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Exchange traded fundsExplore the markets your way

Exchange traded fundsTHIS COMMUNICATION IS SUITABLE FOR RETAIL CLIENTS IN THE UK

This document is of a commercial nature and not of a regulatory nature. This communication is directed at retail clients in the UK.

We are the original pioneers

What you need to know 4

An introduction to ETFs 6

Knowing your risks 7

A market on the rise 8

A new world of opportunity 9

Understanding indices 10

How you track counts 12

Keeping it physical 13

When its time for a boost 14

Keeping our lending on track 15

Collateral holdings 16

Why you can trust Lyxor 17

How to take the first step 18

We are curious explorers 19

Your questions answered 20

Exchange traded funds

Welcome to the world of Exchange Traded Funds, oras they are more commonly known, ETFs. It is fair tosay that ETFs are now considered a mainstreaminvestment, used by all kinds of investors fromprofessional portfolio managers, to individual investors. What unites them all is a quest for a lower cost, more flexible way to invest.

Across the world, more than $3.2trn is invested in more than 4,400 ETFs. In Europe ETFs have been around sincethe turn of the new millenium when just Lyxor and one other manager were offering ETFs. Today there are around 50 different ETF providers in Europe, offering more than 1,500 different ETFs. Why has the market come so far? It’s simple really; ETFs offer investors a low cost, flexible and transparent way to access practically every corner of the financial markets.

As one of the great pioneers of the market, Lyxor has been present from the start, running ETFs longer than any other European provider. We have introduced many new exposuresand taken quality to a standard few others can match. We are excited by the future for ETFs and hope that this guide will show you why.

Please make sure you read pages 5 and 7 in order familiarise yourself with the key terms and risks relating to ETF investing.

3

Welcome


What you need to know

5

The following phrases are used throughout this guide. They also provide a good idea of what to look for when you’re reading an ETF factsheet.

Ask price The price at which you can buy a unit of an ETF.

Assets under management (Aum)

Measures the market value of the assets managed by the fund.

Benchmark Index The index whose performance the fund aims to replicate.

Bid price The price at which you can sell a unit of an ETF.

Collateral The stocks or bonds provided as security in a Securities Lending transaction.

Counterparty Risk

Investors may be exposed to Counterparty Risk in the case of Physical Funds using a Securities Lending Programme. It refers to the risk that the party borrowing the stock could default and be unable to return the stock to the fund, which would cause the fund to lose value. Collateral is taken against any Securities Lending transaction to mitigate Counterparty Risk.

Market Maker An entity which actively trades a given security by displaying buy and sell prices on exchange.

Net asset value (Nav) Refers to the net value of the fund on a per share basis. It is calculated by subtracting total liabilities from total assets and dividing by the number of shares outstanding.

Physical Fund A fund whose performance is determined by reference to a basket of physical assets, which are the same or similar to the Benchmark index. Lyxor’s retail range only includes Physical Funds.

Securities Lending The process of lending a stock, derivative or other security to a counterparty. The counterparty is required to put up Collateral as security and the lender receives a fee in return.

Total Expense Ratio (TER) Covers all costs incurred by the fund manager to manage the fund on a per annum basis. It includes a management fee and structural costs and is deducted from the fund’s performance daily.

UCITS (Undertakings for Collective Investment in Transferable Securities)

European regulatory framework of the UCITS IV Directive which applies to all European investment funds.

ETFs

Flexible

Transparent

Access

Low cost

Highly regulated


ETFs are open-ended investment funds that track the performance of a diversified Benchmark Index, which contains at least 5 different assets. Like traditional mutual funds, ETFs are highly regulated according to the European regulatory framework of the UCITS IV Directive that applies to all European investment funds.

Flexible tradingThe big difference with ETFs is that they are listed onan exchange such as the London Stock Exchange(LSE). As such they bring a new level of tradability thatcan’t be matched by traditional mutual funds. With live prices supporting each ETF on exchange during normal market conditions, investors enjoy the flexibility to buy or sell their ETF holdings as easily as trading a share. There may be times when normal market conditions do not prevail. Please read the liquidity risk section on page 7 to understand how this can impact an ETF.

Simple, low cost Another key attraction of ETFs is their simplicity. As “passive” investments the aim of an ETF is simply to track the Benchmark Index as cost effectively and precisely as possible. As such, ETFs have lower investment costs than an actively managed fund, with typical annual Total Expense Ratios (TERs) ranging between 0.05% and 0.85%per year and no upfront fee. The only cost to trading is the broker’s trading fee, and a very small spread between the Bid (sell) and Ask (buy) price.

Access to global marketsOne of the biggest benefits to ETF investing is the choice it gives investors. ETFs are available on all major equity geographies, sectors and themes, as well as a large number of fixed income and commodity exposures for those looking to widen their exposure.

TransparentTransparency is a key tenet of ETF investing. Through the information disclosed throughout the trading day, investors are able to determine exactly what the ETF is tracking, what it invests in, what the risks are, how well the ETF typically tracks its Benchmark Index and what the total cost of investment is. This is all available on our website www.lyxoretf.co.uk at any time.

An introduction to ETFs

Exchange Traded Funds (ETFs) are just like any regular mutual fund. Through a single fund you can access thousands of shares, bonds or commodity futures. You can access the world’s largest companies, or target a specific region, country, sector or theme. They can take you wherever you want to go.

7

Knowing your risks

ETFs may be suitable for different types of investors in the UK, ranging from retail investors to institutional fund managers.

Essentially an ETF has a simple risk profile; its value will rise and fall in line with the Benchmark Index that it tracks.

Capital at risk

ETFs are tracking instruments: Their risk profile is similar to a direct investment in the Benchmark Index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.

Counterparty risk

Physical ETFs may have Counterparty Risk resulting from the use of a Securities Lending Programme.

Currency risk

ETFs may be exposed to currency risk if the ETF or Benchmark Index holdings are denominated in a currency different to that of the Benchmark Index they are tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.

Replication risk

ETFs are designed to replicate the performance ofthe Benchmark Index. Unexpected events relating to the constituents of the Benchmark Index may impact the Index provider’s ability to calculate the Benchmark Index, which may affect the ETF’s ability to replicate the Benchmark Index efficiently.

Underlying risk

The Benchmark Index of a Lyxor ETF may be complex and volatile. ETFs exposed to Emerging Markets like China carry a greater risk of potential loss than investment in Developed Markets like the UK as they are exposed to a wide range of unpredictable Emerging Market risks.

Liquidity risk

On-exchange liquidity may be limited as a result of a suspension in the underlying market represented by the Benchmark Index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, Societe Generale or other Market Maker systems; or an abnormal trading situation or event.

Why are more investors turning to ETFs?In recent years investors had to fight hard to keep portfolios in the black. In the past, it was assumed that a good active manager could add real value to a portfolio, perhaps even beat the market. However with more and more research now done on manager performance, two messages are coming through time and time again: beating the market is not simple or guaranteed, and high fees can be detrimental. For many investors faced with the task of investing for the future, the solution is not to try to beat the market, but simply to track it as efficiently as possible.

As a passive tracking investment, the objective of an ETF is simply to achieve the market return, and not beat it as is the aim for an actively managed fund. It does this by tracking an index such as the FTSE 100 index, which includes the 100 largest companies listed on the London Stock Exchange. This creates a very simple dynamic: if the ETF’s index rises by 5%, your ETF aims to rise by 5%. Conversely, if it falls by 5%, expect your ETF to fall by 5%. Markets do rise and fall, so only invest if you are comfortable putting your capital at risk. For further information see the ‘Knowing your risks’ section on page 7.

One of the great advantages of this simpler approach to investing is that it tends to cost much less than an equivalent active fund.

A market on the rise


The combination of low investment costs and an extensive universe of investment opportunity has driven a rapid rise in ETF investing. Since the first ETF was launched in Europe back in 2000, ETFs have attracted over $500bn of investment.*

AUM # ETFs

1800

1600

1400

1200

1000

800

600

400100

200

300

400

500

600

200

0 02005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ass

ets

(US

$ B

n)

# ET

Fs

*Source: ETFGI, December 2016

The importance of costImagine you had a choice of two funds in which to invest £100 over the next ten years. Fund A charges 0.30% - a not untypical cost for an ETF - while Fund B, an actively managed fund, charges 1.50% per annum. If we assume no capital growth at all, Fund A would be worth £97.04 after ten years having incurred £2.96 in fees. However, Fund B would reduce your £100 to £85.97 after the £14.03 of fees had been collected.

£100

£95

£90

£85

£80

YR 0 YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 YR 7 YR 8 YR 9 YR 10

£97.04

£85.97

Fund A (0.3%) Fund B (1.5%)

9

A new world of opportunityETFs are used by all types of investor, from large institutions to individual retail clients. With simple access through a stockbroker or platform dealing account, ISA or SIPP, ETFs trade as easily as buying a share.

ETFs are typically used to build an efficient, low cost ‘Core’ portfolio to capture long term growth. The ability to target the whole risk spectrum from Government Bonds to Emerging Markets, from defensive stocks to Financial and IT companies means that practically any type of investor can find a suitable investment opportunity. And, with both income paying (distributing) ETFs and growth (capitalising) ETFs available, they can be suitable for both growth and income strategies.

The ease with which ETFs can be bought and sold opens the door to more tactical opportunities. This can be useful for more strategic investors who are looking to take advantage of a short term trend in a specific country, sector or theme in the ‘Satellite’ portion of their portfolio.

Remember that currency can play a considerable role in your investment - in some cases adding profits and other cases eroding returns - perhaps even contributing to a loss.

Core (Strategic)

Satellite(Tactical)

Core and satellite opportunities

Achieving your objectives ► Generate long term growth by using ETFs to build

low cost core exposures

► Generate income in your portfolio by targeting ‘distributing’ income strategies

► Take advantage of short term market trends in the satellite part of your portfolio


Source: Lyxor International Management. Data as of April 13th, 2017.

Understanding indices

An Index is simply a big, long list of companies - or bonds - whose securities are quoted on a local stock market. However, understanding the rules, weightings and biases of the Index is essential if you want to understand what drives its performance.

Let’s start by looking at a well known Index in the UK, the FTSE 100 Index. This Index comprises the 100 largest companies by market value that are listed on the London Stock Exchange. It contains a lot of well known names such as BP, HSBC or Shell. However, not every company or stock in the Index is equal - in fact, far from it.

Each company in the FTSE 100 Index is weighted according to its market value or ‘market capitalisation’ as it is known. For instance, if Shell was worth say £100 billion in total, and the total value of all 100 companies in the Index was £1,000 billion, Shell’s shares would have a 10% weighting in the Index.

This means that although the FTSE 100 is a diversified index, which contains 100 UK listed stocks, your investment is concentrated on the largest stocks.

The top 10 stocks for example are responsible for almost 43% of the performance of the FTSE 100 Index. This is why it is important to get beneath the skin of an Index to see where the performance will come from.

TOP 10 HOLDINGS FTSE 100 INDEX WEIGHT BY SECTOR (%)

Company nameTicker

BloombergWeight %

HSBC Holdings PLC HSBA LN 7.04%

British AmericanTobacco Plc

BATS LN 5.38%

Royal Dutch ShellPLC-A SHS

RDSA LN 5.06%

BP PLC BP LN 4.83%

Royal Dutch Shell PLC B Shares

RDSB LN 4.46%

Glaxosmithkline Plc GSK LN 4.33%

Astrazeneca PLC AZN LN 3.20%

Diageo PLC DGE LN 3.11%

Vodafone Group PLC VOD LN 2.91%

Unilever PLC ULVR LN 2.63%

Financials

Staples(household

goods)

Energy

Health Care

Discretionary (Luxury items)

Materials

Industrials

Others

0% 5% 10% 15% 20% 25%

Source Lyxor International Management.Data as of April 13th, 2017.

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What about dividends?Not all indices give investors the benefit of dividends. The well known FTSE 100 Index for example, is a Price Return index, which simply means that it moves in relation to the price of the stocks i.e. it is purely concerned with capital gains and losses. Its sibling index the FTSE 100 Total Return Index however, tracks both the capital gain, and re-invests any dividends paid by the constituent companies into the price of the index – giving investors the benefit of the dividend payments.

The vast majority of ETFs will track the Total Return version of an index so that they gain the benefit of dividend payments. Those combined dividend payments are then either paid out to investors if it is a ‘Distributing ETF’, or rolled up into the performance of the fund if it is a ‘Capitalising ETF’.

Remember, dividends are taxable regardless of whether or not they are paid out.

International indicesMany ETFs hold a mix of overseas investments and so currency plays a part in the investment returns. Let’s say you are a UK investor investing in a US equity ETF. Your portfolio is probably in pounds, but the US companies trade in US dollars.

So if the index rises by 10% and the dollar strengthens, the return in your portfolio (in pounds) will be higher. But beware, currency can work against you. Following the same example, if the dollar weakens, this will reduce profits or heighten a loss.

Look out for liquidityLast but by no means least, you should also have some understanding of the underlying liquidity of shares within your chosen index. Tens of thousands of investors trade the large multi-national company shares every day. This means that there are a lot available in the market to buy and sell at any moment in time – which in turn means those shares are liquid. This makes tracking the index easy as the ETF can freely buy and sell the underlying shares.

But some indices, especially for smaller companies or maybe companies in Emerging Markets may not be as liquid. There may be local tax issues that affect foreign ownership of shares. Alternatively shares in smaller companies may only be traded infrequently.

Liquidity is a difficult matter to assess. When markets are going through periods of stress, it can be more difficult to trade or more expensive. It’s important to be aware of this and to plan for this.

Make sure you read the risks on page 7 to understand the risk of liquidity and exchange rates.

Which index is right for you?There are a lot of things to look out for when deciding how to pick the right index for your portfolio. Each index has its own methodology, its own style and its own particular biases. To check which Benchmark index is the right one for you, just ask yourself a few simple questions:

1. How is the index weighted, and to what degree is it concentrated around the top stocks?

2. Is the stock selection representative of the market, or is it biased to certain sectors or geographies?

3. What happens to dividends in the index and what does the ETF do with them?

4. Are movements in the exchange rate likely to cause you problems?

5. Is the index liquid and easily tradeable?

All of these things will have a significant impact on the potential return from the index, but also the potential risk. An index weighted heavily towards banks and technology companies in a particular country or region is likely to provide a very different return to one that is focused on utilities or consumer staples.


How you track counts

On the surface, tracking an index is simple; the fund must manage its assets so that the performance of the fund matches that of the index it references. However, an index is not a static thing; it is regularly rebalanced, its constituents change, and it must take account of corporate actions, tax and dividend payments.

All of these factors mean that tracking an index is more complicated than simply buying and holding a basket of stocks. In fact, depending on how many stocks are in the index, or where those companies are listed, it can be very difficult, or even impossible for some ETFs to track that Index accurately. As indices have become more diverse and exotic, ETF Providers have responded with new ways to optimise fund performance, and improve its tracking against the Benchmark Index.

Efficient index tracking

Managing a basketof securities

Optimisingperformance

► Buying a basket of shares

► Re-investing dividends and managing corporate actions

► Re-balancing the fund as the Benchmark Index moves companies in and out of the Benchmark Index

► Tracking the right kind of Benchmark Index

► Tracking the Benchmark Index the best way

► Optimising the performance of the fund according to market conditions, tax and exchange rates

The evolution of index trackingThe traditional way for an ETF to track its Benchmark Index was to simply buy the same stocks as the Benchmark Index and manage them in accordance with changes in the index. However, as the scope of ETFs grew to encompass new and exotic indices, this ‘Physical Replication’ became increasingly difficult for certain exposures, and fund managers were forced to develop new optimisation techniques and replication methodologies. We look at this in the next section.

13

Keeping it physical

Ultimately, our mission is to create and manage a range of funds that track their indices, and trade, as efficiently as possible, no matter what the asset class or geography.

For simple, developed market exposures like the ones we have in our retail range, we have chosen to use what is called Physical Replication to track the indices, as we believe that this is in the best interest of our investors.

What is Physical Replication?Physically replicating funds actually purchase all, or at the very least a representative subset, of the component parts of a given index, in order to mirror its return. They therefore tend to be the same (or very similar) to the benchmark they track. They work well in large, liquid markets where the underlying stocks or bonds can be bought and sold with ease. By buying shares in the ETF, you access the collective performance of the underlying holdings.

ETF HOLDINGSSame (or similar)

holdings as the IndexBENCHMARK INDEX

The example of Government BondsGovernment bonds for example are high quality securities with good liquidity and offer limited opportunity to enhance performance. For this reason, Lyxor believes that the interests of investors are better served by using a “Physical Only” replication method.


Replicating a large, liquid index should be fairly straightforward, but there are factors that can hamper the accuracy. This is where Securities, or stock lending, can make all the difference.

In the same way the owner of a flat can rent it out for money, the owner of a basket of securities can lend them for a fee. Some securities have great lending value, while others don’t. So by selectively lending out some of the fund’s underlying assets to a financial institution (the counterparty) in return for a fee, and then reinvesting those fees into the ETF, the performance of the fund can be significantly boosted.

To safeguard investors, the institution borrowing the securities must provide similar quality assets as collateral in case they default and are unable to pay them back to the fund. More on that later.

Please refer to page 7 for further details on risk.

The example of European EquitiesFor instance, in the case of developed European equity markets the additional gains that can be made from securities lending might offset a significant portion of the annual management fee. You may find the ETF outperforms the index.

ETF HOLDINGSSame (or similar)

as the Benchmark IndexBENCHMARK INDEX

Securities Lent

Collateral andfee received

When it’s time for a boost

15

Keeping our lending on track For Physical Funds, Counterparty Risk only exists if the fund uses securities lending. Here your risk is that one of the parties borrowing the stocks fails and can’t give it back. Without proper cover this could create a big loss to the fund.

But that is where good governance prevails, and again, where Lyxor goes further to keep your money safe:

► Limit how much we’re lending. In most cases we don’t lend out more than 25% of the portfolio.

► Control who we lend to. We’ll never lend to anyone that hasn’t been vetted by the risk divisions of both Societe Generale and Lyxor.

► Cover the lending. Every euro of stock we lend out is covered by at least €1.05 of collateral. That collateral is held in a segregated account with the fund custodian. It is monitored every day to ensure it provides sufficient protection.

► Demand quality collateral. Unlike some providers who accept stocks as collateral for their government bond ETFs, or even emerging market ETFs as collateral for their US Treasuries ETFs, we ensure the quality of collateral matches that of the assets on loan so that you are not taking on any additional risk (i.e. bonds for bonds, equities for equities).

Our clients can see the value of the Securities Lending collateral, as well as the amount of assets on loan, on a daily basis on our website www.lyxoretf.co.uk.

Quality foundationsRegardless of where you are investing, with Lyxor ETF you know you are always

backed by the security of high quality stocks and bonds. All physical assets are

held in a segregated account and are monitored every day to ensure they always comply with our stringent policies.

Pure physical ETFs largely have to hold the same assets as the index they’re tracking so you know what you’re getting. But what about the collateral used in a securities lending programme? How do you know if these are up to standard? At Lyxor we publicise the fund and collateral holdings on the website every day so you know what you are buying.

Please refer to page 7 for further details on risk.

We go further to protect your money ► All profits gained through securities lending have to be reinvested back into the fund – ensuring its investors

reap the rewards

► Unlike some managers who can lend out as much as 100% of the fund’s assets, our securities lending in most cases is capped at 25% each day – adding an additional layer of rigour and control

► We also insist on liquid, high quality collateral in order to cover up to 110% of the borrowed value on equities and 105% of the borrowed value on bonds


Collateral holdings

Quality collateral against securities

lending

Regardless of where you are investing, with Lyxor ETF you know that you are always backed by the security of high quality stocks and bonds. All physical assets held as collateral are monitored every day to ensure that they continue to comply with Lyxor’s stringent policies on both quantity and quality.

Collateral for Securities Lending

Equities- Only stocks belonging to a defined list of large cap indices- Issuers must be rated Investment Grade (a bond rated BBB - or higher by Standard &

Poor’s, an independent ratings agency)- Account for no more than 0.75% of the total value of securities available- No more than 10% of the average daily volume traded in a given security over the last 20

trading days- Diversification: the number of securities taken as Collateral should be at least equal to

the number of securities on loan, and not less than 10.- Minimum initial margin (i.e. ratio of collateral value to loan amount): 110%

Bonds- Only sovereign bonds allowed issued by developed countries- Maximum residual time to maturity is 10 years- Minimum initial margin (i.e. ratio of collateral value to loan amount): 105%

Collateral restrictions: we do not accept cash or ETFs as collateral

- Lyxor’s risk department is in charge of controlling on a regular basis that all guidelines are correctly enforced

Lyxo

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f Gui

del

ines

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r B

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Maintaining transparencyTo maintain absolute transparency, Lyxor ETF publishes details of the full fund or collateral holdings of every ETF on www.lyxoretf.co.uk each day. This means that investors can easily determine what the fund is invested in, who any Counterparties are, and what the current exposure to that Counterparty is.

17

Quality you can trust

PerformancePrecise index tracking, competitive and transparent fees and low trading costs make Lyxor ETFs one of the most efficient ways to access the global markets.

Risk ControlEach fund has a daily target of zero Counterparty Risk and holds a basket of shares or bonds (depending on the ETF) in a segregated account to provide the highest level of security for investments.

LiquidityLyxor ETFs are some of the most liquid and flexible in Europe, ensuring trading costs are as low as possible for investors2.

TransparencyAll fund holdings, risk levels,

performance measures and management fees are updated

daily on our websites so you know exactly what you are

investing in.

Having launched our first ETF in 2001, our pioneering spirithelped shape the market you know today. We’ve becomeone of Europe’s largest1, and most liquid ETF managers2.Our quality standards go further than most.

1Source: Lyxor International Asset Management. Data as of May 30th, 20172Source: Lyxor International Asset Management. Data refers to ETF volume on exchange. Data observed between December 30th, 2015 and December 30th, 2016.


How to take the first stepBuying and selling an ETF is simple. If you’ve ever bought a share like Vodafone or HSBC, you are already a good way towards navigating the wonderful world of ETFs.

ETFs like shares are listed on the London Stock Exchange. In normal market conditions when the ETF is trading correctly on exchange, you can see an indication of prices between 8am when markets open, and 4.30pm when they close. You will normally find two prices quoted - a buy (Ask) and sell (Bid) price, though your trading price can vary - particularly if you are placing a larger order.

Getting startedTo buy an ETF you will need a share dealing account to hold your investment. ETFs are typically eligible for investment within a Stocks & Shares Independent Savings Account or Self Invested Personal Pension for tax efficient investing.

Getting inThe actual process of buying an ETF is simple:

1. Research your ETF thoroughly ensuring you have read the ETF’s documentation - particularly the Key Investor Information Document

2. Take note of the ISIN or EPIC code as you will need this to identify your ETF later

3. Log on to your share dealing account

4. Enter the ISIN or EPIC code to locate the ETF

5. Type in the number of units you wish to buy

6. Confirm your order

Getting outIt is just as easy to sell your ETF:

1. Log on to your share dealing account

2. Locate your ETF holding

3. Enter the number of units you wish to Sell

4. Confirm your order

Costs and feesETFs can be a very cost effective way to access markets. The manager of the ETF will charge you what is known as a Total Expense Ratio, which covers the costs of running the fund. This is prorated and taken from the daily performance of the fund. Our TERs start from just 0.07%1, much less than the 1% or more you can pay for an active fund.

Just like a share, your stockbroker will also charge you every time you buy or sell. You need to take this into account as it can make frequent small trades quite unrewarding. You also need to consider the Bid / Ask spread. You buy at the higher price, and sell at the lower so this cost of trading subtracts from your overall profit.

Make sure you read page 7 to understand the risks relating to trading ETFs.

Sell

Bid100.00p

Buy

Ask100.50p

Spread

1Source: Lyxor International Asset Management. Data as of April 13th, 2017

19

Our success is built on a history of innovation and a constant drive to provide investors with better, more efficient ways to access more investment opportunities around the world.

Lyxor is a subsidiary of Societe Generale. We launched our first ETF back in 2001. Today, with more than 15 years of commitment to performance, risk control, liquidity and transparency, it’s no surprise that Lyxor ranks second in Europe with EUR 60bn of ETF assets under management1 and second in terms of the liquidity of its ETFs.2 As one of the most experienced ETF providers, Lyxor has the scope to offer greater choice when it comes to your investment. With products spanning all asset classes, geographies, sectors and types, our investors enjoy the freedom to choose precisely where and how they want to invest.

However, it’s more than just the choice; it is our absolute commitment to tracking efficiency, and our relentless focus on quality that tells investors they can trust us wherever they want to invest, and whatever their investment goals.

Who is Lyxor ETF?

Why Lyxor? ► Lyxor is the one of the largest and among the most liquid providers of ETFs in Europe1

► No other European provider has been running ETFs as long as we have

► Our track record in delivering secure, liquid and precise tracking spans 15 years.

1Source: Lyxor International Asset Management / Bloomberg data. Data as of May 30th, 2017.2Source: Lyxor International Asset Management / Bloomberg data. Data refers to ETF volume on exchange. Data observed between December 30th, 2015 and December 30th, 2016.

Lxyor ETF

Range All asset classes

Heritage 2nd largest ETF issuer by AUM1

Quality Funds you can rely on

*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, amongst other things, 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 brochure.


Your questions answeredWhat costs are involved?There are neither entrance nor exit fees for Lyxor ETFs (although brokerage fees will be paid to the broker buying or selling the ETF on behalf of the investor). All specific fees are variable depending on the amount of capital and the time period an ETF will be held.

Management fees are reduced to a minimum, resulting in a very competitive Total Expense Ratio (TER – the annual cost to investors that covers all costs incurred by the fund manager to manage the fund). In a long-term buy-and-hold strategy, savings through low annual fees can even offset brokerage costs. Brokerage fees when trading ETFs do not depend on Lyxor ETF, but are fixed by the stockbroker or investment platform.

What is the Total Expense Ratio?The Total Expense Ratio (TER) is an annual cost that covers all costs incurred by the fund manager to manage the fund. It includes a management fee and structural costs and is deducted from the fund’s performance daily.

How can investors trade (buy or sell) ETFs?Buying or selling an ETF is a straightforward process. Investors only need an account in which to hold the securities. For orders, they go through their usual financial intermediary: stockbroker or investment platform, or an e-broker, specifying the ETF’s ISIN or the EPIC code. ETFs are typically eligible for investment within a Stocks & Shares Independent Savings Account or Self Invested Personal Pension.

Do ETFs pay dividends?Like traditional shares, many, but not all ETFs can generate income through dividends. Many ETFs distribute dividends if the underlying securities within the fund do so. Investors can refer to the relevant ETF factsheet to see if a fund is distributing (i.e. it pays out a dividend) or capitalising (i.e. it reinvests dividend income back into the fund).

How are ETFs taxed*?The taxation of financial securities depends upon the investor’s individual tax situation within their relevant jurisdiction.Investors are recommended to consult their tax advisor to ascertain their personal situation.

Do Lyxor ETFs qualify for the UK Fund Reporting Status?In order to be identified as a qualifying offshore fund in the UK, an ETF needs to obtain UK Fund Reporting Status (UKFRS) from Her Majesty’s Revenue & Customs (HMRC). Any gains realised on the disposal of a fund which has been certified with

UKFRS are considered as a capital gain for UK individual investors, or a chargeable gain for UK institutional investors*.

All Lyxor ETFs listed on the London Stock Exchange have either qualified for UK Fund Reporting Status or have applied for UKFRS. To find out the current status for any Lyxor ETF, you can download our product factsheet on our website www.lyxoretf.co.uk.

*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, amongst other things, 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 brochure.

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What fund structures do Lyxor use?Lyxor ETFs are open ended mutual investment funds established under French law and approved by the Autorite des Marches Financiers (the French Financial Markets Authority). As the funds are fully compliant with the UCITS IV Directive, they are eligible to be marketed in the UK to both professional and retail investors. Lyxor ETFs are managed by Lyxor International Asset Management S.A.S., a subsidiary of Societe Generale. There are two types of fund structure that are used in our retail range, French SICAV and Luxembourg SICAV. A SICAV is a type of open ended investment fund.

What fund structures do Lyxor use?

Role Provided by Responsibilities

Fund Custodian

The Fund Custodians are Societe Generale Securities Services (a division of Societe Generale) for French ETFs and Societe Generale Bank & Trust SA for Luxembourg.

1. Hold and safeguard the physical assets of the fund in a segregated account in the name of the ETF.

2. Keep record of all open positions, which must be certified each year.

3. Controlling management decisions in order to comply with investment restrictions and the fund strategy described in the fund prospectus

Administrators

The Fund Administrators are Societe Generale Securities Services in France and Societe Generale Securities Services Luxembourg SA in Luxembourg.

Responsible for fund administration and accounting; including daily calculation of the NAV for each ETF share class and the independent calculation of fund asset values. Lyxor validates all NAV calculations through their dedicated NAV control department.

Transfer agents

In France the Transfer Agent is Societe Generale Securities Services. In Luxembourg it is the responsibility of European Fund Services SA.

Responsible for maintaining records of shareholder transactions and balances. They also ensure that subscriptions and redemptions in to the fund comply with the guidelines set out in the fund prospectus.

Auditors

Lyxor ETFs domiciled in France are audited by PricewaterhouseCoopers Audit. Lyxor ETFs domiciled in Luxembourg are audited by PricewaterhouseCoopers Luxembourg. Lyxor Index SICAV funds are audited by Deloitte.

ETF Auditors have a statutory responsibility to report whether the financial statements produced by the fund administrator and validated by Lyxor are a fair and true reflection of the state of the fund’s operations and profit and loss for the year. Reports on Net Assets are to be issued half yearly, or quarterly where the fund assets are greater than EUR 80m. Audit reports are released once per year.

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Important information This communication is directed at retail clients in the UK.

This document is issued in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658.

Some of the funds described in this brochure are investment companies with Variable Capital (SICAV) incorporated under Luxembourg Law, listed on the official list of Undertakings for Collective Investment, authorised under Part I of the Luxembourg Law of 17th December 2010 (the “2010 Law”) on Undertakings for Collective Investment in accordance with provisions of the Directive 2009/65/EC (the “2009 Directive”) and subject to the supervision of the Commission de Surveillance du Secteur Financier (CSSF).

These funds are sub-funds of either Multi Units Luxembourg or Lyxor Index Fund and have been approved by the CSSF.

Alternatively, some of the funds described in this document are sub-funds of Multi Units France a French SICAV incorporated under the French Law and approved by the French Autorité des marchés financiers . Each fund complies with the UCITS Directive (2009/65/CE), and has been approved by the French Autorité des marchés financiers.

Société Générale and Lyxor AM recommend that investors read carefully the “risk factors” section of the product’s prospectus and Key Investor Information Document (KIID). The prospectus and the KIID are available in French on the website of the AMF (www.amf-france.org). The prospectus in English and the KIID in the relevant local language (for all the countries referred to, in this document as a country in which a public offer of the product is authorised) are available free of charge on lyxoretf.com or upon request to client-services-etf@ lyxor.com.

The products are the object of market-making contracts, the purpose of which is to ensure the liquidity of the products on NYSE Euronext Paris, Deutsche Boerse (Xetra) and the London Stock Exchange, assuming normal market conditions and normally functioning computer systems. Units of a specific UCITS ETF managed by an asset manager and purchased on the secondary market cannot usually be sold directly back to the asset manager itself. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them.

Updated composition of the product’s investment portfolio is available on www. lyxoretf.com. In addition, the indicative net asset value is published on the Reuters and Bloomberg pages of the product, and might also be mentioned on the websites of the stock exchanges where the product is listed.

Prior to investing in the product, investors should seek independent financial, tax, accounting and legal advice. It is each investor’s responsibility to ascertain that it is authorised to subscribe, or invest into this product.

This document together with the prospectus and/or more generally any information or documents with respect to or in connection with the Fund does not constitute an offer for sale or solicitation of an offer for sale in any jurisdiction (i) in which such offer or solicitation is not authorized, (ii) in which the person making such offer or solicitation is not qualified to do so, or (iii) to any person to whom it is unlawful to make such offer or solicitation. In addition, the shares are not registered under the U.S Securities Act of 1933 and may not be directly or indirectly offered or sold in the United States (including its territories or possessions) or to or for the benefit of a U.S Person (being a “United State Person” within the meaning of Regulation S under the Securities Act of 1933 of the United States, as amended, and/or any person not included in the definition of “Non-United States Person” within the meaning of Section 4.7 (a) (1) (iv) of the rules of the U.S. Commodity Futures Trading Commission.). No U.S federal or state securities commission has reviewed or approved this document and more generally any documents with respect to or in connection with the fund. Any representation to the contrary is a criminal offence.

This document is of a commercial nature and not of a regulatory nature. This document does not constitute an offer, or an invitation to make an offer, from Société Générale, Lyxor Asset Management (together with its affiliates, Lyxor AM) or any of their respective subsidiaries to purchase or sell the product referred to herein.

These funds include a risk of capital loss. The redemption value of this fund may be less than the amount initially invested. The value of this fund can go down as well as up and the return upon the investment will therefore necessarily be variable. In a worst case scenario, investors could sustain the loss of their entire investment.

This document is confidential and may be neither communicated to any third party (with the exception of external advisors on the condition that they themselves respect this confidentiality undertaking) nor copied in whole or in part, without the prior written consent of Lyxor AM or Société Générale. The obtaining of the tax advantages or treatments defined in this document (as the case may be) depends on each investor’s particular tax status, the jurisdiction from which it invests as well as applicable laws. This tax treatment can be modified at any time. We recommend to investors who wish to obtain further information on their tax status that they seek assistance from their tax advisor. The attention of the investor is drawn to the fact that the net asset value stated in this document (as the case may be) cannot be used as a basis for subscriptions and/or redemptions.

The market information displayed in this document is based on data at a given moment and may change from time to time.

Authorizations: Lyxor International Asset Management (Lyxor AM) is a French management company authorized by the Autorité des marchés financiers and placed under the regulations of the UCITS (2009/65/EC) and AIFM (2011/61/EU) Directives. Lyxor International Asset Management S.A.S. is a subsidiary of Societe Generale.

Societe Generale is a French credit institution (bank) authorised and supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) (the French Prudential Control and Resolution Authority) and regulated by the Autorité des marchés financiers (the French financial markets regulator) (AMF).

Contact information +44 (0) 20 7762 5789 | [email protected] | www.lyxoretf.co.uk March 2017

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