Nifty BeES

About Benchmark
Only Mutual Fund in India with exclusive focus on quantitative and passive investment management Monitored by Securities and Exchange Board of India (SEBI) Managed proactively by the Trustees, separate from the Asset management firm Trustees meet compulsorily once in 2 months and report to SEBI every quarter The Compliance Officer reports independently and directly to the Trustees bi-monthly Benchmark
Benchmark is also regulated by the National Stock Exchange of India rules and bye laws The securities and other assets of the Fund are held by ABN AMRO

Introduction to Nifty BeES

First Exchange Traded Fund (ETF) in India Combination of a share and a mutual fund unit Real-time Trading on NSE Real-time Indicative NAV on www.benchmarkfunds.com Available across 4000 NSE terminals in 400 cities Tracks the S&P CNX Nifty Index Priced at 1/10th of the Nifty Index Investment management fees is 0.35% and the total expense ratio is 0.80% per annum, the lowest in India Structured as a Mutual Fund under the SEBI 1996 regulations

History of ETFs
First ETF came in 1993 on S&P500 called SPDRs SPDRs and QQQs (ETF on Nasdaq 100) are the most actively traded ETFs Globally, there are currently 348 ETFs managed by 43 managers across 31 exchanges. On February 28 , 2005 the ETF market globally was $313.60 billion (Source: MSDW) ETFs launched across the world include Japan in September 2001 and in Korea and Singapore in 2002 Nearly 60% of trading volumes on American Stock Exchange comprises of ETFs

S&P CNX Nifty Index

Indias premier benchmark index introduced in November 1995 and was developed as a basis for introducing index based derivatives Only companies having a high degree of liquidity defined in terms impact cost are included as constituents of the Index Nifty is calculated using the market capitalisation weighted method Impact cost of the S&P CNX Nifty is 0.10% for a portfolio size of Rs.5 million Represents about 66% of total market capitalisation Correlation with Morgan Stanley Capital International (MSCI) India Index is about 97% over last 3 years Attracts most of the Futures of over $ 1 bn daily. The underlying trades over $ 1.2 bn daily.

ETFs Growth - Global

Growth of International ETF
300,000 200,000 100,000 1993 Assets No. Of ETF 811 3 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 350 300 250 200 150 100 50 0

1,121 2,302 5,268 8,234 17,596 39,605 74,337 104,80 141,62 212,01 247,96 3 4 21 21 31 33 92 202 280 282 318

Assets

No. Of ETF

Source: Bloomberg, Morgan Stanley Research

How Nifty BeES work

Primary market Secondary market

Seller Authorised Participants / Financial Institutions Creation in-kind Fund Cash Buy / sell NSE Nifty BeES

Market making / Arbitrage Redemption in-kind

Cash Buyer

Nifty BeES

ETF Liquidity
Futures Underlying Equity (Creation / Redemption Process)

ETF Liquidity

IntraIntra-day Buy/Sell

The notional liquidity of an ETF is the average volume of the underlying.

Nifty BeES Advantages

Simple Can be bought/ sold on NSE like a sharereal-time Economical No load scheme. Annual expense one of the lowest for any mutual fund scheme in India. Diversification Its a cost efficient way to invest in a basket of securities Equitable Structure Long term investors insulated from short term trading activity Transparent Investors have access to information on the portfolio constituents represented represented on a daily basis Premium/Discount to NAV Between +&-0.5%
(Source: Business Standard)

Nifty BeES Details

NSE SYMBOL : NIFTYBEES ISIN: INF732E01011 Reuters NBES.NS Bloomberg NBEES.IN Moneyline Telerate IN;NBFN TOTAL EXPENSE RATIO:
0.80% (upto Rs.1000 mn) 0.70% (next Rs.4000 mn) 0.65% (over Rs.5000 mn)

ENTRY/ EXIT LOAD: NIL

Tracking Error
Annualized Six-month Tracking Error (TE) calculated as on July 08, 2004
Nif ty BeES Junior BeES SBI Magnum Index Fund - Grow th UTI Nif ty Fund Tata Index Fund - Nif ty Plan - Option B Birla Index Fund - Grow th Tata Index Fund - Nif ty Plan - Option A Franklin India Index Fund - NSE Nif ty Plan - Dividend Prudential ICICI Index Fund PRINCIPAL Index Fund - Grow th HDFC Index Fund - Nif ty Plan LIC MF Index Fund - Nif ty Plan - Grow th 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%

Source: www.mutualfundsindia.com

Nifty BeES vs. Open ended Index funds

Attribute Traded throughout the day Low Expense Ratio Trade at any brokerage firm Hedging Tool Ability to lend units Tracking NAV Liquidity Structure Nifty BeES Yes Yes Yes Yes Yes Best Indicative Real time Fund / Stock market Insulates long term investor from short term trading activity Traditional Open Ended Index Funds No No No No No Average Daily Fund Does not insulate long term investors from short term investor activity

Independent Research Review

Nifty BeES seems the best index fund when it comes to all three parameters; Entry loads, Expense ratios and Tracking Error.It is Indias first and only Exchange Traded Fund or simply put, a next generation index fund. - Business World, September 30, 2002 Investing in Nifty BeES is a comparatively better method of participating in any market rally - The Economic Times, December 2, 2002

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