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FDR intl bond funds a better option: Tower

TOWER Investments has restructured and relaunched its international bond funds so the benefits of Fair Dividend Rate (FDR) tax rules can be passed on to taxpaying unitholders.

Friday, January 9th 2009, 7:28AM

The funds involved are the wholesale TOWER International Bond Fund (Fair Dividend Rate) and the retail TOWER BondPlus Fund.

Both funds are PIEs and their international investments are hedged to the New Zealand dollar.

“The change to our international bond funds offers investors access to the FDR regime, which brings some benefits relative to New Zealand fixed interest and non-FDR international bond funds,” said the CEO of TOWER Investments, Sam Stubbs.

“Coupled with the fact that high quality international bonds offer some very persuasive investment opportunities within the context of the global credit crunch recession, we are confident that FDR rules now applicable to our international bond funds make these PIEs core investment portfolio allocations for New Zealand investors,” Stubbs says.

Under FDR rules, TOWER’s FDR international bond funds’ taxable income allocated to investors will be based on a deemed PIE return of 5% per annum of the daily opening market value of the funds’ international investments.

Income received by TOWER’s FDR international bond funds above the deemed return of 5% per annum should not be subject to further taxation for investors.

Investors will pay tax on allocated income at their Prescribed Investor Rate (PIR).

The underlying manager of the wholesale TOWER International Bond Fund (Fair Dividend Rate) and the retail TOWER BondPlus Fund is the giant US bond manager Pacific Investment Company (PIMCO).

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