Value Averaging Investment Plan (VIP)

For

A superior investment discipline available for the first

time to Indian Retail Investors
About Benchmark S&P CNX 500 Fund
 About S&P CNX 500 Index
Scientifically developed index managed by IISL (Joint Venture of NSE &
CRISIL)
Broad based benchmark of the Indian Capital markets
Industry weightages in the index mirror the industry weightages in the
universe
Index values are calculated using the market capitalisation weighted
method
Market cap weighted index automatically changes, adjusts & rebalances to
changing prices, hence there is no need to physically rebalance portfolios
on account of change in prices
The base year for S&P CNX 500 index is 1994 with base value being 1000
Represents about 94.49% of total market capitalisation and about 94.43%
of the total turnover* on the NSE as on May 29, 2009

* In Rs Crs
 About S&P CNX 500 Index

Represents around 72 Industry Indices

Flexibility in the number of Industry Indices & companies within each
Industry Index, so as to attain the objective of being a dynamic market
indicator
Selection of the stocks is based on criteria such as
 Industry representation
 Trading Interest
 Financial Performance
 Others
 Performance - Indices

Normalised To 1 Lac As On Jan 01, 1998 850000

750000
650000
550000
450000
350000
250000
150000
50000
01-Jan-98

01-Jan-99

01-Jan-00

01-Jan-01

01-Jan-02

01-Jan-03

01-Jan-04

01-Jan-05

01-Jan-06

01-Jan-07

01-Jan-08

01-Jan-09
S&P CNX 500 S&P CNX Nifty BSE Sensex

Rs S&P CNX 500 S&P CNX Nifty BSE Sensex

Initial Investment As On
100000 100000 100000
1st Jan 98
Value As On May 29, 09 529273 411483 395853
CAGR(%) 15.72% 13.19% 12.81%

Source: MFI Explorer & Internal. Data As On 29th May 09

 Performance - Indices
60
49 45 48

40

5 Yrs Rolling, Frequency – Daily,

(%)

20 14 12 12
Period – 4th Jan 99 to 29th May 09
0
Minimum Maximum Average
-7 -8
-10
-20
S&P CNX 500 S&P CNX Nifty BSE Sensex

80
66 63
59
60

3 Yrs Rolling, Frequency – Daily,

40
(%)

16 14 14
Period – 2nd Jan 98 to 29th May 09 20

0
Minimum Maximum Average
-20 -16 -18
-23
-40
S&P CNX 500 S&P CNX Nifty BSE Sensex

Source: MFI Explorer & Internal. Note: The above performance is CAGR(%)
 Benchmark S&P CNX 500 Fund

The fund which could be held as a core holding in the portfolio

Gives you participation in top 500 companies in India

Includes mid cap as well as small cap companies and hence less likely to miss
out on emerging star
An Index fund from Benchmark Mutual Fund, currently the largest Index Fund
manager in the country and committed to philosophy of indexing

Benchmark S&P CNX 500 Fund is a ‘Total Stock Market Index Fund’ that
eliminates the risk of individual stocks, sectors, individual fund manager
etc i.e all ‘Unsystemic risks’ only the ‘Systemic’ or market risk
remains which is common to all equity investments
Does Indexing Work In India ?
 Popular Perceptions

Indian markets are inefficient and Indexing does not work

Good Fund Managers will out perform indices consistently

Past performance is useful tool to decide future performance

Let us do some reality check....

 Analysis Methodology

All diversified equity schemes with benchmark index as S&P CNX Nifty/BSE
Sensex/BSE 100/CNX 100 and having track record of at least 5 calendar years as
on Dec 31, 08 (Based on this criteria we have selected 60 schemes)
3 years rolling returns (CAGR %) calculated on daily basis have been considered
for each scheme under analysis
Average returns of diversified equity schemes have been considered for
calculating out performance over Nifty BeES in absolute terms, also each
individual schemes performance is compared vis-à-vis Nifty BeES for calculating
no. of funds underperformed(%) on daily basis for the period under analysis

The start date (i.e 22nd Dec 06) of rolling returns is the day when all the schemes
under analysis have completed 3 yrs time frame since inception. The last
observation date is 19th May 09
All the performance are calculated for growth/dividend reinvestment plan
 Indexing Vs Active Management

Active Funds Outperform ance/Underperform ance Over Nifty

BeES
8 100
6
80
4
2 60
(%)

(%)
0
-2 40
-4
20
-6
-8 0
22-Feb-07

12-Feb-08

13-May-09
22-Dec-06

13-Jun-07

29-Nov-07

16-Jun-08

26-Nov-08

21-Jan-09

17-Mar-09
26-Sep-07

29-Sep-08
03-Aug-07

06-Aug-08
23-Apr-07

24-Apr-08

Absolute %Outperformance - LHS No. of Funds Underperformed (%) - RHS

Data as on 19th May 09. Source: MFI Explorer & Internal

About Value Averaging
 What is Value Averaging?

It is an averaging technique where portfolio balance increases in defined

way irrespective of market movement

It was developed by former Harvard University professor Michael E.

Edleson

The investment amount for each period is different

Investment amount is calculated based on the following formula

 Inv. Amt. = Target Port. Value – Actual Port. Value

Target Port Value is calculated based on the long term average return
 Value Averaging - Advantages

As a discipline it invests more rupee amount when markets are lower

and less when markets are higher

As a discipline, it helps investor overcome emotions

In most cases it generates higher returns than normal SIP which is based
on rupee cost averaging technique

It achieves lower cost of acquisition in most scenarios as compared to

SIP

The probability of achieving target value for a portfolio is much higher

and hence ideal for financial planning

Longer the investor horizon, higher the benefits

 VIP - Salient Features

Very powerful combination of an ideal long term investment discipline

combined with ideal equity fund for long term core holding
Very simple to understand and operate

Facility of advance SMS intimation of monthly debit amount

No entry load

The investment objective of Benchmark S&P CNX 500 Fund is to

generate capital appreciation through equity investments by investing in
securities which are constituents of S&P CNX 500 Index in the same
proportion as in the Index

No Fund Manager risk

Lower annual expenses

 VIP - Salient Features

Nominal Investment Amount

To be intimated by the investor at the time of first investment (Subject to a
minimum amount of Rs.2000 and in multiples of Re.1/- thereafter. There is no
maximum cap on this amount).

Minimum Investment Amount Per Month = Rs. 0/-

Maximum Monthly Investment Amount

To be intimated by the investor at the time of first investment (There is no upper
limit on this amount but the amount should be greater than the nominal amount).

Default target rate of return is 15% p.a. which is close to long term
historical return given by S&P CNX 500 Index

Note: Please refer to Scheme Information Document for more details.

 VIP - Salient Features

Entry Load = Nil

Exit Load
 For Investments less than Rs. 2 Crores
• Redeemed within 1 year from date of allotment – 1.50%
• Redeemed after 1 year but within 2 years from date of allotment – 1.00%
• Redeemed after 2 years but within 3 years from date of allotment – 0.50%
• Redeemed after 3 years from date of allotment – Nil

 For Investments of Rs. 2 Crores and more

• Redeemed within 3 months from date of allotment – 0.50%
• Redeemed after 3 months from date of allotment – Nil

Benchmark Index = S&P CNX 500 Index

Note: Please refer to Scheme Information Document for more details.

 Value Averaging - Challenges

Classical Value Averaging posses some challenges which has been

overcome by introducing some practical modifications
In constantly falling markets the investment amount may increase much beyond
the investor’s cash flow
(Addressed by introducing investor defined maximum monthly debit)

In rising market it generates sell which may result in unwarranted short term
taxation and transaction charges
(Addressed by avoiding sell / redemption and instead have minimum
investment amount as zero)

If left to Individual investors, they may select aspirational rate of target return
rather then long term average, which can perpetually result in higher investment
amount and strained cash flows
(Addressed by keeping default target rate of return at 15% p.a. which is a
long term historical return offered by S&P CNX 500 index)
 Distinguishing Features – Value Averaging Vs.
Rupee Cost Averaging
Parameters Value Averaging Rupee Cost Averaging
(VIP) (SIP)*
Performance Better compared to SIP in Lower compared to VIP in
most scenarios most scenarios
Cost of acquisition Lower as compared to SIP in Higher as compared to VIP
of units most scenarios in most scenarios
Monthly investment Variable Fixed
amount
Portfolio volatility Lower compared to SIP Higher compared to VIP
Expected growth Yes, should be known while Not applicable
rate of portfolio starting the investment
Target maturity amt. Yes, can be achieved Not applicable
for meeting financial (if mkt. returns are less More
goals amt. is invested.)
*SIP – Systematic Investment Plan
 Performance – VIP Vs SIP
Returns - CAGR(%) CAGR Outperformance VIP average cost
Rolling Three Year
VIP SIP of VIP over SIP As % of SIP Cost
Period Ending on
Apr-97 -2.04% -5.61% 3.57% 94.44%
Apr-98 9.06% 5.71% 3.35% 96.09%
Apr-99 3.05% -0.23% 3.27% 95.27%
Apr-00 27.36% 24.45% 2.91% 86.44%
Apr-01 -4.65% -6.25% 1.59% 95.57%
Apr-02 -1.89% -6.85% 4.96% 92.33%
Apr-03 -4.88% -7.36% 2.48% 95.68%
Apr-04 46.36% 44.22% 2.14% 87.03%
Apr-05 40.12% 35.02% 5.10% 81.32%
Apr-06 54.80% 53.27% 1.53% 88.26%
Apr-07 38.14% 34.59% 3.55% 96.34%
Apr-08 30.51% 26.26% 4.25% 97.71%
Apr-09 -4.72% -10.63% 5.90% 89.16%
Average 17.79% 14.35% 3.43% 91.97%
Note: (1) In the above table S&P CNX 500 index is the underlying in which we are investing every month for a particular
period. (2) For VIP the nominal amount considered for investment is Rs.2000. The minimum and the maximum amount
considered for investment are Rs. 0 and Rs. 20,000 per month and the target rate of return considered is 15% p.a. (3) For
SIP a fixed amount of Rs. 2,000 per month is considered for investment. (4) The above data is for illustrative purpose only.
 VIP - A Dynamic Investment Tool

22000 6000
20000

S&P CNX 500 Index Value

VIP investment amount
5000
Investment Amt(Rs.)

18000 reduces to Rs.0/- when

index rises as against
16000 Rs.2000 invested in SIP
14000 4000
12000
3000
10000
8000 2000
6000
4000 1000
2000
0 0
1-Nov-06

1-Nov-07

3-Nov-08
1-Feb-07

1-Feb-08

2-Feb-09
1-Aug-06

1-Aug-07

1-Aug-08
2-May-06

3-May-07

2-May-08
VIP investment amount
increases to Rs.20000/-
when index falls as
against Rs.2000
invested in SIP

M onthly Investment-VIP-LHS M onthly Investment-SIP-LHS Index Value-RHS

Note: (1) In the above graph of VIP & SIP, S&P CNX 500 index is the underlying in which we are investing every month for the period
between May 2006 to Apr 2009. (2) For VIP the nominal amount considered for investment is Rs.2000. The minimum and the maximum
amount considered for investment are Rs. 0 and Rs. 20,000 per month and the target rate of return considered is 15% p.a. (3) For SIP a
fixed amount of Rs. 2,000 per month is considered for investment. (4) The above data is for illustrative purpose only.
 VIP – An Illustration

SIP Investor VIP Investor

N AV
Month SIP Amount Units VIP Amount U nits
(Rs.)
(R s.) Bought (Rs.) Bought

1 10 2000 200 2000 200

2 11 2000 182 1825 166
3 12 2000 167 1684.40 140
4 13 2000 154 1569.67 121
5 11 2000 182 3355.93 305
6 10 2000 200 3060.27 306
7 9 2000 222 3392.90 377
8 8 2000 250 3796.82 475
9 9 2000 222 119.25 13
10 8 2000 250 4339.56 542
11 9 2000 222 0 0
12 10 2000 200 0 0

Total Amount Invested (Rs.) 24000 25144

Total No. of Units Bought 2451 2645
Average Cost Per Unit (Rs.) 9.79 9.50
Market Value As on June (Rs.) 24508 26454
CAGR(%) 4.95% 10.60%

Note: (1) The above NAV data is hypothetical. (2) For VIP the nominal amount considered for investment is Rs.2000. The
minimum and the maximum amount considered for investment are Rs. 0 and Rs. 20,000 per month and the target rate of
return considered is 15% p.a.. (3) For SIP a fixed amount of Rs. 2,000 per month is considered for investment. (4) The
above data is for illustrative purpose only. (5) CAGR(%) is based on XIRR calculations.
About Benchmark
 Benchmark - Highlights

Differentiation in Investment Philosophy, Product structures and Product

delivery mechanism

Clear Positioning – Indexing and Quantitative Asset Management

Leadership position in indexing and ETF areas (Currently largest index fund
manager and ETF manager in India)*

A track record of successfully conceptualizing and launching innovative

products with many firsts

Excellent track record in investment performance

* Source: AMFI
 Achievement

Nifty BeES was Awarded Best Performing Mutual Fund of The Year Award In The Index Fund Category
at the CNBC – TV18 – CRISIL Mutual Fund of The Year Award 2008*

Eligibility Criteria & Methodology

Schemes present in all four quarterly CRISIL CPRs
were considered for the award. The award is based on
consistency of the scheme’s performance in the four
quarterly CRISIL CPR rankings released during the
calendar year 2008. The individual CRISIL CPR
parameter scores averaged for the four quarters were
further multiplied by the parameter weights as per the
CRISIL CPR methodology to arrive at the final scores.
A detailed methodology of the CRISIL CPR is available
at www.crisil.com. Past performance is no guarantee
of future results.
Nifty BeES Rankings and Award Source: CRISIL FundServices,
CRISIL Ltd.

Best Provider of Structured Products

Private Banking Poll
2006

* Past performance is no guarantee for future results.

 Disclaimer
RISK FACTORS

Pertaining To VIP:
(1) As the monthly investment amount is variable, it would be difficult for the investors to manage their cash flows. (2) If the market moves
in one direction i.e. either up or down, VIP may generate less return compared to SIP. (3) If the NAV of the Scheme continuously
decreases, the absolute loss to the investor would be more than what the investor would have incurred by investing in SIP.

General:
(1) Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including
the possible loss of principal. (2) As the price/value/interest rates of the securities in which the Scheme invests fluctuates, the value of your
investment in the Scheme may go up or down depending on the factors and forces affecting the capital markets. (3) Past performance of
the Sponsors/Investment Manager/Mutual Fund and its affiliates does not indicate the future performance of the Scheme and may not
provide a basis of comparison with other investments. (4) Benchmark S&P CNX 500 Fund & Nifty BeES are the name of the Schemes and
does not in any manner indicate either the quality of the Schemes or its future prospects and the returns. Investors are therefore urged to
study the terms of offer carefully and consult their Investment Advisor before they invest in the Schemes. (5) The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the Scheme beyond the initial contribution made by it of an
amount of Rs. 1 Lac towards setting up of the Mutual Fund. (6) The present Scheme is not a guaranteed or assured return Scheme. (7) The
Scheme’s NAV will react to the stock market movements. The Investor could lose money over short periods due to fluctuation in the
Scheme’s NAV in response to factors such as economic and political developments, changes in interest rates and perceived trends in stock
and securities prices, market movements, and over longer periods during market downturns. (8) The Scheme is required to have (i)
minimum 20 investors and (ii) no single investor holding>25% of corpus. If the aforesaid point (i) is not fulfilled within the prescribed time,
the Scheme will be wound up and in case of breach of the aforesaid point (ii) at the end of the prescribed period, the investor's holding in
excess of 25% of the corpus will be redeemed as per SEBI guidelines. (9) “S&P®” and “Standard and Poor’s®” are trademarks of the
McGraw-hill Companies, Inc. (“S&P”), and have been licensed for use by India Index Services & Products Limited in connection with the
S&P CNX 500 Index. The Product is not sponsored, endorsed, sold or promoted by India Index Services & Products Limited ("IISL") or
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). Neither IISL nor S&P makes any representation or warranty,
express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally
or in the Product. Please read the full Disclaimers in relation to the S&P CNX 500 Index in the Scheme Information Document before
investing.
Thank You