KMI - A Brief Presentation

Product Development & Shariah Compliance

By Farhan-Ul-Haq Usmani

AVP, Product Development

& Shariah Compliance (PDSC)

Meezan Bank Limited

A Brief Introduction to the

KMI-30 Index and Stock Screening Process for Shariah Compliance


Overview of KMI - 30

• Introduction

• Objective of Launch

• KMI – 30 Composition

• KMI – 30 Companies



• Introduction– KSE and Al-Meezan Investment Management

Limited launched its first co-branded Islamic Index (KMI-30) on 1st of Ramadan 1429 HIJRA which tracks thirty most liquid SHAIRAH compliant stocks.

– Al Meezan Investments provide its Shariah expertise, guidelines, skills and stocks screening towards the activities with regard to launching and continuation process of the Index. On the contrary, KSE provides maintenance and dissemination support for the index.



• Objective of Launch

– 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.



• KMI – 30 Index Composition

– KMI – 30 Index comprises of 30 Shariah Compliant Companies.

– Shariah compliance is ensured through Stock Screening process conducted by Al-Meezan Investment Management Limited and counter checked by Capital Advisory division of PDSC Department.

– Al Meezan Investments provide its Shariah expertise, guidelines, skills and stocks screening towards the activities with regard to launching and continuation process of the Index. On the contrary, KSE provides maintenance and dissemination support for the index.


KMI-30, Effective from June 1,09

S-NO. SYMBOL NAME OF COMPANY S-NO. SYMBOL NAME OF COMPANY

1 OGDC Oil & Gas Dev Co 16 FCCL Fauji Cement

2 PPL Pak Petroleum 17 BOSI Bosicor Pakistan

3 FFC Fauji Fertiliz Co. 18 PRL Pak Refinery Limited

4 POL Pak Oilfields 19 INDU Indus Motor

5 PSO P.S.O. 20 GLAXO GlaxoSmithKline

6 HUBC Hub Power Co. Ltd 21 MARI Mari Gas Company

7 PTC P.T.C.L.A 22 MTL Millat Tractors

8 LUCK Lucky Cement 23 PSMC Pak Suzuki

9 ATRL Attock Refinery Ltd. 24 PAEL Pak Elektron

10 NML Nishat Mills Limited 25 BOC BOC (Pak)

11 ICI ICI Pakistan 26 GHGL Ghani Glass Ltd.

12 NRL National Refin. 27 PIOC Pioneer Cement

13 SNGP Sui North Gas Pipe. 28 MLCF Maple Leaf Cem.

14 SPL Sitara Peroxide 29 ABOT Abbott (Lab)

15 SSGC Sui South Gas 30 BIPL Bankislami Pakistan


Stock Screening criteria

• Criteria # 1: Business of the Investee Company

– The business of the investee company should be Halal. Accordingly, investment in shares of conventional banks, insurance companies, leasing companies, Mudarabah companies, companies dealing in alcohol etc are not permissible.



• Criteria # 2: Interest Bearing Debt < 40% of Total Assets

– Interest Bearing Debt includes Bonds, TFCs, Conventional Bank Loans, Finance Lease, Preference Shares etc.

– Total Interest bearing Debt must be less than 40% of the Total assets of the investee company.



• Criteria # 3: Non-Shariah Compliant Investments < 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.

– Non-Shariah Compliant investments must be less than 33% of Total Assets of the investee company.



• Criteria # 4: Non-Compliant Income < 5% of Total Revenue

– Non Compliant Income includes Bank Interest, Income from gambling, nightclubs, prostitution, casino, tobacco, alcohol, dividend income from above mentioned businesses, dividend income from Shariah non-Compliant Companies etc.

– Capital Gain need not be purified.

– Non-Shariah Compliant income must be less than 5% of Total Revenue of the investee company.

– Total Revenue includes Gross Sales + Other Operating Income.

– Dividend Purification is done by disbursing amount in Charity calculated as per the Charity rate determined and approved by PDSC.



• Criteria # 5: Illiquid Assets/Total Assets > 0.20 or 20%

– Illiquid Assets include property, plant & equipment, building, furniture & fixture, Intangible Assets, Stock in trade, Stores and spares and all similar assets.

– Illiquid Assets must be at least 20% of the total assets of the Investee company.



• Criteria # 6: Market price/Share > Net Liquid Assets/Share

– Net Liquid Assets Per share = Total Assets – Illiquid Assets – Total Liabilities divided by Number of Shares Outstanding of the Investee Company.

– Market price per share should be greater than Net Liquid assets per Share.

KMI - A Brief Presentation

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