7th May 2008 Golden Era … Investing in Gold

Dear Investors,
BUY ‘Investments’ are made to multiply our hard earned money. In
the current scenario there are many investment options
GOLDBEES: 1178.05 available in the Indian Market like Direct Equities, Mutual
KOTAKGOLD: 1177.12 Funds, Bonds, Gold Etc. All investors have a common
GOLDSHARE: 1179.43 objective – “Highest gains with lowest risk”. But the one
RELGOLD: 1186.46 common problem all investors face is that - Which investment
QGOLDHALF: 588.56 will multiply their money the fastest under different market
conditions. Big & worthy question...
USD$: 41.79
Investment Options:
TARGET
Rs. 1430.00/Grm 1. Share Market: Involves high risk & volatility
2. Equity Mutual Funds: Depends upon stock market but less risky than Direct Equity
investing & Gives average returns to the investors.
3. Bonds: Safe but gives less return (8 to 10%).
4. Bank Deposits: Secured but gives less return (8 to 10%).

A GOLDEN OPPORTUNITY

As Indians - GOLD has been more than a metal, it is a part of our tradition. The general demand
for Gold in both Males and Females has been rising in recent times. When there is a lot of
Institutional Desk: uncertainty, people tend to buy gold. In any adverse conditions, gold is a safe hedge as an
international currency. India, the world's largest consumer of gold, could gobble up an estimated
Aashish Chitlangi 880 tones this year. The Indian demand for gold this year alone can absorb what the French
+ 91-9820186491 want to sell over five years! Every year, Indians buy gold worth Rs 40,000 crore on top of gold
inst@srspl.com worth Rs 6,60,000 crore which we actually hold. Indians hold almost 13,000 tones of gold. The
demand for gold in India is likely to increase as more and more people begin earning higher
Research: incomes.

Rahul Bhandawat Do you know what the per capita consumption of gold is?
+ 91-9321413828 UAE: 31.5 grams (that is high!)
rahulb@srspl.com USA: 1.4 grams
India: less than 1 gram (very low).

According to the survey India consumes more than 26% of total Gold production. Indians consume more than 800 tones gold
per year and in this year (2008-2009) we expect that the demand of GOLD in India will cross a whopping 880 tones.

We foresee an uptrend in the prices of GOLD in up coming times, on basis of demand which would be increasing day by day.
For example “Gold at Indian weddings” go together like “Pasta at Italian weddings”. According to India's latest census,
more than 47 million girls in the age group of 15 to 29 have yet to tie the knot. Assuming 80% of them do so in the next five
years, that's 38 million weddings. At a very modest 10 grams per wedding, or slightly less than one-third of an ounce, that
would translate into 76 metric tons of demand a year, enough to buy a fifth of all gold mined in South Africa last year.
Price of Gold is rising sharply (In the last eight years, global gold prices rose over 245%, from $268.3 per ounce in January
2001 to $927.75 per ounce, including the all time record of $1006.75 per ounce on March 18 this year.)

Two major sources of gold

1. Seventy percent of the gold available comes from gold mines.

2. The remaining 30 percent consists of recycled gold and the reserve that is maintained by central banks all over the
world.
Even if the gold mines begin to produce more, any new supply will take some time to satisfy the huge demand. Central banks,
which hold almost a quarter of gold mined till date, are also looking to convert their dollar reserves into gold since dollar has
depreciated sharply against most world currencies and is expected to get weaker in future.

Wealth Creator Thru Systematic Investment

Interestingly, in 1999, central banks in developed countries agreed upon to restrict the sale of gold. Only France expressed a
wish to liquidate 500 tones of gold in the next five years.

The demand-supply mismatch -- demand is rising, supply is not -- is highly skewed in favor of gold prices increasing.
This points in one direction: The yellow metal may even break its all-time high of $ 1006.75 (Rs 41.79= $ 1 as of
May 07, 2008) an ounce (1 ounce = 28.35 gms) nearly INRs1430/gms soon.

How to Invest in GOLD

There are three ways of owning gold.

1. Buying the shares of mining companies who own Gold mines or through
Mutual Funds which do the same.

2. Buying physical gold (gold bars or coins).

3. Invest in an exchange traded gold fund.

AN EASIEST & SAFE WAY TO INVEST IN GOLD

Exchange Traded Funds (ETFs) are open ended mutual funds that are passively managed and most of them seek to mirror
the return of an index, a commodity or a basket of assets. ETFs are listed and traded on stock exchanges like stocks. They
enable investors to gain broad exposure to indices or defined underlying asset (commodity) with relative case, on a real-time
basis, and at a lower cost than many other forms of investing.

Gold ETFs provided investors a means of participating in the gold bullion market without the necessity of taking physical
delivery of gold, i.e. trading of a security on stock exchange. Gold ETF would be a passive investment; so, when gold prices
move up, the ETF appreciates and when gold prices move down, the ETF loses value.

Gold ETF tracks the performance of Gold Bullion. Gold ETFs provide returns that, before expenses, closely correspond to the
returns provided by physical Gold. Each unit is approximately equal to the price of 1 gram of Gold. But, there are Gold ETFs
which also provide a unit which is approximately equal to the price of ½ gram of Gold.

WHY SHOULD AN INVESTOR INVEST IN GOLD ETF?

ü No worry on adulteration
ü Gold provides diversification to the portfolio
ü Gold is considered as a Global Asset Class
ü Gold is used as a Hedge against Inflation
ü Gold is considered to be less volatile compared to equities
ü Held in Electronic Form
ü Extremely Liquid

INVESTOR REQUIREMENTS FOR TRADING IN GOLD ETF

ü Trading account with a stock exchange broker.

ü Demat account as Gold ETF can be traded only in demat form.
ü Settlement: The transactions are settled with T+2 rolling settlement

LOAD STRUCTURE

ü Entry Load: Nil

ü Exit Load: Nil

TAX TREATMENT OF GOLD ETF

The Gold ETF is classified under mutual fund and will be taxed as per debt mutual fund taxation rules. Investor investing in
Gold ETF need not pay wealth tax. Investor has to pay taxes after redemption as per the tax laws applicable for debt mutual
fund.

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 COMPARISON

S No Parameter Gold ETF Jeweler/ Bank

1 How Gold is held Dematerialized (Electronic Form) Physical (Bars / Coins)

Linked to International Gold Prices and Differs from one to another. Neither
2 Pricing
very transparent. transparent nor standard.
Buying Premium
3 Likely to be less Likely to be more
above gold price
4 Making Charges No Charges are incurred Charges are incurred
5 Impurity Risk Nil High, Banks – Nil
Storage
6 Demat Account Locker / Safe
Requirement
7 Security of Asset Fund House takes the responsibility Investor is responsible
Conditional and uneconomical, Banks
8 Resale At International Market Prices
do not buyback
Convenience in More Convenient, as held in electronic Less convenient, as Gold needs to be
9
Buying / Selling form under the demat account moved physically
Quantity to Buy / Minimum is ½ or 1 gram according to
10 Available in standard denomination
Sell the fund
11 Bid Ask Spread Very Low Very High, Banks – no bid rate
12 Risk of Theft No, Not possible Yes, possible
13 Wealth Tax No Yes (if not used for personal use)
Long Term
14 After 1 year Only after 3 years
Capital Gains Tax

RISKS INVOLVED

ü Mutual Funds and Securities investments are subject to market risks and there can be no assurance or guarantee
that the objective of the scheme will be achieved.
ü As with any investment in securities, the NAV (Net Asset Value) of the units issued under the ETF can go up or
down depending on the factors and forces affecting the Bullion Market, Capital Market and Money Market.
ü The Past Performance of the fund house issuing the ETF should not be construed for the future performance of
the fund. It might not provide a basis of comparison with other investments.
ü The name of the Gold ETF doesn’t indicate the quality of the scheme or its future prospects and the returns.
Investors should study the terms of offer carefully and consult their investment advisor before investing the
scheme.
ü ETFs are a new concept in India compared to other parts of the world.
ü The sponsor of the mutual fund is not responsible or liable for any loss or shortfall resulting from the operation of
the fund beyond the initial contribution made by it of an amount of Rs 1 Lac towards setting up of the Mutual
Fund.
ü Investors are not offered any guaranteed or assured returns.

The scheme NAV will react to the Bullion Market movements. The investor could lose money over short periods due to
fluctuation in the schemes NAV in response to factors such as economic and political developments, changes in interest rates
and perceived trends in Bullion market movements and over longer periods during market downturns.

GOLD ETF(S) AVAILABLE IN INDIA

ü Benchmark Mutual Fund - Gold Benchmark Exchange Traded Scheme (NSE Symbol: GOLDBEES)
ü Kotak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)
ü UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)
ü Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)
ü Quantum Gold Fund – (NSE Symbol: QGOLDHALF)

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GOLD MUTUAL FUNDS AVAILABLE IN INDIA

1. DSP MERRILL LYNCH : World Gold Fund

o Minimum Investment Rs 5000/- after that in multiple of 1000.

o Options Available:
§ Growth
§ Dividend
· -Payout Dividend
· -Reinvestment Dividend
o Entry Load: For Investment < Rs 5.0 crore : 2.25%For Investment > Rs 5.0 crore : Nil
o Exit Load: Holding Period < 6 Months: 1%Holding Period >= 6 Months but < 12 Months: 0.50%Holding
Period >= 12 Months: Nil
o Redemption Proceeds: Normally within 5 Business Days from acceptance of redemption request

2. AIG: World Gold Fund (New Fund Offer- NFO – Last Date 14th May 2008)

o Minimum Investment Rs 5000/- after that in multiple of 1000.

o Options Available:
§ Growth
§ Dividend
· -Payout Dividend
· -Reinvestment Dividend
o Entry Load: For Investment < Rs 5.0 crore : 2.25% For Investment > Rs 5.0 crore : Nil
o Exit Load: Holding Period < 12 Months: 1% Holding Period >= 12 Months: Nil
o Redemption Proceeds: Normally within 10 Business Days from acceptance of redemption request

Strategy:

ü Invest Regularly (Monthly/Quarterly/Six Monthly/Yearly).

ü Fix up a date for investment with a Fixed amount to invest
ü Horizon for investment should be clear. (Like daughter’s marriage, etc.)
ü Position should be liquidated only in dire circumstances
ü Periodic profits can be booked with some quantity being liquidated on any rise of 20% - 30% from your average
cost of acquisition.

So, we hope you all will enjoy the profits of Golden investment opportunity.

Happy Golden Investing,

Suresh Rathi Securities Pvt. Ltd.

9, Parekh Vora Chambers, 66 N.M.Road, Fort, Mumbai – 400023.
Tel: 022-22666178, 22691103 Fax: 022-66344007

Wealth Creator Thru Systematic Investment