taurrus india advantage fund - taurrusfund.com · taurrus india advantage fund 8 taurrus india...

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

TAURRUS INDIA ADVANTAGE FUND

May, 2017

Copy No: ______


MAY, 2017

THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THIS

“MEMORANDUM”) IS BEING FURNISHED ON A CONFIDENTIAL BASIS SOLELY TO

SELECTED QUALIFIED INVESTORS CONSIDERING THE PURCHASE OF SHARES

(THE “SHARES”) IN TAURRUS INDIA ADVANTAGE FUND, A PUBLIC COMPANY

LIMITED BY SHARES CONSTITUTED AS A COLLECTIVE INVESTMENT SCHEME AND

AUTHORIZED TO OPERATE AS AN EXPERT FUND ESTABLISHED IN THE REPUBLIC

OF MAURITIUS (THE “FUND”). THIS MEMORANDUM IS NOT TO BE REPRODUCED

OR DISTRIBUTED TO OTHERS WITHOUT THE PRIOR WRITTEN CONSENT OF

TAURRUS ASSET MANAGERS (MAURITIUS) LTD. (THE “MANAGER”). EACH

RECIPIENT AGREES TO KEEP ALL INFORMATION CONTAINED HEREIN

CONFIDENTIAL (EXCEPT AS PROVIDED IN THE FOLLOWING SENTENCE) AND TO

USE THIS MEMORANDUM FOR THE SOLE PURPOSE OF EVALUATING A POSSIBLE

INVESTMENT IN THE FUND. NOT WITHSTANDING THE FOREGOING, EACH

INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE OR OTHER AGENT OF THE

INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF

ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF AN INVESTMENT IN

THE FUND AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER

TAX ANALYSES) THAT ARE PROVIDED TO THE INVESTOR RELATING TO SUCH TAX

TREATMENT AND TAX STRUCTURE. ACCEPTANCE OF THIS MEMORANDUM BY A

RECIPIENT CONSTITUTES AN AGREEMENT TO BE BOUND BY THE FOREGOING

TERMS.

PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS

MEMORANDUM AS LEGAL, TAX, INVESTMENT OR OTHER ADVICE. EACH

PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ADVISERS AS TO LEGAL,

BUSINESS, TAX AND OTHER RELATED MATTERS CONCERNING AN INVESTMENT IN

THE SHARES.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN

EXAMINATION OF THE FUND AND THE TERMS OF THE OFFERING CONTEMPLATED

BY THIS MEMORANDUM, INCLUDING THE MERITS AND RISKS INVOLVED. THE

SHARES HAVE NOT BEEN RECOMMENDED BY ANY REGULATORY AUTHORITY.

FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE

ACCURACY OR DETERMINED THE ADEQUACY OF THIS MEMORANDUM. ANY

REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE FUND HOLDS A CATEGORY 1 GLOBAL BUSINESS LICENCE ISSUED BY THE

FINANCIAL SERVICES COMMISSION (THE “FSC”) AND IS AUTHORIZED PURSUANT

TO THE MAURITIUS SECURITIES ACT 2005 (THE “SECURITIES ACT 2005”) AND

SECURITIES (COLLECTIVE INVESTMENT SCHEMES AND CLOSED-END FUNDS)

REGULATIONS 2008 (TOGETHER WITH THE SECURITIES ACT 2005, THE “CIS

REGULATIONS”) TO OPERATE AS A COLLECTIVE INVESTMENT SCHEME AND AN

“EXPERT FUND”. THIS MEMORANDUM HAS NOT RECEIVED ANY REGULATORY

APPROVAL. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES LAWS OF ANY JURISDICTION AND ARE BEING OFFERED

AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION

REQUIREMENTS OF SUCH LAWS. THERE IS NO IMPLICATION THAT THE FUND HAS

BEEN OR WILL BE APPROVED BY ANY REGULATORY AUTHORITY IN MAURITIUS,

THE UNITED STATES OR IN ANY OTHER COUNTRY.

THE FSC HAS ISSUED A CATEGORY 1 GLOBAL BUSINESS LICENCE TO THE

FUND TO OPERATE AS A COLLECTIVE INVESTMENT SCHEME. IT MUST BE

UNDERSTOOD THAT IN GIVING THIS AUTHORISATION, THE FSC DOES NOT

VOUCH FOR THE FINANCIAL SOUNDNESS OR FOR THE CORRECTNESS OF ANY

OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARD TO THE

FUND.

THE FUND IS ORGANIZED AS A PUBLIC COMPANY LIMITED BY SHARES

CONSTITUTED AS A COLLECTIVE INVESTMENT SCHEME AND AUTHORIZED TO

OPERATE AS AN “EXPERT FUND”. SHARES IN THE FUND WILL BE AVAILABLE

ONLY TO EXPERT INVESTORS, DEFINED AS (I) AN INVESTOR WHO MAKES AN

INITIAL INVESTMENT, FOR HIS OWN ACCOUNT, OF NO LESS THAN US$100,000;

OR (II) PERSONS MEETING THE CRITERIA OF SOPHISTICATED INVESTORS AS

DEFINED IN THE MAURITIUS SECURITIES ACT 2005 OR ANY SIMILARLY

DEFINED INVESTOR IN ANY OTHER SECURITIES LEGISLATION. NOTHING IN

THIS DOCUMENT SHALL BE CONSTRUED AS AN OFFER OR DISTRIBUTION OF

SECURITIES TO THE PUBLIC IN MAURITIUS. THE MINIMUM INITIAL INVESTMENT

OF AN INVESTOR TO THE FUND FOR ITS OWN ACCOUNT WILL BE US$100,000,

ALTHOUGH THE BOARD OF DIRECTORS OF THE FUND AND/OR ITS MANAGER

RESERVES THE RIGHT, IN THEIR SOLE DISCRETION, TO ACCEPT INVESTMENTS OF

LESSER AMOUNTS, PROVIDED THAT, THE INVESTOR MEETS THE DEFINITION OF

AN EXPERT INVESTOR.

SOPHISTICATED INVESTORS FOR THE PURPOSES OF THE MAURITIAN SECURITIES

ACT INCLUDE THE GOVERNMENT OF MAURITIUS, STATUTORY CORPORATIONS,

COMPANIES WHOLLY OWNED BY THEM, THE GOVERNMENT OF A FOREIGN

COUNTRY OR AGENCY OF SUCH GOVERNMENT, BANKS, FUND MANAGERS,

INSURANCE COMPANIES, INVESTMENT DEALERS AND INVESTMENT ADVISERS

AND ANY OTHER PERSON DESIGNATED AS BEING A SOPHISTICATED PERSON BY

THE FSC.

INVESTORS IN THE FUND ARE NOT PROTECTED BY ANY STATUTORY

COMPENSATION ARRANGEMENTS IN MAURITIUS IN THE EVENT OF THE

FUND'S FAILURE. THE FSC DOES NOT VOUCH FOR THE FINANCIAL

SOUNDNESS OF THE FUND OR FOR THE CORRECTNESS OF ANY STATEMENTS

MADE OR OPINIONS EXPRESSED WITH REGARD TO THE FUND.

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE

SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY STATE OR OTHER

JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO OR FROM WHOM, SUCH

OFFER OR SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE

ANY REPRESENTATION CONCERNING THE FUND OR THE OFFERING OF THE

SHARES OTHER THAN THE INFORMATION CONTAINED IN THIS MEMORANDUM

AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT

BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. NEITHER THE

DELIVERY OF THIS MEMORANDUM NOR THE ISSUANCE OF SHARES WILL UNDER

ANY CIRCUMSTANCES CREATE ANY IMPLICATION OR CONSTITUTE ANY

REPRESENTATION THAT THE AFFAIRS OF THE FUND HAVE NOT CHANGED SINCE

THE DATE HEREOF.

THE SHARES ARE OFFERED SUBJECT TO THE RIGHT OF THE FUND (AS

APPLICABLE) TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART.

AN INVESTMENT IN THE SHARES INVOLVES SIGNIFICANT RISKS. POTENTIAL

INVESTORS SHOULD PAY PARTICULAR ATTENTION TO THE INFORMATION IN

“RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST.” AN INVESTMENT IN

THE FUND IS SUITABLE ONLY FOR EXPERT INVESTORS AND REQUIRES THE

FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT THE HIGH RISKS INHERENT IN

AN INVESTMENT IN THE FUND. NO ASSURANCE CAN BE GIVEN THAT THE FUND’S

INVESTMENT OBJECTIVES PRESENTED UNDER “INVESTMENT PROGRAM” WILL

BE ACHIEVED OR THAT INVESTORS WILL RECEIVE A RETURN OF THEIR

CAPITAL.THE TRANSFERABILITY OF THE SHARES IS RESTRICTED BY THE TERMS

OF THE CONSTITUTION OF THE FUND, AS AMENDED FROM TIME TO TIME (THE

“CONSTITUTION”), AND THE SUBSCRIPTION DOCUMENTS IN RESPECT OF EACH

INVESTOR INCLUDING BUT NOT LIMITED TO THE SUBSCRIPTION AGREEMENT

(THE “SUBSCRIPTION DOCUMENTS”)

EACH PROSPECTIVE INVESTOR IS INVITED TO MEET WITH REPRESENTATIVES OF

THE FUND AND TO DISCUSS WITH, ASK QUESTIONS OF AND RECEIVE WRITTEN

ANSWERS FROM SUCH REPRESENTATIVES CONCERNING THE TERMS AND

CONDITIONS OF THIS OFFERING AND TO OBTAIN ANY ADDITIONAL

INFORMATION, TO THE EXTENT THAT SUCH REPRESENTATIVES POSSESS SUCH

INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR

EXPENSE, NECESSARY TO VERIFY THE INFORMATION CONTAINED HEREIN.

THIS MEMORANDUM DOES NOT CONTAIN OR PURPORT TO CONTAIN A COMPLETE

DESCRIPTION OFTHE CONSTITUTION, THE SUBSCRIPTION DOCUMENTS OR THE

INVESTMENT MANAGEMENT AGREEMENTBY AND AMONG THE FUND AND THE

MANAGER (THE “MANAGEMENT AGREEMENT”), A COPY OF WHICH WILL BE

PROVIDED TO EACH PROSPECTIVE INVESTOR UPON REQUEST. EACH

PROSPECTIVE INVESTOR IN THE FUND IS ENCOURAGED TO REVIEW THE

CONSTITUTION, THE SUBSCRIPTION DOCUMENTS, THE MANAGEMENT

AGREEMENT CAREFULLY, IN ADDITION TO CONSULTING APPROPRIATE LEGAL

AND TAX COUNSELORS.

THIS MEMORANDUM IS QUALIFIED IN ITS ENTIRETY BY THE CONSTITUTION OF

THE FUND (AS AMENDED FROM TIME TO TIME) AND THE SUBSCRIPTION

DOCUMENTS, AND IN THE EVENT OF ANY CONFLICT ARISING BETWEEN ANY

STATEMENT MADE HEREIN AND ANY PROVISION OF THE CONSTITUTION OF THE

FUND AND THE SUBSCRIPTION DOCUMENTS, THE CONSTITUTION OF THE FUND

AND THE SUBSCRIPTION DOCUMENTS SHALL PREVAIL.

CERTAIN INFORMATION CONTAINED IN THIS MEMORANDUM CONSTITUTES

“FORWARD-LOOKING STATEMENTS,” WHICH CAN BE IDENTIFIED BY THE USE OF

FORWARD-LOOKING TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,”

“EXPECT,” “ANTICIPATE,” “PROJECT,” “ESTIMATE,” “INTEND,” OR “BELIEVE” OR

THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE

TERMINOLOGY. DUE TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE

DESCRIBED IN “RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST,”

ACTUAL EVENTS OR RESULTS OR THE ACTUAL PERFORMANCE OF THE FUND

MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH

FORWARD-LOOKING STATEMENTS.

THE FUND’S INVESTMENT PROGRAM SHOULD BE EVALUATED ON THE BASIS

THAT THERE CAN BE NO ASSURANCE THAT ANY OF THE MANAGER’S STRATEGIES

WILL BE EXECUTED IN WHOLE OR IN PART, OR THAT THE FUND WILL ACHIEVE

ITS INVESTMENT OBJECTIVE.

EXCEPT AS OTHERWISE NOTED, ALL MONETARY AMOUNTS SET FORTH HEREIN

ARE EXPRESSED IN UNITED STATES (“U.S.”) DOLLARS.

PROSPECTIVE INVESTORS SHOULD REVIEW THE FOLLOWING LEGENDS

CAREFULLY TO DETERMINE WHETHER ANY APPLY TO THEM.

SELLING RESTRICTIONS

MAURITIUS

THE PUBLIC OF THE REPUBLIC OF MAURITIUS IS NOT INVITED TO SUBSCRIBE

FOR ANY SHARES IN THE FUND AND RESIDENTS OF MAURITIUS SHALL NOT HOLD

ANY SHARES IN THE FUND OTHER THAN HOLDERS OF CATEGORY 1 GLOBAL

BUSINESS LICENCE AND MEETING THE CRITERIA OF AN EXPERT INVESTOR.

INDIA

THE FUND SHALL BE REGISTERED AS A FOREIGN PORTFOLIO INVESTOR UNDER

THE SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN PORTFOLIO

INVESTORS) REGULATIONS, 2014. PERSONS RESIDENT IN INDIA AS PER

APPLICABLE INDIAN LAWS ARE PROHIBITED FROM SUBSCRIBING TO CLASS A

SHARES.

ANY QUESTIONS RELATING TO THIS MEMORANDUM SHOULD BE ADDRESSED TO:

TAURRUS ASSET MANAGERS (MAURITIUS) LTD.

c/o Apex Fund Services (Mauritius) Ltd.

4th

Floor, 19 Bank Street,

Cybercity

Ebene 72201

Mauritius

TABLE OF CONTENTS

I. MARKET OVERVIEW .......................................................................................................8

II. INVESTMENT PROGRAM ...............................................................................................9

III. MANAGEMENT OF THE FUND ....................................................................................12

IV. SUMMARY OF PRINCIPAL TERMS ..............................................................................17

V. BROKERAGE AND CUSTODY ......................................................................................33

VI. RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST ...............................34

VII. TAX CONSIDERATIONS ................................................................................................60

VIII. REGULATORY CONSIDERATIONS ..............................................................................74

IX. SUBSCRIPTIONS .............................................................................................................91

X. DIRECTORY .....................................................................................................................93

Taurrus India Advantage Fund 8


I. MARKET OVERVIEW

India is now the fastest growing major economy in the world with a GDP growth rate of 7-8%

and witnessing a gradual uptick. Long-term fundamentals in India are expected to remain intact

and are a bright spot in an otherwise glum global economy.

The Government has shown a commitment towards the path of fiscal consolidation by targeting a

fiscal deficit of 3.5% of GDP in FY2017 having maintained its FY2016 deficit at 3.9% of GDP.

The Indian Rupee has been stable in recent times on the back of an improvement in the country’s

current account scenario and the continuous commitment of the central bank (RBI) to manage

volatility.

The inflation outlook too has improved on the back of a normal monsoon and the supply

management initiatives of the government with inflation expected to correct in the coming

months and expected to remain within the central bank’s FY2017 targets thereby creating further

room for monetary accommodation.

Investment in India gives an investor the opportunity to invest in high quality assets at attractive

yields (7.5% - 8.5%) amidst the high interest rate differential across countries and invest in a

transparent and very tightly regulated fixed income market. Default rates for CRISIL AA-rated

instruments are lower than 1% and less than 0.1% for AAA rated instruments, highlighting the

low credit risk that exists within a portfolio of AAA and AA-rated India corporate bonds.

Foreign Portfolio Investor (FPI) limits in the Indian debt markets have is to be raised to 5% of

the outstanding by March 2018. In aggregate terms, this is expected to open up room for

additional investments of INR1,200 billion for G-Sec . Additionally, limit for investment by FPIs

in the SDLs is to be increased to reach 2% of the outstanding stock by March 2018. This would

amount to an additional limit of about 500 billion by March 2018.


II. INVESTMENT PROGRAM

Taurrus India Advantage Fund

Taurrus India Advantage Fund Limited (the “Fund”) has been issued a Category 1 Global

Business Licence ("GBL1") by the FSC under the Financial Services Act 2007 and is authorized

as a collective investment scheme under the Securities Act 2005. The Fund’s licence is renewable

on 30 June of each year provided that the Fund complies with the conditions attached to the

licence and pays its licence fees within the prescribed period. The Fund is authorised by the FSC

to be an expert fund under the Securities (Collective Investment Schemes and Closed-end Funds)

Regulations 2008, issued under the Securities Act 2005 of Mauritius. The Fund has been

established as an investment vehicle for the pooling of funds from potential investors.

The Fund’s investment program is managed by Taurrus Asset Managers (Mauritius) Ltd., a

private limited company incorporated under the laws of the Republic of Mauritius and holding a

GBL1 and a CIS Manager license under the Securities Act 2005 and the Financial Services

(Consolidated Licensing and Fees) Rules 2008 of Mauritius(the “Manager”). References herein

to the Manager’s activities shall be construed to refer to its activities with respect to the Fund,

unless the context requires otherwise.

Class A Shares:

The following paragraphs lay down the Investment Objective, Investment Strategy, Investment

Process and Investment Restrictions that would be followed in relation to Class A Shares of the

Fund.

Investment Objective

The Fund, with respect to the Class A Shares, shall seek to generate superior long-term absolute

returns by investing in emerging market fixed income instruments.

Investment Strategy

With core inflation in India staying firm and inflation expectations well anchored, the movement

in the headline inflation is now likely to be driven by food prices, which exhibit heightened

volatility.

CPI inflation which surprised on the upside following the delay in the monsoon onset in month

of May is now likely to turn favourable as food prices see a downward correction, over the high

base of the previous year, boosting market sentiment. Headline inflation to print lower on base

effect &lower food inflation.

RBI/MPC is likely to continue its accommodative monetary policy and is expected to cut policy

rates in this scenario with markets expecting a 25 to 50 basis points cut in the repo rate in the

current financial year.


The debt markets are therefore likely to witness a downward parallel shift in the yield curve and/or a steepening of the yield curve. The strategy would be to position for steepeners, carry

trade and duration play.

Investment Process

Investment Restrictions

1. Investments shall be made in Investment Grade credit only. For e.g:- issuers and instruments

with a credit rating of BB and above as given by an authorized credit rating agency.

2. Investments shall be restricted/ limited to the fixed income/debt asset class only. For e.g:-

Corporate Bonds, Government securities, State Development Loans, Commercial Papers,

Certificate of Deposits, interest rate futures, subordinated debt and other debt structures and

instruments.

The investment activity of the Fund includes its management and administration and

includes the realization and distribution of the Fund’s assets to the Shareholders, including

in a wind-down of the Fund’s operations.

The descriptions contained herein of specific strategies in which the Fund is or may be

engaged should not be understood as in any way limiting the Fund’s investment activities.

The Fund may engage in investment strategies that are not described herein but that the

Manager considers appropriate considering prevailing market conditions.

Sector/

Industry

Company

FIXED

INCOME PORTFOLIO

Monitor

Macro Economic Fiscal Policy

Economic Cycle

Inflation

Monetary Policy

Liquidity

Asset Allocation Treasury Bills

Government Securities (Central & State)

Corporate Bonds

Institutional Bonds

PSU Bonds

Universe

Top Down

Credit Analysis


The Fund’s investment objective is speculative and entails substantial risks. There can be

no assurance that the Fund’s investment program will be achieved. See Section IV: Risk

Factors and Potential Conflicts of Interest for a discussion of the risks of an investment in

the Fund.


III. MANAGEMENT OF THE FUND

The Manager and the Indian Advisor

The board of directors of the Fund has appointed and engaged the services of Taurrus Asset

Managers (Mauritius) Ltd. as the investment manager of the Fund (“Manager” or “Investment

Manager”) pursuant to the terms of an investment management agreement, as the same may be

amended from time to time (the “Management Agreement”). The Investment Manager was

incorporated on 23 February 2017 under the laws of Mauritius as a private company limited by

shares, and is licensed by the FSC as a CIS Manager.

Subject to the overall supervision of the Fund’s Board, the Investment Manager will, inter alia,

and subject to the overall supervision and control of the Fund’s Board, manage the Fund’s

investments activities, and will assist the Fund in making all investment/disinvestment decisions

in relation to each Class.

The Investment Manager has entered into an investment advisory agreement (“Investment

Advisory Agreement”) with Taurus Treasury Management Services Private Limited (the

“Indian Advisor”), a private limited company incorporated under the Indian Companies Act,

1956. The Indian Advisor will provide services that may include providing technical and

fundamental analysis of the market trends, providing macroeconomic updates, sectoral reviews,

stock research and any other relevant information requested by the Investment Manager,

identification of investments, review and monitoring of investments and divestments. The role of

the Indian Advisor is purely advisory and recommendatory with no executory powers or binding

effect whatsoever. Without prejudice to the foregoing, the services and/or advice rendered by the

Indian Advisor are non-exclusive.

For the advisory services rendered by the Indian Advisor, the Indian Advisor shall be entitled to a

fee and reimbursement of expenses in accordance with the terms of the Investment Advisory

Agreement.

Board of Directors of the Fund

The property, business and affairs of the Fund will be managed under the direction of the Fund’s

board of directors. The Fund’s board of directors will consist of at least two (2) directors who

will be Mauritius resident directors.

The Fund has a board of directors currently consisting of Keerti (Anju) Ramnarain and Tevina

Ramsaha-Gulab. Biographies for each of the Fund’s directors are provided below. Keerti (Anju)

Ramnarain and Tevina Ramsaha-Gulab are resident in Mauritius. Additional directors of the

Fund may be appointed from time to time.

The Fund’s directors are responsible for the overall management and control of the Fund in

accordance with the Constitution. The Fund’s directors have, subject to their overall supervision

and control, delegated the day-to-day operation of the Fund to service providers including the

Manager and the Administrator (as defined below) pursuant to the terms of the Management


Agreement and the Administration Agreement (as defined below), respectively. In performing

their duties, the Fund’s directors are entitled to rely upon, and generally rely upon the work

performed by, and information received from, such service providers.

Any of the Fund’s directors may hold any other office in connection with the Fund (other than

the office of the Fund’s independent auditor) in conjunction with his or its office of director on

such terms as to tenure of office and otherwise as the Fund’s directors may determine. Any of

the Fund’s directors may also act in a professional capacity (other than as the Fund’s

independent auditor) and he or it will be entitled to remuneration for such services as if he or it

were not a director of the Fund. A director of the Fund may contract with the Fund, provided

that, such director declares his or its interest or gives notice of his or its interest as soon as

practicable after such director obtains such interest.

A director of the Fund may vote or be counted in the quorum in respect of certain contracts in

which such director is materially interested other than as a Shareholder (as defined below);

provided that such director declares such interest prior to the taking of the vote.

Each of the Fund’s directors serves in accordance with and pursuant to the provisions of the

Constitution, as well as pursuant to and in accordance with the applicable director services

agreement (if any). There is no shareholding qualification for the Fund’s directors.

The Fund’s directors (other than any director associated with Manager, if any) are entitled to

remuneration as approved by the Fund and in accordance with the applicable director services

agreement (if any). The Fund’s directors may also be paid all reasonable traveling, hotel and

other related expenses properly incurred by them in attending meetings of the Fund’s directors or

any committee of the Fund’s directors or any general meeting or any meeting held in connection

with the business of the Fund.

A brief biographical description and credentials of each of the Fund’s directors is given below:

Keerti (Anju) Ramnarain is a Fellow member of the Association of Chartered Certified

Accountants. Anju has over twelve years’ experience in the Mauritius Global Business Sector.

She currently holds the position of Manager Share Registry with Apex Fund Services (Mauritius)

Ltd. (“Apex Mauritius”), which forms part of the Apex Group which has offices in various

jurisdictions including Bermuda, Dubai, Singapore, Hong Kong and Ireland. Prior to joining

Apex Mauritius, Anju held the role of team leader at a leading offshore management company in

Mauritius and was responsible for a number of funds investing into India.

Ms. Tevina Ramsaha-Gulab is a Fellow member of the Association of Chartered Certified

Accountants. Tevina has over eight years experience in the Mauritius Global Business Sector.

She currently holds the position of Senior Accounts Manager at Apex Mauritius, which forms

part of the Apex Group which has offices in various jurisdictions including Bermuda, Dubai,

Singapore, Hong Kong and Ireland. Prior to joining Apex Mauritius, Tevina held the role of

Associate Executive at a leading offshore management company in Mauritius and was

responsible for a number of funds investing into India. Tevina also holds a BSc (Hons)

Accounting with Finance from the University of Mauritius.


Board of Directors of the Manager

The Manager has a board of directors currently consisting of Mr. Navun (Navin) Dussoruth and

Mr. Mahmad Hayder Amiran. Biographies for each of the Manager’s directors are provided

below:

Mr. Navun (Navin) Dussoruth currently holds the position of Head of Private Equity and Risk

Management with Apex Mauritius. Navin holds a number of directorships on the boards of

numerous India focused funds and companies through which he has acquired extensive

experience and knowledge on key industries in India and its principal capital markets. As Head

Risk Management, Navin has the mission to provide objective assurance as to the adequacy and

effectiveness of the Apex Group risk management and control framework including the

implementation and adherence of the SSAE 16 / ISAE 3402 Control Matrix. Prior to joining

Apex, Navin was with Ernst & Young Mauritius for seven years where he was a Manager in the

Assurance & Advisory Business Services, specializing in Global Asset Management and

financial services and has actively been involved in the audit of regulated funds in Cayman

Islands and for funds with listing on the Alternative Investment Market with LSE. Navin is

member of the Association of Chartered Certified Accountants (“ACCA”), UK; member of the

Institute of Internal Auditors (“IIA”) and member of the Mauritius Institute of Professional

Accountants (“MIPA”). Navin also hold an LL.M in International Business Law from the

Universite Pantheon– Assas (Paris II) and hold a Diploma in International Financial Reporting

Standards.

Mr. Mahmad Hayder Amiran is a Fellow member of the Association of Chartered Certified

Accountants. He is the Head of Accounting at Apex Fund Services (Mauritius) Ltd. (“Apex

Mauritius”), which forms part of the Apex Group which has offices in various jurisdictions

including Bermuda, Dubai, Singapore, Hong Kong and Ireland. Prior to joining Apex Mauritius,

he worked as Finance Manager for a German multinational company. Hayder holds a number of

directorships on the boards of numerous India focused funds and companies through which he

has acquired extensive experience and knowledge on key industries in India and its principal

capital markets.

Administrator, Registrar and Transfer Agent, and Company Secretary

The Apex Fund Services (Mauritius) Ltd. (the “Administrator”) is incorporated in Mauritius

and is licensed and regulated by the FSC as a Management Company to, inter alia, provide

company management and administration services to global business companies.

The Fund has entered into an administration agreement with the Administrator (the

“Administration Agreement”) to act as the administrator, registrar and transfer agent, and

company secretary to the Fund, and to provide administration services to the Fund and on its

behalf for each Class of Shares created and that may be created by the Fund’s board of

directors. The Administrator will perform various administrative and registrar and transfer

agency and company secretarial services for the Fund, including:


(i) The day-to-day administration of the Fund and calculation of the net asset value of the

Participating Shares of each Class of the Fund on each applicable Valuation Day or such

other days as the Fund’s board of directors may determine;

(ii) maintaining the register of Shareholders of the Fund and generally performing all actions

related to the issuance and transfer of Shares and the safe-keeping of certificates, if any;

(iii) performing all acts related to the redemption and/or purchase of the Shares;

(iv) maintaining a record of dividends declared, if any, and dividends paid;

(v) on behalf of the Fund, dealing with and replying to all correspondence and other

communications addressed to the Fund in relation to the replacement or transfer of Shares;

(vi) providing guidance to the Fund’s board of directors relating on its duties, responsibilities

and powers;

(vii) informing the Fund’s board of directors of all legislation pertaining to meetings of the

Shareholders and the Fund’s board of directors;

(viii) ensuring that the minutes of all meetings of Shareholders and Fund’s board of directors

are properly recorded, and that all statutory registers are properly maintained;

(ix) certifying in the annual financial statements, that the Fund has filed with the Registrar of

Companies all such returns as are required under the Companies Act 2001;

(x) ensuring the tax filings of the Fund with the tax authorities in Mauritius;

(xi) performing all other incidental services necessary to its duties, which duties shall be set

out in the Administration Agreement.

The Administration Agreement provides that the Administrator and its affiliates, employees and

directors shall not be liable to the Fund or its Shareholders for any act or omission, in the course

of, or in connection with, the services rendered by it under the Administration Agreement or for

any loss or damage which the holders of relevant Classes of Shares in the Fund may sustain or

suffer as a result of, or in the course of, the discharge by the Administrator of its duties pursuant

to the Administration Agreement provided that such loss or damage is not occasioned by the

gross negligence, willful default or fraud of the Administrator. The Administrator’s liability in

these instances is limited. The Administration Agreement also contains provisions for the

indemnification of the Administrator and its affiliates, employees and directors by the Fund for

all liabilities, losses, costs or expenses arising in connection with the performance of its services,

other than such losses resulting from the gross negligence, willful default or fraud on the part of

the Administrator and its affiliates, employees and directors. The Administrator’s liability in the

event of a breach of its contractual duties is limited to the amount of its annual fees and

remuneration.

As a result of its other activities, the Administrator may have conflicts of interest in allocating

time, services and functions among the Fund and other business ventures. See Section VI titled

“RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST.”

The Administrator in no way acts as guarantor or offeror of the Fund’s Shares or any underlying

investment, nor is it responsible for the actions of the Fund’s sales agents, its prime broker(s),

custodian(s), any other brokers or the Manager. The fees payable to the Administrator are based

on its standard schedule of fees charged by the Administrator for similar services. These fees are

detailed in the Administration Agreement.


The Administrator is not responsible for any investment decisions of the Fund (all of which will

be made by the Manager subject to the overall supervision of the board of directors of the Fund).

THE ADMINISTRATOR WILL NOT PROVIDE ANY INVESTMENT ADVISORY OR

MANAGEMENT SERVICE TO THE FUND AND THEREFORE WILL NOT BE IN ANY

WAY RESPONSIBLE FOR THE FUND’S PERFORMANCE. THE ADMINISTRATOR WILL

NOT BE RESPONSIBLE FOR MONITORING ANY INVESTMENT RESTRICTIONS OR

COMPLIANCE WITH THE INVESTMENT RESTRICTIONS AND THEREFORE WILL NOT

BE LIABLE FOR ANY BREACH THEREOF.


IV. SUMMARY OF PRINCIPAL TERMS

The following is a summary of certain information about the Fund and investment in shares or

interest therein. This summary is not intended to be complete and is qualified in its entirety by

the terms of the governing documents of the Fund, including the Constitution of the Fund and the

Subscription Documents of each Shareholder (the “Governing Documents”). The Governing

Documents are available from the Fund upon the request of any potential investor and should be

reviewed carefully before making any investment decision. To the extent that the terms set forth

below or any description of the Fund set forth in this Confidential Private Placement

Memorandum (the “Memorandum”) differs from the terms of the Governing Documents, the

Governing Documents shall control.

Fund Structure Taurrus India Advantage Fund (the “Fund”) is a public

company limited by shares incorporated under the laws of the

Republic of Mauritius, holding a category 1 global business

licence and licenced as a collective investment scheme and

authorized to operate as an expert fund.

Manager The board of directors of the Fund has appointed and engaged

the services of Taurrus Asset Managers (Mauritius) Ltd. as the

investment manager of the Fund (“Manager” or “Investment

Manager”) pursuant to the terms of an investment management

agreement, as the same may be amended from time to time (the

“Management Agreement”). The Investment Manager was

incorporated on 23 February 2017 under the laws of Mauritius

as a private company limited by shares, and is licensed by the

FSC as a CIS Manager.

Subject to the overall supervision of the Fund’s Board, the

Investment Manager will, inter alia, manage the Fund’s

investments activities, and will assist the Fund in making all

investment/disinvestment decisions in relation to each Class.

The Investment Manager has entered into an investment

advisory agreement (“Investment Advisory Agreement”) with

Taurus Treasury Management Services Private Limited (the

“Indian Advisor”), a private limited company incorporated

under the Indian Companies Act, 1956. The Indian Advisor will

provide services that may include providing technical and

fundamental analysis of the market trends, providing

macroeconomic updates, sectoral reviews, stock research and

any other relevant information requested by the Investment

Manager, identification of investments, review and monitoring

of investments and divestments. The role of the Indian Advisor

is purely advisory and recommendatory with no executory

powers or binding effect whatsoever. Without prejudice to the

foregoing, the services and/or advice rendered by the Indian


Advisor are non-exclusive.

For the advisory services rendered by the Indian Advisor, the

Indian Advisor shall be entitled to a fee and reimbursement of

expenses in accordance with the terms of the Investment

Advisory Agreement

Shares The Fund is inviting Eligible Investors (defined below) on a

private placement basis to subscribe for participating, non-

voting, redeemable shares of the Fund of no par value each (the

“Shares”). The Shares shall be issued in different classes

(“Classes”) and in sub-classes (“Sub-Classes”), having such

terms as the Fund’s board of directors may decide. References

to a Class shall include reference to all Sub-Classes of such

Class unless the context requires otherwise. The Class assets

and Class liabilities of each Class shall be kept separate and

separately identifiable from Class assets and Class liabilities

attributable to other Classes. Subject to applicable law, the

rights, privileges and liabilities of a holder of Shares shall be in

relation to that Class of Share only and to no other Class. Each

Class may have its distinct investment philosophy, objective

and strategy, as may be set out in the offering of such Class.

The Fund has established Class A Shares (the “Participating

Shares”) which shall be issued in Sub-Classes for purposes of

separately tracking the relevant issue dates of such Participating

Shares and to equitably reflect the differing Performance

Allocations attributable to each Sub-Class (because of the

differing issue dates throughout the fiscal year). References to

Class A Shares shall include reference to all Sub-Classes of

such Class A Shares unless the context requires otherwise. The

first Sub-Class of Class A Shares issued shall be the “Class A

Shares Lead Sub-Class” and shall be issued at a purchase

price of $1,000 per Share. Sub-Classes of Class A Shares shall

be issued at a purchase price of $1,000 per Share at each issue

date.

At the commencement of each calendar year, the Fund may

consolidate any separate Sub-Classes of Class A Shares into the

Class A Shares Lead Sub-Class, provided however, that no such

consolidation shall occur with respect to a series of

Participating Shares if at the end of a calendar year either the

net asset value per Share of such Sub-Class is below its Prior

High NAV per Share (as defined below) or the net asset value

per Share of the Class A Shares Lead Sub-Class is below its

Prior High NAV per Share. Any such consolidation will be

effected by the simultaneous redemption of Shares of the


relevant Sub-Class of Class A Shares and the reissuance of

Shares of the Class A Shares Lead Sub-Class as per the

prevailing net asset values of the respective Sub-Classes. The

“Prior High NAV per Share” of a Participating Share shall be

the net asset value per Share of that Participating Share

immediately after the most recent Performance Allocation has

been levied with respect to such Participating Share (or if no

Performance Allocation has yet been levied with respect to such

Participating Share, the net asset value per Share of the

Participating Share immediately following the issuance of such

Participating Share).

The Fund is a single legal entity and a creditor of the Fund may

enforce claims against all assets of the Fund notwithstanding

that the creditor’s claims may relate to a single Class or Sub-

Class of Shares. Therefore, in the event of a deficit in one Class

or Sub-Class of Shares, assets of another Class or Sub-Class

might be relied on to cover such deficit.

The holders of Participating Shares will have no right to vote on

any matter except in a case of variation of rights.

The Fund has issued non-participating, voting shares of the

Fund of no par value each (the “Management Shares”), which

will be held by the Manager. The Management Shares carry the

exclusive right to vote as provided for in the Constitution of the

Fund.

Further information on the rights and obligations attached to the

Shares is set out in the Governing Documents.

Other Classes and Sub-Classes of Shares may be issued by the

Fund from time to time in the sole discretion of the board of

directors of the Fund. Any such additional Classes and Sub-

Classes of Shares may be issued on any terms (including terms

that vary materially from the terms of the Classes and Sub-

Classes described herein) as the Fund’s board of directors

determine. The terms and conditions of any offering of any

other Class of Shares will be contained in a supplement to this

Memorandum or other document related to each such offering,

or may be communicated in such other manner as the Directors

may determine from time to time. The relevant documentation,

in prescribed format wherever applicable, in connection with

each additional Class of Shares to be created by the Fund must

be submitted to the FSC for its prior approval. In addition, the

Fund may enter into side letters or other similar agreements

with any Shareholder, which may, as determined by the Fund’s


board of directors, afford to such Shareholders special rights not

generally afforded to other Shareholders. In any such event,

existing Shareholders shall have no right to consent to the

issuance of any such additional Shares, shall have no right of

first refusal with respect to such issuances and shall not be

entitled to receive the benefit of any such side letters or other

agreements or any terms of a Class or Sub-Class that are

different than the terms assigned to the Class or Sub-Class of

Shares they hold.

Subscriptions Participating Shares will generally be available for subscription

on the first business day of each calendar month and on such

other days as the Fund’s board of directors shall determine.

However, subscriptions may be suspended or restricted to

existing investors, as determined by the Fund’s directors on the

advice of the Manager. Each investor will initially be required

to invest a minimum of $100,000 in the Fund, although the

Fund’s board of directors may accept investments of a lesser

amount, on the advice of the Manager, provided that this does

not breach regulations 78 to 81 of the Securities (Collective

Investment Schemes and Closed-end Funds) Regulations 2008,

issued under the Securities Act 2005 of Mauritius. Subject to

the discretion of the Fund’s directors, a shareholder of the Fund

(a “Shareholder”) may make additional investments in the

Fund, generally in minimum amounts of at least $20,000, unless

otherwise permitted by the Fund. Subscriptions are payable in

full upon the Fund’s acceptance of an investor’s subscription

and must be made in cash by wire transfer only to the bank

account detailed in the relevant Subscription Documents. The

Fund’s board of directors reserve the right to reject any

subscription, in whole or in part. No subscriber will be entitled

to receive interest on any subscription amounts remitted to the

Fund prior to the date the Participating Shares are issued to

such subscriber. Any interest income earned on such

subscription amounts will be payable to the Fund and not

applied toward the purchase of the Participating Shares.

In accordance with the Financial Intelligence and Anti-Money

Laundering Act 2002 of Mauritius, and the Code on the

Prevention of Money Laundering and Terrorist Financing

(“Code”) issued by the FSC, all subscribers will be required to

comply with the Fund’s anti-money laundering procedures or

policies as further described in the Fund’s subscription

documents (the “Subscription Documents”). Subscribers will

be required to complete the Subscription Documents, which

consist of the subscription agreement, the subscriber

information form to determine their eligibility and such other


documents as may be prescribed by the board of directors of the

Fund. See “Section IX: Subscriptions – Investor Eligibility

Requirements” for information concerning investor eligibility

requirements for the Fund.

The Fund may appoint one or more placement agents (each, a

“Placement Agent”) in connection with the offering of the

Participating Shares. Placement Agents may charge the

investors who purchase Participating Shares through them

additional upfront and/or ongoing placement fees. With the

consent of a prospective investor, the Fund may add such

placement fee to such investor’s subscription amount, and the

placement fee will not be applied towards the Participating

Shares issued to that investor. Certain Placement Agents may

also receive a portion of the Management Fee and/or

Performance Allocation.

Eligible Investors Participating Shares in the Fund will be available only to expert

investors (defined as (a) an investor who makes an initial

investment, for his own account, of no less than US$100,000;

or (b) persons meeting the criteria of sophisticated investors as

defined in the Mauritius Securities Act 2005 or any similarly

defined investor in any other securities legislation),other than

(i) any person, corporation or entity which cannot acquire or

hold Participating Shares without violating laws or regulations

applicable to it; (ii) any person, corporation or entity whose

holding of Participating Shares, in the opinion of the Fund’s

board of directors, might result in the Fund incurring any

liability to taxation or suffering any other pecuniary

disadvantage which the Fund might not otherwise have incurred

or suffered; (iii) any person, corporation or entity whose

holding of Participating Shares, in the opinion of the Fund’s

board of directors, does not conform with the requirements of

the Memorandum, Constitution and the Subscription

Documents; (iv) a custodian, nominee or trustee for any person

or entity described in (i) to (iii) above (“Eligible Investors”).

In addition to the above, Class A Shares shall not be available to

any person who is a person resident in India as per applicable

Indian laws.

Valuations Under the overall supervision and direction of the Fund’s board

of directors, the Administrator will calculate the Fund’s net

asset value, the net asset value of each Class and Sub-Class and

the net asset value per Share of each Class and Sub-Class, in

each case, as of each Valuation Day (as defined hereinafter).


The net asset value of each Class shall be the value of all the

assets less all the liabilities attributable to that Class. Where the

Fund has created a Sub-Class, the Net Asset Value and Net

Asset Value per Share shall be calculated in relation to that Sub-

Class as if reference herein to a Class was reference to a Sub-

Class.

Such calculations of the net asset value shall be made as of the

last business day of each month or such other date designated

by the Fund’s board of directors after having considered the

advice of the Investment Manager (each a “Valuation Day”) in

accordance with the Constitution. All net asset value

calculations shall be made as soon as possible after each

Valuation Day.

The assets of the Fund will be valued in accordance with

International Financial Reporting Standards.

Management Fee The Fund will pay the Manager a management fee in respect of

each Class A Share (the “Management Fee”) at a rate not

greater than 2.75% per annum of the net asset value per Class A

Share (before deduction of the Management Fee and accrual of

any Performance Allocation) in consultation with the board of

the Fund and Manager. Subject the paragraph below, generally,

the Management Fee will be calculated and payable quarterly in

arrears as of the end of each quarter. Shares issued after the

commencement of a quarter will be subject to a prorated

Management Fee.

Solely for the first year of investment by any holder of Class A

Shares, the Management Fee shall be payable in the following

manner: 0.75% of the net asset value per Share (before

deduction of the Management Fee and accrual of any

Performance Allocation) shall be payable in advance at the time

of issue of the Shares, and 0.50% of the net asset value per

Share(before deduction of the Management Fee and accrual of

any Performance Allocation) payable quarterly in arrears, after

which the Management Fee shall be payable quarterly in

arrears.

The Management Fee with respect to any Shareholder may be

waived or reduced by the Manager, in its sole discretion. Any

investment of the Manager and its principals and affiliates will

not be required to bear the Management Fee; such investors will

hold special Classes and Sub-Classes of Shares for such

purpose.


Performance Allocation With respect to Class A Shares, for each Measurement Period

(as defined below), the Fund shall pay the Manager the

Applicable Percentage (as defined below) of the Performance

Change Amount (as defined below) to the extent that it exceeds

the Hurdle Amount (as defined below) and in addition will be

entitled to the Further Applicable Percentage (as defined below)

of the Performance Change Amount to the extent that it exceeds

the Further Hurdle Amount (as defined below). Such allocation

is referred to as the “Performance Allocation.”

The “Applicable Percentage” with respect to Class A Shares is

10%.

The “Further Applicable Percentage” with respect to Class A

Shares is 5%.

The “Measurement Period” is the calendar year except if the

Sub-Class is created after the start of the calendar year, in which

case the first Measurement Period for such Sub-Class will begin

on the date of issue of the Class A Shares of such Sub-Class and

end on the first December 31, and the second Measurement

Period and each succeeding Measurement Period will be the

calendar year.

A “Performance Change Amount” is the amount (if positive)

by which the net asset value of the Sub-Class as of the end of

the Measurement Period exceeds its High Water Mark (as

defined below). In computing a Performance Change Amount,

adjustment will be made for any subscriptions, redemptions or

distributions in respect of that Sub-Class.

The “High Water Mark” is the net asset value of the Sub-Class

as of the end of the most recent Measurement Period for which

such Sub-Class was charged a Performance Allocation

(calculated after the charging of such Performance Allocation),

or if no Performance Allocation has been charged to such Sub-

Class, net asset value of the Sub-Class immediately following

the issuance of such Sub-Class.

The “Hurdle Amount” with respect to any Sub-Class will be

determined as of the end of any Measurement Period and will

be an amount equivalent to 6% of the High Water Mark of such

Sub-Class, after adjustment for realized and unrealized gains

and losses, Management Fees, expenses and increases and

decreases in Fund liabilities during such Measurement Period,

as well as any subscriptions, redemptions or distributions with


respect to such Sub-Class. The “Further Hurdle Amount”

with respect to any Sub-Class will be determined as of the end

of any Measurement Period and will be an amount equivalent to

8% of the High Water Mark of such Sub-Class, after adjustment

for realized and unrealized gains and losses, Management Fees,

expenses and increases and decreases in Fund liabilities during

such Measurement Period, as well as any subscriptions,

redemptions or distributions with respect to such Sub-Class. If

the Performance Allocation is based on a Measurement Period

of less than a full calendar year, the Hurdle Amount and Further

Hurdle Amount shall be prorated to a percentage based on the

number of days elapsed in the Measurement Period compared

to the number of days in the full calendar year. As a point of

clarification, the Hurdle Amount or Further Hurdle Amount is

not calculated based on a cumulative annual or other periodic

rate of return but rather can be no higher than 6% of the High

Water Mark or 8% of the High Water Mark regardless of what

period of time is required to exceed the Hurdle Amount or

Further Hurdle Amount respectively.

If Shares are redeemed on a Valuation Day other than the last

business day of a calendar year, the Fund will pay the Manager

any Performance Allocation that has accrued in respect of the

Shares being redeemed. In the case of a partial redemption, the

Performance Allocation will only be charged with respect to the

pro rata portion of the Performance Change Amount attributable

to the Shares being redeemed. If the Fund is terminated as of a

date other than the last day of a calendar year, the Performance

Allocation will be calculated on the basis of the performance in

respect of each Sub-Class over the period from the

commencement of such year through the termination date and

will be payable within 30 days after such date.

Certain designated affiliates of the Investment Manager may

hold a special Class of Shares entitling them to receive the

Performance Allocation, subject to the satisfaction the solvency

test requirements.

The Performance Allocation may be waived or reduced by the

Manager (or by the holder of any Shares which is entitled to

receive a Performance Allocation) in whole or in part, in its sole

discretion.

For purposes of calculating the Performance Allocation, the net

asset value of the Shares will be grossed up by the amount of

any withholding or other taxes.


Fund Expenses The Fund will pay or reimburse the Manager and their

respective affiliates for all organizational and offering expenses

of the Fund including (“Organization Expenses”) being

attributable to the Fund’s set-up, including but not limited to the

costs incurred towards the incorporation, structuring and

organization of the Fund and/or Manager, including the setting

up and offering costs, legal fees and professional expenses

incurred in relation to the preparation and negotiation of the

material documents or any other documents applicable to the

Fund in relation to the offering of Shares pursuant to this

Memorandum, fees and commissions to be paid to

intermediaries/placement agents, such other costs attributable to

the establishment of the Fund. Such Organization Expenses

shall not exceed USD 100,000 and shall be allocated to the

holders of all Class/es of Shares. Further, such Organization

Expenses may amortized over such period of time as the board

of directors of the Fund determine.

The Fund bears the costs and expenses directly related to

portfolio investments or prospective investments (whether or

not consummated) of the Fund, including (but not limited to)

brokerage commissions, marketing expenses, interest on debit

balances or borrowings, clearing and settlement charges,

custodial fees, travel expenses, appraisal fees, investment

banking expenses, fees and profit-sharing payments due to

unaffiliated advisers, sub-advisers, consultants and finders

(which do not offset the Management Fee or the Performance

Allocation), specific expenses incurred in obtaining or

maintaining systems, research and other information and

information service subscriptions utilized with respect to the

Fund’s investment program, any tax-related structuring or legal

expenses incurred, any withholding or transfer taxes imposed

on the Fund, liability premiums for insurance covering the

Manager and its affiliates and costs of any litigation or

investigation involving Fund activities, all out-of-pocket costs

of the administration of the Fund, including tax preparation,

accounting, audit, operational, administration and legal

expenses, registrar and transfer agency expenses, costs

associated with reporting and providing information to existing

and prospective Shareholders (“Operating Expenses”). Such

Operating Expenses shall be allocated to all Class/es of Shares

and shall not exceed 0.75% p.a. of the aggregate net asset value

of all Classes of Shares in the Fund for the respective calendar

year. Any fee in excess of 0.75% p.a. will be borne by the

Manager.


Expenses relating specifically to a particular Class will be

allocated to such Class. Generally, most other expenses will be

allocated pro rata to the Classes in accordance with the net

asset value of such Class (in each case, before accrual of any

unearned Performance Allocation).

The Fund does not have its own separate employees or office.

The Fund maintains its registered office in the Republic of

Mauritius. The Manager is responsible for its own

organizational, general operating and overhead costs.

Redemptions Subject to the Fund’s board of directors’ right to limit aggregate

redemptions as described below, a Shareholder may voluntarily

redeem all or a portion of its Shares on a monthly basis as of

each Valuation Day and at such other times as the Fund’s board

of directors determine (each, a “Redemption Date”) at the net

asset value of the Shares being redeemed, provided that, Shares

may not be redeemed until they have been issued for not less

than fifteen (15) months (the “Lock-Up Period”).

Redemptions are permitted prior to the expiration of the Lock-

Up Period applicable to the Shares subject to an early

redemption penalty equal to 2% of the redemption proceeds to

which such Shareholder would otherwise be entitled (the

“Early Redemption Penalty”). For any Class or Sub-Classes

of Shares, written notice of any redemption (in the form

prescribed under the Subscription Documents) must be given at

least 60 days prior to the proposed Redemption Date unless

such notice period is waived or reduced by the Fund’s directors.

The Early Redemption Penalty may be reduced by the Fund’s

board of directors in its sole discretion. Any amount paid as an

Early Redemption Penalty shall be an asset of the Fund.

If aggregate redemption requests are received for a particular

Redemption Day for more than 25% of the net asset value of

the relevant Class as of such Redemption Day, the board of

directors of the Fund may, on the advice of the Manager, reduce

all redemption requests for such Redemption Day pro rata in

proportion to the net asset value of the Shares sought to be

redeemed by each redeeming Shareholder so that Shares

representing no more than 25% of the net asset value of the

relevant Class as of such Redemption Day are redeemed (the

“Gate”). The Gate may be waived with respect to certain

Shareholders whose remaining Shares would otherwise be less

than the minimum value of investment required by the Fund.

To the extent that any Shareholder’s request has been reduced


by the Gate, such request shall be satisfied as of the next

Redemption Day (and if not fully satisfied as of that

Redemption Day because of the Gate, then as of the end of the

next Redemption Day and, if necessary, successive Redemption

Days), each time subject to the Gate. Any deferred redemption

requests shall be treated in priority to any redemption requests

received for Redemption Days subsequent to the initial

Redemptions Day at which the deferred request would have

been effected in the absence of the Gate. Any unsatisfied

portion of any such redemption requests shall continue to be at

risk in the Fund’s portfolio until the effective date of the

redemption.

If a redemption request would cause the aggregate net asset

value of the remaining Shares held by a Shareholder to fall

below the minimum prescribed, then the Fund’s board of

directors will have the right to compel the redemption of all

Participating Shares held by such Shareholder.

Redemption requests may not be revoked without the consent

of the Fund’s board of directors. The Fund’s board of directors

may waive or reduce notice period requirements or permit the

redemption of any Shareholder under such other circumstances

and conditions as they deem appropriate.

Subject to the Fund’s board of directors’ right to create reserves

and to suspend the calculation of the Fund’s net asset value

and/or the voluntary redemption of Shares in certain

extraordinary circumstances, the amount due to any redeeming

Shareholder will generally be settled within 30 days of the

Redemption Date. The Fund’s directors may delay settlement if

such delay is reasonably necessary to prevent a material adverse

impact on the Fund or the remaining Shareholders (for example,

if it is not feasible under prevailing market conditions to

liquidate assets required to fund redemption requests at prices

that are considered reasonable).

The Fund will have the authority to deduct from the gross

redemption proceeds due to any Shareholder an amount

representing the Fund’s actual or estimated expenses associated

with processing the redemption.

Redemption proceeds generally will be paid in cash, although

the Fund’s board of directors may make a distribution in kind to

any Shareholder with respect to any redemption including, but

not limited to, a distribution of shares in a liquidating entity or

similar special purpose vehicle which may be subject to


management fees and performance allocations comparable to

those applicable to the Shares being redeemed.

To the extent the Fund’s directors anticipate the distribution of

redemption proceeds in kind as of a particular date, it is

generally expected that the Fund will distribute redemption

proceeds in kind pro rata in respect of all redemptions to be

effected as of such date, based on net asset value and asset

composition, in each case except to the extent that any such pro

rata in-kind distribution is not reasonably practicable.

Mandatory Redemptions The Fund’s directors reserve the right to compel the redemption

of all or any of the Shares of any Shareholder on not less than

two days’ prior written notice in the following circumstances:

a. if such Shareholder is no longer an Eligible Investor or has

failed to comply with any anti-money laundering

requirements in Mauritius or abroad;

b. if any law has been passed renders it illegal or, in the

reasonable opinion of the board of directors of the Fund,

impracticable or inadvisable to continue the Fund;

c. if in the reasonable opinion of the board of directors of the

Fund, the holders continued shareholding would for any

reason cause the Fund any regulatory, pecuniary, legal,

taxation or administrative disadvantage; or

d. if such Shareholder has requested a partial redemption

which would cause the aggregate holding owned by such

Shareholder following such redemption to decline below

the minimum holding as was applicable to such

Shareholder (if any) or below the minimum holding

applicable to that Class (if any).

Settlements will be made in the same manner as voluntary

redemptions.

Suspension of

Redemptions

The Fund’s Constitution provides that the board of directors of

the Fund, having considered the advice of the Manager, may

declare a temporary suspension of the determination of the net

asset value of a Class or Sub-Classes and the sale, allotment,

issue or redemption of the Shares in the events set out in the

Constitution.

Dividends Dividends will not ordinarily be paid to the Shareholders. All

earnings of the Fund will ordinarily be retained for

reinvestment and will be reflected in the net asset value. The

Fund’s directors, on the advice of the Manager, may elect from


time to time to pay dividends. Any such dividend generally

will be to the Shareholders on the record date subject to the

applicable solvency test in the Republic of Mauritius.

Transfers Subject to the provisions of the Constitution, Shares may not be

transferred without the prior written consent of the Fund’s

board of directors, which may be given or withheld in their sole

discretion.

Changes to Fund

Structure

Subject to applicable law, the Fund’s board of directors, on the

advice of the Manager, may change the domicile of the Fund to

another state, country or other jurisdiction where advisable due

to legal, tax or other considerations. Subject to applicable law,

the Fund’s directors, on the advice of the Manager, may make

adjustments to the structure of the Fund and the Governing

Documents related thereto, or may vary the manner in which

the Management Fee or Performance Allocation is paid,

allocated or distributed, in order to address applicable

structural, ownership, legal, or regulatory changes, or to

improve overall tax efficiency.

Indemnification The directors of the Fund, the Manager, the Administrator, their

directors, officers, affiliates and their respective partners,

members, shareholders, officers, directors, employees and

associates and agents as well as the Fund’s board of directors

(each a “Covered Person”) shall not be liable to the Fund or

the Shareholders for any loss or damage occasioned by any acts

or omissions in the performance of their services on behalf of

the Fund except as set forth in the Constitution and the

Management Agreement, to the extent permitted by law. The

Constitution and the Management Agreement contain

provisions for the indemnification of the Covered Persons by

the Fund (but not by the Shareholders individually) against any

liabilities arising in connection with the performance of their

activities on behalf of the Fund, in the absence of bad faith,

fraud, gross negligence, or willful misconduct, to the extent

permitted by law.

Reserves Appropriate reserves may be accrued and charged against the

net assets of the Fund for contingent liabilities, such reserves to

be in the amounts (subject to increase or reduction) that the

Manager deems necessary or appropriate).


Limited Liability of

Shareholders

Shareholders will not have personal liability for the debts or

obligations of the Fund.

Fiscal Year The Fund has a fiscal year ending on December 31 of each

calendar year.

Reports to Shareholders The Fund will furnish to its Shareholders as soon as practicable

after the end of each fiscal year audited annual reports

containing financial statements examined by the Fund’s

independent auditors. In addition, the Manager will furnish

each Shareholder with quarterly letters on the operations of the

Fund and unaudited quarterly reports showing the value of the

net asset value of the Shares held by the Shareholder. The

Board may make adjustments in the Fund’s financial statements

for a fiscal year to conform to International Financial Reporting

Standards for financial reporting purposes. Any such

adjustments, unless the Fund’s board of directors determine

otherwise, will not affect net asset value calculations or the

allocation of gains or losses among Shareholders for such fiscal

year.

Duration The Fund does not have a finite duration.

Amendments to the

Constitution; Modification

of Rights and Other

Changes

The Constitution may be amended only by way of special

resolution passed by the holders of the Management Shares or

with the unanimous written consent of the holders of the

Management Shares. The purchase and redemption of Shares

will not require notice or disclosure to, or the approval of, the

other Shareholders.

The rights attached to any Class/Sub-Class may (except as set

forth below or unless otherwise provided by the terms of issue

of the Shares of that Class/Sub-Class) only be varied or

abrogated if approved by a special resolution or by the consent

in writing of the holders of not less than seventy five percent of

the Shares of the relevant Class/Sub-Class, and the

Shareholders of any other Class/Sub-Class shall have no vote or

consent right with respect to any such variation or abrogation.

The Fund’s board of directors may treat all the Classes/Sub-

Classes or any two or more Classes/ Sub-Classes as forming

one Class/Sub-Class if they consider that the variation or

abrogation of the rights attached to such Classes/ Sub-Classes

proposed for consideration at such meeting is the same

variation or abrogation for all such relevant Classes/ Sub-

Classes, but in any other case shall treat them as separate

Classes/ Sub-Classes.


The rights conferred upon the holders of the Shares of any

Class or Sub-Class shall not, unless otherwise expressly

provided by the terms of issue of the Shares of that Class/ Sub-

Class be deemed varied or abrogated by, inter alia, (i) the

redemption or repurchase of any Shares; (ii) the creation,

allotment or issue of any other Class/ Sub-Class of Shares, (iii)

any modification of the fees payable to any service provider to

the Fund or any change to any subscription date, Redemption

Date or Valuation Day; or (iv) the declaration of a dividend with

respect to any Shares.

The Fund shall have the absolute discretion to waive or modify

the application of any provision of the terms herein with respect

to a Shareholder (including, without limitation, those relating to

the Management Fee, the Performance Allocation, transparency,

and redemptions) without obtaining the consent of any other

Shareholder (other than a Shareholder whose rights as a

Shareholder would be materially and adversely changed by

such waiver or modification). The Fund generally grants

waivers of the Management Fee and Performance Allocation to

employees of the Manager and its affiliates, as well as their

related family members and affiliates.

Risk Factors/Conflicts of

Interest

An investment in the Fund entails a high degree of risk. The

Fund, the Manager and their respective affiliates are subject to

various conflicts of interest, including, but not limited to, in

connection with transfers of assets between entities advised by

the Manager or its affiliates.

Legal Counsel IC Legal, Advocates and Solicitors is serving as the Fund’s and

Manager’s India legal counsel. Anand Kumar Gujadhur is

serving as the Fund’s and Manager’s Mauritius legal counsel.

In connection with this offering of Shares and subsequent

advice to the Fund, the Manager, and affiliates of each of the

foregoing, neither Anand Kumar Gujadhur nor IC Legal,

Advocates and Solicitors will be representing investors in the

Fund. No independent counsel has been retained to represent

investors in the Fund. In assisting in the preparation of this

Memorandum, IC Legal, Advocates and Solicitors and Anand

Kumar Gujadhur have relied upon information provided by the

Fund and the Manager, and did not investigate or verify the

accuracy and completeness of information set forth herein

concerning the Fund, the Manager, the Fund’s service providers

and their affiliates and personnel.

Administrator Apex Fund Services (Mauritius) Ltd.


Auditors Anathiva serves as the Fund’s auditors.

Custodian IL&FS Securities Services Limited serves as the Fund’s

custodian.


V. BROKERAGE AND CUSTODY

Brokerage

The Manager is responsible for the placement of the portfolio transactions of the Fund and the

negotiation of any commissions or spreads paid on such transactions. Portfolio securities are

normally purchased through brokers on securities exchanges or directly from the issuer or from

an underwriter or market maker for the securities. Purchases of portfolio instruments through

brokers involve a commission to the broker. Purchases of portfolio securities from dealers

serving as market makers include the spread between the bid and the asked price. In placing

portfolio transactions, the Manager will seek to obtain the best execution for the Fund, taking

into account such factors as price (including the applicable dealer spread or commission, if any),

size of order, difficulty of execution, operational facilities of the firm involved and the firm’s risk

in positioning a block of securities.

Brokerage transactions are executed by brokers and dealers selected by the Manager on the basis

of a variety of factors, including the following: the ability to effect prompt and reliable

executions at favorable prices; the operational efficiency with which transactions are effected;

the financial strength, integrity and stability of the broker; the level of confidentiality maintained

with respect to the Fund’s transactions; the quality, comprehensiveness and frequency of

available research services considered to be of value; and the competitiveness of commission

rates in comparison with other brokers satisfying the Manager’s other selection criteria. In

addition, the Manager may execute investments with brokers and dealers with who are affiliates

of the Manager. However, the Manager does not intend for these other relationships to influence

the choice of brokers and dealers who execute investments for the Fund.

Custody

Substantially all of the Fund’s investments in marketable securities, as well as its cash and cash

equivalents, are expected to be held at IL&FS Securities Services Limited or other prime brokers

or custodians selected by the Manager. Bank debt assignments and participations, trade credit

claims and other instruments not constituting marketable securities generally are recorded

through book entry by the borrower or by an agent for the borrower or the creditors.

Documentary evidence of the acquisition, ownership and disposition of these assets typically will

be held at the offices of the Manager for the benefit of the Fund.

The Manager may cause the Fund and one or more other funds managed by the Manager (or

other discretionary accounts managed by the Manager) to commingle certain of their investments

in special purpose entities or accounts in order to facilitate co-investment. Ownership interests

in such vehicles typically will be recorded by means of private book entry in records maintained

by the Manager or its affiliates.


VI. RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST

Prospective investors should be aware that an investment in the Fund entails risks of significant

losses arising from a variety of factors, including the following (as may be applicable, depending

on the investment strategy employed by the Fund in respect of a particular Class of Shares):

General Investment Strategy and Market Risks

Business Risk. The companies in which the Fund invests may involve a high degree of business

and financial risk. These companies, in some cases, may have significant variations in operating

results, may be engaged in a rapidly changing business environment with products subject to a

substantial risk of obsolescence, may require significant additional capital to support their

operations, or may otherwise have a weak or unstable financial condition.

Availability of Suitable Investment Opportunities. The Fund competes with other potential

investors to acquire interests in its targeted investments. Certain of the Fund’s competitors may

have greater financial and other resources and may have better access to suitable investment

opportunities. There can be no assurance that the Fund will be able to locate and complete

suitable investments that satisfy the Fund’s objectives. Whether or not suitable investment

opportunities are available to the Fund, the Fund will bear the Management Fee and other fund

expenses described herein.

Market Risks. The profitability of a significant portion of the Fund’s investment program

depends to a great extent upon correctly assessing the future course of the price movements of

securities and other investments. There can be no assurance that the Manager will be able to

predict accurately these price movements. With respect to the investment strategy utilized by the

Fund, there is always some, and occasionally a significant, degree of market risk.

Highly Volatile Markets. Price movements of turnaround securities are especially volatile,

principally due to the uncertainties attached in the turnaround process, making them susceptible

to adverse changes in the situation of the issuer.

High Risk Investments. The Fund invests principally in publicly traded equity or equity linked

securities and other financial instruments and obligations of stressed companies which may result

in significant returns to the Fund, but which involve a substantial degree of risk. The Fund may

lose its entire investment in a stressed company, may be required to accept cash or securities with

a value less than the Fund’s investment and may be prohibited from exercising certain rights with

respect to such investment. Troubled company investments may not show any returns for a

considerable period of time, if ever. Stressed company investments may be adversely affected by

state, federal and foreign laws relating to, among other things, fraudulent conveyances, voidable

preferences, lender liability and a bankruptcy court’s discretionary power to disallow,

subordinate or disenfranchise particular claims. Investments in securities of stressed companies

made in connection with an attempt to influence a restructuring proposal or plan of

reorganization in a bankruptcy case may also involve substantial litigation.

The Fund may have significant investments in companies involved in (or the target of)

acquisition attempts or tender offers or companies involved in work-outs, liquidations, spin-offs,


reorganizations, bankruptcies and similar transactions. In any investment opportunity involving

any such type of business enterprise, there exists the risk that the transaction in which such

business enterprise is involved either will be unsuccessful, take considerable time or result in a

distribution of cash or a new security, the value of which will be less than the purchase price to

the Fund of the security, or other financial instrument in respect of which such distribution is

received. Similarly, if an anticipated transaction does not in fact occur, the Fund may be required

to sell its investment at a loss. Because there is substantial uncertainty concerning the outcome of

transactions involving financially troubled companies in which the Fund may invest, there is a

potential risk of loss by the Fund of its entire investment in such companies.

Potential Illiquidity of Fund Investments. The market value of Fund investments will fluctuate

with, among other things, changes in market rates of interest, general economic conditions,

economic conditions in particular industries, the condition of financial markets and the financial

condition of the issuers of Fund investments. In addition, the lack of an established, liquid

secondary market for some Fund investments may have an adverse effect on the market value of

those Fund investments and on the Fund’s ability to dispose of them. Partly as a result of the

foregoing, as well as general market inefficiencies respecting companies in varying stages of

reorganizations and/or recapitalizations, a portfolio valuation for the Fund may not necessarily be

indicative of actual results or amounts to be realized by the Fund from its investments.

Additionally, some Fund investments may be subject to certain other transfer restrictions that

may contribute to illiquidity. Also, Fund investments constituting a control position may be

subject to additional transfer restrictions under securities and other laws by virtue of such control

position which will further contribute to illiquidity. Therefore, no assurance can be given that, if

the Fund decides to dispose of a particular investment, it will be able to dispose of such

investment at the prevailing market price.

Illiquidity in the investments of the Fund will compromise the ability of the Fund to meet

redemption requests in respect of Shares in cash or at all. It should be noted that the Fund’s

publicly traded investments may be relatively illiquid even though they may be publicly traded

or convertible into securities that are publicly traded. Some of the Fund’s investments may trade

only in the over-the-counter market, where trading tends to be substantially thinner than on

established securities markets. While trading of such securities often becomes active if the

financial situation of the issuer subsequently improves, trading may become even thinner, or

non-existent, if the issuer’s financial situation instead deteriorates after the Fund acquires its

securities.

Many investments, though publicly traded at the time of acquisition by the Fund, could become

non-publicly traded after the Fund acquires them (e.g., due to a de-listing or de-registration of the

company or its securities as a result of its financial distress). Similarly, other portfolio securities

of the Fund, although public when issued, could later become non-public for various reasons –

many of which are more likely to occur for companies in which the Fund intends to invest

because of the relatively less strong financial condition of such companies.

Some investments of the Fund may include securities that are not themselves publicly traded but

are convertible into securities that are publicly traded. The conversion price may be higher than

the market price of such publicly traded security at the time of the Fund’s investment, in which

event it will be impractical or uneconomical for the Fund to exercise its conversion rights unless


the market price of such publicly traded security subsequently increases, during the period of

convertibility, to a level that exceeds the conversion price. Such an increase may not occur for a

substantial time after the Fund makes such investment, if ever.

Significant Positions. Portfolio companies in which the Fund may invest could have a relatively

small aggregate number of outstanding shares, so the Fund may have a significant position in the

shares of a single issuer that could lead to litigation or disputes in the event the Manager desires

to influence the issuer. The Fund may also seek to challenge the management of a portfolio

company through a proxy contest or litigation. Such litigation or proxy contest may result in

substantial expense to the Fund, thus reducing the value of the Fund’s investment.

Moreover, the Fund’s ability to realize value from certain of its investments may depend upon

the ability of the Manager to influence the management of a portfolio company to take certain

actions, including, for example, a recapitalization, restructuring, spin off, sale of the business or

change in management. If the Manager is incorrect in its assessment of the impact such action

will have on the value of a portfolio company, or if it is unsuccessful in persuading the portfolio

company’s management to take the desired action, the Fund may sustain a loss on its investment

in the portfolio company, resulting in a reduction of the value of the Fund’s investment.

Event-Driven Strategies. The success of event-driven strategies depends on the successful

prediction of whether various corporate events will occur or be consummated. When the

Manager determines that a merger, exchange offer or tender offer transaction may be

consummated, the Fund may purchase securities at prices only slightly below the anticipated

value to be paid or exchanged for such securities in the merger, exchange offer or tender offer,

and substantially above the prices at which such securities traded immediately prior to the

announcement of the merger, exchange offer or tender offer. The consummation of mergers,

exchange offers, tender offers and other similar transactions can be prevented or delayed, or the

terms changed, by a variety of factors. If the proposed transaction later appears unlikely to be

consummated or is delayed, the market price of the securities may decline sharply by more than

the difference between the purchase price and the anticipated consideration to be paid, resulting

in a loss to the Fund.

Special Situation Investments. The Fund invests in companies undergoing significant economic

and corporate change. Because of the inherently speculative nature of this activity, the results of

the Fund’s operations may fluctuate from month to month and from period to period. The

returns generated from such an investment program may not adequately compensate investors for

the business and financial risk assumed. The Fund’s investments may be adversely affected by

changes in economic conditions or political events that are beyond its control.

Investments in Undervalued Assets. The Fund invests in undervalued assets. The identification

of investment opportunities in undervalued assets is a difficult task, and there is no assurance that

such opportunities will be successfully recognized or acquired. While investments in

undervalued assets offer the opportunity for above-average capital appreciation, these

investments involve a high degree of financial risk and can result in substantial losses. Returns

generated from the Fund’s investments may not adequately compensate Shareholders for the

business and financial risks assumed. A Shareholder should be aware that it may lose all or part

of its investment in the Fund.


The Fund may be forced to sell, at a substantial loss, assets which it believes are undervalued, if

they are not in fact undervalued. In addition, the Fund may be required to hold such assets for a

substantial period of time before realizing their anticipated value. During this period, a portion

of the Fund’s funds would be committed to the assets purchased, thus possibly preventing the

Fund from investing in other opportunities. In addition, the Fund may finance such purchases

with borrowed funds and thus will have to pay interest on such funds during such waiting period.

High-Yield Securities. The Fund may invest in “high yield” bonds and preferred securities which

are rated in the lower rating categories by the various credit rating agencies (or in comparable

non-rated securities). Securities in the lower rating categories are subject to greater risk of loss of

principal and interest than higher-rated securities and are generally considered to be

predominantly speculative with respect to the issuer’s capacity to pay interest and repay

principal. They are also generally considered to be subject to greater risk than securities with

higher ratings in the case of deterioration of general economic conditions. Because investors

generally perceive that there are greater risks associated with the lower-rated securities, the

yields and prices of such securities may tend to fluctuate more than those for higher-rated

securities. The market for lower-rated securities is thinner and less active than that for higher-

rated securities, which can adversely affect the prices at which these securities can be sold. In

addition, adverse publicity and investor perceptions about lower-rated securities or the issuers

thereof, whether or not based on fundamental analysis, may be a contributing factor in a decrease

in the value and liquidity of such lower rated securities.

Debt Securities. The Fund may invest in debt securities which may be low-rated or unrated by a

recognized credit-rating agency or below investment grade and which are subject to greater risk

of loss of principal and interest than higher-rated debt securities, due to a possible default by, or

bankruptcy of, the issuers of the securities. The Fund may invest in debt securities which rank

junior to other outstanding securities and obligations of the issuer, all or a significant portion of

which may be secured on substantially all of that issuer’s assets. The Fund may invest in debt

securities which are not protected by financial covenants or limitations on additional

indebtedness. The Fund may invest in distressed debt securities which are subject to the

significant risk of the issuer’s inability to meet principal and interest payments on the obligations

(credit risk) and may also be subject to price volatility due to such factors as interest rate

sensitivity, market perception of the creditworthiness of the issuer and general market liquidity

risk (market risk). The Fund will therefore be subject to credit, liquidity and interest rate risks.

In addition, evaluating credit risk for debt securities involves uncertainty because credit rating

agencies throughout the world have different standards, making comparison across countries

difficult. Furthermore, the market for credit spreads is often inefficient and illiquid, which can

make it difficult to accurately calculate discounting spreads for valuing financial instruments.

Distressed Securities. Although distressed securities may offer substantial upside potential, the

discounts at which such securities typically may be purchased reflect the market’s perception that

a substantial risk of non-payment exists. The Fund will be very much more exposed to the risk of

non-performance than is true for most funds (including most private investment funds). That risk

will be especially high during times of economic distress for the industry or industries in which

the issuers of such distressed securities are engaged, or during general economic downturns.


Emerging Market Currencies and Securities. The Fund invests all or substantially all of its

assets in the securities (or instruments thereto) of issuers located in India, and the Fund may

invest in Indian Rupees for hedging purposes. The value of the Indian Rupee and securities may

be drastically affected by political developments in the country of issuance. In addition, the

existing governments in India could take actions that could have a negative impact on the Fund,

including nationalization, expropriation, imposition of confiscatory taxation or regulation or

imposition of withholding taxes on interest payments.

India has experienced political, economic and/or social instability in the past. Such markets have

also experienced dramatic swings in the value of their national currency. There can be no

assurance that such instability or such fluctuations will not occur in the future and, if they do

occur, that they will not have a substantial adverse effect on the performance of the Fund.

The Indian economy is still in the early stages of modern development and is subject to abrupt

and unexpected change. In many cases, the government retains a high degree of direct control

over the economy and may take actions having sudden and widespread effects. Also, the

economy has a high dependence on a small group of markets.

India is prone to have periods of high inflation and high interest rates as well as substantial

volatility in interest rates, which could affect the Fund adversely.

In certain cases, the structures that the Fund may employ to make investments may be complex,

entail significant counterparty exposure and/or not clearly comply with local law.

Indian regulations may in the future require identifying information about entities and persons

who have direct, or even indirect, exposure to the securities of issuers in those countries. This

may result in the Fund being asked to provide information about Shareholders to regulators or to

the brokers who are providing services to the Fund in connection with investment activities.

Such information may include, but may not be limited to, the identities, addresses and countries

of origin of Shareholders.

Potential Involvement in Litigation. As a result of the Fund’s potential investments in distressed

investments and the possibility that the Manager may participate in restructuring activities, it is

possible that the Fund may become involved in litigation respecting creditor disputes and similar

issues among classes of claimants. Litigation entails expense and the possibility of

counterclaims against the Fund including the Fund’s directors and the Manager and ultimately

judgments may be rendered against the Fund for which the Fund does not carry insurance.

Nature of Reorganization Proceedings. Investments in the debt or equity of companies involved

in reorganization proceedings typically entail a number of risks that do not normally apply to

investments in financially sound companies. For example, if the Manager’s evaluation of the

anticipated outcome of a reorganization or the timing of such outcome should prove incorrect,

the Fund could experience losses. A wide variety of considerations make any evaluation of the

outcome of an investment in such a company uncertain. Such considerations include, for

example, the possibility of litigation between the participants in a reorganization or liquidation

proceeding or a requirement to obtain mandatory or discretionary consents from various

governmental authorities or others. The uncertainties inherent in evaluating such investments


may be increased by legal and practical considerations which limit the access of the Manager to

reliable and timely information concerning material developments affecting a company, or which

cause lengthy delays in the completion of a reorganization or liquidation proceeding.

Competition from other investors may also render it difficult or impossible for the Fund to

achieve intended results or promptly effect transactions.

Options. The successful use of options depends on the ability of the Manager to forecast interest

rate and market movements correctly. In addition, when it purchases an option, the Fund runs

the risk that it will lose its entire investment in the option in a relatively short period of time,

unless the Fund exercises the option or enters into a closing transaction with respect to the option

during the life of the option. If the price of the underlying security does not rise (in the case of a

call) or fall (in the case of a put) to an extent sufficient to cover the option premium and

transaction costs, the Fund will lose part or all of its investment in the option. Although the Fund

will take an option position only if the Manager believes there is a liquid secondary market for

the option, there is no assurance that the Fund will be able to affect closing transactions at any

particular time or at any acceptable price. In the event of the bankruptcy of a broker through

which the Fund engages in transactions in options, the Fund could experience delays and/or

losses in liquidating open positions purchased or sold through the broker

Execution Risks and Manager Error. The execution of the trading and investment strategies

employed by the Manager can often require complex investments, difficult to execute

investments, the use of negotiated terms with counterparties such as in the use of derivatives, and

the execution of investments involving less common or novel instruments. In each case, the

Manager seeks best execution and has trained execution and operational staff devoted to

executing, settling and clearing such investments. However, in light of the complexity and

global diversity involved, some errors and miscommunications with brokers and counterparties

are inevitable and may result in losses to the Fund. The Manager will evaluate the merits of

potential claims for damage against brokers and counterparties who are at fault, and to the extent

practicable, will seek to recover losses from those parties. The Manager may choose to forego

pursuing claims against brokers and counterparties on behalf of the Fund for any reason

including, but not limited to, the cost of pursuing claims relative to the likely amount of any

recovery and the maintenance of its business relationships with brokers and counterparties. In

addition, the Manager’s own execution and operational staff may be solely or partly responsible

for errors that occur during the investment decision-making process or the trading process (such

as in the placing, processing and settling of trades) that result in losses to the Fund (“trade

errors”). The Manager attempts to minimize such trade errors by promptly reconciling

confirmations with trade tickets, and by reviewing past trade errors to understand the internal

control breakdown that caused the trade errors. To the extent that trade errors do occur, in

accordance with its internal policies, the Manager will correct them as soon as practicable and,

generally, the Fund will bear the cost of such errors in the absence of bad faith, fraud, gross

negligence, or willful misconduct. The Manager’s staff will also ensure that trade errors are

promptly reported to the relevant personnel and reviewed to determine whether policies or

procedures should be changed to prevent future trade errors.

Exit Strategies. Due to the illiquid nature of many of the positions which the Fund may acquire,

as well as the uncertainties of the reorganization and active management process, the Manager is

unable to predict with confidence what the exit strategy will ultimately be for any given core


position, or that one will definitely be available. Exit strategies which appear to be viable when

an investment is initiated may be precluded by the time the investment is ready to be realized due

to economic, legal, political or other factors.

Hedging Transactions. The Fund may from time to time purchase or sell forwards, swaps or

options on currencies, securities and indices. It is generally impossible to fully hedge an

investment given the uncertainty as to the amount and timing of projected cash flows and

investment returns, if any, on the Fund’s investments. This may lead to losses on both the Fund’s

investment and the related transaction. Conversely, there will be times in which the Fund

believes that it is not advisable to enter into hedging transactions; accordingly, the Fund may be

exposed to fluctuations in currencies and other market conditions specific to the underlying asset.

The success of the Fund’s hedging transactions will be subject to its ability to predict correlations

between the value of the portfolio’s assets and the direction of currency exchange rates, interest

rates and securities prices. Therefore, while the Fund may enter into such transactions with

respect to one or more classes of Shares to seek to reduce currency exchange rate, interest rate or

securities value risks, unanticipated changes in currency exchange or interest rates may result in

a poorer overall performance for the Fund with respect to such classes of Shares than if it had not

engaged in any such hedging transaction. In addition, the degree of correlation between price

movements of the instruments used in a hedging strategy and price movements in the portfolio

position being hedged may vary.

Non-U.S. Currencies and Investments. Investing in non-U.S. issuers involves certain

considerations comprising both risks and opportunities not typically associated with investing in

U.S. issuers. These considerations include changes in exchange control regulations, political and

social instability, expropriation, imposition of non-U.S. taxes, less liquid markets and less

available information than is generally the case in the U.S., higher transaction costs, less

government supervision of exchanges, brokers and issuers, less developed bankruptcy laws,

difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards

and greater price volatility. The Fund investments that are denominated in a non-U.S. currency

are subject to the risk that the value of a particular currency will change in relation to one or

more other currencies. Among the factors that may affect currency values are trade balances, the

level of short-term interest rates, differences in relative values of similar assets in different

currencies, long-term opportunities for investment and capital appreciation, and political

developments. The Manager intends, but is under no obligation, to employ hedging techniques

to minimize these risks, but there can be no assurance that such strategies will be effective.

Concentration of Investments. From time to time the Fund may hold a few, relatively large

securities positions in relation to the Fund’s capital. In addition, the Fund is not subject to any

restriction requiring diversification by industry or region. The result of any such concentration

of investments would be that a loss in any such position, industry or region could materially

reduce the Fund’s capital.

Board Participation. The Manager anticipates that the Fund’s investment program may from

time to time enable the Fund to place its representatives on creditors’ committees and/or boards

of certain companies in which the Fund has invested. While such representation may enable the

Manager to enhance the sale value of its investments, it may also prevent the Fund from freely

disposing of its investments and may subject the Fund to additional liability. To the maximum


extent permitted under applicable laws, the Fund will indemnify the Fund’s directors, the

Manager or any other person designated by the Fund’s directors or the Manager for claims

arising from such board representation. The Fund will attempt to balance the advantages and

disadvantages of such representation when deciding whether and how to exercise its rights with

respect to such companies, but the exercise of such rights could produce adverse consequences in

particular situations.

Financial Fraud. Instances of fraud and other deceptive practices committed by senior

management of certain companies in which the Fund invests may undermine the Manager’s due

diligence efforts with respect to such companies, and if such fraud is discovered, negatively

affect the valuation of the Fund’s investments. In addition, when discovered, financial fraud may

contribute to overall market volatility which can negatively impact the Fund’s investment

program.

Political and Economic Conditions. The Fund’s investments may be adversely affected by

changes in economic conditions or political events that are beyond its control. For example, a

stock market break, the outbreak of hostilities, or the death of a major political figure may have

significant adverse effects on the Fund’s investment results. Other factors, such as changes in tax

laws, securities laws, bank regulatory policies or accounting standards, may make corporate

acquisitions less desirable. Similarly, legislative acts, rulemaking, adjudicatory or other

activities of governmental or quasi-governmental bodies, agencies and regulatory organizations

may make the investments of the Fund less attractive.

Interest Rate Fluctuations. The prices of portfolio investments tend to be sensitive to interest

rate fluctuations and unexpected fluctuations in interest rates could cause the corresponding

prices of the long and short portions of a position to move in directions which were not initially

anticipated. For example, as interest rates rise, the market value of fixed income securities tends

to decrease. Conversely, as interest rates fall, the market value of fixed income securities tends

to increase. This risk will be greater for long-term securities than for short-term securities. In

addition, interest rate increases generally will increase the interest carrying costs to the Fund of

borrowed securities and leveraged investments.

Market Changes. Changing market and economic conditions may make the Fund’s intended

investment strategy less profitable. The profitability of a significant portion of the Fund’s

investment program depends to a great extent upon correctly assessing the future course of price

movements of specific securities. There can be no assurance that the Manager will be able to

predict accurately these price movements.

Changes in Law. Amendments to applicable securities, tax, pension and bankruptcy or other

relevant laws could alter an expected outcome or introduce greater uncertainty regarding the

likely outcome of an investment situation.

Valuation. The Manager has the ultimate responsibility to value any position for which an

independent quotation is not available or is determined by the Manager not to provide a reliable

indication of fair value (subject to periodic review of certain positions by an independent

valuation firm). There can be no assurance that the Manager’s determinations will be accurate.


The Fund generally will not make any retroactive adjustments to valuations for purposes of

subscriptions, redemptions and Management Fee or Performance Allocation calculations.

Risk Control Framework. No risk control system is fail safe, and no assurance can be given that

any risk control framework designed or used by the Fund or the Manager will achieve its

objective. To the extent that risk controls will be based upon historical trading patterns for the

financial instruments in which the Fund invests and upon pricing models for the behavior of such

financial instruments in response to various changes in market conditions, no assurance can be

given that such historical trading patterns will accurately predict future trading patterns or that

such pricing models will necessarily accurately predict the manner in which such financial

instruments are priced in financial markets in the future. There is no assurance that the risk

control framework employed, if any, will be successful in minimizing losses to the Fund.

Taxation. With respect to certain countries, there is a possibility of expropriation, confiscatory

taxation, imposition of withholding or other taxes on dividends, interest, capital gains or other

income, limitations on the removal of funds or other assets of the Fund, political or social

instability or diplomatic developments that could affect investments in those countries. An issuer

of securities may be domiciled in a country other than the country in whose currency the

instrument is denominated. The values and relative yields of investments in the securities

markets of different countries, and their associated risks, are expected to change independently of

each other.

Changes in existing tax laws or regulations and their interpretation may occur after the date of

this Memorandum (possibly with retroactive effect) and could alter the income tax consequences

of an investment in the Fund. Such changes could require significant restructuring of the Fund in

order to mitigate such effects. The Fund may take positions with respect to certain tax issues

which depend on legal conclusions not yet resolved by the courts. Should any such positions be

successfully challenged by the IRS or other applicable taxing authorities, there could be a

materially adverse effect on the Fund.

An audit of the Fund by any taxing authority could result in adjustments to the tax consequences

initially reported by the Fund, which examination could affect the after-tax returns of a

Shareholder’s investment in the Fund. If such audit adjustments result in an increase in the

Fund’s income tax liability for any year, such the Fund may also be liable for interest and

penalties with respect to the amount of underpayment. The legal and accounting costs incurred

in connection with any audit of the Fund’s tax returns will be borne by the Fund.

The taxation of investment funds and investors is complex, and in many cases uncertain.

Additionally, some statutory provisions remain to be interpreted by administrative regulations.

Investors will thus be subject to the risk caused by the uncertainty of the tax consequences with

respect to an investment in the Fund. Each prospective investor should have the tax aspects of an

investment in the Fund reviewed by professional advisers familiar with such investor’s personal

tax situation and with the tax laws and regulations applicable to the investor and private

investment vehicles. Potential investors are strongly urged to review the discussion below under

Section VII: Tax Considerations and Section VIII: Regulatory Considerations and to consult

their own independent tax advisers.


Necessity for Counterparty Trading Relationships; Counterparty Risk. The Fund may establish

relationships to obtain financing, derivative intermediation and prime brokerage services that

permit the Fund to invest in any variety of markets or asset classes over time; however, there can

be no assurance that the Fund will be able to establish or maintain such relationships. An

inability to establish or maintain such relationships could limit the Fund’s trading activities,

could create losses, preclude the Fund from engaging in certain transactions, financing,

derivative intermediation and prime brokerage services and could prevent the Fund from trading

at optimal rates and terms. Moreover, a disruption in the financing, derivative intermediation

and prime brokerage services provided by any such relationships before the Fund establishes

additional relationships could have a significant impact on the Fund’s investment operations due

to the Fund’s reliance on such counterparties.

Private Investment Fund Risks

General Investment Risks. All Fund investments risk the loss of capital. The Manager believes

that the Fund’s investment program, research, and participation in the reorganization process

moderate this risk. However, there can be no assurance that the Fund’s program will be

successful.

Limited Operating History. The Fund has a limited operating history upon which prospective

investors can evaluate the likely performance of the Fund. The past performance of any

investments or investment funds managed by the principals of the Manager cannot be construed

as any indication of the future results of an investment in the Fund. The Fund’s investment

program should be evaluated on the basis that there can be no assurance that any of the

Manager’s strategies will be executed in whole or in part, or that the Fund will achieve its

investment objective.

Dependence on Key Individuals. Investors shall have no authority to make decisions or to

exercise investment discretion on behalf of the Fund. The authority for all such decisions is

delegated to the Manager and its principals, associates, and other employees. The future

performance depends on the continued service of such persons. The departure of any of the key

management can have an adverse effect on the profits of the Fund.

Special Transparency and Liquidity Rights. The Fund may grant preferential transparency and

liquidity rights to certain investors. A combination of special transparency and liquidity rights

for some investors may have an adverse impact on the remaining investors’ ability to redeem

their Shares, especially in situations in which the Fund’s directors elect to impose limitations on

redemptions.

Illiquidity; Transfers and Redemptions. An investment in the Fund is suitable only for certain

sophisticated investors who have no need for liquidity in the investment. The Shares are highly

illiquid and are not transferable without the approval of the Fund’s board of directors. There will

be no secondary market for the Shares or Interests, and consequently, investors may not be able

to dispose of them. Shareholders will have the right to redeem Shares only subject to the

limitations set forth herein. Further, distributions of proceeds upon a Shareholder’s redemption

may be limited, in the Fund’s board of directors’ discretion, as further described in Section IV:

Summary of Principal Terms – Redemptions. There can be no assurance that the Fund will


have sufficient cash to satisfy redemption requests, or that it will be able to liquidate investments

at the time of such redemption requests at favorable princes. Under the foregoing circumstances,

and under other circumstances deemed appropriate by the Fund’s board of directors, on the

advice of the Manager, a Shareholder may receive in-kind distributions from the Fund’s

portfolio, including, but not limited to, a distribution of interests in a liquidating entity or similar

special purpose vehicle which may be subject to management fees and performance allocations

comparable to those applicable to the Shares being redeemed. The investments so distributed

may not be readily marketable or saleable and may have to be held by such Shareholder for an

indefinite period of time. For the purpose of determining the value to be ascribed to any assets

of the Fund used for an in-kind redemption, the value ascribed to such assets shall be the value of

such assets on the relevant Redemption Date. The risk of a decline in the value of such assets in

the period from the relevant Redemption Date to the date upon which such assets are distributed

to the redeeming Shareholder, the risk of any loss or delay in liquidating such securities, will be

borne by the redeeming Shareholder. Also, the Fund’s directors may suspend the redemption

privilege and/or the valuation of the Fund’s net assets if it determines that such a suspension is

warranted by extraordinary circumstances, including in circumstances where the Manager is

unable fairly to value the Fund’s net assets due to extreme market conditions.

Possible Effect of Substantial Redemptions or Withdrawals. A substantial amount of redemptions

or withdrawals by one or more investors could require the Fund to liquidate positions in order to

raise the cash necessary to fund the redemptions or withdrawals at a time when market

conditions are adverse or when such liquidations are otherwise not in the best interests of non-

redeeming investors. Such redemptions or withdrawals may occur for a variety of reasons which

may be unrelated to an investor’s assessment of the investment program or performance of the

Fund. There can be no assurance such developments will not occur and if they do occur they

could result in the type of consequences described above.

Multi-Class Structure; Cross Class Liabilities. The Fund is a single legal entity and a creditor of

the Fund may enforce claims against all assets of the Fund notwithstanding that the creditor’s

claims may relate to a single Class or Sub-Class of Shares. Therefore, in the event of a deficit in

one Class or Sub-Class of Shares, assets of another Class or Sub-Class might have to be used to

cover such deficit. Such cross-class liability could adversely impact the value of any Shares in

unanticipated ways, in particular in instances where a Class has been leveraged or hedged and

other Classes have not. See the separate risk factor on “Hedging Transactions.”

Dividends and other Distributions. At the time of each redemption of any Shares, the Fund as a

whole would have to meet the solvency test. In the event that the Fund does not meet the solvency

test, then payment of the redemption proceeds would not be possible. The Fund will satisfy the

solvency test under the Companies Act 2001 where the Fund is able to pay its debts as they become

due in the normal course of business and the value of its assets is greater than the value of its

liabilities. In the case of dividends, then addition to the solvency test requirements, the dividends

can only be paid out of retained earnings, after the Fund has satisfied all accumulated losses at the

beginning of the accounting period. Since the Fund will not ordinarily pay distributions to the

Shareholders, all earnings of the Fund are expected to be retained for reinvestment. Therefore, an

investment in the Fund will not be suitable for investors seeking current income. Moreover, an

investor will be required to report and pay taxes on his allocable share of income from the Fund,

even though no cash may be distributed by the Fund.


Indemnification of the directors and the Manager. The Management Agreement between the

Fund and the Manager provides for indemnification of the Manager against all actions,

proceedings, claims, losses, damages, liabilities, costs and expenses incurred by the Manager by

reason of the performance of its obligations or functions under the terms of that agreement,

including all legal and professional expenses, except such as shall arise from willful misconduct,

or gross negligence in the performance of its duties, or by reason of a material breach or default

of its obligations and duties. The Manager shall not be liable for any error of judgement or for

any misconduct or gross negligence on part of any agent selected by the Manager with

reasonable care or if the Fund fails to achieve its investment objectives or for any loss arising out

of any advice or for any act or omission in the performance of the investment management

services rendered to the Fund or otherwise, except for willful misconduct, or gross negligence in

the performance of its duties. Such indemnification may impair the financial condition of the

Fund and its ability to acquire assets or otherwise achieve its investment objective or meet its

obligations. Similarly, the Fund’s Constitution contains indemnification provisions in favour of

the directors.

Disclosure of Information. The Shareholders may include entities that are subject to state public

records or similar laws that may compel public disclosure of confidential information regarding

the Fund, its investments and its investors. There can be no assurance that such information will

not be disclosed either publicly or to regulators, law enforcement or otherwise, including to

comply with regulations or policies to which the Fund, the Manager, portfolio companies or

services providers to any of them may be or become subject.

Financial Markets and Regulatory Change. Market disruptions and the dramatic increase in the

capital allocated to alternative investment strategies during recent years have led to increased

governmental as well as self-regulatory scrutiny. The laws and regulations affecting the industry

continue to evolve in an unpredictable manner. Laws and regulations, particularly those

involving taxation, investment and trade, applicable to the Fund’s activities can change quickly

and unpredictably, and may at any time be amended, modified, repealed or replaced in a manner

adverse to the interests of the Fund. It is impossible to predict what, if any, changes in regulation

applicable to the Fund or the Manager, the markets in which they trade and invest or the

counterparties with which they do business may be instituted in the future. The Fund or the

Manager may be or may become subject to unduly burdensome and restrictive regulation. In

particular, in response to significant recent events in international financial markets,

governmental intervention and certain regulatory measures have been adopted in certain

jurisdictions, including restrictions on short selling of certain securities in certain jurisdictions.

The extent to which the underlying causes of these recent events are pervasive throughout global

financial markets and have the potential to cause further instability is not yet clear.

Competition. There is currently, and will likely be, competition for investment opportunities by

investment vehicles and others with investment objectives and strategies identical or similar to

the Fund’s investment objectives and strategies.


Risks Related to India

Special Risks of Indian Stressed Securities. India is an emerging economy and carries with it the

often substantial risks associated with investing in one. Any investment in the securities of

issuers that are denominated in Indian Rupees will have currency risk associated with it. In

addition, the legal process in India is sluggish and any legal disputes with debtors may take many

years to resolve, which would likely substantially restrict liquidity in the related portfolio

securities.

FPI. The Fund intends to primarily use a FPI registration to execute its investment strategy. The

Fund shall be registered as a FPI. If SEBI does not approve such registration or qualification, the

Fund may not be able to fulfill its investment objectives. Moreover, the Fund’s ability to execute

its investment strategy following such registration will partially depend on continuation of the

registration with SEBI, the loss of which could impair the ability of the Fund to continue making

or disposing of its investments in an orderly fashion. Further, any regulatory action or sanction

against the Fund as a FPI could adversely affect the Fund’s ability to make investments or

divestments in a timely manner.

Currency Risks. Commitments to the Fund are denominated in U.S. dollars. However, the Fund

will generally invest in securities denominated in INR. Any dividends, sale proceeds, interest

and return of capital contributions in respect of the portfolio companies will likely be paid in

INRs and subsequently converted into U.S. dollars for repatriation. A change in value of the

INR against the U.S. dollar will cause a corresponding change in the U.S. dollar value of the

investments that are denominated in the INR. Such changes may also affect the Fund’s income

and profitability. The RBI has historically engaged in active trading of INR and U.S. dollars,

resulting in a “managed exchange rate.” Any change in trading policy by the RBI can

significantly and suddenly influence exchange rates from time to time. Other factors that may

affect currency values include trade balances, the level of short-term interest rates, long-term

opportunities for investment and capital appreciation and political developments. The Fund may

incur costs in converting from one currency to another. The Manager may, but is under no

obligation to employ hedging techniques to minimize these risks, but there can be no assurance

that such strategies will be effective. There may be foreign exchange regulations applicable to

investments in foreign currencies in certain jurisdictions.

Legal Considerations. India may not accord equivalent rights (or protection for such rights) to

those which investors might expect in countries with more sophisticated and developed laws and

regulations. Many laws and regulations in India are new or have only recently come into force,

which increases the risk of ambiguity and inconsistency in their application, interpretation and

enforcement. It may be more difficult for the Fund to obtain effective enforcement of its rights

by legal or arbitral proceedings in India than in countries with more mature legal systems.

Furthermore, the judicial process in India may take longer than the judicial process in countries

with more sophisticated and developed judicial systems.

This risk is increased because adequate procedural safeguards have often not been developed.

Due to the developing nature of the Indian legal and regulatory system, laws may refer to

regulations which have not yet been introduced, leaving substantial gaps. In addition, the

regulatory framework is sometimes poorly drafted and incomprehensible. These uncertainties


may lead to difficulties in obtaining or renewing necessary licenses or permissions and may lead

to substantial delays and costs for the companies subject to them, all of which may ultimately

adversely affect the performance of the Fund. Changes in laws, treaties and regulations (or in the

interpretation thereof) occurring from time to time in India are possible and may worsen the legal

and tax requirements within which the Fund will operate. Such changes may require structuring

and financing alternatives to be identified and implemented and may lead to increased legal costs

and reduced returns. In particular, tax laws, treaties and regulations or their interpretation may

change and there can be no assurance that the structure of the Fund or its investments will be tax

efficient. Further, India is subject to rapid changes in legislation, many of which are extremely

difficult to predict. Existing laws may be applied inconsistently and new laws and regulations,

including those which purport to have retroactive effect, may be introduced with little or no prior

consultation. As such, the Fund’s ability to secure the judicial or other enforcement of its rights

may be limited.

Restrictions on Investment and Repatriation. India imposes restrictions and controls regarding

investment by foreigners. While these restrictions have been progressively eased to permit

foreign investment, there is no guarantee that this policy of liberalization will continue. Any

reversal may have a retroactive effect and affect existing investments and may also impact the

Fund’s ability to enforce negotiated rights. Among other things, these restrictions may require

prior governmental approvals, impose limits on the amount or types of securities that may be

held by foreigners or impose limits on the types of companies in which foreigners may invest.

These restrictions may at times limit or preclude the Fund’s investment and may increase the

Fund’s costs and expenses. In addition, India imposes restrictions and controls on repatriation of

investment income and capital. Repatriation of income, capital and the proceeds of sale by the

Fund requires Indian governmental consent where the consideration for such sale is not

calculated in accordance with the minimum valuation and pricing guidelines established under

the Foreign Exchange Management Act, 1999 (“FEMA”). Delays in or a refusal to grant any

such approval, or a revocation or variation of consents granted prior to the making of an

investment, or the imposition of new restrictions, may adversely affect the Fund’s investments.

Further, the Fund will be subject to foreign exchange controls which may adversely affect the

ability to repatriate the income or sale proceeds arising from the Fund’s investments.

If, at any time, including at the termination of the Fund, the Fund is required to make

distributions in kind, Indian exchange control regulations at such time may prohibit or require

government approval with respect to the distribution in kind of one or more assets of (including

securities held by) the Fund to persons not resident in India. As such, any such distribution in

kind may be restricted and consequently Shareholders may not be able to realize the full value of

these assets.

Promoter Liability. It is possible the Fund may be deemed to be a promoter of a portfolio

company and, as such, will be subject to additional regulations, including periodic reporting

requirements, minimum contributions and minimum holding periods. To the extent the Fund is

designated as a promoter, the Fund will be subjected to greater costs, obligations and potential

liabilities.

Pricing Guidelines. Pursuant to the rules and regulations of the RBI under FEMA and the

regulations issued thereunder, foreign investment in Indian companies is subject to certain


minimum valuation and pricing guidelines. Such minimum valuation and pricing guidelines may

restrict the ability of the Fund to make investments in Indian companies at attractive prices. The

RBI has also prescribed certain maximum valuation and pricing guidelines for persons and

corporations resident outside India that sell securities of Indian companies to resident Indian

persons and corporations. Such maximum valuation and pricing guidelines may restrict the

ability of the Fund to sell its investments in Indian companies at a price higher than the valuation

arrived at in accordance with the stipulated pricing guidelines. In addition, there are similar

pricing guidelines for issuing capital instruments in qualified institutional placements, for the

issue of Global Depository Receipts and/or American Depository Receipts and for the private

sale of listed and unlisted securities.

Regulatory Risk. The value and marketability of the Fund’s investments may be affected by

changes or developments in the legal and regulatory climate in India. SEBI regulates the

securities market in India and legislates from time to time on matters affecting the stock market.

SEBI has issued regulations that affect investment in India, including regulations on takeovers,

raising funds and insider dealing. The regulations affect the pricing, cost of a transaction and the

ability to conduct due diligence. SEBI and/or the Government of India may make changes to

regulations which may affect the ability of the Fund to make, or exit, investments.

Competition Law. Under The Competition Act, 2002 (“The Competition Act”), any

arrangement, understanding or action between enterprises, whether formal or informal, which

causes or is likely to cause an appreciable adverse effect on competition is void and will be

subject to substantial penalties. Any agreement that directly or indirectly determines purchase or

sale prices, limits or controls production, or creates market sharing by way of geographical area

or number of customers in the market is presumed to have an appreciable adverse effect on

competition. Provisions relating to the regulation of certain acquisitions, mergers or

amalgamations which have an appreciable adverse effect on competition and regulations recently

issued by the Competition Commission of India with respect to notification requirements for

such combinations became effective June 1, 2011.

The effect of The Competition Act on the business environment in India is unclear. If the

portfolio companies are affected, directly or indirectly, by the application or interpretation of any

provision of The Competition Act or any enforcement proceedings initiated by the Competition

Commission of India or any other relevant authority under The Competition Act or any claim by

any other party under The Competition Act or any adverse publicity that may be generated due to

scrutiny or prosecution by the Competition Commission of India or any other relevant authority

under The Competition Act, the business of the portfolio companies may be materially and

adversely affected.

An investment by the Fund in a portfolio company exceeding the threshold prescribed may

require the prior consent of the Competition Commission of India, which may delay the Fund’s

investment (to the extent applicable) in such portfolio company, and may affect the performance

of the Fund.

Financial Instability in Other Countries may Cause Increased Volatility in Indian Financial

Markets. The Indian market and the Indian economy are influenced by economic and market

conditions in other countries, particularly emerging market countries in Asia. Financial turmoil


in Asia, Russia, the United States, Europe and elsewhere in the world in recent years has affected

the Indian economy. Although economic conditions are different in each country, investors’

reactions to developments in one country can have adverse effects on the securities of companies

in other countries, including India. A loss of investor confidence in the financial systems of

other emerging markets may cause increased volatility in Indian financial markets and,

indirectly, in the Indian economy in general. Any worldwide financial instability may also have

a negative impact on the Indian economy. Any such financial disruption in India may harm the

portfolio companies’ business or their future financial performance and the prices of their

securities, which will in turn affect the Fund’s investments and returns.

Foreign Capital Flows. In recent years, the Indian stock market has witnessed a surge in the

inflow of foreign capital, which has contributed to a sharp rise in the market index (the

“Sensex”) of the Bombay Stock Exchange Limited (the “BSE”). If capital inflows were to slow

or reverse, there could be a negative impact on the Sensex.

Stock Market Risk. Indian securities markets are substantially smaller, less liquid and more

volatile than securities markets in the United States and certain other developed countries. There

are approximately 20 recognized stock exchanges in India, including the Over the Counter

Exchange of India. Most stock exchanges are governed by regulatory boards. The BSE and the

National Stock Exchange of India Limited (the “NSE”) have nationwide trading terminals and,

taken together, are the principal Indian stock exchanges in terms of the number of listed

companies, market capitalization and trading volume. The relatively small market

capitalizations of, and trading values on, the BSE and NSE, as compared to more developed and

sophisticated stock exchanges like the New York Stock Exchange, may cause the Fund’s

investments in securities listed on these exchanges to be comparatively less liquid and subject to

greater price volatility than comparable investments in the United States. Accordingly, the

Indian stock markets may decline significantly in response to adverse issuer, political,

regulatory, market or economic developments. Different parts of the market and different types

of equity securities may react differently to these developments. For example, small cap stocks

may react differently from large cap stocks. Issuer, political or economic developments may

affect a single issuer, issuers within an industry, sector or geographic region, or the market as a

whole.

Functioning of the Stock Exchanges. The Fund expects to invest in listed securities. Indian

stock exchanges, including the BSE and the NSE, have in the past experienced substantial

fluctuations in the prices of their listed securities. They have also experienced problems such as

temporary exchange closures, broker defaults, settlement delays and broker strikes which, if they

occur again, could affect the market price and liquidity of the securities of Indian companies in

which the Fund invests. In addition, the governing bodies of the various Indian stock exchanges

have from time to time imposed restrictions on trading in certain securities, limitations on price

movements and margin requirements. Disputes have also occurred from time to time among

listed companies, the stock exchanges and other regulatory bodies, and in some cases those

disputes have had a negative effect on overall market sentiment. Recently, there have been

delays and errors in share allotments relating to initial public offerings. In addition, SEBI has

recently imposed heavy fines on market intermediaries in relation to manipulation by some

investors of the allotment process in several recent initial public offerings with a view to

cornering large share allotments in the “retail investor” category. Such events in turn may affect


overall market sentiment and lead to fluctuations in the market prices of the securities of those

companies and others in which the Fund may invest.

SEBI Operates an Index-based Market-wide Circuit Breaker. The index-based market-wide

circuit breaker generally imposed by SEBI on Indian stock exchanges may be triggered by an

extremely high degree of volatility in market activity. Due to the existence of this circuit

breaker, among many other reasons, there can be no assurance that the Fund will be able to sell

the shares of portfolio companies at a preferred price.

Regulation of Indian Securities Markets. SEBI is responsible for setting disclosure and other

regulatory standards for the Indian securities markets. While SEBI has issued regulations and

guidelines on disclosure requirements, takeover, insider trading and other matters, the level of

regulation, monitoring and reporting requirements imposed by SEBI on the Indian securities

markets and Indian companies may be less stringent than those imposed by regulatory authorities

and stock exchanges in developed countries such as the United States. Issuers in India are

subject to accounting, auditing and financial standards and requirements that differ, in some

cases significantly, from those applicable to U.S. issuers.

Therefore, there may be less publicly available information about Indian listed companies than is

regularly made available in many developed countries and the Fund may have less access to

information about the operations and financial conditions of companies listed on Indian stock

exchanges than investors may have in the case of companies subject to the reporting

requirements of other countries.

Moreover, issuers of securities in India may be subject to a different degree of regulation than

U.S. or European issuers with respect to such matters as insider trading rules, tender offer

regulation, shareholder proxy requirements and the timely disclosure of information. Legal

principles relating to corporate affairs and the validity of corporate procedures, directors’

fiduciary duties and liabilities and shareholders’ rights may differ from those that may apply in

other jurisdictions. Investors’ rights under Indian law may not be as extensive as those that exist

under the laws of the United States or the member nations of the European Union and it may be

more difficult to assert rights as a shareholder of an Indian company than it would as a

shareholder of a comparable U.S. or European company.

Limited Liquidity. A high proportion of the shares of many Indian issuers are held by a limited

number of persons, which may limit the number of shares available for investment. In addition,

further issuances of securities by Indian issuers which could dilute a company’s earnings per

share, or the perception that such issuances may occur, could adversely affect the market price of

such securities. Sales of securities by such issuer’s major shareholders, or the perception that

such sales may occur, may also significantly and adversely affect the market price of such

securities and, in turn, the investment. A limited number of issuers represent a

disproportionately large percentage of market capitalization and trading value. The limited

liquidity of the Indian securities markets may also affect the ability to acquire or dispose of

securities at the desired price and time. Further, the small trading volume concentrated in a

limited number of the largest companies, combined with certain investment diversification

requirements and other restrictions applicable, may affect the rate at which investments can be

made initially in liquid public equity.


Exit Strategies. It is expected that companies in which the Fund invests will have their securities

listed with a stock exchange in India or be sold privately as a means of creating liquidity for that

investment. Listing in India is subject to guidelines that are issued and revised by SEBI from

time to time, The Companies Act, 2013 (“The Companies Act”) and by the terms of the listing

agreements entered into with various stock exchanges. There can be no assurance that securities

listed on an Indian stock exchange will provide a viable exit mechanism, as these securities may

suffer from low trading volumes and low market capitalization at the time of intended disposal.

Moreover, there can be no assurance that a portfolio investment will ever be disposed of. In the

case of a liquidation of a portfolio investment, liquidation procedures in India are time

consuming, complex and require permissions from various authorities, including government,

courts and creditors, which may impair the ability of the Fund to realize gains upon such

liquidation.

Enforcement of Foreign Judgments. The Indian companies in which the Fund will invest are

expected to generally be companies incorporated under the laws of India. Generally, the

directors, executive officers and a substantial portion of the assets of such companies are located

in India. It may be difficult for the Fund to obtain a judgment in a court outside India to the

extent that there is a default with respect to the security of an Indian issuer or with respect to any

other claim that the Fund may have against any such issuer or its directors and officers. As a

result, even if the Fund initiates a suit against the issuer outside of India, it may not be possible

for it to (i) effect service of process in India, (ii) enforce court judgments obtained outside India

against Indian companies or the directors and the executive officers of such Indian companies, or

(iii) obtain expeditious adjudication of an original action in an Indian court to enforce liabilities

against Indian companies or the directors and executive officers of such Indian companies.

A judgment of a court (which has to direct the payment of a certain sum against the defendant) in

a jurisdiction that is not a reciprocating territory may be enforced only by a fresh suit upon the

judgment and not by proceedings in execution. The suit must be brought in India within three

years from the date of the judgment in the same manner as any other suit filed to enforce a civil

liability in India. It is unlikely that a court in India will award damages on the same basis as a

foreign court if an action were brought in India. It is uncertain as to whether an Indian court will

enforce foreign judgments that contravene or violate Indian law or public policy. Furthermore, it

is unlikely that an Indian court will enforce foreign judgments if it viewed the amount of

damages awarded as excessive, as a penalty or inconsistent with public policy.

A party seeking to enforce a foreign judgment in India is also required to obtain prior approval

from the RBI under FEMA to repatriate any amount recovered pursuant to such enforcement,

and any such amount may be subject to income tax in accordance with applicable laws. Any

judgment in a foreign currency is required to be converted into INR on the date of judgment and

not on the date of payment.

Corporate Disclosure, Accounting and Regulatory Standards. Indian disclosure and regulatory

standards are in many respects less stringent than standards in the United States and certain other

developed countries. There may be less publicly available information about Indian companies

than is regularly published by or about companies in such other countries. The difficulty in

obtaining such information may mean that the Fund may experience difficulties in obtaining


reliable information regarding any corporate actions and dividends of companies in which the

Fund has invested. Indian accounting standards and requirements also differ in significant

respects from those applicable to companies in the United States and certain other developed

countries. In particular, the assets and profits appearing on the financial statements of an Indian

issuer may not reflect its financial position or results of operations in the way they may be

reflected had such financial statements been prepared in accordance with International Financial

Reporting Standards.

Investigations. Any investigations of, or actions against, the Fund initiated by SEBI or any other

Indian regulatory authority may impose a ban on the investment and trading activities of the

Fund.

Need for Administrative Review and Approval. Many business activities and products in India,

including the Fund’s activities in India and the activities and products of the Fund’s portfolio

companies, are subject to administrative review and approval by various national and provincial

agencies of the Indian government. The Fund and its portfolio companies may not be able to

secure the requisite governmental approvals for their activities and products. Failure to obtain

requisite governmental approvals may substantially harm the Fund and its investments.

Inflation. Inflation in India may have an adverse effect on the ability of the Fund to make

investments and to dispose of portfolio investments on attractive economic terms within the term

of the Fund. High inflation may undermine the performance of the Fund’s investments by

reducing the value of such investments and/or the income received from such investments. To

that extent, the Fund may not be able to generate any returns and Shareholders may not receive

any return on their capital.

Information. Privately held companies generally maintain less comprehensive financial

information than listed companies. When exercising its discretionary investment management

powers, the Manager is reliant on information and data made directly available to it by issuers or

through other sources. Although the Manager may evaluate such information and data and seek

independent corroboration when appropriate and available, the Manager is not in a position to

confirm the completeness, genuineness or accuracy of such information and data.

The due diligence performed by the Fund in respect of potential portfolio investments will often

be limited by Indian regulations that restrict the ability to conduct due diligence in listed

companies. Indian insider trading regulations prohibit any dealings in securities on the basis of

unpublished price sensitive information. The Fund and others involved in investments may

violate the insider trading regulations if an investment decision is made based on unpublished

price sensitive information obtained during the due diligence of a listed company and, as a result,

may not be able to make the investment. This restriction will impact the ability of the Fund to

receive and analyze such information, which may adversely affect the quality and effectiveness

of the due diligence. In addition, any dealings on the basis of unpublished price sensitive

information may expose the recipient to insider trading charges.

Political, Economic and Social Risk. The Government of India has traditionally exercised and

continues to exercise influence over many aspects of the Indian economy. The Fund’s

investments and financial position and prices and yields of the Fund’s portfolio investments may


be affected by interest rates, changes in government policy, taxation, social and civil unrest and

other political, economic or other developments in or affecting India. The Government of

India’s current policies and initiatives support economic liberalization. However, the rate of

economic liberalization may change and specific laws and policies affecting the sectors in which

the Fund invests may change. While the Government of India is expected to continue the

liberalization of India’s economic and financial sectors and deregulation policies, there can be no

assurance that such policies will be continued.

A significant change in India’s policy of economic liberalization and deregulation or any social

or political uncertainties could adversely affect business and economic conditions in India

generally and specifically affect the business and financial performance of the Fund. The Fund

does not intend to obtain political risk insurance. In addition, the Indian economy may compare

favorably or unfavorably to other economies in several respects, including the rate of growth of

gross domestic product, the rate of inflation, interest rates, capital reinvestment, resource self-

sufficiency and the balance of payments position. Economic activity, inflation, industrial

disruption, interest rate fluctuations, political conditions, regional conflicts, corruption, social

instability, consumer confidence, stock market prices and changes in governmental policy,

regulations or legislation may have a material adverse effect on the Fund’s return and/or

financial position.

Regional Hostilities, Terrorist Attacks or Social Unrest in India or Abroad. India has from time

to time experienced instances of social, religious, civil unrest and hostilities and other acts of

violence involving neighboring countries. India has also experienced instances of civil unrest,

hostilities and military confrontations with its neighboring countries, including Pakistan. There

have also been incidents in and near India, such as terrorist attacks and troop mobilizations along

the border. Events of this nature in the future, as well as social and civil unrest within other

countries in Asia, may influence the Indian economy and may have a material adverse effect on

the investment by the Fund in securities of Indian companies.

Quality of Infrastructure. India faces substantial problems owing to the lack of, or inadequate

condition of, physical infrastructure and poor environmental standards, including, but not limited

to, in the sectors of electricity (both generation and transmission), transport, communication,

water, sewage and healthcare. The lack, or inadequate condition, of physical infrastructure

damages the Indian economy, disrupts the transportation of goods and supplies, increases the

cost of doing business, can interrupt business operations and, in general, has an on-going adverse

impact on the ability to manage and grow businesses in India.

Withholding Taxes. Dividend and interest payments on some securities the Fund may own may

be subject to withholding taxes, which may reduce net proceeds. Currently, tax rules, regulations

and treaties in India are either new or under varying stages of review and revision. There is

considerable uncertainty as to whether, in some instances, new tax laws will be enacted and, if

enacted, what the scope and content of such laws will be. Consequently, it is possible that the

Fund may face unfavorable tax treatment, which may materially adversely affect the value of

portfolio investments.

Changes in Tax Residency. In the event the management and control of the affairs of the Fund or

its non-corporate affiliates is situated, in whole or in part, in India, the Fund or one or more of its


affiliates may be treated as an Indian resident and, as a consequence, be subject to tax in India on

its worldwide income.

India-Mauritius Double Taxation Treaty. As at date, taxation of the income of the Fund arising

from its investments in India is minimized under the provisions of the India / Mauritius Double

Taxation Avoidance Agreement (the “Treaty”).

However, on 10th May, 2016, the Governments of India and Mauritius signed a Protocol

amending the Treaty dated 24 August, 1982, between India and Mauritius.

The key features of the Protocol are:

(i) Gains from the alienation of shares acquired on or after 1 April 2017 in a company which

is resident of a Contracting State may be taxed in that state.

(ii) There will be no capital gains tax imposed on the sales or transfer of shares of an Indian

company acquired on or before 31 March 2017.

(iii)Capital gains from the sales or transfer of shares of an Indian company acquired on or

after 1 April 2017 will be subject to capital gains tax in India.

(iv) Capital gains arising between 1 April 2017 to 31 March 2019 from the sales or transfer of

shares in an Indian company acquired on or after 1 April 2017 will be taxed at 50% of

India domestic capital gains tax rate, subject to compliance with the Treaty’s Limitations

of Benefits clause.

Under the Limitation of Benefits Clause, a resident of a Contracting State shall not be entitled to

the benefit mentioned under point (iv) if its affairs were arranged with the primary purpose to

take advantage of the said benefit.

A shell/conduit company that claims it is a resident of a Contracting State shall not be entitled to

the benefit mentioned under point (iv). A shell/conduit company is any legal entity falling within

the definition of resident with negligible or nil business operations or with no real and

continuous business activities carried out in that Contracting State.

A resident of a Contracting State is deemed to be a shell/conduit company if its expenditure on

operations in that Contracting State is less than Mauritian Rs.1,500,000 or Indian Rs. 2,700,000

in the respective Contracting State as the case may be, in the immediately preceding period of 12

months from the date the gains arise, unless it is listed on a recognized stock exchange of the

Contracting State.

The term “Contracting State” means India or Mauritius, as the context requires.

No assurance can be given that the terms of the Treaty will not be subject to re-negotiation in the

future and any change could have a material adverse effect on the returns of the Fund. There can

be no assurance that the Fund will continue to qualify for, or receive the benefits of the Treaty, or

that the terms of the Treaty will not be changed.


Exposure to Permanent Establishment. While the Manager believes that the activities of the

Fund, the Manager, and the Advisors described in this Memorandum will likely not create a

permanent establishment (“PE”) for the Fund in India, there may, however, be a risk that the

Indian tax authorities claim that these activities result in such a permanent establishment. If for

any reason any of the Fund’s, the Manager’s or the Advisors’ activities are held to be such a

permanent establishment, then the profits of the Fund, to the extent attributable to the permanent

establishment, may be subject to additional tax in India, including interest and penalties.


Potential Conflicts of Interest

There may be inherent and potential conflicts of interest among the Manager, its respective

members or principals, the Manager’s or its affiliates’ other advisory clients, and the Fund. By

acquiring Shares, each Shareholder will be deemed to have acknowledged the existence of such

actual and potential conflicts of interest and, to the extent permitted by applicable law, to have

waived any claims with respect to the existence of any conflicts of interest. Among other things,

a prospective investor should consider the following:

Management of the Fund. The Manager (including its members, principals, officers, affiliates

and employees) is not under any obligation to devote its full time (or any material part of its

time) to the business of the Fund, but is only required to devote such time and attention to the

affairs of the Fund as it may deem appropriate. The Manager (including its members, principals,

officers, affiliates and employees) may engage in other activities unrelated to the affairs of the

Fund. Manager and its affiliates may also provide investment management services to managed

accounts and other collective investment vehicles, some of which may have a similar investment

program to that of the Fund (collectively, “Other Accounts”).

Allocation of Trading Opportunities. To the extent that the Manager or its affiliates were to

manage Other Accounts, participation in specific investment opportunities may be appropriate, at

times, for the Fund and one or more Other Accounts. The Manager and its affiliates are not

required to accord exclusivity or priority to the Fund in the event of limited investment

opportunities. When the Manager determines that it would be appropriate for the Fund and any

Other Account to participate in an investment opportunity, the Manager will seek to execute

orders for all of the participating accounts on an equitable basis, taking into account such factors

as the relative amounts of capital available for new investments and the investment programs and

portfolio positions of the Fund and such Other Account for which participation is appropriate. If

the Manager has determined to invest in the same direction in the same security at the same time

for the Fund and any Other Account, the Manager is authorized generally to combine the Fund’s

order with orders for any such Other Accounts and if all such orders are not filled at the same

price, the Fund’s order may be filled at an average price, which normally will be the same

average price at which contemporaneously entered proprietary orders are filled on that day.

Similarly, if an order on behalf of more than one account cannot be fully executed under

prevailing market conditions, the Manager may allocate the investments among the different

accounts on a basis that it considers equitable.

The Manager is not required to assure equality of treatment among all of its advisory clients

(including that the opportunity to purchase or sell that security or other investment will be

proportionally allocated among those advisory clients according to any particular or

predetermined standards or criteria) and, therefore, there can be no assurance that a purchase or

sale opportunity that would be suitable for the Fund will not be allocated to another client, with

the Fund being unable to participate in such purchase or sale opportunity. Although Other

Accounts may pursue investment objectives that are similar to the Fund’s, the portfolios of the

Fund and such Other Accounts may differ as a result of purchases and withdrawals being made

at different times and in different amounts, as well as because of different tax and regulatory

considerations. It is possible, for example, that the Fund may have a long position in (or be a

buyer of) a security in which one or more other clients of the Manager or its affiliates have a


short position (or are sellers). Situations may occur where the Fund could be disadvantaged

because of the various other activities conducted by the Manager.

Related Party Transactions. From time to time, the Manager may determine that a sale of

positions from one client account to another is in the best interests of both accounts. This may

arise, for example, if one account is being wholly or partially liquidated to fund withdrawals,

while another account has cash available for investment. The following related party

transactions (among others) generally will not be subject to any independent review or approval

by any investor: (i) buying interests in or selling interests to one or more Other Accounts where

the Manager has verified the valuation of such interests and the purchase or sale is in the best

interests of the Fund, (ii) rebalancing transactions for co-investments between the Fund and any

Other Account and (iii) actual or synthetic ownership or support of the bank debt owned by an

Other Account.

Conflicts Relating to Equity and Debt Ownership by the Fund and Affiliates. In certain

circumstances, the Fund and Other Accounts may invest in securities or other instruments of the

same issuer (or affiliated group of issuers) having a different seniority in the issuer’s capital

structure. If the issuer becomes insolvent, restructures or suffers financial distress, there may be

a conflict between the interests of the Fund and those Other Accounts insofar as the issuer may

be unable (or in the case of a restructuring prior to bankruptcy may be expected to be unable) to

satisfy the claims of all classes of its creditors and security holders and the Fund and such Other

Accounts may have competing claims for the remaining assets of such issuers. Under these

circumstances it may not be feasible for the Manager to reconcile the conflicting interests of the

Fund and such Other Accounts in a way that protects the Fund’s interests. Additionally, the

Manager or its nominees may hold board or creditors’ committee memberships which may

require them to vote or take other actions in such capacities that might be conflicting with respect

to certain funds managed by the Manager in that such votes or actions may favor the interests of

one account over another account. Furthermore, the Manager’s fiduciary responsibilities in these

capacities might conflict with the best interests of the investors.

Non-Public Information. From time to time, the Manager may come into possession of non-

public information concerning specific companies. Under applicable securities laws, this may

limit the Manager’s flexibility to buy or sell portfolio securities issued by such companies. The

Fund’s investment flexibility may be constrained as a consequence of the Manager’s inability to

use such information for investment purposes.

Allocation of Personnel. The Manager personnel will devote such time as they determine shall be

necessary to conduct the business affairs of the Fund in an appropriate manner. However,

Manager personnel may work on other projects, including Manager’s other investments and

other existing and potential business activities. The Fund will have no interest in such

investments or in other investment funds organized or sponsored by Manager. It is possible that

the investments held by such funds may be in competition with those of the Fund. The fact that

Manager personnel involved in such other activities or who have knowledge of the transactions

of other Manager entities also are involved with the Fund may prevent the Fund from making or

divesting certain investments which it might otherwise have made or divested. Conflicts may

also arise in the allocation of management and personnel resources as among Manager’s various

activities.


Diverse Membership. The investors in the Fund are expected to include taxable and tax-exempt

entities, persons, or entities organized in various jurisdictions and subject to different tax and

regulatory regimes. Such diverse investors may thus have conflicting investment, tax and other

interests, relating to, among other things, the nature of investments made by the Fund, the

structuring or the acquisition of investments and the timing of disposition of investments. As a

result, conflicts of interest may arise in connection with decisions made by the Manager

including as to the nature and structure of investments that may be more beneficial for one type

of investor than for another type of investor, including investors affiliated with the Manager.

The results of the Fund’s activities may affect individual investors differently, depending upon

their individual financial and tax situations because, for instance, of the timing of an event of

realization of gain or loss and its characterization as long-term or short-term gain or loss. In

addition, the Fund may make investments that may have a negative impact on related

investments made by the investors in separate transactions. In selecting, structuring and

managing investments appropriate for the Fund, the Manager will consider the investment and

tax objectives of the Fund as a whole, not the investment, tax, or other objectives of any

investors individually. However, there can be no assurance that a result will not be more

advantageous to some investors than to others or to the Manager and/or its affiliates than to a

particular investor.

Other Fees Paid to the Manager. The Manager and their affiliates are permitted to receive

consulting fees, investment banking fees, advisory fees, breakup fees, director’s fees, closing

fees, transaction fees and similar fees in connection with actual or contemplated investments.

Performance Allocation. The existence of the Performance Allocation may create an incentive

for the Manager to make more speculative investments on behalf of the Fund than it might

otherwise make in the absence of such performance-based compensation. The terms of the

Performance Allocation could give the Manager an incentive to make determinations regarding

the timing and structure of realization transactions that are not applicable to the interests of

investors. In addition, the Performance Allocation, together with the fact that the Management

Fee is calculated as a percentage of net asset value, creates a potential conflict of interest for the

Manager in valuing Fund investments that are not readily marketable or are difficult to value.

Placement Agents. Placement Agents and brokers who receive compensation in respect of

selling Shares have a conflict of interest in consulting with investors as to the purchase and

redemption of Shares. Further, different Placement Agents may receive different amounts of

compensation with respect to the Fund, and any one Placement Agent may receive different

amounts of compensation with respect to sales of the Fund than from other products advised by

the Manager and therefore may have incentives to favor one or more products over others.

No Separate Counsel. IC Legal, Advocates and Solicitors has been appointed as the Fund’s and

the Manager’s Indian counsel in connection with the formation of the Fund and certain other

matters for which it is specifically engaged. Anand Kumar Gujadhur has been appointed as the

Fund’s and the Manager’s Mauritius counsel in connection with the formation of the Fund and

certain other matters for which it is specifically engaged. In acting as counsel to the Fund,

Manager and certain of their affiliates, Anand Kumar Gujadhur has not represented nor will

represent any Shareholders. No independent counsel has been retained to represent the

Shareholders. In assisting in the preparation of this Memorandum, Anand Kumar Gujadhur have


relied on information provided by the Fund, Manager and certain of the Fund’s other service

providers without verification and do not express a view as to whether such information is

accurate or complete.


VII. TAX CONSIDERATIONS

Introduction

The following is a general discussion of certain of the anticipated Mauritius and India income tax

considerations applicable to the activities of the Fund, arising from the purchase, ownership and

disposition of Shares. This discussion does not address the local tax consequences to potential

investors of the purchase, ownership and disposition of Shares. Prospective investors should

consult their own tax advisers to determine the application and effect of tax laws with respect to

their own particular circumstances, including consequences to them under the laws of the

jurisdictions of which they are citizens, residents or domiciliaries and in which they conduct

business.

This discussion is based on laws and regulations currently in effect, which may change or be

subject to differing interpretations (possibly on a retroactive basis).

Certain Mauritian Tax Considerations

The Fund, holding a Category One Global Business Licence ("GBL1"), will be a tax resident in

the Republic of Mauritius. It is also anticipated that the Fund shall make an application to the

Mauritius Revenue Authority (“MRA”) for a Tax Residency Certificate (“TRC”) to be certified

as a resident of Mauritius for income tax purposes. As a Mauritian tax resident, the Fund will be

liable to tax under the Income Tax Act 1995, at a rate of 15%. However, it will be entitled to a

credit for foreign tax on its income which is not derived from Mauritius against the Mauritius tax

computed by reference to the same income. If no written evidence is submitted to the MRA of

Income Tax sharing the amount of foreign tax charged on income derived by the Fund outside

Mauritius, the amount of foreign tax shall be conclusively presumed to be equal to 80% of the

Mauritius tax chargeable with respect to that income, which would reduce the rate of tax

effectively to about 3%. If the foreign tax is at a rate greater than 15%, the effective rate may be

reduced further in certain circumstances.

Currently, no capital gains tax is payable in respect of the Fund’s realized investments.

Accordingly, the Fund will be exempt from Mauritius income tax on capital gains arising from

sale of securities in portfolio companies. There is no withholding tax payable in Mauritius in

respect of payments of dividends to Shareholders or in respect of redemption or exchange Shares.

A significant portion of the Fund’s investments will be undertaken in India. Accordingly, the

Fund will apply for a TRC issued by the MRA to accede the Treaty for the Avoidance of Double

Taxation and Prevention of Fiscal Evasion between Mauritius and India (the "Treaty"). The TRC

is valid for a period of one (1) year and is renewable annually, subject to payment of a service fee,

and provided the Fund adheres to the undertakings that the Board of directors has given to the

Mauritius Financial Services Commission (“FSC”) and the MRA. .

Shareholders will not be subject to any form of Mauritian tax on redemption of shares and

payment of dividend by the Fund. However, those Shareholders may be subject to taxation in the

jurisdiction in which they are resident or domiciled for tax purposes.


The MRA will issue a TRC to the Fund upon application made to the FSC along with an

undertaking that the Fund is and will be centrally managed and controlled in Mauritius. In this

respect, the Fund must:

(a) have at all times at least two (2) resident directors of appropriate caliber and able to exercise

independence of mind and judgment;

(b) maintain, at all times, its principal bank account in Mauritius;

(c) keep and maintain, at all times, its accounting records at a registered office in Mauritius;

(d) prepare its statutory financial statements and cause its financial statements to be audited in

Mauritius; and

(e) provide for meetings of directors to include at least two (2) directors from Mauritius.

In addition to the above, the FSC has devised additional requirements when determining whether

a GBL1 company is ‘managed and controlled’ in Mauritius by amending section 3 of chapter 4

of the Guide to Global Business (the "Guide") issued by the FSC.

GBL1 entities are expected to comply with the new ‘economic substance’ requirement by 01

January 2015, by meeting at least one of the following criteria:

(a) it has or shall have office premises in Mauritius; or

(b) it employs or shall employ on a full time basis at administrative/technical level, at least one

person who shall be resident in Mauritius; or

(c) its constitution contains a clause whereby all disputes arising out of the constitution shall be

resolved by way of arbitration in Mauritius; or

(d) it holds or is expected to hold within the next twelve months, assets (excluding cash held in

bank account or shares/interests in another GBL1 entity) which are worth at least USD

100,000 in Mauritius;

(e) its shares are listed on a securities exchange licensed by the FSC; or

(f) it has or is expected to have a yearly expenditure in Mauritius which can be reasonably

expected from any similar corporation which is controlled and managed from Mauritius.

The Guide further provides that a GBL1 entity shall be deemed to have satisfied the additional

‘economic substance’ requirements where a related corporation, that is, a subsidiary, fellow

subsidiary, a parent corporation or any other corporation within the same group structure,

holding a GBL1 satisfies one of the ‘economic substance’ criteria. Further, the Central Board of

Direct Taxes (CBDT), the apex administrative body of direct taxes in India, has issued a press

release dated 10th May 2016, on signing of the protocol amending the Treaty.

The protocol was signed by both countries on 10th May 2016, at Port Louis, Mauritius. The key

features of the protocol, as stated in the press release, are as under:

Capital gains taxation

With effect from Financial Year (FY) 2017-18 (tax year 1st April 2017 to 31th March 2018),

India shall have taxation rights on capital gains arising from alienation of shares of an Indian

resident company, acquired on or after 1st April 2017.


For shares acquired prior to 1st April 2017, the exemption from tax in India as currently

available would continue to apply.

For a transition period of 1st April 2017 to 31th March 2019, the tax rate will be limited to

50% of the domestic tax rate of India, subject to the fulfilment of the Limitation of Benefits

(LOB) article as introduced by the protocol.

Taxation in India at full domestic tax rate will take place from FY 2019-20 onwards.


Indian Tax Considerations

Certain Indian Income Tax Considerations

Please note that the tax implications in this section are based on the current provisions of the

Indian tax laws, the regulations thereunder, and the judicial and administrative interpretations

thereof, which are subject to change or modification by subsequent legislative, regulatory,

administrative or judicial decisions. Any such changes could have different tax implications.

The following summary is based on the law and practice of the Indian Income-tax Act, 1961

(“ITA”) read with the Income-tax Rules, 1962 (the “IT Rules”) and provisions of the relevant

India-Mauritius tax treaty (the “Treaty”). ITA is amended every year by the Finance Act (“FA”)

of the relevant year, and this summary reflects changes as of the date of this Memorandum, as

updated by the Finance Act, 2016 (“FA 2016”). Accordingly, the rates provided herein are the

revised tax rates as will be introduced by the FA 2016 and applicable for the financial year 2016-

17 (assessment year 2017-18). The rates under the ITA are to be increased by a surcharge and

education cess and are stated at the highest applicable slabs.

Currently, for non-resident companies, a surcharge at the rate of 2% (where total income

chargeable to tax in India exceeds INR 10 million but does not exceed INR 100 million) is levied

on the income-tax and a surcharge at the rate of 5% (where total income chargeable to tax in

India exceeds INR 100 million) is levied on the income-tax. Further, an education cess of 3% on

income-tax and surcharge is payable by the non-resident companies.

This information does not purport to be a complete analysis of all relevant tax considerations;

nor does it purport to be a complete description of all potential tax costs, incidence and risks

inherent in purchasing or holding interests of the Fund. The information contained herein is

based on an interpretation of prevailing tax legislation, and could therefore change. The Fund

and the investors may be adversely affected if alternative interpretations are adopted. Also, no

assurance can be provided that the Indian tax authorities will not challenge the eligibility of the

Fund of being a non-resident under the Indian tax laws or its eligibility to claim the benefits of

the Treaty, or seek to assert that the Fund has a permanent establishment (“PE”)/business

connection in India.

General

The basis of the charge of Indian income-tax depends upon the residential status of the taxpayer

during a tax year and the nature of the income earned. The Indian tax year runs from 1st April in

any year until 31st March of the following year.

A company is a resident of India for the purposes of the ITA if it is incorporated in India, or

during the financial year its place of effective management (“POEM”) is in India.

The term “POEM” has been defined to mean a place where key management and commercial

decisions necessary for the conduct of business of an entity, as a whole are, in substance made.


The Central Board of Direct Taxes (“CBDT”) had issued draft guiding principles for

determination of POEM of a company on 23rd December 2015, which are yet to be finalized.

The FA 2016 has deferred the applicability of POEM by a year to financial year commencing on

1st April 2016.

A company that is treated as a non-resident for Indian income-tax purposes is generally subject

to Indian income-tax in accordance with the ITA only on that company’s Indian-sourced income

(including income deemed to be sourced in India) or income received in India (including income

deemed to be received in India).

Indian-sourced income or income received in India will include dividends declared by Indian

companies or mutual funds, interest received in respect of debt instruments issued by Indian

companies and capital gains arising on the transfer of Indian securities.

Taxation of the Fund

The Fund proposes to make investments in Indian securities under the FPI route. The income

streams which the Fund will receive from such investment income would be in the form of

dividend, interest and exit gains arising from transfer/ buyback/ redemption of shares/ debentures

or from writing, square-off, exercise of exchange traded derivatives (futures and options)

[“Securities”].

As per the provisions of section 90(2) of the ITA, where the Fund qualifies as a tax resident of

Mauritius eligible to claim the benefits of the Treaty, the provisions of the Act shall apply only to

the extent more beneficial. Accordingly, the tax implications discussed below should be read in

light of benefits available to the Fund under the Treaty.

Income from Securities

A. Dividends

Dividends earned by the Fund would not be chargeable to tax in the hands of the Fund.

However, the investee companies are liable to pay a dividend distribution tax (“DDT”) at

the rate of 17.304% (including applicable surcharge and education cess) at the time of

distribution of dividends. The DDT should be applied to the amount of dividend distributed

to shareholders by grossing up the said amount by the DDT rate of tax, thus the effective

rate of DDT is 20.36% (including applicable surcharge and education cess).

Similarly, income earned by the Fund in respect of units of a mutual fund (other than

equity oriented mutual funds) would not be chargeable to tax in the hands of the Fund.

However, the mutual fund shall be liable to pay additional income-tax on such distributed

income as follows:

25% (plus applicable surcharge and education cess) on income distributed to any

person being an individual or Hindu undivided family;


30% (plus applicable surcharge and education cess) on income distributed to any

other person;

5% (plus applicable surcharge and education cess) in case of a distribution by a

mutual fund under an infrastructure debt scheme to a non-resident.

Like the DDT, even the mutual funds are required to gross-up the distribution amount by

the distribution tax rate.

B. Interest income on fixed income securities

(i) As per section 115AD of the ITA, interest received by a FII/FPI in respect of coupon

bearing securities (except securities referred to in point (ii) and (iii) below),

irrespective of the denomination of the debt, is chargeable to tax at the rate of 20%.

(ii) Interest payable to a FII/FPI on or after 1 June 2013 but before 1 July 2017, in

respect of investments made in rupee denominated bonds of an Indian company

(where the rate on such bond at the time of issuance does not exceed 500 basis points

over the applicable base rate of the State Bank of India) or in Government securities

is chargeable to tax at the rate of 5%.

(iii) Interest arising out of Foreign Currency Convertible Bonds (FCCBs) held by the

Fund is chargeable to tax at the rate of 10%.

Indian tax on interest income will be deducted at source by the payer (except on

government securities) of such interest income as withholding tax. Where the tax payable

is not withheld, the Fund would need to self-assess and deposit such taxes.

C. Exit gains arising from the transfer/ buyback/ redemption of securities held in the

Indian Portfolio Companies

Characterization of income

With effect from 1 April 2015, any securities held by a FII/FPI which has invested in such

securities in accordance with the regulations under the Securities and Exchange Board of

India Act, 1992 is deemed as a capital asset under the Income-tax Act, 1961. This is

irrespective of whether the FII/FPI has held such securities as an investment or stock-in-

trade.

The rate of tax and other tax implications on gains earned on sale of Indian securities

would vary depending upon whether the Indian securities (being in the nature of capital

asset) are short-term capital assets or long-term capital assets.

Period of holding is determined as follows:


Type of instrument Period of holding immediately preceding the date of

transfer

Listed Security and units of

equity oriented mutual fund

More than 12 months Long-term Capital Asset

12 months or less Short-term Capital Asset

Unlisted Shares More than 24 months Long-term Capital Asset


Unlisted Security other than

shares and units of mutual fund

other than equity oriented mutual

fund

More than 36 months Long-term Capital Asset


The FA 2016 has reduced the period of getting the benefit of long-term capital gains tax

regime in case of unlisted shares from 36 months to 24 months.

Based on the period of holding, the capital gains shall be taxable as follows:

Short-term Capital Gains

1. Short-term capital gains arising on transfer of equity shares of a company or units of

equity oriented mutual fund which are subject to Securities Transaction Tax (STT)

are chargeable to income-tax at a concessional rate of 15%. Further, section 48 of the

ITA provides that in the computation of capital gains no deduction shall be allowed

in respect of STT paid.

2. Short-term capital gains arising on off-market transactions in respect of transfer of

equity shares, units of equity oriented mutual funds, bonds, debentures which are not

subject to STT and derivatives (whether or not subject to STT) are chargeable to

income-tax at the rate of 30%.

Long-term Capital Gains

3. Long-term capital gains arising on sale of equity shares of a company or units of

equity oriented mutual fund on which STT is chargeable are exempt from income-

tax.

4. Long-term capital gains arising on off-market transaction in respect of equity shares,

units of equity oriented mutual funds, bonds, debentures which are not subject to

STT and derivatives (whether or not subject to STT) will be chargeable to tax at the

rate of 10%.

Capital gains arising from the transfer of FCCBs, GDRs or ADRs outside India between

two non-resident investors, should not be subject to tax in India;

Capital gains realized on transfer of shares acquired on redemption of GDRs or ADRs

would be taxed at the applicable rate mentioned above. Gains on transfer of shares


acquired on redemption of GDRs or ADRs are treated as long-term if such shares are held

for more than 12 months prior to transfer (from the date the instruction to redeem the

GDR/ ADR for underlying shares is issued). Gains on transfer of the shares acquired on

redemption of GDRs or ADRs are treated as short-term, if such shares are held for 12

months or less prior to transfer.

Buy-Back of Shares

Under the ITA, buy back of shares (not being shares listed on a recognised stock exchange)

by the Indian Companies from shareholders in accordance with the provisions of the

Companies Act would be subject to tax at the rate of 20% (plus surcharge and cess) on

distributed income in the hands of the Indian Companies. Distributed income for this

purpose means the consideration paid by the company on the buyback of shares, as reduced

by the amount which was received by the company for the issue of such shares. Such buy

back of shares would be exempt in the hands of the shareholders. No withholding of tax

will arise in respect of such buy back of shares.

The FA 2016 has covered buy-back undertaken pursuant to ‘any law in force relating to

companies’ under scope of buy-back tax. Further, it has also introduced rules to determine

the issue price of shares in certain cases for calculating the buyback tax.

Tax implications on conversion of convertible debentures / preference shares

Conversion of Compulsorily Convertible Debentures (“CCDs”) / Optionally Convertible

Debentures (“OCDs”)

Conversion of debentures of a company into shares of that company is not regarded as a

transfer under the Act. Hence, no capital gains would arise in the hands of the Fund on

conversion of convertible debentures of an Indian portfolio company into equity shares.

Period of holding of equity shares pursuant to such conversion

There are no specific provisions in the Act determining the holding period of shares

acquired pursuant to conversion of CCDs/ OCDs. CBDT, vide Notification No. 18/2016

dated 17th March 2016 effective from 1st April 2016, has clarified that in computing the

period of holding of a share or debenture of a company, received on conversion of a bond

or debenture, debenture-stock or deposit certificate of that company, the period for which

such convertible instrument was held by the taxpayer prior to the conversion shall also be

included.

Determination of cost of acquisition of equity shares acquired pursuant to conversion

As per the Act, the cost of acquisition of the shares received on conversion of CCDs/OCDs

of a company is the original acquisition cost of the CCDs/OCDs.


Conversion of Compulsorily Convertible Preference Shares (“CCPS”)/Optionally

Convertible Preference Shares (“OCPS”)

Unlike in the case of convertible debentures, there are no specific provisions under the Act

exempting gains on the conversion of preference shares into equity shares. There are two

views regarding the tax treatment at the time of conversion of such shares. The tax

treatment of transfer of equity shares pursuant to the conversion would differ based on the

tax treatment taken at the time of conversion of such shares.

Benefit of DTAA

As discussed above, as per the provisions of section 90(2) of the ITA, in determining the

taxability of a non-resident, the provisions of the relevant Double Taxation Avoidance Agreement

(DTAA) or the ITA, whichever are more beneficial shall apply. Accordingly, the taxation of the

Fund in India is governed by the provisions of the ITA or the Treaty whichever is more

beneficial.

In this context, it is relevant to note that as per the provisions of section 90(4) and 90(5) of the

ITA, effective from 1st April 2012, a non-resident shall not be entitled to the benefit of a DTAA,

unless the non-resident obtains a Tax Residence Certificate (TRC) from the Government of the

country of which the non-resident is a resident for tax purposes and the non-resident provides

documents and information as may be prescribed. In this regard, the CBDT has prescribed the

following information to be provided in Form No. 10F with effect from 1st April 2012:

1. Status (individual/company/firm etc.) of the taxpayer;

2. Nationality (in the case of an individual) or country or specified territory of incorporation

or registration (in the case of others);

3. The taxpayer's tax identification number in the country or specified territory of residence

and, if there is no such number, then, a unique number on the basis of which the taxpayer is

identified by the Government of the country or the specified territory of which it claims to

be a resident:

4. Period for which the residential status, as mentioned in the TRC, is applicable;

5. Address of the taxpayer in the country or territory outside India during the period for which

the TRC, mentioned in (iv) above, is applicable.

The above information, or any part thereof, may not be provided if it is already contained in the

TRC. Further, the non-resident would be required to keep and maintain documents necessary to

substantiate the above prescribed information. The IRA may require the non-resident to provide

the above in relation to the claim of DTAA relief made by the taxpayer.

Accordingly, in order to claim the beneficial provisions of the DTAA, the Fund must be a tax

resident of Mauritius. In light of Circular No. 789 dated 13th April, 2000, issued by the CBDT,

the Fund should be eligible for the benefits under the DTAT if it is incorporated in Mauritius and

has been issued a TRC by the Mauritius Revenue Authority (MRA). The Supreme Court of India

has also upheld the validity of Circular No. 789 and accordingly, upon obtaining a Mauritius

TRC, under the extant taxation provisions, the Fund should be eligible for the benefits under the


DTAT. The press release issued on 1st March 2013, mentioned above, also stated that Circular

No 789 continues to be in force, pending ongoing discussions between India and Mauritius.

The Fund has and, subject to compliance with Mauritius law, will continue to obtain a TRC from

the MRA containing the particulars specified by the Indian Government or IRA.

Since the Fund expects to hold a valid TRC issued by the MRA for the relevant financial year

and on the basis that it does not have any PE in India, the income earned by the Fund under the

DTAT would be as follows:

Dividend income earned by the Fund from investments in equity shares of an Indian

company will be exempt from tax in the hands of the Fund in accordance with the ITA.

Indian-sourced interest income earned by the Fund will be subject to tax under the ITA in

accordance with the provisions of the ITA as discussed above.

Any capital gains earned by the Fund on disposal of Indian securities will be exempt from

tax in India, pursuant to the provisions of the DTAT.

Further, the Central Board of Direct Taxes (CBDT), the apex administrative body of direct taxes

in India, has issued a press release dated 10th May 2016, on signing of the protocol amending the

tax treaty between India and Mauritius.

The protocol was signed by both countries on 10th May 2016, at Port Louis, Mauritius. The key

features of the protocol, as stated in the Press Release, are as under:

Capital gains taxation

With effect from Financial Year (FY) 2017-18 (tax year 1st April 2017 to 31th March 2018),

India shall have taxation rights on capital gains arising from alienation of shares of an Indian

resident company, acquired on or after 1st April 2017.

For shares acquired prior to 1st April 2017, the exemption from tax in India as currently

available would continue to apply.

For a transition period of 1st April 2017 to 31th March 2019, the tax rate will be limited to

50% of the domestic tax rate of India, subject to the fulfilment of the Limitation of Benefits

(LOB) article as introduced by the Protocol.

Taxation in India at full domestic tax rate will take place from FY 2019-20 onwards.

Limitation of benefits

A Mauritius resident (including a shell/ conduit company) will not be eligible for the benefit

of 50% reduction in tax rate during the transitory period if it fails to fulfil the main purpose

test and the bona fide business test.

A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in

Mauritius is less than INR 2.7 million (Mauritian Rupees 1.5 million) in the immediately

preceding 12 months

Interest taxation - Mauritian resident banks earning interest from India will be subject to

withholding tax at the rate of 7.5% in respect of debt claims/ loans made after 31st March 2017.

Interest income earned prior to that shall be exempt from tax in India


The Protocol also provides for updating of Exchange of Information Article as per international

standard, provision for assistance in collection of taxes, source-based taxation of other income,

amongst other changes.

In view of the above, the aforesaid income (as mentioned in the above protocol) earned by the

Fund may be taxed in India as per the amended DTAT once it is notified.

Minimum Alternate Tax (MAT)

As per the provisions of section 115JB of the ITA, if the tax payable by a tax payer on the total

income computed as per the provisions of the Act is less than 18.50% of its ‘book profit’, then

notwithstanding anything contained in any other provision of the Act, the ‘book profit’ shall be

deemed to be the total income of the tax payer, and the amount of tax payable shall be the

amount of income tax at the rate of 18.50% on such total income. Section 115JB(2) of the ITA

provides that, every company shall, for the purposes of section 115JB of the ITA, prepare its

profit and loss account in accordance with Parts II and II of Schedule VI of the Companies Act,

1956.

Recently, the Ministry of Finance, vide its Press Release dated 24th September 2015, has

announced that the provisions of MAT will be amended with retrospective effect from 1st April

2001 to provide that the MAT provisions will not be applicable to foreign companies in the

following circumstances:

Where the foreign company is resident of a country with which India has entered into a

DTAA and such foreign company does not create a permanent establishment in India as per

the provisions of the relevant DTAA.

Where the foreign company is resident of a country with which India has not entered into a

DTAA and such foreign company is not obliged to seek registration under the relevant

provision of the Companies Act, 1956 or the Companies Act, 2013.

The FA 2016 has made the aforesaid amendment to the ITA retrospectively with effect from 1st

April 2001.

Securities Transaction Tax (STT)

The exemption for long-term capital gains and the concessional tax rate on short-term capital

gains are applicable only if the sale or transfer of the equity shares takes place on a recognized

stock exchange in India or if there is a sale of units of equity oriented fund to the mutual fund,

and if the STT is collected, by the respective stock exchanges/ mutual fund, at the applicable

rates on the transaction value.


The Fund will be liable to pay STT in respect of dealings in Indian securities purchased or sold

on the Indian stock exchanges/ to a mutual fund. The applicable rates of STT are as under:

Nature of Transaction Payable

by

Applicable STT

Rates (%)

Delivery based purchase transaction

in equity shares entered into in a

recognized stock exchange

Purchaser 0.1

Delivery based purchase transaction

in units of equity oriented fund

entered into in a recognized stock

exchange

Purchaser Nil

Delivery based sale transaction in

equity shares entered in a recognized

stock exchange

Seller 0.1

Delivery based sale transaction in

units of equity oriented fund entered

into in a recognized stock exchange

Seller 0.001

Non-delivery based sale transaction

in equity shares or units of equity

oriented fund entered in a

recognized stock exchange

Seller 0.025

Transaction for sale of futures in

securities

Seller 0.01

Transaction for sale of an option in

securities

Seller 0.051

Transaction for sale of an option in

securities, where the option is

exercised

Purchaser 0.125

Sale of units of an equity oriented

fund to the mutual fund

Seller 0.001

Sale of unlisted equity shares by any

holder of such shares under an offer

for sale to the public included in an

IPO and where such shares are

subsequently listed on a recognized

stock exchange

Seller 0.2

Taxation of Indirect Transfer of Indian Assets

1The FA 2016 has increased the STT on transaction for sale of an option in securities from 0.017% to

0.05%.


The Finance Act 2012 had introduced an amendment (with retrospective effect from 1st April

1961) to provide, inter alia, that an asset or a capital asset being any share or interest in a

company or entity registered or incorporated outside India shall be deemed to be situated in

India, if the share or interest derives, directly or indirectly, its value substantially from the assets

located in India. Consequently, the gains or losses from the transfer of such asset (being any

share or interest in a company outside India) would be deemed to be gains or losses accruing or

arising in India in the hands of the non-resident transferor. In view of the above, any transfer of

interest in the Fund by the non-resident investors could be potentially deemed to be income

accruing or arising in India (where the Fund derives, directly or indirectly, its value substantially

from the assets located in India) and thus subject to tax in India. Such income or gains, if deemed

taxable in India, may be subject to relief from taxation as available under any applicable DTAA

(unless GAAR provisions are invoked).

General Anti Avoidance Rule

GAAR was introduced by the Finance Act, 2012, to be effective from the financial year 2013-14

with the objective of dealing with aggressive tax planning through the use of sophisticated

structures and codifying the doctrine of ‘substance over form’. Based on the recommendations of

an Expert Committee constituted by the Government, the applicability of GAAR was deferred by

the Finance Act, 2013, to the financial year 2015-16. It has since then been deferred to become

effective from 1st April 2017.

The provisions provide that an arrangement whose main purpose is to obtain a tax benefit and

which also satisfies at least one of the four specified tests (i.e. arrangement is not in arm’s length,

misuse or abuse of tax laws, lacks or is deemed to lack commercial substance or not carried out

for bona fide purpose) can be declared as an “impermissible avoidance arrangement”.

Once an arrangement is held to be an impermissible avoidance arrangement, then the

consequences in relation to taxation of the arrangement, including denial of tax benefits or a

benefit under a DTAA, will be determined keeping in view the circumstances of the case. Such

consequences could include, but are not limited to: (i) disregarding, combining or re-

characterizing the arrangement, or any step or part thereof; (ii) treating the arrangement as if it

had not been entered into or carried out; (iii) disregarding any accommodating party or treating

the accommodating party and any other party as the same person; (iv) deeming connected

persons as the same person for the purpose of determining tax treatment of any amount; (v) re-

allocating, amongst the parties to the arrangement, any accrual, receipt (capital or revenue),

expenditure, deduction, relief or rebate; (vi) treating the place of residence of any party to the

arrangement, or the situs of an asset or a transaction, as a place other than the place of residence,

or location of the asset or the transaction as provided under the arrangement; and (vii) looking

through any arrangement by disregarding any corporate structure.

Further, the Finance Minister, in his budget speech in 2015 has indicated that GAAR would

apply prospectively to investments made on or after 1st April 2017.

GAAR would override the provisions of the applicable DTAA even if such provisions are not


beneficial to the tax payer. Further, the GAAR provisions shall be applied in accordance with

such guidelines and subject to such conditions, as may be prescribed by the CBDT.

However, it is pertinent to note that vide notification dated 23rd September 2013, the IRA

notified that GAAR would not apply to FIIs (which is an assesse under the ITA) that do not take

any benefit under tax treaties entered into by India with other countries and have invested in

listed or unlisted securities with prior permission of the competent authority, in accordance with

the Securities and Exchange Board of India Regulations, 1995 and such other regulations, as may

be applicable, in relation to such investments.

Given that the provisions have been recently introduced and there is lack of clarity on the criteria

for establishing that obtaining a tax benefit was not the main purpose of an arrangement (or any

step or part thereof), it introduces significant risks that the IRA could seek to review all

investments and/or arrangements in relation to which beneficial treatment is claimed under the

applicable DTAA, in order to determine whether such investments and/ or arrangements could be

held to be an impermissible avoidance arrangement.

In an event where any arrangement or a part of an arrangement of making investments in Indian

securities by the Fund is declared as an impermissible avoidance arrangement by the IRA, the

GAAR provisions would override the provisions of the DTAA (even if such provisions are not

beneficial to the Company) and may cause the Fund to incur capital gains tax in India.

PLEASE NOTE THAT THE ABOVE IS SUBJECT TO CHANGE OR MODIFICATION

BY SUBSEQUENT LEGISLATIVE, REGULATORY, ADMINISTRATIVE OR JUDICIAL

DECISIONS. ANY SUCH CHANGES COULD HAVE DIFFERENT TAX

IMPLICATIONS.

.


VIII. REGULATORY CONSIDERATIONS

Indian Regulatory Matters

THE FOLLOWING DESCRIPTION IS A SUMMARY OF CERTAIN ASPECTS OF THE

RELEVANT LEGAL REGIME APPLICABLE TO INVESTMENTS AND OPERATIONS IN

INDIA. THE DESCRIPTION SET OUT BELOW IS NOT INTENDED TO BE

COMPREHENSIVE OR EXHAUSTIVE, IS ONLY INTENDED TO PROVIDE GENERAL

INFORMATION TO THE INVESTORS AND IS NEITHER DESIGNED NOR INTENDED TO

BE A SUBSTITUTE FOR PROFESSIONAL LEGAL ADVICE. INVESTORS INTERESTED

IN SUBSCRIBING FOR SHARES ARE ADVISED TO REVIEW ANY LEGAL

RESTRICTIONS WHICH MAY BE RELEVANT TO THEIR PARTICULAR

CIRCUMSTANCES IN CONNECTION WITH THE ACQUISITION, HOLDING OR

DISPOSITION OF SUCH SHARES.

Exchange Control Regulations

Foreign investment in securities issued by Indian companies is regulated under the Foreign

Exchange Management Act, 1999 (“FEMA”) and by the RBI. The Foreign Exchange

Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations,

2000 (as amended, the “Security Regulations”) issued under the FEMA establish various

investment routes available to persons resident outside India (a “Non-Resident”), such as the

Fund, seeking to make investments in securities issued by Indian companies.

The Security Regulations provide for investing into India under the Foreign Direct Investment

(“FDI”) regime, the Foreign Portfolio Investment (“FPI”) regime or the Foreign Venture Capital

Investor (“FVCI”) regime. The following is a summary of relevant regimes.

Foreign Direct Investment

RBI circulars, the Consolidated FDI Policy (the “FDI Policy”) and the Master Circular on

Foreign Investment in India, prescribe the rules, regulations and policies governing FDI into

India. FDI is generally permitted either under the automatic route, where no prior approval of

any regulatory authority is required, or under the government approval route. Subject to certain

conditions, such as pricing restrictions, in most industry sectors, if the percentage of equity

holding by non-residents does not exceed certain industry-specific thresholds (sectoral caps) then

FDI does not require prior government approval. However, FDI requires prior government

approval by the Foreign Investment Promotion Board (the “FIPB”) if it is in excess of sectoral

caps, does not comply with specified conditions or is to be made in sectors specifically requiring

the approval of the FIPB. Issuance of partly-paid shares and warrants to Non-Resident investors

are also subject to certain conditions under recent RBI circulars, including pricing guidelines and

conditions relating to the receipt of the balance of payments.

FDI is prohibited or subject to limitations in certain sectors such as real estate, retail trading,

atomic energy, lottery business, tobacco and tobacco products and gambling and betting. FDI is

also prohibited in trusts other than venture capital funds registered with SEBI.


Transfer of Capital Instruments under FDI. A Non-Resident investor is permitted to freely sell

or gift capital instruments (being equity shares, compulsorily and mandatorily convertible

preference shares and compulsorily and mandatorily convertible debentures) of an Indian

company held by it to another Non-Resident investor without RBI/FIPB approval. In addition, a

Non-Resident investor is permitted to sell or purchase capital instruments held by it in an Indian

company to or from a resident through a sale under private arrangement without RBI/FIPB

approval subject to compliance with FDI sectoral caps, pricing guidelines and reporting

requirements.

However, in certain cases, such as where the transfer by a resident to a Non-Resident of capital

instruments of an Indian company engaged in a sector where FDI is not permitted under the

automatic route or where the transfer will result in the sectoral caps being exceeded, prior

approval of the FIPB is required. Further, unless certain requirements are met, RBI approval is

also required where the transfer (i) is by a resident to a Non-Resident of capital instruments of an

Indian company engaged in the financial services sector (e.g., banks), or (ii) is not in compliance

with pricing guidelines.

Pricing Guidelines for Issue/Transfer of Capital Instruments. The price of shares or debentures

compulsorily convertible into equity shares issued by an Indian company to a Non-Resident

investor is regulated under the FDI Policy, which requires the price to be not less than (i) the

price established in accordance with SEBI guidelines where the shares of the company are listed

on any recognized stock exchange in India (discussed below under Securities Law

Considerations), or (ii) the fair valuation of shares as determined as per any internationally

accepted pricing methodology for valuation of shares on arm’s length basis duly certified by a

SEBI registered Merchant Banker or a Chartered Accountant where the shares of the company

are not listed on any recognized stock exchange in India.

Repatriation/Remittance. FDI by a Non-Resident, other than “non-resident Indians” (as defined

under FEMA) is on a repatriation basis and therefore, may be remitted outside India without RBI

approval subject to certain conditions. Under the FDI Policy, in case of a sale by a Non-Resident

to a resident, authorized dealers may permit the remittance of sale proceeds of capital

instruments (net of applicable taxes) to the seller resident outside India, without RBI approval,

provided that the capital instruments were held on repatriation basis, the sale was in accordance

with prescribed regulations and guidelines and a no objection or tax clearance certificate

obtained from the Indian income tax authorities is produced. Capital returned by an Indian

company by way of (i) buy-back of the equity shares or other specified securities, (ii) reduction

of share capital by returning the paid up amounts of the share capital contributed, or (iii) winding

up or liquidation of the company is also permitted to be remitted outside India without RBI

approval, subject to payment of all applicable taxes and compliance with certain other conditions.

Dividends declared by an Indian company are also permitted to be remitted outside India without

RBI approval, subject to deduction of all applicable taxes. However, under the FDI Policy the

rate of dividend on preference shares is not permitted to exceed 300 basis points over the Prime

Lending Rate of the State Bank of India prevailing as on the date of the board meeting in which

issue of such shares is recommended. Although the FDI Policy does not prescribe a ceiling on

interest payments on compulsorily and mandatorily convertible debentures, the ceiling on


dividends on preference shares may be applicable to interest payable on debentures. Interest

payments on compulsorily and mandatorily convertible debentures within the ceiling are

permitted to be remitted outside India without RBI approval, subject to payment of all applicable

taxes.

Foreign Portfolio Investor

The SEBI (Foreign Portfolio Investors) Regulations, 2014 (“FPI Regulations”) were notified by

SEBI on January 7th, 2014 (effective from June 1st, 2014) pursuant to which existing foreign

institutional investors (“FIIs”), sub accounts and Qualified Foreign Investors (“QFIs”) have

been merged into a new class of foreign investors termed as Foreign Portfolio Investors

(“FPIs”).An FPI has been defined as a person who satisfies the eligibility criteria and has been

registered under the FPI Regulations. Any FII or QFI with a valid registration certificate is

deemed to be a FPI till the expiry of the block of 3 (three) years for which fees have been paid

under the SEBI (Foreign Institutional Investor) Regulations, 1995.

Under the Security Regulations, SEBI registered FPIs have also been permitted to purchase

equity shares (fully or partly paid) or fully and mandatorily convertible preference shares or fully

and mandatorily convertible debentures or warrants of an Indian company through offer/private

placement, subject to total FPI investment being within the investment limit, as set out under

“Investment Caps” below and provided that:

(i) in the case of public offer, the price of shares to be issued is not less than the price at

which shares are issued to residents; and

(ii) in the case of issue by private placement, the price is not less than the price arrived in

terms of SEBI guidelines or not less than the fair price worked out as per any

internationally accepted pricing methodology for valuation of shares on arm’s length

basis, duly certified by a SEBI registered Merchant Banker or Chartered Accountant,

as applicable and as elaborated above.

FPI Registration

FPIs are categorized into 3 (three) classes: (a) Category I: government and government related

foreign investors such as central banks and sovereign wealth funds; (b) Category II:

appropriately regulated entities such as Broad Based Funds, banks and asset management

companies, Broad Based Funds that are not appropriately regulated but whose manager itself is

an FPI of this category; or (c) Category III: all others not eligible under Category I or II such as

endowments, charitable societies and family offices.

A “Broad Based Fund” means a fund outside India, which has at least 20 (twenty) investors

with no investor holding more than 49% (forty-nine percent) of the fund. If an institutional

investor holds more than 49% (forty-nine percent) of the fund, then such institutional investor

must itself be a broad based fund. For ascertaining the number of investors, the direct as well as

underlying investors of entities which have been set up for the sole purpose of pooling funds and

making investments will also be considered.


An entity proposing to register as an FPI must make an application to the Designated Depository

Participant in a prescribed form under the FPI Regulations for one of the 3 (three) categories

mentioned above. An FPI is required to satisfy certain conditions in order to be eligible for a

registration including good track record, professional competency and various criteria linked to

residency status.

Under FPI regulations, Designated Depository Participants who have been granted approval by

SEBI shall ensure that the FPI does not have “Opaque Structures”.

“Opaque Structures” have been defined as protected cell company, segregated cell company or

equivalent, where the details of the ultimate beneficial owners are not accessible or where the

beneficial owners are ring fenced from each other or where the beneficial owners are ring fenced

with regard to enforcement. Provided that the following structures are not to be treated as having

Opaque Structures:

(i) the applicant is regulated in its home jurisdiction;

(ii) each fund or sub fund in the applicant satisfies broad based criteria;

and

(iii) the applicant gives an undertaking to provide information regarding its

beneficial owners as and when SEBI seeks this information.

An FPI registration once granted is permanent unless cancelled or suspended by SEBI.

Investment Conditions and Restrictions as applicable to a FPI:

FPIs are permitted to invest in the following types of instruments under the FPI Regulations:

(i) securities in the primary and secondary markets including shares, debentures

and warrants of companies, listed or to be listed on a recognized stock

exchange in India;

(ii) units of schemes floated by domestic mutual funds, whether listed on a

recognized stock exchange or not;

(iii) units of schemes floated by a collective investment scheme;

(iv) derivatives traded on a recognized stock exchange;

(v) treasury bills and dated government securities;

(vi) commercial papers issued by an Indian company;

(vii) rupee denominated credit enhanced bonds;

(viii) security receipts issued by asset reconstruction companies;


(ix) perpetual debt instruments and debt capital instruments, as specified by the

Reserve Bank of India from time to time;

(x) listed and unlisted non-convertible debentures/bonds issued by an Indian

company in the infrastructure sector (‘infrastructure’ is defined in terms of the

external commercial borrowings guidelines);

(xi) non-convertible debentures or bonds issued by non-banking financial

companies categorized as ‘infrastructure finance companies’ by the RBI;

(xii) rupee denominated bonds or units issued by infrastructure debt funds;

(xiii) Indian depository receipts;

(xiv) Unlisted non-convertible debentures/bonds issued by an Indian company

subject to the guidelines issued by the Ministry of Corporate Affairs,

Government of India from time to time; and

(xv) such other instruments specified by the SEBI from time to time.

The secondary market, FPIs are only permitted to trade in listed securities of Indian companies.

Unless approved by the SEBI, securities are required to be registered in the name of the FPI as a

beneficial owner for the purposes of the Depositories Act, 1996.

FPIs must comply with the investment restrictions contained in the FDI Policy, FPI Regulations,

FEMA and the regulations thereunder and any circulars and notifications issued by SEBI and

RBI from time to time.

As per the circular dated March 15, 2016, SEBI has permitted FPIs to invest in Units (as defined

below under section “Investment by FPI in Investment Vehicles’) of Real Estate Investment

Trusts registered under the Securities and Exchange Board of India (Real Estate Investment

Trusts) Regulations, 2014, Infrastructure Investment Trusts registered under the Securities and

Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 and Alternative

Investment Funds registered under the Securities and Exchange Board of India (Alternative

Investment Funds) Regulations, 2012 subject to such other terms and conditions that may be

prescribed by SEBI from time to time. Investment by an FPI in units of a Category III

Alternative Investment Fund is limited to 25% of the corpus of such Category III Alternative

Investment Fund.

Investment Cap

A single FPI or a foreign portfolio investor group is permitted to hold equity shares constituting

less than 10% (ten percent) of the total paid-up equity capital or 10% (ten percent) of the paid-up

value of each series of convertible debentures issued by an Indian company and total holdings by

all FPIs put together shall not exceed 24% (twenty-four percent) paid-up equity capital or of the


paid-up value of each series of convertible debentures. This aggregate limit of 24% (twenty-four

percent) can be increased to the sectoral cap/statutory ceiling, as applicable, by the Indian

company concerned through a resolution by its board of directors followed by a special

resolution to that effect by its general body and subject to prior intimation to the RBI. The

aggregate FPI investment, in the FDI and Portfolio Investment Scheme, should be with the above

caps.

An FPI may also invest in shares of an Indian company under the FDI regime for which the

payment shall be made directly into Indian company’s bank account and the Indian company has

filed Form FC-GPR in that regard.

Investment restrictions and limits are also provided in the FDI policy, in respect of FPIs.

The FDI Policy and Security Regulations also provide that:

(i) FPIs are eligible to purchase shares (fully or partly paid), convertible debentures or

warrants issued by Indian companies under the Foreign Portfolio Investment Scheme

(“FPIS”) subject to the terms and conditions specified in Schedule 2A to the Security

Regulations and the limits and margin requirements prescribed by RBI/ SEBI as well

as the stipulations regarding collateral securities as specified by the RBI, from time to

time;

(ii) FPIs cannot invest in certain activities, such as real estate business, and others as

specified in the FDI policy;

(iii) a registered FPI may trade in all exchange traded derivative contracts approved by

RBI/SEBI subject to the limits and margin requirement prescribed by RBI/SEBI as

well as the stipulations regarding collateral securities as directed by the RBI from

time to time;

(iv) A registered FPI may, undertake short selling as well as lending and borrowing of

securities subject to such conditions as may be stipulated by the RBI and the SEBI

from time to time.

Offshore Derivative Instruments (“ODIs”)

Under the FPI Regulations, only Category I and II FPIs are permitted to issue, subscribe and

otherwise deal in ODIs, directly or indirectly. Category III and Category II unregulated Broad

Based Funds are not permitted to issue, subscribe or deal in ODIs.

On 24th

November 2014 SEBI issued a circular aligning the applicable eligibility and investment

norms between FPI regime and subscription through the ODI route. An FPI can issue ODIs only

to those subscribers which meet the eligibility criteria (for FPI registration) as laid down in

Regulation 4 of the FPI Regulations. Regulation 4 requires that an FPI applicant shall not be

granted registration unless it satisfies inter alia the following conditions namely:

a. The applicant is resident of a country whose securities market regulator is a

signatory to International Organization of Securities Commission’s Multilateral

Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral


Memorandum of Understanding with SEBI; applicant being a bank, is a resident of a

country whose central bank is a member of Bank for International Settlements;

b. The applicant is not resident in a country identified in the public statement of

Financial Action Task Force as:

i. a jurisdiction having a strategic Anti-Money Laundering or Combating the

Financing of Terrorism deficiencies to which counter measures apply; or

ii. a jurisdiction that has not made sufficient progress in addressing the

deficiencies or has not committed to an action plan developed with the

Financial Action Task Force to address the deficiencies

An FPI can issue ODIs only to those subscribers which do not have Opaque Structure(s) as

elaborated above.

The investment restrictions applicable to an FPI (as noted above) shall apply to ODI subscribers

also. For this purpose, two or more ODI subscribers having common beneficial owner shall be

considered together as a single ODI subscriber, in the same manner as is being done in the case

of FPIs.

Further, where an investor has investments as FPI, and also holds positions as an ODI subscriber,

the investment restrictions shall apply on the aggregate of FPI investments and ODI positions

held in the shares of underlying Indian company. In other words, the investment as FPI and

positions held as ODI subscriber will be clubbed together with reference to the said investment

restrictions.

FPIs which issue ODIs are required to put in place necessary systems to ensure compliance with

above provisions.

Unregulated Broad Based Funds, which are classified as Category II FPIs by virtue of their

investment manager being appropriately regulated are not permitted to issue, subscribe or

otherwise deal in offshore derivatives instruments directly or indirectly.

Other conditions with respect to issue, subscription and dealing in ODIs are stipulated under the

FPI Regulations.

Investment by FPIs in Investment Vehicles

As per Regulation 5(10) of the Security Regulations to be read with the circular dated March 15,

2016 issued by SEBI (as discussed above), an FPI is permitted to acquire, purchase, hold, sell or

transfer Units of an Investment Vehicle, in the manner and subject to the terms and conditions

specified in Schedule 11 of Security Regulations.

Subject to the Security Regulations, an FPI is permitted to pledge Units of an Investment Vehicle

to secure credit facilities being extended to such FPI.

As per Schedule 11 of the Security Regulations, investment by an FPI in Units of an Investment

Vehicle shall be subject to the following conditions:


a) The payment for the Units of an Investment Vehicle acquired by a person resident or

registered / incorporated outside India shall be made by an inward remittance through the

normal banking channel including by debit to an NRE or an FCNR account.

b) A person resident outside India who has acquired or purchased units in accordance with

this Schedule may sell or transfer in any manner or redeem the Units as per regulations

framed by SEBI or directions issued by RBI.

c) Downstream investment by an Investment Vehicle shall be regarded as foreign

investment if either the Sponsor or the Investment Manager or the Investment Manager

(of the Investment Vehicle) is not Indian ‘owned and controlled’ as defined in Regulation

14 of the Security Regulations. Regulation 14 lays down criteria to determine if a

company or limited liability partnership incorporated in India is Indian ‘owned and

controlled’. A company shall be considered as ‘owned’ by resident Indian citizens if more

than 50% of the capital in it is beneficially owned by resident Indian citizens and/or

Indian companies, which are ultimately owned and controlled by resident Indian citizens.

A company owned by non-residents shall mean an Indian company that is not owned by

resident Indian citizens. A limited liability partnership (“LLP”) will be considered as

‘owned’ by resident Indian citizens if more than 50% of the investment in such LLP is

contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and

controlled by resident Indian citizens’ and such resident Indian citizens and entities have

majority of the profit share.

d) For the purpose of company, ‘control’ shall include the right to appoint a majority of the

directors or to control the management or policy decisions including by virtue of their

shareholding or management rights or shareholders agreements or voting agreements. For

the purpose of LLP, ‘control’ shall mean right to appoint majority of the designated

partners, where such designated partners, with specific exclusions to others, have control

over all the policies of limited liability partnership.

e) For sponsors or managers or investment managers organized in a form other than

companies or LLPs, SEBI shall determine whether the sponsor or manager or investment

manager is foreign ‘owned and controlled’. In case the sponsors or managers or

investment managers of the AIF are individuals, for the treatment of downstream

investment by such AIF as domestic, such sponsors or managers or investment managers

should be resident Indian citizens.

f) The extent of foreign investment in the corpus of the Investment Vehicle will not be a

factor to determine as to whether downstream investment of the Investment Vehicle

concerned is foreign investment or not.

g) Downstream investment by an Investment Vehicle that is reckoned as foreign investment

shall have to conform to the sectoral caps and conditions / restrictions, if any, as

applicable to the Indian company in which the downstream investment is made, as per the

FDI Policy or Schedule 1 of the Security Regulations.


h) Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign

investment has to conform to the provisions of Schedule 9 of the Security Regulations

and FDI Policy.

i) An Alternative Investment Fund Category III with foreign investment shall make

portfolio investment in only those securities or instruments in which a FPI is allowed to

invest under the Security Regulations

j) The Investment Vehicle receiving foreign investment shall be required to make such

report and in such format to RBI or to SEBI as may be prescribed by them from time to

time.

Securities Law Considerations

The Company may make equity or equity linked investments in an unlisted company

incorporated in India through (i) an initial public offering, (ii) a private placement of securities,

or (iii) an issue of shares on a rights basis. In addition, the Company may make equity or equity

linked investments in a listed portfolio company incorporated in India through (i) a follow on

public offering, (ii) a private placement of securities, (iii) an issue of foreign currency

convertible bonds, (iv) an issue of Global Depository Receipts and/or American Depository

Receipts, or (v) a Qualified Institutional Placement. Such investments are subject to regulations

including, but not limited to, The Companies Act, 2013 the FDI Policy, the Securities

Regulations, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, the

Securities Contracts (Regulation) Act, 1956, the Securities Contracts (Regulation) Rules, 1957,

the stock exchange rules and regulations, the listing agreements of the various stock exchanges,

the Securities and Exchange Board of India Act, 1992 and the Depositories Act, 1996.

SEBI Regulations on Initial Public Offerings. In exercise of its powers conferred by Section 30

of the Securities and Exchange Board of India Act, 1992, the SEBI has framed the SEBI (Issue

of Capital and Disclosure Requirements) Regulations, 2009 (the “ICDR Regulations”), notified

on August 26, 2009. The ICDR Regulations replace the SEBI (Disclosure and Investor

Protection) Guidelines, 2000 (“DIP Guidelines”).

In the event the investee companies in which the Company has invested goes for an initial public

offering (“IPO”) or if the Company exits from its investment through an IPO, the ICDR

Regulations could have a significant impact on the ability of the Company as an investor in such

company or on its exit strategy. This Section provides a summary of some of the provisions of

the ICDR Regulations, which could be relevant for the Company in the above circumstances.

The ICDR Regulations apply to IPOs by unlisted companies, public issues, qualified institution

placements, offers for sale, rights issues and preferential allotment by listed companies.

An unlisted company eligible to make a public issue, and desirous of getting its securities listed

on a recognised stock exchange pursuant to a public issue, is required to price its equity shares or


any of its securities convertible at a later date into equity shares in consultation with the lead

manager to the issue on the basis of certain parameters provided under the ICDR Regulations.

A notable feature of the Indian capital markets is the close identification of promoters with their

companies. In order to discipline the new issues market, SEBI has stipulated that promoters must

retain a certain minimum certified holding of the equity capital issued by the company. The

ICDR Regulations also require the disclosure of the aggregate shareholding of the promoters

group as well as the details of the inter se transfer of securities amongst the promoters. For the

purposes of these disclosures, the term “promoter” includes the person who is in overall control

of the company and a person who is named as a promoter in the prospectus. However, financial

institutions, scheduled banks, FPIs (other than Category III FPI) and mutual funds are not

deemed to be promoters nor deemed to form part of the promoter groups merely by virtue of

them holding more than the minimum percentage equity holding prescribed to determine the

promoter group.

A minimum of 20% of the post issue capital must be held by the promoters. Provided that in case

the post issue shareholding of the promoters is less than twenty per cent, alternative investment

funds may contribute for the purpose of meeting the shortfall in minimum contribution as

specified for promoters, subject to a maximum of ten per cent of the post issue capital. Such

minimum promoter’s contribution is locked-in and cannot be disposed of; such lock-in

commencing on the date of allotment in the proposed public issue and the last date of the lock-in

is three years from the date of allotment, or commencement of commercial production,

whichever is later. However, inter se transfer of promoter holdings is possible subject to the lock-

in being made applicable to the transferees for the remaining period of the lock-in. Promoters are

also obligated to bring in their full subscription to the issue at least one day prior to the issue

opening date. Entire pre-issue share capital of an unlisted company (other than the minimum

promoter contribution referred to above which is locked-in for a minimum period of three years)

is locked-in for a period of one year from the date of allotment in the public issue. However, the

lock-in period of one year shall not be applicable to the pre-issue share capital:

a. If the equity shares held by a venture capital fund or alternative investment fund of

category I or a foreign venture capital investor if such equity shares have been held for a

period of at least one year from the date of purchase by the venture capital fund or

alternative investment fund or foreign venture capital investor;

b. if such shares have been held for a period of at least one year at the time of filing draft

offer document with SEBI and being offered to the public through offer for sale;

c. if the pre-IPO shares held by employees, were issued under an employee stock option or

employee stock purchase scheme of the issuer company before the IPO, provided the

issuer company has complied the disclosure requirements pertaining to the same under

the ICDR Regulations.

Preferential Allotment of Securities. The Company may invest in investee companies by

participating in a private offer of securities by the issuer. The Companies Act, 2013 stipulates

that the issuing company (whether listed or unlisted) should obtain the prior approval of its


existing shareholders, through a special resolution, before it issues its securities on a preferential

basis (i.e., any issue that is not a rights issue to all existing shareholders of the company). The

ICDR Regulations further lay down certain requirements for preferential issue of securities by

listed companies in select group of persons on a private placement basis (“Preferential

Allotment”) and for a qualified institutional placement (“QIP”).

All issues of capital by listed companies by way of shares or convertible securities by way of

QIP or Preferential Allotment are subject to the pricing guidelines provided under the ICDR

Regulations. In particular, a Preferential Allotment, in the event that the equity shares of the

issuer have been listed for a period of twenty six weeks or more as on the ‘relevant date’, must

be made at a price not less than the higher of:

(i) The average of the weekly high and low of the volume weighted average

prices of the related equity shares quoted on the stock exchange during the

twenty six week period preceding the relevant date; or

(ii) The average of the weekly high and low of the volume weighted average

prices of the related equity shares quoted on a stock exchange during the two-

week period preceding the relevant date.

In the event that the equity shares of the issuer have been listed on a stock exchange for a period

less than twenty six weeks as on the relevant date, the preferential allotment must be made at a

price not less than:

(i) the price at which equity shares were issued by the issuer in its initial public

offer or the value per share arrived at in a scheme of arrangement under

sections 391 to 394 of the Companies Act, 1956, pursuant to which the equity

shares of the issuer were listed, as the case may be; or

(ii) the average of the weekly high and low of the volume weighted average prices

of the related equity shares quoted on the recognised stock exchange during

the period shares have been listed preceding the relevant date; or

(iii) the average of the weekly high and low of the volume weighted average prices

of the related equity shares quoted on a recognised stock exchange during the

two weeks preceding the relevant date.

The issues of securities by means of a QIP shall be made at a price not less than the average of

the weekly high and low of the closing prices of the related shares quoted on the stock exchange

during the two weeks preceding the relevant date.

The term “relevant date” for the issue of securities to a qualified institutional buyer (QIB) under

a QIP means the date of the meeting in which the board of directors of the company or the

committee of directors duly authorized by the board of directors of the company decides to open

the proposed issue whereas the term “relevant date” for the issue of securities in (i) a Preferential

Allotment of equity shares is the date thirty days prior to the date on which the meeting of


shareholders is held to consider the proposed preferential issue and (ii) in a Preferential

Allotment of convertible securities either the date set out in (i) above or a date thirty days prior to

the date on which the holders of the convertible securities become entitled to apply for the equity

shares.

Securities issued in Preferential Allotment by a listed company to the promoters/promoter group

of the company are locked-in for a period of three (3) years from the date of trading approval

granted for the securities, such lock-in being applicable to a maximum of 20% of the share

capital of the company (computed on a post issue basis). Further, securities issued to any person

including promoters/promoters group (which do not form a part of the securities locked-in for

three (3) years as mentioned above) in a Preferential Allotment shall be subject to a lock-in for a

period of one year from the date of trading approval.

The “date of trading approval” shall mean the latest date when trading approval has been granted

by all the recognised stock exchanges where the equity shares of the company are listed, for

specified securities allotted.

The eligible securities allotted under QIP are subject to a lock-in of one year from the date of

allotment, unless the securities are sold on a recognized stock exchange.

Such lock-in requirements may also be applicable with respect to the Company’s investment in

listed securities by way of Preferential Allotment/QIP by the issuing company.

Takeover Code. On September 23, 2011, SEBI announced its new takeover code, the Securities

and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,

2011 (“Takeover Code”), which came into effect on October 22, 2011 and replaced the

Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997. The Takeover Code came into effect on October 22, 2011.

Under the provisions of the Takeover Code, any acquirer (meaning a person who, directly or

indirectly, acquires or agrees to acquire shares or voting rights in a company or acquires or

agrees to acquire control over a company, either by himself, or through, or with any person

acting in concert) who acquires aggregating to 5% or more of the shares of a listed public Indian

company is required to notify to the company at its registered office and each of the stock

exchanges on which the shares of such company are listed about its aggregate shareholdings and

voting rights within two (2) days of (i) the receipt of intimation of allotment of shares or (ii) the

acquisition of shares or voting rights. Furthermore, any person holding 5% or more of the shares

or voting rights in a company is required to inform the company at its registered office and the

stock exchange about the number of shares or voting rights held and change in its shareholding

or voting rights (even if such change results in shareholding falling below 5%) representing 2%

or more of the shares or voting rights of the company within two days of (i) the receipt of

intimation of allotment of shares or (ii) the acquisition or disposal of shares or voting rights.

The open offer for the acquisition of a further minimum of 26% of shares of the company or such

other percentage as prescribed under the Takeover Code has to be made by way of a public


announcement on the date of agreeing to acquire shares or voting rights in, or control over the

company.

Prohibition of Insider Trading Regulations. SEBI (Prohibition of Insider Trading) Regulations,

2015, (the “Insider Trading Regulations”) have been notified by the SEBI and came into force

with effect from May 15, 2015. The Insider Trading Regulations replace SEBI (Prohibition of

Insider Trading) Regulations, 1992. The Insider Trading Regulations prohibit an “insider” and a

“connected person” from dealing, either on his own behalf or on behalf of any other person, in

the securities of a company listed on any stock exchange when in possession of “unpublished

price sensitive information” which is distinguished from “generally available information”. The

terms “insider”, “connected person”, “unpublished price-sensitive information” and “generally

available information” are defined in the Insider Trading Regulations.

The insider is also prohibited from communicating, counseling, causing or procuring, directly or

indirectly, any unpublished price-sensitive information to any other person who while in

possession of such unpublished price-sensitive information is prohibited from dealing in

securities except where such communication is in furtherance of legitimate purposes,

performance of duties or discharge of legal obligations and in furtherance in the interest of the

company.

In the case of “connected persons” the onus of establishing, that they were not in possession of

unpublished price sensitive information, shall be on such connected persons and in other cases,

the onus would be on SEBI.

Prevention of Money Laundering

The Prevention of Money-Laundering Act, 2002 (“PMLA”), which was amended by the

Prevention of Money-Laundering (Amendment) Act, 2005, embodies India’s legislative

commitment to the elimination and prevention of money laundering. The main objects of PMLA

are (i) the prevention and control of activities concerning money laundering and (ii) the

confiscation of property derived or involved in money laundering. Also, SEBI vide its circular

No. ISD/CIR/RR/AML/1/06 dated January 18, 2006 and Master Circular dated December 31,

2010 has mandated that all intermediaries should formulate and implement a proper policy

framework as per the guidelines on anti-money laundering measures and also to adopt a “Know

Your Customer” (KYC) policy. The intermediaries may, according to their requirements specify

additional disclosures to be made by clients for the purpose of identifying, monitoring and

reporting incidents of money laundering and suspicious transactions undertaken by clients.

Under the PMLA, a person is guilty of an offence of “money laundering” if that person “directly

or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually

involved in any process or activity connected with the proceeds of crime and projecting it as

untainted property.” The term “proceeds of crime” has been defined under the PMLA to mean

property derived or obtained, directly or indirectly, by any person as a result of criminal activity

relating to an offence listed in the schedule to the PMLA or the value of any such property.


The PMLA mandates certain entities such as banks, financial institutions and intermediaries

dealing in securities (including FPIs) to maintain a record of all transactions of a certain nature

and value, as prescribed in the rules framed under the PMLA. The transactions so prescribed may

be a single transaction or a series of inter-connected transactions which take place within one

month (“Transactions”). The institution must provide information relating to such Transactions

to the Director appointed under the PMLA within the prescribed time limit. The institution is

required to appoint a principal officer who shall report the transactions to the Director of the

Financial Intelligence Unit set up by the Ministry of Finance within the prescribed time limit.

Further, these institutions are required to formulate and implement an anti-money laundering

policy, as well as verify and maintain the records of identity of their clients in the manner

prescribed in the rules under the PMLA. The PMLA also confers discretionary power on the

principal officer of a bank, financial institution or intermediary to report Transactions that have

been valued below the prescribed limits to escape scrutiny.

The Prevention of Money Laundering (Amendment) Act, 2013 received Presidential assent on

January 3, 2013 and has come into effect from February 15, 2013. The amendment act has inter

alia enlarged the definition of ‘money-laundering’ to include concealment, acquisition,

possession and use of proceeds of crime as criminal activities The amendment act has made

sweeping changes to the PMLA that are in line with recommendations of the FATF, an inter-

governmental policy making body, with a mandate to establish international standards for

combating money laundering and terror financing.

For the purpose of complying with the obligations under the PMLA, an applicant may be

required to provide certain information and / or documents for the purpose of verifying the

identity of the applicant, the source of funds and obtain confirmation that the application monies

do not represent directly or indirectly, the proceeds of any crime and other confirmations

regarding the source of funds as may be relevant for complying with the provisions of the PMLA.

In this context a procedure for the identification of investors has been established by the

Company and/or its Administrator. The application form of an applicant shall therefore, be

accompanied by such documents as determined from time to time. Applicants may also be

requested to provide additional or updated identification documents from time to time pursuant

to ongoing client due diligence requirements under relevant laws and regulations.

The prospective investor must understand that by investing in the Company, the prospective

investor irrevocably and unconditionally agrees and authorizes the Company and / or its

Administrator / other authorised representatives to disclose, share, remit in any form, mode or

manner, all / any of the information provided by the prospective investor, including all changes,

updates to such information as and when provided by the applicant to the Company,

Administrator, their respective employees or any Indian or foreign governmental or statutory or

judicial authorities/agencies including but not limited to SEBI, the Financial Intelligence Unit-

India, the tax/revenue authorities in India or outside India and other such regulatory/

investigation agencies or such other third party, on a need to know basis, without any obligation

of the applicant of the same.

Mauritius Regulatory, Exchange Control and Anti-Money Laundering Considerations


Regulatory

The Fund has been issued with a Category 1 Global Business License ("GBL1") under the

Financial Services Act 2007 of the Republic of Mauritius and is authorized to act as a collective

investment scheme and an expert fund under the Securities Act 2005 and the Securities

(Collective Investment Schemes and Closed-end Funds) Regulations 2008. The GBL1 is

renewable annually provided its licensing conditions are abided to and the annual license fees are

paid in a timely manner.

The Fund must conduct its activities in accordance with the provisions of relevant legislations in

Mauritius, including but not limited to the Financial Services Act 2007, the Companies Act 2001,

the Securities Act 2005 and the conditions of its licenses and/or authorizations.

The Investment Manager also holds a GBL1 and a CIS Manager license under the Securities Act

2005 and the Financial Services (Consolidated Licensing and Fees) Rules 2008 of Mauritius, under

similar conditions as above and shall be required to conduct its activities in accordance with the

aforesaid legislations and its licenses.

Exchange Control in Mauritius

Exchange control laws and regulations have been suspended in Mauritius since 1994 and, in any

case, the Fund is a global business company and therefore not subject to any exchange control

restrictions in Mauritius. Any payments made to or by the Fund are therefore not restricted by the

exchange control regulations.

The Fund will have to comply with the exchange control regulations of the countries where the

investments are envisaged.

Anti-Money Laundering

To ensure compliance with the Financial Intelligence and Anti-Money Laundering Act 2002 and

the Code on the Prevention of Money Laundering and Terrorist Financing (“ Code”) issued by

the FSC, the Administrator will require an applicant for Shares to, amongst other requirements,

provide certain information and documents for the purpose of verifying the identity of the

applicant, the source of funds and obtain confirmation that the application monies do not

represent directly or indirectly, the proceeds of any crime. The request for information may be

reduced where an applicant is a regulated financial services business based in Mauritius or in an

equivalent jurisdiction (i.e. subject to the supervision of a public authority) or in the case of

public companies listed on recognized stock exchanges, as set out in the Code.

In the event of delay or failure by the applicant to produce any information required for

verification purposes, the Administrator may refuse to accept the application and the subscription

monies relating thereto or may refuse to process a redemption request until proper information

has been provided. Investors should note specifically that the Administrator reserves the right to

request such information as may be necessary in order to verify the identity of the investor and


the owner of the account to which the redemption proceeds will be paid. Redemption proceeds

will not be paid to a third party account.

Records of all customer due diligence information are required to be kept for a period of seven

(7) years after the termination of the investor relationship. By subscribing for Shares, the

applicant for Shares consent to the disclosure of any information about them to the regulators

and banker or other parties as may be appropriate and relevant, upon request, provided these are

in connection with money laundering requirements in Mauritius.

Each applicant for Shares acknowledges that the Administrator shall be held harmless against

loss arising as a result of a failure to process or delay in processing an application for Shares if

such information and documentation as requested by the Administrator has not been provided in

full with sufficient detail by the applicant.

The Administrator may, at any time, request such additional information as may be required to

comply with the Fund’s reporting obligations in Mauritius and abroad.

Mauritius-U.S. Intergovernmental Agreement ("IGA")

Attention is drawn to the coming into force of the Agreement for the Exchange of Information

Relating to Taxes (The United States of America – FATCA Implementation) Regulations 2014

issued pursuant to the Income Tax Act which may require the sharing of information generally to

public authorities in Mauritius, in the United States (USA) and elsewhere (the “FATCA

Regulations”). The Fund may be required to use and disclose information about the Fund

(“Client Data”) pursuant to (i) sections 1471 through 1474 of the United States Internal Revenue

Code of 1986 (also known as the United States Foreign Account Tax Compliance Act) (the “US

FATCA”), any equivalent law or regulation of the United States or any other jurisdiction, or any

intergovernmental agreement between the United States and another jurisdiction relating to

FATCA, as may be in effect from time to time and (ii) any agreement entered into by the

Administrator (or any of its Affiliates) pursuant to the FATCA Regulations and the US FATCA or

any of those equivalent laws, regulations or agreements (together, Tax Compliance Obligations).

Client Data may be disclosed for this purpose directly to third parties, including the United States

Internal Revenue Service (“IRS”), other foreign tax authorities, or the Fund’s domestic tax

authority (including for the purpose of onward disclosure to the IRS or other foreign tax

authorities). Tax authorities may hold Client Data for as long as permitted to do so under the

laws of the jurisdiction of the tax authority and the Administrator may hold Client Data for as

long as permitted under the laws applicable to the Administrator, including for the purpose of

complying with Tax Compliance Obligations. Client Data will be transferred (in any medium or

format) to the United States and other relevant foreign jurisdictions for the purposes set out

above.

Implementation of the Common Reporting Standard for Automatic Exchange of Information

Mauritius has made a commitment for the implementation of the new global standard for

automatic exchange of information for tax purposes (the Common Reporting Standard (“CRS”)


developed by the OECD). Mauritius has also signed (a) the Multilateral Competent Authority

Agreement in October 2014 which provides for automatic exchange of information with other

Early Adopter Competent Authorities; and (b) the Convention on Mutual Administrative

Assistance (the “Convention”) on 23 June 2015. Formalities for the bringing into force of the

Convention have been completed.

Apart from becoming a signatory to the Convention, Mauritius has also brought necessary

amendments to the Income Tax Act for the implementation of CRS. Accordingly, powers have

been given to the Director-General of the MRA to require any person to establish, maintain and

document such due diligence procedures as he may determine and to provide him with

information of a specified description at such time and in such form and manner as he may

determine.

Under CRS, Mauritian financial institutions will have to report annually to the MRA on the

financial accounts held by non-residents for eventual exchange with relevant treaty partners. The

first reporting period is scheduled to begin on 01 January 2017 for eventual exchange with the

relevant treaty partners by September 2018.

Under CRS financial institutions will have to carry out very similar due diligence procedures as

under FATCA to identify reportable financial accounts on residence basis. A distinction is made

between individual and entity accounts, between pre-existing and new accounts as well as

between low value and high value accounts.

THE ABOVE IS ONLY A BRIEF AND GENERAL SUMMARY OF ONLY SOME LEGAL

AND REGULATORY CONSIDERATIONS AND CONSEQUENCES. FURTHER,

THESE REGULATORY CONSIDERATIONS ARE SUBJECT TO CHANGE OR

MODIFICATION BY SUBSEQUENT LEGISLATIVE, REGULATORY,

ADMINISTRATIVE OR JUDICIAL DECISIONS. ANY SUCH CHANGES COULD

HAVE DIFFERENT LEGAL AND REGULATORY IMPLICATIONS. INVESTORS ARE

URGED TO CONSULT THEIR OWN ADVISORS TO VERIFY THE ACCURACY OF

THE SAME AND TO UNDERSTAND ALL THE LEGAL AND REGULATORY

CONSIDERATIONS BEFORE MAKING AN INVESTMENT.


IX. SUBSCRIPTIONS

Subscription Procedures for the Fund

Subscriptions for Shares will be accepted as of the first business day of each calendar month or

at such other times as the Fund shall determine. The Fund, in its sole discretion, reserves the

right to reject any subscription.

The Fund is seeking subscriptions for Shares, subject to the minimum initial subscription amount

of $100,000 provided that the Fund’s board of directors may waive this requirement on the

advice of the Manager, provided that this does not breach regulations 78 to 81 of the Securities

(Collective Investment Schemes and Closed-end Funds) Regulations 2008, issued under the

Securities Act 2005 of Mauritius. Subject to the discretion of the Fund, a shareholder of the

Fund (a “Shareholder”) may make additional contributions to the Fund, generally in a minimum

amount of at least $20,000, unless otherwise permitted by the Fund. Subscriptions are payable in

full upon acceptance. Subscriptions generally are payable in cash, although the Fund may accept

marketable securities by special arrangement. The Fund’s directors reserve the right to reject any

subscription in whole or in part. No subscriber will be entitled to receive interest on any

subscription amounts remitted to the Fund prior to the date Shares are issued to such subscriber.

Any interest income earned on such subscription amounts will be payable to the Fund and not

applied toward the purchase of Shares.

Payment for Shares should generally be sent in the form of a wire transfer to be received by the

Fund at least one business day prior to the relevant subscription date, unless otherwise permitted

by the Fund in its discretion. Completed Subscription Documents may be sent by facsimile to

+230 4048899, email to [email protected] or courier delivery service to the Administrator to the

attention of Investor Relations and should be received by the Administrator on behalf of the Fund

at least three (3) business days prior to the relevant subscription date, unless otherwise permitted

by the Fund in its discretion. If initially sent by facsimile or email, the original should generally

be sent by courier delivery service. The Administrator shall, on behalf of the Fund, acknowledge

receipt of all subscription applications within five (5) days of receipt. Upon approval of a

subscription by the Fund, the Administrator shall acknowledge the Fund’s acceptance by way of

trade confirmation. Should a prospective investor not receive an acknowledgement of receipt or

a trade confirmation, it is the prospective investor’s responsibility to contact the Administrator to

ascertain the status of its subscription, as it cannot assume its successful subscription until it

receives a trade confirmation. Neither the Fund nor the Administrator shall be responsible for

any mis-delivery or non-receipt of any facsimile, email or original request. Facsimiles, emails or

original requests sent to the Fund or the Administrator shall only be effective when actually

acknowledged by the Fund or the Administrator.

The Fund may appoint one or more Placement Agents in connection with the offering of Shares.

Placement Agents may charge the investors who purchase Shares through them additional

upfront and/or ongoing placement fees. With the consent of a prospective investor, the Fund

may add such placement fee to such investor’s subscription amount, and the placement fee will

not be applied towards the Shares issued to that investor. Certain Placement Agents may also

receive a portion of the Management Fee and/or Performance Allocation.

mailto:[email protected]


Each subscriber will be required to acknowledge in the Subscription Documents that the Fund,

the Administrator, and/or the Manager may disclose to each other, to any other service provider

to the Fund, to any regulatory body in any applicable jurisdiction to which any of the Fund, the

Administrator, and/or the Manager is or may be subject, copies of the subscriber’s Subscription

Documents and any information concerning the subscriber in their respective possession,

whether provided by the subscriber to the Fund, the Administrator, and/or the Manager or

otherwise, including details of that Shareholder’s holdings in the Fund, historical and pending

transactions in the Fund’s Shares and the values thereof, and any such disclosure shall not be

treated as a breach of any restriction upon the disclosure of information imposed on any such

person by law or otherwise.

Investor Eligibility Requirements

The Fund’s policies also prohibit the sale of Shares to any investor to whom such sale would be

unlawful. The Fund’s directors have, and intend to exercise, the right compulsorily to redeem

any Share sold or otherwise acquired in contravention of these prohibitions.

Each subscriber will generally be required to certify that the beneficial owner of Shares satisfies

the Fund’s suitability criteria for such investors. More detailed information concerning the

applicable suitability criteria is set forth in the Subscription Documents.

Redemption Procedures

The Administrator will process redemption requests which are initially received by facsimile or

email, but reserves the right to withhold payment of redemption proceeds until the Administrator

has received the original redemption request (in the form prescribed under the Subscription

Documents) signed by the redeeming Shareholder or by an authorized signatory of the

redeeming Shareholder. Neither the Fund nor the Administrator shall be responsible for any mis-

delivery or non-receipt of any facsimile, email or original request. Facsimiles, emails or original

requests sent to the Fund or the Administrator shall only be effective when actually

acknowledged by the Fund or the Administrator. Shareholders who submit redemption

requests initially by facsimile or email to the Administrator are advised to contact the

Administrator by telephone at +230 404 800 to confirm that the Administrator has received

the facsimile or email redemption request.


X. DIRECTORY

Registered Office c/o Apex Fund Services (Mauritius) Ltd.

4th

Floor,

19 Bank Street,

Cybercity,

Ebene 72201,

Mauritius

Manager Taurrus Asset Managers (Mauritius) Ltd.

c/o Apex Fund Services (Mauritius) Ltd.

4th

Floor,

19 Bank Street,

Cybercity,

Ebene 72201,

Mauritius

Legal Counsel In India:

IC Legal, Advocates and Solicitors

209, Hubtown Solaris

Off Western Express Highway

Prof. N.S. Phadke Marg

Andheri (East), Mumbai 400069

Maharashtra

India

In Mauritius:

Anand Kumar Gujadhur

Madun Gujadhur Chambers,

1st Floor, Fon Sing Building,

Pope Hennessy Street, Port Louis,

Mauritius

Administrator Apex Fund Services (Mauritius) Ltd.

19 Bank Street,

Cybercity,

Ebene 72201,

Mauritius

Auditors Anathiva

Inquiries Inquiries concerning the Fund (including information concerning

subscription procedures) should be directed to:


Tel: +230 404 8800

Email: [email protected]

Website: www.taurrusfund.com

This Memorandum does not purport to be and should not be construed as a complete description

of the Governing Documents, a copy of which will be provided to each prospective investor upon

request. Each prospective investor in the Fund is encouraged to review the Governing

Documents carefully, in addition to consulting appropriate legal and tax counselors.

mailto:[email protected]