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 REITs, in essence, by investing in SGD-denominated beneficiary certificates of the Singapore-domiciled offshore investment trust Amova Straits Trading Asia ex Japan REIT. Therefore, the NAV of the Fund may fall and you may suffer a loss for reasons such as a drop in the price of REITs or deterioration in the financial conditions and business performance of an issuer of REITs, deterioration in real estate market, etc. Losses may also be incurred due to exchange rate fluctuation when investing in assets denominated in foreign currencies.
Major risks are as follows:
1. Price Fluctuation Risk The Singapore-domiciled offshore investment trust Amova Straits Trading Asia ex Japan REIT, in which the Fund invests, is impacted by fluctuations in the FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index, which it tracks as its target index. There is a risk that, if the FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index falls, the price of the beneficiary certificates in which the Fund invests will also fall, causing losses in the Fund.
The source of revenue in real estate investment trusts comes from income and capital gains by way of investment in real estate and real estate securitization products. Prices will fluctuate due to various factors, such as regulations on the real estate environment, rent levels, occupancy rates, trends in the real estate market and long and short-term interest rates, or changes in the macro economy. There is also the possibility that prices will be affected by losses and damage to real estate resulting from deterioration, changes in location’s condition, fire or natural disaster. There is a risk that the Fund will incur losses due to a decrease in dividends and prices of real estate investment trusts if there is deterioration in their financial standing, or worsening performance and market conditions.
2. Liquidity Risk Where the market size or trading volume is small, buying and selling prices for securities may be largely affected. This results in the risk that securities cannot be traded at the expected prices, sold at the appraised prices, or that trading volume is limited regardless of prices. This creates the risk of unexpected losses.
There is a risk that, if SGD-denominated beneficiary certificates of the Singapore domiciled offshore investment trust Amova Straits Trading Asia ex Japan REIT are delisted from the Singapore Securities Exchange, or if there is concern that this may happen, management of the Fund will be obstructed.
3. Credit Risk There is a risk that this Fund will incur material losses in the event that the real estate investment trusts are in a state of insolvency or excessive debt or if it is expected that such a situation will arise.
4. Currency Fluctuation Risk
For foreign-currency-denominated assets, in general, if the yen is stronger than the currencies of such assets, the Fund's NAV will decline.
5.Country Risk There is the risk of significant losses in the Fund due to market trends or the flow of funds, including state of emergencies in invested countries (such as financial crises, government default due to financial reasons, significant policy changes or introductions of new regulations including asset freezes, natural disasters, coups or significant political changes, or war). In such cases, it is possible that the fund cannot be managed in accordance with the investment policy.
Emerging countries in general tend to be insufficient or slow in information disclosure or in the dispatch of accurate information, when compared to advanced countries.
6.Security-lending Risk Lending of securities is accompanied by counterparty risks, which are the risks of default or cancellation of lending agreements as result of bankruptcy, etc., by the counterparties. As a result, there is a risk that the Fund will suffer unanticipated 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.
Factors Contributing to the discrepancies between yen-converted FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index and NAV
This Fund seeks to ensure that its NAV has the same volatility as the yen-converted FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index; however, we cannot always guarantee that the Fund will have the same volatility as the Index due to the following factors attributable to this Fund and to the investment trust securities invested in by this Fund:
- Discrepancies between price fluctuations for the Singapore-domiciled offshore investment trust Amova Straits Trading Asia ex Japan REIT, in which the Fund invests, and price fluctuations for the FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index caused by low trading volume on the Singapore Securities Exchange.
- Investment by the Singapore-domiciled offshore investment trust Amova Straits Trading Asia ex Japan REIT, in which the Fund invests, in names other than those included in the FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index . The possibility of sustaining a market impact when trading individual names or engaging in other such action in the case of a portfolio adjustment due to changes such as an adjustment in the constituent names included in the FTSE EPRA/NAREIT Asia ex Japan REITS 10% Capped Index or capital changes. Also, bearing costs such as trust fees, brokerage commissions or audit costs.
- Discrepancies occurring between the execution price and valuation price (closing price) of Amova Straits Trading Asia ex Japan REIT, in which the Fund invests, in line with daily additional subscriptions and redemptions in the Fund and other such factors.
Discrepancies between the market prices at which the Fund are traded on the exchange and the NAV This Fund is listed on and will be publicly traded on the Tokyo Stock Exchange; however, the market price of the units will depend mainly on the demand for the Fund, its investment performance, and how attractive it is to investors in comparison to alternative investments, etc. We cannot predict whether this fund will be traded at a market value below or above its NAV.
* The factors that contribute to fluctuations in the NAV 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 evaluation and analysis of risks and performance, risk management, and monitoring of the status of compliance with laws are performed by the departments in charge of risk management and compliance, which is independent from fund management departments.
- To maintain an appropriate management system, the above-mentioned departments make report and proposals to the committee associated with risk management and compliance, and instruct fund management departments to take corrective actions as necessary.
* The above described system is as of the end of March 2017 and may be subject to change in the future.
