By

Muhammad Asad Zahid

KSE and Al-Meezan Investment Management

launched its first co-branded Islamic Index (KMI30) 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.

Oil & Gas Development Co.

OGDC

Pakistan Petroleum

PPL

Fauji Fertilizer Co. Ltd.

FFC

Pakistan Oilfields Ltd.

POL

Pakistan State Oil

PSO

Hub Power Co.

HUBC

Lucky Cement

LUCK

Kot Addu Power Co. Ltd.

KAPCO

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 NonTradable (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 semiannual 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.