By

Muhammad Asad Zahid

 KSE and Al-Meezan Investment Management
launched its first co-branded Islamic Index (KMI-
30) on 1st of Ramadan 1429 HIJRA which tracks
30 most liquid SHARIAH compliant stocks.
 Al-Meezan Investments and Meezan bank
provides its SHARIAH expertise, guidelines, skills
and stocks activities with regard to launching
and continuation of process of the Index.
 On the contrary KSE provides maintenance and
dissemination support for the Index.
 To provide investors suitable benchmark for
returns on SHARIAH compliant equity
investments.
 To help SHARIAH conscious people choose
the profitable stocks which are SHARIAH
compliant
 To provide a relevant benchmark to Islamic
equity funds for comparing their
performance.
 KSE-Meezan Index is calculated using the “Free-Float
Market Capitalization”, wherein, the level of index at
any point in time reflects the free-float market value
of the selected Shariah compliant shares in relation to
the base period.
 Free-Float of a security is defined as the proportion of
total shares outstanding that are deemed available for
purchase in the Stock Exchange.
 Therefore, it generally excludes the shares held by
controlling directors / sponsors / promoters,
government and other locked-in shares not available
for trading in the normal course.
 Listed companies shall submit their pattern
of shareholding in the prescribed manner to
help the Exchange determine a Free-Float
Factor.
 Free float factor is a multiple with which
“total market capitalization” of a company is
adjusted to arrive at its “Free float market
capitalization”.
 KMI 30 index consist of 30 SHARIAH
compliant companies.
 SHARIAH compliance is ensured through
“Stock screening process” conducted by Al
Meezan Investment Management Limited
and counter checked by Islamic Financial
Advisory division of Meezan Bank limited.
1 Oil & Gas Development Co. OGDC
2 Pakistan Petroleum PPL
3 Fauji Fertilizer Co. Ltd. FFC
4 Pakistan Oilfields Ltd. POL
5 Pakistan State Oil PSO
6 Hub Power Co. HUBC
7 Lucky Cement LUCK
8 Kot Addu Power Co. Ltd. KAPCO
9 D.G. Khan Cement DGKC
10 Nishat Mills Ltd. NML
11 Pakistan Telecommunication Co. Ltd. PTC
12 K-Electric Limited KEL
13 Fauji Fertilizer Bin Qasim Ltd. FFBL
14 Engro Foods Ltd. EFOODS
15 Fauji Cement Ltd. FCCL
16 Packages Ltd. PKGS
17 Attock Petroleum Ltd. APL
18 Millat Tractors MTL
19 Glaxo Smith Kline GLAXO
20 Attock Refinery ATRL
21 National Refinery Ltd. NRL
22 Maple Leaf Cement MLCF
23 Kohat Cement KOHC
24 Cherat Cement CHCC
25 I.C.I. Pakistan ICI
26 Shell Pakistan SHEL
27 Mari Gas MARI
28 Sui Northern Gas SNGP
29 Pioneer Cement PIOC
30 Netsol Technologies NETSOL
 Criteria 1: Business of the Investee company

 The business of the Investee company should be

Halal. Accordingly investment in shares of capital
banks, insurance companies, leasing companies,
companies dealing in alcohol etc. are not
permissible.
 Criteria 2: Interest bearing debt should be less
than 37% of total assets.

 Interest bearing debt includes Bonds, TFCs,

conventional bank loans, finance lease, preference
shares etc.
 Criteria 3: Non shariah compliant investments
should be less than 33% of total assets.

 Non shariah compliant investments include

investments in conventional mutual funds,
conventional money market instruments, Bonds,
PIBs, FIB, CoIs, CoDs, TFCs, DSCs, T-bills, all
interest based placements and interest based loans
and advances etc.
 Criteria 4: Non compliant Income should be less
than 5% of total revenue.

 Non compliant income includes bank interest, income

from gambling, nightclubs, prostitutions, casino,
tobacco, alcohol, dividend income from above
mentioned businesses, dividend income from Shariah
non compliant companies etc.
 Capital gain need not be purified.
 Total revenue includes gross sales + other operating
income.
 Dividend purification is done by disbursing amount in
charity calculated as per the charity rate determined.
 Criteria 5: Illiquid assets/Total assets > 0.25 or
25%

 Illiquid assets include property, plant and

equipment, building, furniture and fixture,
intangible assets, stock in trade, stores and spares
and all similar assets.
 Criteria 6: Market price per share > Net liquid
assets / share

 Net liquid assets/share = Total assets – illiquid

assets – Total liabilities divided by number of
shares outstanding of the Investee company.
 Criteria 1:

 The Company which is on the Defaulters’ Counter

and/or its trading is suspended, declared Non-
Tradable (i.e. NT) in preceding 6 months from the
date of re-composition shall NOT be considered
for inclusion in KMI-30 Index
 Criteria 2:

 The Company will be eligible for KMI-30 Index if

its securities are available in the Central
Depository System
 Criteria 3:

 The Company should have a formal listing history

of at least two months on KSE
 Criteria 4:

 The company must have an operational track

record of at least one financial year
 Criteria 5:

 The Company should have minimum free-float

shares of 5% of total outstanding shares
 Criteria 6:

 The Company will be eligible for KMI-30 Index if

its securities are traded for 75% of the total
trading days
 Criteria 6:

 Mutual Funds (both Open-Ended and Closed-

Ended) are ineligible for inclusion in the KMI-30
Index.
 From the list of Shariah compliant companies,
securities are selected on the basis of Free Float
and Impact Cost.
 While ranking the companies 50% weight is
assigned to Free Float capitalization and the
remaining 50% is allocated to Impact Cost, such
that the companies with the highest Free Float
and the lowest Impact Cost get the highest rank
in the selection process.
 Top 30 ranked companies as per above criteria
are included in Islamic Index.
 The Index Technical Committee has used
15,000 as the base value, whereas June 30, 08
serve as the base period for the index.
 The value of Islamic Index shall be arrived at
by dividing the free-float market
capitalization of all eligible Islamic Securities
in the Index by a number called the Index
Divisor.
 The index will be re-composed on semi-
annual basis as follows:

 Basis: December 31 and June 30

 Revision: May 15 and November 15
 Islamic Index shall be calculated and
disseminated to market participants,
regulators and trading screens on real-time
basis.