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WhattheExpertssay
After twenty years of watching investment practitioners dance around the fire shaking their feathered sticks, I observe
that far too many of their patients die and that the turnover of medicine men is rather high. There must be a better way.
And there is Index funds.
John C Bogle, Founder and retired CEO of the Vanguard Group.
The only way to beat an index is to invest in something other than the index. Why would you, when the only source of ,
Mark Hebner, Founder, Index Funds Advisor, Inc
Most investors, both institutional and individual, will find the best way to own common stocks is through an index fund
which charges nominal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered
by the great majority of investment professionals
Warren Buffet, Berkshire Hathaway Chairman
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ItsdifficulttooutperformaBenchmark
Key observations from the Forth Edition of the S&P CRISIL SPIVA for the period ended June 2011.
Amongequityorientedfunds,majorityoflargecapanddiversifiedequityfundsunderperformedtheirbenchmark
indices,viz,theS&PCNXNiftyandtheS&PCNX500,respectively,inallthreetimeperiodsofanalysis(1,3and5years).
In
case
of
equity
linked
saving
schemes
(ELSS),
majority
of
funds
have
underperformed
the
benchmark
S&P
CNX
500
overthe3and5yeartimeframes
Percentageoffundsthatoutperformedbythebenchmark
Category BenchmarkIndex 1year 3Year 5Year
Largecap S&P CNX
Nifty 60.61 60.00 65.00
Diversified S&PCNX50053.62 51.28 55.71
ELSS S&PCNX50037.84 56.67 65.38
Source:S&PCRISILSPIVA,IndicesVersusActiveFundsScorecard,India,June2011
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IntroductiontoExchangeTradedFunds(ETFs)
ExchangeTradedFunds(ETFs)
ETFs areIndexFunds,listedandtradedonexchanges like stocks
ass ve ymanage un strac a enc mar n exc ose y,an re ectt eper ormanceo t at n ex
At the end of June 2011, the global ETF industry comprised 2,825 ETFs from 146 providers on 49 exchanges around the
world, with total assets of 1.49 Trillion USD Source
http://www.ifaonline.co.uk
ApplicationofETFs
EfficientTrading: ETFsprovideinvestorswithaconvenientwaytogainmarketexposureviz.anindexthattradeslikea
stock.Unlikeasinglestock,aninvestmentinanETFIndexproductprovidesdiversifiedexposuretothemarket.
Equitising Cash: Investorswithidlecashintheirportfoliosmaywishtoinvestinaproducttiedtoamarketbenchmark,
likeanIndex,asatemporaryinvestmentbeforedecidingwhichstockstobuyorwhilewaitingfortherightprice
ManagingCashFlows: InvestmentmanagerswhoseeregularinflowsandoutflowsmayoftenchooseETFsbecauseof
theirliquidity,andtheirabilitytorepresentthemarket
DiversifyingExposure: Ifaninvestorisnotsureaboutwhichparticularstocktobuy,butlikestheoverallsector,investing
insharestiedtoanIndexorabasketofstocksprovidesdiversifiedexposure,andreducesstockspecificrisk
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AdvantagesofETF
AdvantagesoverActivelyManagedMutualFunds
investing
Managersdiscretion
Lowcost . . .
expenseratiosaretypicallyinthe0.25% 0.75%p.a range
No
minimum
investments
MutualFundsmayoftenhaveminimuminvestmentsofRs5,000ormore,ETFs
canbeboughtorsoldinaslittleasoneshareincrements
Tradingflexibility
Mutualfundsareonlypricedonceaday,atthecloseofthemarket.ETFs
howeverarepricedthroughoutthedayandcanbeboughtandsoldonthe
exchange
Nostyledrift TheSchemeinvestsexactlyaspertheindexconstitution,andstickstothemandate
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AdvantagesofETF
AdvantagesoverIndexFutures
LotsizeETFscanbeboughtandsoldevenassingleunits,whereasIndexFuturesarein
specificlotsizes
Longtermhorizons
UnlikeETFs,IndexFuturesneedtoberolledovereverymonthorquarter which
carriesitsownrisksandcosts
Taxation ETFswouldbetaxedlikestocksandinvestorscantakeadvantageofspecialrates
Premium &
discounts PremiumsanddiscountstendtobehigherinFuturesthaninETFs
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HowETFswork
PrimaryMarket SecondaryMarket
AllEligible
including
retail
Subscriptionduring
NFO
Investors
nits
Creation
InCreation
UnitsSize
(i.e.5000Units)
Redemptions
y/SellET
F
AuthorizedParticipants/Large
National
Stock
Exchange
(NSE)
B
Investors CapitalMarketSegmentMarketMaking/Arbitrage
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IIFLNiftyETF Keyhighlights
Name:IIFLNiftyETF
Type:AnOpenendedIndexExchangeTradedFund
Investments:TheSchemewillinvestinthesecuritieswhichareconstituentsoftheS&PCNXNiftyIndex,inthesame
proportion
as
the
Index
O ect ve:T e nvestmento ect veo t esc eme stoprov ereturns e ore eesan expenses t atc ose y
correspondtothetotalreturnoftheS&PCNXNiftyIndex,subjecttotrackingerrors.However,therecanbenoassurance
orguaranteethattheinvestmentobjectiveoftheSchemewillbeachieved
Benchmark:
S&P
CNX
Nifty
Index
AssetAllocation:StockscomprisingS&PCNXNiftyIndex:95%100%,DebtandMoneyMarketInstruments:0%5%
Sustainability:Thiswillestablishthatthemarketasawholeismoreefficientthantheindividualswhoareapartofit.
Thatiswhy,itisdifficulttooutperformthemarket.Consequentlytheevergrowingbeliefininvestinginmutualfund
schemesthat
follow
apassive
investment
strategy
Expenses:0.25%p.a.
FundManager:Mr.ManishBandi,aged33years,isaSciencegraduateandaCharteredAccountantwith11yearsof
exper ence nt e nanc a serv ces n ustry
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AbouttheS&PCNXNifty
Index Service Provider
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL)
s a o n ven ure e ween e an . as a cens ng an mar e ng agreemen w an ar an oor s
(S&P), the world's leading provider of investible equity indices, for cobranding equity indices.
S&P CNX Nifty is a welldiversified 50 stock index accounting for 24 sectors of the economy and represents 63.94% of the
total free float market capitalization of the universe of stocks traded on the NSE as on June 30, 2011
Selection of the index set is based on three criteria:
Liquidity: the security should have traded at an average impact cost of 0.50% or less during the last six months for
90% of the observations, for the basket size of Rs. 20 Million.
10%
Others: A company which comes out with an IPO will be eligible for inclusion in the index, if it fulfills the normal
eligibility criteria for the index like impact cost, market capitalization and free float, for a 3 month period
S&P CNX Nifty is computed using the free float market capitalization method
SourceNSEwe s tean IISL Facts eetason30 une2011
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Annualperformance
S&PCNXNifty
67.42%71.90%
75.76%80.00%
100.00
20.05%
36.34%39.83%
54.77%
40.00%
60.00%
1.04%
3.25% 10.68%
.
0.00%
20.00%
.
18.08%14.65%
16.18%18.48%
40.00%
20.00%
th
51.79%60.00%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
,
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S&PCNXNiftystatistics
PeriodReturns* Volatility
Particular No.
PerformanceasonAugust30,2011
3 Months 10.06 1.21
6 months6.23 1.18
NoofCompanies 50
PricetoEarnin P/E 18.05
1year 7.43 1.17
3years 4.68 1.91
PricetoBook(P/B) 2.95
DividendYield(%) 1.525years 7.93 1.87
10years 16.85 1.66
Since Ince tion 10.82 1.70
FreeFloatMarketcap(Rs.cr) 1,500,226
Top 10continentweights 57.54%
*Returnsabove1yearsareCAGR1yearandbelowreturns areabsolutereturns Source:NSEwebsite/IISL
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Thetop10constituentsoftheIndex
Constituent
FreeFloat
MarketCa Weight
AsonAugust30,2011
(Rs.cr)
RelianceIndustriesLtd. 132,000 8.80
. , .
ITCLtd. 106,650 7.11
ICICIBankLtd. 100,595 6.71
HDFC 87,799 5.85
Larsen&ToubroLtd. 86,253 5.75
HDFCBankLtd. 84,509 5.63
TCS 52,892 3.53
, .
Bharti Airtel Ltd. 48,725 3.25
Source:IISL
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Sectorcomposition
19.50
25.00
S&P CNX Nifty
12.8615.00
.
.
7.115.85 5.75
4.97 4.23 3.92 3.85 3.60 3.04 2.71 2.36 2.191.29 1.29 1.23 1.21 0.94 0.92 0.90 0.61 0.29
5.00
10.00
0.00
Banks
Software
Refineries
Cigarettes
Housing
gineering
Wheelers
Power
aceuticals
lProducts
Services
roduction
Wheelers
quipment
Diversified
luminium
tProducts G
as
Metals
nstruction
Synthetic
Institution
Mining
Finance
C
omputers
Financ E
to
mobiles
Phar
SteelAndSte
mmunication
Ex
ploration/
bile
s
2And3
Electrical
tA
ndCemen
Co
Textiles
Financial
A
Telec O
il
Automo
Ceme
Source:IISL,AsonAugust30,2011
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NFOdetails
NewFund
Offer
Period:
NFO
Opens
on:
September
28,
2011;
NFO
Closes
on:
October
12,
2011
NewFundOfferPrice:TheunitsbeingofferedwillhaveafacevalueofRs.10/ eachandwillbeissuedatapremium
MinimumAmountforApplicationintheNFO:Rs.5,000andmultiplesofRe.1/ thereafter
Plans/Options
offered:
Only
Growth
option
Allotment:Within5(Five)daysaftertheclosureoftheNewFundOffer
AllotmentPrice: Approximately1/10th ofthevalueofS&PCNXNiftyIndexonallotmentdate
Wherecanyousubmitthefilledupapplications:R&TOffice(CAMS)andInvestorServiceCentres(ISCs)ofAMCoffice
Applicationthrough
ASBA
process:
Available
and
Self
Certified
Syndicate
Banks
(SCSBs)
provide
ASBA
facility
Liquidity :SchemeisproposedtobelistedonNSEandIIFLAMChasproposedtoengageAuthorizedParticipants(AP)for
creatin li uidit for ETFs in the stock exchan e
Ongoingsubscription/redemptions:OntheExchange:Investorcanbuy/sellunitsinroundlotof1unitonNSE.Directlywith
theMutualFund:TheAP/largeinvestorcansubscribe/redeemtheunitsoftheSchemedirectlywiththeMutualFundonlyin
. .,
Dematerialization:TheunitsoftheSchemeareavailableonlyintheDematerialized(electronic)mode
LoadStructure:EntryLoad:Nil;ExitLoad:Nil.
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AbouttheCompany
AssetManagementCompany
IndiaInfoline AssetManagementCompanyLtd.(IIFLAMC)isapubliclimitedcompanyincorporatedonMarch22,2010
IIFLAMChasbeenappointedastheInvestmentManagertoIIFLMutualFundbyIndiaInfoline TrusteeCompanyLtd.(IIFL
Trustee)
TheBoardofDirectorsofIIFLAMCcompriseofeminentpersonalitieswithvariedexperience
TheTrustee
IIFLTrusteewasincorporatedonJune05,2009undertheCompaniesAct,1956andistheTrusteetoIIFLMutualFund
IIFLTrusteew ensuret att etransact onsentere nto yIIFLAMCare naccor ancew t t eSEBIRegu at onsan w
alsoreview
the
activities
carried
on
by
the
AMC
MutualFund
IIFLMutualFundhasbeenconstitutedasatrustonApril29,2010.IndiaInfolineLimitedistheSponsorsandIndiaInfoline
TrusteeCompanyLimitedistheTrustee
TheMutual
Fund
was
registered
with
SEBI
on
March
23,
2011
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BoardofDirectorsIndiaInfoline TrusteeCompanyLimited(IIFLTC)
Mr A.K.Shukla
(IndependentDirector)
M.SC.
Former Chairman of Life Insurance Corporation of India
Has an experience of more than 41 years in the insurance business
Chairman Recipient of various prestigious awards including Distinguish Fellow, Institute of Directors, Delhi; Indira Gandhi
Priyadarshni Award by National Unity Congress, Delhi, Marketing King Award by IMM Delhi, etc.
B.Sc;LLB
Mr R.S.Loona
(IndependentDirector)
CorporateLawyerbyprofessionwithanexperienceofmorethan30yearsinthelegalfield.
HeldseniorpositionssuchasChiefGeneralManager(Legal)inIDBIandExecutiveDirector(Law)inSEBI
AssociatedwithseveralExpertGroups/CommitteesconstitutedbyGovt.ofIndia,SEBIandalsowritesarticlesin
financialnewspapersonsecuritieslawsandcorporatematters
Mr J.H.Mehta
(IndependentDirector)
B.Com;MBAfromIIM(Ahmadabad);GraduateofAdvancedManagementProgrammefromWhartonSchool,USA
ManagementConsultantbyprofession
Hasanexperienceofmorethan30yearsandwasassociatedwithrenownedorganisationslikeHLLasVice
President,HindustanLeverasExecutiveDirector,RPGGroupas President
B.Com;
CA.;
ICWA;
MBA
(IIM)
(AssociateDirector) ChairmanandManagingDirectorofIIFLGroup,oneoftheleadingFinancialServicesCompanyinIndia
Richandvariedexperienceofmorethan21yearsinfinancialservicesindustry
RankedsecondinIndiasMostValuableCEOsbyBusinessWorldfor2009
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BoardofDirectorsIndiaInfoline AssetManagementCompanyLimited
MsHomaiDaruwalla
Chartered Accountant and CAIIB
Former Chairperson and Managing Director of Central Bank of India
Varied and rich experience of more than 34 years in Banking Sector
(Independent Director) Handled varied assignments in 3 large Public Sector Banks viz. Union Bank of India, Oriental Bank of Commerce and
Central Bank of India
Handled prestigious assignment as Region of India Director on BoDs of The Institute of Internal Auditors (IIA), Florida,
U.S.A.
Mr PranabPattanayak
M.A. in Economics from Utkal University and CAIIB PtI
Former Managing Director of State Bank of Mysore
c an var e exper ence o years n e an ng nanc a erv ces e
Held senior positions in State Bank of India and State Bank of Travencore
Mr R.Venkataraman
(AssociateDirector)
B. Tech from IIT (Kharagpur) and MBA from IIM (Bangalore)
CoPromoter and Executive Director of India Infoline Ltd.
Varied experience of more than 19 years in the financial services sector including Stock Broking, Private Equity andnvestment an ng
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TheFundssponsor:IIFL
IndiaInfoline Group(IIFL)isoneoftheleadingplayersintheIndianfinancialservicesspace
IIFLoffersadviceandexecutionplatformfortheentirerangeoffinancialservicescoveringproductsrangingfromEquitiesand
derivatives,Commodities,Wealthmanagement,Assetmanagement,Insurance,Fixeddeposits,Loans,InvestmentBanking,
bondsandothersmallsavingsinstruments
IIFLis
listed
on
NSE
and
BSE
with
amarket
cap
of
US$500mn
Majorbusinessunits
IIFLhasawidenetwork,coveringover3,000businesslocationsspreadacross500citiesandtownsacrossIndia
ThegrouphasalsoexpandedgloballyandhassubsidiariesandofficesinColombo,Dubai,NewYorkandSingapore
RetailEquities
Credit&
Finance
Financial
Over1million
customers
serviced
from
3,000
locations;
leadershippositionwith4%marketshareFocus
on
retail
secured
mortgages
and
consumer
loans;
Book
sizeofRs39bn withNPAsatlessthan 0.5%.
Equities
Investment
Bankin
Products
Distribution
Asset
Mana ement
,
capabilities,strongfranchiseinIndiaandAsiaPacific
PrimaryexpertiseisEquityCapitalMarketswithaviewto
levera einstitutionalandretaildistributionca abilities
,
and othersavingsproducts
Receivedlicense
to
set
up
mutual
fund
PrivateWealth
Management
International
OperationsAmongstleadingIndianplayerswithoverRs200bn assets under
advice
Regulatedsubsidiariesinkeymarkets,targetinginstitutional
equitiesandNRIwealthmanagement
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Evolution
1995 CommencedoperationsasanEquityResearchfirm
1997 Launchedresearchproducts ofleadingIndiancompanies,keysectors
andtheeconomy
Income(` mn)
9,28011,239
14,720
1999 Launchedwww.indiainfoline.com
2000
Launchedonlinetradingthroughwww.5paisa.com
Starteddistribution
of
life
insurance
and
mutual
fund
7422,021
3,974
,
2003 LaunchedproprietarytradingplatformTraderTerminalforretail
customers
2004 Acquiredcommoditiesbrokinglicense
LaunchedPortfolioManagementService
NetProfit(` mn)
FY05 FY06 FY07 FY08 FY09 FY10 FY11
2,320
2,047
2005 MaidenIPOandlistedonNSE,BSE
2006 AcquiredmembershipofDGCX
Commencedthecredit&finance 492756
1,5991,448
2007 ommence nst tut ona equ t es us nessun er
FormedSingaporesubsidiary,IIFL(Asia)PteLtd
2008 LaunchedIIFLWealth
Transitionedto insurance
broking
model
Networth(` mn)FY05 FY06 FY07 FY08 FY09 FY10 FY11
2009 AcquiredregistrationforHousingFinance
ObtainedVentureCapitallicense
2010 ReceivedmembershipoftheSingaporeStock ExchangeandColombo
StockExchange
14,892 15,44716,053
,
CommencedoperationsinSingapore&Colombo
2011 Received SEBIfinalapprovalforIIFLMutualFund522
1,9433,251
FY05 FY06 FY07 FY08 FY09 FY10 H1FY11FY11
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IndependentDirectorsofotherGroupCompanies
Mr A.K. Purwar Joined State Bank in 1968 and became chairman in 2002
Became Chairman o Indian Banks Association in the year 200506
Received CEO of the year and Outstanding Achiever of the year award
.
(IndependentDirector)
PartoftheManagingCouncilandheadingtheCorporateMembersCommitteeoftheChamberofTaxConsultants
(CTC)
Mr.Kranti Sinha
(IndependentDirector)
Director
and
Chief
Executive
of
LIC
Housing
Finance
Limited
1998
to
2002
ConcurrentlywastheMDofLICHFLCareHomes
ServedasDeputyPresidentofGoverningCouncilofInsuranceInstitute
Mr.M.N.Singh
(IndependentDirector)
JoinedtheIndianPoliceServicein1967
Worked as the chiefs of the crime branch of Mumbai Police State CID and AntiCorru tion Bureau
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AwardsandAccolades
IIFLawardedBestWealthManagementHouse IndiaandBestBroker India,2011
Hon'bleFinanceMinisterpresentingIndiasBestEquity
BrokerAward
to
INDIASBESTEQUITY
BROKER2011
BLOOOMBERGUTV2011
BESTBROKER INDIA
FINANCEASIA2011
HOUSE INDIA
THEASSETTRIPLEA
INVESTMENTAWARDS,2011
March26,2011
Someotherrecentawards
BESTBROKER
INDIA2008
MOSTIMPROVED
BROKERAGE INDIA
2008
FASTESTGROWING
BROKINGHOUSE
2008
Ranked2nd in
INDIASMOST
VALUABECEOs
2009
BESTMARKET
ANALYST2009
Amongsttop3for
BESTBROKERAGE
2009
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ThankYou
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