Following in the footsteps of Malayan Banking Bhd (Maybank), AMMB Holdings Bhd (AHB) is now proposing to undertake a dividend reinvestment plan that allows shareholders the option to reinvest their cash dividend entitlements in new shares.
In a statement yesterday, AHB said as part of its capital management programme, its board would have absolute discretion, for each declared dividend, to determine whether to offer shareholders the option to reinvest the whole or a portion of their dividend entitlements in AHB shares.
It said new shares to be issued under the option would be priced of the higher between that of not more than a 10% discount to the five-day volume weighted average market price and the par value. The share issuance will be free from any brokerage fee.
AHB said the plan was expected to be in place by the current quarter of this year. For income tax purposes, shareholders will be treated as having received a cash distribution equivalent to the amount of the cash dividend declared. Shareholders must expressly elect for the reinvestment in writing, that is by signing and returning the notice of election. Otherwise, it will be paid in cash.
AHB said the proposed plan was a capital management tool that would strengthen its capital position as the new share issuances would enlarge its share capital base. It said the cash, which would otherwise be paid out, would be preserved to fund the banking group’s working capital and capital funds requirements.
“This is consistent with the themes outlined in the capital proposals issued by an international committee on banking supervision for the further strengthening of the capital funds of banking institutions,” it said.
This article appeared in The Edge Financial Daily, August 3, 2010.
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