Neither the Securities and Exchange Commission (the “SEC”) nor any
state securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement
or the accompanying product supplement, underlying supplement, prospectus supplement and prospectus. Any representation to the contrary
is a criminal offense.
Pricing supplement to product supplement no. 4-II dated November
4, 2020, underlying supplement no. 1-II dated November 4, 2020
and the prospectus and prospectus supplement, each dated April 8, 2020
Key Terms
Issuer:
JPMorgan Chase Financial Company LLC, an indirect, wholly owned finance subsidiary of JPMorgan Chase &
Co.
Guarantor:
JPMorgan Chase & Co.
Funds:
The iShares® Global Clean Energy ETF (Bloomberg ticker: ICLN) and the Invesco Solar ETF
(Bloomberg ticker: TAN)
Contingent Interest
Payments: If the notes have not been automatically called and the closing price of one share of each Fund on any Review Date
is greater than or equal to its Interest Barrier, you will receive on the applicable Interest Payment Date for each $1,000 principal amount
note a Contingent Interest Payment equal to $6.2917 (equivalent to a Contingent Interest Rate of 7.55% per annum, payable at a rate of
0.62917% per month).
If the closing price of one share of either Fund on any Review Date is less
than its Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date.
Contingent
Interest Rate: 7.55% per annum, payable at a rate of 0.62917% per month
Interest Barrier / Trigger Value: With
respect to each Fund, 70.00% of its Initial Value, which is $16.52 for the iShares® Global Clean Energy ETF and $63.469
for the Invesco Solar ETF
Pricing Date:
November 26, 2021
Original
Issue Date (Settlement Date): On or about December 1, 2021
Review Dates*:
December 27, 2021, January 26, 2022, February 28, 2022, March 28, 2022, April 26, 2022, May 26, 2022, June 27, 2022, July 26, 2022, August
26, 2022, September 26, 2022, October 26, 2022, November 28, 2022, December 27, 2022, January 26, 2023, February 27, 2023, March 27, 2023,
April 26, 2023 and May 26, 2023 (final Review Date)
Interest Payment Dates*:
December 30, 2021, January 31, 2022, March 3, 2022, March 31, 2022, April 29, 2022, June 1, 2022, June 30, 2022, July 29, 2022, August
31, 2022, September 29, 2022, October 31, 2022, December 1, 2022, December 30, 2022, January 31, 2023, March 2, 2023, March 30, 2023,
May 1, 2023 and the Maturity Date
Maturity Date*:
June 1, 2023
Call Settlement Date*: If the notes
are automatically called on any Review Date (other than the first, second and final Review Dates), the first Interest Payment Date immediately
following that Review Date
* Subject to postponement in the event of a market disruption event and as described
under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to Multiple Underlyings” and
“General Terms of Notes — Postponement of a Payment Date” in the accompanying product supplement
|
Automatic Call:
If the closing price of one share of each Fund on any Review Date (other than
the first, second and final Review Dates) is greater than or equal to its Initial Value, the notes will be automatically called for a
cash payment, for each $1,000 principal amount note, equal to (a) $1,000 plus (b) the Contingent Interest Payment applicable to
that Review Date, payable on the applicable Call Settlement Date. No further payments will be made on the notes.
Payment at Maturity:
If the notes have not been automatically called and the Final Value of each Fund
is greater than or equal to its Trigger Value, you will receive a cash payment at maturity, for each $1,000 principal amount note, equal
to (a) $1,000 plus (b) the Contingent Interest Payment applicable to the final Review Date.
If the notes have not been automatically called and the Final Value of either
Fund is less than its Trigger Value, your payment at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Lesser Performing Fund Return)
If the notes have not been automatically called and the Final Value of either
Fund is less than its Trigger Value, you will lose more than 30.00% of your principal amount at maturity and could lose all of your principal
amount at maturity.
Lesser Performing Fund: The
Fund with the Lesser Performing Fund Return
Lesser Performing Fund Return: The
lower of the Fund Returns of the Funds
Fund Return:
With respect to each Fund,
(Final Value – Initial Value)
Initial Value
Initial
Value: With respect to each Fund, the closing price
of one share of that Fund on the Pricing Date, which was $23.60 for the iShares® Global Clean Energy ETF and $90.67 for
the Invesco Solar ETF
Final
Value: With respect to each Fund, the closing price of one share of that Fund on the final
Review Date
Share Adjustment
Factor: With respect to each Fund, the Share Adjustment Factor is referenced in determining the closing price of one share
of that Fund and is set equal to 1.0 on the Pricing Date. The Share Adjustment Factor of each Fund is subject to adjustment upon the occurrence
of certain events affecting that Fund. See “The Underlyings — Funds — Anti-Dilution Adjustments” in the accompanying
product supplement for further information.
|
PS-1
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
How the Notes Work
Payments in Connection with the First and Second Review Dates
Payments in Connection with Review Dates (Other than the First,
Second and Final Review Dates)
PS-2
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
Payment at Maturity If the Notes Have Not
Been Automatically Called
Total Contingent Interest Payments
The table below illustrates the hypothetical total Contingent Interest
Payments per $1,000 principal amount note over the term of the notes based on the Contingent Interest Rate of 7.55% per annum, depending
on how many Contingent Interest Payments are made prior to automatic call or maturity.
Number of Contingent Interest Payments
|
Total Contingent Interest Payments
|
18
|
$113.2500
|
17
|
$106.9583
|
16
|
$100.6667
|
15
|
$94.3750
|
14
|
$88.0833
|
13
|
$81.7917
|
12
|
$75.5000
|
11
|
$69.2083
|
10
|
$62.9167
|
9
|
$56.6250
|
8
|
$50.3333
|
7
|
$44.0417
|
6
|
$37.7500
|
5
|
$31.4583
|
4
|
$25.1667
|
3
|
$18.8750
|
2
|
$12.5833
|
1
|
$6.2917
|
0
|
$0.0000
|
PS-3
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
Hypothetical Payout Examples
The following examples illustrate payments on the notes linked
to two hypothetical Funds, assuming a range of performances for the hypothetical Lesser Performing Fund on the Review Dates. Each hypothetical
payment set forth below assumes that the closing price of one share of the Fund that is not the Lesser Performing Fund on each Review
Date is greater than or equal to its Initial Value (and therefore its Interest Barrier and Trigger Value).
In addition, the hypothetical payments set forth below assume the
following:
|
·
|
an Initial Value for the Lesser Performing Fund of $100.00;
|
|
·
|
an Interest Barrier and a Trigger Value for the Lesser Performing Fund of $70.00 (equal to 70.00% of its hypothetical Initial Value);
and
|
|
·
|
a Contingent Interest Rate of 7.55% per annum (payable at a rate of 0.62917% per month).
|
The hypothetical Initial Value of the Lesser Performing Fund of
$100.00 has been chosen for illustrative purposes only and does not represent the actual Initial Value of either Fund. The actual Initial
Value of each Fund is the closing price of one share of that Fund on the Pricing Date and is specified under “Key Terms —
Initial Value” in this pricing supplement. For historical data regarding the actual closing prices of one share of each Fund, please
see the historical information set forth under “The Funds” in this pricing supplement.
Each hypothetical payment set forth below is for illustrative purposes
only and may not be the actual payment applicable to a purchaser of the notes. The numbers appearing in the following examples have been
rounded for ease of analysis.
Example 1 — Notes are automatically called on the third
Review Date.
Date
|
Closing Price of One Share of Lesser Performing Fund
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$105.00
|
$6.2917
|
Second Review Date
|
$115.00
|
$6.2917
|
Third Review Date
|
$120.00
|
$1,006.2917
|
|
Total Payment
|
$1,018.875 (1.8875% return)
|
Because the closing price of one share of each Fund on the third
Review Date is greater than or equal to its Initial Value, the notes will be automatically called for a cash payment, for each $1,000
principal amount note, of $1,006.2917 (or $1,000 plus the Contingent Interest Payment applicable to the third Review Date), payable
on the applicable Call Settlement Date. The notes are not automatically callable before the third Review Date, even though the closing
price of one share of each Fund on each of the first and second Review Dates is greater than its Initial Value. When added to the Contingent
Interest Payments received with respect to the prior Review Dates, the total amount paid, for each $1,000 principal amount note, is $1,018.875.
No further payments will be made on the notes.
Example 2 — Notes have NOT been automatically called and
the Final Value of the Lesser Performing Fund is greater than or equal to its Trigger Value.
Date
|
Closing Price of One Share of Lesser Performing Fund
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$95.00
|
$6.2917
|
Second Review Date
|
$85.00
|
$6.2917
|
Third through Seventeenth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$90.00
|
$1,006.2917
|
|
Total Payment
|
$1,018.875 (1.8875% return)
|
Because the notes have not been automatically called and the Final
Value of the Lesser Performing Fund is greater than or equal to its Trigger Value, the payment at maturity, for each $1,000 principal
amount note, will be $1,006.2917 (or $1,000 plus the Contingent Interest Payment applicable to the final Review Date). When added
to the Contingent Interest Payments received with respect to the prior Review Dates, the total amount paid, for each $1,000 principal
amount note, is $1,018.875.
PS-4
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
Example
3 — Notes have NOT been automatically called and the Final Value of the Lesser Performing Fund is less than its Trigger Value.
Date
|
Closing Price of One Share of Lesser Performing Fund
|
Payment (per $1,000 principal amount note)
|
First Review Date
|
$40.00
|
$0
|
Second Review Date
|
$45.00
|
$0
|
Third through Seventeenth Review Dates
|
Less than Interest Barrier
|
$0
|
Final Review Date
|
$50.00
|
$500.00
|
|
Total Payment
|
$500.00 (-50.00% return)
|
Because the notes have not been automatically called, the Final
Value of the Lesser Performing Fund is less than its Trigger Value and the Lesser Performing Fund Return is -50.00%, the payment at maturity
will be $500.00 per $1,000 principal amount note, calculated as follows:
$1,000 + [$1,000 × (-50.00%)] = $500.00
The hypothetical returns and hypothetical payments on the notes
shown above apply only if you hold the notes for their entire term or until automatically called. These hypotheticals do not reflect
the fees or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical
returns and hypothetical payments shown above would likely be lower.
Selected Risk Considerations
An investment in the notes involves significant risks. These risks
are explained in more detail in the “Risk Factors” sections of the accompanying prospectus supplement, product supplement
and underlying supplement.
Risks Relating to the Notes Generally
|
·
|
YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS —
|
The notes do not guarantee any return of principal. If the
notes have not been automatically called and the Final Value of either Fund is less than its Trigger Value, you will lose 1% of the principal
amount of your notes for every 1% that the Final Value of the Lesser Performing Fund is less than its Initial Value. Accordingly, under
these circumstances, you will lose more than 30.00% of your principal amount at maturity and could lose all of your principal amount at
maturity.
|
·
|
THE NOTES DO NOT GUARANTEE THE PAYMENT OF INTEREST AND MAY NOT PAY ANY INTEREST AT ALL —
|
If the notes have not been automatically called, we will
make a Contingent Interest Payment with respect to a Review Date only if the closing price of one share of each Fund on that Review Date
is greater than or equal to its Interest Barrier. If the closing price of one share of either Fund on that Review Date is less than its
Interest Barrier, no Contingent Interest Payment will be made with respect to that Review Date. Accordingly, if the closing price of one
share of either Fund on each Review Date is less than its Interest Barrier, you will not receive any interest payments over the term of
the notes.
|
·
|
CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. —
|
Investors are dependent on our and JPMorgan Chase &
Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase & Co.’s creditworthiness
or credit spreads, as determined by the market for taking that credit risk, is likely to adversely affect the value of the notes. If we
and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you under the notes and
you could lose your entire investment.
|
·
|
AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS —
|
As a finance subsidiary of JPMorgan Chase & Co., we
have no independent operations beyond the issuance and administration of our securities. Aside from the initial capital contribution from
JPMorgan Chase & Co., substantially all of our assets relate to obligations of our affiliates to make payments under loans made by
us or other intercompany agreements. As a result, we are dependent upon payments from our affiliates to meet our obligations under the
notes. If these affiliates do not make payments to us and we fail to make payments on the notes, you may have to seek payment under the
related guarantee by JPMorgan Chase & Co., and that guarantee will rank pari passu with all other unsecured and unsubordinated
obligations of JPMorgan Chase & Co.
PS-5
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
|
·
|
THE APPRECIATION POTENTIAL OF THE NOTES IS LIMITED TO THE SUM OF ANY CONTINGENT INTEREST PAYMENTS THAT MAY BE PAID OVER THE TERM
OF THE NOTES,
|
regardless of any appreciation of either Fund, which may
be significant. You will not participate in any appreciation of either Fund.
|
·
|
YOU ARE EXPOSED TO THE RISK OF DECLINE IN THE PRICE OF ONE SHARE OF EACH FUND —
|
Payments on the notes are not linked to a basket composed
of the Funds and are contingent upon the performance of each individual Fund. Poor performance by either of the Funds over the term of
the notes may result in the notes not being automatically called on a Review Date, may negatively affect whether you will receive a Contingent
Interest Payment on any Interest Payment Date and your payment at maturity and will not be offset or mitigated by positive performance
by the other Fund.
|
·
|
YOUR PAYMENT AT MATURITY WILL BE DETERMINED BY THE LESSER PERFORMING FUND.
|
|
·
|
THE BENEFIT PROVIDED BY THE TRIGGER VALUE MAY TERMINATE ON THE FINAL REVIEW DATE —
|
If the Final Value of either Fund is less than its Trigger
Value and the notes have not been automatically called, the benefit provided by the Trigger Value will terminate and you will be fully
exposed to any depreciation of the Lesser Performing Fund.
|
·
|
THE AUTOMATIC CALL FEATURE MAY FORCE A POTENTIAL EARLY EXIT —
|
If your notes are automatically called, the term of the
notes may be reduced to as short as approximately three months and you will not receive any Contingent Interest Payments after the applicable
Call Settlement Date. There is no guarantee that you would be able to reinvest the proceeds from an investment in the notes at a comparable
return and/or with a comparable interest rate for a similar level of risk. Even in cases where the notes are called before maturity, you
are not entitled to any fees and commissions described on the front cover of this pricing supplement.
|
·
|
YOU WILL NOT RECEIVE DIVIDENDS ON EITHER FUND OR THE SECURITIES HELD BY EITHER FUND OR HAVE ANY RIGHTS WITH RESPECT TO EITHER FUND
OR THOSE SECURITIES.
|
|
·
|
THE RISK OF THE CLOSING PRICE OF ONE SHARE OF A FUND FALLING BELOW ITS INTEREST BARRIER OR TRIGGER VALUE IS GREATER IF THE PRICE
OF ONE SHARE OF THAT FUND IS VOLATILE.
|
The notes will not be listed on any securities exchange.
Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS is willing
to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term trading instruments. Accordingly,
you should be able and willing to hold your notes to maturity.
Risks Relating to Conflicts of Interest
We and our affiliates play a variety of roles in connection
with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests are potentially adverse to your
interests as an investor in the notes. It is possible that hedging or trading activities of ours or our affiliates in connection with
the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer to “Risk
Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement.
Risks Relating to the Estimated Value and Secondary Market Prices
of the Notes
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES —
|
The estimated value of the notes is only an estimate determined
by reference to several factors. The original issue price of the notes exceeds the estimated value of the notes because costs associated
with selling, structuring and hedging the notes are included in the original issue price of the notes. These costs include the selling
commissions, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations
under the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated Value of the Notes”
in this pricing supplement.
|
·
|
THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the Notes” in this
pricing supplement.
PS-6
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
|
·
|
THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE —
|
The internal funding rate used in the determination of the
estimated value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity
issued by JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based
on certain market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement
funding rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the
terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
|
·
|
THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE
THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD —
|
We generally expect that some of the costs included in the
original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in an amount
that will decline to zero over an initial predetermined period. See “Secondary Market Prices of the Notes” in this pricing
supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this initial
period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES —
|
Any secondary market prices of the notes will likely be
lower than the original issue price of the notes because, among other things, secondary market prices take into account our internal secondary
market funding rates for structured debt issuances and, also, because secondary market prices may exclude selling commissions, projected
hedging profits, if any, and estimated hedging costs that are included in the original issue price of the notes. As a result, the price,
if any, at which JPMS will be willing to buy the notes from you in secondary market transactions, if at all, is likely to be lower than
the original issue price. Any sale by you prior to the Maturity Date could result in a substantial loss to you.
|
·
|
SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS —
|
The secondary market price of the notes during their term
will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the selling commissions,
projected hedging profits, if any, estimated hedging costs and the prices of one share of the Funds. Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes
in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value and Secondary Market Prices of the Notes
— Secondary market prices of the notes will be impacted by many economic and market factors” in the accompanying product supplement.
Risks Relating to the Funds
|
·
|
THERE ARE RISKS ASSOCIATED WITH THE FUNDS —
|
The Funds are subject to management risk, which is the risk
that the investment strategies of the applicable Fund’s investment adviser, the implementation of which is subject to a number of
constraints, may not produce the intended results. These constraints could adversely affect the market prices of the shares of the Funds
and, consequently, the value of the notes.
|
·
|
THE PERFORMANCE AND MARKET VALUE OF EACH FUND, PARTICULARLY DURING PERIODS OF MARKET VOLATILITY, MAY NOT CORRELATE WITH THE PERFORMANCE
OF THAT FUND’S UNDERLYING INDEX AS WELL AS THE NET ASSET VALUE PER SHARE —
|
Each Fund does not fully replicate its Underlying Index
(as defined under “The Funds” below) and may hold securities different from those included in its Underlying Index. In addition,
the performance of each Fund will reflect additional transaction costs and fees that are not included in the calculation of its Underlying
Index. All of these factors may lead to a lack of correlation between the performance of each Fund and its Underlying Index. In addition,
corporate actions with respect to the equity securities underlying a Fund (such as mergers and spin-offs) may impact the variance between
the performances of that Fund and its Underlying Index. Finally, because the shares of each Fund are traded on a securities exchange and
are subject to market supply and investor demand, the market value of one share of each Fund may differ from the net asset value per share
of that Fund.
During periods of market volatility, securities underlying
each Fund may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per
share of that Fund and the liquidity of that Fund may be
PS-7
| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
adversely affected. This kind of market volatility may also
disrupt the ability of market participants to create and redeem shares of a Fund. Further, market volatility may adversely affect, sometimes
materially, the prices at which market participants are willing to buy and sell shares of a Fund. As a result, under these circumstances,
the market value of shares of a Fund may vary substantially from the net asset value per share of that Fund. For all of the foregoing
reasons, the performance of each Fund may not correlate with the performance of its Underlying Index as well as the net asset value per
share of that Fund, which could materially and adversely affect the value of the notes in the secondary market and/or reduce any payment
on the notes.
|
·
|
RISKS ASSOCIATED WITH THE CLEAN ENERGY SECTOR WITH RESPECT TO THE iSHARES® GLOBAL CLEAN ENERGY ETF —
|
All or substantially all of the equity securities held
by the iShares® Global Clean Energy ETF are issued by companies whose primary line of business is directly associated with
the clean energy sector. As a result, the value of the notes may be subject to greater volatility and be more adversely affected by a
single economic, political or regulatory occurrence affecting this sector than a different investment linked to securities of a more broadly
diversified group of issuers. The risks of investing in the clean energy sector include the risks of focusing investments in the water,
energy and environmental sectors, and adverse developments in these sectors may significantly affect the price of the iShares®
Global Clean Energy ETF. Clean energy companies may be highly dependent upon government subsidies, contracts with government entities
and the successful development of new and proprietary technologies. In addition, seasonal weather conditions, fluctuations in the supply
of and demand for clean energy products, changes in energy prices, international political events, the success of project development
and tax and other governmental regulatory policies may cause fluctuations in the performance of clean energy companies and the prices
of their securities. Weak demand for the companies’ products or services or for clean energy products and services in general, may
adversely affect the iShares® Global Clean Energy ETF’s performance. Obsolescence of existing technology, short product
cycles, legislation resulting in more strict government regulations and enforcement policies, falling prices and profits, energy conservation,
the supply of, and demand for, oil and gas, the price of oil and gas, competition from new market entrants and general economic conditions
can significantly affect the clean energy sector. The clean energy sector is relatively nascent and under-researched in comparison to
more established and mature sectors, and should therefore be regarded as having greater investment risk. Therefore, shares of companies
in this sector maybe more volatile and, historically, have been more volatile than shares of companies operating in other, more established
industries. In addition, certain methods used to value companies involved in the alternative power and power technology sectors, particularly
those companies that have not yet traded profitably, have not been in widespread use for a significant period of time. As a result, the
use of these valuation methods may serve to increase further the volatility of certain alternative power and power technology company
share prices. These factors could affect the clean energy sector and could affect the value of the equity securities held by the iShares®
Global Clean Energy ETF and the price of the iShares® Global Clean Energy ETF during the term of the notes, which may adversely
affect the value of your notes.
|
·
|
RISKS ASSOCIATED WITH THE SOLAR INDUSTRY WITH RESPECT TO THE INVESCO SOLAR ETF —
|
All or substantially all of the equity securities held by
the Invesco Solar ETF are issued by companies whose primary line of business is directly associated with the solar industry. As a result,
the value of the notes may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory
occurrence affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers. The
value of stocks that comprise the energy sector and the prices of energy may decline. The alternative energy industry can be significantly
affected by obsolescence of existing technology, short product lifecycles, falling prices and profits, competition from new market entrants
and general economic conditions. This industry can also be significantly affected by fluctuations in energy prices and supply and demand
of alternative energy fuels, energy conservation, the success of exploration projects, tax incentives, subsidies and other government
regulations and policies. Companies in this industry may be adversely affected by commodity price volatility, changes in exchange rates,
imposition of import controls, availability of certain inputs and materials required for production, depletion of resources, technological
developments and labor relations. Recently, the price of oil has declined significantly and experienced significant volatility, which
may materially impact companies operating in the solar energy sector. Shares of companies involved in the solar energy sector have historically
been more volatile than shares of companies operating in more established industries. These factors could affect the solar industry and
could affect the value of the equity securities held by the Invesco Solar ETF and the price of the Invesco Solar ETF during the term of
the notes, which may adversely affect the value of your notes.
|
·
|
AN INVESTMENT IN THE NOTES IS SUBJECT TO RISKS ASSOCIATED WITH MID-SIZE, SMALL AND MICRO-CAPITALIZATION STOCKS WITH RESPECT TO
THE INVESCO SOLAR ETF —
|
Some of the equity securities held by the Invesco Solar
ETF have been issued by mid-size, small or micro-capitalization companies. Mid-size, small and micro-capitalization companies may be less
able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Mid-size, small and micro-capitalization
companies are less likely to pay
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| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
|
dividends on their stocks, and the presence of a dividend payment could
be a factor that limits downward stock price pressure under adverse market conditions.
|
·
|
NON-U.S. SECURITIES RISK —
|
Some of the equity securities held by the Funds have been
issued by non-U.S. companies. Investments in securities linked to the value of such non-U.S. equity securities involve risks associated
with the home countries and/or the securities markets in the home countries of the issuers of those non-U.S. equity securities. Also,
there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies
that are subject to the reporting requirements of the SEC.
|
·
|
EMERGING MARKETS RISK —
|
Some of the equity securities held by the Funds have been
issued by non-U.S. companies located in emerging markets countries. Countries with emerging markets may have relatively unstable governments,
may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets,
and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be
based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond
effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times.
|
·
|
THE NOTES ARE SUBJECT TO CURRENCY EXCHANGE RISK —
|
Because the prices of the non-U.S. equity securities held
by each Fund are converted into U.S. dollars for purposes of calculating the net asset value of that Fund, holders of the notes will be
exposed to currency exchange rate risk with respect to each of the currencies in which the non-U.S. equity securities held by that Fund
trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar and the relative
weight of equity securities held by the relevant Fund denominated in each of those currencies. If, taking into account the relevant weighting,
the U.S. dollar strengthens against those currencies, the price of the relevant Fund will be adversely affected and any payment on the
notes may be reduced.
|
·
|
RECENT EXECUTIVE ORDERS MAY ADVERSELY AFFECT THE PERFORMANCE OF THE FUNDS —
|
Pursuant to recent
executive orders, U.S. persons are prohibited from engaging in transactions in, or possession of, publicly traded securities of certain
companies that are determined to be linked to the People’s Republic of China military, intelligence and security apparatus, or securities
that are derivative of, or are designed to provide investment exposure to, those securities. The sponsor of the Underlying Index for the
iShares® Global Clean Energy ETF has recently removed the equity securities of a small number of companies from the index
from which the constituents of the Underlying Index are drawn in response to these executive orders. If the issuer of any of the equity
securities held by the Funds is in the future designated as such a prohibited company, the value of that company may be adversely affected,
perhaps significantly, which would adversely affect the performance of the relevant Fund. In addition, under these circumstances, each
of the sponsor of the relevant Underlying Index and the relevant Fund is expected to remove the equity securities of that company from
that Underlying Index and that Fund, respectively. Any changes to the composition of either Fund in response to these executive orders
could adversely affect the performance of that Fund.
|
·
|
THE ANTI-DILUTION PROTECTION FOR THE FUNDS IS LIMITED —
|
The calculation agent will make adjustments to the Share
Adjustment Factor for each Fund for certain events affecting the shares of that Fund. However, the calculation agent will not make an
adjustment in response to all events that could affect the shares of the Funds. If an event occurs that does not require the calculation
agent to make an adjustment, the value of the notes may be materially and adversely affected.
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of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
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The Funds
The iShares® Global Clean Energy ETF is an exchange-traded
fund of iShares® Trust, a registered investment company, that seeks to track the investment results, before fees and expenses,
of an index composed of global equities in the clean energy sector, which we refer to as the Underlying Index with respect to the iShares®
Global Clean Energy ETF. The Underlying Index for the iShares® Global Clean Energy ETF is currently the S&P Global
Clean Energy IndexTM. The S&P Global Clean Energy IndexTM is a modified market capitalization-weighted index
that is designed to measure the performance of companies in global clean energy related businesses from both developed and emerging markets,
with a target constituent count of 100. For additional information about the iShares® Global Clean Energy ETF, see Annex
A in this pricing supplement.
The Invesco Solar ETF is an exchange-traded fund of Invesco Exchange-Traded
Fund Trust II, a registered investment company, that seeks to track the investment results (before fees and expenses) of the MAC Global
Solar Energy Index, which we refer to as the Underlying Index with respect to the Invesco Solar ETF. The MAC Global Solar Energy Index
is a modified market capitalization-weighted index that is designed to track the global solar energy equity sector. For additional information
about the Invesco Solar ETF, see Annex B in this pricing supplement.
Despite their names, there is no guarantee that either Fund
will provide exposure to companies that exhibit positive or favorable clean energy characteristics. If the clean energy characteristics
of either Fund are a factor in your decision to invest in the notes, you should consult with your legal or other advisers before making
an investment in the notes.
Historical Information
The following graphs set forth the historical performance of
each Fund based on the weekly historical closing prices of one share of each Fund from January 8, 2016 through November 26, 2021. The
closing price of one share of the iShares® Global Clean Energy ETF on November 26, 2021 was $23.60. The closing price of
one share of the Invesco Solar ETF on November 26, 2021 was $90.67. We obtained the closing prices above and below from the Bloomberg
Professional® service (“Bloomberg”), without independent verification. The closing prices above and below may
have been adjusted by Bloomberg for actions taken by the Funds, such as stock splits.
The historical closing prices of one share of each Fund should
not be taken as an indication of future performance, and no assurance can be given as to the closing price of one share of either Fund
on any Review Date. There can be no assurance that the performance of the Funds will result in the return of any of your principal amount
or the payment of any interest.
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| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
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Tax Treatment
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. 4-II. In determining our reporting responsibilities
we intend to treat (i) the notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons
and (ii) any Contingent Interest Payments as ordinary income, as described in the section entitled “Material U.S. Federal Income
Tax Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent
Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel,
we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt, in which
case the timing and character of any income or loss on the notes could be materially affected. In addition, in 2007 Treasury and the IRS
released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their
investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments
and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice requests
comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration
of these issues could materially affect the tax consequences of an investment in the notes, possibly with retroactive effect. The discussions
above and in the accompanying product supplement do not address the consequences to taxpayers subject to special tax accounting rules
under Section 451(b) of the Code. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the notes, including possible alternative treatments and the issues presented by the notice described above.
Non-U.S. Holders — Tax Considerations. The U.S.
federal income tax treatment of Contingent Interest Payments is uncertain, and although we believe it is reasonable to take a position
that Contingent Interest Payments are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided), a withholding
agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of that rate under an
applicable income tax treaty), unless income from your notes is effectively connected with your conduct of a trade or business in the
United States (and, if an applicable treaty so requires, attributable to a permanent establishment in the United States). If you are not
a United States person, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the notes in light of your particular circumstances.
Section 871(m) of the Code and Treasury regulations promulgated
thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless an income tax treaty applies) on dividend equivalents
paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include
U.S. equities. Section 871(m) provides certain exceptions to this withholding regime, including for instruments linked to certain broad-based
indices that meet requirements set forth in the applicable Treasury regulations. Additionally, a recent IRS notice excludes from the scope
of Section 871(m) instruments issued prior to January 1, 2023 that do not have a delta of one with respect to underlying securities that
could pay U.S.-source dividends for U.S. federal income tax purposes (each an “Underlying Security”). Based on certain determinations
made by us, our special tax counsel is of the opinion that Section 871(m) should not apply to the notes with regard to Non-U.S. Holders.
Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application
may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security.
You should consult your tax adviser regarding the potential application of Section 871(m) to the notes.
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| Structured Investments
Auto Callable Contingent Interest Notes Linked to the Lesser Performing
of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
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In the event of any withholding
on the notes, we will not be required to pay any additional amounts with respect to amounts so withheld.
The Estimated Value of the Notes
The estimated value of the notes set forth on the cover of this
pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component with
the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying
the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would be willing to
buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated
value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity issued by
JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’ view of
the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain
market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement funding
rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the notes and any secondary market prices of the notes. For additional information, see “Selected Risk Considerations —
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Is Derived by
Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives underlying the economic
terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as the traded
market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which can include
volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or environments. Accordingly,
the estimated value of the notes is determined when the terms of the notes are set based on market conditions and other relevant factors
and assumptions existing at that time.
The estimated value of the notes does not represent future values
of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide valuations for the notes
that are greater than or less than the estimated value of the notes. In addition, market conditions and other relevant factors in the
future may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based
on, among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements
and other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market
transactions.
The estimated value of the notes is lower than the original
issue price of the notes because costs associated with selling, structuring and hedging the notes are included in the original issue price
of the notes. These costs include the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, the projected profits,
if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated
cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond
our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits,
if any, realized in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one
or more of our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Is Lower Than the Original Issue
Price (Price to Public) of the Notes” in this pricing supplement.
Secondary Market Prices
of the Notes
For information about factors that will impact any secondary market
prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market Prices of the Notes —
Secondary market prices of the notes will be impacted by many economic and market factors” in the accompanying product supplement.
In addition, we generally expect that some of the costs included in the original issue price of the notes will be partially paid back
to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial predetermined period.
These costs can include selling commissions, projected hedging profits, if any, and, in some circumstances, estimated hedging costs and
our internal secondary market funding rates for structured debt issuances. This initial predetermined time period is intended to be the
shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the
notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes
and when these costs are incurred, as determined by our affiliates. See “Selected Risk Considerations — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — The Value of the Notes as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this
pricing supplement.
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| Structured Investments
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of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
|
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Supplemental Use of Proceeds
The notes are offered to meet investor demand for products that
reflect the risk-return profile and market exposure provided by the notes. See “How the Notes Work” and “Hypothetical
Payout Examples” in this pricing supplement for an illustration of the risk-return profile of the notes and “The Funds”
in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to the estimated
value of the notes plus the selling commissions paid to JPMS and other affiliated or unaffiliated dealers, plus (minus) the projected
profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the
estimated cost of hedging our obligations under the notes.
Supplemental Plan of
Distribution
We expect that delivery of the notes will be made against payment
for the notes on or about the Original Issue Date set forth on the front cover of this pricing supplement, which will be the third business
day following the Pricing Date of the notes (this settlement cycle being referred to as “T+3”). Under Rule 15c6-1 of
the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days,
unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to
two business days before delivery will be required to specify an alternate settlement cycle at the time of any such trade to prevent a
failed settlement and should consult their own advisors.
Validity
of the Notes and the Guarantee
In the opinion of Davis Polk
& Wardwell LLP, as special products counsel to JPMorgan Financial and JPMorgan Chase & Co., when the notes offered by this pricing
supplement have been executed and issued by JPMorgan Financial and authenticated by the trustee pursuant to the indenture, and delivered
against payment as contemplated herein, such notes will be valid and binding obligations of JPMorgan Financial and the related guarantee
will constitute a valid and binding obligation of JPMorgan Chase & Co., enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles
of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided
that such counsel expresses no opinion as to (i) the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable
law on the conclusions expressed above or (ii) any provision of the indenture that purports to avoid the effect of fraudulent conveyance,
fraudulent transfer or similar provision of applicable law by limiting the amount of JPMorgan Chase & Co.’s obligation under
the related guarantee. This opinion is given as of the date hereof and is limited to the laws of the State of New York, the General Corporation
Law of the State of Delaware and the Delaware Limited Liability Company Act. In addition, this opinion is subject to customary assumptions
about the trustee’s authorization, execution and delivery of the indenture and its authentication of the notes and the validity,
binding nature and enforceability of the indenture with respect to the trustee, all as stated in the letter of such counsel dated February
26, 2020, which was filed as an exhibit to the Registration Statement on Form S-3 by JPMorgan Financial and JPMorgan Chase & Co. on
February 26, 2020.
Additional Terms Specific
to the Notes
You should read this pricing supplement together with the accompanying
prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes of which these notes
are a part, and the more detailed information contained in the accompanying product supplement and the accompanying underlying supplement.
This pricing supplement, together with the documents listed below, contains the terms of the notes and supersedes all other prior or contemporaneous
oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas,
structures for implementation, sample structures, fact sheets, brochures or other educational materials of ours. You should carefully
consider, among other things, the matters set forth in the “Risk Factors” sections of the accompanying prospectus supplement,
the accompanying product supplement and the accompanying underlying supplement, as the notes involve risks not associated with conventional
debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at www.sec.gov
as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is 1665650, and
JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us” and “our”
refer to JPMorgan Financial.
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of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
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Annex A
The iShares® Global Clean Energy ETF
All information contained in this pricing supplement regarding
the iShares® Global Clean Energy ETF (the “ICLN Fund”) has been derived from publicly available information,
without independent verification. This information reflects the policies of, and is subject to change by iShares® Trust
and BlackRock Fund Advisors (“BFA”). The ICLN Fund is an investment portfolio of iShares® Trust. BFA is currently
the investment adviser to the ICLN Fund. The ICLN Fund is an exchange-traded fund that trades on The NASDAQ Stock Market under the ticker
symbol “ICLN.”
The ICLN Fund seeks to track the investment results, before fees
and expenses, of an index composed of global equities in the clean energy sector, which is currently the S&P Global Clean Energy IndexTM.
For additional information about the ICLN Fund, see the information set forth under “Fund Descriptions — The iShares®
ETFs” in the accompanying underlying supplement. For the purposes of the accompanying underlying supplement, the ICLN Fund is an
“iShares® ETF.”
The S&P Global Clean Energy IndexTM
All information contained in this pricing supplement regarding
the S&P Global Clean Energy IndexTM, including, without limitation, its make-up, method of calculation and changes in its
components, has been derived from publicly available information, without independent verification. This information reflects the policies
of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones”). The S&P Global Clean Energy IndexTM
is calculated, maintained and published by S&P Dow Jones. S&P Dow Jones has no obligation to continue to calculate and publish,
and may discontinue calculation and publication of, the S&P Global Clean Energy IndexTM.
The S&P Global Clean Energy IndexTM is a modified
market capitalization-weighted index that is designed to measure the performance of companies in global clean energy related businesses
from both developed and emerging markets, with a target constituent count of 100. The S&P Global Clean Energy IndexTM is
reported by Bloomberg L.P. under the ticker symbol “SPGTCLEN.”
The S&P Global Clean Energy IndexTM Eligibility
To be eligible for inclusion in the S&P Global Clean Energy
IndexTM, an eligible stock must have a minimum total market capitalization of US$300 million and a minimum float-adjusted market
capitalization (“FMC”) of US$100 million. Eligible stocks must also maintain a 6-month median daily value traded (“MDVT”)
liquidity threshold of US$3 million for new constituents and US$2 million for current constituents. If a stock has traded for less than
six months, the MDVT amount for as long as the stock has been trading is used. Eligible stocks must be trading on a developed market exchange
and included in the S&P® Global BMI in order to be considered for inclusion in the S&P Global Clean Energy IndexTM.
For more information about the S&P® Global BMI’s constituent selection process, please see “The S&P®
Global BMI Constituent Selection” below.
The S&P® Global BMI Constituent Selection
The S&P® Global BMI is designed to measure global
stock market performance. Securities issued by companies domiciled in countries classified as developed or emerging markets are eligible
for inclusion in the S&P® Global BMI. The S&P® Global BMI covers all publicly listed equities with
FMCs of at least US$100 million. At the S&P® Global BMI reconstitution, an S&P® Global BMI constituent
is removed if its FMC falls below US$75 million.
At the annual reconstitution, the liquidity of each stock being considered
for inclusion is evaluated using two median daily value traded metrics:
|
1.
|
Eligible stocks must have a minimum US$12 month median value traded ratio (“MVTR”) to be eligible. The ratio is calculated
by taking the US$ MDVT amount for each of the 12 months preceding the rebalancing reference date, multiplying the monthly amount by the
number of days that the stock traded during that month, and then dividing by its end-of-month FMC, also calculated in US$. The sum of
the 12 monthly values is the MVTR for that stock. If a stock has traded for less than 12 months, the average of the available monthly
values is taken and multiplied by 12. Monthly MDVT is defined as the median of the daily value traded for a given company in a given month.
The value traded is calculated by multiplying the number of shares traded by each stock’s price.
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of the iShares® Global Clean Energy ETF and the Invesco Solar ETF
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2.
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Eligible stocks must have a minimum US$ MDVT over the six months prior to the rebalancing reference date to be eligible. If a stock
has traded for less than six months, the MDVT amount for as long as the stock has been trading is used. The requirements vary based on
a stock’s country classification, whether emerging or developed. These requirements are summarized in the following table:
|
Liquidity Thresholds for Potential Constituents
|
Region
|
12-Month MVTR (%)
|
6-Month MDVT (US$M)
|
Emerging
|
10
|
0.1
|
Developed
|
20
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0.25
|
At annual reconstitution, current constituents of the S&P®
Global BMI are removed if either of the liquidity metrics fall below the thresholds in the following table:
Liquidity Thresholds for Current Constituents
|
Region
|
12-Month MVTR (%)
|
6-Month MDVT (US$M)
|
Emerging
|
7
|
0.07
|
Developed
|
14
|
0.175
|
S&P® Global BMI candidates must be common shares
or other securities that have the characteristics of common equities. All classes of common shares, both fully and partially paid, are
eligible. Temporary issues arising from corporate actions, such as “when-issued shares,” are considered on a case-by-case
basis when necessary to maintain continuity in a company’s index membership. Real estate investment trusts (“REITs”),
listed property trusts and similar real-property-owning pass-through structures taxed as REITs by their domiciles are eligible. In Canada,
income trusts (including Canadian REITs) are eligible, however, income-participating securities that combine stock and debt ownership
are ineligible. All publicly listed multiple share class lines are eligible for inclusion in the S&P® Global BMI, subject
to meeting the eligibility criteria and foreign investors may hold shares in the class.
If the practical available limit for an existing constituent (as
defined by the known shares actually available to foreign investors) falls below 5%, then it will be removed from the S&P®
Global BMI at the next quarterly rebalancing. A stock can be added only if the practical available limit is 10% or more. All stocks are
reviewed for this at each quarterly rebalancing.
Initial Public Offerings (“IPOs”), as well as new listings
on eligible exchanges and issues that emerged from bankruptcy status can be added to the S&P® Global BMI on a quarterly
basis. The criteria for inclusion are the same as that used at the annual reconstitution. In addition, the stock must have a trading history
of at least three months as of the reference date. The reference date for quarterly inclusions is five weeks prior to the effective rebalancing
date, and additions are effective at the open of Monday following the third Friday of March, June, September and December. Market cap
and liquidity are evaluated as of the reference date. Since the stocks will have traded less than a full year, the trading value data
that is available is annualized to determine S&P® Global BMI eligibility.
Certain large IPOs are eligible for fast track entry to the S&P®
Global BMI subject to the following conditions:
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·
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Only newly public IPOs and direct placement listings will be considered eligible for fast track entry. Formerly bankrupt companies
that switch from Over-the-Counter Exchange or a non-covered exchange to an S&P Dow Jones covered exchange are ineligible.
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·
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Fast track IPO additions must meet a minimum FMC threshold of US$2 billion, calculated using the shares offered (excluding over-allotment
options) and the closing price on the first day of trading on an eligible exchange. The threshold level is reviewed from time to time
and updated as needed to assure consistency with market conditions.
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·
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In addition, the IPO will need to meet all other applicable S&P® Global BMI eligibility rules except for the liquidity
requirement. If all necessary public information is available, S&P Dow Jones verifies that the fast track conditions have been met.
Once S&P Dow Jones announces that the IPO is eligible for fast track addition, it is added to the S&P® Global BMI
with five business days lead time. Fast track IPO additions eligible to be added during a quarterly rebalancing freeze period will be
added on the rebalancing effective date.
|
Between rebalancings, a company can be deleted from the S&P®
Global BMI due to corporate events such as mergers, acquisitions, delistings or bankruptcies. Companies that fall below US$25 million
FMC are removed from the S&P® Global BMI. Evaluations are made quarterly using data from the reference date which is
five weeks prior to the effect rebalancing date. Deletions are effective at the open of Monday following the third Friday in March, June,
September and December.
A company is deleted from the S&P® Global BMI
if it is involved in a merger, acquisition or significant restructuring such that it no longer meets the eligibility criteria. If a company’s
shares are no longer available or are no longer trading, the company is deleted from the
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S&P® Global BMI as soon as reasonably possible providing that
five days’ notice is given. In the event the information of delisting, bankruptcy or ineligible status becomes public after the
fact, the stock may be removed with a one-day notice period.
The S&P Global Clean Energy IndexTM Construction
Stocks that meet the eligibility criteria are reviewed for specific
practices related to clean energy in their business description. The universe of companies that may be considered eligible for potential
index inclusion is determined by S&P Dow Jones based on factors such as a company’s business description and its most recent
reported revenue by segment. Companies are identified as being in the clean energy business for their involvement in the production of
Clean Energy or provision of Clean Energy Technology & Equipment, including but not limited to: Biofuel & Biomass Energy Production,
Biofuel & Biomass Technology & Equipment, Ethanol & Fuel Alcohol Production, Fuel Cells Technology & Equipment, Geothermal
Energy Production, Hydro Electricity Production, Hydro-Electric Turbines & Other Equipment, Photo Voltaic Cells & Equipment, Solar
Energy Production, Wind Energy Production and Wind Turbines & Other Wind Energy Equipment.
After determining the eligible universe, the S&P Global Clean
Energy IndexTM components are selected as follows:
|
1.
|
S&P Dow Jones defines exposure scores for each company based on its primary business (see the following table).
|
|
2.
|
The 30 largest companies, as ranked by FMC, with exposure scores of 1 from the eligible universe are selected.
|
|
3.
|
Stocks are ranked by FMC, and the highest-ranking stock with an exposure score of 0.75 is selected and added to the S&P Global
Clean Energy IndexTM. This process continues iteratively until the target constituent count is reached.
|
|
4.
|
If, after step 3, there are still not 100 constituents, the highest ranking stock with an exposure score of 0.5 is selected until
the target constituent count of 100 is reached or all eligible companies with exposure scores of 1, 0.75 and 0.5 are selected.
|
|
5.
|
From all companies selected in the prior steps, those with an S&P Trucost Limited (“Trucost”) carbon-to-revenue footprint
standard score greater than three are excluded from inclusion in the S&P Global Clean Energy IndexTM. The carbon-to-revenue
footprint standard score is calculated by subtracting the mean carbon-to-revenue footprint of all the selections as of the rebalancing
reference date from each selection’s carbon-to-revenue footprint and then dividing the difference by the standard deviation. The
top and bottom five percent are excluded from the mean and standard deviation calculations. Companies without Trucost coverage are eligible
for S&P Global Clean Energy IndexTM inclusion. Companies without a Trucost carbon-to revenue footprint are excluded from
the carbon-to-revenue footprint standard score calculation process. If there are 100 stocks selected in the previous step, those excluded
stocks with a carbon-to-revenue footprint standard score greater than three are replaced with the next highest ranked stocks in order
to reach the S&P Global Clean Energy IndexTM’s target constituent count of 100. Replacement stocks must have a carbon-to-revenue
footprint lower than those being replaced to qualify for addition to the S&P Global Clean Energy IndexTM.
|
|
6.
|
If, after step 5, the weighted average exposure score of the S&P Global Clean Energy IndexTM falls below 0.85, the
lowest ranking stock with an exposure score of 0.5 is removed until the weighted average exposure score of the S&P Global Clean Energy
IndexTM reaches 0.85. Therefore, it is possible for the final S&P Global Clean Energy IndexTM constituent count
to be below 100. Weighted average exposure score is the sum of the product between each constituents’ exposure score and its final
optimized weights.
|
Exposure Scores
|
0
|
0.5
|
0.75
|
1
|
Eliminated, no exposure
|
Moderate clean energy exposure
|
Significant clean energy exposure
|
Maximum clean energy exposure
|
The carbon-to-revenue footprint data used in the methodology is
calculated by Trucost, and is defined as the company’s annual greenhouse gas (“GHG”) emissions (direct and first tier
indirect), expressed as metric tons of carbon dioxide equivalent (tCO2e) emissions, divided by annual revenues for the corresponding
year, expressed in millions of US dollars. Trucost’s annual research process evaluates environmental performance of a given company
with one output of this process being its annual GHG emissions profile.
Trucost Environmental Register Research Process
|
1.
|
Map company business segments. Trucost maps company business segments to more than 450 business activities in the Trucost model.
The model is based on the North American Industry Classification System, but goes into greater granularity in some areas, such as power
generating utilities.
|
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Auto Callable Contingent Interest Notes Linked to the Lesser Performing
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|
|
|
2.
|
Estimate data-modelled profile. Once company business segments have been mapped to Trucost sectors and their share of revenue
apportioned to each, Trucost is able to generate a data-modelled profile for the company. Trucost uses its environmentally extended input-output
model to estimate data for over 800 environmental and operational metrics across the entire operations of companies; from the raw materials
they depend on in their supply chains to the electricity they purchase to power their operations.
|
|
3.
|
Collect public disclosure. Trucost searches for environmental performance information in annual reports, sustainability reports,
websites and other publicly disclosed sources. Third party datasets, like disclosures to the Carbon Disclosure Project (“CDP”),
are also reviewed. Trucost then standardizes reported environmental performance data to best practice guidelines so that it can be compared
across companies, regions and business activities. To correct errors in company reporting, data control procedures are applied, including
sector specialist data reviews, automated outlier identifications and year-on-year comparisons. Wherever a material metric is not disclosed,
Trucost uses the modelled value, to estimate the missing data fields. CDP is a not-for-profit charity that surveys companies on Climate,
Water and Forestry issues and aggregates the collected disclosures.
|
|
4.
|
Engage with company. Trucost then conducts an annual engagement with each company, providing the opportunity to verify environmental
performance and provide additional information. Companies are further welcomed to contact Trucost analysts at any point in their environmental
reporting cycle to provide their most recently available data. This supports Trucost’s efforts to utilize the most up-to-date company
information and to maximize data quality.
|
Greenhouse Gas Emissions Data
The S&P Global Clean Energy IndexTM uses Trucost’s
greenhouse gas emissions data set. Quantities of greenhouse gas emissions are normalized by sales to calculate the company’s carbon
intensity, or “carbon-to-revenue footprint.” The S&P Global Clean Energy IndexTM uses direct and first-tier
indirect emissions in the carbon-to-revenue footprints.
Constituent Weighting
At each rebalancing, constituents are weighted based on the product
of each constituent’s FMC and exposure score, subject to the below constraints. This is done by using an optimization procedure
that chooses final weights in such a way to minimize the sum of the squared difference of capped weight and uncapped weight, divided by
uncapped weight for each stock, subject to the following constraints:
|
•
|
Constituents with an exposure score of 1 are capped at the lower
of 8% or five times the constituent’s liquidity weight.
|
|
•
|
Constituents with an exposure score of 0.75 are capped at the
lower of 6% or five times the constituent’s liquidity weight.
|
|
•
|
Constituents with an exposure score of 0.5 are capped at the lower
of 4% or five times the constituent’s liquidity weight.
|
|
•
|
The cumulative weight of all constituents within the S&P Global
Clean Energy IndexTM that have a weight greater than 4.5% cannot exceed 40%.
|
The liquidity weight of a given stock is defined as the stock liquidity
of that stock divided by the aggregate stock liquidity of all selected stocks, where the stock liquidity of a given stock is the 6-month
MDVT of that stock, calculated as the median of the number of shares traded each day multiplied by that day’s closing price over
the six months prior to the relevant rebalancing reference date.
The S&P Global Clean Energy IndexTM Calculation
The S&P Global Clean Energy IndexTM is a modified
market capitalization-weighted index where index constituents have a defined weight in the S&P Global Clean Energy IndexTM.
The index value of the S&P Global Clean Energy IndexTM is simply the market value of the S&P Global Clean Energy IndexTM
divided by the index divisor:
Index Value = (Index
Market Value) / Divisor
Index Market Value
=
× Sharesi × IWFi ×
FxRateI × AWFi
where, Pi the price of stock i, Sharesi
are the outstanding shares of stock i, IWFi is the float factor of stock i (as defined below), AWFi
is the adjustment factor of stock i assigned at each index rebalancing date, t, which adjusts the market capitalization
for all index constituents to achieve the user-defined weight, while maintaining the total market value of the overall index and FxRatei
is the exchange rate from the local currency into index currency for stock i. The AWF for each index constituent, i,
at rebalancing date, t, is calculated as:
AWFi,t =
Z / FloatAdjustedMarketValuei,t × Wi,t × FxRatei
where Z is an index specific constant set for the purpose
of deriving the AWF and, therefore, each stock’s share count used in the index calculation (often referred to as modified index
shares). Wi,t is the user-defined weight of stock i on rebalancing date t and FxRate is the exchange rate
from the local currency into index currency for stock i.
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|
|
Float Adjustment. Float adjustment means that the number
of shares outstanding is reduced to exclude closely held shares from the calculation of the index value because such shares are not available
to investors. The goal of float adjustment is to adjust each company’s total shares outstanding for long-term, strategic shareholders,
whose holdings are not considered to be available to the market.
For each component, S&P Dow Jones calculates an Investable
Weight Factor (“IWF”), which represents the portion of the total shares outstanding that are considered part of the public
float for purposes of the S&P Global Clean Energy IndexTM.
The purpose of the S&P Global Clean Energy IndexTM
divisor is to maintain continuity of the S&P Global Clean Energy IndexTM level following the implementation of corporate
actions, index rebalancing events, or other non-market driven actions. To assure that the S&P Global Clean Energy IndexTM’s
value, or level, does not change when stocks are added or deleted, the divisor is adjusted to offset the change in market value of the
S&P Global Clean Energy IndexTM. Thus, the divisor plays a critical role in the S&P Global Clean Energy IndexTM’s
ability to provide a continuous measure of market valuation when faced with changes to the stocks included in the S&P Global Clean
Energy IndexTM. In a similar manner, some corporate actions that cause changes in the market value of the stocks in the S&P
Global Clean Energy IndexTM should not be reflected in the S&P Global Clean Energy IndexTM level. Adjustments
are made to the divisor to eliminate the impact of these corporate actions on the S&P Global Clean Energy IndexTM value.
The S&P Global Clean Energy IndexTM Maintenance
and Adjustments
Semi-annual reconstitutions of the S&P Global Clean Energy
IndexTM occur after the close of trading on the third Friday of April and October. The reference date is after the close of
trading on the third Friday of March and September, respectively. In addition, quarterly reweightings occur after the close on the third
Friday of January and July.
The table below summarizes the type of index maintenance adjustments
and indicate whether or not an index adjustment is required.
Type of
Corporate Action
|
|
Comments
|
|
Divisor Adjustment
|
Spin-off
|
|
All spun-off companies are added to and remain in the
S&P Global Clean Energy IndexTM until the subsequent rebalancing.
|
|
No
|
Constituent Change
|
|
There are no intra-rebalancing additions with the exception
of spin-offs.
|
|
-
|
Deletions due to delistings, acquisition or any other
corporate event resulting in the deletion of the stock from the S&P Global Clean Energy IndexTM will cause the weights
of the rest of the stocks in the S&P Global Clean Energy IndexTM to change. Relative weights will stay the same.
|
Yes
|
Constituents changing their GICS® classification
to a non-eligible GICS® classification will be removed at the next rebalancing.
|
-
|
Rebalancing changes including additions, deletions and weight changes.
|
Yes
|
Index Committee
The S&P Global Clean Energy IndexTM is maintained
by an S&P Dow Jones index committee (the “Index Committee”). The Index Committee meets regularly. At each meeting, the
Index Committee may review pending corporate actions that may affect the S&P Global Clean Energy IndexTM constituents,
statistics comparing the composition of the S&P Global Clean Energy IndexTM to the market, companies that are being considered
as candidates for addition to the S&P Global Clean Energy IndexTM and any significant market events. In addition, the Index
Committee may revise index policy covering rules for selecting companies, treatment of dividends, share counts or other matters.
S&P Dow Jones considers information about changes to the S&P
Global Clean Energy IndexTM and related matters to be potentially market moving and material. Therefore, all Index Committee
discussions are confidential.
The Index Committee reserves the right to make exceptions when
applying the methodology if the need arises. In any scenario where the treatment differs from the general rules S&P Dow Jones will
provide sufficient notice, whenever possible.
In addition to the daily governance of the S&P Global Clean
Energy IndexTM and maintenance of index methodologies, at least once within any 12-month period, the Index Committee reviews
the methodology to ensure the S&P Global Clean Energy IndexTM continues
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|
|
to achieve the stated objectives, and that the data
and methodology remain effective. In certain instances, S&P Dow Jones may publish a consultation inviting comments from external parties.
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|
|
Annex B
The Invesco Solar ETF
All information contained in this document regarding the Invesco
Solar ETF (the “Solar Fund”) has been derived from publicly available information, without independent verification. This
information reflects the policies of, and is subject to change by, Invesco Exchange-Traded Fund Trust II (the “Invesco Trust”)
and Invesco Capital Management LLC (“Invesco”). Invesco is currently the investment adviser to the Solar Fund. The Solar Fund
is an exchange-traded fund that trades on NYSE Arca, Inc. under the ticker symbol “TAN.”
The Solar Fund seeks to track the investment results (before fees
and expenses) of the MAC Global Solar Energy Index. For additional information about the MAC Global Solar Energy Index, see “—
The MAC Global Solar Energy Index” below.
The Solar Fund uses an “indexing” investment approach
to seek to track the investment results, before fees and expenses, of the MAC Global Solar Energy Index. The Solar Fund employs a “full
replication” methodology in seeking to track the MAC Global Solar Energy Index, meaning that it generally invests in all of the
securities (including American Depositary receipts) composing the MAC Global Solar Energy Index in proportion to their weightings in the
MAC Global Solar Energy Index. However, under various circumstances, it may not be possible or practicable to purchase all of those securities
in those same weightings. In those circumstances, the Solar Fund may purchase a sample of securities in the MAC Global Solar Energy Index.
A “sampling” methodology means that Invesco uses quantitative analysis to select securities from the MAC Global Solar Energy
Index universe to obtain a representative sample of securities that have, in the aggregate, investment characteristics similar to the
MAC Global Solar Energy Index in terms of key risk factors, performance attributes and other characteristics. These include industry weightings,
market capitalization, return variability, earnings valuation, yield and other financial characteristics of securities. When employing
a sampling methodology, Invesco bases the quantity of holdings in the Solar Fund on a number of factors, including asset size of the Solar
Fund, and generally expects the Solar Fund to hold less than the total number of securities in the MAC Global Solar Energy Index. However,
Invesco reserves the right to invest the Solar Fund in as many securities as it believes necessary to achieve the Solar Fund’s investment
objective.
The Solar Fund’s return may not match the return of the MAC
Global Solar Energy Index for a number of reasons. For example, the Solar Fund incurs operating expenses not applicable to the MAC Global
Solar Energy Index and incurs costs in buying and selling securities, especially when rebalancing the Solar Fund’s securities holdings
to reflect changes in the composition of the MAC Global Solar Energy Index. In addition, the performance of the Solar Fund and the MAC
Global Solar Energy Index may vary due to asset valuation differences and differences between the Solar Fund’s portfolio and the
MAC Global Solar Energy Index resulting from legal restrictions, cost or liquidity constraints.
The Invesco Trust is a registered investment company that consists
of numerous separate investment portfolios, including the Solar Fund. Information provided to or filed with the SEC by the Invesco Trust
pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to
SEC file numbers 333-138490 and 811-21977, respectively, through the SEC’s website at http://www.sec.gov.
The MAC Global Solar Energy Index
All information contained in this pricing supplement regarding
the MAC Global Solar Energy Index, including, without limitation, its make-up, method of calculation and changes in its components, has
been derived from publicly available information, without independent verification. This information reflects the policies of, and is
subject to change by, MAC Indexing, LLC (“MAC Indexing”). The MAC Global Solar Energy Index was developed by MAC Indexing
and is calculated, maintained and published by S&P Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC (“S&P Dow Jones”).
Neither MAC Indexing nor S&P Dow Jones has any obligation to continue to publish, and may discontinue publication of, the MAC Global
Solar Energy Index. The MAC Global Solar Energy Index is reported by Bloomberg L.P. under the ticker symbol “SUNIDX.”
The MAC Global Solar Energy Index is a modified market
capitalization-weighted index that is designed to track the global solar energy equity sector. The MAC
Global Solar Energy Index includes companies listed on exchanges in specified countries that derive a significant amount of their revenues
from solar business activities.
The MAC Global Solar Energy Index Construction
In order to be eligible for inclusion in the MAC Global Solar Energy
Index, constituent stocks must be listed on an exchange in one of the following countries: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom or the United States, and effective March 2021, the following countries will be added to the list of countries
in which constituent stocks must be listed: Israel, Luxembourg, South Korea and Taiwan.
The MAC Global Solar Energy Index selects stocks based upon the
relative importance of solar power within the company’s business model. Segment revenue is the primary metric used for determining
a company’s solar exposure if available, but other metrics may be
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|
used for determining solar exposure depending on availability, such as EBITDA,
net income, earnings, balance sheet, portfolio holdings, cash flow, cash available for distribution, solar electricity capacity or production
in energy terms or other relevant metrics.
Companies that qualify for inclusion in the MAC Global Solar Energy
Index must derive a significant portion of their revenue, or other relevant metric, from operating in the following business segments
of the solar industry: solar power equipment producers including ancillary or enabling products such as tracking systems, inverters, batteries,
or other energy storage systems; suppliers of raw materials, components or services to solar producers or developers; companies that produce
solar equipment fabrication systems; companies involved in solar power system installation, development, integration, maintenance, or
finance; companies that produce hydrogen using solar energy; companies that provide solar-powered charging systems for electric vehicles
or other electric devices; companies selling systems that use solar thermal energy to produce heat or electricity; or companies that sell
electricity derived from solar power.
To determine whether solar power is a significant component of
a company’s business, MAC Indexing uses the following process:
All publicly-traded companies with any connection to the solar
industry, and are listed in one of the countries specified above, are identified by company description database searches and bottom-up
industry research of publicly available information and databases. Based on a review of the company’s public filings and company
description, companies that are identified through the initial search are put into groups:
|
·
|
Pure-Play Group — Companies that generate in excess of two thirds of their revenue from solar related business are considered
to have their primary business in the solar industry and are placed in the Pure-Play Group. These are assigned an “Exposure Factor”
of 1.0.
|
|
·
|
Medium-Play Group — Companies that operate in multiple industries but have significant exposure to the solar industry —
defined as generating less than approximately two thirds but more than approximately one third of their revenue from solar related business
— are placed in the Medium-Play Group. These are assigned an Exposure Factor of 0.5.
|
|
·
|
Eliminated Group — Companies with marginal exposure to the solar industry — defined as generating less than approximately
one third of their revenue from solar related business — are eliminated from consideration as a MAC Global Solar Energy Index constituent.
|
From the securities in the Pure-Play Group and Medium-Play Group,
securities eligible for inclusion in the MAC Global Solar Energy Index that are not existing constituents of the MAC Global Solar Energy
Index must be listed on an exchange in a country specified above, have a minimum float-adjusted market capitalization greater than or
equal to $150 million at the reference date preceding each rebalance and have a minimum one month average daily trading value of $750,000
at the reference date preceding each rebalance. Securities in the Pure-Play Group or Medium-Play Group that do not meet these criteria
are excluded from consideration as a MAC Global Solar Energy Index constituent. Securities that are already in the MAC Global Solar Energy
Index are not subject to the minimum market capitalization and trading value to remain constituents of the MAC Global Solar Energy Index.
The MAC Global Solar Energy Index Weight Adjustments
The weighting of MAC Global Solar Energy Index constituents on
the rebalance date is determined as follows:
|
·
|
The float-adjusted market capitalization for each security is multiplied by its Exposure Factor of either 1.0 or 0.5, meaning the
market capitalization for the securities in the Pure-Play Group is taken at full value and for the Medium-Play Group is reduced by one
half.
|
|
·
|
The resulting adjusted market capitalizations are used to create a standard market-capitalization-weighted index with raw weighting
factors.
|
|
·
|
If necessary, the raw weighting factors are modified through a weighting-gap rebalancing algorithm to ensure that, at the time of
rebalance, no security in the MAC Global Solar Energy Index has an individual weighting greater than 10% and that the aggregate weighting
of securities in the MAC Global Solar Energy Index with individual weightings of more than 4.5% is no more than 45.0% of the total MAC
Global Solar Energy Index. The weighting-gap rebalancing algorithm progressively reduces the weighting gap between adjacent securities,
as ranked by their raw weighting factors, on a proportional basis, until the weighting parameters specified above are met. MAC Indexing
may adjust the weights to account for liquidity, solar exposure, ownership, or diversification factors. The MAC Global Solar Energy Index
in addition follows an “80% investment policy” whereby at least 80% of the combined weight of the MAC Global Solar Energy
Index constituents must be represented by companies that derive at least 50% of their revenues from the solar industry. Stocks with less
than 50% solar revenue will either be dropped from the MAC Global Solar Energy Index, not included in the MAC Global Solar Energy Index
or have a weight adjustment to the extent necessary to comply with this policy.
|
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|
|
The MAC Global Solar Energy Index Maintenance
If a MAC Global Solar Energy Index constituent is determined to
be delisted; illiquid; in bankruptcy or debt restructuring proceedings; acquired; or in extreme legal, regulatory or financial distress,
that constituent may be removed from the MAC Global Solar Energy Index effective immediately and the stock will not be replaced. A MAC
Global Solar Energy Index constituent that is under a trading halt or suspension will be reviewed on an ongoing basis for possible deletion.
A spin-off from an existing MAC Global Solar Energy Index constituent will automatically be included in the MAC Global Solar Energy Index
if it meets the standard MAC Global Solar Energy Index criteria but will be dropped from the MAC Global Solar Energy Index as soon as
is reasonably practicable if the spun-off company does not meet the standard MAC Global Solar Energy Index constituent criteria.
A company that recently completed an initial public offering and
that meets the criteria above can be considered for inclusion in the MAC Global Solar Energy Index only at the time of the quarterly MAC
Global Solar Energy Index rebalance, and only after the security has completed at least two months of trading history.
Except in unusual circumstances (including, but not limited to,
mergers, spin-offs, delisting, tender offers, or the acquisition or bankruptcy of a company), the MAC Global Solar Energy Index will be
rebalanced quarterly on the third Friday of the last month of each calendar quarter, with a reference date for the data being the first
business day of the last month of the calendar quarter. At the quarterly MAC Global Solar Energy Index rebalance:
|
·
|
securities may be added or deleted as MAC Global Solar Energy Index constituents according to the criteria defined above,
|
|
·
|
the Exposure Factor may be changed based on a shift in a company’s relative exposure to the solar industry, and
|
|
·
|
constituent weightings may be adjusted to reflect a change in the Exposure Factor for a particular stock, the addition or deletion
of MAC Global Solar Energy Index constituents and/or the need to meet the specified weighting requirements.
|
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