Pakistan Credit Rating Agency Maintains Stability Rating of Income Fund

Lahore, June 28, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the stability rating of NAFA Income Fund (NIF) at ‘A-(f)’ (Single A Minus ; fund rating), an open end income fund. The fund’s rating denotes a strong capacity to manage relative stability in returns and low exposure to risks.

The fund primarily invests in money market and debt securities having good credit quality and aims to earn a competitive rate of return for its unit holders.

The rating reflects good credit quality of fund’s investments, adequately diversified sectoral concentration in assets and low exposure against interest rate volatility. The liquidity profile of the fund is low as the majority of fund’s assets are invested in TFCs, ~60% at end-Mar12.

The exposure against non-performing instruments is considerably high (~9%). However, the recent restructuring development coupled with full-provision for some large exposures bodes well for the fund. However, the fund’s asset quality is susceptible to erosion owing to exposure against stressed investments.

The unit holding pattern is highly concentrated with single investor representing 99% of the total assets. However, comfort can be drawn from the sponsor’s investment. Meanwhile, the fund’s segment wise exposure is also highly concentrated.

The fund plans to increase its exposure in TFCs (~70%), going forward, and remaining portion in a mix of Government securities and term deposits with scheduled banks (rated A and above).The main risk factor affecting the stability of returns emanate from volatility in prices of TFCs amidst largely illiquid market for this segment.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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