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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 Pakistan Cash Management Fund

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

The fund's mandate is to generate optimal returns by investing primarily in shorter duration money market instruments.

The rating reflects the strength of the fund's credit and interest risk profile. The fund's very strong credit quality and sound liquidity profile emanates primarily from its mandate to invest in government securities; mainly Treasury Bills. At the same time, the fund adheres to very conservative duration limit, ensuring low exposure to interest rate risk. At end-May17, the fund is primarily invested in T-bills (95.25%), while the remaining assets are held as cash in scheduled banks with very strong credit quality – AAA. Average duration of the fund and exposure in government securities remained in line with assigned parameters. The unit holding pattern of the fund has high concentration with top10 investors representing 85% of the net assets which exposes the fund to redemption pressure.

Going forward, the rating remains dependent on maintaining at least 70% allocation towards government securities or AAA rated banks with portfolio duration not exceeding 45 days. Meanwhile, the remaining assets of the fund must be placed with scheduled banks having very strong credit quality. PACRA would monitor compliance against agreed parameters on monthly average basis.

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.