Continue to hold Telstra and buy Argo

We calculate the overall dividend plus franking credits return to our SMSF is 12.1%. This is an excellent return and we are happy to remain long Telstra. The major risk to this investment is a reduced dividend pay out.

Trustees will further investigate Argo Investments with view to buy a stake to allow participation in share purchase scheme.

Investment in Argo Investment

The fund will make an inital small investment in Argo Investments shares. The initial investment will be to facilitate participation in their Share Repurchase plan and other attractive benefits as listed below.

Low Management Costs
No management fees are charged by Argo and being a listed company, only normal stockbroker charges apply when shares are purchased and sold. For the year ended 30 June, 2005 total operating costs were 0.15% of total assets at market value.

Franked Dividends
Argo pays dividends in March and September each year. Imputation credits on dividends received by Argo are passed on through the fully franked dividends paid to Argo shareholders, with all shareholders benefiting from the associated tax credits. Certain Australian share holders can also claim a tax benefit where the dividend is sourced from a LIC capital gain.

Share Purchase Plan
Argo has a Share Purchase Plan which enables shareholders to invest up to $5,000 a year in additional shares, currently at a 2.5% discount off the market price. Participation in the SPP is entirely at the option of the shareholders and no transactional costs apply.

Dividend Reinvestment Plan
Argo has a Dividend Reinvestment Plan, which is currently offered to eligible shareholders at a 2.5% discount off the market price. Participation in the DRP is again entirely optional and no transactional costs will apply.

Share Issues
Argo also has a history of making attractively priced new issues of shares to our existing shareholders.

Combined with their outperformance of All Ords Accumulation INdex for 5,10,15 and 20 years.

Initial investment of between $2-$5k will be made and then a regular investment of $400-$800 per month to dollar cost average in to the stock.

BHP position not taken

Due to circumstances we did not sell the BHP puts as planned on Monday 23rd Jan. The stock price then took off from a low of 24.23 on Monday to peak at 26.63 a week later and hovered in the low 26 range until today, when gravity and sanity returned with the stock dropping over 5%. After reading comments by the Intelligent Investor we will now closely watch both BHP and Rio Tinto for an entry or attractive Put position.

Holding Telstra

The Trust will continue to hold Telstra. The latest pop in share price on news of T3 in encouraging that the trustees original investment thesis will be fulfilled. The trust will be able to sell some of it's holding over the average paid and will have netted the attractive dividends for that period. Despite being in the troubled Telecommunications industry the trustees had believed if as the largest shareholder the government had known any information that would have led them to believe $5.25 for not a realistic price for T3 then they would have stated that and lowered their price accordingly. However, despite having the knowledge they did not lower their price target. This resulted in the Trusts purchase of a volume and portfolio percentage of the shares far greater than they would normally allocate to an individual share. The other contributing factor was the announcement of the special dividend combining to form $.40 a year in franked dividend. Was that a bribe to unload shares by the company?

At any rate the dividend has been better than interest and as stated the trustees believe they will get to sell above the average price, some time in the future. They will look at call options on Telstra.