Annex - Examples of how the discount rate for variable remuneration is applied

Calculation of the discounted part of variable remuneration (‘dvr’) for the purpose of calculating the ratio between the variable and fixed component of remuneration:

( )

Where: dvr = discounted variable remuneration; vr = variable remuneration subject to the discount (max 25% of total variable remuneration provided it is paid in instruments that are deferred for at least five years); i = inflation rate in percentage; g = interest rate for government bonds EU average in percentage; id = incentive factor for use of long-term deferral in percentage; n = number of years in the vesting period.

The total variable remuneration is the sum of the discounted part of variable remuneration and the non-discounted part of variable remuneration.

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