AnnualReport2007 08

D.G.
Khan Cement Company Limited
CONTENTS
D.G. Khan Cement Company Limited Corporate profile Mission and Vision Statements Notice of Annual General Meeting Directors Report Operating and financial data Pattern of shareholding Statement of Compliance with the Code of Corporate Governance Statement of Compliance with the Best Practices on Transfer Pricing Review Report to the members Auditors Report to the members Balance Sheet Profit and loss account Cash flow statement Statement of changes in equity Notes to the financial statements D.G. Khan Cement Company Limited and its Subsidiary Directors Report Auditors Report to the members Consolidated Balance Sheet Consolidated Profit and loss account Consolidated Cash flow statement Consolidated Statement of changes in equity Notes to the consolidated financial statements 66 67 68 70 71 72 73 3 4 5 7 13 14 18 19 20 21 22 24 25 26 27
Proxy form
D.G. Khan Cement Company Limited
D.G. Khan Cement Company Limited CORPORATE PROFILE
Board of Directors
Mrs. Naz Mansha Mian Raza Mansha Mr. Manzar Mushtaq Mr. Khalid Qadeer Qureshi Mr. Zaka-ud-Din Mr. Muhammad Azam Mr. Inayat Ullah Niazi Mr. Manzar Mushtaq Mr. Khalid Qadeer Qureshi Mr. Muhammad Azam Mr. Khalid Mahmood Chohan
Chairperson Chief Executive
Chief Financial Officer Member/Chairman Member Member
Audit Committee
Company Secretary Bankers
Royal Bank of Sotland (Formerly ABN AMRO Bank (Pakistan) Limited) Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Citibank N.A. Habib Bank Limited MCB Bank Limited National Bank of Pakistan Standard Chartered Bank (Pakistan) Limited The Bank of Punjab United Bank Limited
Auditors Legal Advisors Registered Office
KPMG Taseer Hadi & Co, Chartered Accountants Mr. Shahid Hamid, Bar-at-Law Nishat House, 53-A, Lawrence Road, Lahore-Pakistan Phone: 92-42-6367812-20 UAN: 111 11 33 33 Fax: 92-42-6367414 Email: info@dgcement.com web site: www.dgcement.com 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan Phone: 92-641-460025-7 Fax: 92-641-462392 Email: dgsite@dgcement.com 12, K.M. Choa Saidan Shah Road, Khairpur, Tehsil Kallar Kahar, Distt. Chakwal-Pakistan Phone: 92-543-650215-8 Fax: 92-543-650231
Factory
2.
Mission Statement
To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.
Vision Statement
To transform the Company into a modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.
D.G. Khan Cement Company Limited NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that 30th Annual General Meeting of the Shareholders of D. G. Khan Cement Company Limited ("the Company") will be held on October 31, 2008 ( Friday) at 3:30 p.m. at Nishat House, 53-A, Lawrence Road, Lahore to transact the following business: 1. To confirm minutes of the last meeting. 2. To receive and adopt the audited accounts of the Company for the financial year ended June 30, 2008 together with the Directors' and Auditors' reports thereon. 3. To appoint Auditors for the year 2008 - 2009 and fix their remuneration. The retiring Auditors M/s. KPMG Taseer Hadi & Co., Chartered Accountants, Lahore, being eligible offer themselves for re-appointment. 4. SPECIAL BUSINESS:To consider and if thought fit to pass the following special resolutions to amend the following clauses of the Articles of Association of the Company: General Meeting when to be held: RESOLVED that the article No. 38 of the Articles of Association of the Company be and is hereby amended so that the words six months appearing in 3rd line be substituted with the words four months. Quorum of Annual General Meeting: RESOLVED that the article No. 42 of the Articles of Association of the Company be and is hereby amended so that the words Three members appearing in 1st line be substituted with the words Ten members. Statements of Accounts to be laid before General Meeting: RESOLVED that the article No. 115 of the Articles of Association of the Company be and is hereby amended so that the words six months appearing in 4th line be substituted with the words four months. RESOLVED that the Chief Executive or Company Secretary be and is hereby authorized singly to take all such steps as may be necessary to incorporate the above amendments, alterations in the Articles of Association of the Company. 5. Any other matter with the permission of the Chair. By order of the Board
LAHORE SEPTEMBER 19, 2008
( KHALID MAHMOOD CHOHAN ) COMPANY SECRETARY

NOTES: 1. BOOK CLOSURE NOTICE:The Share Transfer Books the Company will remain closed for attending of Annual General Meeting, from 25-10-2008 to 31-10-2008 (both days inclusive). Physical transfers / CDS Transactions IDs received in order at Nishat House, 53-A, Lawrence Road, Lahore, upto 1:00 p.m. on 24-10-2008 will be considered in time for attending of meeting. 2. A member eligible to attend and vote at this meeting may appoint another member his / her proxy to attend and vote instead of him/her. Proxies in order to be effective must reach the Company's Registered office not less than 48 hours before the time for holding the meeting. Proxies of the Members through CDC shall be accompanied with attested copies of their NIC. The shareholder through CDC are requested to bring original NIC, Account Number and Participant Account Number to produce at the time of attending the meeting. 3. Shareholders are requested to immediately notify the change in address, if any. STATEMENT U/S 160(i)(b) OF THE COMPANIES ORDINANCE 1984. This statement sets out the material facts pertaining to the special business to be transacted at the forthcoming Annual General Meeting of the Company to be held on October 31, 2008. The Directors in their meeting held on September 19, 2008 have recommended to the shareholders to pass the special resolutions to approve amendments in certain clauses of the Articles of Association of the Company to bring it in line with the changes made by Securities & Exchange Commission of Pakistan and Ministry of Finance and Law, Government of Pakistan in Companies Ordinance, 1984, from time to time.
D.G. Khan Cement Company Limited DIRECTORS REPORT

I, on behalf of the Board of Directors of D.G. Khan Cement Company Limited, feel pleasure to put before you the 30th Annual Report of D.G. Khan Cement Company Limited, along with financial statements and auditors report thereon for the year ended June 30, 2008. INDUSTRY REVIEW The cement industry of Pakistan again set a new record and sold 30.112M tons during FY 2008 against 24.222M tons last year, with a growth of over 24%. During the period under report the capacity utilization of the industry was 81% against 79% last year. The slight increase in capacity utilization is due to the fact that during the year industry added another 6.5M tons of new capacity. Pakistani Cement industry fully tapped the export prospects of cement and managed to export hefty 6.610M tons against 2.797M tons last year. The cement manufacturers fully poised to explore new export markets. Contrary to past, now the cement is being exported not only to regional neighbouring countries, rather Pakistani cement is finding its place in South East Asian countries, Russia and in African countries as well.
M.Tons
40,000,000
INSTALLED CAPACITY AND INDUSTRY VS. DGK UTILIZATION

120%
110.2% 102.8% 101.8% 102.3%
35,000,000
85.7%
100%
82.5% 91.3% 79.1% 69.9%
30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0
80%
79.1% 81.0%
60%
40%
16,321,050
17,278,550
17,908,550
20,954,912
30,622,325
37,156,750
20%
0%
2003
2004
2005
2006
2007
DGK
2008
Years
Industry
Clouds of recession are hovering over the economy of Pakistan and having achieved consecutive growth of over 6% in real GDP during last four years, economic growth slowed down to 5.8% in FY 2008 against 6.8% recorded last year. Demand of cement is directly related with prevailing economic conditions. During FY 2008 cement sales in the country remained bleak due to uncertainty in political and economic front coupled with fading law and order situation. Total sales in the country were 22.395M tons against 21.034M tons last year, witnessing an increase of only over 6%. Dilemma of price war among the cement manufacturers to find out the market share has badly affected the financial health of the cement sector. In addition, all time high oil and coal prices coupled with expanding inflationary trend in the country hit badly the cost of production. Going forward, monetary tightening stance of the State Bank of Pakistan to curb inflation in the country posed additional burden in the form of increased lending rates.
PLANT PERFORMANCE
Plant performance during the year under review was excellent. Kiln-2 at DG Khan Site operated for record 343 days which is a record in the cement industry. Kiln-1 at DGK and kiln-1 at KHP operated 325 and 287 days respectively. It was only possible by adopting sound and prudent production management and preventive maintenance techniques. Your management believes in the policy of using the best available equipments to achieve both efficiency and effectiveness. This is evident for the fact that overall capacity utilization of the plants was above 103% during FY 2008 which is unprecedented in the cement industry of Pakistan.
7
Capacity Utilization
87.9%
DGK-Unit-1 DGK-Unit-2 KHP-Unit-1 Total
FY2007-08 M.Tons Utilization 912,303 112.6% 1,368,798 114.1% 1,861,663 92.6% 4,142,764 103.1%
FY 2006-07 M.Tons 948,289 1,338,345 146,794 2,433,428

M.Tons 4,000,000 3,500,000 85% 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 68% 63% 70% 60% 50% 40% 30%
CLINKER PRODUCTION & CAPACITY UTILIZATION
112% 96% 90%
112%
120% 110% 103% 100% 90%
Capacity Utilization
80%
Expansion plant in Khairpur (KHP) Dist. Chakwal, being in its first year of operation, operated remarkably well during the period under review. Detailed operational parameters are well within the range of guarantees given by the plant supplier. State of the art duel fuel power generation plant placed at Khairpur cement plant also started its commercial operations successfully.
1,045,023
1,120,246
1,396,246
1,478,071
1,590,808
2,288,170
4,142,764
2,193,687
20% 10% 0%
500,000 0 Years
2001 2002 2003
2004 2005 2006 2007
2008
FY 2007-08 M.Tons DGK-Unit-1 DGK-Unit-2 KHP-Unit-1 Total 967,697 1,281,323 1,978,747 4,227,767
FY 2006-07 M.Tons 1,075,745 1,312,236 154,622 2,542,603
Cement production during the period under report was good and posted an increase of 76% compared with last year. Vertical Cement Grinding mill placed at Khairpur plant proved to be energy efficient and entails low maintenance compared with traditional cement mills.
FY 2007-08 Local Exports 1,871,727 395,046 1,700,351 266,828 3,572,078 661,875 4,233,953 95,202 72,481 167,683 FY 2006-07 Local Exports 2,214,059 153,477 134,770 2,348,829 153,477 2,502,306 25,000 25,000 -
DGK Site KHP Site Total Cement Sales Clinker Sales Total Clinker Sales
SALES The following table portrays the sales summary: Your company, after the start of production from new cement plant at Khairpur, fully paced to tap the local and export markets. Local Cement sales during FY 2008 ballooned by 52% compared with last year.
M.Tons
45,000,000
LOCAL & EXPORT SALES

757,077
40,00,000
33,000,000
30,000,000 153,477 2,500,000 166,241 290,205 41.486 171,345 1,500,000 0 6,862 1,000,000
Whereas, export of cement posted a decent hike and augmented by 331%. Your company is now exporting not only to traditional market of Afghanistan, rather has entered into most of the countries of Middle East. In addition, your company is also trying to tap new export avenues and started exporting to Russia, India and some African countries. Your company is making all out efforts to utilize the optimum level of its available capacity, and have also started selling clinker both locally and in the international markets.
2,000,000
1,094,438
1,091,563
1,392,065
1,316,632
1,536,765
2,048,114
2,375,486
7
500,000
0 1 2 3 4 5 6 8
3,644,559

2008 2007 (Rupees in thousand) OPERATING RESULTS -Net Sales -Cost of Sales -Gross Profit -After tax (loss) / profit (Loss)/earning per share (Rs. /Share) 12,445,996 10,530,723 1,915,273 (53,230) (0.21) 6,419,625 4,387,640 2,031,985 1,622,471 6.43
Volumetric growth in cement sales during the period contributed in getting the sale revenue doubled from last year. Despite the growth of 94% in sale revenue, gross profit during the period witnessed a decline of about 6% compared with previous period. Major contributors to the decline in gross profit are, the price war among the cement manufacturers which squeezed the profit margins sharply. The position further aggrevated due to sky rocketing fuel prices in international markets and severe inflation in the country. Prices of coal, used in cement industry, increased by nearly 50% during the period under report compared to last year. Likewise, since July 2007, OGRA increased Gas Tariff by over 40% for cement sector and over 38% for power generation. Similar trends were also witnessed in other input costs which badly affected the profitability of the company. Insufficient cash flows which rest to rely more on running finances and increasing lending benchmark rates, on the back of stringent monetary policy of the State Bank of Pakistan to curb mounting inflation in the country, put unmatched pressure on the finance cost. Going forward, worsening economic conditions and huge trade imbalances led to weak the Pakistani Rupees in relation to major international currencies. Higher production cost and devaluation of the rupee cast serious burden on the profitability of the company during the year, which was somehow bailed out by dividend income from investments. Total dividend stream during FY 2008 stood at Rs. 820.446 million against Rs. 465.774 million last year. After accounting for all charges including deprecation/
PKR In Millions PROFITABILITY 3,449
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 (500)

YEARS (431) 2001 294 280 2002 (444) 356 2003 2004 2005 2006 2007 2008 (53) (242) 794 1,120 1,682 2,121 2,418 1,720 1,622
Profit Ater Tax
Profit Before Tax
amortization of Rs. 1,363.037 million, financial charges of Rs. 1,749.837 million and Rs. (197.70) million for provision for taxation (including deferred tax of Rs. (305.0) million) etc. your Company suffered a net loss of Rs. 53.230 million. DIVIDEND Your management keeping in view profitability and liquidity position of the company decided not to recommend any dividend for the period under review. OPERATING AND FINANCIAL DATA Operating and financial data with key ratios for the last six years is annexed.

ONGOING PROJECTS The new worlds largest Vertical Cement Grinding Mill at D.G. Khan Site is under commissioning. The mill is expected to start commercial production in second quarter of FY 2009. After the start of grinding mill additional quantities of cement will be available, which will help boost revenue. Project of power generation from waste heat at DGK Site is in full swing. Civil work has already been started. Shipments from plant supplier would start by the end of this calendar year. The project is expected to generate substantially cheap electricity of about 10.4MW without using any fuel. This would help to cut down the cost of production. The project is expected to start in first quarter of next financial year. Going forward, your company has also decided to use municipal solid waste as fuel for heating purposes. In this regard, negotiations with equipment suppliers are in process, which is expected to be finalized soon. In addition, your company is also in contact with different city governments to enter into agreements for acquiring the solid waste. This project entail multi dimensional benefits, like it would bring down the costs of production, help resolve the environmental issues related with disposal of solid waste and most important, it would save huge foreign exchange spent on importing fossil fuels. FUTURE OUTLOOK Despite severe fiscal pressure on the Govt. of Pakistan due to economic turn down and mounting trade and budget deficit, the Federal budget came up with incremental Public sector development plan (PSDP). The outlay budgeted for FY 2009 is Rs 550bn. against Rs. 520bn. last year which is 5.7% higher and 20% higher than the revised budget of Rs. 458bn for FY 2008, this bodes well for the cement industry of the country. The Govt. has already announced after the meeting of NEC in June 2008 allocation of Rs. 166bn for infrastructural projects out of which Rs. 54bn. would be spent on 314 small new dams countrywide. In the budget 2009, an allocation of Rs. 75bn. has also been made for construction and improvement of dams and water reservoirs in the country. In addition, an amount of Rs. 37bn. has also been allocated for roads and highways. Pakistan is short of housing compared with regional countries. To address the issue the Govt. has announced to add 1000K units of low cost houses. All these steps announced if followed will increase the cement demand in the country during FY 2009. Cement industry of the country since the last few years had been demanding gradual slash in central excise duty (CED) which is the highest among the regional countries, but as a surprise the Govt. has rather increased the CED in the Federal budget from Rs.750/ton to Rs.900/ton. In addition, Govt. also increased general sales tax by 1%. Both these indirect tax measures would bode negatively on cement demand in the country. Exports have touched almost 7.0 million tons mark during FY 2008. The cement players in the country are trying to find new markets in the world. Demand of cement manufacturers to allow export of cement to India via land route is not yet resolved. If allowed a sizeable quantity of cement could be exported through land route which is the cheapest and most convenient. Growth in exports is continuing and cement has emerged as a valuable commodity for the country as it is earning precious foreign exchange. Impediments to the exports like lack of bulk handling facilities at ports and insufficient export rebate is hindering the exports potentials of the country. Cement inductry is demanading from Govt. of Pakistan to set up bulk handling facilities for cement, clinker and coal at Karachi ports but nothing has turned out yet.
10

RELATED PARTIES The transactions between the related parties were made at arms length prices determined in accordance with the comparable uncontrolled prices method. The Company has fully complied with the best practices on Transfer Pricing as contained in the Listing Regulations of Stock Exchanges in Pakistan. CORPORATE & FINANCIAL REPORTING FRAME WORK In compliance with the Code of Corporate Governance, we give below statements on Corporate and Financial Reporting Frame Work: The financial statements, prepared by the management of the Company, present fairly its state of affairs, the results of its operations, cash flows and changes in equity. Proper books of account of the Company have been maintained. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the Companys ability to continue as a going concern. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. Value of investments of Provident Fund as on June 30, 2008 is Rs. 235.022 million. Board Meetings: During the year under review, five meetings were held. Attendance by each director is as follow: S. No. Name of Director 1. 2. 3. 4. 5. 6. 7. Mrs. Naz Mansha Chairperson Mian Raza Mansha Chief Executive Mr. Manzar Mushtaq Khalid Qadeer Qureshi Zaka ud din Muhammad Azam Inayat Ullah Niazi Attendance 4 5 4 5 5 5 5
CORPORATE GOVERNANCE The statement of compliance with the best practices of Code of Corporate Governance is annexed.
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PATTERN OF SHAREHOLDING AND INFORMATION UNDER CLAUSE XIX (i) AND (j) OF THE CODE OF CORPORATE GOVERNANCE The information under this head as on June 30, 2008 is annexed. AUDIT COMMITEE The Board of Directors in compliance with the Code of Corporate Governance has established an audit committee. The names of its members are given in the company profile. AUDITORS M/s. KPMG Taseer Hadi and Khalid, Chartered Accountants, Lahore, retire and being eligible, offer themselves for the reappointment. M/s. Avais Hyder Liaquat Nauman Rizwan, Chartered Accountants, Lahore have been appointed as Cost Auditors. ACKNOWLEDGEMENT The management applauds the efforts of dedicated engineers, technicians and staff of D.G. Khan Site for their hard work and commitment which turned to set a record run factor of Kiln-2. In addition, management also acknowledges the role of all the financial institutions, dealers, customers, suppliers and other stakeholders for their continued support.
For and on behalf of the Board
Lahore September 19, 2008
MIAN RAZA MANSHA Chief Executive
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D.G. Khan Cement Company Limited OPERATING AND FINANCIAL DATA

2008 PRODUCTION & SALES (M.Tons) Clinker Cement Cement sales: Local Export Clinker sale Local Export OPERATING RESULTS Net sales Gross profit Pre-tax profit /(loss) After tax profit /(loss) FINANCIAL POSITION Current assets Current liablilities Property, plant & equipment Total assets Long term liabilites Shareholder's equity RATIOS Current ratio Gross profit to sales Net profit to sales Earnings per share Basic Diluted (%) (%) (Rs.) (Rs.) 1.59:1 15.39 (0.43) (0.21) (0.21) 2.6 : 1 31.65 25.27 6.43 6.43 1.64 : 1 49.81 30.40 10.37 9.14 1.37 : 1 36.91 31.86 9.12 7.82 1.10 : 1 35.68 20.46 4.31 3.78 1.34 : 1 22.65 16.16 2.84 2.77 19,202,591 12,054,718 22,977,894 51,992,934 8,538,959 30,080,257 19,214,954 7,390,229 22,117,551 51,744,331 8,806,917 33,923,185 9,909,895 4,196,769 6,015,436 3,055,858 7,521,723 6,637,237 34,304,376 18,016,505 7,461,740 5,105,649 19,268,200 9,317,998 2,881,143 2,376,989 6,128,083 11,714,619 2,882,575 6,317,055 2,051,813 1,527,010 6,147,435 9,660,401 3,048,296 5,085,095 12,445,996 1,915,273 (250,930) (53,230) 6,419,625 2,031,985 1,720,471 1,622,471 7,955,665 3,962,843 3,448,533 2,418,455 5,279,560 1,948,791 2,121,271 1,682,078 (Rupees in thousand) 3,882,756 2,992,006 1,385,494 677,676 1,120,415 355,510 794,493 483,592 4,142,764 4,227,767 4,233,953 3,572,078 661,875 72,481 95,202 2,433,428 2,542,602 2,502,306 2,348,829 153,477 25,000 2,193,687 2,125,585 2,134,355 1,968,114 166,241 80,000 1,590,808 1,812,333 1,812,546 1,522,341 290,205 1,478,071 1,482,362 1,487,976 1,316,632 171,345 1,396,246 1,436,263 1,433,551 1,392,065 41,486 2007 2006 2005 2004 2003
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PATTERN OF SHARE HOLDING AS AT JUNE 30, 2008 (ORDINARY SHARES)
NO. OF SHAREHOLDERS 1496 2121 1311 1528 315 79 75 60 22 21 14 11 27 8 9 7 5 7 5 4 3 5 14 7 3 3 5 4 2 1 3 7 3 3 2 1 1 1 3 3 1 1 1 3 1 2 1 1 1 1 3 FROM 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 105001 110001 115001 120001 125001 130001 135001 145001 150001 155001 160001 165001 170001 175001 190001 195001 200001 210001 215001 225001 240001 245001 260001 270001 285001 290001 295001 SHARE HOLDING (NO. OF SHARES) TO TOTAL SHARES HELD 79976 738121 1155654 3836352 2456969 1018805 1338348 1421073 634757 695370 533218 475170 1325522 422164 531900 441940 338353 515224 391710 333000 262200 467254 1387300 714700 319547 343700 590624 493000 259000 130510 412000 1037412 463100 472337 327300 169527 175000 180000 582534 596700 202100 214055 217500 684400 242500 498000 263800 273900 290000 294500 900000 Continued
100 Shares 500 Shares 1000 Shares 5000 Shares 10000 Shares 15000 Shares 20000 Shares 25000 Shares 30000 Shares 35000 Shares 40000 Shares 45000 Shares 50000 Shares 55000 Shares 60000 Shares 65000 Shares 70000 Shares 75000 Shares 80000 Shares 85000 Shares 90000 Shares 95000 Shares 100000 Shares 105000 Shares 110000 Shares 115000 Shares 120000 Shares 125000 Shares 130000 Shares 135000 Shares 140000 Shares 150000 Shares 155000 Shares 160000 Shares 165000 Shares 170000 Shares 175000 Shares 180000 Shares 195000 Shares 200000 Shares 205000 Shares 215000 Shares 220000 Shares 230000 Shares 245000 Shares 250000 Shares 265000 Shares 275000 Shares 290000 Shares 295000 Shares 300000 Shares
14
NO. OF SHAREHOLDERS 1 3 1 2 2 1 2 1 1 1 1 1 1 1 1 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
FROM 300001 305001 310001 315001 320001 340001 345001 350001 360001 390001 425001 430001 440001 460001 475001 495001 505001 545001 575001 590001 610001 650001 675001 725001 735001 745001 750001 760001 795001 810001 825001 835001 840001 885001 895001 935001 995001 1005001 1015001 1145001 1170001 1285001 1345001 1410001 1545001 1560001 1605001 1795001 2145001 2230001 2395001 2480001 2760001
SHARE HOLDING (NO. OF SHARES)
TO
TOTAL SHARES HELD 300600 918862 315000 632824 649500 340500 696500 352000 365000 391690 426157 435000 440500 463600 478500 3000000 506000 550000 578500 595000 615000 651000 679680 729200 738475 748700 753200 763300 800000 814000 826000 839000 843800 890000 900000 937500 1000000 1008200 1018000 1145700 1173287 1290000 1347200 1413800 1548485 1564500 1609300 1800000 2150000 2232700 2400000 2485000 2765000 Continued
305000 Shares 310000 Shares 315000 Shares 320000 Shares 325000 Shares 345000 Shares 350000 Shares 355000 Shares 365000 Shares 395000 Shares 430000 Shares 435000 Shares 445000 Shares 465000 Shares 480000 Shares 500000 Shares 510000 Shares 550000 Shares 580000 Shares 595000 Shares 615000 Shares 655000 Shares 680000 Shares 730000 Shares 740000 Shares 750000 Shares 755000 Shares 765000 Shares 800000 Shares 815000 Shares 830000 Shares 840000 Shares 845000 Shares 890000 Shares 900000 Shares 940000 Shares 1000000 Shares 1010000 Shares 1020000 Shares 1150000 Shares 1175000 Shares 1290000 Shares 1350000 Shares 1415000 Shares 1550000 Shares 1565000 Shares 1610000 Shares 1800000 Shares 2150000 Shares 2235000 Shares 2400000 Shares 2485000 Shares 2765000 Shares
15
NO. OF SHAREHOLDERS 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 7294
FROM 2785001 2840001 3025001 3405001 3445001 3790001 3950001 3980001 4615001 5595001 6025001 10115001 11545001 11690001 12015001 12020001 TOTAL
SHARE HOLDING (NO. OF SHARES)
TO
TOTAL SHARES HELD 2787400 2843500 3030000 3409201 3449200 3793700 3950100 3980548 4617000 5597852 6030000 10119166 11545548 11690276 12019080 79614700
2790000 Shares 2845000 Shares 3030000 Shares 3410000 Shares 3450000 Shares 3795000 Shares 3955000 Shares 3985000 Shares 4620000 Shares 5600000 Shares 6030000 Shares 10120000 Shares 11550000 Shares 11695000 Shares 12020000 Shares 79615000 Shares 253541157
CLASSIFICATION OF ORDINARY SHARES BY CATEGORIES AS AT JUNE 30, 2008

CATEGORIES OF MEMBERS Individuals Investment Companies Insurance Companies Joint Stock Companies Financial Institutions Modaraba Companies Foreign Investors Others TOTAL: NUMBER 6895 37 15 186 37 21 16 87 7294 SHARES HELD 62659226 8039501 8036953 100529053 16386972 1072099 29573302 27244051 253541157 PERCENTAGE 24.72 3.17 3.17 39.65 6.46 0.42 11.66 10.75 100.00
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INFORMATION UNDER CLAUSE XIX (i) OF THE CODE OF CORPORATE GOVERNANCE AS ON JUNE 30, 2008
SHARES HELD PERCENTAGE (A) ASSOCIATED COMPANIES, UNDERTAKINGS AND RELATED PARTIES :1. NISHAT MILLS LTD. 2. ADAMJEE INSURANCE COMPANY LIMITED (B) NIT AND ICP:1. INVESTMENT CORPORATION OF PAKISTAN 2. NATIONAL BANK OF PAKISTAN-TRUSTEE WING (NATIONAL INVESTMENT (UNIT) TRUST) (C) DIRECTORS, CEO, THEIR SPOUSE AND MINOR CHILDERN:1. MRS. NAZ MANSHA 2. MIAN RAZA MANSHA DIRECTOR/ CHAIRPERSON DIRECTOR/ CHIEF EXECUTIVE DIRECTOR/CFO 65,451 5,597,852 12,607 3,409,201 0.03 2.21 0.00 1.34 1,400 1,483,929 0.00 0.58 79,614,700 1,173,287 31.40 0.46
3. MR. I.U. NIAZI 4. MRS. AMMIL RAZA MANSHA (SPOUSE OF CHIEF EXECUTIVE)
(D) EXECUTIVES:NIL (E) PUBLIC SECTOR COMPANIES & CORPORATIONS:1. Joint Stock Companies 100,529,053 39.65
(F) BANKS, DEVELOPMENT FINANCE INSTITUTIONS, NON-BANKING FINANCE INSTITUTIONS INSURANCE COMPANIES, MODARABAS AND MUTUAL FUNDS:1. 2. 3. 4. Investment Companies Insurance Companies Financial Institutions Modaraba Companies 8,039,501 8,036,953 16,386,972 1,072,099 3.17 3.17 6.46 11.66
(G) SHAREHOLDERS HOLDING TEN PERCENT OR MORE VOTING INTEREST IN THE LISTED COMPANY:1. NISHAT MILLS LTD. 79,614,700 31.40
INFORMATION UNDER CLAUSE XIX (J) OF THE CODE OF CORPORATE GOVERNANCE There is no trading in the Companys Shares during the period July 1, 2007 to June 30, 2008 by the related parties
17

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No. 37, 43 & 36 of listing regulations of Karachi, Lahore & Islamabad Stock Exchanges respectively for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. The Company encourages representation of independent non-executive directors and directors representing minority interests on its Board of Directors. At present the Board includes independent non-executive directors. 2. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. 3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. No casual vacancy occurred in the Board. 5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been signed by all the directors and employees of the Company. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. Orientation course has been arranged. 10. The appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment have been duly approved by the Board. 11. The directors' report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.
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14. The Company has complied with all the corporate and financial reporting requirements of the Code. 15. The audit committee is continued and it comprises 3 members, of whom all are non-executive directors including the chairman of the committee. 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. 17. The Board has set-up an effective internal audit function who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they are involved in the internal audit function on a full time basis. 18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review programme 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 Company 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 Institute of Chartered Accountants of Pakistan. 19. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations 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 substantially complied with.
MIAN RAZA MANSHA Chief Executive NIC Number : 35202-2539500-5
STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES ON TRANSFER PRICING FOR THE YEAR ENDED JUNE 30, 2008. The Company has fully complied with the best practices on Transfer Pricing as contained in the related Listing Regulations of the Karachi, Lahore and Islamabad Stock Exchanges.
MIAN RAZA MANSHA Chief Executive NIC Number : 35202-2539500-5
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D.G. Khan Cement Company Limited REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE
We have reviewed the statement of compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of D. G. Khan Cement Company Limited (the Company) to comply with the Listing Regulations of the respective Stock Exchanges, where the Company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the statement of compliance reflects the status of the Companys compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control system sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Boards statement on internal control covers all controls and the effectiveness of such internal controls. Based on our review, nothing has come to our attention, which causes us to believe that the statement of compliance does not appropriately reflect the Companys compliance, in all material respects, with the best practices contained in the Code of Corporate Governance.
KPMG Taseer Hadi & Co Chartered Accountants
20
D.G. Khan Cement Company Limited AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of D. G. Khan Cement Company Limited (the Company) as at 30 June 2008 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these 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 assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a) b) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; in our opinion: i) ii) iii) c) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; the expenditure incurred during the year was for the purpose of the Companys business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;
in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Companys affairs as at 30 June 2008 and of the profit, its cash flows and changes in equity for the year then ended; and in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
d)
KPMG Taseer Hadi & Co. Chartered Accountants
21
D.G. Khan Cement Company Limited BALANCE SHEET

2008 2007 (Rupees in thousand)
Note EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital - 950,000,000 (2007: 950,000,000) ordinary shares of Rs 10 each - 50,000,000 (2007: 50,000,000) preference shares of Rs 10 each Issued, subscribed and paid up capital Reserves Accumulated (loss) / profit 5 6
9,500,000 500,000 10,000,000 2,535,412 27,595,698 (50,853) 30,080,257
9,500,000 500,000 10,000,000 2,535,412 29,630,084 1,757,689 33,923,185
NON-CURRENT LIABILITIES Long term finances Liabilities against assets subject to finance lease Long term deposits Retirement and other benefits Deferred taxation 7 8 9 10 11 8,411,051 73,890 54,018 1,319,000 9,857,959 CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowing - secured Current portion of non - current liabilities Provision for taxation 12 13 14 15 1,370,336 364,664 7,597,020 2,687,608 35,090 12,054,718 CONTINGENCIES AND COMMITMENTS 16 1,027,274 342,612 3,942,972 2,042,281 35,090 7,390,229 8,686,447 1,141 79,467 39,862 1,624,000 10,430,917
51,992,934 The annexed notes from 1 to 45 form an integral part of these financial statements.
51,744,331
Chief Executive
22
D.G. Khan Cement Company Limited AS AT JUNE 30, 2008

Note ASSETS NON-CURRENT ASSETS Property, plant and equipment Assets subject to finance lease Capital work in progress Investments Long term loans, advances and deposits 17 18 19 20 21
22,977,894 5,135 2,488,307 6,795,961 523,046 32,790,343
22,117,551 133,376 1,907,063 8,174,474 196,913 32,529,377
CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debts Investments Advances, deposits, prepayments and other receivables Cash and bank balances 22 23 24 25 26 27 2,299,250 445,856 366,173 15,082,582 782,358 226,372 19,202,591 1,496,291 295,140 144,245 16,933,790 229,315 116,173 19,214,954
51,992,934
51,744,331
Director
23
D.G. Khan Cement Company Limited PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2008
2008 2007 (Rupees in thousand) 12,445,996 (10,530,723) 1,915,273 30 31 32 33 (111,658) (561,465) (581,913) 847,344 1,507,581 34 20 (1,749,837) (8,674) (250,930) 35 197,700 (53,230) 42 (0.21) 6,419,625 (4,387,640) 2,031,985 (104,169) (65,122) (139,721) 479,420 2,202,393 (467,759) (14,163) 1,720,471 (98,000) 1,622,471 6.43
Note Sales - net Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Profit from operations Finance cost Share of loss of associated companies (Loss) / profit before tax Taxation (Loss) / profit for the year (Loss) / earnings per share - basic and diluted 28 29
Appropriations have been reflected in the statement of changes in equity. The annexed notes from 1 to 45 form an integral part of these financial statements.
Chief Executive
Director
24
D.G. Khan Cement Company Limited CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2008
Note Cash flows from operating activities Cash generated from operations Finance cost paid Retirement and other benefits paid Taxes paid Net (decrease) / increase in long term deposits Net cash (used in)/generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of investments Sale proceeds of investments Net (increase)/decrease in long term loans, advances and deposits Sales proceeds of property, plant and equipment Dividend received Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of share capital Proceeds from long term finances Repayment of long term finances Repayment of liabilities against assets subject to finance lease Dividend paid Net cash (used in)/generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 37 36
1,263,660 (1,727,177) (5,054) (135,780) (5,577) (609,928)
996,605 (465,771) (43,067) (57,759) 45,653 475,661
(2,698,370) (188,339) (325,502) 26,655 820,435 8,333 (2,356,788)
(5,095,269) (320,955) 90 138,897 18,608 465,779 3,681 (4,789,169)
3,000,000 (3,178,083) (19,957) (379,093) (577,133) (3,543,849) (3,826,799) (7,370,648)
1,602,666 3,332,548 (1,481,302) (85,932) (344,743) 3,023,237 (1,290,271) (2,536,528) (3,826,799)
The annexed notes from 1 to 45 form an integral part of these financial statements.
Chief Executive
Director
25
D.G. Khan Cement Company Limited STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2008
CAPITAL RESERVE Fair value reserve R u p e e s Capital redemption reserve fund i n REVENUE RESERVE Accumulated (loss)/profit Total
Share capital
Share premium
General reserve
t h o u s a n d
Balance as at 30 June 2006 Final dividend for the year ended 30 June 2006 - Rs 1.5 per share Issue of 46,098,392 ordinary shares of Rs 10 each fully paid in cash Transfer from profit and loss account Issue of bonus shares @ 10% Fair value gain during the year Profit for the year Balance as at 30 June 2007 Final dividend for the year ended 30 June 2007 - Rs 1.5 per share Transfer from profit and loss account Fair value loss during the year Loss for the year Balance as at 30 June 2008
1,843,937
1,561,350
11,092,777
284,400
2,146,827
2,330,558
19,259,849
(345,738)
(345,738)
460,983 230,492 2,535,412
1,150,034 2,711,384
11,775,586 22,868,363
69,110 353,510
1,611,017 11,775,586 1,622,471 33,923,185
1,550,000 (1,619,110) (230,492) - 1,622,471 3,696,827 1,757,689
2,535,412
(3,409,386) -
353,510
(380,312) 1,375,000 (1,375,000) (53,230) 5,071,827 (50,853)
(380,312) (3,409,386) (53,230) 30,080,257
2,711,384 19,458,977
The annexed notes from 1 to 45 form an integral part of these financial statements.
Chief Executive
Director
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008
1 Legal status and nature of business 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 Basis of preparation 2.1 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 (IFRSs) issued by the International Standard Board as are notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued under the Companies ordinance, 1984. In case requirement differ, the provision or directives of the Companies Ordinance, 1984 shall prevail. Standards, interpretations and amendments to published approved accounting standards New accounting standards and IFRIC interpretations that are not yet effective The following standards, amendments and interpretations of approved accounting standards , effective for accounting periods beginning on or after 1 July 2008 are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements other than certain increased disclosures: IFRS 7 - Financial Instruments: Disclosures IFRS 8 - Operating Segments Revised IAS 1 - Presentation of financial statements Revised IAS 23 - Borrowing costs IFRS 2 (amendment) - Share based payments IFRS 3 (amendment) - Business Combinations and consequential amendments to IAS 27 - Consolidated and separate financial statements, IAS 28 - Investment in associates and IAS 31-Interest in Joint Ventures. IAS 32 (amendment) - Financial instruments: Presentation and consequential amendment to IAS 1- Presentation of Financial Statements IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 Group and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 - Customer Loyalty Programme IFRIC 14 IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction 3 Basis of measurement 3.1 These financial statements have been prepared on the basis of historical cost convention, except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value. The preparation of financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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2.2

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The areas where various assumptions and estimates are significant to Company's financial statements or where judgments were exercised in application of accounting policies are: 4 provision for taxation retirement and other benefits residual value and useful lives of depreciable assets provisions and contingencies Interest rate and cross currency swap note note note note note 4.1 4.2 4.3 4.15 4.16
Significant accounting policies 4.1 Taxation Income tax expense comprises current and deferred tax. Income tax is recognized in profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted after taking into account tax credits, rebates and exemptions, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity. 4.2 Retirement and other benefits The main features of the schemes operated by the Company for its employees are as follows: Defined benefit plan The Company operates an approved funded defined benefit gratuity plan for all employees having a service period of more than five years for management staff and one year for workers. Provisions are made in the financial statements to cover obligations on the basis of actuarial valuations carried out annually. The most recent valuation was carried out as at 30 June 2008 using the "Projected unit credit method". The amount recognised in balance sheet represents the present value of the defined benefit obligation as on 30 June 2008 as adjusted for unrecognised actuarial gains and losses. Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the Company obligations and the fair value of plan assets are amortised
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over the expected average working lives of the participating employees. Defined contribution plan The Company operates a recognized provident fund for all its regular employees. Equal monthly contributions are made to the fund both by the Company and the employees at the rate of 10% of the basic salary for officers and 10% of basic salary plus cost of living allowance for workers. Obligation for contributions to defined contribution plan is recognized as an expense in the profit and loss account as and when incurred. Accumulating compensated absences The Company provides for accumulating compensated absences, when the employees render service that increase their entitlement to future compensated absences. Under the rules employees are entitled to 2.5 days leave per month. Unutilized leaves can be accumulated upto 90 days in case of officers. Any balance in excess of 90 days can be encashed upto 17 days a year only. Any further unutilised leaves lapse. In case of workers, unutilized leaves may be accumulated without any limit. However, balance above 50 days is encashable upon demand of the worker. Unutilized leaves can be used at any time by all employees, subject to the Company's approval. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to profit. The most recent valuation was carried out as at 30 June 2008 using the "Projected unit credit method". The amount recognised in the balance sheet represents the present value of the defined benefit obligations. Actuarial gains and losses are charged to profit immediately in the period when these occur. 4.3 Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation to certain property, plant and equipment signifies historical cost, gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 4.16 and borrowing costs as referred to in note 4.18. Depreciation on all property, plant and equipment is charged to profit on the reducing balance method, except for plant and machinery which is being depreciated using the straight line method, so as to write off the historical cost of an asset over its estimated useful life at annual rates mentioned in note 17 after taking into account their residual values. Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial year end and adjusted if impact on depreciation is significant. Depreciation on additions to property, plant and equipment is charged from the month in which the asset is acquired or capitalised, while no depreciation is charged for the month in which the asset is disposed off. The company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
29

only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. 4.4 Capital work-in-progress Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment loss and represents expenditure incurred on property, plant and equipment during the construction and installation. Cost also includes applicable borrowing costs. Transfers are made to relevant property, plant and equipment category as and when assets are available for use. 4.5 Leases Finance leases Leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. At inception, finance leases are capitalised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets, less accumulated depreciation and impairment loss, if any. The related rental obligations, net of finance costs, are included in liabilities against assets subject to finance lease as referred to in note 8. The liabilities are classified as current and non-current depending upon the timing of the payment. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments , if any are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. The interest element of the rental is charged to income over the lease term. Assets acquired under a finance lease are depreciated over the estimated useful life of the assets on reducing balance method except plant and machinery which is depreciated on straight line method at the rates mentioned in note 18. Depreciation of leased assets is charged to profit. Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial year-end and adjusted if impact of depreciation is significant. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit on a straight-line basis over the lease term. 4.6 Investments Investment in equity investments of subsidiary company Investment in subsidiary company is measured at cost as per the requirements of IAS-27 "Consolidated and Separate Financial Statements". However, at subsequent reporting dates, the Company reviews the carrying
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amounts of the investment and its recoverability to determine whether there is an indication that such investments have suffered an impairment loss. If any such indication exists the carrying amount of the investment is adjusted to the extent of impairment loss. Impairment losses are recognized as an expense. Investments in equity instruments of associated companies Investments in associates where the company has significant influence are measured at cost in the company's financial statements The company is required to issue consolidated financial statements along with its separate financial statements, in accordance with the requirements of IAS 27 'Consolidated and Separate Financial Statements'. Investments in associated undertakings, in the consolidated financial statements, are being accounted for using the equity method. Available for sale Investments which are intended to be held for an indefinite period of time but may be sold in response to the need for liquidity are classified as available for sale. Available for sale investments are recognised initially at fair value plus any directly attributable transaction costs. After initial recognition, these are stated at fair values unless fair values can not be measured reliably, with any resulting gains and losses being taken directly to equity until the investment is disposed or impaired. At each reporting date, these investments are remeasured at fair value, unless fair value cannot be reliably measured. At the time of disposal, the respective surplus or deficit is transferred to income currently. Fair value of quoted investments is their bid price on Karachi Stock Exchange at the balance sheet date. Unquoted investments, where active market does not exist, are carried at cost as it is not possible to apply any other valuation methodology. Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital, are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and reevaluates such designation on a regular basis. All purchases and sales of investments are recognised on the trade date which is the date that the company commits to purchase or sell the investment. At subsequent reporting dates, the company reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognised as expense. Where an impairment loss subsequently reverses, the carrying amount of the investment is increased to the revised recoverable amount but limited to the extent of initial cost of the investment. A reversal of the impairment loss is recognised in income. 4.7 Stores and spares Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. 4.8 Stock-in-trade Stock of raw materials, except for those in transit, work in process and finished goods are valued principally at the lower of average cost and net realisable value. Stock of packing material is valued principally at moving average cost. Cost of work in process and finished goods comprises cost of direct materials, labour and appropriate manufacturing overheads. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make a sale.
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4.9
Financial assets and liabilities Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value, amortised cost or cost, as the case may be. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item.
4.10
Offsetting of financial assets and financial liabilities A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
4.11
Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.
4.12
Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings. In the balance sheet, short term borrowings are included in current liabilities.
4.13
Borrowings Interest bearing borrowings are recognized initially at fair value less attributable transaction cost. Subsequent to initial recognition, these are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss over the period of the borrowings on an effective interest basis. Preference shares, which are mandatorily redeemable on a specific date at the option of the company, are classified as liabilities. The dividend on these preference shares are recognised in the profit and loss account as finance cost. Finance costs are accounted for on an accrual basis.
4.14
Trade and other payables Financial liabilities are initially recognized at fair value plus directly attributable cost, if any, and subsequently at amortized cost using effective interest rate method. Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services.
4.15
Provisions Provisions are recognized when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate.
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4.16 Derivative financial instruments and hedging activities These are initially recorded at fair value on the date on which a derivative contract is entered into and subsequently measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as cash flow hedges. The Company documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. Derivatives are carried as asset when the fair value is positive and liabilities when the fair value is negative. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recognised in profit and loss account in the periods when the hedged item will effect profit or loss. However, when the forecast hedged transaction results in the recognition of a non-financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Any gains or losses arising from change in fair value derivatives that do not qualify for hedge accounting are taken directly to profit and loss. 4.17 Foreign currencies All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at exchange rates prevailing at the date when fair values are determined. Exchange gains and losses are included in the income currently. 4.18 Borrowing costs Mark-up, interest and other charges on borrowings are capitalised upto the date of commissioning of the related property, plant and equipment acquired out of the proceeds of such borrowings. All other markup, interest and other charges are charged to profit in which they are incurred. 4.19 Revenue recognition Revenue represents the fair value of the consideration received or receivable for goods sold, net of discounts and sales tax. Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue, and the associated cost incurred, or to be incurred, can be measured reliably. Revenue from sale of goods is recognised when the significant risk and rewards of owner ship of the goods are transferred to the buyer i.e. on the dispatch of goods to the customers. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. Dividend income on equity investments is recognised as income when the right of receipt is established. 4.20 Dividend Dividend distribution to the Company's shareholders is recognised as a liability in the period in which the
33

dividends are approved. 4.21 Related party transactions The Company enters into transactions with related parties on an arm's length basis. Prices for transactions with related parties are determined using admissible valuation methods, except in extremely rare circumstances where, subject to approval of the Board of Directors, it is in the interest of the Company to do so. 5 Issued, subscribed and paid up capital 2008 2007 (Number of shares) 158,934,068 20,000,000 74,607,089 253,541,157 158,934,068 20,000,000 74,607,089 253,541,157 Ordinary shares of Rs 10 each fully paid in cash Ordinary shares of Rs 10 each issued for consideration other than cash Ordinary shares of Rs 10 each issued as fully paid bonus shares 2008 2007 (Rupees in thousand) 1,589,341 200,000 746,071 2,535,412 1,589,341 200,000 746,071 2,535,412
79,614,700 (2007: 79,614,700) ordinary shares of the Company are held by Nishat Mills Limited, an associated concern as at 30 June 2008. In addition 1,173,287 (2007: 1,173,287) ordinary shares are held by the Adamjee Insurance Company Limited a related party as at 30 June 2008. 2008 2007 Note (Rupees in thousand) Reserves Movement in and composition of reserves is as follows: Capital Share premium At the beginning of the year Addition during the year Fair value reserve At the beginning of the year Net (loss) / gain during the year Capital redemption reserve fund At the beginning of the year Transfer from profit and loss account Revenue General reserve At the beginning of the year Transfer from profit and loss account 6.1 2,711,384 2,711,384 6.2 22,868,363 (3,409,386) 19,458,977 6.3 353,510 353,510 22,523,871 3,696,827 1,375,000 5,071,827 27,595,698 284,400 69,110 353,510 25,933,257 2,146,827 1,550,000 3,696,827 29,630,084 11,092,777 11,775,586 22,868,363 1,561,350 1,150,034 2,711,384
6.1
This reserve can be utilised by the Company only for the purposes specified in section 83(2) of the Companies Ordinance, 1984.
34

6.2 6.3 As referred to in note 4.6 this represents the unrealised gain on remeasurement of investments at fair value and is not available for distribution. This amount will be transferred to profit and loss account on realisation.
In accordance with the terms of issue of preference share, to ensure timely payments, the Company was required to maintain a redemption fund with respect to preference shares. The Company had created a redemption fund and appropriated Rs 7.4 million each month from the profit and loss account in order to ensure that fund balance at redemption date is equal to the principal amount of the preference shares. The preference shares have been redeemed during the year ended 30 June 2007. 2008 2007 Note (Rupees in thousand) Long term finances These are composed of: Long term loans Loan under musharika arrangement Less: Current portion shown under current liabilities 7.1 & 7.2 7.3 15 9,094,112 2,000,000 11,094,112 2,683,061 8,411,051 10,705,016 10,705,016 2,018,569 8,686,447
35

7.1
Loan
Long term loans Long term finances utilized under mark up arrangements from banking companies are composed of:
Lender 2008 2007 (Rupees in thousand) Rate of interest per annum Outstanding installments Interest payable
Long term loan from banking company-secured 1 Habib Bank Limited 457,143 685,714 * Base rate +0.625% 4 equal semi-annual installments ending 31 March 2010 4 equal semi-annual installment ending June 20, 2010 4 equal semi-annual installments ending 30 June 2010 2 equal semi-annual installments ending 12 June 2009 3 equal semi-annual installments ending 19 August 2009 5 equal semi-annual installments ending 19 August 2010 6 equal semi-annual installments ending 30 June 2011 7 equal semi-annual installments ending 29 September 2011 The loan has been fully repaid during the year 7 equal semi-annual installments ending 16 November 2011 7 equal semi-annual installments ending on 30 December 2011 9 equal semi-annual installments ending 30 September 2012 11 equal semi-annual installments beginning on 16 March 2009 Semi annual Quarterly
Habib Bank Limited
114,286
171,429
* Base rate +3%
Quarterly
National Bank of Pakistan
171,428
257,143
* Base rate + 0.65%
Semi annual
Bank of Punjab
80,000
160,000
* Base rate +0.5%
Quarterly
Standard Chartered Bank
60,000
100,000
* Base rate + 0.6%
Semi annual
100,000
140,000
* Base rate + 0.6%
Semi annual
Allied Bank Limited
780,000
1,040,000
* Base rate + 0.65%
Semi annual
Habib Bank Limited
636,364
818,182
* Base rate + 0.625%
Quarterly
Citi Bank
1,200,000
* Base rate + 1%
10
700,000
900,000
* Base rate + 0.65%
11
Habib Bank Limited
700,000
900,000
* Base rate + 0.625%
Quarterly
12
United Bank Limited
900,000
1,000,000
* Base rate + 0.65%
Semi annual
13
Bank Alfalah
634,000
634,000
* Base rate + 0.65%
Quarterly
14
United Bank Limited Foreign currency-unsecured European Investment Bank US$ 40.482 million (2007 : US$ 44.530 million)
1,000,000
* Base rate + 0.60%
2 equal semi annual Semi annual installments payable on 27-02-2009 & 27-08-2009 10 equal semi-annual installments ending on 29 March 2013 Quarterly
15
2,760,891
2,698,548
** Base rate + 0.063%
9,094,112
10,705,016
* Base rate ** Base rate Average ask rate of six-month Karachi Inter Bank Offer Rate ("KIBOR") to be set for each mark-up period. Average ask rate of three-month London Inter Bank Offer Rate ("LIBOR") to be set for each mark-up period.
36

7.2 Security These loans are secured by a registered first pari passu charge on all present and future fixed assets of the Company upto Rs 15,353 million (2007: Rs 12,843.640 million). 7.3 This finance facility is arranged under syndicated arrangement, led by Meezan Bank Limited. The aggregate sanction limit is Rs. 2,000 million (2007: Nil) and caries four unequal semi annual rentals. Principle amount is payable after two years from the date of disbursement i.e 08 May 2010. The facility is secured by a registered first pari passu charge on all present and future fixed assets of the Company upto Rs 2,666 million (2007: Nil). Note 8 Liabilities against assets subject to finance lease Present value of minimum lease payments Less: Current portion shown under current liabilities 15 1,141 1,141 21,729 20,588 1,141 2008 2007 (Rupees in thousand)
The minimum lease payments have been discounted at an implicit interest rate ranging from 5.24% to 5.30% (2007: 5.24% to 8.10%) to arrive at their present value. Rentals are paid in monthly installments and in case of default of any payment, an additional charge @ 2% to 5% per month shall be paid. The lessee has the option to purchase the assets after expiry of the lease term. Taxes, repairs and insurance costs are to be borne by the Company. In case of termination of the agreement, the Company is to pay the entire rent for the unexpired period of lease agreement . The amount of future payments of the lease and the period in which these payments will become due are as follows: Minimum Future Present value of lease finance lease liability payments charge 2008 2007 (R u p e e s i n t h o u s a n d) 1,151 1,151 10 10 Note 1,141 1,141 20,588 1,141 21,729
Years
Not later than one year Later than one year and not later than five years
9.
Long term deposits Customers Others
2008 2007 (Rupees in thousand) 28,252 45,638 73,890 25,995 53,472 79,467
9.1 These represent interest free security deposits from stockists and suppliers and are repayable on cancellation/withdrawal of the dealership or on cessation of business with the company respectively. Note 10.1 10.2
37
10
Retirement and other benefits Staff gratuity Leave encashment
2008 2007 (Rupees in thousand) 26,362 27,656 54,018 17,147 22,715 39,862

2008 2007 (Rupees in thousand) 10.1 Staff gratuity-net The amounts recognised in the balance sheet are as follows: Present value of defined benefit obligation Fair value of plan assets Unrecognised actuarial (losses) Liability as at 30 June Change in present value of net staff gratuity Liability as at 01 July Charge for the year including capitalized during the year Contributions plus benefit payments made directly by the Company during the year Reversal of excess/(short) payments made during the year Liability as at 30 June 10.1.2 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at 01 July Current service cost Interest cost Reversal of excess payments made last year Benefits paid during the year Actuarial loss on present value of defined benefit obligation Present value of defined benefit obligation as at 30 June 10.1.3 Movement in fair value of plan assets Fair value of plan assets as at 01 July Expected return on plan assets Contributions during the year Benefits paid during the year Actuarial (loss) on plan assets Fair value of plan assets as at 30 June 10.1.4 Actual return on plan assets Expected return on plan assets Actuarial (loss) on plan assets 10.1.5 Plan assets consist of the following: Cash and other deposits 10.1.6 Movement in actuarial (losses) Un recognised actuarial (losses) as at 01 July Actuarial (losses) arising during the year Actual losses charged to profit during the year Un recognised actuarial losses as at 30 June (5,558) (1,453) 252 (6,759) (2,824) (2,861) 127 (5,558) 1 36 4 (39) (35) 36 4 2,266 (2,266) (39) 1 42,212 (42,174) (2) 36 22,741 8,775 2,274 184 (2,266) 1,414 33,122 11,685 7,458 1,052 (313) 2,859 22,741 33,122 (1) (6,759) 26,362 17,147 11,297 (2,266) 184 26,362 22,741 (36) (5,558) 17,147 51,809 8,637 (42,397) (902) 17,147
38

2008 2007 (Rupees in thousand) 10.1.7 Charge for the year including capitalized during the year Current service cost Interest cost Expected return on plan Assets Actuarial losses charge 8,775 2,274 (4) 252 11,297 2008 10.1.8 Historical Information Present value of defined benefit obligation Present value of defined benefit assets Deficit in the plan Experience adjustment arising on plan liabilities Experience adjustment arising on plan assets 33,122 (1) 33,121 1,414 (39) 22,741 (36) 22,705 2,859 (2) 11,685 N/A 11,685 (495) N/A 40,390 N/A 40,390 3,531 N/A 31,479 N/A 31,479 510 N/A 2007 2006 Rupees in thousand 2005 7,458 1,052 127 8,637 2004
10.1.9 Assumptions used for valuation of the defined benefit schemes for management and non-management staff are as under: 2008 2007 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee 10.1.10 12 % per annum 11 % per annum 12 years 10 % per annum 9 % per annum 13 years
The Company expects to pay Rs. 15.328 million in contributions to defined benefit plan in 2009. 2008 2007 Note (Rupees in thousand) 10.2 Leave encashment Opening balance Expenses recognized Payments made Payable within one year Closing balance 15 22,715 11,135 (2,788) 31,062 (3,406) 27,656 17,711 8,798 (670) 25,839 (3,124) 22,715
10.2.1 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at 01 July Current service cost Interest cost Benefits paid during the period Actuarial loss on present value of defined benefit obligation Payable within one year Present value of defined benefit obligation as at 30 June
39
22,715 5,853 2,272 (2,788) 3,010 (3,406) 27,656
17,711 5,036 1,594 (670) 2,168 (3,124) 22,715

2008 2007 (Rupees in thousand) 10.2.2 Charge for the year including capitalized during the year Current service cost Interest cost Actuarial losses charge 2008 10.2.3 Historical Information Present value of defined benefit obligation Experience adjustment arising on plan liabilities 27,656 3,010 22,715 2,168 17,711 8,149 8,694 1,174 6,458 608 2007 2006 Rupees in thousand 5,853 2,272 3,010 11,135 2005 5,036 1,594 2,168 8,798 2004
10.2.4 Assumptions used for valuation of the accumulating compensated absences are as under: 2008 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee Expected withdrawal and early retirement rate 2007
12 % per annum 10 % per annum 11 % per annum 9 % per annum 12 years 13 years Based on experience 2 0 0 7 Officers Workers (days) (days) 14.00 8.00 0.50 0.25 20.00 8.00 3.00 2.00
2 0 0 8 Officers Workers (days) (days) Average number of leaves - Utilized per annum - Encashed per annum - Utilized per annum in excess of accrued leave of 30 days - Encashed per annum in excess of accrued leave of 30 days 11 Deferred taxation The liability for deferred taxation comprises temporary differences relating to: 13.00 6.00 0.50 0.25 18.00 10.00 3.00 2.00
2008 2007 (Rupees in thousand) Deferred tax liability Accelerated tax depreciation Deferred tax assets Provision for retirement and other benefits Unabsorbed tax credits 4,672,944 (2,629) (3,351,315) 1,319,000 4,390,528 (2,669) (2,763,859) 1,624,000
40

2008 2007 (Rupees in thousand) 12 Trade and other payables Trade creditors Customers' balances Accrued liabilities Derivative financial instruments Workers' profit participation fund Workers welfare fund payable Sales tax payable Custom duties payable Special excise duty payable Retention money Unclaimed dividend Advances against sale of scrap Redeemable preference shares (non-voting) - unsecured Other payables 12.1 12.2 Note 12.1 12.2 12.3 288,093 354,380 425,489 145,262 35,112 1,131 8,007 67,254 5,427 2,488 127 37,566 1,370,336 390,957 187,626 188,610 93,145 35,112 31,423 1,131 61,396 4,208 317 133 33,216 1,027,274
Included in trade creditors is an amount of Rs Nil (2007: Rs 28.297 million) payable to a related party. The Company has entered into two interest rate cross currency swaps agreements with banks for a notional amount of Rs. 2,000 million (2007: Nil), maturing upto 28 September 2009. The outstanding balance of these arrangements is Rs. 2,000 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements the Company would receive 6 months KIBOR rates and pay 6 months LIBOR rates as per the respective arrangements. Further under cross currency swaps arrangements the Company would receive USD and pay PKR, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 145.262 million (2007: Nil) 2008 2007 Note (Rupees in thousand) Workers' profit participation fund Opening balance Provision for the year Interest for the year Less:Payments during the year Closing balance 32 34 93,145 522 93,667 93,667 182,006 93,145 98 275,249 182,104 93,145
12.3
13
Accrued markup Long term loans Short term borrowing - secured Preferred dividend on redeemable preference shares 273,080 91,495 89 364,664 301,310 41,209 93 342,612
14
Short term borrowing - secured Short term running finances Import finances 14.1 14.2 5,359,645 2,237,375 7,597,020 3,269,971 673,001 3,942,972
41

14.1 Short term running finances - secured Short term running finances available from a consortium of commercial banks under mark up arrangements amount to Rs 6,470 million (2007: Rs 4,280 million). The rates of mark up range from 9.83% to 15.00% (2007: 9.20% to 12.20%) or part thereof on the balance outstanding. The aggregate short term running finances of Rs 6,470 million (2007: Rs 4,280 million) are secured by a first registered charge on all present and future current assets of the company wherever situated including stores and spares, stock in trade, book debts, investments, receivables and pledge of 10.2 million shares of MCB Bank Limited. 14.2 Import finances- secured The Company has obtained import finance facilities aggregating to Rs 2,903 million (2007: Rs 890 million) from commercial banks. The rates of mark-up range from 3.89% to 6.46% (2007: 5.7% to 9.21%). The aggregate import finances are secured by a registered charge on all present and future current assets of the Company wherever situated including stores and spares, stock in trade, book debts, investments and receivables. Of the aggregate facility of Rs 5,766.17 million (2007: Rs 5,348.22 million) for opening letters of credit and Rs 1,401.40 million (2007: Rs 901.40 million) for guarantees, the amount utilized as at 30 June 2008 was Rs 1,133.30 million (2007: Rs 886.68 million) and Rs 828.74 million (2007: Rs 215.78 million) respectively. The aggregate facilities for guarantees are secured by a registered charge on current assets of the Company. Of the facility for guarantees, Rs 14.48 million (2007: Rs 12.98 million) is secured by a lien over bank deposits as referred to in note 28.2. Note 15 Current portion of non-current liabilities Long term finances Liabilities against assets subject to finance lease Retirement and other benefits 16 Contingencies and commitments 16.1 Contingencies (i) The Income Tax Officer, while framing the assessments for the assessment years 1984-85 to 1990-91, has taxed the income of the Company on account of interest on deposits and sale of scrap etc. The Appellate Tribunal on appeal filed by the Company issued an order in favour of the Company for the assessment years 1984-85 to 1990-91. The Income Tax Department filed reference before the Lahore High Court. Pending final outcome of such reference, no adjustment has been made in these financial statements for the relief granted by the Appellate Tribunal aggregating Rs 35.090 million. During the period 1994 to 1996, the Company imported plant and machinery relating to expansion unit, for which exemption was claimed under various SROs from the levy of custom duty and other duties including sales tax. As per the provisions of SRO 484 (I)/92, 978 (I)/95 and 569 (I)/95, the exemption from the statutory duty etc. would be available only if the said plant and machinery was not manufactured locally. However, the Custom Authorities rejected the claim of the Company by arguing that the said machinery was on the list of locally manufactured machinery, published by the Central Board of Revenue. Consequently, the Company appealed before the Lahore High Court, Multan Bench, which allowed the Company to release the machinery on furnishing indemnity bonds with the Custom Authorities. 7 8 10 2,683,061 1,141 3,406 2,687,608 2,018,569 20,588 3,124 2,042,281 2008 2007 (Rupees in thousand)
(ii)
42
Collector of Customs and Central Excise, Multan has passed an order dated November 26, 1999, against the Company on the grounds that the said machinery was being manufactured locally during the time when it was imported. The total demand as raised against the Company amounts to Rs 715.372 million out of which Rs 200.645 million has been paid. An appeal against the order was filed with the Lahore High Court, which has been decided in favour of the Company. However, the Custom Authorities have filed an appeal with the Supreme Court of Pakistan against the orders of the Lahore High Court. Hence, no provision for the balance amount of Rs 514.727 million has been made in the financial statements as according to the management of the company there are meritorious grounds that the ultimate decision would be in its favour. (iii) The Company has issued following guarantees in favour of: Collector of Customs, Excise and Sales Tax against levy of sales tax, custom duty and excise duty amounting to Rs 21.830 million (2007: Rs 21.830 million). Director, Excise Collection Office, Sindh Development and Maintenance against recovery of infrastructure fee amounting to Rs 113 million (2007: Rs 83 million). Director General, Mines and Minerals, Punjab against installation of cement factory near Khairpur, District Chakwal amounting to Rs 3 million (2007: Rs 3 million). Director General, Mines and Minerals, Quetta against lime stone, shale and other cement manufacturers' amounting to Rs 3 million (2007: Rs 3 million). The President of the Islamic Republic of Pakistan against the performance of a contract and against advance payment to Frontier Works Organisation amounting to Rs 1 million (2007: Rs 1 million). Managing Director, Pakistan Railways against the performance of a contract amounting to Rs 3.925 million (2007: Rs 9.742 million). Sui Northern Gas Pipeline against the performance of a contract amounting to Rs 707.164 million (2007: Rs 707.164). Professional Tax imposed by Administration Zila Council ( The District Coordination Officer, DG Khan) Rs. 50 thousand (2007: Nil) 16.2 Commitments (i) (ii) (iii) (iv) Contracts for capital expenditure Rs 113.987 million (2007: Rs 306.936 million). Letters of credit for capital expenditure Rs 857.570 million (2007: Rs 1,013.409 million). Letters of credit other than capital expenditure Rs 275.746 million (2007: Rs 431.169 million). The amount of future payments under operating leases and the period in which these payments will become due are as follows: 2008 2007 Note (Rupees in thousand) 319 747 3,524 4,590
43
Not later than one year Later than one year and not later than five years Later than five years
319 898 3,692 4,909

17. Property, plant and equipment Description
Freehold land Leasehold land Building on freehold land - Factory building - Office building and housing colony Roads Plant and machinery Quarry equipment Furniture, fixture and office equipment Vehicles
Annual Cost as at rate of June 30, depreciation 2007 % Additions/ Written off (deletions) during the year Transfer in/ (out)
(Rupees in thousand)
Accumulated Accumulated Depreciation Accumulated Cost as at Book value depreciation depreciation charge/ depreciation June 30, as at June written off as at June 30, (deletions) as at June 2008 30, 2008 during the 2007 for the year 30, 2008 year
3.33
206,738 -
69,261 63,000
275,999 63,000
1,050
1,050
275,999 61,950
10 5 10
4,395,391 539,799 355,136
107,273 38,085 5,401 1,648,600 (20,352) 69,905
(11,949) (5,356) (10,261)
4,490,715 577,884 360,537
686,201 126,611 80,098 4,110,402 282,389
377,569 21,003 27,623 684,450 (1,292) 181,485
(10,476) (4,198) (10,074)
1,053,294 147,614 107,721
3,437,421 430,266 252,816
4,76-4,98 20,119,099 20 1,263,942
121,566 21,863,557 1,323,586
4,789,362 17,074,195 453,800 869,786
10 20
236,217 128,851
39,077 24,456 (9,350) -
(27,407) (1,740)
3,233
247,887 145,450
69,971 44,614
17,755 17,002 (6,423) 2,167
(21,022) (1,615)
66,704 53,578
181,187 91,872
Aircraft Power and water supply lines 2008
30
38,185
38,185
30,959
33,126
5,059
10
321,468 27,604,826
61,802 2,126,860 (29,702)
(3,238) (59,951)
124,799
380,032 29,766,832
56,030 5,487,275
29,491 1,359,595
(2,832) (50,217)
82,689
297,343
6,788,938 22,977,894
(7,715)
Freehold land and building include book values of Rs 12 million(2007: Rs 12 ,million) and Rs 9.177 million (2007: Rs 9.177 million) respectively which are held in the name of Chief Executive of the Company. This property is located in the locality of Defence Housing Authority where the by-laws restrict transfer of the residential property in the name of the Company.
Description
Freehold land Leasehold land Building on freehold land - Factory building - Office building and housing colony Roads Plant and machinery Quarry equipment Furniture, fixture and office equipment Vehicles
Annual Cost as at rate of June 30, depreciation 2006 %
Additions/ Written off (deletions) during the year
Transfer in/ (out)
Accumulated Accumulated Depreciation Accumulated Cost as at Book value depreciation depreciation charge/ depreciation June 30, as at June written off as at June 30, (deletions) as at June 2007 30, 2007 during the 2006 for the year 30, 2007 year
160,745 -
45,993 -
206,738 -
206,738 -
10 5 10
1,027,418 248,010 188,739
3,367,973 291,789 166,397 9,832,383 (2,499) 874,749
4,395,391 539,799 355,136
616,934 118,699 66,303 3,800,076 237,910
69,267 7,912 13,795 310,709 (383) 44,479
686,201 126,611 80,098
3,709,190 413,188 275,038
4,76-4,98 10,149,278 20 389,193
139,937 20,119,099 1,263,942
4,110,402 16,008,697 282,389 981,553
10 20
142,518 98,558
93,699 46,987 (23,760) 227,499
7,066
236,217 128,851
59,834 39,021
10,137 12,351 (6,758) 3,096 7,780 479,526 (7,141)
69,971 44,614
166,246 84,237
Aircraft Power and water supply lines 2007
30 10
38,185 93,969
147,003
38,185 321,468 27,604,826
27,863 48,250 5,014,890
30,959 56,030
7,226 265,438
12,536,613 14,947,469 (26,259)
5,487,275 22,117,551
44

17.1 The depreciation charge for the year has been allocated as follows: Note Cost of sales Administrative expenses Selling and distribution expenses 29 30 31 2008 2007 (Rupees in thousand) 1,346,428 11,844 1,323 1,359,595 469,367 9,027 1,132 479,526
17.2 Disposal of property, plant and equiment Detail of property, plant and equipment disposed off during the year is as follows:
Particulars of assets Sold to Cost Accumulated depreciation
Book value
Sales proceeds
Mode of Disposal
Plant and machinery Vehicles Nishat Mill Limited - Related party 20,352 1,292 19,060 20,760 Negotiation Outsiders Mr. Tariq Munir Mr. Waqar Mustafa Mr. Zahid Ali Khan Mr. Mehboob Alam Mr. Ghulam Akhtar Mr. Irfan Hammed Mr. Rehman Yousaf Mr. Waqar Mustafa Mr. Rashid Mr. Zahid Pervaiz Mr. Irfan Hammed Mr. Sh Nadeem Mr. Saeed Ahmed Mr. Mahmood Akhtar Other assets with book value less than Rs. 50,000 2008 2007
543 1,102 687 731 439 452 452 522 576 396 1,268 366 353 1,214 249 29,702 26,259
390 849 493 638 357 235 229 441 357 208 700 290 202 848 186 7,715 7,141
153 253 194 93 82 217 223 81 219 188 568 76 151 366 63 21,987 19,118
281 490 422 515 224 476 463 339 337 453 810 198 240 550 97 26,655 23,608
-do-do-do-do-do-do-do-do-do-do-do-do-do-do-
18.
Assets subject to finance lease

Rate % Cost as at June 30, 2007 16,883 138,000 Additions/ (deletions) Transfer In/(out) Cost as at June 30, 2008 10,333 -
Accumulated Depreciation Accumulated Book value depreciation charge/ depreciation as at June as at June 30, (deletions) as at June 30, 2008 2007 for the year 30, 2008 7,490 14,017 1,025 (3,317) 2,417 (16,434) 3,442 (19,751) 5,198 5,135 -
Description
Vehicles Plant and machinery
20 4.76
(6,550) (138,000)
2008
154,883
(144,550)
10,333
21,507
5,198
5,135
Description
Rate % Cost as at June 30, 2006 28,152 308,000 Additions/ (deletions) Transfer In/(out) Cost as at June 30, 2007 16,883 138,000 Accumulated Depreciation Accumulated Book value depreciation charge/ depreciation as at June as at June 30, (deletions) as at June 30, 2007 2006 for the year 30, 2007 8,719 32,375 2,974 (4,203) 11,705 (30,063) 14,679 (34,266) 7,490 9,393
20 4.76
(11,269) (170,000)
14,017 123,983
2007
336,152
(181,269)
154,883
41,094
21,507 133,376
45

Note 18.1 Depreciation charge for the year has been allocated as follows: Cost of sales Administration expenses 29 30 3,331 111 3,442 13,108 1,571 14,679 2008 2007 (Rupees in thousand)
Note 19 Capital work in progress Civil works Plant and machinery [including in transit Nill (2007: Rs 417,453)] Advances Others Expansion project : Civil works Plant and machinery Others Advances
2008 2007 (Rupees in thousand) 198,881 2,073,276 16,563 61,846 2,642 443,097 55,575
19.1
135,434 2,307 137,741 2,488,307
73,312 1,220,863 60,913 50,661 1,405,749 1,907,063
19.1
Advances Civil works Plant and machinery Others 9,233 39,628 1,800 50,661
20
Investments Equity instruments of associated company Investment in subsidiary company Available for sale 20.1 Equity instruments of associated company Note Un-quoted Nishat Paper Products Company Limited (Formerly Nishat Shauaiba Paper Product Company Limited) NIL (2007: 9,307,359) fully paid ordinary shares of Rs 10 each 2008 2007 (Rupees in thousand) 20.1 20.2 20.3 203,629 6,592,332 6,795,961 72,693 8,101,781 8,174,474
93,073 93,073
46

Movement in iequity instruments of associated company till the date of conversion to subsiadiary company is as follows: Note 2008 2007 (Rupees in thousand) Opening balance Purchase of equity investment Transferred to available for sale investments during the year Share of after tax losses Transferred to investment in subsidiary company 20.2 93,073 93,073 (29,054) 64,019 (64,019) 106,250 49,073 (62,250) 93,073 (20,380) 72,693 72,693
The Companys share of the result of its associated company, which are unlisted and incorporated in Pakistan, and its share of the assets, liabilities and revenue is as follows: Percentage Interest held % Assets Liabilities Revenues (Loss) (Rupees in thousand) Nishat Shuaiba Paper Products Company Limited 20.00% 321,495 321,495 248,844 248,844 Note 20.2 Investment in subsidiary company Un-quoted Nishat Paper Products Company Limited (Formerly Nishat Shauaiba Paper Products Company Limited) 23,268,398 (2007: NIL) fully paid ordinary shares of Rs 10 each Equity held: 50% (2007: Nil) Carrying amount of 9,307,359 ordinary shares of Rs 10 each transferred from investment in associate Purchase consideration for acquisition of 13,961,039 ordinary shares of Rs 10 each 20.3 Available for sale Related parties Others 20.3.1 20.3.2 1,552,937 1,334 1,554,271 Revaluation surplus 5,038,061 6,592,332 1,504,232 1,310 1,505,542 6,596,239 8,101,781 232,683 20.1 64,019 139,610 203,629 110,110 110,110 (12,701) (12,701)
Name 2007
47

2008 2007 (Rupees in thousand) 20.3.1 Related parties Quoted Nishat Mills Limited - associated company 18,281,733 (2007: 18,281,733) fully paid ordinary shares of Rs 10 each Market value - Rs 1,571.681 million (2007: Rs 2,384.852 million) Nishat (Chunian) Limited - associated company 6,917,421 (2007: 6,917,421) fully paid ordinary shares of Rs 10 each Market value - Rs 166.087 million (2007: Rs 284.652 million) MCB Bank Limited 12,026,299 (2007: 12,026,299) fully paid ordinary shares of Rs 10 each Market value - Rs 3,925.143 million (2007: Rs 4,389.599 million) Adamjee Insurance Company Limited - associated company 2,926,770 (2007: 2,926,770) fully paid ordinary shares of Rs 10 each Market value - Rs 792.335 million (2007: Rs 953.980million) Un-quoted Gulf Nishat Apparel Limited - associated company 13,906,500 (2007: 9,036,000) fully paid ordinary shares of Rs 10 each
893,664
893,664
48,872
48,872
125,834
125,834
348,858
348,858
135,709 1,552,937
87,004 1,504,232
Nishat Mills Limited, Nishat (Chunian) Limited, Adamjee Insurance Company Limited and Gulf Nishat Apparel Limited are associated undertakings as per the Companies Ordinance, 1984, however, for the purpose of measurement, these have been classified as available for sale and measured at fair value as the Company dose not have significant influence over these companies.
48

2008 Note 20.3.2 Others-Quoted Maple Leaf Cement Factory Limited 13,747 (2007: 13,747) fully paid ordinary shares of Rs 10 each Market value - Rs 0.149 million (2007: Rs 0.335 million) 1,999 (2007: 1,999) fully paid preference shares of Rs 10 each Market value - Rs 0.017 million (2007: Rs 0.016 million) First Capital Mutual Fund 89,000 (2007: 89,000) certificates of Rs 10 each Market value - Rs 0.734 million (2007: Rs 0.899 million) Oil and Gas Development Company Limited 2,353 (2007: 2,353) fully paid ordinary shares of Rs 10 each Market value - Rs 0.293 million (2007: Rs 0.282 million) Pakistan Petroleum Limited 550 (2007: 500) fully paid ordinary shares of Rs 10 each Market value - Rs 0.135 million (2007: Rs 0.131 million) Kot Addu Power Company Limited 500 (2007: 500) fully paid ordinary shares of Rs 10 each Market value - Rs 0.024 million (2007: Rs 0.03 million) Habib Bank Limited 110 (2007: Nil) fully paid ordinary shares of Rs 10 each Market value - Rs 0.023 million (2007: Nil) 20.4 21 282 20 282 20 2007
890
890
76
76
27
27
15
15
24 1,334
1,310
Investments with a face value of Rs 102 million (2007: Rs 17.0 million) are pledged as security against bank facilities.
Long term loans, advances and deposits Loans to employees - considered good - Executives - Others Less: Receivable within one year - Executives - Others 21.1 89 5,261 5,350 73 1,548 1,621 21.2 26 3,729 154,851 17,206 137,645 Advance against issue of shares - related party Security deposits 21.3 339,816 41,856 523,046
49
444 5,430 5,874 359 1,503 1,862 4,012 172,057 17,206 154,851 38,050 196,913
Loan to related party - considered good Less receivable within one year

2008 2007 (Rupees in thousand) 21.1 Executives Opening balance Addition during the period Interest accrued Less: Repayment during the year 444 17 461 372 89 285 400 33 718 274 444
These represent secured loans given to executives and other employees for house building and purchase of motor vehicles and are recoverable in equal monthly installments over a period of 24 to 96 months. The loans given to executives and other employees carry interest at the rate 10% per annum (2007: 10% per annum) except for loans given to workers which are interest free. The loans of Rs 5.350 million (2007: Rs 5.874 million) are secured against the employees' respective retirement benefits. The maximum aggregate amount due from executives at any time during the year was Rs 0.413 million (2007: Rs 0.594 million). 21.2 This represents un-secured loan of Rs 122.500 million and Rs 49.557 million given to Sui Northern Gas Pipelines Limited for the development of infrastructure for supply of natural gas to the plants at D. G. Khan and Khairpur. Mark-up is charged at rates ranging from 1.5% to 2% per annum (2007: 1.5% to 2 % per annum) and is receivable annually. This amount is receivable in 10 annual installments commencing 01 January 2007 and 28 March 2008. This represents payment to Nishat Hotels Limited as advance for issuance of shares. 2008 2007 (Rupees in thousand) 22 Stores, spares and loose tools Stores [including in transit Rs 179.944 million (2007: Rs 156.173 million)] Spares Loose tools 1,898,494 389,236 11,520 2,299,250 1,107,260 385,284 3,747 1,496,291
21.3
Stores and spares include items which may result in fixed capital expenditure but are not distinguishable. 2008 2007 (Rupees in thousand) 23 Stock-in-trade Raw materials Packing material Work-in-process Finished goods 138,409 110,786 118,292 78,369 445,856 28,871 53,855 142,686 69,728 295,140
50

Note 24 Trade debts - considered good - Secured - Unsecured: Related parties Others 24.1
291,570 3,662 70,941 366,173
3,485 140,760 144,245
24.1
Due from related parties Nishat Mills Limited Nishat (Chunian) Limited MCB Bank Limited Gulf Nishat Apparel Limited Nishat Power Limited These are in the normal course of business and are interest free. 769 2,893 3,662 2,415 425 607 38 3,485
25
Investments Available-for-sale Related parties Add: Revaluation surplus 25.1 Related parties-Quoted Nishat Mills Limited - associated company 1,875,658 (2007: 1,875,658) fully paid ordinary shares of Rs 10 each Market value -Rs 161.250 million (2007: Rs 244.681 million) Nishat (Chunian) Limited - associated company 151,199 (2007: 151,199) fully paid ordinary shares of Rs 10 each Market value - Rs 3.630 million (2007: Rs 6.221 million) MCB Bank Limited 45,706,541 (2007: 45,706,541) fully paid ordinary shares of Rs 10 each Market value Rs 14,917.702 million (2007: Rs 16,682.888 million) 25.1 661,666 14,420,916 15,082,582 661,666 16,272,124 16,933,790
171,794
171,794
11,638
11,638
478,234 661,666
478,234 661,666
Nishat Mills Limited and Nishat (Chunian) Limited are associated undertakings as per the Companies Ordinance, 1984, however, for the purpose of measurement, these have been classified as available for sale and measured at fair value as the Company dose not have significant influence over these companies.
51

Note 26 Advances, deposits, prepayments and other receivables Loans to employees - considered good Advances - considered good - to employees - to suppliers Current portion of long term receivable from related party Due from related parties Mark-up receivable from related party Derivative financial instruments Profit receivable on bank deposits Prepayments Letters of credit - margins, deposits, opening charges, etc. Claims recoverable from government Income tax Sales tax Excise duty Export rebat Dividend receivable Receivable against sale of fixed assets Other receivables
1,621 26.1 26.2 21 26.3 26.4 26.5 & 26.6 2,834 413,868 416,702 17,206 11,492 1,255 102,235 443 180 5,597 115,218 70,593 18,374 19,814 223,999 11 1,617 782,358
1,862 2,370 42,154 44,524 17,206 1,241 1,386 101 257 2,898 86,738 44,696 13,036 9,015 153,485 5,000 1,355 229,315
26.7
26.1 26.2
Included in advances to employees are amounts due from executives of Rs 385 thousand (2007: Rs 152 thousand). This includes amount due from Subsidiary company amounting to Rs. 377.736 million (2007: Nil) relating to advance for purchase of paper bags carrying interest rate 3 months KIBOR plus 90bps (2007: Nil). 2008 2007 (Rupees in thousand)
26.3
Due from related parties Nishat Mills Limited Security General Insurance Company Limited These relate to normal business of the Company and are interest free. 11,492 11,492 1,092 149 1,241
26.4 26.5
This represents mark-up receivable from Sui Northern Gas Pipelines Limited against the loan as referred to in note 21.2. The Company has entered into two interest rate cross currency swaps agreements with banks for a notional amount of USD 15 million (2007: Nil), maturing upto 29 September 2013. The outstanding balance of these arrangements is USD. 13.712 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements the Company would pay 3 months KIBOR rates and receive 3 months LIBOR rates as per the respective arrangements on quarterly basis, further under cross currency swaps arrangements the Company would receive PKR and pay USD, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 89.076 million (2007: Nil).
52

26.6 The Company has entered into an interest rate cross currency swaps agreements with a bank for a notional amount of Rs. 750 million (2007: Nil), maturing upto 23 November 2009. The outstanding balance of these arrangements is Rs. 750 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements the Company would received 6 months KIBOR rates and pay 6 months LIBOR rates as per the respective arrangments, further under cross currency swaps arrangements the Company would receive USD and pay PKR, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 13.160 million (2007: Nil). Sales tax recoverable includes an amount of Rs 47.439 million (2007: Rs 44.696 million) which represents amounts which have been recovered by the sales tax department against miscellaneous demands raised by it. The Company has filed appeals against the demands at different forums.
26.7
27
Pending the outcome of the appeals, the amount has been shown as recoverable in the financial statements as according to the management, there are meritorious grounds that the ultimate decision would be in its favour. 2008 2007 (Rupees in thousand) Cash and bank balances At banks Saving accounts - Pak rupee - Foreign currency US $ 22.20 (2007: US $ 22.22) Current accounts Cash in hand
119,776 2 105,308 225,086 1,286 226,372
66,088 1 45,563 111,652 4,521 116,173
27.1 27.2
The balances in saving accounts bear mark-up which ranges from 0.1% to 5% per annum (2007: 0.1% to 3.5% per annum). Included in balances at banks on saving accounts are Rs 14.480 million (2007: Rs 12.975 million) which are under lien to secure bank guarantees as referred to in note 14.2. 2008 2007 (Rupees in thousand)
28
Sales - net Local sales Export sales Less: Excise duty Special Excise duty Sales tax Commission to stockists 14,685,075 2,741,111 17,426,186 2,727,232 99,556 1,902,653 250,749 4,980,190 12,445,996 28.1 8,887,306 511,826 9,399,132 1,679,829 1,159,214 140,464 2,979,507 6,419,625
Export sales include rebate on exports amounting to Rs 16.500 million (2007: Rs 2.736 million).
53

Note 29 Cost of sales Raw and packing materials consumed Salaries, wages and other benefits Electricity and gas Furnace oil/coal Stores and spares consumed Repair and maintenance Insurance Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Royalty Excise duty Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Estate development Rent, rates and taxes Freight charges Other expenses 29.1 29.2 17.1 18.1 1,381,169 478,790 1,644,759 4,595,975 761,950 98,482 43,082 1,346,428 3,331 83,731 25,962 15,484 5,383 3,471 1,476 9,639 6,982 5,746 22,432 10,534,272 Opening work-in-process Transfer from trial run Closing work-in-process 142,686 (118,292) 24,394 Cost of goods manufactured Opening stock of finished goods Transfer from trial run Closing stock of finished goods Less: Own consumption capitalised 10,558,666 69,728 (78,369) (8,641) 19,302 10,530,723 29.1 580,717 293,929 605,335 1,902,567 383,159 22,913 21,840 469,367 13,108 45,349 15,373 7,159 1,784 945 499 6,227 4,113 3,396 9,449 4,387,229 161,989 50,462 (142,686) 69,765 4,456,994 5,058 39,300 (69,728) (25,370) 43,984 4,387,640 2008 2007 (Rupees in thousand)
Salaries, wages and other benefits include Rs 13.106 million (2007: Rs 7.950 million), Rs 8.661 million (2007: Rs. 5.462 million) and Rs 7.783 million (2007: Rs 6.068 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. Stores and spares consumed during the year include Rs. 3.465 million (2007: Rs 0.874 million) being stores and spares written off.
29.2
54

Note 30 Administrative expenses Salaries, wages and other benefits Electricity Repair and maintenance Insurance Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Rent, rates and taxes Entertainment School expenses Fee and subscription Other expenses 30.1 56,893 2,985 1,614 1,675 11,844 111 3,539 3,439 2,206 3,463 6,765 170 1,132 9,004 1,982 4,836 111,658 30.1 Salaries, wages and other benefits Salaries, wages and other benefits include Rs 2.099 million (2007: Rs 1.645 million), Rs. 1.620 million (2007: 0.982 million) and Rs 2.041 million (2007: Rs 2.278 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. 30.2 Legal and professional charges 48,958 2,678 1,324 1,277 9,027 1,571 5,353 2,738 1,897 3,369 6,104 2,699 2,780 8,491 2,966 2,937 104,169 2008 2007 (Rupees in thousand)
17.1 18.1
30.2
Legal and professional charges include the following in respect of auditors' services for: KPMG Taseer Hadi & Co. Statutory audit Half yearly review Certification and sundry services Out of pocket expenses A. F. Ferguson & Co. Half yearly review Tax services Certification and sundry services Out of pocket expenses 850 225 20 75 700 20 50
553 1,723
200 410 45 73 1,498
55

31 Selling and distribution expenses Salaries, wages and other benefits Electricity Repair and maintenance Insurance Depreciation on property, plant and equipment Vehicle running Postage, telephone and telegram Printing and stationery Rent, rates and taxes Travelling and conveyance Entertainment Advertisement and sales promotion Freight charges - local Freight and handling charges - export Other expenses 31.1 Note 31.1 2008 2007 (Rupees in thousand) 35,371 875 299 299 1,323 1,933 1,234 1,553 3,438 3,720 296 3,395 12,914 492,219 2,596 561,465 29,727 670 884 235 1,132 1,603 1,361 1,094 2,312 1,406 189 2,643 50 19,637 2,179 65,122
17.1
32
Salaries, wages and other benefits include Rs 1.433 million (2007: Rs 1.185 million), Rs 0.987 million (2007: 0.760 million) and Rs 1.131 million (2007: Rs 1.178 million) respectively, in respect of provident fund contribution by the Company, provision for gratuity and staff compensated absences. 2008 2007 Note (Rupees in thousand) Other operating expenses Workers' profit participation fund Book value of asset written off Donation Worker welfare fund Exchange loss 17 32.1 9,734 5,000 567,179 581,913 32.1 None of the directors and their spouses had any interest in any of the donees. Note 93,145 11,050 35,112 414 139,721
33
Other operating income Income from financial assets Income on bank deposits Interest on loans to employees Dividend income from: - Related parties - Others
661 128 33.1 820,303 143 820,446 821,235 1,588 4,668 10,240 7,755 1,858 26,109 847,344
56
1,659 182 465,656 118 465,774 467,615 1,634 4,490 4,170 1,208 303 11,805 479,420
Income from non-financial assets Rental income Profit on sale of property, plant and equipment Scrap sales Mark-up on loan/advances to related parties Provisions and unclaimed balances written back

2008 2007 (Rupees in thousand) 33.1 Dividend income from related parties Nishat Mills Limited Nishat (Chunian) Limited MCB Bank Limited Adamjee Insurance Company Limited 34 Finance cost Interest and mark-up on: - Long term finances: - Long term loans - Preferred dividend - Short term borrowings - Finance lease - Workers' profit participation fund Loss on derivative financial instruments Guarantee commission Bank charges 34.1 1,030,526 493,401 563 522 205,308 4,165 15,352 1,749,837 323,183 28,281 103,324 6,564 98 1,813 4,496 467,759 50,393 10,603 750,527 8,780 820,303 27,487 10,603 420,446 7,120 465,656
35
During the year borrowing costs amounting to Nil (2007: Rs. 879.781 million) has been capitalized in the property, plant and equipment pertaining to the new expansion project. 2008 2007 (Rupees in thousand) Provision for taxation For the year - Current - Deferred Prior year - Current - Deferred 107,300 (305,000) (197,700) (197,700) 35.1 33,000 312,435 345,435 (247,435) (247,435) 98,000
The provision for current taxation represents the minimum tax due under section 113 of the Income Tax Ordinance, 2001, which is available for set off against normal tax liability that may arise in five succeeding years. For purposes of current taxation, the tax credit available for carry forward as at 30 June 2008 are estimated approximately at Rs 9,576 million (2007: Rs 7,897 million).
35.2
Since the Company is liable to pay minimum tax, therefore, no numerical tax reconciliation is given.
57

Note 36 Cash flow from operating activities Profit before tax Adjustment for : - Depreciation on property, plant and equipment - Depreciation on assets subject to finance lease - Profit on disposal of property, plant and equipment - Dividend income - Share of loss of associate - Store and spares directly written off - Markup income - Retirement and other benefits accrued - Exchange loss - net - Finance cost Profit before working capital changes Effect on cash flow due to working capital changes: - Increase in stores, spares and loose tools - Increase in stock-in-trade - Increase in trade debts - Increase in advances, deposits, prepayments and other receivables - (Decrease)/Increase in trade and other payables Cash generated from operations 37 Cash and cash equivalents Short term borrowings - secured Cash and bank balances 38 Remuneration of Chief Executive, Directors and Executives 38.1 The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits, to the chief executive, full time working directors and executives of the Company is as follows: Chief Executive 2008 2007 (Rupees in thousand) Managerial remuneration Contributions to provident and gratuity funds Housing Utilities Leave passage Medical expenses Others Number of persons 4,723 3,149 469 1,940 10,281 1
58
2008 2007 (Rupees in thousand) (250,930) 1,359,595 3,442 (4,668) (820,446) 8,674 3,465 (8,544) 22,616 567,179 1,749,837 2,630,220 (806,424) (150,716) (221,928) (529,341) 341,849 (1,366,560) 1,263,660 1,720,471 479,526 14,679 (4,490) (465,774) 14,163 874 (3,049) 16,533 414 467,759 2,241,106 (661,116) (68,854) (70,080) (63,728) (380,723) (1,244,501) 996,605
14 27
(7,597,020) 226,372 (7,370,648)
(3,942,972) 116,173 (3,826,799)
Directors 2008 2007 (Rupees in thousand) 7,470 1,370 810 354 72 1,432 11,508 2 6,214 1,207 540 340 477 61 1,338 10,177 2
Executives 2008 2007 (Rupees in thousand) 73,737 10,822 33,978 1,965 1,068 12,835 134,405 69 51,014 5,159 12,082 3,797 1,442 894 16,770 91,158 48
3,936 1,752 394 863 3,378 10,323 1

The Company also provides the chief executive and some of the directors and executives with free transport and residential telephones. 38.2 Remuneration to other directors Aggregate amount charged in the financial statements for the year for fee to 2 directors (2007: 2 directors) was Rs Nil (2007: Rs Nil). 39 Transactions with related parties The related parties comprise subsidiary company, associated companies, other related companies, directors of the company, key management personnel and post employment benefit plans. The directors of the related companies are close members of the family of the directors of the company. The company in the normal course of business carries out transactions with various related parties. Amounts due from and due to related parties are shown under receivables and payables, dividend income is disclosed in note 33, expense charged in respect of staff retirement benefit plans is disclosed in note 10 and remuneration of the key management personnel is disclosed in note 38. Other significant transactions with related parties are as follows: Relationship with the company i. Subsidiary Company Nature of transaction Sale of goods Purchase of goods Rental income Interest income Sale of goods Insurance premium Purchase of services Insurance claims received Mark-up income on balances with related parties Rental income 978,083 748 4,693 25,431 57,090 1,022,511 32,213 3,691 4,538 449,544 134 27,062 34,661 369,777 2,323 7,748 1,155
ii. Other related parties
All transactions with related parties have been carried out on commercial terms and conditions. 40. Plant capacity and actual production Capacity 2008 2007 Clinker (M. Tons) Unit 1 Unit 2 Unit 3 Actual production 2008 2007
810,000 1,200,000 2,010,000
810,000 1,200,000 2,010,000
912,303 1,368,798 1,861,663
948,289 1,338,345 1,536
59

41. Financial assets and liabilities
INTEREST/MARK-UP BEARING Maturity up Maturity Sub to one after Total year one year NON INTEREST BEARING Maturity up Maturity Sub to one after Total year one year Total 2008 Credit risk 2008
Financial assets On balance sheet Investments Long term loans and deposits Trade debts Advances, deposits, prepayments and other receivables - Mark-up receivable from related party - Profit receivable on bank deposits - Dividend receivable - Derivative financial instruments - Other receivable Cash and bank balances 18,827 137,734 156,561 -
15,082,582 6,805,230 21,887,812 1,548 44,865 46,413 366,173 366,173
21,887,812 202,974 366,173
202,974 366,173
102,235 119,778 240,840 240,840
137,734 137,734
102,235 119,778 378,574 378,574
1,255 443 11 1,617 106,594 15,560,223
1,255 443 11
1,255 443 11
1,255 443 11 102,235 1,617 225,086 899,794 899,794
102,235 1,617 1,617 106,594 226,372 6,850,095 22,410,318 22,788,892 22,410,318 22,788,892
Off balance sheet Total Financial liabilities On balance sheet Long term finances Liabilities against assets subject to finance lease Long term deposits Short term borrowing - secured Trade and other payables Accrued markup
15,560,223 6,850,095
2,683,061 1,141 7,597,020 10,281,222
8,411,051 11,094,112 1,141 - 7,597,020 8,411,051 18,692,273
969,218 364,664 1,333,882
73,890 73,890
- 11,094,112 1,141 73,890 73,890 - 7,597,020 969,218 969,218 364,664 364,664 1,407,772 20,100,045
Off balance sheet Contracts for capital expenditure Guarantees Letters of credit for capital expenditure Letters of credit other than for capital expenditure 113,987 852,969 857,570 275,746 2,100,272 3,434,154 73,890 113,987 852,969 857,570 275,746 2,100,272 113,987 852,969 857,570 275,746 2,100,272
Total On balance sheet gap Off balance sheet gap
10,281,222
8,411,051 18,692,273
3,508,044 22,200,317 2,688,847 (2,100,272)
(10,040,382) (8,273,317) (18,313,699) 14,226,341 (2,100,272)
6,776,205 21,002,546 (2,100,272)
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.
60

INTEREST/MARK-UP BEARING Maturity up Maturity Sub to one after Total year one year NON INTEREST BEARING Maturity up Maturity Sub to one after Total year one year
Total 2007
Credit risk 2007
Financial assets On balance sheet Investments Long term loans and deposits 19,068 Trade debts Advances, deposits, prepayments and other receivables - Mark-up receivable from related party - Profit receivable on bank deposits - Dividend receivable - Other receivable Cash and bank balances 66,089 85,157 Off balance sheet Total 85,157 Financial liabilities On balance sheet Long term finances Liabilities against assets subject to finance lease Long term deposits Short term borrowing - secured Trade and other payables Accrued markup 2,018,569 20,588 3,942,972 5,982,129 Off balance sheet Contracts for capital expenditure Guarantees Letters of credit for capital expenditure Letters of credit other than for capital expenditure 5,982,129 8,687,588 14,669,717 8,686,447 10,705,016 1,141 21,729 3,942,972 154,936 174,004 -
16,933,790 1,503 144,245
8,101,781 25,035,571 25,035,571 41,346 42,849 216,853 144,245 144,245
216,853 144,245
154,936 154,936
66,089 240,093 240,093
1,386 101 6,241 50,084 17,137,350 17,137,350
1,386 1,386 101 101 6,241 6,241 50,084 116,173 8,143,127 25,280,477 25,250,570 8,143,127 25,280,477 25,250,570
1,386 101 6,241 111,652 480,478 480,478
678,520 342,612 1,021,132
79,467 79,467
- 10,705,016 79,467 678,520 342,612 21,729 79,467 3,942,972 678,520 342,612
8,687,588 14,669,717
1,100,599 15,770,316
306,936 828,736 1,013,409 431,169 2,580,250 3,601,382 16,116,218 (2,580,250)
79,467
306,936 828,736 1,013,409 431,169 2,580,250
306,936 828,736 1,013,409 431,169 2,580,250
3,680,849 18,350,566 9,750,254
(5,896,972) (8,532,652) (14,429,624) -
8,063,660 24,179,878 -
(2,580,250) (2,580,250)
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.
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41.1 Financial risk management objectives The Company finances its operations through equity, borrowings and management of working capital with a view to maintaining a reasonable mix between the various sources of finance to minimise risk. Taken as a whole, risk arising from the company's financial instruments is limited as there is no significant exposure to market risk in respect of such instruments. (a) Concentration of credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The Company's credit risk is primarily attributable to its trade debts and its balances at banks. The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The Company has no significant concentration of credit risk as exposure is spread over a large number of counter parties in the case of trade debts. Out of the total financial assets of Rs 22,575.994 million (2007: Rs 25,519.067 million) financial assets which are subject to credit risk amount to Rs 899.794 million (2007: Rs 478.975 million). To manage exposure to credit risk, the Company applies credit limits to its customers and also obtains collaterals, where considered necessary. (b) Interest rate risk management Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Significant interest rate risk exposures are primarily managed by a mix of borrowings at fixed and variable interest rates and contracting floor and cap of interest rates as referred to in note 7. (c) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions with foreign buyers and suppliers. The Company, where considered necessary, uses forward contracts and foreign currency forward options against payables exposed to foreign currency risks. (d) Liquidity risk Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. (e) Capital management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Company defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Company's objectives when managing capital are: (i) to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and (ii) to provide an adequate return to shareholders. The Company manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt. The Company monitors capital on the basis of the debt-to-equity ratio-calculated as a ratio of total debt to equity.
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The debt-to-equity ratios as at 30 June 2008 and 2007 were as follows: 2008 2007 (Rupees in thousand) Total debt Total equity and debt Debt-to-equity ratio 19,056,937 49,137,194 39% 15,012,329 49,935,514 31%
The increase in the debt-to-equity ratio in 2008 resulted primarily from additional borrowings made during the year to meet finance the expension project and meet additional working capital requirements. Neither there were any changes in the Companys approach to capital management during the year nor the Company is subject to externally imposed capital requirements. 41.2 Fair value of financial assets and liabilities The carrying value of financial assets and liabilities reflected in the financial statements approximates their fair values. Fair value is determined on the basis of objective evidence at each reporting date. 42 (Loss) / earnings per share - basic and diluted 2008 42.1 (Loss) / earnings per share - Basic (Loss) / profit for the year Weighted average number of ordinary shares (Loss) / earnings per share 42.2 (Loss) / earnings per share - Diluted There is not dilution effect on the basic earnings per share as the Company has no such commitments. 43 Events after the balance sheet date The Board of Directors have proposed a final dividend for the year ended 30 June 2008 of Rs Nil per share (2007: Rs 1.50 per share) amounting to Rs Nil million (2007: Rs 380.312 million) at their meeting held on 19 September, 2008 for approval of the members at the Annual General Meeting to be held on 31 October, 2008. The Board has also recommended a transfer of Rs. Nil million (2007: Rs. 1,375 million) to general reserve. These financial statements do not reflect these appropriations. 44 Date of authorisation These financial statements were authorised for issue on 19 September, 2008 by the Board of Directors of the Company. 45 General 45.1 45.2 Figures have been rounded off to the nearest thousand of Rupees. Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However, no significant re-arrangements have been made. Director
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2007
Rupees in thousand Number Rupees
(53,230) 252,485,315 (0.21)
1,622,471 252,485,315 6.43
Chief Executive
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D.G. Khan Cement Company Limited and its Subsidiary

Consolidated Financial Statements for the year ended 30 June 2008
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D.G. Khan Cement Company Limited and its Subsidiary DIRECTORS REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
The Directors are pleased to present before you the audited financial statements of D.G. Khan Cement Company Ltd. and its subsidiary namely Nishat Paper Products Company Limited. D.G. Khan Cement holds 50% shares of Nishat Paper Products Co. Ltd. The Nishat paper was formed in 2005 and major business of the company is to produce and sell paper sack for cement packing. The company has annual capacity of 120 million bags. Combined financials are as follows: FY 2007-08 Sale Revenue Gross Profit (Loss)/Profit Before Tax Profit After Tax Earning per Share 12,464,347 1,936,301 (175,273) 25,685 0.12
A separate report on affairs of D.G. Khan Cement Company Ltd. for the year ended June 30, 2008 has been separately presented. For and on behalf of the Board
Mian Raza Mansha Chief Executive
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D.G. Khan Cement Company Limited and its Subsidiary AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of D.G. Khan Cement Company Limited (the Company) and its subsidiary company (hereinafter referred as the Group) as at 30 June 2008 and the related consolidated profit and loss account, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. The financial statements of the subsidiary company, Nishat Paper Products Company Limited (formerly Nishat Shuaiba Paper Products Company Limited) was audited by another firm of auditors, whose report has been furnished to us and our opinion in so far as it relates to the amounts included for such company, is based solely on the report of other auditor. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion 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 assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion the consolidated financial statements present fairly the financial position of the Group as at 30 June 2008 and the results of its operations, its cash flows and changes in equity for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.
KPMG Taseer Hadi & Co. Chartered Accountants
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D.G. Khan Cement Company Limited and its Subsidiary CONSOLIDATED BALANCE SHEET
Note EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital - 950,000,000 (2007: 950,000,000) ordinary shares of Rs 10 each - 50,000,000 (2007: 50,000,000) preference shares of Rs 10 each Issued, subscribed and paid up capital Reserves Accumulated profit Minority interest NON-CURRENT LIABILITIES Long term finances Liabilities against assets subject to finance lease Long term deposits Retirement and other benefits Deferred taxation 7 8 9 10 11 5 6
9,500,000 500,000 10,000,000 2,535,412 27,634,722 32,399 30,202,533 325,907 30,528,440
9,500,000 500,000 10,000,000 2,535,412 29,630,084 1,757,689 33,923,185 33,923,185
8,871,051 393 73,890 54,018 1,251,000 10,250,352
8,686,447 1,141 79,467 39,862 1,624,000 10,430,917
CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowing - secured Current portion of non - current liabilities Provision for taxation 12 13 14 15 1,450,074 391,610 8,194,330 2,828,202 35,090 12,899,306 CONTINGENCIES AND COMMITMENTS 16 1,027,274 342,612 3,942,972 2,042,281 35,090 7,390,229
53,678,098 The annexed notes from 1 to 46 form an integral part of these consolidated financial statements. Chief Executive
51,744,331
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D.G. Khan Cement Company Limited and its Subsidiary AS AT JUNE 30, 2008
Note ASSETS NON-CURRENT ASSETS Property, plant and equipment Assets subject to finance lease Capital work in progress Investments Long term loans, advances and deposits 17 18 19 20 21
24,224,273 6,839 2,488,307 6,592,332 524,176 33,835,927
22,117,551 133,376 1,907,063 8,174,474 196,913 32,529,377
CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debts Investments Advances, deposits, prepayments and other receivables Cash and bank balances 22 23 24 25 26 27 2,323,883 1,300,325 463,446 15,082,605 427,832 244,080 19,842,171 1,496,291 295,140 144,245 16,933,790 229,315 116,173 19,214,954
53,678,098
51,744,331
Director
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D.G. Khan Cement Company Limited and its Subsidiary CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2008
Note Sales - net Cost of sales Gross profit Administrative expenses Selling and distribution expenses Other operating expenses Other operating income Profit from operations Finance cost Excess of acquires interest in the net assets of acquiree Share of loss of associated company (Loss) / profit before tax Taxation Profit for the year Attributable to: Equity holders of the parent Minority interest Earnings per share - basic and diluted 43 35 20 34 30 31 32 33 28 29 2008 2007 (Rupees in thousand) 12,464,347 (10,528,046) 1,936,301 (110,745) (562,970) (595,687) 846,606 1,513,505 (1,766,298) 86,194 (8,674) (175,273) 200,958 25,685 30,022 (4,337) 25,685 0.12 6,419,625 (4,387,640) 2,031,985 (104,169) (65,122) (139,721) 479,420 2,202,393 (467,759) (14,163) 1,720,471 (98,000) 1,622,471 1,622,471 1,622,471 6.43
Appropriations have been reflected in the statement of changes in equity. The annexed notes from 1 to 46 form an integral part of these consolidated financial statements.
Chief Executive
Director
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D.G. Khan Cement Company Limited and its Subsidiary CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2008
Note Cash flows from operating activities Cash generated from operations Finance cost paid Retirement and other benefits paid Taxes paid Net (decrease) / increase in long term deposits Net cash (used in)/generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Acquistion of subsidiary Purchase of investments Sale proceeds of investments Net (increase) /decrease in long term loans, advances and deposits Sales proceeds of property, plant and equipment Dividend received Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of share capital Proceeds from long term finances Repayment of long term finances Repayment of liabilities against assets subject to finance lease Dividend paid Net cash (used in)/generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 37 3,000,000 (3,789,167) (18,970) (379,093) (1,187,230) (4,123,451) (3,826,799) (7,950,250) 1,602,666 3,332,548 (1,481,302) (85,932) (344,743) 3,023,237 (1,290,271) (2,536,528) (3,826,799) (2,724,888) (121,902) (48,752) 64,019 (326,133) 35,353 820,435 7,617 (2,294,251) (5,095,269) (320,865) 138,897 18,608 465,779 3,681 (4,789,169) 36 1,245,428 (1,744,245) (5,054) (132,522) (5,577) (641,970) 996,605 (465,771) (43,067) (57,759) 45,653 475,661 2008 2007 (Rupees in thousand)
The annexed notes from 1 to 46 form an integral part of these consolidated financial statements.
Chief Executive
Director
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D.G. Khan Cement Company Limited and its Subsidiary CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2008
CAPITAL RESERVE Fair value reserve Capital redemption reserve fund R u p e e s Balance as at 30 June 2006 Final dividend for the year ended 30 June 2006 Rs 1.5 per share Issue of 46,098,392 ordinary shares of Rs 10 each fully paid in cash Transfer from profit and loss account Issue of bonus shares @ 10% Fair value gain during the year Profit for the year Balance as at 30 June 2007 Final dividend for the year ended 30 June 2007 Rs 1.5 per share Transfer from profit and loss account Fair value loss during the year Minority interest arising on business combination Post acquisition reserve Profit for the year Balance as at 30 June 2008 1,843,937 1,561,350 11,092,777 i n REVENUE RESERVE Accumualated profit Total
Share capital
Share premium
General reserve
Minority Interest
t h o u s a n d 2,146,827 2,330,558 19,259,849 -
284,400
(345,738)
(345,738)
460,983
1,150,034
1,611,017
230,492 2,535,412
2,711,384
11,775,586 22,868,363
69,110 353,510
1,550,000 3,696,827
(1,619,110) (230,492) 1,622,471 1,757,689
11,775,586 1,622,471 33,923,185
2,535,412
2,711,384
(3,409,386) 19,458,977
353,510
1,375,000 39,024 5,110,851
(380,312) (1,375,000) 30,022 32,399
(380,312) (3,409,386) 39,024 30,022 30,202,533
330,244 (4,337) 325,907
The annexed notes from 1 to 46 form an integral part of these consolidated financial statements.
Chief Executive
Director
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008
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 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 packaging material. 2 Basis of preparation 2.1 Statement of Compliance 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 (IFRSs) issued by the International Standard Board as are notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued under the Companies ordinance, 1984 differ, the provision or directives of the Companies Ordinance, 1984 shall prevail. 2.2 Basis of Consolidation The consolidated financial statements include the financial statements 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 controls, beneficially owns or holds more than 50% of voting securities or otherwise has power to elect and appoint more then 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 shareholders' 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 reserves 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 2.3 Standards, interpretations and amendments to published approved accounting standards New accounting standards and IFRIC interpretations that are not yet effective The following standards, amendments and interpretations of approved accounting standards , effective for
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accounting periods beginning on or after 1 July 2008 are either not relevant to the Group's operations or are not expected to have significant impact on the Group's financial statements other than certain increased disclosures: IFRS 7 - Financial Instruments: Disclosures IFRS 8 - Operating Segments Revised IAS 1 - Presentation of financial statements Revised IAS 23 - Borrowing costs IFRS 2 (amendment) - Share based payments IFRS 3 (amendment) - Business Combinations and consequential amendments to IAS 27 - Consolidated and separate financial statements, IAS 28 - Investment in associates and IAS 31-Interest in Joint Ventures. IAS 32 (amendment) - Financial instruments: Presentation and consequential amendment to IAS 1- Presentation of Financial Statements IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 Group and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 - Customer Loyalty Programme IFRIC 14 IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction 3 Basis of measurement 3.1 These consolidated financial statements have been prepared on the basis of historical cost convention, except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value. The preparation of these consolidated financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The areas where various assumptions and estimates are significant to Group's financial statements or where judgments were exercised in application of accounting policies are: 4 provision for taxation retirement and other benefits residual value and useful lives of depreciable assets provisions and contingencies Interest rate and cross currency swap note note note note note 4.1 4.2 4.3 4.15 4.16
Significant accounting policies 4.1 Taxation Income tax expense comprises current and deferred tax. Income tax is recognized in profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted after taking into account tax credits, rebates and exemptions, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.
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Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity. 4.2 Retirement and other benefits The main features of the schemes operated by the Group for its employees are as follows: D. G. Khan Cement Company Limited Defined benefit plan The company operates an approved funded defined benefit gratuity plan for all employees having a service period of more than five years for management staff and one year for workers. Provisions are made in the financial statements to cover obligations on the basis of actuarial valuations carried out annually. The most recent valuation was carried out as at 30 June 2008 using the "Projected unit credit method". The amount recognised in balance sheet represents the present value of the defined benefit obligation as on 30 June 2008 as adjusted for unrecognised actuarial gains and losses. Cumulative net unrecognised actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the company's obligations and the fair value of plan assets are amortised over the expected average working lives of the participating employees. Defined contribution plan The company operates a recognized provident fund for all its regular employees. Equal monthly contributions are made to the fund both by the company and the employees at the rate of 10% of the basic salary for officers and 10% of basic salary plus cost of living allowance for workers. Obligation for contributions to defined contribution plan is recognized as an expense in the profit and loss account as and when incurred. Accumulating compensated absences The company provides for accumulating compensated absences, when the employees render service that increase their entitlement to future compensated absences. Under the rules employees are entitled to 2.5 days leave per month. Unutilized leaves can be accumulated upto 90 days in case of officers. Any balance in excess of 90 days can be encashed upto 17 days a year only. Any further unutilised leaves lapse. In case of workers, unutilized leaves may be accumulated without any limit. However, balance above 50 days is encashable upon demand of the worker. Unutilized leaves can be used at any time by all employees, subject to the company's approval. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to profit. The most recent valuation was carried out as at 30 June 2008 using the "Projected unit credit method". The amount recognised in the balance sheet represents the present value of the defined benefit obligations. Actuarial gains and losses are charged to profit immediately in the period when these occur.
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4.3Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation to certain property, plant and equipment signifies historical cost, gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 4.16 and borrowing costs as referred to in note 4.18. Depreciation on all property, plant and equipment is charged to profit on the reducing balance method, except for plant and machinery which is being depreciated using the straight line method, so as to write off the historical cost of an asset over its estimated useful life at annual rates mentioned in note 17 after taking into account their residual values. Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial year end and adjusted if impact on depreciation is significant. Depreciation on additions to property, plant and equipment is charged from the month in which the asset is acquired or capitalised, while no depreciation is charged for the month in which the asset is disposed off. The Group assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. 4.4 Capital work-in-progress Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment loss and represents expenditure incurred on property, plant and equipment during the construction and installation. Cost also includes applicable borrowing costs. Transfers are made to relevant property, plant and equipment category as and when assets are available for use. 4.5 Leases Finance leases Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. At inception, finance leases are capitalised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets, less accumulated depreciation and impairment loss, if any. The related rental obligations, net of finance costs, are included in liabilities against assets subject to finance lease as referred to in note 8. The liabilities are classified as current and non-current depending upon the timing of the payment. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments , if any
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are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. The interest element of the rental is charged to income over the lease term. Assets acquired under a finance lease are depreciated over the estimated useful life of the assets on reducing balance method except plant and machinery which is depreciated on straight line method at the rates mentioned in note 18. Depreciation of leased assets is charged to profit. Depreciation methods, residual values and the useful lives of the assets are reviewed at least at each financial year end and adjusted if impact of depreciation is significant. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit on a straight-line basis over the lease term. 4.6 Investments Investments in equity instruments of associated companies Associates are all entities over which the Group has significant influence but not control. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Groups investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The Groups share of its associates post acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Available for sale Investments which are intended to be held for an indefinite period of time but may be sold in response to the need for liquidity are classified as available for sale. Available for sale investments are recognised initially at fair value plus any directly attributable transaction costs. After initial recognition, these are stated at fair values unless fair values can not be measured reliably, with any resulting gains and losses being taken directly to equity until the investment is disposed or impaired. At each reporting date, these investments are remeasured at fair value, unless fair value cannot be reliably measured. At the time of disposal, the respective surplus or deficit is transferred to income currently. Fair value of quoted investments is their bid price on Karachi Stock Exchange at the balance sheet date. Unquoted investments, where active market does not exist, are carried at cost as it is not possible to apply any other valuation methodology. Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital, are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.
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Investments at fair value through profit or loss Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as at fair value through profit or loss and are included in current assets. They are initially measured at cost and at subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments for which a quoted market price is not available, are measured at cost as it is not possible to apply any other valuation methodology. Realised and unrealised gains and losses arising from changes in fair value are included in net profit or loss for the period in which they arise. All purchases and sales of investments are recognised on the trade date which is the date that the Group commits to purchase or sell the investment. At subsequent reporting dates, the Group reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognised as expense. Where an impairment loss subsequently reverses, the carrying amount of the investment is increased to the revised recoverable amount but limited to the extent of initial cost of the investment. A reversal of the impairment loss is recognised in income. 4.7 Stores and spares Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. 4.8 Stock-in-trade Stock of raw materials, except for those in transit, work in process and finished goods are valued principally at the lower of average cost and net realisable value. Stock of packing material is valued principally at moving average cost. Cost of work in process and finished goods comprises cost of direct materials, labour and appropriate manufacturing overheads. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make a sale. 4.9 Financial assets and liabilities Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value, amortised cost or cost, as the case may be. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item. 4.10 Offsetting of financial assets and financial liabilities A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Group has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. 4.11 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.
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4.12 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings. In the balance sheet, short term borrowings are included in current liabilities. 4.13 Borrowings Interest bearing borrowings are recognized initially at fair value less attributable transaction cost. Subsequent to initial recognition, these are stated at amortized cost with any difference between cost and redemption value being recognized in the profit and loss over the period of the borrowings on an effective interest basis. Preference shares, which are mandatorily redeemable on a specific date at the option of the Group, are classified as liabilities. The dividend on these preference shares are recognised in the profit and loss account as finance cost. Finance costs are accounted for on an accrual basis. 4.14 Trade and other payables Financial liabilities are initially recognized at fair value plus directly attributable cost, if any, and subsequently at amortized cost using effective interest rate method. Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services. 4.15 Provisions Provisions are recognized when the Group has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 4.16 Derivative financial instruments and hedging activities These are initially recorded at fair value on the date on which a derivative contract is entered into and subsequently measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as cash flow hedges. The Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. Derivatives are carried as asset when the fair value is positive and liabilities when the fair value is negative. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recognised in profit and loss account in the periods when the hedged item will effect profit or loss. However, when the forecast hedged transaction results in the recognition of a nonfinancial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.
79

Any gains or losses arising from change in fair value derivatives that do not qualify for hedge accounting are taken directly to profit and loss. 4.17 Foreign currencies All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at exchange rates prevailing at the date when fair values are determined. Exchange gains and losses are included in the income currently. 4.18 Borrowing costs Mark-up, interest and other charges on borrowings are capitalised upto the date of commissioning of the related property, plant and equipment acquired out of the proceeds of such borrowings. All other mark-up, interest and other charges are charged to profit in which they are incurred. 4.19 Revenue recognition Revenue represents the fair value of the consideration received or receivable for goods sold, net of discounts and sales tax. Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue, and the associated cost incurred, or to be incurred, can be measured reliably. Revenue from sale of goods is recognised when the significant risk and rewards of owner ship of the goods are transferred to the buyer i.e. on the dispatch of goods to the customers. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. Dividend income on equity investments is recognised as income when the right of receipt is established. 4.20 Dividend Dividend distribution to the shareholders is recognised as a liability in the period in which the dividends are approved. 4.21 Related party transactions The Group enters into transactions with related parties on an arm's length basis. Prices for transactions with related parties are determined using admissible valuation methods, except in extremely rare circumstances where, subject to approval of the Board of Directors, it is in the interest of the Group to do so. 5. Issued, subscribed and paid up capital 2008 2007 (Number of shares) 158,934,068 20,000,000 74,607,089 253,541,157 158,934,068 20,000,000 74,607,089 253,541,157 Ordinary shares of Rs 10 each fully paid in cash Ordinary shares of Rs 10 each issued for consideration other than cash Ordinary shares of Rs 10 each issued as fully paid bonus shares 2008 2007 (Rupees in thousand) 1,589,341 200,000 746,071 2,535,412 1,589,341 200,000 746,071 2,535,412
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79,614,700 (2007: 79,614,700) ordinary shares are held by Nishat Mills Limited, an associated concern as at 30 June 2008. In addition 1,173,287 (2007: 1,173,287) ordinary shares are held by Adamjee Insurance Company Limited a related party as at 30 June 2008. 2008 2007 Note (Rupees in thousand) Reserves Movement in and composition of reserves is as follows: Capital Share premium At the beginning of the year Addition during the year Fair value reserve At the beginning of the year Net (loss) / gain during the year Capital redemption reserve fund At the beginning of the year Transfer from profit and loss account Revenue General reserve At the beginning of the year Post acquisition reserves Transfer from profit and loss account 6.1 2,711,384 2,711,384 6.2 22,868,363 (3,409,386) 19,458,977 6.3 353,510 353,510 22,523,871 3,696,827 39,024 1,375,000 5,110,851 27,634,722 284,400 69,110 353,510 25,933,257 2,146,827 1,550,000 3,696,827 29,630,084 11,092,777 11,775,586 22,868,363 1,561,350 1,150,034 2,711,384
6.
6.1 This reserve can be utilised by the Group only for the purposes specified in section 83(2) of the Companies Ordinance, 1984. 6.2 As referred to in note 4.6, this represents unrealised gain on remeasurement of investments at fair value and is not available for distribution. This amount will be transferred to profit and loss account on realisation. 6.3 In accordance with the terms of issue of preference share, to ensure timely payments, the Group was required to maintain a redemption fund with respect to preference shares. The Group had created a redemption fund and appropriated Rs 7.4 million each month from the profit and loss account in order to ensure that fund balance at redemption date is equal to the principal amount of the preference shares. The preference shares were redeemed during the year ended 30 June 2007. 2008 2007 Note (Rupees in thousand) Long term finances These are composed of: Long term loans Loan under musharika arrangement Less: Current portion shown under current liabilities
7.
7.1 & 7.2 7.3 15
9,694,112 2,000,000 11,694,112 2,823,061 8,871,051
10,705,016 10,705,016 2,018,569 8,686,447
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7.1
Loan
Long term loans - secured Long term finances utilized under mark up arrangements from banking companies are composed of:
Lender 2008 2007 (Rupees in thousand) Rate of interest per annum Outstanding installments Interest payable
Long term loan from banking company-secured 1 Habib Bank Limited 457,143 685,714 *Base rate +0.625% 4 equal semi-annual installments ending 31 March 2010 4 equal semi-annual installments ending June 20, 2010 4 equal semi-annual installments ending June 30, 2010 2 equal semi-annual installments ending June 12, 2009 3 equal semi-annual installments ending August 19, 2009 5 equal semi-annual installments ending August 19, 2010 6 equal semi-annual installments ending June 30, 2011 7 equal semi-annual installments ending September 29, 2011 The loan has been fully repaid during the year 7 equal semi-annual installments ending Nobember 16, 2011 7 equal semi-annual installments ending December 30, 2011 Semi annual Quarterly
Habib Bank Limited
114,286
171,429
*Base rate +3%
Quarterly
171,428
257,143
*Base rate +0.65%
Semi annual
Bank of Punjab
80,000
160,000
*Base rate +0.5%
Quarterly
60,000
100,000
*Base rate +0.6%
Semi annual
100,000
140,000
*Base rate +0.6%
Semi annual
Allied Bank Limited
780,000
1,040,000
*Base rate +0.65%
Semi annual
Habib Bank Limited
636,364
818,182
*Base rate +0.625%
Semi annual
9 10
Citi Bank National Bank of Pakistan
700,000
1,200,000 900,000
*Base rate +1% *Base rate +0.65%
11
Habib Bank Limited
700,000
900,000
*Base rate +0.625%
Quarterly
12
United Bank Limited
900,000
1,000,000
*Base rate +0.65%
9 equal semi-annual Semi annual instalments commencing September 31, 2012 11 equal semi-annual instalments beginning on March 16, 2009 Quarterly
13
Bank Alfalah
634,000
634,000
*Base rate +0.65%
14
United Bank Limited
1,000,000
*Base rate +0.60%
2 equal semi-annual Semi annual instalments commencing payable on 27-02-2009&27-08-2009 6 equal semi-annual installments ending May 28, 2010 10 equal semi-annual installments ending December 02, 20081 10 equal semi-annual installments ending July 10, 2009 10 equal semi-annual instalments commencing March 29, 2013 Quarterlyl
15
Habib Bank Limited
300,000
*Base rate +1.15%
16
Habib Bank Limited
200,000
*Base rate +1.15%
Quarterly
17
Habib Bank Limited Foreign currency-unsecured European Investment Bank US$ 44.530 million (2007: US$ 44.530 million)
100,000
*Base rate +1.15%
Quarterly
18
2,760,891 9,694,112
2,698,548 10,705,016
**Base rate +0.063%
Quarterly
*Base rate
Average ask rate of six-month Karachi Inter Bank Offer Rate (KIBOR) to be set for each mark-up period.
**Base rate
Average ask rate of three-month London Inter Bank Offer Rate (LIBOR) to be set for each mark-up period.
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7.2 Security These loans are secured by a registered first pari passu charge on all present and future fixed assets of the Group upto Rs 15,353 million (2007: Rs 12,843.640 million). These finances are also secured by first exclusive charge of Rs. 960 million (2007: Nil) over leasehold rights of land together with building, structure, fixture, plant and machinery and personal guarantees of the CEO of the Group. 7.3 This finance facility is arranged under syndicated arrangement, led by Meezan Bank Limited. The aggregate sanction limit is Rs. 2,000 million (2007: Nil) and carries four unequal semi annual rentals. Principal amount is payable after two years from the date of disbursement i.e. 08 May 2010. The facility is secured by a registered first pari passu charge on all present and future fixed assets of the Group upto Rs 2,666 million (2007: Nil). Note 8 Liabilities against assets subject to finance lease Present value of minimum lease payments Less: Current portion shown under current liabilities 15 2,128 1,735 393 21,729 20,588 1,141 2008 2007 (Rupees in thousand)
The minimum lease payments have been discounted at an implicit interest rate ranging from 5.24% to 11.07% (2007: 5.24% to 8.10%) to arrive at their present value. Rentals are paid in monthly installments and in case of default of any payment, an additional charge @ 2% to 5% per month shall be paid. The lessee has the option to purchase the assets after expiry of the lease term. Taxes, repairs and insurance costs are to be borne by the Group. In case of termination of the agreement, the Group is to pay the entire rent for the unexpired period of lease agreement . The amount of future payments of the lease and the period in which these payments will become due are as follows: Minimum Future lease finance payments charge (R u p e e s i n Years Not later than one year Later than one year and not later than five years 1,818 422 2,240 83 29 112 1,735 393 2,128 20,588 1,141 21,729 Present value of lease liability 2008 2007 t h o u s a n d)
2008 2007 (Rupees in thousand) 9. Long term deposits Customers Others 28,252 45,638 73,890 25,995 53,472 79,467
9.1 These represent interest free security deposits from stockists and suppliers and are repayable on cancellation/withdrawal of the dealership or on cessation of business with the Group respectively.
83

2008 2007 (Rupees in thousand) 10 Retirement and other benefits Staff gratuity Leave encashment 10.1 Staff gratuity-net The amounts recognised in the balance sheet are as follows: Present value of defined benefit obligation Fair value of plan assets Unrecognised actuarial (losses) Liability as at 30 June Change in present value of net staff gratuity Liability as at 01 July Charge for the year including capitalized during the year Contributions plus benefit payments made directly by the Group during the year Reversal of excess/(short) payments made during the year Liability as at 30 June 10.1.2 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at 01 July Current service cost Interest cost Reversal of excess payments made last year Benefits paid during the year Actuarial loss on present value of defined benefit obligation Present value of defined benefit obligation as at 30 June 10.1.3 Movement in fair value of plan assets Fair value of plan assets as at 01 July Expected return on plan assets Contributions during the year Benefits paid during the year Actuarial (loss) on plan assets Fair value of plan assets as at 30 June 10.1.4 Actual return on plan assets Expected return on plan assets Actuarial (loss) on plan assets 4 (39) (35) 36 4 2,266 (2,266) (39) 1 42,212 (42,174) (2) 36 22,741 8,775 2,274 184 (2,266) 1,414 33,122 11,685 7,458 1,052 (313) 2,859 22,741 17,147 11,297 (2,266) 184 26,362 51,809 8,637 (42,397) (902) 17,147 33,122 (1) (6,759) 26,362 22,741 (36) (5,558) 17,147 10.1 10.2 26,362 27,656 54,018 17,147 22,715 39,862
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Note 10.1.5 Plan assets consist of the following: Cash and other deposits 10.1.6 Movement in actuarial (losses) Un recognised actuarial (losses) as at 01 July Actuarial (losses) arising during the year Actual losses charged to profit during the year Un recognised actuarial losses as at 30 June 10.1.7 Charge for the year including capitalized during the year Current service cost Interest cost Expected return on plan Assets Actuarial losses charge 8,775 2,274 (4) 252 11,297 2008 10.1.8 Historical Information Present value of defined benefit obligation Present value of defined benefit assets Deficit in the plan Experience adjustment arising on plan liabilities Experience adjustment arising on plan assets 33,122 (1) 33,121 1,414 (39) 22,741 (36) 22,705 2,859 (2) N/A 11,685 N/A 11,685 (495) 40,390 N/A 40,390 3,531 N/A N/A 31,479 N/A 31,479 510 2007 2006 Rupees in thousand 2005 7,458 1,052 127 8,637 2004 (5,558) (1,453) 252 (6,759) (2,824) (2,861) 127 (5,558) 1 36 2008 2007 (Rupees in thousand)
10.1.9 Assumptions used for valuation of the defined benefit schemes for management and non-management staff are as under: 2008 2007 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee 12 % per annum 11 % per annum 12 years 10 % per annum 9 % per annum 13 years
10.1.10 The Company expects to pay Rs. 15.328 million in contributions to defined benefit plan in 2009.
85

Note 10.2 Leave encashment Opening balance Expenses recognized Payments made Payable within one year Closing balance 10.2.1 Movement in liability for defined benefit obligation Present value of defined benefit obligation as at 01 July Current service cost Interest cost Benefits paid during the period Actuarial loss on present value of defined benefit obligation Payable within one year Present value of defined benefit obligation as at 30 June 10.2.2 Charge for the year including capitalized during the year Current service cost Interest cost Actuarial losses charge 2008 10.2.3 Historical Information Present value of defined benefit obligation Experience adjustment arising on plan liabilities 27,656 3,010 22,715 2,168 17,711 8,149 8,694 1,174 6,458 608 2007 2006 Rupees in thousand 5,853 2,272 3,010 11,135 2005 5,036 1,594 2,168 8,798 2004 22,715 5,853 2,272 (2,788) 3,010 (3,406) 27,656 17,711 5,036 1,594 (670) 2,168 (3,124) 22,715 15 22,715 11,135 (2,788) 31,062 (3,406) 27,656 17,711 8,798 (670) 25,839 (3,124) 22,715 2008 2007 (Rupees in thousand)
10.2.4 Assumptions used for valuation of the accumulating compensated absences are as under: 2008 Discount rate Expected rate of increase in salary Average expected remaining working life time of employee Expected withdrawal and early retirement rate 2007
12 % per annum 10 % per annum 11 % per annum 9 % per annum 12 years 13 years Based on experience
86

2 0 0 8 Officers Workers (days) (days) Average number of leaves - Utilized per annum - Encashed per annum - Utilized per annum in excess of accrued leave of 30 days - Encashed per annum in excess of accrued leave of 30 days 11 Deferred taxation The liability for deferred taxation comprises temporary differences relating to: 2008 2007 (Rupees in thousand) Deferred tax liability Accelerated tax depreciation Deferred tax assets Provision for retirement and other benefits Unabsorbed tax credits 5,267,352 (2,629) (4,013,723) 1,251,000 12 Trade and other payables Trade creditors Customers' balances Due to related parties Accrued liabilities Derivative financial instruments Workers' profit participation fund Workers welfare fund payable Sales tax payable Custom duties payable Special excise duty payable Federal Excise duty Retention money Unclaimed dividend Advances against sale of scrap Redeemable preference shares (non-voting) - unsecured Other payables 12.1 12.2 12.3 12.4 293,779 354,380 1,779 426,976 145,262 35,112 69,400 8,007 279 67,277 5,427 2,488 127 39,781 1,450,074 12.1 390,957 187,626 188,610 93,145 35,112 31,423 1,131 61,396 4,208 317 133 33,216 1,027,274 4,390,528 (2,669) (2,763,859) 1,624,000 13.00 6.00 0.50 0.25 18.00 10.00 3.00 2.00 2 0 0 7 Officers Workers (days) (days) 14.00 8.00 0.50 0.25 20.00 8.00 3.00 2.00
Included in trade creditors is an amount of Rs Nil (2007: Rs 28.297 million) payable to a related party.
87

12.2 12.3 This represents interest free amount due to Nishat Mills Limited in the normal course of business of the Group
The Group has entered into two interest rate cross currency swaps agreements with banks for a notional amount of Rs. 2,000 million (2007: Nil), maturing upto 28 September 2009. The outstanding balance of these arrangements is Rs. 2,000 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements, the Group would receive 6 months KIBOR rates and pay 6 months LIBOR rates as per the respective arrangements. Further under cross currency swaps arrangements, the Group would receive USD and pay PKR, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 145.262 million (2007: Nil) 2008 2007 (Rupees in thousand) Note 12.4 Workers profit participation fund Opening balance Provision for the year Interest for the year Less: Payments during the year Closing balance 32 34 93,145 522 93,667 93,667 182,006 93,145 98 275,249 182,104 93,145
13
Accrued markup Long term loans Short term borrowing - secured Preferred dividend on redeemable preference sharees 290,174 101,347 89 391,610 301,310 41,209 93 342,612
14
Short term borrowing - secured Short term running finances Import finances Modaraba finances 14.1 Short term running finances - secured Short term running finances available from a consortium of commercial banks under mark up arrangements amount to Rs 7,020 million (2007: Rs 4,280 million). The rates of mark up range from 9.83% to 15.00% (2007: 9.20% to 12.20%) or part thereof on the balance outstanding. The aggregate short term running finances of Rs 7,020 million (2007: Rs 4,280 million) are secured by a pledge of 10.2 million shares of MCB Bank Limited and first registered charge on all present and future current assets of the Group wherever situated including stores and spares, stock in trade, book debts, investments and receivables. 14.2 Import finances- secured The Group has obtained import finance facilities aggregating to Rs 3,453 million (2007: Rs 890 million) from commercial banks. The rates of mark-up range from 3.89% to 8.40% (2007: 5.7% to 9.21%). The aggregate import finances are secured by a registered charge on all present and future current assets of the Group wherever situated including stores and spares, stock in trade, book debts, investments and receivables. 14.1 14.2 14.3 5,526,226 2,608,104 60,000 8,194,330 3,269,971 673,001 3,942,972
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Of the aggregate facility of Rs 6,216.17 million (2007: Rs 5,348.22 million) for opening letters of credit and Rs 1,416.81 million (2007: Rs 901.40 million) for guarantees, the amount utilized as at 30 June 2008 was Rs 1,504.03 million (2007: Rs 886.68 million) and Rs 844.15 million (2007: Rs 215.78 million) respectively. The aggregate facilities for guarantees are secured by registered charge on current assets of the Group. Of the facility for guarantees, Rs 29.38 million (2007: Rs 12.98 million) is secured by a lien over bank deposits as referred to in note 27.2. 14.3 Modaraba finance The Group has obtained modaraba finance facilities aggregating to Rs 60 million (2007: Rs Nil). The rates of mark-up range from 10.68% to 14.36% per annum. The modaraba finance facility is secured by first pari passu hypothecation charge on all present and future current assets of the Group. Note 15 Current portion of non-current liabilities Long term finances Liabilities against assets subject to finance lease Retirement and other benefits 7 8 10 2,823,061 1,735 3,406 2,828,202 16 Contingencies and commitments 16.1 Contingencies (i) The Income Tax Officer, while framing the assessments for the assessment years 1984-85 to 1990-91, has taxed the income of the Group on account of interest on deposits and sale of scrap etc. The Appellate Tribunal on appeal filed by the Group issued an order in favour of the Group for the assessment years 1984-85 to 1990-91. The Income Tax Department filed reference before the Lahore High Court. Pending final outcome of such reference, no adjustment has been made in these financial statements for the relief granted by the Appellate Tribunal aggregating Rs 35.090 million. (ii) During the period 1994 to 1996, the Group imported plant and machinery relating to expansion unit, for which exemption was claimed under various SROs from the levy of custom duty and other duties including sales tax. As per the provisions of SRO 484 (I)/92, 978 (I)/95 and 569 (I)/95, the exemption from the statutory duty etc. would be available only if the said plant and machinery was not manufactured locally. However, the Custom Authorities rejected the claim of the Group by arguing that the said machinery was on the list of locally manufactured machinery, published by the Central Board of Revenue. Consequently, the Group appealed before the Lahore High Court, Multan Bench, which allowed the Group to release the machinery on furnishing indemnity bonds with the Custom Authorities. Collector of Customs and Central Excise, Multan has passed an order dated 26 November 1999, against the Group on the grounds that the said machinery was being manufactured locally during the time when it was imported. The total demand as raised against the Group amounts to Rs 715.372 million out of which Rs 200.645 million has been paid. An appeal against the order was filed with the Lahore High Court, which has been decided in favour of the Group. However, the Custom Authorities have filed an appeal with the Supreme Court of Pakistan against the orders of the Lahore High Court. Hence, no provision for the balance amount of Rs 514.727 million has been made in the financial statements as according to the management of the Group there are meritorious grounds that the ultimate decision would be in its favour. 2,018,569 20,588 3,124 2,042,281 2008 2007 (Rupees in thousand)
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(iii) The Group has issued following guarantees in favour of: Collector of Customs, Excise and Sales Tax against levy of sales tax, custom duty and excise duty amounting to Rs 21.830 million (2007: Rs 21.830 million). Director, Excise Collection Office, Sindh Development and Maintenance against recovery of infrastructure fee amounting to Rs 113 million (2007: Rs 83 million). Director General, Mines and Minerals, Punjab against installation of cement factory near Khairpur, District Chakwal amounting to Rs 3 million (2007: Rs 3 million). Director General, Mines and Minerals, Quetta against lime stone, shale and other cement manufacturers' amounting to Rs 3 million (2007: Rs 3 million). The President of the Islamic Republic of Pakistan against the performance of a contract and against advance payment to Frontier Works Organisation amounting to Rs 1 million (2007: Rs 1 million). Managing Director, Pakistan Railways against the performance of a contract amounting to Rs 3.925 million (2007: Rs 9.742 million). Sui Northern Gas Pipeline against the performance of a contract amounting to Rs 707.164 million (2007: Rs 707.164). Professional Tax imposed by Administration Zila Council ( The District Coordination Officer, DG Khan) Rs. 50 thousand (2007: Nil) Guarantee in favour of Director Excise and Taxation Government of Sindh against levy of infrastructure cess amounting to Rs 14.9 million (2007: Nil) Guarantee in favour Sui Northern Gas Pipelines Limited as a security against gas connection amounting to Rs 15.412 (2007: Nil) 16.2 Commitments (i) Contracts for capital expenditure Rs 113.987 million (2007: Rs 306.936 million). (ii) Letters of credit for capital expenditure Rs 857.570 million (2007: Rs 1,013.409 million). (iii) Letters of credit other than capital expenditure Rs 374.078 million (2007: Rs 431.169 million). (iv) The amount of future payments under operating leases and the period in which these payments will become due are as follows: 2008 2007 (Rupees in thousand) Not later than one year Later than one year and not later than five years Later than five years 319 747 3,524 4,590 319 898 3,692 4,909
90
91
92

17.1 The depreciation charge for the year has been allocated as follows: Note Cost of sales Administrative expenses Selling and distribution expenses 17.2 Disposal of property, plant and equiment Detail of property, plant and equipment disposed off during the year is as follows:
Particulars of assets Sold to Cost Accumulated depreciation Book value Sales proceeds Mode of Disposal
2008 2007 (Rupees in thousand) 1,354,192 11,956 1,342 1,367,400 469,367 9,027 1,132 479,526
29 30 31
Plant and machinery Bestway Cement Limited Nishat Mill Limited - Related party Vehicles Outsiders Mr. Tariq Munir Mr. Waqar Mustafa Mr. Zahid Ali Khan Mr. Mehboob Alam Mr. Ghulam Akhtar Mr. Irfan Hammed Mr. Rehman Yousaf Mr. Waqar Mustafa Mr. Rashid Mr. Zahid Pervaiz Mr. Irfan Hammed Mr. Sh Nadeem Mr. Saeed Ahmed Mr. Mahmood Akhtar 9,293 20,352
415 1,292 8,878 19,060 7,800 20,760 Negotiation -do-
543 1,102 687 731 439 452 452 522 576 396 1,268 366 353 1,214 249 2008 2007 38,995 26,259
390 849 493 638 357 235 229 441 357 208 700 290 202 848 186 8,130 7,141
153 253 194 93 82 217 223 81 219 188 568 76 151 366 63 30,865 19,118
281 490 422 515 224 476 463 339 337 453 810 198 240 550 97 34,455 23,608
-do-do-do-do-do-do-do-do-do-do-do-do-do-do-
Other assets with book value less than Rs. 50,000
18.
Assets subject to finance lease

Description
Rate % Cost as at June 30, 2007 Acquired through business combination Additions/ (deletions) Transfer In/(out) Cost as at June 30, 2008
Accumulated Acquired Depreciation Accumulated Book value depreciation through charge/ depreciation as at June as at June 30, business (deletions) as at June 30, 30, 2008 2007 combination for the year 2008
20 4.76
16,883 138,000
2,354 -
(6,550) (138,000)
12,687 -
7,490 14,017
635 -
1,040 (3,317) 2,417 (16,434) 3,457 (19,751)
5,848 -
6,839 -
2008
154,883
2,354
(144,550)
12,687
21,507
635
5,848
6,839
Description
Rate %
Cost as at June 30, 2006
Acquired through business combination
Additions/ (deletions)
Transfer In/(out)
Cost as at June 30, 2007
Accumulated Acquired Depreciation Accumulated Book value depreciation through charge/ depreciation as at June as at June 30, business (deletions) as at June 30, 30, 2007 2006 combination for the year 2007
20 4.76
28,152 308,000
(11,269) (170,000)
16,883 138,000
8,719 32,375
2,974 (4,203) 11,705 (30,063) 14,676 (34,266)
7,490 14,017
9,393 123,983
2007
336,152
(181,269)
154,883
41,094
21,507
133,376
93

Note 18.1 Depreciation charge for the year has been allocated as follows: Cost of sales Administration expenses 29 30 3,331 126 3,457 13,108 1,571 14,679 2008 2007 (Rupees in thousand)
Note 19 Capital work in progress Civil works Plant and machinery [including in transit Nill (2007: Rs 417,453)] Advances Others Expansion project : Civil works Plant and machinery Others Advances
2008 2007 (Rupees in thousand) 198,881 2,073,276 16,563 61,846 2,642 443,097 55,575
19.1
135,434 2,307 137,741 2,488,307
73,312 1,220,863 60,913 50,661 1,405,749 1,907,063
19.1
Advances Civil works Plant and machinery Others 9,233 39,628 1,800 50,661
20
Investments Equity instruments of associated company Available for sale 20.1 Equity instruments of associated company 2008 2007 (Rupees in thousand) Un-quoted Nishat Paper Products Company Limited (Formerly Nishat Shauaiba Paper Product Company Limited) NIL (2007: 9,307,359) fully paid ordinary shares of Rs 10 each 20.1 20.2 6,592,332 6,592,332 72,693 8,101,781 8,174,474
93,073 93,073
94

Movement in equity instruments of associated company till the date of conversion to subsidiary company is as follows: Note 2008 2007 (Rupees in thousand) Opening balance Purchase of equity investment Transferred to available for sale investments during the year Share of after tax losses Transferred to investment in subsidiary company 93,073 93,073 (29,054) 64,019 (64,019) 106,250 49,073 (62,250) 93,073 (20,380) 72,693 72,693
The Group's share of the result of its associated companies, which are unlisted and incorporated in Pakistan, and its share of the assets, liabilities and revenue is as follows: Percentage Interest held % Assets Liabilities Revenues (Loss) (Rupees in thousand) Nishat Shuaiba Paper Products Company Limited 20.00% 321,495 321,495 Note 20.2 Available for sale Related parties Others Revaluation surplus 20.2.1 20.2.2 1,552,937 1,334 1,554,271 5,038,061 6,592,332 1,504,232 1,310 1,505,542 6,596,239 8,101,781 248,844 248,844 110,110 110,110 (12,701) (12,701)
Name 2007
95

2008 2007 (Rupees in thousand) 20.2.1 Related parties Quoted Nishat Mills Limited - associated company 18,281,733 (2007: 18,281,733) fully paid ordinary shares of Rs 10 each Market value - Rs 1,571.681 million (2007: Rs 2,384.852 million) Nishat (Chunian) Limited - associated company 6,917,421 (2007: 6,917,421) fully paid ordinary shares of Rs 10 each Market value - Rs 166.087 million (2007: Rs 284.652 million) MCB Bank Limited 12,026,299 (2007: 12,026,299) fully paid ordinary shares of Rs 10 each Market value - Rs 3,925.143 million (2007: Rs 4,389.599 million) Adamjee Insurance Company Limited - associated company 2,926,770 (2007: 2,926,770) fully paid ordinary shares of Rs 10 each Market value - Rs 792.335 million (2007: Rs 953.980million) Un-quoted Gulf Nishat Apparel Limited - associated company 13,906,500 (2007: 9,036,000) fully paid ordinary shares of Rs 10 each
893,664
893,664
48,872
48,872
125,834
125,834
348,858
348,858
135,709 1,552,937
87,004 1,504,232
Nishat Mills Limited, Nishat (Chunian) Limited, Adamjee Insurance Company Limited and Gulf Nishat Apparel Limited are associated undertakings as per the Companies Ordinance, 1984, however, for the purpose of measurement, these have been classified as available for sale and measured at fair value as the Group dose not have significant influence over these companies.
96

2008 Note 20.2.2 Others-Quoted Maple Leaf Cement Factory Limited 13,747 (2007: 13,747) fully paid ordinary shares of Rs 10 each Market value - Rs 0.149 million (2007: Rs 0.335 million) 1,999 (2007: 1,999) fully paid preference shares of Rs 10 each Market value - Rs 0.017 million (2007: Rs 0.016 million) First Capital Mutual Fund 89,000 (2007: 89,000) certificates of Rs 10 each Market value - Rs 0.734 million (2007: Rs 0.899 million) Oil and Gas Development Company Limited 2,353 (2007: 2,353) fully paid ordinary shares of Rs 10 each Market value - Rs 0.293 million (2007: Rs 0.282 million) Pakistan Petroleum Limited 550 (2007: 500) fully paid ordinary shares of Rs 10 each Market value - Rs 0.135 million (2007: Rs 0.131 million) Kot Addu Power Company Limited 500 (2007: 500) fully paid ordinary shares of Rs 10 each Market value - Rs 0.024 million (2007: Rs 0.03 million) Habib Bank Limited 110 (2007: Nil) fully paid ordinary shares of Rs 10 each Market value - Rs 0.023 million (2007: Nil) 20.3 282 20 282 20 2007 (Rupees in thousand)
890
890
76
76
27
27
15
15
24 1,334
1,310
Investments with a face value of Rs 102 million (2007: Rs 17.0 million) are pledged as security against bank guarantees. 2008 2007 Note (Rupees in thousand)
21.
Long term loans, advances and deposits Loans to employees - considered good - Executives - Others Less: Receivable within one year - Executives - Others Loans to related party - considered good Less receivable within one year Advance against issue of shares - Related party Security deposits 21.2 26 21.3 21.1 89 5,261 5,350 73 1,548 1,621 3,729 154,851 17,206 137,645 339,816 42,986 524,176 444 5,430 5,874 359 1,503 1,862 4,012 172,057 17,206 154,851 38,050 196,913
97

2008 2007 (Rupees in thousand) 21.1 Executives Opening balance Addition during the year Interest accrued Less: Repayment during the year 444 17 461 372 89 285 400 33 718 274 444
These represent secured loans given to executives and other employees for house building and purchase of motor vehicles and are recoverable in equal monthly installments over a period of 24 to 96 months. The loans given to executives and other employees carry interest at the rate of 10% per annum (2007: 10% per annum) except for loans given to workers which are interest free. The loans of Rs 5.350 million (2007: Rs 5.874 million) are secured against the employees' respective retirement benefits. The maximum aggregate amount due from executives at any time during the year was Rs 0.413 million (2007: Rs 0.594 million). 21.2 This represents un-secured loan of Rs 122.500 million and Rs 49.557 million given to Sui Northern Gas Pipelines Limited for the development of infrastructure for supply of natural gas to the plants at D. G. Khan and Khairpur. Mark-up is charged at rates ranging from 1.5% to 2% per annum (2007: 1.5% to 2 % per annum) and is receivable annually. This amount is receivable in 10 annual installments commencing 01 January 2007 and 28 March 2008. This represents payment to Nishat Hotels Limited as advance for issuance of shares. 2008 2007 (Rupees in thousand) 22 Stores, spares and loose tools Stores [including in transit Rs 179.944 million (2007: Rs 156.173 million)] Spares Loose tools 1,901,227 410,983 11,673 2,323,883 1,107,260 385,284 3,747 1,496,291
21.3
Stores and spares include items which may result in fixed capital expenditure but are not distinguishable. 2008 2007 (Rupees in thousand) 23 Stock-in-trade Raw materials Packing material Work-in-process Finished goods 968,089 95,080 118,292 118,864 1,300,325 28,871 53,855 142,686 69,728 295,140
98

2008 2007 (Rupees in thousand) 291,570 24.1 3,662 168,214 463,446 3,485 140,760 144,245
Note 24 Trade debts - considered good - Secured - Unsecured: Related parties Others 24.1 Due from related parties Nishat Mills Limited Nishat (Chunian) Limited MCB Bank Limited Gulf Nishat Apparel Limited Nishat Power Limited These are in the normal course of business and are interest free. 25 Investments Available-for-sale Related parties Add: Revaluation surplus At fair value through profit and loss 25.1 Related parties-Quoted Nishat Mills Limited - associated company 1,875,658 (2007: 1,875,658) fully paid ordinary shares of Rs 10 each Market value -Rs 161.250 million (2007: Rs 244.681 million) Nishat (Chunian) Limited - associated company 151,199 (2007: 151,199) fully paid ordinary shares of Rs 10 each Market value - Rs 3.630 million (2007: Rs 6.221 million) MCB Bank Limited 45,706,541 (2007: 45,706,541) fully paid ordinary shares of Rs 10 each Market value Rs 14,917.702 million (2007: Rs 16,682.888 million) 25.1
769 2,893 3,662
2,415 425 607 38 3,485
661,666 14,420,916 15,082,582 23 15,082,605
661,666 16,272,124 16,933,790 16,933,790
25.2
171,794
171,794
11,638
11,638
478,234 661,666
478,234 661,666
Nishat Mills Limited and Nishat (Chunian) Limited are associated undertakings as per the Companies Ordinance, 1984, however, for the purpose of measurement, these have been classified as available for sale and measured at fair value as the Group does not have significant influence over these companies
99

Note 25.2 At fair value through profit and loss Habib Bank Limited 110 (2007: Nil) fully paid ordinary shares of Rs 10 each Market value - Rs 0.023 million (2007: Nil) 26 Advances, deposits, prepayments and other receivables Loans to employees - considered good Advances - considered good - to employees - to suppliers Current portion of long term receivable from related party Due from related parties Mark-up receivable from related party Derivative financial instruments Profit receivable on bank deposits Prepayments Letters of credit - margins, deposits, opening charges, etc. Claims recoverable from government - Income tax - Sales tax - Excise duty - Export rebate Dividend receivable Receivable against sale of fixed assets Other receivables 26.1 26.2
23 23
1,621 26.1 21 26.2 26.3 26.4 & 26.5 2,848 36,760 39,608 17,206 11,492 1,698 102,235 180 5,666 124,847 83,202 18,374 20,075 246,498 11 1,617 427,832
1,862 2,370 42,154 44,524 17,206 1,241 1,386 101 257 2,898 86,738 44,696 13,036 9,015 153,485 5,000 1,355 229,315
26.6
Included in advances to employees are amounts due from executives of Rs 385 thousand (2007: Rs 152 thousand). 2008 2007 (Rupees in thousand) Due from related parties Nishat Mills Limited Security General Insurance Company Limited These relate to normal business of the Group and are interest free. 11,492 11,492 1,092 149 1,241
26.3 26.4
This represents mark-up receivable from Sui Northern Gas Pipelines Limited against the loan as referred to in note 21.2. The Group has entered into two interest rate cross currency swaps agreements with banks for a notional amount of USD 15 million (2007: Nil), maturing upto 29 September 2013. The outstanding balance of these arrangements is USD. 13.712 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements the Group would pay 3 months KIBOR rates and receive 3 months LIBOR rates as per the respective arrangements on quarterly basis, further under cross currency swaps arrangements the Group would receive PKR and pay USD, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 89.076 million (2007: Nil).

26.5The Group has entered into an interest rate cross currency swaps agreements with a bank for a notional amount of Rs. 750 million (2007: Nil), maturing upto 23 November 2009. The outstanding balance of these arrangements is Rs. 750 million (2007: Nil) as at the balance sheet date. Under interest rate swap arrangements the Group would receive 6 months KIBOR rates and pay 6 months LIBOR rates as per the respective arrangements, further under cross currency swaps arrangements the Group would receive USD and pay PKR, which would be settled semi annually. As at the balance sheet date, the net fair value of these interest rate cross currency swaps is Rs 13.160 million (2007: Nil). 26.6 Sales tax recoverable includes an amount of Rs 47.439 million (2007: Rs 44.696 million) which represents amounts which have been recovered by the sales tax department against miscellaneous demands raised by it. The Group has filed appeals against the demands at different forums.
27
Pending the outcome of the appeals, the amount has been shown as recoverable in the consolidated financial statements as according to the management, there are meritorious grounds that the ultimate decision would consolidated be in its favour. 2008 2007 (Rupees in thousand) Cash and bank balances At banks Saving accounts - Pak rupee - Foreign currency US $ 22.20 (2007: US $ 22.22) Current accounts Cash in hand 27.1 27.2
135,447 2 107,345 242,794 1,286 244,080
66,088 1 45,563 111,652 4,521 116,173
The balances in saving accounts bear mark-up which ranges from 0.1% to 5% per annum (2007: 0.1% to 3.5% per annum).
28
Included in balances at banks on saving accounts are Rs 29.380 million (2007: Rs 12.975 million) which are under lien to secure bank guarantees as referred to in note 14.2. 2008 2007 (Rupees in thousand) Sales - net Local sales Export sales Less: Excise duty Special Excise duty Sales tax Commission to stockists 14,732,445 2,741,111 17,473,556 2,729,046 99,556 1,929,858 250,749 5,009,209 12,464,347 8,887,306 511,826 9,399,132 1,679,829 1,159,214 140,464 2,979,507 6,419,625
28.1
Export sales include rebate on exports amounting to Rs 16.500 million (2007: Rs 2.736 million).
101

Note 29 Cost of sales Raw and packing materials consumed Salaries, wages and other benefits Electricity and gas Furnace oil/coal Stores and spares consumed Repair and maintenance Insurance Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Royalty Excise duty Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Estate development Rent, rates and taxes Freight charges Other expenses Opening work-in-process Transfer from trial run Closing work-in-process 29.1 29.2 17.1 18.1 1,368,488 480,352 1,644,759 4,597,486 764,204 98,530 43,904 1,354,192 3,331 83,731 25,962 15,541 5,389 3,480 1,499 9,639 6,982 5,753 20,791 10,534,013 142,686 (118,292) 24,394 Cost of goods manufactured Opening stock of finished goods Transfer from trial run Closing stock of finished goods 10,558,407 107,804 (118,863) (11,059) Less: Own consumption capitalised 29.1 19,302 10,528,046 580,717 293,929 605,335 1,902,567 383,159 22,913 21,840 469,367 13,108 45,349 15,373 7,159 1,784 945 499 6,227 4,113 3,396 9,449 4,387,229 161,989 50,462 (142,686) 69,765 4,456,994 5,058 39,300 (69,728) (25,370) 43,984 4,387,640 2008 2007 (Rupees in thousand)
Salaries, wages and other benefits include Rs 13.106 million (2007: Rs 7.950 million), Rs 8.661 million (2007: Rs. 5.462 million) and Rs 7.783 million (2007: Rs 6.068 million) respectively, in respect of provident fund contribution by the Group, provision for gratuity and staff compensated absences. Stores and spares consumed during the year include Rs. 3.465 million (2007: Rs 0.874 million) being stores and spares written off.
29.2
102

Note 30 Administrative expenses Salaries, wages and other benefits Electricity Repair and maintenance Insurance Depreciation on property, plant and equipment Depreciation on assets subject to finance lease Vehicle running Postage, telephone and telegram Printing and stationery Legal and professional charges Travelling and conveyance Rent, rates and taxes Entertainment School expenses Fee and subscription Other expenses 30.1 Salaries, wages and other benefits Salaries, wages and other benefits include Rs 2.099 million (2007: Rs 1.645 million), Rs. 1.620 million (2007: 0.982 million) and Rs 2.041 million (2007: Rs 2.278 million) respectively, in respect of provident fund contribution by the Group, provision for gratuity and staff compensated absences. 2008 2007 (Rupees in thousand) 30.2 Legal and professional charges Legal and professional charges include the following in respect of auditors' services for: KPMG Taseer Hadi & Co. Statutory audit Half yearly review Certification and sundry services Out of pocket expenses A. F. Ferguson & Co. Statutory audit - Subsidiary Half yearly review - Parent Tax services - Group Certification and sundry services Out of pocket expenses 850 225 20 75 175 553 15 1,913 700 20 50 200 410 45 73 1,498 30.1 57,150 2,985 1,620 1,685 11,956 126 3,545 3,441 2,210 3,522 6,783 176 1,136 9,004 1,982 3,424 110,745 48,958 2,678 1,324 1,277 9,027 1,571 5,353 2,738 1,897 3,369 6,104 2,699 2,780 8,491 2,966 2,937 104,169 2008 2007 (Rupees in thousand)
17.1 18.1
30.2

Note 31 Selling and distribution expenses Salaries, wages and other benefits Electricity Repair and maintenance Insurance Depreciation on property, plant and equipment Vehicle running Postage, telephone and telegram Printing and stationery Rent, rates and taxes Travelling and conveyance Entertainment Advertisement and sales promotion Freight charges - local Freight and handling charges - export Other expenses 31.1 31.1 35,431 875 299 497 1,342 1,940 1,235 1,553 3,438 3,720 296 3,395 14,135 492,219 2,595 562,970 29,727 670 884 235 1,132 1,603 1,361 1,094 2,312 1,406 189 2,643 50 19,637 2,179 65,122 2008 2007 (Rupees in thousand)
17.1
Salaries, wages and other benefits include Rs 1.433 million (2007: Rs 1.185 million), Rs 0.987 million (2007: 0.760 million) and Rs 1.131 million (2007: Rs 1.178 million) respectively, in respect of provident fund contribution by the Group, provision for gratuity and staff compensated absences. 2008 2007 (Rupees in thousand)
32
Other operating expenses Workers' profit participation fund Book value of asset written off Donation Worker welfare fund Exchange loss 17 32.1 9,734 5,000 580,953 595,687 32.1 None of the directors and their spouses had any interest in any of the donees. 93,145 11,050 35,112 414 139,721
33
Other operating income Income from financial assets Income on bank deposits Interest on loans to employees Dividend income from: - Related parties - Others Income from non-financial assets Rental income Profit on sale of property, plant and equipment Scrap sales Mark-up on loan/advances to related parties Provisions and unclaimed balances written back 727 128 33.1 820,303 143 820,446 821,301 1,592 4,488 10,394 6,973 1,858 25,305 846,606
104
1,659 182 465,656 118 465,774 467,615 1,634 4,490 4,170 1,208 303 11,805 479,420

2008 2007 (Rupees in thousand) 33.1 Dividend income from related parties Nishat Mills Limited Nishat (Chunian) Limited MCB Bank Limited Adamjee Insurance Company Limited 34 Finance cost Interest and mark-up on: - Long term finances: - Long term loans - Preferred dividend - Short term borrowings - Finance lease - Workers' profit participation fund Loss on derivative financial instruments Guarantee commission Bank charges 34.1 1,040,737 499,413 584 522 205,308 4,165 15,569 1,766,298 323,183 28,281 103,324 6,564 98 1,813 4,496 467,759 50,393 10,603 750,527 8,780 820,303 27,487 10,603 420,446 7,120 465,656
During the year, borrowing costs amounting to Nil (2007: Rs. 879.781 million) have been capitalized in the property, plant and equipment pertaining to the new expansion project. 2008 2007 (Rupees in thousand)
35
Provision for taxation For the year - Current - Deferred Prior year - Current - Deferred 108,214 (309,167) (200,953) (5) (5) (200,958) 33,000 312,435 345,435 (247,435) (247,435) 98,000
35.1
The provision for current taxation represents the minimum tax due under section 113 of the Income Tax Ordinance, 2001, which is available for set off against normal tax liability that may arise in five succeeding years. For purposes of current taxation, the tax credit available for carry forward as at 30 June 2008 are estimated approximately at Rs 10,360 million (2007: Rs 7,897 million).
35.2
Since the Group is liable to pay minimum tax, therefore, no numerical tax reconciliation is given.

Note 36 Cash flow from operating activities (Loss) / profit before tax Adjustment for : - Depreciation on property, plant and equipment - Depreciation on assets subject to finance lease - Profit on disposal of property, plant and equipment - Dividend income - Share of loss of associate - Store and spares directly written off - Markup income - Retirement and other benefits accrued - Excess of acquirer's interest in the net assets of acquiree - Exchange loss - net - Finance cost Profit before working capital changes Effect on cash flow due to working capital changes: - Increase in stores, spares and loose tools - Increase in stock-in-trade - Increase in trade debts - Increase in advances, deposits, prepayments and other receivables - Decrease in trade and other payables Cash generated from operations 37 Cash and cash equivalents Short term borrowings - secured Cash and bank balances 38 Remuneration of Chief Executive, Directors and Executives 38.1 The aggregate amount charged in the consolidated financial statements for the year for remuneration, including certain benefits, to the chief executive, full time working directors and executives of the Group is as follows: Chief Executive 2008 2007 (Rupees in thousand) Managerial remuneration Contributions to provident and gratuity funds Housing Utilities Leave passage Medical expenses Others Number of persons 4,723 3,149 469 1,940 10,281 1 3,936 1,752 394 863 3,378 10,323 1 Directors 2008 2007 (Rupees in thousand) 7,906 1,370 867 13 354 72 1,432 12,014 2 6,214 1,207 540 340 477 61 1,338 10,177 2 Executives 2008 2007 (Rupees in thousand) 73,737 10,822 33,978 1,965 1,068 12,835 134,405 69 51,014 5,159 12,082 3,797 1,442 894 16,770 91,158 48 14 27 (8,194,330) 244,080 (7,950,250) (3,942,972) 116,173 (3,826,799) (175,273) 1,367,490 3,457 (4,488) (820,446) 8,674 3,465 (7,828) 22,616 (86,194) 580,953 1,766,298 2,658,724 (806,424) (203,962) (221,928) (146,567) (34,415) (1,413,296) 1,245,428 1,720,471 479,526 14,679 (4,490) (465,774) 14,163 874 (3,049) 16,533 414 467,759 2,241,106 (661,116) (68,854) (70,080) (63,728) (380,723) (1,244,501) 996,605 2008 2007 (Rupees in thousand)

The Group also provides the chief executive and some of the directors and executives with free transport and residential telephones. 38.2 Remuneration to other directors Aggregate amount charged in the consolidated financial statements for the year for fee to 9 directors (2007: 2 directors) was Rs Nil (2007: Rs Nil). 39 Transactions with related parties The related parties comprise, associated companies, other related companies, directors of the Group, key management personnel and post employment benefit plans. The directors of the related companies are close members of the family of the directors of the Group. The Group in the normal course of business carries out transactions with various related parties. Amounts due from and due to related parties are shown under receivables and payables, dividend income is disclosed in note 33, expense charged in respect of staff retirement benefit plans is disclosed in note 10 and remuneration of the key management personnel is disclosed in note 38. Other significant transactions with related parties are as follows: 2008 2007 (Rupees in thousand) Relationship with the company i. Related parties Nature of transaction Sale of goods and services Insurance premium Purchase of services Insurance claims received Mark-up income on balances with related parties Rental income 25,446 57,090 1,022,511 32,213 3,691 27,062 34,661 369,777 2,323 7,748 1,155
All transactions with related parties have been carried out on commercial terms and conditions. 40 Acquisition of subsidiary and controlling interest Business combination On 10 May 2008 the Group obtained control of Nishat Paper Product Limited-NPPL (Formerly Nishat Shuaiba Paper Product Limited), previously accounted for as an associate, by acquiring additional 30% of the shares and voting interest in the company. NPPL manufactures and distribute paper bags. The acquisition of the NPPL has enabled the Group to have continuous supply of paper bags for cement production. In these consolidated financial statements, the subsidiary contributed revenue of Rs. 18 thousands and loss of Rs. 8.67 million. If the acquisition had occurred on 01 July 2007, the consolidated revenue would have been higher Rs. 92 thousands and consolidated profit / (loss) for the period would have been higher / lower by Rs. 43 million.

The following summarise the major classes of consideration transferred, and the recognised amount of assets acquired and liabilities assumed: (Rupees in thousand) Cumulative purchase consideration - net of cash acquired Identifiable assets acquired and liabilities assumed Property, plant and equipment Assets subject to finance lease Deferred tax assets Long term loans, advances and deposits Stores, spares and loose tools Stock-in-trade Trade debts Investments Advances, deposits, prepayments and other receivables Cash and bank balances Long term finances Liabilities against assets subject to finance lease Short term borrowing - secured Trade and other payables 1,246,379 1,704 68,000 1,130 24,633 854,470 97,273 23 23,147 17,708 (600,595) (393) (597,310) (475,681) 660,488 Less: Minority interest Less: Post acquisition reserve Share of net assets acquired Excess of acquirer's interest in the net assets of acquiree arising on acquisition 41. Plant capacity and actual production Capacity 2008 2007 Clinker Unit 1 Unit 2 Unit 3 Cement bags Actual production 2008 2007 330,244 39,024 291,220 (86,194) A 205,026
B A-B
M. Tons M. Tons M. Tons Bags
810,000 1,200,000 2,010,000 120,000,000
810,000 1,200,000 2,010,000 -
912,303 1,368,798 1,861,663 80,188,180
948,289 1,338,345 1,536 -

42. Financial assets and liabilities
INTEREST/MARK-UP BEARING NON INTEREST BEARING Maturity up Maturity Maturity up Maturity Sub Sub to one after to one after Total Total year one year year one year Total 2008 Credit risk 2008
Financial assets On balance sheet Investments Long term loans and deposits 18,827 Trade debts Advances, deposits, prepayments and other receivables - Mark-up receivable from related party - Profit receivable on bank deposits - Dividend receivable - Dividend financial instruments 102,235 - Other receivable Cash and bank balances 135,449 256,511 Off balance sheet Total Financial liabilities On balance sheet Long term finances Liabilities against assets subject to finance lease Long term deposits Short term borrowing - secured Trade and other payables Accrued markup 2,823,061 1,735 8,194,330 11,019,126 8,871,051 11,694,112 393 2,128 8,194,330 8,871,444 19,890,570 256,511 137,734 156,561 -
15,082,605 1,548 463,446
6,592,332 21,674,937 21,674,937 45,995 47,543 204,104 463,446 463,446
204,104 463,446
137,734 137,734
1,255 443 11 102,235 1,617 135,449 108,631 394,245 15,659,556 394,245 15,659,556
1,255 1,255 443 443 11 11 102,235 1,617 1,617 108,631 244,080 6,638,327 22,297,883 22,692,128 6,638,327 22,297,883 22,692,128
1,255 443 11 102,235 1,617 242,794 1,015,905 1,015,905
980,687 391,610 1,372,297
73,890 73,890
- 11,694,112 2,128 73,890 73,890 8,194,330 980,687 980,687 391,610 391,610 1,446,187 21,336,757
Off balance sheet Contracts for capital expenditure Guarantees Letters of credit for capital expenditure Letters of credit other than for capital expenditure Total On balance sheet gap Off balance sheet gap 113,987 867,869 955,962 374,078 2,311,896 3,684,193 73,890 113,987 867,869 955,962 374,078 113,987 867,869 955,962 374,078
11,019,126 (10,762,615) -
8,871,444 19,890,570
2,311,896 2,311,896 3,758,083 23,648,653 1,355,371
(8,733,710) (19,496,325) 14,287,259 (2,311,896)
6,564,437 20,851,696 -
(2,311,896) (2,311,896)
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the consolidated financial statements.

INTEREST/MARK-UP BEARING Maturity up Maturity Sub to one after Total year one year NON INTEREST BEARING Maturity up Maturity Sub to one after Total year one year Total 2007 Credit risk 2007
Financial assets On balance sheet Investments Long term loans and deposits 17,565 Trade debts Advances, deposits, prepayments and other receivables - Mark-up receivable from related party - Profit receivable on bank deposits - Dividend receivable - Other receivable Cash and bank balances 66,089 83,654 Off balance sheet Total 83,654 Financial liabilities On balance sheet Long term finances Liabilities against assets subject to finance lease Long term deposits Short term borrowing - secured Trade and other payables Accrued markup 2,018,569 20,588 3,942,972 5,982,129 Off balance sheet Contracts for capital expenditure Guarantees Letters of credit for capital expenditure Letters of credit other than for capital expenditure 5,982,129 8,687,588 14,669,717 8,686,447 10,705,016 1,141 21,729 3,942,972 154,936 172,501 -
16,933,790 1,503 144,245
8,101,781 25,035,571 25,035,571 41,346 42,849 215,350 144,245 144,245
215,350 144,245
154,936 154,936
66,089 238,590 238,590
1,386 101 6,241 50,084 17,137,350 17,137,350
1,386 1,386 101 101 6,241 6,241 50,084 116,173 8,143,127 25,280,477 25,519,067 8,143,127 25,280,477 25,519,067
1,386 101 6,241 111,652 478,975 478,975
1,027,274 342,612 1,369,886
79,467 79,467
- 10,705,016 79,467 1,027,274 342,612 21,729 79,467 3,942,972 1,027,274 342,612
8,687,588 14,669,717
1,449,353 16,119,070
306,936 828,736 1,013,409 431,169 2,580,250 3,950,136 15,767,464 (2,580,250)
79,467
306,936 828,736 1,013,409 431,169 2,580,250
306,936 828,736 1,013,409 431,169 2,580,250
4,029,603 18,699,320 9,399,997
(5,898,475) (8,532,652) (14,431,127) -
8,063,660 23,831,124 -
(2,580,250) (2,580,250)
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the consolidated financial statements.

42.1 Financial risk management objectives The Group finances its operations through equity, borrowings and management of working capital with a view to maintaining a reasonable mix between the various sources of finance to minimize risk. Taken as a whole, risk arising from the Group's financial instruments is limited as there is no significant exposure to market risk in respect of such instruments. (a) Concentration of credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The Group's credit risk is primarily attributable to its trade debts and its balances at banks. The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The Group has no significant concentration of credit risk as exposure is spread over a large number of counter parties in the case of trade debts. Out of the total financial assets of Rs. 22,692.128 million (2007: Rs 25,519.067 million) financial assets which are subject to credit risk amount to Rs. 1,015.905 million (2007: Rs 478.975 million). To manage exposure to credit risk, the Group applies credit limits to its customers and also obtains collaterals, where considered necessary. (b) Interest rate risk management Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Significant interest rate risk exposures are primarily managed by a mix of borrowings at fixed and variable interest rates and contracting floor and cap of interest rates as referred to in note 7. (c) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions with foreign buyers and suppliers. The Group, where considered necessary, uses forward contracts and foreign currency forward options against payables exposed to foreign currency risks. (d) Liquidity risk Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Group follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. (e) Capital management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Group defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Group's objectives when managing capital are: (i) (ii) to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders.

The Group manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt. The Group monitors capital on the basis of the debt-to-equity ratio - calculated as a ratio of total debt to equity. The debt-to-equity ratios as at 30 June 2008 and at 30 June 2007 were as follows: 2008 2007 (Rupees in thousand) Total debt Total equity and debt Debt-to-equity ratio 20,285,193 50,487,726 40% 15,012,329 49,935,514 31%
The increase in the debt-to-equity ratio in 2008 resulted primarily from additional borrowings made during the year to meet finance the expansion project and meet additional working capital requirements. Neither there were any changes in the Groups approach to capital management during the year nor the Group is subject to externally imposed capital requirements. 42.2 Fair value of financial assets and liabilities The carrying value of financial assets and liabilities reflected in the financial statements approximates their fair values. Fair value is determined on the basis of objective evidence at each reporting date. 43 Earnings per share - basic and diluted 2008 43.1 Earnings per share - Basic Profit for the year Weighted average number of ordinary shares Earnings per share 43.2 Earnings per share - Diluted There is not dilution effect on the basic earnings per share as the Company has no such commitments. 44 Events after the balance sheet date The Board of Directors have proposed a final dividend for the year ended 30 June 2008 of Rs Nil per share (2007: Rs 1.50 per share) amounting to Rs Nil million (2007: Rs 380.312 million) at their meeting held on19 September, 2008 for approval of the members at the Annual General Meeting to be held on 31 October, 2008 . The Board has also recommended a transfer of Rs. Nil million (2007: Rs. 1,375 million) to general reserve. These financial statements do not reflect these appropriations. Rupees in thousand Number Rupees 30,022 252,485,315 0.12 1,622,471 252,485,315 6.43 2007
65

45 Date of authorisation These financial statements were authorised for issue on 19 September, 2008 by the Board of Directors of the Group. 46 General 46.1 46.2 Figures have been rounded off to the nearest thousand of Rupees. Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However, no significant re-arrangements have been made.
Chief Executive
Director
65
PROXY FORM
Folio No. CDC Participants Name Shares Held CDC Participant I.D. No. A/C, Sub A/C No.
I/We of b e i n g a m e m b e r o f D . G . K H A N C E M E N T C O M PA N Y L I M I T E D h e r e b y a p p o i n t
(NAME) of or falling him/her (NAME) of
who is also a member of the Company, vide Registered Folio No./CDC A/C Sub A/C No.___________________as my/our proxy to vote for me / us and on my / our behalf at the 30th Annual General Meeting of the Company to be held on 31st October 2008 at 3:30 p.m. at Registered Office, Nishat House, 53-A, Lawrence Road, Lahore and at any adjournment thereof. As witness my/our hand this_______________day of _______________2008 Witness Signature Name Dated Place
Signature on Five Rupees Revenue Stamp
Note: Proxies , in order to be effective, must be received at the Companys Registered Office not less than forty eight hours before the time for holding the meeting and must be stamped, signed and witnessed. Proxies of the members through CDC shall be accompanied with attested copies of thier NIC. The shareholders through CDC are requested to bring their original NIC, Sub Account Number and Participant I.D. No. to produce at the time of attending the meeting.

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D.G.

Khan Cement Company Limited

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited CORPORATE PROFILE

Chairperson Chief Executive

Chief Financial Officer Member/Chairman Member Member

Company Secretary Bankers

Auditors Legal Advisors Registered Office

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited NOTICE OF ANNUAL GENERAL MEETING

LAHORE SEPTEMBER 19, 2008

( KHALID MAHMOOD CHOHAN ) COMPANY SECRETARY

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited DIRECTORS REPORT

INSTALLED CAPACITY AND INDUSTRY VS. DGK UTILIZATION

30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0

DGK-Unit-1 DGK-Unit-2 KHP-Unit-1 Total

FY 2006-07 M.Tons 948,289 1,338,345 146,794 2,433,428

D.G. Khan Cement Company Limited

112% 96% 90%

120% 110% 103% 100% 90%

2001 2002 2003

2004 2005 2006 2007

FY 2006-07 M.Tons 1,075,745 1,312,236 154,622 2,542,603

LOCAL & EXPORT SALES

D.G. Khan Cement Company Limited

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 (500)

Profit Ater Tax

Profit Before Tax

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

For and on behalf of the Board

Lahore September 19, 2008

MIAN RAZA MANSHA Chief Executive

D.G. Khan Cement Company Limited OPERATING AND FINANCIAL DATA

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

SHARE HOLDING (NO. OF SHARES)

D.G. Khan Cement Company Limited

NO. OF SHAREHOLDERS 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 7294

SHARE HOLDING (NO. OF SHARES)

CLASSIFICATION OF ORDINARY SHARES BY CATEGORIES AS AT JUNE 30, 2008

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

D.G. Khan Cement Company Limited

Lahore September 19, 2008

MIAN RAZA MANSHA Chief Executive NIC Number : 35202-2539500-5

Lahore September 19, 2008

MIAN RAZA MANSHA Chief Executive NIC Number : 35202-2539500-5

Lahore September 19, 2008

KPMG Taseer Hadi & Co Chartered Accountants

D.G. Khan Cement Company Limited AUDITORS' REPORT TO THE MEMBERS

Lahore September 19, 2008

KPMG Taseer Hadi & Co. Chartered Accountants

D.G. Khan Cement Company Limited BALANCE SHEET

9,500,000 500,000 10,000,000 2,535,412 27,595,698 (50,853) 30,080,257

9,500,000 500,000 10,000,000 2,535,412 29,630,084 1,757,689 33,923,185

D.G. Khan Cement Company Limited AS AT JUNE 30, 2008

22,977,894 5,135 2,488,307 6,795,961 523,046 32,790,343

22,117,551 133,376 1,907,063 8,174,474 196,913 32,529,377

1,263,660 (1,727,177) (5,054) (135,780) (5,577) (609,928)