Press Release
JCR-VIS Reaffirms Fund Stability Rating of Meezan Islamic Income Fund
Karachi, August 15, 2013: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the Fund Stability Rating (FSR) of Meezan Islamic Income Fund (MIIF) at ‘A-(f)’ (Single A Minus(f)).
Net assets of the fund had reduced considerably in FY12; in the out-going year, the fund has been able to recoup the same, with net assets recorded at Rs. 2.6b at end-FY13. At year-end, around 37% of the fund was invested in cash and bank balances, followed by government backed securities (34%), corporate sukuk (13%) and commercial paper (8%). Increase in fund size has diluted the proportion of restructured assets, which collectively represented 6.7% of net assets at year-end. Overall exposure of the fund to credit risk is considered manageable, assuming restructured assets continue to make payments in line with the fresh repayment terms. Moreover, interest rate risk of the fund is expected to remain within manageable limits as return on assets is pegged to market benchmark rates.
The fund’s return benefited from reversal against provisions in the out-going year. With provisions to the extent of 68% and 31% taken against two restructured Sukuk, repayment in line with current terms will result in reversals in provisions, enhancing the return on assets. If fund size continues to grow, the positive impact will be diluted and the fund’s return will become more aligned with market benchmark rates, assuming no additional deterioration is witnessed in its risk profile. Investor concentration in MIIF has improved on a time line basis; there is nevertheless room for further improvement. Proportion of retail investors has increased over time, reducing the fund’s exposure to liquidity risk.
For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 021-35311861-70 or fax to 021-35311872-3.
Jamal Abbas Zaidi
Deputy CEO