I. Summary of Research Process - A team of 20 equity research analysts, one of the largest teams for Japanese asset management companies, forecasts corporate earnings based on such field research as company/factory visits, quarterly company result meetings, and the quantitative valuations made by proprietary models. Our proprietary research universe is consistently managed to cover 800 companies, more than 90% of total market capitalization of the Japanese market. For other asset management companies, equity research analysts normally create investment ideas and alpha ratings based on several style factors like value or growth to support long only fund managers. But their ideas are not always translated directly to fund managers' final investment decision to buy or sell a certain stock in managing a portfolio. In contrast, our analysts are more actively involved in the investment decision-making process of the long-short fund. For the long-short fund, research analysts have specially developed a new rating, called Sub Rating, to identify the positivity or negativity (expected absolute returns) for individual names within the same sector that fund managers can directly and conveniently rely on for stock selection when making investment decision. II. Pair Trades - To achieve the investment objective, we construct our Japanese equity long and short fund composed of pair trades within the same sector. The investment ideas of pair trades are produced based on the strong and consistent relationship between fund managers and analysts. Two individual stocks with similar historical price movement and risk characteristics (beta, sector and PBR ratio) but different earnings forecast/sub-rating measured by analysts are selected as candidates for pair trade. In principle, after considering the level of similarity of price movements and momentum of earnings forecast, fund managers will build up positions for relevant pair trades and then successfully close the aforesaid positions when their proprietary earnings forecast become close to the consensus level of other market participants (profit taking). III. Portfolio Construction - Long and short portfolios are generally composed of 50-60 pairs of stocks selected by fund managers. These pairs are basically equally-weighted but adjusted by fund managers based on the following criteria as below: 1) Liquidity of stocks in the pairs: If either long or short names are less liquid, fund managers may allocate relatively small exposures to this pair. 2) Confidence of analysts: After in-depth discussion, fund managers may allocate larger exposure to some pairs. 3) Demand and supply in the market: Fund managers may fine tune the exposures to the pairs upon the existence of large supply or large demand for the relevant stocks in the current market. Fund managers monitor the risk characteristics of both long and short portfolios and try to neutralize any bias for beta, sector, and style by utilizing BARRA Japanese equity model. Our investment strategy of this fund is similar to market neutral strategy with low sensitivity to market directions. Inception date is June 8, 2007.