● THE INDEX MAY NOT APPROXIMATE ITS TARGET VOLATILITY —
No assurance can be given that the Index will maintain an annualized realized volatility that approximates its target volatility of
35%. The Index’s target volatility is a level of implied volatility and therefore the actual realized volatility of the Index may be
greater or less than the target volatility. On each weekly Index rebalance day, the Index’s exposure to the Futures Contracts is set
equal to (a) the 35% implied volatility target divided by (b) the one-week implied volatility of the SPY Fund, subject to a maximum
exposure of 500%. The Index uses the implied volatility of the SPY Fund as a proxy for the volatility of the Futures Contracts.
However, there is no guarantee that the methodology used by the Index to determine the implied volatility of the SPY Fund will be
representative of the implied or realized volatility of the Futures Contracts. The performance of the SPY Fund may not correlate
with the performance of the Futures Contracts, particularly during periods of market volatility. In addition, the volatility of the
Futures Contracts on any day may change quickly and unexpectedly and realized volatility may differ significantly from implied
volatility. In general, over time, the realized volatilities of the SPY Fund and the Futures Contracts have tended to be lower than
their respective implied volatilities; however, at any time those realized volatilities may exceed their respective implied volatilities,
particularly during periods of market volatility. Accordingly, the actual annualized realized volatility of the Index may be greater
than or less than the target volatility, which may adversely affect the level of the Index and the value of the notes.
● THE INDEX IS SUBJECT TO RISKS ASSOCIATED WITH THE USE OF SIGNIFICANT LEVERAGE —
On a weekly Index rebalance day, the Index will employ leverage to increase the exposure of the Index to the Futures Contracts if
the implied volatility of the SPY Fund is below 35%, subject to a maximum exposure of 500%. Under normal market conditions in
the past, the SPY Fund has tended to exhibit an implied volatility below 35%. Accordingly, the Index has generally employed
leverage in the past, except during periods of elevated volatility. When leverage is employed, any movements in the prices of the
Futures Contracts will result in greater changes in the level of the Index than if leverage were not used. In particular, the use of
leverage will magnify any negative performance of the Futures Contracts, which, in turn, would negatively affect the performance of
the Index. Because the Index’s leverage is adjusted only on a weekly basis, in situations where a significant increase in volatility is
accompanied by a significant decline in the value of the Futures Contracts, the level of the Index may decline significantly before
the following Index rebalance day when the Index’s exposure to the Futures Contracts would be reduced.
● THE INDEX MAY BE SIGNIFICANTLY UNINVESTED —
On a weekly Index rebalance day, the Index’s exposure to the Futures Contracts will be less than 100% when the implied volatility
of the SPY Fund is above 35%. If the Index’s exposure to the Futures Contracts is less than 100%, the Index will not be fully
invested, and any uninvested portion will earn no return. The Index may be significantly uninvested on any given day, and will
realize only a portion of any gains due to appreciation of the Futures Contracts on any such day. The 6.0% per annum deduction
is deducted daily, even when the Index is not fully invested.
● THE INDEX MAY BE ADVERSELY AFFECTED IF LATER FUTURES CONTRACTS HAVE HIGHER PRICES THAN AN
EXPIRING FUTURES CONTRACT INCLUDED IN THE INDEX —
As the Futures Contracts included in the Index come to expiration, they are replaced by Futures Contracts that expire three months
later. This is accomplished by synthetically selling the expiring Futures Contract and synthetically purchasing the Futures Contract
that expires three months from that time. This process is referred to as “rolling.” Excluding other considerations, if the market for
the Futures Contracts is in “contango,” where the prices are higher in the distant delivery months than in the nearer delivery
months, the purchase of the later Futures Contract would take place at a price that is higher than the price of the expiring Futures
Contract, thereby creating a negative “roll yield.” In addition, excluding other considerations, if the market for the Futures Contracts
is in “backwardation,” where the prices are lower in the distant delivery months than in the nearer delivery months, the purchase of
the later Futures Contract would take place at a price that is lower than the price of the expiring Futures Contract, thereby creating
a positive “roll yield.” The presence of contango in the market for the Futures Contracts could adversely affect the level of the
Index and, accordingly, any payment on the notes.
● THE INDEX IS AN EXCESS RETURN INDEX THAT DOES NOT REFLECT “TOTAL RETURNS” —
The Index is an excess return index that does not reflect total returns. The return from investing in futures contracts derives from
three sources: (a) changes in the price of the relevant futures contracts (which is known as the “price return”); (b) any profit or loss
realized when rolling the relevant futures contracts (which is known as the “roll return”); and (c) any interest earned on the cash
deposited as collateral for the purchase of the relevant futures contracts (which is known as the “collateral return”).
The Index measures 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 the Futures Contracts). By contrast, a total return index, in addition to reflecting
those returns, would also reflect interest that could be earned on funds committed to the trading of the Futures Contracts (i.e., the
collateral return associated with an investment in the Futures Contracts). Investing in the notes will not generate the same return
as would be generated from investing in a total return index related to the Futures Contracts.
● CONCENTRATION RISKS ASSOCIATED WITH THE INDEX MAY ADVERSELY AFFECT THE VALUE OF YOUR NOTES —
The Index generally provides exposure to a single futures contract on the S&P 500
®
Index that trades on the Chicago Mercantile
Exchange. Accordingly, the notes are less diversified than other funds, investment portfolios or indices investing in or tracking a
broader range of products and, therefore, could experience greater volatility. You should be aware that other indices may be more
diversified than the Index in terms of both the number and variety of futures contracts. You will not benefit, with respect to the
notes, from any of the advantages of a diversified investment and will bear the risks of a highly concentrated investment.
● THE INDEX IS SUBJECT TO SIGNIFICANT RISKS ASSOCIATED WITH FUTURES CONTRACTS, INCLUDING VOLATILITY —
The Index tracks the returns of futures contracts. The price of a futures contract depends not only on the price of the underlying
asset referenced by the futures contract, but also on a range of other factors, including but not limited to changing supply and
demand relationships, interest rates, governmental and regulatory policies and the policies of the exchanges on which the futures
contracts trade. In addition, the futures markets are subject to temporary distortions or other disruptions due to various factors,
including the lack of liquidity in the markets, the participation of speculators and government regulation and intervention. These
factors and others can cause the prices of futures contracts to be volatile.