AMP proposes 40c a share capital return

15 February 2007

AMP proposes 40c a share capital return
and increases final dividend payment

AMP Limited shareholders are set to receive a capital return of 40 cents a share in a proposed capital initiative of around A$750 million in the first half of 2007, subject to shareholder and Australian Tax Office (ATO) approval.
The final 2006 dividend has also been increased by 3 cents a share compared with the previous corresponding period to 21 cents a share, 85 per cent franked1. This has lifted the full year dividend payment by 25 per cent to 40 cents a share.

The proposed capital return has been structured in the same way as the 2005 and 2006 capital returns. Shareholders will have the opportunity to approve the latest proposed return at the Annual General Meeting, to be held in Melbourne in May.

Almost 850,000 AMP shareholders own less than 10,000 shares. A shareholder with 1000 shares will receive total cash payments of A$800 for the 2006 financial year. This includes the interim dividend of 19 cents a share, the final dividend of 21 cents a share, and the June 2006 capital return of 40 cents a share.

AMP Chief Executive Officer Andrew Mohl said that AMP’s capital management strategy since 2004 had driven a number of outcomes including a total of A$2.25 billion of capital returns (including the proposed 2007 return); a A$600 million reduction in group debt; an increase in the dividend payout ratio to 85 per cent (with franking increased to 85 per cent); and an increase in underlying return on equity to above 30 per cent.

“AMP’s capital management strategy in recent years has focused on reducing the capital intensity in the business,” Mr Mohl said.

The unfranked portion of 15 per cent will be declared to be conduit foreign income, which has no impact on Australian shareholders.

“This has been achieved through a combination of measures including growth in the relatively low capital intensive Australian contemporary and asset management businesses; strong markets, sustained investment out performance and risk reduction in the Australian mature business; and the development of sophisticated monitoring systems and sensitivity modelling.

“Notwithstanding the capital returns, the strength of AMP’s balance sheet is evident in underlying interest cover of 15.2 times and gearing on a Standard & Poor’s basis of 12 per cent.”

AMP targets a level of capital equal to its Minimum Regulatory Requirement (MRR) plus a target surplus. Following the 2007 capital return, AMP’s surplus capital position is expected to be within its target range.

“With an 85 per cent dividend payout ratio policy, future capital initiatives are likely to be less frequent, and/or significantly smaller in scale,” Mr Mohl said.

“Initiatives will also continue to be framed against the objective to maintain the Group’s ‘A’ range credit rating.”

In terms of regulatory approvals, the final dividend payment and capital return have been approved by the Australian Prudential Regulation Authority (APRA). AMP has applied to the ATO to treat the capital return as a reduction in the cost base and not as a taxable dividend, and a ruling is in progress.
Relevant dates for the capital return (if approved by the ATO and shareholders at the Annual General Meeting on 17 May 2007), and final dividend payments, are:

Final dividend
Ex-dividend (ASX) 9 March 2007
Record date 16 March 2007
Ex-dividend date (NZX) 19 March 2007
Payment date 12 April 2007
Capital return
Capital return ex-entitlement (ASX) 21 May 2007
Capital return record date 25 May 2007
Capital return ex-entitlement (NZX) 28 May 2007
Payment date On or around 18 June 2007

ENDS

© Scoop Media