Under the Articles of Association, the Exchange Supervisory Board consists of five to seven members appointed for a joint three-year term. The Exchange Supervisory Board appoints the Chairman and the Deputy Chairman of the Exchange Supervisory Board from among its members. The Exchange Supervisory Board may also appoint a secretary from among its members.

Composition of the Exchange Supervisory Board as at 31 December 2013

Composition of the Exchange Supervisory Board as at 31 December 2012

The composition of the Exchange Supervisory Board changed in 2013 as follows:

On 9 April 2013, i.e., the day the Exchange received a decision of the Polish Financial Supervision Authority concerning appointment of Paweł Graniewski, Member of the Exchange Supervisory Board, as Vice-President of the Exchange Management Board, the resignation of Paweł Graniewski from the Exchange Supervisory Board dated 22 February 2013 became effective. Previously, on 21 December 2012, the Exchange Supervisory Board adopted a resolution delegating Paweł Graniewski to temporarily perform the functions of a Member of the Exchange Management Board for a period no longer than 3 months as of 10 January 2013.

The Company’s Ordinary General Meeting was held on 21 June 2013. The General Meeting decided to dismiss Sebastian Skuza, Member and Secretary of the Exchange Supervisory Board, from the Exchange Supervisory Board. In addition, the following persons were appointed Members of the Exchange Supervisory Board:

- Wiesław Rozłucki, candidate nominated by minority shareholders who are not exchange members; and

- Dariusz Kacprzyk.

The current term of office of all Exchange Supervisory Board members expires no later than at the General Meeting to be held to approve the financial statements for the financial year 2013.

Participation of Women and Men in the Exchange Supervisory Board in 2011-2013

Appointment and Dismissal of the Supervisory Board Members

Exchange Supervisory Board members are appointed and dismissed by the General Meeting. The number of Exchange Supervisory Board members is set by the General Meeting in a resolution to appoint the Exchange Supervisory Board. Pursuant to the Articles of Association, the General Meeting appoints:

• at least one of the Exchange Supervisory Board members from among the candidates proposed by the shareholders being exchange members; and
• at least one of the Exchange Supervisory Board members from among the candidates proposed by a shareholder or shareholders who represent in total less than 10% of the share capital and are not exchange members (minority shareholders).

The candidates proposed by both of the above groups need to meet the criteria for independence, as described below. Candidates must be proposed no later than seven days before the scheduled date for the General Meeting. The application must include a candidate’s resume and indicate the number of shares and the number of votes that are represented by the shareholder or shareholders proposing that candidate.

If a vote is ordered for candidates proposed by shareholders who are also members of WSE, first, a vote shall be cast on candidates submitted by members of WSE who represent the largest number of votes. If no candidates are proposed by shareholders who are WSE members and by minority shareholders, all the Exchange Supervisory Board members are appointed by the General Meeting pursuant to the general rules. If at least one candidate is proposed by either WSE members or minority shareholders, the General Meeting appoints the remaining Exchange Supervisory Board members pursuant to the general rules. If the General Meeting has not appointed two Exchange Supervisory Board members pursuant to the rules described above, although shareholders (exchange members and minority shareholders) have proposed their candidates, a new General Meeting to appoint such Exchange Supervisory Board members must be convened. At this subsequent General Meeting, shareholders must propose new candidates.

The Exchange Supervisory Board members appointed under the rules described above can be dismissed only if new Exchange Supervisory Board members are appointed simultaneously under the same rules. If, due to the expiry of a mandate during a term other than by dismissal, the Exchange Supervisory Board does not contain a member appointed pursuant to the above rules, such a member must be appointed at the next General Meeting. However, if the Exchange Supervisory Board is appointed by voting in separate groups, the above rules of appointing two Exchange Supervisory Board members do not apply, meaning that all the Exchange Supervisory Board members will be appointed pursuant to the general rules. In this procedure, neither the preferences with regard to voting rights nor the limitation on voting rights apply and the exact number of seven members of the Exchange Supervisory Board shall be appointed.

The independence criteria are met by a person who:

• is not a related party of WSE (but for membership in the Exchange Supervisory Board), is not a related party of WSE’s parent entity or subsidiary and a subsidiary to WSE’s parent entity, or a related party of an entity in which WSE holds over 10% of the share capital;
• is not a relative by blood or affinity up to the second degree of a person referred to in the point above;
• is not a relative by blood or affinity up to the second degree of a WSE shareholder holding more than 5% of all the votes in WSE;
• is not a related party of any WSE shareholder holding more than 5% of the total votes in WSE, or its parent company or subsidiary, or a subsidiary of the parent entity in relation to such shareholder; and
• is not a relative by blood or affinity up to the second degree of the person referred to in the point above.

 “Related party” is understood as:

• being a member of the statutory bodies of a legal entity, and in the case of a partnership – partner or general partner;
• being an employee or a contracted agent of or being related under a similar legal relationship with the  entity. The above is applicable to persons who within the period of the last three years before the appointment of the Exchange Supervisory Board have been in an employment, contracted agent or similar legal relationship with the Company.

Powers of the Exchange Supervisory Board

Pursuant to the Articles of Association, the Exchange Supervisory Board has the following powers:

• to appoint the Exchange Management Board members as set out in the section 3.9 “Management Board”;
• to assess the Exchange Management Board’s report and the financial statements for the previous financial year;
• to assess the Exchange Management Board’s proposals on the distribution of profits or coverage of losses;
• to provide the General Meeting with a written report on the findings of the above assessments;
• to approve the Exchange Management Board Rules at the request of the Exchange Management Board;
• to adopt the Exchange Supervisory Board Rules;
• to adopt, at the request of the Exchange Management Board, the Exchange Rules and any amendments thereto;
• to determine the terms of the employment contracts and the amount of remuneration of the President of the Exchange Management Board and the other members of the Exchange Management Board, where the terms of the employment contracts and the amount of remuneration of the other members of the Exchange Management Board are determined upon the request of the President of the Exchange Management Board;
• to represent the Company in contracts and disputes between the Company and the Exchange Management Board members;
• to grant consent for the Company to conclude, with its related party, a material agreement, within the meaning of the applicable provisions of law on current and periodic reports to be published by issuers of securities admitted to trading on the regulated market, provided that no consent is required for the conclusion of typical agreements on an arm’s length basis in the course of the Company’s operational activity;
• to determine the rules on which the Exchange Management Board members acquire and dispose of securities listed on the exchange operated by the Company;
• to appoint an auditor to audit the Company’s financial statements;
• to approve the financial plan and a financial plan implementation report at the request of the Exchange Management Board;
• to provide the General Meeting with a concise annual assessment of the Company’s standing, including an assessment of the internal control system and the system applied to manage risks material to the Company;
• to present the General Meeting with an annual report on the activities of the Exchange Supervisory Board; and
• to consider and give opinions on matters to be discussed by the General Meeting.

The Articles of Association provide that the resolutions of the Exchange Supervisory Board are generally adopted by an absolute majority of votes (i.e., the majority of the votes cast); however, a four-fifths majority vote is required for the following:

• granting consent for the conclusion of an agreement on establishing a strategic alliance with another stock exchange (in particular regarding on-going operational relations involving the main scope of activities of WSE);
• approval, at the request of the Exchange Management Board, of a multiannual growth strategy of WSE;
• granting consent for the conclusion, to the extent permitted by law, of an agreement for outsourcing operational services of trading on the regulated market or any segment thereof, or an agreement for the outsourcing operational services of trading organized in an alternative trading system;
• acquisition of an IT system for concluding stock exchange transactions; and
• granting consent for the purchase or disposal of shares in companies or partnerships if the value thereof, according to the purchase price or selling price, exceeds 1/10 of the WSE’s share capital. However, under the Commercial Companies Code, if the Exchange Supervisory Board declines to grant its approval, the Exchange Management Board may apply to the General Meeting for approval.

Operation of the Exchange Supervisory Board

According to the Articles of Association, the Exchange Supervisory Board meets at least once per quarter. The Chairman or the Deputy Chairman of the Exchange Supervisory Board must convene a Exchange Supervisory Board meeting if requested to do so in writing by the Exchange Management Board or a Exchange Supervisory Board member. This meeting should be held within two weeks from the date the request is received.

The detailed rules concerning the Exchange Supervisory Board’s operation are provided for in the Exchange Supervisory Board Rules. In addition to standard provisions, the Exchange Supervisory Board Rules include a regulation providing that a Exchange Supervisory Board member will, promptly after the end of each quarter of the calendar year, notify the Chairman of the Exchange Supervisory Board in writing of any transaction in securities and other financial instruments listed on WSE. In addition, pursuant to the Exchange Supervisory Board Rules, the Exchange Supervisory Board may appoint committees and working teams from among its members.

The Exchange Supervisory Board adopts resolutions in an open ballot. A secret ballot shall be ordered for appointment of the Chairman, the Deputy Chairman, and the Secretary of the Exchange Supervisory Board and at the request of at least one-third of Exchange Supervisory Board members present at the meeting. The Exchange Supervisory Board passes resolutions by an absolute majority of votes when at least half of the members are present except for resolutions on matters for which a qualified majority of four-fifths of votes is required. The Exchange Supervisory Board members who have a conflict of interest with the Company should inform the Exchange Supervisory Board of the conflict and refrain from taking part in discussion and vote on a resolution in the matter that is subject to the conflict of interest.

The Exchange Supervisory Board meetings are convened and chaired by the Chairman. In the case of an equal number of votes, the Chairman shall cast the deciding vote. The Exchange Supervisory Board can vote in writing or by electronic means, except for matters regarding appointment of the Chairman and the Deputy Chairman of the Supervisory Board and members of the Management Board and dismissal and suspension of the Exchange Management Board and its members.

Exchange Supervisory Board Committees

The Exchange Supervisory Board appoints the Audit Committee. In addition, pursuant to the Articles of Association, the Exchange Supervisory Board appoints the Regulation Committee and may appoint other committees, in particular the Remuneration and Nominations Committee. Detailed tasks as well as principles governing appointment and operation of the committees are set out in the Exchange Supervisory Board Rules.

Each operating Exchange Supervisory Board Committee should have at least one independent member of the Exchange Supervisory Board appointed by the General Meeting in accordance with the Articles of Association from among:

• candidates nominated by shareholders being WSE members;
• candidates nominated by a shareholder or shareholders representing jointly less than 10% of the Company’s share capital who are not WSE members.

Pursuant to the Exchange Supervisory Board Rules, the committees include: Audit Committee, Remuneration and Nominations Committee, Regulation and Corporate Governance Committee, and Strategy Committee. The committees provide annual reports on their activity to the Exchange Supervisory Board.

Composition of Exchange Supervisory Board Committees as at 31 December 2013

Composition of Exchange Supervisory Board Committees as at 31 December 2012

No ad hoc committee was appointed in 2013.

Audit Committee

The Audit Committee comprises at least three Exchange Supervisory Board members, including at least one member meeting the independence criteria and qualified in the area of accounting or auditing as set out in Article 86 paragraph 4 of the Act on Chartered Auditors.

As at the date of preparation of this Report, all the Audit Committee members satisfied the independence requirements and had qualifications in accounting or financial review in accordance with Article 86 paragraph 4 of the Act on Chartered Auditors.

Pursuant to the Articles of Association, the Audit Committee duties include, but are not limited to, supervising the internal audit department; monitoring financial reporting; monitoring the effectiveness of internal control, internal audit and risk management systems; monitoring the financial audit function; monitoring the independence of the chartered auditor and the entity authorized to audit the financial statements, including provision of services other than audit services to the Company; recommending to the Exchange Supervisory Board an entity authorized to audit the financial statements to audit the Company’s financial statements. Pursuant to the Exchange Supervisory Board Rules, the Audit Committee duties include also giving opinions on financial statements and motions of the Management Board concerning profit distribution or coverage of loss, giving opinions on the financial plan of WSE, giving opinions on the report of the Exchange Management Board on implementation of the financial plan, giving opinions on risk assessment reports, giving opinions on proposals of companies to be appointed auditor, giving recommendations to the Exchange Supervisory Board on the selection of the company to be appointed auditor.

Remuneration and Nominations Committee

Pursuant to the Exchange Supervisory Board Rules, the Remuneration and Nomination Committee duties comprise giving opinions on the remuneration system, employment contracts with the Exchange Management Board members, annual awards proposed for the Exchange Management Board members and the incentive system.

Regulation and Corporate Governance Committee

Pursuant to the Exchange Supervisory Board Rules, the Regulation and Corporate Governance Committee’s duties involve initiating and issuing opinions on proposed changes in regulations, preparing Management and Supervisory Boards’ joint position statements, issuing opinions on WSE corporate governance compliance statements, initiating, issuing opinions and monitoring activities related to the implementation of the corporate governance rules by WSE, as well as activities supporting the implementation of the corporate governance rules in listed companies.

Strategy Committee

Pursuant to the Exchange Supervisory Board Rules, the Strategy Committee’s duties are to issue opinions on WSE’s strategy, its updates and implementation, as well as on the aspects of WSE’s privatization, proposed strategic alliances, proposed acquisition by WSE of stakes in entities of strategic significance, and materials related to exchange fees.