May 7th, 2003

ISSUE BRIEFINGEuropean Parliament

Warrants and Bonds Prospectuses

2

Warrants

May 7th, 2003

Société Générale Equities & Derivatives« Trading and sale of equity derivatives products »

More precisely, derivatives products such as :

Simple calls & puts

• example : a plain vanilla call gives the right to buy a specific underyling at a fixed price - at or up to a determined date (maturity date)

a wide range of « innovative » options

• example : corridor option gives the right to receive 1 euro per day, where the underlying asset closes inside specific range (up and down limits) during a period of time.

3

Warrants

May 7th, 2003

Société Générale Equities & Derivatives« Trading and sale of equity derivatives products »

Structured products

• with simple or innovative indexations• example : at maturity the holder will receive 100% of the initial amount

invested plus x% of the performance of the CAC 40 index over the period.

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Warrants

May 7th, 2003

Adapting the offer to client needs ... Different « wrappers » ….

Warrants Certificats EMTN Funds

…. answering specific needs for different types of customers

Retail clients Institutional clients Distribution networksbank & insurance companies / bank & insurace companies /

proprieraty activities distribution to retail customers

WARRANTS X XCERTIFICATES X XEMTN X XFUNDS X X X

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Warrants

May 7th, 2003

What are Covered Warrants? Generally simple call & put options

“Covered” means that when the issuer launches a warrant on the market, he buys/sells the underlying share to cover its position (i.e. no equity creation in case of exercise)

Issued by a financial institution

Mid to long-term (6 to 24 month) options

High liquidity provided on the exchanges

Leverage effect

Possibility to hedge : portfolio protection

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Warrants

May 7th, 2003

SydneySydney

Hong-KongHong-Kong

StockholmStockholm

ParisParis

MadridMadrid

ZurichZurichMilanMilan

FrankfurtStuttgartFrankfurtStuttgartBrusselBrussel

AmsterdamAmsterdam

LisboaLisboa

HelsinkiHelsinki

Warrant markets in the world

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Warrants

May 7th, 2003

2002 Turnover on Warrant markets

in M€

100

3000

9500

13500

800 1100 700

17000

5001 800

16000

-

3 000

6 000

9 000

12 000

15 000

18 000

Austra

lia

Belgium

Finla

nd

Fran

ce

Germ

any

Hong

Kong Italy

Portu

gal

Spain

Sweden

Switzer

land

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Warrants

May 7th, 2003

Issue process today

SG acts as issuer targeting retail investors in 13 countries

Today, plain vanilla call and put warrants are considered as « standard » by market authorities throughout Europe

SG Manages a global range of 5,000 warrants updated on a daily basis (strikes, maturities) with a lot of product replication due to a lack of common European regulations and definitions

When it comes to innovative products discrepancies throughout Europe limit the offering possibilities

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Warrants

May 7th, 2003

Germany’s legal framework

The oldest warrants market (with Switzerland) : 1st issue in 86

German market authorities have set the listing guidelines with the input of issuers

Great reactivity : listing within two days

Same issue procedures for simple and innovative warrants : Deposit of a Master Document for each category ; once a

year with the new financial statements of the issuer For all following issues only a complete prospectus is required to

be deposited at the exchange ; listing the next day No legal restrictions on the characteristics (strikes, redemption at

maturity, expiry…)

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Warrants

May 7th, 2003

France’s legal framework

The warrants are issued and listed on the Stock Exchange since the issue is approved by the COB

Less reactivity : listing within a week (minimum)

Different procedures for simple warrants and innovative products Warrants program registered by the COB ; updated once a year

with the new financial statements of the issuer Innovative structures should be issued as bonds (legal and fiscal

consequences)

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Warrants

May 7th, 2003

Italy’s legal framework

The warrants are issued and listed on the Stock Exchange since the issue is approved by first CONSOB then Borsa Italiana

Different procedures for simple warrants and innovative products Warrants program registered with the CONSOB ; updated once a

year. • Delay of approval : 1 month and 1 week for every supplement

Innovative structures should be issued on a “stand alone” format.• Delay for approval : 1 month minimum

Registration costs extremely high

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Warrants

May 7th, 2003

Issue process today

Issuers still have to cope with 13 different issue procedures (requirements and delays)

All market authorities have different views on the product : a digital option should be issued as a warrant? As a certificat? As

an EMTN? Up and in options?

What Does the Directive Prospectus propose ?

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Warrants

May 7th, 2003

The Directive proposals First proposal

European Passport No choice of competent market authority : headquarter of the

issuer Language of the prospectus (French exception)

The current proposal Choice of the competent market authority : country of the

headquarter of the issuer or country where the public offer will take place

• Since market authorities accept different products under the name of “warrants”, competition discrepancies between issuers will subsist (ex : German issuers)

Different rules for warrants when issued by SG on SG share• different requirements are not justified on a financial basis

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Warrants

May 7th, 2003

The « ideal world » All market authorities should agree on the same definition and

language local rules should converge, in particular in the context of Stock

Exchange mergers adapted language: one common and usual languages should be

accepted by all market authorities

Accuracy and reactivity of the product range to market fluctuations : Delays reduced to the minimum : 1 week maximum

Investor protection information on the underlying asset should not undermine an

understandable description of the rights attached to the product adapted language : summary in the language of the country where

the product is offered