warrants and certificates

Warrants &CertificatesGuideSeason your strategy

www.nyseeuronext.com2008 © NYSE Euronext, Inc. All Rights Reserved.

AMSTERDAM BRUSSELS CHICAGO LISBON LONDON NEW YORK PARIS SAN FRANCISCO

SR/ID/022008/500

Contents

Contents 2

Understanding warrants and certificates 3

What is a warrant? 3

What is a certificate? 3

What are their advantages? 3

What underlying assets are available? 4

What is the warrant and certificate segment? 4

How do you assess their risk level? 5

Segmentation 6

Code 8

Product denomination 9

Product types (table) 10

- Reference to Product Sheet Appendix 10

How do you choose them? 12

How do you buy them? 14

Seven golden rules for warrant and certificate investors 15

Appendix 16

How do warrants differ from options? 16

How do certificates differ from ETFs? 17

Glossary 18

Contacts 20

2

The benefits of warrants and certificates are well

established by now. Listed on the stock exchange and

tradable like shares, they offer a straightforward and

effective way to turn your market expectations into

investments or to hedge your portfolio. In return for a

modest outlay, they provide investors with significant

profit potential, while the maximum loss is known in

advance.

The attractiveness of these instruments is clear from

the success they enjoy among the financial

community. Following their launch on the French

market in 1989, the number of available products

rose to 3,700 by the end of 2000. Five years later,

that figure had almost doubled to 6,358 warrants and

certificates from around ten issuers. More than

20 institutions are now active in this market, which

currently accounts for an annual transaction volume in

excess of 30 billion euros and offers a choice of over

12,000 products.

NYSE EuronextSM decided in November 2007 to

segment its warrants and certificates. From now on,

they will be categorised according to an objective

assessment of the potential profit and loss they carry

for their holders, rather than by their legal

characteristics, as was previously the case.

This guide introduces investors to the new terminology

and provides a complete overview of the products

currently available on Euronext®’s markets. It will help

you to select the instruments that are best suited to

your risk profile and which have the potential, within

reasonable limits, to boost the performance of your

portfolio.

Season your strategy

3

What is a warrant?A warrant is a financial instrument that can be traded

on the stock exchange. It gives the holder the right,

but not the obligation, to buy (in the case of a call

warrant) or to sell (in the case of a put warrant) an

underlying asset at a predetermined price (the strike

price or exercise price) up to a given date (expiry).

The life of the warrant terminates on that date. The

price the buyer pays for this right is less than that of

the underlying asset.

What is a certificate?Certificates are listed securities with the legal

character of a complex debt instrument. They are

issued by banks and have settlement terms on expiry

that are known and guaranteed at the time of issue.

There are several types of product, each with a

specific investment and risk profile.

What are their advantages?As exchange-listed products, warrants and certificates

offer a variety of benefits:

• SimplicityWarrants and certificates can be traded on the

stock market, just like shares. Investors can put

on or close positions whenever the market is open,

by buying or selling the instruments.

• LiquidityThe liquidity of warrants and certificates is

ensured by their issuer, who undertakes to provide

a buy price and a sell price at all times.

• TransparencyDetailed information about the nature of each

product is available from the issuer’s website and

from that of NYSE Euronext.

• SecurityThe issue of warrants and certificates is controlled

and approved by the financial market regulator of

any EU member state. They are traded on

NextWarrants®, the dedicated product segment of

Euronext, the European subsidiary of

NYSE Euronext.

Warrants and certificates offer additional benefits,

specific to their structure:

• LeverageThe price you pay for the warrant or certificate is

often considerably lower than that of the

underlying asset. This enables investors to take

advantage of movements in the price of the

underlying securities for a relatively modest outlay.

The leverage or gearing is represented by the

number of warrants or certificates the investor can

purchase for a sum equivalent to the price of the

underlying asset. The effect is measured by

dividing the underlying asset price by the warrant

or certificate price (adjusted for parity).

• Risk limited to original investmentWarrant and certificate investors always know the

maximum loss they can incur, which is not the

case with futures contracts, options or Deferred

Settlement Service transactions. In the worst case,

they cannot lose more than the amount of their

initial investment - the warrant or certificate price.

Understanding warrants and certificates

4

What are their advantages?(continued)

• Easier access to all asset classesWarrants and certificates enable you to invest in

asset classes that tend to be difficult for private

investors to access, such as commodities, foreign

exchange and baskets of shares from a particular

sector. They also provide exposure to foreign

equities and indices on the same pricing terms as

apply to domestic equities.

• DiversificationBecause of the wide variety of asset classes,

sectors and geographical regions to which they

provide access, warrants and certificates enable

you to diversify an existing portfolio, consisting of

traditional asset classes like shares and bonds, at

lower cost.

• HedgingThe price of certain warrants and certificates

moves in the opposite direction to that of the

underlying assets. This allows investors to hedge

their portfolio against the risk of a fall in the

market or to take advantage of a decline in the

price of the underlying securities.

• Anticipating trendsWarrants and certificates, which can have a

maturity of several years, enable investors to

benefit from the anticipated performance of an

underlying asset in return for a modest

investment. Rather than funding the purchase of

the underlying immediately, they can wait for the

ideal moment at which to buy the asset at the

predetermined price. Conversely, some warrants

and certificates (puts) allow investors to defer

selling assets in their portfolio, while protecting

them against the risk of a fall in price.

What underlying assets are available?Warrants and certificates provide access to a steadily

growing number of underlying assets: currently over

350. These break down into six major asset classes:

- Domestic and foreign equities

- Baskets of domestic, foreign and themedequities

- National, international and sector indices

- Foreign exchange

- Commodities

- Interest rates

What is the warrant and certificatesegment?NYSE Euronext created this segment in 2002 to bring

together all the warrants and certificates listed on its

different markets, and to raise the visibility of these

products in order to facilitate their access.

The number of listed products varies as new ones are

issued, existing products mature and replacements

arise in response to new market conditions. This

responsiveness ensures that investors have access to

products that are always in sync with financial market

trends.

5

The level of risk associated with each certificate or

warrant varies widely. Some products are simply

intended to track the performance of the underlying

asset as closely as possible, giving them the same risk

level. Others, by contrast, strongly amplify any

changes in the underlying. The way their prices move

also depends on factors other than simply the

performance of the underlying asset. As a result, their

risk level is substantially greater than that of the

underlying.

NYSE Euronext resegmented its listed warrants and

certificates in November 2007 to help investors

assess the risk level of these products more

accurately. Further segments are likely to be created

in the future as new types of product are brought to

market.

Segmentation by exposure andproduct behaviour

When these products first appeared, the legal

distinction between warrants and certificates - with

the former deemed less risky than the latter - was

enough to give investors a relatively reliable way of

assessing their exposure. However, the proliferation of

products on the market and growing innovation have

blurred the traditional boundaries between warrants

and certificates, to the extent that this criterion is no

longer relevant. This prompted NYSE Euronext to

segment warrants and certificates according to an

objective assessment of the potential gains and losses

they represent for their investors.

How do you assess their risk level?

6

Investment product:Product with a risk profile close to that of the

underlying asset, but which offers certain benefits

in terms of performance or protection.

This segment is made up of products for which

investors can answer « no » to the following question:

« Could I possibly lose my entire investment? » Unless

the underlying asset loses all its value, investors

cannot lose more than they would if they had invested

in the underlying directly.

assessing the risk exposure

The first level of segmentation distinguishes between « investment products » and « leverage products ».

Level I

Investment product family:• « Pure indexation » products precisely track the

performance of the underlying asset.

• Upon maturity, « Yield enhancement » products

are valued at least the underlying asset price

while improving on its performance, in certain

market conditions or between certain

predetermined limits.

• « Capital protection » products reproduce some

or all of the upside performance of the

underlying asset, while guaranteeing some or all

of the initial capital if the value of the

underlying falls.

assessing the behaviour of the product

The second level of segmentation groups products that behave in a similarway. Investment products consist of three product families, while leverageproducts have five.

level II

7

Leverage products:Investors can lose their entire investment. The

product is designed either to amplify or to invert

the performance of the underlying asset.

This segment is made up of products for which

investors can answer « yes » to the following question:

« Could I possibly lose my entire investment? » Even

if the underlying asset itself does not lose all its

value, investors risk losing more than they would if

they had invested in the underlying directly.

assessing the risk exposure Level I

Leverage product family:• « Plain vanilla warrants » are basic call or put

option products.

• « Bear indexation » products generate the

opposite performance to the underlying asset.

They mature prematurely if a predetermined

level is reached during the product’s life.

• « Spread » products combine the purchase and

sale of options.

• « Digital knock-out » products are valued on

expiry at a sum determined in advance, provided

the underlying asset stays between two

predetermined levels. The product matures

prematurely if either of these two levels is

reached during its life.

• « Leverage knock-out » products offer leveraged

tracking of the performance of the underlying

asset if the latter is above (call) or below (put) a

predetermined level. They mature prematurely if

that level is reached during the product’s life.

assessing the behaviour of the product Level II

8

Code to indicate a product’s risklevel and compositionInvestors now have a straightforward code they can

use to rapidly assess the level of risk associated with

products they are thinking of buying. The code also

informs them about the product characteristics and

whether there is a « knock-out » mechanism that

could potentially trigger the total loss of their

investment.

The code is included in each product sheet and in the

bookmark attached to the brochure.

� Investment product: risk equivalent to investing

directly in the underlying asset.

� Leverage product: risk greater than investing

directly in the underlying asset.

� Knock-out feature: the investor could suddenly

lose the entire investment. These products are

structured around « knock-out barriers », which

means that investors cannot lose more than their

initial outlay.

� Option component: the investor needs to use a

valuation tool for the product. These products are

based on options and their valuation depends on

factors like time and volatility rather than the

simple evolution of the underlying assets.

9

Product denomination to identify the characteristics of each product

It is important that you clearly understand Euronext’s denomination for its warrants and certificates, as you will

encounter them every time you place an order for these products.

The denomination consists of a short name specifying each individual product. The purpose is to provide

enough concise information for investors to correctly evaluate the type of product. Issuers are currently

harmonising the naming conventions for warrants and certificates, which should result in a new standard for

designating these products.

Example of product denomination:

There are five parts to the name:

- A code of up to five characters for the underlying asset: ‘ABC’ means the ABC share

- The strike price rounded to a maximum of five digits

- The product type in up to three characters: ‘C’ means ‘call’

- The maturity date in four digits: ‘0912’ or September 2012

- A single-character code representing the issuer: “X”

A B C 1 1 0 C X2190

10

Yield enhancementCapital protectionPure indexation

Bull

Same as underlying

ST to LT

Simple

No

With or without

Certificate

No

No

No

No

No

No No

No Variable

Variable

Variable

Variable

Variable

Yes

No

Capital guarantee

Variable Variable

Complex

Yes

Yes

Certificate

Complex

Yes

Yes

Certificate

Bull and defensive

Less than underlying

MT to LT according to product type

Bull and defensive

Same as underlying

LT

Investment strategy

Risk level

Investment horizon

Valuation

Option component

Expiry date

Legal form

Upside cap

Knock-out feature

Trigger that alters the nature of theproduct

Lower limit

Upper limit

Nature of lower limit

Nature of upper limit

Graph: warrant/certificate simulation(at expiry)

Investment products

Profit

LossUnderlying Certificate

0

Profit

Loss Certificate Underlying

Protection level

% participation in upside

Profit

LossUnderlying Bonus Discount Jet Airbag

ST: Short Term: less than 6 monthsMT: Medium Term: Between 6 and 18 monthsLT: Long Term: more than 18 months

Product types

11

Bear indexation

Leverage products

Plain vanilla warrant

Call

Bull Bear Bull Bear Contained variation Bull BearBear

Opposite of the underlying

ST to LT

Simple

Negligible

Variable

Certificate

Limited to the underlying asset value

Yes (upper limit)

No

No

Yes

Knocks out product

No

No

Yes

No

Strike

No

Yes

Strike

Strike bought

Strike sold

Strike sold

Strike bought

No

Variable

Yes

Yes

Yes, 2

No

Yes

Yes

Knock-out

Knock-out

Yes

No

Yes

Variable

Knock-out ifsingle barrier

Knock-out

Knock-out

Knock-out ifsingle barrier

Variable

Yes

NoLimited to

the underlyingasset value

Yes Yes NoLimited to


Warrant Certificate Warrant Certificate or Warrant

Yes Yes Yes Variable

Complex

Yes

Complex

Yes

Complex

Yes

Complex

Negligible

Risk of total loss of capital

Greater than the underlying

ST to MT


ST to MT

Significantly greater than the underlying

ST to MT

Far greater than the underlying

ST to MT

Put Call Put

Spread (combination of options)Digital with double knock-out Leverage knock-out

Profit

LossCertificate Underlying

Knock-out

Entry level

0

Profit

Loss Underlying Call Put

Strike price

0

Profit

Loss Call Underlying Put

Lower limits

Upper limits

0

Profit

Loss Underlying Certificate

Knock-out barriers

0

Profit


Knock-out

0

ST: Short Term: less than 6 monthsMT: Medium Term: between 6 and 18 monthsLT: Long Term: more than 18 months

Knock-out barrier: the product matures prematurely if the underlying reaches thislevel. Trigger that alters the nature of product: certain characteristics of the product arepermanently altered if the underlying reaches this level

12

Investment products

The investor expects the underlying to go up in value

and does not wish, or is not able, to invest in it

directly.

Pure indexation: performance will exactly match

that of the underlying asset. The potential profit

will not be leveraged, but it is theoretically

unlimited. Potential losses are the same as those

in the underlying asset value.

The investor expects the underlying asset value to

rise, is not convinced of the potential increase and

wishes to limit the losses in the event that the

anticipated scenario does not occur.

Capital protection: risk is limited by the protection

level, while the potential profit is generally limited

to a specific percentage of the performance of the

underlying.

The investor expects that any increase in the

underlying asset value will be limited in scale.

Yield enhancement: the risk is identical to that of

a pure indexation product. The performance of the

underlying asset may be amplified and/or subject

to an upper limit if the underlying rises beyond a

certain value.

How do you choose them?

Choosing between the various existing products depends on the investor’s profile, risk preference, market vision

and level of conviction. Investors with a clear market vision and substantial risk tolerance will opt for leverage

products.

Those with a less pronounced view of where markets are going and who do not wish to take too high a risk will

prefer investment products. Segmentation will help investors to translate their risk appetite and market

expectations into specific products.

13

Leverage products

The investor firmly expects the underlying to fall invalue.

Bear indexation: the performance is opposite to

that of the underlying. If the underlying asset

value falls, the investment will generate a return of

the same percentage (negative leverage of 1). If

the underlying asset value rises beyond a certain

level, the product will be ‘knocked out’ and the

investor will lose his entire investment.

The investor firmly expects the value of the underlyingto rise or to fall, wants to gain exposure to theunderlying and is prepared to accept a greater level ofrisk than that represented by the underlying itself.

Plain vanilla warrant: the potential performance

(gain or loss) is multiplied by leverage. This

depends on numerous factors, including the strike

price, the expiry date and the volatility of the

underlying. The gains are theoretically unlimited.

The level of the potential profit correlates with the

level of risk accepted. Potential losses are limited

to the initial investment. Losses could result from

two factors:

- The passage of time: the value of the warrant

declines as it approaches its expiry date.

- Expiry below the strike price for a call

warrant or above the strike price for a put

warrant: the investment is lost if the strike

price is not reached by the expiry date.

Warrants that are firmly out of the money

(with a very high strike price in the case of a

call or a very low one for a put) are cheaper

(and offer greater leverage), but there is a

greater risk that they will expire without

value.

The investor firmly expects a modest rise or fall in thevalue of the underlying, thinks that the scale of therise or fall in value will be limited, wishes to gainexposure to the underlying, and is prepared to accepta higher risk level than that associated with theunderlying itself.

Spreads (combination of options): the level of risk

and reward is comparable to that of plain vanilla

warrants, for a smaller investment. If the rise or

fall in value anticipated by the investor does not

occur (the underlying goes down in value rather

than rising or vice versa), the losses will be

smaller than would be incurred using a plain

vanilla warrant. If the underlying asset performs

better than anticipated (it rises or falls more than

expected), the gains will be less than would be

achieved using a plain vanilla warrant (potential

returns subject to upper limit). In all other cases,

the returns will be greater than would be obtained

using a plain vanilla warrant, as the sale of one

warrant partially finances the purchase of the

other.

The investor firmly expects a limited movement in thevalue of the underlying, wants to gain exposure to theasset in question and is prepared to accept a greater levelof risk than that represented by the underlying itself.

Digital knock-out: the potential gain is limited to a

fixed return on expiry. The investor could lose the

entire investment if the underlying asset value

reaches or passes one of the two limits set on

issue. The narrower the gap between the

underlying asset value and the two limits, the

greater the risk and the greater the profit

potential.

The investor firmly expects the value of the underlyingto move in the short term, thinks that this rise or fallwill occur without a return of trend, wishes to gainexposure to the underlying, and is prepared to accept agreater level of risk than that represented by theunderlying itself.

Leverage knock-out: the potential gain is

comparable to that for plain vanilla warrants, but

the required investment is lower. In other words,

the leverage is greater than that offered by plain

vanilla warrants. The investor could lose the entire

investment if the underlying asset value reaches or

passes a lower limit (call) or upper limit (put) set

on issue. The narrower the gap between the

underlying asset value and the limit, the greater

the risk and the greater the profit potential.

14

Continuous tradingWarrants and certificates can be bought and resold

continuously between 9.05 a.m. and 5.30 p.m. on

every market trading day. The order book is electronic,

which means orders are executed automatically. The

financial intermediary is free to set the trading fees.

Euronext has established specific rules for the

segment, in view of the characteristics of warrants

and certificates and the need to protect investors.

Trading in a warrant or certificate may, for instance,

be suspended if an order entering the system will

result in too significant a price movement. All issuers

are subject to liquidity contracts to ensure that

investors can buy or sell warrants and certificates at

any time and at fair prices. Liquidity providers have to

offer maximum bid-ask Spreads and minimum

quantities throughout the trading day. Euronext can

release liquidity providers from their obligations under

unusual market conditions.

Designator and order typeTo place an order, the investor has to specify the

warrant or certificate’s ISIN code or Euronext symbol.

The order quantity must respect the unit of trade. The

entire range of orders available on Euronext can be

used: « limit », « market », « market-to-limit » and

« stop » orders. It is advisable, however, to use limit

orders for warrants and certificates, as price

movements can be very fast.

Last day of tradingThe last day of trading for a warrant or certificate is

not always the expiry date. Before investing, you

should check with your financial intermediary, the

issuer or NYSE Euronext the product’s last trading

date.

How do you buy them?

Warrants and certificates are traded on Euronext’s regulated market in the same way as shares. You do not have

to open a specific securities account: buy and sell orders can be placed via any financial intermediary (bank,

stockbroker, online brokerage, etc.). Here is a summary of the key characteristics of warrants and certificates.

15

1- Determine your profileBefore making any investment decisions or choosing a

product, it is vital to identify your precise profile as an

investor. How much money are you prepared to risk in

this market? How much time do you have (per day,

week or month) and are you prepared to devote to

managing your portfolio? What goals do you have in

terms of returns? How much are you willing to invest to

achieve those goals? The answers you give to these

questions will help you choose products with more or

less risk exposure, and more or less volatility.

2- Have clear viewsBefore making any investment decision, it is

imperative that you carry

out a preliminary analysis

of the market in general

and of the underlying asset

in particular. You have to

form a clear view of how

the underlying is likely to

move. Your investment

strategy and choice of

product will be based on

the rise or fall in value that

you anticipate.

3- Set targetsAs an investor, you have to

set yourself buying and

selling targets. It is vital to time your purchase

correctly. Once the predicted scenario has occurred,

you must not hesitate to close your position and take

your profit. Conversely, you must not hesitate to close

your position in order to limit your losses. This

strategy is all the more important when dealing with

leverage products and products sensitive to time

value.

4- Diversify your portfolioHoldings of certificates and warrants should never

account for too substantial a proportion of an

investor’s portfolio. You should treat them as products

that enable you to diversify your assets in terms of

risk (leverage) and/or underlying assets.

5- Optimise your tradingWarrants and certificates require regular monitoring.

Taking too many positions at once over several

products can reduce the quality with which you

manage your investments. You can diversify across

products with different risk profiles, provided that you

can still devote the necessary time to tracking your

positions.

6- Choose the right maturityIf a product has an expiry date, the closer it

approaches to that date, the riskier it becomes and

the quicker it will have to be sold. That means it is

less likely to realise a

return. You need to

choose an expiry date

that matches your

investment goals,

while maintaining a

certain safety margin.

Ideally, the life of the

selected products

should be at least

four times longer than

the scenario you have

in mind.

7- Understandthevaluationfactors

The valuation of some products is easy to understand:

it basically depends on movements in the value of the

underlying asset. Others, by contrast, are complicated,

involving factors like time value and volatility. You

need to master concepts like this before investing in

products of this kind.

Seven golden rules for warrant and certificate investors

16

How do warrants differ fromoptions?Warrants, like options, depend on an underlying asset

such as a share, bond or index, movements in which,

both upward and downward, they generally amplify.

Other features they have in common are an expiry

date and a strike price. All the same, warrants differ

from options in several respects:

• Legal formWarrants are financial products, whereas options

are contracts. Options are traded on the Liffe®

options market. Warrants are traded on the stock

market like shares, in the dedicated segment of

the regulated markets of Euronext, the European

subsidiary of NYSE Euronext.

• AccessibilityWarrants can be bought or sold via a regular

securities account. You need to open a special

account to trade options.

• StandardisationOptions are standard contracts: expiry date, strike

price and parity for the same underlying asset are

standardised. It is up to the issuing banks, by

contrast, to decide the characteristics of warrants:

a wide range of expiry dates, strike prices and

parities is often available for the same underlying.

• Diversity of underlying assetsWarrants offer a wide range of underlying assets.

Options are mainly issued on shares, indices,

commodities and interest rates.

• Issue capacityAn unlimited number of options can be issued on

the same asset class. The number of warrants

issued with a given maturity and strike price is

limited and chosen by the issuer, which can

influence the valuation of the warrants.

Appendix

17

How do certificates differ fromETFs?ETFs (Exchange Traded Funds), or Trackers®, are

funds listed on the stock market, the purpose of

which is to faithfully reproduce movements in a

reference index. Like pure indexation certificates,

which have the same purpose, they are traded like

shares and have a dedicated segment within

Euronext’s regulated markets (NextTrack®). However,

they differ from certificates in several respects.

• Legal formETFs are variable capital investment funds. Their

assets vary as investors subscribe to and withdraw

from them. Certificates are issued in limited

numbers, which can influence their valuation.

• MaturityETFs have an unlimited life. Certificates can have

an expiry date.

• DistributionETFs can distribute dividends. This is not always

the case for certificates.

• Diversity of underlying assetsCertificates offer a wide range of underlying

assets. ETFs, which are subject to stricter

investment rules, focus on reproducing indices,

which are themselves invested over a broad group

of underlying assets.

• LiquidityGenerally speaking, the issuer of a certificate is

also the counterparty for transactions in it. The

secondary ETF market is ensured by market-

makers independent of the issuer.

18

American warrantA warrant is referred to as ‘American’ when it can beexercised at any time between issue and expiry.

At the moneyA product is ‘at the money’ when its strike price is near orequal to the market price of the underlying asset.

Break-even pointThe level the underlying must have reached on the product’sexercise date in order for the investor to recover the initialoutlay.

Call warrantA call warrant gives the right, but not the obligation, to buyan underlying asset at a price fixed at issue for a specifiedperiod.

CertificateA certificate is a listed security issued by a financialinstitution, accessible from a standard securities account,with settlement terms on expiry that are known at the time ofissue.

DeltaCoefficient used to calculate the number of units by whichthe product will change when the underlying asset changesby one unit. A product with a delta of 100%, for instance,will reproduce 100% of the change in the value of theunderlying asset.

ElasticityParameter allowing a product’s sensitivity to changes in theprice of the underlying to be expressed as a percentage.Elasticity = (price of underlying / (price of product x parity) xdelta.

European warrantA warrant is referred to as « European » when it can only beexercised on its expiry date.

ExerciseExercising a warrant or certificate means using the rightattached to it.

Exercise price (or strike)The price at which the holder may buy or sell the underlying.It is fixed at the moment the product is issued.

Expiry date (or maturity)Date on which the right to buy or sell an instrument expires.This date represents the limit of the warrant or certificate’slife.

GearingRatio of the price of the underlying to the product price,adjusted for parity.

In the moneyA call product is ‘in the money’ when the price of theunderlying is higher than the strike. A put product is in themoney when the price of the underlying is lower than thestrike.

Intrinsic valueThe positive difference between the price of the underlyingand the strike price in the case of a call product, or thepositive difference between the strike price and the price ofthe underlying in the case of a put product.

Knock-outIf the market price of the underlying passes the knock-outlevel, the right conferred by the product is cancelled.

LeverageRatio of the warrant or certificate price to that of theunderlying. Movements in a warrant or certificate are oftenproportionally greater than those in the underlying.

Out of the moneyA call product is ‘out of the money’ when the price of theunderlying is lower than the strike. A put product is out ofthe money when the price of the underlying is higher thanthe strike.

ParityThe number of products you have to acquire to exercise yourright with regard to the underlying asset. A parity of 10 on acall product over a share, for instance, means that you wouldhave to exercise ten products to purchase a share at thestrike price.

Plain vanilla warrantStructured investment instrument with a continuous marketlisting that gives the right, but not the obligation, to buy orsell a chosen asset at a price fixed at issue during apredetermined period.

PremiumPercentage by which the value of the underlying must movein order to reach break-even.

Put warrantA put warrant gives the right, but not the obligation, to sellan underlying asset at a price fixed at issue for a specifiedperiod.

SecurityTradable financial instrument issued by a company or apublic institution, which may be listed and traded on anexchange (e.g. shares, bonds, warrants and certificates).

ThetaCoefficient measuring a product’s sensitivity to the passageof time.

Underlying Financial instrument (share, bond, index, exchange rate,interest rate, commodity, etc.) to which the warrant orcertificate relates.

Unit of tradeMinimum quantity of products that can be traded.

VolatilityIndicator of the likelihood that an asset will fluctuate invalue. Volatility is calculated mathematically as theannualised standard deviation of the returns on theunderlying.

Glossary

19

NYSE Euronext, a holding company created by the combination of NYSE Group®, Inc. and

Euronext N.V., commenced trading on 4 April 2007. NYSE Euronext (NYSE/New York and

Euronext/Paris: NYX) operates the world’s largest and most liquid exchange group and offers

the most diverse array of financial products and services. NYSE Euronext, which brings

together six cash equities exchanges in five countries and six derivatives exchanges, is a world

leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the

distribution of market data. Representing a combined $30.5 trillion/20.9 trillion total market

capitalisation of listed companies and average daily trading value of approximately

$141 billion/103 billion (as of 31 December 2007), NYSE Euronext seeks to provide the

highest standards of market quality and integrity, innovative products and services to

investors, issuers, and all users of its markets.

20

This publication is solely intended as information and does not constitute any investment advice or an offer, solicitation or recommendation to acquireor dispose of any investment or to engage in any transaction. Although this publication is issued in good faith, no representation or warranty, express orimplied, is or will be made and no responsibility or liability is or will be accepted by NYSE Euronext or by any of its officers, employees or agents in relation to the accuracy or completeness of this publication and any such liability is expressly disclaimed. No information set out or referred to in this publication shall form the basis of any contract. The creation of rights and obligations in respect of financial products that are traded on the exchangesoperated by NYSE Euronext’s subsidiaries shall depend solely on the applicable rules of the market operator. NYSE Euronext encourages you to reachyour own opinion as to whether investments are appropriate or relevant and recommends you not to make any decisions on the basis of the informationcontained in this publication before checking it, as you will bear full responsibility for any use that you make of it. Persons wishing to trade products available on NYSE Euronext markets or wishing to offer such products to third parties are advised, before doing so, to check their legal and regulatory position in the relevant territory and to understand the related risks. All proprietary rights and interest in or connected with this publication are vested inNYSE Euronext. No part of it may be redistributed or reproduced in any form or by any means or used to make any derivative work (such as translation,transformation, or adaptation) without the prior written permission of NYSE Euronext. NYSE Euronext refers to NYSE Euronext and its affiliates and references to NYSE Euronext in this publication include each and any such company as the context dictates. NYSE EuronextSM, NYSE Group®, Euronext®, Liffe®, NextWarrants® NextTracks® and Trackers® are registered marks of NYSE Euronext.

© February 2008, NYSE Euronext. All rights reserved.

Contacts

For futher information, log on to www.nyseeuronext.comIf you have any question about warrants & certificates, e-mail us at: [email protected]

Amsterdam

P.O. Box 19163

1000 GD Amsterdam

The Netherlands

Tel. +31 (0)20 550 5555

Fax +31 (0)20 550 4900

Brussels

Palais de la Bourse/Beurspaleis

Place de la Bourse/Beursplein

1000 Brussels

Belgium

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Portugal

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United Kingdom

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Paris

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France

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Fax +33 (0)1 49 27 11 71

Warrants &CertificatesGuideSeason your strategy

www.nyseeuronext.com2008 © NYSE Euronext, Inc. All Rights Reserved.

AMSTERDAM BRUSSELS CHICAGO LISBON LONDON NEW YORK PARIS SAN FRANCISCO

SR/ID/022008/500

Investment

products

Pure indexation

Investment strategy

Risk level

Investment horizon

Valuation

Option component

Expiry date

Legal form

Upside limit

Knock-out Trigger that alters the nature of the productLower limit

Upper limit



Pure indexation

Capital protection

Capital protectionBull anddefensive

Less thanunderlying

MT to LT,according toproduct life

Bull anddefensive

Same asunderlying

LT (2 to 3 years)

Same asunderlying

ST to LT,according toproduct life

Less thanunderlying

ST to MT

Same asunderlying

MT (average 1 year)

Bull anddefensive

Moderatelybullish

Neutral to slightlybullishBull

Same asunderlying

ST to LT

Simple

No

With or without

Certificate

No

No

No

No

No

Alteringtrigger

Maximumsettlement

Variable

No

No

Yes

No

Capitalguarantee

Alteringtrigger

Bonus level Maximumsettlement

Maximumsettlement

Doubling ofperformance

No

No

Yes

Variable

No

Yes

Yes

Yes

No

No

No

Yes

No

No

Yes

Yes

Variable No Yes Yes

Certificate Certificate Certificate Certificate Certificate

Complex

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Complex Complex Complex Complex

Airbag Bonus Discount Jet/Sprint

Yield enhancement

Investment products

ST: Short Term: less than 6 months MT: Medium Term: between 6 and 18 months LT: Long Term: more than 18 months

Knock-out barrier: the product expires prematurely if the underlyingreaches this level. Altering trigger: certain characteristics of the product are permanentlychanged if the underlying reaches this level.

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: generally yes (deducted pro rata

temporis)• Parity: varies by product• Investment profile: bull strategy • Risk level: identical to underlying• Investment horizon: from short to long term, depending

on strategy• Valuation: transparent (equivalent to a

fraction of the underlying)• Knock-out feature no• Trigger that alters the nature of the product: no• Option component: no• Expiry date: with or without• Legal form: certificate

Strategies/ProfilePure indexation certificates offer their holders exposure to an underlying asset for afraction of the underlying’s price. Investing in a pure indexation certificate enablesyou to diversify your portfolio over a given asset at a lower cost, while gainingexposure to the same movements in the asset’s market value as you would from adirect investment. A pure indexation certificate also frees the holder from the risksassociated with investing in the underlying, such as insurance, storage anddeterioration in the case of precious metals, and the costs incurred with futuresholdings.

Pure indexationcertificate

A pure indexation productis an investment instrument that closelytracks the performance ofthe underlying asset. The latter is generally an index, basket ofshares, interest rate or commodity.

Please turn over

Investment products

Pure indexation

Profit


0

Sheet I 1

Situation 1:The price of the underlying asset ABC increases by 3%• Underlying asset value: 103 euros.• Product value: 10.29 euros• Investor’s profit: 2.90%• Deviation in gain/loss compared to underlying: -0.1%

Situation 2: The price of the underlying asset ABC falls by 3%• Underlying asset value: 97 euros• Product value: 9.68 euros• Investor’s loss: 3.20%• Deviation in gain/loss compared to underlying: -0.2%

Pure indexationcertificate (continued)

ExamplePure indexation product with

the underlying asset ABC: • The initial value of which is

100 euros. • Parity is 1/10. • The initial value of the

product is 10 euros.

Profit


0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: generally no • Parity: varies by product• Investment profile: bull and defensive strategy• Risk level: lower than the underlying (partial

or total capital protection)• Investment horizon: medium to long term, depending

on the product’s life• Valuation: relatively complex• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileCapital-protected products allow their holders to pursue defensive investmentstrategies. They are excellent tools for gaining exposure to a market with low or evenzero risk. There are, however, a great many types of capital-protected products, eachwith its own specific profile in terms of potential gains and losses. Most can besubscribed to for a fixed price during a period determined by the issuer (subscriptionperiod). Their subsequent value reflects movements in the underlying asset and ininterest rates (option component). That means valuing these products is oftencomplicated. Careful study of their characteristics, especially the conditions to whichthe capital guarantee is subject, is required before any investment.

Profit


Protection level


Capitalprotectedproduct

A capital-protected product enables theinvestor to gain full orpartial exposure to anunderlying asset, whileenjoying a guarantee onall or part of the investedcapital in the event thatthe value of the assetfalls. The guaranteemight apply throughoutthe life of the product or merely on expiry.

Please turn over

Investment products

Capital protection

Sheet I 2

Situation 1:The price of the underlying asset ABC increases by 30%• Underlying asset value on expiry: 130 euros• Product value: 11.5 euros• Investor’s profit: 15%• Deviation in gain/loss compared to underlying: -15%

Situation 2: The price of the underlying asset ABC falls by 20%• Underlying asset value on expiry: 80 euros• Product value: 10 euros• Investor’s loss: 0%• Deviation in gain/loss compared to underlying: 20%

Capitalprotectedproduct(continued)

ExampleCapital-protected product withthe underlying asset ABC• Initial underlying asset

value: 100 euros• Protection level: 100 euros• Participation: 50%• Parity: 1/10

Profit


Protection level


Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: bull and defensive strategy• Risk level: identical to underlying• Investment horizon: short to medium term, depending

on the product’s life• Valuation: complex• Knock-out feature: no• Trigger that alters the nature of the product: yes• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileAirbag products enable investors, under certain market conditions, to enhance theupside performance of an underlying asset, while protecting part of their capital (the « airbag effect ») if the underlying asset falls slightly in value. The degree ofenhancement is subject to different levels within the performance of the underlyingasset. It is determined on expiry whether the underlying has passed these levels. The more strongly the underlying performs, the greater the enhancement effect willbe. It is, however, subject to an upper limit.

Airbag certificate

Airbag products areinvestment instrumentsthat offer their holdersamplified exposure to anunderlying asset, whilegiving them a capital guarantee, provided thatthe value of the underlying does not fallbelow a certain percentage fixed at thetime of issue. The amplified exposure issubject to an upper limiton any increase in theunderlying asset, the levelof which is also fixed on issue.

Please turn over

Investment products

Yield enhancement

Profit

Loss UnderlyingCertificate

0

Sheet I 3

Situation 1:The price of the underlying asset ABChas risen 5% on expiry• Underlying asset value: 105 euros• Product value: 10.5 euros• Investor’s profit: 4.9%• Deviation in gain/loss compared to

underlying: -0.1%

Situation 2: The price of the underlying asset ABChas risen 15% on expiry• Underlying asset value: 115 euros• Product value: 11.75 euros (100%

of 1 euro for the first 10% and 150%of 0.5 euro for the next 5% - i.e. 0.75 euro)

• Investor’s profit: 17.4%• Deviation in gain/loss compared to

underlying: 2.4%

Situation 3: The price of the underlying asset ABChas risen 40% on expiry• Underlying asset value: 140 euros• Product value: 13.5 euros (maximum

settlement)• Investor’s profit: 34.85%• Deviation in gain/loss compared to

underlying: -5.15%

Situation 4: The price of the underlying asset ABChas fallen 15% on expiry• Underlying asset value: 85 euros• Product value: 10 euros (airbag effect)• Investor’s loss: 0.01%• Deviation in gain/loss compared to

underlying: 14.99%

Situation 5: The price of the underlying asset ABChas fallen 40% on expiry. That meansthe product has fallen 15% below theairbag level.• Underlying asset value: 60 euros• Product value: 8 euros• Investor’s loss: 20%• Deviation in gain/loss compared to

underlying: 20%

Airbag certificate(continued)

ExampleAirbag product with the

underlying asset ABC

• Expiry: 3 years

• Performance enhancement at

each level:

➱ 100% if the underlying

increases in value by 0-10%





➱ Any value increase beyond

25% is subject to an upper

limit of 13.5 euros (100 +

100% x (110 - 100) +

150% x (120 - 110) +

200% x (125 -120)) / 10

• Airbag effect: 80% of the

underlying asset value on issue

• Parity: 1/10

• Underlying asset value on

issue: 100 euros

• Product value on issue:

10.01 euros

• The investor buys 10 products

at 10.01 euros

Profit

Loss UnderlyingCertificate

0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: neutral to slight bull strategy• Risk level: lower than the underlying• Investment horizon: short to medium term• Valuation: complex• Knock-out feature: no• Trigger that alters the nature of the product: yes• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileInvestors profit from the entirety of any increase in the underlying asset value, whileprotecting their capital to the level fixed by the lower barrier. They will only incur aloss if that barrier is reached and if the underlying asset price turns out to be lessthan the price of the certificate. Bonuses are investment products with the potential for enhanced performance,without exposure to a greater risk than that associated with investing in theunderlying. There is no upside limit, which means investors can take full advantageof a rise in value, while guaranteeing a minimum return provided that the lower limitis not reached. Above the bonus level, the product’s performance will be the same asthat of the underlying asset.

Bonus certificate

This product offers investors a bonus on expiry, provided that itsvalue has remained between a lower and anupper limit fixed onissue. If either of theselimits is passed, settlement on expiry willbe equal to the closingprice of the underlying. If the lower limit is passed, the bonus is cancelled and the product thereafterbehaves like a pureindexation certificate.Passing the upper limit does not cancel the bonus.

Please turn over

Investment products

Yield enhancement

Profit

Loss Price 1 Price 2 and underlying asset priced

Lower limit

Upper limit

Sheet I 4

Situation 1:The price of the underlying asset ABC has risen 25% on expiry• Value of the underlying: 125 euros• Settlement value: 125 euros• Investor’s profit: 25%• Deviation in gain/loss compared to underlying: 0%

Situation 2: The price of the underlying asset ABC has fallen 11% on expiry. The underlyingasset price did not reach the lower limit (below 80 euros) before expiry. • Underlying asset value: 89 euros• Settlement value: 120 euros (Bonus value)• Investor’s profit: 20%• Deviation in gain/loss compared to underlying: 31%

Situation 3: The price of the underlying asset ABC has fallen 36% on expiry. • Underlying asset value: 64 euros• Settlement value: 64 euros• Investor’s loss: 36%• Deviation in gain/loss compared to underlying: 0%

Situation 4: The price of the underlying asset ABC has risen 2% on expiry. The underlying assetprice fell below the lower limit (below 80 euros) before expiry.• Underlying asset value: 102 euros• Settlement value: 102 euros• Investor’s profit: 2%• Deviation in gain/loss compared to underlying: 0%

Bonus certificate(continued)

ExampleBonus product with the


• Expiry: 3 years

• Underlying asset value on

issue: 100 euros

• Price of Bonus certificate:

100 euros

• Bonus level: 120 euros

• Lower limit: 80 euros

• Parity: 1/1

The investor buys 1 certificate

at 100 euros

Profit

Loss Price 1 Price 2 and underlying asset priced

Lower limit

Upper limit

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: neutral to slight bull strategy• Risk level: lower than the underlying• Investment horizon: short to medium term• Valuation: complex• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileDiscount products are suitable for investors who expect the underlying asset value toremain flat or to rise by a small amount. If the underlying asset value should fall (or rise), the initial discount on the purchase price will provide the investor with a superior performance than that of the underlying. Other things being equal, a discount product increases in value over time, since its value on expiry has to bethe same as the underlying (subject to the upper settlement limit). Three settlementscenarios are possible if the product is held to maturity (see example).

Discountcertificate

The Discount productenables investors to gainexposure to an underlyingasset while benefitingfrom a discount on thepurchase price. In exchange for thisimmediate benefit, thesettlement of the producton expiry is subject to anupper limit set at thetime of issue.

Please turn over

Investment products

Yield enhancement

Profit


Maximum settlement

Sheet I 5

Situation 1:The price of the underlying asset ABC has risen 10% on expiry• Underlying asset value: 11 euros• Product’s settlement value: 11 euros• Investor’s profit 15.79%• Deviation in gain/loss compared to underlying: 5.79%

Situation 2: The price of the underlying asset ABC has risen 35% on expiry• Underlying asset value: 13.5 euros• Product’s settlement value: 12 euros (maximum settlement price)• Investor’s profit: 26.32%• Deviation in gain/loss compared to underlying: -8.68%

Situation 3: The price of the underlying asset ABC has fallen 15% on expiry• Underlying asset value: 8.5 euros• Product’s settlement value: 8.5 euros• Investor’s loss: -10.53%• Deviation in gain/loss compared to underlying: 4.47%

Discountcertificate(continued)

ExampleDiscount product with the


• Expiry: 1 year

• Original price of the

underlying: 10 euros

• Price of the Discount

product: 9.5 euros

• Maximum settlement price:

12 euros

• Parity: 1/1

The investor buys 1 certificate

at 9.5 eurosProfit


Maximum settlement

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: moderate bull strategy• Risk level: identical to underlying• Investment horizon: medium term (average 1 year)• Valuation: complex• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileJet products are suitable for investors who expect the underlying asset value to rise,but not beyond the settlement limit fixed on issue. The profit potential is, inprinciple, substantially greater than that of the underlying, while the level of risk inthe event of a fall in value is the same. The additional profit potential offered by theproduct compared to the underlying is built up progressively over time and is onlyfully realised (if at all) on expiry. Three settlement scenarios are possible if theproduct is held to maturity (see example). Before purchasing a Jet product at a pricehigher than that of the underlying, it is vital to calculate the theoretical break-evenpoint for the investment.

Jet/Sprintcertificate

The Jet (or Sprint) product gives investorsthe opportunity to doublethe performance of anunderlying asset if thatasset closes at a pricebetween two limits (upperand lower) fixed at thetime of issue. This performance is subject toan upper settlement limit,which is also fixed onissue. If the value of theasset falls and the underlying closes belowthe lower limit, the valueof the Jet product will beequal to the closing priceof the underlying.

Please turn over

Investment products

Yield enhancement

Profit


Upper limit

Lower limit

Sheet I 6

Situation 1:The price of the underlying asset ABC is 108 euros on expiry. The closing price isbetween the two limits. Settlement is equal to: lower limit + 2 times (closing price -lower limit)• Underlying asset value: 108 euros• Return on the underlying: 8%• Product’s settlement value: 120 euros• Investor’s profit: 16.51%• Deviation in gain/loss compared to underlying: 8.51%

Situation 2: The price of the underlying asset ABC is 115 euros on expiry. The closing price isabove the upper limit. Settlement is equal to: lower limit + 2 times (upper limit -lower limit)• Underlying asset value: 115 euros• Return on the underlying: 15%• Product’s settlement value: 124 euros (maximum settlement limit)• Investor’s profit: 20.39%• Deviation in gain/loss compared to underlying: 5.39%

Situation 3: The price of the underlying asset ABC is 95 euros on expiry. The closing price is lessthan the lower limit. Settlement is equal to the closing price of the underlying.• Underlying asset value: 95 euros• Return on the underlying: -5%• Product’s settlement value: 95 euros (closing price of the underlying)• Investor’s loss: -7.77%• Deviation in gain/loss compared to underlying: - 2.77%

Jet/Sprintcertificate(continued)

ExampleJet product with the


• Expiry: 1 year

• Initial price of the

underlying: 100 euros

• Product price: 103 euros


• Upper limit: 110 euros

• Maximum settlement limit:

124 euros

• Parity: 1/1

The investor buys 1 product at

103 euros

Profit


Upper limit

Lower limit

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: yes• Parity: varies by product• Investment profile: bull strategy • Risk level: identical to underlying• Investment horizon: from short to long term, depending

on strategy• Valuation: transparent (equivalent to a

fraction of the underlying)• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: no• Expiry date: no• Legal form: certificate

Strategies/ProfileETC certificates allow the investor to gain exposure to an underlying commodity forall or part of the price of the underlying. In other words, investing in an ETC enablesyou to diversify your portfolio over a particular commodity at a lower cost, whilegaining the same exposure to movements in the price of that commodity as youwould have obtained by investing directly. An ETC also frees the holder from therisks associated with investing in the underlying asset, such as insurance, storageand deterioration in the physical commodity.

ExchangeTradedCommodities(ETC)

An ETC is simply a pureindexation certificate forwhich the underlying is acommodity. ExchangeTraded Commodities areundated zero-couponbonds backed by acontract giving it exposure to the underlying commodity.ETCs directly track movements in the priceof the commodity itselfrather than in the shareprice of companies specialising in the commodity sector. Theyallow investors to obtainthis exposure withouthaving to manage futuremarket investments or totake physical delivery ofthe underlying.

Please turn

Investment products

Pure indexation

Profit


0

Sheet I 7

Situation 1:The price of the underlying commodity ABC increases by 3%• Underlying asset value: 103 euros• Certificate value: 10.29 euros• Investor’s profit: 2.90%

Situation 2: The price of the underlying commodity ABC falls by 3%• Underlying asset value: 97 euros• Certificate value: 9.69 euros• Investor’s loss: 3.10%

ExchangeTradedCommodities (ETC)(continued)

ExampleETC with the underlying

commodity ABC:

• The initial value of which is

100 euros.

• Parity is 1/10.

• The initial value of the

certificate is 10 euros.Profit


0

ST to MT

Strike Strike sold Strike sold AlteringtriggerStrike bought

Strike bought Strike sold Alteringtrigger Strike sold

Limited to the underlying

asset valueYes

No

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Certificat

Complex

Bear Bull


Bear Bull Bear

Spread (combination of options)


Spread Plus(combination of options)

Put

ST to LT ST to MT

Opposite of theunderlying


Knocks outproduct

Strike

Yes (upper limit)

No

No

Yes

Certificat

Limited to the underlying

asset valueNo

Negligible

Variable

Yes

Yes

Warrant

No

No

Yes

No

Simple Complex

Bear indexation

Bear indexation

Bear Bull




Call

Leverage products

Investment strategy

Risk level

Investment horizon

Valuation

Option component

Expiry date

Legal form

Upside limit

Knock-out featureTrigger that alters the nature of the productLower limit

Upper limit



Leverageproducts

Strike = exercise price

ST to MT ST to MT

Knock-out

Knock-out

Knock-out Strike

Knock-out Strike

Knock-out

Knock-out

Yes

Yes, 2

No

Yes

Yes

Yes

No

Yes

No

No

Yes

Yes

Yes

Yes

Yes

NoLimited to


NoLimited to


Yes

Yes

Warrant

Negligible

Yes

Certificate or Warrant

No

Complex Simple Transparent

Weak variation

Substantially greater than the underlying Far greater than the underlying

Bull Bear Bull Bear

Digital with double knock-out

Digital with double knock-out Leverage knock-out Leverage knock-out

with financing level

Call

Leverage knock-out

Put Call Put


Investment strategy

Risk level

Investment horizon

Valuation

Option component

Expiry date

Legal form

Upside limit

Knock-out featureTrigger that alters the nature of the productLower limit

Upper limit



Leverage products

Leverageproducts(continued)

ST: Short Term: less than 6 monthsMT: Medium Term: between 6 and 18 monthsLT: Long Term: more than 18 months

Knock-out barrier: the product expires prematurely if theunderlying reaches this level. Alterning trigger: certain characteristics of the product arepermanently changed if the underlying reaches this level

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: generally yes (deducted pro rata

temporis)• Parity: varies by product• Investment profile: bear strategy• Risk level: virtually identical to the opposite

of the underlying• Investment horizon: short to long term• Valuation: transparent (difference between

reference level fixed on issue andthe underlying asset price,adjusted for parity, excludingmanagement fees)

• Knock-out feature: yes (upper limit)• Trigger that alters the nature of the product: no• Option component: negligible• Expiry date: with or without• Legal form: certificate

Strategies/ProfileBear indexation products are suitable for investors who expect the underlying assetvalue to fall and who want to limit their risk to the amount invested. They generatethe opposite performance to the underlying, some products are adjusted to exchangerate movements. Their value equals the difference between a reference level (fixedon issue) and the underlying asset price.

Bear indexation

Bear indexation productsoffer investors the opposite performance tothat of the underlyingasset. A safety threshold(close or equal to a reference level fixed atthe time of issue) acts asa cut-off to limit the riskof loss if the underlyingasset price should rise.This means the maximumloss that the investor canincur is limited to theamount invested, unlike atraditional short sale,where the maximum lossis theoretically unlimited.

Please turn over

Leverage

Bear indexation

Profit


Knock-out

Entry level

0

Sheet L 1

Situation 1:The underlying asset price is 90 points• Underlying asset value: 90 points• Return on the underlying: -10%• Certificate value: 1.10 euro (reference level - underlying asset value, adjusted for

parity, i.e. (200 - 90) / 100) = 1.10• Investor’s profit/loss: 10%

Situation 2: The underlying asset price is 110 points• Underlying asset value: 110 points• Return on the underlying: 10%• Product value: 0.90 euro (reference level - underlying asset value, adjusted for

parity, i.e (200 - 110) / 100)• Investor’s profit/loss: -10%

Situation 3: The underlying asset price is 195 points• Underlying asset value: 195 points• Return on the underlying: 95%• Product value: knocked out and settled• Settlement value: 0.05 euro (reference level - underlying asset value, adjusted for

parity, i.e (200 - 195) / 100)• Investor’s profit/loss: -95%

Bear indexation(continued)

ExampleBear indexation product with

the underlying asset ABC

• Initial underlying asset price

100 points

• Certificate price: 1 euro

• Reference level: 200 points

• Safety threshold: 190

points (95% of reference

level)

• Parity: 1/100

The investor buys 1 product

at 1 euro

Profit


Knock-out

Entry level

0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: bull (call warrant) or bear strategy

(put warrant)• Risk level: greater than the underlying• Investment horizon: short to medium term• Valuation: complex (time value, volatility, etc.)• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: warrant

Strategies/ProfilePlain vanilla warrants are suitable for investors who want to share in the rise (callwarrant) or fall (put warrant) in the underlying asset value, for an initial investmentlower than the price of the underlying. In other words, warrants offer leverage withrespect to the underlying asset. Their profit potential is far greater than that of theunderlying. In theory, it is unlimited. Their risk profile is also much higher than thatof the underlying, but potential losses cannot exceed the amount invested. A clearunderstanding of how these products function is vital before investing in them. Theprice of a warrant moves in accordance with several criteria in addition to changes inthe underlying asset price, which it amplifies in a bull (call warrant) or bear market(put warrant). The warrant price is sensitive to the time value: it falls in value as thewarrant’s expiry date approaches. A warrant loses roughly two thirds of its valueduring the final third of its life. The warrant price is also sensitive to the volatility ofthe underlying asset. The higher the volatility, the higher the warrant price. If thevolatility diminishes, the value of the warrant also falls.

Profit


Strike price

0

Plain vanillawarrant

A plain vanilla warrantgives the holder the right,but not the obligation, tobuy (in the case of a callwarrant) or to sell (in thecase of a put warrant) theunderlying asset at a predetermined price (the strike price or exercise price) up to agiven date (expiry). Thelife of the warrant terminates on that date.The price the buyer paysfor this right is less thanthat of the underlyingasset. Plain vanilla warrants never exposetheir holders to a risk ofloss greater than their initial investment.

Please turn over

Leverage


Sheet L 2

Situation 1:The price of the underlying asset ABC is 125 euros on expiry• Underlying asset value: 125 euros• Return on the underlying: 25%• Value of the warrant on expiry: 25 euros (underlying asset value - strike price)• Investor’s profit/loss: 108%

Situation 2: The price of the underlying asset ABC is 80 euros on expiry• Underlying asset value: 80 euros• Return on the underlying: -20% (loss of 20 euros)• Value of the warrant on expiry: 0 euro• Investor’s profit/loss: -100% (loss of 12 euros)

Plain vanillawarrant(continued)

ExampleCall warrant with the


• Initial underlying asset

price: 100 euros

• Warrant price: 12 euros

• Warrant strike price:

100 euros

The investor buys 1 warrant at

12 euros Profit


Strike price

0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: bull (call Spread) or bear strategy

(put Spread)• Risk level: greater than the underlying• Investment horizon: short to medium term• Valuation: relatively complex (time value,

volatility, etc.)• Knock-out feature: no• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileCall Spread and put Spread certificates are comparable in economic terms withplain vanilla warrants. If you buy a call Spread certificate, for instance, you aresimultaneously purchasing a call warrant with the lower limit as its strike price andselling a call warrant with the upper limit as its strike price and the same expirydate. The exposure to the time value generated by buying one call is partially offsetby selling the other. Spread certificates offer cheaper and less volatile hedging thanwould be obtained by purchasing a plain vanilla warrant.

Combinationof optionsbuy/sell (callSpread andput Spread)

These certificates, based on acombination of options, offerinvestors exposure to movements in an underlyingasset in a bull market (callSpread) or bear market (putSpread). The investor’s returnon expiry depends on theunderlying asset value and whether or not it falls betweenan upper and a lower limit fixedon issue. If the underlyingcloses between the two limits,the value of the certificate willbe equal to the underlying assetvalue minus the lower limit(call Spread) or the upper limitminus the underlying assetvalue (put Spread). If theunderlying closes below thelower limit (call Spread) orabove the upper limit (putSpread), the value of the certificate on expiry is zero. Themaximum capital gain is knownat the time of issue (maximumsettlement). The risk is limitedto the amount invested.

Please turn over

Leverage


Profit


Lower limits

Upper limits

0

Sheet L 3

Situation 1:The price of the underlying asset ABC is 75 euros on expiry. The lower limit hasbeen passed.• Underlying asset value: 75 euros• Return on the underlying: -25%• Value of call Spread on expiry: 0 euro• Investor’s profit/loss: -100% (-125 euros)

Situation 2: The price of the underlying asset ABC is 90 euros on expiry. The underlying isbetween the two limits.• Underlying asset value: 90 euros• Return on the underlying: -10%• Value of call Spread on expiry: 10 euros (difference between underlying and lower

limit)• Investor’s profit/loss: -20% (100 euros - 125 euros)

Situation 3: The price of the underlying asset ABC is 120 euros on expiry. The underlying isabove the upper limit.• Underlying asset value: 120 euros• Return on the underlying: 20%• Value of call Spread on expiry: 20 euros (difference between the two limits)• Investor’s profit/loss: 60% (200 euros - 125 euros)

Combinationof optionsbuy/sell (callSpread andput Spread)(continued)

ExampleCall Spread with the



price: 100 euros

• Price of call Spread:

12.5 euros



• Maximum potential gain:

20 euros

The investor buys 10 call

Spreads at 12.5 euros, giving

a total purchase cost of 125

euros

Profit


Lower limits

Upper limits

0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: more dynamic portfolio management• Risk level: higher than the underlying• Investment horizon: short to medium term• Valuation: relatively complex (time value, volatility,

etc.)• Knock-out feature: no• Trigger that alters nature of the product: yes• Option component: yes• Expiry date: yes• Legal form: certificate

Strategies/ProfileCall Spread Plus and put Spread Plus products offer investors a double opportunityto obtain the maximum settlement fixed on issue. Unlike the basic call Spread andput Spread, they are guaranteed to receive the maximum settlement if the finalunderlying asset value is higher than the upper limit for a call Spread Plus (or belowthe lower limit for a put Spread Plus), but also if the final asset value falls betweenthese two limits, provided that the underlying asset value did not pass the lower (callSpread Plus) or upper limit (put Spread Plus) during the life of the product.Investors choose a call Spread Plus when they expect a slight increase, stability oreven a slight fall (but not below the lower limit) in the underlying asset value. In thecase of a put Spread Plus, the investor expects a fall, stability or even a slightincrease (but not beyond the upper limit) in the underlying asset value.

Combination ofoptions buy/sellcertificates (call SpreadPlus and putSpread Plus)

Call Spread Plus and putSpread Plus certificates arebased on a combination ofoptions and offer investorsexposure to movements in anunderlying asset in a bullmarket (call Spread Plus) orbear market (put SpreadPlus). The investor’s returnon expiry depends on thebehaviour of the underlyingduring the life of the pro-duct. If, in the case of a bullproduct, the underlyingpasses the lower limit (callSpread Plus) or in the caseof a bear product, the upperlimit (put Spread Plus) fixedon issue, the product willsubsequently behave exactlylike a call Spread or putSpread certificate respectively(see Sheet L 3). In all othercases, the investor will receive on expiry the maximumsettlement amount, equal tothe difference between thetwo limits.

Leverage

Spread(combination of options)

Profit

LossCall UnderlyingPut

Lower limit

Upper limit

Price 2Price 1

Sheet L 4

Combination ofoptions buy/sellcertificates (call SpreadPlus and putSpread Plus)(continued)

ExampleSpread Plus Put with the



price: 100 euros

• Price of put Spread Plus:

15 euros



• Maximum potential gain:

20 euros

The investor buys 10 put

Spread Plus at 15 euros,

giving a total purchase cost

of 150 euros.

Profit

LossCall UnderlyingPut

Lower limit

Upper limit

Price 2Price 1

Situation 1:The price of the underlying asset ABC is 90 euros on expiry

The underlying has reached the upper limit(150 euros) during the life of the product• Underlying asset value on expiry:

90 euros • Return on the underlying: -10% • Value of the put Spread Plus on

expiry: 20 euros (the lower of: upperlimit minus underlying asset price(150 - 90) and the maximum gain)

• Investor’s profit/loss: 25% (50 euros)

The underlying has not reached the upperlimit (150 euros) during the life of theproduct• Underlying asset value on expiry:

90 euros• Return on the underlying: -10%• Value of the put Spread Plus on

expiry: 20 euros (maximum gain)• Investor’s profit/loss: 25% (50 euros)

Situation 2:The price of the underlying asset ABC is 140 euros on expiry

The underlying has reached the upper limit(150 euros) during the life of the product • Underlying asset value on expiry:

140 euros• Return on the underlying: 40%• Value of the put Spread Plus on

expiry: 10 euros (the lower of: upperlimit minus underlying asset price(150 - 140) and the maximum gain)

• Investor’s profit/loss: -33% (-50 euros)

The underlying has not reached the upperlimit (150 euros) during the life of theproduct• Underlying asset value on expiry:

140 euros• Return on the underlying: 40%• Value of the put Spread Plus on

expiry: 20 euros (maximum gain)• Investor’s profit/loss: 33% (50 euros)

Situation 3:The price of the underlying asset ABC is 160 euros at maturity. The upper limit has

been passed.

• Underlying asset value on expiry: 160 euros

• Return on the underlying: 60%

• Value of the put Spread Plus on expiry: 0 euro (the lower of: upper limit minus

underlying asset price (150 - 160) and the maximum gain)

• Investor’s profit/loss: -100% (-150 euros)

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: bull/bear strategy• Risk level: much higher than that of the

underlying (risk of total capitalloss)

• Investment horizon: short term• Valuation: relatively simple (intrinsic value)• Knock-out feature: yes, equal to the strike price• Trigger that alters the nature of the product: no• Option component: slight• Expiry date: yes• Legal form: certificate or warrant

Strategies/ProfileKnock-out products are highly leveraged, which means they are only suitable foractive investors who want to take a bull (call) or bear position (put) in order to profitfrom movements in the underlying asset. It is relatively easy to value these products:they are valued at their intrinsic value, namely the underlying asset price minus thestrike price, divided by parity (for bull products) or the strike price minus theunderlying asset price, divided by parity (for bear products). These products are onlyaffected to a limited extent by the time value and volatility pattern of the underlyingasset. They require constant monitoring of the underlying asset price.

Leverageknock-out

A knock-out producttracks and substantiallyamplifies the performanceof an underlying asset inboth a bull and a bearmarket. However, if theunderlying reaches a predetermined limit orknock-out barrier (downward for a call,upward for a put), the product expires prematurely. Its valuebecomes zero. The investor loses thewhole of the investment.If, by contrast, the product matures withoutbeing knocked out, itsholder enjoys the samerights as with a plainvanilla warrant.

Please turn over

Leverage

With barrier

Profit


Knock-out

0

Sheet L 5

Situation 1:The underlying asset value is 110 euros. The knock-out barrier has not been reached• Underlying asset value: 110 euros• Return on the underlying: 4.76%• Value of the call warrant: 10.01 euros• Investor’s profit/loss: 99.40% (499 euros, or 100 times (10.01 - 5.02)

Situation 2: The underlying asset value is 103 euros. The knock-out barrier has not been reached• Underlying asset value: 103 euros• Return on the underlying: -1.90%• Value of the call warrant: 3.03 euros• Investor’s profit/loss: -39.60% (-199 euros, or 100 times (3.03 - 5.02))

Situation 3: The underlying asset value is 99 euros. The knock-out barrier has been reached• Underlying asset value: 99 euros• Return on the underlying: -5.70%• Product value: knocked out and settled• Settlement value: 0 euro• Investor’s profit/loss: -100% (-502 euros, or 100 times (0 - 5.02))

Leverageknock-out (continued)

ExampleBull market product with a

knock-out barrier and the



value: 105 euros

• Knock-out: 100 euros

• Product value: 5.02 euros

• Parity: 1/1

The investor buys 100 call

warrants at 5.02 euros,

giving a total investment

of 502 eurosProfit


Knock-out

0

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: bull/bear strategy• Risk level: much higher than that of the

underlying (risk of total capital loss)• Investment horizon: from short to medium term,

depending on strategy• Valuation: relatively simple (intrinsic value)• Knock-out feature: yes, one that evolves over time• Strike price: yes, one that moves on a daily

basis• Trigger that alters the nature of the product: no• Option component: slight• Expiry date: no• Legal form: certificate or warrant

Strategies/ProfileKnock-out products are highly leveraged, which means they are only suitable foractive investors who want to take a bull (call) or bear position (put) in order to profitfrom movements in the underlying asset. It is relatively easy to value these products,provided that the knock-out barrier has not been reached. They are valued at theirintrinsic value, namely the underlying asset price minus the strike price, divided byparity (for bull products) or the strike price minus the underlying asset price, dividedby parity (for the bear products). If the knock-out barrier is reached, the productexpires prematurely. Its value is then zero. The investor can, however, receive acompensation payment (generally small), calculated according to each issuer’sprospectus terms.

Profit

Loss Call UnderlyingPut

0

Knock-out

Leverageknock-outwith strike

A knock-out product withstrike tracks and substantially amplifiesthe performance of theunderlying asset in both abull and a bear market, if the underlying is above(call) or below (put) apredetermined level. The product expires prematurely if that predetermined level is reached.

Please turn over

Leverage

With barrier

Sheet L 6

Situation 1:The underlying passes the barrier and the issuer unwinds at an average of 102.70euros.• Product is knocked out• Settlement of the product: 0.27 euro• Loss (0.27 - 2.01) = -1.74 euros or -86.57%• The loss on a direct investment in the underlying would have been 14.44%

Situation 2: The underlying does not reach the knock-out barrier at any stage and is worth 147 euros• Position is sold when the underlying asset value is 147 euros• Product value: 4.69 euros• Profit (4.69 - 2.01) = 2.68 euros or 133.33%• The profit on a direct investment in the underlying would have been 22.50%

Leverageknock-outwith strike (continued)

ExampleLeverage product with a




value: 120 euros

• Strike price (or financing

level): 100 euros

• Knock-out barrier:

104 euros

• Parity: 10/1

The investor buys 10 products

at 2.01 euros

Profit

Loss Call UnderlyingPut

0

Knock-out

Characteristics• Continuous listing: yes• Entry/exit fees: no• Annual management fee: no• Parity: varies by product• Investment profile: movements in the underlying are

contained• Risk level: much higher than that of the

underlying (risk of total loss of capital)

• Investment horizon: short to medium term• Valuation: complex• Knock-out feature: yes, two• Trigger that alters the nature of the product: no• Option component: yes• Expiry date: yes• Legal form: certificate or warrant

Strategies/ProfileProducts with a double knock-out barrier offer very strong leverage and are onlysuitable for active investors who want to take a position in order to profit from abetter return than that of the underlying asset, movements of which are containedbetween two limits. The product has a fixed value on expiry, irrespective of wherethe underlying asset value ends up between the two limits. If either of the knock-outbarriers containing the underlying asset value is reached during the life of theproduct, the product expires prematurely with zero value.

Digital with doubleknock-outbarrier

Product with doubleknock-out barrier, thevalue of which on expiryis fixed in advance. The product expires prematurely if one of twopredetermined levels isreached during the product’s life.

Please turn over

Leverage

Digital with double knock-out

Profit


Knock-out barriers

0

Sheet L 7

Situation 1:The underlying has risen 25% on expiry• Underlying asset value: 125 euros• Product is knocked out• Settlement of the product: 0 euro• Investor’s loss: 100%

Situation 2: The underlying has not reached either knock-out barrier at any point and has fallen15%• Underlying asset value: 85 euros• Settlement of the product: 1 euro• Investor’s profit: 100%

Digital withdoubleknock-outbarrier (continued)

ExampleDigital product with a double




value: 100 euros

• Lower knock-out barrier:

80 euros

• Upper knock-out barrier:

120 euros

• Settlement value: 1 euro

The investor buys 10 products

at 0.50 euro

Profit


Knock-out barriers

0

warrants and certificates

Documents