Shariah Compliance Methodology

At Pak-Qatar Asset Management Company Limited, we are dedicated in providing Shariah-compliant investment solutions. In this regard, we adhere to the Shariah guidelines as advised by the Shariah Advisor. The investments are limited to asset classes approved by the Shariah Advisor and all companies under investment consideration are regularly screened for Shariah compliance.

The Role of Shariah Advisor: The primary role of the Shariah Advisor is to ensure compliance with Islamic Shariah principles which includes:

(a) Selection of Investment Instruments: Shariah Advisor regularly monitors the Shariah Compliance criteria for the selection of companies or instruments in which the various funds of Pak-Qatar Asset Management may invest. Screening of these investment avenues includes periodic review of Shariah Compliance screening of Investments and Identification of purification amounts.

(b) Monitoring of Investment Management: The Shariah Advisor ensures that the Funds, Services and Operations are in compliance with the Islamic guidelines through the performance of annual Shariah Audits. These Periodic Sharia audits and certifications provide assurance to the stakeholders and thus enhances the credibility of the institution.

(c) Portfolio Purification: Funds may invest in securities that generate Shariah non-compliant income, which is diligently purified and divested by Pak-Qatar Asset Management Company. The entire purification process is determined, monitored, and completed under the purification guidelines of the Shariah Advisor.

(d) Information Reporting: The Shariah Advisor also prepares annual Shariah Audit and Review Reports pertaining to the Shariah compliance of the Fund’s activities. This report forms an integral part of the Fund’s Annual Financial Statements

Shariah Screening Guidelines: Following is the screening criteria for investments in equity scrips in the stock market.

(a) Business of the Investee Company: The business of the investee company should be Halal. Accordingly, investment in shares of conventional banks, insurance companies, leasing companies, companies dealing in alcohol, and any other non-compliant activities is not permissible.

(b) Interest Bearing Debt to Total Assets: The total interest on debt of the investee company should not exceed 37% of the total assets. The debt here includes all interest-based debt & interest-based financing.

(c) Investment in Non-Shariah Compliant Activities and Income from Non-Shariah Compliant Investments: The following two conditions must be observed for share screening purposes:

  • The total investment of the investee company in non-Shariah compliant activities should not exceed 33% of the total assets.
  • The income from non-Shariah compliant investments should not exceed 5% of the gross revenue. (Gross revenue means gross sales plus other income). Subsequently’ giving the proportionate portion of non-compliant income to charity is required to purify earnings from investee companies.

(d) Illiquid to Total Assets: The total illiquid assets of the investee company as a percentage of the total assets should at least be 20% where illiquid assets are defined as those assets which can be traded at price different from their reported value.

(e) Shariah Compliance screening should be performed on a quarterly basis for investee companies

(f) Shares cannot be sold prior to assumption of possession i.e. settlement as per schedule of then Stock Exchange

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