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.

COMPANIES FOR KMI 30 INDEX RECOMPOSITION BASED ON ACCOUNTS FOR JUNE 2021

NOTE: The above criteria of KMI Index is approved by Sharia’h Supervisory Board of KMI Index Partner, MBL.

NC= Non – Compliant

N/A = Not Applicable

* These are provisional rates for dividend purification, which are subject to final adjustment upon announcement of respective companies’ annual accounts for the year 2020/2021.

** Only illiquid Assets to Total Assets and Net Liquid Asset ratios calculated of all Islamic Financial Institutions.

*** Status of ‘No Opinion’ is ascertained due to non-disclosure of the required information as per last available financial statement i.e breakup of sales revenue including interest element. Therefore, such companies will not be included in KMI Islamic Index.

**** Total Assets of OGDC are adjusted with non-cash items arising due to the adoption of IFRS 16 ‘Leases’ in respect of sale agreements with HUPL and UCH-II.

^ While calculating Net Liquid Asset ratio, Average Net Liquit Asset and Average market price per share of last four quarters considered.

^^ As Debt to Asset ratio is marginally exceeded from the given threshold, therefore, PIOC is considered as Compliant.

^^^ FML and ILP is compliant after considering additional disclosures provided by Management of both companies regarding compliant portion of debt.

# As AVN, NETSOL & TELE are from IT sector, therefore their fixed assets are not significant in value therefore, these are considered as Compliant and relaxation provided over Illiquid assets to Total Assets ratio.

## While calculating HUBC’s Income ratio, China Power Hub Generation Company (CPHGC) which is an associated investee company of HUBC whose revenues are consolidated with HUBC’s revenues upto the the extent of HUBC’s investment.

1. Based on March-2021 accounts
2. Based on May-2021 accounts
3. As per last available annual / half-yearly accounts