Österreichische Volksbanken-Aktiengesellschaft ... - Volksbank AG

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 IRR (Internal Rate of Return) may be either
fixed or variable. Changes in market interest rates have a substantially stronger impact on
the prices of Zero Coupon Notes than on the prices of ordinary notes, because the discounted
issue prices are substantially below par. If market interest rates increase, Zero Coupon
Notes can suffer higher price losses than other notes having the same maturity and a
comparable credit rating. Due to their leverage effect, Zero Coupon Notes are a type of investment
associated with a particularly high price risk.
Reverse Floating Rate Notes
The interest income from reverse floating rate notes ("Reverse Floating Rate Notes") is calculated
in reverse proportion to the reference rate: if the reference rate increases, interest
income decreases, whereas it increases if the reference rate decreases. Unlike the price of
ordinary Floating Rate Notes, the price of reverse Floating Rate Notes is highly dependent
on the yield of Fixed Rate Notes having the same maturity. Price fluctuations of reverse
Floating Rate Notes are parallel but are substantially sharper than those of Fixed Rate Notes
having a similar maturity. Investors are exposed to the risk that long-term market interest
rates will increase even if short-term interest rates decrease. In this case, increasing interest
income cannot adequately offset the decrease in the reverse floating note's price because
such decrease is disproportionate.
Fixed to Floating Rate Notes
Fixed to floating rate Notes ("Fixed to Floating Rate Notes") bear interest at a rate that the
Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a
fixed rate. The Issuer’s ability to convert the interest rate will affect the secondary market
and the market value of the Notes since the Issuer may be expected to convert the rate when
it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed
rate to a floating rate, the spread on the Fixed to Floating Rate Notes may be less favourable
than then prevailing spreads on comparable Floating Rate Notes relating to the same reference
rate. In addition, the new floating rate at any time may be lower than the interest rates
payable on other Notes. If the Issuer converts from a floating rate to a fixed rate, the fixed
rate may be lower than the then prevailing interest rates payable on its Notes.
Dual Redemption Notes
During the term of dual redemption Notes ("Dual Redemption Notes") a fixed coupon is
paid. On the date of redemption, the Issuer has the option to choose between a redemption
in Euro or another currency, the exchange rate between Euro and the foreign currency being
fixed at the beginning of the term. Therefore, changes in currency exchange rates may particularly
affect the yield of such Notes.
Reverse Convertible Notes
Reverse convertible notes ("Reverse Convertible Notes") provide the Issuer with the right to
convert Notes into shares or other equity like instruments. The Issuer may choose whether it
wants to redeem the Notes by way of cash settlement or whether it prefers to exercise the
option. The investor is therefore also exposed to the risk of direct equity investments.
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