The Australian dollar is proving a difficult beast to tame.

Since hitting a fourth-quarter closing low of USD1.0187 on Oct. 5 the aussie has rallied to USD1.0559, a 3.7 percent surge that started right after one 25 basis point reduction in the Reserve Bank of Australia’s (RBA) benchmark interest rate and picked up steam after another 25 basis point reduction on Dec. 4.

The RBA paused in November, but that’s 50 basis points in three meetings and the target cash rate is now down to 3 percent, the same level it hit during the heat of the Great Financial Crisis in 2009.

The RBA’s benchmark is still among the highest in the world, with central banks in the US, Europe, Japan, the UK and Switzerland having reduced their respective key interest rates to 1 percent or lower.

The list of countries with central bank targets higher than Australia’s 3 percent includes Poland (4.25 percent), Mexico (4.5 percent), South Africa (5 percent), Chile (5 percent), Indonesia (5.75 percent), China (6 percent), Hungary (6 percent), Brazil (7.25 percent), India (8 percent) and Russia (8.25 percent).

In November the RBA reduced its 2013 growth forecast, reasoning that lower investment in iron ore, coal and natural gas projects and the Australian government’s pledge to deliver an election-year budget surplus would restrain the economy.

In its quarterly monetary policy report the RBA noted, “Most of this revision to the outlook is accounted for by a change in the profile for mining investment.” The central bank forecast a peak in resource spending at about 8 percent of gross domestic product from a prior 9 percent. It also noted that “a slightly weaker” domestic economy and labor market should help contain inflation.

Prime Minister Julia Gillard’s bid for a AUD44 billion budget swing back to the black “appears to be weighing on growth over the second half” of this year, the report concluded.

The RBA has now cut its cash rate target by 1.5 percentage points since Nov. 1, 2011, as it continues to grapple with a strong aussie that’s hurting domestic manufacturers.

It appears that now other central bankers are offering advice on how to help the RBA with its strong currency problem, by suggesting the RBA intervene in markets to bring the value of the aussie down.

Here’s how one analyst, quoted by FT Alphaville, characterized this advice:

This sounds like the fisherman explaining the benefits of his fishing net to the fish.

The problem for reserve managers seeking to diversify is that there are not enough good assets to buy. In fact, yesterday a client argued to me that further diversification in to AUD would be difficult because of an absence of assets. From the perspective of reserve managers the RBA selling a truckload of AUD would be a welcome source of AUD supply. If the intervention were sterilized it would essentially be the RBA taking AUD assets from domestics and selling to foreigners.

Of course central bankers who are still hopeful of diversifying their currency assets want more of a strong one and fewer, say Japanese yen, US dollars, euros and UK pounds.

International desire for the aussie–and the Canadian dollar, known as the loonie–was underscored by a November report from the International Monetary Fund (IMF) that suggested the two currencies be included among the basket of currencies–which now includes the US dollar, the euro, the Japanese yen and the Swiss franc–listed in the IMF’s quarterly Currency Composition of Official Foreign Exchange Reserves. The aussie and the loonie are currently lumped with “other currencies.”

It should be noted that the IMF is merely catching up to the curve here, as central banks have been diversifying into alternative currencies in earnest since the September 2008 crackup of Lehman Brothers signaled the serious stage of the Great Financial Crisis.

The aussie’s reaction to this round of rate cuts has been somewhat stunning. But traders likely believe the RBA has reached an end.

Mr. Stevens’ statement on the December rate cut, in its concluding paragraph, indeed noted that monetary policy “has become more accommodative” over the past year and that there are “signs of easier conditions starting to have some of the expected effects.”

The RBA’s primary concern, quite apart from the economic outlook for Australia, where “most indicators…suggest that growth has been running close to trend over the past year,” is the potential impact of a persistently high Australian dollar on consumers and businesses.

Mr. Stevens pointed out that “the exchange rate remains higher than might have been expected, given the observed decline in export prices and the weaker global outlook.”

In a speech delivered Tuesday in Sydney RBA Deputy Governor Philip Lowe described the aussie as “uncomfortably high,” a condition that wasn’t helped, at least immediately, by the latest in a series of moves that’s shaved 175 basis points off the RBA’s cash rate since November 2011.

Mr. Lowe shed additional light on the aussie’s strength, noting, “Countries that are in relatively good shape and have not seen large-scale expansion of the central bank balance sheet are experiencing stronger currencies than those that are in relatively poor shape.”

The specter of Europe’s debt crisis continues to hang over the RBA’s outlook for global growth, though the threat of a US fiscal cliff-dive also has Mr. Stevens’ attention. Encouragingly, “Recent data suggest that the US economy is recording moderate growth and that growth in China has stabilised.”

At the same time, broader Asian growth “has been dampened by the more moderate Chinese expansion and the weakness in Europe.” Headwinds have combined to drive price for key Australian commodities down by about 15 percent from peak levels, though even here they’re still “historically high.”

Financial market sentiment globally has also improved from mid-2012, though Europe, of course, “is likely to remain a source of instability for some time.”

Mr. Stevens also noted that “capital markets remain open to corporations and well-rated banks” and that “Australian banks have had no difficulty accessing funding, including on an unsecured basis.” Benchmark interest rates around the world remain at historically low levels, making borrowing conditions for large corporations “attractive.”

Inflation in Australia “is consistent with” the RBA’s medium-term target, “with underlying measures at around 2.5 percent.” The RBA anticipates the July 2012 introduction of a price on carbon emissions to continue to impact prices, potentially driving the headline Consumer Price Index above 3 percent “briefly.”

At the same time, labor market conditions are softening and unemployment is on an uptrend, which is working to contain some cost pressures. Consequently, the RBA forecast that “inflation will be consistent with the target over the next one to two years.”

According to the statement on monetary policy posted on its website:

In determining monetary policy, the Bank has a duty to maintain price stability, full employment, and the economic prosperity and welfare of the Australian people. To achieve these statutory objectives, the Bank has an ‘inflation target’ and seeks to keep consumer price inflation in the economy to 2–3 per cent, on average, over the medium term. Controlling inflation preserves the value of money and encourages strong and sustainable growth in the economy over the longer term.

This, despite the fact that “the full effects of earlier measures are yet to be observed,” is what gave the RBA the scope for further easing it announced this week. The goal is to “help to foster sustainable growth in demand and inflation outcomes consistent with the target over time.”

The Australian Bureau of Statistics (ABS) reported last week that third-quarter gross domestic product (GDP) expanded by 3.1 percent year over year, slowing from a revised growth rate of 3.8 percent for the second quarter. Quarter-over-quarter growth was 0.5 percent, slower than the 0.6 percent rate of growth from the first to the second quarter of 2012.

Household consumption rose 0.3 percent in the third quarter, adding 0.2 percentage point to GDP growth after a 0.7 percent gain in the second quarter. This is the weakest consumption growth since the first quarter of 2010. Machinery and equipment investment grew by 6.2 percent, adding 0.4 point to the expansion. Mining, the biggest contributor to growth, expanded 4.5 percent.

Government spending, meanwhile, fell 0.4 percent, subtracting 0.1 point from overall GDP growth.

The ABS followed Dec. 6 with a labor statistics report for November that surprised to the upside: The unemployment rate fell to 5.2 percent in November from 5.4 percent in October. Economists had expected the rate to rise to 5.5 percent.

Australia added 13,900 jobs in November, beating forecast for no increase. The participation rate softened slightly to 65.1 percent from 65.2 percent in October.

The RBA makes interest rate policy decisions 11 times a year, or once every month except January. Its next announcement will come on Feb. 4, 2013.

Dividend Watch List

Because Australian companies typically report official earnings and declare dividends only twice a year, changes–additions to and subtractions from–the Dividend Watch List will be rarer than, for example, the Dividend Watch List compiled for AE’s sister letter Canadian Edge.

Reporting season Down Under is complete, which means that movements onto or off the Watch List will be for the most part determined by guidance revisions.

The next major round of reporting will happen in February 2013.

It’s important to note that Australian companies customarily maintain policies of paying out a specified percentage based on particular earnings metrics, whether that metric is statutory net profit after tax (NPAT), underlying NPAT or earnings before interest, taxation, depreciation and amortization (EBITDA).

What this means is that dividend rates will often vary more than they do for Canadian or US companies, which are almost universally pledged to maintaining dividend rates, often at the cost of tapping balance sheets in the absence of sufficient cash flow to cover obligations to shareholders.

This latter is fine in the short term, and it can be manageable in the longer term as well. But Australian firms are traditionally more debt-averse than their North American counterparts.

It’s important to note, too, that the CE Watch List is based on the monthly distribution scheme established during the income trust era, which, to the benefit of investors everywhere, persists even after the forced conversion to traditional corporations for many of these stocks.

Australia’s twice-yearly rhythm varies as well from the quarterly dividend arrangement to which most US companies adhere.

With recent dividend reductions, changes to guidance or policies that suggest non-regular payment the following companies have declared their worthiness for inclusion on the Dividend Watch List.

The List includes all companies that reduced payouts during the recently concluded earnings reporting season Down Under.

Basic Materials

Aditya Birla Minerals Ltd’s (ASX: ABY, OTC: ABWAF) board approved and management declared a AUD0.05 dividend on May 30, finally getting back to a paying basis after “omitting” a mid-year payment. It appears the company pays an annual dividend, but policy remains “to seek to maximise cash returns to Shareholders whilst having regard to ensuring a sound financial structure for the Company and providing for value accretive development and exploration activities and targeted growth opportunities.”

Because there’s no clarity on the payment interval this stock will probably be an emeritus member of the Dividend Watch List. It is, however, a speculative buy under USD0.50 for aggressive investors only.

Alumina Ltd (ASX: AWC, NYSE: AWC) didn’t declare an interim dividend when it reported 2012 first-half results on Aug. 16. Management had reduced its final dividend for 2011 by 25 percent, in step with guidance issued late in the year.

The company recorded a net loss of USD14.6 million, compared with a profit of USD67.7 million a year ago, although revenue from continuing operations was flat. Alumina received USD70.4 million in dividends and distributions from its joint venture with Alcoa Inc (NYSE: AA), in line with the previous six-month period but down from USD170 million the year before.

Although the company has undrawn credit facilities to help it through what is an increasingly difficult operating environment for global aluminum companies, absence of any cash flow guidance and rising overall debt levels suggested a dividend cut was highly likely. Hold.

Aquarius Platinum Ltd (ASX: AQP, OTC: AQPBF) halted operations at its Everest mine, the second such move in recent weeks, as its partners in the Marikana mine in South Africa had previously mothballed the No. 4 shaft due to the continuing weakness for platinum-group metals (PGM) prices.

Marikana accounts for approximately 18 percent of Aquarius’s annual production. This comes after the company reported that fiscal 2012 third-quarter earnings slid 137 percent to a AUD9.4 million loss, as production declined 18 percent and prices for PGMs dove 14 percent. Cash costs, meanwhile, surged by 26 percent.

The company didn’t pay an interim dividend on its fiscal 2012 first-half results. Sell.

Arrium Ltd (ASX: ARI, OTC: ARRMF, ADR: OSTLY) posted fiscal 2012 underlying net profit after tax of AUD195 million, down 17 percent from the prior corresponding period but in line with management guidance. Unfortunately, the final dividend was 25 percent lower than it paid a year ago, at AUD0.03 per share.

Positives include a 2 percent increase in cash flow to AUD470 million and a 4 percent reduction in net debt. Arrium, formerly OneSteel Ltd, paid a AUD0.03 per share interim dividend, down 50 percent from the AUD0.06 it paid for the first half of fiscal 2011. This one is for speculators ready for a double turnaround play, for the company as it continues to reorient itself as an iron ore producer and for the price of the relevant commodity. Buy under USD0.80.

BlueScope Steel Ltd (ASX: BSL, OTC: BLSFF) posted a fiscal 2012 net loss after tax of AUD1.044 billion, better than the AUD1.054 billion loss for fiscal 2011.

A joint venture with Japan’s Nippon Steel Corp (Japan: 5401, OTC: NISTF) that generated about AUD540 million for the company helped it shave AUD580 million in debt.

Management had already “omitted” the interim dividend and didn’t declare a final dividend either. But the balance sheet repair job merits an upgrade. Hold.

Fortescue Metals Group (ASX: FMG, OTC: FSUMF, ADR: FSUGY) held its final dividend steady, but recent events, described in the October In Focus feature, suggest “steady” may be as good as it gets from a dividend perspective for this company going forward.

An onerous debt burden of AUD10 billion, sliding iron ore prices, the announcement that it’s scaling back its expansion aspiration to 115 million metric tons from 155 million and the sale of a power station to raise AUD300 million are signs of desperate times.

The next dividend declaration should come around the second week of February 2013. The company paid an interim dividend of AUD0.04 for fiscal 2012, up from AUD0.03 in fiscal 2011. Look for that to be reversed, at least. Hold.

Grange Resources Ltd (ASX: GRR, OTC: GRRLF), which enjoyed a short membership in the AE Portfolio Aggressive Holdings, cut its 2012 interim dividend from AUD0.02 a year ago to AUD0.01. That move on top of an abrupt change in leadership, prompted its removal from the Portfolio via an Aug. 31 Flash Alert, after just joining the Aggressive Holdings as of the July issue. Hold.

Independence Group NL (ASX: IGO, OTC: IPGDF) reduced its final dividend for fiscal 2012 from AUD0.07 to AUD0.05. The company is showing improved production metrics at its key nickel mine, and its efforts to diversify what it produces–including the development of the Tropicana gold mine–will help it in the long run.

Revenue was up 32 percent to AUD216.6 million. Nevertheless, Independence reported a full-year net loss after tax of AUD285.3 million, reversing a year-ago profit of AUD5.5 million. Hold.

Medusa Mining Ltd (ASX: MML, OTC: MDSMF), an un-hedged, low-cost gold producer, saw a steep decline in fiscal 2012 gold sales, from 96,217 ounces to 55,446 ounces. Costs remained on the extremely low side, and management reiterated its target of 400,000 ounces of production per year by 2015.

We like the company, as we detail in the November In Focus feature. But it did cut its final dividend by 60 percent to AUD0.02 per share. This remains, however, a great way to gain gold exposure and get paid at the same time. Buy under USD6.50.

Mount Gibson Iron Ltd (ASX: MGX, OTC: MTGRF) reported a slide in fiscal 2012 sales of 3.6 percent, and net profit after tax declined 27.8 percent. That led to a 50 percent reduction in its final dividend, to AUD0.02 per share.

Iron ore tons mined increased by 29 percent, though tons sold declined by 0.5 percent. Costs were up, selling prices down. Hold.

Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY) reported an 18.6 percent decline in first-half revenue and a 32 percent decline in earnings before interest, taxation, depreciation and amortization (EBITDA). It also raised its full-year cash cost guidance to USD1.10 to USD1.20 per ounce from USD1 to USD1.10.

That, on top if the fact that it reduced its interim dividend to AUD0.10 from AUD0.30 a year ago, suggests the final dividend, which will be declared on or about Feb. 14, will be lower than last year’s. Buy under USD8.50.

Panoramic Resources Ltd (ASX: PAN, OTC: PANRF) didn’t declare a final dividend for fiscal 2012 after paying AUD0.02 per share a year ago. It paid 50 percent less for its fiscal 2012 interim dividend than it for fiscal 2011.

Fiscal 2012 net revenue was down 7 percent, and the company posted a net loss after tax of AUD18.2 million. Average realized nickel prices declined by 23 percent, the source of all its dividend trouble. Cash costs, however, were down 4 percent, and management continues to put up solid production numbers. This is for speculators on a stimulus-driven global economic turnaround. Buy under USD1.00.

Western Areas NL (ASX: WSA, OTC: WNARF) cut its final dividend from AUD0.15 a year ago to AUD0.06, as fiscal 2012 revenue was down 29.4 percent on a 29 percent decline for nickel prices. With production flat, sales volumes down and cash costs up, the thing to hold onto is a return of more normal growth for the global economy.

Fiscal 2013 first-quarter production was, and a reorganization effort has had a significant impact on the company’s cost structure–Western Areas is Australia’s lowest-cost nickel miner. Buy under USD4.60.

Whitehaven Coal Ltd (ASX: WHC, OTC: WHITF) declared a final dividend of AUD0.03, down from AUD0.041 a year ago, as underlying net profit after tax slid 13 percent. Revenue from coals sales actually grew by 2.6 percent, however. The company posted fiscal 2013 first-quarter total coal sales that were 5 percent lower than year-ago levels. Hold.

Consumer Goods

Billabong International Ltd (ASX: BBG, OTC: BLLAF, ADR: BLLAY) cut its interim distribution by 81 percent, which we said was likely an interim step on the way to zero. And that’s where we are after management didn’t declare a final dividend in August.

Billabong posted a fiscal 2012 net loss of AUD275.6 million, as sales declined 7.9 percent. There are now competing AUD1.45 per share offers to buy the company. Management has guided to fiscal 2013 EBITDA guidance of AUD100 million to AUD110 million. Sell.

Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY) didn’t pay an interim dividend nor did it pay a final dividend for fiscal 2012. Fiscal 2012 revenue was down 1.7 percent, while normalized earnings before interest, taxation, depreciation and amortization (EBITDA) slid 16.6 percent. The company did reduce net debt by 23.8 percent, and the sale of its edible oils business to Aggressive Holding GrainCorp Ltd (ASX: GNC, OTC: GRCLF) for AUD472 million will help the balance sheet. Hold.

Consumer Services

APN News & Media Holdings Ltd (ASX: APN, OTC: APNDF) cut its 2012 interim dividend to AUD0.015 from the AUD0.035 it paid a year ago.

APN reported a net loss of AUD319.4 million for the six months to Jun. 30, which included a AUD485 million writedown on its New Zealand assets. Revenue fell 6 percent to AUD477 million, and earnings before interest, taxation, depreciation and amortization (EBITDA) slid 12 percent to AUD74.9 million. Debt remains a concern. Sell.

David Jones Ltd (ASX: DJS, ADR: DJNSY) reported that fiscal 2012 sales declined 4.6 percent, as like-for-like sales were off 4.3 percent. The company cut its final dividend to AUD0.07 per share from AUD0.15 a year ago. Hold.

Harvey Norman Holdings Ltd (ASX: HVN, OTC: None) declared a final dividend of AUD0.04 per share, down from AUD0.06 a year ago, as fiscal 2012 sales revenue slid 9.6 percent, earnings before interest and taxation (EBIT) declined 24.8 percent and net profit after tax (NPAT) fell 31.6 percent. Fiscal 2013 first-quarter sales were down 10 percent. Sell.

JB Hi-Fi Ltd (ASX: JBH, OTC: JBHIF) reduced its final dividend to AUD0.16 per share from AUD0.29 a year ago. Total dividends for fiscal 2012 were AUD0.65 per share, down from AUD0.77 for fiscal 2011.

Management noted during its fiscal 2012 earnings call that July margin trends have started to rebound. Though the environment for discretionary retail purchases isn’t great this company competes hard and is expanding its offerings to meet the new digital age.

The company reported that fiscal 2013 first-quarter sales rose 3.8 percent, though comparable sales declined 2.4 percent. Management is confident in its ability to grow market share. Buy under USD9.75.

Myer Holdings Ltd (ASX: MYR, OTC: MYGSF) cut its fiscal 2012 final distribution to AUD0.09 from AUD0.115 a year ago. The company posted a 1.3 percent decline in sales to AUD3.12 billion, though fourth-quarter comparable sales were up 3 percent and operating profit increased by 1.3 percent to AUD1.29 billion.

Myer posted a 1 percent rise in total sales for the first quarter of fiscal 2013 and a 0.8 percent increase in like-for-like sales. We’re raising our rating on this, though conservative investors should steer clear. Buy under USD2.40.

Navitas Ltd (ASX: NVT) reduced its fiscal 2012 final dividend to AUD0.101 from AUD0.12 in fiscal 2011. Total dividends for fiscal 2012 were AUD0.195 per share, down from AUD0.207 per share in fiscal 2011. The company continues to build its global education franchise, however, and will benefit from changes to Australia’s visa system. Buy under USD4.

Seven West Media Ltd (ASX: SWM, OTC: WANHF) cut its final dividend to AUD0.06 from AUD0.24 a year ago, though earnings before interest and taxation came in right at revised guidance at AUD473.4 million. Management forecast low single-digit advertising growth for fiscal 2013, suggesting this difficult period for media companies will continue.

Management did, however, provide quantitative guidance for fiscal 2013 first-half earnings before interest and taxation (EBIT) of approximately AUD250 million and noted signs of stabilization in the advertising market. That’s worth an upgrade to make this a worthy speculation for very aggressive investors. Buy under USD1.65.

 Hold.

Southern Cross Media Group Ltd (ASX: SXL, OTC: SOUTF) terminated 2day FM’s Hot 30 show after the show’s hosts’ prank call to a London hospital during Kate Middleton’s visit in the early stages of her pregnancy. The nurse who accepted the call subsequently committed suicide.

Management says the broadcast violated no laws, regulations or code, but Southern Cross shares have slid on the news, as advertisers have pulled business.

Southern Cross paid a AUD0.05 final dividend, which was actually up from the AUD0.03 it paid as a final dividend for fiscal 2011.

Last month we declared the company “off the List,” but that was before this tragic bombshell cast doubt on prospects. Southern Cross is back on the List, and we’re also reducing our rating on the stock. Hold.

Financials

QBE Insurance Ltd (ASX: QBE, OTC: QBEIF) reduced its 2012 interim distribution to AUD0.40 from the AUD0.62 it paid as an interim distribution in 2011. Operating results were actually solid, as net profit after tax (NPAT) was up 13 percent on lower claims. Insurance profit was up 26 percent, and management reiterated its “positive” full-year outlook for underlying insurance margin and profitability.

That, however, was before Superstorm Sandy hit the east coast of the US. Management has said that damage from the storm could mean costs of AUD350 million to AUD450 million for the insurer and reduced its earnings outlook. Hold.

Industrials

Boral Ltd (ASX: BLD, OTC: BOALF) reduced its fiscal 2012 final dividend by 50 percent to AUD0.035 per share, though statutory net profit after tax (NPAT) was up 5.3 percent. Hold.

Emeco Holdings (ASX: EHL, OTC: None) reduced fiscal 2013 first-half operating net profit after tax (NPAT) guidance to AUD23 million to AUD26 million from AUD29.2 million. The company also reduced its sustaining capital expenditure budget; though this may help preserve the payout it’s not a good long-term sign. Hold.

GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY) has adjusted its payout policy. The company now plans to pay 80 percent to 95 percent of net profit after tax (NPAT), up from 70 percent to 80 percent, but management has also removed the AUD0.18 per share “floor” that had underpinned the policy. Buy under USD2.

Leighton Holdings Ltd (ASX: LEI, OTC: LGTHF) slashed its interim distribution from AUD0.59 per share to AUD0.20 per share.

The company reported 2012 first-half statutory net profit after tax (NPAT) of AUD114.6 million, at the low end of its AUD100 million to AUD150 million guidance. Management, however, maintained full-year NPAT guidance of AUD400 million to AUD450 million, which is a reduction from previous guidance for 2012 NPAT of AUD600 million to AUD650 million. Hold.

Toll Holdings Ltd (ASX: TOL, OTC: THKUF) maintained its final distribution at AUD0.135 per share, despite chopping its guidance for fiscal 2012 underlying earnings before interest and taxation (EBIT) to AUD400 million to AUD420 million from a prior target of AUD450 million. Fiscal 2011 underlying EBIT was AUD436 million.

The company posted actual EBIT of AUD410.8 million, right in the middle of the revised forecast.

Australia’s largest trucking company and freight handler has a relatively strong balance sheet, and its operating performance remains sound. But external pressures in the form of a weakening Chinese economy and a still-recovering Japanese economy suggest an overabundance of caution is in order. Hold.

Oil & Gas

Boart Longyear (ASX: BLY, OTC: BOARF, ADR: BLGPY) maintained its 2012 revenue guidance of USD2 billion but reduced its earnings before interest, taxation, depreciation and amortization (EBITDA) guidance to USD310 million to USD320 million from USD360 million to USD390 million due to margin pressures.

The company will report final 2012 results on or about Feb. 21, 2013, at which time it will likely also reveal a reduced final dividend. Hold.

The ADR List

We continue to track the How They Rate coverage universe and beyond for Australia-based companies that afford US investors the convenience of ADR investing, either on their initiative or via the effort of an interested financial institution.

Here again is our primer on Australian stocks, US OTC symbols and ADRs.

The great majority of the companies under How They Rate coverage have US symbols, many because they actively seek to raise capital here on their own accord. That means they comply, to varying degrees, with US Securities and Exchange Commission filing requirements for foreign companies and with US accounting principles. Others trade here because a sponsoring institution has effectively created a secondary market for the shares, without the underlying company’s active participation.

Shares traded on US OTC markets bearing a final “F” in their five-letter symbols are basically home-listed shares trading in a market created by and for US institutions. Individuals can buy and sell here, too. Prices basically reflect ASX prices and also reflect changes in the relationship between the US dollar and the Australian dollar. One “F” share represents one ASX-listed share. The dividend you receive in respect of an “F” share is the dividend paid in respect of the ASX-listed share, adjusted for currency effects.

An ADR is a certificate that represents stock of a foreign company. ADRs are listed on US stock exchanges or the OTC Bulletin Board or Pink Sheets. Those that trade OTC have five-letter symbols ending with the letter “Y.” All transactions, including dividend payments, are conducted in US dollars.

One ADR certificate may represent one or more shares of the foreign stock; it can also represent a fraction of a share. For example, one Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY) ADR, which trades under the symbol TLSYY, is worth five ordinary shares that trade on the Australian Securities Exchange under the symbol TLS. Australia & New Zealand Banking Group Ltd’s (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) ADR, ANZBY, is worth one Australia-listed ANZ share.

Because many ADRs don’t have a one-to-one ratio between the depositary receipts and the shares of stock, financial ratios are often not included in stock listings. Data in Australian Edge Portfolio tables and How They Rate is derived based on Australian Securities Exchange symbols so is as complete as you’ll find anywhere.

Foreign companies themselves often “sponsor” the creation of their own ADRs. These are called “sponsored ADRs.” There are three levels of sponsorship.

A Level I sponsored ADR is created by a company because it wants to extend the market for its securities to the US. It does not, however, want to register with the Securities and Exchange Commission (SEC) or conform to generally accepted accounting principles (GAAP). Level I ADRs trade on the OTC Bulletin Board or Pink Sheets trading systems, usually but not exclusively by institutional investors. Australia & New Zealand Banking Group’s is a Level I ADR.

Level II and Level III sponsored ADRs must be registered with the SEC, and financial statements must be reconciled to generally accepted accounting principles. A Level II ADR requires partial compliance with GAAP, while a Level III ADR requires complete compliance. A Level III sponsorship is require if the ADR is a primary offering and is used to raise capital for the company. Only Level II and Level III sponsored ADRs can be listed on the New York Stock Exchange (NYSE), the American Stock Exchange or Nasdaq. Telstra Corp sponsors a Level III ADR in the US, meaning it’s actively seeking to raise capital here.

An unsponsored ADR is created by a US investment bank or brokerage that buys ordinary shares on the underlying company’s home market then deposits them in a local custodian bank. This depositary bank then issues shares that represent an interest in the stocks and handles most of the transactions with American investors, serving both as transfer agent and registrar for the ADR.

The shares of the foreign stock held in the custodian bank are called “American Depositary Shares,” although this term is sometimes used as a synonym for “American Depositary Receipts.” Unsponsored ADRs can’t be listed on the major American stock exchanges because they aren’t registered with the SEC and lack other necessary qualifications.

The price of an ADR is determined by supply and demand but will generally track the price of the underlying ordinary share. When dividends are paid, the custodian bank receives it and withholds any foreign taxes, exchanges it for US dollars and then sends it to the depositary bank, which then sends it to the investors.

The US depositary bank handles most of the interaction with US investors, including rights offerings, stock splits and stock dividends. Sponsored ADR investors may receive communications, including financial statements, directly from the company.

Here is a list of companies in the How They Rate coverage universe that have an ADR listing in the US, along with the number of ordinary ASX-listed shares the ADR represents.

Basic Materials          

• Alumina Ltd (ASX: AWC, NYSE: AWC)–One ADR is worth four ordinary shares.
• Aquarius Platinum Ltd (ASX: AQP, OTC: AQPBF, ADR: AQPTY)–One ADR is worth two ordinary shares.
• Arrium Ltd (ASX: ARI, OTC: OSTLF, ADR: OSTLY)–One ADR is worth 20 ordinary shares.
• BHP Billiton Ltd (ASX: BHP, NYSE: BHP)–One NYSE-listed ADR is worth two ordinary shares.
• BlueScope Steel Ltd (ASX: BSL, OTC: BLSFF, ADR: BLSFY)–One ADR is worth five ordinary shares.
• Fortescue Metals Group Ltd (ASX: FMG, OTC: FSUMF, ADR: FSUMY)–One ADR is worth five ordinary shares.
• Iluka Resources Ltd (ASX: ILU, OTC: ILKAF, ADR: ILKAY)–One ADR is worth five ordinary shares.
• Kingsgate Consolidated Ltd (ASX: KCN, OTC: KSKGF, ADR: KSKGY)–One ADR is worth one ordinary share.
• Newcrest Mining Ltd (ASX: NCM, OTC: NCMGF, ADR: NCMGY)–One ADR is worth one ordinary share.
• Oz Minerals Ltd (ASX: OZL, OTC: OZMLF, ADR: OZMLY)–One ADR is worth 0.5 ordinary shares.
• Rio Tinto Ltd (ASX: RIO, NYSE: RIO)–One ADR is worth one ordinary share.

Consumer Goods

• Billabong International Ltd (ASX: BBG, OTC: BLLAF, ADR: BLLAY)–One ADR is worth two ordinary shares.
• Goodman Fielder Ltd (ASX: GFF, OTC: GDFLF, ADR: GDFLY)–One ADR is worth 10 ordinary shares.

Consumer Services

• Crown Ltd (ASX: CWN, OTC: CWLDF, ADR: CWLDY)–One ADR is worth two ordinary shares.
• David Jones Ltd (ASX: DJS, ADR: DJNSY)–One ADR is worth one ordinary share.
• Metcash Ltd (ASX: MTS, OTC: MCSHF, ADR: MHTLY)–One ADR is worth six ordinary shares.
• TABCORP Holdings Ltd (ASX: TAH, OTC: TABCF, ADR: TACBY)–One ADR is worth two ordinary shares.
• Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY)–One ADR is worth 0.5 ordinary share.

Financials

• Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY)–One ADR is worth one ordinary share.
• Commonwealth Bank of Australia Ltd (ASX: CBA, OTC: CBAUF, ADR: CMWAY)–One ADR is worth one ordinary share.
• National Australia Bank Ltd (ASX: NAB, OTC: NAUBF, ADR: NABZY)–One ADR is worth one ordinary share.
• QBE Insurance Ltd (ASX: QBE, OTC: QBEIF, ADR: QBIEY)–One ADR is worth one ordinary share.
• Westfield Group Ltd (ASX: WDC, OTC: WEFIF, ADR: WFGPY)–One ADR is worth two ordinary shares.
• Westpac Banking Corp Ltd (ASX: WBC, NYSE: WBK)–One ADR is worth five ordinary shares.

Health Care

• Cochlear Ltd (ASX: COH, OTC: CHEOF, ADR: CHEOY)–One ADR is worth 0.5 ordinary share.
• CSL Ltd (ASX: CSL, OTC: CMXHF, ADR: CMXHY)–One ADR is worth 0.5 ordinary share.
• Sonic Healthcare Ltd (ASX: SHL, OTC: SKHCF, ADR: SKHCY)–One ADR is worth one ordinary share.

Industrials

• Amcor Ltd (ASX: AMC, OTC: AMCRF, ADR: AMCRY)–One ADR is worth four ordinary shares.
• Boral Ltd (ASX: BLD, OTC: BOALF, ADR: BOALY)–One ADR is worth four ordinary shares.
• GWA Group Ltd (ASX: GWA, OTC: GWAXF, ADR: GWAXY)–One ADR is worth four ordinary shares.
• Toll Holdings Ltd (ASX: TOL, OTC: THKUF, ADR: THKUY)–One ADR is worth two ordinary shares.

Oil & Gas

• Beach Energy Ltd (ASX: BPT, OTC: BEPTF, ADR: BCHEY)–One ADR is worth 20 ordinary shares.
• Boart Longyear Ltd (ASX: BLY, OTC: BOARF, ADR: BLGPY)–One ADR is worth two ordinary shares.
• Caltex Australia Ltd (ASX: CTX, OTC: CTXAF, ADR: CTXAY)–One ADR is worth two ordinary shares.
• Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY)–One ADR is worth 10 ordinary shares.
• Santos Ltd (ASX: STO, OTC: STOSF, ADR: SSLTY)–One ADR is worth one ordinary share.
• Woodside Petroleum Ltd (ASX: WPL, OTC: WOPEF, ADR: WOPEY)–One ADR is worth one ordinary share.
• WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY)–One ADR represents one ordinary share.

Technology

• Redflex Holdings Ltd (ASX: RDF, OTC: RFLXF, ADR: RFLXY)–One ADR is worth eight ordinary shares.

Telecommunications  

• Singapore Telecommunications Ltd (Singapore: ST, ASX: SGT, OTC: SNGNF, ADR: SGAPY)–One ADR is worth 10 ordinary shares.
• Telecom Corp of New Zealand Ltd (ASX: TEL, NYSE: NZT)–One ADR is worth five ordinary shares.
• Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY)–One ADR is worth five ordinary shares.

Utilities

• AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY)–One ADR is worth one ordinary share.
• Origin Energy Ltd (ASX: ORG, OTC: OGFGF, ADR: OGFGY)–One ADR is worth one ordinary share.