PEKAO S.A. (EQUITY)

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Equity investment of US$ 100 million in new issue of shares. The principal objectives of the project are: The project is expected to: (i) increase the competitive standing of the group through its privatisation and ongoing restructuring with a resultant increase in competition in the financial sector; (ii) increase competition, which should also lead to further integration of the financial sector into the national economy, thereby lowering the cost of financial services across economic sectors; and (iii) serve as a demonstration effect of a market-led approach to consolidation and in particular, efficiency improvements. PEKAO is the largest banking group in Poland. The group comprises the parent bank, Bank Pekao S.A with headquarters in Warsaw, and three regional banks: Bank BDK based in Lublin in south-east Poland, Bank PBG based in Lodz in central Poland and Bank PBKS based in Szczecin in north-west Poland. PEKAO's primary business is the provision of commercial banking services, including lending and deposit-taking, to large corporations and small and medium-sized enterprises. PEKAO's management has decided to merge fully the three regional banks which were absorbed into PEKAO by a government decision in 1996. As at 31 December 1997, PEKAO had 24,920 employees based in 564 branches in Poland and ten in cities worldwide, including Berlin, New York, Paris and Tel Aviv. At 1997 year-end PEKAO had total assets of US$ 13.5 billion, representing some 20 per cent of all assets in the Polish banking system. Equity investment of US$ 100 million in new issue of shares. The subscription to newly issued ordinary shares represents 5.3 per cent of PEKAO's enlarged capital. This increase follows the combined offering of 15 per cent of PEKAO's shares to domestic and international investors. US$ 100 million. The proceeds of the capital increase will be used to finance expected growth in the bank's interest-earning assets and investments in technology as well as modernisation of PEKAO's organisation. PEKAO will carry out its operations in accordance with the EBRD's Environmental Procedures for Local Banks. These provide for the integration of environmental due diligence into PEKAO's credit appraisal processes and a requirement that borrowers comply, at a minimum, with national and local health, safety and environmental regulations and standards and public consultation requirements. PEKAO will submit annual environmental reports to the EBRD. None