ESCORTS MUTUAL FUND

ESCORTS TAX PLAN

SCHEDULE FORMING PART OF THE ACCOUNTS

SCHEDULE  9

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON 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,security transaction tax, custodian charges directly identifiable with an investment and service tax levied (if any) at the time of purchase but excludes interest accrued upto 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.

(d)  Based on the Guidance Note on Accounting for Investment in the Financial Statements of Mutual Funds issued by the Institute of Chartered Accountants of India, net unrealised gain or loss in the value of investment is determined separately for each category of investments.  The change in net unrealised loss between two balance sheet dates is recognised in the Revenue Account and the change in net unrealised gain is adjusted in the Unrealised Appreciation Reserve.

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)     Premium earned on equity stock options is recognised on the contract date, i.e. the date on which an option is written. Potential loss, if any, between premiums contracted and as prevailing at the year-end are provided.

(4)  Expenses are accounted on accrual basis.

1.3              Investment Management & Advisory Fees

                In accordance with the Investment Management Agreement, investment management and advisory fees payable to Escorts Asset Management Limited is chargeable at a rate of 1.25% of the daily average net assets of the Scheme.

1.4       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.

1.5       Marketing Expenses:    

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

1.6      Derivatives Transactions

NAV is adjusted by mark to market on daily basis for adverse difference between the strike price and market price of securities in respect of un-expired equity stock option written by the Fund. Any loss arising on exercise of option is recorded upon incurrence. Futures are valued by marking the underlying stock on daily basis. Premium earned on stock options is recorded on the contract date.

  2.        NOTES ON ACCOUNTS

2.1       Computation of Distributable Income:

2.2       Movement in Unit Capital

2.3       The aggregate value of purchases (excluding call money and derivatives’ transactions) during the year amounted to Rs.54,086,556/- (Rs. 19,749,933/-) i.e.225.90% (160.71%)of daily average net assets and aggregate value of sales (excluding call money and derivatives’ transactions) during the year amounted to Rs.46,688,437/- (Rs 16,513,272/-) i.e.195.00% (134.37%) of daily average net assets.

2.4       Associate Companies of Asset Management Company:

(a)    The Scheme has paid brokerage of Rs. 17,643/- (Rs. 31,976/-) to Escorts Securities Ltd. on purchase and sale of securities.

(b)   A sum of Rs. 45,510/- (Rs. 22,957/-) has been paid to Escorts Securities Ltd. as   brokerage towards the sale of units of the schemes during the period.

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 have been received from HDFC Bank Limited at the year-end, in this regard.

2.6      No provision for taxation has 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 include Rs. NIL (Rs. NIL) and  Rs. NIL     (Rs. 22,139/-)  respectively towards inter-scheme dues.

2.9       There are outstanding contracts at the year-end towards equity stock Options and Futures amounting to Rs. 2,938,000/- ( NIL ) and RS. 296,596  (Rs. 381,274 ) as per annexure 1. & annexure 2

2.10     The total income and expenditure (including change in unrealized depreciation in the value of investments) are 32.45% (39.39%) and 09.69 % (13.88%) respectively of Daily average 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 shown in the brackets 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

                                                                                                (K.K. MITAL)

 FUND   MANAGER

Per our report of even date

For S.N. DHAWAN & Co.

Chartered Accountants

(SURESH SETH)

PARTNER

Member Ship No – 10577

PLACE: NEW DELHI

DATE: 05^th September, 2007

ANNEXURE  - 1

ANNEXURE  - 1