GPW REMUNERATION POLICY

The incentive remuneration system for employees and managers consists of the following components: 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.

The bonus system 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 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, partial 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.

For more information on the GPW employee policy, including the training policy, the recruitment policy and employee volunteering, see section IV.4 Responsible Human Resources Policy.

REMUNERATION POLICY FOR EXCHANGE MANAGEMENT BOARD MEMBERS

Pursuant to the Articles of Association, the power to determine the rules of remuneration of the Members of the Exchange Management Board is vested in the General Meeting and the power to determine the terms of contracts and the remuneration of the Members of the Exchange Management Board is vested in the Exchange Supervisory Board.

The new system of defining the rules of remuneration of the Members of the Exchange Management Board was approved in Resolution 3 of the Extraordinary General Meeting of 30 November 2016. The amendments introduced in the Resolution derive from the provisions of Article 2(1) of the Act of 9 June 2016 on Rules of Remuneration of Managers of Certain Companies (Journal of Laws of 2016, item 1202). The Resolution was amended by Resolution 42 of the Ordinary General Meeting of 19 June 2017.

The remuneration system for Members of the Exchange Management Board includes a basic part (fixed remuneration) and a variable part which constitutes supplementary remuneration (variable remuneration). The existing remuneration system was implemented in the Company in March 2017.

The monthly fixed remuneration of each Member of the Exchange Management Board ranges from 4 times to 8 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).

The variable remuneration depends on the performance of management targets and it cannot be more than 100% of the fixed remuneration in the previous financial year. The management targets include growth of the Company value and improvement of its financial indicators. The Exchange Supervisory Board defines specific management targets and their weights as well as objective and measurable criteria (indicators) of their performance. Other management targets on which variable remuneration depends include:

development and application of rules of remuneration of members of management and supervisory authorities in accordance with the provisions of the Act of 9 June 2016 on Rules of Remuneration of Managers of Certain Companies,
performance of the obligations defined in Articles 17-20, Article 22 and Article 23 of the Act of 16 December 2016 on Management of Public Assets (Journal of Laws of 2016, item 2259) concerning the exercise of rights attached to shares and the requirements for candidates for members of supervisory authorities and management authorities in GPW’s subsidiaries.

The previous remuneration system for the members of the Exchange Management Board was based on a long-term incentive system. It consisted 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 variable part of remuneration, i.e., the discretionary annual bonus, could be awarded provided that the following criteria were met:

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

The amount of the bonus for Members of the Management Board depended 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 performed an annual appraisal which could determine the grant and the amount of the discretionary bonus awarded to a Management Board Member. The maximum amount of the discretionary annual bonus was capped as a percentage of annual basic remuneration. Payments of the awarded discretionary bonus were 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 was 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.

The discretionary bonuses to the Exchange Management Board under the previous remuneration scheme will have been settled by 2020.