4. Shareholder remuneration system and allocation of earnings
Shareholder remuneration system
During 2011, 2012 and 2013, a shareholder remuneration system called the “Dividend Option” was implemented.
Under this remuneration scheme, BBVA offers its shareholders the opportunity 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.
The Bank’s Shareholders’ Annual General Meeting held on March 14, 2014 once more approved the establishment of the “Dividend Option” program for 2014, through four share capital increases charged to voluntary reserves, under similar conditions to those established in the previous years.
In April 2014, the Executive Committee approved the execution of the first of the capital increases charged to reserves as agreed by the AGM held on March 14, 2014 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €49,594,990.83 (101,214,267 shares at a €0.49 par value each). 89.21% of shareholders opted to receive their remuneration in the form of shares (see Note 25). The other 10.79% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 624,026,809 rights for a total amount of €104,836,503.91; said shareholders were paid in cash at a gross fixed price of €0.168 per right.
In October 2014, the Executive Committee approved the execution of the first of the capital increases charged to reserves as agreed by the AGM held on March 14, 2014 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €20,455,560.09 (41,746,041 shares at a €0.49 par value each). 85.09% of shareholders opted to receive their remuneration in the form of shares (see Note 25). The other 14.91% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 877,643,649 rights for a total amount of €70,211,491.92; said shareholders were paid in cash at a gross fixed price of €0.080 per right.
In December 2014, the Executive Committee approved the execution of the third of the capital increases charged to reserves as agreed by the AGM held on March 14, 2014 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €26,256,622.07 (53,584,943 shares at a €0.49 par value each). 85.96% of shareholders opted to receive their remuneration in the form of shares (see Note 25). The other 14.04% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 866,429,450 rights for a total amount of €69,314,363.20; said shareholders were paid in cash at a gross fixed price of €0.080 per right.
Dividends
At its meeting of June 25, 2014, the Board of Directors of BBVA approved the payment of an interim dividend against 2014 earnings of €0.08 gross (€0.0632 net) per outstanding share to be paid on July 10, 2014.
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, 2014 |
|
| Profit of BBVA, S.A. at each of the dates indicated, after the provision for income tax | 983 |
| Less - |
|
| Estimated provision for Legal Reserve | 10 |
| Acquisition by the bank of the free allotment rights in 2014 capital increase | 105 |
| Additional Tier I capital instruments remuneration | 53 |
| Maximum amount distributable | 815 |
| Amount of proposed interim dividend | 471 |
| BBVA cash balance available to the date | 1,827 |
The amount of the interim dividend which was paid to the shareholders on July 10, 2014, after deducting the treasury shares held by the Group’s entities, amounted to €471 million and was recognized under the heading “Stockholders’ funds - Dividends and remuneration”
The allocation of earnings for 2014 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 |
|---|---|
| 2014 | |
| Profit for year (*) | 1,105 |
| Distribution: |
|
| Interim dividends | 471 |
| Acquisition by the bank of the free allotment rights(**) | 244 |
| Additional Tier 1 securities | 126 |
| Legal reserve | 38 |
| Voluntary reserves | 226 |