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Press release


Assenagon extends Asian dividend fund to include Australia: Assenagon Substanz Asien-Pazifik

A larger investment universe will enable the Assenagon Substanz Asien fund to exploit a wider range of earnings opportunities. Including Australia allows for broader diversification. Like the fund's Asian markets, Australia also offers attractive dividend yields. To highlight the extended investment universe, the fund will be renamed Assenagon Substanz Asien-Pazifik from 22 August 2016.

"By including Australia, we are adding a leading industrial nation with excellent credit standing which has strong economic ties to the Asian continent”, explained portfolio manager Daniel Jakubowski, who manages the fund with Dorian Ruffini. "The individual country weights within the fund will be reduced accordingly, offering investors even more efficient risk spreading”, added Ruffini.

Assenagon Substanz Asien was launched in March 2015. The fund invests in high dividend-yielding Asian equities to generate regular, predictable income. In addition, a systematic options strategy permanently reduces share price risk and currency risks. The fund's annual distribution target is 4.5% of the NAV, based on 30 September of the previous year. The existing target countries of Hong Kong, China, Japan, Singapore, South Korea and Taiwan will remain in the universe and offer sustainable innovative creativity, plentiful currency reserves and high market capitalisation.

Assenagon Substanz Asien's current equity universe already breaks the pattern of traditional Asian market funds, which generally focus on Asia while excluding Japan. "Japan and Australia have close economic ties with the rest of Asia”, explained Jakubowski. "That's why we see it as a logical consequence to include the two countries in our investment universe.” The current six and future seven target markets are among the world's 20 largest trading nations.

"At the same time, the region offers an equity universe which allows for a successful long-term dividend strategy”, commented Ruffini. The majority of the companies, which are regularly analysed by the portfolio managers, have substantial market capitalisation and positive earnings, and finance their dividends from profits. "These markets are also relatively favourably valued compared to Europe and the USA”, added Ruffini.

Fund strategy

The aim of the portfolio composition is to stabilise dividend income and collect continual distributions throughout the year. At least half of the stocks held should therefore have dividend payments forthcoming in the next three months. This means that the portfolio is reallocated on a quarterly basis to capture the respective dividend cycles in the target markets.

Dividend health is the most important valuation criterion in selecting the stocks, especially the continuity and sustainability of distributions. The quality of the dividend payments is determined using fundamental company data and the source of the distributed amount; the latter should be sourced from profits, not from assets. Using these criteria, the portfolio managers select 50 different equities and include them in the fund with equal weighting. To ensure diversification, limits are set for maximum portfolio weightings for countries and sectors.

However, diversification, healthy ordinary income and selecting value stocks only provide limited protection from general market turbulence. The portfolio managers therefore use dividend income both for fund distributions as well as for an options strategy to permanently reduce the fund's risk of loss by simultaneously hedging the equity nominal and currency risks on an ongoing basis.

Munich, 22 July 2016

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