PrincipalEquity Savings Fund

(An open ended scheme investingin equity, arbitrage and debt)

August 2020

Principal Equity Savings Fund:(An open ended scheme investing in

equity, arbitrage and debt)

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Income generation and capital appreciation over the medium to long term.

Investment in equity and equity related instruments, debt and money market instruments and arbitrage opportunities.

SchemesProduct Labeling

This product is suitable for investors who are seeking~-

The Best Performing Asset Class Is Different Each Year

Data as on 31st Jul 2020. Source: NSE, MFI Explorer and Internal Analysis.

The above table is for illustration purpose only and should not be construed as an investment advise. Past performance may or may not be sustained in future.

FY returns by different asset classes*

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FYTD^

67% 14% 25% 12% 75% 12% 9% 11% 19% 28% 8% 20% 12% 16% 9% 29%

21% 7% 11% 9% 27% 8% 9% 9% 12% 16% 8% 12% 8% 10% 6% 12%

6% 7% 9% -9% 6% 7% 2% 9% 9% 10% 2% 9% 7% 7% -4% 5%

6% 5% 9% -35% 5% 6% -8% 9% 8% 9% -8% 7% 7% 7% -25% 1%

*All returns mentioned above are absolute; ^July 2020

Nifty 50 TRI – representing equity investments NIFTY Short Duration Debt Index – representing fixed income returns

Nifty Equity Savings Index – representing asset allocation investments NIFTY Liquid Index – representing cash returns

A diversified asset allocation can help cushion the volatility from individual asset classes

The performance of the NIFTY Equity Savings Fund ( debt, equity and arbitrage) has been in the middle of interchanging performances among equities, fixed income and cash returns

2

3

Managing Risk Of Investing

Index growth with 5% or more corrections in Nifty Equity Savings Index

Asset allocation endeavors to curtail losses during market downfalls. Fall in the NIFTY Equity Savings Index has been markedly lower than the fall in the NIFTY50

Event From To Nifty Equity Savings Index Nifty 50 TRI Nifty ESI outperformance over Nifty 50 TRI

1 10/05/2006 14/06/2006 -11.4 -29.7 18.3

2 07/02/2007 05/03/2007 -5.3 -15.2 9.9

3 08/01/2008 20/11/2008 -23.9 -59 35.1

4 07/11/2010 20/12/2011 -5.8 -27.2 21.4

5 13/02/2020 23/03/2020 -13.9 -37.3 23.4

Values of Nifty 50 TRI and Nifty Equity Savings Index rebased to 100 on 31st Mar 2005

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Nifty Equity Savings Index Nifty 50 TRI

12

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5

Data as on 31st Jul 2020. Source: NSE, Morningstar Direct and Internal Analysis. The above chart is for illustration purpose only and should not be construed as an investment advise. Past performance may or may not be sustained in future.

4

Managing Risk Of Investing

Historical market drawdown events

Asset allocation aims to help in making investment resilient to market falls

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Nifty Equity Savings Index

Nifty 50 TRI

Data as on 31st Jul 2020. Source: NSE, Morningstar Direct and Internal Analysis. The above chart is for illustration purpose only and should not be construed as an investment advise. Past performance may or may not be sustained in future.

5

Scenario analysis of asset allocations

How to read the table?

Lets take an example of the cell shaded in orange color Arbitrage & Fixed Income: 6% return * 75% exposure = 4.5% contribution Equity: 15% return * 25% exposure = 3.75% contributionFund performance = 8.25% return

Equity Portion returns % (25%)

25 20 15 10 5 0 -5 -10 -15 -20 -25

Arb

itra

ge

+ F

ixe

d

Inc

om

e R

etu

rns %

(7

5%

) 11 13.25 12.00 10.75 9.50 8.25 7.00 5.75 4.50

10 13.75 12.50 11.25 10.00 8.75 7.50 6.25 5.00 3.75

9 13.00 11.75 10.50 9.25 8.00 6.75 5.50 4.25 3.00

8 12.25 11.00 9.75 8.50 7.25 6.00 4.75 3.50 2.25

6 10.75 9.5 8.25 7 5.75 4.5 3.25 2 0.75

3.25

2.50

1.75

1.00

-0.5

2.00

1.25

0.50

-0.25

-1.75

14.50

The equity and debt + arbitrage exposure given above is only to illustrate the effect of returns on the portfolio based on the exposure. The actual exposure of the fund may be different. The figures in the above table are based on the assump-

tions on the asset allocation and returns. It is provided for illustration purposes only and should not be construed as indicative yield or return. The above numbers are gross and will reduce based on expenses that shall be charged to the

fund. The actual numbers may be more or less depending on the securities market movement. There may arise a situation where good arbitrage opportunities are not available and hence the allocation of the fund may be different as stated

in the SID.

Principal Equity Savings Fund(An open ended scheme investing in equity, arbitrage and debt)

6

7

Right mix of 3 different asset classes

3 in one investment solution packed along with tax treatment of an equity fund

The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

15% to 50% allocation(high risk)

15% to 75% allocation(medium to high risk)

10% to 35% allocation(low to medium risk)

Growth potential with investmentsin equities,

Risk Mitigation by using cash futures

arbitrage opportunities

Regular Income with investments in dynamically managed fixed income instruments

8

Right mix of 3 different asset classes

3 in one investment solution packed along with tax treatment of an equity fund

The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

Diversified portfolio, predominantly large cap.Bottom-up approachSector agnostic

High quality fixed income allocationActive duration management

Lock in gains by buying in cash market and selling in futures market

Equity

Arbitrage

Fixed Income

9

Appropriate for investors with a lower risk appetite

Principal Equity Savings Fund is:

Lowest on the risk matrix amongst hybrid and equity fund categories

Ideal for first time equity investorsor investors nearing retirement

Suitable for conservative type of investors who seeks to participate in equities but are wary of volatility

Investment option for investors seeking tax efficient returns

10

Why Principal Equity Savings Fund?

Principal

Equity Savings

Fund

Maintains disciplined asset

allocation

Provides easy liquidity

An ideal option for RWP and STP

in other equity products

Participation in equities with

lower risk

Historical Asset Allocation

Net Eq Arbitrage Debt and Others

Change in the asset allocation since Apr 2020 to seek more participation in equities

The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

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100%Ju

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0

11

Principal Equity Savings Fund Nifty Equity Savings Index

Performance

Change in the asset allocation has resulted in alpha generation over the benchmark

Last 5 Financial Year Performance

Data as on 31st Jul 2020. Source: NSE, MFI Explorer and Internal Analysis. Past performance may or may not be sustained in future. For detailed performance in regulatory format, please refer to Annexures

-0.1

-0.05

0

0.05

0.1

0.15

FY2017 FY2018 FY2019 FY2020 FYTD (Jul 2020)

12

Equity Allocation: Sector Profile (as on 31st Jul 2020)

The sectors referred above should not be construed as recommendation from Principal Asset Management and/or Principal Mutual Fund. The scheme may or may not have any present or future positions in these sectors. The views

given above may change from time to time without any notice.

0.5%

0.6%

0.6%

1.0%

1.4%

1.8%

2.1%

2.4%

4.0%

10.1%

10.3%

10.5%

18.4%

36.0%

Media & Entertainment

Services

Industrial Manufacturing

Fertilisers & Pesticides

Cement & Cement Products

Power

Metals

Construction

Pharma

Telecom

Chemicals

Oil & Gas

Automobile

IT

Consumer Goods

Financial Services

Principal Equity Savings Fund

-0.3%

-0.5%

0.5%

0.1%

-1.5%

-0.8%

-0.7%

-0.6%

-1.0%

-0.8%

4.0%

-6.1%

4.7%

-5.6%

5.8%

2.8%

Over/UnderweightThe fund portfolio is diversified across 14 sectors with top allocation

to Financial Services, Consumer Goods and IT.

The portfolio was overweight on Consumer Goods, Automobiles and Chemicals sectors

Demand in Consumer Goods space is one of the least impacted and further is likely to recover the fastest as the COVID19 issue settles.

Auto and Auto Ancillaries companies are expected to likely be benefited from rural growth especially the 2-wheeler industry. Moreover, the volumes for the industry are expected to improve from 2HFY21.

The de-risking of supply chains from China is expected to likely be benefited the Specialty Chemical sector in India.

IT and Oil& Gas sectors were largely underweight vis-à-vis benchmark

IT (Software) was the top underweight sector. We believe that H1FY21 would be significantly impacted due to clients reducing spends especially on the discretionary side of the business.

We remain underweight in Energy / Gas sector owing to the slower than expected offtake in the power segment.

13

Fund Facts (as on 31st Jul 2020)

Market Cap Ranges are determined as per AMFI classification as on June 2020

Large Cap: 1st -100th company in terms of full market capitalization.

Mid Cap: 101st -250th company in terms of full market capitalization.

Small Cap: 251st company onwards in terms of full market capitalization.

Top 10 Holdings % to NAV

Reliance Industries Ltd. 5.61

HDFC Bank Ltd. 4.19

Infosys Ltd. 2.80

HDFC Ltd. 2.69

HDFC AMC Ltd. 2.26

United Spirits Ltd. 1.92

Tata Consultancy Services Ltd. 1.91

Max Financial Services Ltd. 1.85

Rossari Biotech Ltd. 1.69

ICICI Bank Ltd. 1.65

Marketcap allocation (rebased to 100)

Large Cap 90.10Mid Cap 8.71Small Cap 1.19

Average Maturity

367 Days

Modified Duration

330 Days

Gross YTM

4.55%

Equity Turnover

0.77

Debt Turnover

0.13

14

Investment

Philosophy and

Process

15

16

Equity Investment Philosophy

At Principal we believe:

Bottom-up stock selection is the most reliable and repeatable source of consistent investment performance

Integration of traditional and quantitative fundamental researchBreadth through a sophisticated comparative stock selection frameworkDepth through focused due diligence and expertise

Sustainable Fundamental ChangeRising Investor ExpectationsAttractive Relative Valuations

3 key attributes distinguish superior stock selection :

17

Equity Investment Process

IdeaGeneration

Investment Universe

(200-225 Stocks)

StockSelection

Inhouse Research

Third Party Research

Industry Experts

Portfolio Construction

(Compounders + Alpha Generators)

Investment Objective and Strategy

Risk Reward Framework

Portfolio Diversification

Regulatory and Internal risk limits

Portfolio Monitoring

and Evaluation

Performance attribution analysis

Benchmark and peer group analysis

Risk / Reward analysis

Management Meetings

6 Pillar Investment Framework

DueDiligence

18

6 Pillars of our Equity Investment Process

BusinessDynamics

OperatingMatrix

Profitability

Quality of Growth

Capital Allocation

Valuation

Size, scalability and

longevity

Operational efficiencies

Quality and sustainability

of profits

Management quality and

business model

Efficiency and distribution

of capital

Price the Value and not Value

the Price

1 2 3 4 56

19

Fixed Income Management Philosophy

Returns are best achieved for our investors through the integration of:

Rigorous Credit

and Economic

Research

Focused Fund

Management

Disciplined Risk

Management

20

Rates: Access to one of the best of Internal/External & Proprietary

Credit: Exhaustive top down process combined with “bottom up” issuer selection

Enhancement in top down process including Credit Policy & Credit Comm

Surveillance tools added

RESEARCHFUND

MANAGEMENT

RISK

MANAGEMENT

Monthly Asset Allocation Matrix

Benchmark & Peer Group Analysis

Daily Performance AttributionPortfolio Laddering

Changes in Fund Management ResponsibilitiesKey product strategy changes

Limit monitoring / compliance

Monthly Review of Risk AreasGlobal Supervision of Risk

Processes

Internal Limits tightened Asset Class & Rating Wise

Fixed Income Management Process

21

Fund Details

Mr. Sudhir Kedia has over 14 years of experience in research and asset management business. During the course of his career, he has worked with Mirae India AMC and ASK Investment Managers. He has managed Hybrid strategies and other Multi cap portfolios is his earlier organisations. He has a very strong research background and has sound understanding of the fund management business.

Nature of Scheme

Fund Manager: (for equity portion) Mr. Sudhir Kedia

Gurvinder Singh Wasan is a Fund Manager at Principal Mutual Fund. He has over 16 years of work experience in Fixed Income markets, credit analysis and structured finance. Before joining Principal Mutual Fund, he worked with CRISIL Limited and ICICI Bank Limited. Wasan holds a post-graduate degree in Commerce (Masters in Commerce). He is a Chartered Accountant (CA) and a CFA (from CFA institute USA) as well.

Fund Manager: (for debt portion) Mr. Gurvinder Singh Wasan

An open ended scheme investing in equity, arbitrage and debtInception date (Regular Plan) 23rd May 2002.

Investment ObjectiveTo provide capital appreciation and income distribution to the investors by using equity and equity related instruments,arbitrage opportunities, and investments in debt and money market instruments.

Fund ManagerMr. Sudhir Kedia (for equity portion – managing since Oct 2019)Mr. Gurvinder Singh Wasan (for debt portion – managing since May 2019).

Investment Plan Direct & Regular.Investment Options Growth & Dividend (Quarterly and Half Yearly).

Min Application Amount

New Investor – Rs.5000/- for both Dividend and Growth Option and any amount thereafter under each Plan/Option. Existing Investor – Rs. 1000/- and any amount thereafter under each Plan/Option. Systematic Investment Plan: Minimum twelve installments of Rs. 500/- each. Systematic Transfer Plan: Minimum Six installments of Rs. 1,000/- each. Regular Withdrawal Plan: Minimum Six installments of Rs.500/- each.

Benchmark NIFTY Equity Savings Index

Load Structure Entry Load: NIL Exit Load: NIL

22

The performance details provided herein are of Regular Plan - Growth option. Past performance may or may not be sustained in future. Returns (in%) are calculated on Compounded Annualised Basis (CAGR). PTP (Point to Point) Returns

are based on standard investment of Rs. 10,000/- made at the beginning of relevant period. Performance of the dividend option for the investors would be net of dividend distribution tax, as applicable. Mr. Sudhir Kedia manages total of 4

schemes. Mr Gurvindersingh Wasan manages total of 3 schemes. Please refer slide no. 22 for annexure of returns for all scheme managed by the fund manager. Data as on 31st July, 2020. Different plans shall have a different expense

structure. The returns shown under SIP are calculated using XIRR approach (CAGR Returns) assuming investment of Rs. 10,000/- on the 1st business day of every month. XIRR helps in calculating return on investments given an initial and

final value and a series of cash inflows and outflows with the correct allowance for the time impact of the transactions. Load is not taken into consideration for computation of performance. Mr. Sudhir Kedia (for Equity Portion) as a Fund

Manager managing Since October 2019 & Mr Gurvindersingh Wasan (for Debt portion) is managing Since May 2019. Disclaimer: The above investment simulation is for illustrative purposes only and should not be construed as a promise

on minimum returns and safeguard of capital. The AMC / Mutual Fund is not guaranteeing or promising or forecasting any returns. SIP does not assure a profit or guarantee protection against a loss in a declining market.

*23rd May 2002

Point to Point Performance

Annexures

PeriodsPrincipal Equity Savings Fund

Returns PTP Returns$Nifty Equity Savings Index

Returns PTP Returns$10 Year GOI

Returns PTP Returns$1 Year 5.45% 10546.78 6.16% 10617.66 7.72% 10774.093 Year 3.96% 11237.72 6.42% 12055.14 6.85% 12202.745 Year 5.94% 13347.5 7.22% 14176.87 8.40% 14974.38Since Inception* 7.59% 37868.2  NA NA 7.05% 34571.77

1 Year SIP 1,20,000.00 10.64% 126763 8.74% 125572 10.12% 1264383 Years SIP 3,60,000.00 4.77% 387114 6.56% 397587 10.46% 4211335 Years SIP 6,00,000.00 5.54% 690151 7.42% 723490 8.63% 7457047 Years SIP 8,40,000.00 5.99% 1039357 7.81% 1108883 8.64% 114244710 Years SIP 12,00,000.00 6.16% 1646696 8.36% 1847160 8.11% 1823629Since Inception* 21,80,000.00 6.80% 4217237 5.45% 3677984 7.05% 4325217

Periods

Principal Equity Savings FundTotal AmountInvested(in Rs.)

Nifty Equity Savings Index 10 Year GOI

Returns Market Value(in Rs.) Returns Market Value

(in Rs.) Returns Market Value(in Rs.)

SIP Performance

23

Annexures

Other schemes managed by Mr. Sudhir Kedia

Other schemes managed by Mr. Gurvinder Singh Wasan

Periods1 Year CAGR

(%)

3 Years

CAGR (%)

5 Years

CAGR (%)Since Inception CAGR (%) Date of Inception

Principal Personal Tax Saver Fund31-03-1996

Nifty 500 Index - TRI$

Principal Tax Savings Fund31-03-1996

Nifty 500 Index - TRI$

-0.90%

0.98%

-0.29%

0.98%

-1.97%

2.08%

-0.62%

2.08%

2.68%

6.17%

5.81%

6.17%

17.77%

12.61%

14.89%

12.61%

Periods1 Year CAGR

(%)

3 Years

CAGR (%)

5 Years

CAGR (%)Since Inception CAGR (%) Date of Inception

Principal Short Term Debt Fund 4.42% 6.13% 7.30%09-05-2003

CRISIL Short Term Bond Fund Index 8.44% 8.61% 7.48%

Principal Credit Risk Fund 5.97% 6.95% 7.38%14-09-2004

CRISIL Composite AA Short Term Bond Index

10.65%

11.16%

12.11%

9.88% 8.18% 8.90% 8.85%

Past performance may or may not be sustained in future. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. Returns (in %) are calculated on

Compounded Annualised Basis (CAGR).

Sudhir Kedia also manages Principal Tax Savings Fund, Principal Personal TaxSaver Fund w.e.f. October 2019, Principa Midcap Fund w.e.f. December 2019

Gurvindersingh Wasan manages Principal Short Tern Debt Fund w.e.f. April 2011, Principal Credit Risk Fund w.e.f. January 2018

$As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR of Nifty 500 Index PRI values from date 31-03-1996 to 26-11-1998 and TRI values since 26-11-1998.

Note: Performance of Principal Mid Cap is not given as the scheme has not completed 1 year.

Data as on July 31, 2020.

The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme

Information Document of the scheme. The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest

thereto. Reliance upon information in this material is at the sole discretion of the reader. This material should not be relied upon by you in evaluating the merits of

investing in any securities or products. Diversification does not guarantee investment returns and does not eliminate the risk of loss. It should be noted that the value

of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full

amount invested. Past performance may or may not be sustained in future. The views and strategies described may not be suitable for all investors. Furthermore,

whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. Investors are

advised to consult their Investment advisors for determining their risk appetite and Tax Advisor before taking any investment decision.

Disclaimers

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.