27/03/2025 - Bank Millennium SA: Report in the matter of the Supervisory Board report on remuneration of the Members of the Management Board and Supervisory Boardlink otwiera się w nowym oknie

Table of contents

INTRODUCTION ...................................................................................................................... 3

REVIEW OF THE BANK'S AND THE GROUP'S FINANCIAL RESULTS IN 2024 ................................................................. 4

REMUNERATION POLICY .......................................................................................................... 4

REMUNERATION OF MANAGEMENT BOARD MEMBERS ............................................................................... 5

REMUNERATION IN THE FORM OF A FINANCIAL INSTRUMENT ........................................................................ 14

REMUNERATION OF SUPERVISORY BOARD MEMBERS ............................................................................... 16

EXCEPTIONS TO THE PRINCIPLES SET OUT IN THE REMUNERATION POLICY .......................................................... 17

INFORMATION ON CHANGES IN THE REMUNERATION POLICY AND THE BANK'S RESULTS ............................................... 17

Introduction

This report on the remuneration of Members of the Management Board and Supervisory Board of Bank Millennium SA (hereinafter referred to as the "Bank") has been prepared in accordance with the requirements set out in the Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies (hereinafter referred to as the "Act on Public Offering"). The report covers the financial year 2024 and includes an overview of remuneration awarded in accordance with the applicable internal regulations and corporate governance procedures, in particular:

1. "Remuneration policy with regard to members of the Management Board and Supervisory Board of Bank Millennium SA." (hereinafter: "Remuneration Policy").

Additional rules resulting from membership in the Risk Takers group regarding remuneration are clarified by:

2. "Remuneration Policy with Respect to Risk Takers in the Bank Millennium SA Group" (hereinafter referred to as the "RT Remuneration Policy"), which is an integral part of the Remuneration Policy.

The Remuneration Policy supports the implementation of the strategy of the Bank and its subsidiaries (hereinafter: "BM Group") and contributes to the protection of the long-term interests of the Bank and its customers. In particular, by providing competitive basic salaries and additional benefits, the Bank strives to attract and retain key people in the organisation. By granting variable remuneration, depending on key financial indicators and additional qualitative indicators, the Bank strives to motivate Management Board Members to achieve strategic objectives. The Remuneration Policy is also in line with the Bank's overall strategy, enabling the Bank to attract, motivate and retain talented employees in key areas of specialisation for the Bank.

Context of the performance evaluation of Management Board Members in terms of the implementation of the remuneration policy:

The Bank's main priority remains to consistently and safely meet the capital adequacy and MREL requirements, while maintaining business development and improving profitability and efficiency. In this context, during 2024 the Management Board of Bank Millennium finalised, ahead of the plan, the implementation of the objectives planned in the 2021-24 strategy, in particular:

• − increasing the digitisation of customer service,

• − increase in the number of active customers above 3 million, maintaining the highest level of service quality

• − maintaining the share of non-performing loans (NPL ratio) below 4.7%,

• − further reduction of the share of foreign currency mortgage loans to below 10% of total gross loans,

• − revenue growth across all segments

• − improving the efficiency of the operational platform, taking into account modern solutions (chatbots and SmartOps, AI).

At the same time, work was carried out on the preparation of a new strategy for 2025-28, looking at the effects of the previous cycle and the conditions for doing business.

In addition, an important aspect of the Management Board's work was to prepare the organisation for comprehensive regulatory changes concerning financial institutions and to further solve problems related to the legal risk of servicing foreign currency mortgage loans.

The Bank remains committed to the natural environment and society, and pursuing its ESG strategy goals, it is actively involved in supporting customers in their decarbonization.

Review of the Bank's and the Group's financial results in 2024

Bank Millennium SA Group's 2024 reported net profit of PLN719 million was materially above the 2023 reported net result (PLN576 million). It is worth noting that in June 2024, the Bank successfully completed and exited Recovery Plan and returned to paying banking tax. Moreover, the 10% ROE generated in 2024 was achieved despite the still high costs associated with the legacy portfolio of foreign currency mortgage loans. 2024 net profit adjusted for these costs and other material positive and negative non-recurrent items would be a record-breaking PLN3,202 million.

In 2024, core business of the Bank delivered solid results with 5% growth of NII (7% without credit holiday impact), 11% growth in customer funds and 2% growth in loans (4% without the impact of fast contracting portfolio of foreign currency mortgage loans).

Operating efficiency remained solid with adjusted cost/income ratio of 31%. Cost of risk remained low at 39bps while NPL ratio dropped to below 4.5% despite more challenging macroeconomic background. Customer growth continued at a solid pace with the number of active retail clients reaching nearly 3150 thousand at the end of 2024, ahead of the YE24 target of 3,000 thousand. Capital ratios improved further during the year 2024 increasing the T1/TCR surplus over levels to over 5 percentage points. Combined with the first issue of senior non-preferred green bonds (EUR500 million) in September 2024, these increased MREL ratios further with the surplus of the MREL trea ratio exceeding 8 percentage points. Following the significant reduction of the foreign currency mortgage portfolio, P2R buffer is expected to be eliminated in the first half of 2025, further increasing the surplus of capital and MREL ratios.

Remuneration Policy

The Remuneration Policy provides a formal framework for determining remuneration from the perspective of corporate governance, institutional security and the adequacy of remuneration to the Group's condition, scale of operations and development potential. In accordance with the requirements of among others the Act on Public Offering, the Bank applies the Remuneration Policy to Members of the Management Board, according to which fixed and variable remuneration is granted, including:

• 1) basic salary,

• 2) other remuneration and benefits included in income from employment,

• 3) additional benefits provided in accordance with the provisions of the labour law,

4) variable remuneration.

The components of remuneration paid in 2024 were defined in accordance with the applicable Remuneration Policy and reflected its assumptions.

Members of the Management Board are appointed by the Supervisory Board. The remuneration of the Management Board Members is paid on the basis of employment agreements concluded for the duration of the term of office. Some elements of the remuneration of Management Board Members are granted on the basis of internal regulations applicable to all employees of the Bank.

Members of the Supervisory Board are appointed by the General Meeting for a term of office. No agreements related to the performance of functions in the Supervisory Board are concluded with the Members of the Supervisory Board. The remuneration is due by virtue of appointment. The remuneration for performing the function is paid on the basis of the "Remuneration policy for Members of the Management and Supervisory Boards of Bank Millennium SA" approved by Resolution No. 27 of the General Meeting of Shareholders on 24 March 2021, while the amounts result from the resolution of the General Meeting on remunerating members of the Supervisory Board of 21 May 2015 determining the amount of the components of this remuneration. The rules for remunerating Supervisory Board Members are presented in the section "Remuneration of Supervisory Board Members".

Remuneration of Management Board Members

Base salary

The Bank pays the Base Salary to the Members of the Management Board. The level of this remuneration is determined taking into account:

• a) the level of education, professional experience, specialist knowledge and skills adequate to the role in the organisation,

• b) the complexity of the tasks and the impact on the risk profile of the institution, as well as constraints (e.g. social, economic, cultural or other relevant factors);

• c) the scale of operations and the level of remuneration for similar positions in institutions with a similar profile and scale of operations as the Bank.

With regard to the basic remuneration of the Members of the Management Board of the Bank, the following principles are observed:

• a) Members of the Management Board are appointed by the Supervisory Board for a joint term of office,

• b) for the duration of the term of office, an employment agreement or other agreement is signed with the Member of the Management Board, regulating the scope of duties in connection with the performance of the function,

• c) the periods and conditions of termination of the agreements referred to in point b) above may be each time determined individually in these agreements in accordance with the arrangements of the parties,

• d) non-competition agreements have been concluded with the Members of the Management Board1,providing for compensation for refraining from competitive activity after the termination of the agreement referred to in letter b.

• e) The agreements referred to in point (b) provide for severance payments for their early termination.

Benefits

The Bank provides additional benefits to Management Board Members. It is a benefit in the form of a package of private medical care services offered by the Bank to the Management Board Members. Members of the Management Board are also entitled on a voluntary basis to participate in Employee Capital Plans (hereinafter referred to as "ECP"). Four Members benefited from participation in the ECP. The Bank does not provide for other forms of long-term retirement benefits. The above-mentioned benefits are offered on terms specified internally for all employees of the Bank.

In addition, Members of the Management Board are entitled to benefits aimed at enabling and improving the performance of their functions at the Bank. Members of the Management Board who come from outside Poland are entitled to benefits enabling them to move to Poland with their families in order to effectively and without interruption perform their function at the Bank, i.e. covering the costs of accommodation and utilities, reimbursement of flight costs to the country and tuition fees.

Variable remuneration

In accordance with the Remuneration Policy, Management Board Members may be entitled to a variable remuneration component. It can take the form of bonuses, guaranteed components of variable remuneration - limited to the first year of employment, or one-off retirement severance pay.

The ratio of variable remuneration to fixed remuneration per annum may not exceed 100%. In justified cases, with the consent of the Bank's General Meeting of Shareholders, the ratio of variable remuneration to fixed remuneration on an annual basis may be increased, but not more than to 200%.

In 2024, the Bank did not grant guaranteed components of variable remuneration or one-off retirement severance pay to Management Board Members.

The annual bonus is granted after assessing the Bank's performance as a whole in combination with qualitative and quantitative indicators relating to the principles and behaviours conducive to prudential risk management, as well as assessing the Bank's risk profile.

The bonus amount is determined by the bonus pool. The bonus pool is determined based on the following criteria:

1) results achieved by the Bank at the solo and consolidated level - the level of the Bank's net profit in absolute terms and the level of execution of the net profit plan, result on banking activities, C/I, ROE

1 applies to Members of the Management Board with Polish citizenship

• 2) the level of the capital adequacy ratio at both the solo and consolidated level

• 3) levels of risk indicators reflecting the Bank's liquidity.

The Bonus Pool for Management Board Members should not exceed a certain percentage of the consolidated net profit for BM Group and 100% of the total fixed remuneration of Management Board Members. The decision on the amount of the bonus pool for Management Board Members is made by the Personnel Committee of the Supervisory Board.

In order to determine the amount of the bonus, the Management Board Members are subject to the Committee's assessment based on a set of quantitative and qualitative criteria. The results of the quantitative and qualitative criteria constitute the percentage of the basic salary that should be awarded as a result of the evaluation process.

At its meeting on 7 May 2024, the Personnel Committee of the Supervisory Board assessed the financial and non-financial results achieved by individual Members of the Management Board of Bank Millennium for 2023. The assessment of the Bank's results for the purposes of determining the work of the Management Board is made in the perspective of 3 calendar years preceding a given year. The Committee took into account the following areas of assessment:

1) Quantitative criteria - constituting the basis for recommending the bonus pool granted in 2024 for 2023.

The quantitative criteria, their weights and the results of the evaluation of the Management Board Members for 2024 are presented in the table below.

Description of the criterion*

Criterion Weight

Results of the evaluation carried out in 2024 (based on financial results for 2023)

Result on Banking Activities vs. plan	10,0%	102,3%
Cost/Income vs. Plan	7,5%	108,7%
Net profit (adjusted for special items) vs. plan	20,0%	118,7%
ROE vs. Plan	7,5%	113,5%
ROE (adjusted) vs. Peers	10,0%	72,3%
Cost/Income vs. Peers	10,0%	108,2%
TSR1 vs Market	15,0%	103,1%
Net profit growth	20,0%	200,0%

(*) Results, Cost/Income and ROE are adjusted for the impact of extraordinary items. 1 Total Shareholder Return

The evaluation levels in the quantitative criteria translate into recommendations for the individual bonus in accordance with the table below:

Quantitative results in the following areas:

% of the recommended bonus

0%	80%	discretionary decision
80%	90%	50%
90%	100%	60%
100%	110%	80%
110%	120%	90%
120%	100%

2) Qualitative evaluation - which may affect the adjustment of the bonus pool, in particular:

• − Capital management

• − Liquidity

• − Risk (in particular: credit, legal, business - AML)

• − ESG

• − Other non-financial management objectives

Capital:

In H2 2023, as a result of the portfolio of bonds valued at market value making up for losses and thanks to the Bank's actions to improve capital efficiency, namely, securitisation of cash loans and reduction of risk-weighted assets (RWA), capital ratios as at 31 December 2023 for the Bank Millennium Group and the Bank itself were significantly higher than the minimum levels required by the PFSA. The required minimum capital ratios were also reduced in December 2023:

12.22% 9.85%

19.04% 15.40%

Liquidity:

The Bank Millennium Group was characterized by a solid liquidity position:

• • the loans-to-deposit ratio is at 69%,

• • supervisory and internal liquidity measures were kept above the minimum limits:

  • a) at the end of 2023, the LCR reached 327%, which allows the minimum limit set by the Supervisor to be met at 100%,

  • b) the NFSR measure is at 180%, well above the internally defined security level of 110%,

  • c) all internal liquidity ratios were positive and well above the minimum limits set.

Credit risk:

At the end of December 2023, the cost of risk stood at 39 bps, with very good performance of corporate and cash loans, much better than the 76 bps planned for 2023. In December, the NPL ratio was 4.6%, it was at a much better level than the internally determined level of safety, with the NPL coverage ratio at 72%.

An element of the qualitative assessment was, among others, the analysis of risk indicators used to assess risk appetite.

The risk appetite was reflected in specific indicators in key areas:

Summary of evaluation results

The Committee found that the Bank's Management Board managed the institution in a business-effective and safe manner. When evaluating the Management Board Members, the Committee appreciated, in particular:

• a) effective implementation of the objectives of the business strategy for 2021-2024,

• b) consistent development of the customer base and profitable business operations with low risk,

• c) achieving a positive net financial result despite very high costs related to the portfolio of loans in CHF,

• d) high Management Board skill to implement the capital protection plan and the recovery plan,

• e) effective actions aimed at recapitalising the Bank, and above all the issuance of bonds that allow the Bank to meet the MREL requirements.

In addition, the Committee took into account the opinion of the Supervisory Board regarding long-term provisions for the CHF mortgage loan portfolio reducing the Bank's financial results, in the context of granting variable remuneration for the results in 2024 to the Management Board Members:

The risk of the portfolio of CHF loans granted by Bank Millennium in the years 2006-2008 is largely beyond the control of the Bank and the Management Board - it depends on the case law, decisions of national courts and the European Court of Justice and the influx of court cases.

The Bank devotes great attention to the process of mitigating the effects of risks related to the portfolio of foreign currency loans. The bank launched the process of amicable settlements and large-scale negotiations with borrowers already in 2020, anticipating the PFSA's recommendation in this regard. This strategy is consistently implemented, as evidenced by the number of settlements concluded with clients (this applies to both clients who have taken legal action and with borrowers from the portfolio). By the end of 2024, more than 25,890 settlements were signed with borrowers, of which more than 4,450 in 2024 alone. At the same time, the value of the CHF portfolio has decreased significantly since the beginning of 2020. In awarding variable remuneration to the Management Board in 2024, the Supervisory Board appreciated the commitment and proactive approach to risk management and the efforts made to mitigate the risk associated with the mortgage loan portfolio, as well as the measurable results in terms of reducing its impact on Bank Millennium's financial results.

Decision on % of variable remuneration (annual bonus) of Management Board Members:

124,10%

Positive

100%

Taking into account the above factors, as well as the fact that the Bank met the MREL requirements, the Personnel Committee of Supervisory Board decided at its meeting on 7 May 2024 to grant the Bank's

Management Board a bonus for 2023 in the total amount of PLN 11.177 million.

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Bank Millennium SA published this content on March 27, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 27, 2025 at 17:38:48.607.