Shariah Committee

 1. Shariah Guidelines for Investment in Equities and Index Funds

1. Permissible Activities

Investment is permitted in companies whose core activities are permissible, such as cement, transportation, telecommunications, and similar industries.

2. Prohibited Activities

Investment is prohibited in companies engaged in non-permissible activities such as conventional banks, alcohol, tobacco, pork products, gambling, and the like.

3. Insurance Companies

Investment in insurance companies is not permitted unless the company has its own Shariah Supervisory Board overseeing its activities.

4. Mixed Activities

Investment is permitted in companies with primarily permissible activities but which occasionally engage in impermissible transactions, subject to the following conditions:

• • The total interest-bearing deposits must not exceed 33% of the company’s total assets or market capitalization, whichever is higher.

  • The company’s interest-bearing debt must not exceed 33% of its total assets or market capitalization, whichever is higher.

  • The total income from non-compliant sources must not exceed 5% of total revenue, whether from interest or other impermissible activities.

  • Any impermissible income must be purified (disposed of).

Note: These guidelines do not imply the permissibility of interest-based lending or earnings.

5. Annual Screening

Companies’ compliance with these guidelines must be verified annually.

6. Purification

Any impermissible income derived from investment in companies with mixed activities must be purified.

7. Calculation of Purification

The purification amount is calculated by applying the ratio of impermissible income to total company revenue, multiplied by the dividends received.

8. Reclassification

Shares of companies that lose their Shariah compliance status must be divested within 90 days. However, if the company’s interest-based debt slightly exceeds 33% of market capitalization, the following conditions apply:

• • Obtain Shariah Committee approval to retain the shares.

  • No additional shares may be purchased.

  • Impermissible income must still be purified.

2. Shariah Guidelines for Investment in Money Market Instruments, Debt Instruments, and Related Funds

• Murabaha contracts must be Shariah-compliant.

• Investment sukuk must be Shariah-compliant.

• Trading transactions must be Shariah-compliant.

• Investment in conventional bonds is strictly prohibited.

3. Shariah Guidelines for Investment in Real Estate Funds

1. Fund managers must invest only in real estate projects that comply with Shariah rules and avoid projects leased to tenants engaged in impermissible activities such as:

   • Conventional financial institutions (banks, finance companies, credit card companies, etc.).

   • Gambling.

   • Brokerage of non-compliant securities (e.g., conventional bonds).

   • Conventional insurance.

   • Sale of impermissible products (alcohol, pork, tobacco).

   • Entertainment activities inconsistent with Shariah principles.

   • Hotels/resorts offering non-compliant services.

2. Non-compliant rental income must not exceed 49% of the fund’s annual rental income. Profits must be purified accordingly.

3. The fund may claim eviction costs, legal fees, or litigation expenses incurred due to defaulting tenants.

4. Shariah-compliant financing is allowed with investor approval, particularly for bridging commitments or partial funding of acquisitions and development.

5. Excess liquidity must be invested in Shariah-compliant instruments such as Murabaha, sukuk, Islamic investment accounts, or Shariah-compliant funds.

6. Security deposits and earnest money may be invested in Shariah-compliant instruments. Profits are distributed based on agreement between investors and the fund manager.

7. Non-compliant income must be set aside for charitable purposes. If segregation is impractical, purification percentages must be estimated and approved by the Shariah Committee.

8. The Shariah Committee reserves the right to require measures such as liquidation of non-compliant assets, reduction of leverage, or disposal of certain investments to maintain compliance.

4. Shariah Guidelines for Investment in Gold Funds

• Adherence to Shariah rules governing currency exchange (ṣarf).

• Verification of ownership and valid possession of gold.

• Oversight by a Shariah Supervisory Board is mandatory.

5. Shariah Guidelines for Investment in Real Estate Investment Trusts (REITs)

• Investment is permitted in REITs that are included in the IdealRatings Global Shariah-Compliant REITs Index.

6. Shariah Guidelines for Investment in Private Equity Funds

1. A private equity fund is considered Shariah-compliant if it has its own Shariah Supervisory Board.

2. Investment is permitted in private equity funds that invest in companies engaged in permissible activities, provided there is no evidence of impermissible dealings.

3. It is prohibited to establish or invest in private equity funds whose purpose is to acquire companies engaged in impermissible activities, unless the goal is to change and rectify their activities under a Shariah-approved plan.

4. In the case of preferred shares where contractual terms cannot be modified, the Shariah Committee must be consulted at the time of liquidation or profit distribution to correct any non-compliance.

5. Fund managers are strictly prohibited from using interest-based financing and repaying it with investor subscriptions.