Annual Report for Fixed Maturity Schemes - Tata Mutual Fund

. Recognition, de-recognition and measurement
Regular purchases and sales of investments are recognised on the trade date – i.e. the date on which the Scheme‟s order of purchase
or sale of investment is executed. Investments include contracts for purchase of securities and exclude contracts for sale of securities,
for which deliveries are not received/collected.
Investments purchased are initially recognised at cost of acquisition. Cost of acquisition includes transaction costs such as brokerage,
stamp charges and other charges customarily included in the brokers note.
Investments are derecognised when the rights to receive cash flows from the investments have expired or the Scheme has transferred
substantially all the risks and rewards of ownership.
Subsequent to initial recognition, all investments are measured at fair values reflective of the realisable value of the securities / assets.
Gains or losses on sale of investments are determined using the “average cost method” and are recognised in the Revenue Account in
the period in which they arise either within “Income” if it is a gain or within “Expenses and Losses” if it is a loss. Changes in the
unrealised diminution in the value of investments, if any, between two balance sheet dates is recognised in the Revenue Account as
“Provision/(Reversal) for diminution in value of investments”. Changes in the unrealised appreciation in the value of investments, if
any, between two balance sheet dates is disclosed under appropriation account as “Increase / (Decrease) in unrealised appreciation in
the value of investments”. Unrealised gain in the value of investment is reduced from distributable income at the time of income
distribution.
c. Fair value estimation
Debt securities (including asset backed securities and money market instruments but excluding Government securities and
Treasury Bills):
Traded:
Upto 28th July, 2010, traded debt securities were being valued at the last quoted closing price on the principal stock exchange
(National Stock Exchange of India Limited) on which the security is traded on the valuation date.
Consequent to SEBI‟s circular (Ref: SEBI/IMD/CIR No.16/ 193388/2010) dated 2nd February, 2010 (the “SEBI Circular on
valuation of Debt Securities and Money Market Instruments”), with effect from 29th July, 2010, such securities are valued at the
weighted average price at which they are traded on the particular valuation day on the principal stock exchange (National Stock
Exchange of India Limited) on which the security is traded.
Non-traded, thinly-traded:
Based on the procedures determined by the Investment Manager and approved by the Trustee Company, the fair values of
thinly traded and non- traded debt securities have been determined as under:
Up to 28th July, 2010, the non – traded/ thinly traded debt securities having maturity over 182 days were categorised by the
Investment Manager as “investment grade” and “below investment grade”. The values applied by the Investment Manager for
“investment grade” debt securities were based on yield derived from the risk free benchmark yield and matrix of spread obtained
from CRISIL ( the agency being entrusted for the purpose by the Association of Mutual Funds in India ("AMFI")). The Scheme does
not have investments in „below-investment grade‟ securities.
Non – traded/ thinly traded debt securities with residual maturity of upto 182 days were valued on the basis of amortisation (cost /
last valuation price (as applicable) plus the difference between the redemption value and the cost / last valuation price (as applicable)
spread uniformly over the remaining maturity period of the instrument).
With effect from 29th July, 2010, non-traded / thinly traded debt securities (including floating rate securities) and Money Market
Instruments of over 91 days to maturity are valued based on yields arrived at by using a matrix of spread over the risk free
benchmark yield. The risk free benchmark yield and matrix of spread is obtained from CRISIL and ICRA (both agencies being
entrusted for the purpose by AMFI), which are aggregated to arrive at the average yield for valuation.