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

ANNUAL REPORT FOR THE YEAR ENDED JUNE 30, 2025

Popular Islamic Modaraba Management Company (Private) Limited

To be Modaraba of choice adhering to financing principles of Quran and Sunnah.

To develop Popular Islamic Modaraba as a leading Financial Institution of the country offering all modes of Islamic Financing to the satisfaction of customers who aspire to realize the growth potential of Shariah Compliant Financing in Pakistan.

We focus on value creation for our stakeholders.

STATEMENT OF ETHICS AND BUSINESS PRACTICES

We believe a complete Code of Ethics is a prerequisite for all Directors and Employers of Popular Islamic Modaraba. We Endeavour to have fully groomed employees committed to the philosophy behind the Code of Ethics to carry out honestly activities assigned to them. Our aim is to have highest standard of excellence for the product and the betterment for all those involved directly or indirectly with our Modaraba.

SHARIAH ADVISOR Al-Hamd Shariah Advisory Services (Pvt.) Limited

COMPANY SECRETARY Ms. Aisha Mughal

CHIEF FINANCIAL OFFICER Mr. Ghulam Mustafa

BANKERS Albaraka Bank (Pakistan) Limited

AUDITORS BKR Muniff Ziauddin & Co.

Chartered Accountant

LEGAL ADVISOR Syed Sikandar Ali Shah - Advocate

MANAGEMENT COMPANY Popular Islamic Modaraba Management Company (Pvt.) Ltd

REGISTERED OFFICE

406-410, 4th Floor, Hasrat Mohani Road, Off. I.I.Chundrigar Road, Karachi.

SHARE REGISTRAR Central Depository Company of Pakistan

CDC House, 99-B, Block 'B', S.M.C.H.S., Main Shahra-e-Faisal, Karachi

Chairman's Review Report

It is a pleasure for me to once again present to you the review of Popular Islamic Modaraba's (PIM) performance for the year ended June 30, 2025, and share how your Modaraba has remained steadfast in its mission of delivering value to stakeholders. During the year under review, PIM continued to operate in a satisfactory manner, demonstrating resilience in a challenging macroeconomic environment.

As Chairman of the Board, it has been my privilege to oversee the progress of the Modaraba during the past decade. PIM has emerged as a forward-looking and responsible institution, serving its stakeholders with dedication while contributing positively to the growth of the Islamic financial sector, our community, and the national economy.

During the year, the Board of Directors diligently discharged its responsibilities by reviewing and approving strategies, corporate objectives, business plans, financial statements, and regulatory reports. Key issues were regularly placed before the Board by the Management, internal and external auditors, legal advisors, and Shariah advisor. The Board has exercised its authority in full compliance with applicable laws, regulations, and the Shariah Governance Framework specified in Shariah Governance Regulation, 2023. Each director has demonstrated commitment to their responsibilities as outlined under the Code of Corporate Governance and relevant regulations.

I am pleased to report that the Modaraba achieved a net profit after tax of Rs. 25.71 million, as compared to Rs. 24.70 million in the previous year. This growth in profitability reflects prudent cost management, diversification of income sources, and effective utilization of resources. While overall income witnessed some moderation due to reduced financing and compression of financing margins from the declining KIBOR, your Modaraba remained successful in maintaining operational stability and delivering sustainable returns to its certificate holders.

I also confirm that the Board meeting agendas, supporting documents, and reports were shared with members in a timely manner, ensuring informed and effective decision-making. Board members actively participated in deliberations, contributing their diverse expertise to address challenges and identify new opportunities. The Board also undertook its annual self-evaluation, with results indicating satisfactory performance in line with the principles of integrity, fairness, and accountability.

On behalf of the Board, I express sincere appreciation for the trust and confidence placed in us by our stakeholders. We remain committed to further strengthening Popular Islamic Modaraba as a reliable and competitive Islamic financial institution, while safeguarding and enhancing the interests of our valued certificate holders.

SD

Imamuddin Shouqeen Chairman

October 03, 2025

Directors' Report

The Board of Directors of the Popular Islamic Modaraba Management Company (Pvt.) Limited, the Management Company of Popular Islamic Modaraba (the Modaraba), is pleased to present the Directors' Report on the Modaraba together with Notes, Audited Financial Statements and Auditor's Report for the year ended June 30, 2025.

1. REVIEW OF ECONOMY:

   The year under review witnessed a challenging yet gradually stabilizing macroeconomic environment in Pakistan. Inflationary pressures remained elevated, averaging around 20-22%, though easing from the historic highs of the prior year. The SBP Policy Rate and KIBOR remained at historically high double-digit levels for most of the fiscal year, exerting pressure on the cost of borrowing and private sector credit offtake.

   However, in the last six months of FY 2025, the KIBOR rate started to decline as inflation expectations moderated and monetary easing was initiated by the State Bank of Pakistan. While this reduction supported certain sectors of the economy by lowering financing costs, it also had an adverse impact on the Modaraba sector. Since Modaraba financing and investments are largely benchmarked to KIBOR, the decline in benchmark rates reduced the profitability margins on financing portfolios. The sector, including Popular Islamic Modaraba, faced challenges in maintaining returns to certificate holders while ensuring sustainability of operations in a lower-yield environment.

   Despite these challenges, some signs of stability emerged as foreign exchange reserves improved and the rupee remained relatively stable. Fiscal consolidation and external inflows provided temporary relief, though economic growth remained subdued, with GDP expansion estimated around 2.5-3%. Going forward, the outlook depends on sustained structural reforms, improvement in external account position, and careful calibration of monetary policy to balance growth with inflation control.

2. Financial Highlights:

   The summarized financial results for the year ended June 30, 2025 are as under:

   2025 2024

   Income	41,742,544	45,693,425
   Operating expenses	(8,884,417)	(10,177,392)
   Depreciation of property and equipment-Ijarah	(4,551,958)	(6,804,518)
   Operating profit	28,306,169	28,711,515
   Other income	2,458,099	1,837,536
   Profit before management fee	30,764,268	30,549,051
   Management fee	(1,538,213)	(1,527,453)

   (Rupees)

   Sales tax on management fee	(230,732)		(198,569)
   Provision for worker's welfare fund	(579,906)		(576,461)
   Profit before taxation	28,415,416		28,246,569
   Taxation	(2,706,683)		(3,550,559)
   Profit after taxation Other comprehensive income	25,708,733 -		24,696,010 -
   Total comprehensive income	25,708,733		24,696,010
   Earnings per certificate - basic & diluted	1.39		1.76

3. Review of Operations:

   By the Grace of Almighty Allah, the performance of Popular Islamic Modaraba during the period under review continued to be strong. During the financial year ended June 30, 2025, Modaraba generated total income of Rs. 41.74 million as compared to Rs. 45.69 million in the preceding year, reflecting a moderate decline primarily due to reduced Ijarah Financing.

   Operating expenses were contained at Rs. 8.88 million (FY 2024: Rs. 10.18 million), showing the management's continued focus on cost efficiency and prudent financial discipline. Depreciation on Ijarah assets amounted to Rs. 4.55 million compared to Rs. 6.80 million in the previous year, reflecting a rationalization of the asset base. Consequently, operating profit stood at Rs. 28.31 million (FY 2024: Rs. 28.71 million), demonstrating stability in core operations despite macroeconomic challenges.

   Other income increased to Rs. 2.46 million (FY 2024: Rs. 1.84 million), mainly arising from investment income and ancillary business activities. After accounting for management fee, sales tax, Workers' Welfare Fund, and taxation, the Modaraba posted a net profit after tax of Rs. 25.71 million, compared to Rs. 24.70 million in FY 2024. This represents a year-on-year growth in bottom-line profitability, reflecting operational resilience and effective resource deployment. The Modaraba converted the loan through "other than right issue" and issued certificates to the Management company, resultantly, the earning per certificate reduced from Re.1.76 to Re.1.39.

   The management remains committed to further diversifying income streams, optimizing the funding mix, and exploring new avenues of Shariah-compliant financing and investment, while continuing to exercise stringent risk management practices.

4. Profit Distributions:

   The Management of Modaraba has decided in the best interest of Certificate Holders to reduce the Management Fee from 10% to 5% this year and approved the distribution of profit at Rs. 1/-per certificate of Rs.10/- each i.e 10%, subject to deduction of zakat and tax at source where applicable, for the year ended June 30, 2025.

5. Shari'ah Advisor Report:

   The Modaraba continues to seek guidance from its Shariah Advisor namely M/s. Alhamad Shariah Advisory Services (Private) Limited as and when required to ensure full compliance of Shariah Governance Regulations, 2023. The Internal Shariaah Auditor also handles the day to day affairs of the Modaraba ensuring complete adherence to Shariah policies and principles. The Shariah Advisor Report issued for the affairs of the Modaraba by the Shariah Advisor for the year ended June 30, 2025 is attached with the Annual Financial Statements which confirms that the Business of Modaraba is Shariah Compliant.

6. External Shariah Auditor Report:

   In compliance of Shariah Governance Regulations, 2023, the Modaraba has appointed existing external auditor Messrs BKR Muniff Ziauddin & Company, Chartered Accountants to conduct External Shariah Audit of Modaraba. The External Shariah Audit Report issued for the affairs of the Modaraba for the year ended June 30, 2025 is attached with the Annual Financial Statements which confirms that the Business of Modaraba is Shariah Compliant.

7. Compliance with the Code of Corporate Governance:

   The Modaraba has been and remains committed to the conduct of its business in line with the Listed Companies (Code of Corporate Governance) Regulations, 2019 and the Rule Book of the Pakistan Stock Exchange. As required by the Code of Corporate Governance, following is the statement of compliance with the Corporate and Financial Reporting Framework of the Code:

   The Directors are pleased to confirm that:

   • The Board has consistently complied with the relevant principles of corporate governance.

   • The financial statements prepared by the management of the Modaraba present its state of affairs fairly which includes the result of its operations, cash flows and changes in equity.

   • Proper books of accounts of the Modaraba have been maintained.

   • Appropriate accounting policies have been consistently applied in preparation of financial statements, and accounting estimates used are based on reasonable and prudent judgment.

   • Relevant International Accounting Standards and Islamic Financial Accounting Standards, as applicable in Pakistan, provisions of the Modaraba Companies and Modarabas (Floating and Control) Ordinance, 1980, the Modaraba Companies and Modaraba Rules, 1981, Modaraba Regulations, 2021 and directives of Securities and Exchange Commission of Pakistan have been followed in preparation of financial statements, and any departures there from have been adequately disclosed.

   • The system of internal control which is in place is sound in design, and has been effectively Implemented and monitored.

   • The Modaraba is financially sound in design, and has been effectively implemented and monitored.

   • There is no significant doubt upon the Modaraba's ability to continue as a going concern, and that is why the Management is considering fresh injection of equity in the Modaraba.

   • There are no outstanding statutory payments on account of taxes, duties, levies and charges as on June 30, 2025 except for those disclosed in the financial statements.

   • During the year under review, Four (4) meetings of the Board of Directors were held.

     Attendance by each Director was as follows:

     Name of Director	Meetings Attended
     Mr. Imamuddin Shouqeen	4
     Mr. Shahbaz Ali Malik	4
     Mr. Khurram Abdullah	4
     Mr. Malik Junaid Emam	4
     Mr.Kamran Hussain Mughal	4
     Ms. Aisha Mughal	4

   • The pattern of holding of certificates by the Certificate Holders is included in this annual report.

   • The Directors, CEO, CFO/ Company Secretary and their spouses and minor children did not carry out any transaction in the certificates of Modaraba during the year.

8. Sustainability Committee (Regulation 10-A):

   In accordance with Clause 10(4)(xiv) of the Listed Companies (Code of Corporate Governance) Regulations, 2019, and Regulation 10A of the SRO 920(I)/2024 dated June 12, 2024 regarding the formation of a sustainability committee, the Modaraba acknowledges the importance of Environmental, Social and Governance (ESG) principles in its business practices.

   While a formal ESG policy and committee have not yet been constituted, the management of Popular Islamic Modaraba has voluntarily undertaken several initiatives in line with ESG considerations. These include measures relating to responsible financing, energy conservation, employee welfare, Shariah-compliant investment practices, and community support programs. These steps reflect the Modaraba's commitment to gradually integrating sustainability into its operations, in the spirit of the Code and the SECP's directives.

   The Modaraba remains mindful of its ESG-related risks and opportunities. Its operational and investment policies incorporate guidelines on mitigating these risks and ensuring that growth

   strategies are consistent with long-term sustainability objectives. The management intends to progressively strengthen its ESG framework, including the eventual adoption of a formal sustainability policy and committee structure, to further align with evolving regulatory expectations and stakeholder needs.

9. Future outlook:

   Going forward, your Modaraba will continue to explore and invest in high-yield and Shariah-compliant enterprises, with a focus on sustainable growth and diversification of income streams. The management remains committed to pursuing both short-term opportunities and long-term strategic initiatives that will enhance operational efficiency and deliver superior returns to certificate holders.

   The declining KIBOR environment presents both challenges and opportunities. While reduced benchmark rates put pressure on financing margins, they also open avenues for expansion of customer base by offering competitive and affordable Shariah-compliant financial solutions. The management intends to leverage this situation by targeting growth sectors, improving asset quality, and carefully aligning financing structures to maintain healthy spreads.

   We recognize that the operating environment remains highly competitive, particularly with Islamic and commercial banks aggressively expanding their footprint in Islamic finance. To address this, the Modaraba will focus on customer-centric services, innovative product structuring, prudent risk management, and enhanced recoveries. Our objective is to safeguard the interests of certificate holders while continuing to strengthen the Modaraba's market position.

   With a disciplined approach, emphasis on risk-adjusted returns, and adoption of modern business strategies, we are confident that the Modaraba will continue to create value for all stakeholders despite the prevailing economic challenges.

10. Role of Certificate-Holders:

    The Board aims to ensure that the Modaraba's Certificate Holders are kept informed about major developments affecting the Modaraba's state of affairs. To achieve this objective, information is communicated to certificate holders through quarterly, half-yearly and annual financial reports, which are also being posted on website i.e www. popularislamicmodaraba.com

11. External Auditors:

    The existing auditors Messrs BKR Muniff Ziauddin & Company, Chartered Accountants offered themselves for appointment as on External Auditor for the year ending June 30, 2026. The Board has recommended the reappointment of existing external auditor. Application for appointment of external auditors of the Modaraba for financial year ending June 30, 2026 will be submitted to approval of the Registrar Modaraba-SECP.

12. Compliance with the Code of Corporate Governance:

    The requirements of the Listed Companies (Code of Corporate Governance) Regulations, 2019 set out by the Securities and Exchange Commission of Pakistan, relevant for the year ended June 30, 2025 have been duly complied with, and exceptions if any have been disclosed in the Statement of Compliance with the Best Practices of Corporate Governance. A statement to this effect is annexed with this report

13. Acknowledgments:

The Modaraba wishes to express its gratitude for the invaluable advice and assistance provided throughout the year by the Registrar Modarabas, the Securities & Exchange Commission of Pakistan, the Pakistan Stock Exchange, NBFI, the Modaraba Association of Pakistan, and all staff members of the Modaraba. It also hopes to continue to benefit from these services in the future.

for and on behalf of the Board.

SD

Kamran Hussain Mughal Chief Executive

Place: Karachi

Dated: October 03, 2025

Name of Company: POPULAR ISLAMIC MODARABA Year ending: June 30, 2025

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

1. The total number of directors are 7 (seven) as per the following:

   1. Male: 6 (six)

   2. Female: 1 (one)

2. The composition of Board is as follows:

   Category	Names
   Other Non-Executive Directors Independent Director Executive Directors	Mr. Imamuddin Shouqeen (Chairman) Mr. Shahbaz Ali Malik Mr. Malik Junaid Emam
   	Mr. Khurram Abdullah Mr. Abdul Jaleel Shaikh
   	Mr. Kamran Hussain Mughal Ms. Aisha Mughal

3. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including this company;

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. The Board has ensured that 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 decisions on relevant matters have been taken by Board of Directors of the Management Company / Certificate Holders of the Modaraba 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 complied with the requirements of Act and the Regulations with respect to frequency, recording and circulating minutes of meeting of Board;

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

9. The Modaraba will arrange Directors' Training Program (DTP) for Directors in due course of time to meet the requirement of Code of Corporate Governance.

10. The Board has approved appointment of Chief Financial Officer, Company Secretary and outsourcing of Internal Audit, including their remuneration and terms and conditions of employment and complied with relevant requirements of the Regulations;

11. Chief Financial Officer and Chief Executive Officer duly endorsed the financial statements before approval of the Board;

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

    Audit Committee HR and Remuneration Committee	Mr. Khurram Abdullah (Chairman) Mr. Shahbaz Ali Malik (Member) Mr. Malik Junaid Emam (Member)
    	Mr. Khurram Abdullah (Chairman) Mr. Malik Junaid Emam (Member) Mr. Kamran Hussain Mughal (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 of the committee were as per following:

    1. Audit Committee Quarterly

    2. HR and Remuneration Committee Annually

15. The Board has outsourced the Internal Audit function to M/s. Suriya Nauman Rehan & Co. Chartered Accountant who 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 and all their partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP and that they and the partners of the firm involved in the audit are not a close relative (spouse, parent, dependent and non-dependent children) of the chief executive officer, chief financial officer , head of internal audit, company secretary or director of the company;

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 requirements of the Regulations 3, 7, 8, 27, 32, 33 and 36 of the Regulations have been complied with; and

19. Explanation for the non-compliance with the requirement, other than Regulations 3, 7, 8, 27, 32, 33 and 36 are as follows:

SD

Mr. Imamuddin Shouqeen

Chairman

Dated: October 03, 2025