Struktuirani proizvodi-Erste brošura

8/13/2019 Struktuirani proizvodi-Erste broura

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Der praktische Ratgeberfr Ihr SanierungsprojektHigher return, higher safety.Erste Group bonds andstructured products.


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Dear investors,

The markets are continually on the move, and as the past has shown us, these moves can

be of a dramatic nature. We all are therefore now more than ever faced with the question,

What investment is the right one at this point in time? Of course this is a question that every

investor will have to answer themselves. We cannot take his investment decision for you. But

we can offer you products that will allow you to implement your opinion on where the market is

headed in an optimal and cost-efficient way. Bonds and structured products are two of the most

important portfolio modules.

Bonds offer you a fixed or variable interest rate and tend to make up the more conservative

part of the portfolio. With structured products you can benefit from both rising and falling

markets. This brochure is meant to give you an overview of the specific advantages and theessential differences. Of course we will also alert you to the respective risks.

One common denominator of our products: they all are transparent, come with low fees, and

are negotiable at all times.

We invite you to take an exciting trip with us through this world of products.

Your expert team of Erste Group


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LeveragePortfoliooptimisation

Valueconservation

Overview An overview of Erste Group 04 Product overview 05

Value conservation Mortgage and municipal bonds 06 Bank debentures 08

Guaranteed products 10

Best Garant products 12

Performance Garant products 14

Structured Bonds 16

Portfolio optimisation Foreign currency bonds 18 Index certificates 20

Bonus cer tificates 22

Reverse convertible bonds 24

Protect bonds 26 Discount certificates 28

Express certificates 30

Leverage Turbo certificates 32 Warrants 34

Taxation Tax information for private individuals subject totaxation in Austria 36

Customer service Contacts and information 37


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Product overview

The market of bonds and structured products is

growing very rapidly. There are countless different

types of products available, and even professionals in

the industry sometime find it difficult to keep track. For

this reason, we have categorised the most important

products for you in a simple form.

You will be able to see at first glance what opportuni-

ties and what risks are associated with any particular

product and what product is best suited for investors.

Higher return vs. higher safety:Its your choice

The following graph shows the relationship between

risk and return. Because one thing is for sure: thehigher the risk, the higher the possible return, and the

lower the risk, the more conservative the expected

return.

New quality standards for all bonds and structured

products are aimed at providing the investor with an

even higher degree of transparency:

Clear categorisation with regard to product type

(maturity, market expectation, capital guarantee,risk)

Terms in line with the market

Comprehensible and interesting structures for

the customer

Positive aggregate return in realistic market

scenarios

Value conservation

Mortgage and municipal bonds

Bank debentures

Guaranteed products

Best Garant products

Performance Garant products

Structured bonds

Portfolio optimisation

Foreign currency bonds

Index certificates

Bonus certificates

Reverse convertible bonds

Protect bonds

Discount certificates

Express certificates

Leverage

Turbo certificates

Warrants

Risk

Return

04

05


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Mortgage and municipal bonds

What are mortgageand municipal bonds?

Mortgage and municipal bonds are secured, fixed-

income debentures. Their special feature is the fact

that on the one hand the issuing bank guarantees thesafety of the bond with its rating. And on the other

hand, mortgage bonds are directly collateralised by

liens on property and buildings. The value of municipal

bonds is secured by claims against the public sector.

Regulated by public lawand recommended

Both the issue process and the documentation of

the collateral of mortgage and municipal bonds are

regulated by law. The collateral of the mortgage bonds

is entered into the mortgage register as a list of liens.

This means that the value of a mortgage bond is

covered by real property. States and municipalities

are liable for the redemption of a municipal bond with

their income from taxes and duties. The steady flow of

income of the municipalities represents a safe haven

in times of crises. Both kinds of bonds are therefore

considered legal investments under Austrian law

(Austrian Civil Code).

How do mortgage andmunicipal bonds work?

Mortgage and municipal bonds generate interest

(coupon) payments that are fixed by amount and

schedule. At the end of maturity the investor receives100% of his money back. The invested capital is

secured by collateral. Given the high degree of safety,

the interest rate is moderate.

Your benefits

Mortgage and municipal bonds are ideal if you are

looking for a long-term and very safe form of investment.

You like to stay on top of your finances and want a

precise picture of your assets on the basis of a fixed,

constant stream of income at every point in time.

Mortgage and municipal bonds are therefore suited toproviding for your children.


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Valueconservation

How do mortgage andmunicipal bonds react to

rising interest rates?

When interest rates are rising, mortgage and

municipal bonds with lower interest rates lose value.If you sell these bonds prior to maturity, you may

record a loss.

stable interest rates?

In the case of stable interest rates, the price of

mortgage and municipal bonds does not change.

falling interest rates?

When interest rates are falling, mortgage and

municipal bonds with higher interest rates gain value.

If you sell these bonds prior to maturity, you may

record a profit.

Your advantages

You benefit from attractive interest payments

on your capital.

You enjoy a legally protected, very high degree

of safety.

Income and payment dates are clearly scheduled

ahead of time and thus exactly calculable.

Details you should be aware of

Between issue date and maturity, price fluctua-

tions are possible, which means that the sale of

the bond prior to maturity may result in a loss.

The 100% capital redemption only applies to the

end of maturity. 0607


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Bank debentures

What are bank debentures?

Senior bonds are fixed or floating-rate debentures

issued by banks, are fixed or floating-rate issued by

banks, savings banks, and other credit institutions in

order to finance their lending business. The maturitiesof the bonds are largely medium to long-term. The

coupon is usually paid once a year.

The issuing institute is liable with all its assets for

the timely honouring of the coupon payments and the

redemption. In addition, the claims arising from bank

debentures are deemed direct, unconditional, and

non-subordinated, i.e. they have senior debt status.

In the case of insolvency, you, the holder, take priority

in having your claims satisfied from the bankrupts

estate before all other creditors. When buying bank

debentures, you should pay attention to the rating of

the issuing credit institution.

How do bankdebentures work?

The investor buys the senior bond and in return,

the investor receives periodical interest payments

(coupons) and the redemption at the end of maturity.

The coupon can be fixed or variable. At the end of

maturity the senior bond is redeemed in full, i.e. paid

back, or in the case of a redemption plan, paid back in

instalments.

Your benefits

A bank debenture is ideal for you if you want to invest

your money in the medium to long term. You receive

attractive interest rate payments for tying up your

capital in this form of investment. The credit institutionguarantees the interest payments and the redemption

at nominal value. Bank debentures offer additional

benefits in that they balance out the higher risk of

other investments in the portfolio.

Your advantages

You benefit from attractive interest payments

throughout the entire term of the bond.

The payment dates are fixed in advance.

You enjoy a high degree of safety.




the bond prior to maturity may result in a loss.

The 100% capital redemption only applies to the

end of maturity and depends on the solvency of

Erste Group Bank AG (default risk).


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How do bank debenturesreact to

... rising interest rates?Bank debentures with fixed interest rate fall when

interest rates are rising. If you sell this debenture priorto maturity, you may record a loss.

Bank debentures with floating interest rates, on the

other hand, benefit from rising interest rates. Given

that these bonds (floaters) have their interest rate

periodically adjusted to a referential rate such as the

Euribor, an increase in the level of interest rates also

means a rising interest rate for the bond. The price of

the bond tends to oscillate around face value.

... stable interest rates?

In the case of stable interest rates, neither the price

nor the coupon of the bank debentures change.

... falling interest rates?Bank debentures with fixed interest rate increase when

interest rates are falling. If you sell these debentures

prior to maturity, you may record a profit. Falling inter-

est rates, on the other hand, have a negative impact

on bank debentures with floating interest rate. Given

that these bonds (floaters) have their interest rate

periodically adjusted to a referential rate such as the

Euribor, a decrease in the level of interest rates also

means a falling interest rate for the bond. The price of

the debentures tends to oscillate around face value.

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Valueconservation


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Guaranteed products

What are guaranteedproducts?

In addition to our Best Garant products we also offer a

number of other guaranteed products, like Perfor-

mance Garant products. Those, too, focus on the fullprotection of the capital invested and on interesting

return opportunities. Essential features are return

opportunities that do not depend on the direction the

underlying instrument is taking as well as variable

payout structures (e.g. highest value guarantee or

guaranteed average performance of the underlying

instrument).

The products of this category therefore offer you a

lower degree of risk for your investment in combination

with attractive return opportunities.

How do guaranteedproducts work?

If the underlying instrument goes the expected way,

you participate in its per formance and receive an

attractive bonus return on top of any minimum return

agreed. Your participation in the development of the

underlying instrument tends to be partial, or up to a

certain cap. In return the issuer grants you the capital

guarantee. If the underlying instrument goes against

expectations, the capital invested is still safe and you

receive a minimum payment in accordance with the

structuring of the product.

Depending on the structure, you may also benefit from

sideways or negative movements of the underlying

instrument on top of the return you may have earned

from its price increases.

Your benefits

The focus of this group of products are the capital

guarantee and the manageable maturity of up to five or

six years. On top of that, capital guarantee products

offer you a chance of surplus returns that may besubstantially above the market yield.

Your advantages

You have the chance of attractive returns with

or without minimum payouts.

You benefit from capital guarantee at the end of

maturity.

You participate in the development of domestic

and international markets.


Depending on the specific product, you may

participate only partially or up to a cer tain cap

in the performance of the underlying instrument.


tions may occur, and selling prior to maturity

may result in a loss.

The capital guarantee only applies to the end

of maturity and depends on the solvency of



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How do guaranteedproducts react to

rising, stable, or falling markets?

Depending on the structure of the product, the price

development hinges on the underlying instrument.Guaranteed products may benefit from rising, sideways,

and falling movements in the markets, which is why

you would have to look into the structuring of the

specific product.

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Best Garant products

What are Best Garantproducts?

The essential features of the Best Garant products are

the capital guarantee, the medium-term maturity of up

to five years, and the annual minimum interest payoutduring maturity or minimum redemption above 100

% at the end of maturity. On top of that, Best Garant

products offer you the chance of an additional return

based on the development of the underlying instru-

ment.

How do Best Garant productswork?

If the underlying instrument goes the expected way,

you participate in its per formance and receive an

attractive bonus return on top of the minimum return.

Your participation in the development of the underlying

instrument is only partial, or up to a certain cap.

In return the issuer grants you the capital guarantee.

If the underlying goes against expectations, the capital

invested is still safe and you receive a minimum

payment in accordance with your agreement.

Depending on the structure, you may also benefit from

sideways or negative movements of the underlyinginstrument on top of the return you may have earned

from its price increases.

Your benefits

The focus of this group of products is the capital guar-

antee and the attractive minimum return. In addition

to that, Best Garant products offer you the chance of

surplus returns that may substantially outperform the

market yield.


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Your advantages

You have the chance to receive attractive

returns. Your capital invested is fully protected.

During maturity you receive a minimum couponor a minimum redemption payment at the end

of maturity.

You participate in the development of domestic

and international markets.

Straightforward terms the maximum maturity

is five years.


Between issue date and maturity, price

fluctuations may occur, and selling prior to

maturity may result in a loss.

The capital guarantee only applies to the

end of maturity and depends on the solvency

of Erste Group Bank AG (default risk).

How do Best Garant productsreact to


Depending on the structuring of the product, the price

development hinges on the underlying instrument.Best Garant products may benefit from rising, side-

ways, and falling movements in the markets, which is

why you would have to look into the structuring of the

specific product.

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Performance Garant products

What are Performance Garantproducts?

The essential features of the Performance Garant pro-

ducts are the capital guarantee and the participation

in the performance of an underlying instrument suchas shares, indices, or funds. The maximum participati-

on may be capped. The maturity is medium to long-

term.

How do Performance Garantproducts work?

If there is an increase in the underlying instrument,

the investor participates in its performance up to a

certain cap, if existent. You can also rely on a capital

guarantee from the issuer.

If the value of the underlying decreases, the notional

of 100% of the capital invested is paid back at the end

of maturity.

Your benefits

The Performance Garant products offer a capital gua-

rantee and direct participation in the underlying. This

means you have the chance of surplus returns that

may be substantially above the market yield.


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Your advantages

You can benefit directly from the performance of

an underlying instrument.

You have the chance of surplus returns that may

be above the current market yield. Your capital is fully protected by the capital

guarantee given by the issuer.

Your capital is invested for a manageable term

of up to six years.


During the life of the bond, price fluctuations

may occur, and selling prior to maturity may

result in a loss.

The price fluctuations of the bond are not

synchronised 1:1 with the underlying over the

life of the bond.

The capital guarantee only applies at the end of

maturity. Investors of this bond bear the default

risk of Erste Group Bank AG.

Your return may be capped, even if the under-

lying shows a better performance during the

observation period.

How do Performance Garantproducts react to


The performance of the Performance Garant products

is based on the respective underlying. If the price ofthe underlying rises, you participate in the develop-

ment of the underlying up to a certain cap, if existent.

If the price of the underlying falls or remains stable,

you can rely on the capital guarantee given by the

issuer at the end of maturity. Rising interest rates may

negatively affect the price of the bond.

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Structured bonds

What are structured bonds?

Structured bonds are debt securities that feature

individualised terms and therefore come in a range of

different shapes and sizes. A feature of these bonds

is the coupon payments that depend on the develop-ment of an interest rate or a spread. Structured bonds

are attractive alternatives to conventional debt securi-

ties, because their terms can be defined flexibly.

The structure of the bonds may result in attractive

earning opportunities. Floating-rate notes which pay

a fixed minimum coupon are structured bonds, too.

How do structuredbonds work?

The maturity, repayment and interest rates (coupons)of a structured bond are defined by the individual terms

of issue. The flexibility of the structure makes it

possible for the bond to take advantage of current

opportunities on the bond market and of fer attractive

yields.

Your benefits

Structured bonds offer you above-average return

opportunities if the expected yield scenarios come

through. The flexible terms allow you to benefit from

the opportunities arising on the interest market at anygiven time.

Your advantages

You profit from the very attractive interest paid

on your principal.

The yield opportunities are higher than on

classic bonds.

The repayment of the principal is guaranteed

upon maturity.


Price fluctuations are possible during the life of

the bond and therefore premature selling could

result in a price loss.

These bonds may carry higher risks than classic

bonds due to the individual bond terms.

Repayment of the principal at 100% applies only

upon maturity and depends on the solvency of



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How do structured bondsreact to

rising, stable, or falling interest rates?

The maturity, repayment and interest rate payments of

a structured bond are determined by the individualterms of issue.

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Foreign currency bonds

What are foreign currencybonds?

Foreign currency bonds offer fixed or variable coupons

that are denominated in a currency other than the

Euro. The maturity of these bonds can vary, too.The coupons are usually paid out once a year.

If you hold a foreign currency account in the respective

currency, the coupons accruing to you over the life of

the bond and the redemption proceeds can be paid out

at the end of maturity in foreign currency. If you do not

hold a foreign currency account in the respective

currency, the coupons and redemption proceeds are

exchanged into Euro at the exchange rate and paid out.

As Euro investor you bear the currency risk, since the

bonds are traded in foreign currency and both interest

payments and the repayment take place in the foreigncurrency.

How do foreign currencybonds work?

The investor buys a foreign currency bond and receives

regular interest rate payments (i.e. coupons) in foreign

currency over the life of the bond.

At the end of maturity the foreign currency bond is

redeemed at 100%, bearing in mind the default risk of

Erste Group Bank AG. If you hold a foreign currency

account in the respective currency, the redemption

proceeds are credited to the account at the end of

maturity to this account. Therefore the investor

chooses the time of exchange by his own.

Your benefits

A foreign currency bond is optimal for you, if you want

to invest your capital in a currency other than Euro for

a specified period of time. In return for tying up your

capital for that period, you receive an attractivecoupon. Redemption is at 100% at the end of maturity

and is in foreign currency. You can benefit from an

appreciating foreign currency vis--vis the Euro.

Portfolios tend to contain foreign currency bonds for

reasons of diversification, among other things.

Your advantages

You receive an attractive rate of return over the

entire life of the bond. The payment date of the

coupon is fixed. You may benefit from an appreciating foreign

exchange rate relative to the Euro.

Details you should be aware

The 100% redemption in foreign currency is

limited to the end of maturity (default risk of

Erste Group Bank AG).



result in a loss.

The Euro investor bears the currency risk, since

the bond is traded in foreign currency.


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How do foreign currencybonds react to

rising interest rates?

The price of foreign currency bonds with fixed-rate

coupons falls when the foreign currency interest ratesare rising. This means, if the interest rate of the

country in which the bond is quoted rises, the price of

the foreign currency bond falls. Selling the foreign

currency bond prior to maturity may result in a loss.

Foreign currency bonds with variable coupons, on the

other hand, benefit from rising interest rates, since the

interest rate of these bonds (floaters) is frequently

adjusted to the referential interest rate of the foreign

currency. The price tends to hover around 100%, if the

default risk of the issuer remains the same.

stable interest rates?

If the interest rates of the foreign currency are stable

on the market, the price of the foreign currency bond

remains stable as well (ceteris paribus).

falling interest rates?

The price of foreign currency bonds with fixed-ratecoupons rises when interest rates are generally falling.

Selling the foreign currency bond prior to maturity may

result in a profit. Foreign currency bonds with variable

coupons, on the other hand, are negatively affected by

falling interest rates, since the interest rate of these

bonds (floaters) is frequently adjusted to the referenti-

al interest rate of the foreign currency. The price tends

to hover around 100%, if the default risk of the issuer

remains the same.

The coupons as well as the redemption is done in the

foreign currency, therefore you face chances and risks

because of the development of the currency.

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Index certificates

What are index certificates?

With an index certificate, you can directly benefit from

the development of the underlying instrument. It allows

you to diversify the risk, because you do not invest

in one specific security, but in an index such as forexample the ATX. This way your investment is not in-

fluenced by the fluctuations in one security, but by the

combined development of all the securities contained

in the index.

The losses of one group of shares may be offset by

the gains in another group in the index. Your overall

risk is therefore lower if you hold an index certificate

than if you hold specific shares. Index certificates

may be issued on performance indices as well as on

price indices.

How do index certificateswork?

Index certificates are issued at a certain exchange

ratio relative to the underlying instrument. Most often

they are traded at 1:100 or 1:10 to the index. Thismeans that if for example the ATX is at 3,700 points,

one index certificate with an exchange ratio of 1:100

to the ATX costs EUR 37. Incidentally, index certifi-

cates are a cost-efficient form of investment in that

they come with no load or management fee.

Your benefits

If you are convinced of future price rises of an index,

index certificates are a cost-efficient way of investing

in the underlying instrument. The certificate reflectsthe price movements of the underlying index 1:1.

Issuers basically charge no load or management fee

on index certificates.


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How do index certificatesreact to

rising markets?

Rising markets mean proportionately rising index

certificates. If the ATX increases for example from4,000 to 4,400 points, i.e. by 10%, the value of

the index certificate will also rise by 10% from

EUR 40 to 44 (in the case of an exchange ratio of

1:100).

stable markets?

If the index does not move, the index certificate will

not move either.

falling markets?

Falling markets mean proportionately falling index

certificates. If the ATX declines for example from

4,000 to 3,600 points, i.e. by 10%, the value ofthe index certificate will also decline by 10% from

EUR 40 to 36.

Your advantages

You benefit directly from the development of

the underlying instrument. This means that in

case of a rising market, your potential gains

are not capped. Index certificates are a cost-efficient form of

investment.

They are an easy way for you to diversify the risk.


Falling markets translate into losses for index

certificates.

An index certificate can never outperform the

underlying instrument.

Redemption depends on the solvency of



Payoff chart

Profit

Loss

0

Index certificate Uderlying instrument

Line

arpar

ticip

atio

n


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Bonus certificates

What are bonus certificates?

Bonus certificates combine three advantages in one

product. The investor benefits from rising prices of the

underlying instrument, receives a sizeable bonus

payment, and, in the case of falling prices, is protect-ed up to (or in fact, down to) the safety barrier. In case

of an unexpected slump, the bonus payment is

dropped, and the price of the underlying instrument is

credited at the end of maturity.

How do bonuscertificates work?

The bonus level, which determines the bonus pay-

ment, is set above the current price of the underlying

instrument at the issue of the certificate. The barrieris set below the initial value. If the specific certificate

comes with a cap as well, it is set at or above the

bonus level.

The redemption at the end of maturity hinges on the

development of the underlying instrument.

The following two cases can occur:

If the underlying instrument does not fall to or below

the barrier, the investor receives at least the bonus

level payment. If the price of the underlying instrument

is higher than the bonus level on the reference date,

the investor receives the higher payment of the two.

The cap, if any, determines the maximum payout.

If the underlying instrument does fall to or below the

barrier at least once during the term of the certificate,

there will be no bonus payment. The investor gets the

performance of the underlying instrument paid out at

the end of maturity (limited by the cap, if any). Depend-

ing on whether the price of the underlying instrument

is below or above the issue price, the investor suffers

a loss or makes a profit.

Your benefitsWith bonus certificates you have the chance to earn

an attractive return even if the price of the underlying

instrument has not moved or has in fact fallen, as long

as the price of the underlying instrument has not fallen

to or below the barrier. This means that bonus certifi-

cates also bring a little more safety to your portfolio.


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How do bonuscertificates react to

rising markets?

In rising markets, the investor receives the bonus

payment at the end of maturity. If the certificate is not

capped, you participate directly from the development

of the underlying instrument once the price of the

underlying instrument is above the bonus level.

stable markets?

In stable markets, the investor receives the bonus

payment (sideways yield) at the end of maturity.

falling markets?

In falling markets, the investor receives the bonus

payment at the end of maturity as long as the price of

the underlying instrument has not fallen to or below

the barrier. On the other hand, if that has happened,

there is no bonus payment, and the certificate follows

the performance of the underlying instrument until the

end of maturity (i.e. losses are possible)

Your advantages

Your receive an attractive bonus payment at

the end of maturity even in the case of stable

or falling prices as long as the price of the

underlying instrument has not fallen to or below

the barrier (sideways yield).

The barrier offers partial protection to falling

prices (risk buffer).


The return may be capped.

If the price of the underlying instrument falls to

or below the barrier, losses are possible.


tions are possible, which means that the sale

of the bonus certificates prior to maturity mayresult in a loss.

Capital redemption depends on the solvency


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Payoff chart

Profit

Loss

0

Bonus certificate Underlying instrument

Unlimited profit

Capped profit potential

Bonus payment (risk buffer)

Value of the underlying

instrument at issue date

Barrier


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Reverse convertible bonds

What are reverse convertiblebonds?

Reverse convertible bonds are debentures with a very

attractive interest rate. Given that the bond is linked to

a share (underlying), coupons are substantially abovemarket rates. In return for the high coupon, the

investor also bears the risk associated with the share:

at the end of maturity, the redemption of the reverse

convertible bond is based on the price of the under-

lying instrument.

In addition to reverse convertible bonds with one

underlying instrument, there are also reverse convert-

ible bonds with more shares as underlying instruments.

These multi-cash or multi-reverse convertible bonds

tend to pay a higher coupon.

How do reverse convertiblebonds work?

With a reverse convertible bond, the investor buys

a bond that is linked to the price development of a

share. As in the case of a normal bond, a coupon is

paid annually, but because it is linked to a share, the

coupon of a reverse convertible bond is substantially

higher than the market yield. The redemption of the

reverse convertible bond hinges on the performance

of the share. If at the end of maturity the market price

of the underlying instrument is above the strike price

fixed at the beginning of the term, the reverse convert-

ible bond is redeemed at its nominal value plus

coupon. If the share price is below the initial value, the

investor receives a physical delivery of the share plus

the payment of the coupon. The number of shares to

be delivered per nominal value is set at the beginning

of the term.

In case of a multi-reverse convertible bond, which has

more than one underlying share, redemption is based

on the share with the worst performance as at matu-

rity. Regardless of the nature of redemption, a fixed

coupon is paid out in this case too.

Your benefits

Investors who do not expect any strong movements

in a share can receive a high, fixed coupon when

investing in a reverse convertible bond. In return, the

upward potential is limited to the value of the coupon.This form of investment is highly interesting in an

environment of attractively valued equity markets.

Your advantages

You get a high, fixed coupon that is above

the market interest rate

Reverse convertible bonds tend to have

short maturities.

The fixed coupon offers you a risk buffer.


The potential return is limited to the coupon.



the reverse convertible bonds prior to maturity


In case of redemption by physical delivery of

shares, you may incur losses.

Capital redemption depends on the solvency



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How do reverse convertiblebonds react to

rising markets?

If the price of the underlying share rises, the price of

the bond rises as well because the redemption ofthe nominal value is becoming more likely.

stable markets?In stable markets, the investor benefits from the

fixed coupon and the redemption at nominal value at

the end of maturity. The stable price has very little

influence on the value of the bond, but the value of the

certificate rises as the remaining period to maturity

shortens.

falling markets?If the price of the underlying share falls, the price of

the bond falls as well because the redemption of thenominal value by means of physical delivery of the

share is becoming more likely. The fixed coupon is

paid out in any case.

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Payoff chart

Profit

Loss

0

Reverse convertible bond Underlying instrument

Initial value (strike)

Maximum yield (coupon)


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Protect bonds

What are Protect bonds?

With a Protect bond, you benefit from a fixed, attractive

rate of return above the current market level. The fixed

rate is independent of the performance of the underly-

ing instrument, which may be a share or an index.

Price declines of the underlying instrument are not

taken into account as long as the price does not hit or

fall below the barrier. This means that as investor, you

receive a positive return even in cases of moderately

falling prices. However, should the price of the underly-

ing instrument fall to or below the defined barrier,

redemption would be in accordance with the perfor-

mance of the underlying (at a maximum of 100%).

How do Protect bonds work?

With a Protect bond, you achieve positive returns in

rising and moderately falling markets. Redemption is at

par value at the end of maturity and depends on the

performance of the underlying instrument (index or

share).

If at the end of maturity the underlying is traded above

the barrier and the price has not fallen to or below the

barrier at any point in time during the life of the underly-

ing, redemption is at 100% of the invested capital at

the end of maturity.

If during the observation period the price has fallen to

or below the barrier at least once (even on an intraday

basis, irrespective of the closing price), redemption

depends on the performance of the underlying. In this

case the Protect bond is treated like a direct investment

in the underlying instrument, and the investors incurs

the according losses, if any.

If the price falls to or below the barrier and the underly-

ing is still traded above 100% at the end of maturity,

this positive performance is not taken into account, and

redemption is still at 100%.

The fixed rate of return does not depend on the perfor-

mance of the underlying and is paid out in any case.

Your benefits

A Protect bond is optimal for you if you believe that the

underlying value will basically increase but if at the

same time you envisage price fluctuations. Losses up

to (or in fact, down to) the barrier are not taken into

account at redemption.

Therefore you benefit from price movements both ways

and enjoy a higher degree of safety (prior to hitting the

barrier) than in case of a direct investment in the

underlying asset. On top of that you receive a fixed,

attractive rate of return regardless of the performance

of the underlying.


27/40

Your advantages

You receive a fixed, attractive rate of return

above the market level.

You can benefit from both rising and falling

prices. You are safe knowing that at the end of maturity

the Protect bond will never be worth less than

the underlying.

Your investment is shielded by a risk buffer.




result in a loss.

The risk buffer is limited by the barrier. Once the

price of the underlying falls to or below the

barrier (at least once, also on an intraday basis,

irrespective of the closing price) the safety

buffer is gone and you may incur a loss.

The return of Protect bonds is capped even if

the underlying achieves a better performance.

There is no capital guarantee and investors bear

the default risk of Erste Group Bank AG.

How do Protect bonds reactto

rising markets?If the price of the underlying asset rises (and has not

previously fallen to or below the barrier), the bond isredeemed at 100% and the fixed, attractive rate of

return is paid out.

stable markets?

If the price of the underlying instrument does not

change (and has not previously fallen to or below the

barrier), the bond is redeemed at 100% and the fixed,

attractive rate of return is paid out.

falling markets?

If during the life of the bond the price of the underlying

instrument falls to a value above the barrier, the bond

is redeemed at 100% and the fixed, attractive rate ofreturn is paid out.

If during the life of the bond the price of the underlying

instrument falls to or below the barrier the bond turns

into a direct investment, and losses are possible.

The fixed, attractive rate of return will still be paid out

regardless of the performance of the underlying

instrument.

26

27



28/40

Discount certificates

What are discountcertificates?

Discount certificate are debentures through which the

investor acquires an underlying instrument at a

discount to the direct investment. At the beginning ofthe term a cap is set which limits the potential return.

At the end of maturity the current price of the underly-

ing instrument is paid out, with the cap representing

the upper limit of the payout.

This is the advantage of discount certificates since

the buyer of a discount certificate buys the share at a

discount to its current price but gets the full share

price (limited by the cap) paid out at the end of

maturity, the investor can earn the so-called sideways

yield. Please keep in mind the respective exchange

ratio.

How do discount certificateswork?

The potential return from discount certificates is

capped. In return for this cap (and thus, for the

unlimited potential return), the investor gets to buy the

specific underlying instrument at a discount. This

means that you pay a lower price for the discount

certificate than you would pay for investing directly in

the underlying instrument. At the end of maturity the

current price of the underlying instrument is paid out

(while bearing in mind the exchange ratio), with the

cap representing the upper limit of the payout. The cap

is set at the beginning of the term, remains constant

over time, and marks the maximum return potential.

Your benefits

Discount certificates bring a little more safety to your

portfolio. The discount at the time of acquisition

means that you have a safety cushion and can make

attractive profits even if markets do not move. This isthe so-called sideways yield: the underlying instrument

has not moved, but you are still making a profit.

Your advantages

You may achieve a positive return at the end of

maturity even if the underlying instrument comes

out below the initial price (sideways yield).

The difference between the price of the under-

lying instrument and your initial acquisition price

serves as cushion against losses. Short maturities minimise your risk further and

allow you to change your investment strategy in

the medium term.


With discount certificates, your potential return

is capped.

If the underlying instrument falls, you may incur

losses.


tions are possible, which means that the sale

of the discount certificates prior to maturity may

result in a loss.




29/40

How do discount certificates

react to rising markets?

In rising markets discount certificates tend to rise as

well, with the cap marking the maximum possible

return. This means that in the case of rising markets,

the discount certificate gradually approaches its cap.

stable markets?

In stable markets, discount certificates rise over the

course of time while approaching the end of maturity.

This happens because the discount of the certificate

decreases until the end of maturity, at which point the

price of the certificate equals the price of the under-lying instrument. This is a prime example of the

sideways yield.

falling markets?

In falling markets, the certificates fall as well. How-

ever, since the discount certificate was bought at a

discount to the underlying instrument, the loss is lower

by the amount of the discount than it would be for the

underlying instrument.

28

29


Payoff chart

Profit

Loss

0

Discount certificate Underlying instrument

Maximum yield (cap)

Dis

coun

t(riskbu

ffer)


30/40

Express certificates

What are express certificates?

Express certificates offer the chance of high coupon

payments at reduced levels of risk. Even minor in-

creases or sideways movements in the price of the

underlying instrument trigger attractive return ratesthat exceed the market interest rate substantially.

On top of that the safety cushion that is part of the

structure offers partial protection against losses.

Express certificates tend to come with maturities of

one to four years.

How do express certificateswork?

Express certificates combine the chance of an

attractive yield on the redemption prior to totalmaturity with the protection provided by an integrated

safety cushion. The size of the redemption depends on

the development of the underlying instrument (share,

commodity, index).At the beginning of term, the initial value is set. Every

year on the reference date, this value is compared

with the current price of the underlying instrument. If

the price is at or above the value set initially, the

nominal value plus the fixed coupon is automatically

redeemed. If the price is below the initial value, the

term of the certificate is automatically extended by

one year.

The same procedure happens in the second year. If

the current price of the underlying instrument now

exceeds the initial value, the investor receives the

redemption in the form of the nominal value plus twice

the fixed coupon. Otherwise the term of the certificate

is extended by another year, and the investor has the

chance of receiving a triple coupon at the end of the

third year.

If the underlying instrument is also quoted below the

initial value at the end of the third year, but if it is

above the barrier, the certificate is redeemed at its

nominal value. The investor has not incurred anylosses in this case. It is only when the price falls

below the barrier that the investor incurs a loss. In this

case the redemption equals the actual development of

the underlying instrument.

Beginning of term

Initial value set

First reference day

Underlying instrument closes at orabove the initial value

Second reference day


Last reference day (n years)


Underlying instrument closes at orabove the barrier

Redemption at price of theunderlying instrument

Redemption of face value

100% plus 1 coupon


100% plus 2 coupons


100% plus 3 coupons


at 100%

Yes

Yes

Yes

Yes

No

No

No

No


31/40

30

31

Your benefits

Express certificates bring a little more safety and high

return opportunities to your portfolio. You can earn

attractive rates of return that substantially outperform

the market interest rate even if the price of theunderlying instrument rises only marginally or actually

moves sideways. The integrated safety buffer partially

protects your invested capital from losses.

How do express certificatesreact to

rising markets?

If the price of the underlying instrument rises, so does

the value of the certificate, since the redemption onthe reference day becomes more likely. On the refer-

ence day, the investor receives the fixed coupon and

the redemption at nominal value.

stable markets?

In stable markets the express certificate keeps a

constant value as well. If the price of the underlying

instrument on the reference day of comparison is

equal to or slightly above the initial value, the fixed

coupon and the redemption at nominal value is paid

out to the investor.

falling markets?In falling markets the value of the express certificate

falls as well. If the price of the underlying instrument

is below the initial value on the reference day of

comparison, the term of the certificate gets extended

by one year. If at the end of maturity the price of the

underlying instrument is again below the initial value

but above the barrier, the certificate is redeemed

without a loss at nominal value. However, if the price

of the underlying instrument is below the barrier at the

end of maturity, the value of the underlying instrument

is credited in the investors favour.

Your advantages

You have the chance to earn high coupon

payments.

The barrier protects your partially from losses.

Maturities tend to be short to medium-term.


Losses may be incurred if the price of the under-

lying instrument falls to or below the barrier.

The barrier protects your capital only partially.

Between issue date and maturity, price

fluctuations are possible, which means that the

sale of the express certificates prior to maturity






32/40

Turbo certificates

What are turbo certificates?

Turbo certificates allow you to benefit from market

fluctuations in both ways. Turbo long certificates benefit

from rising prices, turbo short certificates from falling

ones. Every incremental movement in the price of theunderlying instrument may lead to disproportionately high

returns due to the leverage effect. However, while the

unlimited upward potential is the upside of this particular

certificate, the risk of losing the entire capital invested

if the set barrier has been broken is its downside. In the

case of turbo long certificates the barrier is set below the

current price of the underlying instrument. Turbo short

certificates will have the barrier set above the current

price of the underlying instrument. Turbo certificates can

come with and without expiry date.

How do turbo certificateswork?

Turbo certificates offer the investor the chance to benefit

from price fluctuations of the underlying instrument at

a disproportionately high degree (leverage effect). If the

price of the underlying instrument rises, the price of

the turbo long certificate rises, and if the price of the

underlying instrument falls, the price of the turbo short

certificate rises according to the chosen leverage at a

disproportionate level. However, turbo certificates come

with the disadvantage that they become worthless, or

only a residual value may be paid out to the holder, oncethe price of the underlying instrument has reached a bar-

rier (or knockout threshold) set in advance.

The leverage effect results from the lower purchase price

of a turbo certificate relative to the direct investment

in the underlying instrument. The lower the purchase

price of the turbo certificate, the bigger the leverage. In

contrast to warrants, volatility has little or no influence on

how the price development of the underlying instruments

is reflected.

Turbo certificates have a strike (base) price and a

barrier.The intrinsic value of the turbo certificate isthe difference between the share price and the strike

price (turbo long certificate) or the difference between

the strike price and the share price (turbo short

certificate), respectively.

Your benefits

Turbo certificates are the ideal instruments for active,

market-oriented investors to benefit from short-term

market fluctuations with a leverage effect. There is a

vast array of cer tificates available both for rising (turbolong) and for falling (turbo short) prices. The turbo short

certificate is therefore one of the few instruments on the

equity market that gives you the chance to benefit from

falling markets.

Your advantages

Your return potential is disproportionately high

due to low capital investment and the leverage

effect.

You can participate in rising and falling markets. The influence of time value and volatility is

very low.


You may lose your entire investment.

The leverage effect may cause disproportion-

ately high losses




33/40

How do turbo certificatesreact to

rising markets?

In rising markets the price of turbo long certificates

rises, and the price of turbo short certificate falls ata disproportionately high level in accordance with the

leverage chosen.

stable markets?

In stable markets, the price of turbo certificates is

influenced by the financing costs. They fall over time

for turbo long certificates, which means that you may

incur losses, whereas the opposite, i.e. possible gains

due to rising financing costs, is the case for turbo

short cer tificates.

falling markets?

In falling markets the price of turbo long certificatesfalls, and the price of turbo short certificates rises at

a disproportionately high level in accordance with the

leverage chosen.

32

33

Leverage

Payoff chart

Profit

Loss

0

Turbo long certificate Turbo short certificateUnderlying instrument

Barrier (knock-out)

Strike price

Potential residual value


34/40

Warrants

What are warrants?

Warrants are securities that transfer the right (but not

the obligation) to the holder to buy or sell an underlying

instrument (for example, a share).

A call warrant gives you the right to buy the underlying

instrument at a later date for an agreed price (i.e. the

strike price).

A put warrant is just the opposite it gives you the

right to sell the underlying instrument at a later date for

an agreed price.

A warrant may be either exercised during the term

(American style) or at the end of it (European style).

Warrants may be traded on the stock exchange or over

the counter.

How do warrants work?

A call warrant gives you the right to buy the underlying

instrument at a later date for an agreed price. Of course

you will only want to exercise this right if the price of

the underlying instrument is higher than the strike price

(in the money). This way you could buy the underlying

instrument from the issuer at the strike price and sell it

on at the currently higher price on the stock exchange.

If the price of the underlying instrument is at (at the

money) or below (out of the money) the strike price,

it does not make sense to exercise the purchase right.In this case you would lose your invested capital.

The picture looks exactly the other way around for a put

warrant. Here you get the right to sell the underlying

instrument at a later date for an agreed price. You will

only want to exercise this right if the price of the under-

lying instrument is below the strike price

(in the money). In this case, you can buy the under-

lying instrument on the stock exchange and sell it to the

issuer at the higher strike price.

In practice, instead of the actual delivery of the under-

lying instrument the transaction tends to be settled in

cash by paying the difference between the price of the

underlying instrument on the day of exercise and the

strike price.

Warrants give the investor the chance to benefit at

disproportionately high rates from fluctuations in the

price of the underlying instrument. This leverage effect

is due to the relatively lower capital investment involved

in the purchase of a warrant in comparison with an

investment in the underlying instrument.

The price of a warrant is influenced by the following

variables during its term:

Price of the underlying instrumentThe current price of the underlying instrument and the

strike price set the intrinsic value of a warrant. The

intrinsic value of a call warrant is the positive differ-

ence between the price of the underlying instrument

and the strike price. For a put warrant, the intrinsic

value is defined as the positive difference between the

strike price and the price of the underlying instrument.

If the price of the underlying instrument rises/falls,

this movement will usually push up the price of thecall/put warrant.

Volatility

The volatility of the underlying instrument has a very

strong influence on the value of the warrant. Usually

an increase in volatility would also trigger an increase

in the value of the warrant, and vice versa.

Remaining time to maturity

The longer the remaining time to maturity of the

warrant, the better the chances of the underlying

instrument moving in the right direction for the war-

rant. With the remaining time to maturity shrinking, theso-called time value decreases as well, and equals zero

on the expiry date.

Risk-free market interest rate

The increase of the risk-free interest rate has a

positive effect on the value of a call warrant and a

negative one on the value of a put warrant.


35/40

Your benefits

Warrants allow you to benefit from market movements

at disproportionately high rates. There is a vast array

of warrants available for rising (calls) and falling (puts)

prices. A put warrant is one of the few instruments onthe equity market that gives you the chance to benefit

from falling markets.

How do warrants react to

rising markets?If the price of the underlying instrument rises, and

all other variables remain equal, the value of the call

rises and the value of the put falls disproportionately.

stable markets?

If the price of the underlying instrument remains stable,

the value of the warrant tends to decrease due to the

falling time value.

falling markets?

If the price of the underlying instrument falls, and all

other variables remain equal, the value of the call falls

and the value of the put rises disproportionately.

Your advantages

You participate in the price movements of the

underlying instrument at disproportionately high

rates.

You can participate in rising and falling markets.

You can protect your portfolio against short-term

price declines.


You may lose your entire investment

If you decide to exercise the right to buy or

sell the underlying instrument, you have to bear

in mind the fees and deadlines associated with

the transaction.



34

35

Leverage

Payoff chart

Profit

Loss

0

Call Put Underlying instrument

Strike price


36/40

Tax information for private individualssubject to taxation in Austria

Realised profits and income from bonds and structured

products bought from 1 April 2012 are subject to a tax

rate of 25%. The tax is withheld by the depositary bank

in Austria and will be withheld irrespective of the

holding period. For income from securities held outside

of Austria, the taxation is based on the individual tax

return.

For bonds and structured products, the period of

1 October 2011 to 31 March 2012 is also relevant.

Purchases within this period lead to the so-called

perpetuation of the speculative period. Profits realised

by sales from 1 April 2012 onwards are subject to

taxation on speculative gains (regardless of the holding

period), but at the reduced special tax rate of 25%,

which is applied within the framework of the individual

tax return.

From 1 April 2012 onwards, there will be no withhol-

ding tax credit or charge on accrued interest in case ofpurchases or sales between two coupon dates any-

more. However, in the case of buying before 1 April

2012 and selling from 1 April 2012 onwards, there

will be a pro-rata withholding tax credit (purchase) or

charge (sale), respectively.

The representation of the tax treatment of realized

profits on exchange and yields is based on the changes

by the Budgetbegleitgesetz 2011, the Abgabennde-

rungsgesetz 2011 and the Budgetbegleitgesetz 2012.

The entry into force of the new fiscal regulations is in

principle intended beyond that with 1.4.2012 (are

special entry into force regulations to consider alreadybefore).


37/40

Contacts and information

Internet:

www.produkte.erstegroup.com

http://erstegroupbank.onvista.de

E-Mail: [email protected]

Telefon: +43 (0)5 0100 - 83200

Reuters:ERSTE02

Traded on the following stock exchanges:

Vienna stock exchange, Stuttgart stock exchange

Directbroker for Austria:www.brokerjet.at

www.direktanlage.at

www.flatex.at

Directbroker for Germany:

www.dab-bank.dewww.cortalconsors.de

www.comdirect.de

www.flatex.de

www.ingdiba.de

www.onvistabank.de

www.sbroker.de

OTC: yes

For general information about the Austrian

certificate market, please visit:

www.zertifikateforum.at

36

37


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Notes

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This is a marketing publication. Our languages of communication are German

and English. This document is intended as source of additional information

for our investors and is based on the knowledge of the persons involved in its

preparation at the time of going to press. Our analyses and conclusions are of

a general nature and do not take into account the requirements of our investors

with regard to return, tax situation, or risk profile. Please note that the invest-

ment in securities implies risks along with the aforementioned oppor tunities.Information about previous performance does not guarantee future perfor-

mance. The full information (base prospectus, terms and conditions, customer

information with regard to the Austrian Securities Supervision Act [WAG] 2007)

relating to the products of Erste Group Bank AG is available for inspection at

the registered office of the issuer at Graben 21, 1010 Vienna, during regular

business hours.

These products are issued as continous issue and of fered to the public in

Austria and Germany. The exclusive legal basis of our products is the version of

the final terms and conditions as deposited with Commission de Surveillance du

Secteur Financier in Luxemburg that is accessible on the website of Erste Group

Bank AG (www.erstegroup.com). A base prospectus was prepared and approved

by the Commission de Surveillance du Secteur Financier (in accordance with

the regulations set forth in the Directive of the European Parliament and the

European Council 2003/71/EC and article 7, paragraph 4 of the Regulation of

the European Commission (EC) no. 809/2004). The base prospectus became

both the Austrian Financial market supervisory authority (FMA) and the German

Federal Institution for supervision of financial service (BAFIN) of the CSSF in ac-cordance with 8b of the Austrian capital market law and/or 17 exp. 3 of the

German security folder law notifies. The final terms are deposited with the CSSF.

The complete information (base prospectus, final terms and possible supple-

ments , WAG 2007 client information) for the product is available for inspection

at the registered office of the issuer at Graben 21, 1010 Vienna during regular

business hours. The information set forth in this publication is not binding. Only

the information given in the base prospectus (together with the final terms) is

binding in connection with the of fer of securities by the issuer. Please also take

note of the Austrian Securities Supervision Act (WAG) 2007 customer informa-

tion of your bank. The final terms are subject to Austrian right. Perhaps only a

limited contingent is available of this investment.

The financial product as well as the appropriate product documents may be

offered, sold, resold or supplied and/or published neither directly nor indi-

rectly natural and/or legal entities, who have their domicile/seat in the USA

(inclusively US-Person as in the regularization S under the Securities act

1933 idjgF defined).

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