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John, 43 and Amelia 39, have built a nest egg over the years by investing in shares and managed funds.
They have $30,000 in cash they want to invest in shares, but they want to make their investment more tax-efficient.
They decide to buy instalment warrants over shares in BHP, CBA and Qantas - shares they believe will pay good levels of franked dividends - rather than buying the shares outright.
The result
By using instalments rather than fully-paid shares, John and Amelia:
get exposure to almost twice as many shares (see table 1)
get all dividends and franking credits on the instalments (see table 2 - they get $288 worth of franking credits from their BHP instalment warrants, rather than just the $150 worth they'd get from their ordinary shares).
Table 1
| Company |
Amount invested |
Share price |
Amount of fully-paid shares |
First Instalment price |
Instalments bought with the same cash amount |
| BHP |
$10,000 |
$11.50 |
870 |
$6.00 |
1,667 |
| CBA |
$10,000 |
$31.40 |
318 |
$15.63 |
640 |
| QAN |
$10,000 |
$4.30 |
2,326 |
$2.28 |
4,386 |
Based on closing prices on 14/03/02 and information available to Macquarie at that time. Investment is in an IMF Series of Instalments.
Table 2
| Company |
Dividends - shares |
Franking credits - shares |
Dividends -Instalment warrants |
Franking credits - instalment warrants |
| BHP |
$350 |
$150 |
$671 |
$288 |
| CBA |
$700 |
$300 |
$1,406 |
$603 |
| QAN |
$690 |
$296 |
$1,301 |
$558 |
Based on one year gross yield forecast by Macquarie Equities Australia Limited as at 15/3/02. These three companies pay 100% franked dividends.
By using instalment warrants, John and Amelia have greater exposure to both the shares and their franking credits. If they wish to keep the shares they simply need to pay the second instalment when it falls due.
This advice has been prepared by Macquarie Equities Ltd [ABN 41 002 574 923] and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. All potential investors should obtain a Product Disclosure Statement available from us relating to that financial product and consider that PDS before making any decision about whether to acquire that particular financial product. To acquire the product, you must complete the application form which accompanies the Product Disclosure Statement.
For information relating to our financial services you should refer to the Macquarie Equities Ltd Financial Services Guide.
This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.
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