Description
The report which specifies the details of new product. What is this scheme? Which index or market does it track? What are the associated risks and returns?
SN Swarna (Gold ETF)
New Fund Offer
What is this scheme? Which index or market does it track? What are the associated risks and returns? ____________________________________________ Comprehensive document to specify the details of our new product!!
SN Swarna (Gold ETF)
TABLE OF CONTENTS Theme of the Product - ETF ............................................................................................................ 4 Investment Philosophy ................................................................................................................... 4
Strategy ..................................................................................................................................................... 4
Investment Objective ...................................................................................................................... 4 Structure ......................................................................................................................................... 4
Liquidity..................................................................................................................................................... 5 Benchmark ................................................................................................................................................ 5 Load sturcture ........................................................................................................................................... 5 Asset Allocation......................................................................................................................................... 5
Plans/Options offered ..................................................................................................................... 5 Minimum Application Amount ....................................................................................................... 6 Risk Factors ..................................................................................................................................... 6
Standard Risk Factors: ........................................................................................................................... 6 Scheme Specific Risk Factors: ............................................................................................................... 6 Scheme investing in Debt and Money Market Instruments ................................................................. 8
Targeted Returns ............................................................................................................................ 8 Breakdown of Recurring Expenses ................................................................................................. 9 Creation and Redemption Of Units ................................................................................................ 9
Creation Procedures ............................................................................................................................... 10 Delivery of required deposits.............................................................................................................. 10 Redemption Procedure ........................................................................................................................... 11
Fund Managers ............................................................................................................................. 11 Special Product Facility ................................................................................................................. 11 Role of Custodian .......................................................................................................................... 11 Units on Offer................................................................................................................................ 12 Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 2
SN Swarna (Gold ETF)
Target Investors ............................................................................................................................ 12 Listing Procedure .......................................................................................................................... 13 Legal Framework ........................................................................................................................... 13 References .................................................................................................................................... 16 Appendix ....................................................................................................................................... 17
Definitions ............................................................................................................................................... 17
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 3
SN Swarna (Gold ETF)
THEME OF THE PRODUCT - ETF SN Swarna is an open ended, Exchange Traded Fund offered by SN Mutual funds and tracks the performance of the gold and is based on the real-time price of the underlying asset i.e. gold. Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. Our product is a Gold ETF which invests in gold as its primary asset and hence its value will be based upon the price of the gold. INVESTMENT PHILOSOPHY SN Swarna will primarily invest in gold as the essence of the fund is to track the performance of gold but in order to mitigate risk or invest the surplus funds, some of the corpus may be invested in the money market/debt instruments. The guiding philosophy behind the investment is that gold is not as volatile as shares in the stock market and has displayed consistent increment in value over the past few decades. STRATEGY The scheme would invest in gold and endeavor to track price of the gold. The scheme invests in gold and gold bullion as underlying asset regardless of investment merit. The scheme may buy or sell gold at different points of time during the trading session at the then prevailing prices which may not correspond to its closing price, disinvestments to meet redemptions, transactions cost and recurring expenses, execution of large buy/sell orders etc. This may cause some distortion, but the scheme will try to minimize the tracking error. The Scheme may also invest in Debt & Money Market Instruments for meeting the liquidity requirements for honouring repurchases or redemptions as permitted in the regulations 44 (5)(b) of SEBI (Mutual Fund) Regulation. INVESTMENT OBJECTIVE The investment objective of Swarna fund is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold. However, the performance of the scheme may differ from that of the underlying asset due to tracking error. STRUCTURE SN Swarna is an open ended scheme which can be freely traded on the National Stock Exchange as the fund will be listed on the same. Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 4
SN Swarna (Gold ETF)
LIQUIDITY The units for Swarna can be traded on National Stock Exchange and therefore it will provide the ability to buy and sell them quickly at the ruling market price to ensure higher liquidity. BENCHMARK As per SEBI circular April 21, 2006, since there are no indices catering to the gold sector or securities linked to gold, Swarna shall be benchmarked against the price of Gold. The price here refers to, the morning fixing (AM) of Gold by London Bullion Market association (LBMA). LOAD STURCTURE The load structure for Swarna during new fund offer (NFO) is tabulated below in order to specify the entry and exit load associated with the scheme.
Application Size Up to Rs. 25 Lakhs Rs 25 Lakhs to Rs. 50 Lakhs Rs. 50 Lakhs to Rs 1 Crore Rs 1 crore and above Entry Load 2.5% 1.5% 1.0% Nil Exit Load Nil Nil Nil Nil
Table 1: Load Structure for Swarna ETF NFO
Note: For a continuing scheme there is no entry and exit load. ASSET ALLOCATION Asset allocation mentioned in this document is indicative in nature and informs the investor about the various asset classes and their respective proportions. Sample Asset allocation planned for Swarna has been tabulated below.
Instruments Indicative allocations (% of total assets) Maximum Minimum Gold and gold bullion 100% 90% Debt & Money Market Instruments 10% 0%
Table 2: Asset Allocation of Swarna Corpus
Risk Profile High/Medium/Low Medium to High Low
PLANS/OPTIONS OFFERED Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 5
SN Swarna (Gold ETF)
Swarna scheme will offer Growth Option to its investors. MINIMUM APPLICATION AMOUNT Swarna’s Minimum application amount –
Type of Investor & Transaction Sale of unit by Mutual Fund Redemption of unit by Mutual Detail Fund During New Fund Offer: Authorized Participation Investment of Rs 5000 and in Not Applicable multiples of Re. 1 thereafter Investor Investment of Rs. 5000 and in Not Applicable multiples of Re. 1 thereafter During Continuous Offer: Authorized Participants In creation unit size In creation unit size Investor Only through stock exchange Only through stock exchange
Table 3: Minimum Application Amount
RISK FACTORS STANDARD RISK FACTORS: ? Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. ? As the price / value of the underlying asset i.e. gold or debt/money market instruments in which the scheme invests fluctuate, the value of investment in the scheme may go up or down. NAV of Swarna units may be affected by change in the general market conditions, factors and forces affecting capital markets in particular, demand of gold and trading volumes. ? An ETF scheme is not a guaranteed or assured return scheme. SCHEME SPECIFIC RISK FACTORS: ? The NAV of the units is closely related to the value of gold held by the scheme. The value (price) of gold may fluctuate for several reasons and all such fluctuations will result in changes in the NAV of units under the scheme. ? Counter party Risk: There is no Exchange for physical gold in India. The Mutual Fund may have to buy or sell gold from the open market, which may lead to counter party risks for the Mutual Fund for trading and settlement. Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 6
SN Swarna (Gold ETF)
? Liquidity Risk: The Mutual Fund has to sell gold only to bullion bankers/traders who are authorized to buy gold. Though, there are adequate numbers of players (commercial or bullion bankers) to whom the Fund can sell gold. Fund may have to resort to distress sale of gold if there is no or low demand for gold to meet its cash needs of redemption or expenses. ? Currency Risk: The value of gold or NAV, therefore will depend upon the conversion value of US dollar into Indian rupee and attracts all the risks attached to such conversion. ? Regulatory Risk: Any changes in trading regulations by the stock exchange (s) or SEBI may affect the ability of Authorized Participant to arbitrage resulting into wider premium/ discount to NAV. They may affect the ability of the scheme to buy/sell gold against the purchase and redemption requests received. ? Asset Class Risk: The returns from physical Gold in which the Scheme invests may underperform returns from the securities or other asset classes. ? Physical gold: There is a risk that part or all of the Scheme’s gold could be lost, damaged or stolen. Access to the Scheme’s gold could also be restricted by natural events or human actions. Any of these actions may have adverse impact on the operations of the scheme and consequently on investment in units. ? The Schemes’ performance may be affected by a general price decline in the Gold prices. The Scheme invests in the physical Gold regardless of their investment merit. ? Investors may note that even though this is an open-ended scheme, they will have to buy or sell units of the scheme on the National Stock Exchanges where these units are listed for liquidity at the market price, subject to the rules and regulations of the exchange. The market price of Swarna units, like any other listed security, is largely dependent on two factors, viz. (1) Intrinsic value of the unit (or NAV) (2) Demand and supply of units in the market. ? Fund may have to sell gold to meet recurring expenses. Then, even if the price of gold goes up, the NAV of the Fund will go down due to such expenses. Swarna is not an equity oriented Fund; therefore, tax benefit related to equity oriented Fund will not be available.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 7
SN Swarna (Gold ETF)
SCHEME INVESTING IN DEBT AND MONEY MARKET INSTRUMENTS ? Swarna will be investing in debt instruments, and money market instruments. Trading volumes and settlement periods inherently restrict the liquidity of the scheme’s investments. ? Different types of securities in which the scheme would invest carry different levels of risk. Accordingly the scheme’s risk may increase or decrease depending upon the investment pattern. For e.g. corporate debt carry a higher amount of risk than money market instruments. ? Credit risk: Credit risk is risk resulting from uncertainty in counterparty’s ability or willingness to meet its contractual obligations. This risk pertains to the risk of default of payment of principal and interest. ? Liquidity risk: Liquidity Risk pertains to how saleable a security is in the market. If a particular security does not have a market at the time of sale, then the scheme may have to bear an impact depending on its exposure to that particular security. ? Interest Rate risk: Interest Rate risk is associated with movements in interest rate, which depend on various factors such as government borrowing, inflation, economic performance etc. The value of investments will appreciate/depreciate if the interest rates fall/rise. ? Reinvestment risk: This risk arises from uncertainty in the rate at which cash flows from an investment may be reinvested. TARGETED RETURNS Gold has given quite consistent returns in the last few years, and never a negative return in the last 7 years, and due to depleting reserves of gold and unabated appetite for this asset, there is little risk of this asset having a devaluement, of the nature of equities, in the future. And therefore Gold is one of the safer investments with very high returns and as this scheme will invest primarily in gold so this scheme should be able replicate the returns provided by Gold. RETURNS ON GOLD HISTORICALLY Percentage returns provided by investing in Gold from year 2002 to 2008 has been depicted in the figure below. We can observe that Gold has given substantial positive returns in all these 7 years.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 8
SN Swarna (Gold ETF)
40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2002 2003 2004 2005 2006 2007 2008
Figure 1: Annual Returns given by Gold (2002-2008)
Note: Past Performance may or may not be sustained in future. BREAKDOWN OF RECURRING EXPENSES The breakdown of the recurring expenses incurred by Swarna scheme is as follows:
Recurring Expense Items % of average daily net assets (estimated) Investment Management and Advisory Fees 0.5 Cost relating to Investors communication 0.25 Custodial Fees 0.5 Registrars Fees & Processing Charges inc. stamp duty 0.1 Listing Fees 0.01 Marketing & Sales Promotion 1.1 Miscellaneous and other charges 0.04 Total 2.5
Table 4: Recurring Expense
CREATION AND REDEMPTION OF UNITS The SN AMC will create and redeem units on a continuous basis, but only in one or more baskets (a basket equals 1000 units). The creation and redemption of baskets will only be made in exchange for the delivery to or by the scheme of the amount of gold and cash if any represented by the baskets being created or redeemed. The total amount of gold and cash if any required for such a delivery will be based on the pro-rata amount of the NAV of the scheme Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 9
SN Swarna (Gold ETF)
represented by the baskets being created or redeemed determined on the day the order to create or redeem is placed. Unit holders who are not authorized participants will only be able to redeem their units through an authorized participant. The custodian will allocate specific bars of gold representing the amount of gold (to the extent such amount can be represented by whole gold bars) to the scheme’s allocated account. All gold bullion held in the scheme’s allocated account with the custodian must be of fineness (or purity) of 995 parts per 1000 (99.5%). CREATION PROCEDURES ? ? ? On any business day, an Authorized Participant may submit an application to AMC by 3:00 p.m. or the close of regular trading on the NSE, whichever is earlier. By applying, an Authorized Participant agrees to deposit gold and the cash component in the scheme’s account. For Swarna, the Authorized participant has the option to deposit at least 1 kilogram of physical certified gold & in multiples of 1 kilogram thereof in order to create units of the scheme. Units are allotted on the basis of realization. Purchase request for creation units shall be made by such investor to the AMC whereupon the AMC will arrange to buy gold. The AMC has the right to collect any cost incurred by the AMC in terms of the transaction charges, other incidental charges, the difference between the acquisition cost and closing prices of gold at the end of each business day.
? ? ?
DELIVERY OF REQUIRED DEPOSITS An authorized participant submits an application for the process of creation of units. By submitting the application the Authorized participant agrees to deposit physical gold to the custodian by T+2 date. On having credited the scheme’s allocated account with the gold deposits in physical form, the custodian intimates the registrar the total number of units to be created. The creation of units will be at the NAV of the fund on T day. The registrar will then allocate the units in the proportion of the amount received from the authorized participant and will credit the units to the DEMAT account of the respective authorized participants.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 10
SN Swarna (Gold ETF)
REDEMPTION PROCEDURE The procedure by which an authorized participant can redeem one or more baskets will mirror the procedure for the creation of units. On any business day, an authorized participant may send a redemption request to the AMC. The registrar will instruct the custodian to sell the number of units to be redeemed and the mode of redemption (physical gold or cash). The custodian will deliver the gold in physical form to the nearest Kilogram and the balance amount will be paid in cash. In Swarna scheme, the redemption of gold will be made only in physical form to the authorized participants. The delivery of physical gold will be subject to Mumbai Jurisdiction. The redemption price will be based on the NAV of the same business day. These redemption procedures allow authorized participants to redeem baskets and do not entitle an individual unit-holder to redeem any units in an amount less than a basket, or to redeem baskets other than through an authorized participant. By placing a redemption order, an authorized participant agrees to deliver the units to be redeemed to the AMC not later than the third business day following the effective date of the redemption order. Dispatch of redemption proceeds: The AMC will endeavor to deliver physical gold of the specified quality and quantity only to the authorized participants within 5 business days from the date of receipt of redemption request. FUND MANAGERS Name of the Fund Manager Educational Qualifications Experience
Fund Manager Name Soutik Sarkar Neha Gupta Educational Qualification B.E. , M.B.A. B.E., M.B.A. Work Experience 0 0
SPECIAL PRODUCT FACILITY The scheme will offer the product facilities of Systematic Investment Plan, Systematic Withdrawal Plan, and Systematic Transfer Plan to its unit holders. ROLE OF CUSTODIAN
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 11
SN Swarna (Gold ETF)
HDFC has gold in their custody for the Swarna scheme; hence it acts as the custodian for the same and its role consists of: As Custodian of Gold, HDFC Bank may select Sub custodians to perform any of its duties, including holding gold for it. Following activities form part of the Custody operations: ? ? ? ? ? ? ? ? Account opening and KYC Processing of initial creation/subscription of units Processing of redemption of units Reporting Reconciliation Accounting Compliance Business Resumption Plan
The Custodian will be required to take delivery of all properties other than Gold and cash belonging to the scheme and to hold them in separate custody account and also separately from the assets of the custodian and their clients. UNITS ON OFFER
Basic details New Fund Offer Period : Period during which this NFO opens on: March 30, 2009 scheme sells its units NFO closes on: April 28, 2009 New Fund Offer Price: Price per unit that Rs. 100/- per unit, subject to the applicable load. investors have to pay during NFO
TARGET INVESTORS The Swarna scheme will be investing primarily in physical Gold and therefore the ideal investor class would be who like to invest in gold because of its specific characteristics namely: ? ? ? Growth independent of the economic cycles Long investment cycles Low volatility
This scheme has also been made into an exchange traded scheme, so that the investor has the liquidity provided by equities therefore removing the biggest disadvantage of general mutual funds in which liquidity is always a problem. The investor in his earning phase can invest small Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 12
SN Swarna (Gold ETF)
amounts at a regular interval since the scheme offers SIP & similarly, sell the units in case of need as it offers SWP as well. A typical investor would be: ? ? ? ? ? ? ? Age above 30 yrs and in earning phase Looking for long term appreciation & not regular income like dividend etc. Has a housing loan Providing for children education Planning for child’s wedding Takes care of old parents Planning for retirement
LISTING PROCEDURE The Fund would endeavor to get the units of the Scheme listed on the National Stock Exchange and/or any other stock exchange(s) as may be decided by the AMC within 30 days from the closure of the New Fund Offer period, subsequent buying or selling by investors can be made from the secondary market on the NSE or any other Stock Exchange, if any. LEGAL FRAMEWORK In terms of SEBI (Mutual Funds) Regulations, a gold exchange traded scheme shall be subject to the following investment restrictions: ? The funds of SBI GETS shall be invested only in gold or gold bullion in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for meeting repurchases or redemptions; and Pending deployment of funds in accordance with regulation 44 (5) (b), the mutual fund may invest such funds in short term deposits of scheduled commercial banks. No term loans will be advanced by this scheme for any purpose as per SEBI regulation 44 (3) of SEBI (Mutual Funds) Regulations 1996. The Scheme shall not make any investment in any fund of fund scheme. The scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company.
? ? ? ?
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 13
SN Swarna (Gold ETF)
Such limit shall not be applicable for investments in government securities and money market instruments. Also investment within such limit can be made in mortgagedbacked securitized debt, which is rated not below investment grade by a credit rating agency registered with the Board. The Scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the Scheme. All such investments shall be made with the prior approval of the Board of Trustees and the board of Asset Management Company. Further, the aforesaid investment limits are applicable to all debt securities which are issued by public bodies/institutions such as electricity boards, municipal corporations, state transport corporations etc guaranteed by either state or central government. Government securities issued by central/state government or on its behalf by the RBI are exempt from the above referred investment limits. ? ? Debentures, irrespective of any residual maturity period (above or below one year), shall attract the investment restrictions as applicable for debt instruments. Transfer of investments from one scheme to another scheme, including this scheme, under the Mutual Fund shall be allowed only if: o Such transfers are done at the prevailing market price for quoted securities on spot basis; explanation - “spot basis” shall have the same meaning as specified by the stock exchange for spot transactions, and o The securities so transferred shall be in conformity with the investment objective of the relevant scheme to which such transfer has been made. The Mutual Fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. The scheme shall provide that the securities be purchased or transferred in the name of the Mutual Fund for the relevant scheme, wherever the investments are intended to be of a long-term nature. The assets of the scheme shall not in any manner be used in short selling or carry forward transactions. The investment limitations in each fund shall be subject to SEBI Guidelines/Circulars as amended from time to time. The scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interPage 14
?
?
?
? ? ?
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
SN Swarna (Gold ETF)
scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The securities shall be purchased or transferred in the name of the Mutual Fund for the scheme, wherever the investments are intended to be of a long-term nature. The scheme shall not make any investment in; o Any unlisted security of an associate or group company of the sponsor; or o Any security issued by way of private placement by an associate or group company of the sponsor; or o The listed securities of group companies of the sponsor which is in excess of 25% of the net assets. The scheme shall not make any investment in any Fund of Funds scheme.
? ?
?
Apart from the investment restrictions prescribed under SEBI (MF) Regulations, the mutual fund has no separate internal norms vis-à-vis limiting exposure in case of SN Swarna.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 15
SN Swarna (Gold ETF)
REFERENCES ? ? ? ? ? ? www.amfiindia.com http://www.mutualfundsindia.com/ http://new.valueresearchonline.com/ http://www.kotakmutual.com/kmw/downloads/offerdocuments/kotakGOLDETFSID.pdf http://www.reliancemutual.com/Downloads/ARNCodePopUp.aspx?ReferenceID=5a2f0 7a5-98fc-4743-bfdf-9a31f89cf1a3 Class Notes
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 16
SN Swarna (Gold ETF)
APPENDIX DEFINITIONS Offer document defines all the relevant terms used in the document for better understanding of the investor. Some of the key definitions are AMC: Asset Management Company. SN MF Associates is the AMC of Swarna. Authorized Participants : A Member of the National Stock Exchange of India Limited or any other recognized stock exchange or any other person; who is appointed by the AMC to act as Authorized Participants upon entering into a participant agreement with the AMC. Allotment Price: Allotment price will be on the basis of the closing value of the benchmark i.e. indices or gold etc. Cash Component: Cash Component represents the difference between the applicable net asset value of Creation Unit and the market value of physical Gold. This difference will represent accrued interest, income earned by the Scheme, accrued annual charges including management fees and residual cash in the Scheme. In addition the Cash Component will include transaction cost as charged by the Custodian/DP and other incidental expenses for creating units. Creation unit: Fixed number of “Swarna” unit (i.e. 1000 Units of Swarna) which is exchanged for a portfolio deposit consisting of physical gold kept in the custody and cash component in lieu of which SN Swarna are units are allotted to the authorized participants. During the Continuous Offer, the Authorized Participant will create /redeem units in Creation Unit Size only. Creation Unit Size means fixed number of Swarna Units which is equal to 1,000 units of Swarna. Creation Date: The date on which SN Swarna units are created. Cut-off time: 3.00 p.m. (applicable only for fresh creation of units) Gold ETF: Gold Exchange Traded Fund is a passively managed fund tracking Gold Prices. They are listed on a stock exchange and their underlying value is Gold LBMA: London Bullion Market Association Money Market Instruments : Commercial Paper, Commercial Bills, Certificates of Deposit, Treasury Bills, Bills Rediscounting, Repos, Collateralized Borrowing & Lending Obligation (CBLO), Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 17
SN Swarna (Gold ETF)
Government securities having an unexpired maturity of less than 1 year, Call or notice money, Usance Bills etc. NFO / New Fund Offer: Means New Fund Offer when the units are issued at face value of Rs. 100 /- (subject to applicable load) Net Asset Value / NAV: Net Asset Value of the Units of the Scheme calculated in the manner provided in this Scheme Information Document or as may be prescribed by the SEBI (Mutual Funds) Regulations, 1996 from time to time. NAV related price: The sale price and the repurchase price is calculated on the basis of NAV and are known as NAV related prices. The sale price is calculated by adding the entry loads (if any) to the NAV and the repurchase price is calculated by deducting the exit load (if any) from the NAV. Physical gold for creation of unit: Amount of Gold deposited with the Custodian in the account of SBIMF against which units will be created. Portfolio Deposit: These are LBMA Good Delivery physical gold bars imported by Bank of Nova Scotia authorized by RBI to deal in Gold and other securities. The value of gold and other instruments will be linked to the domestic prices of gold. Portfolio Deposit can change from time to time. Premium: Any cost over and above the face value of Swarna. Repurchase Price: The price at which the units are repurchased at NAV related price subject to applicable exit load. Registrars: The registrars and transfer agents to the scheme. Sale Price: The price at which units are sold at the NAV related price subject to applicable entry load. Trustee: SN Mutual Fund Trustee Company Private Limited (SBIMFTCPL), a wholly owned subsidiary of SN, incorporated under the provisions of the Companies Act, 1956. The registered office of SNMFTCPL is situated at Ribandar, Goa. SEBI: Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 18
SN Swarna (Gold ETF)
Tracking Error: Tracking error means the variance between daily returns of the underlying benchmark (gold prices in this case) and the NAV of the scheme for any given period. NAV of the Scheme is dependent on valuation of gold.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 19
doc_179031044.pdf
The report which specifies the details of new product. What is this scheme? Which index or market does it track? What are the associated risks and returns?
SN Swarna (Gold ETF)
New Fund Offer
What is this scheme? Which index or market does it track? What are the associated risks and returns? ____________________________________________ Comprehensive document to specify the details of our new product!!
SN Swarna (Gold ETF)
TABLE OF CONTENTS Theme of the Product - ETF ............................................................................................................ 4 Investment Philosophy ................................................................................................................... 4
Strategy ..................................................................................................................................................... 4
Investment Objective ...................................................................................................................... 4 Structure ......................................................................................................................................... 4
Liquidity..................................................................................................................................................... 5 Benchmark ................................................................................................................................................ 5 Load sturcture ........................................................................................................................................... 5 Asset Allocation......................................................................................................................................... 5
Plans/Options offered ..................................................................................................................... 5 Minimum Application Amount ....................................................................................................... 6 Risk Factors ..................................................................................................................................... 6
Standard Risk Factors: ........................................................................................................................... 6 Scheme Specific Risk Factors: ............................................................................................................... 6 Scheme investing in Debt and Money Market Instruments ................................................................. 8
Targeted Returns ............................................................................................................................ 8 Breakdown of Recurring Expenses ................................................................................................. 9 Creation and Redemption Of Units ................................................................................................ 9
Creation Procedures ............................................................................................................................... 10 Delivery of required deposits.............................................................................................................. 10 Redemption Procedure ........................................................................................................................... 11
Fund Managers ............................................................................................................................. 11 Special Product Facility ................................................................................................................. 11 Role of Custodian .......................................................................................................................... 11 Units on Offer................................................................................................................................ 12 Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 2
SN Swarna (Gold ETF)
Target Investors ............................................................................................................................ 12 Listing Procedure .......................................................................................................................... 13 Legal Framework ........................................................................................................................... 13 References .................................................................................................................................... 16 Appendix ....................................................................................................................................... 17
Definitions ............................................................................................................................................... 17
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 3
SN Swarna (Gold ETF)
THEME OF THE PRODUCT - ETF SN Swarna is an open ended, Exchange Traded Fund offered by SN Mutual funds and tracks the performance of the gold and is based on the real-time price of the underlying asset i.e. gold. Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. Our product is a Gold ETF which invests in gold as its primary asset and hence its value will be based upon the price of the gold. INVESTMENT PHILOSOPHY SN Swarna will primarily invest in gold as the essence of the fund is to track the performance of gold but in order to mitigate risk or invest the surplus funds, some of the corpus may be invested in the money market/debt instruments. The guiding philosophy behind the investment is that gold is not as volatile as shares in the stock market and has displayed consistent increment in value over the past few decades. STRATEGY The scheme would invest in gold and endeavor to track price of the gold. The scheme invests in gold and gold bullion as underlying asset regardless of investment merit. The scheme may buy or sell gold at different points of time during the trading session at the then prevailing prices which may not correspond to its closing price, disinvestments to meet redemptions, transactions cost and recurring expenses, execution of large buy/sell orders etc. This may cause some distortion, but the scheme will try to minimize the tracking error. The Scheme may also invest in Debt & Money Market Instruments for meeting the liquidity requirements for honouring repurchases or redemptions as permitted in the regulations 44 (5)(b) of SEBI (Mutual Fund) Regulation. INVESTMENT OBJECTIVE The investment objective of Swarna fund is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold. However, the performance of the scheme may differ from that of the underlying asset due to tracking error. STRUCTURE SN Swarna is an open ended scheme which can be freely traded on the National Stock Exchange as the fund will be listed on the same. Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 4
SN Swarna (Gold ETF)
LIQUIDITY The units for Swarna can be traded on National Stock Exchange and therefore it will provide the ability to buy and sell them quickly at the ruling market price to ensure higher liquidity. BENCHMARK As per SEBI circular April 21, 2006, since there are no indices catering to the gold sector or securities linked to gold, Swarna shall be benchmarked against the price of Gold. The price here refers to, the morning fixing (AM) of Gold by London Bullion Market association (LBMA). LOAD STURCTURE The load structure for Swarna during new fund offer (NFO) is tabulated below in order to specify the entry and exit load associated with the scheme.
Application Size Up to Rs. 25 Lakhs Rs 25 Lakhs to Rs. 50 Lakhs Rs. 50 Lakhs to Rs 1 Crore Rs 1 crore and above Entry Load 2.5% 1.5% 1.0% Nil Exit Load Nil Nil Nil Nil
Table 1: Load Structure for Swarna ETF NFO
Note: For a continuing scheme there is no entry and exit load. ASSET ALLOCATION Asset allocation mentioned in this document is indicative in nature and informs the investor about the various asset classes and their respective proportions. Sample Asset allocation planned for Swarna has been tabulated below.
Instruments Indicative allocations (% of total assets) Maximum Minimum Gold and gold bullion 100% 90% Debt & Money Market Instruments 10% 0%
Table 2: Asset Allocation of Swarna Corpus
Risk Profile High/Medium/Low Medium to High Low
PLANS/OPTIONS OFFERED Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 5
SN Swarna (Gold ETF)
Swarna scheme will offer Growth Option to its investors. MINIMUM APPLICATION AMOUNT Swarna’s Minimum application amount –
Type of Investor & Transaction Sale of unit by Mutual Fund Redemption of unit by Mutual Detail Fund During New Fund Offer: Authorized Participation Investment of Rs 5000 and in Not Applicable multiples of Re. 1 thereafter Investor Investment of Rs. 5000 and in Not Applicable multiples of Re. 1 thereafter During Continuous Offer: Authorized Participants In creation unit size In creation unit size Investor Only through stock exchange Only through stock exchange
Table 3: Minimum Application Amount
RISK FACTORS STANDARD RISK FACTORS: ? Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. ? As the price / value of the underlying asset i.e. gold or debt/money market instruments in which the scheme invests fluctuate, the value of investment in the scheme may go up or down. NAV of Swarna units may be affected by change in the general market conditions, factors and forces affecting capital markets in particular, demand of gold and trading volumes. ? An ETF scheme is not a guaranteed or assured return scheme. SCHEME SPECIFIC RISK FACTORS: ? The NAV of the units is closely related to the value of gold held by the scheme. The value (price) of gold may fluctuate for several reasons and all such fluctuations will result in changes in the NAV of units under the scheme. ? Counter party Risk: There is no Exchange for physical gold in India. The Mutual Fund may have to buy or sell gold from the open market, which may lead to counter party risks for the Mutual Fund for trading and settlement. Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 6
SN Swarna (Gold ETF)
? Liquidity Risk: The Mutual Fund has to sell gold only to bullion bankers/traders who are authorized to buy gold. Though, there are adequate numbers of players (commercial or bullion bankers) to whom the Fund can sell gold. Fund may have to resort to distress sale of gold if there is no or low demand for gold to meet its cash needs of redemption or expenses. ? Currency Risk: The value of gold or NAV, therefore will depend upon the conversion value of US dollar into Indian rupee and attracts all the risks attached to such conversion. ? Regulatory Risk: Any changes in trading regulations by the stock exchange (s) or SEBI may affect the ability of Authorized Participant to arbitrage resulting into wider premium/ discount to NAV. They may affect the ability of the scheme to buy/sell gold against the purchase and redemption requests received. ? Asset Class Risk: The returns from physical Gold in which the Scheme invests may underperform returns from the securities or other asset classes. ? Physical gold: There is a risk that part or all of the Scheme’s gold could be lost, damaged or stolen. Access to the Scheme’s gold could also be restricted by natural events or human actions. Any of these actions may have adverse impact on the operations of the scheme and consequently on investment in units. ? The Schemes’ performance may be affected by a general price decline in the Gold prices. The Scheme invests in the physical Gold regardless of their investment merit. ? Investors may note that even though this is an open-ended scheme, they will have to buy or sell units of the scheme on the National Stock Exchanges where these units are listed for liquidity at the market price, subject to the rules and regulations of the exchange. The market price of Swarna units, like any other listed security, is largely dependent on two factors, viz. (1) Intrinsic value of the unit (or NAV) (2) Demand and supply of units in the market. ? Fund may have to sell gold to meet recurring expenses. Then, even if the price of gold goes up, the NAV of the Fund will go down due to such expenses. Swarna is not an equity oriented Fund; therefore, tax benefit related to equity oriented Fund will not be available.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 7
SN Swarna (Gold ETF)
SCHEME INVESTING IN DEBT AND MONEY MARKET INSTRUMENTS ? Swarna will be investing in debt instruments, and money market instruments. Trading volumes and settlement periods inherently restrict the liquidity of the scheme’s investments. ? Different types of securities in which the scheme would invest carry different levels of risk. Accordingly the scheme’s risk may increase or decrease depending upon the investment pattern. For e.g. corporate debt carry a higher amount of risk than money market instruments. ? Credit risk: Credit risk is risk resulting from uncertainty in counterparty’s ability or willingness to meet its contractual obligations. This risk pertains to the risk of default of payment of principal and interest. ? Liquidity risk: Liquidity Risk pertains to how saleable a security is in the market. If a particular security does not have a market at the time of sale, then the scheme may have to bear an impact depending on its exposure to that particular security. ? Interest Rate risk: Interest Rate risk is associated with movements in interest rate, which depend on various factors such as government borrowing, inflation, economic performance etc. The value of investments will appreciate/depreciate if the interest rates fall/rise. ? Reinvestment risk: This risk arises from uncertainty in the rate at which cash flows from an investment may be reinvested. TARGETED RETURNS Gold has given quite consistent returns in the last few years, and never a negative return in the last 7 years, and due to depleting reserves of gold and unabated appetite for this asset, there is little risk of this asset having a devaluement, of the nature of equities, in the future. And therefore Gold is one of the safer investments with very high returns and as this scheme will invest primarily in gold so this scheme should be able replicate the returns provided by Gold. RETURNS ON GOLD HISTORICALLY Percentage returns provided by investing in Gold from year 2002 to 2008 has been depicted in the figure below. We can observe that Gold has given substantial positive returns in all these 7 years.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 8
SN Swarna (Gold ETF)
40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2002 2003 2004 2005 2006 2007 2008
Figure 1: Annual Returns given by Gold (2002-2008)
Note: Past Performance may or may not be sustained in future. BREAKDOWN OF RECURRING EXPENSES The breakdown of the recurring expenses incurred by Swarna scheme is as follows:
Recurring Expense Items % of average daily net assets (estimated) Investment Management and Advisory Fees 0.5 Cost relating to Investors communication 0.25 Custodial Fees 0.5 Registrars Fees & Processing Charges inc. stamp duty 0.1 Listing Fees 0.01 Marketing & Sales Promotion 1.1 Miscellaneous and other charges 0.04 Total 2.5
Table 4: Recurring Expense
CREATION AND REDEMPTION OF UNITS The SN AMC will create and redeem units on a continuous basis, but only in one or more baskets (a basket equals 1000 units). The creation and redemption of baskets will only be made in exchange for the delivery to or by the scheme of the amount of gold and cash if any represented by the baskets being created or redeemed. The total amount of gold and cash if any required for such a delivery will be based on the pro-rata amount of the NAV of the scheme Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 9
SN Swarna (Gold ETF)
represented by the baskets being created or redeemed determined on the day the order to create or redeem is placed. Unit holders who are not authorized participants will only be able to redeem their units through an authorized participant. The custodian will allocate specific bars of gold representing the amount of gold (to the extent such amount can be represented by whole gold bars) to the scheme’s allocated account. All gold bullion held in the scheme’s allocated account with the custodian must be of fineness (or purity) of 995 parts per 1000 (99.5%). CREATION PROCEDURES ? ? ? On any business day, an Authorized Participant may submit an application to AMC by 3:00 p.m. or the close of regular trading on the NSE, whichever is earlier. By applying, an Authorized Participant agrees to deposit gold and the cash component in the scheme’s account. For Swarna, the Authorized participant has the option to deposit at least 1 kilogram of physical certified gold & in multiples of 1 kilogram thereof in order to create units of the scheme. Units are allotted on the basis of realization. Purchase request for creation units shall be made by such investor to the AMC whereupon the AMC will arrange to buy gold. The AMC has the right to collect any cost incurred by the AMC in terms of the transaction charges, other incidental charges, the difference between the acquisition cost and closing prices of gold at the end of each business day.
? ? ?
DELIVERY OF REQUIRED DEPOSITS An authorized participant submits an application for the process of creation of units. By submitting the application the Authorized participant agrees to deposit physical gold to the custodian by T+2 date. On having credited the scheme’s allocated account with the gold deposits in physical form, the custodian intimates the registrar the total number of units to be created. The creation of units will be at the NAV of the fund on T day. The registrar will then allocate the units in the proportion of the amount received from the authorized participant and will credit the units to the DEMAT account of the respective authorized participants.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 10
SN Swarna (Gold ETF)
REDEMPTION PROCEDURE The procedure by which an authorized participant can redeem one or more baskets will mirror the procedure for the creation of units. On any business day, an authorized participant may send a redemption request to the AMC. The registrar will instruct the custodian to sell the number of units to be redeemed and the mode of redemption (physical gold or cash). The custodian will deliver the gold in physical form to the nearest Kilogram and the balance amount will be paid in cash. In Swarna scheme, the redemption of gold will be made only in physical form to the authorized participants. The delivery of physical gold will be subject to Mumbai Jurisdiction. The redemption price will be based on the NAV of the same business day. These redemption procedures allow authorized participants to redeem baskets and do not entitle an individual unit-holder to redeem any units in an amount less than a basket, or to redeem baskets other than through an authorized participant. By placing a redemption order, an authorized participant agrees to deliver the units to be redeemed to the AMC not later than the third business day following the effective date of the redemption order. Dispatch of redemption proceeds: The AMC will endeavor to deliver physical gold of the specified quality and quantity only to the authorized participants within 5 business days from the date of receipt of redemption request. FUND MANAGERS Name of the Fund Manager Educational Qualifications Experience
Fund Manager Name Soutik Sarkar Neha Gupta Educational Qualification B.E. , M.B.A. B.E., M.B.A. Work Experience 0 0
SPECIAL PRODUCT FACILITY The scheme will offer the product facilities of Systematic Investment Plan, Systematic Withdrawal Plan, and Systematic Transfer Plan to its unit holders. ROLE OF CUSTODIAN
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 11
SN Swarna (Gold ETF)
HDFC has gold in their custody for the Swarna scheme; hence it acts as the custodian for the same and its role consists of: As Custodian of Gold, HDFC Bank may select Sub custodians to perform any of its duties, including holding gold for it. Following activities form part of the Custody operations: ? ? ? ? ? ? ? ? Account opening and KYC Processing of initial creation/subscription of units Processing of redemption of units Reporting Reconciliation Accounting Compliance Business Resumption Plan
The Custodian will be required to take delivery of all properties other than Gold and cash belonging to the scheme and to hold them in separate custody account and also separately from the assets of the custodian and their clients. UNITS ON OFFER
Basic details New Fund Offer Period : Period during which this NFO opens on: March 30, 2009 scheme sells its units NFO closes on: April 28, 2009 New Fund Offer Price: Price per unit that Rs. 100/- per unit, subject to the applicable load. investors have to pay during NFO
TARGET INVESTORS The Swarna scheme will be investing primarily in physical Gold and therefore the ideal investor class would be who like to invest in gold because of its specific characteristics namely: ? ? ? Growth independent of the economic cycles Long investment cycles Low volatility
This scheme has also been made into an exchange traded scheme, so that the investor has the liquidity provided by equities therefore removing the biggest disadvantage of general mutual funds in which liquidity is always a problem. The investor in his earning phase can invest small Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026) Page 12
SN Swarna (Gold ETF)
amounts at a regular interval since the scheme offers SIP & similarly, sell the units in case of need as it offers SWP as well. A typical investor would be: ? ? ? ? ? ? ? Age above 30 yrs and in earning phase Looking for long term appreciation & not regular income like dividend etc. Has a housing loan Providing for children education Planning for child’s wedding Takes care of old parents Planning for retirement
LISTING PROCEDURE The Fund would endeavor to get the units of the Scheme listed on the National Stock Exchange and/or any other stock exchange(s) as may be decided by the AMC within 30 days from the closure of the New Fund Offer period, subsequent buying or selling by investors can be made from the secondary market on the NSE or any other Stock Exchange, if any. LEGAL FRAMEWORK In terms of SEBI (Mutual Funds) Regulations, a gold exchange traded scheme shall be subject to the following investment restrictions: ? The funds of SBI GETS shall be invested only in gold or gold bullion in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for meeting repurchases or redemptions; and Pending deployment of funds in accordance with regulation 44 (5) (b), the mutual fund may invest such funds in short term deposits of scheduled commercial banks. No term loans will be advanced by this scheme for any purpose as per SEBI regulation 44 (3) of SEBI (Mutual Funds) Regulations 1996. The Scheme shall not make any investment in any fund of fund scheme. The scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company.
? ? ? ?
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 13
SN Swarna (Gold ETF)
Such limit shall not be applicable for investments in government securities and money market instruments. Also investment within such limit can be made in mortgagedbacked securitized debt, which is rated not below investment grade by a credit rating agency registered with the Board. The Scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the Scheme. All such investments shall be made with the prior approval of the Board of Trustees and the board of Asset Management Company. Further, the aforesaid investment limits are applicable to all debt securities which are issued by public bodies/institutions such as electricity boards, municipal corporations, state transport corporations etc guaranteed by either state or central government. Government securities issued by central/state government or on its behalf by the RBI are exempt from the above referred investment limits. ? ? Debentures, irrespective of any residual maturity period (above or below one year), shall attract the investment restrictions as applicable for debt instruments. Transfer of investments from one scheme to another scheme, including this scheme, under the Mutual Fund shall be allowed only if: o Such transfers are done at the prevailing market price for quoted securities on spot basis; explanation - “spot basis” shall have the same meaning as specified by the stock exchange for spot transactions, and o The securities so transferred shall be in conformity with the investment objective of the relevant scheme to which such transfer has been made. The Mutual Fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. The scheme shall provide that the securities be purchased or transferred in the name of the Mutual Fund for the relevant scheme, wherever the investments are intended to be of a long-term nature. The assets of the scheme shall not in any manner be used in short selling or carry forward transactions. The investment limitations in each fund shall be subject to SEBI Guidelines/Circulars as amended from time to time. The scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interPage 14
?
?
?
? ? ?
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
SN Swarna (Gold ETF)
scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The securities shall be purchased or transferred in the name of the Mutual Fund for the scheme, wherever the investments are intended to be of a long-term nature. The scheme shall not make any investment in; o Any unlisted security of an associate or group company of the sponsor; or o Any security issued by way of private placement by an associate or group company of the sponsor; or o The listed securities of group companies of the sponsor which is in excess of 25% of the net assets. The scheme shall not make any investment in any Fund of Funds scheme.
? ?
?
Apart from the investment restrictions prescribed under SEBI (MF) Regulations, the mutual fund has no separate internal norms vis-à-vis limiting exposure in case of SN Swarna.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 15
SN Swarna (Gold ETF)
REFERENCES ? ? ? ? ? ? www.amfiindia.com http://www.mutualfundsindia.com/ http://new.valueresearchonline.com/ http://www.kotakmutual.com/kmw/downloads/offerdocuments/kotakGOLDETFSID.pdf http://www.reliancemutual.com/Downloads/ARNCodePopUp.aspx?ReferenceID=5a2f0 7a5-98fc-4743-bfdf-9a31f89cf1a3 Class Notes
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 16
SN Swarna (Gold ETF)
APPENDIX DEFINITIONS Offer document defines all the relevant terms used in the document for better understanding of the investor. Some of the key definitions are AMC: Asset Management Company. SN MF Associates is the AMC of Swarna. Authorized Participants : A Member of the National Stock Exchange of India Limited or any other recognized stock exchange or any other person; who is appointed by the AMC to act as Authorized Participants upon entering into a participant agreement with the AMC. Allotment Price: Allotment price will be on the basis of the closing value of the benchmark i.e. indices or gold etc. Cash Component: Cash Component represents the difference between the applicable net asset value of Creation Unit and the market value of physical Gold. This difference will represent accrued interest, income earned by the Scheme, accrued annual charges including management fees and residual cash in the Scheme. In addition the Cash Component will include transaction cost as charged by the Custodian/DP and other incidental expenses for creating units. Creation unit: Fixed number of “Swarna” unit (i.e. 1000 Units of Swarna) which is exchanged for a portfolio deposit consisting of physical gold kept in the custody and cash component in lieu of which SN Swarna are units are allotted to the authorized participants. During the Continuous Offer, the Authorized Participant will create /redeem units in Creation Unit Size only. Creation Unit Size means fixed number of Swarna Units which is equal to 1,000 units of Swarna. Creation Date: The date on which SN Swarna units are created. Cut-off time: 3.00 p.m. (applicable only for fresh creation of units) Gold ETF: Gold Exchange Traded Fund is a passively managed fund tracking Gold Prices. They are listed on a stock exchange and their underlying value is Gold LBMA: London Bullion Market Association Money Market Instruments : Commercial Paper, Commercial Bills, Certificates of Deposit, Treasury Bills, Bills Rediscounting, Repos, Collateralized Borrowing & Lending Obligation (CBLO), Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 17
SN Swarna (Gold ETF)
Government securities having an unexpired maturity of less than 1 year, Call or notice money, Usance Bills etc. NFO / New Fund Offer: Means New Fund Offer when the units are issued at face value of Rs. 100 /- (subject to applicable load) Net Asset Value / NAV: Net Asset Value of the Units of the Scheme calculated in the manner provided in this Scheme Information Document or as may be prescribed by the SEBI (Mutual Funds) Regulations, 1996 from time to time. NAV related price: The sale price and the repurchase price is calculated on the basis of NAV and are known as NAV related prices. The sale price is calculated by adding the entry loads (if any) to the NAV and the repurchase price is calculated by deducting the exit load (if any) from the NAV. Physical gold for creation of unit: Amount of Gold deposited with the Custodian in the account of SBIMF against which units will be created. Portfolio Deposit: These are LBMA Good Delivery physical gold bars imported by Bank of Nova Scotia authorized by RBI to deal in Gold and other securities. The value of gold and other instruments will be linked to the domestic prices of gold. Portfolio Deposit can change from time to time. Premium: Any cost over and above the face value of Swarna. Repurchase Price: The price at which the units are repurchased at NAV related price subject to applicable exit load. Registrars: The registrars and transfer agents to the scheme. Sale Price: The price at which units are sold at the NAV related price subject to applicable entry load. Trustee: SN Mutual Fund Trustee Company Private Limited (SBIMFTCPL), a wholly owned subsidiary of SN, incorporated under the provisions of the Companies Act, 1956. The registered office of SNMFTCPL is situated at Ribandar, Goa. SEBI: Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 18
SN Swarna (Gold ETF)
Tracking Error: Tracking error means the variance between daily returns of the underlying benchmark (gold prices in this case) and the NAV of the scheme for any given period. NAV of the Scheme is dependent on valuation of gold.
Submitted by Soutik Sarkar (2008052) & Neha Gupta (2008026)
Page 19
doc_179031044.pdf