2023 AUGUST

To: All Partners and Investors of the ARTHA CAPITAL FUNDS

Date: August 20, 2023

Re: 2023 Results etc.

Dear Partners,

As I sit down to write this year's letter, I'm reminded of a quote by the legendary investor, Benjamin Graham: "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." These words have never rung truer than in the past year, where we've seen our investments face the turbulence of short-term sentiment, but ultimately prevail as the weight of true value asserted itself.

Obvious questions arise: What is the performance? We deeply respect that the realm of calculations is vast—time-weighted return (IRR), money-weighted return (XIRR), Beta-adjusted return, and more. Many stock recommendations or fund managers tend to spotlight the few stocks that are doing well without mentioning the many that aren't. Investors should always ask for the complete portfolio performance versus just a few stocks.

For complete transparency, I've compiled NAV values and their corresponding returns. It's important to note that cash flows occur throughout the year, but for simplicity, I've calculated them as of July 1st for each year to determine the NAV

PERFORMANCE OF THE ARTHA FUNDS

No Units

Date

NAV (Net Asset Value) USD

5428

10-Aug-23

$ 459.63

5463

31-Dec-22

$ 408.15

4484

31-Dec-21

$ 425.57

4484

31-Dec-20

$ 350.93

2833

31-Dec-19

$ 281.49

2922

31-Dec-18

$ 227.19

2697

31-Dec-17

$ 236.01

2466

31-Dec-16

$ 197.17

2560

31-Dec-15

$ 169.73

2560

31-Dec-14

$ 176.66

1757

31-Dec-13

$ 169.45

1277

31-Dec-12

$ 145.76

1068

31-Dec-11

$ 117.15

794

31-Dec-10

$ 119.01

794

01-Sep-10

$ 100.00

It's easy for funds to boast about high returns when the market is on a roll, but the real mettle shines when the tides turns down. Our ability to perform well, if not extraordinarily, during market downturns underscores our commitment to your financial well-being.

In the year 2022, when the S&P500 declined by 19.44%, our fund displayed remarkable resilience with only a 5.51% decline, outlining our steadfastness during downturns.

Just for the interest of those who believe in several terminologies such as “Beta Adjusted Return”, 85.41% of our equities reside in Large Cap Value, while 13.84% in Large Cap Growth.

This intricate balance signifying that the Beta of our stocks is delightfully low. So, if you find yourself delving into the labyrinth of market terminology, where "Adjusted Return" comes into play with its Beta calculation, rest assured, the Adjusted return that includes Beta would surpass by any means.

Many funds showcase their returns during market highs but fail to project their performance during market lows. Ensuring investor safety requires insight into fund returns during both bullish and bearish market conditions—a testament to how well the fund safeguards the principal. It's also common to see funds highlighting their 1-year return versus their 5 or 10-year returns. While due diligence is multi-faceted, I personally advocate for understanding returns over 5, 7, and 10 years.

Past 5-year returns, 7-year returns, and 10-year returns as of this 2023, August 20 stand at 16.6%, 13.9%, and 11.1%.

No Units

Date

NAV (Net Asset Value) USD

Past 4.6 years return

Past 6.6 years return

Past 9.6 years return

5428

10-Aug-23

459.63

16.6%

13.9%

11.1%

5463

31-Dec-22

408.15

12.6%

14.5%

11.4%

4484

31-Dec-21

425.57

18.2%

14.5%

4484

31-Dec-20

350.93

17.1%

11.9%

12.1%

2833

31-Dec-19

281.49

10.7%

11.5%

2922

31-Dec-18

227.19

6.6%

10.7%

2697

31-Dec-17

236.01

11.0%

11.1%

2466

31-Dec-16

197.17

12.0%

11.0%

2560

31-Dec-15

169.73

8.0%

2560

31-Dec-14

176.66

13.2%

1757

31-Dec-13

169.45

1277

31-Dec-12

145.76

1068

31-Dec-11

117.15

794

31-Dec-10

119.01

794

01-Sep-10

100.00

Yet, the assessment goes beyond singular snapshots. Past average 5-year returns over 10 years are at 13%, the average of past 7-year returns over 8 years is 12%, and the average of 10-year returns over a 5-year period is 12%.

For utmost transparency, I've provided NAV values based on yearly calculations. We have made attempts to outline the rates based on money-weighted performance.

Further refinement is possible through the use of quarterly cash flows. The calculation methods are varied, leading me to provide NAV values based on yearly cash flows. If additional performance percentages are desired, a comprehensive table could be crafted. For those seeking a more detailed understanding of fund cash flows, please do not hesitate to reach out via personal email.

In INR Terms, the performance figures at 4.6 years, 6.6 years, and 9.6 years are 21%, 17%, and 15%, respectively.

USDVSINR

Date

INR (base of 1000)

Past 4.6 years return

Past 6.6 years return

Past 9.6 years return

10-Aug-23

847766

21%

17%

15%

31-Dec-22

743739

19%

18%

17%

31-Dec-21

699821

20%

17%

19%

31-Dec-20

569279

20%

15%

18%

31-Dec-19

450389

14%

16%

17%

31-Dec-18

348355

16%

31-Dec-17

330420

15%

17%

31-Dec-16

297950

19%

18%

31-Dec-15

248938

17%

31-Dec-14

247317

22%

31-Dec-13

233462

31-Dec-12

171669

31-Dec-11

135372

31-Dec-10

119008

01-Sep-10

100000

Now, let's shift our focus to a star player within our portfolio. A remarkable 45% of our holdings are championed by one stock that has delivered an 22.1% return, dwarfing the S&P500's 5.6%. As we emphasize the importance of long-term returns, consider the performance of this stock over the past 5 years. It has surged by a 69%, leaving the S&P's 52% And what's truly fascinating is that this gap is poised to widen during the inevitable low phases of the S&P. So, while market downturns are an inherent part of the investment landscape, our star player's performance shines even brighter in these challenging moments.

It's a testament to our first principle: "Good Returns," all while maintaining a reassuringly low risk.

I'm often asked, "What's the secret sauce to your investment strategy?" Well, if I were to distill it down to a recipe, it would go something like this: Take a cup of patience, a tablespoon of due diligence, a pinch of contrarian thinking, and a whole lot of belief in the power of compounding. Mix it all together with a healthy dose of humility, and you have a portfolio that stands the test of time.

As we move forward into the next chapter of our partnership, let's remember that the market will continue to fluctuate, headlines will continue to shout, and predictions will continue to be proven wrong. But through it all, our approach remains steady: to invest in companies that have a strong moat, visionary leadership, and a clear path to sustainable growth.

In closing, I want to express my sincere gratitude for your unwavering trust and commitment to this journey. Remember, investing is a marathon, not a sprint. So let's lace up our investor sneakers, grab a handful of popcorn, and get ready for another exciting year ahead.

P.S. If you ever find yourself worried about short-term market fluctuations, just picture me doing the Chicken Dance. Trust me, it's hard to take life too seriously when you're flapping your wings to a tune only you can hear! 🐔📈

Yours in financial adventure,

Dharmesh Agarwal

ARTHA CAPITAL

FINRA CRD 328191 (Financial Industry Regulatory Authority Central Registration Depository.)

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