Section I: General Questions

1. What is the Default Investment Strategy (“DIS”)?

   DIS is a ready-made investment arrangement mainly designed for those members who are not interested or do not wish to make an investment choice, and is also available as an investment choice itself, for members who find it suitable for their own circumstances. For those members who do not make an investment choice, their future contributions and accrued benefits transferred from another MPF scheme (collectively the “Future Investments”) will be invested in accordance with the DIS. The DIS is required by law to be offered in every MPF scheme and is designed to be substantially similar in all MPF schemes.

2. What are the main features of DIS?

   The key features of the DIS are included:

   • Each MPF scheme provides two constituent funds that meet the requirements of the Ordinance for the purpose of the members who opt to invest in the DIS:
     The DIS consists of two constituent funds under each scheme, namely, the Core Accumulated Fund (“CAF”) and the Age 65 Plus Fund (“A65F”). The CAF is a mixed assets constituent fund with higher risk, while the A65F is a mixed assets constituent fund with lower risk. For the investment objectives and strategies of these two constituent funds, please refer to the offering document of the relevant MPF schemes.
   • De-risking mechanism:
     This mechanism aims at adjusting the proportion of members investing in higher and lower risk assets in accordance with the age of individual members. The DIS will automatically reduce the risk of investing in higher-risk assets as members’ age and invest in lower-risk assets accordingly to manage investment risk. Please refer to Question 3 for details.
   • Fee control mechanism:
     The total amount of the fees (including the out-of-pocket expenses) of the CAF, A65F or DIS which paid by the members of the DIS shall not exceed the percentage prescribed in the legislation. Please refer to Question 6 for details.

3. How does the "De-risking mechanism" actually work?

   Such de-risking is to be achieved by way of reducing the holding in the CAF and increasing the holding in the A65F over time. The asset allocation stays the same up until 50 years of age, then reduces steadily until age 64, after which it stays steady again. In summary, under the DIS:

   • When a member is below the age of 50, all existing accrued benefits and Future Investments will be invested in the CAF.
   • When a member is between the ages of 50 and 64, all existing accrued benefits and Future Investments will be invested according to the allocation percentages between the CAF and A65F as shown in DIS de-risking table below. The de-risking on the existing accrued benefits and Future Investments will be automatically carried out as described above.
   • When a member reaches the age of 64, all existing accrued benefits and Future Investments will be invested in the A65F.

   DIS De-risking Table:

   Age	CAF	A65F
   Below 50	100.0%	0.0%
   50	93.3%	6.7%
   51	86.7%	13.3%
   52	80.0%	20.0%
   53	73.3%	26.7%
   54	66.7%	33.3%
   55	60.0%	40.0%
   56	53.3%	46.7%
   57	46.7%	53.3%
   58	40.0%	60.0%
   59	33.3%	66.7%
   60	26.7%	73.3%
   61	20.0%	80.0%
   62	13.3%	86.7%
   63	6.7%	93.3%
   64 and above	0.0%	100.0%

4. When will the DIS come into effect?

   DIS becomes effective on 1 April 2017 (“Effective Date”).

5. What is the impact of the DIS on pre-existing account (refer to MPF account set up before the Effective Date) under the scheme?

   In respect of pre-existing accounts set up before 1 April 2017, depending on whether the members have previously made any fund choices, it may affect such members in different ways.

   • If members have already given a valid investment instruction for the accrued benefits and Future Investments in pre-existing account or members are 60 years old or above before the Effective Date, such members will not be affected by the implementation of the DIS.
   • If members who joined an MPF scheme before 1 April 2017 and their pre-existing account with all accrued benefits being invested into the existing default fund but no investment instruction being given, a special rules and arrangements will be applied in due course to determine whether accrued benefits in such account will be transferred to the DIS. The relevant members will receive a notice called the DIS Re-investment Notice (only apply to members who are under or becoming 60 years of age on the Effective Date). The relevant member may follow the guidance of notice to provide a specified investment instruction to the Trustee within a specific timeline. If relevant scheme member does not reply before the deadline, his/her MPF accrued benefits and/or Future Contributions will be invested according to the DIS automatically. Please refer to the DIS Re-investment Notice for details of the arrangement.
   • If part or none of the accrued benefits of members’ pre-existing account was invested in the existing default fund, unless the Trustee has received any investment instructions, their accrued benefits will be invested in the same manner as accrued benefits were invested immediately as at 31 March 2017. The members’ future contributions which received on or after 1 April 2017 will be invested in DIS, until the Trustee has received specific investment instructions from scheme members.
   • For the member accounts that were merged from BOC-Prudential Flexible Mandatory Provident Fund Scheme into BOC-Prudential Easy-Choice Mandatory Provident Fund Scheme due to scheme restructuring, the relevant member accounts will be arranged as follows:
     • If member’s benefits under the account are only invested in the existing default fund of the scheme (i.e. only investing in BOC-Prudential MPF Conservative Fund) upon scheme restructuring , and all accrued benefits are invested in the existing default fund of Easy-Choice Scheme as at 31 March 2017, the relevant member will receive a notice called the DIS Re-investment Notice (only apply to members who are under or becoming 60 years of age on the Effective Date). The relevant member may follow the guidance of notice to provide a specific investment instruction to the Trustee within a specific timeline. If relevant scheme member does not reply before the deadline, his/her MPF accrued benefits and/or Future Contributions will be invested according to the DIS automatically. Please refer to the DIS Re-investment Notice for details of the arrangement; or
     • For a member’s Pre-existing Account which as at 31 March 2017 has all or part of the accrued benefits in it invested in constituent funds other than the existing default fund after scheme restructuring, his/her accrued benefits and future mandate will remain unchanged after implementation of DIS on 1 April 2017.

6. What are the charges for the DIS?

   Under the law, management fees chargeable to the DIS funds (CAF or A65F) must not, in a single day, exceed a daily rate of 0.75% per annum of the net asset value of each of the DIS Funds divided by the number of days in the year, while fees for recurrent operational expenses are capped at 0.2% in a single year.

Section II: DIS’s operation and other important notes

Part A: Opt to DIS

1. What circumstances will members' contributions be invested in the DIS?

   Apart from the member's own choice, if the member does not provide a valid investment portfolio, including but not limited to (1) failure to submit a valid application form; or (2) not having a valid investment portfolio on the application form, for example, the total percentage is not equal to 100% or the percentage of individual fund choices (including the percentage invested in the DIS) is less than 5%, the percentage of fund selected (including the percentage invested in the DIS) is not an integer), then the member’s investment portfolio will adopt the DIS.

2. How to operate if I did not provide a date of birth and chose the DIS as my portfolio?

   If a member does not provide a date of birth on the member's application form, his/her portfolio will be fully invested in the A65F as default.

3. Can I customize the percentage of CAF and A65F as my portfolio, apart from selecting a DIS?

   Members can customize the percentage of CAF and A65F as portfolios, but this investment instruction will not be considered as the DIS, so the de-risking mechanism will not apply (i.e. will not adjust the asset portfolios in accordance with DIS De-risking Table).

Part B: De-risking mechanism

1. When will the asset allocation be adjusted in accordance with the de-risking mechanism under the DIS?

   When the members are aged between 50 and 64, the accrued benefits of the existing DIS will be allocated on the basis of the percentage of setting of the "DIS De-risking Table" on the member's birthday each year. If the member's birthday is not the trading day, the adjustment mechanism will be postponed to the next trading day. If the member's birthday is 29 February and the relevant year is not a leap year, the adjustment mechanism will be postponed to 1 March or the next trading day.

   When one or more of the specified instructions (including but not limited to redemption or switching instructions) are being processed on the annual date of de-risking for a relevant member, the annual de-risking will only take place after completion of these instructions where necessary.

2. Will I be notified before and after the yearly adjustment of asset allocation?

   Aged below 50, the DIS asset allocation will remain unchanged. If members hold the DIS funds, the members will be notified about 60 days before their 50th birthday by providing the members with the "DIS De-risking Table" with asset allocation percentage for reference, but there will not be notified between the aged 51 and 64. For each auto-adjusting asset allocation of DIS, there will be related statement sending to members.

3. If market conditions are not good, can I request to stop auto-adjusting asset allocation?

   No. In the DIS, the auto-adjusting asset allocation will continue to be effective until the members reach 65 years old.

Part C: Rebalancing of investment account balances

1. What should I do if I want to choose a DIS?

   Members can choose DIS as one of their investment options through telephone interactive voice system, online system or submitting the Change of Investment Fund Instruction Form, including changing the future contributions or rebalancing of existing investment accounts balance.

2. If I choose the DIS, can I choose other constituent funds?

   Yes, the member can choose the DIS as one of the fund options. For example, 50% of the DIS and 50% of other constituent funds.

3. What funds will I invest if I choose to rebalance my investment portfolios to the DIS?

   On the trading day of rebalancing, the CAF and the A65F will be reallocated the percentage according to the member’s age at the time and the de-risking mechanism which mentioned in the Question 3 of Section I.

Part D: Asset switch-in and switch-out

1. Can I submit a fund switching instruction to change the asset from DIS and reallocate to other investment options?

   Yes. Members may submit the fund switching instruction at any time by telephone interactive voice system, online system or by filling in the form.

2. Can I submit a fund switching instruction to change the assets from other investment options and reallocate to DIS?

   Yes. Members may submit the fund switching instruction at any time by telephone interactive voice system, online system or by filling in the form.

3. If I submit a fund switching instruction to change the asset from DIS and reallocate to other investment options, can I specify the transfer-out percentage of CAF and A65F?

   No, after submitted the fund switching instruction, the transfer-out units from CAF and/or A65F will be redeemed by proportion based on the asset allocation ratio of CAF and/or A65F by the end of the processing date.

4. If I submit a fund switching instruction to change the asset from another investment option and reallocate to the DIS, can I specify the allocation percentage of CAF and A65F?

   No, as the percentage of asset allocation of CAF and A65F will be different according to age. Please refer to the “DIS De-risking Table” for detail arrangement. (For example, if the member aged below 50, the transfer-out assets from other investment option will be 100% invested in the CAF under the current account).

5. Can I choose to switch-in or switch-out of DIS at any time?

   Members may make their investment choice at their own discretion at any time to switch-in or switch-out of DIS according to the scheme rules.

Part E: Account termination or Claim

1. If I have submitted a claim form, whether the auto-adjusting asset allocation of DIS will be stopped automatically?

   No, unless the claim procedure is completed, the member does not hold any unit of the DIS funds.

2. If partial claim was made (e.g. LSP, terminal illness, etc.), whether the auto-adjusting asset allocation of DIS will be stopped to process on the remaining assets?

   No, the auto-adjusting asset allocation of DIS will continue to process based on the age unless the account has terminated or no unit hold under the DIS funds.

3. Will the DIS stop if the employer has already reported the notice of termination to trustee?

   No, unless the account is terminated or no unit holds under the DIS funds, the auto-adjusting asset allocation of DIS will continue to process based on the age.