1,548
Agha Khan University and Medical Foundation - 1,000
Jinnah Foundation Memorial Trust - 500
Umeed-e-Noor - 300
C.P.L.C. - 150
55,975 11,783

None of the directors, executives or their spouses had any interest in the donee.

annual report 2009 80


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

29.3 Auditors' remuneration


2009
Ernst & Young BDO Overseas Total
Ford Rhodes Ebrahim Auditors
Sidat Hyder & Co.
(Rupees in '000)
Audit fee 5,738 5,738 47,087 58,563
Fee for audit of EPZ branch 221 - - 221
Fee for audit of domestic subsidiaries - 328 - 328
Out of pocket expenses 1,868 1,682 - 3,550
7,827 7,748 47,087 62,662

2008
Ernst & Young KPGM Overseas Total
Ford Rhodes Taseer Auditors
Sidat Hyder Hadi & Co.
(Rupees in '000)
Audit fee 5,100 5,100 34,487 44,687
Fee for audit of EPZ branch 150 - - 150
Fee for audit of domestic subsidiaries - 242 - 242
Out of pocket expenses 848 862 - 1,710
6,098 6,204 34,487 46,789

Note 2009 2008


30. OTHER PROVISIONS / WRITE OFFS - NET (Rupees in '000)

Provision against other assets - net 13.4 339,131 196,026


Provision against off - balance sheet obligations 20.2 20,250 42,966
Other provisions / write offs 276,716 215,568
Provision against Ijara Assets - Specific 9,191 4,235
- General (3,014) 9,247
642,274 468,042
31. WORKERS' WELFARE FUND

The Bank is liable to pay WWF @ 2% of profit before tax as per accounts or declared income as per income tax
return, which ever is higher under the Worker's Welfare Fund Ordinance, 1971.

2009 2008
32. OTHER CHARGES (Rupees in '000)
Penalties of State Bank of Pakistan 64,552 258,321
Others - 34,056
64,552 292,377

81 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009
Overseas Azad Kashmir Domestic Total
33. TAXATION (Rupees in '000)

Current tax 906,230 113,181 5,976,846 6,996,257


Prior year tax 78,598 - 112 78,710
Deferred tax (7,677) (684) (2,162,377) (2,170,738)
977,151 112,497 3,814,581 4,904,229

2008
Overseas Azad Kashmir Domestic Total
(Rupees in '000)
Current tax 921,098 200,500 5,029,922 6,151,520
Prior year tax 35,072 - 400,000 435,072
Deferred tax 21,606 2,029 (1,003,427) (979,792)
977,776 202,529 4,426,495 5,606,800

2009 2008
(Rupees in '000)
33.1 Relationship between tax expense and accounting profit

Accounting profit for the year 14,392,181 14,052,051

Tax on income @ 35% (2008: 35%) 5,037,263 4,918,218


Tax effect of items that are either not included in determining taxable
profit or taxed at reduced rates / permanent difference (316,009) 169,176
Prior year tax charge 78,710 435,072
Others 104,265 84,334
Tax charge 4,904,229 5,606,800

34. BASIC / DILUTED EARNINGS PER SHARE

Profit after taxation for the year 9,521,546 8,355,757

(Number of shares)

Weighted average number of ordinary shares 1,112,890,625 1,112,890,625

(Rupees)

Basic / diluted earnings per share 8.56 7.51

34.1 A diluted earnings per share has not been presented as the Bank does not have any convertible instruments in issue
at December 31, 2009 and 2008 which would have any effect on the earnings per share if the option to convert is
exercised.

34.2 Earnings per share for the year 2008 has been restated for the effect of bonus shares issued during the year.

35. CASH AND CASH EQUIVALENTS Note 2009 2008


(Rupees in '000)
Cash and balances with treasury banks 6 61,252,772 50,143,570
Balances with other banks 7 14,049,990 14,540,306
75,302,762 64,683,876

annual report 2009 82


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008

36. STAFF STRENGTH (Number)

Permanent 8,648 9,028


Contractual basis 90 13
Group’s own staff strength at the end of the year 8,738 9,041
Outsourced 5,516 6,192
Total number of employees at the end of the year 14,254 15,233

37. EMPLOYEE BENEFITS

37.1 United Bank Limited

37.1.1 Defined benefit plan

37.1.2 General description

United Bank Limited operates a funded pension scheme established in 1986. The Bank also operates a funded
gratuity scheme for new employees and those employees who have not opted for the pension scheme. Further,
the Bank also operates a contributory benevolent fund scheme and provides post retirement medical to eligible
retired employees. The benevolent fund plan and post retirement medical plan cover all the regular employees of
the Bank who joined the Bank pre privatisation. The Bank is also maintaining employee compensated absences
scheme. The liability of the Bank in respect of long-term employee compensated absences is determined based
on actuarial valuation carried out using Projected Unit Credit Method. Actuarial valuation of the defined benefit plan
scheme is carried out every year and the latest valuation was carried out as at December 31, 2009.

37.1.3 Principal actuarial assumptions

The latest actuarial valuation was carried out as at December 31, 2009. Projected unit credit actuarial cost method,
using following significant assumptions was used for the valuation of the defined benefit plans:
2009 2008
Discount rate 12.75% 14.00%
Expected rate of return on plan assets 12.75% 14.00%
Expected rate of salary increase 10.50% 11.50%
Expected rate of pension increase 5.00% 5.00%

37.1.4 Reconciliation of (receivable from) / payable to defined benefit plans

2009 2008
Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Present value of funded obligations 3,585,208 365,292 459,080 - - 3,625,280 384,786 529,647 - -
Fair value of plan assets (6,107,212) (301,174) (796,302) - - (6,526,828) (291,292) (739,180) - -
(2,522,004) 64,118 (337,222) - - (2,901,548) 93,494 (209,533) - -
Present value of unfunded obligation - - - 852,603 731,908 - - - 875,509 613,602
Net actuarial gains or (losses) not
recognized 2,119,273 (79,620) 205,656 294,492 - 2,486,765 (133,812) 120,356 343,891 -
(Receivable) / payable (402,731) (15,502) (131,566) 1,147,095 731,908 (414,783) (40,318) (89,177) 1,219,400 613,602

83 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

37.1.5 Movement in defined benefit obligation


2009 2008
Note Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Obligation at the beginning of the year 3,625,280 384,786 529,647 875,509 613,602 4,343,529 399,289 564,591 1,202,462 843,193
Current service cost 10,051 46,619 7,103 5,914 34,461 16,408 46,748 10,597 11,693 25,562
Interest cost 156,655 53,312 62,995 103,084 110,245 160,501 38,557 54,239 120,831 85,597
Benefits paid by the bank (653,986) (86,446) (127,518) (125,019) (299,837) (848,135) (138,852) (141,047) (131,882) (369,949)
Recognition of prior service cost - - - - 62,201 - - - - -
Return allocated to other funds 37.1.8.1 322,253 - - - - 340,745 - - - -
Early retirement liability - - - (24,242) - - - - - -
Actuarial (gain) / loss on obligation 124,955 (32,979) (13,147) 17,357 211,236 (387,768) 39,044 41,267 (327,595) 29,199
Obligation at the end of the year 3,585,208 365,292 459,080 852,603 731,908 3,625,280 384,786 529,647 875,509 613,602

37.1.6 Movement in fair value of plan assets


2009 2008
Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Fair value at the beginning of the year 6,526,828 291,292 739,180 - - 7,260,256 356,676 914,356 - -
Expected return on plan assets 843,551 41,702 90,031 - - 852,156 34,520 84,307 - -
Contribution by the bank - 75,044 5,979 - - - 88,419 6,622 - -
Contribution by the employees - - 5,979 - - - - 6,622 - -
Amount paid by the fund to the bank (1,272,621) (119,390) (122,924) - - (1,600,934) (137,722) (136,307) - -
Payment received on behalf of the fund - - - - - - - - - -
Actuarial gain / (loss) on plan assets 9,454 12,526 78,057 - - 15,350 (50,601) (136,420) - -
Fair value at the end of the year 6,107,212 301,174 796,302 - - 6,526,828 291,292 739,180 - -

37.1.7 Movement in (receivable from) / payable to defined benefit plans


2009 2008
Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Opening balance (414,783) (40,318) (89,177) 1,219,400 613,602 (669,309) (1,886) (25,516) 1,218,758 843,193
Mark-up receivable on bank's balance (22,731) (846) (99) - - 5,273 (125) (338) - -
Charge / (reversal) for the year (583,852) 67,762 (31,717) 52,714 418,143 (503,546) 51,242 (51,961) 132,524 140,358
Contribution by the bank - (75,044) (5,979) - - - (88,419) (6,622) - -
Amount paid by the Fund to the bank 1,272,621 119,390 122,924 - - 1,600,934 137,722 136,307 - -
Payment received on behalf of the bank - - - - - - - - - -
Benefits paid by the bank (653,986) (86,446) (127,518) (125,019) (299,837) (848,135) (138,852) (141,047) (131,882) (369,949)
Closing balance (402,731) (15,502) (131,566) 1,147,095 731,908 (414,783) (40,318) (89,177) 1,219,400 613,602

37.1.8 Charge for defined benefit plans


2009 2008
Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Current service cost 10,051 46,619 7,103 5,914 34,461 16,408 46,748 10,597 11,693 25,562
Interest cost 156,655 53,312 62,995 103,084 110,245 160,501 38,557 54,239 120,831 85,597
Expected return on plan assets (843,551) (41,702) (90,031) - - (852,156) (34,520) (84,307) - -
Recognition of prior service cost - - - - 62,201 - - - - -
Actuarial (gains) and losses (229,260) 9,533 (5,805) (32,042) 211,236 (169,044) 457 (25,868) - 29,199
Return allocated to other funds 37.1.8.1 322,253 - - - - 340,745 - - - -
Employees' contribution - - (5,979) - - - - (6,622) - -
Settlement loss / gains - - - (24,242) - - - - - -
(583,852) 67,762 (31,717) 52,714 418,143 (503,546) 51,242 (51,961) 132,524 140,358

37.1.8.1 This represents return allocated to those employees who exercised the conversion option offered in the year 2001
as referred to in note 5.11.1.

annual report 2009 84


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

37.1.9 Actual return on plan assets

Amongst the defined benefit plans, currently, the pension, gratuity and benevolent fund plans are funded. The actual
return earned on the assets during the year are:

2009 2008
Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
(Rupees in '000)
Expected return on plan assets 843,551 41,702 90,031 - - 852,156 34,520 84,307 - -
Actuarial gain / (loss) on plan assets 9,454 12,526 78,057 - - 15,350 (50,601) (136,420) - -
853,005 54,228 168,088 - - 867,506 (16,081) (52,113) - -

37.1.10 Five year data on surplus / (deficit) of the plans and experience adjustments

2009 2008 2007 2006 2005


(Rupees in '000)
Pension Fund
Present value of defined benefit obligation (3,585,208) (3,625,280) (4,343,529) (4,433,583) (4,184,487)
Fair value of plan assets 6,107,212 6,526,828 7,260,256 7,116,577 6,349,249
Surplus / (deficit) 2,522,004 2,901,548 2,916,727 2,682,994 2,164,762
Experience adjustments on plan liabilities [loss / (gain)] 89,216 (87,141) 126,265 238,500 251,108
Experience adjustments on plan assets [loss / (gain)] (282,376) (1,195) (11,848) (411,713) (438,971)

Gratuity Fund
Present value of defined benefit obligation (365,292) (384,786) (399,289) (437,373) (381,983)
Fair value of plan assets 301,174 291,292 356,676 335,449 345,484
Surplus / (deficit) (64,118) (93,494) (42,613) (101,924) (36,499)
Experience adjustments on plan liabilities [loss / (gain)] 137,106 43,905 27,782 33,547 50,697
Experience adjustments on plan assets [loss / (gain)] 96,896 55,290 (5,179) 10,979 757

Benevolent Fund
Present value of defined benefit obligation (459,080) (529,647) (564,591) (670,979) (665,686)
Fair value of plan assets 796,302 739,180 914,356 917,522 773,365
Surplus / (deficit) 337,222 209,533 349,765 246,543 107,679
Experience adjustments on plan liabilities [loss / (gain)] (8,798) 138,712 (90,203) (11,064) 33,543
Experience adjustments on plan assets [loss / (gain)] (56,670) 144,550 (45,638) (64,187) (59,679)

Post retirement medical benefit


Present value of defined benefit obligation (852,603) (875,509) (1,202,462) (1,298,048) (1,263,750)
Experience adjustments on plan liabilities [loss / (gain)] 37,473 761 (67,904) (37,633) (12,195)

Employee compensated absences


Present value of defined benefit obligation 731,908 613,602 843,193 1,074,258 1,037,500
Experience adjustments on plan liabilities [loss / (gain)] - - - - -

37.1.11 Effects of a 1% movement in assumed medical cost trend rates

Annual medical expense limit is based on frozen non-monetized basic pay of employees as on June 30, 2001.
Accordingly, movement in medical cost trend rates would not affect current service cost, interest cost and defined
benefit obligation.

85 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

37.1.12 Components of plan assets as a percentage of total plan assets


2009 2008
Note Pension Gratuity Benevolent Post Employee Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen- fund fund fund retirement compen-
medical sated medical sated
absences absences
Percentage
Government securities 15.95% 51.14% 41.32% - - 35.54% 39.39% 43.39% - -
Units of mutual funds 24.98% 17.84% 45.40% - - 22.03% 29.38% 31.11% - -
Ordinary shares of listed companies 0.62% 0.77% 3.63% - - 0.30% - 3.20% - -
Term finance certificates 7.23% 29.35% - - - 7.89% 31.07% - - -
Others (including bank balances) 51.22% 0.90% 9.65% - - 34.24% 0.16% 22.30% - -
100.00% 100.00% 100.00% - - 100.00% 100.00% 100.00% - -

As per the actuarial recommendations the expected return on plan assets was taken as 12% per annum on Pension
Fund Assets, 10% per annum on Gratuity Fund Assets and 10% per annum on Benevolent Fund Assets. The
expected return on plan assets was determined by considering the expected returns available on the assets underlying
the current investment policy.

37.1.13 Expected contributions to be paid to the funds in the next financial year

The Bank contributes to the pension and gratuity funds according to the actuary's advice. Contribution to the
benevolent fund is made by the Bank as per the rates set out in the benevolent scheme. Based on actuarial advice,
the management estimates that the charge in respect of defined benefit plans for the year ended December 31,
2010 would be as follows:
2010
Pension Gratuity Benevolent Post Employee
fund fund fund retirement compen-
medical sated
absences
(Rupees in '000)
Expected charge for the year (468,765) 60,447 (48,534) 89,163 145,866

37.2 United National Bank Limited Pension and Life Assurance Scheme for U.K Employees.

As part of the shareholder agreement (the "agreement") signed on November 9, 2001 between UNBL and the share
holders of United Bank Limited and National Bank of Pakistan, it was agreed that the UNBL may participate as an
associated employer in the United Bank Limited Pension and Life Assurance Scheme ("The Scheme") with effect
from the completion of transfer of the businesses (November, 2001) ("The Completion date"). The scheme provides
benefits based on final pensionable salary.

Under the terms of the Agreement, the company is responsible for the funding requirements of the active members
whose employment were transferred to the UNBL on the completion date and for any new members admitted to
the scheme after this date. United Bank Limited remains responsible for the funding of the pensioners and deferred
members as at the Completion Date.

No new members have been admitted to the scheme in the year ended December 31, 2009.

The last full actuarial valuation of the scheme was carried at January 01, 2008 and has been updated as at January
01, 2009 by a qualified actuary on the basis of triennial valuations using Projected Unit Credit Method. The major
assumptions used by the actuary are as follows:

annual report 2009 86


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
Percentage
Discount rate 5.60% 6.40%
Rate of revaluation of pension in deferment 5.00% 5.00%
Expected rate of salary increase 0.00% 4.25%
Expected rate of pension increase 3.70% 3.00%
Price inflation 3.70% 2.75%

The assets and liabilities of the scheme noted below relate to those employees for whom the UNBL has a funding
liability. The combined assets in the scheme and the expected rate of return were:

(2009 (2008
Percentage Rupees Percentage Rupees
‘000) ‘000)
Other - insurance policy 5.60% 510,254 6.40% 398,970

Total market value of assets 510,254 398,970


Actuarial value of liability (654,625) (394,267)
Gross pension (liability) / asset (144,371) 4,703
Related Deferred Tax Relief 40,473 -
Net pension asset / (liability) (103,898) 4,703

The asset value supplied by the insurance company for 2009 is on an ongoing basis. If the policy had been
surrendered at December 31, 2009 the surrender value would have been Rs. 510.250 million (2008: Rs 398.970
million). It is not UNBL's intention to surrender the policy.
2009 2008
(Rupees in '000)
37.2.1 Movement in surplus / (deficit) during the year

Obligation at the beginning of the year 4,703 37,509


Current Service Cost (14,089) (17,043)
Past Service Cost (28,178) -
Interest Income 1,281 2,212
Employer`s contribution 21,262 12,620
Actuarial (gains) / losses (121,679) (31,745)
Exchange Adjustment (5,366) 1,151
Related Deferred Tax Relief 38,169 -
Obligation at the end of the year (103,897) 4,703

The Company's contribution increase to 25.9% from the start of 2009 and that of the employee's contribution remained
at 4%. No directors were members of the defined benefit scheme during the year or as at December 31, 2009.

37.2.2 Analysis of the amount charged to operating profit

Current service cost 14,089 17,043


Past service cost 28,178 -
Total operating charge 42,267 17,043

The defined benefit scheme is now closed to new entrants and future accrual will cease from January 1, 2010. As
a result of the curtailment in benefits the Company has recognised a past service cost of Rs. 28.178 million in this
year's profit and loss account.

87 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)
37.2.3 Analysis of the amount credited / (debited) to net interest income

Expected return on pension scheme assets 29,331 32,135


Interest on pension scheme liabilities (28,050) (29,923)
Net return 1,281 2,212

37.3 UBL Fund Managers Limited

The latest actuarial valuation of the Company's gratuity fund has been carried out as at December 31, 2009 using
the Projected Unit Credit Method. The main assumption used in the actuarial valuation are as follows:

37.3.1 Principal actuarial assumptions 2009 2008


Percentage
The key assumptions used for actuarial valuation were as follows:

Discount rate 12.75% 15.00%


Expected rate of return on plan assets 12.75% 15.00%
Expected rate of salary increase 12.75% 15.00%
Expected withdrawal rate Moderate Moderate

37.3.2 Reconciliation of payable to defined benefit plan


2009 2008
(Rupees in '000)
Present value of defined benefit obligations 13,168 8,041
Fair value of plan assets (7,246) (3,061)
5,922 4,980
Unrecognised actuarial gains / (losses) (1,131) (2,050)
4,791 2,930

37.3.3 Movement in defined benefit obligation

Obligation at the beginning of the year 8,041 4,427


Current service cost 4,045 2,714
Interest cost 1,491 575
Benefits paid (250) (537)
Actuarial (gains) / losses (159) 862
Obligation at the end of the year 13,168 8,041

37.3.4 Movement in the fair value of plan assets


3,061 1,897
Fair value of plan assets at the beginning of the year 828 359
Expected return on plan assets 2,930 1,939
Contributions to the plan (250) (537)
Benefits paid 677 (597)
Actuarial gains / (losses) 7,246 3,061

37.3.5 Plan assets are comprised as follows:

Balance with banks in deposit account 2,809 1,361


Cash 847 1,700
Equity 3,575 -
Others 15 -
(Surplus) / Deficit 7,246 3,061

annual report 2009 88


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)
37.3.6 Charge for defined benefit plan

Current service cost 4,045 2,714


Interest cost 1,491 575
Expected return on plan asset (828) (359)
Amortization of (gain) / loss 83 -
4,791 2,930

Actual return on plan assets 1,433 11

37.3.7 Movement in net liability recognised

Opening net liability 2,930 1,939


Expense recognised 4,791 2,930
Contribution to the fund made during the year (2,930) (1,939)
Closing net liability 4,791 2,930

37.4 OTHER EMPLOYEE BENEFITS

37.4.1 Defined contribution plan

The Bank operates a contributory provident fund scheme for 5,356 (2008: 5,383) employees who are not in the
pension scheme. The employer and employee both contribute 8.33% of the basic salaries to the funded scheme
every month.

37.4.2 Employee Motivation and Retention Scheme

The Bank operates a long term motivation and retention scheme for its employees. The objective of the scheme is
to reward, motivate and retain high performing executives and officers of the Bank by way of bonus in the form of
shares of the Bank .The liability of the Bank in respect of this scheme is fixed and approved each year by the Board
of Directors of the Bank .The scheme is managed by separate Trusts formed in respect of each year.

89 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

38. COMPENSATION OF DIRECTORS AND EXECUTIVES

President / Chief
Directors Executives
Executive
2009 2008 2009 2008 2009 2008
(Rupees in '000)
Fees - - 54,090 14,912 - -

Managerial remuneration 67,696 76,158 - - 2,312,762 2,007,321

Charge for defined benefit plans 1,001 991 - - 189,601 184,281

Charge for defined contribution plan 1,880 1,880 - - 48,875 38,528

Rent and house maintenance 2,375 2,592 - - 333,228 257,666

Utilities 148 182 - - 105,803 50,917

Medical 56 170 - - 66,902 50,917

Conveyance - - - - 292,845 252,377

Reimbursement of children's education


fees 5,928 2,219 - - - -

Others 1,880 1,558 - - 110,800 101,806

80,964 85,750 54,090 14,912 3,460,816 2,943,813

Number of persons 1 1 7 7 1,135 973

The Bank's President / Chief Executive Officer and Executives are provided with free use of Bank maintained cars
and household equipments.

In addition to the above, all executives including Chief Executive Officer of the bank, are also entitled to certain short
and long term employee benefits which are disclosed in note 37 to these consolidated financial statements.

The particulars in this note do not include particulars of Directors, Chief Executive and Executives of subsidiary companies.

39. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of traded investments other than those classified as held to maturity is based on quoted market price.
Fair value of unquoted equity investments is determined on the basis of break-up value of these investments as
per the latest available audited financial statements. The provision for impairment of associates and other investments
has been determined in accordance with the Group's accounting policy as stated in notes 4.2 and 5.8 to these
consolidated financial statements respectively.

Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient
reliability due to absence of current and active market for assets and liabilities and reliable data regarding market
rates for similar instruments. The provision for impairment of loans and advances has been calculated in accordance
with the Group's accounting policy as stated in note 5.6 to these consolidated financial statements.

The repricing profile, effective rates and maturity are stated in note 44 to these consolidated financial statements.

In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly
different from their carrying values since assets and liabilities are either short term in nature or in the case of customer
loans and deposits are frequently repriced.

annual report 2009 90


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

40. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

For The Year Ended December 31, 2009


Corporate Trading Retail Commercial Asset Others
finance & sales banking banking management
(Rupees in '000)
Total income 629,587 15,649,156 25,808,474 30,857,547 480,357 1,080,784
Total expenses (1,065,551) (12,462,672) (16,660,335) (28,475,397) (304,110) (1,145,659)
Profit / (loss) before tax (435,964) 3,186,484 9,148,139 2,382,150 176,247 (64,875)
Segment return on assets (ROA) (%) -3.8% 1.2% 2.7% 0.6% 23.1%
Segment cost of funds (%) 14.7% 10.5% 7.0% 10.2% 8.5%

For The Year Ended December 31, 2008


Corporate Trading Retail Commercial Asset Others
finance & sales banking banking management
(Rupees in '000)
Total income 1,124,926 12,475,582 23,424,209 25,546,181 512,093 750,967
Total expenses (1,597,122) (12,106,850) (15,611,414) (19,968,125) (338,367) (160,026)
Profit / (loss) before tax (472,196) 368,732 7,812,795 5,578,056 173,726 590,941
Segment return on assets (ROA) (%) -3.4% 0.1% 2.6% 1.5% 23.2%
Segment cost of funds (%) 13.5% 7.6% 5.0% 10.0% 9.0%

As at December 31, 2009


Corporate Trading Retail Commercial Asset Others
finance & sales banking banking management
(Rupees in '000)
Segment assets (gross of NPL provisions) 7,449,464 166,432,507 222,607,209 246,060,761 495,052 25,105,386
Segment non performing loans (NPL) - - 20,021,906 13,522,882 - 6,520,449
Segment provision required against NPL - - 12,981,152 8,293,354 - 6,426,344
Segment liabilities 6,449,753 162,108,934 200,753,892 228,201,047 51,050 (24,433,510)

As at December 31, 2008


Corporate Trading Retail Commercial Asset Others
finance & sales banking banking management
(Rupees in '000)
Segment assets (gross of NPL provisions) 9,061,986 170,434,698 197,562,501 240,661,490 487,666 21,066,432
Segment non performing loans (NPL) - - 15,001,943 8,271,004 - 5,279,775
Segment provision required against NPL - - 9,774,847 3,619,083 - 5,173,453
Segment liabilities 10,332,523 170,610,912 182,682,516 225,672,677 135,280 (18,122,182)

41. TRUST ACTIVITIES

The bank is not engaged in any significant trust activities. However, it acts as custodian for some of the Term
Finance Certificates it arranges and distributes on behalf of its customers.

91 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

42. RELATED PARTY TRANSACTIONS

The Group has related party relationship with its associates, subsidiary companies undertakings (refer note 9),
employee benefit plans (refer note 37) and its directors and executive officers (including their associates).

Detail of loans and advances to the key management personnel, the companies or firms in which the directors of the
group are interested as directors, partners or in case of private companies as members are given in note 10.8 to these
consolidated financial statements.

Contributions to and accruals in respect of staff retirements and other benefit plans are made in accordance with the
actuarial valuations / terms of the contribution plan (refer note 37 to these consolidated financial statements for the
details of plans). Remuneration to the executives, disclosed in note 38 to these consolidated financial statements, is
determined in accordance with the terms of their appointment.

Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in
these consolidated financial statements, are as follows:

2009 2008
Key mana- Other Key mana- Other
gement Associates related gement Associates related
personnel parties personnel parties
(Rupees in '000)
Advances
At January 01 148,875 - - 80,592 - -
Given during the year 38,092 - - 135,743 - -
Repaid during the year (84,217) - - (67,460) - -
At December 31 102,750 - - 148,875 - -

Deposits
At January 01 20,149 147,701 308,347 14,252 231,886 5,865,116
Received during the year 258,920 15,508,596 1,151,870 543,947 44,273,279 2,034,774
Withdrawn during the year (259,704) (15,491,420) (1,403,764) (538,050) (44,357,464) (7,591,543)
At December 31 19,365 164,877 56,453 20,149 147,701 308,347

Outstanding borrowing at the end of the year - 300,000 - - 850,000 -

Other receivable - 108,522 - - 37,954 4,458

Other payable - 26,851 - - 164,932 -

Employee Motivation and Retention Scheme - - 210,000 - - 338,552

Term Finance Certificates purchased - - - - 1,898,783 -

2009 2008
Key mana- Other Key mana- Other
gement Associates related gement Associates related
personnel parties personnel parties
(Rupees in '000)
Mark-up / return / interest earned 7,398 - - 5,855 499 -
Mark-up / return / interest expensed 389 69,402 816 122 91,185 387
Dividend income received - 228,516 - - 317,202 -
Other income - 576 - - 114,643 -
Insurance premium paid - 215,804 - - 42,125 -
Remuneration paid 299,564 - - 277,185 - -
Post employment benefits 11,740 - - 10,487 - -
Contribution to defined contribution plan - - 416,114 - - 122,417
Contribution to defined benefit plan - - 81,023 - - 95,041
Employee Motivation and Retention Scheme - - 210,000 - - 230,005
Borrowing made during the year - 4,429,043 - - 8,100,000 -
Borrowing settled during the year - 5,279,043 - - 7,250,000 -
Maximum amount of a placement
made during the year - 1,279,043 - - 800,000 -
Investment made during the year - 4,600,810 - - 5,579,970 -
Redemption made during the period - 1,121,117 - - 8,702,834 -
Gains realised on derivative transactions - 1,662,595 - - - -
Unrealised loss on derivative transactions - 307,241 - - - -
Bonus units received - 22,500 - - 127,175 -

annual report 2009 92


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

43. CAPITAL ADEQUACY

43.1 The basel II Framework is applicable to UBL both at the consolidated level (comprising of wholly / partially owned
subsidiaries) and also on a stand alone basis.

Risk is an inherent part of every bank's business activities, which are managed through risk management frame
work and governance structures at Group.

The major risks types are:


- Market risk
- Credit risk
- Liquidity risk
- Operational risk
- Legal risk
- Reputational risk

Group's capital adequacy is being managed, maintained and reported using various measures including the rules
and ratios provided by the State Bank of Pakistan.

Capital adequacy ratio is a measure of the amount of the Group's capital expressed as a percentage of its risk
weighted assets. Measuring capital adequacy requires risk mitigants to be applied to the amount of assets shown
on a Group's balance sheet. These assets are then applied weightages according to the degree of inherent risk.
The capital adequacy ratios compare the amount of eligible capital with the total of Risk-Weighted Assets (RWAs).

The Group identifies measures, monitors / controls and reports risk through various control mechanisms, including
dynamically assessing the potential impact of internal and external factors on transactions and positions developing
risk mitigation strategies, and establishing risk management policies. The Group will continue to maintain the capital
adequacy requirement either through its stringent risk management strategies or by increasing the capital requirements
in line with business and capital needs.

The Group has developed Internal Capital Adequacy Assessment Process (ICAAP) as per the guidelines provided
by SBP. This framework has been approved by Bank’s Board of Directors and submitted to SBP. The Group has
covered additional risks which are not covered under Pillar I and have projected satisfactory capital adequacy for
the next six years leaving ample cushion for any future capital requirements. The Group will review the ICAAP
framework on annual basis (financial year end i.e. December) and changes/updates will be recommended to Basel
II committee for onward submission to the Board of Directors.

The Group is in the process of developing an internal economic capital model, where each business unit will be
allocated capital according to the risks generated including incorporating the diversification concept of each
risk type.

43.2 Capital Management

The objective of managing capital is to safeguard the Group's ability to continue as a going concern, so that it could
continue to provide adequate returns to shareholders by pricing products and services commensurately with the
level of risk. It is the policy of the Group to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’
return is also recognized and the bank recognizes the need to maintain a balance between the higher returns that
might be possible with greater gearing and the advantages and security afforded by a sound capital position.

93 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Goals of managing capital

The goals of managing capital of the Group are as follows:

- to comply with the capital requirements set by regulators and comparable to the peers;

- to actively manage the supply of capital costs and increase capital velocity;

- to increase strategic and tactical flexibility in the deployment of capital to allow for the timely reallocation of
capital;

- to improve the liquidity of the Group's assets to allow for an optimal deployment of the bank's resources

- to protect the Group against unexpected events and maintain strong rating;

- to safeguard the Group's ability to continue as a going concern so that it can continue to provide adequate return
to shareholders;

- availability of adequate capital (including the quantum) at a reasonable cost so as to enable the Group to expand;

- to achieve low overall cost of capital with appropriate mix of capital elements.

Statutory minimum capital requirement and management of capital

The State Bank of Pakistan through its BSD Circular No. 07 dated April 15, 2009 has prescribed the minimum paid-
up capital (net of losses) for Banks / Development Finance Institutions to be raised to Rs.10 billion by the year
ending December 31, 2013. The raise is to be achieved in a phased manner requiring Rs.6 billion paid up capital
(net of losses) by the end of the financial year 2009.

Minimum paid-up capital (net of losses) deadline by which to be increased is as follows:

Rs.6 billion December 31, 2009


Rs.7 billion December 31, 2010
Rs.8 billion December 31, 2011
Rs.9 billion December 31, 2012
Rs.10 billion December 31, 2013

The paid-up capital of the Bank for the year ended December 31, 2009 stood at Rs. 11,128.907 million (2008: Rs.
10,117.188 million) and is in compliance with the SBP requirement for the said year. In addition the Banks are also
required to maintain a minimum Capital Adequacy Ratio (CAR) of 10% of the risk weighted exposure of the Group.
The Group’s CAR as at December 31, 2009 was 14.03% (2008: 10.43%) of its risk weighted exposure.

Group’s regulatory capital is analyzed into two tiers.

Tier 1 capital, which includes fully paid up capital (including the bonus shares), balance in share premium account,
general reserves as per the financial statements and net un-appropriated profits etc after deductions of book value
of goodwill / intangibles, deficit on revaluation of available for sale investments and 50% of other deductions calculated
as per the guidelines laid under the Basel II framework.

annual report 2009 94


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Tier 2 capital, which includes general provisions for loan losses (up to a maximum of 1.25% risk weighted assets),
reserves on the revaluation of fixed assets and equity investments (up to a maximum of 45% the balance in the
related revaluation reserves), foreign exchange translation reserves and sub-ordinated debts (upto maximum of
50% of total eligible tier 1 capital) after deduction of 50% of other deductions calculated as per the guidelines laid
under the Basel II framework.

Tier 3 Capital, has also been prescribed by the SBP for managing market risk; however, the Group does not have
any Tier 3 capital.

The capital of the UBL is managed keeping in view the minimum "Capital Adequacy Ratio" required by SBP through
BSD Circular No.6 dated October 28, 2006.The adequacy of capital is tested with reference to the risk-weighted
assets of the bank.

The required capital adequacy ratio (10% of the risk-weighted assets) is achieved by the Group through improvement
in the asset quality at the existing volume level, ensuring better recovery management and striking compromise
proposal and settlement and composition of asset mix with low risk. Banking operations are categorized as either
trading book or banking book and risk-weighted assets are determined according to specified requirements of the
State Bank of Pakistan that seek to reflect the varying levels of risk attached to assets and off-balance sheet
exposures. The total risk-weighted exposures comprise the credit risk and market risk.

The calculation of Capital Adequacy enables the Group to assess the long-term soundness. As the Group carries
on the business on a wide areas network basis, it is critical that it is able to continuously monitor the exposure across
the entire organization and aggregate the risks so as to take an integrated approach / view.

The allocation of capital between specific operations and activities is, to a large extent driven by the optimization
of the return achieved on the capital allocated. Although maximization of the return on risk-adjusted capital is the
principal basis used in determining how capital is allocated within the Group to particular operations or activities, it
is not the sole basis used for decision making. Account also is taken of synergies with other operations and activities,
etc. and the fit of the activity with the Group’s long term strategic objectives. The Group has complied with all
externally imposed capital requirements through out the period. Further, there has been no material change in the
Group's management of capital during the year.

95 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009
43.3 Capital Adequacy Ratio

The capital to risk weighted assets ratio, calculated in accordance with the State Bank of Pakistan's guidelines on capital adequacy was
as follows:
2009 2008
Regulatory capital base
(Rupees in '000)
Tier 1 Capital
- Fully paid-up capital 11,128,907 10,117,188
- Statutory and general reserves as disclosed on the balance sheet 12,354,984 10,386,033
- Un appropriated profit 23,617,874 17,703,327
- Minority interest 2,279,691 2,044,589
49,381,456 40,251,137
Deductions:
- Book value of intangibles 491,511 405,247
- Deficit on account of revaluation of investments held in AFS category - 7,888,767
- Other deductions (50% of the amount)
Investment in equity and other regulatory capital of (majority
or significant minority) in an insurance entity 33,792 1,452,916
525,303 9,746,930
Total eligible Tier 1 Capital 48,856,153 30,504,207

Supplementary Capital
Tier 2 Capital
- General provisions or general reserves for loan losses-up to
maximum of 1.25% of risk weighted assets 569,195 881,137
- Revaluation reserves up to 45% 5,980,110 4,979,272
- Foreign exchange translation reserves 9,019,387 7,146,661
- Subordinated debt - upto maximum of 50% of total eligible Tier 1 capital 8,300,938 10,254,006
- Cash flow hedge reserve (317,562) (425,589)
Total Tier 2 Capital 23,552,068 22,835,487

Deductions:
- Other deductions (50%of the amount as calculated on CAP 2)
Investments in equity and other regulatory capital of (majority
or significant minority) in an insurance entity 33,792 1,452,916
33,792 1,452,916
Total eligible Tier 2 Capital 23,518,276 21,382,571

Tier 3 Capital - -
Eligible Tier 3 Capital - -

Total eligible Capital (1+2+3) 72,374,429 51,886,778

Capital requirements Risk weighted assets


Risk weighted exposures 2009 2008 2009 2008
Credit risk (Rupees in '000)
Claims on:
Other sovereigns, GoP, PG, SBP other than PKR 1,304,341 1,320,243 13,043,410 14,669,372
PSE's 1,197,023 1,728,056 11,970,232 19,200,626
Banks 2,591,925 1,477,086 25,919,253 16,412,068
Corporate 25,181,850 25,061,638 251,818,497 278,462,640
Retail portfolio 4,683,906 4,289,403 46,839,059 47,660,035
Secured by residential property 196,697 682,428 1,966,966 7,582,529
Past due loans 1,429,507 1,028,755 14,295,066 11,430,616
Listed equity investments 908,622 105,799 9,086,220 1,175,547
Unlisted equity investments 66,274 39,821 662,736 442,452
Investments in fixed assets 2,324,257 1,756,950 23,242,572 19,521,668
Other assets 682,561 660,277 6,825,606 7,336,411
40,566,963 38,150,456 405,669,617 423,893,964
Market risk
Interest rate risk 1,830,566 371,176 22,882,079 4,639,697
Equity exposure risk 337,635 219,071 4,220,436 2,738,386
Foreign exchange risk 673,653 620,609 8,420,665 7,757,616
Position in options - 595,584 - 7,444,796
2,841,854 1,806,440 35,523,180 22,580,495
Operational risk 5,980,740 4,071,756 74,759,246 50,896,954
49,389,557 44,028,652 515,952,043 497,371,413

Capital adequacy ratio

Total eligible regulatory capital held 72,374,429 51,886,778


Total risk weighted assets 515,952,043 497,371,413
Capital adequacy ratio 14.03% 10.43%

annual report 2009 96


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

44. RISK MANAGEMENT

This section presents information about the Group’s exposure to and its management and control of risks, in particular
the primary risks associated with its use of financial instruments:

- Credit risk is the risk of loss resulting from client or counterparty default
- Market risk is exposure to market variables such as interest rates, exchange rates and equity indices
- Liquidity risk is the risk that the Group may be unable to meet its payment obligations when due
- Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems
or from external events, and therefore includes legal risk

Representations of risk are for a given period and UBL’s risk management will constantly evolve as its business
activities change in response to credit, market, product and other developments. There have been many initiatives
started by the Group including IT projects for replacing the core Banking system, business process re-engineering
and inventorying the risks and controls within the Group's existing business and process units. All of these initiatives,
as they partially or completely roll out, will have a direct impact on the risk management function within the Group.

44.1 Credit risk

Credit risk is the risk of loss to the Group as a result of failure by a client or counterparty to meet its contractual
obligations. It is inherent in loans, commitments to lend and contingent liabilities, such as letters of credit – and in
traded products – derivative contracts such as forwards, swaps and options, repurchase agreements (repos and
reverse repos) and securities borrowing and lending transactions.

The Risk and Credit Policy Group, has the Credit Administration, Market and Treasury Risk, Commercial and FIRMU
Credit Policy, Consumer and Retail Credit, Credit Risk Management and Operational Risk and Basel II functions
reporting directly to the Risk and Credit Policy Group Executive. There are senior managers heading each risk
category, managing a team solely dedicated to risk management and to maintain a sound and effective risk
management culture. The role of the Risk and Credit Policy Group particularly includes:

- Participation in portfolio planning and management.


- Establishment of credit policies and standards that conform to regulatory requirements and the Group’s overall
objectives.
- Working with Business Groups in keeping aggregate credit risk well within the Group’s risk taking capacity.
- Developing and maintaining Credit Approval Authority structure.
- Approving major credits.
- Granting approval authority to qualified and experienced individuals.
- Reviewing the adequacy of credit training across the Group.
- Organizing portfolio reviews focusing on quality assessment, risk profiles, industry concentrations, etc.
- Setting systems to identify significant portfolio indicators, problem credits and level of provisioning required.

44.1.1 Credit Risk - General Disclosures

The bank is following standardized approach for all its Credit Risk Exposures.

Credit Risk: Disclosures for portfolio subject to Standardized Approach and supervisory risk weights in IRB
approach Basel II specific

Under standardized approach, the capital requirement is based on the credit rating assigned to the counterparties
by the External Credit Assessment Institutions (ECAIs) duly recognized by SBP for capital adequacy purposes. In
this connection, the Group utilizes the credit ratings assigned by ECAIs and has recognized agencies such as
PACRA (Pakistan Credit Rating Agency), JCR-VIS (Japan Credit Rating Company – Vital Information Systems),
Fitch, Moody’s and Standard & Poors which are also recognized by the SBP. The Group also utilizes rating scores
of Export Credit Agencies (ECA) participating in the “Arrangement on Officially Supported Export Credits”.

97 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

The standardised approach to credit risk sets out fixed risk weights corresponding, where appropriate, to external
credit assessment levels or for unrated claims.

Selection of ECAIs

The Group selects particular ECAI(s) for each type of claim. Amongst the ECAIs that have been recognised as
eligible by SBP, the following are being used against each respective claim type.

Sovereigns Exposures: For foreign currency claims on sovereigns, the Group uses country risk scores of Export Credit
Agencies (ECA) participating in the “Arrangement on Officially Supported Export Credits” available on OECD’s website.

Exposures to Multilateral Development Banks (MDBs): For exposures on MDBs not eligible for a 0% risk weight,
ratings of Moody’s, S&P and Fitch are being used to calculate risk-weighted assets.

Exposures to Public Sector Entities (PSEs): For PSE exposures, ratings of PACRA and JCR-VIS are used to arrive
at risk weights.

Bank Exposures: For foreign banks (i.e., incorporated outside Pakistan), ratings of Moody’s, S&P and Fitch is being
used to arrive at risk weights. However, for local banks (i.e., incorporated in Pakistan) ratings of PACRA and JCR-
VIS are used.

Corporate Exposures: Ratings assigned by PACRA and JCR-VIS are used for claims on Corporate (excluding equity
exposures).

Use of ECAI Ratings

The Group prefers solicited ratings over unsolicited ratings at all times, owing to the greater degree of accuracy (in
general) associated with solicited ratings as compared to unsolicited ratings. Unsolicited ratings may only be used
in cases where a solicited rating is not available.

annual report 2009 98


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Mapping to SBP Rating Grades

The selected final ratings (after application of the principles stated above) for all exposures need to be translated
to the standard rating grades given by the SBP. In this regard, the mapping tables to be used for converting ECAI
ratings to SBP rating grades are given below:

Long – Term Rating Grades Mapping

SBP Rating grade Fitch Moody’s S&P PACRA JCR-VIS ECA Scores
1 AAA Aaa AAA AAA AAA 0
AA+ Aa1 AA+ AA+ AA+ 1
AA Aa2 AA AA AA
AA- Aa3 AA- AA- AA-
2 A+ A1 A+ A+ A+ 2
A A2 A A A
A- A3 A- A- A-
3 BBB+ Baa1 BBB+ BBB+ BBB+ 3
BBB Baa2 BBB BBB BBB
BBB- Baa3 BBB- BBB- BBB-
4 BB+ Ba1 BB+ BB+ BB+ 4
BB Ba2 BB BB BB
BB- Ba3 BB- BB- BB-
5 B+ B1 B+ B+ B+ 5
B B2 B B B 6
B- B3 B- B- B-
6 CCC+ and Caa1 and CCC+ and CCC CCC 7
below below below CC CC
C C
D
Short – Term Rating Grades Mapping

SBP Rating grade Fitch Moody’s S&P PACRA JCR-VIS


S1 F1 P-1 A-1+ A-1+ A-1+
A-1 A-1 A-1
S2 F2 P-2 A-2 A-2 A-2
S3 F3 P-3 A-3 A-3 A-3
S4 Others Others Others Others Others

Types of exposures and ECAI's used


Exposures JCR-VIS PACRA Fitch S & P ECA scores
Corporate P P - - -
Banks P P P P -
Sovereigns - - - - P
PSE P P - - -

99 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Credit exposures subject to Standardized Approach


2009 2008
Rating Amount Deduction Net Amount Deduction Net
category outstanding CRM amount outstanding CRM amount
Rupees in ‘000
Cash and Cash Equivalents - 13,813,277 - 13,813,277 14,893,506 - 14,893,506

Claims on Government of Pakistan - 62,121,705 6,228,951 55,892,754 139,692,559 12,155,890 127,536,669


(Federal or Provincial Governments) and
SBP, denominated in PKR

Foreign Currency claims on SBP arising - 4,487,971 - 4,487,971 4,732,746 - 4,732,746


out of statutory obligations of banks in
Pakistan

Claims on other sovereigns and on 1 1,946,332 - 1,946,332 12,640,404 - 12,640,404


Government of Pakistan or provincial 2 12,669,156 - 12,669,156 8,368,632 - 8,368,632
governments or SBP denominated in 3 - - - - - -
currencies other than PKR 4,5 6,668,157 (22,570) 6,690,727 6,785,270 - 6,785,270
6 2,528,342 - 2,528,342 4,121,052 - 4,121,052
Unrated 26,338 - 26,338 28,799 - 28,799
23,838,325 (22,570) 23,860,895 31,944,157 - 31,944,157

Corporate 0 - - - 1,985,549 - 1,985,549


1 15,388,248 9,092 15,379,156 8,964,923 62,769 8,902,154
2 6,182,276 107,907 6,074,369 2,673,643 130,669 2,542,974
3,4 1,679,117 - 1,679,117 2,916,477 - 2,916,477
5,6 1,182,235 - 1,182,235 - - -
Unrated 270,537,693 28,284,682 242,253,011 277,499,611 5,005,365 272,494,246
294,969,569 28,401,681 266,567,888 294,040,203 5,198,803 288,841,400

Banks 0 - - - - - -
1 37,788,122 22,769,911 15,018,211 42,168,289 17,134,820 25,033,469
2,3 26,124,854 47,116 26,077,738 6,133,005 2,528,842 3,604,163
4,5 3,506,514 576 3,505,938 3,010,901 - 3,010,901
6 - - - - - -
Unrated 12,899,955 158,346 12,741,609 7,698,801 16,759 7,682,042
80,319,445 22,975,949 57,343,496 59,010,996 19,680,421 39,330,575

Claims on banks with maturity less than 3 1,2,3 - - - 2,996,416 - 2,996,416


months and denominated in foreign currency 4,5 - - - 2,747,459 - 2,747,459
6 - - - - - -
Unrated - - - 3,891,789 - 3,891,789
- - - 9,635,664 - 9,635,664

Public sector 0 - - - 4,469 - 4,469


1 6,656,459 589,581 6,066,878 17,143,202 3,396,643 13,746,559
2,3 - - - - - -
4,5 - - - - - -
6 - - - - - -
Unrated 66,982,129 45,468,416 21,513,713 32,923,943 21,314 32,902,629
73,638,588 46,057,997 27,580,591 50,071,614 3,417,957 46,653,657

Retail 75% 65,720,344 3,268,265 62,452,079 64,599,491 1,052,777 63,546,714


35% 5,619,903 - 5,619,903 21,664,368 - 21,664,368
71,340,247 3,268,265 68,071,982 86,263,859 1,052,777 85,211,082

Equity Investments
- Listed 100% 9,086,220 - 9,086,220 2,144,587 969,040 1,175,547
- Unlisted 150% 441,824 - 441,824 441,465 146,497 294,968
9,528,044 - 9,528,044 2,586,052 1,115,537 1,470,515

Past due loans


- Less than 20% 150% 3,576,454 212,420 3,364,034 3,573,906 191,731 3,382,175
- Between 20% to 50% 100% 11,399,342 4,191,246 7,208,096 7,152,233 2,632,536 4,519,697
- More than 50% 50% 25,846,230 23,347,721 2,498,509 18,176,970 15,678,509 2,498,461
40,822,026 27,751,387 13,070,639 28,903,109 18,502,776 10,400,333

Past due loans secured against mortgage


of residential property:
- past due for more than 90 days 100% 626,876 80,912 545,964 492,347 - 492,347
- past due by 90 days 50% 891,713 400,312 491,401 397,619 205,462 192,157
1,518,589 481,224 1,037,365 889,966 205,462 684,504

All Fixed Assets 100% 23,242,572 - 23,242,572 19,521,668 - 19,521,668

Others 8,372,309 1,546,703 6,825,606 9,810,187 2,473,776 7,336,411


Total 708,012,667 136,689,587 571,323,080 751,996,286 63,803,399 688,192,887

annual report 2009 100


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Credit Risk: Disclosures with respect to Credit Risk Mitigation for Standardized Approach

The Group has adopted the Comprehensive Approach of Credit Risk Mitigation for the Banking Book. No credit risk
mitigation benefit is taken in the trading book. In instances where the Group’s exposure on an obligor is secured
by collateral that conforms to the eligibility criteria under the Comprehensive Approach of CRM, then the Group
reduces its exposure under that particular transaction by taking into account the risk mitigating effect of the collateral
for the calculation of capital requirement i.e. risk weight of the collateral instrument securing the exposure is substituted
for the risk weight of the counter party.

The Group accepts cash, lien on deposits, government securities and eligible guarantees etc. under the comprehensive
approach of Credit Risk Mitigation. The Group has in place detailed guidelines with respect to valuation and
management of various collateral types. In order to obtain the credit risk mitigation benefit, the Group uses realizable
value of eligible collaterals to the extent of outstanding exposure.

Counterparty ratings are obtained through the two local SBP authorized External Credit Rating Agencies; JCR VIS
and PACRA and other international sources such as Standard and Poor's, Fitch and Moody’s. Credit risk assessment
and the continuous monitoring of counterparty and portfolio credit exposures is carried out by the Credit Risk
Management function.

The wholesale portfolio, which includes corporate, commercial and agricultural loans are ideally collateralized by
cash equivalents, fixed and current assets including property plant and equipment and land. Loans to individuals
are typically secured by autos for car loans and private or income producing real estate is secured by a mortgage
over the relevant property.

The Group manages limits and controls concentrations of credit risk as identified, in particular, to individual
counterparties and groups, and to industries and countries, where appropriate. Concentrations of credit risk exist
if clients are engaged in similar activities, or are located in the same geographic region or have comparable economic
characteristics such that their ability to meet contractual obligations would be similarly affected by changes in
economic, political or other conditions. Group sets limits on its credit exposure to counterparty groups, by industry,
product, counterparty and geographical location, in line with SBP standards. Limits are also applied in a variety of
forms to portfolios or sectors where Group considers it appropriate to restrict credit risk concentrations or areas of
higher risk, or to control the rate of portfolio growth.

The Group classifies a claim as impaired if it considers it likely that it will suffer a loss on that claim as a result of
the obligor’s inability to meet its commitments (including interest payments, principal repayments or other payments
due) after realization of any available collateral. Loans carried at amortized cost are classified as non-performing
where payment of interest, principal or fees is overdue by more than 90 days. Allowances or provisions are determined
such that the carrying values of impaired claims are consistent with the requirements of SBP. The authority to
establish allowances, provisions and credit valuation adjustments for impaired claims, is vested in Finance Division
and is according to SBP regulations. Details are given in note 10 to these financial statements.

101 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

44.1.2 Geographical segment analysis


2009
Profit before Total assets Net assets Contingencies
taxation employed employed & commitments
(Rupees in ‘000)

Pakistan operations 11,804,300 484,460,960 32,231,500 362,537,146

United States of America 111,414 2,138,970 1,259,785 320,870


Europe 95,224 22,661,929 8,149,517 3,702,120
Asia Pacific 58,448 708,459 321,518 166,269
Middle East 2,322,795 130,479,211 25,356,043 83,660,911
2,587,881 155,988,569 35,086,863 87,850,170
14,392,181 640,449,529 67,318,363 450,387,316

2008
Profit before Total assets Net assets Contingencies
taxation employed employed & commitments
(Rupees in ‘000)

Pakistan operations 9,721,480 462,033,125 21,653,667 394,539,543

United States of America 177,668 736,875 932,672 -


Europe 378,069 20,291,474 10,157,008 2,647,897
Asia Pacific 41,387 1,336,065 207,453 38,862,833
Middle East 3,733,447 136,309,850 16,444,864 49,426,850
4,330,571 158,674,264 27,741,997 90,937,580
14,052,051 620,707,389 49,395,664 485,477,123

Total assets employed include intra group items of Rs.Nil.

44.2 Market Risk

Market risk is the risk that a bank may experience loss due to unfavourable movements in market prices. It results
from changes in the prices of equity instruments, fixed-income securities and currencies. Its major components are,
therefore, equity position risk, rate-of-return risk, and currency risk. Each component of risk includes general aspect
of market risk and a specific aspect of market risk that originates in the portfolio structure of a bank.

Market risk measures and controls are applied at the portfolio level, and concentration limits and other controls are
applied where necessary to individual risk types, to particular books and to specific exposures. Portfolio risk measures
are common to all market risks, but concentration limits and other controls are tailored to the nature of the activities
and the risks they create.

Trading activities are centered in the Treasury and Capital Market (TCM) and include market making, facilitation of
client business and proprietary position taking. The Group is active in the cash and derivative markets for equities,
fixed income and interest rate products and foreign exchange.

annual report 2009 102


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Controls are also applied to prevent any undue risk concentrations in trading books, taking into account variations
in price volatility and market depth and liquidity. They include controls on exposure to individual market risk variables,
such as individual interest or exchange rates (’risk factors’), and on positions in the securities of individual issuers.

Treasury and Market Risk (TMR) division performs all market risk management activities within the Group. The
Division is composed of two wings, i.e., Treasury Middle Office and Market Risk Management. The Market Risk
Department is responsible for developing and reviewing market risk policies, strategies, processes, conducting
market research, and is involved in model construction and testing etc. Middle Office is taking care of the operational
side. It has to ensure monitoring and implementation of market risk and other policies, escalation of any deviation
to senior management, compilation and MIS reporting, etc.

44.2.1 Segmental information

44.2.1.1 Segments by class of business


2009
Contingencies and
Gross advances Deposits
commitments
(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent
Chemical and pharmaceuticals 6,081,931 1.56% 11,971,327 2.38% 1,235,141 0.27%
Agri business 50,894,347 13.03% 21,026,267 4.17% 48,362 0.01%
Textile spinning 19,541,766 5.00% 1,225,983 0.24% 3,153,486 0.70%
Textile weaving 7,788,745 1.99% 804,049 0.16% 3,307,899 0.73%
Textile composite 21,246,034 5.44% 965,467 0.19% 244,588 0.05%
Textile others 13,090,077 3.35% 1,981,459 0.39% 2,521,137 0.56%
Cement 6,508,094 1.67% 988,097 0.20% 1,471,077 0.33%
Sugar 7,068,609 1.81% 2,360,348 0.47% 16,915 0.00%
Shoes and leather garments 2,200,397 0.56% 1,827,377 0.36% 11,522 0.00%
Automobile and transportation equipment 5,574,069 1.43% 4,318,840 0.86% 1,306,428 0.29%
Financial 5,679,937 1.45% 11,835,140 2.35% 262,516,211 58.29%
Insurance - 0.00% 13,802,720 2.74% 37,673 0.01%
Electronics and electrical appliances 2,159,288 0.55% 7,076,567 1.40% 1,931,037 0.43%
Production and transmission of energy 41,179,308 10.55% 19,932,300 3.96% 20,328,644 4.51%
Paper and allied 1,125,589 0.29% 1,016,292 0.20% 267,165 0.06%
Surgical and metal 567,366 0.15% 1,553,961 0.31% 95,659 0.02%
Contractors 2,600,466 0.67% 18,104,119 3.59% 20,133,503 4.47%
Wholesale traders 11,749,311 3.01% 26,658,663 5.29% 1,383,149 0.31%
Fertilizer dealers 5,729,029 1.47% 9,516,985 1.89% 1,461,840 0.32%
Sports goods 432,121 0.11% 868,470 0.17% 70,510 0.02%
Food industries 7,470,504 1.91% 3,231,634 0.64% 2,241,180 0.50%
Airlines 5,569,645 1.43% 1,621,206 0.32% 118,910 0.03%
Cables 379,600 0.10% 225,097 0.04% 255,330 0.06%
Construction 26,087,924 6.68% 7,793,699 1.55% 7,829,209 1.74%
Containers and ports 95,855 0.02% 1,223,696 0.24% 1,036,486 0.23%
Engineering 1,496,050 0.38% 3,124,994 0.62% 3,093,417 0.69%
Glass and Allied 444,982 0.11% 914,092 0.18% 316,022 0.07%
Hotels 2,747,484 0.70% 1,018,965 0.20% 303,976 0.07%
Infrastructure 2,507,584 0.64% 4,547,147 0.90% 32,018 0.01%
Media - 0.00% 448,233 0.09% 77,411 0.02%
Polyester and fibre 3,403,956 0.87% 409,196 0.08% 117,122 0.03%
Telecommunication 8,557,307 2.19% 3,526,634 0.70% 25,329,025 5.62%
Individuals 81,411,045 20.85% 269,979,202 53.59% 3,361,186 0.75%
Others 39,105,534 10.01% 47,933,444 9.51% 84,734,076 18.81%
390,493,953 100.00% 503,831,672 100.00% 450,387,316 100.00%

103 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

2008
Contingencies and
Gross advances Deposits
commitments
(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent
Chemical and pharmaceuticals 4,969,946 1.25% 3,346,416 0.68% 6,493,951 1.34%
Agri business 28,392,337 7.14% 23,389,224 4.75% 45,358 0.01%
Textile spinning 22,498,135 5.66% 743,221 0.15% 2,167,314 0.45%
Textile weaving 8,405,185 2.11% 283,074 0.06% 1,724,231 0.36%
Textile composite 21,799,000 5.48% 784,763 0.16% 581,207 0.12%
Textile others 13,002,671 3.27% 1,517,089 0.31% 7,523,260 1.55%
Cement 5,748,245 1.45% 1,095,680 0.22% 15,777,626 3.25%
Sugar 7,125,739 1.79% 2,328,901 0.47% 108,543 0.02%
Shoes and leather garments 3,083,922 0.78% 2,113,705 0.43% 273,673 0.06%
Automobile and transportation equipment 9,625,335 2.42% 3,599,445 0.73% 3,077,958 0.63%
Financial 7,395,753 1.86% 8,919,716 1.81% 263,913,854 54.36%
Insurance - 0.00% 13,203,155 2.68% 71,278 0.01%
Electronics and electrical appliances 2,543,023 0.64% 3,511,547 0.71% 1,971,279 0.41%
Production and transmission of energy 39,135,346 9.84% 23,219,533 4.72% 28,780,455 5.93%
Paper and allied 1,987,626 0.50% 783,732 0.16% 227,899 0.05%
Surgical and metal 928,548 0.23% 1,404,496 0.29% 108,109 0.02%
Contractors 2,353,124 0.59% 16,324,227 3.32% 2,355,113 0.49%
Wholesale traders 13,395,158 3.37% 24,116,087 4.90% 1,435,078 0.30%
Fertilizer dealers 5,396,543 1.36% 9,433,187 1.92% 1,957,674 0.40%
Sports goods 563,160 0.14% 530,438 0.11% 22,652 0.00%
Food industries 7,580,540 1.91% 4,932,417 1.00% 2,598,762 0.54%
Airlines 7,953,299 2.00% 1,737,760 0.35% 21,269 0.00%
Cables 365,900 0.09% 81,578 0.02% 651,244 0.13%
Construction 21,888,695 5.50% 10,010,811 2.03% 33,764,171 6.95%
Containers and ports 192,406 0.05% 2,023,997 0.41% 895 0.00%
Engineering 2,175,931 0.55% 2,593,967 0.53% 610,024 0.13%
Glass and Allied 607,918 0.15% 599,924 0.12% 129,092 0.03%
Hotels 3,201,814 0.81% 853,170 0.17% 25,366 0.01%
Infrastructure 3,113,952 0.78% 1,842,238 0.37% 5,491 0.00%
Media 493,290 0.12% 457,455 0.09% 93,620 0.02%
Polyester and fibre 1,739,026 0.44% 229,345 0.05% 51,127 0.01%
Telecommunication 8,297,343 2.09% 1,510,486 0.31% 7,354,556 1.51%
Individuals 91,926,964 23.11% 258,799,330 52.57% 17,080,211 3.52%
Others 49,850,570 12.53% 65,947,783 13.40% 84,474,783 17.40%
397,736,446 100.00% 492,267,898 100.00% 485,477,123 100.00%

annual report 2009 104


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

44.2.1.2 Segments by sector


2009
Contingencies and
Gross advances Deposits
commitments
(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent
Public / Government 66,948,105 17.14% 50,369,132 10.00% 63,563,612 14.11%
Private 323,545,848 82.86% 453,462,540 90.00% 386,823,704 85.89%
390,493,953 100.00% 503,831,672 100.00% 450,387,316 100.00%

2008
Contingencies and
Gross advances Deposits
commitments
(Rupees in '000) Percent (Rupees in '000) Percent (Rupees in '000) Percent
Public / Government 44,845,490 11.28% 79,197,323 16.09% 72,427,524 14.92%
Private 352,890,956 88.72% 413,070,575 83.91% 413,049,599 85.08%
397,736,446 100.00% 492,267,898 100.00% 485,477,123 100.00%

44.2.2 Details of non performing advances and specific provisions by class of business segment
2009 2008
Classified Specific Classified Specific
advances provision held advances provision held
(Rupees in '000)
Chemical and pharmaceuticals 309,349 177,596 165,190 130,312
Agri business 1,508,525 862,526 1,625,152 604,915
Textile spinning 5,017,860 3,927,267 2,420,187 2,013,992
Textile weaving 888,722 867,460 242,469 235,243
Textile composite 998,902 765,271 724,001 570,310
Textile others 2,935,380 2,365,528 2,767,639 2,489,931
Cement 4,450 4,450 31,598 29,483
Sugar 33,638 33,638 34,782 34,782
Shoes and leather garments 241,948 180,321 97,319 78,005
Automobile and transportation equipment 1,019,508 704,676 783,119 656,798
Financial 59,305 22,348 43,675 23,774
Insurance - - - -
Electronics and electrical appliances 542,892 428,957 240,344 66,513
Production and transmission of energy 2,927,748 1,942,137 154,429 154,429
Paper and allied 173,212 116,438 39,881 39,881
Surgical and metal 1,775 1,775 44,515 33,423
Contractor - - 6,540 3,501
Wholesale traders 1,024,613 648,018 963,506 690,107
Fertilizer dealers 6,182 4,364 36,549 21,440
Sports goods 280,675 279,310 307,202 300,339
Food industries 795,442 781,194 714,275 670,400
Construction 4,106,175 1,249,378 3,059,111 512,722
Containers and ports - - - -
Engineering 353,454 353,454 353,111 341,571
Steel - - - -
Glass and Allied 29,796 14,899 34,976 17,488
Hotels 489,493 116,586 202,338 2,338
Infrastructure - - - -
Media - - - -
Polyester and fibre 1,702,376 1,668,561 1,744,057 960,778
Telecommunication - - 14,000 2,421
Individuals 11,145,588 8,073,785 8,542,935 5,608,049
Others 3,468,229 2,110,913 3,159,822 2,274,438
40,065,237 27,700,850 28,552,722 18,567,383

105 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

44.2.3 Details of non performing advances and specific provision by sector


2009 2008
Classified Specific Classified Specific
advances provision held advances provision held
(Rupees in '000)
Public / Government - - - -
Private 40,065,237 27,700,850 28,552,722 18,567,383
40,065,237 27,700,850 28,552,722 18,567,383

The scope of market risk management is as follows:

- To keep the market risk exposure within the Group’s risk appetite as assigned by the Board of Directors (BOD).

- All the market risk policies are approved by the BOD and implementation is done by the senior management
through MRC, Treasury and Market Risk division.

- Various limits have been assigned to different businesses on a product-portfolio basis. All the products have
been approved through product programs, where all the risk have been identified and limits and parameters to
operate have been set.

- Any transaction / product falling beyond the Product Policy Manuals must be approved through separate
transaction / product memo.

44.2.4 Foreign Exchange Risk


2009
Assets Liabilities Off - balance Net foreign
sheet items currency
exposure
(Rupees in '000)
Pakistan Rupee 544,311,005 477,309,003 (7,376,198) 59,625,804
US Dollar 36,427,386 35,678,901 128,765 877,250
Pound Sterling 15,648,746 16,217,506 5,300,828 4,732,068
Japanese Yen 317,257 276,281 (41,117) (141)
Euro 3,330,172 6,801,212 3,508,282 37,242
UAE Dirham 3,078,195 2,122,578 (1,061,846) (106,229)
Bahrain Dinar 18,850,218 18,874,901 - (24,683)
Qatari Riyal 795,762 - (842,508) (46,746)
Other Currencies 17,690,787 15,850,784 383,794 2,223,798
640,449,529 573,131,166 - 67,318,363

2008
Assets Liabilities Off - balance Net foreign
sheet items currency
exposure
(Rupees in '000)
Pakistan Rupee 439,513,706 394,866,701 3,263,227 47,910,232
US Dollar 46,659,832 42,844,714 (4,025,639) (210,521)
Pound Sterling 16,871,368 11,606,861 3,156,482 8,420,989
Japanese Yen 59,183 61,562 26,292 23,913
Euro 3,654,139 8,599,843 5,503,905 558,201
UAE Dirham 79,149,702 78,552,022 (593,973) 3,707
Bahrain Dinar 11,399,872 11,038,396 - 361,476
Qatari Riyal 17,590,011 17,707,716 (391) (118,096)
Other Currencies 5,809,576 6,033,910 (7,329,903) (7,554,237)
620,707,389 571,311,725 - 49,395,664

annual report 2009 106


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

Foreign Exchange Risk is the risk of loss resulting from changes in exchange rates. Foreign exchange positions
are reported on a consolidated basis and limits are used to monitor exposure in individual currencies.

The Group is an active participant in currency cash and derivatives markets and carries currency risk from these
trading activities, conducted primarily in the Treasury & Capital Markets. These trading exposures are subject to
prescribed stress, sensitivity and concentration limits. Details of foreign exchange contracts, most of which arise
from trading activities and contribute to currency risk, are shown in this note.

The Group's reporting currency is the PKR, but its assets, liabilities, income and expense are denominated in many
currencies. Reported profits or losses are translated daily into PKR, reducing volatility in the Group’s earnings from
subsequent changes in exchange rates within the limits regulated by SBP. Treasury also, from time to time, proactively
hedges significant expected foreign currency earnings / costs (mainly USD, EUR and GBP) within a time horizon
up to one year, in accordance with the instructions of the SBP and subject to pre-defined limits.

44.2.5 Equity position risk in the banking book – Basel II specific

Equity risk is the risk of loss resulting from changes in the levels of equity indices and values of individual stocks.
Equity investments in banking book are normally taken on by the Investment Banking Group (IBG) and Treasury and
Capital Markets. The positions held for capital gains are classified in Held for Trading (HfT) and Available for Sale (AfS)
portfolios, whereas a separate strategic portfolio is maintained for position held for relationship or strategic purposes.

Product programs have been developed to discuss in detail the objectives / policies for equity investments and
accounting / valuation procedures.

Currently, UBL is following Average Costing (AVCO) policy for accounting of equity investment / trading portfolios.
Revaluation (MTM) of portfolio is done on a daily basis and separate profit and loss / balance sheet accounts are
maintained for different portfolios.

UBL’s equity investments portfolio includes Listed company shares, Mutual Funds, Unlisted companies and other
illiquid investments (non-tradable due to de-listing, etc.). Treasury Capital Market’s investments generally constitute
of highly liquid listed shares (highly publicly traded) and are classified in HFT and AFS portfolios. IBG’s investments
are held with medium to long term gains with some part in listed shares and mutual funds while the rest are included
in strategic investment.

Equity position risk in trading book arises due to changes in prices of individual stocks or levels of equity indices.
UBL’s equity trading book comprises of Treasury Capital Market’s Held-for-Trading (HFT) & Available-for-Sale (AFS)
portfolios and Investment Banking Group’s AFS portfolio. Objective of Treasury Capital Market’s HFT portfolio is
to take advantages of short-term capital gains, while the AFS portfolio is maintained with a medium-term view of
capital gains and dividend income. IBG maintained its AFS portfolio with a medium-long term view of capital gains
and higher dividend yields. Separate product program manuals have been developed to discuss in detail the
objectives / policies, risks / mitigates, limits / controls for equity trading portfolios of TCM and IBG.

44.2.6 Yield / Interest Rate Risk in the Banking Book (IRRBB)

The increase (decline) in earnings or economic value (or any other relevant measures used by management) for
upward and downward shocks according to management's method for measuring IRRBB, broken down by currencies
(if any, and then translated into rupees).

Interest rate risk is the risk of loss resulting from changes in interest rates, including changes in the shape of yield
curves. It is controlled primarily through a limit structure. Exposure to interest rate movements can be expressed
for all interest rate sensitive positions as the impact on their fair values of a one basis point (0.01%) change in
interest rates.

Interest rate risk is inherent in many of the Group’s businesses and arises from factors such as mismatches between
contractual maturities or re-pricing of on and off balance sheet assets & liabilities. Interest rate risk arises from the
banking book mainly through its advances and deposits portfolio, particularly the Corporate, Commercial and
Consumer business’s books.

107 United Bank Limited


Notes to and Forming Part of the Consolidated Financial Statements
For The Year Ended December 31, 2009
44.2.7 Mismatch of Interest Rate Sensitive Assets and Liabilities 2009
Exposed to yield / interest risk Non-interest
bearing
Effective yield Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10 financial
/ interest rate month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years instruments
On-balance sheet financial instruments % (Rupees in ‘000)

Assets
Cash and balances with treasury banks 0.01% 61,252,772 15,398,540 - - - - - - - - 45,854,232
Balances with other banks 0.6% 14,049,990 6,546,749 2,029,733 680,099 - - - - - - 4,793,409
Lendings to financial institutions 10.8% 23,162,130 18,483,355 2,773,622 385,669 143,875 1,210,610 165,000 - - - -
Investments 10.4% 137,734,578 6,054,475 49,292,312 28,353,250 17,014,397 3,252,847 4,407,582 1,432,058 13,138,356 3,639,751 11,149,548
Advances 13.0%
Performing 349,715,209 77,542,326 144,052,123 52,589,999 51,493,148 10,279,900 6,853,267 6,853,267 - - 51,179
Non-performing 12,364,387 - - - - - - - - - 12,364,387
Operating fixed assets - Ijara assets 10% - 23% 514,391 - - 514,391 - - - - - - -
Other assets - 13,108,576 - - - - - - - - - 13,108,576
611,902,033 124,025,445 198,147,790 82,523,408 68,651,420 14,743,357 11,425,849 8,285,325 13,138,356 3,639,751 87,321,331

Liabilities
Bills payable - 5,166,361 - - - - - - - - - 5,166,361
Borrowings 11.2% 37,168,277 11,691,719 6,701,606 14,316,171 455,496 526,093 283,755 137,058 2,928,274 88,581 39,524
Deposits and other accounts 0.3-13.6% 503,831,672 103,680,944 123,272,252 42,761,077 52,195,507 7,234,507 3,539,662 3,539,662 3,513,600 - 164,094,462
Subordinated loans 12.60% 11,989,800 - 7,994,424 - 424 665,467 1,330,085 1,999,400 - - -
Liabilities against assets subject
to finance lease 11.5-14.5% 611 - - 478 133 - - - - - -
Other liabilities - 13,358,662 - - - - - - - - - 13,358,662
571,515,383 115,372,663 137,968,282 57,077,726 52,651,560 8,426,067 5,153,502 5,676,120 6,441,874 88,581 182,659,009

On-balance sheet gap 40,386,650 8,652,782 60,179,508 25,445,682 15,999,860 6,317,290 6,272,347 2,609,205 6,696,482 3,551,170 (95,337,678)

Non financial net assets 26,931,714

Total net assets 67,318,363

Off-balance sheet financial instruments

Interest rate swaps - Long position 11,014,381 7,094,496 175,000 421,208 1,050,196 102,273 750,000 1,000,000 421,208 - -
Interest rate swaps - Short position (11,014,381) (957,598) (382,598) (2,198,481) - (1,000,000) - (6,054,496) (421,208) - -
Cross Currency Swaps - Long Position 36,372,837 5,712,267 25,438,470 5,222,100 - - - - - - -
Cross Currency Swaps - Short Position (36,372,837) (5,712,267) (25,438,470) (5,222,100) - - - - - - -
Swaptions - Long Position 2,527,248 - 2,527,248 - - - - - - - -
Swaptions -Short Position (2,527,248) - (2,527,248) - - - - - - - -
FX Options - Long position 410,535 - - - - - - - - - 410,535
FX Options - Short position (410,535) - - - - - - - - - (410,535)
Commodity Indices - Long position - - - - - - - - - - -
Commodity Indices - Short position - - - - - - - - - - -
annual report 2009 108

Equity Indices - Long position - - - - - - - - - - -


Equity Indices - Short position - - - - - - - - - - -
Forward Rate Agreements - Long position - - - - - - - - - - -
Forward Rate Agreements - Short position - - - - - - - - - - -
Forward Purchase of Govt. Securities - - - - - - - - - - -
Forward Sale of Govt. Securities - - - - - - - - - - -
Foreign currency forward purchases 92,086,590 26,411,085 42,328,428 22,624,587 722,491 - - - - - -
Foreign currency forward sales (47,499,455) (35,327,341) (11,286,064) (886,050) - - - - - - -

Off-balance sheet gap 44,587,135 (2,779,358) 30,834,766 19,961,264 1,772,687 (897,727) 750,000 (5,054,496) - - -

Total Yield/Interest Risk Sensitivity Gap 84,973,784 5,873,424 91,014,274 45,406,946 17,772,547 5,419,563 7,022,347 (2,445,291) 6,696,482 3,551,170 (95,337,678)

Cumulative Yield/Interest Risk Sensitivity Gap 84,973,784 5,873,424 96,887,697 142,294,643 160,067,190 165,486,753 172,509,099 170,063,809 176,760,291 180,311,461 84,973,783

Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.
Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.
Notes to and Forming Part of the Consolidated Financial Statements
109 United Bank Limited

For The Year Ended December 31, 2009


2008
Exposed to yield / interest risk Non-interest
bearing
Effective yield Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10 financial
/ interest rate month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years instruments
On-balance sheet financial instruments % (Rupees in ‘000)

Assets
Cash and balances with treasury banks 0.40% 50,143,570 11,595,644 - - - - - - - - 38,547,926
Balances with other banks 5.30% 14,540,307 4,901,020 2,663,012 - 639,025 260,805 - - - - 6,076,445
Lendings to financial institutions 9.10% 22,805,341 21,735,819 449,824 208,372 65,492 179,167 166,667 - - - -
Investments 8.50% 115,057,089 9,547,173 57,764,358 15,755,405 679,730 421,416 2,341,465 6,126,634 11,559,480 1,348,899 9,512,529
Advances 12.0%
Performing 367,960,027 82,523,989 156,087,413 56,664,878 46,385,037 11,136,654 7,418,052 7,677,113 - - 66,891
Non-performing 9,985,339 - - - - - - - - - 9,985,339
Operating fixed assets - Ijara assets 10% - 25% 741,919 - 42,369 127,108 572,442 - - - - - -
Other assets - 14,439,255 - - - - - - - - - 14,439,255
595,672,847 130,303,645 217,006,976 72,755,763 48,341,726 11,998,042 9,926,184 13,803,747 11,559,480 1,348,899 78,628,385

Liabilities
Bills payable - 5,210,869 - - - - - - - - - 5,210,869
Borrowings 8.6% 44,749,691 43,091,213 1,550,000 - - - - - - - 108,478
Deposits and other accounts 1.9-20.2% 492,267,900 113,993,701 127,054,440 45,523,038 49,883,102 7,124,393 3,855,926 3,855,926 4,591,424 - 136,385,950
Subordinated loans 12.60% 11,993,848 - 7,997,624 - 424 848 665,467 3,329,485 - - -
Liabilities against assets subject
to finance lease 11.5-14.5% 1,978 - - 1,493 485 - - - - - -
Other liabilities - 14,301,214 - - - - - - - - - 14,301,214
568,525,500 157,084,914 136,602,064 45,524,531 49,884,011 7,125,241 4,521,393 7,185,411 4,591,424 - 156,006,511

On-balance sheet gap 27,147,347 (26,781,269) 80,404,912 27,231,232 (1,542,285) 4,872,801 5,404,791 6,618,336 6,968,056 1,348,899 (77,378,126)

Non financial net assets 22,248,317

Total net assets 49,395,664


-
Off-balance sheet financial instruments

Interest Rate Derivatives - Long position 20,758,372 4,465,985 4,279,925 43,332 259,444 3,142,105 1,170,455 6,397,126 1,000,000 - -
Interest Rate Derivatives - Short position (20,758,372) (2,873,552) (5,299,108) (4,339,802) - - (1,000,000) (6,454,925) (790,985) - -
Cross Currency Swap - Long position 15,948,869 - 11,249,669 4,449,200 - - 250,000 - - - -
Cross Currency Swap - Short Position (15,948,869) - (11,249,669) (4,449,200) - - (250,000) - - - -
FX Options - Long position 891,725 891,725 - - - - - - - - -
FX Options - Short position (6,723,373) (6,723,373) - - - - - - - - -
Commodity Indices - Long position 39,545 39,545 - - - - - - - - -
Commodity Indices - Short position - - - - - - - - - - -
Equity Indices - Long position 355,943 355,943 - - - - - - - - -
Equity Indices - Short position - - - - - - - - - - -
Forward Rate Agreements - Long position 850,000 850,000 - - - - - - - - -
Forward Rate Agreements - Short position (850,000) (850,000) - - - - - - - - -
Forward Purchase of Govt. Securities 10,065,070 - 9,597,520 - 467,550 - - - - - -
Forward Sale of Govt. Securities (8,611,020) - (8,143,470) - (467,550) - - - - - -
Sale of Govt. Securities not yet purchased - - - - - - - - - - -
Foreign currency forward purchases 79,929,121 38,211,338 20,619,302 18,564,127 2,353,462 180,892 - - - - -
Foreign currency forward sales (55,616,766) (17,639,096) (16,497,240) (18,303,946) (3,001,953) (174,531) - - - - -

Off-balance sheet gap 20,330,245 16,728,515 4,556,929 (4,036,289) (389,047) 3,148,466 170,455 (57,799) 209,015 - -

Total Yield/Interest Risk Sensitivity Gap (10,052,754) 84,961,841 23,194,943 (1,931,332) 8,021,267 5,575,246 6,560,537 7,177,071 1,348,899 (77,378,126)

Cumulative Yield/Interest Risk Sensitivity Gap (10,052,754) 74,909,087 98,104,030 96,172,698 104,193,965 109,769,211 116,329,748 123,506,819 124,855,718 47,477,592

Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.

Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.
Notes to and Forming Part of the Consolidated Financial Statements
For The Year Ended December 31, 2009

44.3 Liquidity Risk

The Group’s approach to liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions without incurring unacceptable losses or risking sustained damage to business franchises. A centralized approach is adopted, based
on an integrated framework incorporating an assessment of all material known and expected cash flows and the availability of high-grade collateral which could be
used to secure additional funding if required. The framework entails careful monitoring and control of the daily liquidity position, and regular liquidity stress testing
under a variety of scenarios. Scenarios encompass both normal and stressed market conditions, including general market crises and the possibility that access to
markets could be impacted by a stress event affecting some part of Group’s business.

44.3.1 Maturities of Assets and Liabilities - based on contractual maturity of the assets and liabilities of the Group

The maturity profile set out below has been prepared on the basis of contractual maturities. The management believes that such a maturity analysis does not reveal
the expected maturity of current and saving deposits as a contractual maturity analysis of deposits alone does not provide information about the conditions expected
in normal circumstances. The maturity profile disclosed in note 43.3.2 that includes maturities of current and saving deposits determined by the Assets and Liabilities
Management Committee (ALCO) keeping in view historical withdrawal pattern of these deposits reflects a more meaningful analysis the liquidity risk of the bank.

2009
Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10
month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years
(Rupees in ‘000)
Assets

Cash and balances with treasury banks 61,252,772 48,151,775 - - - - - - - 13,100,997


Balances with other banks 14,049,990 9,836,577 2,662,509 899,726 180,043 37,672 - - - 433,463
Lendings to financial institutions 23,162,130 18,323,555 2,319,313 783,185 216,592 354,485 1,000,000 165,000 - -
Investments 137,734,578 2,132,842 20,045,826 19,544,119 20,076,565 6,708,279 8,084,089 33,793,777 25,404,237 1,944,848
Advances 362,079,596 122,194,665 44,938,461 37,724,332 37,850,760 27,098,325 7,526,873 25,376,341 51,269,189 8,100,648
Operating fixed assets 23,734,082 1,940,947 364,608 749,032 769,222 2,347,761 907,601 1,613,853 2,622,572 12,418,486
Deferred tax asset 649,814 40,744 - - 273,858 335,212 - - - -
Other assets 17,786,567 1,790,870 1,781,912 9,618,760 2,470,936 1,740,158 - 383,929 - -
640,449,529 204,411,975 72,112,629 69,319,154 61,837,976 38,621,892 17,518,563 61,332,900 79,295,998 35,998,442
Liabilities

Bills payable 5,166,361 4,972,520 193,841 - - - - - - -


Borrowings 37,168,277 11,700,809 6,732,040 14,366,171 405,496 526,093 283,755 137,058 2,928,274 88,581
Deposits and other accounts 503,831,672 426,804,901 42,046,318 8,488,651 9,957,838 6,811,436 702,303 1,062,379 7,957,846 -
annual report 2009 110

Subordinated loans 11,989,800 - 2,024 - 2,024 668,667 1,997,821 3,334,864 5,984,400 -


Liabilities against assets
subject to finance leases 611 - - - 611 - - - - -
Other liabilities 14,974,445 30,721,503 (26,713,934) 1,729,996 7,450,947 (126,524) - - 1,912,455 -
Deferred tax liability - - - - - - - - - -
573,131,166 474,199,733 22,260,289 24,584,818 17,816,916 7,879,672 2,983,879 4,534,301 18,782,975 88,581
Net assets 67,318,363 (269,787,758) 49,852,340 44,734,336 44,021,060 30,742,220 14,534,684 56,798,599 60,513,023 35,909,861

Represented by:

Share capital 11,128,907


Reserves 21,167,954
Unappropriated profit 23,617,875
Minority interest 2,279,691
Surplus on revaluation of assets 9,123,936
67,318,363
Notes to and Forming Part of the Consolidated Financial Statements
111

For The Year Ended December 31, 2009


United Bank Limited

2008

Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10
month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years
(Rupees in ‘000)
Assets

Cash and balances with treasury banks 50,143,570 45,409,616 - - - - - - - 4,733,954


Balances with other banks 14,540,306 11,477,194 - 3,063,112 - - - - - -
Lendings to financial institutions 22,805,341 21,507,303 678,340 208,372 65,492 179,167 166,667 - - -
Investments 115,057,090 5,966,460 53,390,776 8,183,146 1,550,569 2,626,910 4,673,170 22,012,561 13,102,650 3,550,848
Advances 377,945,366 77,866,575 162,886,307 55,618,575 55,618,575 11,123,714 7,415,810 7,415,810 - -
Operating fixed assets 19,926,915 136,927 273,857 410,785 821,571 1,643,142 942,132 1,521,688 4,722,069 9,454,744
Deferred tax asset 2,164,148 - - - 973,867 1,190,281 - - - -
Other assets 18,124,653 6,121,078 721,453 11,282,122 - - - - - -
620,707,389 168,485,153 217,950,733 78,766,112 59,030,074 16,763,214 13,197,779 30,950,059 17,824,719 17,739,546
Liabilities

Bills payable 5,210,870 5,210,870 - - - - - - - -


Borrowings 44,749,690 43,199,690 1,550,000 - - - - - - -
Deposits and other accounts 492,267,898 240,816,664 136,724,757 45,466,021 49,554,339 7,243,728 3,935,482 3,935,482 4,591,424 -
Subordinated loans 11,993,848 - 2,024 - 2,024 4,052 668,668 4,664,947 6,652,133 -
Liabilities against assets
subject to finance leases 1,978 - - - 1,978 - - - - -
Other liabilities 17,087,441 - 15,694,915 - - - - - 1,392,526 -
Deferred tax liability - - - - - - - - - -
571,311,725 289,227,224 153,971,696 45,466,021 49,558,341 7,247,780 4,604,150 8,600,429 12,636,083 -
Net assets 49,395,664 (120,742,071) 63,979,037 33,300,091 9,471,733 9,515,434 8,593,629 22,349,630 5,188,636 17,739,546

Represented by:

Share capital 10,117,188


Reserves 17,256,061
Unappropriated profit 17,703,327
Minority interest 2,044,589
Surplus on revaluation of assets 2,274,499
49,395,664
Notes to and Forming Part of the Consolidated Financial Statements
For The Year Ended December 31, 2009

44.3.2 Maturities of assets and liabilities - based on working prepared by the Assets and Liabilities Management Committee (ALCO) of the Group

Current and savings deposits do not have any contractual maturity therefore, current deposits and savings accounts have been classified between all four maturities.
Further, it has been assumed that on a going concern basis, these deposits are not expected to fall below the current year's level.

2009
Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10
month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years
(Rupees in ‘000)
Assets

Cash and balances with treasury banks 61,252,772 30,108,340 5,744,339 3,821,791 4,031,174 5,046,748 107,770 294,807 12,097,803 -
Balances with other banks 14,049,990 10,364,189 2,443,990 824,096 180,043 37,672 - - 200,000 -
Lendings to financial institutions 23,162,130 20,623,296 2,159,149 169,075 - 210,610 - - - -
Investments 137,734,578 17,557,963 19,241,497 18,917,627 16,066,142 5,469,278 3,794,038 29,480,465 25,093,085 2,114,483
Advances - Performing 349,715,209 113,791,821 53,482,143 34,093,945 31,042,626 26,082,159 8,800,873 26,010,075 47,508,041 8,903,526
- Non-performing 12,364,387 - - - - - - - 12,364,387 -
Other assets 17,786,567 3,166,659 1,019,732 12,877,160 62,799 - - - 660,217 -
Operating fixed assets 23,734,082 1,745,741 - - - 62,671 - - 21,925,670 -
Deferred tax assets 649,814 40,744 274,188 334,882 - - - -
640,449,529 197,398,753 84,090,850 70,703,694 51,656,972 37,244,020 12,702,681 55,785,347 119,849,203 11,018,009

Liabilities

Bills payable 5,166,361 3,983,539 1,182,822 - - - - - - -


Borrowings 37,168,276 15,452,801 13,603,220 6,848,198 - - - 1,264,057 - -
Deposits and other accounts 503,831,672 99,619,122 101,402,301 49,270,259 54,014,009 60,048,963 1,826,977 4,593,456 133,056,585 -
Subordinated loan 11,989,800 - 2,024 - 2,024 668,667 1,997,821 3,334,864 5,984,400 -
Liabilities against assets
subject to finance leases 611 - - - 611 - - - - -
Deferred tax liability - - - - - - - - - -
Other liabilities 14,974,445 485,102 12,390,929 - - - - - 2,098,414 -
573,131,166 119,540,564 128,581,296 56,118,457 54,016,644 60,717,630 3,824,799 9,192,377 141,139,399 -

Net assets 67,318,363 77,858,189 (44,490,446) 14,585,237 (2,359,672) (23,473,609) 8,877,882 46,592,970 (21,290,196) 11,018,009

Represented by:

Share capital 11,128,907


annual report 2009 112

Reserves 21,167,954
Unappropriated profit 23,617,875
Minority interest 2,279,691
Surplus on revaluation of assets 9,123,936
67,318,363
Notes to and Forming Part of the Consolidated Financial Statements
113

For The Year Ended December 31, 2009


United Bank Limited

2008
Total Upto 1 Over 1 month Over 3 months Over 6 months Over 1 year Over 2 year Over 3 year Over 5 year Over 10
month to 3 months to 6 months to 1 year to 2 years to 3 years to 5 years to 10 years years
(Rupees in ‘000)
Assets

Cash and balances with treasury banks 50,143,570 14,384,285 14,456,461 3,797,711 3,377,681 3,927,894 226,159 222,229 9,746,155 4,995
Balances with other banks 14,540,306 11,764,500 1,875,976 - 639,025 260,805 - - - -
Lendings to financial institutions 22,805,341 19,209,457 200,000 3,395,884 - - - - - -
Investments 115,057,090 15,823,621 50,572,384 5,081,372 2,266,770 5,326,550 5,573,718 14,639,175 14,243,000 1,530,500
Advances - Performing 367,960,027 95,034,919 75,282,236 36,317,007 50,182,733 14,758,777 17,883,397 32,292,285 29,569,981 16,638,692
- Non-performing 9,985,339 - - - - - - - - 9,985,339
Other assets 18,124,653 6,204,697 721,452 11,127,919 70,517 68 - - - -
Operating fixed assets 19,926,915 1,840,289 - - - 65,181 - - 18,021,445 -
Deferred tax assets 2,164,148 114,713 - - 918,850 1,130,585 - - - -
620,707,389 164,376,481 143,108,509 59,719,893 57,455,576 25,469,860 23,683,274 47,153,689 71,580,581 28,159,526

Liabilities

Bills payable 5,210,870 4,171,980 1,038,890 - - - - - - -


Borrowings 44,749,690 30,406,505 10,078,790 4,264,395 - - - - - -
Deposits and other accounts 492,267,898 110,626,321 92,615,090 53,533,980 52,076,880 51,620,620 3,479,791 7,018,943 121,282,039 14,235
Subordinated loan 11,993,848 - 2,024 - 2,024 4,048 668,667 4,664,957 6,652,128 -
Liabilities against assets
subject to finance leases 1,978 - - - 1,978 - - - - -
Deferred tax liability - - - - - - - - - -
Other liabilities 17,087,441 717,287 14,872,952 - 104,676 - - - 1,392,526 -
571,311,725 145,922,093 118,607,746 57,798,375 52,185,558 51,624,668 4,148,458 11,683,900 129,326,693 14,235

Net assets 49,395,664 18,454,388 24,500,763 1,921,518 5,270,018 (26,154,808) 19,534,816 35,469,789 (57,746,112) 28,145,291

Represented by:

Share capital 10,117,188


Reserves 17,256,061
Unappropriated profit 17,703,327
Minority interest 2,044,589
Surplus on revaluation of assets 2,274,499
49,395,664
Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

44.4 Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from
external events.

The Group's Operational Risk Management implementation framework, is based on advanced risk management
architecture. The framework is flexible enough to implement in stages, and permits the overall risk management
approach to evolve in response to organizational learning and the future needs of the organization.

Following are the high-level strategic initiatives that the Group has undertaken for the effective implementation of
Operational Risk Management:

- Recruiting skilled resources for Operational Risk Management.

- Engaging external consultants to assist us in the development of an operational risk management infrastructure.

- In conjunction with the external consultants, determining the current state of key risks and their controls residing
in each business unit.

- Developing policies, procedures and defining end to end information flow to establish a vigorous governance
infrastructure.

- Analyzing current systems for data collection, migration, validation and retention for current and historical
reference and calculation. Data warehousing solutions are being assessed for timely availability and storage
of data.

A consolidated Business Continuity Plan is being augmented for the Group which encompasses roles and
responsibilities, recovery strategy, IT and structural backups, scenario and impact analyses and testing directives.

There are several IT developments underway in the credit, market and operational risk areas. Specifically for
operational risk mitigation and control, an IT infrastructure is being developed along with the other high-level initiatives,
including process re-engineering and inventorying of risks and controls within the Group. A methodology for Risk
and Control Self Assessment is ready to be implemented at all core units of the Group.

annual report 2009 114


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

45. ISLAMIC BANKING BUSINESS

The bank is operating 05(2008:05) Islamic banking branches and 19(2008:14) Islamic banking windows. The balance
sheet of the bank's Islamic Banking Branches at December 31, 2009 is as follows:
2009 2008
ASSETS (Rupees in '000)

Cash and balances with treasury banks 208,180 259,264


Balances with other banks 93,410 396,325
Lendings to financial institutions 100,000 25,000
Investments 1,563,953 1,186,757
Financing and receivables
- Murabaha 154,650 92,060
- Musharaka 222,222 250,000
- Diminishing Musharaka 261,259 127,850
638,131 469,910

Operating fixed assets including assets given on Ijara 598,452 848,086


Other assets 548,396 148,826
Total Assets 3,750,522 3,334,168

LIABILITIES

Bills payable 4,522 24,838


Deposits and other accounts
- Current accounts 429,412 464,204
- Saving accounts 209,676 270,276
- Term deposits 459,878 413,322
- Deposits from financial institutions - remunerative 1,109,452 844,455
2,208,418 1,992,257

Due to head office 948,744 1,145,380


Other liabilities 84,544 61,192
3,246,228 3,223,667
NET ASSETS 504,294 110,501

REPRESENTED BY
Islamic Banking Fund 681,000 470,000
Unappropriated / Unremitted profit (174,404) (346,051)
506,596 123,949
(Deficit) / surplus on revaluation of assets (2,302) (13,448)
504,294 110,501

115 United Bank Limited


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

The profit and loss account of the bank's Islamic Banking Branches for the year ended December 31, 2009 is
as follows:
2009 2008
(Rupees in '000)

Return earned 484,098 326,885


Return expensed (110,927) (74,733)
373,171 252,152

Reversal / (Provision) for diminution in value of investment 99,904 (108,479)


Provision against assets given on Ijarah (6,177) (13,482)
93,727 (121,961)
Net return after provision 466,898 130,191

Other Income
Fee, commission and brokerage income 4,444 1,454
Dividend income 12,169 20,166
Income from dealing in foreign currencies 2,904 133
Loss on sale of securities (14,969) -
Other income 4,201 5,332
Total other income 8,749 27,085
475,647 157,276
Administrative expenses (304,000) (347,197)
Net profit / (loss) for the year 171,647 (189,921)

Unappropriated loss brought forward (346,051) (156,130)


Unappropriated loss carried forward (174,404) (346,051)

2009 2008
(Rupees in '000)
Remuneration to shariah Advisor / Board 1,924 2,467

CHARITY FUND
Opening balance 19,609 -
Addition during the period 6,629 19,809
Payment / utilization during the period 5,506 200
Closing balance 20,732 19,609

annual report 2009 116


Notes to and Forming Part of the Consolidated
Financial Statements
For The Year Ended December 31, 2009

46. NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE

The Board of Directors in its meeting held on March 01, 2010 has proposed a cash dividend in respect of 2009 of
Rs. 2.5 per share (2008: cash dividend Re.1.00 per share). In addition, the directors have also announced a bonus
issue of 10% (2008: 10%) These appropriations will be approved in the forthcoming Annual General Meeting. The
consolidated financial statements for the year ended December 31, 2009 do not include the effect of these
appropriations which will be accounted for in the consolidated financial statements for the year ending December
31, 2010.

47. DATE OF AUTHORIZATION

These consolidated financial statements were authorized for issue on March 01, 2010 by the Board of Directors of
the Group.

48. GENERAL

48.1 Comparatives

Comparative information has been re-classified, re-arranged or additionally incorporated in these consolidated
financial statements for purposes of better presentation as follows:

- Rs. 334.132 million has been reclassified from mark-up interest earned (loan and advances to customers) to
other income (income from dealing in derivatives).

- Rs. 108.479 million relating to provision for diminution in the value of investments has been reclassified from
the results of the conventional banking branches to Islamic Banking branches.

- Rs. 348.606 million relating to non-banking assets acquired in satisfaction of claim has been reclassified from
Non-performing advances to other assets.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

117 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

1) Particulars of Investment held in listed companies and Modarbas

Number of Paid up value per Total paid up


Investee shares / Cost
share / certificate value
certificates held

(Rupees) (Rupees in ‘000)


Held for trading securities

Investments in units of mutual funds


CS Money Market Funds 3,253 66,041 214,831 214,865
214,865
Available for sale securities

Investment in ordinary shares

1st Fedility Leasing Modaraba 997 10.00 10 26


1st Habib Bank Modaraba 15,295 10.00 153 149
1st Punjab Modaraba 15,705 10.00 157 168
Adamjee Insurance Company Limited 1,750,000 10.00 17,500 261,995
Agriauto Industries Limited 6,428 5.00 32 62
Al Zamin Leasing Modaraba 30,705 10.00 307 158
Allied Bank Limited 1,329 10.00 13 32
Atlas Fund Of Funds 1,050,000 10.00 10,500 10,000
Azam Textile Mills Limited 292,851 10.00 2,929 2,929
Bank Al-Falah Limited 1,000,000 10.00 10,000 13,950
BOC Pakistan Limited 204,100 10.00 2,041 34,061
Century Paper And Board Mills Limited 98,100 10.00 981 8,008
Chenab Limited 1,218,282 10.00 12,183 22,663
D.G. Khan Cement Limited 3,300,000 10.00 33,000 230,037
Dawood Cotton Mills Limited 350 10.00 4 4
DP World 138,528 8.42 1,167 15,171
Engro Chemical Paksitan Limited 600,000 10.00 6,000 110,531
Engro Polymer & Chemicals Limited 2,576,358 10.00 25,764 48,948
Fauji Cement Company Limited 105,318,542 10.00 1,053,185 1,666,715
Fauji Fertilizer Company Limited 52,904 10.00 529 961
First Capital Securities Corporation Limited 708,400 10.00 7,084 31,913
First Dawood Mutual Fund 661,500 10.00 6,615 5,695
Hira Textile Mills Limited. 3,948,803 10.00 39,488 49,360
IGI Investment Bank Limited 9,986,501 10.00 99,865 99,865
Jahangir Siddiqui & Company Limited 2,500,000 10.00 25,000 141,590
JS Growth Fund 127,160 10.00 1,272 2,250
KASB Modarba 124,796 10.00 1,248 750
KASB Securities Limited 2,591,176 10.00 25,912 174,904
Kay Taxtile Mills Limited 377,800 10.00 3,778 3,778
Kohat Textile Mills Ltd 100,000 10.00 1,000 1,000
MCB Bank Limited 275,000 10.00 2,750 60,625
Mehran Sugar Mills Limited 2,400 10.00 24 72
Modaraba Al-Mali 4,140 10.00 41 55
National Bank Of Pakistan 500,000 10.00 5,000 37,856
National Refinery Limited 240 10.00 2 3
NIB Bank Limited 5,329 10.00 53 12
Nishat Mills Limited 1,000,000 10.00 10,000 70,936

annual report 2009 118


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

1) Particulars of Investment held in listed companies and Modarbas

Number of Paid up value per Total paid up


Investee shares / Cost
share / certificate value
certificates held

Pak Oilfields Limited 370,000 10.00 3,700 85,003


Pakistan State Oil Company Limited 350,000 10.00 3,500 104,345
Pakistan Telecommunication Company Limited 4,200,000 10.00 42,000 73,127
Pakistan Telecommunication Company Limited 150,000 10.00 1,500 22,661
Pakistan Tobacco Company Limited 102,800 10.00 1,028 18,551
PICIC Growth Fund 25,200 10.00 252 410
PICIC Insurance Company Limited 56 10.00 1 1
PICIC Investment Fund 23,406 10.00 234 316
Sakrand Sugar Mills Limited 1,547,040 10.00 15,470 11,720
Saleem Sugar Mills Limited 892 10.00 9 8
Samba Bank Limited 500,000 10.00 5,000 1,761
Saritow Spinning Mills Limited 617,110 10.00 6,171 6,171
Shell Pakistan Limited 66,916 10.00 669 17,198
Shell Pakistan Limited 620 10.00 6 22
Standard Chartered Modaraba 132,957 10.00 1,330 1,368
Tariq Glass Ltd (Nasir Siddiq Corp) 334,500 10.00 3,345 5,629
The Bank of Punjab 99,883 10.00 999 378
The Hub Power Company Limited 554,486 10.00 5,545 17,206
The Resource Group Pakistan Limited 10,571,500 10.00 105,715 116,477
UDL Modaraba 2,020 10.00 20 18
Unilever Pakistan Limited 196 10.00 2 56
UTP Growth Fund 58,444 10.00 584 1,040
VISA Inc. 12,805 4,193.82 53,702 53,702
3,644,398
Investments in preference shares

Chenab Limited 8,701,482 10.00 87,015 87,015


Masood Textile Mills Limited 11,000,000 10.00 110,000 110,000
197,015
Investments in units of mutual funds

AMZ Plus Stock Fund 530,000 100 53,000 50,000


Atlas Stock Market Fund 17,364 500 8,682 5,000
Faysal Balance Growth 117,392 50 5,870 7,201
Meezan Islamic Income Fund 2,499,928 50 124,996 129,098
191,299

119 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

2) Particulars of Investment held in unlisted companies

Percentage Number of Breakup Based on


Investee of holding shares / Cost value of audited Name of Chief Executive
(%) certificates investment accounts
held

Shareholding more than 10%

Cinepax 28.6% 5,037,200 50,372 24,583 30-Jun-09 Arif Baigmohamed

Khushhali Bank Limited 11.7% 20,000,000 200,000 220,521 31-Dec-08 Ghalib Nishtar

National Institute for Facilitation of 8.4% 914,093 1,527 46,405 30-Jun-09 M. M. Khan
Technology (Pvt.) Ltd.

Pakistan Agricultural Storage & 18.3% 5,500 5,500 115,242 31-Mar-09 Anwar Saeed Khan
Services Corporation (Managing Director)

World Bridge Connect Inc. 18.1% 1,979,295 77,606 41,961 30-Jun-07 Gurojot Singh Khalsa

National Investment Trust Limited 12.5% 79,200 100 807,480 30-Jun-09 Tariq Iqbal Khan

Shareholding upto 10%

Equity Participation Fund 1.74% 27,000 2,700 17,946 31-Dec-08 Syed Shabahat Hussain
(Executive Director)

First Women Bank Limited 8.9% 2,532,000 21,100 101,387 31-Dec-08 Ms Shafqat Sultana

News - VIS Credit Information 4.7% 32,500 325 (78) 30-Jun-09 Faheem Ahmad
Services (Pvt.) Limited

SME Bank Limited 1.7% 3,975,003 26,950 39,149 31-Dec-08 R. A. Chughtai

Swift Belgium 0.0% 25 2,905 7,137 31-Dec-08 Lazaro Campos

Techlogix International 4.4% 4,455,829 50,703 11,535 31-Dec-08 Mr.Salman Akhtar &
Kewan Khawaja
(Co Chief Executive)

Tri Star Shipping Company 0.0% 15,000 250 - - N/A

Master Card International 0.0% 461 0 - - Robert W. Selander

The Benefit Company B.S.C © 0.0% 80 1,788 - - Abdul Wahid Janahi

441,824

annual report 2009 120


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

3) Particulars of Bonds

Terms of Redemption Rate of


Investee Outstanding
Interest/Profit
Principal Interest/Profit Amount

(Rupees in '000)
Held for trading securities

Islamic Republic of Pakistan - 2017 - Euro Bond At Maturity Bi-annually 6.88% 76,206

Available for sale securities

Government of Pakistan Islamic Bonds

Govt. of Pakistan Ijara Sukuk Bonds Maturity Bi-annually 06M T-Bills cut off
yield plus 45 bps 320,000

Govt. of Pakistan Ijara Sukuk Bonds Maturity Bi-annually 06M T-Bills cut off
yield plus 75 bps 750,000

Govt. of Pakistan Ijara Sukuk Bonds Maturity Bi-annually 06M T-Bills cut off
yield plus 0 bps 2,400,000
3,470,000
Foreign securities

DEWA Sukuk - Al Ijara FRN 2013 At Maturity Bi-annually 6 month EIBOR


plus 125 bps 6,880,320

Tamweel Sukuk 2013 FRN At Maturity Bi-annually 3 month EIBOR


plus 225 bps 3,440,160

Dubai Government FRN-2014 At Maturity Bi-annually 3 month EIBOR


plus 370 bps 153,648

Government Of Qatar US Bonds At Maturity Semi annually 9.75% 1,373,533

Tabreed FRN 2011 At Maturity Bi-annually 6-months


LIBOR+125bps 556,245

Tabreed Financing Corporation 2006 At Maturity Bi Annually 2.84% 189,549

Tabreed 06 FRN At Maturity Bi Annually 2.24% 147,424


12,740,879

Government of Pakistan - Euro Bond

Govt. of Pakistan Dollar Sukuk Bonds 2010 Maturity Bi-annually 6 Month LIBOR
Plus 220bps 1,419,158

Islamic Republic of Pakistan - 2017 - Euro Bond At Maturity Bi-annually 6.88% 2,451,398
3,870,557

Held to maturity securities

Government of Pakistan - Guaranteed Bonds

Low Yielding Bonds Bullet Half Yearly Annual Weighted


Repayment average of last year's 1,433,444
yield on treasury bills

Wapda Bonds - Sukuk II At Maturity Half Yearly 06 months KIBOR


minus 25bps 51,613
1,485,057

121 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

3) Particulars of Bonds

Terms of Redemption Rate of


Investee Outstanding
Interest/Profit
Principal Interest/Profit Amount

(Rupees in '000)
Government of Pakistan Islamic Bonds

Government of Pakistan Sukuk Bond At Maturity Half Yearly 6 month weighted avg.
cutt off yield plus 45 bps 30,000
30,000
Foreign securities

Srilanka Euro Bonds At Maturity Bi-annually 8.25% 1,687,712


Others 2,314,006
4,001,718

Sukuk Bonds

Dawood Hercules Chemicals Limited ^ Half Yearly * 600,000

Security Leasing Corporation Bullet Repayment Half Yearly Simple Avg. of 6 months
KIBOR ask side 53,125

B.R.R Guardian Modaraba 7 equal installments Half Yearly Simple Avg. of 6 months
starting from 2011 KIBOR ask side 100,000

K.S. Suleman G. - Diminishing Musharika Quarterly Quarterly Simple Avg. of 3 months


KIBOR ask side 303,997

Sitara Energy Limited Repayment after Half Yearly Avg. rate of 6 Month KIBOR
completion of 2 years ask side plus 1.15% 84,545

Sitara Peroxide Limited Quarterly Quarterly Avg rate of 3 Months KIBOR


ask side plus 1.1% 300,000

Pakistan International Airlines Ltd Half Yearly Half Yearly 6 month KIBOR
plus 1.75% 890,000

Islamic Sukkuk Bonds - Central Bank of Bahrain At maturity BI Annually 3.75% 308,373

Maple Leaf Cement Limited Half Yearly Half Yearly Avg rate of 6 Months
KIBOR ask side plus 1.7% 15,719
2,655,759
Government of Pakistan - Euro Bond

Government of Pakistan foreign currency bond Annually Annually 3 Months LIBOR plus 1% 478,184
Government of Pakistan foreign currency bond At maturity Bi-annually 6.88% 76,397
Government of Pakistan foreign currency bond At maturity Bi-annually 6.88% 212,115
Government of Pakistan foreign currency bond At maturity Bi-annually 6.88% 70,705
Government of Pakistan foreign currency bond At maturity Bi-annually 6.88% 85,104
922,505

^ Principal redemption on semi annual basis after expiry of twelve months.


* Average of 6 months KIBOR ask side plus 120 bps. The rental bench mark rate will be subject to a floor of 3.5% and
cap of 25% p.a.

annual report 2009 122


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

4) Particulars of Debentures

Terms of Redemption Rate of


Investee Outstanding
Interest/Profit
Principal Interest Amount

(Rupees in '000)
Public Sector

SDA - Cold Storage Haripur Overdue Overdue 12.50% 1,300

SDA - Cold Storage Haripur Overdue Overdue 12.00% 825

Private Sector

Aley Hosery Mills Ltd Overdue Overdue 14.00% 200

Effef Ind Ltd Overdue Overdue 11.00% 1,017

Effef Ind Ltd Overdue Overdue 14.00% 379

Khyber Textile Mills Ltd Overdue Overdue 14.00% 395

Morgah Valey Ltd Overdue Overdue 11.00% 316

Morgah Valey Ltd Overdue Overdue 14.00% 160

4,592

123 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

5) Particulars of Investments in Term Finance Certificates

No. of Paid up Total Paid Outstanding


Investee Certificates value per up value Amount Name of Chief Executive
held certificate
(Rupees) (Rupees in '000)

Unlisted - available for sale

Pakistan International Airlines 1,700 5,000 8,500 8,498 Captian Mohammad Aijaz Haroon
Engro Chemicals Pakistan Limited 7,000 100,000 700,000 703,265 Asad Umar
711,763
Listed - available for sale

Allied Bank Limited TFC-II 53,000 5,000 265,000 275,392 Mohammad Aftab Manzoor
Allied Bank Limited TFC 1 5,000 5 5 Mohammad Aftab Manzoor
Azgard Nine Limited 60,000 5,000 300,000 224,699 Ahmed H. Shaikh
Bank Al Falah Limited TFC II 3,000 5,000 15,000 15,115 Sirajuddin Aziz
Bank Al Falah Limited TFC III 26,200 5,000 131,000 134,239 Sirajuddin Aziz
Bank Al Habib Limited TFC II 44,766 5,000 223,830 230,252 Abbas D. Habib
Bank Al Habib Limited TFC III 46,000 5,000 230,000 229,908 Abbas D. Habib
Engro Chemical Pakistan Limited TFC III 22,562 5,000 112,810 113,336 Asad Umar
Standard Chartered Bank Pakistan Limited TFC II 4,000 5,000 20,000 13,984 Badar Kazmi
Standard Chartered Bank Pakistan Limited 2 5,000 2 8 Badar Kazmi
1,236,939
Unlisted - held to maturity

National Transmission & Despatch Co Ltd 2,329,400 5,000 11,647,000 11,647,000 Tariq Qazi
Power Holding (Pvt) Limited 1,886,400 5,000 9,432,000 9,432,000 Shahid Rafi
Pakistan International Airlines Corporation 408,867 5,000 2,044,335 2,043,926 Captian Mohammad Aijaz Haroon
Orix Leasing Pakistan Limited 2,000 100,000 200,000 200,000 Humayun Murad
Crescent Textile Mills Limited 110,000 5000 550,000 199,970 Muhammad Anwar
Al Abbas Sugar Mills Limited 12,000 5,000 60,000 48,000 Shunaid Qureshi
Dewan Farooq Spining Mills Limited 30,000 5,000 150,000 37,472 Dewan Abdul Baqi Farooqui
Security Leasing Corporation Limited 40,000 5,000 200,000 75,000 Mohammad Khalid Ali
SME Leasing Limited 24,000 5,000 120,000 70,000 Mrs. Arjumand Qazi
Al-Azhar Textile Mills Ltd 14 774,670 10,845 5,418 N/A
Apex Fabrics Limited 1 323,759 324 2,640 N/A
Bachani Sugar Mills Ltd. - - - 25,500 N/A
Bentonite (Pakistan) Ltd 14 268,894 3,765 3,417 N/A
Blue Star Textile Mills Ltd 17 497,020 8,449 3,392 N/A
Cast-N-Link Products Limited 16 369,054 5,905 2,549 N/A
Faruki Pulp Mills Ltd. 14 2,627,445 36,784 16,088 N/A
Frontier Ceramics Limited 46 370 17 2,749 N/A
Hospitex Limited 16 64,375 1,030 511 N/A
Khairpur Sugar Mills Limited 28 1,642,964 46,003 5,565 N/A
Monro & Miller (Pak) Ltd 16 63,125 1,010 368 N/A
Pangrio Sugar Mills Ltd 16 321,445 5,143 887 N/A
Regency Textile Ltd 24 108,958 2,615 6,165 N/A
Scan Recycling (Pak) Ltd 17 75,882 1,290 639 N/A
Sialkot Dairies Ltd 12 269,833 3,238 2,320 N/A
Tanocrafts Ltd 22 156,227 3,437 537 N/A
Tharparkar Sugar Mills 5 1,754,000 8,770 26,238 N/A
23,858,351

annual report 2009 124


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

5) Particulars of Investments in Term Finance Certificates

No. of Paid up Total Paid Outstanding


Investee Certificates value per up value Amount Name of Chief Executive
held certificate
(Rupees) (Rupees in '000)

Listed - held to maturity

Allied Bank Limited TFC II 129,397 5,000 646,985 646,611 Mohammad Aftab Manzoor
Askari Commercial Bank Limited 43,525 5,000 217,625 217,233 Mohammad Rafiquddin Mehkari
Askari Commercial Bank Limited 40,000 5,000 200,000 199,680 Mohammad Rafiquddin Mehkari
Bank Al Habib Limited 5,000 5,000 25,000 24,950 Abbas D. Habib
Royal Bank of Scotland 22,000 5,000 110,000 109,802 Shehzad Naqvi
Soneri Bank Limited 999 5,000 4,995 4,986 Safar Ali K. Lakhani
IGI Investment Bank Limited 31,083 5,000 155,415 77,676 S. Javed Hassan
Pak Arab Fertilizer (Private) Limited 30,000 5,000 150,000 149,910 Fawad Ahmad Mukhtar
1,430,848

6) Particulars of Participation Term Certificates

No. of Paid up Total Paid Outstanding


Investee Certificates value per up value Amount Name of Chief Executive
held certificate
(Rupees) (Rupees in '000)

Ali Paper Board Mills Ltd 13 164,846 3,393 3,393 Farooq Alam Butt
Brother Steel Industries Ltd 17 108,024 2,144,313 2,144 Mian Yousuf Aziz
Crystal Chemicals Ltd 14 145,933 3,897,000 3,897 Maqsood A. Shaikh
Leatherite Ltd 15 22,200 888,603 889 K.H. Khalid
Mass Dairies Ltd 11 136,818 2,523,000 2,523 Mian Mohammad Akhtar Paganwala
Morgah Valey Ltd 16 29,250 436,414 436 Air Marshal A. Rahim Khan
Pangrio Sugar Mills Ltd 44 64,000 11,198,023 11,198 Aftab Ahmed
Zamrock Fibers Glass Ltd 12 32,833 2,358,000 2,358 S. Zamir Syed
26,838

125 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

7) Quality of Investments classified as Available For Sale (AFS)

Investee Market Value Credit Rating

(Rupees in '000)
Investment in ordinary shares
1st Fedility Leasing Modaraba 3 A-
1st Habib Bank Modaraba 63 AA-
1st Punjab Modaraba 27 A-
Adamjee Insurance Company Limited 215,775 AA
Agriauto Industries Limited 387 N/A
Al Zamin Leasing Modaraba 95 A-
Allied Bank Limited 78 AA
Atlas Fund Of Funds 3,717 -
Azam Textile Mills Limited 425 N/A
Bank Al-Falah Limited. 13,770 AA
BOC Pakistan Limited 26,115 N/A
Century Paper And Board Mills Ltd. 1,299 A-
Chenab Limited 4,678 N/A
D.G. Khan Cement Limited 107,448 N/A
Dawood Cotton Mills Limited 21 N/A
DP World 4,901 N/A
Engro Chemical Paksitan Limited 109,962 AA
Engro Polymer & Chemicals Limited 46,220 N/A
Fauji Cement Company Limited 648,762 N/A
Fauji Fertilizer Company Limited 5,445 N/A
First Capital Securities Corp Ltd. 6,723 N/A
First Dawood Mutual Fund 1,118 2-Star
Hira Textile Mills Limited. 11,452 N/A
IGI Investment Bank Limited 35,252 A
Jahangir Siddiqui & Company Limited 75,175 AA+
JS Growth Fund (Formerly Utp Growth Fund) 628 3-Star
KASB Modarba 374 BBB+
KASB Securities Limited 24,253 A+
Kay Taxtile Mills Limited 3,778 N/A
Kohat Textile Mills Limited 161 N/A
MCB Bank Limited 60,412 AA+
Mehran Sugar Mills Limited 144 N/A
Modaraba Al-Mali 7 A-
National Bank Of Pakistan 37,185 AAA
National Refinery Limited 42 AAA
NIB Bank Limited 26 AA-
Nishat Mills Limited 69,900 A+
Pak Oilfields Limited 85,385 N/A
Pakistan State Oil Company Limited 104,104 AA+
Pakistan Telecommunication Company Limited 74,130 N/A
Pakistan Telecommunication Company Limited 2,634 N/A
Pakistan Tobacco Company Limited 10,794 N/A
PICIC Growth Fund 359 2-Star
PICIC Insurance Company Limited 0 A-
PICIC Investment Fund 136 3-Star
Sakrand Sugar Mills Limited 3,079 N/A
Saleem Sugar Mills Limited 7 N/A
SAMBA Bank Limited 1,655 A
Saritow Spinning Mills Limited 1,092 N/A
Shell Pakistan Limited 16,753 N/A
Shell Pakistan Limited 155 N/A
Standard Chartered Modaraba 1,203 AA+

annual report 2009 126


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

7) Quality of Investments classified as Available For Sale (AFS)

Investee Market Value Credit Rating

(Rupees in '000)

Investment in ordinary shares


Tariq Glass Ltd (Nasir Siddiq Corp) 2,679 N/A
The Bank of Punjab 1,948 AA-
The Hub Power Company Limited 17,233 AA+
The Resource Group Pakistan Limited 22,412 -
UDL Modaraba 10 N/A
Unilever Pakistan Limited 451 N/A
UTP Growth Fund 289 N/A
Visa Inc. 95,078 N/A
1,957,408
Investments in preference shares
Chenab Limited. 55,226 N/A
Masood Textile Mills Limited 110,000 N/A
Chenab Limited. 5,684 N/A
165,226
Investments in units of mutual funds
AMZ Plus Stock Fund 32,039 2-Star
Atlas Stock Market Fund 7,588 3-Star
Faysal Balance Growth Funds 11,739 3-Star
Meezan Islamic Income Fund 126,796 3-Star
178,162

Investee Cost Credit Rating

(Rupees in '000)
Investment in unlisted shares

Shareholding more than 10%


Khushhali Bank Limited 200,000 A-
Pakistan Agricultural Storage & Services Corporation 5,500 unrated
World Bridge Connect Inc. 77,606 unrated
Cinepax 50,372 unrated
National Institute for Facilitation of Technology (Pvt.) Ltd. 1,527 unrated

Shareholding upto 10%


Equity Participation Fund 2,700 unrated
First Women Bank Limited 21,100 BBB+
News - VIS Credit Information Services (Pvt.) Limited 325 unrated
NIT (Equity) 100 AM2
SME Bank Limited 26,950 BBB
Techlogix International 50,703 unrated
Swift Belgium 2,905 unrated
The Benefit Company B.S.C © 1,788 unrated
441,574

127 United Bank Limited


Investment Annexures Annexure ‘A’
Year Ended December 31, 2009

7) Quality of Investments classified as Available For Sale (AFS)

Particulars Market Value Credit Rating

(Rupees in '000)
Federal Government Securities
Market Treasury Bills 39,572,065 Unrated - Govt Securities
Pakistan Investment Bonds 15,599,536 Unrated - Govt Securities
55,171,601

Government of Pakistan Islamic Bonds


Government of Pakistan International Sukuk 2010 1,440,005 B-
Government of Pakistan Ijara Sukuk 3,470,000 B-
4,910,005

Government of Pakistan - Euro Bond


Islamic Republic of Pakistan - 2017 - Euro Bond 2,426,704 B-

Foreign Currency Bonds


DEWA Sukuk - Al Ijara FRN 2013 6,157,886 Ba2
Tamweel Sukuk 2013 FRN 2,408,112 Baa3
Dubai Government FRN-2014 164,096 -
Government Of Qatar US Bonds 1,260,325 AA-
Tabreed FRN 2011 481,852 B+
Tabreed Financing Corporation 2006 166,803 B+
Tabreed 06 FRN 129,733 B+
10,768,807

Investee Market Value Credit Rating

(Rupees in '000)
Term Finance Cerificates

Listed
Allied Bank Limited TFC-II 256,418 AA-
Azgard Nine Limited 223,986 AA-
Bank Al Falah Limited TFC III 126,083 AA-
Bank Al Falah Limited TFC II 14,642 AA-
Bank Al Habib Limited TFC II 223,606 AA-
Bank Al Habib Limited TFC III 229,908 -
Engro Chemicals Pakistan Limited - TFC III 104,877 AA
Standard Chartered Bank Pakistan Limited TFC II 13,697 AAA
Allied Bank Limited TFC II 5 AA-
Standard Chartered Bank Pakistan Limited TFC II 8 AAA
1,193,230
Un Listed
Pakistan International Airlines 8,498 Unrated
Engro Chemical Pakistan Limited 703,265 AA
711,763

annual report 2009 128


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)
Furniture and fixtures
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 28,986 22,734 6,252 3,135 Auction Various

Electrical, office and


computer equipment
Items having book value of less
than Rs. 250,000 or cost of
less than Rs. 1,000,000 52,475 42,430 10,045 6,046 Auction Various

Vehicles
Items having book value of
more than Rs. 250,000
or cost of more than
Rs. 1,000,000

H/Civic 1,043 730 313 879 Auction Maqsood Ahmed


S/Cultus 620 362 258 370 Auction Malik Masood
S/Cultus 620 351 269 570 Auction Razaullah Khaldi
S/Cultus 620 289 331 570 Auction Muhammad Arshad
S/Cultus 560 308 252 513 Auction Malik Khuram
S/Cultus 560 289 271 506 Auction Zahid Qadri
H/Accord 2,410 1,848 562 603 Buy back Ayaz H. Shamsi
M/Lancer 1,329 1,063 266 576 Buy back Najeeb Aagrawala
S/Cultus 652 239 413 467 Buy back Ghulam Rasool Chugtai
S/Cultus 652 239 413 489 Buy back Saad Kaleem
S/Cultus 652 98 554 559 Buy back Malik Fazal Haq
S/Cultus 636 254 382 457 Buy back Nasir Mehmood
S/Cultus 636 139 497 552 Buy back Vinod Kumar Ahuja
S/Cultus 636 107 529 552 Buy back Muhammad Riaz Tarar
S/Cultus 636 98 539 560 Buy back Muhammad Asif Wajih
S/Cultus 636 98 539 560 Buy back Qamarudin Memon
S/Cultus 636 98 539 560 Buy back Tanweer Qazi
S/Cultus 636 74 562 552 Buy back Mumtaz Ali Mangi
S/Cultus 636 53 583 626 Buy back Muhammad Shamim
S/Cultus 636 42 594 626 Buy back Munawar Ali
S/Cultus 620 362 258 331 Buy back Abdul Wahid Khan
S/Cultus 620 341 279 331 Buy back Mansoor Alam Sumbal
S/Cultus 620 331 289 424 Buy back Muhammad Asif Bashir
S/Cultus 620 310 310 444 Buy back Arif Hussain
S/Cultus 620 279 341 522 Buy back Talat Khurshid Mian
S/Cultus 620 271 349 390 Buy back Aslam Pervaiz Nizamani
S/Cultus 620 165 455 517 Buy back Muhammad Waqar
S/Cultus 550 229 321 268 Buy back Rasheed Ahmed Balouch
H/Civic 1,506 778 728 728 Insurance Claimed UBL Insurers
S/Cultus 611 282 328 627 Auction Noman Ahmed Siddiqui

129 United Bank Limited


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)
Vehicles

Items having book value of


less than Rs. 250,000
or cost of more than
Rs. 1,000,000

T/Corolla 969 969 - 205 Auction M. Fazal


T/Corolla 963 963 - 639 Auction Malik Khuram
T/Corolla 939 939 - 738 Auction Syed Riaz
T/Corolla 939 939 - 761 Auction Syed Riaz
T/Corolla 939 939 - 722 Auction M. Rashid
T/Corolla 939 939 - 757 Auction Syed Riaz
T/Corolla 939 939 - 719 Auction Syed Riaz
T/Corolla 939 939 - 758 Auction Syed Riaz
T/Corolla 939 939 - 744 Auction Saghir
T/Corolla 939 939 - 723 Auction Noman Ahmed
T/Corolla 939 939 - 718 Auction Saghir
T/Corolla 939 939 - 638 Auction Saghir
T/Corolla 849 849 - 717 Auction Juma Khan
T/Corolla 849 849 - 766 Auction Syed Riaz
S/Jeep 678 678 - 482 Auction Murtaza Khan
S/Jeep 678 678 - 373 Auction Noor Ali Veerani
S/Cultus 620 413 207 562 Auction Nazeer Ahmed
S/Cultus 618 618 - 328 Auction Noor Ali Veerani
S/Cultus 604 604 - 393 Auction Razaullah Khaldi
S/Cultus 567 557 9 441 Auction Malik Khuram
S/Cultus 560 560 - 404 Auction Arshad Shah
S/Cultus 560 439 121 467 Auction Malik Khuram
S/Cultus 560 429 131 502 Auction Abdul Ahahd
S/Cultus 560 411 149 437 Auction Malik Khuram
S/Cultus 560 401 159 471 Auction Maaz Saleem
S/Cultus 560 392 168 454 Auction Ijaz Ahmed
S/Cultus 560 345 215 539 Auction Zameen Ahmed
S/Cultus 555 555 - 356 Auction Rehan Methani
S/Cultus 555 555 - 413 Auction Noman Ahmed
S/Cultus 555 555 - 402 Auction Khuldullah
S/Cultus 555 555 - 392 Auction Khuldullah
S/Cultus 555 555 - 399 Auction Maaz Saleem
S/Cultus 555 370 185 460 Auction Razaullah Khaldi
S/Cultus 500 500 - 623 Auction Abdul Wajid
S/Khyber 466 466 - 191 Auction Faisal Khan
S/Alto 419 419 - 218 Auction Khuldullah
S/Alto 419 419 - 269 Auction Muhammad Ali
S/Alto 419 419 - 264 Auction Khuldullah
S/Margalla 387 387 - 270 Auction Zafar Khan
S/Mehran 355 302 53 244 Auction Razaullah Khaldi
S/Mehran 350 222 128 265 Auction Shaikh Riaz Ahmed
S/Mehran 346 317 29 261 Auction Faisal Khan

annual report 2009 130


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)

Pajero 330 330 - 273 Auction Abdul Wajid


S/Jeep 314 314 - 132 Auction Abdul Wajid
S/Swift 160 160 - 167 Auction Noman Ahmed Chawla
S/Jeep 100 100 - 254 Auction S.Ameer Ali
S/Cultus 636 557 79 570 Buy back Ghulam Abbas
S/Cultus 620 434 186 320 Buy back Ghulam Abbas Butt
S/Cultus 560 336 224 289 Buy back Nouman Sadiq Butt
S/Cultus 560 327 233 299 Buy back Hasan Shahnawaz
S/Cultus 555 555 - 111 Buy back Basharat Zia
S/Cultus 555 555 - 56 Buy back Habibullah
S/Cultus 555 546 9 46 Buy back Muhammad Ali Saleem
S/Cultus 555 527 28 204 Buy back Arif Ali Shah
S/Cultus 555 342 213 210 Buy back Shahnawaz Hadi
S/Alto 419 419 - 84 Buy back Malik Amir Sahib
S/Alto 419 419 - 84 Buy back Mr Safdar Khan
S/Mehran 360 198 162 240 Buy back Mr Zulfiqar Kamal
S/Mehran 350 222 128 128 Buy back Saif UR Rehman Khan
S/Mehran 350 210 140 163 Buy back Shakeel Ahmed
S/Mehran 346 248 98 185 Buy back Malik Muhammad Afzal
S/Jeep 678 644 34 375 Insurance Claimed Adamjee Insurance Co. Ltd
S/Mehran 360 252 108 300 Insurance Claimed UBL Insurers
Various 97 8 88 602 Auction Various
59,579 43,971 15,608 41,306

Ijara Assets

Items having book value of


more than Rs. 250,000
or cost of more than
Rs. 1,000,000

Prado 2,097 724 1,373 1,273 buy back Shaheed Hussain Isran
SUZUKI APV LE CNG 1,784 200 1,584 1,553 buy back Ziauddin Qureshi
COROLLA ALTIS M/T 1,729 241 1,488 1,545 buy back Khurram Farooq
CIVIC VTI MT ORIEL 1,627 39 1,588 1,571 buy back Saeed Jawed
COROLLA XLI 1,329 132 1,197 1,226 buy back Muhammad Bashir Khan
Coupe 1,283 408 876 872 buy back Syed Moonis Abdullah Alvi
CITY IDS-I MT (Stand 1,121 115 1,006 990 buy back Muhammad Saleem Waheed
COROLLA XLI 1,092 458 635 690 buy back Mohammad Shahab
CITY STEERMATIC V TE 1,080 847 233 292 buy back Khalid Zafar Hashmi
COROLLA GLI 1,080 79 1,001 1,072 buy back Nasir Ghulam
COROLLA GLI 1,044 177 867 839 buy back Ishrat Malik
CITY IDS-I MT (Stand 1,044 68 976 987 buy back Shahzad Taswir
COROLLA GLI 1,039 621 418 433 buy back Khurram Farooq
COROLLA GLI 1,038 229 809 729 buy back Imran Ali

131 United Bank Limited


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)

COROLLA XLI 981 149 832 820 buy back Shahid Ali
COROLLA XLI 980 135 845 868 buy back Muhammad Ali Qureshi
COROLLA XLI 980 190 790 741 buy back Ashfaq Javed
Corolla X Grade 972 183 789 781 buy back Nafees Ahmed
COROLLA XLI 970 148 822 803 buy back Muhammad Naeem Qureshi
RAVI CNG 964 188 776 767 buy back Ghulam Rasool
COROLLA XLI 963 135 828 850 buy back Muhammad Ali Qureshi
CITY VARIO CVT (Stan 962 128 834 853 buy back Shaikh Ausaf Ahmed
COROLLA XLI 958 480 478 514 buy back Muhammad Ovais
COROLLA XLI 956 153 803 793 buy back Amir Butt
LIANA 1.3 RXI CNG 955 86 869 885 buy back Hasham Uddin Khan
COROLLA XLI 949 184 765 793 buy back Noman
COROLLA XLI 948 198 750 718 buy back Farah Naz
COROLLA XLI 947 246 700 826 buy back Samina Aslam
COROLLA XLI 943 123 820 816 buy back Shahid Ali
COROLLA XLI 943 382 561 570 buy back Adeel Niazi
COROLLA XLI 923 334 588 567 buy back Khalil Ur Rehman
COROLLA XLI 922 323 599 576 buy back Muhammad Ali
COROLLA XLI 921 349 573 697 buy back Azhar Shah
LIANA 1.3 RXI CNG 921 475 446 440 buy back M Hasham Ahmed Khan
CITY IDS-I MT (Upgra 907 199 708 621 buy back Ahmed Afraz Arif
LIANA 1.3 RXI CNG 877 24 853 852 buy back Faisal Malik
CITY IDS-I MT (Stand 861 334 527 489 buy back M.Khallilullah Usmani
LIANA 1.3 RXI 840 21 819 807 buy back Mohammad Akhter Siddiqui
CULTUS VXL 754 131 624 617 buy back M.Farooq Rahim
SHEHZORE PICKUP 742 142 600 623 buy back Syed Salman Ali Nizami
SHEHZORE PICKUP 722 40 682 683 buy back Zar Wali Khan
CULTUS VXL CNG 721 219 503 462 buy back Faraz Nathani
CULTUS VXR CNG 718 43 676 690 buy back Irfan Ali Shiekh
SHEHZORE PICKUP 718 223 495 464 buy back Muhammad Rizwan Yaqoob
SHEHZORE PICKUP 716 432 285 332 buy back Muhammad Shahid Dawood
SHEHZORE PICKUP 707 419 287 178 buy back Syed Shujaat Ali
CULTUS VXR CNG 691 80 611 581 buy back Asma Jafar Zaidi
CULTUS VXL CNG 691 172 520 425 buy back Jamil Ahmed Siddiqui
CULTUS VXR CNG 685 61 624 638 buy back Muniza Irshad
CULTUS VXR CNG 685 151 534 520 buy back Atif Hammad
CULTUS VXR CNG 685 298 387 405 buy back Syed Shabee Ul Hassan
LIANA 1.6 681 409 272 277 buy back Abdul Rauf
CULTUS VXR CNG 679 169 510 453 buy back Shakeel Ahmed
CULTUS VXR CNG 671 239 431 458 buy back Sanam Riaz
CULTUS VXR CNG 665 231 434 285 buy back Muhammad Aamir Shahzad
CULTUS VXR CNG 664 285 380 410 buy back Mohammad Aqeel Khan
CULTUS VXR CNG 657 318 339 325 buy back Saima Hasan
TOYOTA IST 656 260 396 403 buy back Ahsan Ilyas
CULTUS VXR CNG 655 193 462 573 buy back Wali Ullah Khan
CULTUS VXL 654 34 619 637 buy back Muhammad Rehan
RAVI CNG 650 78 571 571 buy back Saleem Ahmed Khan
CULTUS VXR CNG 650 112 538 537 buy back Syed Mehmood Ali

annual report 2009 132


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)

ALTO VXR CNG 622 97 524 442 buy back Maqsood Hussain
ALTO VXR CNG 615 60 554 550 buy back Muhammad Asif
CUORE CX ECO 595 279 316 364 buy back Sheikh Abdul Waheed
MEHRAN VXR CNG 592 225 368 410 buy back Tahseen Feroz
ALTO VXR CNG 576 142 434 442 buy back Abdul Rasheed Adil
CUORE CX ECO 564 179 385 398 buy back Muhammad Umer
ALTO VXR CNG 560 47 513 518 buy back Farhat Ullah Khan
ALTO VXR CNG 558 87 471 460 buy back Asad Ali
ALTO VXR CNG 558 239 319 352 buy back Gopi Chand
ALTO VXR CNG 557 83 474 502 buy back Asif Siddique
BOLAN CNG A-C 557 285 273 363 buy back Syed Ghulam
ALTO VXR CNG 554 151 403 382 buy back Maheen Bhatti
ALTO VXR CNG 548 146 402 375 buy back Zil-E-Hasnain
ALTO VXR CNG 546 138 408 410 buy back Muhammad Ibrahim
ALTO VXR CNG 545 58 487 503 buy back Syed Khursheed Alam
ALTO VXR CNG 544 160 384 470 buy back Zahid Yameen Qureshi
CUORE CX AT 543 75 468 449 buy back Muhammad Talha Arif
ALTO VXR CNG 543 107 435 428 buy back Raheel Naveed
ALTO VXR CNG 543 144 398 378 buy back Zafar Mehdi
ALTO VXR CNG 540 144 396 354 buy back Dixon
ALTO VXR CNG 536 146 390 379 buy back Mazahar Ali Shaikh
ALTO VXR CNG 536 160 376 267 buy back Maqsood Ahmed
BOLAN CNG A-C 535 103 432 434 buy back Mohammad Amin
ALTO VXR CNG 534 144 390 359 buy back Saif Uddin Khan
ALTO VXR CNG 534 160 374 433 buy back Syed Asif Ali
ALTO VXR CNG 527 199 327 303 buy back Masud-Uz-Zaman Khan
ALTO VXR CNG 523 144 379 373 buy back Munir Hussain Bhatti
ALTO VXR CNG 521 104 416 394 buy back Adeel Ahmed
CUORE CX AT 520 138 382 363 buy back Obaid Ahmed Khan
CUORE CX ECO 519 61 458 469 buy back Aziz Punjwani
CUORE CX ECO 519 220 298 308 buy back Asif Mohammad Shiekh
CUORE CX ECO 510 87 423 424 buy back S M Arshad Hussain Rizvi
ALTO VXR CNG 503 81 422 417 buy back M.Jalal Meerza
BOLAN CNG A-C 503 138 365 373 buy back Mushaid Alam
CUORE CX ECO 503 152 351 339 buy back Irfan Javed Lari
CUORE CX ECO 488 34 454 400 buy back Michael Ghori
MEHRAN VXR CNG 485 123 362 369 buy back Rashid Muhammad Khan
CUORE CX ECO 478 22 456 455 buy back Michael Ghori
MEHRAN VXR CNG 478 207 272 274 buy back Mohammad Ajmal
BOLAN CNG STD 476 59 417 442 buy back Ghulam Rasool
BOLAN CNG STD 474 85 389 387 buy back Atta Muhammad
BOLAN CNG STD 462 92 370 359 buy back Kashif Raheem
BOLAN CNG STD 457 65 392 386 buy back Sana Musarat
RAVI CNG 457 70 387 396 buy back Mohammad Tanveer Ali
MEHRAN VXR CNG 455 102 354 342 buy back Fiyaz Ahmed
CUORE CL ECO 454 47 407 405 buy back Naveed Hafeez
BOLAN CNG STD 451 72 379 277 buy back Rashid Hussain
BOLAN CNG STD 450 141 309 271 buy back Muhammad Salman

133 United Bank Limited


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)

MEHRAN VXR CNG 440 46 393 396 buy back Zafar Bin Tahir Khan
BOLAN CNG STD 440 65 375 387 buy back Nehal Uddin
MEHRAN VXR CNG 440 87 353 349 buy back Aziz Ahmed
BOLAN CNG STD 438 164 275 292 buy back Muhammad Iqbal Memon
MEHRAN VXR CNG 435 38 396 411 buy back Faisal Aziz Toor
MEHRAN VXR CNG 432 97 334 309 buy back Shahid Latif
MEHRAN VX CNG 422 47 375 382 buy back Kausar Abbas
RAVI CNG 422 102 321 312 buy back Izzat Khan
MEHRAN VXR CNG 416 115 301 280 buy back Sumera Baloch
MEHRAN VX CNG 409 51 358 364 buy back Sumera Tabassum
SANTRO CLUB GV 409 69 339 341 buy back Syed Muhammad Imran
CUORE CL STD 408 91 316 300 buy back Amir Ali Raza
CUORE CL ECO 404 27 377 388 buy back Sagheer Ahmed
CUORE CL STD 403 86 317 297 buy back Mohsin Abbas
RAVI CNG 383 68 315 325 buy back Bahw Singh
RAVI CNG 382 65 317 310 buy back Mohammad Perveez
MEHRAN VX 372 91 281 302 buy back Ahmed Ali
RAVI CNG 367 82 285 202 buy back Kahlil Ahmed
COROLLA GLI 1,043 137 906 936 insurance claimed Pak Kuwait Takaful Pakistan
LIANA 1.3 RXI CNG 898 446 452 493 insurance claimed Takaful Pakistan Ltd
CULTUS VXR CNG 692 155 537 503 insurance claimed Pak Kuwait Takaful Pakistan
MEHRAN VX CNG 607 81 526 498 insurance claimed Takaful Pakistan Ltd
CUORE CX ECO 574 118 456 494 insurance claimed Takaful Pakistan Ltd
CUORE CX ECO 554 129 425 392 insurance claimed Takaful Pakistan Ltd
BOLAN CNG A-C 541 114 427 506 insurance claimed Takaful Pakistan Ltd
CUORE CX ECO 534 57 477 486 insurance claimed Pak Kuwait Takaful Pakistan
BOLAN CNG A-C 534 223 311 224 insurance claimed Pak Kuwait Takaful Pakistan
CUORE CX ECO 530 63 468 502 insurance claimed Pak Kuwait Takaful Pakistan
MEHRAN VXR CNG 441 47 394 432 insurance claimed Takaful Pakistan Ltd
MEHRAN VXR CNG 441 85 356 384 insurance claimed Pak Qatar General Takaful
MEHRAN VX CNG 401 49 352 351 insurance claimed Pak Kuwait Takaful Pakistan
MEHRAN VX 371 74 296 355 insurance claimed Pak Kuwait Takaful Pakistan

annual report 2009 134


Annexure 'C' As Referred to in Note 11.8 of
Consolidated Financial Statements

Disposals of operating fixed assets during the year 2009


Accumu-
lated Book Sale Mode of
Cost Particulars of Buyers
deprec- value proceeds disposal
iation
(Rupees in '000)

Items having book value of


less than Rs. 250,000
or cost of less than
Rs. 1,000,000

COROLLA XLI 920 765 155 178 buy back Shehzad Masood
ALTO VXR CNG 561 341 220 252 buy back Tabinda Qureshi
ALTO VXR CNG 555 458 97 115 buy back Syed Asad Raza Zaidi
ALTO VXR CNG 533 320 213 243 buy back Syed Muhammad Sajid
CUORE CX ECO 531 492 39 (101) buy back Hassan Ali
BOLAN CNG STD 448 222 227 245 buy back Asad Ahmed
RAVI CNG 393 292 101 119 buy back Muhammad Murshid
RAVI CNG 392 191 201 211 buy back Muhammad Arif Idrees
RAVI CNG 389 227 162 190 buy back Muhammad Kashif
RAVI CNG 385 148 237 248 buy back Mohammad Saleem
RAVI CNG 381 214 167 205 buy back Rashid Waheed
MEHRAN VX CNG 379 186 193 179 buy back Sajid Qureshi
RAVI CNG 370 137 233 253 buy back Shahzad Khan
ALTO VXR CNG 340 110 230 211 buy back Asif Ali
104,755 27,518 77,235 77,065

Finance Lease Vehicles

Items having book value of


less than Rs. 250,000
or cost of less than
Rs. 1,000,000

S/Cultus 619 584 34 512 Auction Noman Ahmed Siddiqui


S/Mehran 399 230 170 357 Auction Noman Ahmed Siddiqui
1,018 814 204 869
Total 246,813 137,467 109,344 128,421

135 United Bank Limited


Consolidated Balance Sheet (in US Dollars)
As at December 31, 2009

2009 2008
(US Dollars in '000)

ASSETS
Cash and balances with treasury banks 727,108 595,235
Balances with other banks 166,782 172,602
Lendings to financial institutions 274,949 270,714
Investments 1,634,995 1,365,799
Advances
Performing 4,151,336 4,367,914
Non-performing - net of provision 146,773 118,532
4,298,109 4,486,446
Operating fixed assets 281,738 236,545
Deferred tax asset - net 7,714 25,690
Other assets 211,138 215,151
7,602,533 7,368,181

LIABILITIES
Bills payable 61,328 61,856
Borrowings 441,210 531,207
Deposits and other accounts 5,980,794 5,843,525
Sub-ordinated loans - unsecured 142,326 142,374
Liabilities against assets subject to finance lease 7 23
Deferred tax liability - net - -
Other liabilities 177,756 202,839
6,803,422 6,781,824
NET ASSETS 799,111 586,357

REPRESENTED BY:
Share capital 132,107 120,097
Reserves 251,277 204,840
Unappropriated profit 280,359 210,149
Total equity attributable to the equity holders of the Bank 663,743 535,087
Minority Interest 27,061 24,271
690,804 559,357
Surplus on revaluation of assets - net of deferred tax 108,307 27,000
799,111 586,357

CONTINGENCIES AND COMMITMENTS

These has been converted at Rs.84.24 per US Dollar from the audited financial statements.

annual report 2009 136


Consolidated Profit And Loss Account (in US Dollars)
For the Year Ended December 31, 2009

2009 2008
(US Dollars in '000)

Mark-up / return / interest earned 729,989 626,332


Mark-up / return / interest expensed 336,215 287,830
Net mark-up / interest income 393,775 338,502

Provision against loans and advances 114,491 53,590


Provision against lendings to financial institutions 6,658 -
Provision for diminution in value of investments - net 14,096 22,217
Bad debts written off directly 17,639 16,234
152,884 92,041
Net mark-up / return / interest income after provisions 240,890 246,461

Non Mark-up / Interest Income


Fee, commission and brokerage income 79,965 85,978
Dividend income 2,549 2,272
Income from dealing in foreign currencies 15,146 19,669
Gain on sale of securities 8,301 2,388
Unrealized loss on revaluation of investments classified as - -
held for trading (31) (127)
Other income 40,322 22,761
Total non mark-up / return / interest income 146,252 132,941
387,142 379,402
Non Mark-up / Interest Expenses
Administrative expenses 211,337 198,002
Other provisions / write offs - net 7,624 5,556
Workers' welfare fund 4,761 4,043
Other charges 766 3,471
Total non mark-up / interest expenses 224,488 211,071
Share of income / (loss) of associates 8,190 (1,525)
Profit before taxation 170,844 166,807

Taxation - Current 83,050 73,022


- Prior year 934 5,165
- Deferred (25,768) (11,631)
58,216 66,556
Profit after taxation 112,628 100,250

Attributable to:
Equity shareholders of the Bank 113,027 99,188
Minority Interest (399) 1,062
112,628 100,250

(US Dollars)
Earnings per share - basic and diluted 0.10 0.09

These has been converted at Rs.84.24 per US Dollar from the audited financial statements.

137 United Bank Limited


BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
2nd Floor, Block C Progressive Plaza
Lakson Square Building No. 1 Beaumont Road
Sarwar Shaheed Road PO Box 15541
Karachi 74200 Karachi 75530

Auditors' Report to the Members


We have audited the annexed unconsolidated balance sheet (b) in our opinion:
of UNITED BANK LIMITED (the Bank) as at December 31, (i) the unconsolidated balance sheet and unconsolidated
2009 and the related unconsolidated profit and loss account, profit and loss account together with the notes thereon
unconsolidated statement of comprehensive income, have been drawn up in conformity with the Banking
unconsolidated cash flow statement, and unconsolidated Companies Ordinance, 1962 (LVII of 1962), and the
statement of changes in equity, together with the notes Companies Ordinance, 1984 (XLVII of 1984), and are
forming part thereof (here-in-after referred to as the 'financial in agreement with the books of account and are further
statements') for the year then ended, in which are incorporated in accordance with accounting policies consistently
applied except for the change in accounting policy as
the unaudited certified returns from the branches except for
disclosed in note 5.1 to the accompanying financial
forty eight branches which have been audited by us and
statements, with which we concur;
seventeen branches audited by auditors abroad and we (ii) the expenditure incurred during the year was for the
state that we have obtained all the information and purpose of the Bank's business; and
explanations which, to the best of our knowledge and belief, (iii) the business conducted, investments made and the
were necessary for the purposes of our audit. expenditure incurred during the year were in accordance
with the objects of the Bank and the transactions of
It is the responsibility of the Bank's Board of Directors to the Bank which have come to our notice have been
establish and maintain a system of internal control, and within the powers of the Bank;
prepare and present the financial statements in conformity
with approved accounting standards and the requirements (c) in our opinion and to the best of our information and
of the Banking Companies Ordinance, 1962 (LVII of 1962), according to the explanations given to us the unconsolidated
and the Companies Ordinance, 1984 (XLVII of 1984). Our balance sheet, unconsolidated profit and loss account,
responsibility is to express an opinion on these statements unconsolidated statement of comprehensive income,
based on our audit. unconsolidated cash flow statement and unconsolidated
statement of changes in equity, together with the notes
We conducted our audit in accordance with the International forming part thereof conform with approved accounting
Standards on Auditing as applicable in Pakistan. These standards as applicable in Pakistan and give the information
standards require that we plan and perform the audit to required by the Banking Companies Ordinance, 1962 (LVII
of 1962), and the Companies Ordinance, 1984 (XLVII of
obtain reasonable assurance about whether the financial
1984), in the manner so required and give a true and fair
statements are free of any material misstatement. An audit
view of the state of the Bank's affairs as at December 31,
includes examining, on a test basis, evidence supporting 2009 and its true balance of the profit, its comprehensive
the amounts and disclosures in the financial statements. An income, its cash flows and changes in equity for the year
audit also includes assessing the accounting policies and then ended; and
significant estimates made by management, as well as,
evaluating the overall presentation of the financial statements. (d) in our opinion zakat deductible at source under the Zakat
We believe that our audit provides a reasonable basis for and Ushr Ordinance, 1980 (XVIII of 1980), was deducted
our opinion and after due verification, which in case of loans by the Bank and deposited in the Central Zakat Fund
and advances covered more than sixty percent of the total established under Section 7 of that Ordinance.
loans and advances of the Bank, we report that:
The financial statements of the Bank for the year ended
(a) in our opinion proper books of account have been kept December 31, 2008 were audited by Ernst & Young Ford Rhodes
by the Bank as required by the Companies Ordinance, Sidat Hyder, Chartered Accountants and KPMG Taseer Hadi &
1984 (XLVII of 1984), and the returns referred to above Co., Chartered Accountants who had expressed an unqualified
received from the branches have been found adequate opinion thereon vide their report dated March 12, 2009.
for the purposes of our audit;

BDO Ebrahim & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Audit Engagement Partner Audit Engagement Partner
Zulfiqar Ali Causer Shabbir Yunus

Karachi
Date : March 01, 2010

annual report 2009 138


Unconsolidated Balance Sheet
As At December 31, 2009

Note 2009 2008


(Rupees in '000)

ASSETS
Cash and balances with treasury banks 6 61,160,678 50,069,965
Balances with other banks 7 5,407,470 7,497,174
Lendings to financial institutions 8 23,162,130 22,805,341
Investments 9 136,145,524 116,328,288
Advances
Performing 10 342,663,339 361,863,689
Non-performing - net of provision 10 11,428,374 9,275,986
354,091,713 371,139,675
Operating fixed assets 11 21,925,669 18,021,445
Deferred tax asset - net 12 608,876 2,055,609
Other assets 13 17,241,991 17,621,844
619,744,051 605,539,341
LIABILITIES
Bills payable 15 5,147,259 5,194,449
Borrowings 16 35,144,823 44,195,886
Deposits and other accounts 17 492,036,103 483,560,062
Sub-ordinated loans 18 11,989,800 11,993,848
Deferred tax liability - net 12 - -
Other liabilities 19 14,489,343 16,732,337
558,807,328 561,676,582
NET ASSETS 60,936,723 43,862,759

REPRESENTED BY:
Share capital 20 11,128,907 10,117,188
Reserves 18,959,537 15,501,513
Unappropriated profit 22,187,802 16,604,076
52,276,246 42,222,777
Surplus on revaluation of assets - net of deferred tax 21 8,660,477 1,639,982
60,936,723 43,862,759

CONTINGENCIES AND COMMITMENTS 22

The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

139 United Bank Limited


Unconsolidated Profit And Loss Account
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)

Mark-up / return / interest earned 24 60,857,035 51,919,229


Mark-up / return / interest expensed 25 28,163,787 24,061,790
Net mark-up / interest income 32,693,248 27,857,439

Provision against loans and advances - net 10.5 9,623,204 4,509,956


Provision against lending to financial institutions 8.5 560,852 -
Provision for diminution in value of investments - net 9.3 945,342 2,219,815
Bad debts written off directly 10.6 1,485,976 1,367,514
12,615,374 8,097,285
Net mark-up / return / interest income after provisions 20,077,874 19,760,154

Non Mark-up / Interest Income


Fee, commission and brokerage income 5,925,082 6,249,015
Dividend income 606,347 587,989
Income from dealing in foreign currencies 1,213,881 1,795,319
Gain on sale of securities 26 629,418 200,804
Unrealized loss on revaluation of investments classified as
held for trading 9.4 (3,006) (19,547)
Other income 27 3,297,839 1,866,034
Total non mark-up / return / interest income 11,669,561 10,679,614
31,747,435 30,439,768
Non Mark-up / Interest Expenses
Administrative expenses 28 16,608,561 15,519,634
Other provisions / write offs - net 29 642,274 450,390
Workers' welfare fund 30 397,547 336,999
Other charges 31 64,552 258,321
Total non mark-up / interest expenses 17,712,934 16,565,344
Profit before taxation 14,034,501 13,874,424

Taxation - Current 32 6,930,585 6,090,351


- Prior years 32 76,328 435,072
- Deferred 32 (2,165,099) (984,119)
4,841,814 5,541,304
Profit after taxation 9,192,687 8,333,120
Unappropriated profit brought forward 16,604,076 15,653,703
25,796,763 23,986,823
Transfer from surplus on revaluation of fixed assets - net of tax 21.1 253,014 253,018
Profit available for appropriation 26,049,777 24,239,841

(Rupees)
Earnings per share - basic and diluted 33 8.26 7.49

The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

annual report 2009 140


Unconsolidated Statement Of Comprehensive Income
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)

Profit for the year 9,192,687 8,333,120

Other comprehensive income:


Exchange differences on translation of net investment in foreign branches 1,549,269 3,849,564
Net gain / (loss) on cash flow hedges 108,028 (425,589)
Related deferred tax (liability) / asset on cash flow hedges (37,810) 148,956
1,619,487 3,572,931

Comprehensive income transferred to equity - net of tax 10,812,174 11,906,051

Surplus arising on revaluation of assets has been reported in accordance with the requirements of the Companies Ordinance,
1984 and the directives of the State Bank of Pakistan in a separate account below equity.

The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

141 United Bank Limited


Unconsolidated Cash Flow Statement
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 14,034,501 13,874,424
Less: Dividend income 606,347 587,989
13,428,154 13,286,435
Adjustments:
Depreciation 1,471,525 1,236,031
Amortization 184,241 156,178
Worker's welfare fund 397,547 336,999
Provision for retirement benefits 462,726 19,969
Provision against loans and advances 9,623,204 4,509,956
Provision against lending to financial institutions 560,852 -
Provision for diminution in value of investments 945,342 2,219,815
Reversal of provision in respect of investments disposed off during the year (1,208,712) -
Provision against off- balance sheet items 20,250 42,966
Gain on sale of fixed assets (30,856) (14,298)
Bad debts written-off directly 1,485,976 1,367,514
Unrealized loss on revaluation of investments classified as held for trading 3,006 19,547
Provision against other assets 622,024 196,026
14,537,125 10,090,703
27,965,279 23,377,138
Decrease / (increase) in operating assets
Lendings to financial institutions (917,641) 1,976,382
Held-for-trading securities 743,410 (4,312,626)
Advances 5,938,782 (77,662,409)
Other assets (excluding advance taxation) 2,008,449 (5,612,902)
7,773,000 (85,611,555)
(Decrease) / increase in operating liabilities
Bills payable (47,190) (884,892)
Borrowings (9,051,063) (14,907,464)
Deposits and other accounts 8,476,041 82,585,523
Other liabilities (excluding current taxation) (2,030,138) 3,188,142
(2,652,350) 69,981,309
33,085,929 7,746,892
Staff retirement benefits paid (637,322) (193,417)
Income taxes paid (9,658,543) (7,165,283)
Net cash inflow from operating activities 22,790,064 388,192

CASH FLOW FROM INVESTING ACTIVITIES


Net investment in securities (13,565,270) (8,085,605)
Dividend income received 620,499 584,769
Investment in operating fixed assets (1,550,661) (3,077,157)
Sale proceeds from disposal of property and equipment 172,876 138,348
Net cash outflow on investing activities (14,322,556) (10,439,645)

CASH FLOW FROM FINANCING ACTIVITIES


Receipt of sub-ordinated loan - 6,000,000
Repayments of principal of sub-ordinated loans (4,048) (2,848)
Dividends paid (1,011,719) (3,945,703)
Net cash (used in) / from flow financing activities (1,015,767) 2,051,449
Exchange differences on translation of net investment in foreign branches 1,549,269 3,849,564
Increase / (Decrease) in cash and cash equivalents 9,001,010 (4,150,440)

Cash and cash equivalents at beginning of the year 57,567,139 61,717,579

Cash and cash equivalents at end of the year 34 66,568,149 57,567,139

The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

annual report 2009 142


Unconsolidated Statement Of Changes In Equity
For The Year Ended December 31, 2009

Capital reserves
Reserve Cash flow Unapprop-
Share Exchange
Statutory for issue hedge riated Total
capital translation
reserve of bonus reserve profit
reserve shares
(Rupees in ‘000)
Balance as at December 31, 2007 8,093,750 8,709,751 1,552,207 - - 15,653,703 34,009,411

Final cash dividend for the year ended December 31, 2007
declared subsequent to year end at Rs.3.00 per share - - - - - (2,428,125) (2,428,125)

Changes in equity for 2008

Interim cash dividend for the half year ended June 30, 2008
declared subsequent to the period end at Rs.1.5 per share - - - - - (1,517,578) (1,517,578)

Transfer to reserves for issue of bonus shares - - - 2,023,438 - (2,023,438) -

Issue of bonus shares 2,023,438 - - (2,023,438) - - -

Profit after taxation for the year ended December 31, 2008 - - - - - 8,333,120 8,333,120

Transfer from surplus on revaluation of fixed assets


to unappropriated profit - net of tax - - - - - 253,018 253,018

Other comprehensive income - net of tax - - 3,849,564 - (276,633) - 3,572,931

10,117,188 8,709,751 5,401,771 - (276,633) 18,270,700 42,222,777

Transfer to statutory reserve - 1,666,624 - - (1,666,624) -

Balance as at December 31, 2008 10,117,188 10,376,375 5,401,771 - (276,633) 16,604,076 42,222,777

Final cash dividend for the year ended December 31, 2008
declared subsequent to year end at Rs.1.00 per share - - - - - (1,011,719) (1,011,719)

Transfer to reserves for issue of bonus shares - - - 1,011,719 - (1,011,719) -

Issue of bonus shares 1,011,719 - - (1,011,719) - - -

Changes in equity for 2009

Profit after taxation for the year ended December 31, 2009 - - - - - 9,192,687 9,192,687

Transfer from surplus on revaluation of fixed assets


to unappropriated profit - net of tax - - - - 253,014 253,014

Other comprehensive income - net of tax - - 1,549,269 - 70,218 - 1,619,487

11,128,907 10,376,375 6,951,040 - (206,415) 24,026,339 52,276,246

Transfer to statutory reserve - 1,838,537 - - - (1,838,537) -

Balance as at December 31, 2009 11,128,907 12,214,912 6,951,040 - (206,415) 22,187,802 52,276,246

Appropriations made by the directors subsequent to the year ended December 31, 2009 are disclosed in note 46 of these unconsolidated financial statements.

The annexed notes from 1 to 48 and annexures form an integral part of these unconsolidated financial statements.

Atif R. Bokhari Dr. Ashfaque Hasan Khan Sir Mohammed Anwar Pervez, OBE, HPk Nahayan Mabarak Al Nahayan
President & Director Deputy Chairman Chairman
Chief Executive Officer

143 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

1. STATUS AND NATURE OF BUSINESS

United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking
and related services. The bank's registered office and principal office are situated at UBL building, Jinnah Avenue,
Blue Area, Islamabad and at State Life Building No. 1, I. I. Chundrigar Road, Karachi respectively. The bank operates
1,120 (2008: 1,119) branches including 05 (2008: 05) Islamic banking branches, 01 (2008: 01) branch in Karachi
Export Processing Zone (KEPZ) and 17 (2008: 17) branches outside Pakistan.

The Bank's Ordinary shares are listed on all three stock exchanges in Pakistan where as its Global Depository Receipts
(GDRs) are on the list of UK Listing Authority and London Stock Exchange Professional Securities Market. These
GDRs are also eligible for trading on the International Order Book System of the London Stock Exchange. Further,
the GDRs constitute an offering in the United States only to qualified institutional buyers in reliance on Rule 144A
under the US Securities Act of 1933 and an offering outside the United States in reliance on Regulation S.

2. BASIS OF PRESENTATION

In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic
modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related
modes of financing include purchase of goods by banks from their customers and immediate resale to them at
appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements
are not reflected in these financial statements as such but are restricted to the amount of facility actually utilized and
the appropriate portion of mark-up thereon. However, the Islamic Banking branches of the bank have complied with
the requirements set out under the Islamic Financial Accounting Standards issued by the Institute of Chartered
Accountants of Pakistan and notified under the provisions of the Companies Ordinance, 1984.

The financial results of the Islamic banking branches of the Bank have been consolidated in these unconsolidated
financial statements for reporting purposes, after eliminating material inter branch transactions / balances. Key financial
figures of the Islamic banking branches are disclosed in note 45 to these unconsolidated financial statements.

3. STATEMENT OF COMPLIANCE

3.1 These financial statements have been prepared in accordance with approved accounting standards as applicable in
Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) and
interpretations issued by the International Accounting Standards Board and Islamic Financial Accounting Standards
(IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance,
1984, the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued
by the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan. Wherever the requirements
of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or directives issued by the Securities and
Exchange Commission of Pakistan and the State Bank of Pakistan differ with the requirements of IFRS or IFAS, the
requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the requirements of the
said directives prevail.

3.2 The SBP vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting
Standard 39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard
40, Investment Property (IAS 40) for banking companies till further instructions. Further, according to the notification
of SECP dated April 28, 2008, the IFRS - 7 "Financial Instruments: Disclosures" has not been made applicable for
banks. Accordingly, the requirements of these standards have not been considered in the preparation of these financial
statements. However, investments have been classified and valued in accordance with the requirements of various
circulars issued by SBP.

3.3 These unconsolidated financial statements represent the separate stand alone financial statements of the Bank. The
consolidated financial statements of the bank and its subsidiary companies are presented separately.

annual report 2009 144


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

3.4 Standard, amendments interpretation not yet effective

The following revised standards, amendments and interpretations with respect to the approved accounting standards
as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or
interpretation:

Standard or Interpretation Effective date (Accounting


periods beginning on or after)
IAS 24 – Related Party Disclosures (Revised) January 01, 2011

IAS 32 – Financial Instruments: Presentation -


Classification of Rights Issues (Amendment) February 01, 2010

IFRS 2 – Share-based Payments: Amendments relating to Group


Cash-settled Share-based Payment Transactions January 01, 2010

IFRS 3 – Business Combinations (Revised) July 01, 2009

IAS - 27 Consolidated and Separate Financial


Statements (Amendment) July 01, 2009

IFRIC 14 - The Limit on Defined Benefit Assets, Minimum Funding


Requirements and their Interaction (Amendments) January 01, 2011

IFRIC 15 – Agreement for the construction of real estate October 01, 2009

IFRIC 17 – Distributions of Non-cash Assets to owners July 01, 2009

IFRIC 19 - Extinguishing Financial Liabilities with


Equity Instruments July 01, 2010

The Bank considers that the above standards and interpretations are either not relevant or will have no material impact
on its financial statements in the period of initial application other than to the extent of certain changes or enhancements
in the presentation and disclosures in the financial statements to the extent that such presentation and disclosure
requirements do not conflict with the format of financial statements prescribed by the SBP for banks.

In addition to the above, amendments to various accounting standards have also been issued by the IASB as a result
of its improvement project in April 2009. Such improvements are generally effective for accounting periods beginning
on or after January 01, 2010. The Bank expects that such improvements to the standards will not have any material
impact on the Bank's financial statements in the period of initial application.

4. BASIS OF MEASUREMENT

4.1 Accounting convention

These unconsolidated financial statements have been prepared under the historical cost convention except that certain
operating fixed assets have been stated at revalued amounts, certain investments have been stated at fair value and
derivative financial instruments are measured at fair value.

145 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

4.2 Critical accounting estimates and judgments

The preparation of these unconsolidated financial statements in conformity with approved accounting standards requires
management to make judgments, estimates and assumptions that effect the reported amounts of assets and liabilities
and income and expenses. It also requires management to exercise judgement in application of its accounting policies.
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects
only that period, or in the period of revision and future periods if the revision affects both current and future periods.

Significant accounting estimates and areas where judgements were made by the management in the application of
accounting policies are as follows:

i) classification of investments (notes 5.4 and 9)


ii) provision against investments (notes 5.4 and 9.3) and advances (notes 5.5 and 10.5)
iii) income taxes (notes 5.8 and 32)
iv) staff retirement benefits (note 5.10 and 36)
v) fair value of derivatives (note 5.15 and 19.4)
vi) operating fixed assets, depreciation and amortization (note 5.6 and 11)
vii) impairment (note 5.7)

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1 Change in accounting policy and disclosure

The accounting policies adopted in the preparation of these financial statements are consistent with those followed
in the preparation of previous financial year except for the following:

- IAS-1 Presentation of Financial Statements (Revised) effective January 01, 2009

The revised standard separates owner and non-owner changes in equity. The statement of changes in equity
includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In
addition, the standard introduces the statement of comprehensive income: it presents all items of recognised income
and expense, either in one single statement, or in two linked statements. The Bank has elected to present two
statements, an income statement and a statement of comprehensive income, rather than a single statement of
comprehensive income combining the two elements.

Further, surplus arising on revaluation of assets has been reported in accordance with the requirements of the
Companies Ordinance, 1984 and the directives of the State Bank of Pakistan in a separate account below equity.

5.2 Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement represent cash and balances with treasury banks
and balances with other banks in current and deposit accounts.

5.3 Lendings to / borrowings from financial institutions

The bank enters into transactions of repos and reverse repos at contracted rates for a specified period of time. These
are recorded as under:

5.3.1 Sale under repurchase agreements

Securities sold subject to a re-purchase agreement (repo) are retained in the unconsolidated financial statements as
investments and the counter party liability is included in borrowings from financial institutions. The differential in sale
and re-purchase value is accrued over the period of the agreement and recorded as an expense.

annual report 2009 146


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.3.2 Purchase under resale agreements

Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The
differential between the contracted price and resale price is amortized over the period of the agreement and recorded
as income.

Securities borrowed are not recognized in the financial statements, unless these are sold to third parties, in which case
the obligation to return them is recorded at fair value as a trading liability under borrowings from financial institutions.

5.4 Investments

The Bank classifies its investments as follows:

5.4.1 Held for trading

These are securities, which are either acquired for generating a profit from short-term fluctuations in market prices,
interest rate movements, dealers margin or are securities included in a portfolio in which a pattern of short-term profit
taking exists.

5.4.2 Available for sale

These are investments, other than those in subsidiaries and associates, that do not fall under the held for trading or
held to maturity categories.

Investments other than those categorized as held for trading are initially recognized at fair value which includes
transaction costs associated with the investment. Investments classified as held for trading are initially recognized
at fair value, and transaction costs are expensed in the profit and loss account.

All purchases and sales of investments that require delivery within the time frame established by regulations or market
convention are recognized at the trade date. Trade date is the date on which the bank commits to purchase or sell
the investment.

In accordance with the requirements of State Bank of Pakistan, quoted securities other than those classified as 'held
to maturity', investments in subsidiaries and investments in associates (which qualify for accounting under International
Accounting Standard - 28), are subsequently re-measured to market value. Surplus / (deficit) arising on revaluation
of quoted securities classified as 'available for sale', is taken to a separate account shown in the balance sheet below
equity. Surplus / (deficit) arising on revaluation of quoted securities which are classified as 'held for trading', is taken
to the profit and loss account.

Unquoted equity securities excluding investments in subsidiaries and associates are valued at the lower of cost and
break-up value. Break-up value of equity securities is calculated with reference to the net assets of the investee
company as per the latest available audited financial statements. Investments classified as 'held to maturity' are carried
at amortized cost. Investments in subsidiaries and associates (which qualify for accounting under International
Accounting Standard - 28) are carried at cost net of impairment (if any).

Provision for diminution in the values of securities (except debentures, participation term certificates and term finance
certificates) is made after considering impairment, if any, in their value. Provision for diminution in value of debentures,
participation term certificates and term finance certificates is made as per the requirements of the Prudential Regulations
issued by the State Bank of Pakistan.

Profit and loss on sale of investments is included in income currently.

5.4.3 Held to maturity

These are securities with fixed or determinable payments and fixed maturity in respect of which the Bank has the
positive intent and ability to hold to maturity.

147 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.5 Advances

Advances are stated net of specific and general provisions. Specific provision against domestic advances is determined
on the basis of Prudential Regulations and other directives issued by the State Bank of Pakistan and charged to the
profit and loss account. General provision against consumer loans is made in accordance with the requirements of
the Prudential Regulations issued by the State Bank of Pakistan. General and specific provisions pertaining to overseas
advances are made in accordance with the requirements of monetary agencies and regulatory authorities of the
respective countries. Advances are written off when there is no realistic prospect of recovery.

5.6 Operating fixed assets and depreciation

5.6.1 Owned

Property and equipment, other than freehold land which is not depreciated and capital work-in-progress, are stated
at cost or revalued amount less accumulated depreciation and accumulated impairment losses (if any). Freehold land
is carried at revalued amount less impairment losses while capital work-in-progress is stated at cost less impairment
losses. Cost of property and equipment of foreign branches includes exchange difference arising on currency translation
at the year-end rates of exchange.

Depreciation is calculated so as to write off the depreciable amount of the assets over their expected economic lives
at the rates specified in note 11.2 to these unconsolidated financial statements. The depreciation charge for the year
is calculated after taking into account residual value, if any, and using methods depending on the nature of the asset
and the country of its location. The residual values, useful lives and depreciation methods are reviewed and adjusted,
if appropriate, at each balance sheet date.

Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in the
month of disposal.

Land and buildings are revalued by professionally qualified valuers with sufficient regularity to ensure that the net
carrying amount does not differ materially from their fair value.

Surplus arising on revaluation is credited to the surplus on revaluation of fixed assets account. Deficit arising on
subsequent revaluation of fixed assets is adjusted against the balance in the above-mentioned surplus account as
allowed under the provisions of the Companies Ordinance, 1984. The surplus on revaluation of fixed assets to the
extent of incremental depreciation charged on the related assets is transferred to unappropriated profit.

Gains and losses on sale of fixed assets are included in income currently, except that the related surplus on revaluation
of fixed assets (net of deferred taxation) is transferred directly to unappropriated profit.

Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs and
maintenance are charged to the profit and loss account as and when incurred.

5.6.2 Leased (Ijarah)

Assets leased out under 'Ijarah' are stated at cost less accumulated depreciation and accumulated impairment losses,
if any. Assets under Ijarah are depreciated over the period of lease term. However, in the event the asset is expected
to be available for re-ijarah, depreciation is charged over the economic life of the asset using straight line basis.

Ijarah income is recognized on an accrual basis as and when the rental becomes due.

annual report 2009 148


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.6.3 Intangible assets

Intangible assets having a finite useful life are stated at cost less accumulated amortization and accumulated impairment
losses, if any. Intangible assets are amortized from the month, when these assets are available for use, using the
straight line method, whereby the cost of the intangible asset is amortized on the basis of the estimated useful life
over which economic benefits are expected to flow to the Bank. The residual value, useful life and amortization method
is reviewed and adjusted, if appropriate, at each balance sheet date.

Intangible assets having an indefinite useful life are stated at acquisition cost. Provisions are made for impairment
in the value of assets, if any. Gains and losses on disposals, if any, are taken to the profit and loss account.

5.7 Impairment

The carrying amount of assets are reviewed at each balance sheet date for impairment whenever events or changes
in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists,
and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable
amount. The resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued
assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed
the surplus on revaluation of that asset.

The 'available for sale' equity investments are impaired when there has been a significant or prolonged decline in the
fair value below its cost. The determination of what is significant or prolonged requires judgment. In making this
judgment, the Bank evaluates among other factors, the normal volatility in share price. In addition the impairment may
be appropriate when there is an evidence of deterioration in the financial health of the invested industry and sector
performance, changes in technology and operational / financial cash flows.

5.8 Taxation

5.8.1 Current

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing
laws for taxation on income earned from local as well as foreign operations, as applicable to the respective jurisdictions.
The charge for the current tax is calculated using prevailing tax rates or tax rates expected to apply to the profits for
the year at enacted rates. The charge for the current tax also includes adjustments, where considered necessary
relating to prior years, arising from assessments made during the year.

5.8.2 Deferred

Deferred tax is recognized using the balance sheet liability method on all major temporary differences between the
amounts attributed to assets and liabilities for financial reporting purposes and amounts used for taxation purposes.
In addition, the Bank also records deferred tax asset on available tax losses. Deferred tax is calculated at the rates
that are expected to apply to the period when the differences are expected to reverse, based on tax rates that have
been enacted or substantively enacted by the balance sheet date.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available
against which the assets can be utilized.

The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be
utilized.

The bank also recognizes deferred tax asset / liability on deficit / surplus on revaluation of fixed assets, cash flow
hedge reserve and securities which is adjusted against the related deficit / surplus in accordance with the requirements
of the revised International Accounting Standard (IAS) 12 Income Taxes.

149 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.9 Provisions

Provisions are recognized when the Bank has a legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.

5.10 Staff retirement and other benefits

5.10.1 Staff retirement benefit schemes

The Bank operates the following staff retirement schemes for its employees

a) For employees who have not opted for the new scheme introduced in 1991

- approved funded pension scheme, introduced in 1986 (defined benefit scheme); and
- approved non-contributory provident fund in lieu of the contributory provident fund.

b) For new employees and for those who opted for the new scheme introduced in 1991, the Bank operates

- approved contributory provident fund (defined contribution scheme); and


- approved gratuity scheme (defined benefit scheme).

In the year 2001, the Bank modified the pension scheme and introduced a conversion option for employees covered
under option (a) above to option (b). This conversion option ceased on December 31, 2003.

The Bank also operates a contributory benevolent fund for all its eligible employees (defined benefit scheme).

Annual contributions towards the defined benefit schemes are made on the basis of actuarial advice using the
Projected Unit Credit Method.

For defined contribution plans, the Bank pays contributions to the Fund on a periodic basis. The Bank has no further
payment obligation once the contributions have been paid. The contributions are recognized as employee benefit
expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or
a reduction on the future payments is available.

5.10.2 Other benefits

a) Employees' compensated absences

The Bank makes provisions for compensated vested and non-vested absences accumulated by its employees
on the basis of actuarial advice under the Projected Unit Credit Method.

b) Post retirement medical benefits (defined benefit scheme)

The Bank provides post retirement medical benefits to eligible retired employees. Provision is made annually
to meet the cost of such medical benefit on the basis of actuarial advice under the Projected Unit Credit Method.

c) Employee motivation and retention scheme

The Bank operates a long term motivation and retention scheme for its employees with the objective to reward,
motivate and retain its high performing executives and officers. The liability of the Bank is fixed and determined
each year based on the performance of the Bank.

annual report 2009 150


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.10.3 Actuarial gains and losses

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess
of the greater of 10% of the value of the plan assets or 10% of the defined benefit obligation at the end of the last
reporting year are charged or credited to income over the employees' expected average remaining working lives.
These limits are calculated and applied separately for each defined benefit plan.

Actuarial gains and losses pertaining to long term compensated absences are recognized immediately.

5.11 Sub-ordinated Debts

Sub-ordinated debt is initially recorded at the amount of proceeds received. Mark-up accrued on these debts are recognised
separately as part of other liabilities and is charged to profit and loss account over the period on accrual basis.

5.12 Borrowings / deposits and their cost

a) Borrowings / deposits are recorded at the proceeds received.


b) Borrowing / deposits costs are recognized as an expense in the period in which these are incurred.

5.13 Revenue recognition

Revenue is recognized to the extent that the economic benefits will flow to the Bank and the revenue can be reliably
measured. The following recognition criteria must be met before revenue is recognized.

5.13.1 Advances and investments

Mark-up / return on performing advances and investments is recognized on a time proportion basis over the term
of loans and advances. Where debt securities are purchased at premium or discount, those premiums / discounts
are amortized through the profit and loss account over the remaining period of maturity.

Interest or mark-up recoverable on non-performing advances and classified investments is recognized on receipt
basis. Interest / return / mark-up on rescheduled / restructured loans and advances and investments is recognized
as permitted by the regulations of the State Bank of Pakistan or overseas regulatory authorities of countries where
the branches operate, except where in the opinion of the management, it would not be prudent to do so.

5.13.2 Dividend income

Dividend income is recognised when the right to receive the dividend is established.

5.13.3 Fee, brokerage and commission

Fee, brokerage, commission and other income are recognized on an accrual basis.

5.14 Foreign currencies

5.14.1 Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment
in which the Bank operates. The financial statements are presented in Pakistani Rupees, which is the Bank's
functional and presentation currency.

151 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.14.2 Foreign currency transactions

Transactions in foreign currencies are translated to rupees at the foreign exchange rates prevailing on the transaction
date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange
prevailing at the balance sheet date. Forward foreign exchange contracts and foreign bills purchased are valued
at forward rates applicable to their respective maturities.

5.14.3 Foreign operations

The assets and liabilities of foreign operations are translated to rupees at exchange rates prevailing at the balance
sheet date. The results of foreign operations are translated at the average rate of exchange for the year.

5.14.4 Translation gains and losses

Translation gains and losses are taken to the profit and loss account, except those arising on the translation of net
investment in foreign branches which are taken to capital reserve (Exchange Translation Reserve).

5.14.5 Commitments

Commitments for outstanding forward foreign exchange contracts are disclosed in the financial statements at
contracted rates. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in
foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the date of transaction.

5.15 Financial instruments

5.15.1 Financial assets and liabilities

Financial instruments carried on the balance sheet include cash and bank balances, lendings to institutions,
investments, advances, certain receivables, bills payables, borrowings from financial institutions, deposits, sub-
ordinated loan and certain other payables. The particular recognition methods adopted for significant financial assets
and financial liabilities are disclosed in the individual policy notes associated with them.

5.15.2 Derivative financial instruments

Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is
entered into and are subsequently re-measured at fair value using appropriate valuation techniques. All derivative
financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any
change in the fair value of derivative financial instruments is taken to the profit and loss account.

5.15.3 Hedge accounting

The Bank makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit
risks, including exposures arising from forecast transactions. In order to manage particular risks, the Bank applies
hedge accounting for transactions which meet the specified criteria.

At inception of the hedge relationship, the Bank formally documents the relationship between the hedged item and
the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge and
the method that will be used to assess the effectiveness of the hedging relationship.

Also at the inception of the hedge relationship, a formal assessment is undertaken to ensure the hedging instrument
is expected to be highly effective in offsetting the designated risk in the hedged item. Hedges are formally assessed
each quarter. A hedge is regarded as highly effective if the changes in fair value or cash flows attributable to the
hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%.
For situations where that hedged item is a forecast transaction, the Bank assesses whether the transaction is highly
probable and presents an exposure to variations in cash flows that could ultimately affect the profit and loss account.

annual report 2009 152


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

(a) Fair value hedges

For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised
in the profit and loss account in other income. Meanwhile, the change in the fair value of the hedged item attributable
to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the profit
and loss account in other income.

(b) Cash flow hedges

For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow
hedge is recognised initially in statement of changes in equity, and recycled to the profit and loss account in the
periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the hedging
instrument is recognised in the profit and loss account immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity until the forecast transaction occurs or
is no longer expected to occur. When a forecast transaction occurs or is no longer expected to occur, the cumulative
gain or loss that was recognised in equity is immediately transferred to the profit and loss account.

5.15.4 Off setting

Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when
there is a legally enforceable right to set off and the Bank intends to either settle on a net basis, or to realize the
assets and to settle the liabilities simultaneously.

5.16 Segment reporting

A segment is a distinguishable component of the Bank that is engaged either in providing product or services
(business segment), or in providing products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those of other segments.

5.16.1 Business segments

(a) Corporate finance

Corporate banking includes services provided in connection with mergers and acquisition, underwriting, privatization,
securitization, research, debts (government, high yield), equity, syndication, IPO and secondary private placements.

(b) Trading and sales

It includes fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending
and repos, brokerage debt and prime brokerage.

(c) Retail banking

It includes retail lending and deposits, banking services, trust and estates, investment advice, merchant /
commercial / corporate cards and private labels and retail.

(d) Commercial banking

Commercial banking includes project finance, real estate, export finance, trade finance, factoring, leasing, lending,
guarantees, bills of exchange and deposits.

(e) Others

It includes all support functions.

153 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

5.16.2 Geographical segments

The Bank operates in three geographical regions being:

- Pakistan
- United States of America
- Middle East
- Asia Pacific (including South Asia)

5.17 Dividend and appropriation to reserves

Dividend and appropriation to reserves, except appropriation which are required by the law after the balance sheet
date, are recognized as liability in the Banks' unconsolidated financial statements in the year in which these are
approved.

5.18 Earnings per share

The Bank presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the bank by the weighted average number of
ordinary shares outstanding during the period / year. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, if any. There were no convertible dilutive potential ordinary shares in issue
at December 31, 2009.
Note 2009 2008
(Rupees in '000)
6. CASH AND BALANCES WITH TREASURY BANKS

In hand
Local currency 10,744,149 9,859,986
Foreign currency 2,945,974 4,951,053
13,690,123 14,811,039
With State Bank of Pakistan in
Local currency current account 6.1 18,937,149 14,324,727
Local currency deposit account 3,864 3,864
Foreign currency current account 6.2 2,809 2,656
Foreign currency deposit account 6.3 4,487,971 4,730,090
23,431,793 19,061,337
With other central banks in foreign currency current account 6.4 15,372,202 8,006,779
With National Bank of Pakistan in local currency current account 8,609,162 8,153,544
National Prize Bonds 57,398 37,266
61,160,678 50,069,965

6.1 The local currency current account is maintained with the State Bank of Pakistan (SBP) as per the requirements
of Section 36 of the State Bank of Pakistan Act, 1956. This section requires banking companies to maintain a local
currency cash reserve in current account opened with the SBP at a sum not less than such percentage of its time
and demand liabilities in Pakistan as may be prescribed by SBP.

6.2 This represents US Dollar Settlement Account maintained with SBP.

6.3 The foreign currency cash reserve comprises of an amount equivalent to at least 5% of the bank's foreign currency
deposits which is kept in a non-remunerative account. It also includes foreign currency cash reserve maintained with
SBP equivalent to at least 15% of the bank's foreign currency deposits. The return on this account is declared by SBP
on a monthly basis as at December 31, 2009 and carries mark-up at the rate of 0% (2008: 0.90%) per annum.

annual report 2009 154


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

6.4 Deposits with other central banks are maintained to meet the minimum cash reserves and capital requirements
pertaining to the foreign branches of the Bank.

Note 2009 2008


(Rupees in '000)
7. BALANCES WITH OTHER BANKS

Inside Pakistan
In current accounts 26,715 -
In deposit accounts 7.1 75,630 380,669
102,345 380,669
Outside Pakistan
In current accounts 3,500,428 4,441,155
In deposit accounts 7.1 1,804,697 2,675,350
5,305,125 7,116,505
5,407,470 7,497,174

7.1 These carry mark-up at rates ranging from 0.12% to 2.01% (2008: 3.25% to 13.00%) per annum.

Note 2009 2008


8. LENDINGS TO FINANCIAL INSTITUTIONS (Rupees in '000)
Call money lendings 8.2 1,110,610 2,800,780
Repurchase agreement lendings 8.3 17,941,216 15,639,163
Lendings to banks / financial institutions 8.4 4,671,156 4,365,398
23,722,982 22,805,341
Provision against lendings to financial institutions 8.5 (560,852) -
23,162,130 22,805,341

8.1 Particulars of lendings to financial institutions

In local currency 21,140,954 18,618,677


In foreign currencies 2,021,176 4,186,664
23,162,130 22,805,341

8.2 These are unsecured lendings carrying mark-up at rates ranging from 11.95% to 12.65% per annum (2008: 9.50%
to 15.65% per annum) and are due to mature latest by April 2010.

8.3 Securities held as collateral against repurchase agreement lendings


2009 2008
Held by Further Total Held by Further Total
Bank given as Bank given as
collateral / collateral /
sold (Rupees in '000) sold
Market Treasury Bills 16,691,063 990,566 17,681,629 12,596,455 - 12,596,455
Pakistan Investment
Bonds 159,587 100,000 259,587 2,192,708 850,000 3,042,708
16,850,650 1,090,566 17,941,216 14,789,163 850,000 15,639,163
These carry mark-up at rates ranging from 10.75% to 12.35% per annum (2008: 6.00% to 16.00% per annum) and
are due to mature latest by March 2010.
8.4 These carry mark-up at rates ranging from 3.00% to 15.87% per annum (2008: 15.53% to 17.77% per annum) and are
due to mature latest by February 2014, where as lending pertaining to overseas operation carry mark-up at rates ranging
from 1.03% to 3.46% per annum (2008: 1.19% to 6.02% per annum) and are due to mature latest by August 2010.
8.5 This represents provision made against lendings to overseas financial institutions with movement as follows:
2009 2008
(Rupees in '000)
Opening balance - -
Charged during the year 560,852 -
Closing balance 560,852 -

155 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

9. INVESTMENTS Note 2009 2008

Held by Given as Total Held by Given as Total


9.1 Investments by types Bank collateral Bank collateral
Held for trading securities (Rupees in '000)

Market Treasury Bills 3,268,035 - 3,268,035 4,202,368 - 4,202,368


Ordinary shares of listed companies - - - 348,506 - 348,506
Pakistan Investment Bonds 438,505 97,306 535,811 15,929 - 15,929
3,706,540 97,306 3,803,846 4,566,803 - 4,566,803
Available for sale securities

Market Treasury Bills 35,572,747 3,978,323 39,551,070 33,775,219 13,841,226 47,616,445


Pakistan Investment Bonds 16,728,759 - 16,728,759 16,777,690 428,230 17,205,920
Foreign securities 12,740,879 - 12,740,879 15,235,129 - 15,235,129
Government of Pakistan - Sukuk 3,470,000 - 3,470,000 1,100,000 - 1,100,000
Government of Pakistan Euro Bonds 3,870,557 - 3,870,557 5,734,927 - 5,734,927
Ordinary shares of listed companies 3,639,088 - 3,639,088 5,690,840 - 5,690,840
Term Finance Certificates 1,948,689 - 1,948,689 2,172,435 - 2,172,435
Ordinary shares of unlisted companies 9.7 441,574 - 441,574 441,465 - 441,465
Units of mutual funds 191,299 - 191,299 211,583 - 211,583
Preference shares 188,895 - 188,895 189,909 - 189,909
Sukuk Bonds - - - 455,276 - 455,276
78,792,487 3,978,323 82,770,810 81,784,473 14,269,456 96,053,929
Held to maturity securities

Term Finance Certificates 25,289,199 - 25,289,199 4,915,803 - 4,915,803


Market Treasury Bills 11,611,110 - 11,611,110 1,263,178 - 1,263,178
Sukuk Bonds 2,640,040 - 2,640,040 1,094,372 - 1,094,372
Pakistan Investment Bonds 2,497,301 - 2,497,301 4,339,104 - 4,339,104
Foreign securities 1,687,712 - 1,687,712 1,911,320 - 1,911,320
Government of Pakistan - Guaranteed Bonds 1,485,057 - 1,485,057 1,485,444 - 1,485,444
Government of Pakistan - Euro Bond 478,184 - 478,184 897,982 - 897,982
Government of Pakistan - Sukuk 30,000 - 30,000 - - -
Participation Term Certificates 26,838 - 26,838 38,205 - 38,205
Debentures 4,592 - 4,592 6,676 - 6,676
CDC SAARC Fund 421 - 421 395 - 395
Certificates of Deposit - - - 4,091,750 - 4,091,750
CIRC Bonds - - - 2,900,000 - 2,900,000
45,750,454 - 45,750,454 22,944,229 - 22,944,229
Associates

United Growth and Income Fund 5,002,027 - 5,002,027 1,504,559 - 1,504,559


UBL Liquidity Plus Fund 600,000 - 600,000 - - -
United Composite Islamic Fund 386,997 - 386,997 523,048 - 523,048
United Islamic Income Fund 250,000 - 250,000 250,000 - 250,000
United Stock Advantage Fund 250,000 - 250,000 250,000 - 250,000
UBL Participation Protected Plan 200,000 - 200,000 200,000 - 200,000
UBL Insurers Limited 150,000 - 150,000 90,000 - 90,000
United Capital Protected Fund - I 75,075 - 75,075 75,075 - 75,075
Oman United Exchange Company, Muscat 6,981 - 6,981 6,981 - 6,981
9.9 6,921,080 - 6,921,080 2,899,663 - 2,899,663
Subsidiaries

United National Bank, UK 1,482,011 - 1,482,011 1,482,011 - 1,482,011


United Bank AG Zurich, Switzerland 589,837 - 589,837 589,837 - 589,837
UBL Fund Managers Limited 100,000 - 100,000 100,000 - 100,000
United Executors and Trustees Company Ltd 30,100 - 30,100 30,100 - 30,100
2,201,948 - 2,201,948 2,201,948 - 2,201,948
137,372,509 4,075,629 141,448,138 114,397,116 14,269,456 128,666,572
Provision for diminution in value of
investments 9.3 (2,252,653) - (2,252,653) (2,536,770) - (2,536,770)
Investments (net of provisions) 135,119,856 4,075,629 139,195,485 111,860,346 14,269,456 126,129,802
Deficit on revaluation of available for
sale securities 21.2 (3,049,359) 2,404 (3,046,955) (9,672,239) (109,728) (9,781,967)
Deficit on revaluation of held for trading
securities 9.4 (2,286) (720) (3,006) (19,547) - (19,547)
Total investments 132,068,211 4,077,313 136,145,524 102,168,560 14,159,728 116,328,288

annual report 2009 156


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
9.2 Investments by segments

Federal Government Securities


Market Treasury Bills 48,577,758 51,818,813
Pakistan Investment Bonds 19,761,871 21,560,953
Government of Pakistan - Sukuk 3,500,000 1,100,000
Government of Pakistan - Euro Bonds 4,348,741 6,632,909
Government of Pakistan - Guaranteed Bonds 1,485,057 4,385,444
77,673,427 85,498,119
Foreign Securities
Government securities 9,067,350 4,934,465
CDC SAARC Fund 421 395
Other securities 11,213,698 17,566,912
20,281,469 22,501,772
Fully Paid-up Ordinary Shares
Listed companies 3,639,088 6,039,346
Unlisted companies 9.7 441,574 441,465
4,080,662 6,480,811

Preference Shares 188,895 189,909

Units of Mutual Funds 191,299 211,583

Term Finance Certificates


Unlisted 24,570,114 5,778,897
Listed 2,667,774 1,309,341
27,237,888 7,088,238

Sukuk Bonds 2,640,040 1,549,648


Debentures 4,592 6,676
Participation Term Certificates 26,838 38,205

Investments in subsidiaries and associates 9.9 9,123,028 5,101,611

Total investments at cost 141,448,138 128,666,572

Provision for diminution in value of investments 9.3 (2,252,653) (2,536,770)

Investments (net of provisions) 139,195,485 126,129,802

Deficit on revaluation of available for sale securities 21.2 (3,046,955) (9,781,967)


Deficit on revaluation of held for trading securities 9.4 (3,006) (19,547)

Total investments 136,145,524 116,328,288

157 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
9.3 Particulars of provision for diminution in value of investments:

9.3.1 Opening balance 2,536,770 351,191

Charged during the year 9.3.1.1 1,249,158 2,240,588


Reversed during the year (303,816) (20,773)
Net charge for the year 945,342 2,219,815

Reversed on disposal (1,208,712) -

Written off during the year (20,747) (34,236)


Closing balance 2,252,653 2,536,770

9.3.1.1 This includes impairment loss in respect of equity securities / mutual funds held under available for sale category
of investment deferred as at 31, December 2008, in accordance with the BSD circular number 4 of SBP, dated
February 13, 2009. The said impairment loss is charged to the profit and loss account after taking into account
effects of price movements during the year.

9.3.2 Particulars of provision for diminution in value of investments by type 2009 2008
(Rupees in '000)
Available for sale securities
Ordinary shares of listed companies 1,830,318 1,882,296
Ordinary shares of unlisted companies 150,275 150,275
1,980,593 2,032,571
Held to maturity securities
Term Finance Certificates 104,985 109,989
Debentures 4,591 6,676
Participation Term Certificates 26,838 38,205
136,414 154,870
Associates 135,646 349,329
2,252,653 2,536,770

9.3.3 Particulars of provision for diminution in value of investments by segment

Fully Paid-up Ordinary Shares


Listed companies 1,830,318 1,882,296
Unlisted companies 150,275 150,275
1,980,593 2,032,571

Term Finance Certificates, Debentures and


Participation Term Certificates
Term Finance Certificates 104,985 109,989
Debentures 4,591 6,676
Participation Term Certificates 26,838 38,205
136,414 154,870
Associates 135,646 349,329
2,252,653 2,536,770
9.4 Unrealized loss on revaluation of held for trading securities

Market Treasury Bills 1,416 1,968


Pakistan Investment Bonds (4,422) (1,154)
Ordinary shares of listed companies - (20,361)
(3,006) (19,547)

annual report 2009 158


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

9.5 Investments include certain approved / government securities which are held by the Bank to comply with the Statutory
Liquidity Requirement determined on the basis of the Bank's demand and time liabilities as set out under Section
29 of the Banking Companies Ordinance, 1962.

9.6 Investments include Rs.282 million (2008: Rs.282 million) held by the State Bank of Pakistan and National Bank
of Pakistan as pledge against demand loan, TT / DD discounting facilities and foreign exchange exposure limit
sanctioned to the Bank and Rs.5 million (2008: Rs.5 million) held by the Controller of Military Accounts (CMA) under
Regimental Fund Arrangements.

9.7 This includes the Bank's subscription towards the paid-up capital of Khushhali Bank Limited amounting to Rs.200
million (2008: Rs.200 million). Pursuant to Section 10 of the Khushhali Bank Ordinance, 2000 strategic investors
including the bank cannot sell or transfer their investment before a period of five years that has expired on October
10, 2005. Thereafter, such sale/ transfer would be subject to the prior approval of SBP. In addition, profit of Khushhali
Bank Limited cannot be distributed as dividend under clause 35(i) of the Khushhali Bank Ordinance, 2000.

However, SBP prepared a conversion structure for the Khushhali Bank Limited to operate as Micro Finance Bank
under Micro Finance Institution Ordinance, 2001 which was approved by the Ministry of Finance. Moreover, the
scheme of conversion was also approved by the shareholders of the Khushhali Bank Limited in Extra Ordinary
General Meeting held on December 17, 2007. Accordingly, an application for incorporation was submitted to the
SECP on February 15, 2008. The SECP has incorporated the Khushhali Bank Limited under Micro Finance Institution
Ordinance, 2001 and issued Certificate of Incorporation on February 28, 2008 under section 32 of Companies
Ordinance, 1984.

In a meeting between SBP and the Board of Directors of Khushhali Bank Limited held on June 12, 2008, it was
agreed that since Khushhali Bank Limited has a majority of private sector commercial banks as its shareholders
and is legally a private sector bank, it is required to be managed as a private sector institution.

In order to achieve the strategic restructuring of Khushhali Bank Limited, a consortium of commercial banks including
UBL decided to completely divest their shareholding in Khushhali Bank Limited. Thereafter, the Consortium appointed
Advisors (financial, legal and accounting) for conducting preliminary due diligence for valuation and preparing a data
room for the prospective purchasers. Khushhali Bank Limited, on behalf of the Consortium of the Commercial Banks
has sought prior clearance/approval of the SBP for appointment of Advisors to conduct due diligence of Khushhali
Bank Limited.

SBP has conveyed its, in principle, no objection to the consortium of selling shareholders of Khushhali Bank Limited
for conducting due diligence/valuation of Khushhali Bank Limited subject to compliance with all the applicable
laws/rules/regulations etc. The due diligence / valuation is in the process of being carried out.

9.8 Information relating to investments in ordinary and preference shares / certificates of listed and unlisted companies
/ modarabas / mutual funds, term finance certificates, debentures and bonds, required to be disclosed as part of
the financial statements under State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006, is given in
Annexure 'A'. Details in respect of quality of available for sale securities are also disclosed in Annexure 'A' to these
unconsolidated financial statements.

9.9 This includes investment in the seed capital aggregating to Rs.1,100 million (2008: Rs.1,250 million) which is required
to be kept for a period of two years.

159 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

10. ADVANCES Note Performing Non-performing Total


2009 2008 2009 2008 2009 2008
(Rupees in '000)
Loans, cash credits,
running finances, etc.

In Pakistan 10.2 244,389,399 254,525,402 32,220,534 23,988,307 276,609,933 278,513,709


Outside Pakistan 82,463,971 92,869,805 4,064,166 2,132,279 86,528,137 95,002,084
326,853,370 347,395,207 36,284,700 26,120,586 363,138,070 373,515,793
Bills discounted and
purchased (excluding
government treasury bills)

Payable in Pakistan 11,607,055 11,104,578 2,400,013 1,297,385 14,007,068 12,401,963


Payable outside Pakistan 4,916,421 4,241,493 416,683 421,349 5,333,104 4,662,842
16,523,476 15,346,071 2,816,696 1,718,734 19,340,172 17,064,805
343,376,846 362,741,278 39,101,396 27,839,320 382,478,242 390,580,598
Financing in respect of
Continuous Funding
System (CFS) - 322,180 - - - 322,180

Advances - gross 343,376,846 363,063,458 39,101,396 27,839,320 382,478,242 390,902,778

Provision against advances 10.5


- Specific - - (27,673,022) (18,563,334) (27,673,022) (18,563,334)
- General (713,507) (1,199,769) - - (713,507) (1,199,769)
(713,507) (1,199,769) (27,673,022) (18,563,334) (28,386,529) (19,763,103)

Advances - net of provision 342,663,339 361,863,689 11,428,374 9,275,986 354,091,713 371,139,675

Performing Non-performing Total


2009 2008 2009 2008 2009 2008
10.1 Particulars of
advances - gross (Rupees in '000)

10.1.1 In local currency 253,182,814 257,379,877 33,781,868 25,285,692 286,964,682 282,665,569


In foreign currencies 90,194,032 105,683,581 5,319,528 2,553,628 95,513,560 108,237,209
343,376,846 363,063,458 39,101,396 27,839,320 382,478,242 390,902,778

10.1.2 Short term 230,096,641 253,342,253 - - 230,096,641 253,342,253


Long term 113,280,205 109,721,205 39,101,396 27,839,320 152,381,601 137,560,525
343,376,846 363,063,458 39,101,396 27,839,320 382,478,242 390,902,778

10.2 This includes performing advances given under various Islamic financing modes amounting to Rs.638.131 million
(2008: Rs.469.910 million).

10.3 Non-performing advances include advances having gross book value of Rs.1,596.136 million (2008: Rs.936.792
million) and net book value of Rs.919.006 million (2008: Rs.339.689 million) though restructured and performing
have been placed under non-performing status as required by the revised Prudential Regulations issued by the
State Bank of Pakistan, which requires monitoring for at least one year before any upgradation is considered.

annual report 2009 160


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

10.4 Advances include Rs.39,101 million (2008: Rs.27,839 million) which have been placed under non-performing status
as detailed below:
2009

Category of Classification Classified advances Provision Required Provision held


Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in ‘000)
Other Assets Especially
Mentioned * 386,517 - 386,517 - - - - - -
Substandard 3,802,275 1,473,002 5,275,277 891,498 368,251 1,259,749 891,498 368,251 1,259,749
Doubtful 6,007,332 1,696,401 7,703,733 2,651,589 848,206 3,499,795 2,651,589 848,206 3,499,795
Loss 24,424,423 1,311,446 25,735,869 21,602,032 1,311,446 22,913,478 21,602,032 1,311,446 22,913,478
34,620,547 4,480,849 39,101,396 25,145,119 2,527,903 27,673,022 25,145,119 2,527,903 27,673,022

2008

Category of Classification Classified advances Provision Required Provision held


Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total
(Rupees in ‘000)
Other Assets Especially
Mentioned * 562,548 - 562,548 - - - - - -
Substandard 4,857,390 83,689 4,941,079 905,120 20,922 926,042 905,120 20,922 926,042
Doubtful 6,308,575 308,796 6,617,371 2,214,783 154,726 2,369,509 2,214,783 154,726 2,369,509
Loss 13,557,179 2,161,143 15,718,322 13,106,640 2,161,143 15,267,783 13,106,640 2,161,143 15,267,783
25,285,692 2,553,628 27,839,320 16,226,543 2,336,791 18,563,334 16,226,543 2,336,791 18,563,334

* The Other Assets Especially Mentioned category pertains to agricultural finance only.

10.5 Particulars of provision against advances


2009 2008
Note Specific General Total Specific General Total
(Rupees in ‘000)

Opening balance 18,563,334 1,199,769 19,763,103 16,030,682 1,352,028 17,382,710


Exchange adjustments 272,286 13,018 285,304 724,699 12,738 737,437

Charge / (Reversals)
Charge for the year 11,530,793 - 11,530,793 6,889,976 (214,675) 6,675,301
Reversals (944,245) (963,344) (1,907,589) (796,116) - (796,116)
10,586,548 (963,344) 9,623,204 6,093,860 (214,675) 5,879,185
Reversal of provision due to change
in Prudential Regulations - - - (1,369,229) - (1,369,229)
10,586,548 (963,344) 9,623,204 4,724,631 (214,675) 4,509,956
Transfers (464,064) 464,064 - (49,678) 49,678 -
Amounts written off 10.6 (1,285,082) - (1,285,082) (2,867,000) - (2,867,000)
Closing balance 27,673,022 713,507 28,386,529 18,563,334 1,199,769 19,763,103

10.5.1 General provision represents provision amounting to Rs.569.195 million (2008: Rs.1,082.499 million) against
consumer finance portfolio as required by the Prudential Regulations issued by State Bank of Pakistan and Rs.144.311
million (2008: Rs.117.270 million) pertaining to overseas advances to meet the requirements of monetary agencies
and regulatory authorities of the respective countries in which the overseas branches operate.

10.5.2 Particulars of provision against advances


2009 2008
Specific General Total Specific General Total
(Rupees in ‘000)

In local currency 24,327,702 569,195 24,896,897 16,226,543 1,082,499 17,309,042


In foreign currencies 3,345,320 144,311 3,489,631 2,336,791 117,270 2,454,061
27,673,022 713,506 28,386,528 18,563,334 1,199,769 19,763,103

161 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
10.6 Particulars of write-offs

10.6.1 Against provisions 10.5 1,285,082 2,867,000


Directly charged to profit and loss account 1,485,976 1,367,514
2,771,058 4,234,514

10.6.2 Write-offs of Rs.500,000 and above 10.7 1,588,946 2,982,367


Write-offs of below Rs.500,000 1,182,112 1,252,147
2,771,058 4,234,514
10.7 Details of loan write-offs of Rs.500,000 and above

In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the statement in respect of
written-off loans or any other financial relief of five hundred thousand rupees or above allowed to a person during
the year ended December 31, 2009 is given in Annexure "B" to these unconsolidated financial statements. These
loans are written off as a book entry without prejudice to the Bank's right of recovery against the customers.

Note 2009 2008


10.8 Particulars of loans and advances to executives, directors, (Rupees in '000)
associated companies etc.

Debts due by directors or executives of the Bank or any of them


either severally or jointly with any other persons

Balance at beginning of year 981,319 946,044


Loans granted during the year 1,020,264 425,554
Repayments (519,109) (390,279)
Balance at end of year 1,482,474 981,319

10.9 Debts due by companies or firms in which the directors of the


Bank are interested as directors, partners or in the case
of private companies as members

Balance at beginning of year - -


Loans granted during the year - -
Repayments - -
Balance at end of year - -

11. OPERATING FIXED ASSETS

Capital work-in-progress 11.1 997,617 1,004,542


Property and equipment 11.2 20,439,417 16,614,563
Intangible assets 11.3 488,635 402,340
21,925,669 18,021,445

11.1 Capital work-in-progress

Civil works 11.1.1 484,612 488,720


Equipment 202,119 284,421
Software 11.1.2 297,984 214,891
Advances to suppliers and contractors 12,902 16,510
997,617 1,004,542

11.1.1 This includes Rs.297.430 million (2008: Rs.224.967 million) paid in respect of construction of head office building.

11.1.2 This includes Rs.221.56 million (2008: Rs.101.903 million) paid in respect of the core banking software.

annual report 2009 162


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009
11.2 Property and equipment 2009
COST/REVALUATION ACCUMULATED DEPRECIATION Net book Annual
At January Additions / Surplus on Reversal of Exchange At December At January Charge for the Reversal due Exchange At value at rate of
01, 2009 (deletions) revaluation accumulated adjustment 31, 2009 01, 2009 year / (deprec- to adjustme December December deprec-
depreciation / other iation on revaluation nt/ Other 31, 2009 31, 2009 iation %
adjustments deletions) adjustme
Owned nts
(Rupees in ‘000)
Freehold land 1,502,746 1,724 332,426 - - 1,825,754 - - - - - 1,825,754 -
(11,142) - - - - - -
Leasehold land 10,092,131 9,470 3,328,235 - 1,793 12,802,015 307,447 305,640 - 63 1,052 12,800,963 1 - 3.33
(106,551) - (523,063) - (87,760) (523,063) (1,275)
Buildings on
freehold land 81,021 - 44,923 - 975 118,967 3,826 4,126 - - - 118,967 5
(112) - (7,840) - (112) (7,840) -
Buildings on 1,904,654 - 434,008 - 587 2,149,539 128,769 93,934 - 498 36,283 2,113,256 5
leasehold land (5,240) - (184,470) - (1,965) (184,470) (483)

Leasehold 1,169,850 305,714 - - 19,449 1,495,013 255,761 149,724 - 9,929 415,414 1,079,599 10
Improvement - - - - - -
Furniture and 801,949 104,078 - - 8,745 885,786 418,311 73,279 - 8,805 477,661 408,125 10
fixtures (28,986) - - - (22,734) - -
Electrical, office
and computer 3,137,525 777,812 - - 33,966 3,896,827 1,833,212 616,013 - 20,440 2,427,235 1,469,592 20-25
equipment (52,476) - - - (42,430) - -
Vehicles 272,066 51,958 - - 2,697 267,752 141,973 58,523 - 2,175 158,981 108,771 20
(58,969) - - - (43,690) - -
Assets held under
operating lease
Ijarah assets - 895,217 39,648 - - - 810,456 153,297 170,285 - - 296,066 514,390 20 - 33.33
note 11.9 (104,750) - - (19,659) (27,516) - -
19,857,159 1,290,404 4,139,592 - 68,212 24,252,109 3,242,596 1,471,524 - 41,910 3,812,692 20,439,417
2009 (368,226) - (715,373) (19,659) (226,206) (715,373) (1,758)

2008
COST/REVALUATION ACCUMULATED DEPRECIATION Net book Annual
At January Additions / Surplus on other Exchange At December At January Charge for the Other Exchange At value at rate of
01, 2008 (deletions) revaluation adjustments adjustment 31, 2008 01, 2008 year / (deprec- adjustments adjustment December December deprec-
iation on 31, 2008 31, 2008 iation %
deletions)
Owned (Rupees in ‘000)
Freehold land 866,013 636,733 - - - 1,502,746 - - - - - 1,502,746 -
-
Leasehold land 10,333,042 - - - 253 10,092,131 700 305,272 1,277 198 307,447 9,784,684 1 - 3.33
(241,164) - - -
Buildings on
freehold land 76,584 4,437 - - 81,021 - 3,702 124 - 3,826 77,195 5
- - - - -
Buildings on 1,889,369 26,916 - 5,487 1,959 1,904,654 27,508 98,915 787 1,559 128,769 1,775,885 5
leasehold land (19,077) - - -
Leasehold 766,665 340,191 - - 66,451 1,169,850 132,364 104,137 224 22,145 255,761 914,089 10
Improvement (3,457) (3,109) - -

Furniture and 663,292 153,711 - - 28,061 801,949 367,356 63,306 - 12,555 418,311 383,638 10
fixtures (1,775) (41,340) (1,478) (23,428) -
Electrical, office
and computer
equipment 2,441,214 719,837 - - 96,874 3,137,525 1,403,465 469,394 - 49,518 1,833,212 1,304,313 20-25
(70,260) (50,140) (70,252) (18,913) -
Vehicles 298,914 89,370 - - 8,809 272,066 148,195 48,925 - 4,332 141,973 130,093 20
(105,826) (19,201) (50,546) (8,933) -
Assets held under
operating lease
Ijarah assets -
note 11.9 307,473 659,038 - - 895,217 14,944 142,380 - - 153,297 741,920 20-33.33
(71,294) - (4,027) - -
2008 17,642,566 2,630,233 - 5,487 202,407 19,857,159 2,094,532 1,236,031 2,412 90,307 3,242,596 16,614,563
(252,612) - (370,922) - (129,412) (51,274) -

163 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

11.3 Intangible assets


2009
Cost Accumulated Amortization Net book Annual
At January Additions / Exchange At December At January Charge for Exchange At value at rate of
01, 2009 (deletions) Adjustment 31, 2009 01, 2009 the year / adjustment December December amorti-
(amorti-sation 31, 2009 31, 2009 sation %
on deletion)
(Rupees in ‘000)
Software 777,027 267,182 8,144 1,043,528 374,687 184,241 4,790 554,893 488,635 25
(8,825) (8,825)

2008
Cost Accumulated Amortization Net book Annual
At January Additions / Exchange At December At January Charge for Exchange At value at rate of
01, 2009 (deletions) Adjustment 31, 2008 01, 2008 the year / adjustment December December amorti-
(amorti-sation 31, 2008 31, 2008 sation %
on deletion)
(Rupees in ‘000)
Software 541,918 221,386 23,131 777,027 213,381 156,178 13,686 374,687 402,340 25
(9,408) (8,558)

11.4 Revaluation of properties

During the year, the properties of the Bank were revalued by independent professional valuers and the results of
the revaluation exercise were incorporated in the financial statements as at December 31, 2009. The revaluation
was carried out by M/s. Pirsons Chemicals Engineering (Private) Limited, M/s. Sadruddin Associates, M/s. Maricon
Consultants (Private) Limited and M/s. Engineering Pakistan International (Private) Limited on the basis of professional
assessment of present market values and resulted in a surplus of Rs.4,139.592 million. Had there been no revaluation,
the carrying amount of revalued assets at December 31, 2009 would have been as follows:

(Rupees
in '000)
Freehold land 1,484,906
Leasehold land 9,472,729
Buildings on freehold land 73,256
Buildings on leasehold land 1,679,280

2009 2008
(Rupees in '000)
11.5 Carrying amount of temporarily idle property 158,927 113,111

11.6 The gross carrying amount of fully depreciated assets that are still in use

Furniture and fixtures 233,962 232,078


Electrical, office and computer equipment 214,367 159,348
Vehicles 33,601 48,531
IT hardware 1,006,455 692,804
1,488,385 1,132,761
11.7 The balance under leasehold land includes an amount of Rs.2,174 million relating to surplus on properties for which
title was completed during the year on the basis of which valuation has been incorporated in the financial statements.

annual report 2009 164


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

11.8 Details of disposal of operating fixed assets

The information relating to operating fixed assets disposed off during the year is given in Annexure C and is an
integral part of these unconsolidated financial statements.

11.9 The Islamic Banking Branches of the bank have entered into Ijarah transactions with customers during the year.
The significant Ijarah transactions have been entered in respect of vehicles.

The ijarah payments receivable from customers for each of the following periods under the terms of the respective
arrangements are given below:
Note 2009 2008
(Rupees in '000)
Not later than one year 270,864 266,347
Later than one year but not later than five years 436,129 672,047
Later than five years 3,020 20,875
710,013 959,269
12. DEFERRED TAX ASSET - NET

Deferred tax asset - net 12.1 608,876 2,055,609


12.1 Movement in temporary differences during the year
2009
At January Recognised Others At December
01, 2009 in profit 31, 2009
and loss
(Rupees in '000)

Deductible temporary differences on


- deficit on revaluation of investments 3,201,075 - (2,134,641) 1,066,434
- ijarah financing 118,653 (66,339) - 52,314
- workers' welfare fund 117,950 21,192 - 139,142
- derivative transactions 148,956 - (37,808) 111,148
- provision against off balance sheet items,
post retirement medical benefits and
advances 2,658,457 2,004,141 - 4,662,598
6,245,091 1,958,994 (2,172,449) 6,031,636
Taxable temporary differences on
- surplus on revaluation of fixed assets (3,972,755) 136,238 (1,439,383) (5,275,900)
- accelerated tax depreciation (216,727) 69,867 - (146,860)
(4,189,482) 206,105 (1,439,383) (5,422,760)
2,055,609 2,165,099 (3,611,832) 608,876

2008
At January Recognised Others At December
01, 2008 in profit 31, 2008
and loss
(Rupees in '000)
Deductible temporary differences on
- deficit on revaluation of investments 136,364 - 3,064,711 3,201,075
- ijarah financing 57,605 61,048 - 118,653
- workers' welfare fund - 117,950 - 117,950
- derivative transactions - - 148,956 148,956
- provision against off balance sheet items,
post retirement medical benefits and
advances 1,785,737 872,720 - 2,658,457
1,979,706 1,051,718 3,213,667 6,245,091
Taxable temporary differences on
- surplus on revaluation of fixed assets (4,199,162) 136,240 90,167 (3,972,755)
- accelerated tax depreciation (12,888) (203,839) - (216,727)
(4,212,050) (67,599) 90,167 (4,189,482)

(2,232,344) 984,119 3,303,834 2,055,609

165 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
13. OTHER ASSETS

Income / mark-up accrued in local currency 11,036,384 10,711,450


Income / mark-up accrued in foreign currency 272,232 992,171
11,308,616 11,703,621

Advance taxation - net of provision 13.1 2,338,434 -


Receivable from staff retirement funds 1,045,899 798,514
Receivable on account of encashment of savings certificates 74,406 775,289
Receivable in respect of derivative transactions 124,977 416,075
Receivable against sale of securities 897,457 1,086,879
Receivable from other banks against telegraphic transfers and
demand drafts 836,556 1,799,920
Unrealized gain on forward foreign exchange contracts 142,266 483,745
Unrealized gain on derivative financial instruments 23.2 499,672 466,859
Advance against Murabaha 13.2 383,929 -
Suspense accounts 169,309 224,618
Stationery and stamps on hand 143,825 115,265
Advances, deposits, advance rent and other prepayments 771,109 835,049
Others 1,139,428 1,389,785
19,875,883 20,095,619

Provision held against other assets 13.3 (1,546,703) (1,209,096)


Unrealized mark-up held in suspense account (1,087,189) (1,264,679)
Other assets (net of provisions) 17,241,991 17,621,844

13.1 The Income Tax assessments of the Bank for domestic branches up to tax year 2009 (financial year ended December
31, 2008) were filed under the provisions of Section 114 of the Income Tax Ordinance, 2001 (Ordinance) and are
deemed to be assessed under section 120 of the Ordinance, unless amended by the Commissioner of Income Tax.

For tax year 2009 (financial year ended December 31, 2008) subsequent to the balance sheet date, the taxation
authorities have issued an amended assessment order under section 122(5A) of the Ordinance determining further
tax liability of Rs. 960 million. The Bank will file an appeal before the Commissioner of Income Tax (Appeals) [CIT
(A)] against the said liability. The management is confident that the appeal will be decided in favour of the Bank.

For tax year 2008 (financial year ended December 31, 2007) the taxation authorities have issued an amended
assessment order under section 122(5A) of the Ordinance determining additional tax liability of Rs. 1,609 million.
The Bank has filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)] against the said additional
liability, for which hearing is still pending. The management is confident that the appeal will be decided in favour of
the Bank.

annual report 2009 166


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

For tax years 2004 to 2007 (financial year ended December 31, 2003 to 2006) the taxation authorities have issued
amended assessment orders under section 122(5A) of the Ordinance, which were further rectified under section
221 of the Ordinance determining additional tax liability of Rs.3,564 million. Appeals filed by the Bank before the
CIT (A) against these amended assessments have been decided, by allowing relief on certain issues. However, for
remaining issues appeals have been filed before the Income Tax Appellate Tribunal (ITAT), and hearing is still
pending. The return for the tax year 2003 was selected for audit under section 177 of the Ordinance and the amended
assessment order was passed, which has been contested before the CIT(A). The management is confident that
the appeals will be decided in favour of the Bank.

In respect of Azad Kashmir Branches for the tax years 2005 to 2009 (financial years ended December 31, 2004 to
2008) were filed under the provisions of Section 120(1) read with section 114 of the Ordinance and in compliance
with the terms of agreement between the banks and the Azad Kashmir Council in May 2005. The returns so filed
qualify the statutory conditions to be termed as deemed assessment orders.

During the year, amendments were brought in through Finance Act 2009 regarding allowance of provision against
non performing loans and off balance sheet exposures applicable from Tax year 2010 (accounting year Dec 31,
2009) and onwards. The Bank has accounted for these in the tax computation for the period, therefore, in accordance
with the law, provision under the category of doubtful and loss category have been treated as allowed subject to a
maximum limit of 1% of gross advances, consequently a deferred tax asset of Rs. 1,589 million is recognized relating
to amounts allowed to be carried forward to future years. Based upon the legal opinion of the tax advisor, the Bank
is confident that these disallowances and any relating to prior periods, which approximates to Rs.5,454 million, would
be allowed to the Bank in future periods against available profits and hence, the same has been carried forward
as an tax asset in these financial statements.

13.2 This represents goods purchased for Murabaha which remained unsold at the balance sheet date.
Note 2009 2008
(Rupees in '000)
13.3 Provision against other assets

Opening balance 1,209,096 1,319,997


Exchange adjustments - 6,809
1,209,096 1,326,806

Charge for the year 361,391 209,325


Reversals (22,260) (13,299)
29 339,131 196,026

Transfers 126,552 -
Amounts written off (128,076) (313,736)
Closing balance 1,546,703 1,209,096

14. CONTINGENT ASSETS

There were no contingent assets as at the balance sheet date.

15. BILLS PAYABLE

In Pakistan 4,944,903 4,690,304


Outside Pakistan 202,356 504,145
5,147,259 5,194,449

167 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
16. BORROWINGS

In Pakistan 32,604,252 38,967,725


Outside Pakistan 2,540,571 5,228,161
35,144,823 44,195,886
16.1 Particulars of borrowings with respect to currencies

In local currency 30,953,357 38,967,725


In foreign currencies 4,191,466 5,228,161
35,144,823 44,195,886
16.2 Details of borrowings from financial institutions

Secured
Borrowings from the State Bank of Pakistan under
- Export refinance scheme 16.3 14,666,570 12,804,867
- Long term fixed finance 16.4 1,018,535 459,946
- Long-term financing under export oriented projects 16.5 3,705,568 3,820,223
- Locally manufactured machinery refinance scheme - 544
19,390,673 17,085,580
Repurchase agreement borrowings 16.6 5,066,098 14,284,138
24,456,771 31,369,718
Unsecured
Call borrowings 16.7 8,679,283 10,200,693
Overdrawn nostro accounts 648,559 2,027,468
Trading liabilities 96,586 598,007
Other borrowings 16.8 1,263,624 -
10,688,052 12,826,168
35,144,823 44,195,886

16.3 The Bank has entered into agreements with the State Bank of Pakistan (SBP) for extending export finance to
customers. As per the terms of the agreement, the bank has granted SBP the right to recover the outstanding amount
from the Bank at the date of maturity of finances by directly debiting the current account maintained by the Bank
with SBP. These borrowings are repayable within six months latest by June 2010.

16.4 These borrowings have been made from SBP for providing financing facilities to exporters for adoption of new
technologies and modernizing their plant and machinery. These borrowings are repayable within a period ranging
from 3 years to 10 years.

16.5 These borrowings have been made from SBP for providing financing facilities to customers for import of machinery,
plant, equipment and accessories thereof (not manufactured locally) by export oriented units.

16.6 These repurchase agreement borrowings are secured against market treasury bills and Pakistan Investment Bonds and
carry mark-up at rates ranging from 11.50% to 12.40% per annum (2008: 9.00% to 15.00% per annum). These borrowings
are repayable latest by January 2010. The carrying value of securities given as collateral is given in note 9.1.

16.7 These are unsecured borrowings and carries mark-up at rates ranging from 11.0% to 12.6% per annum (2008:
10.50% to 17.00% per annum) and are repayable latest by May 2010, where as borrowing pertaining to overseas
operation carries mark-up at rates ranging from 0.5% to 0.6% per annum (2008: 1.25% to 5.80% per annum) and
are due to mature latest by January 2010.

16.8 This represents borrowing from an overseas bank for the development of Small and Medium Sized Enterprises
(SMEs) in Pakistan, carries mark-up at the rate of six months LIBOR + 1.2% and repayable by June 2013.

annual report 2009 168


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)
17. DEPOSITS AND OTHER ACCOUNTS

Customers
Fixed deposits 150,792,206 186,961,343
Savings deposits 178,287,618 156,021,485
Sundry deposits 4,643,923 4,957,358
Margin deposits 4,319,476 3,977,821
Current accounts - remunerative 2,114,809 2,064,207
Current accounts - non-remunerative 150,803,732 128,380,418
490,961,764 482,362,632
Financial Institutions
Remunerative deposits 964,066 1,104,863
Non-remunerative deposits 110,273 92,567
1,074,339 1,197,430
492,036,103 483,560,062

17.1 Particulars of deposits and other accounts

In local currency 368,303,869 353,210,334


In foreign currencies 123,732,234 130,349,728
492,036,103 483,560,062

18. SUB-ORDINATED LOANS - UNSECURED

Issue Tenor Rate % Maturity Frequency of 2009 2008


Date per annum principal
redemption
(Rupees in '000)

Term Finance August 8 years 8.45% August Semi Annual 1,996,160 1,996,928
Certificates - I 2004 2012

Term Finance March 8 years 9.49% March Semi Annual 1,999,640 1,999,720
Certificates - II 2005 2013

Term Finance September 8 years 6 months September Semi Annual 1,997,600 1,998,400
Certificates - III 2006 Kibor+1.70% 2014

Term Finance February 10 years For the first five February Semi Annual 5,996,400 5,998,800
Certificates - IV 2008 years 6 months, 2018
Kibor+0.85%
and for the
remaining
term, 6 months
Kibor+1.35%
11,989,800 11,993,848

169 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

18.1 These represent listed Term Finance Certificates (TFCs) issued by the Bank. The liability of the Bank is subordinated
as to the payment of principal and profit to all other indebtedness of the Bank (including deposits) and is not
redeemable before maturity without approval of the State Bank of Pakistan.

18.2 In case of Term Finance Certificate IV the Bank has the right to exercise the call option after a period of 5 years
from the issue date.
Note 2009 2008
19. OTHER LIABILITIES (Rupees in '000)
Mark-up / return / interest payable in local currency 7,015,536 6,791,850
Mark-up / return / interest payable in foreign currency 353,032 356,961
Accrued expenses 19.1 1,528,824 1,704,183
Branch adjustment account 529,977 495,047
Payable against purchase of securities 197,722 -
Payable under severance scheme 33,452 34,183
Unearned commission 95,736 67,833
Provision for taxation - net 13.1 - 713,636
Provision against off - balance sheet obligations 19.2 682,141 651,697
Deferred liabilities 19.3 2,098,414 2,025,625
Unrealized loss on derivative financial instruments 23.2 557,414 1,295,867
Workers welfare fund payable 734,534 336,987
Insurance payable against consumer assets 393,288 689,124
Payable on account of Government transaction - 1,506,101
Others 269,273 63,243
14,489,343 16,732,337

19.1 This includes an accrual of Rs.210 million for the year ended December 31, 2009 (2008: Rs.338.551 million) in
respect of employee bonus scheme. The objective of the scheme is to reward, motivate and retain high performing
executives and officers of the Bank by way of bonus in the form of shares of the Bank. The liability of the Bank in
respect of this scheme is fixed and is approved each year by the Board of Directors of the Bank. The scheme for
each year is managed by a separate Trust formed for this purpose.

Note 2009 2008


(Rupees in '000)
19.2 Provision against off - balance sheet obligations

Opening balance 651,697 608,731

Charge during the year 29 20,250 42,966


Transfers during the year 10,194 -
30,444 42,966

682,141 651,697

19.3 Deferred liabilities

Provision for post retirement medical benefits 36.3 1,147,095 1,219,400


Provision for gratuity - overseas 219,411 192,623
Provision for compensated absences 36.3 731,908 613,602
2,098,414 2,025,625

annual report 2009 170


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

19.4 Unrealized loss on derivative financial instruments

Note Contract / notional amount Unrealised gain / (loss)


2009 2008 2009 2008
(Rupees in '000)
Derivatives held for trading
- Interest rate swaps 11,014,381 20,758,372 (187,593) (320,033)
- Cross currency swaps 36,372,837 15,948,869 143,894 (82,915)
- Swaptions 2,527,248 - (14,044) -
- Fx options 821,070 9,814,318 - -
- Commodity options - 39,545 - -
- Equity Indices - 355,943 - -
- Forward rate agreements - 850,000 - (1,457)
- Forward purchase contracts of
government securities - 10,065,070 - 5,848
- Forward sale contracts of
government securities - 8,611,020 - (4,864)
50,735,536 66,443,137 (57,743) (403,421)
Derivatives held for cash flow hedges
Interest rate swaps
19.4.1 - - - (425,587)
50,735,536 66,443,137 (57,743) (829,008)

Note 2009 2008


(Rupees in '000)
19.4.1 Unrealized loss on derivative financial instruments - net
Unrealized gain on derivative financial instruments 13 499,671 466,859
Unrealized loss on derivative financial instruments 19 (557,414) (1,295,867)
23.2 (57,743) (829,008)

20. SHARE CAPITAL

20.1 Authorized Capital

2009 2008
(Number of shares)
2,000,000,000 2,000,000,000 Ordinary shares of Rs.10 each 20,000,000 20,000,000

20.2 Issued, subscribed and paid-up capital

Fully paid-up ordinary shares of Rs.10 each

2009 2008
(Number of shares)
Fully paid-up ordinary shares of Rs.10 each
518,000,000 518,000,000 Issued for cash 5,180,000 5,180,000
594,890,625 493,718,750 Issued as bonus shares 5,948,907 4,937,188
1,112,890,625 1,011,718,750 11,128,907 10,117,188

171 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

20.3 During the year 2007, the Bank was admitted to the official list of the UK Listing Authority and to the London Stock
Exchange Professional Securities Market for trading of Global Depository Receipts (GDRs), each representing four
ordinary equity shares issued by the Bank. The GDRs constitute an offering in the United States only to qualified
institutional buyers in reliance on Rule 144A under the U.S Securities Act of 1933 and an offering outside the United
States in reliance on Regulation S.

Holders of GDRs are entitled, subject to the provision of the depository agreement, to receive dividends, if any and
rank pari passu with other equity shareholders in respect of such entitlement to receive dividends. However, the
holders of GDRs have no voting rights or other direct rights of shareholders with respect to the equity shares
underlying such GDRs. Subject to the terms and restrictions set out in the offering circular dated June 25, 2007,
the deposited equity shares in respect of which the GDRs were issued may be withdrawn from the depository facility.
Upon withdrawal, the holders will rank pari passu with other equity shareholders in respect of voting powers. As
at December 31, 2009: 92,519,435 (2008: 143,078,641) GDR shares were in issue.

20.4 Major shareholders (holding more than 5% of total paid-up capital)

2009 2008
Name of shareholder Number of Percentage of Number of Percentage of
shares held shareholding shares held shareholding
His Highness Shaikh Nahayan Mabarak Al Nahayan 71,765,548 6.45% 65,241,408 6.45%
H.E. Dr. Mana'a Saeed Al Otaiba 61,356,720 5.51% 55,778,837 5.51%
Bestway (Holdings) Limited 202,522,894 18.20% 128,989,257 12.75%
Sir Mohammed Anwar Pervez, OBE, HPk 56,757,421 5.10% 51,597,656 5.10%
Bestway Cement Limited 85,136,131 7.65% 77,396,483 7.65%
Government of Pakistan 216,879,438 19.49% 197,163,126 19.49%

As at December 31, 2009 Abu Dhabi Group held 30.30% (2008: 30.30%) shareholding (including GDRs) and Bestway
Group held 31.07% (2008: 31.07%) shareholding of the Bank.

Note 2009 2008


(Rupees in '000)
21. SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX

Surplus arising on revaluation of assets - net of tax :

Fixed assets 21.1 10,640,998 8,220,874


Securities 21.2 (1,980,521) (6,580,892)
8,660,477 1,639,982

annual report 2009 172


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Note 2009 2008


(Rupees in '000)
21.1 Surplus on revaluation of fixed assets

Surplus on revaluation of fixed assets at January 01 12,193,629 12,840,532

Revaluation of fixed assets during the year


the year / adjustments 4,139,592 (167,478)
Written off during the year (27,071) -
Transferred to unappropriated profit in respect of incremental
depreciation charged during the year (253,014) (253,018)
Related deferred tax liability on incremental depreciation charged
during the year (136,238) (136,240)
Related deferred tax liability on transfer of property during the year - (90,167)
3,723,269 (646,903)
15,916,898 12,193,629
Less: Related deferred tax liability on:
Revaluation as on January 01 3,972,755 4,199,162
Revaluation of fixed assets during the year 1,448,858 -
Written off during the year (9,475) -
Incremental depreciation charged on related assets (136,238) (136,240)
Reversal in respect of transfer of a property - (90,167)
5,275,900 3,972,755
10,640,998 8,220,874
21.2 Deficit on revaluation available-for-sale securities

Market Treasury Bills 20,995 (16,685)


Pakistan Investment Bonds (1,129,224) (3,293,999)
Quoted shares 93,619 (1,892,828)
Mutual fund units (2,302) (9,837)
Term Finance Certificates, Sukuk, other Bonds etc. (43,856) (53,850)
Overseas securities (1,986,187) (4,514,768)
(3,046,955) (9,781,967)
Related deferred tax asset 1,066,434 3,201,075
(1,980,521) (6,580,892)

22. CONTINGENCIES AND COMMITMENTS

22.1 Direct credit substitutes

Contingent liabilities in respect of guarantees given favouring

Government
Banking companies and other financial institutions 10,818,102 12,725,414
Others 2,758,243 4,865,333
7,396,201 8,642,081
20,972,546 26,232,828

173 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

2009 2008
(Rupees in '000)
22.2 Transaction-related contingent liabilities

Contingent liabilities in respect of performance bonds,


bid bonds, warranties, etc. given favouring

Government 77,448,985 60,706,466


Banking companies and other financial institutions 3,311,075 4,115,594
Others 18,521,775 17,061,793
99,281,835 81,883,853
22.3 Trade-related contingent liabilities

Contingent liabilities in respect of letters of credit opened favouring

Government 56,186,541 68,756,444


Others 61,762,728 71,862,882
117,949,269 140,619,326
22.4 Other contingencies

Claims against the bank not acknowledged as debts 20,668,309 17,230,124

22.5 Commitments in respect of forward lending

The Bank makes commitments to extend credit in the normal course of its business but these being revocable
commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.
2009 2008
22.6 Commitments in respect of forward foreign exchange contracts (Rupees in '000)

Sale 46,364,122 55,225,610

Purchase 90,952,188 79,548,383

22.7 Commitments in respect of derivatives

Interest rate swaps 11,014,381 20,758,372

Cross currency swaps 36,372,837 15,948,869

Swaptions 2,527,248 -

FX options - purchased 410,535 9,814,318

FX options - sold 410,535 15,645,965

Commodity options - 39,545

Equity indices - 355,943

Forward rate agreements - 850,000

Forward purchase contracts of government securities - 10,065,070

Forward sale contracts of government securities - 8,611,020

22.8 Commitments in respect of capital expenditure 567,882 1,182,316

22.9 For contingencies relating to taxation refer note 13.1

annual report 2009 174


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

23. DERIVATIVE INSTRUMENTS

“Derivative” means a type of financial contract the value of which is determined by reference to one or more underlying
assets or indices. The major categories of such contracts include forwards, futures, swaps and options. Derivative also
includes structured financial products that have one or more characteristics of forwards, futures, swaps and options.

The Bank as an Authorized Derivative Dealer (ADD) is an active participant in the derivatives’ market of Pakistan.
Although the ADD license covers the below mentioned transactions only (permitted under Financial Derivatives
Business Regulations issued by SBP), the bank offers a wide variety of derivative products to satisfy customers’
needs (specific approval for which is sought from SBP on transaction basis):

a. Foreign Currency Options


b. Forward Rate Agreements
c. Interest Rate Swaps
d. Cross Currency Swaps
e. Equity indices
f. Commodity options

These transactions cover both the aspects of market making and hedging.

The authority for approving policies lie with the BoD, who has delegated its powers to Market Risk Committee (MRC),
which runs the affairs in line with policies approved by the BoD.

With regard to derivatives, the Market Risk Committee (MRC) is authorized to:

- Review derivatives business with reference to market risk exposure and assign various limits in accordance with
the risk appetite of the bank
- Review and approve the Derivatives Business Policy
- Review and sign off derivatives’ product programs
- Authorize changes in procedures and processes regarding derivatives and structured products

Overall responsibility for derivatives trading activity lies with Treasury and Capital Markets (TCM). Identifying and
quantifying market risk on derivatives, coordinating approvals on temporary or permanent market risk limits, formulation
of policies and procedures with respect to market risk arising from derivatives, formal monitoring of market and credit
risk exposure and limits and its reporting to the senior management and BoD is done by Treasury and Market Risk
(TMR). Treasury Operations (TROPS) records derivative activity in the Bank’s books, and handles its reporting to SBP.

Derivative Risk Management

There are a number of risks undertaken by the bank, which need to be monitored and assessed. The “risk continuum”
includes:

Credit Risk

This refers to the risk of non-performance or default by a party (a customer, guarantor, trade counterparty, third party,
etc.), resulting in a negative impact on the Bank’s equity. There are two types of credit risk (Settlement and Pre-
Settlement risk) that are associated with derivatives transactions and monitored on a regular basis. To mitigate the
settlement risk, settlement is carried out by netting the amounts receivable and payable, i.e., net amount is either
received or paid. Further, for Pre-Settlement Risk, the Bank has constituted Treasury Product Credit Committee
(TPCC) that is authorized to approve credit limits (based on internal obligor risk rating) for all derivative counterparties.
Credit exposure for each counterparty is calculated and monitored by an independent risk monitoring and control
department i.e. Treasury Middle Office.

175 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

Market Risk

Market risk exposure limits have been assigned in accordance with the risk appetite of the Bank and are being
monitored on a daily basis, which include sensitivity limits, tenor limits, and notional limits. An exercise is under way
to model VaR structure, which will then help in deriving VaR limits.

Liquidity Risk

Derivative transactions, usually being non-funded in nature, do not involve funds therefore there is no specific risk
of liquidity.

The other aspect of liquidity refers to the availability of certain instruments or hedge in the market, which is very
much true in the local market, as interest rate derivatives have a unidirectional demand, and no perfect hedge is
available. The Bank mitigates its risk, on one side, by limiting the portfolio in terms of tenor, notional, and sensitivity
limits, and on the other side it is running a short position in fixed income securities to partially cover the unfavourable
movement in interest rates.

Operational Risk

The human resources involved in the process of trading, settlement and risk management of derivatives are carefully
selected and subsequently trained to deal with the delicacies involved in the process. A state-of-the-art system has
been put in place which handles the derivative transactions. As each and every product / transaction is processed
in accordance with the product program or transaction memo, which contains in detail the accounting and operational
aspects of the transaction, it further mitigates the operational risk. In addition, Treasury Middle Office (TMO) and
Compliance and Control Department (CCD) are assigned with the responsibility of monitoring any deviation from
the policies and procedures. Bank’s Audit and Inspection wing also reviews this function, which covers regular review
of systems, transactional processes, accounting practices, end-user roles and responsibilities.

The Bank has installed a state-of-the-art derivatives system (SUPER DERIVATIVE), which provides an end-to-end
solution. Other than supporting the routine transactional process it also provides analytical tools to measure various
risk exposures and stress / sensitivity analysis.

Treasury Middle Office produces various reports for higher management (BoD, MRC etc.) on daily, monthly and ad-
hoc basis. These reports provide a quick look on derivatives business profile and various risk exposures.

Derivatives market in Pakistan, except for currency options, has a unidirectional demand, therefore the portfolio
structure, as regards interest rate derivatives, is liability dominant.

annual report 2009 176


Notes to and Forming Part of the Unconsolidated Financial Statements
177 United Bank Limited

For The Year Ended December 31, 2009

23.1 Product analysis 2009


Interest rate swaps Cross currency swaps Swaptions FX options Commodity options Equity indices Forward rate agreements Forward purchase Forward sale contracts
contracts of of government securities
government securities
Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Total
of principal of principal of principal of principal of principal of principal of principal of principal of principal Notional
contracts contracts contracts contracts contracts contracts contracts contracts contracts
(Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees
in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000)

With Banks for


Hedging 8 7,740,900 4 14,571,600 - - 4 410,535 - - - - - - - - - - 22,723,035
Market Making 4 2,206,208 5 2,335,884 1 2,527,248 - 7,069,340
12 9,947,108 9 16,907,484 1 2,527,248 4 410,535 - - - - - - - - - - 29,792,375
With other entities
Market Making 8 1,067,273 8 19,465,353 - - 4 410,535 - - - - - - - - - - 20,943,161

Total
Hedging 8 7,740,900 4 14,571,600 - - 4 410,535 - - - - - - - - - - 22,723,035
Market Making 12 3,273,481 13 21,801,237 1 2,527,248 4 410,535 - - - - - - - - - - 28,012,501
20 11,014,381 17 36,372,837 1 2,527,248 8 821,070 - - - - - - - - - - 50,735,536

2008
Interest rate swaps Cross currency swaps Swaptions FX options Commodity options Equity indices Forward rate agreements Forward purchase Forward sale contracts
contracts of of government securities
government securities
Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Number Notional Total
of principal of principal of principal of principal of principal of principal of principal of principal of principal Notional
contracts contracts contracts contracts contracts contracts contracts contracts contracts
(Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees (Rupees
in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000) in '000)

With Banks for


Hedging 9 7,987,105 8 11,217,419 - - 45 16,091,828 - - - - 1 250,000 - - - - 35,546,352
Market Making 10 7,678,036 1 1,958,250 - - 2 445,862 1 39,545 6 355,943 1 250,000 6 10,065,070 7 8,611,020 29,403,726
19 15,665,141 9 13,175,669 - - 47 16,537,690 1 39,545 6 355,943 2 500,000 6 10,065,070 7 8,611,020 64,950,078
With other entities
Market Making 21 5,093,231 6 2,773,200 - - 42 8,922,593 - - - - 2 350,000 - - - - 17,139,024

Total
Hedging 9 7,987,105 8 11,217,419 - - 45 16,091,828 - - - - 1 250,000 - - - - 35,546,352
Market Making 31 12,771,267 7 4,731,450 - - 44 9,368,455 1 39,545 6 355,943 3 600,000 6 10,065,070 7 8,611,020 46,542,750
40 20,758,372 15 15,948,869 - - 89 25,460,283 1 39,545 6 355,943 4 850,000 6 10,065,070 7 8,611,020 82,089,102
Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

23.2 Maturity analysis of derivatives


2009
Remaining Maturity No. of Notional Mark to market
contracts principal Negative Positive Net
(Rupees in '000)
Upto 1 Month 2 40,000 918 - (918)
1 to 3 Month 11 979,704 - 2,150 2,150
3 to 6 Month - - - - -
6 Month to 1 Year 7 1,225,196 8,367 21,138 12,771
1 to 2 Year 4 1,202,273 61,448 57 (61,391)
2 to 3 Year 2 6,975,000 32,171 119,516 87,345
3 to 5 Year 14 17,317,094 145,045 215,404 70,359
5 to 10 Year 6 22,996,269 309,465 141,406 (168,059)
Above 10 Year - - - - -
46 50,735,536 557,414 499,671 (57,743)

2008
Remaining Maturity
No. of Notional Mark to market
contracts principal Negative Positive Net
(Rupees in '000)
Upto 1 Month 47 18,400,759 1,935 478 (1,457)
1 to 3 Month 32 22,986,230 3,666 - (3,666)
3 to 6 Month 26 2,854,281 900 - (900)
6 Month to 1 Year 15 1,593,368 13,051 - (13,051)
1 to 2 Year 17 3,811,299 45,382 13,941 (31,441)
2 to 3 Year 6 2,570,454 100,990 17,169 (83,821)
3 to 5 Year 20 21,887,726 579,607 351,021 (228,586)
5 to 10 Year 5 7,984,985 550,336 84,250 (466,086)
Above 10 Year - - - - -
168 82,089,102 1,295,867 466,859 (829,008)

2009 2008
24. MARK-UP / RETURN / INTEREST EARNED (Rupees in '000)
On loans and advances
- Customers 45,171,580 40,012,840
- Financial institutions 625,906 709,286
45,797,486 40,722,126
On investments in
- Available for sale securities 10,359,807 8,545,478
- Held to maturity securities 3,372,692 939,763
- Associates and subsidiaries 18,532 2,091
13,751,031 9,487,332
On deposits with financial institutions 168,525 273,039
On securities purchased under resale agreements 1,115,663 1,413,574
Discount income 24,330 23,158
60,857,035 51,919,229

25. MARK-UP / RETURN / INTEREST EXPENSED

On deposits 22,210,362 18,598,162


On securities sold under repurchase agreements 1,622,552 2,214,520
On other short - term borrowings 2,584,549 1,659,990
On long - term borrowings 1,511,574 1,348,166
Discount expense 234,750 240,952
28,163,787 24,061,790

annual report 2009 178


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009
Note 2009 2008
(Rupees in '000)

26. GAIN ON SALE OF SECURITIES

Federal Government Securities


Market Treasury Bills 108,683 (10,229)
Pakistan Investment Bonds 46,290 (77,680)
154,973 (87,909)
Fully paid-up ordinary shares
Listed companies 331,362 325,856

Other securities 143,083 (37,143)


629,418 200,804
27. OTHER INCOME

Charges recovered from customers 1,162,018 926,051


Rent on properties 134,643 136,766
Income from dealing in derivatives 1,720,332 574,881
Others 280,846 228,336
3,297,839 1,866,034
28. ADMINISTRATIVE EXPENSES

Personnel Cost
Salaries, allowances etc. 28.1 6,914,343 6,686,184
Charge for compensated absences 36.6 418,143 140,358
Medical expenses 373,907 331,099
Contribution to defined contribution plan 416,114 122,417
Reversal in respect of defined benefit obligations (371,531) (242,806)
7,750,976 7,037,252
Premises Cost
Rent, taxes, insurance, electricity etc. 2,025,555 1,643,862
Depreciation 11.2 553,425 512,026
Repairs and maintenance 85,684 83,258
2,664,664 2,239,146
Other Operating Cost
Outsourced service charges including sales commission 1,313,164 1,785,256
Advertisement and publicity 221,107 319,139
Communications 722,241 667,238
Depreciation 11.2 918,100 724,005
Legal and professional charges 217,776 299,672
Banking service charge 553,377 436,236
Stationery and printing 336,597 288,788
Travelling 161,192 181,619
Cash transportation charges 339,024 228,378
Repairs and maintenance 246,424 172,028
Insurance expense 164,073 116,839
Vehicle expenses 107,213 115,593
Amortization 11.3 184,241 156,178
Training and seminar 44,326 66,174
Office running expenses 152,318 115,366
Entertainment 89,921 87,522
Cartage, freight and conveyance 68,553 71,742
Auditors' remuneration 28.3 44,835 28,666
Subscriptions 26,121 29,942
Brokerage expenses 19,457 24,614
Sub-ordinated debt related costs 7,990 26,254
Donations 28.2 55,975 11,893
Non-executive directors' fee and allowances 54,090 14,912
Miscellaneous expenses 144,806 275,182
6,192,921 6,243,236
16,608,561 15,519,634

179 United Bank Limited


Notes to and Forming Part of the
Unconsolidated Financial Statements
For The Year Ended December 31, 2009

28.1 The Bank operates a short term employee benefit scheme which includes cash awards / bonus. Under the scheme,
the cash awards to all executives including the Chief Executive Officer is determined on the basis of employees'
evaluation and Bank's performance during the year. The aggregate amounts determined in respect of all executives
amounted to Rs.314.812 million (2008: Rs.168.884 million).
2009 2008
28.2 Donations exceeding Rs.0.1 million
(Rupees in '000)
Karachi Education Initiative 40,000 3,000
Karachi City Police 9,793 -
Friends of Burns Center 1,728 1,440
Family Education Services Foundation 900 480
Marie Adelade Leprocy Center 850 850
Hisaar Foundation 550 -
Shalamar Hospital 545 -
Sun Development Foundation 483 -
SOS Childrens' Villages of Sindh 451 -
Institute of Business Administration 360 -
Lahore University of Management Sciences 315 315
Citizens Foundation - 2,200
Book Group - 1,548
Agha Khan University and M