National Income Securities (NIS) are a form of hybrid income security. They're not ordinary shares or bank deposits but are listed on the ASX.
NIS consist of two components:
- A fully paid debt security of $100 (Note).
- An unpaid preference share (or Preference Share).
These two components are stapled together and cannot be traded separately.
On 11 January 2021, NAB issued an Exchange Notice in respect of the NIS, in accordance with their terms. That notice confirmed that on Monday, 15 February 2021, all NIS on issue will be repaid. The Exchange Notice is irrevocable.
On 15 February 2021, holders of NIS will receive cash proceeds of $100 per NIS, plus the final interest payment on the Note. The Preference Shares forming part of the NIS will be bought back for no consideration and cancelled.
The last date for trading in NIS will be 27 January 2021 and the Record Date for the final payment will be 29 January 2021.
Floating distribution rate
NIS offer a floating distribution rate, payable quarterly in arrears. The distribution rate will vary every quarter at the defined market rate plus 1.25% per annum.
The defined market rate is the 90 Day Bank Bill Rate. A feature of the NIS is that they have no maturity date but may be repaid at NAB’s election in certain circumstances. NIS may be sold on the ASX at the prevailing market price, or privately.
Under Australian tax law, the NIS distributions represent non-share dividends which are unfrankable.
For Australian resident holders, the distributions received will form part of your Australian taxable income. Franking credits can’t be attached to the NIS distributions made. For tax return purposes the NIS distributions should therefore be disclosed as unfranked dividends.
For non-resident holders, the NIS distributions received generally won’t be subject to Australian tax. No Australian withholding tax will be deducted from your NIS distributions due to a specific withholding tax exemption applicable to certain non-share dividends.
- NIS payments history
- National Income Securities Prospectus (PDF, 457 KB)
- Exchange Notice in respect of National Income Securities (PDF, 178KB)
Note: the above information is not financial or tax advice. Please consult your independent financial adviser if you are considering investing in NIS.