DATE OF ISSUE: 17 OCTOBER 1994
NRMA SHARE FLOAT - TREATMENT OF SHARE AND CASH ENTITLEMENTS
INTRODUCTION
The Department of Social Security have recently completed an information paper on the treatment of the proposed NRMA share float. This paper has been prepared in anticipation of members voting in favour of the share float.
BACKGROUND
2.In August this year, the NRMA Board of Directors decided to recommend to NRMA members the listing and share float of a holding company with limited liability that has NRMA Ltd and NRMA Insurance Ltd as subsidiary companies. The proposed new company is referred to simply as NRMA in this document.
3.Following the Director's decision, NRMA members were issued a prospectus and a ballot paper and asked to vote on whether they were for or against the proposal to float NRMA.
4.As a ballot has not yet been finalised, it is not known if the float will take place. The Calendar of Events at Attachment A provides a timetable which sets out relevant events and dates.
SHARE ENTITLEMENTS
5.Should the float go ahead, NRMA Ltd members as at 16 March 1994 would receive at least 250 shares (estimated value $500.00), or cash from the sale of these shares. Longer term members would receive additional shares, based on continuous membership of up to a maximum of 25 years. Members who had a current policy with NRMA Insurance Ltd (other than Life Insurance or Travel Insurance) as at 16 March 1994, would receive double the amount of shares or cash to which they would be entitled as members of NRMA Ltd. Any NRMA Insurance Ltd policy holders who are not NRMA Ltd members would not be entitled to shares or cash. The maximum share entitlement for a member without a current policy is 500 shares (estimated cash equivalent $1,000.00), while members with a current policy can receive a maximum of 1,000 shares (estimated cash equivalent $2,000.00).
Note: Estimates of the value of the shares are NRMA estimates and not the Department's estimates.
CASH ENTITLEMENTS
6.If NRMA members do not want to receive the shares, they can elect to receive a cash entitlement. The funds for the cash entitlements will come from the sale of the unwanted NRMA shares by the NRMA Offer Trust. It is expected that members will receive a cheque before the end of December 1994. However, this depends on when the shares are sold. The amount of cash actually received by the service pensioner depends on how much the shares are sold for and the cost of selling them. The maximum cost these members will bear is 5 cents per share.
POLICY ASPECTS
DVA Treatment of Receipt of Shares
7.The actual receipt of shares or cash would not be considered as income for service pensioners. NRMA will assign shares to all eligible clients. As mentioned in paragraph 3, those clients who take the cash option will have their shares held by the NRMA Offer Trust and sold on their behalf with the proceeds of the sale distributed to the service pensioner.
8.Therefore, as with the share distribution, the cash payment will be treated as a return of capital. The value of the shares would be subject to assets testing as would the amount of cash received (unless spent).
Date of Acquisition of NRMA shares
9.The date of acquisition of shares received through the float would be the date the shares are listed on the stock exchange. Consequently, assuming the NRMA float occurs, then no NRMA shares could be considered to come within the shares savings provision, and all NRMA shares will be subject to a Rate of Return (ROR) assessment.
ROR Assessment
10.Initially, the current ROR assessment used for listed products less than 12 months old will apply to NRMA shares. Within the first 12 months following listing, the price used as the price at the beginning of the ROR period will be the last sale price for NRMA shares at the close of business on the first trading day the shares are listed. The first ROR is expected to be available a fortnight after NRMA list on the Australian Stock Exchange. No predictions as to the value of the ROR can be made as this will depend on the actual market performance of the shares.
AFFECT ON SERVICE PENSIONERS
11.Some service pensioners may be concerned that they may lose all, or part of their DVA entitlement under the income or assets tests should they receive cash or shares. It should be made clear to concerned clients that this is not a necessary consequence and will only affect a limited number of service pension recipients. Should NRMA Ltd members vote accordingly, clients could opt to receive cash and could use it in such a way that it will not affect their service pension entitlement, such as using it on every day living expenses, paying bills, or home renovations.
MEMBER'S SHARE INFORMATION HOTLINE
12.NRMA Ltd has set up an information hotline for service pension recipients and DSS clients that is being run by the Council on the Ageing. The number 008 656363 and is available between the hours of 9 am and 3 pm.
Kay Grimsley
Assistant Secretary
Income Support Branch
ATTACHMENT A
CALENDAR OF EVENTS
March
The share issue proposal was announced in March 1994.
June
NRMA Ltd members received some details about the proposal together with membership details for checking.
August
NRMA Board of Directors decided to recommend the proposal to proceed with the share float to its 1.8 million members.
September
Members will receive full details on the number and value of shares (or cash) to be issued, the financial details of the company and a voting form.
October
Members will be invited to vote on the proposal. If at least 75% of members vote in favour of the proposal, it will be approved.
November
If the proposal is approved by the membership, shares (or cash) will be issued to members and NRMA will be listed on the Australian Stock Exchange.
December
Service Pensioners taking the cash option will receive a cheque for the sale of their shares.