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Equity

Share Capital

2014 2013
Number of shares
Authorised
Ordinary shares of 10 Russian roubles each		 991 907 260 937 586 094
Issued and fully paid
Ordinary shares of 10 Russian roubles each		 991 907 260 937 586 094

On June 27, 2014, the Board of Directors authorised an increase of share capital. In December 2014, the Group received 5.5 billion Russian roubles (101,536 at the historical exchange rates) as consideration from shareholders for the issuance of 54,321,166 shares.

Treasury Shares

2014 2013
Number of shares 72 559 628 72 559 628
Cost 319 149 319 149

Reserve Capital

According to Russian Law, the Company must create a reserve capital in the amount of 5% of the share capital per the Russian statutory accounts by annual appropriations that should be at least 5% of the annual net profit per the statutory financial statements. The reserve capital can be used only for covering losses and for the redemption of the Company’s bonds and purchase of its own shares if there are no other sources of financing.

Dividends Declared by the Parent Entity to its Shareholders

On June 19, 2014, the annual shareholders’ meeting approved final dividends in respect of 2013 in the amount of 731,317 thousand Russian roubles (21,001 at the exchange rate at the date of approval) or 0.78 Russian roubles per share (0.02 US dollars per share), from which 56,597 thousand Russian roubles (1,625 at the exchange rate at the date of approval) related to the treasury shares in possession of the Group.

On December 25, 2014, the extraordinary shareholders’ meeting approved interim dividends in respect of six months 2014 in the amount of 393,786 thousand Russian roubles (7,227 at the exchange rate at the date of approval) or approximately 0.397 Russian roubles per share from which 28,806 thousand Russian roubles (529 at the exchange rate at the date of approval) related to the treasury shares in possession of the Group.

Dividends Declared by Subsidiaries of the Group to the Non-controlling Interest Owners

During the years ended December 31, 2014 and 2013, the Group’s subsidiaries declared dividends to the non-controlling interest owners in the amounts of 1,367 and 1,554, respectively.

Acquisition of Non-controlling Interests in Subsidiaries

In the year ended December 31, 2014, the Company purchased additional 0.21% of OAO “Seversky Tube Works” shares for cash consideration of 193. The excess in the amount of 383 of the carrying values of net assets attributable to the acquired interests over the consideration paid was recorded in additional paid-in capital.

Recognition of the Change in Non-controlling Interests in the Subsidiary as an Equity Transaction

Non-controlling interest shareholder of OOO “TMK-INOX” has a right to sell its ownership interest to the Group under certain circumstances beyond the Group’s control starting 2018. The terms of the put option do not provide the Group with a present ownership interest in the shares subject to the put, thus the Group accounted for this put option as the following:

Hedges of Net Investment in Foreign Operations

As at December 31, 2014, a proportion of the Group’s US dollar-denominated borrowing in the amount of 1,197,710 (December 31, 2013: 1,197,710) was designated as hedges of net investments in the Group’s foreign subsidiaries.

The effectiveness of the hedging relationship was tested using the dollar offset method by comparing the cumulative gains or losses due to changes in US dollar / Russian rouble spot rates on the hedging instrument and on the hedged item. In the year ended December 31, 2014, the effective portion of net losses from spot rate changes in the amount of 602,032 at historical exchange rates, net of income tax of 120,406, at historical exchange rates was recognised in other comprehensive loss.

Movement on Cash Flow Hedges

The Group hedges its exposure to foreign currency risk using currency forwards and its exposure to variability in cash flows attributable to interest rate risk using interest rate swaps.

The details of movement on cash flow hedges during the years ended December 31, 2014 and 2013 are presented in the following table:

Currency forward contracts Interest rate swap contracts TOTAL
2014 2013 2014 2013 2014 2013
Gain/(loss) arising during the period (26) 103 (744) (47) (770) 56
Recognition of realised results in the income statement 26 (49) 2 502 539 2 528 490
Movement on cash flow hedges – 54 1 758 492 1 758 546
Income tax – (8) (406) (155) (406) (163)
Movement on cash flow hedges, net of tax – 46 1 352 337 1 352 383