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The concept of mutual funds
Advantages for Investors
The Indian MF Industry
Islamic Fund Management
Shariah Screening Process Screening Methodology
Taurus Ethical Fund
Zakath
Potential of Zakath from a Kerala Context
Functioning of Baithuzzakath Kerala
Futuristic Zakath Management System
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Mutual funds are vehicles to mobilize moneys
from investors, to invest in different marketsand securities, in line with the investment
objectives agreed upon, between the mutual
fund and the investors.
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Professional Management
Affordable Portfolio Diversification
Economies of Scale
Liquidity Tax Deferral
Tax Benefits
Convenient Options
Investment Comfort
Regulatory Comfort
Systematic Approach to Investments
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OpenEnded
CloseEnded
Interval Total %
Income 4,41,422 26,203 8,759 4,76,384 62.1%
Equity 1,48,726 19,621 325 1,68,672 22.0%
Balanced 15,277 1,864 17,141 2.2%
Liquid/Money
Market
73,030 73,030 9.5%
Gilt 3,171 3,171 0.4%
ELSS-Equity 19,617 3,047 22,664 3.0%
Gold ETF 1,583 1,583 0.2%Other ETFs 1,342 1,342 0.2%
FoFs (Overseas) 2,882 2,882 0.4%
Total 7,07,050 50,735 9,084 7,66,869 100.00%
% 92.2% 6.6% 1.2% 100.00%
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Mutual funds are constituted as Trusts.
The mutual fund trust is created by one or more Sponsors,
who are the main persons behind the mutual fund business.
Every trust has beneficiaries. The beneficiaries, in the case ofa mutual fund trust, are the investors.
The operations of the mutual fund trust are governed by a
Trust Deed, which is executed by the sponsors. SEBI has laid
down various clauses that need to be part of the Trust Deed. The Trust acts through its trustees. Therefore, the role of
protecting the beneficiaries (investors) is that of the Trustees.
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Day to day management of the schemes is handled by an
Asset Management Company (AMC). The AMC is appointed
by the sponsor or the Trustees.
Although the AMC manages the schemes, custody of the
assets of the scheme (securities, gold, gold-related
instruments & real estate assets) is with a Custodian, who is
appointed by the Trustees.
The record of investors and their unit-holding may be
maintained by the AMC itself, or it can appoint a Registrar &Transfer Agent (RTA).
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Islamic unit trust schemes must be supervised by a
Shariah committee or Shariah adviser to ensure that
the fund is managed and administered in accordancewith Shariah principles.
The Shariah Committee should function
independently of trustee and portfolio manager.
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1.Portfolio purification
2.Portfolio selection screening stocks
3.Portfolio monitoring
4.Working with fund management
5.Monitoring of fund fees
6.Monitoring fund documentation
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S&P CNX Shariah 500
Dow Jones Islamic Index
BSE TASIS Shariah 50
GCC Islamic Index
FTSE Global Islamic Index Series
MSCI Islamic Index Series
Jakarta Islamic Index
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BusinessScreens
FinancialScreens
Monitoring,Removal &
Replacement
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The S&P CNX 500 Shariah is derived from the S&P
CNX 500, the complete benchmark for the Indian
stock market.
Representative of the Indian equity market and with
high correlations to their underlying indices, each
Shariah compliant index provides investors with a
comparable investable portfolio while adoptingexplicit selection criteria defined by Islamic law.
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Dr. Muhammad Ali Elgari
PhD in Economics from the University of California, United States.
Dr. Abdul Sattar Abu GhuddahPhD in Islamic Law from Al Azhar University, Cairo, Egypt.
Dr. Nazih Hammad
PhD in Islamic Law from the University of Cairo, Egypt.
Dr. Mohammad Amin Ali-QattanPhD in Islamic Banking, Birmingham University, United Kingdom.
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Business activities related to the following are excluded:
1) Pork
2) Alcohol
3) Gambling4) Financials
5) Advertising and Media (newspapers are allowed, sub
industries are analyzed individually)
6) Pornography7) Tobacco
8) Trading of gold and silver as cash on deferred basis
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During the selection process, each companys
audited annual report is reviewed to ensure that the
company is not involved in any non-Shariah
compliant activities. Those that are found to be non-compliant are
screened out.
The above industries are not considered Islamic and
would not be appropriate for investment for
observant Muslims.
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After removing companies with non-compliant
business activities, the rest of the companies are
examined for compliance in financial ratios, as
certain ratios may violate compliance measurements.
Three areas of focus are leverage, cash, and the
share of revenues derived from non-compliant
activities. All of these are subject to evaluation on an ongoing
basis.
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This compliance is measured as:
Debt / Market Value of Equity (12 Month
average) < 33 %
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One-third (33%) is representative of preponderancemay be derived from a hadith, related by Bukhari, inwhich Prophet Muhammad (pbuh) said: ...Then a third.And a third is a great deal, when he was asked how
much ofones estate a person may bequeath to someone other than the prescribed heirs. (It should bestated emphatically here that this formula is one thatapplies to investors interested in companies offeringshares on the international market over which Muslims
have no control. It should not be understood as anendorsement of the practice, by Muslim-ownedbusinesses, of interest-based borrowing.)
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There are compliances with reference to cash
holdings. These are:
1) Accounts Receivables / Market value of
Equity (12 Month average) < 49 %
2) (Cash + Interest Bearing Securities) / Market
value of Equity (12 Month average)
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In certain cases, revenues from non compliant
activities are permissible, if they comply with
the following threshold:
(Non-Permissible Income other than Interest
Income) / Revenue < 5%
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This ratio is provided to investors for
purification purposes, it is calculated as:
Dividends * (Non Permissible Revenue / Total
Revenue)
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As soon as any new information regarding aconstituent company is collected, compliance isreviewed.
RI (Ratings Intelligence) provides the compliance data
to Standard & Poors via a monthly compliance report. A daily screening report is checked by RI and provided
to the Shariah supervisory board.
A member of the Shariah board signs off on a monthlybasis.
Standard & Poors reviews the monthly report and,accordingly, removes any existing constituents for non-compliance.
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Diversified Equity fund catering to investors looking for Shariahcompliant investment opportunities.
Long term wealth creation through investment in Shariah compliantequity instruments.
Invests across various sectors.
Selection of stocks based on better management quality, goodcorporate governance and strong balance sheet with limitedexposure to debt.
During FY 09 10 declared 3 dividends amounting in aggregate toRs. 4.50 per unit.
During FY 10 11 declared a dividend of Rs. 1.80 per unit on 10th
Dec 2010.
As on 30th June 2011, TEF has given a CAGR of 21.47% in two yearsas against return of 12.94% by the Benchmark index.
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Performance as
on 30th June 2011
1 year 2 years Since Inception
(6th April 2009)
Taurus
Ethical
2.85% 21.47% 45.48%
S&P CNX
500 Shariah
-0.06% 12.94% 28.71%
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SIP Performance TEF & S&P CNX 500 Shariah
Monthly investment (5th
of every month)
1000 1000
No. of months 12 27
Total investments 12,000 27,000
Value of TEF investment
(8th July, 2011)
11,772 31,395
Value of Benchmark (8th
July, 2011)
11,746 28,820
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Top 10 Equity Holdings of Taurus EthicalCompany Name % of Net Asset
Infosys Ltd. 6.46%
Reliance Industries Ltd. 5.09%
Oil & Natural Gas Corporation Ltd. 4.90%
Bharti Airtel Ltd. 4.62%
HCL Technologies Ltd. 4.58%
Cairn India Ltd. 4.07%
Gail (India) Ltd. 3.68%
Havells India Ltd 3.50%
Rallis India Ltd. 3.49%
GVK Power & Infrastructure Ltd. 3.27%
Total Top 10 Equity Holding 43.67%
Other Equity 47.67%
Total Equity Holdings 91.34%
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Top 10 Equity Sectors of Taurus Ethical
Sector Name % of Net asset
Software 13.26%
Pharmaceuticals 9.18%
Oil 8.97%
Gas 6.75%
Power 6.30%
Consumer Non Durables 5.38%
Petroleum Products 5.09%
Trading 5.02%
Non Ferrous Metals 4.71%
Industrial Capital Goods 4.63%
Top 10 Equity Sector Holding 69.31%
Other Equity Sectors 22.03%
Total Equity Sector 91.34
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The literary meaning purification, growth
Technical meaning in Islamic Shariah The
prescribed rate of purging that each Muslim isobliged to do on the different categories of wealth
under his ownership when they achieve prescribed
levels of aggregation which shall be distributed to
prescribed classes of people.
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The spiritual nature of Zakath.
The material nature of Zakath.
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Thawba: 103.
Depends on the strength of belief and the
purity of intention.
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ArRoom: 39
Al Hashr:7
Muad (R) reports from Prophet (SAW): It will becollected from the rich among you and given backto the poor among you.
Success in this front depends upon the efficiencyof the Zakath collection-apportionment-distribution system.
Islam created its revolutions during those periodswhen this system was completely in vogue.
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A complete Zakath system is a must for the
swift propagation of the Islamic message.
Without a complete Zakath system the Islamicmessage loses its aura and becomes
powerless.
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The robustness of any system has to be primarily
assessed by comparing it with the systems during the
period of the Prophet (SAW) and the rightly guided
Caliphs.
The expansionary nature and adaptability of Shariah.
New methods can be developed to improve the
efficiency of Zakath systems provided they are not inconflict with Shariah.
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Our discussion should touch upon this
futuristic pictures of Zakath systems.
Our discussion would be complete only whenwe consider the Islamic past and the Islamic
future.
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Muslims in Kerala constitute 25% of the total
population
Population in Kerala around 3,20,00,000
Muslim population around 80,00,000
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Total remittance of around 30,000 cr.
Muslims share around 56% which is around16,800 cr.
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Around Rs. 5700 cr. remitted as salary a year.
Muslims share around 11.5% which amounts
to Rs. 655.5 cr.
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Keralas annual industrial production amounts
to around Rs. 23,500 cr.
Muslims share 30% which amounts to Rs.7050 cr.
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Annual agricultural production of Kerala is Rs.
18,200 cr.
Muslims share of the agricultural production
is 23% which amounts to Rs. 4200 cr.
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Trade conducted to the tune of Rs. 37,000 cr.
40% of this is controlled by Muslims which
amounts to Rs.14,800 cr.
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From official data itself the production of Kerala
Muslims is to the tune of Rs. 43,500 cr.
Let off 30% for basic expenses.
Zakath being estimated at Rs. 1000 cr.
Unaccounted money in the economy.
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Out of the 80 lakh Muslims in Kerala 31% live
below poverty line, ie, about 25 lakh people.
10% of the Muslim population doesnt have
habitable houses, ie, 8 lakh people.
The poverty rate among Muslims is higher
than that among low caste Hindus.
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Has been functioning for more than 30 years inthe state at unit level.
The Baithuzzakath Kerala was established in the
year 2000. All party workers and members are required to
deposit their Zakath with Baithuzzakath.
Additional funds have to be raised from othersfor local operations.
Receives Zakath remittances from Keraliteexpatriates also.
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Year Total Collection Percentage Growth
2000-01 453089
2001-02 1135031 151%
2002-03 2200031 94%
2003-04 3526734 60%
2004-05 6207175 76%
2005-06 5077565 -18%
2006-07 9374751 85%
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Year No. of Remitters
Percentage
Growth
2000-01 69
2001-02 164 138%
2002-03 239 46%
2003-04 353 48%
2004-05 565 60%
2005-06 411 -27%
2006-07 678 65%
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Year No. of Beneficiaries Percentage Growth
2000-01 54
2001-02 134 148%
2002-03 234 75%
2003-04 446 91%
2004-05 673 51%
2005-06 626 -7%
2006-07 883 41%
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Year Per Capita Remittance Percentage Growth
2000-01 6567
2001-02 6921 5%
2002-03 9205 33%
2003-04 9991 9%
2004-05 10986 10%
2005-06 12354 12%
2006-07 13827 12%
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Year Per Capita Benefit Percentage Growth
2000-01 8391
2001-02 8470 1%
2002-03 9402 11%
2003-04 7907 -16%
2004-05 9223 17%
2005-06 8111 -12%
2006-07 10617 31%
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Zakath Management as a Supply Chain function.
Centralization with decentralization.
Minimal time for clearances.
Local distribution to the extent possible. Complete disbursement in an accounting year.
Unhealthy practice of using the bulk funds forpurposes other than poverty eradication.
Introduction of centralized Zakath DatabaseManagement Systems.
Training of those who work with Zakath funds.
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Establish Shariah rulings as an integral part of the
business thought process while creating new
paradigms for business performance and
management.
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We shall see through the processes of establishing new businesses
that are value bound and performance oriented.
We shall see through the processes of value integrating existingbusinesses while raising performance levels.
We shall continuously raise the content, variety and scope of
Shariah oriented business education.
We shall continuously innovate, challenge the status quo,
continuously create opportunities and rejuvenate the waybusinesses operate.
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Shariah compliant business and management consulting
Islamic Finance, Banking and Management Education
Shariah compliant investment solutions
1) In Greenfield projects
2) In stocks (shares)
3) In individually customized portfolios
4) In commodities (gold, silver etc.)
5) In mutual funds
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Project Reports Forensics
Feasibility Studies Import Export Code
Techno Economic Surveys PAN Application
Digital Signatures TAN Application
Trademarks Domain Name Registration
Service Marks Web Hosting (Linux and Windows)
Company Registration Email Hosting
LLP Registration SSL Certificates
ISO Certification Website BuildingPatents Branding & Logo Designs
Copyrights Online Payment Gateways
Disclaimers Drafting Agreements Drafting
Privacy Policy Drafting Legal Transcription
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Post Graduate Diploma in Islamic Banking & Finance
(Regular & Distant)
Certified Islamic Mutual Fund Distributor
Certified Islamic Finance Educator
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