Transmission of Annual Report for the Year Ended June 30,2025

Contents

Company Information 2

Mission Statement 3

Notice of Annual General Meeting 4

Chairman's Review 7

Directors' Report 8

Key Operating and Financial Data 14

Statement of Compliance with listed companies Code of Corporate Governance 15

Independent Auditors' Review Report to the members 18

Independent Auditors' Report to the members 20

Statement of Financial Position 25

Statement of Profit & Loss Account 26

Statement of Comprehensive Income 27

Statement of Changes in Equity 28

Statement of Cash Flow 29

Notes to the Financial Statements 30

Pattern of Shareholding 65

Form of Proxy 67

Form of Proxy (Urdu) 68

Directors' Report (Urdu) 75

Notice of Annual General Meeting (Urdu) 78

Jama Punji

BOARD OF DIRECTORS Executive Director

Mr. Waseem-ul- Haque Ansari Chief Executive Officer

Non-Executive Directors

Mr. Ghazanfar Baber Siddiqi Chairman Board of Directors Mr. Mehmood-ul-Hassan Asghar

Mr. Abdul Basit

Mr. Muhammad Hanif German

Mrs. Nida Jamil Female Director

Independent Director

Mr. Aziz-ul-Haque

AUDIT COMMITTEE Mr. Aziz-ul-Haque Chairman Mr. Ghazanfar Baber Siddiqi Member Mr. Abdul Basit Member

HUMAN RESOURCE & REMUNERATION COMMITTEE

Mr. Aziz-ul-Haque Chairman Mr. Waseem-ul- Haque Ansari Member Mr. Abdul Basit Member

CHIEF FINANCIAL OFFICER Mr. Muhammad Farooq Khan

COMPANY SECRETARY Mr. Muhammad Hanif German

REGISTERED OFFICE Dewan Centre, 3-A, Lalazar,

Beach Luxury Hotel Road, Karachi, Pakistan

FACTORY Jilaniabad, Budhu Talpur, District Sajawal, Sindh.

AUDITORS Faruq Ali & Co., Chartered Accountants

LEGAL ADVISOR A.K.Brohi & Co.

SHARES REGISTRAR / TRANSFER AGENT BMF Consultants Pakistan (Pvt.) Limited

BANKERS Allied Bank of Pakistan Limited Saudi Pak Industrial and Agricultural Askari Bank Limited Investment Co. (Pvt.) Limited

Faysal Bank Limited Standard Chartered Bank

Habib Bank Limited Summit Bank Limited Meezan Bank Limited The Bank of Khyber National Bank of Pakistan The Bank of Punjab Silk Bank Limited United Bank Limited

02 ANNUAL REPORT 2025

To be the No. 1 automobile company in Pakistan

Mission Statement

Notice of Annual General Meeting

Notice is hereby given that 27th Annual General Meeting of Dewan Farooque Motors Limited will be held at Dewan Cement Limited Factory Site, at Deh Dhando, Dhabeji, District Malir, Karachi, Pakistan on Wednesday, April 22, 2026 at 12:00 p.m. to transact the following businesses;

1. To confirm the minutes of the preceding Extra Ordinary General Meeting of the Company held on Friday, December 19, 2025;

2. To receive, consider, approve and adopt the annual audited financial statements of the Company for the year ended June 30, 2025, together with the Directors' and Auditors' Reports thereon;

3. To confirm the appointment of the Statutory Auditors of the Company for the year ended June 30, 2026, and to fix their remuneration;

4. To consider any other business with the permission of the Chair.

   
   
   

   By order of the Board

   Karachi

   Dated: April 1, 2026

   Notes:

   Muhammad Hanif German

   (Director & Company Secretary)

   1. The share transfer books of the company will remain closed from April 15, 2026 to April 22, 2026 (both days inclusive). Transfers received in order at the share registrar office M/s. BMF Consultants Pakistan (Private) Limited, Located at Anum Estate Building, Room No.310 & 311,3rd Floor,49, Darul Aman Society, Main Shahrah-e-Faisal, adjacent to Baloch Colony Bridge, Karachi, Pakistan.

   2. A member entitled to attend and vote at this meeting may appoint another member as his/her proxy to attend the meeting and vote for his/her behalf. proxies in order to be effective must be received at the Shares Registrar Office duly stamped and signed not less than 48 hours (Working days only) before the time of holding of the meeting.

      CDC Account Holder will further have to follow the guidelines as laid down in Circular 1 dated January 26,2000 issued by Securities and Exchange commission of Pakistan for attending the meeting and appointment of proxies.

   3. Video Conference Facility:

      Pursuant to the provisions of the Companies Act, 2017, member can avail video conference facility to participate in this Annual General Meeting provided that the company receives consent from the members holding in aggregate 10% or more shareholding, residing in a city, at least seven (7) days prior to the date of meeting. Subject to the fulfillment of the above conditions, members shall be informed of the venue along with complete information necessary to access the facility. Format of request form has been placed on the Company's website.

      04 ANNUAL REPORT 2025

      
      
      

   4. Attendance through Zoom:

      The members may attend the AGM online through ZOOM, by following the below guidelines:

      1. The member shall get himself/herself registered by sending his/her request to the Company at e-mail ID dfml.corp@yousufdewan.com as per Standard Request Form available on the Company's website (http://www.yousufdewan.com/DFML/index.html or can send his/her request to the Company Secretary at Dewan Centre, 3-A Lalazar Beach Hotel Road Karachi along with a legible copy of CNIC not later than April 20, 2026.

      2. Zoom link shall be sent by the Company only on email ID or Mobile/WhatsApp Number mentioned in Standard request Form.

   5. Deposit of physical Shares into CDC Account;

      As per section 72 of the Companies Act,2017 every existing company shall be required to replace its physical shares with book-entry form in a manner as may be specified and from the date notified by the commission, within a period not exceeding four years from the commencement of the Act i.e May 30,2017.

      The physical Shareholders having physical shareholding are encouraged to open CDC Investor Account with CDC or CDC Sub-Account with any of the brokers to place their physical shares into Script less form.

   6. E-Voting Procedure

      1. Details of the e-voting facility will be shared through an email with those members of the Company who have their valid CNIC numbers, cell numbers, and email addresses available in the register of members of the Company within due course.

      2. The web address, login details, will be communicated to members via email.

      3. Identity of the members indenting to case vote through E-voting shall be authenticated through authenticated login.

      4. E-Voting lines will start from April 15, 2026 at 10 a.m. and shall close on April 21, 2026 at 5 p.m. Members can cast their votes any time in the period.

   7. Procedure for Voting Through Postal Ballot

      For voting through Postal Ballot members may exercise their right to vote as per provisions of the Companies (Postal Ballot) Regulations, 2018 subject to the requirement of Section 143 and 144 of the Companies Act, 2017. Further details in this regard will be communicated to the shareholders within the legal time frame as stipulated under these said Regulations, if required.

      The members shall ensure that duly filed and signed ballot paper along with copy of CNIC should reach the Chairman of the meeting through post on the Company's Registered office or email at dfml.corp@yousufdewan.com one day before the Annual General Meeting

      i.e. April 21, 2026 during the working hours. The signature on the ballot paper shall match with the signature on CNIC or Company records.

      ANNUAL REPORT 2025 05
      
      

   8. Appointment of Scrutinizer.

      In accordance with the regulation 11 of the Companies (Postal Ballot) regulation, 2018 (the Regulation), the Board of Directors of the Company has appointed M/s. Faruq Ali & Co. Chartered Accountants, a QCR rated audit firm, to act as scrutinizer of the Company for election of directors in the meeting and to undertake other responsibilities as defined in regulation 11A of the Regulation.

   9. Particulars of Physical Shareholders:

      According to section 119 of the Companies Act, 2017 and Regulation 19 of the Companies (General Provisions and Forms) Regulations, 2018, all physical Shareholders are advised to provide their mandatory information such as CNIC number, address, email address, contact mobile/telephone number, International Bank Account Number (IBAN), etc. to Company's Share Registrar at their address M/s. BMF Consultants Pakistan (Private) Limited, Located at Anum Estate Building, Room No. 310 & 311, 3rd Floor, 49, Darul Aman Society, Main Shahrah-e-Faisal, adjacent to Baloch Colony Bridge, Karachi, email (bmfconsultantspakistan@gmail.com) immediately to avoid any non-compliance of law or any inconvenience in future.

   10. Updating of Particulars:

       The Shareholders are requested to promptly notify change in their address, if any, to the Company's Share Registrar. In case of corporate entity, the shareholders are requested to promptly notify change in their particulars of their authorized representative, if applicable.

   11. Restriction on Distribution of Gifts:

In accordance with the directive issued by the SECP Vide SRO 452 (1)/2025 dated 17th March 2025 the Company would like to inform all the shareholders that no gifts will be distributed at the AGM.

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Chairman's Review

I am pleased to present a report on the overall performance of the Board of Directors and effectiveness of the role played by the board in achieving the Company's objectives. The board of directors is responsible for the management of the company, which formulates all significant policies and strategies. The board is governed by relevant laws & regulations and its obligation, rights, responsibilities and duties as specified and prescribed therein.

The Board of Directors comprises of individuals with diversified knowledge who endeavour to contribute towards the aim of the Company with the best of their abilities.

An annual self-evaluation of the Board of Directors of the Company is carried out. The purpose of this evaluation is to ensure that the Board's overall performance and effectiveness is measured and benchmarked against expectations in the context of objectives set for the Company.

During financial year ended 30 June 2025, four board meetings were held. The Board of Directors of the Company received agendas and supporting material in sufficient time prior to the board and its committee meetings. All the directors are equally involved in important decisions. the Board's overall performance and effectiveness for the year under review was satisfactory.

Ghazanfar Babar Siddiqui

Chairman Board of Directors March 24, 2026

Directors' Report

The Board of Directors of Dewan Farooque Motors Limited is pleased to present its annual report along with the Company's audited Financial Statements for the year ended 30 June 2025 and welcomes you to the 27th Annual General Meeting.

Industry Overview

The Pakistan's automotive industry recovered strongly in the financial year ended 30 June 2025 after a difficult previous year. According to the Pakistan Automotive Manufacturers Association (PAMA), total sales of passenger cars, SUVs, and LCVs increased by 43%, reaching 148,023 units, compared to 103,829 units in financial year 2024. While passenger car sales grew significantly, the commercial vehicle segment also performed well. Truck sales increased by 103.2% to 4,444 units. However, the agricultural sector faced challenges, with tractor sales declining by 36.4% due to climate issues and weak farm economics.

This recovery was mainly supported by a more stable economy, declining inflation and the central bank's policy rate's sharp declined to 11% by June 2025.

Company's performance

The summary of financial performance of the Company for the year, along with the comparative figures is as follows:

30 June 2025 30 June 2024

----- (Rupees in thousand) -----

During the year, Company continued commercial production of "the Kia SHEHZORE" Standard variant, along with the assembly of other variants namely; King Cabin and Crew Cabin. Furthermore, from August 2024, the Company commenced production of electric vehicles (Honri VE 2.0 and VE 3.0) of its sister concern - Eco-Green Motors Limited (EGML) under toll manufacturing arrangement.

Following the restart of operations last year, the Company delivered 391 vehicles, increasing sales to Rs. 1.405 billion due to improved market demand. Company while not having working capital lines, could only managed to operate on limited scale and had to suffer net loss due to unabsorbed expenses in the initial period of Company's operations. Management is optimizing the supply chain and availability of working capital to improve future profitability.

In response to historical financial constraints and absence of working capital lines, the Company has continued to receive support from its sponsors to enable the production of its vehicles. In order to have better cashflows by retaining such funds, the Company converted Rs. 1.612 billion of sponsors' loans into equity; this conversion was completed subsequent to the year-end and reflects the sponsors' commitment to keep the Company in operations and portrays their strong confidence in the Company's future performance.

The Board sincerely regrets the delay in disseminating financial results due to a temporary disruption of the Company's information technology system due to malware attack. Following a rigorous data restoration and verification process, the Company has implemented enhanced technical safeguards and IT security protocols to prevent future recurrences.

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Future Outlook

The outlook for the Company is anchored by the strategic revival and market expansion of the KIA Commercial brand, which is a market leader in South Korea and is gradually making inroads in the Pakistan domestic light commercial vehicle segment.

Together with the strong support of the KIA management, DFML has embarked on a product offensive which will enable the KIA Shehzore to increase market share in the 1-ton to 3-ton segments. This product line extension will enable the company to cater to the wider LCVs customers' requirements. By prioritizing cost-efficient local assembly and enhancing after-sales support, the Company is well-positioned to navigate macroeconomic volatility and restore the legendary Shehzore brand to its previous glory.

Beyond our core commercial operations, the Company is aligning its long-term strategy with the evolving landscape of Pakistan's automotive industry. Under the New Energy Vehicle Policy (2025-30), the sector is transitioning toward a more competitive, market-driven environment focused on sustainability and localization. By embracing this shift toward modern mobility and leveraging favorable regulatory incentives, the Company is strategically positioned to adapt to emerging market trends and capitalize on the growing demand for diversified transportation solutions.

Observation in the Auditors' Report:

The Auditors have qualified their report due to significance of the matter as referred in Para

(a) of the Auditors' Report.

Non-provision of mark-up:

The management approached its lenders for restructuring of its debts and is confident that the Company's restructuring proposals without markup will be accepted by the financial institutions

/ Banks. Therefore, the Company has not made any provision of mark-up as the same will not be payable as per the proposed restructuring terms and this reflects present commercial reality of financial position of the Company.

Emphasis of matter on Going concern assumption:

The Board is fully committed to ensure the Company's continued operations with growth. Production of the KIA Shehzore with three variants and the assembly of electric vehicles Honri-VE 2.0 & 3.0 have enabled the Company to generate revenues and new business opportunities.

Although the auditors highlighted past losses and cash flow pressures which were mainly attributed to the periods when the operations were closed, the Company is actively addressing these issues by taking various measures. A key milestone was obtaining loan from the sponsors and its conversion of Rs. 1.612 billion into equity, subsequent to the year end, which reflected the strong support of sponsors and the improved financial position of the Company. We strongly believe that all these conditions are temporary and would reverse in future. Upon finalization of restructuring of existing debt coupled with the introduction of new vehicle models, the Board is confident that the Company will be in a position to procure working capital lines and move towards stable, profitable and sustainable growth.

Board of Directors

The Board Comprises of one independent Director, one Executive and five Non-Executive Directors. The following are the names of Directors:

• Mr. Abdul Basit

• Mr. Waseem-ul-Haque Ansari

• Mr. Mehmood -ul-Hassan Asghar

• Mr. Muhammad Hanif German

• Mr. Ghazanfar Baber Siddiqi

• Mr. Aziz-ul-Haque

• Mrs. Nida Jamil

  During the year no casual vacancy occurred on the board.

  Gender pay-gap disclosure

  In line with the Securities and Exchange Commission of Pakistan's disclosure requirements, we assessed our remuneration practices to identify and address any gender-based pay disparities.

  The gender pay gap reflects the difference in average earnings between male and female employees, influenced by factors such as occupational segregation, tenure, representation in senior roles, and unconscious bias.

  Mean Gender Pay Gap : 15% Median Gender Pay Gap : 19%

  Principal Activities of the Company

  Dewan Farooque Motors Limited was incorporated in Pakistan as a public limited Company and is listed on the Pakistan Stock Exchange. The Company's principal activity is the assembly/contract assembly, progressive manufacturing and sale of vehicles.

  Principal Risks and Uncertainties

  The Company considers the following as key risks:

• Sustained competition from newer players including Chinese-backed assemblers is capturing the SUV and LCV segments where DFML historically held a stronger foothold.

• Intensifying EV competition due to government's push for electric vehicle adoption

• Depreciation of Pak Rupee against US Dollar;

• Non-availability of banking lines.

The Company is endeavoring internally as well as externally to cater with and mitigate the impact of aforesaid risks and uncertainties.

Corporate Social Responsibility

The Company conducts its business in a responsible manner looking after its stakeholders and the environment. The Company mainly focuses providing on job training to fresh hired work force enabling them to develop adequate skills. While employing work force, the Company encourages under-privileged people residing close to the plant, thereby increasing their standard of living. Moreover, health and safety of employees is another area of focus. The Company complies with all applicable rules and regulations in the manufacturing process to ensure environmental protection. Standard Operating Procedures have been laid down to ensure protecting the health and safety of employees. The Company is also involved in providing medical facilities to people residing in the surrounding area.

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Subsequent Events

As stated above, subsequent to the year end loans from the sponsors have been converted into shares. Other than this conversion, no material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year and the date of this report.

Statement of Corporate and financial reporting framework:

• The Financial Statements for the year ended 30 June 2025, prepared by the management of the Company, present fairly its state of affairs, the results of its operations, cash flow and changes in equity;

• Proper books of account of the Company have been maintained;

• Appropriate accounting policies have been consistently applied in preparation of Financial Statements for the year ended 30 June 2025 and accounting estimates are based on reasonable and prudent judgment.

• International Financial Reporting Standards (IFRS) as applicable in Pakistan, have been followed in preparation of Financial Statements and departure there from, if any, has been adequately disclosed in the Financial Statements;

• The system of internal control is sound in design and has been effectively implemented and monitored;

• The Management has explained their views in detail regarding the going concern ability of the Company in note 2 and non-provisioning of mark-up in note 28 to the annexed audited Financial Statements.

• There has been no material departure from the best practices of the corporate governance, as detailed in the listing regulations of the stock exchange of Pakistan;

• Summarized key operating and financial data of last six years is enclosed with the report;

• All taxes have been paid and nothing is outstanding, except as disclosed in note 19 to the annexed audited Financial Statement;

• The fair value of the Provident Fund's Investment as at 30 June 2025 is Rs.51.424 (2024: Rs.39.203) million.

• The Board of Directors comprise of individuals with diversified knowledge who endeavor to contribute towards the aim of the Company with the best of their abilities. During the year, six meetings of the Board were held. The attendance of directors was as follows:

Leave of absence was granted to directors who could not attend Board meetings.

The audit committee comprises of three directors, one of them is an independent director and two are non-executive directors. During the year, four meeting were held, members' attendance in these meetings is as under:

During the year one meeting of the human resource & remuneration committee was held, members' attendance meeting is as under:

The present Auditors M/s. Faruq Ali & Co., Chartered Accountants have retired and offers themselves for re-appointment.

The Board of Director on recommendation of the Audit committee has recommended the re-appointment of M/s. Faruq Ali & Co., Chartered Accountants.

Loss per share

The loss per Share is Rs. 4.17 (2024 Rs. 3.30)

Dividend

On account of the loss for the year, the Board is not in a position to recommend dividends for the period under review.

Pattern of Shareholding:

The Pattern of Shareholding of the Company as at 30 June 2025 is annexed. Trading in Company Shares

None of the Directors, CFO, Company Secretary, their spouses and minor children have traded in the shares of the Company during the year other than that has already been disclosed in the pattern of shareholding.

Vote of Thanks:

On behalf of the Board, I thank you, the valued Shareholders, Federal and Provincial Governments and their functionaries, banks, development financial institutions, leasing companies, dealers, vendors and customers for their continued support and patronage.

The Board would also like to appreciate the valuable services, loyalty and efforts rendered by the executives, staff members and workers of the Company, during the year under review.

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Conclusion:

In conclusion, we bow, beg and pray to Almighty Allah, Al-Rahman, Al-Rahim, in the name of his beloved Prophet, Muhammad, peace be upon him, for continued showering of His blessings, guidance, strength, health and prosperity to us, our Company, country and nation and also pray to Almighty Allah to bestow peace, harmony, brotherhood and unity in true Islamic spirit to whole of Muslim Ummah, Ameen, Summa Ameen.

LO-MY LORD IS INDEED HEARER OF PRAYER (AL-QURAN)

Under / By Authority of Board of Directors

Waseem-ul-Haque Ansari Ghazanfar Babar Siddiqui

Chief Executive Chairman Board of Directors Karachi: March 24, 2026

Key Operating and Financial Data

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Statement of Compliance with Listed Companies (Code of Corporate Governance) Regulations, 2019

For the Year Ended June 30, 2025

The company has complied with the requirements of the Regulations in the following manner:

1. The total number of directors are seven as per the following:

   1. Male : 6

   2. Female : 1

2. The composition of board is as follows:

   1. Independent Director : Mr. Aziz-ul-Haque

   2. Other Non-executive

      Directors : Mr. Ghazanfar Baber Siddiqi

      Mr. Mehmood-ul-Hassan Asghar Mr. Abdul Basit

      Mr. Muhammad Hanif German Mrs. Nida Jamil

   3. Executive Director : Mr. Waseem-ul-Haque Ansari

3. Six Directors have confirmed that they are not serving as Director in more than seven listed Companies including this Company, however, one Director is serving as Director in more than seven listed Yousuf Dewan Companies.

4. The company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures.

5. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

6. All the powers of the board have been duly exercised and decision on relevant matters have been taken by board/ shareholders as empowered by the relevant provisions of the Act and these Regulations.

7. The meetings of the board were presided over by the Chairman and, in his absence, by a director elected by the board for this purpose. The board has compiled with requirements of Act and the regulations with respect to frequency, recording and circulating minutes of meeting of board.

8. The board of directors have a formal policy and transparent procedures for remuneration of directors in accordance with the Act and these Regulations.

9. Three Directors are qualified under the directors training program. During the year the board did not arrange training program. However, we will arrange the same in the next coming session.

   ANNUAL REPORT 2025 15
   
   

10. The board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment and complied with relevant requirements of the Regulations.

11. CFO and CEO duly endorsed the financial statements before approval of the board.

12. The board has formed committees comprising of members given below:

    a) Audit Committee :	Mr. Aziz-ul-Haque Mr. Ghazanfar Baber Siddiqi Mr. Abul Basit	Chairman Member Member
    b) HR and Remuneration Committee :	Mr. Aziz-ul-Haque	Chairman
    	Mr. Waseem-ul-Haque Ansari Mr. Abdul Basit	Member Member

13. The terms of reference of the aforesaid committees have been formed, documented and advised to the committee for compliance.

14. The frequency of meetings (quarterly/half yearly/ yearly) of the committee were as per following:

    1. Audit Committee : 1 meeting during the financial year ended June 30, 2025

    2. HR and Remuneration : 1 annual meeting held during the financial year ended Committee June 30, 2025

15. The board has set up an effective internal audit function. The staffs are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the company.

16. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP and registered with Audit Oversight Board of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP.

17. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Act, these regulations or any other regulatory requirement and the auditors have confirmed that they have observed IFAC guidelines in this regard.

18. We confirm that all other requirements of the Regulations 3, 6, 7, 8, 27,32, 33 and 36 of the Regulations have been complied with; and

    16 ANNUAL REPORT 2025

    
    
    

19. Explanation for non-compliance with requirements, other than regulations 3, 6, 7, 8, 27,

32, 33 and 36 are below:

Waseem-ul-Haque Ansari Ghazanfar Babar Siddiqui

Chief Executive Chairman Board of Directors

FARUQ ALI & CO.

' CHARTER ED .4CCODNT ENTS

C -88, KDA Scheme No. 1, Telephone (021) 343019d6 Ma i n Ka r sa z P oa d . : (021) 34301967

Opp: Maritime Museum, Karachi. (021) 343019d8

E ma i I: in fo @fa c. c om . p k (021) 343019d9 Website: https://www.fac.com.pk Fax (021) 343019b5

We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019 (the Regulations) prepared by the Board of Directors of Dewan Farooque Motors Limited (the Company) for the year ended June 30, 2025 in accordance with the requirements of regulation 36 ofthe Regulations.

The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our responsibility is to review whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Regulations and report if it does not and to highlight any noncompliance with the requirements of the Regulations. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Regulations.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.

The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval, its related party transactions. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee.

Following instances of non-compliances with the requirements of the Code were observed which are not

stated in the Statement of Compliance.

1. The composition ofboard includes one independent director Mr. Aziz ul Haque, whereas in our opinion he does not meet the criteria of independence due to his cross-director ship in associated Companies.

2. The chairman of Audit committee and Human Resource and Remuneration Committee shall be an independent director, whereas in our view Mr. Aziz ul Haque does not Complied with the criteria of independence as the reason reflects in para (a) above.

3. The Company is required at least two or one third members of the Board, whichever is higher, as independent directors on its board. However, the Company includes only one independent director as disclosed in Paragraph 2 of Statement of Compliance.

Based on our review, except for the above instances ofnon-compliance, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the requirements contained in the Regulations as applicable to Company for the year ended June 30, 2025.

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... . ,.,

FARUQ ALI & CO.

CHARTEkE D ACCOUNT.ENTS

C -8 8, KDA Scheme No. 1. Telephone : (021) 34301966 Ma i n Ka r sa z R oa d . (021) 343019d7

Opp: Maritime Museum. Karachi. (021) 343019d8

E ma il in fo @ af c . c om . p k (021) 34301969

Website: www.fac.com.pk Fax : (021) 3430l9b5

INDEPENDENT AUDITOR'S REPORT

To the members of Dewan Farooque Motors Limited Report on the Audit of the Financial Statements Qualified Opinion

We have audited the annexed financial statements of Dewan Farooque Motors Limited (the Company), which comprise the Statement of financial position as at June 30, 2025, and the Statement of profit or loss, Statement of comprehensive income, the Statement of changes in equity, the Statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in Basis for Qualified opinion Paragraph of our report, the statement of financial position, the statement of profit or loss, statement of comprehensive income, the statement of changes in equity and the statement of cash flows together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2025 and of the loss and other comprehensive loss, the changes in equity and its cash flows for the year then ended.

Basis for Qualified Opinion

We conducted our audit inaccordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the company in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

a) The company has not made provision of markup for the year amounting to Rs. 682.132 million (2024: Rs. 1,120.876 million) (refer note 28) on account of restructuring proposal offered to the lenders as described in note 2 to the financial statements. We do not concur with the management's view of non-provisioning of markup. Therefore, the provision of markup should have been made in these financial statements. Had the provision ofmarkup been made in the financial statements, the loss before taxation for the year would have been higher by Rs. 682.132 million (2024: Rs. 1,120.876 million) and markup payable would have been higher and shareholder's equity would have been lower by Rs. 9.996 billion (2024: Rs: 9.313 billion).

Material Uncertainty Relating to Going Concern

We draw attention of the members to note 2 to the financial Statements for the year ended June 30, 2025 which indicates loss after taxation of Rs. 578.442 (2024: Rs. 457.847) million and as of that date it has accumulated losses of Rs. 5.666 (2024: Rs. 5.087) billion which resulted in net capital deficiency of Rs. 4.278 (2024: Rs. 3.700) billion and its current liabilities exceeded its current assets by Rs. 5.925 (2024: Rs. 5.475) billion and total assets by Rs. 4.255 (2024: Rs. 3.d79) billion without providing the markup as refer in above para (a). The company has been unable to ensure timely repayments of debts owing to financial institutions due to liquidi

20

Continiiorion Street

problems and also short-term finance facilities have expired and not been renewed by banks as disclosed in note 21 to the financial statements. Further, balance confirmations from financial institutions have not been received as the Company is in litigation with the financial institutions. Following course, lenders have gone into litigation for repayment of liabilities through attachment and sale of company's hypothecated / mortgaged properties as disclosed in note 22.3 to the financial Statements. These conditions, along with other matters as set forth in note 2 indicates the existence of material uncertainty which may cast significant doubt about Company's ability to Continue as going concern therefore the company may be unable to realize its assets and discharge its liabilities in normal course of business. The amounts of the current liabilities and loss reported in said note do not include the effect ofmatters discussed in the basis for qualified opinion paragraph. Our opinion is not qualified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were ofmost significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matters described in the Basis for Qualified Opinion section we have determined the matters described below to be the key audit matters to be communicated in our report Following are the Key Audit Matters:

Continuation Sheet

Other Matter

The financial statements ofDewan Farooque Motors Limited ('the Company'), for the year ended 30* June 2024 were audited by another auditor who expressed aqualified opinion on those financial statements on 07 November 2024.

Information Other than the Financial Statements and Auditor's Report Thereon

Management is responsible for the other information. The other information comprises the information in the Annual Report, but does not include the financial statements and our auditor's reports thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to

report that fact. We have concluded that the other information is materially misstated for the same reason with respect to the matters described in the basis for Qualified Opinion section and in the Material Uncertainty Related

to Going Concern section.

Responsibilities of Management and Board of Directors for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Accounting and Reporting Standards as applicable in Pakistan and requirements of companies Act 2017 (XIX of 2017), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our

22 ANNUAL REPORT 2025

" w.

Continuation Sheet

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect amaterial misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk ofnot detecting amaterial misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether amaterial uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content ofthe financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board ofDirectors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Continuation Slteet

Report on Other Legal and Regulatory Requirements

Based on our audit except for the matter discussed in basis for qualified opinion section, we further report that n our op on

1. proper books of account have been kept by the Company as required by the Companies Act, 2017;

2. the statement of financial position, the statement of profit or loss, statement of comprehensive income, the statement of changes in equity and the statement of cash flows together with the notes thereon have been drawn up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books

of account and returns;

Investments made, expenditure incurred and guarantees extended were for the purpose of the Company's business;

d) No Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

The engagement partner on the audit resulting in this independent auditor's report is Muhammad Faisal Nini

CHARTE D ACCOUNTANTS

Place: I€aracbi

Dated: « 2026

UDIN: AR202510l78H2ahvI35R

24 ANNUAL REPORT 2025

As at June 30, 2025 Note June 30,

2025

June 30,

2024

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 5

Intangible assets 6

Investment 7

CURRENT ASSETS

Stores and spares 8

Stock-in-trade 9

Trade debts - Considered good 10

Advances, deposits, prepayments and

other receivables - Considered good 11

Taxation - Net 12

Cash and bank balances 13

EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES

Authorised share capital

150,000,000 (2024: 150,000,000)

Ordinary shares of Rs.10 each

Issued, subscribed and paid-up share capital 14

Accumulated losses

NON-CURRENT LIABILITIES

Long term loans - secured 15

Long term security deposits 16

Deferred liabilities 17

CURRENT LIABILITIES

Short term loan from related parties 18

Trade and other payables 19

Unclaimed dividend 20

Short term finances and book over draft - secured 21

Current maturity of long term loans 15

CONTINGENCIES AND COMMITMENTS22

The annexed notes form an integral part of these financial statements.

----------(Rs. in '000)----------

1,030,042

4,413

761,521 1,795,976

68,176

889,279

672

1,037,785

26,934

144,862

2,167,708

3,963,684

1,500,000

1,387,353

(5,087,240)

(3,699,887)

--16,800

4,231

21,031

1,696,185

674,066

1,802

4,173,558

1,096,929

7,642,540

--3,963,684

Muhammad Farooq Khan

Chief Financial Officer

Waseem-ul-Haque Ansari

Chief Executive

Mehmood-ul-Hassan Asghar

Director

For the year ended June 30, 2025

Note

2025 2024

----------(Rs. in '000)----------

Muhammad Farooq Khan

Chief Financial Officer

Waseem-ul-Haque Ansari

Chief Executive

Mehmood-ul-Hassan Asghar

Director

26 ANNUAL REPORT 2025

For The Year Ended June 30, 2025

2025 2024

----------(Rs. in '000)----------

Muhammad Farooq Khan

Chief Financial Officer

Waseem-ul-Haque Ansari

Chief Executive

Mehmood-ul-Hassan Asghar

Director

For The Year Ended June 30, 2025

----------------------(Rs. in '000)----------------------

The annexed notes form an integral part of these financial statements.

Muhammad Farooq Khan

Chief Financial Officer

Waseem-ul-Haque Ansari

Chief Executive

Mehmood-ul-Hassan Asghar

Director

28 ANNUAL REPORT 2025

For the year ended June 30, 2025

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation

Note

2025 2024

----------(Rs. in '000)----------

(560,708)

85,205

1,394

130,651

553

217,803

(342,905)

10,710

(117,582)

(237,132)

537,903

1,900

195,799

(147,106)

(34,485)

(553)

(182,144)

(91,009)

(91,009)

(457,723)

Adjustment for non-cash and other items:

Depreciation

Amortization of intangible asset

Loss due to change in valuation of investment in associates Financial charges

Movement in working capital:

(Increase) / decrease in current assets Stores and spares

Stock-in-trade

Advances, deposits, pre-payments & other receivables

62,881

1,394

68,811

200

133,286

(324,437)

(13,083)

(866,307)

25,898

Increase / (decrease) in current liabilities

Trade and other payables Long term security deposits

Net changes in working capital

231,250

5,100

(617,142)

Cash used in operation (941,579)

Payments for:

Taxes Financial cost

Net cash outflows from operating activities

(3,131)

(200)

(944,910)

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures incurred

Net cash outflows from investing activities

(353,746)

(353,746)

CASH FLOWS FROM FINANCING ACTIVITIES

Muhammad Farooq Khan

Chief Financial Officer

Waseem-ul-Haque Ansari

Chief Executive

Mehmood-ul-Hassan Asghar

Director

For The Year Ended June 30, 2025

1. THE COMPANY AND ITS OPERATIONS

   Dewan Farooque Motors Limited (the Company) was incorporated in Pakistan on 28 December 1998 as a public limited company under the repealed Companies Ordinance, 1984 (now the Companies Act, 2017). The shares of the Company are quoted on the Pakistan Stock Exchange. The principal activity of the Company is the assembly, progressive manufacturing and sale of vehicles in Pakistan.

   The Company commenced commercial production through the interim facility from 01 January 2000 and main facility came into commercial operation from 01 January 2001.

   The Company signed Technical Licence Agreement (TLA) on 07 November 2022 with KIA Corporation for assembly / progressive manufacturing of Commercial Vehicles, accordingly the production has been commenced during the year from June 2024 with brand name of KIA Shehzore.

   The registered office of the Company is situated at Dewan Centre, 3-A Lalazar, Beach Hotel Road, Karachi, while its manufacturing facilities are situated at Jilianabad, Budhu Talpur, District Sa¡awal, Sindh.

2. GOING CONCERN ASSUMPTION

   The Company has incurred a loss after taxation of Rs.578.442 (2024: Rs.457.848) million during the year ended 30 June 2025. As of the reporting date, it has accumulated losses of Rs.5.666 (2024: Rs.5.087) billion and its current liabilities exceeded its current assets by Rs.5.925 (2024: Rs.5.475) billion. Furthermore, cumulatively the Company has not provided markup on its borrowings from banks and financial institution amounting to Rs.9.996 (2024: Rs.9.314) billion. Further the Company has been unable to ensure timely repayments of debts owing to financial institutions due to liquidity problems and the short term facilities have not been renewed by banks/financial institutions. Following course most of the lenders have gone into litigation for recovery of loans through attachment and sale of Company's hypothecated

   / mortgaged properties. These conditions indicate the existence of material uncertainty, which may cast significant doubt about Company's ability to continue as going concern.

   These financial statements have been prepared on going concern assumptions because the conditions being faced by the Company are temporary and would reverse in foreseeable future. As the company has successfully resumed its operations of manufacturing and sale of vehicles consequent to the execution of TLA. Moreover, Company is also manufacturing electric vehicles on toll basis for its associated concern. The management is confident that resumption of manufacturing operations will bring about improved results in future. Furthermore, the Company is defending its legal cases successfully and restructuring of company's debt is in advanced stage and expected to be concluded in ensuing financial year. Management is also hopeful that all the outstanding markup will be waived therefore no provision of markup has been made in these financial statements. The company's ability to arrange funds from its associates / sponsors is yet another positive factor which mitigates the risks involved. All these mitigating factors reduce the risks relating to company's ability to continue as going concern, accordingly preparation of these financial statements using the going concern assumption is ¡ustified.

   30 ANNUAL REPORT 2025

   
   
   Notes to the Financial Statements

   For The Year Ended June 30, 2025

3. BASIS OF PREPARATION
   1. Statement of compliance

      These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan with the exception of departure of IFRS as mentioned in note 28 to the financial statements, for which the management concludes that provisioning of mark-up would conflict with the ob¡ectives of the financial statements. The accounting and reporting standards applicable in Pakistan comprise of:

      1. International Financial Reporting Standard issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017; and

      2. Provisions of and directives issued under the Companies Act, 2017.

      Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS, the provisions of and directives issued under the Companies Act, 2017 have been followed.

   2. Accounting Convention

      These financial statements have been prepared on historical cost convention except as otherwise stated in respective accounting policies.

   3. Changes in accounting standards, interpretations and amendments to accounting and reporting standards Amendments to accounting and reporting standards and interpretations / guidance that became effective during the year

      There were certain amendments to accounting and reporting standards that became applicable to the Company during the year. These do not have any material impact on the Company's financial reporting and, therefore, have not been disclosed in these financial statements.

      New and Revised Standards, interpretation and amendments to approved accounting standards that are not yet effective

      The following standards, amendments and interpretations are only effective for accounting periods, beginning on or after the date mentioned against each of them. These standards, interpretations and the amendments are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements other than certain additional disclosures.

      ANNUAL REPORT 2025 31
      
      Notes to the Financial Statements

      For The Year Ended June 30, 2025

      Amendments to IAS 21 'The effects of changes in foreign

      exchange rates' - Lack of exchangeability 1 July 2025

      Amendments IFRS 9 and IFRS 7 regarding the power purchase

      agreements 1 January 2026

      Annual Improvements to IFRS Accounting Standards -Volume 11 1 January 2026 IFRS S1 General Requirements for Disclosure of Sustainability-

      related Financial Information 1 July 2026

      IFRS S2 Climate-related Disclosures 1 July 2026 Amendments to IFRS 7 'Financial instruments - Disclosures'

      and IFRS 9 'Financial Instruments' - classification and

      measurement of financial instruments 1 January 2026

      Standard IFRS 17 'Insurance Contract' 1 January 2027 Amendment to IFRS 10 and 28 - Sale or Contribution of Deferred

      Assets between an Investor and its Associate or Joint Venture indefinitely

      Other than the aforesaid amendments, the International Accounting Standards Board (IASB) has also issued the following standards which have not been adopted locally by the Securities and Exchange Commission of Pakistan:

      • IFRS 1 'First Time Adoption of International Financial Reporting Standards'

      • IFRS 18 'Presentation and Disclosures in Financial Statements'

      • IFRS 19 'Subsidiaries without Public Accountability: Disclosures'

   4. Functional and presentation currency

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

      32 ANNUAL REPORT 2025

      
      
      Notes to the Financial Statements

      For The Year Ended June 30, 2025

   5. Critical accounting estimates and judgements

      The preparation of financial statements in conformity with approved accounting standards require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses. It also requires management to exercise

      ¡udgement in application of the company's accounting policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

      Significant accounting estimates and areas where ¡udgements were exercised by management in the application of accounting policies in the financial statements are as follows:

      • Useful lives of Property, Plant and equipment (notes 4.1 and 5.1)

      • Provision for doubtful trade debts (note 4.5)

      • Income taxes (note 4.5)

      • Classification and valuation of investments (note 4.10)

      • Provision for Slow moving stores and spares (note 4.2)

      • Provision for Slow moving stock in trade (note 4.3)

4. MATERIAL ACCOUNTING POLICY INFORMATION

   The material accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated:

   1. Property Plant and Equipment
      1. Operating fixed assets

         These are stated at cost less accumulated depreciation except for land and capital workin-progress which are stated at cost.

         Depreciation is charged to income using the reducing balance method whereby the cost of an asset is written off over its estimated useful life. The rates of depreciation are stated in note 5.1 to the accounts. Depreciation is charged in proportion to the use of assets in the respective year of addition.

         The assets' residual values and useful lives are reviewed at each financial year end, and ad¡usted, if appropriate, at each statement of financial position date.

         Maintenance and normal repairs are charged to income as and when incurred whereas ma¡or renewals and improvements are capitalized and the assets so replaced, if any, are retired.

         ANNUAL REPORT 2025 33
         
         Notes to the Financial Statements

         For The Year Ended June 30, 2025

         Gains and losses on disposal are determined by comparing proceeds with the carrying amount of the relevant assets. These are included in the statement of profit or loss.

      2. Capital work-in-progress

         All expenditures connected to the specific assets incurred during installation and construction period are carried under capital work-in-progress. These are transferred to specific assets as and when assets are available for use.

      3. Right-of-use asset and lease liability

         The Company accounts for property, plant and equipment acquired under lease agreement by recording the right of use asset and related lease liability.

         The right-of-use asset is initially measured based on the initial amount of the lease liability ad¡usted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.

         The right-of-use asset is depreciated on a reducing balance method over the shorter of lease term or assets economic life. The right-of-use asset is reduced by impairment losses, if any, and ad¡usted for certain re-measurements of the lease liability.

         Initially on lease commencement date, the lease liability is measured at the present value of unpaid lease payments. These unpaid lease payments are discounted using interest rate implicit in the lease, if readily determinable. If that rate cannot be readily determined then the incremental borrowing rate is used.

         The lease liability is subsequently measured (at amortised cost) by increasing the carrying amount to reflect interest on the lease liability using the effective interest method and by reducing the carrying amount to reflect the lease payments made. It is remeasured when there is a change in future lease payments arising from a change in fixed lease payments or an index or rate, change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. The corresponding ad¡ustment is made to the carrying amount of the right-of-use asset, or is recorded in statement of profit or loss if the carrying amount of right-of-use asset has been reduced to zero.

         Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of- use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the income and expenditure account.

         For short term leases and leases of ow / immaterial value assets. the Company's recognises the lease payments as an expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

         34 ANNUAL REPORT 2025

         
         
         Notes to the Financial Statements

         For The Year Ended June 30, 2025

   2. Stores and spare parts

      These are valued at cost determined on weighted average basis. Items in transit are valued at cost comprising of invoice values plus other charges incurred thereon accumulated to the statement of financial position date.

      Stores, spares and loose tools are regularly reviewed by the management and any obsolete items are brought down to their net realisable value.

   3. Stock-in-trade

      Raw materials and components are valued at cost. Those in transit are stated at invoice price plus other charges paid thereon upto the statement of financial position date. Cost is determined on a moving average basis.

      Work-in-process is valued at material cost consisting of CKD kits, local vendor parts and consumables.

      CBU (finished goods) in hand are valued at the lower of cost and net realizable value. Cost is determined on moving average basis.

      Goods-in-transit are valued at purchase price, freight and other charges incurred thereon upto the statement of financial position date.

      Stock-in-trade is regularly reviewed by the management and any obsolete items are brought down to their net realisable value.

      Net realisable value signifies the estimated selling price in the ordinary course of business less cost necessary to make sale.

   4. Provisions

      Provisions are recognized when the company has present obligation, legal or constructive, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. Provisions are reviewed at each statement of financial position date and ad¡usted to reflect the current best estimate.

   5. Taxation Current

      The charge for current taxation is based on taxable income at current rates of taxation after taking into account tax rebates and credits available, if any, or one percent of turnover or Alternate Corporate Tax whichever is higher. Alternate Corporate Tax is calculated in accordance with the provisions of Section 113C of Income Tax Ordinance.

      ANNUAL REPORT 2025 35
      
      Notes to the Financial Statements

      For The Year Ended June 30, 2025

      Deferred

      Deferred tax is provided, using the liability method, on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax losses can be utilized.

      The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized.

      Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets is realized or the liability is settled, based on tax rates that have been enacted or substantially enacted by the statement of financial position date.

      Levies

      The tax charged under Income Tax Ordinance. 2001 which is not based on taxable income or any amount paid / payable in excess of the calculation based on taxable income, which is not ad¡ustable against the future tax liability, is c ossified as levy in the statement of profit or loss and other comprehensive income as these levies fall under the scope of IFRIC 21/1AS 37.

   6. Share capital

      Share capital is classified as equity and recognised at face value.

   7. Revenue recognition

      Sales are recognized as revenue when goods are invoiced to customers. Return on bank deposits are on an accrual basis.

      Markup on loan to associated undertaking is recognized on an accrual basis. Agency commission is recognized when shipments are made by the principal.

      Unrealized gains / loss arising on re-measurement of investments classified as "financial assets at fair value though "profit or loss" are included in the profit and loss account in the period in which these arise.

      Realised capital gains / loss on sale of investments are recognized in the profit and loss account at the time of sale.

      36 ANNUAL REPORT 2025

      
      
      Notes to the Financial Statements

      For The Year Ended June 30, 2025

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

      Revenue from contracts with customers is recognized when the control of the goods is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods according to the negotiated contractual terms. The Company has generally concluded that it acts as a principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.

      Performance obligations held by the Company are not separable, and are not partially satisfied, since they are satisfied at a point in time, when the customer accepts the products. Moreover, the payment terms identified in most sources of revenue are short-term usually 30 to 60 days upon delivery, without any variable considerations, financing components and guarantees.

      The Company recognizes an account receivable when the performance obligations have been met, recognizing the corresponding revenue. Moreover, the considerations received before satisfying the performance obligations are recognized as advances from customer.

   8. Advance from customers

      Advance from customers is the obligation to transfer goods or services to the customers for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, it is recognised when the payment is made or the payment is due (whichever is earlier). Advance from customers is recognised as revenue when the Company performs under the contract.

   9. Staff retirement benefits

      The Company operated Unfunded Gratuity Scheme till December 2003, Effective from 01 January 2004, the Company has established a recognized provident fund (Defined Contribution Plan) for its permanent employees. Equal contributions are being made of by the Company and its employees in accordance with the terms of the fund.

   10. Financial instruments
       1. Initial measurement of financial asset

          The Company classifies its financial assets into following three categories:

          • Fair value through other comprehensive income (FVOCI);

          • Fair value through profit or loss (FVTPL); and

          • Measured at amortised cost.

          A financial asset is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

          ANNUAL REPORT 2025 37
          
          Notes to the Financial Statements

          For The Year Ended June 30, 2025

          Subsequent measurement Debt Investments at FVOCI

          These assets are subsequently measured at fair value. Interest / mark-up income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in the statement of profit or loss. Other net gains and losses are recognised in other comprehensive income. On de-recognition, gains and losses accumulated in other comprehensive income are reclassified to the statement of profit or loss.

          Equity Investments at FVOCI

          These assets are subsequently measured at fair value. Dividends are recognised as income in the statement of profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in other comprehensive income and are never reclassified to the statement of profit or loss.

          Financial assets at FVTPL

          These assets are subsequently measured at fair value. Net gains and losses, including any interest / mark-up or dividend income, are recognised in the statement of profit or loss.

          Financial assets measured at amortised cost

          These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest / mark-up income, foreign exchange gains and losses and impairment are recognised in the statement of profit or loss.

       2. Non-derivative financial assets

          All non-derivative financial assets are initially recognised on trade date i.e. date on which the Company becomes party to the respective contractual provisions. Non-derivative financial assets comprise loans and receivables that are financial assets with fixed or determinable payments that are not quoted in active markets and includes trade debts, advances, other receivables and cash and cash equivalent. The Company derecognises the financial assets when the contractual rights to the cash flows from the asset expires or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risk and rewards of ownership of the financial assets are transferred or it neither transfers nor retain substantially all of the risks and rewards of ownership and does not retain control over the transferred asset.

          38 ANNUAL REPORT 2025

          
          
          Notes to the Financial Statements

          For The Year Ended June 30, 2025

          1. Trade debts, advances and other receivables

             These are classified at amortised cost and are initially recognised when they are originated and measured at fair value of consideration receivable. These assets are written off when there is no reasonable expectation of recovery. Actual credit loss experience over past years is used to base the calculation of expected credit loss.

          2. Cash and cash equivalents

             For the purpose of presentation in statement of cash flow, cash and cash equivalents includes cash in hand, balances with banks and investments with maturities of less than three months or less from acquisition date that are sub¡ect to insignificant risk of changes in fair value and short term borrowings availed by the Company, which are repayable on demand and form an integral part of the Company's cash management.

       3. Financial liabilities

          Financial liabilities are initially recognised on trade date i.e. date on which the Company becomes party to the respective contractual provisions. Financial liabilities include mark-up bearing borrowings and trade and other payables. The Company derecognises the financial liabilities when contractual obligations are discharged or cancelled or expire. Financial liability other than at fair value through profit or loss are initially measured at fair value less any directly attributable transaction cost. Subsequent to initial recognition, these liabilities are measured at amortised cost using effective interest rate method.

          1. Mark-up bearing borrowings and borrowing costs

             Mark-up bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, mark-up bearing borrowings are stated at amortised cost, while the difference between the cost (reduced for periodic payments) and redemption value is recognised in the statement of profit or loss over the period of the borrowings using the effective interest method.

             Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the relevant asset.

          2. Trade and other payables

             Trade and other payables are recognised initially at fair value plus directly attributable costs, if any, and subsequently measured at amortised costs.

       4. Derivative financial instruments - Other than hedging

Derivatives that do not qualify for hedge accounting are recognised in the statement of financial position at estimated fair value with corresponding effect to statement of profit or loss. Derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative.