Replication Products (ETFs and ETNs) – Track the Market

Exchange Traded Funds

These products are for less active investors who wish to gain cost effective access to a specific region, sector, theme, asset class or commodity. As a ‘tracking’ product, the price of the product will rise or fall in line with the value of the asset that it tracks. These products are typically suited for the longer term investor who is looking to build a low cost, diversified portfolio.

Established under French law, Lyxor ETFs are open ended mutual investment funds and are UCITS compliant. These funds track a diversified index with at least 5 holdings whichmakes them particularly useful for investors wishing to gain broad exposure to the main constituents of a specific country, theme, sector or fixed income strategy in one simple trade.

Lyxor ETFs track their indices through the use of a form of derivative called a ‘performance swap,’which is a contractural agreement negotitated over-the-counter (OTC) between two parties, and a basket of large cap international stocks, which are held as collateral. This collateral must be worth at least 90% of the value of the fund. This means that if the bank who is responsible for the performance swap, and therefore the ETF’s performance ever defaulted, the collateral can be sold to re-pay investors. In the case of Lyxor ETFs, the fund’s collateral is managed daily in an effort to cover the whole fund’s value.

Most of the protections provided by the UK regulatory system generally do not apply to these funds. Investors should note that holdings in this product will not be covered by the provisions of the FSCS, nor by any similar scheme in France

Exchange Traded Notes

Exchange Traded Notes are a type of unsecured, unsubordinated debt security and are particularly useful for investors with a specific view on a single underlying stock or commodity. A key advantage of many ETNs is the ‘Quanto’ feature which can eliminate currency risk in an investment like Gold, which is denominated in US Dollars, and would normally expose investors to the GBP / USD exchange rate. For a small fee, Quanto ETNs give investors the ability to invest in foreign markets in GBP so you don’t have to worry about exchange rates moving against you.

Unlike the Lyxor ETFs however, ETNs do not hold any collateral to protect investors. This means that in the unlikely event of Societe Generale defaulting, investors can lose some or all of their investment.

Societe Generale Commodity Exchange Traded Notes Brochure

Leveraged Products – Enhance the Market

Leveraged products are designed for the more sophisticated investor who wants the opportunity to enhance their returns from rising, flat or falling markets, but doesn’t want to risk more than they invest.

Super10s

As a fixed risk, fixed return and fixed term product, Super10s were designed to be simple. Investors can enhance returns from a major market by simply deciding whether it will Stay High, Stay Low, or stay within a range for the whole of the one to six month investment term.

At the end of the investment term when the Super10 expires, it will simply pay back £10 per unit invested, provided the underlying asset has never touched a pre-defined barrier level. If the barrier level is touched at any point, the Super10 terminates, and you will lose your initial investment immediately. However, as with all Listed Products, you cannot lose more than you invested.

Societe Generale Super10s Brochure

Turbos

Turbos are short term leveraged investment products, which offer the chance to enhance returns from the rising or falling value of a global index or single stock with the safety of a built in stop loss. At expiry, Turbos will automatically generate a payout based on how far above (Long Turbos), or below (Short Turbos) the asset price has moved in relation to a pre-determined price level called the Strike Price.

The price will move throughout the trading day and you can buy or sell to capitalize on short term market movements. A key feature of all Turbos is the Knock Out Level, which is a built in Stop Loss safety mechanism that causes the turbo to expire immediately if that level is ever touched. This ensures that you can never lose more than you invested.

Societe Generale SG Turbos Brochure

Covered Warrants

The major difference between Covered Warrants and Turbos is that Covered Warrants do not have a knock out (stop loss) feature. This means that if markets go against you, you have the chance for the asset to recover, as long as there is still time before the warrant expires. Covered Warrants are more sophisticated trading tools and offer more confident traders the chance for higher levels of gearing, but equally, more risk.

Societe Generale has the largest range of covered warrants in the UK, covering a huge variety of single stocks, indices, commodities and currencies. Like Turbos, there are two types: call warrants for rising markets, and put warrants for falling markets. On the strike date, when the Covered Warrant expires, it generates a payout if the underlying asset price is above (call) or below (put) that strike price. If not, your Covered Warrant simply expires worthless. You can’t lose more than you invest.

Societe Generale Covered Warrants Brochure

What are the risks of investing in Listed Products?

Prior to any investment in these products, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us, both in web page and in the Pricing Supplement of the product available on this website.

If you decide that you would like to invest in these products, you must complete, sign and return the Covered Warrants and Other Complex Instruments Risk Warning Notice documentation.

This means that you may find it difficult or impossible in certain circumstances to sell the covered warrant or may be offered a price less than what you paid for it.