1. Welcome Macquarie Financial Services How to Increase your Income Wisely
Presenters:
Alan McKinnon - Associate Director
Andrew Telford - Branch Manager, Burleigh Heads
Thursday 14th June 2001

2. Agenda High Yielding Shares Listed Property Trusts Preference Shares
Good Franked Dividends and Capital Gains
Listed Property Trusts
Top income returns from ‘bricks and mortar’
Learn the criteria for selecting the right trust
Preference Shares
RECAPS, PRYMES, PERLS, Reset Prefs
Income Securities/Floating Rate Notes
Why should you invest in Inc. Sec/FRN’s?

3. High Yielding Fully Franked shares
Superannuation funds and investors with a marginal tax rate of less than the company tax rate can create yields in excess of quoted yields. For example: Marginal tax rate of 15%, Company rate 34% Dividend of 5.00% fully franked ($5.00) Price of $ Gross Dividend of $7.58 Tax payable of $1.14, rebate of $1.44 Net yield = $ $1.44 = $6.44 (6.44%)

4. High Yielding Fully Franked shares
Be aware that not all dividends are sustainable. A company showing a 10% fully franked dividend based on historical figures may not be all that it seems. Were there any special dividends due to one-off asset sales? Are profits able to support any future dividends? More often than not excessively high dividend yields are not maintainable and the market is telling us this.

5. What is a Listed Property Trust?
A Listed Trust which invests in a portfolio of property assets
A number of different types
Industrial
Commercial
Leisure
Retail
Diversified

6. Criteria for Investment
Diversification of properties
Diversification geographically
Diversification of revenue
Quality of Management
Quality of Properties
Vacancy rates of Properties
Average Lease profiles
Quality of Tenants
Borrowings

7. Diversification of Properties
Are the properties diversified?
What level of exposure does the trust have to any one property? For example: a property trust with 10 properties would seem well diversified. What if one of the properties makes up 50% of revenues?

8. Diversification Geographically
Where are the properties situated?
Ensure that not all properties are situated in one region, city or state For example: If all the properties are in Victoria then the trust is at the mercy of the economic conditions in Victoria.

9. Diversification of revenues
What level of exposure does the trust have to any one tenant?
Are there any large tenants, ie. 30% of revenues from one group. For example: If this major tenant gets into difficulties earnings would be under pressure.

10. Quality of Management What is their track record?
Are they a large manager with access to greater expertise?
Are they achieving adequate vacancy rates?
Are they achieving adequate rental increases?

11. Quality of Properties
Are the properties of investment grade or are they substandard?
Are there any buildings that need renovation or are they in good condition?
What yields are the buildings achieving?
Are the managers achieving adequate rental increases?

12. Vacancy rates of Properties
Low vacancy rates are important Very simple concept, the more tenants the more revenue!

13. Lease Profiles What is the average lease profile?
An average of five years or longer is adequate
Does any large tenancies come up for renewal in the near term?
What is the likelihood of an increase in rental income from these properties?

14. Quality of Tenants
Are the tenants financially sound with the ability to pay rent over a long period? For example: quality tenants like Coles Myer.

15. Property Trusts Commercial/Office Industrial Retail Diversified Trusts
Macquarie Office, ING Office
Industrial
Deutsche Industrial
Retail
Westfield Trust
Diversified Trusts
AMP Diversified

16. Preference Shares
A Preference share is a share of a company that usually has preference to dividends over the ordinary shares and usually rank behind debt and before ordinary shares in the event of the company being wound up.
The dividends are also usually franked
The dividends are usually higher than on ordinary shares

17. Coles Myer RECAPS Resetting Convertible Preference shares
Resetting - rate resets at maturity (based on 5yr SWAP)
Convertible - Can be converted to ordinary shares at maturity at 5% discount to VWAP
6.50% fully franked on Face Value of $100.00
Current price $105.75, running yield 6.15% fully franked
May be redeemed by issuer at Face Value at maturity date

18. St George Bank PRYMES
Preferred Resetting Yield Market Equity Securities
Resetting Yield - rate resets at maturity (based on 5yr SWAP)
Convertible - can convert to St George Bank shares at 2.5% discount to VWAP
6.36% fully franked on Face Value of $100.00
Current Price $106.75, running yield 5.96%
May be redeemed by issuer at Face Value at maturity date

19. Commonwealth Bank PERLS
Preferred Exchangeable Resettable Listed shares
Exchangeable - can be exchanged for Ordinary shares at reset dates at 2.5% discount to VWAP
Resettable - rate is reset on a quarterly basis in reference to 90 day Bank Bill rate.
Yield is 90 Day BB rate % multiplied by Current 90 day Bank Bill rate 4.84%. Yield is therefore 5.06%. Current price is $203.25, running yield 4.98% fully franked.
The issuer may redeem PERLS at Face Value of $ at resettable date.

20. Bank of Qld Reset Prefs Reset Convertible Preference shares
Reset - rate is reset at maturity
Convertible - may be converted into ordinary shares at maturity or by issuer at 2.5% discount
Yield is % on Face Value of $100.00
Current Price is $107.00, running yield 6.9% fully franked

21. Income Securities/Floating Rate Notes
A Note with an interest payment which is usually based on the 90 day Bank Bill Rate
A debt instrument by nature as opposed to an equity instrument (shares) and are therefore unfranked
Participation in movements in interest rates

22. Current Issues Macquarie Floating Rate notes
1.70% over 90 day BB rate
Minimum 7.25% until 15 January 2003
Current Yield 7.25% per $100 (min. rate)
Current Price $97.00, running yield 7.47%
National Bank Income Securites
1.25% over 90 day BB rate
Current yield 6.09% per $100
Current price $91.65, running yield 6.65%

23. Current Issues AMP Income Securities Woolworths Income Securities
1.30% over 90 day BB rate
Current Yield 6.14% per $100
Current Price $89.90, running yield 6.83%
Woolworths Income Securities
2.00% over the 90 day BB rate
Current Yield 6.84% per $100
Current Price $97.20, running yield 7.04%

24. Current Issues Publishing & Broadcasting Income Securities
2.0% over 90 day BB rate
Current rate 6.84% per $100
Current Price $92.00, running yield 7.44%

25. Current Issues Publishing & Broadcasting Income Securities
2.0% over 90 day BB rate
Current rate 6.84% per $100
Current Price $92.00, running yield 7.44%