The SGI Chipeco Vol Target (USD-Total Return) Index (the Index) began publishing on March 18, 2011, with a level set at 1,000. The Index reflects long positions in the Chilean, Peruvian and Colombian equity markets through American Depositary Receipts (ADRs) or Common Stocks, while benefiting from a volatility control mechanism.
The Index selects the basket of equities according to a systematic stock picking criteria (Equity Basket). Every quarter, the weight of each stock within a given country is adjusted according to its market capitalization. In addition, the weightings of each stock is adjusted to make the Chilean, Peruvian and Colombian portfolios respectively equal to 40,% 40% and 20% of the Equity Basket generally corresponding to the market size of each country.
The Index then varies its exposure to the Equity Basket depending on the historical volatility of the Equity Basket as compared to a Target Volatility of 15%. If the historical volatility is greater or less than 15,% the Index increases or decreases its exposure to the Equity Basket, respectively with a cap of 150% on exposure and a floor of 0% on exposure.