How does the Stefnir - Di­cidend Fund work?

Key benefits of the Stefnir - Dividend Fund

1. The fund offers exposure to all companies that have historically paid dividends – in a single investment.

2. Dividends are distributed once a year.

3. Investing in the Stefnir - Dividend Fund simplifies tax reporting, as investors do not need to record individual purchases and sales of equities or manage multiple dividend slips.

4. Investors can easily choose how the dividend distribution is paid.

The Stefnir - Dividend Fund differs from traditional equity funds in that dividends are paid directly to unitholders. The companies in which the fund invests distribute part of their earnings to shareholders in the form of dividends. The fund receives these dividends and subsequently distributes them to its unitholders each year.

The fund invests in companies that have historically paid dividends and/or are likely to pay dividends within the next 12 months. It primarily takes positions in shares of Icelandic public limited companies, as well as companies operating in Iceland, listed on NASDAQ OMX Nordic Iceland, the First North market, or another recognised stock exchange or regulated marketplace.

The total dividend amount is divided by the total number of outstanding units to determine the dividend per unit. Unitholders can calculate their dividend by multiplying the number of units they hold by the dividend per unit:

Total dividend amount / Total number of outstanding units = Dividend per unit

Dividend per unit * Number of units held = Investor’s dividend payment

Dividends can also be calculated based on the dividend yield.

Example:

If an investor holds ISK 1,000,000 in the fund on 28 June and the dividend yield is 5%, the dividend payment will be ISK 50,000:

ISK 1,000,000 * 0,05 = ISK 50,000

Capital gains tax (22%) applies, so the net payment would be ISK 39,000:

ISK 50,000 * (1 - 0.22) = 39,000

Gains from the redemption of fund units are taxable in Iceland under the Income Tax Act No. 90/2003 and withholding tax rules under Act No. 94/1996 on withholding of tax on capital income. Additional taxation may apply. Capital income tax is levied when units are sold at a profit or when dividends are paid on units. Foreign investors should consult the tax rules applicable in their country of residence as additional tax obligations may apply.

Investors (other than tax-exempt entities such as pension funds) should be aware that purchasing units shortly before the fund’s annual dividend date (30 June each year) can lead to a tax liability upon the dividend payout.

Example: On 25 June, an investor purchases ISK 5,000 worth of units, equal to 50 units at ISK 100 each. If the fund pays out a dividend of ISK 5 per unit on 30 June, the fund price decreases by ISK 5 per unit and becomes ISK 95 (assuming no other market movements). The investor still holds ISK 5,000 in total value (50 units * 95 = 4,750 plus ISK 250 in cash from the dividend). However, the investor owes capital income tax on the ISK 250 dividend. To avoid this, investors are advised to check the fund’s dividend date before investing.

When will I receive my dividend?

Dividends are paid on 30 June each year to all unitholders who hold units at the end of day on 28 June, the last day on which units trade with dividend rights. The ex-dividend date is 29 June each year, when a new dividend accumulation period begins. If 30 June is not a banking day, the dividend will be paid on the next banking day.

Do I need to hold the fund for a full year?

No. Any investor who holds units in Stefnir - Dividend Fund at the end of day on 28 June receives the annual dividend on 30 June or the next banking day.

How is the dividend paid?

The dividend is paid into the unitholder’s custody account. All investors with a registered email address will also receive a separate receipt for the dividend payment.

1. The unitholder can then transfer the dividend to a bank account in the Arion online bank. To do this, select Securities in the left-hand menu, choose Overview, and click Transfer request from bank account at the bottom right corner.

2. This action can also be carried out in the Arion app by tapping the ISK line in the custody account and selecting Transfer request, where the desired destination account can be chosen.

3. It is also possible to receive dividend payments automatically into a bank account. To activate automatic transfers in the Arion online bank, go to Securities in the left-hand menu, then select Settings in the top-right corner. Under Automatic payments for corporate actions (dividends and bond repayments), choose the preferred deposit account. Once the account has been selected, all dividend payments will be transferred automatically shortly after they are paid.

Why does the fund’s price decrease when dividends are paid?

The Stefnir - Dividend Fund differs from other equity funds in that dividends are distributed to unitholders. The total return can therefore be viewed as two components: the change in the fund’s price and the dividend paid to unitholders. The dividend yield reflects the portion of the investor’s return that comes from dividend payments. It is calculated as the dividend per unit relative to the unit price.

When dividends are paid to unitholders, the fund’s price decreases by an equivalent amount. To assess total return, the dividend yield must therefore be added to the fund’s price performance.

The table below shows the fund’s performance in recent years, both with and without dividend payments included.

*Real return represents nominal return adjusted for inflation.