Shariah Screening Criteria (for equity securities)

Shariah compliance of stocks is done under the guidance of qualified and reputed Shariah experts. For stocks to be “Shariah compliant”, it must meet ALL the six key tests given below.

Business of the Investee Company

Core business of the company must be halal and in line with the dictates of Shariah. Hence, investment in securities of any company dealing in conventional banking, conventional insurance, alcoholic drinks, tobacco, pork production, arms manufacturing, pornography or related activities is not permissible.

Debt to Total Assets

Debt to Asset ratio should be less than 37%. Debt, in this case, is classified as any interest bearing debts. Zero coupon bonds and preference shares are, both, by definition, part of debt.

Non-Compliant Investments to Total Assets

The ratio of non compliant investments to total assets should be less than 33%. Investment in any non-compliant security shall be included for the calculation of this ratio.

Non-Compliant Income to Total revenue – Purification of Non-compliant income

The ratio of non compliant income to total revenue should be less than 5%. Total revenue includes Gross revenue plus any other income earned by the company. This amount is cleansed out as charity as a pro rata ratio of dividends issued by the company.

Illiquid Assets to Total Assets

The ratio of illiquid assets to total assets should be at least 25%. Illiquid asset, here, is defined as any asset that that Shariah permits to be traded at value other than the par.

Net Liquid Assets to Share Price

The market price per share should be greater than the net liquid assets per share calculated as: (Total Assets – Illiquid Assets – Total Liabilities) divided by number of shares.

FINAL LIST OF COMPANIES FOR KMI-30 INDEX RECOMPOSITION JUNE 2017

Rates are calculated based on June 2016 accounts

Dividend purification rate means investors of the respective company should purify dividend income by the following formula:

Dividend income received x Dividend purification rate

*These are provisional rates for dividend purification which are subject to final adjustment on the basis of respective company’s annual accounts for the year 2017.
**Dividend purification rate of DGKC is calculated on the basis of additional information provided by the company.
***OGDC scrip has been considered compliant due to circular debt issue and restriction on sellling government securities. However, income from the scrip will be purified by charity rate mentioned.

1. As per September 2016 accounts
2. As per last available accounts