1. Issues & Suggestions for OIC Shari’ah Compliant Indexes
Rushdi Siddiqui
Global Director
Dow Jones Islamic Market Index Group

2. Presentation Overview
Are the various Islamic Funds assisting and promoting OIC Countries economic and capital market development at:
Member Country Level
Intra-OIC Portfolio Investments
Liquidity on Stock Exchanges
Transparency & Governance Listed Firms
Deyaar, Tamweel, Nakheel, etc.
Regional/OIC Level
Viewed as a common market
OIC Global Level
Foundational, not Transactional, Infrastructure Paradigm

3. Dow Jones Indexes Timeline: Key Dates
10/6/97-Cash options on DJIA begin trading on CBOE
2/26/98-Dow Jones STOXX Indexes launch
2/5/99-Dow Jones-AIG Commodity Index launch
2/9/99-Dow Jones Islamic Market Indexes launch
7/14/99-Dow Jones Global Titans Index launch
9/7/99-Dow Jones Sustainability Group Indexes launch
2/14/00-Dow Jones U.S. Total Market Index launch
2/18/03-Dow Jones Indexes Islamic Blue-Chip Indexes launch
11/3/03-Dow Jones Select Dividend Index launch
11/30/05-Dow Jones Wilshire U.S. Industry Indexes launch
1/23/06-Dow Jones Islamic Market Sustainability Index launch
3/6/06-Announced launch of Dow Jones Citigroup Sukuk Index
5/31/06-Dow Jones Islamic market China Offshore Index launch
6/7/06-Dow Jones BRIC 50 Index launch

4. Dow Jones Islamic Market Index Awards
Best Shariah Compliant Index Provider (Global Finance Magazine, US, 2008)
Global Recognition in Islamic Finance for a Finance Institution (Dubai, IIFF 2008)
Best Islamic Index Provider (Euromoney, London, 2008)
Best Islamic Index Provider (Islamic Finance News, Malaysia, 2007)
Best Islamic Index Provider (Terrapin, Singapore)- 2007
Best Individual Contribution to Islamic Finance (Kuala Lumpur Islamic Finance Forum (KLIFF), Malaysia, 2007)
American Muslim Achievement Award, Islamic Center of Southern California, USA (2006)
Sh. Mohmmad Rashid Bin Makhtoum Award for Contribution by Western Institution to Islamic Finance (2006)
Contribution to Islamic Capital Market Development, International Islamic Finance Forum, Singapore, 2006.
Failka Award for Contribution & Development to Islamic Funds (2006)
Deloitte/KLIFF Award for Special Contribution to Islamic Finance (2005)
CERT (Malaysia) Award for Excellence in Islamic Finance (2004)
Sh. Mohmmad Rashid Bin Makhtoum Award for Innovation in Islamic Finance (2003)

5. Where are we coming from?
Structured Sukuk
Mega Project Finance
Mega Commercial Banks
Hard Asset Private Equity
Fund Management
Islamic Indexes
Market Exposure: 250m
Conversions, Islamic Windows & Subsidiaries of Mega Banks,
Establishment of significant Islamic Banks in Non-Muslim states
Muslim populated states getting interested Syria, Libya, Soviet bloc
Commercial Banking
Syndications
Islamic Conglomerates
Market exposure: 100m
Concentrations of Islamic Banks growing in GCC, Malaysia, Pakistan and Bangladesh
Market exposure: 20m
Onset of Islamic Banks (Malaysia, UAE, etc.)
Inefficient Command SOEs in Iran and Sudan, and Pakistan
Source: S. Farooq, BIBF
Timeline 5 5 5 5

6. We are moving forward in IFVC PE E
Activities
Risk
Reward S
-Petro-liquidity & HNWs
-Diversification
-Shariah Scholars/research
-Stress Tested/Time
-Cross Sell R L M
IFPs
CFPs
IFI
CFIs IF CF
300 plus years
Timeline/Products/Returns

7. Hypothetical “Islamic Investor & Asset Manager” Dilemma?
Increased Volatility:
Exclusion of prohibited industries that may be the current high-fliers
Exclusion of financial sector
Exclusion of highly leveraged firms
Exclusion of companies with high non-operating interest income
Bias: Technology, Healthcare & Energy
Quarterly Reviews (turnover) 7

8. First Islamic Funds Inception Location Fund Manager Fund Name Jan-93
Saudi Arabia
National Commercial Bank
AlAhli US Trading Equity
Jul-92
Al Rajhi Banking & Invest.
Al Rajhi Local Share
Jun-92
South Africa
Futuregrowth AlBaraka
May-91
Singapore
Mendaki Holdings Pte. Ltd.
Mendaki Growth Fund
Jun-86
USA
Saturna Capital
Amana Income Fund
May-71
Malaysia
Tabung Amanah Bakti
May-68
Mara Unit Trust
Dana Al-Aiman
Inception
Location
Fund Manager
Fund Name
Source: Failaka 8

9. Growth in Assets in Equity Funds
Plain vanilla to more sophisticated: structured, ETF, Sukuk, project finance
Source:Failaka

10. Growth in the Number of Islamic Equity Funds (excluding Asia)
Source:Failaka 10

11. As regards Equity Funds
Total Number of Islamic Equity Funds: 306
Source: Failaka 11

12. Nearly Full Range of Products
Hedge Fund 6-7 nearly there; 2 operational
Balanced Easy to duplicate and 17 available
Sector Funds 9 available
Regional Funds (45 funds dealing in GCC Equities)‏
Small Company (Al-Rajhi Global Small Cap Equity)
Single Country (SABB Amanah Saudi Equity)
Emerging Market 19 available (BRIC, South Africa, Turkey)‏
European Equity 7 available
US Equity 12 available
Asian Equity 7 by non-Asian based managers
Global Equity 27 available
Fund categories
Source:Failaka 12

13. Total Mutual Funds in the World: 56,863
Its all Relative
Total Mutual Funds in the World: 56,863
Total Islamic: 550
Total Islamic Equity: 320 (including balanced)‏
Total Socially Responsible (SRI): 201
Source:Failaka 13

14. Assets Under Management: In Perspective
Total Assets invested in Mutual Funds: US$ 17.8 Trillion
Total Assets in SRI Mutual Funds: US$ 179 Billion
Total Assets in Islamic Equity Funds: US $ 17.3 Billion (est.)‏
Source:Failaka 14

15. DJIM Screens DJIM Shariah Supervisory Board v Outsourcing Shariah
Primary Business
Negative Screens ~ Socially Responsible Investing
Positive Screens: DJIM Sustainability Index
Revenue Accountability
Financial Screens
Debt/MC <33%
Cash + IBS/MC <33%
Acc Rec/MC <33%
Debt Screen Impact:
Enron (Deleted: 3Q’01), Worldcom (2Q’01), Tyco (1Q’02) & Global Crossings (2Q’01)
AAOIFI Standard (21): Product  Standard
DJ CitiGroup Sukuk Index: Standard  Product
Price Only, Market Cap & Free Float Weighted Indexes
Price, Equal, MC and Fundamental Indexes
Low Debt/Non-Financial Social-Ethical Index  Alpha Strategy

16. Screening Process
95%
D/MC
C+IB/MC
AR/MC

17. DJIM Screening

18. DJIM Regional Breakdown (2007)UK
Cana
Indonesia

19. DJIM Sector Breakdown (2007)
Credit & Impact on Financial
Tech
Indust
Financial

20. DJIM Performance (2007)

21. Compliant Sector Based Investing
Islamic Equity Indexes
Benchmark Indexes: Dow Jones Islamic Market Index ($17T)
Sector Indexes:
Industries (Broadest-Based)
Telecom
Industrials
Oil & Gas
Financials
Cons Svcs
Basic Matls
Utilities
Technology
Cons Goods
Health Care

22. Theme Based Investing Strategy and Theme Based Indexes
Dow Jones Sustainability Indexes
Based on the cooperation of Dow Jones Indexes and Zurich-based SAM, Dow Jones and Dow Jones STOXX Sustainability Indexes track the performance of the leading sustainability-driven companies.
The family includes global and regional indexes, and subindexes excluding alcohol, gambling, tobacco and/or armaments and firearms.
Dow Jones Islamic Market Sustainability Index
First indexes from major provider; widely accepted as the standard.
Measure companies that have been screened for compliance with Islamic principles based on financial ratios and industry.
Family includes 70+ indexes for countries, regions, sectors and cap ranges.

23. Islamic Asset Class Expansion
Screening
Pricing
Data
Education & Awareness
Commodities
REITs
Hedge Funds
Portfolio Indexes

24. Islamic Investing in OIC Countries
Location Source of Funds
GCC
Location of Underlying Assets Invested
LME Murabaha
Palm Oil (Malaysia)
Equity
Real Estate
Commodities
PE/VC (ArCapita, etc.)
Absorption of Liquidity without Asset Inflation
Capital flight: How does it benefit Muslim Country?

25. Sector Weighting Breakdown (Q2 2008)  What does this mean?
Sctrs
DJIM Malsia T-25 DJ
Malsia
DJIM Turk
DJW Turk
DJIM PK
DJW PK
DJIM
Ind
DJ Ind
Arbia 50
DJ Bah
DJ Kw T-50
DJIM Kw
Oil/
Gas
.6% 1%
19% 9%
31% 4% 2% 0% BM 2 3 30 11 38 47 37 10 8 40 24 9 15 17 31 CG 35 20 4 5 14 1 --
.28
HCR
.51
.91 CS
.72
.49
Tele 16 6 21 13
UTI 7
FIN 27 44 49 45 85 69 51
TECH .4
.37
.13
.21
.69

26. What does Sector breakdown mean for an Islamic OIC Index?
Largest sector Eliminated
Conventional Financial
2-3 Sectors more than 70% of Weighting
One Company Sector
Lack of Technology sector implies:
VC Industry/Angel Investing?
Innovation?
Equity Culture?
Knowledge Based Economies?

27. Muslim Country Islamic & Conventional Index Top 5 Components & Weightings (Q1 2008)
DJIM Turkey
DJW Turkey
DJIM
Pakistan
DJW Pakistan
Egreg DeMir Ve Celik (24%)
Turkcell 9%
Dawood Hercules Chem (10%)
MCB (15%)
Turkeye Petrol (22)
Turkiye Garanti (9)
Pakistan oilfields (10)
Pak State Oil (5)
BIM Birlesik (8)
Akbank (8)
Pakistan Petroleum (10)
Oil/Gas Dev (4)
Asya Katlim (6)
Turkiye Is Bankasi (6)
Oil/Gas Dev (10)
J&S Co (4)
Turcas Petrol (4)
Egreg DeMir Ve Celik (5)
Engro Chem Pk (10)
Natl bank of Pk (4)
37%
50%
32%
64%

28. Muslim Country Islamic & Conventional Index Top 5 Components & Weightings (Q1 2008)
DJIM Malaysia Titans 25
DJ Malaysia
DJIM Indonesia
DJ Indonesia
IOI Corp (19%)
SimeDarby (7%)
Bumi Resources (25%)
Bumi Resources (16%)
SimeDarby (19)
IOI Corp (6)
Telekomunikasi (23)
Telekomunikasi (14)
DiGi.com (9)
Bumiputra Comm Ltd (6)
Astra Intl (12)
Astra Intl (7)
KL Kepong (8)
Public Bank (5)
Perusahaan Gas (6)
Bakrie Bros (7)
MISC (7)
Malayan Banking (5)
Indosat (4)
Bank central Asia (6)
29%
70%
50%
60%

29. Muslim Country Islamic & Conventional Index Top 5 Components & Weightings (Q1 2008)
DJIM Kuwait
DJ Kuwait Titans 50
DJ Arabia Titans 50
DJ Bahrain Stock Exchange
DJ MSM
Investment Dar (10%)
NBK (10%)
Maroc Telecom (10%)
Ahli United Bank (22%)
NBO (10%)
MTC (9)
KFH (9)
Orascom Const (7)
Batelco (12)
Raysut Cement (10)
Agility (9)
Orascom Telecom (7)
GFH (11)
BM (9)
Gulf Cble/Elec (6)
NIG (6)
MTC (6)
NBB (6)
Oman Telecom (9)
Boubyan Petro (5)
Comm Bank of Kuwait (6)
Arab Bank (6)
Ithmaar Bank (6)
Ren Services (7)
39%
40%
36%
55%
45%

30. What does this sampling of top 5 weighting mean?
Conventional components from OIC
Comparable to non-OIC EM
Capping weightings
Financial sector available
Trading in top 20 companies
Shari’ah compliant components from OIC
Largest/liquid sector eliminated
Free Float
Illiquid Mid-Small caps available
No equity culture (debt screen)
Volatility
Established OIC v Emerging OIC
Malaysia, Turkey, Pakistan, Egypt, Saudi, UAE, Kuwait, etc.
Bangladesh, Nigeria, Jordan, etc.

31. Suggestions
OIC Countries
Risk Mindset: Debt v. Equity Culture?
Habit Mindset: Depositors v. Investors?
Fraud on the Unsuspecting (Returns advertised)
Understanding Mindset: Real estate v. Other asset class comprehension?
Shariah Screening
Muslim owned companies
One methodology does not fit all geographies or asset classes
Consensus on Primary Business

32. Suggestion Number 1 (Sukuk):
Financial Screens
Conventional Debt
Reduction over a given time frame
Islamic Indexes v Funds: Selling no longer compliant companies
Conversions FIs to IFIs (Sharjah Islamic Bank)
Acquisitions (ADIB acquires Natl Bank of Development (Egypt))
Equitization of Balance Sheet via Sukuks & Equity Recapitalization
PLUS (Malaysia)  WIDER SHAREHOLDERS
Sukuks [financial incentive within time, Ex: IDB Incentive Fund]:
Primary & secondary mkt development
Sukuk Market Development
Yield curves for corporate tenors
Sukuk Trading & Investing vehicles
Expansion to other issuers
Cross Issuers & Buyers

33. Billion Dollar Watermark Cross-Over
Eurobond Market*
Sukuk profile
* Source: Frank J. Fabozzi,
Handbook of Fixed Income Securities, 1991
Malaysia

34. Suggestion Number 2: Index for investable and tradable OIC countries
DJ OIC Index
DJ OIC Islamic Index
[Profile Indexes: DJIA, S&P 500, DJIM, MSCI EAFE, FTSE 100, Russell 2000, etc.)
Sub-Indexes
Transparency & Governance
Investable Products off of the Index
Intra-OIC Investments  Liquidity
Liquidity Encourages Listings (BB v FPI)

35. Suggestion Number 3 (Complimenting COMCEC: OIC Exchange Cooperation OIC VTP)
Arab Stock Exchange?
Islamic Stock Exchange:
Location?
Deciding Compliance?
Listing of companies/products?
OIC VTP:
Neutrality
Gatekeeper of compliance?
Trading of companies & products
Funds Supermarket
Supported by financial information, news, analysis, PLUS:
Obligatory Information
Liquidity to traded company  Home country exchange
Proprietary Trading
Global Secondary Sukuk Trading Platform
Cross sell

36. Conclusion
Suggesting a Path for Shariah compliance for OIC publicly listed Companies & Encourage Listings
Add Depth & Breadth
Encouraging Use of Sukuks
Developing an Equity/risk taking culture in OIC
Establishing an informed Global Portal for Intra-OIC Investment Opportunities for ALL investors
Win  Country OIC Level
Win  Regional OIC level
Win  Global OIC Level