Religare Gold Exchange Traded Fund.

Transcription

1 Add a touch of gold to your portfolio. Religare Gold Exchange Traded Fund. (an open ended Gold ETF) NFO Opens: 28th Jan, 2010 Closes: 23rd Feb, 2010

2 Religare Gold ETF Jump into gold! Content Gold Market Dynamics Does it merit long term investment? Religare Gold ETF 1

3 Market Dynamics Factors affecting Gold Prices Supply Side Other Factors Demand Side New Gold Discoveries Financial & Economic Crisis Religious Festivals Central Bank Reserves Inflation Industrial Demand Political Risks Golden China Dollar Indian Wedding Season 2

4 Gold Market Dynamics Demand by Sector Total Global Demand (2008): Approx tonnes The strongest demand was for jewellery accounting for 2185 tonnes Total industrial demand, including from dental industry was 435 tonnes ETFs & other similar products accounted for 320 tonnes 862 tonnes were converted into bars, gold coins and other retail investment products Jewellery - 58% Industrial & Dental - 11% Bar & Gold Coin Retail Investment - 23% ETFs & Similar Products 8% Source: World Gold Council, Gold.org 3

5 Gold ETFs Adding to the demand Global ETF Demand (Tonnes) - Cumulative Gold Price (US$/ Oz) Tonnes Q US$/Oz The inflows into ETFs have thus far continued unabated, buoyed by rally in gold prices Safe haven buying is supporting the price of Gold Source: Bloomberg, World Gold Council, Gold.org 4

6 Gold Reserves Holdings of Central Banks and IMF United States Germany IMF Italy France Gold ETFs China Switzerland Japan Netherlands Russia India ECB Taiwan Portugal 1,054 1,040 2,452 2,435 1,780 3,408 3,217 Gold Reserves (Tonnes), Q , (includes 200 tonnes purchase from IMF) ,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Gold ETFs holding globally is ranked 6th vis-à-vis other Central Banks and IMF s gold reserves China has increased its gold reserves by 166% since 2000 Source: World Gold Council, Gold.org. IMF: International Monetary Fund 5

7 Gold Market Dynamics Supply Old Gold Scrap, 1209 Tonnes Official Sector Sales, 236 Tonnes Mine Production (net of hedging), 2064 Tonnes Total supply of gold, including scrap gold sales is over 3500 tonnes in 2008 Mine production in 2008 was around 2064 tonnes Supply Tonnes Mine Production (net of hedging) 2064 Official Sector Sales 236 Old Gold Scrap 1209 Total Supply 3509 De -hedging Since mine operators are subject to substantial capital expenditure for exploration and production, they sell parts of their future gold output forward. The cancellation of these forward positions is called De-Hegding. i.e additional gold is taken off the market Source: World Gold Council, Gold.org. Data as on Dec

8 Gold Market Dynamics Supply Declining Mine Production Real value of Gold will increase in the long term as production declines 2,700 Gold Mine Production ( ) Tonnes 2,600 2,500 2,400 2,300 2,200 2,100 2,000 Gold Mine production has been on a decline peak production was in the year 2001 over 2,600 tonnes New Gold Mine deposits are harder to find Source: U.S Geological Survey, Bloomberg Price of Gold Gold Mine Production US$/Oz

9 Gold Market Dynamics Supply Fewer New Mine Discoveries Number of new discoveries and resources in new discoveries (million ounces) Dearth of major new mine discoveries in the last few years Resources in Discoveries 3-year Avg. (LHS) Number of new discoveries (RHS) Source: Metals Economics Groups 8

10 Gold Market Dynamics Supply Recycled Gold Surges Gold Supply - Old gold scrap (tonnes) 400 Tonne s Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Some of the gold deficit is met through recycled gold Source: World Gold Council, Gold.org 9

11 Gold Market Dynamics Demand vs. Supply (Gap widening) Demand Supply Deficit Tonnes Gold Supply roughly is 2500 tonnes (mine production) per annum Traditional demand exceeds the supply significantly some of this gap is filled by recycled Gold (old gold scrap sales) Source:World Gold Council, Gold.org 10

12 Decline in Central Bank's Sales Have turned into net buyers of Gold Global Currency Debasement - US dollar weakness leading to Central Bank's replacing dollar reserves with Gold. Increased Money supply by US and other nations - Can create very Gold Friendly environment Tonnes CBGA I Limit CBGA II Limit Tonnes Jun Dec Jun- 03 Dec- 03 Jun- 04 Dec Jun Dec- 05 Jun- 06 Dec- 06 Jun- 07 Dec- 07 Jun Dec- 08 Jun Dec- 09 Signatory banks of CBGA II have sold less gold Central Banks around the world (including CBGA signatories) have turned into net buyers of Gold in 2009 Source: World Gold Council, Gold.org CBGA: Central Bank Gold Agreements 11

13 Conclusions No major threat of increased supply Declining production and increasing demand make Gold very attractive Central banks selling less declining trend Strong demand for Gold in emerging markets, particularly India and China Strong investment demand investments in Gold ETFs already rank 6th 12

14 13 Jump into Gold! Does it merit long term investment?

15 Gold as an Inflation Hedge? Gold Prices Gold Prices-adjusted for Inflation WPI Inflation (India) Jan- 02 Jun- 02 Nov- 02 Prices Rebased to 1000 Apr- 03 Sep- 03 Feb- 04 Jul- 04 Dec- 04 May- 05 Oct- 05 Mar- 06 Aug- 06 Jan- 07 Jun- 07 Nov- 07 Apr- 08 Sep- 08 Feb- 09 Jul- 09 Dec- 09 Gold is renowned as a hedge against inflation as inflation goes up, price of Gold also tends to go up Gold preserves the purchasing power and infact even increases it gradually Inflation adjusted gold prices have generated a positive rate of return in the last 7 years Past Performance may or may not be sustained in future Source: Bloomberg. Data as on 31st Dec,

16 Gold A shining performance Gold versus other asset classes Best Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec Worst Cash Short-Term Debt Long-Term Debt GOLD CNX S&P Nifty MSCI World Index Past Performance may or may not be sustained in future Source: Bloomberg. Quarterly performance of different asset classes. Data from Mar 2004 to Dec Cash represented by Crisil Liquid Fund Index, Short Term debt represented by Crisil Short Term Bond Fund Index and Long term debt represented by Crisil Composite Bond Fund Index 15

17 Gold as Dollar Hedge Gold Price (USD/Oz) - LHS Dollar Index - RHS Gold - Dollar Correlation Since 1975 Last 10 Years Last 3 Years Gold has historically exhibited an inverse relationship to the US dollar, which has grown stronger in the recent years Gold is bought and sold in US dollars, so any decline in the value of the dollar causes the price of gold to rise Source: Bloomberg. Data as on 31st Dec

18 Dow / Gold Ratio Median : Currently, the ratio is 9.5, the historical median is 7.8. Gold still looks attractively valued in comparison with US shares Although it is significantly below its peak in 1999, it is still 9 times higher than in the 1930s and 1970s bear market bottom Source: Bloomberg. Data as on 31st Dec, Dow/Gold ratio shows the ratio of price of gold with the price of the Dow Jones. In another words, it represents the number of ounces of gold it takes to buy one basket of the Dow Jones index 17

19 Gold Low Correlation with other Asset classes An Effective Portfolio Diversifier Period: Jan 2002 Dec Period: Jan 2000 Dec Gold Cash Long Term Debt Short Term Debt 0.29 Crude Oil GOLD S&P NIFTY India MSCI World Index A portfolio comprising of un-correlated assets generally has low volatility If one asset class underperforms, it is compensated by the out performance of other asset classes, thereby stabilizing overall returns Source : CRISIL, Bloomberg, Religare Mutual Fund. Short Term debt represented by Crisil Short Term Bond Fund Index and Long term debt represented by Crisil Composite Bond Fund Index. Cash is represented by Crisil Liquid Fund Index. Correlation is a statistical measure of how two securities move in relation to each other. 18

20 Gold Low on volatility Nifty and Gold - Monthly Volatility (July 1990 Dec 2009) Nifty Gold 0.2 (%) Jan-2009 Dec-2009 Source: Bloomberg. Data as on 31st Dec,

21 Gold Safe Haven during Financial Crisis Nifty Returns (%) Gold Returns (INR) (%) MSCI World Index (%) 41.99% % 5.52% 7.2% (%) % % % -0.80% % -5.96% % % Jan 00 May 02 April 04 Jun 04 Mar 06 Jun 06 Dec 07 Mar 09 Event Dotcom Bubble Unexpected Election result leads to sharp fall in India and Trading Suspension, World markets uneasy ahead of First Fed rate hike in 4 years Date Range Jan 00 - May 02 Apr 04 - Jun 04 Nifty Returns % % Gold Returns (INR) 11.78% 5.52% MSCI World Index % -0.80% Heavy selling by FIIs, retail investors and global weakness. Mar 06 - Jun % 7.2% -5.96% Credit Crisis Dec 07 - Mar % 41.99% % 20 Past Performance may or may not be sustained in future Source: Bloomberg. Religare Mutual Fund. Returns are absolute in nature. Returns shown for Jan00-May02 and Dec07-Mar09 are CAGR, whereas absolute for Apr04-Jun04 and Mar06-Jun06 period

22 Investor Allocation to Gold is Low Market Capitalisation (bn) Largest Gold ETF (US) 40 United States 13,900 The largest gold ETF in the world represents only about 0.29% of the total market cap of US stocks. Source: Bloomberg. Data as on 18th Jan,

23 Presenting Religare Gold ETF Jump into Gold! 22

24 Religare Gold ETF Simply put it is a gold exchange traded mutual fund scheme that invests in physical gold It is a convenient and inexpensive alternative to owning physical gold The Fund is designed to seek returns that closely correspond to the returns provided by investment in physical gold 23

25 Religare Gold ETF All that glitters is Gold The Fund invests only in physical gold of 99.5 purity or higher No issuer risk One Unit of Religare Gold ETF will represent 1 gram of Gold The Fund intends to remain fully invested at all times Gold Exposure, through derivatives is not allowed Lending and borrowing not allowed Currency Hedging versus US dollar The gold is physically segregated and stored exclusively in high- security vaults 24

26 Indians and GOLD India is the world s largest consumer of Gold Gold is regarded as a symbol of wealth in Indian households Gold Purchases in India be it Dhanteras, Akshaya tritiya or any other auspicious occasion. Gold has ritual, religious and sentimental value attached Weddings are incomplete without Gold - accumulation starts with the new born child Gold for centuries has been regarded as safe haven in India Symbolizes Security In India, Gold has been accumulated and passed from generation to generation Gold ETF is the new way to accumulate Gold. " the desire of gold is not for gold. It is for the means of freedom and benefit" - Ralph Waldo Emerson 25

27 Benefits of Religare Gold ETF Easily Accessible During NFO Retail Investors can directly buy from the Fund House Post NFO Units will be listed on National Stock Exchange and the Bombay Stock Exchange. Investors can buy, sell units through their normal brokerage accounts Cost Effective Much lower than cost of buying, storing and insuring physical gold Liquid Not limited to Secondary Market Trading at NSE / BSE Investors can create and redeem units in minimum lot size of 1000 units directly with the Fund House Physical Gold and Purity The underlying gold is held in the form of 1 kg bars. Gold held by the Fund shall be of fineness (or purity) of 995 parts per 1000 (99.5%) or higher; sourced from LBMA (London Bullion Market Association) approved refiners Transparent NAV will be declared on a daily basis and portfolio on a monthly basis 26

28 Religare Gold ETF Tax Treatment From a Tax standpoint, the treatment will be similar to that of a debt mutual fund scheme, and it will not attract wealth tax, which is the case with physical gold Redemption of units of Gold ETF by Authorised Participant / Large Investors with mutual fund or Sale of Units by the investor on the Stock Exchange may attract short or long term capital gain tax depending upon the holding period of the Units Converting Units of Religare Gold Exchange Traded Fund to Gold may also attract Wealth Tax Please consult your professional tax advisor. 27

29 Reasons to Invest in Gold Gold as an inflation hedge keeps purchasing power intact Gold is an Effective Diversifier - Helps to contain Portfolio Risk. Low / Negative Co-relation with major asset classes Gold as Safe Haven in financial crisis Solid Asset Global Currency Debasement US dollar weakness to continue. Other countries are reluctant to see their currencies appreciate. This could lead to increase in price of Gold Investment demand on a rise globally hedge funds, Gold ETFs and mutual funds are driving up investment demand for gold for its safe haven qualities Gold Exposure is warranted based on macroeconomic considerations Central Banks have changed their attitude towards gold increasing Gold reserves 28

30 Who should invest? Investors looking to diversify specific asset class risk, by combining Gold in their overall portfolio Investors who are bullish on long term prospects of Gold as a commodity Investors looking for a hassle free way of owning Gold Families accumulating Gold for future events e.g. Marriage etc. can look towards investing in Gold making small and regular purchases possible 29

31 Religare Gold ETF vs. Buying Physical Gold Parameters Religare Gold ETF Jeweller Banks Mode Demat Jewellery / Bar/ Coins Bar / Coins Safety/ Storage No risk of theft High Risk High Risk Purity of Gold 99.5 % or higher Can t Say High on Purity Pricing Transparent. Low on cost. Can t Say High Mark up Liquidity On business days on the exchange Relatively at High Cost Low on Liquidity Denomination 1 unit (1 gram of Gold) Pre-defined Pre-defined 30

32 Physical Gold vs. Gold Mining Shares The difference is Risk. Gold Mining Shares will come with higher risk compared to investments in physical gold Gold mining share is not gold. It s a company stock first and then secondly can be construed as Gold A Gold Mining Share is NOT a substitute for physical Gold. It represents a benefit in the future from potential Gold deposits in the ground and not the actual Gold itself Physical Gold ownership has protected investors during periods of economic depression, wars and political unrest. Mining stocks could be negatively affected in such times as stock markets may be closed or adversely affected for a period of time 31

33 Commodity vs. Gold / Oil Companies 300 Gold versus HUI Gold mine index Crude Oil versus NYSE Arca Oil 250 GOLDS Comdty HUI Index 250 CL1 Comdty XOI Index USD 150 USD Jan-05 M ar-05 M ay-05 Jul-05 Sep-05 N ov-05 Jan-06 M ar-06 M ay-06 Jul-06 Sep-06 N ov-06 Jan-07 M ar-07 M ay-07 Jul-07 Sep-07 N ov-07 Jan-08 M ar-08 M ay-08 Jul-08 Sep-08 N ov-08 Jan-09 M ar-09 M ay-09 Jul-09 Sep-09 N ov Jan-07 M ar-07 M ay-07 Jul-07 Sep-07 N ov-07 Jan-08 M ar-08 M ay-08 Jul-08 Sep-08 N ov-08 Jan-09 M ar-09 M ay-09 Jul-09 Sep-09 N ov-09 Prices rebased to 100 Prices rebased to 100 Owning the stocks of commodity companies is not the same as owning the underlying commodity The movement of the commodity price is not always reflected in the movement of stock prices as a stock trades based on long term average prices rather than current prices Past performance may or may not be sustained in future Source: Bloomberg. Data as on 31st Dec

34 Key Facts Type Investment Objective An open-ended Gold Exchange Traded Fund To generate returns that closely correspond to the returns provided by investment in physical gold in the domestic market, subject to tracking error Asset Allocation Type of Instruments Physical Gold Indicative Allocation (% of total assets) Risk Profile % Medium Debt and Money Market instruments 0-10% Low to medium * Investments in securitized debt can be made by the scheme up to 10% of the net assets Minimum Application Amount Unit Loads Fund Manager Listing Benchmark Rs. 5,000 per application and in multiples of Re.1/- 1 unit = approx. price of 1 gram of Gold Entry Load: Nil Gautam Kaul National Stock Exchange (NSE) & Bombay Stock Exchange (BSE) Price of Gold Exit Load: Nil 33

35 Compliance Information Disclaimer: This information alone is not sufficient and shouldn t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. The readers should exercise due caution and/or seek independent professional advice before making any investment decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. All opinions, figures, charts/graphs, estimates and data included in this presentation are as on date and are subject to change without notice. The statements contained herein may include statements of future expectations and other forward looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The data used in this material is obtained by Religare AMC from the sources which it considers reliable. While utmost care has been exercised while preparing this document, Religare AMC does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The recipient of this material should rely on their investigations and take their own professional advice. Risk Factors: All mutual funds and securities investments are subject to market risks and there can be no assurance that the objective of Scheme will be achieved. Investment in mutual fund units involve investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of capital. As with any investment in securities, the NAV of the units issued under Scheme may go up or down depending upon the factors and forces affecting the securities markets. As the Scheme will invest primarily in physical gold, the NAV of the Scheme will react to the price of gold. The prices of gold may be affected by several factors such as demand and supply of gold in India and in the global market, change in political, economical environment and government policy, inflation trends, currency exchange rates, interest rates, perceived trends in bullion prices, restrictions on the movement/trade of gold by RBI, GOI, etc. Past performance of the Sponsor and its affiliates / AMC / Mutual Fund and its Scheme(s) do not indicate the future performance of the Scheme of the Mutual Fund. There is no assurance or guarantee to unit holders as to the rate of dividend distribution nor that dividend will be paid regularly. Investors in the Scheme are not being offered any guaranteed / assured returns. Religare Gold Exchange Traded Fund, an open-ended Gold Exchange Traded Fund is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme or its future prospects and returns. Please read the Statement of Additional Information (SAI) / Scheme Information Document (SID) before investing. SID, SAI and Key Information Memorandum cum Application Form are available at the ISC/Distributors. Terms of Issue: Offer for Units having face value of Rs. 100 each and will be issued at a premium equivalent to difference between the allotment price and face value during the New Fund Offer. After the closure of NFO, the Units of the Scheme will be listed on Stock Exchange(s) and the same can be purchased / sold in round lots of 1 Unit during the trading hours of the Stock Exchange(s) like any other publicly traded stock. In addition to purchase and sale of Units on Stock Exchange(s), Authorized Participants and Large Investors can directly subscribe to or redeem the Units of the Scheme with the Mutual Fund in Creation Units size at NAV based prices on all Business Days during an ongoing offer period. The NAV of the Scheme will be disclosed on all Business Days. Statutory Details: Religare Mutual Fund has been set up as a trust sponsored by Religare Securities Ltd. (liability restricted to Rs. 1,50,000) with Religare Trustee Company Ltd. as the Trustee (Trustee under the Indian Trusts Act, 1882) and with Religare Asset Management Company Ltd. as the Investment Manager. Disclaimer of NSE/BSE: It is to be distinctly understood that the permission given by National Stock Exchange of India Ltd. (NSE) / Bombay Stock Exchange Ltd. (BSE) should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE/ BSE nor does it certify the correctness or completeness of any of the contents of the draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of Disclaimer Clause of NSE/ BSE. Religare Enterprises Limited ( REL ) proposes, subject to receipt of requisite approvals, market conditions and other considerations, to make a rights issue of its equity shares to its existing shareholders and has filed a letter of offer ( LOF ) with the Bombay Stock Exchange Limited ( BSE ), the National Stock Exchange of India Limited ( NSE, together with BSE, the Stock Exchanges ) and the Securities and Exchange Board of India ( SEBI ). The LOF is available on the websites of the Stock Exchanges and SEBI at and respectively, as well as on the website of the lead manager at Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same, please refer to the section titled Risk Factors of the LOF. MKTG/ RPSUNFO/ C

36 For a more in-depth look at the Religare Gold Exchange Traded Fund, visit or call for more information. Corporate Office: Religare Asset Management Company Limited 3rd Floor, GYS Infinity, Paranjpe B Scheme, Subhash Road, Vile Parle (East), Mumbai T F