DISCLOSURE DOCUMENT
For
PORTFOLIO MANAGEMENT SERVICE

OCTOBER 2020

The Risk Disclosure Document is a mandated document that has been filed with the Board along with the certificate in the specified format in terms of Regulation 22 of the SEBI (Portfolio Managers) Regulations, 2020

The purpose of the document is to provide essential information about Unifi’s (Portfolio Manager) portfolio services in a manner to assist and enable the investors in making informed decision for engaging a Portfolio Manager.

The necessary information about Unifi required by an investor before investing is contained in this document.

UNIFI CAPITAL PRIVATE LTD

11, KAKANI TOWERS.15, KHADER NAWAZ KHAN ROAD,
CHENNAI 600 006

 

SEBI Regn No: INP 000000613

DISCLOSURE DOCUMENT
For
PORTFOLIO MANAGEMENT SERVICE

OCTOBER 2020

  • The Document has been filed with the Board along with the certificate in the specified format in terms of Regulation 22 of the SEBI (Portfolio Managers) Regulations, 2020
  • The purpose of the document is to provide essential information about Unifi’s (Portfolio Manager) portfolio services in a manner to assist and enable the investors in making informed decision for engaging a Portfolio Manager.
  • The necessary information about Unifi required by an investor before investing is contained in this document. Kindly retain this document for future reference.
  • The name, phone number, e-mail address of the Principal Officer is:
  • Mr. K. Sarath Reddy
  • Telephone: 044-28331556/28332719
  • E-mail – sarath@unificap.com
    • THE INVESTOR HAS THE OPTION OF ENROLLING WITH UNIFI EITHER DIRECTLY OR THROUGH A DISTRIBUTOR OR THROUGH A REGISTERED INVESTMENT ADVISOR (RIA).

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    TABLE OF CONTENTS

    .
    Sl. No Particulars Page No.
    1 Disclaimer 4
    2 Definitions 4
    3 Description 5
    4 Penalties, Pending Litigations etc. 9
    5 Services Offered 10
    6 Risk Factors 40
    7 Client Representation 57
    8 Financial Performance 58
    9 Performance of Portfolio Manager 59
    10 Audit observations 61
    11 Nature of Expenses 61
    12 Execution of Trades 65
    13 Custodian 65
    14 Taxation 65
    15 Accounting policies 72
    16 Investors services 74
    17 Arbitration 75
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    1. Disclaimer clause

    The particulars of this Disclosure document have been prepared in accordance with the SEBI (Portfolio Managers) Regulations, 2020 and filed with SEBI. This document has neither been approved nor disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the contents of the document.

    2. Definitions

    In this document, unless the context otherwise requires: -

    1. a) “Act” means the Securities and Exchange Board of India, Act 1992.
    2. b) “Board” , “SEBI” means The Securities and Exchange Board of India
    3. c) “Body corporate” shall have the meaning assigned to it in or under clause (7) of section 2 of the companies Act 2013
    4. d) “Certificate” means a certificate of registration issued by the Board.
    5. e) “Chartered Accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949(38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act.
    6. f) “Corpus” The initial and additional amount of capital or Securities or combination thereof contributed by the Client for the management by the Portfolio Manager.
    7. g) “Custodian “means the entity appointed as custodian by the Portfolio Manager to provide custodial services and to act as a custodian on the terms and conditions as are agreed between the Custodian and the Portfolio Manager.
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    1. h) “Funds” means the monies managed by the Portfolio Manager, on behalf of the Client, pursuant to this Agreement as mentioned in the Application, placed by the Client from time to time with the Portfolio Manager for the purposes of being managed pursuant to this Agreement, and includes the proceeds of the sale or other realization of the Portfolio and interest, dividends and other monies realized from the Assets.
    2. i) “Regulations mean the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 as amended and modified from time to time and includes any circulars/notifications issued pursuant thereto.
    3. j) “Portfolio” means the Securities managed by the Portfolio Manager on behalf of the client.
    4. k) “Principal Officer” means a Director of the Portfolio manager who is responsible for the activities of portfolio management and has been designated as principal officer by the portfolio manager.

    3. Description

    (i) History, Present Business and Background of the Portfolio Manager.

    Unifi was incorporated on the 2nd of January 2001. Unifi obtained SEBI’s approval to become a member of the National Stock Exchange and commenced broking operations on the NSE on 6th August 2001.The company obtained SEBI approval to act as a Portfolio Manager in March 2002 and commenced operations from April 2002. The registration has been renewed periodically.

    Unifi has obtained registration in April 2005 as a depository participant with CDSL and commenced operations from July-2005. Unifi is also registered as a member with Bombay Stock Exchange since May 2008.


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    Unifi’s principal businesses are Portfolio Management, Stock Broking, Corporate Finance & Advisory and Depository services. Unifi is headquartered in Chennai and focuses on serving customers in the four Southern States, Mumbai and Delhi.

    Unifi was founded and managed by experienced Professionals. Unifi greatly values its independence in fulfilling its advisory role in a truly unbiased manner.

    (ii) Promoters of the Portfolio Manager, Directors and their Background.

    Mr. K. Sarath Reddy, Chairman and Managing Director of the company is the Principal Promoter of the company. His experience and other particulars are furnished hereunder.

    Mr. K. Sarath Reddy - Managing Director

    In a career spanning over 27 years, Mr. Sarath Reddy has led a variety of functions in the field of Investments. Having started his career in Mumbai with Standard Chartered Bank, he took the first opportunity to that came along to turn into an entrepreneur. He founded Unifi Capital in 2001 with a highly experienced team.

    Mr. Sarath Reddy was born on 16th August 1967. He has a BA in economics from Loyola College Chennai and MBA finance from Utah State University in USA.

    Mr. Sandeep Reddy - Member, Board of Directors

    Mr. Sandeep is the co-founder of Peepul Capital Investment Advisors Pvt. Ltd. Prior to the launch of Peepul Capital in 2000, he had 10 years of experience in Strategy Consulting with Price Water House in San Francisco and with Andersen Consulting in London.

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    He has been one of the early participants in the rapidly evolving Indian Private Equity industry having been active for over ten years. He takes overall responsibility in defining and executing Peepul Capital's strategy. In that role he has spawned and built a number of entities as well as driven migration through their lifecycles.

    Mr. Sandeep Reddy was born on 22nd July 1968.He has a BS in Computer Science and Finance from Utah State University and an MBA from IMD (Switzerland).

    Mr. K. Narendranath - Executive Director

    Mr. Narendranath is one of Unifi's co-founders. He manages day to day operations, finance and compliance. He began his financial services career in 1980. During a 20 year stint with a leading non-bank finance company, he has had hands-on exposure at a senior level to equipment leasing, hire purchase, and credit cards. Functionally, he has handled business development, client relationship, capital raising, compliance and back-room operations.

    Mr. Narendranath was born on 18th November 1953 and has a Masters degree in Economics from Madras Christian College.

    Mr. Maran Govindasamy- Executive Director

    Mr. Maran Govindasamy is one of Unifi’s co-founders and currently holds position of Executive Director. Over his 25 years in the capital markets, he has worked with some of the leading names in the industry. In addition to managing investments for some of Unifi’s most important relationships he has also been instrumental in spear heading Unifi’s initiatives in major markets like Mumbai and Delhi. His passion for value investing approaches help in designing niche investment themes for Unifi to pursue.

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    Mr. Maran was born on 29th July, 1971. He did his Bachelors in Computer Science.

    Mr. Christopher Vinod, Executive Director

    Mr. Christopher Vinod is one of Unifi’s co-founders and currently holds position of Executive Director. Armed with a Post Graduate Degree in Economics from Loyola College, Chennai and over 25 years of experience in capital markets, Chris heads the company's branches at Bangalore & Hyderabad and is also responsible managing client relationships with several HNIs and corporate leaders. Prior to joining Unifi, Chris was with Navia Markets Ltd. (1994 -2001), a Chennai based financial services firm that provides brokerage services for stocks, currencies and commodities. At Navia, he was responsible for building a strong franchisee network for the company, business development and managing client relationships. Christopher also managed a centralized order routing and risk management system.

    Mr. Christopher was born on 20th September 1972.

    (iii)Top 10 Group companies/Firms of the Portfolio Manager on Turnover basis (Latest audited financial statements may be used for this purpose).

    A wholly owned subsidiary, Unifi Financial Private Ltd has been incorporated on 14th March 2008

    (iv) Details of the services being offered: Discretionary/Non-Discretionary/ Advisory.

    The company offers Discretionary and Non-Discretionary Portfolio Management and Advisory Services, to Individuals, Family Offices, Firms, HUF, NRIs and Corporates.

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    4. Penalties, pending litigation or proceedings, findings of inspection or investigations for which action may have been taken or initiated by any regulatory authority.

    i. All cases of penalties imposed by the Board or the directions issued by the Board under the Act or Rules or Regulations made there under.

    There are no cases of penalties imposed by the Board under the Act or Rules or Regulations made there under.

    ii. The nature of the penalty/direction.
    Not applicable.

    iii. Penalties imposed for any economic offence and/ or for violation of any securities laws.
    Nil.

    iv. Any pending material litigation/legal proceedings against the Portfolio manager / key personnel with separate disclosure regarding pending criminal cases, if any.
    Nil.

    v. Any deficiency in the systems and operations of the portfolio manager observed by the Board or any regulatory agency.
    An inspection of the Books of accounts and other records was conducted by the Board during the year 2013. The Board observed a few deficiencies relating to complying with some of the Regulations for PMS.
    The Board has advised the Company to be careful and cautious and ensure the strict compliances of the provisions of the SEBI Act, SEBI (Portfolio Managers) Regulations 1993 and the directives/circulars issued from time to time while carrying out Portfolio Management Services activity.

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    vi. Any enquiry/ adjudication proceedings initiated by the Board against the portfolio manager or its directors, principal officer or employee or any person directly or indirectly connected with the portfolio manager or its directors, principal officer or employee, under the Act or Rules or Regulations made there under.
    Nil.

    5. Services Offered

    The Clients Portfolio is customized taking into account the clients preferences and objectives with reference to risk and reward as indicated in the clients application form. We believe that it is the consistency of returns that makes a portfolio grow over a period of time rather than large gains followed by large losses. While it is important to compare with stated benchmarks, it must be recognised that for an intelligent analysis 5 to 10 years are required i.e. sufficient time for at least 1 bull and bear cycle.

    Scope of Instruments

    Unifi’s expertise primarily lies in equities, derivatives, debt and equity mutual funds and other related instruments. Allocation of investible funds will be driven by our objective of optimising returns while keeping a careful eye on Risk.

    The Investment Approach

    Unifi currently has five distinct investment approaches:

    • Blended - Rangoli
    • BC AD (Business Consolidation After Disruption)
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    • Insider Shadow Fund
    • HoldCo Fund
    • Others (OT)

    The below mentioned Investment Approaches are closed for New Subscriptions.

    • Spin Off – New
    • Sector Trend Fund
    • The Green Fund
    • Deep Value at Discount
    • APJ-20
    • Event Arbitrage Fund

    i. Blended – Rangoli (Benchmark: BSE Midcap)

    Objective

    The Blended – Rangoli fund cherry picks the best opportunities from across seven thematic funds that Unifi manages. The mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and attractiveness of core fundamentals. The fund aims to thrive through market cycles and helps cutting down the investors switching cost and effort in migrating between different funds over time.

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    Investment Approach

    Value creation requires a mental model which goes beyond the obvious. It requires a meticulous mind-set which is able to sift through reams of information and assimilate only that which is relevant in identifying value accretive opportunities. Metaphorically this could be compared to searching the proverbial needle in a haystack. This fund investment approach will be to pick best opportunities from the following themes.

    Spin Off New: In a single corporate structure with multiple businesses, the sum of the value of the separate parts is often less than that of the whole. A de-merger of disparate businesses, unlocks the financial and management bandwidth required for the respective businesses to grow. Spin off fund invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.

    DVD: Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices. DVD invests in such businesses and exploits market inefficiencies.

    Holdco: Many holding companies are run as group holding companies rather than strategic investment companies. This results in a perennial discount in their valuations but such discounts are not a constant. The Holdco fund identifies strong underlying businesses and looks for significant valuation discounts that are likely to recover as promoters feel the heat of change in the regulatory landscape; or as underlying businesses exhibit significant growth.

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    APJ20: As always, markets fancy few sectors that have done well in the past ignoring the rest. Of the sectors which are less understood, few like speciality chemicals, agri, precision manufacturing have become globally competitive and are privy to an expanding market opportunity. APJ20 invests in firms that have evolved and are in a ripe position to benefit from such growth prospects.

    Green Fund: The investment focus of the green fund is on companies which provide products and services that help in reducing the carbon footprint in the environment and/or result in more efficient use of natural resources. Within the context of this approach, the sectors that have been identified for creating the portfolio are - emission control, energy efficiency, water management and waste management.

    Insider Shadow Fund (ISF): The Insider Shadow Fund invests in companies in which founders’ have acquired meaningful quantity of additional shares at market prices. Such an action demonstrates their conviction on company’s growth prospects or inherent value not captured in stock price at that point. The proposition is to understand and validate the founder’s perspective of value and gain from the eventual balancing of the value-price mismatch in the market.

    BCAD: The investment focus is on established companies in specific sectors which are leading the migration of market share from unorganized players to organized players. As India’s economy grows rapidly in scale and sophistication, several sectors are positioned to change dramatically over the next decade. Certain powerful trends are driving the shift in the balance of competitive advantage in favour of organized businesses.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years

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    Universe

    The fund’s investment universe would include the diverse investment opportunities within the following mentioned funds at any specific point of time: SPIN OFF, DVD, HOLDCO, APJ20, Green fund, Insider Shadow Fund and BCAD.

    The fund’s investments will be majorly concentrated in small and midcap space wherein it is difficult for “institutional” type of capital to invest and where Unifi’s relatively smaller size helps us to focus in niche areas of the market.

    Investment Risks

    Though careful and meticulous effort would be put in selecting only the best of opportunities’ within UNIFI’s fund universe, the risks here can originate from the time required for value unlocking in case of stocks picked from the Spin Off or Holdco universe. Other risks will include ones associated with illiquidity, change in approach change in business fundamentals and value destructive acquisitions in the case of stocks selected from the APJ, Green or DVD universe.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

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    ii. The BC AD Fund (Benchmark: BSE Midcap)

    Objective

    The investment focus is on growth oriented companies in specific sectors which are leading the migration of market share from unorganised players to organised players. As India’s economy grows rapidly in scale and sophistication, several sectors are positioned to change dramatically over the next decade. Certain powerful trends are driving the shift in the balance of competitive advantage in favour of organized businesses.

    Investment Approach

    India’s economy has a high proportion of unorganised businesses which are estimated to account for about 35% of the GDP. As the economy grows in size from the current $ 2.6 Tn to $ 5 Tn over the next decade, it will traverse certain social, technology, scale, legal, taxation and regulatory changes. These changes are likely to challenge the current business models of unorganized players in certain sectors.

    As a result, well established organized players in such sectors will gain market share along with improving margins, potentially generating very high earnings growth. The BC-AD fund has been structured to benefit from this imminent migration of market share from the unorganised segment to organised players. The fund would be investing in well-established organised players who would be gaining market share from the unorganised players thus posting higher revenue growth rate than that of their industry. The high top line growth along with the benefits of operating leverage would help them record a superior earnings trajectory over the next decade.

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    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

    Universe

    The Universe of Companies would be broadly selected from the following sectors:

    • Building materials
    • Consumer durables
    • Logistics
    • Personal grooming & Hygiene
    • Dairy
    • Retail & Jewellery
    • Healthcare
    • Hospitality & Entertainment
    • Alternative finance
    • Real Estate

    These sectors are only indicative of our current thinking and it is entirely possible that as our research progresses we might look at companies beyond these sectors.

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    Investment Risks

    The fund would focus on companies in sectors where it expects a gradual shift in consumer demand from the unorganized players to the organized. The investment process would involve analysing multiple sectors and drawing up the list of factors which would be triggers for the migration of demand to the organized space. The key risk would be the time required for the transition to start playing out within the selected sectors. There might be stocks/sectors wherein the anticipated migration might take longer than the initially estimated time periods. Thus, it is suggested that investors take a longer time horizon view when investing in this particular theme.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

    iii. Insider Shadow Fund (Benchmark: BSE Midcap)

    Objective

    The fund seeks to generate superior risk adjusted returns, in relation to the broad market, by investing in fundamentally sound companies which have repurchased its own shares or where its promoters’ have acquired additional shares at market prices. Typically, such an action by a company or a controlling shareholder demonstrates their conviction that the company’s growth prospects or inherent value has not been captured in its stock price at that point.

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    Unifi’s proposition is to gain from the eventual balancing of the value-price mismatch in the market by identifying and investing in such companies after a detailed review of their fundamentals and corporate governance standards.

    Investment Approach

    The basic approach is to invest in companies where the promoter or the company has acquired additional shares

    • At market prices either through creeping acquisition or buyback route
    • That seem to be motivated either by an undervalued stock price or an impending improvement in business prospects that are still to be reflected in the market price and
    • Where complete disclosures of stock purchases have been made to stock exchanges.
    • The underlying assumption behind this approach is that the managers and controlling shareholders have a clear advantage over other market participants and are well positioned to take sensible investment decisions especially in case of small and under-tracked companies. By limiting the investible universe to such companies, we believe that we would be able to improve the probability of achieving superior risk adjusted returns.

    We find that promoters typically use one or more of the following methods to increase their stake by:

    • Preferential issue of shares and/or warrants.
    • Merger of promoter owned private/public companies.
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    • Creeping acquisition in open market.
    • Voluntary open offers.
    • Subscribing to the unsubscribed public portion in rights issues.
    • Initiating the company to do a buyback either through market purchases or tender offer route.
    • While preferential issues invariably enable promoters to hike stake at a price substantially lower than the market price, mergers are also structured to get the same benefit. However, we would focus only on those companies where promoters increased stake by purchasing the shares at then-prevailing market prices or at a premium in any form, be it rights, creeping acquisition, tender offers or buybacks.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

    Universe

    Our universe is built from the news flow of disclosures made by promoters/executives/companies under Clause 7 & 8 of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations and Clause 13 of SEBI (Prohibition of Insider Trading) Regulations. We will never consider companies where such disclosures are not made, thereby clearly avoiding market rumours and speculation. Such disclosures are constantly screened and fed into our internal model based on which the universe is expanded / pruned. From the universe of such companies, we would select ideas to invest based on a bottom up approach that we have been practicing over the last six years.

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    Investment Risks

    While research supports the view that insider shadowing works best in the aggregate, in few cases it could result in negative value creation. Lehman Brothers did a USD 10 Billion buyback just a few months before bankruptcy. Even in Indian context, we have had similar instances as some promoters tend to get carried away in predicting that good times will continue to persist. Few promoters also just use this medium to send a signal without any genuine interest to buy. To address such risks, we will meticulously deploy a second layer of filtering based on the merit of fundamentals and scrutiny of the promoter’s behaviour.

    To quote, Warren Buffet: “Before investing in a company that is repurchasing its own shares, you should investigate the company fundamentals and its management quality. Overall, if a company purchases its own shares on a regular basis and its fundamentals appear sound, you should consider buying shares in the company”.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

    iv. HoldCo Fund (Benchmark: BSE 500)

    Objective

    The objective of the fund is to seek to unlock value by investing in listed holding companies across a wide array of industries. Holding companies in the fund’s universe are defined as those entities which hold stakes in other listed entities, and trade at a significant discount to

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    the NAV of the underlying assets. The Holdco fund identifies strong underlying businesses and looks for significant valuation discounts that are likely to recover as promoters feel the heat of change in the regulatory landscape; or as underlying businesses exhibit significant growth.

    Investment Approach

    The Fund would focus on holding companies which are sub-scale and run as group holding companies rather than strategic investment companies. These companies which are typically run by, for and of the promoter are the most likely ones to feel the heat of change in regulatory landscape. The Companies Act, 2013 have enabled certain shareholder rights and are likely to bring sweeping changes in how companies approach “Related Party Transactions”. The renewed thrust of MCA and SEBI in ensuring higher level of corporate governance could prompt promoters to consider delisting their holding companies, leading to value unlocking for public shareholders. There is a clear opportunity to plan well and buy assets with a fair value of Rs.100 at Rs.50 or lower. The intent is to engage with and nudge the promoters to unlock value through demerger, delisting, corporate restructuring etc.

    Secondly, when the Indian economy liberalised in the 90s, new opportunities such as insurance, asset management, credit cards, investment banking and brokerage were open to the private sector. Of the variety of firms that entered these areas, the greatest successes in terms of market share and profitability were ventures sponsored by leading financial institutions of the country. Over two decades, these new ventures have matured and many of them are being listed. The erstwhile promoters and sponsoring banks stand to gain disproportionately as the growth potential of their subsidiaries is captured in growing market capitalisation.

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    Given the lower risk profile of sectors such as insurance and asset management and their tremendous growth potential, we have an opportunity to invest in the parent’s equity and realise both gains in earnings from the consolidated entity as well as potential gain in valuation.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

    Universe

    Our universe will comprise firms of two types:

    • Firms that offer deep value i.e. where their current market capitalization is fraction of the market value of their investments.
    • Those institutions that have successfully incubated new ventures that have over time grown large and offer potential for rapid and sustained growth

    Investment Risks

    Illiquidity is the biggest risk beckoning the investor considering exposure to Holding Companies. Most of value unlocking in holding companies will have “pressure cooker” effect in price whereby a single event can overnight make the valuation convergence happen whether it is 100% or more. Till then the stock may remain sideways or even drop in a rising market. Price volatility is also an unavoidable phenomenon where the discount between fair value and market value converge in a bull market and widen in a bear market in addition to volatility in fair value itself.

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    Sophisticated investors believe risk is a chance for absolute loss of capital and since each stock is bought at steep discount to current price of a growing asset, chances are less for a capital loss. On the other hand, if we define risk as measured by standard deviation of the stock, then such stocks would fall under the high risk category.

    With respect to group entities in the financial services sector, risk pertains to the fortunes of underlying companies with varied risk profiles being tied together. Any mishap, especially on the credit side, in any of the businesses is likely to cast a shadow on the other companies.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund

    v. Others (OT)

    a) This investment approach is available for clients who entrust a relatively large corpus.

    b) For such clients who seek to have an option to participate and indicate certain preferences that should be accommodated in the Portfolio construction and securities selection.

    c) Securities are selected from the ideas predominantly from our existing themes in which we have already invested.

    This approach also allows for clients who are desirous of depositing their personal securities to be held along with the securities that we invest in.

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    vi. Spin Off – New (Benchmark: BSE Midcap)

    Objective

    The fund seeks to generate superior risk adjusted returns relative to market indices by investing in stocks of companies undergoing a demerger. Typically, such an action by the company will help remove the holding company discount that the market attributes and thereby enhance the stock's valuation. Unifi's proposition is to gain from the information and fundamental asymmetry linked value-price mismatch, by closely tracking the entire Spin-Off process and investing in such companies after a detailed review of their fundamentals.

    Investment Approach

    As businesses enter different life cycles, the stakeholders realise that the manner in which they attract different capital, financial, return metrics and consequently very different investor interests. As a result, this leads to a vastly altered valuation proposition for the consolidated entity that holds the different lines of businesses. Understandably, one business is deemed to be far more valuable than the other. But the consolidated value of the business does not in its entirety capture the same as it has to account for the lower valued business. In other words, the sum of the parts is almost always lesser than that of the whole.

    Corporate India has woken up to the fact that spinning off an unrelated business, or a business with a distinctly and vastly different growth profile is key to realizing the right value for the respective business, and is in the long term interest of its key stake holders. The Unifi Spin Off Fund seeks to identify such opportunities where the sum of the parts is greater than the whole and invest in such parts to unlock value that was hitherto lost in a conglomerate’s consolidated set of books.

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    The fund will invest only in listed Indian equities. The indicative tenure of the fund is three years.

    Universe

    Our universe is built from the Spin-offs approved by Boards of respective companies as filed with the stock exchanges. At any point in time, our portfolio may include 20% of companies that may not have publicly announced a demerger but we believe, through our primary research, are close to doing so. From the universe of such companies, we would select ideas to invest based on a bottom up approach that we have been practicing over the last twenty years.

    Investment Risk

    While various research reports support our inferences about the outperformance potential of Spin-offs, the skewed return performance of the stocks suggest that the portfolio will likely to have higher volatility in relation to broader markets. Since the Spin-off approach is based on the hypothesis of identifying a stock valued at X, based on prevailing peer valuation of respective businesses, and buying it at or below 0.7X; it is fair to expect that a Spin-off portfolio will have lesser capital risk than broader markets, but that does not protect us from poor execution by management. Lack of sustained transaction flow is a possible risk.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

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    vii. Sector Trend Fund (Benchmark: Sensex)

    Objective

    Our objective is to build a Long Term portfolio of large cap stocks that will seek to generate superior risk adjusted return relative to the benchmark (SENSEX). The underlying driver of this style is to align with sectors and companies that are in the favourable end of the business cycle and underweighting sectors facing industry head winds. The portfolio will largely (>85%) consist of companies within the blue chip universe of BSE200.

    Investment Approach

    The investment approach will be to manage differential sector exposure levels to constituents of BSE 200, relative to the Sensex. Alpha will be generated by maintaining an overweight stance on sectors expected to lead the market and by going underweight/ avoiding sectors that are expected to lag the market.

    Methodology: Research shows that no two sectors lead the market performance in consecutive years. Meaning, at different points in time, different sectors drive the markets. As India’s economy grows, certain sectors will enjoy growth rates faster than the others due to their inherent strengths, industry cycles and other macro-economic factors. Portfolio weights will be decided on the basis of two parameters (a) Current Economic Indicators and (b) Company Fundamentals.
    Sector weights will be determined on the basis of companies most expected to benefit from the current economic indicators (for instance, interest rates, foreign exchange movements, global economic health and others) business cycles.

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    The investment approach is to identify and participate in growth as defined by (a) visibility of medium to long term earnings, (b) strong balance sheet metrics, (c) competitive MOAT and, (d) how the risk/reward is positioned at existing valuations. The fund manager at any given point in time reserves the flexibility to participate in an opportunity outside of BSE200 that is backed by in-house fundamental conviction.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

    Investment Risk

    The Portfolio will comprise of approximately 20-25 stocks. Exposure per company will range between 2-10%. Typically, we will underweight/overweight a sector to the extent of 25%-200% of its weight in the Sensex. In any case, no sector will constitute more than 40% of the portfolio. The average market capitalization of the portfolio will be more than the median market capitalization of BSE 200. While the portfolio focuses primarily on a buy and hold approach , we will balance the same with a rational approach to selling when fundamentals have deteriorated or valuations become too demanding even in the face of reasonable growth prospects in the long run. Derivatives will typically not be used except on rare occasions as a hedge, but never for leverage. Risks include general market risks, sector selection risk and valuation downgrade risks.

    Portfolio Structure

    The portfolio is likely to have around 20 – 25 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

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    viii. The Green Fund (Benchmark: BSE Smallcap)

    Objective

    The investment focus of the green fund is on companies which provide products and services that help in reducing the carbon footprint in the environment and/or result in more efficient use of natural resources. Within the context of this approach, the sectors that have been identified for creating the portfolio are - emission control, energy efficiency, water management and waste management. Developing a greener business ecosystem requires a long term perspective.

    Investment Approach

    The Fund will focus on investing in companies which would provide the support infrastructure for a “Green Economy” This would include manufacturers/producers of renewable energy systems , organic chemicals, emission control products, energy efficiency products, water & waste management solutions. As this is an evolving theme newer business models are expected to develop during the course of time. Unifi’s key strength has been its ability to identify the next generation of winners from the small and midcap space. In continuation of this approach, Unifi would primarily focus in the small and midcap space to identify companies which fit into the Green theme.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

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    Universe

    The Universe of Companies would be broadly selected from the following sectors:

    • Renewable & Alternative energy
    • Energy efficiency
    • Water infrastructure & technologies
    • Pollution reduction
    • Waste recycling and management
    • Environmental support services
    • Green Chemicals

    These sectors are only indicative of our current thinking and it is entirely possible that as our research progresses we might look at companies beyond these sectors. But in all cases the Green theme would be the underlying basis for selection.

    Investment Risks

    The foundation for the Green theme is predicated on climate change, the effect of which if not controlled or reversed has the potential to threaten the very existence of humanity within the next 100 years. Therefore, it is quite clear that the criticality of the green theme will become even more evident in the future. Nonetheless, from an investment perspective, there are certain underlying risks investors should be aware of:

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    • Regulations would be one of the important drivers in the transformation of the economy into a green economy. However, sometimes due to short-term political considerations, the government of the day might hesitate to legislate certain key regulations. For example: The incoming Trump administration has promised to roll back some of the existing environmental regulations.
    • Technology is playing a key role in many aspects of the evolving green economy across the world. Current technologies could be overshadowed and rendered obsolete due to new innovations and discoveries. In this backdrop, the business models of some of the companies in which we invest may become redundant/obsolete due to technology disruption.
    • As this is an evolving theme, there could be a possibility of high concentration risk due to limited availability of investable ideas under this theme.
    • The hype created around the renewable energy space has attracted significant number of new players including businesses from other industries. This has the potential to drive down energy prices to a level which would make the renewable sector unappealing from an investment perspective.
    • Due to the evolutionary nature of this theme, to realize the full value of our investments would require a long-term outlook. During the interim period, significant volatility could be experienced in the value of our investments.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

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    ix. Deep Value at Discount (DVD) (Benchmark: BSE Midcap)

    Objective

    The fund seeks to achieve above-average returns with below-average risk by exploiting inefficiencies. Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices.

    Investment Approach

    The Fund concentrates on exploiting inefficiencies in the market. Market inefficiencies typically arise in the following situations:

    • Over-reaction to a short-term negative event, a poor earnings report for example.
      From Contrarian Investment, Extrapolation and Risk (Lakonishak, Schleifer and Vishny):
      “Putting excessive weight on recent past history, as opposed to a rational prior, is a common Judgment error in psychological experiments and not just in the stock market.”
    • A sector that is currently temporarily depressed.
    • A business that is in the midst of a turnaround.
    • Widespread market dislocation driven by a geo-political/economic shock.
    • Institutional imperative of benchmarking that causes portfolio managers to chase businesses with good recent business performance and sell those that haven’t.
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    • Large corpuses under institutional management that suppress the incentive to seek out small companies that aren’t widely followed or understood.
    • Institutional reluctance to purchase, and disclose, companies with recent “negative” headlines.
    • Indiscriminate selling e.g. a margin call on a promoter pledge.
    • Corporate restructurings such as demergers or spin-offs.
    • High-uncertainty but low-risk situations.

    The fund will invest only in listed Indian equities. The indicative tenure of the fund is three years.

    Universe

    The Fund’s primary source of investment ideas will come from a custom screener that is designed to filter companies whose stock has underperformed relative to the business over a 5-year time period by a significant margin (20% or greater). Benjamin Graham and David Dodd’s text titled ‘Security Analysis’, often labelled the Bible of Value Investing, starts with this Horace quote that is appropriate in this context: “Many shall be restored that are now fallen and many shall fall that are now in honour.” Another source of ideas will be news flows of disclosures made by insiders/companies under Clause 7&8 (Substantial Acquisition of Shares and Takeovers) and clause 13 (Prohibition of Insider Trading) of SEBI Regulations. The Fund will also source ideas from spin-off announcements from companies that have been disclosed to the exchanges. All ideas that have been so sourced will be subject to the rigorous, bottom-up, fundamental analysis that Unifi Capital has been practicing over the last decade.

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    Stocks in the portfolio will be predominantly within the market capitalization range of Rs.1000 cr and Rs.30,000 cr. The fund may also consider opportunities outside of this range.

    Investment risks

    While the approach itself is rooted on buying at a discount to conservative valuation, there nevertheless exist possibilities for negative surprises in individual securities including, but not limited to:

    • An issue that had been assessed as being temporary morphing into a long-term fundamental deficiency
    • Erosion of a moat that had previously been assessed as being durable
    • Value-destroying acquisitions
    • Change in business strategy/management behaviour that are at odds with prior communication

    However, the emphasis on price paid for each individual security should protect the overall portfolio from the possibility of a significant permanent loss of capital.

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

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    x. APJ-20 (Benchmark: BSE Midcap)

    Objective

    The Fund seeks to achieve superior absolute returns with below-average risk over a horizon of 5 years. The thematic approach focuses on sectors that will benefit from the next stage of India’s growth on the back of improvement in India’s economic and policy climate. APJ20 invests in firms that have evolved and are in a ripe position to benefit from such growth prospects.

    Investment Approach

    We believe that select participants in industries such as (a) agriculture, (b) speciality chemicals, (c) mining, (d) hi tech manufacturing and (e) infrastructure will see a new wave of growth over the next 5 years and will be a direct beneficiary of India’s macro policy initiatives as well as inherent demographic strengths it has built over a period of time.

    Over the years, each of the target sectors has built a niche set competencies that have bordered on being disruptive. This has translated to them enjoying a quasi-oligopolistic status in their industry. However, these developments in absolute terms are at a small number. The evolution of the end user industry is such that, this base is poised to experience high growth and operating advantage over the next few years. In other words, each of these firms, have a high inbuilt option to participate in a disproportionate pay off. Our endeavour is to participate with concentrated positions across sectors that will be a direct or proxy beneficiary of the growth in the specified industries. While our study of the opportunities reveals the underlying and obvious risks that could play out in future, we believe the risk reward equation is favourable to an equity investor at current valuations considering the next 5 years’ potential growth.

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    The fund will invest only in listed Indian equities. The indicative tenure of the fund is five years.

    Universe

    The Fund’s primary source of investment ideas will come from firms within industries that are a proxy to the following industries: (a) agriculture, (b) speciality chemicals, (c) mining, (d) hi tech manufacturing and (e) infrastructure. The investee companies would necessarily be one that has built a niche for itself over the years and is set to leverage on the same to deliver a pace of return that is disproportionate on the upside, in the coming years.

    Investment risks

    The key risk is a sustained under performance in all or select components of the Indian economy which will then automatically slow down the pace of growth of our investment universe as well. Also, risks may emanate from adverse policy climate or regulations that may affect the operations of the industry as such. In addition, the micro level risks include:

    • Inability to grow revenues in sync with expectations previously communicated and thought reasonable
    • Change in the macro industry structure due to which margins may come under cloud
    • Wrong full capital allocation across capital expenditure or expensive acquisitions
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    • Change in business strategy/management behaviour that are at odds with prior communication
    • Governance issues

    Portfolio Structure

    The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

    xi. Event Arbitrage Fund (Benchmark: Nifty G-Sec Composite Index)

    Objective

    The fund seeks to generate stable absolute returns that are consistently superior to conventional fixed income instruments by identification and quick execution of low risk – moderate gain event arbitrage opportunities arising in the equity markets from time to time. Additionally, nominal and high yield debt would be considered to ensure optimum utilisation of funds and enhance returns with uncompromising emphasis on capital preservation.

    Investment Approach

    The core investment approach is to exploit corporate event arbitrage opportunities in the listed capital markets that inherently have limited correlation to economic cycles and market volatility. These opportunities are driven by corporate events like mergers, acquisitions, delisting and buyback of shares through a “tender offer”. The risk- return pay-off in most of such deals is deal-specific and hence has limited correlation to market cycles.

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    Corporate events like mergers, acquisition, enhancement of stake in the companies, buy back of shares etc lead to any of the following:-

    • Share of one company is swapped with shares of another company in a pre-specified ratio. An entity, other than promoters, acquires more than 25 percent stake in a company. It is required to make open offer to the shareholders to acquire another 26 percent as per the SEBI Substantial Acquisition of Shares and Takeover Regulations, 1997.
    • An existing promoter wants to increase the stake in the company or delist the company, hence gives open offer to acquire additional shares.
    • A company decides to buy-back its own shares.

    Typically, the price at which the buyer makes an offer for purchase is higher than the prevailing market price so as to induce shareholders to offer their shares. Arbitrage opportunities emerge in such cases due to the perceived discount in the pre-event market price in relation to the open offer and the post-event price, occurring largely due to asymmetric information distribution, difference in investment objectives and expectation amongst investors. In case of swap of shares there could be differences in the market price of the two companies, which do not correctly reflect the swap ratio and throws up an arbitrage opportunity. Our expertise lies in identifying and quickly converting these opportunities into profit.

    Event arbitrage also is possible in Initial Public Offers (IPO) segment whose activity tends to peak in buoyant markets. Selective participation in IPOs through measured applications in order to take advantage of the “proportionate allotment” system could be quite profitable. Such IPO arbitrage requires a much disciplined approach in timely exit.

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    Unifi is a registered member of both cash market segment and derivatives segment of the National Stock Exchange. Hence from time to time, we are able to locate arbitrage opportunities across the two segments execute them quickly to offer risk-free good returns to the investors.

    Generally, we participate in those opportunities where –

    • there is sufficient liquidity in the scrip
    • the management is reasonably sound
    • the process of share acquisition is completely transparent, and,
    • where the balance of risk-reward after taking into account the possibility of non-acceptance of shares offered (in case of public tenders) and the capital loss/risk on the shares not accepted is reasonably estimated to be in our favour.

    Nominal and High Yield Debt: It is quite possible that there may not sufficient Event Arbitrage opportunities at a given point of time. Hence, we do invest in debt / fixed income papers either short term or with high liquidity instead of parking money in low yielding liquid mutual funds. The focus is on opportunities in the AA to Investment Grade segment to optimize after tax yields while balancing risks. Typically, all debt investments are made with Hold to Maturity (HTM) mind-set but some of it could be traded opportunistically to maximize capital appreciation or minimize risk. The returns from this approach arise on account of periodical coupon accruals as well as capital gains. Credit and credibility assessment of counter parties, collaterals, structures as well as intermediaries involved will carried out rigorously before getting into any opportunity.

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    Strategies Instruments Min-Max Allocation
    Event Arbitrage Arbitrage opportunities in Listed Equities arising from open offers, delistings, mergers and de-mergers, IPOs and Cash-Futures 0-100%
    High Yield Bonds Commercial Papers, NCDs, Sub-Debt and Tax Efficient Preference Shares of Alternative NBFCs focusing on Affordable Housing, SME, CV and Micro Finance typically rated between AA- to BBB-; Secured Structured Debt 0-25%
    Nominal Bonds Traded corporate bonds, commercial papers, NCDs, Sub-Debt Papers, Perpetual Bonds, Preference Shares of various Indian Companies typically rated between AAA to A- 0-100%

    Investment Risk

    Investments in Tender Offers are done with certain underlying assumptions as regards the offer completion timelines, tendering pattern and post offer market price. While these assumptions are backed up by detailed analysis of various fundamental and behavioural aspects including historical trends, the actual occurrences may or may not be as per our expectations. Any adverse outcomes contrary to our hypothesis could result in losses and negatively impact the overall portfolio returns. As is the case with any debt investments, the fund’s fixed income portfolio is also subject to credit, liquidity and price risks. Firm adherence to company-specific limits along with a complete bottom-up review of the issuer company and the management abet us to manage the credit risk.

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    However, illiquidity of corporate bonds, given the shallowness of debt markets in India, is something we have to live with. We are constantly looking to increase our network of debt market intermediaries to help us create liquidity in case the need arises. It is subject to price volatility due to changes in interest rates especially if RBI changes its policy stance. As we have structured this part of the allocation with a hold-to-maturity mind-set and are comfortable with the carry yield, we would not be unduly concerned about the intermediate price fluctuations.

    6. Risk factors

    • Securities investments are subject to market risks and there can be no assurance or guarantee that the fund's objectives will be achieved.
    • As with any investment in securities, the market value may go up or down depending on the various factors and forces affecting the capital markets.
    • Past performance of the Portfolio Manager does not indicate the future performance of the strategies managed by the Portfolio Manager.
    • Trading volumes, settlement periods, regulatory and legal issues and transfer procedures may restrict the liquidity of investments made by the funds leading to delays in receipt of proceeds from sale of securities. This may cause the time taken for processing redemption of investment to be significant.
    • The performance of a fund may be affected by changes in government policies, regulation, general levels of interest rates and risk associated with trading volumes, liquidity and settlement systems in the markets.
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    • Investments in debt instruments are subject to default risk and interest rate risk. Interest rate risk results from changes in demand and supply for money and other macroeconomic factors and create price changes in the value of the debt instruments. Consequently, the value of the fund may be subject to fluctuation. Generally, prices of long term securities fluctuate more in response to interest rate changes than short term securities.
    • Investments in debt instruments are subjective to reinvestment risks as interest rates prevailing on interest or maturity due dates may differ from the original coupon of the bond, which might result in the proceeds being invested at a lower rate.
    • Engaging in securities lending is subject to risks related to fluctuations in collateral value/settlement/liquidity/counter party.
    • The Portfolio Manager or any of its associates is not responsible or liable for any loss resulting from the operation of the Service.
    • The strategies may also use various derivatives and hedging products from time to time as would be available and permitted by SEBI, in an attempt to protect the value of the portfolio and enhance clients’ interest. In case the fund utilizes any derivatives under the regulations, the fund may in certain situations, be exposed to price risks.
    • The fund invests in arbitrage opportunities arising from tender offers due to buy back of shares, and tender offers due to mergers and acquisitions in India and Overseas. Such corporate events are exposed to delays on account of litigation, and risk of withdrawal by a seller/buyer/counter-offerer, change in government policy/regulation exposing the fund to significant price risks.
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    • Most companies in this universe are in high/highest corporate tax brackets. Moreover, India being a price sensitive market, any change in excise structure would impact selling price, demand and/or company margins. Also, increases in personal taxes correspondingly reduce disposable income, thereby reducing consumption. Hence any modification to existing tax rate or structure would impact business performance.
    • The universe is to a great extent dependent on strong consumer spending, to be able to deliver strong performance. Political uncertainty creates a weaker consumer environment, as individuals defer purchases until discerning a more secure, stable environment (often referred to as the “feel good factor”).
    • The performance of the Indian economy is closely related to the performance of the monsoon. It directly impacts agricultural production and therefore rural incomes which is an important determinant of consumer demand. Industrial growth is also therefore indirectly dependent on the monsoon.
    • The Portfolio Manager has not authorized any person to give any information or make any representations, either oral or written not stated in the Disclosure Document in connection with the fund.
    • Prospective investors are advised not to rely upon any information or representations not incorporated in the Disclosure Document as the same have not been authorized by the Portfolio Manager. Any investment made by any person on the basis of statements or representations which are not contained or which are inconsistent with the information contained in the Disclosure document shall be solely at the risk of the investor.
    • The portfolio Manager recognizes that diversification of risk through allocation of capital across multiple investments is essential. However the actual limits with reference to any specific investment are left to the judgment of the Fund Manager.
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      While this provides flexibility to optimize investment returns it could potentially have an adverse impact in the event of underperformance of a large exposure, if any.

    • The Portfolio Manager is a member of the National Stock Exchange and The Bombay Stock Exchange. The secondary Market transactions are executed by its Secondary Markets Business group in compliance with the relevant SEBI regulations and are strictly kept at an arm’s length. However it must be recognised that conflicts of interest may/do arise and they are handled with due care.

    Basic Risks involved in Trading on the Stock Exchanges

    The basic risks involved in trading on the Stock Exchanges ( National Stock Exchange of India ("NSE") / (The Stock Exchange, Mumbai ( “BSE”) has been formulated by the Exchanges in coordination with the Securities and Exchange Board of India ("SEBI") and contains important information on trading in Equities and F&O Segments of NSE / BSE. All prospective constituents should read this before trading on Capital Market/Cash Segment or F&O segment of the Exchanges.

    It must be clearly understood by you that your dealings on NSE/BSE through a member shall be subject to your fulfilling certain formalities set out by the member, which may inter alia include your filling the know your client form, client registration form, execution of an agreement, etc., and are subject to the Rules, Byelaws and Regulations of NSE/BSE and its Clearing Corporation, guidelines prescribed by SEBI and in force from time to time and Circulars as may be issued by NSE/BSE or its Clearing Corporation/Clearing House and in force from time to time.

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    NSE/BSE does not provide or purport to provide any advice and shall not be liable to any person who enters into any business relationship with any trading member and/or sub-broker of NSE/BSE and/or any third party based on any information contained in this document. Any information contained in this document must not be construed as business advice/investment advice. No consideration to trade should be made without thoroughly understanding and reviewing the risks involved in such trading. If you are unsure, you must seek professional advice on the same.

    1. In considering whether to trade or authorize someone to trade for you, you should be aware of acquainted with the following:-

    1.1 Risk of Higher Volatility:

    Volatility refers to the dynamic changes in price that securities undergo when trading activity continues on the Stock Exchange. Generally, higher the volatility of a security/contract, greater is its price swings. There may be normally greater volatility in thinly traded securities/contracts than in active securities/contracts. As a result of volatility, your order may only be partially executed or not executed at all, or the price at which your order got executed may be substantially different from the last traded price or change substantially thereafter, resulting in notional or real losses.

    1.2 Risk of Lower Liquidity:

    Liquidity refers to the ability of market participants to buy and/or sell securities/contracts expeditiously at a competitive price and with minimal price difference. Generally, it is assumed that more the numbers of orders available in a market, greater is the liquidity.

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    Liquidity is important because with greater liquidity, it is easier for investors to buy and/or sell securities / contracts swiftly and with minimal price difference, and as a result, investors are more likely to pay or receive a competitive price for securities / contracts purchased or sold. There may be a risk of lower liquidity in some securities / contracts as compared to active securities / contracts. As a result, your order may only be partially executed, or may be executed with relatively greater price difference or may not be executed at all.

    1.2.1 Buying/selling without intention of giving and/or taking delivery of a security, as part of a day trading strategy, may also result into losses, because in such a situation, stocks may have to be sold/purchased at a low/high prices, compared to the expected price levels, so as not to have any obligation to deliver/receive a security.

    1.3 Risk of Wider Spreads:

    Spread refers to the difference in best buy price and best sell price. It represents the differential between the price of buying a security and immediately selling it or vice versa. Lower liquidity and higher volatility may result in wider than normal spreads for less liquid or illiquid securities / contracts. This in turn will hamper better price formation.

    1.4 Risk-reducing orders:

    Most Exchanges have a facility for investors to place "limit orders”, "stop loss orders" etc". The placing of such orders (e.g., "stop loss” orders, or "limit" orders), which are intended to limit losses to certain amounts, may not be effective many a time because rapid movement in market conditions may make it impossible to execute such orders.

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    1.4.1 A "market" order will be executed promptly, subject to availability of orders on opposite side, without regard to price and that, while the customer may receive a prompt execution of a "market" order, the execution may be at available prices of outstanding orders, which satisfy the order quantity, on price time priority. It may be understood that these prices may be significantly different from the last traded price or the best price in that security

    1.4.2 A "limit" order will be executed only at the "limit" price specified for the order or a better price. However, while the customer receives price protection, there is a possibility that the order may not be executed at all.

    1.4.3 A stop loss order is generally placed "away" from the current price of a stock / contract, and such order gets activated if and when the stock / contract reaches, or trades through, the stop price. Sell stop orders are entered ordinarily below the current price, and buy stop orders are entered ordinarily above the current price. When the stock reaches the pre-determined price, or trades through such price, the stop loss order converts to a market/limit order and is executed at the limit or better. There is no assurance therefore that the limit order will be executable since a stock / contract might penetrate the pre-determined price, in which case, the risk of such order not getting executed arises, just as with a regular limit order.

    1.5 Risk of News Announcements:

    Issuers make news announcements that may impact the price of the securities/contracts. These announcements may occur during trading, and when combined with lower liquidity and higher volatility, may suddenly cause an unexpected positive or negative movement in the price of the security / contract.

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    1.6 Risk of Rumours:

    Rumours about companies at times float in the market through word of mouth, newspapers, websites or news agencies, etc. The investors should be wary of and should desist from acting on rumours.

    1.7 System Risk:

    High volume trading will frequently occur at the market opening and before market close. Such high volumes may also occur at any point in the day. These may cause delays in order execution or confirmation.

    1.7.1 During periods of volatility, on account of market participants continuously modifying their order quantity or prices or placing fresh orders, there may be delays in order execution and its confirmations.

    1.7.2 Under certain market conditions, it may be difficult or impossible to liquidate a position in the market at a reasonable price or at all, when there are no outstanding orders either on the buy side or the sell side, or if trading is halted in a security due to any action on account of unusual trading activity or stock hitting circuit filters or for any other reason.

    1.8 System/Network Congestion:

    Trading on NSE/BSE is in electronic mode, based on satellite/leased line based communications, combination of technologies and computer systems to place and route orders.

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    Thus, there exists a possibility of communication failure or system problems or slow or delayed response from system or trading halt, or any such other problem/glitch whereby not being able to establish access to the trading system/network, which may be beyond the control of and may result in delay in processing or not processing buy or sell orders either in part or in full. You are cautioned to note that although these problems may be temporary in nature, but when you have outstanding open positions or unexecuted orders, these represent a risk because of your obligations to settle all executed transactions.

    2. As far as Futures and Options segment is concerned, please note and get yourself acquainted with the following additional features:-

    2.1 Effect of "Leverage" or "Gearing"

    The amount of margin is small relative to the value of the derivatives contract so the transactions are 'leveraged' or 'geared'. Derivatives trading, which is conducted with a relatively small amount of margin, provides the possibility of great profit or loss in comparison with the principal investment amount. But transactions in derivatives carry a high degree of risk.

    You should therefore completely understand the following statements before actually trading in derivatives trading and also trade with caution while taking into account one's circumstances, financial resources, etc. If the prices move against you, you may lose a part of or whole margin equivalent to the principal investment amount in a relatively short period of time. Moreover, the loss may exceed the original margin amount.

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    • Futures trading involves daily settlement of all positions. Every day the open positions are marked to market based on the closing level of the index. If the index has moved against you, you will be required to deposit the amount of loss (notional) resulting from such movement. This margin will have to be paid within a stipulated time frame, generally before commencement of trading next day.
    • If you fail to deposit the additional margin by the deadline or if an outstanding debt occurs in your account will be liable for any losses incurred due to such close-outs.
    • Under certain market conditions, an investor may find it difficult or impossible to execute transactions. For example, this situation can occur due to factors such as illiquidity i.e. when there are insufficient bids or offers or suspension of trading due to price limit or circuit breakers etc.
    • In order to maintain market stability, the following steps may be adopted: changes in the margin rate, increases in the cash margin rate or others. These new measures may also be applied to the existing open interests. In such conditions, you will be required to put up additional margins or reduce your positions.
    • You must ask your broker to provide the full details of the derivatives contracts you plan to trade i.e. the contract specifications and the associated obligations.

    2.2. Risk of Option holders:

    • An option holder runs the risk of losing the entire amount paid for the option in a relatively short period of time. This risk reflects the nature of an option as a wasting asset which becomes worthless when it expires. An option holder who neither sells his option in the secondary market nor exercises it prior to its expiration will necessarily lose his entire investment in the option.
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      If the price of the underlying does not change in the anticipated direction before the option expires to an extent sufficient to cover the cost of the option, the investor may lose all or a significant part of his investment in the option.

    • The Exchange may impose exercise restrictions and have absolute authority to restrict the exercise of options at certain times in specified circumstances.

    2.3. Risk of Option Writers:

    • If the price movement of the underlying is not in the anticipated direction, the option writer runs the risks of losing substantial amount.
    • The risk of being an option writer may be reduced by the purchase of other options on the same underlying interest and thereby assuming a spread position or by acquiring other types of hedging positions in the options markets or other markets. However, even where the writer has assumed a spread or other hedging position, the risks may still be significant. A spread position is not necessarily less risky than a simple 'long' or 'short' position.
    • Transactions that involve buying and writing multiple options in combination, or buying or writing options in combination with buying or selling short the underlying interests, present additional risks to investors. Combination transactions, such as option spreads, are more complex than buying or writing a single option. And it should be further noted that, as in any area of investing, a complexity not well understood is, in itself, a risk factor. While this is not to suggest that combination strategies should not be considered, it is advisable, as is the case with all investments in options, to consult with someone who is experienced and knowledgeable with respect to the risks and potential rewards of combination transactions under various market circumstances.
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    3. General

    3.1 Commission and other charges

    Before you begin to trade, you should obtain a clear explanation of all commission, fees and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.

    3.2 Deposited cash and property

    You should familiarise yourself with the protections accorded to the money or other property you deposit particularly in the event of a firm insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which has been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall. In case of any dispute with the member, the same shall be subject to arbitration as per the bye laws/regulations of the Exchange.

    3.3 The term ‘constituent’ shall mean and include a client, a customer or an investor, who deals with a member for the purpose of acquiring and/or selling of securities through the mechanism provided by NSE/BSE.

    3.4 The term ‘member’ shall mean and include a trading member, a broker or a stock broker, who has been admitted as such by NSE/BSE and who holds a registration certificate as a stock broker from SEBI.

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    Investor’s Rights and Obligations

    1.1 You should familiarise yourself with the protection accorded to the money or other property you may deposit with your member, particularly in the event of a default in the stock market or the broking firm’s insolvency or bankruptcy.

    1.1.1 Please ensure that you have a documentary proof of your having made deposit of such money or property with the member, stating towards which account such money or property deposited.

    1.1.2 Further, it may be noted that the extent to which you may recover such money or property may be governed by the Bye-laws and Regulations of NSE/BSE and the scheme of the Investors’ Protection Fund in force from time to time.

    1.1.3 Any dispute with the member with respect to deposits, margin money, etc., and producing an appropriate proof thereof, shall be subject to arbitration as per the Rules, Byelaws/Regulations of NSE/BSE or its Clearing Corporation/Clearing House.

    1.2 Before you begin to trade, you should obtain a clear idea from your member of all brokerage, commissions, fees and other charges which will be levied on you for trading. These charges will affect your net cash inflow or outflow.

    1.3 You should exercise due diligence and comply with the following requirements of the NSE/BSE and/or SEBI:

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    1.3.1 Please deal only with and through SEBI registered members of the Stock Exchange and are enabled to trade on the Exchange. All SEBI registered members are given a registration no., which may be verified from SEBI. The details of all members of NSE/BSE and whether they are enabled to trade may be verified from NSE/BSE website (www.nseindia.com / www.bseindia.com).

    1.3.2 Demand any such information, details and documents from the member, for the purpose of verification, as you may find it necessary to satisfy yourself about his credentials.

    1.3.3 Furnish all such details in full as are required by the member as required in "Know Your Client" form, which may also include details of PAN or Passport or Driving Licence or Voters Id, or Ration Card, bank account and depository account, or any such details made mandatory by SEBI/NSE at any time, as is available with the investor.

    1.3.4 Execute a broker-client agreement in the form prescribed by SEBI and/or the Relevant Authority of NSE or its Clearing Corporation / Clearing House from time to time, because this may be useful as a proof of your dealing arrangements with the member.

    1.3.5 Give any order for buy or sell of a security in writing or in such form or manner, as may be mutually agreed. Giving instructions in writing ensures that you have proof of your intent, in case of disputes with the member.

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    1.3.6 Ensure that a contract note is issued to you by the member, which contains minute records of every transaction. Verify that the contract note contains details of order no., trade number, trade time, trade price, trade quantity, name of security, client code allotted to you and showing the brokerage separately. Contract notes are required to be given/sent by the member to the investors latest on the next working day of the trade. Contract note can be issued by the member either in electronic form using digital signature as required, or in hard copy. In case you do not receive a contract note on the next working day or at a mutually agreed time, please get in touch with the Investors Grievance Cell of NSE/BSE, without delaying.

    1.3.7 Facility of Trade Verification is available on NSE/BSE website (www.nseindia.com/ www.bseindia.com), where details of trade as mentioned in the contract note may be verified from the trade date up to five trading days. Where trade details on the website, do not tally with the details mentioned in the contract note, immediately get in touch with the Investors Grievance Cell of NSE/BSE.

    1.3.8 Ensure that payment/delivery of securities against settlement is given to the concerned member within one working day prior to the date of pay-in announced by NSE/BSE or its Clearing Corporation / Clearing House. Payments should be made only by account payee cheque in favour of the firm/company of the trading member and a receipt or acknowledgement towards what such payment is made be obtained from the member. Delivery of securities is made to the pool account of the member rather than to the beneficiary account of the member.

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    1.3.9 In case pay-out of money and/or securities is not received on the next working day after date of pay-out announced by NSE/BSE or its Clearing Corporation / Clearing House, please follow-up with the concerned member for its release. In case pay-out is not released as above from the member within five working days, ensure that you lodge a complaint immediately with the Investors’ Grievance Cell of NSE/BSE.

    1.3.10. Every member is required to send a complete 'Statement of Accounts', for both funds and securities settlement to each of its constituents, at such periodicity as may be prescribed by time to time. You should report errors, if any, in the Statement immediately, but not later than 30 calendar days of receipt thereof, to the member. In case the error is not rectified or there is a dispute, ensure that you refer such matter to the Investors Grievance Cell of NSE/BSE, without delaying.

    1.3.11 In case of a complaint against a member/registered sub-broker, you should address the complaint to the Office as may be specified by NSE/BSE from time to time.

    1.4 In case where a member surrenders his membership, NSE/BSE gives a public notice inviting claims, if any, from investors. In case of a claim, relating to "transactions executed on the trading system" of NSE/BSE, ensure that you lodge a claim with NSE/BSE/NSCCL/Clearing House within the stipulated period and with the supporting documents.

    1.5 In case where a member is expelled from trading membership or declared a defaulter, NSE/BSE gives a public notice inviting claims, if any, from investors. In case of a claim, relating to "transactions executed on the trading system" of NSE/BSE, ensure that you lodge a claim with NSE/BSE within the stipulated period and with the supporting documents.

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    1.6 Claims against a defaulter/expelled member found to be valid as prescribed in the relevant Rules/Bye-laws and the scheme under the Investors’ Protection Fund (IPF) may be payable first out of the amount vested in the Committee for Settlement of Claims against Defaulters, on pro-rata basis if the amount is inadequate. The balance amount of claims, if any, to a maximum amount of Rs.10 lakhs per investor claim, per defaulter/expelled member may be payable subject to such claims being found payable under the scheme of the IPF.

    Notes

    • The term ‘constituent’ shall mean and include a client, a customer or an investor, who deals with a trading member of NSE/BSE for the purpose of acquiring and / or selling of securities through the mechanism provided by NSE/BSE.
    • The term ‘member’ shall mean and include a member or a broker or a stock broker, who has been admitted as such by NSE/BSE and who holds a registration certificate as a stock broker from SEBI.
    • NSE/BSE may be substituted with names of the relevant exchanges, wherever applicable.
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    7. Client Representation: (Last 3 years)

    i. The company has Clients under Discretionary & Non-Discretionary Portfolio Services, the details are:

    Category of Clients Number of Clients Funds Managed (Rs. in crores)
    March 2018 March 2019 March 2020 March 2018 March 2019 March 2020
    Disc * ND ** Disc ND Disc ND Disc ND Disc ND Disc ND
    Associates / Group Companies NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL
    Others 2691 63 3611 62 3406 59 2995 73 3594 59 2485 44
    Total 2691 63 3611 62 3406 59 2995 73 3594 59 2485 44

    * Discretionary

    ** Non-Discretionary

    ii. Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India.

    The following clients, who are related parties as per the standards specified by the Institute of Chartered Accountants of India, have Portfolio accounts with the Portfolio Manager.

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    Client Name Relationship AUM as on 30th September 2020 PMS Fee Charged - April 2020 to September 2020
    Mrs. K. Sylakumari Mother of Managing Director Mr. K Sarath Reddy 2,11,37,434 45,978
    Mrs. Urmila Reddy Mother of Director Mr. N Sandeep Reddy 7,45,35,753 1,02,056
    Mr. Livintha Dhanraj Mother of Director Mr. Christopher Vinod 74,73,219 17,564
    Mrs. Fredrick Sahaya Merly Anchilla Wife of Director Mr. Christopher Vinod 31,63,486 7,876

    Unifi Financial Pvt Ltd., A wholly owned subsidiary has a Broking account with the Company

    8. Financial Performance of the Portfolio Manager

    31st March 2018 Audited 31st March 2019 Audited 31st March 2020 Audited
    Total Income (Net) 77,54,88,649 59,36,65,264 55,79,21,918
    Profit After Tax 27,09,68,825 14,93,95,968 16,91,70,101
    Paid Up Capital 1,65,40,352 1,68,29,597 1,68,29,597
    Free Reserves 65,94,08,938 79,14,85,206 92,41,35,159
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    Net worth 67,59,49,290 80,83,14,803 94,09,64,756

    9. Performance of Portfolio Manager

    Portfolio Management performance of the Portfolio Manager for the last three years and in case of discretionary portfolio manager disclosure of performance indicators calculated using Time Weighted Rate of Return method in terms of Regulation 22 of the SEBI (Portfolio Managers) Regulations, 2020.

    Investment Approaches April 2017
    to March
    2018 TWRR
    April 2018
    to March
    2019 TWRR
    April 2019
    to March
    2020 TWRR
    Since Inception
    to September
    2020 TWRR
    Returns (%) Bench
    mark (%)
    Returns (%) Bench
    mark (%)
    Returns (%) Bench
    mark (%)
    Returns (%) Bench
    mark (%)
    Blended- Rangoli (Jun 2017) 21.47 7.88 -1.66 -3.03 -24.03 -31.64 16.92 -0.18
    BCAD (April 2018) - - 0.64 -8.50 -19.84 -31.64 5.20 -5.60
    Insider Shadow Fund (May 2010) 18.38 13.24 6.36 -3.03 -31.53 -31.64 13.03 7.69
    Holdco (May 2014) 19.47 11.83 -4.36 8.32 -36.35 -27.42 20.43 7.83
    Following approaches are not open for new subscriptions
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    Spin off New (Nov 2014) 35.11 13.24 -11.32 -3.03 -37.44 -31.64 16.32 6.74
    Trend (Oct 2011) 7.90 11.30 -2.73 17.30 -25.30 -23.74 9.18 10.00
    Green Fund (Jan 2017) 17.00 17.74 -13.77 -11.57 -39.83 -35.98 4.92 4.10
    Deep Value at Discount (Dec 2012) 12.46 13.24 -2.56 -3.03 -23.46 -31.64 24.06 9.96
    APJ 20 (Sep 2015) 19.33 13.24 -12.03 -3.03 -31.22 -31.64 17.68 6.98
    Event Arbitrage (April 2004) 6.36 2.36 5.64 7.88 7.47 13.58 12.85 8.19

    Benchmark for

    Blended- Rangoli - BSE Midcap
    BCAD - BSE Midcap
    Insider Shadow Fund - BSE Midcap
    Holdco - BSE 500
    Spin Off New - BSE Midcap
    Sector Trend Fund - Sensex
    Green Fund - BSE Small cap
    Deep Value at Discount - BSE Midcap
    APJ 20 - BSE Midcap
    Event Arbitrage - Nifty G-Sec Composite Index
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    Methodology

    - The returns reflect the performance of the Investment Approach computed on TWRR basis.

    - The returns are net of all expenses including the fees paid to the Portfolio Manager during the specified period of reporting.


    10. Audit Observations

    There have not been any adverse Audit observations in the preceding 3 years.

    11. Nature of expenses

    (i) Management Fees:
    Direct Option

    Option 1
    Fixed Management Fee only
    Option 2
    Management Fee + Performance Fee
    Management Fee of 1.5% p.a. of the AUM will be charged on a monthly basis on each day end value. Management Fee of 1% p.a. of the AUM will be charged on a monthly basis on each day end value
    AND
    Performance Fees of 10% of profits (without offset of Management fee) above a hurdle rate of 10% p.a.
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    Regular Option (Through Distribution Partners)

    Option 1
    Fixed Management Fee only
    Option 2
    Management Fee + Performance Fee
    Management Fee of 2% p.a. of the AUM will be charged on a monthly basis on each day end value. a) Management Fee of 1.50 % p.a. of the AUM will be charged on a monthly basis on each day end value AND Performance Fees of 20% of profits (with offset of Management Fee) above a hurdle rate of 10% p.a.
    b) Management Fee of 1.50 % p.a. of the AUM will be charged on a monthly basis on each day end value AND Performance Fees of 10% of profits (without offset of Management Fee) above a hurdle rate of 10% p.a.

    Regular Option (Through Registered Investment Advisors)

    Option 1
    Fixed Management Fee only
    Option 2
    Management Fee + Performance Fee
    Management Fee of 1.25% p.a. of the AUM will be charged on a monthly basis on each day end value. Management Fee of 0.75 % p.a. of the AUM will be charged on a monthly basis on each day end value
    AND
    Performance Fees of 10% of profits (without offset of Management Fee) above a hurdle rate of 10% p.a.

    *In case of pre-closure, the hurdle rate for all the options will be 8% p.a. and the fee offset benefit of Management Fees, (wherever applicable) will not be available.

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    Additional Terms for the following Investment Approaches under Fee Option 2

    - BCAD, Blended-Rangoli & Insider Shadow Fund are:

    • The Performance fee will be charged at the end of 5 years or when the portfolio achieves 200% return, whichever is earlier.

    Management Fee is charged on NAV basis. The charges shall be at the contracted annual rate and shall be charged to the client on a monthly basis. Performance based fee is charged annually/on 31st March at the contracted rates or as prescribed under each Investment Approach and will be computed on the basis of the high water mark principle over the life of the investment.

    Profits/losses will be computed taking into account booked profits/losses plus mark to market gains minus mark to market losses minus expenses

    Other statutory levies at applicable rate shall be levied on the PMS fee.

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    (ii) Custodian Fee, Brokerage and Transaction Costs

    S.No. Particulars Charges
    I a) Custodian & Administration Charges
    These charges relate to custody fee and charges paid to the Custodian
    Up to 0.15% p.a. of the Corpus
    b) Brokerage
    (Payable to the broker for, execution of transactions on the stock exchange excluding GST, stamp duty costs, Exchange Turnover charges,STT etc.
    Not exceeding 0.50%
    c) Bond Transaction Fee : Rs. 250 per transaction
    d) Audit Fee
    Annual Audit of the clients account – Ref. Clause 10
    Not exceeding Rs. 10,000/- p.a
    II a) Depository
    Annual Maintenance Charges (AMC)
    Transaction cost
    Not exceeding Rs. 1000/ p.a
    Not exceeding 0.05% of the value or up to Rs. 25/- per transaction, whichever is higher
    b) Transaction Costs - Statutory
    STT, GST, Exchange Turnover Charges,
    Stamp Charges.
    As per the directives of the Government
    c) Bank charges for NRI accounts Bank charges as levied by the Bank towards maintenance and TDS calculations etc.
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    12. Execution of Trades

    Unifi capital P Ltd., is a member of the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and will be executing trades on the NSE/BSE using its own terminals. The services of other SEBI registered Brokers will also be utilized b for execution of the trades on the Exchanges. Currently the services of M/s. Kotak Securities M/s. Motilal Oswal Wealth Management Pvt. Ltd.and M/s. Sanctum Wealth Management Pvt. Ltd. are being availed.

    The Trade execution may happen by aggregation of purchase or sales for economy of sale, inter se allocation shall be done on a pro rata basis and at weighted average price of the day’s transactions.

    13. Custodian

    (1) Kotak Mahindra Bank Ltd. has been appointed as Custodian with effect from 16th April 2018

    (2) HDFC Bank Ltd has been appointed as Custodian with effect from 17th May 2019

    14. Taxation:

    As per the taxation laws in force as at the date of the Disclosure document, the tax implications to the clients under the Portfolio Management service are stated herein below. The information so stated is based on Unifi’s understanding of such tax laws in force as on date of the Disclosure document.

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    The following information is provided only for general information purposes. In view of the individual nature of tax benefits, the client is advised to consult with his or her own tax consultant with respect to the specific tax implications arising out of their participation in the PMS Service.

    Short Term Capital Gains:

    In respect of gains made on investments held for a period of not more than 12 months is added to the total income of the individual. Total income including short term capital gains is chargeable to tax as per the relevant slab rates. The maximum tax rates applicable to different categories of assessees are as follows (plus surcharge and Cess wherever applicable on the total tax payable):

    Resident Individuals and HUF 30 %
    Partnership Firms 30 %
    Indian Companies (up 400 crs Turnover in the previous year) 25 %
    Indian Companies (> 400 crs Turnover in the previous year) 30 %
    Non Resident Indians 30 %
    Foreign Companies 40 %
    Overseas Financial Organisations Z (Corporate) 40 %
    Overseas Financial Organisations (Non-Corporate) 30 %
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    Local Authorities 30 %
    Co-Operative Society Progressive Slab

    However, Short Term Capital Gains made on transfer of equity shares or units in equity oriented mutual fund, where the transaction of sale is entered into on a recognised Stock Exchange in India, is chargeable to tax at a concessional rate of 15% plus surcharge and Cess as applicable. Further, such transaction is chargeable to Securities Transaction Tax at the applicable rates. With respect to Short Term Capital Gains on Debt Oriented Schemes / Money Market and Liquid Schemes, gains are taxed at the respective slab rates pertaining to the various categories of assesses as mentioned above.

    Note: Units held in equity-oriented schemes for a period of more than 12 months is considered as Long-Term Capital Gains and for a period of 12 months or less is considered as Short-Term Capital Gains. Units held in debt-oriented schemes for a period of more than 36 months is considered as Long-Term Capital Gains and for a period of 36 months or less is considered as Short-Term Capital Gains.

    Long term Capital gains:

    For Resident Individuals and Hindu Undivided Families :

    Long term capital gains in respect of investments held for a period of more than 12 months will be chargeable under section 112 of the Income Tax Act at the rate of 10% plus surcharge and Cess (without indexation benefit) on gains exceeding Rs.1 Lakh provided transfer of such units is subject to STT for equity oriented schemes & 20 % plus surcharge and Cess (with respect to Debt oriented Schemes / Money Market and Liquid Schemes) and, as applicable on such Tax.

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    Capital gains will be computed after reducing the aggregate of cost of acquisition (as adjusted by cost inflation index. notified by the Central Government) and expenditure incurred wholly and exclusively in connection with the transfer with respect to gains arising out of Debt oriented Schemes / Money Market and Liquid Schemes

    Section 10(38) inter alia, provides for exemption from tax on the income arising from the transfer a long term capital (being an equity share in a company or a unit of an equity oriented fund) subject to certain conditions. However, the exemption under section 10 (38) will not be available if equity shares / units are transferred on or after April 1, 2018. Tax on long term capital gains which arises on transfer of listed equity shares or units of equity oriented mutual funds on or after April 1, 2018 will be calculated as per special provisions in Section 112A. If section 112A is not applicable then tax will be calculated under the existing provision of Section 112. .As per section 112A the long term capital gains arising out of the sale of equity oriented mutual funds schemes and equity shares will now be taxed at the rate of 10% without any benefit of indexation, if the capital gain exceeds Rs 1 lakh in a year. Further, there is no change in the period of holding to qualify for long term asset. Upon insertion of this new section, with effect from 01.04.2018 both Capital gains tax and STT will be levied on the gains arising in excess of Rs.1 Lakh in a particular fiscal year.

    A short-term relief has been given for the investors that the current exemption under section 10(38) would continue on appreciation in value till 31st January 2018, only the gains that would arise after such date will be taxable.

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    Further, in the case of individuals and Hindu Undivided Families, being resident, where taxable income as reduced by long term capital gains, is below the basic exemption limit, the Long term capital gains after reducing the un-availed basic exemption limit (only after adjusting all other income and without adjusting against deductions under Chapter VI-A) will be subject to Income Tax at 20% or 5% ( depending on the arrived amount) plus surcharge plus Health and Education Cess as applicable on such tax.

    For Partnership firms, Indian companies and other Residents:

    Long term capital gains will be subjected to the Income tax at the rate of 20 % ( (with respect to Debt oriented Schemes / Money Market and Liquid Schemes) after providing indexation benefit and at 10% ( Equity Oriented Scheme) plus surcharge, Health and Education Cess as applicable on such tax as the case may be.

    For Non-Resident and Foreign companies:

    Long term capital gains will be subjected to the Income Tax at the rate of 20 % ( (with respect to Debt oriented Schemes / Money Market and Liquid Schemes) after providing indexation benefit and 10% ( Equity Oriented Scheme) plus surcharge, Health and Education Cess as applicable on such tax. However, no benefit of indexation is available.

    Further, the long term capital gain will be subjected to the Income Tax at the rate of 10% plus surcharge, Health and Education Cess as applicable on such tax provided the capital gains aroused from transfer of such capital asset being unlisted securities or shares of a company not being a company in which the public are substantially interested.

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    For Non-Resident Indians:

    Under Section 115 E of the Income Tax Act, for Non-Resident Indians, any income from investment or income from long term capital gains of an asset other than a specified asset and income by way of Long term capital gains is chargeable at the rate of 20% ( (with respect to Debt oriented Schemes / Money Market and Liquid Schemes) after providing indexation benefit (with respect to Debt Oriented Schemes) and 10% ( Equity Oriented Scheme without indexation benefit on gains exceeding Rs.1 lakh provided transfer of such units is subject to STT) plus applicable surcharge plus Health and Education Cess as applicable on such tax respectively.

    Non-Resident Indians may opt for computation of long-term capital gains as per section 112, which is more beneficial.

    Further, in the case of NRI (Individual or HUF), LTCG cannot be adjusted against the basic exemption limit. Therefore, in the case of NRI even if the taxable income is NIL and has booked long term capital gain against the capital asset, NRI has to pay LTCG tax at the rate depending on the asset class.

    For overseas Financial Organisations, including Overseas Corporate Bodies fulfilling conditions laid down under sec 115 AB (Off-shore Funds)

    Under section 115 AB of the Act, Long term capital gains from investments in shares held for more than 12 months would be chargeable at the rate of 10 % plus surcharge, Health and Education Cess as applicable on such tax as stated below :

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    115AB. Tax on income from units purchased in foreign currency or capital gains arising from their transfer.—(1) where the total income of an assessee, being an overseas financial organisation (hereinafter referred to as Offshore Fund) includes—
    (a) Income received in respect of units purchased in foreign currency; or
    (b) Income by way of long-term capital gains arising from the transfer of units purchased in foreign currency, the income-tax payable shall be the aggregate of—
    (i) the amount of income-tax calculated on the income in respect of units referred to in clause (a), if any, included in the total income, at the rate of ten per cent.;
    (ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent.; and
    (iii) the amount of income-tax with which the Offshore Fund would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).

    As per the Finance Act, 2002, in computing the income under the head ‘Capital Gains’, brought forward losses on transfer of long-term capital assets would be allowed to be set off only against gains from the transfer of long-term capital assets. The long-term capital losses brought forward can be set off only against long term capital gains.

    As per the Finance Act, 2004, with effect from 1st October 2004, long term capital gains made on transfer of equity shares or units in equity oriented mutual fund (a fund where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 65% -upto May 31, 2006 it is 50%), where the transaction of sale is entered into on a recognised Stock Exchange in India, is exempt from tax under section 10 (38) of the Income tax Act. This exemption will be available only on the gains aroused till 31st January 2018.

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    However, such sale is subject to Securities Transaction Tax as applicable. With effect from Assessment year 2007-08, Long Term Capital Gains generated by a Company & which is exempt under section 10 (38) will be taken into consideration to calculate book profits tax under section 115 JB for the purpose of calculating Minimum Alternate Tax.

    15. Accounting policies.

    Accounting policy followed: All income [dividend, interest, etc.] and all expense [management fees, custody/transaction related expenses, etc.] are accounted on accrual basis of accounting.

    Corpus in the form of stock

    In case of corpus received/redeemed in form of stock, the same is accounted for in PMS accounts on the date on which the stock is credited/debited to/by the depository at the closing price of the stock on the day of such credit/debit. Accordingly, such date of credit/debit shall be construed as date of acquisition/sale and cost as stated above is considered as cost of acquisition for the purpose of computing gains / returns

    Transaction Costs

    The cost of securities executed on exchange includes grossed-up brokerage, and other exchange charges except for Security Transaction Tax (“STT”). In determining the holding cost of investments and its gain/loss on sale, First-in-First Out method is followed

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    GST, Securities Transaction tax, Exchange Turnover charges, if any, shall be charged to the clients at actual cost.

    Transactions for purchase/sale/buy back of investments shall be recognized as of the trade date.

    Treatment of various corporate actions

    i) Bonus & rights shares – These are accounted on the date when the original shares are traded on the stock exchange at ex-bonus/rights price;

    ii) Merger, Demerger & Split – The date of acquisition of these shares would be the date of acquisition of original shares.

    PMS Fees

    Management Fee is charged on NAV basis. The charges shall be at the contracted annual rate and shall be charged to the client on a monthly basis. Performance based fee is charged annually/ or on 31st March at the contracted rates and will be computed on the high water mark principle over the life of the investment. Other statutory levies at applicable rate shall be levied on the PMS fee.

    Interest, Dividend & Other returns

    Returns from investment in units of Mutual fund in the form of interest, Dividends, profit & loss on investment shall be passed on to the clients. Profit or loss on sale of investment shall be recorded on the date of sale or redemption of investment.

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    Interest from Banks, Dividends received by clients, etc. shall be passed on to the clients at net value in the form of cash credits and TDS certificates wherever applicable.

    16. Investors services

    i. Name, address and telephone number of the Investor Relation officer who shall attend to the investor queries and complaints.

    K. Narendranath, Compliance Officer
    Unifi Capital Pvt. Ltd
    11, Kakani Towers.15, Khader Nawaz Khan Road,
    Chennai 600 006, Tel: 044-28331556,
    Email: naren@unificap.com
    Email ID of Investor Relations Cell: ir@unificap.com

    ii. Grievance redressal and dispute settlement mechanism

    Investors may contact the Investor Relations Officer for all grievances with respect to investor’s services. If no response is received within a reasonable time period the matter may be referred to the Principal Officer of the Portfolio Manager and also to SEBI through SCORES - URL – http://scores.gov.in

    The Portfolio Manager will endeavor to address all complaints regarding service deficiencies or causes for grievance, for whatever reason, in a reasonable manner and time. If the investor remains dissatisfied with the remedies offered or the stand taken by the Portfolio Manager, the investor and the Portfolio Manager shall refer the matter for Arbitration.

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    17. Arbitration

    Any dispute or difference between the parties with regard to this agreement and all connected and related matters whatsoever shall be discussed and settled amicably. In the event of any failure to resolve the disputes or differences amicably, all such disputes or differences whatsoever shall be referred to Arbitration. The Arbitration Proceedings shall be conducted in English and in accordance with the provisions of Indian Arbitration and Conciliation Act, 1996 or any statutory modification or enactment thereof.

    The Venue of Arbitration shall be Chennai. The language of arbitration shall be English.

    The arbitration shall be conducted by a sole Arbitrator appointed/nominated by Unifi. The arbitration shall be a documents only, evidence through affidavits, “fast track” arbitration. The arbitrator shall have the right to pass interim awards and issue directions.

    Sl.No Name of Director Signature
    1 K. Sarath Reddy Sd/-
    2 K. Narendranath Sd/-

    Date: 8th October 2020

    Place: Chennai

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    Unifi Capital Pvt. LImited, 11,Kakani Towers, 15,Khader Nawaz Khan Road,Nungambakkam,Chennai- 600 006.

    Tel: +91-44-28331556,+91-44-28332723

    Email:info@unificap.com

    www.unificap.com

    Mumbai | Chennai | Bengaluru | Hyderabed | Delhi

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