Matters to Consider -Listed Index Fund Japan High Dividend (TSE Dividend Focus 100)
Investors are not guaranteed the investment principal that they commit. Investors may incur a loss and the value of their investment principal may fall below par as the result of a decline in market price or NAV. All profits and losses arising from investments in the Fund belong to the investors (beneficiaries).This fund is different from saving deposit.
The Fund invests primarily in stocks and listed REITs. The NAV of the Fund may fall and investors may suffer a loss due to a decline in stock prices or in listed REITs, or deterioration in the financial conditions and in the business performance of an issuer of stocks or REITS.
Major risks are as follows:
1. Price Fluctuation Risk
- Stock prices fluctuate as they are affected by information on the company’s growth rate and profitability as well as changes in such information. They also fluctuate as they are affected by economic and political conditions in Japan and abroad. There is a risk that the Fund will suffer material losses if unexpected changes occur in stock price movements or liquidity.
- The prices of REITs change due to factors including real estate conditions, the real estate market, long- and short-term interest rate trends, and changes in the macro economy. Deterioration in the financial condition of REITs, financial results, or market conditions may cause a drop in the dividends and prices of REITs, and create the risk of losses to the Fund.
2. Liquidity Risk
- In a situation where the market or trading volume is small, the price at which a security can be purchased or sold can be greatly influenced by the size of the transaction, giving rise to the risk that a transaction cannot be completed at the price expected from the market conditions, that a security cannot be sold as appraised, or that the transaction volume is limited regardless of the price level. This could lead to an unexpected loss.
3. Credit Risk
- There is a risk that the Fund will incur material losses in the event of a crisis that directly or indirectly affects the business of a corporation in which the Fund invests. The prices of stocks of issuers may substantially decline (possibly to zero) due to fears of default or corporate bankruptcy, which can contribute to decline in the Fund's NAV.
- If REITs become, or are anticipated to become, insolvent due to excessive liabilities, major losses may be incurred. Furthermore, REITs may be delisted if they meet certain criteria specified by financial instruments exchanges.
4. Risk Involved in Lending of Securities
- Lending of securities involves counterparty risks, which are the risks of contractual default or cancellation following bankruptcy, etc., by the counterparty. As a result, the Fund may suffer unexpected losses. Following the default or cancellation of a lending agreement, when liquidation procedures are implemented by using the collateral that is set aside in the lending agreement, the procurement cost of buying back the securities can surpass the collateral value, due to price fluctuations in the market. In such cases, the Fund is required to pay the difference, which may cause the Fund to incur losses.
<Risk of Discrepancy between the TSE Dividend Focus 100 Index and NAV>
This Fund seeks to match the NAV volatility with that of the TSE Dividend Focus 100 Index, but it cannot guarantee that movements will be consistent with the Index for the following reasons:
- The Fund may be subjected to a market impact when buying or selling individual stocks as it adjusts its portfolio in response to changes in the stocks that comprise TSE Dividend Focus 100 Index and capital changes among corporations. In addition, the Fund incurs various expenses, including trust fees, brokerage commissions, and audit fees.
- Dividends may be paid by stocks in the portfolio and fees may be earned for securities lent.
- When derivative transactions such as futures are made, there may be disparity between the price movements of such transactions and that of some or all of the constituents of the TSE Dividend Focus 100 Index.
◇Discrepancy between the market prices at which the stocks are traded at exchanges and the NAV
The Fund is listed in the Tokyo Stock Exchange and the units are traded on that exchange. The market price of the units is affected primarily by the size of demand for the Fund, its performance, and how attractive it is to investors in comparison with their other investments. It is not possible to predict whether the Units will sell in the market above or below the NAV.
*Factors that contribute to NAV fluctuations are not limited to those listed above.
- This document is produced by Nikko Asset Management for the primary purpose of providing information on the Listed Index Fund Japan High Dividend (TSE Dividend Focus 100), and to increase investors’ understanding of this Fund.
- The provisions stipulated in Article 37-6 of the Financial Instruments and Exchange Act (“cooling-off period”) are not applicable to Fund transactions.
- This Fund differs from deposits or insurance policies in that it is not protected by the Deposit Insurance Corporation of Japan or the Policyholders Protection Corporation of Japan. Furthermore, units purchased from registered financial institutions, such as banks, are exempted from compensation by the Japan Investor Protection Fund.
- When applying to invest in the Fund, please make the decision to invest carefully after taking the time to read the delivered pre-agreement document and other relevant materials in detail.