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

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.