INDEX METHODOLOGYLONG SHORTSTRATEGY INDEX ON
MSCI JAPAN IMICUSTOM (GROSS) 85%+ CASH (JPY) 15%
INDEX*METHODOLOGY* a custom index combining MSCI Japan IMI custom Liquidity and Yield Low
Volatility Index and MSCI Japan IMI based on the factors provided by Nikko AMRahman, AtiqurMarch 2017

MARCH 2017

LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH(JPY) 15% INDEX* METHODOLOGY | MARCH 2017

CONTENTS

1Introduction ................................................................................ 32 Constructing the Long Short Strategy Index on MSCI Japan IMICustom (Gross) 85% + Cash (JPY) 15% Index ...................................... 4
2.1

Index Structure ......................................................................................... 4

2.2Index Weighting Scheme.......................................................................... 43 Maintaining the Long Short Strategy Index on MSCI Japan IMICustom (Gross) 85% + Cash (JPY) 15% Index ...................................... 5
3.1

Daily Rebalancing ..................................................................................... 5

3.2

Ongoing Event Related Changes .............................................................. 5

Appendix 1 Methodology for Sub-Component Indexes ..................... 6MSCI Japan IMI Custom Liquidity and Yield Low Volatility Index .....................................6MSCI Japan IMI .................................................................................................................6© 2017 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH(JPY) 15% INDEX* METHODOLOGY | MARCH 2017

1INTRODUCTION
The Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15%Index is designed to represent the performance of a strategy that assigns 85% weight to theLong Short Strategy Index on MSCI Japan IMI Custom Index and 15% weight to Cash(overnight LIBOR Japanese Yen). The Long Short Strategy Index on MSCI Japan IMI CustomIndex (“Component Index”) aims to represent the returns of a strategy which takes a longposition on constituents in the MSCI Japan IMI custom Liquidity and Yield Low Volatility
Index and a short position on constituents of the MSCI Japan Investable Market Index (IMI)
based on the weights provided by Nikko AM.
This methodology book provides a description of the rules and guidelines followed by MSCIfor the construction and maintenance of the Long Short Strategy Index on MSCI Japan IMICustom (Gross) 85% + Cash (JPY) 15% Index.

© 2017 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH(JPY) 15% INDEX* METHODOLOGY | MARCH 20172CONSTRUCTING THE LONG SHORT STRATEGY INDEX ON MSCIJAPAN IMI CUSTOM (GROSS) 85% + CASH (JPY) 15% INDEX

2.1

INDEX STRUCTURE
The Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15%Index is constructed using following two Component Indexes.
Long Short Strategy Index on MSCI Japan IMI Custom Index
Long Short Strategy Index on MSCI Japan IMI Custom Index is designed to represent
the performance of a strategy that is 100% long on constituents of the MSCI JapanIMI Custom Liquidity and Yield Low Volatility Index (“Sub-Components Index 1“) andX%1 short on constituents of the MSCI Japan IMI (“Sub-Components Index 2”). It isconstructed and maintained by applying the MSCI Short and Leveraged Daily
Indexes methodology2.
This Index is computed using a variant of the MSCI Short and Leveraged Daily
Indexes Methodology that does not apply stock borrowing costs and the overnightrisk-free rates.
Please Refer to Appendix I for further details on the Sub-Component Indexes ofLong Short Strategy Index on MSCI Japan IMI Custom Index.
Sub-Component Index weights can be adjusted by Nikko AM with at least 15
business days’ notice prior to the effective date of the Quarterly Index Reviews.

Cash (JPY LIBOR rate)
Cash represents the performance of the overnight London Interbank Offered Rate(LIBOR) denominated in Japanese Yen (JPY).

2.2

INDEX WEIGHTING SCHEME
The Index is constructed as combination of the following component indexes at the specifiedweights.
Long Short Strategy Index on MSCI Japan IMI Custom Index: 85%

Cash (JPY LIBOR rate): 15%

1

X represent the Beta weighting factor provided by the Nikko AM prior to each Quarterly Index Review

2MSCI Short and Leveraged Daily Indexes methodology is available at https://www.msci.com/index-methodology© 2017 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH(JPY) 15% INDEX* METHODOLOGY | MARCH 2017

3MAINTAINING THE LONG SHORT STRATEGY INDEX ON MSCI JAPANIMI CUSTOM (GROSS) 85% + CASH (JPY) 15% INDEX

3.1

DAILY REBALANCING
The Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15%Index is rebalanced daily. The weights applicable for the Long Short Strategy Index on MSCIJapan IMI Custom (Gross) 85% + Cash (JPY) 15% Index are effective at the open of eachbusiness day.
The Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15%Index is derived from existing underlying MSCI Indexes. As a result, changes in theconstituent securities of the component indexes are reflected in the Long Short Strategy
Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15% Index as they occur and as
they are captured in the underlying MSCI Indexes.

3.2

ONGOING EVENT RELATED CHANGESThe Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15%Index is derived from underlying MSCI Indexes. As a result, corporate events are reflected inthe Long Short Strategy Index on MSCI Japan IMI Custom (Gross) 85% + Cash (JPY) 15% Index
as they occur and as they are captured in the underlying MSCI Indexes.

© 2017 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

MSCI.COM | PAGE 5 OF 8LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH(JPY) 15% INDEX* METHODOLOGY | MARCH 2017

APPENDIX 1 METHODOLOGY FOR SUB-COMPONENT INDEXESThe following Sub-Component indexes are used in the construction of the Long Short
Strategy Index on MSCI Japan IMI Custom Index.
MSCI JAPAN IMI CUSTOM LIQUIDITY AND YIELD LOW VOLATILITY INDEXThe MSCI Japan IMI Custom Liquidity and Yield Low Volatility Index is a customindex constructed by applying an optimization process to achieve total riskminimization for a set of companies with high yield and liquidity within the ParentIndex.
The Index is constructed and maintained in accordance with the MSCI Japan IMICustom Liquidity and Yield Low Volatility Index methodology available athttps://www.msci.com/index-methodology.
MSCI JAPAN IMIThe MSCI Japan IMI is constructed and maintained according to the MSCI Global
Investable Market Indexes Methodology and MSCI Corporate Events Methodology.

© 2017 MSCI Inc. All rights reserved. Please refer to the disclaimer at the end of this document.

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LONG SHORT STRATEGY INDEX ON MSCI JAPAN IMI CUSTOM (GROSS) 85% + CASH
(JPY) 15% INDEX* METHODOLOGY | MARCH 2017CONTACT US
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