47. Benefits for the PKO Bank Polski SA key management

Short-term employee benefits include, apart from the base salary, also the part of the variable remuneration component paid in cash which is not deferred.

The deferred part of the variable remuneration component paid in cash was recognized as other long-term benefits.

Non-deferred and deferred remuneration components granted in the form of financial instruments i.e. phantom shares (for which conversion into cash is carried out after an additional period of retention) are recognized as sharebased payments settled in cash in accordance with the principles described below.

Variable remuneration components are granted in the form of: non-deferred (in the first year after the calendar year constituting an appraisal period), and deferred remuneration (for the next three years after the first year of the appraisal period), whereas both the non-deferred and deferred remuneration is awarded in equal parts in cash and in the form of financial instruments, i.e. phantom shares (for which conversion into cash is carried out after an additional period of retention).

The component of remuneration in the form of the financial instrument is converted into phantom shares after granting a particular component – taking into consideration the median of the daily average prices of the Bank’s shares (Volume Weighted Average Price) on the Warsaw Stock Exchange, published in the Thomson Reuters or Bloomberg information systems – from the fourth quarter of the appraisal period. Next, after a period of retention and deferral period, the shares are converted into cash – taking into consideration the median of the daily average prices of the Bank’s shares (Volume Weighted Average Price) on the Warsaw Securities Exchange from the third quarter of the calendar year preceding the payment (the Management Board) and the third quarter of the calendar year, in which the payment is made (other persons in management positions), published in the Thomson Reuters or Bloomberg information systems.

The deferred remuneration may be reduced in the event of deterioration in the financial performance of the Bank or a Group Company, respectively, a loss incurred by the Bank / Company or deterioration of other variables related to the performance in the period of appraisal of key management personnel and results of the organizational units/cells supervised or managed by these people, which were revealed after the appraisal period.

In 2019, variable remuneration components were also granted in selected PKO Bank Polski SA Group companies.

Regulations on variable remuneration components for members of the Management Board applied in: PKO Bank

Hipoteczny SA, PKO BP BANKOWY PTE SA, PKO TFI SA, PKO Leasing SA, PKO Towarzystwo Ubezpieczeń SA and PKO Życie Towarzystwo Ubezpieczeń SA. Simultaneously, employees in certain managerial positions at PKO Bank Hipoteczny SA, PKO Towarzystwo Ubezpieczen SA and PKO Zycie Towarzystwo Ubezpieczen SA having a significant impact on the company’s risk profile, and certain employees at PKO TFI SA, whose jobs include activities that materially affect the risk profile of the company or the fund management company, were also covered by variable remuneration policies.

The interest rates and repayment terms do not differ from the arm’s-length conditions for similar banking products.

The Bank provides the key management personnel, members of the Supervisory Board and their families with standard financial services which comprise, among other things, operating bank accounts, accepting deposits, granting loans and providing other financial services. All these transactions are concluded on an arm’s length basis.