Companies that have less than 5% of their revenues coming from prohibited business activities are said to have passed the Sector-based Screening process. However, the proportion of dividends attributed to revenue generated from such non-permissible business activities and interest income will have to be purified.
Any cash dividend received from the clients with a portfolio consisting of HLAL holdings will be subject to a purification process as determined by the Wahed upon consultation and endorsement by the Shariah Adviser from time to time. By carrying this exercise, Wahed is performing its duties and authority to act as a fund manager and manages clients' funds according to the terms espoused in the Scope of Services of the Investment Management Agreement.
Dividend Income Purification Process
Consideration for purification of income of the Shariah stocks is determined by our Shariah Board’s screening of stocks with non-compliant income not exceeding 5.0% of its revenue. The purified dividend income will be channeled to charitable bodies as endorsed by our Shariah Board and approved by the Trustee every time the dividend is distributed. Our Shariah board approves the calculation of the purification amount on an annual basis.
What about other funds in my portfolio, how are those purified?
Funds other than the Wahed FTSE USA Shariah ETF (HLAL) listed in your portfolios have been purified by the ETF manager at the fund level. No further action is required on your end to ensure your investments are purified.