Public Asia Ittikal Fund not Syariah Compliant?

I’ve been meaning to blog about this topic for quite sometime now.

While I was in Malaysia, I received Public Asia Ittikal Fund’s (PAIF) annual report for the financial period from 2nd of August 2006 to 31st October 2007.

In the “notes to financial statements” section, they listed out pretty much all of the companies that they are holding in their portfolio.

One company caught my attention. ABC Learning Centre, an Australian company.

According to ABC Learning Centre’s financials, I noticed that their total debt divided by market capitalisation is somewhat in the vicinity of more than 50%.

I used to hold ABC Learning Centre in my portfolio myself and I’m pretty sure the ratio has been maintained above 50% for quite some time. ABC Learning Centre has adopted an aggressive takeover strategy for a while now, utilising heaps of debts.

Now, according to Dow Jones Islamic Market Shari’ah Supervisory Board, the total debt divided by trailing 12-month average market capitalisation should be below 33%.

I am indeed puzzled. Correct me if I’m wrong, but for that criteria alone, ABC Learning Centre is not syariah-compliant.

Please, somebody out there much more knowledgeable than me, mind trying to explain this rather peculiar phenomenon?

Perhaps there’s a rather logical explanation to this or perhaps the methodology of Public Mutual’s syariah supervisory board is different. Or perhaps there’s information in the report that I missed out on?

Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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