42. Equity and shareholding structure of the Bank

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

Equity components:

• share capital comprises solely the share capital of the parent company and is stated at nominal value in accordance with the Articles of Association and entry in the Register of Entrepreneurs.
• supplementary capital is created according to the Articles of Association of Companies in the Group, from the appropriation of profits and from share premium less issue costs and is to cover the potential losses which might result from the Group’s activities.
• the 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 intended 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 company in 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 a rate constituting the arithmetic mean of foreign exchange rates for the currency 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 2018 the Bank’s shareholding structure is as follows:

All the shares of PKO Bank Polski SA carry the same rights and obligations. Shares are not preference shares, in relation to voting rights or dividends. However, the Articles of Association of PKO Bank Polski SA restricts the voting rights of shareholders holding more than 10% of the total number of votes at the General Meeting of Shareholders and forbids those shareholders to execute more than 10% of the total number of votes at the General Meeting of Shareholders. The above does not apply to:

• those shareholders who on the date of passing the resolution of the General Meeting of Shareholders 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, limitation 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 obtaining the aforementioned 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 granted.

Pursuant to Art. 13 (20) of the Act dated 16 December 2016 on the rules for managing State property, the shares of PKO Bank Polski S.A. owned by the State Treasury may not be sold. Moreover, according to Art. 14 of the aforesaid Act, shares in PKO Bank Polski S.A., (which – in line with the Regulation of the Chairman of the Council of Ministers on determining a list of companies of high importance for the State economy – was classified as a company of high importance for the State economy), owned by the State Treasury may not be donated to a local self-government unit or an association of local self-government units.

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

In 2018 and in 2017, there were no changes in the amount of the share capital of PKO Bank Polski SA. Shares of PKO Bank Polski SA issued are not preference shares and are fully paid up.