Contents 1. General information on the Group Management of the Group Business overview... 11

Directors Report on the operations of the Grupa Azoty Zakłady Chemiczne Police Group

Contents 1. General information on the Group... 4 1.1. Organisation... 4 1.2. Changes in the organisation... 8 1.3. Company organisational and equity ties... 9 1.4. Parent s branches (divisions)... 9 2. Management of the Group... 9 2.1. Parent organisational chart... 9 2.2. Changes in key management policies... 10 2.3. Organisational changes at the Parent... 10 2.4. Workforce... 10 3. Business overview... 11 3.1. Basic information... 11 3.2. Overview of key products, goods and services... 12 3.3. Sales markets and supply sources... 14 3.4. Significant agreements... 15 3.5. Material related-party transactions on non-arm s length terms... 16 3.6. Significant events... 16 4. Strategy and development policy... 17 4.1. Strategy... 17 4.2. Directions of development... 17 4.3. Growth prospects and market strategy... 18 4.4. Key investments in Poland and abroad... 19 4.5. Key equity investments... 20 4.6. Feasibility of investment plans... 20 4.7. Significant R&D achievements... 20 4.8. Corporate Social Responsibility Policy... 21 5. The Group s current financial position... 21 5.1. Assessment of non-recurring factors and events having a material impact on operations and financial performance... 21 5.2. Market overview... 22 5.3. Key financial and economic data... 24 5.3.1. Consolidated financial information... 24 5.3.2. Segment results... 25 5.3.3. Operating expenses by nature... 27 5.3.4. Structure of assets, equity and liabilities... 28 5.4. Financial ratios... 29 5.5. Explanation of differences between actual performance and financial forecasts... 31 5.6. Management of capital and assets... 31 5.7. Bank deposits... 32 5.8. Borrowing agreements concluded or terminated during the financial year... 32 5.9. Loans advanced... 34 5.10. Sureties and guarantees received and issued... 35 5.11. Material off-balance-sheet items... 35 5.12. Financial instruments... 35 5.13. Forecast financial position... 36 6. Risks, threats and growth prospects... 36 6.1. Significant risk factors and threats... 36 6.1.1. Strategic management... 36 6.1.2. Technical and environmental safety... 36 6.1.3. Comprehensive customer support... 38 6.1.4. Availability of feedstocks and materials... 39 6.2. Grupa Azoty Group s significant external and internal growth factors... 40 6.2.1. External factors... 40 6.2.2. External factors... 40 7. Parent s equity and other securities and its major shareholders... 41 7.1. Total number and par value of Parent shares, holdings of Parent shares by supervisory and management personnel, and interests of such persons in the Parent s related entities... 41 Grupa Azoty Zakłady Chemiczne Police Group Page 2 of 63

7.2. Agreements known to the Parent which may cause future changes in share percentages of existing shareholders and bondholders... 42 7.3. Control systems for employee share ownership plans... 42 7.4. Treasury shares held by the Parent, Group companies and persons acting on their behalf... 42 7.5. Issue, redemption, and repayment of debt and equity securities... 43 7.6. Use of proceeds from share issues... 43 7.7. Parent shares... 43 8. Statement of compliance with corporate governance principles... 44 8.1. Corporate governance code applicable to the Parent and availability of the text of the code to the public... 44 8.2. Degree of the Company s non-compliance with corporate governance principles, specification of the principles not complied with, and reasons for the non-compliance... 45 8.3. Internal control and risk management systems... 47 8.4. Shareholding structure... 48 8.5. Special control powers of security holders... 49 8.6. Restrictions on voting rights... 49 8.7. Restrictions on the transferability of securities... 49 8.8. Rules governing appointment and removal from office of management personnel; powers of such personnel, including their authority to decide on the issue or buy-back of shares... 49 8.9. Rules governing amendments to the Parent s Articles of Association... 50 8.10. Operation of the General Meeting... 50 8.11. Composition and operation of the Company s management and supervisory bodies... 52 8.12. Remuneration and additional benefits... 55 8.13. Agreements between the Parent and Management Board members... 56 8.14. Sponsorship, charitable and similar activities... 57 9. Other material information and events... 57 9.1. Audit firm... 57 9.2. Court proceedings... 58 9.3. Environmental performance... 58 9.4. Awards and distinctions... 59 10. Events after the end of the reporting period... 60 Index of tables... 61 Index of figures... 62 Grupa Azoty Zakłady Chemiczne Police Group Page 3 of 63

1. General information on the Group 1.1. Organisation As at December 31st 2015, the Grupa Azoty Zakłady Chemiczne Police Group (the Group ) comprised Grupa Azoty Zakłady Chemiczne Police S.A. (the Parent, the Company ), and: nine subsidiaries (in which the Parent held ownership interests above 50%), including one company in liquidation, one indirect subsidiary, two associates (in which the Parent holds ownership interests below 50%), including one company in liquidation bankruptcy. Table 1. Parent s interests in subsidiaries as at December 31st 2015 Name Registered office/address Share capital % of shares directly attributable to the Parent Grupa Azoty Police Serwis Sp. z o.o. ul. Kuźnicka 1, 72-010 Police, Poland 9,618 100.00 Koncept Sp. z o.o. ul. Kuźnicka 1, 72-010 Police, Poland 512 100.00 PDH Polska S.A. ul. Kuźnicka 1, 72-010 Police, Poland 60,000 100.00 Supra Sp. z o.o. Transtech Usługi Sprzętowe i Transportowe Sp. z o.o. ul. Monopolowa 6 51-501 Wrocław, Poland ul. Kuźnicka 1, 72-010 Police, Poland 19,721 100.00 9,783 100.00 Grupa Azoty Africa S.A. Route de Ngor Villa No. 12, Dakar, Senegal XOF 132,000 thousand 99.99 ZMPP Sp. z o.o. ul. Kuźnicka 1, 72-010 Police, Poland 32,617 99.98 African Investment Group S.A. (Afrig S.A.) Route de Ngor Villa No. 12, Dakar, Senegal XOF 340,000 thousand 54.90 Infrapark Police S.A. w likwidacji (in liquidation) Budchem Sp. z o.o. w upadłości likwidacyjnej (in liquidation bankruptcy) Kemipol Sp. z o.o. ul. Kuźnicka 1, 72-010 Police, Poland ul. Moczyńskiego 8/10, 70-101 Szczecin, Poland ul. Kuźnicka 6, 72-010 Police, Poland 9,559 54.43 1,201 48.96 3,445 33.99 Grupa Azoty Zakłady Chemiczne Police Group Page 4 of 63

The Parent Grupa Azoty Zakłady Chemiczne Police S.A. Operations of the Parent are of key importance to the Group s business. The remaining Group companies perform only support functions, and their results have little effect on the Group s performance. For 40 years, Grupa Azoty Zakłady Chemiczne Police has been one of the leading European manufacturers of fertilizers, and is also one of the largest Polish exporters. The Company plays a key role in the economic and social well-being of the Szczecin province. Its core business is manufacture of chemical products in three Business Units: Fertilizers, Nitro, and Pigments. The Company is entered in the National Court Register maintained by the District Court for Szczecin- Centrum, 13th Commercial Division of the National Court Register, under entry No. KRS 0000015501 With its registered office in Police, at ul. Kuźnicka 1, the Company trades under the name Grupa Azoty Zakłady Chemiczne Police Spółka Akcyjna (abbreviated to Grupa Azoty Zakłady Chemiczne Police S.A.). The Company shares have been listed on the Warsaw Stock Exchange since July 14th 2005. In 2015, the Issuer s performance figures more than doubled on 2014. It was also a period of many crucial initiatives, which are translating into the Company s increased competitiveness, mainly due to implementation of strategic projects designed to develop target markets for the Fertilizers and Pigments Business Units and to reduce the costs of their operation. The changes initiated and implemented recently have helped to limit the impact of business cycles on the Company s sales volumes and to improve its resilience to unfavourable external developments. Considering the effects already achieved and business results expected in the following years, a crucial factor was our consistent efforts to give effect to the operationalization of the Grupa Azoty Group s strategy for 2014 2020. In 2015, the Company implemented the plan of strategic initiatives for its key business segments aiming to achieve ROCE target of 14% in 2020, in line with the Grupa Azoty Group s growth vision. The document Grupa Azoty Group s Strategy for 2014 2020 Operationalisation focuses on three pillars: organic growth, operational excellence, and M&A. In 2015, the Company was gradually increasing the production and consumption of phosphates from Senegal. The Parent holds 55% of shares in AFRIG S.A. of Senegal, which has access to phosphate rock and ilmenite sand deposits in that country. Thus, a substantial part of phosphates used for production were sourced at a lower cost from the Company s own reserves in Senegal, which contributed directly to reducing the production costs. As a result, the supplies are uninterrupted, and the Company s susceptibility to changes in market prices has been reduced. This investment in overseas feedstock reserves is the first of its kind in the Polish chemical sector. Up to one million tonnes of phosphorite can be shipped annually from Senegal to Poland. In 2016, the Company expects to further increase its production of phosphate rock. On September 10th 2015, PDH Polska Spółka Akcyjna of Police, with a share capital of PLN 60,000 thousand, was formed. The Parent subscribed for 100% of its shares. The company was established in connection with the PDH propylene production unit with infrastructure project. On September 24th 2015, PDH Polska Spółka Akcyjna was entered in the Business Register of the National Court Register. The main purpose of the project is to construct a propane dehydrogenation (PDH) unit with a target annual output of at least 400,000 tonnes of propylene. The launch of production is planned for 2019. The project is intended to diversify the structure of the Issuer s revenue by creating new growth opportunities given the broad range of propylene processing options and the possibility of selling the product, which is in short supply on the market, to third-party customers. Under its contract policy, PDH Polska S.A. intends to structure the project work so as to ensure the broadest possible share of work areas that can be executed using the know-how of Polish companies. Grupa Azoty Zakłady Chemiczne Police Group Page 5 of 63

Figure 1. Structure of the Group as at December 31st 2015: Source: Company data. Grupa Azoty Zakłady Chemiczne Police Group Page 6 of 63

Group subsidiaries: Grupa Azoty Police Serwis Sp. z o.o. The subsidiary was registered on March 15th 2002 and entered in the National Court Register under No. 0000099823 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. Its business includes overhauls and services as part of investment projects in the mechanical industry, repairs of process units, construction of installations and apparatuses, including those made of plastics, maintenance services for the mechanical industry, workshop services and treatment of metals, as well as project execution and technical and engineering services (assembly and commissioning) in the area of automation, repairs of instrumentation and control equipment and maintenance of computer control systems, repairs, maintenance and inspections of electrical machinery, measurement and diagnostics services, and inspections and maintenance of medium- and-low voltage electrical equipment and networks. Koncept Sp. z o.o. The subsidiary was registered on September 6th 2001 and entered in the National Court Register under No. 0000041533 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The company s business consists of the provision of design services for the construction, assembly, mechanical, electrical, automation and measurement, and technological industries (including preparation of expenditure and investment estimates). The company specialises in design work for the chemical industry (manufacture of ammonia, urea, compound fertilizers, phosphoric and sulfuric acid, and titanium pigment), as well as printing and binding services. PDH Polska S.A. The subsidiary was registered on September 24th 2015 and entered in the National Court Register under No. 0000577195 by the District Court Szczecin-Centrum of Szczecin, 13th Commercial Division of the National Court Register. The company s purpose is to construct a PDH unit for propylene production with related infrastructure and auxiliary systems. Supra Sp. z o.o. The subsidiary was registered on December 29th 2001 and entered in the National Court Register under No. 00000138374 by the District Court for Wrocław-Fabryczna of Wrocław, 6th Commercial Division of the National Court Register. Its business comprises revitalising post-industrial areas owned by the company and preparing them for execution of investment projects. Transtech Usługi Sprzętowe i Transportowe Sp. z o.o. The subsidiary was registered on April 2nd 2001 and entered in the National Court Register under No. 00003660 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The company s business consists in the provision of transport services (goods transport on lorries with load capacity of up to 24 tonnes, and minibus transport), plant and equipment services (mobile cranes with lifting capacity of up to 65 tonnes, diggers, loaders, bulldozers, and special-use vehicles), workshop services and periodic check-ups. Grupa Azoty Africa S.A. This wholly-owned subsidiary is a joint-stock company with its registered office in Senegal, entered in the commercial register (RC) on September 10th 2014 under No. SN-DKR-2014-B-16199. Grupa Azoty Africa S.A. s business profile includes: fertilizers and chemical products import, distribution and trading, storage and logistics services, farmer training. Zarząd Morskiego Portu Police Sp. z o.o. The subsidiary was registered on December 13th 2004 and entered in the National Court Register under No. 0000223709 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The Municipality of Police holds a minority interest in the company. The company s business consists in sea port operation, property management, research and development work, sea and inland shipping services, port construction, and coastal water transportation services. Grupa Azoty Zakłady Chemiczne Police Group Page 7 of 63

Infrapark Police S.A. w likwidacji (in liquidation) The subsidiary was registered on June 21st 2004 and entered in the National Court Register under No. 0000210413 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The minority shareholders are the Municipality of Police, the Szczecin University, and Zachodniopomorska Agencja Rozwoju Regionalnego S.A. The company is in liquidation and is not conducting any business. African Investment Group S.A. The subsidiary, with its registered office in Senegal, was entered in the commercial register (RC) under No. SN-DKR-2002-B-1295. On August 28th 2013, the Issuer acquired 55% of its shares. The company specialises in projects and investments relating to the mineral industry in Senegal and neighbouring countries, including exploration for and extraction of mineral resources for the needs of industry. The company s business also includes: trade in industrial products for industry and agriculture trade in raw materials, including phosphorites, advisory services for the mining and power generation industries. AFRIG Trade SARL The indirect subsidiary of Grupa Azoty Zakłady Chemiczne Police S.A. was established on May 14th 2014. It is wholly owned by African Investment Group S.A. The company s business includes: chemical products and raw materials import, distribution and trading, storage and logistics services. Associates: Budchem Sp. z o.o. w upadłości likwidacyjnej (in liquidation bankruptcy) The associate was registered on October 14th 1999 and entered in the National Court Register under No. 0000135223 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The majority shareholder is WB Technika Sp. z o.o. The company is in liquidation bankruptcy and is not conducting any business. Kemipol Sp. z o.o. The associate was registered on October 23rd 1990 and entered in the National Court Register under No. 0000119127 by the District Court of Szczecin, 13th Commercial Division of the National Court Register. The majority shareholder is Kemira Kemi AB from Sweden. The remaining shares are held by the Company and Bank Ochrony Środowiska S.A. The company s business consists in the production and sale of chemicals for water purification and wastewater treatment. 1.2. Changes in the organisation Merger of subsidiaries Remech Sp. z o.o. and Automatika Sp. z o.o. On April 1st 2015, the Supervisory Board of Grupa Azoty Zakłady Chemiczne Police S.A. passed a resolution to approve the merger of Remech Sp. z o.o. and Automatika Sp. z o.o. in accordance with Art. 492.1.1 of the Commercial Companies Code, through the transfer of all assets of Automatika Sp. z o.o. (the target) to Remech Sp. z o.o. (the acquirer). On June 1st 2015, the following were entered in the Business Register of the National Court Register: merger of Remech Sp. z o.o. and Automatika Sp. z o.o., effected under Art. 492.1.1 of the Commercial Companies Code, i.e. through the transfer of all assets of Automatika Sp. z o.o. (the target) to Remech Sp. z o.o. (the acquirer). change of name of Remech Grupa Remontowo-Inwestycyjna Spółka z ograniczoną odpowiedzialnością to Grupa Azoty Police Serwis Spółka z ograniczoną odpowiedzialnością. Grupa Azoty Zakłady Chemiczne Police Group Page 8 of 63

Establishment of PDH Polska S.A. On August 31st 2015, the Company s Management Board passed a resolution to approve the establishment by Grupa Azoty Zakłady Chemiczne Police S.A. of a joint-stock company with registered office in Police, and subscription for 100% of shares in its share capital. On September 10th 2015, PDH Polska Spółka Akcyjna of Police, with a share capital of PLN 60,000 thousand, was formed. The Parent subscribed for 100% of its shares. The company was established in connection with the PDH propylene production unit with infrastructure project. On September 24th 2015, PDH Polska Spółka Akcyjna was entered in the Business Register of the National Court Register. 1 1.3. Company organisational and equity ties Grupa Azoty Police Serwis Sp. z o.o. holds one share in African Investment Group S.A. and has the right of representation on the company s five-member Executive Board. On December 23rd 2015, African Investment Group S.A. purchased one share in Grupa Azoty Africa S.A. from Grupa Azoty Zakłady Chemiczne Police S.A. As at December 31st 2015, the remaining subsidiaries and associates of the Group did not have any organisational ties with and did not hold any shares in other entities. 1.4. Parent s branches (divisions) The Parent does not operate any branches or divisions outside of its principal place of business. 2. Management of the Group 2.1. Parent organisational chart Figure 2.Parent organisational chart as at December 31st 2015 Source: Company data. 1 The Company disclosed this information in Current Reports No. 5/2015 of March 27th 2015, No. 23/2015 of August 31st 2015 and No. 25/2015 of September 25th 2015. Grupa Azoty Zakłady Chemiczne Police Group Page 9 of 63

2.2. Changes in key management policies In 2015, there were no material changes in the Group s key management policies. 2.3. Organisational changes at the Parent In the reporting period, there were no material organisational changes at the Parent. 2.4. Workforce Table 2. Number of employees at the Zakłady Chemiczne Police Group* As at Employee group Dec 31 2015 As at Dec 31 2014 Blue collar employees 2,187 2,235 White collar employees 970 986 Total 3,157 3,221 * Excluding Supra Sp. z o.o. Table 3. Number of employees at consolidated subsidiaries* As at Employee group Dec 31 2015 As at Dec 31 2014 Blue collar employees 541 554 White collar employees 273 287 Total 814 841 * Excluding the Parent and Supra Sp. z o.o. Table 4. Number of Group employees: average annual and as at the end of 2015* Employee group Average annual At year end Blue collar employees 2,209 2,187 White collar employees 966 970 Total 3,175 3,157 * Excluding Supra Sp. z o.o. Table 5. Number of employees at consolidated subsidiaries: average annual and as at the end of 2015* Employee group Average annual At year end Blue collar employees 541 541 White collar employees 261 273 Total 802 814 * Excluding the Parent and Supra Sp. z o.o. Table 6. Employee turnover from January 1st to December 31st 2015* 2015 New hires 407 Redundancies -471 Total -64 * Excluding Supra Sp. z o.o. Grupa Azoty Zakłady Chemiczne Police Group Page 10 of 63

Table 7. Workforce structure by education* University Total Item Year or Secondary Vocational Primary employment equivalent Number of employees 2015 3,157 828 1,216 861 252 Number of employees 2014 3,221 798 1,209 911 303 * Excluding Supra Sp. z o.o. Table 8. Workforce structure by length of service* Item Year up to 5 years 6-10 years 11-20 years Number of employees 2015 266 365 586 8% 12% 18% Number of employees 2014 228 426 534 7% 13% 17% * Excluding Supra Sp. z o.o. over 20 years 1,940 62% 2,033 63% 3. Business overview 3.1. Basic information In the reporting period, the financial performance of the Group was strongly correlated with the situation in the Parent s market environment. This regularity has been present since the launch of the Company s operations and remains beyond the Company s influence or control. The Parent is the top chemical producer in the region and a significant one in the EU. Currently, the Issuer operates in three segments: Fertilizers, Pigments and Other, through three business units and four support centres: Fertilizers Business Unit Nitro Business Unit Pigments Business Unit Power Centre Logistics Centre Infrastructure Centre Laboratory Analysis Centre Fertilizers Business Unit The Fertilizers Business Unit is the largest organisational unit within the Company in terms of revenue and production volumes. The output includes compound NP, NPK and NS fertilizers, as well as phosphoric and sulfuric acids. The Parent is the largest manufacturer of these compound fertilizers and acids in Poland and one of the largest in Europe. Products of the Fertilizers Business Unit are sold in Poland and on foreign markets (including Europe and South America, as well as Africa). Key products of the Fertilizers Business Unit are POLIFOSKA and POLIDAP, which are well recognised fertilizer brands in Poland. The POLIFOSKA brand has become a synonym for compound fertilizers in Poland, evoking superior quality and highest performance. The POLIFOSKA brand has a high concentration of pure constituents, chemical uniformity of fertilizer grains and high assimilability of constituents. Nitro Business Unit The Nitro Business Unit is one of Poland s leading manufacturers of ammonia and urea. The products are marketed both on the domestic and export markets. Urea is sold for agricultural and technological applications. An important business line within the unit is the manufacture and sale of NOXy (AdBlue ), a urea solution used in the automotive industry to reduce nitric oxides in diesel engines. With tightening standards for nitric oxide emissions under EU directives, the European market of NOXy (AdBlue ) is expected to grow steadily in the coming years. The Nitro Business Unit s product range is complemented by Likam (ammonia water). These products are manufactured at production plants which are constantly modernised and upgraded, with an emphasis on occupational safety and environmental protection. Grupa Azoty Zakłady Chemiczne Police Group Page 11 of 63

Pigments Business Unit The principal activity of the Pigments Business Unit is the manufacture and sale of titanium white and associated semi-products: iron sulfate and hydrolytic acid. The Unit is the leader in the domestic market of titanium white and operates a well-developed export network. Titanium dioxide-based pigments, marketed under the TYTANPOL brand, are manufactured using state-ofthe-art technology which meets stringent environmental requirements. The pigments are highly sought after due to their versatility, efficiency, durability, safety in use and non-toxic nature, and their associated products have excellent aesthetic and protective properties. Applications of titanium white include the production of paints and varnishes, printing inks, plastics, papers and laminated materials. The consistent high product quality and professional advice on product use have been recognised the Unit has received many awards and honours such as EUROPRODUKT 2004, MEDAL EUROPEJSKI 2004 (European Medal), the Highest Quality Certificate (2007) and the Teraz Polska Badge of Quality (2012). Power Centre The Power Centre produces heat (in the form of hot steam), electricity and feedwater, and also purchases electricity and heat (steam) for the Company s needs. It operates state-of-the-art generating units, ensuring reliable supplies of heat, electricity and feedwater. The Centre also sells electricity, hot steam and heating water as well as fly ash to external customers, and is also responsible for energy management across the organisation. In addition to this, the Centre generates electricity using high-efficiency co-generation technology, and therefore obtains certificates of origin from co-generation, which are transferable property rights. Logistics Centre The Logistics Centre is responsible for shipping and transport, packaging and distribution, and the operation and maintenance of port infrastructure. In the transport processes, it is important to ensure continuity of supplies, product dispatch handling, transport organisation and services, and operation of ports owned by the Company. There are two port facilities (a sea port and a barge port), which have bulk cargo transshipment wharves and transshipment stations for ammonia and sulfuric acid. The packaging process involves efficient fertilizer packaging, storage and distribution. The logistics system handles over 3m tonnes of bulk cargo annually (ca. 1.5m tonnes of feedstock and raw materials and ca. 1.5m tonnes of products). Infrastructure Centre The Infrastructure Centre manages technical infrastructure, auxiliary utility production and distribution, wastewater treatment and waste landfilling. It supports comprehensive management of land, buildings and structures. In production asset management, the Centre carries out inspections required under applicable laws and standards, and manages repairs and maintenance. It is also responsible for procurement and storage of technical materials. The Centre s operations are environmentally friendly, as evidenced by rare flora and fauna species found in areas adjacent to the Company s wastewater treatment plant and phosphogypsum landfill unit. Laboratory Analysis Centre The Laboratory Analysis Centre satisfies all needs of internal customers regarding chemical analyses of feedstock/raw material supplies, implementation of technological processes, quality assessment of semi-finished and finished goods, environmental protection issues, OHS, and implementation of new technical and technological solutions. The Centre also provides similar laboratory services to the Company s external customers. The Laboratory Analysis Centre operates in accordance with the Integrated Management System in place at the Company based on PN-EN ISO 9001 and PN-EN ISO 14001, PN-EN ISO 18001 and PN-EN ISO/IEC 17025:2005. 3.2. Overview of key products, goods and services The Parent s principal business is the manufacture of fertilizers and nitrogen compounds (PKD 20.15.Z) and the manufacture of dyes and pigments (PKD 20.12.Z). Its non-core operations comprise the manufacture of other inorganic basic chemicals (PKD 20.13.Z) and the manufacture of other chemical products not elsewhere classified (PKD 20.59.Z). In addition, the Company s Articles of Association provide for the conduct of any activities necessary to ensure proper operation of its business, including procurement of raw materials, as well as product distribution and sales. Grupa Azoty Zakłady Chemiczne Police Group Page 12 of 63

The Company s main commercial products include: compound fertilizers - NP 2 (MAP, DAP) and NPK 3 mineral fertilizers manufactured using monoand bi-ammonium phosphate and potassium salt, with secondary nutrient additives (sulfur, magnesium) and microelements NS fertilizer - nitrogen-based fertilizer with sulfur and magnesium, a granulated mixture of ammonia sulphate, urea and magnesite nitrogen fertilizer - urea liquid ammonia titanium white - a group of titanium dioxide-based white dyes The Parent produces high volumes of sulfuric and phosphoric acid to obtain semi-finished products for the manufacture of its key commercial products. Using its semi-finished products, by-products and waste products, the Company also manufactures: 32.5% aqueous urea solution for automotive applications - NOXy (AdBlue ) and crystalline urea for its production, hexafluorosilicic acid, dried iron (II) sulfate. 2015 production Table 9. Parent s production volume by product [tonnes] Product 2015 production volume 2014 production volume % change NPK 862,975 686,384 25.7% NP 213,669 200,512 6.6% NS 51,176 41,358 23.7% Urea 361,845 362,485-0.2% Ammonia 517,695 508,333 1.8% Titanium white 31,716 36,001-11.9% AdBlue 105,358 82,863 27.1% Sulfuric acid 701,700 591,850 18.6% Phosphoric acid 357,982 300,153 19.3% 2015 sales Table 10.Consolidated revenue by segment Segment 2015 2014 % change Fertilizers 2,420,349 2,066,647 17.1% Pigments 269,475 299,746-10.1% Other 51,865 46,050 12.6% Total revenue 2,741,689 2,412,443 13.6% The 2015 consolidated revenue was PLN 2,741,689 thousand, up by PLN 329,246 thousand (13.6%) on 2014. The highest sales were recorded in the case of compound fertilizers and urea, which jointly generated PLN 2,045,350 thousand in revenue, accounting for 75% of total sales. NP fertilizers - compound fertilizers with two primary nutrients: nitrogen (N) and phosphorus (P) 2 NPK fertilizers - compound fertilizers with three primary nutrients: nitrogen (N), phosphorus (P) and potassium (K) 3 Grupa Azoty Zakłady Chemiczne Police Group Page 13 of 63

Figure 3. Revenue by main product groups and other sales NOXy (AdBlue ) Other 2% NS Titanium white; 3% 2% 9% NPK 46% Urea 13% NP 14% Source: Company data. 3.3. Sales markets and supply sources Domestic sales of the Group s products in the reporting period totalled PLN 1,608,958 thousand, up by 12% year on year. The share of exports in the 2015 revenue (41%) rose by 2pp compared with the previous year. Domestic and export sales accounted respectively for 61% and 39% of total fertilizer sales. Key export markets included Venezuela, Germany, United Kingdom, Denmark, Czech Republic and Colombia. Combined sales to those countries accounted for 79% of total export sales. The domestic share of titanium white sales was 47%, while product exports made up the remaining 53%. Key export markets included Germany, Italy and France. Combined sales to those countries accounted for 63% of total export sales. 53% of chemicals sales were to the domestic market and 47% to export markets. Key export markets included Sweden, Germany, Spain, Belgium and Slovakia. Combined sales to those countries accounted for 87% of total export sales. Figure 4. 2015 sales by geographical regions South America Africa 10% 1% Germany 11% Other countries ; 1% Other EU countries; 18% Poland 59% Source: Company data. No customer/trading partner of the Company accounted for more than 10% of the Parent s revenue in 2015. In the case of suppliers, only PGNIG S.A., a gas fuel supplier, and Uralkali Trading S.A., a supplier of potassium chloride, exceeded the 10% threshold (accounting respectively for 14.4% and 10.2% of the Company s revenue). Grupa Azoty Zakłady Chemiczne Police Group Page 14 of 63

Sources of strategic raw materials 2015 saw an increase in prices of main raw materials for fertilizer production (phosphorites, potassium salt, sulfur and sulfuric acid). There was a downward trend, however, in prices of natural gas and titanium-containing raw materials used to manufacture titanium white. Phosphorites In 2015, phosphorites were mainly procured from Morocco, Algeria and Senegal, with supplementary supplies coming from Israel. Since 2013, phosphorites have also been supplied from the Company s own sources in Senegal. Access to its own phosphorite deposits has considerably improved the Company s security in terms of feedstock supplies, reducing its dependence on external suppliers and reinforcing its negotiating position. Potassium chloride In 2015, the Company relied on its traditional sources of potassium chloride supply. It was procured mainly from Russia (about 93% from the main supplier: Uralkali Trading S.A., and Uralkali Trading SIA). The potassium chloride stock was also replenished through purchases in Germany. Ilmenite and titanium slag In 2015, the main source of ilmenite was still Norway (88% of the total purchase volume). The Parent continued to seek alternative suppliers of ilmenite from India, Ukraine and Kenya, which accounted for the remaining 12% of the purchase volume. All supplies of titanium slag were made from Norway. Natural gas In 2015, the Group continued to diversify its natural gas supply sources. In addition to the gas volumes delivered by PGNiG S.A., the Company procured natural gas from the European market, with supplementary purchased made on the Polish Power Exchange. Overall, in 2015, the proportions of the respective gas supply sources were as follows: PGNiG S.A. 71%, EU market 29%, and PPE 0.31%. In comparison with 2014, the average purchase price of natural gas fell by 12%. 3.4. Significant agreements Table 11. Agreements significant to the Parent s operations Agreement Party Subject matter date Uralkali Trading S.A. PST PGNiG Sales & Trading GmbH Hokr s r.o. Witt Handel GmbH Metrac HmbH Beiselen GmbH Purchase of potassium chloride Feb 12 2015 Supply of gaseous fuel Sep 23 2015 Sale of compound fertilizers and ammonia Sale of compound fertilizers and ammonia Sale of compound fertilizers and ammonia Sale of compound fertilizers and ammonia Nov 23 2015 Nov 24 2015 Dec 08 2015 Dec 17 2015 Date and number of current report Feb 12 2015 Current Report No. 4/2015 Sep 23 2015 Current Report No. 24/2015 Nov 24 2015 Current Report No. 27/2015 Nov 24 2015 Current Report No. 28/2015 Dec 08 2015 Current Report No. 29/2015 Dec 17 2015 Current Report No. 30/2015 Value 250,000 160,000 (214,000)* 126,355 (153,569)* 480,815 305,269 198,968 * Total value of contracts signed over the last 12 months or from the submission date of the last current report concerning agreements with this entity. Grupa Azoty Zakłady Chemiczne Police Group Page 15 of 63

3.5. Material related-party transactions on non-arm s length terms In 2015, the Group did not enter into any related-party transactions on non-arm s length terms. 3.6. Significant events Key investment project On March 27th 2015, the Company announced plans to build Europe s largest and most advanced PDH propylene production unit in Police. Worth PLN 1.7bn, the project involves the construction of a propylene production unit, a power generating units, and extension of the Police port facilities to include a liquid chemicals handling terminal. Ultimately, the terminal will be able to receive largest LPG vessels in Poland, with its capacity expected to double. The project is scheduled for completion within the next four years, and its first positive contribution to the financial performance is expected as early as 2019. The new project is expected to ultimately add about PLN 2bn to the Group s revenue and hundreds of millions to its earnings. Some 1,000 staff will work on the project construction site and, once it comes on stream, the plant will provide permanent employment to approximately 200 people. The PDH technology will be supplied by UOP LLC (a Honeywell company), a global supplier of most innovative industrial solutions. On May 11th 2015, a Basic Engineering Package was signed, including licensing, warranty and engineering services agreements. Basic Engineering is the first phase of project implementation, following concept development and feasibility study. It consists in formulating the concept of a complex process involving material balances, flow diagrams and preliminary unit designs. The Parent believes that the selected technology supplier will ensure the highest quality and efficiency of propylene production, with no environmental footprint. The PDH unit not only represents the Group s flagship project, but it will also be an exemplary and most technologically advanced installation of its kind in Europe. 4 Merger of subsidiaries On April 1st 2015, the Supervisory Board of Grupa Azoty Zakłady Chemiczne Police S.A. passed a resolution to approve the merger of Remech Sp. z o.o. and Automatika Sp. z o.o. in accordance with Art. 492.1.1 of the Commercial Companies Code, through the transfer of all assets of Automatika Sp. z o.o. (the target) to Remech Sp. z o.o. (the acquirer). On June 1st 2015, the following were entered in the Business Register of the National Court Register: merger of Remech Sp. z o.o. and Automatika Sp. z o.o., effected under Art. 492.1.1 of the Commercial Companies Code, i.e. through the transfer of all assets of Automatika Sp. z o.o. (the target) to Remech Sp. z o.o. (the acquirer). change of name of Remech Grupa Remontowo-Inwestycyjna Spółka z ograniczoną odpowiedzialnością to Grupa Azoty Police Serwis Spółka z ograniczoną odpowiedzialnością. Cooperation agreement On May 19th 2015, Grupa Azoty Zakłady Chemiczne Police S.A., Polskie Inwestycje Rozwojowe S.A. ( PIR ) and Grupa Azoty Zakłady Azotowe Kędzierzyn S.A. ( GA Kędzierzyn ) executed a Cooperation Agreement, where the parties expressed their intent to collaborate on feasibility assessment of joint implementation of a project called PDH propylene production unit with infrastructure. Under the Agreement: the Company agreed to propose the structure of the Project and its financing, including the partners participation in the financing, and to present the proposal to PIR and GA Kędzierzyn, PIR agreed to carry out a preliminary analysis of the Project structure and its financing, and to seek a preliminary investment decision from the PIR Supervisory Board, GA Kędzierzyn agreed to carry out a preliminary analysis of the Project structure and its financing, and to make a preliminary investment decision. 4 The Company disclosed this information in Current Report No. 5/2015 Delayed disclosure of inside information of March 27th 2015. Grupa Azoty Zakłady Chemiczne Police Group Page 16 of 63

Negotiations of a Detailed Cooperation Agreement will commence after PIR or Grupa Azoty Kędzierzyn has obtained a positive preliminary investment decision and after the terms and conditions of that decision have been provisionally accepted by the Parent. 5 Profit distribution On May 27th 2015, the Annual General Meeting passed a resolution to distribute PLN 42,000 thousand as dividend for 2014. The dividend record date and the dividend payment date were set for June 11th 2015 and June 25th 2015, respectively. On May 27th 2015, the Annual General Meeting of Kemipol Sp. z o.o. (an associate) resolved to distribute dividend for 2014. The dividend amounted to PLN 11,035 thousand and was paid on June 30th 2015. 6 Establishment of PDH Polska S.A. On August 31st 2015, the Company s Management Board passed a resolution to approve the establishment by Grupa Azoty Zakłady Chemiczne Police S.A. of a joint-stock company with registered office in Police, and subscription for 100% of shares in its share capital. On September 10th 2015, PDH Polska Spółka Akcyjna of Police, with a share capital of PLN 60,000 thousand, was formed. The Parent subscribed for 100% of its shares. The company was established in connection with the PDH propylene production unit with infrastructure project. On September 24th 2015, PDH Polska Spółka Akcyjna was entered in the Business Register of the National Court Register. 7 4. Strategy and development policy 4.1. Strategy The 2013 2020 Strategy of the Grupa Azoty Group was published in June 2012. The Group manufactures and sells products for agriculture (mineral fertilizers), technologically-advanced materials (engineering plastics), and organic and non-organic chemicals. In 2015, the Parent carried out strategic projects to support the development of the target markets for the Fertilizers and Pigments Business Units, as well as to reduce their operating expenses and thus enhance the Company s competitive edge. The changes initiated and implemented recently helped to limit the impact of business cycles on the Company s sales volumes and to improve its resilience to unfavourable external developments. 4.2. Directions of development The outcomes of the consistently pursued strategy confirm that the business targets planned for the coming years are attainable. To ensure that the planned measures are as effective as possible, in 2014 the Strategy of the Grupa Azoty Group for 2014-2020 Operationalisation was formulated. It focused on three pillars: operational excellence, organic growth, and mergers and acquisitions. Operational excellence In 2014, the Operational Excellence Programme (Azoty PRO) was launched. Azoty PRO is the Company s internal development programme designed to ensure the best possible use of the Company s assets and human resources. Its ultimate goal is to produce long-term improvement in product competitiveness. The first stage of the Operational Excellence Programme covers the period from 2014 to 2017. The most important achievements were made thanks to the following initiatives: Preventive Maintenance and TPM, reduction of gas consumption costs, implementation of uniform rules for managing coal stocks, work organisation efficiency enhancement, and improvement of administrative staff work organisation. 5 The Company disclosed this information in Current Report No. 4/2015 Execution of a significant agreement, dated February 12th 2015. 6 The Company disclosed this information in Current Report No. 16/2015 Payment of dividend for 2014, dated May 27th 2015. 7 The Company disclosed this information in Current Report No. 23/2015 Establishment of PDH Polska Spółka Akcyjna., dated August 31st 2015. Grupa Azoty Zakłady Chemiczne Police Group Page 17 of 63

Organic growth Efforts directed towards organic growth comprise a number of initiatives in the Fertilizers and Pigments Segments. In 2015, the following projects were carried out in the Fertilizers Segment: the ammonia unit was upgraded to reduce the energy consumption of the ammonia production process and to increase production capacities, the phosphoric acid unit was upgraded to enhance production efficiency and improve the quality of the output phosphoric acid, the logistics infrastructure was developed to not only increase the fertilizer packing capacities and streamline the loading and forwarding of pallets with fertilizers, but also to markedly increase the storage capacity for finished products. In 2014 and 2015, the strategy of the Pigments Business Unit was updated. Following an update of the strategic analysis, it was decided that the original objectives of increasing the share of the strategic customer segment in sales and focusing on the European market would be pursued further. Due to the continued challenging market landscape, a cost restructuring plan for the Pigments Business Unit was formulated. It has been gradually implemented since Q3 2015. Scientific research plays a fundamental role in the development of any business, as it provides knowledge and skills necessary to develop innovative products and processes or to improve the existing ones. The Management Board attaches an increasingly greater importance to scientific research, as evidenced by the expenditure on research and development growing year by year. Key R&D projects in 2015: Exploration and production of mineral deposits in Senegal, Commencement of concept design work to construct a phosphorus complex (phosphate rock mine and phosphoric acid production plant), Upgrade of the post-hydrolytic sulfuric acid concentration unit, Investigation into the possibility of recovering phosphorous from a phosphogypsum landfill site leachate, Improvement of the phosphoric acid quality, Environmental assessment of fertilizer lifespan, Investigation into the marketability of a new liquid fertilizer, Development of a new type of titanium white to be used in plastics, Analysis of the possibility of producing NOXy solution directly from urea solution discharged from the synthesis unit, Development of a coal gasification technology for highly effective production of fuels and electricity, as well as a study of CO 2 removal processes in chemical looping (jointly with Grupa Azoty S.A.). The implementation of the PDH project deserves particular attention. It is intended to diversify the structure of the Company s revenue by using the broad range of propylene processing options and selling propylene, which is in short supply on the market, to external customers. Under its contract policy, PDH Polska S.A. intends to structure the project work so as to ensure the broadest possible share of work areas that can be executed using the know-how of Polish companies. The project is connected with the construction of a terminal for deliveries of feedstock for propylene production. It is scheduled to be completed by December 31st 2018. 4.3. Growth prospects and market strategy In the coming years, the Company will endeavour to strengthen the value of the Group by seeking out new business opportunities and further reinforcing its competitive advantage. More specifically, the Company will strive to accomplish the following: optimise its operating expenses and financing structure, increase the utilisation of its units, including through reliability and efficiency improvement, reduce the consumption of strategic feedstocks and utilities used in production processes, ensure compliance with environmental and technical safety requirements, streamline inventory management processes, develop technologies and ensure efficient project delivery, streamline logistics processes, increase the efficiency of support processes, increase the value of intellectual property, and Grupa Azoty Zakłady Chemiczne Police Group Page 18 of 63

use its assets in the most optimal way. Growth prospects at the Parent are analysed with reference to individual business units as they compete with different business rivals, operate in different marketplaces, have different customer bases, offer different product ranges, and face different challenges resulting from trends and legal environments relevant to their respective business segments. Fertilizer market Developments in the mineral fertilizer segment, the largest area of the Company s activity, are of key importance for its business. They are driven by the strategy of market penetration and intensification of efforts in primary markets in Poland and Germany based on the existing product portfolio. The Company is consistently adding new products to its mix of liquid and specialty fertilizers, and other products and services for the agricultural sector. Additionally, it has partnered with a research institute to work on non-toxic phosphate pigments. The objective of product portfolio development is to provide a comprehensive range of fertilizers based on phosphorous and potassium. Implementation of this strategy requires continued efforts to ensure cost-efficiency of the business. The company will maintain its presence on distant markets, in particular in Senegal, where the company recently acquired its own deposits of phosphate rock. Ammonia and urea market A number of investment projects will be carried out in the Nitro Business Unit to improve its cost efficiency. The upgraded, more power-efficient, ammonia unit, will maintain its competitiveness and minimise the costs associated with CO 2 emissions. The scope of upgrade work will bring about more production capacity and efficiency. The modernised urea unit will be more efficient and will maintain compliance with BAT environmental requirements. Titanium white market In the titanium white market, a further growth is expected of its globalisation potential. Acquisition of ilmenite (a strategic raw material for the segment) deposits in Senegal is being considered to significantly improve the cost efficiency of the Pigments segment. Currently, the Company is considering making changes to its product portfolio to include new types of titanium white suitable for the needs of the plastics industry, with high weather resistance and appropriate optical properties. The strategy intends to deliver ROCE at a level set by the Grupa Azoty Group s objectives, and includes efforts to maintain stable sales of this product group by focusing primarily on strategic customers in the target markets of Poland and Germany. Other markets The Grupa Azoty Zakłady Chemiczne Police Group is to build the largest and most technologically advanced PDH propylene production unit in Europe. As part of the project, the chemicals handling terminal at the Company s sea port in Police will be expanded. 4.4. Key investments in Poland and abroad In 2015, the Group s expenditure on property, plant and equipment and intangible assets (including mineral resources exploration and evaluation expenditure of PLN 25,847 thousand) amounted to PLN 266,827 thousand, up 66% year on year. Capital expenditure was PLN 211,080 thousand and the balance was spent on significant overhaul work. The Parent s expenditure on property, plant and equipment and intangible assets was PLN242,771 thousand. Capital expenditure was PLN 187,024thousand, and comprised: business development: PLN 111,785 thousand, business continuity: PLN 18,425 thousand, mandatory expenditure: PLN 33,180 thousand, purchase of finished goods: PLN 18,110 thousand. Grupa Azoty Zakłady Chemiczne Police Group Page 19 of 63

Figure 5. Structure of expenditure by project type Purchase of Business finished goods continuity 10% 10% Business development 62% Source: Company data. In 2015, 53 new investment projects were launched. Key projects included: Propane dehydrogenation (PDH) unit with related infrastructure, Modernisation of the floodbank around the phosphogypsum landfill site, Alteration of the raw material (phosphate rock) storage facility, Remote (online) monitoring of physical and chemical parameters of liquids at production units. In 2015, the Company continued to work on 17 investment projects commenced in previous years, including: Exhaust gas treatment unit and upgrade of the EC II CHP plant, Upgrade of the ammonia unit, Change of the DA-HF phosphoric acid production technology. In 2015, the Parent completed 35 projects, including: Upgrade of internal road no. 3 from route A to route E. Project completed in December 2015. Installation of a system for protecting products against secondary moisture Project completed in December 2015. 4.5. Key equity investments On August 31st 2015, the Company Supervisory Board passed a resolution to approve the establishment by Grupa Azoty Zakłady Chemiczne Police S.A. of PDH Polska Spółka Akcyjna, a jointstock company based in Police, and subscription for 100% of shares in its share capital. The share capital of PDH Polska Spółka Akcyjna of Police amounts to PLN 60m. The company was established in connection with the project to construct the PDH propylene production unit with infrastructure. On September 24th 2015, the District Court for Szczecin-Centrum in Szczecin, 13th Commercial Division of the National Court Register, registered PDH Polska Spółka Akcyjna. 4.6. Feasibility of investment plans The planned investments will be financed mainly with current assets and funds available under intragroup financing agreements. Funds for some projects will come from preferential external sources other than banks, such as EU funds or national support programmes. The funds will be appropriated mainly for projects designed to protect the environment. 4.7. Significant R&D achievements Development projects are a prominent element of business strategies. Development programmes are formulated based on a thorough analysis of the company s needs and market preferences. In 2015, the Group s expenditure on research and development work amounted to PLN 31,241 thousand. The key item, of PLN 25,651 thousand, was represented by mineral resource exploration and evaluation work at AFRIG S.A. In 2015, the Company s expenditure on research and development work exceeded PLN 5,590 thousand. The Company s efforts in this area concentrated on: Grupa Azoty Zakłady Chemiczne Police Group Page 20 of 63

laboratory research and quarter-technical analyses, feasibility studies, expert investigation and analyses. The work was conducted mostly in cooperation with other Polish and foreign organisations and institutions. Apart from new R&D work, projects launched in 2014 continued throughout 2015. The list below summarises the most important R&D projects: Exploration and production of mineral deposits in Senegal, Commencement of concept design work to construct a phosphorus complex (phosphate rock mine and phosphoric acid production plant), Feasibility study for upgrade of the post-hydrolytic sulfuric acid concentration unit, Investigation into the possibility of recovering phosphorous from a phosphogypsum landfill site leachate, Research into phosphoric acid quality improvement, Analysis of environmental assessment of fertilizer lifespan, Research into a new liquid fertilizer to be produced based on urea and ammonia sulfate derived from post-crystallization acid and assessment of its marketability, Application tests on a new type of titanium white to be used in plastics, Analysis of the possibility of producing NOXy solution directly from urea solution discharged from the synthesis unit. 4.8. Corporate Social Responsibility Policy The Parent takes CSR issues very seriously, engaging in projects supporting local communities and regional development. A socially responsible business cares about all its stakeholders. The Company seeks to respond to the needs of its employees, shareholders, business partners, customers and local communities. As part of its efforts to operate in a responsible and reliable manner, the Company adopted the Grupa Azoty Group s Code of Ethical Conduct, which defines the expected behaviour and practices. The document presents the values and standards essential for ethical business, as well as the principles to be followed by the Group s employees in their daily work. 2015 was the second year when Grupa Azoty Zakłady Chemiczne Police S.A. together with other companies of the Grupa Azoty Group published the Integrated Report compliant with the Global Reporting Initiative G4 standards. This reporting framework gives a complete picture of the business not only its financial performance but, most importantly, its environmental and social aspects. Environmental protection is a major element of corporate social responsibility. In 2016, the Company will celebrate 20 years of its participation in the Responsible Care programme, focused on environmental, health, safety and security performance. 5. The Group s current financial position 5.1. Assessment of non-recurring factors and events having a material impact on operations and financial performance In the reporting period, the financial performance of the Group was strongly correlated with the situation in the Parent s market environment. This regularity has been present since the launch of the Company s operations and remains beyond the Company s influence or control. Domestic, European and global factors with the largest impact on performance in 2015: high grain yields and high global inventory levels, low agricultural produce prices, crisis in the dairy industry and pig farming, extensive drought in Poland preventing winter crops from being sown on time in autumn, economic slowdown in Europe and China depressing titanium white demand, considerable increase in global ammonia and urea production capacities, lower prices of gas a key raw material in ammonia production. Grupa Azoty Zakłady Chemiczne Police Group Page 21 of 63

5.2. Market overview NPK and DAP fertilizers In 2015, the Polish NPK market was marked by pronounced seasonal fluctuations. The increase in prices of certain agricultural produce (wheat, rapeseed) and disbursement of direct subsidies pushed up retail sales of fertilizers ahead of spring. Demand picked up again in August and September before the sowing of winter crops. However, the drought which hit many regions of Poland prevented the sowing of numerous winter crops, particularly rapeseed. As a result, acreage and demand for fertilizers went down. Due to many farms poor liquidity, payments for purchased fertilizers were increasingly often postponed until much later dates, e.g. until the 2016 harvest. In Western Europe, apart from short seasonal increases in purchasing, sales of compound NPK fertilizers were lower for the majority of 2015 than in 2014. Although market prices of NPK fertilizers remained broadly flat, the price of the standard 16-16-16 NPK fertilizer declined by approximately 5% in 2015. In the second half of the year, uncertainty about the condition of winter crops, low grain prices, and high inventory levels of grains and fertilizers discouraged European farmers from purchasing larger amounts of NPK fertilizers. Throughout most of 2015, the price of the 18-46 NP compound fertilizer (POLIDAP ) on global markets remained under constant pressure, primarily due to insufficient demand. The price went down some 20% in the course of the year, while the low prices of agricultural produce, currency depreciations and adverse weather conditions limited the fertilizer s sales on many markets. 2015 saw different fluctuations in the prices of raw materials used in the production of NPK compound fertilizers. In H1 2015, potassium salt and phosphate prices increased moderately. The decline in compound fertilizer prices translated into pressure on the prices of raw materials used in their production. In H2 2015, phosphate prices remained unchanged, while those of potassium salt were down 13%. Sulfur prices declined from the beginning of 2015, with the total change for the year amounting to 13%. Figure 6. Monthly average prices of NPK and DAP fertilizers in 2015 [USD/t] 600 500 400 300 200 100 0 DAP NPK Source: Company data. Ammonia and urea Ammonia prices continued to decline throughout 2015 despite periodic increases caused by seasonal upturns in demand. Signals for price reductions came mainly from the US. In 2015, the market price of ammonia went down by approximately 40%. The supply and demand relation was significantly affected by a decline in output caused by disrupted gas supplies and plant failures, as well as the launch of new production units in Saudi Arabia, Qatar, Algeria and the US. After a years-long break, the US, which is the word s largest ammonia importer, put forward its first offers to export the product. At the end of the year, several ammonia manufacturers halted production due to the overfilling of storage tanks and lack of demand. In 2016, ammonia prices may be under pressure following the planned launch of new production units. Grupa Azoty Zakłady Chemiczne Police Group Page 22 of 63

The oversupply of ammonia from China, Iran, Russia, the Persian Gulf and North Africa, combined with certain macroeconomic factors such as low prices of agricultural produce, high grain stocks and the turmoil on the financial markets, supported the downward price trend throughout 2015. The decrease was most strongly driven by higher supply. In 2015, the already excessive urea production capacities increased by a total of more than 4 million tonnes per annum. In all of 2015, urea prices declined by approximately 30%. New urea production units will be launched in 2016, deepening the already considerable imbalance on the market. Figure 7. Monthly average prices of ammonia and urea in 2015 [USD/t] 700 600 500 400 300 200 100 0 Urea Ammonia Source: Company data. Titanium white Titanium white demand is correlated with economic growth. Because of the global economic downturn, titanium white demand continued to decline. The challenging economic climate in the US and Europe was aggravated by stock market turmoil and slower economic growth in China. The global oversupply of titanium white (compared to existing demand) drove the market prices down throughout 2015. On the European markets, the decline in 2015 amounted to 11%. In H2 2015, two of the world s largest manufacturers (DuPont and Huntsman) permanently shut down a number of production lines. Also in China (accounting for 35% of global titanium white output), production operations were suspended by several manufacturers and limited by most. Given the lack of prospects of a significant economic revival, forecasts for H1 2016 indicate further titanium white price corrections. A minor, seasonal increase in demand is anticipated in Q3. Figure 8. Monthly average prices of titanium white in 2015 [EUR/t] 2 350 2 300 2 250 2 200 2 150 2 100 2 050 2 000 1 950 Titanium white Source: Company data. Chemicals Ammonia is one of the Parent s key chemical products. In 2015, a downturn trend in this product s price was observed on global markets following a decline in the demand for fertilizer and technical Grupa Azoty Zakłady Chemiczne Police Group Page 23 of 63

grade ammonia. However, the principal cause of the decrease was considerable higher production capacities. Output reduction by a number of major exporters failed to check the price decline. Technical grade urea is used mainly to produce glues for the furniture industry and to prepare the NOXY (AdBlue ) solution. In 2015, the demand for urea used in glue production was stable. The demand for NOXY (AdBlue ) depends on the number of vehicles fitted with catalytic converters and industrial facilities using NOXY (AdBlue ) for flue gas treatment. Growth in the product s consumption in 2015 was limited due to the economic slowdown, lower volume of transport compared to 2014, and a lower number of new cars and industrial facilities placed in service. Intensive competition was seen on export markets, particularly the German one, which had an impact on the product s prices and profitability. 5.3. Key financial and economic data 5.3.1. Consolidated financial information The Group s key achievements in 2015 included: EBIT and net profit more than two times higher than in 2014, EBIT margin and net profit margin higher by more than 100%, ROCE at 13% (the Grupa Azoty Group strategy envisages target ROCE of 14% by 2020), Increased sales of fertilizers, Substantial decline in production costs due to constantly growing phosphate supplies from the Company s own source (a subsidiary in Senegal) and lower prices negotiated on key raw materials, Dividend payment of PLN 42,000 thousand. In 2015, the Group generated a net profit of PLN 164,789 thousand, with EBIT at PLN 209,162 thousand and EBITDA at PLN 293,442 thousand. Compared with 2014, net profit rose by PLN 103,578 thousand (169%), while EBIT improved by PLN 128,366 thousand (159%). In the reporting period, the financial performance of the Group was strongly correlated with the situation in the Parent s market environment. In 2014, the Company conducted intensive negotiations to lower production costs, which led to a marked reduction in the price of the key raw material natural gas and better financial performance. Table 12. Consolidated financial performance Item 2015 2014 change % change Revenue 2,741,689 2,412,443 329,246 14 Cost of sales 2,253,035 2,078,423 174,612 8 Gross profit 488,654 334,020 154,634 46 Selling and distribution expenses 97,664 90,254 7,410 8 Administrative expenses 184,668 169,001 15,667 9 Net profit on sales 206,322 74,765 131,557 176 Other income/(expenses) 2,840 6,031-3,191-53 EBIT 209,162 80,796 128,366 159 Finance income/(costs) -16,696-17,231 535-3 Share of profit (loss) of equity-accounted associates 10,816 11,043-227 -2 Profit before tax 203,282 74,608 128,674 172 Income tax 38,493 13,397 25,096 187 Net profit/loss 164,789 61,211 103,578 169 In 2015, revenue was higher by 14% year on year, whereas the EBITDA margin of 11% was up by 3.5pp relative to 2014. The revenue was driven up by increased sales volumes for fertilizers (urea and compound fertilizers). Selling and distribution costs were up on 2014 due to higher sales Grupa Azoty Zakłady Chemiczne Police Group Page 24 of 63

volumes. Also there was an increased number of transactions in which the Company was tasked to handle transport logistics. Net finance income/cost remained broadly flat on the previous year. 5.3.2. Segment results In 2015, EBIT in the Fertilizers Segment was PLN 216,795 thousand. Given a difficult market situation, EBIT in the Pigments Segments was negative at PLN -13,718 thousand. The Fertilizers Segment accounted for a larger share (88%) of the Group s revenue. The Pigments Segment generated 10% of the Group s total revenue, while revenue from Other Activities represented 2% of the Group s total revenue from sales to external customers. In 2015, operating profit posted in the Fertilizers Segment was 255% higher than in the previous year. The improvement was driven mainly by the increased sales volume. EBIT generated by the Pigments Segments was down by PLN 26,042 thousand relative to 2014. Titanium white sales continued to decline in 2015. Other activities yielded a positive EBIT of PLN 6,085 thousand, down by 17% year on year. Table 13. Consolidated EBIT by segment in 2015 Other Item Fertilizers Pigments Activities Revenue from external sales 2,420,349 269,475 51,865 Share [%] 88% 10% 2% EBIT 216,795-13,718 6,085 Table 14. Consolidated EBIT by segment in 2014 Other Item Fertilizers Pigments Activities Revenue from external sales 2,066,647 299,746 46,050 Share [%] 86% 12% 2% EBIT 61,138 12,324 7,334 In 2015, the Fertilizers Segment s share in the Group s revenue from external sales increased by 2pp, while the Pigments Segment s share declined. Figure 9. Revenue by segment 2 000 000 1 600 000 2014 2015 1 200 000 800 000 400 000 Fertilizers Pigments Other Activities 0 Source: Company data. Fertilizers In 2015, revenue of the Fertilizers Segment was PLN 2,420,349 thousand, a marked improvement on 2014 (by 17%). The increase was predominantly due to higher sales volumes and fertilizer prices. Fertilizers sales were 21% higher than in 2014. Grupa Azoty Zakłady Chemiczne Police Group Page 25 of 63

Figure 10. 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 2014 2014 2014 2014 2015 2015 Q3 2015 Q4 2015 Source: Company data. Pigments In 2015, revenue from external sales posted by the Pigments Segment was PLN 269,475 thousand, down 10% on 2014. The key product sold by the Pigments Segment is titanium white. In 2015, the Segment s revenue from sales of titanium white reached PLN 258,559 thousand. Key factors behind the year-on-year drop in revenue of the Pigments Segment included a decrease in domestic sales volumes of titanium white and a 7% drop in average selling prices. Figure 11. Revenue of the Pigments Segment 120 000 100 000 80 000 60 000 40 000 20 000 0 Q1 2014 Source: Company data. Q2 2014 Other Activities Revenue recognised under Other Activities accounts for 2% of the Group s total external sales and is derived mainly from occasional sales of merchandise and services. Sales by product group Q3 2014 Q4 2014 Q1 2015 2Q 2015 Q3 2015 Q4 2015 Sales of the Group s products are driven primarily by the Parent s performance in the fertilizer market. Sales of compound fertilizers (NPK, NP, NS and PK) are the most important source of revenue, accounting for 61% of the Group s total sales. In 2015, revenue from sales of compound fertilizers came in at PLN 1,678,891 thousand, up by 29% year on year. In the compound fertilizer category, sales of NPK fertilizers are the main contributor to revenue, with a 46% share in total sales. In 2015, revenue from sales of compound fertilizers was up 32% year on year, reflecting an increase in sales volumes and market prices of NPK fertilizers in the reporting period. In 2015, revenue from sales of urea was PLN 368,216 thousand and accounted for 13% of the Group s total sales. Relative to 2014, the Group posted a 14% increase in revenue. In 2015, revenue from sales of titanium white was PLN 258,559 thousand and accounted for 9% of the Group s total sales. The average selling prices were approximately 7.5% lower than in 2014. Grupa Azoty Zakłady Chemiczne Police Group Page 26 of 63

Figure 12. Revenue by product group 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 Compound fertilizers Source: Company data. Urea Revenue from sales of chemicals also grew by 10% year on year. In the Other Activities group, accounting for 2% of total revenue, a year-on-year decrease was recorded in terms of sales value, on the back of lower sales of merchandise and materials. Figure 13. Revenue by product group 2015 Urea 14% Titanium white Chemicals Other 2% Other 2015 2014 Chemicals 14% Compound fertilizers 61% 2014 Chemicals 14% Titanium white; 12% Other 3% Compound fertilizers 54% Urea 16% Source: Company data. Compared with 2014, the share of urea in total revenue fell from 16% to 14%, while the share of titanium white was down from 12% to 9%. The share of compound fertilizers was up by 7pp. 5.3.3. Operating expenses by nature Operating expenses were up 8% in 2015 relative to 2014. The most important item of operating expenses was raw materials and consumables used, most of which generated by the Parent. The main cause of the year-on-year increase in operating expenses was higher production. The increase in taxes and charges is attributable to a change in the manner of posting of CO 2 costs (which were reclassified from raw materials and consumables used to taxes and charges) and higher waste Grupa Azoty Zakłady Chemiczne Police Group Page 27 of 63