Der praktische Ratgeber Higher return, higher safety. fr IhrGroup Sanierungsprojekt Erste bonds and structured products.

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-efcient way. Bonds and structured products are two of the most important portfolio modules. Bonds offer you a xed or variable interest rate and tend to make up the more conservative part of the portfolio. With structured products you can benet from both rising and falling markets. This brochure is meant to give you an overview of the specic advantages and the essential 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

Value conservation

Portfolio optimisation

Leverage

Overview Value conservation

An overview of Erste Group Product overview

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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 certificates 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 to taxation in Austria 36 Customer service Contacts and information 37

An overview of Erste Group

A strong partner
Erste Group was incorporated in 1819 as Erste sterreichische Spar-Casse. In 1997 it was oated and listed on the Vienna Stock Exchange with the strategy of expanding its retail business to Central and Eastern Europe. Since then, Erste Group has acquired more than ten banks and has stepped up the number of customers from 600,000 to 17 million over the years. 95% of these customers live in EU countries and can therefore rely on the advantages of a stable legal framework. In terms of customers and balance sheet total, Erste Group has developed into one of the largest nancial service providers in Central and Eastern Europe. Additional international ofces in New York (USA), London (UK), and Hong Kong ensure that Erste Group can provide its services to customers in all important nancial centres of the world. With its broad range of services including wealth formation, nancing, and insurance, the strategic focus of Erste Group is on retail customers and small and medium-sized businesses. Approximately 17 million customers already rely on the comprehensive range of products and appreciate the tailor-made service on the highest level. Decades of experience in the market, a vast pool of resources, and direct market access make Erste Group a competent and reliable partner that will continue to offer you innovative products in the future. You can retrieve the rating of Erste Group Bank AG under www.erstegroup.com/en/Investors/Ratings. For information and real-time prices of our products, please visit: www.produkte.erstegroup.com

Ukraine Czech Republic Slovakia Austria Slovenia Hungary Romania Croatia Bosnia and Herzegovina Serbia

Montenegro
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Macedonia

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 nd it difcult 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 rst glance what opportunities and what risks are associated with any particular product and what product is best suited for investors. 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

Higher return vs. higher safety: Its your choice

The following graph shows the relationship between risk and return. Because one thing is for sure: the higher the risk, the higher the possible return, and the lower the risk, the more conservative the expected return.

 Positive aggregate return in realistic market scenarios

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Risk

Leverage
Turbo certicates Warrants

Portfolio optimisation
Foreign currency bonds Index certicates Bonus certicates Reverse convertible bonds Protect bonds Discount certicates Express certicates

Value conservation
Mortgage and municipal bonds Bank debentures Guaranteed products Best Garant products Performance Garant products Structured bonds

Return

Mortgage and municipal bonds

What are mortgage and municipal bonds?
Mortgage and municipal bonds are secured, xedincome debentures. Their special feature is the fact that on the one hand the issuing bank guarantees the safety 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.

How do mortgage and municipal bonds work?

Mortgage and municipal bonds generate interest (coupon) payments that are xed by amount and schedule. At the end of maturity the investor receives 100% of his money back. The invested capital is secured by collateral. Given the high degree of safety, the interest rate is moderate.

Your benets
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 nances and want a precise picture of your assets on the basis of a xed, constant stream of income at every point in time. Mortgage and municipal bonds are therefore suited to providing for your children.

Regulated by public law and 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 ofliens. 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 ow 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).

Value conservation

Your advantages
 You benet 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.

How do mortgage and municipal 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 prot.

Details you should be aware of

 Between issue date and maturity, price uctuations 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.

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Bank debentures
What are bank debentures?
Senior bonds are xed or oating-rate debentures issued by banks, are xed or oating-rate issued by banks, savings banks, and other credit institutions in order to nance their lending business. The maturities of 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 satised from the bankrupts estate before all other creditors. When buying bank debentures, you should pay attention to the rating of the issuing credit institution.

Your benets
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 institution guarantees the interest payments and the redemption at nominal value. Bank debentures offer additional benets in that they balance out the higher risk of other investments in the portfolio.

Your advantages
 You benet from attractive interest payments throughout the entire term of the bond. The payment dates are xed in advance.  You enjoy a high degree of safety.

How do bank debentures 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 xed 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.

Details you should be aware of

 Between issue date and maturity, price uctuations 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 and depends on the solvency of Erste Group Bank AG (default risk).

Value conservation

How do bank debentures react to

... rising interest rates? Bank debentures with xed interest rate fall when interest rates are rising. If you sell this debenture prior to maturity, you may record a loss. Bank debentures with oating interest rates, on the other hand, benet from rising interest rates. Given that these bonds (oaters) 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 xed interest rate increase when interest rates are falling. If you sell these debentures prior to maturity, you may record a prot. Falling interest rates, on the other hand, have a negative impact on bank debentures with oating interest rate. Given that these bonds (oaters) 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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Guaranteed products
What are guaranteed products?
In addition to our Best Garant products we also offer a number of other guaranteed products, like Performance Garant products. Those, too, focus on the full protection 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.

Your benets
The focus of this group of products are the capital guarantee and the manageable maturity of up to ve or six years. On top of that, capital guarantee products offer you a chance of surplus returns that may be substantially above the market yield.

Your advantages
 You have the chance of attractive returns with or without minimum payouts.  You benet from capital guarantee at the end of maturity.  You participate in the development of domestic and international markets.

How do guaranteed products work?

If the underlying instrument goes the expected way, you participate in its performance 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 p roduct. Depending on the structure, you may also benet from sideways or negative movements of the underlying instrument on top of the return you may have earned from its price increases.

Details you should be aware of

 Depending on the specic product, you may participate only partially or up to a certain cap in the performance of the underlying instrument.  Between issue date and maturity, price uctuations 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).

Value conservation

How do guaranteed products 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 benet from rising, sideways, and falling movements in the markets, which is why you would have to look into the structuring of the specic product.

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Best Garant products

What are Best Garant products?
The essential features of the Best Garant products are the capital guarantee, the medium-term maturity of up to ve years, and the annual minimum interest payout during 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 instrument. In return the issuer grants you the capital guarantee. If the under lying 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 benet from sideways or negative movements of the underlying instrument on top of the return you may have earned from its price increases.

Your benets
The focus of this group of products is the capital guarantee 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.

How do Best Garant products work?

If the underlying instrument goes the expected way, you participate in its performance 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.

Value conservation

Your advantages
 You have the chance to receive attractive returns.  Your capital invested is fully protected.  During maturity you receive a minimum coupon or 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 ve years.

How do Best Garant products react to

rising, stable, or falling markets? Depending on the structuring of the product, the price development hinges on the underlying instrument. Best Garant products may benet from rising, sideways, and falling movements in the markets, which is why you would have to look into the structuring of the specic product.

Details you should be aware of

 Between issue date and maturity, price uctuations 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).
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Performance Garant products

What are Performance Garant products?
The essential features of the Performance Garant products are the capital guarantee and the participation in the performance of an underlying instrument such as shares, indices, or funds. The maximum participation may be capped. The maturity is medium to longterm.

How do Performance Garant products 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 benets
The Performance Garant products offer a capital guarantee and direct participation in the underlying. This means you have the chance of surplus returns that may be substantially above the market yield.

Value conservation

Your advantages
 You can benet 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.

How do Performance Garant products react to

rising, stable, or falling markets? The performance of the Performance Garant products is based on the respective underlying. If the price of the underlying rises, you participate in the development 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.

Details you should be aware of

 During the life of the bond, price uctuations may occur, and selling prior to maturity may result in a loss.  The price uctuations 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.

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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 development of an interest rate or a spread. Structured bonds are attractive alternatives to conventional debt securities, because their terms can be dened exibly. The structure of the bonds may result in attractive earning opportunities. Floating-rate notes which pay a xed minimum coupon are structured bonds, too.

Your benets
Structured bonds offer you above-average return opportunities if the expected yield scenarios come through. The exible terms allow you to benet from the opportunities arising on the interest market at any given time.

Your advantages
 You prot 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.

How do structured bonds work?

The maturity, repayment and interest rates (coupons) of a structured bond are dened by the individual terms of issue. The exibility of the structure makes it possible for the bond to take advantage of current opportunities on the bond market and offer attractive yields.

Details you should be aware of

 Price uctuations 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 Erste Group Bank AG (default risk).

Value conservation

How do structured bonds react to

rising, stable, or falling interest rates? The maturity, repayment and interest rate payments of a structured bond are determined by the individual terms of issue.

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Foreign currency bonds

What are foreign currency bonds?
Foreign currency bonds offer xed 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 foreign currency.

Your benets
A foreign currency bond is optimal for you, if you want to invest your capital in a currency other than Euro for a specied period of time. In return for tying up your capital for that period, you receive an attractive coupon. Redemption is at 100% at the end of maturity and is in foreign currency. You can benet from an appreciating foreign currency vis--vis the Euro. Portfolios tend to contain foreign currency bonds for reasons of diversication, 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 xed.  You may benet from an appreciating foreign exchange rate relative to the Euro.

How do foreign currency bonds 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.

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).  During the life of the bond, price uctuations may occur, and selling prior to maturity may result in a loss.  The Euro investor bears the currency risk, since the bond is traded in foreign currency.

Portfolio optimisation

How do foreign currency bonds react to

rising interest rates? The price of foreign currency bonds with xed-rate coupons falls when the foreign currency interest rates are 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, benet from rising interest rates, since the interest rate of these bonds (oaters) 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 xed-rate coupons rises when interest rates are generally falling. Selling the foreign currency bond prior to maturity may result in a prot. Foreign currency bonds with variable coupons, on the other hand, are negatively affected by falling interest rates, since the interest rate of these bonds (oaters) 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. 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 certicates
What are index certicates?
With an index certicate, you can directly benet from the development of the underlying instrument. It allows you to diversify the risk, because you do not invest in one specic security, but in an index such as for example the ATX. This way your investment is not inuenced by the uctuations 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 certicate than if you hold specic shares. Index certicates may be issued on performance indices as well as on price indices.

How do index certicates work?

Index certicates 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. This means that if for example the ATX is at 3,700 points, one index certicate with an exchange ratio of 1:100 to the ATX costs EUR 37. Incidentally, index certicates are a cost-efcient form of investment in that they come with no load or management fee.

Your benets
If you are convinced of future price rises of an index, index certicates are a cost-efcient way of investing in the underlying instrument. The certicate reects the price movements of the underlying index 1:1. Issuers basically charge no load or management fee on index certicates.

Portfolio optimisation

Your advantages
 You benet directly from the development of the underlying instrument. This means that in case of a rising market, your potential gains are not capped.  Index certicates are a cost-efcient form of investment.  They are an easy way for you to diversify the risk.

How do index certicates react to

rising markets? Rising markets mean proportionately rising index certicates. If the ATX increases for example from 4,000 to 4,400 points, i.e. by 10%, the value of the index certicate 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 certicate will not move either. falling markets? Falling markets mean proportionately falling index certicates. If the ATX declines for example from 4,000 to 3,600 points, i.e. by 10%, the value of the index certicate will also decline by 10% from EUR40 to 36.
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Details you should be aware of

 Falling markets translate into losses for index certicates.  An index certicate can never outperform the underlying instrument.  Redemption depends on the solvency of Erste Group Bank AG (default risk).

Payoff chart
Prot

Loss
Index certicate Uderlying instrument

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Bonus certicates
What are bonus certicates?
Bonus certicates combine three advantages in one product. The investor benets from rising prices of the underlying instrument, receives a sizeable bonus payment, and, in the case of falling prices, is protected 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. 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 certicate, 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). Depending on whether the price of the underlying instrument is below or above the issue price, the investor suffers a loss or makes a prot.

How do bonus certicates work?

The bonus level, which determines the bonus payment, is set above the current price of the underlying instrument at the issue of the certicate. The barrier is set below the initial value. If the specic certicate 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.

Your benets
With bonus certicates 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 certicates also bring a little more safety to your portfolio.

Portfolio optimisation

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).

How do bonus certicates react to

rising markets? In rising markets, the investor receives the bonus payment at the end of maturity. If the certicate 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 certicate follows the performance of the underlying instrument until the end of maturity (i.e. losses are possible)

Details you should be aware of

 The return may be capped.  If the price of the underlying instrument falls to or below the barrier, losses are possible.  Between issue date and maturity, price uctuations are possible, which means that the sale of the bonus certicates prior to maturity may result in a loss.  Capital redemption depends on the solvency of Erste Group Bank AG (default risk).

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Payoff chart
Prot
Unlimited prot Bonus payment (risk buffer)

Capped prot potential Value of the underlying instrument at issue date Barrier

Loss
Bonus certicate Underlying instrument

Reverse convertible bonds

What are reverse convertible bonds?
Reverse convertible bonds are debentures with a very attractive interest rate. Given that the bond is linked to a share (underlying), coupons are substantially above market 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 convertible bonds with more shares as underlying instruments. These multi-cash or multi-reverse convertible bonds tend to pay a higher coupon.

Your benets
Investors who do not expect any strong movements in a share can receive a high, xed 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, xed coupon that is above the market interest rate  Reverse convertible bonds tend to have short maturities.  The xed coupon offers you a risk buffer.

How do reverse convertible bonds 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 xed at the beginning of the term, the reverse convertible 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 maturity. Regardless of the nature of redemption, a xed coupon is paid out in this case too.

Details you should be aware of

 The potential return is limited to the coupon.  Between issue date and maturity, price uctuations are possible, which means that the sale of the reverse convertible bonds prior to maturity may result in a loss.  In case of redemption by physical delivery of shares, you may incur losses.  Capital redemption depends on the solvency of Erste Group Bank AG (default risk).

Portfolio optimisation

Payoff chart
Prot
Maximum yield (coupon)

How do reverse convertible bonds react to

rising markets? If the price of the underlying share rises, the price of the bond rises as well because the redemption of the nominal value is becoming more likely. stable markets? In stable markets, the investor benets from the xed coupon and the redemption at nominal value at the end of maturity. The stable price has very little inuence on the value of the bond, but the value of the certicate 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 the nominal value by means of physical delivery of the share is becoming more likely. The xed coupon is paid out in any case.
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Initial value (strike)

Loss
Reverse convertible bond Underlying instrument

Protect bonds
What are Protect bonds?
With a Protect bond, you benet from a xed, attractive rate of return above the current market level. The xed rate is independent of the performance of the underlying 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 underlying instrument fall to or below the dened barrier, redemption would be in accordance with the performance of the underlying (at a maximum of 100%). 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 underlying 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 xed rate of return does not depend on the performance of the underlying and is paid out in any case.

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 underlying, redemption is at 100% of the invested capital at the end of maturity.

Your benets
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 uctuations. Losses up to (or in fact, down to) the barrier are not taken into account at redemption. Therefore you benet 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 xed, attractive rate of return regardless of the performance of the underlying.

Portfolio optimisation

Your advantages
 You receive a xed, attractive rate of return above the market level.  You can benet 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.

How do Protect bonds react to

rising markets? If the price of the underlying asset rises (and has not previously fallen to or below the barrier), the bond is redeemed at 100% and the xed, 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 xed, 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 xed, attractive rate of return 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 xed, attractive rate of return will still be paid out regardless of the performance of the underlying instrument.
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Details you should be aware of

 During the life of the bond, price uctuations may occur, and selling prior to maturity may 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.

Discount certicates
What are discount certicates?
Discount certicate are debentures through which the investor acquires an underlying instrument at a discount to the direct investment. At the beginning of the term a cap is set which limits the potential return. At the end of maturity the current price of the underlying instrument is paid out, with the cap representing the upper limit of the payout. This is the advantage of discount certicates since the buyer of a discount certicate 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.

Your benets
Discount certicates 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 prots even if markets do not move. This is the so-called sideways yield: the underlying instrument has not moved, but you are still making a prot.

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.

How do discount certicates work?

The potential return from discount certicates is capped. In return for this cap (and thus, for the unlimited potential return), the investor gets to buy the specic underlying instrument at a discount. This means that you pay a lower price for the discount certicate 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.

Details you should be aware of

 With discount certicates, your potential return is capped.  If the underlying instrument falls, you may incur losses.  Between issue date and maturity, price uctuations are possible, which means that the sale of the discount certicates prior to maturity may result in a loss.  Redemption depends on the solvency of Erste Group Bank AG (default risk).

Portfolio optimisation

Payoff chart
Prot
Maximum yield (cap)

0
(ri sk bu f fe r)

Loss
Discount certicate Underlying instrument

Di

sc

ou

nt

How do discount certicates react to

rising markets? In rising markets discount certicates tend to rise as well, with the cap marking the maximum possible return. This means that in the case of rising markets, the discount certicate gradually approaches its cap. stable markets? In stable markets, discount certicates rise over the course of time while approaching the end of maturity. This happens because the discount of the certicate decreases until the end of maturity, at which point the price of the certicate equals the price of the under lying instrument. This is a prime example of the sideways yield. falling markets? In falling markets, the certicates fall as well. However, since the discount certicate 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.

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Express certicates
What are express certicates?
Express certicates offer the chance of high coupon payments at reduced levels of risk. Even minor increases or sideways movements in the price of the underlying instrument trigger attractive return rates that 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 certicates tend to come with maturities of one to four years.
Beginning of term Initial value set

First reference day Underlying instrument closes at or above the initial value No Second reference day Underlying instrument closes at or above the initial value No Last reference day (n years) Underlying instrument closes at or above the initial value No Underlying instrument closes at or above the barrier No Redemption at price of the underlying instrument

Yes

Redemption of face value 100% plus 1 coupon

Yes

Redemption of face value 100% plus 2 coupons

Yes

Redemption of face value 100% plus 3 coupons

How do express certicates work?

Express certicates combine the chance of an attractive yield on the redemption prior to total maturity 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).

Yes

Redemption of face value at 100%

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 xed coupon is automatically redeemed. If the price is below the initial value, the term of the certicate 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 xed coupon. Otherwise the term of the certicate 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 certicate is redeemed at its nominal value. The investor has not incurred any losses 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.

Portfolio optimisation

Your benets
Express certicates 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 the underlying instrument rises only marginally or actually moves sideways. The integrated safety buffer partially protects your invested capital from losses.

How do express certicates react to

rising markets? If the price of the underlying instrument rises, so does the value of the certicate, since the redemption on the reference day becomes more likely. On the reference day, the investor receives the xed coupon and the redemption at nominal value. stable markets? In stable markets the express certicate 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 xed coupon and the redemption at nominal value is paid out to the investor. falling markets? In falling markets the value of the express certicate 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 certicate 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 certicate 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.

30 31

Details you should be aware of

 Losses may be incurred if the price of the underlying instrument falls to or below the barrier.  The barrier protects your capital only partially.  Between issue date and maturity, price uctuations are possible, which means that the sale of the express certicates prior to maturity may result in a loss.  Redemption depends on the solvency of Erste Group Bank AG (default risk).

Turbo certicates
What are turbo certicates?
Turbo certicates allow you to benet from market uctuations in both ways. Turbo long certicates benet from rising prices, turbo short certicates from falling ones. Every incremental movement in the price of the underlying instrument may lead to disproportionately high returns due to the leverage effect. However, while the unlimited upward potential is the upside of this particular certicate, the risk of losing the entire capital invested if the set barrier has been broken is its downside. In the case of turbo long certicates the barrier is set below the current price of the underlying instrument. Turbo short certicates will have the barrier set above the current price of the underlying instrument. Turbo certicates can come with and without expiry date.

Your benets
Turbo certicates are the ideal instruments for active, market-oriented investors to benet from short-term market uctuations with a leverage effect. There is a vast array of certicates available both for rising (turbo long) and for falling (turbo short) prices. The turbo short certicate is therefore one of the few instruments on the equity market that gives you the chance to benet 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 inuence of time value and volatility is very low.

How do turbo certicates work?

Turbo certicates offer the investor the chance to benet from price uctuations 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 certicate rises, and if the price of the underlying instrument falls, the price of the turbo short certicate rises according to the chosen leverage at a disproportionate level. However, turbo certicates come with the disadvantage that they become worthless, or only a residual value may be paid out to the holder, once the price of the underlying instrument has reached a barrier (or knockout threshold) set in advance. The leverage effect results from the lower purchase price of a turbo certicate relative to the direct investment in the underlying instrument. The lower the purchase price of the turbo certicate, the bigger the leverage. In contrast to warrants, volatility has little or no inuence on how the price development of the underlying instruments is reected. Turbo certicates have a strike (base) price and a barrier.The intrinsic value of the turbo certicate is the differ ence between the share price and the strike price (turbo long certicate) or the difference between the strikeprice and the share price (turbo short certicate), respectively.

Details you should be aware of

 You may lose your entire investment.  The leverage effect may cause disproportion ately high losses  Redemption depends on the solvency of ErsteGroup Bank AG (default risk).

Leverage

Payoff chart
Prot

How do turbo certicates react to

Barrier (knock-out)
Potential residual value

rising markets? In rising markets the price of turbo long certicates rises, and the price of turbo short certicate falls at a disproportionately high level in accordance with the leverage chosen. stable markets? In stable markets, the price of turbo certicates is inuenced by the nancing costs. They fall over time for turbo long certicates, which means that you may incur losses, whereas the opposite, i.e. possible gains due to rising nancing costs, is the case for turbo short certicates. falling markets? In falling markets the price of turbo long certicates falls, and the price of turbo short certicates rises at a disproportionately high level in accordance with the leverage chosen.

Strike price

Loss
Turbo long certicate Underlying instrument Turbo short certicate

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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. Warrants give the investor the chance to benet at disproportionately high rates from uctuations 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 inuenced by the following variables during its term: Price of the underlying instrument The 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 difference between the price of the underlying instrument and the strike price. For a put warrant, the intrinsic value is dened 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 the call/put warrant. Volatility The volatility of the underlying instrument has a very strong inuence 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 warrant. With the remaining time to maturity shrinking, the so-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.

How do warrants work?

A call warrant gives you the right to buy the under lying 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 under lying instrument at a later date for an agreed price. You will only want to exercise this right if the price of the underlying 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.

Leverage

Your benets
Warrants allow you to benet 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 on the equity market that gives you the chance to benet 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.
34 35

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.

Details you should be aware of

 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.  Redemption depends on the solvency of ErsteGroup Bank AG (default risk).

Payoff chart
Prot

0
Strike price

Loss
Call Put Underlying instrument

Tax information for private individuals subject to taxation in Austria

Realised prots 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. Prots 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 withholding tax credit or charge on accrued interest in case of purchases 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 prots on exchange and yields is based on the changes by the Budgetbegleitgesetz 2011, the Abgabennderungsgesetz 2011 and the Budgetbegleitgesetz 2012. The entry into force of the new scal regulations is in principle intended beyond that with 1.4.2012 (are special entry into force regulations to consider already before).

Contacts and information

Internet: www.produkte.erstegroup.com http://erstegroupbank.onvista.de E-Mail: produkte@erstegroup.com 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.atex.at Directbroker for Germany: www.dab-bank.de www.cortalconsors.de www.comdirect.de www.atex.de www.ingdiba.de www.onvistabank.de www.sbroker.de OTC: yes For general information about the Austrian certicate market, please visit: www.zertikateforum.at

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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 prole. Please note that the investment in securities implies risks along with the aforementioned opportunities. Information about previous performance does not guarantee future performance. 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 ofce of the issuer at Graben 21, 1010 Vienna, during regular business hours. These products are issued as continous issue and offered to the public in Austria and Germany. The exclusive legal basis of our products is the version of the nal 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 nancial service (BAFIN) of the CSSF in accordance with 8b of the Austrian capital market law and/or 17 exp. 3 of the German security folder law noties. The nal terms are deposited with the CSSF. The complete information (base prospectus, nal terms and possible supplements , WAG 2007 client information) for the product is available for inspection at the registered ofce 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 nal terms) is binding in connection with the offer of securities by the issuer. Please also take note of the Austrian Securities Supervision Act (WAG) 2007 customer information of your bank. The nal terms are subject to Austrian right. Perhaps only a limited contingent is available of this investment. The nancial product as well as the appropriate product documents may be offered, sold, resold or supplied and/or published neither directly nor indirectly 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 dened). Misprints and errors excepted. Last revised: Dezember 2011

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