Forum Archive Index - May 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

No, I don't think that this business about tax credits will come to anything.

There is a lot of investment by Australian companies in NZ and many NZ subsidiaries are 100% owned by Australia.

 

The Westpac Bank has made provision for NZ ers to use the local imputation credits attached. The NAB has applied the same system in England. Years ago, I asked the NAB to apply this to NZ.

 

There was some talk that the Aus. Banks would follow Westpac; no luck so far.

 

As to warrants, there are also Australian endowment warrants. When they are first issued, you pay a price and there is nothing to pay after that. They tend to mature at the end of 10 years. At the end of that period, you will get the shares: however, the Issuer states the initial amount owing at issue time.

 

They then apply an interest rate to this outstanding amount. This rate is slightly higher than the 90 day bill rate. As dividends fall due, the Issuer uses them to offset interest.

 

 When dividend rates are high, then in time, there will be nothing left outstanding. Then you will get the shares!

 

If dividends are too low and you want the shares after the mentioned 10 years, then you either pay the outstanding amount, sell the warrant or let it lapse. The Issuer tends to pick good companies.

 

The 2006 NAB end. warrants have not much left outstanding. These warrants are being traded on the open market. Needless to say, it is difficult to get some of the earlier issues.

 

There has been a problem with regard to tax on dividends between the issuer and the Aust. IRD. I am not sure what happened: however, Challenger has a new lot to be taken up now; these are based on a holding of the top 10 companies, I understand. 

They will be more expensive than the earlier issues which in hindsight were very cheap.

 

Suggest you try: < www.challengergroup.com  > and get the explanations from them rather than relying on mine.

 

Those are my opinions.

 

Gerry