NewGold Gold Bullion Debentures NewGold Issuer LimitedIncorporated in the Republic of South AfricaRegistration number 2004/014199/06
Disclaimer NewGold Gold Bullion Debentures (“NewGold”) are issued by NewGold Issuer Limited, in association with Absa and the World Gold Council. Potential investors should be aware, however, that neither Absa nor the World Gold Council is in any way responsible for NewGold Gold Bullion Debentures, or for any information provided in respect of NewGold Gold Bullion Debentures, nor do or will either of them provide any guarantee as to the performance of NewGold Gold Bullion Debentures. This document is intended for general information purposes only and does not promote, make any recommendation in relation to, or provide any advice, or forecast, as to investment in NewGold Gold Bullion Debentures. In addition past performances of the gold price is not necessarily indicative of its future performance.
Gold “The desire for gold is the most universal and deeply rooted commercial instinct of the human race." Gerald M. Loeb “Gold is forever. It is beautiful, useful, and never wears out. Small wonder that gold has been prized over all else, in all ages, as a store of value that will survive the travails of life and the ravages of time." James Blakely “Gold has worked down from Alexander's time ... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory.” Bernard M. Baruch “Gold still represents the ultimate form of payment in the world.” Alan Greenspan, Chairman of the Federal Reserve Board of the United States of America
Summary • NewGold Gold Bullion Debentures (“NewGold”) are securities listed on the JSE Securities Exchange within the Exchange Traded Funds sector, under the symbol GLD • Issued by NewGold Issuer Limited, a public company incorporated in the RSA • Joint initiative with the World Gold Council • Proceeds of the issue of NewGold Gold Bullion Debentures utilised to acquire gold bullion, in the form of 400oz London Good Delivery Bars. • All the Debentures in issue are 100% backed by allocated gold bullion • NewGold Gold bullion is held in safe custody by the NewGold Custodian, Rand Refinery Limited • Initially valued at 1/100 of one fine troy ounce of gold; NewGold is designed to track the price of gold less expenses • Provides investors with a simple, cost-effective and secure means of buying, holding and selling gold bullion
Investment in gold • Treasured as a store of value for thousands of years, gold is an important and secure asset. Some of the factors that should be considered by the potential investors - • Gold is an effective portfolio diversifier, … • … a store of value, • … a safe haven investment, • … a low risk investment compared to gold stocks, • … has positive track record in terms of returns, compared to the broad market, • … is an excellent rand hedge, • … as well as an excellent USD hedge.
Investment in gold • Key factors that support the investment case for gold include: • Strategic • Effective portfolio diversifier • Store of value • Safe haven in turbulent times • Attractive alternative asset • Tactical • Current gold industry fundamentals • Current economic fundamentals • Practical • Liquid, 24 hour market • Recognized as a global “currency”
Investment in gold Gold is an effective portfolio diversifier… Gold has low to negative correlation with other asset classes, making it an excellent portfolio diversifier
Investment in gold – SA asset allocation Source: World Gold Council: “The Role of Gold in South African Investment Portfolio”, September 2004
Investment in gold … a store of value, Over the long run, gold price has outperformed inflation significantly
Gold is among only a handful of financial assets that is not matched by a liability. It can provide 'insurance' against extreme movements on the value of traditional asset classes that can happen in unsettled times. It concentrates a lot of value in a small volume. Some recent examples of the refuge afforded by gold include: During the 1987 stock market crash, gold proved itself the most effective way of raising cash to meet immediate needs. In 1997/98 the Government of South Korea asked its citizens to allow it to buy their gold holdings in exchange for local currency debt instruments. The Government raised over five million ounces of gold in this way which it sold for hard currency. As a result it was able to service its external debt. Fearful of the implications of the forecast electronic and communications disaster surrounding Y2K, there was a flight to gold in 1999. The first quarter of 2002 saw a flight to gold by Japanese investors as they awaited the withdrawal of government guarantees on bank deposits. Investment in gold … a safe haven investment,
Investment in gold … a low risk investment compared to gold stocks, Gold returns are significantly less volatile than the returns on gold equities, and on par with the broad market
Investment in gold … has positive track record in terms of returns, compared to the broad market,
Investment in gold … is an excellent rand hedge,
Investment in gold … as well as an excellent USD hedge
Securitising gold • Low investors’ interest in gold for the following reasons – • Regulatory environment – In SA, holding of unwrought gold prohibited; gold considered to be foreign currency; the only allowed gold investments Krugerrands • Gold is not part of investors’ benchmarks • Exposure to gold is limited to gold mining equities (this is not the same investment) • Physical gold is traded OTC and therefore is excluded from the investment universe • Physical transaction and ownership is cumbersome and unfamiliar to most investors, i.e., custody arrangements, insurance, settlement etc. • Channels are not properly developed for the retail investor, and costs associated with physical purchases are high
Securitising gold • Securities linked to gold bullion, in contrast, are – • Easily accessible and simple - listed on an exchange, quoted in local currency, with no minimum investment required, and with no physical delivery of underlying asset required • Secure – 100% backed by allocated gold, gold is not lent, no derivatives are employed • Cost effective – brokerage charges similar to quoted equities, tracking error compares favourably with major ETF’s, typically less than cost of buying, storing, and insuring physical gold (<30bpts bid/offer spread) • Liquid – market makers ensure liquidity in the secondary market; underpinned by liquidity of global gold market; liquidity not limited to secondary market – can be created and redeemed to meet market demand;
Gold securities worldwide • Currently, two gold-linked securities listed: 03/03 ASX - “GOLD”; 12/03 LSE - “GBS” • US$716m of assets, 1.72mozs gold • Average daily trading of US$15-25 million • Three additional filings: two in US, one in Europe.
NewGold – features • NewGold Gold Bullion Debentures are securities listed on the JSE Securities Exchange in the Exchange Traded Funds sector, under the symbol GLD • Issued by NewGold Issuer Limited, a public company incorporated in the RSA, Registration Number 2004/014199/06 • SARB approved – current annual limits on gold-linked ETFs are 500,000oz of gold per annum (starting Nov 1, 2004) • Not a Collective Investment Scheme (CIS) • Initially valued at 1/100 of one fine troy ounce of gold (“Initial quantity” – the quantity of gold bullion the debenture is referenced and linked on the issue date) • Annual fees 0.4% p.a; discharged by reducing the quantity of gold the debenture is referenced to
NewGold – features • Qualifying investors can redeem in gold • Qualifying investors – holding at 400,000 securities, an in possession of all necessary licenses, consents and approvals (including, without limitation, the required approvals in terms of the Mining Rights Act, 20 of 1967, and under Regulations 2 and 5 of the Exchange Control Regulations) to buy, own, be in possession of and/or otherwise deal in Gold Bullion); • IPO – subscriptions in cash, in specie, minimum application R1,000 • Post listing, subscription in specie only (minimum 400,000 securities, possession of all necessary licenses, consents and approvals) • Creation and redemption fees: 0.15% (wavered pre-listing) • Secondary market – ACMB acting as a market maker.
Absa Bank Limited NewGold Owner Trust Bridging Loan Agreement 49% 100% (beneficially held) 51% NewGold Manager (Pty) Limited NewGold Issuer Limited Debenture Holders Management Agreement and payment of agreed management fee Gold Bullion Debentures (tracking the value of gold bullion and listed on the JSE NewGold purchases Gold Bullion and concludes the Custody Agreement in relation thereto Custodian (Rand Refinery Limited) Structure
Investors – subscription in cash GLD CREATION GOLD BULLION GLD NewGold Issuer NewGold Manager JSE / STRATE ZAR ZAR ZAR NewGold Issuer’s allocated account INSTRUCTIONS GOLD BULLION Qualifying investor’s account Qualifying investor – subscription in specie GLD CREATION GLD Custodian (Rand Refinery) APPLICATION FORM INSTRUCTIONS Mechanics – IPO
Market maker JSE / STRATE Investors – secondary market GLD ZAR Custodian (Rand Refinery) secondary market INSTRUCTIONS Market maker’s account GLD CREATIONS / REDEMPTIONS – IN SPECIE DELIVERY GOLD BULLION NewGold Issuer NewGold Manager NewGold Issuer’s allocated account GLD ZAR secondary market INSTRUCTIONS Qualifying investor’s account GLD CREATIONS / REDEMPTIONS – IN SPECIE DELIVERY GOLD BULLION Qualifying investor – primary market Mechanics – post-listing
Taxation – debenture holders • The gain made by Debenture Holders from the acquisition and disposal of Gold Bullion Debentures will, depending on the circumstances of each Debenture Holder, be subject to income tax, CGT or will not be taxable at all, for example, if the Debenture Holder is tax-exempt or, subject to certain requirements, is not a South African resident. Applicants are advised to consult with their tax advisers on this aspect. • Debenture Holders will be liable for VAT on Creation Fees, Redemption Fees and any sales of Gold Bullion to them by NewGold Issuer. • Debenture Holders will reimburse NewGold Issuer for the UST incurred by it on the issue of Gold Bullion Debentures to them. Debenture Holders will reimburse their respective CSDPs for any UST incurred on the disposal (including redemptions) by them of Gold Bullion Debentures.
NewGold - product participants • ACMB Originator, administration • WORLD GOLD COUNCIL Marketing partner • JAVA CAPITAL Sponsor • RAND REFINERY Custodian • ACMB/ABSA STOCKBROKERS Market maker • ABSA STOCKBROKERS Participating broker • AIMS Investment plan admin, information agent • ABSA INVESTOR SERVICES CSDP • KPMG Auditors • WERKSMANS, INC Attorneys
Salient dates *Ramp up period:variable depending on prevailing market conditions but shall be maximum period of three trading days for cash subscriptions equal to or less than R1bn, and a maximum period of five trading days for cash subscriptions in excess of R1bn
Contacts • Dr Vladimir Nedeljkovic, ACMB • +27 (11) 350-2632 • firstname.lastname@example.org • Tjaart Kruger, ACMB • +27 (11) 350-2635 • email@example.com • For Manager: Mitesh Gosai, ACMB • +27 (11) 350-8075 • firstname.lastname@example.org • NewGold Call Centre • 0860 122 122 • +27 (11) 276 3958 for callers outside South Africa WWW.ABSA.CO.ZA