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

1.4. Information about JSW S.A.’s ownership structure and the shares issued

1.4.1. JSW S.A.’s capital and ownership structure

As at the last date of the reporting period and the date of this report, JSW S.A.’s share capital was PLN 587,057,980.00 and was divided into 117,411,596 ordinary shares with a par value of PLN 5.00 each, as follows:

• 99,524,020 series A shares,
• 9,325,580 series B shares,
• 2,157,886 series C shares,
• 6,404,110 series D shares.

Registered shares which will be dematerialized pursuant to the Act on Trading in Financial Instruments of 29 July 2005 will be transformed into bearer shares upon such dematerialization.

The total number of votes linked to all the shares issued by JSW S.A. is 117,411,596 votes at the JSW S.A. Shareholder Meeting.

As at 31 December 2012 and the date of the Management Board Report on the activity of the JSW S.A. Capital Group for 2012(1),the shareholding structure of JSW S.A. was as follows:

	Number of shares	Number of votes at the Shareholder Meeting	Percentage of share capital	Percentage of the total number of votes at the Shareholder Meeting
State Treasury of the Republic of Poland(2)	64,775,542	64,775,542	55.16%	55.16%
Other shareholders(3)	50,478,168	50,478,168	43.00%	43.00%
Other shareholders(4)	2,157,886	2,157,886	1.84%	1.84%
Total	117,411,596	117,411,596	100.00%	100.00%

(1) JSW S.A. does not hold an itemized breakdown of the shareholder structure as at 31 December 2012 or the date of the Management Board Report on the activity of the JSW S.A. Capital Group for 2012 due to the pending process of JSW S.A.’s eligible employees acquiring shares free of charge from the State Treasury by the power of the Act on Commercialization and Privatization of 30 August 1996. The information included in the foregoing table was transmitted in Current Report no. 40/2012 on 30 November 2012 prepared on the basis of the notification submitted by the State Treasury.
(2) The State Treasury, including Employee Shares. The shares of eligible employees or their successors until their transfer remain the property of the State Treasury. 1. Starting on 10 October 2011, JSW S.A. began to dispose, free of charge, 14,928,603 registered series A shares with a par value of PLN 5.00 each to eligible employees. 2. In connection with the contribution of KK Zabrze shares to JSW S.A., the shares of persons entitled to a gratuitous purchase of KK Zabrze shares allowing them to exercise their right to a gratuitous purchase of JSW S.A. shares instead of KK Zabrze shares. Starting on 23 April 2012, JSW S.A. began to dispose, free of charge, 1,130,137 series D shares with a par value of PLN 5.00 each to eligible employees.
(3) Institutional and individual investors, including employees of JSW S.A., KK Zabrze and their heirs, who have taken advantage of their entitlement to acquire Employee Shares free of charge, pursuant to the Act on Commercialization and Privatization of 30 August 1996.
(4) Series C employee shares offered in a private subscription to an investment company which offered to dispose of the taken-up series C shares to the employees referred to in sec. 5 of Resolution no. 3 of the Company’s Shareholder Meeting of 12 May 2011, Rep. A no. 3173/2011. On 17 April 2012, the JSW S.A. Shareholder Meeting adopted a resolution to retire 1,796,324 series C shares (Current Report no. 25/2012). Information about the adjustment of the number of series C shares is presented in Item 1.4.3 of the Management Board Report on the activity of the JSW S.A. Capital Group for 2012.

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JSW S.A. has not received any information about exceeding the percentage thresholds of the total number of votes specified in art. 69 sec. 1 of the Act on Public Offerings and the Conditions for Floating Financial Instruments in an Organized Trading System and on Public Companies.

As at the date of this report, according to the notices received from shareholders holding directly or indirectly through subsidiaries at least 5% of the total number of votes at the JSW S.A. Shareholder Meeting (Current Report No. 40/2012 of 30 November 2012), the ownership structure of JSW S.A. was as follows:

1.4.2. Prices of JSW S.A. shares in the capital market

In 2012, the average annual price per JSW S.A. share was PLN 93.59 and the difference between the listing at the beginning and end of 2012 was +7.94%. By comparison, the WIG20 index increased by 17.72% and the WIG-Surowce (WIG-Raw Materials) index increased by 70.50% in the same period.

In 2012, the lowest closing price per JSW S.A. share was PLN 82.80 and the highest closing price per JSW S.A. share was PLN 110.60. The value of JSW S.A. shares as at the end of 2012 was PLN 92.40. The average daily trading volume in 2012 was 145,235 shares.

The prices of JSW S.A. shares as well as the WIG20 and WIG-Surowce indexes in 2012 and the RESPECT index since the date of inclusion of JSW S.A. in its composition are presented in the following graph:

1.4.3. Reduction of the Parent Company’s share capital

On 17 April 2012, the Shareholder Meeting adopted a resolution to retire 1,796,324 series C shares, a resolution to authorize the JSW S.A. Management Board to acquire treasury shares of JSW S.A. free of charge for the purpose of retirement and a resolution to reduce the share capital by PLN 8,981,620, i.e. from PLN 596,039,600 to PLN 587,057,980 and create other reserve capital (Current Report no. 25/2012). On 30 April 2012, JSW S.A. received the decision of the District Court in Gliwice, 10th Business Division of the National Court Register, dated 26 April 2012 on the registration of a share capital decrease in JSW S.A. in connection with the retirement of 1,796,324 series C shares corresponding to 1,796,324 shares in the JSW S.A. Shareholder Meeting (Current Report no. 29/2012).

The consequences of the anticipated decrease in the number of shares granted to the employees (retirements of series C shares) caused a reduction of costs of the employee share ownership program which was captured in the ledgers as at 30 June 2011 in the amount of PLN 243.9 million. The adjustment of costs was carried out in the ledgers in 2011. At the same time, JSW S.A. made proper adjustment of the surplus of the share issue value over their par value on account of the employee share ownership plan by the amount of PLN 234.9 million, and retained profits by the amount of PLN 9.0 million.

The amount of the share capital after registration of the retirement is PLN 596,039,600 and is divided into 119,207,920 shares with a par value of PLN 5.00 each. The total number of votes linked to all the shares issued by JSW S.A. after the registration of the change in the value of share capital (retirement of shares) is 117,411,596 votes at the JSW S.A. Shareholder Meeting. The shares were retired following the voluntary retirement procedure, without any remuneration. The purpose of the share capital decrease is to transfer the amount corresponding to the share capital decrease forming the sum of the par value of the shares being retired to a separate other reserve capital account, which may be used only to cover losses.

1.4.4. Dividends

In accordance with the recommendation presented in the JSW S.A. issue prospectus (p. 59), in 2013 the Parent Company’s Management Board will propose to the JSW S.A. Shareholder Meeting the payment of a dividend of at least 30% of the consolidated net profit for 2012. The Company's dividend policy takes into account the Group’s development plans, in particular its investment plans aimed at ensuring stable development of the Group and generating profit from ongoing operations, and depends on current activity results, cash flows, financial standing and capital requirements, general economic conditions as well as legal, tax, regulatory and contractual restrictions pertaining to dividend payments and on other factors which the Management Board considers important, and is subject to changes aimed at adapting it to the above factors. JSW S.A.’s dividend payments also depend on the approach of the State Treasury who is the shareholder with the decisive vote.

On 31 May 2012, the Ordinary Shareholder Meeting of JSW S.A. adopted a resolution on the distribution of net profit for the financial year 2011. The net profit earned by JSW S.A. in 2011 in the amount of PLN 2,082,532,648.47, reduced by the obligatory payment from the profit for the period from 1 January 2011 to 31 July 2011 charged from wholly-owned State Treasury companies pursuant to the Act of 1 December 1995 on Profit Distributions by Companies Wholly Owned by the State Treasury (Journal of Laws No. 154 Item 792, as amended) in the amount of PLN 126,978,067.20 million, and therefore the distributable net profit of PLN 1,955,554,581.27 was distributed as follows:

• the amount of PLN 631,674,386.48 was earmarked for dividends. This means that the dividend per share was PLN 5.38. The date of acquisition of the right to the dividend was set at 6 July 2012 and the dividend was paid on 24 July 2012. The dividend received by the State Treasury was PLN 349.6 million,
• the amount of PLN 130,000,000.00 was earmarked for distribution to JSW S.A.’s employees and to cover related charges. The profit bonus for employees was paid out on 22 June 2012,
• the amount of PLN 1,193,880,194.79 was earmarked for additional reserve capital to finance the investment program of JSW S.A.

As a result of 2011 profit distributions from the subsidiaries, the Parent Company received dividends in the total amount of PLN 54.1 million. The dividend per share ratio is presented in Note 34 of the “Consolidated financial statements of Jastrzębska Spółka Węglowa S.A. for the financial year ended 31 December 2012”.

1.4.5. The number and nominal value of JSW S.A.’s shares and shares in JSW S.A.’s related parties held by persons discharging executive and supervisory functions

The holding of JSW S.A.’s shares with a par value of PLN 5.00 each by persons discharging executive and supervisory functions in JSW S.A. is as follows:

	Number of shares as at 31 December 2012	Number of shares as at the date of this report
JSW S.A. Management Board
Jarosław Zagórowski	210	210
Grzegorz Czornik	378	378
Robert Kozłowski	-	-
Andrzej Tor	211	211
Artur Wojtków	367	367
JSW S.A. Supervisory Board
Józef Myrczek	-	-
Antoni Malinowski	-	-
Eugeniusz Baron	382	382
Andrzej Karbownik*	-	-
Stanisław Kluza	-	-
Robert Kudelski	256	256
Tomasz Kusio	-	-
Alojzy Nowak	-	-
Andrzej Palarczyk	591	591
Łukasz Rozdeiczer-Kryszkowski	-	-
Adam Rybaniec	-	-
Adam Wałach	532	532

* On 19 February 2013, Mr. Andrzej Karbownik was appointed to the JSW S.A. Supervisory Board of the 8th term of office.

The persons discharging executive and supervisory functions in JSW S.A. do not hold any shares in JSW S.A.’s subsidiaries.

1.4.6. Agreements pertaining to potential changes in the shareholding structure

The Parent Company’s Management Board does not have information about agreements which may result in the future in changes to the proportions of shares held by the existing shareholders.

1.4.7. Information on employee share plan control system

Series A and C shares

Since JSW S.A. was incorporated as a result of transformation of state-owned enterprises into a joint-stock company, pursuant to the provisions of the Act on Commercialization and Privatization, eligible employees and their heirs are entitled to gratuitous receipt of 15% shares of JSW S.A. from the State Treasury. Starting on 10 October 2011, JSW S.A. began to dispose, free of charge, to eligible employees, series A shares.

At the same time, employees employed as at the date of the first listing of JSW S.A. shares who did not acquire the aforementioned entitlement, acquired the right to receive free of charge additionally issued 3,954,210 series C shares.

The actions taken in 2011 and the process of disposing of the shares to employees eligible and ineligible to receive the (series A and C) shares was described in detail in the annual report for 2011 – the JSW S.A. Management Board activity report for the financial year ended 31 December 2011, Item 1.4.5.

On 27 February 2012, the JSW S.A. Management Board adopted a resolution to determine the number of shares for each group of ineligible employees, divided by period of employment (Current Report no. 14/2012). Pursuant to the above resolution, the number of the JSW S.A.’s series C shares designated to be allocated to employees of the Capital Group eligible to acquire them free of charge was determined to be 2,157,886 series C shares out of 3,954,210 issued shares. Then, in its resolution of 27 February 2012, the JSW S.A. Supervisory Board gave consent to divide series C shares in the manner defined in the resolution of the JSW S.A. Management Board in the matter of determining the number of shares for each group of ineligible employees divided by period of employment.

Considering the above, the JSW S.A. Management Board recommended retirement of the surplus of 1,796,324 series C shares. On 17 April 2012, the Extraordinary Shareholder Meeting adopted a resolution to retire the surplus shares. On 26 April 2012, the reduction of the JSW S.A. share capital associated with the retirement of series C shares was registered. Series C shares have been allocated since 1 March 2012. By 20 April 2012, series A and C shares were allocated in JSW S.A. plants. After this date agreements on gratuitous disposal of series A and C shares are concluded in the branches of the Dom Maklerski PKO BP brokerage house.

Series D shares

In connection with the contribution of KK Zabrze shares to JSW S.A., the State Treasury Minister, acting pursuant to Article 38 d section 1 of the Act on Commercialization and Privatization, issued an offer addressed to entitled to a gratuitous purchase of KK Zabrze shares allowing them to exercise their right to a gratuitous purchase of shares by purchasing JSW S.A. shares instead of KK Zabrze shares. On 23 April 2012, the gratuitous sale of shares commenced, to eligible employees of KK Zabrze who submitted their declarations that their right to a gratuitous purchase of KK Zabrze shares may be exercised by a purchase of 1,130,137 registered series D shares of JSW S.A. with a par value of PLN 5.00 each.

KK Zabrze shares were exchanged into JSW S.A. shares based on the following parity: 1 JSW S.A. share = 0.876 KK Zabrze shares. This parity was determined by an auditor in the opinion on the fair value of the non-cash contribution made by the State Treasury – the State Treasury Minister to JSW S.A. in the form of shares of KK Zabrze, which was commissioned by the Management Board of JSW S.A.

By 31 December 2012, the following shares were sold:

• 14,149,045 shares out of 14,928,603 series A shares earmarked for eligible employees. 779,558 shares were still available.
• 2,120,048 shares out of 2,157,886 series C shares earmarked for ineligible employees. 37,838 shares were not sold.
• 853,944 shares out of 1,130,137 series D shares earmarked for eligible employees. 276,193 shares were not sold.
• The process of gratuitous sale of series A and C shares will continue until 8 October 2012, while series D shares will be sold gratuitously until 21 March 2014.

The shares received may not be sold for a period of 2 years (or 3 years for Management Board members), starting from 7 July 2011, regardless of the date when the eligible persons actually received the shares ("lock-up"). During that period, the shares will be held in custody of the Dom Maklerski PKO BP S.A. brokerage house.

1.4.8. Purchase of treasury stock

In 2012, the Parent Company did not purchase any treasury stock.