First Punjab Modaraba ('the Modaraba'), established in 1992, is a perpetual multi-purpose Modaraba, listed on PSX as ‘FPJM’.

The Modaraba was formed under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance,1980. The Modaraba is managed by Punjab Modaraba Services (Pvt) Ltd ('the Management Company'), a wholly-owned subsidiary of The Bank of Punjab (BoP).

The Modaraba caters to corporate, commercial, and individual customers through various modes of Islamic financing, mainly Ijarah, Morabaha, and Musharikah. Musharikah pertains to vehicle financing. Ijarah focuses onplant & machinery, vehicles, and the Home Decor Scheme. Morabaha targets financing for raw materials (working capital) for different sectors. Its head office is situated in Lahore.

The Management Company retains ~54% ownership in the Modaraba, while ~2% of the shareholding is distributed among various financial institutions and corporate entities. The general public holds the remaining ~44%.

The Modaraba is managed by the Management Company, so the BoP stands behind the Modaraba as it has been providing financial assistance for years. As the Government of Punjab is the majority shareholder of BoP, it will also provide the comfort to the Modaraba.

The Modaraba benefits from the BoP’s industry-specific expertise in lending and financing a diverse range of customers and sectors across Pakistan.

BoP has committed its financial support to meet the mandatory capital requirements and also, has also furnished a support letter from its Board. As of IQCY26, the BoP’s total assets amount to PKR 2,599bln and is assigned a long-term rating of "AAA" by PACRA.

The Board of Directors (BoD) comprises eight members, including the CEO. Apart from the CEO, who is an Executive Director, the Board includes five Non-Executive Directors and two Independent Directors.

Mr. Ijaz ur Rehman Qureshi, Chairman of the Board, is a Chartered Accountant and currently serves as Group Head Operations at The Bank of Punjab. He possesses over 30 years of professional experience. Mr. Samina Afsar, an Independent Director, has over 18 years of experience in the field of marketing and corporate management. The Board comprises a balanced mix of nominee and independent directors, including experienced professionals from banking, finance, accounting, Islamic banking, corporate banking, SME banking, and business management backgrounds. Collectively, the Board members bring extensive industry expertise ranging from over 18 to 34 years, which strengthens the strategic oversight, governance framework, and policy-making process of the Modaraba. Mr. Asim Jahangir Seth, (CEO), and Director on the Board, is currently serving as Chief Executive of PMSL and possesses over 28 years of professional experience.

To enhance the effectiveness of the Board and strengthen its governance framework, First Punjab Modaraba has constituted three Board-level committees, namely the Audit Committee, Human Resource & Remuneration Committee, and Board Risk Management Committee. These committees support the Board in discharging its responsibilities by providing focused oversight of financial reporting, internal controls, risk management, human resource matters, and strategic decision-making. During CY25, the Board committees collectively held six meetings, with the Audit Committee meeting on a quarterly basis, while the other committees met at least annually in accordance with their respective terms of reference and regulatory requirements. The proceedings and deliberations of all committee meetings were duly documented, and proper minutes were maintained to ensure transparency, accountability, and effective follow-up on decisions and recommendations. Through these committees, the Board is able to exercise enhanced oversight and promote prudent governance practices across the Modaraba's operations.

Crowe Hussain Chaudhury & Co., Chartered Accountants, are the current external auditors of the Modaraba. They have expressed an unqualified opinion on the review of the Modaraba's financial statements for CY25. The audit firm is also included on the State Bank of Pakistan (SBP) panel of auditors. The previous external auditors were Kreston Hyder Bhimji & Co., Chartered Accountants, who also expressed an unqualified opinion on the review of the Modaraba's financial statements for CY24.

The Modaraba's operations are segregated and managed through the Executive Director and Departmental Heads. All department heads report directly to the CEO, with the exception of Internal Audit, which reports directly to the Board Audit Committee

Mr. Asim Jahangir Seth was appointed as the Chief Executive Officer (CEO) of First Punjab Modaraba in March 2025. Since assuming the role, he has been responsible for providing strategic leadership and overseeing the overall operations of the Modaraba. He brings significant experience in the financial services sector and plays a key role in driving the Modaraba's growth and business objectives. Supporting the CEO is Mr. Shiraz Butt, appointed as Chief Operating Officer (COO), is a seasoned finance professional with over 28 years of experience in Pakistan’s non-banking financial and Modaraba sector. He has held senior leadership positions in several leading Modaraba and leasing companies. He is also associated with professional bodies such as the Modaraba Association of Pakistan, the Institute of Capital Markets Pakistan, and international accounting organizations. He has served in key leadership roles across various organizations, including CEO, CFO, Company Secretary and COO positions. The finance function is headed by Mr. Zeeshan Ahmed, Chief Financial Officer (CFO), who has been associated with the Modaraba for more than two years and is responsible for financial management, regulatory compliance, budgeting, and reporting. Collectively, the management team comprises a balanced mix of seasoned professionals with expertise in operations, finance, business development, risk management, credit administration, and asset management, providing a strong foundation for the effective execution of the Modaraba's strategic and operational objectives.

The Modaraba has four committees for better functioning of its affairs: i) Credit Committee, ii) InvestmentCommittee, iii) Asset and Liability Committee, and iv) Management Committee. To ensure adherence to policies & procedures, management committees are working effectively.

The Modaraba has acquired an online, centralized Al-Nizam Solution that has been custom-developed in a server application architecture that will help in managing the business processes easily and efficiently.

The Modaraba has strengthened its credit risk management framework through the implementation of the Obligor Risk Rating (ORR) Module, which supports informed and prudent credit decision-making. The system facilitates a structured assessment of obligors by enabling timely evaluation of creditworthiness and risk profiles, thereby enhancing the overall quality of financing decisions. The ORR module has improved the Modaraba's risk management capabilities by providing a real-time, user-friendly, and secure platform for risk assessment and monitoring. Its implementation has contributed to greater consistency, transparency, and efficiency in the credit approval process while supporting compliance with internal risk management policies and regulatory requirements. As a result, the Modaraba is better positioned to identify, measure, and manage credit risk across its financing portfolio.

Pakistan's Modaraba sector represents a specialized component of the country's Islamic non-bank financial services industry, operating under the regulatory oversight of the Securities and Exchange Commission of Pakistan (SECP). The sector comprises Shariah-compliant investment and financing entities engaged in activities including Islamic leasing, Diminishing Musharakah financing, trade finance, manufacturing, renewable energy projects, and investment operations. The operating environment for the sector improved during CY25 and continued to show stability into IHCY26, supported by a favorable macroeconomic backdrop characterized by declining interest rates, easing inflationary pressures, relative exchange rate stability, and improving business confidence. The reduction in benchmark rates eased funding costs and supported demand for Islamic financing products, particularly among small and medium-sized enterprises (SMEs), commercial customers, and consumer finance segments. Despite these positive developments, the sector continues to face a number of structural challenges. These include limited industry scale, concentrated funding sources, increasing competition from well-capitalized Islamic banking institutions, and asset-quality concerns within certain financing portfolios. Consequently, growth and profitability remain uneven across market participants. Industry players have increasingly focused on portfolio diversification, expansion of Diminishing Musharakah and Ijarah-based financing products, vehicle and equipment financing, renewable energy financing, and digital channels to enhance customer outreach and operational efficiency. The sector continues to benefit from the growing acceptance of Islamic financial services in Pakistan and ongoing regulatory support for Shariah-compliant financial intermediation. Going forward, the outlook for the Modaraba sector remains stable. The sector is expected to benefit from improving economic conditions and increasing demand for Islamic financial solutions. However, sustained growth will depend on effective risk management, maintenance of asset quality, access to cost-effective funding, continued product innovation, and the ability of Modarabas to differentiate themselves from increasingly competitive Islamic banking institutions. Stronger entities with diversified business models, experienced management teams, and prudent governance frameworks are expected to remain better positioned to capitalize on emerging opportunities.

First Punjab Modaraba ("FPM") operates within Pakistan's Modaraba sector, a relatively small but established component of the Islamic non-bank financial services industry. Compared to larger and more diversified Modarabas, FPM maintains a modest market presence and principally focuses on Shariah-compliant financing and investment activities. The Modaraba benefits from its association with Punjab Modaraba Services (Pvt.) Limited and its established operating history; however, its competitive position remains constrained by the sector's limited scale and the growing presence of Islamic banks, which possess broader distribution networks, larger balance sheets, and greater product diversity. The sector currently comprises a limited number of active Modarabas, resulting in a concentrated competitive landscape. Within this market, FPM's position is considered moderate, supported by its established franchise and regional presence, while remaining relatively smaller than the leading sector participants in terms of operational scale and market outreach. The Modaraba's ability to strengthen its relative market position will depend on sustained portfolio growth, product innovation, operational efficiency, and effective risk management in an increasingly competitive Islamic finance environment

During IQCY26, the Modaraba's advances income reflected an uptake of ~14% reporting at PKR 51mln (CY25: PKR 211mln). Diminishing musharikah financing remained the top contributor with generating ~80%. Going forward, overall performance is expected to increase.

During IQCY26, the Modaraba reported a net markup loss of PKR 3 million, a significant improvement compared to a net loss of PKR 98 million in CY25. Despite the quarterly improvement, the Modaraba's overall performance remained weak, with cumulative net losses increasing to PKR 173 million in CY25 compared to PKR 94 million in CY24. Going forward, business performance is expected to remain under stress due to subdued earning capacity and ongoing operational challenges.

A structural change in the Modaraba's management has been observed in CY25, reflecting efforts to strengthen governance and improve operational effectiveness. A comprehensive business plan, approved by the Board of Directors, is currently being implemented. The sponsors have reaffirmed their commitment to supporting the Modaraba, which is expected to facilitate the revival of its business operations and strengthen its otherwise weak financial and business profile. While these developments are encouraging, the Modaraba continues to face significant challenges, necessitating close monitoring and sustained management focus to achieve a meaningful turnaround.

The Modaraba seeks to manage its credit risk exposure through diversification of Ijarah activities to avoid undue concentrations of risks with individuals or groups of customers in specific locations or businesses. The Modaraba also obtains security deposits when appropriate. Cash at Banks is held only with reputable banks with high-quality credit worthiness. Credit risk is highest in the Aviation and Transport sector. Going forward the Modaraba intends to have a mix of corporate and individuals customers to manage its credit risk.

Market risk includes currency risk, interest rate risk, and price risk. The Modaraba is exposed to interest rate risk only. The Modaraba does not have any fixed-rate financial assets and liabilities. However, going forward the decrease in interest rate will have an impact on the profitability of the Company.

The total funding of the Modaraba increased marginally to PKR 2,047mln during IQCY26 (CY25: PKR 2,045mln). Funding is solely from the sponsor in the form of deposits. BoP has affirmed its commitment to continuing financial assistance by injecting PKR 2bn in CY25 in Modaraba. Liquid assets increased to PKR 103mln during IQCY26 (CY25: PKR 81mln) due to an increase in bank deposits, which impacted the liquid assets/funding coverage ratio and reported at ~5% (CY25:~4%). Going forward the liquidity position is expected to improve.

In line with its commitment, the sponsor, BoP, has extended a subordinated loan of PKR 2000mln, which has enhanced the equity base and the Modaraba’s per party limits as per Modaraba Regulations, 2021. The equity base of the Modaraba reported positive results during CY25.