01 02

Contents COMPANYINFORMATION

Auditors

M/s.TariqAbdulGhaniMaqbool&CompanyCharteredAccountants

Bankers

NationalBankofPakistanUnitedBankLimitedSummitBank

LegalAdvisor

SardarZulfiqarUmarKhanThahim

RegisteredOffice

6/7-SirGangaRamTrustBuilding,Shahrah-e-Quaid-e-Azam,Lahore.

Phones:04237320225-7FaxNo.:04237323108E-Mail:info@peco.com.pkWebsite:http://www.peco.com.pkPlant:KotLakhpatLahore.

ShareRegistrar:

BoardofDirectors

SyedKaukabMohyuddin(Chairman)

Mr.MairajAneesAriff(ChiefExecutive)

Mr.NaeemJanKhan

Mr.MuhammadArifHabib

Mr.RashidAliKhan

Mr.LiaqatMohammad

Mr.MuhammadIqbal

MirzaMahmoodAhmad

Mr.AnsarJaved

BoardAudit&RiskManagementCommittee

MirzaMahmoodAhmad(Chairman)

Mr.LiaqatMohammad

Mr.MuhammadIqbal

Mr.AnsarJaved

BoardFinanceCommittee

Mr.RashidAliKhan(Chairman)

Mr.NaeemJanKhan

Mr.LiaqatMohammad

BoardHR&RemunerationCommittee

Mr.NaeemJanKhan

Mr.RashidAliKhan

CFO&CompanySecretary

MianAnwarAziz

M/s.CentralDepositoryCompanyofPakistanLimitedMezzanineFloor,SouthTower,LSEPlaza,19-Khayaban-e-Awan-e-Iqbal,Lahore-54000,Pakistan.

Mr.MuhammadIqbal

Mr.AnsarJaved(Chairman)

SyedKaukabMohyuddin

CompanyInformation

OurProducts

Vision/MissionStatementandCorporateStrategy

OurValues

FinancialHighlightsofSixYears

NoticeofAnnualGeneralMeeting

NoticeofAnnualGeneralMeeting

Chairman’sReview

Chairman’sReview

Directors’Report

Directors’Report

StatementofCompliancewithListedCompanies

IndependentAuditor’sReport

StatementofFinancialPosition

StatementofProfitandLossAccount

StatementofComprehensiveIncome

StatementofCashFlow

StatementofChangesinEquity

NotestotheFinancialStatements

PatternofShareholding

JamaPunji

FormofProxy

FormofProxy

IndependentAuditor'sReviewReporttothemembersofPeco

02

03

04

05

06

07

11

12

14

15

26

27

29

30

35

37

38

39

40

41

84

86

88

89

03 04

PECOisplayingavitalroleinthemanufacturingofqualitativeengineeringgoodsofinternationalstandard.Itsproductshaveearnedreputationduetoqualityandreliability.PECOpresentproductsrangeincludesthefollowing:

•SteelStructure-ElectricityTransmission&DistributionLineTowers.(11,132,220&500Kv)-TelecommunicationTowers(GreenField&RoofTop)

• Pumps&TurbinesPECOproducesMonoBlock&NonCloggingPumps,MultiStageCentrifugalPumps,DeepWell&AgroTurbinesofvariouscapacities&headsasperrequirementsofthecustomers.PECOpumpsrangealsoincludesSludgePumpsandthePumpsutilizedinSugar&Chemicalindustries.

• ElectricMotorsPECOmanufacturesfollowingrangeofelectricmotors:-HorizontalFootMountedMotorsinDripProof&T.E.F.C.Enclosures.-FlangeMountedSquirrelCageInductionMotors.-VerticalHollowShaftMotorsinDripProof&TotallyEnclosedFanCooledEnclosures.

• Safes,StrongRoomDoors&SteelLockers.-SteelSafes–30”,60”,72”-StrongRoomDoors&SteelLockersforBanks

• FoundryProducts.-Grey&S.G.IronCastings.-BronzeCastings.-AluminumAlloyCastings.

• RolledProducts-Angles-PlainBars-DeformedBars(Grade60&40)

OURPRODUCTS VisionStatement

A sustainablegrowthorientedcompanyandmarketleaderinSteelTowersforElectricityTransmissionandTelecommunication,

Pumps&ElectricMotors

MissionStatement

Toreplacetheoldmachines&equipmentwithmostmodern,efficientmachinesleadingtowardsautomation.Toproducequalityproductsathigherefficiencyandconsistentqualitywithlowercost.

CorporateStrategy

Toaccomplishexcellentresultsthroughincreasedearningsinthebestinterestofallstakeholders.Tobearesponsibleemployer

totakecareoftheemployeesintheircareerplanningandreward.

Being agoodcorporatecitizen,contributingtothedevelopmentofsociety

throughharmonyinallrespects.

QualityPolicy

WearecommittedtomaintainourCustomer’ssatisfactionbydelivering thequalitativeproductsand

servicesinaccordancewiththeirneedsandrequirements.Customer’sfeed-backiscontinuouslyreviewedforqualityimprovementtohavecontinuedcustomer’s

confidenceandtrustinourproducts.Qualitypolicyandobjectivesarereviewedonyearlybasis.

OURVALUES

1.TheCompany’sPolicyistoconductbusinesswithhonestyandintegrityandtobeEthicalinall

itsdealingsshowingrespectfortheinterestofthosewithwhomithasrelationship.

2. The Company complies with all laws and regulations. All employees are expected tofamiliarize themselves with laws and regulations governing their individual areas ofresponsibility,andnottotransgressthem.Incaseofanydoubttheemployeesareexpectedto seek necessary advice. The Company believes in fair competition and supports appropriatecompetitionlaws.

3. The Company does not support any political partynorcontribute to the fundsofgroupswhoseactivitiespromotepartyinterests.

4.TheCompanyiscommittedtoprovideservices,whichconsistentlyoffer,valueintermsofpriceandqualityandsatisfycustomerneedsandexpectations.

5. The Company is committed to run its business in an environment that issoundandsustainableAsagoodcorporateentity,theCompanyrecognizesitssocialresponsibilitiesandwillendeavortocontributetocommunityactivitiesasawhole.

6.TheCompanybelievesinandfullyadherestotheprinciplesofreliabilityandcredibilityinitsfinancialreportingandintransparencyofbusinesstransactions.

7. The Company is an equal opportunity employer. Its employee recruitment and promotionalpolicies are free of any gender bias and are merit and excellence oriented. It believes in providingitsemployeessafeandhealthyworkingconditionsandinmaintaininggoodchannelsofcommunications.

TheBoardofDirectorshasconstitutedthe ‘BoardAudit&RiskManagementCommittee’to

ensurecomplianceofaboveprinciples.

8. The Company expects its employees to abide by certain personal ethics whereby Companyinformationandassetsarenotusedforanypersonaladvantageorgain.Anyconflictofinterestshouldbeavoided,whereitexistsitshouldbedisclosedandguidancesought.

FINANCIALHIGHLIGHTS

Rupeesinmillion

TradingResults

Sales–Net

CostofSales

GrossProfit/(Loss)

Admn,Gen.&SellingExp.

OtherOperatingCharges

OtherOperatingIncome

OperatingProfit/(Loss)

FinancialCharges

WorkersProfitParticipationfund

Profit/(Loss)beforeTax

NetProfit/(Loss)afterTax

Dividend

CashDividend

DividendPerShare(Rs.)

FinancialPosition

Property,PlantandEquipment

PaidupCapital

Reserves

FixedCapitalExpenditure

KeyIndicators

GrossProfitRatio

OperatingProfit/(Loss)Ratio

OperationExpensesRatio

Profit/(Loss)BeforeTaxRatio

NetProfit/(Loss)Ratio

EarningPerShare

WorkingCapitalTurnover

Currentratio

Quickratio

2017

1,353.17

1,187.00

166.17

105.46

6.44

23.33

77.60

17.07

3.30

60.53

66.74

-

-

14,555.17

56.90

10.00

37.50

12.28

5.73

7.79

4.47

4.93

11.73

794.54

2.01

1.23

2016

2,329.08

1,856.63

472.44

83.89

46.76

4.65

346.44

15.36

17.78

331.08

219.49

-

-

56.90

14,564.50

10.00

20.28

23.74

14.87

3.60

14.22

9.42

38.57

748.66

1.80

1.39

2013

385.77

464.93

(79.16)

53.71

0.81

6.67

(127.00)

26.48

-

(153.48)

(83.11)

-

-

56.90

8,663.36

10.00

23.19

(20.52)

(32.92)

13.92

(39.79)

(21.54)

(14.61)

380.32

2.69

1.26

2014

222.32

280.44

(58.13)

53.63

0.87

5.21

(107.42)

16.95

-

(124.37)

(66.61)

-

-

56.90

10.00

6.98

(26.15)

(48.32)

24.12

(55.94)

(29.96)

(11.71)

306.48

1.80

0.60

8,630.10

2015

923.26

781.39

141.87

67.32

2.10

11.88

81.10

17.52

3.23

63.58

45.27

-

-

56.90

10.00

22.37

15.37

8.78

7.29

6.89

4.90

7.96

471.81

1.81

0.88

8,588.62

2018

1,424.45

1,399.41

25.04

108.87

1.03

(81.41)

17.56

-

(98.97)

3.45

(69.96)

-

-

14,558.75

56.90

10.00

41.61

1.76

(5.72)

7.64

(6.95)(4.91)

(12.29)

665.74

2.56

1.35

05 06

NOTICEOFANNUALGENERALMEETING

thNoticeisherebygiventhatthe69 AnnualGeneralMeetingofPakistanEngineeringCompanyLimitedwillbeheldatHotelAmbassador,7-DavisRoad,Lahore,onSaturday,October27,2018at11.30AM.totransactthefollowingbusiness:-

A)OrdinaryBusinessth1.ToconfirmMinutesof28 ExtraOrdinaryGeneralMeetingheldonApril9,2018.

2. Toreceive,considerandadopttheAuditedAccountsoftheCompanyfortheyearendedJune30,2018togetherwiththeAuditors'andDirectors'reportthereon.

3.ToappointCompany'sauditorsandtofixtheirremuneration.Theboardandtheauditcommitteehaverecommended the appointment of M/s. EY Fordes Rhodes, Chartered Accountants as auditors of theCompanyinplaceofretiringauditorsM/sTariqAbdulGhaniMaqboolCharteredAccountants.Accordingly,themembersareherebygiventhenoticeasrequiredunderSection246(2)oftheCompaniesAct,2017regardingappointmentofanauditorotherthantheretiringauditors.

B)SpecialBusiness

4.Toobtain consent of the shareholders in termsof S.R.O. 470(I)/2016datedMay31, 2016 issuedbySecuritiesandExchangeCommissionofPakistan,forthetransmissionoftheannualreportsincludingannualaudited accounts, notices of annual general meetings and other information contained therein of theCompanyeitherthroughCDorDVDorUSBandtopassthefollowingresolutionasanOrdinaryResolution,withorwithoutmodification:

“Resolved that consent & approval of the members of Pakistan Engineering Company Limited (the“Company”)beandisherebyaccordedfortransmissionofannualreportsincludingannualauditedaccounts,noticesofannualgeneralmeetingsandotherinformationcontainedthereinoftheCompanytothemembersforfutureyearscommencingfromtheyearendingonJune30, 2019throughCDorDVDorUSBinsteadoftransmittingthesameinhardcopies.

ResolvedFurtherthatChiefExecutiveOfficerorCompanySecretaryoftheCompanybeandisherebyauthorizedtodoallacts,deedsandthings,takeorcausetobetakenallnecessaryactionstocomplywithalllegalformalitiesandrequirementsandfilenecessarydocumentsasmaybenecessaryorincidentalforthepurposesofimplementingthisresolution”

C)OtherBusiness

5.TotransactanyotherbusinesswiththepermissionoftheChair.

September27,2018 BYORDEROFTHEBOARDMianAnwarAzizCompanySecretary

NOTES:

1.TheShareTransferBooksoftheCompanyshallremainclosedfromOctober19,2018toOctober27,2018(Bothdaysinclusive)andnotransferwillberegisteredduringthattime.Transfersreceivedinorderattheoffice of the Registrar of the Company, M/s. Central Depository Company of Pakistan Limited (CDC),MezzanineFloor,SouthTower,LSEPlaza,19-Khayban-e-Aiwan-e-Iqbal,LahoreatthecloseofbusinessonOctober18,2018,willbetreatedintime.

2.Amemberentitledtoattendandvoteatthismeetingisentitledtoappointanypersonasaproxyandvoteonhis/herbehalf.ProxiesinordertobeeffectivemustbereceivedattheRegisteredOfficeoftheCompanynotlessthan48hoursbeforethetimeofthemeeting.

4.Membersare requested tonotifyus immediatelyof any change in their registeredaddress currentlyavailablewithus.

5.TheRegistraroftheCompanyis,M/s.CentralDepositoryCompanyofPakistanLimited,Lahore.

6.MemberswhohavenotyetsubmittedphotocopyoftheirComputerizedNationalIdentityCards(CNIC)totheCompanyarerequestedtosendthesamebymailorfaxattheearliest.

InaccordancewiththeprovisionsofSection244oftheAct,anysharesissuedordividenddeclaredbytheCompany,whichremainunclaimedorunpaidforaperiodofthreeyearsfromthedateitisdueandpayable,theCompanyshallgiveninetydaysnoticestotheshareholderstofileclaim,ifnoclaimismadebeforetheCompany by the shareholders, the Company shall proceed to deposit the unclaimed or unpaidShares/DividendswiththeFederalGovernmentincompliancewiththeSection244oftheAct.

Inthisregard,aNoticewassentbyRegisteredADdueonthelastknownaddressesoftheshareholderstosubmittheirclaimswithin90daystotheCompany.IncomplianceofSection244(1)(b)oftheActaFinalNoticehadalsobeenpublishedonSeptember19,2018intwodailynewspapersi.e.(i)BusinessRecorderand(ii)DailyDunyainEnglishandUrdurespectively.

IncasenoclaimisreceivedwithinthegivenperiodfromtheaforesaidNotice,theCompanyshallproceedtodeposit the unclaimed/unpaid amountwith the Federal Government Pursuant to the provision of sub-section(2)ofsection244oftheAct.

TransmissionofAnnualFinancialStatementsthroughE-Mail:

SECPvideSRO787(1)/2014datedSeptember8,2014hasprovidedanoptiontoreceiveauditedfinancialstatements electronically through email. Hence, members who hold shares in physical form and areinterested in receiving the annual reports electronically in future are required to submit their e-mailaddressesandconsentforelectronictransmissiontotheSharesRegistraroftheCompany.CDCshareholdersarerequestedtosubmittheiremailaddressandconsentdirectlytotheirbroker(Participant)/CDCInvestorAccountServices.

IncompliancewithSECPnotificationNo.634(1)/2014datedJuly10,2014,theauditedfinancialstatementsandreportsof theCompany foryearended June30,2018arebeingplacedon theCompany'swebsite:www.peco.com.pkfortheinformationandreviewofshareholders.

3.AnyindividualBeneficialOwneroftheCentralDepositoryCompany(CDC),entitledtovoteatthismeetingmustbringhis/herComputerizedNationalIdentityCard(CNIC)orpassport(incaseofforeigner)along-withCDCaccountnumbertoprovehis/heridentityandincaseofproxymustencloseanattestedcopyofhis/herCNICorpassport.Representativesofcorporatemembersshouldbringtheusualdocumentsrequiredforsuchpurpose.

Unclaimed/UnpaidSharesandDividends

07 08

StatementunderSection134(3)oftheCompaniesAct2017

CirculationsofAnnualReportsthroughCD/DVD/USB

SecuritiesandExchangeCommissionofPakistanhasvideS.R.O470(I)/2016dated31May2016allowedthecompanies to circulate theannual reports includingannual auditedaccounts,noticesof annual generalmeetingsandotherinformationcontainedthereinoftheCompanytoitsmembersthroughCD/DVD/USBsubjecttoconsentoftheshareholdersinthegeneralmeeting.Thiswillsavetimeandexpensesincurredonprintingoftheannualreport.

The Directors of the Company in their meeting held on September 27, 2018 has recommended thetransmissionofAnnualAuditedAccounts to themembersat theirregisteredaddresses insteadofHardcopies,however,theCompanyshallsupplythehardcopiesoftheaforesaiddocumenttotheshareholdersondemand,freeofcost,withinoneweekofsuchdemand.Afterapprovaloftheshareholders,theCompanywillplaceaStandardRequestFormonitswebsitetocommunicatetheirneedofhardcopiesofthedocumentsalongwithpostalandemailaddressoftheCompanySecretary/ShareRegistrartowhomsuchrequestsshallbemade.Thedirectorsarenotinterested,directlyorindirectly,intheabovebusinessexcepttotheextentoftheirinvestmentashasbeendetailedinthepatternofshareholdingannexedtotheDirectorsReport.

09 10

CHAIRMAN'SREVIEW

It is my pleasure to present this report to the shareholders of the Company pertaining to the overallperformance of the Board ofDirectors, its Committees and their effectiveness in guiding the Companytowardsaccomplishingitsaims,objectivesandimplementingastronggovernanceframeworkthatsupportsaneffectiveandprudentmanagementofbusinessmatters,whichisregardedasinstrumentalinachievingthelongtermsuccessoftheCompany.TheBoardisconstitutedofthefollowingcompetentandproficientleadershavingimmenseexperienceinvariousdomainsofbusinessworldandpublicsector:

Governmentnominee

1.SyedKaukabMohuyuddin(Chairman)2.Mr.MairajAneesAriff(ChiefExecutiveOfficer)3.Mr.NaeemJanKhan

Electeddirector

4.Mr.RashidAliKhan5.MuhammadIqbal6.Mr.AnsarJaved7.Mr.LiaqatMuhammad8.MirzaMahmoodAhmad9.Mr.MuhammadArifHabib

Duringthecourseofthefinancialyear2017-2018,theBoardofDirector;anditsCommitteesworkedwithamarkedlevelofdiligenceandproficiencyinguidingtheCompanytowardsachievingitsbestpotential.TheBoardofDirectorsconfirmsthatintheirviewAnnualReportandtheFinancialStatements,takenasawhole,arefair,balancedandcomprehensive.

During financialyear2017-2018, theBoardmetsix timesandduring thesemeetings theBoardstrictlymonitored the performance of its sub-committees. Comprehensive and effectivemeetings of theBoardresulted in conducive decisions for the Company. Whereas, integration of all policies assimilating tocompany'smissionandvisionwasensuredbytheBoard.Inadditiontoit,theBoardalsoensurescompliancewithallapplicablerulesandbestpracticesofthecompany.TheBoardalsomonitoredthefollowings:

·StrategicPlanning.·Qualitystandardofitsproducts.·EffectivestepstowardsmaintenanceofstableworkingcapitalforCompany'soperations.·CompliancewithbestCorporatePracticesandGoodGovernance.·Stableandcontinualgrowthandareasofpossiblediversity.·Upholdingethicalbehaviorforacomprehensivecorporatesocialresponsibility.·Developmentofskillfulresourcestoattainadvancementandexcellence.

Duringtheyear,theBoardrecommendedandapprovedamongotherthings:

·Quarterlyandannualfinancialstatements;·Committeesreports,findingsandrecommendations;·Appointmentofexternalauditors;·RestructuringofCommitteetobringinlinewiththeregulations

(69)

(69)

11 12

IwouldliketoacknowledgetheBoard'smemberscontinuedsupportandcooperationinmaintaininghighstandardsofexcellence.Itakethisopportunitytothankourvaluedcustomersforthetrusttheycontinuetoplaceinus,themanagementteamforitssincereefforts,andallstakeholders-Bankers,Vendors,AssociatesandShareholdersforhelpingbuildingPECOauniquepublicasset.

September27,2018Lahore

ElectedChairman

13 14

AnsarJaved

DIRECTORS'REPORTToTheShareholders

thTheDirectorsofPakistanEngineeringCompanyLimited arepleased topresent the69 AnnualReportaccompaniedbytheauditedfinancialstatementsfortheyearendedJune30,2018.

GLOBALSTEELSCENERIOANDPAKISTANECONOMY

Worldcrudesteelproductiontouched1.69billionmetrictonsduringtheyear,whereasthedemandgrewby1.8%comparedtolastyear.

Despitethepoliticalsituation,thecountry'seconomymaintainedthegrowthmomentumandachievedGDPgrowthof5.8%.Thereasonsbeneaththepersistentgrowthremainedthesameincludingimprovedenergysupply,investmentrelatedtotheChina-PakistanEconomicCorridorandstrongcreditgrowth.However,theprojection for 2019will moderate to 4.7% due tomacroeconomic vulnerabilities and domestic policyslippages.

Industrialsectorrecordedagrowthof5.80%ascomparedto5.02%lastyear.LargeScaleManufacturing(LSM)recordedagrowthof6.13%against5.10%lastyear.Thisisthehighestgrowthpercentageinlasttenyears.TheconstructionsectorcontinuedtoraiseitsshareinGDPto2.74%fromlastyear's2.65%supportingotheralliedindustriesincludingthesteelindustry.

PERFORMANCEOUTLOOK

Currentyearwasverychallenginginwhichacuteincreaseinrawmaterialprices,dollarrupeeparityandintensecompetitionfromforeigncompetitorserodedtheprofitsofCompanyduringthisyear.TheCompanytooknewchallengesandthedevelopmentofnewprototypeof500kVwillprovetobeanimportantmilestoneinliftingsalesvolumesoftheCompany.TheCompanywillcontinuetoconsolidateandleverageitsmarketbypursuingtheproduct/marketdevelopment/penetrationstrategies.

TheBoardof directors andmanagementhasmade efforts to improve the salesorders/credit recovery,expediteproduction,reductioninexpensesandupdatingtechnologicalbase.TheoutcomeofsucheffortsledtheCompanytohaveuniformityinitsprofitableoperations.

Thebusinessofelectricitytransmissiontowers,inPakistan,isgettingsignificantlycompetitiveduetoentryofforeigncompaniesinthisbusinessandduetothisfact,PECO'srelativecomfortinwinningtendershasbecometenuousandunpredictable.TheCompanyis,however,gearinguptomeetthechallengesintermsoftechnicalcapability,manufacturingcapacity,stringentcompetitionandmarketacceptanceofitsproducts.Inviewofincreasedbusiness,theCompanyenhanceditscreditceilingfromMinistryofFinance(MoF)toRs.1,000million.

FINANCIALPERFORMANCE

Despitethevolatileglobalalloysprices,uncertainty indollarrateparity, lowmargin innewordersandcompetitionfromforeigncompetitors,theCompanywasabletoachievesalesandgrossprofitduringtheyearunderreviewatRs.1,424millionandRs.25.04millionascomparedtosalesandgrossprofitofRs.1,353millionandRs.166.17millionrespectivelyduringtheyear2017.

Inordertomanagecompetition,theManagementreviseditsstrategyanddecidedtoincreaseitsvolumebyloweringitsprofitmargin.Thegrossprofitaccordinglydwindledto1.76%ofnetsalescomparedto12.28%oflastyear.TheoperatingexpensesoftheCompanyremainedwithinthelimits.

Overall,PECOincurredalossaftertaxationofRs.69.96millioncomparedtolastyearprofitaftertaxationofRs.66.74million.ThemajorreasonsoflossareincreaseinrawmaterialcostsespeciallyZincandSteelrolledproductsby28.61%and30.56%respectively.Resultantly,thereisalosspershareofRs.12.29ascomparedtolastyear'searningspershareofRs.11.73.

CONTRIBUTIONTONATIONALEXCHEQUERANDTHEECONOMY

YourCompanymadeacontributionofRs.228.05million(June30,2017:Rs.256.28million)tothenationalexchequerduringtheyearonaccountofincometax,salestax,andotherlevies.

FINANCIALRESULTSANDAPPROPRIATIONS

Appropriations:

OPERATING&FINANCIALDATA

OperatingandFinancialdataandkeyratiosoftheCompanyforthelastsixyearsareannexed.

GRATUITYSCHEME

TheCompanyprovidesretirementbenefittoitsemployees.Thisincludesanon-contributorydefinedbenefitGratuitySchemeforallemployees.

ThevalueoftheGratuitySchemeattheyear-endwasRs.21.20million(June30,2017:Rs.15.25million),valuedbythefirmofConsultingActuaries.

BOARD'SCOMPOSITION,ELECTIONS,REMUNERATIONANDMEETINGS

TheBoardcomprisesofoneExecutive,threenon-executiveandfiveindependentdirectors.CompositionoftheBoardandthenamesofMembersofBoardSub-CommitteesmaybereferredatPage02.

ThepresentGovernmentnominateddirectorsareMr.MairajAneesAriff,SyedKaukabMohyuddinandMr.NaeemJanKhan.

60,5276,21266,739

YEARENDED

30.06.2018

YEARENDED

30.06.2017

(Loss)/ProfitbeforeTaxationTaxation(Loss)/ProfitafterTaxation

(98,973)29,017

(69,956)

(Loss)/ProfitfortheyearRemeasurementofretirementbenefitplanTransferfrom“SurplusonRevaluationofFixedAssets”Adjustmentforchangeintaxrate

(Loss)/Profitcarriedforwardtoaccumulatedloss

(69,956)877

17,706

4,981

(46,392)

66,7392,23918,375

5,323

92,676

15 16

---Rupeesinthousand---

Furthermore,theBoardofDirectorshaveaformalpolicyandtransparentproceduresforremunerationofitsDirectors in accordance with the Companies Act 2017 and the Listed Companies (Code of CorporateGovernance)Regulations2017.Duringtheyear2017-18,six(06)meetingsoftheBoardwereheld.TheattendanceoftheBoardmemberswasasfollows:

ThoseDirectors,whohavenotattendedtherequirednumberofmeetings,haveappliedforleaveofabsencewhichwasdulygrantedbytheBoard.

Duringtheyear2017-18,freshelectionoftheDirectorsoftheCompanywasheldonApril09,2018andtheentireBoardhasbeenre-electedforthenexttermofthreeyearseffectiveApril09,2018.NochangeismadeintheBoardofDirectorsoftheCompanyasallpreviousdirectorsarere-electedunopposed.

TheBoardwishestoplaceonrecorditsappreciationoftheservicesrenderedbyitsmembersduringtheirlasttermandexpectthemtocontinueprovidingvaluableguidanceandmakingpositivecontributioninthefuture.

SyedKaukabMohyuddinhasbeenappointedastheChairmanoftheBoardofDirectorsandMr.MairajAneesAriffreassignedtotheofficeofChiefExecutiveOfficeroftheCompanyonApril28,2018,inaccordancewithCompany'spoliciesandrulesofservice.

Duringtheyear2017-18,GovernmentofPakistanhadnominatedMr.GhulamDastgirKhanBalochasnon-executivedirectorinplaceofMr.ArifIbrahimbutthereafter,Mr.NaeemJanKhan,hadnominatedasnon-executivedirector inplaceofMr.GhulamDastgirKhanBaloch.TheBoardwishes toplaceonrecord itsappreciationofthevaluableservicesrenderedbyMr.ArifIbrahim.

PATTERNOFSHAREHOLDINGANDSHARESTRADED

The pattern of shareholding and additional information regarding pattern of shareholding is attachedseparately.NotradinginthesharesoftheCompanywascarriedoutbytheDirectors,theChiefExecutiveOfficerandtheCompanySecretaryandtheirspousesandminorchildrenduringtheyearunderreview.

EARNINGSPERSHARE

ThereisalosspershareofRs.12.29ascomparedtolastyear'searningspershareofRs.11.73.

AUDITORS

Messrs. TariqAbdulGhaniMaqbool&Co.CharteredAccountants retire and in their place the companyreceivednoticesundersection246oftheCompaniesAct,2017fromshareholdersforappointingMessrs.EYFordRhodes&Co.CharteredAccountantsasAuditorfortheyearendingon30June2019.TheAudit

6361-56556

SyedKuakabMohyuddinMr.ArifIbrahimMr.MairajAneesAriffMr.GhulamDastgirKhanBalochMr.NaeemJanKhanMr.ArifHabibMr.LiaqatMohammadMr.RashidAliKhanMirzaMahmoodAhmadMr.M.IqbalMr.AnsarJaved 6

CommitteeandtheBoardofDirectorshavealsorecommendedtoappointMessrs.EYFordRhodes&Co.CharteredAccountantsastheAuditorfortheyear2018-2019.

EYFordRhodeshasbeengivenasatisfactoryundertheQualityControlReviewProgramoftheInstituteofCharteredAccountantsofPakistan(ICAP)andthefirmisfullycompliantwiththeInternationalFederationofAccountants (IFAC)GuidelinesonCodeofEthics,asadoptedby ICAP.Theauditorshave indicated theirwillingnesstocontinueasauditors.

COMMENTSONEMPHASISOFMATTERPARAGRAPHINAUDITOR'SREPORT

i.Mutationofland

This represents land of 263 kanals and 3marlas of BadamiBaghWorkswhich has been valued by anindependentconsultantatRs.4,605.133million.Thecompanyhasthepossessionandcontrolofthelandandholdsvalidtitle.AspertheEconomicCoordinationCommitteedecisionthetitledocumentsofthelandwerehanded over to the Privatization Commission for sale and proceeds to be utilized for settlement ofoutstandingGovernmentliabilities.SincethentilldatethelandhasbeenofferedforsalevarioustimesbythePrivatizationCommissionofPakistan.TheMutationoflandiscompleteasperTheBoardofRevenuePunjabletterwhichstatesthattheGovernmentofPunjabhas,however,noobjectiontothedisposalofpropertiesofPECO.HoweveraletterwasissuedbytheJointSecretaryMinistryofIndustriesandProductionIslamabaddirectingDistrictOfficerRevenueLahoreandcopyendorsedtoMemberRevenuePunjabtostoptheabovemutationtillfurtherinstructions,forundisclosedreasons.TheBoDandtheManagementoftheCompanyaretilldatestronglycommittedtotheplanofsellingtheBadamiBaghLandandtherehasbeennorevocationoftheGoPorderoranychangeinthemanagement'sstanceorplan.

ii.SettlementofGoP/PCLoansagainstproceedsofBadamiBaghLand

The issue of Government of Pakistan and Privatization Commission Loans has been discussed withrepresentativesofGoP,PCandMoF.Asaresultofvariousmeetings,theprincipalloanexceptRs.131.454million(beingtheadditionalgratuitypaidbyPrivatizationCommissionatitsown)hasbeenreconciled.

TheBoardofDirectorsinitsvariousmeetingshasresolvedthatamountdueunderthelawtotheGovernmentofPakistan(GoP)foranyloangiventoPECOshallbepaid.TheBoardhasagreedwithGoPtoadjust itsliabilitiesbydisposalofBadamiBaghLandasdecidedinE.C.Cdecisiondated02.03.1993,whichaccordingtotherecentvaluationamountstoRupees4,605.13millionanditisinexcessoftheamountbeingclaimedbyGoPfromPECO.TheBoardofDirectors(BoD)andthemanagementoftheCompanybelievesthattheyarenotliabletopayanyinterestontheseloansintheabsenceofanyagreement.

SUBSEQUENTEVENTS

Nomaterial changes and commitments affecting the financial position of the Company have occurredbetweentheendofthefinancialyeartowhichthisBalanceSheetrelatesandthedateoftheDirectors'report.

STATEMENTONCORPORATEFINANCIALREPORTINGFRAMEWORK

TheCompanyhascompliedwithalltherequirementsofthecodeofCorporateGovernancebythelistingregulations.

AccordinglytheDirectorsarepleasedtoconfirmthefollowing:

i.The financial statements together with the notes thereon have been drawn up in conformity withCompanies Act, 2017. These statements present fairly the Company's state of affairs, the results of itsoperations,cashflowandchangesinequity.

ii.ProperbooksofaccountsoftheCompanyhavebeenmaintained.

17 18

iii.Appropriateaccountingpolicieshavebeenconsistentlyappliedinthepreparationoffinancialstatementswhich conform to the International Accounting Standards as applicable in Pakistan. The accountingestimates,whereverrequiredarebasedonreasonableandprudentjudgment.iv. International Financial Reporting Standards, as applicable in Pakistan, have been followed in thepreparationoffinancialstatements.v.Thesystemofinternalcontrolissoundindesignandhasbeeneffectivelyimplementedandmonitoredandisbeingcontinuouslyreviewedbytheinternalauditfunction.vi.TherearenosignificantdoubtsupontheCompany'sabilitytocontinueasagoingconcern.vii.TherehasbeennomaterialdeparturefromthebestpracticesofCorporateGovernance,asrequiredbythelistingregulations.viii.Thekeyoperatingandfinancialdataforthelastsixyearsisannexed.

AUDITANDRISKMANAGEMENTCOMMITTEE

AuditandRiskManagementCommitteewasestablishedbytheBoardtoassistthedirectorsindischargingtheirresponsibilities,CorporateGovernance,FinancialReportingandCorporateControl.TheCommitteeconsists of four members where all members including Chairman of the Committee are Independentdirectors.TheBoardAuditandRiskManagementCommitteeisresponsibleforreviewingreportsofthecompany'sfinancialresults,auditandadherencetostandardsofthesystemofmanagementcontrols.TheCommitteereviewstheprocedures,ensurestheirindependencewithrespecttotheservicesperformedfortheCompanyandmakesrecommendationstotheBoardofDirectors.

TheAuditandRiskManagementCommitteeheldfivemeetingsduringtheyearunderreview,eachbeforetheBoardofDirectorsmeetingtoreviewthefinancialstatements,internalauditreportsandcomplianceoftheCorporateGovernancerequirements.ThesemeetingsincludedmeetingwithexternalauditorsbeforeandaftercompletionofauditandotherstatutorymeetingsasrequiredbytheCodeofCorporateGovernance.

ThepresentconstitutionoftheCommitteeisasunder:

MirzaMahmoodAhmad ChairmanMr.LiaqatMohammad MemberMr.MuhammadIqbal MemberMr.AnsarJaved Member

DIRECTORSTRAININGPROGRAM

TheBoardofDirectorsoftheCompanyconsistof09eminentdirectors,wheredirectorsarecertifiedunderthe Directors Training Program as per Regulation 20 of the Listed Companies (Code of CorporateGovernance)Regulations,2017.

CODEOFCONDUCT

InordertoputinplaceprofessionalstandardsandcorporatevaluesforpromotionofintegrityoftheBoard,seniormanagementandotheremployees,theBoardhasapprovedanddisseminatedaCodeofConduct,defining therein acceptable and unacceptable behaviors. The same has been placed on the Company'sWebsite.

NUMBEROFEMPLOYEES

TheCompanycontinueditsoperationswithanoptimalheadcount.TheheadcountasonJune30,2018were395comparedto366oflastyear.

HUMANRESOURCEANDREMUNERATIONCOMMITTEE

HumanResourceandRemunerationCommitteewasestablishedby theBoard toassist theDirectors indischargingtheirresponsibilitieswithregardtoselection,evaluation,compensationandcarrierplanningofkey management personnel. It is also involved in recommending improvements in Company's humanresourcepoliciesandproceduresandtheirperiodicreview.

thTheBoardofDirectorsinits196 meetingheldonFebruary21,2018resolvedtoreformBoardHRandRemunerationCommitteeandalsoresolvedtoincludeMr.AnsarJavedandMr.NaeemJanKhaninplaceofMr.MuhammadIqbalandMr.ArifIbrahim,asamemberinHR&RemunerationCommittee.Mr.AnsarJavedalsoassumedthechargeofChairmanBoard'sHR&RemunerationCommittee.

FINANCECOMMITTEE

The objective of the Committee is to set treasury related policieswithin the overall policy frameworkestablishedbytheBoard.Theformationofthiscommitteedoesnotimpairorlimitthemanagementofdaytodaytreasuryoperationsandroutineactivities.AnydeviationarisingduetospecialcircumstancesorfinancialmarketbehaviorshallbeplacedinsubsequentBoard'smeetingforratification.TheCommitteeshallaimtomeeteachquarterbutitisrequiredthatamajorityoftheCommitteemembersshallmeetatleasttwotimeseachfinancialyearandalsoatothertimesastheChairmanoftheCommitteeshallrequire.

thTheBoardofDirectorsinits196 meetingheldonFebruary21,2018resolvedtoreformBoardFinanceCommitteeandalsoresolvedtoincludeMr.MuhammadIqbal,IndependentdirectorasamemberinFinanceCommittee.Afterthisinclusion,theCommitteeconsistsoffourmembers.ThreemembersoftheCommitteeareIndependentdirectorsandtheothermemberisanon-executivedirector.

RELATEDPARTYTRANSACTIONS

The Company has continued to present the details of all related party transactions before the AuditCommitteeandupontheirrecommendationtotheBoardforreviewandapproval.ThedefinitionofrelatedpartyusedisinaccordancewithrepealedCompaniesOrdinance,1984andapplicablefinancialreportingframeworkastheregulationsunderSection208oftheCompaniesAct,2017havenotyetbeenannounced.

STATEMENTOFCOMPLIANCEWITHTHECODEOFCORPORATEGOVERNANCE

The requirementsof theCodeofCorporateGovernance setoutby theStockExchanges in theirListingRegulations,relevantfortheyearendedJune30,2018havebeendulycompliedwith.Astatementtothiseffectisannexedwiththereport.

WEBPRESENCE

Company'speriodicfinancialstatementsforthecurrentfinancialyearincludingannualreportsforthelastthreeyears are availableon theCompany'swebsitewww.peco.com.pk for informationof the investors.Communicationwiththeshareholdersisgivenhighpriority.CompleteinformationabouttheManagement,Products,Policies,Annual,HalfYearlyandQuarterlyAccountsareplacedonthewebsiteasperdirectivesofSECP.

HEALTH,SAFETYANDENVIRONMENT

CompanybelievesinandisfullycommittedtoimproveHealth,SafetyandEnvironmentstandardstoachievesustainableHSEperformance.ProcessSafety&BehaviorBasedSafetyacrosstheorganizationisenhancedthrough System integrated with the company's organization scheme and the Company is on track ofcontinuousimprovementwithfocustoachieve&sustainleadinglevels.

19 20

The Company has formulated a firm succession plan which includes performance evaluation andappropriatetrainingrequirementsfordevelopmentofpotentialfutureleaders.

OUTSTANDINGSTATUTORYDUES

DetailofoutstandingstatutoryduesisgiveninNoteno.10totheAccounts.

QUALITYCONTROL

To ensure implementation of the Management System, Internal Quality Audits, Surveillance Audits,ManagementReviewMeetingsareconductedregularly.TheCompanyisalsocertifiedforISO9001:2008 (EnvironmentalManagementSystem).

BUSINESSPLANSANDACHIEVEMENTOFTARGETS

ShortmediumandlongtermtargetsaresetbytheBoard.Managementendeavorstoachievethosethroughbetterplanning,concertedeffortsandhardwork.Eachyearacomprehensivebusinessplanischalkedoutanddulyapprovedby theBoard.Themanagementbelieves thatbasedonorders inhand,expansion inproductionandmarketingfacilities,theCompanywilloperateasa“GoingConcern”tillindefiniteperiod,Insha'Allah.

SIGNINGOFDIRECTORS'REPORT

Thisdirectors'reporthasbeenapprovedbytheBoardofDirectorsandsignedbytwodirectorsinsteadofchiefexecutiveandonedirector,asthechiefexecutivehasneitherattendednorappliedforleaveofabsence

thfrom198 meetingofBoardofDirectorsheldonSeptember27,2018.TheCompanySecretaryfulfilledallth

statutoryrequirementsforconvening198 Board'smeetingcalledforapprovalofthesefinancialstatements.

ACKNOWLEDGEMENT

TheBoardwould like to thankallof their stakeholders, employees, customers, suppliers, shareholders,bankersandanyothersfortheirsupportandloyalty.Suchsupport isrequiredtonotonlymeetnormalcommercial challenges but also those posed by security Issues and tough economic conditions. TheconfidenceandgoodwillofthestakeholdershasallowedtheCompanytosustainandgrowovertheyears.

WecontinuetopraytoAllahforthesuccessoftheCompanyandforthebenefitofallstakeholders,andthecountryingeneral.

ForandonBehalfoftheBoard

September27,2018Lahore

21 22

AnsarJaved MuhammadIqbalDirector Director

23 24

25 26

18

StatementofCompliancewithListedCompanies(CodeofCorporateGovernance)Regulations,2017NameoftheCompany:PakistanEngineeringCompanyLimited.Yearended:June30,2018

ThecompanyhascompliedwiththerequirementsoftheRegulationsinthefollowingmanner:1.Thetotalnumberofdirectorsarenineasperthefollowing:

a.Male:9b.Female:Nil

a)IndependentDirectors

Mr.RashidAliKhanMr.MuhammadIqbalMr.AnsarJavedMr.LiaqatMohammadMirzaMahmoodAhmad

b)Non-executiveDirectors

SyedKaukabMohuyuddinMr.NaeemJanKhanMr.MuhammadArifHabib

c)ExecutiveDirector

Mr.MairajAneesAriff

3.Thedirectorshaveconfirmedthatnoneofthemisservingasadirectoronmorethanfivelistedcompanies,includingthiscompany(excludingthelistedsubsidiariesoflistedholdingcompanieswhereapplicable).

4.ThecompanyhaspreparedaCodeofConductandhasensuredthatappropriatestepshavebeentakentodisseminateitthroughoutthecompanyalongwithitssupportingpoliciesandprocedures.

5.Theboardhasdevelopedavision/missionstatement,overallcorporatestrategyandsignificantpoliciesofthecompany.Acompleterecordofparticularsofsignificantpoliciesalongwiththedatesonwhichtheywereapprovedoramendedhasbeenmaintained.

6.Allthepowersoftheboardhavebeendulyexercisedanddecisionsonrelevantmattershavebeentakenbyboard/shareholdersasempoweredbytherelevantprovisionsoftheActandtheseRegulations.

7.ThemeetingsoftheboardwerepresidedoverbytheChairmanand,inhisabsence,byadirectorelectedbytheboardforthispurpose.TheboardhascompliedwiththerequirementsofActandtheRegulationswithrespecttofrequency,recordingandcirculatingminutesofmeetingofboard.

8.TheboardofdirectorshaveaformalpolicyandtransparentproceduresforremunerationofdirectorsinaccordancewiththeActandtheseRegulations.

9.TheBoardarrangesorientationcoursesforitsdirectorsasandwhenneededtoapprisethemoftheirdutiesandresponsibilities.TheincomingdirectorsareprovidedwithappropriatebriefingandorientationmaterialtoenablethemfirsthandknowledgeontheworkingoftheCompany.

10.TheboardhasapprovedappointmentofCFO,CompanySecretaryandHeadofInternalAudit,includingtheirremunerationandtermsandconditionsofemploymentandcompliedwithrelevantrequirementsoftheRegulations.

11.OnlyCFOhasdulyendorsedthefinancialstatementsbeforeapprovaloftheboardbecausethechiefth

executivehasneitherattendednorappliedforleaveofabsencefrom198 meetingofBoardofDirectorsheld,forapprovaloffinancialstatements,onSeptember27,2018.

12.Theboardhasformedcommitteescomprisingofmembersgivenbelow:

a)AuditandRiskManagementCommittee

MirzaMahmoodAhmad(Chairman)Mr.LiaqatMohammadMr.MuhammadIqbalMr.AnsarJaved

b)HRandRemunerationCommittee

Mr.AnsarJaved(Chairman)SyedKaukubMohyuddinMr.NaeemJanKhanMr.RashidAliKhan

c)FinanceCommittee

Mr.RashidAliKhan(Chairman)Mr.NaeemJanKhanMr.LiaqatMohammadMr.MuhammadIqbal

13.Thetermsofreferenceoftheaforesaidcommitteeshavebeenformed,documentedandadvisedtothecommitteeforcompliance.

14.Thefrequencyofmeetings(quarterly/halfyearly/yearly)ofthecommitteewereasperfollowing:

a)AuditCommittee:Four(4)b)HRandRemunerationCommittee:Three(3)c)FinanceCommittee:Four(4)

15.Theboardhassetupaneffectiveinternalauditfunction.

16.ThestatutoryauditorsofthecompanyhaveconfirmedthattheyhavebeengivenasatisfactoryratingunderthequalitycontrolreviewprogramoftheICAPandregisteredwithAuditOversightBoardofPakistan,thattheyoranyofthepartnersofthefirm,theirspousesandminorchildrendonotholdsharesofthecompany and that the firm and all its partners are in compliance with International Federation ofAccountants(IFAC)guidelinesoncodeofethicsasadoptedbytheICAP

17.ThestatutoryauditorsorthepersonsassociatedwiththemhavenotbeenappointedtoprovideotherservicesexceptinaccordancewiththeAct,theseregulationsoranyotherregulatoryrequirementandtheauditorshaveconfirmedthattheyhaveobservedIFACguidelinesinthisregard.

18.WeconfirmthatallotherrequirementsoftheRegulationshavebeencomplied.

2.Thecompositionofboardisasfollows:

27 28

AnsarJaved MuhammadIqbalDirector Director

INDEPENDENTAUDITOR'SREPORTTotheMembersofPakistanEngineeringCompanyLimitedReportontheAuditoftheFinancialStatements

Opinion

We have audited the annexed financial statements of Pakistan Engineering Company Limited, which

comprisethestatementoffinancialpositionasat June30,2018andthestatementofprofitorloss,the

statementofothercomprehensiveincome,thestatementofchangesinequity,thestatementofcashflowsfor

theyearthenended,andnotestothefinancialstatements,includingasummaryofsignificantaccounting

policiesandotherexplanatory information,andwestatethatwehaveobtainedall the informationand

explanationswhich,tothebestofourknowledgeandbelief,werenecessaryforthepurposesoftheaudit.

Inouropinionandtothebestofourinformationandaccordingtotheexplanationsgiventous,thestatement

of financialposition, the statementofprofit or loss, the statementof other comprehensive income, the

statementofchangesinequityandthestatementofcashflowstogetherwiththenotesformingpartthereof

conformwiththeaccountingandreportingstandardsasapplicableinPakistanandgivetheinformation

requiredbytheCompaniesAct,2017,inthemannersorequiredandrespectivelygiveatrueandfairviewof

thestateoftheCompany'saffairsasat June30,2018andoftheloss,othercomprehensiveincome,the

changesinequityanditscashflowsfortheyearthenended.

BasisforOpinion

Weconductedouraudit inaccordancewith InternationalStandardsonAuditing(ISAs)asapplicable in

Pakistan.OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor'sResponsibilities

for theAuditof theFinancial Statements sectionofour report.Weare independentof theCompany in

accordancewiththeInternationalEthicsStandardsBoardforAccountants'CodeofEthicsforProfessional

AccountantsasadoptedbytheInstituteofCharteredAccountantsofPakistanandwehavefulfilledourother

ethicalresponsibilitiesinaccordancewiththeCode.Webelievethattheauditevidencewehaveobtainedis

sufficientandappropriatetoprovideabasisforouropinion.

EmphasisofMatter

Withoutqualifyingouropinion,wedrawattentiontothefollowings:

INotes14.1.1&14.1.3to14.1.14tothefinancialstatementswhichdescribesvariousdisputedmattersofthe

CompanywithPrivatizationCommission,MinistryofFinance,FBRandotherparties.

ii.Note.26.tothefinancialstatementswhichdescribesthat,throughaletter,theJointSecretaryMinistryof

IndustriesandProductionIslamabadhasdirected,theDistrictOfficerrevenueLahoreandMemberRevenue

Punjab, to stop themutationof landheld for sale till further instructions, forundisclosed reasons.The

management of Company is strongly committed to the plan of sale of this land and there has been no

revocationoftheGovernment'sorder.

OurOpinionisnotqualifiedinrespectofthismatter.

IndependentAuditor'sReviewReporttothemembersofPakistanEngineeringCompanyLimitedReviewReportontheStatementofCompliancecontainedinListedCompanies(CodeofCorporateGovernance)Regulations,2017

WehavereviewedtheenclosedStatementofCompliancewiththeListedCompanies(CodeofCorporateGovernance) Regulations, 2017 (“the Regulations”) prepared by the Board of Directors of PakistanEngineeringCompanyLimited(“theCompany”)fortheyearendedJune30,2018inaccordancewiththerequirementsofregulation40oftheRegulations.

TheresponsibilityforcompliancewiththeRegulationsisthatoftheBoardofDirectorsoftheCompany.Ourresponsibility is to review whether the Statement of Compliance reflects the status of the Company'scompliancewith the provisions of the Regulations and report if it does not and to highlight any non-compliancewith the requirements of the Regulations. A review is limited primarily to inquiries of theCompany's personnel and review of various documents prepared by the Company to complywith theRegulations.Asapartofourauditofthefinancialstatementswearerequiredtoobtainanunderstandingoftheaccountingandinternalcontrolsystemssufficienttoplantheauditanddevelopaneffectiveauditapproach.Wearenotrequired toconsiderwhether theBoardofDirectors' statementon internal control coversall risksandcontrols or to form an opinion on the effectiveness of such internal controls, the Company's corporategovernanceproceduresandrisks.

TheRegulationsrequiretheCompanytoplacebeforetheAuditCommittee,anduponrecommendationoftheAudit Committee, place before the Board of Directors for their review and approval, its related partytransactionsandalsoensurecompliancewiththerequirementsofsection208oftheCompaniesAct,2017.WeareonlyrequiredandhaveensuredcomplianceofthisrequirementtotheextentoftheapprovaloftherelatedpartytransactionsbytheBoardofDirectorsuponrecommendationoftheAuditCommittee.Wehavenot carriedoutprocedures toassessanddetermine theCompany'sprocess for identificationof relatedpartiesandthatwhethertherelatedpartytransactionswereundertakenatarm'slengthpriceornot.

Basedonourreview,nothinghascometoourattentionwhichcausesustobelievethattheStatementofCompliancedoesnot appropriately reflect theCompany's compliance, in allmaterial respects,with therequirementscontainedintheRegulationsasapplicabletotheCompanyfortheyearendedJune30,2018.

Further,wehighlightbelowan instanceofnon-compliancewith therequirementsof theRegulationsasreflectedintheparagraphreferencewherethisisstatedintheStatementofCompliance:

September27,2018 TariqAbdulGhaniMaqbool&Co.Lahore CharteredAccountants

29 30

ParagraphReference Description

11

OnlyCFOhasdulyendorsedthefinancialstatementsbeforeapprovaloftheboardbecausethechiefexecutivehasneitherattendednorappliedforleaveofabsencefrom198thmeetingofBoardofDirectorsheld,forapprovaloffinancialstatements,onSeptember27,2018.

11

andrelateddisclosuresmadebymanagement.

ResponsibilitiesofManagementandBoardofDirectorsfortheFinancialStatements

Management is responsible for the preparation and fair presentation of the financial statements inaccordancewiththeaccountingandreportingstandardsasapplicableinPakistanandtherequirementsofCompaniesAct,2017andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Inpreparingthefinancialstatements,managementisresponsibleforassessingtheCompany'sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcern basis of accounting unless management either intends to liquidate the Company or to ceaseoperations,orhasnorealisticalternativebuttodoso.

BoardofDirectorsareresponsibleforoverseeingtheCompany'sfinancialreportingprocess.

Auditor'sResponsibilitiesfortheAuditoftheFinancialStatements

Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor'sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAsasapplicableinPakistanwillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

AspartofanauditinaccordancewithISAsasapplicableinPakistan,weexerciseprofessionaljudgmentandmaintainprofessionalskepticismthroughouttheaudit.Wealso:

·Identifyandassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

·Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcontrol.

·Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimates

31 32

KeyAuditMatters

Keyauditmattersarethosemattersthat,inourprofessionaljudgment,wereofmostsignificanceinouraudit

ofthefinancialstatementsofthecurrentperiod.Thesematterswereaddressedinthecontextofourauditof

thefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparate

opiniononthesematters.

FollowingaretheKeyauditmatters:

S.KeyauditmatterHowthematterwasaddressedinourNo.audit

1.CompliancewithLawsandRegulations-Changesin4thSchedule

InformationOtherthantheFinancialStatementsandAuditor'sReportthereon;

Managementisresponsiblefortheotherinformation.TheOtherInformationcomprisestheinformationincludedintheAnnualReportbutdoesnotincludethefinancialstatementsandourauditor'sreportthereon.OuropiniononthefinancialstatementsdoesnotcovertheOtherInformationandwedonotexpressanyformofassuranceconclusionthereon.

Inconnectionwithourauditofthefinancialstatements,ourresponsibilityistoreadtheOtherInformationand, in doing so, considerwhether the Other Information ismaterially inconsistent with the financialstatementsorourknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisOtherInformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

The Companies Act, 2017 (the Act)promulgated on May 30, 2017. The ActrevisedandreplacedtheFourthScheduleof the Companies Ordinance, 1984 andbrought changes in the presentation anddisclosuresof the financialstatementsbyelimination of duplicative disclosureswith IFRS disclosure requirements andincorporation of significant additionaldisclosures.Thesechangesareapplicablefirst time to the Company's financialstatements for the year ended June 30,2018.Thechangesareconsideredasakeyaudit matter because failure to complywith the requirements of the Act, couldhavefinancialandreputationalimpacton

Refer note 4 for changes in disclosuresmadethroughtheAct.

thecompany.

Ourauditproceduresinrespectofthisareaincluded:

Obtainedanunderstandingoftherelatedprovisions and schedules of the Actapplicableto theCompanyandprepareddocument to assess the Company'scompl iance wi th the d i sc losurerequirement of the Act. Wediscussedtheapplicablechangeswiththe Company's management and thosecharged with governance as to whethertheCompany is in compliancewith suchchanges.We also maintained a high level ofvigilance when carrying out our otheraudit procedures for indication of non-compliance.Weensuredthatthefinancialstatementshave been prepared in accordance withthe approved accounting standards andthe A c t .

·Concludeontheappropriatenessofmanagement'suseofthegoingconcernbasisofaccountingand,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheCompany'sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor'sreporttotherelateddisclosuresinthefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor'sreport.However,futureeventsorconditionsmaycausetheCompanytoceasetocontinueasagoingconcern.

·Evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

We also provide the board of directors with a statement that we have complied with relevant ethicalrequirementsregardingindependence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonourindependence,andwhereapplicable,relatedsafeguards.

Fromthematterscommunicatedwiththeboardofdirectors,wedeterminethosemattersthatwereofmostsignificanceintheauditofthefinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters. We describe these matters in our auditor's report unless law or regulation precludes publicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,wedeterminethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.

ReportonOtherLegalandRegulatoryRequirements

Basedonouraudit,wefurtherreportthatinouropinion:

a)properbooksofaccounthavebeenkeptbytheCompanyasrequiredbytheCompaniesAct,2017;

b)thestatementoffinancialposition,thestatementofprofitorloss,thestatementofothercomprehensiveincome,thestatementofchangesinequityandthestatementofcashflowstogetherwiththenotesthereonhavebeendrawnupinconformitywiththeCompaniesAct,2017andareinagreementwiththebooksofaccountandreturns;

c)investmentsmade,expenditureincurredandguaranteesextendedduringtheyearwereforthepurposeoftheCompany'sbusiness;and

33 34

d)noZakatwasdeductibleatsourceundertheZakatandUsherordinance,1980(XVIII1980).

Theengagementpartnerontheauditresultinginthisindependentauditor'sreportisMalikHaroonAhmad.

September27,2018 TariqAbdulGhaniMaqbool&Co.Lahore CharteredAccountants

FINANCIALSTATEMENTSFORTHEYEARENDED

JUNE30,2018

NoteJune30,2018

RestatedJune30,2017

RestatedJuly01,2016

EQUITYANDLIABILITIESSHARECAPITALANDRESERVESSharecapital 5

Revenuereserve-general

Accumulatedloss

Surplusonrevaluationoffixedassets 6

56,902

10,000

(832,934)

14,498,128

56,902

10,000

(925,610)

14,516,504

13,667,998

13,732,096

13,657,796

56,902

10,000

(884,307)

14,485,403

NON-CURRENTLIABILITIESLongtermfinancing 7 9,747

29,250

48,753

Longtermdeposits 8 3,000

2,000

2,000

Deferredliabilities-net 9 71,044

115,609 133,662

83,791

146,859

184,415

CURRENTLIABILITIESTradeandotherpayables 10 313,569

657,519

797,533

UnclaimedDividend 11 13,126

13,257 13,309

Shorttermborrowing-secured 12 61,494

74,919

49,984

Currentportionoflongtermfinancing 7 19,503

19,503 19,503

Accruedmark-up 2,128

2,491

2,541

Provisionfortaxation 15,992

13,748

56,123

425,812

781,437

938,993

Liabilitiesdirectlyassociatedwithfreeholdland-heldforsale 13 1,790,848

1,790,848

1,790,848

CONTINGENCIESANDCOMMITMENTS 14

TOTALEQUITYANDLIABILITIES 15,968,449

16,451,240 16,572,052

Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements

------------Rupeesinthousand---------

NoteJune30,2018

RestatedJune30,2017

RestatedJuly01,2016

ASSETS

NON-CURRENTASSETS

Property,plantandequipment 15

Investmentproperty 16

Longterminvestment 17

Longtermdeposits 18

14,564,505

610

725

1,832

14,567,672

CURRENTASSETS

Stores,sparesandloosetools 19

Stock-in-trade 20

14,562,172

14,558,750

550

819

2,053

14,555,168

579

741

2,053

14,558,541

Tradedebts-unsecured 21

Advances 22

Tradedeposits,prepaymentsandotherreceivables 23

TaxrefundsduefromGovernment 24

Cashandbankbalances 25

170,463

446,910

781,691

6,191

30,905

104,912

36,903

1,577,975

121,271

256,813

1,119,940

6,687

25,881

137,128

21,936

1,689,656

168,898

347,621

382,497

6,499

27,007

120,923

38,108

1,091,553

Freeholdland-heldforsale 26 314,724

314,724

314,724

TOTALASSETS 15,968,449

16,451,240

16,572,052

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

------------Rupeesinthousand---------

STATEMENTOFFINANCIALPOSITIONASATJUNE30,2018

STATEMENTOFFINANCIALPOSITIONASATJUNE30,2018

35 36

June30,2018

June30,2017

Sales-net

Costofsales

GrossProfit

1,424,449

(1,399,407)

25,042

1,353,172

(1,187,003)

166,169

Sellinganddistributionexpenses

Freightandforwardingexpenses

Administrativeexpenses

Otheroperatingcharges

Otheroperatingincome

Operating(Loss)/Profit

(12,024)

(22,714)

(74,133)

(1,034)

(109,905)

3,449

(81,414)

(10,542)

(21,848)

(73,073)

(6,439)

(111,902)

23,332

77,599

Financecost (17,559)

(Loss)/Profitbeforetaxation (98,973)

(17,072)

60,527

Taxation 29,017 6,212

(Loss)/Profitaftertaxationfortheyear (69,956) 66,739

BASICANDDILUTED(LOSS)PERSHARE ------Rupees------

Basicanddiluted(loss)/earningspershare (12.29)

11.73

Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements

STATEMENTOFPROFITANDLOSSFORTHEYEARENDEDJUNE30,2018

June30,

2018

June30,

2017

(69,956) 66,739

Itemsthatwillnotbereclassifiedtoprofitandlossaccount:

Remeasurementofretirementbenefitplan 1,235 3,199

Relateddeferredtaximpact (358) (960)

Remeasurementofretirementbenefitplan-net 877 2,239

Totalcomprehensive(loss)/incomefortheyear (64,098) 74,300

Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements

STATEMENTOFCOMPREHENSIVEINCOMEFORTHEYEARENDEDJUNE30,2018

Note

27

28

29

30

31

32

33

34

35

36

----Rupeesinthousand---- ----Rupeesinthousand----

(Loss)/Profitaftertaxationfortheyear

Effectofchangeintaxratesonbalanceofrevaluationonproperty,plantandequipment 4,981 5,322

37 38

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

STATEMENTOFCHANGESINEQUITYFORTHEYEARENDEDJUNE30,2018

5,32213,732,096

13,732,096

(69,956)

56,902

10,000

(925,610)

-

(858,708)

-

-

-

14,516,504

14,516,504

56,902

10,000

(925,610)

14,516,504

13,657,796

-

-

66,739

-

66,739

-

-

3,199

-

3,199

- - (960) - (960)

-

-

2,239

-

2,239

-

-

18,375 (18,375) -

-

-

5,323 (5,323) -

-

-

-

5,322

56,902 10,000 (832,934) 14,498,128

56,902 10,000 (832,934) 14,498,128

- - (69,956) -

-

-

1,235

-

1,235

-

-

(358)

-

(358)

-

-

877

-

877

-

-

17,706

(17,706)

-

-

-

-

4,981

4,981

56,902

10,000

(884,307)

14,485,403

13,667,998

BalanceasatJuly01,2016-aspreviouslyreported

Impactofrestatement(note4)

BalanceasatJuly01,2016-asrestated

-ProfitaftertaxfortheyearendedJune30,2017

Othercomprehensiveincomefortheyear-Remeasurementofretirementbenefitplan-Relateddeferredtaximpact

Surplusonrevaluationofproperty,plantand equipmentrealizedduringtheyearonaccountof:-incrementaldepreciation-netofftax-disposalofrevaluedmachinery-netofftax

-Revaluationofproperty,plantandequipmentadjustmentduetochangeintaxrate-OCIBalanceasatJune30,2017-asrestated

BalanceasatJuly01,2017

-(Loss)aftertaxfortheyearendedJune30,2018

Othercomprehensiveincomefortheyear-Remeasurementofretirementbenefitplan-Relateddeferredtaximpact

Surplusonrevaluationofproperty,plantand equipmentrealizedduringtheyearonaccountof:-incrementaldepreciation-netofftax

-Revaluationofproperty,plantandequipmentadjustmentduetochangeintaxrate-OCI

BalanceasatJune30,2018-asrestated

TOTAL

Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements

Issued,subscribedandpaid-upcapital

RevenueReserve-General

AccumulatedLoss

Surplusonrevaluationoffixedassets

Note

June30,2018

June30,2017

Cashgeneratedfromoperations 37 111,720 54,535

Financecostpaid (14,873) (14,376)

Gratuitypaid (800) (600)

Incometaxpaid (14,108) (6,085)

Workers'profitparticipationfundpaid (7,066) (7,564)

Netcashgeneratedfromoperatingactivities 74,873 25,910

CASHFLOWSFROMINVESTINGACTIVITIES

Fixedcapitalexpenditureincurred (41,609) (37,573)

ProceedsfromdisposalofProperty,plantandequipment - 21,472

Longtermdeposits - (221)

Netcash(usedin)investingactivities (41,609) (16,322)

CASHFLOWSFROMFINANCINGACTIVITIES

Shorttermborrowings (13,425) 24,935Securitydepositreceived 1,000 -Longtermborrowings-(repayments) (19,503) (19,503)Dividendpaid (131) (53)Netcash(usedin)/generatedfromfinancingactivities (32,059) 5,379NETINCREASEINCASHANDCASHEQUIVALENTS 1,205 14,967 CASHANDCASHEQUIVALENTSATTHEBEGINNINGOFTHEYEAR 36,903 21,936

CASHANDCASHEQUIVALENTSATTHEENDOFTHEYEAR 25 38,108 36,903

Theannexednotesfrom1to47formanintegralpartofthesefinancialstatements.

----Rupeesinthousand----

----Rupeesinthousand----

39 40

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

MianAnwarAziz

ChiefFinancialOfficer

MuhammadIqbal

DirectorAnsarJavedDirector

STATEMENTOFCASHFLOWSFORTHEYEARENDEDJUNE30,2018

2.4Standards,interpretationsandamendmentstopublishedapprovedaccountingstandardsthatare

NOTESTOTHEFINANCIALSTATEMENTSFORTHEYEARENDEDJUNE30,2018

1.LEGALSTATUSANDOPERATIONS

PakistanEngineeringCompanyLimited("theCompany")wasincorporatedinPakistanonFebruary15,1950undertheCompaniesAct,1913(NowCompaniesAct,2017)asapubliclimitedcompany.ItssharesarequotedonPakistanStockExchange.ThefactoryoftheCompanyissituatedatNearKotLakhpatRailwayStation,QuaideAzamIndustrialEstate,PECORoad,Lahore.TheregisteredofficeoftheCompanyissituatedat6/7GangaRamTrustBuilding,Shahra-e-Quaid-e-Azam,Lahore.Thecompanyisprincipallyengagedinthemanufacturingandsaleofengineeringproducts.Themajorproductsofthecompanyareelectricitytransmissionandcommunicationtowers,electricmotors,pumpsandsteelrolledproductsetc.

KeepinginviewthefinancialconditionoftheCompany,theGovernmentofPakistaninpasthadcloseddownallthedivisionsoftheCompany,however,arehabilitationplanwasapprovedbytheFederalCabinetandaccordingtotheplan,Structure(STR)divisionwaskeptoperationalandBadamiBaghWorkswascloseddownwithitslandbeingofferedforsalebythePrivatizationCommissionofPakistan.Furthermore,thecompanywasallowedtohireneededworkforceonjob-to-jobbasisoncontract/dailywages.Inthisregardtitle deed of Badami Bagh Land was also handed over to the Privatization Commission of Pakistan.ExpressionofinteresthasbeenreceivedbyPrivatizationCommissionofPakistaninthisregardfrommanypartiesandmanagementisconfidentthatthetransactionwillbecompletedsoon.Takingintoconsiderationthesuccessfuloperationofthestructuredivisionanddemandforpumpsandmotors,theBoDdecidedtobring other divisions into operation as well. At present structure, pump, electric motor and foundrydivisionsofthecompanyareinoperation.

2.BASISOFPREPARATION

2.1StatementofCompliance

ThesefinancialstatementshavebeenpreparedinaccordancewiththeaccountingandreportingstandardsasapplicableinPakistan.TheaccountingandreportingstandardsasapplicableinPakistancompriseofInternational Financial Reporting Standards (IFRS) issued by the International Accounting StandardsBoardandIslamicFinancialAccountingStandards(IFAS)issuedbyInstituteofCharteredAccountantsofPakistanandprovisionsofanddirectivesissuedundertheCompaniesAct,2017(theAct).WherevertherequirementsoftheActordirectivesissuedbySecuritiesandExchangeCommissionofPakistandifferwiththerequirementsofIFRSorIFAS,therequirementsoftheActortherequirementsofthesaiddirectivesprevail.

2.2BasisofMeasurement

These financial statements have been prepared under the historical cost convention except for therevaluationofcertainitemsofproperty,plantandequipmentwhicharestatedatrevaluedamounts,certainfinancial liabilitieswhicharecarriedatamortizedcostandrecognitionofcertainemployeeretirementbenefitsatpresentvalue.Historicalcosts isgenerallybasedon fairvalueof theconsiderationgiven inexchangeforgoodsandservices.Themethodsusedtomeasurefairvaluesarediscussedfurtherintherespectivepolicynotes.

2.3 Standards, interpretations and amendments to published approved accounting standards that areeffectiveandrelevant

TheamendmentsandInterpretationswhichbecameeffectiveduringtheyearareconsiderednottoberelevanttotheCompany’soperationsandthereforearenotdetailedinthesefinancialstatementsexceptfortheamendmentsasexplainedbelow:

AmendmentstoIAS16,‘Property,plantandequipment’andIAS38,‘Intangibleassets’areapplicableonaccountingperiodsbeginningonor after January01,2016. IASBhas clarified that theuseof revenuebasedmethodstocalculatethedepreciationofanassetisnotappropriatebecauserevenuegeneratedbyanactivitythatincludestheuseofanassetgenerallyreflectsfactorsotherthantheconsumptionoftheeconomicbenefitsembodiedintheasset.TheIASBhasalsoclarifiedthatrevenueisgenerallypresumedtobean inappropriatebasis formeasuring theconsumptionof theeconomicbenefitsembodied inanintangible asset. The application of these amendments has no material impact on the Company’sfinancialstatements.

AmendmentstoIAS1,‘Presentationoffinancialstatements’onthedisclosureinitiativeisapplicableonannualperiodsbeginningonorafterJanuary01,2016.TheseamendmentsarepartoftheIASBinitiativetoimprovepresentationanddisclosureinfinancialreports.TheapplicationoftheseamendmentshasnomaterialimpactontheCompany’sfinancialstatements.

ThethirdandfourthscheduletotheCompaniesAct,2017becameapplicabletotheCompanyforthefirsttimeforthepreparationofthesefinancialstatements.TheCompaniesAct,2017(includingitsthirdandfourthschedule)formsanintegralpartofthestatutoryfinancialreportingframeworkapplicabletotheCompany and amongst others, prescribes the nature and content of disclosures in relation to variouselementsofthefinancialstatements.Additionaldisclosuresincludebutarenotlimitedto,managementassessment of sufficiency of tax provision in the financial statements (refer note 35.3), change inthresholdforidentificationofexecutives(Ref.Note:42),additionaldisclosurerequirementsforrelatedparties(RefNote:38)etc.

Therearecertainstandards,amendmentstotheapprovedaccountingstandardsandinterpretationsthatare mandatory for the Company’s accounting periods beginning on or after January 1, 2016 but areconsidered not to be relevant or to have any significant effect on the Company’s operations and are,therefore,notdetailedinthesefinancialstatements.

2.5Standardsthatarenotyeteffective

T he following revised standards, amendments and interpretations with respect to the approvedaccounting standards as applicable in Pakistan would be effective from the dates mentioned belowagainsttherespectivestandardorinterpretation:

Theabovestandards,AmendmentsorInterpretationsarenotlikelytohavematerial/significantimpactonCompany'sfinancialstatements.

Standard,AmendmentsorInterpretationEffectiveDate

IAS7 StatementofCashFlows January01,2017IAS12 IncomeTaxes January01,2017IFRS2 ShareBasedPayment January01,2018IFRS9 FinancialInstruments July01,2018IFRS15 RevenuefromContractsWithCustomers' July01,2018IFRS16 Leases January01,2019IFRIC22 ForeignCurrencyTransactionsandadvanceconsideration January01,2018

(Annualperiodsbeginningonorafter)

effectivebutnotrelevant

41 42

2.6Functionalandpresentationcurrency

Items included in the financial statements of the Company are measured using the currency of theprimaryeconomicenvironmentinwhichtheCompanyoperates(thefunctionalcurrency).ThefinancialstatementsarepresentedinPakRupees,whichistheCompany’sfunctionalandpresentationcurrency.

2.7CriticalAccountingEstimate&Judgments

TheCompany’s significantaccountingpoliciesare stated innote3.Notallof these significantpoliciesrequire themanagement tomakedifficult, subjectiveor complex judgmentsorestimates.Following isintendedtoprovideanunderstandingofthepolicies,themanagementconsiderscriticalbecauseoftheircomplexity, judgment and estimation involved in their application and their impact on these financialstatements.Estimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperience,including expectations of future events that are believed to be reasonable under the circumstances.Thesejudgmentsinvolveassumptionsorestimatesinrespectoffutureeventsandtheactualresultsmaydifferfromtheseestimates.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimateisrevised,iftherevisionaffectsonlythatperiod,orintheperiodofrevisioninfutureperiodsiftherevisionaffectsbothcurrentandfutureperiods.The areas involving higher degree of judgments or complexity or areas where assumptions andestimatesaresignificanttothefinancialstatementsareasfollows:

2.7.1Property,PlantandEquipment

TheCompanyreviewsappropriatenessoftheratesofdepreciation/usefullivesandresidualvaluesusedin the calculationofdepreciation at each financial year end. Further, theCompanyestimates revaluedamount and useful life of land, building and plant and machinery based on the periodic valuationscarried out by independent professional valuers. Any change in estimate in future might effect thecarryingamountsoftherespectiveitemofproperty,plantandequipmentwithcorrespondingeffectonthe depreciation charge and impairment, surplus on revaluation and annual transfer of incrementaldepreciationfromsurplusonrevaluationoffixedassetsaccounttoaccumulatedloss.

2.7.2Taxation

Inmakingtheestimateforincometaxpayable,thecompanytakesintoaccounttheapplicabletaxlaws.Deferredtaxisrecognizedusingthebalancesheetmethod,providingfortemporarydifferencesbetweenthecarryingamountofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtotemporarydifferencewhentheyareexpectedtoreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactivebythereportingdate.Significantjudgmentisexercisedtodeterminetheamountofnetdeferredtaxliabilitiestoberecognized.Duringtheyeartheestimateofamountowingtothetaxationauthoritiesinthefuturechangedasaresultofchangeinrateofcorporatetaxfrom31%to30%.Resultantlythebalanceofdeferredtaxationhasbeenadjustedaccordingly.

2.7.3Storesandspares

TheCompanyreviewsthestoresandsparesforpossibleimpairmentonannualbasis.Anychangeintheestimatesinfutureyearsmightaffectthecarryingamountsoftherespectiveitemsofstoresandspareswithcorrespondingaffecttotheprovision.

2.7.4ProvisionsAgainstDoubtfulBalances

The Company reviews its doubtful balances at each balance sheet date to assess the adequacy of theprovisionthereagainst.Inparticular,judgmentisrequiredintheestimationoftheamountandtimingoffuture cash flows when determining the level of provision required. Such estimates are based onassumptionsaboutanumberoffactorsandactualresultsmaydiffer,resultinginfuturechangestotheprovision.

3.SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESThe principal accounting policies applied in the preparation of these financial statements are set outbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.

3.1Property,PlantandEquipmentProperty, plant & equipment is stated at cost or revalued amount less accumulated depreciation andimpairmentloss,ifany,exceptforfreeholdlandandcapitalworkinprogresswhichisstatedatrevaluedamount/costlessimpairment,ifany.Costoftheseassetsconsistsofhistoricalcostanddirectlyattributablecostsofbringingtheassetstoworkingcondition.Subsequentcostsareincludedintheassetscarryingamountorrecognizedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefits associatedwith the itemwill flow to theCompany and the cost of the item canbemeasuredreliably.Costincurredtoreplaceacomponentofanitemofproperty,plantandequipmentiscapitalizedandtheassetsoreplacedisderecognized.Thecostofthedaytodayservicingofproperty,plantandequipmentarerecognizedinprofitandlossaccount.Thecostofselfconstructedassetsincludesthecostofmaterials, direct labor and any other cost directly attributable to bringing the assets to aworkingconditionfortheirintendeduse.Borrowingcostspertainingtotheconstructionanderectionarecapitalizeduptothedateofcompletion.Depreciationonproperty,plant&equipmentischargedtoincomeonreducingbalancemethodattheratesspecifiedin(note15)totheaccountstowriteoffthecostovertheirestimateduseful lives.Depreciationonadditionanddeletionischargedonthebasisofnumberofdaystheassetremainsinuseofthecompany.Assets'residualvalues,usefullivesanddepreciationratesarereviewedandadjusted,ifappropriate,ateachbalancesheetdate.Revaluationoflandandbuildingiscarriedoutwithsufficientregularitytoensurethatthecarryingamountofassetsdoesnotdiffermateriallyfromthefairvalue.Anyrevaluationincreaseinthecarryingamountoflandandbuildingisrecognized,netoftax,inothercomprehensiveincomeandpresentedasaseparatecomponentofequityas“Revaluationsurplusonproperty,plantandequipment“excepttotheextentthatitreversesarevaluationdecrease/deficitforthesameassetpreviouslyrecognisedinprofitandlossaccount,inwhich case the increase is first recognized in profit and loss account to the extent of the decreasepreviouslycharged.Anydecreasesthatreversepreviousincreasesofthesameassetarefirstrecognizedinothercomprehensive income to theextentof theremainingsurplusattributable to theasset,allotherdecreasesarechargedtoprofitandlossaccount.TherevaluationreserveisnotavailablefordistributiontotheCompany’sshareholders.Eachyear,thedifferencebetweendepreciationbasedontherevaluedcarryingamountoftheassetchargedtoprofitandlossaccountanddepreciationbasedontheasset’soriginalcost,netoftax,isreclassifiedfromrevaluationsurplustoretainedearnings.DuringtheyeartheCompanychangeditsaccountingpolicyinrespectoftheaccountingandpresentationofrevaluation of property, plant and equipment. Previously, the Company’s accounting policy was inaccordancewiththeprovisionsoftherepealedCompaniesOrdinance1984.ThoseprovisionsandresultantpreviouspolicyoftheCompanywasnotinalignmentwiththeaccountingtreatmentandpresentationofrevaluationofproperty,plantandequipmentasprescribed in IAS16 ‘Property,plantandEquipment’.However,theCompaniesAct,2017hasnotspecifiedanyaccountingtreatmentforrevaluationofproperty,plantandequipment,accordinglytheCompanyhaschangedtheaccountingpolicytobringitinconformitywith the accounting treatment and presentation of revaluation of property, plant and equipment asspecifiedinIAS16‘Property,PlantandEquipment’.Thedetailedinformationandimpactofthischangeinpolicyisprovidedinnote4tothesefinancialstatements.Impairmenttestforproperty,plantandequipmentisperformedwhenthereisanindicationofimpairment.Ateachyearend,anassessmentismadetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationsexist,anestimateoftheassetsrecoverableamountiscalculatedbeingthehigherofthefairvalueoftheassetlesscosttosellandtheassetsvalueinuse.Ifthecarryingamountoftheassetexceedsitsrecoverableamount,theproperty,plantandequipmentisimpairedandanimpairmentlossischargedto

43 44

theprofitandlossaccountsoasthereducethecarryingamountofproperty,plantandequipmenttoitsrecoverableamount.Fairvalueisdeterminedastheamountthatwouldbeobtainedfromthesaleoftheassetinanarm'slengthtransactionbetweenknowledgeableandwillingparties.Valueinuseisdeterminedasthepresentvalueoftheestimatedfuturecashflowsexpectedtoarisefromthecontinueduseoftheproperty,plantandequipmentinitspresentformanditseventualdisposal.Animpairmentlossisrecoverediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.Animpairmentlossisreversedonlytotheextentthattheasset'scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortization,ifnoimpairmentlosshadbeenrecognized.Anitemofproperty,plantandequipmentisderecognizedupondisposalorwhennofutureeconomicbenefitsareexpectedfromitsuseordisposal.Anygainandlossondisposalorde-recognition(calculatedatthedifferencebetweenthenetdisposalproceedsandcarryingamountoftheasset)istakentoprofitandlossaccount.Whentherevaluedassetsaresold,therelevantremainingsurplusonrevaluationistransferreddirectlytoaccumulatedloss.

3.2CapitalWork-in-Progress

Capitalwork-in-progressisstatedatcostlessanyidentifiedimpairmentloss.Allexpendituresconnectedwithspecificassetsincurredduringinstallationandconstructionperiodarecarriedundercapitalwork-inprogress.Thesearetransferredtooperatingfixedassetsasandwhentheseareavailableforuse.

3.3Investmentproperty

Buildings held for capital appreciation or to earn rental income is classified as investment property.Investmentpropertyisstatedatcostlessaccumulateddepreciationandanyrecognizedimpairmentloss.Depreciationonbuildingsischargedtoprofitandlossaccountapplyingthereducingbalancemethodsoastowriteoffthecostofbuildingsovertheirestimatedusefullivesatarateof5%perannum.

3.4SegmentReporting

Operatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecisionmaker.Thechiefoperatingdecisionmaker,whoisresponsibleforallocatingresourcesandassessingperformanceoftheoperatingsegments,hasbeenidentifiedastheBoardofDirectorsoftheCompany thatmakesstrategicdecisions.On thebasisof its internal reporting structure, theCompanyconsidersitselftobeasinglereportablesegment.AnoperatingsegmentisacomponentoftheCompanythatengages in business activities from which it may earn revenues and incur expenses. The financialinformationhasbeenpreparedonthebasisofsinglereportablesegmenti.e."Engineering".

3.5Non-currentassetsheldforsale

Non-currentassetsareclassifiedasheldforsale if theircarryingamountwillberecoveredprincipallythoroughasaletransactionratherthenthroughcontinuinguse.Non-currentassetsclassifiedasheldforsalearemeasuredattheloweroftheircarryingamountandfairvaluelesscosttosale.

3.6Inventories

Thesearevaluedatlowerofcostandnetrealizablevalue.Costisdeterminedasfollows:

3.7Tradedebtsandotherreceivables

Tradedebtsandotherreceivablesarerecognizedinitiallyatinvoicevalue,whichapproximatesfairvalue,lessprovisionfordoubtfuldebtsorallowanceforanyuncollectableamounts.Anestimatedprovisionfordoubtfuldebtsismadewhencollectionofthefullamountisnolongerprobable.Baddebtsarewrittenoffasincurred.AprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethattheCompanywillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Theprovisionisrecognizedintheprofitandlossaccount.Whenatradedebtisuncollectible,itiswrittenoffagainsttheprovision. Subsequent recoveriesof amountspreviouslywrittenoff are credited to theprofit and lossaccount.

3.8AssociatedUndertakings/RelatedParties

TheunitscontrolledbytheMinistryofProduction,GovernmentofPakistanandundercommoncontrolsareconsideredasassociatedundertakingsof thecompany.All transactionsbetweentheCompanyandtheassociatedundertakingsareaccountedforatanarm'slengthpricesdeterminedusing"costplusmethod"andproperlyrecommendedbytheauditcommitteeandsubsequentlyapprovedbytheboardofdirectorsoftheCompany.

3.9ForeignCurrencyTranslation

ForeigncurrencytransactionsaretranslatedintoPakRupeesusingtheexchangeratesprevailingatthedates of the transactions. Foreign exchange gains and losses resulting from the settlement of suchtransactions and from the translation at year-end exchange rates of monetary assets and liabilitiesdenominatedinforeigncurrenciesarerecognizedintheprofitandlossaccount.

3.10Employees'RetirementBenefits

TheCompanyoperatesunfundedgratuityforitsemployees.Theschemesdefinetheamountsofbenefitthatanemployeewillreceiveonorafterretirement,resignationorterminationsubjecttoaminimumqualifyingperiodofserviceundertheschemes.TheCompany’snetobligationinrespectofdefinedbenefitplaniscalculatedseparatelyforplanbyestimatingtheamountoffuturebenefitsthatemployeeshaveearnedincurrentandpriorperiods,discountingthatamountanddeductingthefairvalueofanyplanassets.Thecalculationofdefinedbenefitobligationisperformedannuallybyaqualifiedactuaryusingtheprojectedunitcreditmethod.Previouslythecompanywaspayingoffall itsretirementbenefitobligationsontheexpiryofemploymentcontractperiod(annually).Remeasurement changes in net defined benefit liability are recognized immediately in othercomprehensiveincome.TheCompanydeterminesnetinterestexpenseonthedefinedbenefitobligationfortheperiodbyapplyingthediscountrateusedtomeasurethedefinedbenefitobligationatthebeginningoftheannualperiodtothen-netdefinedbenefit,takingintoaccountanychangeinthenetdefinedbenefitobligationduringtheperiodasaresultofcontributionsandbenefitpayments.Netinterestexpenseandotherexpensesrelatedtodefinedbenefitplansarerecognizedinprofitandloss.

UptoJune30,2005,companywasoperatingafundedprovidentfundschemecoveringallregularmembersand monthly contribution was made to the trust @10% of basic pay both by the company and theemployees.

Net realizable value represents selling price in the ordinary course of business less selling expensesincidentaltosales.Provisionsagainststore,spareandloosetoolsareprovidedifthereisobjectiveevidencethattheitemshavebecomeobsoleteorhavebecomeslowmoving.

RawmaterialWorkinProcessFinishedGoodsGoodsinTransitStores,SpareParts&LooseTools

Atweightedaveragecost.Atdirectmaterialcost,laborandappropriateportionofproductionoverheads.Atdirectmaterialcost,laborandappropriateportionofproductionoverheads.Atinvoicevalueplusothercharges,ifany

Atweightedaveragecost

a)Definedbenefitsplan

b)Definedcontributionplan

45 46

3.11TradeandotherPayables

Tradeandotherpayablesarerecognizedinitiallyatfairvalueandsubsequentlymeasuredatamortizedcostusingtheeffectiveinterestmethod.Exchangegainsandlossesarisingontranslationinrespectofliabilitiesinforeigncurrencyareaddedtothecarryingamountoftherespectiveliabilities.

3.12Taxation

a)Current

Provisionforcurrenttaxisbasedonthetaxableincomefortheyeardeterminedinaccordancewiththeprevailinglawfortaxationofincome.Thechargeforcurrenttaxiscalculatedusingprevailingtaxratesortaxrates expected to apply to the profit for the year if enacted. The charge for current tax also includesadjustments,whereconsiderednecessary,toprovisionfortaxationmadeinpreviousyearsarisingfromassessmentsframedduringtheyearforsuchyears.

b)DeferredTax

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectofalltemporarydifferencesarisingfromdifferencesbetweenthecarryingamountofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationofthetaxableprofit.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedtotheextent that it isprobable that taxableprofitswillbeavailableagainstwhich thedeductible temporarydifferences,unusedtaxlossesandtaxcreditscanbeutilized.Deferredtaxiscalculatedattheratesthatareexpectedtoapplyfortheyearwhenthedifferencesreversebasedontaxratesthathavebeenenactedorsubstantivelyenactedbythebalancesheetdate.Deferredtaxischargedorcreditedintheprofitandlossaccount,exceptinthecaseofitemscreditedorchargedtoothercomprehensiveincomeorequityinwhichcaseitisincludedinothercomprehensiveincomeorequity.

3.13RevenueRecognition

a)Saleofgoods

Revenuefromsaleofgoodsisrecognizedwhensignificantrisksandrewardsofownershiparetransferredtothebuyer,recoveryoftheconsiderationisprobable,theassociatedcostsandpossiblereturngoodscanbeestimatedreliably, there isnocontinuingmanagement involvementwiththegoods,andtheamountofrevenuecanbemeasuredreliably.Revenue fromthesaleofgoods ismeasuredat the fairvalueof theconsiderationreceivedorreceivable,netofgovernmentlevies.

b)Incomeonbankdeposits

Interestincomeonbankdepositsisaccountedforonthetimeproportionbasisusingtheapplicablerateofreturn.

c)Others

Scrapsalesandmiscellaneousreceiptsarerecognizedonrealizedamounts.

3.14BorrowingCosts

Borrowingcostsarerecognizedasanexpenseintheperiodinwhichtheseareincurredexcepttotheextentof borrowing costs that are directly attributable to the acquisition, construction or production of aqualifyingasset.Suchborrowingcostsarecapitalizedaspartofthecostofthatassetuptothedateofitscommissioning.

3.15Provisions

ProvisionsarerecognizedwhentheCompanyhasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.Provisionsarereviewedateachbalancesheetdateandadjustedtoreflectthecurrentbestestimate.

3.16CashandCashEquivalent

Cashandcashequivalentsincludecashinhand,depositsheldatcallwithbanks,othershort-termhighlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts.Shorttermborrowingsareshownincurrentliabilitiesonthebalancesheet.

3.17Investments

Investmentsintendedtobeheldforlessthantwelvemonthsfromthebalancesheetdateortobesoldtoraise

operatingcapital,areincludedincurrentassets,allotherinvestmentsareclassifiedasnon-currentassets.

a)InvestmentsAvailableforsaleTheseareinitiallyrecognizedatcostandatsubsequentreportingdatesmeasuredatfairvalues.Gainsor

lossesfromchangesinfairvaluesaretakentoothercomprehensiveincomeuntildisposalatwhichtime

thesearerecycledtoprofitandlossaccount.

b)Heldtomaturity

Investmentswithfixedmaturitythatthemanagementhastheintentandabilitytoholdtomaturityare

classified as held to maturity and are initially measured at cost and at subsequent reporting dates

measuredatamortizedcostusingtheeffectiveyieldmethod.

c)LoansandReceivablesLoansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatare

notquoted inanactivemarket.Loansandreceivablesare initiallymeasuredat fairvalueplusdirectly

attributable transaction costs. After initial measurement loans and receivables are subsequently

measured at amortized cost using effective interest rate method less impairment, if any. These are

classifiedascurrentandnon-currentassetsinaccordancewithcriteriasetoutbytheIFRS.

d)InvestmentsatFairvaluethroughprofitorloss-HeldforTradingInvestmentswhichareacquiredprincipallyforthepurposeofsellingintheneartermortheinvestments

thatarepartofaportfoliooffinancialinstrumentsexhibitingshorttermprofittaking,areclassifiedas

heldfortradinganddesignatedassuchuponinitialrecognition.Thesearestatedatfairvalueswithany

resultinggainsorlossesrecognizeddirectlyintheprofitandlossaccount.TheCompanyrecognizesthe

regularwaypurchaseorsaleoffinancialassetsusingsettlementdateaccounting.

3.18Impairment

a)FinancialAssets

Afinancialassetisconsideredtobeimpairedifobjectiveevidenceindicatethatoneormoreeventshada

negativeeffectontheestimatedfuturecashflowofthatasset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as a

difference between its carrying amount and the present value of the estimated future cash flows

discounted at the original effective interest rate. Individually significant financial assets are tested for

impairmentonanindividualbasis.Theremainingfinancialassetsareassessedcollectivelyingroupsthat

sharesimilarcreditriskcharacteristics.

b)Non-FinancialAssetsThe carrying amount of the Company’s assets are reviewed at each balance sheet date to determinewhetherthereisanyindicationofimpairment.Ifsuchindicationsexist,theasset’srecoverableamountisestimatedinordertodeterminetheextentoftheimpairmentloss,ifany.Impairmentlossisrecognizedasexpense in theprofitand lossaccount.An impairment loss isreversedonly to theextent that theasset’scarrying amount does not exceed the carrying amount that would have been determined, net ofdepreciationoramortization,ifnoimpairmentlosshadbeenrecognized.

47 48

3.19FinancialInstruments

All financial assets and liabilities are recognized at the timewhen the company becomes a party to thecontractualprovisionsof the instrument.All financial assetsand liabilitiesare initiallymeasuredat cost,which is the fair value of the consideration given and received respectively. These financial assets andliabilitiesaresubsequentlymeasuredat fairvalue,amortizedcostorcostas thecasemaybe.A financialassetisde-recognizedwhenthecompanylosescontrolofitscontractualrightsthatcomprisethefinancialasset.A financial liability isde-recognizedwhen it is extinguished.Anygainor lossonde-recognitionofthe financial assetsor liabilities is taken toprofit and lossaccount.TheCompanyrecognizes the regularwaypurchaseorsaleoffinancialassetsusingsettlementdateaccounting.

a)TradeandOtherReceivablesTradeandotherreceivablesarerecognizedandcarriedatoriginalinvoiceamount/costlessanallowanceforanyuncollectibleamounts.Carryingamountsoftradeandotherreceivablesareassessedonaregularbasisandif there isanydoubtaboutthereliabilityof thesereceivables,appropriateamountofprovisionismade.

b)OffSettingOfFinancialAssetsandFinancialLiabilitiesFinancial assets and financial liabilities are offset and the net amount is reported in the financialstatements only when there is a legally enforceable right to set off the recognized amount and theCompany intends either to settle on a net basis or to realize the assets and to settle the liabilitiessimultaneously.

c)Interest-upbearingborrowingsMark-upbearingborrowingsarerecognizedinitiallyatcostbeingthefairvalueofconsiderationreceived,less attributable transaction costs. Subsequent to initial recognition, mark-up bearing borrowings arestatedatoriginalcostlesssubsequentrepayments.

d)Interest-freeborrowingsatamortizedcostThesearemeasuredatamortizedcost.Theamortizedcostofthesefinancialliabilitiesisdeterminedusingprevailingmarketinterestratesforequivalentloans.

3.20DividendandAppropriationtoreserves

Dividenddistribution to the Company's shareholders and appropriation to reserves is recognized in the

financialstatementsintheperiodinwhichtheseareapproved.

3.21Earningspershare

TheCompanypresentsbasicanddilutedearningspershare(EPS)dataforitsordinaryshares.BasicEPS

is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the

weightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedby

adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of

ordinarysharesoutstandingfortheeffectsofalldilutivepotentialordinaryshares.

3.22ContingentAssets

ContingentassetsaredisclosedwhentheCompanyhasapossibleasset thatarises frompasteventsand

whose existencewill be confirmed only by the occurrence or non-occurrence of one ormore uncertain

future events notwhollywithin the control of the Company. Contingent assets are not recognized until

theirrealizationbecomesvirtuallycertain.

3.23ContingentLiabilities

Contingent liability isdisclosedwhentheCompanyhasapossibleobligationasaresultofpasteventsand whose existence will be confirmed only by the occurrence or non-occurrence of one or moreuncertain future eventsnotwhollywithin the control of theCompany; or theCompanyhas apresentlegal or constructive obligation that arises from past events but it is not probable that an outflow ofresources embodying economic benefits will be required to settle the obligation or the amount ofobligationcannotbemeasuredwithsufficientreliability.

3.24ShareCapital

Ordinary shares are classified as equity and recognized at their face value. Incremental costs directlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax.

4.CHANGEINACCOUNTINGPOLICY

Thespecificprovision/section in therepealedCompaniesOrdinance,1984relating to thesurplusonrevaluationoffixedassetshasnotbeencarriedforwardintheCompaniesAct,2017.Previously,section235oftherepealedCompaniesOrdinance,1984specifiedtheaccountingtreatmentandpresentationofthe surplus on revaluation of fixed assets, whichwas not in accordancewith the IFRS requirements.Accordingly, in accordance with the requirements of International Accounting Standard (IAS) 16,Property,PlantandEquipment,surplusonrevaluationof fixedassetswouldnowbepresentedwithinequity.

FollowingtheapplicationofIAS16,theCompany'saccountingpolicyforsurplusonrevaluationoflandandbuildingstandsamendedasfollows:

Increasesinthecarryingamountsarisingonrevaluationofland,buildingsandplantandmachineryarerecognized, net of tax, in other comprehensive income and accumulated in revaluation surplus inshareholders' equity to the extent that increase reverses a decrease previously recognized in thestatementofprofitor loss, the increase is firstrecognizedinthestatementofprofitor loss.Decreasesthatreversepreviousincreasesofthesameassetarefirstrecognizedinothercomprehensiveincometothe extent of the remaining surplus attributable to the asset; all other decreases are charged to thestatement of profit or loss. Each year, the difference between depreciation based on the revaluedcarryingamountof theassetcharged to thestatementofprofitor lossanddepreciationbasedon theasset'soriginalcost,netoftax,isreclassifiedfromrevaluationsurplusonproperty,plantandequipmenttounappropriatedprofit.The change in accounting policy has been accounted for retrospectively in accordance with therequirements of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' andcomparativefigureshavebeenrestated.

Aspreviouslyreported Asre-stated Re-statement Asre-stated

-

(14,516,504)

14,498,128

-

(14,498,128)

14,516,504 14,516,504 14,498,128 14,498,128

4.1 Effectonstatementoffinancialposition

SurplusonrevaluationoffixedassetsSharecapitalandreserves

EffectonstatementofchangesinequityRevaluationsurplusonfixedassets 14,516,504 14,516,504 14,498,128 14,498,128

AsatJune30,2017

Re-statement

AsatJuly01,2016

14,516,504

--

Aspreviouslyreported

--

49 50

6.1.1.1ThisrepresentsrevaluationsurplusarisingonrevaluationoflandofBadamiBaghworks,whichwas revalued on 1991, prior to being classified as 'Held for Sale' resulting in surplus of Rs. 321.358million.(Ref:Note.26)

6.1.2KotLakhpatworkswasrevaluedonFebruary15,2016byan independentapprovedvaluerM/sIndusSurveyors(Private)Limitedonthebasisofaveragemarketratekeepinginviewofprevailingrealestatemarketconditions.Thelandwasrevaluedat13,835.500millionresultinginrevaluationsurplusofRs.5,929.500million.Earlier,thelandhasbeenrevaluedin1991byM/sNESPAKandin2001,2009and2013byM/sIndusSurveyors(Pvt.)Limited.

2018 2017 2018 2017

NumberofShares ---Rupeesinthousand---

5. SHARECAPITAL

AuthorizedCapital:

OrdinarysharesofRs.10/-each 9,000,000 9,000,000 90,000 90,000

7.5%CumulativeredeemablepreferencesharesofRs.100/-each 100,000 100,000 10,000 10,000

9,100,000

9,100,000

100,000

100,000

Issued,SubscribedandPaidupCapital:

OrdinarysharesofRs.10/-eachfullypaidincash 3,162,144 3,162,144 31,621

31,621

OrdinarysharesofRs.10/-eachissuedasfullypaidupbonusshares 2,528,101 2,528,101 25,281

25,2815,690,245

5,690,245

56,902

56,902

5.1 StateEngineeringCorporation,anassociatedcompany,holds1,415,723(2017:1,415,723)ordinarysharesofRs.10/-asatJune30,2018.

6.1 14,148,746 14,148,746

6.2 180,378

187,197

6.3 156,279

162,18514,485,403

14,498,128

6.1.1 313,999

313,999

6.1.2 13,834,747

13,834,747

14,148,746

14,148,746

321,358

321,358

7,359

7,359

313,999

313,999

FreeholdlandBuildingstructureonfreeholdlandPlantandmachinery

6. SURPLUSONREVALUATIONOFFIXEDASSETS

6.1.1 BadamiBaghLandSurplusonrevaluationLess:AdjustmentonaccountofsaleofpartofBadamiBaghWorksLandin2001

6.1FreeHoldLandSurplusonrevaluationofBadamiBaghlandSurplusonrevaluationofKotLakhpatland

2018 2017---Rupeesinthousand---

6.2 BuildingStructureonfreeholdlandGrosssurplusonrevaluationofBuildingstructure 6.2.1

Less:Surplusrealizedonaccountofincrementaldepreciationinrespectof:

-Prioryears

-Currentyear

-Relateddeferredtaxliability

425,712

158,2869,494

3,877

171,657

254,055

425,712

144,2129,8524,222

158,286267,426

Less:Relateddeferredtaxliabilityinrespectof:

-Balanceatthebeginningoftheyear

-Changeofrate

-Newsurplusduringtheyear

-Incrementaldepreciationfortheyear

NetsurplusonrevaluationofBuildingstructure

80,229 87,266(2,675) (2,815)

- -

(3,877) (4,222)

73,677 80,229180,378 187,197

6.2.1Building structureofKotLakhpatworkswas revaluedonFebruary15,2016byan independentapproved valuer M/s Indus Surveyors (Private) Limited on the basis of present depreciated marketvalue. The building structure was revalued at 317.339million resulting in revaluation surplus of Rs.12.684million.Earlier,thebuildingstructurehasbeenrevaluedin1997,2009and2013byM/sIndusSurveyors(Pvt.)Limited.

6.3.1PlantandmachineryofKotLakhpatworkswasrevaluedonFebruary15,2016byanindependentapprovedvaluerM/sIndusSurveyors(Private)Limitedonthebasisofpresentdepreciatedmarketvalue.Theplantandmachinerywasrevaluedat369.450millionresultinginrevaluationsurplusofRs.49.426million. Earlier, the plant and machinery has been revalued in 1997, 2009 and 2013 by M/s IndusSurveyors(Pvt.)Limited.

7.1.1ThefinancingformspartoftotalcreditfacilityavailabletotheextentofRs.108.351million.Theloancarriesmarkup@3monthsKIBORplus2.50%.ThecreditfacilityoftheCompanywillbeexpiredonDecember31,2019.Thequarterlyinstallmentofprincipalliabilityisamountingto4.876million.Thisis

6.3PlantandMachineryGrosssurplusonrevaluationofPlantandmachinery 6.3.1 353,561 379,373Less:Adjustmentonaccountofsaleofmachinery -

25,812

353,561

353,561

Less:Surplusrealizedonaccountofincrementaldepreciationinrespectof:

-Prioryears 122,224

110,048

-Currentyear 8,212

8,523

-Relateddeferredtaxliability 3,355

3,653

133,791

122,224

219,770

231,337

2018 2017---(Rupeesinthousand)---

Less:Relateddeferredtaxliabilityinrespectof:

-Balanceatthebeginningoftheyear 69,152 77,703

-Changeofrate (2,306)

(2,507)

-Realizedondisposalofmachinery -

(2,391)

-Incrementaldepreciationfortheyear (3,355)

(3,653)

63,491

69,152

NetsurplusonrevaluationofPlantandmachinery 156,279

162,185

7.LONGTERMFINANCINGLoanfromNationalBankofPakistan-Secured 7.1 9,747 29,250

7.1LoanfromNationalBankofPakistan-SecuredMovementoflongtermfinances-fromNBPOpeningbalance 48,75368,256

Financeavailedduringtheyear -48,75368,256

Less:Repaymentduringtheyear (19,503)(19,503)29,25048,753

Less:Currentmaturityshownundercurrentliabilities (19,503)(19,503)9,747

29,250

51 52

-

9.1.7YearendsensitivityanalysisondefinedbenefitobligationReasonably possible changes at the balance sheet date to one of the relevant actuarial assumptions,holdingotherassumptionsconstant,wouldhaveresultedinpresentvalueofdefinedbenefitobligationasstatedbelow:

The above sensitivity analyses are based on a change in an assumption while holding all otherassumptionsconstant.Inpractice,thisisunlikelytooccur,andchangesinsomeoftheassumptionsmaybecorrelated.Whencalculating thesensitivityof thedefinedbenefitobligation tosignificantactuarialassumptions the same method (present value of the defined benefit obligation calculated with theprojectedunitcreditmethodattheendofthereportingperiod)hasbeenappliedaswhencalculatingthestaffretirementgratuityrecognizedwithinthestatementoffinancialposition.

9.1.8 The Company does not have any plan assets covering its staff retirement benefits payable. Thecomparativestatementofpresentvalueofdefinedbenefitobligationsisasunder:

9.1.5

7.75% 7.25%9.00% 9.00%8.00% 6.75%394 366

Age60 Age605Years 5Years

Expectedrateofincreaseinsalarylevel-perannum

Totalnumberofemployees

Discountrateusedforinterestcostchargedtoprofitandloss-perannum

Discountrateusedforendobligation-perannum

ProjectedUnitCredit(PUC)

Expectedmortalityrateforactiveemployees SLIC2001-2005Setback1Year

Retirementassumptions

Averagedurationofliability

Balancesheetliabilityandchargeforthecurrentyearhavebeendeterminedonthebasis

offollowingactuarialestimatesprovidedbytheactuary.

Actuarialvaluationmethod

Actuarialassumptions

9.1.6Costofsales 5,8427,965

Sellinganddistributionexpenses 225459

Administrativeexpenses 1,9182,4987,98510,922

Chargefortheyearhasbeenallocatedasunder:

securedagainstfirstchargeofRs.73.128millionovermovablefixedassets[excludinglandandbuilding]ofthecompany.

8.1These represent security deposits from dealers (Pump well Company, National Company andCognitiveSolutions)which,byvirtueofagreementareinterestfreeandusedinthecompany'sbusiness.Thesearerepayableoncancellationofdealershipcontractwithdealers.

TheCompanyoperatesunfundedgratuityforitsemployees.Theschemesdefinetheamountsofbenefitthatanemployeewillreceiveonorafterretirementsubjecttoaminimumqualifyingperiodofserviceunder the schemes. Actuarial valuation of these plans is carried out every year. The latest actuarialvaluationoftheFundasatJune30,2018wascarriedoutusingtheProjectedUnitCreditMethod.DetailsoftheFundaspertheactuarialvaluationareasfollows:

21,19515,24549,849100,36471,044115,609

3,000 2,0003,000 2,000

2018 2017---Rupeesinthousand---

9.1.19.1.2 21,19515,245

--21,19515,245

9.1.2Openingbalance 15,2458,097Chargefortheyear 9.1.3 7,98510,947

9.1.4 (1,235)(3,199)(800)(600)

Closingbalance 21,19515,245

9.1.3ChargefortheyearCurrentservicecost 8,2117,876Interestcost 1,024471Pastservicecost (1,250)2,600

Paymentduringtheyear

BalancesheetreconciliationasatJune30,2018

FairvalueofplanassetsPresentvalueofplanliability

Remeasurementrecognizedinothercomprehensiveincome

Recognizedliability

Movementinpresentvalueofobligation

9.1.4 Remeasurementrecognizedinothercomprehensiveincome

9.1.19.2

8.1

7,985 10,947

--

6818

(1,303)(3,217)(1,235)(3,199)

Actuarial(gains)/lossesfromchangeindemographicassumptions

Actuarial(gains)/lossesfromchangeinfinancialassumptions

Experienceadjustment

2018 2017---(Rupeesinthousand)---

53 54

8. LONGTERMDEPOSITSSecuritydeposits

9. DEFERREDLIABILITIES-NetRetirementbenefitobligationDeferredincometaxliability-net

Discountrate 1%18,48120,521Salaryincrease 1%20,56318,426

Changeinassumption

Increaseinassumption

Decreaseinassumption

Impactondefinedbenefitobligation

Rupeesinthousand

9.1Retirementbenefitobligation

9.2.3Themovementintemporarydifferencesisasfollows:

Deferredtaxassetsinrespectofdeductibletemporarydifferences:

10.TRADEANDOTHERPAYABLES

Provisionforgratuity

Provisionforstoresandspares

Minimumandalternatecorporatetaxavailableforcarryforward

UnusedtaxlossesProvision for workers profit participation fund and workers welfarefund

9.2Deferredincometaxliability-netDeferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsettaxassetsagainsttaxliabilitiesandwhendeferredtaxassetsandliabilitiesrelatetoincometaxesleviedbythesametaxationauthorityonthetaxableentityandwhenthereisanintentiontosettlethebalancesonnetbasis.Theapplicabletaxrateforthepurposeofcomputationofdeferredtaxationhasbeenchangedfrom30%to29%asaresultofchangeinrateasapprovedbyFinanceAct2018.

Deferredtaxliabilityanddeferredtaxassetcomprisesoftaxable/(deductible)temporarydifferencesinrespectofthefollowing:

9.2.1 170,675171,646

9.2.2 (120,826)(71,282)

49,849100,364

9.2.1 Deferredtaxliabilitiesinrespectoftaxabletemporarydifferences:

Acceleratedtaxdepreciationallowances 32,191 26,379

Surplusonrevaluationoffixedassets 137,166144,307

Remeasurementofdefinedbenefitplan 1,318 960170,675171,646

9.2.2 Deferredtaxassetsinrespectofdeductibletemporarydifferences:

Provisionsfordoubtfulandotherbalances (14,670)(14,217)Provisionforgratuity (7,465) (5,534)Provisionforstoresandspares (2,900) (3,000)Minimumandalternatecorporatetaxavailableforcarryforward (60,737)(32,260)Unusedtaxlosses (20,490) -Provisionforworkersprofitparticipationfundandworkerswelfarefund (14,564)(16,271)

(120,826)(71,282)

2018 2017---Rupeesinthousand---

AsatJuly1,2017

Recognizedinprofitor

loss

Recognizedinother

comprehensiveincome/

RevaluationSurplus

BalanceasatJune30,2017

BalanceasatJune30,2018

Recognizedinprofitor

loss

Recognizedinother

comprehensiveincome/

RevaluationSurplus

Acceleratedtaxdepreciationallowances

Surplusonrevaluationoffixedassets

Remeasurementofdefinedbenefitplan

28,467

160,507

-

188,974

3,233

(16,200)

-

(12,967)

(5,321)

-

960

(4,361)

26,379

144,307

960

171,646

10,793

(7,141)

-

3,652

(4,981)

-

358

(4,623)

32,191

137,166

1,318

170,675

Provisionsfordoubtfulandotherbalances

(2,510)

(3,100)

(42,005)

-

-

(63,409)

125,565

(15,794)

(3,024)

100

9,745

-

(16,271)

(7,873)

(20,840)

1,577

-

-

-

-

-

-

(4,361)

-

(5,534)

(3,000)

(32,260)

-

(16,271)

(71,282)

100,364

(14,217)

(1,931)

100

(28,477)

(20,490)

1,707

(49,544)

(45,892)

(453)

-

-

-

-

-

-

(4,623)

-

(7,465)

(2,900)

(60,737)

(20,490)

(14,564)

(120,826)

49,849

(14,670)

TOTAL

214,755 549,57540,462 44,057

913

93210.1

773

773

PayabletoStateEngineeringCorporation(Private)Limited(SEC)(anassociatedundertaking) 151

15110.2

46,914

50,931

3,308

3,308

10.3

6,293

7,792

313,569

657,519

10.1

10.3 ReconciliationofWorkers'ProfitParticipationFundPrincipal 10.3.1 35,294

35,294

Accumulatedinterest 10.3.2 11,620

15,637

46,914

50,931

10.3.1 MovementinprincipalOpeningbalance 35,294

31,999

Add:Chargefortheyear -

3,295

Less:Paidduringtheperiod -

-

35,294

35,294

IncludeRs.30million((2017:30million)inrespectofprovisionagainstlitigationsmentionedinNote14.1.6

TradecreditorsAccruedliabilitiesAdvancesPayabletopreferenceshareholders

Workers'ProfitParticipationFundWorkers'WelfareFundOthers

2018 2017—---Rupeesinthousand---

10.4

10.2 Theamountispayabletopreferenceshareholdersonaccountofprincipalamountdue.

55 56

21,19515,2458,097 1,225--- -

21,19515,2458,0971,225

2018 2017 2016 2015

--------------------------Rupeesinthousand---------------------------

Presentvalueofdefinedbenefitobligation

Fairvalueofplanasset

Deferredtaxliabilitiesinrespectoftaxabletemporarydifferences:

----------Rupeesinthousand----------

Theoffsetamountsareasfollows:

Deferredtaxliabilities

Deferredtaxassets

Deferredincometaxliability-net

32

11. UNCLAIMEDDIVIDEND

InlightofCompaniesAct2017,theCompanyhasissuednoticestoshareholdersonregisteredaddressandnoticeshasalsobeenpublishedintwodailynewspapers(oneUrduandoneEnglishnewspaper)fortheclaimofdividend.Onexpiryof90daysfromnoticeinnewspapers.CompanyshallproceedtodeposittheuncalimeddividendwithFederalGovernmentpursuanttotheprovisionofSub-Section"2"ofSection244oftheCompaniesAct2017.

12.SHORTTERMBORROWINGS-SECURED

12.1ThefinancingformspartoftotalcreditfacilityavailabletotheextentofRs.75.0million(2017:75.0

million).Theloancarriesmarkup@3monthsKIBORplus2.50%.ThecreditfacilityoftheCompanywill

beexpiredonDecember31,2018.ThisissecuredagainstfirstchargeofRs.100millionovercurrentand

movablefixedassets[excludinglandandbuilding]ofthecompany.

13.2TheserepresentfundsprovidedbytheGovernmentofPakistan(theGovernment),bankloansofthe

companytakenoverbytheGovernmentandamountspayablebythecompanytodifferentGovernment

departments like Customs, Railways and Karachi Port Trust. According to the Cabinet Committee

Divisiondecisiondated30thMay1994and2005 these liabilitieswill be settled against theproceeds

fromdisposalofLandheldforsale(Ref:Note26)andsurpluslandofKotLakhpat,

FromNBPBankundermarkuparrangements-Secured:RunningFinance 12.1 61,494

74,919

10.3.2 Movementinaccumulatedinterest

OpeningbalanceAdd:Interestonfundsutilizedforthecompany'sbusinessLess:Paidduringtheperiod

10.4IncludesRs.5.251million(2017:5.251million)inrespectofprovisionagainstitigationsmentionedin

Note14.1.10,14.1.11,14.1.12,14.1.13

13. LIBILITIESDIRECTLYASSOCIATEDWITHFREEHOLDLAND-HELDFORSALELoanfromGovernmentofPakistan-unsecured 13.1 1,790,848 1,790,848

13.1LoanFromGovernmentOfPakistan-unsecuredPrivatizationcommissionloan 13.2.1 481,469

481,469

GovernmentEscrowaccount 13.2.3 112,937

112,937

OtherGovernmentLoan 13.2.5 100,000

100,000

FederalGovernmentloanforcompulsoryseparationscheme 13.2.7 309,000

309,000

FederalGovernmentBonds 13.2.9 787,442

787,442

1,309,379

1,309,379

1,790,848

1,790,848

ifneeded.Thereisnofixrepaymentscheduleortenureforrepaymentoftheseliabilities.Anexercisetoreconciletheliabilitiesisinprocessandseveralmeetingshavebeenconductedinthisregard,however,allthesemeetingsconcludedwithoutanydecisionoragreementwithrespecttothereconciliationoftheloanliabilitiesandcalculation,paymentormodeofpaymentofinterestonGovernmentofPakistanloansduetowhichthereiscurrentlynofixedtenureforrepaymentoftheseliabilitiesnorthetotalamountoftheliabilityisdeterminable.Intheabsenceoftheavailabilityofadefinedrepaymentscheduleduetoreasonsexplainedabove,thefairvalueoftheseloansisnotdeterminableandhencetheyhavebeenstatedatcost.

TheTechnicalAdvisoryCommittee(TAC)ofInstituteofCharteredAccountantsofPakistan(ICAP),ontherequestofManagementofPECO,onMarch28,2017,alsogaveanopinion,ontheissueofrecordingaccrualofmark-uponGoPloans.Afterreviewofalldetails,workingsandcompletedocuments,TheCommitteeisoftheviewthat"themanagementofcompanyneedstodeterminewhetherapresentobligationexistsattheendofthereportingperiodtakingintoaccountalltheavailableevidences,including,theopinionoflegalexperts.Wherethereisaprobabilitythatapresentobligationexistsattheendofthereportingperiod,theprovisionshouldberecognized.Contrarytothiswillrequireanentitytodiscloseacontingentliability".

The Board of Directors in its various meetings has resolved that amount due under the law to theGovernmentofPakistan(GoP)foranyloangiventoPECOshallbepaid.TheBoardhasagreedwithGoPtoadjustitsliabilitiesbydisposalofBadamiBaghLandasdecidedinE.C.Cdecisiondated02.03.1993,whichaccordingtotherecentvaluationamountstoRupees4,605.13millionanditisinexcessoftheamountbeingclaimedbyGoPfromPECO.TheBoDandthemanagementoftheCompanybelievesthattheyarenotliabletopayanyinterestontheseloansintheabsenceofanyagreement.Thelegaladvisorofthecompanyisalsoofthefirmopinionthatsincethereisnomentionofanymarkuptobechargedonthisloannoristhereanymarkupagreement,therefore,nomarkupispayablebythecompanyinrespectofthisloan.Therefore,adisclosureofacontingentliabilityismadeinnotes(refernote14.1.3,14.1.4&14.1.15)tothesefinancialstatements.

DuringtheyearendedJune30,2017andinpastaswellPrivatizationcommissionandFinancedivisionhaveclaimed additional principal and markup on the above loan liabilities, however, the BoD and themanagementdonotagreewiththeadditionalliabilitiesclaimedandtheclaimofGoPregardingthepaymentofinterestisdisputed(refernote14.1.3,14.1.4&14.1.5)bytheBoDandthemanagementastherehadneverbeenanyagreementinthisregard.Further,theaboveloanliabilitieswerepickedupbytheGoPinordertoprovidepublicsectorenterprisesincludingPECOtogivethemcleanslateontheirliabilitiessothattheycouldbeprivatizedandwereprovidedwithoutanyspecificrequestfromthesepublicsectorenterprises,includingPECO.Inadditiontotheabove,similarpublicsectorentitieswhichwereprovidedsimilarreliefsbytheGoPhaveneverbeenaskedtomakeanypaymentsinrespectofsuchreliefs.However,despiteofthistheBoDandthemanagementoftheCompanyiswillingtorepaytheprincipalandinordertoreconciletheprincipalandmarkupamountswithrespecttoGoPLoans,acommitteewasconstitutedasperthedecisionofAdditionalFinanceSecretaryinthemeetingheldinGovernmentofPakistanFinanceDivision(CFWing),Islamabad. The committee includes representatives fromMinistry of Finance,Ministry of Production,PrivatizationCommissionandBoardmembersfromPECO.SeveralmeetingshavebeentakenplacetilldateandinthisregardameetingofthecommitteewasheldonOctober7,2010atMinistryofFinance(FinanceDivision)whichwasattendedbyrepresentativesofPrivatizationCommission,MinistryofProductionandPECO.TheBoDandmanagementofPECOagreedtorepayalltheoutstandingprincipal,whichthecompanyislegallyliablethroughdisposalproceedsofBadamiBaghLandandsurplusLandofKotLakhpat,ifneeded.However,theBoDandthemanagementoftheCompanybelievesthattheyarenotliabletopayanyintereston these loans in the absenceof any agreement. In themeetingheldon13 July2015 inPrivatizationCommission,itwasmutuallyagreedbyallstakeholderstoresolvetheaboveissuesattheearliest.

57 58

15,637 20,4553,049 2,746

2018 2017---Rupeesinthousand---

(7,066) (7,564)11,620 15,637

Further, the Finance Divisionwas instructed in themeeting to re-examine the issue and confirm thecontentionofPECO.Following, themeetingheldatFinanceDivision, themanagementof thecompanyobtainedfreshlegalopinionfromlegalconsultantregardingthematterofcharginginterestonGoPloans.Thelegaladvisorwasoftheopinionthatnomarkup/interestwaspayablebyPECOtoMinistryofFinanceandPrivatizationCommissionandinsteadbelievedthatacaseofcausinglosstoPECOonaccountofdelaycausedindisposingoffthelandatBadamiBaghshouldbemadeout,eitherbyraisingmonetaryclaimorclaimingset-offagainsttheallegedprincipalloanliability.ThemanagementofthecompanyhadhandedoverthetitledocumentsofthesaidlandtothePrivatizationCommissionfordisposalintheyear1994andhadPrivatizationCommissiondisposedoff the landatthattime,noissueof interestwouldhaverisen.Further,meetingswereheldbetweentherepresentativesofMinistryofFinance,PrivatizationCommissionandMinistryofProductionandthePECOLoanCommitteetoreconciletheloanliabilities.However,thesemeetingsconcludedwithoutanydecisionoragreementwithrespecttothereconciliationofloanliabilitiesandcalculation,paymentormodeofpaymentof interestonGovernmentofPakistan loans.Further,asagreednoSRO,notification,documentationwasprovidedbytheMinistryofFinancetosubstantiatetheirviewpointontheissueoflevyofmarkuponGovernmentloansanditwasagreedtoreferPECO'sviewpointstoMinistryofFinancewhomayrefer thematter toMinistryofLawto formtheirverdict.Further, theprincipalamountoftheseloanshasbeenagreedexcept

13.2.2ThisrepresentsinterestfreeloanprovidedbyPrivatizationCommissiontoPECOforpaymentofsalaries,energybills, shiftingofplant&machinery fromBadamiBagh toKotLakhpatandpaymentofoutstanding essential liabilities. According, to the Cabinet Committee Division decision, PrivatizationCommissionwouldadjustitsloanliabilityagainstthesaleproceedsofBadamiBaghLandandsurpluslandofKotLakhpat,ifneededandinthisregardtitledocumentsofBadamiBaghLandwerehandedovertothePrivatizationCommissionin1994byPECO.Theforegoingloanshavebeenoutstandingsince1993.Thecompanyalsoobtainedlegalopinionfromthelegaladvisersofthecompany.ThelegaladviserisofthefirmopinionthatsincethereisnomentionofanymarkuptobechargedonthisloaninanyagreementnoristhereanymarkupagreementinrespectofthisloanthereforenomarkupispayablebyPECOinrespectofthisloan.TheBoDandthemanagementfirmlybelievesthatastheCompanyhadhandedoverthetitledocumentsofthe said land to the Privatization commission for disposal in the year 1994 and had PrivatizationCommissiondisposedoffthelandatthattimenoissueofcharginganyinterestontheseloanswouldhaverisenandinsteadbelievedthatacaseofcausinglosstoPECOonaccountofdelaycausedindisposingoffthelandatBadamiBaghshouldbemadeout,eitherbyraisingmonetaryclaimorclaimingset-offagainstthealleged principal loan liability. The difference of Rs. 131.454 million claimed by the PrivatizationCommissiononaccountofadditionalgratuitiesisbecauseofmisapprehensiononpartofGoP,whereby,PECOisconsideredresponsibletopayRs.131.454million,thatinfactwastheliabilityofthePrivatizationCommissionundertheAPSEWECagreement.AspertheAPSEWECagreementPrivatizationCommissiontooktheliabilitytomakeadditionalgratuitypayments,forwhichpurposeithadadvancedRs.131.454milliontoPECO.OnreceivingthesaidamountsPECOhadmadethepaymentsaswasdirected.ItisimportanttonotethatPECOwasnotapartytotheseagreements,therefore,itcannotbeheldresponsibleforfulfillinganyobligationpertainingtothem.TheclaimofGoPisbasedonillegitimateassumption.

281,082 281,08275,819 75,819

124,568 124,568481,469 481,469

2018 2017---Rupeesinthousand---

13.2.1ThebreakupofloanfromPrivatizationCommissionisasfollows:Loanforvoluntaryseparationscheme(VSS)/Compulsoryseparationscheme(CSS)andSalaries

Loanforshiftingofmachinery

LoanforEnergybillsandImportduties

Furthermore, the legaladvisorsarealsoof firmopinionthat theamountofadditionalgratuitiesofRs.131.454million(refernote14.1.3)shouldbebornebythePrivatizationCommission.Inthisregard,inthemeetingheldonOctober7,2010atFinanceDivision,PrivatizationCommissionwasinstructedbyMinistryofFinancetoreviewthecalculation/treatmentoftheloanamountingtoRs.131.454millionandcomeupwithfirmstanceonit.ThePrivatizationCommissionwasfurtherinstructedtosortouttheissueofcharginginterestonVSSloanandcomeupwithsoundreasonandlogicforcharginginterestthereon.Neitherformalagreementswere signedor executedbetween thePrivatizationCommission,Ministries andPECOnordefinitive terms and conditions exist in relation to the issue of markup and that the PrivatizationCommissiononlyappliedmarkupasinstructedbytheFinanceDivision.Further,underthedirectionsofpublicaccountscommitteethematterofcharginginterestisbeingreviewedbythecommitteecomprisingofMinistryofIndustries,MinistryofFinanceandPrivatizationCommissionofPakistan.

13.2.4ThecompanyhasnotprovidedinterestamountingtoRs.41.989million(accumulatedRs.41.989million)@14%forthreeyearsrelatingtocustomandotherimportduties(2017:Rs41.989million)astheBoDandthemanagementbelievesthattherewasnoclauseofcharginginterestorsurchargeintheECCandCabinetDecision.

13.2.6 This represents amount payable on account of the company's bank loans taken over by theGovernmentintheyear1990.BoDandthemanagementoftheCompanybelievesthattherewasnointerestasPECOwasrequiredtotake-uponlyprincipalamountoftheloaninitsbooks.ThelegaladvisorisalsoofthefirmopinionthatnomarkupispayablebyPECOinrespectofthisloan.Furthermore,inthemeetingheldatMinistryofFinanceinOctober2010,FinanceDivisionwasinstructedtore-examinetheissuerelatingtoRs.100.00millionLoanandinterestthereof,toconfirmthecontentionofPECOanddecisiontobeconveyedatitsearliest.

13.2.3 ThebreakupofGovernmentEscrowaccountisasfollows:

Customsandotherimportduties 86,984

86,984

PakistanRailwaysfreight 12,989

12,989

KarachiPortTrust 12,964

12,964112,937

112,937

13.2.5Bankloanstakenover 100,000

100,000100,000

100,000

ThebreakupofOtherGovernmentloansisasfollows:

13.2.7

LoanforCSS 309,000 309,000

ThebreakupofFederalGovernmentloanforcompulsoryseparationschemesisasfollows:

2018 2017

59 60

---Rupeesinthousand---

13.2.8ThisrepresentsloanprovidedbytheFederalGovernmentofPakistantoPECOtopayoffthestaffthroughCompulsorySeparationSchemevideletterNo.1(26)CF111/93dated4thMarch2002.TheBoDandthemanagementofthecompanydonotagreewiththemarkupclaimedbyGOPandisoftheopinionthatmarkupisnotpayableonthisloanliabilityintheabsenceofanyagreementformarkup.TheBoDandthemanagementhavetakenlegalopinionandthelegaladvisorvidehisletterdatedAugust10,2015isalsoofthe opinion that no interest is payable and the letter dated 4th March 2002 referred by the GoP, tosubstantiateclaimofpaymentofinterest@10%perannumagainstloanofRs.309.00millionwasintheabsenceofperusalofrelevantdecisions/formativedocumentswasmisconceivedanddidnotplaceanypaymentobligationonPECO.Theletterwascontrarytothedecisions/documentsanddidnotestablishanyliabilitytopayinterest@10%perannumandthatanyallegedpremiumintheabsenceofagreementisvoidandunfair.Intheabsenceofacontractualarrangement/agreementnointerestcanbeclaimedandintheabsenceofanyagreementtheallegedclaimofinteresttantamounttoapenalty,whichisconstruedaspenalinterestinnatureandcouldnotbegrantedunlessloss/damageprovedthroughsubstantialevidence,whichintheinstantcasewillbeallmoredifficultonaccountofhandingoveroflandofBadamiBaghofPECOforsale/disposal.Inviewoftheabove,BoDandthemanagementalongwiththelegaladvisorfirmlybelievethatthe alleged claim of GoP appears to bemisconceived andwithout any basis and recommend that theaforesaiddisputeshouldbereferredtosomeimpartialbodyforresolutionundersomeAlternateDisputeResolution (ADR) mechanism, where claims / counter claims of the respective parties be examined,consideredanddecided.Furthermore,inordertoreconciletheprincipalandmarkupamountswithrespecttoGovernment of PakistanLoans, a committeehasbeen constituted asper thedecisionofAdditionalFinanceSecretary.ThemanagementofPECOintendstopaybacktheGovernmentofPakistanLoansafterthereconciliationofdifferencesaspertherecordsandfactsavailablewiththecommitteerepresentatives.

13.2.10ThesebondswereissuedbytheFederalGovernmentagainsttheliabilityofthecompanytowardsbanks/financialinstitutionstakenupbytheFederalGovernmentinthelightofFederalCabinetdecisionandS.R.ONo.823(1)/94datedAugust28,1994.AgainsttheprincipalamountinterestbearingbondsandagainstaccruedmarkupinterestfreebondswereissuedbytheGovernment.TheGovernmentisliabletopayinterest@12.43%perannumtotheBanks/DFIregardingtheinterestbearingbonds.However,theBoDandthemanagementoftheCompanydonotagreewiththemarkupclaimedbytheFinanceDivisionandisoffirmopinionthattheGovernmentis liabletopayanyinterestthereon,andthattherewasnoagreementforcharginganyinterestthereon.Furthermore,thelegaladviserisalsoofthefirmopinionthatnomarkup is payable by the Company in respect of this loan in the absence of any specificmarkupagreement.

14.CONTINGENCIESANDCOMMITMENTS

14.1Contingencies

14.1.1ClaimsnotacknowledgedasdebtsinrespectofvarioussubjudicecasesfiledagainstthecompanyforwhichthemaximumpossibleliabilitiescouldbeapproximatelyRs.2.912million(2017:Rs.2.912million).ProvisionhasnotbeenmadeinthesefinancialstatementsforthesaidamountasthemanagementoftheCompany,basedontheadviceofitslegalcounselhandlingthesubjectcases,isoftheopinionthatmattersshallbedecidedintheCompany’sfavor.

13.2.9 ThebreakupofFederalGovernmentBondsisasfollows:Interestbearingbonds 655,138

655,138

Interestfreebonds 132,304

132,304787,442

787,442

14.1.2GuaranteesofRs.225.81million(2017:Rs617.85million)issuedbythebanksandinsurancecompaniestodifferentpartiesonbehalfofthecompany.

14.1.3ThePrivatizationCommission through its confirmationdatedAugust06,2018 for theyearhasclaimedadditionalloanliabilityamountingtoRs.131.454millionandmarkupamountingtoRs.1,290.504million(Ref:Note13.2.1).ThesaidconfirmationfromprivatizationCommisionalsostatesthatinitiallytherewasnomentionofspecificinterestrateontheloanamount,therefore,themarkupontheoutstandingamountofloantoPECOwaschargedonthebasisofannualrateofmarkupchargeableoncashdevelopmentloanstoProvincialGovernments,corporations,localbodiesetc.andcapitaloutlaysofFederalGovernmentincommercialdepartments.ThemanagementofthecompanyalreadyinameetingheldonOctober7,2010atMinistryofFinance'soffice toreconcile theprincipalandmarkupamountswithrespect toGovt.ofPakistanloansdidnotagreewiththestanceofPrivatizationCommissioninrespectofadditionalloanandmarkupclaimed.PrivatizationCommissionhasbeeninstructedbytheMinistryofFinancetoreviewthecalculation/treatmentofaloanamountingRs.131.454millionandhasbeenaskedtocomeupwithfirmstanceontheforegoingloanamountingtoRs.131.454million.Further,PrivatizationCommissionhasbeeninstructedtosortouttheissueofcharginginterestonVSSloanandPrivatizationCommissionhasbeenaskedtocomeupwithsoundreasonandlogicforcharginginterestontheaboveloan.Thelegaladvisorofthecompanyisalsoofthefirmopinionthatsincethereisnomentionofanymarkuptobechargedonthisloannoristhereanymarkupagreement,therefore,nomarkupispayablebythecompanyinrespectofthisloan.Themanagement is confident that theultimateoutcomeof thematterwill result in favorof thecompanyandhencenoprovisionhasbeenmadeinthesefinancialstatementsinrespectoftheadditionalloanandmarkupclaimed.

14.1.4TheFinanceDivisionvideitsletterdatedJune02,2018fortheperiodendedDecember2010hasclaimedanamountofRs.2703.82millioninrespectofsurchargepayableonCustom&OtherImportduties.However,themanagementofthecompanyisoftheopinionthatnomarkupispayableintheabsenceofanyagreementformarkup.Furthermore,thecompanyhasalsoobtainedtheopinionfromthelegaladvisor,whoisalsoofopinionthatnomarkupispayable.Themanagementisconfidentthattheultimateoutcomeofthematter will result in favor of the company and hence no provision has beenmade in these financialstatementsinrespectofthemarkupclaimed.

14.1.5TheFinanceDivisionvideitsletterdatedJuly28,2017,hasclaimedanamountofRs.671.860millionin respect of additional principal liability and Rs. 2,517.766million in respect ofmarkup payable onremainingGovernmentofPakistanLoans(Ref:Note13.2.5,13.2.7&13.2.9).However,themanagementofthecompanyisoftheopinionthatnomarkupispayableintheabsenceofanyagreementformarkup.Thematterwas takenupby theMinistryof Finance, inmeetingheldonOctober7, 2010, to reconcile theprincipalandMarkupamountswithrespecttoGovt.ofPakistanloans,whichhasinstructedtheFinanceDivisiontore-examinetheissuerelatingtoRs.100.00millionloanandinterestthereof,toconfirmthecontentionofPECO.Decisiononthisaccountwouldbeconveyedtocompanyattheearliest.Tilltheissueofannual accounts no suchdecisionhas been receivedby company. Furthermore, the companyhas alsoobtained the opinion from the legal advisor, who is also of opinion that no markup is payable. Themanagementisconfidentthattheultimateoutcomeofthematterwillresultinfavorofthecompanyandhencenoprovisionhasbeenmadeinthesefinancialstatementsinrespectofthemarkupclaimed.

2018 2017

61 62

---Rupeesinthousand---

Netcarryingvaluebasis

YearendedJune30,2017

Openingnetbookvalue(NBV)

Additions

Disposal

Cost

Accumulateddepreciation

Writtendownvalue

Depreciationcharge

Netbookvalue(NBV)

Grosscarryingvaluebasis

AtJune30,2017

Cost/Revaluedamount

Accumulateddepreciation

Netbookvalue(NBV)

Netcarryingvaluebasis

YearendedJune30,2018

Openingnetbookvalue(NBV)

Additions

Disposal

Cost

Accumulateddepreciation

Writtendownvalue

Depreciationcharge

Closingnetbookvalue(NBV)

Grosscarryingvaluebasis

AtJune30,2018

Cost/Revaluedamount

Accumulateddepreciation

Netbookvalue(NBV)

AnnualRateofDepreciation

311,989

-

--

-(15,599)296,390

317,910

(21,520)

296,390

296,390

12,089

-

-

(14,935)293,544

329,999

(36,455)293,544

-5%

362,2514,303

(8,976)277

(8,699)

(17,869)339,986

364,057

(24,071)

339,986

339,986

18,136

-

-

-

(17,621)340,501

382,193

(41,692)340,501

5%

1,742148

--

-

(181)1,709

8,251

(6,542)

1,709

1,709

1,184

-

-

(230)2,663

9,435

(6,772)2,663

10%

2,701758

--

-

(306)3,153

8,408

(5,255)

3,153

3,153

345

-

-

(337)3,161

8,753

(5,592)3,161

10%

2,73978

--

-(280)2,537

9,853

(7,316)

2,537

2,537

183

-

-

(260)2,460

10,036

(7,576)2,460

10%

9,6448,051

(4,198)3,734

(464)

(2,777)14,454

31,378

(16,924)

14,454

14,454

6,759

-

-

(4,024)17,189

38,137

(20,948)17,189

20%

5,423165

--

-(553)5,035

15,754(10,719)

5,035

5,035

633

-

-

(516)5,152

16,387

(11,235)5,152

10%

1,118

-

--

-(112)1,006

6,552(5,546)

1,006

1,006

190

-

-

(104)1,092

6,742

(5,650)1,092

10%

15.1.1 Depreciationfortheyearhasbeenallocatedasunder:

CostofSales 28 33,176AdministrativeExpenses 31 4,851

38,027

14,533,10713,503

(13,174)4,011

(9,163)

(37,677)14,499,770

14,597,663(97,893)14,499,770

14,499,770

39,519

-

-

(38,027)14,501,262

14,637,182

(135,920)14,501,262

34,1343,543

37,677

13,835,500

-

--

-

-13,835,500

13,835,500

-

13,835,500

13,835,500

-

-

-

- --- - -- --

-13,835,500

13,835,500

-13,835,500

Operatingfixedassets 15.1 14,501,26214,499,77015.2 49,9922,98215.3 7,49652,416

14,558,75014,555,16815.1 Operatingfixedassets

Advancesagainstcapitalassets

Capitalworkinprogress-atcost

14.1.6TheCompanyhasfiledvarioussuitsagainstSuiNorthernGasPipeline(SNGPL)andFederationof

Pakistan (FOP) throughMinistry ofWater andPower. Further, SNGPLhas also filed a suit against the

Company. These suits are presently pending adjudication before the Civil Court, Lahore. The

managementisvigilantlypursuingthesecases.Accordingtotheopinionoflegaladvisor,thesettlement

ofwhichisexpectedtoresultinanoutflowfromtheentityofresourcesisamountingtoRs.30million

hasbeenprovidedfor(RefNote:10.1).

14.1.7M.MTradershasalsofiledasuit(36037/16)againsttheCompany.ThissuitispresentlypendingadjudicationbeforetheCivilCourt,Lahore.Accordingtotheopinionoflegaladvisor,thereisnolikelihoodofanyunfavorableresultsoranyfinanciallossesinthiscase.Themanagementisvigilantlypursuingthiscases.Therefore,Nocontingentliabilityisneededtoberecognizedonthisaccount.

14.1.8 The Company has also filed a suit (RFA No. 121/2014) Muhammad Sohail Asghar (Ex-PECOemployee).ThissuitispresentlypendingadjudicationbeforetheAdditionalDistrictJudge.Accordingtotheopinionoflegaladvisor,thereisnolikelihoodofanyunfavorableresultsoranyfinanciallossesinthiscase.Themanagement is vigilantly pursuing this cases. Therefore, No contingent /liability is needed to berecognizedonthisaccount.

14.1.9TheCompanyhasfiledasuit(870/2013)againstChinaNationalMachineryandMuhammadHanifhasalsofiledasuitagainsttheCompany.ThesesuitsarepresentlypendingadjudicationbeforetheHighCourt,LahoreandNIRCLahorerespectively.Accordingtotheopinionoflegaladvisor,thereisnolikelihoodofanyunfavorableresultsoranyfinanciallossesinthesecases.

14.1.10 Punjab employees social security institution (PESSI) has also filed various suits against theCompany. These suits are presently pending adjudication before the Special Judicial Magistrate. Themanagementisvigilantlypursuingthesecases.Accordingtotheopinionoflegaladvisor,thesettlementofwhichisexpectedtoresultinanoutflowfromtheentityofresourcesisamountingtoRs.0.994millionhasbeenprovidedfor(RefNote:10.4).

14.1.11M/sTerniSPAItalyhasfiledasuit(92/11)againsttheCompanyforrecovery.ThissuitispresentlypendingadjudicationbeforetheCivilCourt,Lahorerespectively.Themanagementisvigilantlypursuingthecase.Accordingtotheopinionoflegaladvisor,thesettlementofwhichisexpectedtoresultinanoutflowfromtheentityofresourcesisamountingtoRs.3.059millionhasbeenprovidedfor(RefNote:10.4).

14.1.12FBRhasfiledasuitagainsttheCompanyforrecovery.ThissuitispresentlypendingadjudicationbeforetheCivilCourt,Lahorerespectively.Themanagementisvigilantlypursuingthecase.Accordingtotheopinionof legal advisor, the settlementofwhich is expected to result inanoutflow from theentityofresourcesisamountingtoRs.0.674millionhasbeenprovidedfor(RefNote:10.4).

14.1.13AftabAhmedhasfiledasuitagainsttheCompany.ThissuitispresentlypendingadjudicationbeforetheCivil Court, Lahore respectively. Themanagement is vigilantlypursuing the case.According to theopinionof legal advisor, the settlementofwhich is expected to result inanoutflow from theentityofresourcesisamountingtoRs.0.524millionhasbeenprovidedfor(RefNote:10.4).

14.1.14MuhammadRafique,QaiserMustafa,MuhammadIshaqandFayyazMehmoodhavefiled varioussuitsagiansttheCompany.Accordingtotheopinionoflegaladvisor,thereisnolikelihoodofanyunfavorableresultsoranyfinanciallossesinthesecases.Themanagementisvigilantlypursuingthesecases.Therefore,Nocontingentliabilityisneededtoberecognizedonthisaccount.

14.2 Commitmentsinrespectof:14.2.1Lettersofcreditformachinery,rawmaterialandstoreitemsamountingtoRs.Nil(2017:Nil.).

2018 2017

Freeholdland

Factorybuildingonfree

Plantandmachinery

Officeequipment

Computers Vehicles TotalToolsElectric

Equipmentholdland

Furnitureand

Fixtures

63 64

15. PROPERTY,PLANTANDEQUIPMENT---Rupeesinthousand---

---Rupeesinthousand---

Depreciationchargeisinclusiveofincrementaldepreciationduetorevaluation.

15.1.2Land,BuildingandPlantandMachinerywererevaluedonFebruary15,2016byanindependentvaluerM/sIndusSurveyorCo.(Pvt)Ltd,onthebasisoffairvalue/depreciatedmarketvaluefortheperiodofuseresultinginsurplusofRs.5,929.500million,Rs.12.684millionandRs.49.426millionrespectively.DetailsofpreviousrevaluationsisprovidedinNote.6.

15.1.3Freeholdlandrepresentslandofkotlakhpatworks.Thecompanyhaspossessionandcontrolofthelandandholdsvalidtitle.TheMutationoflandiscompleteasperTheBoardofRevenuePunjabletterwhichstatesthattheGovernmentofPunjabhas,however,noobjectiontothedisposalofpropertiesofPECOwhichhadvested in theFederalGovernment.Howevera letterwas issuedby the JointSecretaryMinistryofIndustries and Production Islamabad directing District Officer Revenue Lahore and copy endorsed toMemberRevenuePunjabtostoptheabovemutationtillfurtherinstructions,forundisclosedreasons.

15.1.4Frocedsalevalueoffreeholdland,buildingandplantandmachineryisRs.6,720million,Rs.298millionandRs.318millionrespectively.

15.1.5Hadtherebeennorevaluation,thewrittendownvalueoftherevaluedassetsinthebalancesheetwouldhavebeen:

Freeholdland 753

753Factorybuildingonfreeholdland 39,491 28,965Plantandmachinery 120,732 108,650

160,976138,36815.2CapitalWorkinProgress-atcost:

Civilworks

Plantandmachinery

15.2.1 -2,98215.2.2 49,992 -

49,9922,982

15.2.1MovementinCivilWorks:Openingbalance 2,982

2,239

Addition 24

743

Capitalized (3,006)

-

Closingbalance -2,982

15.2.2 MovementinPlantandMachinery:Openingbalance -

-

Addition 49,992

-

Capitalized -

-

Closingbalance 49,992 -

2018 2017

15.3 AdvancesagainstpurchaseofCapitalAssetsAgainstvehicles 15.3.1 - 5,435Againstplantandmachinery 15.3.2 7,275 46,880AgainstERPsoftware 15.3.3 221101

7,49652,416

15.3.1 MovementinadvanceagainstVehicles:Openingbalance 5,435 4,745Advancepaidforoperatingfixedassets - 7,294Transfertooperatingfixedassets (5,435) (6,604)Closingbalance - 5,435

15.3.2 MovementinadvanceagainstPlantandMachinery:Openingbalance 46,880 24,313Advancepaidforoperatingfixedassets 6,263 32,954Transfertooperatingfixedassets (30,811) (10,387)Transfertocapitalworkinprocess (15,057) -

Closingbalance 7,275 46,880

15.3.3MovementinagainstERPsoftware:Openingbalance 101

101

Advancepaidforoperatingfixedassets 120

-

Transfertocapitalworkinprocess -

-

Closingbalance 221

101

16. INVESTMENTPROPERTYOpeningnetbookvalue 16.1 579 610Additions - -Depreciationchargedfortheyear 29 31Closingnetbookvalue 550 579

Depreciationrate 5% 5%

16.1Cost 959 959Accumulateddepreciation 409 380Netbookvalue 550 579

15.3.4This represents the advances given to PakOriental Engineers,Mintin Corporation (Private) Limited and Scarlet ITSystems(Pvt.)LimitedforpurchaseofSteamBoiler,CNCmachinepartsandfortheinstallationofERPsoftwarerespectively.

2018 2017

16.2InvestmentpropertycomprisesofnumberofcommercialpropertiesthataresituatedatUniTower,I.I.Chundrigar Road, Karachi and leased toM/S UBL Insurers Limited. The lease contains an initial non-cancellableperiodofthreeyears,withannualrentindexedtoconsumerprices.Subsequentrenewalsarenegotiatedwiththelesseeandonaveragerenewalperiodsarethreeyears.Nocontingentrentarecharged.

16.3OneofthepropertieshavingcarryingvalueofRs.275thousandsremainedvacentduringlastthreeyearsandnorentalincomewasearnedduringthoseyears.

16.4Fairvalueofinvestmentproperty,basedonvaluationcarriedoutbyanindependentvaluerasatMarch17,2016wasrupees18.780million.Nomaterialchangeinfairvalueofproperyfrompreviousevaluation,isexpected.

16.5FrocedsalevalueofinvestmentpropertiesisamountingRs.15.963million.

65 66

---Rupeesinthousand---

---Rupeesinthousand---

32

17. LONGTERMINVESTMENT

Heldtomaturity:

TermdepositinStandardCharteredBankLimited 819 741

17.1

18. LONGTERMDEPOSITSLongtermdeposits 18.1 3,771

3,771Less:Provisionagainstdoubtfuldeposits 18.2 1,718

1,7182,053

2,053

18.1 TheseincludeRs1.059million(2017:Rs1.059million)representingamountdepositedwithWaterandSanitationAgency(LDA),LAHOREasasecuritydeposit.

18.2 Movementinprovisionisasfollows:Openingbalance 1,718

1,718

Providedfortheyear -

-

Closingbalance 1,7181,718

ThiswasmaturedonJune2019andcarryinterest@5.3%(2017:5.3%)perannum.TheprincipalamountdepositedwithbankisRs.0.741million.

2018 2017

18.3 Thelongtermdepositsotherthanthoseagainstwhichprovisionhasbeenmadeareconsideredgoodbythemanagement.

19. STORES,SPARESANDLOOSETOOLS31,528

27,109122,285

128,66625,085

24,688

178,898

180,463

(10,000)

(10,000)

168,898

170,463

20.150,024

178,218

143,688

154,168

53,909

114,524

347,621

446,910

STOCKINTRADE

StoresSparespartsLooseTools

Less:Provisionforslowmovingstores

19.1

RawmaterialWorkinprocessFinishedgoods

20.1 StockintradeamountingtoRs.0.68millionrelatedtofinishedgoodsandRs.18.93millionrelatedtoworkinprocessarevaluedatnetrealizablevalue.

Storesandsparesincludeitemswhichareofcapitalnaturebutcannotbedistinguished.

21.TRADEDEBTS-UNSECURED21.2 273

273

387,519

778,704

21.3 37,917

45,926

425,709

824,903

21.412,677

12,677

AssociatedundertakingWAPDA,AJKandTelecommunicationCompaniesOthers

Less:ProvisionforbadanddoubtfuldebtsWAPDAOthers 30,535

30,535

43,212

43,212

382,497

781,691

21.1Tradedebtorsotherthanthoseagainstwhichprovisionhasbeenmadeareconsideredgoodbythemanagement.

21.2Maximumamountduefromassociatedundertakings(Ref:Note38)attheendofanymonthwasofRs.0.273million(2017:Rs.0.273million).Further,balanceoutstandingfromassociatedundertakingismorethan360daysoverdue.

21.3TradedebtorsincludeanamountofRs.7.617million(2017:Rs.7.617million)receivablefromM/sMetropolitanSteelCorporationLimitedagainstwhichthecompanyhas filedsuit forexecutionofCourtdecisioninfavoroftheCompany.

21.5AsatJune30,2018,tradereceivablesofRs43.212million(2017:Rs43.212million)werepastduebutnotimpaired.Theserelatetoanumberofindependentcustomersforwhomthereisnorecenthistoryofdefault.Theageinganalysisofthesetradedebtsisasfollows:

22.1 Advances other than those against which provision has been made are considered good by themanagement.

Theagingoftradedebtsatthereportingdatewas:

Notyetdue

Pastdue1-30days

Pastdue31-60days

Pastdue61-90days

Over90days

345,58758,559

243,46821,944

155,345824,903

1,857129,687

49,646

53,384

191,135

425,709

----

43,21243,212

--

-

-

43,21243,212

22. ADVANCES

June30,2017June30,2018

Gross Impairment Gross Impairment

Advances,consideredgood,to:

Employees-Secured-againstsalary 1,043

652

-againstexpenses 22.2 704

641

Suppliers 22.3 4,752

4,898

6,499

6,191

21.4 Movementinprovisionisasfollows:Openingbalance 43,212

43,212

Add:Provisionfordoubtfuldebts -

-

Less:Provisionfordoubtfuldebtswrittenoff -

-

ClosingBalance 43,212

43,212

2018 2017

67 68

---Rupeesinthousand---

---Rupeesinthousand---

------------Rupeesinthousand-------------

26.FREEHOLDLAND-HELDFORSALE

Thisrepresentslandof263kanalsand3marlasofBadamiBaghWorkswhichhasbeencloseddown.Thefairvalueofland,basedonvaluationcarriedoutbyanindependentvaulaeronFeburary15,2016wasestimatedatRs.4,605.133million.Thecompanyhasthepossessionandcontrolofthelandandholdsvalidtitle.AspertheEconomicCoordinationCommitteedecisionthetitledocumentsofthelandwerehandedovertothePrivatizationCommissionforsaleandproceedstobeutilizedforsettlementofoutstandingGovernmentliabilities(refernote.13.2).InthisregardthetitledocumentsofthelandhavebeenhandedovertothePrivatizationCommissionforsalein1994byNationalBankofPakistan.SincethentilldatethelandhasbeenofferedforsalevarioustimesbythePrivatizationCommissionofPakistan.ApartofthelandwassoldinFebruary2001bythePrivatizationCommissionofPakistanandseveralexpressionofinterestshavebeenreceivedfortheremainingportionbyPrivatizationCommissionfrommanyparties.TheMutationoflandiscomplete as per TheBoard of Revenue Punjab letterwhich states that the Government of Punjab has,however,noobjectiontothedisposalofpropertiesofPECOwhichhadvestedintheFederalGovernment.HoweveraletterwasissuedbytheJointSecretaryMinistryofIndustriesandProductionIslamabaddirectingDistrictOfficerRevenueLahoreandcopyendorsedtoMemberRevenuePunjabtostoptheabovemutationtillfurtherinstructions,forundisclosedreasons.TheBoDandtheManagementoftheCompanyaretilldatestronglycommittedtotheplanofsellingtheBadamiBaghLandandtherehasbeennorevocationoftheGoPorderoranychangeinthemanagement'sstanceorplan.FurtherthePrivatizationCommissioninitsdirectconfirmations to the auditors has also clearly stated that GoP loanswould be recovered from the saleproceedsofBadamiBaghLand.ThereforetakingintoaccountthefactthatthecarryingamountofthelandwouldberecoveredprincipallythoughasaletransactionandnotthroughcontinuinguseandthatthemanagementandtheGoParefirmlycommittedtoaplantosellthelandandtilldatetherehasbeennochangeofplanorrevocationofGovernmentorder,thelandisavailableforimmediatesale,activeprogramstolocatebuyerscontinuetobecarriedout,theassetismarketedatfairvalueanditisextremelyunlikelythattheplanwillbesignificantlybechangedorwithdrawn.Theforegoingfactsthateventsorcircumstanceswhichhaveresultedintheextensionoftheperiodtocompletethesalebeyondone-year,arebeyondtheentity'scontrol,therefore,BadamiBaghLandisclassifiedas“HeldforSale”atlowerofitscarryingamountorfairvaluelesscosttosell.

22.2Advances to employees are provided tomeet business expenses and are settled as andwhen theexpensesareincurred.

22.3 Suppliers

Suppliersasatclosingdate 7,218

7,364

Less:Provisionfordoubtfulbalances 21.2.1 2,466

2,466

4,752

4,898

2018 2017

2,466 2,466

- -

- -2,466 2,466

Tradedeposits-Consideredgood 23.1 565 565

Marginagainstbankguarantee-Consideredgood 23.2 21,381

25,205

Shorttermprepaymentsandotherreceivables 5,061

5,135

27,007

30,905

23.1 BalanceasonClosingdate 3,697 3,697 Less:Provisionagainstdoubtfulbalances 23.1.1 3,132 3,132

565

565

23.1.1 Movementinprovisionisasfollows:

Openingbalance 3,132

3,132Add:Provisionfordoubtfulbalances -

-

Less:Provisionfordoubtfulbalanceswrittenoff -

-

ClosingBalance 3,132

3,132

23.2 BalanceasonClosingdate21,442

25,266

Less:Provisionagainstdoubtfulbalances61

61

21,381

25,205

24. TAXREFUNDDUEFROMGOVERNMENTAdvanceincometax-net 85,759 86,281

Salestaxrefundable 35,164 18,631

120,923

104,912

25.CASHANDBANKBALANCESCashinhand 2,082

2,626

Cashwithbanks:LocalCurrency-Currentaccounts 28,803

34,118

-Depositaccounts 25.1 7,191

127

-Escrowaccount 32

32

36,026

34,277

38,108

36,903

25.1

25.2 Allbankaccountsaremaintainedunderconventionalbankingsystem.

314,724

314,724

Thecompanyismaintainingsavingaccountwithdifferentbankswithinterestonthedailyproductbasiswhichwas

carryinginterest@5%to6%.(2017:@5%to6%).

27. SALES-NetSales-Local 1,666,605

1,584,733

Less:Salestax 242,156

231,561

1,424,449

1,353,172

69 70

2018 2017

21.2.1Movementinprovisionisasfollows:Openingbalance

Add:Provisionfordoubtfulbalances

Less:ProvisionfordoubtfulbalanceswrittenoffClosingBalance

23.TRADEDEPOSITS,PREPAYMENTSANDOTHERRECEIVABLES

---Rupeesinthousand---

---Rupeesinthousand---

29.1 ThisincludesretirementbenefitsamountingtoRs.0.225million(2017:Rs.0.459million).

30. FREIGHTANDFORWARDINGEXPENSESFreightandforwardingexpenses 22,714 21,848

31. ADMINISTRATIVEEXPENSESSalariesandwages(includingallbenefits) 31.1 34,351 34,755Vehiclerunningexpenses 4,880 4,182Travelingandconveyance 3,406 3,065Printing,stationeryandofficesupplies 3,124 3,358Legalandprofessional 2,705 1,789Utilities 2,388 2,443

Entertainment 1,644 1,334Rent,rates,andtaxes 1,625 1,527Repairandmaintenance 1,742 3,518Postage,telegramsandtelephone 1,551 1,556Securitycharges 1,375 2,011Insurance 712 682Feeandsubscriptioncharges 903 858Advertisement 357 792Training 17 134Miscellaneous 8,502 7,526Depreciation 15.1.1 4,851 3,543

74,133 73,07328.2 Thisincludesamountpaidtocontractorforwagesofworkersoncontract.Thisalsoincludesretirement

benefitsamountingtoRs.5.842million(2017:Rs.7.965million).

28. COSTOFSALESRawmaterialconsumed 28.1 945,805

1,034,692

Storesandsparesconsumed 110,131

85,216

Salariesandwages(includingallbenefits) 28.2 98,542

89,388

Fuelandpower 51,044

52,154

Processingcharges 58,674

28,043

Inspectionfee 6,045

7,104

Servicecharges 5,780

5,119

Repairandmaintenance 4,652

5,263

Vehiclerunningexpenses 4,601

2,424

Rent,ratesandtaxes 1,384

1,435

Publicationoftenderdocuments 1,594

1,734

Insurance 1,349

1,029

Travelingandconveyance 1,196

1,038

Printing,stationeryandofficeSupplies 1,463

920

Postage,telegramandtelephone 741

680

Entertainment 942

429

Legalandprofessional 460

-

Otherexpenses 733

1,069

Depreciation 15.1.1 33,176

34,134

382,507

317,179

1,328,312

1,351,871

Openingstockofwork-in-process 154,168

83,578

Closingstockofwork-in-process (143,688)

(154,168)

10,480

(70,590)

Costofgoodsmanufactured 1,338,792 1,281,281

Openingstockoffinishedgoods 114,524

20,246Closingstockoffinishedgoods (53,909)

(114,524)

60,615

(94,278)

1,399,407

1,187,003

28.1 Rawmaterialconsumed

Openingstock 178,218

152,989

Add:purchases 917,611

1,059,921

1,095,829

1,212,910

Less:closingstock 150,024

178,218

945,805

1,034,692

2018 2017

29. SELLINGANDDISTRIBUTIONEXPENSESSalariesandwages(includingallbenefits) 29.1 4,562

6,001

Insurance 1,932

-

Travelingandconveyance 1,900

1,266

Entertainment 502 200

Training - 46

Repairandmaintenance 101 129

Researchanddevelopment 235 -

Postage,telegramsandtelephone 69 106

Vehiclerunningexpenses 464 277

Printing,stationeryandofficesupplies 76 225

Rent,ratesandtaxes 296 363

Publishingoftenderandsalespromotion 1,315

858

Feeandsubscriptioncharges 125 295

Miscellaneous 447 776

12,024

10,542

2018 2017

71 72

---Rupeesinthousand------Rupeesinthousand---

(69,956)

66,739

5,690 5,690(12.29) 11.73

(Loss)/Profitaftertaxation(Rupeesin'000)Weightedaveragenumberofordinaryshares(No.in'000)outstandingduringtheyear

(Loss)/Earningspershare(Rupees)

36.1TherearenodilutivepotentialordinarysharesoutstandingasatJune30,2018and2017.

Basic

37. CASHGENERATEDFROMOPERATIONS

(Loss)/Profitbeforetaxation (98,973)

60,527

Adjustmentsfor:

Depreciation 15.1.1 38,056

37,708

Financialcharges 14,510

14,326

Interestonworkers'profitparticipationfund 3,049

2,746

Interestincomeonbankdeposit (79)

(15)

Provisionforgratuity 7,985

10,947

ProvisionforWPPF -

3,295

ProvisionforWWF -

2,081

Liabilitywrittenoff (4)

(6,757)

Gainonsaleofproperty,plantandequipment -

(12,309)

63,517

52,022

Profitbeforeworkingcapitalchanges (35,456)

112,549

32.1 675 732

330

300

-

3,295

-

2,081

16 29

31

1,034

6,439

550

616

90

87

Auditors'remunerationTaxconsultancyfeeWorkers'profitparticipationfundWorkers'welfarefund

Depreciationoninvestmentproperty

32.1Auditors'remunerationAuditfeeHalfyearlyreviewfeeReviewofcompliancewithcodeofcorporategovernance 35

29

675

732

33. OTHEROPERATINGINCOME

31.1 This includes retirement benefits amounting to Rs. 1.918 million (2017: Rs. 1.836 million).

This also includes retirement benefit of Managing Director amounting to Rs. 0.846 million paid during

theyeartoStateEngineeringCorporation(SEC).2018 2017

IncomefromFinancialAssets

Interest/profit-ondepositswithbanks-oninvestments

IncomefromNon-FinancialAssetsMiscellaneousincomeLiabilitywrittenoffRentalincome

Gainonsaleofproperty,plantandequipment

108 67779 15

272 2,2684 6,757

2,986 1,306

- 12,309

3,262 22,6403,449 23,332

34. FINANCECOSTSBanksandfinancialinstitutions

Mark-uponshorttermborrowings 6,041

4,293

Mark-uponlongtermborrowings 3,455

4,879

Bankchargesandcommission 34.1 5,014

5,154

14,510

14,326

Interestonworkers'profitparticipationfund 3,049

2,746

17,559

17,072

34.1 Bankguaranteecommissionpaidbythecompanyischargedovertheperiodofcontract.

35. TAXATIONCurrent-fortheyear 15,992

13,748

-forprioryears 883

880

Deferred-Originationandreversaloftemporarydifferences (41,471)

(19,569)

-Impactofchangeintaxrate (4,421)

(1,271)

(29,017)

(6,212)

2018 2017

35.1ThecurrenttaxprovisionrepresentstheMinimumTaxundersection113ofIncomeTaxOrdinance,2001.Asaresultreconciliationoftaxchargefortheyearisnotrequired.

35.2Company'sincometaxassessmenthasbeenfinalizedupto2017.

35.3Asperthemanagement’sassessment,sufficienttaxprovisionhasbeenmadeintheCompany’sfinancialstatements.Thecomparisonoftaxprovisionasperthefinancialstatementsviz-a-viztaxassessmentforlastthreeyearsisasfollows:

73 74

ProvisionasperfinancialstatementsTaxassessment

2017 2016 2015

13,748 54,8679,55313,101 56,05210,809

32. OTHEROPERATINGCHARGES

36. BASICANDDILUTED(LOSS)PERSHARE

---Rupeesinthousand---

---Rupeesinthousand---

---Rupeesinthousand---

2018 2017---Rupeesinthousand---

10.3.1

40.2

FINANCIALASSETSLongterminvestments -819 - 741

-2,053 - 2,053Tradedebts-netofimpairment 382,497 - 781,691 -Advances 1,043 - 652 -

21,946 - 25,770 -Cashandbankbalances 38,108 - 36,903 -Total 443,5942,872 845,016 2,794

-1,790,848 - 1,790,848Longtermborrowings 19,5039,747 19,503 29,250Shorttermborrowings 61,494 - 74,919 -Tradeandotherpayables 312,656 - 671,844 -Mark-upaccrued 425,812 - 2,491 -Total 819,4651,800,595 768,757 1,820,098

Longtermsecuritydeposits-netofimpairment

Tradedepositsandguaranteemargins

FINANCIALLIABILITIESGovernmentofPakistanLoans

MovementsinworkingcapitalDecrease/(Increase)incurrentassets:-Stores,sparesandloosetools 1,565 (49,192)-Stockintrade 99,289 (190,097)-Tradedebts 399,194 338,249-Advances (308) 496

-Tradedeposits,prepaymentsandotherreceivables 3,898 (5,024)

-Salestaxrefundable (16,533) (18,631)Increase/(Decrease)incurrentliabilities:

-Tradeandotherpayables (339,929) (133,815)

147,176 (58,014)

Cashgeneratedfromoperations 111,720

54,535

2018 2017

38.TRANSACTIONSWITHRELATEDPARTIESTherelatedpartiescompriseGoP,associatedcompanies/undertakings,directorsoftheCompanyandkeymanagementstaff.Detailsoftransactionswithrelatedpartiesduringtheyearotherthanthosewhichhavebeendisclosedelsewhereinthesefinancialstatementsarestatedbelow:

38.1DuringtheyearnotransactionwasmadewithHeavyElectricalComplex,ENARPetrotechServicesandFurniturePakistan.

38.2Maximumamountduefromassociatedundertakings(Ref:Note21.2)attheendofanymonthwasofRs.0.273million(2017:Rs.0.273million).Further,balanceoutstandingfromassociatedundertakingismorethan360daysoverdue.

38.3 All related party transactions are in accordance with accounting policy and are approved andrecommendedbytheauditcommitteeandsubsequentlyapprovedbytheboardofdirectors.Noneofthedirectorshadanyinterestinanytransaction.

39.OPERATINGSEGMENTThefinancialinformationhasbeenpreparedonthebasisofsinglereportablesegmenti.e."Engineering".

39.1InformationaboutproductsandservicesRevenue from sales of electricity transmission and communication towers represents 91.53% (2017:91.73%)oftotalsales.

39.2InformationaboutgeographicalareasCompanyasatJune30,2018arelocatedinPakistan.100%(2017:100%)ofthegrosssalesoftheCompanyaremadetocustomerslocatedinPakistan.

39.3InformationaboutmajorcustomersTheCompany’smostsignificantcustomersareelectricsupplycompanies.Electric supply companies (PESCO, HESCO, QESCO, LESCO, GEPCO and IESCO), electricity transmissioncompany (NTDCL) and tower errection and installation company (NATRACON)accounts formore than91.53%ofthegrosssalesoftheCompanyfortheyear.

40.FINANCIALRISKMANAGEMENT

40.1Riskmanagementframework

The Company's activities expose it to a variety of financial risks. The Board of Directors has overallresponsibilityfortheestablishmentandoversightoftheCompany’sriskmanagementframework.TheBoardisalsoresponsiblefordevelopingandmonitoringtheCompany’sriskmanagementpolicies.The Board meets frequently throughout the year for developing and monitoring the Company's riskmanagementpolicies.TheCompany’sriskmanagementpoliciesareestablishedtoidentifyandanalyzetherisksfacedbytheCompany,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheCompany’sactivities.TheCompany,throughitstrainingandmanagementstandardsandprocedures,aimstodevelopadisciplinedandconstructivecontrolenvironmentinwhichallemployeesunderstandtheirrolesandobligations.The Audit Committee oversees how management monitors compliance with the Company's riskmanagementpoliciesandprocedures,andreviews theadequacyof theriskmanagement framework inrelationtotherisksfacedbythecompany.TheCompany'sAuditCommitteeisassistedinitsoversightrolebyInternalAudit.InternalAuditundertakesbothregularandadhocreviewsofriskmanagementcontrolsandprocedures,theresultsofwhicharereportedtotheAuditCommittee.

StateEngineeringCorporation(SEC)-Reimbursementexpensespayable

PakistanMachineToolFactory(PMTF)-Receivableattheendoftheyear

151 151

38.2 273 273

75 76

Financialassetsandliabilitiesbycategoryandtheirrespectivematurities

Maturityuptooneyear

Maturityafteroneyear

Maturityuptooneyear

Maturityafteroneyear

June30,2017June30,2018

Onbalancesheetdategap (375,871) (1,797,723) 76,259 (1,817,304)

---Rupeesinthousand---

--------------------Rupeesinthousand--------------------

Gross Impairment

Maturityuptooneyear

Maturityafteroneyear

Maturityuptooneyear

Maturityafteroneyear

June30,2017June30,2018

TheCompany’smostsignificantamountreceivableisfromNTDCL,PESCOandPumpWellwhichisincludedintotalcarryingamountoftradedebtsasatreportingdate.Fortradedebts,internalriskassessmentprocessdeterminesthecreditqualityofthecustomers,takingintoaccount their financial positions, past experiences and other factors. Aging of trade debts is regularlyreviewedby theBoard'sReceivablesCommittee andnecessary actions are taken in respect of overduebalances.Thecompanyassessesthecreditqualityofthecounterpartiesassatisfactory.Bankbalancesareheldonlywithreputablebankswithhighqualitycreditratings.Loansandadvancestoemployeesarenotexposedtoanymaterialcreditrisksincethesearesecuredagainsttheirsalaries.Geographicallythereisnoconcentrationofcreditrisk.Themaximumexposuretocreditriskfortradedebtsatthereportingdatearewithcustomerswithinthecountry.Thecreditqualityofbankbalancesthatareneitherpastduenorimpairedcanbeassessedbyreferencetoexternalcreditratings(ifavailable)ortohistoricalinformationaboutcounterpartydefaultrate:

Basedonpastexperiencethemanagementbelievesthatnofurtherimpairmentallowanceisnecessaryastherearereasonablegroundstobelievethattheamountswillberecoveredinshortcourseoftime.

40.2.1ThematterofcharginginterestontheseloansisdisputedinrespectofwhichreconciliationexerciseiscurrentlyinprogressthroughMinistryofFinance.Theultimateoutcomeofthemattercannotpresentlybedetermined.Hencetheseloanshavebeenstatedatcost.

40.3FairValues

ThecarryingvaluesofthefinancialassetsandfinancialliabilitiesapproximatetheirfairvaluesexceptforGovernmentofPakistanloansasdisclosedinnote.13tothefinancialstatements.Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Ifthetransactionisnotbasedonmarketterms,orifamarketpricecannotbereadilydetermined,thenanestimateoffuturecashpaymentsorreceipts,discountedusingthecurrentmarketinterestrateforasimilarfinancialinstrument,isusedtoapproximatethefairvalue.

40.4FinancialRiskFactorsTheCompanyhasexposurestothefollowingrisksfromitsuseoffinancialinstruments:

40.4.1Creditrisk

CreditriskistheriskoffinanciallosstotheCompanyifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromlongtermsecuritydeposits,loansandadvancestoemployees,deposits,tradedebts,otherreceivablesandbankbalances.The Company's exposure to credit risk is influenced mainly by the individual characteristics of eachcustomer.Tomanageexposuretocreditriskinrespectoftradereceivables,managementreviewscreditworthiness,references,establishpurchaselimitstakingintoaccountthecustomer'sfinancialposition,pastexperienceandotherfactors.Concentration of credit risk ariseswhen a number of counter parties are engaged in similar businessactivitiesorhavesimilareconomicfeaturesthatwouldcausetheirabilitiestomeetcontractualobligationtobesimilarlyeffectedbythechangesineconomic,politicalorotherconditions.TheCompanybelievesthatitisnotexposedtomajorconcentrationofcreditrisk.

The carrying amount of financial assets represents the maximum credit exposure before any creditenhancements.Themaximumexposuretocreditriskatthereportingdatewas:

OFF-BALANCESHEETITEMS225,811 617,847Letterofguarantees

-CreditRisk-LiquidityRisk-MarketRisk

Shortterm Longterm Agency

A1+ AAA PCRAL 3248AA+ JCR-VIS 33,59532,255

A1+ AAA JCR-VIS 2,3481,905A1+ AAA JCR-VIS 5169

36,02634,277

Theagingoftradedebtsatthereportingdatewas:

Notyetdue

Pastdue1-30days

Pastdue31-60daysPastdue61-90daysOver90days

1,857 -129,687 -49,646 -53,384 -191,135 43,212425,709 43,212

345,587 -58,559 -

243,468 -21,944 -

155,345 43,212824,903 43,212

HabibBankLimited

Rating

MCBBank

UnitedBankLimited

NationalBankofPakistan

2018 2017

Longterminvestments 819 741

Longtermsecuritydeposits-netofimpairment 2,053

2,053

Tradedebts-netofimpairment 382,497

781,691

Advances 1,043

652

Tradedepositsandguaranteemargins 21,946

25,770

Bankbalances 36,026

34,277

444,384

845,184

77 78

June30,2018 June30,2017

Gross Impairment

A1+

---Rupeesinthousand---

------------Rupeesinthousand------------

--------------------Rupeesinthousand--------------------

40.4.2LiquidityriskLiquidityriskistheriskthattheCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheCompany'sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions.LiquiditypositionoftheCompanyiscloselymonitoredthroughbudgets,cashflowprojectionsandcomparisonwithactualresultsbytheBoard.

Thecontractualcashflowsrelatingtotheabovefinancialliabilitieshavebeendeterminedonthebasisofmark-uprateeffectiveasatJune30,2018.Theratesofmark-uphavebeendisclosedintherespectivenotestothefinancialstatements.Itisnotexpectedthatthecashflowsincludedinthematurityanalysiscouldoccursignificantlyearlieroratsignificantlydifferentamounts.

40.4.3MarketRiskMarketriskistheriskthatthevalueofthefinancialinstrumentmayfluctuateasaresultofchangesinmarketinterestratesorthemarketpriceduetochangeincreditratingoftheissuerortheinstrument,changeinmarketsentiments,speculativeactivities,supplyanddemandofsecuritiesandliquidityinthemarket.TheCompanyincursfinancialliabilitiestomanageitsmarketrisk.AllsuchactivitiesarecarriedoutwiththeapprovaloftheBoard.TheCompanyisexposedtointerestrateandcurrencyrisks.

a)CurrencyRiskCurrencyRisk is therisk that the fairvalueor futurecash flowsofa financial instrumentwill fluctuatebecauseofchangesinforeignexchangerates.Thecompanyisnotsignificantlyexposedtocurrencyriskasthecompanydoesnotmaintainbankaccountsinforeigncurrencies.

b)InterestRiskInterestrateriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuateduetochangesinmarketinterestrates.Significantinterestrateriskexposuresareprimarilymanagedbyamixofborrowingsatfixedandvariableinterestratesandenteringintointerestrateswapcontracts.

Followingisthematurityanalysisoffinancialliabilities:Non-derivativefinancialliabilities Upto1year 1to5years TotalGovernmentofPakistanLoans -

1,790,8481,790,848Longtermborrowings 19,503

9,747

29,250

Shorttermborrowings 61,494

-

61,494

Tradeandotherpayables 312,656

-

312,656

Mark-upaccrued 425,812

-

425,812

June30,2018 819,465

1,800,595

2,620,060

Non-derivativefinancialliabilities Upto1year 1to5years TotalGovernmentofPakistanLoans - 1,790,848 1,790,848Longtermborrowings 19,503 29,250 48,753Shorttermborrowings 74,919 - 74,919Tradeandotherpayables 671,844

-

671,844

Accruedmark-up 2,491

-

2,491

June30,2017 768,757

1,820,098

2,588,855

Thecompany's interest rate riskarises fromshort termcash finance facility.The companyanalyzes itsinterestrateexposureonaregularbasisbymonitoringexistingfacilitiesagainstprevailingmarketinterestratesandtakingintoaccountsvariousotherfinancingoptionsavailable.Asat30June2018,ifinterestratesoncompany'sbankborrowingshadbeen1%higher/lowerthemarkupexpenseswouldhavebeenhigher/lowerbyRs.0.095million(2017:Rs.0.092million).

41.CAPITALRISKMANAGEMENT

TheBoard’spolicyistomaintainanefficientcapitalbasesoastomaintaininvestor,creditorandmarketconfidenceandtosustainthefuturedevelopmentofitsbusiness.TheBoardofDirectorsmonitorsthereturnoncapitalemployed,whichtheCompanydefinesasoperatingincomedividedbytotalcapitalemployed.TheBoardofDirectorsalsomonitorsthelevelofdividendstoordinaryshareholders.

TheCompany'sobjectiveswhenmanagingcapitalare:

(i)tosafeguardtheentity'sabilitytocontinueasagoingconcern,sothatitcancontinuetoprovidereturnsforshareholdersandbenefits forotherstakeholders, theCompany'sability tocontinueasgoingconcern isdisclosedinnote2.1tothefinancialstatements,and

(ii)toprovideanadequatereturntoshareholders.

The Company manages the capital structure in the context of economic conditions and the riskcharacteristicsoftheunderlyingassets.Inordertomaintainoradjustthecapitalstructure,theCompanymay,forexample,adjusttheamountofdividendspaidtoshareholders,issuenewshares,orsellassetstoreducedebt.Inlinewithothersintheindustrypractices,theCompanymonitorscapitalonthebasisofthegearingratio.This ratio is calculated as net debt divided by total capital employed. Net debt is calculated as totalborrowings.TotalborrowingscompriseoflongandshorttermloanTotalcapitalemployediscalculatedasequityasshowninthebalancesheetplusnetdebt.Asatthebalancesheetdate,thegearingratiooftheCompanywasworkedoutasunder:

42.REMUNERATIONOFCHIEFEXECUTIVE,DIRECTORSANDEXECUTIVES

Theaggregateamountschargedinthesefinancialstatementsinrespectofremunerationincludingbenefitsapplicabletothechiefexecutive,directorsandexecutivesoftheCompanyaregivenbelow.

ThegearingratioasatJune30,isasfollows:Debt 1,883,720

1,917,011Equity 13,667,998

13,732,096

Totalequityanddebt 15,551,718

15,649,107

GearingRatio 12.11% 12.25%

2018 2017

79 80

--------Rupeesinthousand--------

--------Rupeesinthousand--------

44.NUMBEROFEMPLOYEES

42.1ComparativefigureshavebeenrestatedtoreflectchangesinthedefinitionofexecutiveasperCompaniesAct,2017.

42.2Inadditiontoaboveremunerations8directors(2017:8directors)werepaidaggregateremunerationofRs.Nil(2017:Rs.Nil).

42.3Aggregateamountchargedintheaccountsfor08directorsforMeetingfeeswereRs.7.275million(2017:Rs.5.78million)andreimbursableexpenseswereRs.Nil(2017:Rs.0.98million)formeetingsofBoardofDirectorsandsubcommitteesofBoardofDirectors.

42.4TheChiefExecutiveOfficerandoneDirectorisentitledforcompanymaintainedcar.

43.PLANTCAPACITYANDACTUALPRODUCTION

U/M Installed Assessed 2018 2017

Pumps/turbines No. 3,400 3,400

174

113

Electricmotors No. 16,500 6,500

133

89

Rolledmaterial Tons 80,000 30,000

-

-

Foundry Tons 4,000 4,000 99

88

Steelfabrications(STR) Tons 20,000 20,000

9,351

10,707

ConcreteMixture No. 350 350

-

-

ActualProductionCapacity

45.CORRESPONDINGFIGURES

Correspondingfigureshavebeenre-arrangedwherevernecessaryforpurposesofbetterpresentationas

follows:

Reclassificationfromcomponent Reclassificationtocomponent

Administrativeexpenses Administrativeexpenses

Miscellaneous Rent,rates,andtaxes 50

Miscellaneous Utilities 61

Miscellaneous Securitycharges 2,011

Miscellaneous Feeandsubscriptioncharges 858

Costofsales Costofsales

Otherexpenses Entertainment 429

Otherexpenses Publicationoftenderdocuments 1,734

Storesandsparesconsumed Fuelandpower 32,890

Sellinganddistributionexpenses Sellinganddistributionexpenses

Miscellaneous Feeandsubscriptioncharges 295

Advanceagainstsuppliers Advancetoemployeesagainstexpenses 641

Tradeandotherpayables Longtermdeposits

Securitydeposits Securitydeposits 2,000

UnclaimedDividendUnclaimedDividend UnclaimedDividend 13,257

---Rupeesinthousand---

81 82

ChiefExecutive

Executives Executives

Remuneration 5,331

8,391

4,084

8,505

Bonus 50

-

-

Reimbursementofexpenses 744

-

986

-

Pensioncontribution -

277

-

Perquisites 486

699

-

709

6,560

9,090

5,847

9,213

Numberofpersons 1 4 1

4

ChiefExecutive

20172018

-

Contractualemployees-HeadOfficeTemporarystaff-HeadOfficeContractualemployees-FactoryTemporarystaff-FactoryWorkers-Factory

32303943250394

2018 2017--------Numbers--------

33292834

242366

AveragenumberofemployeesduringtheyearContractualemployees-HeadOfficeTemporarystaff-HeadOfficeContractualemployees-FactoryTemporarystaff-FactoryWorkers-Factory

33303439246382

33293136

244373

TotalnumberofemployeesasatJune30,are-------------Rupeesinthousand-------------

500

PatternofShareholdingASATJUNE30,2018

#OfShareholders TotalSharesHeld

1,4945481269723251311111111111111

100500

1,0005,000

10,00015,00020,00025,00030,00040,00045,00050,00060,00085,00090,000

130,000140,000170,000305,000455,000510,000

1,395,0001,420,000

1101501

1,0015,001

10,00115,00120,00125,00135,00140,00145,00155,00180,00185,001

125,001135,001165,001300,001450,001505,001

1,390,0011,415,001

40,747128,19088,746

188,388164,67121,91994,40021,07083,90040,00043,77645,80057,50080,20085,931

128,790135,240165,254303,200452,700510,000

1,394,1001,415,723

2313 5,690,245

CategoriesofShareholders

Directorsandtheirspouse(s)andminorchildrenMirzaMahmoodAhmedMr.AnsarJavedMr.RashidAliKhanMr.MuhammadArifHabibMr.LiaqatMohammadMr.MuhammadIqbal

#ofShareholders SharesHeld Percentage

111111

1,0001,0001,0001,0003,7001,027

0.020.020.020.020.070.02

ASSOCIATEDCOMPANIES,UNDERTAKINGSANDRELATEDPARTIES

RotocastEngineeringCompany(Private)LimitedStateEngineeringCorporation

11

1,394,1001,415,723

24.5024.88

From To

ASATJUNE30,2018

MuahammadIqbalDIRECTOR

MianAnwarAzizChiefFinancialOfficer

AnsarJavedDIRECTOR

46.AUTHORIZATIONOFFINANCIALSTATEMENTS

46.1ThesefinancialstatementshavebeenauthorizedforissueonSeptember27,2018bytheBoardof

DirectorsoftheCompany.

46.2Thesefinancialstatementshavebeensignedbytwodirectorsinsteadofchiefexecutiveandoneth

director,asthechiefexecutivehasneitherattendednorappliedforleaveofabsencefrom198 meeting

of Board of Directors held on September 27, 2018. The Company Secretary fulfilled all statutorythrequirementsforconvening198 Board'smeetingcalledforapprovalofthesefinancialstatements.

47.GENERAL

47.1Figureshavebeenroundedofftothenearestthousandrupee.

83 84

85 86

NITandICP

BANKS,DEVELOPMENTFINANCEINSTITUTIONS,NON-BANKINGFINANCECOMPANIES,

INSURANCECOMPANIES,

MODARABASANDMUTUALPENSIONFUNDSCDC-TRUSTEEAKDOPPORTUNITYFUND

PUBLICSECTORCOMPANIESANDCORPORATIONS

GENERALPUBLICa.Local

b.Foreign

Others

2.31

2.55

4.02

0.12

0.49

25.72

-

15.26

100

131,330

145,115

229,030

6,900

27,600

1,463,272

-

868,448

5,690,245

2

12

3

1

7

2237

43

2,313TOTAL

SHAREHOLDERSHOLDING5%ORMOREVOTINGINTEREST

StateEngineeringCorporationLimitedRotocastEngineeringCompany(Private)LimitedMr.AhmadMasoodKhanMahaSecurities(Private)LimitedDjmSecurities(Private)Limited

1,415,7231,394,100

510,000452,700303,200

24.8824.508.96

7.965.33

Duringthefinancialyear,Nodirector,CEO,CFO,CompanySecretary,HeadofInternalAuditandtheirspousesandminorchildrencarriedoutanytransactionsinthesharesoftheCompany

CategoriesofShareholders#ofShareholders SharesHeld Percentage

ASATJUNE30,2018

-

88

FORMOFPROXY

TheCompanySecretary,PakistanEngineeringCompanyLimited,6/7-SirGangaRamTrustBuilding,Shahra-e-Quaid-e-Azam,LAHORE

1. Amemberentitledtoattendandvoteatthemeetingmayappointanyotherpersonashis/herproxytoattendandvoteinsteadofhim/her.ACorporationbeingamemberoftheCompanymayappointasitsproxyanypersonauthorizedbytheDirectorsofCorporation.

2. ProxiesinordertobevalidmustbereceivedattheCompany’sRegisteredOfficenotlessthan48hoursbeforethemeetingdulystamped,signedandwitnessed.

3. IncaseofCentralDepositorySystemAccountholder,anattestedcopyofidentitycardshouldbeattachedtothisProxyForm.

I/We

beingmember(s)ofPakistanEngineeringCompanyLtd.and

holderof

(incaseofCentralDepositorySystemAccountNo.

herebyappointMr./Ms.

(orfailinghim/her)Mr./Ms.

asaproxyofvoteonmy/ourbehalfat theAnnualGeneralMeetingof theCompany tobeheld

on Saturday, October 27, 2018 at 11:30 a.m. at Hotel Ambassador, 7-Davis Road, Lahore.

Signedthis

of

ordinarysharesasperShareRegisterFolioNo.

)

of

of

dayof 2018.

WITNESS

Signature

Name

Address

Note:

Signature

PleaseaffixRupeesfive

RevenueStampC.N.I.C

89

27201811:30