The text below is an unofficial translation of the report disclosed by PKO BP pursuant to the Polish Act on Public Trading in Securities of 21st August, 1997 (as amended). As Polish is the only official language in the Republic of Poland, PKO BP assumes responsibility only for the Polish language report. PKO BP assumes no responsibility for the report in its unofficial English translation. The Management Board of Powszechna Kasa Oszczędności Bank Polski S.A. (the “Bank”) hereby announces that on 21 October 2004, an underwriting agreement relating to 105,000,000 shares of PKO Bank Polski S.A. offered in the International Institutional Investor Tranche by way of a public offering (the “Underwriting Agreement”) was executed between Credit Suisse First Boston (Europe) Limited (“CSFB”), HSBC Bank plc (“HSBC”) and ING Bank N.V. (London Branch) (“ING”) (CSFB jointly with HSBC and ING shall hereinafter be referred as the “Managers”), Credit Suisse First Boston Sp. z o.o., Bank Gospodarki Żywnościowej S.A. (“BGŻ”), the Bank and the State Treasury of the Republic of Poland (the “State Treasury”). Pursuant to the provisions of the Underwriting Agreement, the State Treasury agreed to sell 105,000,000 of the Bank’s shares (the “Firm Shares”) to the purchasers procured by the Managers and, should the Managers fail to procure the purchasers, to sell the Firm Shares to the Managers. Pursuant to the provisions of the Underwriting Agreement, each of the Managers agreed to procure purchasers and, should they fail to do so, to purchase such number of the Firm Shares as corresponds to the percentage of the Firm Shares ascribed to each of the Managers. Pursuant to the provisions of the Underwriting Agreement: CSFB agreed to purchase: 90%, HSBC agreed to purchase 5% and ING agreed to purchase 5% of the Firm Shares. If Manager fails to perform its obligation to purchase the Firm Shares, and the total number of the Firm Shares with respect to which the obligation to purchase has not been performed does not exceed 10%, each of the other Managers shall be additionally obliged, to purchase such number of the Firm Shares as has not been purchased by the non-defaulting Manager. The Managers’ commitment to purchase such additional Firm Shares is in proportion to their respective commitments under the Underwriting Agreement. The abovementioned obligations of the State Treasury and the Managers are subject to the condition precedent of the Parties to the Underwriting Agreement executing a pricing supplement specifying the price of the Offered Shares (the “Offering Price) (the “Pricing Supplement”) on 3 November 2004 or on such other day as may be agreed upon by CSFB an the State Treasury (the “Pricing Date”). The execution of the Pricing Supplement is subject to the satisfaction of certain conditions precedent and is solely in the discretion of the parties to the Underwriting Agreement. Apart from the Offering Price, the Pricing Supplement shall indicate the final number of shares to be subscribed for by each of the Managers in case the Managers fail to procure the purchasers, which number shall correspond to the respective percentages ascribed to each of the Managers in the Underwriting Agreement. The final number of the Firm Shares will be equal to the number of the Offered Shares in the International Institutional Investor Tranche, which will be determined in such manner and on the dates as specified in the Prospectus of the Bank’s Shares. Apart from the condition of executing the Pricing Supplement, the obligations of the Managers are subject to the satisfaction of, among others, the following conditions precedent: (i) the application for Admission of the Shares to Trading on the Warsaw Stock Exchange having been filed not later than at 12 pm (noon) on 9 November 2004 or on such other date as jointly determined by CSFB and the State Treasury (the “Closing Date”); (ii) on or prior to the Closing Date, there having been delivered to the Managers a letter dated the Closing Date from Ernst & Young Audit Sp. z o.o., Certified Accountants to the Company, in the agreed form; (iii) on or prior to the Closing Date, there having been delivered standard legal opinions, each in the agreed form, dated the Closing Date; (iv) as at the Pricing Date and at the Closing Date the respective representations and warranties set forth in the Underwriting Agreement shall be accurate and correct as if made on such date; (v) at the Closing Date there shall not have occurred any change, or any development or event reasonably likely to result in a prospective change in the financial condition, prospects, results of operations or properties of the Company and/or its subsidiaries from that set forth in the offering documents, which, in the sole reasonable discretion of CSFB, is material and adverse and which makes it, in the sole reasonable discretion of CSFB, impracticable to market the Offer Shares on the terms and in the manner contemplated in the offering documents. Pursuant to the provisions of the Underwriting Agreement, CSFB on behalf of the Managers may, to the extent permitted by applicable laws, regulations and rules of the Exchange, at its discretion effect transactions in the Shares on the Exchange, with a view to supporting the market price of the Shares at a level higher than that which might otherwise prevail in the open market (the “Stabilising Transactions”). The Stabilising Transactions shall be effected in accordance with the Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments, as well as with the UK Price Stabilising Rules made under the Financial Services and Markets Act 2000. The Stabilising Transactions shall be carried out during up to 30 days starting on the first listing date of the Shares on the Exchange (the “Stabilisation Period”). CSFB shall be under no duty to carry out any Stabilising Transactions. Any Stabilising Transaction, if commenced, may be discontinued at any time at CSFB’s sole discretion. All Stabilising Transactions shall be discontinued as at the end of the Stabilisation Period. Corresponding provisions were included in the Reverse Greenshoe Option Agreement described below. Furthermore, the State Treasury covenanted to the Managers that neither the State Treasury, nor will any person acting on its behalf, for a period of 365 days immediately following the Closing Date, without the prior written consent of CSFB, issue, offer, sell, contract to sell, pledge or otherwise dispose of (or publicly announce any such issuance, offer, sale or disposal) any shares of the Bank or securities convertible or exchangeable into the shares of the Bank or warrants or other rights to purchase the Bank’s shares or any security or financial product whose value is determined directly or indirectly by reference to the price of the Bank’s shares, including equity swaps, forward sales and options (save for the issue of Premium Shares and the Employee Shares, as defined in the Prospectus). The Underwriting Agreement contains provisions under which the Company and the State Treasury shall hold harmless, among others, the Managers and their respective directors and officers in such cases as specified in the Underwriting Agreement, from and against any liability arising from the performance of the Underwriting Agreement. In consideration for the services rendered by the Managers under the Underwriting Agreement, the State Treasury shall pay to the Managers an agreed commission. Following the execution of the Pricing Supplement, CSFB may terminate the Underwriting Agreement in particular in any of the following circumstances: (i) if the Company and/or the State Treasury have not performed any of their respective undertakings under the Underwriting Agreement; or (ii) if a material breach or any event has occurred rendering any of the warranties and representations of the Company and/or the State Treasury untrue or incorrect; or (iii) if there has occurred, in the sole judgment of CSFB, any change, or any development involving a prospective change, in national or international monetary, financial, political or economic conditions (including any disruption to trading generally, or trading in any securities of the Company, on any stock exchange or in any over-the-counter market) or currency exchange rates or foreign exchange controls. Furthermore, on 21 October 2004 a reverse greenshoe option agreement (the “Reverse Greenshoe Option Agreement”) was executed by and between the State Treasury (the Selling Shareholder), Credit Suisse First Boston (Europe) Limited (the Lead Manager and the Stabilising Entity) and BGŻ (the “Listing Agent”). In the Reverse Greenshoe Option Agreement, the State Treasury submitted an irrevocable offer to the Stabilizing Entity to purchase, at the Offering Price, up to 25,000,000 million of the acquired Shares (the “Reverse Greenshoe Option”) in connection with the stabilising transactions effected by the Stabilising Entity in the Bank’s shares listed on the Warsaw Stock Exchange with a view to supporting the market price of the Shares at a level higher than that which might otherwise prevail in the open market (the “Stabilising Transactions”). The Reverse Greenshoe Option is binding on the State Treasury and shall remain valid for a period not longer than 30 (thirty) calendar days from the Shares’ first listing date on the Warsaw Stock Exchange (the “Stabilisation Period”). At any time during the Stabilization Period, the Stabilising Entity may submit to the other parties of the Reverse Greenshoe Agreement an Option Exercise Notice or an Option Termination Notice, which shall end the Stabilisation Period. In case the Stabilising Entity chooses to exercise the Reverse Greenshoe Option, the Shares shall be transferred to the State Treasury off the regulated market under Art. 93 of the Law on Public Trading in Securities based on the Polish SEC’s permit dated 28 September 2004. Pursuant to the provisions of the Reverse Greenshoe Option Agreement, the Stabilising Entity acting on behalf of the Managers, in the capacity of CSFB’s subcontractor (the Financial Advisor) and BGŻ, may, at its discretion effect the Stabilisation Transactions, when requested by the Selling Shareholder, to the extent permitted by applicable laws, regulations and rules of the Exchange. The Stabilising Transactions shall be effected in accordance with the Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments. The Stabilising Entity shall also comply with the UK Price Stabilising Rules made under the Financial Services and Markets Act 2000. The Stabilising Transactions shall be carried out during the Stabilisation Period. CSFB shall be under no duty to carry out any Stabilising Transactions. Any Stabilising Transaction, if commenced, may be discontinued at any time at CSFB’s sole discretion. All Stabilising Transactions shall be discontinued as at the end of the Stabilisation Period. Furthermore, the Reverse Greenshoe Option Agreement specifies the detailed rules for payments and settlements between the Selling Shareholder and the Listing Agent as well as the Stabilising Entity in connection with effecting the Stabilising Transaction and the exercise of the Reverse Greenshoe Option. The Reverse Greenshoe Option Agreement was entered into on the condition precedent that the Selling Shareholder ultimately allocates the Offered Shares, on such terms as specified in the Prospectus, by 31 December 2004. The Reverse Greenshoe Option Agreement is governed by Polish law. Stabilisation/FSA Legal basis: - Art. 81 section 1 point. 2) of the Law on Public Trading in Securities dated 21 August 1997 (J.L. No. 49, item 447, as amended); - § 5 section 1 point 3 of the Regulation of the Council of Ministers dated 16 October 2001 on the Current and Periodic Information to be Disclosed by Issuers of Securities (J.L. No. 139, item 1569, as amended).
