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IMPORTANT NOTICE ON THE TRANSLATION OF THIS
PROSPECTUS
This is an unofficial translation/abstract and should be used solely for
reference purposes. If there is any discrepancy between this
translation and the Japanese original, the latter shall prevail.
This English translation is not required by law or any regulation
applicable to BlackRock Japan Co., Ltd. (“The Company”). There is
no guarantee that this translation will be updated in correspondence
with the Japanese version.
The information in this document is directed only at persons within
Japan and is not directed at nor intended for use or distribution to
persons in any jurisdiction in which this investment product is not
authorised for distribution or where the dissemination of information
regarding this investment product is not permitted.
The Company has registered the fund in accordance with relevant
laws and regulations in Japan. Registration with the Government of
Japan is intended for residents of Japan and is not intended for
distribution to, or use by, any person or entity from any other
jurisdictions.
All information contained herein has been prepared by the Company
for informational or educational purposes only and it does not
constitute a recommendation, offer or solicitation to buy or sell any
securities or to adopt any investment strategy.
The Company makes no representation, express or implied, that this
translation is accurate or complete. The Company does not accept
any responsibility whatsoever for any loss arising from any reliance
on or action taken (or omission to take action) by any person using
this translation.
The Company reserves the right to change, modify, add or remove
portions of this translation at any time for any reason. Such changes
may be made without notice.
1
EXHIBIT A
iShares MSCI Japan High Dividend
ETF
Open-Type Investment Trust, Domestic, Equity, ETF,
Index Type
Explanatory Booklet on the Investment Trust
(Mandatory Prospectus)
November 10, 2016
* This booklet is a prospectus pursuant to the provisions of Article 13 of the Financial Instruments and
Exchange Act.
- In connection with the solicitation of iShares MSCI Japan High Dividend ETF (the “Fund”), the
management company filed a securities registration statement with the Director General of the Kanto
Local Finance Bureau on November 9, 2016 pursuant to the provisions of Article 5 of the Financial
Instruments and Exchange Act (Law No. 25 of 1948). The filing took effect on November 10, 2016.
- The Fund’s explanatory booklet on the investment trust (Prospectus on request) is available via the
website of the management company. It is also available from an authorised participant upon request.
In case you request it, please keep a personal record of that fact.
- The complete terms and conditions of this investment trust fund are attached to the explanatory
booklet on the investment trust (Prospectus on request).
- In case a significant change is made to the content of the Fund, the intentions of unitholders will be
confirmed in advance in accordance with the Act on Investment Trust and Investment Corporations
(Law No. 198 of 1951).
- The investment trust fund assets are separately managed by the trustee in accordance with the Trust
Act.
2
Product Classification Attribute Category
Unit-Type/
Open-Type
Investment
Area
Investment
Assets
(Source of
Income)
Independent
Category
Supplementary
Classification
Investment
Assets
Frequency of
Account
Settlement
Investment
Area
Target
Index
Open-Type
Investment
Trust
Japanese
Domestic
Equity ETF
Index Type
Equities in
general
Twice a year
Japan
Others
(MSCI
Japan High
Dividend
Index)
* Please refer to the website of the Investment Trusts Association, Japan (http://www.toushin.or.jp/) regarding the
definitions relating to product classification and attribute categories.
Management Company (person giving instructions for fund management)
BlackRock Japan Co., Ltd.
- Registered as a financial instruments firm with Director General of the Kanto Local Finance
Bureau (Kinsho) No. 375
- Date established: March 11, 1988
- Paid-in Capital: 2,435 million yen
- Total net asset value of investment trusts under management: 4,247.7 billion yen (as of August 31,
2016)
<Detailed information about the Fund>
- Please contact us if you need detailed information about the Fund.
Phone: 03-6703-4110 (9:00 to 17:00, business days)
Website: http://www.blackrock.com/jp/
Trustee (person responsible for custody and management of Fund assets)
Mitsubishi UFJ Trust and Banking Corporation
Please read this document carefully before deciding to purchase units of the Fund.
3
Objective and Characteristics of the Fund
Objective of the Fund
iShares MSCI Japan High Dividend ETF aims to achieve a Net Asset Value per unit of the Fund
(“NAV”) that closely corresponds to the movement of the MSCI Japan High Dividend Index by
investing mainly in shares of the stocks constituting and determined to constitute the MSCI Japan
High Dividend Index (the “Index” or the “Benchmark”).
Characteristics of the Fund
While the Fund is an open-type equity investment trust, its concept is to physicalise Index by utilising
functions of an investment trust. Its product design is different from other ordinary investment trusts
from the following viewpoints.
1. Units of the Fund (“Units”) are listed on the Tokyo Stock Exchange.
Units of the Fund can be traded at any time on the TSE.
Units may be traded in blocks of 1 unit. Type 1 financial instruments firms engaged in trading
may determine their trading commissions using multipliers that they decide on their own. The
method of trading is the same as that of equity trading.
For further information, please contact type 1 financial instruments business firm who are the
members of the TSE.
2. The minimum number of units is limited to an additional creation or redemption.
Additional creation and redemption are limited to those for amounts required at least to create a
portfolio reflecting the Index so that the Fund’s performance can closely correspond to the
movement of the Index.
Additional creation and redemption are done by unit called a creation unit. The creation unit is a
unit displayed by the number of Units that the management company determines to create and
redeem these rights.
The management company also determines the number of Units corresponding to one creation
unit every business day.
3. The constituent stocks of the Index may be used for additional creation and redemption.
Stocks constituting the Index (the “Index ETF Constituent Stocks”), as well as cash, which are
necessary for the creation or redemption of one creation unit, are determined by the management
company as a portfolio composition file (the “PCF”), and presented to authorised participants.
If the Fund’s market price of Unit on the stock exchange deviates from its NAV, smooth price
formulation on the stock exchange can be expected with reasonable arbitration that can shrink
4
such deviation.
*The “authorised participants” shall be the type I financial instruments firms that are designated
by the management company as persons to apply for the creation of the Units and the redemption.
(A) Additional creation
Investors may create Units by contributing Index ETF Constituent Stocks and cash as provided
for in the PCF.
If an investor is an issuer of shares constituting Index ETF Constituent Stocks, an amount
equivalent to the total market value of such stocks included in the total market value of Index ETF
Constituent Stocks, as well as an amount equivalent to expenses necessary to acquire such stocks
as trust assets (up to 0.2% of such total market value), will be paid to the authorised participants
in cash, instead of such stocks.
(B) Redemption
Investors who own more than certain number of Units may redeem them in exchange for an
equivalent amount of Index ETF Constituent Stocks included in trust assets.
The Fund may conduct stock lending. In this case, the Fund shall delegate authority to BlackRock
Institutional Trust Company, N.A. in whole or in part to give instructions in respect of stock
lending.
Investment Management Structure
- Fund investment, management, and relevant roles are separated under the internal rules.
- The management company’s investment management division controls the Fund’s investment
management.
- The management company has established an internal audit division, as well as a division giving
feedback to relevant divisions after monitoring fund investment statuses, risk conditions and others.
It has also established a section (function) to confirm whether investments are made in accordance
with the investment policy of each fund. Such confirmation is conducted by holding Investment
Committee Meetings, etc.
- The Stock Index Investment Division (approximately 4 persons) will be responsible for this Fund.
* The Fund’s investment management structure may be changed in the future.
Investment Restrictions
In principle, the ratio of investment in assets other than stocks shall be less than 50% of the total
5
amount of the trust property.
In principle, no investment will be made in assets denominated in foreign currencies.
Distribution Policy
In principle, the aggregate of dividend income (meaning the dividends, fees for loan securities and
other similar incomeless interest on payments) after deduction of the expenses is distributed
semiannually at the end of each financial period (February 9 and August 9, in principle). However,
such distribution in the future, as well as its amount, is not guaranteed.
6
Investment Risk
Factors that contribute to fluctuations in the NAV of the Fund
The NAV of the Fund is affected by the fluctuations of the invested securities held for the account of
the Fund. All profits and losses arising from investment management of these trust asset investments
are attributed to the investors. Accordingly, the principal amount of the Fund and profits arising from
these investments are not guaranteed. Investors may incur a loss and the value of their investment
principal may fall below its original principal amount as the result of a decline in the NAV.
Investment trusts are different from bank deposits. The Fund’s major risks are as follows:
- Risk of Investing in Domestic Equity Securities
The Fund primarily invests in common stocks of companies based in Japan. Accordingly, the
performance of the Fund is affected by fluctuations in stock prices and the amounts of dividends
received from the issuers that are influenced by Japanese economic and market conditions as well as
their management and financial situations.
- Securities Lending Risk
Lending of securities involves counterparty risk, which is the risk of contractual default by the
counterparty due to its insolvency or other events, and the Fund may suffer losses in such cases.
Other considerations
The provision stipulated in Article 37-6 of the Financial Instruments and Exchange Act (“cooling-off
period”) is not applicable to the Fund’s transactions.
Considerations regarding profit distribution
- Distribution is paid out of the Fund’s net assets and is different from interest earned on bank
deposits. Thus, the Fund’s NAV declines by the distribution amount when it pays out
distribution.
- The distribution amount is not always the same as income earned by the Fund during each
financial period.
Risk Management Framework
The management company places an emphasis on risk oversight, and risks are managed using its
proprietary system. More specifically, Fund’s investment risk is measured and analysed, and
investment restrictions are monitored by an independent risk management department. This
department confirms that the Fund’s investment risk profile meets the investment guideline, and gives
feedback to investment teams and other relevant departments, with internal sharing of relevant results.
7
Additionally, the management company’s operational risks are clearly defined in operational
guidelines, and managed accordingly.
8
(Reference Information)
Comparison of the Fund with other representative
asset classes in terms of percentage changes (September 2011 to August 2016)
* The above graph represents the annual average, maximum and
minimum percentage changes at the end of each month during the five
years between September 2011 and August 2016 for the Fund and
other representative asset classes. The percentage changes for the Fund
are calculated on assumption that the amount of distribution before tax
is reinvested and may differ from the annual percentage change
calculated based on the actual NAV. Because the establishment date of
the Fund is October 19, 2015, the percentage changes for the Fund are
calculated based on the value of the benchmark and differ from the
actual results of the Fund.
* Not every asset class may be the investment target of the Fund.
* Index of each asset class
Japanese equity: ················· Tokyo Stock Price Index
(TOPIX Total Return)
Developed country equity: ····· MSCI Kokusai Index
(Total Return, Yen based)
Emerging country equity: ······ MSCI Emerging Markets Index
(Total Return, Yen based)
Japanese government bond: ··· Nomura Bond Performance Index
Government
Developed country bond: ······ Citi World Government Bond Index
(excluding Japan, Yen based)
Emerging country bond: ······· J.P. Morgan Government Bond Index-
Emerging Markets Global Diversified
Index (Yen based)
(Note) Foreign indexes are yen-based, assuming investments with no
currency hedge.
Annual percentage change and dividend-included
NAV of the Fund
(September 2011 to August 2016)
* The above graph illustrates the amount and percentage changes of
dividend-included NAV as at each month-end of the year during a five-
year period between September 2011 and August 2016. Because the
annual percentage change shows the annual percentage changes of the
benchmark, it is not the actual results of the Fund. The above graph
illustrates the dividend-inclusive NAV for the period from the end of
October 2015 to the end of August 2016.
* The dividend-included NAV is calculated on assumption that the
amount of distribution before tax is reinvested and may differ from the
actual NAV.
<Indexes>
TOPIX (Total Return) is a benchmark calculated based on the total market capitalisation of all issues listed on the first section of the Tokyo Stock
Exchange. TOPIX (Total Return) is an intellectual property of the Tokyo Stock Exchange, and all rights pertaining to this stock price index, including
the index calculation and publication and use of the figures belong to the Tokyo Stock Exchange. The Tokyo Stock Exchange also holds the right to
change the method of calculation or publication of TOPIX (Total Return), to terminate the method of calculation or publication of TOPIX (Total
Return) or to change or terminate the use of trademark of TOPIX (Total Return).
The MSCI Kokusai Index (Total Return, Yen based) and MSCI Emerging Markets Index (Total Return, Yen based) are benchmarks developed and
calculated by MSCI Inc. The MSCI Kokusai Index (Total Return, Yen based) is an index which benchmarks the stock performance of developed
50.1
65.0 65.7
47.4
6.7
34.9
43.7
-16.9 -17.0 -15.6
-27.4
0.4
-8.6
-17.4
12.116.1
19.5
6.82.5
10.36.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
the Fund Japanese
equity
Developed
country
equity
Emerging
country
equity
JGBs Developed
country
bond
Emerging
country
bond
（％） Maximum percentage change
Minimum percentage change
Average percentage change
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2011/09 2012/09 2013/09 2014/09 2015/09
Annual percentage change of
fundAnnual percentage change of
benchmarkDividend-included NAV
(%)(yen)
9
countries of the world excluding Japan while the MSCI Emerging Markets Index (Total Return, Yen based) is an index which benchmarks the stock
performance of emerging countries. The copyrights, intellectual property rights and all other rights concerning these indexes belong to MSCI Inc. In
addition, MSCI Inc. holds the right to amend the content of each index and the right to terminate publication of these indexes.
Nomura Bond Performance Index Government is an index published by Nomura Securities Co., Ltd. to measure the movements of Japanese
government bonds and is calculated with the return on investment of a portfolio. The intellectual property right concerning this index belongs to
Nomura Securities Co., Ltd. Note that Nomura Securities Co., Ltd. does not guarantee the accuracy, completeness, reliability and effectiveness of
Nomura Bond Performance Index Government and bears no responsibility whatsoever on business activities and services implemented by
BlackRock Japan Co., Ltd. using the index.
The Citi World Government Bond Index (excluding Japan, Yen based) is a bond index published by Citigroup Index LLC for benchmarking the
overall investment return on government bonds of the world’s major countries excluding Japan. The copyright, trademark right, intellectual property
right and all other rights concerning this index belong to Citigroup Index LLC.
The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified Index (Yen based) is published by J.P. Morgan Securities LLC and
is calculated to track local currency bonds issued by emerging market governments. The copyright concerning this index belongs to J.P. Morgan
Securities LLC.
10
Past Performance
As of August 31, 2016
Changes in NAV and Net Assets
* The NAV figures are those after deduction of the trust fee. For the trust fee, please refer to
“Expenses of Fund” below. The benchmark figures shown are multiplied by 100.
Changes in Distributions
Cumulative total since creation 1,400 yen
FY1 August 2016 1,400 yen
*Distributions are the amount per unit net of tax.
Status of major assets
Top 10 stocks incorporated (10%)
Name of stocks Business Ratio
1 Toyota Motor Transport machinery 7.9
2 Fuji Heavy Industries Transport machinery 4.4
3 Fanuc Electrical equipment 4.1
4 Honda Motor Transport machinery 4.0
5 Mitsui & Co. Wholesale 2.3
6 Nissan Motor Transport machinery 2.1
7 Canon Electrical equipment 2.1
8 Nippon Telegraph and
Telephone Information and telecommunication
2.1
9 Bridgestone Rubber products 2.0
10 NTT Docomo Information and telecommunication 1.8
0
50
100
150
200
250
0
50,000
100,000
150,000
200,000
250,000
15/10 15/11 15/12 16/1 16/2 16/3 16/4 16/5 16/6 16/7 16/8
Total net asset value (right axis)
NAV (without distribution; left
axis)Benchmark (left axis)
(yen) (billion yen）
11
Changes in Annual Rates of Return
* The rates of return of the Fund are calculated based on the NAV (without distribution).
* The rates for the period from 2006 to 2014 shows the annual rates of return.
* In 2015, the rate of return shows the rate from the creation date (October 19) to the end of the same
year, and the benchmark shows the rates from the beginning to the end of each year.
* Past performance, data, etc. are those as of the preparation date, or past performance, data, etc., and
do not guarantee future results.
* Benchmarks are provided for reference purposes only, and do not represent the Fund’s performance
results.
* The status of investment by the Fund is separately disclosed on the website of the management
company.
17.6%
-9.5%
-37.2%
9.5%3.0%
-16.9%
17.5%
37.5%
12.1% 9.0%
-60%
-40%
-20%
0%
20%
40%
60%
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015
Fund
Benchmark
12
Procedures, Fees and Other Items
Application Memo
Creation unit One Creation unit or its integral multiples thereof
Creation Price NAV on the day a creation application is accepted
The Net Asset Value per Unit of the Fund is indicated on a per 100 Unit basis.
Investors create Units with Index ETF Constituent Stocks and cash as
stipulated in the PCF.
The management company shall present a PCF to the Authorised Participants
on a business day immediately preceding the day a creation application is
accepted.
Delivery
(settlement) of
creation basket
Delivery of Index ETF Constituent Stocks and cash by the date designated
by Authorised Participant in accordance with the creation application
Amount per share
on inception date
The amount per share on the inception date will be 1,827 yen per Unit.
Redemption Unit One creation unit* or its integral multiples thereof.
Redemption Price NAV on the day a redemption application is accepted
Trust assets invested in stocks that are stocks equivalent in value to the Units
subject to the request for redemption are delivered to investors.
The management company shall present the stocks to be delivered (PCF) to
the Authorised Participants on a business day immediately preceding a Units
redemption request acceptance date.
Delivery
(settlement) of
redemption basket
Trust assets invested in stocks are generally delivered to Authorised
Participants or others requesting the redemption from the fourth business day
after the acceptance date of redemption application.
Application Cutoff
Time
15:00 Japan Standard Time on the creation application date or the acceptance
date of redemption application
* The application may not be canceled after the creation application is accepted by the
management company.
Creation
Application Period
From November 10, 2016 to May 9, 2017
*The application period is renewed by way of the filing of a securities registration
statement before the expiration of the above period.
Days on which
Creation and
Redemption
Applications for creation and redemption of Units may not be accepted on
the following days and periods (as outlined in 1) through 8) below).
1) For a period of two business days, beginning two business days prior to
13
Applications are
not accepted
the last day of the relevant financial period of the fund (record dates)
(or, if such date falls on a holiday, for a period of three business days,
beginning three business days prior to the account close date)
2) In the event that Management Company determines the Fund cannot be
managed according to the Fund’s investment policies provided in the
Trust Deed due to unavoidable circumstances.
3) For a period of three business days, beginning one business day prior to
the ex-dividend or ex-rights day of any Index ETF Constituent Stocks.
4) For a period of three business days, beginning one business day prior to
the rebalance day for the Index ETF Constituent Stocks, or the day the
number of stocks are changed.
5) For a period, beginning one business day prior to the delisting day (due
to the share transfer and merger of any Index ETF Constituent Stocks)
and ending one business day after the Index inclusion day for new shares
(due to such transfer and merger).
6) On any day on which trading of Index ETF Constituent Stocks is
suspended.
7) For a period of five business days prior to the date of termination, if the
Fund terminates.
8) Any event other than in 1) through 7) above in which the Management
Company determines the Fund’s operations may be undermined due to
unavoidable circumstances.
Suspension and
Cancellation of
Application for
Creation and
Redemption
In cases where trading on the stock exchange is halted, settlement functions
are suspended, circumstances are beyond the control of the Management
Company, or the Management Company deems necessary, the Management
Company may suspend and/or cancel the applications for creation and
redemption of Units.
Trust Period Indefinite Period (Established on October 19, 2015)
Early Termination
The Management Company may terminate the trust early before the
expiration of the trust term (early redemption) if it considers that the
termination is beneficial to the investors, the number of Units is less than
500,000 after the day that is three (3) years from the creation day, or the
circumstances beyond the Management Company’s control necessitate.
The trust may also be terminated if the Fund’s units are delisted from all the
stock exchanges they are listed, or if Index is discontinued.
Record Dates February 9 and August 9 of Each Year
14
Distribution
Distributions are paid twice a year in accordance with the Fund’s distribution
policy.
Maximum Trust
Assets
Securities and cash that are equivalent to 10 trillion yen
Public Notification
of Important
Announcements
Public notice the management company issues to unitholders shall be posted
on the website shown below by means of electronic notice:
www.blackrock.com/jp/
Management
Reports
Management reports are not prepared and published.
Tax Treatment
For tax purposes, the Fund is treated as a specified stock investment trust.
Publicly-offered stock-type investment trusts are subject to the Nippon
Individual Savings Account under tax laws. Tax credit for distributions and
the exclusion from gross revenue applies.
15
Fund Expenses and Taxes
Fund Expenses
Expenses to be borne directly by investors Details of expenses
Broker Commissions
charged on creation
orders
Authorised Participants may independently set
application commissions (including
consumption taxes, etc.), and receive them
from investors. Please contact your
Authorised Participants for further
information.
Consideration for
explanation of instruments
at the time of subscription
and administrative
procedures relating to the
creation
Subscription/Redemp
tion Charge
N/A -
Broker Commissions
charged on
redemption orders
If an Authorised Participant receives a request
for redemption or repurchase of Units from an
investor, it may receive commissions
(including consumption taxes, etc.) that it
independently sets from the investor. Please
contact your Authorised Participants for
further information.
Consideration for
administrative procedures
relating to the redemption
(repurchase)
Expenses to be borne indirectly by investors (i.e. expenses
paid out of the Fund’s assets)
Details of expenses
Management Fee
(Trust Fee)
The Fund’s total net assets at an annual rate of
0.2052%* (0.19% excluding taxes) or less
*Management fees (trust fees) are paid out of the
Fund’s assets at the end of each fiscal year or at trust’s
termination.
Management fees (trust
fees) ＝ NAV during the
management term x trust
fee ratio
Breakdown of
Management
Fee
Management
Company
Annual rate
of 0.1782%
(0.165%
excluding
taxes)
Consideration for fund
management, calculation
of the NAV, preparation of
various documents, and
other related services
Trustee Annual rate
of 0.027%
(0.025%
Consideration for
administration of
investment assets,
16
excluding
taxes)
execution of instructions
received from the
management company,
and other related services
Other Expenses and
Fees
The Fund’s total net assets at the maximum
annual rate of 0.0486% (0.045% excluding
taxes) are paid out of the Fund’s assets for
listing fees and usage fees of trademark of the
Index at the end of each fiscal year or at trust’s
termination.
Fund’s costs and expenses, and brokerage
commissions are paid out of the Fund’s assets
from time to time.
If the Fund conducts stock lending, at most
one half of the amounts of negative interest of
per diem, which are proceeds of the Fund, will
be paid to the entrusted company etc. as fees
from time to time.
*Rates, maximum amounts, etc. of other expenses and
fees are not shown in advance as they fluctuate with
past performance and other factors.
- Fund’s costs and
expenses: Auditing fees of
the Fund’s financial
statements, taxes imposed
on the trust assets, fees
charged on fund
management, and
interests accrued on the
amount paid by the trustee
company in advance
- Brokerage commissions:
Commissions charged on
buy and sell orders of
Fund’s investment
securities
*The total amount of commissions, expenses, etc. of the Fund to be borne by investors varies depending on the holding
period of the shares of the Fund.
*Broker commissions charged on creation orders, exchange (purchase fees), management fees (trust fees), and other
expenses and fees include consumption tax and local consumption tax.
Taxes
- Taxes are incurred as outlined below.
- The following table shows withholding tax rates for individual investors, which may vary depending
on taxation methods, etc.
Transaction Item Tax
Distribution Income tax and local tax Taxable as dividend income
20.315% of a distribution amount
Repurchase and
Redemption Income tax and local tax
Taxable as capital gains
20.315% of capital gains on the
17
repurchase and redemption
*In the case that the Nippon Individual Savings Account (known as “NISA”) is used:
In the case of the use of NISA, the taxes on the dividend income and capital gains arising from the publicly-offered
stock-type investment trusts and other instruments that are newly purchased up to a certain amount each year will be
exempted for a certain period of time. A person who satisfies certain requirements such as opening of a tax-
exemption account may use NISA. For the details thereof, including the amounts and periods eligible for tax
exemption, please contact your type I financial instrument business firm.
*Different tax rates are applicable to corporations.
*Tax rates, etc. may be changed if tax laws are revised because the above tax rates are as of the last day of August 2016.
It is recommended that investors consult tax professionals or equivalent persons regarding details of tax treatment.
Copyright and other rights relating to the MSCI Japan High Dividend Index (“MSCI Index”)
18
This Fund is not sponsored, endorsed, sold or promoted by MSCI Inc. (“MSCI”), any of its affiliates,
any of its information providers or any other third party involved in, or related to, compiling,
computing or creating any MSCI Index (collectively, the “MSCI Parties”). The MSCI Indexes are
the exclusive property of MSCI. MSCI and the MSCI Index names are service mark(s) of MSCI or its
affiliates and have been licensed for use for certain purposes by [licensee]. None of the MSCI Parties
makes any representation or warranty, express or implied, to the issuer or owners of this Fund or any
other person or entity regarding the advisability of investing in funds generally or in this Fund
particularly or the ability of any MSCI Index to track corresponding stock market
performance. MSCI or its affiliates are the licensors of certain trademarks, service marks and trade
names and of the MSCI Indexes which are determined, composed and calculated by MSCI without
regard to this Fund or the issuer or owners of this Fund or any other person or entity. None of the
MSCI Parties has any obligation to take the needs of the issuer or owners of this Fund or any other
person or entity into consideration in determining, composing or calculating the MSCI Indexes. None
of the MSCI Parties is responsible for or has participated in the determination of the timing of, prices
at, or quantities of this Fund to be issued or in the determination or calculation of the equation by or
the consideration into which this Fund is redeemable. Further, none of the MSCI Parties has any
obligation or liability to the issuer or owners of this Fund or any other person or entity in connection
with the administration, marketing or offering of this Fund. Although MSCI shall obtain information
for inclusion in or for use in the calculation of the MSCI Indexes from sources that MSCI considers
reliable, none of the MSCI Parties warrants or guarantees the originality, accuracy and/or the
completeness of any MSCI Index or any data included therein. None of the MSCI Parties makes any
warranty, express or implied, as to results to be obtained by the issuer of the Fund, owners of the Fund,
or any other person or entity, from the use of any MSCI Index or any data included therein. None of
the MSCI Parties shall have any liability for any errors, omissions or interruptions of or in connection
with any MSCI Index or any data included therein. Further, none of the MSCI Parties makes any
express or implied warranties of any kind, and the MSCI Parties hereby expressly disclaim all
warranties of merchantability and fitness for a particular purpose, with respect to each MSCI Index
and any data included therein. Without limiting any of the foregoing, in no event shall any of the MSCI
Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
EXHIBIT B
19
iShares MSCI Japan High Dividend ETF
Open-End Investment Trust/Domestic/Shares/ETF/index-type
*For tax purposes, the Fund is treated as a specified stock investment trust.
Explanatory Booklet on the Investment Trust (Prospectus on Request)
November 10, 2016
※This booklet is a prospectus pursuant to the provisions of Article 13 of the Financial Instruments
and Exchange Act.
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1. In connection with the solicitation of iShares MSCI Japan High Dividend ETF (the “Fund”), the
management company filed a securities registration statement with the Director General of the Kanto
Local Finance Bureau on November 9, 2016 pursuant to the provisions of Article 5 of the Financial
Instruments and Exchange Act (Act No. 25 of 1948). The filing took effect on November 10, 2016.
2. The Net Asset Value per unit of the Fund is affected by the fluctuation of currency exchange rates,
as well as that of the prices of securities that are included into the Fund, and all profits or losses arising
out of the management shall be attributed to the investors. The principal is not guaranteed.
3. The Fund is not covered by the protection of the Deposit Insurance Corporation or Insurance
Policyholder Protection Corporation. When the sales company is a registered financial institution, the
Fund is not covered by Investor Protection Corporation.
Issuer: BlackRock Japan Co., Ltd.
Name and title of representative:
President and Representative Director, Yoshiyuki Izawa
Address of registered office: 8-3, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
Place at which a copy of the security registration statement is made available for inspection:
Tokyo Stock Exchange (Address: 2-1 Nihonbashi-Kabutocho, Chuo-ku, Tokyo)
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Part I. Securities Information
(1) Name of the Fund
iShares MSCI Japan High Dividend ETF (the “Fund”)
(2) Type of Unit Certificate of Domestic Investment Trust, etc.
The Units of the Fund are unit certificates of an open-end investment trust.
The initial principal amount of the Fund is 1,827 per Unit.
The Units of the Fund are subject to the Act on Book-Entry Transfer of Company Bonds, Shares,
etc. (the “Book-Entry Transfer Law”) and attribution of the Units is determined by listing or
registering in the book-entry transfer account book with a book-entry institution provided in “(11)
Item on Book-Entry Institution” below and a sub institution of such book-entry institution for
account management (meaning “the Account Management Institution” provided in Article 2 of
the Book-Entry Transfer Law and hereinafter referred to as the “Book-Entry Institution, etc.”
including the book-entry institution) (hereinafter the Units to be settled by listing or registering in
the book-entry transfer account book shall be referred to as the “Book-Entry Units”). Except for
unavoidable circumstances, the management company will not issue unit certificates representing
the relevant Book-Entry Units. The Book-Entry Units are not in blank or nominative form.
With regard to the Fund, there are no credit ratings that are assigned by or provided for review by
any registered credit rating agency at the request of the management company, or that will be
assigned by or provided for review by any registered credit rating agency.
(3) The Sum of Issuing (Selling) Amounts
Up to 10 trillion yen
(4) Issuing (Selling) Price
To be the Net Asset Value per Unit of the Fund*1 as of the day on which a creation application is
accepted
An application for a creation shall be deemed to be accepted on the application date when such
application is made before 3:00 pm and for which administrative procedures by the Authorised
Participant*2 involved in such application for a creation is completed.
*1 “Net Asset Value per Unit” means the Net Asset Value divided by the number of Units as of
the calculation date. In this Fund, the Net Asset Value per Unit is indicated on a per 100
Unit basis.
*2 The “Authorised Participant” shall be the type I financial instruments business firm that is
designated by the management company as a person to apply for the creation of the Units and
the redemption.
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Contact point for price inquiries of the Net Asset Value per Unit
The Net Asset Value per unit of the Fund is available by inquiring at an Authorised Participant*
or by calling the management company.
BlackRock Japan Co., Ltd.
Phone Number: 03-6703-4110 (from 9:00 am to 5:00 pm on business days)
Official company website: www.blackrock.com/jp/
(5) Application Fee
To be the amount that the relevant Authorised Participant decide at its sole discretion
For further information, please contact the relevant Authorised Participant.
Investors shall pay the application fee together with the amount equivalent to consumption taxes
and regional consumption taxes imposed on it (the “Amount equivalent to Consumption Taxes,
etc.”) with regard to the application to the Authorised Participants.
(6) Creation Unit
One creation unit* or its integral multiples
*A creation unit means a unit expressed in the number of the Units that the management company
determines in order to create or redeem the Units.
The details of—
(i) the shares comprising the Index (the “Index ETF Constituent Stocks”) and
(ii) cash
—that are necessary to create or redeem one creation unit shall be determined by the management
company as the portfolio composition file (the “PCF”) and shall be presented to the Authorised
Participants.
The number of the Units corresponding to one creation unit shall be determined by the
management company on a daily basis.
(7) Period for Application
From November 10, 2016 to May 9, 2017
※The period for application may be extended by filing the security registration statement before
the expiry of the above period.
(8) Place to Process Applications
With regard to the place to process applications for the Fund, please inquire at the following contact
point.
23
BlackRock Japan Co., Ltd.
Phone Number: 03-6703-4110 (from 9:00 am to 5:00 pm on business day)
Official company website: www.blackrock.com/jp/
(9) Date of Payment
Continuous application period
Applicants for the creation of the Units shall deliver the Index ETF Constituent Stocks and the
cash* in respect of such creation application on or before the date designated by the Authorised
Participants. Shares of each issue at the time of the creation shall be held in custody.
*1 When an applicant for the creation of the Units is the issuer of a share included in the Index
ETF Constituent Stocks or its subsidiary (meaning a subsidiary provided in Item 3 of
Paragraph 1 of Article 2 of the Companies Act; the same applies hereafter, and the issuing
company or its subsidiary shall be referred to as the “Issuing Company, etc,” ), in principle
the applicant for the creation shall pay to the Authorised Participants the amount* separately
designated by the management company as the amount equivalent to the market capitalisation
of such shares in the Index ETF Constituent Stocks and the amount equivalent to expenses
necessary to acquire such stocks in trust fund in money in lieu of such stocks.
If the component stocks of the Index in respect of the application for creation include stocks
(in this paragraph, the “ex-dividend stocks”) with respect to which unit certificates are
delivered in response to the application for creation on the day specified by a person who may
receive dividends or subscribe for rights or on the business day immediately preceding such
day after the ex-dividend or ex-rights of such component stocks, the management company
may accept the application for creation in cash in the amount equal to the total market value
of the specific issue of the ex-dividend stocks that are the component stocks of the Index in
respect of the application for creation. The total market value of specific issues in this case
will be the amount calculated by multiplying the closing price (or, if the closing price is not
available, a similar price) at the financial instrument exchanges of the ex-dividend stocks as
of the date of application for creation by the number of the ex-dividend stocks included in the
component stocks of the Index in respect of the application for creation, and in this case, the
management company may charge the amount separately designated by the management
company as the amount equal to the expenses necessary for the trust property to acquire such
ex-dividend stocks.
*2 The amount separately designated as mentioned above shall be the amount obtained by
multiplying the market capitalisation of such stocks by a percentage up to 0.2%. However,
the percentage may be changed in the future.
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(10) Place of Payment
Please deliver the Index ETF Constituent Stocks and the money pertaining to your application to
the Authorised Participants of the application. Some branches or offices of certain Authorised
Participants may not process subscriptions. For further information, please inquire at the contact
point provided in “(8) Place to Process Applications.
(11) Item on Book-Entry Institution
The Book-Entry Institution regarding the Units of the Fund is as follows:
Japan Securities Depository Center, Inc.
(12) Others
(A) Method of Application
Investors who apply for the creation of Units shall make an application in accordance with
the method prescribed by and within the business hours of the Authorised Participants.
(B) Issuance outside Japan
N/A
(C) Non-Application Days
The management company may not accept applications for the creation of the Units on the
date or period mentioned in the following (i) to (viii). In this case, the management company
does not present the PCF.
(i) For a period of two business days, beginning two business days prior to the fund’s
account close dates (or, if the account close date falls on a holiday, for a period of
three business days, beginning three business days prior to the account close date).
(ii) In the event that the management company determines the Fund cannot be managed
according to the Fund’s investment policies provided in the Trust Deed due to
unavoidable circumstances.
(iii) For a period of three business days, beginning one business day prior to the ex-
dividend or ex-rights day of any Index ETF Constituent Stocks.
(iv) For a period of three business days, beginning one business day prior to the rebalance
day for the Index ETF Constituent Stocks, or the day the number of stocks are
changed.
(v) For a period, beginning one business day prior to the delisting day (due to the share
transfer and merger of any Index ETF Constituent Stocks) and ending one business
day after the Index inclusion day for new shares (due to such transfer and merger).
(vi) On any day on which trading of the Index ETF Constituent Stocks is suspended.
25
(vii) For a period of five business days prior to the date of trust termination, if the Fund
terminates.
(viii) Any event other than in (i) through (vii) above in which that the management
company determines the Fund’s operations may be undermined due to unavoidable
circumstances.
(D) Units in a Book-Entry Transfer Form
Since the Units of the Fund were transferred to the book-entry transfer system of investment
trust (sometimes referred to as the “Book-Entry System”), the rights shall be subject to
provisions of the Book-Entry Transfer Law and shall be treated in accordance with provisions
of operational rules, etc. concerning the book-entry work of the book-entry institution
mentioned in “(11) Item on Book-Entry Institution” above.
Payment or delivery of dividends, redemption money and redemption stock shall be made in
accordance with the Book-Entry Transfer Law and operational and other rules of the book-
entry institution mentioned in above “(11) Item on Book-Entry Institution”.
(Reference)
Occurrence, determination and transfer of the Units of the Fund are managed by computer
system.
No unit certificates will be issued, because the creation, redemption and cancellation are made
by listing or recording on book in the computer system (the “Book-Entry Account Book”).
26
Part II. Fund Information
Section 1. Status of the Fund
1. Characteristics of the Fund
(1) Purpose and Basic Characteristics of the Fund
(A) iShares MSCI Japan High Dividend ETF (the “Fund”) aims to achieve the Net Asset Value per
unit of the Fund (“NAV”) that closely corresponds to the movement of the MSCI Japan High Dividend
Index by investing mainly in shares of the component stocks of the MSCI Japan High Dividend Index
(the “Index” or “Benchmark”). It basically incorporates or is determined to incorporate shares of all
constituents of the Index.
The management company is entitled to add to the trust property up to a ceiling of 10 trillion yen
(¥10,000,000,000,000) in securities and cash, and is entitled, subject to consent of the trustee company,
to change the said ceiling.
(B) Predominant feature of the Fund
The Fund is an open-ended and subsequently offered equity investment trust provided under the
concept that investment trust functions can be used to make the Index spot tradable. Its product design
is different from other ordinary investment trusts from the following viewpoints:
4. Units of the Fund (“Units”) are listed on the Tokyo Stock Exchange.
The Units of the Fund can be traded on the Tokyo Stock Exchange at any time.
Units may be traded in blocks of 1 unit. Type I financial instruments business firms engaged in
trading may determine their trading commissions using multipliers that they decide on their own.
The method of trading is as a general rule the same as that of equity trading.
For further information, please contact the relevant type I financial instruments business firm
which is a member of the Tokyo Stock Exchange.
5. Additional creation and redemption are limited to those involving a certain minimum number of
units.
Additional creation and redemption are limited to those for an amount at least equal to the amount
required to create a portfolio reflecting the Index so that the Fund’s performance can closely
correspond to the movement of the Index.
Additional creation and redemption are done by a unit called a creation unit. The creation unit is
27
a unit displayed by the number of Units that the management company determines to create and
redeem these rights.
6. The constituent stocks of the Index may be used for additional creation and redemption. The
constituent stocks of the Index (the “Index ETF Constituent Stocks”), as well as cash, which are
necessary for the creation or redemption, are determined by the management company as a
portfolio composition file (the “PCF”), and presented to the Authorised Participants.
If the market price on the stock exchange of a Fund’s Unit deviates from its NAV, smooth price
formulation on the stock exchange can be expected with reasonable arbitration that can shrink
such deviation.
7. The Fund may carry out stock lending. In this case, the Fund will delegate all or part of the
authority related to the instructions for stock lending to BlackRock Institutional Trust Company,
N.A.
[Product Classification]
The product classification of the Fund based on the “Guideline for Product Classification” established
by the Investment Trusts Association, Japan, is as follows:
The product classification and attributes applicable to the Fund are shaded in the table.
[Product Classification Table]
Unit Type/
Open-end Type Investment Area
Investment
Assets (Source
of Income)
Independent
Category
Supplementary
Classification
Unit-type
investment trust
Open-end
investment trust
Domestic
Foreign
International
Equity
Bond
Real estate
Other assets
Asset mix
MMF
MRF
ETF
Index type
Special type
[Attribute Category Table]
Investment Assets Frequency of Account
Settlement Investment Area Target Index
Equity
General
Large-cap issue
Once a year
Twice a year
Four times a year
Global
Japan
North America
Nikkei 225
TOPIX
Other
28
Small/medium-cap
issue
Bond
General
Public bond
Corporate bond
Other bond
Credit attribute
Real estate investment
trust
Other assets
Asset mix
Asset allocation fixed
type
Asset allocation
variable type
Six times a year
(every other month)
Twelve times a year
(every month)
Daily
Other
Europe
Asia
Oceania
Latin America
Africa
Middle & Near East
(Middle East)
Emerging
(MSCI Japan High
Dividend Index)
[Definitions of Product Classification]
Item Applicable Product Classification Description
Unit Type or Open-
end Type Open-end investment trust
Means the fund where additionally
established trust property is managed
together with the initially established
trust property
Investment Country Japanese Domestic
Means the fund where main investment
income derives effectively from
domestic assets, as set forth in the
Prospectus or the Trust Deed of the
Investment Trust (the “Trust Deed”)
Investment Assets
(source of income) Equity
Means the fund where main investment
income derives effectively from equities,
as set forth in the Prospectus or the Trust
Deed
Independent
Classification ETF
Means the securities investment trust
specified in Article 12, items 1 and 2 of
the Ordinance for Enforcement of the
Act on Investment Trusts and
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Investment Corporations (Cabinet
Order No. 480 of 2000) and the listed
securities investment trust specified in
Article 9-4-2 of the Act on Special
Measures Concerning Taxation (Act
No. 26 of 1957)
Supplementary
Classification Index Fund
Means the type of fund where past
performance linked to various indices
will be sought, as set forth in the
Prospectus or the Trust Deed
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[Definitions of Attribute Classification]
Item Applicable Attribute Classification Description
Investment Assets Equity – General
Mean the assets which do not fall under
the category of large-cap or
small/middle-cap issues
Frequency of
Account Settlement Once annually
Means the fund where the financial
results are to be closed once annually, as
set forth in the Prospectus or the Trust
Deed
Investment Country Japan
Means the investment income derives
from Japanese assets, as set forth in the
Prospectus or the Trust Deed
Index Other Means all indices other than the Nikkei
225 or TOPIX
*For overall definitions of the product classification and attribute classification, please visit the
website for the Investment Trusts Association, Japan (http://www.toushin.or.jp).
(2) History of the Fund
October 19, 2015 Trust deed concluded, fund established, investment started
October 20, 2015 Listed on the First Section of the Tokyo Stock Exchange
31
(3) Structure of the Fund
(A) Structure of the Fund
Tokyo Stock Exchange
iShares MSCI Japan High Dividend
ETF
Fund
BlackRock Japan Co., Ltd.
(Investment instructions, etc. for
trust assets)
Management company
Mizuho Trust & Banking Co., Ltd.
(Trust assets administration service)
Master trustee company: Trust &
Custody Services Bank, Ltd.
Trustee company
listed
Securities
investment
trust contract
(Dealings in subscription and distribution;
services related to creation and redemption)
Authorised Participants
Authorised Participant Agreement
BlackRock Institutional Trust Company,
N.A.
(Carry out stock lending upon delegation of
authority related to instructions for
management of the trust assets)
Investment adviser
Agreement for
delegation of authority
related to instructions for
lending of stocks in the
trust assets
Investors
Trading
32
a. Securities investment trust deed
In forming the Fund, this contract will be executed pursuant to the provisions of the Act on
Investment Trusts and Investment Corporations (the “Investment Trust Act”), and entered into by
and between the management company and the trustee company in accordance with the trust deed
registered in advance with the supervisory authorities. The principal provisions of the contract
include basic investment policies, matters related to the services of the management company and
trustee company, matters related to management of the principal of and income from the trust
assets, and investment instructions.
b. Authorised Participants contract
This contract prescribes matters related to designation of authorised participants, creation of units,
requests for redemption, brokerage service for Authorised Participants, brokerage commissions,
etc.
c. Delegation agreement for stock lending instructions in respect of the trust assets
The delegation agreement stipulates the delegation of the authority to an agent for making stock
lending instructions, as well as the details of the said lending operations, etc.
(B) Overall condition of the management company
The overall condition of the management company as of August 31, 2014, was as described below:
a. Amount of capital ¥2,435 million
b. Corporate history
January 1985
Merrill Lynch Investment Advisory Co., Ltd. (subsequently named “Merrill
Lynch Investment Managers Co., Ltd.”) established
Mar. 1987 Registered as a securities investment advisor
Jun. 1987 Obtained license for discretionary investment business
Dec. 1997 Obtained license for investment trust management
business
March 1988
Barclays de Zoeta Wedd Co., Ltd. (subsequently named “Barclays Global
Investors Co., Ltd.”) established
Jun. 1988 Registered as a securities investment advisor
Jan. 1989 Obtained license for discretionary investment business
33
Mar. 1998 Obtained license for investment trust management
business
April 1999
Nomura BlackRock Asset Management Co., Ltd. (subsequently named
“BlackRock Japan Co., Ltd.”) established
Jun. 1999 Registered as a securities investment advisor
Aug. 1999 Obtained license for discretionary investment business
October 2006
Merrill Lynch Investment Managers Co., Ltd. merged with BlackRock Japan
Co., Ltd. as surviving company
New trade name: “BlackRock Japan Co., Ltd.”
December 2009
Barclays Global Investors Co., Ltd. merged with BlackRock Japan Co., Ltd. as
surviving company
New trade name: “BlackRock Japan Co., Ltd.”
c. Status of Major Shareholder
Shareholder’s Name Address Number of Shares
Held
Percentage of Shares
Held
BlackRock Japan
Holdings Limited
Liability Company
1-8-3 Marunouchi,
Chiyoda-ku, Tokyo 10,158 shares 100%
34
2. Investment Policy
(1) Investment Policy
(A) The Fund will seek to achieve investment results highly linked to movements of the Index by
investing primarily in the stocks constituting and determined to constitute the Index.
(B) The Fund will adjust the weight of its incorporated issues, if:
the constituent issues of the Index change or if the index component ratios of constituent issues
are modified or such modification is announced;
the method for calculation of the Index is amended;
any additional entrustment/redemption is executed for the Fund; or
otherwise the management company determines it necessary in order to achieve investment in
accordance with the “basic investment policy” provided for in the Trust Deed.
If any surplus fund accrues in the process of adjustment, such surplus fund may be invested in a call
loan or a similar instrument until such time as said surplus fund is invested in equity.
(C) The Fund will delegate all or part of its authority related to the instructions for stock lending to
BlackRock Institutional Trust Company, N.A.
(D) Investment in the manner described above may not be possible due to capital trends, market
conditions, the remaining trust period, or the like.
The Fund aims to maintain high correlations with its benchmarks by constructing a portfolio to
replicate the benchmarks as much as possible in terms of sector weights, constituents and other
characteristics.
*The management company will exercise control by means of trade execution management policies
and other internal regulations to ensure that interests of investors are not affected when executing or
intending to execute a transaction with a potential risk of prejudice to interests of investors as a result
of promoting the benefit of its own or a third party.
About Copyright, etc. relating to the MSCI Japan High Dividend Index (“MSCI Index”)
This Fund is not sponsored, endorsed, sold or promoted by MSCI Inc. (“MSCI”), any of its
35
affiliates, any of its information providers or any other third party involved in, or related to,
compiling, computing or creating any MSCI Index (collectively, the “MSCI Parties”). The
MSCI Indexes are the exclusive property of MSCI. MSCI and the MSCI Index names are service
mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by
[licensee]. None of the MSCI Parties makes any representation or warranty, express or implied,
to the issuer or owners of this Fund or any other person or entity regarding the advisability of
investing in funds generally or in this Fund particularly or the ability of any MSCI Index to track
corresponding stock market performance. MSCI or its affiliates are the licensors of certain
trademarks, service marks and trade names and of the MSCI Indexes which are determined,
composed and calculated by MSCI without regard to this Fund or the issuer or owners of this
Fund or any other person or entity. None of the MSCI Parties has any obligation to take the
needs of the issuer or owners of this Fund or any other person or entity into consideration in
determining, composing or calculating the MSCI Indexes. None of the MSCI Parties is
responsible for or has participated in the determination of the timing of, prices at, or quantities
of this Fund to be issued or in the determination or calculation of the equation by or the
consideration into which this Fund is redeemable. Further, none of the MSCI Parties has any
obligation or liability to the issuer or owners of this Fund or any other person or entity in
connection with the administration, marketing or offering of this Fund. Although MSCI shall
obtain information for inclusion in or for use in the calculation of the MSCI Indexes from
sources that MSCI considers reliable, none of the MSCI Parties warrants or guarantees the
originality, accuracy and/or the completeness of any MSCI Index or any data included
therein. None of the MSCI Parties makes any warranty, express or implied, as to results to be
obtained by the issuer of the Fund, owners of the Fund, or any other person or entity, from the
use of any MSCI Index or any data included therein. None of the MSCI Parties shall have any
liability for any errors, omissions or interruptions of or in connection with any MSCI Index or
any data included therein. Further, none of the MSCI Parties makes any express or implied
warranties of any kind, and the MSCI Parties hereby expressly disclaim all warranties of
merchantability and fitness for a particular purpose, with respect to each MSCI Index and any
data included therein. Without limiting any of the foregoing, in no event shall any of the MSCI
Parties have any liability for any direct, indirect, special, punitive, consequential or any other
damages (including lost profits) even if notified of the possibility of such damages.
(2) Investment Objective
(A) Types of Assets Constituting Investment Objectives
The types of assets constituting investment objectives for this trust are those listed below:
a. Specified Assets listed below (“Specified Assets” mean those Specified Assets which are specified
36
in the Act on Investment Trusts and Investment Corporations; the same shall apply hereafter).
(a) Securities;
(b) Rights pertaining to Derivative Transactions (meaning the Derivative Transactions specified
in Article 2, paragraph 20 of the Financial Instruments and Exchange Act (the “FIX Act”) and
limited to those prescribed in the Trust Deed);
(c) Monetary claims (including deposits and call loans but excluding monetary claims falling into
(a) and (d)); and
(d) Promissory notes.
b. Assets specified below other than Specified Assets
(a) Draft bills of exchange
(B) Scope of instructions for investment in Securities
The management company will give instructions to invest the trust property primarily in the following
Securities (excluding those rights listed in the items of Article 2, paragraph 2 of the FIX Act which,
pursuant to the provisions of said paragraph and items, shall be deemed as Securities):
(a) Share certificates or subscription warrant;
(b) National government bonds;
(c) Municipal bonds;
(d) Bonds issued by a juridical person under a special act;
(e) Company bonds (excluding warrant certificates of company bonds with warrant where
warrant certificates and company bonds come together (“Company Bonds with Detachable
Warrant”));
(f) Specified company bonds prescribed in the Act of Liquidation of Assets (meaning the
specified company bonds specified in Article 2, paragraph 1, item 4 of the FIX Act);
(g) Investment securities issued by a juridical person under a special act (meaning the investment
securities specified in Article 2, paragraph 1, item 6 of the FIX Act);
(h) Preferred equity investment certificates prescribed in the Act on Preferred Equity Investment
by Cooperative Structured Financial Institutions (meaning the preferred equity investment
certificates specified in Article 2, paragraph 1, item 7 of the FIX Act);
(i) Preferred equity investment certificates or securities indicating preemptive rights for new
preferred equity investment prescribed in the Act on Liquidation of Assets (meaning the ones
specified in Article 2, paragraph 1, item 8 of the FIX Act);
(j) Commercial paper;
(k) Warrant certificates (including warrant certificates of Company Bonds with Detachable
Warrant; the same shall apply hereafter) and share option certificates;
37
(l) Securities or certificates which have been issued by a Foreign State or foreign person and
have the nature of securities and certificates listed in the preceding items;
(m) Unit certificates of investment trusts or foreign investment trusts (meaning the unit certificates
specified in Article 2, paragraph 1, item 10 of the FIX Act);
(n) Investment securities or investment corporation bonds, or foreign investment securities
(meaning those specified in Article 2, paragraph 1, item 11 of the FIX Act);
(o) Trust unit certificates of foreign loan claims (meaning those trust unit certificates specified in
Article 2, paragraph 1, item 18 of the FIX Act);
(p) Securities or certificates which indicate options (meaning those specified in Article 2,
paragraph 1, item 19 of the FIX Act, and limited to those pertaining to securities);
(q) Deposited certificates (meaning the deposited certificates specified in Article 2, paragraph 1,
item 20 of the FIX Act);
(r) Negotiable certificates of deposit issued by a foreign juridical person;
(s) Unit certificates of designated money in trust (limited to unit certificates-issuing trust
specified in Article 2, paragraph 1, item 14 of the FIX Act);
(t) Mortgage securities (meaning the mortgage securities specified in Article 2, paragraph 1, item
16 of the FIX Act);
(u) Trust units in loan claims which should be indicated on the unit certificates-issuing trust
specified in Article 2, paragraph 1, item 14 of the FIX Act); and
(v) Rights against a foreign person and having the nature of Securities prescribed in the preceding
item.
The securities or certificates specified in (a), and those securities or certificates specified in (l) and (q)
which have the nature of the securities or certificates specified in (a), will hereinafter be referred to as
the “Stocks.” The securities specified in (b) through (f), and those securities or certificates specified
in (l) and (q) which have the nature of the securities specified in (b) through (f) will hereinafter be
referred to as the “Public and Corporate Bonds.” The securities and certificates specified in (m) and
(n) will hereinafter ben referred to as the “Investment Trust Securities.”
(C) Scope of instructions for investment in Financial Instruments
In addition to the Securities listed in ○2 above, the management company is entitled to give
instructions to invest the trust money in the Financial Instruments listed below (including those rights
listed in the items of Article 2, paragraph 2 of the FIX Act which, pursuant to the provisions of said
paragraph and items, shall be deemed as Securities):
(a) Deposits;
(b) Designated money in trust (excluding the unit certificates-issuing trust specified in Article 2,
38
paragraph 1, item 14 of the FIX Act);
(c) Call loans;
(d) Bills traded in the bill discount market;
(e) Trust units in loan claims which are specified in Article 2, paragraph 2, item 1 of the FIX Act;
and
(f) Rights against a foreign person and having the nature of the rights prescribed in the preceding
item.
(3) Investment Framework
[Investment Framework]
- Fund investment, management, and relevant roles are separated under the internal rules.
- The management company’s investment management division controls the Fund’s
investment management.
- The management company has established an internal audit division, as well as a division
giving feedback to relevant divisions after monitoring fund investment statuses, risk conditions
and others. It has also established a section (function) to confirm whether investments are made in
accordance with the investment policy of each fund. Such confirmation is conducted by holding
Investment Committee Meetings, etc.
- The Stock Index Investment Division (approximately 4 persons) will be responsible for this
Fund.
[Decision-Making Process]
- Prior to commencing portfolio investment, the Stock Index Management Meeting will
review basic investment matters (including investment objectives, investment policies, basic terms
and conditions of an investment trust, and operational constraints) and determine basic investment
policies and investment plans. Basic investment policies and investment plans will be reported to
the Investment Committee.
- Investment environment analysis, market analysis, establishment of investment models, all
of which are necessary for building and operating a portfolio, will be conducted by the Portfolio
Management Meeting which is anchored by investment units. By adopting investment models,
BlackRock executes investments where the arbitrariness of a specific individual person would not
easily come into play, but the Portfolio Monitoring Meeting will also monitor and check if such
investment models are functioning validly, come up with remedial measures if needed, and
implement countermeasures in the wake of a sudden market change.
- Investment Committee will periodically analyze and examine investment risks and
performances.
39
*The Fund’s investment framework may be changed in the future.
The BlackRock Group
With around $4.89 trillion (approximately 502 trillion yen)* in assets under management, the
BlackRock group is one of the world’s largest independent asset management groups, and the
company is its local Japanese subsidiary.
The group manages a variety of asset classes such as stocks, bonds, cash management and alternative
investments for institutional and individual investors throughout the world. The group also provides
risk management, investment system outsourcing and financial advisory services to institutional
investors.
* As of the end of June 2016 (based on an exchange rate of $1 = 102.59 yen)
(4) Distribution Policy
(A) As a general rule, the aggregate of dividend income (meaning the dividends, fees for lending
securities and other similar incomeless interest on payments) after deduction of the expenses will be
distributed semiannually at the end of each financial period (February 9 and August 9, in principle).
(B) With respect to each trust calculation period, the entire amount of income including dividends
generated from the trust property and any amount of provision for distribution carried over from the
previous period, after deducting the sum of trust fees and expenses provided in the Trust Deed and
consumption tax and other taxes thereon (“expenses” in this paragraph) and then supplying in full any
negative amount of provision for distribution carried over from the previous period, will be distributed
to investors; provided, however, that if, for the purpose of adjusting the amount of income distribution,
the whole or a part of such income is retained within the trust property, such retained fund will be
accumulated as a provision for distribution, and such provision may be applied to distributions on the
occasions of the following or subsequent distributions. In the event that expenses and any negative
amount of provision for distribution cannot be fully deducted, the difference will be carried over to
the following term as the negative amount of provision for distribution. Neither any payment of
distributions in the future nor any amount thereof is guaranteed.
(C) If, after the sum of the losses described in b below is deducted from the sum of the profits that are
generated from the trust property and are described in a below, any retained loss is incurred, the entire
amount of such loss would be compensated for and carried forward to the following term:
a. Gains on securities trading, gains on futures transactions, marginal gains on additional trust, and
marginal gains on redemption
b. Losses on securities trading, losses on futures transactions, marginal losses on additional trust,
and marginal losses on redemption
40
(5) Investment Restrictions
Investment restrictions prescribed in the Trust Deed of the Fund
(A) Restrictions on percentage of investment in stocks to be invested
As a general rule, the ratio of investment in assets other than stocks shall be less than 50% of the total
amount of the trust property. However, the aforesaid management may not be achieved if a rapid
change is expected in the market, if preparations for redemption have been started, if the size of the
trust property becomes a level that hinders the management, or if other unavoidable circumstances
occur after the initial inception date of the Fund.
(B) Scope of stocks to be invested in
a. The stocks, warrant certificates and share option certificates that the management company may
give instructions to invest in shall be those issued by the issuers whose stocks are listed on
Financial Instruments Exchanges, but this restriction shall not apply to the stocks, warrant
certificates or share option certificates acquired through allocation of new shares to existing
shareholders or bondholders.
b. Notwithstanding the provisions of item a above, the management company may give instructions
to invest in any stocks, warrant certificates and share option certificates that are scheduled to be
listed or registered and with respect to which it is possible to confirm in a prospectus or any similar
document that they are to be listed or registered.
(C) Instructions for and scope of loaning of stocks
a. In order to facilitate efficient investment of the trust property, the management company may give
instructions to loan the stocks belonging to the trust property with such a scope as prescribed in b
below.
b. As of the time of loaning, the aggregate market value of the stocks loaned may not exceed fifty
percent (50%) of the aggregate market value of the stocks held in the trust property.
c. If the maximum limit prescribed in b above is exceeded, the management company shall promptly
give instructions to cancel those portions of loaning contracts which bear upon said excess.
d. The management company, if finding it necessary to do so when loaning the stocks, shall give
instructions to accept collateral.
(D) Instructions for and scope of futures transactions
a. In order to facilitate efficient investment of the trust property and to avoid price fluctuation risk,
the management company may give instructions to conduct securities futures transactions
41
(meaning the transactions specified in Article 28, paragraph 8, item 3(a) of the FIX Act), securities
index futures transactions (meaning the transactions specified in Article 28, paragraph 8, item 3(b)
of the FIX Act), and securities option transactions (meaning the transactions specified in Article
28, paragraph 8, item 3(c) of the FIX Act) at Financial Instruments Exchanges in Japan, and
transactions similar to such transactions at Financial Instruments Exchanges in a Foreign State.
Put and call transactions are to be included as part of option transactions (the same applies
hereinafter).
b. In order to facilitate efficient investment of the trust property and to avoid price fluctuation risk,
the management company may give instructions to conduct interest-rate futures transactions and
interest-rate option transactions at Financial Instruments Exchanges in Japan, and transactions
similar to such transactions at Financial Instruments Exchanges in a Foreign State.
(E) Scope of instructions for swap transactions
a. In order to facilitate efficient investment of the trust property and to avoid price fluctuation risk,
the management company may give instructions to conduct a transaction whereby different sets
of interest receivable or different sets of interest receivable and principal would be swapped under
certain specific conditions (a “Swap Transaction”).
b. In principle, for the purpose of instructions to conduct a Swap Transaction, the contractual term
of the transaction may not exceed the trust period, unless the entire transaction is cancellable
within said trust period.
c. A Swap Transaction will be valued according to the value calculated by the counterparty thereto
on the basis of the interest rate prevailing in the market.
d. The management company, if finding it necessary to do so when conducting a Swap Transaction,
shall give instructions to accept collateral.
(F) Investment restrictions on derivative transactions
The amount of derivative transactions as calculated by a reasonable method prescribed by the rules of
the Investment Trusts Association, Japan will not exceed the total net asset value of the trust property.
(G) Investment restrictions for hedging the concentration of the credit risk
The ratio of stock exposure, bond exposure and derivative exposure to a person prescribed by the rules
of the Investment Trusts Association, Japan to the Total Net Asset Value of the trust property will not,
in principle, exceed ten-hundredths respectively, or twenty-hundredths in total, and if such ratio
exceeds such rate, the management company shall make adjustments so that such ratio is within such
rate in accordance with the rules of the Investment Trusts Association, Japan.
42
(H) Scope of instructions for margin transactions
a. In order to facilitate efficient investment of the trust property, the management company may give
instructions to sell stock certificates by means of margin transactions. The management company
may give instructions to settle said sale by means of handover or repurchase of the relevant stock
certificates.
b. The scope of instructions for a margin transaction described above shall be such that market
capitalisation of the open position pertaining to said sale is equal to or less than the aggregate
amount of net assets of the trust property.
c. If, for the reason of redemption of the trust property or any other reason, market capitalisation of
the open position pertaining to said sale exceeds the aggregate amount of net assets of the trust
property, the management company shall promptly give instructions to settle part of the sale
bearing upon said excess.
d. The management company, if finding it necessary to do so when conducting the transaction
described above, shall give instructions to provide or accept collateral.
(I) Percentage of investment in investment trust securities
The percentage of investment in investment trust securities (excluding listed investment trust
securities) shall be equal to or less than five percent (5%) of the aggregate amount of net assets of the
trust property.
Investment restrictions prescribed by the Act on Investment Trust and Investment Companies
Stocks issued by the same entity
If with respect to the shares of stock issued by the same entity the number provided in (a) below
exceeds the number provided in (b) below, the management company shall not give instructions for
the trustee company to acquire any shares of said stock by means of the investment trust property
(a) the aggregate number of the voting rights of such shares held by all of the funds for which the
management company gives management instructions; and
(b) the aggregate number of voting rights of such shares multiplied by a factor of 50/100.
3. Investment Risk
(1) Investment Risk
The NAV of the Fund is affected by the fluctuations of the investment securities held by the Fund. All
profits and losses arising from investment management of these trust asset investments belong to the
investors. Accordingly, the principal amount of the Fund and profits arising from these investments
are not guaranteed. Investors may incur a loss and the value of their investment principal may fall
43
below par as the result of a decline in the NAV. Investment trusts are different from bank deposits. The
Fund’s major risks are as follows:
(A) Factors for fluctuations of NAV
a. Risk of Investing in Domestic Equity Securities
The Fund primarily invests in common stocks of companies based in Japan. Accordingly, the
performance of the Fund is affected by stock price fluctuations and the amounts of dividends received
from the issuers that are influenced by Japanese economic and market conditions as well as their
management and financial situations.
b. Securities Lending Risk
Lending of securities involves counterparty risks, which are the risks of contractual default by the
counterparty due to its bankruptcy, etc., and the Fund may suffer losses.
(B) Points to remember about the index to which the Fund is linked
a. Factors causing a gap between the Index and NAV
The Fund aims to cause its NAV to be highly linked to the movements of the Index but, primarily
due to the presence of the following factors, the Fund is operationally unable to promise that its
movements will coincide with those of the Index.
When the trust property is being configured or when the portfolio is adjusted due to changes
in the constituent issues of the Index, trading of individual issues may be subject to a market
impact and the Fund would need to bear the operating costs such as brokerage commissions.
Until such time as the portfolio is built, and as a result of processing dividends and rights
arising from the issues held in the Fund, a certain amount of cash will accrue in the trust
property.
When futures transactions are utilized, there will be a price differential between the futures
price and the Index.
The Fund will need to pay trust fees and bear other costs.
The Fund will be able to earn loan remuneration from loaning of stocks.
b. Risk associated with the index
While the Fund aims to seek performance linked to prices or return ratios published by the
providers of benchmark indices, the accuracy of the composition or calculation of the indices by
the index providers is not assured. While the index providers of indices generally disclose the
constituent issues for their indices, calculation methods, etc., they do not assume liability for the
quality, accuracy or completeness of data of the indices, nor do they warrant that their indices
have been calculated in accordance with the disclosed calculation methods. The Fund aims to seek
44
performance in consistency with the indices provided, and the management company does not
indemnify for errors by the index providers, nor does it assume liability for such errors. The data
may contain errors in its quality, accuracy or completeness, and such errors may remain undetected
or uncorrected for a certain length of time. Profits or losses, or expenses in relation to the errors
by the index providers will belong to the Fund and investors. For example, if any incorrect
constituent issue is included in the index, while the Fund aiming to link the performance to the
published index, for its part, would be expected to have market exposure to said constituent issue,
market exposure to other constituent issues would be decreased. Hence an error in the index may
exert a positive or negative impact on the past performance of the Fund.
If the index is rebalanced ad interim in order to correct an error in the constituent issues, and if
the Fund’s portfolio is adjusted in association with said rebalancing, the Fund must bear the
relevant transactional costs and market exposure that may arise from such portfolio adjustment.
Unexpected rebalance would expose the Fund to the risk (tracking error risk) in which the return
ratio of the Fund is not correctly linked to the return ratio of the index.
Therefore, the index provider’s indexing error or ad interim rebalancing may cause the Fund’s
costs and exposure risk to increase.
(C) Risks associated with the management of the Fund
a. Suspension and cancellation of acceptance of application for creation and acceptance of request
for redemption
The management company may, in the event of a trading suspension by a financial instrument
exchange, of suspension of settlement functions, or of any other unavoidable circumstances,
suspend accepting applications for the creation of Units and accepting requests for redemption at
its discretion. In this case, the management company may cancel previously-accepted creation
applications or redemption requests for the Units.
b. Early redemption
If any of the following events occurs, the Fund may, with concurrence from the trustee, terminate
the trust.
1. When delisted from all Financial Instruments Exchanges on which the Units were listed;
2. When the Index is terminated; or
3. When the amendment to the Trust Deed associated with changes in the calculation method
of the Index or other changes is denied by a written resolution.
The Fund may, when the number of the Units becomes less than 500,000 units as a result of
redemption after the day that is three (3) years from the date of conclusion of the Trust Deed, or
the Fund recognising that it is for the benefit of the investors, or in the event of an unavoidable
45
circumstance, redeem the Fund even during the trust term.
c. Changes in laws or ordinances, tax system, accounting and other matters.
Laws or ordinances, tax system, accounting and other matters may change in the future.
d. Points to remember about the Fund’s distributions
In contrast to interest on bank deposits, distributions are from the net assets of the Fund. Hence,
when distributions are paid out, the NAV would fall. The level of distribution does not necessarily
indicate the ROI of the Fund.
(2) Risk Management Framework
The management company places an emphasis on risk oversight, and risks are managed using its
proprietary system. More specifically, Fund’s investment risk is measured and analyzed, and
investment restrictions are monitored by an independent risk management department. This
department confirms that the Fund’s investment risk profile meets the investment guideline, and gives
feedback to investment teams and other relevant departments, with internal sharing of relevant results.
Additionally, the management company’s operational risks are clearly defined in operational
guidelines, and managed accordingly.
*The risk management framework may be changed.
(Reference Information)
Comparison of the Fund with other representative
asset classes in terms of percentage changes
(September 2011 to August 2016)
Annual percentage change and dividend-included
NAV of the Fund
(September 2011 to August 2016)
50.1
65.0 65.7
47.4
6.7
34.9
43.7
-16.9 -17.0 -15.6
-27.4
0.4
-8.6
-17.4
12.116.1
19.5
6.82.5
10.36.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
the Fund Japanese
equity
Developed
country
equity
Emerging
country
equity
JGBs Developed
country
bond
Emerging
country
bond
（％） Maximum percentage change
Minimum percentage change
Average percentage change
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2011/09 2012/09 2013/09 2014/09 2015/09
Annual percentage change of
fundAnnual percentage change of
benchmarkDividend-included NAV
(%)(yen)
46
* The above graph represents the annual average, maximum and
minimum percentage changes at the end of each month during the five
years between September 2011 and August 2016 for the Fund and
other representative asset classes. The percentage changes for the Fund
are calculated on assumption that the amount of distribution before tax
is reinvested and may differ from the annual percentage change
calculated based on the actual NAV. Because the establishment date of
the Fund is October 19, 2015, the percentage changes for the Fund are
calculated based on the value of the benchmark and differ from the
actual results of the Fund.
* Not every asset class may be the investment target of the Fund.
* Index of each asset class
Japanese equity: ················· Tokyo Stock Price Index
(TOPIX Total Return)
Developed country equity: ····· MSCI Kokusai Index
(Total Return, Yen based)
Emerging country equity: ······ MSCI Emerging Markets Index
(Total Return, Yen based)
Japanese government bond: ··· Nomura Bond Performance Index
Government
Developed country bond: ······ Citi World Government Bond Index
(excluding Japan, Yen based)
Emerging country bond: ······· J.P. Morgan Government Bond Index-
Emerging Markets Global Diversified
Index (Yen based)
(Note) Foreign indexes are yen-based, assuming investments with no
currency hedge.
* The above graph illustrates the amount and percentage changes of
dividend-included NAV as at each month-end of the year during a five-
year period between September 2011 and August 2016. Because the
annual percentage change shows the annual percentage changes of the
benchmark, it is not the actual results of the Fund. The above graph
illustrates the dividend-inclusive NAV for the period from the end of
October 2015 to the end of August 2016.
* The dividend-included NAV is calculated on assumption that the
amount of distribution before tax is reinvested and may differ from the
actual NAV.
<Indexes>
TOPIX (Total Return) is a benchmark calculated based on the total market capitalisation of all issues listed on the first section of the Tokyo Stock
Exchange. TOPIX (Total Return) is an intellectual property of the Tokyo Stock Exchange, and all rights pertaining to this stock price index, including
the index calculation and publication and use of the figures belong to the Tokyo Stock Exchange. The Tokyo Stock Exchange also holds the right to
change the method of calculation or publication of TOPIX (Total Return), to terminate the method of calculation or publication of TOPIX (Total
Return) or to change or terminate the use of trademark of TOPIX (Total Return).
The MSCI Kokusai Index (Total Return, Yen based) and MSCI Emerging Markets Index (Total Return, Yen based) are benchmarks developed and
calculated by MSCI Inc. The MSCI Kokusai Index (Total Return, Yen based) is an index which benchmarks the stock performance of developed
countries of the world excluding Japan while the MSCI Emerging Markets Index (Total Return, Yen based) is an index which benchmarks the stock
performance of emerging countries. The copyrights, intellectual property rights and all other rights concerning these indexes belong to MSCI Inc. In
addition, MSCI Inc. holds the right to amend the content of each index and the right to terminate publication of these indexes.
Nomura Bond Performance Index Government is an index published by Nomura Securities Co., Ltd. to measure the movements of Japanese
government bonds and is calculated with the return on investment of a portfolio. The intellectual property right concerning this index belongs to
Nomura Securities Co., Ltd. Note that Nomura Securities Co., Ltd. does not guarantee the accuracy, completeness, reliability and effectiveness of
Nomura Bond Performance Index Government and bears no responsibility whatsoever on business activities and services implemented by
BlackRock Japan Co., Ltd. using the index.
The Citi World Government Bond Index (excluding Japan, Yen based) is a bond index published by Citigroup Index LLC for benchmarking the
overall investment return on government bonds of the world’s major countries excluding Japan. The copyright, trademark right, intellectual property
right and all other rights concerning this index belong to Citigroup Index LLC.
The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified Index (Yen based) is published by J.P. Morgan Securities LLC and
is calculated to track local currency bonds issued by emerging market governments. The copyright concerning this index belongs to J.P. Morgan
Securities LLC.
4. Fees and Commissions, and Taxes
(1) Subscription Commission
The Authorised Participants are entitled to collect subscription commission (including the
consumption taxes thereon) as determined by it from the investors. For further details, please contact
the Authorised Participants. For further details on the Authorised Participants, please contact the
management company.
Subscription commission is to be paid at the time of subscription in consideration of services such as
47
explanation of instruments at the time of subscription and administrative procedures for subscription.
(2) Redemption (Cancellation) Fee
The Authorised Participants are entitled to collect a fee (including the consumption taxes thereon) as
independently determined by it from the investor if said investor seeks to have the relevant unit
redeemed or repurchased. For further details, please contact the Authorised Participants. For further
details on the Authorised Participants, please contact the management company.
Redemption (cancellation) fee is to be paid at the time of redemption in consideration of services such
as administrative procedures for redemption or repurchase.
(3) Trust Fee, etc.
For each day of the calculation period, the trust fee shall be the amount obtained by multiplying the
Total Net Asset Value of the trust property by a factor designated by the management company within
of 0.2052% p.a. (0.19% p.a., excluding tax), and the allocations of the trust fee and the content of
services for which such trust fee is paid as consideration are as follows:
Allocation of Trust Fee Content of Services
Management
company
0.1782% p.a.
(0.165%, excluding tax)
Fund management, calculation of the
NAV, preparation of various
documents, and other related services
Trustee
company
For portions where
the Total Net Asset
Value is 200 billion
or less
0.027% p.a.
(0.025%,
excluding tax)
Administration of investment assets,
execution of instructions received
from the management company, and
other related services
For portions where
the Total Net Asset
Value is more than
200 billion and 800
billion or less
0.0243% p.a.
(0.0225%,
excluding tax)
For portions where
the Total Net Asset
Value is more than
800 billion
0.0216% p.a.
(0.02%, excluding
tax)
The aggregate amount of the above-described trust fee shall be paid out of the trust property at the end
of each financial period or the time of termination of trust.
48
(4) Other Fees and Commissions
(A) Taxes related to the trust property, costs and expenses required for processing trust administration,
and interest on any advances made by the trustee company shall be borne by the investors, and shall
be paid out of the trust property from time to time.
(B) Any brokerage commission accruing at the time of trading of securities held in the trust property,
consumption taxes on said brokerage commission, and costs and expenses required for futures
transactions shall paid out of the trust property from time to time.
(C) Any audit costs and expensed related to the trust property and consumption taxes on said costs and
expenses shall be paid out of the trust property at the end of each financial period or the time of
termination of trust.
(D) The following expenses shall be borne by the investors, and shall be paid out of the trust property:
1. expenses for listing;
2. fees for use of trademark of the Index
The management company may receive from the Fund the amount obtained by multiplying the daily
Total Net Asset Value by the ratio calculated by reasonably estimating the amount of the above
expenses with the maximum ratio being 0.0486 p.a. (0.045%, excluding tax), or the amount calculated
by reasonably estimating the amount of the above expenses by deeming such amount to be the total
payment amount of the expenses. The expenses and the Amount equivalent to Consumption Taxes,
etc. shall be paid out of the trust property at the end of each calculation period or the time of termination
of trust.
(E) If, at the time of application for creation, the stocks issued by the Authorised Participants or the
investor or the stocks issued by the parent company of the Authorised Participants or the investor
(meaning the parent company specified in Article 2, paragraph 1, item 4 of the Companies Act;
hereinafter the same) are included in the Index ETF Constituent Stocks, the Authorised Participants or
the investor shall pay an amount* separately designated by the management company as costs and
expenses required for acquisition of the stocks for and on behalf of the Authorised Participants or the
investor.
(F) If the Index ETF Constituent Stocks in respect of the application for creation include stocks (the
“ex-dividend stocks”) with respect to which unit certificates are delivered in response to the
application for creation on the day specified by a person who may receive dividends or acquire rights
49
or the business day immediately prior to such day after the ex-dividend or ex-rights of such component
stocks, the Authorised Participants or the investor shall pay an amount* separately designated by the
management company as costs and expenses required for acquisition of the stocks for and on behalf
of the Authorised Participants or the investor.
(G) If, at the time of redemption, the Authorised Participants or the redemption requester is the issuer
of the stocks included in the issues of the Index ETF Constituent Stocks or is a subsidiary thereof
(meaning a subsidiary specified in Article 2, paragraph 1, item 3 of the Companies Act; hereinafter
the same), the market value of the unit that the Authorised Participants or the redemption requester
may receive shall be in the amount* separately designated by the management company as costs and
expenses required for sale of the stocks for and on behalf of the Authorised Participants or the creation
applicant.
(H) If any stock lending is carried out, an amount of fees obtained by multiplying premium charges,
which constitute the revenues of the Fund, by a factor no more than 50% will be paid by the Fund to
a party to which the management services are delegated or the like from time to time.
*The amount separately designated as mentioned above shall be the amount obtained by multiplying
the market capitalisation of such stocks by a percentage up to 0.2%. However, the percentage may be
changed in the future.
*Rates, maximum amounts, etc. of other expenses and fees are not shown in advance as they fluctuate
with past performance and other factors.
(5) Tax Treatment
For tax purposes, the Fund is treated as a specified stock investment trust.
(A) Taxation on individual investors
a. At the time of sale of unit
In principle, the transaction is subject to self-assessed separate taxation where a tax rate of
20.315% (15.315% as income tax and 5% as local consumption tax) will be applied to capital
gains on stock transfer. There is a special exception where the presence of a selective withholding
account would make it unnecessary to declare a tax return.
b. At the time of receipt of distributions
In principle, the transaction is subject to withholding where a tax rate of 20.315% (15.315% as
income tax and 5% as local consumption tax) will be applied at the time of receipt of distribution.
It is possible to file an income tax return and choose between separate taxation and aggregate
50
taxation. If aggregate taxation is chosen, dividend deduction will be applied, and the relevant
distributions will be treated in the same manner as stock dividends.
c. Redeeming Units by exchanging Units and spot-trading stocks
If you intend to redeem Units by exchanging Units and spot-trading stocks, please contact the
Authorised Participants. For further details on the Authorised Participants, please contact the
reference party.
d. Aggregation of capital losses on transfer and distributions
By means of an income tax return, losses incurred at the time of sale and redemption (capital
losses on stock transfer) can be aggregated with income from dividends on listed stocks and the
amount of interest income from specific bonds (limited to distributions and dividends only if self-
assessed separation taxation is chosen).
*You may use a Nippon Individual Savings Account (NISA). If you use a NISA, you will be offered
exemption for a certain period of time from taxation on dividend income and capital gains arising from
publicly-offered stock-type investment trusts and the like that have been newly purchased up to a
certain amount each year. A person who satisfies certain requirements such as opening a tax-exempt
account may use NISA. Please note that it is not possible to aggregate profit or loss resulting from
dividend income or capital gains that arise in specified accounts or general accounts with those that
arise in the NISA account. For further details on NISA, including the amounts and periods eligible
for tax exemption, please contact your type I financial instrument business firm.
(B) Taxation on corporate investors
a. At the time of sale of unit
As in the case of ordinary sale of stocks, any difference between the acquisition value and sale
price of Units will be subject to taxation in combination with other corporate income.
b. At the time of receipt of distributions
Distributions will be excluded from deductible expenses, and a limitation on such exclusion will
be the same as in the case of stock dividends.
c. Redeeming Units by exchanging Units and spot-trading stocks
If you intend to redeem Units by exchanging Units and spot-trading stocks, please contact the
Authorised Participants. For further details on the Authorised Participants, please contact the
reference party.
51
* Because the descriptions above are as of the end of August 2016, if tax laws amended, the tax ratio
and other matters may be changed. We recommend that you confirm details regarding tax treatment
with a tax professional.
52
5. Status of Investment
(1) Investment Status
As of the end of August 2016
Types of assets Amount (yen) Investment ratio (%)
Stocks 14,380,657,050 99.43
Japanese stocks 14,380,657,050 99.43
Call loans and other assets (after deduction of liabilities) 82,210,143 0.57
Total net asset value 14,462,867,193 100.00
(Note) The investment ratio means the current market price ratio of the relevant assets to the total
net asset value.
(2) Assets to be invested in
(A) Major stocks to be invested in
a. Top 30 stocks As of the end of August 2016
Stocks Country/ region
Type of business Amount
Book value Appraised value Investment
ratio (%)
Unit (yen) Amount (yen)
Unit (yen) Amount (yen)
1 Toyota Motor Japan Transport machinery
128,900 6,011.00 6,238.00
5.56 774,817,900 804,078,200
2 Fuji Heavy Industries Japan Transport machinery
190,800 3,868.90 4,098.00
5.41 738,187,269 781,898,400
3 Fanuc Japan Electrical equipment
43,600 17,420.00 17,630.00
5.31 759,512,000 768,668,000
4 Honda Motor Japan Transport machinery
240,200 2,992.00 3,170.00
5.26 718,678,400 761,434,000
5 Mitsui & Co. Japan Wholesale 531,300 1,303.00 1,377.00
5.06 692,283,900 731,600,100
6 Nissan Motor Japan Transport machinery
679,800 1,012.50 1,015.00
4.77 688,297,500 689,997,000
7 Canon Japan Electrical equipment
229,700 2,923.50 2,964.00
4.71 671,527,950 680,830,800
8 Nippon Telegraph and Telephone
Japan Information and
telecommunication 148,900
4,854.00 4,546.00 4.68
722,760,600 676,899,400
9 Bridgestone Japan Rubber products 189,100 3,616.00 3,555.00
4.65 683,785,600 672,250,500
10 NTT Docomo Japan Information and
telecommunication 254,800
2,661.00 2,603.00 4.59
678,022,800 663,244,400
11 Komatsu Japan Machinery 287,600 2,171.00 2,261.50
4.50 624,379,600 650,407,400
12 Denso Japan Transport machinery
151,400 4,097.00 4,272.00
4.47 620,285,800 646,780,800
13 Japan Tobacco Japan Food 157,800 3,996.00 4,008.00 4.37
53
630,568,800 632,462,400
14 Itochu Japan Wholesale 465,500 1,213.00 1,221.00
3.93 564,651,500 568,375,500
15 Tokyo Electron Japan Electrical equipment
48,900 8,642.00 9,508.00
3.21 422,593,800 464,941,200
16 Daiichi Sankyo Japan Medicine 187,600 2,390.00 2,374.50
3.08 448,364,000 445,456,200
17 Asahi Kasei Japan Chemistry 393,000 822.90 872.40
2.37 323,399,700 342,853,200
18 Taito Trust Construction Japan Construction 21,900 16,675.00 15,235.00
2.31 365,182,500 333,646,500
19 Sekisui House Japan Construction 187,700 1,684.00 1,666.00
2.16 316,086,800 312,708,200
20 Aisin Seiki Japan Transport machinery
59,600 4,795.00 4,885.00
2.01 285,782,000 291,146,000
21 Marubeni Japan Wholesale 513,500 500.10 515.70
1.83 256,801,350 264,811,950
22 T&D Holdings Japan Insurance 180,800 1,113.50 1,180.50
1.48 201,320,800 213,434,400
23 Kuraray Japan Chemistry 110,600 1,398.00 1,478.00
1.13 154,618,800 163,466,800
24 Lawson Japan Retailing 20,300 7,590.00 7,260.00
1.02 154,077,000 147,378,000
25 Aozora Bank Japan Banking 368,000 348.00 366.00
0.93 128,064,000 134,688,000
26 Mitsubishi Tanabe Pharma Japan Medicine
70,000 1,947.00 1,920.00
0.93 136,290,000 134,400,000
27 Konica Minolta Japan Electrical equipment 141,000
898.00 932.00 0.91
126,618,000 131,412,000
28 Trend Micro Japan Information and
telecommunication 35,000
3,760.00 3,670.00 0.89
131,600,000 128,450,000
29 Brother Industries Japan Electrical equipment 73,500
1,517.00 1,736.00 0.88
111,499,500 127,596,000
30 Japan Airlines Japan Electrical equipment 37,100
1,517.00 1,736.00 0.81 111,499,500 127,596,000
(Note) The investment ratio means the current market price ratio of the relevant assets to the total
net asset value.
b. Investment ratio by type of assets and type of business
As of the end of August 2016
Type of Assets Type of business Investment ratio (%)
Stocks Construction 4.47
Food 4.37
Chemistry 4.62
Medicine 4.01
Rubber products 5.63
Nonferrous metal 0.70
Machinery 6.40
Electrical equipment 15.03
Transportation equipment 28.46
Air transportation 0.81
54
Information and
telecommunication 10.15
Wholesale 10.82
Retailing 1.02
Banking 0.93
Insurance 2.00
Total 99.43
(Note) The investment ratio means the current market price ratio of the relevant assets to the total
net asset value.
(2) Real estate property to be invested in
Not applicable
(3) Other material assets to be invested in
As of the end of August 2016
Type Region Exchange Name of assets Long/
short
Amount
(number)
Book value
(yen)
Current appraised
value
(yen)
Investment ratio
(%)
Stock price index
futures trading Japan
Osaka stock
exchange
Mini TOPIX futures
2809 Long 57 75,040,500 75,838,500 0.52
(Note 1) The investment ratio means the current market price ratio of the relevant assets to the total
net asset value.
(Note 2) The appraised value is based on the settlement price or final closing price published by the
relevant stock exchange on the nearest available day to the calculation date.
(3) Past Performance
(A) Changes in Net Assets
As of the end of August 2016, the changes in the net assets as of the last day of each month within one
year immediately prior to the end of July 2016 and as of the end of each calculation period are as
follows.
End of calculation period or end
of each month
Total net asset value NAV
Market price
(yen) Without distribution
(yen)
With distribution
(yen)
Without
distribution
(yen)
With distribution
(yen)
1st calculation period (August 9, 2016)
14,186,292,531 14,303,917,605 1,688.48 1,702.48 1,687
As of the end of October 2015 569,621,127 － 1,899.00 － 1,928
As of the end of November 2015 570,992,559 － 1,903.00 － 1,925
As of the end of December 2015 566,248,021 － 1,887.00 － 1,925
As of the end of January 2016 3,221,482,905 － 1,790.00 － 1,826
As of the end of February 2016 3,503,698,395 － 1,668.00 － 1,720
55
As of the end of March 2016 6,801,353,230 － 1,744.00 － 1,740
As of the end of April 2016 8,316,333,031 － 1,732.00 － 1,735
As of the end of May 2016 8,462,000,064 － 1,762.00 － 1,755
As of the end of June 2016 12,883,645,539 － 1,590.00 － 1,619
As of the end of July 2016 14,181,385,010 － 1,687.90 － 1,690
As of the end of August 2016 14,462,867,193 － 1,721.40 － 1,725
(Note) The market price means the closing price on the Tokyo Stock Exchange as of the relevant
day. However, if no closing price for the relevant day is available, the closing price as of
the nearest day is indicated.
(B) Changes in Distributions
Distribution per unit (yen)
1st calculation period 14
(C) Changes in Rates of Return
Changes in rate of return of NAV Changes in rate of return of market price
Rate of return (%) Rate of return (%)
1st calculation period △6.8 △7.7
(Note 1) The figure stated for rate of return of NAV for the 1st calculation period is equal to the NAV
per unit (with distribution) as of August 9, 2016 less the NAV per unit at the time of creation
(creation date: October 19, 2015) divided by the NAV per unit, and multiplied by 100.
(Note 2) The figure stated for rate of return of market price for the 1st calculation period is equal to
the market price as of August 9, 2016 less the market price at the time of creation (creation
date: October 19, 2015) divided by the market price at the time of creation, and multiplied
by 100.
(4) Records of Creation and Cancellation
Period Number of units created Number of units cancelled
1st calculation period 10,200,000 units 1,798,209 units
(Note) The number of units created includes the number of units initially created.
(Reference Information)
Status of Investment (as of August 31, 2016)
Changes in NAV and Net Assets
56
* The NAV figures are those after deduction of the trust fee. For the trust fee, please refer to
“Expenses of Fund” below. The benchmark figures shown are multiplied by 100.
Changes in Distributions
Cumulative total since creation 1,400 yen
FY1 August 2016 1,400 yen
*Distributions are the amount per unit net of tax.
Status of major assets
Top 10 stocks incorporated (10%)
Name of stocks Business Ratio
1 Toyota Motor Transport machinery 7.9
2 Fuji Heavy Industries Transport machinery 4.4
3 Fanuc Electrical equipment 4.1
4 Honda Motor Transport machinery 4.0
5 Mitsui & Co. Wholesale 2.3
6 Nissan Motor Transport machinery 2.1
7 Canon Electrical equipment 2.1
8 Nippon Telegraph and
Telephone Information and telecommunication
2.1
9 Bridgestone Rubber products 2.0
10 NTT Docomo Information and telecommunication 1.8
Changes in Annual Rates of Return
* The rates of return of the Fund are calculated based on the NAV (without distribution).
* The rates for the period from 2006 to 2014 shows the annual rates of return.
0
50
100
150
200
250
0
50,000
100,000
150,000
200,000
250,000
15/10 15/11 15/12 16/1 16/2 16/3 16/4 16/5 16/6 16/7 16/8
Total net asset value (right axis)
NAV (without distribution; left
axis)Benchmark (left axis)
(yen) (billion yen）
57
* In 2015, the rate of return shows the rate from the creation date (October 19) to the end of the same
year, and the benchmark shows the rates from the beginning to the end of each year.
* Past performance, data, etc. are those as of the preparation date, or past performance, data, etc., and
do not guarantee future results.
* Benchmarks are provided for reference purposes only, and do not represent the Fund’s performance
results.
* The status of investment by the Fund is separately disclosed on the website of the management
company.
17.6%
-9.5%
-37.2%
9.5%3.0%
-16.9%
17.5%
37.5%
12.1% 9.0%
-60%
-40%
-20%
0%
20%
40%
60%
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015
Fund
Benchmark
58
Section 2. Management and operation
1. Application (sales) procedure
(A) Offering of creation to Units is conducted on each business day throughout the creation
application period with a Units creation application accepted by an Authorised Participant.
Any inquiry on such Authorised Participants should be made to the following inquiry contact point:
BlackRock Japan Co., Ltd.
Telephone number: 03-6703-4110 (service hours: 9:00 to 17:00)
Official corporate website: http://www.blackrock.com/jp/
(B) The management company shall provide, on a business day immediately preceding the
applicant’s creation application date, the Authorised Participants with a PCF (Portfolio Composition
File) showing the Index ETF Constituent Stocks and values that are specified by the management
company as the shares required for the applicant to create the number of units equivalent to that of one
creation unit.
(C) The Authorised Participants, being allowed to serve as intermediary for the applicant’s
application to create Units, shall present the relevant PCF to the investor for which the former serves
as creation application intermediary.
(D) Acceptance of application for creation of Units
The management company shall, no later than 3:00 p.m. of the date of the applicant’s creation
application, accept the latter’s application to create Units in integer multiples of one creation unit in
exchange for the Index ETF Constituent Stocks and cash that are specified by the management
company.
(E) Application price of Units
The price of the applicant’s application to create Units shall be the net asset value per unit as
of the date of creation application. The Authorised Participants may collect from the applicant
relevant application fee (including consumption taxes and equivalents), which shall be
received by the Authorised Participants.
(F) Notwithstanding the provision of section (D), the management company may not accept any
Units creation application on the dates and periods set forth in item 1 through item 8 that are shown
59
below. In such event, the applicant shall be not provided with a PCF by the management company:
9) For a period of two business days, beginning two business days prior to the fund’s
account close dates (or, if the account close date falls on a holiday, for a period of three
business days, beginning three business days prior to the account close date)
10) In the event that management company determines the Fund cannot be managed
according to the Fund’s investment policies provided in the Trust Deed due to
unavoidable circumstances.
11) For a period of three business days, beginning one business day prior to the ex-dividend
or ex-rights day of any Index ETF Constituent Stocks.
12) For a period of three business days, beginning one business day prior to the rebalance
day for the Index ETF Constituent Stocks, or the day the number of stocks are changed.
13) For a period, beginning one business day prior to the delisting day (due to the share
transfer and merger of any Index ETF Constituent Stocks) and ending one business day
after the Index inclusion day for new shares (due to such transfer and merger).
14) On any day on which trading of the Index ETF Constituent Stocks is suspended.
15) For a period of five business days prior to the date of trust termination, if the Fund
terminates.
8) Any event other than in 1) through 7) above in which the management company
determines the Fund’s operations may be undermined due to unavoidable circumstances.
(G) In the event that any of the stocks provided for in section (B) includes shares issued by the
Authorised Participants or the investor or the stocks issued by its parent company, the Authorised
Participants or the investor shall create the Units in a certain number of units with the amount of money
equivalent to the value of the shares and with the amount* separately designated by the management
company as the expenses required for the acquisition of the shares as the trust’s asset, instead of
acquiring the shares concerned. If the marked-to-market value of shares of a stock provided for in
section (B), falls short of the valuation amount of the Units to be delivered in a certain number of units,
the difference shall be compensated for by cash.
(H) In the event of any of the circumstance set forth in section (G) occurring, the Authorised
Participants shall notify the management company to that effect by the procedure specified separately
by the latter party. If any damage is caused to the trust assets and other following the Authorised
Participants’ failure to provide such notification to the management company at the time of making
Units creation application, the former party shall be held responsible for any and all of the damage
concerned.
60
(I) If the shares of a stock provided for in section (B) include ex-dividend stocks, the
management company may accept the application for creation in cash in the amount equal to the total
market value of the specific issue of the ex-dividend stocks that are the component stocks of the Index
pertaining to the application for creation. The total market value of specific issues in this case will be
the amount calculated by multiplying the closing price (or, if the closing price is not available, a similar
price) at the financial instrument exchanges of the ex-dividend stocks as of the calculation date of the
Net Asset Value by the number of the ex-dividend stocks included in the component stocks of the
Index in respect of the application for creation, and in this case, the management company may charge
the amount separately designated by the management company as the amount equal to the expenses
necessary for the trust property to acquire such ex-dividend stocks.
(J) Notwithstanding the provision of section (F), the management company may, in the event
of a trading suspension by financial instrument exchange, of suspension of settlement functions, or of
any other unavoidable circumstances, either suspend accepting applications for the creation of Units
or cancel previously-accepted creation applications, or alternatively, take both steps.
(K) The Authorised Participants and the investor may not cancel the application after the
creation application is accepted by the management company.
(L) The Authorised Participants shall deliver to the trustee company the shares and cash required
for the creation application concerned no later than the fourth business day from the date on which the
creation application is made (“Delivery Deadline”).
(M) If the valuation amount of the shares the Authorised Participants intend to deliver to the
trustee company exceeds the value of the Units representing integer multiples of creation application-
related one creation unit, the management company shall adjust the creation unit.
(N) The management company shall deliver Units to the Authorised Participants or to the
investor through the Authorised Participants after confirming that the trustee company has received
the delivery of shares as provided for in section (L).
(O) If the Authorised Participants determine that it will be difficult for the Authorised
Participants or the applicants in Units to deliver by the Delivery Deadline all or any part of the stocks
or cash to be delivered that constitute the creation unit as at the time of creation (such delivery, the
“Whole or Partial Delivery”), the Authorised Participants shall immediately notify the management
company or the trustee company to such effect.
(P) If the management company, based on the notification in section (O), determines that Whole
or Partial Delivery will not be possible within the period prescribed by the management company as
61
a period in which there is no likelihood of hindrance being caused to operations that are in line with
the “Basic Investment Policy” prescribed in the Trust Deed, creation applications for or redemptions
of trust units, or any other operations of the trust, the management company may cancel creation
applications that have already been received from Authorized Participants or applicants.
(Q) In the case of section (P), if any damage arises to the trust property or otherwise due to the
Whole or Partial Delivery not being possible, the Authorized Participants will bear all liability in
respect thereof.
*The amount separately designated as mentioned above shall be the amount obtained by multiplying
the market capitalisation of such stocks by a percentage up to 0.2%. However, the percentage may be
changed in the future.
2. Realisation (redemption) procedure
(A) Partial redemption of trust units
During the course of the trust period, the investor may not request a partial redemption of trust units
with regard to the Units it holds.
(B) Redemption of Units by exchanging unit and shares included in trust assets
a. The Authorised Participants and an investor requesting the redemption of more than a certain
number of Units (hereafter the “Units Redemption Requester”) may request the management company
or the Authorised Participants to redeem, no later than 3:00 p.m. on a redemption request acceptance
date, the relevant Units for book entry transfer in integral multiples of one creation unit, for shares
equivalent in value to the Units concerned, among shares included in the trust assets.
b. The management company shall present a PCF to the Authorised Participants on a business
day immediately preceding a Units redemption request acceptance date.
c. The Authorised Participants shall present a PCF to the Units Redemption Requester by
serving as a redemption request intermediary.
d. The management company may not accept any Units redemption request on the dates and
periods set forth in item 1 through item 8 that are shown below. In such event, the Units Redemption
Requester shall be not presented with a PCF by the management company:
1. For a period of two business days, beginning two business days prior to the fund’s account
close dates (or, if the account close date falls on a holiday, for a period of three business days,
beginning three business days prior to the account close date)
62
2. In the event that management company determines the Fund cannot be managed according to
the Fund’s investment policies provided in the Trust Deed due to unavoidable circumstances.
3. For a period of three business days, beginning one business day prior to the ex-dividend or ex-
rights day of any Index ETF Constituent Stocks.
4. For a period of three business days, beginning one business day prior to the rebalance day for
the Index ETF Constituent Stocks, or the day the number of stocks are changed.
5. For a period, beginning one business day prior to the delisting day (due to the share transfer
and merger of any Index ETF Constituent Stocks) and ending one business day after the Index
inclusion day for new shares (due to such transfer and merger).
6. On any day on which trading of the Index ETF Constituent Stocks is suspended.
7. For a period of five business days prior to the date of trust termination, if the Fund terminates.
8. Any event other than in 1 through 7 above in which the management company determines the
Fund’s operations may be undermined due to unavoidable circumstances.
e. The price of Units at the time of redemption shall be the net asset value per unit as of the
date of the redemption request being accepted. For the calculation method and frequency of such net
asset value per unit, please see the section titled “3. Management and operation, 3. An outline of our
asset management, (1) Valuation of assets.” The Authorised Participants may collect from the Units
Redemption Requester relevant intermediary service fee that is specified individually (including
consumption taxes and equivalents).
f. If the valuation amount of the shares the management company intends to redeem exceeds
the value of the Units representing integral multiples of redemption request-related one creation unit,
the management company shall adjust the creation unit.
g. In the event of a trading suspension by financial instrument exchange, of suspension of
settlement functions, or of any other unavoidable circumstances, or when the Investment Manger
deems it to be necessary, it may either suspend accepting Units redemption requests or cancel
previously-accepted Units redemption requests, or alternatively, take both steps.
h. If the management company has suspended accepting Units redemption request pursuant to
the provision of item (g), it shall deem that the price of the Units redemption for which request was
accepted by itself prior to the acceptance suspension, and for which no acceptance cancellation is made
by the management company, was calculated pursuant to the provision of item (e), as if the redemption
request was accepted by the management company on the first per-unit net asset value calculation date
after the redemption request acceptance suspension is lifted.
63
i. The Authorised Participants and the Units requester may not cancel the redemption request
after the redemption request is accepted by the management company.
j. In the event that the Authorised Participants having made a redemption request or the Units
Redemption Requester is an issuer of any of Index ETF Constituent Stocks or such issuer’s subsidiary,
the Authorised Participants or the Units Redemption Requester shall give an instruction to redeem the
Units in a number of units determined by subtracting from the number of units required to be redeemed,
the number of Units equivalent to the market value of the shares concerned of the issuer’s individual
stock for the number of shares in integral multiples of the trading unit of the exchange.
The market value of the shares concerned shall be an amount of money obtained by
subtracting from the actual market value an amount obtained pursuant to laws and the regulations of
the Investment Trusts Association, Japan the amount* separately designated by the management
company as the expenses required for the sale transaction of the shares concerned and for the
transaction required for changing any of the stocks held in trust assets and its quantity by using the
proceeds of the sale transaction concerned.
*The amount separately designated as mentioned above shall be the amount obtained by multiplying
the market capitalisation of such stocks by a percentage up to 0.2%. However, the percentage may be
changed in the future.
k. If the specific issues that the investor may acquire pursuant to Item a. above include ex-
dividend stocks, the management company may instruct to redeem the shares subject to Redemption
that are the ex-dividend stocks by delivering the amount equal to the total market value of the specific
issue of such stocks. The total market value of such specific issues in this case will be the amount
calculated by multiplying the closing price (or, if the closing price is not available, a similar price) at
the financial instrument exchanges of the ex-dividend stocks as of the calculation date of the NAV
provided in Item e. of the preceding Article by the number of the ex-dividend stocks included in the
specific issues that the investor may acquire pursuant to Item a. above.
l. The Authorised Participants and the Units Redemption Requester shall apply to the book
entry transfer institution for the annulment of the book entry transfer Units involved in the redemption
concerned no later than the deadline specified by the management company. If the application for the
annulment of the book entry transfer Units, made for the purpose of the redemption, is confirmed to
have been accepted by the book entry transfer institution, the trustee company shall, according to the
management company’s instruction, request the book entry transfer institution to implement the book
64
entry transfer of the shares subject to the redemption by the method specified by the book entry transfer
institution. The delivery of the shares included in the trust assets shall be made to the Authorised
Participants or the Units Redemption Requester starting from the fourth business day after the date on
which the redemption request is accepted. Business offices, etc. of the Authorised Participants may
process the payment of money.
m. In the event of a circumstance set forth in section “j”, the Authorised Participants shall, when
making redemption request, notify the management company of the circumstance in question by a
method specified separately by the latter.
n. In the event that the notification set forth in item “l” fails to be conducted by the Authorised
Participants at the time of making redemption request, resulting in damage being caused to the trust
assets and other matter, the Authorised Participants that served as redemption request intermediary
shall be held responsible for the damage concerned.
o. If the Authorized Participants determine that it will be difficult for the application that is to
be made by the Authorized Participants or the Units Redemption Requester for the annulment of all
or any part of the book entry transfer Units to be accepted by the deadline designated by the
management company, the Authorized Participants shall immediately notify the management
company and the trustee company to such effect.
p. If the management company, based on the notification in item o., determines that annulment
of all or any part of the book entry transfer Units will not be able to be accepted by the book entry
transfer institution within the period prescribed by the management company as a period in which
there is no likelihood of hindrance being caused to operations that are in line with the “Basic
Investment Policy” prescribed in the Trust Deed, creation applications for or redemptions of trust units,
or any other operations of the trust, the management company may cancel redemption requests that
have already been received from Authorized Participants or Units Redemption Requesters.
q. In the case of item p., if any damage arises to the trust property or otherwise due to the
annulment of the book entry transfer Units not being possible, the Authorized Participants will bear
all liability in respect thereof.
r. After confirming the completion of the annulment from the book entry transfer account of
the book entry transfer Units that are to be annulled by the Authorized Participants or the Units
Redemption Requester, the management company shall deliver shares to the Authorized Participants
or to the Units Redemption Requester via the Authorized Participants.
s. The management company shall deem to have been expired Units equal in number to the
65
book entry transfer Units to be annulled due to redemption on or after the business day immediately
following the date of redemption request, and the trustee company shall confirm that the book entry
transfer Units related to the Units concerned were annulled on the date on which the book entry transfer
of the shares to be transferred.
(C) Purchase of Units (purchase request system)
a. The Authorised Participants shall purchase from the investor its Units as the application
accepted before 3:00 pm of the date of acceptance of purchase request being considered to be the
application made on that date if requested by the investor in the event of any of the following
circumstances; provided, however, that a purchase request to be made in the circumstance mentioned
in item “2” shall be made at least two business days prior to the date of trust termination:
1. Book entry transfer Units less than the minimum number of financial instrument exchange
trading units that has occurred due to an exchange conducted;
2. The Units have been delisted from all exchanges on which they had previously been listed.
b. The applicable purchase price shall be the net asset value per unit as of the date on which
the purchase request is accepted.
c. The Authorised Participants may, when purchasing Units, collect fee obtained by
multiplying the applicable per-unit net asset value by a rate specified separately by itself as well as an
amount equivalent to consumption tax on such fee.
d. In the event of a trading suspension by financial instrument exchange, of suspension of
settlement functions, or any other unavoidable circumstances, the Authorised Participants may
suspend the purchase of Units and cancel the purchase of Units that has been already accepted, based
on consultation with the management company.
e. In the event of a suspension of the purchase of Units, the investor may cancel its Units
purchase request for a given day that was made prior to the purchase suspension; provided, however,
that, in the event of the investor not cancelling its Units purchase request, the purchase price of the
Units concerned shall be deemed to have been calculated according to the aforesaid procedure as if
the purchase request was accepted on the first calculation date of net asset value per unit after the
purchase suspension is lifted.
(D) Redemption at the time of trust termination
a. The management company shall, if the trust concerned is to terminate, deliver to an investor
66
holding Units in integer multiples of one creation unit, book entry transfer Units stated or recorded in
the book entry transfer account register with shares equivalent to the portion of the trust assets held
under the Units concerned as the applicable Units, or alternatively deliver to the unitholder a unit
certificate representing the Units concerned, in exchange for the Units held by the unitholder
concerned.
b. Offices of the Authorised Participant may process the redemption provided in Item a.
c. The value of the Units in respect of redemption provided in Item a. shall be the NAV on five
(5) business days prior to the date of trust termination. In this case, the number of the specific issue of
securities acquired by the investors through the redemption shall be the number of securities in integral
multiples of the exchange trading unit calculated based on the value of such securities on five (5)
business days prior to the date of trust termination.
d. If an investor which is the issuer or otherwise of the stocks constituting in the Index makes
redemption pursuant to Item c., the management company shall give instructions to the trustee to
repurchase the Units in the number of units equivalent to the individual market capitalisation of stocks
of the issuer. The individual market capitalisation in this case shall be the amount by which such stocks
are sold (the amount after deduction of costs necessary for sale) by a reasonable method which is a
discretionary method or similar method after opening on four (4) business days prior to the date of
trust termination.
e. Cash in respect of the Units repurchased in the trust property pursuant to Item d. shall be
paid on the fourth business day after the day on which the individual market capitalisation provided
in the preceding paragraph is fixed.
f. Upon the redemption provided in Item a. the Authorised Participants may charge to the
investors the amount corresponding to the commission set by the Authorised Participants and the
consumption tax, etc. on the commission.
g. The redemption of securities provided in Item a. shall, as a general rule, be performed
starting from the third business day from the business day immediately after the day on which the
trustee confirms that the application for the annulment of the Book-Entry Units for the redemption is
accepted by the book-entry institution.
h. The management company shall treat the Units (including those repurchased by the trust
67
property pursuant to Item d.) in the same number of units of the Book-Entry Units to be annulled as a
result of the redemption as being invalidated, and the management company confirms that the Book-
Entry Units relating to such Units have been annulled on the transfer date of the securities subject to
the redemption.
i. Notwithstanding the provisions of Items a and c, in the case of any of the following events,
the Authorised Participant specified by the management company in respect of the termination of this
trust shall, as a general rule, repurchase any of the following based on the value of the Units at the
time of the termination of the trust:
1. In the case of Item a., Book-Entry Units in the number of units remaining after deducting
the number of units necessary for the redemption of securities from the number of units held
by the investors; and
2. Book-Entry Units of less than one (1) Creation Unit provided in Item a. (including Book-
Entry Units of less than one (1) exchange trading unit).
j. The Authorised Participants provided in Item i may, upon the repurchase pursuant to Item i,
charge the amount corresponding to the commission specified individually by the Authorised
Participants and consumption tax on the commission.
k. The Authorized Participants authorized by the management company in relation to the trust
termination shall request redemption of all Units held thereby. If the shares requested for redemption
include the own shares or the like of such Authorized Participants, the management company shall
instruct the trustee company to sell such shares and the trustee company shall use the trust property to
purchase Units in a number equivalent to the value of such own shares or the like.
3. An outline of asset management
(1) Valuation of assets
<NAV>
The net asset value per unit (the “NAV”) refers to an amount determined by dividing by the number
of Units outstanding as of the calculation date, an amount obtained by subtracting the trust’s total debt
from the total outstanding trust assets (excluding securities pledged as margin collateral and loaned
securities) that are identified based on a mark-to-market valuation performed pursuant to laws and the
regulations of the Investment Trusts Association, Japan (the “Total Net Asset Value”). The NAV
changes daily due to the price fluctuations of securities held in the portfolio.
The net asset value per unit is made available by making inquiry to the relevant Authorised
Participants or calling the management company by telephone. In this Fund, the Net Asset Value
per Unit is indicated on a per 100 Unit basis.
68
BlackRock Japan Co., Ltd.
Telephone number: 03-6703-4110 (service hours: 9:00 to 17:00)
Official corporate website: http://www.blackrock.com/jp/
<Method for the valuation of securities>
Japanese stocks: Japanese stocks are valued in principle at the closing prices recorded at financial
instrument exchanges on the day on which net asset value calculation is made.
(2) Storage
Not applicable
(3) Trust period
The trust period of the Fund shall be indefinite; provided, however, that if any of the Fund’s premature
redemption clauses applies, the management company may terminate the Trust Deed and close the
trust.
(4) Financial period
The Fund’s financial period shall in principle be the period from February 10 to August 9 of each year,
and from August 10 of each year to February 9 of the following year; provided, however, that the first
financial period shall be the period from the date of conclusion of the Trust Deed to August 9, 2016,
and the last day of the final accounting period shall be the date on which the trust period ends as
provided for in section (3) above titled “Trust period.”
(5) Others
(A) Termination of Trust Deed
a. In the event that the number of the Units becomes less than 500,000 units after the day that
is three (3) years from the date of conclusion of the Trust Deed, the management company deeming
closing the trust to be in the interest of the unitholder, or of any unavoidable circumstance occurring
during the trust term, the management company may terminate the Trust Deed and close the trust upon
reaching agreement with the trustee company. In that case, the management company shall notify, in
advance, the regulatory authority of its intention to terminate the Trust Deed.
b. In the event of any of the following events occurring, the management company shall
terminate the Trust Deed and close the trust upon reaching agreement with the trustee company. In
such event, the management company shall notify, in advance, the regulatory authority of its intention
69
to terminate the Trust Deed.
1. When delisted from all Financial Instruments Exchanges on which the Units s were listed;
2. When the Index is terminated; or
3. When the amendment to the Trust Deed associated with changes in the calculation method
of the Index or other changes is denied by a written resolution.
If the Trust Deed is terminated for reasons provided in Item 1 above, the procedures for termination
of this trust shall be commenced on such delisting date.
c. With regard to the circumstances mentioned in item “a”, the management company will
make a resolution in writing (the “written resolution”). In that case, the management company will
determine in advance the date of the written resolution, the reason for redemption of the Fund and
other related matters and will give a notice in writing of the written resolution stating those matters to
known investors relating to the Trust Deed at least two (2) weeks before the date of the resolution.
d. In making the written resolution provided for in item “c”, investors (excluding the
management company as investor with respect to the unit in this trust when such unit belongs to the
management company and trust property of this trust; the same applies hereinafter in this item “d”)
have voting rights corresponding to the number of units held and are entitled to exercise such rights.
If any known investors do not exercise their voting rights, such known investors will be deemed to be
in favor of the written resolution.
e. The written resolution provided for in item “c” will be voted on by a majority of the investors
who are entitled to exercise voting rights and will be passed by two-thirds or more of the voting rights
held by such investors.
f. The provisions of items “c” through “e” will not apply when all investors with respect to the
Trust Deed express, in writing or by electromagnetic record, their intention to consent to the
management company’s proposal for redemption of the Fund. Additionally, in light of the state of the
trust property, the provisions shall not apply, if a truly unavoidable circumstance arises and there is
difficulty in taking measures set out in items “c” through “e”.
g. The regulatory authority’s order relating to the Trust Deed
In the event of the management company being ordered by the regulatory authority to terminate
the Trust Deed and close the trust pursuant to the order.
h. The procedure to be taken in response to an annulment of the management company’s
70
registration
In the event that the registration of the management company is annulled by the regulatory
authority, the management company is dissolved, or its operations are abolished, the
management company shall terminate the Trust Deed and close the trust; provided, however, that,
if the regulatory authority has ordered the management company to hand over its operations
related to the Trust Deed concerned to other investment trust management company, the trust
concerned shall continue to exist between the investment trust management company and the
trustee company with the exception of cases where a written resolution mentioned in item “d” of
section (B) titled “Amendment of the Trust Deed” is denied.
i. The procedure to be taken in response to the resignation or dismissal of the trustee company
(a) The trustee company may resign from its duties by obtaining consent of the management
company. In the event of the trustee company failing to perform its duties, or of any other
significant circumstance, the management company or the trustee company may file a petition to
the court requesting the dismissal of the trustee company.
(b) In the event that the trustee company resigns from its duties by obtaining consent of the
management company, or it is dismissed by the court, and that the management company is unable
to appoint a new trustee company, it shall terminate the Trust Deed concerned and close the trust.
(B) Amendment of the Trust Deed
a. The management company may amend the Trust Deed or merge this trust with another
trust (which means the “merger of investment trusts with instruction by the management company”
defined in Item 2 of Article 16 of the Act Concerning Investment Trusts and Investment
Companies; the same applies hereinafter) upon reaching agreement with the trustee company if
doing so is deemed by the former to be necessary for the benefit of investors, or if any unavoidable
circumstance has occurred. The management company shall, prior to doing so, notify the
regulatory authority to that effect and of details of the amendment of the trust agreement or the
merger. The Trust Deed may not be amended in any way other than the way provided below.
b. With respect to matters mentioned in item “a” (including cases where the contents are
material in cases of amendment and excluding cases where the merger has a minor effect on the
interests of the unitholders; collectively, “material amendment to the Trust Deed, etc.”), the
management company will make resolutions in writing. In such case, the management company
will determine in advance the date of the written resolution, the details of and reason for the
71
material amendment to the Trust Deed etc. and other related matters and will give a notice in
writing of the written resolution stating those matters to the known investors relating to the Trust
Deed at least two (2) weeks before the date of the resolution.
c. In making the written resolution provided for in item “b”, investors (excluding the
management company as investor with respect to the unit in this trust when such unit belongs to
the management company and trust property of this trust; the same applies hereinafter in this item)
have voting rights corresponding to the number of units held and are entitled to exercise such
rights. If any known investors do not exercise their voting rights, such known investors will be
deemed to be in favor of the written resolution.
d. The written resolution provided for in item “b” will be passed by two-thirds or more of
the voting rights held by the investors who are entitled to exercise voting rights.
e. A written resolution will take effect on all investors of this trust.
f. The provisions of items “b” through “e” will not apply when all investors with respect to the
Trust Deed express, in writing or by electromagnetic record, their intention to consent to the
management company’s proposal for material amendment to the Trust Deed, etc.
g. Notwithstanding the provisions of the preceding paragraphs, even if a written resolution for
a merger is passed on this trust, this trust cannot be merged with other trusts if a written resolution for
the merger is rejected at one or more of such other trusts.
h. The management company shall comply with the provisions set out in items “a” through
“f” upon amendment to the Trust Deed as ordered by the regulatory authority.
(C) Purchase request right of objector
In cases where the management company terminates the Trust Deed or makes a material
amendment to the Trust Deed, etc., any investor having lodged an objection to such termination
or material amendment to the Trust Deed, etc. in a written resolution may request the trustee
company to use the trust assets to purchase the Units belonging to the unitholder. The details of
the right to redemption and matters relating to procedures for redemption claim will be noted in
the section titled “(A) Termination of Trust Deed, item c or (B) Change to the terms and conditions
of the Trust Deed, b.”
72
(D) Public notice
Public announcements made by the management company to the investors will be posted on the
website shown below by means of electronic notice.
www.blackrock.com/jp/
However, if public announcements by such means cannot be made, public announcements will be
published in Nihon Keizai Shimbun.
(E) Renewal of agreement with related company
The effective term of the “Securities Investment Trust Deed” between an entity and the trustee
company is a period until the date on which the trust stipulated in the terms and conditions of the
Trust Deed terminates; provided, however, that, if necessary, part of the agreement may be changed
during the effective term of the agreement.
The “Authorised Participant Agreement” may be cancelled without prior notification or notice if any
of the events set out in such agreement occurs with respect to the Authorised Participant or the
management company.
Since the effective term of the “delegation agreement for securities lending instructions in respect of
trust assets” has not been specified in particular, one party to such agreement may terminate the
agreement at any time by giving a prior written notice to the other party (in case of a securities lending
agent, a 30-day prior written notice is required).
(F) Reentrustment of trust administrative and clerical operations
The trustee company has entered into a reentrustment agreement with The Master Trust Bank of
Japan, Ltd., under which the former has entrusted part of its trust administrative and clerical
operations to the latter.
(G) Preparation of management report
The Fund will not prepare or deliver any management reports.
4. Rights of unitholders
Shown below are the principal rights held by investors (unitholders):
(A) The right to request profit distribution payment and the registration of name
a. The recipient of profit distribution as of the last day of a given calculation period shall be
any unitholder whose personal name or entity name and address or location and individual number
(meaning the individual number provided for in Article 2, Paragraph 5 of the Act on the Use of
Numbers to Identify a Specific Individual in Administrative Procedures; the same hereinafter) or
corporate registration number (meaning the corporate registration number provided for in Article 2,
73
Paragraph 15 of the same Act, or personal name or entity name and address or location in the case of
a unitholder who does not have an individual number or a corporate registration number or who
receives income distribution via a person in charge of handling payment as provided for in Paragraph
1 of Article 9-3-2 of the Act on Special Measures Concerning Taxation) or any other information
prescribed by the trustee company (such information, the “Investor (Unitholder) Information”) is
registered with the trustee company as of the last day of such calculation period (a “Registered
Unitholder”*), and profit distribution shall be paid to such Registered Unitholder. In that event, even
if the Registered Unitholder differs from a Unitholder as of the last day of the financial period
concerned, the management company and the trustee company shall neither be under the obligation
to pay profit distribution to such Unitholder, nor be held responsible for any damage caused to the
Unitholder concerned.
*The management company shall prepare the register of unitholders in relation to this trust, and
register the Investor (Unitholder) Information in the register of unitholders with respect to the
investors.
The management company shall register the Investor (Unitholder) Information of the person to
which the Units belong and who receives notice from the Book-entry Institution pursuant to the
relevant laws and ordinances such as the Book-Entry Transfer Law and other various regulations
as the investors of the Units stated or recorded on the book-entry account of the Book-entry
Institution. The management company may execute a delegation agreement with the person
determined by the management company to be appropriate such as other securities agent
companies, and delegate such person to prepare the register of unitholders and make the registration
in the register of unitholders.
b. An investor shall in principle conduct such registration as is provided for in item “a” by
way of requesting a member of the financial instrument exchange on which the Units of the trust
concerned are listed (such exchange members are limited to account management institutions; the
same hereinafter) to register the name of the investor in the register of unitholders. In such event, the
exchange member may collect commission separately stipulated by the former and an amount
equivalent to consumption tax on the commission; provided, however, that securities finance
companies, etc. may conduct such registration as is provided for in item “a” with the trustee company
directly on its own (or, if the trustee company has delegated the preparation of the register of
unitholders as provided for in item a., with such delegated person).
c. The name registration procedures provided for in item b. shall be suspended for a period
of 15 days starting from the day immediately following the last day of each accounting period of the Fund. If the Fund terminates, the registration shall be suspended for a period of 5 business days
74
immediately prior to the date of trust termination.
d. The name registration procedure for the Units stated or recorded in the book transfer
account register of book transfer institution pursuant to the Book-Entry Transfer Law and other
applicable laws and regulations shall be governed by provisions prescribed separately.
e. The payment of profit distribution shall in principle be made from the day specified by the
management company, which falls within forty (40) days from the completion of every accounting
period, by depositing the income distribution payment in the deposit account, etc. specified in
advance by the Registered Unitholder. If the Registered Unitholder separately executes an agreement
regarding handling of the profit distribution with a member provided in item “b”, the profit
distribution shall be paid pursuant to such agreement.
f. The trustee may delegate the person delegated to prepare the register of unitholders to pay
profit distribution.
g. The trustee shall, if holding an unpaid balance of profit distributions after the passage of
five years from the payment commencement date, deliver the amount concerned to the management
company.
h. The trustee shall, subsequent to delivering profit distribution to the management company
as set forth in item “g” above, be under no obligation to pay the profit distribution to the investors
related to such delivery.
i. Any investor not requesting the payment of profit distribution for a period of five years
from the applicable payment commencement date shall forfeit its right to the profit distribution, and
any money received by the management company from the trustee company shall belong to the
management company.
(B) Right to redeem Units for shares belonging to the trust assets
An investor may request a redemption of a certain number or more of its Units for shares equivalent
to its interest that belong the trust assets.
(C) Right to request the purchase of Units
In the event that the total number of Units held by an investor falls short of minimum Units trading
unit prescribed by financial instrument exchange, the investor may request the Authorised
Participants to purchase such Units from the former.
75
(D) Right to request the redemption and right to request the purchase upon trust termination
Upon the termination of the trust, an investor has the right to request the redemption and the right to
request the purchase in proportion to its interest.
If the investor fails to request delivery of securities and money subject to redemption upon the trust
termination for a period of 10 years from the date of trust termination, or to request delivery of
purchase price for a period of 10 years from the payment commencement date, it shall forfeit its
relevant rights.
(E) Right to request to inspect or copy books and documents
The investor may make a request to the management company to inspect or copy books and
documents relating to the trust property of the Fund within the business hours of the management
company.
76
Section 3. Status of Accounting of the Fund
(1) The financial statements of this Fund have been prepared in accordance with the Ordinance on
Terminology, Forms and Preparation Methods of Interim Financial Statements, etc. (Ministry of
Finance Ordinance No.59 of 1963) and the Ordinance on Accountings of Investment Trust Property
(Ordinance of the Prime Minister’s Office No. 133 of 2000), as required under the provisions of Article
2-2 of the said Ordinance on Terminology, Forms and Preparation Methods of Financial Statements,
etc.
The amounts contained in the interim financial statements are presented in yen.
(2) Since the Fund was newly set up on October 19, 2015, this specified period is from October 19,
2015 to August 9, 2016.
(3) Pursuant to the provisions of Article 193-2, paragraph (1) of the Financial Instruments and
Exchange Act, the Fund has undertaken an audit of financial statements for the 1st fiscal period (from
October 19, 2015 to August 9, 2016) by PricewaterhouseCoopers Aarata.
77
1. Financial Statements
iShares MSCI Japan High Dividend ETF
(1) Balance Sheet
(Unit: yen)
End of 1st period
(as of August 9, 2016)
Assets
Current assets
Money trust 48,418,283
Stocks 14,099,357,800
Derivative evaluation account 4,475,035
Account receivable 103,277,101
Accrued dividend receivable 56,449,600
Customers’ margin 3,978,001
Total current assets 14,315,955,820
Total assets 14,315,955,820
Liabilities
Current liabilities
Accrued liability 3,595,252
Accrued dividend payable 117,625,074
Trustee fee payable 880,428
Investment trust management fee payable 5,811,039
Other accrued expenses 1,751,496
Total current liabilities 129,663,289
Total liabilities 129,663,289
Net assets
Principal and other
Principal 15,350,072,157
Surplus
Surplus (deficit) at the end of the period (1,163,779,626)
(Reserve for distribution) 6,237,324
Total principal and other 14,186,292,531
Total net assets of the Fund 14,186,292,531
Total liabilities and net assets 14,315,955,820
78
(2) Statement of Income and Retained Earnings
(Unit: yen)
1st period
(From October 19, 2015 to
August 9, 2016)
Operating revenue
Dividends income 135,946,720
Interest income 8
Profit and loss on buying and selling of
securities and other 176,406,123
Profit and loss on dealing of derivatives (2,878,076)
Other revenue 48,840
Total operating revenue 309,523,615
Operating expenses
Trustee fee 1,243,694
Investment trust management fee 8,208,916
Other expenses 2,680,560
Total operating expenses 12,133,170
Operating income (loss) 297,390,445
Ordinary income (loss) 297,390,445
Net income (loss) 297,390,445
Surplus (deficit) at the beginning of the period －
Increase in surplus or decrease in deficit 150,155,003
Increase in surplus or decrease in deficit from
partial exchange for the period 150,155,003
Decrease in surplus or increase in deficit 1,493,700,000
Decrease in surplus or increase in deficit from
additional subscriptions for the period 1,493,700,000
Dividends 117,625,074
Surplus (deficit) at the end of the period (1,163,779,626)
79
(3) List of Explanatory Notes
(Notes Concerning Matters Pertaining to Significant Accounting Policies)
1. Valuation Basis and Method for Securities
Stocks are generally stated at market value using the moving average method in the following manner:
(i) Securities listed on financial instruments exchange, etc.
Securities listed on financial instruments exchange, etc. are generally stated at the most recently
available closing price on the said exchange, etc. at the end of the period.
(ii) Securities not listed on financial instruments exchange, etc.
Such securities are generally stated at the price quoted either by financial institutions or market price
data providers.
(iii) Securities whose market value was not available
In cases where appropriate valuation was not available or where there are grounds to believe that the
assessed valuation does not reflect market value, they are stated at the price which the investment trust
management company reasonably in good faith believes reflects market value, or at the price which,
in consultation with the trustee, both parties reasonably believe reflects market value.
2. Valuation Basis and Method for Derivatives
Stock price index futures trading
They are generally stated at market value using the specific identification method. For the
determination of market value, in principle, the settlement price announced by the relevant exchange
or the closing price on the nearest available date to the end of the period is used.
3. Recognition of Revenues and Expenses
(i) Recognition of dividend income
Dividend income is generally recognized on the ex-dividend date for the prospective dividend amount.
Difference with the amount received is recognized when the dividend is received.
(ii) Recognition of profit and loss on buying and selling of securities and other, and profit and loss
on dealing of derivatives
They are recognized on a contract date basis.
(Notes to Balance Sheet)
Category End of 1st period
(as of August 9, 2016)
1 Total number of units of beneficial
interests at the end of the period 8,401,791 units
2 Amount prescribed in Article 55-6,
Item 10 of the Ordinance on
Accountings of Investment Trust
Property
Loss of principal
1,163,779,626 yen
3 Net assets per unit 1,688.48 yen
80
(Notes to Statement of Income and Retained Earnings)
(Notes to Statement of Income and Retained Earnings)
Category 1st fiscal period
(From October 19, 2015 to August 9, 2016)
Dividend
calculation
process
A. Dividends income and other revenue for the period 135,995,568 yen
B. Reserve for distribution － yen
C. Total dividends income and other revenue (A + B) 135,995,568 yen
D. Expenses 12,133,170 yen
E. Distributable amount from the revenue (C - D) 123,862,398 yen
F. Dividends 117,625,074 yen
G. Balance carried forward (reserve for distribution) (E - F) 6,237,324 yen
H. Number of units 8,401,791 units
I. Dividend per unit (F / H × number of units used in calculation) 14 yen
(Notes on Financial Instruments)
I Matters concerning Status of Financial Instruments
1. Policy for financial instruments
The Fund is a securities investment trust as defined in Article 2, paragraph (4) of the Act on Investment
Trusts and Investment Corporations; and its purpose is to invest in security financial instruments in
accordance with the “basic policy for investment” prescribed in the terms and conditions of the
investment trust.
2. Nature and risk of financial instruments
Financial instruments held by the Fund are securities, derivative transactions, monetary claims such
as call loans, and monetary liabilities. Securities held by the Fund are stocks.
Principal investment risks of the Fund include the “risk of investing in domestic stocks” and the “risk
associated with the loan, etc. of securities.”
The Fund uses derivative transactions, namely stock price index futures trading, for the purposes of
hedging against the risk of changes in the prices of securities, and effective investment of trust property.
The main risk associated with stock price index futures trading is the risk of price changes caused by
fluctuations in stock prices.
3. Risk management structure for financial instruments
(i) Management of market risk
The BlackRock Solution Green Package Production Team measures the risk on a daily basis, and
81
delivers its reports via the intranet to the Investment Division and other relevant departments. In
addition, the Portfolio Compliance Team monitors compliance with the investment guidelines; and if
any violations of the guidelines, etc. are found, such violations are reported to the relevant departments
and appropriate corrective measures are taken.
(ii) Management of credit risk
The Fundamental Bond Investment Division performs its original quantitative and qualitative analyses,
etc. on individual credit risks of domestic bonds and relative values between issues. For foreign bond
issues, etc., information and analysis results are shared with the Global Credit Team through the in-
company research database.
(iii) Management of counterparty risk
The Risk and Quantitative Analysis Division, together with the RQA Counterparty & Concentration
Risk Team of BlackRock, Inc., the parent company in the U.S., conducts monitoring for credit
deterioration of existing approved counterparties, and analyze the impact of counterparty and issuers’
risks of default on the Fund. For the approval of new counterparties, the Risk and Quantitative Analysis
Division first checks the approval applications for new counterparty to see if there are no problems,
and then sends the applications to the RQA Counterparty & Concentration Risk Team of BlackRock,
Inc., the parent company in the U.S.
In addition, the Investment Committee, which meets monthly, deliberates on matters such as risk
management and investment analysis methods.
II. Matters concerning Market Value, etc. of Financial Instruments
End of 1st fiscal period
(as of August 9, 2016)
1. Balance sheet amount, market value and difference
Balance sheet amounts of financial instruments are generally stated at their market
value; and therefore there are no differences between the balance sheet amounts and
market values.
2. Method for determining market value
(1) Securities
Described in the section of “(Notes Concerning Matters Pertaining to Significant
Accounting Policies).”
(2) Derivative transactions
For derivative transactions, described in the section of “3 Derivative Transactions”
under “(Other Notes).”
(3) Monetary claims such as call loans, and monetary liabilities
Market value of these items is considered to approximate the book value due to the
short term of settlement period; therefore they are stated at their book value.
3. Supplementary explanations on matters concerning market value, etc. of financial
instruments
Market values of financial instruments, in addition to those based on market price,
82
include those that are reasonably estimated in cases where market price is not
available. These estimated values are based on certain assumptions, etc., and
therefore they may vary according to differently employed assumptions, etc.
Contract amounts, etc. of derivative transactions are merely indications of the
nominal contract amounts of the derivative transactions or the nominal principal
amounts for calculation purposes only, and the amounts in themselves are not
indicative of the magnitude of risk associated with the derivative transactions.
4. Amount of redemption scheduled to be due after the end date of the period for
monetary claims
All monetary claims are scheduled to be redeemed within one year.
(Notes on Transactions with Related Parties)
Not applicable.
(Other Notes)
1 Changes in the Amount of Principal during the Period
Item End of 1st period
(as of August 9, 2016)
Amount of principal at the establishment 548,100,000 yen
Amount of principal invested during the
period
18,087,300,000 yen
Amount of principal partially exchanged
during the period
3,285,327,843 yen
2 Securities
Securities available for sale/purchase
Class
1st fiscal period
(as of August 9, 2016)
Valuation difference recognized in profit or loss during the period
(yen)
Stock 73,775,669
Total 73,775,669
83
3 Derivative Transactions
Matters concerning market value of derivative transactions
Stock-related matters
Cat
egory
Class
End of 1st period (as of August 9, 2016)
Contract amounts, etc. (yen)
Market Values
(yen)
Valuation gain
or loss (yen)
of which, those
exceeding one
year term (Yen)
Mar
ket
tra
din
g Stock price
index
futures
trading
70,559,248 － 75,040,500 4,481,252
Buying
position
Total 70,559,248 － 75,040,500 4,481,252
(Note 1) Method for determining market value
(1) Market value of stock price index futures trading is determined in the following manner:
In principle, for the determination of market value, the settlement price or the standard price for margin
calculation announced by the main exchange on the nearest available date to the end of the period is
used. If such prices are not available, the valuation is performed in a manner consistent with the
principle, using such information as the closing price or indicative price on the nearest available date
to the end of the period.
(2) Outstanding balance of stock price index futures trading is presented on a contract amount basis.
(3) Contract amounts, etc. do not include the amount corresponding to fees.
(Note 2) Hedge accounting is not applied to any of the above transactions.
84
Part 1 Schedules of Securities
(i) Stocks
(Unit: yen)
Issue Number of
shares
Value Note
Unit price Amount
DAITO TRUST CONSTRUCTION CO.,LTD. 22,200 16,675.00 370,185,000
Sekisui House,Ltd. 187,700 1,684.00 316,086,800
Lawson,Inc. 20,300 7,590.00 154,077,000
JAPAN TOBACCO INC. 157,800 3,996.00 630,568,800
KURARAY CO.,LTD. 110,600 1,398.00 154,618,800
ASAHI KASEI CORPORATION 393,000 822.90 323,399,700
JSR CORPORATION 59,400 1,459.00 86,664,600
Hitachi Chemical Company,Ltd. 32,500 2,095.00 68,087,500
Mitsubishi Tanabe Pharma Corporation 70,000 1,947.00 136,290,000
DAIICHI SANKYO COMPANY,LIMITED 187,600 2,390.00 448,364,000
Trend Micro Incorporated 35,000 3,760.00 131,600,000
KONICA MINOLTA,INC. 141,000 898.00 126,618,000
The Yokohama Rubber Company,Limited 35,000 1,473.00 51,555,000
BRIDGESTONE CORPORATION 189,100 3,616.00 683,785,600
Sumitomo Rubber Industries,Ltd. 54,100 1,480.00 80,068,000
Mitsubishi Materials Corporation 349,000 270.00 94,230,000
AMADA HOLDINGS CO.,LTD. 106,100 1,071.00 113,633,100
KOMATSU LTD. 287,600 2,171.00 624,379,600
SUMITOMO HEAVY INDUSTRIES,LTD. 171,000 487.00 83,277,000
BROTHER INDUSTRIES,LTD. 73,500 1,517.00 111,499,500
THK CO.,LTD. 36,400 2,028.00 73,819,200
DENSO CORPORATION 151,400 4,097.00 620,285,800
FANUC CORPORATION 43,600 17,420.00 759,512,000
NISSAN MOTOR CO.,LTD. 683,600 1,012.50 692,145,000
TOYOTA MOTOR CORPORATION 128,900 6,011.00 774,817,900
HINO MOTORS,LTD. 80,500 1,067.00 85,893,500
AISIN SEIKI CO.,LTD. 59,600 4,795.00 285,782,000
HONDA MOTOR CO.,LTD. 240,200 2,992.00 718,678,400
Fuji Heavy Industries Ltd. 182,100 3,858.00 702,541,800
TOYODA GOSEI CO.,LTD. 20,300 2,166.00 43,969,800
CANON INC. 229,700 2,923.50 671,527,950
ITOCHU Corporation 465,500 1,213.00 564,651,500
Marubeni Corporation 513,500 500.10 256,801,350
MITSUI & CO.,LTD. 531,300 1,303.00 692,283,900
Tokyo Electron Limited 48,900 8,642.00 422,593,800
Aozora Bank,Ltd. 368,000 348.00 128,064,000
Sony Financial Holdings Inc. 53,800 1,449.00 77,956,200
T&D Holdings, Inc. 180,800 1,113.50 201,320,800
Japan Airlines Co.,Ltd. 37,100 3,103.00 115,121,300
NIPPON TELEGRAPH AND TELEPHONE CORPORATION 148,900 4,854.00 722,760,600
NTT DOCOMO,INC. 263,000 2,661.00 699,843,000
Total 7,149,600 14,099,357,800
85
(ii) Non-stock Securities
Not applicable.
Part 2 Schedule of Margin Contracts Outstanding
Not applicable.
Part 3 Status Table of Contract Amounts, etc. and Market Values of Derivative Transactions and
Forward Foreign Exchange Contract Transactions
Relevant matters are described in the notes on Derivative Transactions.
86
2. Current Status of the Fund
iShares MSCI Japan High Dividend ETF (as of the end of August, 2016)
Statement of Net Assets
I Total assets 14,618,327,341 yen
II Total liabilities 155,460,148 yen
III Total net assets (I-II) 14,462,867,193 yen
IV Number of units issued 8,401,791 units
V Net assets per unit (III/IV) 1,721.40 yen
87
Section 4. Outline of Unit Certificate of Domestic Investment Trust Work
(1) Name Change of Unit Certificate, etc.
N/A
Attribution of the Units of the Fund is determined by listing or registering on the Book-Entry
Account Book with the Book-Entry Institution and no unit certificates representing such Book-
Entry Units will be issued, except for the cases that the Book-Entry Institution that treats the Units
of this Fund gets the designation by the competent minister revoked in accordance with provisions
of the Book-Entry Transfer Law or such designation becomes invalid and there is no one to succeed
the book-entry work of such Book-Entry Institution or under other unavoidable circumstances.
Investors shall not demand the change from a blank unit certificate to nominative one, the change
from a nominative unit certificate to blank one and the reissuance of a unit certificate, except for
the cases that the management company issues the unit certificates under unavoidable
circumstances, etc.
(2)Investors’ Privilege
N/A
(3)Transfer of Units
(a) When an investor transfers the Units in possession, it shall apply the book-entry with the Book-
Entry Institution, etc. involved in the Book-Entry Account Book listing or recording the Units that
such investor intends to transfer.
(b) When the application mentioned in (a) above is made, the Book-Entry Institution, etc. mentioned
in (a) above shall list or record the decrease in the shares of Units in the possession of the transferor
involved in the transfer and the increase in the shares of Units in the possession of the transferee
involved in the transfer on the Book-Entry Account Book in its possession. When, however, the
Book-Entry Institution, etc. mentioned in (a) above is not the institution that opens the account to
which the transfer is made, it shall notify the transfer to the other Book-Entry Institution, etc.
(including a superagency of the other Book-Entry Institution, etc.) that opens the account of the
transferee, to which the transfer is made, so that the increase in the shares of Units can be listed or
recorded on the account of the transferee, to which the transfer is made, in accordance with
provisions of the Book-Entry Transfer Law.
(c) With regard to the book-entry mentioned in (a) above, in the case that the Book-Entry Institution,
etc. involved in the Book-Entry Account Book listing or recording the Units that such investor
88
intends to transfer is different from the Book-Entry Institution, etc. that opens the account to which
the transfer is made and when the management company acknowledge the necessity or judges that
there are unavoidable circumstances, the management company may set a day or period when the
book-entry is prohibited.
(4) Perfection Requirements of Units
The transfer of the Units may not be asserted against the management company or the trustee
company unless it is listed or recorded on the Book-Entry Account Book.
(5) Re-split of Units
The management company may not re-split the Units. However, when a law concerning the book-
entry of corporate bonds, shares, etc. is implemented, the management company may re-split
equally the Units at a certain point of time, upon consultation with the trustee company and in
accordance with the law.
(6) Redemption upon Termination of Trust
Stocks to be exchanged with the Units will be delivered to the investor who is listed or recorded
on the Book-Entry Account Book with the Book-Entry Institution on the termination date (except
for the investor involved in the Units, redemption of which is recorded on trust asset on or before
the termination date).
(7) On Treatment of Units Listed or Recorded as Pledged
Payment of dividends, acceptance of the request for redemption, delivery of stocks exchanged and
exchange of shares upon termination of the trust, etc. of the Units listed or recorded as pledged on
the Book-Entry Account Book with the Book-Entry Institution, etc. shall be treated in accordance
with civil code and other laws and regulations, as well as provisions of covenants.
89
Part III. Information on Management Company
Section 1. Outline of the management Company
1. Outline of the management company
(1) Capital Amount, etc.
(a) Paid-in Capital: 2,435,000,000 yen
(b) The total number of shares to be issued: 36,000 shares
(c) The total number of issued shares: 10,158 shares
(d) Increase or decrease in the capital amount in last five years:
N/A
(2) Organisation of Management Company
(a) Decision-making Organisation on Management
(Shareholders’ general meeting)
As the company’s supreme decision-making organisation consisting of shareholders, this
organisation makes decision on important matters including the election of directors, approval
of disposal of profit, change in the articles of incorporation in accordance with Companies
Act and provisions of the articles of incorporation.
(Board of directors)
Consisting of directors, this organisation makes decision on the execution of operations of the
company and supervises the execution.
(Executive committee and other committees)
In order to establish an appropriate management strategy, a system to perform operations and
to improve business operation of the company, the executive committee is established, and in
order to improve effective operation of businesses and to establish the responsibility system,
other committees are established.
(b) Decision-making organisation on operations
(Investment committee)
90
The investment committee discusses on the investment policy regarding operations and
important matters regarding the performance and risk management.
(Divisions in charge of operations)
Each operational division prepares each operation plan of funds and operates it through the
investment process of each division in accordance with the decision of the investment
committee.
(Portfolio manager)
The portfolio manager selects individual issues and gives directions on the trading in
accordance with the established operation plan.
(Risk management)
The management company emphasises the risk management and manages risks using the
system that was developed independently by the company. To be more specific, the other
division than those in charge of operations confirms that the investment risks of funds are in
line with the operation policy, by measuring and analyzing the investment risks of funds, and
monitoring the investment restriction, and shares the result with persons concerned in the
company, as well as feeds back the result to operational divisions. Risks concerning the
management company businesses are managed by establishing the company’s regulations.
2. Contents of Businesses and Outline of Operations
The management company, as an investment trust management company stipulated by Act on
Investment Trust and Investment Companies, creates a securities investment trust and operate it
(investment operation business) as a financial instruments business firm set forth in Financial
Instruments and Exchange Act. And the management company is engaged in the investment
advisory business, the type I financial instruments business and type II financial instruments
business set forth in Financial Instruments and Exchange Act.
The securities investment trusts that the management company operates at the end of August 2016
are as follows:
Type Number of trusts Total net asset value
Public offering
investment trust
Additional type investment trust 63 596,692 million yen
Unit type investment trust 0 0 million yen
Private offering investment trust 66 3,650,981 million yen
Total 129 4,247,673 million yen
91
3. Financial conditions of entrusting company, etc.
1. Preparation of the financial statements
The financial statements of the entrusting company, BlackRock Japan Co., Ltd. (hereinafter, referred
to as “the Company”) have been prepared, being pursuant to the Article 2 of “The Terminology, Forms
and Methods for Preparation of Financial Statements” (Ministry of Finance Ordinance No. 59 enacted
in 1963) and “Cabinet Office Ordinance to Financial Instruments Business etc.” (Cabinet Office
Ordinance No.52 enacted on August 6, 2007).
2. Audit and attestation
The Company was audited by Deloitte Touche Tohmatsu LLC on its financial statements for the 29th
term fiscal year covering the period from January 1, 2015 to December 31, 2015 in pursuant to the
rule stated in the Paragraph 1 of Article 193-2 of the Financial Instruments and Exchange Act.
3. Amounts reported in the financial statements are described by discarding fractions less than one
million yen.
4. Pursuant to Article 319, Paragraph 1 of the Company Law, a partial change to the Articles of
Incorporation was resolved in writing at the Extraordinary General Meeting of Stockholders held on
November 18, 2014 and the fiscal year-end of the Company was changed from March 31 to
December 31.
Accordingly, the previous fiscal year under review is the nine-month period from April 1, 2014 to
December 31, 2014.
92
(1)Balance Sheet
(Unit: Millions of Yen)
28th Term,
as of December 31, 2014
29th Term,
as of December 31, 2015
Assets
Current Assets Cash and deposits 10,971 14,514
Payment in advance 18 6
Prepaid expenses 121 146
Accounts receivable * 2 208 207
Uncollected management company’s fees 1,102 1,077
Uncollected fund management fees 2,606 2,742
Accrued income * 2 852 1,467
Deferred tax assets 948 882
Short-term loans to affiliated companies * 2 － 130
Other current assets 3 4
Total current assets 16,833 21,179
Fixed assets
Tangible fixed assets
Building equipment * 1 1,391 1,223
Appliances and fixtures * 1 346 292
Total tangible fixed assets 1,738 1,515
Intangible fixed assets
Computer Software 1 0
Goodwill 685 154
Client relationships 230 －
Total intangible fixed assets 916 155
Investments and other assets
Long-term guarantee deposited 980 967
Prepaid pension expenses 315 409
Long-term prepaid expenses 27 17
Deferred tax assets － 9
Investments and other assets 1,323 1,404
Total fixed assets 3,978 3,075
Total Assets 20,811 24,255
93
(Unit: Millions of Yen)
28th Term,
as of December 31, 2014
29th Term,
as of December 31, 2015
Liabilities
Current liabilities Deposits 159 80
Accounts payable * 2
Distribution of income payable 2 3
Redemption money payable 75 75
Commission payable 386 346
Other accounts payable 88 947
Accrued expenses * 2 1,246 1,091
Accrued consumption taxes 204 238
Accrued income taxes 1,001 561
Reserve for bonus 1,761 1,875
Asset retirement obligations 42 －
Reserve for directors’ bonus 98 150
Reserve for early retirement benefits 36 7
Total current liabilities 5,104 5,377
Fixed liabilities
Reserve for retirement benefits 51 53
Asset retirement obligations 250 254
Deferred tax liabilities 17 －
Total fixed liabilities 320 308
Total liabilities 5,425 5,685
Net assets
Stockholders’ equity
Capital 2,435 2,435
Capital surplus
Capital reserve 2,316 2,316
Other capital surplus 3,846 3,846
Total capital surplus 6,162 6,162
Accumulated profit
Profit reserve 336 336
Other accumulated profit
Accumulated profit carried forward 6,452 9,634
Total accumulated profit 6,788 9,971
Total stockholders’ equity 15,386 18,569
Valuation and translation adjustment
Valuation and translation adjustment in
other investments － －
Total valuation and translation
adjustment － －
Total net assets 15,386 18,569
Total Liabilities and Net Assets 20,811 24,255
94
(2)Income Statement
(Unit: Millions of Yen)
28th Term
(From April 1, 2014 to
December 31, 2014)
29th Term
(From January 1, 2015
to December 31, 2015)
Operating revenues Management company fees 3,449 4,339
Fund management fees * 1 5,762 10,063
Other operating revenues * 1 6,135 9,911
Total operating revenues 15,347 24,315
Operating expenses
Commission 1,167 1,478
Advertisement 356 262
Investigation expenses
Investigation 256 398
Investigation by entrustment * 1 2,678 4,371
Total investigation expenses 2,934 4,770
Calculation expense by entrustment 76 124
Operating miscellaneous expenses
Communication 56 61
Printing 58 74
Meetings 22 27
Total operating miscellaneous expenses 136 163
Total operating expenses 4,672 6,799
General and administrative expenses
Salaries
Directors’ remuneration 262 548
Salaries and allowances 2,665 3,631
Bonus 1,355 2,231
Total salaries 4,282 6,411
Retirement benefits 185 227
Welfare 531 731
Office expenses for entrustment * 1 1,007 1,954
Entertainment 37 54
Contribution 5 5
Travel and transportation 163 208
Taxation and other public dues 92 107
Rent on real estate 583 735
Utility 75 75
Depreciation for fixed assets 186 214
Amortization of goodwill 516 530
Amortization of client relationships 230 230
Interest expense for asset retirement obligations 2 3
Miscellaneous expenses 286 376
Total general and administrative expenses 8,187 11,869
Operating income 2,486 5,645
95
(Unit: Millions of Yen)
28th Term
(From April 1, 2014 to
December 31, 2014)
29th Term (From January 1, 2015
to December 31, 2015)
Non-operating income Interest income 0 6
Profit on securities sold 142 －
Foreign exchange gains 13 －
Miscellaneous income 6 28
Total non-operating income 163 34
Non-operating expenses
Interest expense 49 －
Foreign exchange loss － 32
Loss from fixed assets retirement 38 34
Total non-operating expenses 88 66
Ordinary income 2,561 5,613
Extraordinary income
Total extraordinary income － － Extraordinary losses
Loss from special retirement benefits 104 26
Total extraordinary losses 104 26
Net income before taxes 2,457 5,586
Income taxes, residential and business taxes 1,507 2,366
Adjustment of income tax, etc. △372 37
Net income 1,322 3,182
96
(3) Statement of Changes in Stockholders’ Equity and etc.
28th Term (From April 1, 2014 to December 31, 2014)
(Unit: Millions of Yen)
Stockholders' Equity Valuation and translation
adjustment
Total
net
assets Capital
Capital surplus Profit surplus
Total
Stockholders'
Equity
Valuation and
translation
adjustment in other
investments
Total valuation
and translation
adjustment
Capital
reserve
Other
capital
surplus
Total
capital
surplus
Profit
reserve
Other profit
surplus Total
profit
surplus Profit surplus
carried forward
Balance as at
April 1, 2014
2,435 2,316 3,846 6,162 336 5,129 5,465 14,063 40 40 14,103
Changes during
the period
Net income 1,322 1,322 1,322 1,322
Changes during
the period other
than changes in
Stockholders'
Equity (net)
△40 △40 △40
Total changes
during the period - - - - - 1,322 1,322 1,322 △40 △40 1,282
Balance as at
December 31, 2014 2,435 2,316 3,846 6,162 336 6,452 6,788 15,386 - - 15,386
29th Term (From January 1, 2015 to December 31, 2015)
(Unit: Millions of Yen)
Stockholders' Equity Valuation and translation
adjustment
Total
net
assets Capital
Capital surplus Profit surplus
Total
Stockholders'
Equity
Valuation and
translation
adjustment in other
investments
Total valuation
and translation
adjustment
Capital
reserve
Other
capital
surplus
Total
capital
surplus
Profit
reserve
Other profit
surplus Total
profit
surplus Profit surplus
carried forward
Balance as at
January 1, 2015 2,435 2,316 3,846 6,162 336 6,452 6,788 15,386 - - 15,386
Changes during
the period
Net income 3,182 3,182 3,182 3,182
Changes during
the period other
than changes in
Stockholders'
Equity (net)
Total changes
during the period - - - - - 3,182 3,182 3,182 - - 3,182
97
Balance as at
December 31, 2015 2,435 2,316 3,846 6,162 336 9,634 9,971 18,569 - - 18,569
(Significant accounting policies)
1. Valuation principles and methods of securities
Securities
Other securities
Securities with market value
The Company adopts market value method based on the market price as of the valuation date.
(All valuation gains or losses are treated as a component of net assets, with the cost of
securities sold calculated according to the moving-average method.)
2. Depreciation and amortization method of fixed assets
(1) Tangible fixed assets
The straight-line method is adopted for depreciation. Service life mainly used for
depreciation is 6－18 years for building equipment, 2－15 years for appliances and fixture.
(2) Intangible fixed assets
Computer software is amortized over the useful period (internally fixed as 5 years) by the
straight-line method. Goodwill and client relationships are amortized over the effective
working period (5 – 9 years) by the straight-line method.
3. Accounting basis for reserves
(1) Accounting method for allowance for doubtful accounts
The estimated uncollectible amounts are accounted for as allowance with reference to
the individual collectibility of specific default receivable.
(2) Accounting method for retirement benefits reserve
① Former Retirement Benefits Program
The employees, who were employed at the date of transfer from Qualified Pension
Program to a new retirement benefit program are guaranteed to receive the benefits under
the former program. Accordingly, differences of the benefits between the current
retirement program and the former one as of the fiscal-year end are accounted for as a
reserve.
② Defined Contribution Pension Plan
The Company adopts the Defined Contribution Pension Plan (DC) for its retirement
benefits program.
③ Defined Benefit Pension Plan
The Company adopts the cash balance type of Defined Benefit Pension Plan (DC) for its
retirement benefits program. The CB guarantees to provide a fixed rate of return. In
accordance with the accounting standards of Defined Benefit Pension Plan, the Company
accounts for reserve to prepare for future payment of the mentioned return.
In calculating the pension benefit liabilities, the Company adopts the point based plan as
the attribution method for projected retirement benefits.
Past service liability is accounted for as an expense under the straight-line method with
98
a fixed amortization, which is shorter than average remaining service period of
employees at the time of recognition (9 years).
The proportional amount of actuarial valuation differences are accounted for as an
expense or a deductible expense in the following fiscal year. Such amount is calculated
by the straight-line method over the period shorter than employees’ average remaining
service years at the time of recognition (9 years).
(3) Accounting method for bonus reserve
To prepare for the payment of employee’s bonus, the Company accounts for estimated amount
of bonus reserve attributable to the current fiscal year.
(4) Accounting method for reserve for directors’ remuneration
The Company accounts for estimated amount of directors’ remuneration reserve attributable
to the current fiscal year to prepare for the payment.
(5) Accounting method for early retirement benefit reserve
To prepare for the payment of early retirement benefits, the Company accounts for estimated
amount of early retirement benefits payable attributable to the current fiscal year.
4. Translation of assets and liabilities denominated in foreign currencies into Japanese yen
Claims and debts denominated in foreign currencies are translated into Japanese yen at spot rates
quoted from the foreign exchange market at the end of the fiscal year. Translation differences are
accounted for as gains or losses.
5. Significant factors for preparing other financial statements
(1) Accounting method for consumption taxes
The Company applies a tax-exclusive method in accounting for consumption taxes.
(2) Change in fiscal year-end
Pursuant to Article 319 of the Company Law, a partial change to the Articles of Incorporation
was resolved in writing at the Extraordinary General Meeting of Stockholders held on
November 18, 2014 and the fiscal year-end of the Company was changed from March 31 to
December 31.
Accordingly, the previous fiscal year under review is the nine-month period from April 1,
2014 to December 31, 2014.
(3) Adoption of Consolidated Tax Payment System
From the Current Fiscal Year, Consolidated Tax Payment System has been adopted.
BlackRock Japan Holdings Limited Liability Company (“the parent company”), is the
parent company of the consolidated tax payment system.
[Notes]
(Balance Sheet related)
* 1 Cumulative amount of depreciation for tangible fixed assets
Previous Fiscal Year
(as of December 31, 2014)
Current Fiscal Year
(as of December 31, 2015)
Building equipment 892 Millions of Yen 1,039 Millions of Yen
Appliances and fixtures 702 Millions of Yen 649 Millions of Yen
99
*2 Assets and liabilities related to affiliated companies
The amounts included in each item are presented as follows.
Previous Fiscal Year
(as of December 31, 2014)
Current Fiscal Year
(as of December 31, 2015)
Accounts receivable 201 Millions of Yen 200 Millions of Yen
Accrued income 510 Millions of Yen 379 Millions of Yen
Short- term loans - Millions of Yen 130 Millions of Yen
Accounts payable - Millions of Yen 930 Millions of Yen
Accrued expenses 316 Millions of Yen 201 Millions of Yen
*3 The Company entered into current account overdraft agreements with two banks to assure
efficient funding for working capital. Outstanding balances of these agreements as of the fiscal
year-end are as follows.
Previous Fiscal Year
(as of December 31, 2014)
Current Fiscal Year
(as of December 31, 2015)
Cap amounts of the current
account overdrafts 1,000 Millions of Yen 1,000 Millions of Yen
Outstanding balances of used
borrowings － －
Difference 1,000 Millions of Yen 1,000 Millions of Yen
(Income Statement related)
* 1 Operating revenues and Operating expenses related to affiliated companies
The amounts included in each item are presented as follows.
Previous Fiscal Year
(From April 1, 2014
to December 31, 2014)
Current Fiscal Year
(From January 1, 2015
to December 31, 2015)
Other operating revenues 3,611 Millions of Yen 4,286 Millions of Yen
Investigation by entrustment 353 Millions of Yen 467 Millions of Yen
Office expenses for entrustment 1,210 Millions of Yen 613 Millions of Yen
Fund management fees 0 Millions of Yen 1 Millions of Yen
(Statement of Changes in Stockholders’ Equity related)
Previous Fiscal Year (From April 1, 2014 to December 31, 2014)
1. Matters concerning issued shares
Balance in the beginning
of previous fiscal year Increase Decrease
Balance in the end of
previous fiscal year
Common
Stock (shares) 10,158 － － 10,158
2. Matters concerning treasury shares
There are no applicable items.
3. Matters concerning share options and treasury shares options
There are no applicable items.
4. Matters concerning dividend
There are no applicable items.
100
Current fiscal year (From January 1, 2015 to December 31, 2015)
1. Matters concerning issued shares
Balance in the beginning
of current fiscal year Increase Decrease
Balance in the end of
current fiscal year
Common
Stock (shares) 10,158 － － 10,158
2. Matters concerning treasury shares
There are no applicable items.
3. Matters concerning share options and treasury shares options
There are no applicable items.
4. Matters concerning dividend
There are no applicable items.
(Financial instruments related)
1. Matters concerning financial instruments
(1) Policies in operating financial instruments
For fund management, the Company invests in short term deposits and similar instruments, and
for funding, the Company procures long-term loans from relevant parties.
(2) Characteristics and risks of financial instruments, and risk management
Management company fees receivable and fund management fees are trade receivables, which
are exposed to credit risk of customers. The Company manages the risk by monitoring each
customer’s due date and amounts outstanding, and by reference to the individual collectablility
of receivables.
All fees payable are going to be collected within one year from the trade date.
Trade payables are exposed to liquidity risk. The Company manages the risk by assessing the
financial condition plan, etc.
2. Matters concerning market values of financial instruments
Differences between amounts reported in the balance sheet and market values are presented as
follows. Immaterial amount items are not included.
Previous Fiscal Year (as of December 31, 2014)
Amounts on the
Balance Sheet
Market Values Differences
(Millions of Yen) (Millions of Yen) (Millions of Yen)
(1) Cash and deposits 10,971 10,971 －
(2) Management company fees
receivable 1,102 1,102 －
(3) Fund management fees receivable 2,606 2,606 －
(4) Accrued income 852 852 －
(5) Long-term guarantees deposited 980 971 △9
Total Assets 16,514 16,504 △9
(1) Accrued fees 386 386 －
(2) Accrued expense 1,246 1,246 －
Total Liabilities 1,633 1,633 －
101
Current Fiscal Year (as of December 31, 2015)
Amounts on the
Balance Sheet
Market Values Differences
(Millions of Yen) (Millions of Yen) (Millions of Yen)
(1) Cash and deposits 14,514 14,514 －
(2) Management company fees
receivable
1,077 1,077
－
(3) Fund management fees receivable 2,742 2,742 －
(4) Accrued income 1,467 1,467 －
(5) Long-term guarantees deposited 967 959 △7
Total Assets 20,769 20,761 △7
(1) Accrued fees 346 346 －
(2) Accrued expense 1,091 1,091 －
Total Liabilities 1,437 1,437 －
(Note 1) Matters concerning calculation methods of financial instruments
Assets
Market value of the following items are recorded at book value, as the short settlement period means
that market value and book value are efficiently the same.
(1) Cash and deposits, (2) Management company fees receivable, (3) Fund management fees
receivable, (4) Accrued income
(5) Long-term guarantees deposited
Market value of the lease deposit for the Company’s office building is calculated by discounting
the lease deposit amount at a swap rate of yen traded in the Inter-Bank Market with a term based
on the lease contract period. Market value of the lease deposit for the employees’ housing is
calculated by discounting the lease deposit amount at a swap rate of yen traded in the Inter-Bank
Market with a term based on the average remaining service period.
Liabilities
Market values of following items are recorded at book value, as the short settlement period means that
market value and book value are efficiently the same.
(1) Accrued fees, (2) Accrued expense
(Note 2) Redemption schedule of monetary claims subsequent to the fiscal year-end
Previous Fiscal Year (as of December 31, 2014)
Within
1 year
1 to 5 years 5 to 10
years
Over 10
years
(Millions of Yen) (Millions of Yen) (Millions of Yen) (Millions of Yen)
(1) Cash and deposits 10,971 — — —
(2) Management company fees receivable 1,102 — — —
(3) Fund management fees receivable 2,606 — — —
(4) Accrued income 852 — — —
(5) Long-term guarantees deposited 26 904 40 10
Total 15,559 904 40 10
102
Current Fiscal Year (as of December 31, 2015)
Within
1 year
1 to 5 years 5 to 10
years
Over 10
years
(Millions of Yen) (Millions of Yen) (Millions of Yen) (Millions of Yen)
(1) Cash and deposits 14,514 — — —
(2) Management company fees receivable 1,077 — — —
(3) Fund management fees receivable 2,742 — — —
(4) Accrued income 1,467 — — —
(5) Long-term guarantees deposited — 907 48 11
Total 19,801 907 48 11
(Securities related)
Previous Fiscal Year (as of December 31, 2014)
Other securities sold during the previous fiscal year
Category
Amount sold Toal gain on sale Total loss on sale
(Millions of Yen) (Millions of Yen) (Millions of Yen)
Other 942 142 —
Current Fiscal Year (as of December 31, 2015)
There are no applicable items.
(Retirement benefits related)
Previous Fiscal Year (from April 1, 2014 to December 31, 2014)
1. Summary of the present retirement benefits programs.
The Company provides following three retirement benefits programs: The legacy retirement
benefit program: This program had been in place in the former Barclays Global Investors Co., Ltd.
and the Company took it over at the business integration. The Defined Contribution Pension
Plan and the Defined Benefit Pension Plan: These two programs had been in place in the former
Blackrock Japan Co., Ltd. and they were carried over to the Company at the merger with the
former BlackRock Japan Co., Ltd. on December 2, 2009. In addition, another retirement benefits
program (i.e. the Qualified Pension Program), which the former Barclays Global Investor Co., Ltd.
had provided, was transferred to the above the Defined Benefit Pension Plan by converting the
program into a cash-balance type on January 1, 2011. The aforementioned three programs have
been in place since January 1, 2011.
103
2. Defined Benefit Pension Plan
(1) Reconciliation of the beginning and ending balances of retirement benefits liability
(Unit: Millions of Yen)
Previous Fiscal Year
(From April 1, 2014
to December 31, 2014)
Beginning balance of the retirement benefits liability 1,580
Service cost 164
Interest Expense 11
Actuarial gain or loss 52
Payment of retirement benefits △221
Ending balance of retirement benefits liability 1,587
(2) Reconciliation of the beginning and ending balances of plan assets
(Unit: Millions of Yen)
Previous Fiscal Year
(From April 1, 2014
to December 31, 2014)
Beginning balance of the plan assets 2,050
Expected returns from plan assets management 13
Actuarial gain or loss 176
Contributions by the Company 185
Payment of retirement benefits △221
Ending balance of plan assets 2,205
104
(3) Reconciliation between the ending balances of retirement benefits liability/plan assets and reserve
for retirement benefits/ prepaid pension expenses on the Balance Sheet
(Unit: Millions of Yen)
Previous Fiscal Year
(as of December 31, 2014)
Funded retirement benefits obligations scheme 1,536
Plan assets △2,205
△669
Unfunded retirement benefits obligations scheme 51
Unfunded retirement benefits obligations △618
Unrecognized actuarial gain or loss 323
Unrecognized past service cost 31
Net amount of liabilities and assets in the Balance Sheet △263
Reserve for retirement benefits 51
Prepaid pension expenses △315
Net amount of liabilities and assets in the Balance Sheet △263
(4) Retirement benefits expenses and other details
(Unit: Millions of Yen)
Previous Fiscal Year
(From April 1, 2014
to December 31, 2014)
Service cost 164
Interest Expense 11
Expected returns from plan assets management △13
Expenses related to actuarial calculation differences △20
Expenses related past service liability △3
Total retirement benefits expenses for Defined Benefit Pension Plan 138
Special retirement allowances 104
Total 242
105
(5) Plan assets
① Details of main plan assets
The ratio by major category for total plan assets is as follows:
Previous Fiscal Year
(as of December 31, 2014)
Pooled fund 100%
Total 100%
The ratio by major product category for plan assets managed by pooled fund is presented as 68%
in bonds, 29% in equity securities, and 3% in others.
② Calculation of long-term expected rate of return on plan assets
Long-term expected rate of returns from plan assets is determined considering the plan assets
allocation and long-term expected returns from plan assets composed of various kinds of assets,
at the present and in the future.
(6) Basis of actuarial calculation
Previous Fiscal Year
(From April 1, 2014
to December 31, 2014)
Discount rate 0.7%
Long-term expected rate of return on plan assets 1.1%
3. Defined Contribution Plans
The Company is obligated to contribute 46 million yen.
Current Fiscal Year (from January 1, 2015 to December 31, 2015)
1. Summary of the present retirement benefits programs
The Company provides following three retirement benefits programs: The legacy retirement
benefit program: This program had been in place in the former Barclays Global Investors Co., Ltd.
and the Company took it over at the business integration. The Defined Contribution Pension
Plan and the Defined Benefit Pension Plan: These two programs had been in place in the former
Blackrock Japan Co., Ltd. and they were carried over to the Company at the merger with the
former BlackRock Japan Co., Ltd. on December 2, 2009. In addition, another retirement benefits
program (i.e. the Tax Qualified Pension Program), which the former Barclays Global Investor Co.,
Ltd. had provided, was merged to the above the Defined Benefit Pension Plan by converting
the program into a cash-balance type on January 1, 2011. The aforementioned three programs
have been in place since January 1, 2011.
106
2. Defined Benefit Pension Plan
(1) Reconciliation of the beginning and ending balances of retirement benefits liability
(Unit: Millions of Yen)
Current Fiscal Year
(From January 1, 2015
to December 31, 2015)
Beginning balance of the retirement benefits liability 1,587
Service cost 223
Interest Expense 10
Actuarial gain or loss 10
Payment of retirement benefits △171
Ending balance of retirement benefits liability 1,661
(2) Reconciliation of the beginning and ending balances of plan assets
(Unit: Millions of Yen)
Current Fiscal Year
(From January 1, 2015
to December 31, 2015)
Beginning balance of the plan assets 2,205
Expected returns from plan assets management 24
Actuarial gain or loss △9
Contributions by the Company 256
Payment of retirement benefits △171
Ending balance of plan assets 2,304
107
(3) Reconciliation between the ending balances of retirement benefits liability/plan assets and reserve
for retirement benefits/ prepaid pension expenses on the Balance Sheet
(Unit: Millions of Yen)
Current Fiscal Year
(as of December 31, 2015)
Funded retirement benefits obligations scheme 1,607
Plan assets △2,304
△697
Unfunded retirement benefits obligations scheme 53
Unfunded retirement benefits obligations △643
Unrecognized actuarial gain or loss 261
Unrecognized past service cost 26
Net amount of liabilities and assets in the Balance Sheet △355
Reserve for retirement benefits 53
Prepaid pension expenses △409
Net amount of liabilities and assets in the Balance Sheet △355
(4) Retirement benefits expenses and other details
(Unit: Millions of Yen)
Current Fiscal Year
(From January 1, 2015
to December 31, 2015
Service cost 223
Interest Expense 10
Expected returns from plan assets management △24
Expenses related to actuarial calculation differences △4
Expenses related past service liability △41
Total retirement benefits expenses for Defined Benefit Pension Plan 164
Special retirement allowances 26
Total 191
108
(5) Plan assets
① Details of main plan assets
The ratio by major category for total plan assets is as follows:
Current Fiscal Year
(as of December 31, 2015)
Pooled fund 100%
Total 100%
The ratio by major product category for plan assets managed by pooled fund is presented as 70%
in bonds, 27% in equity securities, and 1% in others.
② Calculation of long-term expected rate of return on plan assets
Long-term expected rate of returns from plan assets is determined considering the plan assets
allocation and long-term expected returns from plan assets composed of various kinds of assets,
at the present and in the future.
(6) Basis of actuarial calculation
Current Fiscal Year
(From January 1, 2015
to December 31, 2015)
Discount rate 0.7%
Long-term expected rate of return on plan assets 1.2%
3. Defined Contribution Plans
The Company is obligated to contribute 64 million yen.
109
(Tax effect accounting related)
1. Major accounting items which generate deferred tax assets and deferred tax liabilities.
(Unit: Millions of Yen)
Previous Fiscal Year Current Fiscal Year
(as of December 31, 2014) (as of December 31, 2015)
Deferred tax assets
Accrued expense 231 155
Bonus reserve 616 619
Asset retirement obligations 104 82
Asset adjustment 73 46
Accrued business tax 74 105
Reserve for early retirement benefits 12 2
Reserve for retirement benefits 18 17
Tangible fixed assets 0 0
Others 23 15
Total deferred tax assets 1,156 1,046
Deferred tax liabilities
Intangible fixed assets △81 －
Reserve for retirement benefits △112 △132
Expenses related to asset retirement
obligations
△31 △21
Total deferred tax liabilities △225 △153
Net deferred tax assets 931 892
(Note): Net deferred assets of the previous and current fiscal year are presented in the balance sheet
as follows.
(Unit: Millions of Yen)
Previous Fiscal Year Current Fiscal Year
(as of December 31, 2014) (as of December 31, 2015)
Current assets－deferred tax assets 948 882
Fixed assets－deferred tax assets － 9
Fixed liabilities－deferred tax liabilities 17 －
110
2. Major items which caused differences between the effective statutory tax rates and the tax
rates after applying the tax effect accounting
Previous Fiscal Year Current Fiscal Year
(as of December 31, 2014) (as of December 31, 2015)
Effective statutory tax rate 35.6 % 35.6 %
(Adjustments)
Items which are permanently discarded from
deductible expenses such as entertainment
expense
3.4 3.0
Goodwill amortization expense, which is
non-deductible expense
7.5 3.3
Corrections of the deferred tax assets in the
fiscal year-end due to the change in tax rates
－ 1.2
Others △0.4 △0.2
Tax rates (corporate tax and other tax rates)
after applying the tax effect accounting
46.0 % 43.0 %
(Asset retirement obligations related)
Asset retirement obligations recognized in the balance sheet
1. Summary of the asset retirement obligations
The obligations mainly relates to restoration of the Company’s office building under the lease
agreement “Teiki Tatemono Chintaishaku-keiyaku” (i.e. the agreement made for a case of no
renewal of the lease).
2. Calculation method for the asset retirement obligations
The asset retirement obligations are calculated at the discount rate of 1.5% p.a. with an expected
lease period of 10 years as stated in the aforementioned lease agreement.
3. Changes in total amount of the asset retirement obligations
(Unit: Millions of Yen)
Previous Fiscal Year Period Current Fiscal Year Period
(from April 1, 2014 (from January 1, 2015
to December 31, 2014) to December 31, 2015)
Balance in the beginning of the period 306 293
Adjustments due to passage of time 2 3
Decrease from Asset retirement obligations － △42
Increase/decrease from changes in accounting
estimates △15 －
Balance in the end of the period 293 254
4. Changes in estimates of assets retirement obligations
The Company reduces the assets retirement obligations of 15 million yen due to the change in
estimate for the previous fiscal year as the asset retirement costs which deem to be necessary when
the Company retires a part of the assets at the time of retirement are expected to fall below the
estimated amounts at the time of the acquisition of the fixed assets.
111
(Segment information and other information)
Previous fiscal year (From April 1, 2014 to December 31, 2014):
1. Segment information
The Company is solely engaged in investment management business, therefore, description of
segment information is omitted.
2. Relevant information
(1) Information categorized by products and services
(Unit: Millions of Yen)
Management
company fees
Fund management
fees Others Total
Revenues generated from
transactions with external
customers
3,449 5,762 6,135 15,347
(2) Information categorized by countries / regions
① Revenues
(Unit: Millions of Yen)
Japan North America Others Total
8,479 5,353 1,514 15,347
(Note) The above revenues are reported by countries or regions where customers reside.
② Tangible fixed assets
As tangible fixed assets located in Japan account for more than 90% of the total tangible fixed
assets in the balance sheet, description in this section is omitted.
(3) Information categorized by major customers
Major customers who account for more than 10 % of the total revenues are as follows.
(Unit: Millions of Yen)
Client Operating revenue Related segment
BlackRock Financial
Management, Inc.
3,611 Investment management business
BlackRock Fund
Advisors
1,690 Investment management business
3. Information concerning impairment losses of fixed assets by reporting segments
There are no applicable items.
4. Information concerning amortized and unamortized amounts of goodwill by reported segments
As the Company is solely engaged in investment management business, description in this section
is omitted.
5. Information concerning gains from negative goodwill by reported segments
There are no applicable items.
112
Current fiscal year (From January 1, 2015 to December 31, 2015):
1. Segment information
The Company is solely engaged in investment management business, therefore, description of
segment information is omitted.
2. Relevant information
(1) Information categorized by products and services
(Unit: Millions of Yen)
Management
company fees
Fund management
fees Others Total
Revenues generated from
transactions with external
customers
4,339 10,063 9,911 24,315
(2) Information categorized by countries / regions
① Revenues
(Unit: Millions of Yen)
Japan North America Others Total
13,272 8,558 2,483 24,315
(Note) The above revenues are reported by countries or regions where customers reside.
② Tangible fixed assets
As tangible fixed assets located in Japan account for more than 90% of the total tangible fixed
assets in the balance sheet, description in this section is omitted.
(3) Information categorized by major customers
Major customers who account for more than 10 % of the total revenues are as follows.
(Unit: Millions of Yen)
Client Operating revenue Related segment
BlackRock Financial
Management, Inc.
4,287 Investment management business
BlackRock Fund
Advisors
2,857 Investment management business
3. Information concerning impairment losses of fixed assets by reporting segments
There are no applicable items.
4. Information concerning amortized and unamortized amounts of goodwill by reported segments
As the Company is solely engaged in investment management business, description in this section
is omitted.
5. Information concerning gains from negative goodwill by reported segments
There are no applicable items.
113
(Information concerning related party)
1. Related party transactions
Transactions between a financial statement-submitting company and the related party
(1) Parent company of the financial statement-submitted company, major shareholders (only
corporations and the like) and etc.
Previous Fiscal Year (From April 1, 2014 to December 31, 2014)
Type
Company’s or
Individual’s
name
Address
Capital or
Contribution
to capital
Business
lines or
Occupation
Ratio (%) of
Voting
Rights
holding or
held by
Relations
with the
related party
Contents of
Transaction
Transaction
amount
(Millions
of Yen)
Category
Balance in
the fiscal
year-end
(Millions
of Yen)
Parent
company
BlackRock
Financial
Management
Inc.
New York
State,
U.S.A.
13,067
million U.S.
dollars
Provider of
investment
and advisory
Held by,
indirect,
100%
Re-entrust
ment of
investment
advisory
contracts
Asset
managem
ent fees
0 Accrued
income 510
Commissions
3,611
Entrusted fees
for research
cost
353
Accounts
payable 316
Entrusted fees
for office
expenses
1,210
Current Fiscal Year (From January 1, 2015 to December 31, 2015)
Type
Company’s or
Individual’s
name
Address
Capital or
Contribution
to capital
Business
lines or
Occupation
Ratio (%) of
Voting
Rights
holding or
held by
Relations
with the
related party
Contents of
Transaction
Transaction
amount
(Millions
of Yen)
Category
Balance in
the fiscal
year-end
(Millions
of Yen)
Parent
company
BlackRock
Financial
Management
Inc.
New York
State,
U.S.A.
13,482
million U.S.
dollars
Provider of
investment and
advisory
Held by,
indirect,
100%
Re-entrust
ment of
investment
advisory
contracts
Asset
management
fees
1 Accrued
income 379
Commissions
4,286
Entrusted fees
for research
cost
467
Accounts
payable 201
Entrusted fees
for office
expenses
613
Parent
company
BlackRock
Japan Holdings
LLC
Tokyo,
Japan
10,000
yen
Holding
company
Held by,
direct,
100%
shareholding
Non-
operating
income
0
Accounts
receivable 200
Accrued
income 0
Short- term
loans 130
other
payables 930
(2) Subsidiaries and affiliated companies of the financial statement-submitting company
Previous Fiscal Year (From April 1, 2014 to December 31, 2014)
There are no applicable items.
Current Fiscal Year (From January 1, 2015 to December 31, 2015)
114
There are no applicable items.
(3) Companies whose parent company is same as the financial statement-submitting company,
and other subsidiaries of related companies of the financial statement-submitting company
Previous Fiscal Year (From April 1, 2014 to December 31, 2014)
Type
Company’s
or
Individual’s
name
Address
Capital or
Contribution
to capital
Business
lines or
Occupation
Ratio of
Voting Rights
holding or
held by
Relations
with the
related party
Contents of
Transaction
Transaction
amount
(Millions
of Yen)
Category
Balance in
the fiscal
year-end
(Millions
of Yen)
Company
under the
same parent
company
BlackRoc
k Lux
Finco
S.à r.l.
Luxemburg
City, Grand
Duchy of
Luxemburg
2 million
U.S. dollars
Control
and
administr
ation of
asset
managem
ent firms
and the
like
None Borrower of
loans
Repayment of
loans 2,737
Long term
loans －
Interest
expense on
loans
49 Interest
payable －
Company
under the
same parent
company
BlackRock
Fund
Advisors
California
State,
U.S.A.
1,000
U.S. dollars
Provider of
investment
and advisory
None
Re-entrust
ment of
investment
advisory
contracts
Commissions 1,690 Accounts
receivable 183
Current Fiscal Year (From January 1, 2015 to December 31, 2015)
Type
Company’s or
Individual’s
name
Address
Capital or
Contribution
to capital
Business
lines or
Occupation
Ratio (%) of
Voting
Rights
holding or
held by
Relations
with the
related party
Contents of
Transaction
Transaction
amount
(Millions
of Yen)
Category
Balance in
the fiscal
year-end
(Millions
of Yen)
Company
under the
same parent
company
BlackRock
Fund
Advisors
California
State,
U.S.A.
1,000
U.S. dollars
Provider of
investment
and advisory
None
Re-entrust
ment of
investment
advisory
contracts
Commissions 2,857 Accounts
receivable
3
Investigation
by
entrustment
3 Accrued
income
736
Office
expenses for
entrustment
0 Accrued
expenses
1
Company
under the
same parent
company
BlackRock
Investment
Management
LLC
Delaware
State,
U.S.A
1,723
U.S. dollars
Provider of
investment
and advisory
None
Re-entrust
ment of
investment
advisory
contracts
Commissions 543 Accrued
income
49
Investigation
by
entrustment
1,449 Accrued
expenses
142
Office
expenses for
entrustment
74
(Note) 1. Policies for terms and conditions of transactions and their decision making
115
(1) Fund management fees are determined under the same conditions as those in regular transactions
with external customers.
(2) Commissions are determined under the same conditions as those in regular transactions with
external customers.
(3) Entrusted investigation expenses are determined under the same conditions as those in regular
transactions with external customers.
(4) Operations consignment expenses are determined under the same conditions as those in regular
transactions with external customers.
(5) The interest expense on the loan is calculated by taking into consideration with the market interest
rates. There is no guarantee deposited for the loan.
(6) Fiscal year-end balances of long-term loans are related to subordinated borrowings.
2. Notes concerning the parent company
(1) Information of the parent company
BlackRock Inc. (listed on the New York Stock Exchange.)
BlackRock Financial Management Inc. (Not listed on the stock exchange)
BlackRock Japan Holdings Limited Liability Company (Not listed on the stock exchange)
(Information per share)
Previous Fiscal Year Current Fiscal Year
(From April 1, 2014 (From January 1, 2015
to December 31, 2014) to December 31, 2015)
Net assets per share 1,514,717 yen and 33 sen 1,828,038 yen and 62 sen
Net income per share 130,237 yen and 41 sen 313,321 yen and 29 sen
(Notes) 1. As there is no residual securities, the description of net income after making an
adjustment of residual securities is not presented.
2. Net income is calculated based on the following information.
Item
Previous Fiscal Year Current Fiscal Year
(From April 1, 2014 (From January 1, 2015
to December 31, 2014) to December 31, 2015)
Net income (Millions of yen) 1,322 3,182
Amount not attributed to common
stockholders (Millions of Yen)
－ －
Net income attributed to common stock
(Millions of Yen)
1,322 3,182
Average number of common stock during
the fiscal year (Shares)
10,158 10,158
The audit period of the independent auditor ’s report is from January 1, 2015 to December
31, 2015 (“the current fiscal year”).
116
Interim Financial Statements
1. Method of Preparation of Interim Financial Statements
The interim financial statements of the management company, BlackRock Japan Co., Ltd. (hereinafter,
the “Company”), i.e., Balance Sheet, Income Statement and Statement of Changes in Stockholders’
Equity, are prepared pursuant to the Ordinance on Terminology, Forms, and Preparation Methods of
Interim Financial Statements, etc. (Ordinance of the Ministry of Finance No. 38 of 1977) and to the
Cabinet Office Ordinance on Financial Instruments Business, etc. (Cabinet Office Ordinance No. 52
of 2007) as required by the provisions of Article 38 and Article 57 of the Ordinance on Terminology,
Forms, and Preparation Methods of Interim Financial Statements, etc.
2. Audit Certificate
Pursuant to the provisions of Article 193-2, paragraph (1) of the Financial Instruments and Exchange
Act, the Company has undertaken an audit of interim financial statements for the interim fiscal period
(from January 1, 2016 to June 30, 2016) by Deloitte Touche Tohmatsu LLC.
3. Monetary amounts presented in the financial statements have been rounded down to the nearest
million yen.
117
(1) Interim Balance Sheet
(Unit: Millions of Yen)
End of Interim Period
(June 30, 2016)
Assets
Current Assets
Cash and deposits * 2 15,696
Payment in advance 1
Prepaid expenses 149
Accounts receivable 2
Uncollected management company’s fees 1,040
Uncollected fund management fees 2,056
Accrued income 963
Deferred tax assets 485
Other current assets 7
Total current assets 20,404
Fixed assets
Tangible fixed assets
Building equipment * 1 1,158
Appliances and fixtures * 1 466
Total tangible fixed assets 1,625
Intangible fixed assets
Computer Software 3
Goodwill 126
Total intangible fixed assets 130
Investments and other assets
Long-term guarantee deposited 970
Prepaid pension expenses 454
Long-term prepaid expenses 13
Total investments and other assets 1,438
Total fixed assets 3,194
Total Assets 23,599
118
(Unit: Millions of Yen)
End of Interim Period
(June 30, 2016)
Liabilities
Current liabilities
Deposits 121
Accounts payable
Distribution of income payable 3
Redemption money payable 75
Commission payable 322
Other accounts payable 363
Accrued expenses 1,086
Accrued consumption taxes 84
Accrued income taxes 185
Reserve for bonus 927
Reserve for directors’ bonus 75
Reserve for early retirement benefits 29
Total current liabilities 3,275
Fixed liabilities
Reserve for retirement benefits 58
Asset retirement obligations 256
Deferred tax liabilities 5
Total fixed liabilities 320
Total liabilities 3,595
Net assets
Stockholders’ equity
Capital 2,435
Capital surplus
Capital reserve 2,316
Other capital surplus 3,846
Total capital surplus 6,162
Accumulated profit
Profit reserve 336
Other accumulated profit
Accumulated profit carried forward 11,069
Total accumulated profit 11,405
Total stockholders’ equity 20,003
Total net assets of the Fund 20,003
Total Liabilities and Net Assets 23,599
119
(2) Interim Income Statement
(Unit: Millions of Yen)
Interim Period
(From January 1, 2016 to June
30, 2016)
Operating revenues
Management company fees 1,885
Fund management fees 4,671
Other operating revenues 5,143
Total revenues 11,700
Operating expenses
Commission 601
Advertisement 77
Investigation expenses
Investigation 194
Investigation by entrustment 2,097
Total investigation expenses 2,292
Calculation expense by entrustment 54
Operating miscellaneous expenses
Communication 28
Printing 36
Meetings 11
Total operating miscellaneous expenses 76
Total operating expenses 3,101
General and administrative expenses
Salaries
Directors’ remuneration 362
Salaries and allowances 1,886
Bonus 1,251
Total salaries 3,500
Retirement benefits 129
Welfare 394
Office expenses for entrustment 1,104
Entertainment 22
Contribution 0
Travel and transportation 113
Taxation and other public dues 65
Rent 365
Utility 31
Depreciation and amortization for fixed assets * 1 105
Amortization of goodwill * 1 28
Interest expense for asset retirement obligation 1
Miscellaneous expenses 222
Total general and administrative expenses 6,086
Operating income 2,512
120
(Unit: Millions of Yen)
Interim Period
(From January 1, 2016 to June
30, 2016)
Non-operating income
Interest income 2
Interest on refund 0
Miscellaneous income 0
Total non-operating income 2
Non-operating expenses
Foreign exchange loss 99
Miscellaneous loss 0
Total non-operating expenses 99
Ordinary income 2,415
Extraordinary losses
Loss from special retirement benefits 81
Total extraordinary losses 81
Net income before taxes 2,333
Income taxes, residential and business taxes 486
Adjustment of income tax, etc. 412
Net income 1,434
121
(3) Interim Statement of Changes in Stockholders’ Equity and etc.
Interim Period (From January 1, 2016 to June 30, 2016)
(Unit: Millions of Yen)
Stockholders’ Equity
Total net
assets Capital
Capital surplus Profit surplus
Total
stockholders’
Equity
Capital
reserve
Other
capital
surplus
Total
capital
surplus
Profit
reserve
Other profit
surplus Total
profit
surplus
Profit surplus
carried
forward
Balance as at
January 1, 2016 2,435 2,316 3,846 6,162 336 9,634 9,971 18,569 18,569
Changes during the
period
Net income 1,434 1,434 1,434 1,434
Changes during the
period other than
changes in
Stockholders’ Equity
(net)
Total changes during the
period – – – – – 1,434 1,434 1,434 1,434
Balance as at
June 30, 2016 2,435 2,316 3,846 6,162 336 11,069 11,405 20,003 20,003
(Significant accounting policies)
Item Interim Period
From January 1, 2016 to June 30, 2016
1. Depreciation and amortization
method of fixed assets
(1) Tangible fixed assets
The straight-line method is adopted for depreciation.
Service life mainly used for depreciation is 6 to 18 years for
building equipment, 2 to 15 years for appliances and fixtures.
(2) Intangible fixed assets
Computer software for in-house use is amortized over the
useful period (internally fixed as 5 years) by the straight-line
method.
Goodwill is amortized over the effective working period (5
to 9 years) by the straight-line method.
122
Item Interim Period
From January 1, 2016 to June 30, 2016
2. Accounting basis for reserves (1) Accounting method for retirement benefits reserve
(i) Former Retirement Benefits Program
The employees, who were employed at the date of transfer
from Qualified Pension Program to a new retirement benefit
program, are guaranteed to receive the benefits under the
former program. Accordingly, differences of the benefits
between the current retirement program and the former one
as at the end of interim period are accounted for as a reserve. (ii) Defined Contribution Pension Plan
The Company adopts the Defined Contribution Pension Plan
(DC) for its retirement benefits program.
(iii) Defined Benefit Pension Plan
The Company adopts the cash balance type (CB) of Defined
Benefit Pension Plan for its retirement benefits program. The
CB guarantees to provide a fixed rate of return. In accordance
with the accounting standards of Defined Benefit Pension
Plan, the Company accounts for reserve to prepare for future
payment of the mentioned return.
In calculating the pension benefit liabilities, the Company
adopts the point based plan as the attribution method for
projected retirement benefits.
Past service liability is accounted for as an expense under the
straight-line method with a fixed amortization, which is
shorter than average remaining service period of employees
at the time of recognition (9 years).
The proportional amount of actuarial valuation differences
are accounted for as an expense or a deductible expense in
the following fiscal year. Such amount is calculated by the
straight-line method over the period shorter than employees’
average remaining service years at the time of recognition (9
years).
(2) Accounting method for bonus reserve
To prepare for the payment of employee’s bonus, the
Company accounts for estimated amount of bonus reserve
attributable to the current interim period.
(3) Accounting method for reserve for directors’ remuneration
The Company accounts for estimated amount of directors’
remuneration reserve attributable to the current interim
period to prepare for the payment.
(4) Accounting method for early retirement benefit reserve
To prepare for the payment of early retirement benefits, the
Company accounts for estimated amount of early retirement
benefits payable attributable to the current interim period.
123
Item Interim Period
From January 1, 2016 to June 30, 2016
3. Translation of assets and
liabilities denominated in
foreign currencies into
Japanese yen
Claims and debts denominated in foreign currencies are translated
into Japanese yen at spot rates quoted from the foreign exchange
market at the end of the interim period. Translation differences are
accounted for as gains or losses.
4. Other significant factors for
preparing semi-annual financial
statements
Accounting for consumption taxes
The Company applies a tax-exclusive method.
[Notes]
(Interim Balance Sheet related)
End of Interim Period (June 30, 2016)
* 1 Cumulative amount of depreciation for tangible fixed assets
Building equipment 1,114 million yen
Appliances and fixtures 679 million yen
*2 The Company entered into current account overdraft agreements with two banks to assure efficient
funding for working capital. Outstanding balances of these agreements as of the end of the interim
period are as follows.
Cap amounts of the current account overdrafts 1,000 million yen
Outstanding balances of used borrowings –
Difference 1,000 million yen
(Interim Income Statement related)
Interim Period (From January 1, 2016 to June 30, 2016)
*1 Depreciation and Amortization
Tangible fixed assets 105 million yen
Intangible fixed assets 28 million yen
(Interim Statement of Changes in Stockholders’ Equity related)
Interim Period (From January 1, 2016 to June 30, 2016)
1. Matters concerning type and total number of shares outstanding
Balance at the end
of the previous
fiscal year
Increase during the
current interim
period
Decrease during
the current interim
period
Balance at the end of
the current interim
period
Shares outstanding
Common Stock 10,158 – – 10,158
Total 10,158 – – 10,158
2. Matters concerning treasury shares
There are no applicable items.
124
3. Matters concerning share options and treasury shares options
There are no applicable items.
4. Matters concerning dividend
(1) Dividends paid
There are no applicable items.
(2) Dividends the record date of which comes during the current interim period, but the effective date of which
comes after the current interim period
There are no applicable items.
(Financial instruments related)
Interim Period (From January 1, 2016 to June 30, 2016)
1. Matters concerning status of financial instruments
(1) Policy in operating financial instruments
For fund management, the Company invests in short term deposits and similar instruments only, and for
funding, the Company procures long-term loans from relevant parties.
(2) Characteristics and risks of financial instruments, and risk management
Management company fees receivable and fund management fees are trade receivables, which are exposed
to credit risk of customers. The Company manages the risk by monitoring each customer’s due date and
amounts outstanding, and by reference to the individual collectability of receivables.
All fees payable are going to be collected within one year from the trade date.
Trade payables and loans are exposed to liquidity risk. The company manages the risk by assessing the
financial condition plan, etc.
Interim Period (From January 1, 2016 to June 30, 2016)
2. Matters concerning market value, etc. of financial instruments
Differences between amounts reported in the interim balance sheet and market values as of June 30, 2016
(interim closing date) are presented as follows.
(Unit: Millions of Yen)
Amounts on the Balance
Sheet (*) Market Values (*) Differences
(1) Cash and deposits 15,696 15,696 –
(2) Management
company’s fees
receivable
1,040 1,040 –
(3) Fund management
fees receivable 2,056 2,056 –
(4) Accrued income 963 963 –
(5) Long-term guarantees
deposited 970 970 –
Total Assets 20,727 20,727 –
(6) Accrued fees 322 322 –
(7) Accrued expenses 1,086 1,086 –
Total Liabilities 1,409 1,409 –
125
(Note) Matters concerning calculation methods of financial instruments
Market value of the following items is recorded at book value, as the short settlement period means
that market value and book value are efficiently the same.
(1) Cash and deposits, (2) Management company fees receivable, (3) Fund management fees
receivable, (4) Accrued income
(5) Long-term guarantee deposited
Market value of the lease deposit for the Company’s office building is calculated by discounting the
lease deposit amount at a swap rate of yen traded in the Inter-Bank Market with a term based on the
lease contract period. Market value of the lease deposit for the employees’ housing is calculated by
discounting the lease deposit amount at a swap rate of yen traded in the Inter-Bank Market with a term
based on the average remaining service period.
However, when the above rate is negative, the discount rate is set to zero.
Market value of the following items is recorded at book value, as the short settlement period means
that market value and book value are efficiently the same.
(6)Accrued fees, (7) Accrued expense
(Securities related)
There are no applicable items.
(Asset retirement obligations related)
Interim Period (From January 1, 2016 to June 30, 2016)
Asset retirement obligations recognized in the balance sheet
1. Summary of the asset retirement obligations
The obligations mainly relates to restoration of the Company’s office building under the lease agreement
“Teiki Tatemono Chintaishaku-keiyaku” (i.e. the agreement made for a case of no renewal of the lease).
2. Calculation method for the asset retirement obligations
The asset retirement obligations are calculated at the discount rate of 1.5% p.a. with an expected lease
period of 10 years as stated in the aforementioned lease agreement.
3. Changes in total amount of the asset retirement obligations during the current interim period
Balance in the beginning of the period 254 Millions of Yen
Adjustments due to passage of time 1 Millions of Yen
Balance in the end of the interim period 256 Millions of Yen
126
(Segment information and other information)
Interim Period (From January 1, 2016 to June 30, 2016)
1. Segment information
The Company is solely engaged in investment management business, therefore, description of segment
information is omitted.
2. Relevant information
(1) Information categorized by products and services
(Unit: Millions of Yen)
Management
company fees
Fund
management fees Others Total
Revenues generated from
transactions with external
customers
1,885 4,671 5,143 11,700
(2) Information categorized by countries / regions
(i) Revenues
(Unit: Millions of Yen)
Japan North America Others Total
6,060 4,226 1,413 11,700
(Note) The above revenues are reported by countries or regions where customers reside.
(ii) Tangible fixed assets
As tangible fixed assets located in Japan account for more than 90% of the total tangible fixed assets
in the balance sheet, description in this section is omitted.
(3) Information categorized by major customers
Major customers who account for more than 10 % of the total revenues are as follows.
(Unit: Millions of Yen)
Client Operating revenue Related segment
BlackRock Financial
Management, Inc. 2,349 Investment management business
BlackRock Fund Advisors 1,352 Investment management business
(Derivatives related)
Interim Period (From January 1, 2016 to June 30, 2016)
There are no applicable items as the Company does not use any derivatives.
127
(Per share information)
Interim Period (From January 1, 2016 to June 30, 2016)
Net assets per share 1,969,229 yen and 9 sen
Net income per share 141,190 yen and 46 sen
As there are no residual securities, diluted net income per share is not indicated.
Net income is calculated based on the following information.
Net income in interim income statement 1,434 million yen
Net income related to common stock used in the calculation of
net income per share 1,434 million yen
Average number of common stock during the interim period 10,158 shares
(Material subsequent events)
There are no applicable items.
128
4. Restrictions on transactions with interested parties
Pursuant to the Financial Instruments and Exchange Act, an entrusting company is prohibited
from conducting following acts in transactions with interested parties.
(1) Investment management, where the Company itself, the Company’s Officer or Director are
engaged as a counter party in transactions. (Except for transactions specified by Cabinet Office
Ordinance as those which do not generate risks of impairing customers’ protection, fairness of
transactions, or credibility of financial instruments business.)
(2) Investment management, where cross transactions are involved. (Except for transactions specified
by Cabinet Office Ordinance as those which do not generate risks of impairing customers’
protection, fairness of transactions, or credibility of financial instruments business.)
(3) Transactions, which are associated with purchase and sales of securities, other securities
transactions, or financial derivatives, and they are schemed with irregular conditions, being
deviated from standard conditions and involving a risk of impairing fairness of transactions. In
addition, the counter party of the above transactions is an entrusting company’s parent company
and the alike (*), or an entrusting company’s subsidiary and the alike (**).
(*) A corporation or other institution, which holds majority of voting rights such as a major
shareholder of an entrusting company and is subject to requirements under the Order for
Enforcement of the Financial Instruments and Exchange Act as a company or other institution
having a close relations with other entrusting companies. This shall also apply to the
following (4) and (5).
(**) A corporation or other institution, whose majority of voting rights is owned by an entrusting
company as a major shareholder and who is subject to conditions specified by Cabinet Orders
as a company or an institution having a close relation with other entrusting companies. This
shall also apply to the following (4) and (5).
(4) Investment management, where transactions aim to generate interest to an entrusting company’s
parent company and the alike or its subsidiaries and the alike, and entail to scheme unnecessary
transactions in light of investment management policies, size of invested assets and market
circumstances.
(5) In additions to the aforementioned, acts specified by Cabinet Office Ordinance concerning the
financial instruments business, etc. such as those which may impair customers’ protection, fairness
of transactions, and credibility of financial instruments business.
129
5. Others Amendments of the articles of incorporation, transferring or transferred businesses, status of
finance and other material items
Amendment date Amendment Items
September 18, 2007 Amended the articles of incorporation due to the change of the trade name
(changed to “Barclays Global Investors Securities Investment Co., Ltd.”)
for the purpose of registering securities business
September 30, 2007 Amended the articles of incorporation due to the change of the trade name
(changed to “Barclays Global Investors Co., Ltd.”)
September 30, 2007 Amended the articles of incorporation due to the change of a method for
public notice
December 27, 2007 Amended the articles of incorporation to change the purpose for business
operation
July 1, 2008 Absorbed “Barclays Global Investors Services Co., Ltd.”, the company
under the same group and amended the amount of the capital
July 1, 2008 Amended the articles of incorporation to place additional descriptions
concerning Share Handling Regulations
June 22, 2009 Amended the articles of incorporation for the change of the Company’s
head quarter’s address
December 2, 2009 Merged with BlackRock Japan Co., Ltd. Changed the trade name (changed
to “BlackRock Japan Co., Ltd.”) and amended the articles of incorporation
April 1, 2011 Amended the articles of incorporation and the amount of the capital prior
to the implementation of the absorption-type merger with BlackRock
Securities Co., Ltd., the company under the same group
October 5, 2013 Amended its articles of incorporation, and acquired the real 3estate
investment business from MGPA Japan LLC
December 1, 2014 Amended the articles of incorporation to change the financial period from
March 31 to December 31.
iShares MSCI Japan High Dividend ETF
Trust Deed
BlackRock Japan Co., Ltd.
1
Open-type Securities Investment Trust
iShares MSCI Japan High Dividend ETF
Basic Investment Policy
The Management Company separately defines the Basic Investment Policy pursuant to the provisions
of Article 23 of the Trust Deed as follows.
1. Basic Policy
iShares MSCI Japan High Dividend ETF (the “Fund”) seeks to provide performance that closely
corresponds to the performance of MSCI Japan High Dividend Index (the “Index”) by generally
investing in stocks incorporated and determined to constitute in the Index.
2. Management Methods
(1) Objects of Investment
The Fund invests primarily in stocks incorporated in, and determined to be incorporated in, the Index.
(2) Investment Attitudes
(i) The Fund seeks to provide performance that closely corresponds to the performance of the Index.
(ii) Equity weighting adjustments will be made in any of the following cases.
- In case there is a change to the component stocks of the Index or an adjustment to the
constituent index ratio of the component stocks, or such adjustment is published.
- In case the calculation method for the Index is revised.
- In case an additional trust or redemption is executed for the Fund.
- In case the Management Company deems necessary to achieve the investment in accordance
with this investment policy
Any surplus funds that may arise during the course of an adjustment may be managed using a
call loan, etc. until the funds are invested in stocks.
(iii) The Fund wholly or partly authorises BlackRock Institutional Trust Company, N.A. to make
orders for lending of stocks.
(iv) The Fund may not be able to be managed as indicated above because of trends regarding funds
or market conditions or remaining trust term.
(3) Investment Restrictions
(i) As a general rule, the ratio of investment in assets other than stocks shall be less than 50% of the
total amount of the trust property. However, the aforesaid management may not be achieved if
preparations for redemption have been started, if the size of the trust property becomes a level
that hinders the management, or if other unavoidable circumstances occur after the initial
inception date of the Fund.
(ii) Any stock, subscription warrant, and share option certificate in which the Management Company
instructs to invest shall be such that are issued by an issuing company of a stock listed on a
financial instruments exchange (including those scheduled to be listed on a financial instruments
exchange) or registered in the registry of over-the-counter traded securities (including those
scheduled to be registered in the registry of over-the-counter traded securities) and that are
incorporated in, and determined to be incorporated in, the Index, provided, however, that this
does not apply to stocks acquired through shareholder allotment. Although stocks that are
excluded from the Index are basically and promptly sold by taking into account market conditions
and other factors, it is not possible to promptly sell such stocks due to liquidity of such stocks or
other reasons.
(iii) As a general rule, no investment is made in the assets denominated in foreign currencies.
(iv) To contribute to the efficient management of trust property, an instruction to loan stocks that
belong to the trust property may be given within the limit prescribed in Article 26 of Trust Deed.
3. Income Distribution Policy
2
As a general rule, the aggregate of dividend income (meaning the dividends, fees for lending securities
and other similar incomeless interest on payments) after deduction of the expenses will be distributed
semiannually at the end of each financial period (February 9 and August 9, in principle).
4. Other Characteristics of the Fund
(i) Units are listed.
(ii) Creation/redemption of units are conducted based on a unit called “Creation Unit” or its integral
multiples specified by the Management Company. “Creation Unit” is a unit represented by a
number of units specified by the Management Company to conduct creation/redemption of units.
3
Subsequently offered Securities Investment Trust
iShares MSCI Japan High Dividend ETF
Trust Deed
Article 1 [Type of Trust, Management Company and Trustee, Entrustment of Trust Administration]
This trust is a securities investment trust, with BlackRock Japan Co., Ltd. as the Management
Company and Mitsubishi UFJ Trust and Banking Corporation as the Trustee.
(ii) This trust shall be governed by the Trust Act (Act No. 108 of 2006).
(iii) The Trustee may enter into a Trust Deed, with respect to part of the process of trust administration,
in the form of entrustment of trust administration pursuant to Article 28, Paragraph 1 of the Trust Act,
with a financial institution that has received authorisation for engagement in the trust business
provided in Paragraph 1 of Article 1 of the Act on Concurrent Operation of Trust Business by a
Financial Institution (including its interested party (that is, an interested party prescribed in Item 1 of
Paragraph 2 of Article 29 of the Trust Business Act applied mutatis mutandis to Paragraph 1 of Article
2 of the Act on Concurrent Operation of Trust Business by a Financial Institution, and the same applies
hereinafter in this Article)), and make the entrustment thereof.
(iv) Assignment of operations to an interested party mentioned in the preceding paragraph will be
made when such assignment does not hinder the protection of the unitholders.
Article 2 [Purpose of Trust and Equivalent Amount]
The Management Company shall place in trust, securities and money equivalent to a total value of no
more than 100 billion yen for the purpose of earning income for unitholders, and the Trustee shall
undertake them upon trust.
Article 3 [Maximum Value of Trust Funds]
The Management Company may, based on agreement reached with the Trustee, add trust funds up to
a total equivalent value of no more than 10 trillion yen in securities and money.
(ii) The Management Company may, based on agreement reached with the Trustee, change the
maximum value described in the preceding paragraph.
Article 4 [Trust Term]
This trust shall have no term, provided, however, that this trust may be terminated pursuant to the
provisions of Paragraphs (i) and (ii) of Article 55, Paragraph (i) of Article 57, Paragraph (i) of Article
58 and Paragraph (ii) of Article 60.
Article 5 [Type of Solicitation of Offer for Creation of Units]
The solicitation of an offer for creation of units relating to this trust falls under Item (i) of Paragraph
3 of Article 2 of the Financial Instruments and Exchange Act and shall be made by means of a public
offering provided in Paragraph 8 of Article 2 of Act on Investment Trusts and Investment Corporations.
Article 6 [Listing on Financial Instruments Exchange]
The Management Company shall, with respect to units of this trust, apply for listing on the Financial
Instruments Exchange provided in the Attachment of the Trust Deed (the Financial Instruments
Exchange Market provided in Paragraph 16 of Article 2 of the Financial Instruments and Exchange
Act; the same applies hereinafter,) and the units shall be listed based on the authorisation received
from the Financial Instruments Exchange according to the regulations and rules provided for in the
Financial Instruments Exchange.
(ii) The Management Company shall, when the units of this trust are listed, comply with the rules and
regulations provided for the Financial Instruments Exchange in the preceding paragraph, and adhere
to the termination of listing or suspension of sales and purchase transactions and any other action taken
against the units in accordance with the regulations and rules of the Financial Instruments Exchange.
Article 7 [Definitions]
In the Trust Deed herein, definitions of the terms in the following items shall be as defined under each
4
item.
1. “Total Net Asset Value” is the value of total assets minus the value of total liabilities.
2. “Total Assets Value” is the aggregated mark-to-market value of assets (excluding substitute
securities for received cash collateral) that belong to the trust property derived in accordance with
the respective laws and regulations as well as the rules of The Investment Trusts Association,
Japan.
3. “Net Asset Value” is the amount derived by dividing Total Net Asset Value by the total number of
units as of the calculation date.
4. “Dividend and Other Income” refers to the amount derived by deducting interest paid from the
aggregated value of dividends received, stock dividends, interest income and other income.
Article 8 [Initial Unitholders]
The unitholders at the time of initial conclusion of the Trust Deed and of additional trust placed shall
be the authorised participants and the parties applying for creation of units of this trust as specified by
the authorised participants provided in Paragraph (i) of Article 17, and units split as per Article 9 shall
belong to the creation applicants of units in proportion to the number of units applied for creation.
Article 9 [Splits and Re-splits of Units]
The Management Company shall split, with respect to the units arising as a result of trust provided in
Article 2, up to no more than the units equivalent to 100 billion yen, and with respect to units arising
as a result of additional trust placed, to the number of units of additional trust in Article 11 for every
additional trust made, equally and respectively.
(ii) The Management Company may, based on discussion with the Trustee, re-split equally the units
as of a certain date.
Article 10 [Value of Initial Units]
The value of a unit issued at the time of inception of trust shall be the closing price of MSCI Japan
High Dividend Index (the “Index”) on one (1) business day prior to the date of conclusion of the Trust
Deed multiplied by 1 yen and rounding off any numbers below 1 yen.
Article 11 [Establishment of Additional Trust]
Additional trust shall be established by securities and cash equivalent to the amount derived by taking
the Net Asset Value on one (1) business day prior to the date of establishing additional trust and
multiplying it by an integral multiple of a certain number of units specified by the Management
Company relating to the additional trust (the “Creation Unit”).
Article 12 [Accounting for Additional Trust Assets]
Additional trust assets shall be accounted for by recognising the amount of difference between the
amount of additional trust and the amount corresponding to the principal as the difference on additional
trust.
Article 13 [Accounting for Redemption of Units for Stocks]
In redeeming units in exchange for stocks defined in Article 47, Creation Unit is adjusted to prevent
arising of any difference between the amount derived by multiplying the number of units comprising
the Creation Unit against the Net Asset Value as of the date of accepting the application for redemption
and the total market value of stocks corresponding to the principal.
Article 14 [Substance of Units on Different Trust Date/Time]
No variance arises as a result of differences in trust dates/time with respect to the units of this trust.
Article 15 [Jurisdiction Over Units and Non-Issuance of Unit Certificates]
All units of this trust shall be governed by the provisions of the Act on Book-Entry of Company Bonds,
Shares, etc. (the “Book-Entry Act”), and the jurisdiction of the units shall be determined based on the statement or recording made on the book-entry account registry of a book-entry institution to which
5
the Management Company had given its consent to handle the units of this investment trust (the
“Book-entry Institution” provided in Article 2 of the Book-Entry Act, and hereafter referred to as
“Book-entry Institution”) and of a subordinate account management institution of the aforesaid Book-
entry Institution (the “Account Management Institution” provided in Article 2 of the Book-entry Act,
and hereafter referred to, inclusive of Book-entry Institution as “Book-entry Institution, etc.”) (these
units determined based on the statement or recording made on the book-entry account registry are
hereafter referred to as “Book-entry Units”).
(ii) The Management Company shall not issue unit certificates that represent Book-entry Units, in case
the designation from the competent minister as a Book-entry Institution that handles the units of this
trust is cancelled or the designation is no longer in effect with the exception of when there is no party
to succeed the book-entry business of the Book-entry Institution or there is an unavoidable
circumstance.
Unitholders shall not, unless in cases where unit certificates are issued due to an avoidable
circumstance, etc. of the Management Company, request a change from bearer unit certificates to
registered unit certificates, a change from registered unit certificates to bearer unit certificates, or a
reissuance of unit certificates.
(iii) The Management Company shall, with respect to units split pursuant to the provisions of Article
9, notify the Book-entry Institution of matters provided for in the Book-entry Act to newly state or
record on the book-entry account registry of Book-entry Institution, etc. The Book-entry Institution,
etc. shall, when the notification from the Management Company is made to the Book-entry Institution,
newly state or record on the book-entry account registry, maintained in accordance with the provisions
of the Book-entry Act.
Article 16 [Notification by Trustee Concerning Establishment of Units]
The Trustee shall, when receiving a notification on receipt or book-entry executed with regard to the
portfolio composition file at the time of the conclusion of the Trust Deed (stocks necessary for
subscribing for the number of units equivalent to one (1) Creation Unit that correspond to the stocks
specified by the Management Company as issues constituting the Index and money; hereafter referred
to as the “PCF”), notify the Book-entry Institution to the effect that initial trust was established.
(ii) The Trustee shall, when receiving a notification on receipt or book-entry executed with regard to
the PCF relating to additional trust, notify the Book-entry Institution to the effect that additional trust
was placed.
Article 17 [Numbers and Amounts of Application of Units]
The Management Company may respond to the application for creation of units to be split pursuant to
the provisions of Paragraph (i) of Article 9 submitted by the Authorised Participant (which means a
Type I Financial Instruments Business Operator (which means any person engaged in Type I Financial
Instruments Business as defined in Paragraph 1 of Article 28 of the Financial Instruments and
Exchange Act) specified by the Management Company; the same applies hereinafter) and any party
applying for creation of no less than a certain number of units specified by the Authorised Participant
(the “Creation Applicant”).
(ii) An Authorised Participant may broker the submission of the application for creation of units to be
split pursuant to the provisions of Paragraph (i) of Article 9.
(iii) The Management Company shall present the PCF to the Authorised Participant one (1) business
day prior to the date of application for creation.
(iv) The Authorised Participant shall present the PCF to the Creation Applicant for which the
Authorised Participant serves as a broker for the application for creation.
(v) In the case of the first paragraph above, the Management Company accepts the application for
creation of units in the number equivalent to an integer multiple of Creation Unit in exchange for
stocks and cash equivalent to the stocks specified by the Management Company as issues comprising
the Index by the time specified in the Attachment of the Trust Deed on the date of the application for
creation.
(vi) The value of units in the case of the first paragraph above shall be the Net Asset Value as of the date of the application for creation. The Authorised Participant may charge the amount corresponding
6
to the individually defined brokerage commission and consumption tax, etc. on the brokerage
commission.
(vii) Notwithstanding the provisions of Paragraph (v) above, the Management Company may not
respond to the application for creation of units for the dates and periods in the following items. In such
a case, the PCF is not presented.
1) For a period of two business days, beginning two business days prior to the final date of calculation
period provided in Article 39 (or, if the final date of calculation period falls on a holiday, for a
period of three business days, beginning three business days prior to the final date of calculation
period)
2) In the event that Management Company determines the Fund cannot be managed according to the
Fund’s investment policies provided in Article 23 due to unavoidable circumstances.
3) For a period of three business days, beginning one business day prior to the ex-dividend or ex-
rights day of any constituents of the Index.
4) For a period of three business days, beginning one business day prior to the rebalance day for
constituents of the Index, or the day the number of stocks are changed.
5) For a period, beginning one business day prior to the delisting day (due to the share transfer and
merger of any constituents of the Index) and ending one business day after the Index inclusion
day for new shares (due to such transfer and merger).
6) On any day on which trading of constituents of the Index is suspended.
7) For a period of five business days prior to the date of trust termination, if this trust terminates.
8) Any event other than in 1) through 7) above in which the Management Company determines the
Fund’s operations may be undermined due to unavoidable circumstances.
(viii) Notwithstanding the provisions of the first paragraph above, in the event that the shares of issues
provided in Paragraph (v)) include stocks issued by an Authorised Participant or a Creation Applicant,
or stocks used by its parent company (the parent company defined in Item 4 in Paragraph 1 of Article
2 of the Companies Act; the same applies hereinafter), the Authorised Participant or the Creation
Applicant shall, in replacement of such stocks, create units in a certain number by cash equivalent to
such stocks and cash corresponding to the expenses required for the creation under the trust property.
In the event the value of the issues provided in Paragraph (v) fall short of the value of units issued in
a certain number of units, cash shall be attributed to only the difference thereof.
(ix) In the case of the preceding paragraph, the Authorised Participant shall notify the Management
Company to the effect thereof based on the method separately defined by the Management Company.
If this notification is not made at the time of application for creation, the Authorised Participant shall
be held liable for any damage arising to the trust property or other.
(x) If the component stocks of the Index in respect of the application for creation provided in Paragraph
(v) include stocks (in this paragraph, the “ex-dividend stocks”) with respect to which unit certificates
are delivered in response to the application for creation on the day specified by a person who may
receive dividends or subscribe for rights or on the business day immediately preceding such day after
the ex-dividend or ex-rights of such component stocks, notwithstanding the provisions of Paragraph
(v), the Management Company may accept the application for creation in cash in an amount equal to
the total market value of the specific issue of the ex-dividend stocks that are the component stocks of
the Index in respect of the application for creation. The total market value of specific issues in this
case will be the amount calculated by multiplying the closing price (or, if the closing price is not
available, a similar price) at the financial instrument exchanges of the ex-dividend stocks as of the
calculation date of the Net Asset Value provided in Paragraph (vi) by the number of the ex-dividend
stocks included in the component stocks of the Index in respect of the application for creation provided
in Paragraph (v), and in this case, the Management Company may charge the amount separately
designated by the Management Company as the amount equal to the expenses necessary for the trust
property to acquire such ex-dividend stocks.
(xi) The Creation Applicant in the first paragraph above shall present to the Authorised Participant at
the time of applying for creation or in advance, the account with a Book-entry Institution, etc. opened
for the Creation Applicant for the book-entry of units of this trust, and the increase in the number of
units relating to the application for creation is stated or recorded on the account. The Authorised Participant may state or record the increase in the number of units relating to the Creation Applicant
7
to the account in exchange for the delivery of the PCF or payment required for the application for
creation.
(xii) Notwithstanding the provisions of Paragraph (v), the Management Company may, in the event of
a suspension of trading on the Financial Instruments Exchange, of a suspension of settlement functions,
or of any other unavoidable circumstance, suspend the acceptance of application for creation of units,
cancel the application for creation already accepted, or both at its discretion.
(xiii) The Authorised Participant and Creation Applicant cannot cancel an application for creation
upon and any time after the Management Company has accepted the application for creation.
(xiv) The Authorised Participant shall deliver to the Management Company the stocks and cash
required for the application for creation by the deadline specified by the Management Company (the
“Delivery Deadline”).
(xv) The Management Company shall adjust the Creation Unit in cases where the appraised value of
stocks to be delivered by the Authorised Participant to the Trustee exceeds the value of units in integral
multiples of Creation Unit relating to the application for creation.
(xvi) If the Authorised Participants determine that it will be difficult for the Authorised Participants or
the applicants to deliver by the Delivery Deadline all or any part of the stocks or cash to be delivered
that constitute the creation unit as at the time of creation (such delivery, the “Whole or Partial
Delivery”), the Authorised Participants shall immediately notify the Management Company or the
Trustee to such effect.
(xvii) If the Management Company, based on the notification in the preceding item, determines that
Whole or Partial Delivery will not be possible within the period prescribed by the Management
Company as a period in which there is no likelihood of hindrance being caused to operations that are
in line with the “Basic Investment Policy” prescribed in Article 23, creation applications for or
redemptions of trust units, or any other operations of the trust, the Management Company may cancel
creation applications that have already been received from Authorized Participants or applicants.
(xviii) In the preceding item, if any damage arises to the trust property or otherwise due to the Whole
or Partial Delivery not being possible, the Authorized Participants will bear all liability in respect
thereof.
Article 18 [Statement or Recording Concerning Transfer of Units]
A unitholder shall, when transferring the units it owns, apply for book entry to a Book-entry Institution,
etc. relating to the book-entry account registry on which the units subject to the transfer is stated or
recorded.
(ii) In the case an application for book entry in the preceding paragraph is made, the Book-entry
Institution, etc. in the preceding paragraph shall state or record on the book-entry account registry
maintained, the decrease in the number of units owned by the transferor relating to the transfer and the
increase in the number of units owned by the transferee. In the case, however, where the Book-entry
Institution, etc. in the preceding paragraph is not the party that opened the receiving book-entry
account, the Book-entry Institution, etc. shall notify another Book-entry Institution, etc. that opened
the receiving book-entry account of the transferee (including the superior institution of the Book-entry
Institution, etc.) in accordance with the provisions of the Book-entry Act.
(iii) The Management Company may, with respect to the book entry provided in the first paragraph
above, establish dates or period of book-entry suspension in cases for example the Book-entry
Institution, etc. relating to the book-entry account registry on which the units of the unitholder to be
transferred are stated or recorded and the Book-entry Institution, etc. that opened the receiving book-
entry account of the transferee differ and when the Trustee deems it necessary to do so or determines
that there is an unavoidable circumstance.
Article 19 [Perfection of Transfer of Units]
Any transfer of units cannot be asserted to the Management Company and the Trustee unless based on
the statement or recording on the book-entry account registry provided in the preceding Article.
Article 20 [Types of Assets as Investment Objectives] The types of assets as investment objectives under this trust shall be as follows.
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1. Specified assets described below (“Specified Assets” refer to such provided in Paragraph 1 of
Article 2 of the Act on Investment Trusts and Investment Corporations; the same applies
hereinafter.)
(a) Securities
(b) Rights relating to Derivative Transactions (such provided in Paragraph 20 of Article 2 of the
Financial Instruments and Exchange Act, and only such provided under Articles 27 and 28 of
the Trust Deed.)
(c) Monetary claims (including deposits and call loans, and excluding items that fall under (a)
and (d) herein.)
(d) Promissory notes
2. Assets other than Specifies Assets below.
(a) Bills of exchange
Article 21 [Scope of Investment Instructions]
The Management Company shall give instructions to invest the trust property primarily in the
following securities (excluding the rights regarded as securities as provided in each of the items in
Paragraph 2 of Article 2 of the Financial Instruments and Exchange Act.)
1. Stocks and subscription warrants
2. Government bonds
3. Local government bonds
4. Bonds issued by a juridical person under a special legislation
5. Corporate Bonds (excluding subscription warrants of corporate bonds with subscription warrants
in which the subscription warrant and the bond is integrated (hereafter referred to as “Separable-
type Bond with Subscription Warrant.”))
6. Specified bonds provided in the Act on Securitisation of Assets (such provided under Item (iv) in
Paragraph 1 of Article 2 of the Financial Instruments and Exchange Act.)
7. Equity securities issued by an entity established under a special act (such provided under Item (vi)
in Paragraph 1 of Article 2 of the Financial Instruments and Exchange Act.)
8. Preferred equity securities provided in the Act on Preferred Equity Investment by Cooperative
Structured Financial Institutions (such provided under Item (vii) in Paragraph 1 of Article 2 of the
Financial Instruments and Exchange Act.)
9. Preferred equity securities and securities indicating preemptive rights for new preferred equity
investment prescribed in the Act on Securitisation of Assets (such provided in Item (viii) in
Paragraph 1 of Article 2 of the Financial Instruments and Exchange Act.)
10. Commercial paper
11. Subscription warrants (including subscription warrants of Separable-Type Bond with Subscription
Warrant; the same applies hereinafter) and share option certificates.
12. Securities or certificates issued by a foreign state or foreign entity and have characteristics
comparable to the securities or certificates in each of the preceding paragraphs.
13. Units of investment trusts or foreign investment trusts (such provided in Item (x) in Paragraph 1 of
Article 2 of the Financial Instruments and Exchange Act.)
14. Investment securities or investment corporation debentures, or foreign investment securities (such
provided in Item (xi) in Paragraph 1 of Article 2 of the Financial Instruments and Exchange Act.)
15. Beneficiary securities of foreign loan claim trust (such provided under Item (xviii) in Paragraph 1
of Article 2 of the Financial Instruments and Exchange Act.)
16. Securities or certificates which indicates options (such provided under Item (xix) in Paragraph 1
of Article 2 of the Financial Instruments and Exchange Act, and limited to those pertaining to
securities)
17. Certificates of deposits (such provided under Item (xx) in Paragraph 1 of Article 2 of the Financial
Instruments and Exchange Act.)
18. Certificates of deposits issued by a foreign entity
19. Beneficiary securities of specified monetary trust (only beneficiary securities of certificates issuing
trusts provided under Item (xiv) in Paragraph 1 of Article 2 of the Financial Instruments and Exchange Act.)
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20. Mortgage securities (such provided under Item (xvi) in Paragraph 1 of Article 2 of the Financial
Instruments and Exchange Act.)
21. Beneficial interests of loan claim trusts that should be presented as beneficiary securitiesof
certificates-issuing trusts prescribed under Item (xiv) in Paragraph 1 of Article 2 of the Financial
Instruments and Exchange Act.)
22. Rights for a foreign party that has characteristics comparable to the securities described in the
preceding paragraph.
Securities or certificates in Item 1 and securities or certificates in Items 12 and 17 that have the
characteristics of securities or certificates in Item 1 shall be referred hereinafter as “Stocks,” securities
in Item 2 through Item 6 and securities or certificates in Item 12 and Item 17 that have the
characteristics of securities in Item 2 through Item 6 shall be referred hereinafter as “Public and
Corporate Bonds”, and securities in Items 13 and 14 shall be referred hereinafter as “Investment Trust
Securities.”
(ii) The Management Company may give instructions to invest the trust money in securities described
in the preceding paragraph as well as in financial instruments listed below (including the rights
regarded as securities as provided in each of the items in Paragraph 2 of Article 2 of the Financial
Instruments and Exchange Act.)
1. Deposits
2. Specified monetary trusts (excluding unit certificates of beneficiary securities of certificates-
issuing trusts provided in Item (xiv) in Paragraph 1 of Article 2 of the Financial Instruments and
Exchange Act.)
3. Call loans
4. Negotiable instruments traded on the discount market
5. Beneficial interests of loan claim trusts prescribed in Item (i) in Paragraph 2 of Article 2 of the
Financial Instruments and Exchange Act
6. Rights for a foreign party that have the characteristics of the rights in the preceding item
(iii) The Management Company shall not give instructions to make any investments that causes the
total market value of the Investment Trust Securities (excluding exchange-traded funds) that belong
to the trust property to be higher than five-hundredths of the Total Net Asset Value of the trust property.
Article 22 [Dealings with Interested Parties, etc.]
The Trustee may, under the instruction of the Management Company, invest in the types of assets set
out in the preceding two Articles and transactions set out in Article 26 through Article 28, Article 31,
Article 35 and Article 36 and other similar acts between the trust property and the Trustee (including
cases when the Trustee acts as an agent for a third party in transactions or other acts that are made with
a third party for the trust property) and its interested parties (that is, an interested party prescribed in
Article 29, Paragraph 2, Item 1 of the Trust Business Act applied mutatis mutandis to Article 2,
Paragraph 1 of the Act on Provision of Trust Business by a Financial Institution, and the same
definition applies hereinafter in this paragraph, the following paragraph and Article 32), trustees of
trust business to be prescribed in Paragraph (i) of Article 32, and their interested parties or other trust
property of the Trustee to the extent such investment will not conflict with the Trust Business Act, the
Act Concerning Investment Trusts and Investment Companies and other related laws and regulations,
if such investment or transactions will not prejudice the protection of the unitholders and will not
conflict with the Trust Business Act, the Act Concerning Investment Trusts and Investment Companies
and other related laws and regulations.
(ii) The Trustee may make transactions and other acts that it is entitled to make as part of trust
operations pursuant to its authority as the Trustee of the Trust in its own account or that of its interested
party. Similarly, any interested party of the Trustee may make such acts in the account of the interested
party.
(iii) The Management Company may order investment in the types of assets set out in the preceding
two Articles and transactions set out in Article 26 through Article 28, Article 31, Article 35 and Article
36 and other similar acts between the trust property and the Management Company and its directors,
executive officers and interested parties (which mean the parent companies and subsidiaries defined in Article 31-4, Paragraph 3 and Paragraph 4 of the Financial Instruments and Exchange Act; the same
10
definition applies hereinafter) or other trust property with respect to which the Management Company
gives investment instructions if such transactions will not conflict with the Financial Instruments and
Exchange Act, the Act Concerning Investment Trusts and Investment Companies and other related
laws and regulations and the Trustee may make such investment, transactions and acts upon
instructions by the Management Company.
(iv) When making an investment, a transaction or the acts mentioned in the preceding three paragraphs,
neither the Management Company nor the Trustee will give unitholders the notice prescribed in
Paragraph 3 of Article 31, and Paragraph 3 of Article 32 of the Trust Act.
Article 23 [Investment Policy]
The Management Company shall, in managing the trust property, give instructions in accordance with
the investment policy separately set forth.
Article 24 [Authorisation for Management]
In case of lending of stocks pursuant to Article 26, the Management Company shall wholly or partly
authorise the following person to make orders for lending of stocks.
Trade name: BlackRock Institutional Trust Company, N.A.
Address: San Francisco, CA, U.S.A.
(ii) In case of lending of stocks, the fees received by the person designated in the preceding paragraph
shall be paid out of the fees to be received pursuant to Article 43, and the amount of the fees shall be
separately determined by the Management Company, such person designated in the preceding
paragraph and the Trustee.
(iii) Notwithstanding the first paragraph, if the entity authorised in Paragraph (i) of this Article violates
any law, exercises the authorisation to make orders for management which results in breaching the
Trust Deed, or causes a material loss to the trust property, or it is otherwise deemed necessary for
reasonable grounds, the Management Company may discontinue its authorisation to the person to
make orders for management or modify the content of the authorisation.
Article 25 [Scope of Stocks for Investment]
Stocks, subscription warrants, and share option certificates in which instructions are given to invest
by the Management Company shall be such issued by issuers whose stocks are listed on Financial
Instruments Exchanges, provided, however, that this does not apply to stocks, subscription warrants
and share option certificates acquired through shareholder allotment or bondholder allotment.
(ii) Notwithstanding the provisions of the preceding paragraph, the Management Company may give
instructions to invest in stocks, subscription warrants, and share option certificates scheduled to be
listed or registered if such plan of listing and registration can be confirmed in a prospectus or any other
related document.
Article 26 [Instruction and Scope for Lending of Stocks]
The Management Company (including the person designated in Article 24; the same applies in this
Article) may, in order to contribute to the efficient management of the trust property, give instructions
to lend stocks that belong to the trust property to the extent prescribed in the following paragraphs.
(ii) Lending of stocks shall be such that the total market value of lending stocks at the time of lending
does not exceed 50 percent of the total market value of stocks held under the trust property.
(iii) In the event the maximum value prescribed in the preceding paragraph will be exceeded, the
Management Company shall promptly instruct to cancel part of the contract corresponding to the
amount of excess.
(iv) The Management Company shall give an instruction to accept collateral if it deems necessary to
do so in lending stocks.
Article 27 [Instructions and Scope for Futures Transactions and others]
The Management Company may, in order to contribute to the efficient management of the trust
property and avoid price fluctuation risks, give instructions to enter into, at Financial Instruments Exchanges in Japan, securities futures transaction (such prescribed under Item (iii)(a) in Paragraph 8
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of Article 28 of the Financial Instruments and Exchange Act), securities index futures transactions
(such prescribed under Item (iii)(b) in Paragraph 8 of Article 28 of the Financial Instruments and
Exchange Act) and securities options transactions (such prescribed under Item (iii)(c) in Paragraph 8
of Article 28 of the Financial Instruments and Exchange Act), and to enter into transactions
comparable to the aforesaid transactions at Financial Instruments Exchanges in foreign countries.
Transactions with options shall be handled as part of options transactions (the same applies hereinafter).
(ii) The Management Company may, in order to contribute to the efficient management of the trust
property and to avoid price fluctuation risks, give instructions to enter into futures transactions and
options transactions underlying interest rates at Financial Instruments Exchanges in Japan and to
execute transactions comparable to the aforesaid transactions at exchanges in foreign countries.
Article 28 [Instructions and Scope for Swap Transactions]
The Management Company may, in order to contribute to the efficient management of assets that
belong to the trust property and to avoid price fluctuation risks, give instructions to enter into
transactions to exchange, under a certain set of conditions, different interest rates or different interest
rate and principal thereof (the “Swap Transactions”.)
(ii) In giving instructions on Swap Transactions, the term of contract of the transactions shall not, as a
general rule, exceed the term of trust prescribed in Article 4, provided however, that this may not apply
for such transactions that can be fully cancelled within the term of this trust.
(iii) Valuation of Swap Transactions shall be performed using the price computed by the counterparty
of the transaction contract based on the market prevailing interest effective rates and other factors.
(iv) The Management Company may give an instruction to pledge or accept collateral if it is deemed
necessary to pledge or accept collateral in executing a Swap Transaction.
Article 29 [Investment Restrictions on Derivative Transactions]
The amount of derivative transactions as calculated by a reasonable method set forth under the rules
of the Investment Trusts Association, Japan will not exceed the total net asset value of the trust property.
Article 30 [Investment Restrictions for Hedging the Concentration of the Credit Risk]
The ratio of stock exposure, bond exposure and derivative exposure to a person prescribed by the rules
of the Investment Trusts Association, Japan to the Total Net Asset Value of the trust property will not,
in principle, exceed ten-hundredths respectively, or twenty-hundredths in total, and if such ratio
exceeds such rate, the Management Company shall make adjustments so that such ratio is within such
rate in accordance with the rules of the Investment Trusts Association, Japan.
Article 31 [Instructions and Scope for Margin Transactions]
The Management Company may, in order to contribute to the effective management of the trust
property, give instructions to sell stocks through margin transactions. With respect to the settlement of
such sale of stocks, an instruction to deliver or buy back the stocks may be given.
(ii) Instructions for margin transactions in the preceding paragraph shall be such that the total market
value of the position relating to the sale shall fall within the total Net Asset Value of the trust property.
(iii) In the event the total market value of the position relating to the sale in the preceding paragraph
is to exceed the total Net Asset Value of the trust property, the Management Company shall promptly
give an instruction to settle part of the sale that corresponds to the amount of excess.
(iv) The Management Company may give instructions to pledge or accept collateral if it is deemed
necessary to pledge or accept collateral in executing the transaction provided in the first paragraph.
Article 32 [Delegation of Fiduciary Services]
When the Trustee delegates fiduciary services defined in Paragraph 1 of Article 22 of the Trust
Business Act with respect to part of its fiduciary functions in consultation with the Management
Company, the Trustee will select entities which fall under all of the following standards (including
interested parties of the Trustee) as its trustees:
1. Entities for which there are no concerns regarding their continuous conduct of the delegated functions in light of their creditworthiness;
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2. Entities that are deemed to be able to surely process the delegated functions in light of their past
results and other factors relating to the delegated functions;
3. Entities that have already arranged a system for a separate management of assets belonging to
the trust property to be delegated and its own and other assets; and
4. Entities that have already arranged a system for appropriate conduct of operations relating to
internal management.
(ii) When selecting trustees provided for in the preceding paragraph, the Trustee will confirm that each
of the prospective trustees falls under the standards set out in the items of the preceding paragraph.
(iii) Notwithstanding the preceding two paragraphs, the Trustee may delegate operations set out in the
following items to any person or entity (which may be an interested party of the Trustee) deemed
appropriate both by the Trustee and the Management Company, regarding:
1. Operations relating to custody of the trust property;
2. Operations for utilisation or improvement of the trust property to the extent that the characteristics
of the trust property will not be changed;
3. Operations relating to acts necessary for disposal of the trust property and achievement of other
trust purposes only under instructions of the Management Company; and
4. Acts which have supplementary functions for the Trustee’s conduct of operations.
Article 33 [Commingled Deposit]
Certificates of deposits or commercial papers issued in a foreign country that were acquired from a
financial institution or a Type I Financial Instruments Business Operator (which means any party
similar to a person engaged in Type I Financial Instruments Business that is any juridical person
established in compliance with the laws and regulations of a foreign country, which is equivalent to
the aforesaid party; the same applies hereinafter in this Article) in a transaction for which the trade
amount and redemption amount, etc. are contracted in yen and settled in yen, may be deposited in
commingled form under the name of the financial institution or the Type I Financial Instruments
Business Operator with the depositary institution with which the financial institution or the Type I
Financial Instruments Business Operator has concluded a custody agreement.
Article 34 [Withholding of Registration, etc. and Recording etc. of Trust Property]
With regard to the trust property for which this trust can be registered or recorded, registration or
recording of trust shall be made, provided however, that the registration or recording of trust may be
withheld if approved by the Trustee.
(ii) Notwithstanding the conditional clause in the preceding paragraph, the registration or recording
shall be promptly made for the protection of unitholders or if deemed necessary to do so by the
Management Company or the Trustee.
(iii) With regard to the trust property for which a statement or recording can be made to the effect that
assets belong to the trust property, the statement or recording to the effect shall be made, and
concurrently, such assets shall be managed separately by means of a method that clearly indicates the
calculation. The assets, however, may simply be managed separately by means of a method that clearly
indicates the underlying calculation if approved by the Trustee.
(iv) Personal Assets (excluding money) may be managed separately by means of a method that can be
outwardly segregated or a method that clearly indicates the underlying calculation.
Article 35 [Instructions to Sell Securities and Others]
The Management Company may give instructions to sell securities and other assets that belong to the
trust property.
Article 36 [Instructions for Reinvestment]
The Management Company may give instructions to reinvest sales proceeds, distribution money from
liquidation of stocks, dividends from stocks and other income.
Article 37 [Attribution of Income and Loss] Any income and loss arising to the trust property as a result of acts based on instructions of the
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Management Company shall belong to the unitholders.
Article 38 [Advancement of Funds by Trustee]
In case of issuance of new shares or allotment of shares with respect to stocks that belong to the trust
property, the Trustee may advance funds if requested by the Management Company.
(ii) If estimates of amounts of distribution on liquidation of stocks, dividends on stocks or any other
receivable that belongs to the trust property can be made before the date of termination of this trust,
the Trustee may advance these amounts to be incorporated in the trust property.
(iii) With regard to the settlement of advances in the preceding two paragraphs and interest thereof,
the Trustee and the Management Company shall separately define such settlement and interest as they
arise based on discussions.
Article 39 [Calculation Period of Trust]
The calculation period of this trust shall in principle be the period from February 10 to August 9 of
each year, and from August 10 of each year to February 9 of the following year, provided, however,
that the first calculation period shall be from the execution date of the Trust Deed to August 9, 2016,
and the final date of the calculation period shall be the termination day of the trust term when this
trust is terminated in accordance with the provisions of the proviso of Article 4.
Article 40 [Report on Trust Property]
The Trustee shall calculate income and loss at the end of every calculation period, prepare a report on
the trust property and submit the report to the Management Company.
(ii) The Trustee shall perform the final calculation upon termination of trust, prepare a report on the
trust property and submit the report to the Management Company.
(iii) The Trustee will make reports prescribed in the preceding two paragraphs instead of reports to
unitholders which are prescribed in Paragraph 3 of Article 37 of the Trust Act.
(iv) No unitholder is entitled to apply to the Trustee for access to or reproduction of information
prescribed in Paragraph 1 of Article 38 of the Trust Act except for information indispensable for
preparation of documents or electronic records prescribed in Paragraph 2 of Article 37 of the Trust Act
and other material information relating to the trust and information which may do no harm to the
interests of persons other than the unitholder.
Article 41 [Expenses Concerning Trust Administration]
Taxes relating to the trust property, various expenses required in trust administration and interest on
advances made by the Trustee shall be borne by the unitholders and paid from the trust property.
(ii) Audit expenses in connection with the trust property and consumption tax, etc. in connection with
the audit expenses shall be paid from the trust property on the final day of the initial six-month period
of the first calculation period and at the end of every calculation period or at the time of termination
of this trust.
(iii) In addition to the expenses provided in the preceding two paragraphs, the following expenses
(including consumption tax, etc. in connection with such expenses) shall be borne by the unitholders
and paid from the trust property:
1. expenses for listing of units; and
2. fees for use of trademark of the Index.
(iv) The Management Company may pay the expenses provided in the preceding paragraph for the
trust property, and may be reimbursed for the amount of payment out of the trust property. In lieu of
the receipt of the amount to be actually paid, the Management Company may, after reasonably
estimating the amount of such expenses, receive the maximum amount to be actually, or expected to
be, paid at the fixed rate or in the fixed amount out of the trust property.
(v) If the maximum amount, fixed rate or fixed amount of the expenses is determined pursuant to the
preceding paragraph, the Management Company may change such maximum amount, fixed rate or
fixed amount during the trust term in light of the size of the trust property and other matters.
(vi) If the fixed rate or fixed amount of the expenses is determined pursuant to the preceding two paragraphs, the amount of such expenses shall be recorded based on the Total Net Asset Value of the
14
trust property every day throughout the calculation period provided in Article 39. The amount
corresponding to the expenses and consumption tax, etc. associated with such expenses shall be paid
out of the trust property on the final day of the initial six-month period of the first financial period and
at the end of each financial period or at the time of termination of this trust.
Article 42 [Total Amount of Trust Fees, etc.]
The total amount of trust fees for the Management Company and the Trustee shall be the amount
derived by multiplying a ratio within 19/10,000 per annum against the Total Net Asset Value of the
trust property every day throughout the calculation period provided in Article 39.
(ii) The fees in the preceding paragraph shall be paid from the trust property on the final day of the
initial six-month period of the first calculation period or at the end of every calculation period or at
the time of termination of this trust, and the distribution between the Management Company and the
Trustee shall be separately defined.
(iii) The amount corresponding to the consumption tax, etc. associated with the trust fees in the first
paragraph above shall be paid from the trust property when paying the trust fees.
Article 43 [Fees for Lending of Securities]
In addition to the trust fees provided in Article 42, in the case of lending securities, the Management
Company, the person designated in Paragraph (i) of Article 24 and the Trustee shall receive the amount
equal to the total income arising from lending securities multiplied by the ratio within fifty-hundredths.
Such fees shall be paid on a monthly basis out of the trust property, and allotment of such fees between
the Management Company, the person designated in Paragraph (i) of Article 24 and the Trustee shall
be determined separately.
(ii) Consumption tax, etc. imposed on the fees relating to the Management Company and the Trustee
set out in the first paragraph above shall be paid out of such fees.
Article 44 [Income Distribution Policy]
Dividend and other income arising from the trust property and reserve for distribution carried forward
from the previous period shall be distributed to unitholders at every calculation period of trust after
deducting the total amount of trust fees and expenses provided in each paragraph of Article 41, and
consumption tax, etc. imposed thereon (in this Article, the “Costs”) and fully compensating for reserve
for distribution, if any, carried forward from the previous period. If, however, for purposes of making
adjustments to the income distribution amount, part or all of the amount is retained within the trust
property, the amount may be put aside as reserve for distribution and be appropriated to the distribution
in the following period or thereafter. In the event expenses and negative amount of reserve for
distribution cannot be fully deducted, the difference shall be carried forward to the following period
as negative amount of reserve for distribution.
(ii) The total amount of income arising from the trust property at the end of every calculation period
described in item 1) below shall, if after deducting the loss described in 2) there is loss carried forward,
be carried forward to the next period after fully compensating for the loss.
1) Gain on purchase & sale of securities, gain on trading futures transactions, etc., gain on additional
trust, gain on redemption
2) Loss on purchase & sale of securities, loss on trading futures transactions, etc., loss on additional
trust, loss on redemption
Article 45 [Preparation of Register of Unitholders and Registration]
The Trustee shall prepare the register of unitholders of this trust, and register the personal name or
entity name, address, and individual number (meaning the individual number provided for in Article
2, Paragraph 5 of the Act on the Use of Numbers to Identify a Specific Individual in Administrative
Procedures; the same hereinafter) or corporate registration number (meaning the corporate registration
number provided for in the Article 2, Paragraph 15 of the same Act, or personal name or entity name
and address or location in the case of a unitholder who does not have an individual number or a
corporate registration number or who receives income distribution via a person in charge of handling payment as provided for in Paragraph 1 of Article 9-3-2 of the Act on Special Measures Concerning
15
Taxation; the same applies hereinafter) and other matters designated by the Trustee in the register of
unitholders with respect to the unitholders provided in Article 8.
(ii) The Trustee shall register the personal name or entity name, address, and individual number or
corporate registration number and other matters designated by the Trustee of the person who holds
units and who receives notice from the Book-entry Institution pursuant to the relevant laws and
ordinances such as the Book-entry Transfer Act and other various regulations as the holders of units
stated or recorded on the book-entry account registry of the Book-entry Institution, etc. The Trustee
may enter into a delegation agreement with the person determined by the Trustee to be appropriate
such as other securities agent companies, and delegate such person to prepare the register of
unitholders and make the registration in the register of unitholders.
(iii) Unitholders may request the registration in the register of unitholders provided in the first
paragraph above through a member of the Financial Instruments Exchange on which units of this trust
are listed (such member shall be limited to Account Management Institution; the same applies
hereinafter.). In this case, the member may charge the amount corresponding to the commission set by
the Account Management Institution and the consumption tax, etc. relating to the commission,
provided, however, that securities finance companies, etc. may perform the registration provided in
the preceding paragraph directly with the Trustee (or, if the Trustee delegates the preparation of the
register of unitholders pursuant to the first paragraph above, the person so entrusted).
(iv) The name registration provided in the preceding paragraph shall be suspended for a period of
fifteen (15) days from the day immediately following the last day of each financial period provided in
Article 39. If this trust terminates, the registration shall be suspended for a period of five (5) business
days immediately prior to the date of trust termination.
Article 46 [Payment of Distribution of Income]
Distribution of income will be paid out to any unitholder registered in the register of unitholders
provided in Article 45 as of the final date of the relevant financial period as a unitholder (a “Registered
Unitholder”) as of the final date of the relevant financial period.
(ii) The payment of income distribution provided in the preceding paragraph shall be made from the
day specified by the Management Company, which falls within forty (40) days of the completion of
every calculation period, by depositing the income distribution payment in the deposit account
specified in advance by the Registered Unitholder. If the Registered Unitholder separately enters into
an agreement regarding handling of the distribution of income with a member provided in Paragraph
(iii) of Article 45, the distribution of income shall be paid pursuant to such agreement.
(iii) In relation to the payment of distribution of income, the Trustee may delegate the person who has
been delegated to prepare the register of unitholders in accordance with the provisions of Paragraph
(i) of Article 45.
Article 47 [Liability of Trustee Regarding Issuance and Payment of Income Distribution to the
Management Company]
The Trustee shall, when there is an outstanding payable balance of income distribution after five (5)
years have passed since the initial date of payment provided in Paragraph (ii) of Article 46, pay the
amount to the Management Company.
(ii) After the payment of the distribution of income has been made to the Management Company
pursuant to the provisions of the preceding paragraph, the Trustee shall not be held liable for the
payment to the unitholders of the amount so paid.
Article 48 [Prescriptions Concerning Income Distribution, and Securities Subject to Redemption upon
Trust Termination and Repurchase Price]
In the event a unitholder has not claimed payment of income distribution for five years from the initial
date of payment provided in Paragraph (ii) of Article 46, such unitholder loses the right to claim
income distribution, and the money received by the Management Company from the Trustee shall
belong to the Management Company.
(ii) In the event a request for delivery of securities and cash subject to Redemption upon trust termination has not been made for ten (10) years from the date of trust termination, or a request for
16
repurchase has not been made for ten (10) years form the initial date of payment, the right to apply for
redemption is lost, and is placed under the Management Company.
Article 49 [Application for Redemption]
An Authorised Participant and any unitholder submitting an application for redemption for no less
than a certain number of units specified by an Authorised Participant (the “Redemption Applicant”)
may request the Management Company or the Authorised Participant, by means of the book-entry
units worth a total mark-to-market value of shares corresponding to the price of units, to redeem the
units relating to the application for the shares (the “Redemption”) by the time specified by the
Management Company in the Attachment of the Trust Deed on the date of acceptance of application
for Redemption.
(ii) An Authorised Participant may broker submission of an application for Redemption of units.
(iii) The Management Company shall present the PCF to the Authorised Participant one (1) business
day prior to the date of acceptance of application for Redemption.
(iv) The Authorised Participant shall present the PCF to the Redemption Applicant for which the
Authorised Participant brokers the submission of application for Redemption.
(v) Notwithstanding the provisions of the first paragraph above, the Management Company may not
respond, as a general rule, to applications for Redemption with regard to the dates and periods in each
of the following items. In such a case, the PCF is not presented.
16) For a period of two business days, beginning two business days prior to the final date of financial
period provided in Article 39 (or, if the final date of financial period falls on a holiday, for a period
of three business days, beginning three business days prior to the final date of financial period)
17) In the event that Management Company determines the Fund cannot be managed according to the
Fund’s investment policies provided in Article 23 due to unavoidable circumstances.
18) For a period of three business days, beginning one business day prior to the ex-dividend or ex-
rights day of any constituents of the Index.
19) For a period of three business days, beginning one business day prior to the rebalance day for
constituents of the Index, or the day the number of stocks are changed.
20) For a period, beginning one business day prior to the delisting day (due to the share transfer and
merger of any constituents of the Index) and ending one business day after the Index inclusion
day for new shares (due to such transfer and merger).
21) On the day trading of constituents of the Index is suspended.
22) For a period of five business days prior to the date of trust termination, if this trust terminates.
8) Notwithstanding the provisions of 1) through 7) above, in the event that the Management
Company determines the Fund’s operations may be undermined due to unavoidable circumstances.
(vi) The value of a unit provided in the first paragraph above shall be the Net Asset Value on the date
of acceptance of Redemption applications. In addition, the Authorised Participant may charge the
amount corresponding to the brokerage commission individually set and consumption tax, etc. relating
to the commission.
(vii) A unitholder submitting the application for Redemption in the first paragraph shall request the
Book-entry Institution, etc. with which the account is opened to delete the same number of Book-entry
Units as the number of units relating to the Redemption provided in the first paragraph of Article 50,
and a decrease of the number of units shall be stated or recorded on the account of the Book-entry
Institution, etc. in accordance with the provisions of the Book-entry Act.
(viii) With regard to units to be redeemed, the Trustee shall, pursuant to the instruction for Redemption
of the Management Company in the first paragraph of Article 50, perform the procedure for
elimination on the book-entry account registry and confirm the elimination provided in Article 51 as
a token of acceptance and deletion of Book-entry Units.
(ix) The Management Company shall adjust the Creation Unit in the event the value of shares to be
delivered exceeds the value of units in integral multiples of Creation Unit to be redeemed.
(x) The Management Company may suspend acceptance of Redemption applications, cancel the
acceptance of Redemption applications, or both, in the event of suspension of trading at a Financial
Instruments Exchange, of a suspension of settlement functions, or of any other unavoidable circumstance and when the Management Company deems it necessary to do so.
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(xi) If, based on the provisions of the preceding paragraph, the acceptance of Redemption applications
is suspended, the value of Redemption the application for which was accepted prior to the suspension
of acceptance and which the Management Company does not cancel shall be calculated in accordance
with the provisions of Paragraph (vi) assuming that the application for Redemption was accepted on
the initial calculation date of the Net Asset Value after the removal of suspension for acceptance.
(xii) Authorised Participants and Redemption Applicants may not cancel the application for
Redemption when and after the Management Company has accepted the application for Redemption.
Article 50 [Instruction, etc. for Redemption]
When an Authorised Participant or a Redemption Applicant presents Book-entry Units in an integral
multiple of one (1) Creation Unit to the Management Company or an Authorised Participant and
submits the application in the first paragraph of the preceding Article and the Management Company
accepts the application, the Management Company shall instruct the Trustee to redeem the units
relating to the application for shares equivalent to the value of the units.
(ii) Notwithstanding the provisions of the preceding paragraph, in the event the Authorised Participant
or the Redemption Applicant that submitted the application for Redemption is an issuing company of
shares of the stock, which is a constituent of the Index, or its subsidiary (the subsidiary provided in
Item (iii) in Paragraph 1 of Article 2 of the Companies Act), the Management Company shall give an
instruction to redeem the number of units derived by taking the number of units required for
Redemption and deducting the number corresponding to the total market value of the specific issue of
the issuer for the number of shares in integral multiples of the trading unit of the Financial Instruments
Exchange (excluding the stock of the issuing company). In this case, the total market value of specific
issues shall be the amount derived by taking the market value obtained in accordance with the
respective laws and regulations, and the rules of The Investment Trusts Association, Japan and
deducting the amount corresponding to the expenses relating to the sale of shares, which was obtained
by multiplying a ratio separately defined against the total market value.
(iii) If the specific issues that the relevant unitholder may acquire pursuant to the first paragraph above
include stocks (in this paragraph, the “ex-dividend stocks”) with respect to which unit certificates are
delivered in response to the application for Redemption on the date specified by a person who may
receive dividends or subscribe for rights after the ex-dividend or ex-rights of such issues,
notwithstanding the provisions of the first paragraph above, the Management Company may instruct
to redeem the shares subject to Redemption that are the ex-dividend stocks by delivering the amount
equal to the total market value of the specific issue of such stocks. The total market value of such
specific issues in this case will be the amount calculated by multiplying the closing price (or, if the
closing price is not available, a similar price) at the financial instrument exchanges of the ex-dividend
stocks as of the calculation date of the Net Asset Value provided in Paragraph (vi) of the preceding
Article by the number of the ex-dividend stocks included in the specific issues that the relevant
unitholder may acquire pursuant to the first paragraph above.
(iv) Authorised Participants and Redemption Applicants shall request Book-entry Institutions to delete
Book-entry Units relating to the Redemption by the deadline specified by the Management Company.
The Trustee, when confirming that the application for deletion of Book-entry Units for Redemption as
described in Paragraph (vii) of the preceding Article has been accepted by the Book-entry Institution,
shall issue an application for book entry of shares subject to the Redemption that belong to the trust
property and payment of cash by means of the method defined by the Book-entry Institution in
accordance with the instruction of the Management Company. In relation to the delivery of shares
subject to the Redemption, the Authorised Participant or the Redemption Applicant shall, as a general
rule, deliver the shares belonging to the trust property on or after the fourth business day from the date
of acceptance of application for Redemption to the Authorised Participant or the Redemption
Applicant. Business offices, etc. of the Authorised Participants may process the payment of money.
(v) In the case of Paragraph (ii), the Authorised Participant shall notify the Management Company to
the effect when submitting the application for Redemption by means of a method separately prescribed
by the Management Company.
(vi) In the event the notification in the preceding paragraph is not made at the time of submitting the application for Redemption, which causes damage on the trust property or other, the Authorised
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Participant that brokered the submission of Redemption application shall be liable for the damage.
(vii) If the Authorized Participants determine that it will be difficult for the application that is to be
made by the Authorized Participants or the Redemption Applicant for the annulment of all or any part
of the Book-entry Units to be accepted by the deadline designated by the Management Company, the
Authorized Participants shall immediately notify the Management Company and the Trustee to such
effect.
(viii) If the Management Company, based on the notification in the preceding item, determines that
annulment of all or any part of the Book-entry Units will not be able to be accepted by the Book-entry
Institution within the period prescribed by the Management Company as a period in which there is no
likelihood of hindrance being caused to operations that are in line with the “Basic Investment Policy”
prescribed in Article 23, creation applications for or Redemptions of trust units, or any other operations
of the trust, the Management Company may cancel Redemption applications that have already been
received from Authorized Participants or Redemption Applicants.
(ix) In the case of the preceding item, if any damage arises to the trust property or otherwise due to the
annulment of the Book-entry Units not being possible, the Authorized Participants will bear all liability
in respect thereof.
Article 51 [Handling of Redeemed Units]
The Management Company shall, on the business day following the date of application for
Redemption and thereafter, recognise that the same number of units as that of the Book-entry Units to
be deleted through Redemption has become null and void, and the Trustee shall confirm that the Book-
entry Units relating to such units have been deleted on the date of book entry of the Redemption shares.
Article 52 [Purchase of Units]
Authorised Participants shall purchase units in the cases described in the following items and when
receiving an application from a unitholder as an application that the Management Company receives
by the time set out in the Attachment of the Trust Deed being considered to be the application made
on that date, provided, however, that the application for the case in Item 2 shall be made by two (2)
business days prior to the date of termination of trust.
1. Book-entry Units of less than the exchange trading unit arise as a result of Redemption
2. If delisted in all Financial Instruments Exchanges where the units were listed, based on the
provisions of Article 6.
(ii) The purchase price in the preceding paragraph shall be the Net Asset Value of the day the
application for purchase is accepted.
(iii) Authorised Participants may, when purchasing units pursuant to the provisions of the preceding
two paragraphs, charge the amount corresponding to the commission calculated by multiplying the
ratio defined individually by the Authorised Participant against the Net Asset Value and the
consumption tax, etc. relating to the commission.
(iv) Authorised Participants may suspend purchase of units in the first paragraph based on discussions
with the Management Company in the event of suspension of trading at a Financial Instruments
Exchange, of suspension of settlement functions, or of any other unavoidable circumstance.
(v) If, based on the provisions of the preceding paragraph, the purchase of units is suspended,
unitholders may withdraw the application for purchase for the day issued prior to the suspension of
purchase. If, however, a unitholder does not withdraw the application for purchase, the purchase price
of the units shall be calculated in accordance with the provisions of Paragraphs (ii) and (iii) assuming
that the application for purchase was accepted on the initial calculation date of Net Asset Value after
the removal of suspension for purchase.
Article 53 [Handling of Units Recorded on Pledge Section]
Payment of income distribution, acceptance of Redemption applications, delivery of redemption
shares, and issuance, etc. of shares at the time of termination of trust relating to the units recorded on
the pledge section of the book-entry account registry of Book-entry Institution, etc. shall be handled
pursuant to the Trust Deed herein as well as to the Civil Code and other respective laws and regulations.
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Article 54 [Partial Cancellation of Trust]
Unitholders may not apply for the implementation of partial cancellation of trust during the term of
this trust with respect to the units attributable to the unitholders.
Article 55 [Early Termination of Trust Deed]
The Management Company, when the number of units is less than 500,000 after the day that is three
(3) years from the date of conclusion of the Trust Deed, or the Management Company recognising that
terminating this trust is for the benefit of the unitholders, or in the event of an unavoidable
circumstance, may with concurrence from the Trustee, cancel the Trust Deed and terminate this trust
during the trust term. In this case, the Management Company shall notify the competent authorities in
advance of its intent for early termination.
(ii) If any of the following events occurs during the trust term, the Management Company may, with
concurrence from the Trustee, cancel the Trust Deed and terminate this trust. In this case, the
Management Company shall notify the competent authorities in advance of its intent for early
termination.
1. When delisted from all Financial Instruments Exchanges on which the units were listed based on
the provisions of Article 6;
2. When the Index is terminated; or
3. When an amendment to the Trust Deed that is determined by the Management Company or the
Trustee to be necessary due to changes in the calculation method of the Index or other changes is
denied by a written resolution provided in Paragraph (ii) of Article 61.
If the Trust Deed is cancelled for reasons provided in Item 1 above, the procedures for termination of
this trust shall be commenced on such delisting date.
(iii) With respect to the matter provided for in the first paragraph, the Management Company will
make a resolution in writing (the “written resolution”). In such case, the Management Company will
determine in advance the date of the written resolution, the reason for cancellation of the Trust Deed
and other related matters and will give a notice in writing of the written resolution stating those matters
to known unitholders relating to the Trust Deed at least two (2) weeks before the date of the resolution.
(iv) In making the written resolution provided for in the preceding paragraph, unitholders (excluding
the Trustee as unitholder with respect to the unit in this trust when such unit belongs to the
Management Company and trust property of this trust; the same applies hereinafter in this paragraph)
have voting rights corresponding to the number of units held and are entitled to exercise such rights.
If any known unitholders do not exercise their voting rights, such known unitholders will be deemed
to be in favor of the written resolution.
(v) The written resolution provided for in Paragraph (iii) will be voted on by a majority of the
unitholders who are entitled to exercise voting rights and will be passed by two-thirds or more of the
voting rights held by such unitholders.
(vi) The provisions of Paragraph (iii) through the immediately preceding paragraph will not apply
when all unitholders with respect to the Trust Deed express, in writing or by electromagnetic record,
their intention to consent to the Management Company’s proposal for termination to the Trust Deed,
and when this trust is terminated pursuant to the provisions of Paragraph (ii). Additionally, in light of
the conditions of the trust property, the provisions shall not apply, if a truly unavoidable circumstance
arises and there is difficulty in taking measures set out in Paragraph (iii) through the immediately
preceding paragraph.
Article 56 [Redemption, etc. Upon Termination of Trust]
The Management Company, when this trust is to be terminated, shall deliver shares equivalent to the
equity interest of units in the trust property to unitholders that hold such units in integral multiples of
Creation Unit in exchange for the Book-entry Units recorded on the book-entry account registry
(ii) Offices of the Authorised Participant may process the Redemption provided in the preceding
paragraph.
(iii) The value of the units to be redeemed as provided in the first paragraph above shall be the Net
Asset Value on five (5) business days prior to the date of trust termination. In this case, the number of
the specific issue of securities acquired by the unitholders through the Redemption shall be the number of securities in integral multiples of the exchange trading unit calculated based on the value of such
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securities on five (5) business days prior to the date of trust termination.
(iv) If a unitholder who is the issuer of the stocks constituting in the Index makes Redemption pursuant
to the preceding paragraph, the Management Company shall give instructions to the Trustee to
repurchase the units in the number equivalent to the individual market capitalisation of stocks of the
issuer. The individual market capitalisation in this case shall be the amount by which such stocks are
sold (the amount after deduction of costs necessary for sale) by a reasonable method which is a
discretionary method or similar method after opening on four (4) business days prior to the date of
trust termination.
(v) With respect to the units repurchased in the trust property pursuant to the preceding paragraph,
cash shall be paid on the fourth business day after the day on which the individual market capitalisation
provided in the preceding paragraph is fixed.
(vi) Upon the Redemption provided in the first paragraph above, the Authorised Participants may
charge the amount corresponding to the commission set by the Authorised Participants and the
consumption tax, etc. on the commission to the unitholders.
(vii) The Redemption of securities provided in the first paragraph above shall, as a general rule, be
performed starting from the third business day from the business day immediately after the day on
which the Trustee confirms that the application for the annulment of the Book-entry Units to be
redeemed is accepted by the Book-entry Institution.
(viii) The Management Company shall treat the units (including those repurchased by the trust
property) in the same number of the Book-entry Units to be annulled as a result of the Redemption as
being invalidated, and the Trustee confirms that the Book-entry Units relating to such units have been
annulled on the transfer date of the securities subject to the Redemption.
(ix) Notwithstanding the provisions of Paragraphs (i) and (iii), in the case of any of the following
events, the Authorised Participant specified by the Management Company in respect of the termination
of this trust shall, as a general rule, repurchase any of the following based on the value of the units at
the time of the termination of this trust:
1. In the case of the first paragraph above, Book-entry Units in the number remaining after
deducting the number necessary for the Redemption of securities from the number of units held
by the unitholder; and
2. Book-entry Units of less than one (1) Creation Unit provided in the first paragraph above
(including Book-entry Units of less than one (1) exchange trading unit).
(x) The Authorised Participant provided in Paragraph (ix) may, upon the repurchase pursuant to the
preceding paragraph, charge the amount corresponding to the commission individually set by the
securities company and the consumption tax, etc. on the commission.
(xi) The Authorized Participants authorized by the Management Company in relation to the trust
termination shall, upon the trust termination, request Redemption of all units held thereby. If the
shares requested for Redemption include the own shares or the like of such Authorized Participants,
the Management Company shall instruct the Trustee to sell such shares and the Trustee shall use the
trust property to purchase units in a number equivalent to the value of such own shares or the like.
Article 57 [Order of Competent Authorities Concerning Trust Deed]
The Management Company shall, when receiving an order for early termination of the Trust Deed
from the competent authorities, comply with such order, cancel the Trust Deed and terminate this trust.
(ii) The Management Company shall, when making revisions to the Trust Deed of this trust based on
the order from the competent authorities, abide by the provisions of Article 59.
Article 58 [Handling Associated with Cancellation of Registration, etc. of the Management Company]
In the event the Management Company is subject to the cancellation of registration by the competent
authorities, is dissolved, or suspends its operations, the Management Company shall cancel this Trust
Deed and terminate this trust.
(ii) Notwithstanding the provisions of the preceding paragraph, if the competent authorities issues an
order that the operations of the Management Company relating to the Trust Deed be substituted by
another investment trust management company, this trust shall continue between the investment trust management company and the Trustee, with the exception of when the written resolution set out in
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Paragraph (ii) of Article 61 is rejected.
Article 59 [Handling Associated with Transfer and Succession of Business of the Management
Company]
The Management Company may transfer all or part of its business, and in conjunction with this transfer,
may transfer the business concerning this Trust Deed.
(ii) The Management Company may cause all or part of the business to be succeeded as a result of a
company split, and in conjunction with this split, may cause a business pertaining to this trust to be
succeeded.
Article 60 [Handling of Resignation and Dismissal of the Trustee]
The Trustee may, with the consent of the Management Company, resign from its duties. In the event
the trust property suffers significant damage as a result of violation of duties by the Trustee or any
other critical situation arises, the Management Company or a unitholder may apply to the court to have
the Trustee removed. In case the Trustee resigns, or the court has removed the Trustee, the
Management Company shall select a new Trustee pursuant to the provisions of Article 61. Except for
the case of dismissal pursuant to the above-mentioned procedures, the unitholders may not dismiss the
Trustee.
(ii) In the event the Management Company cannot select a new Trustee, the Management Company
shall terminate this Trust Deed and this trust.
Article 61 [Amendments to Trust Deed of Trust]
The Management Company may, with the consent of the Trustee, amend to the Trust Deed of this trust
or merge this trust with another trust (which means the “merger of investment trusts with instruction
by the management company” defined in Item 2 of Article 16 of the Act Concerning Investment Trusts
and Investment Companies; the same applies hereinafter), when recognising the need to do so for the
benefit of the unitholders or when an unavoidable circumstance arises, and shall notify the competent
authorities in advance of the intention to amend or merge and the contents thereof. The Trust Deed
may not be amended in any way other than the way provided for in this Article.
(ii) With respect to matters mentioned in the preceding paragraph (including cases where the contents
are material in cases of amendment and excluding cases where the merger has a minor effect on the
interests of the unitholders; collectively, “material amendment to the Trust Deed, etc.”), the
Management Company will make resolutions in writing. In such case, the Management Company will
determine in advance the date of the written resolution, the details of and reason for the material
amendment to the Trust Deed, etc. and other related matters and will give a notice in writing of the
written resolution stating those matters to the known unitholders relating to the Trust Deed at least two
(2) weeks before the date of the resolution.
(iii) In making the written resolution provided for in the preceding paragraph, unitholders (excluding
the Trustee as unitholder with respect to the units of this trust when such units belong to the
Management Company and trust property of this trust; the same applies hereinafter in this paragraph)
have voting rights corresponding to the number of units held and are entitled to exercise such rights.
If any known unitholders do not exercise their voting rights, such known unitholders will be deemed
to be in favour of the written resolution.
(iv) The written resolution provided for in Paragraph (ii) will be passed by two-thirds or more of the
voting rights held by the unitholders who are entitled to exercise voting rights.
(v) A written resolution will take effect on all unitholders of this trust.
(vi) The provisions of Paragraph (ii) through the immediately preceding paragraph will not apply when
all unitholders with respect to the Trust Deed express, in writing or by electromagnetic record, their
intention to consent to the Management Company’s proposal for material amendment to the Trust
Deed, etc.
(vii) Notwithstanding the provisions of the preceding paragraphs, even if a written resolution for a
merger is passed on this trust, this trust cannot be merged with another trust if a written resolution for
the merger is rejected at one or more of such other trust.
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Article 62 [Right to Purchase by Objectors]
When terminating the Trust Deed provided in Article 54 or making a material amendment to the Trust
Deed, etc. provided in the preceding Article, any unitholder who has made an objection to such
termination or material amendment to the Trust Deed, etc. at a written resolution may request the
Trustee to repurchase the units that belong to such unitholder with the trust property. The details of the
right to redemption and matters relating to procedures for redemption claim will be noted in the notice
provided for in Paragraph (iii) of Article 55, or Paragraph (ii) of Article 61.
Article 63 [Restrictions on Request to Disclose Names, Etc. of Other Unitholders]
The unitholders of this trust shall not request the Management Company or the Trustee to disclose the
following matters:
1. names and addresses of other unitholders; and
2. details of units held by the other unitholders.
Article 64 [Public Notice]
Any public notice made by the Management Company will be posted on the website shown below by
means of electronic notice.
www.blackrock.com/jp/
However, if public notice by such means cannot be made, public notice will be published in Nihon Keizai Shimbun.
Article 65 [Handling of Doubts Concerning Trust Deed of Trust]
In the event any doubt arises regarding the interpretation of the Trust Deed of this trust, the
Management Company and the Trustee shall solve the doubt based on discussions.
IN WITNESS WHEREOF, the parties hereto have executed the Trust Deed.
October 19, 2015 (Date of conclusion of the Trust Deed)
Management Company
BlackRock Japan Co., Ltd.
Marunouchi Trust Tower Main
1-8-3 Marunouchi. Chiyoda-ku, Tokyo
Trustee
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
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Attachment
1. The financial instruments exchange provided in the Attachment of the Trust Deed in Paragraph (i)
of Article 6 of the Trust Deed refers to the following.
The Tokyo Stock Exchange
2. The time specified in the Attachment of the Trust Deed in Paragraph (v) of Article 17, Paragraph (i)
of Article 49 and Paragraph (i) of Article 52 of the Trust Deed refers to 3 p.m.
