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The Pakistan Credit Rating Agency Limited
Press Release

Date
12-Jul-17

Analyst
Mohsin Naseer
mohsin.naseer@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Stability Rating of Alhamra Islamic Income Fund (Formerly: MCB Islamic Income Fund)

Rating Type Stability Rating
Current
(12-Jul-17)
Previous
(30-Dec-16)
Action Maintain Maintain
Long Term AA-(f) AA-(f)
Short Term - -
Outlook Stable Stable
Rating Watch - -

The investment objective of the fund is to generate superior risk adjusted returns by investing in short, medium and long-term Shariah compliant fixed income instruments.

The rating incorporates the fund's strong credit quality and sound liquidity profile emanating from the fund's policy to invest only in good quality Shariah compliant instruments. At end-May17, 8.6% of the fund's net assets were invested with GoP Ijarah sukuks, whilst 82.3% were invested with banks rated 'AA-'. The remaining assets of the fund were invested in good quality corporate sukuks having credit rating of 'A'. Fund's whole exposure with 'A+' and above rating shows the strong credit quality of the portfolio. The fund has well diversified unit holding pattern, with top10 investors representing 26% of the fund size.

Going forward, the fund intends to maintain its exposure to government securities (above 40%) with rest of the fund's assets invested in Shariah compliant instruments rated A+ and above. Material changes in the fund's asset allocation strategy, which could negatively impact the fund's credit quality and exposure to interest rate risk, remains critical for the rating.

About the Entity
MCBAH is a subsidiary of MCB Bank Limited (MCB). MCB holds majority stake (51%) in the company, followed by Arif Habib Corporation Limited (30%). The company is managing fourteen open end mutual funds along with two pension schemes with AUMs of ~ PKR 47bln at end-Mar17. MCBAH also manages an SMA portfolio of ~ PKR 24bln. Sizeable chunk of this portfolio is related to an associated company. MCB, the fourth largest bank in Pakistan in terms of asset size and branch network, has a very strong financial position, evidenced by a long-term entity rating of AAA by PACRA. Arif Habib Corporation is the holding company for Arif Habib Group with interests in the financial and industrial sectors.

MCBAH’s eight members BoD, three representatives from MCB including CEO, two representatives from AHG and three are independent. Mian Muhammad Mansha - Chairman MCB - serves as the Chairman on the board. Mr. Nasim Beg - a representative of AHG - acts as the Vice Chairman. Mr. Saqib Saleem, former Chief Operating Officer and Company Secretary, is leading the AMC as Chief Executive Officer.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.