JPMorgan Commodity Target Volatility Index Series

Transcription

1 JPMorgan Commodty Target Volatlty Index Seres Index Rules November 2010 All Rghts Reserved

2 1. Ths Part A: General Rules 1.1 Introducton PART A General Rules Ths Part A: General Rules sets out a general framework for the J.P. Morgan Commodty Target Volatlty Index Seres, whch s a famly of notonal rule-based propretary ndces. In addton to ths Part A: General Rules, each J.P. Morgan Commodty Target Volatlty Index (each an Index) wll nclude: (a) (b) a separate Part B that contans, among other thngs, specfc rules for a targeted volatlty strategy, whch wll be embedded nto the Index (the Applcable Target Vol Strategy Rules); and an addtonal annex attached to the Applcable Target Vol Strategy Rules (the Informaton Annex). The Informaton Annex sets out specfc nformaton pertanng to the Index such as (amongst other nformaton): (a) the Index Name and ts Bloomberg Tcker; (b) the Underlyng Index (or Underlyng Indces) and the applcable Bloomberg Tckers for such Underlyng Index (or Underlyng Indces); (c) the Currency of the Index, and (d) other specfc rules (f any) applcable to the Index. 1.2 Publcaton and avalablty of the Index Rules The Index Rules for an Index are comprsed of ths Part A: General Rules, the Applcable Target Vol Strategy Rules and the Informaton Annex. The Index Rules for an Index are publshed by J.P. Morgan Securtes Ltd. of 125 London Wall, London EC2Y 5AJ, UK n ts capacty as Index Calculaton Agent of the Index. The Index Calculaton Agent may, n ts dscreton, publsh the Index Rules applcable to an Index by only publshng ths Part A: General Rules, the Applcable Target Vol Strategy Rules and Informaton Annex that apply to such Index. Copes of the Index Rules for an Index may be obtaned by holders of nvestments lnked to the Index free of charge on request to the Index Calculaton Agent. 1.3 Amendments The Index Rules for an Index may be amended from tme to tme at the dscreton of the Index Calculaton Agent and wll be re-publshed (n a manner determned by the Index Calculaton Agent from tme to tme) no later than one calendar month followng such amendment. Although the Index Rules for an Index are ntended to be comprehensve, ambgutes may arse. If so, the Index Calculaton Agent wll resolve such ambgutes and, f necessary, amend the Index Rules to reflect such resoluton. 1.4 No offer of securtes The Index Rules for an Index nether consttute an offer to purchase or sell securtes nor specfc advce of whatever form (tax, legal, accountng or regulatory) n respect of any nvestment strategy or nvestment that may be lnked to such Index. 2. Synthetc strateges, no components of an Underlyng Index nor assets held Each Index s constructed on notonal Underlyng Indces because there s no actual portfolo of the consttuent commodtes of the Underlyng Indces or assets to whch any person s enttled or n whch any person has any ownershp nterest. Each Index merely dentfes certan Underlyng Indces (that n turn reference partcular commodty futures contracts) and rules-based tradng strateges, the performance of whch are used as a reference pont for the purposes of calculatng the level of the Index. 3. Index Calculaton Agent 3.1 Identty J.P. Morgan Securtes Ltd. or any afflate or subsdary desgnated by t wll act as calculaton agent n connecton wth each Index (the Index Calculaton Agent). 3.2 Index Calculaton Agent standards The Index Calculaton Agent shall act n good fath and n a commercally reasonable manner n respect of determnatons made by t pursuant to the Index Rules for an Index. 3.3 Index Calculaton Agent determnatons All determnatons of the Index Calculaton Agent pursuant to the Index Rules for an Index and nterpretaton of the Index Rules shall be fnal, conclusve and bndng and no person shall be enttled to make any clam aganst the Index Calculaton Agent or any of the Relevant Persons n respect thereof. Nether the Index Calculaton Agent nor any Relevant Person shall: P a g e 2

3 (a) (b) be under any oblgaton to revse any determnaton or calculaton made or acton taken for any reason n connecton wth the Index Rules for an Index [or an Index]; or have any responsblty to any person (whether as a result of neglgence or otherwse) for any determnatons made or anythng done (or omtted to be determned or done) n respect of an Index or n respect of the publcaton of any Index Level or Adjusted Index Level (or falure to publsh such level) or any use to whch any person may put an Index or the Index Levels or Adjusted Index Levels. 4. Calculaton of Index Levels 4.1 Base Level and Base Date The Base Level and Base Date of an Index are specfed n the Informaton Annex for the Index. 4.2 Publcaton of Index Levels In respect of each Index, the Index Calculaton Agent shall calculate (and publsh n a manner determned by the Index Calculaton Agent from tme to tme) the Index Level n respect of each Index Busness Day n accordance wth the Applcable Target Vol Strategy Rules and the nformaton provded n the Informaton Annex. 4.3 Dsrupted Days An Index Busness Day for an Index shall be a Dsrupted Day on the occurrence or exstence of a Dsrupton Event n respect of any Underlyng Index of the Index n respect of such Index Busness Day. 4.4 Adjusted Index Levels In respect of each Index, the Index Calculaton Agent shall calculate an Adjusted Index Level n respect of each Index Busness Day that s a Dsrupted Day n accordance wth the Applcable Target Vol Strategy Rules and the nformaton provded n the Informaton Annex. Adjusted Index Levels are calculated as of an Index Busness Day after the relevant Index Busness Day and wll generally represent a notonal tradable level (.e. a level based on notonal tradable settlement prces of relevant underlyng commodty futures contracts). Adjusted Index Levels are avalable on request from the Index Calculaton Agent durng the perod startng on the date of calculaton of the Adjusted Index Level and endng 30 calendar days thereafter or such longer perod determned by the Index Calculaton Agent n ts sole dscreton. 5. Correctons n respect of an Index If, n respect of an Index: (a) (b) the level of any Underlyng Index, varable, nput or other matter whch s used for any calculaton relevant to the Index Level and/or Adjusted Index Level (as applcable) for any Index Busness Day s subsequently corrected and the correcton s publshed by the relevant Underlyng Index Sponsor or relevant publcaton source; or the Index Calculaton Agent dentfes an error or omsson n any of ts calculatons or determnatons n respect of the Index Level and/or Adjusted Index Level (as applcable) for any Index Busness Day, then, the Index Calculaton Agent may, f practcable and t consders such correcton materal, adjust or correct the Index Level and/or Adjusted Index Level (as applcable) for such day and/or each subsequent Index Busness Day. The Index Calculaton Agent shall publsh (n such manner determned by the Index Calculaton Agent) corrected Index Level(s) as soon as reasonably practcable. 6. Extraordnary Events 6.1 Extraordnary Events for Underlyng Indces (a) (b) If any Underlyng Index of an Index s permanently cancelled or s not calculated and announced by the applcable Underlyng Index Sponsor of such Underlyng Index, but s: (A) calculated and announced by a successor sponsor (the Successor Sponsor) acceptable to the Index Calculaton Agent, and/or (B) replaced by a successor ndex (the Successor Underlyng Index) usng, n the determnaton of the Index Calculaton Agent, the same or a substantally smlar formula for and method of calculaton as used n the calculaton of such Underlyng Index, then the Index Calculaton Agent may deem such Underlyng Index of the Index to be: () the Underlyng Index so calculated and announced by that Successor Sponsor or () that Successor Underlyng Index, as the case may be, wth effect from a date determned by the Index Calculaton Agent and the Index Calculaton Agent may make such adjustment to the Index Rules of the Index, as t determnes n good fath s approprate, to account for such change. If: (A) an Underlyng Index Sponsor makes a materal change n the formula for or the method of calculatng an Underlyng Index of an Index or n any other way materally modfes that Underlyng Index (other than a modfcaton prescrbed n that formula or method to mantan the Underlyng Index n the event of changes n consttuent commodtes and other routne events), or (B) the Underlyng Index Sponsor permanently cancels the Underlyng Index of an Index; or (C) the Underlyng Index Sponsor fals P a g e 3

4 to calculate and announce the Underlyng Index of an Index for a contnuous perod of three (3) Index Busness Days and the Index Calculaton Agent determnes that there s no Successor Sponsor and/or Successor Underlyng Index (such events (A), (B) and (C) to be collectvely referred to as Index Dsrupton Events), then the Index Calculaton Agent may at ts opton, make such adjustment(s) that t determnes to be approprate to any varable, calculaton methodology, valuaton terms or any other rule n relaton to the relevant Index to account for the Index Dsrupton Event ncludng, wthout lmtaton, () calculatng the level of the Underlyng Index, wth effect from a date determned by the Index Calculaton Agent, n accordance wth the formula for and method of calculatng the Underlyng Index last n effect pror to the Index Dsrupton Event, but usng only those futures contracts contemplated by the formula for and method of calculaton of the Underlyng Index as such formula and method exsted mmedately pror to the relevant Index Dsrupton Event (other than those futures contracts that have ceased to be lsted on any relevant exchange), or () substtutng the Underlyng Index wth a replacement Underlyng Index selected by the Index Calculaton Agent or excludng the Underlyng Index from the Index. 6.2 Cancellaton of relevant lcence If n respect of an Index, at any tme, the lcence granted (f requred) to the Index Calculaton Agent (or ts afflates) to use any Underlyng Index for the purposes of the Index termnates, or the Index Calculaton Agent s rghts to use any Underlyng Index for the purpose of the Index s otherwse dsputed, mpared or ceases (for any reason), the Index Calculaton Agent may exclude or substtute the relevant Underlyng Index from the Index and make such adjustments to the Index Rules, as t determnes n good fath to be approprate to account for such event on such dates as selected by the Index Calculaton Agent. 6.3 Change n Law Substtuton or Excluson of Underlyng Indces Wthout prejudce to the ablty of the Index Calculaton Agent to amend the Index Rules, the Index Calculaton Agent may n respect of an Index, actng n good fath and n a commercally reasonable manner exclude or substtute any Underlyng Index followng the occurrence (and/or contnuaton) of a Change n Law, and f t excludes or substtutes any Underlyng Index, then the Index Calculaton Agent may adjust the Index Rules as t determnes n good fath to be approprate to account for such excluson or substtuton on such date(s) selected by the Index Calculaton Agent. 6.4 Index Cancellaton If the Index Calculaton Agent determnes that no adjustment that t could make pursuant ths secton 6 n connecton wth an Index Dsrupton Event under secton 6.1, the use of any Underlyng Index under secton 6.2 or Change n Law under secton 6.3, wll produce a commercally reasonable result, then the Index Calculaton Agent may cease calculatng and publshng the Index from a date determned by the Index Calculaton Agent. Notwthstandng ths secton 6.4, the Index Calculaton Agent s under no oblgaton to contnue the calculaton, publcaton and dssemnaton of an Index. 7. Defntons Captalsed terms defned below shall have the followng meanngs n the Index Rules for each Index: Adjusted Index Level n respect of an Index, has the meanng gven n the Applcable Target Vol Strategy Rules for the Index; Applcable Target Vol Strategy Rules means, n respect of an Index, the separate part of ths document that contans (amongst other rules) the rules of the target volatlty strategy applcable to the Index; Base Date means, n respect of an Index, the base date specfed as such n the Informaton Annex for the Index; Base Level means, n respect of an Index, the base level specfed as such n the Informaton Annex for the Index; Change n Law means: (a) due to: () () the adopton of, or any change n, any applcable law, regulaton or rule (ncludng, wthout lmtaton, any tax law); or the promulgaton of, or any change n, the nterpretaton by any court, trbunal or regulatory authorty wth competent jursdcton of any applcable law, rule, regulaton or order (ncludng, wthout lmtaton, as mplemented by the U.S. Commodty and Futures Tradng Commsson or any exchange or tradng faclty), n ether case, the Index Calculaton Agent determnes n good fath that (x) t s contrary to such law, rule, regulaton or order for any market partcpants that are brokers or fnancal ntermedares (ndvdually or collectvely) to hold, acqure or dspose of (n whole or n part) any Underlyng Index of the relevant Index, any transacton referencng the Underlyng Index or any component of the Underlyng Index (ncludng wthout lmtaton, commodtes futures contracts) or, (y) holdng a poston n any Underlyng Index of the relevant Index, any transacton referencng the Underlyng Index or any component of the Underlyng Index P a g e 4

5 (b) (ncludng wthout lmtaton, commodty futures) s (or, but for the consequent dsposal or termnaton thereof, would otherwse be) n excess of any allowable poston lmt(s) applcable to any market partcpants that are brokers or fnancal ntermedares (ndvdually or collectvely) under any such law, rule, regulaton n relaton to such Underlyng Index, transacton referencng the Underlyng Index or component of the Underlyng Index traded on any exchange(s) or other tradng faclty (ncludng, wthout lmtaton, any relevant exchange); or the occurrence or exstence of any: () () suspenson or lmtaton mposed on tradng futures contracts (relatng to any Underlyng Index, any transacton referencng the Underlyng Index or any component of the Underlyng Index) ncludng wthout lmtaton, commodtes futures contracts; or any other event that causes tradng n futures contracts (relatng to any Underlyng Index, any transacton referencng the Underlyng Index or any component of the Underlyng Index ) to cease ncludng wthout lmtaton, commodtes futures contracts. Dsrupted Day has the meanng gven n secton 4.3 of ths Part A: General Rules; Dsrupton Event means, n respect of an Index Busness Day and an Underlyng Index of an Index, the occurrence of any of the followng events: (a) (b) (c) (d) (e) a materal lmtaton, suspenson, dscontnuaton or dsrupton of tradng n one or more optons or futures contracts on a relevant commodty or commodtes related to the Underlyng Index, whch results n falure by the relevant exchange on whch such opton(s) and/or futures contract(s) s/are traded to report an offcal settlement prce for such opton(s) and/or futures contract(s) on such Index Busness Day; a lmtaton, suspenson or dsrupton of tradng n one or more optons or futures contracts on a relevant commodty or commodtes related to the Underlyng Index, by reason of movements exceedng lmt up or lmt down levels permtted by the relevant exchange and whch, n the opnon of the Index Calculaton Agent, s materal to tradng volume and market condtons n such opton(s) or futures contract(s) on such Index Busness Day; publcaton by the relevant exchange of a lmt prce as the offcal settlement prce for any futures contract on the relevant commodty or commodtes related to the Underlyng Index (by reason of movements exceedng lmt up or lmt down levels permtted by the relevant exchange); the occurrence of a Non-Publcaton Event; or a relevant exchange on whch one or more optons or futures contracts on a relevant commodty or commodtes related to the Underlyng Index s not open for tradng durng ts regular tradng sesson, regardless of whether any such exchange closes pror to ts scheduled closng tme. Index Busness Day means, n respect of an Index, the ndex busness days specfed as such n the Informaton Annex for the Index, subject to adjustment n accordance wth the Index Rules for the Index; Index Calculaton Agent means J.P. Morgan Securtes Ltd. or any afflate or subsdary desgnated by t n accordance wth secton 3.1 of ths Part A: General Rules; Index means, as defned n secton 1.1 of ths Part A: General Rules, each ndex comprsed n the J.P. Morgan Commodty Target Volatlty Index Seres; Index Level n respect of an Index, has the meanng gven n the Applcable Target Vol Strategy Rules for the Index; Index Rules means, n respect of an Index, the rules of the Index whch are comprsed of ths Part A: General Rules, the Applcable Target Vol Strategy Rules for the Index and the Informaton Annex for the Index; Informaton Annex means, n respect of an Index, the Informaton Annex annexed to the Applcable Target Vol Strategy Rules that sets out specfc nformaton pertanng to the Index; Non-Publcaton Event means, the falure by the relevant exchange, ndex sponsor or other prce source to announce publcly or publsh the followng (or the nformaton necessary for determnng the followng): (a) the offcal settlement prce for any relevant futures contract on the relevant commodty or commodtes related to the Underlyng Index of an Index or (b) the offcal publshed closng level of the Underlyng Index of an Index; Relevant Persons means any afflate or subsdary of the Index Calculaton Agent or ther respectve drectors, offcers, employees, representatves, delegates or agents; Underlyng Index means, n respect of an Index, each commodty ndex or other ndex specfed as such n the Informaton Annex for the Index (and together, n respect of an Index, the Underlyng Indces); Underlyng Index Sponsor means the sponsor or any successor sponsor of the relevant Underlyng Index, as may be specfed n the Informaton Annex for the Index. P a g e 5

6 Notces, Dsclamers and Conflcts J.P. Morgan Securtes Ltd, n ts capacty as sponsor of each Index and Index Calculaton Agent does not endorse or make any representaton or warranty, express or mpled, n connecton wth nvestments lnked to one or more J.P. Morgan Commodty Target Volatlty Indces (Product). Further, J.P. Morgan Securtes Ltd, n ts capacty as sponsor of the Index and Index Calculaton Agent, has no oblgaton or lablty n connecton wth the admnstraton, marketng or tradng of the Product. No one may reproduce or dssemnate the nformaton contaned n ths document or an Index Level and/or Adjusted Index Level (as applcable) wthout the pror wrtten consent of the Index Calculaton Agent. Ths document s not ntended for dstrbuton to, or use by any person n, a jursdcton where such dstrbuton s prohbted by law or regulaton. Each J.P. Morgan Commodty Target Volatlty Index s the exclusve property of J.P. Morgan Securtes Lmted (the Index Sponsor) and the Index Sponsor retans all propretary rghts theren. Copyrght JPMorgan Chase & Co All rghts reserved. JPMorgan s the marketng name for J.P. Morgan Chase & Co. and ts subsdares and afflates worldwde. Potental conflcts of nterest may exst n the structure and operaton of a J.P. Morgan Commodty Target Volatlty Index and the conduct of normal busness actvtes for the Index Calculaton Agent or any of ts afflates or subsdares or ther respectve drectors, offcers, employees, representatves, delegates or agents (a Relevant Person). Durng the course of ther normal busness, the Index Calculaton Agent or any Relevant Person may enter nto or promote, offer or sell transactons or nvestments (structured or otherwse) lnked to a J.P. Morgan Commodty Target Volatlty Index or any component of such an Index. In addton, any Relevant Person may have, or may have had, nterests or postons, or may buy, sell or otherwse trade postons n or relatng to the J.P. Morgan Commodty Target Volatlty Indces or any of ther components, or may nvest or engage n transactons wth other persons, or on behalf of such persons relatng to any of these tems. Such actvty could gve rse to a conflct of nterest, and such conflct may have an mpact, postve or negatve, on the level of the Indces. Nether the Index Calculaton Agent nor any Relevant Person has any duty to consder the crcumstances of any person when partcpatng n such transactons or to conduct themselves n a manner that s favourable to anyone wth exposure to the Indces. The foregong notces, dsclamers and conflcts dsclosure s not ntended to be exhaustve. Anyone readng these Index Rules should seek such advce as they consder necessary from ther professonal advsors, legal, tax or otherwse, wthout relance on any Relevant Person to satsfy themselves that they fully understand these Index Rules and the rsks assocated wth a J.P. Morgan Commodty Target Volatlty Index. P a g e 6

7 PART B Applcable Target Vol Strategy Rules J.P. Morgan Long Commodty Target Volatlty Indces 1. Introducton Ths Part B sets out the Applcable Target Vol Strategy Rules for the J.P. Morgan Long Commodty Target Volatlty Indces (each a Long Commodty Target Vol Index or Index and together the Long Commodty Target Vol Indces or Indces ). The Long Commodty Target Vol Indces are a sub-famly of ndces of the J.P. Morgan Commodty Target Volatlty Index Seres that provde long-only exposure to one or more Underlyng Indces and utlse a mathematcal volatlty targetng algorthm to dynamcally adjust the Exposure Level to the Underlyng Indces. The Exposure Level s adjusted on Rebalancng Dates based on changes n hstorcal volatlty of the Underlyng Indces wth the am that the realsed volatlty of the Index should be approxmately equal to or less than a pre-determned Target Volatlty. Accordngly, n general terms, where the hstorcal realsed volatlty (and rskness) of the Underlyng Indces ncreases, the exposure to the Underlyng Indces wll be reduced on the next rebalancng and on the other hand, f the hstorcal realsed volatlty decreases the exposure wll be ncreased, subject to maxmum and mnmum exposure level restrctons. Hstorcal volatlty s used as a measure of the rsk assocated wth the Underlyng Indces. It s ntended to gve an ndcaton of the varablty of the returns and accordngly rsks of the relevant Underlyng Indces. The hstorcal volatlty of the Underlyng Indces s determned by reference to the greater of the hstorcal volatlty over two separate perods (Hstorcal Volatlty Lookback Perod 1 & 2). The Informaton Annex (annexed to ths Part B) for a Long Commodty Target Vol Index sets out, wthout lmtaton, the followng specfc nformaton pertanng to the Long Commodty Target Vol Index: Name of the Index and Bloomberg tcker; Currency of the Index; Number of Underlyng Indces; Underlyng Indces of the Index; Weghts of the Underlyng Indces; Target Volatlty; Index Busness Days; Rebalancng Selecton Dates and Rebalancng Dates; Adjustment Factor; Maxmum Exposure Level; Mnmum Exposure Level; and Hstorcal Volatlty Lookback Perods 1 & 2. The Index Rules of each Long Commodty Target Vol Index are comprsed of the General Rules n Part A, the Applcable Target Vol Strategy Rules n ths Part B and the Informaton Annex to ths Part B for the Index. 2. Rebalancng the Exposure Level of the Underlyng Indces 2.1 Rebalancng the Exposure Level The Exposure Level appled to the Underlyng Indces on each Rebalancng Date s determned on the Rebalancng Selecton Date mmedately before the Rebalancng Date (Rebalancng Date RD n-1) n accordance wth the methodology descrbed n sectons 2.2 to 2.4 below. 2.2 Step 1: Determnng Non-Volatlty Targeted Levels Frstly, the Index Calculaton Agent shall calculate a Non Volatlty Targeted Level n respect of each Index Busness Day solely for the purposes of utlsng such levels to determne the Hstorcal Volatlty n respect of Rebalancng Selecton Dates pursuant to secton 2.3 below. The Non Volatlty Targeted Levels for each Index Busness Day of an Index shall be calculated n accordance wth the rules for calculatng Index Levels of the Index n secton 3.1(a) below except that: (a) the Exposure Level shall be fxed at 100%, (b) sectons 2.3 and 2.4 below shall not apply, (c) the Adjustment Factor shall be deemed to be 0%; and (d) secton 3.1(a) shall be used to calculate the Index Level for each Index Busness Day ncludng where Rebalancng Date n-1 s a Dsrupted Day and the words If Rebalancng Date n-1 s not a Dsrupted Day, at the begnnng of secton 3.1(a) shall be deleted. P a g e 7

8 Calculatng Non Volatlty Targeted Levels allows the Hstorcal Volatlty of the Underlyng Indces to be determned by reference to a statc basket, monthly rebalanced, of the Underlyng Indces as opposed to a dynamc basket of the Underlyng Indces that adjusts exposure based on the volatlty targetng algorthm. 2.3 Step 2: Calculatng the Hstorcal Volatlty Secondly, n respect of the relevant Rebalancng Selecton Date, the Index Calculaton Agent wll determne the hstorcal volatlty of the Underlyng Indces (Hstorcal Volatlty) observed over two separate perods (beng Hstorcal Volatlty Lookback Perod 1 and Hstorcal Volatlty Lookback Perod 2) n accordance wth the formulae below. The Hstorcal Volatlty of the Underlyng Indces for the purposes of determnng the Exposure Level shall be the greater of the Hstorcal Volatlty observed over Hstorcal Volatlty Lookback Perod 1 and Hstorcal Volatlty Lookback Perod 2 as set out below. Hstorcal Vol Where: Hstorcal Vol Hstorcal Vol where: m 1 m 2 Rtn Rtn ( RD ) Max( HstorcVol ( RD ) HstorcVol ( RD )) n 1 = 1 n, 2 n 252 m1 m1 = 1( RDn 1) Rtn 1 m1 j= 1 m1 k= ( j,1) Rtn( k, ) m2 m2 = 2 ( RDn 1) Rtn 2 m2 j= 1 m2 k= 1 1 ( j,2) Rtn( k, ) means each Index Busness Day of Hstorcal Volatlty Lookback Perod 1 of the Index as specfed n the Informaton Annex; means each Index Busness Day of Hstorcal Volatlty Lookback Perod 2 of the Index as specfed n the Informaton Annex; NVTLevel( d,1) NVTLevel( d,1) ( d, 1) = NVTLevel( d,2) NVTLevel( d,2) ( d, 2) = NVTLevel (d,1) s the level of the Non-Volatlty Targeted Level n respect of the d-th Index Busness Day n the Lookback Perod 1, calculated n accordance wth secton 2.2 above. NVTLevel (d,2) s the level of the Non-Volatlty Targeted Level n respect of the d-th Index Busness Day n the Lookback Perod 2, calculated n accordance wth secton 2.2 above. 2.4 Step 3: Calculate the Exposure Level Immedately after determnng the Hstorcal Volatlty of the Underlyng Indces for the Index n respect of the relevant Rebalancng Selecton Date, the Index Calculaton Agent shall calculate the Exposure Level to apply to the Index from, but excludng, the Rebalancng Date (Rebalancng Date n-1) mmedately followng the Rebalancng Selecton Date n accordance wth the followng formula: ExposureLevel Where: ( RD ) n = Max Mn, MaxExposureLevel, MnExposureLevel HstorcalVol( RDn 1) TargetVol HstorcVol(RD n 1) means the Hstorcal Volatlty of the Index determned n respect of the relevant Rebalancng Selecton Date n accordance wth secton 2.3 above; elevel MnExposur means the Mnmum Exposure Level of the Index as specfed n the Informaton Annex; 2 2 P a g e 8

9 MaxExposur elevel means the Maxmum Exposure Level of the Index as specfed n the Informaton Annex; Ta rgetvol means the Target Volatlty of the Index as specfed n the Informaton Annex. 3 Index Levels 3.1 Calculaton and Publcaton of Index Levels The level for each Long Commodty Target Vol Index (Index Level) shall be calculated and publshed n respect of each Index Busness Day t from but excludng the Rebalancng Date mmedately precedng such Index Busness Day (Rebalancng Date n-1) to, and ncludng, the Rebalancng Date mmedately after Rebalancng Date n- 1 (Rebalancng Date n) as follows: (a) If Rebalancng Date n-1 s not a Dsrupted Day, the Index Level shall be calculated n respect of each Index Busness Day t, from and excludng Rebalancng Date n-1 to, and ncludng, Rebalancng Date n, n accordance wth the followng formula: Index( t) = Index( RD Where: ( RDn ) ( t) NS n 1) 1 ExposureLevel( RDn 1) W Perf ( t) * 1 1 FX + = FX CalendarDays ( AF) 360 Index( RD ) n 1 means the Index Level calculated and publshed n respect of Rebalancng Date n-1 pursuant to ths secton 3.1, rounded to 4 decmals; NS W Level ( t) Perf ( ) = t Level ( RDn AF means the total Number of Underlyng Indces of the Index as specfed n the Informaton Annex; means the Weght of Underlyng Index as specfed n the Informaton Annex; where: ) Level (t) means the Underlyng Index Closng Level (as defned n secton 3.1(c)) of Underlyng Index for Index Busness Day t determned as of Index Busness Day t; Level ( ) RD n 1 means the Underlyng Index Closng Level (as defned n secton 3.1(c)) of Underlyng Index n respect of Rebalancng Date n-1 determned as of Index Busness Day RD n ; means the Adjustment Factor of the Index as specfed n the Informaton Annex; Calendar Days means the number of calendar days from, and ncludng, Rebalancng Date n-1 to, but excludng, Index Busness Day t. vel( ) 1 ExposureLe means the Exposure Level of the Index determned n accordance wth FX (t) FX (RD n-1 ) FX Rate RD n secton 2.4 above and appled to the Index from but excludng Rebalancng Date n-1. means the FX Rate of Underlyng Index for Index Busness Day t of the Underlyng Index; means the FX Rate of Underlyng Index for Rebalancng Date n-1; means n respect of an Underlyng Index, the spot exchange rate, defned as Currency of the Underlyng Index per Currency of the Index (each as specfed n the nformaton annex). The FX Rate shall be one (1) f the Currency of the Underlyng Index and Currency of the Index are the same. The Index Calculaton Agent shall determne the rate based on daly fxes publshed on the Bloomberg page for the WMS references (FX Reference Rate) specfed n the Informaton Annex (f applcable). If the relevant rate s not publshed on the relevant date (or such other page as may replace that page on that servce, or such other servce as may be nomnated as the nformaton vendor, for the purpose of dsplayng rates or prces comparable to that rate), the FX Rate shall be the rate P a g e 9

10 determned by the Index Calculaton Agent takng nto account all nformaton that n good fath t deems relevant. (b) If Rebalancng Date n-1 s a Dsrupted Day, the Index Level shall be calculated n respect of each Index Busness Day t from but excludng Rebalancng Date n-1 to, and ncludng, Rebalancng Date n, n accordance wth the followng formula: Index( t) = Index Adj ( RD ( RDn 1 ) ( t) NS CalendarDays 360 n 1 ) Index( RDn 1) ExposureLevel ( RDn 1) W PerfAdj, ( t)* (1 AF) 1 FX + = FX Perf (c) Adj, Where: Index Adj (RDn-1) means an adjusted level of the Index n respect of Rebalancng Date n-1 as determned by the Index Calculaton Agent usng the method for calculatng the Index level n secton 3.1(a) except that the Underlyng Index Closng Levels (as defned n secton 3.1(c)) of any Underlyng Index shall be determned as of Index Buness Day t; and Index ( RD ) n 1 means the Index Level calculated and publshed n accordance wth ths secton 3.1 above n respect of Rebalancng Date n-1; Level adj ( t) ( t) = Level adj ( RDn ) where Level adj (t) means the Underlyng Index Closng Level (as defned n secton 3.1(c)) of where ( RDn ) Underlyng Index n respect of Index Busness Day t determned as of Index Busness Day t; Level adj means the Underlyng Index Closng Level (as defned n secton 3.1(c)) of Underlyng Index n respect of Rebalancng Date n-1 determned as of Index Busness Day t. All the other terms not defned n ths secton 3.1(b) have the meanng gven n secton 3.1(a). For the purposes of ths secton 3.1, Underlyng Index Closng Level means, n respect of an Underlyng Index and Index Busness Day, the offcal publshed closng level of the Underlyng Index for such day. If the Index Busness Day s a Dsrupted Day n respect of the Underlyng Index (Affected Underlyng Index), the Underlyng Index Closng Level n respect of the Index Busness Day shall be deemed to be an adjusted level determned by the Index Calculaton Agent as of the relevant determnaton day usng the then current method for calculatng the Affected Underlyng Index but based on and by reference to the relevant closng prces of each futures contract on a relevant commodty or commodtes related to the Affected Underlyng Index as follows: () () n respect of each futures contract on a commodty related to an Affected Underlyng Index where all of such futures contracts are not affected by the Dsrupton Event for such Index Busness Day, the offcal settlement prce of such futures contract wll be that announced or publshed by the applcable exchange for the Index Busness Day; and n respect of each futures contract on a commodty related to an Affected Underlyng Index whch are affected by the Dsrupton Event on the Index Busness Day t and any future contracts on such commodty related to the Affected Underlyng Index whch are not affected by a Dsrupton Event n respect of the Index Busness Day t, the closng prce of such futures contracts wll be determned as of the relevant determnaton day based on (A) the offcal settlement prce of such contracts on the frst Index Busness Day followng the Index Busness Day (but on or before the relevant determnaton day as of whch the Underlyng Index Closng Level s calculated) on whch all such futures contracts are not affected by a Dsrupton Event; or (B) f a prce s not avalable pursuant to (A) as of the relevant determnaton day, the last avalable publshed prce for each contract. If the fve (5) Index Busness Days mmedately followng the orgnal Index Busness Day are Dsrupted Days for such contracts, the Index Calculaton Agent shall determne the closng prce for the futures contract actng n good fath and usng such nformaton and/or methods as t determnes, n ts reasonable dscreton are approprate P a g e 10

11 . (d) Index Levels calculated n respect of an Index Busness Day t pursuant to ths secton 3.1 are calculated as of Index Busness Day t. 3.2 Calculaton of Adjusted Index Levels (not publshed but avalable on request) The Index Calculaton Agent shall calculate an Adjusted Index Level n respect of each Index Busness Day that s a Dsrupted Day n respect of any Underlyng Index. Adjusted Index Levels are calculated as of an Index Busness Day after the relevant Index Busness Day and wll generally represent a notonal tradable level (.e. a level based on notonal tradable settlement prces of relevant underlyng commodty futures contracts). An Adjusted Index Level n respect of an Index Busness Day t shall be calculated (and be avalable on request n accordance wth secton 4.3 of Part A) n accordance wth the rules for calculatng the Index Level n secton 3.1 above except that the determnaton of any Underlyng Index Closng Level shall be made as of the Index Busness Day after Index Busness Day t when each futures contract on a relevant commodty or commodtes related to any Affected Underlyng Index s no longer affected by a Dsrupton Event on such Index Busness Day after Index Busness Day t unless the fve (5) Index Busness Days mmedately followng Index Busness Day t are Dsrupted Days for such relevant futures contracts, n whch case the Adjusted Index level shall be calculated as of such ffth (5 th ) Index Busness Day. P a g e 11

12 Informaton Annex B1.0: JPMCCI Ex Front Month Agrculture 10 ER Index Ths Informaton Annex B1.0 should be read n conjuncton wth the General Rules set forth n Part A and Applcable Target Vol Strategy Rules set forth n Part B for the JPMorgan Commodty Target Volatlty Index Seres. Ths Informaton Annex sets out the specfc nformaton pertanng to the JPMCCI Ex Front Month Agrculture 10 ER Index. Index Name and Bloomberg Tcker Applcable Target Vol Strategy Rules Currency of the Index JPMCCI Ex Front Month Agrculture 10 ER Index (Bloomberg Tcker: JMAB010E Index) See Part B (Applcable Target Vol Strategy Rules: JPMorgan Long Commodty Target Volatlty Indces). U.S. dollar Number of Underlyng Indces Underlyng Index and ts Bloomberg Tcker: Currency of Underlyng Index One JPMorgan JPMCCI Ex-Front Month Agrculture Excess Return Index (Bloomberg tcker JMCXXAGE) U.S. dollar Weght 100% Underlyng Index Sponsor: J.P. Morgan Securtes Ltd. or ts successors and assgns Index Busness Days: JPMCCI Ex-Front Month Agrculture ER Index Busness Days Rebalancng Dates: The frst Index Busness Day of each calendar month Rebalancng Selecton Dates: Target Volatlty 10% The Index Busness Day whch falls two Index Busness Days pror to the Rebalancng Date Maxmum Exposure Level 100% Mnmum Exposure Level 0% Base Date 30 December 1994 Base Level Hstorcal Volatlty Lookback Perod 1 Hstorcal Volatlty Lookback Perod 2 Adjustment Factor 0% The 21 Index Busness Days from but excludng the Index Busness Day that falls 21 Index Busness Days before the relevant Rebalancng Selecton Date to and ncludng the Rebalancng Selecton Date. The 63 Index Busness Days from but excludng the Index Busness Day that falls 63 Index Busness Days before the relevant Rebalancng Selecton Date to and ncludng the Rebalancng Selecton Date. P a g e 12