Strategy
In order to achieve the investment objective of the Sub-Fund, the Manager will primarily use a full replicationstrategy by directly investing all, or substantially all, of the assets of the Sub-Fund in securities constituting theIndex (the "Index Securities") in substantially the same weightings (i.e. proportions) as these Index securitieshave in the Index.
The Sub-Fund may invest up to 100% of its NAV directly in equity securities listed on the Prime Market of theTokyo Stock Exchange.
The Manager may however, in the exceptional circumstances (i.e. due to restrictions, suspensions of trading,limited availability of certain Index Securities, corporate events, or as the Manager believes there is significantmarket mispricing or foreseeable market turbulence) where it is not feasible or not in the best interest of investorsto acquire certain securities which are constituents of the Index and/or it is not cost efficient, by reference to theSub-Fund's NAV, use a representative sampling strategy where the Manager believes will help the Sub-Fundachieve its investment objective.
In pursuing the representative sampling strategy, the Manager may:
- invest in a representative sample whose performance is closely correlated with the Index, but whoseconstituents may or may not themselves be constituents of the Index;
- invest less than 30% of the Net Asset Value of the Sub-Fund in other collective investment schemes("CIS"), each being either an exchange traded fund or an unlisted index tracking fund which tracks anindex that has a high correlation with the Index. Such CIS may be authorised by the SFC, eligibleschemes under Chapter 7.11A of the Code, or non-eligible schemes. For the avoidance of doubt, theSub-Fund's aggregate investment in non-eligible schemes and not authorised by the SFC may notexceed 10% of the NAV of the Sub-Fund; and
- invest financial derivative instruments ("FDIs") which exhibit high correlation with the Index, includingfutures and swaps where the Manager believes such investments will help the Sub-Fund achieve itsinvestment objective and are beneficial to the Sub-Fund. For the avoidance of doubt, the aggregateinvestment in futures and swaps will be less than 30% of the Sub-Fund's NAV.
In pursuing the representative sampling strategy, the Manager may cause the Sub-Fund to deviate from the indexweighting on condition that the maximum deviation from the index weighting of any constituent will not exceed3% or such other percentage as determined by the Manager after consultation with the SFC.
Investors should note that the Manager may switch between the full replication and representative samplingstrategies without notice to investors and in its absolute discretion.
The Sub-Fund may also utilise FDIs for hedging purposes to the extent permitted by Chapter 7 of the Code.
Securities Lending
The Manager may, on behalf of the Sub-Fund, enter into securities lending transactions, with the maximum levelfor up to 50% and expected level for approximately 20% of its NAV, and is able to recall the securities lent out atany time. As part of the securities lending transactions, the Sub-Fund must receive cash and/or non-cashcollateral of at least 100% of the value of the securities lent (interests, dividends and other eventual rightsincluded). The collateral will be marked-to-market on a daily basis and be safekept by the Custodian. Allsecurities lending transactions will only be carried out in the best interest of the Sub-Fund and as set out in therelevant securities lending agreement. Such transactions may be terminated at any time by the Manager at itsabsolute discretion1.
The Manager does not currently intend to enter into sale and repurchase transactions, reverse repurchasetransactions and other similar over-the-counter transactions on behalf of the Sub-Fund. The Manager will seekprior approval of the SFC (to the extent required under applicable regulatory requirements) and provide at leastone month's prior notice to Shareholders before the Manager engages in any such transactions.
Index
The Index, which is also known as the Nikkei 225 Index, is an adjusted price-weighted equity index with highlyliquid and representative stocks that consists of 225 stocks listed on the Prime Market of the Tokyo StockExchange. The 225 constituent stocks are reviewed and rebalanced twice a year with a base date at the end ofJanuary and July, and the rebalancing results become effective on the first trading day of April and October. Theconstituents are selected based on their liquidity in the market and sector balance.
The top 450 (double the constituent count for the Index) of the most liquid stocks ranked in descending order ofliquidity are selected and categorised into six industrial sectors – Technology, Financials, Consumer Goods,Industrial Materials, Capital Goods/others and Transportation/Utilities. A rebalancing is conducted if any of thesectors are over-represented or under-represented. After adjustments made for liquidity and sector balance(please refer to the Appendix of the Sub-Fund in Part 2 of the Explanatory Memorandum for further informationon the rebalancing of the Index), the total number of constituents of the Index is set to be 225.
The Index is a net total return index, which means that it reflects the reinvestment of dividends or distributions,after deduction of any withholding tax. The Index is denominated and quoted in JPY.
The Index is compiled and managed by Nikkei Inc. (the "Index Provider"). The Manager (and each of itsConnected Persons) is independent of the Index Provider.
The Index was launched on 3 December 2012 and had a base level of 6569.47 as of 28 December 1979. As of14 January 2025, the Index had a total market capitalisation of JPY 693.38 trillion and 225 constituents.
The most updated list of the constituents of the Index and their respective weightings and additional informationand other important news of the Index can be obtained from the website of the Index Provider at https://indexes.nikkei.co.jp/en/nkave/index/profile?idx=nk225 (the contents of which has not been reviewed bythe SFC).
Bloomberg Code: NKYNTR
