37. Equity and shareholding structure of the Bank

Equity constitutes capital and reserves created in accordance with the legal regulations.

The classification to particular components discussed below results from the Polish Commercial Companies Code, the Banking Law and the requirements of IAS 1.7, IAS 1.78.e, IAS 1.54.q-r and IAS 1.79.b.

Equity components of the subsidiaries other than share capital, in proportion to the parent’s interest in the subsidiary, are added to respective equity components of the parent. The Group’s equity includes only those parts of the equity of the subsidiaries which arose after the acquisition of shares by the parent. In accordance with the legal regulations in force in Poland, only the equity of the parent and the equity of specific subsidiaries, determined on the basis of standalone financial statements, are distributable.

Equity components:

• Share capital comprises solely the share capital of the parent and is stated at nominal value in accordance with the Articles of Association and entry to the Register of Entrepreneurs.
• Supplementary capital is created according to the Articles of Association of Group companies, from the appropriation of profits and from share premium less issue costs and it is to cover the potential losses which might result from the Group’s activities.
• General banking risk fund in PKO Bank Polski SA is created from profit after tax in accordance with the Banking Law, and it is to cover unidentified risks of the Bank’s operations.
• Other reserves are created from the appropriation of net profit. Other reserves are only meant to cover any potential balance-sheet losses.
• Non-controlling interests represent the part of capital in a subsidiary which cannot be directly or indirectly assigned to the parent company.
• Accumulated other comprehensive income includes the effects of the measurement of financial assets at fair value through other comprehensive income, allowances for expected credit losses on these assets, the effective portion of cash flow hedges in hedge accounting, as well as actuarial gains and losses. Deferred tax on those items is recognized in other comprehensive income. Moreover, the item includes the share of the parent in the total other comprehensive income of associates and joint ventures and foreign exchange differences on translation to Polish currency of the net result of the foreign operation at an exchange rate constituting the arithmetic mean of the average foreign exchange rates as at the day ending each of the months in the financial year published by the National Bank of Poland.

According to the information available as at 31 December 2019 the Bank’s shareholding structure is as follows:

All the shares of PKO Bank Polski SA carry the same rights and obligations. No shares are preferred shares (one share entitles to one vote), in particular with regard to voting rights or dividend. The Articles of Association of PKO Bank Polski SA restrict the voting rights of shareholders holding more than 10% of the total number of votes at the General Shareholders’ Meeting and forbid those shareholders to execute more than 10% of the total number of votes at the General Shareholders’ Meeting. The above restriction does not apply to:

• those shareholders who on the date of passing the resolution of the General Shareholders’ Meeting introducing the limitation of the voting rights had rights from the shares representing more than 10% of the total number of votes at the Bank (i.e. the State Treasury and BGK),
• shareholders who have the rights from A-series registered shares (the State Treasury), and
• shareholders acting jointly with the shareholders referred to in point (2) based on an agreement concerning the joint execution of voting rights from shares. Moreover, restriction of the voting rights shall expire when the share of the State Treasury in the Bank’s share capital drops below 5%.

In accordance with § 6 (2) of the PKO Bank Polski SA’s Articles of Association, the conversion of A-series registered shares into bearer shares and the transfer of these shares requires the approval of the Council of Ministers in the form of a resolution. Conversion into bearer shares or transfer of A-series registered shares, after getting the abovementioned approval, results in the expiry of the above-mentioned restrictions in respect of shares subject to conversion into bearer shares or transfer, to the extent to which this approval was given.

Pursuant to Article 13 (1) (26) of the Act dated 16 December 2016 on the rules for managing the State property, the shares of PKO Bank Polski S.A. owned by the State Treasury may not be sold (excluding statutory exceptions).

The Bank’s shares are listed on the Warsaw Stock Exchange.