Consolidated Quarterly Report of the Grupa Azoty Zakłady Chemiczne Police Group for Q1 2020

Consolidated quarterly report of the Grupa Azoty Zakłady Chemiczne Police Group for Q1 2020

Contents I. FINANCIAL HIGHLIGHTS ...... 4 Consolidated financial highlights ...... 5 Separate financial highlights ...... 6 II. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31ST 2020 PREPARED IN ACCORDANCE WITH IAS 34 INTERIM FINANCIAL REPORTING AS ENDORSED BY THE EUROPEAN UNION ...... 7 Interim condensed consolidated statement of profit or loss and other comprehensive income ...... 8 Interim condensed consolidated statement of financial position ...... 10 Interim condensed consolidated statement of changes in equity ...... 12 Interim condensed consolidated statement of cash flows ...... 14 1. Information about the Group ...... 16 1.1. Organisation of the Grupa Azoty Zakłady Chemiczne Police Group ...... 16 1.2. Composition of the Group ...... 16 Changes in the companies’ structures ...... 17 Organisational and equity ties ...... 17 1.3. Composition of the Parent’s Management and Supervisory Boards ...... 17 2. Key events in the three months ended March 31st 2020 and until the authorisation date ...... 18 2.1 Issue of new Company shares ...... 18 2.2 Share capital increase at subsidiary Grupa Azoty Polyolefins S.A...... 18 3. Policies applied in the preparation of the interim condensed consolidated financial statements ...... 19 3.1. Statement of compliance and general policies ...... 19 3.2. Accounting policies and computation methods ...... 19 4. Selected supplementary and explanatory notes ...... 21 4.1. Explanatory notes ...... 21 PROPERTY, PLANT AND EQUIPMENT ...... 26 4.2. Related parties ...... 29 4.3. Events after the reporting period that could affect financial results in the future...... 30 4.4. Dividends ...... 31 4.5. Seasonality of operations ...... 31 III. INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31ST 2020 PREPARED IN ACCORDANCE WITH IAS 34 INTERIM FINANCIAL REPORTING AS ENDORSED BY THE EUROPEAN UNION ...... 32 Interim condensed separate statement of profit or loss and other comprehensive income ...... 33 Interim condensed separate statement of financial position ...... 34 Interim condensed separate statement of cash flows ...... 37 Notes to the interim condensed separate financial statements ...... 39 1. OVERVIEW OF THE COMPANY ...... 39 1.1. Organisation of the Company ...... 39 2. MATERIAL EVENTS IN THE THREE MONTHS ENDED MARCH 31ST 2020 AND UNTIL THE AUTHORISATION DATE ...... 39 3. POLICIES APPLIED IN THE PREPARATION OF THE INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS ...... 39 3.1. Statement of compliance and general policies ...... 39 3.2. Accounting policies and computation methods ...... 40 4. SELECTED SUPPLEMENTARY AND EXPLANATORY NOTES ...... 40 IV. MANAGEMENT’S DISCUSSION AND ANALYSIS...... 41 1. GENERAL INFORMATION ABOUT THE GROUP ...... 42 1.1. Organisation and structure ...... 42 2. FINANCIAL CONDITION AND ASSETS ...... 44 2.1. Assessment of factors and one-off events with a material impact on operations and financial performance . 44 2.2. Market overview ...... 46 2.3. Key financial and economic data ...... 52 2.3.1. Consolidated financial results ...... 52 2.3.2. Segments’ financial results...... 52 2.3.3. Operating expenses ...... 54 2.3.4. Structure of assets, equity and liabilities ...... 54 2.3.5. Financial ratios ...... 56 2.4. Financial liquidity ...... 58 2.5. Borrowings ...... 58

2.6. Key projects ...... 59 2.7. Factors which will affect performance over at least the next reporting period ...... 61 3. OTHER INFORMATION ...... 64 3.1. Significant events ...... 64 3.2. Significant agreements ...... 65 3.3. Sureties and guarantees ...... 65 3.4. Shareholding structure ...... 66 3.5. Parent shares held by management and supervisory personnel ...... 66 3.6. Composition of the Management Board and the Supervisory Board ...... 67 4. OTHER INFORMATION ...... 70

I. FINANCIAL HIGHLIGHTS

Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Financial highlights

Consolidated financial highlights

PLN ’000 EUR ’000 for the period for the period for the period for the period Jan 1− Jan 1− Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 Mar 31 2020 Mar 31 2019

unaudited unaudited unaudited unaudited Revenue 648,224 726,661 147,448 169,077 Operating profit 9,163 59,536 2,084 13,853 Profit before tax 29,555 61,012 6,723 14,196 Net profit 22,570 48,610 5,134 11,310 Comprehensive income for period 22,608 48,617 5,143 11,312 Number of shares 124,175,768 75,000,000 124,175,768 75,000,000 Earnings per ordinary share 0.11 0.66 0.03 0.15

Net cash from operating activities (48,691) 19,216 (11,075) 4,471 Net cash from investing activities (471,889) (27,689) (107,338) (6,443) Net cash from financing activities 338,036 (6,673) 76,891 (1,553) Total net cash flows (182,544) (15,146) (41,522) (3,524) Cash and cash equivalents at beginning of period 445,295 160,209 101,289 37,277 Cash and cash equivalents at end of period 263,449 144,606 59,925 33,647 as at as at as at as at Mar 31 2020 Dec 31 2019 Mar 31 2020 Dec 31 2019 unaudited audited unaudited audited Non-current assets 2,264,894 1,837,782 497,527 431,556 Current assets 1,185,470 1,095,718 260,411 257,301 Non-current liabilities 444,957 531,230 97,743 124,746 Current liabilities 1,149,882 1,065,144 252,594 250,122 Equity 1,855,525 1,337,126 407,602 313,990 Share capital 1,241,758 750,000 272,776 176,118 Non-controlling interests 212,093 203,373 46,590 47,757

Separate financial highlights

PLN ’000 EUR ’000 for the period for the period for the period for the period Jan 1− Jan 1− Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 Mar 31 2020 Mar 31 2019 unaudited unaudited unaudited unaudited Revenue 644,694 724,844 146,645 168,655 Operating profit 15,072 67,342 3,428 15,669 Profit before tax 1,483 78,109 337 18,174 Net profit 868 65,466 197 15,232 Comprehensive income for period 868 65,466 197 15,232 Number of shares 124,175,768 75,000,000 124,175,768 75,000,000 Earnings per ordinary share 0.01 0.87 0.00 0.20

Net cash from operating activities 20,695 17,207 4,707 4,004 Net cash from investing activities (28,633) (25,014) (6,513) (5,820) Net cash from financing activities 206,746 (6,097) 47,027 (1,419) Total net cash flows 198,808 (13,904) 45,222 (3,235) Cash and cash equivalents at beginning of period 39,399 32,913 8,962 7,658 Cash and cash equivalents at end of period 238,842 18,547 54,328 4,315 as at as at as at as at Mar 31 2020 Dec 31 2019 Mar 31 2020 Dec 31 2019 unaudited audited unaudited audited Non-current assets 1,817,946 1,820,458 399,347 427,488 Current assets 990,402 667,240 217,561 156,684 Non-current liabilities 403,340 494,696 88,601 116,167 Current liabilities 699,589 784,848 153,678 184,302 Equity 1,705,419 1,208,154 374,628 283,704 Share capital 1,241,758 750,000 272,776 176,118

The selected items of the statement of profit or loss and other comprehensive income, statement of financial position and statement of cash flows were translated into the euro using the method described below: • Individual items of assets and equity and liabilities in the statement of financial position were translated at the exchange rate effective for the last day of the reporting period: the exchange rate as at December 31st 2019 was EUR 1 = PLN 4.3013 (table No. 063/A/NBP/2019), the exchange rate as at March 31st 2020 was EUR 1 = PLN 4.5523 (table No. 063/A/NBP/2020), • Items of the statement of profit or loss and other comprehensive income and statement of cash flows were translated at the arithmetic mean of the EUR/PLN rates quoted by the National Bank of Poland as effective for the last day of each month in the reporting period: in the period January 1st–March 31st 2019, the average exchange rate was EUR 1 = PLN 4.2978, in the period January 1st–March 31st 2020, the average exchange rate was EUR 1 = PLN 4.3963. The amounts were translated at the exchange rates specified above by dividing amounts expressed in thousands of the złoty by the respective exchange rates.

II. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31ST 2020 PREPARED IN ACCORDANCE WITH IAS 34 INTERIM FINANCIAL REPORTING AS ENDORSED BY THE EUROPEAN UNION

Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of profit or loss and other comprehensive income

for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Profit or loss Revenue 648,224 726,661 Cost of sales (563,548) (597,911) Gross profit 84,676 128,750 Selling and distribution expenses (30,583) (29,215) Administrative expenses (45,110) (39,956) Other income 1,622 11,134 Other expenses (1,442) (11,177) Operating profit 9,163 59,536 Finance income 35,488 2,428 Finance costs (18,630) (3,674) Net finance income/(costs) 16,858 (1,246) Share of profit of equity-accounted investees 3,534 2,722 Profit before tax 29,555 61,012 Income tax (6,985) (12,402) Net profit 22,570 48,610

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of profit or loss and other comprehensive income (continued)

for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Other comprehensive income Items that will be reclassified to profit or loss Exchange differences on translating foreign operations 38 7 Total other comprehensive income 38 7 Comprehensive income for period 22,608 48,617 Net profit/(loss) attributable to: Owners of the Parent 13,850 49,506 Non-controlling interests 8,720 (896) Comprehensive income for period attributable to: Owners of the Parent 13,888 49,513 Non-controlling interests 8,720 (896) Earnings per share Basic (PLN) 0.18 0.66 Diluted (PLN) 0.18 0.66

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of financial position

as at as at Mar 31 2020 Dec 31 2019

unaudited audited Assets Non-current assets Property, plant and equipment 1,581,498 1,541,713 Right-of-use assets 72,152 74,594 Investment property 6,837 6,837 Intangible assets 77,091 77,382 Shares 523 - Equity-accounted investees 29,899 26,365 Other receivables 463,297 76,900 Deferred tax assets 33,597 33,991 Total non-current assets 2,264,894 1,837,782

Current assets Inventories 273,652 371,070 Property rights 220,551 83,121 Derivative financial instruments 56,157 157 Current tax assets 6,940 6,978 Trade and other receivables 345,125 169,886 Cash and cash equivalents 263,449 445,456 Non-current assets held for sale 19,596 19,050 Total current assets 1,185,470 1,095,718 Total assets 3,450,364 2,933,500

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of financial position (continued)

as at as at Mar 31 2020 Dec 31 2019 unaudited audited Equity and liabilities Equity Share capital 1,241,758 750,000 Share premium 4,639 - Exchange differences on translating foreign operations 50 12 Retained earnings, including: 396,985 383,741 Net profit for period 13,850 49,196

Equity attributable to owners of the Parent 1,643,432 1,133,753 Non-controlling interests 212,093 203,373 Total equity 1,855,525 1,337,126 Liabilities Borrowings 153,277 243,331 Lease liabilities 62,229 63,973 Employee benefit obligations 78,846 79,410 Trade and other payables 12,831 12,736 Provisions 111,213 111,213 Grants 20,095 20,567 Deferred tax liabilities 6,466 - Total non-current liabilities 444,957 531,230 Borrowings 482,588 360,267 Derivative financial instruments 899 - Lease liabilities 5,366 5,737 Other financial liabilities 5,530 84,625 Employee benefit obligations 14,086 14,230 Current tax liabilities 1 1 Trade and other payables 551,014 582,153 Provisions 4,203 4,256 Grants 74,393 2,235 Liabilities directly related to assets held for sale 11,802 11,640 Total current liabilities 1,149,882 1,065,144 Total liabilities 1,594,839 1,596,374 Total equity and liabilities 3,450,364 2,933,500

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of changes in equity for the three months ended Mar 31 2020

Equity attributable to Retained owners of the Non-controlling Share capital Share premium Translation reserve earnings Parent interests Total equity Balance as at Jan 1 2020 750,000 - 12 383,741 1,133,753 203,373 1,337,126 Profit or loss and other comprehensive income Net profit - - - 13,850 13,850 8,720 22,570 Other comprehensive income - - 38 - 38 - 38 Comprehensive income for period - - 38 13,850 13,888 8,720 22,608 Transactions with owners, recognised directly in equity Issue of ordinary shares 491,758 4,639 - - 496,397 - 496,397 Total contributions by and distributions to owners 491,758 4,639 - - 496,397 - 496,397 Changes in ownership interests in subsidiaries Total transactions with owners 491,758 4,639 - - 496,397 - 496,397 Other - - - (606) (606) - (606) Balance as at Mar 31 2020 (unaudited) 1,241,758 4,639 50 396,985 1,643,432 212,093 1,855,525

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of changes in equity (continued) for the three months ended Mar 31 2019

Equity attributable Retained to owners of the Non-controlling Share capital Translation reserve earnings Parent interests Total equity Balance as at Jan 1 2019 750,000 5 336,420 1,086,425 113,538 1,199,963 Profit or loss and other comprehensive income Net profit - - 49,506 49,506 (896) 48,610 Other comprehensive income - 7 - 7 - 7 Comprehensive income for period - 7 49,506 49,513 (896) 48,617 Transactions with owners, recognised directly in equity Total contributions by and distributions to owners ------Changes in ownership interests in subsidiaries Total transactions with owners ------Balance as at Mar 31 2019 (unaudited) 750,000 12 385,926 1,135,938 112,642 1,248,580

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed consolidated statement of cash flows

for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Cash flows from operating activities Profit before tax 29,555 61,012 Adjustments for: 6,752 29,827 Depreciation and amortisation 33,593 30,132 Profit from investing activities (1,335) (139) Gain on disposal of financial assets - (478)

Share of profit of equity-accounted investees (3,534) (2,722) Interest, foreign exchange gains or losses 11,006 3,094 Net change in fair value of financial assets at fair value through profit or loss (32,978) (60) 36,307 90,839

Increase in trade and other receivables (186,015) (101,918) Increase in inventories (40,011) (128,448)

Increase/(Decrease) in trade and other payables (30,075) 101,883 Increase in provisions, grants and employee benefit obligations 71,582 57,452 Reverse factoring adjustment 100,575 - Other adjustments (524) (529) Cash generated from operating activities (48,161) 19,279 Income taxes refunded/(paid) (530) (63) Net cash from operating activities (48,691) 19,216

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Interim condensed consolidated statement of cash flows (continued)

for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Cash flows from investing activities Proceeds from sale of property, plant and equipment, intangible assets and investment property 231 67 Payments for acquisition of property, plant and equipment, intangible assets and investment property (449,725) (26,908) Proceeds from sale of financial assets - 564 Outflows on lease of investment property (269) (1,406) Outflows on purchase of derivative instruments* (22,128) - Other proceeds/(outflows) 2 (6) Net cash from investing activities (471,889) (27,689) Cash flows from financing activities Net proceeds from issue of share capital** 500,861 - Proceeds from borrowings 172,358 34,041 Repayment of borrowings (144,324) (16,311) Interest paid (6,178) (3,509) Payment of finance lease liabilities (953) (951) Reverse factoring finance costs (184,523) (20,683) Other proceeds 795 740 Net cash from financing activities 338,036 (6,673) Total net cash flows (182,544) (15,146)

Cash and cash equivalents at beginning of period 445,295 160,209 Effect of exchange rate movements on cash held 698 (457) Cash and cash equivalents at end of period, including: 263,449 144,606 restricted cash 56,759 -

* Option premium paid by the subsidiary Grupa Azoty Polyolefins S.A. for transactions hedging future cash flows related to the Polimery Police project. ** Proceeds from issue of shares by Grupa Azoty Zakłady Chemiczne Police S.A. (the Parent).

Notes to the interim condensed consolidated financial statements are an integral part thereof.

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Notes to the interim condensed consolidated financial statements

1. Information about the Group 1.1. Organisation of the Grupa Azoty Zakłady Chemiczne Police Group The Group's parent, Grupa Azoty Zakłady Chemiczne Police Spółka Akcyjna, with its registered office in Police (the “Parent” or “Company”), was established on December 14th 1995 on the basis of Notarial Deed A No. 20142. The Parent operates as a joint-stock company in Poland. The Parent is registered with the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, under No. KRS 0000015501. The Parent has been assigned REGON (industry identification) No. 810822270 and NIP (tax identification) No. 851-02-05-573, as well as BDO (Database on Products and Packaging, and on Waste Management) No. 000016847. The duration of the Parent and the entities comprising the Grupa Azoty Zakłady Chemiczne Police Group (the "Group") is unlimited. The Parent’s business includes in particular:

• manufacture and sale of chemical fertilizers, • manufacture and sale of titanium white and other chemicals, • generation, transmission and distribution of electricity. The Grupa Azoty Zakłady Chemiczne Police Group is part of the Grupa Azoty Group, whose parent is Grupa Azoty S.A.

1.2. Composition of the Group As at March 31st 2020, the Grupa Azoty Zakłady Chemiczne Police Group comprised Grupa Azoty Zakłady Chemiczne Police S.A. (the “Parent”, the “Company”) and: • six subsidiaries (in which Grupa Azoty Zakłady Chemiczne Police S.A. held equity interests above 50%), including one company in liquidation, • two associates (in which the Parent held equity interests of less than 50% but more than 20%), including one company in liquidation bankruptcy, • one related entity in which the Parent held an equity interest below 20%).

Structure of the Grupa Azoty Zakłady Chemiczne Police Group as at March 31st 2020

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Changes in the companies’ structures On January 9th 2020, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, deleted INFRAPARK Police S.A. w likwidacji (in liquidation) from the Business Register of the National Court Register. On January 29th 2020, the District Court for Lublin-Wschód in Lublin, with its seat in Świdnik, 6th Commercial Division of the National Court Register, registered the incorporation of Koncept Sp. z o.o. by PROZAP Sp. z o.o. of Puławy. Following the merger, Koncept Sp. z o.o. was deleted from the Business Register and Grupa Azoty Zakłady Chemiczne Police S.A. acquired 131 shares in PROZAP Sp. z o.o. in exchange for 1,023 shares in Koncept Sp. z o.o.

Organisational and equity ties As at March 31st 2020, the Company’s shares in total voting rights at the subsidiaries and associates were equal to its respective equity interests in these companies (with the exception of PROZAP Sp. z o.o.).

1.3. Composition of the Parent’s Management and Supervisory Boards

Composition of the Parent’s Management Board as at January 1st 2020: • Wojciech Piotr Wardacki – President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 223/VII/18 of May 30th 2018; on the Management Board from April 7th 2016; • Tomasz Grzegorz Panas – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 225/VII/18 of May 30th 2018; on the Management Board from April 7th 2016; • Włodzimierz Zasadzki, Ph.D. – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 224/VII/18 of May 30th 2018; on the Management Board from July 15th 2016; On April 27th 2020, Mr Zasadzki was removed from the Management Board by way of Supervisory Board Resolution No. 76/VIII/20 , • Anna Tarocińska – Member of the Management Board of the eighth joint term of office, elected by Parent employees and appointed by Supervisory Board Resolution No. 226/VII/18 of May 30th 2018; on the Management Board from March 3rd 2017.

As at the date of authorisation of these interim condensed consolidated financial statements for issue, the composition of the Parent's Management Board was as follows: • Wojciech Piotr Wardacki, PhD – President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 223/VII/18 of May 30th 2018; on the Management Board from April 7th 2016; • Tomasz Grzegorz Panas – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 225/VII/18 of May 30th 2018; on the Management Board from April 7th 2016; • Anna Tarocińska – Member of the Management Board of the eighth joint term of office, elected by Parent employees and appointed by Supervisory Board Resolution No. 226/VII/18 of May 30th 2018; on the Management Board from March 3rd 2017.

As at the date of authorisation of these interim condensed consolidated financial statements for issue, the composition of the Parent's Supervisory Board was as follows: • Mariusz Kądziołka − Chairman of the Supervisory Board of the eighth joint term of office, appointed by General Meeting Resolution No. 18 of June 25th 2019; • Mirosław Kozłowski – Deputy Chairman of the Supervisory Board of the eighth joint term of office – Representative of the Ministry of State Treasury, appointed on June 25th 2019 (appointed as Deputy Chairman on July 2nd 2019); • Bożena Licht – Secretary of the Supervisory Board of the eighth joint term of office, appointed to the Supervisory Board by General Meeting Resolution No. 19 of June 25th 2019 (appointed as Secretary on July 2nd 2019); • Agnieszka Ewa Dąbrowska − Member of the Supervisory Board of the eighth joint term of office, appointed by General Meeting Resolution No. 20 of June 25th 2019;

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• Andrzej Rogowski − Member of the Supervisory Board of the eighth joint term of office, elected by the Parent’s employees and appointed by General Meeting Resolution No. 22 of June 25th 2019; • Iwona Wojnowska − Member of the Supervisory Board of the eighth joint term of office, elected by the Parent’s employees and appointed by General Meeting Resolution No. 21 of June 25th 2019.

As at the date of authorisation of these interim condensed consolidated financial statements for issue, the composition of the Audit Committee was as follows: • Mariusz Kądziołka – Chairman of the Audit Committee, appointed by Supervisory Board Resolution No. 3/VIII/19 of July 2nd 2019; • Agnieszka Ewa Dąbrowska – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 4/VIII/19 of July 2nd 2019; • Mirosław Kozłowski – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 5/VIII/19 of July 2nd 2019; • Andrzej Rogowski – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 6/VIII/19 of July 2nd 2019.

2. Key events in the three months ended March 31st 2020 and until the authorisation date 2.1 Issue of new Company shares On January 10th 2020, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, registered an increase in the Parent's share capital. Following the capital increase, the Parent's share capital amounts to PLN 1,241,758 thousand. 49,175,768 Series C ordinary bearer shares were acquired in the secondary offering of the Company shares at an issue price of PLN 10.20 per share. The Parent raised equity of PLN 496,397 thousand, including: • share capital of PLN 491,758 thousand, • share premium of PLN 4,639 thousand (share premium of PLN 9,835 thousand less issue costs of PLN 5,196 thousand). The Company received the issue proceeds on January 30th 2020. Grupa Azoty S.A. purchased most of the new shares. The number of Series C shares purchased by Grupa Azoty S.A. is 28,551,500, representing 62.86% of the Company's share capital. A detailed shareholding structure of the Company is presented in Note 2.

2.2 Share capital increase at subsidiary Grupa Azoty Polyolefins S.A. On February 18th 2020, the General Meeting of Grupa Azoty Polyolefins S.A. passed a resolution to increase the company’s share capital by PLN 131,944,310 thousand, to PLN 599,283,310 thousand, through the issue of 13,194,431 new Series F registered shares with a par value of PLN 10 per share and at the issue price of PLN 47.90 per share. The new shares will be subscribed for in a private placement by the existing shareholders: • Grupa Azoty Zakłady Chemiczne Police S.A. will subscribe for 6,993,048 Series F registered shares, • Grupa Azoty S.A. will subscribe for 6,201,383 Series F registered shares, as announced by the Company in Current Report No. 20/2020 of February 18th 2020. New Series F shares will be paid for by July 31st 2020.

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3. Policies applied in the preparation of the interim condensed consolidated financial statements

3.1. Statement of compliance and general policies These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union, and in accordance with the Minister of Finance's Regulation on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated April 20th 2018 (Dz.U. of 2018, item 757). These interim condensed consolidated financial statements of the Group present the Group’s statement of financial position as at March 31st 2020 and December 31st 2019 and the statement of profit or loss and other comprehensive income for the three months ended March 31st 2020 and March 31st 2019. The statement of cash flows and the statement of changes in equity are presented for the three months ended March 31st 2020 and March 31st 2019. These interim condensed consolidated financial statements of the Grupa Azoty Police Group for the three months ended March 31st 2020 were authorised for issue by the Parent’s Management Board on May 21st 2020. These interim condensed consolidated financial statements do not include all the information and disclosures required to be given or made in full-year financial statements and should be read in conjunction with the Group’s consolidated financial statements for the year ended December 31st 2019, authorised for issue on April 7th 2020. The interim profit/loss may not fully reflect the realisable profit/loss for the full financial year. All figures in these interim condensed consolidated financial statements are presented in thousands of złoty. These interim condensed consolidated financial statements were prepared under the assumption that the Group companies would continue as going concerns in the foreseeable future, with the exception of the subsidiary in liquidation (Grupa Azoty Africa S.A. w likwidacji). As at the date of authorisation of these interim condensed consolidated financial statements, no circumstances were identified which would indicate that the Group companies may be unable to continue as going concerns, with the exception of the aforementioned subsidiaries.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 19 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

The following standards and interpretations have been issued by the International Accounting Standards Board, but are not yet effective: • IFRS 14 Regulatory Deferral Accounts (issued on January 30th 2014) − pursuant to the European Commission’s decision, the process leading to the approval of a preliminary version of the standard will not be initiated until the issue of its final version (not endorsed by the EU by the date of authorisation of these financial statements for issue) – effective for annual periods beginning on or after January 1st 2016; • Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (issued on September 11th 2014) − work leading to endorsement of the amendments was deferred by the EU for an indefinite period − effective date was deferred by the IASB for an indefinite period; • IFRS 17 Insurance Contracts (issued on May 18th 2017) – effective for annual periods beginning on or after January 1st 2021, • Amendments to IAS 1 Presentation of Financial Statements: Current and non-current liabilities (issued on January 23rd 2020) – expected to be effective for periods beginning on or after January 1st 2022. The effective dates are set in the text of the standards issued by the International Accounting Standards Board. The effective dates of the standards for application in the European Union may differ from those specified in the text of the standards and are announced on approval of a standard by the European Union. c) Judgements and estimates The preparation of interim condensed consolidated financial statements requires the Management Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and other factors reasonable in the circumstances and are the basis for determining the carrying amounts of assets and liabilities that do not result directly from other sources. Actual results may differ from these estimates. Estimates and the underlying assumptions are reviewed on an ongoing basis. Changes to accounting estimates are recognised in the period in which the estimates are revised or in current and any future periods affected. The key judgements and estimates made by the Management Board in preparing these interim condensed consolidated financial statements were the same as those made in preparing the consolidated financial statements for the financial year ended December 31st 2019.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 20 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

4. Selected supplementary and explanatory notes 4.1. Explanatory notes Business segment reporting Operating segments The Group identifies operating segments based on internal reports. The operating results of each segment are reviewed on a regular basis by the Parent’s chief operating decision maker, who decides about the allocation of resources to different segments and analyses their results. Separate financial information prepared for each segment is available.

The Group identifies the following operating segments: • Fertilizers Segment (the Fertilizers Business Unit and the Nitro Business Unit), • Pigments Segment (the Pigments Business Unit), • Polymers Segment (the subsidiary Grupa Azoty Polyolefins S.A. implementing the Polimery Police project), and Other Activities, which include power generation, port services, wastewater disposal, waste storage, laboratory services, property rental, and other activities which cannot be allocated to any of the segments specified above. The Fertilizers Business Unit and the Nitro Business Unit are included in the Fertilizers Segment. The subsidiaries (except for Grupa Azoty Polyolefins S.A., allocated to the Polymers Segment) are presented under other activities. Under the operating segments' data, the Group presents administrative, selling and distribution expenses and other income and expenses allocated to each segment. Performance of each of the segments is discussed in the note: ‘Operating segments’. Each segment’s performance is measured based on its revenue, EBIT and EBITDA. The Group’s financing (including finance costs and finance income) and income tax are monitored at the level of individual Group companies and are not allocated to the segments. Intersegment sales and transfers at the Parent are accounted for based on production costs. Geographical areas The Group identifies the following geographical areas of its operations (countries or regions): • Poland • Germany • Other EU countries • South American countries • Other countries. If information is presented by geographical areas, revenue is determined based on the country of destination, i.e. the country where the product will be sold (irrespective of the location of the wholesaler, whose operations frequently have a global reach). Assets allocated to a geographical area are identified on the basis of their geographical location.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 21 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Operating segments Revenue, expenses and financial result of operating segments for the three months ended March 31st 2020 (unaudited)

Fertilizers Pigments Polymers Other Total External revenue 540,926 93,728 100 13,470 648,224 Intersegment revenue 62,519 (539) 40 248,092 310,112 Total revenue 603,445 93,189 140 261,562 958,336 Operating expenses, including (-): (600,147) (81,709) (4,539) (262,958) (949,353) Selling and distribution expenses (-) (28,150) (2,433) - - (30,583) Administrative expenses (-) (30,867) (5,105) (4,457) (4,681) (45,110) Other income 335 92 201 994 1,622 Other expenses (-) (421) (7) (11) (1,003) (1,442) Segment’s EBIT* 3,212 11,565 (4,209) (1,405) 9,163 Finance income x x x x 35,488 Finance costs (-) x x x x (18,630)

Share of profit of equity-accounted investees x x x x 3,534 Profit/(loss) before tax x x x x 29,555 Income tax x x x x (6,985) Net profit/(loss) x x x x 22,570 EBIT* 3,212 11,565 (4,209) (1,405) 9,163 Depreciation and amortisation 25,600 6,370 111 1,512 33,593 EBITDA** 28,812 17,935 (4,098) 107 42,756

* EBIT is calculated as operating profit/(loss) as disclosed in the statement of profit or loss. ** EBITDA is calculated as operating profit (loss) before depreciation and amortisation (this metric is not defined in the IFRSs and the method of its calculation may vary from company to company).

Grupa Azoty Zakłady Chemiczne Police S.A. Page 22 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Revenue, expenses and financial result of operating segments for the three months ended March 31st 2019 (unaudited)

Fertilizers Pigments Polymers Other Total External revenue 613,189 101,458 9 12,005 726,661 Intersegment revenue 75,350 (580) - 224,974 299,744 Total revenue 688,539 100,878 9 236,979 1,026,405 Operating expenses, including (-): (633,661) (89,198) (2,682) (241,285) (966,826) Selling and distribution expenses (-) (26,736) (2,479) - - (29,215) Administrative expenses (-) (27,002) (5,128) (2,624) (5,202) (39,956) Other income 166 129 - 10,839 11,134 Other expenses (-) (112) (77) - (10,988) (11,177) Segment’s EBIT* 54,932 11,732 (2,673) (4,455) 59,536 Finance income x x x x 2,428 Finance costs (-) x x x x (3,674) Share of profit of equity-accounted investees x x x x 2,722 Profit before tax x x x x 61,012 Income tax x x x x (12,402) Net profit x x x x 48,610 EBIT* 54,932 11,732 (2,673) (4,455) 59,536 Amortisation 23,228 5,474 106 1,324 30,132 EBITDA** 78,160 17,206 (2,567) (3,131) 89,668

Grupa Azoty Zakłady Chemiczne Police S.A. Page 23 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Operating segments’ assets and liabilities as at March 31st 2020

Fertilizers Pigments Polymers Other Total Segment’s assets 1,697,869 402,407 892,849 108,454 3,101,579 Unallocated assets x x x x 318,363 Investments in subordinated entities - - - 30,422 30,422 Total assets 1,697,869 402,407 892,849 138,876 3,450,364 Segment’s liabilities 606,934 115,595 450,054 116,785 1,289,368 Unallocated liabilities x x x x 305,471 Total liabilities 606,934 115,595 450,054 116,785 1,594,839

Assets and liabilities of the operating segments as at December 31st 2019

Fertilizers Pigments Polymers Other Total Segment’s assets 1,679,770 372,047 279,527 128,766 2,460,110 Unallocated assets x x x x 90,127 Investments in subordinated entities - - - 16,588 16,588 Total assets 1,679,770 372,047 279,527 145,354 2,566,825 Segment’s liabilities 685,835 104,087 11,957 104,941 906,820 Unallocated liabilities x x x x 411,425 Total liabilities 685,835 104,087 11,957 104,941 1,318,245

Grupa Azoty Zakłady Chemiczne Police S.A. Page 24 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Other segmental information for the three months ended March 31st 2020

Fertilizers Pigments Polymers Other Total Expenditure on property, plant and equipment 23,445 6,642 41,184 580 71,851 Expenditure on intangible assets - - 117 257 374 Total expenditure 23,445 6,642 41,301 837 72,225 Segment’s depreciation and amortisation 25,600 6,370 111 1,512 33,593 Total depreciation and amortisation 25,600 6,370 111 1,512 33,593

Other segmental information for the three months ended March 31st 2019

Fertilizers Pigments Polymers Other Total Expenditure on property, plant and equipment 6,924 1,860 4,045 1,053 13,882 Expenditure on intangible assets 666 - - 230 896 Total expenditure 7,590 1,860 4,045 1,283 14,778 Segment’s depreciation and amortisation 23,228 5,474 106 1,324 30,132 Total depreciation and amortisation 23,228 5,474 106 1,324 30,132

Grupa Azoty Zakłady Chemiczne Police S.A. Page 25 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Geographical areas Revenue for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Poland 380,763 464,614 Germany 94,489 72,039 Other EU countries 146,608 160,151 South America - 570 Other countries 26,364 29,287 Total 648,224 726,661

No single customer accounted for more than 10% of the Group’s revenue in Q1 2020 or Q1 2019.

Note 1. Property, plant and equipment, right-of-use assets and intangible assets as at as at Mar 31 2020 Dec 31 2019

Property, plant and equipment

Land 1,918 1,918 Buildings and structures 477,915 483,746 Plant and equipment 792,124 812,283 Vehicles 9,342 9,908 Other property, plant and equipment 14,066 13,503 Property, plant and equipment under construction 286,133 220,355 1,581,498 1,541,713 Right -of-use assets 72,152 74,594 Intangible assets 77,091 77,382

Impairment test As at March 31st 2020, at least one of the triggers referred to in paragraph 12d of IAS 36 Impairment of Assets occurred – the carrying amount of the Parent’s net assets was higher than its market capitalisation. It was also determined that as at March 31st 2020 there were no material changes in the Parent’s position relative to the date of the most recent asset impairment test, performed as at December 31st 2019. The subsidiary Grupa Azoty Polyolefins S.A. monitors the projected profitability of its investment project using a financial model developed in collaboration with renowned consultancies. The key assumptions for the financial model, including technological assumptions and market forecasts, are based on independent studies, such as technical documentation provided by reputable engineering companies (including technology licensors) and reports prepared by market advisors. The subsidiary Grupa Azoty Polyolefins S.A. reviews the need to update the key model assumptions and parameters on an ongoing basis. The updates made in Q1 2020 related primarily to selected aspects of financial assumptions, including those resulting from current arrangements with the syndicate of financing institutions. Given that the raising of financing for the Polimery Police project was at an advanced stage and in view of the updated positive results yielded by the financial model, which are treated by the subsidiary as an estimate of the recoverable amount as part of asset impairment testing, the conclusion that the assets of the Polimery Police project are not impaired was maintained.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 26 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Note 2. Shareholding structure Number of Ownership Number of % of total Shareholder shares interest (%) voting rights voting rights Mar 31 2020 Grupa Azoty S.A. 78,051,500 62.86 78,051,500 62.86 OFE PZU Złota Jesień 16,092,634 12.96 16,092,634 12.96 Agencja Rozwoju Przemysłu S.A. 16,299,649 13.13 16,299,649 13.13 State Treasury 9,273,078 7.47 9,273,078 7.47 Other shareholders 4,458,907 3.58 4,458,907 3.58 124,175,768 100.00 124,175,768 100.00 Dec 31 2019 Grupa Azoty S.A. 49,500,000 66.00% 49,500,000 66.00% OFE PZU Złota Jesień 12,187,694 16.25% 12,187,694 16.25% Agencja Rozwoju Przemysłu S.A. 6,607,966 8.81% 6,607,966 8.81% State Treasury 3,759,356 5.01% 3,759,356 5.01% Other shareholders 2,944,984 3.93% 2,944,984 3.93% 75,000,000 100.00% 75,000,000 100.00%

Note 3. Contingent liabilities, contingent assets, sureties and guarantees As at March 31st 2020, the Group did not identify any disclosable contingent liabilities or contingent assets. As at March 31st 2020, the Parent granted sureties with respect to the following credit facility agreements and contracts:

As at Mar 31 As at Dec 31 Type/ Details Date 2020 2019 Issuer (PLN ‘000) (PLN ‘000) Surety for syndicated credit Revolving credit facility Jun 29 2018 1,200,000 1,200,000 facility agreement Surety for PKO BP credit facility Overdraft facility Jun 29 2018 124,000 124,000 (overdraft) agreement Surety for PKO BP credit facility Multi-purpose credit facility Jun 29 2018 96,000 96,000 (MPCF) agreement

Guarantee for EIB credit facility Credit facility agreement May 28 2015 220,000 220,000

Guarantee for EBRD credit Credit facility agreement May 28 2015 60,000 60,000 facility

Guarantee for EIB credit facility Credit facility agreement Jan 25 2018 264 033* 246 993*

Guarantee for EBRD credit Credit facility agreement Jul 26 2018 200,000 200,000 facility

*Surety amount: EUR 58,000 thousand. 2,164,033 2,146,993

As at March 31st 2020, none of the subsidiaries had any sureties issued to other entities.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 27 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Guarantees provided to the Parent by Bank PKO BP S.A. under credit limits: As at Mar 31 As at Dec 31 Beneficiary Details Date 2020 2019 (PLN ‘000) (PLN ‘000)

Guarantor’s obligation as general security in STATE TREASURY Mar 20 2018 1,000 1,000 customs transactions (...)

Payment guarantee for electricity Nov 15 2017 PSE S.A. 1,300 1,300 transmission contract (annex) STATE TREASURY (Chief Inspectorate of Performance bond for iron sulfate (waste) Apr 19 2018 1,702 1,702 Environmental supply contract Protection)

PGE S.A. Performance bond in open tender contract Feb 21 2019 94 94

Guarantor’s obligation as general security in May 13 STATE TREASURY 250 250 customs transactions (...) temporary storage 2019 STATE TREASURY (Chief Inspectorate of Performance bond for iron sulfate (waste) Jul 29 2019 1,182 1,182 Environmental supply contract Protection) STATE TREASURY (Chief Inspectorate of Performance bond for iron sulfate (waste) Jul 29 2019 1,697 1,697 Environmental supply contract Protection) STATE TREASURY (Chief Inspectorate of Performance bond for iron sulfate (waste) Nov 25 2019 3,444 3,444 Environmental supply contract Protection)

PGE S.A. Performance bond in open tender contract Mar 25 2020 31 -

PGE S.A. Performance bond in open tender contract Mar 25 2020 42 -

10,742 10,669

As at March 31st 2020, no guarantees had been issued by the subsidiaries to other parties. As at the reporting date, the total amount of guarantees provided to the Parent was PLN 13,920 thousand. As at March 31st 2020, Grupa Azoty Police Serwis Sp. z o.o. had received guarantees for a total amount of PLN 7,407 thousand, and Grupa Azoty Polyolefins S.A. had received an insurance guarantee from the general contractor related to an advance payment of EUR 89,281 thousand (PLN 406,434 thousand) for the Polimery Police project. Pursuant to the Act on the Compensation Scheme for Energy-Intensive Sectors and Subsectors of July 19th 2019 (Dz.U. of 2019, item 1532), the Parent filed an application for cash compensation of PLN 7,668 thousand on account of higher costs of electricity for 2019. Pending a positive decision of the President of the Energy Regulatory Office to grant the compensation, it is presented as contingent assets.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 28 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

Note 4. Accounting estimates and assumptions Changes in impairment loss on property, plant and equipment for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Balance at beginning of period 212,468 213,400 Used (-) (53) (1,014) Balance at end of period 212,415 212,386 Changes in inventory write-downs for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Balance at beginning of period 8,755 8,126 Recognised 13 78 Reversed (-) (13) (17) Used (-) (44) (62) Balance at end of period 8,711 8,125

Changes in impairment loss on receivables for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Balance at beginning of period 32,032 18,780 Recognised 285 503 Reversed (-) (109) (418) Used (-) (1) (1) Balance at end of period 32,207 18,864

4.2. Related parties Material related-party transactions: a) Material related-party transactions executed by the Group on non-arm’s length terms In the three months ended March 31st 2020, the Group did not execute any related-party transactions on non-arm’s length terms. b) Transactions with members of the Management Board and the Supervisory Board or with their spouses, siblings, ascendants, descendants, or other persons closely related to them In the three months ended March 31st 2020, the Group did not grant any advances, loans, guarantees or sureties to management or supervisory personnel or persons closely related to them, nor did it enter into any agreements with them to provide any services to the Group. c) Material related-party transactions executed by the Group Transactions with the following entities are considered related-party transactions of the Grupa Azoty Police Group: companies of the Grupa Azoty Group, companies of the Grupa Azoty ZAK Group, companies of the Grupa Azoty PUŁAWY Group, companies of the Grupa Azoty PKCh Group, and with the associated and non-consolidated companies of the Grupa Azoty Police Group.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 29 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

The most important transactions executed by the Grupa Azoty Police Group with its related parties in the period January–March 2020 were the following: • sale of liquid ammonia and iron sulfate to Grupa Azoty S.A. for PLN 16,733 thousand, • sale of urea and fertilizers to Agrochem Puławy Sp. z o.o. for PLN 7,540 thousand, • sale of services to Grupa Azoty Koltar Sp. z o.o. for PLN 316 thousand, • sale of fertilizers to Compo Expert Gmbh for PLN 1,005 thousand, • sale of fertilizers to Compo Expert Italia for PLN 193 thousand, • purchase of marketing services from Grupa Azoty S.A. for PLN 2,205 thousand, • purchase of the SBO wetter from Grupa Azoty JRCH Sp. z o.o. for PLN 788 thousand, • purchase of ammonium sulfate and ammonia from Grupa Azoty Zakłady Azotowe Puławy S.A. for PLN 4,898 thousand, • purchase of liquid sulfur from Grupa Azoty Kopalnie i Zakłady Chemiczne Siarki Siarkopol S.A. for PLN 5,587 thousand, • purchase from Grupa Azoty Koltar Sp. z o.o. of railway transport handling services for PLN 2,234 thousand and investment services for PLN 4,586 thousand.

Moreover: a) Grupa Azoty S.A. granted the following loans to the Parent: • on September 14th 2015, a PLN 60,000 thousand loan to finance the share capital of the subsidiary Grupa Azoty Polyolefins S.A., under the intragroup financing agreement of April 23rd 2015. As at March 31st 2020, the amount outstanding under the agreement was PLN 57,000 thousand. b) The Parent granted the following loans to Supra Agrochemia Sp. z o.o.: • On March 14th 2014, a PLN 3,600 thousand loan to finance the subsidiary’s capital expenditure. As at March 31st 2020, the amount outstanding under the loan was PLN 3,600 thousand. The loan is to be repaid by December 31st 2020. • On December 31st 2014, a PLN 10,000 thousand loan to finance the subsidiary’s capital expenditure. As at March 31st 2020, the amount outstanding under the loan was PLN 10,000 thousand. The loan is to be repaid by December 31st 2020. • On June 28th 2018, a PLN 1,000 thousand loan to secure the funding required to complete a share disposal process. As at December 31st 2020, the amount outstanding under the loan was PLN 1,000 thousand. The loan is to be repaid by December 31st 2020. • On March 30th 2020, a PLN 468 thousand loan to pay charges for perpetual usufruct rights to land for 2020. As at March 31st 2020, the amount outstanding under the loan was PLN 468 thousand. The loan is to be repaid by December 31st 2020.

4.3. Events after the reporting period that could affect financial results in the future There were no reportable events subsequent to the end of the reporting period that could potentially affect the Group's future financial performance.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 30 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed consolidated financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise) Supplementary information

4.4. Dividends On May 6th 2020, the Annual General Meeting of KEMIPOL Sp. z o.o. passed a resolution to distribute dividend from the profit generated in 2019. Grupa Azoty Zakłady Chemiczne Police S.A. is to receive PLN 12,493 thousand. The dividend will be paid by August 31st 2020.

4.5. Seasonality of operations Seasonality of the Parent's operations is seen mainly on the markets for mineral fertilizers and pigments. The Group’s subsidiaries are not affected by seasonality. Mineral fertilizers market The end of the first quarter and beginning of the second quarter of each year (March and April) as well as the third quarter of each year (August and September) are periods of increased activity in the agricultural sector, when demand for mineral fertilizers is high. On the Group's key markets (Poland and Europe), the periods of fertilizer purchases are the same. The seasonality of the fertilizers market is mitigated by various distribution and commercial efforts (including exports outside Europe), which ensure stable and continuous sale of fertilizers. Titanium white market In the Parent’s key markets (Poland and Europe), spring and summer (the second and third quarters) are the time of increased demand for titanium white, driven by stronger demand for paints and varnishes in the construction industry. Sales of titanium white usually decline during the winter season – in the fourth and first quarters of each year. Titanium white remains a seasonal product, but given its widespread application, demand for this product chiefly depends on general market conditions. Chemicals For other chemicals manufactured by the Parent (urea, AdBlue, Fespol), seasonality virtually does not occur or may occur to a limited extent and its effect on the Parent’s performance is insignificant.

Grupa Azoty Zakłady Chemiczne Police S.A. Page 31 of 73

III. INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31ST 2020 PREPARED IN ACCORDANCE WITH IAS 34 INTERIM FINANCIAL REPORTING AS ENDORSED BY THE EUROPEAN UNION

Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of profit or loss and other comprehensive income for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Profit or loss Revenue 644,694 724,844 Cost of sales (562,654) (595,543) Gross profit 82,040 129,301 Selling and distribution expenses (30,583) (29,215) Administrative expenses (35,972) (32,130) Other income 1,631 11,252 Other expenses (2,044) (11,866) Operating profit 15,072 67,342 Finance income 2,592 14,348 Finance costs (16,181) (3,581) Net finance income/(costs) (13,589) 10,767 Profit before tax 1,483 78,109 Income tax (615) (12,643) Net profit 868 65,466 Comprehensive income for period 868 65,466 Earnings per share 0.01 0.87 0.01 0.87

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 33 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of financial position as at as at Mar 31 2020 Dec 31 2019

unaudited audited Assets Non-current assets Property, plant and equipment 1,391,157 1,391,731 Right-of-use assets 53,903 54,942 Investment property 27,665 27,665 Intangible assets 16,955 17,241 Shares 306,121 306,116 Other receivables 1,237 1,368 Deferred tax assets 20,908 21,395 Total non-current assets 1,817,946 1,820,458

Current assets Inventories 270,874 369,879 Property rights 220,551 83,121 Derivative financial instruments - 157 Other financial assets 15,490 14,871 Current tax assets 6,940 6,978 Trade and other receivables 237,705 152,835 Cash and cash equivalents 238,842 39,399 Total current assets 990,402 667,240 Total assets 2,808,348 2,487,698

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 34 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of financial position (continued) as at as at Mar 31 2020 Dec 31 2019 unaudited audited Equity and liabilities Equity Share capital 1,241,758 750,000 Share premium 4,639 - Retained earnings, including: 459,022 458,154 Net profit for period 868 60,487 Total equity 1,705,419 1,208,154

Liabilities Borrowings 153,277 243,331 Lease liabilities 49,063 49,988 Employee benefit obligations 66,844 66,844 Trade and other payables 2,958 2,863 Provisions 111,103 111,103 Grants 20,095 20,567 Total non-current liabilities 403,340 494,696 Borrowings 98,793 108,745 Derivative financial instruments 899 - Lease liabilities 3,858 3,832 Other financial liabilities 5,530 84,625 Employee benefit obligations 11,380 11,380 Trade and other payables 500,733 570,028 Provisions 4,003 4,003 Grants 74,393 2,235 Total current liabilities 699,589 784,848 Total liabilities 1,102,929 1,279,544 Total equity and liabilities 2,808,348 2,487,698

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 35 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of changes in equity for the three months ended March 31st 2020

Share Retained Share capital premium earnings Total equity Balance as at Jan 1 2020 750,000 - 458,154 1,208,154 Profit or loss and other comprehensive income Net profit - - 868 868 Comprehensive income for period - - 868 868 Transactions with owners, recognised directly in equity Issue of ordinary shares 491,758 4,639 496,397 Total transactions with owners 491,758 4,639 - 496,397 Balance as at Mar 31 2020 (unaudited) 1,241,758 4,639 459,022 1,705,419

for the three months ended Mar 31 2019

Retained Share capital earnings Total equity Balance as at Jan 1 2019 750,000 399,971 1,149,971 Profit or loss and other comprehensive income Net profit - 65,466 65,466 Comprehensive income for period - 65,466 65,466 Transactions with owners, recognised directly in equity Total transactions with owners - - - Balance as at Mar 31 2019 (unaudited) 750,000 465,437 1,215,437

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 36 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of cash flows for the period for the period Jan 1− Jan 1− Mar 31 2020 Mar 31 2019 unaudited unaudited Cash flows from operating activities Profit before tax 1,483 78,109 Adjustments for: 44,963 19,567 Depreciation and amortisation 33,314 29,927 Profit from investing activities (474) (308) Gain on disposal of financial assets - (478) Interest, foreign exchange gains or losses 11,072 2,800 Dividends accrued - (12,314) (Gain)/loss on change in fair value of financial assets at fair value through profit or loss 1,051 (60) 46,446 97,676

Increase in trade and other receivables (87,955) (44,017) Increase in inventories (38,425) (126,592)

Increase/(Decrease) in trade and other payables (71,104) 29,944 Increase in provisions, grants and employee benefit obligations 71,686 60,196 Reverse factoring adjustment 100,575 -

Cash generated from operating activities 21,223 17,207 Income tax refunded (528) - Net cash from operating activities 20,695 17,207

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 37 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed separate financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Interim condensed separate statement of cash flows (continued)

Outflows on lease of investment property 449 (694) Non-bank borrowings (468) (400) Other payments (37) (9) Net cash from investing activities (28,633) (25,014) Cash flows from financing activities Net proceeds from issue of share capital 500,861 - Proceeds from borrowings 40,085 34,041 Repayment of borrowings (144,324) (16,311) Interest paid (5,685) (3,294) Payment of finance lease liabilities (463) (590) Reverse factoring finance costs (184,523) (20,683) Other proceeds 795 740 Net cash from financing activities 206,746 (6,097) Total net cash flows 198,808 (13,904)

Cash and cash equivalents at beginning of period 39,399 32,913 Effect of exchange rate movements on cash held 635 (462) Cash and cash equivalents at end of period, including: 238,842 18,547 restricted cash 56,759 -

Notes to the interim condensed consolidated financial statements form an integral part of the statements.

Page 38 of 73 Grupa Azoty Zakłady Chemiczne Police S.A. Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

Notes to the interim condensed separate financial statements 1. Overview of the Company

1.1. Organisation of the Company Grupa Azoty Zakłady Chemiczne Police Spółka Akcyjna of Police ("the Company") was established on December 14th 1995 on the basis of Notarial Deed A No. 20142. The Company operates as a joint- stock company in Poland. It is registered with the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, under No. KRS 0000015501. The Company has been assigned REGON (industry identification) No. 810822270 and NIP (tax identification) No. 851-02-05-573, as well as BDO (Database on Products and Packaging, and on Waste Management) No. 000016847. The Company is established for an indefinite period. The Company's principal business includes in particular: • manufacture and sale of chemical fertilizers, • manufacture and sale of titanium white and other chemicals, • generation, transmission and distribution of electricity.

2. Material events in the three months ended March 31st 2020 and until the authorisation date For information on material events in the three months ended March 31st 2020, see Section 2 in Part II of the interim condensed consolidated financial statements.

3. Policies applied in the preparation of the interim condensed separate financial statements

3.1. Statement of compliance and general policies These interim condensed separate financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union, and in accordance with the Minister of Finance's Regulation on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated April 20th 2018 (Dz.U. of 2018, item 757). These interim condensed separate financial statements of the Company present the Company’s statement of financial position as at March 31st 2020 and December 31st 2019 and the statement of profit or loss and other comprehensive income for the three months ended March 31st 2020 and March 31st 2019. The statement of cash flows and the statement of changes in equity are presented for the three months ended March 31st 2020 and March 31st 2019. These interim condensed separate financial statements of Grupa Azoty Zakłady Chemiczne Police S.A. for the three months ended March 31st 2020 were authorised for issue by the Company’s Management Board on May 20th 2020. The Company has also prepared interim condensed consolidated financial statements for the three months ended March 31st 2020, which were authorised for issue by the Management Board on May 20th 2020. These interim condensed separate financial statements do not include all the information and disclosures required to be given or made in full-year financial statements and should be read in conjunction with the Company’s separate financial statements for the year ended December 31st 2019, authorised for issue on April 7th 2020. The interim profit/loss may not fully reflect the realisable profit/loss for the full financial year. All figures in these interim condensed separate financial statements are presented in thousands of złoty.

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Grupa Azoty Zakłady Chemiczne Police S.A. Interim condensed financial statements for the three months ended March 31st 2020 (all amounts in PLN ‘000 unless indicated otherwise)

These interim condensed separate financial statements were prepared on the assumption that the Company would continue to operate as a going concern in the foreseeable future. As at the date of authorisation of these financial statements, no circumstances were identified which would indicate that the Company may be unable to continue as a going concern.

3.2. Accounting policies and computation methods a) Applied accounting policies, changes in International Financial Reporting Standards The accounting policies applied to prepare the interim condensed separate financial statements are consistent with the policies applied to draw up the Company’s full-year separate financial statements for the year ended December 31st 2019, except for the application of new or amended standards and interpretations effective for annual periods beginning on or after January 1st 2020. The amendments to IFRSs have been applied in these financial statements in accordance with their effective dates. However, they had no material effect on the disclosed financial information or did not apply to any of the executed transactions. For a full list of the amendments, see Section 3.2 in Part II of the interim condensed consolidated financial statements. The Company did not elect to early adopt any of the standards, interpretations or amendments that have been published but are not yet effective in accordance with the European Union regulations. b) New standards and interpretations which have been issued but are not yet effective For information on the new standards and interpretations which have been issued but are not yet effective, see Section 3.2 in Part II of the interim condensed consolidated financial statements. c) Judgements and estimates The preparation of interim condensed separate financial statements requires the Management Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and other factors reasonable in the circumstances and are the basis for determining the carrying amounts of assets and liabilities that do not result directly from other sources. Actual results may differ from these estimates. Estimates and the underlying assumptions are reviewed on an ongoing basis. Changes to accounting estimates are recognised in the period in which the estimates are revised or in current and any future periods affected. The key judgements and estimates made by the Management Board in preparing these interim condensed separate financial statements were the same as those made in preparing the separate financial statements for the financial year ended December 31st 2019.

4. Selected supplementary and explanatory notes In the opinion of the Management Board of Grupa Azoty Zakłady Chemiczne Police Spółka Akcyjna, notes to the interim condensed consolidated financial statements of the Grupa Azoty Zakłady Chemiczne Police Spółka Akcyjna Group contain all relevant information required to properly assess the Company’s assets and financial position in the presented period.

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IV. MANAGEMENT’S DISCUSSION AND ANALYSIS GRUPA AZOTY ZAKŁADY CHEMICZNE POLICE S.A. PERFORMANCE IN Q1 2020

Grupa Azoty Zakłady Chemiczne Police Group

Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

1. General information about the Group 1.1. Organisation and structure As at March 31st 2020, the Grupa Azoty Zakłady Chemiczne Police Group comprised Grupa Azoty Zakłady Chemiczne Police S.A. (the “Parent”, the “Company”) and: • six subsidiaries (in which Grupa Azoty Zakłady Chemiczne Police S.A. held equity interests above 50%), including one company in liquidation, • two associates (in which the Parent held equity interests of less than 50% but more than 20%), including one company in liquidation bankruptcy, • one related entity in which the Parent held an equity interest below 20%).

The Parent – Grupa Azoty Zakłady Chemiczne Police S.A. The Company has for decades been a leading European manufacturer of fertilizers and one of the largest Polish chemical companies. The Company’s advantages include a strong position in the market for compound mineral fertilizers, a titanium white unit of a type unique in Poland, as well as the large scale of ammonia, phosphoric acid and sulfuric acid production. The Group’s most significant segment is the Fertilizers Segment, which manufactures: • compound fertilizers (Polifoska® and Polidap®); the distinctive features of those complex products include chemical uniformity of fertilizer grains, high assimilability, and high concentration of pure nutrients in the final product, • nitrogen fertilizers (urea) and nitrogen-sulfur fertilizers (Polifoska® 21), used as all-purpose fertilizers for general application. Application of fertilizers manufactured by the Company has a positive effect on the development of the plant root system and the way plants use mineral nutrients and water, leading to improved biological and economic efficiency of fertilization. This segment also produces nitrogen-based chemicals, including ammonia and urea solutions: 32.5% – NOXy® (AdBlue®), and 40% – Pulnox®. NOXy® (AdBlue®) is used in the automotive industry to reduce nitrogen oxide emissions from diesel engines. A steady rise in the consumption of NOXy® is expected in Europe in the coming years given the increasingly stringent regulations aimed at reducing atmospheric emissions of exhaust fumes. Pulnox® is also used as a reducing agent in vehicle emissions control technologies. It is widely used in large energy facilities which generate harmful substances, including nitrogen and sulphur oxides, when burning fossil fuels.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

The Company’s Pigments Segment produces mainly titanium dioxide-based pigments, marketed under the TYTANPOL® brand. Titanium white is used, among others, in the production of paints and varnishes, printing inks, plastics, as well as paper and laminates. The consistently high product quality and professional advice on product use have been recognised − the Unit has received many awards and honours. Internationally, the Company is appreciated not only for its fertilizer production and sales volumes, but also for contributing to the progress of the chemical industry and global agriculture. The Group is committed to CSR, engaging in projects that support local communities and regional development. Liaising with local authorities, Grupa Azoty Zakłady Chemiczne Police S.A. supports vocational education, with a particular focus on professions useful to the Company. The Company has also established links with higher education institutions, sharing expertise with students majoring in chemistry, environmental protection, management and marketing. Upon graduation, some of them move on to become Company employees. Table 1. Parent’s equity interests in subordinated entities at March 31st 2020 Registered % of shares Entity Share capital office/address held by the Parent Grupa Azoty Police Serwis ul. Kuźnicka 1, 9,618 100.00% Sp. z o.o. 72-010 Police, Poland Supra Agrochemia ul. Monopolowa 6, 19,721 100.00% Sp. z o.o. 51-501 Wrocław, Poland Grupa Azoty Transtech ul. Kuźnicka 1, 9,783 100.00% Sp. z o.o. 72-010 Police, Poland Grupa Azoty Africa S.A. Route de Ngor Villa No. XOF 132,000 99.99% w likwidacji (in liquidation) 12, Dakar, Senegal thousand Zarząd Morskiego Portu ul. Kuźnicka 1, 32,642 99.91% Police Sp. z o.o. 72-010 Police, Poland Grupa Azoty Polyolefins S.A. ul. Kuźnicka 1, 467,339 53.00% (formerly PDH Polska S.A.) 72-010 Police, Poland budchem Sp. z o.o. ul. Moczyńskiego 8/10, w upadłości likwidacyjnej (in 1,201 48.96% 70-101 Szczecin liquidation bankruptcy) ul. Kuźnicka 6, Kemipol Sp. z o.o. 3,445 33.99% 72-010 Police, Poland Al. Tysiąclecia Państwa PROZAP Sp. z o.o. Polskiego 13 891 7.35% 24-110 Puławy

For a description of the subsidiaries, see Section 1, and for an overview of the Group’s business, see Section 3 of the Directors’ Report on the operations of Grupa Azoty Zakłady Chemiczne Police S.A. and the Grupa Azoty Zakłady Chemiczne Police Group in the twelve months ended December 31st 2019. Changes in the companies’ structures On January 9th 2020, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, deleted INFRAPARK Police S.A. w likwidacji (in liquidation) from the Business Register of the National Court Register. On January 29th 2020, the District Court for Lublin-Wschód in Lublin, with its seat in Świdnik, 6th Commercial Division of the National Court Register, registered the incorporation of Koncept Sp. z o.o. by PROZAP Sp. z o.o. of Puławy. Following the merger, Koncept Sp. z o.o. was deleted from the Business Register and Grupa Azoty Zakłady Chemiczne Police S.A. acquired 131 shares in PROZAP Sp. z o.o. in exchange for 1,023 shares in Koncept Sp. z o.o. Organisational and equity ties As at March 31st 2020, the Company’s shares in total voting rights at the subsidiaries and associates were equal to its respective equity interests in these companies (with the exception of PROZAP Sp. z o.o.).

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

2. Financial condition and assets 2.1. Assessment of factors and one-off events with a material impact on operations and financial performance Impact of COVID-19 pandemic on the Company’s and Group’s business The Company’s Management Board is keeping track of the developments around the COVID-19 pandemic and its unfolding impact on the Company’s and its Group’s business. In order to ensure that the Parent and the other entities of its Group can operate as smoothly as possible, procedures have been put in place to ensure immediate response by the relevant services. In addition, the Company has issued instructions to minimise the risk of infection to employees. In Q1 2020, the Group did not record any major declines in sales volumes, any disruptions in the supply chains of feedstock, materials and services, or increased sick absence rates among staff that would interfere with the continuity of production. It has, though, identified potential risk areas related to the COVID-19 pandemic that can materially affect its future financial performance. These risks include: 1. Disruptions in the raw material/feedstock supply and product sale chains owing to transport issues. 2. Disruption of sale processes in individual business segments. 3. Disruptions in the continuity of production processes due to potentially reduced availability of staff resources. 4. Potential temporary disruptions in the timely delivery of capital and maintenance projects at the Company or other entities of its Group, possible delays in the lead times of materials and equipment, or actions by government bodies issuing decisions in administrative processes. 5. Potential threat to the liquidity of some customers suffering from payment backlogs. 6. Exchange rate fluctuations. With respect to sales, the following trends were observed in the key segments. Sales in the Fertilizers Segment In Q1 2020, no significant negative impact of the pandemic on sales of fertilizers was observed. No significant contraction in demand for the main products was recorded. In March, domestic sales of compound fertilizers were high. The first quarter saw, and the second quarter may see, lower demand for certain products applied in industry. The slowdown in the activities of transport companies was reflected in lower purchases of fuel and fuel additives reducing exhaust emissions (such as NOXy®). The decline in NOXy® sales in April is estimated at approximately 10%. A drop in demand (estimated at 10–20%) was also recorded in technical grade urea. The demand is not going down any further. There were no significant changes in sales of fertilizers in April, and no significant changes in demand are expected until the end of the quarter. However, the identified risks may still materialise if the epidemic situation in the individual markets becomes more serious. Sales in the Pigments Segment Towards the end of Q1 2020, an adverse impact of the current situation on the pigments market in Europe was identified. Italy was the first country to order a complete lockdown of the industrial sectors not related to public security. At the end of March, it was impossible to sell titanium white on the Italian market. However, the impact of the pandemic on the Pigments Segment’s first- quarter performance was limited and the segment’s results were close to the figures reported for Q1 2019. According to market information, the impact of the pandemic on the titanium white market will be material in the second quarter. The markets on which the Company actively sells its products (especially Italy, France, and Germany to some extent) showed a downward trend in demand. Slump in demand is also observed on the domestic market. The huge supply of goods on the market has caused price erosion. This situation shows that the pandemic’s impact on the sales of pigments has strengthened, but it is currently not significant in relation to the scale of operations of the entire Company and the Group. Purchases of strategic raw materials and feedstocks In Q1 2020, there were no disruptions in the supply of raw materials and feedstocks. The suppliers made all planned deliveries in the agreed quantities. Neither was there any disruption in the

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

transport of raw materials and feedstocks. The second quarter is not expected to see any significant impact of the coronavirus pandemic on procurement. Production At present, there are no production cuts on the production units. However, the risk of such cuts remains real as long as the pandemic continues. The main risk factor here is the potential lack of workforce necessary to maintain continuous production in various areas. The company has developed measures designed to mitigate this risk.

Logistics No significant impact of the pandemic on logistics activities was identified in Q1 2020, nor is any such impact expected in Q2 2020. Nonetheless, in many areas of the company’s operations, transport constraints are identified as a potential threat which, if significant, may have a material impact on operations. Other areas The coronavirus epidemic had no significant impact on the operations of the other areas of the Company and its subsidiaries in the first quarter of 2020, nor is it expected that the pandemic will have a material impact on the Group’s operations in the second quarter, although many risks remain valid. To date, some difficulties have been observed in connection with modified work organisation (to curb the spread of the epidemic) and the external conditions, but the Company has been adjusting to the situation on an ongoing basis and has not yet been significantly affected by these changes. The Group monitors risks in all areas on an ongoing basis. The scale of the future economic consequences of the COVID-19 pandemic is not fully known as the threat concerns all markets, the internal as well as global environment, and involves factors that remain beyond the Company’s control and are subject to dynamic change. As at the date of this report, Grupa Azoty Zakłady Chemiczne Police Group did not experience any significant impact of the pandemic. Activities to support the local community Grupa Azoty Zakłady Chemiczne Police S.A. allocated PLN 750,000 to the fight against SARS-CoV-2. Financial and in-kind assistance was provided to institutions and units combating the spread of COVID-19. Most of the funds were received by the Provincial Sanitary and Epidemiological Station in Szczecin, which purchased high-quality specialist equipment for coronavirus testing and disposable materials necessary to carry out diagnostic tests. The Company also provided hygiene supplies and personal protection equipment, including masks and protective coveralls, and a disinfectant to the Provincial Emergency Medical Service of Szczecin, the County Headquarters of the State Fire Service in Police, and the St. Charles Borromeo Rehabilitation Hospital in Szczecin. Since March 16th 2020, Grupa Azoty Zakłady Chemiczne Police S.A. has been paying benefits to the Company employees who, during the epidemic period, stay at home to care of children aged 8 to 12. The benefit in the form of days off work with a care allowance paid is an important assistance for many persons, as the allowances paid by the Polish Social Insurance Institution only cover parents who care for children up to 8 years of age. The Company has implemented internal measures to prevent the spread of the virus while maintaining continuity of production and security of technological processes. Any person entering the Company’s premises can disinfect their hands using disinfectant dispensers. The Company has provided employees with reusable protective masks to be used in the Company’s premises. The equipment is disinfected regularly.

Foreign exchange transactions of Grupa Azoty Polyolefins S.A. In Q1 2020, Grupa Azoty Polyolefins S.A. entered into forward contracts to purchase EUR 159.8m for PLN. The contracts are designed to secure planned EUR payments under a contract for comprehensive implementation of the Polimery Police project to be financed from planned PLN contributions from Grupa Azoty S.A. and Grupa Azoty Zakłady Chemiczne Police S.A. to be made in the form of a share capital increase and subordinated loans. In Q1 2020, Grupa Azoty Polyolefins S.A. also purchased currency call options to buy EUR 104.5m for PLN to finance the planned PLN contribution of the Project’s joint sponsors, and call options to buy

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

EUR 300.5m for USD to finance the USD contribution to be made by the Project’s joint sponsors, and partly for a USD-denominated senior facility. The transactions enable the Project’s budget to be secured in accordance with the Project’s financial model. As at the end of Q1 2020, the total net valuation of forward contracts and options executed by Grupa Azoty Polyolefins S.A. was PLN 34,029 thousand.

2.2. Market overview Agricultural market – Poland The condition of crops was assessed as good, both in January and in the subsequent months of Q1 2020. What further improved the condition of crops was the recent application of the first dose of nitrogen fertilizers by farmers. However, the temperatures were too high for the time of the year, which additionally heightened the risks related to diseases and pest activity. A short spell of cold weather in March, in particular night frost, caused leaf damage. As in the same period of the previous year, there were fears of a spring drought, but the general condition of the crops was good and the condition of grain crops was similar to that observed a year earlier. However, drought became more severe towards the end of the first quarter and at the beginning of the second quarter, when a large part of the Central and Eastern Europe and the United Kingdom were affected by rainfall shortage. According to the European Commission, it was the driest beginning of spring since 1979. The hydrological situation started to improve at the beginning of May. The prices of main agricultural produce followed varied trends in the first quarter. Price increases were observed for wheat, maize and rapeseed, while the price of rye fell. In 2020, compared with the first quarter of 2019, prices of milling wheat, milling rye and maize fell by 12%, 22%, 10%, respectively, while rapeseed prices grew 2%. FERTILIZERS COMPOUND FERTILIZERS NPK fertilizers The domestic demand for fertilizers at retail outlets rose during Q1 2020 and was largely driven by direct payments and drought assistance payments to farmers. At the end of the first quarter, due to the coronavirus pandemic there were some minor problems with logistics, particularly with road transport. Despite these issues sales on the Polish market were relatively high. There were no interruptions in transport by rail and at ports. Surprisingly, fertilizer sales in Poland increased. Despite changeable weather and the related issues, the fertilizer season was in full swing. Farmers needed both fertilizers and plant protection products, and those who did not have sufficient stocks purchased slightly more than they had planned for fear of availability constraints. Depreciation of the złoty against the US dollar and the euro flattened the differences between the price of imported fertilizers and those manufactured by the Company. As regards exports markets, the first weeks of 2020 saw significant demand for NPK fertilizers only in Russia and Ukraine, but at the end of the quarter demand picked up also in Slovakia, Ireland and the United Kingdom. Demand in Russia was close to the previous year’s levels. In January, a Russian manufacturer resumed the production of NPK 13:19:19, which was to be applied mainly in Russia and the Baltic States. In Ukraine, a major plant launched the production of NPK 16:16:16. Restrictions imposed by governments to fight the coronavirus caused noticeable delays in road transport on international markets. No problems were observed in the case of rail transport, and also ports operated without any major disruptions. In the Baltic Sea, in Q1 2020 and Q1 2019, NPK 15:15:15 prices were on an upward trend with the average price in Q1 2020 down 10% year on year.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Figure 1. Prices of NPK, DAP [FOB Baltic, USD/t] 600 500 400 300 200 100 0

DAP NPK

As the end of the first quarter and beginning of the second quarter were dry periods, the consumption of fertilizers, including NPK, declined. Drought had a negative impact on the NPK markets across Europe, hitting especially Italy, Central Europe and the Balkans. Despite drought, farmers purchased fertilizers for the first application, which significantly reduced stock levels at distributors and increased fertilizer purchases from the Grupa Azoty Group. The fertilizer application season for basic crops has practically come to an end. However, the first week of May brought rainfall in Poland and a large part of Europe, which prompted farmers to purchase more fertilizers for selected plants (maize) and grassland. DAP In Q1 2020, DAP prices in the Baltic Sea region were in an upward trend, partially improving after the declines recorded in 2019. However, their average prices in Q1 2020 dropped more than 23% year on year. At the beginning of Q1 2020, manufacturers focused on export shipments, for instance to India, Brazil, Ethiopia and the US. At the end of Q1, the demand in Europe picked up, but the market suffered from road transport disruptions caused by the pandemic-related restrictions. According to available sources, despite restrictions in India (including even production plant shutdowns), the total output in March 2020 went up year on year. Due to the Chinese government’s decision to supply fertilizers first to domestic farmers, exports were markedly curtailed. In the second half of March, foreign markets of phosphate fertilizers were driven by two factors. The first was the effect of the battle against the coronavirus, i.e. reduced production, problems with transport (especially road transport) and shortage of workforce. The other problem in the first quarter of the year was the spring drought, adversely affecting many European countries. Its consequences are not yet known, but the rainfall in early May and the forecast rainfall in June may cause them to be less severe.

RAW MATERIALS FOR THE PRODUCTION OF COMPOUND FERTILIZERS Phosphate rock Throughout the first quarter of 2020 the prices of phosphate fertilizers on global markets followed an upward trend, having rebounded after the sharp declines in prices of DAP and MAP fertilizers in the second half of 2019. Based on various market benchmarks for phosphate rock, its price in Q1 2020 fell on average by approximately 16.5% year on year. The coronavirus pandemic did not lead to a decline in the prices of phosphate fertilizers due to the exclusion of Chinese manufacturers, who – aside from producing for the home market – supply a large part of Asia and Australia. On the one hand, demand declined, but on the other, various logistic issues (such as force majeure declared at Indian ports) and supply constraints increased the price benchmarks for phosphate fertilizers. Some local governments (in Jordan, Peru) ordered a temporary shutdown of phosphate fertilizers and phosphate rock production. The production of fertilizers in China has been gradually resumed since early March, mainly in the Hubei province, where the leading fertilizer plants and phosphate rock mines are located. Potassium chloride In Q1 2020, the average benchmark price of potassium chloride was approximately 21% lower than in the same period of 2019. In the second half of 2019, the potassium chloride market was much

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

weaker than in the first and second quarter of 2019, and the main producers of potassium chloride reduced their output by 2.8 million tonnes in Q4 2019. In Q1 2020, the demand for both standard and granular potassium chloride was significantly suppressed by the coronavirus pandemic. The shutdown of the Chinese economy, demand constraints in India, as well as logistics problems hitting many regions of the world resulted in a higher oversupply and declining prices. Sulfur In Q1 2020, the sulfur market saw a continuation of the trend which remained practically unchanged since the beginning of 2019. The weakening of the phosphate fertilizers market pulled down the market of sulfur, which is in the first place used in the production of phosphoric acid and then DAP, MAP and NPK fertilizers. In Q1 2020, the prices of prilled sulfur (Vancouver SPOT FOB) fell by about 56% year on year. China, as the leading target market for prilled sulfur, significantly reduced the production of phosphate fertilizers, including its demand for sulfur, for half of the quarter in connection with its fight against the coronavirus pandemic. However, the price of prilled sulfur in China rose slightly in Q1 2020, which was due to major logistic constraints. The European liquid sulfur market saw slightly milder declines. In Q1 2020, the average price of liquid sulfur (delivered Benelux) was approximately 29% lower than in the corresponding period of 2019. Despite resistance from manufacturers (refineries, gas plants), the price of liquid sulfur had to follow the global prices of the prilled product. There were no dramatic changes in demand on the European market in Q1 2020. Logistics difficulties arose due to the closure of borders between the EU Member States in March.

NITROGEN PRODUCTS Ammonia In Q1 2020, the average prices of ammonia in the Baltic Sea were 21% lower year on year, while the decrease in prices of natural gas (the main feedstock for ammonia production) was even deeper. The demand on the US market was initially very weak due to adverse weather. A major producer in India closed its ammonia/urea unit for an indefinite period following a failure in January 2020. Due to disruptions in the production of chemicals and fertilizers on both sides of the Suez Canal, most players again decided to stop operations and watch the market. Low demand from industrial users (such as caprolactam and acrylonitrile producers) due to the coronavirus pandemic, especially in the Asia Pacific region, contributed to greater availability of ammonia.

Figure2. Ammonia and natural gas prices 500 30 400

300 20 200 USD/t 10

100 EUR/MWh 0 0

Ammonia Gas

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Urea The prices of urea fluctuated in the first quarter on the markets under analysis, to ultimately remain in the upward trend. In Q1 2020, the average prices of urea in the Baltic Sea region fell 4.6% year on year. In Europe, due to a humid and mild winter weather, demand slowed down. Figure 3. Urea prices [USD/t] 350 300 250 200 150 100 50 0

Urea

The measures taken in connection with the COVID-19 pandemic caused a decline in the availability of urea on certain markets, mainly in the case of the Chinese and Iranian urea. The Lithuanian, Belarusian and Russian producers focused on meeting demand on home markets. The supply of uncoated urea to Italy was also irregular due to stoppage of goods transport to Italy by transport companies. India’s RCF announced a purchase campaign planning to sign letters of intent for the purchase of 747,000 tonnes of urea for India. Demand picked up in the first quarter also in the US and Australia. Activity in other markets was low. Other nitrogen products The Company’s line of RedNOX® products (designed to reduce nitric oxide emissions in the automotive and industrial industries) includes the following: NOXY® (32.5% urea solution, AdBlue®); Likam® (ammonia water); Pulnox® (40% technical-grade urea solution). The Rednox market shows a strong growth trend in a longer term both in Poland and Europe. EU regulations on reducing flue gas emissions are very stringent and these products enable meeting EU standards in this respect. The slowdown in the activities of transport companies observed at the end of the first quarter and the beginning of the second quarter of 2020 led to lower purchases of fuel and a mild drop in the purchases of fuel additives reducing exhaust emissions (such as NOXy®). KEY FEEDSTOCK FOR NITROGEN PRODUCTS Natural gas In Q1 2020, gas prices were approximately 45% lower year on year. The main factor behind the decline was a significant oversupply of gas in the European system due to the global spread of the coronavirus, resulting in a decline in demand for gas from industry. Another factor supporting low gas prices is the trade war between OPEC and Russia over crude oil production cuts, which resulted in a sharp price depression to levels not seen for years. The drop in gas prices was also prompted by weather conditions and temperatures significantly above seasonal averages, leading to a sharp decline in the quantities of gas used for heating purposes amid stable levels of gas supplies to Europe, record-high LNG supplies and high gas inventory levels. In Q1 2020, due to economic and legal reasons, natural gas was purchased from PGNiG.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Figure 4. Market prices of natural gas [EUR/MWh] 30 25 20 15 10 5 0

Gas

PIGMENTS Titanium white In Q1 2020, the price of titanium white in Europe decreased by 5% year on year. After a decline at the beginning of the year, the prices remained stable until the end of the quarter. Some uncertainties which dampened demand already in 2019, such as the trade war and the unresolved Brexit issues, still persisted in Q1 2020. In addition, the titanium white market was affected by a slowdown in industrial and chemical production in the EU countries. The demand from many sectors, especially from the automotive industry, shrank significantly. In January and February 2020, supply and demand remained substantially balanced. The availability of the product was good, while buyers’ activity remained limited. What materially affected the market balance were imports of competitively priced titanium white from China into Europe, additionally supported by the launch of new capacities (chloride process) by Lomon Billions of Jiaozuo, China (with a total target capacity of 200,000 tonnes per year). In March, the impact of the outbreak of coronavirus pandemic began to be felt in Europe, coinciding with the seasonal increase in demand for titanium white. Limited purchases, resulting from the implementation of the measures combating the coronavirus, were offset by the buyers’ efforts to secure adequate stock levels. The ultimate impact of COVID-19 on the titanium white market is still unknown. The situation has been changing rapidly, but demand may be hit if the pandemic stays for longer.

As of February 14th, China reduced the duty on certain goods imported from the US, including TiO2. Steps towards the end of the trade war between the US and China are a very good sign, but the spread of the coronavirus has led to heightened economic concerns amid an already certain economic instability. Residential construction is expected to continue to slow down. The prospects for the automotive industry are not likely to improve in the near future. Logistic constraints have been increasing due to strict border security controls and insufficient availability of lorries and drivers. There are also logistics problems in the trade between China and Europe, causing some delays in Chinese exports of titanium dioxide to Europe. On February 18th 2020, the European Union published Delegated Regulation amending Regulation (EC) No. 1272/2008 of the European Parliament and of the Council of 16 December 2008 on classification, labelling and packaging (CLP) of substances and mixtures. The Regulation, classifying titanium dioxide as a suspected category 2 carcinogen by inhalation in certain powder forms, will apply after an 18-month transitional period, i.e. as of October 1st 2021. Figure 5. Market prices of titanium white [EUR/t] 3 000

2 500

2 000

1 500

Titanium white

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Other products Iron sulfate is a by-product of titanium white and steel production. In 2019, demand for the product rose on the back of a very good market situation. The demand was driven by favourable conditions in the construction sector in Europe, resulting in high cement production volumes which continued into Q1 2020. This situation changed slightly at the end of the first quarter (in mid-March) as a result of the coronavirus epidemic. Lower demand for the material from certain customers was observed. The coming months will show the impact of the situation on the sulfate market (in a situation where Poland’s isolation continues).

RAW MATERIALS FOR MANUFACTURE OF PIGMENTS Ilmenite and titanium slag In titanium-bearing minerals markets, the situation is stable. Only minor (between 2.5% and 3.5%) increases in ilmenite prices were recorded in Europe. China saw slightly more pronounced increases due to local limitations in the availability of the raw material caused by the COVID-19 outbreak. Currently, no problems with the ilmenite availability in Europe are recorded. Titanium slag is a metallurgical product obtained by smelting ilmenite with coke. In the absence of investments in new furnaces, there is a clear undersupply on the titanium slag market, especially in the case of slag with a 74% to 76% titanium content, which is used for the production of titanium white in the sulfate process. Some of its existing producers switched from the production of slag with a low titanium content to slags with a higher content of TiO2, in excess of 90%, encouraged by higher sales margins in the segment which employs the chlorine process to obtain titanium white. Thus, despite falling prices of titanium white, the global price of titanium slag remains high. In Q1 2020, in Europe the average price of titanium slag used in the manufacture of titanium white by sulfate process remained at a stable, though high, level. No material changes in slag prices relative to 2019 were recorded.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

2.3. Key financial and economic data 2.3.1. Consolidated financial results In the reporting period, the financial results of the Group were strongly correlated with the Parent’s market environment. In Q1 2020, the Company posted positive EBITDA of PLN 42,756 thousand and net profit of PLN 22,570 thousand. Revenue decreased by 10.8% year on year, while cost of sales fell 5.7%, resulting in gross profit of PLN 84,676 thousand. The key factor behind the year-on-year drop in performance was lower sales prices of products (chiefly compound fertilizers, ammonia and urea), partly offset by a significant decline in prices of natural gas (the main feedstock for nitrogen products). The main item affecting net finance income (costs) was the valuation of derivative financial instruments contracted by the subsidiary GA Polyolefins to secure future cash flows relating to the Polimery Police project. For details, see Section 2.1 of this Management’s Discussion and Analysis. Table 2. Consolidated financial data Item Q1 2020 Q1 2019 change % change Revenue 648,224 726,661 -78,437 -10.8 Cost of sales 563,548 597,911 -34,363 -5.7 Gross profit 84,676 128,750 -44,074 -34.2 Selling and distribution expenses 30,583 29,215 1,368 4.7 Administrative expenses 45,110 39,956 5,154 12.9 Net profit on sales 8,983 59,579 -50,596 -84.9 Other income/(expenses) 180 -43 223 518.6 EBIT 9,163 59,536 -50,373 -84.6 Finance income/(costs) 16,858 -1,246 18,104 1,453.0 Share of profit/(loss) of equity-accounted 3,534 2,722 812 29.8 associates Profit before tax 29,555 61,012 -31,457 -51.6 Income tax 6,985 12,402 -5,417 -43.7 Net profit/(loss) 22,570 48,610 -26,040 -53.6 EBITDA 42,756 89,668 -46,912 -52.3

2.3.2. Segments’ financial results In Q1 2020, the Group’s performance was primarily determined by the market situation in the Fertilizers Segment. Table 3. EBITDA by segment in Q1 2020 Other Item Fertilizers Pigments Polymers Activities Revenue from external sales 540,926 93,728 100 13,470 Share [%] 83% 15% 0% 2% EBIT 3,212 11,565 (4,209) (1,405)

The shares of individual segments in total revenue changed slightly year on year – the share of the Fertilizers Segment went down by 1pp, while the share of the Pigments Segment rose by 1pp. FERTILIZERS In Q1 2020, the Company generated EBIT of PLN 3,212 thousand in the Fertilizers Segment. The Segment’s revenue was PLN 540,926 thousand, down by almost 12% on Q1 2019. Sales of compound fertilizers accounted for more than 65% of the Fertilizers Segment’s total revenue. On average,

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domestic sales of fertilizer and ammonia accounted for 61% of the Segment’s total sales in the period covered. Figure 6. Revenue of the Fertilizers Segment

700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2019 Q1 2020

2014 2015 2016 2017 2018 2019 2020

EBIT for Q1 2019 was PLN 54,932 thousand. The main factor behind the year-on-year decrease in performance of the Fertilizers Segment in Q1 2020 was lower sales prices of products. The lower sales prices of ammonia and urea were offset by a significant decline in the prices of natural gas (the main feedstock for the production of nitrogen products), which prevented the erosion of margins on nitrogen products. However, the absence of a simultaneous decline in prices of key feedstocks for the compound fertilizer production translated into lower margins in this area compared with Q1 2019.

PIGMENTS In Q1 2020, the Company’s EBIT in the Pigments Segment was PLN 11,565 thousand, close to the previous year’s level despite lower revenue. The year-on-year decrease in the segment’s revenue was primarily attributable to lower average sales prices of titanium white as well as lower sales volumes (down 8.3%). In the reporting period, the Pigments Segment’s revenue came in at PLN 93,728 thousand, accounting for 15% of the Group’s total. Approximately 62% of the revenue from sale of titanium white was generated on foreign markets. Figure7. Revenue of the Pigments Segment

120 000 100 000 80 000 60 000 40 000 20 000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Q1 2019 Q1 2020 2014 2015 2016 2017 2018 2019 2020

Compared with Q1 2019, the Pigments Segment’s performance in Q1 2020 was boosted by higher sale prices of iron sulfate and lower prices of natural gas used as feedstock. POLYMERS In 2018, the share of Grupa Azoty Polyolefins S.A.’s assets in total assets of all segments of the Group exceeded 10%. Therefore, a condition for identifying a separate reportable segment was met, i.e. one of the quantitative thresholds specified in IFRS 8 Operating Segments was exceeded. By the Parent Management Board’s decision, Grupa Azoty Polyolefins S.A. was separated from Other Activities and is currently presented under a newly identified reportable segment, namely the Polymers Segment. As the Polimery Police project is still under way, the Polymers Segment has not yet commenced its proper operations; it generates immaterial revenue, while incurring day-to-day running costs. For a detailed description of the project, see Section IV.2.6 of this Report.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

OTHER ACTIVITIES Revenue recognised under Other Activities accounted for approximately 2% of the Group’s total sales. Other Activities delivered EBIT of PLN -1,405 thousand.

2.3.3. Operating expenses The Group’s operating expenses amounted to PLN 592,980 thousand in Q1 2020, having decreased by PLN 75,564 thousand (or 11%) year on year. The drop in costs of raw materials and consumables used in the reporting period compared with the corresponding period of the previous year was mainly attributable to lower prices of natural gas and reduced production of compound fertilizers. Costs of services rose on the back of higher costs of transport services and water treatment owing to the poor quality of water in the Oder river. The completion of a number of investment projects and major overhauls resulted in higher depreciation charges. Salaries and wages, including overheads, went up year on year, chiefly in connection with the collective pay agreements executed by the Parent. Cost of taxes and charges declined due to a range of factors, including lower landfill charges. Table 4. Costs by nature of expense Item Q1 2020 Q1 2019 change % change Depreciation and amortisation 33,593 30,132 3,461 11 Raw materials and consumables used 371,039 459,700 -88,661 -19 Services 45,690 39,331 6,359 16 Wages and salaries, including surcharges, 95,136 91,077 4,059 4 and other benefits Taxes and charges 38,864 39,562 -698 -2 Other costs by nature of expense 8,658 8,742 -84 -1 Total 592,980 668,544 -75,564 -11

2.3.4. Structure of assets, equity and liabilities In Q1 2020, the Group’s assets rose to PLN 3,450,364 thousand, by PLN 883,539 thousand on the end of Q1 2019. As at March 31st 2020, non-current assets amounted to PLN 2,264,894 thousand and current assets to PLN 1,185,470 thousand.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Table 5. Structure of assets Item Q1 2020 Q1 2019 change % change Non-current assets, including: 2,264,894 1,661,210 603,684 36 Property, plant and equipment 1,581,498 1,457,717 123,781 8 Perpetual usufruct of land 0 58,985 -58,985 -100 Right-of-use assets 72,152 0 72,152 - Investment property 6,837 6,168 669 11 Intangible assets 77,091 49,606 27,485 55 Shares 523 0 523 - Equity-accounted investees 29,899 16,588 13,311 80 Other receivables 463,297 33,575 429,722 1280 Deferred tax assets 33,597 38,571 -4,974 -13 Current assets, including: 1,185,470 905,615 279,855 31 Inventories 273,652 329,557 -55,905 -17 Property rights 220,551 170,026 50,525 30 Derivative financial instruments 56,157 60 56,097 93495 Current tax assets 6,940 5,800 1,140 20 Trade and other receivables 345,125 235,769 109,356 46 Cash and cash equivalents 263,449 144,606 118,843 82 Non-current assets held for sale 19,596 19,797 -201 -1 Total assets 3,450,364 2,566,825 883,539 34

As the Polimery Police project (carried out by subsidiary Grupa Azoty Polyolefins S.A.) has entered the execution phase, a number of significant changes in the balance-sheet items relate to this area of the Group’s business. Year on year, the most significant movements contributing to the increase in assets in Q1 2020 included: • an 8% (PLN 123,781 thousand) increase in property, plant and equipment, mainly attributable to new investment projects having been placed in service at the Parent and a material increase in property, plant and equipment at the subsidiary Grupa Azoty Polyolefins S.A.; • a PLN 27,485 thousand increase in intangible assets, driven primarily by a substantial increase in intangible assets under construction at the subsidiary Grupa Azoty Polyolefins S.A., related to payments under licence agreements; • a PLN 429,722 thousand increase in other receivables resulting mainly from PLN 420,261 thousand reported by Grupa Azoty Polyolefins S.A. on account of prepaid deliveries of non- current assets, • recognition of PLN 72,152 thousand in right-of-use assets, compared with perpetual usufruct rights to land worth PLN 58,985 thousand in the first quarter of 2019 (result of application of IFRS 16 Leases); • a PLN 109,356 thousand increase in short-term trade receivables, including a PLN 89,999 thousand increase in short-term other taxes, grants, customs duties and social security receivable, at the subsidiary Grupa Azoty Polyolefins S.A.; • a PLN 56,157 thousand increase in derivative financial instruments recorded at the subsidiary Grupa Azoty Polyolefins S.A., and a PLN 118,843 thousand increase in cash (mainly proceeds from the secondary issue of Parent shares to be used as one of the financing sources for the Polimery Police project).

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Table 6. Structure of equity and liabilities Item Q1 2020 Q1 2019 change % change Equity 1,855,525 1,248,580 606,945 49 Non-current liabilities, including: 444,957 507,935 -62,978 -12 Borrowings 153,277 283,764 -130,487 -46 Lease liabilities 62,229 64,535 -2,306 -4 Employee benefit obligations 78,846 65,704 13,142 20 Other liabilities 12,831 3,932 8,899 226 Provisions 111,213 68,018 43,195 64 Grants 20,095 21,919 -1,824 -8 Deferred tax liability 6,466 63 6,403 10163 Current liabilities, including: 1,149,882 810,310 339,572 42 Borrowings 482,588 91,321 391,267 428 Other financial liabilities 5,530 1,635 3,895 238 Derivative financial instruments 899 0 899 - Lease liabilities 5,366 4,046 1,320 33 Employee benefit obligations 14,086 8,527 5,559 65 Current tax liabilities 1 1 0 0 Trade and other payables 551,014 625,218 -74,204 -12 Provisions 4,203 4,731 -528 -11 Grants 74,393 62,632 11,761 19 Liabilities directly related to assets held for 11,802 12,199 -397 -3 sale Total liabilities 1,594,839 1,318,245 276,594 21 Total equity and liabilities 3,450,364 2,566,825 883,539 34

The significant year-on-year changes in equity and liabilities in the reporting period included: • an increase in equity, including mainly a PLN 491,758 thousand increase in the Parent’s share capital as a result of a secondary share issue and a PLN 99,451 thousand increase in non- controlling interests, mainly as a result of Grupa Azoty S.A.’s subscription for shares in Grupa Azoty Polyolefins S.A. in Q3 2019; • a PLN 130,487 thousand decrease in non-current borrowings; • an increase in short-term borrowings, mainly as a result of the short-term loan of PLN 383,795 thousand obtained by Grupa Azoty Polyolefins S.A. from Grupa Azoty S.A.

2.3.5. Financial ratios Profitability The profitability ratios in Q1 2020 were affected by the Company’s financial performance. In addition, changes in the structure of the Company’s balance sheet, including increase of the Company’s share capital and cash and cash equivalents (finalisation of the issue of Series C shares by the Parent), affected the values of ROA, ROE and ROCE ratios in the reporting period.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Table 7. Profitability ratios Ratio Q1 2020 Q1 2019 Gross profit margin 13% 18% EBIT margin 1% 8% EBITDA margin 7% 12% Net profit margin 3% 7% ROA 1% 2% ROCE 0.4% 3% ROE 1% 4% Return on non-current assets 1% 3%

Ratio formulas: Gross profit margin = gross profit (loss) / revenue (statement of comprehensive income by function) EBIT margin = EBIT / revenue EBITDA margin = EBITDA / revenue Net profit margin = net profit (loss) / revenue ROA (return on assets) = net profit (loss) / total assets Return on capital employed (ROCE) = EBIT / (total assets less current liabilities) Return on equity (ROE) = net profit (loss) / equity Return on non-current assets = net profit (loss) / non-current assets

Liquidity In Q1 2020, the liquidity ratios were similar to those reported in Q1 2019. Table 8. Liquidity ratios Ratio Q1 2020 Q1 2019 Current ratio 1.0 1.1 Quick ratio 0.8 0.7 Cash ratio 0.2 0.2

Ratio formulas: Current ratio = current assets / current liabilities Quick ratio = (current assets - inventories - current prepayments and accrued income) / current liabilities Cash ratio = (cash + other financial assets) / current liabilities.

Operating efficiency Year on year, the average collection period lengthened by 19 days, mainly due to higher VAT receivables at Grupa Azoty Polyolefins S.A. The Group’s average inventory turnover and payment periods shortened by six days. The cash conversion cycle in the period under review was four days. Table 9. Operating efficiency ratios Ratio Q1 2020 Q1 2019 Inventory turnover 44 50 Average collection period 48 29 Average payment period 88 94 Cash conversion cycle 4 -15 Ratio formulas: Inventory turnover in days = (inventories * 90) / cost of sales Average collection period in days = (trade and other receivables * 90) / revenue Average payment period in days = (trade and other payables *90) / cost of sales

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Cash conversion cycle = inventory turnover in days + average collection period in days - average payment period in days

Debt In Q1 2020, total debt ratio was lower by 5pp year on year, mainly due to the closing of the secondary offering of Series C shares in the Parent at the beginning of 2020. Following the registration of the share capital increase, the debt to equity ratio went up. As a result of a significant decrease in the Company's non-current liabilities under borrowings, the long-term debt ratio fell by 7pp, while the short-term debt ratio remained relatively unchanged year on year. Table 10. Debt ratios Ratio Q1 2020 Q1 2019 Total debt ratio 46% 51% Long-term debt ratio 13% 20% Short-term debt ratio 33% 32% Equity-to-debt ratio 116% 95%

Ratio formulas: Total debt ratio = current and non-current liabilities / total assets Long-term debt ratio = non-current liabilities / total assets Short-term debt ratio = current liabilities / total assets Equity-to-debt ratio = equity / current and non-current liabilities

2.4. Financial liquidity During the reporting period, the Group did not identify any threats to its financial liquidity. Financial liquidity is one of the key areas that are subject to continuous monitoring. The Group uses external financing sources to satisfy its liquidity needs and is able to obtain additional financing for its current and long-term corporate needs under an intragroup financing agreement signed by the Grupa Azoty Group companies. Loans are repaid using current cash flows, but a safe level of credit reserve is always maintained for use when necessary. The Parent identifies and manages the liquidity risk, and pursues an active cash flow (inventories, payables and receivables) management policy by using such tools as trade credit, prepayments in sale transactions, and longer payment deadlines in purchase transactions. In Q1 2020, the insurance of trade receivables arising from sales of fertilizers, urea, titanium white and chemicals was continued. The insurance covers almost all of the Company’s trade receivables, including domestic and export trade receivables. In the reporting period, there were no events of default, whether related to timely payment of liabilities or other covenants, which could result in debt acceleration. The Parent is monitoring the spread of the COVID-19 pandemic and its impact on the Group’s economic environment. The Parent has identified the following risk areas related to the pandemic outbreak that may affect its liquidity: • potential threat to the liquidity of some customers suffering from payment backlogs, • exchange rate fluctuations. As at the date of this report, no material impact of the above risks on the Company’s financial condition was recorded. 2.5. Borrowings In Q1 2020, the Grupa Azoty Police Group repaid all its borrowings when due, and there is no threat to the Group’s ability to continue servicing its debt. The Group uses consolidated financing from PKO BP under a PLN 119,500 thousand overdraft facility with a physical cash pooling service. Furthermore, the Parent uses a PLN 62,000 thousand multi- purpose credit facility and a PLN 90,000 thousand intraday overdraft limit under the cash pooling service. As at March 31st 2020, the Group had undrawn credit facilities of PLN 215,758 thousand with PKO BP S.A.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Under bilateral agreements signed by the Company with Bank Gospodarstwa Krajowego, the Company uses a PLN 100,000 thousand overdraft facility and a foreign currency non-revolving working capital facility for EUR 22,000 thousand. As at March 31st 2020, the Company had an undrawn overdraft facility limit of PLN 100,000 thousand, while the amount drawn under the foreign currency facility was EUR 15,000 thousand. The Company also relies on financing available based on the intragroup financing agreement, consisting of corporate loans advanced under long-term loan agreements with a bank syndicate, the EIB and the EBRD. The amount drawn as at March 31st 2020, in the form of a loan from Grupa Azoty S.A., was PLN 57,000 thousand. The limits available to the Company total PLN 943,000 thousand. Additionally, the Parent used long-term preferential loans from the National Fund for Environmental Protection and Water Management (NFOŚiGW) and the Provincial Fund for Environmental Protection and Water Management (WFOŚiGW). Two loans of PLN 90,000 thousand each were drawn down in full, and the amount outstanding under the loans as at March 31st 2020 totalled PLN 82,312 thousand.

2.6. Key projects In Q1 2020, the Group’s capital expenditure on property, plant and equipment and intangible assets reached PLN 72,225 thousand, including: • growth capex PLN 47,054 thousand; • maintenance capex PLN 18,093 thousand, • mandatory capex PLN 3,064 thousand; • purchase of finished goods PLN 1,039 thousand.

Figure 8. Structure of capital expenditure of the Group as at March 31st 2020

2% 4% 4% Growth capex

Maintenance capex

Mandatory capex 25% 65% Purchase of finished goods

other

THE GROUP’S KEY INVESTMENT PROJECT In 2020, the Group continued work on its key investment project, Polimery Police, comprising the construction of propylene and polypropylene units with auxiliary facilities and infrastructure, as well as a port terminal with feedstock storage facilities (the “Project”). Polimery Police broke ground as scheduled, in late 2019 and early 2020. Its completion is expected in late 2022. The project is being executed by special purpose vehicle Grupa Azoty Polyolefins S.A. (GA Polyolefins). Hyundai Engineering Co., Ltd. (HEC), selected in the tender for the award of a lump- sum turn-key contract (EPC), is the general contractor for the Project. Technical workstream Currently, GA Polyolefins is carrying out the construction phase of the Project. As at the date of this report, work under the obtained building permits was carried out on two sub-projects: the PDH unit and the storage and handling terminal. At the same time, the development of a detailed engineering design is nearing completion in line with the schedule. On January 29th 2020, the Management Board of GA Polyolefins and Przedsiębiorstwo Robót Czerpalnych i Podwodnych sp. z o.o. concluded a contract for the execution of the project “Planning and performing dredging work to increase depth from 10.5 to 12.5 metres (within the port terminal on the Police channel) as part of the Polimery Police project” for a remuneration of PLN 15,283,752.50.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Financing workstream As regards raising equity financing (equity and subordinated loans), details of investment agreements with Grupa Lotos, HEC and Korea Overseas Infrastructure & Urban Development Corporation (KIND) are being negotiated based on the term-sheets setting out the key terms of financing for the Project, signed on December 13th 20191 (with Grupa Lotos) and on December 23rd2 2019 (with HEC/KIND). On March 30th 2020, GA Polyolefins announced the signing of commitment letters with the financial institutions, confirming the submission by those institutions of offers approved by their credit committees. The financing institutions involved in the Project include: PKO BP S.A., Bank Pekao S.A., Bank Gospodarstwa Krajowego, Alior Bank S.A., PZU S.A., Bank Ochrony Środowiska S.A., Santander Bank Polska S.A., BNP Paribas Bank Polska S.A., European Bank for Reconstruction and Development, mBank S.A. as well as Industrial and Commercial Bank of China (Europe) S.A. Poland Branch. The total amount offered by the financial institutions fully covers the Company’s senior debt financing requirements. On February 18th 2020, the Extraordinary General Meeting of GA Polyolefins resolved to increase the share capital of GA Polyolefins by PLN 131,944,310.00 (one hundred and thirty-one million, nine hundred and forty-four thousand, three hundred and ten złoty) through an issue of 13,194,431 (thirteen million, one hundred and ninety-four thousand, four hundred and thirty-one) new Series F registered shares with a par value of PLN 10 (ten złoty, 00/100) per share. The issue price of each Series F share was set at PLN 47.90 (forty-seven złoty, 90/100). The new shares will be taken up in a private placement by: • Grupa Azoty Zakłady Chemiczne Police S.A., which will take up 6,993,048 (six million, nine hundred and ninety-three thousand, forty-eight) shares; • Grupa Azoty S.A., which will take up 6,201,383 (six million, two hundred and one thousand, three hundred and eighty-three) shares.3 Decisions and permits On January 17th 2020, the Polish Office of Competition and Consumer Protection (UOKiK) issued a decision clearing the proposed concentration whereby Grupa Azoty, HEC, KIND and Grupa Lotos would establish a joint venture operating under the name of GA Polyolefins. The application for the decision was filed on December 23rd 2019. 12 building permits had been issued by the date of this report.

PARENT'S KEY PROJECTS In Q1 2020, the Company launched 11 new projects with an aggregate budget of PLN 8,845 thousand and continued 45 projects commenced in previous years. Presented below are the selected and ongoing major investment projects. Decoupling of demineralised water production from variable salinity of the Oder river and increasing the units’ capacity to produce process waters The upgrade and expansion of the water treatment and demineralisation station will help protect the Company against periodic increases in salinity of the Oder river and enable using water from the river as the Company’s only source of supply. The project will also secure the supply of demineralised water to Grupa Azoty Polyolefins S.A. units. Development of design documentation is under way; part of the documentation has already been submitted for acceptance. The Contractor has signed contracts for the purchase of some equipment, such as ion and zwitterion exchange tanks, main pumps, container transformer station, and fixtures. Work began in filter chambers and the circulator. Project budget: PLN 108,000 thousand, expected completion: 2022

1 For details, see Current Report No.71/2019 “Execution of initial term sheet with Grupa LOTOS for equity investment and financing of Polimery Police” of December 13th 2019. 2 The Company announced the above events in Current Report No.77/2019 “Execution of amended term sheet concerning equity investment and financing of Polimery Police project with Hyundai Engineering Co., Ltd and Korea Overseas Infrastructure & Urban Development Corporation”, dated December 23rd 2019. 3 For details, see Current Report No. 22/2020 of February 18th 2020 – Share capital increase at subsidiary.

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Upgrade of the 220/110 kV GPZ Police substation to connect and supply the propane dehydrogenation and polypropylene production unit The upgrade of the substation will secure the distribution of electricity for the purposes of the planned propane dehydrogenation and polypropylene production unit (Polimery Police). A tender procedure for the purchase and start-up of autotransformers was concluded. The contract is currently in progress. On March 25th 2020, an EPC contract was signed to upgrade the substation. Documents are being prepared to enable the handover of the construction site. The development of a building permit design of autotransformer stations and temporary work on 220 kV lines is under way. Project budget: PLN 46,661 thousand, expected completion: 2022 WA II tower replacement on Line 7 The replacement of the absorption tower is aimed at maintaining the continuity of operation of the sulfuric acid production plant and preventing an unexpected failure. An EPC contract was signed for the project. Working plans and specifications for all types of works were prepared. The prefabrication of the tower and circulation tank commenced. Project budget: PLN 16,350 thousand, expected completion: 2021 Facility 508 tray with a sedimentation tank and an acidic wastewater drain The existing tray under the phosphoric and sulfuric acid tanks is in a poor technical condition. The tanks are tilting as a result of the continuing settlement of the tray and tank footing under the weight of the materials. The contractor for the project was selected, the construction site manager was appointed, the commencement of work was notified to the Building Inspection Authority and construction work started. Project budget: PLN 10,810 thousand, expected completion: 2021 Construction of PULNOx technical-grade urea solution production, storage and loading facility The project will guarantee the availability of PULNOx solution for the existing and future customers of the Company and will also increase the Company’s revenue. Construction and assembly work was completed, mechanical start-up was carried out and acceptance procedures were performed by the Transport Technical Supervision Authority. Construction completion was notified and an application for a permit to operate was submitted to the County Building Inspection Officer. Project budget: PLN 5,900 thousand, expected completion: 2020

2.7. Factors which will affect performance over at least the next reporting period A universal factor which may affect the Company’s performance in the next quarter is the economic situation caused by the pandemic. For a discussion of the expected impact of the coronavirus pandemic on the Company’s operations in the next quarter, as well as a description of the pandemic’s impact in Q1 2020, see Section 2.1 of this Management’s Discussion and Analysis. The description of market trends presented below also shows the projected impacts of the pandemic from the perspective of different product and raw material markets, with the proviso that (given the scale of the Company’s business on different markets) not all of the changes described will have a significant impact on the Company’s operations. Prices of raw materials and products Compound fertilizers The output of DAP is expected to be reduced by leading global manufacturers due to the coronavirus pandemic. Europe is expecting new prices to be announced after the end of the spring campaign. The market is expected to remain stagnant in anticipation of new pricing decisions. In the first half of 2020, the global DAP/MAP market is likely to be oversupplied. However, the DAP market is to remain relatively stable and the prices of this product are not expected to change markedly.

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At the beginning of the 2020 spring season, despite the impact of COVID-19 on economic processes, sales of NPK fertilizers in Poland rose unexpectedly. Fearing availability constraints, farmers purchased slightly more than they had planned. Similar behaviour was seen in other European markets. Presumably, some of the fertilizers purchased in spring will be stored on farms, and those farmers who have built such stocks will buy one dose of fertilizers less in the next season. Hence, despite minor periodic fluctuations, the prices of NPK fertilizers are expected to remain stable. Urea Urea prices are expected to remain low in the coming weeks until a new purchasing campaign in India is announced. China is the only market where the prices are stable. The country is recovering from the crisis caused by the fight against the coronavirus. Following an increase in domestic demand, the prices may remain stable for about a few weeks. Demand in Europe continues, but customers purchase products mostly on local markets or import them from neighbouring markets to ensure short delivery times. Measures taken to combat the COVID-19 pandemic will lead to delays in road transport as lorries wait to cross the border. Prices in Europe are under pressure on the back of not only large supply, but also lower demand. The weather conditions (drought) in a large part of north-western Europe also affected demand. However, rainy weather is expected to set in in mid-May and early June. Ammonia The international ammonia market decelerated. Lower demand from certain chemical and fertilizer sectors led to oversupply. Demand for fertilizers in India improved after the government abolished the restrictions imposed on key industries. However, although fertilizer production is possible, there may be shortages in labour force and difficulties in logistics, especially road transport. In Europe, manufacturers will be focusing more on contract sales rather than spot sales. No significant changes on the ammonia market are expected in the near future. At the beginning of the second quarter, market prices were in a downward trend and may continue to be under downward pressures. The shutting down of certain global competitors’ units may help stabilise or slightly increase the prices. Titanium white The price trends for titanium white will be principally driven by the global economic conditions. In early 2020, the coronavirus pandemic became the key threat to global economic growth. The economic slowdown caused by the coronavirus may affect demand for titanium white in 2020, with the impact depending on how the risk escalates. The rapid growth of the Chinese market is strengthening the position of Chinese producers of titanium white, with Lomon Billions as the leader among them. The other of the two new production lines, increasing the company’s annual production capacity by another 100,000 tonnes, is to be launched by mid-2020. Products manufactured using the two new lines will probably be exported to Europe. This means that imports of Chinese-produced titanium white into the EU market are also likely to continue to increase. In March, the impact of the pandemic was still a bit of a puzzle. Before the start of the season (usually the second quarter of the year), demand from customers went up as they secured appropriate stock levels. Demand for titanium white has been suppressed since the beginning of the second quarter after measures were taken to halt the spread of coronavirus. Deliveries of pigments to Italy and France are becoming increasingly difficult. Some production plants of titanium white buyers located in Benelux, Italy and France were reported to have been temporarily shut down (for two weeks). As the new season is starting, the market situation is uncertain. The high supply volumes cause a downward pressure on prices, while rising exchange rates have a favourable effect the sales prices translated into the złoty. RAW MATERIALS Phosphate rock Further in 2020, the market of phosphate fertilizers and key raw materials for their production will be driven by the developments related to the coronavirus pandemic. The weather in many parts of the world has so far supported intensive fertilisation, but on the other hand, logistics problems in

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product transport are likely to occur. In April, the market for phosphate fertilizers was under a slight pressure of strategies applied by state governments, which introduced various restrictions in response to the coronavirus pandemic. However, these changes did not trigger any significant price fluctuations. Most of them led to local logistics problems or minor delays in unloading. It cannot be ruled out that production capacities of the world’s leading producers will be reduced. Given the characteristics of fertilizers as a product, many countries (including China) do everything to make sure that fertilizers reach the target customers to enable them to achieve planned yields. However, the current situation may still lead to significant constraints, both in supply and demand. Drought occurring in many regions of the world could contribute to lower fertilization levels and demand for phosphate. Sulfur In Q2 2020, prices of liquid sulfur in Western Europe remained unchanged relative to Q1 2020, while prilled sulfur prices increased globally. However, analysts point out that in the case of prilled sulfur this could be a short-lived market reaction. Potential production cuts by phosphate fertilizer manufacturers, which are the main buyers of sulfur, may have a strong impact on sulfur supply. On the other hand, crude oil processing and sulfur production may also be reduced. These developments have been accompanied by general logistic constraints and their effect on freight availability and rates. Potassium chloride Further into 2020, the development of the coronavirus pandemic will be a significant factor with a bearing on the market for potassium chloride. The market was relatively stable throughout April. Prices stopped rising across all markets. This market trend was reflected in the contract signed between China and BPC, a Belarusian potassium chloride supplier. The new potassium chloride price effective from May 1st 2020 is approximately 24% lower than the one provided for in the 2018/2019 contract. Russia-based Uralkali stated in its announcement that the price of the BPC contract with China was too low and did not reflect actual market conditions, but still it was very likely to constitute a market benchmark. Ilmenite and titanium slag In view of signs of growing demand for ilmenite, mainly from Chinese producers of titanium white, and insufficient investments in the mining sector, global prices of this raw material are expected to rise over the next quarters. The continuing undersupply of titanium slag is likely to prevent price declines and the price of this raw material is expected to remain high. Rio Tinto announced that it would decelerate some of its operations to prevent the spread of coronavirus. The re-launch of the Richard Bay Minerals mine in Rio Tinto in South Africa following a safety shutdown did not have a noticeable impact on the market for TiO2 as the stoppage was short and occurred in an off-peak season. To date, the Company has not experienced any significant problems with the availability of titanium-bearing minerals due to the COVID-19 pandemic. The situation is being monitored. MACROECONOMIC FACTORS Exchange rates The current situation of the financial markets, driven by uncertainty as to the outcome of the response to the coronavirus pandemic and the second outbreak predicted for Q3 and Q4 2020, leads to increased risk aversion and flight of capital to assets considered as safe investment. The Company believes that the złoty will remain weak throughout Q2 and that there remains a considerable risk of a further slight depreciation below the present levels. The central bank interest rate cuts in Poland in March and April are likely to exert pressure on the złoty in the short and medium term. The impact of the weakening of the złoty in relation to convertible currencies should not significantly jeopardise the Company’s expected performance in respect of its foreign currency exposure in Q2 2020. Interest rates in Poland In March and April, the Monetary Policy Council reduced the interest rates twice, each time by 0.5 pp. This will help reduce the Company’s financing costs.

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The base interest rate for the Company’s loans (1M WIBOR) should remain at approximately 0.65% throughout the current year, following a decline in the cost of money. Neither the ECB nor the FED are expected to cut the interest rates until the end of the year as they focus on introducing unconventional quantitative easing instruments and supporting interbank liquidity. In conclusion, the Company expects that the currently low interest rates should remain unchanged until the end of 2020 with respect to the currencies used to finance its activities (PLN and EUR). Therefore, the costs of financing will remain at all-time low levels.

3. Other information 3.1. Significant events Registration of share capital increase and amendments to the Articles of Association On January 10th 2020, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, registered the following: • an increase in the Company’s share capital from PLN 750,000,000 to PLN 1,241,757,680, effected through the issue of 49,175,768 Series C ordinary bearer shares in the Company with a par value of PLN 10.00 per share, issued pursuant to Resolution No. 4 of the Extraordinary General Meeting of the Company increasing the Company’s share capital through a rights issue, public offering of new shares, setting November 7th 2019 as the pre-emptive rights record date in respect of new shares, conversion into book-entry form and seeking admission of pre- emptive rights, allotment certificates and new shares to trading on the regulated market operated by the Warsaw Stock Exchange, amending the Company’s Articles of Association, and authorising the Supervisory Board to adopt a consolidated text of the Company’s Articles of Association; • amendments to the Company’s Articles of Association resulting from the resolutions passed by the Extraordinary General Meeting of November 7th 2019 and September 23rd 2019 and the representation of the Company’s Management Board of December 24th 20194. On January 16th 2020, the Company’s Supervisory Board adopted the consolidated text of the Company’s Articles of Association, incorporating the amendments5. Antitrust clearance of intended concentration On January 21st 2020, the Polish Office of Competition and Consumer Protection (UOKiK) issued a decision clearing the proposed concentration whereby the Company’s parent – Grupa Azoty S.A., Hyundai Engineering Co., Ltd., Korea Overseas Infrastructure & Urban Development Corporation and Grupa LOTOS S.A. would establish a joint venture operating under the name of Grupa Azoty Polyolefins S.A. This satisfies one of the conditions precedent under the initial term-sheets, as announced by the Company in Current Report No. 71/2019 of December 13th 2019 and Current Report No. 77/2019 of December 23rd 20196. Co-financing of R&D projects The Company is implementing an R&D project: “Development of a technology for the production of a new type of liquid fertilizers based on phosphate-bearing materials of sedimentary origin”, co- funded by the EU. The purpose of the project is to develop a new technology for optimum and efficient purification and concentration of phosphoric acid (V) for the production of ammonium polyphosphate (APP) based on phosphate-bearing materials of sedimentary origin and APP-based innovative liquid fertilizers. The project will ultimately deliver product innovations in the form of modern APP-based liquid fertilizers manufactured using UAN solutions and other fertilizer components. The Company is the leader of the Consortium implementing the project. The maximum amount of EU funding is PLN 7,420,477.21, representing 49.94% of total eligible expenditure.

4 For details, see Current Report No. 9/2020 of January 16th 2019 – Adoption of consolidated text of Articles of Association by Supervisory Board. 5 For details, see Current Report No. 5/2020 of January 13th 2020 – “Registration of share capital increase and amendments to the Articles of Association”. 6 For details, see Current Report No. 11/2020 of January 21st 2019 – Antitrust clearance of intended concentration.

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Important information about the carbon market

In Q1 2020, the prices of CO2 emission allowances (EUAs) on the exchange market ranged between EUR 14 and EUR 26. Until March 13th, exchange prices remained in a broad consolidation pattern ranging from EUR 22 to EUR 26. On March 16th, the prices fell below EUR 22 and plummeted to about EUR 14 over the following days. A rebound up to EUR 18 continued until the end of the quarter. Current market forecasts envisage that average allowance prices will remain below the levels seen last year due to lower demand from issuers and a continued positive correlation with oil and gas prices. It should be added that as at the date of this report risks related to forecasts are greater than usual due to the high uncertainty as to the future of the global economy and the persistently high market volatility. In Q1 2020, the Company purchased allowances for 2020 and 2021–2022 based on the Grupa Azoty Group’s common model of CO2 emission allowance management. As at the end of Q1, the Company secured a large part of its requirement for EUA emission allowances for 2020. Classification of titanium white In February 2020, Commission Delegated Regulation (EU) 2020/217 was published, concerning, among other things, the classification of TiO2 as a substance that may cause cancer by inhalation (category 2). This classification is not related to the chemical properties of titanium dioxide, but to the form in which it is found – very fine particles inhaled when dust concentration is extremely high. The Regulation will take effect on October 1st 2021, giving entities along the entire supply chain the time to ensure conformity of package labelling and processes with the new regulations. The Company monitors the risk related to the classification on an ongoing basis and takes extensive measures relating to information, occupational health and safety, environmental protection and labelling of products in order to meet the requirements imposed by the Regulation.

3.2. Significant agreements On January 9th 2020, the Company’s Management Board entered into an ilmenite supply agreement with Titania AS of Hauge i Dalane, Norway. The contract was concluded for a definite term from January 1st 2020 to December 31st 2022. The value of the deliveries to be made under the contract is estimated at approximately PLN 168,000 thousand.7 Significant financing agreements A PLN 80,000 thousand overdraft facility agreement with Bank Gospodarstwa Krajowego expired on January 24th 2020. Accordingly, the Parent carried out an RFP procedure for a PLN 100,000 thousand overdraft facility. The best tender was submitted by Bank Gospodarstwa Krajowego, and on March 5th 2020 the Parent entered into a PLN 100,000 thousand overdraft facility agreement with that bank, expiring on January 23rd 2023. As a means of protection against risk, the Company signed a trade receivables insurance contract with Atradius Credito y Caucion S.A. de Seguros y Reaseguros S.A. Poland Branch. The new contract is a continuation of the contracts concluded with the insurer in the previous years. The policies are valid from January 1st 2020 to December 31st 2021 and cover receivables in domestic and export sales of fertilizers, pigments, chemicals and plastics in three currencies (PLN, EUR and USD). Almost 100% of trade credit limits extended by Grupa Azoty Zakłady Chemiczne Police S.A. are covered by the current policy. A small percentage of limits granted internally within the Company are not covered by the Insurer’s recommendations, which mostly applies to associates and limits secured by bank guarantees.

3.3. Sureties and guarantees In Q1 2020, the Group did not issue any guarantees with a significant aggregate value. The Group did not amend any guarantees in Q1 2020.

7 For details, see Current Report No. 3/2020 of January 9th 2020 – “Execution of contract with Titania AS”.

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Guarantees On March 25th 2020, a PLN 31,000 performance bond was issued on the Company’s instruction for PGE Górnictwo i Energetyka Konwencjonalna S.A., expiring on April 17th 2021. On March 25th 2020, a PLN 42,000 performance bond was issued on the Company’s instruction for PGE Górnictwo i Energetyka Konwencjonalna S.A., expiring on April 17th 2021. As at the reporting date, the total value of guarantees issued by the Group was PLN 10,742 thousand. The guarantees were issued on the Parent’s instruction under a multi-purpose credit facility with PKO BP S.A. Sureties The Group did not grant any sureties in Q1 2020. Intragroup loans In Q1 2020, the Parent granted a loan of PLN 468 thousand to the subsidiary Supra Agrochemia Sp. z o.o. As at March 31st 2020, Supra Agrochemia Sp. z o.o. owed Grupa Azoty Zakłady Chemiczne Police S.A. PLN 15,068 thousand in aggregate under four loans. The loans are to be repaid by December 31st 2020. 3.4. Shareholding structure Below are listed shareholders holding directly, or indirectly through subsidiaries, at least 5% of total voting rights at the General Meeting as at the date of this report, along with information on the number of shares held by such entities, their respective ownership interests, the number of voting rights held, and their share in total voting rights at the General Meeting. Table 11. Shareholding structure as at this report date % of total Number of Ownership Number of voting shares interest (%) voting rights Shareholder rights Grupa Azoty S.A. 78,051,500 62.86 78,051,500 62.86 ARP S.A. 16,299,649 13.13 16,299,649 13.13 OFE PZU Złota Jesień 16,092,634 12.96 16,092,634 12.96 State Treasury 9,273,078 7.47 9,273,078 7.47 Other shareholders 4,458,907 3.58 4,458,907 3.58 124,175,768 100.00 124,175,768 100.00

The actual shareholding structure may differ from the presented one if there were no events obligating a shareholder to disclose its new shareholding or, even if such events did occur, a shareholder failed to provide the information.

3.5. Parent shares held by management and supervisory personnel As at the reporting date (March 31st 2020) and as at the date of issue of this report, no members of the Parent’s Supervisory Board held any shares in the Parent. Since the date of issue of the previous report, there have been no changes in holdings of Parent shares by the supervisory personnel. Table 12. Parent shares held by management personnel Number of shares / voting rights As at Mar 31 2020 As at the date of As at Jan 1 2020 this report Wojciech Wardacki, Ph.D. - - - Tomasz Panas - - - Włodzimierz Zasadzki, - - - Ph.D.* Anna Tarocińska 1 1 1

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* until April 27th 2020

Since the date of issue of the previous report, there have been no changes in holdings of Parent shares by the management personnel.

3.6. Composition of the Management Board and the Supervisory Board Parent’s Management Board Composition of the Parent’s Management Board as at March 31st 2020: • Wojciech Piotr Wardacki – President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 223/VII/18 of May 30th 2018; • Tomasz Grzegorz Panas – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 225/VII/18 of May 30th 2018; • Włodzimierz Zasadzki – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 224/VII/18 of May 30th 2018; • Anna Tarocińska – Member of the Management Board of the eighth joint term of office, elected by Parent employees and appointed by Supervisory Board Resolution No. 226/VII/18 of May 30th 2018. On April 27th 2020, by way of Resolution No. 76/VIII/20, the Company’s Supervisory Board resolved to remove Włodzimierz Zasadzki from the Management Board of Grupa Azoty Zakłady Chemiczne Police S.A. of the 8th joint term of office. The resolution became effective as of its date.8 As at the date of authorisation of the interim condensed consolidated financial statements for issue, the composition of the Parent’s Management Board was as follows: • Wojciech Piotr Wardacki – President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 223/VII/18 of May 30th 2018; • Tomasz Grzegorz Panas – Vice President of the Management Board of the eighth joint term of office, appointed by Supervisory Board Resolution No. 225/VII/18 of May 30th 2018; • Anna Tarocińska – Member of the Management Board of the eighth joint term of office, elected by Parent employees and appointed by Supervisory Board Resolution No. 226/VII/18 of May 30th 2018. Powers and responsibilities of the Parent's Management Board In accordance with the Commercial Companies Code and the Articles of Association, the Management Board is the Company's executive body responsible for managing its affairs and representing it in and out of court. The Management Board, headed by the President, manages the Company and represents it before third parties. All matters connected with the management of the Company’s affairs which are not reserved under the law or the Articles of Association for the General Meeting or the Supervisory Board, fall within the scope of powers and responsibilities of the Management Board. The Management Board operates in compliance with effective laws and is accountable for the management of the Company's affairs before the Supervisory Board and the General Meeting. Division of powers and responsibilities within the Management Board Pursuant to Supervisory Board's Resolution No. 26/VI/13 on approval of amendments to the Rules of Procedure for the Management Board of Grupa Azoty Zakłady Chemiczne Police S.A., the division of powers and responsibilities for the supervision of the Company's individual organisational areas is each time determined and approved by the Company's Management Board by way of a resolution. As at the issue date of this Report, the division of powers and responsibilities among the Management Board members is governed by: • Management Board Resolution No. 895/VIII/20 of April 28th 2020 on the division of powers and responsibilities among the Management Board Members with regard to the supervision of organisational areas and business processes; • Organisational Rules adopted by the Management Board by Resolution No. 9/VI/12 of July 6th 2012, as amended (most recently amended by Management Board Resolution No. 887/VIII/20 of April 22nd 2020, approved by Supervisory Board Resolution No. 78/VIII/20 of April 27th 2020).

8 For details, see Current Report No. 28/2020 of April 27th 2020 – Removal of Management Board Member.

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Pursuant to Management Board Resolution No. 895/VIII/20 of April 28th 2020, the supervisory powers and responsibilities are divided among the Company’s Management Board members as follows: • Wojciech Wardacki, Ph.D., President of the Management Board and Chief Executive Officer: o Central Dispatch Division, o Internal Audit Division, o Public Relations Office, o Security Office, o Human Resources and Management Department, o Finance Department, o Controlling Department, o Strategic Procurement Department, o Corporate Controlling Department. • Tomasz Panas, Vice President of the Management Board: o Nitro Business Unit, o Pigments Business Unit, o Fertilizers Business Unit, o Technical Department, o Power Centre, o Infrastructure Centre, o Laboratory Analysis Centre, o Logistics Centre, o Technology Development Office, • Anna Tarocińska, Management Board member elected by employees: o Technical Safety Department, o Corporate Agro Sales Department, o Tendering Department, o Fertilizer Sales Department. As regards the division of duties among the Management Board members, the resolution also sets out their powers and responsibilities in the coordination of business processes. The Management Board members oversee and coordinate the following business processes: • Wojciech Wardacki, Ph.D., President of the Management Board and Chief Executive Officer: o Strategic management, o Human resources management, o Financial management, o Financial controlling, o Availability of feedstocks and raw materials. • Tomasz Panas, Vice President of the Management Board: o Logistics support, o Production asset management. o Investment project management. • Anna Tarocińska, Management Board member elected by employees: o Technical and environmental safety, o Comprehensive customer support. The President of the Management Board, assisted by the unit responsible for providing support to the Company’s governing bodies, performs ongoing supervision of the implementation of resolutions of the Parent's Management Board, Supervisory Board, and General Meeting. The President of the Management Board convenes Management Board meetings on his/her own initiative, or at the request of a member of the Management or Supervisory Board, sets the agenda and chairs the meetings. In the President’s absence, these activities are performed by a Management Board member designated by the President of the Management Board. In accordance with the Organisational Rules of Grupa Azoty Zakłady Chemiczne Police S.A., President of the Management Board – Chief Executive Officer exercises general supervision of the Company’s operations and is assisted by directors of departments, business units and centres, as well as by managers of other organisational units.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

Powers and responsibilities of the President of the Management Board - Chief Executive Officer include: • general supervision and coordination of Company’s activities, • promoting a good image of the Company as a corporate citizen, • managing the work of the Company’s Management Board and presiding over its meetings, • performing the Company's responsibilities as an employer within the bounds of the Polish Labour Code, • supervising the restructuring and privatisation processes at the Company and its subsidiaries, • supervising and coordinating business processes specified in the Management Board Rules of Procedure, and supervising organisational units that report directly to the President of the Management Board – Chief Executive Officer, • approving internal audit, business control and stocktaking plans, as well as making decisions on their implementation, and • representing the Company in and out of court, jointly with another Management Board member or proxy. The previous allocation of powers and responsibilities between the Members of the Management Board (valid in Q1 2020) is presented is Section 8.12 of the Directors’ Report on the operations of Grupa Azoty Zakłady Chemiczne Police S.A. and the Grupa Azoty Zakłady Chemiczne Police Group in the 12 months ended December 31st 2019.

Supervisory Board As at the date of authorisation of these interim condensed consolidated financial statements for issue, the composition of the Parent's Supervisory Board was as follows: • Mariusz Kądziołka − Chairman of the Supervisory Board of the eighth joint term of office, appointed by Resolution No. 18 passed by the Parent’s Annual General Meeting on June 25th 2019; • Mirosław Kozłowski – Representative of the State Treasury, Deputy Chairman of the Supervisory Board of the eighth joint term of office, appointed by a letter from the Chancellery of the Prime Minister on June 25th 2019 (effective from July 2nd 2019); • Bożena Licht – Secretary of the Supervisory Board of the eighth joint term of office, appointed Resolution No. 19 passed by the Parent’s Annual General Meeting on June 25th 2019 (effective from July 2nd 2019); • Agnieszka Dąbrowska − Member of the Supervisory Board of the eighth joint term of office, appointed by Resolution No. 20 passed by the Parent’s Annual General Meeting on June 25th 2019; • Iwona Wojnowska − Member of the Supervisory Board of the eighth joint term of office, elected by the Parent’s employees and appointed by Resolution No. 21 of the Parent’s Annual General Meeting of June 25th 2019; • Andrzej Rogowski − Member of the Supervisory Board of the eighth joint term of office, elected by the Parent’s employees and appointed by Resolution No. 22 of the Parent’s Annual General Meeting of June 25th 2019.

The Supervisory Board operates on the basis of: • the Commercial Companies Code of September 15th 2000, • the Act on Commercialisation and Privatisation, • the Accounting Act, • the Act on Statutory Auditors, Audit Firms, and Public Oversight, • the Company’s Articles of Association, • the Rules of Procedure for the Supervisory Board of Grupa Azoty Zakłady Chemiczne Police S.A. Audit Committee On November 23rd 2009, the Supervisory Board established an Audit Committee (Resolution No. 342/IV/09) to improve the effectiveness of the Board’s work and to strengthen control over the Parent and the Group. The Audit Committee is an advisory body acting collectively within the Supervisory Board. As at the date of authorisation of these interim condensed consolidated financial statements for issue, the composition of the Audit Committee was as follows:

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

• Mariusz Kądziołka – Chairman of the Audit Committee, appointed by Supervisory Board Resolution No. 3/VIII/19 of July 2nd 2019; • Agnieszka Dąbrowska – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 4/VIII/19 of July 2nd 2019; • Mirosław Kozłowski – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 5/VIII/19 of July 2nd 2019; • Andrzej Rogowski – Member of the Audit Committee, appointed by Supervisory Board Resolution No. 6/VIII/19 of July 2nd 2019. The Audit Committee's tasks include in particular: a) monitoring of: o the financial reporting process, o the effectiveness of internal control and risk management systems as well as internal audit systems in place at the Company, including effectiveness of the financial reporting process, o performance of financial audit, in particular an audit conducted by the audit firm, taking into account all recommendations and findings of the Audit Oversight Commission resulting from audits carried out at the audit firm; b) controlling and monitoring of the independence of the qualified auditor and the audit firm, in particular when the audit firm also provides services other than the audit of financial statements; c) informing the Supervisory Board of the audit findings and explaining how the audit contributed to the reliability of the Company’s financial reporting and what role the Audit Committee played in the audit; d) assessing the auditor’s independence and approving the provision of permitted non-audit services by the auditor; e) developing a policy for selecting an audit firm to conduct the audit; f) developing a policy for providing permitted non-audit services by the audit firm carrying out the audit, entities related to the audit firm or a member of the audit firm’s network; g) establishing an audit firm appointment procedure for the Company; h) giving recommendations to the Supervisory Board on the appointment of auditors or auditing firms in line with the procedures referred to above; i) submitting recommendations to ensure the reliability of the financial reporting process at the Company. Detailed rules of operation of the Audit Committee are provided for in the Rules of Procedure for the Audit Committee approved by Resolution No. 159/VII/17 of the Company’s Supervisory Board of December 28th 2017.

4. Other information Management Board’s position on the achievement of forecasts As no performance forecasts were published, the position of the Parent’s Management Board concerning achievement of such forecasts is not presented. Parent’s branches (divisions) The Company does not operate any branches or divisions outside of its principal place of business. Shares 49,175,768 Series C ordinary bearer shares were subscribed for in a secondary offering of shares in Grupa Azoty Zakłady Chemiczne Police S.A. at an issue price of PLN 10.20 per share (which means that the gross value of the share issue amounted to PLN 501,592,833.60). Net of issue costs, the Parent raised PLN 496,397 thousand in equity, including: • share capital of PLN 491,758 thousand, • share premium of PLN 4,639 thousand (share premium of PLN 9,835 thousand less issue costs of PLN 5,196 thousand). The Company received the issue proceeds on January 30th 2020. They will be allocated to the implementation by the Company’s subsidiary Grupa Azoty Polyolefins S.A. of an investment project to construct propylene and polypropylene production units and ancillary infrastructure. On January 24th 2020, the Extraordinary General Meeting of Grupa Azoty Zakłady Chemiczne Police S.A. passed a resolution concerning the subscription by the Company of

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

issue shares by way of a private placement for the issue price determined by the GA Polyolefins S.A. General Meeting, and in such number as is required to maintain the Company’s existing percentage shareholding in GA Polyolefins S.A., provided that the Company’s total financial commitment to subscribe for shares in the subsidiary does not exceed PLN 334,968 thousand. On January 10th 2020, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, registered an increase in the Parent’s share capital from PLN 750,000,000 to PLN 1,241,757,680 by way of an issue of 49,175,768 Series C ordinary bearer shares in the Company, with a par value of PLN 10.00 per share. The Company does not operate any control system for employee share option plans. Following the completion of the issuance process, the Company calculated the cost of issue. Total costs classified as issue costs amounted to PLN 5,352 thousand and included: • cost of preparing and carrying out the offering: PLN 3,756 thousand, • underwriting fees (separately for each underwriter): not applicable, • costs of preparing the issue prospectus, including costs of advisory services: PLN 1,558 thousand, • costs of promoting the offering: PLN 38 thousand. The issue costs of PLN 5,196 thousand were disclosed in the Company’s financial statements under equity, as a reduction of the share premium. The remaining PLN 156 thousand was recognised as operating expenses under general and administrative expenses. Recognition of the costs in the Company’s financial statements corresponds to accounting for those costs in the Company’s accounting records. Average cost of issue per share subscribed for: PLN 0.119 Litigation The Company is not party in any material court, arbitration or administrative proceedings concerning liabilities or receivables referred to in the Minister of Finance’s Regulation on current and periodic information, dated March 29th 2018 (Dz.U. of 2018, item 757, published on April 20th 2018). Events after the reporting date On May 6th 2020, the Annual General Meeting of KEMIPOL Sp. z o.o. passed a resolution to distribute dividend from the profit generated in 2019 to Shareholders. The Company is to receive PLN 12,493 thousand. The dividend will be paid by August 31st 2020.

9 For details, see Current Report No. 27/2020 of April 21st 2020 – Issue costs of Series C shares.

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

This consolidated quarterly report of the Grupa Azoty Zakłady Chemiczne Police Group for Q1 2020 contains 73 pages.

Signatures of Members of the Parent's Management Board

Signed with qualified Signed with qualified electronic signature electronic signature …………………………………………… …………………………………………… Wojciech Wardacki, Ph.D. Tomasz Panas President of the Vice President of the Management Board Management Board

Signed with qualified electronic signature …………………………………………… Anna Tarocińska Member of the Management Board

Police, May 20th 2020

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Grupa Azoty Zakłady Chemiczne Police Group Management’s discussion and analysis: Q1 2020 (all amounts in PLN '000 unless indicated otherwise)

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