4. Shareholder remuneration system and allocation of earnings
Shareholder remuneration system
A shareholder remuneration system called the “Dividend Option” was implemented in 2011 and 2012. The Bank’s Shareholders’ Annual General Meeting held on March 15, 2013 once more approved the establishment of the “Dividend Option” program for 2013, through two share capital increases charged to voluntary reserves, under similar conditions to those established in 2011 and 2012. Under this remuneration scheme, BBVA offers its shareholders the chance to receive part of their remuneration in the form of free shares; however, they can still choose to receive it in cash by selling the rights assigned to them in each capital increase either to BBVA (by the Bank exercising its commitment to purchase the free assignment rights) or on the market.
In April 2013, the Executive Committee approved the execution of the first of the capital increases charged to reserves as agreed by the AGM held on March 15, 2013 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €40,862,919.86, (83,393,714 shares at a €0.49 par value each). 85.71% of shareholders opted to receive their remuneration in the form of shares (see Note 27). The other 14.29% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 778,801,510 rights for a total amount of €94,234,982.71; said shareholders were rewarded in cash form.
In October 2013, the Executive Committee approved the execution of the second of the capital increases charged to reserves as approved during the AGM held on March 15, 2013 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €30,197,696.48, (61,627,952 shares at a €0.49 par value each). 88.28% of shareholders opted to receive their remuneration in the form of shares (see Note 27). The other 11.72% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 670,834,333 rights for a total amount of €66,412,598.97; said shareholders were rewarded in cash form.
Dividends
At its meeting of June 24, 2013, the Board of Directors of BBVA approved the payment of an interim dividend against 2013 earnings of €0.10 gross (€0.079 net) per outstanding share to be paid on July 10, 2013.
The expected financial statements prepared in accordance with legal requirements evidenced the existence of sufficient liquidity for the distribution of the amounts to the interim dividend, as follows:
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| Available amount for interim dividend payments | Millions of Euros |
|---|---|
| May 31, 2013 |
|
| Profit of BBVA, S.A. at each of the dates indicated, after the provision for income tax | 1,639 |
| Less - | - |
| Estimated provision for Legal Reserve | (8) |
| Acquisition by the bank of the free allotment rights in 2013 capital increase | (94) |
| Maximum amount distributable | 1,537 |
| Amount of proposed interim dividend | 553 |
| BBVA cash balance available to the date | 1,129 |
The first amount interim dividend which was paid to the shareholders on January 10, 2013, including the new shares issued on July 3 through the capital increase described in Note 27 and after deducting the treasury shares held by the Group’s entities, amounted to €570 million
The allocation of earnings for 2013 subject to the approval of the Board of Directors at the Annual Shareholders Meeting is presented below:
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| Allocation of Earnings | Millions of Euros |
|---|---|
| 2013 | |
| Profit for year (*) | 1,406 |
| Distribution: |
|
| Interim dividends | 572 |
| Acquisition by the bank of the free allotment rights(**) | 161 |
| Additional Tier 1 securities | 35 |
| Legal reserve | 33 |
| Voluntary reserves | 605 |