Ciech S.A.

Legal Proceedings Report • Jun 27, 2019

Contentof the report:

Withreference to the current report No. 22/2019 dated 6 June 2019, CIECHS.A. (the "Company" or the "Issuer")hereby informs that today, based on its own assessment of the case,adviser's opinion and the auditor's approach, it has completed theinternal assessment of risks related to the potential:

(i)sustainingin the next stage of administrative proceedings of the decisions of theHead of the Kujawsko-Pomorskie Tax Office in Bydgoszcz, disadvantageousto the Issuer's subsidiaries CIECH Soda Polska S.A., CIECH Cargo sp. zo.o., CIECH Pianki sp. z o.o. (jointly the "Subsidiaries"),

(ii)issuanceof decisions disadvantageous to five of the Issuer's subsidiaries in theongoing tax proceedings or tax proceedings potentially instigated in thefuture, as part of which the competent Tax Office would question theright of the Issuer's subsidiaries to settle a tax loss fromparticipation in a partnership being the Issuer's indirect subsidiary inthe tax years 2015-2018 and the right of the Issuer's subsidiaries tosettle the loss after 2018.

Asa result of such assessment, following the precautionary principle, inaccordance with the interpretation 23 of the International FinancialReporting Interpretations Committee, the Company has decided that eventswhich occurred after the balance sheet date (i.e. the decisions of thehead of the Tax Office) are a source of additional information of astate of facts existing as at the balance sheet date. In the assessmentof the Company the above indicates the necessity of recognising as at 31December 2018 of provisions for ongoing tax proceedings and thewrite-off for deferred tax asset in relation to five of the Issuer'ssubsidiaries which settled a tax loss from participation ina partnership being the Issuer's indirect subsidiary (the issueddecisions related only to the Subsidiaries). Therefore, the Company hasdecided on the necessity of correction of already published, but not yetapproved, the Consolidated Financial Statements of CIECH Group for theyear 2018, the Report of the Management Board on CIECH and CIECH Groupactivity for the year 2018. The reason for the correction of thedocuments mentioned in the previous sentence is the decision to createin the consolidated financial statements of CIECH Group for the year2018 (the "Statements") a provision for the income tax inthe amount of PLN 65 Million and to recognise a provision for latepayment interest, which as at the balance sheet date, i.e. as at 31December 2018, amounted to around PLN 6 Million.

Thedescription of the inspection on the right of five of the Issuer'ssubsidiaries to settle a tax loss from participation in a partnershipbeing the Issuer's indirect subsidiary has been presented in item 9.2 ofthe Statements and was also presented in the periodic report for thefirst quarter of the year 2019, as well as in periodic reports publishedby the Company in previous reporting periods. The amounts of createdprovisions for income tax and the write-off for deferred tax assetmentioned in this report fall within the amount of PLN 143.8 Millionpresented in the Statements.

Thecreation of provision and the write-off for deferred tax asset shall notresult in the outflow of financial finds from five of the Issuer'ssubsidiaries. If tax authorities of second instance issuedisadvantageous decisions against the companies, they shall be obligedto pay amounts with interest determined in such decisions.

At thesame time the Issuer would like to emphasise that the Issuer, theSubsidiaries and their advisers do not agree with the approach expressedin the decisions of the tax authority, therefore the Subsidiaries havetaken procedural steps aimed at defending tax consequences of theiractions taken in 2015 and appealed against the received decisions on 19June 2019.