PS-12 | Structured Investments
Notes Linked to an Unequally Weighted Basket Consisting of the S&P 500®
Index and the J.P. Morgan Multi-Asset Index
less than 4%. Furthermore, the volatility threshold of the MAX Index is subject to upward adjustment and, thus, the realized
volatility threshold used to determine any selected portfolio may be greater than 4%, perhaps significantly. While the assigned
weights of the notional portfolio(s) tracked by the MAX Index are based in part on the recent historical volatility of the relevant
notional portfolio, there is no guarantee that trends existing in the relevant measurement periods will continue in the future. The
volatility of the notional portfolio on any day may change quickly and unexpectedly. Accordingly, the actual annualized realized
volatility of the MAX Index on a daily basis may be greater than or less than the volatility threshold used to select the relevant
selected portfolio(s), which may adversely affect the level of the MAX Index and the value of the notes.
In addition, due to the weight constraints applied in constructing the MAX Index, the aggregate assigned weights of the Equity
Constituents will not be less than 10%, even if the Equity Constituents are performing poorly. In general, the Equity Constituents
will tend to receive their minimum weight of 10% during periods when equities are experiencing poor performance or high volatility.
In addition, during periods when equities are experiencing high volatility, the initial volatility threshold, and the actual realized
volatility, of the MAX Index may be significantly higher than 4%, even if other assets are not experiencing high volatility.
A SIGNIFICANT PORTION OF THE MAX INDEX
Under normal market conditions, the Equity Constituents and the Commodity Constituents have tended to exhibit realized
volatilities that are higher than the realized volatilities of the Bond Constituents in general over time. As a result, the MAX Index will
generally need to reduce its exposure to the Equity Constituents and the Commodity Constituents in order to satisfy the volatility
threshold. Therefore, the MAX Index may have significant exposure for an extended period of time to the Bond Constituents, and
that exposure may be greater, perhaps significantly greater, than its exposure to the Equity Constituents and the Commodity
Constituents. However, the returns of the Bond Constituents may be significantly lower than the returns of the Equity Constituents
and the Commodity Constituents, and possibly even negative while the returns of the Equity Constituents and the Commodity
Constituents are positive, which will adversely affect the level of the MAX Index and any payment on, and the value of, the notes.
THE MAX INDEX IS SUBJECT TO CONCENTRATION RISK IN ITS ALLOCATION AMONG ITS CONSTITUENTS
The strategy employed by the MAX Index involves an asset allocation that imposes certain weight caps and floors that may result
in the MAX Index being allocated to as few as three Constituents, with up to 40% of the MAX Index being allocated to a single
Equity Constituent and/or any single Bond Constituent. Under these circumstances, the MAX Index may face more risks than if it
were diversified broadly over numerous asset classes and geographical regions. Accordingly, the MAX Index may be more
adversely affected by negative economic, political or regulatory occurrences affecting its Constituents and the relevant asset
classes than a more broadly diversified allocation among its Constituents. Additionally, the MAX Index allocation will sometimes
result in exposure to only the Equity Constituents and the Bond Constituents, without any exposure to the Commodity Constituents.
Because the notes are linked in part to the MAX Index, which is linked to the performance of its Constituents, which collectively
represent a broad range of asset classes (equities, fixed income and commodities) and developed markets (the United States,
Germany and Japan), price movements between the Constituents representing different asset classes or developed markets may
not correlate with each other. At a time when the value of a Constituent representing a particular asset class or developed market
increases, the value of other Constituents representing a different asset class or developed market may not increase as much or
may decline. Therefore, in calculating the level of the MAX Index, increases in the values of some of its Constituents may be
moderated, or more than offset, by lesser increases or declines in the values of its other Constituents. In addition, high correlation
during periods of negative returns among its Constituents could have a material adverse effect on the performance of the MAX
Index.
DO NOT REFLECT INTEREST THAT COULD BE EARNED ON FUNDS NOTIONALLY COMMITTED TO THE TRADING OF
FUTURES CONTRACTS
Each of the Constituents is an excess return index and not a total return index. The MAX Index, by providing exposure to the
Constituents, is also an excess return index and not a total return index. The return from investing in futures contracts derives from
fit or loss
realized when rolling the relevant futures contracts (which
Some indices, including the Constituents (and indirectly, the MAX Index), that track futures contracts are excess return indices that
measure the returns accrued from investing in uncollateralized futures contracts (i.e., the sum of the price return and the roll return
associated with an investment in futures contracts). By contrast, a total return index, in addition to reflecting those returns, also
reflects interest that could be earned on funds committed to the trading of the underlying futures contracts (i.e., the collateral return