NFO Reliance Infrastructure Fund

Reliance Infrastructure Fund An Open Ended Equity Scheme Rationale Infrastructure spending has witnessed a sharp acceleration, with most of the segments in the economy constrained in terms of capacity availability. Riding on the back of the fourth consecutive year of 8%+ GDP growth, a balanced increase in the gross capital formation (GCF) in infrastructure as a proportion of GDP emerges as the most important key in sustaining high economic growth. Currently, the GCFI is at 5% of GDP. As per the Planning Commission, the GCFI need to be increased to 9% of the GDP to sustain growth momentum in the economy. Infrastructure sector plays important role in country’s development and GDP growth. India has already negotiated the difficult transition from public infrastructure creation to a marketdetermined model. An ambitious reform programme initiative involving a shift from a controlled to an open market economy has opened doors for private sector / foreign investment in infrastructure projects such as energy, petroleum, telecommunications transportation sectors etc. And in the Indian context, removal of regulatory and availability constraints on any product or service, has catalyzed investments, attracted competition and rationalized costs leading to a new growth trajectory. The infrastructure sector in the country is thus poised for accelerated growth in the coming years. There is already momentum in highways, power generation and ports, where a successful track record has fostered a virtuous cycle of more success. Infrastructure sector comprises of Energy, Power and Power Equipment, Oil & Gas and related industries, Petroleum and related industries, Coal, Mining, Aluminum and other Metal Industries, Steel and Steel Utilities, Engineering, Construction and Construction Related Industries, Cement, Transportation, Ports, Telecommunications, Housing, Banking and Financial Services and Healthcare and Related Industries. However, the Scheme will not restrict its investments only in the above mentioned sectors. The Investment Manager may add such other sectors/ group of industries which broadly satisfy the category of being under Infrastructure Sector or benefit directly or indirectly from the Infrastructure growth depending on the relevance of that sector to the investment objective of the scheme. Infrastructure gaining momentum We observe a pick up of infrastructure spending in the economy, driven by strong political will and ease of project financing. An urgency to ensure commercial viability is now apparent across the board, and is being reflected across sectors. For instance, SEB losses are reducing, bottom-line of Indian Railways is improving and income of port authorities is rising. The momentum of private 1 Product/PN/Ver1.0/15th May 2009 sector participation is also picking, with innovative financing concepts like ‘Public Private Partnerships’ and ‘Viability Gap Funding’. According to a recent consultation paper, ‘Investment in Infrastructure’ in the Eleventh Plan Period (FY07-12) issued by the Planning Commission, the total investment in infrastructure is expected to be Rs.20, 271 Billion (USD 494 Billion). This estimate assumes a 15% cut on the total investment estimates by the Planning Commission due to likely spillovers. The total investment in infrastructure, which is based on sectoral analysis, initially projected by the Planning Commission, was Rs.23, 848 Billion (USD 582 Billion). The projected investment in infrastructure in the Eleventh Plan is 2.3x the amount in the Tenth Plan. The total investments as a percentage of GDP are expected to increase to 9.22% by FY12. Power (30%) form the biggest chunk of the planned expenditure while road, telecom and railways are the next big contributors. The largest inflection in investments is expected to be in ports, airports, railways, water supply and sanitation over the next five years. Why invest in Reliance Infrastructure Fund? From India’s No 1 Mutual Fund with an AAUM of Rs 88387.98 Crs* (as on 29th April 2009) Huge anticipated growth opportunity in the sector as reflected in the preceding paragraph. Market Valuations of Companies related to Infrastructure Sector attractive compared to potential growth. *Source: www.amfiindia.com 2 Product/PN/Ver1.0/15th May 2009 Investment Strategy The investment focus would be guided by the growth potential and other economic factors of the country. The Fund aims to maximize long-term total return by investing in equity and equityrelated securities which have their area of primary activity in India The Fund intends to invest in (i) Companies in sectors related to infrastructure; (ii) Companies operating and listed in India engaged in Infrastructure Sector and (iii) In diversified companies, where a major portion of their revenues (primary activity) is derived from the infrastructure related activities. If the Fund Manager decides to invest in ADRs / GDRs issued by Indian / foreign companies and in foreign Securities in accordance with SEBI Regulations in the Scheme, it is the intention of the Fund Manager that such investments will not normally exceed 20% of the net assets of the Scheme. Following areas/sectors of the economy listed below are covered in infrastructure sector; 1. Airports 2. Banks, Financial Institutions & Term lending Institutions 3. Cement & Cement Products 4. Coal 5. Construction 6. Electrical & Electronic components 7. Engineering 8. Energy including Coal, Oil & Gas, Petroleum & Pipelines 9. Industrial Capital Goods & Products 10. Metals & Minerals 11. Ports 12. Power and Power equipment 13. Road & Railway initiatives 14. Telecommunication 15. Transportation 16. Urban Infrastructure including Housing & Commercial Infrastructure 17. Mining, 18. Aluminum Please note that the list provided is indicative and the Investment Manager may add such other sectors/ group of industries which broadly satisfy the category of being under Infrastructure Sector or are related to the Infrastructure growth depending on the relevance of that sector to the investment objective of the scheme 3 Product/PN/Ver1.0/15th May 2009 The Scheme will purchase securities in the public offerings and rights issues, as well as those traded in the secondary markets. On occasions, if deemed appropriate, the Scheme will invest in securities sold directly by the issuer, or acquired in a negotiated transaction or issued by way of private placement. The moneys collected under this scheme shall be invested only in transferable securities. Product Features Type of Scheme – An Open-ended Equity Scheme Investment Objective -The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in infrastructure and infrastructure related sectors and which are incorporated or have their area of primary activity, in India and the secondary objective is to generate consistent returns by investing in debt and money market securities. Asset Allocation Under normal circumstances, the proposed asset allocation would be: Indicative asset allocation (% Instruments of total assets) Minimum Equities and equity related securities including derivatives engaged in infrastructure sectors and infrastructure related sectors# Debt and Money market securities** (including investments in securitised debt) ** including securitised debt upto 30% Atleast 65% of investment would be made in equity /equity related securities of companies engaged in infrastructure sectors and infrastructure related sectors. If the Fund Manager decides to invest in ADRs / GDRs issued by Indian / foreign companies and in foreign Securities in accordance with SEBI Regulations in the Scheme, it is the intention of the Fund Manager that such investments will not normally exceed 20% of the net assets of the Scheme. #an overall limit of 100% of the portfolio value has been introduced for the purpose of equity derivatives in the scheme. The margin money requirement for the purpose of derivative exposure will be as per the SEBI Regulations. The derivate exposure will be restricted to such limit so that the scheme does not leverage upon margin requirements. 4 Product/PN/Ver1.0/15th May 2009 0% 35% Low to Medium 65% 100% Medium to High Maximum Risk Profile The Scheme may take derivatives position based on the opportunities available subject to the guidelines issued by SEBI from time to time and in line with the overall investment objective of the Scheme. These may be taken to hedge the portfolio, rebalance the same or to undertake any other strategy as permitted under the SEBI Regulations. The fund will also invest in Pre IPO Placement, lock-in non transferable securities and up to 5% or max permissible limit in Unlisted Securities. The above Asset Allocation Pattern is only indicative. The investment manager in line with the investment objective may alter the above pattern for short term and on defensive consideration. Plans Available: The scheme will have the following plans /options Retail Plan Institutional Plan Each of the above plans will have Growth & Dividend Plans respectively as specified below Growth Plan: Growth Option & Bonus Option Dividend Plan: Dividend Payout Option & Dividend Reinvestment Option Benchmark Index BSE 100 Considering the investment in the fund made in equity /equity related securities of companies engaged in infrastructure sectors and infrastructure related sectors, we propose to have BSE 100 as a benchmark since majority of the stocks relate to the sectors which would contribute to the infrastructure growth or to diversified companies, where a major portion of their revenues (primary activity) is derived from the infrastructure related activities. Minimum Application Amount: For Retail Plan: Rs 5,000/For Institutional Plan: Rs 5, 00, 00,000/- Load Structure (During new fund offer & continuous offer including SIP installments) For Retail Plan Entry Load • • • For subscription below Rs. 2 Crs - 2.25% For subscription of Rs 2 Crs & above and below Rs 5 Crs - 1.25% For subscription of Rs 5 Crs and above- Nil 5 Product/PN/Ver1.0/15th May 2009 Exit Load: For subscriptions of less than Rs 5 Crs per purchase transactions • • 1% if redeemed/switched on or before completion of 1 year from the date of allotment Nil if redeemed/switched after completion of 1 year from the date of allotment For subscriptions of more than Rs 5 Crs - nil For Institutional Plan • • Entry Load: Nil Exit Load: Nil Pursuant to SEBI Circular No. SEBI/IMD/CIR No. 10/112153/07 dated December 31, 2007, with effect from January 4, 2008, no entry load shall be charged in respect of direct applications received by Reliance Mutual Fund (RMF) i.e. applications received through internet or submitted to the AMC or any designated collection centre/Investor Service Centre of RMF that are not routed through any distributor/agent/broker. Reliance Any Time Money Card: It shall be issued only to investors subscribing in this fund through Self Cheque New Fund Offer expenses: The Scheme shall meet the entire sales, marketing and such other expenses connected with sales and distribution of scheme during the new fund offer from the entry load in accordance with SEBI Circular dated April 4, 2006, being an open-ended scheme. Any expenses over & above the entry load amount shall be borne by the AMC. SIP: Available – Retail Plan Call our Investor Service Cell @ 0-9818269396 6 Product/PN/Ver1.0/15th May 2009 ___________________________________________________________________________ The information herein constitutes only an opinion and does not constitute any guidelines or recommendation on any course of action to be followed by the reader. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The information contained herein has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. None of The Sponsor, The Sponsor, The Investment Manager, The Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Sponsor: Reliance Capital Limited. Trustee: Reliance Capital Trustee Co. Limited. Investment Manager: Reliance Capital Asset Management Limited. Statutory Details: The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. ___________________________________________________________________________ Reliance Infrastructure Fund (An open-ended Equity Scheme): The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in infrastructure and infrastructure related sectors and which are incorporated or have their area of primary activity, in India and the secondary objective is to generate consistent returns by investing in debt and money market securities. Asset Allocation: Equities and equity related securities including derivatives – 65% -100%. Debt and Money market securities** (including investments in securitised debt) – 0-35%. ** including securitised debt upto 30%. Load Structure: For Retail Plan: Entry Load For subscription below Rs. 2 Crs - 2.25%; For subscription of Rs 2 Crs & above and below Rs 5 Crs - 1.25%; For subscription of Rs 5 Crs and above- Nil Exit Load For subscriptions of less than Rs 5 Crs per purchase transactions: 1% if redeemed/switched on or before completion of 1 year from the date of allotment; Nil if redeemed/switched after completion of 1 year from the date of allotment. For Institutional Plan: Entry Load - NIl Exit Load – Nil. Pursuant to SEBI Circular No. SEBI/IMD/CIR No. 10/112153/07 dated December 31, 2007, with effect from January 4, 2008, no entry load shall be charged in respect of direct applications received by Reliance Mutual Fund (RMF) i.e. applications received through internet or submitted to the AMC or any designated collection centre/Investor Service Centre of RMF that are not routed through any distributor/agent/broker. Terms of Issue: The Units are available at Rs. 10/- per unit plus applicable load during the New Fund Offer Period and thereafter at applicable NAV based prices. The AMC will calculate and disclose the first NAV not later than 30 days from the closure of the New Fund Offer Period. Subsequently, the NAV will be calculated and disclosed at the close of every working day which shall be published in at least in two daily newspapers and also uploaded on AMFI site i.e. www.amfiindia.com and Reliance Mutual Fund website i.e. www.reliancemutual.com. General Risk Factors: Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital markets. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. Reliance Infrastructure Fund is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme; it's future prospects or returns. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. The Mutual Fund is not guaranteeing or assuring any dividend. The Mutual Fund is also not assuring that it will make periodical dividend distributions, though it has every intention of doing so. All dividend distributions are subject to the availability of the distributable surplus in the Scheme. For details of scheme features apart from those mentioned above and scheme specific risk factors, please refer to the provisions of the Scheme Information Document. Scheme Information Document and KIM cum application form is available at all the DISCs/ Distributors of RMF/www.reliancemutual.com. Please read the Scheme Information Document carefully before investing. 7 Product/PN/Ver1.0/15th May 2009