Letter of the President of the Management Board

Marek DietlDear Shareholders and Investors,

It is with great pleasure that I present this Report of the GPW Management Board on the activity of the Giełda Papierów Wartościowych w Warszawie Group (GPW Group) and the separate and consolidated financial statements for 2017.

There is no doubt that 2017 was a good year for GPW and the capital market and generated gains for investors and issuers alike. Particularly memorable are large IPOs and the rebound of exchange indices to the levels from before the financial crisis, hitting historical highs, which were once again beaten in January 2018 (the oldest GPW index WIG reached 67,933.05 points at the session on 23 January 2018, beating the previous record of 67,568.51 points set on 6 July 2007). According to Bloomberg, WIG20 generated one of the best returns among global exchanges at 55 percent in 2017. The turnover on the GPW stock market increased by 28 percent in 2017 (EUR 55.8 billion according to FESE), which ranks GPW first in Europe, ahead of the stock exchanges in Bucharest and Vienna, and ahead of Deutsche Boerse and Euronext as well.

When I joined the Group as President of the GPW Management Board in the autumn of 2017, the company’s financial standing was excellent. It was corroborated at the year’s end when we reported a record-high net profit of PLN 156.1 million, representing an increase of 19 percent year on year. The consolidated revenue was PLN 352 million in 2017, an increase of 13.2 percent, including both increase of 13.7% of the revenue from the financial market as well increase of revenue from the commodity market by 13.4%. The operating profit was PLN 183.9 million in 2017 compared to PLN 139.5 million in 2016. EBITDA was PLN 212.2 million in 2017, an increase of 15.5 percent year on year. Our cost/income ratio has remained under 50 percent, which is in line with the Group’s strategy. The financial results of the GPW Group in 2017 were impacted by one-off events including the cost of implementation of MiFID2 at PLN 11.0 million during the year.

We want to build sustainable shareholder value and regularly share our profits. This is why we paid more than PLN 90.2 million in dividend in 2017 from the consolidated profit of 2016 (adjusted for the share of profit of associates). Consequently, we paid one of the highest dividends among all European exchanges. The total shareholder return (TSR) was 23.1% in 2017 while GPW’s share price gained 17.7% in 2017. The GPW Management Board is planning to maintain the dividend policy in the coming years.

Last year was very successful for our subsidiary Towarowa Giełda Energii as well. The volume of trading in natural gas was record-high (138.7 TWh, an increase of 21.1 percent year on year), as was the volume of trading in property rights (the annual volume of trading in property rights in energy efficiency was 399.9 thousand toe, an increase of 27.0% year on year). In 2017, TGE celebrated the fifth anniversary of the gas market, which is an important and integral part of Poland’s natural gas market.

The Polish economy is growing fast. The conditions on GPW’s spot market are favourable. Investor sentiment on the global stock market in early 2018 was strong. FTSE Russell’s decision upgrading Poland as a Developed Market will take effect this autumn. The promotion is a reward for the development of the Polish economy and the local capital market. I hope that it will bring new categories of investors to GPW.

All of this makes me certain that we have a robust foundation for further growth, not only owing to conducive external factors but also our own resources. This year will be crucial for GPW and the local capital market in view of the planned development of a capital market strategy in collaboration with all market participants. GPW wants to actively contribute to the process and play a key role in the strategy. Importantly, the presence of many companies on our trading floor improves our capacity to analyse the Polish economy while disclosure requirements allow us to track the performance of companies and industries. Public companies should be supported by the State as a strategic asset, not least in decisions introducing administrative and legislative changes. We are aware that some companies have not yet been floated on the exchange even though they are on the forefront of the Polish economy, have a presence on many markets and efficiently compete with global leaders. Any new incentive for Polish companies to go public on GPW or for investors to invest in listed companies is bound to help the development of an attractive capital market in Poland.

The GPW Management Board has decided to update the strategy GPW.2020. We see many areas of development and improvement of our existing competences. However, we want to focus mainly on new business lines, including mainly technologies which will be an important driver of our growth. We will continue to work in support of the reputation of the exchange and its strong position in Central and Eastern Europe. We are not afraid to compete with global exchanges. The internationalisation of our business is a challenge for the Management Board this year.

I can see the huge potential and opportunities ahead of GPW Group, we can reach for new, attractive growth factors that will also translate into greater profits for our Shareholders. I wish that to myself and all of us


Yours sincerely,

Marek Dietl, President of GPW Management Board