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By

Muhammad Asad Zahid

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KSE and Al-Meezan Investment Managementlaunched its first co-branded Islamic Index (KMI-30) on 1st of Ramadan 1429 HIJRA which tracks30 most liquid SHARIAH compliant stocks.Al-Meezan Investments and Meezan bankprovides its SHARIAH expertise, guidelines, skills

and stocks activities with regard to launchingand continuation of process of the Index.On the contrary KSE provides maintenance anddissemination support for the Index.

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To provide investors suitable benchmark forreturns on SHARIAH compliant equity

investments.To help SHARIAH conscious people choosethe profitable stocks which are SHARIAHcompliantTo provide a relevant benchmark to Islamicequity funds for comparing theirperformance.

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KSE-Meezan Index is calculated using the Free -FloatMarket Capitalization, wherein, the level of index atany point in time reflects the free-float market valueof the selected Shariah compliant shares in relation tothe base period.Free-Float of a security is defined as the proportion oftotal shares outstanding that are deemed available forpurchase in the Stock Exchange.Therefore, it generally excludes the shares held bycontrolling directors / sponsors / promoters,government and other locked-in shares not availablefor trading in the normal course.

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Listed companies shall submit their patternof shareholding in the prescribed manner to

help the Exchange determine a Free-FloatFactor.Free float factor is a multiple with whichtotal market capitalization of a company isadjusted to arrive at its Free float marketcapitalization.

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KMI 30 index consist of 30 SHARIAHcompliant companies.

SHARIAH compliance is ensured throughStock screening process conducted by AlMeezan Investment Management Limitedand counter checked by Islamic FinancialAdvisory division of Meezan Bank limited.

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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 LUCK8 Kot Addu Power Co. Ltd. KAPCO

9 D.G. Khan Cement DGKC

10 Nishat Mills Ltd. NML

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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. APL18 Millat Tractors MTL

19 Glaxo Smith Kline GLAXO

20 Attock Refinery ATRL

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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 MARI28 Sui Northern Gas SNGP

29 Pioneer Cement PIOC

30 Netsol Technologies NETSOL

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Criteria 1: Business of the Investee company

The business of the Investee company should beHalal. Accordingly investment in shares of capitalbanks, insurance companies, leasing companies,companies dealing in alcohol etc. are not

permissible.

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Criteria 2: Interest bearing debt should be lessthan 37% of total assets.

Interest bearing debt includes Bonds, TFCs,conventional bank loans, finance lease, preferenceshares etc.

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Criteria 3: Non shariah compliant investmentsshould be less than 33% of total assets.

Non shariah compliant investments includeinvestments in conventional mutual funds,conventional money market instruments, Bonds,

PIBs, FIB, CoIs, CoDs, TFCs, DSCs, T-bills, allinterest based placements and interest based loansand advances etc.

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Criteria 4: Non compliant Income should be lessthan 5% of total revenue.

Non compliant income includes bank interest, incomefrom gambling, nightclubs, prostitutions, casino,tobacco, alcohol, dividend income from abovementioned businesses, dividend income from Shariahnon compliant companies etc.

Capital gain need not be purified.Total revenue includes gross sales + other operatingincome.Dividend purification is done by disbursing amount incharity calculated as per the charity rate determined.

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Criteria 5: Illiquid assets/Total assets > 0.25 or25%

Illiquid assets include property, plant andequipment, building, furniture and fixture,intangible assets, stock in trade, stores and spares

and all similar assets.

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Criteria 6: Market price per share > Net liquidassets / share

Net liquid assets/share = Total assets illiquidassets Total liabilities divided by number ofshares outstanding of the Investee company.

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Criteria 1:

The Company which is on the Defaulters Counterand/or its trading is suspended, declared Non-Tradable (i.e. NT) in preceding 6 months from thedate of re-composition shall NOT be considered

for inclusion in KMI-30 Index

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Criteria 2:

The Company will be eligible for KMI-30 Index ifits securities are available in the CentralDepository System

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Criteria 3:

The Company should have a formal listing historyof at least two months on KSE

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Criteria 4:

The company must have an operational trackrecord of at least one financial year

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Criteria 5:

The Company should have minimum free-floatshares of 5% of total outstanding shares

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Criteria 6:

The Company will be eligible for KMI-30 Index ifits securities are traded for 75% of the totaltrading days

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Criteria 6:

Mutual Funds (both Open-Ended and Closed-Ended) are ineligible for inclusion in the KMI-30Index.

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From the list of Shariah compliant companies,securities are selected on the basis of Free Floatand Impact Cost.

While ranking the companies 50% weight isassigned to Free Float capitalization and theremaining 50% is allocated to Impact Cost, suchthat the companies with the highest Free Float

and the lowest Impact Cost get the highest rankin the selection process.Top 30 ranked companies as per above criteriaare included in Islamic Index.

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The Index Technical Committee has used15,000 as the base value, whereas June 30, 08

serve as the base period for the index.The value of Islamic Index shall be arrived atby dividing the free-float marketcapitalization of all eligible Islamic Securitiesin the Index by a number called the IndexDivisor.

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The index will be re-composed on semi-annual basis as follows:

Basis: December 31 and June 30Revision: May 15 and November 15

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Islamic Index shall be calculated anddisseminated to market participants,

regulators and trading screens on real-timebasis.