Westpac Self-Funding Instalments

• Listed on the ASX
  
• The second instalment (referred to as the Completion Payment or Loan Amount) is the loan component payable if you want to take full legal ownership of the underlying security
• All or part of the interest may be tax deductible
• If the price of the underlying security falls below the Loan Amount, you can walk away at expiry with no additional future payment required
• After paying the first instalment, investors receive many of the benefits of direct security ownership such as exposure to potential capital growth, dividends or distributions and franking credits (if eligible), for a lower capital outlay upfront (compared to buying the security outright)
• Any dividends or distributions received in relation to the underlying security are automatically used to reduce the Loan Amount whilst the annual interest payment is automatically capitalised to the Loan Amount
• Obtain a potentially tax efficient investment – depending on your circumstances and subject to the capital protected borrowing rules, the interest payments may be tax deductible and excess franking credits may be used to offset tax payable. Please refer to the detailed tax section in the PDS
• No separate loan application or credit checks
• No margin calls
• Available to SMSFs.

Risks associated with Westpac Self-Funding Instalments include:

• Gearing can magnify losses as well as gains. If the price of the underlying security falls, the price of the Westpac SFI may fall at a greater rate and investors may risk losing some or all of their capital investment
• The gearing level may change materially as the price of the underlying security and the loan amount change throughout the term. If the price of the underlying security falls, the price of the Westpac SFI will generally fall
• Any rise in interest rates may increase the amount added to the Loan Amount as interest
• The interest capitalised to the loan may be higher than the dividends received from the underlying securities, causing the loan amount to increase
• If a TFN, ABN or proof of exemption is not provided, holders may be required to pay an additional amount for tax in respect of any special dividends that are not fully franked
• The Completion Date for a Westpac SFI may be brought forward where an ‘Extraordinary Event’ occurs (for example, the underlying securities being subject to a buy-back offer, a takeover bid, a scheme of arrangement or a demerger)
• Tax legislation may alter and affect the tax treatment or obligations of instalment holders
• Exposure to Westpac if it is unable to perform its obligations.

You should also consider the taxation consequences. Investors should seek independent professional tax advice on any taxation matters.

This is not a full description of the features and risks associated with investing in Westpac SFIs. Please see the Westpac Self-Funding Instalments Product Disclosure Statement (PDF 2MB) for more information.