COMPLETE CONSOLIDATED INTERIM REPORT OF CIECH CHEMICAL GROUP FOR THE FIRST HALF OF 2011 Ciech Group complete consolidated report for the first half of 2011 CONTENTS I. CIECH GROUP CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ................................................................. 4 1. Ciech Group consolidated profit and loss statement ....................................................................................... 4 2. Ciech Group consolidated statement of comprehensive income ..................................................................... 6 3. Ciech Group consolidated statement of financial position ............................................................................... 7 4. Ciech Group consolidated statement of cash flows ......................................................................................... 8 5. Ciech Group consolidated statement of changes in equity ............................................................................ 10 II. MANAGEMENT REPORT ............................................................................................................................................ 12 1. Key events taking place in Ciech Group between 1 January 2011 and the date for the preparation of these financial statements....................................................................................................................................... 12 2. Description of achievements at Ciech Group during the period 1 January to 30 June 2011, together with a description of factors and events having a significant impact on the financial result achieved ...................... 15 2.1 Basic financial data ............................................................................................................................... 15 2.2 Revenue from sales ............................................................................................................................... 16 2.3 Gross profit and operating profit ............................................................................................................ 17 2.4 Net result ............................................................................................................................................... 18 2.5 Assets ................................................................................................................................................... 18 2.6 Liabilities ............................................................................................................................................... 18 2.7 Cash Flows ............................................................................................................................................ 18 3. Seasonality and cyclical nature of CIECH S.A.'s and the Ciech Group's operations ..................................... 19 4. Achievement of previously published earnings forecasts for a given financial year in light of results presented in the quarterly report in relation to forecast results. ..................................................................... 19 5. Factors impacting on the Ciech Group's results, with particular consideration to the upcoming half year ..... 19 5.1 External factors ...................................................................................................................................... 19 5.2 Internal factors ...................................................................................................................................... 20 6. Description of principal risks and hazards in the remainder of the financial year .......................................... 23 7. Changes CIECH S.A. shares held by Management Board and Supervisory Board members ...................... 26 8. CIECH S.A. shareholders with at least 5% of votes at the General Meeting ................................................. 26 9. Issue, redemption and repayment of debt and equity securities in Ciech Group ........................................... 27 10. Information on dividends paid (or declared) – overall and per share – split between ordinary and preference shares ........................................................................................................................................................... 27 11. Description of organisation or indication of the effects of changes in the structure of Ciech Group entities .. 28 12. Pending proceedings before a public court, arbitration body or public administration authority .................... 28 13. Information on the execution by CIECH S.A. or a subsidiary of one or more transactions with associates which are not typical or routine transactions ................................................................................................. 28 14. Disclosure of loan or other guarantees issued by CIECH S.A. and its subsidiaries ...................................... 28 III. INFORMATION ON THE PRINCIPLES ADOPTED IN PREPARATION OF THE COMPLETE CONSOLIDATED INTERIM REPORT OF THE CIECH GROUP FOR THE FIRST HALF OF 2011 ............................................................................................................ 29 1. Basis for preparation of the Consolidated Interim Report of the Ciech Group for the First Half of 2011 ....... 29 2. Statement of compliance ............................................................................................................................... 29 3. Accounting policies adopted .......................................................................................................................... 29 4. Functional currency, presentation currency and currency translation ........................................................... 29 IV. NOTES TO CIECH GROUP 'S CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ............................................. 31 1. Consolidated entities ..................................................................................................................................... 31 2. The impact of changes in Ciech Group’s organisational structure in the first half of 2011, including mergers, acquisitions or divestitures of Group entities, long-term investments, de-mergers, restructuring and discontinuation .............................................................................................................................................. 35 ••• ORGANIKA-SARZYNA S.A. ..................................................................................................................................... 36 3. Financial information by operating segment .................................................................................................. 38 4. Information concerning the financial situation of the Ciech Group ................................................................ 44 5. Currency risk exposure ................................................................................................................................. 50 6. Pending proceedings in a public court, body of arbitration or public administration institution as at 30 June 2011 .............................................................................................................................................................. 50 6.1 CIECH S.A. ............................................................................................................................................ 50 6.2 Subsidiaries – significant provisions ...................................................................................................... 53 7. Information on related entity transaction(s) concluded by CIECH S.A. or its subsidiaries, if significant on a separate or joint basis and concluded on terms other than arm’s length ...................................................... 54 8. Disclosure of loan or other guarantees issued by CIECH S.A. and its subsidiaries ...................................... 55 9. Information on provisions and asset impairment charges in the period 1 January - 30 June 2011 ............... 57 The following alterations (creation, use and termination) in provisions and impairment losses were included in the Ciech Group consolidated financial statements during the first half of 2011. .......................................... 57 10. Notes to Ciech Group’s consolidated statement of comprehensive income .................................................. 58 11. Information on the acquisition and disposal of property, plant and equipment .............................................. 59 12. Information on changes in contingent liabilities or contingent assets since the end of the last financial year 60 13. Guarantees issued by Ciech Group Companies to the Arranging Banks and the Medium Exposure Banks 60 14. Discontinued operations and available-for-sale assets ................................................................................. 65 15. Disclosure of debt delinquencies or any infringement of debt-related agreements ....................................... 65 2 Ciech Group complete consolidated report for the first half of 2011 16. Recognition of the consortium loan in accordance with IAS 39 ..................................................................... 65 17. Information on non-consolidated subsidiaries and associates ...................................................................... 66 V. CIECH S.A. CONDENSED SEPARATE FINANCIAL STATEMENTS FOR THE FIRST HALF OF 2011, PREPARED IN ACCORDANCE WITH INTERNATIONAL