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

5.2. Identification of corporate governance rules not applied

JSW S.A. does its utmost to apply the corporate governance rules prescribed by the document entitled Best Practices of Companies Listed on WSE. In 2012, JSW S.A. did not apply the following rules:

I. Recommendations for Best Practices

Rule no. I.1:

“A company should pursue a transparent and effective information policy using both traditional methods and modern technologies and latest communication tools ensuring fast, secure and effective access to information. Using such methods to the broadest extent possible, a company should in particular:

• maintain a company website whose scope and method of presentation should be based on the model investor relations service available at http://naszmodel.gpw.pl/;
• ensure adequate communication with investors and analysts, and use to this purpose also modern methods of Internet communication;
• enable on-line broadcasts of General Meetings over the Internet, record General Meetings, and publish the recordings on the company website.”

Explanation:

In an EBI (Electronic Information Database) report of 5 July 2011, JSW S.A. announced that it will not apply the foregoing rule in the part concerning the broadcasting of shareholder meetings using the Internet, recording of the meetings and publishing them on its website, since the Company's shareholders are very dispersed and the Company cannot be protected against the possible shareholders' claims who might not wish to have their image or statements published.

Rule no. I.5:

“A company should have a remuneration policy and rules of defining the policy. The remuneration policy should in particular determine the form, structure, and level of remuneration of members of supervisory and management bodies. Commission Recommendation of 14 December 2004 fostering an appropriate regime for the remuneration of directors of listed companies (2004/913/EC) and Commission Recommendation of 30 April 2009 complementing that Recommendation (2009/385/EC) should apply in defining the remuneration policy for members of supervisory and management bodies of the company.”

Explanation:

On 18 November 2011 the JSW S.A. Supervisory Board adopted a resolution on executing management contracts with the Members of the JSW S.A. Management Board. This resolution was adopted in the interest of, and in response to the explicit suggestion made by shareholders of JSW S.A. who expected a system to incentivize senior management to care for the interests of the owners. Therefore the Supervisory Board acted in compliance with the Commission Recommendation of 14 December 2004 according to which the “form, structure and level of directors’ compensation are powers of companies and their shareholders”. In turn, the JSW S.A. Shareholder Meeting sets the compensation for the Supervisory Board members.

IV. Best Practices of Shareholders

Rule no. IV.10:

“A company should enable its shareholders to participate in a General Meeting using electronic communication means through:

1. real-life broadcast of General Meetings;
2. real-time bilateral communication where shareholders may take the floor during a General Meeting from a location other than the General Meeting;
3. exercise their right to vote during a General Meeting either in person or through a plenipotentiary.”

Explanation:

In an EBI report of 5 July 2011, JSW S.A. announced that it will not apply the rule IV.10 for technical reasons associated with the implementation of a data transmission system. The JSW S.A. Management Board will strive to apply it eventually. If this rule is implemented, JSW S.A. will immediately announce information about this fact publicly.

An amendment of the Best Practice for WSE Listed Companies dated 31 August 2011 made by the power of a resolution of the WSE Supervisory Board, the obligation to apply the rule IV.10 was postponed. According to the amendment, the change should be applied no later than 1 January 2013. Until that time, listed companies were not obligated to follow this rule. This change did not result in an obligation to publish the EBI report.

In 2012, by Resolution no. 19/1307/2012 adopted by the WSE Supervisory Board on 21 November 2012, the rule IV.10 was amended again by transferring item 3 to the rule I.12 of the recommended Best Practice for Listed Companies. From the standpoint of JSW S.A., the explanation about the application of the rule IV.10, which was included in the published EBI report of 5 July 2011, remains true with respect to the wording of rules I.12 and IV 10 of the Best Practice applicable from 1 January 2013.

In 2012 and as at the date of this report, JSW S.A. applied the remaining corporate governance rules set forth in the Best Practice for Listed Companies document.