Daily Leverage PRODUCTS STRIKE WITH 5 TIMES MORE POWER

Transcription

1 NOVEMBER 2014 LISTED PRODUCTS Daily Leverage PRODUCTS STRIKE WITH 5 TIMES MORE POWER THIS COMMUNICATION IS DIRECTED AT SOPHISTICATED RETAIL CLIENTS IN THE UK

2 Risk warning Contents Who should invest? Daily Leverage Products are Securitised Derivatives* suitable for UK sophisticated retail and professional investors who have a good understanding of the underlying market and product characteristics. In particular, it is important that you appreciate at the outset that these are leveraged products which carry a high level of risk. You could lose all your invested capital when investing in these products. Counterparty risk Daily Leverage Products are issued by Societe Generale Acceptance. If Societe Generale Acceptance were to fail to make payments due, you could lose some or all of your investment. *A Securitised Derivative (SD) is a security listed on the London Stock Exchange and issued by a bank via an Issuing Programme which is approved by the UK Listing Authority. Final Terms are published for each SD detailing its specific characteristics and its pay-off at maturity. The product features given in the Final Terms are prescribed by the approved Base Prospectus. 3 KEY TERMS YOU WILL COME ACROSS in THIS BROCHURE 4 Making more from the markets Each day 5 INTRODUCING DAILY LEVERAGE PRODUCTS 6 THE POWER OF LEVERAGE 7 DAILY LONG 5s 8 DAILY Short 5s 9 COMPOUNDED DAILY RETURNS 10 RISK MANAGEMENT FEATURES 11 TRADING DAILY LEVERAGE PRODUCTS 12 FREQUENTLY ASKED QUESTIONS 13 WHAT RISKS SHOULD I BE AWARE OF? 13 SECONDARY MARKET 14 Societe Generale Listed Products 15 Important Information 2 16

3 Key Terms you will come across in this brochure Term Close-to-Close performance Costs & Fees Daily Leverage Product Daily Long 5 Daily Short 5 EPIC Code Final Terms Description The change in closing price on one Trading Day to the closing price the following day. Investors holding their position overnight will incur a Commission and Gap Premium. These will be calculated daily and deducted from the price of the Daily Leverage Product. See page 11 for more information. A Daily Long 5 or Daily Short 5. A product which is designed for investors looking to gain a return of five times the positive daily performance of the FTSE 100 TR. A product which is designed for investors looking to gain a return of five times the negative daily performance of the FTSE 100 TR. The unique code you need to quote to your broker to buy or sell the product. The legal documentation of the Daily Leverage Product. FTSE 100 TR The Underlying Indices used for the Daily Leverage Products are linked to the performance of the FTSE 100 TR Index. The composition of the FTSE 100 TR Index is the same as the FTSE 100 Index, except that the FTSE 100 TR Index automatically re-invests the dividends paid by the constituent companies back into the index, whereas the FTSE 100 Index does not. See page 12 for more information. X5 Daily Leveraged RT FTSE 100 Total Return Index The X5 Daily Leveraged RT FTSE 100 Total Return Index is the Underlying Index for the Daily Long 5s, which is independently calculated by FTSE. As a Net Return Index, dividends are re-invested into the Index minus any withholding tax. X5 Daily Short Strategy RT FTSE 100 Gross TR Index The X5 Daily Short Strategy RT FTSE 100 Gross TR Index is the Underlying Index for the Daily Short 5s, which is independently calculated by FTSE. As a Gross Return Index, dividends are re-invested into the Index gross without taking into account any withholding tax. Maturity Leverage Parity Spread (Bid/Offer) Trading Day Underlying Index The date that the Daily Leverage Products will expire. At Expiry investors will automatically receive a payout based on the final value of the Underlying Index. The amount by which the Daily Leverage Products price moves in relation to a 1% change in the price of the FTSE 100 TR. For example, if a Daily Leverage Product has a gearing of 5x, a 1% move in the FTSE 100 TR would result in a 5% move in the price of the Daily Leverage Product before Costs & Fees. Parity describes the number of units of a Daily Leverage Product that you would need to buy to gain exposure to one unit of the Underlying Index. Daily Long 5s have a Parity of 100 and Daily Short 5s have a Parity of 50. By scaling down the Daily Leverage Product s exposure to the Underlying Index in this way we can reduce the minimum investment size to 100 per unit at launch, whilst maintaining the same performance as the Underlying Index in percentage terms. There is always a spread between the buy (Ask) and sell (Bid) price for Daily Leverage Products. As with shares, investors always buy at the higher price (Ask price) and sell at the lower price (Bid price). Under normal market conditions, (see Secondary Market), Societe Generale Option Europe provides Bid/Ask spreads throughout the regular LSE Trading Day to provide liquidity. The London Stock Exchange (LSE) Trading Day is from 8:00am to 4.30pm. Daily Leverage Products can be bought or sold at any time during LSE market hours in normal market conditions. The Underlying Index for the Daily Long 5 is the X5 Daily Leveraged RT FTSE 100 TR Index. The Underlying Index for the Daily Short 5 is the X5 Daily Short Strategy RT FTSE 100 Gross TR Index. 3 16

4 MAKING MORE OF THE MARKETS EACH DAY Many investors focus on the long term, building value in their portfolio by buying and holding a diverse selection of stocks, funds or commodities. Endless research will confirm the sense of this strategy. Indeed, looking at the 5 year performance of the main equity indices in the table below, stock markets have performed well. However, if we shorten the time horizon to the past year, we can see a clear problem: equities have traded somewhat sideways during this period. This certainly doesn t mean that markets haven t moved in this period, or that buy and hold isn t the right thing to do long term. It just means that the bulls have been largely matched by the bears over the past year, and perhaps investors need to supplement their portfolio with some shorter, more tactical trading. The table below looks at the average daily change in 4 major indices on a Close-to-Close basis over a 5 year period ending on November 6th, For example, the FTSE 100 TR moved an average of 0.78% in one Trading Day. For day traders this daily movement of the FTSE 100 TR can provide a valuable source of profit. Daily Leverage Products provide the opportunity to boost returns by multiplying the daily performance of the FTSE 100 by a factor of 5. However, the potential for such high returns does bring a higher level of risk. If the FTSE 100 TR moves against you, your losses will be multiplied by 5 as well. Index 5 year performance 1 year performance Average daily change on a CLOSE-TO-CLOSE basis FTSE 100 TR 53.39% 1.42% 0.78% Eurostoxx 50 TR 10.91% 1.40% 0.90% S&P 500 TR 89.96% 14.73% 0.76% MSCI Emerging Markets TR 5.87% -2.44% 0.79% Source Bloomberg, November 7th, FOR ILLUSTRATIVE PURPOSES ONLY. THIS IS NOT A RECOMMENDATION. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RETURNS. 4 16

5 INTRODUCING DAILY LEVERAGE PRODUCTS Daily Leverage Products are designed to multiply the daily performance of the FTSE 100 TR by a factor of five. They typically have a maximum Investment Term of 3 years, but are designed to be traded on an intra-day basis throughout the Trading Day. In order to provide the amplified returns, a Daily Leverage Product tracks the performance of a leveraged Underlying Index. This Index is independently calculated by FTSE, and aims to multiply the daily return of the FTSE 100 TR on a Close-to-Close basis by a factor of five. If the FTSE 100 TR moves by 1% from its closing price the previous day, the value of the Underlying Index will move by 5%. The price of a Daily Leverage Product will rise or fall in line with the Underlying Index that it tracks. For rising or falling markets When your time horizon is just a single Trading Day you need the flexibility to trade both rising and falling markets. With Daily Leverage Products you can do just that. If you re a bullish investor and think that the FTSE 100 TR is set to rise over the Trading Day you can select a Daily Long 5, which will rise in value by 5% for every 1% rise in the FTSE 100 TR, subject to applicable Costs & Fees. See page 11 for more information. However, if you re more bearish and expect the FTSE 100 TR to fall, you could select a Daily Short 5 which will rise in value by 5% for every 1% fall in the FTSE 100 TR before Costs & Fees. In either case, if you call the markets wrong, your Daily Leverage Product will amplify losses in the same way as it will profits, and your entire capital is at risk. Efficient trading Because Daily Leverage Products are listed on the London Stock Exchange (LSE), they trade like a share throughout LSE market hours in a regular stockbroker Dealing Account, Individual Savings Account or Self Invested Pension Plan (SIPP). Compound returns It is important to note that the Underlying Indices used in the Daily Leverage Products are re-set daily. This means that the performance of the Underlying Index on any given day is based on how far the FTSE 100 TR has risen or fallen from the level it closed at the day before. The next day, the process starts again from the new closing level of the FTSE 100 TR the day before. As a result, over periods of more than one day, profits or losses are compounded, and the performance of the Underlying Index, and therefore the Daily Leverage Product will deviate from five times the actual performance of the FTSE 100 TR. This is why Daily Leverage Products are best suited to intra-day trading. We look at this in more detail on page 9. Rising Market Daily LONG 5 Falling Market Daily SHORT

6 The power of leverage Markets don t typically move too far in just one day, so buying and selling exposure to the FTSE 100 TR directly can be a limited endeavour unless you are trading in sizeable quantities, particularly once trading costs are taken into account. For those with a more modest trading budget, Daily Leverage Products can provide the opportunity to gear up your exposure by five. This means that a 1,000 position in a Daily Leverage Product can provide the same exposure as 5,000 invested directly in the FTSE 100 TR. We call this Leverage, and it simply means that every 1% move in the FTSE 100 TR translates to a 5% move in the price of your Daily Leverage Product. The chart below illustrates what this means to your investment by looking at the daily performance of the FTSE 100 TR over a 5 year period up to November 7th, The black line shows the daily performance of the FTSE 100 TR and the brown line shows this same performance, multiplied by a factor of five. To give you an example of how these products work, let s consider again the fact that the FTSE 100 TR moves on average 0.78% per day*. If you purchased a Daily Long 5 and the FTSE 100 TR rose by 0.78% from the closing value the day before, you could make a profit of 3.9% on your initial investment. Know your risk Obviously, in the event that the markets had moved the other way, you would have equally made a loss of 3.9% of your investment. Importantly, unlike other leveraged products such as CFDs and spread bets, you can never lose more than you invest, which means you can manage your risk precisely, and know exactly what you are letting yourself in for. Daily returns of the FTSE 100 TR and FTSE 100 TR multiplied by 5 (06/11/09-07/11/14) Daily % Change in Index FTSE 100 TR x 5 FTSE 100 TR /11/ /03/ /07/ /11/ /03/ /07/ /11/ /03/ /07/ /11/ /03/ /07/ /11/ /03/ /07/ /11/2014 Time Source Bloomberg / Societe GENERALE. FOR ILLUSTRATIVE PURPOSES ONLY. THIS IS NOT A RECOMMENDATION. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE RETURNS. *Source Societe Generale / Bloomberg, NOVEMBER 7TH,

7 DAILY LONG 5s Daily Long 5s are for the bullish investor who believes that the FTSE 100 TR is set to rise over the Trading Day, and wants the opportunity to enhance their returns. As a long investment, a Daily Long 5 will rise by 5% for every 1% that the FTSE 100 TR has risen above the previous day s closing price before Costs & Fees. It does this by tracking the performance of the X5 Daily Leveraged RT FTSE 100 NET TR Index (FTSE 100 DL5), which is created and calculated by FTSE. Product overview NAME Daily Long 5 Issuer Underlying Index Benchmark Index Leverage Societe GENERALE ACCEPTANCE The X5 Daily Leveraged RT FTSE 100 Net TR Index FTSE 100 TR INDEX x5 Maturity 18/09/15 ISSUE price per unit How does a Daily Long 5 work? The best way to demonstrate how a Daily Long 5 works is to look at an example. Let us assume that markets are about to open on Tuesday. On Monday the FTSE 100 TR closed at a level of 5,000, the FTSE 100 DL5 closed at a level of 22,000, and the Daily Long 5 closed at 100 per unit. As you believe that the FTSE 100 TR is set to rise on Tuesday, you purchase 10 units of the Daily Long 5 at a total cost of 1,000. You would execute this trade through your stockbroker in exactly the same way as you would buy a share. If later that day the FTSE 100 TR had increased by 1% to a level of 5,050, the value of the FTSE 100 DL5 would have increased by 5% (1% x 5) to a level of 23,100. Because the Daily Long 5 simply tracks the FTSE 100 DL5, it too would have risen by 5% before Costs & Fees. Fees only apply on investments that are held overnight or longer. See page 11 for a full explanation of the Costs & Fees associated with trading Daily Leverage Products. With the potential for such high returns, you also face a high level of risk. If the FTSE 100 TR was to decrease by 1% in a day, the value of the Daily Long 5 would also decrease by 5%. EPIC Code / ISIN UKL5 / CWN8138Y4548 Parity 100 Parity describes the number of units of a Daily Long 5 needed to gain exposure to one unit of the Underlying Index. This scaling factor allows us to reduce the minimum investment size to 100 per unit at launch, whilst maintaining the same performance as the Underlying Index in percentage terms. Illustrative returns from a Daily Long 5 The following illustrative returns are for an investment of 10 units of the Daily Long 5, which are bought when the FTSE 100 DL5 Index was trading at 22,000 and sold on the same Trading Day. % Change in FTSE 100 TR FROM THE PREVIOUS CLOSE CHANGE IN THE FTSE 100 DL5 Value of the FTSE 100 DL5 Value of the Daily Long 5 per unit TOTAL Profit or loss (Incl. AMC) -3.0% -15.0% 18, % -10.0% 19, % -5.0% 20, % 5.0% 23, % 10.0% 24, % 15.0% 25, Source: SG Listed PRODUCTS. for illustrative purposes only. This is not a recommendation 7 16

8 Daily Short 5s Daily Short 5s are for the bearish investor who believes that the FTSE 100 TR is set to fall over the Trading Day, and wants the opportunity to enhance their returns. As a Short investment, a Daily Short 5 will rise by 5% for every 1% that the FTSE 100 TR has fallen below the previous day s closing price before Costs & Fees. It does this by tracking the performance of the X5 Daily Short Strategy RT FTSE 100 Gross TR Index (FTSE 100 DS5), which is created and calculated by FTSE. Product overview NAME Daily Short 5 Issuer Underlying Index Benchmark Index Leverage Societe GENERALE ACCEPTANCE The X5 Daily Short Strategy RT FTSE 100 Gross TR Index FTSE 100 TR Index x5 How does a Daily Short 5 work? Again, the best way to demonstrate how a Daily Short 5 works is to look at an example. Let us assume that markets are about to open on Wednesday. On Tuesday the FTSE 100 TR closed at a level of 5,000, the FTSE 100 DS5 closed at a level of 1,400 and the Daily Short 5 closed at 100 per unit. As you believe that the FTSE 100 TR is set to fall on Tuesday, you purchase 10 units of the Daily Short 5 for a total cost of 1,000. If later that day the FTSE 100 TR had fallen by 1% to a level of 4,950 the value of the FTSE 100 DS5 would have increased by 5% (1% x 5) to a level of 1,470. Again, because the Daily Short 5 simply tracks the performance of the FTSE 100 DS5, it would also rise by 5% before fees. See page 11 for a full explanation of the Costs & Fees associated with trading Daily Leverage Products. Again, the potential for high returns brings risk. If the FTSE 100 TR were to increase by 1% in a day, the value of the Daily Short 5 would also decrease by 5%. Maturity 18/09/15 ISSUE price per unit EPIC Code / ISIN UKS5 / CWN8138Y4704 Parity 50 Parity describes the number of units of a Daily Short 5 needed to gain exposure to one unit of the Underlying Index. This scaling factor allows us to reduce the minimum investment size to 100 per unit at launch, whilst maintaining the same performance as the Underlying Index in percentage terms. Illustrative returns from a Daily Short 5 The following illustrative returns are for an investment of 10 units of the Daily Short 5, which are bought when the FTSE 100 DS5 Index was trading at 1,400 and sold on the same Trading Day. % Change in FTSE 100 TR from the previous close CHANGE IN THE FTSE 100 DS5 VALUE OF THE FTSE 100 DS5 Value of the Daily Short 5 per unit TOTAL PROFIT or loss (Incl. AMC) 3.0% -15.0% 1, % -10.0% 1, % -5.0% 1, % 5.0% 1, % 10.0% 1, % 15.0% 1, Source: SG Listed Products. for illustrative purposes ONLY. THIS IS NOT A RECOMMENDATION. 8 16

9 COMPOUNDED DAILY RETURNS Daily Leverage Products are not designed for investors looking to buy and hold their position for long periods. This is because the 5 times leverage is applied to the performance of the FTSE 100 TR over a single Trading Day, so when the markets open again the following Trading Day, the process starts again. Let s assume that we buy a Daily Long 5 when the FTSE DL5 closed the previous day at a level of 22,000. If on the day of purchase the FTSE 100 TR closes 2% lower than it had the previous day, the FTSE DL5 would close 10% lower at a level of 19,800. If the following day the FTSE 100 TR rallied and closed up 2% on the previous closing price, the FTSE DL5 would be up 10% at the end of the day. However, the 10% gain would be based on the starting level of 9,000. So although over two days the FTSE 100 DL5 had fallen 10% one day and recovered 10% the following day, the FTSE 100 DL5 would be down 1% at 21,780, equating to a loss before Costs & Fees of 1% on the Daily Long 5. The scenarios below demonstrate how this compounding effect can work for you or against you. In our negative compounding example below the FTSE 100 TR returns to its starting level after 4 days but the Daily Long 5 is 2.9% down. A continued fall in the FTSE 100 TR would of course create a larger compound loss on the Daily Long 5. However, in the positive compounding case, the compounding effect is positive and the Daily Long 5 returns 5.56 times the performance of the FTSE 100 TR over 4 days (51.8% / 9.3%). Illustrative compounded returns NEGATIVE COMPOUNDING FTSE 100 TR Daily Long 5 POSITIVE COMPOUNDING FTSE 100 TR Daily Long 5 +1% 5,000 DAY % +3% 5,000 DAY % 5,050 DAY ,150 DAY % -20% +2% +10% 4,848 DAY ,253 DAY % 5,000 DAY % +4% 5,463.1 DAY % +0.0% -2.9% Over 3 days the FTSE 100 TR returns 0% but the Daily Long 5 is down 2.9% +9.3% +51.8% Over 3 days the FTSE 100 TR returns 9.3% but the Daily Long 5 is up 51.8% For illustration purposes only. The FTSE 100 TR indicative levels and UKL5 indicative prices are rounded to the closest integer. Negative compounding: illustrative performance of FTSE 100 TR Vs Daily Long Positive compounding: illustrative performance of FTSE 100 TR Vs Daily Long FTSE 100 TR Daily Long 5 80 DAY 1 DAY 2 DAY 3 DAY FTSE 100 TR Daily Long 5 80 DAY 1 DAY 2 DAY 3 DAY 4 FOR ILLUSTRATIVE PURPOSES ONLY. THE DATA HAS BEEN REBASED TO 100 TO ENABLE COMPARISON BETWEEN THE FTSE 100 TR AND THE DAILY LONG

10 RISK MANAGEMENT FEATURES As we have already seen, Daily Leverage Products multiply the daily rise or fall of the FTSE 100 TR by a factor of five. This does mean that both profits and losses are amplified by five. To offer some protection against extreme movements, Daily Leverage Products include two important features; an Air Bag mechanism to slow the rate of loss during the day, and a Gap Premium which limits your risk overnight. The Air Bag mechanism Both the Long and Short Leveraged Indices include an Air Bag mechanism, which is designed to slow the rate of loss on the Index in extreme market conditions. The Air Bag comes into effect if the Underlying Index loses 75% of its value in one Trading Day. If this does occur, the Air Bag triggers an intraday re-set of the Underlying Index. The reset takes place over a one minute period. Following the reset, the performance of the Underlying Index is based on the level that the FTSE 100 TR was trading at when the Air Bag was triggered. This is designed to reduce the impact of any subsequent fall. To illustrate how this works, let s assume that you bought a Daily Long 5 on Tuesday and the FTSE 100 TR had closed on the Monday at a level of 5,000. If on Tuesday, by 11:00 am, the FTSE 100 TR had dropped 15% this would translate into a 75% loss on the FTSE 100 DL5 Index, leaving it at a level of 5,500. At this point the Index is reset and the performance of the Index is now based on the new level of 5,500. Therefore, if the FTSE 100 TR was to fall another 5% from 5,500 when the markets closed, the loss to the FTSE 100 DL5 would be 25% of 5,500, meaning it would close at a level of 4,125. Without the Air Bag, the additional 5% fall in the FTSE 100 TR would have left the FTSE 100 DL5 and the Daily Long 5 worthless. This is because the total loss on the FTSE 100 TR of 20% would equate to a 100% loss on the FTSE 100 DL5. Gap Premium Although the Air Bag mechanism can slow the rate of loss dramatically during the day, it cannot protect you from market close on one day, to market open the following day. This is why Daily Leverage Products include a Gap Premium, which is essentially like a form of insurance that is embedded in the price of the product to limit your risk from extreme market movements overnight. Without the Gap Premium, if the FTSE 100 TR was to open more than 20% against you, you could lose more than your initial investment as the product would lose more than 100% of its value. However, because of the hedging paid for by the Gap Premium, the worst that can happen is that your Daily Leverage Product is worth nothing. You cannot lose more than you invest. The Gap Premium is a cost that is calculated daily and deducted from the product at market close. If you trade out before the end of the day no Gap Premium is paid. An illustration of the Air Bag mechanism on the FTSE 100 DL5 Index 26,400 22,000 FTSE 100 DL5 Index Index Level 17,600 13,200 8,800 4, ,500 FTSE 100 DL5 Index without the Air Bag 4, ,400-8,800 Market open 11:00am 4:00pm Source Societe Generale. For illustrative purposes only. Time LEVEL OF THE FTSE 100 TR % CHANGE IN THE FTSE 100 TR FROM PREVIOUS CLOSE % CHANGE IN THE FTSE 100 DL5 LEVEL OF THE FtsE 100 DL5 Market CLOSE DAY 1: 5,000 0% 0% 22,000 22,000 MARKET OPEN DAY 2: 5,000 0% 0% 22,000 22,000 11:00 AM 4,250-15% -75% 5,500 5,500 4:00 PM 4, % -25% 4,125 0 LEVEL OF THE FTSE 100 DL5 (NO AIR BAG) 10 16

11 TRADING DAILY LEVERAGE PRODUCTS One of the key points about Daily Leverage Products, and any other Listed Product for that matter, is that you are buying an actual investment product. That product is listed with live pricing publicly available on the LSE and trades in a similar way to a share in your existing stockbroker account, ISA or SIPP. This means that you are seeing the same price as any other investor, whether they are a private trader, or a financial institution. It also gives you the flexibility to buy or sell at any time during LSE market hours (8:00am to 4.30pm). Highly regulated trading Transparency and flexibility are not the only benefits to trading an LSE listed product. These products are also governed by the rules of the LSE, which include: Live prices must be provided throughout the Trading Day in normal market conditions on the LSE. All investors see the same price Minimum tradable volumes to ensure liquidity Maximum Bid (the price at which you can sell) / Ask (the price at which you buy) spread of 2 pence or 10% of the Ask price to ensure that trading costs are kept to a minimum. At Societe Generale we aim to maintain the spread of the Underlying Asset to keep costs to a minimum The result of this double layer of regulation by the FCA and the LSE is that you can trade more confidently, knowing that you are buying and selling a real investment product, which must comply to strict trading standards set to protect the interests of investors, and ensure robust, consistent and sustainable trading conditions. Trading Costs & Fees Investors trading in and out of a Daily Leverage Product in the same day will simply pay a dealing commission to their broker, and a small spread on the Bid & Ask prices, i.e. a small difference between the price at which you could buy - the `Ask price, and the price at which you could sell - the `Bid price. Gap Premium is also incurred by investors wishing to hold their position over night. It is calculated daily according to the prevailing level of volatility, and displayed on the product pages of each Daily Leverage Product at www. sglistedproducts.co.uk. Gap Premium is essentially a form of insurance that is embedded in the price of the product to limit your risk from extreme market movements overnight. Without the Gap Premium, if the FTSE 100 TR was to open more than 20% against you, you could lose more than your initial investment as the product would lose more than 100% of its value. If you trade intra-day no Gap Premium is paid. The impact of Costs & Fees Over time the combined cost of the Commission and Gap Premium will affect the relationship between a change in price of the Underlying Index, and the resulting change in the Daily Leverage Product. We call this relationship the Ratio. When a new Daily Leverage Product is launched the Ratio is one. However, over time the Gap Premium and Commission will together erode the value of the product. This combined with a fall in value of the Underlying Index can lead to a scenario where the Commission and Gap Premium account for more than 20% of the value of the Daily Leverage Product. In this scenario the Daily Leverage Product will not effectively replicate the performance of the Underlying Index. Should this occur, Societe Generale will adjust the Ratio to ensure that the Daily Leverage Product can maintain the same performance as the Underlying Index. However, Investors who wish to hold their position over night will incur a Commission of 0.50% per year in the same way as they would in a fund. The Commission is charged daily and taken from the value of the product at a pro-rated rate of % per day

12 FREQUENTLY ASKED QUESTIONS Who are Daily Leverage Products suited to? Daily Leverage Products are designed for the sophisticated investor who is looking for the potential to make enhanced returns from the daily movement of the FTSE 100 TR. Daily Leverage Products carry a high degree of risk and it is important to fully understand your exposure to risk before investing. See page 13 for more information. Prior to trading you will need to complete a Complex Instruments Appropriateness Assessment. How might I use Daily Leverage Products? Daily Leverage Products can compliment a portfolio by offering enhanced returns over a shorter time frame. You can take advantage of daily market news and in light of expected economic events. Provided that the markets go the right way for you, these magnified returns can be an effective way to boost the overall return of your portfolio. The capital required is also significantly reduced as the same exposure is achieved without the need for the full pound-for-pound investment, possibly freeing up funds for other assets to be added to the portfolio. What is the FTSE 100 TR? This index comprises the 100 most highly capitalised blue chip companies, representing approximately 81% of the UK market. The FTSE 100 TR Index is different to the better known FTSE 100 Index and has a separate value. This is because the FTSE 100 Index is a price return index which does not include dividends in the performance of the index. The FTSE 100 TR however is a Total Return Index, and as such, dividends are automatically re-invested in the FTSE 100 TR. The Bloomberg code for the FTSE 100 TR is TUKXG. 5 year performance of the FTSE 100 TR Vs the FTSE FTSE 100 FTSE 100 TR /11/ /11/ /11/ /11/ /11/ /11/2014 Source: Bloomberg November 7th, Past performance is not a reliable indicator of future returns. How are the leveraged returns created? Daily Leverage Products are linked to the performance of the X5 Daily Leveraged RT FTSE 100 TR Index series (Daily Leveraged Indices). These Daily Leveraged Indices aim to multiply the daily performance of the FTSE 100 TR Index by a factor of 5. As Total Return Indices, corporate actions and dividends are reflected in the Daily Leveraged Index as they occur and as they are captured in the FTSE 100 TR Index. The X5 Daily Leveraged RT FTSE 100 Net TR Index used in the Daily Long 5 is a Net Return Index, which means that dividends are re-invested in the Index minus any withholding tax. The X5 Daily Short Strategy RT FTSE 100 Gross TR Index used in the Daily Short 5s is a Gross Return Index. This means that the Index capitalises the dividend. How can I trade Daily Leverage Products? The Daily Leverage Product range, like all our listed products, is listed on the LSE and can be traded like a share through a stockbroker in a regular dealing account, ISA or SIPP. Societe Generale are acting as market maker through Societe Generale Option Europe and provide investors with a price for each Daily Leverage Product (a bid/offer spread) during LSE market hours, between (8:00am to 4.30pm). Where can I access product prices? You can access live prices from your UK stockbroker, the LSE, or the Societe Generale website Societe Generale Option Europe, in conjunction with the LSE, displays prices in Pounds and not in Pence. Is my invested capital at risk? Your invested capital is fully at risk. Before trading you should ensure that you understand the nature of Daily Leverage Products and the extent of your exposure to risk. What is the tax treatment? Investments made outside of a tax efficient wrapper will be subject to Capital Gains Tax*. Unlike a UK share purchase, you will not be charged the 0.5% Stamp Duty usually incurred*. What happens at Maturity? Daily Leverage Products have a limited life, and will expire at Maturity. At Maturity the final redemption value of the Daily Leverage Product is calculated and automatically paid to investors. The calculation for the final redemption value is as follows: (Final Index Value / Parity) minus Costs & Fees. Do I face counterparty risk? Yes, these products are issued by Societe Generale Acceptance, a member of the Societe Generale group of companies. Any failure of Societe Generale Acceptance to perform obligations when due may result in the loss of all or part of an investment. *Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, inter alia, depend on an individual s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this document

13 WHAT RISKS SHOULD I BE AWARE OF? Capital at Risk Capital is fully at risk, we recommend that you consult your independent professional advisor before investing. Leveraged returns Leveraged returns are a major advantage of Daily Leverage Products but can also work against you. You should be aware that, if the FTSE 100 TR moves in the opposite direction to that which you anticipated, the losses incurred by the Daily Leverage Product will be greater in percentage terms than those incurred by a direct investment in the FTSE 100 TR itself. The price of a Daily Leverage Product can therefore be volatile. Compound returns As the product is reset on a daily basis, your capital could erode very quickly following a continued succession of positive (Daily Short 5) or negative (Daily Long 5) performance of the FTSE 100 TR (See the compounded daily return section on page 9 for further information about this risk factor). Underlying Risk The value of the product will depend on the value of the X5 Daily Leveraged RT FTSE 100 TR Index series, which are linked to the FTSE 100 TR. The FTSE 100 TR can be volatile and may move in the opposite direction to that which you anticipated. Counterparty Risk Daily Leverage Products are issued by Societe Generale Acceptance, a member of the SOCIETE GENERALE group of companies. At any point during the life of the investment, any failure of Societe Generale Acceptance to perform obligations when due may result in the loss of all or part of an investment. Investors should note that holdings in these products will not be covered by the provisions of the Financial Services Compensation Scheme, nor by any similar scheme. Liquidity Risk Societe Generale is the only market-maker and therefore the only liquidity provider for these products. Liquidity will only be available in normal market conditions. You can find out more about the risks of trading Listed Products on the Secondary Market below. SECONDARY MARKET Societe Generale is the only market-maker, and therefore the only liquidity provider for Daily Leverage Products. This means we are governed by LSE rules to buy back and sell our products at the prevailing market price between (8:00am to 4.30pm). By investing in a Daily Leverage Product you can be assured that Societe Generale will buy back your product at any time during market hours. However, during abnormal market conditions, there is no guarantee that liquidity or live prices will be available on the secondary market. Instances of abnormal market conditions include: The Underlying is suspended or not tradable There is a period of extreme volatility in any of the Underlying Asset Classes There is a failure in the LSE or Societe Generale systems. This means that you may find it difficult or impossible in certain circumstances to sell the Daily Leverage Product or may be offered a price less than you paid for it

14 Societe Generale LISTED PRODUCTS About Societe Generale Listed Products Societe Generale Corporate and Investment Bank, the investment banking division of Societe Generale, is the world s largest listed products issuer by volume, with more than a 25 year track record of providing an outstanding trading service. With more than 750 products listed on the LSE, Societe Generale has the depth of product offering to help virtually any kind of investor to meet their investment objectives. Tracking Products The aim of Tracking Products (Lyxor ETFs and SG ETNs) is simple: to replicate as closely as possible the performance of an index, a selection of stocks or a physical commodity. This is a straightforward unleveraged exposure. These products enable you to diversify a portfolio in one single trade and gain exposure to markets potentially difficult to enter. Structured Products Structured Products (Synthetic Zeros, Autocalls, Twin Wins...) provide an innovative, dynamic and flexible range of products designed to fit your market view. Structured Products enable you to access to a wide range of Underlying Assets with the benefit of some capital protection, and a fixed or an enhanced payout profile. Structured Products are listed and actively traded on the LSE with continuous quoted bid-offer prices provided by Societe Generale under normal market conditions. Leverage Products In addition to the Daily Leverage Product range, Societe Generale offer Covered Warrants, Infinite Turbos and Turbos, which offer leveraged performance over different time frames and directions. Find out more at Recent Awards Best in the UK Structured Products Europe Awards 2013 Best Structured Products & Warrants 2013 Covered Warrants Provider of the year Investors Chronicle 14 16

15 Important Information This communication is directed at professional clients and sophisticated retail clients in the UK. This document is issued in the U.K. by the London Branch of Societe Generale. Societe Generale is a French credit institution (bank) authorised by the Autorité de Contrôle Prudentiel et de Résolution (the French Prudential Control and Resolution Authority) and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. Although information contained herein is from sources believed to be reliable, Societe Generale makes no representation or warranty regarding the accuracy of any information. Any reproduction, disclosure or dissemination of these materials is prohibited. The products described within this document are not suitable for everyone. Investors capital is at risk. Investors should not deal in this product unless they understand its nature and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. Prior to any investment in this product, investors should make their own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us, both in this document and the Final Terms of the product available on the website co.uk. We recommend that you consult your own independent professional advisers. Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, inter alia, depend on an individual s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this document. For more information: see the Terms and Conditions available on our website Index Disclaimer All rights in the Index vest in FTSE International Limited ( FTSE ). FTSE is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. This product (the Product ) has been developed solely by Societe Generale. The Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by Societe Generale. Investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme, nor by any similar scheme in the country where the Issuer is domiciled. The securities can be neither offered in nor transferred to the United States

16 CONTACT For further information on the range of SG Listed Products, go to Alternatively, call the Freephone line or Telephone calls may be recorded and/or monitored for training and quality purposes.