Passive Funds: Exchange Traded Funds (ETFs) and Index Funds

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENT CAREFULLY. Growth of Equity ETFs and Index Funds in

18.42% 1,70,308 16.72% 1,37,776

10.67% 8.81%

74,925 % share % 4.50% 45,624 2.52% Crs. Rs. inAUM 17,009 8,534

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Dec-19 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Dec-19 Period Period

Equity ETFs + Index Funds AUM* Equity ETFs and Index Funds AUM as % of Equity AUM*

❑ Major Growth Enablers

✓ Retirement Funds are mandated to invest at least 5% of annual accretion in Equities. Many of them have opted Equity ETFs/Index Funds for equity investment.

✓ Categorization and Rationalization of Mutual Fund Schemes by SEBI$

✓ Benchmarking of funds moved from Price Return Index (PRI) to Total Return Index (TRI).

✓ Challenges in generating alpha due to improving efficiency of equity market and reducing information asymmetry.

* Month End Asset Under Management (AUM). Source: MFI Explorer. $ with reference to circular number SEBI/HO/IMD/DF3/CIR/P/2017/114 SEBI - Securities and Exchange Board of India. TRI refers to index values which also account for dividends, where as in case of Price Return Index (PRI), dividends distributed by companies forming part of an index are not considered. What is an Equity Index?

Rule Based Representation Indexing

Investing in a Indices represents portfolio which is An Index is a rule certain aligned to particular based portfolio characteristics of a index. I.e. equity where, market segment, portfolio will hold stocks/companies like market same stocks and in are selected based capitalization, same proportion as on pre-defined rules sectors, themes, represented by an factors etc. Index. Why Indexing?

Market is efficient Zero Sum Game Easy to understand No Biases Low Risk Low Cost

Movement in prices Positive alpha* of It reduces the Elimination of Helps in reducing Available at lower are based on new one market process of individual’s biases un-systematic risk cost as compared information and participant has to selection vis-à-vis & subjective and rewards for to actively indices reflects the come from an individual opinion while taking systematic managed funds collective negative alpha of stock/fund picking risk. interpretation by another market stocks/funds the various market participant participants

* Alpha is difference between returns generated by a scheme and its benchmark. When a scheme generate more returns as compared to its benchmark is called positive alpha. When scheme generate less returns as compared to its benchmark, is called negative alpha. Why Indexing? S&P Indices versus Active Fund (SPIVA) India Scorecard

• SPIVA India scorecard compares the performance of actively managed Indian mutual funds with their respective benchmark indices over 1, 3, 5, and 10 year period.

• The comparison is done in a scientific way considering survivorship bias correction, style consistency, apple-to-apple comparison, asset weighted returns etc.

• This semi-annual report is called as SPIVA scorecard.

• Extract from the Mid Year June 2019 Report: Majority of large-cap funds are underperforming the Index.

Source: https://us.spindices.com/documents/spiva/spiva-india-mid-year-2019.pdf About Indices - Attributes

S&P BSE Sensex Index Nifty 50 S&P BSE Sensex Nifty Next 50 Next 50

Top 50 companies Next 50 companies Broad Selection Top 30 companies Next 50 companies by free float market by M-Cap after S&P BSE Criteria* by free float M-Cap by M-Cap after Nifty 50 Index capitalization (M-Cap) Sensex 50 Index

Number of 50 30 50 50 Constituents

Launch Date April 22, 1996 January 1, 1996 December 24, 1996 February 27, 2017 Base Date November 03, 1995 April 3, 1979 November 04, 1996 December 16, 2005

Semi-Annual Semi-Annual Semi-Annual Semi-Annual Re-balance (January and July) (June and December) (January and July) (June and December)

NSE Indices, subsidiary of Asia Index Private Limited, joint NSE Indices, subsidiary of Asia Index Private Limited, joint Index Provider National Stock Exchange of venture between S&P Dow National Stock Exchange of venture between S&P Dow India (NSE) Limited Jones Indices LLC & BSE Ltd India (NSE) Limited Jones Indices LLC & BSE Ltd

Source: www.niftyindices.com, www.asiaindex.co.in * - Subject to other selection criteria defined under index construction methodology. About Indices – Market Capitalization (M-Cap)

Nifty 50 S&P BSE Sensex

Market 75,02,530 Market 88,41,439 Exposure Exposure

57% 48%

Cap in Rs. Rs. Crores Capin Rs. Crores Capin

- - M M 8,94,874 8,94,874 1,05,447 10,011 1,72,238 49,850

Total M-Cap of Index Median M-Cap M-Cap of Top Company M-Cap of Bottom Company Total M-Cap of Index Median M-Cap M-Cap of Top Company M-Cap of Bottom Company

Nifty Next 50 S&P BSE Sensex Next 50 18,64,169 Market Market 23,81,803 Exposure Exposure

15% 12%

Cap in Rs. Rs. Crores Capin Rs. Crores Capin

- -

M M 1,33,964 1,33,964 39,975 13,101 30,774 10,011

Total M-Cap of Index Median M-Cap M-Cap of Top Company M-Cap of Bottom Company Total M-Cap of Index Median M-Cap M-Cap of Top Company M-Cap of Bottom Company

$ - Data as on Jan 31, 2020. Source: Bloomberg. Data based on Total Market Capitalization of companies. % Market Exposure = Total Market Cap of Index / Market cap of all listed companies in National Stock Exchange Limited (NSE). About Indices – Sector Weight

Sectors Nifty 50 S&P BSE Sensex Nifty Next 50 S&P BSE Sensex Next 50

FINANCIAL SERVICES 41.50% 45.36% 30.97% 26.68%

CONSUMER GOODS 11.60% 12.42% 23.43% 15.22%

ENERGY 13.66% 13.40% 5.50% 6.32%

PHARMA 13.17% 14.54% 0.87% 2.60%

AUTOMOBILE 2.17% 1.10% 12.03% 11.50%

IT 5.66% 5.14% 5.08% 9.57%

CEMENT & CEMENT PRODUCTS 1.63% 1.16% 7.48% 6.40%

INDUSTRIAL MANUFACTURING 0.00% 0.00% 1.71% 5.15%

CONSTRUCTION 3.42% 3.90% 2.06% 0.00%

CHEMICALS 0.58% 0.00% 3.69% 3.80%

SERVICES 0.00% 0.00% 2.95% 4.81%

METALS 2.95% 0.77% 1.91% 1.32%

TELECOM 2.67% 2.20% 0.49% 2.77%

FERTILISERS & PESTICIDES 0.00% 0.00% 0.00% 1.98%

TEXTILES 0.00% 0.00% 1.81% 1.87%

HEALTHCARE SERVICES 0.59% 0.00% 0.00% 0.00%

MEDIA & ENTERTAINMENT 0.41% 0.00% 0.00% 0.00%

$ - Data as on Jan 31, 2020. Source: www.niftyindices.com, www.asiaindex.co.in Bloomberg. The Sectors referred in this literature are not an endorsement by the Mutual Fund and AMC of their soundness or a recommendation to buy or sell at any point of time. These are only for reference purpose. About Indices – Top 10 Stock Weights

Nifty 50 S&P BSE Sensex Nifty Next 50 S&P BSE Sensex Next 50

HDFC BANK LTD. 10.73% HDFC BANK LTD. 12.15% SBI LIFE INSURANCE COMPANY LTD. 4.71% SBI LIFE INSURANCE COMPANY LTD. 4.33%

RELIANCE INDUSTRIES LTD. 9.23% LTD. 10.45% HDFC LIFE INSURANCE COMPANY LIMITED 4.49% HDFC LIFE INSURANCE COMPANY LIMITED 3.97%

HDFC LTD. 8.42% HDFC LTD. 9.69% LTD. 3.93% DIVIS LABORATORIES LTD. 3.29%

ICICI BANK LTD 6.87% ICICI BANK LTD 7.88% INDIA LTD. 3.59% LTD. 3.07%

INFOSYS LTD. 5.75% LTD. 6.78% ICICI LOMBARD GENERAL INSURANCE COMPANY LTD 3.37% AVENUE SUPERMARTS LTD. 2.99%

KOTAK MAHINDRA BANK LTD. 4.58% TATA CONSULTANCY SERVICES LTD. 5.11% LTD 3.26% BHARTI INFRATEL LTD 2.77%

TATA CONSULTANCY SERVICES LTD. 4.42% ITC LTD. 4.69% DIVIS LABORATORIES LTD. 3.18% SHREE CEMENT LTD. 2.74%

ITC LTD. 4.15% LTD. 4.67% AVENUE SUPERMARTS LTD. 3.08% PETRONET LNG LTD. 2.64%

LARSEN & TOUBRO LTD. 3.42% LARSEN & TOUBRO LTD. 3.90% PIDILITE INDUSTRIES LTD. 2.95% INFO-EDGE (INDIA) LTD. 2.60%

AXIS BANK LTD. 3.28% LTD. 3.89% PETRONET LNG LTD. 2.56% PIRAMAL ENTERPRISES LTD. 2.43%

Total 60.84% Total 69.21% Total 35.12% Total 30.83%

$ - Data as on Jan 31, 2020. Source: www.niftyindices.com, www.asiaindex.co.in Bloomberg. The Stocks referred in this literature are not an endorsement by the Mutual Fund and AMC of their soundness or a recommendation to buy or sell these stocks at any point of time. The name of companies are only for reference purpose. Total Return Index Comparison – Annualized Returns

15% 15% 15% 14% 14% 13% 12% 12% 11% 11% 10% 9% 8% 8% 8% 8%

6%

Annualized Annualized Returns 5%

3%

#N/A

1 Year 3 Years 5 Years 10 Years 15 Years Period

Nifty 50 TRI S&P BSE Sensex TRI Nifty Next 50 TRI S&P BSE Sensex Next 50 TRI

Data as on Jan 31, 2020. Total Return Index (TRI) consider the dividend issued by companies forming part of Index. TRI Value Source: www.niftyindices.com. www.asiaindex.co.in Returns are calculated considering last working day of the month. Investors can not invest directly in to an index. However they can expect similar returns using ETF or , subject to tracking error and cost. Returns over one year are of compounded annualized growth rate (CAGR). #N/A = Data not available for the period. Performance is based on the Base Date of Indices as mentioned in slide on Index Attributes. Total Return Index Comparison – Monthly Investment Returns

14% 13% 13% 12% 12% 12% 12% 12% 11% 11% 10% 10% 10%

8% 8%

5% Annualized Annualized Returns

3% 3%

#N/A

0%

1 Year 3 Years 5 Years 10 Years 15 Years Period

Nifty 50 TRI S&P BSE Sensex TRI Nifty Next 50 TRI S&P BSE Sensex Next 50 TRI

Data as on Jan 31, 20. Returns are calculated considering last working day of the month. In case of monthly investment, we have assumed Rs.10,000 invested at month end closing price of total return index. Monthly return is calculated considering RATE() function in MsExcel. Such monthly return is annualized. Investors can not invest directly in to an index. However they can expect similar returns using ETF or Index Fund, subject to tracking error and cost. TRI Value Source: www.niftyindices.com. www.asiaindex.co.in. Performance is based on the Base Date of Indices as mentioned in slide on Index Attributes. Returns over one year are of compounded annualized growth rate (CAGR) Total Return Index Comparison – Rolling Returns

5 Years Annualized Return, Rolled Over on Monthly Basis (60 Monthly Return Data Points) 30.00%

26.03% 25.00%

22.02% 20.00% 17.82% 17.32% 17.19%

15.00% 14.45%

11.68% 11.67% 10.00% 9.11%

6.55% 6.56% 6.34% 5.00%

0.00% Nifty 50 TRI S&P BSE Sensex TRI Nifty Next 50 TRI S&P BSE Sensex Next 50 TRI

Maximum Return Average Return Minimum Return

Data as on Jan 31, 2020. Returns are calculated considering last working day of the month. First 5 Year Return is calculated from Feb 26, 2010 to Feb 28, 2015. Such returns are rolled over up to Jan 31, 2020. Average of these data points are mentioned in diamond. The maximum return out of these data points is mentioned in circle. The minimum return out of these data point is mentioned in square. Closing Value Source: www.niftyindices.com Performance is based on the Base Date of Indices as mentioned in slide on Index Attributes. Returns over one year are of compounded annualized growth rate (CAGR) ETFs vs Index Funds – Major Differences

• ETFs and Index Funds, both can be used for Investing in an Index.

• Both are very similar from fund management perspective.

• Major Differences:

Exchange Traded Funds Features Index Funds (ETFs)

Net Asset Value (NAV) Real Time End of the day

Authorised Participants (APs) Liquidity Provider@ Only by Fund on stock exchange + Fund itself

Portfolio Disclosure Daily Monthly

Possible if investor has Intraday Trading Not possible required inventory of units Each investor bears their Transaction costs are Cost effectiveness own transaction cost spread across the fund Compulsory in Holding format Physical + Demat Demat form Controlled by investor as investor Investment decision can suggest the price/NAV Not applicable at which they want to transact

@ - In case of ETFs the Scheme offers units for subscription / redemption directly with the Mutual Fund in multiple of creation unit size to Authorized Participants / Large Investors only. Investor can buy/sell ETF units in cash segment on secondary market of exchanges where it is listed in multiple of 1 unit. AMC may appoint APs for providing liquidity on exchanges. Please read scheme related documents for “creation unit size” ETFs vs Index Funds – How to transact?

NSE / BSE

Stock Exchanges Investor can get in touch with their ETF units can be held only in stock broker or sub-broker to buy/sell dematerialized (demat) form. The ETFs through their broking account, holding is reflected in demat statement similar to transacting in a stock. available with demat participants ETF Units where demat account is maintained

Investor can get in touch with AMC or Index Fund Index Fund units can be held in digital IFA/RIA/Distributor etc., to buy/sell or dematerialized form. In case of Index Fund similar to transacting in digital holding, investor can get traditional open-ended mutual fund statement of account from AMC or its scheme Registrar and Transfer Agent. Fund House

Additionally ETFs can be bought/sold through Asset Management Companies (AMCs) in multiple of creation unit size. How ETF works?

ETFs are traded on exchange just like a normal stock Money Money Stock Exchange Various investors, buying & selling ETF units on Secondary stock exchanges, creates natural liquidity. Market ETFs ETFs Buyer Seller Generally, all trading and settlement rules applicable to a stock, are also applicable to ETFs.

AMCs appoint Authorized Participants (APs)

ETFs Money Money ETFs to provide additional liquidity.

When there is high demand of units on exchanges, APs create units from AMCs and sell these units on exchanges.

When there is high supply of units on Primary exchanges, APs buy units on *APs / LIs Market exchanges and redeem these units ETFs Money Money ETFs with AMCs.

*AMC

* AP – Authorized Participant. LIs – Large Investors. AMC – Asset Management Company UTI Offerings for Index Investment

UTI S&P BSE UTI Nifty UTI Nifty UTI Nifty Scheme UTI Nifty ETF UTI Sensex ETF Sensex Next 50 Next 50 Index Next 50 ETF Index Fund ETF Fund

Type ETF ETF ETF ETF Index Fund Index Fund

Underlying S&P BSE Sensex Next Nifty 50 S&P BSE Sensex Nifty Next 50 Nifty 50 Nifty Next 50 Index 50

Plans: Regular & Plans: Regular & Plans & Options Direct NA NA NA NA Direct @ Options: Growth & Available Options: Growth Dividend

Annual Expense Direct: 0.10% Direct: 0.27% 0.06% 0.06% 0.15% 0.21% Ratio* Regular: 0.17% Regular: 0.86%

Unit Creation Size 5,000 Units 2,000 Units 10,000 Units 15,000 Units NA NA

Entry & Exit Load* NIL NIL NIL NIL NIL NIL

# (NAV) in relation to index value may differ due to dividend & expense. * As on Jan 31, 2020. @ Under UTI Nifty Index Fund & UTI Nifty Next 50 Index Fund in addition to regular, there is a direct plan. Under UTI Nifty Index Fund both Plan offers Growth, Dividend Payout and Dividend Reinvestment Options. Under UTI Nifty Next 50 Index Fund only Growth Option is available. For more details please read Scheme Information Document. Asset Under Management (AUM)

26,061 3,817 10,053 18,690

16,880

12,757 AUM in Rs. Crs. Rs. inAUM

7,002 6,388 4,278 2,565 2,231 1,827 1,276 725 527 771 576 50 28 11 340 374 15

Mar-17 Mar-18 Mar-19 Dec-19 Period

UTI Nifty ETF UTI Sensex ETF UTI Nifty Next 50 ETF UTI S&P BSE Sensex Next 50 ETF UTI Nifty Index Fund UTI Nifty Next 50 Index Fund Total

* Month End Asset Under Management (AUM). Source: MFI Explorer. Tracking Error

Scheme 1 Year 3 Years 5 Years Since Inception (Inception Date)

UTI Nifty ETF 0.01% 0.04% NA 0.14% (01/09/2015)

UTI Sensex ETF 0.01% 0.04% NA 0.13% (01/09/2015)

UTI Nifty Next 50 ETF 0.26% NA NA 0.22% (04/08/2017)

UTI S&P BSE Sensex Next 50 ETF NA NA NA 0.36% (08/03/2019) UTI Nifty Index Fund Direct Plan 0.02% 0.11% 0.15% 0.17% (01/01/2013) UTI Nifty Index Fund Regular Plan 0.02% 0.11% 0.15% 1.65% (14/02/2000) UTI Nifty Next 50 Index Fund Direct Plan 0.31% NA NA 0.28% (28/06/2018) UTI Nifty Next 50 Index Fund Regular Plan 0.30%NA NA NA 0.27% (28/06/2018)

Data as on Jan 31, 2020. Under UTI Nifty Index Fund & UTI Nifty Next 50 Index Fund in addition to regular, there is a direct plan. Under UTI Nifty Index Fund both Plan offers Growth, Dividend Payout and Dividend Reinvestment Options. Under UTI Nifty Next 50 Index Fund only Growth Option is available. For more details please read Scheme Information Document. Tracking Error is calculated by considering standard deviation of daily difference between return of the scheme and its respective total return index. 250 days are assumed for annualizing tracking error. NA= Scheme has not completed the period. Product Label UTI Nifty ETF This product is suitable for investors who are seeking*:

•long term investment

•Investment in securities covered by Nifty 50 Index

UTI Sensex ETF

This product is suitable for investors who are seeking*:

•long term investment

•Investment in securities covered by S&P BSE Sensex Index

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Product Label UTI Nifty Next 50 ETF This product is suitable for investors who are seeking*:

•long term investment

•Investment in securities covered by Nifty Next 50 Index

UTI S&P BSE Sensex Next 50 ETF

This product is suitable for investors who are seeking*:

•long term investment

•Investment in securities covered by S&P BSE Sensex Next 50 Index * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Product Label UTI Nifty Next 50 Index Fund This product is suitable for investors who are seeking*:

•Capital growth in tune with the index returns

•Passive investment in equity instruments comprised in Nifty Next 50 Index

UTI Nifty Index Fund This product is suitable for investors who are seeking*:

•Capital growth in tune with the index returns

•Passive investment in equity instruments comprised in Nifty 50 Index

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them. REGISTERED OFFICE: UTI Tower, ‘GN’ Block, , Bandra (E), - 400051.Phone: 022 – 66786666. UTI Asset Management Company Ltd (Investment Manager for UTI Mutual Fund) Email: [email protected] . (CIN-U65991MH2002PLC137867). For more information, please contact the nearest UTI Financial Centre or your AMFI/NISM certified UTI Mutual Fund Independent Financial Advisor (IFA) for a copy of the Statement of Additional Information, Scheme Information Document and Key Information Memorandum cum Application Form.

Disclaimers: The information on this document is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. Users of this document should seek advice regarding the appropriateness of investing in any securities, financial instruments or investment strategies referred to on this document and should understand that statements regarding future prospects may not be realized. The recipient of this material is solely responsible for any action taken based on this material. Opinions, projections and estimates are subject to change without notice.

UTI AMC Ltd is not an investment adviser, and is not purporting to provide you with investment, legal or tax advice. UTI AMC Ltd or UTI Mutual Fund (acting through UTI Trustee Company Pvt. Ltd) accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully