•THE INDEX MAY BE SIGNIFICANTLY UNINVESTED -
For each volatility measure oneach day, the Indexseeks to identify a notional portfoliocomposed of the Portfolio Constituentsthat
hasan annualized realized volatilitydetermined for that volatilitymeasure approximately equal to the Target Volatility of 3.0% and
an aggregate weight of 100%. If the Index identifiesandselectssuch anotional portfolio for a volatilitymeasure, but the weight of
either Portfolio Constituent isgreater than100%, the weight of that Portfolio Constituent in the notional portfolioselected for that
volatilitymeasure on that daywill be 100% and, if the weight of either Portfolio Constituent is less than 0%, the weight of that
Portfolio Constituent in the notionalportfolio selectedfor that volatilitymeasure on that daywill be 0%.Inaddition, if there is no
such notional portfoliofor a volatilitymeasure, the Index selects for that volatilitymeasure on that day the notional portfolio withthe
lowest realizedvolatility.
As a result of applying a cap and floor and in the case of selecting the notional portfolio with the lowest realized volatility, the
resulting notional portfoliomay be greater than or less than 3.0% for the relevant volatilitymeasure. If the annualized realized
volatilityof the notional portfolio selected for a volatility measure on any day is greater than 3.0%, that notional portfolio will be
adjusted so that the weight of each Portfolio Constituent in that notional portfolio willbe reduced proportionately to achieve a
notionalportfolio that has an annualized realized volatility forthe relevant volatility measure of 3.0%. Under these circumstances,
the aggregate weight of the Portfolio Constituents in that notional portfolio will beless than 100%.
If theIndex tracks a notional portfolio with an aggregate weight that is lessthan 100%, the Index will not be fully invested, and any
uninvested portion will earn no return. The Indexmay be significantlyuninvested onany givenday, and will realize onlya portion
of any gains due to appreciation of the Portfolio Constituents on any such day. The Index Deduction is deducted daily at a rate of
0.95%per annum, even when the Index is not fullyinvested.
•A SIGNIFICANT PORTION OF THE INDEX'S EXPOSURE MAY BE ALLOCATED TO THE BOND CONSTITUENT -
Under normal market conditions, the Equity Constituent has tended to exhibit a realized volatility that ishigher than the Target
Volatility and that is higherthan the realized volatilityof the Bond Constituent in generalover time. As a result, and because the
Target Volatilityisonly 3.0% the Index willgenerally needto reduce its exposure to the Equity Constituent in order to approximate
the Target Volatility. Therefore, the Index may have significant exposure for an extended period of time to the Bond Constituent,
and that exposure may be greater, perhapssignificantly greater, than its exposure to the Equity Constituent. Moreover, under
certain circumstances, the Index mayhave no exposure to the Equity Constituent. However, the returnsof the Bond Constituent
maybesignificantly lower than the returns of the Equity Constituent, and possibly even negative while the returns of the Equity
Constituent are positive, which will adversely affect the level of the Index and any payment on, and the value of, the notes.
•THE INDEX MAY BE MORE HEAVILY INFLUENCED BY THE PERFORMANCE OF THE EQUITY CONSTITUENT THAN THE
PERFORMANCE OF THE BOND CONSTITUENT IN GENERAL OVER TIME -
In any initial selection between two eligiblenotional portfolios, the Index will select the portfolio that hasthehigher allocation to the
Portfolio Constituent with a higher realized volatility, as described under "TheJ.P.Morgan Dynamic BlendSMIndex" inthe
accompanying underlying supplement, which generally will cause the Equity Constituent to receive a higher allocation than if the
portfolio that has the higher allocation to the Portfolio Constituent with a lower realized volatility were selected.
Furthermore, under normal market conditions, the Equity Constituent's realized volatility has been relatively more variableand has
tended to be significantly higher than the Bond Constituent's realized volatility. Under these circumstancesandbecause the
Target Volatilityisonly 3.0%, the Index is generally expected to be more heavily weighted towardsthe Bond Constituent.
However, under circumstances where the Equity Constituent's realizedvolatility is significantlyhigher than that of the Bond
Constituent, the performance of the Indexis expected to be influenced to a greater extent by the performance of the Equity
Constituent than by the performance of the Bond Constituent, even if the weight of the Bond Constituent issignificantly greater
than the weight of the Equity Constituent.
Consequently, even in caseswhere the allocation to the Bond Constituent isgreater than the allocation to the Equity Constituent,
the Index may be influenced to a greater extent by the performance of the Equity Constituent than by the performance of the Bond
Constituent because, under some conditions, the greater allocation to the Bond Constituent will not be sufficiently large to offset
the greater realized volatility of the Equity Constituent.
Accordingly,the levelof the Indexmay decline if the value of the Equity Constituent declines, evenif the value of the Bond
Constituent increases at the same time. See also "-The Returns of the Portfolio ConstituentsMay Offset Each Other or May
Become Correlatedin Decline" below.
•THE RETURNS OF THE PORTFOLIO CONSTITUENTS MAY OFFSET EACH OTHER OR MAY BECOME CORRELATED IN
DECLINE -
At a time when the value of one Portfolio Constituent increases, the value of the other Portfolio Constituent may not increaseas
much or may even decline. Thismay offset the potentially positive effect of the performance of theformer Portfolio Constituent on
the performance of the Index. During the termof the notes, it is possible that the value of the Indexmay decline even if the value