Ciech S.A.

Legal Proceedings Report • Jul 17, 2019

The Management Board of CIECH S.A. (hereinafterreferred to as "Issuer" or "CIECH")herewith informs that on 17 July 2019, the commercial proxy ofsubsidiaries of the Issuer: Verbis ETA sp. z o.o. S.K.A. (hereinafterreferred to as "Verbis Eta") and CIECH Soda Polska S.A.(hereinafter referred to as "CSP"), the legal successor ofCerium Finance Sp. z o.o. (hereinafter referred to as "CeriumFinance"), (hereinafter jointly referred to as "Subsidiaries"),received:

1.1.Decision (hereinafter referred to as"Decision") of the Head of the Małopolskie Province Customsand Tax Office in Krakow (hereinafter referred to as the "Authority")in connection with the tax proceedings conducted against Verbis Eta bythe Authority with respect to the settlement of VAT for the fourthquarter of 2013 (hereinafter referred to as "Proceeding I"),

2.2.Accounting Book Audit Report(hereinafter referred to as the "Report") in connectionwith the tax proceedings conducted against CSP (legal successor ofCerium Finance) by the Authority with respect to the settlement of VATfor December 2014 (hereinafter referred to as "Proceeding II").TheAuthority challenged the right to deduct VAT from a part of the non-cashcontribution (hereinafter referred to as the "Contribution-in-kind")made by CIECH to the supplementary capital of Verbis Eta and the rightto deduct VAT from the Contribution-in-kind made by CSP to thesupplementary capital of Cerium Finance.

If this position is maintained in relation to VerbisEta in Proceeding I and possible court and administrative proceedings,the consolidated result of the CIECH Group will be affected by thefollowing amounts: PLN 30,775,122.00 (thirty million seven hundred andseventy-five thousand one hundred and twenty-two and 00/100 zlotys) dueto VAT and interest which as of today amounts to PLN 13,898,551.00. Dueto the fact that the entire amount of VAT was paid to the competent taxoffice, according to the current state of affairs - the consolidatedcash flows of the CIECH Group may be affected by the payment of theaforementioned interest.

Maintaining an unfavourable position against CSP(legal successor of Cerium Finance) in Proceeding II and possible courtand administrative proceedings due to the fact that according to theinterpretation and position of persons carrying out the tax audit,Cerium Finance adjusted VAT, the consolidated result of the CIECH Groupwill be affected by the interest which as of today amounts to PLN9,047,235.00. Due to the fact that the entire VAT amount, i.e. PLN25,277,408.25, was paid to the competent tax office, according to thecurrent state of affairs, the consolidated cash flows of the CIECH Groupmay be affected by the payment of the aforementioned interest.

The Subsidiaries subjected to the tax audit and theiradvisors do not agree with the position of the Authority. Therefore,Subsidiaries intend to take procedural measures to defend the taxconsequences of their operations in 2013 and 2014. Their position isbased, among others, on the fact that CIECH, CSP, Verbis Eta and CeriumFinance obtained tax interpretations issued by the Head of the NationalTax Information Department, which confirm the correctness of operationsperformed by the Subsidiaries or tax interpretations that they compliedwith.

The Issuer informed about the Accounting Book AuditReport as part of Proceeding I in its Current Report No. 17/2019 of 22May 2019.

The Issuer informed about pending Proceeding I andProceeding II and about the amounts of potential tax liability in theconsolidated statements of the CIECH Group. In the consolidatedfinancial statements of the CIECH Group for 2018, Proceeding I andProceeding II are described in note 9.2 in the section "Audits of taxsettlements in the CIECH Group", with regard to VAT audits:1.Proceeding I: "VATaudit for the fourth quarter of 2013 at VERBIS ETA Sp. z o.o. S.K.A.",2.Proceeding II: "VATaudit for December 2014 at Cerium Finance Sp. z o.o."

The Subsidiaries are analysingthe Decision and the Report in terms of the appropriateness of creatinga provision:1.for interest andVAT which was not deducted - in Proceeding I,2.for interest inProceeding II.