Management Board Report on the activity of the JSW S.A. Capital Group for 2012

1.3. Changes in basic management principles in the JSW S.A. and its Capital Group

Basic management principles in the Parent Company

Pursuant to the Articles of Association of Jastrzębska Spółka Węglowa S.A., the JSW S.A.’s governing bodies are:

1. the Management Board,
2. the Supervisory Board,
3. the Shareholder Meeting.

The powers of JSW S.A.’s governing bodies follow from the provisions of the Commercial Companies Code and JSW S.A.’s Articles of Association. The powers of JSW S.A.’s individual governing bodies are defined in:

1. of the Management Board, in the Management Board Bylaws,
2. of the Supervisory Board, in the Supervisory Board Bylaws,
3. of the Shareholder Meeting, in the Shareholder Meeting Bylaws.

JSW S.A.’s Management Board consists of three to six members. The number of members in the JSW S.A. Management Board of the 7th term of office (lasting 3 years and ending on the date of the Ordinary Shareholder Meeting approving the financial statements for the financial year 2012) was set in the Shareholder Meeting Resolution of 26 April 2010 at five members. As at 31 December 2012 and as at the date of this report, the Management Board of JSW S.A. is composed of:

1. Jarosław Zagórowski – President of the Management Board,
2. Grzegorz Czornik – Vice-President for Sales,
3. Andrzej Tor – Vice-President for Technical Matters,
4. Robert Kozłowski – Vice-President for Financial Matters,
5. Artur Wojtków – Vice-President for Employment and Social Policy (elected by employees).

CVs of members of the JSW S.A. Management Board are available on JSW S.A.’s website.

The Management Board determines the strategic directions, defines goals and tasks, manages JSW S.A. directly through resolutions and decisions, and indirectly through Entity Directors, Department Directors and Proxies.

The Directors Council, composed of Directors of the JSW S.A.’s Entities and other invited persons, is an opinion-making and advisory body to the JSW S.A. Management Board.

The President exercises supervision over JSW S.A.’s overall operations and makes decisions not reserved for the powers of JSW S.A.’s governing bodies. The President of the Management Board also exercises direct supervision over reporting Departments, Teams and Proxies.

The Vice-Presidents of the Management Board exercise supervision over JSW S.A.’s operations in their areas of authority and make decisions not reserved for the powers of JSW S.A.’s governing bodies. The Vice-Presidents also exercise direct supervision over their reporting Departments. Furthermore, the Vice-President for Financial Matters also exercises supervision over the Management Board Representative for Computerization of JSW S.A. and the Vice-President for Technical Matters also exercises substantive supervision over the Health and Safety at Work Team.

The division of powers between the distinct members of the Management Board ensures effective operation of JSW S.A., and the Organizational Bylaws of JSW S.A., the Organizational Bylaws of the Management Board Office and the Organizational Bylaws of JSW S.A.’s mines adopted by the Management Board ensure the effective performance of tasks assigned by the Management Board.

Pursuant to the Articles of Association of JSW S.A., the Supervisory Board consists of at least 9 members appointed by the Shareholder Meeting. On 27 February 2012, the Shareholder Meeting set the number of Supervisory Board members of the 8th term of office (lasting 3 years) at 12. As at 31 December 2012, the composition of the Supervisory Board was as follows:

1. Józef Myrczek – Chairman,
2. Antoni Malinowski – Deputy Chairman,
3. Eugeniusz Baron – Secretary,
4. Stanisław Kluza – Member,
5. Robert Kudelski – Member,
6. Tomasz Kusio – Member,
7. Alojzy Nowak – Member,
8. Andrzej Palarczyk – Member,
9. Łukasz Rozdeiczer-Kryszkowski – Member,
10. Adam Rybaniec – Member,
11. Adam Wałach – Member.

On 19 February 2013, the Minister of Economy, pursuant to § 15 sec. 12 and 13 of the Articles of Association of JSW S.A., appointed Mr. Andrzej Karbownik to the Supervisory Board of the 8th term of office.

The powers and authority of the Supervisory Board have been described in Item 5.8 of this report.

CVs of members of the JSW S.A. Supervisory Board are available on JSW S.A.’s website.

Changes to the management principles in JSW S.A.

Changes in the organizational structure of the JSW S.A. Management Board Office

To improve management in JSW S.A., in 2012 the Management Board adopted a number of resolutions pertaining to changes in the organizational structure of the JSW S.A. Management Board Office. These changes were aimed at updating the range of performed tasks and improving the efficiency of operations.

The JSW S.A. Management Board made the following decisions pertaining to changes in the organizational structure, as described in Item 1.2 of the Management Board report on the activity of Jastrzębska Spółka Węglowa S.A. for the financial year ended 31 December 2012, effective in 2012, including:

• establishing the position of the Management Board Representative for Operational Integration of Coking Plants within the JSW Capital Group, and the Management Board Representative for Spatial Planning in Mining Areas,
• establishing the Coke and Coal Derivatives Sales Strategy Department and the Team for Monitoring Investments of the JSW Group’s Subsidiaries,
• transferring the subordination of the organizational unit Management Board Representative for Computerization of JSW S.A. previously assigned to the President of the Management Board to the Vice-President for Financial Matters.

In addition, in 2012, the JSW S.A. Management Board made the decisions pertaining to changes in the organizational structure effective as of 1 January 2013:

• establishing the Internal Audit Team and the Audit Team in place of the previously existing Internal Control and Audit Department, and assigning its subordination to the President of the JSW S.A. Management Board,
• dissolving the organizational unit of the Management Board Representative for Spatial Planning in Mining Areas and establishing the organizational units of the Management Board Representative for Cooperation with Local Authorities and the Management Board Representative for Risk Management.

On 22 January 2013, the JSW S.A. Management Board decided to establish the Legal Department.

The above changes in the organizational structure of the JSW S.A. Management Board Office were aimed at improving the efficiency of operation of the Office and adapting to the changing market situation.

Changes in the organizational structure of the JSW S.A. mines

Since 1 January 2013, the JSW S.A.’s Entities have been operating within the framework of a new, uniform organizational structure adopted by Management Board decision of 11 December 2012, on the basis of which detailed Organizational Bylaws and Charts of the JSW S.A.’s Entities were prepared.

Furthermore, the JSW S.A. Management Board made various decisions pertaining to changes in the organizational structure of JSW S.A.’s Entities in 2012, as described in Item 1.2 of the Management Board report on the activity of Jastrzębska Spółka Węglowa S.A. for the financial year ended 31 December 2012.

On 7 August 2012, the JSW S.A. Management Board made a decision to establish in JSW S.A., as of 1 January 2013, the Borynia-Zofiówka-Jastrzębie mine created as a result of the merger of the Borynia-Zofiówka and the Jas-Months mines.

On 26 February 2013, the Parent Company’s Supervisory Board issued a positive opinion on the JSW S.A. Organizational Bylaws adopted by the JSW S.A. Management Board on 22 January 2013.

Basic management principles in the Capital Group and their changes

On 8 May 2012, the Jastrzębska Spółka Węglowa S.A. Management Board adopted the document entitled “Principles of Corporate Governance in the Jastrzębska Spółka Węglowa S.A. Capital Group” (“Principles”). The development and implementation of the Principles was based on the provisions of the Capital Group Code providing for, in Article 21, the introduction of uniform procedures and standards of conduct in the JSW S.A. Capital Group. In the Principles, changes in the legal status were taken into account and new solutions were proposed. As a result of the implementation of appropriate regulations in the area of ​​supervision over subsidiaries, standardization was introduced in such areas as the recruitment procedures and the selection of members of the subsidiaries’ corporate bodies.

As at 31 December 2012 and as at the date of this report, the Group was composed of:

1. Jastrzębska Spółka Węglowa S.A. with its registered offices in Jastrzębie-Zdrój,
2. Koksownia Przyjaźń Sp. z o.o. with its registered offices in Dąbrowa Górnicza,
3. Baza Transportu Samochodowego Sp. z o.o. with its registered offices in Dąbrowa Górnicza,
4. Zakład Remontów Mechanicznych Sp. z o.o. with its registered offices in Dąbrowa Górnicza,
5. Zakład Przewozów i Spedycji SPEDKOKS Sp. z o.o. with its registered offices in Dąbrowa Górnicza,
6. Kombinat Koksochemiczny Zabrze S.A. with its registered offices in Zabrze,
7. Przedsiębiorstwo Produkcyjno-Handlowo-Usługowe REM-BUD Sp. z o.o. with its registered offices in Zabrze,
8. Zakład Transportu Samochodowego, Sprzętu Budowlanego i Usług Serwisowych CARBOTRANS Sp. z o.o. with its registered offices in Zabrze,
9. Wałbrzyskie Zakłady Koksownicze Victoria S.A. with its registered offices in Wałbrzych,
10. Zakład Usług Energetycznych epeKoks Sp. z o.o. with its registered offices in Wałbrzych,
11. Spółka Energetyczna Jastrzębie S.A. with its registered offices in Jastrzębie-Zdrój,
12. SEJ-Serwis Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
13. Przedsiębiorstwo Energetyki Cieplnej S.A. with its registered offices in Jastrzębie-Zdrój,
14. Polski Koks S.A. with its registered offices in Katowice,
15. Przedsiębiorstwo Gospodarki Wodnej i Rekultywacji S.A. with its registered offices in Jastrzębie-Zdrój,
16. Jastrzębskie Zakłady Remontowe Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
17. JZR Dźwigi Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
18. Centralne Laboratorium Pomiarowo-Badawcze Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
19. Jastrzębska Spółka Kolejowa Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
20. Advicom Sp. z o.o. with its registered offices in Jastrzębie-Zdrój,
21. Jastrzębska Spółka Ubezpieczeniowa Sp. z o.o. with its registered offices in Jastrzębie-Zdrój.

Pursuant to the JSW S.A. Management Board decision of 14 December 2011 regarding the introduction of a personal union in certain subsidiaries of the Group involving joint management, with effect from 1 January 2012 the President of the Koksownia Przyjaźń Management Board was also appointed to the position of President of the KK Zabrze Management Board.

Koksownia Przyjaźń Sp. z o.o. was transformed into a joint stock company pursuant to the decision of the District Court in Katowice, 8th Corporate Division of the National Court Register, of 2 January 2013 on entering the changes in the National Court Register.