KBC confirms final terms of core capital issue

Regulated information* - 5 December 2008 (after trafing hours)

KBC announced on 27 October its intention to issue 3.5 billion euros'
worth of core capital securities to the Belgian State. Today, the
Inner Cabinet agreed with the fine-tuning of some technical features
of the transaction agreed between KBC and the Belgian State. The
transaction is expected to be closed before the end of the year.
Today's highlights
*          KBC to issue 3.5 billion euros' worth of core capital, as
  announced on 27 October
*          Removal of option held by the State to convert securities
  into ordinary shares
*          Adjustment of the dividend multiples used for determining
  the annual coupon amount and adjustment of the bottom price for the
  State in the event of conversion into shares initiated by KBC
*          No material changes to other terms and conditions

Transaction details finalised
André Bergen, Group CEO: 'As previously announced, KBC will further
strengthen its capital base by issuing 3.5 billion euros' worth of
core-capital securities to be subscribed to by the Belgian State.
Today, we are happy to reconfirm this transaction. We have also
agreed with the Belgian State representatives on a number of features
which will improve the structure of the transaction for both
parties'. The transaction is expected to be settled by the end of
2008.

Technical changes made
KBC may buy back all or some of the securities at any time at 150% of
the issue price. In this case, however, the State initially had the
option to require the buyback to be settled by exchanging one
security for one ordinary share. This option has been removed in the
final set of terms and conditions, thus eliminating the related
earnings dilution risk for KBC shareholders.

The annual cash coupon initially agreed on was the higher of 2.51
euros per security (reflecting an interest rate of 8.5%) or an amount
equal to 110% of the dividend paid on ordinary shares for the year
2009 and 115% from 2010 and onwards. The dividend multiples used have
been changed to 120% and 125%, respectively. The coupon amount will
be the higher of 2.51 euros per security or an amount equal to 120%
of the dividend paid for the year 2009 and 125% from 2010 and
onwards.

KBC is also entitled to exchange all or some of the securities into
ordinary shares on a one-for-one basis, from the fourth year after
the issuance onwards. However, if KBC chooses to do this, the State
may opt to have the securities redeemed in cash. The conversion price
for this cash option was initially set at 100% of the issue price. In
the final agreement, the conversion price has been set at 115% of the
issue price as of the fourth year, and will be increased by 5
percentage points for every subsequent year, capped at 150%.


Summary of terms and conditions

  * Issuer (unchanged): KBC Group
  * Subscriber (unchanged): Belgian State
  * Type of securities (unchanged): fully paid-up new class of
    non-transferable non-voting securities qualifying as core capital
  * Ranking (unchanged): pari passu with ordinary shares
  * Issue price (unchanged): 29.50 euros per security
  * Interest coupon (changed): the higher of (i) 2.51 euros per
    security (reflecting an interest rate of 8.5%) or (ii) 120% of
    dividend paid on ordinary shares for 2009 and 125% for 2010 and
    onwards. No coupon if no dividend is paid.
  * Maturity (unchanged): perpetual
  * Buy back option (changed): KBC may at any time buy back (subject
    to the regulator's approval) all or some of the securities at
    150% of the issue price (44.25 euros), to be settled in cash
  * Conversion option (changed): after three years, and onwards, KBC
    may substitute the securities with ordinary shares on a
    one-for-one basis. If KBC chooses to do this, the State may opt
    to have the securities repaid in cash. The cash amount will be
    115% of the issue price as of the fourth year, and will be
    increased by 5 percentage points for every subsequent year,
    capped at 150%.
  * Tax treatment (unchanged): coupon is not tax deductible


The amount of securities issued will be part of the parent
shareholders' equity, as presented on the balance sheet according to
IFRS. Including the changes announced today, the transaction will
have no impact whatsoever on existing debt holders.


* This news item contains information that is subject to the
transparency regulations for listed companies.


This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement.