NISM Series XIX-B · Chapter 10: Good Practices

L1 · Foundation

Foundation — The Pitch Book and the Distribution Kit

What a Pitch Book is, who prepares it, who may receive it and why it is confidential; how it is built from the PPM and the duty that its disclosures be transparent and not misleading; the five sections of an ideal Pitch Book — the sponsor and investment manager, historical performance benchmarked against indices and Benchmarking Agency data, the proposed investment strategy including leverage and exit strategy, the key terms from fund structure through fee structure and reporting, and the key risk factors extracted from the PPM; the Distributor's Sales Pitch and its product analysis and suitability elements; and the eleven contents of a Distribution Kit.

20 min read · Worth 8% of the paper · Written from pages 339–354 of the official NISM workbook · Updated 18 September 2026

The document that sells the fund

1. What a Pitch Book is

In plain words, the Pitch Book is the fund's sales document. The investment manager writes it. It is private, not public. And it is built from the PPM, so it must not say anything the PPM does not support.

⚠️ "The pitch book IS PREPARED AFTER A THOROUGH ANALYSIS OF THE PRIVATE PLACEMENT MEMORANDUM ISSUED BY THE CATEGORY III AIF. The Investment Manager, AND THE DISTRIBUTOR APPOINTED BY SUCH MANAGER, SHOULD ENSURE THAT ALL DISCLOSURES ARE TRANSPARENT IN NATURE AND DO NOT CONTAIN ANY MISLEADING INFORMATION".

Three things follow from that definition and are easy to lose. The Pitch Book is derived from the PPM, not independent of it. Its accuracy is the duty of both the manager and the distributor. And its circulation is limited by the recipient's mandate and suitability, not merely by his wealth.

2. The five sections of an ideal Pitch Book

An ideal Pitch Book has five parts. Each one answers a question an investor is bound to ask.

2.1 Introduction to the Fund Sponsor and Investment Manager

Who is behind this fund?

⚠️ DETAILS OF SPONSOR GROUP AND INVESTMENT MANAGER of the Category III AIF.
⚠️ DETAILS OF THE DISTRIBUTOR APPOINTED BY THE FUND.
⚠️ MINIMUM SPONSOR COMMITMENT AND CONTINUING INTEREST.
⚠️ DETAILS OF THE INVESTMENT MANAGEMENT TEAM, WITH THEIR BRIEF PROFILE.
⚠️ EXPERIENCE OF INVESTMENT MANAGER AND PREVIOUS TRACK RECORD, IN OTHER FUNDS (IF ANY).

2.2 Historical Performance

How has it done so far, and against what yardstick?

⚠️ HISTORY AND TRACK RECORD OF THE FUND/SCHEME.
⚠️ "COMPARISON OF HISTORICAL PERFORMANCE OF THE FUND/SCHEME WITH KEY MARKET INDICES AND RELEVANT BENCHMARKS, AS PUBLISHED BY PERFORMANCE BENCHMARKING AGENCIES".

2.3 Proposed Investment Strategy

What will the fund buy, how, and how will it get out?

⚠️ OVERVIEW OF TARGET MARKETS, SECTORS AND CURRENT MARKET OUTLOOK.
⚠️ INVESTMENT OBJECTIVE OF THE FUND/SCHEME AND INVESTMENT PROCESS.
⚠️ INVESTMENT PHILOSOPHY OF THE INVESTMENT MANAGER.
⚠️ INVESTMENT STRATEGY, "with detailed description on TARGET INDUSTRIES, TYPES OF SECURITIES FOR INVESTMENTS, TARGET ALLOCATION, TIME HORIZON OF INVESTMENTS AND RISK-RETURN OBJECTIVES".
⚠️ LEVERAGE STRATEGY, "with detailed description on THE TYPES OF DERIVATIVE EXPOSURES, TARGET MARKETS AND INHERENT RISKS OF SUCH EXPOSURES".
⚠️ EXIT STRATEGY DURING THE STATED FUND TERM.
⚠️ "INVESTMENT OPPORTUNITY AND EXPECTED RISK-RETURN PROFILE OF THE FUND/SCHEME, ON IMPLEMENTATION OF THE INVESTMENT STRATEGY".

2.4 Key Terms

What exactly am I signing up for, and what will it cost?

⚠️ FUND STRUCTURE AND RELEVANT JURISDICTION, IF FUND IS AN OFFSHORE FUND.
⚠️ FUND TENURE · TARGET CORPUS · INVESTOR ELIGIBILITY REQUIREMENTS.
⚠️ "DETAILS OF CAPITAL COMMITMENTS AND INVESTMENT PERIOD FOR EACH CLASS OF UNITS ISSUED... INVESTOR SIDE LETTER CLAUSES, IF APPLICABLE TO A SPECIFIC CLASS OF UNITS".
⚠️ "CO-INVESTMENTS, IF APPLICABLE, AND MOST FAVOURED NATION CLAUSES, IF ANY".
⚠️ DATES OF FIRST CLOSE AND FINAL CLOSE.
⚠️ "FEE STRUCTURE, INDICATING MANAGEMENT FEES AND YEARLY EXPENSES CHARGEABLE... DETAILS OF ADDITIONAL RETURNS, ALONG-WITH CATCH-UP PROVISIONS AND HURDLE RATE APPLICABLE FOR EACH CLASS OF UNITS".
⚠️ KEY SERVICE PROVIDERS AND GOVERNANCE MECHANISMS.
⚠️ INVESTOR REPORTING MECHANISM.
⚠️ CONTACT DETAILS OF INVESTMENT MANAGER OR POINT OF CONTACT AT THE FUND.

2.5 Key Risk Factors

What could go wrong?

⚠️ "Key risk factors SHOULD BE EXTRACTED FROM THE DETAILED DISCLOSURES PROVIDED IN THE PRIVATE PLACEMENT MEMORANDUM AND MOST IMPORTANT RISK FACTORS APPLICABLE TO THE FUND/SCHEME SHOULD BE DISCLOSED IN THE PITCH BOOK":

⚠️ Risk factor category
⚠️ RISK FACTORS RELATED TO PORTFOLIO INVESTMENTS
⚠️ RISK FACTORS RELATED TO FUND STRUCTURE
⚠️ REGULATORY RISK FACTORS
⚠️ GENERAL RISK FACTORS
⚠️ TAX-RELATED RISK FACTORS
⚠️ SECTOR-SPECIFIC RISK FACTORS
⚠️ CURRENCY-RELATED RISK FACTORS

This is the same seven-category list the PPM itself carries. The Pitch Book does not invent risk factors — it selects the most important ones from a document the investor is separately urged to read in full.

3. The Sales Pitch and the Distribution Kit

The Pitch Book comes from the manager. The Sales Pitch and the Distribution Kit belong to the distributor. The pitch explains the fund to a client. The kit holds every paper the client may need.

⚠️ "The Distributor SHOULD BE ABLE TO PREPARE A SALES PITCH TO POTENTIAL INVESTORS. The Distributors' Sales Pitch includes PRODUCT ANALYSIS ON THE BASIS OF THE INVESTMENT STRATEGY OF THE FUND/SCHEME, INHERITED COSTS, RISKS AND RETURN IN THE FUND, PRODUCT SUITABILITY OF THE FUND BASED ON RISK PROFILING".

#	⚠️ Contents of the Distribution Kit
1	⚠️ COPIES OF FUND CONSTITUTION AND SEBI REGISTRATION CERTIFICATE of the fund/scheme
2	⚠️ PRIVATE PLACEMENT MEMORANDUM issued by the Category III AIF
3	⚠️ DISTRIBUTOR'S INVESTOR PRESENTATION
4	⚠️ KEY DISCLOSURE STATEMENT, EXTRACTED FROM THE PPM
5	⚠️ KEY TIMELINES with respect to the fund/scheme
6	⚠️ KYC DOCUMENTATION REQUIREMENTS, AS PER FEMA, PMLA AND OTHER APPLICABLE LAWS
7	⚠️ RELEVANT FORMS FOR INVESTORS IN DIFFERENT CONSTITUTIONS AND JURISDICTIONS
8	⚠️ NOTE ON FATCA REQUIREMENTS AND FATCA DECLARATION FORMS
9	⚠️ EXPERT OPINIONS, IF ANY · ESSENTIAL APPROVALS, IF ANY, REQUIRED FOR THE INVESTMENT
10	⚠️ "FAQs ON THE SCHEME, FUND, SPONSOR, INVESTMENT MANAGER, INVESTMENT PROCESS, INVESTOR ELIGIBILITY, TAX LAWS AND REGULATIONS, RISK PROFILING AND STOCK SELECTION"
11	⚠️ "CO-ORDINATES OF KEY OFFICIALS AND RELATIONSHIP MANAGERS FROM THE DISTRIBUTOR'S OFFICE"

⚠️ "The Distribution Kit SHOULD BE UPDATED ON A REGULAR BASIS WITH NECESSARY INFORMATION AND FAQs FOR THE INVESTORS".

Think of it like this

The wedding photograph album and the medical file

A hospital keeps a full medical file — every test, every note, every risk the doctor considered. What the family is shown is a summary: what is wrong, what is proposed, what could go wrong.

The PPM is the file. The Pitch Book is the summary, "PREPARED AFTER A THOROUGH ANALYSIS OF THE PRIVATE PLACEMENT MEMORANDUM."

But a summary can lie by omission more easily than a full record can. Which is why the duty attaches to both parties: "The Investment Manager, AND THE DISTRIBUTOR APPOINTED BY SUCH MANAGER, SHOULD ENSURE THAT ALL DISCLOSURES ARE TRANSPARENT IN NATURE AND DO NOT CONTAIN ANY MISLEADING INFORMATION."

And the summary never replaces the file. The Code of Conduct requires the distributor to "ENCOURAGE INVESTORS TO GO THROUGH THE DISCLOSURES MADE IN THE PPM AND ALL RELATED DOCUMENTS BEFORE MAKING AN INVESTMENT DECISION."

The shopkeeper who returns part of his own margin

A shopkeeper earning Rs 100 commission on a product quietly hands Rs 30 back to the customer to win the sale. The customer feels clever. But he has just chosen the product that paid the shopkeeper most, not the one that suits him best.

That is a PASS-BACK — "an INDIRECT INCENTIVE PROVIDED TO POTENTIAL INVESTORS, WHEREIN THE DISTRIBUTOR GIVES BACK A PART OF THE COMMISSION EARNED FROM THE AIF, TO THE INVESTOR."

The workbook names the harm precisely: "This REPRESENTS AN INHERENT CONFLICT WHEREIN POTENTIAL INVESTORS ARE DISCOURAGED TO TAKE INVESTMENT DECISIONS BASED ON THE MERIT OF THE FUND AND INVESTMENT STRATEGY IMPLEMENTED BY THE INVESTMENT MANAGER."

And it sits alongside "REBATE, GIFTS OR OTHER CONCESSIONS" in the list of unethical means the Code of Conduct prohibits.

The company car used for the family holiday

A firm's car may be used for the firm's work. Using it for the proprietor's holiday, at the firm's cost, is a different thing entirely — even if he genuinely also does some work while away.

That is the SOFT DOLLAR problem. "In a soft dollar arrangement, the Category III AIF MAY USE CLIENTS' MONEY AS A MEDIUM TO PAY FOR THIRD-PARTY RESEARCH AND PROPRIETARY RESEARCH."

The dividing line is stated with care: "Research SHOULD BE PURCHASED WITH CLIENT ASSETS, ONLY IF THE PRIMARY USE OF SUCH RESEARCH REPORT OR SERVICE DIRECTLY ASSISTS THE MANAGER IN INVESTMENT DECISION-MAKING PROCESS AND NOT IN THE MANAGEMENT OF THE INVESTMENT FIRM. ANY PROPRIETARY RESEARCH SHOULD BE PAID FOR FROM THE ASSETS OF THE INVESTMENT MANAGER."

Research that helps him pick stocks may be paid from the fund. Research that helps him run his business may not.

The three insurance policies a family business carries

A trading family carries three quite different covers, and confusing them is expensive.

Fire insurance on the godown protects the business against loss to its goods. That is PROFESSIONAL INDEMNITY or E&O INSURANCE — it "PROTECTS THE CATEGORY III AIF FROM ANY COSTS BORNE BY SUCH FUND, AS A RESULT OF A SUBSTANTIAL LOSS CAUSED TO AN INVESTOR DUE TO ERRORS AND OMISSIONS."

Personal liability cover for the partners protects the individuals if someone sues them. That is D&O LIABILITY INSURANCE, safeguarding "KEY INDIVIDUALS FROM PERSONAL LOSSES, IF THEY ARE SUED AS A RESULT OF SERVING AS A DIRECTOR OR AN OFFICER" — though it "DO NOT COVER CLAIMS ON ACCOUNT OF FRAUDULENT ACTIVITIES."

Cover on the life of the eldest son who alone knows the trade protects the business against losing him. That is KEY-MAN INSURANCE, covering "DEATH, INCAPACITY, KIDNAP OR DISABILITY OF A KEY EXECUTIVE."

Three risks, three policies. Ask "who is protected, and against what" and the answer is immediate.

The tailor who must tell you the cloth has changed

You order a suit in one fabric. The tailor substitutes another of similar weight without telling you. Even if the new cloth is no worse, he has taken away your right to decide.

The same duty runs through AIF distribution. "MATERIAL CHANGES MADE BY THE INVESTMENT MANAGER IN THE INVESTMENT STRATEGY SHOULD BE INFORMED TO THE DISTRIBUTOR. The Distributor SHOULD BE OBLIGED TO INFORM SUCH CHANGES, AND ITS POTENTIAL IMPACT ON THE TOTAL RISK AND SUITABILITY OF THE REVISED INVESTMENT STRATEGY, TO EVERY EXISTING INVESTOR AND POTENTIAL INVESTORS."

The workbook lists six such changes: target sectors or industries · target holding period and exit strategy · target allocation to asset classes or securities · valuation methodology and policies · target leverage · and the impact on estimated return.

Note the chain. The manager tells the distributor; the distributor tells existing and potential investors — and tells them not merely what changed but what it does to the risk.

The safe with three keys

A jeweller does not keep his stock in a drawer. It sits in a safe; only some staff hold keys; the register of what is inside is separately locked; and a duplicate inventory is kept at his brother's house in case of fire.

A distributor's data deserves the same care, because a Pitch Book, an investor list and a fund's target allocations are "PROPRIETARY TO THE CATEGORY III AIF, DEEMED TO BE OWNED BY THE FUND AND CAN BE CATEGORIZED AS 'FINANCIAL DATA' UNDER THE DATA PROTECTION BILL, 2018."

The best practices read like the jeweller's routine: ENCRYPTION AND SAFEGUARDED DATABASES · NON-DISCLOSURE AGREEMENTS · FIREWALLS where external sources access the server · FREQUENT BACK-UPS STORED AT A DISASTER RECOVERY SITE · PAPER DOCUMENTS STORED AND LOCKED · and SENIOR MANAGEMENT AUTHORIZATION before any employee may access confidential information.

Which is exactly why giving every employee access is the one option in the workbook's sample question that is not a best practice.

Key terms in this chapter

Best Execution: The standard against which investment managers must assess the capabilities of brokers appointed by the fund, and in respect of which all benefits received through a client's brokerage must be disclosed.
Confidentiality Policy: The distributor's internal policy listing compulsory and prohibited actions, communicated to all teams and binding on employees, board members, partners, directors and contracted third-party service providers, with disciplinary action for breach.
Disaster Recovery Site: The separate location at which a copy of frequently taken back-ups of confidential data must be stored, one of the six confidentiality best practices.
Distribution Kit: The set of documents a distributor maintains — fund constitution and SEBI registration certificate, the PPM, investor presentation, key disclosure statement, timelines, KYC requirements, jurisdiction-specific forms, FATCA note and forms, expert opinions, approvals, FAQs and contact details — updated regularly.
Distributors Agreement: The legally enforceable contract between the Category III AIF manager and the distributor setting out the scope of services, of which the confidentiality and data privacy clause is a key term.
D&O Liability Insurance: Insurance purchased by directors, partners and executives of the sponsor or investment manager to safeguard them personally if sued for serving as a director or officer, covering losses and legal fees but not claims arising from fraudulent activities.
Financial Data: The classification under the Data Protection Bill, 2018 of a fund's proprietary data on investment strategy, process, target allocations, sectors, time horizon, fund life, expected returns, terms and fee structure, breach of which attracts penalties and remedies.
Four Pillars of AIF Distributorship: Marketing, sales, investor support and relationship management — two of which are post-sale, reflecting the long gestation period of a Category III AIF.
In-Person Verification (IPV): The verification of an investor in person that a distributor must perform diligently as part of the KYC process, alongside attesting investor documents.
Key-man Insurance: Insurance taken by the fund to compensate it for financial losses from the death, incapacity, kidnap or disability of a key executive such as the investment manager, giving investors comfort of orderly dissolution or transition under succession planning.
Material Change in Investment Strategy: A change in target sectors or industries, target holding period and exit strategy, target allocation, valuation methodology and policies, target leverage, or the estimated return — each of which the manager must tell the distributor, who must tell existing and potential investors along with its impact on risk and suitability.
Model Code of Conduct: The twenty-one clause code for Category III AIF distributors, read with the Code of Conduct in the SEBI (AIF) Regulations, covering regulatory adherence, PPM familiarity, risk disclosure, suitability, commission disclosure, and prohibitions on assured returns, pass-backs and disparagement.
Pass-back: An indirect incentive in which the distributor gives back part of the commission earned from the AIF to the investor. It is prohibited because it discourages investment decisions based on the merit of the fund and its strategy.
Pitch Book: A confidential document prepared by the investment manager after analysing the PPM, covering the scheme, manager and team profile, track record, proposed strategy, philosophy and process, strictly for private circulation to proposed investors or appointed distributors.
Post-Investment Services: Distributor services after investment — co-ordinating capital calls and drawdown notices, obtaining investor approvals, acting as point of contact for reports, facilitating meetings, forwarding co-investment requirements and grievances, and marketing follow-on schemes.
Pre-Commitment Services: Distributor services before capital is committed — engaging managers on launches, preparing pitch books and kits, organising investor meets, presenting the strategy, explaining disclosures and assessing suitability, procuring information, facilitating due diligence, seeking commitment consent and assisting the transaction.
Professional Indemnity Insurance: Also called Errors and Omissions or E&O Insurance, it protects the Category III AIF against costs it bears from a substantial loss caused to an investor by errors and omissions in services provided.
Sales Pitch: The distributor's presentation to potential investors, including product analysis on the fund's investment strategy, inherited costs, risks and return, and product suitability based on risk profiling.
Soft Dollar Arrangement: An arrangement in which the fund uses clients' money to pay for third-party and proprietary research. Client assets may fund research only where its primary use directly assists investment decision-making, not firm management; proprietary research must be paid from the manager's own assets.
Succession Planning: The arrangement under which a new investment manager is appointed on immediate liquidation or transition of the fund, a process key-man insurance is intended to support financially.

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Original explanatory writing based on the official NISM workbook for Series XIX-B, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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