Aliquot Precious Metals Fund March 2012
Aliquot Precious Metals Contents About Castlestone Management Fund overview Conclusion Appendix Source: Castlestone Management 2 www.castlestonemanagement.com
Who Are We? About Castlestone Management Independently owned asset management firm established in 1996 Strong Board of Directors with Independent Directors Focused on four main investment asset classes that we believe will be the best performing over the next decade Asset Class Fund Name Global Macro Porcupine Commodity Relative Value Commodity Aliquot Agriculture, Aliquot Commodity Specialist Emerging Markets Next 11 Emerging Markets Real Assets Aliquot Gold Bullion, Aliquot Precious Metals Funds distributed via financial intermediaries We provide investment management services based on foresight and appropriateness Our aim is to meet long term investment objectives for our investors Source: Castlestone Management. 3 www.castlestonemanagement.com CM02
Our Expertise About Castlestone Management Experienced investment team, with more than 60 years combined investment experience A complimentary 360 investment approach involving the entire investment team Proven track record in Global Macro analysis and portfolio management (Porcupine Global Macro Plus returned +14% in 2008*) Proven concept on devaluation of money over the last decade 180% 170% 160% 150% 140% 130% 120% 110% 100% 90% Porcupine Global Macro Plus +8.40% per annum +14% in 2008 80% 2005 2006 2007 2008 2009 2010 2011 Aliquot Gold Bullion +16.09% per annum +63.31% Launched Aliquot Gold Bullion in 2003; investing directly in physical gold bullion returning +16.09% per annum** We believe our debt to GDP concept will be equally successful over the next decade Solid global macro track record 530 480 430 380 330 280 230 180 130 80 2003 2004 2005 2006 2007 2008 2009 2010 2011 +238.28% Source: Castlestone Management. & Bloomberg. * Porcupine Global Macro Plus C shares;. Date range: February 2008 to January 2012, Aliquot Gold Bullion date range January 2004 to February 2012. 4 www.castlestonemanagement.com
Aliquot Precious Metals Fund overview Fund Launch Date: November 2003 Minimum Investment: $/ / 10,000 Fees: Tiered Fee Structure Dealing Frequency: Weekly** 100% unleveraged, direct exposure to physical commodities (gold, silver and platinum). No equity exposure and no corporate risk, the Fund only holds the physical metal Custody of the physical metal is maintained by Barclays Capital and/or HSBC Weekly liquidity available in USD, EUR and GBP (currency risk hedged*) Various share classes based on three different fee structures +/- 5% +/- 5% Domicile: British Virgin Islands Gold Silver Platinum 23.3% to 43.3% Source: Castlestone Management. *EUR & GBP share classes. ** Weekly, subscriptions by close of business on Tuesday or the previous day in the case of a UK public holiday. The allocations are indicative and for illustrative purposes only. 5 www.castlestonemanagement.com AGB02
Billions of USD Two Main Reasons to Own This Asset Class 140% 120% 100% 80% Safe-haven asset in times of economic and geopolitical turmoil 60% 40% Gold Spot $/oz 20% S&P 500 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Gold bullion up +4.32%, financial assets (S&P 500) down -37.00% (CY 2008) Seen as a safe-haven asset in the 1970 s & 2000 s 2,200 2008 700% 2008 2,000 1,800 1,600 1,400 M1 Money Supply (LHS) Gold Spot $/oz. (RHS) S&P 500 Index (RHS) 600% 500% 400% 300% Hedge against the devaluation of money Protects against the value of money falling vs. financial assets 1,200 1,000 200% 100% Real assets outperformed financial assets (2000 s) 800 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0% Source: Castlestone Management. Date range January 1 st 2007 to 31 st December 2008 & January 1 st 2000 to December 31 st 2010 Note: The Fund holds both allocated and unallocated gold bullion. 6 www.castlestonemanagement.com PM12
Economic Global Downturn - Why did Metals Fall in 2011? $1,950 Gold Spot $/oz (LHS). $1,750 CME Gold initial margin requirement (RHS) $1,550 $1,350 $1,150 $950 $750 Jan-2009 Aug-2009 Mar-2010 Oct-2010 May-2011 Dec-2011 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $55 $50 $45 Silver Spot $/oz (LHS). CME Silver initial margin requirement (RHS) $40 $35 $30 $25 $20 $15 $10 Jan-2009 Aug-2009 Mar-2010 Oct-2010 May-2011 Dec-2011 $ 30000 $ 26000 $ 22000 $ 18000 $ 14000 $ 10000 $ 6000 $ 2000 Sources: Chicago Mercantile Exchange Initial Margin Requirements, Bloomberg & Castlestone Management. Data range January 2009 to March 2012. 7 www.castlestonemanagement.com
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 USD (Billions) US Debt Crisis is Not Going to be Solved Soon 0-100 -200-300 -400-500 -600-700 -800-900 2011 to 2021: -$8.45 trillion Source: Castlestone Management & the Congressional Budget Office. Data as at March 2012. 8 www.castlestonemanagement.com
US GDP Quarterly Growth Rate 6% 4% Positive GDP Growth Rate Negative GDP Growth Rate 6 Month Moving Average 2% 0% -2% -4% -6% -8% -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011 Source: Bloomberg & Castlestone Management. Data as at March 2012. 9 www.castlestonemanagement.com
Billions of USD Precious Metals and M1 Correlation 2200 2000 1800 M1 Money Supply (LHS) Gold Spot $/oz. (RHS) Silver Spot $/oz. (RHS) 1000% 900% 800% 700% 1600 1400 600% 500% 400% % Return 1200 1000 300% 200% 100% 800 1990 1993 1996 1999 2002 2005 2008 2011 Strong relationship between precious metals and money supply 0% Source: Castlestone Management. & Bloomberg. Data as at March 2012. 10 www.castlestonemanagement.com PM16
Billions of USD Gold and M1 Correlation 2400 2200 2000 M1 Money Supply (LHS) Gold Spot $/oz. (RHS) S & P 500 Index (RHS) 500% 450% 400% 350% 1800 1600 300% 250% 200% % Return 1400 1200 1000 150% 100% 50% 0% 800-50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gold is an outstanding hedge Source: Castlestone Management. & Bloomberg. Data as at March 2011. 11 www.castlestonemanagement.com PM16
Gold Supply / Demand 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gold Mine Production (tonnes) 2,562 2,485 2,450 2,441 2,437 2,377 2,521 2,638 2,809 % Change (Year on Year) 1.8% -3.0% -1.4% -0.4% -0.2% -2.5% 6.1% 4.6% 6.4% Demand by end use Investment 16% Investment 44% Dentistry 2% Other 3% Electronics 9% Jewellery 70% Dentistry 1% Other 2% Electronics 8% Jewellery 47% 2007 2011 Sources: CRU, Barclays Capital Outlook for Precious Metals, August 2011, Thomson Reuters GFMS and World Gold Council Identifiable gold demand, 16 Feb 2012 & Castlestone Management. 12 www.castlestonemanagement.com
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Tonnes Gold Reserve Holding Flows 200 100 0-100 -200-300 -400-500 -600-700 A paradigm shift? Sources: Wirtschaftswoche, IMF, World Gold Council & Erste Group Research Special Report Gold July 2011 & World Gold Council, Record investment demand boosts global gold demand to an all time high in 2011, 16th Feb 2012. 13 www.castlestonemanagement.com PM15
Silver Supply / Demand 2003 2004 2005 2006 2007 2008 2009 2010 2011F Silver Mine Production (tonnes) 19,126 19,663 20,556 20,807 21,773 22,265 23,208 24,036 24,411 % Change (Year on Year) -0.1% 2.8% 4.5% 1.2% 4.6% 2.3% 4.2% 3.6% 1.6% Coins & Medallions 5% Demand by end use Coins & Medallions 11% Jewellery & Silverware 26% Industrial 56% Jewellery & Silverware 24% Industrial 51% Photography 14% Photography 13% 2007 2010 Source: CRU, Barclays Capital Outlook for Precious Metals, August 2011 & Castlestone Management 14 www.castlestonemanagement.com
Silver fabrication demand 2.5 2.0 Industrial Coins Photography Jewellery 1.5 1.0 0.5 0-0.5-1.0-1.5-2.0-2.5-3.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Bloomberg, Barclays Capital Commodities Research Outlook for Precious Metals Jan 2010 & Castlestone Management 15 www.castlestonemanagement.com
Platinum Supply / Demand 2005 2006 2007 2008 2009 2010 2011F Platinum Mine Production ( 000oz) 6,640 6,830 6,600 5,940 6,025 6,060 6,244 % Change (Year on Year) 2.3% 2.9% -3.4% -10.0% 1.4% 0.6% 3.0% Industrial 17% ETF Flows 6% Demand by end use Auto-catalyst 39% Industrial 22% ETF Flows 7% Autocatalyst 39% Jewellery 38% Jewellery 38% 2009 2010 Source: CRU, Barclays Capital Outlook for Precious Metals, August 2011 & Castlestone Management 16 www.castlestonemanagement.com
Chinese auto sales 120000 Cars sold by unit 100000 80000 60000 40000 20000 0 Jan-2007 Aug-2007 Mar-2008 Oct-2008 May-2009 Dec-2009 Jul-2010 Feb-2011 Sep-2011 Source: Bloomberg & Castlestone Management. Data as at March 2012. 17 www.castlestonemanagement.com
Direct exposure enhanced returns / reduced volatility January 2006 December 2006 Annualised Return Standard Deviation Aliquot Precious Metals Fund* 20.92% 21.62% DJ Precious Metals Index 8.25% 34.85% January 2006 March 2012 Annualised Return Standard Deviation Aliquot Precious Metals Fund* 9.87% 19.48% DJ Precious Metals Index 4.88% 19.70% Source: Bloomberg & Castlestone Management. * Share class D. Data as at 30 March 2012. 18 www.castlestonemanagement.com
Safe Haven in Times of Turmoil 1970 s 1 1980 s-90 s 2 2000 s 3 2010 s 4 Geopolitical Risk Yes No Yes Yes Changing Rates of Inflation Yes No Yes Yes Changing Rates of Growth Yes No Yes Yes Major Tech Advancements No Yes No No Annualised Return Equities S&P 500 (nominal) 3.64% 14.26% -0.62% 10.42% Annualised Return Commodities S&P GSCI TR 21.60% 8.21% 8.03% 5.66% Annualised Return Precious Metals* 22.05% -2.39% 13.94% 20.14% Source: Bloomberg & Castlestone Management. Equities: S&P 500. Commodities: S&P GSCI. *London PM Fix (1/3 Gold, 1/3 Silver, 1/3 Platinum) Date range: 1: January 1970 to December 1979, 2: January 1980 to December 1999, 3: January 2000 to December 2009 4: January 2010 to present. Data as at March 2012. 19 www.castlestonemanagement.com PM17
Yale endowment allocations* 1996 2009 Fixed Income 13% Cash 1% Domestic Equity 23% Fixed Income 4% Cash -1.9% Domestic Equity 7.5% Real Assets 11%*** Real Assets 32% Absolute Return 24.3% Private Equity 19% Absolute Return 21% Foreign Equity 9.8% Foreign Equity 12% Private Equity 24.3% The investment philosophy of asset allocation is supported by one of the best performing asset allocation managers average annual return of 14.2%** over the past 20 years Source: *Yale University, Bloomberg & **Castlestone Management calculated from data available from Yale University s yearly reports. Note: ***Prior to 1999, Real Assets included only real estate. Oil, Gas and Timber were classified as Private Equity. Past performance cannot be relied on as a guide to future performance. 20 www.castlestonemanagement.com
Predictions for Asset Prices 2012 ($USD / oz) Bank of America Merrill Lynch JP Morgan Chase Barclays Capital Societe Generale Deutsche Bank Gold Price 2,000 1,825 1,920 2,150 1,900 Silver Price 36.00 33.20 27.50 37.00 40.00 Platinum Price 1,750 1,935 1,815 1,730 1,650 Source: Catslestone Management & Bllomberg. Data as at 21 March 2012. 21 www.castlestonemanagement.com
Reasons to own the asset class Hedge against devaluation of money the value of money is falling vs real assets Safe-haven or insurance assets in times of economic and geopolitical turmoil (Gold) Supply and demand fundamentals are favourable to ownership in the long term Historically uncorrelated with other asset classes, providing true diversification Economic sensitivity Silver and Platinum Costs of production continue to rise resulting in the need for higher prices University endowments are significantly weighted towards real assets Source: Castlestone Management. 22 www.castlestonemanagement.com
Conclusion Conclusion 100% direct exposure to the physical commodity (gold, silver and platinum) Precious metals have historically shown to be an insurance when added to a diversified portfolio, acting as a safe-haven asset in times of economic and geopolitical turmoil Silver and platinum can be economically sensitive thus providing potential upside as the economic recovery continues With Global Financial stimulus packages still being implemented, inflation is inevitable. Gold can be your hedge against inflation and the devaluation of money. Incorporated in November 2003 for the reasons we have discussed Source: Bloomberg & Castlestone Management. 23 www.castlestonemanagement.com
Aliquot Precious Metals Fund Appendix
Investment Team Appendix Angus Murray CEO & Portfolio Manager Angus is the Managing Principal and founder of Castlestone Management and the Portfolio Manager of Porcupine Global Macro Plus. Angus previously held the position as President of Macquarie Bank (USA) Inc. in New York and was Co-Head of the International Equity Department of NatWest Markets USA. He holds a Bachelor of Financial Economics from the University of London, England. Claudio Oliveira Head of Trading Claudio joined Castlestone Management in April 2007 to provide fundamental research and trading execution. Prior to joining Castlestone Management, Claudio worked for Deutsche Bank in New York for four years as an analyst within the credit risk department. Claudio has a BA in Economics with a minor in Mathematics from Rutgers University. Michael Delefes Analyst Michael joined Castlestone Management from Noble Group where he held a position as Junior Trader - Oil Analyst within their macro energy trading team. Prior to Noble he held various positions within fixed income at Lloyds Banking Group and Societe Generale in London. Michael began his career in Leverage Finance. He earned a B.S in Business Administration from Deree College of The American College of Greece in Athens. 25 www.castlestonemanagement.com CM07
Important Information Appendix This document is intended for and directed at investment professionals and is not intended for retail customer use. Persons who do not have professional experience in matters relating to investments should not rely on it. This document is not offering to sell any product. Any transaction requires our subsequent formal agreement which will be subject to internal approvals and binding transaction documents. Castlestone Management ( We ) will not be liable for any use you make of any information in this document. We are not your advisor or fiduciary. We are not recommending or making any representations as to suitability of any product or the tax, legal or accounting treatment of any product. We are not responsible for information stated to be obtained or derived from third party sources. All opinions are given as of the date hereof and are subject to change. We are not obliged to inform you of any such changes. Any simulated performance data and/or past performance data contained herein is not a reliable indicator of future performance. Income from investments may fluctuate and investors may not recoup the amount originally invested. Any forward-looking statements concerning the financial condition, results of operations and businesses of Castlestone Management expressed or implied, are based on management's current expectations and assumptions, which may change without notice, and are no guarantee of future results, performance or events This document is confidential. No part of it may be reproduced, distributed or transmitted without Castlestone Management s written permission. Neither this document nor any copy of it may be distributed, directly or indirectly, in the United States of America or its territories or possessions (the United States or to any US Person as defined in Regulation S under the United States Securities Act of 1933 (as amended). Any failure to comply with these restrictions may constitute a violation of United States securities law. This is not exhaustive; other regional-specific wording may apply. If in doubt, please consult with Castlestone Management s Legal and Compliance department. Castlestone Management Inc. is regulated by the British Virgin Islands Financial Services Commission. This scheme is not available for distribution in Singapore. This scheme has been entered into the List of Restricted Schemes by the Monetary Authority of Singapore under paragraph 2(3) of the Sixth Schedule to the Securities and Futures (Offers of Investments)(Collective Investment Schemes) Regulations 2009 for distribution to institutional and accredited investors. No invitation to the public in Hong Kong to buy or subscribe for any product is permitted to be made. You should consult your own attorney, business adviser and tax adviser as to legal, business, tax and related matters concerning any of the contents of this document. This document has not been delivered for registration to the Registrar of Companies in Hong Kong, its contents have not been reviewed by any regulatory authority in Hong Kong, nor has the product been authorised by the Securities and Futures Commission. Accordingly, this document must not be issued, circulated or distributed in Hong Kong other than (1) in circumstances which do not constitute it as a prospectus as defined in the Companies Ordinance (Cap.32) or which do not constitute an offer to the public within the meaning of that ordinance, or (2) to professional investors as defined in the Securities and Futures Ordinance (Cap.571) and the Securities and Futures (Professional Investor) Rules made thereunder. Unless permitted by the securities laws of Hong Kong, no person may issue in Hong Kong, or have in its possession for issue in Hong Kong, this document or any other advertisement, invitation or document relating to any products other than to a professional investor as defined in the Securities and Futures Ordinance (Cap.571) and the Securities and Futures (Professional Investor) Rules made thereunder. 26 www.castlestonemanagement.com CMD