GPW REMUNERATION POLICY

The incentive remuneration system for employees and managers consists of a fixed part (basic remuneration), a variable part (including the annual bonus and discretionary awards), as well as fringe benefits. Basic remuneration on GPW is linked to the employee’s potential, competences and performance.

A new bonus system introduced in 2015 covers all GPW employees other than the Exchange Management Board Members. It provides a simple and clear mechanism of calculating and distributing the bonus pool. The overall bonus pool available for bonuses for all eligible GPW employees in a bonus year depends on the profit on sales generated by GPW.

The new system is designed to incentivise employees for superior performance by achieving individual targets and evaluating employee attitudes; it incentivises managers to motivate their employees. The bonus system includes an annual employee appraisal which covers the employee’s overall performance in the bonus year, identifies the employee’s strengths and areas for improvement. The annual appraisal includes an assessment of the employee’s individual targets and attitudes throughout the bonus year as well as the employee’s overall performance in the bonus year as the basis for determining the amount of the bonus.

GPW provides employees with a wide range of fringe benefits including health care, life insurance, reimbursement of commuting costs, the Employee Pension Scheme, a canteen system. GPW employees can use loans including housing and medical loans, as well as payments from the Company Social Benefits Fund. Managers are entitled to a flat-rate reimbursement of the cost of a vehicle.

More information about employees, including the GPW training policy, recruitment policy and employee volunteering is presented in section IV.4 Responsible Human Relations Policy.

REMUNERATION POLICY FOR EXCHANGE MANAGEMENT BOARD MEMBERS

Pursuant to the Articles of Association, the power to determine the terms of the employment contracts and the amount of remuneration of the President and the other members of the Exchange Management Board has been vested in the Exchange Supervisory Board. However, the terms of the employment contracts and the amount of remuneration of the other members of the Exchange Management Board are determined upon the request of the President of the Exchange Management Board. The Members of the Management Board of the current term of office receive no remuneration for their functions on the boards of subsidiaries and associates of the GPW Group.

The remuneration system for the members of the Exchange Management Board is based on a long-term incentive system. It consists of a fixed part (basic remuneration), a variable part (incentive system, i.e., discretionary annual bonus), as well as fringe benefits to the extent defined by the Exchange Supervisory Board. The bonus system for the Management Board Members was implemented in 2014 and was not modified in 2015.

The variable part of remuneration, i.e., the discretionary annual bonus, may be awarded subject to the following conditions:

• the Company reports a net profit for the financial year for which the discretionary bonus is to be awarded;
• the member of the Exchange Management Board is employed as at the 30th day after the publication of the consolidated financial statements of the GPW Group;
• the Members of the Exchange Management Board are granted a vote of discharge of their duties for the last bonus year.

The amount of the bonus for Members of the Management Board depends on semi-annual appraisal of performance and the Company’s results performed by the Exchange Supervisory Board, as well as verification of results of work of the Exchange Management Board Members in previous bonus years.

The Exchange Supervisory Board performs an annual appraisal which may determine the grant and the amount of the discretionary bonus of a Management Board Member. The maximum amount of the discretionary annual bonus is capped as a percentage of annual basic remuneration. Payments of the awarded discretionary bonus are made as follows:

• 30% of the awarded bonus paid on a one-off basis;
• 30% paid in phantom shares, which are paid out one year after the award;¹
• 40% of the awarded bonus is added to the bonus bank and settled in equal parts in the next three years subject to positive reassessment by the Supervisory Board of the work taken in the period of the bonus.

Fringe benefits available to the Management Board Members in 2015 included health care, life insurance, as well as an Employee Pension Plan.

In addition to the foregoing, the Company has no incentive or bonus schemes based on the issuer’s equity (including schemes based on bonds with pre-emptive rights, convertible bonds, subscription warrants, or stock options).

[1] Form of remuneration where a certain number of virtual (phantom) shares are allocated for a period of time. The block of such shares authorises the manager to draw phantom payments in an amount depending on the GPW share price on the exchange.

Remuneration and benefits of the members of the Exchange Management Board paid and due in 2015 (PLN thousand)²

[2] The amount of the variable part (bonus) and long-term liabilities (phantom shares/bonus bank) for 2015 represent the provisions

Remuneration and benefits of the members of the Exchange Management Board paid and due in 2014 (PLN thousand)³

[3] The amount of the variable part (bonus) and long-term liabilities (phantom shares/bonus bank) for 2015 represent the provisions

The tables above do not include social security contributions paid by the employer. Furthermore, Exchange Management Board Members received PLN 193 thousand in respect of functions on the supervisory board of subsidiaries in 2014 (PLN 0 in 2015), not included in the table above.

TERMS OF EMPLOYMENT CONTRACTS WITH MEMBERS OF THE EXCHANGE MANAGEMENT BOARD

Employment contracts with the Members of the Exchange Management Board of the new term of office, which started in 2014, were signed for a determined period, i.e., until the expiry of the mandate. The contracts may be terminated by the Company or a Management Board Member with a notice of three months or by arrangement of the parties.

Employment contracts with members of the Exchange Management Board as at 31 December 2015

The Exchange Supervisory Board signed non-competition agreements with the Members of the Management Board which will take effect after the termination of employment for a term of 3 months (if an employment contract is terminated during the term of office) or 6 months (after the end of the term of office in the event of no re-appointment for the next term of office). The non-competition agreements may be terminated by the Company within 30 days of termination of the employment contract.

The term of agreements with two Management Board Members – Mirosław Szczepański and Paweł Tamborski – was changed in 2015.

• Mirosław Szczepański resigned from the function of Vice-President of the Management Board as of 2 July 2015. The agreement was terminated with a notice of 3 months, i.e., as of 31 October 2015. After the termination of employment, Mirosław Szczepański was entitled to a non-competition compensation at 100% of remuneration for a period of 3 months.
• Paweł Tamborski resigned from the function of President of the Management Board as of 31 December 2015. The agreement will be terminated with a notice of 3 months, i.e., as of 31 March 2016. After the termination of employment, Paweł Tamborski will be entitled to a non-competition compensation at 100% of remuneration for a period of 3 months.

In 2015, GPW paid out compensation under the non-competition agreements to Adam Maciejewski and Beata Jarosz – Members of the Management Board of the previous term of office whose employment agreements were terminated upon the expiry of the mandate, i.e., on 25 July 2014. Under the non-competition agreements signed by the Exchange Supervisory Board in 2006, the Members of the Management Board were not to engage in activities competitive to the Company for a period of 12 months after the termination of the employment agreements with the Company and were entitled within that period to compensation at 100% of the gross basic remuneration received within 12 months prior to the termination of employment, paid out in 12 equal monthly instalments.

Under these agreements, the Company paid compensation of PLN 948 thousand to Adam Maciejewski and PLN 454 thousand to Beata Jarosz, as shown in Tables 22 and 23. The Company paid out monthly compensation of PLN 79 thousand to Adam Maciejewski. The amount of PLN 50.5 thousand paid out to Beata Jarosz as monthly compensation under the non-competition agreement was reduced by the gross monthly remuneration of Beata Jarosz due to her employment with the Polish Power Exchange as of December 2014 pursuant to an agreement signed by the Company on 7 October 2014 concerning the amount of monthly compensation under the non-competition agreement.

The non-competition agreements with Adam Maciejewski and Beata Jarosz were effective until 31 July 2015; consequently, a part of these amounts was paid out in January – July 2015.

On 12 January 2016, the Extraordinary General Meeting of the Company appointed Ms Małgorzata Zaleska as President of the Management Board. The decision took effect upon the delivery of the PFSA decision approving the change to the composition of the Exchange Management Board to the Company, i.e., 10 February 2016.

REMUNERATION OF EXCHANGE SUPERVISORY BOARD MEMBERS

According to the Articles of Association, the Exchange Supervisory Board Members receive remuneration in the amount set by the Ordinary General Meeting. Pursuant to the latest Resolution of the Company’s Ordinary General Meeting of 25 July 2014, the amount of monthly remuneration of the Exchange Supervisory Board members has been set as follows:

• Chairman of the Exchange Supervisory Board – 2 times the average monthly remuneration in the enterprise sector, net of profit bonuses for the fourth quarter of the previous year, as announced by the President of the Central Statistical Office (GUS);
• Deputy Chairman of the Exchange Supervisory Board, Secretary to the Exchange Supervisory Board, Member of the Exchange Supervisory Board – 1.5 times the average monthly remuneration in the enterprise sector, net of profit bonuses for the fourth quarter of the previous year, as announced by the President of the Central Statistical Office (GUS).

Remuneration of the Supervisory Board members (PLN thousand)

Exchange Supervisory Board members have no supervisory or management functions in GPW subsidiaries.

EVALUATION OF THE REMUNERATION POLICY

The Company’s remuneration policy based on an incentive system directly supports the implementation of GPW’s business strategy. The Company’s remuneration system is based on fixed remuneration and variable remuneration under the incentive system. The remuneration system also includes other factors such as recognition, career development and work conditions, which contributes to the Company’s organisational culture and facilitates the implementation of the business strategy.

The remuneration policy differentiates between pay levels depending on the job position, performance and competences. The variable component provides flexibility and aligns the system with the implementation of GPW’s strategy. The incentive system links the Company’s management with the goals of the GPW strategy and cascades the goals to employees, thus supporting GPW’s business.

The extensive system of employee benefits is competitive on the market while ensuring cost efficiency for the Company. As a part of the HR strategy, the remuneration policy consistently helps to recruit, retain and incentivise employees.