Rel Infra Fund- Product Note

8/14/2019 Rel Infra Fund- Product Note

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1 Product/PN/Ver1.0/25th

May 2009

Reliance Infrastructure Fund

An Open Ended Equity Scheme

NFO Dates

NFO opens: 25th May 09

NFO closes: 23rd June 09

Indian Equity Markets Visible Change

Oct 2008 Now

Major global banks failed, more probable Looks remote

Liquidity evaporated Liquidity all around

Risk aversion Risk appetite returning

Companies facing capital shortage Equity raising easier, change in B/S

Election uncertainty in India Biggest verdict since 1984

FIIs major sellers Becoming big buyers

Equity Markets- Our View

The catapult

Election - A big positive game changer

Accompanied by improving monetary and economic conditions

Governance, infrastructure and inclusive growth looks to be key goals of incumbent

Government

FII/FDI inflows can be very strong

Earnings upgrades may follow

Sustainable attractive returns from Indian equities look possible

What can go wrong?

Another global financial catastrophe

Big disappointment in pace of Govt. actions over next 6 months

Everything going for India

Youngest population in the world

Largest middle-class and consuming population

Domestic focused economy

Banking system proved to be amongst the healthiest

Global leader in services


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May 2009

Lowest cost producer in metals

Huge savings and investment rates

Source: Internal - RMF Research

HOWEVER..

Infrastructure... Miles to Go

Source: Published Media, Global Research 2007-08

World Banks Global Competitiveness Report 2007-08

Inadequate supply of infrastructure

- Most problematic factor for doing business in India.

India ranked 48th

out of 131 counties in the Global Competitive Index 2007.

- Ranked 67th

on the quality of infrastructure.

India lags behind in infrastructure facility usage compared to US, UK & China.

Infrastructure Investment China Vs India

Comparision of Infrastructure Facilities

Particulars India US China

Electric consumption per capita (KwH) 618 14240 1684

Roads per mn people (km) 2983 21443 1471

Steel Consumption per capita (kg) 34 357 244

Rail route per mn people (km) 56 755 57

Cargo handled at ports per capita (kg) 572 7953 4265

No. of passengers handled at airports per 1,000 persons 71 4780 151


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May 2009

Factors driving demand for better Infrastructure

1. Economic Factors

2. Demographic Factors

3. Global Integration

Congress Manifesto- Makes intentions clear

Increase public investment in infrastructure

Ensure that India adds at least 12000-15000 MW of power capacity every year.

Rural electrification & reduction in distribution losses.

Implement a scheme to supply energy to poor families at affordable prices.

Promises a very significant increase in the share of nuclear power.

Connect villages through broadband network within 3 years

Source: Congress Manifest 2009

Intentions evident in Interim Budget 2009

Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore from

August, 2008 to January, 2009 alone.

Under PPP mode, 54 Central sector infrastructure projects in-principal or final approval

and 23 projects approved for viability gap funding in 2008-09.

India Infrastructure Finance Company Ltd. (IIFCL) to refinance up to 60 % of commercial

bank loans for PPP projects involving total investment of Rs.1,00,000 crore in

infrastructure over the next eighteen months.

Source: http://indiabudget.nic.in


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May 2009

Planned Infrastructure Expenditure in XIth FYP ..

Sector 2007-08 2008-09 2009-10 2010-11 2011-12 Total XIth

FYP

Power 74,205 92,829 116,541 146,914 186,038 616,527

Roads 51,352 54,318 58,729 67,901 79,516 311,816Telecom 33,075 39,834 50,293 63,408 80,390 267,000

Railway 33,207 39,964 48,626 59,738 76,466 258,001

Irrigation 27,002 33,839 42,625 53,946 65,718 223,130

Water Supply & Sanitation 25,840 31,110 37,868 46,555 57,754 199,127

Ports 9,691 11,740 14,271 17,397 20,841 73,940

Airports 6,223 6,459 6,814 7,296 7,956 34,748

Storage 3,777 4,098 4,446 4,824 5,234 22,379

Gas 2,984 3,454 4,005 4,651 5,407 20,500

Total Investment 267,356 317,645 384,218 472,630 585,320 2,027,168Total (USD Billion) 65 77 94 115 143 494

Investment as % of GDP 6.0 6.5 7.2 8.1 9.2 7.5

Rs. Crore (At 2006-07 prices), Exchange Rate of Rs.41/$(2006-07)

Source: Planning Commission of India

With much bigger outlay of USD 1,128 Billion in XIIth FYP

Question marks on infrastructure spending:

Huge budgetary and fiscal deficit

Past record on foreign flows so-so and not very robust

However, future looks brighter

Avenues to control deficit in sight

PPP

Foreign investments

Source: Internal - RMF Research

Funding Pattern(XIth FYP):

Private Funding gains importance- 30% of planned expenditure

FDI

Private Equity

Infrastructure Fund why now?

Despite recent spurt, still attractive

Political stability for five years

Some stability. Investors will move to higher growth economies

Interest rates plunge, debt available, investors looking for equity investments

Attractive Valuations


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May 2009

Introducing Reliance Infrastructure Fund (an open ended equity scheme)Investment Strategy

The investment focus would be guided by the growth potential and other economic factors of thecountry. The Fund aims to maximize long-term total return by investing in equity and equity-

related 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


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May 2009

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.

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 and 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


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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 (for details, please refer to Scheme Information Document)


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May 2009

__________________________________________________________________________

The information herein constitutes only an opinion.. Readers are advised to seek independent professional advice andarrive at an informed investment decision before making any investments. The information contained herein has beenprepared 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%. LoadStructure: 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 everyworking 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 dividenddistributions 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.

Documents

Rel Infra Fund- Product Note