ICRA has reaffirmed the credit risk rating of mfA1+ (pronounced m f A One plus) to UTI Liquid Fund –Cash Plan. The rating is the highest-credit-quality short-term rating assigned by ICRA to debt funds.

This scale applies to debt funds with weighted average maturity up to one year. Such funds would generally include liquid funds and cash funds. Benchmark maturity for this scale is 12 months. The rated fund carries the lowest credit risk, similar to that associated with short-term debt obligations rated in the highest-credit-quality category. ICRA has also reaffirmed the credit risk rating of mfAAA (pronounced m f triple A) to UTI Floating Rate Fund – Short-term Plan and UTI Liquid Plus Scheme. The rating indicates highest-credit-quality rating assigned by ICRA to debt funds. The rated debt fund carries the lowest credit risk, similar to that associated with long-term debt obligations rated in the highest-credit-quality category.

The ratings should, however, not be construed as an indication of the prospective performance of the Mutual Fund scheme or of volatility in its returns.

Asset Management Company and Fund Details

The two funds are mutual fund schemes of UTI Mutual Fund which was has been established as a Trust under the Indian Trusts Act, 1882 with State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India as the sponsors. UTI Asset Management Company Private Limited, incorporated under the Act, 1956 is the AMC to the fund. With a corpus of over Rs. 508 billion as on June 30, 2008 UTI Mutual Fund is the fourth largest fund house in the country.

Launched in June 2003, UTI Liquid Fund – Cash Plan is an open ended liquid scheme with a stated objective to generate steady and reasonable income, with low risk and high level of liquidity, from a portfolio of money market securities and high quality debt. The funds assets under management stood at Rs. 114 billion as on June 30, 2008 and an average residual maturity of around 5 months as on that date. The fund continues to maintain a high proportion of its investments rated at highest credit quality and has been maintaining an average residual maturity of 3-5 months in the past few months.

Launched in August 2003, UTI Floating Rate Fund – Short-Term Plan is an open-end income fund that would invest 65-100% in floating rate debt instruments with the balance in fixed rate debt securities.

The funds objective of the fund is to generate regular income through investment in a portfolio comprising substantially of floating rate debt / money market instruments, fixed rate debt / money market instruments swapped for floating rate returns and fixed rate debt securities and money market instruments. The fund’s corpus stood at Rs. 3.64 billion as on June 30, 2008 and an average residual maturity of around 18 months as on that date. The fund continues to maintain a high proportion of its investments rated at highest credit quality and has been maintaining an average residual maturity of 1-2 years in the past few months.

Launched in July 1999 as UTI Bond Advantage Fund and later christened to UTI Liquid Plus Fund, the key objective of this open ended debt scheme is to generate income through investments in quality oriented debt and Money Market Instruments. The funds assets under management stood at around Rs. 61.45 billion as on June 30, 2008 and an average residual maturity of around 7 months as on that date. The fund continues to maintain a high proportion of its investments rated at highest credit quality and has been maintaining an average residual maturity of 4-7 months in the past few months.

ICRA Credit Quality Rating Methodology for debt mutual fund schemes

ICRA’s mutual fund rating methodology is based on evaluating the inherent credit quality of the funds portfolio. As a measure of the credit quality of a debt fund’s assets, ICRA uses the concept of credit scores. These scores are based on ICRA’s estimates of credit risk associated with each exposure of the portfolio taking into account its maturity. To quantify the credit risk scores, ICRA uses its database of historical default rates for various rating categories for various maturity buckets. The credit risk ratings incorporate ICRA’s assessment of a debt fund’s published investment objectives and policies, its management characteristics, and the creditworthiness of its investment portfolio. ICRA reviews relevant fund information on an ongoing basis to support its published rating opinions. If the portfolio credit score meets the benchmark of the assigned rating during the review, the rating is retained. In an event that the benchmark credit score is breached, ICRA gives a month’s time to the debt fund manager to bring the portfolio credit score within the benchmark credit score. If the debt fund manager is able to reduce the portfolio credit score within the benchmark credit score, the rating is retained. If the portfolio still continues to breach the benchmark credit score, the rating is revised to reflect the change in credit quality.

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