für Erste Ihr Group Sanierungsprojekt structured products.

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1 Der Higher praktische return, higher Ratgeber safety. für Erste Ihr Group Sanierungsprojekt bonds and structured products.

2 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 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

3 Value conservation Portfolio optimisation Leverage 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 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

4 An overview of Erste Group A strong partner Erste Group was incorporated in 1819 as Erste österreichische Spar-Casse. In 1997 it was floated 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 financial service providers in Central and Eastern Europe. Additional international offices in New York (USA), London (UK), and Hong Kong ensure that Erste Group can provide its services to customers in all important financial centres of the world. With its broad range of services including wealth formation, financing, 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 For information and real-time prices of our products, please visit: Czech Republic Ukraine Slovakia Austria Hungary Slovenia Croatia Romania Bosnia and Herzegovina Serbia Montenegro Macedonia

5 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 opportunities and what risks are associated with any particular product and what product is best suited for investors. Higher return vs. higher safety: It s 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. 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 Risk Leverage Turbo certificates Warrants 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 Return

6 Mortgage and municipal bonds What are mortgage and municipal bonds? Mortgage and municipal bonds are secured, fixedincome 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. 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 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 and municipal bonds work? Mortgage and municipal bonds generate interest (coupon) payments that are fixed 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 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 to providing for your children.

7 Value conservation 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. 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. Details you should be aware of stable interest rates? In the case of stable interest rates, the price of mortgage and municipal bonds does not change. Between issue date and maturity, price fluctuations 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. 06 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. 07

8 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 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 satisfied from the bankrupt s estate before all other creditors. When buying bank debentures, you should pay attention to the rating of the issuing credit institution. 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 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 institution guarantees 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. Details you should be aware of Between issue date and maturity, price fluctuations 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).

9 Value conservation How do bank debentures react to... rising interest rates? Bank debentures with fixed interest rate fall when interest rates are rising. If you sell this debenture prior to 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 interest 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.

10 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. 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 product. 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 be substantially 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. Details you should be aware of Depending on the specific 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 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). 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.

11 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 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

12 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 five 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. 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. 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 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 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.

13 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 five 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 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. Details you should be aware of 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)

14 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 benefits 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.

15 Value conservation 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. Details you should be aware of 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. 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 underlying shows a better performance during the observation period

16 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 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 structured bonds 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 offer 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 any given 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. Details you should be aware of 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 Erste Group Bank AG (default risk).

17 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

18 Foreign currency bonds What are foreign currency bonds? 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 foreign currency. 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. 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 attractive coupon. Redemption is at 100% at the end of maturity and is in foreign currency. You can benefit from an appreciating foreign currency vis-à-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). During the life of the bond, price fluctuations 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.

19 Portfolio optimisation How do foreign currency bonds react to rising interest rates? The price of foreign currency bonds with fixed-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, 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-rate coupons 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 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

20 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 for example the ATX. This way your investment is not influenced 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 certificates work? 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. This means 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 certificates 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 reflects the price movements of the underlying index 1:1. Issuers basically charge no load or management fee on index certificates.

21 Portfolio optimisation 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. Details you should be aware of Falling markets translate into losses for index certificates. An index certificate can never outperform the underlying instrument. Redemption depends on the solvency of Erste Group Bank AG (default risk). Payoff chart How do index certificates react to rising markets? Rising markets mean proportionately rising index certificates. If the ATX increases for example from 4,000 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 of the index certificate will also decline by 10% from EUR 40 to Profit 0 Linear participation Loss Index certificate Uderlying instrument

22 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 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. How do bonus certificates work? The bonus level, which determines the bonus payment, is set above the current price of the underlying instrument at the issue of the certificate. The barrier is 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). Depending 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 benefits With 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 certificates also bring a little more safety to your portfolio.

23 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). 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 fluctuations are possible, which means that the sale of the bonus certificates prior to maturity may result in a loss. Capital redemption depends on the solvency of Erste Group Bank AG (default risk). How do bonus certificates 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) Payoff chart Profit Unlimited profit Bonus payment (risk buffer) 0 Capped profit potential Value of the underlying instrument at issue date Barrier Loss Bonus certificate Underlying instrument

24 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 underlying 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. 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 fixed 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. 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. Details you should be aware of The potential return is limited to the coupon. Between issue date and maturity, price fluctuations 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). 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 fixed coupon is paid out in this case too.

25 Portfolio optimisation Payoff chart Profit How do reverse convertible bonds react to 0 Maximum yield (coupon) Initial value (strike) 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. Loss Reverse convertible bond Underlying instrument 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 the nominal value by means of physical delivery of the share is becoming more likely. The fixed coupon is paid out in any case

26 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 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 defined barrier, redemption would be in accordance with the performance 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 underlying, 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 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 fixed rate of return does not depend on the performance 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 Portfolio optimisation 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. Details you should be aware of During the life of the bond, price fluctuations 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. 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 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 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 fixed, attractive rate of return will still be paid out regardless of the performance of the underlying instrument

28 Discount certificates What are discount certificates? Discount certificate 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 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 certificates work? 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 is the 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 underlying 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. Details you should be aware of With discount certificates, your potential return is capped. If the underlying instrument falls, you may incur losses. Between issue date and maturity, price fluctuations are possible, which means that the sale of the discount certificates prior to maturity may result in a loss. Redemption depends on the solvency of Erste Group Bank AG (default risk).

29 Portfolio optimisation Payoff chart Profit Maximum yield (cap) 0 Loss Discount (risk buffer) Discount certificate Underlying instrument 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 underlying instrument. This is a prime example of the sideways yield. falling markets? In falling markets, the certificates fall as well. However, 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.

30 Express certificates What are express certificates? Express certificates 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 certificates tend to come with maturities of one to four years. How do express certificates work? Express certificates 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). 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 Redemption of face value 100% plus 1 coupon Redemption of face value 100% plus 2 coupons Redemption of face value 100% plus 3 coupons 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 fixed coupon is automatically redeemed. If the price is below the initial value, the term of the certificate is automatically extended by one year. Yes Yes Yes Yes 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 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.

31 Portfolio optimisation 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 the underlying instrument rises only marginally or actually moves sideways. The integrated safety buffer partially protects your invested capital from losses. 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. 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 fluctuations are possible, which means that the sale of the express certificates prior to maturity may result in a loss. Redemption depends on the solvency of Erste Group Bank AG (default risk). How do express certificates react to rising markets? If the price of the underlying instrument rises, so does the value of the certificate, since the redemption on the reference day becomes more likely. On the reference 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 investor s favour

32 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 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 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 certificates work? 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, once the price of the underlying instrument has reached a barrier (or knockout threshold ) set in advance. 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 certificates available both for rising (turbo long) 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. Details you should be aware of You may lose your entire investment. The leverage effect may cause disproportionately high losses Redemption depends on the solvency of Erste Group Bank AG (default risk). 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 is the differ ence 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.

33 Leverage Payoff chart Profit 0 Loss Barrier (knock-out) Potential residual value Strike price Turbo long certificate Turbo short certificate Underlying instrument How do turbo certificates react to rising markets? In rising markets the price of turbo long certificates rises, and the price of turbo short certificate falls at a 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 certificates. falling markets? In falling markets the price of turbo long certificates falls, and the price of turbo short certificates rises at a disproportionately high level in accordance with the leverage chosen

34 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 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 underlying instrument on the stock exchange and sell it to the issuer at the higher 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 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 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 the call/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 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. In practice, instead of the actual delivery of the underlying 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.

35 Leverage 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 on the equity market that gives you the chance to benefit from falling markets. 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 Erste Group Bank AG (default risk). 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 Payoff chart Profit 0 Strike price Loss Call Put Underlying instrument