birla sun life gold etf fund/pdf/birlanfo_ppt_goldetf... · 2011-04-22 · copyright: birla sun...

Copyright: Birla Sun Life Asset Management Company Ltd.

Birla Sun Life Asset Management Company Ltd. Mutual Fund investments are subject to market risksPlease read the SID & SAI carefully before investing

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Birla Sun Life Gold ETFAn Open-ended Gold Exchange Traded Fund



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Mutual Fund investments are subject to market risksPlease read the SID & SAI carefully before investing

1. Investing in Gold

2. Gold: Rising Demand

3. Why Gold ETF

4. Birla Sun Life Gold ETF

5. Disclaimers, Statutory details & Risk Factors

Contents



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Investing in GoldAs an inflation hedgeAs a portfolio diversifier



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When we have gold we are in fear…when we have none we are in danger.

- English Proverb



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• Gold is a symbol of wealth and good fortune

• It is viewed as a secure, value preserver, and is the second preferred investment after bank deposits

• It is a good instrument for diversifying your investment portfolio due to its low correlation with most other asset classes

• Gold tends to rise in value during times of rising inflation, thus providing an effective hedge against price increases in long-term

Gold



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Gold has traditionally performed well in periods of rising inflation.

Returns from Gold in the last decade (CY 2001 – 2010) have been well above inflation.

Gold: An effective inflation Hedge

Source: World Gold Council (WGC), Bloomberg



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• Gold has a low correlation with most asset classes & markets. • This makes gold an excellent tool for diversifying your portfolio.

Gold: A portfolio Diversifier

1.00

-0.07 -0.05-0.18

0.08

-0.13-0.05

-1.00

-0.50

0.00

0.50

1.00

Gold LBMA

(INR/ oz)

BSE 200 BSE SENSEX

3-month CD

MSCI EM MSCI US MSCI India

Correlation to Gold (INR)

Source: World Gold Council Calculations in INR wherever applicable.Correlations based on 3 year weekly returns upto 24th Dec 2010



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Gold Demand - SupplyRising Global DemandHigh Demand in India & ChinaSuppliers turning into buyers



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Gold demand in 2010 reached a 10-year high of 3,812.2 tonnes.In value terms, annual gold demand surged 38% to a record of US$150bn.Annual demand for gold jewellery rose 17% YoY to ~ 2060 tonnes in 2010.

Rising Global Demand…

Source: World Gold Council (WGC)



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Driven by High Demand in India & China

= 52% of world demand

Source: WGC

• India and China are not only the largest demand centers for Gold, but also seeing the demand grow at a rapid pace.



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• In spite of rising prices, Indian jewellery demand rose 69% year-on-year, resulting in a new annual record total of 746 tonnes in 2010.

• Gold jewellery represents about 75% of Indian gold demand for 2010

Gold: Rising Jewellery Demand in India

Source: WGC



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Gold: Rising Jewellery Demand in China

• The estimated per-capita jewellery demand in China (2009) is extremely low at 0.26 gms, as compared to its other Asian counterparts like South Korea & Taiwan (~ 1.2 to 1.4 gms).

• However, as per a recent report, China’s jewellery demand in 2010 is estimated to have increased by 13% to reach a new annual record of 400 tonnes, in spite of a rise in prices.

Source: World Gold Council (WGC). Includes both investment & jewellery demand.

Source: WGC



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• From 1989 to 2007 net official sector sales averaged 400-500 tonnes per year• In 2010, the official sector became a net buyer of gold for the first time in 21 years.• Emerging market economies experiencing rapid growth have been large buyers of gold, diversifying their

external reserves.• European central banks – which for two decades had been selling gold – have virtually stopped sales in

the wake of the financial and European sovereign debt crises.• These two forces have considerably reduced the supply of gold to the market.

Suppliers turning into buyers!

Net Sales / purchases of Gold by Official Sector (Tonnes)

Note: Official sector means central banks and other official institutions like IMF. Source: WGC



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Why Gold ETF?



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• Ease of Purchase: Investors can purchase units directly from the AMC during NFO period, and from the stock exchange during ongoing offer period.

• Ease of Storage: Easier to hold Gold ETF units in a Demat form rather than Buying physical gold and storing them in lockers, with the added risk of theft.

• Assured for purity: The underlying gold is held in the form of 1kg Gold Bars having purity of 99.5% or higher, sourced from LBMA^ Approved Refiners.

• Low Transmission losses: Lower charges incurred in buying-selling of gold as compared to Jewellery which costs higher in form of making charges at the time of purchase, and a high deduction at the time of selling the gold.

• Tax benefit: Indexation benefit for Long Term Capital gains available after one year in Gold ETF, as against 3 years for Physical Gold. Moreover, Wealth Tax is payable on Gold Jewellery and bars, but not on ETFs.

Why Gold ETF?

^ LBMA = London Bullion Market Association(Note: Investors should be advised to consult their tax advisor in view of individual nature of tax benefits before investing)



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Gold ETF Gold Coins & Bars Jewelery

Storage requirement

Demat Account Locker / Safe Locker / Safe

Impurity Risk Not Possible Possible Possible

Available in Small Denominations

1 unit can also be purchased at market price.

Banks / Jewelers may charge higher for smaller coin sizes.

Depends on the Jewelery design & type.

Taxation on Price Appreciation

upto 1 Yr STCG *1Yr + LTCG* with Indexation benefit

upto 3 Yr STCG 3Yr + LTCG with indexation benefit

upto 3 Yr STCG 3Yr + LTCG with indexation benefit

Wealth Tax Not Applicable Applicable Applicable

Comparison

•LTCG = Long Term Capital Gains, •STCG = Short Term Capital Gains

(Note: Investors should be advised to consult their tax advisor in view of individual nature of tax benefits before investing)



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Gold ETFs getting increasingly popular…

Source: MFI Explorer, Internal Computation

• Since 2007 the number of Gold ETF schemes in India have grown five fold, with ~15x increase in Assets Under Management.

• The AUM has increased 2x in last 9 months, as against gold price increase of 10.4%, showing the investors’ increasing awareness and preference for ETFs as a medium of investing in Gold.



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When we have gold we are in fear…when we have none we are in danger.

- English Proverb

Gold ETF – No Fear…No Danger



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Birla Sun Life Gold ETFKey FeaturesBenefits vs Physical GoldHow does it work?NFO Details



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Scheme Name Birla Sun Life Gold ETF (BSL Gold ETF)

Investment Objective The investment objective of the Scheme is to generate returns that are in line with the performance of gold, subject to tracking errors.

Scheme Type An Open ended Gold Exchange Traded Fund

Asset Allocation Physical Gold: 95% - 100%Debt & Money Market Instruments: 0% - 5% (including cash & Cash Equivalents)

Minimum Purchase during NFO

Minimum of Rs. 6,000/- and in multiples of Rs. 2000/- thereafter per application

Benchmark The performance of the scheme will be benchmarked against the Domestic price of physical gold.

Fund Manager Mr. Satyabrata Mohanty

Load Structure # Entry load: NilExit load: Nil (Including for fractional units)

Key Features

# The units of the scheme are compulsorily traded in dematerialized form, and hence, there shall be no entry/exit load for the units purchased or sold through stock exchanges. However, the investor shall have to bear costs in form of bid/ask spread and brokerage or such other cost as charged by his broker for transacting in units of the scheme through secondary market.



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Potentially cheaper to have price exposure to gold price as compared to other

available avenues

Can be traded on stock exchange like buying / selling a stock. Quick and convenient

dealing through Demat account

No storage and security issue for investors

Transparent pricing

Taxation of non-equity Mutual Fund. No Wealth Tax.

Ideal for retail investors as minimum lot size to trade is one unit of Gold ETF which

is approximately equal to one gram of Gold.

Benefits vs Physical Gold



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Option to convert to Physical Gold# provided by certain vendors

• Investors will be provided an option to convert from Demat form to Physical Gold by some of our vendors

• Benefit – traditional savings in gold can be replaced by ETF at market price today and investor can enjoy benefits of higher safety, easier holding/storage and lower transmission loss to reconvert traditional jewellery at the time of need. At time of need ETF can be reconverted to physical Gold of highest purity at market price

Additional benefit of Birla Sun Life Gold ETF

# Birla Sun Life Asset Management Company Ltd. (BSLAMC) shall, for the convenience of unitholders, endeavor to provide the updated list/details of the vendor/s to facilitate such arrangement/s between the Unit holder and the vendor/s. The Unitholders may opt to enter into the arrangement/s with the Vendor, on such terms as may be mutually agreeable between the unit holder and vendor. The Unit holder agrees and acknowledges that neither Birla Sun Life Mutual Fund, its Trustees, nor BSLAMC shall, in any manner whatsoever, be responsible and/or liable with respect to, or in connection with, any such arrangement/s.



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Note: The role of the AMC is of a facilitator to the Authorized Participants / Large Investors to purchase / sell Gold on their behalf for the purpose of creating/redeeming Units of the scheme in Creation Unit Size.

How does BSL Gold ETF Work?Here is an illustration on the working of Birla Sun Life Gold ETF.



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Birla Sun Life Gold ETF

New Fund Offer Opens on: 25th Apr 2011New Fund Offer Closes on: 09th May 2011Scheme Re-opens on: Not later than 24th May 2011

NFO Details



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This document is strictly confidential and meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units of Birla Sun Life Mutual Fund. Please note that this is not an advertisement. The document is solely for the information and understanding of intended recipients only. If you are not the intended recipient, you are hereby notified that any use, distribution, reproduction or any action taken or omitted to be taken in reliance upon the same is prohibited and may be unlawful. Views expressed herein should not be construed as investment advice to any party and are not necessarily those of Birla Sun Life Asset Management Company Ltd.(BSLAMC) or any of their officers, employees, personnel, directors and BSLAMC and its officers, employees, personnel, directors do not accept responsibility for the editorial content. Wherever possible, all the figures and data given are dated, and the same may or may not be relevant at a future date. Further the opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to update the same. While utmost care has been exercised, BSLAMC or any of its officers, employees, personnel, directors make no representation or warranty, express or implied, as to the accuracy, completeness or reliability of the content and hereby disclaim any liability with regard to the same. Recipients of this material should exercise due care and read the scheme information document (including if necessary, obtaining the advice of tax/legal/accounting/ financial/other professional(s) prior to taking of any decision, acting or omitting to act. Further, the recipient shall not copy/circulate contents of this document, in part or in whole, or in any other manner whatsoever without prior and explicit approval of BSLAMC.

Disclaimers



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Disclaimer Clause of NSE / BSE: It is to be distinctly understood that the permission given by National Stock Exchange of India Limited (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 the ‘Disclaimer Clause of NSE/BSE’.

Statutory Details - Constitution: Birla Sun Life Mutual Fund has been set up as a Trust under the Indian Trusts Act, 1882. Sponsors: Aditya Birla Financial Services Private Limited and Sun Life (India) AMC Investments Inc. [liability restricted to seed corpus of Rs. 1 Lac]. Trustee:Birla Sun Life Trustee Company Pvt. Ltd. Investment Manager: Birla Sun Life Asset Management Company Ltd.Scheme Classification and Objective: Birla Sun Life Gold ETF: (An Open ended Gold Exchange Traded Fund) with an investment objective to generate returns that are in line with the performance of gold, subject to tracking errors.Asset Allocation: Physical gold*: 95-100%, Debt & Money Market Instruments (including cash & cash equivalent): 0%-5%. *The Scheme will invest in physical gold of the prescribed quality and standard. Issue Price: Offer of Units at face value of Rs. 10 each at a premium equivalent to the difference between the allotment price and the face value during the New Fund Offer (NFO) and at NAV based prices for Creation unit on an ongoing basis. Allotment price for the NFO shall be approximately equal to 1 (one) gram of gold.

Disclaimers & Statutory Details



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Minimum Application amount: During NFO: Rs. 6,000/- and in multiples of Rs. 2,000/- thereafter. During Ongoing Offer period: Units of scheme may be subscribed to / redeemed in Creation Unit size of 1,000 units & in multiples thereof, by Authorised Participants and Large Investors on any business day directly with the Mutual Fund at applicable NAV and transaction charges, if any. Terms of Issue/Liquidity: Units of the scheme shall be available and compulsorily be issued/repurchased and traded in dematerialized form. The Units of the scheme will be listed on NSE and BSE and all categories of Investors may purchase the units of the scheme through the Stock exchange(s) on which the units of the scheme are listed on any trading day in round lot of 1 (one) Unit at the prevailing listed price. The Fund may also allot fractional units for subscriptions / purchase requests received only during NFO of the scheme. These fractional units may be redeemed by unitholders on any business day during the ongoing offer period at applicable NAV directly with Mutual Fund/AMC and these fractional units shall not be available for trading on Stock Exchange(s). Load Structure: Entry Load: Nil; Exit Load (including for fractional units): Nil. The units of the scheme are compulsorily traded in dematerialized form, and hence, there shall be no entry/exit load for the units purchased or sold through stock exchanges. However, the investor shall have to bear costs in form of bid/ask spread or brokerage or such other cost as charged by his broker for transacting in units of the scheme through secondary market. Unitholder Information & General Services: No separate account statement will be issued to the Unit holders since the statement of account furnished by depository participant will contain the details of transactions. The AMC will calculate and disclose the first NAV of the scheme not later than 5 business days from the date of allotment. Thereafter, the NAV of the Scheme will be calculated on all business days.

Statutory Details



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Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the objective of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme may go up or down depending on the various factors and forces affecting capital markets and money markets. Past performance of the Sponsors / Investment Manager / Mutual Fund does not indicate the future performance of the Scheme and may not necessarily provide a basis of comparison with other investments. Birla Sun Life Gold ETF is only name of the Scheme and does not, in any manner, indicate either the quality of the Scheme or its future prospects or returns. Unitholders in the Scheme are not being offered any guaranteed/assured returns. Scheme Specific Risk Factors: As the Scheme will invest primarily in physical gold, the scheme's performance shall relate directly to the value of the gold and fluctuations in the price of gold could adversely affect investment value of the units. The price of gold may be affected by several factors such as demand and supply of gold in India, change in political, economical environment and government policy, changes in interest rates and perceived trends in bullion prices, inflation trends, market movements, etc. The scheme shall also be subject to, but not limited to, risks related to liquidity, regulatory, passive investments, redemption, trading, asset class, currency, loss of physical gold, counter party, indirect taxation, etc. Further, tracking error may cause the scheme to generate returns which are not in line with the performance of gold. The scheme may invest in debt and money market instruments to meet the liquidity requirements. Accordingly, scheme shall be subject to risks associated with investments in Fixed Income securities such as Price-Risk or Interest-Rate Risk, Credit Risk, Liquidity or Marketability Risk, Reinvestment Risk etc. Please read the Scheme Information Document for detailed Scheme Specific Risk Factors. Investors should read the Scheme Information Document / Statement of Additional Information / Key Information Memorandum available at Investor Service Centers and with Distributors carefully before investing. Please refer www.birlasunlife.com for further details.

Risk Factors



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