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 REITs. The NAV of the Fund may fall and investors may suffer a loss due to a decline in stock prices or deterioration in the financial conditions and business performance of an equity issuer.
Major risks are as follows:
1. Price Fluctuation Risk
Income and profits from the sale of real estate and real estate securitized products form the source of earnings for REITs, and REIT prices can fluctuate due to various factors including the circumstances surrounding the real estate, real estate market conditions, trends in long- and short-term interest rates and changes in the macroeconomic environment. Aging and changes in property conditions as well as the loss of or damage to properties from fire or natural disasters can also affect the price. Deterioration in dividends, financial conditions, earnings, and the market environment can cause a decline in the price of the REIT and a loss in 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
If Real Estate Investment Trusts become or are anticipated to become insolvent or to enter a state of holding excessive debt, there is a risk that the Fun will incur material losses.
4. Risk Contingent to the Lending of Real Estate Investment Trust Securities
The engaging in security lending incurs counterparty risk (the risk that the lending agreement is not honored or the agreement is canceled due to reasons including a counterparty's bankruptcy) and could cause an unexpected loss as a result. Even when liquidating the position by offsetting it with the collateral upon the default of the lending agreement or cancelation of the agreement, there is the possibility that the acquisition cost of the security from the market may exceed the value of the collateral due to market price fluctuations. In such a case, the fund would need to make up for the price difference, and therefore incur a loss.
Risk of Discrepancies between TSE REIT Index and NAV
This Fund seeks to match with NAV volatility with that of the TSE REIT Index; however, we cannot guarantee that movements will be identical to those of the Index for the following reasons:
- The potential market impact from the trading, etc., of individual issues when portfolio adjustments are made due to changes in the selected issues on the TSE REIT Index or capital transfers, or the costs borne by the Fund such as trust fees, brokerage commission, and audit costs, etc.
- 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 all or some of such transactions and that of the TSE REIT Index.
Discrepancy between the market prices at which stocks are traded on financial instruments exchange and the NAV
This Fund is listed on and will be publicly traded on the Tokyo Stock Exchange; however, the market price of units will depend mainly on the Fund's demand, its investment performance, and how attractive it is to investors in comparison to alternative investments, etc. We cannot predict whether the units of this Fund will be traded at the market value, below the NAV or above the NAV
*The prices of REIT securities targeted for investment of this Fund will fluctuate due to the effects of the aforementioned risks. Therefore, please note that this Fund itself has these risks as well.
*The factors that contribute to fluctuations in the NAV are not limited to those listed above.
Additional Considerations
- This document is prepared by Nikko Asset Management Co., Ltd. as sales material for the purpose of providing information on Listed Index Fund J-REIT (Tokyo Stock Exchange REIT Index) Bi-Monthly Dividend Payment Type and promoting investor 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 the Fund faces big redemption causing short term cash requirement or sudden change in the main trading market condition, there can be temporal decline in the liquidity of holding assets, resulting in the risks that Fund unable to trade securities at the expected market prices or appraised prices, or encounters limitation in trading volume. This may result in the negative influence on NAV, suspension of redemption applications, or delay in making payment of redemption.
- 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.