CONTENTS. Company Information 2. Vision, Mission Statement 3. Operating and Financial Data 4. Notice of Annual General Meeting 5. Directors' Report 6

CONTENTS Company Information 2 Vision, Mission Statement 3 Operating and Financial Data 4 Notice of Annual General Meeting 5 Directors' Report 6 Statement of Compliance with the Best Practices 9 of Code of Corporate Governance Review Report to the members on Statement of Compliance 11 with the Best Practices of Code of Corporate Governance Auditors' Report to the Members 12 Balance Sheet 13 Profit and Loss Account 14 Statement of Comprehensive Income 15 Cash Flow Statement 16 Statement of Changes in Equity 17 Notes to the Accounts 18 Pattern of Shareholding 48 Additional Information on Pattern of Shareholding 50 As required by the Code of Corporate Governance Form of Proxy 51

COMPANY INFORMATION BOARD OF DIRECTORS BANKERS Askari Bank Limited Mr. Kamran Khan Chairman The Bank of Punjab & Chief Executive United Bank Limited Al-Baraka Islamic Bank Mr. Imran Qamar Director Faysal Bank Limited Mr. Momin Qamar Director MCB Bank Limited Mr. Bilal Qamar Director National Bank of Pakistan Mrs. Shaista Imran Director Bank AI-Habib Limited Mrs. Samina Kamran Director Bank Alflah Limited Mrs. Misbah Momin Director Habib Bank Limited AUDIT COMMITTEE REGISTERED & HEAD OFFICE Mrs. Misbah Momin Chairperson 103-Fazal Road, Lahore Cantt. Lahore. Mr. Momin Qamar Member Tel: 042-36674301-05 Mr. Bilal Qamar Member Fax: 042-36660693 www.flyingcement.com STATUTORY AUDITORS M/S. Tahir Siddqi & Co. PRODUCTION FACILITIES Chartered Accountants 25Km, Lilla Interchange (A member firm of TIAG Int'l) Lahore-Islamabad Motorway, Mangowal, Distt. Khushab. COST AUDITORS M/S. Mumtaz Balouch & Co. SHARE REGISTRAR Chartered Accountants THK Associates (Pvt) Limited Ground Floor, State Life Building-Ill INTERNAL AUDITOR Dr. Zia Uddin Ahmed Road, Mr. Imran Matloob Khan P.O.Box 8533 Karachi 75530 COMPANY SECRETARY Tel: 021-111-000-322 Mr. Mubashir Asif Fax:021-35655595 CHIEF FINANCIAL OFFICER Mr. Muhammad Basharat Jamil LEGAL ADVISOR Mr. Muhammad Atif Amin Advocate High Court WEBSITE Www.flyingcement.com E-MAIL info@flyingcement.com info@flyinggroup.com.pk FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 02

VISION To be a premier quality cement manufacturing unit engaged in nation building through the most efficient utilization of resources. MISSION Successfully deliver quality cement by using innovative practices with the ultimate goal of increasing the satisfaction of our customers. To minimize the cost of production by using state of the art technology and utilizing our experience in increasing profits for our shareholders. 03 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

Operating and Financial Data Particulars 2010 2009 2008 2007 2006 Operating Results (Rs.) Net Sales 80,616,760 666,072,160 158,298,146 1,178,787,297 1,554,374,647 Gross Profit / (Loss) (159,072,513) (148,958,014) (277,118,832) 118,129,457 328,753,806 Pre tax profit / (loss) (201,969,891) (239,449,822) (331,339,139) 79,595,906 282,788,737 After tax profit / (loss) (172,173,546) (161,746,756) (272,587,247) 16,645,595 284,333,065 Financial Position (Rs.) Current Assets 692,300,326 673,708,476 659,210,727 689,992,129 433,902,231 Current Liabilities 745,860,161 673,113,384 637,789,931 473,590,167 164,929,861 Property, Plant & Equipments 4,856,004,029 4,754,732,832 4,696,595,213 4,716,694,669 4,543,468,026 Total Assets 5,548,304,355 5,428,441,308 5,355,805,940 5,406,686,798 4,977,370,257 Long Term Liabilities 600,716,992 340,609,791 63,850,168 72,408,095 25,453,829 Share Holser's Equity 1,598,524,078 1,737,102,148 1,864,567,807 1,975,195,347 1,922,855,149 Ratios (%) Current Ratio 0.93 1.00 1.03 1.46 2.63 Debt to Equity Ratio 0.38 0.20 0.03 0.04 0.01 Gross Profit to Sale Ratio -197.32% -22.36% -175.06% 10.02% 21.15% Net Profit to Sales Ratio (before tax) -250.53% -35.95% -209.31% 6.75% 18.19% Earning Per Share (Rs.) Basic (before tax) (1.15) (1.36) (1.88) 0.45 3.44 Basic (after tax) (0.98) (0.92) (1.55) 0.09 3.46 FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 04

NOTICE OF 17th ANNUAL GENERAL MEETING th Notice is hereby given that 17 Annual General Meeting of the shareholders of Flying Cement Company Limited will be th held on 30 of October, 2010 at 12:00 hours at Sunfort Hotel, Liberty Market, Commercial Zone Gulberg, Lahore to transact the following business: th To confirm minutes of 16 Annual General Meeting of shareholders. To approve and adopt the audited accounts of the company for the year ended on June 30, 2010. To appoint the Auditors and fix their remuneration. To transact any other business with the permission of Chairman. (By Order of the Board) Lahore: October 09, 2010 (Mubasshir Asif) COMPANY SECRETARY Notes: 1. The Share Transfer Books of the company will be closed from October 22, 2010 to October 29, 2010 (inclusive of both days) 2. A shareholder entitled to attend and vote may appoint another member as his/her proxy to attend and vote in his/her place. In this case proxies must reach to the company not later than 48 hours of the start of meeting. 3. The shareholders are requested to notify the company of the change in their address, if any. 05 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

DIRECTORS REPORT th The Board of Directors of Flying Cement Company Limited present herewith the 17 annual report, together with the Company's audited financial statements for the year ended June 30, 2010. OPERATIONAL AND FINANCIAL RESULTS 2010 2009 Sales - Net 80,616,760 666,072,160 Gross (Loss) (159,072,513) (148,958,014) (Loss) after tax (172,173,546) (161,746,756) During the year under review, the prices of cement started recovering but on the other hand input cost was also increased therefore net effect remains negative as before. Cost for generation of electricity from captive power unit remains as usual extraordinarily high as against subsidized supply of electricity from WAPDA. To avoid operational losses, the management was forced to drop the production of cement at its lowest ebb and the volume of cement sale was contained to keep the cement brand just alive in the market. During the year, the management focused their efforts for installation of Grid Station, Electric Towers, procedural formalities and financial requirements to energize the unit on WAPDA supply at the shortest possible time. By the grace of All Mighty Allah, the management has accomplished the first top priority BMR agenda item i.e. switching over of electricity supply to WAPDA. WAPDA has energized our unit with effect from August 2010. The BMR program remained on the top of the Agenda. The BMR included installation of single raw mill (Vertical Type) in replacement of three raw mills (Ball Type), Building of sheds for coal, stacker and re-claimer. The management has envisaged to achieve the targets according to plans. The management had geared up its efforts to make the unit economical, compatible with any best unit in the country, so that, operational losses could be avoided and viability of the unit is secured by implementation of BMR program. The Company has posted Loss per share of Rs 0.98 after tax for the year ended June 2010, as against Loss per Share of Rs 0.92 for the year ended June 2009 CORPORATE AND FINANCIAL REPORTING FRAMEWORK The board reviews the company's strategic direction on regular basis. The business plans and budgetary targets, set by the Board are also reviewed regularly. The Board is committed to maintain a standard of corporate governance and ensures the compliance of the Code of Corporate Governance enforced by the Securities & Exchange Commission of Pakistan through Listing Rules of Stock Exchanges of the country. FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 06

Your directors are pleased to report that: The financial statements prepared by the management present fairly its state of affairs, the result of its operations, cash flow and changes in equity. Proper books of account have been maintained by the company. 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. The existing internal control system and procedures are continuously reviewed by the internal auditor. The process of review will continue and weaknesses in control will be removed. There are no significant doubts upon the company's 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 of stock exchanges. Key operating and financial data from the start of commercial production is annexed. No trade in share of Flying Cement Company Ltd. was carried out by the directors, CEO, CFO, company secretary and their spouses and minor children except of those as were reported to the regulatory authorities and disclosed in the annexed Pattern of Shareholding. The Board held 12 meetings during the year and attendance by each Director was as follows: Name of Director Total No. of No. of Board Board Meetings* Meetings Attended 1. Mr. Kamran Khan 12 12 2. Mr. Imran Qamar 12 12 3. Mr. Momin Qamar 12 12 4. Mr. Bilal Qamar 12 12 5. Mrs. Shaista Imran 10 10 6. Mrs. Samina Kamran 12 12 7. Mrs. Misbah Momin 10 10 8. Mr. Qasim Khan 2 2 9. Mr. Yousaf Kamran Khan 2 2 * Held during the period concerned director was on the board. 07 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

FUTURE OUTLOOK Our country is facing hazardous disaster due to heavy floods. Major part of the country has been affected badly. Government and Non-Government Organizations have come out in the field for the reconstruction in flood affected areas. We are foreseeing very positive upward trend in the cement consumption mainly for the reconstruction of houses and infrastructure in the flood affected areas. Besides demand of cement seems very promising due to high demand of cement in our neighboring countries like India, Afghanistan and African Countries as well. Our company has an edge as against our competitors for export of cement to India due to nearest approach through land route. PATTERN OF SHAREHOLDINGS Statement showing pattern of shareholding of the company is annexed. AUDITORS The present auditors M/s. Tahir Siddiqi & Co; Chartered Accountants, retire and being eligible have offered themselves for their reappointment. Audit committee has recommended the appointment of M/s Tahir Siddiqi & Co., Chartered Accountants. ACKNOWLEDGEMENT In conclusion, we extend our thanks and appreciation to shareholders, customers and employees of Flying Cement Company for their persistent support and trust and we do hope to maintain the cordial relations with our patronage. On behalf of the Board of Directors Lahore: October 09, 2010 KAMRAN KHAN Chairman FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 08

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulations No. 37 of the Karachi and Chapter XII of the Listing Regulations of the Lahore and Islamabad Stock Exchanges for the purpose of establishing a frame work of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The company had 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 interest on its Board of Directors at present. The board comprises seven Directors, including the CEO. The number of executive directors on the board is three including CEO. Remaining are 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 of Directors has adopted a vision / mission statement of the company and has also formulated significant policies as mentioned in the Code. 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 Chief Executive Officer, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman. 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. In-house orientations for the directors were made, as and when required, to apprise them of their duties and responsibilities and to brief them regarding amendments in the Companies Ordinance/Corporate Laws. 10. The Directors of the Company have given a declaration that they are aware of their duties, powers and responsibilities under the Companies Ordinance, 1984 and the listing regulations of the Stock Exchanges. The directors have also attended talks, workshops and seminars on the subject of Corporate Governance. 11. The Board of Directors has approved the appointment of CFO, Company Secretary and their remuneration and terms and conditions of employment, as determined by CEO. 12. 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. 09 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

13. The Financial statements of the Company were duly endorsed by the CEO and CFO before approval of the Board. 14. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding. 15. The company has complied with all the corporate and financial reporting requirements of the code. 16. The related party transactions have been placed before the audit committee and approved by the board of directors with necessary justification for non arm s length transactions and pricing methods for transactions that were made on terms equivalent to those that prevail in the arm s length transaction only if such terms can be substantiated. 17. The Board has formed an Audit Committee. It comprises of 3 members, two (2) of whom are non- Executive Directors. 18. 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. 19. The Board has setup an efficient internal audit function for the company. The officials conducting internal audit are considered suitably qualified and experienced for the purpose; and are conversant with policies and procedures of the company and they are involved in internal audit function of full time bases. 20. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), 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 ICAP. 21. 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. 22. The Management of the company is committed to good corporate governance, and appropriate steps are taken to comply with the best practices. 23. We confirm that all other material principles contained in the code have been complied. On behalf of the Board of Directors Lahore: October 09, 2010 KAMRAN KHAN Chairman FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 10

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 Flying Cement Company Limited (the Company) to comply with the Listing Regulation No. 33, 35 and 36 of the Karachi, Lahore and Islamabad Stock Exchanges respectively 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 Company's 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 systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board's statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such controls, the Company's corporate governance procedures and risks. Further, sub-regulation (xiii a) of the Listing Regulation 35, notified by The Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated January 19, 2009 requires the company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price, recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not. 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 Company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance, as applicable to the company for the year ended June 30, 2010. Lahore: October 09, 2010 Tahir Siddiqi & Co. Chartered Accountants Engagement Partner: Imran Saeed 11 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

AUDITORS' REPORT TO THE MEMBERS We have audited the annexed balance sheet of Flying Cement Company Limited as at June 30, 2010 and the related profit & loss account, statement of comprehensive statement, statement of changes in equity and cash flow statement 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 Company's management to establish and maintain a system of internal control, 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) in our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984; b) in our opinion: - i) the balance sheet and the 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 except for the change referred in note 4.1.2.4 with which we concur; ii) iii) the expenditure incurred during the year was for the purposes of the Company's business; and the business conducted, investments made and expenditure incurred during the year were in accordance with the objects of the Company; c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet and profit & loss account, statement of comprehensive income, statement of changes in equity and statement of cash flow 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 Company's affairs as at June 30, 2010 and of the loss, total comprehensive loss, changes in equity and its cash flows for the year then ended; and d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980. Lahore: October 09, 2010 Tahir Siddiqi & Co. Chartered Accountants Engagement Partner: Imran Saeed FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 12

BALANCE SHEET AS AT JUNE 30, 2010 Note 2010 EQUITY AND LIABILITIES SHARE CAPITAL & RESERVES Authorized capital 200,000,000 ordinary shares of Rs 10/- each. 2,000,000,000 2,000,000,000 Issued, subscribed and paid up capital 176,000,000, ordinary shares of Rs. 10/- each. 5 1,760,000,000 1,760,000,000 Reserves 6 (161,475,922) (22,897,852) 1,598,524,078 1,737,102,148 Surplus on revaluation of fixed assets 7 1,720,448,111 1,754,043,587 NON-CURRENT LIABILITIES Long term finance 8 567,759,233 311,532,325 Liabilities against assets subject to finance lease 9 21,157,759 17,277,466 Long term deposits 10 11,800,000 11,800,000 Deferred liabilities 11 882,755,013 923,572,398 1,483,472,005 1,264,182,189 CURRENT LIABILITIES Trade and other payables 12 563,957,431 349,128,710 Accrued interest / Mark-up 13 2,967,294 11,396,843 Short term finance 14 164,093,943 252,186,666 Current portion of: Liabilities against assets subject to finance lease 9 4,230,309 16,609,665 Long term finance 8 10,208,100 43,791,500 Provision for taxation 28 403,084-745,860,161 673,113,384 TOTAL LIABILITIES 2,229,332,166 1,937,295,573 Contingencies and commitments 15 - - TOTAL EQUITY AND LIABILITIES 5,548,304,355 5,428,441,308 ASSETS NON-CURRENT ASSETS Property, plant & equipment 16 4,856,004,029 4,754,732,832 CURRENT ASSETS Stores & Spares 17 39,320,838 29,174,560 Stock in trade 18 423,596,305 425,981,534 Trade debts 19 448,881 10,792,073 Advances, deposits, prepayments & other receivables 20 227,989,928 201,394,643 Cash and bank balances 21 944,374 6,365,666 692,300,326 673,708,476 TOTAL ASSETS 5,548,304,355 5,428,441,308 The annexed notes form 1 to 37 form an integral part of these financial statements. 2009 Momin Qamar Director Kamran Khan Chief Executive 13 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2010 Note 2010 2009 Sales 22 80,616,760 666,072,160 Cost of Sales 23 239,689,273 815,030,174 Gross Profit/(Loss) (159,072,513) (148,958,014) Operating Expenses Distribution Cost 24 2,982,274 7,021,029 Administrative Expenses 25 11,796,194 17,725,117 Other operating expenses 26-30,583 14,778,468 24,776,729 Operating Profit/(Loss) (173,850,981) (173,734,743) Financial Cost 27 (28,118,910) (65,715,079) Profit/(Loss) Before Taxation (201,969,891) (239,449,822) Taxation 28 29,796,345 77,703,066 Profit/(Loss) After Taxation (172,173,546) (161,746,756) Earning Per Share (before tax) - Basic (1.15) (1.36) Earning Per Share (after tax) - Basic (0.98) (0.92) The annexed notes form 1 to 37 form an integral part of these financial statements. Momin Qamar Director Kamran Khan Chief Executive FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 14

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30, 2010 2010 2009 Profit / (Loss) for the year (172,173,546) (161,746,756) Other Comprehensive income - - Total Comprehensive income/(loss) for the year (172,173,546) (161,746,756) The annexed notes form 1 to 37 form an integral part of these financial statements. Momin Qamar Director Kamran Khan Chief Executive 15 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2010 Cash Flow From Operating Activities 2010 2009 Profit for the period - before taxation (201,969,891) (239,449,822) Adjustment for non cash charges and other items Depreciation 76,092,078 75,402,445 Provision for gratuity 993,627 392,917 Loss on sale of assets - 30,583 Financial cost 28,118,910 65,715,079 105,204,615 141,541,024 Cash Inflow from operating activities before working capital changes (96,765,276) (97,908,798) Changes In Working Capital (Increase) / Decrease in current assets Stores & Spares (10,146,278) (22,661,148) Stock-in-trade 2,385,229 (21,352,399) Trade debtors 10,343,192 715,960 Advances, deposits, and other receivables (26,595,285) 19,762,037 (24,013,142) (23,535,550) Increase / (Decrease) in current liabilities Creditors, accruals and other liabilities 205,213,967 217,788,538 Cash Inflow/(Outflow) from Operating Activities-Before Taxation 84,435,549 96,344,190 Payment of Gratuity (1,996,829) - Taxes Paid - (390,804) Cash Inflow/(Outflow) From Operating Activities - After Taxation 82,438,720 95,953,386 Cash Inflow/(Outflow) From Investing Activities Fixed Capital Expenditures (177,764,479) (138,270,646) Sale Proceed of assets 401,204 4,700,000 (177,363,275) (133,570,646) Cash Flow From Financing Activities Financial charges paid (36,548,459) (61,404,564) Short term finance (35,797,106) (345,389,324) Liabilities against assets subject to finance lease (8,499,063) (18,815,977) Long term finance 222,643,508 316,434,937 Long term deposits - (5,705,000) Net Cash Inflow/(Outflow) From Financing Activities 141,798,880 (114,879,928) Net Increase / (decrease) in Cash and Cash Equivalents 46,874,325 (152,497,188) Cash and Cash Equivalents - at the beginning of the year (210,023,894) (57,526,706) Cash and Cash Equivalents - at the end of the period (163,149,569) (210,023,894) The annexed notes form 1 to 37 form an integral part of these financial statements. Momin Qamar Director Kamran Khan Chief Executive FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 16

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2010 Ordinary Accumulated Capital Share Capital Profit / (Loss) Reserve Total (Rs.) (Rs.) (Rs.) (Rs.) Balance as at June 30, 2008 1,760,000,000 (22,411,187) 126,978,994 1,864,567,807 Total Comprehensive Income/(loss) For the year - (161,746,756) - (161,746,756) Incremental depreciation - 34,281,097-34,281,097 Balance as at June 30, 2009 1,760,000,000 (149,876,846) 126,978,994 1,737,102,148 Total Comprehensive Income/(loss) for the year - (172,173,546) - (172,173,546) Incremental depreciation - 33,595,476-33,595,476 Balance as at June 30, 2010 1,760,000,000 (288,454,916) 126,978,994 1,598,524,078 The annexed notes form 1 to 37 form an integral part of these financial statements. Momin Qamar Director Kamran Khan Chief Executive 17 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 2010 1 LEGAL STATUS AND OPERATIONS The Company was incorporated as Public Limited Company on December 24, 1992 under the Companies Ordinance, 1984. The company is listed on Karachi, Lahore and Islamabad Stock Exchanges in Pakistan. The main objective of the company is to manufacture and sale the cement. The registered office of the company is situated at 103 Fazal Road, Lahore Cantt. Lahore and the factory in Khushab. 2 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the approved International Accounting Standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved Accounting Standards comprise of such International Financial Reporting Standards IFRS's issued by International Standard Board as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 are or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 3 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Estimate and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the process of applying the Company's accounting policies, management has made the following estimates and judgments which are significant to the financial statements: (a) recognition of taxation and deferred tax (note 28); (b) determining the residual value and useful lives of property, plant and equipment (note 16); (c) accounting for post employment benefits (Note 11); (d) impairment of inventories / adjustment of their net realizable value (note 4.8, 17 and 18) and (e) provision for doubtful debts / other receivables (note 4.13 and 19) 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 Basis of Preparation 4.1.1 Accounting Convention These financial statements have been prepared under the historical cost convention except for certain fixed assets which are stated at revalued amount as referred in note 4.2 & 16.1 FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 18

4.1.2 Standards, Interpretations and Amendments 4.1.2.1 The following standards, interpertations and amendments of approved accounting standards are effective for accounting periods beginning on or after 01 January 2010. - Improvements to IFRSs 2009- Amendments to IFRS5 Non-Current Assets Held for Sale and Discontinued Operations (effective for annual periods beginning on or after 1 January 2010). The amendments clarify that the required disclosures for non-current assets (or disposal groups) classified as held for sale or discontinued operations are specified in IFRS 5. These amendments are unlikely to have an impact on the Company's financial statements. - Improvements to IFRSs 2009- Amendments to IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2010). The amendments clarify that segment information with respect to total assets is required only if such information is regularly reported to the chief operating decision maker. The amendment is not relevant to the Company's operations. - Improvements to IFRSs 2009- Amendments to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2010). The amendments clarify that the classification of the liability component of a convertible instrument as current or non-current is not affected by terms that could, at the option of the holder of the instrument, result in settlement of the liability by the issue of equity instruments. These amendments are unlikely to have an impact on the Company's financial statements. - Improvements to IFRSs 2009- Amendments to IAS 7 Statement of Cash Flows (effective for annual periods beginning on or after 1 January 2010). The amendments clarify that only expenditures that result in recognition of an asset can be classified as a cash flow from investing activities. These amendments are unlikely to have a significant an impact on the Company's financial statements other than increase in disclosures. - Improvements to IFRSs 2009- Amendments to IAS 17 Leases (effective for annual periods beginning on or after 1 January 2010). The IASB deleted guidance stating that a lease of land with an indefinite economic life normally is classified as an operating lease, unless at the end of the lease term title is expected to pass to the lessee. The amendments clarify that when a lease includes both the land and building elements, an entity should determine the classification of each element based on paragraph 7-13 of IAS-17, taking account of the fact that land normally has an indefinite economic life. The amendment is not relevant to the Company's operations. - Improvements to IFRSs 2009- Amendments to IAS 36 Impairment of Assets (effective for annual periods beginning on or after 1 January 2010). The amendments clarify that the largest unit to which goodwill should be allocated is the operating segment level as defined in IFRS 8 before applying the aggregation criteria of IFRS 8. The amendments apply prospectively. The amendment is not relevant to the Company's operations. - Improvements to IFRSs 2009- Amendments to IAS 39 Financial Instruments: Recognition and Measurement (effective for annual periods beginning on or after 1 January 2010). The amendment provide additional guidance on determining whether loan prepayment penalties result in an embedded derivative that needs to be separated; clarify that the scope exemption in IAS 39 paragraph 2(g) is 19 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

restricted to forward contracts, i.e. not options, between an acquirer and a selling shareholder to but or sell an acquiree that will result in a business combination at a future acquisition date within a reasonable period normally necessary to obtain any required approvals and to complete the transaction; and clarifty that the gains or losses on a cash flow hedge should be reclassified from other comprehensive income to profit or loss during the period that the hedged forecast cash flows impact profit or loss. The amendments apply prospectively to all unexpired contracts from the date of adoption. These amendments are unlikely to have an impact on the Company's financial statements. -Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Additional Exemptions for First-time Adopters (effective for annual periods beginning on or after 1 January 2010). The IASB provided additional optional exemptions for first-time adopters contains a lease if the same assessment as that required by IFRIC 4 was made under previous GAAP; and allow entities in the oil and gas industry to use their previous GAAP carrying amounts as deemed cost at the date of transition for oil and gas assets. The amendment is not relevant to the company's operations. - Amendments to IFRS 2 Share-based Payment - Group Cash-settled Share-based payment Transactions (effective for annual periods beginning on or after 1 January 2010). The IASB amended IFRS 2 to require an entity receiving goods or services (receiving entity) in either an equity-settled or a cash settled share-based payment transaction to account for the transaction in its separate or individual financial statements. This principle even applies if another group entity or shareholder settles the transaction (setting entity) and the receiving entity has no obligation to settle the payment. Retrospective application is subject to the transitional requirements in IFRS2. - Amendment to IAS 32 Financial Instruments: Presentation - Classification of Rights Issues (effective for annual periods beginning on or after 1 January 2010). The IASB amended IAS 32 to allow rights, options or warrants to acquire a fixed number of the entity's own equity instruments for a fixed amount of any currency to be classified as equity instruments provided the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. These amendments are unlikely to have an impact on the Company's financial statements. 4.1.2.2 The following standards, interpretations and amendments of approved accounting standards are not yet effective. - IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for accounting periods beginning on or after 1 July 2010). This interpretation provides guidance on the account for debt for equity swaps. The amendment is not relevant to the Company's operations. -Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards - Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters (effective for accounting periods beginning on or after 1 July 2010). The amendment provides the same relief to first-time adopters as was given to current users of IFRSs upon adoption of the Amendments to IFRS 7. The amendment also clarifies the transitional provisions of the Amendments to IFRS 7. The amendment is not relevant to the Company's operations. FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 20

4.1.2.3 Improvements to IFRSs 2010 (effective for annual periods beginning on or after 1 July 2010). The IASB issued amendments to various standards effective. Below is a summary of the amendments that are effective for either annual periods beginning on or after 1 July 2010 or annual periods beginning on or after 1 January 2011: - Improvements to IFRSs 2010 - Amendments to IFRS 3 Business Combinations (effective for accounting periods beginning on or after 1 July 2010). The amendments calrify that contingent consideraton arising in a business combination previously accounted for in accordance with IFRS 3 (2004) that remains outstanding at the adoption date of IFRS 3 (2008) continues to be accounted for in accordance with IFRS 3 (2004); limit the accounting polity choice to measure non-controlling interests upon initial recognition at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets to instruments that give rise to a present ownership interest and that currently entitle the holder to a share of net assets in the event of liquidation; and expand the current guidance on the attribution of the market-based measure of an acquirers share based payments awards issued in exchange for acquiree awards between consideration transferred and postcombination compensation cost when an acquirer is obliged to replace the acquiree's existing awards to encompass voluntarily replaced unexpired acquiree awards. These amendments are unlikely to have an impanct on the Company's Financial statements. - Improvements to IFRSs 2010 - Amendments to IAS 27 Consolidated and Separated Financial Statements (effective for annual periods beginning on or after 1 July 2010). The amendments clarify that the consequential amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 and IAS 31 resulting from IAS 27 (2008) should be applied prospectively, with the exception of amendments resulting from renumbering. These amendments are unlikely to have an impact on Company's financial statements. - IAS 24 Related Party Disclosures (revised 2009) (effective for annual periods beginning on or after 1 July 2011). The revised IAS 24 Related Party Disclosures amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. These amendments are unlikely to have an impact on Company's financial statements other than increase in disclosures. - Amendments to IFRIC 14 IAS 19- The limit on a Defined Benefit Assets, Minimum Funding Requirements and their interaction (effective for annual periods beginning on or after 1 January 2011). These amendments remove unintended consequences arising from the treatment of prepayments where there is am minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognized as an asset rather than an expense. These amendments are unlikely to have an impact on the Company's financial statements. - Improvements to IFRSs 2010 - IFRS 1 First-time Adoption of IFRSs (effective for accounting periods beginning on or after 1 January 2011).The amendments clarify that IAS 8 is not first IFRS finanacial statements; introduce guidance for entities that publish interim financial information under IAS 34 interim Financial Reporting and change either their accounting policies or use of the IFRS 1 exemptions during the period covered by their first IFRS financial statements; extend the scope of paragraph D8 of IFRS 1 so that an entity is permitted to use an event-driven fair value measurement as deemed cost for some or all of its assets when such revaluation occurred during the reporting periods covered by its first IFRS financial statements; and introduce an additional optional deemed cost 21 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

exemption for entities to use the carrying amounts under previous GAAP as deemed cost at the date of transition to IFRSs for items of property, plant and equipment or intangible assts used in certain rateregulate activities. The amendment is not relevant to the Company's operations. - Improvements to IFRSs 2010 - IFRS 7 Financial Instruments; Disclosures (effective for accounting periods beginning on or after 1 January 2011). The amendments clarify that desegregation of changes in each component of equity arising from transactions recognized in other comprehensive income also is required to be presented, but may be presented either in the statement of changes in equity or in the notes. - Improvements to IFRSs 2010 - IAS 34 Interim Financial Reporting (effective for accounting periods beginning on or after 1 January 2011). The amendments add examples to the list of events or transactions that require disclosure under IAS 34 and remove references to materiality in IAS 34 that describes other minimum disclosures. - Improvements to IFRSs 2010 - IFRIC 13 Customer Loyalty Programmes (effective for accounting periods beginning on or after 1 January 2011). The amendments clarify that the fair value of award credits takes into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. - IFRS 9 Financial Instruments (effective for accounting periods beginning on or after 1 January 2013). IFRS 9 is the first standard issued as part of a wider project to replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets : amortized cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. 4.1.2.4 Changes in accounting policies The company has applied Revised IAS 1- Presentations of Financial Statements (2007) which became effective as of January 01, 2009. The Company has opted two statement approach to present its comprehensive income for the year ended 30 June 2010 and comparative period. 4.2 Property, Plant & Equipment 4.2.1 Owned Property, plant and equipments except land and capital work in progress are stated at cost less accumulated depreciation and impairment loss, if any. Land and capital work in progress are stated at cost less impairment, if any. Depreciation is charged to income applying reducing balance method at the rates specified in Note 16.3. Maintenance and repairs are charged to income as and when incurred. Major renewals and improvements which increase the assets remaining useful economic life or the performance beyond current estimated levels are capitalized and the assets so replaced, if any are retired. FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 22

4.2.2 Leased Gains or losses on disposal of Property, plant and equipment, if any, are recognized in the profit and loss account. The carrying values of the Property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If such indications exists and where the carrying values exceeds the recoverable amount, the assets are written down to the recoverable amounts. Depreciation is charged from the month of the year in which addition / capitalization occurs, while no depreciation is charged in the month in which the asset is disposed off. Asset's residual values and useful lives are reviewed and adjusted, if appropriated at each balance sheet date. Leases where the company has substantially all the risks and rewards of ownership are classified as finance leases. At inception, finance leases are capitalized 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 leases referred in note 9. 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 the finance lease are depreciated over the estimated useful life of assets on reducing balance method at the rates mentioned in note 16.1. Depreciation of leased assets is charged to profit. 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. 4.2.3 Intangible Intangible asset, if any, is stated at cost less accumulated amortization and any impairment loss. Intangible asset is amortized from the year when this asset is available for use on the straight line method whereby the cost of an intangible asset is written off over the period, which reflects the pattern 23 ANNUAL REPORT 2010 FLYING CEMENT COMPANY LTD.

in which the economic benefits associated with the asset are likely to be consumed by the company. Amortization is charged from the month of the year in which addition / capitalization occurs, while no depreciation is charged in the month in which the asset is disposed off. 4.3 Capital Work-in-Progress Capital work-in-progress is stated at cost less any identified impairment loss, if any. This represents expenditure incurred on property, plant & equipment during their construction and installation. Transfers are made to relevant property plant & equipment category as and when assets are available for use. 4.4 Cash & Cash Equivalents Cash & cash equivalents are carried in balance sheet at cost. For the purpose of cash flow statement and cash & cash equivalents comprises cash in hand, with banks on current, saving and deposit accounts, running finance under mark-up arrangements, if any. 4.5 Stores and Spares These are valued at weighted average cost except for items in transit, which are stated at cost, incurred upto the balance sheet date. Cost comprising invoice value plus other charges paid thereon. Obsolete and used items are recorded at nil value. Value of items is reviewed at each balance sheet date to record provision for any slow moving items. Adequate provision is made for any excess book value over estimated net realizable value. The Company reviews the carrying amount of stores and spares on a regular basis and provision is made for obsolescence, if any. 4.6 Stock-in-Trade Stock of raw material, work-in-process and finished goods are valued at lower of weighted average cost and net realizable value. Cost of work-in-process and finished goods represents direct cost of materials, labour and appropriate portion of production overheads. Stock in transit is stated at cost comprising invoice value plus other charges paid thereon accumulated to the balance sheet date. Net realizable value signifies the estimated selling price in the ordinary course of business less costs necessary to be incurred in order to make the sale. 4.7 Trade Debts Trade debts originated by the company are recognized and carried at the original invoice amount less an allowance for any impairment, if any, at the year end. Known bad debts are written off, when identified. FLYING CEMENT COMPANY LTD. ANNUAL REPORT 2010 24