In accordance with the Company’s dividend policy approved in 2012, the General Meeting of Shareholders approves the amount of dividend to be disbursed, based on a recommendation by the Board of Directors (following preliminary determinations by the CEO). The amount will depend on the financial results, the cash needed by the Company to develop its business, implement its strategy and meet its obligations, and any other factors that the Board of Directors believes relevant, including the impact on the Company’s investment-grade credit ratings.
The Company aims to pay at least 50% of adjusted net profit or 70% of adjusted cash flow (whichever is greater) in dividends annually. The target pay-out percentages may be adjusted upwards or downwards by the Board of Directors as needed to maintain a capital structure based on a net debt/adjusted OIBDA ratio of 1.2–1.5.
The Annual General Meeting of Shareholders held on 30 June 2015 approved the payment of RUB 10 bn in dividends for FY2014 (RUB 16.13 per share or GDR). The Extraordinary General Meeting of Shareholders held on 11 December 2015 approved the payment of RUB 40 bn in dividends for the first 9 months of 2015 (RUB 64.51 per share or GDR). As a result, the dividends distributed in 2015 totalled RUB 50 bn.
The procedure for the payment of dividends is as follows. The Company transfers dividends to its direct shareholders and registered nominee holders listed in the Company's register as shareholders as of the respective record dates.
The nominee holders then distribute the dividends to sub-nominees at the next levels (including the Bank of New York Mellon, as depositary under the Company’s GDR programme), and asset management companies, funds, trustees and other nominee holders, who are then responsible for the distribution of dividends to persons on their books shown as entitled to receive dividends.
|Dividend accrual period||9 months1||12 months||12 months||9 months|
|Dividends paid for the period, RUB bn||33.59||46.412||10.00||40.00|
|Total dividends distributed in the calendar year, RUB bn||||40.00||40.00||50.00|
|Record date||21 May 2013||11 July 2014||13 July 2015||22 December 2015|
|Dividend payment dates3||22 July 2013||06 August 2014||17 August 2015||03 February 2016|
|Dividend payout ratio4||96%||90%||27%||119%|
|(1) Q2–Q4 2012
(2) Of which RUB 6.41 billion in dividends for Q1 2013 were approved by the Annual General Meeting of MegaFon’s Shareholders on 28 June 2013, along with the dividends for 2012, and paid out on 22 July 2013.
(3) Date of official disclosure of the dividend payment at the London Stock Exchange
(4) Total dividend as a percentage of profit for the same financial year (in accordance with IFRS) attributable to equity holders of the Company.
Under the Russian tax legislation, dividend income received by shareholders is subject to Russian income tax at the following rates:
The above tax is determined, withheld and paid to the Russian Treasury by the tax agent upon each payment of dividends, i.e. by MegaFon in relation to dividends paid to the shareholders whose rights to the shares are accounted for in the Company’s securities register, and by a Russian depository in other cases.
To benefit from a reduced tax rate envisaged by a Double Tax Treaty a foreign shareholder who is the beneficial owner of the dividend income, must provide to the tax agent a certificate confirming his/her residence in the country which concluded the relevant Double Tax Treaty with Russia. The above certificate must be duly notarised by the competent authority and provided to the tax agent prior to the dividend payment date.
Special rules apply to shareholders who hold MegaFon’s shares or GDRs through foreign nominee holders. In this case, the depository withholds income tax at the standard rate prescribed by the Russian Tax Code or by the Double Tax Treaty (if applicable). Should the Double Tax Treaty provide for an additional reduction in the tax rate subject to certain criteria being met, such reduced rates are not applied.
Shareholders may subsequently claim a refund of excess tax withheld and paid to the Russian Treasury by the tax agent by providing to the Russian tax authorities documents confirming their entitlement to a reduced rate of income tax. Such a refund claim may be submitted within three years following the year of the dividend payment.
MegaFon aims to comply with the legislation affecting payment of dividends as directed by its professional advisers. In the absence of sufficient evidence confirming that a different tax rate is applicable, MegaFon intends to withhold income tax on dividends at the standard rates listed above.
MegaFon recommends that shareholders consult their tax advisers about possible legitimate ways to minimise their exposure to the Russian income tax on dividends to which they may be entitled.