Renata PlcDSEBD: RENATA

Dividend Distribution Policy

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RENATA LIMITED

DIVIDEND DISTRIBUTION POLICY

Policy Statement

The Dividend Policy of the Company aims to strike a balance between the dual objectives of rewarding shareholders through Dividends and ploughing back earnings to support sustained growth.

Bangladesh Companies Act 1994 empowers the Board of Directors to make dividend decisions that must be approved by shareholders at the Annual General Meeting. Shareholders, on the other hand, cannot approve a higher dividend than the Board of Directors recommends.

The Dividend Distribution Policy was developed and implemented in accordance with the rules of the Bangladesh Securities and Exchange Commission's (BSEC) Directive No. BSEC/CMRRCD/2021-386/03 dated 14 January 2021 on dividend declara- tion, payment, disbursement, and compliance.

Companies that fail to report at least 30% of their net profits for the year as dividends are subject to a penalizing tax provision under Bangladeshi Tax regulation, Income Tax Ordinance 1984. The rule also states that if a company declares both a cash and a stock dividend, the amount of stock dividend cannot be greater than the cash dividend. Thus, the Company shall endeavor to maintain the Dividend Payout Ratio of at least 30% of the net earnings for the year as dividend.

When declaring or proposing a dividend on behalf of the Company, the Board of Directors (the Board) will take the directive into account. The Policy shall not be an alternative to the Board's decision to make/recommend dividend taking into account all relevant conditions listed below or other determinations by the Board.

Scope

The dividend is the proportion of the profit to be distributed among its shareholders by a Company in relation to the amount of paid-up shares they hold in the form of Cash and/or Stock (Bonus). The Company's profits might either be retained in the business or dispersed as dividends among shareholders.

The Policy set out herein relate to Boards report in accordance with the provisions of Section 184 1(c) of the Companies Act, 1994. This Policy is also in compliance with section 16G of Income Tax Ordinance 1984. The Policy generally relate to Final Dividend recommended by the Board of Directors of the Company; however, it also applies to Interim Dividend declared by the Board of Directors of the Company, when they consider it fit.

Dividend Classifications

The Act covers two dividend classifications - Interim and Final

  • The interim dividend is the dividend declared by the Board of Directors between two Annual General Meetings (AGMs), as and when it is deemed appropriate. The Board is authorized by the Act to declare interim dividends during any financial year from the earnings for the financial year in which the dividend is requested to be declared and/or the profit and loss account surplus.
  • At the time of approval of the annual financial accounts as well as profit appropriation, the final dividend for the fiscal year is recommended. The Board of Directors shall have the authority to recommend a final dividend to the sharehold- ers for approval at the Company's AGM. The dividend recommended by the Board cannot be altered before the AGM takes place.

Objectives

  1. To define the Policy and Procedures of the Company in relation to the calculation, declaration and settlement of Dividends.
  2. To create a transparent and methodological Dividend policy, clearly identified and promptly communicated to appropri- ate stakeholders.

Dividend Declaration

Dividends are declared and paid out of the following accounts, subject to the Act's provisions:

  1. Company profit in respect of the year for which, after set-off, the dividend is to be paid in respect of prior losses and depreciation not given in the preceding year(s);
  2. Profits from prior financial years that were left undistributed after accounting for depreciation in line with the law.
  3. Both i and ii come from the same source.

Prior to dividend declaration, the Company may, in its sole discretion, move a part of its profit to the Company's reserves.

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In case of a lack of profit in any year, the Company may, according to the Act and Rules, issue dividend out of free reserves.

Parameters / Factors to be considered

It is a vital choice to decide whether the shareholders should get a dividend payment, and if the profit should be maintained in the firm.

Dividend pay-out decision conditions depend on many external and internal variables and financial considerations that the Board of Directors takes into account while recommending/declaring dividends including:

1. External Factors

  • In the event of an Adverse Economic Scenario, the Board should strive to maintain a bigger part of its earnings to build up reserves.
  • In order to save resources, the Board should assess the market trends for technological advances that need invest- ments, competitive profitability, etc.
  • In order to guarantee compliance with relevant regulations, the Board shall, when appropriate, examine the limits imposed by Acts and other applicable laws as regards the declaration of dividends.
  • The choice on the dividend declaration may have an influence on the dividend distribution tax or any tax deduction from sources, as required by tax act, which applies at the time of the dividend declaration.
  • Other events that are beyond management control, such as natural disasters, fire, etc., that affect the Company's activities, may influence the decision on a dividend declaration.

2. Internal Factors

  • Possibility of earning consisting profit
  • Global Market Conditions
  • Tax Policy
  • Fund availability and liquidity
  • Capital expenditure requirements for established companies
  • Business expansion / upgrade
  • Further investment in subsidiaries/company partners
  • Cost of collecting resources from other sources
  • Cost of maintenance of debts remaining
  • Contingent liability funds
  • Acquisitions and Mergers
  • Any other criteria that the Board deems acceptable.

In addition to the aforementioned factors, the Board analyzes the prior payout history and the sense of shareholders' expectations when establishing the dividend rate. In exceptional situations, the Board may also recommend a special dividend.

3. Financial Factors

The Company is devoted to providing its shareholders with sustainable value. The Company will seek to deliver an optimal and suitable amount of earnings in the form of dividends to its shareholders.

The Board will make every effort to sustain a dividend pay-out, taking into account the aforementioned considerations. While recommending / declaring dividend, the Board will consider financial parameters, including but not limited to,

  • Operating results and overall financial position
  • Working capital
  • Capital expenditure requirement including for inorganic growth, if any

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  • Debt servicing requirements of the Company, its Subsidiaries, its Associates and Joint Ventures ('Group').

Dividend Expectations

The recommendation of Dividend will always be at the sole discretion of the Board. The Board will recommend and/or declare Dividend after reviewing this Policy keeping in mind the business environment and requirements of the Group.

Utilization of Retained Earnings

The Company will endeavor to utilize Retained Earnings for business requirements including, but not limited to, working capital, investments, expansions, acquisitions, etc.

Thus, the retained earnings may be used in accordance with, subject to the provisions of the Act and other applicable laws, as set forth in:

  • Bonus shares that are completely paid up are issued;
  • Interim or Final Dividend Declaration;
  • Increase internal resources;
  • Capital expenditure/expansion plans/procurement funding;
  • Debt Repayment;
  • Any other purpose that the Board deems appropriate.

Criteria for Different Share Classes

The company currently has only one share class: Equity Shares. In terms of dividend distribution, there is no special treatment for the Company's Equity Shareholders.

General Procedure

All resolutions relating to the declaration and payment of dividends will be generated by the Board of Directors of the Company.

The Board of Directors shall have the authority to recommend a final dividend to the shareholders for approval at the Compa- ny's Annual General Meeting. The Board of Directors shall have the exclusive authority to issue an interim dividend at any time throughout the fiscal year as they see fit.

The Board of Directors' decision on the Final Dividend shall be communicated to the Shareholders in the form of a recommen- dation.

At the AGM, the decision on whether or not to declare and pay dividends will be a separate item on the agenda.

The Board of Directors will decide on the Dividend amounts due and the payment method at a meeting when the directors will vote on the distribution of the Company's net profit for the fiscal year and recommend it to the Shareholders.

Any declaration to pay Dividends may provide the following:

  1. The type and class of shares on which the Dividends have been declared;
  2. The amount of Dividends per share of each type and class;
  3. The period for payment; and
  4. The form of payment.

Persons entitled to receive Dividends

  1. The list of persons entitled to receive Dividends will be prepared by the Company's Registrar in accordance with the record date determined by the Company for such purpose.
  2. Such list will contain registered shares, and the people on behalf of whom the nominal holders own the shares as on the record date.
  3. Nominal shareholders will submit information on the individuals for whom they hold shares in order to compile a list of those entitled to dividends.

Paying Declared Dividends

  1. The date on which annual Dividends are paid will be chosen by the Directors and announced in the Notice convening the AGM in the case of a Final Dividend. The Board of Directors will decide when interim dividends will be paid.
  2. No interest shall accrue on unclaimed Dividends.

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  1. Any issues pertaining to the payment of Dividends that are not covered by the Law, the Company's Articles of Associa- tion, or policies shall be decided by the Board of Directors in a way that respects and protects the rights and legitimate interests of shareholders.

Disclosure of Policy

This policy is to be disclosed in the company's annual report and on the website of the company, www.renata-ltd.com.

In cases where, apart from the criteria referred to in the policy, the Company proposes or intends to amend the parameters included in this Policy to make a dividend, the Company should announce such amendments together with the rationale for them in the Annual Report and through the Website.

Board Approval

The Board of Directors of the Company at its meeting held on October 23, 2021 has approved this Dividend Distribution Policy.

Applicability and Effective Date

This Policy shall be applicable to the Company for dividend, if any, with effect from the Financial Year 2020-21 onward.

Policy Amendments

Any or all provisions of this Policy may be amended, revoked, modified, or revised by the Board. Amendments to the Act or the Listing Regulations, however, will be binding even if they are not included in this Policy.

On behalf of the Board of Directors,

Dr. Sarwer Ali

Chairman

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