D.G. Khan Cement Company Limited

CONTENTS

D.G. Khan Cement Company Limited Corporate Profile 3

Directors’ Report 4

Review Report to the members 7

Condensed Interim Balance Sheet 8

Condensed Interim Profit and Loss Account 10

Condensed Interim Cash Flow Statement 11

Condensed Interim Statement of Changes in Equity 12

Selected Notes to the Condensed Interim Financial Statements 13

D.G. Khan Cement Company Limited and its Subsidiary

Directors’ Report 23

Condensed Interim Consolidated Balance Sheet 24

Condensed Interim Consolidated Profit and Loss Account 26

Condensed Interim Consolidated Cash Flow Statement 27

Condensed Interim Consolidated Statement of Changes in Equity 28

Selected Notes to the Condensed Interim Consolidated Financial Statements 29

2 D.G. Khan Cement Company Limited

CORPORATE PROFILE Board of Directors Mrs. Naz Mansha Chairperson Mian Raza Mansha Chief Executive Mr. Khalid Qadeer Qureshi Mr. Zaka-ud-Din Mr. Muhammad Azam Mr. Inayat Ullah Niazi Chief Financial Officer Ms. Nabiha Shahnawaz Cheema

Audit Committee Mr. Khalid Qadeer Qureshi Member/Chairman Mr. Muhammad Azam Member Ms. Nabiha Shahnawaz Cheema Member

Company Secretary Mr. Khalid Mahmood Chohan

Bankers Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Citibank N.A. Deutsche Bank AG Dubai Islamic Bank Pakistan Limted Faysal Bank Limited Habib Bank Limited HSBC Limited MCB Bank Limited Meezan Bank Limited National Bank of Pakistan NIB Bank Limited Standard Chartered Bank (Pakistan) Limited The Bank of Punjab The Royal Bank of Scotland (Formerly ABN AMRO Bank (Pakistan) Limited) United Bank Limited

Auditors KPMG Taseer Hadi & Co., Chartered Accountants

Legal Advisor Mr. Shahid Hamid, Bar-at-Law

Registered Office Nishat House, 53-A, Lawrence Road, Lahore-Pakistan UAN: 92-42-111-11- 33 - 33 92-42-6367812 Fax: 92-42-6367414 Email: [email protected] web site: www.dgcement.com

Factory 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan UAN: 92-642-111-11- 33 - 33 92-642-460025 Fax: 92-642-462392 Email: [email protected] 2. 12, K.M. Choa Saidan Shah Road, Khairpur, Tehsil Kallar Kahar, Distt. Chakwal-Pakistan UAN: 92-543-111-11- 33 - 33 92-543-650215 Fax: 92-543-650231 3 D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

INDEPENDENT REPORT ON REVIEW OF CONDENSED INTERIM FINANCIAL INFORMATION TO THE MEMBERS OF D.G. KHAN CEMENT COMPANY LIMITED

INTRODUCTION

We have reviewed the accompanying condensed interim balance sheet of D. G. Khan Cement Company Limited ("the Company") as at 31 December 2008 and the related condensed interim profit and loss account, condensed interim cash flow statement and condensed interim statement of changes in equity for the six months period then ended (condensed interim financial information). Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with approved accounting standards as applicable in Pakistan relating to interim financial reporting. Our responsibility is to express a conclusion on this condensed interim financial information based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information as at and for the six months period ended 31 December 2008 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan relating to interim financial reporting. The figures for the quarter ended 31 December 2008 in the condensed interim profit and loss account have not been reviewed and we do not express an opinion on them.

KPMG Taseer Hadi & Co. Chartered Accountants (Farid uddin Ahmed)

Date: February 20, 2009 Lahore

7 D.G. Khan Cement Company Limited

CONDENSED INTERIM BALANCE SHEET AS AT December 31, June 30, 2008 2008 Note (Rupees in thousand) EQUITY AND LIABILITIES

CAPITAL AND RESERVES Authorised capital

- 950,000,000 (June 30,2008: 950,000,000) ordinary shares of Rs 10 each 9,500,000 9,500,000 - 50,000,000 (June 30,2008: 50,000,000) preference shares of Rs 10 each 500,000 500,000 10,000,000 10,000,000

Issued, subscribed and paid up capital 253,541,157 (30 June 2008: 253,541,157) ordinary shares of Rs 10 each 2,535,412 2,535,412 Reserves 14,142,659 27,595,698 Accumulated profit / (loss) 76,195 (50,853) 16,754,266 30,080,257

NON-CURRENT LIABILITIES

Long term finances 6 7,093,914 8,411,051 Long term deposits 73,094 73,890 Retirement and other benefits 66,392 54,018 Deferred taxation 879,000 1,319,000 8,112,400 9,857,959

CURRENT LIABILITIES

Trade and other payables 1,278,552 1,370,336 Accrued markup 571,693 364,664 Short term borrowing-secured 9,337,471 7,597,020 Current portion of non-current liabilities 3,768,758 2,687,608 Provision for taxation 35,090 35,090 14,991,564 12,054,718

CONTINGENCIES AND COMMITMENTS 7

39,858,230 51,992,934

The annexed notes 1 to 15 form an integral part of these condensed interim financial statements. The details of valuation of investments, impairment and impact on profit and loss account are given in note 9.3

Chief Executive

8 D.G. Khan Cement Company Limited

DECEMBER 31, 2008 (UN-AUDITED) December 31, June 30, 2008 2008 Note (Rupees in thousand) ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 22,639,893 22,977,894 Assets subject to finance lease - 5,135 Capital work in progress 2,615,339 2,488,307 Investments 9.1 2,631,312 6,795,961 Long term loans, advances and deposits 525,630 523,046 28,412,174 32,790,343

CURRENT ASSETS

Stores, spares and loose tools 1,851,724 2,299,250 Stock-in-trade 1,826,217 445,856 Trade debts 925,501 366,173 Investments 9.2 5,794,192 15,082,582 Advances, deposits, prepayments and other receivables 910,975 782,358 Cash and bank balances 137,447 226,372 11,446,056 19,202,591

39,858,230 51,992,934

Director

9 D.G. Khan Cement Company Limited

CONDENSED INTERIM PROFIT AND LOSS ACCOUNT FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) 2008 2007 July to October to July to October to December December December December Note (Rupees in thousand) (Rupees in thousand)

Sales - net 8,652,392 4,314,960 4,822,709 2,589,526

Cost of goods sold 10 (6,058,827) (3,021,505) (4,061,773) (2,202,254)

Gross profit 2,593,565 1,293,455 760,936 387,272

Administrative and general expenses (65,870) (34,403) (52,705) (27,712) Selling and distribution expenses (1,090,165) (661,986) (119,149) (72,981)

Other operating expenses (658,449) (37,883) (80,942) (60,417) Other operating income 432,400 239,816 367,754 169,384

(1,382,084) (494,456) 114,958 8,274

Profit from operations 1,211,481 798,999 875,894 395,546

Finance cost (1,457,433) (698,300) (785,217) (414,981)

Share of loss of associated company - - (802) (958) (1,457,433) (698,300) (786,019) (415,939)

(Loss) / profit before taxation (245,952) 100,699 89,875 (20,393) Taxation 373,000 195,000 239,786 82,120

Profit after taxation 127,048 295,699 329,661 61,727

Earnings per share basic and diluted 0.50 1.17 1.30 0.24

Appropriations have been reflected in the statement of changes in equity.

Chief Executive Director

10 D.G. Khan Cement Company Limited

INTERIM CONDENSED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) July to July to December December 2008 2007 Note (Rupees in thousand) Cash flows from operating activities

Cash generated from operations 12 434,281 292,903 Finance cost paid (1,250,404) (848,174) Retirement and other benefits paid (4,270) (5,342) Taxes paid (101,359) (14,052) Long term deposits - net (796) 1,444

Net cash used in operating activities (922,548) (573,221)

Cash flows from investing activities

Purchase of property, plant and equipment (446,304) (850,532) Purchase of investments - (356,983) Long term loans, advances and deposits-net (2,800) (3,234) Sales proceeds of property, plant and equipment 844 24,922 Dividend received 401,202 354,171 Interest received 25,453 185

Net cash used in investing activities (21,605) (831,471)

Cash flows from financing activities

Proceeds from long term finances - 1,042,304 Repayment of long term finances (883,541) (693,767) Repayment of liabilities against assets subject to finance lease (1,141) (19,280) Dividend paid (541) (123,304)

Net cash (used in)/generated from financing activities (885,223) 205,953

Net decrease in cash and cash equivalents (1,829,376) (1,198,739)

Cash and cash equivalents at the beginning of period (7,370,648) (3,826,799)

Cash and cash equivalents at the end of period 13 (9,200,024) (5,025,538)

The annexed notes 1 to 15 form an integral part of these condensed interim financial statements.

Chief Executive Director

11 INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED)

CAPITAL RESERVE REVENUE RESERVE D.G. KhanCementCompanyLimited Capital Fair redemption Share Share value reserve General Accumulated capital premium reserve fund reserve profit Total ( Rupees in thousand ) Balance as at 30 June 2007 2,535,412 2,711,384 22,868,363 353,510 3,696,827 1,757,689 33,923,185

Final dividend for the year ended 30 June 2007 - Rs 1.5 per share - - - - - (380,312) (380,312) Transfer from profit and loss account - - - - 1,375,000 (1,375,000) - 12 Net change in available for sale financial asset - - 1,574,102 - - - 1,574,102 Profit for the period - - - - - 329,661 329,661

Balance as at 31 December 2007 2,535,412 2,711,384 24,442,465 353,510 5,071,827 332,038 35,446,636

Net change in available for sale financial asset - - (4,983,488) - - - (4,983,488) Loss for the period - - - - - (382,891) (382,891)

Balance as at 30 June 2008 2,535,412 2,711,384 19,458,977 353,510 5,071,827 (50,853) 30,080,257

Net change in available for sale financial asset - - (13,453,039) - - - (13,453,039) Profit for the period - - - - - 127,048 127,048

Balance as at 31 December 2008 2,535,412 2,711,384 6,005,938 353,510 5,071,827 76,195 16,754,266

The annexed notes 1 to 15 form an integral part of these condensed interim financial statements.

Chief Executive Director D.G. Khan Cement Company Limited

SLECTED NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) 1. D. G. Khan Cement Company Limited ("the Company") is a public limited company incorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in production and sale of Ordinary Portland and Sulphate Resistant Cement. The registered office of the Company is situated at 53-A Lawrence Road, Lahore. 2. These condensed interim financial information have been presented in accordance with the requirements of international accounting standard IAS 34 - "Interim Financial Reporting". This condensed interim financial information does not include all the information required for full annual financial statements, and should be read in conjunction with the financial statements of the Company for the year ended 30 June 2008. 3. These condensed interim financial information are un-audited but subject to limited scope review by auditors and are being submitted to the shareholders as required by Section 245 of the Companies Ordinance, 1984. 4. The accounting policies and methods of computation adopted in the preparation of these condensed interim financial statements are the same as those for the preceding annual financial statements for the year ended 30 June, 2008. 5. The preparation of these condensed interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed interim financial information, the significant judgments made by the management in applying accounting policies, key estimates and uncertainty includes:

- Residual value and useful life estimation of fixed assets - Taxation - Retirement and other benefits - Provisions and Contingencies - Fair value of derivatives December 31, June 30, 2008 2008 Note (Rupees in thousand) 6 Long term finances

These are composed of: Long term finances 6.1 10,862,672 11,094,112 Less: Current portion shown under current liabilities 3,768,758 2,683,061 7,093,914 8,411,051 6.1 Long term finances

Opening balance 11,094,112 10,705,016 Add: Disbursement during the period/year - 3,000,000 Foreign currency exchange loss adjustment 430,245 567,179 11,524,357 14,272,195 Less: Repayment during the period/year 661,685 3,178,083 10,862,672 11,094,112 Less: Current portion shown under current liabilities 3,768,758 2,683,061 7,093,914 8,411,051

13 D.G. Khan Cement Company Limited

7 Contingencies and commitments

7.1 Contingencies There is no material change in contingencies from the preceding annual published financial statements of the Company for the year ended 30 June 2008.

7.2 Commitments in respect of: (i) Contracts for capital expenditure Rs 138.502 million (30 June 2008: Rs 113.987 million)

(ii) Letter of credit for capital expenditure Rs 1,234.289 million (30 June 2008: Rs 857.570 million)

(iii) Letter of credit other than capital expenditure Rs 381.438 million (30 June 2008: Rs 275.746 million)

December 31, June 30, 2008 2008 (Rupees in thousand)

8 Property, plant and equipment

Opening book value 22,977,894 22,117,551 Additions (Cost) Freehold land 55,030 69,261 Leasehold land - 63,000 Factory buildings 73,175 107,273 Office building and housing colony 46,418 38,085 Roads 53,199 5,401 Plant and machinery 44,412 1,770,166 Quarry equipment - 69,905 Furniture, fixtures and office equipment 9,413 39,077 Vehicles 9,421 27,689 Power and water supply lines 33,250 61,802

324,318 2,251,659 Disposals (at book value) Plant and machinery - (19,060) Vehicles (713) (2,927)

(713) (21,987) Written off (at book value) Factory buildings - (1,473) Plant and machinery - (1,158) Quarry equipment - (187) Furniture, fixtures and office equipment - (6,385) Vehicles - (125) Power and water supply lines - (406)

- (9,734) 14 D.G. Khan Cement Company Limited

December 31, June 30, 2008 2008 (Rupees in thousand)

Depreciation charge for the period/year (661,606) (1,359,595) 22,639,893 22,977,894

8.1 Assets subject to finance lease at book value amounting to Rs 5.048 million (30 June 2008: Rs 5.135 million) transferred to property, plant and equipment during the period.

December 31, June 30, 2008 2008 Note (Rupees in thousand)

9. Investments

Long term investments 9.1 2,631,312 6,795,961 Short term investments 9.2 5,794,192 15,082,582

9.1 Long term investments

Investment in subsidiary company 9.1.1 203,629 203,629 Available for sale 9.1.2 2,427,683 6,592,332 2,631,312 6,795,961

9.1.1 Investment in subsidiary company

Unquoted Nishat Paper Products Company Limited (Formerly Nishat Shuaiba Paper Products Company Limited) 23,268,398 (30 June 2008: 23,268,398) fully paid ordinary shares of Rs 10 each Equity held: 50% (30 June 2008: 50%) 203,629 203,629

9.1.2 Available for sale Related parties 1,552,937 1,552,937 Others 1,334 1,334 1,554,271 1,554,271 Revaluation surplus 873,412 5,038,061 2,427,683 6,592,332

9.2 Short term investments Available for sale Related parties 661,666 661,666 Add: Revaluation surplus 5,132,526 14,420,916 5,794,192 15,082,582

15 D.G. Khan Cement Company Limited

9.3 The Karachi Stock Exchange (Guarantee) Limited (“KSE”) placed a “Floor Mechanism” on the market value of securities based on the closing prices of securities prevailing as on 27 August 2008. Under the “Floor Mechanism”, the individual security price of equity securities could vary within normal circuit breaker limit, but not below the floor price level. The mechanism was effective from 28 August 2008 and remained in place until 15 December 2008. Consequent to the introduction of ‘floor mechanism’ by KSE, the market volume declined significantly during the period from 27 August 2008 to 15 December 2008. There were lower floors on a number of securities at 31 December 2008. The equity securities have been valued at prices quoted on the KSE on 31 December 2008 without any adjustment as allowed by the Securities and Exchange Commission of Pakistan (SECP) circular No. Enf/D-III/Misc./1/2008 dated 29 January 2009.

Furthermore, SECP vide SRO 150(1)/2009 dated 13 February, 2009 has allowed that the impairment loss, if any, recognized as on 31 December 2008 due to valuation of listed equity investments held as “Available for Sale’ to quoted market prices may be shown under the equity. The amount taken to equity including any adjustment/effect for price movements shall be taken to Profit and Loss account on quarterly basis during the calendar year ending on 31 December 2009. The amount taken to equity at 31 December 2008 shall be treated as a charge to Profit and Loss Account for the purposes of distribution as dividend.

International Accounting Standard 39 – Financial Instruments: Recognition and Measurement (IAS 39) requires that available for sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. Such impairment loss should be transferred from equity to Profit and Loss Account.

In view of the floor mechanism as explained above and current economic conditions in the country, the management believes that these are ‘rare circumstances’ and the plunge in equity markets cannot be considered to be a fair reflection of equity values. Therefore recognition of impairment for ‘Available for Sale’ equity securities through Profit and Loss account will not reflect the correct financial performance of the Company.

The recognition of impairment loss in accordance with the requirements of IAS 39 would have had the following effect on these condensed interim financial information:

2008 (Rupees in thousand)

Effect of Impairment Loss in Profit and Loss Account 620,662 Effect on Tax charge for the period Nil Increase in loss for the period 620,662 Decrease in surplus on revaluation of Available for Sale Securities 620,662 Decrease in Un-appropriated profit 620,662

(Rupees) Decrease in earning per share 2.45

16 D.G. Khan Cement Company Limited

2008 2007 July to October to July to October to December December December December (Rupees in thousand) (Rupees in thousand)

10 Cost of goods sold

Raw and packing materials consumed 718,946 371,563 610,972 326,808 Salaries, wages and other benefits 315,296 149,973 235,856 123,620 Electricity and gas 739,391 370,992 837,985 427,643 Furnace oil/coal 4,375,092 2,552,347 1,889,118 1,088,743 Stores and spares consumed 385,308 187,408 250,326 119,325 Repair and maintenance 60,499 28,212 42,513 28,782 Insurance 22,109 12,030 21,961 10,551 Depreciation on property, plant and equipment 656,004 327,644 663,380 338,010 Depreciation on assets subject to finance lease 80 - 2,874 1,196 Royalty 41,904 22,211 44,237 23,025 Excise duty 16,281 9,088 13,997 7,537 Vehicle running 9,713 4,991 7,213 3,642 Postage, telephone and telegram 2,166 1,074 3,217 1,103 Printing and stationery 1,824 1,301 1,531 368 Legal and professional charges 1,672 364 668 295 Estate development 4,136 2,048 5,696 4,554 Rent, rates and taxes 3,351 1,770 2,991 1,250 Freight charges 2,877 1,572 2,675 1,232 Other expenses 13,803 5,992 10,708 6,770

7,370,452 4,050,580 4,647,918 2,514,454

Opening work-in-process 118,292 320,514 142,686 370,724 Closing work-in-process (1,240,801) (1,240,801) (673,971) (673,971)

(1,122,509) (920,287) (531,285) (303,247)

Cost of goods manufactured 6,247,943 3,130,293 4,116,633 2,211,207

Opening stock of finished goods 78,369 158,162 69,728 110,471 Closing stock of finished goods (262,309) (262,309) (110,967) (110,967) (183,940) (104,147) (41,239) (496)

Less:Own consumption capitalized 5,176 4,641 13,621 8,457 6,058,827 3,021,505 4,061,773 2,202,254

17 D.G. Khan Cement Company Limited

July to July to December December 2008 2007 (Rupees in thousand)

11 Related party transactions

Relationship with the party Nature of transaction

Subsidary Company Purchase of goods and services 400,446 484,082 Rental income 80 73 Interest Income 24,925 -

Other related parties Purchase of goods and services 433,638 560,879 Insurance premium 28,278 27,230 Sale of goods 26,398 6,167 Mark-up income on balances with related parties 1,470 1,612 Insurance claim received 302 2,061 Key Management personnel compensation 35,331 29,815 Expenses charged in respect of staff retirement benefits plans 18,045 17,508

12 Cash flow from operating activities

(Loss)/ profit before tax (245,952) 89,875 Adjustment for:

Depreciation on property, plant and equipment 661,606 669,038 Depreciation on assets subject to finance lease 89 3,233 Profit on disposal of property, plant and equipment (131) (3,843) Dividend income (401,191) (354,171) Share of loss of associate - 802 Retirement and other benefits accrued 13,238 10,647 Markup Income (26,458) (1,694) Exchange loss-net 652,101 - Finance cost 1,457,433 854,334 Profit before working capital changes 2,110,735 1,268,221

18 D.G. Khan Cement Company Limited

July to July to December December 2008 2007 (Rupees in thousand) Effect on cash flow due to working capital changes:

Decrease/(Increase) in stores, spares and loose tools 447,526 (138,137) Increase in stock-in-trade (1,380,361) (636,791) Increase in trade debts (559,328) (178,142) Increase in advances, deposits, prepayments and other receivables (93,048) (232,882) (Decrease)/Increase in trade and other payables (91,243) 210,634 (1,676,454) (975,318) Cash generated from operations 434,281 292,903

December 31, December 31, 2008 2007 (Rupees in thousand)

13 Cash and cash equivalents

Short term borrowing - secured (9,337,471) (5,199,495) Cash and bank balances 137,447 173,957 (9,200,024) (5,025,538)

14 Date of authorization for issue

These un-audited condensed interim financial statements were authorized for issue by the Board of Directors of the Company on February 20, 2009.

15 General

Figures have been rounded off to the nearest thousand of Rupees.

Chief Executive Director

19 D.G. Khan Cement Company Limited and its Subsidiary

D.G. Khan Cement Company Limited and its Subsidiary Interim Condensed Consolidated Financial Statements for the half year ended December 31, 2008

21 D.G. Khan Cement Company Limited and its Subsidiary

Director’s Report on Interim Condensed Consolidated Financial Statements

I am pleased to present before you the consolidated financial statements of D.G. Khan Cement Company Ltd. and its subsidiary Nishat Paper Products Company Ltd.

Consolidated financial performance of the both companies is as follows:

July-December 2008 (Rupees in thousand)

Sale revenue 8,851,064 Gross profit 2,662,633 (Loss) before tax (317,293) Profit after tax 70,707

A review on affairs of D.G. Khan Cement Company Ltd has been separately appended.

for and on behalf of the Board

(Mian Raza Mansha) Chief Executive Lahore: February 20, 2009

23 D.G. Khan Cement Company Limited and its Subsidiary

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS AT December 31, June 30, 2008 2008 Note (Rupees in thousand) EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES Authorised capital

950,000,000 (June 30, 2007: 950,000,000) ordinary shares of Rs 10/- each 9,500,000 9,500,000 50,000,000 (June 30, 2007: 50,000,000) preference shares of Rs 10/- each 500,000 500,000 10,000,000 10,000,000

Issued, subscribed and paid up capital 253,541,157 (June 30, 2007: 253, 541,157) ordinary shares of Rs. 10/- each. 2,535,412 2,535,412 Reserves 14,181,683 27,634,722 Accumulated profit 124,502 32,399 16,841,597 30,202,533 Minority interest 304,511 325,907 17,146,108 30,528,440

NON-CURRENT LIABILITIES

Long term finances 6 7,543,914 8,871,051 Liabilities against assets subject to finance lease 322 393 Long term deposits 73,094 73,890 Retirement and other benefits 66,392 54,018 Deferred taxation 796,000 1,251,000 8,479,722 10,250,352

CURRENT LIABILITIES

Trade and other payables 1,331,637 1,450,074 Accrude mark up 611,104 391,610 Short term borrowing-secured 9,882,053 8,194,330 Current portion of non-current liabilities 3,919,132 2,828,202 Provision for taxation 35,090 35,090 15,779,016 12,899,306

CONTINGENCIES AND COMMITMENTS 7 - -

41,404,846 53,678,098

The annexed notes 1 to 15 form an integral part of these accounts.

Chief Executive

24 D.G. Khan Cement Company Limited and its Subsidiary

DECEMBER 31, 2008 (UN-AUDITED) December 31, June 30, 2008 2007 Note (Rupees in thousand) ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 23,866,741 24,224,273 Assets subject to finance lease 1,627 6,839 Capital work in progress 2,615,339 2,488,307 Investments 9 2,427,683 6,592,332 Long term loans, advances and deposits 526,760 524,176 29,438,150 33,835,927

CURRENT ASSETS

Stores, spares and loose tools 1,878,152 2,323,883 Stock-in-trade 2,390,058 1,300,325 Trade debts 1,057,220 463,446 Investments 5,794,215 15,082,605 Advances, deposits, prepayments and other receivables 694,115 427,832 Cash and bank balances 152,936 244,080 11,966,696 19,842,171

41,404,846 53,678,098

Director

25 D.G. Khan Cement Company Limited and its Subsidiary

INTERIM CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) 2008 2007 July to October to July to October to December December December December Note (Rupees in thousand) (Rupees in thousand)

Sales - net 8,851,064 4,440,747 4,822,709 2,589,526 Cost of goods sold 10 (6,188,430) (3,117,925) (4,061,773) (2,202,254) Gross profit 2,662,634 1,322,822 760,936 387,272

Administrative and general expenses (67,786) (35,623) (52,705) (27,712) Selling and distribution expenses (1,094,291) (663,986) (119,149) (72,981) Other operating expenses (686,179) (65,613) (80,943) (75,515) Other operating income 408,107 231,267 367,754 169,384

(1,440,149) (533,955) 114,957 (6,824) Profit from operations 1,222,485 788,867 875,893 380,448

Finance cost (1,539,778) (715,148) (785,216) (399,883) Share of loss of associated companies - - (802) (958) (1,539,778) (715,148) (786,018) (400,841)

(Loss)/Profit before taxation (317,293) 73,719 89,875 (20,393) Taxation 388,000 220,000 239,786 82,120

Profit for the period 70,707 293,719 329,661 61,727

Attributable: Equity holders of the parent 92,103 303,315 329,661 61,727 Minority interest (21,396) (9,596) - - 70,707 293,719 329,661 61,727

Earnings per share basic and diluted 0.28 1.16 1.30 0.24

Appropriations have been reflected in the statement of changes in equity.

The annexed notes 1 to 15 form an integral part of these accounts.

Chief Executive Director

26 D.G. Khan Cement Company Limited and its Subsidiary

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) July to July to December December 2008 2007 Note (Rupees in thousand) Cash flows from operating activities

Cash (used in)/generated from operations 12 621,019 292,903 Finance cost paid (1,348,020) (848,174) Retirement and other benefits paid (4,272) (5,342) Taxes paid (112,510) (14,052) Net increase in long term deposits (797) 1,444 Net cash (used in)/generated from operating activities (844,579) (573,221) Cash flows from investing activities Purchase of property, plant and equipment (448,546) (850,532) Purchase of investments - (356,983) Long term loans, advances and deposits-net (2,800) (3,234) Sales proceeds of property, plant and equipment 844 24,922 Dividend received 401,202 354,171 Interest received 528 185 Net cash used in investing activities (48,772) (831,471) Cash flows from financing activities Proceeds from long term finances - 1,042,304 Repayment of long term finances (883,541) (693,767) Repayment of liabilities against assets subject to finance lease (1,433) (19,280) Dividend paid (541) (123,304) Net cash generated from financing activities (885,515) 205,953 Net (decrease) in cash and cash equivalents (1,778,867) (1,198,739) Cash and cash equivalents at the beginning of period (7,950,250) (3,826,799) Cash and cash equivalents at the end of period 13 (9,729,117) (5,025,538)

The annexed notes 1 to 15 form an integral part of these accounts.

Chief Executive Director

27 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED)

CAPITAL RESERVE REVENUE RESERVE Capital Fair redemption Total Share Share value reserve General Accumulated Minority capital premium reserve fund reserve profit/(Loss) interest D.G. KhanCementCompanyLimited Rupees in thousand

Balance as at 30 June 2007 2,535,412 2,711,384 22,868,363 353,510 3,696,827 1,757,689 33,923,185 - Final dividend for the year ended 30 June 2007 - Rs 1.5 per share - - - - - (380,312) (380,312) - Transfer from profit and loss account - - - - 1,375,000 (1,375,000) - - Net change in available for sale financial asset - - 1,574,102 - - - 1,574,102 - Profit for the period - - - - - 329,661 329,661 - 28 Balance as at 31 December 2007 2,535,412 2,711,384 24,442,465 353,510 5,071,827 332,038 35,446,636 -

Post acquisition Reserve - - - - 39,024 - 39,024 - Net change in available for sale financial asset - - (4,983,488) - - - (4,983,488) - Minority Interest arising on business combination ------330,244 Loss for the period - - - - - (299,639) (299,639) (4,337) Balance as at 30 June 2008 2,535,412 2,711,384 19,458,977 353,510 5,110,851 32,399 30,202,533 325,907

Net change in available for sale financial asset - - (13,453,039) - - - (13,453,039) - Profit for the period - - - - - 92,103 92,103 (21,396) Balance as at 31 December 2008 2,535,412 2,711,384 6,005,938 353,510 5,110,851 124,502 16,841,597 304,511

The annexed notes 1 to 15 form an integral part of these accounts.

Chief Executive Director D.G. Khan Cement Company Limited and its Subsidiary

SELECTED NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED DECEMBER 31, 2008 (UN-AUDITED) 1. LEGAL STATUS AND NATURE OF BUSINESS The Group comprises of: - D.G.Khan Cement Company Limited ("the Parent Company") and; - Nishat Paper Products Company Limited ("the Subsidiary Company") (formerly Nishat Shuaiba Paper Products Company Limited) D.G.Khan Cement Company Limited ("the Parent Company") is a public limited company incorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in production and sale of Ordinary Portland and Sulphate Resistant Cement. The registered office of the Company is situated at 53-A Lawrence Road, Lahore. Nishat Paper Products Company Limited (formerly Nishat Shuaiba Paper Products Company Limited) ("the Subsidiary Company") is a public limited company incorporated in Pakistan under the Companies Ordinance, 1984 on 23 July, 2004. It is principally engaged in the manufacture and sale of paper products and packing material. 2 BASIS OF PREPARATION 2.1 Statement of Compliance These consoolidated financial stastement have been prepared in accordance with approved accounting standardsas applicable in Pakistan. Approved accounting standards of such International Financial Reporting Standards (IFRSs) issued by the International Standard Board as are notified under the provisions of the Compa nies Ordinance, 1984 differ, the provision or driectives of the Companies Ordinance, 1984 shall prevail. 2.2 Basis of Consolidation The consolidated financial statements include the financial statement of D.G.Khan Cement Company Limited and its subsidiary Nishat Paper Products Group Limited with 50% holding (2007:Nil) ("The Group Companies"). Subsidiary is that enterprise in which Group directly or indirectly benefecially owns or holds more than 50% of voting securities or otherwise has power to elect and appoint more than 50% of its Directors. The financial statements of the subsidiary are included in the consolidated financial statements from the date control commences until the date control ceases. The assets and liabilities of the subsidiary company have been consolidated on a line by line basis and carrying value of investments held by the parent Group is eliminated against the subsidiary equity in the consolidated financial statements. The control of Group was established during the year, and the comparative amounts for the corresponding year relates to the operation of D.G.Khan Cement Company limited only. Material intra-group balances and transactions have been eliminated. Minority interests are that part of the net reeserves of the operation and of net assets of the subsidiary attributable to interests which are not owned by the Group. Minority interest is presented as separate item in the consolidated financial statements. 3. These interim consdensed financial information is unaudited and is being submitted to share holders as required by Section 245 of the Companies Ordinance, 1984.This interim financial information has been prepared in accordance with the International Accounting Standared(IAS) 34 "Interim Financial Reporting" and (IAS) 27 "Consolidated and separate financial statements' as applciable in Pakistan and notified by the Securities and Exchange Commission of Pakistan (SECP).

29 D.G. Khan Cement Company Limited and its Subsidiary

4. The accounting policies adopted for the preparation of these quarterly accounts are the same as those applied in the preparartion of preceding annual published accounts of the company for the year ended June 30, 2008. 5. These financial statements were authorized for issue on Feburary 20, 2009 by the Board of the Company.

December 31, June 30, 2008 2008 Note (Rupees in thousand)

6. Long term finances These are composed of: Long term finances 6.1 11,462,673 11,694,112 Less: Current portion shown under current liabilities 3,918,759 2,823,061 7,543,914 8,871,051 6.1 Long term finances Opening balance 11,694,112 10,705,016 Add: Disbursement during the period/year - 3,600,000 Exchange Adjustment 652,101 567,179 12,346,213 14,872,195 Less: Repayment during the period/year 883,540 3,178,083 11,462,673 11,694,112 7. Contingencies and commitments 7.1 Contingencies There is no material change in contingencies from the preceding annual published financial statements of the Company for the year ended June 30, 2008. 7.2 Commitments in respect of: (i) Contracts for capital expenditure Rs. 138.502 million (June 30,2008: Rs. 113.987 million) (ii) Letter of credit for capital expenditure Rs. 1,234.289 million (June 30,2008: Rs. 857.570 million) (iii) Letter of credit other than capital expenditure Rs 427.401 million (June 30,2008: Rs. 374.078 million)

30 D.G. Khan Cement Company Limited and its Subsidiary

December 31, June 30, 2008 2008 Note (Rupees in thousand) 8. Property, plant and equipment Opening book value 24,224,273 22,117,551 Add:Addition during the period 8.1 326,560 3,514,807 24,550,833 25,632,358 Less: Disposal during the period(at book value) 713 30,861 Written off(book value) - 9,734 Depreciation charged during the period 683,379 1,367,490 684,092 1,408,085 23,866,741 24,224,273 8.1 Additions (Cost) Freehold land 55,030 81,261 Leasehold land - 63,000 Factory buildings 73,175 357,798 Office building and housing colony 46,418 49,167 Roads 53,199 14,579 Plant and machinery 46,654 2,734,774 Quarry equipment - 69,905 Furniture, fixtures and office equipment 9,413 42,928 Vehicles 9,421 28,275 Power and water supply lines 33,250 73,120 326,560 3,514,807 9. Investments Cost 2,215,960 2,215,960 Add:Fair value surplus 6,005,938 19,458,977 8,221,898 21,674,937 Less:Investment classified in current assets 5,794,215 15,082,605 2,427,683 6,592,332

31 D.G. Khan Cement Company Limited and its Subsidiary

2008 2007 July to October to July to October to December December December December (Rupees in thousand) (Rupees in thousand)

10. Cost of goods sold

Raw and packing materials consumed 785,434 427,587 610,972 326,808 Salaries, wages and other benefits 320,898 152,735 235,856 123,620 Electricity and gas 747,803 379,404 837,985 427,643 Furnace oil/coal 4,375,092 2,550,091 1,889,118 1,088,743 Stores and spares consumed 390,557 190,158 250,326 119,325 Repair and maintenance 60,550 28,259 42,513 28,782 Insurance 24,654 13,146 21,961 10,551 Depreciation on property, plant and equipment 677,506 338,404 663,380 338,010 Depreciation on assets subject to finance lease 115 17 2,874 1,196 Royalty 41,904 22,211 44,237 23,025 Excise duty 16,281 9,088 13,997 7,537 Vehicle running 9,980 5,141 7,213 3,642 Postage, telephone and telegram 2,177 1,079 3,217 1,103 Printing and stationery 1,839 1,310 1,531 368 Legal and professional charges 1,772 464 668 295 Estate development 4,136 2,048 5,696 4,554 Rent, rates and taxes 3,371 1,790 2,991 1,250 Freight charges 2,898 1,581 2,675 1,232 Other expenses 13,980 6,063 10,708 6,770 7,480,947 4,130,576 4,647,918 2,514,453

Opening work-in-process 118,292 320,514 142,686 370,724 Closing work-in-process (1,240,801) (1,240,801) (673,971) (673,971) (1,122,509) (920,287) (531,285) (303,247) Cost of goods manufactured 6,358,438 3,210,289 4,116,633 2,211,206

Opening stock of finished goods 118,864 195,973 69,728 110,471 Closing stock of finished goods (283,696) (283,696) (110,967) (110,967) (164,832) (87,723) (41,239) (497) Less: Own consumption capitalised 5,176 4,641 13,621 8,456 6,188,430 3,117,925 4,061,773 2,202,254

32 D.G. Khan Cement Company Limited and its Subsidiary

July to July to December December 2008 2007 (Rupees in thousand) 11. Related party transactions Purchase of goods and services 862,375 560,879 Insurance premium 40 27,230 Sale of goods 26,398 6,167 Mark-up income on balances with related parties 1,470 1,612 Insurance claim received 302 2,061 Key Management personnel compensation 35,331 29,815 Expense charged in respect of staff retirement benefits plans 18,045 17,508 12. Cash flow from operating activities (Loss)profit before tax (317,293) 89,875 Adjustment for: Depreciation on property, plant and equipment 683,383 669,038 Depreciation on assets subject to finance lease 165 3,233 Profit on disposal of property, plant and equipment (131) (3,843) Dividend income (401,191) (354,171) Share of loss of associates - 802 Retirement and other benefits accrued 13,238 10,647 Markup Income (1,533) (1,694) Exchange loss-net 652,101 Finance cost 1,567,513 854,334 Profit before working capital changes 2,196,253 1,268,221 Effect on cash flow due to working capital changes (Increase)/decrease in stores, spares and loose tools 445,731 (138,137) Increase)/decrease in stock-in-trade (1,089,731) (636,791) (Increase)/decrease in trade debts (593,774) (178,142) Increase in advances, deposits, prepayments and other receivables (219,563) (232,882) (Decrease)/increase in trade and other payables (117,896) 210,634 (1,575,233) (975,318) Cash generated from operations 621,019 292,903 13. Cash and cash equivalents Short term borrowing - secured (9,882,053) (5,199,495) Cash and bank balances 152,936 173,957 (9,729,117) (5,025,538) 14. Date of authorization for issue These un-audited condensed interim financial statements were authorized for issue by the Board of Directors of the Company on February 20,2009. 15. Corresponding figures Corresponding figures have been rearranged, wherever necessary for the purposes of comparison. However, no significant rearrangements have been made.

Chief Executive Director