I This document constitutes the base prospectus of ... - Volksbank AG

the investor and part of the capital invested by the investor may be lost, so that the investor in such case
would not receive the total amount of the capital invested. In addition, a future yield expected by the investor
may be lost and investors that have received monies through an early redemption and choose to reinvest
such monies may be able to do so only in securities with a lower yield than the redeemed Securities.
Floor
If a Security includes a floor, the interest rate payable in respect of such Security cannot be lower than the
floor. In general, such a floor is advantageous for the investor. However, since a floor is an option, there is
the exercise price risk and, if there are changes in interest rates or in volatility, substantial price fluctuations
in the Securities may occur.
Cap
If a Security includes a cap, the cap states the maximum for the interest rate payable in respect of such
Security. Since the cap is an option, there is the exercise price risk and, if there are changes in interest rates
or in volatility, substantial price fluctuations in the Securities may occur. In particular, the yield potential
limited by the cap may limit the price increase of the Security, if the market interest rate exceeds the level
of the cap.
Target coupon
A target coupon is a coupon which is accumulated during the term of the Security. It leads to an early redemption
of the Security, as soon as the coupon has reached the specified amount. If a Security includes a
target coupon, the investor bears the risks of early redemption described above, in addition to the stated
risks. Further, due to the mechanics of the target coupon, the investor might, over a longer period of time,
receive little or no interest at all, whereby the time of the Securitys redemption could be delayed (also see
Cash flow risk above).
Subordination
If in the case of any particular tranche of Notes the relevant Final Terms specifies that the Notes are Subordinated
Notes and therefore subordinated obligations of the Issuer, and the Issuer is liquidated or declared
insolvent and a winding up is initiated, it will be required to pay the holders of senior debt and meet its
obligations to all its other creditors (including unsecured creditors but excluding any obligations in respect
of subordinated debt) in full before it can make any payments on the relevant Subordinated Notes. If this
occurs, the Issuer may not have enough assets remaining after these payments to pay amounts due under the
relevant Subordinated Notes. Subordinated Notes may pay a higher rate of interest than comparable Notes
which are not subordinated however, there is a real risk that an investor in Subordinated Notes will lose
all or some of his investment should the Issuer become insolvent.
Risks of individual product categories
Fixed Rate Notes
Investors in Fixed Rate Notes are exposed to the risk that subsequent changes in interest rates may adversely
affect the value of the Notes. The interest rate on the capital markets for comparable issues usually
changes on a daily basis, while the nominal interest rate of a Fixed Rate Note is fixed for the entire term of
the Note. Therefore, the price of Fixed Rate Notes typically changes in the opposite direction from the
market interest rate.
Floating Rate Notes
Floating Rate Notes are Notes on which interest is payable with a variable coupon, and which are redeemed
at par. The interest income on Floating Rate Notes cannot be determined in advance. Due to varying interest
income, investors are not able to determine the definite yield to be received from Floating Rate Notes at
the time they are purchased.
Zero Coupon Notes
Zero Coupon Notes do not include any coupon. The difference between the redemption price and the issue
price constitutes the yield, in lieu of periodic interest payments. Therefore, the investor receives only one
payment: the sales proceeds of a sale prior to maturity or the redemption amount at maturity. The internal
rate of return (the IRR) may be either fixed or variable. Changes in market interest rates have a substan-
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