Reliance Close Ended Equity Fund – Series A Offer for Sale of Units at Rs.10/- per unit during the new fund offer period

(5 years Close Ended Equity Oriented Scheme)

NFO Opens – November 15, 2013 NFO Closes – November 29, 2013

This product is suitable for investors who are seeking*:

· Long term capital growth · Investment in diversified portfolio of equity & equity related instruments with small exposure to fixed income securities · High risk.

(BROWN)

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Note: Risk may be represented as: (BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk

Reliance Capital Asset Management Limited

(BROWN) investors understand that their principal will be at high risk

Slide 2

Index Particulars

Slide No

Market Outlook

Slide 4 - 11

Why Close Ended Equity Fund?

Slide 12 - 15

Framework

Slide 16 - 22

Reliance Close Ended Equity Fund – Series A

Reliance Capital Asset Management Limited

Slide 29

Slide 3

Market Outlook

Reliance Capital Asset Management Limited

Slide 4

Global Liquidity on the Rise 

 

Large Central banks on course of unprecedented expansion of their balance sheet.  Fed = 85 bln US$ per month  BoJ = 70 bln US$ per month  If ECB joins, then ECB will be doing ~ atleast 50 bln per month (likely soon) Top 3 banks together infusing over 200bln US$ p.m. Other Central Banks may also be either remaining quite or easing monetary policy

It can’t get easier than this.. 





There have been over 500 interest rate cuts in the past 6 years and the purchases of financial assets by the Fed, ECB and BoJ will equate to 3060% of their GDP by end-2014 The global liquidity will remain large and benign and will flow into markets where potential return are high and yield differential is positive India could be among the biggest recipient of these flows.. Source: Bloomberg and RMF Research

Reliance Capital Asset Management Limited

Slide 5

Current Indian Challenges 

Currency Depreciation – the vicious cycle – Impacting Commodities, Imports, Outflows, etc.



Twin Deficits again coming back due to major shift in currency



Oil Subsidy and Other Election driven Issues



Local Interest rates – going up instead of coming down impacting Asset Quality as well as growth



Continued Slowdown in policy



Challenges moving faster than solutions from the Government

Reliance Capital Asset Management Limited

Slide 6

No Hype in markets – Lot of macro pain in prices already 

175 companies in BSE 500 have touched their 7 year lows in last 6 months



~200 companies in BSE 500 are trading below their Book Value



Business valuation reflect more than ‘Macro Pain’ …some companies are available at valuations as through they will not exist in 3 years



Overall market indices below even after 6 years



Except one or two sectors – No bubbles any where Source: Bloomberg and RMF Research, 30th Sept’13 Reliance Capital Asset Management Limited

Slide 7

Positives – continue to get ignored as Macros deteriorate 

Total cropped area affected by deficient rainfall is at 12%, which is much lower than 48.4% at the same time last year. Can it ease food inflation?



State Electricity Board (SEB) Restructuring – 20-40% increase in rates across 20 SEBs in the country. 2nd round of price increases underway. Can this release stuck cash flows to suppliers?



Petrol at Full price, Diesel prices corrected meaningfully. Still some way to go, but possibly the biggest rise in prices effected in 12 month period



1/3rd of index companies also benefit from Rupee depreciation significantly

Source: Bloomberg and RMF Research, 30th Sept’13 Reliance Capital Asset Management Limited

Slide 8

Phases of Indian Bull Markets – Born From Pessimism Long periods of ‘flat’ markets?

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Phase I - Post liberalization “Harshad Mehta” led rally (1990-92)

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Phase II - NASDAQ led IT boom (1998-2000)

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Multi-year rally led by global credit boom (2003-2007)

Long periods of ‘flat’ markets have been followed by sharp bull phases Source: Bloomberg and BoA Merill Lynch Global Resources Reliance Capital Asset Management Limited

Slide 9

Significant polarization in Markets Significant divergence in market caps

 



200

% Change of Nifty sectors in last 3 years

99%

180

80% 160

38%

140

29%

120

4%

100

-19%

80

-44% -45%

60

CNX Nifty Index

Nifty Midcap 50

Jun-13

Nov-12

Apr-12

Sep-11

Feb-11

Jul-10

40 Dec-09

Realty*

Capital Goods

Bsemetal

Infra*

Energy

Bank

NIFTY

Auto

IT

Pharma

-64%

May-09

-36%

Oct-08

-11%

FMCG

120% 100% 80% 60% 40% 20% 0% -20% -40% -60% -80%

CNX Smallcap

Huge divergence across sectors and market caps Some sectors / stocks are trading at all time high while many have witnessed flat / negative growth Opportunities exist across market-caps and sectors Source: Bloomberg and RMF Research, 30th Sept’13 Reliance Capital Asset Management Limited

Slide 10

If you see stocks as blips on a ticker tape, you will be led astray. But if you regard stocks as fractional interests in businesses, you will maintain proper perspective…

Reliance Capital Asset Management Limited

Slide 11

Why Close Ended Equity Fund? “Someone’s sitting in the shade today because someone planted a tree a long time ago” Warren Buffett

Reliance Capital Asset Management Limited

Slide 12

Drivers of Slowdown may reverse in 5 Years Some of the factors plaguing the markets in past 5 years, likely to be different in the next 5 years : 

US recovery of 2015 in contrast to US recession of 2008  The US recovery expected to be in full swing by 2015

 Likely to aid other developed markets to get back on their feet, which, in turn, is expected to push export growth within emerging economies 

Flattening of oil prices in contrast to rising oil prices  This would

relieve pressure on tight government finances and contain the current

account deficit  Fuel-led inflation likely to be under control  The resultant INR stability key for stable capital inflows

Source: India Primer, Bank of America Merrill Lynch Reliance Capital Asset Management Limited

Slide 13

Drivers of Slowdown may reverse in 5 Years 

Domestic reforms, such as liberalization in FDI in retail and pensions, in

contrast to lack of reforms  Key Bills passed in recent times - Land Acquisition and Rehabilitation Bill, the Pension

Bill, and the Companies Bill  Other reforms on the way – undoing the retrospective tax changes – FDI in multi-brand retail

 On the whole, we may see the next five years as bringing in the third round

of

liberalization measures that MAY help the economy get back on its potential growth track. Source: India Primer, Bank of America Merrill Lynch Reliance Capital Asset Management Limited

Slide 14

Environment likely to be conducive for Close Ended Equity Fund 

Markets have become significantly polarized which is reflected in the

differential in valuations of sectors and stocks 

Fundamental valuations in stocks disconnected from the underlying opportunities businesses offer for medium term view



ETF and index based buying has added to this polarization



This has created opportunity to generate relatively better return for medium

term investors 

Focus of market participants is in select basket of 75-100 companies compared to over 300 companies in 2007



Market focus has moved to near term outperformance over long term returns

Source: Bloomberg and RMF Research, 30th Sept’13 Reliance Capital Asset Management Limited

Slide 15

Framework of Reliance Close Ended Equity Fund - Series A

Reliance Capital Asset Management Limited

Slide 16

Investment Framework Fund would endeavor to invest into Companies having:  Solid businesses available at low “absolute valuations” 

Sustainable business characteristics with 10-20 year operational track record which are at an inflexion point to scale up

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Currently high ROE or rising ROE’s

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Ability to generate sustainable free cash flows

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High operating leverage not getting captured in today’s valuations

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The fund would endeavor to create a well diversified, Flexi Cap portfolio

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Fund would endeavor to declare dividend as and when opportunity arises Reliance Capital Asset Management Limited

Slide 17

Proposed Fund Philosophy Out of Favor Stocks: Scalable Opportunities: Themes like Retail, Media, Hospitals, etc., which are essentially high-growth themes

A contra theme, which would make investments into sectors / stocks which are significantly below their normal valuations. Eg., Sectors like Engineering, Capital Goods, etc,.

Opportunities in the current market context

Distressed Valuations due to recent events: Investments into companies which are trading at distressed valuations due to specific events like mandatory OFS, PSU disinvestment, etc.

Corporate Actions: Promoter’s increasing stake and/or buyback candidates, acquisitions possibilities.

Reliance Capital Asset Management Limited

Slide 18

1. Scalable Opportunities Long Term Growth Prospects undermined due to near term challenges

Currently small in India vs Globally  However, with current growth rates it will take critical mass in future…  A few examples :

Insurance Media Hospitals Retail

and Franchising Internet Business

2. Distressed Valuation Markets on A Sale 

Companies impacted due to non-fundamental reasons Mandatory

offer for sale Divestment by government The fund may or may not invest into the sectors mentioned above Reliance Capital Asset Management Limited

Slide 19

3. Out of Favor Unloved & Under researched 

Leaders Companies which are leaders in their segments i.e. top 2-3 companies



Long History Companies which have had 15-20 years of listed history

Deep Discount to Value Low near term visibility & hence low expectations  Lack of street coverage 

Coverage

has reduced from over 300 companies to about 100 companies

4. Corporate Action Candidates Promoters increasing stake and/or buyback candidates  M&A possibilities 

E.g. Several MNC companies have increased stake in their Indian subsidiaries at valuations which are 2x-3x the current valuations. This again provides a significant opportunity to trigger action on this count Reliance Capital Asset Management Limited

Slide 20

Key Differentiators of the Fund 

Fund will make an effort on owning stocks as businesses and valuing them for their “absolute return” potential



Focus will be on quality companies with long track record currently beaten down due to  lack of participation, lack of research, low near-term expectation & other nonfundamental reasons



Strategy of the fund will be not to completely mirror the benchmark



Fund will endeavor to invest across market caps and will be well diversified as many sectors/stocks trading below fair value

Reliance Capital Asset Management Limited

Slide 21

Scheme Features Type of Fund

Investment Objective

Option Minimum Application Amount Listing / Load Structure

Close ended equity oriented scheme The investment objective of the scheme is to provide capital appreciation to the investors, which will be in line with their long term savings goal, by investing in a diversified portfolio of equity & equity related instruments with small exposure to fixed income securities.

Direct – Growth & Dividend Payout Other than Direct– Growth & Dividend payout, Rs 5000 and in multiples of Re 1 thereafter The units of the scheme shall be listed on BSE. Entry Load – Not Applicable, Exit Load – Not Applicable Since the scheme

shall be listed on BSE Exit load shall not be applicable. Benchmark

Fund Manager

S&P BSE 200 Index

Sailesh Raj Bhan Reliance Capital Asset Management Limited

Slide 22

Scheme Specific Risk/Disclaimers Trading volumes and settlement periods may restrict liquidity in equity and debt investments. The investments in debt instruments carry various risks like interest rate risk, liquidity risk, credit risk, reinvestment risk, risk associated with derivatives, risk associated with listing of units etc. For detail scheme/securities related risk factors refer 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.

Reliance Capital Asset Management Limited

Slide 23

Disclaimer The views expressed herein constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers. Certain factual and statistical (both historical and projected) industry and market data and other information was obtained by RCAM from independent, third-party sources that it deems to be reliable, some of which have been cited above. However, RCAM has not independently verified any of such data or other information, or the reasonableness of the assumptions upon which such data and other information was based, and there can be no assurance as to the accuracy of such data and other information. Further, many of the statements and assertions contained in these materials reflect the belief of RCAM, which belief may be based in whole or in part on such data and other information. 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. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given are fair and reasonable. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice, verify the contents and arrive at an informed investment decision before making any investments. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. The Sponsor, the Investment Manager, the Trustee, any of their respective directors, employees including the fund managers, affiliates, representatives including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific economic sectors mentioned herein.

Reliance Capital Asset Management Limited

Slide 24

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Reliance Capital Asset Management Limited

Slide 25

Thank You