COMPANY NAME DEPOSITARY RECEIPT PRESENTATION

1
The Bank of New York Exchange Traded Fund
Overview for
November 14, 2002
2
M
arket Position

• BNY Services 35 of the Total Assets in the
  Global ETF Marketplace - 35 Billion, 36
  portfolios
• Handle MidCap SPDR - 5.73 Billion
• Jointly Developed Nasdaq 100 Trust (QQQ)18.7
  Billion
• Facilitated Launch of First European ETF (LDRS) -
  Dublin Based U.C.I.T.
• Originator of HOLDRs Products
• Supported Credit Lyonnais Launch of SPDRs Europe
  
• Services Provider to Treasury FITRs - Launched
  11/1

3
E
TF Product Management

• Active Role in Industry on Global Basis
• Focus on Education and Awareness of ETF Product
• Sponsorship at Leading Events and Conferences
• Research and White Papers
• Articles Developed for Dalbar, Institutional
  Investor, EuroMoney, epn Magazine, Global
  Pensions, and FT Knowledge
• Access to Financial Media
• Active PR Campaign to Support Products and
  Highlight BNYs Focus on ETF Business
• Quoted in Numerous Publications and on Websites
  Including Financial Times, Morningstar.com., WSJ,
  etc.

4
W
What Are Exchange Traded Funds?
hat is an Exchange Traded Fund?
Exchange Traded Funds (ETFs or Trackers) are
baskets of stocks in a form that has proven to be
both cost effective and convenient for
institutional and retail investors. Each share
represents ownership in the underlying basket of
stocks designed to closely track a specific index
or benchmark. ETFs trade throughout the day as
ordinary stocks on stock exchanges, allowing
investors to use the same strategies used with
other equity investments, including market and
limit orders, buying on margin, and short selling.
5
E
fficiencies Over Traditional Funds

• Highly Tradable Product
• Intraday Execution
• Liquidity - Retail and Institutional Appeal
• Exchange for Components
• Excellent Arbitrage Vehicle
• Low Cost
• Eliminates Expensive Recordkeeping Services
• Avoids Rolling Costs of Futures
• Fully Transparent Product
• Components Are Public Information
• Offers Features of Equities
• Margin, Short-Selling, Consolidated Broker
  Reporting

6
K
ey Participants

• Index Creator and Licensor
• Index Calculation Agent
• ETF Sponsor
• Fund Distributor/Distribution Network
• ETF Services - Accounting, Custody, and
  Administration
• Investment Manager
• Transfer Agent
• DTC/NSCC - Basket Dissemination Creation
  Process
• Audit/Legal
• Specialist and/or Market Makers

7
E
TF Order Flow - Primary Market
Authorized Participant
NSCC/CNS
Portfolio Securities

Unit Creations
Fund Shares
Custodian
Transfer Agent
Distributor
Unit Redemtions
Fund Accountant / Administrator
Order / Flow
Securities / Shares
Orders / Instructions / Reports
Fund Manager / Index Calculator
8
T
rading and Execution

• Index Tracking is Key Element
• Limited Performance Variance Successful ETF
• Execution and Sampling Can Impact Performance
• Fungibility of Components
• Arbitrage Fuels Liquidity
• Cash -gtFutures-gtComponents-gtETF
• Transparent and Timely Data
• Market Maker Must Have Info to Hedge Positions
  Cost Effectively
• Spreads Tighten Over Time
• Increased Competition and Product Awareness
  Reduces Spreads
• Bid/Ask Spread is an Indicator of Risk

9
P
ractical Experience - U.S. Markets

• US ETFs Are Remarkably Liquid
• Traditional Measures Dont Apply
• Creation/Redemption Feature Permits Arbitrage
• SalomonSmithBarney ETF Study
• Random Snapshots Found Intra-Day NAV to be
  Between Bid/Ask Price 91 of the Time
• Average Discount of 0.167 to Intraday Bid vs.
  NAV
• Cap-Weighted Average Discount of 0.039
• Real-Time Discounts Were Greater Than 1 to NAV
  and Premiums at Times Exceeded 5
• Nasdaq 100 QQQ and MidCap SPDR MDY
• BNY QQQ Analysis Found 90 of the Time Closing
  NAV was in a .25 Band Between Bid/Ask Since
  April,2000
• BNY MDY Analysis Found 86 of the Time Closing
  NAV was in a .25 Band Between Bid/Ask Since 1995

10
T
ETFs - Exponential Growth
otal Worldwide ETF - Assets Under Management
( Billions)
11
T
ETFs - Exponential Growth
otal Worldwide ETFs - Number of Funds
( Funds)
12
E
TF Product Appeal

• Institutional
• Arbitrageurs
• Market Makers
• Cash Equitization Programs
• Plan Sponsors
• Passive Managers
• Retail
• Market Timers
• Buy and Hold Investors
• Asset Allocation
• WRAP Accounts

13
I
ndicators of ETF Potential

• Growing Analyst Coverage -
• SSB, Prudential, Morgan Stanley, Goldman, Lehman
  and Merrill Lynch have all initiated coverage of
  ETF Product
• Industry Studies -
• Strategic Insight - Predicts 250 Billion by
  2005
• Media Coverage -
• Leading Story Covered by WSJ, FT, Morningstar,
  American Banker and all Industry Publications
• Growing ETF Distribution
• Institutional - Hedging and Arbitrage, Growth of
  Specialists
• Retail Penetration - RIAs, Asset Allocation, and
  WRAP Accounts
• Global Expansion of ETF Sponsors

14
G
lobal Expansion
Nomura, Daiwa - Japan
TIPS - Canada iUnits - Canada
iFTSE - United Kingdom
TraHKer Fund iShares - HK
OPALS - Luxembourg
SPDRs, WEBS, Country Baskets, Diamonds, HOLDRs,
Nasdaq 100 Fresco, FITRS, ..
LDRS - EuroNext DWS Funds - Germany iBloomberg -
U.K. EuroNext EasyETF - EuroNext Xmtch -
Switzerland PDREurope - EuroNext Fresco -
Luxwmbourg
iShares - BGI
streetTracks- SSgA
LDRS - Germany and Switzerland iShares - U.K.
SSgA - Australia TENZ - New Zealand
TALI 25 - Israel
US ETFs - Singapore
SATRIX - S. Africa
15
M
ost Successful U.S. ETFs - Assets
Name Symbol Billions SP 500 SPDR SPY
39.99 Nasdaq 100 Trust QQQ 18.52 SP
400 MidCap SPDR MDY 5.73 DJIA
Diamonds DIA 4.41 iShares SP 500
IVV 4.08 iShares Russell 2000 IWM
2.32 iShares EAFE EFA 1.76 iShares
GS Investop LQD 1.71 iShares Russell
3000 IWV 1.57 Vanguard Total Market
VTI 1.31
16
M
ost Successful ETFs - Top 10 Volume
Name Symbol 5-Day Avg.(mil) Nasdaq 100 Trust
QQQ 87.78 SP 500 SPDR SPY
49.03 DJIA Diamonds DIA 12.16 Select
Sector SPDR-Finl. XLF 2.16 iShares
Russell 2000 IWM 1.93 SP 400 MidCap
SPDR MDY 1.59 Select Sector
SPDR-Tech. XLK 1.41 iShares Russell
3000 IWV 1.21 iShares MSCI-Japan
EWJ 1.14 Select Sector SPDR-Util. XLU
1.04
17
E
TFs - The New Frontier

• New Market Participants
• Expansion of Products in Europe and Asia
• Multiple Exchange Listings - Extended Trading
• Creation of ETF Share Classes
• Enhanced/Optimized Index Products
• Fixed Income Products
• Actively Managed Products
• Elimination of Unsuccessful Products
• Conversion of Existing Products to ETF Structure