NewGold Exchange Traded Fund

Transcription

1 NewGold Exchange Traded Fund NewGold ETF is one of the simplest and cost-efficient methods for investors to invest directly in physical gold. Exchange traded funds (ETFs) are open-ended passive investment vehicles that track the performance of an index, or a basket of securities. Listed on stock exchanges and traded like shares Enable investors to gain broad exposure to: stock markets, sectors, asset classes, investment themes Usually offered at lower costs than traditionally managed investment funds NewGold ETF Absa s NewGold Exchange Traded Fund (NewGold) was initially launched on the JSE in November NewGold was designed to track the price of gold and create an investment tool enabling institutional and retail investors to invest in a listed security that is fully backed by gold bullion. Each NewGold security is equivalent to approximately 1/100 ounce of gold held in a secured stockpile of gold bullion with the NewGold Custodian, Barclays Bank PLC. NewGold securities are currently listed on JSE (South Africa), BSE (Botswana), NSE (Nigeria), GSE (Ghana) and will be, as from 26 July 2013, listed on the SEM (Mauritius) and will be easily obtained through a SEM member stockbroker (investment dealer). Fund Facts Product Issuer: Manager: Originator: Listing: SEM Symbol: NewGold Exchange Traded Fund NewGold Issuer Limited NewGold Manager (Pty) Ltd Absa Bank Limited acting through its corporate and investment division Stock Exchange of Mauritius NGLD.N0001 Regulators Financial Services Commission and Stock Exchange of Mauritius Absa Bank Limited acting through its corporate and investment banking South African Market Maker division Portfolio Components Asset Class: Commodities Salient Dates SEM Listing Date: 26 July 2013

2 Investment in Gold Treasured as a store of value for thousands of years, gold is an important and secure asset. Some of the strategic factors that should be considered by the potential investors: Gold is an effective portfolio diversifier, a store of value in the long term a lower risk investment compared to gold stocks, has outperformed the broad market in recent years, and provides a potential hedge against currency risks. Fees Management fee : 0.40% p.a. accrued daily and debited in gold, monthly in arrears. Trading Fees : 0.35% of the transaction value. FAQ Investor Protection How safe is my investment in NewGold? NewGold securities are issued out of a ring-fenced, insolvency remote special-purpose entity, which has a vey limited mandate of purchasing gold and issuing securities at the back of the gold. Each security is fully hedged by the physical gold bullion held and stored at an independent custodian, Barclays Bank PLC. A security holder is not exposed to any issuer risk but the investors risk is limited to the market risk due to the fluctuation of the gold and currency prices. Trading What is the minimum/maximum number of NewGold securities I can buy/sell? You can buy as little as ONE security and there is no maximum to the number of securities that can be purchased, as this NewGold is an open-ended investment vehicle. What is the minimum/maximum holding period? There are no holding period restrictions. For e.g. you can buy it today at 10:15 and sell it today at 13:15 or sell it 2 years from today. What intra-day price change limits apply The +/- 20% intra-day price change that is applicable to other securities traded on SEM will not apply to NewGold. Prices of new gold can fluctuate freely and will reflect the interaction of market forces. How does the market maker ensure liquidity on the SEM? Absa, who is the originator and SA market maker, has an obligation as required by the SEM Listing Requirements, to make a market and provide liquidity for the securities in Mauritius, through its local executing broker, Axys Stockbroking Limited. Absa Bank Ltd, as market maker in South Africa provides continuous liquidity to the local market during Continuous Trading and Closing Auction. In Mauritius, Absa Bank Ltd will provide liquidity to the market at pre-determined times as agreed with the Exchange. Absa Bank Ltd will hold limited securities at its account at the CSD, however in the situation that an investor requires to purchase a

3 greater amount than Absa has in its account, Absa will then transfer additional securities from South Africa to Mauritius to facilitate the trade settlement. Execution in this example will only occur once the additional securities have settled in Absa s account at the CSD in Mauritius. Absa will provide continuous indicative GLD bid / offer prices to Mauritius website ( Reuters ( NGAF page), and to Bloomberg ( Absa / NewGold Africa page). How are bid and offer prices determined? Absa, as a Market Maker, calculates bid / offer prices for the NewGold ETF based on the underlying dollar gold price, the local currency rate of exchange against the dollar, the daily allocation factor and all relevant transaction fees. Obviously these prices are not static, and constantly move directed by the many underlying market participants. ABSA, as a Market Maker of the NewGold ETF, continuously calculates bid / offer prices for NewGold in each jurisdiction / secondary listing using the underlying price levels and known fees to create the final bid / offer spread of the ETF. As an example the gold price and exchange rates can be viewed by all market participants by price reporting agencies such as Reuters or Bloomberg. E.g. Gold Price Bid USD/MUR Bid Allocation Factor 26Jul2013: Therefore 1272 * 31 * ( /100) = MUR / per security Fees 0.35% = MUR 1.33 per security Final Bid Gold Price Offer USD/MUR Offer Allocation Factor 26Jul2013: Therefore 1273 * * ( /100) = MUR / per security Fees 0.35% = MUR 1.33 per security Final Offer Is the NewGold debenture fungible? Yes, the NewGold debenture is fungible. The NewGold debenture listed on the Stock Exchange of Mauritius and other stock exchanges where NewGold is secondary listed is governed by the same terms and conditions as the NewGold debenture primarily listed on the Johannesburg Stock Exchange, individual units (debentures secondary listed in any exchange) are capable of mutual substitution. At what currency will the NewGold security be traded? In Mauritian Rupee. How is a NewGold ETF security priced? The value of each NewGold security will be equal to the equivalent price of spot gold price multiplied by the $/MUR Exchange Rate (each NewGold security is equivalent to approximately 1/100 ounces of gold). E.g. Gold Price: $1560 per ounce USD/MUR Exchange Rate: Allocation Factor:

4 1 security = (($1560*31.00)* )/100 = MUR How often during a trading session will ABSA provide liquidity to the market? ABSA, as a market maker, will provide liquidity to the market at certain pre-determined daily times through its executing broker, namely 11:25, 12:25 and 13:25. ABSA will provide liquidity to the market outside of these above trading windows within SEM s trading hours, if the transaction is greater than MUR 20 million. It is, however, to be noted that, on any large transactions, trading can only take place within the South Africa JSE trading times, i.e. 09h00 to 17h00 SA time. How often the latest indicative bid and ask price will be published on SEM website? The latest indicative bid and ask prices in MUR for the New Gold product from the market maker, as well as the reference USD/MUR exchange rate and USD gold price that was used to determine the prices, will be displayed on the website of the Stock Exchange of Mauritius Ltd ( This information will be updated every 15 minutes during trading hours. General Why buy gold backed securities and not physical gold instead? Because investors wishing to hold physical gold bullion would have to incur custody and insurance costs themselves. Holding a gold backed security like NewGold, allows an investor to have the same exposure without the worries of safekeeping and it also allows an investor to take advantage of the lower custody and insurance costs charged as a result of the economies of scale benefits due to the size of the fund old. How is the NewGold security listed on the SEM different to the NewGold security listed on the JSE? NewGold security listed on JSE and SEM are exactly the same as they are issued under the same terms and conditions which can be found in pages of the prospectus? What type of exposure would I be getting? The NewGold ETF gives Investors exposure to the price of Gold Bullion. What management fees apply to the NewGold security? The fund charges an all-in fee of 0.40% (40 basis points). How is the management fee charged? It is an amount sufficient inter alia, to meet the monthly fees and expenses of NewGold. It is 0, 40%per annum of the Gold Bullion held by NewGold from time to time in excess of 430 fine troy ounces. What is an allocation factor? An allocation factor can be best explained by way of example; it is daily fee accrual (0.4%/365 days) which is charged in gold into fund. It relates to the rate in which the quantity of gold holding will reduced by per day. E.g. On day 0, the Fund has 100oz and the allocation factor is 1, therefore on day 0 the Fund will have 100oz*1= 100oz of gold. At the end of day 1 the allocation factor will be reduced by (0.40%/365), leaving the allocation factor for the day to

5 The initial 100oz will become 100oz* = oz at the end of day 1. The gold delivery of the Fund is reduced by the equivalent value of the daily fee accrual. The allocation factor is reduced every day by (0.40%/365), representing the expenses charged per day to manage the fund, equating to 0.40% p.a. By how much gold is a NewGold ETF security referenced? One NewGold ETF security is referenced by approximately 1/100 troy ounce (for more detail, please refer to the Supplemental prospectus). How do I get access to the underlying asset? Access to underlying asset is referred to as Gold Option. Gold Option is the right and option of any Qualifying Security Holder redeeming one or more Blocks of Gold Bullion Securities to require NewGold, under Security Condition 8, to sell to such Qualifying Security Holder a quantity of Gold Bullion equal to the Reference Quantity of the Gold Bullion Securities so redeemed; A qualifying Security Holder is defined as a Security Holder holding one or more Blocks of Gold Bullion Securities and who satisfies the Manager that it is in possession of all necessary licences, consents and approvals (including, without limitation, the required approvals in terms of the Mining Rights Act, 20 of 1967, and under Regulations 2 and 5 of the Exchange Control Regulations) to buy, own, be in possession of and/or otherwise deal in Gold Bullion; The Issuer has been advised that, as at the date of this brochure, no license or approval is required under the laws of Mauritius for an investor to convert its securities into Gold. The investment into the NewGold securities is not tantamount to dealing in gold. However, in the event that the gold is shipped to Mauritius, customs clearance shall be required. Please note that this position may change over time. Each investor must obtain its own independent advice in this respect. Please note further that the minimum quantity of gold that may be obtained by an investor is the quantity related to a Block of securities. Therefore, only investors which hold at least 400,000 (four hundred thousand) securities may obtain delivery of gold. A qualifying investor will in effect have to have a minimum investment of 400,000 securities and must have a gold account with Rand Refinery in South Africa, the only gold refinery in the African Continent. On redemption in species, NewGold will have to deliver the gold into an investor s gold account at Rand Refinery and there will be a redemption fee of 15 basis points. What is the process of moving my securities to South Africa to enable me to redeem inspecie? In order for any investor to redeem is specie, such investor has to be a Qualifying Security Holder as defined in the Prospectus, refer to the paragraph above. The investor will then need to advise the Manager on the intention to redeem in species. The Manager will make the arrangement with the Qualifying Security Holder in question. The contact details of the Manager are provided in Supplemental Prospectus.. What do I hold when I buy NewGold? You are holding a security which provides you with exposure to the price movement of gold with an option to exchange the securities for the underlying asset if you meet all the conditions as outlined in the Supplemental Prospectus. Do I get dividends or distributions? No. Because NewGold tracks the price of gold, there are no dividends or distributions. The benefit gained from an investment of this nature is through the capital appreciation of the underlying asset (gold).

6 How can I invest in this product? Through an investment dealer (broker) who is a member of the Stock Exchange of Mauritius, in the same manner as when investing in shares. Where can I find more information on the product? Supplemental Prospectus / / send an to ETF@absacapital.com Convenient» exposure to an index or commodity through a single share Fast and efficient» real time access to markets Cost effective» lower management fees

7 FAIS Act Notice and Disclaimer This brochure/document/material/report/communication/commentary ( this commentary ) has been prepared by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa ( Absa ). Absa is regulated by the South African Reserve Bank. Absa has issued this commentary for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. Absa does not expressly, tacitly or by implication represent, recommend or propose that the securities and/or financial or investment products or services ( the products ) referred to in this commentary are appropriate and/or suitable for your particular investment objectives or financial situation or needs. This commentary is not, nor is it intended to be, advice as defined and/or contemplated in Financial Advisory and Intermediary Services Act, 37 of 2002, ( FAIS Act ) or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever ( advice ). You have to obtain your own advice prior to making any decision or taking any action whatsoever based hereon and Absa disclaims any liability for any direct, indirect or consequential damage or losses that you may suffer from using or relying on the information contained herein even if notified of the possibility of such damage or loss and irrespective of whether or not you have obtained independent advice. This commentary is neither an offer to sell nor a solicitation of an offer to buy any of the products, which shall always be subject to Absa s internal approvals and a formal agreement between you and Absa. Any pricing included in this commentary is only indicative and is not binding as such on Absa. All the risks and significant issues related to or associated with the products are not disclosed and therefore, prior to investing or transacting, you should fully understand the products and any risks and significant issues related to or associated with them. The products may involve a high degree of risk including, but not limited to, the risk of (a) low or no investment returns, (b) capital loss, (c) counterparty or issuer default, (d) adverse or unanticipated financial market fluctuations, (e) inflation and (f) currency exchange. The value of any product may fluctuate daily as a result of these risks. Absa does not predict actual results, performances and/or financial returns and no assurances, warranties or guarantees are given in this regard. The indicative summaries of the products provided herein may be amended, superseded or replaced by subsequent summaries without notice. The information, views and opinions expressed herein are compiled from or based on trade and statistical services or other third party sources believed by Absa to be reliable and are therefore provided and expressed in good faith. Absa gives no recommendation, guide, warranty, representation, undertaking or guarantee concerning the accuracy, adequacy and/or completeness of the information or any view or opinion provided or expressed herein. Any information on past financial returns, modelling or back-testing is no indication of future returns. Absa makes no representation on the reasonableness of the assumptions made within or the accuracy or completeness of any modelling or back-testing. All opinions, views and estimates are given as of the date hereof and are subject to change without notice. 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You should contract and execute transactions through an Absa Bank Limited branch or affiliate in your home jurisdiction unless local regulations permit otherwise. Absa Bank Limited is a licensed Financial Services Provider. Absa has taken no action that would permit a public offering of the products in any jurisdiction in which action for that purpose is required. The products shall only be offered and the offering material shall only be distributed in or from any jurisdiction in circumstances which will result in compliance with any applicable laws and regulations and which will not impose any obligation on Absa or any of its affiliates. In this commentary reference is made to various indices. The publishers and sponsors of those indices ( the publishers and sponsors ) do not endorse, sponsor or promote the products and make no warranty, guarantee, representation or other assurance (express, tacit or implied) relating to the indices. 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