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STOXX® Maximum Dividend 40 Indices
September 2012
STOXX Maximum Dividend 40 Indices is a liquid and tradable
underlying for financial products
» STOXX Maximum Dividend 40 Indices are regional blue-chip indices comprising the 40 highest dividend yielding companies from respective regional benchmark index
» The constituent selection as well as the weighting scheme is based on dividend forecasts
» The index aims to maximize performance obtained from dividend yields on a short-term basis due to the fact that it tracks dividend paying companies from implementation period to implementation period: » At cut-off date, all companies are selected that have a dividend ex date forecasted in the upcoming
implementation period
» Dividend ETFs (Exchange Traded Funds) offer investors a transparent and diversified play for dividend investing
» Cap factor leads to sufficient diversification within the indices and enable the indices to underlie financial products such as ETFs
Key features
Summary
2
Agenda
1. Investment Rational: Dividend Investing Page 04
2. Dividends & Volatility Page 07
3. Methodology Page 12
4. Performance Page 14
Appendix Page 25
3
STOXX Maximum Dividend 40 Indices
1. Investment Rational: Dividend Investing
4
Distribution through dividends has a number of advantages
which are captured through the maximum dividend concept
The benefit pyramid of dividends
» “A dollar today is worth more than a dollar tomorrow” » Well suited for pension funds and investors who desire stable income streams
without speculation on the share price movement
» Maximum Dividend Indices (NR) outperformed the market (exception North America) especially in times of high volatility and market turmoil
» Tax benefits (dividend imputation1) in Australia and New Zealand, tax exemptions (differs among countries2)))
Clientele
Transparency
Performance
» Dividends forecasts are publicly available and have high degree of reliability
» Forecasts are done by experts and are available on Bloomberg
1) http://www.stockwatch.com.au/articles/franking-credits.aspx
2) http://www.iras.gov.sg/irasHome/page04.aspx?id=146, http://www.investopedia.com/terms/e/exempt-interest-
dividend.asp#axzz263FiEF69 5
Earnings distribution through dividends has important
consequences for both: Companies and Shareholders
Dividends
Signaling Volatility
Agency costs Commitment 1 2
3 4
» Earnings distribution through dividends alleviates the agency costs of inside equity2)
» Agency costs of equity arise when there is a lot of excess cash which could motivate managers to squander shareholder´s money
» Distribution through dividends is a strong commitment
» In case of dividend reduction or abolishment significant negative stock price reaction
» Stock repurchases are more flexible with regard to commitment
» Dividends signal company performance » If a company starts to pay out dividends, this may
signal limited growth potential and absence of positive NPV projects
» On the other hand ability of companies to distribute earnings through dividends is perceived positively3) (Clientele effect)
» Dividends are less volatile than earnings » Strong commitment » Industries with stable CF´s dominate the index
» STOXX Europe Maximum Dividend 40: 53.8% of constituents from industries with stable Cash
Flow´s1)
Important factors of dividend distribution
1) Utilities 26.6%, Telecommunication 13.9%, Insurance 13.3%.
2) G.Grullon, R. Michaely: Dividends, Share Repurchases and the Substitution Hypothesis, Journal of Finance, 2002, p. 1652
3) G.Grullon, R. Michaely: Dividends, Share Repurchases and the Substitution Hypothesis, Journal of Finance, 2002, p. 1650 6
STOXX Maximum Dividend 40 Indices
2. Dividends & Volatility
7
The analysis aims to look at performance implication of
Maximum Dividend Indices in times of high volatility
» Comparative analysis on the regional level » Comparison of performance of net return/price return
index and the broad regional index as proxy for the market
» Comparison of NR and PR indices allows to draw conclusion on the dividend impact
» Comparison of performance and volatility » Hypothesis: Dividends result in liquidity outflow
and worsen company performance especially in times of turmoil
Description
» In case of Japan comparability towards the benchmark is biased; TMI includes small firms, which are not included in the Maximum Dividend Index because of the restriction according to the size (measured as market capitalization)
» Coverage of the indices » Volatility indices and interest rate indices cover
not the full region under assessment but mostly parts of it
Limitations
Description, Limitations and Results
» Data does not support Hypothesis (exception North America)
8
Dividends do not exacerbate performance in times of
economic downturn and high volatility
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Assessment of volatility impact on dividends in Europe
Index Performance1) Overview
» In times of economic downturn volatility increases whereas index values decrease
» Performance of Maximum Dividend Index (Net Return) was better than that of the market, especially in times of crisis
» Performance of Net return index is significantly higher than that of Price Return (PR) index
» PR does not account for impact of dividends, so better performance can be explained through dividends
STOXX Europe Maximum Dividend 40 NR
EURO STOXX 50 Volatility (VSTOXX) Index
Key figures2) Performance Volatility
STOXX Europe Max.
Div. 40 NR 9.19% 19.76%
STOXX Europe 600 NR -0.58% 20.91%
1) Figures on the basis of data from 20/03/2000 to 22/08/2012.
2) Annualized figures from 20/03/2000 to 22/08/2012
STOXX Europe 600 NR STOXX Europe Maximum Dividend 40 PR
STOXX Europe 600 PR
9
Data does not allow to draw the conclusion that dividends
payments resulted in bad performance
0
50
100
150
200
250
300
350
400
2004 2005 2006 2007 2008 2009 2010 2011 2012
Assessment of volatility impact on dividends in North America
Index Performance1) Overview
» In times of economic downturn volatility increases whereas index values decrease
» Maximum Dividends Index NR (impact of dividends included) underperformed the market NR index in times of economic downturn and high volatility
» However, the difference between Maximum Dividend NR and PR indices is higher than that of the market which indicates increase dividend yield and proves the concept
» In the period under observation, data does not allow to conclude that dividends were additional financial burden
STOXX North America Maximum Dividend 40 NR
VIX Index2)
Key figures1) Performance Volatility
STOXX North America
Max Div. 40 NR 3.75% 23.39%
STOXX North America
600 NR 5.02% 22.40%
1) Figures on the basis of data from 22/03/20004 to 04/09/2012; performance annualized
2) Volatility index od the S&P 500 Index.
STOXX North America 600 NR
STOXX North America Maximum Dividend 40 PR
STOXX North America 600 PR
10
Hypothesis that dividends worsen financial situation in times
of economic downturn is not supported by data – reverse true
0
50
100
150
200
250
300
350
400
450
500
2004 2005 2006 2007 2008 2009 2010 2011 2012
Index Performance1) Overview
» In times of economic downturn volatility increases whereas index values decrease
» Maximum Dividend Index NR outperformed the market at any time, especially at the time of volatility peaks
» Price return index slightly outperformed the market price return index
» Net return accounts for the effect of the dividend that is why it can be concluded that dividends improved performance
STOXX Asia Pacific Maximum Dividend 40 NR
VHSI Index2)
Key figures1) Performance Volatility
STOXX Asia Pacific
Max Div. 40 NR 11.62% 21.55%
STOXX Asia Pacific
600 NR 3.18% 20.64%
1) Figures on the basis of data from 22/03/20004 to 04/09/2012; annualized performance figures
2) Expected volatility of Hang Seng Index. 3) Nikkei Stock Average Volatility Index
VNKY Index3) STOXX Asia Pacific 600 NR
STOXX Asia Pacific Maximum Dividend 40 PR
Assessment of volatility impact on dividends in Asia/Pacific
STOXX Asia Pacific 600 PR
11
Data suggests that dividends had a negative impact on
performance because of distribution of funds
0
50
100
150
200
250
300
350
400
2004 2005 2005 2006 2006 2007 2007 2008 2009 2009 2010 2010 2011 2012 2012
Index Performance1) Overview
» Maximum Dividend indices underperformed the market on net and price return basis
» The stock picking was such that companies in the index underperformed the market
» In this case data suggests that dividends were an additional burden because of cash outflow and had a negative impact on performance
STOXX Japan Maximum Dividend 40 NR STOXX Japan Total Market NR
Key figures1) Performance Volatility
STOXX Japan
Maximum Dividend 40
NR -4% 23.95%
STOXX Japan TMI NR -0.25% 26.28%
1) Figures on the basis of data from 31/01/2011 to 04/09/2012.
VXJ Index (Volatility Index Japan)
Assessment of volatility impact on dividends in Japan
STOXX Japan Maximum Dividend 40 PR STOXX Japan Total Market PR
12
STOXX Maximum Dividend 40 Indices
3. Methodology
13
14
STOXX Maximum Dividend 40 Indices aims to maximize the
dividend yield of the index portfolio
» STOXX regional benchmark index
» All companies are ranked according to their liquidity adjusted expected dividend yield1)
» The liquidity adjustment considers the ratio of dividend yield and equity turnover in order to select high dividend yielding companies with high liquidity
Universe/ Ranking
» 40 companies with the highest expected dividend yield within upcoming quarter are selected
» Market Cap > 1bn EUR
» ADTV (3-month) > 4mn EUR
» Index is reviewed quarterly in March, June, September and December
Selection
» Constituents are weighted according to expected dividend yield
» Maximum weight of 10% per constituent
» The index calculation is based on closing prices and dividend forecasts as of last trading day in January, April, July and October2)
Calculation
Index methodology overview: regional benchmark
Constituents are shifted on a quarterly basis in order to always select the top dividend yielding companies
1) The expected dividend yield is calculated on the basis of announced or expected dividends and the closing price at the time of
ranking (January, April, July and October)
2) The review frequency of STOXX Country Maximum Dividend Indices depends on the distribution of the country„s dividend ex date
STOXX Maximum Dividend 40 Indices
4. Performance
15
0
50
100
150
200
250
2004 2006 2008 2010 2012
STOXX Global Maximum Dividend 40 shows significant
outperformance and achieves huge dividend yields
» All constituents of STOXX Global 1800 Index are
eligible for index inclusion if fulfilling the following
» ADTV1) (3-month) > 4mn EUR
» Market Capitalization > 1bn EUR
» Companies are ranked according to their dividend
yield calculated based on 3-month dividend forecasts
» The top 40 dividend yielding companies are selected
and weighted by their net dividend yield with a cap of
10% per constituent
» The Index is reviewed in March, June, September
and December where cut-off dates are January, April,
July and October
Concept Overview: Global
STOXX Global Maximum Dividend 40 Performance Chart2)
STOXX Global Maximum Dividend 40
STOXX Global 1800
1) ADTV (3-month): Average Daily Value traded over 3 month measured 3-month back starting at cut-off date
2) Backtested data as of 22/03/2004 – 04/09/2012, Performance key figures have been calculated as annualized
figures in this time frame.
Name Performance Volatility Dividend Yield (net)
STOXX Global Maximum Dividend 40 NR
7.69% 19.64% 11.02%
STOXX Global 1800 NR 4.63% 16.77% 2.19%
16
On Global markets historical dividend yield can be clearly
improved applying STOXX Maximum Dividend concept
STOXX Global Maximum Dividend 40
STOXX Global 1800
Historical net dividend yields on annual basis1)
0%
2%
4%
6%
8%
10%
12%
14%
2005 2006 2007 2008 2009 2010 2011
1) Historical net dividend yield is calculated based on the difference between annual performance of the price and
net return index. The calculation is done based on full calendar years using ytd perofmance. 17
0
50
100
150
200
250
300
350
400
2000 2002 2004 2006 2008 2010 2012
STOXX Europe Maximum Dividend 40 Index significantly
outperforms STOXX Europe 600 showing huge dividend yield
» All constituents of STOXX Europe 600 Index are
eligible for index inclusion if fulfilling the following
» ADTV1) (3-month) > 4mn EUR
» Market Capitalization > 1bn EUR
» Companies are ranked according to their dividend
yield calculated based on 3-month dividend forecasts
» The top 40 dividend yielding companies are selected
and weighted by their net dividend yield with a cap of
10% per constituent
» The Index is reviewed in March, June, September
and December where cut-off dates are January, April,
July and October
Concept Overview: Europe
STOXX Europe Maximum Dividend 40 Performance Chart2)
STOXX Europe Maximum Dividend 40
STOXX Europe 600
1) ADTV (3-month): Average Daily Value traded over 3 month measured 3-month back starting at cut-off date
2) Backtested data as of 20/03/2000 – 04/09/2012, Performance key figures have been calculated as annualized
figures in this time frame.
Name Performance Volatility Dividend Yield (net)
STOXX Europe Maximum Dividend 40 NR
9.19% 19.76% 11.65%
STOXX Europe 600 NR -0.58% 20.91% 2.61%
18
On European markets STOXX Maximum Dividend concept
works best with regard to improving historical dividend yields
STOXX Europe Maximum Dividend 40
STOXX Europe 600
Historical net dividend yields on annual basis1)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1) Historical net dividend yield is calculated based on the difference between annual performance of the price and
net return index. The calculation is done based on full calendar years using ytd perofmance. 19
40
60
80
100
120
140
160
180
2004 2006 2008 2010 2012
STOXX North America Maximum Dividend 40 shows higher net
dividend yield compared to STOXX North America 600
» All constituents of STOXX North America 600 Index
are eligible for index inclusion if fulfilling the following
» ADTV1) (3-month) > 4mn EUR
» Market Capitalization > 1bn EUR
» Companies are ranked according to their dividend
yield calculated based on 3-month dividend forecasts
» The top 40 dividend yielding companies are selected
and weighted by their net dividend yield with a cap of
10% per constituent
» The Index is reviewed in March, June, September
and December where cut-off dates are January, April,
July and October
Concept Overview: North America
STOXX North America Maximum Dividend 40 Performance Chart2)
STOXX North America Maximum Dividend 40
STOXX North America 600
1) ADTV (3-month): Average Daily Value traded over 3 month measured 3-month back starting at cut-off date
2) Backtested data as of 22/03/2004 – 04/09/2012, Performance key figures have been calculated as annualized
figures in this time frame.
Name Performance Volatility Dividend Yield (net)
STOXX North America Maximum Dividend 40 NR
3.75% 23.39% 3.88%
STOXX North America 600 NR
5.02% 22.40% 1.71%
20
With regard to historical dividend yield the STOXX Maximum
Dividend concept can be verified on North American markets
STOXX North America Maximum Dividend 40
STOXX North America 600
Historical net dividend yields on annual basis1)
0%
1%
2%
3%
4%
5%
6%
7%
2005 2006 2007 2008 2009 2010 2011
1) Historical net dividend yield is calculated based on the difference between annual performance of the price and
net return index. The calculation is done based on full calendar years using ytd perofmance. 21
STOXX Asia/Pacific Maximum Dividend 40 clearly outperforms
STOXX Asia/Pacific 600 and has better net dividend yield
» All constituents of STOXX Asia/Pacific 600 Index are
eligible for index inclusion if fulfilling the following
» ADTV1) (3-month) > 4mn EUR
» Market Capitalization > 1bn EUR
» Companies are ranked according to their dividend
yield calculated based on 3-month dividend forecasts
» The top 40 dividend yielding companies are selected
and weighted by their net dividend yield with a cap of
10% per constituent
» The Index is reviewed in March, June, September
and December where cut-off dates are January, April,
July and October
Concept Overview: Asia Pacific
STOXX Asia/Pacific Maximum Dividend 40 Performance Chart2)
1) ADTV (3-month): Average Daily Value traded over 3 month measured 3-month back starting at cut-off date
2) Backtested data as of 22/03/2004 – 04/09/2012, Performance key figures have been calculated as annualized figures in this
time frame.
Name Performance Volatility Dividend Yield (net)
STOXX Asia Pacific Maximum Dividend 40 NR
11.62% 21.55% 9.1%
STOXX Asia Pacific 600 NR
3.18% 20.64% 2.2%
STOXX Asia Pacific Maximum Dividend 40
STOXX Asia Pacific 600
22
Historical dividend yield can be significantly improved by
applying the maximum dividend concept
STOXX Asia/Pacific Maximum Dividend 40
STOXX Asia/Pacific 600
Historical net dividend yields on annual basis1)
0%
2%
4%
6%
8%
10%
12%
14%
2005 2006 2007 2008 2009 2010 2011
1) Historical net dividend yield is calculated based on the difference between annual performance of the price and
net return index. The calculation is done based on full calendar years using ytd perofmance. 23
While performing similar STOXX Japan Maximum Dividend 40
shows higher annualized net dividend yield
» All constituents of STOXX Japan 600 Index are
eligible for index inclusion if fulfilling the following
» ADTV1) (3-month) > 4mn EUR
» Market Capitalization > 1bn EUR
» Companies are ranked according to their dividend
yield calculated based on 6-month dividend forecasts
» The top 40 dividend yielding companies are selected
and weighted by their net dividend yield with a cap of
10% per constituent
» The Index is reviewed in June and December where
cut-off dates are January and October
Concept Overview: Japan
STOXX Japan Maximum Dividend 40 Performance Chart2)
STOXX Japan Maximum Dividend 40
STOXX Japan 600
1) ADTV (3-month): Average Daily Value traded over 3 month measured 3-month back starting at cut-off date
2) Backtested data as of 31/01/2011 – 04/09/2012, Performance key figures have been calculated as annualized figures in
this time frame.
Name Performance Volatility Dividend Yield (net)
STOXX Japan Maximum Dividend 40 NR
-3.08% 20.68% 3.0%
STOXX Japan 600 NR -4.56% 21.5% 1.7%
24
STOXX sales contacts
Americas Europe Asia
Rod Jones
Head of Sales North America
+1 917 916 6027 (mobile)
Asset
Managers,
Investors
ETFs,
Structured
products
Rosanna Grimaldi
Head of Sales Europe, Asia,
LatAm, Middle East
+41 (0)79 470 3575 (mobile)
Lucas van Berkestijn
Head of Buy-Side Sales Europe, Asia,
LatAm, Middle East
+41 (0)79 359 9454(mobile)
25
STOXX Maximum Dividend 40 Index
Appendix
26
» Based on 1 year dividend forecasts
» Semiannual review in March & September
» Ranking, selection and weighting acc. to dividend yields
» Includes liquidity and Market Cap thresholds for index inclusion
STOXX Europe Maximum Dividend 40 index follows a stand
alone concept for the European market
Competitor Overview
Indices
Index
Concept
STOXX Europe Maximum
Dividend 40 FTSE Dividend +
» FTSE UK Dividend+ (50) » FTSE/JSE Dividend+ » FTSE/Taiwan Dividend+
Others
» MSCI High Dividend Yield » S&P 500 Dividend Aristocrats » DJ Select Dividend » FTSE High Dividend Yield
» STOXX Europe Maximum Dividend 40 Index
» Above mentioned concepts use historical dividend data rather than forecasts and are therefore not comparable to the concept at hand and are only listed here for the sake of completeness
» Based on 3-month dividend forecasts
» quarterly review in March, June, Sept. & Dec.
» Ranking, selection and weighting acc. to liquidity adjusted dividend yields
» Includes liquidity and MCap screening
Competitor overview shows that no similar concept to the STOXX Europe Maximum Dividend 40 one exists so far on the European market
Universe
» FTSE UK 350 » FTSE/JSE All Share » FTSE TWSE Taiwan 50, FTSE
TWSE Taiwan Mid-Cap 100
» Respective equity indices offered by index provider
» STOXX Europe 600 Index
27
Disclaimer
About STOXX STOXX Ltd. is an established and leading index specialist of European origins. The launch of the first STOXX® indices in 1998, including the EURO STOXX 50® Index, marked the beginning of a unique success story, based on the company‟s neutrality and independence. Since then, STOXX has been at the forefront of market developments, continuously expanding its portfolio of innovative indices – and now operating on a Europe level, across all asset classes. The indices are licensed to more than 400 companies among the world‟s largest financial products issuers, capital owners, and asset managers. They are used not only as underlyings for financial products such as ETFs, futures and options, and structured products, but also for risk and performance measurement. In addition, STOXX Ltd. is the marketing agent for the indices of Deutsche Börse AG and SIX Swiss Exchange Indices, among them the DAX® and the SMI® indices.
The indices in the presentation and the trademarks used in the index names are the intellectual property of
STOXX Ltd, or SIX Swiss Exchange AG, or Deutsche Börse AG.
The use of the STOXX®, DAX®, and SMI® indices and of the respective index data for financial products or
for other purposes requires a license from STOXX, Deutsche Börse AG, or SIX Swiss Exchange AG. STOXX
and its owners do not make any warranties or representations, express or implied, with respect to the
timeliness, sequence, accuracy, completeness, currentness, merchant- ability, quality, or fitness for any
particular purpose of its index data. STOXX and its owners are not providing investment advice through the
publication of indices or in connection therewith. In particular, the inclusion of a company in an index, its
weighting, or the exclusion of a company from an index, does not in any way reflect an opinion of STOXX or
its owners on the merits of that company. Financial instruments based on the STOXX®, DAX®, or SMI®
indices are in no way sponsored, endorsed, sold, or promoted by STOXX or its owners.
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