MANAGED BY RELIANCE NIPPON LIFE ASSET MANAGEMENT LIMITED (AN OPEN-ENDED INDEX EXCHANGE TRADED SCHEME) (RAJIV GANDHI EQUITY SAVINGS SCHEME (RGESS) $ QUALIFIED SCHEME September 2017
2 Introduction to Exchange Traded Funds (ETFs) Development of International & Indian ETFs Market Advantages of ETF Disinvestment Through an ETF Nifty CPSE Index CPSE Exchange Traded Scheme
Introduction to EXCHANGE TRADED FUND (ETF)? 3
4 An Exchange Traded Fund (ETF) is primarily a mutual fund scheme which is listed and traded on a stock exchange. An ETF can invest in: Equities replicating the composition and performance of an equity index (e.g. Nifty 50 Index, Nifty Next 50 Index) Commodities tracking the actual price of a commodity (e.g. Gold) Money market instruments which include short-term government securities and call money Debt Instruments - Government securities with long maturity
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Globally ETFs have witnessed strong growth across markets Note: Past performance may or may not be sustained in the future. As per latest available data 6
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Aug-17 70000 59333 70 60000 50000 50215 60 50 40000 40 30000 22412 30 20000 10000 0 411 844 3726 3531 1463 2631 6804 11393 13047 13528 14712 20 10 0 Total Corpus (in Crs) - LHS Number of Schemes - RHS Note: Past performance may or may not be sustained in the future. Note: Data as on August 31, 2017. 7
Advantages of ETF 8
Constructed to track an index Open ended mutual fund Lower expense ratio generally as compared to an active equity fund Lower turnover More transparent Trading flexibility intraday on the exchange Real time price Put limit orders Minimum trading lot is just 1 unit Delivery into your Demat account Index fund Stocks ETF 9
10 Liquidity Components of an index have more liquidity ETF liquidity enhanced via direct creation and redemption Increased transparency Investors can generally see an ETF composition at any given time Transaction and management cost Increased trading flexibility Continuous pricing on the exchange throughout market hours Minimum transaction size (1 unit) Return potential Likely to capture market average return at low cost Lower expenses Benefit from lower expense ratios due to lower portfolio management, trading and operational expenses
Divestment Through an ETF 11
12 Disinvestment through an ETF - potential benefits Ability to participate in the long-term development of India, by purchasing stocks in Infrastructure and Natural Resources arena Provides small retail and HNI investors with the ability to diversify exposure across a number of Public Sector companies through a single instrument Ease and flexibility of trading given ETFs can be transacted on terminals across the country Enables large investment in blue chip Public Sector enterprises without the constraint of market liquidity on the underlying individual stock Efficient cost structure for investors given lower expense ratios than mutual funds, lower transaction costs due to low STT(Securities Transaction Tax), and eligibility under the RGESS scheme High transparency allowing investors to make informed decisions
Nifty CPSE Index 13
14 Nifty CPSE Index is constructed in order to facilitate Government of India initiative to disinvest some of its stake in selected CPSEs (Central Public Sector Enterprises) through the ETF route. The index values are to be calculated on free float market capitalization methodology. The index has base date of 01-Jan-2009 and base value of 1000. Weights of index constituent shall be re-aligned (i.e. capped at 25%) on a quarterly basis, after the expiry of F&O contracts in February, May, August and November. Selection Criteria: The 10 CPSE s selected meet below mentioned parameters: Included in the list of CPSEs published by the Department of Public Enterprise Listed at National Stock Exchange of India Ltd. (NSE) Having more than 55% government holding (stake via Govt. of India or President of India) under promoter category. Companies having average free float market capitalization of more than Rs.1000 Cr. for six month period ending June 2013 are selected. Have paid dividend of not less than four per cent including bonus for the seven years immediately preceding or for at least seven out of the eight or nine years immediately preceding are considered as eligible companies as on cut-off date i.e. 28-Jun-2013.
CPSE ETF Portfolio No. Company Name Industry Weightage % 1 Indian Oil Corporation Limited Petroleum Products 22.21% 2 Oil & Natural Gas Corporation Limited Oil 21.22% 3 Coal India Limited Minerals/Mining 14.82% 4 GAIL (India) Limited Gas 11.64% 5 Container Corporation of India Limited Transportation 6.93% 6 Rural Electrification Corporation Limited Finance 6.54% 7 Bharat Electronics Limited Industrial Capital Goods 6.50% 8 Pow er Finance Corporation Limited Finance 5.25% 9 Oil India Limited Oil 2.48% 10 Engineers India Limited Construction Project 2.16% Total 99.75% Industry Allocation % Oil Petroleum Products 23.70% 22.21% Minerals/Mining Finance Gas 11.79% 11.64% 14.82% Transportation Industrial Capital Goods 6.93% 6.50% Construction Project 2.16% 0% 5% 10% 15% 20% 25% Note: Portfolio & industry allocation data as on August 31, 2017. Source: RMF Internal 15
16 Index Name P/E Ratio P/B Ratio Dividend Yield Nifty CPSE Index 11.55 2.07 3.87 Nifty 50 Index 25.62 3.49 0.94 Nifty Next 50 Index 31.48 3.89 1.17 Nifty 100 Index 26.4 3.54 0.98 Nifty 500 Index 29.63 3.32 0.89 Please note that the stock composition of all the indices are different Data as 31 st August 2017. Source : www.nseindia.com
CPSE Exchange Traded Scheme 17
Investment objective The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty CPSE Index, by investing in the Securities which are constituents of the Nifty CPSE Index in the same proportion as in the Index. However the performance of the Scheme may differ from that of underlying index due to tracking error. There can be no assurance or guarantee that the investment objective of the Scheme would be achieved. Investment pattern Instruments Indicative Allocation (% of net assets) Risk Profile Minimum Maximum Securities covered by Nifty CPSE Index 95% 100% Medium to High Money Market Instruments (with maturity not exceeding 91 days), including CBLO, cash & cash equivalents. 0% 5% Low to Medium Type of scheme An Open Ended Index Scheme, listed on the Exchanges in the form of an Exchange Traded Fund (ETF) tracking Nifty CPSE Index RGESS The Scheme is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme, 2013 ( RGESS ) 18
NAV as on Aug 31, 2017: Rs 27.5282 Particulars 1 Year 3 Years 5 Years Since Inception CPSE ETF 16.62 2.87 N.A 14.21 B: Nifty CPSE Index 11.90-0.76 N.A 6.54 AB: Nifty 50 Index 12.88 7.60 N.A 12.13 TRI: Nifty CPSE Index 16.78 2.85 N.A 10.07 Value of ` 10000 Invested CPSE ETF 11,662 10,891 N.A 15,775 B: Nifty CPSE Index 11,190 9,773 N.A 12,429 AB: Nifty 50 Index 11,288 12,469 N.A 14,812 TRI: Nifty CPSE Index 11,678 10,881 N.A 13,895 Inception Date: Mar 28, 2014 Fund Manager: Payal Wadhwa Kaipunjal (Since March 2014) CAGR % B: Benchmark, AB: Additional Benchmark, TRI: Total Return Index $TR Index - Total Returns Index reflects the returns on the index arising from (a) constituent stock price movements and (b) dividend receipts from constituent index stocks, thereby showing a true picture of returns. As the Scheme has completed more than 3 year but less than 5 years, the performance details of since inception, 1 year and 3 years are provided herein. Different plans shall have a different expense structure. For Exchange Traded Funds of Reliance Mutual Fund, performance is provided at Scheme level using Dividend Reinvestment NAV's, since there are no separate plan/option under such Schemes. Period for which scheme s performance has been provided is computed basis last day of the month-end preceding the date of advertisement. Past performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment. Performance of the schemes (wherever provided) are calculated basis CAGR for the past 1 year, 3 years, 5 years and since inception. Dividends (if any) are assumed to be reinvested at the prevailing NAV. Bonus (if any) declared has been adjusted. Performance of dividend option would be Net of Dividend distribution tax, if any. Face value of scheme is `10/- per unit. In case, the start/end date of the concerned period is non-business day (NBD), the NAV of the previous date is considered for computation of returns. Schemes which have not completed one year, performance details for the same are not provided. Performance details of closed ended schemes are not provided since these are not comparable with other schemes. For performance of other schemes managed by the fund manager please refer Slides 23 19
CPSE ETF Scheme Features Benchmark Index Pricing Fund Manager Load Structure Nifty CPSE Index 1/100th of Nifty CPSE Index Payal Kaipunjal For the performance of other schemes managed by the same fund manager please refer to slide 23 Entry & Exit Load : NIL Minimum application amount (during ongoing offer period) Directly with the Mutual Fund: Create / Redeem in exchange of Portfolio Deposit and cash component in Creation Unit Size of 1 lakh units of the Scheme. On the Exchange: 1 (one) Unit and in multiples thereof. Plans Listing Growth Scheme is listed on 4th April 2014 on NSE and BSE(a) (a) The AMC reserves the right to list the Units of the Scheme on any other exchange *Please refer to Section IV(D) (Load Structure) of SID for details on Exit Loads applicable on Redemption of Units lesser than Creation Unit Size directly with the Mutual Fund. 20
21 During Ongoing Offer Primary Market Secondary Market Seller Cash ETF units Subscription / redemption in-kind Authorized Participants / Financial Institutions Fund Buy / Sell Market making / arbitrage Stock Exchange Cash ETF units Buyer
Government of India (GOI) used innovative route to divest its holding in CPSEs via ETF NFO was first launched in March 2014 New Fund Offer (NFO) NFO received overwhelming response; NFO collection was Rs.4,363 Crs, out of which Rs.1,363 Crs was refund to investors due to limited issue size of Rs.3,000 Crs Participation across various categories of investors NFO Units of CPSE ETF were listed on 04th April 2014 on NSE & BSE FFO was launched in January 2017 Further Fund Offer (FFO) FFO received overwhelming response; FFO collection was Rs.13,705 Crs, out of which Rs.7,705 Crs was refund to investors due to limited issue size of Rs.6,000 Crs Participation across various categories of investors FFO Units of CPSE ETF were listed on 31st January 2017 on NSE & BSE Further Fund Offer 2(FFO 2) Further Fund Offer 2 (FFO 2) was launched in March 2017 FFO 2 received overwhelming response; FFO 2 collection was Rs.10,083 Crs, out of which Rs.7,583 Crs has been refund to investors due to limited issue size of Rs.2,500 Crs Participation across various categories of investors FFO 2 Units of CPSE ETF were listed on 28th March 2017 on NSE & BSE 22
Fund Manager: Payal Wadhwa Kaipunjal Top 3 Funds Note: a. Ms. Payal Wadhwa Kaipunjal manages 17 open-ended schemes of Reliance Mutual Fund. b. In case the number of schemes managed by a fund manager is more than six, in the performance data of other schemes, the top 3 and bottom 3 schemes managed by fund manager has been provided herein are on the basis of 1 Year CAGR returns c. Period for which scheme s performance has been provided is computed basis last day of the month-end preceding the date of advertisement d. Different plans shall have a different expense structure. #The performance details provided herein are of Growth Plan (Regular Plan). *The Scheme does not offer any Plans/Options. The performance details are provided at Scheme level using Dividend Reinvestment NAV's. For the Scheme which has completed more than 3 year but less than 5 years, the performance details of since inception, 1 year and 3 years are provided herein. Common Disclaimer : Scheme Benchmark Scheme Benchmark Scheme Benchmark Reliance ETF Bank BeES* 23.21 22.90 15.98 15.54 20.14 19.46 Reliance ETF Junior BeES* 22.91 21.95 18.98 18.65 23.49 23.17 Reliance ETF Shariah BeES* 22.18 21.63 10.84 10.61 15.88 15.50 Bottom 3 Funds Scheme Name/s CAGR % 1 Year Return 3 Years Return 5 Years Return Reliance ETF PSU Bank BeES* 5.96 5.81-1.34-1.88 5.06 3.89 Reliance Gold Savings Fund# -5.88-6.37 0.22 1.91-2.46-1.01 Reliance ETF Gold BeES* -6.99-6.37 1.11 1.91-1.90-1.01 Past performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other Investment. Dividends (if any) are assumed to be reinvested at the prevailing NAV. Bonus (if any) declared has been adjusted. Performance of dividend option would be Net of Dividend distribution tax, if any. Face value of scheme is `10/- per unit. Face value of Reliance ETF Junior BeES is `1.25/- per unit. Face value of Reliance ETF Gold BeES is `100/- per unit. In case, the start/end date of the concerned period is non-business day (NBD), the NAV of the previous date is considered for computation of returns. Schemes which have not completed one year, performance details for the same are not provided. Performance details of closed ended schemes are not provided since these are not comparable with other schemes. 23
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$ No deduction under Rajiv Gandhi Equity Saving Scheme ( The Scheme ) shall be allowed in respect of any fresh investment made from 01.04.2017 onwards: However, an investor, who has invested in listed units of an equity oriented fund in accordance with the scheme and claimed deduction under section 80CCG of The Income Tax Act, 1961( The Act ) financial year commencing before the 1st day of April, 2017, shall be allowed deduction under this section till the financial year ending on the 31st day of March, 2019, if he is otherwise eligible to claim the deduction in accordance with the other provisions of the section 80CCG of The Act. Scheme Specific Risk Factors: Trading volumes and settlement periods may restrict liquidity in equity and debt investments. Investment in Debt is subject to price, credit, and interest rate risk. The NAV of the Scheme may be affected, inter alia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. The NAV may also be subjected to risk associated with tracking error, investment in derivatives or script lending as may be permissible by the Scheme Information Document. BSE Disclaimer: It is to be distinctly understood that the permission given by BSE Ltd. should not in any ways be deemed or construed that the SID has been cleared or approved by BSE Ltd. nor does it certify the correctness or completeness of any of the contents of the SID. The investors are advised to refer to the SID for the full text of the Disclaimer clause of the BSE Ltd. NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the SID has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the SID. The investors are advised to refer to the SID for the full text of the Disclaimer Clause of NSE Disclaimers by Index Provider a) The product i.e. CPSE ETF, is not sponsored, endorsed, sold or promoted by IISL. IISL does not make any representation or warranty, express or implied to the Unit holders of any product or any member of the public regarding the advisability of investing in Securities generally or in any product particularly or the ability of Nifty CPSE Index to track general stock market performance in India. The relationship of IISL to Reliance Nippon Life Asset Management Limited (RNAM) (formerly Reliance Capital Asset Management Limited) is only in respect of the licensing of certain trademarks and trade-names of their index, which is determined, composed and calculated by IISL without regard to RNAM or any product. IISL has no obligation to take the needs of RNAM or the Unit holders of the products into consideration in determining, composing or calculating Nifty CPSE Index. IISL is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the products to be issued or in the determination or calculation of the equation by which the products are to be converted into cash. IISL has no obligation or liability in connection with the administration or marketing or trading of the products. b) IISL does not guarantee the accuracy and/or the completeness of the Nifty CPSE Index or any data included therein and they shall have no liability for any errors, omissions, or interruptions therein. IISL makes no warranty, express or implied, as to the results to be obtained by the RNAM, Unit holders of the products or any other persons or entities from the use of the Nifty CPSE Index or any data included therein. IISL makes no express or implied warranties and expressly disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the index or any data included therein. Without limiting any of the foregoing, in no event shall IISL have any liability for any special, punitive, indirect or consequential damages (including lost profits), even if notified of the possibility of such damages. 25
26 Disclaimers The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent third-party sources, which are deemed to be reliable. It may be noted that since RNAM has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; RNAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RNAM s views or opinions, which in turn may have been formed on the basis of such data or information. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.