Prior to each Annual General Meeting, the Board of Directors must make a recommendation on the allocation of net income of the preceding fiscal year, which will be subject to approval by shareholders of the Company.

WEG considers the following factors to define the allocation of resources:

i.    The current behavior and future prospects of current and potential markets of the Company, aiming to identify the available investment opportunities;

ii.    The resources that are needed for maintenance and expansion of production capacity and supporting assets and resources in order to explore these available investment opportunities;

iii.    The resources available to the Company to make the necessary investments, including both equity and debt that has already been issued or that could be, with reasonable confidence, obtained in the future;

iv.    The flexibility and financial strength needed to maintain ongoing business and the Company’s creditworthiness;

v.    The excess funds are distributed to shareholders as dividends.

The Brazilian law establishes several conditions for the allocation of net income. WEG’s Bylaws considers these limitations on establishing the methodology to calculate dividend distributions, which can also be distributed as interest on capital, as permitted by Law 9.249/95. According to our bylaws, dividends WEG are defined as follows:

Article 37 – The fiscal year shall end on the last day of the month of December of every year, when the inventory shall be taken and the annual balance sheet shall be prepared.

Sole paragraph – The Board of Directors may determine the distribution of interim dividends and/or interest on capital, pursuant to Law 9.249/95, provided a balance sheet is prepared as required by the laws in force.

Article 38 – The income for the year, after the deductions provided by Article 189 of Law 6404/76 and of up to ten percent (10%) as wages of management, observing the legal restrictions (Article 190 of Law 6.404/76), shall have the following destination:

a) five percent (5%) to make up the legal reserve, not to exceed twenty percent (20%) of the capital;

b) an amount for the Contingency Reserves and Unrealized Income Reserve, as required by law;

c) a minimum of twenty-five percent (25%) of the net income adjusted as provided by article 202 of Law 6.404/76 for the distribution of dividends and/or interest on capital, as provided by Law 9.249/95, applied against dividends.

d) undistributed profit, when duly justified by the officers, to fund the capital budget adopted by the Shareholders’ Meeting and annually reviewed;

e) the balance remaining after the above mentioned deductions shall be distributed to the Shareholders as dividend.

Sole paragraph – Pursuant to Law 9.249/95, the Board of Directors shall determine:

a) the amount of interest on capital to be paid or credited to shareholders, in cash or in kind, in total or in part;

b) the application against and deduction from the statutory dividend of the amount of interest paid or credited to shareholders as interest on capital.

Regarding shareholders’ compensation, WEG’s practice has been the following:

i.    Declaring semi-annual dividends, based on the results obtained on June 30 and December 31 of each year;

ii.    Additionally, declaring quarterly interest on stockholders’ equity, in accordance with applicable law, which are added to the dividends declared for all legal purposes;

iii.    The dividends declared are also paid semi-annually.

This Results Distribution Policy has been approved by WEG S.A. Board of Directors on June 21, 2011.

Download WEG S.A. Results Distribution Policy (pdf, 24 kb)