Equity Income

Question 1

INCM

1. Fund Name
2. Fees
3. Index
4. Distribution
5. Rebalance
6. Constituents

Answer 1

1. Global Income Leaders ETF
2. 45bps/0.45%
3. Nasdaq Global Income Leaders NTR Index
4. Quarterly
5. Semi-annual
6. 100

Question 2

UMAX

1. Fund Name
2. Fees
3. Index
4. Distribution
5. Rebalance
6. Constituents

Answer 2

1. S&P500 Yield Maximiser Fund (Managed Fund)
2. 79bps/0.79%
3. N/A (S&P500 + equity income strategy)
4. Quarterly
5. Quarterly
6. 500

Question 3

YMAX

1. Fund Name
2. Fees
3. Index
4. Distribution
5. Rebalance
6. Constituents

Answer 3

1. Australia Top 20 Equity Yield Maximiser Fund (Managed Fund)
2. 76bps/0.76%
3. N/A (ASX20 + equity income strategy)
4. Quarterly
5. Quarterly
6. 20

Question 4

HVST

1. Fund Name
2. Fees
3. Index
4. Distribution
5. Rebalance
6. Constituents

Answer 4

1. Australian Dividend Harvester Fund (Managed Fund)
2. 90bps/0.90%
3. N/A
4. Monthly
5. Every 2 months
6. 18

Question 5

INCM Narrative

Answer 5

Exposure to diversified portfolio of the highest yielding global companies, reducing reliance on Aus equities for yield with better yield from international equities allocation which has traditionally yielded ~2-2.5% (MSCI World)

Full replication of index, unhedged
Weighted prorata by highest sustainable div yield (income) and aligned with Developed World country weightings (core)
Universe of large-mid cap global developed market shares (ex-Aus)
Screens: regularity of divs, positive historical total earnings, volatility, maximum payout ratios + liquidity

Methodology

• Must have place in Nasdaq Developed Markets Large Mid Cap Index (ex Aus) (50 US & 50 non-US securities)
• Min worldwide market cap: US$1B for US + US$0.5B for non-US
• Min 3-month ADVT: US$5M for US + US$2.5M for non-US
• Paid regular div for past 3 years, positive total earnings over 12 month trailing period, div payout ratio <80%, one year realised volatility < benchmark vol + 15%, use most liquid share class if multiple

Question 6

UMAX Narrative

Answer 6

Aims to generate quarterly income and reduce volatility of portfolio returns by implementing equity income strategy over S&P500

• covered call premium strategy tends to outperform in all but bullish markets
• US traditionally have lower div market
• smooth the ride in downward/sideways

Buys iShares Core S&P500 ETF on US Exchange + Sells CBOE S&P500 index options
- CBOE generally written monthly with 1 month maturities (0.25 delta, 0.50% minimum premium)

Question 7

YMAX Narrative

Answer 7

Aims to generate quarterly income and reduce volatility of portfolio returns by implementing equity income strategy over ASX20
- potential for greater risk adjusted returns in sideways or downward trend market

Uses Solactive Australia 20 Index and ETOs to implement covered call strategy

Question 8

HVST Narrative

Answer 8

• Attractive, tax-effective monthly income stream from Australian shares
• Rotating basket of 18 high yielding large cap ASX50 stocks
• Dividend harvesting strategy buying stocks expected to pay dividend during 2 month period
• Risk management strategy overlay (see Milliman strategy )
• Specifically created to meet the investment challenges of SMSF and retiree investors

How:
• Included based on highest BDVD Bloomberg and analyst forecast yield
• Min stock inclusion requirement of 1.5% cash yield for a half year div
• Weighted by yield and down weighted if a stock is of the 10 most volatile stocks out of ASX50
• Individual Stock Cap of 7%
• Aiming for at least 1.5x ASX200 yield. A200 can be used as a counterweight to reduce yield and tracking error to ASX50.
• Financial year’s worth of lumpy dividends are forecast, then monthly distributions are smoothed to match estimated annual total.
• Milliman’s overlay applies a vol target of 12%