Listed Index Fund MSCI Japan Equity High Dividend Low Volatility (Beta Hedged)

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 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 stock index futures contract rights. The NAV of the Fund may fall and investors may suffer a loss due to a decline in stock and stock index futures contract rights prices or deterioration in the financial conditions and business performance of an equity issuer. In the case of investments in foreign currency-denominated assets, losses may be suffered fur to exchange rate fluctuations.

Major risks are as follows:

1. Price Fluctuation RiskStock 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 or liquidity.

Stock index futures contract rights prices fluctuate as they are affected by price movements of the stocks of the companies that form the basis for calculating the stock price index, as well as the stock markets that comprise the stock price index. Stock prices may also fluctuate in response to the movements of other stock price indexes in or outside of Japan. There is a possibility of unexpected changes in the prices of rights relating to stock index futures trading and as a result, the risk that the Fund will incur significant losses, if there is an unexpected fluctuation in the prices of stocks related to the stock price index or the constituent stock markets of the stock price index.

2. Liquidity RiskThe Fund may incur unexpected losses when the size of the market or trading volumes is small. The purchase and sale prices of securities are influenced by trading volume, resulting in the risks that they cannot be traded at prices expected to be realized in light of the prevailing market trend, sold at the estimated prices, or that the trading volume is limited regardless of the level of prices.

3. Credit RiskThere is a risk that the Fund will incur material losses in the event of a serious 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 NAV.

4. Foreign Exchange Rate Fluctuation Risk In general, the Fund’s NAV may fall if the exchange rate of the currency in which foreign currency-denominated assets are denominated falls against the yen.

5. Derivative Risk As financial derivatives-based finance contracts may be used, the value of derivatives will fluctuate depending on the value of underlying assets. The price of derivatives will fluctuate more than the underlying assets depending on the type of derivative. There is also the risk of suffering losses from being unable to execute transactions as originally contracted due to the bankruptcy of transacting parties, the risk of being unable to perform a reverse trade once a transaction has been settled, or the risk of only being able to perform a reverse trade under markedly unfavorable conditions compared to the theoretical price.

6. Beta Hedging RiskAs the Fund aims to constrain the impact of volatility in Japan’s overall stock market by investing in equities while taking short positions in stock index futures contracts (TOPIX futures contracts, etc.) (beta hedging), rises in Japan’s overall stock market may not always generate gains for the Fund.

The Fund’s NAV may fall if gains from equity investments are smaller than losses from stock index futures contracts, or if losses from equity investments are larger than gains from stock index futures contracts. The Fund’s NAV may see a particularly large drop if losses from both equity investments and stock index futures contracts are seen at the same time.

7. Security-lending RiskLending 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.

Risks of Discrepancy between the Long Short Strategy Index on MSCI Japan IMI Custom 85% + CASH (JPY) 15% Index and the NAV

The Fund seeks to match the NAV volatility with that of the Long Short Strategy Index on MSCI Japan IMI Custom 85% + CASH (JPY) 15% 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 the Long Short Strategy Index on MSCI Japan IMI Custom 85% + CASH (JPY) 15% Index and capital changes among corporations. In addition, the Fund will incur 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.
• The beta hedging method of the Fund (using stock price futures indexes (TOPIX, etc.)) may differ from the beta hedge calculation method used in the Long Short Strategy Index on MSCI Japan IMI Custom 85% + CASH (JPY) 15% Index.

Discrepancy between the market prices at stock exchanges and the NAVThe Fund is listed on 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.

Additional Considerations

• The provision stipulated in Article 37-6 of the Financial Instruments and Exchange Act (“cooling-off period”) is 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.

Risk Management System

• The departments in charge of risk management and compliance perform the evaluation and analysis of risks and performance, risk management, and monitoring of the status of compliance with laws, and are independent from fund management departments.
• To maintain an appropriate management system, the departments in charge of risk management and compliance will report and make proposals to the committees associated with risk management and compliance, and instruct fund management departments to take corrective actions as necessary.
  * The system described above is as of the end of November 2016, and may be subject to change in the future.