Thank you for considering an investment with CIMB-Principal Asset Management Berhad ( CIMB-Principal ).

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2 Preface Dear Valued Investor, Thank you for considering an investment with CIMB-Principal Asset Management Berhad ( CIMB-Principal ). CIMB-Principal offers a comprehensive range of conventional Funds for investors diversified investment appetites in achieving their long term financial goals. We are proud to offer our extensive suit of Funds which provides investors with a choice to achieve their long-term financial goals. Investors should continuously take interest in their investments and seek the information they need to know about their investments, know their rights, ask the questions of their financial advisers and know where to check to verify and clarify their doubts. This Master Prospectus has full and accurate disclosure of material information that will enable investors to make informed decisions. Whilst we offer a comprehensive selection of conventional Funds categorised as Equity, Mixed Assets, Money Market, Fixed Income, with a regional and global investment horizon, please note that there are risks involved in investing in these Funds. The general risks which are common to all Funds and specific risks which are explicit to each Fund according to its nature of investment assets. For further details, please refer to the Risk Factors chapter of this Master Prospectus. Each Fund imposes an Application Fee and in certain Funds a Withdrawal Fee, calculated based on the NAV per unit of that Fund at the time of investing. A Management Fee and a Trustee Fee will also be chargeable to the Funds. Take your time to refer to the Key Data chapter in this Master Prospectus. Any questions you may have on our family of conventional Funds such as their investment objectives, key strategies, investor profiles, risks parameters, fees and charges will be answered. Reading this Master Prospectus is your first step towards deciding on the fund that is well-suited for your personal financial goals and risk appetite. To find out more, speak to our helpful personnel at the Customer Care Centre at Alternatively, you may contact our Approved Distributors and Unit Trust Consultants detailed in the Distributors of the Funds chapter in this Master Prospectus. Let us help you grow and move your wealth towards your investment goals. Yours sincerely, For and on behalf of CIMB-Principal Asset Management Berhad Campbell Tupling Chief Executive

3 About this document This is a Master Prospectus that introduces you to CIMB-Principal Asset Management Berhad and its diverse range of conventional investment funds comprising equity funds, mixed asset funds, fixed income and money market funds as well as regional and global funds. This Master Prospectus outlines in general the information you need to know to make an informed decision as to which Fund best suits your financial needs. If you have any questions about the information in this Master Prospectus or would like to know more about investing in the CIMB- Principal family of unit trust funds, please call CIMB-Principal Customer Care Centre at (03) between 8:30 a.m. and 5:30 p.m., Mondays to Fridays (except on Selangor public holidays). If you wish to invest after 29 June 2011, please obtain a Master Prospectus and application form current at that time. Unless otherwise indicated, any reference in this Master Prospectus to any legislation, statute or statutory provision is a reference to that legislation, statute or statutory provision for the time being, as amended or re-enacted, and to any repealed legislation, statute or statutory provision which is re-enacted (with or without modification). Any reference to a time or day in this Master Prospectus shall be a reference to that time or day in Malaysia, unless otherwise stated. Please note that all references to currency amounts and unit prices in this Master Prospectus are in Ringgit Malaysia unless otherwise indicated. Master Prospectus details Issue No. 14 Prospectus Date 30 June 2010 Expiry Date 29 June 2011 Responsibility Statements This Master Prospectus has been reviewed and approved by the directors of CIMB-Principal and they collectively and individually accept full responsibility for the accuracy of the information. Having made all reasonable enquiries, they confirm to the best of their knowledge and belief, there are no false or misleading statements, or omission of other facts which would make any statement in this Master Prospectus false or misleading. Statements of Disclaimer The Securities Commission has approved the issue of, offer for subscription or purchase, or issue of an invitation to subscribe for or purchase units of the Funds, the subject of this Master Prospectus, and a copy of this Master Prospectus has been registered with the Securities Commission. The approval, and registration of this Master Prospectus should not be taken to indicate that the Securities Commission recommends the Funds or assumes responsibility for the correctness of any statement made or opinion or report expressed in this Master Prospectus. The Securities Commission is not liable for any non-disclosure on the part of the CIMB-Principal who is responsible for the Funds and takes no responsibility for the contents in this Master Prospectus. The Securities Commission makes no representation on the accuracy or completeness of this Master Prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF THE INVESTMENT. IN CONSIDERING THE INVESTMENT, INVESTORS WHO ARE IN DOUBT ON THE ACTION TO BE TAKEN SHOULD CONSULT PROFESSIONAL ADVISERS IMMEDIATELY. Additional Statements No units will be issued or sold based on this Master Prospectus later than one (1) year after the date of this Master Prospectus. Investors are advised to note that recourse for false or misleading statements or acts made in connection with this Master Prospectus is directly available through Sections 248, 249 and 357 of the Capital Markets and Services Act i

4 Table of Contents DEFINITIONS... 1 CORPORATE DIRECTORY... 4 KEY DATA... 7 RISK FACTORS GENERAL RISKS OF INVESTING IN UNIT TRUST FUNDS SPECIFIC RISKS ASSOCIATED WITH THE INVESTMENT PORTFOLIO OF THE FUNDS SECTION 1: EQUITY FUNDS SECTION 2: MIXED ASSET FUNDS SECTION 3: FIXED INCOME & MONEY MARKET FUNDS SECTION 4: REGIONAL & GLOBAL FUNDS FUNDS DETAILED INFORMATION SECTION 1: EQUITY FUNDS CIMB-Principal Equity Fund CIMB-Principal Equity Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund SECTION 2: MIXED ASSET FUNDS CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund SECTION 3: FIXED INCOME & MONEY MARKET FUNDS CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund CIMB-Principal Money Market Income Fund SECTION 4: REGIONAL & GLOBAL FUNDS CIMB-Principal Asia Infrastructure Equity Fund 78 About Invesco Asia Infrastructure Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund About DWS Invest Climate Change CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund About Schroder ISF Greater China CIMB-Principal Lifecycle Funds CIMB-Principal MENA Equity Fund About Ocean Fund/Equities MENA Opportunities AUTHORISED INVESTMENTS INVESTMENT RESTRICTIONS AND LIMITS VALUATION OF AUTHORIZED INVESTMENTS BORROWINGS / FINANCING SECURITIES LENDING FUNDS PERFORMANCE AVERAGE TOTAL RETURNS ANNUAL TOTAL RETURNS FUNDS PERFORMANCE AGAINST BENCHMARK..133 DISTRIBUTIONS PORTFOLIO TURNOVER RATIO (PTR) ASSET ALLOCATION HISTORICAL HIGHLIGHTS OF THE FUNDS TOTAL ANNUAL EXPENSES MANAGEMENT EXPENSE RATIO (MER) FEES, CHARGES AND EXPENSES CHARGES FEES AND EXPENSES TRANSACTION INFORMATION UNIT PRICING TRANSACTION DETAILS INVESTING WITHDRAWALS MINIMUM BALANCE COOLING-OFF PERIOD SWITCHING TRANSFER FACILITY DISTRIBUTION OF THE FUNDS UNCLAIMED MONIES THE MANAGER ABOUT CIMB-PRINCIPAL ASSET MANAGEMENT BERHAD THE SUB-MANAGERS ABOUT CIMB-PRINCIPAL ASSET MANAGEMENT (S) PTE LTD ABOUT TEMPLETON ASSET MANAGEMENT LTD..194 THE TRUSTEES AMANAHRAYA TRUSTEES BERHAD MAYBAN TRUSTEES BERHAD PB TRUSTEE SERVICES BERHAD HSBC (MALAYSIA) TRUSTEE BERHAD DEUTSCHE TRUSTEES MALAYSIA BERHAD AMTRUSTEE BERHAD UNIVERSAL TRUSTEE (MALAYSIA) BERHAD WHAT ARE THE RESPONSIBILITIES OF THE TRUSTEES? SALIENT TERMS OF DEEDS APPROVALS AND CONDITIONS RELATED-PARTY TRANSACTIONS/ CONFLICT OF INTEREST TAXATION REPORT ADDITIONAL INFORMATION CONSENT DOCUMENTS AVAILABLE FOR INSPECTION DISTRIBUTORS OF THE FUNDS APPENDIX I ETF RISKS APPENDIX II UNIT TRUST LOAN FINANCING RISK DISCLOSURE STATEMENT ii

5 Definitions Except where the context otherwise requires, the following definitions shall apply throughout this Master Prospectus: AmTB - AmTrustee Berhad ( V). Application Fee - Preliminary charge on each investment. Approved Distributors - Any relevant persons and bodies, as may be approved by the SC (if necessary) or any other regulatory body and appointed by CIMB-Principal from time to time, who are responsible for selling units of the Funds. ART - AmanahRaya Trustees Berhad ( T). ASEAN - Association of Southeast Asian Nations. Auditors - An approved company auditor independent of both the Trustee and the Manager, and appointed by the Trustee of the Fund. BNM - Bank Negara Malaysia. Bursa Malaysia - Bursa Malaysia Securities Berhad ( W). Business Day - Mondays to Fridays when Bursa Malaysia is open for trading, and/or banks in Kuala Lumpur and/or Selangor are open for business. Note for CIMB-Principal ASEAN Equity Fund, CIMB-Principal Asian Equity Fund, CIMB-Principal Emerging Asia Fund, CIMB-Principal Global Asset Spectra Fund, CIMB-Principal Global Balanced Fund, CIMB-Principal Global Growth Fund, CIMB- Principal Global Titans Fund and CIMB-Principal Lifecycle Funds: The Manager may declare certain Business Days a non-business Day if that Fund s investment in foreign markets which are closed for business is at least 50% of the Fund s NAV. Note for CIMB-Principal Asia Infrastructure Equity Fund, CIMB-Principal Climate Change Equity Fund, CIMB-Principal Greater China Equity Fund and CIMB-Principal MENA Equity Fund: The Manager may declare certain Business Days a non-business Day when it is a non- Business Day for the Target Fund or in the event of a temporary suspension of the Net Asset Value calculation of the Target Fund as provided for in its prevailing prospectus. CIMB - CIMB Investment Bank Berhad (18417-M). CIMB FTSE/ASEAN 40 - An Exchange-Traded Fund (ETF) listed in the Singapore Stock Exchange Trading Limited. CIMB Group CIMB Group Holdings - - CIMB Group Sdn. Bhd. ( D). CIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad) (50841-W). CIMB-Principal or the Manager - CIMB-Principal Asset Management Berhad ( K). CIMB-Principal (S) - CIMB-Principal Asset Management (S) Pte Ltd ( K). CIMB-Principal Funds - Any unit trust funds that may be offered by CIMB-Principal. CIS - Collective Investment Scheme. CMSA - Capital Markets and Services Act CWA - CIMB Wealth Advisors Berhad ( H), an IUTA of the Manager. Deeds - The Master and any Supplemental Master Deed in respect of the Funds made between the Manager, the Trustee and the Unit holders of the Funds, agreeing to be bound by the provisions of the respective Deeds. DTMB - Deutsche Trustees Malaysia Berhad ( H). Eligible Market - A market which is regulated by a regulatory authority, operates regularly, is open to the public and has adequate liquidity for the purposes of the Fund. Exchange-Traded Fund or ETF - An authorized collective investment scheme listed in the exchange. FBM FTSE Bursa Malaysia Top 100. Fitch - Fitch Ratings. FTSE - An independent company owned by The Financial Times and the London Stock Exchange. The company s sole business is the creation and management of indices and associated data services, on an international scale. (For more information, please refer to FTSE / ASEAN Index - A benchmark index providing an indication of the financial performance of the top 180 large and mid cap companies from the five ASEAN countries: Indonesia, Malaysia, the Philippines, Singapore and Thailand but currently consisting of 147 securities. FTSE / ASEAN 40 Index - A tradable index consisting of the top 40 constituents from FTSE/ASEAN Index, ranked by market capitalization. 1

6 Fund / Funds - EQUITY FUNDS CIMB-Principal Equity Fund CIMB-Principal Equity Fund 2 CIMB-Principal Equity Aggressive Fund 1 CIMB-Principal Equity Aggressive Fund 3 CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund MIXED ASSET FUNDS CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund FIXED INCOME & MONEY MARKET FUNDS CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund (formerly known as the CIMB-Principal Money Market Fund) CIMB-Principal Money Market Income Fund (formerly known as the CIMB-Principal Xcess Cash Fund) EF EF2 EAF1 EAF3 EGF EGIF EIF SCF BF BIF IPBF BOF SBF DF MMIF REGIONAL & GLOBAL FUNDS CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Funds, a group of three (3) distinct conventional Funds, known as: CIMB-Principal Lifecycle 2017 CIMB-Principal Lifecycle 2022 CIMB-Principal Lifecycle 2027 CIMB-Principal MENA Equity Fund GLG Partners - GLG Partners Inc. GLG UK - GLG Partners UK Ltd. HSBCT - HSBC (Malaysia) Trustee Berhad (1281-T). IUTAs - Institutional Unit Trust Advisers. 2 AIEF ASEF AEF CCEF EMAF GASF GBF GGF GTF GCEF LF LF2017 LF2022 LF2027 CMEF Latest Practicable Date or LPD - 31 May 2010, in which all information provided herein shall remain current and relevant as at such date. LTT - Lifetime Trust (which includes CIMB-Principal Equity Aggressive Fund 3, CIMB-Principal Balanced Fund and CIMB-Principal Income Plus Balanced Fund). MARC - Malaysian Rating Corporation Berhad ( V). Management Fee - A percentage of the NAV of the Fund that is paid to the Manager for managing the portfolio of the Fund. MENA countries - The Middle East and North African countries including Egypt, Jordan, Lebanon, Oman, Qatar, Kuwait, Bahrain, Saudi Arabia, United Arab Emirates, Tunisia, Morocco and other markets of the region. MER - Management Expense Ratio. Moody s - Moody s Investors Service. MSCI - Morgan Stanley Capital International, a global benchmark provider. MTB - Mayban Trustees Berhad (5004-P). Net Asset Value or NAV - The value of the cash, accrued income and investments together with an adjustment for brokerage, stamp duties, transfer fees and other charges, if any, in respect of such investments less liabilities including provisions and allowances for contingencies for the time being in the Fund, at the valuation point. For the purpose of computing the annual Management Fee and annual Trustee Fee, the NAV of the Fund should be inclusive of the Management Fee and Trustee Fee for the relevant day. NAV per unit - The Net Asset Value of the Fund divided by the number of units in circulation, at the valuation point. OTC - Over-the-counter. PBTSB - PB Trustee Services Berhad (7968-T). PGI - Principal Global Investors, LLC.

7 PIA - Principal International (Asia) Ltd. Principal Financial Group or - Principal Financial Group and its affiliates. PFG PTR - Portfolio Turnover Ratio. RAM - RAM Rating Services Berhad ( T). Quant shop MGS All Bond - An Index jointly developed by RAM and Quant Shop Pty. Ltd. Index Quant shop MGS Bond Index - An Index jointly developed by RAM and Quant Shop Pty. Ltd. (Medium Sub-Index) REIT - Real Estate Investment Trust. RM and sen - Ringgit Malaysia and sen respectively. S&P - Standard & Poor s. SC - Securities Commission of Malaysia. SC Guidelines - SC Guidelines on Unit Trust Funds as may be amended and/or updated from time to time. Schroder ISF Greater China - Schroder International Selection Fund Greater China. SGAM Paris - Société Générale Asset Management S.A., France. SGAM UK - Société Générale Asset Management UK Limited. Special Resolution - A resolution passed by a majority of not less than 3/4 of Unit holders voting at a meeting of Unit holders. For the purpose of terminating or winding up a fund, a Special Resolution is passed by a majority in number representing at least 3/4 of the value of the units held by Unit holders voting at the meeting. Switching Fee - A charge that may be levied when switching is done from one Fund to another. TAML - Templeton Asset Management Ltd ( E). Target Fund - The fund or funds into which each Feeder Fund or Fund-of-Funds respectively invests in. Transfer Fee - A nominal fee levied for each transfer of units from one Unit holder to another. Trustees - ART, MTB, PBTSB, HSBCT, AmTB, DTMB and/or UTMB and Trustee means any one of them. Trustee Fee - A fee that is paid to the Trustee for its services rendered as trustee for the Fund. Unit holder - The registered holder for the time being of a unit of the Fund including persons jointly so registered. UTMB - Universal Trustee (Malaysia) Berhad (17540-D). Withdrawal Fee - A charge levied upon redemption under certain terms and conditions (if applicable). YTD - Year-to-date. 3

8 Corporate Directory The Manager CIMB-Principal Asset Management Berhad ( K) Business address Level 5, Menara Milenium 8, Jalan Damanlela Bukit Damansara Kuala Lumpur MALAYSIA Tel: (03) Penang office Level 4, Menara BHL 51, Jalan Sultan Ahmad Shah Penang MALAYSIA Tel: (04) Kuching office Level 6, Wisma STA 26, Jalan Datuk Abang Abdul Rahim Kuching Sarawak MALAYSIA Tel: (082) Registered address 5 th Floor, Bangunan CIMB Jalan Semantan Damansara Heights Kuala Lumpur MALAYSIA Tel: (03) Postal address CIMB-Principal Asset Management Berhad PO Box Kuala Lumpur MALAYSIA Customer Care Centre 50, 52 & 54, Jalan SS21/39 Damansara Utama Petaling Jaya Selangor MALAYSIA Tel: (03) Fax: (03) Website cimb-p.custsupport@cimb.com Board of Directors Dato Mohd Shukri Hussin Datuk Noripah binti Kamso Raja Noorma Binti Raja Othman Dato Charon Wardini bin Mokhzani** Peter William England John Campbell Tupling Rex Auyeung Brig Gen (R) Dato Arif bin Dato Awang* Wong Joon Hian* Dato Anwar bin Aji* Ned Alan Burmeister Loong Chun Nee* Badlisyah bin Abdul Ghani*** * Independent director ** Alternate director to Dato Mohd Shukri Hussin *** Alternate director to Raja Noorma Binti Raja Othman Investment Committee Raja Noorma Binti Raja Othman John Campbell Tupling Badlisyah bin Abdul Ghani Kim Teo Poh Jin* A. Huzaime bin Abdul Hamid* Fad l bin Mohamed* * Independent Member Company Secretary Datin Rossaya Mohd Nashir (LS ) 5 th Floor, Bangunan CIMB Jalan Semantan Damansara Heights Kuala Lumpur MALAYSIA Tel: (03) Sub-Manager for AEF, EGIF, EGF, EIF, EMAF, GASF and GTF CIMB-Principal Asset Management (S) Pte Ltd ( K) Business/registered address 50, Raffles Place #26-05 Singapore Land Tower SINGAPORE Tel: (65) Sub-Manager for GGF and GBF Templeton Asset Management Ltd ( E) Business/registered address 7, Temasek Boulevard #38-03 Suntec Tower One SINGAPORE Tel: (65) Fund Administrator for EGF, EIF, GGF, GBF and AEF Citibank Berhad ( M) Business/registered address Level 44, Menara Citibank 165, Jalan Ampang Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) The Trustees Trustee for EGIF and EAF1 AmanahRaya Trustees Berhad ( T) Business address Tingkat 2, Wisma TAS 21, Jalan Melaka Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) Registered address Tingkat 11, Wisma AmanahRaya 2, Jalan Ampang Kuala Lumpur MALAYSIA Tel: (03)

9 Delegates of AmanahRaya Trustees Berhad HSBC Institutional Trust Services (Singapore) Limited (as Custodian) for EGIF Business/ registered address 21, Collyer Quay #10-00, HSBC Building SINGAPORE Tel: (65) / 4408 / 4492 Fax: (65) Citibank NA (Singapore) Branch (as Custodian) for EAF1 Business address 3, Temasek Avenue, #16-00 Centennial Tower SINGAPORE Tel: (65) (GL) / Fax: (65) Registered address 3, Temasek Avenue, #12-00 Centennial Tower SINGAPORE Trustee for ASEF, EMAF, LTT, SBF, SCF and MMIF Mayban Trustees Berhad (5004-P) Business/ registered address 34 th Floor, Menara Maybank 100, Jalan Tun Perak Kuala Lumpur MALAYSIA Tel: (03) Delegate of Mayban Trustees Berhad Malayan Banking Berhad (3813-K) (as Custodian) (Maybank Custody Services) Business/registered address 14 th Floor, Menara Maybank 100, Jalan Tun Perak Kuala Lumpur MALAYSIA Tel: (03) Delegate of Mayban Trustees Berhad (for IPBF, EMAF and ASEF) Standard Chartered Bank Malaysia Berhad Business/registered address Level 16, Menara Standard Chartered 30, Jalan Sultan Ismail Kuala Lumpur MALAYSIA Tel: (03) Trustee for BOF PB Trustee Services Berhad (7968-T) Business/registered address 17 th Floor, Menara Public Bank 146, Jalan Ampang Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) Trustee for GTF, GASF, GCEF, CCEF, LF and DF HSBC (Malaysia) Trustee Berhad (1281-T) Business/registered address Suite 901, 9 th Floor, Wisma Hamzah-Kwong Hing, 1, Lebuh Ampang Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) Delegate of HSBC (Malaysia) Trustee Berhad (for local investments) The Hongkong And Shanghai Banking Corporation (as custodian) and assets held through: 5 HSBC Nominees (Tempatan) Sdn Bhd ( D) Business/registered address 2, Lebuh Ampang Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) Delegate of HSBC (Malaysia) Trustee Berhad (for foreign investments) HSBC Institutional Trust Services (Asia) Limited 6 th Floor, Tower One HSBC Centre 1, Sham Mong Road Kowloon HONG KONG Tel: (852) Fax: (852) Trustee for CMEF Deutsche Trustees Malaysia Berhad ( H) Business/ registered address Level 20, Menara IMC 8, Jalan Sultan Ismail Kuala Lumpur MALAYSIA Tel: (03) Delegate of Deutsche Trustees Malaysia Berhad (Local & Foreign custodian) Deutsche Bank (Malaysia) Berhad ( W) Registered address Level 18, Menara IMC 8, Jalan Sultan Ismail Kuala Lumpur MALAYSIA Tel: (03) Business address Level 18-20, Menara IMC 8, Jalan Sultan Ismail Kuala Lumpur MALAYSIA Tel: (03) Trustee for AIEF AmTrustee Berhad ( V) Business address 17 th Floor, Bangunan AmBank Group 55, Jalan Raja Chulan Kuala Lumpur MALAYSIA Tel: (03) , (03) Fax: (03) Registered address 22 nd Floor, Bangunan AmBank Group 55, Jalan Raja Chulan Kuala Lumpur MALAYSIA Delegate of AmTrustee Berhad for AIEF CIMB Group Nominees (Tempatan) Sdn Bhd ( T) Business address Level 7, Wisma Amanah Raya Berhad Jalan Semantan, Damansara Heights Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) Registered address 5 th Floor, Bangunan CIMB Jalan Semantan, Damansara Heights Kuala Lumpur MALAYSIA Tel: (03) Fax: (03)

10 Trustee for BIF, EF2, EF, EGF, EIF, GGF, GBF & AEF Universal Trustee (Malaysia) Berhad (17540-D) Business/registered address 1, Jalan Ampang, 3 rd Floor Kuala Lumpur MALAYSIA Tel: (03) Fax: (03) , (03) , (03) Delegate of Universal Trustee (Malaysia) Berhad for GGF, GBF, AEF, EGF & EIF Citibank NA (Singapore) Branch Business/registered address 3, Temasek Avenue, #16-00 Centennial Tower SINGAPORE Tel: (65) (GL) Fax: (65) Federation of Investment Managers Malaysia (FIMM) (formerly known as the Federation of Malaysian Unit Trust Managers) , 7 th Floor, PNB Damansara 19, Lorong Dungun Damansara Heights Kuala Lumpur MALAYSIA Tel: (03) info@fimm.com.my Auditors of the Manager and of the Funds/Reporting Accountants PricewaterhouseCoopers Chartered Accountants Level 10, 1 Sentral Jalan Travers Kuala Lumpur Sentral PO Box Kuala Lumpur MALAYSIA Solicitors Soon Gan Dion & Partners 1 st Floor, 19, Jalan SS21/56B Damansara Utama Petaling Jaya Selangor Darul Ehsan MALAYSIA Tel: (03) Fax: (03) Principal Bankers CIMB Bank Berhad Menara Bumiputra-Commerce 11, Jalan Raja Laut Kuala Lumpur MALAYSIA CIMB Investment Bank Berhad 10 th Floor, Bangunan CIMB Jalan Semantan Damansara Heights Kuala Lumpur MALAYSIA Malayan Banking Berhad Kuala Lumpur Main Office Menara Maybank 100, Jalan Tun Perak Kuala Lumpur MALAYSIA Citibank Berhad Level 45, Menara Citibank 165, Jalan Ampang Kuala Lumpur MALAYSIA HSBC Bank Malaysia Berhad 2, Lebuh Ampang Kuala Lumpur MALAYSIA Consulting Actuaries Mercer Zainal Consulting Sdn Bhd 1702 Kenanga International Jalan Sultan Ismail Kuala Lumpur MALAYSIA Tax Adviser PricewaterhouseCoopers Taxation Services Sdn Bhd Level 10, 1 Sentral Jalan Travers Kuala Lumpur Sentral PO Box Kuala Lumpur MALAYSIA 6

11 Key Data This section contains a summary of the salient information about the Funds. You should read and understand the entire Master Prospectus before investing and keep the Master Prospectus for your records. In determining which investment is right for you, we recommend you speak to professional advisers. CIMB-Principal Asset Management Berhad, member companies of the CIMB Group, the Principal Financial Group and the Trustees do not guarantee the repayment of capital. Fund information Equity Funds CIMB-Principal Equity Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. To maximise capital growth over the medium to long term through the stock market. 63 Benchmark FTSE Bursa Malaysia Top 100 Index 63 Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) and other permissible investments. In line with its objective, the investment policy and strategy of the Fund will focus on investment in shares of companies with growth potential and listed on the Main Market. 63 Principal risks Stock specific risk and company specific risk. 43 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment; are seeking maximum capital appreciation over the long-term and do not require regular income from their investment; are comfortable with a higher than average degree of volatility; and/or are willing to take higher risks in anticipation of potentially higher returns. Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 1 August 1995 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 June 1 billion units million units. 7

12 CIMB-Principal Equity Fund 2 For further details, please refer to page Fund category / Type Investment objective Equity / Aggressive Growth. To achieve maximum capital appreciation over the long term through all types of investments. 64 Benchmark FTSE Bursa Malaysia Top 100 Index 64 Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) and other permissible investments. In line with its objective, the investment policy and strategy of the Fund will focus on investment in shares of companies with growth potential. 64 Principal risks Stock specific risk and company specific risk. 43 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment; are seeking maximum capital appreciation over the long-term and do not require regular income from their investment; are comfortable with a higher than average degree of volatility; and/or are willing to take higher risks in anticipation of potentially higher returns. Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 28 September 1995 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 October 1 billion units million units. 8

13 CIMB-Principal Equity Aggressive Fund 1 For further details, please refer to page Fund category / Type Investment objective Equity / Growth. To provide investors with long term capital growth by investing principally in equities. The Fund also seeks to outperform the FTSE Bursa Malaysia KLCI benchmark. 65 Benchmark FTSE Bursa Malaysia KLCI 65 Investment policy and principal investment strategy Principal risks Investor profile The Fund will invest between 60% to 98% of its NAV in equities (both inclusive) and up to a maximum of 30% of its NAV may be invested in warrants and options. Liquid assets may also be strategically used if the Manager perceives that the downside risk of the market is high in the short term. In line with its objective, the investment policy and strategy of the Fund is to have a portfolio comprising of both equities and derivatives which will be rebalanced to suit market conditions. Stock specific risk, company specific risk and risk associated with investment in warrants/options. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; are seeking capital appreciation over the long-term and do not require regular income from their investment; are willing to take higher risks in anticipation of potentially higher returns; and/or can accept that investment returns may fluctuate significantly over the shortterm and may even be negative Trustee AmanahRaya Trustees Berhad. 197 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 18 August 2004 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 April 500 million units million units. 9

14 CIMB-Principal Equity Aggressive Fund 3 For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The objective of the Fund is to grow the value of investments over the long term through investment in Malaysian shares. 66 Benchmark FTSE Bursa Malaysia Top 100 Index 66 Investment policy and principal investment strategy The Fund may invest between 70% to 98% of the Fund s NAV in local equities (both inclusive). As an aggressive Fund, the Fund will be managed with higher beta and tracking error. The investment policy and strategy of the Fund will be to invest in stocks which are selected based on their future growth prospects with benchmarking of the Fund being a secondary consideration. As such, the Fund may hold a larger percentage of its NAV (may exceed 10%) in stocks of companies with small capitalization. In addition, liquid assets may also be strategically used if the Manager feels that the market downside risk is high in the short term. 66 Principal risks Stock specific risk and company specific risk. 44 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; are seeking capital appreciation over the long-term and do not require regular income from their investment; are willing to take higher risks in anticipation of potentially higher returns; and/or can accept that investment returns may fluctuate significantly over the shortterm and may even be negative. Trustee Mayban Trustees Berhad. 198 Distribution policy No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. 181 Launch date 12 March 1998 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1 billion units million units. 10

15 CIMB-Principal Equity Growth Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. To provide investors with long term capital growth by investing principally in equities. The Fund also seeks to outperform the FTSE Bursa Malaysia KLCI benchmark. 67 Benchmark 50% FTSE Bursa Malaysia KLCI + 50% MSCI AC Asia ex Japan. 67 Investment policy and principal investment strategy The Fund will invest at least 70% of its NAV in equities in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In addition, liquid assets may be strategically used if the Manager feels that the market downside risk is high in the short term. In line with its objective, the investment policy and strategy of the Fund is to have a diversified portfolio of equities aimed at outperforming the market at different cycles of the market. The investment management function for the foreign investments of this Fund has been delegated to CIMB-Principal (S) with the approval of the SC. CIMB- Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. 67 Principal risks Stock specific risk, company specific risk, country risk and currency risk. 44 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want a diversified portfolio of equities with some foreign exposure; are seeking capital appreciation over the long-term; and/or are willing to take moderate risks in pursuit of potentially better returns. Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 1 October 2003 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 November 700 million units million units. 11

16 CIMB-Principal Equity Growth & Income Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. To achieve capital appreciation over the medium to long term through all types of investments that have the potential for above average growth over time. 68 Benchmark 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan*. 68 Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In line with its objective, the investment policy and strategy of the Fund will be to invest primarily in equities, with a bias towards growth stocks that have the potential to deliver long-term capital appreciation. To a lesser extent, the Fund invests in liquid assets primarily for the purpose of cash management. The investment management function for the foreign investments of this Fund has been delegated to CIMB-Principal (S) with the approval of the SC. CIMB- Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. 68 Principal risks Stock specific risk, company specific risk, country risk and currency risk. 44 Investor profile The recommended investment timeframe for this Fund is between 3 and 5 years or more. This Fund is suitable for investors who: have long-term investment horizon; want a diversified portfolio of equities with some foreign exposure; seek capital appreciation with dividend income being secondary; and/or are willing to take moderate risks for potentially better returns from your investment. Trustee AmanahRaya Trustees Berhad. 197 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 15 May 1991 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 April 750 million units million units. * Note: Effective 1 July 2010, the benchmark for this Fund will be replaced with 70% FTSE Bursa Malaysia Top 100 Index + 30% MSCI AC Asia ex Japan. This is to reflect the change in the foreign exposure. 12

17 CIMB-Principal Equity Income Fund For further details, please refer to page Fund category / Type Investment objective Equity / Income. To provide investors with an opportunity to gain consistent and stable income by investing in a diversified portfolio of dividend yielding equities and fixed income securities. The Fund may also provide moderate capital growth potential over the medium to long term period. 69 Benchmark 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan. 69 Investment policy and principal investment strategy Principal risks Investor profile The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In line with its objective, the investment policy and strategy of the Fund will be to invest in a diversified portfolio of high dividend yielding stocks and/or fixed income securities aimed at providing a stable income stream in the form of distributions to investors. The investment management function for the foreign investments of this Fund has been delegated to CIMB-Principal (S) with the approval of the SC. CIMB- Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. Stock specific risk, company specific risk, credit/default risk, interest rate risk, counterparty risk, country risk and currency risk. The recommended investment timeframe for this Fund is between 3 to 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; want a diversified portfolio of equities with some foreign exposure; are looking for stable income through equities that offer stable income and growth potential; and/or are willing to take moderate risks for potentially moderate capital returns Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy Distribution (if any) is expected to be distributed annually, depending on the performance of the Fund and at the Manager s discretion. 181 Launch date 1 October 2003 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 January 500 million units million units. 13

18 CIMB-Principal Small Cap Fund For further details, please refer to page Fund category / Type Investment objective Equity (Small-Cap) / Growth. The objective of the Fund is to provide growth to the value of Unit holders investments over the long term in an equity fund by investing in undiscovered smaller companies listed on Bursa Malaysia. 70 Benchmark FTSE Bursa Malaysia Small Cap Index. 70 Investment policy and principal investment strategy The Fund may invest between 70% to 98% (both inclusive) of the Fund s NAV in shares of smaller companies with market capitalization at point of purchase not exceeding the market capitalization of the largest constituent stock (by market capitalization) of the benchmark. The investment policy and strategy of the Fund will therefore focus on investments in securities of such emerging companies with strong potential growth and hands-on management policies but lacking in track records. To a lesser extent, the Fund may also invest in other permissible investments such as liquid assets primarily for the purpose of cash management. In addition, liquid assets may be strategically used if the Manager feels that the market downside risk is high in the short term. 70 Principal risks Stock specific risk, company specific risk and liquidity risk. 45 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want to diversify their overall investment portfolio by including shares as an asset class, in particular, shares of smaller companies; are seeking higher capital appreciation over the long-term; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risks in anticipation of potentially higher returns compared to other kinds of investment instruments. Trustee Mayban Trustees Berhad. 198 Distribution policy No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. 181 Launch date 20 April 2004 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1.2 billion units million units. 14

19 Fund information Mixed Asset Funds CIMB-Principal Balanced Fund For further details, please refer to page Fund category / Type Investment objective Balanced / Growth. The objective of the Fund is to grow the value of investments over the long term through investment in a diversified mix of Malaysian assets. 71 Benchmark 70% FBM % CIMB Bank 1-Month Fixed Deposit Rate. 71 Investment policy and principal investment strategy Principal risks Investor profile The Fund aims to invest in a diversified portfolio of equities and fixed income investments. In line with its objective, the investment policy and strategy will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 70:30. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in equity securities shall be between 50% to 70% of the NAV of the Fund (both inclusive) and investments in fixed income securities and liquid assets shall not be less than 30% of the NAV of the Fund with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Credit/default risk, interest rate risk, counterparty risk, company specific risk and stock specific risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; want a balanced portfolio that includes equities and fixed income securities; recognise that a well-diversified fund tends to produce a smoother return over time than a fund which invests in only one asset class such as equities; wants a portfolio with preference to higher equity exposure for potentially higher capital appreciation; and/or are willing to take moderate risks for moderate capital appreciation Trustee Mayban Trustees Berhad. 198 Distribution policy Distribution (if any) is expected to be distributed once a year every January at the Manager s discretion. 181 Launch date 12 March 1998 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1 billion units million units. 15

20 CIMB-Principal Balanced Income Fund For further details, please refer to page Fund category / Type Investment objective Balanced / Growth & Income. To seek long term growth in capital and income by investing in all types of investments. 72 Benchmark 60% FBM % CIMB Bank 1-Month Fixed Deposit Rate. 72 Investment policy and principal investment strategy Principal risks Investor profile The Fund aims to invest in a diversified portfolio of equities and fixed income investments. In line with the objective of the Fund, the investment policy and strategy of the Fund will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 60:40. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in equity securities shall not exceed 60% of the NAV of the Fund and investments in fixed income securities and liquid assets shall not be less than 40% of the NAV of the Fund with a minimum credit rating of BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. The fixed income portion will provide capital stability to the Fund whilst the equity portion will provide the added return in a rising market. Credit/default risk, interest rate risk, counterparty risk, company specific risk and stock specific risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; tend to be more conservative in investments; are seeking capital appreciation with income being secondary; want a balanced portfolio that includes equities and fixed income securities; recognise that a well-diversified fund tends to produce a smoother return over time than a fund which invests in only one asset class such as equities; wants a portfolio with preference to higher equity exposure for potentially higher capital appreciation; and/or are willing to take moderate risks for moderate capital appreciation Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 10 August 1995 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 August 700 million units million units. 16

21 CIMB-Principal Income Plus Balanced Fund For further details, please refer to page Fund category / Type Investment objective Balanced / Income. The objective of the Fund is to provide capital growth over the medium to longterm as well as income distributions. 73 Benchmark 40% FBM % CIMB Bank 1-Month Fixed Deposit Rate. 73 Investment policy and principal investment strategy Principal risks Investor profile The Fund aims to invest in a diversified portfolio of primarily fixed income investments and some exposure in equities. The Fund may invest between 60% to 80% (both inclusive) of its NAV in debentures carrying a minimum credit rating of BBB3 or P2 rating by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. The Fund may also invest between 10% to 40% of its NAV in equities (both inclusive). As part of its equities portfolio, the Fund may invest in stocks listed on the following foreign stock exchanges: Australia, China, Hong Kong SAR, India, New Zealand, Singapore, Sri Lanka, Thailand, Korea, the Philippines, Indonesia and Taiwan subject to a maximum of 12% of its NAV. In line with the objective of the Fund, the investment policy and strategy of the Fund is to invest primarily in fixed income securities in order to provide streams of income and some capital stability, whilst having some exposure to equities in order to provide growth and added return in a rising market. Credit/default risk, interest rate risk, counterparty risk, company specific risk, stock specific risk, country risk and currency risk. The recommended investment timeframe for this Fund is 3 years or more. This Fund is suitable for investors who: have a medium-term investment horizon; want a diversified portfolio yet prefer a higher exposure to fixed interest securities; are seeking capital appreciation with income being secondary; are looking for an investment which has the potential to grow in value over the medium term and potentially offset the effects of inflation; and/or are looking for a less volatile investment but can accept that returns may fluctuate over the short term Trustee Mayban Trustees Berhad. 198 Distribution policy Distribution (if any) is expected to be distributed half-yearly in January and July at the Manager s discretion*. 181 Launch date 12 March 1998 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1.5 billion units million units. *Note: Pursuant to the Master Deed, the Manager has the right to make provisions for reserves in respect of distribution of the Fund. If the distribution available is too small or insignificant, any distribution may not be of benefit to the Unit holders as the total cost to be incurred in any such distribution may be higher than the amount for distribution. The Manager has the discretion to decide on the amount to be distributed to the Unit holders. 17

22 Fund information Fixed Income & Money Market Funds CIMB-Principal Bond Fund For further details, please refer to page Fund category / Type Investment objective Bond / Income. The objective of the Fund is to provide regular income as well as to achieve medium to long-term capital appreciation through investments primarily in Malaysian bonds. 74 Benchmark Quant shop MGS Bond Index (medium sub-index). 74 Investment policy and principal investment strategy Between 70% to 98% (both inclusive) of the Fund s NAV may be invested in debentures carrying at least a BBB3 or P3 rating by RAM or equivalent rating by MARC; BB by S&P or equivalent rating by Moody s or Fitch. The rest of the Fund is maintained in the form of liquid assets to meet any redemption payments to Unit holders. In line with its objective, the investment strategy and policy of the Fund is to invest in a diversified portfolio of approved fixed income securities consisting primarily of bonds, and aims to provide a steady stream of income. 74 Principal risks Credit/default risk, interest rate risk, counterparty risk and company specific risk. 48 Investor profile The recommended investment timeframe for this Fund is 3 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; want a diversified portfolio of fixed interest securities; want to receive a tax-effective income stream and maintain the value of their investment over the medium-term; and/or are looking for a less volatile investment but can accept that returns may fluctuate over the short-term. Trustee PB Trustee Services Berhad. 199 Distribution policy Distribution (if any) is expected to be distributed once a year every January at the Manager s discretion*. 181 Launch date 15 November 1995 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1.5 billion units million units. *Note: Pursuant to the Master Deed, the Manager has the right to make provisions for reserves in respect of distribution of the Fund. If the distribution available is too small or insignificant, any distribution may not be of benefit to the Unit holders as the total cost to be incurred in any such distribution may be higher than the amount for distribution. The Manager has the discretion to decide on the amount to be distributed to the Unit holders. 18

23 CIMB-Principal Strategic Bond Fund For further details, please refer to page Fund category / Type Investment objective Bond / Income & Growth. The objective of the Fund is to provide growth to the value of Unit holders investments over the medium term in a medium to long-term bond portfolio as well as to provide a source of regular income. 75 Benchmark Quant shop MGS Bond Index (medium sub-index). 75 Investment policy and principal investment strategy Principal risks Investor profile The Fund may invest between 70% to 98% of its NAV in debentures rated at least BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch and up to 10% of its NAV in warrants and options. As a strategic bond fund, the Fund may also allocate part of its fixed income portfolio to be invested in ICULS/exchangeable bonds listed on the Bursa Malaysia and other eligible exchanges, but subject to a maximum of 10% of its NAV. In line with its objective, the investment strategy and policy of the Fund is to invest in a diversified portfolio of approved fixed income securities aimed to provide a steady stream of income while utilizing warrants and options to provide added returns when appropriate. Credit/default risk, interest rate risk, counterparty risk, company specific risk and risks associated with investment in warrants/options. The recommended investment timeframe for this Fund is 3 years or more. This Fund is suitable for investors who: have a medium-term investment horizon; want a diversified portfolio of investments that includes bonds; seek for less volatile asset class with some exposure to the equities; are willing to take moderate risk for potentially higher returns; and/or can accept that returns may fluctuate over the short-term Trustee Mayban Trustees Berhad. 198 Distribution policy Distribution (if any) is expected to be distributed once a year every January at the Manager s discretion*. 181 Launch date 23 March 2004 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1 billion units million units. *Note: Pursuant to the Master Deed, the Manager has the right to make provisions for reserves in respect of distribution of the Fund. If the distribution available is too small or insignificant, any distribution may not be of benefit to the Unit holders as the total cost to be incurred in any such distribution may be higher than the amount for distribution. The Manager has the discretion to decide on the amount to be distributed to the Unit holders. 19

24 CIMB-Principal Deposit Fund For further details, please refer to page Fund category / Type Investment objective Money Market / Income. The objective of the Fund is to generate regular income for investors through investments primarily in the money market. 76 Benchmark CIMB Bank Overnight Rate. 76 Investment policy and principal investment strategy The Fund will place at least 90% of its NAV in deposits. Up to 10% of the Fund s NAV may be invested in money market instruments and short-term debentures with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch, all of which have a remaining maturity period of less than 365 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments with a high degree of capital preservation. 76 Principal risks Credit/default risk, interest rate risk and counterparty risk. 49 Investor profile This Fund is suitable for short-term investments (recommended up to 1 year). The Fund can be used as a place to: invest the cash portion of an investment portfolio; and/or park money aside while waiting to make another investment. It is also suitable for investors who: have either a short or medium-term investment horizon; desire a stream of income; seek for security and flexibility in investment; and/or want easy access to their funds. Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Monthly, depending on the level of income (if any) the Fund generates. 181 Launch date 8 July 2004 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 August 1.5 billion units million units. 20

25 CIMB-Principal Money Market Income Fund For further details, please refer to page Fund category / Type Investment objective Money Market / Income. The objective of the Fund is to provide a low risk investment option that normally earns higher interest than traditional bank accounts. 77 Benchmark The CIMB Bank Overnight Rate. 77 Investment policy and principal investment strategy The Fund may place at least 90% of its NAV in deposits as well as invest in money market instruments and short-term debentures with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch, all of which have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in short-term debentures which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments with a high degree of capital preservation. 77 Principal risks Credit/default risk, interest rate risk and counterparty risk. 49 Investor profile This Fund is suitable for short-term investments (recommended up to 1 year). The Fund can be used as a place to: invest the cash portion of an investment portfolio; and/or park money aside while waiting to make another investment. It is also suitable for investors who: have either a short or medium-term investment horizon; desire a stream of income; seek for security and flexibility in investment; and/or want easy access to their funds Trustee Mayban Trustees Berhad. 198 Distribution policy Quarterly, if any, within 14 days after the last day of each quarter. 181 Launch date 18 February 2004 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 December 1 billion units million units. 21

26 Fund information Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund For further details, please refer to page Fund category / Type Investment objective Benchmark Investment policy and principal investment strategy Feeder Fund / Growth. The Fund aims to achieve long-term capital growth from investments in a diversified portfolio of Asian securities of issuers which are predominantly engaged in infrastructure activities. The Fund adheres to the reference index of the Target Fund. The Target Fund uses the MSCI AC Asia Pacific ex Japan ND Index as a reference index. A Feeder Fund which invests at least 95% of its NAV in the Invesco Asia Infrastructure Fund (a Luxembourg-domiciled fund established in 31 March 2006) which invests in a diversified portfolio of Asian securities of issuers which are predominantly engaged in infrastructure activities. The Fund will also maintain up to a maximum of 5% of its NAV in liquid assets. Information on the Target Fund: Management company : Invesco Management S.A. Investment Manager : Invesco Hong Kong Limited ( Invesco Hong Kong ) Regulatory Authority : Luxembourg Commission de Surveillance du Secteur Financier Principal risks of the Fund Fund manager s risk, legal and tax risk and currency risk. 50 Principal risks of the Target Fund Investor profile Market risk, industry concentration and infrastructure industry risks, investing in foreign markets, investing in developing markets, investing in smaller companies, investing in high yield bonds, investing in derivatives, interest rate risk and credit risk. The recommended investment timeframe for this Fund is 5 to 10 years. The Fund is suitable for investors who: have a long-term investment horizon; seek to participate in the upside potential of Asian infrastructure activities; seek potentially higher capital appreciation over the long-term; are willing to take higher risk with higher level of volatility in their investments in pursuit for potentially higher returns; and/or want to invest in a fund managed by an established international fund manager. 50 Trustee AmTrustee Berhad. 202 Distribution policy As the Fund will be investing in the share class of the Target Fund that does not pay distributions, and consistent with the Fund s objective to achieve capital growth, the Fund is not expected to pay any distribution. 181 Launch date 25 March 2008 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 May 300 million units million units. 22

27 CIMB-Principal ASEAN Equity Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The Fund aims to provide investors with capital growth over the medium to longterm through investments into ASEAN assets inclusive of equities, ETFs and derivatives. 88 Benchmark The FTSE/ASEAN 40 Index. 88 Investment policy and principal investment strategy Principal risks Investor profile The Fund will invest between 65% to 98% of its NAV in the ASEAN equity markets (both inclusive). The Fund may also invest up to 30% of its NAV in the CIMB FTSE/ASEAN 40 or other ETFs that invest predominantly in the ASEAN countries. Stock specific risk, company specific risk, country risk, currency risk, risks associated with ETF investment (please refer to Appendix I ETF risks on page 230), risk of assets in emerging markets and liquidity risk. The recommended investment timeframe for this Fund is 3 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; seek investment that participates in the growth of the ASEAN region; want access to the large and the mid cap companies in the ASEAN region; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risks in anticipation for potentially higher returns over the medium to long-term Trustee Mayban Trustees Berhad. 198 Distribution policy No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. 181 Launch date 12 September 2007 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 April 300 million units million units. 23

28 CIMB-Principal Asian Equity Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The investment objective is to seek capital growth by investing primarily in equities and equity related instruments in the Asia ex-japan (excluding Malaysia). 89 Benchmark MSCI All Country Asia ex Japan Index. 89 Investment policy and principal investment strategy Principal risks Investor profile The Fund aims to achieve capital growth primarily in equity securities of entities which are incorporated, or have their area of primary activity in the Asia ex-japan (excluding Malaysia). The Fund may also invest in equity securities, which are listed on recognised exchanges in the capital markets of the Asia ex-japan. Under normal market conditions, the Fund will invest primarily in common stocks. However, since the investment objective is more likely to be achieved through an investment policy that is flexible and adaptable, the Fund may seek investment opportunities in other types of transferable securities, including fixed income securities. The Fund may also invest in instruments issued by companies incorporated in the Asia ex-japan but listed or traded on exchanges outside the Asia ex-japan. The Asia ex-japan includes but not limited to the following countries: Hong Kong, India, Indonesia, Korea, the People s Republic of China, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan and Thailand. The investments of the Fund in the foreign markets are in accordance to the SC s Guidelines on Unit Trust Funds. They are further subject to the limits approved by Bank Negara Malaysia. The investment management function of this Fund has been delegated to CIMB- Principal Asset Management (S) Pte Ltd with the approval of the SC. CIMB- Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Stock specific risk, company specific risk, country risk, currency risk, risk of assets in emerging markets and liquidity risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want a well diversified portfolio of Asian region equities; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risks in anticipation for potentially higher capital appreciation over the long-term Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 1 March 2006 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 June 500 million units million units. 24

29 CIMB-Principal Climate Change Equity Fund For further details, please refer to page Fund category / Type Investment objective Benchmark Investment policy and principal investment strategy Feeder Fund / Growth. The Fund aims to achieve capital appreciation primarily through investment in a portfolio of global equities securities related to climate change. The Fund does not have any specific benchmark. However, MSCI World Index can be used for comparative purposes. The Target Fund is also using MSCI World Index as a reference. A Feeder Fund which invests at least 95% of its NAV in the DWS Invest Climate Change (a Luxembourg-domiciled fund established in 14 May 2007) which invests primarily in a portfolio of global equities securities that are primarily active in business areas suited to restricting or reducing climate change and its effects. The Fund will also maintain up to a maximum of 5% of its NAV in liquid assets Information on the Target Fund : Management company : DWS Investment S.A, Investment Manager : DWS-Finanz-Service GmbH Regulatory Authority : Luxembourg Commission de Surveillance du Secteur Financier. Principal risks of the Fund Fund manager s risk, legal and tax risk and currency risk. 54 Principal risks of the Target Fund Investor profile Stock specific risk, company specific risk, sector risk and country risk. 54 The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; want participation in the investments on companies that are primarily active in business areas suited to restricting or reducing climate change in the global market; and/or are willing to take higher risk in pursuit of higher capital appreciation over medium to long-term. Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Given its investment objective, the Fund is not expected to pay any distribution. 181 Launch date 27 September 2007 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 May 300 million units million units. 25

30 CIMB-Principal Emerging Asia Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. To grow the value of Unit holders investments in an equity fund that invests in undervalued and/or undiscovered companies. 97 Benchmark The MSCI All Country Asia ex Japan Index. 97 Investment policy and principal investment strategy Principal risks Investor profile The Fund will invest between 70% to 98% of its NAV in equities (both inclusive) and between 2% to 30% in liquid assets and any other assets, depending on the market condition. In line with its objective, the investment policy and strategy of the Fund is to invest primarily in shares of companies that are deemed to be undervalued as measured by the Price/Earning Ratio, Price/Book, Dividend Yield or any other appropriate method as may be determined by the Manager. The investment management function of this Fund has been delegated to CIMB- Principal (S) with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Stock specific risk, company specific risk, country risk, currency risk and liquidity risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want diversified portfolio that includes shares of undervalued and/or undiscovered companies; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risks in anticipation of higher capital appreciation over the long-term Trustee Mayban Trustees Berhad. 198 Distribution policy No distribution is expected to be paid, however, distribution, if any, will be incidental and will vary from period to period depending on interest rates, market conditions and the performance of the Fund. 181 Launch date 22 November 2005 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 March 500 million units million units. 26

31 CIMB-Principal Global Asset Spectra Fund For further details, please refer to page Fund category / Type Investment objective Fund-of Funds / Growth. The Fund aims to provide capital growth over the medium to long-term through investments in a diversified portfolio of local and/or foreign collective investment schemes (including exchange-traded funds). 97 Benchmark MSCI World Index (25%) + JP Morgan Global Government Bond Index (25%) + S&P/Citigroup BMI Property Index (25%) + S&P GSCI TM Total Return Index (25%). 97 Investment policy and principal investment strategy The Fund is a Fund-of-Funds that will invest at least 95% of its NAV in a minimum of 5 Target Funds at all times. The investment policy of this Fund is to invest in Target Funds registered in, but not limited to, Malaysia, Ireland, Luxembourg, Australia and Hong Kong, but subject to a maximum exposure of 30% for each Target Fund. The Fund will be exposed up to 40% of its NAV in the following asset classes: equities, fixed income securities, property-related securities and/or commodity-related securities. The Fund invests more than one (1) Target Fund for each asset class. 97 The investment management function of this Fund has been delegated to CIMB- Principal (S) with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Principal risks Fund manager s risk, legal and tax risk and currency risk. 55 Principal risks of the Target Fund Investor profile Country risk, risks associated with investment in global commodity-related assets, risks associated with investment in global property-related assets, credit/default risk and interest rate risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; seek a diversified investment portfolio across different asset classes with a focus on developed markets; are seeking a flexible and dynamic asset allocation, with increased asset universe as opposed to a conventional fund; want to invest in established and proven funds managed by renowned international fund managers; want access to markets that would otherwise be unavailable or difficult for an individual to invest in; and/or are willing to take higher risk for potentially higher capital appreciation. Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Given its investment objective, the Fund is not expected to pay any distribution. 181 Launch date 13 November 2006 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 April 400 million units million units. 27

32 CIMB-Principal Global Balanced Fund For further details, please refer to page Fund category / Type Investment objective Benchmark Investment policy and principal investment strategy Principal risks Investor profile Balanced / Growth & Income. The investment objective is to seek capital appreciation and current income over the long-term by investing in a diversified portfolio of equity and fixed income securities worldwide (excluding Malaysia). 55% MSCI All Country World Index + 45% JP Morgan Global Government Bond Index. The Fund aims to achieve its investment objective of capital appreciation and current income by investing in equity and debt obligations of companies and governments worldwide (excluding Malaysia). The investment policy and strategy of the Fund will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 60:40. The investments by the Fund in equity securities shall not exceed 60% of the NAV of the Fund and investments in fixed income securities and liquid assets shall not be less than 40% of the NAV of the Fund. The Fund s portfolio will normally be invested in equity or equity-linked securities, including debt or preferred stock convertible or exchangeable into equity securities, selected primarily on the basis of their capital growth potential (excluding Malaysia). The Fund will seek income by investing in fixed or floating rate securities and debt obligations of government, government-related and corporate issuers in countries around the world (excluding Malaysia). The investment management function of this Fund has been delegated to TAML with the approval of the SC. TAML will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Stock specific risk, company specific risk, credit/default risk, interest rate risk, counterparty risk, country risk and currency risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want a diversified portfolio that includes exposure to foreign equity markets and fixed income securities; prefer a portfolio with higher equity exposure in pursuit for potentially higher capital appreciation; seek long-term stable income; are looking for a less volatile investment globally but can accept that returns may fluctuate over the short-term; and/or are willing to take moderate risk for potentially higher return Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 7 February 2006 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 28 February* 600 million units million units. * 29 February in the event of a leap year. 28

33 CIMB-Principal Global Growth Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The investment objective is to seek long term capital growth by investing in global equities and debt obligations of companies and governments worldwide (excluding Malaysia). 101 Benchmark MSCI All Country World Index. 101 Investment policy and principal investment strategy The Fund will invest principally in global securities, between 70% to 99.5% of its NAV (both inclusive). Under normal market conditions, the investment policy and strategy of the Fund is to invest primarily in common stocks. However, since the investment objective is more likely to be achieved through an investment policy that is flexible and adaptable, it may seek investment opportunities in other types of securities, such as preferred stock, securities convertible into common stock and other fixed income securities. The investment management function of this Fund has been delegated to TAML with the approval of the SC. TAML will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. 101 Principal risks Stock specific risk, company specific risk, country risk and currency risk. 57 Investor profile The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a medium to long-term investment horizon; want a diversified portfolio that includes an exposure to foreign equities; are seeking capital appreciation with income being secondary ; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative. are willing to take higher risk in anticipation for potentially higher capital appreciation. Trustee Universal Trustee (Malaysia) Berhad. 203 Distribution policy The Manager has the discretion to distribute part or all of the Fund s distributable income. The distribution (if any) may vary from period to period depending on the investment objective and the performance of the Fund. 181 Launch date 17 November 2005 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 28 February* 800 million units million units. * 29 February in the event of a leap year. 29

34 CIMB-Principal Global Titans Fund For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The objective of the Fund is to grow the value of Unit holders investments over the medium to long-term in an equity fund that invests in the global titans market of the US, Europe and Japan with an exposure to the Malaysian equities market to balance any short term volatilities. 102 Benchmark 42% S&P % MSCI Europe + 12% MSCI Japan + 10% CIMB Bank 1- Month Fixed Deposit Rate. 102 Investment policy and principal investment strategy Principal risks Investor profile The Fund will invest at least 50% of its NAV in three (3) collective investment schemes, subject to a maximum of 98% of its NAV. The Fund may invest in Malaysian securities but only up to 50% of its NAV. The Fund seeks to give investors a broad exposure to three (3) global regions which attract over 90% of global investment monies in equities. This will be achieved by investing in three (3) PGI funds which invest into these three (3) markets. The Fund will at all times be invested in the three (3) PGI funds, each covering separate geographic regions thus providing diversification and allowing a greater spread of risk. The allocation between the PGI funds is done through a combination of macroeconomic data, liquidity trends and the outlook to overweight or underweight a particular PGI fund. By investing the proper asset allocation between these three (3) PGI funds, the Fund seeks to exploit the low correlation between the Asian markets and the rest of the world. The investment management function of this Fund has been delegated to CIMB- Principal (S) with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. Country risk, currency risk, fund manager s risk, legal and tax risk, stock specific risk and company specific risk. The recommended investment timeframe for this Fund is 5 years or more. This Fund is suitable for investors who: have a long-term investment horizon; want a diversified portfolio that includes exposure to foreign equities; prefer a higher equity exposure for potentially higher capital appreciation over the long-term; and/or can accept that investment returns may fluctuate significantly over the shortterm and may even be negative Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Given its investment objective, the Fund is not expected to pay any distribution. 181 Launch date 18 July 2005 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 March 700 million units million units. 30

35 CIMB-Principal Greater China Equity Fund For further details, please refer to page Fund category / Type Investment objective Benchmark Investment policy and principal investment strategy Feeder Fund / Growth. The Fund aims to achieve medium to long-term capital growth primarily through investment in a portfolio of equity securities with exposure to the Greater China region consisting of the People s Republic of China, Hong Kong and Taiwan. The Fund adheres to the benchmark of the Target Fund. The benchmark of the Target Fund is the MSCI Golden Dragon Index. A Feeder Fund which invests at least 95% of its NAV in the Schroder ISF Greater China (a Luxembourg-domiciled fund established on 28 March 2002) which invests primarily in equity securities of the People s Republic of China, Hong Kong SAR and Taiwan companies. The Fund will also maintain up to a maximum of 5% of its NAV in liquid assets Information on the Target Fund : Management company: Schroder Investment Management (Luxembourg) S.A. Investment Manager: Schroder Investment Management (Hong Kong) Limited Regulatory Authority: Luxembourg Commission de Surveillance du Secteur Financier ( CSSF ). Principal risks of the Fund Fund manager s risk, legal and tax risk and currency risk. 58 Principal risks of the Target Fund Investor profile Stock specific risk, company specific risk, country risk and liquidity risk. 58 The recommended investment timeframe for this Fund is 3 years or more. The Fund is suitable for investors who: have a medium to long-term investment horizon; wish to participate in the upside potential of the Greater China markets; want to invest in a fund with an established track record; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risk for potentially higher capital appreciation. Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Given its investment objective, the Fund is not expected to pay any distribution. 181 Launch date 12 June 2007 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 30 April 1.5 billion units. 1, million units. 31

36 CIMB-Principal Lifecycle 2017 CIMB-Principal Lifecycle 2022 CIMB-Principal Lifecycle 2027 For further details, please refer to page Fund category / Type Investment objective Equity / Growth. The Fund aims to provide investors with capital growth through a well-diversified and evolving asset allocation. 110 Benchmark (current) Quant shop MGS All Bond Index (35%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (35%). Quant shop MGS All Bond Index (30%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (40%). Quant shop MGS All Bond Index (25%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (45%). 110 Investment policy and principal investment strategy Each Fund seeks to achieve its investment objective by investing in different combinations of asset classes liquid assets, local bonds, foreign bonds, local equities, developed equities, emerging equities and local/foreign REITS, either directly or via collective investment schemes. In line with its objective, the Fund investment policy and strategy will be based on an evolving asset allocation whilst maintaining a welldiversified portfolio of mixed assets to suit market conditions. As the Fund approaches maturity, allocation to less risky assets such as bonds will increase. The initial asset allocation for each Fund is as follows (based on percentage of each Fund s NAV). For information on how the asset allocation evolves during the Fund s tenure, please refer to page Liquid assets (0-5%) Local bonds (5-25%) Foreign bonds (5-25%) Local equities (20-35%) Developed equities (15-30%) Emerging equities (0-10%) Local/foreign REITs (0-10%). Liquid assets (0-5%) Local bonds (5-15%) Foreign bonds (5-20%) Local equities (20-35%) Developed equities (20-35%) Emerging equities (0-15%) Local/foreign REITs (0-10%). Liquid assets (0-5%) Local bonds (5-15%) Foreign bonds (5-15%) Local equities (20-40%) Developed equities (20-40%) Emerging equities (0-20%) Local/foreign REITs (0-10%). Principal risks Credit/default risk, interest rate risk, counterparty risk, company specific risk, stock specific risk, risks associated with investment in REITs, country risk and currency risk. 59 Investor profile The Fund is suitable for investors who seek an investment plan spanning 10 years from the Fund s launch date. Such plans include preparation for children s educational needs, additional personal retirement savings or future savings. The Fund is suitable for investors who seek an investment plan spanning 15 years from the Fund s launch date. Such plans include preparation for children s educational needs, additional personal retirement savings or future savings. The Fund is suitable for investors who seek an investment plan spanning 20 years from the Fund s launch date. Such plans include preparation for children s educational needs, additional personal retirement savings or future savings. Trustee HSBC (Malaysia) Trustee Berhad. 200 Distribution policy Given its investment objective, the Funds are not expected to pay any distribution. 181 Launch date 12 July 2007 Maturity Date The 10 th anniversary of the commencement date of the Fund, i.e. 10 August The 15 th anniversary of the commencement date of the Fund, i.e. 10 August The 20 th anniversary of the commencement date of the Fund, i.e. 10 August Financial year-end 31 August. Maximum approved fund size Units in circulation (as at LPD) 600 million units (combined fund size for CIMB-Principal Lifecycle Funds) million units million units million units. 32

37 CIMB-Principal MENA Equity Fund For further details, please refer to page Fund category / Type Investment objective Benchmark Investment policy and principal investment strategy Feeder Fund / Growth. The Fund aims to achieve a total return through investments primarily in shares of companies domiciled or having significant operations, and listed in the Middle Eastern and North African countries. The performance benchmark of this Fund is ten per cent (10%) growth in NAV per annum. This is not a guaranteed return and is only a measurement of the Fund s performance. The Fund may not achieve the ten percent (10%) per annum growth rate in any particular financial year but targets to achieve this growth over the medium to long-term. A Feeder Fund which invests at least 95% of its NAV in the Ocean Fund/Equities MENA Opportunities Fund (a Luxembourg-domiciled fund established on 25 th June 2007) which invests primarily in shares of companies domiciled or having significant operations, and listed in the MENA countries. The Fund will also maintain up to a maximum of 5% of its NAV in liquid assets. Information on the Target Fund : Investment Manager/Management Company : Société Générale Gestion S.A., ( SG2 ) Sub-Investment Manager : GLG Partners UK Ltd ( GLG ) Regulatory Authority : Luxembourg Commission de Surveillance du Secteur Financier of Luxembourg Principal risks of the Fund Fund manager s risk, legal and tax risk and currency risk. 60 Principal risks of the Target Fund Investor profile Potential market volatility risk, market illiquidity and foreign investment infrastructure risk, corporate disclosure, accounting and regulatory standards risk, timing and reliability of official data risk, political climate and extremism risk, nationalisation and taxation risk, currency risk and liquidity of shares risk. The recommended investment timeframe for this Fund is 3 to 5 years. This Fund is suitable for investors who: have a medium to long-term investment horizon; seek to participate in the upside potential of the MENA region; want to invest in a fund managed by an established international fund manager; can accept that investment returns may fluctuate significantly over the shortterm and may even be negative; and/or are willing to take higher risk in anticipation of potentially higher capital appreciation. 60 Trustee Deutsche Trustees Malaysia Berhad. 201 Distribution policy As the Target Fund generally does not pay any distributions, and consistent with this Fund s objective to achieve a total return, the Fund is not expected to pay any distribution. 181 Launch date 19 February 2008 Financial year-end Maximum approved fund size Units in circulation (as at LPD) 31 May 675 million units million units. 33

38 Fees, charges & expenses This table describes the charges that you may directly incur when you buy units of the Funds. The Application Fee may differ between distribution channels. Maximum Application Fee (% of the NAV per unit)* CWA Other IUTAs (%) (%) Equity Funds CIMB-Principal Equity Fund CIMB-Principal Equity Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund Mixed Asset Funds CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund Fixed Income & Money Market Funds CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund Nil Nil CIMB-Principal Money Market Income Fund Nil Nil Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Funds CIMB-Principal MENA Equity Fund * Notwithstanding the maximum Application Fee disclosed above, investors may negotiate with the distributors for lower charges. Please note that investors investing via EPF Members Investment Scheme will only be charged a maximum Application Fee of 3% of the NAV per unit. 34

39 This table describes the other charges that you may directly incur when you redeem / transact units of the Funds. Withdrawal Fee (% of the NAV per unit) Dilution fee/ transaction cost factor Switching Fee (RM) Transfer Fee (RM) Other charges payable directly by investors when purchasing or redeeming units Equity Funds CIMB-Principal Equity Fund Nil Nil CIMB-Principal Equity Fund 2 Nil Nil CIMB-Principal Equity Aggressive Fund 1 Nil Nil CIMB-Principal Equity Aggressive Fund 3 Nil Nil CIMB-Principal Equity Growth Fund Nil Nil CIMB-Principal Equity Growth & Income Fund Nil Nil CIMB-Principal Equity Income Fund Nil Nil CIMB-Principal Small Cap Fund Nil Nil Mixed Asset Funds CIMB-Principal Balanced Fund Nil Nil CIMB-Principal Balanced Income Fund Nil Nil CIMB-Principal Income Plus Balanced Fund Nil Nil Fixed Income & Money Market Funds CIMB-Principal Bond Fund Nil Nil CIMB-Principal Strategic Bond Fund Nil Nil CIMB-Principal Deposit Fund Nil Nil CIMB-Principal Money Market Income Fund Nil Nil Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund Nil Nil CIMB-Principal ASEAN Equity Fund Nil Nil CIMB-Principal Asian Equity Fund Nil Nil CIMB-Principal Climate Change Equity Fund Nil Nil CIMB-Principal Emerging Asia Fund Nil Nil CIMB-Principal Global Asset Spectra Fund Nil Nil CIMB-Principal Global Balanced Fund Nil Nil CIMB-Principal Global Growth Fund Nil Nil CIMB-Principal Global Titans Fund Nil Nil CIMB-Principal Greater China Equity Fund Nil Nil CIMB-Principal Lifecycle Funds* Up to 1% (Please refer to page 168 for the full schedule of Withdrawal Fees) CIMB-Principal MENA Equity Fund Nil Nil Nil Since switching is treated as a withdrawal from one (1) fund and an investment into another fund, you will be charged a Switching Fee equal to the difference (if any) between the Application Fees of these two (2) funds. Switching Fee will not be charged if the fund to be switched into has a lower Application Fee. In addition, the Manager imposes a RM100 administrative fee for every switch made out of a Fund. However, this RM100 administrative fee is waived for the first four (4) switches out of a Fund in every calendar year. The Manager also has the discretion to waive the Switching Fee and/or administrative fees. For details please refer to page 168. A maximum of RM50.00 may be charged for each transfer. Any applicable bank charges and other bank fees incurred as a result of an investment or a redemption will be borne by the investor. * No Switching Fee will be charged for switches within the CIMB-Principal Lifecycle Funds. 35

40 This table describes the fees that you may indirectly incur when you invest in the Funds. Management Fee (% p.a. of the NAV of the Fund) [See NOTE 1] Trustee Fee (% p.a. of the NAV of the Fund) [See NOTE 1] Local custodian fee Foreign custodian fee Fund expenses Other fees payable indirectly by investors Commissions Equity Funds CIMB-Principal Equity Fund # 1.50 NOTE 3 RM25,000 p.a. Nil CIMB-Principal Equity RM20, NOTE 3 Fund 2 p.a. Nil CIMB-Principal Equity Aggressive Fund * Nil Nil CIMB-Principal Equity Aggressive Fund NOTE 2 Nil CIMB-Principal Equity Growth Fund * Nil NOTE 4 CIMB-Principal Equity Growth & Income Fund Nil NOTE 4 CIMB-Principal Equity Income Fund * Nil NOTE 4 CIMB-Principal Small Cap Fund * NOTE 2 Nil Mixed Asset Funds CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund NOTE 2 Nil 1.50 NOTE 3 RM20,000 p.a. Nil Only expenses that are directly related to the Funds can be charged to the Funds. Examples of relevant expenses are audit fee and tax agent s fee. Save for NOTE 5, there are no other fees payable indirectly by investors. Up to 100% of the Application Fee may be payable as commissions to Approved Distributors. For Funds that do not charge any Application Fee, CIMB- Principal may pay a service fee as a portion from the Management Fee to Approved Distributors who provide ongoing service to you. CIMB-Principal Income Plus Balanced Fund NOTE 2 NOTE 4 Fixed Income & Money Market Funds CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund CIMB-Principal Money Market Income Fund NOTE 2 Nil * NOTE 2 Nil * Nil Nil * NOTE 2 Nil Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra CIMB-Principal Global Balanced Fund Up to * NOTE 2 NOTE 4 Up to * NOTE 2 NOTE * Nil NOTE 4 Up to * NOTE 2 NOTE * NOTE 2 NOTE * NOTE 2 NOTE * Nil NOTE 4 36

41 Management Fee (% p.a. of the NAV of the Fund) [See NOTE 1] Trustee Fee (% p.a. of the NAV of the Fund) [See NOTE 1] Local custodian fee Foreign custodian fee Fund expenses Other fees payable indirectly by investors Commissions Regional & Global Funds CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Funds CIMB-Principal MENA Equity Fund * Nil NOTE * NOTE 2 NOTE 4 Up to * NOTE 2 NOTE 4 Up to * NOTE 2 NOTE 4 Up to * NOTE 2 Nil As per previous page As per previous page As per previous page # For EF, UTMB is also entitled for reimbursement of all reasonable costs and expenses incurred in respect of the Fund. * Subject to a minimum fee of RM18,000 p.a. NOTE 1 NOTE 2 NOTE 3 Annual Management Fee and annual Trustee Fee are accrued daily based on the NAV of the Fund and paid monthly. Trustee Fee includes the local custodian fee but excludes the foreign sub-custodian fee (if any). The rates used for the computation of the annual Trustee Fee are as follows: Size of the Fund % p.a. of NAV of the Fund First RM20 million 0.06 Next RM20 million 0.05 Next RM20 million 0.04 Next RM20 million 0.03 Next RM20 million 0.02 Any amount in excess of RM100 million 0.01 NOTE 4 Foreign custodian fee (applicable to EGF, EIF, AEF, GBF and GGF only) The foreign custodian fee (safekeeping fee and transaction fee, including out of pocket charges) is subject to a minimum of USD 500 per month per fund and is charged monthly in arrears. The safekeeping fee ranges from a minimum of 0.04% p.a. to a maximum of 0.38% p.a. of the market value of the respective foreign portfolios, depending on the country invested. The transaction fee is charged for every transaction and the amounts are dependent on the country invested. Foreign custodian fee (applicable to EGIF only) The foreign custodian fee is 0.125% p.a. of the NAV of the foreign portfolio charged monthly in arrears and subject to a minimum fee of SGD1,800 per month and SGD30 per transaction (transaction fee). Foreign custodian fee (applicable to IPBF, AIEF, ASEF, CCEF, EMAF, GASF, GTF, GCEF and LF only) The foreign sub-custodian fee is dependent on the country invested and is charged monthly in arrears. NOTE 5 Other costs of investing in Feeder Funds (applicable to AIEF, CCEF, GCEF and CMEF only) There are other fees indirectly incurred by a Feeder Fund such as annual custodian fees and transaction fees of the Target Fund. As such, Unit holders of a Feeder Fund are indirectly bearing the custodian fees and transaction fees charged at the Target Fund level. Anti dilution levy (applicable to AIEF, CCEF, GASF, GTF, GCEF, LF and CMEF only) An anti dilution levy may be charged in relation to a Fund s application for and redemption of units in collective investment schemes managed by other fund managers. 37

42 Transaction information Minimum initial investment (RM) Minimum additional investment (RM) Minimum withdrawal Minimum balance (Units) Regular Savings Plan (RSP)^ Minimum initial investment (RM) Minimum additional investment (RM) EPF Members Investment Scheme (RM) Equity Funds CIMB-Principal Equity Fund CIMB-Principal Equity Fund CIMB-Principal Equity Aggressive Fund 1 CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund Mixed Asset Funds CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund Fixed Income & Money Market Funds CIMB-Principal Bond Fund 2, CIMB-Principal Strategic Bond Fund 2, CIMB-Principal Deposit Fund 10,000 1,000 CIMB-Principal Money Market Income Fund 10,000 1,000 RM200 or 200 units RM200 or 200 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 200 units RM200 or 200 units RM200 or 800 units RM200 or 400 units RM200 or 200 units RM200 or 400 units RM500 or 500 units RM500 or 500 units RM1,000 or 1,000 units RM1,000 or 1,000 units , , , , N/A # N/A # N/A # 1, , , , N/A # 1,000 1, ,000 1,000 1, ,000 5,000 1, ,000 5,000 N/A N/A N/A 38

43 Minimum initial investment (RM) Minimum additional investment (RM) Minimum withdrawal Minimum balance (Units) Regular Savings Plan (RSP)^ Minimum initial investment (RM) Minimum additional investment (RM) EPF Members Investment Scheme (RM) Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Fund CIMB-Principal MENA Equity Fund RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 800 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 400 units RM200 or 400 units N/A # N/A # N/A # N/A # 1, N/A # N/A # N/A # N/A # N/A # N/A # N/A # N/A # ^ # The Regular Savings Plan (RSP) allows you to make regular monthly investments directly from your account held with a bank approved by CIMB-Principal or Approved Distributors. Currently the EPF does not allow withdrawals for investments into unit trust funds which have a foreign investment exposure. As and when the EPF should allow such investments, EPF withdrawals for investments into such Funds may be made. Please note: 1. The Manager reserves the right to change the above stipulated amounts from time to time. 2. There is no restriction on the frequency of withdrawals. 3. There is no exit and re-entry option. 39

44 Minimum Switching Amount Transfer facility Cooling-off period Equity Funds CIMB-Principal Equity Fund CIMB-Principal Equity Fund 2 CIMB-Principal Equity Aggressive Fund 1 CIMB-Principal Equity Aggressive Fund 3 CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund Mixed Asset Funds CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund Fixed Income & Money Market Funds CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund CIMB-Principal Money Market Income Fund Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Funds* CIMB-Principal MENA Equity Fund Switching will be conducted based on the value of your investment in a Fund. The minimum amount for a switch must be equivalent to the minimum withdrawal amount applicable to a Fund or such amounts as the Manager may from time to time decide. Please note that the minimum amount for a switch must also meet the minimum initial investment amount or the minimum additional investment amount (as the case may be) applicable to the fund to be switched into. Unit holders must at all times maintain at least the minimum balance required for a Fund (please refer to Withdrawals and Minimum balance in pages ) to stay invested in that Fund. The Manager may, at its absolute discretion, allow switching into (or out of) a Fund, either generally (for all Unit holders) or specifically (for any particular Unit holder). Generally, transfer of unit holdings is allowed. Six (6) Business Days from the date the application form is received and accepted by the Manager or the Approved Distributors for the first time. For details, please refer to page 179. * Switching is allowed: within the CIMB-Principal Lifecycle Funds; and from other funds into any of these Funds. Subject always to the Manager s absolute discretion, switching out from any of these Funds into other funds is not allowed. 40

45 Deeds Other information This table describes the principal deed and supplemental deed (if any) governing the Funds. Equity Funds CIMB-Principal Equity Fund CIMB-Principal Equity Fund 2 CIMB-Principal Equity Aggressive Fund 1 CIMB-Principal Equity Aggressive Fund 3 CIMB-Principal Equity Growth Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Income Fund CIMB-Principal Small Cap Fund Mixed Asset Funds CIMB-Principal Balanced Fund CIMB-Principal Balanced Income Fund CIMB-Principal Income Plus Balanced Fund Fixed Income & Money Market Funds CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Deposit Fund CIMB-Principal Money Market Income Fund Regional & Global Funds CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Asian Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Asset Spectra Fund CIMB-Principal Global Balanced Fund CIMB-Principal Global Growth Fund CIMB-Principal Global Titans Fund CIMB-Principal Greater China Equity Fund CIMB-Principal Lifecycle Funds CIMB-Principal MENA Equity Fund Principal deed and supplemental deed (if any) Master Deed dated 15 May 2008, a First Supplemental Deed dated 25 June 2008, a Second Supplemental Master deed dated 25 June 2008, a Third Supplemental Master Deed dated 14 July 2008, a Fourth Supplemental Master Deed dated 18 March 2009, a Fifth Supplemental Master Deed dated 16 July 2009 and an Eighth Supplemental Master Deed dated 14 June Avenues for advice available to prospective investors If you have any questions about the information in this Master Prospectus or would like to know more about investing in any of the Funds, please call CIMB-Principal Customer Care Centre at (03) between 8:30 a.m. and 5:30 p.m., Mondays to Fridays (except on Selangor public holidays) or you can us at cimb-p.custsupport@cimb.com. There are fees and charges involved and investors are advised to consider the fees and charges before investing in the Funds. Unit prices and distributions payable, if any, may go down as well as up. For information concerning certain risk factors which should be considered by prospective investors, see Risk Factors commencing on page 42. Past performance of a Fund is not an indication of its future performance. 41

46 Risk Factors General Risks of Investing in Unit Trust Funds Any investment carries with it an element of risk. Therefore, prior to making an investment, prospective investors should consider the following risk factors in addition to the other information set out in this Master Prospectus. 1. Returns Not Guaranteed Investors should be aware that by investing in a unit trust fund, there is no guarantee of any income distribution, returns or capital appreciation. In addition, there is a possibility that the investment objective of the unit trust fund may not be achieved. However, the Manager endeavours to minimize this risk by ensuring diligent management of the assets of a Fund based on a structured investment process. 2. General Market Risk Any purchase of securities will involve some element of market risk. Hence, a unit trust fund may be prone to changing market conditions as a result of: global, regional or national economic developments; governmental policies or political conditions; development in regulatory framework, law and legal issues; general movements in interest rates; broad investor sentiment; and external shocks (e.g. natural disasters, war and etc.) In addition, the following risk factors should also be considered: Security specific risk There are many specific risks which apply to the individual security. Some examples include the possibility of a company defaulting on the repayment of the coupon and/or principal of its debentures, and the implications of a company s credit rating being downgraded. All these risks may be detrimental to the value of the security. To mitigate these security specific risks, the Manager will perform continuous fundamental research and analysis to assist in security selection and ensure diversification is provided in the portfolio in order to reduce the volatility, and hence the risk in the portfolio. Liquidity risk Liquidity risk can be defined as the ease with which a security can be sold at or near its fair value depending on the volume traded in the market. If a security encounters a liquidity crunch, the security may need to be sold at a discount to the market fair value of the security. This in turn would depress the NAV and/or growth of the Fund. Generally, all investments are subject to a certain degree of liquidity risk depending on the nature of the investment instruments, market, sector, and other factors. For the funds with more apparent liquidity risk, the Manager will continuously conduct research and analysis to actively manage the asset allocations. Inflation risk Inflation rate risk is the risk of potential loss in the purchasing power of your investment due to a general increase of consumer prices. Inflation erodes the real rate of your return, that is, the return after you take away the inflation rate. The inflation rate is commonly reported using the Consumer Price Index. Inflation is thus one of the major risks to investors over a long-term period and results in uncertainty over the future value of investments. Thus, fixed rate securities are exposed to higher inflation risk than equities in a rising inflationary environment. This risk can be minimised by investing in securities that can provide positive real rate of return. All these may result in uncertainties and fluctuations in the price of the underlying securities of the Funds investment portfolio. Such movements in the underlying values of the securities will cause the NAV or prices of units to fall as well as rise, and income produced by a unit trust may also fluctuate. The market risk can be managed by ensuring a rigorous review of macroeconomic trends by the fund management team to determine investments in markets that are not highly correlated and/or employing active asset allocation management. 3. Loan Financing Risk If a loan is obtained to finance the purchases of units of any unit trust fund, investors will need to understand that:: borrowing increases the possibility for gains as well as losses; if the value of the investment falls below a certain level, investors may be asked by the financial institution to top up the collateral or reduce the outstanding loan amount to the required level; the borrowing cost may vary over time depending on the fluctuations in interest rates; the risks of using loan financing in light of investors investment objectives, attitude towards risk and financial circumstances should be carefully assessed. Unit Trust Loan Financing Risk Disclosure Statement Form annexed as Appendix II hereto sets out the risks in detail. 4. Risk of Non-Compliance This refers to the current and prospective risk to the unit trust fund and the investors interest arising from non-conformance with laws, rules, regulations, prescribed practices and internal policies and procedures by the manager. This risk may also occur indirectly due to legal risk, which is risk of circumstances from the imposition and/or amendment on the relevant regulatory frameworks, laws, rules and other legal practices affecting the fund. Non-compliance may result in a fall in the value 42

47 of a unit trust fund. In order to mitigate this risk, the Manager imposed stringent internal controls and ensuring that compliance monitoring processes are undertaken. 5. Manager s Risk The performance of any unit trust funds is dependent amongst others on the experience, knowledge, expertise and investment techniques/process adopted by the manager and any lack of the above would have an adverse impact on the fund s performance thereby working to the detriment of Unit holders. Investors should also note that the quality of the fund s management are also affected by internal circumstances within the management company such operational and system matters. Some of this is due to human error and some due to other factors that may be beyond control. Although the occurrence of such events is very unlikely, the Manager seeks to reduce this risk by implementing a consistent and structured investment process, systematic operational procedures and processes along with stringent internal controls. Specific risks associated with the investment portfolio of the Funds There are specific risks associated with the investment portfolio of each Fund. The key ones include but are not limited to the following: Section 1: Equity Funds 1.1 CIMB-Principal Equity Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. 1.2 CIMB-Principal Equity Fund 2 Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. 1.3 CIMB-Principal Equity Aggressive Fund 1 Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Risks associated with investment in warrants/options As the Fund may invest in warrants/options, investors should note that there are inherent risks associated with it. Warrants/options are financial instruments that entitle the holder to the right but not the obligation to fulfil the requirements of a contract entered into within an agreed timeframe. Warrants/options have values that will change over time, but the change in the value of warrants/options need not be in the same manner as its underlying assets. The value of warrants/options are influenced by the current market price of the underlying security, the exercise price of the contract, the cost of holding a position in the underlying security, the time to expiration of the contract and the estimate of the future volatility of the underlying security s price over the life of the contract. The buyer/holder of warrants/options will incur a cost (the premium) to purchase the warrants/options although the buyer/holder may not exercise the right prior to expiration. Like securities, the fund manager will undertake fundamental research and analysis on these instruments to ensure that the risk to the portfolio is minimised. 43

48 1.4 CIMB-Principal Equity Aggressive Fund 3 Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. 1.5 CIMB-Principal Equity Growth Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have an impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries. The decision on diversification will be based on constant fundamental research and analysis of the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 1.6 CIMB-Principal Equity Growth & Income Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have an impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries. The decision on diversification will be based on constant fundamental research and analysis of the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or 44

49 losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 1.7 CIMB-Principal Equity Income Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for investment with longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and managed the duration of the investment in accordance with the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum rating requirement of at least A3 or P2 by RAM or equivalent rating by MARC, Moody s, S&P or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions perform through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and thereby impose careful credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of the defaulted transaction. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have an impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries. The decision on diversification will be based on constant fundamental research and analysis of the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 1.8 CIMB-PRINCIPAL SMALL CAP FUND Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to 45

50 reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Liquidity risk Liquidity risk is defined as the ease with which a security can be sold at or near its fair value depending on the volume traded on the market. There is additional liquidity risk when investing in this Fund as it invests primarily in smaller capitalised companies that are listed on the Bursa Malaysia. As the Fund s NAV grows larger, there may be insufficient securities of quality small sized companies as a larger number of these securities are required to be acquired or disposed before there is any impact on the Fund. In addition, the acquisition and disposal of such securities may take a longer time as there are generally less ready buyers or sellers as compared to the securities of larger, more established companies. The effect will be further compounded if the market is hit by an external shock such as political upheaval, natural disaster etc. Liquidity of the market for these securities will be affected and may cause difficulties for the Manager to dispose or acquire such securities at or near fair value. Although these problems may be magnified as the Fund size grows as an active fund manager, the Manager employs consistent fundamental research and analysis to ensure the feasibility of its management. Section 2: Mixed Asset Funds 2.1 CIMB-Principal Balanced Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. 2.2 CIMB-Principal Balanced Income Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, 46

51 such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. 2.3 CIMB-Principal Income Plus Balanced Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a diversified portfolio of securities, thus spreading the element of risk. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have an impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries. The decision on diversification will be based on constant fundamental research and analysis of the global markets. 47

52 Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Section 3: Fixed Income & Money Market Funds 3.1 CIMB-Principal Bond Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least a BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of any issuance by that company may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. 3.2 CIMB-Principal Strategic Bond Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. 48

53 Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of any issuance by that company may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Risks associated with investment in warrants/options As the Fund may invest in warrants/options, investors should note that there are inherent risks associated with it. Warrants/options are financial instruments that entitle the holder to the right but not the obligation to fulfil the requirements of a contract entered into within an agreed timeframe. Warrants/options have values that will change over time, but the change in the value of warrants/options need not be in the same manner as its underlying assets. The value of warrants/options are influenced by the current market price of the underlying security, the exercise price of the contract, the cost of holding a position in the underlying security, the time to expiration of the contract and the estimate of the future volatility of the underlying security s price over the life of the contract. The buyer/holder of warrants/options will incur a cost (the premium) to purchase the warrants/options although the buyer/holder may not exercise the right prior to expiration. Like securities, the fund manager will undertake fundamental research and analysis on these instruments to ensure that the risk to the portfolio is minimised. 3.3 CIMB-Principal Deposit Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Investors should note that investment in the Fund is not the same as placing funds in a deposit with a financial institution. There are risks involved and investors should rely on their own evaluation to assess the merits and risks when investing in the Fund. 3.4 CIMB-Principal Money Market Income Fund Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and 49

54 analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Investors should note that investment in the Funds is not the same as placing funds in a deposit with a financial institution. There are risks involved and investors should rely on their own evaluation to assess the merits and risks when investing in the Funds. Section 4: Regional & Global Funds 4.1 CIMB-Principal Asia Infrastructure Equity Fund Principal risks of the Fund: Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into the underlying funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign currency due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Principal risks of the Target Fund: Market risk Since the value of the units in a fund depends on the performance of the underlying investments, which are subject to market fluctuations, no assurance can be given that the investment objective of the Target Fund will be achieved and the amounts invested can be returned to the investor upon redemption of the units. Industry concentration and infrastructure industry risks For an industry-specific fund, the fund manager will not normally maintain a wide spread of investments in order merely to provide a balanced portfolio of investments. A more concentrated approach is taken than is normally the case in order to take greater advantage of successful investments. This policy involves a greater than usual degree of risk as the Target Fund will be more susceptible to adverse economic or regulatory occurrences affecting the infrastructure industry. Infrastructure issuers, including utilities and companies involved in infrastructure projects, may be subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, high leverage, costs associated with environmental and other regulations, the effects of an economic slowdown, surplus capacity, increased competition from other providers of services, uncertainties concerning energy costs, the effects of energy conservation policies and other factors. Infrastructure issuers may also be affected by or subject to regulation by various government authorities; government regulation of rates charged to customers; service interruption due to environmental; operational or other mishaps; the imposition of special tariffs and changes in tax laws; regulatory policies and accounting standards; and general changes in market sentiment towards infrastructure assets. Investing in foreign markets Investments in foreign markets involve certain risks, including: the value of the assets of the Target Fund may be affected by uncertainties such as changes in government policies, taxation, fluctuations in foreign exchange rates, the imposition of currency repatriation restrictions, social and religious instability, political, economic or other developments in the law or regulations of the countries in which the Target Fund may invest and, in particular, by changes in legislation relating to the level of foreign ownership in the countries in which the Target Fund may invest; accounting, auditing and financial reporting standards, practices and disclosure requirements applicable to some countries in which the Target Fund may invest may differ from those applicable in Luxembourg (the domicile of the Target Fund) in that less information is available to investors and such information may be out of date; and the Target Fund s assets may be invested in securities denominated in currencies other than the base currency of the Target Fund, and any income from these investments will be received in those currencies, some of which may fall against the base currency of the Target Fund. The Target Fund will compute its net asset value and make any distributions in the base currency 50

55 of the Target Fund. Therefore, there may be a currency exchange risk which may affect the value of the shares and the income distributions paid by the Target Fund, if any. Investing in developing markets The following considerations apply to the Target Fund which invests in emerging markets or newly industrialised countries. The securities markets of developing countries are not as large as the more established securities markets and have substantially less trading volume. The markets may lack liquidity and exhibit high price volatility meaning that the accumulation and disposal of holdings in some investments may be time consuming and may need to be conducted at unfavourable prices. The market may also exhibit a high concentration of market capitalization and trading volume in a small number of issuers, representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Brokers in developing countries typically are fewer in number and less capitalised than brokers in established markets. At present, some stock markets in emerging market countries restrict foreign investment, which result in fewer investment opportunities for the Target Fund. This may have an adverse impact on the investment performance of the Target Fund. Many emerging markets are undergoing a period of rapid growth and are less regulated than the world s leading stock markets and there may be less publicly available information about companies listed on such markets than is regularly published about companies listed on other stock markets. In addition, market practices in relation to settlement of securities transactions and custody assets in emerging markets can provide increased risk to the Target Fund s investments in emerging markets. Investing in smaller companies Investment in smaller companies may involve greater risks and thus may be considered speculative. Investment in a fund investing in smaller companies should be considered long-term and not as a vehicle for seeking short-term profits. Many small company stocks trade less frequently and in smaller volumes and may be subject to more abrupt or erratic price movements than stocks of larger companies. The securities of small companies may also be more sensitive to market changes than securities in large companies. Investing in high yield bonds High yield bonds are regarded as being predominately speculative as to the issuer s ability to make payments of principal and interest. Investment in such securities involves substantial risk. Issuers of high yield debt securities may be highly leveraged and may not have available to them more traditional methods of financing. An economic recession may adversely affect an issuer s financial condition and the market value of high yield debt securities issued by such entity. The issuer s ability to service its debt obligations may be adversely affected by specific issuer developments, or the issuer s inability to meet specific projected business forecasts, or the unavailability of additional financing. In the event of bankruptcy of an issuer, the Target Fund may experience losses and incur costs. Investing in derivatives The Target Fund may use financial derivative instruments for efficient portfolio management or to attempt to hedge or reduce the overall risk of its investments. Such strategies might be unsuccessful and incur losses for the Target Fund, due to market conditions. The Target Fund s ability to use these strategies may be limited by market conditions, regulatory limits and tax considerations. The use of these strategies involves special risks, including: dependence on the investment adviser s ability to predict movements in the price of the underlying security; imperfect correlation between the movements in securities or currency on which a derivatives contract is based and movements in the securities or currencies in the Target Fund; the absence of a liquid market for any particular instrument at any particular time; the degree of leverage inherent in futures trading (i.e. the loan margin deposits normally required in future trading means that futures trading may be highly leveraged). Accordingly, a relatively small price movement in a futures contract may result in an immediate and substantial loss to the Target Fund; possible impediments to efficient portfolio management or the ability to meet repurchase requests or other short-term obligations because a percentage of the Target Fund s assets will be segregated to cover its obligations. Further, use of financial derivatives instruments may involve other risks, such as: Counterparty risk Financial derivative instrument contracts that are not traded on a recognised exchange are not afforded the same protections as may apply to participants trading financial derivative instruments on organised exchanges, such as the performance of guarantee of an exchange clearing house. The Target Fund will be subject to the possibility of insolvency, bankruptcy or default of a counter party with which the Target Fund trades such instruments, which could result in substantial loss to the Target Fund. Repurchase / reverse repurchase or securities lending agreements In the event of insolvency, bankruptcy or default of the counterparty under a repurchase / reverse repurchase agreement or securities lending agreement, the Target Fund may experience both delays in liquidating the underlying securities and losses, including the possible decline in the value of securities, during the period while it seeks to enforce its rights thereto, possible sub-normal levels of income and lack of access to income during the period and expenses in enforcing its rights. In such circumstances, the collateral will be called upon. Whilst value of the collateral will be maintained to at least equate to the value of the securities transferred, in the event of a sudden market movement there is a risk that the value of such collateral may fall below the value of the securities transferred. Credit default swaps When these transactions are used in order to eliminate a credit risk in respect of the issuer of a security, they imply that the Target Fund bears a counterparty risk in respect of the protection seller. Credit default swaps used for a purpose other than hedging, such as for efficient portfolio management purposes, may present a risk of liquidity if the position must be liquidated before its maturity for any reason. The valuation of credit default swaps may give rise to difficulties which traditionally occur in connection with the valuation of OTC contracts. 51

56 Interest rate risk If the Target Fund invests in bonds or other fixed income securities, it may fall in value if the interest rates change. Generally, the prices of debt securities rise when interest rates fall, while the prices fall when interest rates rise. Longer term debt securities are usually more sensitive to interest rate changes. Credit risk If the Target Fund invests in bonds and other fixed income securities, it may be subject to the risk that issuers not make payments on such securities. An issuer suffering from an adverse change in its financial condition could lower the quality of a security leading to greater price volatility on that security. A lowering of the credit rating of a security may also offset the security s liquidity, making it more difficult to sell. 4.2 CIMB-Principal ASEAN Equity Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign currency due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Risk associated with ETF investment. For more information on ETF risk, please refer to Appendix I (page 230). Risk of assets in emerging markets Investing in assets from the emerging markets generally entails a greater risk (potentially including considerable legal, economic and political risks) than investing in assets from the markets of industrialized countries. Emerging markets are markets that are, by definition, in a state of transition and are therefore exposed to rapid political change and economic declines. During the past few years, there have been significant political, economic and societal changes in many emerging-market countries. In many cases, political considerations have led to substantial economic and societal tensions, and in some cases these countries have experienced both political and economic instability. Political or economic instability can influence investor confidence, which in turn can have a negative effect on exchange rates, security prices or other assets in emerging markets. The exchange rates and the prices of securities and other assets in the emerging markets are often extremely volatile. Among other things, changes to these prices are caused by interest rates, changes to the balance of demand and supply, external forces affecting the market (especially in connection with important trading partners), trade-related, tax-related or monetary policies, governmental policies as well as international political and economic events. In most cases, the securities markets in the emerging markets are still in their primary stage of development. This may result in risks and practices (such as increased volatility) that usually do not occur in developed securities markets and which may have a negative influence on the securities listed on the stock exchanges of these countries. Moreover, the markets in emerging-market countries are frequently characterized by illiquidity in the form of low turnover of some of the listed securities. In comparison to other types of investment that carry a smaller risk, it is important to note that exchange rates, securities and other assets from emerging markets are more likely to be sold as a result of the flight into quality effect in times of economic stagnation. As such, investors should bear in mind that investments in emerging markets are subject to higher price volatility and therefore will tend to have a higher investment risk that will affect the Fund s growth. The Manager will attempt to mitigate all these risk through its active asset allocation management and diversification, in addition to its continuous fundamental research and analysis. Liquidity risk Generally, securities markets in countries other than those of developed countries, while growing in volume, have for the most part substantially less volume than those of developed countries. Also, many securities traded on these foreign markets are less liquid and their prices are more volatile than securities of comparable markets in developed countries. In addition, settlement of trades in some emerging markets is much slower and subject to failure when compared to developed country markets. There may also be less extensive regulation of the securities markets in emerging markets than in developed countries. As part of its risk management, the Manager will attempt to reduce the liquidity exposure by an active asset allocation management and 52

57 diversification within the portfolio. The Manager will also conduct constant fundamental research and analysis to ensure the feasibility of its management. In addition, the constituents of the FTSE/ASEAN Index constituents are subject to liquidity screening as determined by the ground rules of the FTSE Global Equity Index Series as follows: Companies must trade at least 0.5% of their available shares in issue, in ten (10) out of twelve (12) months prior to an index review to be eligible for inclusion in the index. Companies must have a market capitalization greater than USD100m. (Source: CIMB-Principal Asian Equity Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Country risk When a Fund invests into foreign markets, the foreign investments portion of the Fund may be affected by risks specific to the country which it invests in. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Risk of assets in emerging markets Investing in assets from the emerging markets generally entails a greater risk (potentially including considerable legal, economic and political risks) than investing in assets from the markets of industrialized countries. Emerging markets are markets that are, by definition, in a state of transition and are therefore exposed to rapid political change and economic declines. During the past few years, there have been significant political, economic and societal changes in many emerging-market countries. In many cases, political considerations have led to substantial economic and societal tensions, and in some cases these countries have experienced both political and economic instability. Political or economic instability can influence investor confidence, which in turn can have a negative effect on exchange rates, security prices or other assets in emerging markets. The exchange rates and the prices of securities and other assets in the emerging markets are often extremely volatile. Among other things, changes to these prices are caused by interest rates, changes to the balance of demand and supply, external forces affecting the market (especially in connection with important trading partners), trade-related, tax-related or monetary policies, governmental policies as well as international political and economic events. In most cases, the securities markets in the emerging markets are still in their primary stage of development. This may result in risks and practices (such as increased volatility) that usually do not occur in developed securities markets and which may have a negative influence on the securities listed on the stock exchanges of these countries. Moreover, the markets in emerging-market countries are frequently characterized by illiquidity in the form of low turnover of some of the listed securities. In comparison to other types of investment that carry a smaller risk, it is important to note that exchange rates, securities and other assets from emerging markets are more likely to be sold as a result of the flight into quality effect in times of economic stagnation. As such, investors should bear in mind that investments in emerging markets are subject to higher price volatility and therefore will tend to have a higher investment risk that will affect the Fund s growth. The Manager will attempt to mitigate all these risk through its active asset allocation management and diversification, in addition to its continuous fundamental research and analysis. Liquidity risk Investors should be aware that although all funds are exposed to liquidity risk, the exposure of liquidity risk for this Fund should be of more concern as the Fund invests into emerging market. Generally, securities markets outside of those of developed countries, while growing in volume, have for the most part substantially less volume than those of developed countries. Also, many securities traded on these foreign markets are less liquid and their prices are more volatile than securities of comparable markets in developed countries. In addition, settlement of trades in some emerging markets is much slower and more subject to failure than in developed country markets. There may also be less extensive regulation of the securities markets in emerging markets than in developed countries. As part of its risk management, the Manager will attempt to reduce the liquidity exposure by an active asset allocation management and diversification within the portfolio. The Manager will also conduct constant fundamental research and analysis to ensure the feasibility of its management. 53

58 4.4 CIMB-Principal Climate Change Equity Fund Principal risks of the Fund: Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into the underlying funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund(s) may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. To mitigate currency risk, the Fund Manager can use currencies hedging techniques when it is deemed as necessary. Principal risks of the Target Fund: Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as its bonds issuances or shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk to the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Sector risk Stock prices of companies within a sector or industry move together due to sector-specific causal factors, examples of which include business cycle dynamics, key sector or industry earnings' driver trend, demographic or consumer demand changes, new technology or product introduction, government policies or regulatory changes and international events. As this Fund will focus its investments within specific sectors that are related to the prevailing investment themes, its returns are strongly dependent on the impact of such sector-specific causal factors. These causal factors that drive sector-specific returns lead to sector-specific risks. The fund manager of the Target Fund will however, endeavour to minimize such risks by investing in a portfolio that diversifies the Fund's assets within that sector. This is expected to reduce the volatility as well as the risk for the Fund s portfolio. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Target Fund Manager will select securities and collective investment schemes that spread across various countries within its portfolio in an attempt to avoid such events. Decision on diversification will be based on its constant fundamental research and analysis on the global market. In particular to this Fund, the Target Fund s highly disciplined portfolio construction methodology used is aim to always maintain an appropriate level of investment risk, which includes country exposure in the portfolio to manage country risk. 4.5 CIMB-Principal Emerging Asia Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of any issuance by that company may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using 54

59 diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. In particular, as this Fund may invest in emerging markets in Asia, such investments generally entail greater risk than investing in assets from the markets of industrialised countries. Emerging markets are markets that are by definition, in a state of transition and are therefore exposed to rapid political change and economic declines. During the past few years, there have been significant political, economic and societal changes in many emerging market countries which can influence investor confidence and in turn have a negative effect on exchange rates, security prices or other assets in these emerging markets. Moreover, the markets in emerging market countries are frequently characterised by illiquidity in the form of low turnover of some of the listed securities. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across various countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Liquidity risk Generally, securities markets in countries other than developed countries, while growing in volume, have for the most part substantially less volume than those of developed countries. Also, many securities traded on these foreign markets are less liquid and their prices are more volatile than securities of comparable markets in developed countries. In addition, settlement of trades in some emerging markets is much slower and subject to failure when compared to developed country markets. There may also be less extensive regulation of the securities markets in emerging markets than in developed countries. As part of its risk management, the Manager will attempt to reduce the liquidity exposure by an active asset allocation management and diversification within the portfolio. The Manager will also conduct constant fundamental research and analysis to ensure the feasibility of its management. 4.6 CIMB-Principal Global Asset Spectra Fund Principal risks of the Fund: Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into the underlying funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund(s) may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund during those preceding years. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Principal risks of the Target Fund: Country risk When a Fund invests into foreign markets, the foreign investments portion of the Fund may be affected by risks specific to the country which it invests in. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select 55

60 securities and collective investment schemes that spread across countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Risks associated with investment in global commodity-related assets The value of the Target Fund is vulnerable to factors affecting the natural resources industry such as industry wide supply and demand factors, change of regulators pertaining to the increased regulation of the environment by governments, changes in laws relating to mining or production or sales as well as increased labour cost or other costs in mining costs. Nevertheless, investors should note that the Target Fund s highly disciplined portfolio construction methodology used is aim to always maintain an appropriate level of investment risk including this risk. Risks associated with investment in global property-related assets Investment in Real Estate Investment Trust or global property equities fund may subject to risks similar to those associated with the direct ownership of real estate. This includes terrorist attacks, war or other acts that destroy real property (in addition to securities market risks). Other factors that could impact the NAV of the Target Funds are changes in real estate values and property taxes, interest rate, supply and demand of the underlying real estate assets, the management skill and credit worthiness of the issuer. Cyclical changes in the political, economic and social conditions and change in regulatory laws pertaining to the country the Target Fund invests in could have an adverse effect on properties values. Nevertheless, investors should note that the Target Fund s highly disciplined portfolio construction methodology used is aim to always maintain an appropriate level of investment risk including this risk. Credit / default risk Investment in fixed income collective investment schemes may involve a certain degree of credit/default risk with regards to the issuers of the fixed income investments. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Target Fund, thus negatively impacting the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Should the Fund invest into a fixed income Target Fund, the fund manager will ensure via due diligence exercise on the Target Fund, the appropriate creditworthiness and duration management of the Target Fund. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the fixed income collective investment schemes and consequently the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Target Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the fund manager will ensure that the duration of the Target Fund is appropriate for the Fund, depending on its view of the future interest rate trend based on its continuous fundamental research and analysis. 4.7 CIMB-Principal Global Balanced Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a diversified portfolio of securities, thus spreading the element of risk. Company specific risk There are many specific risks, which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management especially in its stock selection process. Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for investment with longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and managed the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum rating requirement of at least A3 or P2 by RAM or equivalent rating by MARC, Moody s, S&P or Fitch. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions perform through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and 56

61 analysis to determine the creditworthiness of its counterparty, and thereby impose careful credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of the defaulted transaction. Country risk When a Fund invests into foreign markets, the foreign investments portion of the Fund may be affected by risks specific to the country which it invests in. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 4.8 CIMB-Principal Global Growth Fund Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks, which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management especially in its stock selection process. Country risk When a Fund invests into foreign markets, the foreign investments portion of the Fund may be affected by risks specific to the country which it invests in. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select securities and collective investment schemes that spread across countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global markets. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 4.9 CIMB-Principal Global Titans Fund Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investment policies. These factors may have an impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. This Fund will be investing in three (3) PGI funds which invest in the three (3) global titans markets of the US, Europe and Japan. The decision on diversification between the three (3) funds will be based on constant fundamental research and analysis of the global markets. Furthermore, each PGI fund has a highly disciplined portfolio construction methodology aimed at maintaining an appropriate level of investment risk, which includes country exposures within each portfolio to manage country risk. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. 57

62 Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into these funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise, CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund(s) may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund during those preceding years. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks, which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management especially in its stock selection process CIMB-Principal Greater China Equity Fund Principal risks of the Fund: Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into the underlying funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise, CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund(s) may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign currency due to the volatile nature of the foreign exchange market. The Manager could utilise two pronged approaches in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary. Principal risks of the Target Fund: Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Company specific risk There are many specific risks, which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of the investment in that company such as shares may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management especially in its stock selection process. 58

63 Country risk As the Fund invests in China, Hong Kong SAR and Taiwan, the foreign investment portion of the Fund may be affected by risks specific to these countries. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. Examples include expropriation, nationalisation, exchange rate control restrictions, confiscatory taxation and limitations on the use or removal of Fund s assets. These factors may have impact on the prices of the Target Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Target Fund s highly disciplined portfolio construction methodology used is aim to always maintain an appropriate level of investment risk, which includes country exposure in the portfolio to manage country risk. Liquidity risk Investors should be aware that although all funds are exposed to liquidity risk, the exposure of liquidity risk for this Fund should be of more concern as the Fund invests into China, Hong Kong SAR and Taiwan markets. Generally, securities markets in these markets while growing in volume, have for the most part substantially less volume than those of comparable markets in developed countries. Also, many securities traded on these foreign markets are less liquid and their prices are more volatile than securities. In addition, settlement of trades in some emerging markets is much slower and more subject to failure than in developed country markets. There may also be less extensive regulation of the securities markets in these markets than most developed countries. As part of its risk management, the Manager will attempt to reduce the liquidity exposure by an active asset allocation management and diversification within the portfolio. The Manager will also conduct constant fundamental research and analysis to ensure the feasibility of its management CIMB-Principal Lifecycle Funds Credit / default risk Investment in debt securities, such as bonds, may involve a certain degree of credit/default risk with regards to the issuers. Generally, credit risk or default risk is the risk of loss due to the issuer s non payment or untimely payment of the investment amount as well as the returns on investment. This will cause a decline in value of the defaulted debt securities and subsequently depress the NAV of the Fund. Usually credit risk is more apparent for an investment with a longer tenure, i.e. the longer the duration, the higher the credit risk. Credit risk can be managed by performing continuous fundamental credit research and analysis to ascertain the creditworthiness of its issuer. In addition, the Manager imposes a minimum rating requirement as rated by either local and/or foreign rating agencies and manages the duration of the investment in accordance to the objective of the Fund. For this Fund, the debt securities investment must satisfy a minimum credit rating requirement of at least A3 or P2 by RAM or equivalent rating by MARC or B1 by Moody s and/or BB by S&P or Fitch. Should the Fund invests into a Target Fixed Income Fund, the Manager will ensure via due diligence exercise on the Target Fund, the appropriate creditworthiness and duration management of the Target Fund. Interest rate risk In general, when interest rates rise, bond prices will tend to fall and vice versa. Therefore, the NAV of the Fund may also tend to fall when interest rates rise or are expected to rise. However, investors should be aware that should the Fund hold a bond till maturity, such price fluctuations would dissipate as it approaches maturity, and thus the growth of the NAV shall not be affected at maturity. In order to mitigate interest rates exposure of the Fund, the Manager will manage the duration of the portfolio via shorter or longer tenured assets depending on the view of the future interest rate trend of the Manager, which is based on its continuous fundamental research and analysis. Counterparty risk When a Fund conducts over-the-counter (OTC) transactions, it may be exposed to risks relating to the credit standing of its counterparties and their ability to fulfil the conditions of the contracts it enters into with them. Hence, it is generally not applicable to transactions performed through exchanges. The Manager aims to mitigate this risk by performing fundamental credit research and analysis to determine the creditworthiness of its counterparty, and impose a credit limit as a precautionary step to limit any loss that may arise directly or indirectly as a result of a defaulted transaction. Company specific risk There are many specific risks which apply to individual companies that may affect the growth of a Fund. Examples include the possible effect on a company of losing a key executive or the unforeseen entry of a new competitor into the market or the implications of a company s credit rating being downgraded. As a consequence, the price of any issuance by that company may fall, and subsequently may also affect the growth of the overall Fund. The Manager aims to reduce all these risks by using diversification that is expected to reduce the volatility as well as the risk for the Fund s portfolio. In addition, the Manager will also perform continuous fundamental research and analysis to aid its active asset allocation management. Stock specific risk Any irregular fluctuation of the value of a particular stock may affect the unit price. The impact is however minimized as the Fund invests in a wide portfolio of investments, thus spreading the element of risk. Risks associated with investment in REITs Investment in Real Estate Investment Trust may be subjected to risks similar to those associated with the direct ownership of real estate. This includes terrorist attacks, war or other acts that destroy real property (in addition to market risk). Other factors that could impact the NAV of the Fund are changes in real estate values and property taxes, interest rate, supply and demand of the underlying real estate assets, the management skill and credit worthiness of the issuer. Cyclical changes in the political, economic and social conditions and change in regulatory laws pertaining to the country the underlying REITs invest in could have an adverse effect on properties values. Nevertheless, investors should note that the CIS s highly disciplined portfolio construction methodology used is aim to always maintain an appropriate level of investment risk including this risk. Country risk When a Fund invests in foreign markets, the foreign investment portion of the Fund may be affected by risks specific to the countries in which it invests. Such risks include changes in the country s economic fundamentals, social and political stability, currency movements and foreign investments policies. These factors may have impact on the prices of the Fund s investment in that country and consequently may also affect the Fund s NAV and its growth. To mitigate these risks, the Manager will select 59

64 securities and collective investment schemes that spread across various countries within its portfolio in an attempt to avoid such events. The decision on diversification will be based on its constant fundamental research and analysis on the global market. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign assets due to the volatile nature of the foreign exchange market. The Manager could utilise a two pronged approach in order to mitigate the currency risk; firstly, by spreading the investments across differing currencies (i.e. diversification) and secondly, by hedging the currencies when it is deemed necessary CIMB-Principal MENA Equity Fund Principal risks of the Fund: Fund manager s risk Since the Fund invests into collective investment schemes managed by other fund houses, CIMB-Principal has no control over the respective fund houses investment technique and knowledge, operational controls and management. In the event of mismanagement of the funds and/or fund houses, the NAV of the Fund which invest into the underlying funds would be affected negatively. Although the probability of such occurrences is minute, should the situation arise, CIMB-Principal reserves the right to seek an alternative collective investment scheme that is consistent with the objective of this Fund. Legal and tax risk As the Fund invests into other funds, investors should be aware that the legal and tax treatment of the Target Fund(s) may impact the Fund in ways that cannot be predicted. For example, taxation bases for preceding fiscal years which have been found to be incorrect can result in the Fund having to bear the tax burden in the current year, even though the Fund may not have had an investment in the Target Fund. Conversely, the Fund may also not benefit from any advantageous correction for the current or preceding fiscal years during which the Fund had an investment in the Target Fund if the Fund s investment in the Target Fund is redeemed before the correction takes place. In addition, a correction of tax data can result in a situation where taxable income or tax benefits are actually assessed for tax in a different assessment period to the applicable one and this may have a negative effect on the Fund. Similarly, any legal changes in the treatment of the Target Fund may also affect the Fund. Currency risk This risk is associated with investments that are quoted and/or priced in foreign currency denomination. Malaysian based investors should be aware that if the Malaysian Ringgit appreciates against the currencies in which the portfolio of the investment is denominated, this will have an adverse effect on the NAV of the Fund and vice versa. Investors should note that any gains or losses arising from the movement of the foreign currencies against its home currency may therefore increase/decrease the capital gains of the investment. Nevertheless, investors should realise that currency risk is considered as one of the major risks to investments in foreign currency due to the volatile nature of the foreign exchange market. The Manager may in order to mitigate the currency risk hedge the currencies when it is deemed necessary. Principal risks of the Target Fund: OCEAN Fund/Equities MENA Opportunities Potential Market Volatility The prices of certain securities listed on stock markets in the Middle East and North Africa have been subject to sharp fluctuations and sudden declines and no assurance can be given as to the future performance of listed securities in general. Volatility of prices may be greater than in more developed stock markets. Prospective investors should therefore be aware that the value of Shares and the income derived from them is likely to fluctuate. Market Illiquidity and Foreign Investment Infrastructure In the MENA the marketability of quoted shares is limited due to the restricted opening hours of stock exchanges, a narrow range of investors and a relatively high proportion of market value being concentrated in the hands of a relatively small number of shareholders. Trading volume is generally lower than on more developed stock markets and equities are generally less liquid. The infrastructure for clearing, settlement, registration and custodian services on the primary and secondary markets of MENA countries is in some cases less developed than in certain other markets and under certain circumstances this may result in the Company experiencing delays in settling and/or registering transactions in the markets in which it invests particularly if the growth of foreign and domestic investment in the MENA countries places an undue burden on such investment infrastructure. Corporate Disclosure, Accounting and Regulatory Standards Companies in some countries in the Middle East and North Africa are not subject to disclosure, accounting, auditing and financial standards which are equivalent to those applicable in more developed countries. Such information as is available is often less reliable. There is less rigorous government supervision and regulation. Regulatory regimes relating to foreign investment are still in their infancy in these countries. This may mean that rules are being applied for the first time or inconsistently which may result, inter alia, in the amount and nature of information available to the Company about companies and potential investments being inconsistent from time to time and from company to company. In addition, companies involved in the provision of financial and investment services have only recently been subject to a more developed regulatory regime and, in particular, to restrictions on the disclosure of information. In particular new regulations drafted to impose strict requirements and conditions of such companies equivalent to those in more of the developed markets have not all been implemented as yet. Timing and Reliability of Official Data The quality, timing and reliability of official data published by the Government and Government Agencies of some of the MENA countries may not always be equivalent to that of more developed countries. 60

65 Political Climate and Extremism Investments in the MENA markets will be sensitive to any significant change in political, social or economic policy in the MENA region. Many countries in the Middle East and North Africa have historically been subject to political instability and their prospects are tied to the continuation of economic and political liberalisation in the region. Instability may result from factors such as government or military intervention in decision-making, terrorism, civil unrest, extremism or hostilities between neighbouring countries. An outbreak of hostilities could result in substantial losses for the Company. Extremist groups in certain countries have traditionally held anti-western views and are opposed to openness to foreign investments. If these movements gain strength they could have a destabilising effect on the investment activities of the Company. Nationalisation and taxation In the past, several of the MENA countries governments have undertaken wide-scale nationalisation programmes. Whilst the current trend is to embark on a programme of privatisations, there can be no assurance that a future government would continue the programme or would not seek to re-nationalise. There may be the possibility of asset expropriations or future punitive levels of taxation. Currency risk The Company invests primarily in securities denominated in currencies other than US Dollars but its Net Asset Value will be quoted in US Dollars. The Company may (but is not obliged to) seek to hedge foreign currency risk. However, it is not possible or practicable to hedge many of the currencies into which the Company will invest, and/or any such hedges may be imperfect. Accordingly, investors may bear the risk of adverse movements in the US Dollar exchange rate with the currencies in which investments are denominated and with the investor s own base currency. Investors will also bear the risks associated with entering imperfect hedging transactions. Liquidity of shares The shares of the Target Fund are redeemable only on a daily basis and then subject to the limitations and restrictions maximum of 10% of the fund s assets. There may also be a lower level of liquidity in the market, which could potentially lead to severe price volatility. There are liquidity risks where market conditions or investments in the securities market may increase the risk of loss by making it difficult to effect transactions or liquidate positions. The Board of Directors of Ocean Fund has the power to impose restrictions on the redemptions of shares as described in the Target Fund s prevailing prospectus. The Funds are managed and portfolio constructed within pre-determined parameters, which have been established by taking into consideration the objective of the Funds, their targeted performance against benchmark, risk budgets and controls. The risk management team, within the investment team, monitors and reviews the Funds regularly to ensure that the parameters are adhered to. Important It is important to note that events affecting investments cannot always be foreseen. Therefore, it is not always possible to protect your investments against all risks. The various asset classes generally exhibit different levels of risk. The risk/return profile of the various asset classes is usually such that, from the highest end of the risk/return spectrum, shares are followed by property, then fixed income securities and finally cash. However, this ranking may be influenced by the time at which you invest and the length of time. In summary, the value of the underlying assets of the fund will fall and rise. The value of your investment and any distribution may also fall and rise. Please note, investments in a fund carry significant risks and we recommend that you read the entire Master Prospectus to assess the risks of investment. 61

66 Funds Detailed Information This chapter explains each of the Funds in detail and will be segregated into two (2) parts to ease investors understanding. PART A This part covers all CIMB-Principal s Funds and is segregated into four (4) different sections. For each of these Funds, we will describe the individual Fund s investment objective and benchmark as well as its investment policy and principal investment strategy. SECTION 1: EQUITY FUNDS 1.1 CIMB-Principal Equity Fund 1.2 CIMB-Principal Equity Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Equity Growth Fund 1.6 CIMB-Principal Equity Growth & Income Fund 1.7 CIMB-Principal Equity Income Fund 1.8 CIMB-Principal Small Cap Fund SECTION 2: MIXED ASSET FUNDS 2.1 CIMB-Principal Balanced Fund 2.2 CIMB-Principal Balanced Income Fund 2.3 CIMB-Principal Income Plus Balanced Fund SECTION 3: FIXED INCOME & MONEY MARKET FUNDS 3.1 CIMB-Principal Bond Fund 3.2 CIMB-Principal Strategic Bond Fund 3.3 CIMB-Principal Deposit Fund 3.4 CIMB-Principal Money Market Income Fund SECTION 4: REGIONAL & GLOBAL FUNDS 4.1 CIMB-Principal Asia Infrastructure Equity Fund 4.2 CIMB-Principal ASEAN Equity Fund 4.3 CIMB-Principal Asian Equity Fund 4.4 CIMB-Principal Climate Change Equity Fund 4.5 CIMB-Principal Emerging Asia Fund 4.6 CIMB-Principal Global Asset Spectra Fund 4.7 CIMB-Principal Global Balanced Fund 4.8 CIMB-Principal Global Growth Fund 4.9 CIMB-Principal Global Titans Fund 4.10 CIMB-Principal Greater China Equity Fund 4.11 CIMB-Principal Lifecycle Funds 4.12 CIMB-Principal MENA Equity Fund PART B covers the foreign market admission requirements by the relevant regulatory authorities. PART C covers the investment parameters and valuation practices of all Funds, which includes authorized investments, limitations on investments, investment restrictions, valuation of authorized investments, borrowings/financing and securities lending. 62

67 PART A SECTION 1: EQUITY FUNDS 1.1 CIMB-Principal Equity Fund Investment objective To maximise capital growth over the medium to long term through the stock market. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the FTSE Bursa Malaysia Top 100 Index. Information on the benchmark can be obtained from and local national newspapers. Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) and other permissible investments. In line with its objective, the investment policy and strategy of the Fund will focus on investment in shares of companies with growth potential and listed on the main board. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund will be invested in equities (both inclusive) and other permissible investments; and at least 2% in liquid assets. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. In a rising market, the 98% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund, it has a proportionally higher equity exposure. Thus, the Manager is unable to take equity exposure down substantially even if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. 63

68 1.2 CIMB-Principal Equity Fund 2 Investment objective To achieve maximum capital appreciation over the long term through all types of investments. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the FTSE Bursa Malaysia Top 100 Index. Information on the benchmark can be obtained from and local national newspapers. Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) and other permissible investments. In line with its objective, the investment policy and strategy of the Fund will focus on investment in shares of companies with growth potential. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund will be invested in equities (both inclusive) and other permissible investments; and at least 2% in liquid assets. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. In a rising market, the 98% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund, it has a proportionally higher equity exposure. Thus, the Manager is unable to take equity exposure down substantially even if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. 64

69 1.3 CIMB-Principal Equity Aggressive Fund 1 Investment objective To provide investors with long term capital growth by investing principally in equities. The Fund also seeks to outperform the FTSE Bursa Malaysia KLCI benchmark. Any material changes to the Fund s investment objective would require the approval of Unit holders. Benchmark The benchmark of the Fund is the FTSE Bursa Malaysia KLCI. Information on the benchmark can be obtained from and local national newspapers. Investment policy and principal investment strategy The Fund will invest between 60% to 98% of its NAV in equities (both inclusive) and up to a maximum of 30% of its NAV may be invested in warrants and options. Liquid assets may also be strategically used if the Manager perceives that the downside risk of the market is high in the short-term. In line with its objective, the investment policy and strategy of the Fund is to have a portfolio comprising of both equities and derivatives which will be rebalanced to suit market conditions. The asset allocation strategy for this Fund is as follows: between 60% to 98% in equities (both inclusive); up to 30% in warrants and options; and minimum of 2% in liquid assets. The Manager will switch between asset classes at different market cycles in order to outperform the benchmark. The Manager will have higher exposure in derivatives at the bottom of the market cycles and increase exposure in dividend yielding stocks at the higher end of the market cycles. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. The warrants and options will be selected after going through the universe of warrants and options for stocks that CIMB-Principal believes are fundamentally undervalued and/or have upside potential. Warrants derive their value primarily from their intrinsic values and their time values. Alternatively, if the Manager believes the underlying security is undervalued, the Manager will also consider investments in the related warrants and options. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund which has a minimum of 60% equity exposure, the Manager is unable to take equity exposure down substantially if it feels that the market is close to its peak. Hence, the Manager may not invest in derivatives when the market outlook is unfavourable but instead will take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. 65

70 1.4 CIMB-Principal Equity Aggressive Fund 3 Investment objective The objective of CIMB-Principal Equity Aggressive Fund 3 is to grow the value of investments over the long-term through investment in Malaysian shares. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of this Fund is the FTSE Bursa Malaysia Top 100 Index. Information on the benchmark can be obtained from and local national newspapers. Investment policy and principal investment strategy The Fund may invest between 70% to 98% of the Fund s NAV in local equities (both inclusive). As an aggressive Fund, the Fund will be managed with higher beta and tracking error. The investment policy and strategy of the Fund will be to invest in stocks which are selected based on their future growth prospects with benchmarking of the Fund being a secondary consideration. As such, the Fund may hold a larger percentage of its NAV (may exceed 10%) in stocks of companies with small capitalization. In addition, liquid assets may also be strategically used if the Manager feels that the market downside risk is high in the short term. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund s NAV will be invested in equities (both inclusive); and at least 2% in liquid assets. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund it has a proportionally higher equity exposure. Thus, the Manager is unable to take equity exposure down substantially even if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. 66

71 1.5 CIMB-Principal Equity Growth Fund Investment objective To provide investors with long-term capital growth by investing principally in equities. The Fund also seeks to outperform the FTSE Bursa Malaysia KLCI benchmark. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund may invest at least 70% of its NAV in equities with up to 50% of its NAV in foreign equities, the benchmark of the Fund is a composite comprising 50% FTSE Bursa Malaysia KLCI + 50% MSCI AC Asia ex Japan. Information on FTSE Bursa Malaysia KLCI can be obtained from and local national newspapers. Information on MSCI AC Asia ex Japan can be obtained from and Bloomberg L.P. Investment policy and principal investment strategy The Fund will invest at least 70% of its NAV in equities in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In addition, liquid assets may be strategically used if the Manager feels that the market downside risk is high in the short term. In line with its objective, the investment policy and strategy of the Fund is to have a diversified portfolio of equities aimed at outperforming the market at different cycles of the market. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund s NAV will be invested in equities; and at least 2% in liquid assets. The Manager will switch between sectors and stocks at different market cycles in order to outperform benchmark. The Manager will have higher exposure to growth stocks at the bottom of the market cycles and increase exposure in defensive stocks at the higher end of the market cycles. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund which has a minimum of 70% equity exposure, the Manager is unable to take equity exposure down substantially if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. The Manager has appointed CIMB-Principal (S), as the Sub-Manager for the foreign investments of this Fund with the approval of the SC and the Trustee. CIMB-Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commissions (IOSCO). The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, the Fund s holding in foreign investments will not exceed 50% of its NAV. The Sub-Manager may invest beyond this limit provided the approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Sub-Manager may decide not to invest in foreign securities as may be agreed upon by the Manager from time to time. 67

72 1.6 CIMB-Principal Equity Growth & Income Fund Investment objective To achieve capital appreciation over the medium to long-term through all types of investments that have the potential for above average growth over time. Any material changes to the objective of the Fund would require Unit holders approval. Benchmark As this Fund is an equity fund with up to 50% of its NAV in foreign equities, the benchmark of the Fund is a composite comprising 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan*. Information on FTSE Bursa Malaysia Malaysia Top 100 Index can be obtained from and local national newspapers. Information on MSCI AC Asia ex Japan can be obtained from and Bloomberg L.P. * Note: Effective 1 July 2010, the benchmark for this Fund will be revised and is to be read as 70% FTSE Bursa Malaysia Top 100 Index + 30% MSCI AC Asia ex Japan. This is to reflect the change in the foreign exposure. Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In line with its objective, the investment policy and strategy of the Fund will be to invest primarily in equities, with a bias towards growth stocks that have the potential to deliver longterm capital appreciation. To a lesser extent, the Fund invests in liquid assets primarily for the purpose of cash management. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund s NAV will be invested in equities (both inclusive); and at least 2% in liquid assets. The asset allocation strategy will be reviewed periodically depending on the country s economic and stock market outlook. In a rising market, this 98% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund, it has a proportionally higher equity exposure. Thus, the Manager is unable to take equity exposure down substantially even if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. The Manager has appointed CIMB-Principal (S), as the Sub-Manager for the foreign investments of this Fund with the approval of the SC and the Trustee. CIMB-Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commissions (IOSCO). The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, the Fund s holding in foreign investments will not exceed 50% of its NAV. Effective 1 July 2010, the Fund s holding in foreign investments will not exceed 30% of its NAV. The change is to differentiate the Fund with other existing Funds in order to provide product variation to investors, i.e. an alternative to those who may not want a high 50% of the portfolio to be invested offshore. The Sub-Manager may invest beyond this limit provided the approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Sub-Manager may decide not to invest in foreign securities as may be agreed upon by the Manager from time to time. 68

73 1.7 CIMB-Principal Equity Income Fund Investment objective To provide investors with an opportunity to gain consistent and stable income by investing in a diversified portfolio of dividend yielding equities and fixed income securities. The Fund may also provide moderate capital growth potential over the medium to long-term period. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund is an equity fund with up to 50% of its NAV in foreign equities, the benchmark of the Fund is a composite comprising 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan. Information on FTSE Bursa Malaysia Top 100 Index can be obtained from and local national newspapers. Information on MSCI AC Asia ex Japan can be obtained from and Bloomberg L.P. Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in equities (both inclusive) in order to gain long-term capital growth. The Fund may opt to invest in foreign equities up to a maximum of 50% of its NAV. In line with its objective, the investment policy and strategy of the Fund will be to invest in a diversified portfolio of high dividend yielding stocks and/or fixed income securities aimed at providing a stable income stream in the form of distributions to investors. The asset allocation strategy for this Fund is as follows: between 70% to 98% (both inclusive) of the Fund s NAV in a diversified portfolio of dividend yielding equities and/or fixed income securities; and at least 2% in liquid assets. The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. The Manager will underweight/overweight equities and/or fixed income securities when necessary. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. The criteria for stock selection would include stocks that have a medium-term (2 to 5 years) dividend record or a yearly distribution policy. The Manager will also actively search for under-valued high dividend yielding stocks that may also offer promising long-term capital appreciation. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this Fund is defensive in nature and designed to cater for the needs of more risk-averse equity investors, this Fund will serve well in bear market conditions. However, in bull market the Fund will underperform the market as the Manager will not take on more risk to divert into highly volatile aggressive stocks. Further, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. The Manager has appointed CIMB-Principal (S), as the Sub-Manager for the foreign investments of this Fund with the approval of the SC and the Trustee. CIMB-Principal (S) will be responsible for investing and managing these foreign investments in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commissions (IOSCO). The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, the Fund s holding in foreign investments will not exceed 50% of its NAV. The Sub-Manager may invest beyond this limit provided the approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Sub-Manager may decide not to invest in foreign securities as may be agreed upon by the Manager from time to time. 69

74 1.8 CIMB-Principal Small Cap Fund Investment objective The objective of CIMB-Principal Small Cap Fund is to provide growth to the value of Unit holders investments over the long-term in an equity fund by investing in undiscovered smaller companies listed on Bursa Malaysia. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of this Fund is the FTSE Bursa Malaysia Small Cap Index. Information on the benchmark can be obtained from and local national newspapers. Investment policy and principal investment strategy The Fund may invest between 70% to 98% (both inclusive) of the Fund s NAV in shares of smaller companies with market capitalization at point of purchase not exceeding the market capitalization of the largest constituent stock (by market capitalization) of the benchmark. The investment policy and strategy of the Fund will therefore focus on investments in securities of such emerging companies with strong potential growth and hands-on management policies but lacking in track records. To a lesser extent, the Fund may also invest in other permissible investments such as liquid assets primarily for the purpose of cash management. In addition, liquid assets may be strategically used if the Manager feels that the market downside risk is high in the short term. The asset allocation strategy for this Fund is as follows: between 70% to 98% of the Fund s NAV will be invested in equities (both inclusive); and at least 2% in liquid assets. The asset allocation strategy will be reviewed periodically depending on the country s economic and stock market outlook. In a rising market, this 98% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB- Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB-Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As small cap stocks tend to be under researched, CIMB-Principal will depend upon proprietary research and selected research from brokers. In particular, stock selection will depend upon the growth potential of the company and its industry, management quality, franchise value and corporate governance considerations. The key strategy is to invest in companies that are trading below its intrinsic value and selling them when the share price has passed its intrinsic value. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. As this is an equity fund it has a proportionally higher equity exposure. Thus, the Manager is unable to take equity exposure down substantially even if it feels that the market is close to its peak. The Manager will therefore take a defensive stance and invest in stocks that have low correlation to market movements. Notwithstanding the aforesaid, in times of adversity in equity markets and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. 70

75 SECTION 2: MIXED ASSET FUNDS 2.1 CIMB-Principal Balanced Fund Investment objective The objective of CIMB-Principal Balanced Fund is to grow the value of investments over the long-term through investment in a diversified mix of Malaysian assets. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund may invest up to 70% of its NAV in Malaysian shares with the balance in fixed income securities, the benchmark of this Fund is a composite comprising 70% FBM % CIMB Bank 1-Month Fixed Deposit Rate. Information on the FBM 100 can be obtained from and local national newspapers. Information on the CIMB Bank 1-Month Fixed Deposit Rate can be obtained from Investment policy and principal investment strategy The Fund aims to invest in a diversified portfolio of equities and fixed income investments. In line with its objective, the investment policy and strategy will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 70:30. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in equity securities shall be between 50% to 70% of the NAV of the Fund (both inclusive) and investments in fixed income securities and liquid assets shall not be less than 30% of the NAV of the Fund with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. The asset allocation strategy for this Fund is as follows: the equity securities will be between 50% to 70% of the NAV of the Fund (both inclusive); investments in fixed income securities and liquid assets shall not be less than 30% of the NAV of the Fund; and at least 2% its NAV in liquid assets. The asset allocation will be reviewed periodically depending on the country's economic and stock market outlook. In a rising market, the 70% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal will adopt an active trading strategy and is therefore especially selective in the buying and selling of securities for the Fund. For the equities portion, CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB-Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB- Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As for the fixed income portion, CIMB-Principal formulates an interest rate outlook by considering factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. In the unlikely event of a credit rating downgrade, the Manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB- Principal has in place flexible tolerance limits to cater to such situations. CIMB-Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. Essentially, CIMB- Principal employs an active asset allocation strategy depending upon the equity market expectations, and at the same time monitors the bond portfolio according to three (3) parameters: tenor, credit ratings and sector. The duration of the bond portfolio is also monitored and modified according to the Manager s interest rate outlook (i.e. the sensitivity of the portfolio to interest rate changes). In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. Additionally, for investments in debt markets, the Manager may reduce holdings in longer tenured assets and channel these monies into shorter-term interest bearing deposits. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. 71

76 2.2 CIMB-Principal Balanced Income Fund Investment objective To seek long-term growth in capital and income by investing in all types of investments. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund may invest up to 60% of its NAV in equities with the balance in fixed income securities, the benchmark of the Fund is a composite comprising 60% FBM % CIMB Bank 1-month Fixed Deposit Rate. Information on FBM 100 can be obtained from and local national newspapers. Information on CIMB Bank 1-month Fixed Deposit Rate can be obtained from CIMB Bank website Investment policy and principal investment strategy The Fund aims to invest in a diversified portfolio of equities and fixed income investments. In line with the objective of the Fund, the investment policy and strategy of the Fund will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 60:40. The fixed income portion of the Fund is to provide some capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The investments by the Fund in equity securities shall not exceed 60% of the NAV of the Fund and investments in fixed income securities and liquid assets shall not be less than 40% of the NAV of the Fund with a minimum credit rating of BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent by Moody s or Fitch. The fixed income portion will provide capital stability to the Fund whilst the equity portion will provide the added return in a rising market. The asset allocation strategy for this Fund is as follows: the equity securities will not exceed 60% of the Net Asset Value of the Fund; investments in fixed income securities and liquid assets shall not be less than 40% of the NAV of the Fund; and at all times, at least 2% of the NAV of the Fund must be maintained in liquid assets. The asset allocation will be reviewed periodically depending on the country's economic and stock market outlook. In a rising market, the 60% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. CIMB-Principal will adopt an active trading strategy and is therefore especially selective in the buying and selling of securities for the Fund. For the fixed income portion, CIMB-Principal formulates the interest rate outlook by considering factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. In the unlikely event of a credit rating downgrade, the investment manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB-Principal has in place flexible tolerance limits to cater to such situations. CIMB-Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. For the equities portion, CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB-Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB- Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. Essentially, CIMB- Principal employs an active asset allocation strategy depending upon the equity market expectations, and at the same time monitors the bond portfolio according to three (3) parameters: tenor, credit ratings and sector. The duration of the bond portfolio is also monitored and modified according to the Manager s interest rate outlook (i.e. the sensitivity of the portfolio to interest rate changes). In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. Additionally, for investments in debt markets, the Manager may reduce holdings in longer tenured assets and channel these monies into shorter-term interest bearing deposits. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. 72

77 2.3 CIMB-Principal Income Plus Balanced Fund Investment objective The objective of CIMB-Principal Income Plus Balanced Fund is to provide capital growth over the medium to long-term as well as income distributions. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund may invest up to 40% of its NAV in shares with the balance in fixed income securities, the benchmark of this Fund is a composite comprising 40% FBM % CIMB Bank 1-Month Fixed Deposit Rate. Information on the FBM 100 can be obtained from and local national newspapers. Information on the CIMB Bank 1-Month Fixed Deposit Rate can be obtained from Investment policy and principal investment strategy The Fund aims to invest in a diversified portfolio of primarily fixed income investments and some exposure in equities. The Fund may invest between 60% to 80% (both inclusive) of its NAV in debentures carrying a minimum credit rating of BBB3 or P2 rating by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. The Fund may also invest between 10% to 40% of its NAV in equities (both inclusive). As part of its equities portfolio, the Fund may invest in stocks listed on the following foreign stock exchanges: Australia, China, Hong Kong SAR, India, New Zealand, Singapore, Sri Lanka, Thailand, Korea, the Philippines, Indonesia and Taiwan, subject to a maximum of 12% of its NAV. In line with the objective of the Fund, the investment policy and strategy of the Fund is to invest primarily in fixed income securities in order to provide streams of income and some capital stability, whilst having some exposure to equities in order to provide growth and added return in a rising market. The asset allocation strategy for this Fund is as follows: Between 60% to 80% (both inclusive) of its NAV in fixed income between 10% - 40% of its NAV in equities (both inclusive) The asset allocation will be reviewed periodically depending on the country s economic and stock market outlook. CIMB-Principal will adopt an active trading strategy and is therefore especially selective in the buying and selling of securities for the Fund. For the fixed income portion, CIMB-Principal formulates the interest rate outlook by considering factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. In the unlikely event of a credit rating downgrade, the Manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB- Principal has in place flexible tolerance limits to cater to such situations. CIMB-Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. For the equities portion, CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, CIMB-Principal analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. CIMB- Principal will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. Essentially, CIMB- Principal employs an active asset allocation strategy depending upon the equity market expectations, and at the same time monitors the bond portfolio according to three (3) parameters: tenor, credit ratings and sector. The duration of the bond portfolio is also monitored and modified according to the Manager s interest rate outlook (i.e. the sensitivity of the portfolio to interest rate changes). In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. Additionally, for investments in debt markets, the Manager may reduce holdings in longer tenured assets and channel these monies into shorter-term interest bearing deposits. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines, for purposes such as hedging. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. 73

78 SECTION 3: FIXED INCOME & MONEY MARKET FUNDS 3.1 CIMB-Principal Bond Fund Investment objective The objective of CIMB-Principal Bond Fund is to provide regular income as well as to achieve medium to long-term capital appreciation through investments primarily in Malaysian bonds. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the Quant shop MGS Bond Index (Medium Sub-Index). Information on the benchmark can be obtained from Investment policy and principal investment strategy Between 70% to 98% (both inclusive) of the Fund s NAV may be invested in debentures carrying at least a BBB3 or P3 rating by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. The rest of the Fund is maintained in the form of liquid assets to meet any redemption payments to Unit holders. In line with its objective, the investment strategy and policy of the Fund is to invest in a diversified portfolio of approved fixed income securities consisting primarily of bonds, aimed to provide a steady stream of income. The asset allocation for the Fund is as follows: between 70% to 98% (both inclusive) in debentures and other permissible investments; and at least 2% in liquid assets. The asset allocation strategy will be reviewed periodically depending on the country s economic and bond market outlook. CIMB- Principal will adopt an active trading strategy and will be especially selective in the buying and selling of securities for the Fund. CIMB-Principal formulates an interest rate outlook through examining factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. In the unlikely event of a credit rating downgrade, the Manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB-Principal has in place flexible tolerance limits to cater to such situations. CIMB- Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. Essentially, CIMB- Principal monitors the bond portfolio according to three (3) parameters: tenor, credit ratings and sector. The duration of the bond portfolio is also monitored and modified according to the Manager s interest rate outlook (i.e. the sensitivity of the portfolio to interest rate changes). In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may reduce holdings in longer tenured assets and channel these monies into shorter-term interest bearing deposits. The Manager may also from time to time invest in liquid assets to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. 74

79 3.2 CIMB-Principal Strategic Bond Fund Investment objective The objective of CIMB-Principal Strategic Bond Fund is to provide growth to the value of Unit holders investments over the medium term in a medium to long-term bond portfolio as well as to provide a source of regular income. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the Quant shop MGS Bond Index (Medium Sub-Index). Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund may invest between 70% to 98% of its NAV in debentures rated at least BBB3 or P3 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch and up to 10% of its NAV in warrants and options. As a strategic bond fund, the Fund may also allocate part of its fixed income portfolio to be invested in ICULS/exchangeable bonds listed on Bursa Malaysia and other eligible exchanges, but subject to a maximum of 10% of its NAV. In line with its objective, the investment strategy and policy of the Fund is to invest in a diversified portfolio of approved fixed income securities aimed to provide a steady stream of income while utilizing warrants and options to provide added returns when appropriate. CIMB-Principal will adopt an active trading strategy and will be especially selective in the buying and selling of securities for the Fund. For the fixed income portion, CIMB-Principal formulates an interest rate outlook through examining factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. In the unlikely event of a credit rating downgrade, the Manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB-Principal has in place flexible tolerance limits to cater to such situations. CIMB- Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. The warrants and options will be selected after going through the universe of warrants and options for stocks that CIMB-Principal believes are fundamentally undervalued and/or have upside potential. Warrants derive their value primarily from their intrinsic values and their time values. Alternatively, if the Manager believes the underlying security is undervalued, the Manager will also consider investments in the related warrants and options. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. Essentially, CIMB- Principal monitors the bond portfolio according to three (3) parameters: tenor, credit ratings and sector. The duration of the bond portfolio is also monitored and modified according to the Manager s interest rate outlook (i.e. the sensitivity of the portfolio to interest rate changes). In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may reduce holdings in longer tenured assets and channel these monies into shorter-term interest bearing deposits. The Manager may also from time to time invest in liquid assets to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. 75

80 3.3 CIMB-Principal Deposit Fund Investment objective The objective of the Fund is to generate regular income for investors through investments primarily in the money market. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the CIMB Bank Overnight Rate. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund will place at least 90% of its NAV in deposits. Up to 10% of the Fund s NAV may be invested in money market instruments and short-term debentures with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch, all of which have a remaining maturity period of less than 365 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments with a high degree of capital preservation. The investment strategy adheres to the SC Guidelines pertaining to investments for a money market fund. As such any changes to these guidelines would tantamount to a change in this investment strategy. CIMB-Principal formulates an interest rate outlook by considering factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. The ratings of the securities will be at least A3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. In the unlikely event of a credit rating downgrade, the investment manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB-Principal has in place flexible tolerance limits to cater to such situations. CIMB-Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal will focus on managing the investment impact caused by the changes in the general interest rate trend and the credit risk profile of the individual debt issuers. The interest rate risk will be managed by investing mainly in securities with less than one (1) year to maturity, while credit risk will be managed via investments in investment grade securities. CIMB-Principal will take reasonable steps to ensure that the above potential risks are adequately managed by adopting various investment strategies, such as diversification in terms of asset allocation, credit and sectoral exposure, as well as duration management to appropriately adjust the risk and return characteristics of the Fund. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. Investment in the Fund is not the same as placing funds in a deposit with a financial institution. There are risks involved and investors should rely on their own evaluation to assess the merits and risks when investing in the Fund. 76

81 3.4 CIMB-Principal Money Market Income Fund Investment objective The objective of CIMB-Principal Money Market Income Fund is to provide a low risk investment option that normally earns higher interest than traditional bank accounts. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the CIMB Bank Overnight Rate. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund may place at least 90% of its NAV in deposits as well as invest in money market instruments and short-term debentures with a minimum credit rating of BBB3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch, all of which have a remaining maturity period of less than 365 days. Up to 10% of the Fund s NAV may be invested in short-term debentures which have a remaining maturity period of more than 365 days but less than 732 days. The Fund will be actively managed. The investment policy and strategy is to invest in liquid and low risk short-term investments with a high degree of capital preservation. The investment strategy adheres to the SC Guidelines pertaining to investments for a money market fund. As such any changes to these guidelines would tantamount to a change in this investment strategy. CIMB-Principal formulates an interest rate outlook by considering factors such as the Malaysian inflation rate, monetary policies and economic growth. With an interest rate outlook and yield curve analysis, CIMB-Principal identifies the weighting of the investment tenure and credit for the Fund. The ratings of the securities will be at least A3 or P2 by RAM or equivalent rating by MARC or BB by S&P or equivalent rating by Moody s or Fitch. In the unlikely event of a credit rating downgrade, the Manager reserves the right to deal with the security in the best interest of the Unit holders. As active fund managers, CIMB-Principal has in place flexible tolerance limits to cater to such situations. CIMB- Principal can for example, continue to hold the downgraded security if the immediate disposal of the security would not be in the best interest of the Unit holders. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal will focus on managing the investment impact caused by the changes in the general interest rate trend and the credit risk profile of the individual debt issuers. The interest rate risk will be managed by investing mainly in securities with less than one (1) year to maturity, while credit risk will be managed via investments in investment grade securities. CIMB-Principal will take reasonable steps to ensure that the above potential risks are adequately managed by adopting various investment strategies, such as diversification in terms of asset allocation, credit and sectoral exposure, as well as duration management to appropriately adjust the risk and return characteristics of the Fund. The Fund may invest in foreign markets where the regulatory authorities are members of the International Organization of Securities Commission (IOSCO) including but not limited to the United States of America, the United Kingdom, France, Germany, the Asia Pacific ex-japan region (i.e. Hong Kong SAR, Taiwan, Korea, People s Republic of China, Indonesia, Malaysia, India, Thailand, the Philippines, Sri Lanka, Singapore, Vietnam, Australia and New Zealand), the Middle Eastern and North African ( MENA ) countries (i.e. Egypt, Jordan, Oman, Qatar, Bahrain, United Arab Emirates, Tunisia, Morocco and other markets of the region) and Brazil. The Fund s investments in foreign markets will be subject to the limit set by BNM and any conditions imposed by the SC from time to time. Currently, this Fund s holding in foreign investments will not exceed 30% of its NAV. The Manager may invest beyond this limit provided the necessary approvals are obtained from the relevant authorities (where necessary) and any increase will be reflected in a supplementary prospectus (if deemed necessary). Notwithstanding the aforesaid, the Manager may decide not to invest in foreign securities. Investment in the Fund is not the same as placing funds in a deposit with a financial institution. There are risks involved and investors should rely on their own evaluation to assess the merits and risks when investing in the Fund. 77

82 SECTION 4: REGIONAL & GLOBAL FUNDS 4.1 CIMB-Principal Asia Infrastructure Equity Fund Investment objective The Fund aims to achieve long term capital growth from investments in a diversified portfolio of Asian securities of issuers which are predominantly engaged in infrastructure activities. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The Fund adheres to the reference index of the Target Fund. The Target Fund uses the MSCI AC Asia Pacific ex Japan Index as a reference index. Information on the index can be obtained from Investment policy and principal investment strategy The Fund is a Feeder Fund that invests at least 95% of the Fund s NAV in the Invesco Asia Infrastructure Fund (a Luxembourgdomiciled fund) which invests in a diversified portfolio of Asian securities of issuers which are predominantly engaged in infrastructure activities. Information on Invesco Asia Infrastructure Fund is detailed below. The asset allocation strategy for this Fund is as follows: at least 95% of the Fund s NAV will be invested in the Invesco Asia Infrastructure Fund; up to 5% of the Fund s NAV will be invested in liquid assets for liquidity purposes. The investment strategy adheres to the SC Guidelines pertaining to Feeder Funds. As such, any changes to these guidelines would tantamount to a change in this investment strategy. If, in the opinion of the Manager, the Invesco Asia Infrastructure Fund no longer meets the Fund s investment objective, and/or when acting in the best interests of Unit holders, CIMB-Principal may replace the Invesco Asia Infrastructure Fund with another collective investment scheme that is consistent with the objective of this Fund, subject to the approval of the Unit holders. The switch to another collective investment scheme may be performed on a staggered basis to facilitate a smooth transition. This is applicable should the Invesco Asia Infrastructure Fund impose any conditions in relation to redemption of units or if the manager of the newly identified Target Fund exercises its discretion to apply an Anti Dilution Levy* in relation to applications for units. Thus, the time frame required to perform the transition will depend on such conditions, if any, imposed by the Invesco Asia Infrastructure Fund as well as any conditions associated with an Anti Dilution Levy that may be charged at the newly indentified Target Fund level. Hence during the transition period, the Fund s investment may differ from the stipulated investment strategies. * Anti Dilution Levy is an allowance for fiscal and other charges that is added to the net asset value per unit to reflect the costs of investing application monies in underlying assets of the Target Fund. The levy is intended to be used to ensure that all investors in the Target Fund are treated equitably by allocating transaction costs to the investors whose transactions give rise to those costs. The risk management strategies and techniques employed will be at the Target Fund level whereby the fund manager of the Target Fund employs a risk management process which combines financial techniques and instruments to manage at any time the risk of various positions and their contribution to the overall risk of the Target Fund s portfolio. 78

83 About Invesco Asia Infrastructure Fund Invesco Asia Infrastructure Fund ( the Target Fund ) is a sub-fund of Invesco Funds (the SICAV ). The SICAV is incorporated as a société anonyme under the laws of the Grand-Duchy of Luxembourg and qualifies as an open-ended société d investissement à capital variable. The SICAV is authorized as an undertaking for collective investment in transferable securities under the law of 20 December, The SICAV was incorporated in Luxembourg on 31 March The Directors of the SICAV are responsible for the management and administration of the SICAV and for its overall investment policy. The Directors of the SICAV have appointed Invesco Management S.A. as management company to be responsible on a day to day basis under the supervision of the Directors, for providing administration, marketing, investment management and advice services in respect of all Invesco Funds. Invesco Management S.A. has delegated the investment management services to Invesco Hong Kong Limited ( Invesco Hong Kong ), who has discretionary investment management powers in respect of the Target Fund. Invesco Management S.A. was incorporated as a société anonyme under the laws of the Grand Duchy of Luxembourg on 19th September 1991 and its articles of incorporation are deposited with the Luxembourg Registre de Commerce et des Sociétés. Invesco Management S.A. is approved as a management company regulated by chapter 13 of the 2002 Law. As at 1 March 2010, its capital amounts to USD 3,840,000 and the Directors of the SICAV are also composing the board of directors of Invesco Management S.A. Invesco Management S.A. shall ensure compliance of the SICAV with the investment restrictions and oversee the implementation of the SICAV s strategies and investment policy. Invesco Management S.A. shall send reports to the Directors of the SICAV on a quarterly basis and inform each board member without delay of any noncompliance of the Company with the investment restrictions. The Target Fund has appointed the Bank of New York Mellon (International) Limited, Luxembourg Branch, ( BNYMI ) as the Custodian of the assets of the SICAV which will be held either directly by BNYMI or through correspondents, nominees, agents or delegates of BNYMI. The Bank of New York Mellon (International) Limited, was established on 9 August BNYMI have an office in Luxembourg City. Investment objective and policy The Target Fund aims to achieve long-term capital growth from investments in a diversified portfolio of Asian securities of issuers which are predominantly engaged in infrastructure activities. At least 70% of the total assets of the Target Fund (without taking into account ancillary liquid assets) shall be invested in equity and debt securities denominated in any convertible currency issued by Asian companies predominantly active in the infrastructure sector. Asian companies shall mean companies listed in an Asian stock market and having their registered office in an Asian country or established in other countries but carrying out their business activities predominantly in Asia or holding companies investing predominantly in equity of companies having their registered office in an Asian country. Up to 30% of the total assets of the Target Fund may be invested in aggregate in cash and cash equivalents, money market instruments, equity and equity related instruments or debt securities (including convertible debt) issued by companies or other entities not meeting the above requirement. Invesco Hong Kong is an active manager combining bottom-up and top-down multi-factor analysis, although they have a strong focus on bottom-up stock selection where they believe it can add value. The investment universe mainly includes companies in the Asia Pacific ex-japan region that are principally engaged in infrastructure-related activities, including companies that are involved in providing the foundation of basic services, facilities and institutions upon which the growth and development of a community depends. In addition, soft infrastructure that includes financial support (e.g. project financing from investment banks) and maintenance support (e.g. management of communication networks) also fall into this definition. Broadly speaking, infrastructure can be classified as but is not limited to: Economic Infrastructure to support the long-term growth of the economy. These assets have a long concession period and high barrier to entry. Examples: roads, airports and ports. Utilities to provide essential services for the community. Examples: gas/energy/electricity generation, distribution and retailing, water distribution and waste treatment. Social Infrastructure to provide public sector facilities for the society. This sector will be using the public private partnership concept in order to encourage operation efficiency. Examples: train stations, hospitals, schools and stadiums. Commercial infrastructure private sector initiatives to cater for technology advancement. Examples: satellites, cable networks. For the purpose of this Fund, the Manager will be investing in Class C of the Target Fund. As at LPD, only Accumulation Shares are available for this share class. Investors holding Accumulation Shares will not receive any distributions. Instead, the income due to them will be rolled up to enhance the value of the Accumulation Shares. Benchmark/Reference index There is currently no widely recognised Asian infrastructure specific index available in the market that is applicable for this Target Fund. MSCI AC Asia Pacific ex Japan ND index is chosen as a reference index only. 79

84 Investment restrictions The Directors of the SICAV shall, based upon the principle of spreading of risks, have power to determine the investment policy for the investments of the SICAV in respect of the Target Fund subject to the following restrictions. (A) General restrictions I. (1) The Target Fund may invest in: (a) transferable securities and money market instruments admitted to or dealt in on a Regulated Market (as defined in the prospectus governing the Target Fund); (b) recently issued transferable securities and money market instruments, provided that the terms of issue include an undertaking that application will be made for admission to official listing on a Regulated Market and such admission is secured within one year of the issue; Note: transferable securities shall mean shares and other securities equivalent to shares, bonds and other forms of securitised debt, any other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange, excluding techniques and instruments relating to transferable securities and money market instruments. (c) units of Undertaking for Collective Investment in Transferable Securities ( UCITS ) and/or other Undertaking for Collective Investment ( UCI ), whether situated in an European Union ( EU ) Member State or not, provided that: o o o o such other UCIs have been authorized under laws which provide that they are subject to supervision considered by the Luxembourg supervisory authority to be equivalent to that laid down in European Community law and that cooperation between authorities is sufficiently ensured, the level of protection for unitholders in such other UCIs is equivalent to that provided for unitholders in a UCITS, and in particular that the rules on assets segregation, borrowing, lending, and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of Directive 85/611/EEC, the business of such other UCIs is reported in half-yearly and annual reports to enable an assessment of the assets and liabilities, income and operations over the reporting period, no more than 10% of the assets of the UCITS or of the other UCIs, whose acquisition is contemplated, can, according to their constitutional documents, in aggregate be invested in units of other UCITS or other UCIs; (d) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no more that 12 months, provided that the credit institution has its registered office in an EU Member State or if the registered office of the credit institution is situated in a non-eu Member State provided that it is subject to prudential rules considered by the Luxembourg supervisory authority as equivalent to those laid down in European Community law; (e) financial derivative instruments, including equivalent cash-settled instruments, dealt in on a Regulated Market and/or financial derivative instruments dealt in over-the-counter ( OTC derivatives ), provided that: o o o o the underlying consists of instruments covered by this section (I) (1), financial indices, interest rates, foreign exchange rates or currencies, in which the Target Fund may invest according to its investment objective; the financial derivative instruments do not expose the Target Fund to risks that it could not otherwise assume; and the counterparties to OTC derivative transactions are credit institutions as defined at (d) above or other institutions subject to prudential supervision and belonging to categories approved by the Luxembourg supervisory authority; the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the SICAV s initiative; and/or (f) money market instruments other than those dealt in on a Regulated Market, if the issue or the issuer of such instruments is regulated for the purpose of protecting investors and savings, and provided that such instruments are: o o o issued or guaranteed by a central, regional or local authority or by a central bank of an EU Member State, the European Central Bank, the EU or the European Investment Bank, a non-eu Member State or, in case of a Federal State, by one of the members making up the federation, or by a public international body to which one or more EU Member States belong, or issued by an undertaking any securities of which are dealt in on Regulated Markets, or issued or guaranteed by an establishment subject to prudential supervision, in accordance with criteria defined by European Community law, or by an establishment which is subject to and complies with prudential rules considered by the Luxembourg supervisory authority to be at least as stringent as those laid down by European Community law, or 80

85 o issued by other bodies belonging to the categories approved by the Luxembourg supervisory authority provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the third indent and provided that the issuer is a company whose capital and reserves amount to at least EUR 10 million and which presents and publishes its annual accounts in accordance with Directive 78/660/EEC, is an entity which, within a group of companies which includes one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line. (2) In addition, the SICAV may invest a maximum of 10% of the net assets of the Target Fund in transferable securities and money market instruments other than those referred to under (1) above. (3) The SICAV may acquire movable and immovable property which is essential for the direct pursuit of its business. II. The Target Fund may hold ancillary liquid assets. III. (a) (i) The Target Fund will invest no more than 10% of its net assets in transferable securities and money market instruments issued by the same body (and in case of credit linked securities, both the issuer of the credit linked securities and the issuer of the underlying securities). (ii) The Target Fund may not invest more than 20% of its net assets in deposits made with the same body when the body is a credit institution referred to in I. (d) above or the custodian of the Target Fund or 10% of its net assets in other cases. (iii) The risk exposure of the Target Fund to a counterparty in an OTC derivative transaction may not exceed 10% of its net assets when the counterparty is a credit institution referred to in I. (d) above or 5% of its net assets in other cases. (b) Where the Target Fund holds investments in transferable securities and money market instruments of bodies which individually exceed 5% of the net assets of the Target Fund, the total of all such investments must not account for more than 40% of the total net assets of the Target Fund. This limitation does not apply to deposits and OTC derivative transactions made with financial institutions subject to prudential supervision. Notwithstanding the individual limits laid down in paragraph (a), the Target Fund may not combine: investments in transferable securities or money market instruments issued by a single body, deposits made with a single body, and/or exposures arising from OTC derivative transactions undertaken with a single body in excess of 20% of its net assets. (c) The limit of 10% laid down in subparagraph (a) (i) above is increased to a maximum of 35% in respect of transferable securities or money market instruments which are issued or guaranteed by an EU Member State, its local authorities, or any other state or by public international bodies of which one or more EU Member States are members. (d) The limit of 10% laid down in subparagraph (a) (i) is increased to 25% for certain bonds when they are issued by a credit institution which has its registered office in a Member State of the EU and is subject by law, to special public supervision designed to protect bondholders. In particular, sums deriving from the issue of these bonds must be invested in conformity with the law in assets which, during the whole period of validity of the bonds, are capable of covering claims attaching to the bonds and which, in case of bankruptcy of the issuer, would be used on a priority basis for the repayment of principal and payment of the accrued interest. If the Target Fund invests more than 5% of its net assets in the bonds referred to in this sub-paragraph and issued by one issuer, the total value of such investments may not exceed 80% of the net assets of the Target Fund. Notwithstanding the above provisions, the Target Fund is authorized to invest up to 100% of its net assets, in accordance with the principle of risk spreading, in transferable securities and money market instruments issued or guaranteed by a Member State of the EU, by its local authorities or agencies, or by another Member State of the Organisation for Economic Cooperation and Development ( OECD ) or by public international bodies of which one or more Member States of the EU are members, provided that the Target Fund must hold securities from at least six different issues and securities from one issue do not account for more than 30% of the net assets of the Target Fund. (e) The transferable securities and money market instruments referred to in paragraphs (c) and (d) shall not be included in the calculation of the limit of 40% in paragraph (b). The limits set out in sub-paragraphs (a), (b), (c) and (d) may not be aggregated and, accordingly, investments in transferable securities or money market instruments issued by the same body, in deposits or in OTC derivative transactions effected with the same body may not, in any event, exceed a total of 35% of the Target Fund s net assets. Companies which are part of the same group for the purposes of the establishment of consolidated accounts, as defined in accordance with Directive 83/349/EEC or in accordance with recognised international accounting rules, are regarded as a single body for the purpose of calculating the limits contained in this paragraph (III). However a limit of 20% of the net assets of the Target Fund may be applied to investments in transferable securities and money market instruments within the same group. IV. (a) Without prejudice to the limits laid down in paragraph V, the limits provided in paragraph III are raised to a maximum of 20% for investments in shares and/or bonds issued by the same body if the aim of the investment policy of the Target Fund is to replicate the composition of a certain stock or bond index which is sufficiently diversified, represents an adequate benchmark for the market to which is refers, is published in an appropriate manner and disclosed in the Target Fund s investment policy. 81

86 (b) The limits laid down in paragraph (a) is raised to 35% where this proves to be justified by exceptional market conditions, in particular on Regulated Markets where certain transferable securities or money market instruments are highly dominant. The investment up to this limit is only permitted for a single issuer. V. The SICAV may not acquire shares carrying voting rights which should enable it to exercise significant influence over the management of a body. The SICAV may acquire no more than: 10% of the non-voting shares of the same issuer; 10% of the debt securities of the same issuer; 10% of the money market instruments of the same issuer. These limits under second and third indents may be disregarded at the time of acquisition, if at that time the gross amount of debt securities or of the money market instruments or the net amount of the instruments in issue cannot be calculated. The provisions of paragraph V. shall not be applicable to transferable securities and money market instruments issued or guaranteed by a Member State of the EU or its local authorities or by any other state, or issued by public international bodies of which one or more Member States of the EU are members. These provisions are also waived as regards shares held by the Target Fund in the capital of a company incorporated in a non-member State of the EU which invests its assets mainly in the securities of bodies having their registered office in that state, where under the legislation of that state, such a holding represents the only way in which the Target Fund can invest in the securities of bodies in that state provided that the investment policy of the company from the non-member State of the EU complies with the limits laid down in paragraph III., V. and VI. (a), (b), (c) and (d). VI. (a) The Target Fund may acquire units of the UCITS and/or other UCIs referred to in paragraph I. (1) (c), provided that no more than 10% of its net assets be invested, in aggregate, in the units of UCITS or other UCI or in one single such UCITS or other UCI. (b) The underlying investments held by the UCITS or other UCIs in which the Target Fund invests do not have to be considered for the purpose of the investment restrictions set forth under III. above. (c) When the SICAV invests in the units of UCITS and/or other UCIs that are managed, directly or by delegation, by the management company or by any other company to which the management company is linked by common management or control, or by a substantial direct or indirect holding (i.e. more than 10% of the capital or voting rights), the management company or other company cannot charge subscription or redemption fees on account of its investment in the units of such UCITS and/or other UCIs. In respect of the Target Fund s investments in other UCITS and other UCIs referred to in the preceding paragraph, the total management fees (excluding any performance fee, if any) that may be charged to the Target Fund and each of the other UCITS or other UCIs concerned shall not be higher than the maximum annual management fee specified for the Target Fund. In such circumstances, the SICAV will indicate in its annual report the total management fees charged both to the Target Fund and to the other UCITS and UCIs in which the Target Fund has invested during the relevant period. (d) The SICAV may acquire no more than 25% of the units of the same UCITS or other UCI. This limit may be disregarded at the time of acquisition if at that time the gross amount of the units in issue cannot be calculated. In case of a UCITS or other UCI with multiple sub-fund(s), this restriction is applicable by reference to all units issued by the UCITS or other UCI concerned, all sub-fund(s) combined. VII. (a) The Target Fund may not borrow for the account of the Target Fund amounts in excess of 10% of the net assets of the Target Fund, any such borrowings to be effected only on a temporary basis, provided that the SICAV may acquire foreign currencies by means of back-to-back loans. (b) The SICAV may not grant loans to or act as guarantor on behalf of third parties. This restriction shall not prevent the SICAV from acquiring transferable securities, money market instruments or other financial instruments referred to in I. (1) (c), (e) and (f) which are not fully paid. (c) The SICAV may not carry out uncovered sales of transferable securities, money market instruments, units of UCITS or other UCI s or other financial instruments. (d) The Target Fund may not acquire either precious metals or certificates representing them. VIII. (a) The Target Fund need not comply with the limits laid down in the investment restrictions when exercising subscription rights attaching to transferable securities or money market instruments which form part of its assets. (b) If the limits referred to in paragraph (a) are exceeded for reasons beyond the control of the SICAV or as a result of the exercise of subscription rights, it must adopt as a priority objective for its sales transactions the remedying of that situation, taking due account of the interest of its shareholders. (c) To the extent that an issuer is a legal entity with multiple sub-funds where the assets of the sub-fund are exclusively reserved to the investors in such sub-fund and to those creditors whose claim has arisen in connection with the creation, operation or liquidation of that sub-fund, each sub-fund is to be considered as a separate issuer for the purpose of the application of the risk spreading rules set out in paragraphs III. IV and VI. The SICAV need not comply with the investment limit percentages when exercising subscription rights attaching to securities which form part of its assets. If, as a result of the exercise of subscription rights or for reasons beyond the control of the SICAV, such as subsequent fluctuation in value of the Target Fund s assets, the above investment limit percentages are infringed, priority will be given, when sales of securities are made, to correcting the situation, having due regard to the interests of shareholders. 82

87 (B) Financial derivative instruments restrictions: Financial derivative instruments may be used for investment, hedging and efficient portfolio management purposes. Securities lending and repurchase and reverse repurchase agreements referred to under (VII) below may be used for efficient portfolio management purposes. The global exposure of the Target Fund relating to financial derivative instruments may not exceed the net assets of the Target Fund. The exposure is calculated taking into account the current value of the underlying assets, the counterparty risk, foreseeable market movements and the time available to liquidate the positions. This shall also apply to the next two subparagraphs. If the SICAV invests in financial derivative instruments, the exposure to the underlying assets may not exceed in aggregate the investment limits laid down in paragraph (A) III. above. When the SICAV invests in index-based financial derivative instruments, these investments do not have to be combined to the limits laid down in paragraph (A) III. above. When a transferable security or money market instrument embeds a financial derivative instrument, the latter must be taken into account when complying with the requirements set out in the preceding subparagraph. The SICAV on behalf of the Target Fund may not: (I) deal in options on transferable securities and money market instruments unless the following limitations are observed: put options may be written provided adequate liquid assets are set aside by the Target Fund until the expiry of said put options to cover the aggregate exercise price of the transferable securities and money market instruments to be acquired by the Target Fund pursuant thereto; call options will only be written if such writing does not result in a short position; in such event the Target Fund will maintain in its portfolio the underlying transferable securities and money market instruments or other adequate instruments to cover the position until the expiry date of the relevant call options granted on behalf of the Target Fund, except that the Target Fund may dispose of said transferable securities and money market instruments or instruments in declining markets in the following circumstances: (a) the market must be sufficiently liquid to enable the SICAV to cover the short position of the Target Fund at any time; (b) the aggregate of the exercise prices payable under such uncovered options shall not exceed 15% of the net asset value of the Target Fund; No option will be purchased or sold unless it is quoted on an exchange or dealt in on a regulated market and provided, immediately after its acquisition, the aggregate of the acquisition prices of all options (in terms of premiums paid) held by the Target Fund does not exceed 15% of its net assets; (II) (III) (IV) acquire warrants if as a result thereof the aggregate of warrants and options on transferable securities and money market instruments held by the SICAV on behalf of the Target Fund exceeds 15% of the net assets of the Target Fund; deal in currency contracts, except that the SICAV may, for the purpose of hedging currency risks, have outstanding commitments in forward currency contracts or currency futures, or acquire currency options, for amounts not exceeding, respectively, the aggregate value of transferable securities and money market instruments and other assets held by the Target Fund denominated in the currency to be hedged, provided however that the Target Fund may also purchase the currency concerned through a cross transaction (entered into through the same counterparty) or enter into currency swaps, should the cost thereof be more advantageous to it. Contracts on currencies must either be quoted on an exchange or dealt in on a regulated market, except that the SICAV may enter into forward currency contracts or swap arrangements with highly rated financial institutions; deal in index options except that: (a) for the purpose of hedging the risk of its transferable securities and money market instruments portfolio, the SICAV may: (i) sell call options on stock indices, in which event the value of the underlying transferable securities and money market instruments included in the relevant stock index option shall not exceed, together with outstanding commitments in financial futures contracts entered into for the same purpose on behalf of the Target Fund, the aggregate value of the portion of the transferable securities and money market instruments portfolio of the Target Fund to be hedged, and/or (ii) acquire put options on stock indices, in which event the value of the underlying transferable securities and money market instruments included in the relevant put options shall not exceed, together with the options and futures referred to in (i) above, the amount required to protect the portion of the transferable securities and money market instruments portfolio of the Target Fund concerned to be hedged against a potential depreciation of the market; and (b) for the purpose of the efficient management of its transferable securities and money market instruments portfolio, the SICAV may acquire call options on stock indices, mainly in order to facilitate changes in the allocation of the Target Fund s assets between markets or in anticipation of, or in, a significant market sector advance, provided the value of the underlying transferable securities and money market instruments included in the relevant stock index options is covered by cash, short-dated debt securities and instruments owned by the Target Fund or transferable securities and money market instruments to be disposed of by the Target Fund at predetermined prices; 83

88 provided however that all such financial futures must either be listed on an exchange or dealt in on a regulated market and that the aggregate acquisition cost (in terms of premiums paid) of options on transferable securities and money market instruments and options on indices and other financial instruments purchased by the Target Fund for purposes other than hedging shall not exceed 15% of its net assets; (V) deal in stock index futures except that: (a) (b) for the purpose of hedging the risk of the fluctuation of the value of the transferable securities and money market instruments portfolio of the Target Fund, the SICAV may have outstanding commitments in respect of index futures sales contracts not exceeding the corresponding risk of fluctuation of the value of the corresponding portion of the Target Fund s portfolio; for the purpose of efficient portfolio management, the SICAV may enter into index futures purchase contracts, mainly in order to facilitate changes in the allocation of the Target Fund s assets between markets or in anticipation of, or in, a significant market sector advance, subject to the availability of sufficient uncommitted cash reserves, short-dated debt securities or instruments owned by the Target Fund, or transferable securities and money market instruments to be disposed of by the Target Fund at a predetermined value existing to match the underlying exposure of both such futures positions and the value of the underlying transferable securities and money market instruments included in call stock index options acquired for the same purpose; provided further that all such index futures must either be listed on an exchange or dealt in on a regulated market; (VI) enter into interest rate futures contracts, deal in options on interest rates, or enter into interest rate swap transactions, except that:: (a) (b) for the purpose of hedging the risk of the portfolio of the Target Fund, the SICAV may sell interest rate futures, or write call options or purchase put options on interest rates, or enter into interest rate swaps, for amounts not exceeding the corresponding risk of fluctuation of the corresponding portion of the Target Fund s portfolio. Such contracts or options must be denominated in the currencies in which the assets of the Target Fund are denominated, or in currencies which are likely to fluctuate in a similar manner, and they must be listed on an exchange or dealt in on a regulated market, provided however that interest rate swap transactions may be entered into by private agreement with highly rated financial institutions; for the purpose of efficient portfolio management, the SICAV may enter into interest rate futures purchase contracts, or acquire call options on interest rate futures, mainly in order to facilitate changes in the allocation of the assets of the Target Fund between shorter or longer term markets in anticipation of, or in, a significant market sector advance, or to give a longer term exposure to short-term investments, subject to the availability of sufficient uncommitted cash reserves, short-dated debt securities or instruments, or transferable securities and money market instruments to be disposed of at a predetermined value existing to match the underlying exposure of both such futures positions and the value of the underlying transferable securities and money market instruments included in call options on interest rate futures acquired for the same purpose and for the Target Fund and that the aggregate acquisition cost (in terms of premiums paid) of options on transferable securities and money market instruments and options on interest rate futures and other financial instruments purchased by the Target Fund for purposes other than hedging shall not exceed 15% of its net assets; (VII) lend portfolio investments or enter into repurchase/reverse repurchase transactions other than to the extent allowed by, and within the limits set forth in, the 2002 Law, as well as present or future related Luxembourg laws, implementing regulations, circulars or CSSF positions and in particular the provisions of (i) article 11 of the Grand-Ducal regulation of 8 February 2008 relating to certain definitions of the 2002 Law and of (ii) CSSF Circular 08/356 relating to the rules applicable to undertakings for collective investments when they use certain techniques and instruments relating to transferable securities and money market instruments (as these may be amended or replaced from time to time). The SICAV, for the Target Fund, may, for the purpose of generating additional capital or income or for reducing costs or risks (A) enter, either as purchaser or seller, into optional as well as non optional repurchase and reverse repurchase transactions and (B) engage in securities lending transactions. The SICAV may, on behalf of the Target Fund, enter into such transactions for up to 100% of the relevant Fund s net assets. As the case may be, cash collateral received by the SICAV for the Target Fund in relation to any of these transactions may be reinvested in a manner consistent with the investment objectives of the Target Fund in (a) shares or units issued by money market undertakings for collective investment calculating a daily net asset value and being assigned a rating of AAA or its equivalent, (b) short term bank deposits, (c) money market instruments as defined in the above referred Grand-Ducal regulation, (d) short-term bonds issued or guaranteed by an EU member state, Switzerland, Canada, Japan or the United States or by their local authorities or by supranational institutions and undertakings with EU, regional or world-wide scope, (e) bonds issued or guaranteed by first class issuers offering an adequate liquidity, and (f) reverse repurchase agreement transactions according to the provisions described under section I.C.a) of the above referred CSSF Circular. Such reinvestment will be taken into account for the calculation of the Target Fund s global exposure, in particular if it creates a leverage effect. Should the SICAV on behalf of the Target Fund engage in securities lending, all incremental income accruing from securities lent will be shared between the parties as agreed to from time to time and disclosed in the SICAV s report and accounts each year. The SICAV will seek to appoint counterparties who have a minimum credit rating of at least A2 by Standard & Poor s Rating Agency and P2 by Moody s Rating Agency or be of a similar credit status. To the extent that any such stock lending transactions are with any appointed investment managers or investment adviser of the SICAV or any Connected Person (as defined in the prospectus governing the Target Fund) of either of them, such transactions will be at arm s length and will be executed as if effected in normal commercial terms. In particular, cash collateral invested in money market funds in this manner may be subject to a pro rata portion of such money market fund s 84

89 expenses, including management fees. Investors should note that such expenses would be in addition to the management fees charged by the SICAV. As security for any securities lending activities, the Target Fund will obtain collateral in the manner set out below, the market value of which will at all times be at least 100% of the market value of the securities lent. (A) Collateral must be obtained for each repurchase/reverse repurchase contract or securities lending transaction. Collateral must take the form of: (i) liquid assets, liquid assets include not only cash and short term bank certificates, but also money market instruments such as defined within Directive 2007/16/EC of 19 March 2007 implementing Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provision relating to certain UCITS as regards the clarification of certain definitions. A letter of credit or a guarantee at first-demand given by a first class credit institution not affiliated to the counterparty is considered as equivalent to liquid assets; (ii) bonds issued or guaranteed by a Member State of the OECD or by their local public authorities or by supranational institutions and undertakings with EU, regional or worldwide scope; (iii) shares or units issued by money market UCIs calculating a daily net asset value and being assigned a rating of AAA or its equivalent; (iv) shares or units issued by UCITS investing mainly in bonds/shares mentioned in (v) and (vi) below; (v) bonds issued or guaranteed by first class issuers offering an adequate liquidity, or (vi) shares admitted to or dealt in on a regulated market of a Member State of the European Union or on a stock exchange of a Member State of the OECD, on the condition that these shares are included in a main index. (B) Until expiry of the repurchase/reverse repurchase contract or lending arrangement, collateral obtained under such contracts or arrangements must:: (i) be marked to market daily; (ii) be equal or exceed in value at all times the value of the amount invested or securities on loan; (iii) be transferred into the name of the SICAV, the Custodian of the SICAV or an agent of the Custodian; (iv) be immediately available to the Target Fund without recourse to the counterparty in the event of default by the counterparty; The requirements at (iii) above is not applicable in the event that the Target Fund uses collateral management services of a recognised international clearing institution and relevant institutions which are generally recognised as specialists in this type of transaction. (VIII) except with the written consent of the Directors of the SICAV, purchase, sell, borrow or lend portfolio investments from or to, or otherwise execute transactions with, any appointed investment manager or investment adviser of the SICAV, or any Connected Person (as defined in the prospectus governing the Target Fund) of either of them. Such transactions (if any) will be disclosed in the SICAV s annual report and will be executed at arm s length and executed as if effected on normal commercial terms. Use of Credit Default Swaps and applicable restrictions The SICAV may use credit default swaps. A credit default swap is a bilateral financial contract in which one counterpart (the protection buyer) pays a periodic fee in return for a contingent payment by the protection seller following a credit event of a reference issuer. The protection buyer must either sell particular obligations issued by the reference issuer at their par value (or some other designated reference or strike price) when a credit event occurs or receive a cash settlement based on the difference between the market price and such reference or strike price. A credit event is commonly defined as bankruptcy, insolvency, receivership, material adverse restructuring of debt, or failure to meet payment obligations when due. The International Swaps and Derivatives Association ( ISDA ) has produced standardized documentation for these transactions under the umbrella of its ISDA Master Agreement. The SICAV may use credit default swaps in order to hedge the specific credit risk of some of the issuers in its portfolios by buying protection. In addition, the SICAV may, provided it is in the exclusive interests of its shareholders, buy protection under credit default swaps without holding the underlying assets provided that the aggregate premiums paid together with the present value of the aggregate premiums still payable in connection with credit default swaps previously purchased and the aggregate premiums paid relating to the purchase of options on transferable securities, money market instruments or on financial instruments for a purpose other than hedging, may not, at any time, exceed 15% of the net assets of the Target Fund. Provided it is in the exclusive interests of its shareholders, the SICAV may also sell protection under credit default swaps in order to acquire a specific credit exposure. In addition, the aggregate commitments in connection with such credit default swaps sold together with the amount of the commitments relating to the purchase and sale of futures and option contracts on any kind of financial instruments and the commitments relating to the sale of call and put options on transferable securities and money market instruments may not, at any time, exceed the value of the net assets of the Target Fund. 85

90 The SICAV will only enter into credit default swap transactions with highly rated financial institutions specialized in this type of transaction and only in accordance with the standard terms laid down by the ISDA. In addition, the use of credit default swaps must comply with the investment objectives and policies and risk profile of the Target Fund. The total commitments arising from the use of credit default swaps together with the total commitments arising from the use of other derivative instruments may not, at any time, exceed the value of the net assets of the Target Fund. The SICAV will ensure that, at any time, it has the necessary assets in order to pay redemption proceeds resulting from redemption requests and also meet its obligations resulting from credit default swaps and other techniques and instruments. Additional Restrictions: (1) The SICAV may enter into OTC option transactions with highly rated financial institutions participating in these types of transactions if such transactions are more advantageous to the Target Fund or if quoted options having the required features are not available; (2) The SICAV may only place deposits of cash (which, for the avoidance of doubt, shall include monies deposited on call) with a bank whose assets less contra accounts exceed one hundred million U.S. Dollars (US$100,000,000), or with a bank which is a wholly owned subsidiary of a bank whose balance sheet total is not less than the said amount; (3) The cash assets of the Target Fund may not at any time be deposited with Invesco Management S.A., the global distributors of the Target Fund, Invesco Hong Kong or any connected entity except such entities who have the status of a licensed bank in their country of incorporation; (4) In relation to the acquisition of money market instruments, no money market instrument may be acquired unless it is issued by a government or state which is a member of the OECD or a bank with which cash of the SICAV may be deposited pursuant to paragraph (2) hereof; (5) During such time as the SICAV is authorized as a mutual fund corporation by the Securities and Futures Commission in Hong Kong ( SFC ), the SICAV shall not: (a) invest more than 10% of the total value of the net assets of the Target Fund in partly paid or nil paid securities, any such investment to be approved by the custodian if the security cannot be paid up at the option of the SICAV within one year of its purchase; (b) purchase or otherwise acquire any investment in which the liability of the holder is unlimited; (c) make deposits with any bank or financial institution if the total value of money market instruments issued by or pursuant to the guarantee of such bank or institution held by the Target Fund, together with such cash deposits with such bank or institution, exceeds 25% of the value of the net assets of the Target Fund [or 10% of such value where the bank or financial institution is a Connected Person (as defined in the prospectus governing the Target Fund)]; (d) in the case of the Reserve Funds, which are regarded by the SFC as Money Market Funds permit the average portfolio maturity to exceed ninety (90) days. (6) Although the SICAV is now authorized by the Luxembourg supervisory authority as a UCITS under the 2002 Law and the prospectus governing the Target Fund has been updated to incorporate new investment restrictions provided thereunder, for so long as the SICAV and the Target Fund remain authorized by the SFC in Hong Kong and unless otherwise approved by the SFC, Invesco Management S.A. and Invesco Hong Kong confirms its intention to operate the Target Fund authorized in Hong Kong in accordance with the 2002 Law, except that the Target Fund may only enter into financial derivative. Instruments for efficient portfolio management or hedging purpose, and to comply with any other requirements or conditions imposed by the SFC from time to time in respect of the Target Fund unless otherwise agreed with the SFC. Unless otherwise agreed with the SFC, not less than 1 month s prior notice will be given to existing Hong Kong investors in the relevant SFC authorised Fund of any change to the aforementioned policy and the relevant offering document will be updated accordingly. Risk management procedures The SICAV will employ a risk-management process which enables it to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of each fund. The SICAV will employ, if applicable, a process for accurate and independent assessment of the value of any OTC derivative instruments. More specifically in relation to the Target Fund calculating its global exposure to financial derivatives instruments using a Value-at- Risk (VaR) methodology, a risk management team at Invesco UK Limited, separate from the appointed portfolio managers, is undertaking risk management controls on behalf of Invesco Management S.A. The VaR calculation is based on the historical risk factor data of the most recent 250 days over a holding period of 20 days at 99% confidence level. Daily back-testing is carried out to access the robustness of the VaR model. Furthermore, a monthly stress-testing is also run as a necessary complement to the use of VaR models. This helps to identify and highlight potential risks of the portfolios. For Funds not using a VaR methodology to monitor market risk, the SICAV will use the commitment approach to monitor such risk. The overall exposure of all financial derivative instruments pursuant to this approach cannot exceed 100% of the NAV of the Fund. A daily counterparty risk computation is run for any OTC derivative positions. The counterparty risk consists of the current market value of the OTC derivative and its potential exposure which depends on the notional amount multiplied by a factor depending on the maturity of the instrument and the type of risk (credit, interest rate, equity) and the type of counterparty as defined by the Commission de Surveillance de Secteur Financier. Issuer concentration risk and coverage rule computations are also run by the SICAV. 86

91 The following limits will be applied: Risk exposure to a counterparty to an OTC derivative is limited to a maximum of 5% of net asset value of the Target Fund. This limit might be raised to 10% of net asset value of the Target Fund if the counterparty is a credit institution. The overall combined exposure to a single issuer/ counterparty is limited to a maximum of 20% of net asset value of the Target Fund under the conditions detailed in paragraph A. III hereinabove. This limit will not only include OTC derivative positions but also the following instruments: a. Investments in transferable securities or money market instruments; b. Deposits. Primary responsibility for the monitoring and control of the risk management reports produced by the risk management team will be with Invesco Management S.A. The Board of Directors of the SICAV will receive a quarterly report relating to risk management. 87

92 4.2 CIMB-Principal ASEAN Equity Fund Investment objective The CIMB-Principal ASEAN Equity Fund aims to provide investors with capital growth over the medium to long term through investments into ASEAN assets inclusive of equities, ETFs and derivatives. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark is FTSE/ASEAN 40 Index. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund will invest between 65% to 98% of the Fund s NAV in the ASEAN equity markets (both inclusive). The Fund may also invest up to 30% of its NAV in the CIMB FTSE/ASEAN 40 or other ETFs that invest predominantly in the ASEAN countries. The manager of the CIMB FTSE/ASEAN 40 is CIMB-Principal Asset Management (S) Pte. Ltd., a wholly owned subsidiary of CIMB-Principal Asset Management Berhad. The CIMB FTSE/ASEAN 40 is an ETF with an objective of providing investment results that, before expenses, closely correspond to the performance of the FTSE/ASEAN 40 Index. The FTSE/ASEAN 40 Index is a subset of the FTSE/ASEAN Index and is a tradable index consisting of the 40 largest companies by full market value that qualify for inclusion into the FTSE/ASEAN Index. As at LPD, the FTSE/ASEAN Index comprises of 147 stocks from Malaysia, Singapore, Thailand, Indonesia and the Philippines which spread across sectors/industries covering oil and gas, basic materials, industrials, consumer goods, consumer services, telecommunications, utilities, technology and financials industry group. The FTSE/ASEAN Index is a subset of the FTSE All-World Index. The CIMB FTSE/ASEAN 40 or other ETFs that invest predominantly in the ASEAN countries are used by the Fund for the following purposes: a) to act as an economical and efficient instrument to gain access into the ASEAN markets; b) to act as the foundation to meet the Fund s objective. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, the Manager analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. The Manager will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, CIMB-Principal may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as defensive stocks and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. 88

93 4.3 CIMB-Principal Asian Equity Fund Investment objective The investment objective is to seek capital growth by investing primarily in equities and equity related instruments in the Asia ex- Japan (excluding Malaysia). Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the MSCI All Country Asia ex Japan Index. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund aims to achieve capital growth primarily in equity securities of entities which are incorporated, or have their area of primary activity in the Asia ex-japan (excluding Malaysia). The Fund may also invest in equity securities, which are listed on recognised exchanges in the capital markets of the Asia ex-japan. Under normal market conditions, the Fund will invest primarily in common stocks. However, since the investment objective is more likely to be achieved through an investment policy that is flexible and adaptable, the Fund may seek investment opportunities in other types of transferable securities, including fixed income securities. The Fund may also invest in instruments issued by companies incorporated in the Asia ex-japan but listed or traded on exchanges outside the Asia ex-japan. The Asia ex-japan includes but not limited to the following countries: Hong Kong, India, Indonesia, Korea, the People s Republic of China, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan and Thailand. The investments of the Fund in the foreign markets are in accordance with the SC s Guidelines on Unit Trust Funds. They are further subject to the limits approved by Bank Negara Malaysia. The asset allocation strategy for this Fund is as follows: Between 70% to 99.5% (both inclusive) of equity securities in the Asia ex-japan (excluding Malaysia) and other permissible investments; and at least 0.5% in liquid assets. The asset allocation will be reviewed periodically depending on the region s economic and stock market outlook. The Manager has appointed CIMB-Principal Asset Management (S) Pte Ltd a company incorporated in Singapore, as the Sub- Manager of the CIMB-Principal Asian Equity Fund with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the CIMB-Principal Asian Equity Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. CIMB-Principal (S) will actively decide on the asset allocation within the Asia ex Japan (excluding Malaysia), based on the outlook of the different geographical markets as well as domestic interest rate trends. The Sub-Manager s investment policy and strategy will be based on its global outlook on the economy and financial markets generally, as well as relative market valuation. CIMB-Principal (S) reserves the right to change the asset allocation and/or the investment strategy (including, but not limited to the investment in foreign mutual funds), provided that the changes are at all times in accordance with the objectives of the Fund. As part of its risk management strategy, CIMB-Principal (S) may vary the Fund s asset allocation in line with its outlook. In addition, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal (S) employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, CIMB-Principal (S) may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purpose such as hedging. 89

94 4.4 CIMB-Principal Climate Change Equity Fund Investment objective The CIMB-Principal Climate Change Equity Fund aims to achieve capital appreciation primarily through investment in a portfolio of global equities securities related to climate change. Any material changes to the objective of the Fund would require Unit holders approval. Benchmark The Fund adheres to the reference index of the Target Fund. The Target Fund does not have any specific benchmark and uses the MSCI World Index as a reference index. Information on the index can be obtained from Investment policy and principal investment strategy The Fund is a Feeder Fund that invests at least 95% of the Fund s NAV in the DWS Invest Climate Change (a Luxembourgdomiciled fund) which invests primarily in a portfolio of global equities securities that are primarily active in business areas suited to restricting or reducing climate change and its effects: CO2-efficient or energy-efficient technologies, renewable or alternative energies, climate protection, disaster prevention or disaster management and energy-efficient mobility. Information on DWS Invest Climate Change is detailed below. The asset allocation strategy for this Fund is as follows: at least 95% of the Fund s NAV will be invested in the DWS Invest Climate Change up to 5% of the Fund s NAV will be invested in liquid assets for liquidity purposes. The investment strategy adheres to the SC Guidelines pertaining to Feeder Funds. As such, any changes to these guidelines would tantamount to a change in this investment strategy. If, in the opinion of the Manager, the DWS Invest Climate Change no longer meets the Fund s investment objective, and / or when acting in the best interests of Unit holders, CIMB-Principal may replace the DWS Invest Climate Change with another collective investment scheme that is consistent with the objective of this Fund, subject to the approval of the Unit holders. The switch to another collective investment scheme may be performed on a staggered basis to facilitate a smooth transition. This is applicable should the DWS Invest Climate Change impose any conditions in relation to redemption of units or if the manager of the newly identified Target Fund exercises its discretion to apply an Anti Dilution Levy* in relation to applications for units. Thus, the time frame required to perform the transition will depend on such conditions, if any, imposed by the DWS Invest Climate Change as well as any conditions associated with an Anti Dilution Levy that may be charged at the newly indentified Target Fund level. Hence during the transition period, the Fund s investment may differ from the stipulated investment strategies. * Anti Dilution Levy is an allowance for fiscal and other charges that is added to the net asset value per unit to reflect the costs of investing application monies in underlying assets of the Target Fund. The levy is intended to be used to ensure that all investors in the Target Fund are treated equitably by allocating transaction costs to the investors whose transactions give rise to those costs. The risk management strategies and techniques employed will be at the Target Fund level whereby the fund manager of the Target Fund employs a risk management process which combines financial techniques and instruments to manage at any time the risk of various positions and their contribution to the overall risk of the Target Fund s portfolio. 90

95 About DWS Invest Climate Change DWS Invest (the "Company") is an investment company with variable capital incorporated under the laws of Luxembourg on the basis of the Law on Undertakings for Collective Investment and the Law on Trading Companies of August 10, 1915 as a société d investissement à capital variable ( SICAV ). The Company was established on the initiative of DWS Investment S.A., a management company under Luxembourg law, which, among other functions, acts as the main distributor for the Company. The Company operates separate funds, each of which is represented by one or more classes of shares. The funds are distinguished by their specific investment policy or any other specific features. The Company constitutes a single legal entity, but the assets of each fund shall be invested for the exclusive benefit of the corresponding fund and the assets of a specific fund are solely accountable for the liabilities, commitments and obligations of the fund. The DWS Invest Climate Change ( the Target Fund ) is a fund under the Company which was launched in 14 May DWS Invest Climate Change is organised under Part 1 of the Luxembourg law of 20 December 2002 and conforms to the requirements of the European directives on Undertakings for Collective Investment in Transferable Securities ( UCITS ). DWS Investment S.A. is a Luxembourg entity appointed as the management company for DWS Invest Fund family range, which provides the overall management of the Company including investment management, administration and distribution of the funds. DWS Investment S.A. is regulated by the Commission de Surveillance du Secteur Financier. DWS is the largest mutual fund company in Germany (around 25% market share) including its most important subsidiaries DWS Investment S.A. in Luxembourg, Deutsche Vermögensbildungsgesellschaft mbh ( DVG ) in Frankfurt and the affiliate DWS Investments. Together with DWS Scudder in the US and the recent market entry in Asia under the DWS brand, DWS has the clear aspiration to leverage their success and brand globally. DWS Investment S.A. has entered into an investment management agreement with DWS Finanz-Service to appoint it as the investment manager of DWS Invest Climate Change. Until December 14, 2009 the investment manager of the fund is DWS Finanz- Service GmbH. Effective as of December 15, 2009 the investment manager of the fund will be replaced by DWS Investment GmbH. These functions include the day-to-day management of the assets of the Target Fund on a discretionary basis and purchase and sale of securities, and otherwise manage the portfolio of the Target Fund on a day-to-day basis subject to the supervision and monitoring of DWS Investment S.A. and the overall control and ultimate responsibility of the board of directors of DWS Invest. DWS Finanz-Service is regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ( BaFin ) and is a wholly-owned subsidiary of DWS Investment GmbH. DWS Investment GmbH was founded in 1956 by Deutsche Bank and other German private banks and is owned today by DWS Holding & Service GmbH. DWS Holding & Service GmbH belongs 100% to DB Financial Services Holding GmbH, which is a wholly owned subsidiary of Deutsche Bank, Frankfurt. DWS Investment S.A. and DWS Finanz-Service GmbH are member companies of Deutsche Bank Group. The Custodian of DWS Invest Climate Change is State Street Bank Luxembourg S.A. It is a public limited company under Luxembourg law and conducts banking activities. Investment objective The objective of the investment policy of DWS Invest Climate Change is to achieve as high an appreciation as possible of capital invested in euros. Benchmark/ Reference Index MSCI World Index is chosen as a reference index only. Investment policy and principal investment strategy At least 70% of the Target Fund s assets (after deduction of liquid assets) are invested in equities, other equity securities and uncertificated equity instruments of foreign and domestic companies that are primarily active in business areas suited to restricting or reducing climate change and its effects: CO 2-efficient or energy-efficient technologies, renewable or alternative energies, climate protection, disaster prevention or disaster management and energy-efficient mobility. Within the area of clean technologies, the focus of investment is on equities of companies whose current or future products contribute towards the reduction of the greenhouse effect and CO 2 emissions. The focus of investment also includes equities of companies with CO 2 efficient operations (e.g., by way of recycling, efficient processes or protecting resources). In the renewable and alternative energies sector, the focus of investment is on companies with operations in the areas of solar energy, bioenergy, wind energy, fuel cells, hydropower, geothermal energy and geoenergy. Within the area of disaster prevention, the focus of investment is on companies that provide products and/or services for monitoring and disaster prevention in coastal areas and other areas that are vulnerable to disasters. Within the area of disaster management, the focus of investment is on companies that provide emergency relief services or support rebuilding efforts. The area of energy-efficient mobility includes companies whose products help to make the flow of goods and people more efficient. Possible measures include influencing the means of transport, reducing fuel consumption and optimizing transport streams. Up to 30% of the Target Fund s assets (after deduction of liquid assets) may be invested in equities, other equity securities and uncertificated equity instruments that do not fulfil the requirements of the preceding paragraph, as well as in all other permissible assets specified below. Investments a) The Target Fund may invest in securities and money market instruments that are listed or traded on a regulated market. 91

96 b) The Target Fund may invest in securities and money market instruments that are traded on another market in a member state of the European Union that operates regularly and is recognized, regulated and open to the public. c) The Target Fund may invest in securities and money market instruments that are admitted for official trading on an exchange in a state that is not a member state of the European Union or traded on another regulated market in that state that operates regularly and is recognized and open to the public. d) The Target Fund may invest in securities and money market instruments that are new issues, provided that: the terms of issue include the obligation to apply for admission for trading on an exchange or on another regulated market that operates regularly and is recognized and open to the public, and such admission is procured no later than one year after the issue. e) The Target Fund may invest in shares of Undertakings for Collective Investment in Transferable Securities within the meaning of Council Directive 85/611/EEC and/or other collective investment undertakings within the meaning of the first and second indent of Article 1 (2), should they be situated in a member state of the European Union or not, provided that such other collective investment undertakings have been authorized under laws that provide that they are subject to supervision considered by the Commission de Surveillance du Secteur Financier to be equivalent to that laid down in Community law, and that cooperation between authorities is sufficiently ensured; the level of protection for shareholders in the other collective investment undertakings is equivalent to that provided for shareholders in an Undertaking for Collective Investment in Transferable Securities and in particular that the rules on Target Fund asset segregation, borrowing, lending, and short sales of transferable securities and money market instruments are equivalent to the requirements of Council Directive 85/611/EEC; the business of the other collective investment undertakings is reported in semi-annual and annual reports to enable an assessment to be made of the assets and liabilities, income and transactions over the reporting period; no more than 10% of the assets of the Undertaking for Collective Investment in Transferable Securities or of the other collective investment undertaking whose acquisition is being contemplated can, according to its contract terms or corporate by-laws, be invested in aggregate in shares of other Undertakings for Collective Investment in Transferable Securities or other collective investment undertakings. f) The Target Fund may invest in deposits with financial institutions that are repayable on demand or have the right to be withdrawn, and mature within twelve months or less, provided that the financial institution has its registered office in a member state of the European Union or, if the registered office of the financial institution is situated in a state that is not a member state of the European Union, provided that it is subject to prudential rules considered by the Commission de Surveillance du Secteur Financier as equivalent to those laid down in Community law. g) The Target Fund may invest in financial derivative instruments ( derivatives ), including equivalent cash-settled instruments, that are traded on a market referred to in (a), (b) and (c) and/or financial derivative instruments that are not traded on an exchange ( OTC derivatives ), provided that: the underlying instruments are instruments covered by this paragraph or financial indices, interest rates, foreign exchange rates or currencies; the counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the Commission de Surveillance du Secteur Financier; and the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the Target Fund s initiative. h) The Target Fund may invest in money market instruments not traded on a regulated market that are usually traded on the money market, are liquid and have a value that can be accurately determined at any time, if the issue or issuer of such instruments is itself regulated for the purpose of protecting investors and savings, and provided that these instruments are issued or guaranteed by a central, regional or local authority or central bank of a member state of the European Union, the European Central Bank, the European Union or the European Investment Bank, a state that is not a member state of the European Union or, in the case of a federal state, by one of the members making up the federation, or by a public international body of which one or more member states of the European Union are members; or issued by an undertaking whose securities are traded on the regulated markets referred to in the preceding subparagraphs (a), (b) or (c); or issued or guaranteed by an establishment that is subject to prudential supervision in accordance with the criteria defined by Community law, or by an establishment that is subject to and complies with prudential rules considered by the Commission de Surveillance du Secteur Financier to be at least as stringent as those laid down by Community law; or issued by other bodies belonging to the categories approved by the Commission de Surveillance du Secteur Financier, provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the third preceding indent and provided that the issuer is a company whose capital and reserves amount to at least EUR 10 million and which presents and publishes its annual financial statements in accordance with the Fourth Council Directive 78/660/EEC, is an entity that, within a group of companies that includes one or more exchange-listed 92

97 companies, is dedicated to the financing of the group or is an entity that is dedicated to the financing of securitization vehicles that benefit from credit lines to assure liquidity. i) Notwithstanding the principle of risk spreading, the Target Fund may invest up to 100% of its assets in securities and money market instruments stemming from different issues that are issued or guaranteed by a member state of the European Union, its local authorities, a state that is not a member state of the European Union, or by a public international body of which one or more member states of the European Union are members, provided that the Target Fund holds securities that originated from at least six different issues and the securities stemming from any one issue do not exceed 30% of the assets of the Target Fund. j) The Target Fund may not invest in precious metals or precious-metal certificates; if the investment policy of the Target Fund contains a special reference to this clause, this restriction does not apply for 1:1 certificates whose underlying are single commodities/precious metals and that meet the requirements of securities as determined in Article 2 of EC-Directive 2007/16/EC. Investment limits a) No more than 10% of the Target Fund s net assets may be invested in securities or money market instruments from any one issuer. b) No more than 20% of the Target Fund s net assets may be invested in deposits made with any one institution. c) The risk exposure to a counterparty in OTC derivative transactions may not exceed 10% of the Target Fund s net assets if the counterparty is a credit institution as defined in Investment restriction (f) above. In all other cases, the exposure limit is 5% of the Target Fund s net assets. d) No more than 40% of the Target Fund s net assets may be invested in securities and money market instruments of issuers in which over 5% of the Target Fund s net assets are invested. This limitation does not apply to deposits and OTC derivative transactions conducted with financial institutions that are subject to prudential supervision. Notwithstanding the individual upper limits specified in (a), (b) and (c) above, the Target Fund may not invest more than 20% of its net assets in a combination of investments in securities or money market instruments issued by, and/or deposits made with, and/or exposures arising from OTC derivative transactions undertaken with a single institution. e) The limit of 10% set in (a) rises to 35%, and the limit set in (d) does not apply to securities and money market instruments issued or guaranteed by a member state of the European Union or its local authorities; or a state that is not a member state of the European Union; or public international bodies of which one or more member states of the European Union are members. f) The limit set in (a) rises from 10% to 25%, and the limit set in (d) does not apply in the case of bonds that fulfil the following conditions: they are issued by a credit institution that has its registered office in a member state of the European Union and which is legally subject to special public supervision intended to protect the holders of such bonds; and sums deriving from the issue of such bonds are invested in conformity with the law in assets that, during the whole period of validity of the bonds, are capable of covering claims attaching to the bonds; and such assets, in the event of default of the issuer, would be used on a priority basis for the repayment of the principal and payment of the accrued interest. If the Target Fund invests more than 5% of its assets in bonds of this type issued by any one issuer, the total value of these investments may not exceed 80% of the value of the net assets of the Target Fund. g) The limits provided for in paragraphs (a), (b), (c), (d), (e) and (f) may not be combined, and thus investments in transferable securities or money market instruments issued by any one institution or in deposits made with this institution or in this institution s derivative instruments shall under no circumstances exceed in total 35% of the Target Fund s net assets. The Target Fund may cumulatively invest up to 20% of its assets in securities and money market instruments of any one group of companies. Companies that are included in the same group for the purposes of consolidated financial statements, as defined in accordance with the Seventh Council Directive 83/349/EEC or in accordance with recognized international accounting rules, shall be regarded as a single issuer for the purpose of calculating the limits contained in this section. h) The Target Fund may invest no more than 10% of its net assets in securities and money market instruments other than those specified in the Investments section. i) The Target Fund may invest no more than 10% of its net assets in shares of other Undertakings for Collective Investment in Transferable Securities and/or other collective investment undertakings as defined in Investments (e). In the case of investments in shares of another Undertaking for Collective Investment in Transferable Securities and/or other collective investment undertakings, the investments held by that Undertaking for Collective Investment in Transferable Securities and/or by other collective investment undertakings are not taken into consideration for the purposes of the limits laid down in (a), (b), (c), (d), (e) and (f). 93

98 j) If admission to one of the markets defined under Investments (a), (b) or (c) is not obtained within the one-year deadline, new issues shall be considered unlisted securities and money market instruments and counted towards the investment limit stated there. k) The Company may not purchase equities with voting rights that would enable the Company to exert significant influence on the management policies of the relevant issuer. The Company may acquire no more than: 10% of the non-voting shares of any one issuer; 10% of the bonds of any one issuer; 25% of the shares of any one fund; 10% of the money market instruments of any one issuer. The limits laid down in the second, third and fourth indents may be disregarded at the time of acquisition if at that time the gross amount of the bonds or of the money market instruments, or the net amount of outstanding fund shares, cannot be calculated. l) The investment limits specified in (k) shall not be applied to: securities and money market instruments issued or guaranteed by a member state of the European Union or its local authorities; securities and money market instruments issued or guaranteed by a state that is not a member state of the European Union; securities and money market instruments issued by public international bodies of which one or more member states of the European Union are members; shares held by the Target Fund in the capital of a company incorporated in a state that is not a member state of the European Union, investing its assets mainly in the securities of issuing bodies having their registered offices in that state, where under the legislation of that state such a holding represents the only way in which the Target Fund can invest in the securities of issuers from that state. This derogation, however, shall apply only if in its investment policy the company from the state that is not a member state of the European Union complies with the limits specified in (a), (b), (c), (d), (e), (f) and (g), (i) and (k). Where these limits are exceeded, Article 49 of the Law of December 20, 2002, on Undertakings for Collective Investment shall apply; shares held by one or more investment companies in the capital of subsidiary companies that only conduct certain management, advisory or marketing activities with regard to the repurchase of shares at the request of shareholders in the country where the subsidiary is located, and do so exclusively on behalf of the investment company or investment companies. m) Notwithstanding the limits specified in (k) and (l), the maximum limits specified in (a), (b), (c), (d), (e) and (f) for investments in shares and/or debt securities of any one issuer are 20% when the objective of the investment policy is to replicate the composition of a certain index. This is subject to the condition that: the composition of the index is sufficiently diversified, the index represents an adequate benchmark for the market to which it refers, the index is published in an appropriate manner. The maximum limit is 35% where that proves to be justified by exceptional market conditions, in particular in regulated markets where certain transferable securities or money market instruments are highly dominant. An investment up to this limit is only permitted for one single issuer. n) The Target Fund s global exposure relating to derivative instruments must not exceed the total net value of its portfolio. The exposure is calculated taking into account the current value of the underlying instruments, the counterparty risk, future market movements and the time available to liquidate the positions. The Target Fund may invest in derivatives as part of its investment strategy and within the limits specified in (g), provided that the global exposure to the underlying instruments does not exceed on aggregate the investment limits specified in (a), (b), (c), (d), (e) and (f). If the Target Fund invests in indexbased derivatives, these investments are not taken into consideration with reference to the investment limits specified in (a), (b), (c), (d), (e) and (f). When a security or money market instrument embeds a derivative, the latter must be taken into consideration when complying with the requirements of the investment limits. o) In addition, the Target Fund may invest up to 49% of its assets in liquid assets. In particular exceptional cases it is permitted to temporarily have more than 49% invested in liquid assets, if and to the extent that this appears to be justified with regard to the interests of shareholders. Exceptions to the investment limits a) The Target Fund need not comply with the investment limits when exercising subscription rights attaching to securities or money market instruments that form part of its assets. b) While ensuring observance of the principle of risk spreading, the Target Fund may derogate from the specified investment limits for a period of six months following the date of its authorization. Credit restrictions No borrowing may be undertaken by the Target Fund. The Target Fund may, however, acquire foreign currency by means of a back-to-back loan. By way of derogation from the preceding paragraph, the Target Fund may borrow: 94

99 up to 10% of the Target Fund s net assets, provided that such borrowing is on a temporary basis; up to the equivalent of 10% of the Target Fund s assets, provided that the borrowing is to make possible the acquisition of immovable property essential for the direct pursuit of its business; in this case the borrowing and that referred to in the preceding subparagraph may not in any case in total exceed 15% of the Target Fund s net assets. The Target Fund may not grant loans, nor may it act as guarantor on behalf of third parties. This shall not prevent the Target Fund from acquiring securities, money market instruments or other financial instruments that are not yet fully paid in. Short sales The Target Fund may not engage in short sales of securities, money market instruments or other financial instruments as specified in Investments (e), (g) and (h). Encumbrance A Target Fund s assets may only be pledged as collateral, transferred, assigned or otherwise encumbered to the extent that such transactions are required by an exchange or regulated market or imposed by contractual or other terms and conditions. Securities lending and repurchase agreements a) In a standardized securities lending system, up to 50% of the Target Fund s securities may be lent for a maximum of 30 days. The securities lending system must be organized by a recognized clearing organization or a top-rated financial institution specializing in such transactions. The securities lending may comprise more than 50% of the securities held by the Target Fund or have a term of more than 30 days, provided that the Target Fund has the right to terminate the securities loan at any time and demand the return of the lent securities. When lending securities, the Target Fund must generally receive collateral in the amount of at least the total value of the lent securities at the time the contract was entered into. This collateral may consist of liquid assets or securities issued or guaranteed by OECD member countries, their local authorities, or international organizations. These liquid assets or securities must be restricted in favour of the Target Fund for the duration of the securities loan. Securities lending may also be conducted synthetically ( synthetic securities lending ). In a synthetic securities loan, a security contained in the Target Fund is sold to a counterparty at the current market price. This sale is, however, subject to the condition that the Target Fund simultaneously receives from the counterparty a securitized unleveraged option giving the Target Fund the right to demand delivery at a later date of securities of the same kind, quality and quantity as the sold securities. The price of the option (the option price ) is equal to the current market price received from the sale of the securities less (a) the securities lending fee, (b) the income (e.g. dividends, interest payments, corporate actions) from the securities that can be demanded back upon exercise of the option and (c) the exercise price associated with the option. The option will be exercised at the exercise price during the term of the option. If the security underlying the synthetic securities loan is to be sold during the term of the option in order to implement the investment strategy, such a sale may also be executed by selling the option at the then prevailing market price less the exercise price. b) The Target Fund may from time to time buy or sell securities in repurchase agreements. The counterparty must be a top-rated financial institution specializing in such transactions. During the period of the securities repurchase agreement, the Target Fund may not sell the securities involved. The scope of securities repurchase transactions will always be kept at a level that allows the Target Fund to meet its redemption obligations at any time. Other permissible assets Derivatives The Target Fund may use derivatives. Their use need not be limited to hedging the Target Fund s assets; they may also be part of the investment strategy. Trading in derivatives is conducted within the confines of the investment limits and provides for the efficient management of the Target Fund s assets, while also regulating investment maturities and risks. Under no circumstance will these transactions cause the Target Fund concerned to diverge from its investment objectives as specified in the prospectus. In this context, the following risks in particular may be associated with derivatives: a) the time-limited rights acquired may expire worthless or suffer a fall in value; b) the risk of loss cannot be predicted and may exceed margins; c) transactions intended to eliminate or reduce risks may not be possible or may only be possible at market prices resulting in a loss; d) the risk of loss increases if the obligations or claims arising from these transactions are denominated in foreign currency. Options Within the scope of the investment policy of the Target Fund, warrants for securities may be acquired. Warrants involve specific risks that result from the so-called leverage effect. This leverage effect is produced by the employment of less capital when acquiring the warrants than when acquiring the underlying assets directly. The greater this leverage is, the more extremely the price 95

100 of the warrant will change when there is a change in the price of the underlying assets (compared to the subscription price specified in the terms of the warrant). Accordingly, the opportunities and risks in warrants tend to increase as leverage increases. Swaps Swaps are exchange contracts that are used, for example, to control exposure to interest rates and currencies. Their use allows the maturity pattern of the Target Fund s interest-bearing assets to be reduced or extended, thus providing control over exposure to interest rate fluctuations. In addition, currency risks can be altered using swaps if assets are exchanged into another currency. The Target Fund may enter into swap transactions on interest rates, currencies and equities, as well as on combinations of these transactions within the scope of the investment principles. If no market price is available for any of the above swap transactions, the price is determined at the time the transaction is entered into, as well as on each date at which the net asset value per share is calculated, by deriving it from the market price of the underlying instruments using accepted valuation models. Transactions and price determinations are documented. In addition to the swap transactions already mentioned, the Target Fund may also enter into credit default swaps. A credit default swap is a bilateral financial agreement under which a counterparty (the protection buyer) pays a periodic premium against an undertaking by the protection seller to pay a certain amount if the reference issuer becomes subject to a credit default risk. The protection buyer acquires the right to sell a particular bond issued by the reference issuer at its face value (or at another reference value or strike price) if a credit default event arises. A credit default event generally includes bankruptcy, insolvency, reorganization under court supervision, significant detrimental rescheduling of debt, or inability to fulfill payment obligations falling due. The International Swaps and Derivatives Association ( ISDA ) has formulated standardized documentation for such transactions in the ISDA Master Agreement. Credit default swaps are valued according to standard market practice at the current value of future cash flows, where the cash flows are adjusted to take into account the risk of default. Interest rate swaps are valued at their market value, which is determined based on the interest-rate curve for each swap. Other swaps are valued at an appropriate market value, determined in good faith in accordance with recognized valuation methods that have been specified by the DWS Investment S.A. and approved by the Target Fund s auditor. The use of credit default swaps may entail greater risks than direct investment in debt securities. The market for credit default swaps can at times be less liquid than the markets for debt securities. Nevertheless, the Target Fund seeks to limit investments to credit default swaps that are liquid. The Target Fund will therefore always strive to attain a position in which it will be able to liquidate its credit default swap exposure in order to accommodate redemption requests. In respect of credit default swaps in which the Target Fund is the protection seller, the Target Fund becomes subject to the risks attributable to an event of default relating to the reference issuer. Furthermore, in respect of credit default swaps in which the Target Fund is the protection buyer, the Target Fund becomes subject to the risk of default by the counterparty. When using credit default swap transactions to reduce the risk of default, the Target Fund will only enter into credit default swaps with top-rated financial institutions specializing in such transactions, and it will adhere to the standardized provisions specified by the ISDA. Risk management The Target Fund shall include a risk management process that enables the DWS Investment S.A. to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of the portfolio. It shall include a process for accurate and independent assessment of the value of OTC derivative instruments. DWS Investment S.A. monitors the Target Fund as specified in circular no. 05/176, dated April 5, 2005, of the Commission de Surveillance du Secteur Financier ( CSSF ) in accordance with the complex approach requirements and guarantees for the Target Fund that the overall risk associated with derivative financial instruments does not exceed 100% of the net assets of that Target Fund and that the risk of the Target Fund therefore does not persistently exceed 200% of the net assets of that Target Fund. The overall risk of the Target Fund must not be increased by more than 10% through temporary borrowing, so that the overall risk does not exceed 210% of the net asset value per share under any circumstances. An overall commitment thus increased of up to 210% can significantly increase both the opportunities and the risks associated with an investment (see in particular the risk warnings in the Derivatives section). 96

101 4.5 CIMB-Principal Emerging Asia Fund Investment objective To grow the value of Unit holders investments over the long term in an equity fund that invests in undervalued and/or undiscovered companies. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of this Fund is the MSCI All Country Asia ex Japan Index. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund will invest between 70% to 98% of its NAV in equities (both inclusive) and between 2% to 30% in liquid assets and any other assets, depending on the market condition. In line with its objective, the investment policy and strategy of the Fund is to invest primarily in shares of companies that are deemed to be undervalued as measured by the Price/Earning Ratio, Price/Book, Dividend Yield or any other appropriate method as may be determined by the Manager. The Manager has appointed CIMB-Principal Asset Management (S) Pte Ltd ( CIMB-Principal (S) ), a company incorporated in Singapore, as the Sub-Manager of the CIMB-Principal Emerging Asia Fund with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the CIMB-Principal Emerging Asia Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. CIMB-Principal (S) will adopt an active investment strategy. After determining the investment universe, they will screen through the universe of stocks and select the stocks that meet a combination of quantitative and qualitative criteria. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal (S) employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, CIMB-Principal (S) may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purpose such as hedging. 97

102 4.6 CIMB-Principal Global Asset Spectra Fund Investment objective The CIMB-Principal Global Asset Spectra Fund aims to provide capital growth over the medium to long-term through investments in a diversified portfolio of local and/or foreign collective investment schemes (including exchange-traded funds). Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark MSCI World Index (25%) + JP Morgan Global Government Bond Index (25%) + S&P/Citigroup BMI Property Index (25%) + S&P GSCI TM Total Return Index (25%). The combination of indexes for the above benchmark reflects the Fund s investment in a broad range of asset classes, i.e. equities, fixed income securities, property-related securities and commodity-related securities. Information on MSCI World Index can be obtained from Information on JP Morgan Global Government Bond Index can be obtained from Bloomberg L.P. Information on S&P/Citigroup BMI Property Index can be obtained from Information on S&P GSCITM Total Return Index can be obtained from Alternatively, information on the benchmark is available on Investment policy and principal investment strategy At least 95% of the NAV of the Fund will be invested in a portfolio of reputable domestic and global collective investment schemes that are registered with recognised exchanges and/or authorities, including but not limited to, the following countries: Malaysia, Ireland, Luxembourg, Australia and Hong Kong (hereinafter referred to as the Target Funds ). The asset allocation strategy for this Fund is as follows: at least 95% of the Fund s NAV will be invested in Target Funds; up to 5% of the Fund s NAV will be invested in liquid assets for liquidity purposes. The Fund will be invested in a minimum of five (5) Target Funds at all times, with a maximum exposure of 30% of the Funds NAV in one (1) Target Fund. The investment strategy adheres to the SC Guidelines pertaining to Fund-of-Funds. As such, any changes to the guidelines would tantamount to a change in this investment strategy. The following asset classes have been identified for the Fund to invest in: Equities; Fixed income securities; Property-related securities; and Commodity-related securities. The Manager has appointed CIMB-Principal Asset Management (S) Pte Ltd ( CIMB-Principal (S) ), a company incorporated in Singapore, as the Sub-Manager of the CIMB-Principal Global Asset Spectra Fund with the approval of the SC. CIMB-Principal (S) will be responsible for investing in managing the CIMB-Principal Global Asset Spectra Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. The Fund s allocation to each of the aforesaid asset classes will range from 0% to 40% of the Fund s NAV, depending on the Sub- Manager s outlook for each asset class. For each asset class, the Sub-Manager may also invest in more than one (1) Target Fund. The Fund s allocation in the asset classes/target Funds would depend on the fund manager s view and the outlook for each asset class/geographical region/country. The Sub-Manager will actively make the asset allocation decision and invest in the appropriate Target Funds to build a welldiversified portfolio of funds. The Fund will be exposed to the above broad range of asset classes which are expected to have low correlation with each other. The Sub-Manager will use a combination of top-down and bottom-up analysis to arrive at an investment decision. The investment team, consisting of both the fixed income and equity teams, meets every month to set out the broad macro / market outlook for the coming months. Portfolio construction is undertaken within a structured risk controlled framework to ensure diversification across countries, asset classes and credits. The Sub-Manager will actively select and combine the Target Funds to produce an optimal diversified portfolio. Factors taken into consideration include the risk and correlation of each asset class, the overall risk-return ratio of the combined portfolio and the current and expected outlook for each asset class / region. Solid management and sound investment performance of the Target Funds are factors that the Sub-Manager also considers. In evaluating the suitability of Target Funds for investment, the Sub-Manager will conduct a review of the track record of the manager and the fund, investment objective of the Target Fund, investment policy and strategies, fund performance and other factors deemed important by the Sub-Manager. Under normal market conditions, the Fund will invest primarily in a portfolio of equities and fixed income Target Funds where the investments are in companies/issuers incorporated or have their principal business activities in developed countries and/or Malaysia. The Fund may also invest in global Target Funds with investments in property-related and commodity-related securities. 98

103 The Sub-Manager will invest in the Target Funds in a manner which will be in the best interest of the Unit holders. The switch to another Target Fund may be performed on a staggered basis to facilitate a smooth transaction. Hence during the transition period, the Fund s investment may differ from the stipulated investment strategies. As part of its risk management strategy, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal (S) employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, CIMB-Principal (S) may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. 99

104 4.7 CIMB-Principal Global Balanced Fund Investment objective The investment objective is to seek capital appreciation and current income over the long term by investing in a diversified portfolio of equity and fixed income securities worldwide (excluding Malaysia). Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark As this Fund may invest up to 60% of its NAV in global equities and at least 40% of its NAV in global fixed income securities, the benchmark of the Fund is a composite comprising 55% MSCI All Country World Index + 45% JP Morgan Global Government Bond Index. Information on the MSCI All Country World Index can be obtained from whilst the JP Morgan Global Government Bond Index can be obtained from Investment policy and principal investment strategy The Fund aims to achieve its investment objective of capital appreciation and current income by investing in equity and debt obligations of companies and governments worldwide (excluding Malaysia). The investment policy and strategy of the Fund will be to maintain a balanced portfolio between equities and fixed income investments in the ratio of 60:40. The investments by the Fund in equity securities shall not exceed 60% of the NAV of the Fund and investments in fixed income securities and liquid assets shall not be less than 40% of the NAV of the Fund. The Fund s portfolio will normally be invested in equity or equity-linked securities, including debt or preferred stock convertible or exchangeable into equity securities, selected primarily on the basis of their capital growth potential (excluding Malaysia). The Fund will seek income by investing in fixed or floating rate securities and debt obligations of government, government-related and corporate issuers in countries around the world (excluding Malaysia). For this Fund, the debt securities investment must satisfy a minimum rating requirement of at least A3 or P2 by RAM or equivalent rating by MARC, Moody s, S&P or Fitch. The asset allocation strategy for this Fund is as follows: up to 60% of the NAV of the Fund in equities securities; at least 40% of the NAV of the Fund in fixed income securities and liquid assets; and at least 0.5% of the NAV of the Fund must be maintained in liquid assets. The asset allocation strategy will be reviewed periodically depending on the global outlook on the economy and financial markets generally. If the 60% equity limit is breached, the Manager will seek to adjust this within a time frame approved by the Trustee. The investments of the Fund in the foreign markets are in accordance with the SC Guidelines. They are further subject to the limits approved by the BNM. The Manager has appointed Templeton Asset Management Ltd ( TAML ), a company incorporated in Singapore, as the Sub- Manager of the CIMB-Principal Global Balanced Fund with the approval of the SC. TAML will be responsible for investing and managing the CIMB-Principal Global Balanced Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. TAML will actively decide on the asset allocation based on the outlook of the different geographical markets as well as domestic interest rate trends. The Sub-Manager s investment policy and strategy will be based on its global outlook on the economy and financial markets generally, as well as relative market valuation. TAML reserves the right to change the asset allocation and/or the investment strategy (including, but not limited to the investment in foreign mutual funds), provided that the changes are at all times in accordance with the objectives of the Fund. As part of its risk management strategy, TAML may vary the Fund s asset allocation in line with its outlook. In addition, the Fund is constructed and managed within pre-determined guidelines. TAML employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, TAML may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purpose such as hedging. 100

105 4.8 CIMB-Principal Global Growth Fund Investment objective The investment objective is to seek long term capital growth by investing in global equities and debt obligations of companies and governments worldwide (excluding Malaysia). Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The benchmark of the Fund is the MSCI All Country World Index. Information on the benchmark can be obtained from Investment policy and principal investment strategy The Fund will invest principally in global securities, between 70% to 99.5% of its NAV (both inclusive). Under normal market conditions, the investment policy and strategy of the Fund is to invest primarily in common stocks. However, since the investment objective is more likely to be achieved through an investment policy that is flexible and adaptable, it may seek investment opportunities in other types of securities, such as preferred stock, securities convertible into common stock and other fixed income securities. The asset allocation strategy for this Fund is as follows: between 70% to 99.5% in global securities (both inclusive); and at least 0.5% in liquid assets. The asset allocation will be reviewed periodically depending on the global outlook on the economy and financial markets generally. In a rising market, this 99.5% limit may be breached. However, the Manager will seek to adjust this within a time frame approved by the Trustee. The Fund will seek to achieve long-term capital growth, through a policy of investing in equity and debt obligations of companies and governments worldwide (excluding Malaysia). The investments of the Fund in the foreign markets are in accordance to the SC Guidelines. They are further subject to the limits approved by BNM. The Manager has appointed Templeton Asset Management Ltd ( TAML ), a company incorporated in Singapore, as the Sub- Manager of the CIMB-Principal Global Growth Fund with the approval of the SC. TAML will be responsible for investing and managing the CIMB-Principal Global Growth Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. TAML will actively decide on the asset allocation based on the outlook of the different geographical markets as well as domestic interest rate trends. The Sub-Manager s investment policy and strategy will be based on its global outlook on the economy and financial markets generally, as well as relative market valuation. TAML reserves the right to change the asset allocation and/or the investment strategy (including, but not limited to the investment in foreign mutual funds), provided that the changes are at all times in accordance with the objectives of the Fund. As part of its risk management strategy, TAML may vary the Fund s asset allocation in line with its outlook. In addition, the Fund is constructed and managed within pre-determined guidelines. TAML employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, TAML may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purpose such as hedging. 101

106 4.9 CIMB-Principal Global Titans Fund Investment objective The objective of CIMB-Principal Global Titans Fund is to grow the value of Unit holders investments over the medium to long term in an equity fund that invests in the global titans market of the US, Europe and Japan with an exposure to Malaysian equities market to balance any short term volatilities. Any material changes to the objective of the Fund would require Unit holders approval. Benchmark The benchmark of this Fund is a composite comprising 42% S&P % MSCI Europe + 12% MSCI Japan + 10% CIMB Bank 1-Month Fixed Deposit Rate. The weightage to the 3 global titans market is reflective of their relative world market capitalization with the balance 25% exposure to Malaysia. Information on the S&P 500 can be obtained from Information on the MSCI Indices can be obtained from Information on the CIMB Bank 1-Month Fixed Deposit Rate can be obtained from Investment policy and principal investment strategy The Fund will invest at least 50% of its NAV in three (3) collective investment schemes, subject to a maximum of 98% of its NAV. The Fund may invest in Malaysian securities but only up to 50% of its NAV. The Fund seeks to give investors a broad exposure to three (3) global regions which attract over 90% of global investment monies in equities. This will be achieved by investing in three (3) PGI funds which invest into these three (3) markets. The Fund will at all times be invested in the three (3) PGI funds, each covering separate geographic regions thus providing diversification and allowing a greater spread of risk. The allocation between the PGI funds is done through a combination of macroeconomic data, liquidity trends and the outlook to overweight or underweight a particular PGI fund. By investing the proper asset allocation between these three (3) PGI funds, the Fund seeks to exploit the low correlation between the Asian markets and the rest of the world. The asset allocation strategy for the Fund is as follows: PGI funds (US Equity Fund, Japanese Equity Fund and European Equity Fund): between 50% - 98% of the Fund s NAV; and investments in Malaysian securities: up to 50% of the Fund s NAV. PGI Funds is a UCITS ( Undertaking for Collective Investment in Transferable Securities ) Umbrella Unit Trust established under the laws of Ireland. The Manager of the funds is Principal Global Investors (Ireland) Limited which was incorporated in Ireland on 22 March 1999 and is ultimately a wholly-owned subsidiary of Principal Financial Group Inc (PFG). Principal Global Investors, LLC is the investment advisers of the funds. PFG, through its subsidiaries, is a shareholder of CIMB-Principal. The three (3) PGI funds are: The PGI Funds US Equity Fund seeks to provide capital growth over the medium to long-term predominantly through investment in equity securities of companies domiciled or with their core business in the United States. The PGI Funds European Equity Fund aims to provide capital growth over the medium to long-term predominantly through investment in equity securities of companies domiciled or with their core business in Europe (including Eastern Europe). The PGI Funds Japanese Equity Fund aims to provide capital growth over the medium to long-term predominantly through investment in equity securities of companies domiciled or with their core business in Japan. The choice for these PGI funds is due to their ability to provide the following: 1) Exposure to investment opportunities in developed markets such as the United States, Europe and Japan. 2) Investments into funds investing in the Global Titans markets when combined with equity funds solely designated for investments into the Malaysian stock market, will assist in reducing volatility of the investors overall equity investments. This is a result of these funds low correlation with the FTSE Bursa Malaysia Top 100 Index and is consistent with portfolio diversification. 3) The funds possess good track records. Generally, these funds managed to outperform their respective benchmarks. 4) Ride on the expertise of our shareholder, PFG. The Manager has appointed CIMB-Principal Asset Management (S) Pte Ltd ( CIMB-Principal (S) ), a company incorporated in Singapore, as the Sub-Manager of the Fund with the approval of the SC. CIMB-Principal (S) will be responsible for investing and managing the Fund in accordance with the investment objective and within the investment restrictions. All costs of this appointment will be borne by the Manager to ensure no additional fee is levied on the Unit holders of this Fund. CIMB-Principal (S) will actively decide on the asset allocation between the US, Europe and Japan, based on the outlook of the different geographical markets as well as domestic interest rate trends. Based on the Sub-Manager s global outlook on the economy and financial markets generally, as well as relative market valuation, the Sub-Manager may also invest in Malaysian securities in order to balance any short- term volatilities. The Sub-Manager may opt to invest in Malaysian securities either directly or via collective investment schemes. 102

107 CIMB-Principal (S) reserves the right to change the asset allocation and/or the investment strategy (including, but not limited to the investment in foreign mutual funds), provided that the changes are at all times in accordance with the objectives of the Fund. As part of its risk management strategy, CIMB-Principal (S) may vary the Fund s asset allocation in the collective investment schemes between 50%-98% in line with its outlook. In addition, the Fund is constructed and managed within pre-determined guidelines. CIMB-Principal (S) employs an active asset allocation strategy depending upon the equity market expectations. Where appropriate, the Sub-Manager will also employ an active trading strategy in managing the Fund. In response to adverse conditions and as part of its risk management strategy, CIMB-Principal (S) may from time to time reduce its proportion of higher risk assets, such as equities and increase its asset allocation to lower risk assets, such as debentures and liquid assets, to safeguard the investment portfolio of the Fund provided that such investments are within the investment objective of the Fund. When deemed necessary, the Sub-Manager may also utilize derivative instruments, subject to the SC Guidelines for purpose such as hedging. 103

108 4.10 CIMB-Principal Greater China Equity Fund Investment objective The CIMB-Principal Greater China Equity Fund aims to achieve medium to long term capital growth primarily through investment in a portfolio of equity securities with exposure to the Greater China region consisting of the People s Republic of China, Hong Kong and Taiwan. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The Fund adheres to the benchmark of the Target Fund. The benchmark of the Target Fund is the MSCI Golden Dragon Index. Information on the benchmark is available at and Bloomberg L.P. Investment policy and principal investment strategy The Fund is a Feeder Fund that invests at least 95% of the Fund s NAV in the Schroder ISF Greater China, a fund of the Schroder International Selection Fund, an open-ended investment company registered in Luxembourg. Information on Schroder ISF Greater China is detailed below. The asset allocation strategy for this Fund is as follows: at least 95% of the Fund s NAV will be invested in the Schroder ISF Greater China; and up to 5% of the Fund s NAV will be invested in liquid assets for liquidity purposes. The investment strategy adheres to the SC Guidelines pertaining to Feeder Funds. As such, any changes to these guidelines would tantamount to a change in this investment strategy. This Target Fund invests primarily in the People s Republic of China, Hong Kong and Taiwan equity markets; hence, investment risk is expected to be higher than a globally diversified fund. Nevertheless, the Target Fund s highly disciplined portfolio constructions used will serve to ensure that investment risk levels are appropriate. In addition, the Fund may be hedged against the US Dollar should the circumstances warrant it to hedge against adverse currency movements. If, in the opinion of the Manager, the Schroder ISF Greater China no longer meets the Fund s investment objective, and/or when acting in the best interests of Unit holders, CIMB-Principal may replace the Schroder ISF Greater China with another Target Fund that is consistent with the objective of this Fund, subject to the approval of the Unit holders. The switch to another Target Fund may be performed on a staggered basis to facilitate a smooth transition. This is applicable should the Schroder ISF Greater China impose any conditions in relation to redemption of units or if the manager of the newly identified Target Fund exercises its discretion to apply an Anti Dilution Levy* in relation to applications for units. Thus, the time frame required to perform the transition will depend on such conditions, if any, imposed by the Schroder ISF Greater China as well as any conditions associated with an Anti Dilution Levy that may be charged at the newly identified Target Fund level. Hence during the transition period, the Fund s investment may differ from the stipulated investment strategies. * Anti Dilution Levy is an allowance for fiscal and other charges that is added to the net asset value per unit to reflect the costs of investing application monies in underlying assets of the Target Fund. The levy is intended to be used to ensure that all investors in the Target Fund are treated equitably by allocating transaction costs to the investors whose transactions give rise to those costs. The risk management strategies and techniques employed will be at the Target Fund level whereby the fund manager of the Target Fund employs a risk management process which combines financial techniques and instruments to manage at any time the risk of various positions and their contribution to the overall risk of the Target Fund s portfolio. 104

109 About Schroder ISF Greater China Schroder International Selection Fund (the "Company") is an open-ended investment company registered with the Registre de Commerce et des Societes, and is organised as a société anonyme under the laws of the Grand Duchy of Luxembourg and qualifies as a Societe d Investissement a Capital Variable ( SICAV ). The Company operates separate funds, each of which is represented by one or more classes of shares. The funds are distinguished by their specific investment policy or any other specific features. The Company constitutes a single legal entity, but the assets of each fund shall be invested for the exclusive benefit of the shareholders of the corresponding fund and the assets of a specific fund are solely accountable for the liabilities, commitments and obligations of that fund. The Schroder International Selection Fund Greater China ( Schroder ISF Greater China or the Target Fund ) is a fund under the Company which was launched in 28 March The legislation governing the establishment and operation of the Target Fund is Luxembourg legislation. The Directors of the Company have appointed Schroder Investment Management (Luxembourg) S.A. as its management company to perform administration functions. Schroder Investment Management (Luxembourg) S.A. is regulated by the Commission de Surveillance du Secteur Financier ( CSSF ). Schroder Investment Management (Luxembourg) S.A. was incorporated as a "Société Anonyme" in Luxembourg on 23 August 1991 and has an issued and fully paid up share capital of EUR 12,650,000. Schroder Investment Management (Luxembourg) S.A. has been authorized as a management company under Chapter 13 of the Law of Collective Investment Undertakings dated 20 December 2002 and, as such, provides collective portfolio management services to undertakings for collective investment. Schroder Investment Management (Luxembourg) S.A.is also acting as a management company for three other Luxembourg domiciled Société d Investissement à Capital Variable: Schroder Special Situations Fund and Schroder Alternative Solutions and Strategic Solutions. The investment manager of the Target Fund is Schroder Investment Management (Hong Kong) Limited ( SIMHK ). SIMHK is regulated by the Securities and Futures Commission of Hong Kong. SIMHK has been managing collective investment schemes and discretionary funds in Hong Kong SAR for more than 30 years. J.P. Morgan Bank Luxembourg S.A. has been appointed as Custodian of the Company. The base currency is in US Dollars. Investment objective To provide capital growth primarily through investment in equity securities of the People s Republic of China, Hong Kong SAR and Taiwan companies. Benchmark The benchmark is the MSCI Golden Dragon Index. Investment strategies SIMHK is a fundamental bottom up manager of Greater China equities with a growth bias. SIMHK emphasises stocks that are able to grow shareholders value in the long-term. Their philosophy in the management of Greater China portfolios is based on the following beliefs: returns over the long-term reflect economic and corporate fundamentals; internal fundamental analysis of companies and markets is paramount in identifying attractive investment opportunities; and companies with consistent above average growth produce superior stock market returns. SIMHK believes in their potential to generate insight through in-house research and to translate that insight into superior investment performance through skilful, highly disciplined portfolio construction, while always maintaining the appropriate level of investment risk. Investment restrictions The investment restrictions imposed by Luxembourg law must be complied with by the fund. Those restrictions in paragraph 1. (D) below are applicable to the company as a whole. If you need more information, kindly visit their website at 1. Investment in transferable securities and liquid assets A) The Company will invest in: (i) transferable securities and money market instruments admitted to an official listing on a stock exchange in an eligible state; and/or (ii) transferable securities and money market instruments dealt in on another regulated market; and/or (iii) recently issued transferable securities and money market instruments, provided that the terms of issue include an undertaking that application will be made for admission to official listing on an Eligible Market and such admission is achieved within one year of the issue. (iv) Units of undertakings for collective investment in transferable securities ( UCITS ) and/or of other undertakings for collective investment within the meaning of the first and second indent of Article 1(2) of Council Directive 85/611/EEC of 20 December 1985, as amended ( other UCIs ), whether situated in an European Union (EU) member state or not, provided that:: 105

110 such other UCIs have been authorized under the laws which provide that they are subject to supervision considered by CSSF to be equivalent to that laid down in EU Law, and that cooperation between authorities is sufficiently ensured, the level of protection for Unit holders in such other UCIs is equivalent to that provided for Unit holders in a UCITS, and in particular that the rules on assets segregation, borrowing, lending, and uncovered sales of transferable securities and money market instruments are equivalent to the requirements of Directive 85/661/EEC, the business of such other UCIs is reported in half-yearly and annual reports to enable an assessment of the assets and liabilities, income and operations over the reporting period, no more than 10% of the assets of the UCITS or of the other UCIs, whose acquisition is contemplated, can, according to their constitutional documents, in aggregate be invested in units of other UCITS or other UCIs; and/or (v) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no more that 12 months, provided that the credit institution has its registered office in a country which is EU member state, or if the registered office of the credit institution is situated in a non-eu member state, provided that it is subject to prudential rules considered by CSSF as equivalent to those laid down in EU law; and/or (vi) financial derivative instruments, including equivalent cash-settled instruments, dealt in on a regulated market referred to in subparagraphs (i) and (ii) above, and/or financial derivative instruments dealt in over-the-counter ( OTC derivatives ), provided that: the underlying consists of securities covered by this section 1. A), financial indices, interest rates, foreign exchange rates or currencies, in which the funds may invest according to their investment objective; the counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the Luxembourg supervisory authority; the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the company s initiative. and/or (vii) money market instruments other than those dealt in on a regulated market, if the issue or the issuer of such instruments are themselves regulated for the purpose of protecting investors and savings, and provided that such instruments are: issued or guaranteed by a central, regional or local authority or by a central bank of an EU member state, the European Central Bank, the European Union or the European Investment Bank, a non-eu member state or, in case of a federal state, by one of the members making up the federation, or by a public international body to which one or more EU member states belong, or issued by an undertaking any securities of which are dealt in on regulated markets, or issued or guaranteed by an establishment subject to prudential supervisions in accordance with criteria defined in EU law, issued by other bodies belonging to categories approved by the Luxembourg supervisory authority provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the third indent and provided that the issuer is a company whose capital and reserves amount to at least ten million euro (10,000,000 euro) and which presents and publishes its annual accounts in accordance with the fourth Directive 78/660/EEC, is an entity which, within a group of companies which includes one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line. In addition, the Company may invest a maximum of 10% of the net asset value of any fund in transferable securities and money market instruments other than those referred to under (i) to (vii) above. B) Each fund may hold ancillary liquid assets. Liquid assets used to back-up financial derivative exposure are not considered as ancillary liquid assets. C) (i) Each fund may invest no more than 10% of its net asset value in transferable securities or money market instruments issued by the same issuing body (and in the case of structured financial instruments embedding derivative instruments, both the issuer of the structured financial instruments and the issuer of the underlying securities). Each fund may not invest more than 20% of its net assets in deposits made with the same body. The risk exposure to a counterparty of a fund in an OTC derivative transaction may not exceed 10% of its net assets when the counterparty is a credit institution referred to in 1. A) (v) above or 5% of its net assets in other cases. (ii) Furthermore, where any fund holds investments in transferable securities and money market instruments of any issuing body which individually exceed 5% of the net asset value of such Fund, the total value of all such investments must not account for more than 40% of the net asset value of such fund. This limitation does not apply to deposits and OTC derivative transactions made with financial institutions subject to prudential supervision. Notwithstanding the individual limits laid down in paragraph C) (i), a fund may not combine: investments in transferable securities or money market instruments issued by, deposits made with, and/or exposures arising from OTC derivative transactions undertaken with a single body in excess of 20% of its net assets. (iii) The limit of 10% laid down in paragraph C) (i) above shall be 35% in respect of transferable securities or money market instruments which are issued or guaranteed by an EU member state, its local authorities or by an eligible state or by public international bodies of which one or more EU member states are members. 106

111 (iv) The limit of 10% laid down in paragraph C) (i) above shall be 25% in respect of debt securities which are issued by highly rated credit institutions having their registered office in an EU member state and which are subject by law to a special public supervision for the purpose of protecting the holders of such debt securities, provided that the amount resulting from the issue of such debt securities are invested, pursuant to applicable provisions of the law, in assets which are sufficient to cover the liabilities arising from such debt securities during the whole period of validity thereof and which are assigned to the preferential repayment of capital and accrued interest in the case of a default by such issuer. If a fund invests more than 5% of its assets in the debt securities referred to in the sub-paragraph above and issued by one issuer, the total value of such investments may not exceed 80% of the value of the assets of such fund. (iv) The transferable securities and money market instruments referred to in paragraphs C) (iii) and C) (iv) are not included in the calculation of the limit of 40% referred to in paragraph C) (ii). The limits set out in paragraphs C) (i), C) (ii), C) (iii) and C) (iv) above may not be aggregated and, accordingly, the value of investments in transferable securities and money market instruments issued by the same body, in deposits or derivative instruments made with this body, effected in accordance with paragraphs C) (i), C) (ii), C) (iii) and C) (iv) may not, in any event, exceed a total of 35% of each fund s net asset value. Companies which are included in the same group for the purposes of consolidated accounts, as defined in accordance with Directive 83/349/EEC or in accordance with recognised international accounting rules, are regarded as a single body for the purpose of calculating the limits contained in this paragraph C). A fund may cumulatively invest up to 20% of its net assets in transferable securities and money market instruments within the same group. (vi) Without prejudice to the limits laid down in paragraph D), the limits laid down in this paragraph C) shall be 20% for investments in shares and/or bonds issued by the same body when the aim of a fund s investment policy is to replicate the composition of a certain stock or bond index which is recognised by the Luxembourg supervisory authority, provided: the composition of the index is sufficiently diversified, the index represents an adequate benchmark for the market to which it refers, it is published in an appropriate manner. The limit laid down in the subparagraph above is raised to 35% where it proves to be justified by exceptional market conditions in particular in regulated markets where certain transferable securities or money market instruments are highly dominant provided that investment up to 35% is only permitted for a single issuer. (vii) Where any fund has invested in accordance with the principle of risk spreading in transferable securities or money market instruments issued or guaranteed by an EU member state, by its local authorities or by an eligible state or by public international bodies of which one or more EU member states are members, the company may invest 100% of the net asset value of any fund in such securities provided that such Fund must hold securities from at least six different issues and the value of securities from any one issue must not account for more than 30% of the net asset value of the fund. Subject to having due regard to the principle of risk spreading, a fund need not comply with the limits set out in this paragraph C) for a period of 6 months following the date of its authorisation and launch. D) (i) The Company may not normally acquire shares carrying voting rights which would enable the Company to exercise significant influence over the management of the issuing body. (ii) The Company may acquire no more than (a) 10% of the non-voting shares of any single issuing body, (b) 10% of the value of debt securities of any single issuing body, (c) 10% of the money market instruments of the same issuing body, and/or (d) 25% of the units of the same collective investment undertaking. However, the limits laid down in (b), (c) and (d) above may be disregarded at the time of acquisition if at that time the gross amount of the debt securities or of the money market instruments or the net amount of securities in issue cannot be calculated. The limits set out in paragraph D) (i) and (ii) above shall not apply to: (i) transferable securities and money market instruments issued or guaranteed by an EU member state or its local authorities; (ii) transferable securities and money market instruments issued or guaranteed by any other eligible state; (iii) transferable securities and money market instruments issued by public international bodies of which one or more EU member states are members; or (iv) shares held in the capital of a company incorporated in a non-eu member state which invests its assets mainly in the securities of issuing bodies having their registered office in that state where, under the legislation of that state, such holding represents the only way in which such fund s assets may invest in the securities of the issuing bodies of that state, provided, however, that such company in its investment policy complies with the limits laid down in Articles 43, 46 and 48 (1) and (2) of the Law of 20 December E) No fund may invest more than 10% of its net assets in units of UCITS or other UCIs. In addition, the following limits shall apply: (i) When a fund invests in the units of other UCITS and/or other UCIs linked to the Company by common management or control, or by a substantial direct or indirect holding of more than 10% of the capital or the voting rights, or managed by a 107

112 management company linked to the investment manager, no subscription or redemption fees may be charged to the company on account of its investment in the units of such other UCITS and/or UCIs. In respect of a fund s investments in UCITS and other UCIs linked to the company as described in the preceding paragraph, there shall be no management fee charged to that portion of the assets of any relevant Fund. The Company will indicate in its annual report the total management fees charged both to the relevant fund and to the UCITS and other UCIs in which such fund has invested during the relevant period. (ii) The Company may acquire no more than 25% of the units of the same UCITS and/or other UCI. This limit may be disregarded at the time of acquisition if at that time the gross amount of the units in issue cannot be calculated. In case of a UCITS or other UCI with multiple sub-funds, this restriction is applicable by reference to all units issued by the UCITS/UCI concerned, all sub-funds combined. (iii) The underlying investments held by the UCITS or other UCIs in which the funds invest do not have to be considered for the purpose of the investment restrictions set forth under 1. C) above. 2. Investment in other assets A) The Company will neither make investments in precious metals or certificates representing these nor make investments into commodities. In addition, the Company will not enter into financial derivative instruments on precious metals or commodities. B) The Company will not purchase or sell real estate or any option, right or interest therein, provided the Company may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein. C) The Company may not carry out uncovered sales of transferable securities, money market instruments or other financial instruments referred to in 1. A) (iv), (vi) and (vii). D) The Company may not borrow for the account of any fund, other than amounts which do not in aggregate exceed 10% of the net asset value of the fund, and then only as a temporary measure. For the purpose of this restriction back to back loans are not considered to be borrowings. E) The Company will not mortgage, pledge, hypothecate or otherwise encumber as security for indebtedness any securities held for the account of any fund except as may be necessary in connection with the borrowings mentioned in D) above, and then such mortgaging, pledging, or hypothecating may not exceed 10% of the net asset value of each fund. In connection with swap transactions, option and forward exchange or futures transactions the deposit of securities or other assets in a separate account shall not be considered a mortgage, pledge or hypothecation for this purpose. F) The Company will not underwrite or sub-underwrite securities of other issuers. G) The Company will on a fund by fund basis comply with such further restrictions as may be required by the regulatory authorities in any country in which the Units are marketed. 3. Derivatives, techniques and other instruments As specified in 1A)(iv) above, the Company may in respect of each fund invest in financial derivative instruments. The Company shall ensure that the global exposure of each fund relating to derivative instruments does not exceed the total net assets of that fund. The fund s overall risk exposure shall consequently not exceed 200% of its total net assets. In addition, this overall risk exposure may not be increased by more than 10% by means of temporary borrowings (as referred to in 2(D) above) so that it may not exceed 210% of any fund s total net assets under any circumstances. The global exposure relating to financial derivative instruments is calculated taking into account the current value of the underlying assets, the counterparty risk, foreseeable market movements and the time available to liquidate the positions. This shall also apply to the following subparagraphs. Each fund may invest, as a part of its investment policy and within the limits laid down in 1.A)(iv) and 1. C) (v), in financial derivative instruments provided that the exposure to the underlying assets does not exceed in aggregate the investment limits laid down in restrictions 1. C) (i) to (vii). When a fund invests in index-based financial derivative instruments compliant with the provisions of 1.C)(i) to (vii), these investments do not have to be combined with the limits laid down in restriction 1. C). When a transferable security or money market instrument embeds a derivative, the latter must be taken into account when complying with the requirements of this restriction. The funds may use financial derivative instruments for investment purposes and for hedging purposes within the limits of the Law of 20 December Under no circumstances shall the use of these instruments and techniques cause a fund to diverge from its investment policy or objective. The risks against which the funds could be hedged may be, for instance, market risk, foreign exchange risk, interest rates risk, credit risk, volatility or inflation risks. Unless specified in the fund s investment objective, the market risk exposure will be calculated using a commitment approach. Funds applying a Value-at-Risk (VaR) approach to calculate their global exposure will contain an indication thereto. VaR reports will be produced and monitored on a daily basis based on the following criteria: one month holding period; 99% unilateral confidence interval; at least one year effective historical observation period (250 days) unless market conditions require a shorter observation period; and parameters used in the model are updated at least quarterly. Stress testing will also be applied at a minimum of once per month. 108

113 4. Use of techniques and instruments relating to transferable securities and money market instruments Techniques and instruments (including, but not limited to, securities lending or repurchase agreements) relating to transferable securities and money market instruments may be used by each fund for the purpose of efficient portfolio management. To the extent permitted by and within the limits prescribed by the 2002 Law as well as any present or future related Luxembourg laws or implementing regulations, circulars and CSSF s positions ( the Regulations ) and in particular the CSSF Circular 08/356 relating to the use of financial techniques and instruments, each fund may for the purpose of generating additional capital or income or for reducing its costs or risks, enter as purchaser or seller into optional or non-optional repurchase transactions and engage in securities lending transactions. In respect of repurchase transactions, the fund will obtain from its counterparty collateral of a type and market value sufficient to satisfy the requirements of the Regulations. In respect of securities loans, the fund will ensure that its counterparty delivers and each day maintains the collateral of at least the market value of the securities lent. Such collateral must be in the form of cash or securities that satisfy the requirements of the Regulations. A fund, within the limits provided by the Regulations and in particular CSSF Circular 08/356 referred to above, may reinvest the cash it receives as collateral against a repurchase transactions or a securities loan in (a) shares or units issued by money market undertakings for collective investment calculating a daily net asset value and being assigned a rating of AAA or its equivalent, (b) short-term bank deposits, (c) money market instruments permitted by the Regulations, (d) short-term bonds issued or guaranteed by the governments, local authorities or supranational institutionals and undertakings of the United States, member states of the EU, Australia, Canada, Finland, Japan, Norway, Sweden or Switzerland, (e) bonds issued or guaranteed by first class issuers offering an adequate liquidity, and (f) reverse repurchase agreement transactions, provided that such reverse repurchase transactions must themselves be fully and continuously collateralised by securities issued or guaranteed by the governments, local authorities or supranational institutions and undertakings of the United States, the EU, Australia, Canada, Finland, Japan, Norway, Sweden or Switzerland. Such reinvestment will be taken into account for the calculation of each concerned fund s global exposure if required. 5. Risk management process The Company will employ a risk management process which enables it with the investment manager to monitor and measure at any time the risk of the positions and their contribution to the overall risk profile of each fund. The Company or the investment manager will employ, if applicable, a process for accurate and independent assessment of the value of any OTC derivative instruments. Upon request of an investor, the management company will provide supplementary information relating to the quantitative limits that apply in the risk management of each fund, to the methods chosen to this end and to the recent evolution of the risks and yields of main categories of instruments. This supplementary information includes the VaR levels set for the funds using such risk measure. The risk management framework is available upon request from the Company s registered office. 6. Miscellaneous A) The Company may not make loans to other persons or act as a guarantor on behalf of third parties provided that for the purpose of this restriction the making of bank deposits and the acquisition of such securities referred to in paragraph 1. A) (i), (ii) and (iii) or of ancillary liquid assets shall not be deemed to be the making of a loan and that the Company shall not be prevented from acquiring such securities above which are not fully paid. B) The Company need not comply with the investment limit percentages when exercising subscription rights attached to securities which form part of its assets. C) Funds registered in Taiwan are restricted in the percentage of the Fund that can be invested in securities traded on the security markets of the People s Republic of China. These limits may be amended from time to time by the Financial Supervisory Commission in Taiwan. D) The Management Company, the Investment Managers, the Distributors, Custodian and any authorised agents or their associates, may have dealings in the assets of the company provided that any such transactions are effected on normal commercial terms negotiated at arm s length and provided that each such transaction complies with any of the following: (i) a certified valuation of such transaction is provided by a person approved by the Directors as independent and competent; (ii) the transaction has been executed on best terms, on and under the rules of an organised investment exchange; or where neither (i) or (ii) is practical; (iii) where the Directors are satisfied that the transaction has been executed on normal commercial terms negotiated at arm s length. 109

114 4.11 CIMB-Principal Lifecycle Funds CIMB-Principal Lifecycle Funds is a series of three (3) conventional open-ended funds with differing maturity periods that match your investment plan. The Funds are: (i) CIMB-Principal Lifecycle Fund 2017 (ii) CIMB-Principal Lifecycle Fund 2022 (iii) CIMB-Principal Lifecycle Fund 2027 Each Fund has its own investment objective, time horizon and recommended asset allocation. The Fund is designed to extract best growth potentials by investing a greater proportion of the investment portfolio into risky assets (such as equities) at the onset of the Fund s life. This is expected to match investor s ability to accept greater risk during the early stages of their investment. As the Fund approaches maturity, the Fund will become increasingly conservative by reducing risky asset composition and investing a greater proportion into more conservative assets such as bonds. This is reflective of investor s decreasing risk appetite as they prepare to drawdown their investment to meet their goals. When selecting the Fund to meet your investment requirement, you are advised to consider the anticipated time you have prior to the investment drawdown. Investors should choose a Fund whose stated maturity year is prior to their investment drawdown requirement. It is important to note that the target year of the Fund you select should not necessarily represent the specific year you intend to draw your investments. This serves only as a guide. You should also realise that the Funds are not a complete solution to your cash flow needs. You must weigh many factors such as retirement needs and lifestyle needs. When in doubt, please consult your financial advisor. Investment objective CIMB-Principal Lifecycle 2017 The Fund aims to provide investors with capital growth through a well-diversified and evolving asset allocation. CIMB-Principal Lifecycle 2022 The Fund aims to provide investors with capital growth through a well-diversified and evolving asset allocation. CIMB-Principal Lifecycle 2027 The Fund aims to provide investors with capital growth through a well-diversified and evolving asset allocation. Any material changes to the objective of the Fund would require Unit holders approval. Benchmark The benchmark changes every five (5) years from the commencement date of the Fund, i.e. 10 August 2007 in accordance with the change in asset allocation of each Fund. The benchmark will be a combination of the following: Rate/ Index Quant shop MGS All Bond Index FTSE Bursa Malaysia Top 100 Index FTSE All-World Index Source Alternatively, the information on the benchmark is available on and Bloomberg L.P. CIMB-Principal Lifecycle 2017 Rate/ Index Current 2012 until maturity Quant shop MGS All Bond Index 35% 45% FTSE Bursa Malaysia Top 100 Index 30% 25% FTSE All-World Index 35% 30% Currently, it will remain as Quant shop MGS All Bond Index (35%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (35%). In two (2) years time, i.e. 2012, it will be Quant shop MGS All Bond Index (45%) + FTSE Bursa Malaysia Top 100 Index (25%) + FTSE All-World Index (30%). 110

115 CIMB-Principal Lifecycle 2022 Rate/ Index Current until maturity Quant shop MGS All Bond Index 30% 35% 45% FTSE Bursa Malaysia 100 Index 30% 30% 25% FTSE All-World Index 40% 35% 30% Currently, it will remain as Quant shop MGS All Bond Index (30%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (40%). In two (2) years time, i.e. 2012, it will be Quant shop MGS All Bond Index (35%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (35%). In seven (7) years time, i.e. 2017, it will be Quant shop MGS All Bond Index (45%) + FTSE Bursa Malaysia Top 100 Index (25%) + FTSE All-World Index (30%). CIMB-Principal Lifecycle 2027 Rate/ Index Current until maturity Quant shop MGS All Bond Index 25% 30% 35% 45% FTSE Bursa Malaysia 100 Index 30% 30% 30% 25% FTSE All-World Index 45% 40% 35% 30% Currently, it will remain as Quant shop MGS All Bond Index (25%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (45%). In two (2) years time, i.e. 2012, it will be Quant shop MGS All Bond Index (30%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (40%). In seven (7) years time, i.e. 2017, it will be Quant shop MGS All Bond Index (35%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (35%). In twelve (12) years time, i.e. 2022, it will be Quant shop MGS All Bond Index (45%) + FTSE Bursa Malaysia Top 100 Index (25%) + FTSE All-World Index (30%). Note: The benchmark weightings may change if the Manager deems the set weightings no longer reflect the Fund s asset allocation. Investment policy and principal investment strategy General Each Fund will invest its assets into a well-diversified portfolio comprising the following asset classes: Liquid assets; Local bonds; Foreign bonds; Local equities; Developed markets equities Emerging markets equities; and Local/foreign REITs. Each Fund seeks to achieve its investment objective by investing in different combinations of the asset classes and the asset allocation will change over time. The allocations into the asset classes differ from one Fund to another depending upon the investment tenure of the Fund. At the onset of each Fund, a greater proportion of the Fund s NAV will be invested into risky assets such as equities. As the Fund approaches its maturity, allocation to less risky assets such as bonds will increase. CIMB-Principal combines a top-down asset and sector allocation process with a bottom-up stock selection process. The asset allocation decision is made after a review of macroeconomic trends in Malaysia and other global economies. In particular, the Manager analyzes the direction of GDP growth, interest rates, inflation, currencies and government policies. The Manager will then assess their impact on corporate earnings and determine if there are any predictable trends. These trends form the basis for sector selection. Stock selection is based on the growth style of equity investing. As such, the criteria for stock selection would include improving fundamentals and growth at reasonable valuations. Stock valuation fundamentals considered are earnings per share growth rate, return on equity, price earnings ratio and net tangible assets multiples. In particular, the Manager will adopt an active investment strategy to invest in the appropriate asset classes based on the efficient portfolio approach within the target asset allocation (as set out in the section below), taking into account the changing investment conditions. An efficient portfolio is a portfolio that provides the greatest expected return for a given level of risk, or equivalently, the lowest risk for a given expected return. In addition to this, the Manager will also adopt a rebalancing discipline throughout the life of the Fund to keep the portfolio within the target asset allocation limits. 111

116 The local bonds and foreign bonds portion can be actively traded based on the outlook of the economy, interest rates, the shape of the future yield curve, relative valuations as well as technical factors such as liquidity. The minimum credit ratings requirements will be at least BBB3 and P2 by RAM or equivalent rating by MARC; BB1 by Moody s and/or BB by S&P or Fitch. The Manager will consider the level of duration risk to be taken to obtain the best returns for the level of risk taken. Each Fund will also invest into equities listed on local and/or selected global stock markets (which include developed and emerging markets) as well as REITs. The Manager may opt to invest in these securities either directly or via collective investment schemes. In evaluating the suitability of a CIS for investment, the Manager will conduct a review of the track record of the manager and the CIS, investment objective of the CIS, investment policy and strategies, fund performance and other factors deemed important by the Manager. The CIS shall be registered with recognized exchanges and/or authorities including, but not limited to, the following countries: Malaysia, Ireland, Luxembourg, Hong Kong, Singapore, Australia, Japan, the United States and the United Kingdom. In identifying companies for selection, the Manager looks into both fundamental and valuation analysis, which include the management quality, products and services, industry position, current financial condition, earnings prospects and valuation attractiveness. Asset Allocation The asset allocation will gradually become more conservative as it approaches the maturity of each Fund, which is indicated in the Fund s name. The asset allocation for each Fund s investments is as follows: Based on % of NAV of the Fund Current asset allocation CIMB-Principal Lifecycle 2017 Asset allocation in 2012 Liquid assets Local bonds Foreign bonds Local equities Developed equities Emerging equities Local/foreign REITs CIMB-Principal Lifecycle 2022 Asset allocation in 2017 Liquid assets Local bonds Foreign bonds Local equities Developed equities Emerging equities Local/foreign REITs CIMB-Principal Lifecycle 2027 Asset allocation in 2022 Liquid assets Local bonds Foreign bonds Local equities Developed equities Emerging equities Local/foreign REITs The Manager may modify the target asset allocation for each Fund. From time to time, the Fund may adjust its investments within set limits based on the Manager s outlook for the economy, financial markets generally and relative market valuation of the asset classes. Additionally, the Fund may deviate from the set limits when, in the Manager s opinion, it is necessary to do so to pursue the Fund s investment objective. However, the amounts it allocates to each asset class will generally vary only within 10% of the ranges specified in the charts above. Review and rebalancing discipline Monitoring the Fund s investments is a continuous process that requires the Manager to evaluate events and trends affecting the prospects of asset class holdings and their suitability for attaining the investment objective. Changes in asset values over time may also create unintended divergences from the target asset allocation. These lead to the need to review and rebalance the Fund s investments to ensure the investment objective is achieved. The term rebalancing means adjusting the actual portfolio to the target asset allocation. For example, if the target proportion for the local equities portion is 20% to 35% of the Fund s NAV, trigger points will be at 20% and 35% of the Fund s NAV. Suppose the Manager observes the actual allocation to be 43%, the upper threshold (35%) has been breached. The Manager will then decide whether to rebalance the portfolio to its target weights, i.e. between 20% to 35% of the Fund s NAV. 112

117 For the purpose of these Funds, the review of the asset allocation is done on an annual basis after the commencement date of the Fund i.e. 10 August The review on these intervals aims to keep the portfolio within the target asset allocation. The Manager will then decide whether to rebalance the portfolio to target weights, taking into consideration the market expectation, benefits and cost of rebalancing. Funds Termination on Maturity Date The Fund will be automatically terminated on its Maturity Date as follows: CIMB-Principal Lifecycle 2017 CIMB-Principal Lifecycle 2022 CIMB-Principal Lifecycle 2027 The 10 th anniversary of the commencement date of the Fund, i.e. 10 August The 15 th anniversary of the commencement date of the Fund, i.e. 10 August The 20 th anniversary of the commencement date of the Fund, i.e. 10 August Investors will have the option to switch their monies into any of the CIMB-Principal funds without charges or to withdraw their investments. However investors are encouraged to reinvest their monies into CIMB-Principal range of bond funds. For further details please refer to page 180. Risk management strategy The Fund is constructed and managed within pre-determined guidelines. The risk management strategies and techniques employed by the Manager include diversification of the Fund s asset allocation in terms of its exposure to various asset classes, sectors and countries. Temporary defensive positions The Manager may take a temporary defensive position when it believes the markets or the economies are experiencing excessive volatility, a prolonged general decline or when other adverse conditions may exist. Under these circumstances, the Fund may be unable to pursue its investment goal. In response to such adverse conditions, CIMB-Principal may reduce the proportion of higher risk assets, such as equities and increase the allocation of assets to lower risk assets, such as debentures and liquid assets, to temporarily reduce the market exposure. When deemed necessary, the Manager may also utilize derivative instruments, subject to the SC Guidelines for purposes such as hedging. 113

118 4.12 CIMB-Principal MENA Equity Fund Investment objective The Fund aims to achieve a total return through investments primarily in shares of companies domiciled or having significant operations, and listed in the Middle Eastern and North African countries. Any material changes to the investment objective of the Fund would require Unit holders approval. Benchmark The performance benchmark of this Fund is ten per cent (10%) growth in NAV per annum. This is not a guaranteed return and is only a measurement of the Fund s performance. The Fund may not achieve the ten percent (10%) per annum growth rate in any particular financial year but targets to achieve this growth over the medium to long term. Investment policy and principal investment strategy The Fund is a Feeder Fund that invests at least 95% of the Fund s NAV in the Ocean Fund/Equities MENA Opportunities ( the Target Fund ), a Luxembourg-domiciled fund which invests primarily in shares of companies domiciled or having significant operations, and listed in the MENA countries. Information on the Ocean Fund/Equities MENA Opportunities is detailed below. The asset allocation strategy for this Fund is as follows: at least 95% of the Fund s NAV will be invested in the Ocean Fund/Equities MENA Opportunities; and up to 5% of the Fund s NAV will be invested in liquid assets for liquidity purposes. The investment strategy adheres to the SC Guidelines pertaining to Feeder Funds. As such, any changes to these guidelines would tantamount to a change in this investment strategy. This Target Fund seeks a total return through investments primarily in shares of companies domiciled in or having significant operations in, and listed on a regulated market in the Middle Eastern and North African ("MENA") countries, including Egypt, Jordan, Lebanon, Oman, Qatar, Kuwait, Bahrain, Saudi Arabia, United Arab Emirates, Tunisia, Morocco, and other markets of the region. As the Target Fund invests only in the equity markets of the MENA region, the investment risk is expected to be higher than a globally diversified fund. Nevertheless, the Target Fund s highly disciplined portfolio constructions used will serve to ensure that investment risk levels are appropriate. If, in the opinion of the Manager, the Ocean Fund/MENA Opportunities no longer meets the Fund s investment objective, and/or when acting in the best interests of Unit holders, CIMB-Principal may replace the Ocean Fund/MENA Opportunities with another Target Fund that is consistent with the objective of this Fund, subject to the approval of the Unit holders. The switch to another Target Fund may be performed on a staggered basis to facilitate a smooth transition. This is applicable should the Ocean Fund/MENA Opportunities impose any conditions in relation to redemption of units or if the manager of the newly identified Target Fund exercises its discretion to apply an Anti Dilution Levy* in relation to applications for units. Thus, the time frame required to perform the transition will depend on such conditions, if any, imposed by the Ocean Fund/MENA Opportunities as well as any conditions associated with an Anti Dilution Levy that may be charged at the newly identified Target Fund level. Hence during the transition period, the Fund s investment may differ from the stipulated investment strategies. * Anti Dilution Levy is an allowance for fiscal and other charges that is added to the net asset value per unit to reflect the costs of investing application monies in underlying assets of the Target Fund. The levy is intended to be used to ensure that all investors in the Target Fund are treated equitably by allocating transaction costs to the investors whose transactions give rise to those costs. The risk management strategies and techniques employed will be at the Target Fund level whereby the fund manager of the Target Fund employs a risk management process which combines financial techniques and instruments to manage at any time the risk of various positions and their contribution to the overall risk of the Target Fund s portfolio. About Ocean Fund/Equities MENA Opportunities Ocean Fund (the Company ) is registered in the Grand Duchy of Luxembourg as an undertaking for collective investment (a UCI ) under the form of an investment company with variable share capital ( SICAV ). The Company is listed on the official list of Undertakings for Collective Investment and is governed by the provisions of Part II of the Luxembourg Law of December 20, 2002 relating to undertakings for collective investment as may be amended from time to time (the 2002 Law ). The Company is an umbrella fund divided into multiple Sub-Funds, each representing a separate portfolio of assets. Ocean Fund/Equities MENA Opportunities is one of the said Sub-Funds. The Board of Directors (BOD) has designated under its responsibility and control SGAM Luxembourg S.A. to act as Management Company of the Company under Chapter 13 of the 2002 Law. The Management Company has been incorporated on 10 November 2004 for an unlimited period. Its registered office is established in Luxembourg. The Management Company has been appointed pursuant to a main delegation agreement concluded between the Management Company and the Company as may be amended from time to time. The Management Company s main object is the management, the administration and the marketing or the monitoring of the marketing of UCITs as well as UCIs. The Management Company shall be in charge of the management and the administration of the Company and the monitoring of the distribution of Shares in Luxembourg and abroad. Pursuant to an investment management agreement between the Management Company and the Investment Manager (the Investment Management Agreement ), the Management Company has appointed under its control and responsibility the 114

119 Investment Manager to assist it in the context of the day to day general management of the Company s investments and to manage the investments of the Sub-Funds. Subject to the terms and conditions of the Investment Management Agreement, the Management Company has delegated to the Investment Manager the power to appoint the Sub-Investment Managers in order to manage the investments of certain Sub-Funds. The Investment Manager may appoint under its control and responsibility certain Sub-Investment Managers pursuant to subinvestment agreements (each as Sub-Investment Agreement ). At the date of the present Prospectus, the Investment Manager has appointed GLG Partners UK Ltd ( GLG UK ) to manage the Sub-Funds Ocean Fund/Equities MENA Opportunities. GLG UK was formerly known as Société Générale Asset Management UK. About GLG Partners Inc ( GLG Partners ) GLG Partners Inc is a NYSE-listed, US public company with operations in London, New York and the Cayman Islands. Founded in 1995, GLG Partners is a multi-strategy asset manager with over US$22.2 billion in net AUM as of 31 December Ocean Fund/Equities MENA Opportunities was launched on 25 June 2007 and has a fund size of USD260 million as at end of February Fund Details Investment objective Ocean Fund/Equities MENA Opportunities ( the Target Fund ) seeks a total return through investment primarily in shares of companies domiciled in or having significant operations in, and listed on a regulated market in the Middle Eastern and North African ("MENA") countries, including Egypt, Jordan, Lebanon, Oman, Qatar, Kuwait, Bahrain, Saudi Arabia, United Arab Emirates, Tunisia, Morocco, and other markets of the region. The Target Fund is denominated in USD. The Target Fund may also invest: in depositary receipts, such as ADRs and GDRs and is not bound by any sector restrictions; up to 10% of its net assets in swap transactions; and listed Participatory Notes (P-Notes) such as low strike price warrants, equity-linked swaps, equity-linked notes. These products have equities listed on the MENA markets as underlying assets. The purpose of investing in P-Notes is to have access to all parts of this market and their Transferable Securities (equities). Benchmark The Ocean Equities MENA Opportunities is run using a total return strategy and there is no benchmark involved. Investment strategies The Target Fund seeks a total return through investment primarily in shares of companies domiciled in or having significant operations in, and listed on a Regulated Market in the Middle Eastern and North African ("MENA") countries, including Egypt, Jordan, Lebanon, Oman, Qatar, Kuwait, Bahrain, Saudi Arabia, United Arab Emirates, Tunisia, Morocco, and other markets of the region. The investment approach of Fund management team at GLG UK is to capitalize on the opportunities presented by the particular features of the Middle East and North Africa markets. GLG UK will look for under valued stocks and naturally favour value over growth, as, in their experience, attractively valued stocks have better risk adjusted returns over the long term. Growth stocks would not be excluded from the portfolio, but would be viewed in a value context best described as Growth at a Reasonable Price (GARP). Since these markets are often inefficient and companies are poorly researched, much of the work to unearth value opportunities relies on visits to companies. GLG UK can then make their own judgement about the outlook for the company; and can stress test analyst assumptions and forecasts, or produce their own. This then allows them to identify where there may be value anomalies. Once there is a view of the company s outlook and expected earnings profile GLG UK can place the company in a valuation context relative to regional and global peers. GLG UK also uses different valuation techniques based on the industry the company operates in. The investment philosophy of GLG UK in relation to the Ocean Equities MENA Opportunities is to identify companies that can benefit from the prevailing economic conditions and where they are of the opinion that future developments are not reflected in the current share price. Having built up an in-depth knowledge of companies, company visits are an essential part of the investment process. GLG UK places significant emphasis on the quality of management and success of strategy. Given that the fund does not use an index as a benchmark, the Fund is managed on an unconstrained total return basis, i.e. GLG UK can select stocks which they believe have investment opportunities that can deliver positive returns without considering the exposure of a particular country or sector reference to an index. However, at the individual stock level, there is a 10% maximum exposure limit. Investment restrictions The BOD shall, based upon the principle of risk spreading, have power to determine the corporate and investment policy for the investments for the Target Fund, the reference currency of the Target Fund and the course of conduct of the management and business affairs of the Company. The assets of the Target Fund must be invested in accordance with the restrictions on 115

120 investments set out in Part II of the 2002 Law and such additional restrictions, if any, as may be adopted from time to time by the directors. A) In respect of the Company's investment in transferable securities, money market instruments, other fixed-income instruments: The Target Fund may invest in transferable securities (shares, bonds and warrants on transferable securities) and in money market instruments, provided that it shall not: a) invest more than 10% of its net assets in transferable securities and money market instruments which are not listed on a stock exchange nor traded on another regulated market i.e. a regulated market which operates regularly and is recognised and open to the public; b) invest more than 10% of its net assets in transferable securities and money market instruments issued by the same issuing body. The Company may acquire no more than 10% of the transferable securities and money market instruments of the same kind issued by the same issuing body; The restrictions mentioned under a) and b) are not applicable to securities issued or guaranteed by Member States of the Organisation for Economic Co-operation and Development (OECD) being Financial Action Task Force (FATF) member or their local authorities or public international bodies with European Union, regional or worldwide scope but the Target Fund must hold securities originating from at least 6 issues, and the securities of any one issue may not exceed 30% of the Target Fund's net asset value. Also, the Target Fund may invest up to 20% in cash deposits with one single entity. By one single entity, it must be considered all companies whose accounting balance sheets are consolidated according to the European Directive 83/349/CEE or according to the international accounting rules. The Target Fund may invest in other open-ended and/or closed-ended UCIs. 1) Investments in other open-ended UCIs shall only be possible under the following conditions: (a) (b) the Target Fund may not invest more than 10% of its net assets in shares or units issued by the same UCI; the Company may acquire up to 10% of the units or shares of the same UCI. The above restrictions under (a) and (b) will not apply to investments in open-ended UCIs subject to risk diversification rules similar to those provided for in respect of Luxembourg UCIs governed by Part I or Part II of the law of December 20, 2002 as may be amended from time to time, (exclusively UCIs domiciled in a country member of the European Union, Switzerland, Japan, Canada, United States of America, Hong-Kong) provided that such UCIs are submitted in their state of origin to a permanent control carried out by a regulatory set up by law in order to ensure the protection of investors. Such derogation may not, at any time, results in an excessive concentration of investment in anyone UCI provided that for the purpose of this limitation, each compartment of a target UCI with multiple compartments is to be considered as a distinct target UCI on the condition that the principle of segregation of the commitments of the different compartments towards third parties is ensured. 2) Investments in closed-ended UCIs shall only be possible under the following conditions: (a) (b) the Target Fund may not invest more than 10% of its net assets in units or shares of UCIs not listed on a stock exchange or not dealt on another regulated market operating regularly, recognised and open to the public (a Regulated Market ); the Target Fund may not invest more than 10% of its net assets in units or shares issued by the same UCI. The company may not acquire more than 10% of the units or shares of the same kind issued by a single UCI. The Target Fund may invest in UCIs promoted by the Group Société Générale and as a consequence thereof the Shareholders will incur a duplication of fees and of commissions (like management fees) but no entrance and redemption fees will be levied for these investments. B) Borrowings The Target Fund may borrow up to a maximum of 25% of its net assets, without restriction as to the use which is made thereof. C) Short Selling Short Selling shall be submitted to the following constraints: A.1. Short sales may, in principle, not result in the UCI holding: a) a short position on transferable securities which are not admitted to official stock exchange listing or dealt in on another regulated market, which operates regularly and is recognised and open to the public. However the UCI may hold short positions on transferable securities which are not quoted or not dealt in on a regulated market if such securities are highly liquid and do not represent more than 10% of the assets of the UCI; b) a short position on transferable securities which represent more than 10% of the securities of the same type issued by the same issuer; c) a short position on transferable securities of the same issuer, (i) if the sum of the prices at which the short sales have been carried out represents more than 10% of the assets of the UCI or (ii) if the short position represents a commitment exceeding 5% of the assets. 116

121 A.2. The commitments arising from short sales on transferable securities at a given time correspond to the cumulative non-realised losses resulting, at that time, from the short sales made by the UCI. The non-realised loss resulting from a short sale is the positive amount resulting from the difference between the market price at which the short position can be covered and the price at which the relevant transferable security has been sold short. A.3. The aggregate commitments of the UCI resulting from short sales may at no time exceed 50% of the assets of the UCI. If the UCI enters into short sales transactions, it must hold sufficient assets enabling it at any time to close the open positions resulting from such short sales. A.4. The short sales of transferable securities for which the UCI holds adequate coverage are not to be considered in the calculation of the total commitments referred to above. For the avoidance of doubt, it is to be noted that the fact for a UCI to grant a security, of whatever nature, on its assets to third parties in order to secure its obligations towards such third parties, is not to be considered as adequate coverage for the UCI's commitments. A.5. In connection with short sales on transferable securities, UCIs are authorized to enter, as borrower, into securities lending transactions with first class professionals specialised in this type of transactions. The counterparty risk resulting from the difference between (i) the value of the assets transferred by a UCI to a lender as security in the context of the securities lending transactions and (ii) the debt of the UCI owed to such lender may not exceed 20% of the assets of the UCI. For the avoidance of doubt, it is to be noted that UCIs may, in addition, give security by using security arrangements which do not result in a transfer of ownership or which limit the counterparty risk by other means. D) Pledge of assets The Company will never give for any reason its assets in pledge to any third party. Specific Investment Restrictions The Target Fund is subject to the following specific investment restrictions: The Target Fund may borrow in the short term up to a maximum of 10% of its net assets without restriction as to the use which is made thereof. The Target Fund may acquire units/shares of other UCITS and/or other UCIs provided that no more than 10% of such Sub- Fund s Net Assets be invested in aggregate in units/shares of such other UCITS or other UCIs. The Target Fund may not acquire most of the voting rights of a same company such as it would interfere on the company s management. Short selling is limited to maximum 50% of the Net Asset Value of the Sub-Fund. The assets of this Target Fund will not be leveraged. In case of conflict between the investment restrictions stated under the heading Investment restriction and those stated in this section, the above limits will prevail. Investment techniques 1. Techniques and instruments relating to transferable securities Subject to any and all limitations set out in their respective investment policies, the Target Fund may use the following techniques and instruments for the purpose of efficient portfolio management. For the purpose of efficient portfolio management, the Target Fund may undertake transactions relating to financial futures, (i.e. interest rate, currency, stock index and futures on transferable securities), warrants and options contracts traded on a regulated market. Alternatively, the Target Fund may undertake, for hedging purposes only, transactions relating to over the counter (OTC) options, swaps and swaptions with highly rated financial institutions specialising in this type of transaction and participating actively in the relevant OTC market. (a) Options on transferable securities The Target Fund may buy and sell put and call options on transferable securities. At the conclusion as well as during the existence of contracts for the sale of call options on securities, a Target Fund will hold either the underlying securities, matching call options, or other instruments (such as warrants) that provide sufficient coverage of the commitments resulting from these transactions. The underlying securities related to written call options may not be disposed of as long as these options are outstanding unless such options are covered by matching options or by other instruments that can be used for that purpose. The same applies to equivalent call options or other instruments which the Target Fund must hold where it does not have the underlying securities at the time of the writing of such options. The Target Fund may not write uncovered call options on transferable securities. As a derogation from this rule, the Target Fund may write call options on securities that it does not hold at inception of the transaction, if the aggregate exercise price of such uncovered written call options does not exceed 25% of the Net Assets of the Target Fund and the Target Fund is, at any time, in a position to cover the open position resulting from such transactions. Where a put option is sold, the Target Fund s corresponding portfolio must be covered for the full duration of the contract by adequate liquid assets that would meet the exercise value of the contract, should the option be exercised by the counterpart. (b) Hedging through stock market index futures, warrants and options As a global hedge against the risk of unfavourable stock market movements, the Target Fund may sell futures contracts on stock market indices, and may also sell call options, buy put options or transact in warrants on stock market indices, provided there is sufficient correlation between the composition of the index used and the Target Fund s corresponding portfolio. The total commitment resulting from such futures, warrants and option contracts on stock market indices may not exceed the global valuation of securities held by the relevant Target Fund s corresponding portfolio in the market corresponding to each index. 117

122 (c) Hedging through interest rate futures, options, warrants, swaps and swaptions As a global hedge against interest rate fluctuations, a fund may sell interest rate futures contracts and may also sell call options, buy put options or transact in warrants on interest rates or enter into OTC interest rates swaps or swaptions with highly rated financial institutions specialising in this type of instruments. The total commitment resulting from such futures, swaps, swaptions, warrants and option contracts on interest rates may not exceed the total market value of the assets to be hedged held by funds in the currency corresponding to these contracts. (d) Futures, warrants, swaps and options on other financial instruments for a purpose other than hedging As a measure towards achieving a fully invested portfolio and retaining sufficient liquidity, a fund may buy or sell futures, warrants, swaps and options contracts on financial instruments (other than transferable securities or currency contracts), such as instruments based on stock market indices and interest rates, provided that these are in line with the stated investment objective and policy of the corresponding fund and the total commitment arising from these transactions together with the total commitment arising from the sale of call and put options on transferable securities at no time exceeds the Net Asset Value of the relevant fund. With regard to the total commitment referred to in the preceding paragraph, the call options written by the Target Fund on transferable securities for which it has adequate cover do not enter in the calculation of the total commitment. The commitment relating to transactions other than options on transferable securities shall be defined as follows: the commitment arising from futures contracts is deemed equal to the value of the underlying net positions payable on those contracts which relate to identical financial instruments (after setting off all sale positions against purchase positions), without taking into account the respective maturity dates, and the commitment deriving from options purchased and written as well as warrants purchased and sold is equal to the aggregate of the exercise (striking) prices of net uncovered sales positions which relate to single underlying assets without taking into account respective maturity dates. The aggregate acquisition prices (in terms of premiums paid) of all options on transferable securities purchased by the Target Fund together with options acquired for purposes other than hedging (see above) may not exceed 15% of the Net Assets of the Target Fund. The Target Fund may also buy and sell futures on transferable securities. The limits applicable to this investment are the ones described above under the point 1) Techniques and Instruments relating to transferable securities. (e) Securities Lending The Target Fund may enter into securities lending and borrowing transactions provided that: The Target Fund may only lend securities included in its portfolio to a borrower either directly or through a standardized lending system organized by a recognized clearing institution or through a lending system organised by a financial institution subject to a prudent supervision rules considered by the Security Authority of Luxembourg as equivalent to those prescribed by Community Law and specializing in this type of transactions. In all cases, the counterparty to the securities lending agreement (i.e. the borrower) must be subject to prudential supervision rules considered by the Supervisory Authority of Luxembourg as equivalent to those prescribed by Community Law. In case the aforementioned financial institution acts on its own account, it is as to be considered as counterparty in the securities lending agreement. The risk exposure to a single counterparty of the UCITS arising from one or more securities lending transactions, sale with right of repurchase transaction and/or reverse repurchase / repurchase transactions may not exceed 10% of its assets when the counterparty is a credit institution referred to in article 41, paragraph (1) (f) of the 2002 Law or 5% of its assets in other cases. As part of lending transactions, the Target Fund must in principle receive a guarantee, the value of which at any time must be at least equal to the total value of the securities lent. This guarantee must be given in the form of (a) liquid assets, (b) securities issued or guaranteed by a member state of the OECD, their local authorities or by supranational institutions and undertakings of a community, regional or world-wide nature and held in escrow in the name of the Target Fund until the expiry of the loan contract or (c) shares listed on a stock exchange of a member state and having the highest rating, which are registered on an account opened in the name of the Fund for the Target Fund until the expiry of the loan contract, or any combination thereof or (d) a guarantee of a highly rated financial institution registered in favor of the Target Fund until the expiry date of the loan contract. Cash received as guarantee may be reinvested in liquid assets authorized under Luxembourg law, such as money market instruments rated at least AAA (or its equivalent) or reverse repurchase agreements with counterparties rated at least AAA (or its equivalent) or, if such counterparties are not rated, whose parent companies are rated at least AAA (or its equivalent). Such a guarantee shall not be required if the securities lending is made through clearstream banking or EUROCLEAR or through any other organization assuring to the lender a reimbursement of the value of the securities lent, by way of a guarantee or otherwise. Lending transactions may not exceed 50% of the global valuation of the securities portfolio of the Target Fund. Securities lending and borrowing transactions may not extend beyond a period of 30 days. These limitations do not apply to securities lending transactions where the Target Fund is entitled at all times to the cancellation of the contract and the restitution of the securities lent. 118

123 The securities borrowed by the Target Fund may not be disposed of during the time they are held by the Target Fund, unless they are covered by sufficient financial instruments which enable the Target Fund to restitute the borrowed securities at the close of the transaction. Borrowing transactions may not exceed 50% of the global valuation of the securities portfolio of the Target Fund. The Target Fund may borrow securities under the following circumstances in connection with the settlement of a sale transaction: (a) during a period the securities have been sent out for re-registration; (b) when the securities have been loaned and not returned in time; (c) to avoid a failed settlement when the Custodian fails to make delivery. (f) Repurchase Agreements The Target Fund may enter, as buyer or as seller, into repurchase agreements (including réméré transactions) only if the counterparty to these transactions is subject to prudential supervision rules considered by the Supervisory Authority of Luxembourg as equivalent to these prescribed by Community Law. These transactions consists in the purchase and sale of securities whereby the terms of the agreement entitle or oblige, depending on the terms of the agreement, the seller to repurchase from the purchaser the securities at a price and a time agreed amongst the two parties at the conclusion of the agreement. Where the Target Fund acts as buyer, for the whole duration of the agreement, the Target Fund may not sell the securities which are the object of the agreement either before the repurchase of the securities has been carried out by the counterpart or the repurchase period has expired. The risk exposure to a single counterparty of the UCITS arising from one ore more securities lending transactions, sale with right of repurchase transaction and/or reverse repurchase / repurchase transactions may not exceed 10% of its assets when the counterparty is a credit institution referred to in article 41, paragraph (1) (f) of the 2002 Law or 5% of its assets in other cases. The Target Fund must ensure that its obligations under repurchase agreements will not prevent it from meeting its redemption obligations to the Shareholders. The same shall apply to buy and sell back transactions where no option is given to the seller. The Target Fund must ensure that its obligations under repurchase agreements will not prevent it from meeting its redemption obligations to the Shareholders. The same shall apply to buy and sell back transactions where no option is given to the seller. 2. Techniques and Instruments on currencies for purposes other than hedging The Target Fund may, for purposes other than hedging, purchase and sell futures contracts and options on currencies, enter into swap agreements on currencies and forward exchange contracts. These techniques and instruments on currencies for purposes other than hedging must meet in the Target Fund the following conditions: a) they may only be used in the sole and exclusive interest of the Shareholders for the purpose of offering an interesting return versus the risks incurred, b) the total of net commitments (these being calculated per currency) arising from the techniques used for purposes other than hedging may not, in any case, exceed the net assets of the Target Fund. 3. Techniques and instruments to protect against exchange risks For the purpose of protecting against currency fluctuation, the Target Fund may undertake transactions relating to financial futures, warrants and options contracts traded on a regulated market. Alternatively, the Target Fund may undertake transactions relating to OTC options, swaps and swaptions with highly rated financial institutions specialising in this type of transaction and participating actively in the relevant OTC market. In order to hedge foreign exchange risks, a Target Fund may have outstanding commitments in currency futures and/or sell call options, purchase put options or transact in warrants with respect to currencies, or enter into currency forward contracts or currency swaps. The hedging objective of the transactions referred to above presupposes the existence of a direct relationship between the contemplated transactions and the assets or liabilities to be hedged and implies that, in principle, transactions in a given currency may not exceed the valuation of the aggregate assets denominated in that currency nor may they, as regards their duration, exceed the period during which such assets are held. 4. Other instruments (a) Warrants Warrants shall be considered as transferable securities if they give the investor the right to acquire newly issued or to be issued transferable securities. The Target Fund, however, may not invest in warrants where the underlying is gold, oil or other commodities. The Target Fund may invest in warrants based on stock exchange indices for the purpose of efficient portfolio management. (b) Rules 144 A Securities The Target Fund may invest in so-called Rule 144A securities which are securities that are not required to be registered for resale in the United States under an exemption pursuant to Section 144A of the 1933 Act ( Rule 144A Securities ), but can be sold in the United States to certain institutional buyers. The Target Fund may invest in Rule 144A Securities, provided that: such securities are issued with registration rights pursuant to which such securities may be registered under the 1933 Act and traded on the US OTC fixed income securities market. Such securities shall be considered as newly issued transferable securities. In the event that any such securities are not registered under the 1933 Act within one year of issue, such securities shall be considered as falling under point A. a) of investment restrictions and subject to the 20% limit of the Net Assets of the Target Fund applicable to the category of securities referred to therein. 119

124 (c) Structured notes Subject to any limitations in its investment objective and policy and to the investment restrictions outlined above, the Target Fund may invest in structured notes, comprising listed government bonds, medium-term notes, certificates or other similar instruments issued by prime rated issuers where the respective coupon and/or redemption amount has been modified (or structured), by means of a financial instrument. These notes are valued by brokers with reference to the revised discounted future cash flows of the underlying assets. The investment restrictions are applying on both the issuer of the notes as well as on the underlying of such notes. Part B Foreign market admission requirements The Funds have obtained prior approval from the relevant regulatory authorities before investing into India, South Korea and Taiwan. The affected Funds are: Funds India South Korea Taiwan CIMB-Principal Equity Growth Fund CIMB-Principal Equity Income Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Asian Equity Fund CIMB-Principal Emerging Asia Fund CIMB-Principal Global Growth Fund - - CIMB-Principal Global Balanced Fund - - Foreign market admission requirements: India: Foreign Institutional Investors (FII) certificate issued by the Securities Exchange Board of India (SEBI), renewal every 5 years; South Korea: Investment Registration Certificate (IRC) issued by the Financial Supervisory Service (FSS), annual renewal of the IRC is not necessary; and Taiwan: Foreign Institutional Investors (FINI) license issued by the Taiwan Stock Exchange, annual renewal of the FINI is not required. 120

125 PART C Authorised investments Subject to the Deeds, the investment policies for the Funds and the requirements of the SC and any other regulatory body, the Manager has the absolute discretion as to how the assets of the Funds are to be invested. Under the Deeds, the Funds can invest in a wide range of securities, including but not limited to those as set out below. SECTION 1: EQUITY FUNDS 1.1 CIMB-Principal Equity Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.2 CIMB-Principal Equity Fund 2 The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.3 CIMB-Principal Equity Aggressive Fund 1 The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.4 CIMB-Principal Equity Aggressive Fund 3 The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes; Structured products; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 121

126 1.5 CIMB-Principal Equity Growth Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.6 CIMB-Principal Equity Growth & Income Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.7 CIMB-Principal Equity Income Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 1.8 CIMB-Principal Small Cap Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes; Structured products; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. SECTION 2: MIXED ASSET FUNDS 2.1 CIMB-Principal Balanced Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; 122

127 Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes; Structured products; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 2.2 CIMB-Principal Balanced Income Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 2.3 CIMB-Principal Income Plus Balanced Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. SECTION 3: FIXED INCOME & MONEY MARKET FUNDS 3.1 CIMB-Principal Bond Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes; Structured products; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 3.2 CIMB-Principal Strategic Bond Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 123

128 3.3 CIMB-Principal Deposit Fund The following types of investments, including but not limited to: Debentures, money market instruments and placement in deposits ( permitted investments ); Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 3.4 CIMB-Principal Money Market Income Fund The following types of investments, including but not limited to: Debentures, money market instruments and placement in deposits ( permitted investments ); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. SECTION 4: REGIONAL & GLOBAL FUNDS 4.1 CIMB-Principal Asia Infrastructure Equity Fund The following types of investments, including but not limited to: One collective investment scheme (local or foreign) provided it is not a Fund-of-Funds or a Feeder Fund; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.2 CIMB-Principal ASEAN Equity Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.3 CIMB-Principal Asian Equity Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.4 CIMB-Principal Climate Change Equity Fund The following types of investments, including but not limited to: One collective investment scheme (local or foreign) provided it is not a Fund-of-Funds or a Feeder Fund; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.5 CIMB-Principal Emerging Asia Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; 124

129 Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.6 CIMB-Principal Global Asset Spectra Fund The following types of investments, including but not limited to: All types of collective investment schemes (both local and foreign) provided they are not a Fund-of-Funds or a Feeder Fund; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; Deposits and money market instruments; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objective. 4.7 CIMB-Principal Global Balanced Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.8 CIMB-Principal Global Growth Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an eligible market; Warrants that carry the right in respect of a security traded in or under the rules of an eligible market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. 4.9 CIMB-Principal Global Titans Fund The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives CIMB-Principal Greater China Equity Fund The following types of investments, including but not limited to: One collective investment scheme (local or foreign) provided it is not a Fund-of-Funds or a Feeder Fund; 125

130 Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives CIMB-Principal Lifecycle Funds (LF2017, LF2022 and LF2027) The following types of investments, including but not limited to: Equities and debentures traded in or under the rules of an Eligible Market; Warrants that carry the right in respect of a security traded in or under the rules of an Eligible Market; Unlisted securities including securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the fund by the issuer; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; All types of collective investment schemes (both local and foreign); Structured products; Securities listed or traded on foreign markets where the regulatory authority is a member of the International Organization of Securities Commissions (IOSCO); and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives CIMB-Principal MENA Equity Fund The following types of investments, including but not limited to: One collective investment scheme (local or foreign) provided it is not a Fund-of-Funds or a Feeder Fund; Deposits and money market instruments; Derivative instruments, including but not limited to options, futures contracts, forward contracts and swaps; and Any other form of investments as may be permitted by the SC from time to time that is in line with the Fund s objectives. The formulation of the investment policies and strategies of the Funds are based on the objectives of the Funds after taking into consideration the regulatory requirements outlined in the SC Guidelines, with such exemptions/variations (if any) as permitted by the SC. 126

131 Investment restrictions and limits CIMB-Principal Equity Fund, CIMB-Principal Equity Fund 2, CIMB-Principal Equity Aggressive Fund 1, CIMB-Principal Equity Aggressive Fund 3, CIMB-Principal Equity Growth Fund, CIMB-Principal Equity Growth & Income Fund, CIMB- Principal Equity Income Fund, CIMB-Principal Small Cap Fund, CIMB-Principal Balanced Fund, CIMB-Principal Balanced Income Fund, CIMB-Principal Income Plus Balanced Fund, CIMB-Principal Bond Fund, CIMB-Principal Strategic Bond Fund, CIMB-Principal ASEAN Equity Fund, CIMB-Principal Asian Equity Fund, CIMB-Principal Emerging Asia Fund, CIMB- Principal Global Balanced Fund, CIMB-Principal Global Growth Fund, CIMB-Principal Global Titans Fund and CIMB- Principal Lifecycle Funds are subject to the following investment restrictions/limits: Exposure Limit the value of the Fund s investment in unlisted securities must not exceed 10% of the Fund s NAV. Investment Spread Limits the value of the Fund s investment in ordinary shares issued by any single issuer must not exceed 10% of the Fund s NAV Note 2 ; the value of the Fund s investments in transferable securities and money market instruments issued by any single issuer must not exceed 15% of the Fund s NAV Note 1 ; the value of the Fund s placement in deposits with any single institution must not exceed 20% of the Fund s NAV; the Fund s exposure from derivatives positions should not exceed the Fund s NAV. Further, the exposure to the underlying assets must not exceed the investment spread limits stipulated in the SC Guidelines; and the value of the Fund s over-the-counter (OTC) derivative transaction with any single counter-party must not exceed 10% of the Fund s NAV; the value of the Fund s investment in structured products issued by a single counter-party must not exceed 15% of the Fund s NAV; the aggregate value of the Fund s investments in transferable securities, money market instruments, deposits, OTC derivatives and structured products issued by or placed with (as the case may be) any single issuer/institution must not exceed 25% of the Fund s NAV Note 1 ; the value of the Fund s investment in units/shares of any collective investment scheme must not exceed 20% of the Fund s NAV (for CIMB-Principal ASEAN Equity Fund, the Fund may invest up to 30% of its NAV into CIMB FTSE/ASEAN 40 or other ETFs with similar objective); the value of the Fund s investment in transferable securities and money market instruments issued by any group of companies must not exceed 20% of the Fund s NAV. Note 1 Investment Concentration Limits Note 2 the Fund s investments in transferable securities (other than debentures) must not exceed 10% of the securities issued by any single issuer; the Fund s investments in debentures must not exceed 20% of the debentures issued by any single issuer; the Fund s investments in money market instruments must not exceed 10% of the instruments issued by any single issuer. This limit does not apply to money market instruments that do not have a pre-determined issue size; the Fund s investments in collective investment schemes not exceed 25% of the units/shares in any one collective investment scheme. Note 1 : Not applicable for CIMB-Principal Bond Fund and CIMB-Principal Strategic Bond Fund. Instead, the following apply: the value of the Fund s investments in debentures issued by any single issuer must not exceed 20% of the Fund s NAV. This single issuer limit may be increased to 30% if the debentures are rated by any domestic or global rating agency to be of the best quality and offer highest safety for timely payment of interest and principal; the value of the Fund s investments in debentures issued by any group of companies must not exceed 30% of the Fund s NAV. Where the single issuer limit is increased to 30%, the aggregate value of a fund s investment must not exceed 30%. Note 2 : For CIMB-Principal Lifecycle Funds, the Investment Concentration Limits will apply at the level of the umbrella fund. CIMB-Principal Money Market Income Fund and CIMB-Principal Deposit Fund are subject to the following investment restrictions/ limits: Exposure Limits The value of the Fund s investments in permitted investments must not be less than 90% of the Fund s NAV; The value of the Fund s investments in permitted investments which have a remaining maturity period of not more than 365 days must not be less than 90% of the Fund s NAV; The value of the Fund s investments in permitted investments which have a remaining maturity period of more than 365 days but fewer than 732 days must not exceed 10% of the Fund s NAV. Investment Spread Limits The value of the Fund s investments in debentures and money market instruments issued by any single issuer must not exceed 20% of the Fund s NAV. This single issuer limit may be increased to 30% if the debentures are rated by any domestic or global rating agency to be of the best quality and offer highest safety for timely payment of interest and principal; The value of the Fund s placement in deposits with any single financial institution must not exceed 20% of the Fund s NAV; The value of the Fund s investments in debentures and money market instruments issued by any group of companies must not exceed 30% of the Fund s NAV; Where applicable, the core requirements for non-specialised funds shall apply for any other type of investments. 127

132 Investment Concentration Limits A fund s investments in debentures must not exceed 20% of the securities issued by any single issuer; A fund s investments in money market instruments must not exceed 20% of the instruments issued by any single issuer; and A fund s investments in collective investment schemes must not exceed 25% of the units/shares in any collective investment scheme. CIMB-Principal Global Asset Spectra Fund is subject to the following investment restrictions/limits: Investment Spread Limits the Fund must be invested in at least five (5) collective investment schemes at all times; the value of the Fund s investments in units/shares of any collective investment scheme must not exceed 30% of the Fund s NAV. Investment Concentration Limit the Fund s investments in collective investment schemes must not exceed 25% of the units/shares in any collective investment scheme. CIMB-Principal Greater China Equity Fund, CIMB-Principal Climate Change Equity Fund, CIMB-Principal MENA Equity Fund and CIMB-Principal Asia Infrastructure Equity Fund are subject to the following investment restrictions/limits: the Fund must be invested in one (1) collective investment scheme; If the Fund ceases to comply with the above limitations on investments, the Manager should not make any further acquisitions to which the relevant limit is breached and must remedy the non-compliance as soon as practicable (maximum three (3) months from the date of the breach). Minimum requirement for liquid assets Liquid assets include cash, deposits with licensed financial institutions, money market instruments and debentures with a remaining maturity of less than one (1) year. CIMB-Principal Equity Fund, CIMB-Principal Equity Fund 2, CIMB-Principal Equity Aggressive Fund 1, CIMB-Principal Equity Aggressive Fund 3, CIMB-Principal Equity Growth Fund, CIMB-Principal Equity Growth & Income Fund, CIMB-Principal Equity Income Fund, CIMB-Principal Small Cap Fund, CIMB-Principal Balanced Fund, CIMB-Principal Balanced Income Fund, CIMB- Principal Income Plus Balanced Fund, CIMB-Principal Bond Fund, CIMB-Principal Strategic Bond Fund, CIMB-Principal ASEAN Equity Fund, CIMB-Principal Emerging Asia Fund and CIMB-Principal Global Titans Fund will hold a minimum of 2% of its Net Asset Value (or such other amount agreed by both the Manager and the Trustee from time to time) in liquid assets. CIMB-Principal Asia Infrastructure Equity Fund, CIMB-Principal Climate Change Equity Fund, CIMB-Principal Global Asset Spectra Fund, CIMB-Principal Greater China Equity Fund, CIMB-Principal Lifecycle Funds and CIMB-Principal MENA Equity Fund may hold up to 5% of its Net Asset Value (or such other amount agreed by both the Manager and the Trustee from time to time) in liquid assets. CIMB-Principal Asian Equity Fund, CIMB-Principal Global Growth Fund and CIMB-Principal Global Balanced Fund will hold a minimum of 0.5% of its Net Asset Value (or such other amount agreed by both the Manager and the Trustee from time to time) in liquid assets. 128

133 Valuation of authorized investments Valuation of fund will be carried out by the Manager in a fair manner in accordance with the applicable laws and guidelines. The valuation bases for the authorised investments of the Funds are as below: Listed securities The value of any authorized investments, which are quoted on an approved exchange, shall be calculated by reference to the last transacted price on that approved exchange. If there is no such transacted price, the value shall be determined by reference to the mean of bid and offer prices at the close of trading. Suspended securities will be valued at their last done price unless there is conclusive evidence to show that the value has gone below the suspended price or where the quotation of the securities has been suspended for a period exceeding 14 days, whereupon their fair value will be determined in good faith by the Manager based on the methods or bases approved by the Trustee after appropriate technical consultation. Unlisted securities As per the SC Guidelines, the value of unlisted securities shall be determined every fortnightly on the basis of fair value as determined in good faith by the Manager on methods or basis which have been verified by the auditor of the Fund and approved by the Trustee, and adequately disclosed in this section. The value of any unlisted RM-denominated bonds shall be calculated on a daily basis using prices quoted by a bond pricing agency (BPA) registered with the SC. Where such prices are not available or where the Manager is of the view that the price quoted by the BPA for a specific bond differs from the market price by more than 20 basis points, the Manager may use the market price by reference to the last available quote provided such quote was obtained within the previous 30 days and the Manager records its basis for using a non-bpa price, obtained necessary internal approvals to use the non-bpa price and keeps an audit trail of all decisions and basis for adopting the market yield. The valuation of securities not listed or quoted on a stock exchange but have been approved by the relevant regulatory authority for such listing or quotation and are offered directly to the Fund by the issuer shall be valued at the issue price of such securities. For unlisted derivative instruments, the value will be determined by the financial institution that issued the instrument. Collective investment schemes The value of any investment in collective investment schemes which are quoted on an approved exchange shall be calculated in the same manner as other listed securities described above. When investing in unlisted collective investment schemes, the value shall be determined by reference to the last published Net Asset Value per unit for that collective investment scheme. Deposits The value of any deposits placed with financial institutions and/or investments in money market instruments such as bankers acceptances and repurchase agreements shall be determined each day by reference to the nominal value of such authorized investments and the accrued income thereon for the relevant period. If the quotations referred to above are not available or if the value of the authorized investments determined in the manner described above, in the opinion of the Manager, does not represent a fair value of the authorized investments, then the value shall be any fair value as may be determined in good faith by the Manager. This valuation method shall be verified by the auditors of the Fund and approved by the Trustee. Where the value of an asset of the Fund (except EGIF) is denominated in a foreign currency, if any, the assets are translated on a daily basis to Ringgit Malaysia using the bid foreign exchange rate quoted by either Reuters or Bloomberg at 6:30 a.m. Malaysian time on the following day, as per the Federation of Investment Managers Malaysia Standard No. 004 (FMUTM/IMS(R&D)-004). Borrowings / Financing Unless approved/allowed by the SC, the Funds may not borrow cash or obtain cash financing or other assets in connection with its activities. However, the Funds may borrow cash for the purpose of meeting withdrawal requests for units and for short-term bridging requirements in accordance with the SC Guidelines. Securities lending The Funds may participate in the lending of securities within the meaning of the Guidelines on Securities Borrowing and Lending issued by the SC (as may be amended and/or updated from time to time) when the Manager finds it appropriate to do so with a view of generating additional income for the Funds with an acceptable degree of risk. The lending of securities is permitted under the Deeds and must comply with the above mentioned as well as with the relevant rules and directives issued by Bursa Malaysia, Bursa Malaysia Depository Sdn Bhd and Bursa Malaysia Securities Clearing Sdn Bhd. 129

134 Average Total Returns Funds Performance As at 31 May 2009, in % 1-Year 3-Year 5-Year 10-Year Since Inception CIMB-Principal Asia Infrastructure Equity Fund (23.14) (23.42) CIMB-Principal Climate Change Equity Fund (38.19) (24.53) CIMB-Principal MENA Equity Fund (46.17) (41.86) As at 30 June 2009, in % CIMB-Principal Equity Fund (4.25) CIMB-Principal Asian Equity Fund (7.72) (1.83) - - (3.90) As at 31 August 2009, in % CIMB-Principal Deposit Fund CIMB-Principal Balanced Income Fund CIMB-Principal Lifecycle (2.26) CIMB-Principal Lifecycle (4.44) CIMB-Principal Lifecycle 2027 (0.16) ) As at 31 October 2009, in % CIMB-Principal Equity Fund As at 30 November 2009, in % CIMB-Principal Equity Growth Fund As at 31 December 2009, in % CIMB-Principal Balanced Fund CIMB-Principal Equity Aggressive Fund CIMB-Principal Small Cap Fund CIMB-Principal Income Plus Balanced Fund CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Money Market Income Fund As at 31 January 2010, in % CIMB-Principal Equity Income Fund As at 28 February 2010 (29 February in the event of a leap year), in % CIMB-Principal Global Growth Fund (14.91) - - (4.37) CIMB-Principal Global Balanced Fund (15.31) - - (2.46) As at 31 March 2010, in % CIMB-Principal Global Titans Fund (19.93) (0.09) - - (4.49) CIMB-Principal Emerging Asia Fund As at 30 April 2010, in % CIMB-Principal Global Asset Spectra Fund (3.16) - - (2.32) CIMB-Principal Greater China Equity Fund (2.80) CIMB-Principal ASEAN Equity Fund (4.09) CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Aggressive Fund All performance figures have been verified by Mercer Zainal Consulting Sdn. Bhd. (35090-H) except for EF, EF2, EAF1, AEF and GGF, where the source is from Lipper. 130

135 Annual Total Returns Aa at 31 May 2009, in % CIMB-Principal Asia Infrastructure Equity Fund CIMB-Principal Climate Change Equity Fund CIMB-Principal MENA Equity Fund As at 30 June 2009, in % CIMB-Principal Equity Fund CIMB-Principal Asian Equity Fund As at 31 August 2009, in % CIMB-Principal Deposit Fund CIMB-Principal Balanced Income Fund CIMB-Principal Lifecycle 2017 CIMB-Principal Lifecycle 2022 CIMB-Principal Lifecycle 2027 As at 31 October 2009, in % CIMB-Principal Equity Fund 2 As at 30 November 2009, in % CIMB-Principal Equity Growth Fund As at 31 December 2009, in % CIMB-Principal Balanced Fund CIMB-Principal Equity Aggressive Fund 3 CIMB-Principal Small Cap Fund CIMB-Principal Income Plus Balanced Fund CIMB-Principal Bond Fund CIMB-Principal Strategic Bond Fund CIMB-Principal Money Market Income Fund As at 31 January 2010, in % CIMB-Principal Equity Income Fund 1-Year 2-Year 3-Year 4-Year 5-Year 6-Year 7-Year 8-Year 9-Year 10-Year Since Inception (16.46) (39.91) (44.98) (37.56) (4.25) (6.04) (25.20) (5.39) (7.11) (4.95) (4.76) 2.28 (9.42) (9.24) (0.16) (12.90) (12.76) (9.72) (10.91) (11.23) (14.23) (17.77) (0.62) (11.40) As at 28 February 2010 (29 February in the event of a leap year), in % CIMB-Principal Global Growth Fund CIMB-Principal Global Balanced Fund As at 31 March 2010, in % (37.71) (11.88) (17.42) (27.60) (4.89) (9.63) 131

136 CIMB-Principal Global Titans Fund CIMB-Principal Emerging Asia Fund As at 30 April 2010, in % CIMB-Principal Global Asset Spectra Fund CIMB-Principal Greater China Equity Fund CIMB-Principal ASEAN Equity Fund CIMB-Principal Equity Growth & Income Fund CIMB-Principal Equity Aggressive Fund 1 1-Year 2-Year 3-Year 4-Year 5-Year 6-Year 7-Year 8-Year 9-Year 10-Year Since Inception (19.93) (9.10) (2.47) (35.45) (1.38) (6.88) (9.19) (7.82) (7.72) (10.20) All performance figures have been verified by Mercer Zainal Consulting Sdn. Bhd. (35090-H) except for EF, EF2, EAF1, AEF and GGF, where the source is from Lipper. Basis of calculation and assumptions made in calculating the returns NAV t NAV t-1 Percentage growth = NAV t _ Number of Periods per Year Total Number of Periods Performance annualized = (1 + Percentage growth)

137 Funds performance against benchmark These tables describe the performance of the Funds and comparison with the selected benchmark for the last financial year end: As at 31 May 2009, in % CIMB-Principal Asia Infrastructure Equity Fund 15.00% 10.00% 5.00% 0.00% -5.00% % % % % % % % % % YTD 1 month 3 Month 6 Month 9 Month 12 Month Since inception For the financial year ended 31 May 2009, the Fund fell by 23.14% underperforming its benchmark by 2.1% as the regional markets succumbed to the subprime crisis in the United States. CIMB-Principal Asia Insfrastructure Fund MSCI AC Asia Pacific ex Japan ND Index CIMB-Principal Climate Change Equity Fund 10% 5% 0% YTD 1 month 3 Month 6 Month 9 Month 12 Month Since inception -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% -55% -60% For the financial year ended 31 May 2009, the Fund was down 38.2% during the period under review as global markets succumbed to the sub-prime crisis in the United States. Climate Change Equity Fund Benchmark CIMB-Principal MENA Equity Fund 15.00% 10.00% 5.00% 0.00% -5.00% % % % % % % % % % % YTD 1 mt h 3 mt h 6 mth 9 mth SinceInc For the financial year ended 31 May 2009, the Fund fell 46.7% during the period under review as global markets succumbed to the sub-crisis in the United States and crude oil prices plunged from a high of USD145 to US35 per barrel on a drop in demand because of the global recession. CIM B-Principal M ena Equity Fund 10% pa 133

138 As at 30 June 2009, in % CIMB-Principal Equity Fund 180% 160% For the financial year ended 30 June 2009, the Fund fell by 4.25%, in the 1-year to June 2009, outperforming the benchmark by 5.13%. 140% 120% 100% 80% 60% 40% 20% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years 5 Years Since inception CIMB-Principal Equity Fund FTSE Bursa Malaysia Top 100 Index CIMB-Principal Asian Equity Fund 50% 40% For the financial year ended 30 June 2009, the Fund fell by 7.72% outperformed its composite benchmark by 7.12% during the year. 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years Since inception -10% -20% -30% CIMB-Principal Asian Equity Fund MSCI All Country Asia ex Japan Index As at 31 August 2009, in % CIMB-Principal Balanced Income Fund 160% 140% 120% 100% 80% 60% 40% For the financial year ended 31 August 2009, the Fund recorded 9.80% in capital gains for the period under review, outperforming the benchmark by 3.84%. The market bottomed in October/November 2008 and was on a sustained uptrend since March Given that we progressively increased weightings closer to end-2008 onwards, the Fund benefitted from the market rally in Over the longer periods, the Fund had managed to outperform the benchmark (excluding the 5-year period when it underperformed by 1.24%), as shown in the chart below. 20% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Year 5 Year Since inception CIMB-Principal Balanced Income Fund 60% FBM % CIMB Bank 1-Month Fixed Deposit Rate * Effective 6 July 2009, the KLCI benchmark for this Fund was discontinued and has been replaced by the FTSE Bursa Malaysia KLCI. As a result of its larger stock universe, this Fund has been replaced with the following: 60% FBM % CIMB Bank 1-month Fixed Deposit Rate 134

139 CIMB-Principal Deposit Fund 16% 14% For the financial year ended 31 August 2009, the Fund generated a return of 2.55% against the benchmark of 1.92%. Hence, a slight outperformance of 0.63%. 12% 10% 8% 6% 4% 2% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Years Since inception CIMB-Principal Deposit Fund CIMB Bank Overnight Rate CIMB-Principal Lifecycle % 25% 20% For the financial year ended 31 August 2009, the Fund posted a growth of 4.36% while the benchmark rose by 0.41%. Since inception however, the Fund is still 2.26% lower. 15% 10% 5% 0% -5% YTD 1 month 3 Month 6 Month 9 Month 12 Month Since inception -10% -15% -20% CIMB-Principal Lifecycle Fund 2017 Quant shop MGS All Bond Index (35%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (35%) CIMB-Principal Lifecycle % 35% 30% 25% For the financial year ended 31 August 2009, the Fund posted a growth of 2.28% while the benchmark rose by 0.78%. Since inception however, the Fund is still 4.44% lower. 20% 15% 10% 5% 0% -5% YTD 1 month 3 Month 6 Month 9 Month 12 Month Since inception -10% -15% -20% CIMB-Principal Lifecycle Fund 2022 Quant shop MGS All Bond Index (30%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (40%) CIMB-Principal Lifecycle % 35% 30% 25% 20% 15% 10% 5% 0% YTD 1 month 3 Month 6 Month 9 Month 12 Month Since inception -5% -10% -15% -20% -25% -30% For the financial year ended 31 August 2009, the Fund posted a decline of 0.16% while the benchmark declined by 1.98%. Since inception however, the Fund is still 6.19% lower. CIMB-Principal Lifecycle Fund 2027 Quant shop MGS All Bond Index (25%) + FTSE Bursa Malaysia Top 100 Index (30%) + FTSE All-World Index (45%) 135

140 As at 31 October 2009, in % CIMB-Principal Equity Fund 2 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% For the financial year ended 31 October 2009, the Fund recorded a total return of 45.16% while the benchmark posted an increase of 43.96%. This represents an outperformance of 1.2%. * Effective 6 July 2009, the KLCI benchmark for this Fund was discontinued and has been replaced by the FTSE Bursa Malaysia KLCI. As a result of its larger stock universe, this Fund s benchmark has been replaced with the following: FTSE Bursa Malaysia Top 100 Index. 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years 5 Years Since inception CIMB-Principal Equity Fund 2 FTSE Bursa Malaysia Top 100 Index As at 30 November 2009, in % CIMB-Principal Equity Growth Fund 80% 70% 60% 50% 40% 30% 20% For the financial year ended 30 November 2008, the Fund gained 55.30% for the year, marginally underperformed its benchmark of 56.01%. On the longer term basis of 3-years, the Fund out-performed its benchmark by 9.03%. Since inception, the Fund has out-performed its benchmark by 8.46%. * Effective 6 July 2009, the benchmark for this Fund has been replaced with the following: 50% FTSE Bursa Malaysia KLCI + 50% MSCI AC Asia ex Japan. This is because the previous benchmark, KLCI was discontinued. 10% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Year 5 Year Since inception CIMB-Principal Equity Growth Fund 50% FTSE Bursa Malaysia KLCI + 50% MSCI AC Asia ex Japan As at 31 December 2009, in % CIMB-Principal Balanced Fund 240% 220% 200% 180% For the financial year ended 31 December 2009, the Fund gained 42.47% for the year, outperforming its benchmark by 11.67%. On the longer term basis of 3 years, the Fund outperformed its benchmark by 3.60%. 160% 140% 120% 100% 80% 60% 40% 20% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Years 5 Years Since Inception CIMB-Principal Balanced Fund 70% FBM % CIMB Bank 1-Month Fixed Deposit Rate 136

141 CIMB-Principal Equity Aggressive Fund 3 250% 200% For the financial year ended 31 December 2009, the Fund gained 55.10% for the year, outperforming its benchmark by 6.19%. On the longer term basis of 3 years, the Fund outperformed its benchmark by 4.64%. 150% 100% 50% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Years 5 Years Since Inception CIMB-Principal Equity Aggressive Fund 3 FTSE Bursa Malaysia Top 100 Index CIMB-Principal Small Cap Fund 70% 60% 50% 40% 30% For the financial year ended 31 December 2009, the Fund increased 41.0% as compared with the benchmark s rise of 55.1%. Therefore, the Fund underperformed the benchmark by 14.1%. The underperformance was due mainly to the sharp rebound in small and illiquid small cap stocks where the fund is underweighted. Over the last 3 years, the Fund has risen 26.1, averaging 8.0% per annum. The Fund has therefore met its objective of consistent capital growth over the medium to long term. 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 year 5 year Since Inception CIMB-Principal Small Cap Fund FTSE Bursa Malaysia Small Cap Index CIMB-Principal Income Plus Balanced Fund 160% 140% 120% For the financial year ended 31 December 2009, the Fund gained 23.92% for the year, outperforming its benchmark by 6.16%. On the longer term basis of 3 years, the Fund outperformed its benchmark by 0.77%. 100% 80% 60% 40% 20% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Years 5 Years Since Inception CIMB-P Income Plus Balanced Fund 40% FBM % CIMB Bank 1-Month Fixed Deposit Rate 137

142 CIMB-Principal Bond Fund 140% 120% 100% For the financial year ended 31 December 2009, the Fund achieved a total return of 8.43% compared to the benchmark Quant Shop MGS Bond Index (medium sub-index) return of 1.51%. 80% 60% 40% 20% 0% YTD 1 month 3 month 6 month 1 Year 3 Year 5 Year Since Inception CIMB-Principal Bond Fund Quant shop MGS Bond Index (Medium Sub-Index) CIMB-Principal Strategic Bond Fund 50% 40% For the financial year ended 31 December 2009, the Fund had a positive return of 7.71% compared to its benchmark which also had a positive return of 1.51%. Hence, there was an outperformance of 6.20%. 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 year 5 year Since Inception CIMB-Principal Strategic Bond Fund Quant shop MGS Bond Index (Medium Sub-Index) CIMB-Principal Money Market Income Fund 20% 18% 16% 14% For the financial year ended 31 December 2009, the Fund consistently outperformed the benchmark by a fair margin over all periods of comparison (1-, 2-, 3- year basis and since inception). In 2009, the Fund generated a return of 3.64% against the benchmark 1.09%. 12% 10% 8% 6% 4% 2% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years 5 Years Since Inception CIMB-Principal Money Market Income Fund CIMB Bank Overnight Rate As at 31 January 2010, in % CIMB-Principal Equity Income Fund 80% 70% 60% 50% 40% 30% 20% For the financial year ended 31 January 2010, the Fund achieved a positive return of 37.78% outperforming its benchmark which also had a positive return of 34.88%. * Effective 6 July 2009, the KLCI benchmark for this Fund was discontinued and has been replaced by the FTSE Bursa Malaysia KLCI. As a result of its larger stock universe, this Fund s benchmark has been replaced with the following: 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan. 10% 0% YTD 1 Month 3 Month 6 Month 12 Month 3 Years 5 Years Since inception -10% CIMB-Principal Equity IncomeFund 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan 138

143 As at 28 February 2010 (29 February in the event of a leap year), in % CIMB-Principal Global Growth Fund 40% 30% 20% 10% For the financial year ended 28 February 2010, the Fund returned 31.87%, while the benchmark rose 42.07%. Consequently, the fund underperformned the benchmark by 10.20%. Since inception, the fund has a return of %, compared to the benchmark s performance of %. 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years Since inception -10% -20% -30% CIMB-Principal Global Grow th Fund MSCI All Country World Index CIMB-Principal Global Balanced Fund 20% 15% For the financial year ended 28 February 2010, the Fund returned 16.22%, while the benchmark returned 19.25%. Consequently, the fund underperformed the benchmark by 3.03%. 10% 5% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years Since inception -5% -10% -15% CIMB-Principal Global Balanced Fund 55% MSCI All Country World Index + 45% JP Morgan Global Government Bond Index As at 31 March 2010, in % CIMB-Principal Global Titans Fund 30% 25% 20% 15% 10% 5% 0% -5% -10% YTD 1 month 3 Month 6 Month 12 Month 3 years Since Inception For the financial year ended 31 March 2010, the Fund had a return of 15.61% compared to its benchmark which had a return of 25.01%. Hence, there was a slight underperformance of 9.4%. * Effective 1 July 2010, the benchmark for this Fund will be replaced with the following: 42% S&P % MSCI Europe + 12% MSCI Japan + 10% CIMB Bank 1-month Fixed Deposit Rate. The cash portion in the benchmark has been re-based to 10% because the original 25% in cash is translating into some negative drag in the performance of the Fund. -15% -20% CIMB-Principal Global Titans Fund 42% S&P % MSCI Europe + 12% MSCI Japan + 10% CIMB Bank 1-Month FDR 139

144 CIMB-Principal Emerging Asia Fund 60% 50% For the financial year ended 31 March 2010, the Fund had a positive return of 41.80% compared to its benchmark which also had a positive return of 53.38%. Hence, there was an underperformance of 11.58%. 40% 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 Years Since Inception -10% -20% CIMB-Principal Emerging Asia Fund MSCI All Country Asia ex Japan Index As at 30 April 2010, in % CIMB-Principal Global Asset Spectra Fund 25% 20% 15% For the financial year ended 30 April 2010, the Fund had a positive return of 15.69% compared to its benchmark which also had a positive return of 17.45%. Hence, there was an underperformance of 1.76%. 10% 5% 0% -5% YTD 1 month 3 Month 6 Month 12 Month 3 Years Since Inception -10% -15% -20% -25% CIMB-Principal Global Asset Spectra Fund MSCI World Index (25%) + JP Morgan Global Government Bond Index (25%) + S&P/Citigroup BMI Property Index (25%) + S&P GSCI Total Return Index (25%) CIMB-Principal Greater China Equity Fund 40% 30% For the financial year ended 30 April 2010, the Fund had a positive return of 30.10% compared to its benchmark, which also had a positive return of 23.11%. Hence, there was an outperformance of 6.99%. 20% 10% 0% YTD 1 month 3 Month 6 Month 9 Month 12 Month Since Inception -10% -20% CIMB-Principal Greater China Equity Fund MSCI Golden Dragon CIMB-Principal ASEAN Equity Fund 60% 50% 40% For the financial year ended 30 April 2010, the Fund had a positive return of 45.54% compared to its benchmark, which also had a positive return of 48.16%. Hence, there was an underperformance of 2.62%. 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 9 Month 12 Month 2 Years Since inception -10% -20% CIMB-Principal ASEAN Equity Fund FTSE/ASEAN 40 Index 140

145 CIMB-Principal Equity Growth & Income Fund 180% 160% 140% During the financial year under review, the Fund had a positive return of 41.18% compared to its benchmark, which also had a positive return of 34.88%. Hence, there was an outperformance of 6.30%. 120% 100% 80% 60% 40% 20% 0% -20% YTD 1 Month 3 Month 6 Month 12 Month 3 Year 5 Year Since inception CIMB-Principal Equity Growth & Income Fund 50% FTSE Bursa Malaysia Top 100 Index + 50% MSCI AC Asia ex Japan CIMB-Principal Equity Aggressive Fund 1 100% 90% 80% During the financial year under review, the Fund had a positive return of 19.19% compared to its benchmark, which also had a positive return of 14.60%. Hence, there was an outperformance of 4.59%. 70% 60% 50% 40% 30% 20% 10% 0% YTD 1 month 3 Month 6 Month 12 Month 3 year 5 year Since inception CIMB-Principal Equity Aggressive Fund 1 FTSE Bursa Malaysia KLCI 141

146 This table describes the performance of the Target Funds against their respective benchmarks as at the latest Financial Year End of their respective Feeder Funds. Schroder ISF Greater China (Target Fund of CIMB-Principal Greater China Equity Fund) As at 30 April 2010 It was an exceptionally strong year for Greater China equities. Greater China equities started with a strong recovery as fears about a global financial meltdown dissipated on signs that the world economy was stabilising. With the return of risk appetite, those stocks that had been hit the hardest in 2008 led the rally fuelled by a better tone to global macro data and strong liquidity conditions created by unprecedented interest rate cuts and fiscal stimulus packaged by central banks and governments around the world. Greater China equities finished the first four months in 2010 lower as fears about future monetary tightening weighed heavily on sentiment. Investors were initially rattled by an earlier-than-expected increase in banks reserve requirements in January, which was followed by another hike in February, leading to worries that this is the start of significant curbs to cool the economy. Further afield, concerns about sovereign risk in the eurozone added to the cautionary mix. The fund registered a very strong return over the review period and outperformed the benchmark comfortably. Our strong stock selection in industrials had the most positive impact on relative returns. On the other hand, relative performance was dented by our overweight position in telecom names. Our stock selection in materials also held back relative gains. The current uncertainties should serve as a reminder about the fragility of the global recovery, and we would expect to see increased volatility in the near term. While this presents a difficult backdrop for investors, we think that there are still areas of the market that offer value, so we will take advantage of any market weakness to add to some of our favoured long-term names. Currently, we remain positive on domestically focused companies with strong business franchises and good visible and sustainable earnings. These companies, in our view, should be better positioned to cope with the uncertainties while still benefiting from the region s positive consumption and capital spending trends. DWS Invest Climate Change (Target Fund of CIMB-Principal Climate Change Equity Fund) DWS Invest Climate Change (FC share class) MSCI World May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 As at 30 April 2010 The escalation of the Greek sovereign debt crisis intensified volatility in the financial markets this month, even as corporate earnings and economic releases offered fresh evidence that the global recovery is on track. Initially, equities set fresh 18 month highs in the middle of April, but uncertainty about the Greek debt crisis, expectations of further monetary tightening from China to slow its growth rate, and news of charges against Goldman Sachs by US regulators led to profit taking in the final days of the month. The Euro sank to its lowest in one year against the Dollar. The energy sector sold off on news of the disastrous oil spill in the Gulf of Mexico. In the month of April the DWS Climate Change fund gained 1.27%, roughly in-line with the 1.6% increase of the MSCI World index During the last four weeks we 142

147 increased our cash position in the fund to about 4% from 1.5%. We expect that the increased uncertainty in the markets, accompanied by heightened volatility, will produce investment opportunities. We intend to invest this cash on days of weakness. Invesco Asia Infrastructure Fund (Target Fund of CIMB-Principal Asia Infrastructure Equity Fund) As at 30 April 2010 After one of the worst years in 2008, Asia Pacific ex Japan markets ended the year on a strong note, with the region surging +73.2% (USD terms) as measured by MSCI AC Asia Pacific ex Japan. Crediting to the aggressive loosening of monetary policy and rapid improvement in economic fundamentals, Asian markets have significantly outpaced that of the developed world in terms of yearly returns, with cyclical sectors such as consumer discretionary, IT and material sectors being the best performing sectors for the year. Against this backdrop, the Fund (C class) returned 48.6% for the year 2009, expressed in USD terms. For the year of 2009, the Fund s relative underperformance against the reference index can mainly be attributed to the insignificant exposure in cyclical sectors that have little relations to infrastructure. With IT and consumer discretionary sectors returning +112% and +108% respectively in 2009 as a cyclical recovery play, the Fund s significantly underweighting in technologyrelated companies in Korea, Taiwan, India and China detracted value. Looking ahead, we remain positive on the Asian markets outlook in 2010, amid abundant liquidity, supportive government policies, and encouraging developments on the external front. Ocean Fund / Equities MENA Opportunities (Target Fund of CIMB-Principal MENA Equity Fund) 120% 100% 80% 60% 40% 20% As at 31 May 2010 Over the period from end May 2009 to end May 2010, the Fund return % due to positive performance of our Saudi petrochemicals, consumers as well as Qatari utilities holdings. Year to date, the Fund returned 0.92% as Qatari banks, Utilities as well as Saudi consumers holdings positively contributed to the portfolio. 0% 3/13/2008 4/13/2008 5/13/2008 6/13/2008 7/13/2008 8/13/2008 9/13/ /13/ /13/ /13/2008 1/13/2009 2/13/2009 3/13/2009 4/13/2009 5/13/2009 6/13/2009 7/13/2009 8/13/2009 9/13/ /13/ /13/ /13/2009 1/13/2010 2/13/2010 3/13/2010 4/13/2010 5/13/2010 OCEAN FUND EQUITIES MENA OPPORTUNITIES X 143