Japan Focus Fund (HFJAX, HFJCX, HFJIX)

The Fund seeks to achieve long-term capital appreciation primarily through investment in equities of Japanese companies and secondarily through investment in equities of other Asian companies. The Fund employs a bottom-up approach to individual security selection, based on an analysis of a company's valuations, earnings growth prospects and unique competitive advantages. The Fund is managed by Michael Wood-Martin.

• Quarterly Factsheet

 

Why invest in this fund?

• A fundamental approach that combines bottom-up security selection with a strategic asset allocation process
• Exposure to attractive investment opportunities in Japan
• The Portfolio Manager focuses on fundamental research; analyzing company valuations, earnings growth prospects and unique competitive advantages

   

Fund facts (as of 3/31/12)

Inception date:	1/31/06
Minimum initial investment:	$500
Benchmark:	MSCI Japan Index
Median market cap ($billions):	16.8
Total number of holdings:	30
Forward 12-month P/E ratio:	13.7
P/B ratio:	1.3
Beta:	1.0
% of holdings in top 10:	44.0
Class A expense ratio1:	1.35
Morningstar rating (as of 4/30/12)2

¹  This ratio is not a guaranteed number and may fluctuate. The class A expense ratio is presented as a percentage of average net assets. The expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 3/31/12. The ratio may differ from that presented in the Fund’s prospectus that is based on the Fun31s then most recent previous fiscal year.

² Morningstar category: Japan Stock, Number of funds in category: 30. The overall Morningstar Rating for the Fund is derived from a weighted average of the risk-adjusted performance figure associated with its 3- and 5- year Morningstar Rating metrics.

 

Portfolio management

Michael Wood-Martin
Director of Japanese Equities

• Read biography

 

 

Top ten holdings %
(as of 4/30/12)

Mitsubishi UFJ Financial (Japan)	6.0
Yamada Denki (Japan)	5.4
Rakuten (Japan)	5.4
Sumitom Mitsui Financial (Japan)	4.4
Keyence (Japan)	4.1
Mizuho Financial (Japan)	4.1
Tokio Marine (Japan)	4.0
Daiwa Securities (Japan)	3.9
Canon (Japan)	3.9
Nintendo (Japan)	3.3

A company's country classification is based on multiple factors including legal domicile and underlying exposure of its business.

• Full holdings list

Performance

Relative performance as of 3/31/12

Inception date 1/31/06.

Lipper rankings are based on total return and dod not reflect a sales charge. Rankings are for Class A shares only, other share classes may vary.

Expense ratios are not guaranteed numbers and may fluctuate. Gross and net expense ratios are presented as a percentage of average net assets. The gross expense ratio is stated in the current prospectus and is based on the Fund's then most recent previous fiscal year. The net expense ratio is unaudited and is based on annualized fiscal year-to-date results from 8/01/11 to 3/31/12. The ratio may differ from that presented in the Fund's prospectus.

For periods prior to 5/31/11, Class I share rates of return are based on Class A shares at NAV.

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Performance results with sales charges reflect the deduction of the maximum front end sales charge and/or the deduction of the applicable contingent deferred sales charge (CDSC). Class A shares are subject to a maximum front end sales charge of 5.75%. Class C shares may be subject to a CDSC of up to 1% on certain redemptions made within 12 months of purchase. Performance presented at NAV which does not include these sales charges would be lower if these charges were reflected. The Fund’s annual operating expenses will likely vary from year to year. It is important for you to understand that a decline in the Fund’s average net assets during the current fiscal year due to recent market volatility or other factors could cause the Fund’s expense ratios for the Fund’s current fiscal year to be higher than the expense information presented. Returns greater than one year are annualized. Index returns provided by Lipper, Inc. Net Asset Value (NAV) is the value of one share of the Fund excluding any sales charge.

Returns included the reinvestment of dividends and capital gains. Performance results reflect expense subsidies and waivers in effect during the periods shown. Absent these waivers, results would have been less favorable for certain periods.

Forward 12-month P/E ratio is calculated using the closing price of portfolio holdings divided by the sum of the 12-month forward earnings per share. P/B ratio is calculated using the closing price of portfolio holdings divided by the most recent fiscal year end book value. Both calculations take into account the respective weightings of portfolio holdings. Beta is a quantitative measure of the volatility of a given stock, mutual fund, or portfolio, relative to the overall market. The MSCI Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance in Japan. It is not possible to invest directly in any index or average.

Fund overview

This Fund seeks to achieve long-term capital appreciation primarily through investment in equities of Japanese companies and secondarily through investment in equities of other Asian companies. The Fund employs a bottom-up approach to individual security selection, based on an analysis of a company's valuations, earnings growth prospects and unique competitive advantages. The Fund is managed by Michael Wood-Martin. 

Quarterly update

It was a quarter full of surprises, the best of which from a Japanese perspective was the unscheduled move by the Bank of Japan to further loosen monetary policy. The yen weakened and the equity market moved sharply higher with gains in stocks keeping up with the pace of markets elsewhere once currency adjusted. With a European crisis being avoided following a last minute deal to salvage what was left of the Greek economy and data in the US surprising on the upside, the backdrop was positive for equity markets. Indeed Japanese equities gained every month during the quarter.

Fund performance

Over the period the Fund underperformed the MSCI Japan Index. The sharp rise in the market was lead unsurprisingly by cyclical sectors such as Financials. Holdings in Mitsubishi UFJ, Sumitomo Mitsui, Mizuho (all banks) and Daiwa Securities gained by much more than the overall market. A number of holdings in the Chemical and Technology sectors also performed in a similar fashion. Just as there were stellar gainers there were also some disappointments, typified by companies which have strong domestic franchises. NTT (telecom), Yamato Holdings (logistics) and Yamada Denki (electronic retailing) suffered declines over the quarter.

Investment activity

With the market rising strongly over the quarter it was a period where action taken within the portfolio at the outset was being reversed towards the end of the period. Positions added to at the beginning of the quarter predominantly included Financial stocks given the relatively upbeat view on the market. Towards the end of the period the overweight position in Financials was reduced as stock prices had run up strongly. Recent additions have been made to laggard domestic issues such as retail stocks. The only deletion from the portfolio was Asahi Holdings (brewer) which had performed well over the past couple of years as profits rose impressively. Nitori, a home furnishing retailer with an impressive track record and which is expanding on a nationwide basis was added to the portfolio. The stock has been left behind in the market rally yet offers exposure to one of Japan’s better managed companies in the retail sector.

Outlook

Markets continue to edge higher buoyed by improvement in the US economy as well as anticipation of a revival of activity in China. Equity markets however are at elevated levels and could be prone to correct on slight disappointment. Japan would suffer in any set-back, although with reconstruction post earthquake under way and a more lenient Bank of Japan policy, any downturn in prices could be short lived.

Prospectus/SAI

Japan Focus Fund