principal smart equity fund - application form

8/8/2019 Principal SMART Equity Fund - Application Form

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(An open ended equity scheme)

[Offer of Units of`10/- each for cash during the New Fund Offer period andContinous offer for Units at NAV based prices]

KEY INFORMATION MEMORANDUM

&

APPLICATION FORM

New Fund Offer Opens on : November 26, 2010

New Fund Offer Closes on : December 10, 2010

This Key Information Memorandum (KIM) sets forth the information, which a prospective investor ought to

know before investing. For further details of the scheme/Mutual Fund, due diligence certificate by

the AMC, Key Personnel, investors' rights & services, risk factors, penalties & pending litigations

etc. investors should, before investment, refer to the Scheme Information Document and

Statement of Additional Information available free of cost at any of the Investor Service Centres

or distributors or from the website www.principalindia.com

The aforesaid SID & SAI are to be read with the addendums, if any issued by the Fund from time

to time. The Scheme particulars have been prepared in accordance with Securities and Exchange

Board of India (Mutual Funds) Regulations 1996, as amended till date, and filed with Securities

and Exchange Board of India (SEBI). The units being offered for public subscription havenot been approved or disapproved by SEBI, nor has SEBI certified the accuracy or adequacy of

this KIM.

+ (Not an Official Point of Acceptance)

Scheme re-opens for continuous sale and repurchase:

within 5 Business Days from the Date of Allotment

Mutual Fund Principal Mutual Fund

Maker Bhavan - II, 1st Floor, 18, Sir Vithaldas Thackersey Marg,

New Marine Lines, Mumbai- 400 020

Asset Management Company Principal Pnb Asset Management Company Private Limited

Exchange Plaza, 'B' Wing, 2nd Floor, NSE Building,

Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.+

Principal SMART Equity Fund


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Investment Objective The primary objective of the scheme is to seek to generate long term capital appreciation with relatively lower volatility

through systematic allocation of funds into equity; and in debt /money market instruments for defensive purposes. The

Scheme will decide on allocation of funds into equity assets based on equity market Price Earning Ratio (PE Ratio) levels.

When the markets become expensive in terms of 'Price to Earnings' Ratio'; the Scheme will reduce its allocation to equities

and move assets into debt and/or money market instruments and vice versa.

Asset Allocation Pattern Under normal circumstances, the asset allocation of the Scheme will be as under:

of the scheme Type of Instrument(s) (% of Net Assets) Risk Profile

Minimum Maximum

Equity & Equity Related Instruments of Large Cap Companies 0 100 Medium to High

Debt or Money Market Securities and/or units of money market/ 0 100 Low to Mediumliquid schemes of Principal Mutual Fund

Investment in derivatives shall be upto 50% of the net assets of the Scheme. Deployment upto 50% of its total net assets of

the Scheme in Stock Lending, subject to the SEBI regulations.

The Scheme has no intention to invest in Securitised Debt.

Large Cap Stocks are defined as stocks with market cap equal to or above the market cap of the lowest market cap stock

of the BSE 100 Index and which may or may not be a constituent of the BSE 100 Index at the time of investment. The

universe may also include Initial Public Offerings whose market capitalization would be as per the above-mentioned

criteria. This large cap cutoff will be so determined taking into account the full market cap range of the BSE 100 index at

the end of every calendar quarter. Such market cap range once determined at quarter-end will apply to all investment

decisions made during the following quarter. The market cap criteria will apply only at the time of making investment

decision. If a stock so qualifies for investment based on above market cap criteria at the time of investment; the fund may

continue to hold the stock irrespective of market cap movement of the stock subsequent to investment in the stock.

The lower end of the full market cap of BSE 100 Index as on September 30, 2010 was ` 3,569 crore.

Risk Profile of the Scheme Mutual Fund units involve investment risks including the possible loss of principal. Please read the SID carefully for details

on risk factors before investment. Scheme specific Risk Factors are summarized below:

A portfolio managed on PE ratios may not outperform a fully invested portfolio even at the peak of a bull market.

Plans & Options The Scheme has two options: Growth and Dividend Option.

Further, the Dividend Option will have the facility of Payout, Re-investment & Sweep.

Applicable NAV Cut Off Time For Subscriptions / Switch-in : In respect of valid applications received upto 3.00 p.m. by the fund

(After the Scheme opens for along with a local cheque or a demand draft payable at par at the Official Point of Acceptance of Transactions

repurchase and sale) where it is received, the closing NAV of the day on which the application has been received shall be applicable.

In respect of valid applications received after 3.00 p.m by the Fund along with a local cheque or a demand draft payable at

par at the Official Point of Acceptance where it is received, the closing NAV of the next business day shall be applicable

In respect of the valid applications received with an outstation demand draft payable on par at the Official Points ofAcceptance of Transactions where the application is received, the closing NAV of day on which the cheque or demand draft

is credited shall be applicable.

Cut Off Time For Redemptions / Switch-out : In respect of valid applications received upto 3.00 p.m. at the Official Point

of Acceptance, same day's closing NAV shall be applicable.

In respect of valid applications received after 3.00 p.m. at the Official Point of Acceptance, the closing NAV of the next

business day shall be applicable.

Cut off time as mentioned above shall be reckoned at the Official Point of Acceptance as disclosed in this Scheme Information

Document and the web-site, www.principalindia.com

Minimum Application Purchase Additional Purchase RepurchaseAmount / Number of Units

`5,000 and any amount in multiple of `500 and any amount in multiple of `500 or 50 units.

`1/- thereafter under each option. `1/- thereafter under each option.

Systematic Investment Plan (SIP) / Systematic Transfer Plan (STP) / Systematic Withdrawal Plan (SWP) :Minimum 6 installments of`500 each (STP / SWP shall be available during continuous offer on an ongoing basis)

Despatch of Repurchase Within 10 business days of the receipt of the redemption request at the Official Points of Acceptance of

(Redemption) Request Principal Mutual Fund.

Benchmark Index The Scheme's performance will be benchmarked against Crisil Balanced Fund Index.

The Fund reserves the right to change the said benchmark and / or adopt one / more other benchmarks to compare

the performance of the Scheme.

Dividend Policy Under Dividend Option, dividend will be declared subject to availability of distributable surplus and at discretion of AMC/

Trustee. The undistributed portion of the income will remain in the Option and be reflected in the NAV, on an ongoing basis. The

Trustee's decision with regard to availability and adequacy, rate, timing and frequency of distribution of dividend shall be final.

Name of the Fund Manager Mr. Rajat Jain

Name of the Trustee Company Principal Trustee Company Private Limited

Performance of the Scheme: This Scheme does not have any performance track record.


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AX & LEGAL & GENERAL INFORMATION

AXATION ON INVESTING IN MUTUAL FUNDS

he following tax implications are provided for general information purposes based on the law prevalent asn the date of this document. Such implications would have to be determined taking into account thepecific facts of each individual case. Further, in the event of amendments to legislation pertaining toaxation from time to time, the nature and / or quantum of such benefits/ implications is subject tohange.

ccordingly, it is recommended that each Unit holder appropriately consult his / her tax consultant withespect to the specific tax implications arising out of their participation in the Scheme.

TO THE MUTUAL FUND:come in the hands of the Mutual Fund

he entire income of the Mutual Fund registered under Securities and Exchange Board of India Act, 1992 orny regulations made thereunder is exempt from income-tax in accordance with the provisions of section0(23D) of the Income-tax Act, 1961 ("the Act").

he income received by such Mutual Fund is not liable for deduction of income tax at source as per therovisions of Section 196(iv) of the Act. Where the Fund receives any income from investments made inverseas jurisdiction, the same may be subject to withholding in the relevant jurisdiction from which thecome is received. As the income of the fund is exempt from tax in India, credit/ refund in respect of such

oreign taxes may not be available in India.

ax on distribution of income by the Mutual Fund to the Unit holders:

nder section 115R of the Act, income distribution, if any, made by the Mutual Fund to the unit holders willttract distribution tax at the following rates:

In case of Money Market Mutual Fund or Liquid Fund

@ 25% plus surcharge on such income-tax @ 7.5% and education cess and secondary and higher educationcess @ 3% on the amount of tax and surcharge.

In case of Other than Equity Oriented Fund, not being a Money Market Mutual Fund or a Liquid Fund @ 12.5% plus surcharge on such income-tax @ 7.5% and education cess and secondary and higher

education cess @ 3% on the amount of tax and surcharge, in case income is distributed to individualsand HUFs; and

@ 20% plus surcharge on such income-tax @ 7.5% and education cess and secondary and highereducation cess @ 3% on the amount of tax and surcharge, in case of income distributed topersons other than individuals and HUFs.

roviso (b) to Section 115R(2) of the Act provides exemption to equity oriented mutual funds from payingstribution tax on income distributed.

urther, in case of distribution of income already paid by the Scheme, the Trustee / AMC reserves the righto recover the additional income-tax on distribution of income so paid from the unit holders of respectivean/option.

he expression "money market mutual fund" has been defined under Explanation (d) to Section 115T whicheans a scheme of a mutual fund which has been set up with the objective of investing exclusively inoney market instruments as defined in sub-clause (p) of clause (2) of the Securities and Exchange Boardf India (Mutual Funds) Regulations,1996.

he expression" liquid fund" has been defined under Explanation (e) to Section 115T which means a scheme

r plan of a mutual fund which is classified by the Securities and Exchange Board of India as a liquid fund inccordance with the guidelines issued by it in this behalf under the Securities and Exchange Board of Indiact, 1992 or regulations made thereunder.

lassification of the fund as 'equity oriented fund' or other than 'equity oriented fund' for the purposesf the Act

he expression "equity oriented fund" has been defined under Explanation (b) to Section 115T of the Act toclude a fund where the investible funds are invested by way of equity shares in domestic companies to

he extent of more than sixty-five per cent of the total proceeds of such fund. Further, as per the provisoo the Explanation (b) to section 115T, the percentage of equity shareholding of the fund shall be computedith reference to the annual average of the monthly averages of the opening and closing figures.

TO THE UNIT HOLDERS:

eduction from total income

nder section 80C of the Act, an assessee, being an individual or HUF, is eligible to claim a deduction upto anggregate of` 1 lacs on account of sums paid as subscr iption to units of an Equity Linked Savings Scheme.

he expression "Equity Linked Savings Scheme " refers to Equity Linked Savings Scheme, 2005 as notified byhe Central Board of Direct Taxes, Ministry of Finance vide not ification dated November 3, 2005 as amended

de notification dated December 13, 2005.ecurities Transaction Tax

nder Chapter VII of Finance (No. 2) Act, 2004 the unit holder is liable to pay Securities Transaction Tax ('STT')respect of "taxable securities transaction" at the applicable rates. Taxable securities transactions include

urchase or sale of units of an equity oriented fund, entered into on the stock exchange or sale of units ofn equity oriented fund to the mutual fund.

The purchaser and seller of units of an equity oriented fund are liable to pay STT @ 0.125% each where thepurchase and sale is entered into on a recognized stock exchange and the contract for the purchase andsale of such units is settled by actual delivery or transfer of such units.

Further, the seller of units is also liable to pay STT @ 0.025% in case of sale of units of an equity orientedfund where the transaction of such sale is entered into on a recognized stock exchange and the contract forthe sale of such units is settled otherwise than by the actual delivery or transfer of such units.

At the time of sale of units of equity oriented fund to the mutual fund, the seller is required to pay anSTT @ 0.25%.

The securities transaction tax paid by the assessee during the year in respect of taxable securities transactionsentered in the course of business shall be allowed as deduction under section 36 of the Act subject to the

condition that such income from taxable securities transactions is included under the head 'profits andgains of business or profession'.

Incomes from Units: Under the provisions of section 10(35) of the Act, any income (other than incomearising from transfer of units) received by any person in respect of the units of the mutual fund is exemptfrom income tax.

Gains on transfer / redemption of Units: Gains arising on transfer / redemption of Units as well asswitching between schemes will be chargeable to tax under the Act. The characterization of income frominvestment in securities as 'business income' or 'capital gains' will have to be examined on a case-to-case basis.

Business Income

Where the units are regarded as Business Asset, then any gain arising from transfer / redemption of Unitswould be taxed under the head "Profits and Gains of Business or Profession" under section 28 of the Act.The gain / loss is to be computed under the head "Profits and Gains of Business or Profession" after allowingnormal business expenses (inclusive of the expenses incurred on transfer).

Business Income is chargeable to tax at the following rates:

Assessee % of Income Tax

Individuals, HUF, Association of Persons Applicable Slab Rates

Partnership Firms [including Limited Liability 30%Partnerships (LLPs)] & Indian Corporates

Foreign Company 40%

The income tax rates specified above and elsewhere in this document are exclusive of the applicable surcharge,education cess and secondary and higher education cess. Persuant to the Finance Bill, 2010, following ratesfor surcharge is applicable. The details are as given below:

Assessee % of Income Tax

Individual (including proprietorships), HUF, Association of NilPersons and Partnership Firms (including LLPs)

Indian Corporates (if income exceeds ` 1 crore) 7.5%

Foreign Company (if income exceeds ` 1 crore) 2.5%

Additionally, education cess and secondary and higher education cess is leviable @ 3% on the income taxand surcharge as computed above.

Capital Gains

The mode of computation of capital gains would be as follows:

Sale Consideration xxxLess: Cost of Acquisition (Note 1) (xxx)Expenses on Transfer (Note 2) (xxx)Capital Gains xxx

Note 1: In case of the computation of long-term capital gains, option of indexation of cost is available.

Note 2: This would include only expenses relating to transfer of units. Normal business expenseswould not be allowable.

Capital gain arising on transfer or redemption of units held for a period of more than 12 months is regardedas "Long-term Capital Gain" which otherwise would be "Short-term Capital Gain".

Long term capital gains

In case of other than Equity Oriented Fund, including Money Market Mutual Fund or a Liquid Fund

As per section 112 of the Act, tax on income on long term capital gains arising from the transfer of unitsshall be lower of the following amount:

(i) 10% plus applicable surcharge and education cess at the rate of 3% on the amount of tax and surcharge,on the Long-term Capital Gains computed without substituting indexed cost of acquisition in place ofthe cost of acquisition; or

(ii) 20% plus applicable surcharge and education cess at the rate of 3% on the amount of tax and surcharge,on the Long-term Capital Gain computed after substituting indexed cost of acquisition in place of thecost of acquisition.

The benefit of indexation will, however, not be available to specified Offshore Fund which is taxable @ 10%plus applicable surcharge and education cess at the rate of 3% on the amount of tax and surcharge in termsof section 115AB of the Act.

Expenses of the Scheme New Fund Offer Period and Continuous Offer

(i) Load Structure : Entry Load : Not Applicable

Exit Load :From the date of allotment if redeemed any time-

Upto 1 Year - 2.00% Upto 2 Years - 1.00% After 2 Years - Nil

Load on switches will be same as exit load applicable for the respective Scheme.

(ii) Recurring Expenses First `100 crores - 2.50 Next `300 crores - 2.25 Next `300 crores - 2.00 Balance - 1.75.

(Percentage of Average (Note: A maximum of 2.25% of average daily net assets will be charged as recurring expenses per annum when the

Daily Net Assets including asset allocation to debt/money market instruments exceeds 65%. This will be done observing the Debt/Money Market

Management Fees): component on each Friday or last working day of the week and accordingly the expenses will be charged next week.)

Actual Expenses for the previous financial year: Not Applicable being a new Scheme.

Waiver of Load for Not applicable.

Direct Applications Pursuant to SEBI circular no. SEBI/IMD/CIR No.4/ 168230/09 dated June 30, 2009 no entry load shall be charged for

all Mutual Fund Scheme(s). Therefore, the procedure for waiver of load for direct applications is no longer applicable.


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he benefit of indexation will, also, not be available to Foreign Institutional Investors who are taxed underection 115AD of the Act @ 10% plus applicable surcharge and education cess at the rate of 3% on themount of tax and surcharge.

he income by way of long term capital gains of a company would be taken into account in computing theook profits and Minimum Alternate Tax payable, if any, under Section 115JB of the Act (irrespective of

whether or not it is exempt under Section 10(38) of the Act).

n case where the taxable income as reduced by Long-term Capital Gains of a resident individual and Hindundivided family is below the taxable limit, the Long-term Capital gain will be reduced to the extent of suchhortfall and only the balance Long-term Capital Gain is chargeable to Income-tax.

he following deductions are available from Long-term Capital Gains arising on sale of Mutual Fund units,f the sale proceeds are invested in eligible avenues:

Section 54 EC Section 54F

Eligible persons All assesses Individual and HUFs

Asset to be purchased Specified Bonds of National Highways Residentia l house property

to claim exemption Autho ri ty of India and RuralElectrification Corporation Limited(cap of` Fifty Lakhs in a financial year)

Time-limit for purchase 6 months Purchase: 1 year backward / 2 yearsfrom date of sale of MF units forward & Construction: 3 years forward

Amount Exempt Investment in the new asset Capital gains proportionate to theor capi tal gain whichever is inves tment made from the sale proceedslower (subject to other conditions of owning /

purchasing residential house mentionedin the section)

Lock-in period 3 years 3 years

he investment under section 54EC on account of which exemption has been claimed from long-termapital gains will not be available for deduction under section 80C of the Act.

Short-term Capital Gain

n case of other than Equity Oriented Fund, including Money Market Mutual Fund or a Liquid Fund

hort term capital gains arising from the transfer of units of funds other than equity oriented scheme woulde chargeable to tax as under:

hort term capital gains are taxed at the normal rates applicable to each unitholder. In case where theaxable income as reduced by Short-term Capital Gains of a resident individual and Hindu Undivided Family below the taxable limit, the Short-term Capital gain will be reduced to the extent of such shortfall andnly the balance Short-term Capital Gain is chargeable to Income-tax.

n case of Equity Oriented Fund

hort Term Capital Gains arising from transfer of units of an Equity Oriented scheme (as defined u/s 115Tf the Income Tax Act, 1961), being subjected to STT would be charged to tax u/s 111A of the Income Taxct, 1961 @ 15% (plus applicable surcharge, education cess and secondary and higher education cess). The

mutual fund would recover STT from the unit holder at the applicable rates when the units are re-purchasedy the mutual fund/ redeemed by the investor.

n case where the taxable income as reduced by Short-term Capital Gains of a resident individual and Hindundivided family is below the taxable limit, the Short-term Capital Gain will be reduced to the extent ofuch shortfall and only the balance Short-term Capital Gain is chargeable to Income-tax.

eduction of income tax at Source from Capital Gains

Resident Unit holders

o income tax is required to be deducted at source from capital gains arising on transfer of units by

esident unit holders.In case of funds other than 'Equity Oriented Fund' under the Act

) Non-Resident unit holders

ncome-tax is required to be deducted at source from the capital gains under section 195 of the Act at thepplicable rates.

nder the Act, the following rates have been prescribed for deduction of tax at source from capital gains:

On income by way of long-term capital gains @ 20% (plus applicable surcharge and education cess)

On income by way of short-term capital gains at normal rates as applicable under Business Income.

n the case of an assessee of a country with which a Double Taxation Avoidance Agreement (DTAA) is inorce, the tax should be withheld as per provisions in the Act or as per the provisions in the DTAA which ever more beneficial to the non-resident holder. However, such a non-resident unit holder will be required torovide appropriate documents to the Fund, to be entitled to a beneficial rate under such DTAA.

) Offshore Fund unit holders

nder Section 196B of the Act, tax shall be deducted at source from the long term capital gains @ 10% pluspplicable surcharge, education cess and secondary and higher education cess at the rate of 3% on themount of tax and surcharge.

Income-tax is required to be deducted at source from the short-term capital gains under section 195 of theAct at the applicable rates. In the case of an assessee resident of a country with which a DTAA is in force,the tax should be withheld as per the provisions of the Act or the provisions in the DTAA which ever is morebeneficial to the assessee. However, the Unit holder will be required to provide appropriate documents tothe Fund, to be entitled to a beneficial rate under such DTAA.

In case of 'Equity Oriented Fund' for Non-Resident unit holders (including Offshore fundunit holders)

Income-tax is required to be deducted at source from the capital gains under section 195 of the Act at theapplicable rates.

Under the Act, the following rates have been prescribed for deduction of tax at source from capital gains:

Income by way of long-term capital gains arising from transfer of units subject to STT is exempt fromtax.

On income by way of short-term capital gains arising from transfer of units subject to STT taxableunder section 111A @ 15% (plus applicable surcharge and education cess).

Income-tax is required to be deducted at source from the capital gains under section 195 of the Act at theapplicable rates. In the case of an assessee resident of a country with which a DTAA is in force, the taxshould be withheld as per provisions in the Act or as per the provisions in the DTAA which ever is morebeneficial to the non-resident holder. However, such a non-resident unit holder will be required to provideappropriate documents to the Fund, to be entitled to a beneficial rate under such DTAA.

Foreign Institutional Investors

As per the provisions of section 196D of the Act, no deduction of tax shall be made from any income, by wayof capital gains arising from the transfer of securities referred to in section 115AD, payable to a ForeignInstitutional Investor.

Default in furnishing the PAN

Section 206AA of the Act inserted by the Finance (No.2) Act, 2009 operative with effect from April 1, 2010states that the deductee is required to mandatorily furnish his PAN to the deductor failing which thedeductor shall deduct tax at source at higher of the following rates:

1. the rate prescribed in the Act; 2. at the rate in force i.e., the rate mentioned in the Finance Act; or3. at the rate of 20%.

Dividend Stripping

As per Section 94(7) of the Act, loss arising on sale of units, which are bought within 3 months of the record

date and sold within 9 months after the record date, shall be ignored for the purpose of computing incomechargeable to tax to the extent of exempt income received or receivable on such Units.

Bonus Stripping

As per Section 94 (8) of the Act, units purchased within a period of 3 months prior to record date ofentitlement of bonus and sold within a period of 9 months after such date, the loss arising on transfer oforiginal units shall be ignored for the purpose of computing the income chargeable to tax.

The amount of loss so ignored shall be deemed to be the cost of purchase / acquisition of the bonus units.

III. Religious and Charitable Trust

Investments in Units of the Mutual Fund will rank as an eligible form of investment undersection 11(5) of the Act read with Rule 17C of the Income tax Rules, 1962 for Religious and Charitable Trust.

IV. Wealth-tax

Units held under the Scheme of the Fund are not treated as assets within the meaning of section 2(ea) ofthe Wealth-tax Act, 1957 and are, therefore, not liable to Wealth-tax.

V. Gift-tax

The Gift -Tax Act, 1958 has been repealed since October 1, 1998. Gift of units of Mutual fund units would besubject to income-tax in the hands of the donor. As per section 56(2)(vii), receipts of securities, fair marketvalue of which exceeds fifty thousand rupees, without consideration or without adequate consideration istaxable as income in the hands of individuals / HUfs.

Further the above provision of section 56(2)(vii) shall not apply to any units received by the donee

(a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or byway of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) fromany local authority as defined in the Explanation to clause (20) of section 10 of the Act; or (f) from any fundor foundation or university or other educational institution or hospital or other medical institution or anytrust or institution referred to in clause (23C) of section 10 of the Act; or (g) from any trust or institutionregistered under section 12AA of the Act.

Relative shall mean: (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother orsister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) anylineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse ofthe individual; (vii) spouse of the person referred to in clauses (ii) to (vi).

nvestor is also advised to refer to the tax details in the Statement of Additional Information.

DAILY NET ASSET VALUE (NAV) PUBLICATION

The NAV of the Fund will be calculated on all Business Days. The NAV will be published in 2 daily newspapers having nationwide circulation and will also bepdated on the AMFI website i.e. www.amfiindia.com by 9.00 P.M. on all business days. The NAV can also be viewed on the website of the Mutual Fund i.e.

www.principalindia.com

FOR INVESTOR GRIEVANCES PLEASE CONTACT

Principal Mutual Fund: Maker Bhavan - II, 1st Floor, 18, Sir Vithaldas Thackersey Marg, New Marine Lines, Mumbai- 400 020. India.TOLL FREE: 1800 22 5600. Fax: 022-2204 4990. E-mail: [email protected]

Registrar: Karvy Computershare Pvt. Ltd. (Unit: Principal Mutual Fund), KARVY HOUSE, 46, Avenue- 4, Street No. 1, Banjara Hills, Hyderabad-500 034.Tel.: (040) 2331 2454 www.karvycomputershare.com

UNITHOLDERS INFORMATION

An Account statement or transaction statement reflecting the unit balance shall be dispatched to the unitholders after every transaction is effected. The Accounttatement shall normally be dispatched within ten business days on an ongoing basis. The Annual financial results of the Schemes or an abridged summary thereof shall

be mailed to all unitholders within 4 months from the date of the closure of the relevant accounts i.e. March 31 each year. The half yearly portfolio and unauditedinancial results, shall be published within one month from the close of each half year (i.e. 31st March and 30th September), in at least in one National English daily andne regional newspaper in the region where the head office of the mutual fund is located.

Key Information Memorandum dated November 2, 2010.


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Principal Mutual FundExchange Plaza, B Wing, IInd Floor, NSE Building,

Bandra Kurla Complex, Bandra (E),Mumbai - 400 051, India.(Not an Official Point of Acceptance)

For investment related enquiries, Investor Grievance please contact:Principal Mutual FundMaker Bhavan - II, 1st Floor, 18, Sir Vithaldas Thackersey Marg,

New Marine Lines, Mumbai- 400 020, IndiaTOLL FREE: 1800 22 5600. Fax: 022-2204 4990.Email : [email protected] Website : www.principalindia.com

CHECK LIST : Please ensure the following : Application form is complete in all respects and signed by all Applicants Bank Account details are filled Copy of PAN card Copy of Know Your Customer (KYC)Acknowledgement letter issued by CDSL Ventures Ltd / printout of KYC compliance status downloaded from CVL w ebsite, as applicable Appropriate options are filled All cheques/drafts should be made out infavour of Principal SMART Equity Fund and crossed Account Payee Only If you are investing for the first time, please ensure that you fill in the contact details for us to serve you better.

(Default Option between Growth and Dividend shall be Growth and in case ofDividend Payout, Reinvestment & Sweep, default shall be Dividend Reinvestment)

7 INVESTMENT DETAILS (Please Choice of Scheme / Option) - Please ensure there is only one cheque/DD per application form


Growth Dividend Payout Reinvestment Sweep

4 BANK ACCOUNT DETAILS (Mandatory) [Refer Instruction No. C(II)]

Account No.

Bank Name(Do not abbreviate)

Branch Address

Account Type

MICR Code* This is a 9 digit number next to your Cheque No.

Branch / City

(Please provide the full account number)

Pin Code

Only forRTGS*

Essential Enclosures : (For Direct Credit)

Blank cancelled cheque Copy of cheque

Direct Credit Facility is currently available with : BNP Paribas Bank, Citibank, Deutsche Bank, ICICI Bank, IDBI Bank, HDFC Bank, HSBC Bank, Kotak Mahindra Bank, Punjab National Bank, Standard Chartered Bank,Axis Bank, Indusind Bank and Development Credit Bank (only for dividend). For an update in this list please contact any of our ISC at the contact details provided overleaf.

Please verify and ensure the accuracy of the bank details provided above as it shall appear in your account statement which shall be issued to you should your appli cation be accepted. Principal Mutual Fundshall not be held responsible for delays or errors in processing your request if the information provided is incomplete or inaccurate. [* indicates - Mandatory]

IFSC*Code

NEFT*Code

For Non-Resident(Please 3) For Residents Savings Current NRO Others ______________________________________NRE Repatriable Non-Repatriable

5 DOCUMENTS ENCLOSED (Please3)Memorandum & Article of Association (MOA & AOA) Trust Deed Bye-Laws Partnership Deed Resolution / Authorisation to investList of Authorised Signatories with Specimen Signature(s) Power Of Attorney (POA)

^ Refer Instruction No. D(II)

6 PAYMENT DETAILS (Mandatory) [Refer Instruction No. C(I)]

(i) InvestmentAmount (`)

(ii) DD Charges (`) Net Amount (`)(i)+(ii)

Drawn on Bank

Branch & City

Mode of Payment (Please3) Cheque DD RTGS NEFT ECS Funds Transfer

DatedAccount Type (Please3) Savings Current NRE NRO FCNR NRSR

Payment fromBank A/c. No. Name of 1st A/c holder

Name of 2nd A/c holder

Name of 3rd A/c holder

*Cheque / DD / RTGS / NEFT No.

Details of the Payer (In case, the payer is not a Bank A/c. holder as mentioned above)

Parent/Grand Parent/related person:

Employer:

Custodian:

Enclosed (please 3)

KYC Acknowledgement Letter

Declaration of the Bank A/c.

Please enclose relevant documents as indicated below as per the Mode of Payment:DD / Pay order / Bankers Cheque and the like Declaration from BankRTGS / NEFT / ECS / Bank Transfer Instruction to the Bank from the Unitholder to Debit the Account.

* Please mention the Application No., PAN and Name of the First Unitholder on the reverse of the Payment Instrument. All Payment Instrument should be drawn in favour ofPrincipal SMART Equity Fund and crossed A/c. Payee only.

Name

Name

Name

D D M M Y Y Y Y

Enclosed (please 3) PAN KYC (Attach copy of PAN & KYC^)


POA HOLDER SIGNATURE


POA HOLDER SIGNATURE

I/We have read and understood the contents of the Scheme Information Document/s to Principal Smart Equity Fund includingthe sections on Prevention of Money Laundering and Know Your Customers. I / We hereby apply to the Trustees of thePrincipal Mutual Fund (the Mutual Fund) for units of Principal SMA RT Equity Fund as indicated above [the Scheme] and agreeto abide by the terms and conditions, of the Scheme and such other scheme(s) of the Mutual Fund [Scheme(s)] into which my/our investment may be moved pursuant to any instruction received from me/us to switch the units as applicable to my / ourinvestment including any further transaction under the Scheme(s). I / We have not received nor have bee n induced by any rebateor gifts, directly or indirectly, in making this investment. I/We further declare that the amount invested by me/us in the Scheme(s)is derived through legitimate sources and is not held or designed for the purpose of contravention of any act, rules, andregulations or any statute or legislation or any other applicable laws or any notifications, directions issued by any governmentalor statutory authority from time to time. I/We hereby confirm that I/we have read and understood the contents on ThirdParty Payments and confirm that the payment for this subscription application has been made from my/our Account orfrom such accounts as permitted by SEBI / AMFI and provided in the said section on Third Party Payments. Further, relevantdeclaration and documents as mandated herein have been provided for the mode of my payment.I/We further confirm that I/we have the express authority from the relevant constitution to invest in the units of the Schemeand the Principal Pnb Asset Mana gement Company Pv t. Ltd. [AMC], its Trustee and the Mutual Fund would no t be responsibleif the investment is ultra vires the relevant constitution.I/We further confirm that the ARN holder (Broker/Sub-Broker) has disclosed to me/us all the commissions (in the form of trailcommission or any other mode), payable to him for the different competing Schemes of various Mutual Funds from amongstwhich the Scheme(s) has been recommended to me/us.I / We authorize AMC to reject the application, reverse the units c redited, restrain me/us from making any further investment inany of the Scheme/s of Principal Mutual Fund, recover / debit my/our folio(s) with the penal interest and take any ap propriateaction against me/us in case the cheque(s) / payment instrument is /are returned unpaid by my/our bank for any reason whatsoever.I/We hereby further agree that AMC can directly credit all the dividend payouts and redemption amount to my / our bankaccount, where AMC has such arrangement with my / our Bank.Applicable to NRIs only: I / We confirm that I am / we are Non- Residents of Indian Nationality / Origin and I / We herebyconfirm that the funds for subscription have been remitted from abroad through approved banking channels or from fundsin my/our Non-Residents External/ Ordinary Account /FCNR Account.

SIGNATURES

Signature of1st Applicant /POA Holder /Guardian

POA Details - Name

PAN

Signature of2nd Applicant /

POA Holder /Guardian

APPLICANT SIGNATURE

POA Details - Name

PAN

Signature of3rd Applicant /POA Holder /Guardian

APPLICANT SIGNATURE

POA Details - Name

PAN

APPLICANT SIGNATURE POA HOLDER SIGNATURE

8 DECLARATION AND SIGNATURES

For ASBA Applications$, please tick here (3) [$ Investors wishing to avail of ASBA facility are requested to submit the ASBA Application Form with SCSB. The investor isrequired to submit a copy of the acknowledgment receipt of the ASBA Form [as submitted to the SCSB] along with the NFO application form to Principal Mutual Fund. (Refer Instruction No. E)]


7/14

SIP Auto Debit Form through ECS for


DISTRIBUTOR INFORMATION & APPLICATION RECEIPT DATE

Broker Name & Code Sub-Broker Code I-Code Registrar Serial No. Bank Serial No. Date & Time of Receipt

Upfront commission shall be paid directly by the investor to the AMFI registered Distributors based on the investors assessment of various factors including the service rendered by the distributor.

REGISTRATION CUM MANDATEFORM FOR ECS

First Investment in SIP vide a cheque and subsequent investments via Auto Debit, available in selected cities only.

New SIP Registration - by an existing investor A/c. No. for Existing Investors

New SIP Reg is trat ion - by a new investo r (Al so at tach the NFO Appl icat ion Form duly f il led & signed ) App li cation No. (As mentioned on the main Appli cation Form)Micro SIP - Refer Instruction No. 16

SIP Auto Debit Form should be accompanied with NFO Application Form and shall be accepted only

at AXIS Bank and KOTAK Bank locations as indicated on the last page of this Form, upto December 3, 2010

2 NEW APPLICANT'S DETAILS (Please fill in BLOCK LETTERS with black/blue ink, use one box for one alphabet leaving one box blank between two words)

Date of Birth D D M M Y Y Y Y PAN

NAME OF THE SECOND APPLICANT Mr. Ms

F I R S T N A M E M I D D L E N A M E L A S T N A M E

NAME OF THE THIRD APPLICANT Mr. Ms


NAME OF FIRST / SOLE APPLICANT Mr. Ms




Attested Photo ID submitted for Micro SIP: Name of Document Document ID Number [Refer Instruction No. E (16-I)]



AUTHORISATION OF THE BANK ACCOUNT HOLDER [to be signed by all the Account Holder(s)]I / We hereby authorise the bank to debit my / our account for making payment to Principal Mutual Fund through ECS (Debit) as per the details given herein.

I/We have read the relevant Scheme Information Document and Statement of Additional Information and agree to discharge the responsibility expected of me/us as a participant under the concerning scheme(s). I/We will also inform Principal Mutual Fund, about any changes in my/our bank account.Further this is to inform you that, I / we have registered with the RBIs Electronic Clearing Service and that the payment towards my investment in PrincipalMutual Fund shall be made from my/our within bank account with your bank. I/We authorise the representative carrying this ECS Mandate Form to get itverified & executed, if necessary. The verification charges, if any, may be debited from my/our account. I/We hereby further authorise Principal Mutual Fund,acting through their authorised service providers to debit my / our bank account by ECS (Debit Clearing) for collection of SIP payments.

Bank Account Number

First Account Holders Signature (As in Bank Records) Second Account Holders Signature (As in Bank Records) Third Account Holders Signature (As in Bank Records)

1 EXISTING UNITHOLDERS DETAILS (Please note that the applicant details and mode of holding will be as per the existing Folio Number) [Refer instruction No. B(5)]

Name of Sole /First Unit Holder

Common Account / Folio No.Please fill your Folio No. and Name and then proceed to Section 3.

3 SIP DETAILS (Please note that a minimum 30 days are required to set up Auto Debit)

Each SIP Amount (`) (Note: Cheque should be drawn onbank details provided below)

Second and subsequent

installment datesSIP Period Start From

(2nd instalment) M M Y Y M M Y Y

End on

(Last instalment)

1st 5th 15th 25th (the date on which you want to

invest for subsequent period)

First SIP Cheque No.

FOR BANK USE ONLY (Not to be filled in by Applicant)

Recorded on Scheme Code

Credit AccountNumber

Bank useMandate Ref. No. Customer Ref. No.

Recorded by

ARN - 25682


8/14

SIP AUTO-DEBIT (ECS) FORM - CHECKLIST

ECS (DEBIT CLEARING) PLEASE ENSURE THAT - :

1. SIP Auto Debit facility is offered to investors having bank accounts in selected cities where

they are located currently as provided above and within these cities were the AMC offices

are located.

2. The first cheque should be drawn on the same bank account which is to be registered for ECS

(Debit Clearing) / Direct Debit. Alternatively, the cheque may be drawn on any bank, but provide

a photocopy of the cheque of the bank / branch for which ECS (Debit Clearing) / Direct Debit is

registered.

3. First SIP Cheque and subsequent SIP installments via ECS (Debit Clearing) / Direct Debitshould be of the same amount.

4. The bank account provided for ECS (Debit) should participate in local MICR clearing.

5. The investor agrees to abide by the terms and conditions of ECS facility of Reserve Bank of

India (RBI).

6. The application form is completed in all respect and signed by all the applicants.

7. Bank account details are correctly and completely furnished including the 9 Digit MICR

Code which is mandatory for SIPs through ECS. 9 digit Branch MICR code to be mentioned on

the SIP form. For payable at par cheques applicant need to mention the bank branch MICR

no. on the SIP application form. If MICR code starts with 000 and end with 000 then investor

should confirm the 9 digit MICR code with his / her bank.

8. The Name & Signature of investors on main application form & ECS application form should

be same. Scheme details such as Scheme, plan, option should be correctly mentioned on

main application & ECS Forms.

9. The Cheque / DD is drawn in favour of Principal SMART Equity Fund and crossed Account

Payee Only.

10. Application number, Name of First Unitholder & PAN is mentioned on the reverse of the

cheque / DD.

Name of the Scheme / Plan / Option Start Date Periodicity (Mthly / Qly) Each amount of installment Number of installments

I/We confirm that I/we have read and understood the contents of the Statement of Additional Information and Scheme Information Document of the respective Scheme(s). I/We have requested transaction(s)as stated herein and agree to abide by the terms and conditions of the respective scheme(s)/Plan(s)/Option(s). I/we will also inform Principal Mutual Fund of any changes in my/our account details. I/We hereindeclare that the particulars given above are correct and express my/our willingness to make payments referred above through participation in ECS. In case the cheques/ my/our instructions to the Bank aredishonoured or cannot be acted upon, then in such an event the Bank, the AMC and Principal Mutual Fund shall not be held responsible.

I/We hereby confirm that I/we have read and understood the contents on Third Party Payments and confirm that the payment for this subscription application has been made from my/our Account or fromsuch accounts as permitted by SEBI / AMFI and provided in the said section on Third Party Payments. Further, relevant declaration and documents as mandated herein have been provided for the mode of mypayment.

I/We further confirm that the ARN Holder (Broker/sub-Broker) has disclosed to me/us all the commissions (in the form of trail commission or any other mode) payable to him for the different competing schemesof various Mutual Funds from amongst which the Scheme(s) has been recommended to me/us. I/we further understand that the contents hereof form an integral part of the main application form.

MICR Code** This is a 9 digit number next to your Cheque No.

4 PAYMENT DETAILS (Mandatory) [Refer Instruction No. C(I)]

(i) InvestmentAmount (`)

(ii) DD Charges (`) Net Amount (`)(i)+(ii)

Drawn on Bank

Branch & City

Mode of Payment (Please 3) Cheque DD

Payment fromBank A/c. No. Name of 1st A/c holder

Name of 2nd A/c holder

Name of 3rd A/c holder

Details of the Payer (In case, the payer is not a Bank A/c. holder as mentioned above) [Refer Instruction No. C(II) for Declaration Format]

Parent/Grand Parent/related person:Employer:

Custodian:

Enclosed (please 3)

KYC Acknowledgement Letter

Declaration of the Bank A/c.

Please enclose, in case of following Mode of Payment: [Refer Instruction No. C(II) for Declaration Format]

DD / Pay order / Bankers Cheque Declaration from Bank

* Please mention the Application No., PAN and Name of the First Unitholder on the reverse of the Payment Instrument. All Payment Instrument are drawn in favour ofPrincipal SMART Equity Fund and crossed A/c. Payee only.** Please provide the MICR Code of the bank branch from where the ECS is to be effected. MICR Codes starting or ending with 000 are not valid for ECS.

NameName

Name

Account Type (Please 3) Savings Current NRE NRO FCNR NRSR

Mandatory Enclosure

Blank Cancelled Cheque Copy of Cheque

Ledger No. / Ledger Folio No.

Signature of 1st Applicant / POA Holder / Guardian(Signature of the legal guardian when the Unit Holder is minor)

Signature of 2nd Applicant / POA Holder / Guardian(Signature of the legal guardian when the Unit Holder is minor)

Signature of 3rd Applicant / POA Holder / Guardian(Signature of the legal guardian when the Unit Holder is minor)

(Banks Stamp) Signature of the Authorised Official from the Bank

Please note Signature(s) should be as it appears on the application form and in the same order. In case, Mode of Holding is joint, all applicants are requested to sign.

Date D D M M Y Y Y Y

In case of any discrepancy in the name of Scheme / Plan / Option, the scheme investment details provided in the NFO Application Form shall prevail.


9/14

ASBA FORM

OPENS ON : NOVEMBER 26, 2010

CLOSES ON : DECEMBER 10, 2010

(To be submitted to Self Certified Syndicate Bank [SCSB])

Principal SMART Equity FundApplication No.

Date

NEW FUND OFFER (NFO)

ACKNOWLEDGEMENT SLIP (To be filled and attached by the Applicant with the NFO Application Form)

NFO OPENS ON : NOVEMBER 26, 2010

NFO CLOSES ON : DECEMBER 10, 2010Principal SMART Equity Fund

Received from __________________________________________________________ (sole / first applicant) ASBA Form dated ____________________ details of which are as follows:

Application No. __________________________________________________________ Amount Blocked (`) _____________________________________________________

SCSB (Bank and Branch) ___________________________________________________ Bank Account No. _______________________________________________________

Date of Submission _______________________________________________________

Maker Bhavan - II, 1st Floor, 18, Sir Vithaldas Thackersey Marg,New Marine Lines, Mumbai- 400 020.Toll Free - 1800 22 5600 Fax: 022-2204 4990.Website: www.principalindia.com E-mail: [email protected]

DISTRIBUTOR INFORMATION

Broker Name & Code Sub-Broker Code

Bank Name(Do not abbreviate)

Account No.

City

Account Type (Please 3)

Branch Name

(Please provide the full account number)Pin Code

For Non-Resident

NRO NRE Repatriable Non-Repatriable Others ______________________________________

For Residents

Savings Current

Amount to be blocked (`)

Amount in words

DETAILS OF BANK ACCOUNT FOR BLOCKING OF FUNDS

APPLICANT'S DETAILS (Please fill in BLOCK LETTERS with black/blue ink, use one box for one alphabet leaving one box blank between two words)

Common Account / Folio No.

(For existing unitholder(s) please furnish your Common Account / Folio No.)

NAME OF FIRST / SOLE APPLICANT Mr. Ms

PAN


INVESTOR CATEGORY (Please 3 as applicable; Refer Instruction No. 4)

IND HUF NRI FII FI IC MF MINOR

BANK TRUST AOP SOCTY BOI CO OTH Please specify

Upfront commission shall be paid directly by the investor to the AMFI registered Distributors based on the investors assessment of various factors including the service rendered by the distributor.

Option(s) Please (3) the Option selectedin the NFO application form

Growth Option

Dividend Payout Option

Dividend Reinvestment Option

Dividend Sweep Option

INVESTMENT DETAILS DEMAT ACCOUNT DETAILS

National Securities Depository Limited

Depository Participant (DP) ID

Beneficiary Account Number

Central Depository Services (India) Limited

Depository Participant (DP) ID

Beneficiary Account Number

ARN - 25682


10/14

Principal Mutual FundExchange Plaza, B Wing, 2nd Floor, NSE Building,Bandra Kurla Complex, Bandra (E),Mumbai - 400 051.(Not an Official Point of Acceptance)

For investment related enquiries, Investor Grievance please contact:

Principal Mutual FundMaker Bhavan - II, 1st Floor, 18, Sir Vithaldas Thackersey Marg,New Marine Lines, Mumbai- 400 020.TOLL FREE: 1800 22 5600. Fax: 022-2204 4990.Email : [email protected] Website : www.principalindia.com

(1) I/ We hereby undertake that, I/ we have read and understood the instructions contained in this Form and Terms and Conditions concerning ASBA as contained in the Scheme InformationDocument (SID) / Key Information Memorandum (KIM) of the above mentioned Scheme and Statement of Additional Information (SAI) of Principal Mutual Fund. Further, I/we understand thatif the details as provided by me/us in this Form are different from those in the NFO Application Form, then in such a case; the information as provided by me/us in the NFO Application Formwill be relied upon. I/we further confirm and undertake that I am/ we are eligible ASBA applicants(s) as per the relevant provisions of the SEBI (Issue of Capital and Disclosure Requirement[ICDR]) Regulations, 2009.

(2) In accordance with provisions of ASBA in the SEBI ICDR Regulations, 2009 and as disclosed in the SAI, I/We authorize

(a) the SCSB to do all acts as are necessary to make an application in the New Fund Offer of above mentioned Scheme, including uploading of application details, blocking the amount tothe extent mentioned above under "DETAILS OF BANK ACCOUNT FOR BLOCKING OF FUNDS" or unblocking of funds in the bank account maintained with the SCSB specified above,transfer of funds to the Principal Mutual Fund's account on receipt of instructions from the Registrar to Principal Mutual Fund after finalisation of the basis of allotment, entitling me/usto receive mutual fund units on such transfer of funds, etc.

(b) Registrar to issue instructions to the SCSB to unblock the funds in the bank account specified above upon finalisation of the basis of allotment and to transfer the requisite money to the

Principal Mutual Fund's account.

(3) In case the amount available in the bank account specified above is insufficient, the SCSB shall reject the application.

(4) If the details as furnished in the form are incorrect or incomplete or not matching with the NFO Application Form, Principal Mutual Fund reserves the right to reject the Application Form andPrincipal Mutual Fund or SCSB shall not be liable for losses, if any.

UNDERTAKING BY ASBA INVESTOR AND ACCOUNT HOLDER

INSTRUCTIONS FOR INVESTORS

1. SCSB means Self Certified Syndicate Bank registered with the SEBI, which offers the facility of ASBA. The current list of SCSBs as available on SEBI website is as follows:

1. Axis Bank Ltd 2. State Bank of Hyderabad 3. Corporation Bank 4. State Bank of Travencore 5. IDBI Bank Ltd. 6. State Bank of Bikaner and Jaipur 7. YES Bank Ltd. 8. Punjab National Bank9. Deutsche Bank 10. Union Bank of India 11. HDFC Bank Ltd. 12. Bank of Baroda 13. ICICI Bank Ltd 14. Vijaya Bank 15. Bank of Maharashtra 16. State Bank of India 17. Andhra Bank18. HSBC Ltd. 19. Kotak Mahindra Bank Ltd. 20. Bank of India 21. CITI Bank 22. IndusInd Bank 23. Allahabad Bank 24. Karur Vysya Bank Ltd. 25. The Federal Bank 26. Indian Bank27. Central Bank of India 28. Oriental Bank of Commerce 29. Standard Chartered Bank 30. J P Morgan Chase Bank, N.A. 31. Nutan Nagarik Sahakari Bank Ltd. 32. UCO Bank 33. Canara Bank34. United Bank of India 35. Syndicate Bank.

For the complete list of controlling / designated branches of above mentioned SCSBs, please refer to websites - www.sebi.gov.in, www.bseindia.com and www.nseindia.com

2. Eligible investors for ASBA maintaining their account in any of the above SCSBs may use ASBA facility subject to fulfilling all the terms and conditions stipulated in this regard.

3. The investor is required to submit a copy of the acknowledgment receipt of the ASBA Form (as submitted with SCSB) along with the NFO application form to be furnished to PrincipalMutual Fund.

4. Invetors shall tick the applicable category in the form, please note the various categories below:

Code Category Code Category Code Category

IND Individual IC Insurance Companies AOP Association of Persons

HUF Hindu Undivided Family MF Mutual Funds SOCTY Society

NRI Non-Resident Indian MINOR Minor (Through Guardian) BOI Board of Individuals

FII Foreign Institutional Investor BANK Bank CO Bodies Corporate

FI Banks & Financial Institutions TRUST Trust OTH Others

Statutory Details: Principal Mutual Fund has been constituted as a trust with Principal Financial Group (Mauritius) Limited, Punjab National Bank and Vijaya Bank as the co-settlors. Sponsor: Principal FinancialServices Inc., USA [acting through its wholly owned subsidiary Principal Financial Group (Mauritius) Ltd.]. Trustee: Principal Trustee Company Private Limited. Investment Manager: Principal Pnb AssetManagement Company Private Limited (AMC). Risk Factors: Mutual funds and securities investments are subject to market risks and there can be no assurance and no guarantee that the schemesobjective can be achieved. As with any investment in securities, the NAV of the units issued under the scheme can go up or down, depending upon the factors and forces affecting the capitalmarkets. Past performance of the Sponsor and any of its associates, co-settlors and/or AMC/ Mutual Fund does not indicate or guarantee the future performance of the Schemes of Principal Mutual Fund.Scheme Classification and Objective:Principal SMART Equity Fund (An open-ended Equity Scheme); Investment Objective: The primary objective of the scheme is to seek to generate long term capitalappreciation with relatively lower volatility through systematic allocation of funds into equity; and in debt /money market instruments for defensive purposes. The Scheme will decide on allocation of funds intoequity assets based on equity market Price Earning Ratio (PE Ratio) levels. When the markets become expensive in terms of Price to Earnings Ratio; the Scheme will reduce its allocation to equities and moveassets into debt and/or money market instruments and vice versa. Asset Allocation: Equity & Equity Related Instruments of Large Cap Companies : 0% to 100%; Debt or Money Market Securities and/or unitsof money market/ liquid schemes of Principal Mutual Fund.: 0% to 100%. Investment in derivatives shall be upto 50% of the net assets of the Scheme. Deployment upto 50% of its total net assets of theScheme in Stock Lending, subject to the SEBI regulations. The Scheme has no intention to invest in Securitised Debt. Terms of Issue: Issue of units at `10/- per unit during the New Fund Offer and at NAV based

prices during the Continous Offer. General Service: NAV shall be disclosed on all business days. The Scheme offers repurchase / redemption facility at NAV based prices on all the business days. Risk Factorspecific to the Scheme: A portfolio managed on PE ratios may not outperform a fully invested portfolio even at the peak of a bull market. Load Structure: Entry Load: N.A. and Exit Load: From the dateof allotment if redeemed any time Upto 1 Year - 2.00% Upto 2 Years - 1.00% After 2 Years - Nil. Principal SMART Equity Fund (an open ended equity scheme) is only the name of the Scheme anddoes not in any manner indicate either the quality of the Scheme or its future prospects or returns. The Sponsor and any of its associates including co-settlors is not responsible or liable for any lossresulting from the operations of the Mutual Fund beyond the initial contribution of an amount of `25 Lakhs towards setting up Principal Mutual Fund. Investors in the scheme is not being offered a guaranteedor assured rate of return or monthly or regular/periodical income distribution, and the actual returns and/or periodical income distribution of an investor will be based on the distributable surplus. For schemespecific risk factors, terms of issue etc. investors are urged to read the Scheme Information Document (SID) / Statement of Additional Information (SAI) and Key Information Memorandum(KIM) carefully and consult with their legal/tax/investment advisor before they invest in the Scheme. Copy of SID/SAI & KIM can be obtained at the investor service centres of AMC andwebsite: www.principalindia.com. Alternately investors can call our Toll Free No: 1800 22 5600 to obtain a copy of the same.

3RD APPLICANT / POA HOLDER

SIGNATURE

SIGNATURES

SCSB BANK - 1ST ACCOUNT HOLDER

SIGNATURE

1ST APPLICANT / POA HOLDER / GUARDIAN

SIGNATURE

2ND APPLICANT / POA HOLDER

SIGNATURE

SCSB BANK - 2ND ACCOUNT HOLDER

SIGNATURE

SCSB BANK - 3RD ACCOUNT HOLDER

SIGNATURE


11/14 7

INSTRUCTIONS FOR COMPLETING THE NFO / SIP APPLICATION FORM

his application form is for Resident Investors/NRIs etc., and should be completed in English in

LOCK LETTERS & BLACK/BLUE INK only. Any overwriting/ cancellation should be countersigned by

he applicants. Failing which such application forms shall be liable for rejection. Please tick (4) in

he appropriate box provided.

lease read the terms of the Scheme Information Document of the Scheme carefully before

lling in the application form. All applicants are deemed to have accepted the terms subject to

hich this offer is being made and bind themselves to the terms upon signing the Application Form

or tendering the payment. Application should be for a minimum amount specified for each

cheme/Option.

A) HOW TO APPLY

pplicants can invest in the scheme by filling the investment amount. Applicants should submit a

ngle cheque under one Application Form for all investments. During the NFO, applications will be

ccepted at the NFO Collection Centres.

ayment Procedures only

esident Investor: Resident Investors may submit payment for units by cheque/demand draft,

ayable locally and drawn on any bank which is a member of the Bankers Clearing House located at

he place where the application form is submitted.

ll cheques/demand drafts should be drawn in favour of Principal SMART Equity Fund and

rossed A/c. Payee only.

ayment Procedures for NRIs

epatriation Basis: Payments may be made through Indian Currency Cheques/Demand Drafts. NRI

pplications can also be made by submitting payments through demand drafts purchased from

CNR bank accounts or cheques drawn on NRE accounts. All cheques/drafts should be locally payable

t the NFO Collection Centres. All applications must be accompanied with a FIRC.

on-Repatriation Basis: In case of NRIs seeking to apply for units on a non-repatriation basis,

ayments shall be made by cheques/demand drafts drawn out of NRO (Non-Resident Ordinary)

ccounts.

ayment Procedure - FIIs: FIIs may pay their subscription amounts by direct remittance from

broad or out of their special Non-Resident Rupee Accounts maintained with a designated bank

ranch in India or as may be permitted under Law. All cheques/drafts should be payable in Mumbai.

pplications by FIIs should be submitted only to the NFO Collection Centre in Mumbai.

ll cheques and bank drafts must be drawn in favour ofPrincipal SMART Equity Fund and crossed

/c. Payee only.

ayment Procedure - General

The Asset Management Company will not accept cash / stockinvests / money order/postal

order/ credit card / post dated account-to- account transfer instructions / post dated cheques

for subscriptions.

Bank charges for outstation demand drafts will be debited to the AMC and will be limited to

those stipulated by the Indian Banks Association. The Mutual Fund will not entertain any request

for refund of demand draft charges.

In case an applicant is located in a place where there is no designated NFO Collection Centre,

the completed application form with a Bank Draft/Pay Order payable at such NFO Collection

Centre for the investment amount (net of Demand Draft charges) may be forwarded to the

nearest designated NFO Collection Centre. Please note that Outstation Demand Draft that are

not payable at par at the concerning NFO Collection Centre where the application is submitted,

will not be accepted.

pplication Acceptance Schedule during the NFO

he New Fund Offer Applications(Non SIP) and Applications for Systematic Investment Plan through

uto Debit (SIP) shall be accepted only at the designated NFO collection centres as mentioned on

he last page, as per the following schedule:

Axis Bank Locations Non SIP December 10, 2010 upto 3.00 p.m.

Kotak Bank Locations SIP - December 3, 2010 upto 3.00 p.m.

IDBI Bank Locations Non SIP December 6, 2010 upto 3.00 p.m.

he Applications should be submitted only at the designated NFO Collections Centres as per the

chedule stated hereabove, else the same shall be liable for rejection and AMC / Principal Mutual

und / Trustee / NFO Collections centre shal l not be liable / responsible for the losses, if any.

B) APPLICATION DETAILS

Existing Unitholders: In case of Applicant(s) who already have a Folio in Principal Mutual Fund,

they can provide their folio number & first holder name in Section 1 and proceed to Section 6

of the Form. The details of such applicant(s) including details of bank account, sequence &

mode of holding, address and nomination, as registered in the existing Folio number would

apply to this investment and the said registered details would prevail over any conflicting

information that may be furnished in this form. First Unitholders' name should be as per details

in the existing folio number, else it would be liable for rejection. Where mandatory details for

eg: PAN/KYC documents, local address in case of FII/NRI/PIO has not been provided/furnished

earlier the same be provided alongwith this application form. Any changes in details registered

with us need to be done vide a separate application request.

If the broker name & code is left blank, the application shall be treated as direct.

Unit holders providing the common account number where the unit holders has / have not

provided the documents as required mandatorily, such documents should then be provided

along with this Application Form.

4 Please write Application serial number, Name and PAN on the reverse of the cheque/

demand draft.

5 The applicants name and address including PIN Code number must be given in full (post box

number alone is not sufficient).

6 In case the investor is a NRI/FII, it is mandatory to provide overseas address in addition to local

address. However, all correspondence shall be at the local address.

7 If the account has more than one (upto three) Unitholder, the account will be registered either

as joint or either/anyone or survivor basis, as specified. If nothing is specified the default

mode of holding will be joint.

8 It is expressly understood that the investor/Unitholder has the express authority from the

relevant constitution to invest in units of the Fund and the AMC/Trustee/Fund would not beresponsible if the investment is ultravires the relevant constitution.

9 All communications and payments will be made to the first applicant or to the Karta in case of

HUF (Where the HUF is the first applicant).

10 Signatures should be in English or in any Indian language as specified in the Eighth Schedule of

the Constitution of India. Thumb impressions must be attested by a Magistrate/Notary Public

under his/her official seal. In case of HUF, the Karta should sign on behalf of the HUF. In case

of Partnership firms, the authorised Partner will sign on behalf of the firm. Similarly, for the

Association of Persons (AOP), the application must be signed by the Authorised Signatory.

11 Applications on behalf of minors should be signed by their guardian.

12 In case of an application under a Power of Attorney or by a limited company, body corporate,

registered society, Trust or partnership, the relevant power of attorney or the relevant resolution

of authority to make the application or the Trust Deed or Partnership Deed as the case may be,

or duly certified copy thereof, alongwith a certified copy of the Memorandum and Articles of

Association and/or bye-laws should be submitted along with the Application Form.

13 For any application of switch-in from any other schemes of Principal Mutual Fund into Principal

SMART Equity Fund, received on any date during the NFO, the application will be deemed to

have been received on the last date of the NFO and will be processed accordingly.

(C) BANK DETAILS

This requirement is mandatory and applications without complete bank details are liable to be

rejected. The Mutual Fund/Asset Management Company will not be responsible for any loss arising

out of fraudulent encashment of cheques and delay/loss in transit.

(I) Third Party Payments:

SEBI constituted Committee on "Operational Risk Issues related to Investor Service processes in

Mutual Funds", has given recommendations on select service processes which are not standard

across the industry, are ambiguous or are high risk due to higher possibility of errors or frauds. AMFI

has been working on implementation plan on various recommendations of the committee and in

the meantime AMFI has been advised by SEBI to take immediate steps to implement recommendations

of the Committee regarding Third-Party Cheques with a view to enhance compliance with AML/KYCrequirements as well as to mitigate the risk associated with such transactions.

Accordingly AMFI vide its Best Practice Guidelines Circular No.16/135/BP/10-11, dated August 16,

2010 has suggested a detailed implementation process stipulating the following:-

Asset management Companies (AMCs) should not accept subscriptions with Third-Party payments

except in the following exceptional situations:

Payment by Parents/Grand-Parents/related persons on behalf of a minor in consideration of

natural love and affection or as gift for a value not exceeding` 50,000/- (each regular purchase

or per SIP installment)

Payment by Employer on behalf of employee under Systematic Investment Plans through Payroll

deductions.

Custodian on behalf of an FII or a client.

When payment is made through instruments issued from an account other than that of the beneficiary

investor, the same is referred to as Third-Party payment. It is clarified that in case of payments

from a joint bank account, the first holder of the mutual fund folio should be one of the jointholders of the bank account from which payment is made

In case of exceptional situations as above, AMFI has directed AMCs to have appropriate and adequate

controls in place to carry out verification as required under the Prevention of Money Laundering Act

(PMLA), which would, inter alia, include:

a) Determining the identity of the Investor and the person making payment i.e. mandatory KYC

for Investor and the person making the payment.

b) Obtaining necessary declaration from the Investor and the person making the payment.

Declaration by the person making the payment should give details of the bank account from

which the payment is made and the relationship with the beneficiary.

c) Verifying the source of funds to ensure that funds have come from the drawer's account only.

Further as advised by AMFI:

a) An investor at the time of his/her purchase must provide the details of his pay-in bank account

(i.e. account from which a subscription payment is made) and his pay-out bank account (i.e.

account into which redemption / dividend proceeds are to be paid). In case an investor hasmultiple accounts, he should register them with the AMC (refer section here below on "Multiple

Bank Accounts").

b) Where a subscription is preferred vide Pay Order, Demand Draft, Banker's cheque and the like,

a Certificate from the Issuing banker must accompany the purchase application, stating the

Account holder's name and the Account number which has been debited for issue of the instrument.


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) A pre-funded instrument issued by the Bank against Cash shall not be accepted for investments

of` 50,000/- or more. This also should be accompanied by a certificate from the banker giving

name, address and PAN (if available) of the person who has requested for the demand draft.

) If payment is made by RTGS, NEFT, ECS, bank transfer, etc., a copy of the instruction to the

bank stating the account number debited must accompany the purchase application.

) Where it is found that the payment is not made from a registered bank account or from an

account not belonging to the first named unit holder, the AMC/R&TA shall be liable to reject

the transaction with due intimation to the investor.

or Declaration format contact any of our Investor Service Centre or visit our website

www.principalindia.com

I) Multiple Bank Accounts:

MFI vide its afore referred Circular of August 16, 2010 has directed Mutual Funds to put in place

trong processes by November 15, 2010 to ensure that Third-Party payment instruments are not

sed for mutual fund subscriptions. Further, Mutual Funds have also been directed to provide a

acility to the investors for registration of multiple bank accounts where they are one of the

olders and from where they expect to make payment for mutual fund subscription.

ursuant to the above, AMFI vide its Best Practice Guidelines Circular No.17/2010-11, dated October

2, 2010, has provided that investors can register Multiple Bank Accounts with the Mutual Fund - up

o a maximum of 5 Bank Accounts in case of Individual and HUF investor and 10 Bank Accounts in

ase of Non-Individual investor. Such facility can be availed by submitting necessary documents

long with the Multiple Bank Accounts Registration Form available at our Investor Service Centre

nd our Website www.principalindia.com. Subsequent to which the Investor can select any of the

egistered bank accounts for pay-ins for subscriptions and pay-out for redemption / dividend

roceeds. For Application Form and details, please refer www.principalindia.com and Statement

f Additional Information.This facil ity can be availed only during continuous offer on an ongoing

asis.

E-mail Communication: Account Statements / Newsletters / Annual Reports / Other statutory

information (as may be permitted under SEBI (Mutual Funds) Regulations, 1996) can be sent toeach Unit holder by courier / post / e-mail.

Unit holders who have opted to receive these documents by e-mail will be required to download

and print the documents after receiving e-mail from the Mutual Fund. Should the Unit holder

experience any difficulty in accessing the electronically delivered documents, the Unit holder

shall promptly advise the Mutual Fund to enable the Mutual Fund to deliver such document

through alternative means. It is deemed that the Unit holder is aware of all security risks

including possible third party interception of the documents and contents of the documents

becoming known to third parties.

ECS/NEFT: Investors who have opted for the ECS/NEFT facility of RBI for dividend payment

will receive a direct credit of the amount to them in their notified account whenever the

payment is made through ECS/NEFT. It should be noted that while the Mutual Fund will make

all efforts, there is no commitment that this facility will be made available to all

desirous Investors. Applicants in cities not covered under ECS/NEFT facility will receive dividend

payments by cheques or demand drafts and the same will be mailed to the Unit holders.

Please note that currently the ECS/NEFT facility is available only in respect of dividendpayments and not in the case of Redemption of Units. In case an investor has been covered

under Direct Credit facility with select banks then dividend payment through ECS/NEFT shall

not be effected.

D) PAN & KYC DETAILS

PAN Details:As per SEBI directive, the requirement for submitting PAN details for all investments

of Mutual Funds is mandatory for all investors [including Non-Resident Indians] irrespective of

the amount of transaction involved. Where the person making an application is minor and who

does not have any income chargeable to income-tax, he shall quote the PAN of his/her father

or mother or guardian, as the case may be.

As directed by SEBI, on submission of sufficient documentary evidence, submission of PAN shall

not be insisted in case of Central Government, State Government and the officials appointed

by the Courts e.g. official liquidator, court receiver etc. (under the category of Government)

while investing in Mutual Funds. The exemption from mandatory PAN requirement will apply to

transactions undertaken on behalf of Central and State Government and not to the transactions

of the employees of Central and State Government in their personal capacity.

All applications without PAN proof and KYC requirements, are liable to be rejected.

. Know Your Customer Acknowledgement Letter (KYC letter): Following listed category of

Investors should note that in line with the guidelines issued by AMFI, it is mandatory for them

to provide a copy of "KYC" Acknowledgement letter issued by CDSL Ventures Limited (CVL) for

all investment transactions: 1.All non-individual investors such as Companies, Body Corporates,

Association of Persons, Banks, Financial Institutions, Funds, Trusts, Societies, Hindu Undivided

Family (HUF), Partnership Firms, Limited Liability Partnerships (LLPs), Foreign Institutional

Investors (FIIs), etc.; 2. Non Resident Indians (NRIs) [including Persons of Indian Origin (PIOs)];

3. Investors (individuals and non-individuals) investing through the Channel Distributors route

[Channel Distributors are those distributors who have an arrangement with AMC, pursuant to

which they submit the mutual fund transactions details (viz. commercial / non-commercial

transactions other requests etc.) of their clients electronically to AMC]. The above category of

investors for the purpose of KYC compliance shall include (i) their constituted Power of Attorney

(PoA) holder, in case of investments through a PoA (both issuer of PoA & POA holder must

attach KYC letter at time of application); and (ii) each of the applicants, in case of application

in joint names. KYC Acknowledgement shall continue to be mandatory for Resident Individual

Investors (including Minors), investing through other than Channel Distributors for transaction

of 50,000/- and above. The KYC letter is one time and unique and can be used for transacting

across the Mutual Funds.

(E) INSTRUCTIONS FOR COMPLETING THE SIP AUTO DEBIT FORM:

1. In accordance with SEBI requirements. SIP Application Form and date of initial Cheque should

be same.

2. SIP Applications will be accepted on any working day of the month: Accordingly the units will

be allotted on the date of receipt of valid SIP Application along with a SIP investment cheque.

3. Thereafter the date of subsequent SIP installment shall be 1st, 5th, 15th or 25th of a particular

month (specified date for SIP investments) after completing a minimum time gap of 30 days

from the date of the first SIP investment cheque. The subsequent SIP installment date has to

be selected by the investor OR will be taken, the nearest date amongst the Specified Date

subject to receipt of the SIP application.

4. Existing Investors need to provide their folio number on SIP application form and need not fill

up the NFO Application Form.

5. In case of Applicant(s) who already have a Folio in Principal Mutual Fund, they can provide

their folio number & First Unitholder name in Section 1 and proceed to Section 3. The details

of such applicant(s), including details fo bank account, sequence & mode of holding, address

and nomination as registered in the existing Folio Number would apply to this Investment and

the said registered details would prevail over any conflicting information that may be furnished

in this form. First Unitholders' name should be as per details in the existing folio number,

else it would be liable for rejection. Where mandatory details for eg: PAN/KYC documents,

Bank details has not been provided/furnished earlier the same be provided alongwith this

application form. Any changes in details registered with us need to be done vide a separate

application request.

6. New Investors who wish to enroll for SIP through Auto Debit should fill the form specifically for

the same in addition to the Common Application Form. Investor has to submit one initial

cheque and a cancelled cheque.

7. SIP Auto Debit is available only on 1st, 5th, 15th or 25th of a month. In case these days are

non-business days for the scheme, then SIP will be processed on the next business day.8. Investors opting for SIP investment can subscribe to this facility subject to the condition that

each of the SIP installments including the initial purchase should be of the same amount.

9. In case the Auto Debit does not take effect for three consecutive times then the SIP would

be liable for cancellation.

10. SIP enrolment will be discontinued by Principal Pnb Asset Management Company Pvt. Ltd.

(AMC) in case [a] the SIP installment is not honored consecutively for three SIP installments

[b] the Bank account [for ECS (Debit Clearing) and / or Direct Debit] is closed and the request

for change in bank account is not submitted by the concerned unit holder at least 15 working

days before the due date of next SIP installment. Further, in such cases the balance cheques,

if any, will be returned to the unit holder.

11. Initial cheque should participate in local MICR clearing or payable at par. If investor has subscribed

for SIP from outstation, then initial DD has to be payable at nearest NFO Collection Centre.

12. Investors will not hold AMC, Principal Mutual Fund, its registrars and other service provides

responsible if the transaction is delayed or not effected or the investor bank account is debited

in advance or after the specific SIP date.

13. AMC, Principal Mutual Fund, its registrars and other service providers shall not be responsible and

liable for any damages/compensation for any loss, damage, etc. incurred by the investor using

ECS facility. The investor assumes the entire risk of using this facility and takes full responsibility.

14. AMC reserves the right to reject any application without assigning any reason thereof.

15. Please refer to the Key Information Memorandum, Scheme Information Document and Statement

of Additional Information for Applicable NAV, Risk Factors, Load and other information on the

Scheme / Plan before investing.

16. As per SEBI directive, the requirement for submitting PAN details for all investments of Mutual

Funds is mandatory for all investors [including Non-Resident Indians] irrespective of the amount

of transaction involved. Where the person making an application is minor and who does not

have any income chargeable to income-tax, he shall quote the PAN of his/her father or mother

or guardian, as the case may be.

I.Micro SIP: Pursuant to SEBIs communication to AMFI vide its letter dated June 19, 2009; AMFI

has issued guidelines for uniform implementation of the said SEBI letter. In accordance to the

same Systematic Investment Plans (SIP) up to ` 50,000/- per year per investor (Micro SIP) shall

be exempt from requirement of PAN. However attested photo-copy of other photo identification

documents like Voter I.D. Card, Government/Defence Card, Card of reputed Employer, Driving

License, Passport should be submitted by the investors (for all joint holders) along with applications

as proof of identification in lieu of PAN. Such document(s) must be current and valid and the

photo copy of the same should be self attested by the investor(s)/attested by the ARN holder

mentioning the ARN number.

This exemption will be applicable ONLY to investments by individuals (including NRIs but not

PIOs), Minors and Sole proprietary firms. HUFs and other categories will not be eligible for Micro

SIPs.

17. Subject to 16 above, all applications without PAN details AND KYC requirements [as applicable.

For details refer instruction D(II)], are liable to be rejected.

18. a) If you have not indicated any of your SIP preferences in the Common Application Form &

this Form, the same would be assumed to be as indicated as follows :

SIP Auto-Debit Period Six Months

SIP Date Cheque Date or next nearest SIP Date (commencing

30 days after the first SIP investment date)

SIP Frequency Monthly

b) If the SIP details indicated in this form materially vary from the SIP Details indicated in

the ECS, the SIP application is liable to be rejected.


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CHECKLIST

Please ensure that:

J All relevant particulars are filled in / ticked in the form

Full name of each holder Full Address N Resident Individual - Indian address or N NRI / FII - Foreign address & Local Address Bank mandate PAN details & Proof of PAN Scheme / Option details Payment details Mode of holding Legal Status

J Effective January 1, 2008: PAN details mandatory for all investments as indicated in D(1).

J Your investment is not less than the minimum i nvestment amount.

J Your application is completed and signed by all applicants.

J KYC acknowledgement letter is enclosed alongwith applications*.

J Cheques are drawn in favour of Principal SMART Equity Fund and crossed A/c. Payee only, datedand signed.

J On the reverse of each cheque submitted write the First Applicants name, PAN and the ApplicationForm number.

Accompanying documents

Please submit the following documents with your application (where applicable).

All documents should be true copies certified by a director / Trustee / Company Secretary /Authorised Signatory.

* For Resident Individual Investors (including Minors), investing through other than Channel DistributorsKYC is mandatory for investments of ` 50,000/- and above.

Documents Companies Societies Partnership Investments Trusts NRI FIIs IndividualFirms through POA

Resolution / A