Security of capital and rising interest rates: the new stepped-interest WohnbauAnleihe bond from Bank Austria Wohnbaubank AG

Starting on 3 March 2014, Bank Austria Wohnbaubank AG is to issue a new WohnbauAnleihe (residential construction bond) for security-oriented investors. The new “2%–4% Stufenzins-Wandelschuldverschreibung 2014–2026/1” stepped-interest convertible bonds have a term of twelve years. The interest rate is fixed for the whole term and is paid out annually on a fixed date – for the first time in 2015. Over its entire term, the WohnbauAnleihe bond will generate average annual interest of 2.75 per cent. The WohnbauAnleihe bond is denominated in units of EUR 100 with a minimum investment of EUR 1,000. Investors receive 100 per cent of the nominal value of their capital at the end of the term provided that they have not converted the bond.

An investment in WohnbauAnleihe bonds offers tax benefits
For Austrian private investors, interest earned on WohnbauAnleihe bonds is not subject to Austrian capital gains tax (KESt) up to an amount of 4 per cent annually. These favourable conditions result in higher net earnings compared to fully taxed bonds. For WohnbauAnleihe bonds purchased after 1 April 2012, capital gains on a sale are taxed at 25 per cent. In addition, WohnbauAnleihe bonds are covered by final taxation; in other words, they are not subject to income tax.
If investors require their money before maturity, the “2%–4% Stufenzins-Wandelschuldverschreibung 2014–2026/1” can be sold at the prevailing market price. However, it should be noted that the WohnbauAnleihe bond is subject to price fluctuations during the term. If the investment is not held until the end of the term, the investor may recover less than the nominal value.
With the changes to the tax-free earnings allowance introduced by the Austrian Tax Code Amendment Act (Abgabenänderungsgesetz) 2014, which was approved by Parliament on 24 February 2014, WohnbauAnleihe bonds are now the only securities product that can count in addition to tangible assets towards an institutional investor’s tax-free earnings allowance (for the first time in financial years ending after 30 June 2014). Although institutional investors do not qualify for the capital gains tax privilege, this change in the law will make additional financial resources available for residential construction.

Details on the bond issue:

2%–4% Stufenzins-Wandelschuldverschreibungen 2014-2026/1

Issuer: Bank Austria Wohnbaubank AG
First value date: On 28 February 2014, thereafter plus accrued interest
ISIN: AT000B074448
Term: 12 years, 28 February 2014 – 27 February 2026
(based on a nominal value of 100%): 2.75% p.a. on average if held to maturity
Years 1 to 4: 2.00% p.a.
Years 5 and 6: 2.25% p.a.
Years 7 and 8: 2.75% p.a.
Years 9 and 10: 3.50% p.a.
Years 11 and 12: 4.00% p.a.
Exempt from capital gains tax on presentation of a declaration of personal assets
Interest payments Due and paid out on 28 February each year; for the first time on 28 February 2015
Repayment/Redemption: On 28 February 2026 at the nominal value, provided that the investor has not converted the bond
Denomination: Nominal value of EUR 100 (minimum investment of EUR 1,000)
Issue price: Your advisor will be able to tell you the current issue price. The initial issue price has been set at 103.00.
Acquisition costs under new capital gains tax regulations: Current issue price minus 1% of the nominal value
Fees and charges: - Custodial fee of 0.235% p.a. plus 20% VAT on the market value (minimum of EUR 3.92 p.a. per securities position plus 20% VAT)
- 0.70% of the sale value (minimum: EUR 23.50).
Conversion right: Convertible bonds with a nominal value of EUR 1,000 can be converted into one profit-sharing certificate from the issuer, made out in the name of the bearer. This equates to a nominal conversion ratio of 10:1.
Conversion dates: Annually on 1 January; for the first time on 1 January 2015
Ordinary cancellation: Not possible
Taxation: – Interest exempt from capital gains tax for Austrian private investors.
– For WohnbauAnleihe bonds purchased after 1 April 2012, capital gains on a sale are taxed at 25 per cent.
– For natural persons residing in a member state of the European Union other than Austria, all interest income from these securities is subject to the 35% EU withholding tax pursuant to Directive 2003/48/EC of 3 June 2003.
– With effect from 1 January 2015, interest income within the meaning of the Austrian Act on EU Withholding Tax (EU-Quellensteuergesetz) will incur a limited tax liability of 25 per cent unless it was earned by persons not covered by this Act.

Please note that tax treatment depends on the investor’s personal circumstances, and that the tax advantages described may be eroded in whole or in part by future changes in the relevant laws.

This information regarding the WohnbauAnleihe bond “2%–4% Stufenzins-Wandelschuldverschreibung 2014–2026/1” is intended solely for informational purposes and does not represent investment advice or an investment or product recommendation. Neither is it an offer nor an invitation to buy or sell the bond described herein, or a solicitation to make such an offer. It is intended solely as introductory information and is not a substitute for advice provided on the basis of the investor’s individual circumstances and knowledge. Every capital investment involves risks, and the value of the bond can fluctuate during the term. Redemption of the WohnbauAnleihe bond at the nominal value occurs on the redemption date according to the bond terms and conditions. The bond may be sold before maturity at the prevailing market price. The prevailing market price may be less than the issue price, so it is possible that the investor may fail to recover the full invested amount.

This press release is not a prospectus as defined by the Austrian Capital Market Act (Kapitalmarktgesetz; KMG). A prospectus pursuant to § 7 KMG was published on 27 February 2014 in accordance with § 10 paragraph 3 item 2 KMG. The prospectus is available free of charge at the registered office of Bank Austria Wohnbaubank AG, Lasallestraße 1, A-1020 Vienna, and can also be obtained at all branches of UniCredit Bank Austria AG. An electronic version can be downloaded from http://wohnbaubank.bankaustria.at.

Enquiries: Bank Austria Press Office Austria
Martin Kammerer, Tel. +43 (0) 50505 – 52803;
E-mail: martin.kammerer@unicreditgroup.at