zakŁady azotowe w tarnowie moŚcicach s.a. group · zakŁady azotowe w tarnowie-moŚ iah s.a....

ZAKŁADY AZOTOWE W TARNOWIE-MOŚCICACH S.A. GROUP

CONSOLIDATED QUARTERLY REPORT

Q3 2012

ZAKŁADY AZOTOWE W TARNOWIE-MOŚCICACH S.A. GROUP Consolidated quarterly report for Q3 2012

(all amounts in PLN thousands unless otherwise stated)

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CONTENTS

SELECTED FINANCIAL DATA ........................................................................................................................ 5

SELECTED CONSOLIDATED FINANCIAL DATA...................................................................................... 6

SELECTED SEPARATE FINANCIAL DATA ............................................................................................... 7

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2012 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION ........................................................... 8

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................................... 9

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................... 10

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................ 12

CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................................ 13

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS ............................................................. 15

I. INFORMATION ON SIGNIFICANT EVENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30 2012 .......................................................................................................................................................... 15

II. INFORMATION ON THE ACCOUNTING PRINCIPLES FOR DRAWING UP THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ................................................................................ 18

1. Accounting principles and calculation methods ....................................................................... 18

1.1. DECLARATION OF CONFORMITY AND GENERAL PRINCIPLES FOR DRAWING UP THE FINANCIAL STATEMENTS .......................................................................................................................... 18

1.2. ACCOUNTING PRINCIPLES AND CALCULATION METHODS ......................................................... 19

1.3. FUNCTIONAL AND PRESENTATION CURRENCY OF THE FINANCIAL STATEMENTS, TOGETHER WITH THE PRINCIPLES ADOPTED FOR THE CONVERSION OF FINANCIAL DATA ...................................... 19

III. SELECTED ADDITIONAL NOTES ........................................................................................................ 19

1. Changes in estimates ................................................................................................................ 19

2. Segment reporting .................................................................................................................... 20

3. Contingent liabilities and sureties, guarantees and other collateral ........................................ 26

4. Information on related parties ................................................................................................. 31

5. Events after the end of the reporting period which could have an impact on future financial results ............................................................................................................................................... 31

6. Dividend .................................................................................................................................... 31

7. Seasonality ................................................................................................................................ 32

CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2012 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION ......................................................... 33

SEPARATE STATEMENT OF COMPREHENSIVE INCOME ........................................................................... 34

SEPARATE STATEMENT OF FINANCIAL POSITION .................................................................................... 35

SEPARATE STATEMENT OF CHANGES IN EQUITY ..................................................................................... 37

SEPARATE STATEMENT OF CASH FLOWS ................................................................................................. 38



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NOTES TO THE CONDENSED SEPARATE FINANCIAL STATEMENTS .......................................................... 40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF Q3 2012 RESULTS ...................................................... 41

I. DISCUSSION OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS ................................ 42

1. Significant factors and events having considerable impact on Group operations and financial results ............................................................................................................................................... 42

1.1. FACTORS HAVING CONSIDERABLE IMPACT ON GROUP OPERATIONS AND FINANCIAL RESULTS42

1.2. MARKET OVERVIEW .................................................................................................................... 43

2. Key Group financial data ........................................................................................................... 50

2.1. CONSOLIDATED GROUP RESULTS................................................................................................ 50

2.2. SEGMENT RESULTS ...................................................................................................................... 51

2.3. EXPENSES BY NATURE ................................................................................................................. 55

2.4. ASSET AND LIABILITY STRUCTURE ............................................................................................... 57

2.5. FINANCIAL RATIOS ....................................................................................................................... 59

3. Significant agreements ............................................................................................................. 61

4. Achievement of issue objectives .............................................................................................. 62

5. Use of proceeds from share issues ........................................................................................... 62

6. Type and value of non-typical items having an impact on assets, liabilities, net financial results or cash flows ......................................................................................................................... 63

7. Issue, buyback and repayment of debt and equity securities .................................................. 63

II. OTHER INFORMATION ...................................................................................................................... 67

1. Description of Group structure ................................................................................................. 67

2. Changes during the reporting period in the structure of commercial entities, including as a result of mergers, acquisitions or sale of Group companies, long-term investments, division, restructuring and discontinued operations ...................................................................................... 70

3. Management’s position concerning forecasts .......................................................................... 71

4. Indication of shareholders directly, or indirectly through subsidiaries, holding at least 5% of total votes at the general meeting as at the date of publishing this report, with indication of the number of shares held by such entities, their share in capital, the number of votes carried thereby and their share in the total number of votes at the shareholder meeting, together with indication of changes in the ownership of significant stakes in the parent from the publication date for the previous annual report ................................................................................................. 72

5. Parent shares held by management and supervisory personnel as at the date of publishing the report, together with indication of changes in such shares held during the period from publication of the last interim report, with separate presentation for each individual .................. 73

6. Court proceedings ..................................................................................................................... 73

7. Credit or loan guarantees, sureties issued ............................................................................... 73

8. Other information essential for assessing the HR, property, financial situations, the financial result and their changes at the company and its group and also information essential for assessing the capability for the company and its group to perform obligations ............................. 74

8.1. EXECUTION OF AN AGREEMENT BETWEEN THE PARENT AND ZA PUŁAWY ............................... 74



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8.2. SETTLEMENT OF TENDER OFFER FOR SHARES IN THE PARENT ANNOUNCED BY NORICA HOLDING S.A.R.L ....................................................................................................................................... 75

8.3. SHARE CAPITAL INCREASE ........................................................................................................... 76

8.4. CHANGE IN THE PARENT’S ISSUE SPONSOR ................................................................................ 77

8.5. IMPLEMENTATION OF KEY INVESTMENTS .................................................................................. 77

8.6. FINANCIAL LIQUIDITY .................................................................................................................. 80

8.7. CREDIT AND LOAN LIABILITIES .................................................................................................... 80

8.8. COMPOSITION OF MANAGEMENT AND SUPERVISORY AUTHORITIES ....................................... 81

9. Factors having an impact on financial results over at least the next quarter .......................... 84

9.1. INTEREST INCOME ON DEPOSITS OF SHARE ISSUE PROCEEDS ................................................... 84

9.2. EXCHANGE RATES ........................................................................................................................ 84

9.3. DOMESTIC INTEREST RATES ........................................................................................................ 85

9.4. RAW MATERIAL AND PRODUCT PRICES OVER THE NEXT QUARTER ........................................... 85

TABLES .............................................................................................................................................. 87

FIGURES ............................................................................................................................................ 87

SELECTED FINANCIAL DATA



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SELECTED CONSOLIDATED FINANCIAL DATA

PLN (thousands) EUR (thousands)

For the period from 1.1.2012 to 30.9.2012




Revenue from sales 5 511 800 3 280 315 1 313 960 811 698

Profit on operating activities 373 635 389 823 89 071 96 460

Profit before tax 369 487 371 497 88 082 91 925

Net profit 292 806 303 433 69 802 75 083

Total comprehensive income 308 277 309 726 73 490 76 640

Number of shares 64 115 444 42 540 945 64 115 444 42 540 945

Net profit per ordinary share 4.10 5.42 0.98 1.34

Net cash flows from operating activities 201 154 49 775 136 805 (74 447)

Net cash flows from investing activities (702 067) (173 723) (109 681) (49 502)

Net cash flows from financing activities (39 554) 546 052 (9 429) 135 118

Total net cash flows 74 229 45 139 17 695 11 169

Cash at the beginning of period 244 791 279 450 58 356 69 149

Cash at the end of period 325 983 334 820 77 711 82 850

As at

30.09.2012 As at

31.12.2011 As at

30.09.2012 As at

31.12.2011

Non-current assets 3 535 379 3 308 229 859 395 749 010

Current assets 1 805 093 1 638 000 438 790 370 857

Non-current liabilities 723 562 639 017 175 887 144 679

Current liabilities 1 162 065 1 154 545 282 480 261 399

Equity 3 454 845 3 152 667 839 818 713 790

Share capital 320 577 320 577 77 927 72 581 Equity attributable to non-controlling interests 422 292 402 197 102 653 91 061



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SELECTED SEPARATE FINANCIAL DATA

PLN (thousands) EUR (thousands)





Revenue from sales 1 525 804 1 334 342 363 737 330 176



Net profit 225 526 130 202 53 763 32 218


Number of shares 64 115 444 42 540 945 64 115 444 42 540 945

Net profit per ordinary share 3.52 3.06 0.84 0.76

Net cash flows from operating activities 176 573 92 042 42 093 22 775

Net cash flows from investing activities (209 161) (672 335) (49 862) (166 366)

Net cash flows from financing activities 78 195 610 649 18 641 151 102

Total net cash flows 45 607 30 356 10 872 7 511

Cash at the beginning of period 86 289 172 191 20 570 42 608

Cash at the end of period 131 896 202 547 31 443 50 119

As at

30.09.2012 As at

31.12.2011 As at

30.09.2012 As at

31.12.2011

Non-current assets 2 261 914 1 973 543 549 836 446 826

Current assets 586 864 502 872 142 657 113 854

Non-current liabilities 303 029 149 906 73 662 33 940

Current liabilities 372 734 400 920 90 606 90 772

Equity 2 173 015 1 925 589 528 226 435 969

Share capital 320 577 320 577 77 927 72 581

Selected entries in the statement of financial position, statement of comprehensive income and cash flow statement are translated into EUR in accordance with the prevailing translation method indicated: a) individual assets and liabilities in the statement of financial position are converted at the

exchange rate prevailing at the end of the reporting period: rate as at 31 December 2011 EUR 1 = PLN 4.4168 (Table 252/A/NBP/2011) rate as at 30 September 2012 EUR 1 = PLN 4.1138 (Table 189/A/NBP/2012)

b) specific items in the statement of comprehensive income and the statement of cash flows were converted according to exchange rates constituting the arithmetical average of exchange rates published by the National Bank of Poland for EUR, in force as at the last day of each month within a given reporting period: average exchange rate during the period 1 January 2011-30 September 2011 EUR 1 = PLN 4.0413 average exchange rate during the period 1 January-30 September 2012 EUR 1 = PLN 4.1948

The conversion was made in accordance with the previously identified exchange rates by dividing the values expressed in thousands of PLN by the exchange rate.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2012

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION

ZAKŁADY AZOTOWE W TARNOWIE-MOŚCICACH S.A. GROUP Condensed consolidated interim financial statements for the three and nine months ended 30 September 2012


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The consolidated statement of comprehensive income should be read together with the notes

comprising an integral part of the condensed consolidated interim financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 September 2012





unaudited unaudited unaudited unaudited Continuing operations

Revenue from sales 1 697 152 5 511 800 1 314 191 3 280 315 Cost of sales (1 514 250) (4 684 801) (1 025 715) (2 559 200)

Gross profit on sales 182 902 826 999 288 476 721 115

Distribution costs (41 916) (134 066) (39 645) (101 895) Administrative expenses (106 557) (279 765) (72 914) (194 985) Other operating revenue 947 20 540 11 289 22 100 Other operating costs (14 632) (60 073) (35 205) (56 512)


Finance income 6 286 14 816 13 250 20 902 Finance costs (2 421) (25 730) (27 483) (40 381)

Net finance income / costs 3 865 (10 914) (14 233) (19 479)

Share of the net profit of associates accounted for using the equity method 2 468 6 766 898 1 153


Income tax (6 815) (76 681) (23 101) (68 064)

Net profit on continuing operations 20 262 292 806 115 565 303 433

Discontinued operations Net profit (loss) on discontinued operations - - - -

Net profit 20 262 292 806 115 565 303 433

Components of other comprehensive income Measurement of hedging instruments 130 408 (1 113) (1 186) Settlement of hedging instruments 329 1 045 874 1 326 Change in fair value of available-for-sale financial assets 25 585 25 585 - - Deferred tax on other comprehensive income (4 948) (5 137) 612 540 Exchange differences on translation of foreign operations (2 939) (6 430) 6 032 5 613

Total other comprehensive income 18 157 15 471 6 405 6 293


Net profit attributable to: Owners of the parent 11 644 262 820 99 983 230 537 Non-controlling interests 8 618 29 986 15 582 72 896

Total comprehensive income attributable to:

Owners of the parent 29 801 278 291 106 195 236 637 Non-controlling interests 8 618 29 986 15 775 73 089

Earnings per share: Basic (PLN) 0.18 4.10 2.35 5.42 Diluted (PLN) 0.18 4.10 2.35 5.42



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CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 September 2012

As at 30.09.2012

As at 31.12.2011

unaudited audited

Assets

Non-current assets

Property, plant and equipment 2 787 142 2 747 478

Investment property 28 691 49 275

Intangible assets 265 022 283 000

Goodwill 9 124 9 124 Investments in subsidiaries, associates and jointly controlled entities 78 322 80 106

Available-for-sale investments 254 684 12 604

Other financial assets 565 565

Non-current receivables 4 665 1 201

Deferred income tax assets 104 117 124 266

Other assets 3 047 610

Total non-current assets 3 535 379 3 308 229

Current assets

Inventory 640 977 653 171

Other financial assets 1 343 253

Income tax receivables 5 781 -

Trade and other receivables 810 405 722 958

Cash and cash equivalents 325 983 244 791

Other assets 20 479 16 702

Available-for-sale non-current assets 125 125

Total current assets 1 805 093 1 638 000

Total assets 5 340 472 4 946 229



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CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 September 2012

As at

30.09.2012 As at

31.12.2011

unaudited audited Equity and liabilities Equity

Share capital 320 577 320 577 Share premium 680 688 680 688 Hedging reserve (457) (1 634) Revaluation reserve 20 724 - Exchange differences on translation of foreign operations (959) 5 471 Retained earnings, including: 2 011 980 1 745 368

Current-period net profit 262 820 461 527

Equity attributable to owners of the parent 3 032 553 2 750 470

Non-controlling interests 422 292 402 197

Total equity 3 454 845 3 152 667

Liabilities Liabilities due to borrowings 301 121 226 072 Provisions for employee benefits 129 668 124 932 Other non-current liabilities 993 790 Other provisions 112 950 118 951 Government grants 20 625 17 917 Deferred income 14 - Provisions for deferred income tax 135 898 126 378 Other financial liabilities 22 293 23 977

Total non-current liabilities 723 562 639 017

Liabilities due to borrowings 92 232 168 754 Provisions for employee benefits 9 972 28 247 Liabilities due to current income tax 20 395 2 179 Trade and other payables 823 644 754 181 Other provisions 146 127 133 142 Government grants 409 600 Deferred income 1 566 644 Other financial liabilities 67 720 66 798

Total current liabilities 1 162 065 1 154 545

Total liabilities 1 885 627 1 793 562

Total equity and liabilities 5 340 472 4 946 229



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 30 September 2012

Share capital

Share premium

Hedging reserve

Exchange differences on translation of

foreign operations Revaluation

reserve Retained earnings

Total equity attributable to owners of the

parent

Non-controlling interests

Total equity

As at 1 January 2011 195 582 209 990 (1 431) (1 566) - 1 099 601 1 502 176 447 926 1 950 102

Total comprehensive income for the nine months ended 30 September 2011 - - (194) 6 622 - 230 909 237 337 73 089 310 426

Share issue 124 995 470 452 - - - - 595 447 - 595 447

Dividend - - - - - - - (265) (265) Non-controlling interests resulting from acquisition of Z.Ch. Police Group - - - - 86 (86) - 254 981 254 981

Other activity - - - - - 253 253 (241) 12

As at 30 September 2011 (unaudited) 320 577 680 442 (1 625) 5 056 86 1 330 677 2 335 213 775 490 3 110 703

As at 1 January 2012 320 577 680 688 (1 634) 5 471 - 1 745 368 2 750 470 402 197 3 152 667

Total comprehensive income for the nine months ended 30 September 2012 - - 1 177 (6 430) 20 724 262 820 278 291 29 986 308 277 Dividend - - - - (8 827) (8 827) Other activity - - 3 792 3 792 (1 064) 2 728

As at 30 September 2012 (unaudited) 320 577 680 688 (457) (959) 20 724 2 011 980 3 032 553 422 292 3 454 845



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CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended 30 September 2012



(after corrections*)

unaudited unaudited Cash flows from operating activities Profit before tax 369 487 371 497 Corrections 197 699 166 259

Depreciation 177 505 124 076 Impairment loss (reversal) (3 228) 13 534 Loss on investing activities 45 648 19 461 Profit on disposal of financial assets (1 151) (2 293) Share of the net profit or loss of associates accounted for using the equity method (6 767) (1 153) Interest, exchange differences (12 968) 9 265 Dividend received 89 (142 ) Profit (loss) on change in fair value of financial assets measured at fair value (1 429) 3 511

Profit on operating activities before changes in working capital 567 186 537 756

Change in trade and other receivables 38 387 (185 254) Change in inventories 9 738 (34 428) Change in trade and other payables and other receivables (20 655) (122 814) Change in inventory, accruals and grants 10 959 54 545 Other corrections (8 990) (11 177)

Cash generated from operating activities 596 625 238 628

Interest paid 13 782 14 549 Tax paid (36 536) (52 023)

Net cash from operating activities 573 871 201 154



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(after corrections*)

unaudited unaudited Cash flows from investing activities

Sale of intangible assets, PP&E and investment properties 5 881 9 227 Payments for intangible assets PP&E and investment properties (260 121) (210 602) Dividend received 8 304 142 Acquisition of a subsidiary, less acquired cash - (502 015) Expenditures on acquisition of financial assets (216 489) (84) Proceeds from sale of financial assets 1 950 3 625 Interest received 3 469 1 669 Grants 3 026 583 Loans (1 041) - Other investment proceeds / outflows (5 067) (4 612)

Net cash flow from investing activities (460 088) (702 067)

Net proceeds from share issue - 594 291 Dividend paid (8 826) (265) Proceeds from loans and borrowings incurred 538 077 706 844 Repayment of borrowings (530 177) (794 459) Interest paid (20 764) (27 530) Payment of liabilities under finance lease contracts (9 268) (4 935) Other finance income / costs (8 596) 72 106

Net cash flows from financing activities (39 554) 546 052

Total net cash flows 74 229 45 139

Cash at the beginning of period 244 791 279 450

Effect of exchange differences 6 963 10 231

Cash at the end of period 325 983 334 820

* - Acquisition of shares in Z.Ch. Police S.A., less acquired cash, which was recognised in the interim financial statements

for the three and nine months ended 30 September 2011 under Other corrections as cash flows from operating activities,

this was transferred and recognised as expenditures under investing activities



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NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

I. Information on significant events during the nine months ended September 30 2012

Acquisition of ZA Puławy

The Parent is currently conducting the acquisition of shares in Zakłady Azotowe Puławy S.A. (hereinafter ZA Puławy). The transaction is being completed in two stages: stage 1 – tender offer, stage 2 – share swap.

Stage 1 was completed on 21 August 2012 through the execution of a transaction to purchase shares in ZA Puławy constituting 10.3% of share capital and entitling to 10.3% of voting rights at the company’s general meeting. The transaction was executed as a tender offer to subscribe for sale of shares in ZA Puławy entitling to 32% of voting rights at ZA Puławy’s general meeting, announced on 13 July 2012. The transaction covered all ZA Puławy shares under subscriptions submitted in response to the tender offer, i.e. 1 968 083 shares. The shares were acquired by the Parent for PLN 110 per share, bringing the transaction value to PLN 216 489 000. Prior to the tender offer announcement, the parent did not hold any ZA Puławy shares. The shares acquired by the Parent are admitted to trading on the regulated market managed by the Warsaw Stock Exchange.

Stage 2 of the transaction will be conducted through a share capital increase within authorised share capital. Under the share swap, the existing ZA Puławy shareholders will be offered Parent shares at an exchange ratio of 2.5 Parent shares for 1 ZA Puławy share. Until the date of this report stage 2 has not been completed. In order to complete the transaction the Parent must, among others, publish a prospectus and receive from the European Commission approval for the business combination.

Execution of a loan agreement with PKO Bank Polski S.A.

On 14 August 2012 the Parent executed a PLN 711 000 000 loan agreement with PKO Bank Polski S.A. Applicable information can be found in the Azoty Tarnów Group management commentary on the results for Q3 2012, Significant agreements section, p. 61.

Subsequently, PZU Życie S.A. entered into the above loan agreement on 22 August 2012. This amendment to the loan agreement introduced a consolidated joint finance agreement, under which PZU Życie S.A. partially acquired the rights and obligations of PKO Bank Polski S.A.

Up to the date of drafting these financial statements, PLN 162 367 000 of the loan had been used, allocated to finance 75% of the purchase price for shares in ZA Puławy, while the PLN 348 633 000 unused part of the loan was cancelled.

Increase in issued share capital within authorised share capital

In altering the company's articles of association, through the resolutions of 14 July 2012, the ordinary general meeting granted authorisations to the Parent's Management Board to increase the Parent's share capital by issuing new shares with a total nominal value not exceeding PLN 240 432 915 through a share capital increase. The Management Board’s authorisation to increase share capital and issue new shares within authorised share capital will expire within six months from registration of the changes in articles of association relating to authorised share capital.

Within authorised share capital the Management Board is authorised to offer shares with exclusion of pre-emptive rights exclusively to ZA Puławy shareholders in exchange for an in-kind contribution in the form of ZA Puławy shares.

On 11 September 2012 the Parent’s Management Board adopted a resolution on an increase in the Parent’s share capital by an amount not lower than PLN 5 and not higher than PLN 214 336 465 through the issue of no less than 1 and no more than 42 867 293 series D ordinary bearer shares with a nominal value of PLN 5 each. The resolution was adopted, pending Supervisory Board approval.



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The issuance of Series D Shares will take place via an open subscription with exclusion of existing shareholders’ pre-emptive rights, through a public offering in the meaning of art. 3 sec. 3 of the Act of 29 July 2005 on Public Offerings and Public Companies. In accordance with § 10 sec. 4 of the Articles of Association, Series D Shares will be offered to the shareholders of ZA Puławy on the conditions specified in the Company’s prospectus or offering memorandum drawn up in connection with the public offering of Series D Shares and the application for admission and introduction of Series D Shares to trading on the regulated market managed by the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A. – the “WSE”). Until the date of these financial statements no increases in share capital took place as a result of the series D share issue.

Azoty Tarnów Group Strategy 2012-2020

On 13 June 2012 the Parent’s Management Board presented an updated strategy for the Azoty Tarnów Group for years 2012-2020. In accordance with the adopted document the Azoty Tarnów Group operations over the next decade are aimed at implementing the Group’s vision, which provides for Azoty Tarnów’s inclusion in the main index at the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A. – GPW), generation of top rates of return on equity in the industry for shareholders and maintenance of a sustainable position as one of the three largest fertiliser manufacturers in Europe.

(see Azoty Tarnów Group Interim financial statements H1 2012, page 10).

Sale of Emission Reduction Units

On the basis of a previous decision, on 7 May 2012 the Ministry of the Environment transferred entitlements under ERUs generated for the fourth measurement period (i.e. 2011) to Mitsubishi Corporation Japan under a joint implementation project pursuant to the "Agreement on Reduction of Nitrogen Oxide at the Azoty Tarnów Nitric Acid Installation", entered into between the Parent and Mitsubishi Corporation.

The Parent provided applicable information on this topic in the Condensed consolidated interim financial statements for the six months ended 30 June 2012, p. 11.

Verification of CO2 emissions

An audit was carried out in the first quarter of 2012 to verify the level of CO2 emissions for 2011. The audit confirmed the calculated emissions levels and ended with a positive result. In fulfilling the statutory verification obligation, a Report on CO2 Emissions was sent to the Marshal of the Małopolskie Province and KASHUE (the National Administrator of Emissions Trading System), and redemption of used emissions allowances occurred on 12 April 2012.

As a result of the verification, a surplus of greenhouse gas emissions allowances was generated for 2011. The annual Reports on CO2 Emissions were also verified at ZAK S.A. and Z.Ch. Police S.A. concerning on-site power plants for 2011, and a surplus of greenhouse gas emissions allowances was generated in both instances.

Certificates of origin for electricity

As a result of applications submitted for the issue of certificates of origin for electricity generated at the CHP plants belonging to the Parent and Z.Ch. Police S.A., the President of the Energy Regulatory Office awarded property rights under certificates of origin for electricity produced through highly efficient co-generation in 2011.

(detailed information can be found in the Condensed consolidated interim financial statements for the six months ended 30 June 2012, p. 12).

Proposal to acquire 50% of shares in Bałtycka Baza Masowa Sp. z o.o.

The Parent has responded favourably to an invitation extended by the Management Board of Morski Port Gdynia S.A. and prepared a proposal to purchase 50% of Bałtycka Baza Masowa Sp. z o.o. for the



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minimum price specified in the information memorandum, i.e. PLN 18 200 000. On 17 September 2012 a request was sent to the Supervisory Board along with a detailed economic justification for the project. At the same time the Parent submitted a request to the President of the Office for Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów – UOKiK) for approval of the business concentration. The UOKiK stated in a letter that this transaction does not require approval due to the fact that it does not meet turnover criteria. Once Supervisory Board approval is received, the Management Board will negotiate the final terms of transaction and potentially sign a privatisation agreement. Until the date of this report the Supervisory Board has not decided on the approval.

The remaining 50% of shares in Bałtycka Baza Masowa Sp. z o.o. are held by ZA Puławy.

Global receivables insurance policies for the Parent and ZAK S.A. at KUKE S.A.

On 4 July 2012 the Parent executed an annex to its insurance policy for receivables with KUKE S.A., extending the policy's validity from 28 February 2013 to 31 July 2013.

Subsequently, ZAK S.A. executed an annex to its insurance policy for receivables with KUKE S.A. on 25 July 2012 in order to establish a new annual settlement period from 1 August 2012 to 31 July 2013.

As a result of the above annexes, the significant terms and conditions of both policies were consolidated and adapted to the standards for trade credit insurance within the Azoty Tarnów Group.

Claims made by ISARIOS Industriekapital AG

At the beginning of 2012 the Parent received a letter from ISARIOS Industriekapital AG concerning UNYLON AG's potential alleged claims against the purchaser of UNYLON Polymers GmbH, headquartered in Guben, currently trading as ATT Polymers GmbH (hereinafter “ATT Polymers”). The letter stated that in August 2011 ISARIOS Industrielkapital AG (hereinafter “ISARIOS”) became the owner of unspecified claims due to UNYLON AG against Azoty Tarnów connected with the acquisition of UNYLON Polymers GmbH. Acting on behalf of ISARIOS, Christian Schennstedt indicated that non-specified judicial proceedings are on-going at appeals level concerning the invalidity of a resolution. No specific claims were outlined in these letters, nor were specific demands made of Azoty Tarnów. Also Azoty Tarnów is not and has never been a party to any judicial or arbitration proceedings in which any claims were raised in relation to the Parent concerning the ATT Polymers share acquisition transaction. Azoty Tarnów is aware that proceedings are in progress between UNYLON AG shareholders and the company concerning questions raised by some shareholders with regard to the procedural correctness of the general meeting of shareholders of UNYLON AG on 23 December 2009, where consent was expressed to the acquisition of shares in ATT Polymers by Azoty Tarnów. One of the Unylon AG shareholders is consistently contesting challenges as to the correctness of the resolution of 23 December 2009, and the courts are in agreement with this view, issuing rulings upholding the resolution of 23 December 2009. It should be borne in mind that firstly the consent of the general meeting of shareholders for execution of the transaction was one of the conditions which Azoty Tarnów could waive, which despite the existence of the resolution of 23 December 2009 the Parent took the precaution to do, and secondly that the management board of UNYLON AG declared during the ATT Polymers sale that ATT Polymers was not UNYLON AG's only asset, and thus legally the consent of the general meeting is not a necessary (legal) condition for the validity of the transaction. On 6 June 2012 the court in Hamburg issued a ruling repealing the resolution of 23 December 2009. The proceedings in this matter took place without the Parent’s presence and the Parent received information on the ruling from representatives of ISARIOS. Legal analysis of the proceedings and ruling is on-going. However legal advisers to the Parent maintain their opinion regarding validity of the agreement on sale of ATT Polymers shares and the fact that there are no circumstances justifying a regressive transfer of these shares to any entity. In the event this transaction is overturned through arbitrage or general court a settlement between the parties should take place, i.e. return of the purchase price and payment of compensation for the Parent.



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II. Information on the accounting principles for drawing up the condensed consolidated interim financial statements

1. Accounting principles and calculation methods

1.1. Declaration of conformity and general principles for drawing up the financial statements

These condensed consolidated interim financial statements have been drawn up in accordance with the requirements of IAS 34 "Interim Financial Reporting" and the Ordinance of the Minister of Finance of 19 February 2009 (Polish Journal of Laws no. 33, item 259) and of 3 April 2013 (Polish Journal of Laws no. 0, item 397) on current and periodic information provided by issuers of securities and the terms and conditions for recognising information required by the provisions of law of a non-member state as equivalent and present the Group's financial position as at 30 September 2012, its operating results for the three and nine month periods ended 30 September 2012 and cash flows for the nine months ended 30 September 2012.

These condensed consolidated interim financial statements should be read together with the audited consolidated financial statements of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group, drawn up in accordance with the requirements of International Financial Reporting Standards as adopted by the European Union, containing notes to the financial statements for the year ending 31 December 2011.

The financial statements were prepared on the assumption that the Group will continue as a going concern and that it will continue its operations in the foreseeable future.

These condensed consolidated interim financial statements were prepared using the number format PLN x 1 000.



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1.2. Accounting principles and calculation methods

a) Adopted accounting principles

These condensed consolidated interim financial statements were drafted on the basis of the same accounting policies in relation to the rules applied in drafting the consolidated annual financial statements for 2011.

b) Changes in International Financial Reporting Standards

The Group intends to adopt changes in IFRS published but not yet in effect as at the publication date of these condensed consolidated interim financial statements, in accordance with the dates of their entry into force.

c) Changes in presentation of Group financial statements and accounting policies

No changes were made to the presentation of the Group's financial statements and accounting principles during the reporting period.

1.3. Functional and presentation currency of the financial statements, together with the principles adopted for the conversion of financial data

The functional and presentation currency for these condensed interim financial statements of the Group and Parent is Polish zloty (PLN).

III. Selected additional notes

1. Changes in estimates

The following estimates were subject to change:

Changes in provisions for payables (without provisions for deferred income tax)

from 1.7.2012 to 30.9.2012

from 1.1.2012 to 30.9.2012

from 1.7.2011 to 30.9.2011

from 1.1.2011 to 30.9.2011

As at the beginning of period 405 595 405 272 272 105 248 502

Creation 5 977 56 150 10 457 45 281 Recognition in connection with the acquisition of the Z.Ch. Police S.A. Group - - 126 609 126 609

Release and use (12 855) (62 705) (11 392) (22 613)

As at the end of period 398 717 398 717 397 779 397 779

Changes in impairment losses recognised on non-current assets

from 1.7.2012 to 30.9.2012

from 1.1.2012 to 30.9.2012

from 1.7.2011 to 30.9.2011

from 1.1.2011 to 30.9.2011


Creation 643 18 786 111 1 338

Release and use (1 247) (6 671) (68) (2 980)


In connection with the decision of the ordinary general meeting of Infrapark S.A. on placing the company in liquidation, a liquidation balance sheet was drawn up. The value of assets was established at the recoverable amount, not exceeding net book value. Assets were valued by an independent property valuation specialist. The PLN 15 052 000 impairment loss recognised on PP&E



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and the creation of a PLN 1 948 000 provision in connection with liquidation were included in the Azoty Tarnów Group’s result for the current period.

Changes in revaluation write-downs on inventories

from 1.7.2012 to 30.9.2012

from 1.1.2012 to 30.9.2012

from 1.7.2011 to 30.9.2011

from 1.1.2011 to 30.9.2011


Creation 21 415 29 495 5 036 6 198

Release and use (22 010) (29 383) (3 016) (6 633)


Changes in revaluation write-downs on receivables

from 1.7.2012 to 30.9.2012

from 1.1.2012 to 30.9.2012

from 1.7.2011 to 30.9.2011

from 1.1.2011 to 30.9.2011


Creation 1 190 2 073 1 490 2 908

Release and use (243) (2 398) (4 520) (8 709)


Changes in fair value of available-for-sale financial assets

The fair value of ZA Puławy shares was determined as at 30 September 2012 based on available prices from the Warsaw Stock Exchange. A PLN 25 585 000 surplus from the restatement of fair value was recognised under other comprehensive income for the period ended September 30 2012. During the period ended 30 September 2012 the Group did not restate the fair value of available-for-sale financial assets.

2. Segment reporting

In accordance with the requirements of IFRS 8, business segments should be identified on the basis of internal reports on those elements of the Group, which are regularly reviewed by people deciding on the allocation of resources to segments and assessing their financial performance.

Business segments

The Group separates business segments as follows:

Plastics segment,

Fertilisers segment,

Oxo alcohols segment,

Other activity segment, which includes the remaining lines of business, including energy, laboratory services, rental properties and other activities not attributable to individual segments.

Segment performance is evaluated in terms of revenue, EBIT and EBITDA.

Geographical segments

The Group separates the following geographical segments:

Poland,

Germany,

Other EU countries,

Other European countries,

Asia,

Other countries.



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Business segments

Revenue, costs and net result by business segment for the three months ended 30 September 2012

Continuing operations Plastics Fertilisers Oxo alcohols Pigments Other activity Total

Revenue from external sales 279 903 1 015 258 210 291 103 687 88 013 1 697 152

Revenue from inter-segment sales 73 005 155 193 1 771 906 351 775 582 650

Total revenue from sales 352 908 1 170 451 212 062 104 593 439 788 2 279 802

Operating costs, including: (-) (365 842) (1 108 590) (237 504) (97 205) (436 232) (2 245 373)

distribution costs (-) (9 428) (25 967) (7 885) (1 157) 2 521 (41 916)

administrative expenses (-) (28 281) (53 804) (9 776) (3 625) (11 071) (106 557)

Other operating revenue 3 211 565 106 - (2 935) 947

Other operating costs (-) (1 340) (2 738) (271) 68 (10 351) (14 632)

Operating EBIT for the segment (11 063) 59 688 (25 607) 7 456 (9 730) 20 744

Finance income x x x x x 6 286

Finance costs (-) x x x x x (2 421)

Share of the net profit of associates accounted for using the equity method x x x x x 2 468

Profit before tax (continuing operations) x x x x x 27 077

Income tax (continuing and discontinued operations) x x x x x (6 815)

Net profit (continuing and discontinued operations) x x x x x 20 262

Depreciation 8 640 20 313 6 255 1 744 16 067 53 019

Unallocated depreciation x x x x x 4 547

EBITDA (2 423) 80 001 (19 352) 9 200 6 337 78 310



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Revenue, costs and net result by business segment for the nine months ended 30 September 2012



Revenue from inter-segment sales 208 046 445 775 1 967 (46) 1 088 461 1 744 203

Total revenue from sales 1 100 383 3 670 757 815 584 329 685 1 339 594 7 256 003

Operating costs, including: (-) (1 036 694) (3 340 494) (783 772) (272 643) (1 409 232) (6 842 835)

distribution costs (-) (29 213) (81 229) (29 811) (3 198) 9 385 (134 066)


Other operating revenue 4 866 6 647 127 1 268 7 632 20 540

Other operating costs (-) (3 954) (10 186) (457) (40) (45 436) (60 073)

Operating EBIT for the segment 64 601 326 724 31 482 58 270 (107 442) 373 635







Depreciation 21 844 64 111 18 479 5 197 61 349 170 980


EBITDA 86 445 390 835 49 961 63 467 (46 093) 551 140



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Revenue, costs and net result by business segment for the three months ended 30 September 2011


Revenue from external sales 303 794 605 915 253 193 50 385 100 904 1 314 191


Total revenue from sales 368 022 680 914 255 482 50 837 279 894 1 635 149

Operating costs, including: (-) (312 703) (606 581) (234 180) (37 720) (268 048) (1 459 232)

distribution costs (-) (8 929) (23 137) (7 276) (742) 439 (39 645)

administrative expenses (-) (13 400) (33 971) (16 224) (1542) (7 777) (72 914)

Other operating revenue 222 1 361 1 846 76 7 784 11 289

Other operating costs (-) (743) (10 559) (420) 46 (23 529) (35 205)




Share of the net profit of associates accounted for using the equity method x x x x x 898




Depreciation 5 778 19 937 6 031 6 966 7 200 45 912


EBITDA 60 576 85 072 28 759 20 205 3 301 200 166



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Revenue, costs and net result by business segment for the nine months ended 30 June 2011




Total revenue from sales 1 084 596 1 511 656 803 683 50 837 727 481 4 178 253

Operating costs, including: (-) (930 511) (1 335 457) (700 733) (37 720) (749 597) (3 754 018)

distribution costs (-) (28 412) (54 438) (25 282) (742) 6 979 (101 895)


Other operating revenue 432 3 373 4 108 76 14 111 22 100

Other operating costs (-) (2 027) (21 022) (729) 46 (32 780) (56 512)








Depreciation 14 608 43 863 18 392 1 288 36 766 114 917


EBITDA 167 098 202 413 124 721 14 527 (4 019) 513 899



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Geographical segments

Geographical segments for the three months ended 30 September 2012

Revenue Costs

Poland 908 287 899 772

Germany 228 204 230 999

Other EU countries 355 377 332 001

Other European countries 40 910 40 925

Asia 41 996 41 559

Other countries 122 378 117 467

Total 1 697 152 1 662 723

Geographical segments for the nine months ended 30 September 2012

Revenue Costs

Poland 2 758 993 2 586 600

Germany 740 287 674 556

Other EU countries 1 338 985 1 209 136


Asia 154 261 131 334


Total 5 511 800 5 098 632

Geographical segments for the three months ended 30 September 2011

Revenue Costs

Poland 610 630 535 065

Germany 206 515 161 805



Asia 65 639 58 508


Total 1 314 191 1 138 274

Geographical segments for the nine months ended 30 September 2011

Revenue Costs

Poland 1 447 258 1 296 271

Germany 567 098 451 264



Asia 135 811 114 847


Total 3 280 315 2 856 080



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3. Contingent liabilities and sureties, guarantees and other collateral

Sureties granted by the Group (as at 30 September 2012)

Type Beneficiary Details Currency 30.9.2012 31.12.2011

Surety / Zakłady Azotowe w Tarnowie - Mościcach S.A.

Envia Mitteldeutsche Energie AG Germany

Security for payment of ATT Polymers GmbH liabilities EUR 4 233*) 4 511*)

Surety / Zakłady Azotowe w Tarnowie - Mościcach S.A. Envia THERM GmbH

Security for payment of ATT Polymers GmbH liabilities EUR 2 117*) 2 255*)

Surety / Zakłady Azotowe w Tarnowie - Mościcach S.A.

Provincial Fund for Environmental Protection and Water Management

Security for payment of PTK Koltar Sp. z o.o. liabilities PLN 1 904 -

8 254 6 766 *)

EUR-denominated liabilities were translated into PLN at the EURPLN bid rate of the lead bank of 28 September 2012, i.e. 1 EUR = PLN 4.233 and of 30 December 2011, i.e. 1 EUR = PLN 4.5106.



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Promissory notes issued by the Group as collateral for liabilities

Beneficiary Details Currency

Promissory note issue

date 30.9.2012 31.12.2011

PKN Orlen S.A. Collateral for payables relating to payment for purchased goods and services PLN 2011-09-02 25 000 25 000

Polimex-Mostostal Siedlce S.A. Collateral for liabilities resulting from a guarantee of deposit refund for a contract with CNCCC China USD 2005-01-26 1 931*) 2 056*)

Director of the Customs Chamber in Krakow Collateral for existing and future excise tax liabilities PLN 2012-08-07 1 050 1 050 National Fund for Environmental Protection and Water Management

Collateral on the refund of funds paid out for implementation of an ash utilisation project PLN 2010-08-09 4 588 4 588

Director of the Customs Chamber in Krakow Collateral for existing and future excise tax liabilities PLN 2011-03-29 330 330 National Fund for Environmental Protection and Water Management

Collateral for agreement on co-financing of project no. KSI POIS.04.03.00-00-012/08 PLN 2009-12-14 20 000 20 000

BRE Bank S.A collateral for the hedge transaction limit PLN 2005-06-21 1 000 1 000

Customs Chamber in Opole collateral for excise tax PLN 2010-12-30 648 648

54 547 54 672 *)

USD-denominated liabilities were translated into PLN at the USDPLN bid rate of the lead bank of 28 September 2012, i.e. 1 EUR = PLN 3.2728 and of 30 December 2011, i.e. 1 EUR = PLN 3.4850.



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Guarantees provided at the request of the Group

Type Beneficiary Details Currency Promissory

note issue date 30.9.2012 31.12.2011

Bank guarantee / Raiffeisen Bank Polska S.A.

Director of the Customs Chamber in Krakow

Collateral for customs procedures PLN 2005-11-15 - 1 600

Bank guarantee / PKO Bank Polski S.A.


Collateral for customs procedures PLN 2011-12-14 1 600 1 600

Bank guarantee / Raiffeisen Bank Polska S.A. GATX Rail Poland Sp. z o.o. Payment guarantee PLN 2008-01-29 - 143

Bank guarantee / Raiffeisen Bank Polska S.A. GATX Rail Poland Sp. z o.o. Payment guarantee PLN 2008-01-29 - 120

Bank guarantee / PKO Bank Polski S.A.


Collateral for customs duty PLN 2010-12-30 - 1 600

Insurance guarantee for due performance of the contract and removal of faults and defects RAFAKO S.A.

Agreement no. Z/K/ZU/0326/08/KO PLN 2010-12-28 171 343

Insurance guarantee for due performance of the contract and removal of faults and defects RAFAKO S.A.

Agreement no. Z/K/ZU/0053/09/AH PLN 2010-08-26 37 123

Insurance guarantee for due removal of faults and defects Lotos S.A. Group

Agreement no. 4600003268 PLN 2011-03-21 15 15

Bank guarantee for proper removal of faults and defects RAFAKO S.A.

Agreement no. Z/K/ZU/0290/10/JB PLN 2011-10-17 124 124

Bank guarantee – Bank PKO Bank Polski S.A. Customs Chamber Collateral for customs duty PLN 2011-12-13 2 000 -



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note issue date 30.9.2012 31.12.2011

PKO Bank Polski S.A. Gaz System S.A. Collateral for gas fuel transmission services PLN 2011-09-30 288 288

PKO Bank Polski S.A. Gaz System S.A. Collateral for gas fuel transmission services PLN 2012-06-13 179 -

Unconditional guarantee Director of the Customs Chamber in Szczecin

Guarantee for the repayment of a customs liability PLN

2010-04-21 (annex on

2012-03-13) 10 000 10 000

Unconditional guarantee Entrade Grupa sp. z o.o.

Collateral for agreement no. KI/1/2012/UR/04 for gaseous fuel sale PLN 2012-07-10 16 000 -

Insurance guarantee - InterRisk Z.Ch. Police S.A. Guarantee for due performance of an agreement PLN 2008-12-19 - 577

Insurance guarantee - InterRisk PGE GiEK S.A Guarantee for due performance of an agreement PLN 2011-04-20 14 14


Insurance guarantee - InterRisk PGE GiEK S.A Guarantee for due performance of an agreement PLN 2011-06-30 - 9

Insurance guarantee - InterRisk PGE GiEK S.A Guarantee for due performance of an agreement PLN 2012-04-16 6 -




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note issue date 30.9.2012 31.12.2011

Insurance guarantee - InterRisk PGE GiEK S.A

Guarantee for due performance of an agreement PLN 2009-04-30 - 7


Guarantee for due performance of an agreement PLN 2012-06-27 23 -

Insurance guarantee - InterRisk MPB Jetty s.c. consortium


Insurance guarantee - InterRisk Energopol Szczecin S.A.






31 250 16 576



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4. Information on related parties

Information concerning significant transactions with related parties

a) Information on significant transactions executed by the Group with related parties on terms other than market terms

During the nine months ended 30 September 2012 there were no transactions executed with related parties on terms and conditions other than market terms and conditions.

b) Transactions with members of the Management Board and Supervisory Board of the parent, their spouses, family, ancestors, descendants or other closely related persons

During the nine months ended 30 September 2012 the Group did not grant any advances, loans, borrowings, guarantees and sureties to management and supervisory personnel or persons closely related to them, nor did it enter into any agreements with them to provide benefits to the Group.

5. Events after the end of the reporting period which could have an impact on future financial results

Binding proposal to acquire 85% of shares in KiZChS Siarkopol S.A.

Continuing the process leading to the purchase of 85% of shares in KiZChS Siarkopol S.A. (which was described on page 18 of the Azoty Tarnów Group Interim management report H1 2012), the Parent favourably responded to the Ministry of Treasury’s invitation and following Supervisory Board approval submitted a binding proposal to purchase the above shares. The Parent, along with two other investors, was admitted to conduct due diligence on KiZChS Siarkopol S.A., which took place on 9-12 October 2012.

The due diligence on KiZChS Siarkopol S.A. was conducted with participation of the Parent’s financial and tax, legal and valuation advisors. On this basis a revised binding proposal to acquire shares in KiZChS Siarkopol S.A. was sent to the Ministry of Treasury on 30 October 2012.

After receipt of a draft privatisation agreement from the Ministry of Treasury, the Parent prepared an opinion and comments as to its content, which was sent to the Ministry and their advisors for further analysis.

Currently the Parent is awaiting decisions and further stages in the process specified by the Ministry and advisors.

Sale of Emission Reduction Units

On 4 October 2012 the Ministry of the Environment transferred entitlements under ERUs generated for the seventh measurement period (i.e. the first half of 2012) to Mitsubishi Corporation Japan under a joint implementation project pursuant to the "Agreement on Reduction of Nitrogen Oxide at the Azoty Tarnów Nitric Acid Installation", entered into between the Parent and Mitsubishi Corporation.

Revenue from generation of these allowances had already been included in the results for the respective periods, however receivables from sale of the above ERUs to the end buyer, valued at EUR 3 146 000, expected to be paid to the Parent's account on 19 November 2012.

6. Dividend

During the third quarter of 2012 the Parent did not distribute or declare a dividend.

On 2 April 2012, after reviewing the Supervisory Board’s opinion on the allocation of net profit proposed by the Parent’s Management Board, the general meeting decided to allocate the 2011 net profit to the Parent’s supplementary capital.



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7. Seasonality

For Azoty Tarnów Group products, seasonality occurs mainly in the markets for mineral fertilisers, pigments and maleic anhydride.

Mineral fertilisers

The third quarter is the grain harvest period and demand for mineral fertilisers falls. The seasonal drop in demand for fertilisers is compensated for within the Azoty Tarnów Group through a distribution system based on year-round fertiliser sales.

Titanium white market

The titanium white sales level increases in the spring-summer period (Q2 and Q3) in connection with the market for its application. Titanium dioxide is used in the manufacture of paints, varnishes, paper and plastics. The winter period traditionally sees a drop in sales for the paints and varnishes sector and seasonal fluctuations are most visible here.

Chemicals

Maleic anhydride demonstrates a similar seasonal drop in sales levels to titanium white. This results from decreased maleic anhydride demand among customers whose finished products are used in construction, and is dependent on market conditions and the weather.

In the case of markets for other chemicals manufactured by the Azoty Tarnów Group, even where present seasonality does not have a significant impact on results due to the small scale of operations.

CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2012

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION



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SEPARATE STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 September 2012





unaudited unaudited unaudited unaudited Continuing operations

Revenue from sales 526 566 1 525 804 514 161 1 334 342 Cost of sales (463 773) (1 226 017) (378 446) (1 025 663)

Gross profit on sales 62 793 299 787 135 715 308 679

Distribution costs (16 270) (50 653) (19 511) (49 925) Administrative expenses (49 207) (113 027) (23 930) (78 664) Other operating revenue 1 067 4 274 5 265 11 430 Other operating costs (6 901) (17 512) (12 443) (32 312)

Profit / loss on operating activities (8 518) 122 869 85 096 159 208

Finance income 23 039 139 698 11 135 21 342 Finance costs (3 144) (11 037) (11 543) (18 750)

Net finance income / costs 19 895 128 661 (408) 2 592


Income tax 973 (26 004) (15 239) (31 598)

Net profit on continuing operations 12 350 225 526 69 449 130 202

Discontinued operations Net profit (loss) on discontinued operations - - - -

Net profit 12 350 225 526 69 449 130 202

Components of other comprehensive income Measurement of hedging instruments 130 408 (1 040) (1 113) Settlement of hedging instruments 329 1 045 422 874 Change in fair value of available-for-sale financial assets 25 585 25 585 - - Deferred tax on other comprehensive income (4 948) (5 137) 117 45

Total other comprehensive income 21 096 21 901 (501) (194)


Earnings per share: Basic (PLN) 0.20 3.52 1.63 3.06 Diluted (PLN) 0.20 3.52 1.63 3.06



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SEPARATE STATEMENT OF FINANCIAL POSITION as at 30 September 2012

As at 30.09.2012

As at 31.12.2011

unaudited audited

Assets

Non-current assets

Property, plant and equipment 963 681 916 912

Investment property 14 787 12 622

Intangible assets 29 164 27 395 Investments in subsidiaries, associates and jointly controlled entities 993 757 993 757

Available-for-sale investments 254 277 12 204

Other financial assets 6 248 10 653

Total non-current assets 2 261 914 1 973 543

Current assets

Inventory 214 921 177 422

Other financial assets 6 083 5 326

Income tax receivables 5 648 2 453

Trade and other receivables 222 842 225 148

Cash and cash equivalents 131 896 86 289

Other assets 5 349 6 109

Available-for-sale non-current assets 125 125

Total current assets 586 864 502 872

Total assets 2 848 778 2 476 415



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SEPARATE STATEMENT OF FINANCIAL POSITION as at 30 September 2012

As at

30.09.2012 As at

31.12.2011

unaudited audited Equity and liabilities Equity

Share capital 320 577 320 577 Share premium 680 688 680 688 Hedging reserve (457) (1 634) Revaluation reserve 20 724 - Retained earnings, including: 1 151 483 925 958

Current-period net profit 225 526 207 875

Total equity 2 173 015 1 925 589

Liabilities Liabilities due to borrowings 178 181 30 135 Provisions for employee benefits 33 940 32 931 Other provisions 23 974 25 289 Government grants 3 639 902 Provisions for deferred income tax 61 299 54 403 Other financial liabilities 1 996 6 246

Total non-current liabilities 303 029 149 906

Liabilities due to borrowings 37 945 92 997 Provisions for employee benefits 2 561 2 420 Trade and other payables 259 209 230 832 Other provisions 13 649 16 191 Government grants 257 18 Deferred income 74 16 Other financial liabilities 59 039 58 446

Total current liabilities 372 734 400 920

Total liabilities 675 763 550 826

Total equity and liabilities 2 848 778 2 476 415



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SEPARATE STATEMENT OF CHANGES IN EQUITY for the period ended 30 September 2012

Share capital Share premium Hedging reserve Revaluation

reserve Retained earnings Total equity

As at 1 January 2011 195 582 209 990 (1 431) - 718 082 1 122 223

Total comprehensive income for the nine months ended 30 September 2011 - - (194) - 130 202 130 008

Share issue 124 995 470 452 - - - 595 447

Other activity - - - - 1 1

As at 30 September 2011 (unaudited) 320 577 680 442 (1 625) - 848 285 1 847 679

As at 1 January 2012 320 577 680 688 (1 634) - 925 958 1 925 589

Total comprehensive income for the nine months ended 30 September 2012 - - 1 177 20 724 225 526 247 427 Other activity - - - - (1) (1)

As at 30 September 2012 (unaudited) 320 577 680 688 (457) 20 724 1 151 483 2 173 015



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SEPARATE STATEMENT OF CASH FLOWS for the period ended 30 September 2012



unaudited unaudited Cash flows from operating activities Profit before tax 251 530 161 800 Corrections (72 355) 55 638

Depreciation 54 803 47 063 Reversal of impairment losses (4 782) (2 419) Loss on investing activities 6 812 5 540 Profit (loss) on disposal of financial assets - (2 674) Interest, exchange differences 3 227 10 720 Dividend received (131 330) (3 407) Profit (loss) on change in fair value of financial assets measured at fair value (1 085) 815

Profit on operating activities before changes in working capital 179 175 217 438

Change in trade and other receivables 2 753 (105 434) Change in inventories (37 498) (3 883) Change in trade and other payables and other receivables 66 290 (2 854) Change in inventory, accruals and grants (3 460) 14 132 Other corrections (3 246) (9 439)

Cash generated from operating activities 204 014 109 960

Interest paid - - Tax paid (27 441) (17 918)

Net cash from operating activities 176 573 92 042



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unaudited unaudited Cash flows from investing activities

Sale of intangible assets PP&E and investment properties 1 038 5 168 Payments for intangible assets PP&E and investment properties (128 801) (112 079) Dividend received 131 330 3 407 Expenditures on acquisition of financial assets (216 489) (569 334) Proceeds from sale of financial assets - 4 006 Interest received - - Grants 2 976 - Other investment proceeds / outflows (3 947) (5 291) Loans 4 732 1 788

Net cash flow from investing activities (209 161) (627 335)

Net proceeds from share issue - 594 291 Dividend paid - - Proceeds from loans and borrowings incurred 404 488 495 141 Repayment of borrowings (309 165) (529 301) Interest paid (5 556) (11 164) Payment of liabilities under finance lease contracts (2 239) (1 042) Other finance income / costs (9 333) 62 724

Net cash flows from financing activities 78 195 610 649

Total net cash flows 45 607 30 356

Cash at the beginning of period 86 289 172 191

Effect of exchange differences - -

Cash at the end of period 131 896 202 547



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NOTES TO THE CONDENSED SEPARATE FINANCIAL STATEMENTS

These condensed separate interim financial statements of Zakłady Azotowe w Tarnowie-Mościcach S.A. should be read together with the condensed consolidated interim financial statements of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for the three and nine months ended 30 September 2012 and the audited separate financial statements of Zakłady Azotowe w Tarnowie-Mościcach S.A. for the year ended 31 December 2011.

The accounting policies applied in drafting the condensed separate interim financial statements are the same as those used by the Group, with the exception of measurement of equity stakes in subsidiaries and associates, which in the condensed separate interim financial statements are measured at purchase price less impairment.

According to the Management Board of Zakłady Azotowe w Tarnowie-Mościcach S.A., notes to the condensed separate interim financial statements of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group contain all relevant information required to properly assess the Company’s assets and financial situation in the presented period.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF Q3 2012 RESULTS

ZAKŁADY AZOTOWE W TARNOWIE-MOŚCICACH S.A. GROUP Management’s discussion and analysis of Q3 2012 results


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I. DISCUSSION OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Significant factors and events having considerable impact on Group operations and financial results

1.1. Factors having considerable impact on Group operations and financial results

Factors having significant impact on financial results include the on-going acquisition by the Parent of a 100% stake in Zakłady Azotowe Puławy S.A. ("ZA Puławy"), with stage 1 implemented through the August 2012 acquisition of 10.3% of shares in ZA Puławy under a tender offer. This is connected with incurring a one-off acquisition expense and, under a "joint financing agreement" with PKO Bank Polski S.A. and PZU Życie, ensuring funds to finance the tender offer and potential subsequent tender offer such as may be required after finalising the planned in-kind offering to swap shares in ZA Puławy for shares in the Parent. Other factors and events capable of impacting on the Group's financial results for Q3 2012 include the on-going fluctuations in the Polish currency's exchange rate on currency markets.

Throughout the third quarter of 2012, PLN strengthened by approx. 6.2% against the US dollar and 3.5% against the euro in relation to the exchange rates recorded as at 30 June 2012. The average USDPLN exchange rate in Q3 2012 was 0.4% below the average rate in the preceding quarter, while the EURPLN exchange rate was down 2.8% respectively. Since the average strengthening of the domestic currency against the exchange rates recorded in the previous quarter was not significant, this did not have a major impact on the Group's financial results with regard to its net foreign currency exposure in USD - and to a lesser extent USD - and its currency surplus over currency expenses.

Based on the Market Risk Management Policy under the 2012 plan and in accordance with the internal guidelines of the Foreign Exchange Risk Committee, during Q3 2012 the Parent hedged up to 50% of planned currency exposure under contracts executed, within a timescale of up to 6 months from the date on which the hedge was originated.

During the third quarter the Parent executed hedges in the form of forward contracts on future exchange of EUR, which were adequate for planned net exposure in both of these currencies.

The result on executed hedging transactions for the first nine months of 2012 amounted to PLN 3 736 000, with a simultaneous gain of PLN 2 521 000 on revaluation of hedging instruments.

In parallel, the remaining part of non-hedged net currency exposure during the reporting period amounted to a negative result on executed currency differences of PLN 8 027 000, with a simultaneous positive valuation of currency settlements amounting to PLN 2 787 000.

In total during the first nine months of 2012 the Group's result on exchange differences and derivative currency transactions (with consideration to the revaluation as at the end of the reporting period) amounted to PLN 1 017 000 (with realised exchange differences and currency hedging transactions at PLN 4 291 000 and unrealised items valued at PLN 5 308 000).

Furthermore, during the first nine months of 2012 the Group recorded a negative result on the revaluation and implementation of interest rate hedging in the form of collar transactions for a total of PLN 305 000 in loans denominated in EUR, together with a negative result on valuation of a PLN 5 362 000 transaction executed last year for conversion of EUAs into CER carbon credits, which resulted from an increase in the market price spread for both types of credits.



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1.2. Market overview

FERTILISERS SEGMENT

As a result of the drought in the United States, which resulted in a sharp drop in harvest yields (mainly corn and soy), the third quarter saw an increase in agricultural commodities prices on global markets. The increase in grain prices was one of a range of factors contributing to the global growth in oil prices. The closely link between markets for both energy and agricultural commodities is a result of increasing global production of biofuels, which constitute an alternative for oil derivatives. An adjustment in global agricultural production occurred. The grain harvests in the US, Argentina, Australia and the Black Sea basin were worse than forecasted, and Ukraine went as far as banning grain exports. Europe, including Poland, balances production with consumption, meaning that there were favourable conditions for grain exports from our region. Despite the current seasonal decrease, grain prices will stay at a high level and non-European markets will enter the coming year with decreased strategic stocks, which will need to be supplemented. As is the case globally, this trend is visible in the European market and in Poland. It is becoming increasingly clear that the agricultural sector is stocking up on fertilisers during the autumn in anticipation of spring application, which alongside the positive economic situation in the agricultural market provides the additional possibility of an increase in demand for fertiliser products and high crop prices.

Fig. 1. Oil seed rape, wheat, oat and corn prices

Source: Ministry of Agriculture and Rural Development

The first estimates of direct subsidy levels for the coming season have been published, which are slightly higher than the levels observed last year despite fears that the calculation of subsidies for specific EU countries, which unfortunately for Poland took place in October on a date when the PLN exchange rate was relatively high, would lead to a drop in the quota.

Natural gas

The "PGNiG S.A. Tariff for Gas Fuels", introduced on 31 March 2012, remained in force for gas prices during Q3 2012. Amendment of the tariff is forecasted for the new year since the current tariff is in force until 31 December 2012.

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Fig. 2. CAN, AN and AS prices

Source: FERTECON

Nitrate fertilisers

Relative price stability was noted in the nitrate fertiliser market during the third quarter of 2012. During this period the fertiliser market is assessed as inactive with regard to the on-going harvest and associated activities. This is also a period when farmers await potential post-season price adjustments.

Developments in international markets during Q3 followed much the same course as the domestic market. With consideration to the high prices of nitrate fertilisers, the European agricultural sector held back on fertiliser purchases, limiting these to the essential minimum. Despite low demand, the key market players in western Europe maintained nitrate fertiliser price listings at a relatively high level.

Nitrate fertiliser prices fell in comparison with the same period a year earlier and an approx. 5% drop in average monthly CAN prices (CFR imp Inland Germany) and 2% drop in AN (Gran del France) were noted.

During this period there were signals of nitrogen fertilisers available from Ukraine delivered directly to farms. Imported fertiliser prices are of no interest to the domestic distribution network. It is thought likely that in the case of nitrogen fertiliser shortages in the domestic market, the scale of imports (in particular from Ukraine) may increase. However, the PLN exchange rate will be of key significance - if it is low, imports should be limited. During the analysed period market prices for nitrate fertilisers recorded slight growth in EU markets, mainly with regard to the price increases introduced in September by key market players (YARA).

Sulphur fertilisers

In the third quarter of 2012 ammonium sulphate FOB Black Sea prices dropped in comparison with the preceding quarter. The average monthly price over Q3 (USD 176 per tonne) was also lower than in the second quarter (USD 196 per tonne). In comparison with the same period in 2011, the average monthly price fell by approx. 11-12%.

During the third quarter a price drop was noticeable in the market for saletrosan (ammonium sulphate nitrate), which is sold throughout Europe.

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Fig. 3. Ammonia and urea prices

Sources: ICIS, FMB

Ammonia

At the end of Q3 2012 the market situation for ammonia was highly unstable, with consideration to factors including the on-going supply limitation in global markets and volatility in fertiliser sales. These factors contributed to a growth in ammonia prices over the last few weeks of September to a level exceeding USD 700 per tonne (CFR NWE listings). A significant excess of demand over supply for this commodity was visible in the European market. In September, ammonia demand increased in the US (for agricultural and industrial purposes) and Southeast Asia. As a result, FOB YUZHNY-based ammonia listings reached their highest level in 2012, and thus the average monthly price during the first quarter was approx. USD 402 per tonne, in the second quarter USD 534 per tonne and in the third quarter as high as USD 619 per tonne.

The situation was similarly unstable in the Polish market over the same period, due to factors including manufacturing disruption at several ammonia plants (e.g. in Włocławek and Kędzierzyn) and maintenance stoppages at key Ukrainian manufacturers (lack of spot purchase opportunities in this market).

Sulphur

Significant shifts towards demand were noted in the sulphur market in CEE. Limitations in phosphorous fertiliser manufacture during Q3 led to a drop in demand for sulphur and increasing pressure from purchasers for sulphur prices to be decreased in the fourth quarter of 2012. The largest fertiliser manufacturers (China, Morocco, Tunisia, Russia) are hinting at significant sulphur stocks and are additionally planning to limit fertiliser production in the fourth quarter. A price drop to below USD 180 per tonne is likely by the end of 2012.

There was not significant change in sulphur prices in the European market over the third quarter - prices remained at a level of USD 205-220 per tonne (Delivered Benelux listing) over the analysed period, as seen in the second quarter. With regard to its specifics (the largest manufacturer's dominant position, limited supply of petrochemical sulphur), the Polish market did not see significant contract price variations during Q3, however at the end of the third quarter offers for spot deliveries of surpluses from refinery production were present.

NPK fertilisers

Q3 2012 saw weak demand for NPK fertilisers in Europe (France, Belgium, Spain, the UK). The exception were markets in Poland and the UK. Some European manufacturers maintained production continuity on the back of non-European exports. Due to government subvention, Russian manufacturers enjoyed a healthy level of demand in the domestic market.

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Due to diminishing demand, from the end of August DAP prices began to decrease in the majority of markets (outside the US). According to observations, trends in DAP prices have on the whole been decreasing from halfway through last year, with the exception of the spring recovery.

Fig. 4. DAP, potassium salt and phosphorites prices

Sources: FMB, FERTECON

According to market analysts, the majority of manufacturers have not yet sold their October production, and some are planning to limit production during the fourth quarter of 2012.

Phosphorites

A drop in phosphorite prices was noted in Q3 2012. This was caused by the on-going low level of demand for phosphorous fertilisers in the majority of global markets. The root cause is the significant limitation in purchases by India. It is estimated that the majority of phosphorous fertiliser manufacturers (DAP, MAP, TSP) will have difficulty selling their entire production output in the market. Some manufacturers have already announced planned production downsizing in the fourth quarter.

Potassium salt (KCl)

A significant reduction in demand for NPK fertilisers was noted in the third quarter in many markets. This meant that interest in the purchase of potassium salt among NPK manufacturers was moderate. Market prices for potassium salt decreased slowly but consistently.

Due to large stockpiles, manufacturers such as Potash Corp. (Canada), K+S (Germany) and Uralkali (Russia) have been limiting the manufacture of potassium salt from the beginning of 2012. A temporary production stoppage was observed at K+S (Germany) during Q3 2012 for maintenance, while Potash Corp. (Canada) sent staff on a month-long holiday. These companies control approx. 60% of the potassium salt market and are showing a preference at the current time for limiting production as opposed to reducing prices.

The main consumers driving demand, i.e. India, China and Brazil, still have stocks.

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PLASTICS SEGMENT

Fig. 5. Caprolactam, PA 6, benzene and phenol

Sources: TECNON, ICIS

Caprolactam

The third quarter saw over-supply of caprolactam due to the weakening market for polyamide 6. This weak demand resulted from planned maintenance downtime, together with the unbeneficial macroeconomic climate. Despite the high benzene price levels in August, caprolactam did not experience a proportional level of growth. Quarterly liquid caprolactam prices dropped by approx. 14.5% in relation to the same period a year earlier.

Polyamid 6 / Tarnamid® (PA 6)

During Q3 2012 monthly polyamide 6 prices demonstrated a decreasing trend. In July average monthly prices levelled out at EUR 2 100-2 200 per tonne, and by September had reached PLN 2 050-2 150 per tonne.

Weak demand continued to plague the polyamide 6 market during the third quarter, caused mainly by lower consumption in China in connection with the holiday period and low levels of demand visible in all polyamide 6 application sectors, together with limitations in warehouse stocks.

Together with the drop in natural PA6 prices, prices for modified polyamide 6 (PA6) also decreased. Quarterly polyamide 6 prices decreased by approx. 16% in relation to the same period a year earlier.

Polyacetal/Tarnoform® (POM)

During Q3, average monthly European polyacetal prices remained at the same level of EUR 2 250 per tonne, approx. 9% lower than in the same period a year earlier. As with polyamide, demand continued to be weak in the POM market. This situation was caused by poor macroeconomic conditions and maintenance stoppages in application segments.

This was also aggravated by extremely low competing prices from the Far East.

Crude oil

Oil prices grew during the third quarter of 2012. The average monthly price for Brent oil in July reached USD 102 per barrel, hitting a level fluctuating at around USD 113 per barrel in September. However, in comparison with the same period a year earlier this price was roughly 2.9% lower.

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Fenol FD NWE EUR/t Benzen FOB NWE EUR/t

Kaprolaktam Krystaliczny CFR N.E.ASIA ICIS USD/t



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Benzene

Benzene prices remained at a significantly high level during Q3 2012 and according to market participants were not adequate to the market situation among end consumers. Average quarterly FOB NWE prices reached a level of approx. EUR 1 011 per tonne. In comparison with the same period a year earlier, the increase in average benzene price was approx. 23%.

Phenol

During Q3 2012 the situation in the phenol market was poor (particularly in August), mainly due to its dependence on benzene prices. The average phenol price for the quarter (FD NWE) was EUR 1 597 per tonne. Growth of approx. 15% in the average quarterly phenol price was noted in comparison with the same period a year earlier. Despite continuing high phenol price at the end of the third quarter of 2012, a temporary increase in supply of this commodity was observed, caused by factors including the weakening economic situation in the most important markets, including the caprolactam market.

OXO ALCOHOLS SEGMENT

Fig. 6. 2-EH, n-butane DEHP and propylene prices

Source: ICIS

Propylene

The third quarter saw a gradual increase in propylene prices, which are closely tied to oil prices. The beginning of the quarter was also a period of limited supply in the propylene market connected with planned maintenance stoppages at the majority of manufacturers. Due to the fact that similar behaviour was observed among consumers, the balance between supply and demand was not affected. Propylene supplies were made systematically and this commodity was available on the spot market.

Oxo alcohols

After June-July maintenance, stoppage, oxo alcohol sales reached a high level in both August and September. Oxo alcohol prices rose alongside September's increase in propylene prices. This was accepted by the market with regard to limitations in supply (stoppages at BASF and Perstorp).

Plasticisers

The market for the main plasticiser, DEHP, developed differently from the market for other plasticisers in July and August due to technological stoppages and plant failures. The drop in commodity prices in July caused by manufacturer shortages enabled the prices observed in June to be brought forward. In August stoppages at principal competitors - Arkema and DEZA - enabled a high level of sales to be achieved, alongside a price level ensuring the increase in commodity prices

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to be fully covered. After the DEHP market saturation seen in August, demand fell. In connection with the improvement in demand, price pressure from customers increased.

In Q3 the market for higher plasticisers (DINP and DPHP) demonstrated good product availability. July saw a drop in commodity prices, which impacted on product prices, however August's increase caused by the summer holiday period and limited demand resulted in flattened margins. The high level of competition in the market in September meant that it was necessary to apply a flexible pricing policy in order to achieve a DPHP sales level comparable to that experienced in August. The third quarter saw a high level of customer interest in non-phthalic plasticiser Oxoplast OT (DOTP).

PIGMENTS SEGMENT

Fig. 7. Titanium white, ilmenite and sulphate slag prices

Sources: ICIS, TZMI

Q3 2012 saw a drop in the global economic conditions in the titanium white market, which was also reflected in the domestic market. Titanium white consumption is closely linked to GDP. The primary market sector for titanium pigments (over 50%) is the paint and varnish industry, which in turn is closely linked to construction. Weak demand resulted in a drop in titanium white prices. During this period many manufacturers maintained a high level of titanium white stocks and manufacturing plants were operating at reduced capacity. Despite expectations, there was no increase in titanium white consumption either in the second or third quarters of 2012. Titanium white is considered a seasonal product and the end of Q3 (September) is additionally a watershed period when decreased demand in application markets - the paint and varnish sector - becomes visible.

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2. Key Group financial data

2.1. Consolidated Group results

During Q3 2012 the Azoty Tarnów Group generated EBIDTA of PLN 78 310 000 and net earnings of PLN 20 262 000.

The above financial results are lower in relation to the third quarter of 2011 by PLN 121 856 000 and PLN 95 303 000 respectively.

The information below compares selected items in the consolidated statement of profit and loss for Q3 2012 and Q3 2011.

Table 1 Consolidated Group results

Description Q3 2012 Q3 2011 change % change

Revenue from sales 1 697 152 1 314 191 382961 29.1

Cost of sales (1 514 250) (1 025 715) (488 535) 47.6

Gross profit on sales 182 902 288 476 (105 574) (36.6)

Distribution costs (41 916) (39 645) (2 271) 5.7

Administrative expenses (106 557) (72 914) (33 643) 46.1

Net profit on sales 34 429 175 917 (141 488) (80.4)

Other operating revenue / costs (13 685) (23 916) 10 231 (42.8)

EBIT 20 744 152 001 (131 257) (86.4)

Depreciation 57 566 48 165 9 401 19.5

EBITDA 78 310 200 166 (121 856) (60.9)

Finance income / costs 3 865 (14 233) 18 098 (127.2)

Profit before tax 27 077 138 666 (111 589) (80.5)

Income tax (6 815) (23 101) 16 286 (70.5)

Net profit 20 262 115 565 (95 303) (82.5) Source: Azoty Tarnów

The year on year revenue growth results from the Azoty Tarnów Group, now including Z.Ch. Police, generating a higher level of sales in the fertilisers, pigments and other activity segments. Despite higher growth in cost of sales over revenue from sales, the Group generated a positive result on sales and as a consequence ended the reporting period with net profit.

In Q3 2012 a negative result of PLN 13 685 000 was recorded on other operating activities, which is lower than the loss generated in the previous reporting period. The loss on other operating activities incurred by the Group in Q3 2012 was impacted by a restatement of emission certificates, creation of provisions and costs connected with facility downtime.

The Group generated a positive result on financing activities in Q3 2012. The quarter’s profit on financing activities results from the following:

interest income on bank deposits,

gain on exchange differences,

interest on trade receivables and loans,

interest on cash pooling services.



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2.2. Segment results

Table 2 EBIT by segment

Description Plastics Fertilisers Oxo

alcohols Pigments Other

activity

Net revenue from sales 279 903 1 015 258 210 291 103 687 88 013

Share [in %] 16.5 59.8 12.4 6.1 5.2

Net profit on sales (12 934) 61 861 (25 442) 7 388 3 556

Share [in %] (37.6) 179.7 (73.9) 21.5 10.3

EBIT (11 063) 59 688 (25 607) 7 456 (9 730)

Share [in %] (53.3) 287.7 (123.4) 35.9 (46.9) Source: Azoty Tarnów

Sales results on Azoty Tarnów Group products are primarily determined by the market situation in

the fertilisers, plastics and oxo alcohol segments. In Q3 2012 revenue from sales in the fertilisers

segment was 1 015 258 000, accounting for 59.8% of Group sales. Revenue from sales was 67.5%

higher than in the same period last year. The segment also generated the highest operating profit.

The pigments segment recorded a more than double growth in revenue from sales compared to Q3

2011, which translated into a positive result on operating activities.

SALES

Fig. 8. Revenue by product group*)

*) Z.Ch. Police S.A. financial data subject to consolidation from 23 August 2011

Source: Azoty Tarnów

The key revenue items in Azoty Tarnów Group sales are nitrogen and multi-component fertilisers,

plastics, oxo alcohols and plasticisers. In analysing revenue from sales, attention should be drawn to

the fact that in Q3 2012 there was a significant growth in revenue from multi-component fertiliser

sales, which is due to the inclusion of Z.Ch. Police in the Azoty Tarnów Group.

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Fig. 9. Sales revenue structure by product group*)



Compared to the third quarter of 2011, the share of multi-component fertilisers in the sales revenue structure increased from 13.0% to 27.6%. Nitrogen fertiliser sales decreased from 34.7% to 26.9%, plastics and intermediates from 22.5% to 15.7% and oxo alcohols and plasticisers from 18.5% to 12.0%. It should, however, be noted that these products still have a significant impact on the Group's revenue

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3Q 2012

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Plastics and intermediates

Oxo alcohols and plasticisers

Pigments

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Pigments

Basic chemicals

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PLASTICS SEGMENT

In Q3 2012 revenue from sales in the plastics segment amounted to PLN 279 903 000, constituting

16.5% of the Group's total revenue from sales. A decreased in sales revenue was recorded in relation

to the same period last year.

The segment recorded a decrease in both domestic and export sales.

Fig. 10. Revenue from sales in the plastics segment


FERTILISERS SEGMENT

In Q3 2012 revenue from sales in the fertilisers segment amounted to PLN 1 015 258 000,

constituting 59.8% of the Group's total revenue from sales. This increased in relation to the third

quarter of 2011, in connection with the inclusion of Z.Ch. Police S.A. in the Azoty Tarnów Group and

an increase in sales volumes by the Parent and the ZAK Group.

In Q3 2012 the segment recorded an increase in both domestic and foreign markets. The domestic

market accounted for the majority of sales revenue, which is over double the export sales.

Fig. 11. Revenue from sales in the fertilisers segment*)



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OXO ALCOHOLS SEGMENT

Sales during Q3 2012 decreased in comparison to the same period last year. The Q3 2012 sales

amounted to PLN 210 291 000, a PLN 42 902 000 decrease over Q3 2011. The drop results from a

decrease in both volume and value of sales.

The segment recorded a decrease in both domestic and foreign markets. The drop was not overly

noticeable in the domestic market, however export sales decreased by approx. 20% compared to the

same period last year.

Fig. 12. Revenue from sales in the oxo alcohols segment


PIGMENTS SEGMENT

A continuous growth trend can be observed in the pigments segment, resulting from increasing sales. The results generated in Q3 2012 are more than twice the figures generated in the same period last year.

Fig. 13. Revenue from sales in the pigments segment*)



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120 000

140 000

3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012



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OTHER ACTIVITY SEGMENT

The other activity segment revenue decreased by 13% during Q3 2012 compared to the same period last year.

Fig. 14. Revenue from sales in the other activity segment*)



2.3. Expenses by nature

Operating expenses during Q3 2012 amounted to PLN 1 681 233 000, a PLN 558 137 000 increase on

the same period last year. The fundamental increase by PLN 576 458 000 is attributed to the largest

cost item, use of materials and energy. An increase in the prices of basic raw materials contributed to

the growth in costs, together with an increase in consumption connected with growth in the scale of

production and higher prices for other materials.

Table 3 Costs by nature


Depreciation 57 566 48 165 9 401 19.5

Use of materials and energy 1 289 091 712 633 576 458 80.9

Third-party services 112 633 205 705 (93 072) (45.2)

Remuneration, margin and other benefits 161 747 116 689 45 058 38.6

Taxes and fees 41 078 28 812 12 266 42.6

Other expenses by nature 19 118 11 092 8 026 72.4

Total 1 681 233 1 123 096 558 137 49.7 Source: Azoty Tarnów

Cost of materials and energy use

In Q3 2012 costs connected with the use of materials and energy increased by 80.9% compared to the same period last year, the difference resulting from addition of a new entity to the Group and an increase in the prices of basic commodities. The addition of Z.Ch. Police S.A. to the Group also increases use of natural gas.

0

20 000

40 000

60 000

80 000

100 000

120 000

3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012



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Table 4 Costs connected with use of materials and energy within the Group


Parent 303 882 217 899 85 983 39.5

ZAK Group 252 044 153 936 98 108 63.7

Police Group*) 408 010 110 645 297 365 268.8

Natural gas 294 283 215 469 78 814 36.6

Other Group entities 30 872 14 684 16 188 110.2 *) Z.Ch. Police S.A. financial data subject to consolidation from 23 August 2011


The highest share in use of materials and energy during Q3 2012 was recorded at the Police Group, which is also reflected in the level of costs incurred. This constitutes 31.7% of total costs. The ZAK Group incurred PLN 252 044 000 in costs, constituting 19.6% of the total.

In relation to the third quarter of 2011 at the Parent, these costs increased by 39.5% and amounted to PLN 303 822 000, not counting costs connected with the use of natural gas.

The cost of natural gas amounted to PLN 294 283 000, constituting 22.8% of total costs under use of materials and energy.

The impact of other entities within the Azoty Tarnów Group on costs incurred constitutes 2.4%.

Fig. 15. Cost of materials and energy use within the Group*)

23,6%

19,6%

31,7%

22,8%

2,4% 3Q 2012

Parent

ZAK Group

Police Group

Natural gas

Other Group entities



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Other expenses by nature

Expenses by nature, excluding cost of materials and energy, comprised 23.3% of total expenses by nature in Q3 2012, compared to 36.5% in Q3 2011.

Table 5 Other expenses by nature [in %]

Description Q3 2012 Q3 2011

Depreciation 3.4 4.3

Third-party services 6.7 18.3

Remuneration, margin and other benefits 9.6 10.4

Taxes and fees 2.4 2.6

Other expenses by nature 1.1 1.0

Total 23.3 36.5 Source: Azoty Tarnów

Following an analysis of the changes in the structure of individual items under other expenses the following should be noted:

a decreasing share of depreciation and amortisation in the overall structure of expenses,

a decrease in the cost of third-party services,

a decrease in staff costs,

2.4. Asset and liability structure

As at the end of Q3 2012, Group assets were valued at PLN 5 340 472 000, having increased by 8.0% compared to the corresponding period last year. As at 30 September 2012 non-current assets amounted to PLN 3 535 379 000, whereas current assets were valued at PLN 1 805 093 000. Given the changes that occurred in the asset and liability structure, it should be noted that the Police Group was not a part of the Azoty Tarnów Group during 2011.

The most significant changes on the asset side during Q3 2012 are as follows:

a 6.9% increase in non-current assets,

a 10.2% increase in current assets,

a 33.2% increase in cash.

30,6%

21,6% 15,5%

30,2%

2,1% 3Q 2011

Parent

ZAK Group

Police Group

Natural gas

Other Group entities



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Table 6 Asset structure

Description 30.09.2012 30.09.2011 change % change

Non-current assets, including: 3 535 379 3 375 628 159 751 4.7

Property, plant and equipment 2 787 142 2 799 126 (11 984) (0.4)

Intangible assets 265 022 262 388 2 634 1.0

Investment property 28 691 45 518 (16 827) (37.0) Investments in subsidiaries, associates and jointly controlled entities 78 322 36 023 42 299 117.4

Current assets, including: 1 805 093 1 738 372 66 721 3.8

Inventory 640 977 592 713 48 264 8.1

Trade and other receivables 810 405 786 775 23 630 3.0

Cash and cash equivalents 325 983 334 820 (8 837) (2.6)

Other financial assets 20 479 23 541 (3 062) (13.0)

Total assets 5 340 472 5 114 000 226 472 4.4 Source: Azoty Tarnów

Essential changes on the equity side of the balance sheet in the audited period included:

a 9.6% increase in Group equity,

a 33.2% increase in non-current liabilities on borrowings,

a 45.3% decrease in current liabilities on borrowings,

a 9.2% increase in trade and other payables,

a 9.8% increase in current provisions.

Table 7 Equity structure

Description 30.09.2012 30.09.2011 change % change

Equity 3 454 845 3 110 703 344 142 11.1

Non-current liabilities, including: 723 562 713 002 10 560 1.5

Borrowings 301 121 146 860 154 261 105.0

Provisions for employee benefits 129 668 101 642 28 026 27.6

Other provisions 112 950 187 419 (74 469) (39.7)

Current liabilities, including: 1 162 065 1 290 295 (128 230) (9.9)

Trade and other payables 823 644 769 493 54 151 7.0

Borrowings 92 232 309 296 (217 064) (70.2)

Other provisions 146 127 90 652 55 475 61.2

Total liabilities 1 885 627 2 003 297 (117 670) (5.9)

Total equity and liabilities 5 340 472 5 114 000 226 472 4.4 Source: Azoty Tarnów



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2.5. Financial ratios

Table 8 Profitability ratios

Ratio Q3 2012 Q3 2011

Return on sales 10.8% 22.0%

EBITDA margin 1.2% 11.6%

EBITDA margin 4.6% 15.2%

Net profit margin 1.2% 8.8%

Return on assets 0.4% 2.3%

Return on capital employed 0.5% 4.0%

Return on equity 0.6% 3.7%

Return on non-current assets 0.6% 3.4% Source: Azoty Tarnów

Ratio definitions:

Return on sales = gross profit (loss) on sales / revenue from sales (statement of comprehensive income in multiple-step format) EBIT margin = EBIT / revenue from sales EBITDA margin = EBITDA / revenue from sales Net profit margin = net profit (loss) / revenue from sales Return on assets = net profit (loss) / total assets Return on capital employed = EBIT / total assets less current liabilities Return on equity = net profit (loss) / equity Return on non-current assets = net profit (loss) / non-current assets

Profitability ratios decreased in Q3 2012 compared to the same period last year. The return on sales decreased the most as a result of a 47.6% increase in cost of sales, with a concurrent increase in revenue from sales of 29.1%. EBIT and EBITDA margins also dropped, due to a slower growth in operating profit than in revenue from sales. Return on equity decreased as a result of growth in the value of equity as at the end of Q3 2012 compared to the end of 2011, with a concurrent decrease in earnings. Return on capital employed and return on assets also deteriorated. This resulted from a proportional decrease in net profit in relation to the increase in capital employed and assets.

Table 9 Liquidity ratios

Ratio Q3 2012 Q3 2011

Liquidity ratio I 1.6 1.3

Liquidity ratio II 1.0 0.9

Liquidity ratio III 0.3 0.3 Source: Azoty Tarnów

Ratio definitions:

Liquidity ratio I = current assets / current liabilities Liquidity ratio II = (current assets – inventory – current accruals) / current liabilities Liquidity ratio III = (cash and cash equivalents + financial derivatives) / current liabilities

As at the end of Q3 2012 the Group recorded an increase in liquidity ratio I, which was caused by growth in current assets (particularly cash), with a concurrent increase in current liabilities.

The growth and stagnation in the value of liquidity II and liquidity III ratios respectively resulted from a slight increase in current liabilities, combined with a significant growth of current assets less inventory and an increase in cash, other financial assets and trade receivables.



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Fig. 16. Inventory, receivables and payables


As a result of the above changes in current assets and liabilities, as at 30 June 2012 working capital amounted to PLN 643 028 000.

Table 10 Inventory, receivables and payables ratios

Ratio Q3 2012 Q3 2011

Inventory turnover 38 52

Receivables turnover 43 54

Payables turnover 49 68

Cash conversion cycle 32 38 Source: Azoty Tarnów

Ratio definitions:

Inventory turnover = inventory * 90 / cost of sales Receivables turnover = trade and other receivables * 90 / revenue from sales Payables turnover = trade and other payables * 90 / cost of sales Cash conversion cycle = inventory turnover period + receivables turnover period - payables turnover period

Inventory turnover decreased primarily due to a drop in inventory. The decrease in receivables turnover, a positive sign, was caused by optimisation and consolidation of the Group’s credit policy, together with an improvement in receivables collection, with the concurrent introduction of a prudent Group-wide insurance policy. At the same time, the decrease in payables turnover, caused primarily by growth in cost of sales (mainly raw material prices), contributed to an expansion in the cash conversion cycle. That said, 32 days is a positive level for the Group, which is reflected in its liquidity ratios.

Table 11 Debt ratios

Ratio Q3 2012 Q3 2011

Total debt ratio 35.3% 39.2%

Long-term debt ratio 13.5% 13.9%

Short-term debt ratio 21.8% 25.2%

Equity-to-debt ratio 183.2% 155.3%

Interest coverage ratio 478.6% 1 371.9% Source: Azoty Tarnów

Ratio definitions:

Total debt ratio = total liabilities / total equity and liabilities

319 425

361 583

347 315

390 603

384 480

412 077

448 077

319 166 342 919

483 455 562 245

592 330

738 336

809 502

643 028

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

31.03.2011 31.05.2011 31.07.2011 30.09.2011 30.11.2011 31.01.2012 31.03.2012 30.09.2012



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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 Interest coverage ratio = [EBIT + interest expense] / interest expense

During the analysed period the main source of financing Group assets and operations was own equity. A stable level of leverage was maintained throughout the period, which was financially effective and safe in terms of financing risk. The interest coverage ratio was maintained at a level confirming the Group’s full interest payment capacity and credit standing.

3. Significant agreements

Bank guarantee as collateral for the tender offer for shares in ZA Puławy

On 13 July 2012, the Parent commissioned Societe Generale S.A. Branch in Poland to issue a bank guarantee for beneficiary UniCredit CAIB Poland S.A. up to a maximum amount of PLN 672 848 000 in order to provide collateral for the tender offer for the purchase of shares in Zakłady Azotowe Puławy S.A. (ZA PUŁAWY), representing 32% of voting rights at the general meeting.

(See section Credit or loan sureties, guarantees issued on page 73 of this report)

(Current report 43/2012 of 13 July 2012)

Execution of a loan agreement with PKO Bank Polski S.A.

On 14 August 2012 the Parent executed a PLN 711 million loan agreement with PKO Bank Polski S.A. for the period up to 31 December 2017, the purposes of which was to grant:

fixed-term loan A totalling PLN 500 million, allocated to partially finance the Parent's acquisition of up to 32% of shares in ZA Puławy as a result of the tender offer and the costs and expenses connected with acquiring shares in ZA Puławy,

fixed-term loan B and a guarantee line totalling up to PLN 211 million, allocated as collateral and subsequently finance for the Parent's acquisition of ZA Puławy as a result of the subsequent tender offer for purchase of shares in ZA Puławy, the announcement of which may be mandatory in connection with the planned in-kind offering.

(Current report 57/2012 of 15 August 2012)

Accession of PZU Życie S.A. to a loan agreement executed between the Parent and PKO Bank Polski S.A.

On 22 August 2012 the Parent executed an agreement with PKO Bank Polski S.A. and PZU Życie S.A. amending the loan agreement and introducing a consolidated joint finance agreement, under which PZU Życie S.A. partially assumed the rights and obligations of PKO Bank Polski S.A. under the loan agreement, becoming the Parent's creditor up to amounts constituting the equivalent to: 50% of PKO Bank Polski S.A.'s prior commitment under Loan A and 50% of PKO Bank Polski S.A.'s prior commitment under Loan B.

The joint finance agreement entails interest at the variable WIBOR 1M rate, augmented by a finance margin established at market levels. The collateral established for both lenders (PKO Bank Polski S.A. and PZU Życie S.A.) is the same, including financial and registered pledges on the 49 500 000 shares in Z.Ch. Police S.A. and 1 968 083 shares in ZA Puławy held by the Parent, together with shares in these companies to be acquired in the future, and furthermore registered and financial pledges on the Parent's bank accounts held at PKO Bank Polski S.A. and the account held at Dom Maklerski PKO Bank Polski S.A., together with a declaration on submission to enforcement.

Up to the publication date of the report for the third quarter of 2012, PLN 162 367 000 of Loan A had been used to finance 75% of the acquisition price under the public tender for 1 968 083 shares in ZA Puławy at a price of PLN 100 per share, while the unused remainder of the loan was automatically cancelled.

(Current report 61/2011 of 23 August 2012).



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Table 12 Turnover per significant agreement

Group turnover Object Period Current report date and

number Turnover

Z.Ch. Police S.A. –JSC Belarusian Potash Company

Purchase of potassium salt

from 1.9.2012 to 6.7.2012

Current report Police S.A. no. 33/2012 of 6 July 2012 134 168

Azoty Tarnów - PGNiG S.A

Supply of high-methane gas

from 12.12.2011 to 12.7.2012

Azoty Tarnów current report no. 39/2012 of 12 July 2012 696 700

4. Achievement of issue objectives

In the third quarter of 2012 expenditures were incurred in connection with implementation of the project "Modernisation of the Caprolactam Plant and Construction of a New Hydrogen Facility", a task resulting from the first share issue in 2008.

The other tasks under the assumptions of the first share issue were completed in accordance with information contained in the Management report on the operations of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for the 12 months ended 31 December 2011, p. 19.

Expenses borne under the project "Modernisation of the Caprolactam Plant together with Construction of a new Hydrogen Facility" were connected with the final stage in construction of the new hydrogen facility. Consumption of gas from local sources has commenced. The installation has been started and operational tests have been conducted. The task was completed and commissioned.

Tasks connected with adapting existing loading stations to TDT requirements are on-going: Adaptation of caprolactam loading equipment to TDT requirements and adaptation of the loading station for liquid sulphur from railway rolling stock to TDT requirements. Work is progressing as per the schedule.

Work is on-going on the task "Means of implementing the Beckmann rearrangement process" using reaction heat. Technological commissioning is planned for the second half of 2012.

Implementation of the project "Upgrade of sulphuric acid plant" is also on-going. The construction design has been completed and the technical project is under development - completion of deliveries is underway. The project is planned for completion in 2013.

5. Use of proceeds from share issues

The value of the Parent's public offerings to date totals PLN 897 246 000 (of which PLN 294 770 000 was generated under the 2008 issue and PLN 602 476 000 in 2011).

Up to the date of publishing these consolidated financial statements for Q3 2012, the Parent had used funds from the public offering, held in fixed-term deposits adapted to the anticipated deadline for achievement of issue objectives, in the following manner:

for covering net costs of the share issue – PLN 15 980 000,

for financing a part of expenditures under achievement of issue objectives: PLN 863 818 000, including:

PLN 38 000 000 for investment tasks implemented under "Optimisation of the Production Portfolio and System for Selling Nitrogen Fertilisers" – the full amount described in the issue prospectus,

PLN 100 909 000 for tasks implemented under "Modernisation of the Caprolactam Plant together with Construction of a New Hydrogen Facility",

PLN 23 490 000 for "Intensification of the Modified Plastics Plant",



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PLN 19 921 000 for increasing polyamide production capacity, the "Polyamide II Plant" (including the acquisition of ATT Polymers GmbH) ,

PLN 569 250 000 for the acquisition of a 66% interest in Z.Ch. Police S.A.,

PLN 102 248 000 for the acquisition of 40.86% shares in ZAK S.A. from the Ministry of the Treasury.

The Parent used a total of PLN 863 818 000 in funds acquired from the public offering for financing expenditures under achievement of issue objectives, including PLN 5 167 000 to finance expenditures incurred in the third quarter of 2012.

In Q3 2012, funds were used to implement one of the tasks under the first share issue completed in 2008, Modernisation of the Caprolactam Plant together with Construction of a New Hydrogen Facility".

However, objectives from the series C share issue were fully completed in 2011 in accordance with the assumptions outlined in the issue prospectus, and proceeds were used as designated. Applicable information was published in the Management report on the operations of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for the 12 months ended 31 December 2011, p. 19.

6. Type and value of non-typical items having an impact on assets, liabilities, net financial results or cash flows

During the third quarter of 2012 there were no unusual items from the viewpoint of type, amount or impact which affected assets, liabilities, equity, net financial result or cash flows.

7. Issue, buyback and repayment of debt and equity securities

In altering the company's articles of association, through the resolutions of 14 July 2012, the ordinary general meeting granted authorisations to the Parent's Management Board to increase the Parent's share capital by issuing new shares with a total nominal value not exceeding PLN 240 432 915 through a share capital increase. An increase of issued share capital within authorised share capital may only occur for the purpose and on the terms specified in the written opinion of the Management Board justifying the reasons for authorising the Management Board to exclude pre-emptive rights and the means of establishing the issue price for shares in the event of the Management Board increasing issued share capital under authorised share capital, published on 13 July 2012 through current report 41/2012. The Management Board's authorisation to increase share capital and to issue new shares under authorised share capital expires six months from the date on which the amendment to the articles of association providing for authorised share capital was made.

Within authorised share capital, the Management Board is authorised to offer the Company’s shares with the exclusion of pre-emptive rights, only to shareholders of ZA Puławy in exchange for a non-cash contribution in the form of shares in ZA PUŁAWY in such a way that one ZA Puławy share will constitute a non-cash contribution to cover 2.5 Parent shares issued within the authorised share capital. Pursuant to this authorisation, the Management Board takes decisions on all issues connected with increasing issued share capital within authorised share capital, and in particular the Management Board is authorised to execute underwriting agreements or other agreements guaranteeing the success of a share issue, adopt resolutions and take other steps to dematerialise shares, pre-emptive rights and rights to shares and to execute agreements with the KDPW concerning the registration of shares, pre-emptive rights and rights to shares, together with other activities concerning issue of shares through a public offering or to apply for shares, pre-emptive rights and rights to shares to be admitted to trading on a regulated market. Management Board resolutions concerning the increase in issued share capital within authorised share capital or establishment of the issue price within authorised share capital require the consent of the Supervisory Board.



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The amendment to the Articles of Association providing for the Management Board’s authorisation to increase the Company’s issued share capital within authorised share capital is aimed at providing the Management Board with the legal instruments necessary to acquire ZA Puławy shares. The acquisition of shares in ZA Puławy is a part of the Parent’s strategy adopted and announced by the Management Board on 13 June 2012 through current report 33/2012, in accordance with which the Parent’s goals include increase the scale of operations conducted within its group through alliances, mergers and acquisitions. Within authorised share capital the Management Board is permitted to conduct a share issue with exclusion of pre-emptive rights, addressed to shareholders of ZA Puławy in exchange for a non-cash contribution in the form of ZA Puławy shares. The in-kind offering will enable the Parent to assume control over ZA Puławy without the need to commit significant funds and increase the Parent’s debt. The General Meeting believes that, from the viewpoint of the Parent’s interests, an increase in issued share capital within authorised share capital is the optimal instrument for implementation of the Parent’s strategy. The Parent’s Management Board announced in current report 62/2012 that on 11 September 2012, acting pursuant to art. 444, 446 and 447 of the Act of 15 September 2000, the Polish Commercial Companies Code, § 10 sec. 3 and subsequent of the Parent’s articles of association and subject to approval from the Parent’s Supervisory Board, it adopted a resolution on increase of the Company’s share capital by an amount not lower than PLN 5 and not higher than PLN 214 336 465 through the issue of not less than 1 and not more than 42 867 293 series D ordinary bearer shares with a nominal value of PLN 5 each. The issuance of Series D Shares will take place via an open subscription with exclusion of existing shareholders’ pre-emptive rights, through a public offering in the meaning of art. 3 sec. 3 of the Act of 29 July 2005 on Public Offerings and Public Companies. In accordance with § 10 sec. 4 of the Articles of Association, Series D Shares will be offered to the shareholders of ZA Puławy S.A. on the conditions specified in the Company’s prospectus or offering memorandum drawn up in connection with the public offering of Series D Shares and the application for admission and introduction of Series D Shares to trading on the regulated market managed by the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A. – the “WSE”).

1. Series D Shares will be fully paid for with non-cash contributions in the form of ZA Puławy shares with a nominal value of PLN 10.00 each. ZA Puławy shares constitute disposable securities which are traded on the main WSE market under ISIN code PLZA PUŁAWYUL00057. The non-cash contribution will be made on the conditions specified in the Offering Document and in accordance with the rules applicable to public companies listed on the WSE. Given the fact that Series D Shares will be subject to dematerialisation in connection with the application for their admission and introduction to trading on a regulated market, in accordance with art. 336, § 3 of the Polish Commercial Companies Code, Series D Shares will be ordinary bearer shares.

2. The Management Board will set the price of one ZA Puławy share in accordance with art. 3121, § 1, point 1 of the Polish Commercial Companies Code on the basis of the six-month weighted average ZA Puławy share price on the WSE main market. In connection with the above, pursuant to art. 3121, § 1, point 1 of the Polish Commercial Companies Code, the Management Board will waive the requirement for the non-cash contribution for Series D Shares to be audited by a statutory auditor.

3. In accordance with § 10, sec. 4 of the Articles of Association, one ZA Puławy share will constitute a non-cash contribution for 2.5 Series D Shares (the “Exchange Ratio”).

4. Subject to the provisions in sec. 5 below, the number of Series D Shares which will be allotted to an existing ZA Puławy shareholder, i.e. an entity in whose securities account ZA Puławy shares are recorded or for whom a relevant register is maintained by an investment firm in respect of such ZA Puławy shares, provided that such entity submits a valid subscription for Series D Shares in accordance with the rules specified in the Offering Document, will constitute the product of multiplying the number of ZA Puławy shares specified in a valid subscription for Series D Shares



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correctly submitted by each shareholder and the Exchange Ratio. The number of Series D Shares calculated in this manner will be rounded down to the nearest whole number.

5. If, following the Series D Shares subscription submission period, the number of ZA Puławy shares covered by correctly submitted Series D Shares subscriptions corresponding to the respective number of deposit certificates submitted, together with ZA Puławy shares held by the Company and its subsidiaries, represents at least 66%, but less than 90% of total votes at the general meeting of ZA Puławy, the Management Board may adopt a decision to decrease the number of Series D Shares offered under the Offering to a number corresponding to the product of multiplying the Exchange Ratio and the total number of ZA Puławy shares constituting, together with fractional ZA Puławy shares acquired in exchange for Additional Payments (in accordance with the definition below) and ZA Puławy shares held by the Company and its subsidiaries, not less than 66% of total votes at the general meeting of ZA Puławy. The Management Board will at the same time specify an appropriate proportional reduction rate in respect of Series D Shares subscriptions submitted by ZA Puławy shareholders (the “Reduction Rate”). In such event the number of Series D Shares acquired by a given ZA Puławy shareholder will be calculated as the product of the number of Series D Shares, as calculated in accordance with the rules specified in sec. 4 above, and the Reduction Rate. The number of Series D Shares calculated in this manner will be rounded down to the nearest whole number.

6. Each ZA Puławy shareholder who/which has submitted a valid subscription for Series D Shares and as a result of the rounding procedure described in sec. 4 and sec. 5 above was not allotted a fractional Series D Share, will receive an additional payment from the Company, calculated as the product of the fraction by which the number of Series D Shares was rounded down and the value of one Company share – PLN 44 (the “Additional Payment”). The Additional Payment will be paid by the Company from its own funds within the deadline and on the conditions specified in the Offering Document.

7. A share capital increase will be carried out in an amount corresponding to the number of Series D Shares acquired, with consideration given to the provisions of sec. 4 and 5 above. The Company’s Management Board will submit a declaration in the form of a notarial deed regarding the amount of the acquired share capital and re-statement of the amount of share capital in the Articles of Association prior to submission of the share capital increase to the register – pursuant to art. 310, § 2 and 4 in connection with art. 431, § 7 of the Polish Commercial Companies Code.

Series D Shares will participate in dividends on a par with other Company shares, starting from the dividend for the financial year 2012, i.e. from 1 January 2012. With Supervisory Board approval, the Management Board set the Series D Shares issue price through a separate resolution.

Detailed rules for the offering, distribution and allotment of Series D Shares, in particular the dates for opening and closing of the subscription submission period, detailed rules regarding the non-cash contribution for Series D Shares, including submission deadlines, and detailed rules regarding the Additional Payments, including payment deadlines, will be specified in the Offering Document.

In the Parent’s interest, the pre-emptive rights to Series D Shares held by the Parent’s existing shareholders are fully waived. The issuance of Series D Shares constitutes an element of the transaction to acquire ZA Puławy shares.

The Management Board may at any time decide not to execute the resolution, suspend its execution, or to withdraw from the public offering of Series D Shares, or to suspend such public offering. In adopting a decision to suspend the public offering of Series D Shares, the Management Board may decide not to indicate a new deadline for such public offering. The deadline may be determined and publically announced at a later date.

A decision has been taken to apply for the admission and introduction of Series D Shares to trading on the WSE regulated market and for the Management Board to take any necessary actions related thereto.



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A decision has been taken to dematerialise Series D Shares and for the Management Board to conclude an agreement on registration of Series D Shares in the National Depository for Securities (Krajowy Depozyt Papierów Wartościowych S.A.), and to take any other necessary actions related to the dematerialisation of Series D Shares.

By way of a separate resolution, the Management Board may decide to apply for the admission and introduction of rights to Series D Shares to trading on the WSE regulated market and to dematerialise such rights to Series D Shares, and to conclude an agreement with the National Depository for Securities on registration of such rights to Series D Shares.



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II. OTHER INFORMATION

1. Description of Group structure

Information about the Group

As at the 30 September 2012, the Azoty Tarnów Group comprised Zakłady Azotowe w Tarnowie-Mościcach S.A. – the Parent, and:

5 subsidiaries (with interest exceeding 50%),

including:

• ZAK S.A., together with the ZAK S.A. Group

• Z.Ch. Police S.A., together with the Z.Ch. Police Group

• ATT Polymers GmbH,

• Polskie Konsorcjum Chemiczne sp. z o.o. with four subsidiaries,

• Przedsiębiorstwo Transportu Kolejowego KOLTAR Sp. z o.o.,

1 associate - Navitrans (with a 26.4% interest).

A detailed description of the companies included in the Azoty Tarnów Group can be found in the Management Report on the Operations of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for the 12-month period ended 31 December 2011, p. 4.

The Parent also holds minority interests in 12 entities. The Parent's minority interests remained unaltered in relation to the information published in the Management report on the operations of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for the 12 months ended 31 December 2011, p.8.



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Diagram of the Group including consolidated and non-consolidated entities as at 30 September 2012

Parent Zakłady Azotowe w Tarnowie-

Mościcach S.A.

Subsidiaries

Subsidiaries Subsidiaries Subsidiaries Non-consolidated entities

Non-consolidated entities

Non-consolidated entities

Associates

Associates Associates

Other interest (50-99%)

100% interest



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Organisational changes in the Parent

In implementing the programme to adapt the Parent's organisation to the requirements of modern corporate management, as of 1 October a range of changes were implemented within the Parent's structure, aimed at impacting the operations of the entire Azoty Tarnów Group:

the Fertiliser Trading Corporate Department was formed, comprising the Fertiliser Sales Office and Operational Marketing Office. The department's activities include the sale of all types of fertilisers manufactured by Azoty Tarnów Group companies while achieving an optimal level of sales and logistics costs and stimulating the market through developing and introducing new fertiliser programmes based on products manufactured by the Group. The director of the Fertiliser Trading Corporate Department at Azoty Tarnów supervises the other fertiliser trading departments at Group companies with regard to their commercial activities. The position is also responsible for direct supervision of sales processes and implementation of the commercial policy for fertilisers.

Further to the above, the former Fertilisers Centre has been transformed into the Fertiliser Manufacturing Unit.

the Plastics Centre has been transformed into the Plastics Business Unit.

the CHP Plant Centre has been transformed into the Energy Business Unit.

the Strategic Marketing Office has been renamed the Corporate Strategic Management Office. Its tasks cover supervision of other strategic marketing offices at Group subsidiaries with regard to strategic marketing activities. The office also supervises the creation of product brand policy within the Group.

the Procurement and Logistics Department has been renamed the Corporate Procurement and Logistics Department.

the Finance Department has been renamed the Corporate Finance Department.

the HR Department has been renamed the Corporate HR Department.

the activities and functions of the Corporate Risk Management Office have been transferred to the Corporate Management Systems Office.

in order to ensure coordination and streamlining of administrative operations for the remaining corporate departments and business centres (business unit, manufacturing unit), the position of Managing Director has been formed, which aside from the activities indicated above is tasked with performing the tasks of General Manager under the company's internal standards and regulations, with the exception of the function of employer, which is reserved exclusively for the President of the Management Board - Managing Director.



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2. Changes during the reporting period in the structure of commercial entities, including as a result of mergers, acquisitions or sale of Group companies, long-term investments, division, restructuring and discontinued operations

Consolidation of the PKCh Sp. z o.o. Group

In accordance with information found in the Management Report on the Group's Operations for the six months ended 30 June 2012, p. 32, the process of consolidating PKCh Sp. z o.o. Group companies is on-going.

Table 13 Consolidation process timetable

Area

Deadline for submission of merger plan to the National

Court Register

Date of EGM of the Companies

Data of entry in the National Court Register

PKCh +BIPROZAT 16 May 2012 19 July 2012 31 July 2012

Mechanics and machinery 28 June 2012 30 July 2012 31 August 2012

Laboratories and small-scale chemical manufacturing 28 June 2012 1 August 2012 31 August 2012

Automation and control systems 19 July 2012 2 October 2012 31 October 2012

General meetings at PKCh Sp. z o.o. and BIPROZAT Sp. z o.o. took place on 19 July 2012. Resolutions were adopted on the merger of these companies through transferring the entire assets of BIPROZAT Sp. z o.o. (target) to PKCh Sp. z o.o. (acquirer). The formal merger took place on 31 July 2012 on the date of entry into the National Court Register (deletion of BIPROZAT from the register without an increase in the capital of PKCH).

On 30 July 2012 general meetings of PROReM Sp. z o.o., ZAK SERWIS Sp. z o.o. and Zakład Remontowy "Rekom" Sp. z o.o. took place. Resolutions were adopted on the merger of these companies through transferring the entire assets of Zakład Remontowy "Rekom" Sp. z o.o. and ZAK SERWIS Sp. z o.o. (targets) to PROReM Sp. z o.o. (acquirer). The formal merger took place on 31 August 2012 on the date of entry into the National Court Register (deletion of Rekom and ZAK SERWIS from the register, with simultaneous increase in the capital of PROReM Sp. z o.o. - all shares in the increased share capital were acquired by PKCH Sp. z o.o. in exchange for shares in Zakład Remontowy Rekom Sp. z o.o. and ZAK SERWIS Sp. z o.o.). After the increase, PROReM Sp. z o.o.'s share capital amounts to PLN 11 567 000.

On 1 August 2012 general meetings were held by JRCh Sp. z o.o. and CHEMZAK Sp. z o.o., subsidiaries of PKCH Sp. z o.o. Resolutions were adopted connected with merging these two companies so that the acquirer is JRCH Sp. z o.o. and the target CHEMZAK Sp. z o.o. The formal merger took place on 31 August 2012 on the date of entry into the National Court Register (removal of CHEMZAK Sp. z o.o. from the register, with simultaneous increase in the share capital of JRCh Sp. z o.o. - all shares in the increased share capital were acquired by PKCH Sp. z o.o. in exchange for shares in CHEMZAK Sp. z o.o.). After the increase, JRCH Sp. z o.o.'s share capital amounts to PLN 21 748 000.

On 2 October 2012, general meeting took place at AUTOMATYKA Sp. z o.o. and ASTER ZAK Sp. z o.o. Resolutions were adopted on the merger of these companies through transferring the entire assets of ASTER ZAK Sp. z o.o. (target) to AUTOMATYKA Sp. z o.o. (acquirer). The formal merger took place



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on 31 October 2012 on the date of entry into the National Court Register with simultaneous increase in the share capital of AUTOMATYKA Sp. z o.o. through the creation of new shares.

Consent for transfer shares in Z.Ch. Police S.A. subsidiaries to PKCh Sp. z o.o.

On 29 October 2012 the Supervisory Board of Z.Ch. Police S.A. granted consent for transfer to Polskie

Konsorcjum Chemiczne Sp. z o.o. (PKCh Sp. z o.o.) as in-kind contribution shares of Koncept Sp. z o.o.,

Remech Sp. z o.o. and Automatika Sp. z o.o. and acquisition by Z.Ch. Police S.A. of 596 538 shares in

the increased capital of PKCh Sp. z o.o. in exchange for a non-cash contribution at a total value of PLN

29 826 900.

Ruling on the liquidation of Budchem Sp. z o.o.

On 19 July 2012, pursuant to a decision issued by the District Court for Szczecin-Centrum in Szczecin, Budchem Sp. z o.o. was declared bankrupt and its assets subject to liquidation.

Continuation of the process of selling ZAK S.A. subsidiaries

During Q3 2012 work was continued on selling ZAK S.A. subsidiaries PTS "AUTOZAK" Sp. z o.o., Hotel Centralny Sp. z o.o. and Hotel "Azoty" Sp. z o.o.:

in relation to the hotel businesses, on 3 August 2012 the Management Board of ZAK S.A. ruled to end the tender procedure without conclusion in connection with the bidder's withdrawal from the procedure,

in relation to PTS AUTOZAK Sp. z o.o.

• initial bids have been verified,

• on 3 August 2012 the Management Board of ZAK S.A. approved selected bidders for advancement to the subsequent phase of the procedure, due diligence,

• within the due diligence process on PTS AUTOZAK Sp. z o.o., bidders were able to visit the company and meet with its management board and key personnel.

On 19 September 2012 extraordinary general meetings were held at ZAK S.A. subsidiaries PTS AUTOZAK Sp. z o.o., Hotel Centralny Sp. z o.o. and Hotel "Azoty" Sp. z o.o., where resolutions were adopted concerning amendment to the articles of association of these companies relating to liquidation of supervisory boards and, in the case of Hotel Centralny Sp. z o.o., expansion of its registered areas of business activity. Simultaneously, all supervisory board members at these companies were dismissed. The above amendments enter into force on registration of the new articles of association in the National Court Register.

Removal of PKCH Sp. z o.o. subsidiaries from the National Court Register

Two entities within the Azoty Tarnów Group (subsidiaries of subsidiaries) were removed from the National Court Register in connection with completion of the liquidation process:

AIR CENTER Sp. z o.o. w likwidacji (subsidiary of PROReM Sp. z o.o., formerly REKOM Sp. z o.o. - 50.87%) - date of removal: 30 October 2012,

BRA SOL Sp. z o.o. w likwidacji (subsidiary of JRCH Sp. z o.o. formerly CHEMZAK Sp. z o.o. - 100%) - date of removal 6 November 2012.

3. Management’s position concerning forecasts

In connection with the fact that financial forecasts 2012 were not published, we cannot present the Parent Management Board's position on achievement of forecast results.



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4. Indication of shareholders directly, or indirectly through subsidiaries, holding at least 5% of total votes at the general meeting as at the date of publishing this report, with indication of the number of shares held by such entities, their share in capital, the number of votes carried thereby and their share in the total number of votes at the shareholder meeting, together with indication of changes in the ownership of significant stakes in the parent from the publication date for the previous annual report

The total number of shares in the Parent amounts to 64 115 444 bearer shares, ISIN code PLZATRM00012.

including:

series AA and B shares 39 116 421 series C shares: 24 999 023

Table 14 Shareholding structure as at the publication date of the financial statements for H1 2012

Shareholder Number of

shares % of share

capital Number of

voting rights % of voting

rights

State Treasury of Poland 20 549 000 32.05 20 549 000 32.05

ING OFE 9 250 000 14.43 9 250 000 14.43 Norica Holding S.à.r.l together with Agroberry Ventures Limited 8 481 287 13.23 8 481 287 13.23

Aviva OFE Aviva BZ WBK 6 397 643 9.98 6 397 643 9.98

Generali OFE 3 340 610 5.21 3 340 610 5.21

PZU OFE Złota Jesieo 3 270 585 5.10 3 270 585 5.10

Other 12 826 319 20.00 12 826 319 20.00

64 115 444 100.00 64 115 444 100.00

The Parent’s Management Board received information from Generali OFE dated 26 October 2012, drafted on the basis of art. 69 sec. 1 and 2 of the Act of 29 July 2005 on Public Offerings and the Terms and Conditions of Admitting Financial Instruments to an Organised System of Trading and on Public Companies (Polish Journal of Laws of 2009 no. 185, item 1439). As per the information provided, as a result of a transaction settlement, as at 24 October 2012 Generali OFE holds less than 5% of the voting rights at the Company’s general meeting.

The number of shares held by Generali OFE before the above change was 3 340 610, constituting 5.21% of the Company’s existing share capital and 5.21% of the voting rights at the Company’s general meeting.

The number of shares held by Generali OFE after the above change was 2 335 522, constituting 3.64% of the Company’s existing share capital and 3.64% of the voting rights at the Company’s general meeting.

(Current report 65/2012 of 29 October 2012)



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Table 15 Shareholding structure as at the publication date of the financial statements for Q3 2012

Shareholder Number of

shares % of share

capital Number of

voting rights % of voting

rights

State Treasury of Poland 20 549 000 32,05 20 549 000 32.05

ING OFE 9 250 000 14,43 9 250 000 14.43 Norica Holding S.à.r.l together with Agroberry Ventures Limited 8 481 287 13,23 8 481 287 13.23

Aviva OFE Aviva BZ WBK 6 397 643 9,98 6 397 643 9.98

PZU OFE Złota Jesieo 3 270 585 5,10 3 270 585 5.10

Other 16 166 929 25,21 16 166 929 25.21

64 115 444 100,00 64 115 444 100.00

Up to the date of drafting this report, the Parent had not received any other official information on changes in the ownership of significant blocks of shares.

5. Parent shares held by management and supervisory personnel as at the date of publishing the report, together with indication of changes in such shares held during the period from publication of the last interim report, with separate presentation for each individual

Table 16 Parent shares held by management personnel

Description Number of shares as

at 1 January 2012

Change Number of shares on

publication date acquisitio

n disposal

Jerzy Marciniak - 2 000 - 2 000

Witold Szczypioski 639 - - 639

Table 17 Parent shares held by supervisory personnel

Description Number of shares as

at 1 January 2012 Change Number of shares on

publication date acquisition disposal

Tomasz Klikowicz 190 - - 190

6. Court proceedings

There are no proceedings on-going within Group companies concerning liabilities or receivables, the value of which could individually or in total constitute 10% of the Parent's equity, i.e. which could constitute the criterion of significance specified in § 87, point 7, par. 7 of the Ordinance of the Minister of Finance concerning current and periodic information of 19 February 2009, as amended.

There is an on-going dispute between Z.Ch. Police S.A. and Polska Kasa Opieki Spółka Akcyjna in Warsaw, commenced on 31 October 2011 through the action brought by Z.Ch. Police S.A. against the bank for refund of costs connected with losses on derivative instruments.

On 20 September 2012 the Arbitration Court at the Polish Bank Association in Warsaw issued a ruling dismissing the action, ordering Z.Ch. Police S.A. to pay the court costs.

7. Credit or loan guarantees, sureties issued

Guarantees and sureties issued by the Parent or a Group company in Q3 2012

No sureties or guarantees were issued by the Parent or Group companies, the total value of which with regard to a single entity and subsidiaries of such entity would exceed 10% of the Parent's equity.



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Azoty Tarnów Group related parties did not provide sureties or guarantees to the Parent.

Guarantees issued at the request of the Parent of a Group company in Q3 2012

Collateral for the tender offer for shares in ZA Puławy

On 13 July 2012, the Parent commissioned Societe Generale S.A. Branch in Poland to issue a bank guarantee for beneficiary UniCredit CAIB Poland S.A. up to a maximum amount of PLN 672 848 000 in order to provide collateral for the tender offer for the purchase of shares in Zakłady Azotowe Puławy S.A. (ZA Puławy), representing 32% of voting rights at the general meeting. The bank guarantee issued by Societe Generale is secured by an interest-bearing collateral account on the Parent’s funds in the amount of PLN 300 000 000 and a financial pledge on the shares in ZA PUŁAWY which are to be acquired through the tender offer. On 17 August 2012 UniCredit CAIB Poland S.A. released Societe Generale from its obligations under the guarantees, and in turn Societe Generale released collateral for the above guarantees, including a deposit amounting to PLN 54 122 000 transferred to UniCredit CAIB Poland S.A. as payment for 25% of the purchase price for ZA Puławy shares acquired under the tender offer announced by the parent, and to the Parent’s current account at PKO Bank Polski S.A.

Collateral securing an agreement on sale of gaseous fuel for Entrade Grupa Sp. z o.o.

On 17 July 2012 Raiffeisen Bank Polska S.A., as commissioned by Z.Ch. Police S.A., issued a bank guarantee for Entrade Grupa Sp. z o.o. in the amount of PLN 16 000 000 as collateral for an agreement on sale of gaseous fuel with a payment deadline on 31 January 2013.

Table 18. Guarantees provided at the request of the Parent in Q3 2012

Type and parties Issue date Subject of collateral

Amount (in PLN

thousands) Validity

Payment guarantee issued by Societe Generale at the request of the Parent for UniCredit CAIB Poland S.A. 13-07-2012

Tender offer for 32% of shares in

ZA Puławy 672 848 25-08-2012

(expired)

Payment guarantee issued by Raiffeisen Bank Polska S.A. at the request of Z.Ch. Police S.A. for Entrade Grupa Sp. z o.o. 10-07-2012

Sale of gaseous fuel 16 000 31-01-2013

688 848

8. Other information essential for assessing the HR, property, financial situations, the financial result and their changes at the company and its group and also information essential for assessing the capability for the company and its group to perform obligations

8.1. Execution of an agreement between the Parent and ZA Puławy

On 20 September 2012 the Parent executed an agreement with ZA Puławy specifying the principles for cooperation and negotiations aimed at executing a consolidation agreement setting out the principles for consolidating both companies under a single group.

In particular, the consolidation agreement will specify the principles for corporate governance at the Parent and ZA Puławy, together with the model for Group operations, including the functional segmentation of Group business areas within management centres in a manner reflecting the experience, knowledge, technical development and market position of both companies. In accordance with the agreement, the Group's integration and development strategy will be aimed at



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ensuring constant improvement in the Group's competitive position and providing conditions for stable growth in the global chemicals market with constant increase in its value. The Group's principal strategic goals will be: to list Group shares in the WIG20 index, to aim at providing Group company shareholders with one of the highest ROI levels in the industry and to maintain the position of leader in the manufacture of fertilisers in Europe and key player in the global market.

The parties to the agreement undertook to apply all efforts aimed at executing the consolidation agreement in two phases: by 30 October 2012 with regard to corporate governance principles, functional segmentation of business areas and continuation of on-going investment projects, including relating to energy, and within 30 days from registration of the Parent's increased share capital with regard to strategy and synergy. Division of the consolidation agreement into two phases stems from certain limitations in information exchange between the Parent and ZA Puławy with regard to regulations on unfair competition. The consolidation agreement will come into effect and be subject to performance on condition that the series D share issue is completed, in as far as this offering results in the Parent creating a group from ZA Puławy.

Under the on-going negotiations, the parties will mutually review and analyse the organisational structure of the companies which will eventually form the group, together with their financial situations and investment projects.

The parties to the agreement are forming a steering committee comprising representatives of the parties and their advisors. The committee will be tasked with supervising performance of the agreement and negotiations on execution of the consolidation agreement.

On 30 October 2012 the parties executed Annex no. 1 to the above agreement, pursuant to which the date for execution of the consolidation agreement was rescheduled for 14 November 2012.

8.2. Settlement of tender offer for shares in the Parent announced by Norica Holding S.à.r.l

As a result of the tender offer for shares in the Parent announced by Norica Holding S.à.r.l. (hereinafter Norica) on 16 May 2012, the Offeror intended to acquire up to 41 550 037 shares, carrying up to 64.80% of votes at the Parent's general meeting (further details: Azoty Tarnów Group Interim management report for the six months ended 30 June 2012, sec. 8.1 on p. 43.

The end-date for acceptance of subscriptions to sell shares in Azoty Tarnów was 16 July 2012. Despite the fact that the conditions outlined in the tender offer had not been fulfilled by the end of this period, the Offeror had decided to acquire all shares covered by subscriptions under the tender offer. The share purchase transaction was completed on 20 July 2012, as announced by the Parent in current report 48/2012 of 23 July 2012.

On 25 July 2012 the Parent received notifications from the attorneys of the following entities:

TrustService Limited Liability Company, having its registered office in Veliky Novgorod, Russia (hereinafter "TrustService"),

JSC Acron, having its registered office in Veliky Novgorod, Russia (hereinafter "Acron"),

Subero Associates Inc., a private limited company having its registered office in Tortola, British Virgin Islands (hereinafter "Subero"),

Mr Viatcheslav Kantor,

on an indirect acquisition of shares in the Parent, as announced by the parent in current report 49/2012 of 25 July 2012.

As a result of the tender offer to purchase shares in the Parent, Norica directly acquired 7 715 131 shares constituting 12.03% of the total number of shares in the Parent and entitling to exercise 7 715 131 votes at the Parent's General Meeting of Shareholders, constituting 12.03% of the total number of votes at the Parent's General Meeting of Shareholders.

At present:



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TrustService, dominant entity of Norica, indirectly, through its subsidiary Norica, acquired 7 715 131 shares in the Company, constituting 12.03% of the total number of shares in the Company which entitle to exercise 7 715 131 votes at the Parent’s General Meeting of Shareholders, constituting 12.03% of the total number of votes at the Parent’s General Meeting of Shareholders.

Acron, dominant entity of TrustService, indirectly, through its subsidiary Norica, acquired 7 715 131 shares in the Parent, constituting 12.03% of the total number of shares in the Company which entitle to exercise 7 715 131 votes at the Parent’s General Meeting of Shareholders, constituting 12.03% of the total number of votes at the Parent’s General Meeting of Shareholders.

Subero, dominant entity of Acron, indirectly, through its subsidiaries Agroberry and Norica, acquired 8 481 287 shares in the Parent, constituting 13.23% of the total number of shares in the Company which entitle to exercise 8 481 287 votes at the Parent’s General Meeting of Shareholders, constituting 13.23% of the total number of votes at the Parent’s General Meeting of Shareholders. Prior to the last transaction the entity held 766 156 shares in the Parent, constituting 1.2% of share capital.

Mr Viatcheslav Kantor, dominant entity of Subero, indirectly, through its controlled entities Norica and Agroberry Ventures Limited, held 8 481 287 shares in the Company, constituting 13.23% of the share capital of the Company which entitled to exercise 8 481 287 votes at the Company’s General Meeting of Shareholders, constituting 13.23% of the total number of votes at the Company’s General Meeting of Shareholders. Prior to the last transaction Mr Viatcheslav Kantor held 766 156 shares in the Parent, constituting 1.2% of share capital.

Entities controlled by Mr Viatcheslav Kantor, other than Norica and Agroberry Ventures Limited, do not hold any shares in the Company.

Subsidiaries of Subero, other than Norica and Agroberry Ventures Limited, do not hold any shares in the Company.

Subsidiaries of Acron, other than Norica and Agroberry Ventures Limited, do not hold any shares in the Company.

Subsidiaries of TrustService, other than Norica and Agroberry Ventures Limited, do not hold any shares in the Company.

8.3. Share capital increase

In connection with the planned acquisition of 66% of shares in ZA Puławy, on 11 September 2012 the Parent’s Management Board adopted a resolution on an increase in the Parent’s capital through the issue of new shares (which is described in detail in the section Issue, buyback and repayment of debt and equity instruments). Pursuant to the resolution, § 7 sec. 1 of the Company’s Articles of Association is reworded as follows: “1. The Company’s share capital amounts to not less than PLN 320 577 225.00 (in words: three hundred and twenty million, five hundred and seventy-seven thousand, two hundred and twenty-five Polish zloty) and not more than PLN 534 913 685.00 (in words: five hundred and thirty-four million, nine hundred and thirteen thousand, six hundred and eighty-five Polish zloty) and is divided into not less than 64 115 445 (in words: sixty-four million, one hundred and fifteen thousand, four hundred and forty-five) and not more than 106 982 737 (in words: one hundred and six million, nine hundred and eighty-two thousand, seven hundred and thirty-seven) shares with a nominal value of PLN 5 (in words: five Polish zloty) each, including:

a) 24 000 000 (in words: twenty-four million) series AA bearer shares, numbered from AA 000000001 to AA 024000000;

b) 15 116 421 (in words: fifteen million, one hundred and sixteen thousand, four hundred and twenty-one) series B bearer shares;



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c) 24 999 023 (in words: twenty-four million, nine hundred and ninety-nine thousand and twenty-three) series C ordinary bearer shares;

d) From 1 (in words: one) to 42 867 293 (in words: forty-two million, eight hundred and sixty-seven thousand, two hundred and ninety-three) series D ordinary bearer shares.”

8.4. Change in the Parent’s issue sponsor

Pursuant to an agreement executed on 22 October 2012 by the Parent’s Management Board with PKO Bank Polski S.A., issue sponsor responsibilities for Azoty Tarnów were transferred to DM PKO Bank Polski S.A. from 2 November 2012.

DM PKO Bank Polski S.A. assumed the responsibilities previously fulfilled by DM BZ WBK S.A. The previous issue sponsor agreement with BZ WBK S.A. was in effect from 30 May 2008 to 31 October 2012.

8.5. Implementation of key investments

The construction of a new hydrogen facility, one of the Parent's principal investments implemented as an issue objective, was completed in September 2012. The investment budget totalled PLN 74 million, while capital expenditure amounted to PLN 70 904 000, including PLN 3 336 000 of expenses borne in Q3 2012.

The second project under issue objectives - modernisation of the sulphuric acid plant - is on-going. This is the Parent's largest investment currently under development and is aimed at ensuring the operational continuity of one of the main installations in the caprolactam production line, improving ecological indicators and increasing the steam production ratio. The project is planned for completion in 2013. The investment budget totals PLN 64.6 million. Capital expenditure amounts to PLN 18 418 000, including PLN 6 370 000 of expenses borne in Q3 2012.

Total capital expenditure incurred by the Azoty Tarnów Group during the period 1 January to 30 September 2012 totals PLN 165 305 000.

The structure of capital expenditure at the Azoty Tarnów Group is as follows:

investments connected with business development PLN 54 642 000,

investments connected with business continuity PLN 65 198 000,

mandatory investments PLN 15 327 000,

purchase of finished goods PLN 30 138 000.

Fig. 17. Investment expenditure structure


33,1%

39,4%

9,3%

18,2%

3Q 2012

Inwestycje związane z rozwojembiznesu

Inwestycje związane zutrzymaniem biznesu

Inwestycje mandatowe

Zakupy gotowych dóbr



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Aside from the above investments, the following are on-going at the Parent:

Modernisation of main electrical substations, The investment budget is PLN 17 000 000. Investment expenditures incurred amount to PLN 16 028 000, including PLN 436 000 incurred in Q3 2012.

Conversion of gate no. 6 from ul. Chemiczna and construction of a heavy goods vehicle parking area, The investment budget is PLN 16 750 000. Investment expenditures incurred amount to PLN 7 769 000, including PLN 5 707 000 incurred in Q3 2012.

IT consolidation at the Azoty Tarnów Group, The investment budget is PLN 9 800 000. Investment expenditures incurred amount to PLN 6 281 000, including PLN 1 559 000 incurred in Q3 2012.

Modernisation of the Cooling Station no. 6 refrigeration system, The investment budget is PLN 11 000 000. Investment expenditures incurred amount to PLN 2 630 000, including PLN 2 322 000 incurred in Q3 2012.

Exchange of the computer control and instrumentation systems in the Lactam Department, The investment budget is PLN 7 000 000. Investment expenditures incurred amount to PLN 4 174 000, including PLN 1 153 000 incurred in Q3 2012.

Exchange of the computer control and instrumentation systems at the Ammonium Nitrate Plant, The investment budget is PLN 5 350 000. Investment expenditures incurred amount to PLN 2 645 000, including PLN 709 000 incurred in Q3 2012.

Removal of phenol and liquid hydrocarbons within the cyclohexanone-over-palladium installation. The investment budget is PLN 4 300 000. Investment expenditures incurred amount to PLN 100, all of which was incurred in Q3 2012.

Modernisation of the interior of ammonia synthesis reactors. The investment budget is PLN 17 600 000. As at 30 September 2012 no investment expenditures were incurred in connection with this project.

Overall during the first nine months of 2012 the Parent incurred investment expenditures amounting to PLN 83 604 000.

The most important on-going investments at ZAK S.A. during the first half of 2012 include:

Expansion of the HNO3 pouring station, The investment budget is PLN 3 144 000. Investment expenditures incurred amount to PLN 2 497 000, including PLN 212 000 incurred in Q3 2012.

Upgrade of propylene loading stations, The investment budget is PLN 1 728 000. Investment expenditures incurred amount to PLN 451 000, with no expenditures incurred in Q3 2012.

Construction of a new hydrogen facility, The investment budget is PLN 2 400 000. Investment expenditures incurred amount to PLN 1 701 000, with no expenditures incurred in Q3 2012.

Construction of a platform to load liquid BKF into tanks, The investment budget is PLN 4 013 000. Investment expenditures incurred amount to PLN 3 570 000, with no expenditures incurred in Q3 2012.

Sulphuric acid dispensing in the process of neutralising nitric acid using ammonia gas, Investment expenditures incurred amount to PLN 646 000 – investment completed in June 2012.

Adaptation of the ester installation to the production of di(2-ethylhexyl) terephthalate, The investment budget is PLN 5 050 000. Investment expenditures incurred amount to PLN 185 000, all of which was incurred in Q3 2012.

Expansion of the steam network through the addition of a 4.0 Mpa steam collector. The investment budget is PLN 3 600 000. Investment expenditures incurred amount to PLN 146 000, including PLN 85 000 incurred in Q3 2012.



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Furthermore, significant tasks on which work is progressing in the field of investment preparation include:

Installation for the manufacture of liquid fertilisers,

Change to the BKM raw material base,

New power generation infrastructure for ZAK.

During the first three quarters of 2012 the total level of expenditures connected with investment implementation was PLN 11 543 000.

At Z.Ch. Police S.A. the principal on-going investments during Q3 2012 include:

Modernisation of synthetic gas compressors and exchange of the CO2 compressor turbine The investment budget is PLN 37 580 000. Investment expenditures incurred amount to PLN 28 106 000, including PLN 187 000 incurred in Q3 2012.

Construction of a filtration system and preparation of the existing installation for dry separation, The investment budget is PLN 10 980 000. Investment expenditures incurred amount to PLN 7 925 000, including PLN 1 705 000 incurred in Q3 2012.

Iron II sulphate neutralisation system - monohydrate The investment budget is PLN 14 600 000. Investment expenditures incurred amount to PLN 11 192 000, including PLN 1 220 000 incurred in Q3 2012.

Logistics development at Z.Ch. Police S.A. - phase 1, The investment budget is PLN 12 390 000. Investment expenditures incurred amount to PLN 4 049 000, including PLN 2 500 000 incurred in Q3 2012.

Logistics development at Z.Ch. Police S.A. - phase 2, The investment budget is PLN 27 040 000. Investment expenditures incurred amount to PLN 854 000, including PLN 269 000 incurred in Q3 2012.

Installation to dispense filler into NP fertilisers, The investment budget is PLN 5 150 000. Investment expenditures incurred amount to PLN 4 991 000, with no expenditures incurred in Q3 2012.

Stripper 20 E-102, The investment budget is PLN 15 000 000. Investment expenditures incurred amount to PLN 12 540 000, including PLN 423 000 incurred in Q3 2012.

Purchase of an imported electro-filter, The investment budget is PLN 3 000 000. Investment expenditures incurred amount to PLN 2 787 000, including PLN 925 000 incurred in Q3 2012.

Upgrade of ammonia loading ramps, The investment budget is PLN 5 540 000. Investment expenditures incurred amount to PLN 2 560 000, with no expenditures incurred in Q3 2012.

Expansion of the post-calcination gas desulphurisation installation through the addition of two new reactors, The investment budget is PLN 8 860 000. As at 30 September 2012 no investment expenditures were incurred.

Overall during the first nine months of 2012 Z.Ch. Police S.A. incurred investment expenditures amounting to PLN 51 532 000.

The principal investments implemented at PTK KOLTAR Sp. z o.o. during Q3 2012 include:

Modernisation of rolling stock for the transport of acetone cyanohydrin and acrylonitrile, The investment budget is PLN 1 900 000. Investment expenditures incurred amount to PLN 1 467 000, including PLN 1 427 000 incurred in Q3 2012.

Procurement and upgrade of self-loading rolling stock, The investment budget is PLN 3 900 000. Investment expenditures incurred amount to PLN 3 543 000, including PLN 827 000 incurred in Q3 2012.

Overhaul of a locomotive.



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The investment budget is PLN 3 200 000. Investment expenditures incurred amount to PLN 2 985 000, all of which was incurred in Q3 2012.

Overall during the first nine months of 2012 KOLTAR Sp. z o.o. incurred investment expenditures amounting to PLN 8 489 000.

Investment expenditures incurred by other Azoty Tarnów Group companies during the first nine months of 2012 are as follows:

PKCH Sp. z o.o. Group – PLN 9 935 000, together with

ATT Polymers GmbH – PLN 201 000.

8.6. Financial liquidity

The Group's financial standing is characterised by full payment capability and creditworthiness, both in relation to the Company and to other leading Group companies. This means the Group's capability to make timely repayment of its liabilities and to hold and generate a surplus on operations activity, allowing for further payment within payment deadlines.

The Azoty Tarnów Group has the above free overdraft limits and supplementary free factoring limits, which may be used in situations of potential growth in short-term requirements for funds, such as may arise for reasons including maintenance downtime or seasonal or periodic drops in sales levels or the extension of payment deadlines in the fertilisers segment.

The Azoty Tarnów Group also has the possibility to fund its investment plans both from its current and planned cash surpluses from operating activities, and through the ability to incur new investment loans. Financial ratios established with strategic lenders allow for a significant increase in the scale of finance for the investment plans using the Parent's and Group's external sources of funding, without the risk of violating the terms and conditions of existing loan agreements.

The Azoty Tarnów Group also has the option to take advantage of unified conditions of lease for subsidiaries under global leasing limits.

8.7. Credit and loan liabilities

The Azoty Tarnów Group has free overdraft limits connected with the structure of virtual cash pooling, which the Group may use in situations of changing need for funds amongst Group companies and supplementary free multi-purpose loan limits within subsidiaries. As at 30 September 2012, in total the Azoty Tarnów Group has credit limits to finance current operating activities at a level of approx. PLN 500 million, with maturities ranging from 1 to 2 years from the end of the reporting period.

Current and multipurpose credit agreements executed by Group companies enable full coverage of financial requirements under operating activities, including with regard to planned liquidity ratios, and ensure the required level of finance appropriate to sales levels.

As at 30 September 2012, Azoty Tarnów had free investment loan limits totalling approx. PLN 248 million allocated for the potential subsequent tender offer for acquisition of shares in ZA Puławy (PLN 211 000), completion of planned capital expenditures on construction of the hydrogen plant (equivalent to approx. PLN 2 million in EUR and USD) and finance for modernisation of the sulphuric acid plant (PLN 35 million).

During Q3 2012 the Group successfully continued the process of finance cost optimisation, which resulted in factors including a decrease in margins on new and existing working capital loans at Z.Ch. Police S.A., adapted to a unified level at banks with strategic significance to the Azoty Tarnów Group.

The Group observes unified covenants under loan agreements, in accordance with which it has the capability to make significant increases in the scale of financial liabilities as required.

Furthermore, in August 2012 the Parent executed a joint finance agreement with PKO Bank Polski S.A. and PZU Życie S.A., providing finance for the cash acquisition of 10.3% of shares in ZA Puławy in



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accordance with the public tender completed in August 2012, while the remaining free funds under loan B (up to PLN 211 million) serve as collateral for the potential subsequent tender offer which the Parent may be required to announce after completion of the planned in-kind tender offer for acquisition of shares in ZA Puławy in return for its of newly issued shares.

In the assessment of strategic lenders, the Group's financial standing is solid and there are no threats or risks to this standing in the future

Table 19 Significant financing agreements signed or annexed in Q3 2012

Type of financing and parties to the agreement

Agreement date Annex date Currency Amount Maturity

Current account overdraft for Azoty Tarnów Group companies – PKO Bank Polski S.A. 01-10-2010 31-07-2012 PLN 250 000 30-09-2014 Loan agreement between Azoty Tarnów and PKO Bank Polski S.A., together with an agreement amending the Joint Financing Agreement executed between Azoty Tarnów and PKO Bank Polski S.A. and PZU Życie S.A. 14-08-2012 22-08-2012 PLN 711 000

31-03-2013 31-12-2017

Multi-purpose facility Z.Ch. Police S.A. – BOŚ S.A. 12-07-2011 07-09-2012 PLN 80 000 30-06-2013

During Q3 2012 the following loan agreements were executed or annexed within the Azoty Tarnów Group:

On 13 July 2012 Azoty Tarnów took out a PLN 70 million revolving facility with ZAK, constituting short-term supplementary funds to provide collateral for the public tender for acquisition of shares in ZA Puławy. This loan was repaid on 20 September 2012 and as at the date of publishing this report the loan remained unused.

On 7 September 2012 Z.Ch. Police S.A. executed an annex to the PLN 240 000 loan agreement with Supra Agrochemia Sp. z o.o. w likwidacji, having its registered office in Wrocław, rescheduling its repayment to 31 December 2012,

8.8. Composition of management and supervisory authorities

Composition of the 9th term Management Board as at the report date did not change compared to the date of the H1 2012 report and is as follows:

Jerzy Marciniak – President of the Management Board, Managing Director

Andrzej Skolmowski – Vice-President of the Management Board responsible for finance and trade at the Azoty Tarnów Group,

Krzysztof Jałosioski – Vice-President of the Management Board responsible for the strategy and development of the Azoty Tarnów Group,

Witold Szczypioski – Vice-President of the Management Board responsible for production and safety at the Azoty Tarnów Group.

Artur Koped – Member elected by employees.

Competences of persons managing the Parent are specified in the following regulations:

Polish Commercial Companies Code,

the Act on Commercialisation and Privatisation of 30 August 1996, as amended,

the Act of 29 July 2005 on Public Offerings and the Terms and Conditions of Admitting Financial Instruments to an Organised System of Trading and on Public Companies,

the Act of 29 July 2005 on Trade in Financial Instruments,

provisions of secondary legislation issued on the basis of the above acts,



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provisions of the Parent's articles of association (§ 19 - § 22).

Through resolution no. 4 of 14 July 2012, The Extraordinary General Meeting of Shareholders

amended the content of §10 sec. 3 and subsequent of the Parent’s Articles of Association by wording

it the following way:

“3. The Management Board is authorised to increase the Company’s share capital by issuing new

shares with a total nominal value of not more than PLN 240,432,915, by means of increasing the

share capital within the limits defined above (“authorised share capital”). The increase of the share

capital within authorised share capital may be effected only for the purpose and under terms and

conditions stipulated in section 4 below. The Management Board’s authorisation to increase the

share capital and to issue new shares within the Authorised share capital expires within six months

from the date of registration of the changes to the Articles of Association, stipulating the Authorised

share capital.

4. Within authorised share capital, the Management Board is authorised to offer the Company’s

shares with the exclusion of pre-emptive rights, only to shareholders of Zakłady Azotowe „Puławy”

S.A., with a registered office in Puławy, Poland, entered into the Register of Entrepreneurs of the

National Court Register under number KRS 0000011737 (”ZA PUŁAWY”) in exchange for a non-cash

contribution in the form of shares in ZA PUŁAWY in such a way that one share in ZA PUŁAWY will be a

non-cash contribution to cover 2.5 Company’s shares issued within the authorised share capital. The

Resolution of the Management Board regarding issuing shares in exchange for a non-cash

contribution in the form of shares in ZA PUŁAWY does not require the approval of the Supervisory

Board.

5. In the Company’s interest the Management Board is authorised to deprive current shareholders, in

whole or in part, of pre-emptive rights in relation to shares issued within the authorised share capital

only to offer them to shareholders of ZA PUŁAWY according to rules described in section 4 above.

6. Unless stipulated otherwise in section 7 or in the Code of Commercial Companies and Partnerships,

the Management Board decides on all matters connected with the increase in the share capital within

the authorised share capital, in particular the Management Board is authorised to:

1) conclude agreements protecting the organization and carrying out a share issue,

2) adopt resolutions and take other actions regarding dematerialisation of shares and rights

to shares as well as to conclude agreements with Krajowy Depozyt Papierów Wartościowych

S.A. (the National Depository for Securities) on the registration of shares and rights to shares,

3) adopt resolutions and take other actions regarding, respectively, issuing shares by public

offering or applying to distribute shares and rights to shares in the regulated market.

7. The Management Board’s resolutions regarding:

1) increasing the share capital within the authorised share capital,

2) establishing the issue price of shares issued within the authorised share capital, and

3) excluding pre-emptive rights,



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require the consent of the Supervisory Board.(...)”

Under § 21 of the articles of association, the Management Board's competences include:

adoption of the Management Board regulations,

approval of Organisational Regulations governing the internal organisation of the Company's business,

creation and liquidation of branches, facilities, offices and other units,

appointment of a commercial representative,

incurrence and grant of loans and borrowings (if the level of Company debt under loans and borrowings, together with planned loans and/or borrowings, exceeds PLN 40 million, the execution of loan and/or borrowing agreements and issue of bonds requires the consent of the Supervisory Board),

issue of bonds, subject to the issue of bonds exchangeable for shares or pre-emptive rights to shares and the competences of the Supervisory Board specified in § 33, sec. 2, point 7,

adoption of annual financial plans and long-term strategic plans,

adoption of financial statements,

incurrence of contingent liabilities, including the grant by the Company of guarantees, sureties and any adoption by the Company of liability for a third party debt, together with the issue, acceptance and grant of promissory notes and the on-demand endorsement of promissory notes, subject to the provisions of § 33, sec. 2, points 5 and 6 (the incurrence of contingent liabilities, including the grant by the Company of guarantees and property sureties and the acceptance of liability for third-party debt of a value exceeding PLN 2 million, together with the issue, acceptance and grant of promissory notes and the on-demand endorsement of promissory notes exceeding PLN 2 million in value, requires the consent of the Supervisory Board),

the disposal, acquisition and encumbrance with limited property rights of property, plant and equipment with a market value equal to or in excess of PLN 50 000, subject to the provisions of § 33, sec. 2, points 1, 2, 3 and 4, together with § 51, sec. 1, points 8, 9, 10, 11 and 24 of the articles of association (competences of the Supervisory Board and General Meeting),

A detailed division of competences amongst Members of the Parent's Management Board, 9th term,

governed by the Resolution of the Management Board of the Parent, no. 1/IX/2011 of 25 October

2011, can be found in the Condensed consolidated interim financial statements for the three and

nine month periods ended 30 September 2011, point 8.2 on p. 58.

Composition of the Parent's Supervisory Board as at the report date:

Marzena Piszczek – Chairperson of the Supervisory Board,

Ewa Lis – Vice-Chairperson,

Jan Wais – Secretary,

Tomasz Klikowicz – Member,

Artur Kucharski – Member,

Marek Mroczkowski – Member,

Jacek Obłękowski – Member,

Zbigniew Paprocki – Member,

Ryszard Trepczyoski – Member.

The Supervisory Board acts pursuant to:

• the provisions of the Act of 15 September 2000 – the Polish Commercial Companies Code (Polish Journal of Laws no. 94, item 1037 as amended),

• the Act on Commercialisation and Privatisation (...),

• the Accounting Act,

• the company's articles of association (§ 32 and subsequent),



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• the Byelaws for the Supervisory Board of Zakłady Azotowe w Tarnowie-Mościcach S.A. In 2011 the Supervisory Board appointed an Audit Committee in order to streamline the work of the

Board and improve control over the Parent and Group. The Committee constitutes an advisory body

working jointly within the structure of the Supervisory Board. The following Board members form its

composition:

Jacek Obłękowski (Chairman),

Marek Mroczkowski,

Tomasz Klikowicz.

The Committee's tasks include in particular:

monitoring the financial reporting process,

monitoring the effectiveness of internal control, internal audit and risk management systems

existing within the Parent,

monitoring financial audit,

monitoring the independence of the statutory auditor and entity authorised to audit the Parent's financial statements,

The specific principles for Audit Committee operations are defined in the Audit Committee Byelaws

drawn up with consideration to the content of annex I, sec. 4 (Audit Committee) to the European

Council Recommendation of 15 February 2005 on the role of non-executive or supervisory directors

of listed companies and on the committees of the (supervisory) board and art. 86, sec. 1 of the Act of

7 May 2009 on Statutory Auditors (...) (Polish Journal of Laws no. 77 of 2009, item 649), and adopted

by the Supervisory Board of Azoty Tarnów.

9. Factors having an impact on financial results over at least the next quarter

9.1. Interest income on deposits of share issue proceeds

With regard to the full achievement of objectives under the 2011 share issue and the use of proceeds to acquire blocks of shares in Z.Ch. Police S.A. and ZAK S.A., and also the advanced stage of objectives under the IPO in 2008, it is anticipated that the final level of funds remaining from the share issue will amount to approx. PLN 250 000.

It is also anticipated that funds generated from the issue will be fully used at the latest by the end of Q1 2013, while revenues from deposits in 4Q 2012 will constitute a marginal share of the Parent's revenues.

9.2. Exchange rates

The announcement of European Central Bank intervention on bond markets and quantitative easing in the US have bolstered demand for Polish government bonds among foreign investors, and further inflows of this type of capital may lead to a strengthening or at the very least continuation of the current PLNEUR and PLNUSD exchange rates in Q4 2012.

Furthermore, the announcement of a mechanism to calculate national debt against GDP through using the average annual exchange rate instead of the rate at the end of the period, should decrease the risk of sudden exchange rate fluctuations up to the end of Q4 2012.

On the other hand the domestic currency's appreciation will be hampered by the slowdown observed in the Polish economy and the anticipated move by Poland's national bank to ease monetary policy (particularly when the National Bank of Poland's inflationary target can be



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achieved), which will lead to decreased investment appeal for sovereign debt and potentially adjust the Polish zloty's current trend towards strengthening.

In the mid-term, PLN should remain within its natural bracket of 4.00 - 4.20 against the euro. Current and expected PLNUSD and PLNEUR exchange rate fluctuations should not pose a risk to the achievement of results planned for 2012 in relation to the Azoty Tarnów Group's net foreign currency exposure since the trend towards limited PLN strengthening was taken into account in the Group's plans. This said, the scenario in which PLN weakens against EUR and USD may have a positive impact on Azoty Tarnów's results in the fourth quarter.

9.3. Domestic interest rates

Alongside review of the inflation forecast, assuming achievement of the National Bank of Poland's 2.5% inflationary target, the slowdown in the Polish economy observed over the last few months should lead the Monetary Policy Council to ease monetary policy.

Thus the most probable scenario would be for the council to lower domestic interest rates by 0.25% until the end of 2012, with a similar drop in the first quarter of 2013.

In turn the euro zone is still seeing signs of recession, thus even if the anticipated signals of an improvement in the situation of several economies appear, it should be assumed that in the mid-term the European Central Bank will keep interest rates at their current, historically low level.

In response to signals of weakening economic growth in the US, the Federal Reserve will also maintain its policy of ultra-low interest rates for the US, and these should be maintained at the same level in the longer-term.

In relation to market rates, it is anticipated that a relatively low spread will be maintained between loan margins and the deposits offered to the Azoty Tarnów Group. The level of finance revenue generated at Azoty Tarnów as a result of interest on surpluses under cash pooling will partially compensate for the cost of external finance under overdraft facilities.

9.4. Raw material and product prices over the next quarter

The level of fertiliser procurement will be dependent on the purchasing power of the agricultural sector in the coming period, mainly on developments in agricultural product prices, which to an increasing degree are subject to speculation, together with the rate at which direct subsidies are paid out.

In comparison with the spring, the level of fertiliser use during the autumn, particular with regard to nitrogen fertilisers, is at a relatively low level and mainly takes the form of supplementary use.

Despite the cool-off in demand, nitrogen fertiliser prices are still at a relatively high level and in accordance with current forecasts they are expected to maintain their current level during Q4 2012. The factor impacting nitrogen fertiliser price developments in the future will be the situation in western European fertiliser markets, together with the prices of commodities used in their manufacture, i.e. natural gas and ammonia. In the case of compound fertilisers, the high prices of commodities (phosphorites, sulphur, potassium salt) used for their production limits manufacturers' application of price discounts encouraging pre-season purchasing. Current drops in the prices of commodities used to manufacture compound fertilisers has not been sufficient. It is anticipated that in Q4 2012 the price of standard NPK fertilisers in global markets will increase, but in local European markets this trend will not be clear-cut. The fourth quarter in Europe usually sees warehousing of fertilisers before the spring season. High fertiliser prices mean that farmers will first stock up on nitrogen fertilisers, with compound fertilisers following behind.

The increase in oil prices over the last few weeks has led to the suspicion that prices at a level above that seen to date are determined by speculative capital. Control over the fiscal crisis and the worsening global economic slowdown creates beneficial conditions for oil prices to drop. Aside from the possibility of escalating military conflict in the Middle East, the risk factor for this prognosis is the



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financial policy of the United States. The majority of economists expect average oil prices in 2012 to reach almost USD 108 per barrel, significantly higher (approx. USD 1) than previous forecasts.

It is anticipated that there may be a limitation in supply in the benzene market connected both with oil prices and application markets, mainly due to the worsening economic situation in the caprolactam and polyamide 6 markets.

The long-term forecast for the phenol market is stabilisation and price decreases, confirmed by factors including offers appearing in the Polish market for sale of phenol from Russian sources. However, contract prices for benzene will have the greatest impact on the price of this commodity. Weak demand for caprolactam is anticipated in subsequent quarters, with a corresponding drop in prices.

In Poland, the sulphur market is expected to experience more significant price reductions at the end of the fourth quarter of 2012 and into the first quarter of 2013, since until the end of the year the majority of domestic consumers will be executing contracts set at annual price mechanisms.

Propylene prices in the European market will be closely correlated to oil prices and demand for this commodity in application markets. It is anticipated that its price should not experience any sharp increase, which in turn impacts the prices of oxo alcohols. In relation to this product group, the forecast is one of stable demand and market balancing. In the case of plasticisers, in particularly DEHP, it is anticipated that demand will decrease and manufacturers' margins will level off.

An improvement in demand for titanium white is only anticipated from Q1 2013 in line with seasonal conditions.


(all data in PLN thousands unless otherwise stated)

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TABLES

Table 1 Consolidated Group results ...................................................................................................... 50 Table 2 EBIT by segment ....................................................................................................................... 51 Table 3 Costs by nature ......................................................................................................................... 55 Table 4 Costs connected with use of materials and energy within the Group ..................................... 56 Table 5 Other expenses by nature [in %] .............................................................................................. 57 Table 6 Asset structure .......................................................................................................................... 58 Table 7 Equity structure ........................................................................................................................ 58 Table 8 Profitability ratios ..................................................................................................................... 59 Table 9 Liquidity ratios .......................................................................................................................... 59 Table 10 Inventory, receivables and payables ratios ............................................................................ 60 Table 11 Debt ratios .............................................................................................................................. 60 Table 12 Turnover per significant agreement ....................................................................................... 62 Table 13 Consolidation process timetable ............................................................................................ 70 Table 14 Shareholding structure as at the publication date of the financial statements for H1 2012 . 72 Table 15 Shareholding structure as at the publication date of the financial statements for Q3 2012. 73 Table 16 Parent shares held by management personnel ...................................................................... 73 Table 17 Parent shares held by supervisory personnel ........................................................................ 73 Table 18. Guarantees provided at the request of the Parent in Q3 2012 ............................................ 74 Table 19 Significant financing agreements signed or annexed in Q3 2012 .......................................... 81

FIGURES

Fig. 1. Oil seed rape, wheat, oat and corn prices .................................................................................. 43 Fig. 2. CAN, AN and AS prices ................................................................................................................ 44 Fig. 3. Ammonia and urea prices ........................................................................................................... 45 Fig. 4. DAP, potassium salt and phosphorites prices ............................................................................. 46 Fig. 5. Caprolactam, PA 6, benzene and phenol .................................................................................... 47 Fig. 6. 2-EH, n-butane DEHP and propylene prices ............................................................................... 48 Fig. 7. Titanium white, ilmenite and sulphate slag prices ..................................................................... 49 Fig. 8. Revenue by product group*) ....................................................................................................... 51 Fig. 9. Sales revenue structure by product group*) ............................................................................... 52 Fig. 10. Revenue from sales in the plastics segment ............................................................................. 53 Fig. 11. Revenue from sales in the fertilisers segment*) ....................................................................... 53 Fig. 12. Revenue from sales in the oxo alcohols segment .................................................................... 54 Fig. 13. Revenue from sales in the pigments segment*) ....................................................................... 54 Fig. 14. Revenue from sales in the other activity segment*) ................................................................. 55 Fig. 15. Cost of materials and energy use within the Group*) ............................................................... 56 Fig. 16. Inventory, receivables and payables ........................................................................................ 60 Fig. 17. Investment expenditure structure ............................................................................................ 77


(all data in PLN thousands unless otherwise stated)

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The consolidated quarterly report of the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group for Q3 2012 contains 88 pages. Management Board signatures ………………………….……… ………………………….……… Jerzy Marciniak Krzysztof Jałosioski President of the Management Board Vice-President of the Management Board ………………………….………

………………………….………

Andrzej Skolmowski Witold Szczypioski Vice-President of the Management Board Vice-President of the Management Board ………………………….……… Artur Koped Member of the Management Board Person responsible for maintaining the accounts: ………………………….……… Ewa Gładysz Chief Accountant Tarnów, 13 November 2012

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