Haitong MPF Retirement Fund (the Scheme ) DIS Pre-implementation Notice to Participating Employers and Members 1

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1 Dated: 9 December 2016 Haitong MPF Retirement Fund (the Scheme ) DIS Pre-implementation Notice to Participating Employers and Members 1 Attention: This document is important and requires your immediate attention. If you are in any doubt about the contents of this document, you should seek independent professional advice. HSBC Institutional Trust Services (Asia) Limited ( Trustee ) and Haitong International Investment Managers Limited ( Investment Manager ) each accept responsibility for the information contained in this document. The DIS Pre-implementation Notice ( DPN ) only contains a summary and Members should refer to the First Addendum and the Explanatory Memorandum for full details. Participating employers and Members may access the latest Explanatory Memorandum of the Scheme (together with the First Addendum) via the Investment Manager s interactive website or request for a copy of the Explanatory Memorandum (as amended) free of charge by contacting Haitong MPF Employers Hotline at (852) , or for Members, Haitong MPF 24 Hours Auto-Info-line at (852) after 9 December The DIS may not be suitable for you. You should consider your own risk tolerance level and financial circumstances before making any investment choices. Unless otherwise defined in the DPN, all capitalised terms used in the DPN have the same meaning as in the Explanatory Memorandum. Dear Participating Employers and Members, We are writing to you because important changes to the Mandatory Provident Fund Schemes Ordinance will take effect on 1 April 2017 ( Effective Date ). From the Effective Date, the default investment arrangement of the Scheme will be the Default Investment Strategy ( DIS ) replacing the existing default arrangement of the Scheme. You should read this DPN carefully because the changes made to the MPF legislation may affect the investment of both your accrued benefits and future contributions. 1. What is DIS? DIS is a default investment arrangement as stipulated in accordance with the Mandatory Provident Fund Schemes Ordinance. For Members who do not make a fund choice for their MPF account, future contributions and accrued benefits transferred from another MPF scheme (collectively, Future Investments ) and their accrued benefits will be invested in the DIS. The DIS is also available as an investment choice itself for Members. The DIS is not a fund it is a strategy that uses two constituent funds, namely the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund (collectively the DIS Funds ) to automatically reduce the risk exposure as the Member approaches retirement age. The DIS funds will invest in a globally diversified manner and invest in 1 Please note that references to you or your in this DPN refer to, as the case may be in the relevant context, participating employers or members. 1

2 different assets (e.g. equities, bonds, money market instruments, etc.). Please refer to Annex 1 for the statement of investment policies and objectives of the DIS Funds. The DIS Funds are subject to fee and expense caps as imposed by the legislation. 2. How does DIS affect you? If you have accounts in the Scheme that are set up before the Effective Date ( preexisting account ), depending on whether you have previously made any fund choices, it may affect you in different ways. If you have already given a Mandate for the accrued benefits and Future Investments in your pre-existing account or you are 60 years old or above before the Effective Date, you will not be affected by the implementation of the DIS. If all your accrued benefits in a pre-existing account are invested in the existing default arrangement (i.e. approximately half of the relevant contributions being in the Haitong MPF Conservative Fund and the other half being allocated equally amongst the other Constituent Funds of the Scheme) as at the Effective Date and you have not given a Mandate for the preexisting account, you will receive a separate notice (i.e. the DIS Re- Investment Notice ) sent to you on or before the end of September The DIS Re-Investment Notice will explain that if you do not make an investment choice by replying within a specified timeline, your accrued benefits in the existing default arrangement will be redeemed in whole and re-invested in accordance with the DIS. Therefore, if you receive the DIS Re-Investment Notice, please pay special attention to the contents and make appropriate arrangement. You should note that the risk of the existing default arrangement may be different from that of the DIS and you may be exposed to market risks as a result of any reinvestment of your accrued benefits in the DIS. There are special circumstances. Where the accrued benefits in the preexisting account are transferred from another account within the Scheme (eg. in the case of cessation of employment, where accrued benefits in your contribution account are transferred to a personal account within the Scheme), your accrued benefits in the pre-existing account will be invested in the same manner as they were invested immediately before the transfer but your Future Investments may be invested in the DIS after the implementation of the DIS, unless otherwise instructed. Please refer to the section headed Implications for New and Pre-existing Accounts on or after DIS Implementation below for further details. 3. Do you need to do anything? Apart from the above, there are other circumstances where your accrued benefits or future contributions may be affected by the implementation of the DIS. If you have any query on how it will affect you and what actions you need to take, you should call the Haitong MPF 24 Hours Auto-Info-line at (852) or the Haitong MPF Employers Hotline at (852) , or visit 2 for more information. If you receive the DIS Re-Investment Notice after the Effective Date, you are advised to pay special attention to the contents and make appropriate arrangements. 2 This website has not been reviewed by the Commission. 2

3 A. What is DIS? DIS is a ready-made investment arrangement mainly designed for those Members who are not interested or do not wish to make a fund choice, and is also available as an investment choice itself, for Members who find it suitable for their own circumstances. For those Members who do not make an investment choice, their Future Investments will be invested in accordance with the DIS. The DIS is required by law to be offered in every MPF scheme and is designed to be substantially similar in all schemes. a) Objectives and Strategy The DIS aims to balance the long term effects of risk and return through investing in two Constituent Funds, namely the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund, according to the pre-set allocation percentages at different ages. The Haitong Core Accumulation Fund will invest around 60% in higher risk assets (higher risk assets generally mean equities or similar investments) and 40% in lower risk assets (lower risk assets generally mean bonds or similar investments) of its net asset value whereas the Haitong Age 65 Plus Fund will invest around 20% in higher risk assets and 80% in lower risk assets. The DIS Funds adopt globally diversified investment principles and use different classes of assets, including global equities, fixed income, money market instruments and cash, and other types of assets allowed under the MPF legislation. Diagram 1: Asset Allocation between the DIS Funds according to the DIS Lower risk assets (mainly global bonds) Higher risk assets (mainly global equities) 40% 60% 80% 20% Haitong Core Accumulation Fund Under Haitong Age 65 Plus Fund Age Note: The exact proportion of the portfolio in higher/lower risk assets at any point in time may deviate from the target glide path due to market fluctuations. b) Annual de-risking Accrued benefits invested through the DIS will be invested in a way that adjusts investment risk depending on a Member s age. The DIS will manage investment risk exposure by automatically reducing the exposure to higher risk assets and correspondingly increasing the exposure to lower risk assets as the Member gets older. Such de-risking is to be achieved by way of reducing the holding in the Haitong Core Accumulation Fund and increasing the 3

4 holding in the Haitong Age 65 Plus Fund over time. The asset allocation stays the same up until 50 years of age, then reduces steadily until age 64, after which it stays steady again. In summary, under the DIS: (1) When a Member is below the age of 50, all accrued benefits and Future Investments will be invested in the CAF. (2) When a Member is between the ages of 50 and 64, all accrued benefits and Future Investments will be invested according to the allocation percentages between the Haitong Core Accumulation Fund and Haitong Age 65 Plus Fund as shown in the DIS de-risking table (as per Diagram 2 below). The de-risking on the existing accrued benefits and Future Investments will be automatically carried out as described above. (3) When a Member reaches the age of 64, all accrued benefits and Future Investments will be invested in the Haitong Age 65 Plus Fund. Diagram 2: DIS De-risking Table Age Haitong Core Accumulation Fund Haitong Age 65 Plus Fund Below % 0.0% % 6.7% % 13.3% % 20.0% % 26.7% % 33.3% % 40.0% % 46.7% % 53.3% % 60.0% % 66.7% % 73.3% % 80.0% % 86.7% % 93.3% 64 and above 0.0% 100.0% Note: The above allocation between the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund is made at the point of annual de-risking and the proportion of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund in the DIS portfolio may vary during the year due to market fluctuations. c) Fees and out-of-pocket expenses of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund The aggregate of the payments for services of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund must not, in a single day, exceed a daily rate of 0.75% per annum of the net asset value ( NAV ) of each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund divided by the number of days in the year. It includes, but is not limited to, the fees paid or payable for the services provided by the Trustee, the Administrator, the Investment Manager, the Custodian and the Sponsor and/or the promoter of the Scheme and the underlying investment fund(s) of each of the respective DIS Funds, and any of the delegates from these parties and such fees are calculated as a percentage of the NAV of each of the DIS Funds and its underlying investment fund(s), but does not include any out-ofpocket expenses incurred by each DIS Fund and its underlying investment fund(s). 4

5 The total amount of all payments that are charged to or imposed on the DIS Funds or Members who invest in DIS Funds, for out-of-pocket expenses incurred by the Trustee on a recurrent basis in the discharge of the Trustee s duties to provide services in relation to the DIS Funds, shall not in a single year exceed 0.2% of the NAV of each of the DIS Funds. For this purpose, out-of-pocket expenses include, for example, annual audit expenses, printing or postage expenses relating to recurrent activities (such as issuing annual benefit statements), recurrent legal and professional expenses, safe custody charges which are customarily not calculated as a percentage of NAV and transaction costs incurred by a DIS Fund in connection with recurrent acquisition of investments for the DIS Fund (including, for example, costs incurred in acquiring underlying investment funds) and annual statutory expenses (such as compensation fund levy where relevant) of the DIS Fund. Out-of-pocket expenses that are not incurred on a recurrent basis may still be charged to or imposed on each of the DIS Fund and such charges are not subject to the statutory cap as described above. Please refer to the sections of the fee table headed (C) Fees, Expenses and Charges of Constituent Funds and (D) Fees, Expenses and Charges of Underlying Funds in the section headed CHARGES AND EXPENSES in the Explanatory Memorandum for the new applicable fees and charges payable out of the constituent funds and underlying funds, respectively. d) Key risks relating to the DIS Members should note that there are a number of attributes of the design of the DIS strategy as set out below, which affect the types of risks associated with the DIS. Limitations on the strategy Age as the sole factor in determining the asset allocation under the DIS As set out in more detail in the sub-section entitled Investment under the MPF Default Investment Strategy ( DIS ), Members should note that the DIS adopts pre-determined asset allocation and automatically adjusts asset allocation based only upon a Member s age. The DIS does not take into account factors other than age, such as market and economic conditions nor a Member s personal circumstances including investment objectives, financial needs, risk tolerance or likely retirement date. Members who want their MPF portfolio to reflect their own personal circumstances can make their own selection of funds from the range available in the Scheme. Pre-set asset allocation Members should note that the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund have to follow the prescribed allocation between higher risk assets and lower risk assets at all times subject to a tolerance level of + or 5%. The prescribed exposure between higher risk and lower risk assets of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund will limit the ability of the Investment Manager of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund to adjust asset allocations in response to sudden market fluctuations; for example through the adoption of either a more defensive asset allocation approach (being an approach which seeks to reduce higher risk assets exposure), or alternatively a more aggressive asset allocation approach (being an approach which seeks to increase higher risk assets exposure) even if, for some reason, the investment manager thought it appropriate to do so. Annual de-risking between the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund 5

6 Members should note that de-risking for each Member will generally be carried out on a Member s birthday, regardless of the prevailing market conditions. While the de-risking process aims at managing risks of the investments through reducing exposure to higher risk assets, it may preclude the DIS from fully capturing the upside in risking equity markets during the de-risking process and therefore would underperform as compared with funds not adopting the de-risking process under the same market conditions. It is possible that the de-risking process is done at a time which may result in Members reducing exposure to an asset class which outperforms and increasing exposure to an asset class which underperforms. The asset allocation changes gradually over a 15-year time period. Members should be aware that the de-risking operates automatically regardless of the wish of a Member to adopt a strategy which might catch market upside or avoid market downside. Also, the de-risking process cannot insulate Members from systemic risk, such as broad-based recessions and other economic crises, which will affect the prices of most asset classes at the same time. Potential rebalancing within each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund In order to maintain the prescribed allocation between the higher risk assets and lower risk assets within each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund, the investments of each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund may have to be continuously rebalanced. For example, when the higher risk assets perform poorly, the Haitong Core Accumulation Fund s and the Haitong Age 65 Plus Fund s asset allocation may fall outside the respective prescribed limit. In this case, each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund will have to liquidate some of the better performing lower risk assets in order to invest more in the higher risk assets, even if the Investment Manager is of the view that the higher risk assets might continue to perform poorly. Additional transaction costs Due to (a) the potential rebalancing of higher risk assets and lower risks assets in the process of maintaining the prescribed allocation within each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund and (b) the annual reallocation of accrued benefits for Members under the derisking process, the DIS may incur greater transaction costs than a fund/strategy with more static allocation. General investment risks related to the DIS Although the DIS is a statutory arrangement, it does not guarantee capital repayment nor positive investment returns (in particular for those Members with only a short investment horizon before retirement). The two designated Constituent Funds for DIS are mixed asset funds investing in a mix of equities and bonds. Members should note that the DIS which invests in these Constituent Funds is subject to the general investment risks that apply to mixed asset funds. Risk on early withdrawal and switching Since the DIS has been developed having regard to the long-term balance between risks and likely returns, and assumes retirement at the age of 65, 6

7 any cessation of the strategy (for example, through early withdrawal of accrued benefits or switching into other funds) will affect that balance. Impact on Members keeping benefits in the DIS beyond the age of 64 Members should note that the de-risking process will discontinue upon reaching the age of 64. Members should be aware that all accrued benefits (including accrued benefits transferred from another MPF scheme)/on-going contribution, if any, will be invested in the Haitong Age 65 Plus Fund which holds around 20% of its assets in higher risk assets which may not be suitable for all members beyond the age of 64. e) Information on Performance of DIS Funds The fund performance of the DIS Funds will be published in the fund factsheet, and at least one fund factsheet will be attached to the annual benefit statement and sent to Members. Members can visit or call the Haitong MPF 24 Hours Auto-Info-line at (852) for information. Members may also obtain the fund performance information at the website of the Mandatory Provident Fund Schemes Authority ( B. Summary of the Existing Default Arrangement and the DIS Please find below a summary of the key features of the existing default arrangement and the DIS for reference: Name Existing Default Arrangement The DIS consisting of 2 Constituent Funds with derisking features Approximately half of the relevant contributions being in the Haitong MPF Conservative Fund and the other half being allocated equally amongst the other Constituent Funds (i.e. Haitong Global Diversification Fund, Haitong Korea Fund, Haitong Asia Pacific (excluding HK) Fund and Haitong Hong Kong SAR Fund) Fund Type Equity and money market Mixed assets De-risking Feature Total management fees for Constituent Fund and Approved Pooled Investment Funds No The existing Management fees of the Constituent Funds, including Class A and Class T, vary in the following range: Rate of Management fees from 1 December 2015 to 31 December 2016* Rate of Management fees from 1 January 2017 onwards 0.35% % of the NAV of each Constituent Fund 0.75% % of the NAV of each Constituent 7 Haitong Core Accumulation Fund and Haitong Age 65 Plus Fund Yes 0.745% per annum of the NAV of each of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund divided by the number of days in the year

8 Fund * the period where the Investment Manager has waived all its Investment Management fees. Such waiver of Investment Management fee is temporary in nature. From 1 January 2017 onwards, the Investment Manager shall resume such Investment Management fees in full. The Management fee of the existing default arrangement shall also vary in the above range, as 50% is invested into the Haitong MPF Conservative Fund while the remaining 50% is split across the other Constituent Funds. Daily fees cap No Yes Expected risk profile Guarantee Feature Medium 3 Since 50% is invested into the Haitong MPF Conservative Fund and the remaining 50% is split across the other Constituent Funds, the investments are made equally into assets at risk levels ranging from low to high. As such, the Investment Manager considers the overall risk to be medium. No Haitong Core Accumulation Fund: The Investment Manager considers the risk to be medium 4. Haitong Age 65 Plus Fund: The Investment Manager considers the risk to be low 5. No For details of the key features of the existing default arrangement and the DIS, please refer to the Explanatory Memorandum (or contact the Trustee). C. Implications for New and Pre-existing Accounts on or after DIS Implementation a) Implications on accounts opened on or after the Effective Date When Members join the Scheme or set up a new account in the Scheme on or after the Effective Date, they have the opportunity to give a Mandate for their Future Investments. If Members fail to or do not want to submit to the Trustee a Mandate at the time of their requests to join / set up account in the Scheme, the Trustee shall invest any of their Future Investments into the DIS. b) Implications on accounts opened before the Effective Date 3 This is based on the relevant risk levels of each Constituent Fund as set out in the Explanatory Memorandum (i.e: Haitong MPF Conservative Fund minimal; Haitong Global Diversification Fund medium; Haitong Korea Fund - high; Haitong Asia Pacific (excluding HK) Fund - medium; and Haitong Hong Kong SAR Fund - high). 4 This is because the investments are well balanced between equity and bond investments, and is done in a global manner. 5 This is because most of the investments shall be made into global government bonds, of investment grade that are considered relatively safe in the global financial markets. 8

9 There are special rules to be applied for pre-existing accounts and these rules only apply to Members who are under or becoming 60 years of age on the Effective Date (1) For a Member s Pre-Existing Account with all accrued benefits being invested into the existing default arrangement but no investment instruction being given in respect of all accrued benefits (known as DIA account ): There are special rules and arrangements to be applied to determine whether accrued benefits in a DIA account will be transferred to the DIS. If your preexisting account is considered as a DIA account, you will receive a notice called the DIS Re-investment Notice explaining the impact on your preexisting account and giving you an opportunity to give a Mandate to the Trustee before the accrued benefits are invested into the DIS. For details of the arrangement, Members should refer to the DIS Reinvestment Notice. (2) For a Member s Pre-existing Account with part of the accrued benefits in the existing default arrangement: If part of the accrued benefits of your pre-existing account was invested into the existing default arrangement, unless the Trustee has received any Mandates, your accrued benefits will be invested in the same manner as immediately before 1 April Future Investments will be invested in the same manner as immediately before the commencement date of the DIS (i.e. 1 April 2017). D. Rules and procedures applicable to investment through the DIS a) Fund Choice Combination Members who join the Scheme or set up new accounts on or after 1 April 2017 may choose to invest their Future Investments into: the DIS; and/or one or more Constituent Funds of their own choice (including the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund as standalone investments) and according to their assigned allocation percentage to relevant fund(s) of their choice. Members should note that, if they choose the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund as standalone investments, those investments/benefits will not be subject to the de-risking process. If a Member s accrued benefits are invested in any combination of (i) Haitong Core Accumulation Fund and/or the Haitong Age 65 Plus Fund as standalone investments and (ii) the DIS (no matter by default or by a Member s Mandate), accrued benefits invested under (i) will not be subject to the de-risking process whereas for accrued benefits under (ii) will be subject to the de-risking process. In this connection, Members should pay attention to the different on-going administration arrangements applicable to accrued benefits invested in (i) and (ii). In particular, Members will, when giving a fund switching instruction, be required to specify to which part of the benefits (namely, under (i) or (ii)) the instruction relates. b) Switching/transfer in and out of the DIS Members may (i) switch into or out of the DIS and (ii) invest their future contributions and accrued benefits transferred from another MPF scheme in the DIS, at any time, 9

10 subject to the sub-section entitled Instructions to Change Investment in the section entitled CONTRIBUTIONS in the Explanatory Memorandum. Members should, however, bear in mind that the DIS has been designed as a long term investment arrangement. If the Member s switching instructions involve the DIS, the holdings of the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund will be rebalanced according to the DIS de-risking table set out above and in the sub-section entitled Investment under the MPF Default Investment Strategy ( DIS ) in the Explanatory Memorandum under the section entitled ABOUT HAITONG MPF RETIREMENT FUND. E. Rules and procedures of annual de-risking If a Member s birthday is not on a dealing day or specified instructions (including but not limited to subscription, redemption or switching instructions) are already being processed on the Member s birthday, then the investments will be moved on the next available dealing day. If the birthday falls on the 29th of February and in the year which is not a leap year, then the investment will be moved on 1st of March or the next available dealing day. When one or more of the specified instruction (including but not limited to subscription, redemption or switching instruction) are being processed on the annual date of de-risking for a relevant member, the annual de-risking will only take place after completion of these instructions where necessary. Please refer to the section entitled CONTRIBUTIONS and BENEFITS in the Explanatory Memorandum for details regarding the handling procedures for subscription, redemption and switching respectively, and the Trustee Service Comparative Platform on the Mandatory Provident Fund Schemes Authority s website for the relevant cut-off times. De-risking may also be deferred in the event of market closure or suspension of dealing in Units of the Constituent Funds or suspension of the calculation of the net asset value. Members should be aware that the above de-risking will not apply where the Member chooses the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund as individual fund choices (rather than as part of the DIS). In summary, under the DIS: When a Member is below the age of 50, all accrued benefits and Future Investments will be invested in the Haitong Core Accumulation Fund. When a Member is between the ages of 50 and 64, all accrued benefits and Future Investments will be invested according to the allocation percentages among the Haitong Core Accumulation Fund and the Haitong Age 65 Plus Fund as shown in the DIS de-risking table above. The de-risking on the existing accrued benefits will be automatically carried out as described above. When a Member reaches the age of 64, all accrued benefits and Future Investments will be invested in the Haitong Age 65 Plus Fund. If the Trustee does not have the full date of birth of the relevant member: If only the year and month of birth is available, the annual de-risking will use the last calendar day of the birth month or the next available dealing day if such day is not a dealing day. If only the year of birth is available, the annual de-risking will use the last calendar day of the year or the next available dealing day if such day is not a dealing day. If there is no information at all on the date of birth, a Member s accrued benefits will be fully invested in the Haitong Age 65 Plus Fund with no de-risking applied. 10

11 F. Rules and procedures relating to investment instructions (i.e. a Mandate) Any Mandate that is not invalid shall be treated as valid. Invalid Mandates shall include any of the following: (i) any part of the specified form is not completed or the form is unsigned, or if signed, the signature does not match the Trustee s records, (ii) alterations to the specified form are not counter-signed, (iii) compulsory fields on the specified form are not complete or are invalid, (iv) no investment allocation is provided on the specified form, or if provided, is less than or more than 100% or is not in the multiples of 1%, (v) the instruction given is to switch out of a Constituent Fund and switch fully into the same Constituent Fund, and (vi) the instruction given is to switch out of the DIS and switch fully into the DIS. G. Other Changes In light of the Mandatory Provident Fund Schemes Ordinance, further changes are made to: a) the Explanatory Memorandum to reflect consequential changes to administration and operations arising from the implementation of the DIS. Please refer to the First Addendum to the Explanatory Memorandum dated December 2016 for further details. b) the Trust Deed to reflect changes to the Scheme arising from the implementation of the DIS. For details of such changes, Members may refer to the 12 th Supplemental Deed to the Trust Deed by obtaining a copy of the same in accordance with section H below. H. Means to obtain further information This document only describes major changes to the Scheme. You are advised to refer to the First Addendum to the Explanatory Memorandum dated December 2016 and the Twelfth Supplemental Deed to the Trust Deed relating to the Scheme for more updated information regarding other changes. Participating employers and Members may access the latest Explanatory Memorandum of the Scheme (together with the First Addendum) via the Investment Manager s Interactive Website or request for a copy of the Explanatory Memorandum (as amended) free of charge by contacting Haitong MPF Employers Hotline at (852) , or for Members, Haitong MPF 24 Hours Auto-Info-line at (852) after 9 December A copy of the Trust Deed and any supplemental deeds or the offering document(s) of the relevant approved pooled investment funds will also be available for inspection at the Investment Manager s office at 21/F - 22/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong during normal office hours (Monday to Friday (excluding public holidays), from 9:00a.m. to 6:00p.m.). Should you have any enquiries in relation to the above changes, please do not hesitate to contact the Trustee at (852) , or Haitong MPF Employers Hotline at (852) HSBC Institutional Trust Services (Asia) Limited and Haitong International Investment Managers Limited 11

12 Annex 1 Investment Policies and Objectives of the Haitong Core Accumulation Fund and Haitong Age 65 Plus Fund Haitong Core Accumulation Fund Investment Objective: The investment objective of the Haitong Core Accumulation Fund is to provide capital growth to Members by investing in a globally diversified manner. Investment Structure: The Haitong Core Accumulation Fund shall be structured as portfolio management fund investing in two Approved Pooled Investment Funds, the Haitong Global Diversification Fund and the Haitong Global Bond Fund, which in turn invest directly in a portfolio of equity securities and/or fixed income instruments, and/or collective investment schemes as allowed under the Mandatory Provident Fund Schemes (General) Regulation. Investment Strategy: The Haitong Core Accumulation Fund will invest in two Approved Pooled Investment Funds, the Haitong Global Diversification Fund and the Haitong Global Bond Fund, which are also managed by the Investment Manager. The Approved Pooled Investment Funds will respectively invest globally mainly in (i) bluechip equities and equity related securities that are listed on approved stock exchanges, although they may from time to time invest in money market, and/or other fixed income instruments, and (ii) investment grade bonds issued by Exempt Authorities (as defined in Section 7(1) of Schedule 1 of the Mandatory Provident Fund Schemes (General) Regulation). The Investment Manager, with investment experts in global equities and global bonds, also actively manages the portfolios of the two Approved Pooled Investment Funds by selecting investment instruments and allocating assets for investment purposes with higher risk and return characteristics based on fundamental research. By adopting the above investment strategy, the Investment Manager has more flexibility to achieve the investment objectives of the Haitong Core Accumulation Fund, and the Haitong Core Accumulation Fund can target better returns than returns from adopting passive management, such as by tracking the MPF industry developed Reference Portfolio as published by the Hong Kong Investment Funds Association that has been adopted for the purpose of the DIS at the same exposure. Asset allocation: Through the underlying investment, the Haitong Core Accumulation Fund targets to hold 60% of its net assets in Higher risk assets, with the remainder investing in Lower risk assets. The asset allocation to Higher risk assets may vary between 55% and 65% due to differing price movements of various equity and bond markets. Such variance of the asset allocation of the Haitong Core Accumulation Fund is subject to the discretion of the Investment Manager. 12

13 Geographical Allocation: There is no prescribed allocation for investments in any specific countries or currencies. Hong Kong Dollar Currency Exposure: The Haitong Core Accumulation Fund will maintain, through its underlying Approved Pooled Investment Fund(s), an effective currency exposure to Hong Kong dollars of not less than 30% through currency hedging operations. Policies regarding the acquisition, holding and disposal of financial futures contracts, financial option contracts and security lending: The Haitong Core Accumulation Fund will not acquire, hold or dispose of financial futures contracts or financial option contracts for any other purpose other than hedging. The Haitong Core Accumulation Fund will not engage in security lending. Risk inherent and Expected Return: Investors should be aware that although equities generally offer higher returns over the long term, investing in equities inherently leads to greater volatility than investing in fixed income instruments. Although the Haitong Core Accumulation Fund will be diversified across differing markets of the world, thus minimizing both single country and regional risk, this cannot completely compensate for the volatile nature of the equities stock market. Investors should be aware that the Haitong Core Accumulation Fund is subject to a number of risks associated with a global investment mandate. Consequently, the Investment Manager is of the view that investors should regard the Haitong Core Accumulation Fund as a medium risk investment. This is because its investment is well balanced between equity and bond investments, and is done in a global manner. The return of the Haitong Core Accumulation Fund is expected to be similar to the return of the Reference Portfolio of Haitong Core Accumulation Fund over the long term. This information on risk and return profile is provided for reference only, and is subject to regular review by the Investment Manager. Haitong Age 65 Plus Fund Investment Objective: The investment objective of the Haitong Age 65 Plus Fund is to provide stable growth for retirement savings to Members by investing in a globally diversified manner. Investment Structure: The Haitong Age 65 Plus Fund shall be structured as a portfolio management fund investing in two Approved Pooled Investment Funds, the Haitong Global Diversification Fund and the Haitong Global Bond Fund, which in turn invest directly in a portfolio of equity securities and/or fixed income instruments, and/or collective investment schemes as allowed under the Mandatory Provident Fund Schemes (General) Regulation. 13

14 Investment Strategy: The Haitong Age 65 Plus Fund will invest in two Approved Pooled Investment Funds, the Haitong Global Diversification Fund and the Haitong Global Bond Fund, which are also managed by the Investment Manager. The Approved Pooled Investment Funds will respectively invest globally mainly in (i) blue-chip equities and equity related securities that are listed on approved stock exchanges, although they may from time to time invest in money market, and/or other fixed income instruments and (ii) investment grade bonds issued by Exempt Authorities (as defined in Section 7(1) of Schedule 1 of the Mandatory Provident Fund Schemes (General) Regulation). The Investment Manager, with investment experts in global equities and global bonds, also actively manages the portfolios of the two Approved Pooled Investment Funds by selecting investment instruments and allocating assets for investment purposes with higher risk and return characteristics based on fundamental research. By adopting the above investment strategy, the Investment Manager has added flexibility to achieve the investment objectives of the Haitong Age 65 Plus Fund, and the Haitong Age 65 Plus Fund can target better returns than returns from adopting passive management such as by tracking the MPF industry developed Reference Portfolio as published by the Hong Kong Investment Funds Association that has been adopted for the purpose of the DIS at the same exposure. Asset allocation: Through the underlying investment, the Haitong Age 65 Plus Fund targets to hold 20% of its net assets in Higher risk assets with the remainder investing in Lower risk assets. The asset allocation of Higher risk assets may vary between 15% and 25% due to differing price movements of various equity and bond markets. Such variance of the asset allocation of the Haitong Age 65 Plus Fund is subject to the discretion of the Investment Manager. Geographical Allocation: There is no prescribed allocation for investments in any specific countries or currencies. Hong Kong Dollar Currency Exposure: The Haitong Age 65 Plus Fund will maintain, through its underlying Approved Pooled Investment Fund(s), an effective currency exposure to Hong Kong dollars of not less than 30% through currency hedging operations. Policies regarding the acquisition, holding and disposal of financial futures contracts and financial option contracts and security lending: The Haitong Age 65 Plus Fund will not acquire, hold or dispose of financial futures contracts or financial option contracts for any other purpose other than hedging. The Haitong Age 65 Plus Fund will not engage in security lending. Risk inherent and Expected Return: Investments in the Haitong Age 65 Plus Fund are subject to a number of risks associated with a global investment mandate. The Investment Manager is of the view that investors should regard the Haitong Age 65 Plus Fund as a low risk investment. This is because most of the Haitong Age 65 Plus Fund s investment shall be made into global government bonds, of investment grade that are considered relatively safe in the global financial markets. The return of the Haitong Age 65 Plus Fund is expected to be similar to the return of the Reference Portfolio of Haitong Age 65 Plus Fund over the long term. This information on risk and return profile is provided for reference only, and is subject to regular review by the Investment Manager. 14