ESCORTS INCOME PLAN

SCHEDULE FORMING PART OF THE ACCOUNTS

SCHEDULE  9

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS

1.         SIGNIFICANT ACCOUNTING POLICIES

1.1              Investments:

(1)       Transactions in securities are recognised as of the trade date. Where securities transactions take place outside the stock market, the transaction is recorded, in the event of purchase, as of the date on which an enforceable obligation to pay the purchase consideration is obtained or, in the event of sale, when an enforceable obligation to collect the sale proceeds or deliver the securities sold, as the case may be, is obtained.

(2)               The cost of investments, inter alia includes brokerage, stamp duty, cost of stamps, custodian charges directly identifiable with an investment and service tax levied (if any) at the time of purchase but excludes interest accrued up to the date of purchase. Any front-end discount / incentive received / receivable in respect of placement of debt instruments is reduced from the cost of investments.

(3) (a) Traded equity securities are valued at the closing (last trade) price on the valuation day and, if the same is not available, at the closing (last trade) price of the earliest previous day within not more than 30 days prior to the valuation day, for which a quotation is available on the National Stock Exchange, in the first instance or the Bombay Stock Exchange.

(b) Traded debt securities are valued at the closing (last trade) price on the valuation day and, if the same is not available, at the closing (last trade) price of the earliest previous day within not more than 15 days prior to the valuation day, for which a quotation is available on the National Stock Exchange.

(c)     Non-traded and thinly traded securities are valued in “good faith” in accordance with the guidelines for valuation of securities issued by SEBI from time to time and approved by the Board of Trustees. Valuation of equity shares is based on the net asset value and earnings capitalisation; valuation of debt securities is mainly based on the Yield to Maturity applied with reference to credit rating, benchmark yields, mandatory additional discounting factors and other criteria. Investments in securities having maturity not exceeding 182 days are valued at cost plus amortisation for premium/ discount.

(d) Government securities issued by Government of India are valued at prices indicated by CRISIL.

(d)   The guidance note on accounting for investment in the financial statement of Mutual Fund issued by the ICAI has been withdrawn with issuance of AS-30. Thus all investment by Mutual Fund is recorded at fair value as on the date of reporting the difference i.e. the resulting profit/loss being taken to the Profit & Loss account.

1.2              Revenue and Expense Recognition:

(1)  Interest and other income are accounted on accrual basis. Dividend is recognised on the date the share is quoted on an ex-dividend basis.

(2)  Gains and losses on sale of securities is determined by considering the weighted average cost.

(3)     Expenses are accounted on accrual basis.

1.3              Non-performing Assets and provisioning thereagainst

An asset is regarded as non-performing if interest and / or principal amount have not been received or remained outstanding for one quarter from the day such income / installment has fallen due. Income on non-performing assets is recognised on cash basis and accrued outstanding income is reversed. Provision is also created against the principal amount, in accordance with related SEBI guidelines.

1.4       Investment Management & Advisory Fees

Investment Management and Advisory Fees is payable to the Asset Management Company is chargeable at a rate of 1.25% on the basis of weekly average net assets, as per the applicable SEBI (Mutual Funds) Regulations, 1996.

1.5       Equalisation Account:

            Upon sale and/or repurchase of units, an amount equal to the distributable income per unit is taken to Equalisation Account; at the year end, the balance in such Equalisation Account is transferred to Revenue Account. The treatment does not, however, impact the net income of the Fund.

1.6       Marketing Expenses

Ongoing marketing expenses such as advertisement expenses, related printing charges and brokerage paid/payable to members of recognised Stock Exchanges/agents of the Mutual Fund towards sale of units are not considered as distribution charges.

1.7       Dividend Provision for dividend is based on the number of units issued or      outstanding under the Dividend Option of the Scheme as on the relevant record dates during the year.

2.        NOTES TO THE ACCOUNTS

2.1          Computation of Distributable Income:

2.2       Movement in Unit Capital:

2.3        The aggregate value of purchases (excluding call money transactions) during the    

            period amounted to Rs. 33,877,973/- (Rs. 250,951,638/-)i.e.71.59% (422.47%)

            of average Daily net assets and the aggregate value of sales (excluding call money

            transactions) during the period amounted to Rs. 32,649,361 /- (Rs. 217,470,807/-

           i.e. 68.99% (366.11%) of average Daily net assets.

2.4              Associate Company of Asset Management Company:

(a)    A sum of Rs.NIL (Rs. NIL) and Rs.4,777 /- (Rs. 61,552 /-) has been paid to Escorts Finance Limited and Escorts Securities Limited respectively as brokerage towards the sale of Units of the Scheme during the period.

(b)   The Scheme has paid brokerage of Rs. NIL (Rs. NIL) to Escorts Securities Ltd on purchase and sale of securities and transactions in derivatives.           

2.5              The Asset Management Company is satisfied that the Custodian of the Scheme, HDFC Bank Limited is maintaining the stock of assets of the Scheme in good order. Necessary confirmations / clarifications have been received from the custodian at the year end, in this regard.

2.6              Provision for taxation has not been made as the Mutual Fund is registered with Securities and Exchange Board of India and therefore, its income is exempt from Income Tax under section 10(23D)(i) of the Income-tax Act, 1961.

2.7       Computation of Management Fees:       

2.8        Other Receivables and Payables includes   Rs. NIL (Rs. NIL) and Rs. NIL (Rs. NIL) respectively towards inter-scheme dues.  

2.9        There are outstanding contracts at the year end towards equity stock futures amounting to Rs.NIL (Rs. NIL ) .

2.10          The total income and expenditure (excluding provisions and appreciation/depreciation) are 9.42% (11.62%) and 2.87% (2.93%) respectively of average daily net assets.

2.11          Figures of the previous year have been regrouped/ rearranged wherever considered necessary to make them comparable with current year’s figures.

2.12          Figures in the brackets shown in the Notes to the Accounts, relate to the previous year.

for Escorts Mutual Fund                                    for Escorts Asset Management Limited

(Trustee: Escorts Investments Trust Limited)

(RAJAN NANDA)                                                         (LALIT K. KHANNA)

CHAIRMAN                                                                 DIRECTOR

(DR. RAKESH KHURANA)                                          (S.C. KUCHHAL)                                           

DIRECTOR                                                                   DIRECTOR

Per our report of even date

S.N. DHAWAN & Co.                                              

Chartered Accountants                                                  

Registration No. 000050N

(SURESH SETH)

PARTNER

MEMBER SHIP NO - 10577

PLACE: NEW DELHI

DATE: