Volatility Target Index

 The positive (and negative) performance of the Volatility Targeted Index will be affected by the level of exposure that the Volatility Targeted Index have to the underlying index. The level of exposure to the underlying index is determined by the participation rate which depends on volatility. Where the participation rate is greater than 100%, the Investors' exposure to increases and decreases in the underlying index will be magnified. Where the participation rate is less than 100%, this means that the Volatility Targeted Index will have less than 100% exposure to any increases (and decreases) in the underlying index.

If the volatility of the underlying index is high, then the Volatility Targeted Index will have a lower exposure to the underlying index, even if the underlying index is performing well.

Conversely, if the volatility of the underlying index is low and the underlying index is performing poorly, the Volatility Targeted Index will have enhanced exposure to the poor performance of the underlying index.