LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR

Transcription

1 LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR PROSPECTUS Page 1

2 CONTENTS LEGAL AND GENERAL INFORMATION... 3 GENERAL CHARACTERISTICS... 4 FUND TYPE... 4 NAME... 4 LEGAL FORM AND MEMBER STATE IN WHICH THE FUND WAS FORMED... 4 FUND INCEPTION DATE AND ANTICIPATED TERM... 4 KEY INFORMATION... 4 WHERE THE MOST RECENT ANNUAL AND PERIODIC REPORTS MAY BE OBTAINED... 4 SERVICE PROVIDERS... 5 THE MANAGEMENT COMPANY... 5 DEPOSITARY & CUSTODIAN... Error! Bookmark not defined. REGISTRAR AND TRANSFER AGENT BY DELEGATION FROM THE MANAGEMENT COMPANY... Error! Bookmark not defined. AUDITOR... 5 DELEGATED SERVICES... 5 FUND OPERATION AND MANAGEMENT... 5 GENERAL CHARACTERISTICS... 5 UNIT CHARACTERISTICS... 5 LISTING OF LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR FUND UNITS BALANCE SHEET DATE... 6 TAXATION... 7 SPECIFIC CHARACTERISTICS... 8 ISIN CODE:... 8 CLASSIFICATION... 8 INVESTMENT OBJECTIVE... 8 BENCHMARK INDEX... 8 ELIGIBLE INVESTORS AND TYPICAL INVESTOR PROFILE DETERMINATION AND APPROPRIATION OF INCOME DISTRIBUTION FREQUENCY UNIT CHARACTERISTICS SUBSCRIPTION AND REDEMPTION FEES AND COMMISSIONS COMMERCIAL INFORMATION INVESTMENT RULES ASSET VALUATION AND RECOGNITION RULES Page 2

3 LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR UCITS COMPLIANT WITH EU STANDARDS DETAILED MEMORANDUM LEGAL AND GENERAL INFORMATION The legal notice will be published in the Bulletin des Annonces Légales Obligatoires (the French official register) on 15 February 2012 Pursuant to Articles L and L of the Code Monétaire et Financier (the "French Monetary and Financial Code), the French financial markets authority, l'autorité des marchés financiers (AMF), has approved this prospectus on 1 February The AMF draws the public s attention to the following: - There is no guarantee that the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund (hereinafter the Fund ) will achieve its investment objective, as indicated in the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR prospectus, which was approved by the AMF on 1 February Achieving the LYXOR ETF S&PP 500 CAPPED FINANCIALS SECTOR investment objective will require extensive use of financial instruments traded on regulated or over-the-counter markets and may involve counterparty risk or market risk. The price of a unit of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund traded on a NYSE Euronext market may not reflect the unit's net asset value. - An order that cannot be executed within the reservation thresholds set down by NYSE Euronext in Article of its NYSE Euronext Cash Market Trading Manual published on 13 December 2004 shall be reserved, as provided for in said article until the forces of supply and demand allow the order to be executed at an authorised price. - Should there be an interruption in the calculation or publication of the S&P Select Sector Capped 20% Financials index, or if NYSE Euronext is unable to obtain the value of this index, or if NYSE Euronext is unable to obtain the daily net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund or to calculate and publish the indicative net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund, it may be impossible to quote the units of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund. - Under the terms of market-making contracts concluded between NYSE Euronext and the "Market Maker" financial institutions, the parties may amend these contracts at their discretion, in particular with respect to the number of "Market Makers", the termination of a "Market Maker" and the maximum bid/ask spreads at which liquidity is likely to be lost. Page 3

4 GENERAL CHARACTERISTICS FUND TYPE A French common fund (FCP) NAME LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR. LEGAL FORM AND MEMBER STATE IN WHICH THE FUND WAS FORMED A French common fund (FCP) formed in France under French law. FUND INCEPTION DATE AND ANTICIPATED TERM The Fund was approved by l Autorité des Marchés Financiers on 1 February 2012 and was formed on 10 February 2012 for a term of 99 years. KEY INFORMATION Units C-EUR Initial net asset value per unit 100 EUR ISIN codes FR Income distribution Accumulation Fund currency EUR Eligible investors C-EUR units are available to all investors Markets where traded NYSE Euronext (Paris), Deutsche Borse (Frankfurt), Borsa Italiana (Milan) Minimum subscription amount EUR 100,000 R C-USD 100 USD FR Accumulation USD C-USD units are available to all investors None The equivalent of EUR 100,000 in USD WHERE THE MOST RECENT ANNUAL AND PERIODIC REPORTS MAY BE OBTAINED The most recent annual and other periodic filings will be sent within one week to Fund unit-holders who request these documents in writing from: LYXOR INTERNATIONAL ASSET MANAGEMENT. 17, cours Valmy Paris La Défense CEDEX France contact@lyxor.com More information or explanations may be requested at Page 4

5 SERVICE PROVIDERS THE MANAGEMENT COMPANY LYXOR INTERNATIONAL ASSET MANAGEMENT. A French joint-stock company with executive board and supervisory board. Registered office: 17, cours Valmy Puteaux FRANCE. Postal address: Tour Société Générale A08-17, Cours Valmy Paris-La Défense Cedex FRANCE. CUSTODIAN/REGISTRAR SOCIETE GENERALE. A credit institution founded on 8 May 1864 by special decree of Napoleon III. Registered office: 29, bd Haussmann Paris FRANCE. Postal address of the custodian function: Paris cedex 18 FRANCE. ESTABLISHMENT RESPONSIBLE FOR HOLDING REGISTERS OF UNITS AND CENTRALISING SUBSCRIPTION AND REDEMPTION ORDERS Registrar and transfer agent by delegation from Lyxor International Asset Management: SOCIETE GENERALE. A credit institution founded on 8 May 1864 by special decree of Napoleon III. Registered office: 29, bd Haussmann Paris FRANCE. Postal address for order processing and account administration: 32, rue du Champ de Tir Nantes AUDITOR PRICEWATERHOUSECOOPERS AUDIT Postal address: 63 rue de Villiers Neuilly-sur-Seine Authorized signatory: Marie-Christine Jetil DELEGATED SERVICES LYXOR INTERNATIONAL ASSET MANAGEMENT is solely responsible for the Fund s investment and administrative management and delegates no tasks to third parties except for accounting management, which is delegated to: Société Générale Securities Services Net Asset Value. Immeuble Colline Sud - 10, passage de l Arche Paris-La Défense Cedex FRANCE. FUND OPERATION AND MANAGEMENT GENERAL CHARACTERISTICS UNIT CHARACTERISTICS The custodian is responsible for keeping unit-holder accounts. Each Fund unit-holder has a co-ownership right to the Fund s net assets that is proportional to the number of units held. Units carry no voting rights as all decisions are made by the management company. Units are held in bearer form and will not be divided. THE LISTING OF LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR FUND UNITS - Where the unit is listed on Euronext Paris, as indicated under Fund Details, investors should note the following listing rules: Pursuant to Article D of the French Monetary and Financial Code which requires that shares or units in an undertaking for collective investment in transferable securities (UCITS) cannot be listed for trading unless the UCITS has implemented a system for ensuring that the price of the shares or units does not substantially deviate from their net asset value per share or unit the NYSE Euronext Paris exchange has set the following reservation thresholds for the trading of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund units: +/- 3% of the Fund s Indicative Net Asset Value or (INAV) (see the "Indicative Net Asset Value" section below), which is published by NYSE Euronext Paris and regularly updated by estimation throughout the trading day in accordance with the change in S&P Select Sector Capped 20% Financials Index. Page 5

6 To observe the reservation thresholds set by NYSE Euronext Paris (see the Indicative Net Asset Value section) the "Market Makers" will ensure that the price of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR Fund units do not deviate more than 3% above or below the Fund s indicative net asset value per unit. - Where the unit is listed on a market other than Euronext Paris, as specified under Fund Details, investors should note the following rules concerning the listing of units on such markets: Investors wishing to acquire Fund units or shares on any of the markets mentioned under Fund Details should familiarise themselves with the guidelines laid down by the relevant exchange operator in compliance with local regulations, seeking the assistance if necessary of their usual brokers for the markets in question. BALANCE SHEET DATE Balance sheet date: the last NAV valuation date of March. The first fiscal year ends on the last NAV valuation date of March Page 6

7 TAXATION Investors should note that the following information is just a general summary of the applicable tax regime, under current French law, for investment in a French FCP fund. Investors should therefore take into account their personal situation and seek advice from their tax adviser. 1. TAXATION OF THE FUND In France, the co-ownership status of FCP funds means that they are not subject to corporate income tax and therefore inherently benefit from some tax transparency. Accordingly the Fund is not liable for taxes on the income that it earns or receives for its management services. In countries other than France where the Fund may invest, capital gains realized on the disposal of foreign securities and foreign-source income earned may be subject to taxation and generally in the form of a withholding tax. In some cases, tax treaties may reduce or eliminate taxation abroad. 2.1 French resident unit-holders 2. TAXATION OF FUND UNIT-HOLDERS Income and capital gains are taxable under the standard applicable tax regime Investors should take into account their personal situation and seek advice from their tax adviser. 2.2 Non-French resident unit-holders The income distributed by the Fund may be subject to a levy or withholding at the source in France, unless otherwise provided for in a tax treaty. Pursuant to Article 244 bis C of the French General Tax Code, any capital gains upon the redemption or sale of Fund units are not taxable in France. Non-French resident unit-holders will be subject to the tax laws of their country of residence. Page 7

8 SPECIFIC CHARACTERISTICS ISIN CODES: C-EUR units: FR C-USD units: FR CLASSIFICATION Global equities. The Fund is an index-tracker fund. INVESTMENT OBJECTIVE The Fund s investment objective is to gain exposure to the S&P Select Sector Capped 20% Financials index ( the benchmark index ), denominated in USD, by replicating the performance of this index to within a maximum tracking error of 1% calculated over a 52-week period. If however the tracking error comes to exceed 1%, the Fund will still seek to remain within 5% of the S&P Select Sector Capped 20% Financials index's volatility. BENCHMARK INDEX Benchmark: the S&P Select Sector Capped 20% Financials Net Total Return Index, in US dollars. 3 - The index The S&P Select Sector Capped 20% Financials index measures the performance of the companies that Standard & Poor s considers to be the world s major global financial institutions. At each moment in time, the constituents of this index, which is denominated in USD, are members of the S&P500 index. Since this benchmark index is a subset of the S&P 500 index, its constituents are selected using a modified market-capitalisation weighted methodology that ensures that the constituent stocks are representative of the financial sector while also ensuring that a specific concentration limit is abided by. The index is calculated by Standard & Poor s, which is a registered trademark of Standard & Poor s Financial Services LLC. The S&P 500 index was first published in 1957 and remains a leading indicator of US equities, reflecting the risk and return characteristics of the broader large-cap universe on an on-going basis. The index is composed of the 500 leading companies in the leading industries of the US economy, covering 75% of publicly listed US companies. Page 8

9 MeThodology The stocks that compose the S&P Select Sector Capped 20% Financials index, denominated in USD, are at all times constituents of the S&P 500 index. None of the stocks that make up the latter index can represent over 19% of the Benchmark Index. The Index Committee observes a set of published guidelines for maintaining the weights of the Benchmark Index constituents below this level. These guidelines ensure the transparency and fair treatment necessary to enable investors to replicate the index and achieve the same returns as the S&P Select Sector Capped 20% Financials index. The Benchmark Index is rebalanced quarterly, as follows: - The index s constituents are reviewed each quarter. The reference date for rebalancing weights is the second Friday of March, June, September and December. - Each company is weighted in accordance with its float-adjusted market capitalisation. - If any Benchmark Index company has a weight greater than 19%, that company has its weight capped at 19%. The cap is set to 19% to allow for a 1% buffer. As the reference date is one week before the actual rebalancing date, this buffer is needed to ensure that no stock exceeds 20% on the actual rebalancing date. - When a constituent s weight threshold is exceeded all excess weight is proportionately redistributed to all uncapped stocks within the S&P Select Sector Capped 20% Financials index. - After this redistribution, if the weight of any other stock(s) then breaches 19%, the process is repeated iteratively until no stocks breach the 19% weight cap. - Index share amounts are assigned to each stock to arrive at the weights calculated above. Since index shares are assigned based on prices one week prior to rebalancing, the actual weight of each stock at the rebalancing will differ somewhat from these weights due to market movements. - All other changes in index level constituents follow the parent S&P 500 index, as documented and published in the index methodology guidelines for the S&P Select Sector Capped 20% Indices. - All information concerning the complete methodology, including the calculation of indices, the adding or deletion of constituents, orientation rules, and research documents are available at Standard & Poor s website at The return that is tracked is the one at the index closing value. Page 9

10 Publication OF THE S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX: The S&P Select Sector Capped 20% Financials index is published by Reuters and Bloomberg. On Reuters:.SPSUFN On Bloomberg: SPSUFN REVISION OF THE S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX The index s composition is revised quarterly. INVESTMENT STRATEGY 1. Strategy employed The Fund will observe the investment rules of European Directive 2009/65/EC of 13 July 2009 To achieve the highest possible correlation with the returns of the S&P Select Sector Capped 20% Financials index, the Fund may purchase a basket of balance sheet assets and mainly global equities and/or enter into over-the-counter swap contracts that enable the Fund to achieve its investment objective, if necessary by swapping the exposure to its assets for exposure to the S&P Select Sector Capped 20% Financials index. The equities that compose the Fund s assets may be those that constitute the S&P Select Sector Capped 20% Financials index or other global equities in any economic sector and listed on any market, including small-cap markets. In this case, the Fund s equities will be selected so as to limit the costs of replicating the index. In managing its basket of equities the Fund will observe the ratio limits that apply to index funds and may therefore invest up to 20% of its assets in the equities and debt securities of a given entity. This 20% limit may be increased to 35% for a single issuing entity when this is justified by exceptional market conditions, and in particular when some stocks are very heavily weighted. Pursuant to Article R II of the French Monetary and Financial Code, the Fund may, in order to achieve its investment objective, receive or grant the guarantees indicated in Article L of said Code, subject to the requirements of said Article, and may also accept joint and several guarantees and first-demand guarantees. Subject to these regulations, the Fund may accept financial instrument accounts as collateral to secure commitments made to the Fund. Page 10

11 The fund manager intends to use mainly the following assets: 2. Balance-sheet assets (excluding embedded derivatives) The Fund may hold up to 100% of its net assets in the form of global equities (in all economic sectors and traded in all markets), provided it does not exceed regulatory ratios. Investment in undertakings for collective investment in transferable securities that comply with Directive 2009/65/EC, and/or are eligible as defined in Article R of the French Monetary and Financial Code, is limited to 10% of the Fund's net assets. To optimise the Fund s management and achieve its investment objective, the fund manager may use other financial instruments, within regulatory limits. When the management company acquires shares/units in another mutual fund that is directly or indirectly managed by either itself or by any other company with which the management company is linked by common management or control or by a direct or indirect holding that exceeds 10% of share capital or voting rights, no commission may be deducted from the fund's assets in relation to these investments. The management company also cannot deduct from the fund any subscription or redemption fees in relation to any linked underlying funds. 3. Off-balance-sheet assets (derivatives) The Fund will use over-the-counter index-linked swaps that exchange the value of the Fund s equity assets (or possibly the value of any other financial instrument in the Fund's portfolio) for the value of the S&P Select Sector Capped 20% Financials index To optimise the Fund s management and achieve its investment objective, the fund manager may use other financial instruments, such as forward financial instruments, other than index-linked swaps, within regulatory limits. Such contracts could be entered into with Société Générale without seeking competitive offers from other counterparties. The Management Company therefore makes no commitment to observe a formal, traceable and verifiable competitive tendering procedure. 4. Securities with embedded derivatives Not applicable. To optimise the Fund s management and achieve its investment objective, the fund manager may use other financial instruments, such as debt securities with embedded derivatives, within regulatory limits. 5. Cash deposits To optimise cash management the Fund may make deposits in credit institutions belonging to the same group as the custodian, up to a maximum of 20% of its net assets. 6. Cash borrowing The Fund may borrow, on a temporary basis, up to 10% of its net assets, mainly to optimize cash management. 7. Temporary security transactions Not applicable. To manage the Fund efficiently, the fund manager may engage in the temporary acquisition or disposal of securities, including: - Repurchase agreements - The lending or borrowing of debt securities, equity securities and money-market instruments, pursuant to Article R of the French Monetary and Financial Code. These transactions will be executed under market conditions. RISK PROFILE The unit-holder s money will be invested mainly in the financial instruments selected by the Management Company. The prices of these financial instruments will rise and fall in accordance with market fluctuations and contingencies. The Fund exposes the unit-holder to the following risks: 1. Equity risk The price of an equity security can increase or decrease in accordance with changes in the risks to which the issuing company is exposed or in the economic conditions of the market in which the equity is traded. Equity markets are more volatile than fixed-income markets, where income can be reliably estimated over a given period if macroeconomic conditions are relatively stable. 2. Risk arising from low index diversification The benchmark index to which investors are exposed covers a specific region, sector or investment strategy and therefore does not enable assets to be as broadly diversified as those of an index that is exposed to several regions, sectors or investment strategies. Exposure to an index with such low diversification may result in higher volatility than in more diversified markets. However, the Fund's underlying assets must comply with the diversification rules of UCITS standards. 3. Counterparty risk The Fund is exposed to the risk of bankruptcy, non-payment or any other type of default of a counterparty with which it enters into a transaction or contract. The Fund is particularly exposed to counterparty risk through its use of over-the-counter forward financial instruments entered into with Société Générale or any other counterparty. Pursuant to UCITS regulations, counterparty risk (whether the counterparty is Société Générale or some other entity) cannot exceed 10% of the total value of the Fund's assets. Page 11

12 4. Capital risk The capital initially invested is not guaranteed. Investors therefore may not recover all or part of their initial investment, particularly in the event that the benchmark index posts a negative return over the investment period. 5. Liquidity risk (primary market) If the Fund (or one of its counterparties to a forward financial instrument) adjusts its exposure at a time when the corresponding markets are restricted, closed or subject to broad swings in bid/ask prices, this could adversely affect the Fund's net asset value and/or liquidity. The inability to effect the transactions necessary to replicate the benchmark index, due to insufficient trading volume, could also adversely affect the subscription, conversion or redemption of the Fund s units. 6. Liquidity risk in a given market The ETF's share price may deviate from its indicative net asset value if the liquidity of the Fund's units or shares in a market where they are traded is adversely affected, for example by any of the following: i) the index ceases to be calculated temporarily or permanently, and/or ii) trading in the market(s) of the benchmark index's underlying equities is suspended, and/or iii) a relevant market can no longer obtain or calculate the Fund's indicative net asset value, and/or iv) a market maker fails to comply with the market's rules, and/or v) failure of the market's IT, electronic or other system. 7. The risk that the investment objective may be only partially achieved, since no asset or financial instrument enables automatic and continuous replication of the benchmark index, particularly if one or more of the following risks occur: 7.1 Risk of using derivative instruments To achieve its investment objective, the Fund may use over-the-counter forward financial instruments (FFI) such as swap contracts that enable it to obtain the same return as that of the benchmark index. These FFI may involve various risks, such as counterparty risk, an event affecting margin cover, an event affecting the index, taxation risk, regulatory risk, operational risk and liquidity risk. These risks may affect an FFI directly and may result in modification or even premature termination of the FFI transaction, and may thus adversely affect the Fund's net asset value Risk of a change in tax rules that affect the Fund A change in the tax laws of a country where the Fund is domiciled, listed or allowed to market its units may affect how investors are taxed. In such an event the Fund's manager will not be liable to investors for any payments that may have to be made to any competent tax authority Risk of a change in tax rules that apply to underlying assets A change in the tax laws that apply to the Fund's underlying assets may affect how the Fund is taxed. Accordingly, a difference between the anticipated tax treatment and the tax treatment actually applied to the Fund (and/or to a counterparty to an FFI) may adversely affect the Fund's net asset value. 7.4 Risk of a regulatory change that affects the Fund A change in the regulations of a country where the Fund is domiciled, listed or allowed to market its units may adversely affect the processes for subscribing for, converting or redeeming units Risk of a regulatory change that affects the underlying assets A change in the regulations that apply to the Fund's underlying assets may adversely affect the processes for subscribing for, converting or redeeming units and the Fund's net asset value Risk of an event that affects the benchmark index If an event occurs that affects the benchmark index, the manager may, within the limits of applicable legislation, have to suspend the subscription or redemption of units in the Fund. The calculation of the Fund's net asset value may also be affected. If the problem persists, the Fund manager will decide which steps to take and these measures may adversely affect the net asset value. An "event that affects the index" may, for example, be any of the following situations: i) the index is considered to be inaccurate or does not reflect the market's actual behaviour ii) the index is terminated by its provider iii) the index provider is unable to indicate the level or value of the index iv) The index provider makes a significant change in the formula or method used to calculate the index (other than a minor modification such as the adjustment of the index's underlyings or of the respective weights of its constituents) that the Fund cannot replicate effectively at a reasonable cost. 7.7 Operational risk An operational failure within the management company or of one of its representatives may delay the subscription, conversion or redemption of units or otherwise disrupt service to investors. 7.8 Risk of corporate action on index constituents If the issuer of a stock that is a constituent of the benchmark index unexpectedly revises a corporate action and the Fund (and/or a Fund counterparty to a forward financial instrument) has based its valuation of the corporate action on the issuer's initial announcement, the Page 12

13 Fund's net asset value may be adversely affected, particularly if the Fund's treatment of the corporate action differs from its treatment in the benchmark index's methodology. 7.9 Currency risk associated with C-EUR units C-EUR units are exposed to currency risk since they are not denominated in the same currency as the benchmark index. Changes in exchange rates may therefore cause the net asset value of these units to decrease even though the value of the benchmark index increases. Page 13

14 ELIGIBLE INVESTORS AND TYPICAL INVESTOR PROFILE The Fund is open to all investors who seek exposure to large-capitalisation US companies in the financial sector, achieved by tracking the S&P Select Sector Capped 20% Financials index. The amount that it is reasonable to invest in this Fund depends on each investor's personal situation. To determine this, potential investors should take into consideration their personal assets and financial needs currently and over the next five years, and also their willingness to take risks or preference for more cautious investment. It is also recommended that investors diversify their investments so that they are not exclusively exposed to this Fund s risks. Investors are therefore encouraged to examine their personal situation with their financial advisor. The recommended minimum investment period is five years. DETERMINATION AND APPROPRIATION OF INCOME Income on C-EUR and C-USD units is accumulated. DISTRIBUTION FREQUENCY Not applicable. UNIT CHARACTERISTICS C-EUR units C-USD units Fund currency EURO USD Only a whole number of units may be subscribed for. Only a whole number of units may be redeemed. Page 14

15 SUBSCRIPTION AND REDEMPTION 1/SUBSCRIPTION AND REDEMPTION ON THE PRIMARY MARKET C-EUR and C-USD units Orders to subscribe for or redeem units in the Fund will be processed centrally by Société Générale's Stock-Market and Securities Department, from 9:00 am to 6:30 pm (Paris time) each Trading Day and will be executed at that Trading Day's net asset value (hereinafter the "reference NAV". Subscription or redemption orders that are received after 6:30 p.m. Paris time on a Trading Day will be processed as if they were received from 9:00 a.m. to 6:30 p.m. Paris time on the following Trading Day. Subscription and redemption orders must be for a whole number of units of a total value of at least 100,000 EUR. Subscriptions / Redemptions are made exclusively in cash and on the basis of the reference NAV. Delivery and settlement of share subscriptions and redemptions. Delivery and settlement of share subscriptions and redemptions will be made no later than five trading days after subscription/redemption orders are received. A Trading Day is a day on which the Fund's net asset value is calculated and published. The net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund is calculated from the closing price of the S&P Select Sector Capped 20% Financials index in USD. Shares subscription and redemption processing: SOCIETE GENERALE - 32, rue du Champ de Tir Nantes France DATE AND FREQUENCY OF NAV CALCULATION The net asset value will be calculated and published daily provided that the market on which the Fund s units are traded is open for business and that orders placed in the primary and secondary markets can be processed. Page 15

16 2/PURCHASES AND SALES ON THE SECONDARY MARKET There are no minimum purchase/sale requirements for purchases or sales of Fund units carried out directly on a market on which the Fund is or will be listed for trading, other than those that may be applicable in the given market. Each new unit in the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund subscribed in accordance with the provisions of the Prospectus as approved by the Autorité des Marchés Financiers will be automatically admitted to trading. In the event of a Secondary Market Suspension (see definition below), the Management Company will set up a procedure to enable investors to redeem their units at the Net Asset Value calculated from the closing price of the benchmark index, provided that this Net Asset Value has not itself been suspended as allowed under the applicable regulations and/or the Fund's prospectus. In such an event redemption orders will not be subject to the requirement that a minimum number of units be redeemed. Furthermore, the maximum redemption fee that will be applied is 3% of the Base, which is defined as the product of the Net Asset Value multiplied by the number of units redeemed. "Secondary Market Suspension" is any situation that makes it impossible for unit-holders to trade units on the secondary market for a period of over seven calendar days and which is caused by either of the following: i. The market undertaking suspends trading on all exchanges where the units are listed ii. The market makers fail to maintain a continuous presence in the market and fulfil their market-making obligations over a material period of time, thus preventing the units from being traded on all of the exchanges on which they are listed. the listing of LYXOR ETF S&P 500 CAPPED financials SECTOR fund units by the market undertaking 1/UNITS MADE AVAILABLE ON THE PRIMARY MARKET C-EUR units: As of 10 February 2012, there are 15,000 fully subscribed and paid up ordinary units. The units are scheduled to be admitted for trading on NYSE Euronext s Euronext market on 16 February C-USD units: On 10 February 2012, 5,000 C-USD units of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund will be made available on the primary market. The initial value of one unit of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund is USD 100 as of 10 February /UNITS MADE AVAILABLE ON THE SECONDARY MARKET C-EUR units: On 16 February 2012, 15,000 C-EUR units of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund will be made available on the market. The initial value of one unit of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund is EUR 100 as of 10 February Page 16

17 Market Makers As of 10 February 2012, the Fund s Market Maker is: Société Générale Corporate and Investment Banking - Tour Société Générale, 17 Cours Valmy, Paris-La Défense, France. Pursuant to Euronext listing requirements, Société Générale and [...] (the Market Maker ) agree to make a market in LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund units as of their listing on the Euronext market. In particular, in undertaking its market making activities the Market Maker will maintain a constant presence in the market and above all maintain a bid/ask range. Where the unit is listed on Euronext Paris, the Market Maker has entered into a contractual agreement with NYSE Euronext to ensure the following for the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund: - an overall spread of no more than 3% between the bid and ask prices in the central order book. - a minimum nominal trading amount of 100,000 euros. The obligations of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund Market Maker will be suspended if the S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX is not available or if the trading of one of its constituent stocks is suspended. The Market Maker s obligations will be suspended if trading is substantially disrupted, for example due to a widespread shift in prices or an event that makes normal market making impossible. The Market Maker is also responsible for ensuring that unit prices do not diverge more than 3% from the indicative net asset value. The indicative net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund is a theoretical net asset value that is based on the S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX value and is calculated every 15 seconds by NYSE Euronext throughout the Paris trading day The indicative net asset value allows investors to compare the prices proposed by the Market Makers with the theoretical net asset value that Euronext calculates. Page 17

18 negotiability of fund units 1/Where the units are listed on Euronext Paris (see Fund Details ): The units are all freely negotiable on NYSE Euronext s Euronext market, pursuant to the provisions and requirements of the applicable laws and regulations. When admitted for trading on Euronext markets, the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund units will be listed in a specific trading group the rules for which are specified in the following NYSE Euronext Instructions: - Instruction N4-01 (Euronext Trading Manual) - Appendix to Instruction N4-01 (Appendix to the Euronext Market Trading Manual. - Instruction N3-03 (Listing Criteria for Index Funds) Pursuant to Decree of 1 August 2011 (Article 3) by virtue of which units or shares in an undertaking for collective investment in transferable securities (UCITS) may be listed for trading provided that the UCITS has implemented a system for ensuring that the unit or share price does not substantially deviate from its net asset value per unit or share the trading of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund units shall be subject to the following rules set forth by NYSE Euronext: - reservation thresholds are set at 3% above and below the indicative net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund, as calculated by NYSE Euronext and updated throughout the trading day by estimation in accordance with the change in the S&P Select Sector Capped 20% Financials index; - trading will be suspended if the indicative net asset value can no longer be calculated and the aforementioned thresholds can therefore no longer be determined, i.e. in the following cases: - the market on which the S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX shares are listed is closed - NYSE Euronext no longer has access to the S&P SELECT SECTOR CAPPED 20% FINANCIALS INDEX price - NYSE Euronext cannot obtain the daily net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund. - 2/Where the units are listed on a market other than Euronext Paris, as specified under Fund Details, investors attention is drawn to the following rules concerning the listing of units on such markets: Investors wishing to acquire Fund units or shares on any of the markets mentioned under Fund Details should familiarise themselves with the guidelines laid down by the relevant exchange operator in compliance with local regulations, seeking the assistance if necessary of their usual brokers for the markets in question. Page 18

19 INDICATIVE net asset value Where the units are listed on Euronext Paris, NYSE Euronext will calculate and publish the indicative net asset value of the C-EUR units of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund (hereinafter INAV ) each trading day during trading hours. The INAV will be calculated each day the net asset value is calculated and published. To calculate the INAV of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund s C-EUR units, which is calculated throughout the Paris trading day (from 9:05 am to 5:35 pm), NYSE Euronext will use the value of the S&P Select Sector Capped 20% Financials index published by Reuters. The prices of the stocks that constitute the S&P Select Sector Capped 20% Financials index and which are used to calculate the index s value and therefore to determine the INAV, are provided to Reuters by the exchanges on which these stocks are listed. If one or more of the exchanges on which the stocks that make up the index are listed are closed (on a holiday as per the TARGET calendar), and if the INAV cannot be calculated, the trading of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund units may be suspended. Reservation thresholds are set at 3% above and below the indicative net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund s C- EURO units, as calculated by NYSE Euronext and updated during the trading day by estimation in accordance with the change in the S&P Select Sector Capped 20% Financials index. Lyxor International Asset Management, the management company of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund, will provide NYSE Euronext with all of the financial and accounting data necessary to enable NYSE Euronext to calculate the INAV of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund s C-EUR units, and in particular the reference net asset value, which is the net asset value of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund s C-EUR units of the previous trading day associated with a reference level of the S&P Select Sector Capped 20% Financials index that is the closing index value on the previous trading day at the EUR/USD exchange rate that is used to calculate the net asset value. NYSE Euronext will use this reference net asset value and these reference levels for the index and the exchange rate to calculate the INAV of the LYXOR ETF S&P 500 CAPPED FINANCIALS SECTOR fund for the following trading day, which is updated in real time. Page 19

20 FEES AND COMMISSIONS SUBSCRIPTION AND REDEMPTION FEES (CHARGED ONLY ON PRIMARY MARKET TRANSACTIONS) Subscription and redemption fees are added to the subscription price paid by investors or are subtracted from the redemption price. Fees kept by the Fund compensate it for the expenses it incurs in investing in the Fund s assets or in divesting these assets. Fees that are not kept by the Fund are paid to the management company, the distributor, etc. C-EUR Fees paid by investors and deducted from subscriptions or redemptions Subscription fee not kept by the Fund Subscription fee kept by the Fund Redemption fee not kept by the Fund Redemption fee kept by the Fund Base NAV per unit Number of units NAV per unit Number of units NAV per unit Number of units NAV per unit Number of units Maximum charge The higher of (i) EUR 50,000 per subscription order and (ii) 5%, payable to third parties N/A The higher of (i) EUR 50,000 per subscription order and (ii) 5%, payable to third parties N/A Page 20

21 Fees paid by investors and deducted from subscriptions or redemptions Subscription fee not kept by the Fund Subscription fee kept by the Fund Redemption fee not kept by the Fund Redemption fee kept by the Fund Base NAV per unit Number of units NAV per unit Number of units NAV per unit Number of units NAV per unit Number of units Maximum charge The higher of (i) the equivalent of (i) EUR 50,000 in US dollars per subscription order and (ii) 5%, payable to third parties N/A The higher of (i) the equivalent of (i) EUR 50,000 in US dollars per subscription order and (ii) 5%, payable to third parties N/A OPERATING AND MANAGEMENT EXPENSES FOR C-EUR AND C-USD UNITS These fees include all fees invoiced directly to the Fund, except for transaction expenses. Transaction expenses include intermediation costs (brokerage fees, stock-exchange tax, etc.) and any turnover commission that may be charged by the custodian or the management company. The following may also be charged in addition to the above operating and management fees and expenses: - incentive fees paid to the management company when the Fund exceeds its objectives and which are accordingly invoiced to the Fund - Turnover commissions invoiced to the Fund - A percentage of the revenue from the temporary acquisition or disposal of securities. For further information on the expenses that are invoiced to the fund, see the Statistics section of the Key Investor Information Document Expenses charged to the Fund Base Maximum rate Operating and management fees and external management charges (1) Net assets 0.20% p.a. maximum incl. taxes Outperformance fees Net assets N/A Transfer fees Charge on each transaction N/A (1) Include all expenses except for transaction expenses, incentive fees and fees associated with investment in UCITS or other investment funds. Calculation and sharing of income from the temporary disposal of securities Income from the lending of securities is split 50/50 between the Fund and the management company. Page 21

22 COMMERCIAL INFORMATION WHERE/HOW NAV IS PUBLISHED OR MADE AVAILABLE AT THE REGISTERED OFFICE OF LYXOR INTERNATIONAL ASSET MANAGEMENT, 17 COURS VALMY PARIS LA DEFENSE CEDEX FRANCE This prospectus and the sale or purchase of the Fund s units may be subject to restrictions in some countries. This prospectus shall not constitute an offer or a solicitation on the part of anyone, in any country in which such offer or solicitation would be illegal, or in which the person making this offer or accomplishing this solicitation does not meet the conditions required for this purpose, or to any person to which it would be illegal to make such offer or solicitation. The Fund s units have not been and will not be sold or offered for sale in the United States on behalf of or for the benefit of a citizen or resident of the United States. No other person than those mentioned in this prospectus is authorized to provide information about the Fund. Investors considering subscribing for the Fund s units must obtain information about the legal requirements that apply to such subscription, possible foreign exchange controls and the tax regime in effect in the country where they are a national or resident or have their domicile. In accordance with Article L of the French Monetary and Financial Code, you may find details on the inclusion, or otherwise, of social, environmental and corporate governance objectives and performance criteria on the management company s website and in the Fund s annual report. C-EUR and c-usd units Units are to be registered with Euroclear France S.A. on 10 February Subscription and redemption orders are to be placed by the investor s financial intermediaries (who are members of Euroclear France S.A.) and will be received and processed centrally by Société Générale s Stock-Market and Securities Department. C-EUR units C-EUR units are to be listed for trading on NYSE Euronext s Euronext market on 16 February 2012, on Borsa Italiana (Milan) and on Deutsche Boerse (Frankfurt). The Fund s management company undertakes to ensure that the market price of the Fund s units does not vary more than 3% above or below the indicative net asset value. C-EUR and C-USD units may be admitted to trading on financial markets other than those indicated above. Where the unit is listed on a market other than Euronext Paris, as specified under Fund Details, investors attention is drawn to the following rules concerning the listing of units on such markets: Investors wishing to acquire Fund units or shares on any of the markets mentioned under Fund Details should familiarise themselves with the guidelines laid down by the relevant exchange operator in compliance with local regulations, seeking the assistance if necessary of their usual brokers for the markets in question. The Fund will send, within one week, its full prospectus and most recent annual and periodic reporting documents to unit-holders who send a written request for these documents to: LYXOR INTERNATIONAL ASSET MANAGEMENT 17, cours Valmy Paris La Défense CEDEX France. contact@lyxor.com More information may also be obtained on the website at This prospectus was published on 20 February The Autorité des Marchés Financiers website ( provides additional information on the various regulations and rules that serve to protect investors. This Prospectus must be made available to investors prior to subscription. Page 22

23 INVESTMENT RULES The Fund will observe the investment rules of European Directive 2009/65/EC of 13 July The Fund may invest in the assets specified in Article L of the French Monetary and Financial Code, subject to the risk-diversification and investment ratio requirements of Articles R to R of said Code. Pursuant to Article R II of the French Monetary and Financial Code concerning index funds and notwithstanding the 10% limit specified in section II of Article R The Fund s 20% exposure limit to a single issuing entity may be increased to 35% when this is justified by exceptional market conditions, and in particular when some stocks are very heavily weighted. RISK MONITORING The commitment approach is used to calculate the Fund's global risk exposure. Page 23

24 ASSET VALUATION AND RECOGNITION RULES A. VALUATION RULES The Fund s assets are valued in accordance with applicable laws and regulations and most notably Regulation No of 2 October 2003 of the Comité de la Réglementation Comptable (the Accounting Regulations Committee), which applies to the chart of accounts for investment funds (Part one). When traded on a regulated market, financial instruments are valued at the closing price observed the day before the calculation of net asset value. When these financial instruments are traded on more than one regulated market, the closing price used is that of the regulated market on which they are most heavily traded. However, in the absence of significant trading on a regulated market, the following financial instruments are valued using the following methods: - Negotiable debt securities ("NDS") with a remaining life upon acquisition that is less than or equal to three months are valued by applying the difference between the acquisition value and the redemption value on a straight-line basis over the remaining life. However, the management company reserves the right to value these securities at their current value if it deems they are particularly exposed to market risks (interest rates, etc). The rate used is that at which equivalent securities are issued and a margin is applied to account for the risk associated with the issuer; - NDS with a remaining life of more than three months upon acquisition but less than or equal to three months at the net asset value calculation date are valued by applying the difference between the most recent valuation and the redemption value on a straight-line basis over the remaining life. However, the management company reserves the right to value these securities at their current value if it deems they are particularly exposed to market risks (interest rates, etc). The rate used is that at which equivalent securities are issued and a margin is applied to account for the risk associated with the issuer; - NDS with a remaining life at the net asset value calculation date that exceeds three months are valued at their current value. The rate used is that at which equivalent securities are issued and a margin is applied to account for the risk associated with the issuer. - Futures contracts are valued at their settlement price the day preceding net asset value calculation. Options traded on organized markets are valued at their market price on the day preceding net asset value calculation. Forward contracts and over-the-counter options are valued at the price quoted by the counterparty and the management company will verify this valuation independently. - Bank deposits are valued at their nominal value plus accrued interest. Warrants, short and medium-term notes (bons de caisse), promissory notes and mortgage notes are valued under the management company s responsibility at their most likely trading value. Temporary securities transactions are valued at their market price. Shares and units in French collective investment undertakings are valued at the last known net asset value at the date the Fund s net asset value is calculated. Shares and units in foreign investment funds are valued at the last known net asset value at the date the Fund s net asset value is calculated. Financial instruments traded on a regulated market and for which no price has been quoted or whose price has been corrected, are valued under the management company s responsibility at their most likely trading value. The exchange rates used to value financial instruments denominated in a currency other than the Fund s base currency are the WM Reuters fixing rates on the day the Fund s net asset value is calculated. B. Accounting treatment of brokerage fees Trading expenses are recorded separately from transactions. C. Accounting treatment of income from fixed-income securities Income from fixed-income securities is recognized on a cash basis. D. Distribution policy Income on both C-EUR and C-USD is accumulated. E. Accounting currency The Fund s accounting currency is the euro (EUR). Page 24