You should read this pricing supplement together with the prospectus dated April 30, 2015 and the prospectus supplement dated April 30, 2015,
relating to our Senior Global Medium-Term Notes (Structured Notes), of which these securities are a part, for additional information about the securities. Information included in this pricing supplement supersedes information in the prospectus
supplement and prospectus to the extent it is different from that information. Certain defined terms used but not defined herein have the meanings set forth in the prospectus supplement.
You should rely only on the information contained in or incorporated by reference in this pricing supplement, the accompanying prospectus supplement and the
accompanying prospectus. This pricing supplement may be used only for the purpose for which it has been prepared. No one is authorized to give information other than that contained in this pricing supplement, the accompanying prospectus supplement
and the accompanying prospectus, and in the documents referred to in this pricing supplement, the prospectus supplement and the prospectus and which are made available to the public. We have not, and Wells Fargo Securities, LLC (“Wells Fargo
Securities”) has not, authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it.
We are not, and Wells Fargo Securities is not, making an offer to sell the securities in any jurisdiction where the offer or sale is not permitted. You should
not assume that the information contained in or incorporated by reference in this pricing supplement, the accompanying prospectus supplement or the accompanying prospectus is accurate as of any date other than the date of the applicable document.
Our business, financial condition, results of operations and prospects may have changed since that date. Neither this pricing supplement, nor the accompanying prospectus supplement, nor the accompanying prospectus constitutes an offer, or an
invitation on our behalf or on behalf of Wells Fargo Securities, to subscribe for and purchase any of the securities and may not be used for or in connection with an offer or solicitation by anyone in any jurisdiction in which such an offer or
solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.
References to “CIBC,” “the
Issuer,” “the Bank,” “we,” “us” and “our” in this pricing supplement are references to Canadian Imperial Bank of Commerce and not to any of our subsidiaries, unless we state otherwise or the context
otherwise requires.
You may access the prospectus supplement and prospectus on the SEC website www.sec.gov as follows (or if such address has changed, by
reviewing our filing for the relevant date on the SEC website):
The securities are not designed for, and may not be a
suitable investment for, investors who:
TERMS OF THE SECURITIES
The information in this “Summary” section is qualified by the more detailed information set forth in this pricing supplement, the prospectus
supplement dated April 30, 2015 and the prospectus dated April 30, 2015, each filed with the SEC. See “Investment Description” in this pricing supplement.
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Market Measure:
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Energy Select Sector SPDR
®
Fund (Bloomberg ticker symbol “XLE”)
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Pricing Date:
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January 31, 2017
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Issue Date:
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February 3, 2017
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Principal Amount:
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$1,000 per security. References in this pricing supplement
to a “security” are to a security with a principal amount of $1,000.
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Redemption
Amount:
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On the stated maturity date, you will be entitled to
receive a cash payment per security in U.S. dollars equal to the redemption amount. The “redemption amount” per security will equal:
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if the ending price is greater than the starting price: the lesser of:
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(i) $1,000
plus
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$1,000 x
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ending price
– starting price
starting price
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x Participation Rate
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; and
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(ii) the capped value;
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if the ending price is less than or equal to the starting price, but greater than or equal to the threshold price:
$1,000; or
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if the ending price is less than the threshold price: $1,000
minus
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$1,000 x
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threshold price – ending price
starting price
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If the ending price is less than the threshold price, you will receive at stated maturity less, and up to 85% less, than the principal amount
of your securities.
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Stated Maturity
Date:
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August 3, 2020. If a market disruption event occurs and is
continuing on the calculation date, the stated maturity date will be postponed until the later of (i) August 3, 2020 and (ii) three business days after the ending price is determined. See “Additional Terms of the Securities—Market
Disruption Events.” The securities are not subject to redemption at the option of Canadian Imperial Bank of Commerce or repayment at the option of any holder of the securities prior to the stated maturity date.
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PRS-5
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
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Fund Closing Price:
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The “fund closing price,” with respect to the Fund on any
trading day, means the product of (i) the closing price of one share of the Fund on such trading day and (ii) the adjustment factor applicable to the Fund on such trading day.
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Closing Price:
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The “closing price” with respect to a share of the Fund on
any trading day means the price, at the scheduled closing time, without regard to after hours or any other trading outside the regular trading session hours, of the share on the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which the share (or any such other security) is listed or admitted to trading.
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Adjustment Factor:
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The “adjustment factor” means, with respect to one share
of the Fund (or one unit of any other security for which a fund closing price must be determined), 1.0, subject to adjustment in the event of certain events affecting the shares of the Fund. See “Additional Terms of the
Securities—Anti-dilution Adjustments Relating to the Fund; Alternate Calculation” below.
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Starting Price:
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72.90, the fund closing price of the Fund on the pricing date.
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Ending Price:
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The “ending price” will be the fund closing price of the
Fund on the calculation date.
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Capped Value:
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The “capped value” is 135% of the principal amount per
security ($1,350 per security). As a result of the capped value, the maximum total return at maturity of the securities will be 35% of the principal amount.
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Threshold Price:
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61.965, which is equal to 85% of the starting price.
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Participation Rate:
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170%
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Calculation Date:
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July 27, 2020 or, if such day is not a trading day, the next succeeding trading day. The calculation date is subject to postponement
due to the occurrence of a market disruption event. See “Additional Terms of the Securities—Market Disruption Events.”
A “trading day” means a day, as determined by the calculation agent, on which the relevant stock exchange and each related futures or options
exchange with respect to the Fund or any successor thereto, if applicable, are scheduled to be open for trading for their respective regular trading sessions. The “relevant stock exchange” for the Fund means the primary exchange or
quotation system on which shares (or other applicable securities) of the Fund are traded, as determined by the calculation agent. A “related futures or options exchange” for the Fund means each exchange or quotation system where trading
has a material effect (as determined by the calculation agent) on the overall market for futures or options contracts relating to the Fund.
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Calculation Agent:
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Canadian Imperial Bank of Commerce. We may appoint a different calculation agent without your consent and without notifying you.
All determinations made by the calculation agent will be at the sole discretion of it,
and, in the absence of manifest error, will be conclusive for all purposes and binding on us and you. All percentages and other amounts resulting from any calculation with respect to the securities will be rounded at the calculation agent’s
discretion. The calculation agent will have no liability for its determinations.
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Business Day:
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A Monday, Tuesday, Wednesday, Thursday or Friday that is neither a legal holiday nor a day on which banking institutions are authorized or
obligated by law, regulation or order to close in New York or Toronto.
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No Listing:
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The securities will not be listed on any securities exchange or quoted on any automated quotation system.
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PRS-6
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
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Clearance and
Settlement:
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The Depository Trust Company (“DTC”)
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Material U.S. Tax Consequences:
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By purchasing the securities, each holder agrees to treat them as
pre-paid
cash-settled derivative
contracts for U.S. federal income tax purposes. Assuming this treatment is respected, gain or loss recognized on the securities should be treated as long-term capital gain or loss if the holder has held the securities for more than a year. However,
if the Internal Revenue Service were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might be materially and adversely affected. As described below under
“United States Federal Income Tax Considerations,” the U.S. Treasury Department and the Internal Revenue Service released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, including the
character and timing of income or loss and the degree, if any, to which income realized by
non-U.S.
persons should be subject to withholding tax, possibly with retroactive effect. Both U.S. and
non-U.S.
persons considering an investment in the securities should review carefully the section of this pricing supplement entitled “United States Federal Income Tax Considerations” and consult their tax
advisers regarding the U.S. federal tax consequences of an investment in the securities (including possible alternative treatments and the issues presented by the notice), as well as tax consequences arising under the laws of any state, local or
non-U.S.
taxing jurisdiction.
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Agent:
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Wells Fargo Securities. The agent may resell the securities to other securities dealers, including securities dealers acting as custodians,
at the principal amount of the securities less a concession not in excess of $20.00 per security. Such securities dealers may include Wells Fargo Advisors (“WFA”) (the trade name of the retail brokerage business of Wells Fargo Clearing
Services, LLC and Wells Fargo Advisors Financial Network, LLC, each an affiliate of Wells Fargo Securities). In addition to the selling concession allowed to WFA, Wells Fargo Securities will pay $0.75 per security of the underwriting discount to WFA
as a distribution expense fee for each security sold by WFA.
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Denominations:
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$1,000 and any integral multiple of $1,000.
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CUSIP / ISIN:
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13605WCC3 / US13605WCC38
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PRS-7
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
DETERMINING PAYMENT AT MATURITY
On the stated maturity date, you will receive a cash payment per security (the redemption amount) calculated as follows:
PRS-8
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
HYPOTHETICAL PAYOUT PROFILE
The following profile is based on a capped value of 135.00% or $1,350.00 per security, a participation rate of 170% and a threshold price equal to 85% of the
starting price. This graph has been prepared for purposes of illustration only. Your actual return will depend on the actual ending price and whether you hold your securities to maturity.
PRS-9
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
RISK FACTORS
The securities have complex features and investing in the securities will involve risks not associated with an investment in conventional debt securities, the
Fund, or the Energy Select Sector Index (the “underlying index”). You should carefully consider the risk factors set forth below as well as the other information contained in this pricing supplement and the accompanying prospectus
supplement and prospectus, including the documents they incorporate by reference. As described in more detail below, the value of the securities may vary considerably before the stated maturity date due to events that are difficult to predict and
are beyond our control. You should reach an investment decision only after you have carefully considered with your advisors the suitability of an investment in the securities in light of your particular circumstances.
If The Ending Price Is Less Than The Threshold Price, You Will Receive At Maturity Less, And Up To 85% Less, Than The Principal Amount Of Your Securities.
We will not repay you a fixed amount on the securities on the stated maturity date. The redemption amount will depend on the direction of and
percentage change in the ending price of the Fund relative to the starting price, the capped value and the other terms of the securities. Because the price of the Fund will be subject to market fluctuations, the redemption amount you receive may be
more or less, and possibly significantly less, than the principal amount of your securities.
If the ending price is less than the threshold price, the
redemption amount that you receive at stated maturity will be reduced by an amount equal to the decline in the price of the Fund to the extent it is below the threshold price (expressed as a percentage of the starting price). The threshold price is
85% of the starting price. As a result, you may receive less, and up to 85% less, than the principal amount per security at maturity even if the price of the Fund is greater than or equal to the starting price or the threshold price at certain times
during the term of the securities.
Even if the ending price is greater than the starting price, the amount you receive at stated maturity may only be
slightly greater than the principal amount, and your yield on the securities may be less than the yield you would earn if you bought a traditional interest-bearing debt security of Canadian Imperial Bank of Commerce or another issuer with a similar
credit rating with the same stated maturity date.
An Investment Linked To The Shares Of The Fund Is Different From An Investment Linked To The
Underlying Index.
The performance of the shares of the Fund may not exactly replicate the performance of the underlying index because the Fund may
not invest in all of the securities included in the underlying index and because the price of the Fund will reflect transaction costs and fees that are not included in the calculation of the underlying index. The Fund may also hold securities or
derivative financial instruments not included in the underlying index. It is also possible that the Fund may not fully replicate the performance of the underlying index due to the temporary unavailability of certain securities in the secondary
market or due to other extraordinary circumstances. In addition, because the shares of the Fund are traded on a securities exchange and are subject to market supply and investor demand, the value of a share of the Fund may differ from the net asset
value per share of the Fund. As a result, the performance of the Fund may not correlate perfectly with the performance of the underlying index, and the return on the securities based on the performance of the Fund will not be the same as the return
on securities based on the performance of the underlying index.
Your Return Will Be Limited By The Capped Value And May Be Lower Than The Return On A
Direct Investment In The Fund.
The opportunity to participate in the possible increases in the price of the Fund through an investment in the
securities will be limited because the redemption amount will not exceed the capped value. Furthermore, the effect of the participation rate will be progressively reduced for all ending prices exceeding the ending price at which the capped value is
reached.
Your Return On The Securities Could Be Less Than If You Owned Shares Of The Fund Or The Securities Composing The Underlying Index.
Your return on the securities will not reflect the return you would realize if you actually owned shares of the Fund, the securities held by the Fund, or the
securities composing the underlying index. This is in part because the redemption amount payable at stated maturity will be determined by reference only to the closing price of a share of the Fund, without taking into consideration the value of
dividends and other distributions paid on such share or the securities composing the underlying index. In addition, the redemption amount will not be greater than the capped value.
PRS-10
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
No Periodic Interest Will Be Paid On The Securities.
No periodic interest will be paid on the securities. However, because it is possible that the securities may be classified for U.S. federal income tax
purposes as contingent payment debt instruments rather than prepaid forward contracts, you may be required to accrue interest income over the term of your securities. See “United States Federal Income Tax Considerations.”
The Securities Are Subject To The Credit Risk Of Canadian Imperial Bank of Commerce.
The securities are our obligations exclusively and are not, either directly or indirectly, an obligation of any third party. Any amounts payable under the
securities are subject to our creditworthiness, and you will have no ability to pursue the shares of the Fund or any securities held by the Fund for payment. As a result, our actual and perceived creditworthiness and actual or anticipated decreases
in our credit ratings may affect the value of the securities and, in the event we were to default on our obligations, you may not receive any amounts owed to you under the terms of the securities.
The Estimated Value Of The Securities Is Not An Indication Of The Price, If Any, At Which Wells Fargo Securities Or Any Other Person May Be Willing To Buy
The Securities From You In The Secondary Market.
The price, if any, at which Wells Fargo Securities or any of its affiliates may purchase the
securities in the secondary market will be based on Wells Fargo Securities’s proprietary pricing models and will fluctuate over the term of the securities as a result of changes in the market and other factors described in the next risk factor.
Any such secondary market price for the securities will also be reduced by a
bid-offer
spread, which may vary depending on the aggregate principal amount of the securities to be purchased in the secondary
market transaction, and the expected cost of unwinding any related hedging transactions. Unless the factors described in the next risk factor change significantly in your favor, any such secondary market price for the securities will likely be less
than the principal amount.
If Wells Fargo Securities or any of its affiliates makes a secondary market in the securities at any time up to the issue date
or during the
six-month
period following the issue date, the secondary market price offered by Wells Fargo Securities or any of its affiliates will be increased by an amount reflecting a portion of the costs
associated with selling, structuring, hedging and issuing the securities that are included in the principal amount. Because this portion of the costs is not fully deducted upon issuance, any secondary market price offered by Wells Fargo Securities
or any of its affiliates during this period will be higher than it would be if it were based solely on Wells Fargo Securities’s proprietary pricing models less the
bid-offer
spread and hedging unwind
costs described above. The amount of this increase in the secondary market price will decline steadily to zero over this
six-month
period. If you hold the securities through an account at Wells Fargo
Securities or one of its affiliates, we expect that this increase will also be reflected in the value indicated for the securities on your brokerage account statement. If you hold your securities through an account at a broker-dealer other than
Wells Fargo Securities or any of its affiliates, the value of the securities on your brokerage account statement may be different than if you held your securities at Wells Fargo Securities or any of its affiliates.
The Value Of The Securities Prior To Stated Maturity Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the securities prior to stated maturity will be affected by the price of the Fund at that time, interest rates at that time and a number of other
factors, some of which are interrelated in complex ways. The effect of any one factor may be offset or magnified by the effect of another factor. The following factors, among others, are expected to affect the value of the securities. When we refer
to the “value” of your security, we mean the value you could receive for your security if you are able to sell it in the open market before the stated maturity date.
●
Fund Performance.
The value of the securities
prior to maturity will depend substantially on the price of the Fund. The price at which you may be able to sell the securities before stated maturity may be at a discount, which could be substantial, from their principal amount, if the price of the
Fund at such time is less than, equal to or not sufficiently above its starting price.
●
Capped Value.
We anticipate that the
value of the securities will always be at a discount to the capped value.
PRS-11
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
●
Interest Rates.
The value of the
securities may be affected by changes in the interest rates in the U.S. markets.
●
Volatility Of The Fund.
Volatility is the term
used to describe the size and frequency of market fluctuations. The value of the securities may be affected if the volatility of the Fund changes.
●
Time Remaining To Maturity.
The value of the
securities at any given time prior to maturity will likely be different from that which would be expected based on the then-current price of the Fund. This difference will most likely reflect a discount due to expectations and uncertainty concerning
the price of the Fund during the period of time still remaining to the maturity date. In general, as the time remaining to maturity decreases, the value of the securities will approach the amount that could be payable at maturity based on the
then-current price of the Fund.
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Dividend Yields On
Securities Included In The Fund.
The value of the securities may be affected by the dividend yields on securities held by the Fund (the amount of such dividends may influence the closing price of the shares of the Fund).
●
Events Involving Companies Whose Securities Are
Included In The Fund.
General economic conditions and earnings results of the companies whose securities are held by the Fund and real or anticipated changes in those conditions or results may affect the value of the securities.
Additionally, as a result of a merger or acquisition, one or more of the securities held by the Fund may be replaced with a surviving or acquiring entity’s securities. The surviving or acquiring entity’s securities may not have the same
characteristics as the securities originally held by the Fund.
●
Our Credit
Ratings, Financial Condition And Results Of Operation.
Actual or anticipated changes in our credit ratings, financial condition or results of operation may affect the value of the securities. However, because the return on the
securities is dependent upon factors in addition to our ability to pay our obligations under the securities, such as the price of the Fund, an improvement in our credit ratings, financial condition or results of operation will not reduce the other
investment risks related to the securities.
You should understand that the impact of one of the factors specified above, such as a change in interest
rates, may offset some or all of any change in the value of the securities attributable to another factor, such as a change in the price of the Fund.
Anti-dilution Adjustments Relating To The Shares Of The Fund Do Not Address Every Event That Could Affect Such Shares.
An adjustment factor, as described herein, will be used to determine the ending price of the Fund. The adjustment factor will be adjusted by the calculation
agent for certain events affecting the shares of the Fund. However, the calculation agent will not make an adjustment for every event that could affect such shares. If an event occurs that does not require the calculation agent to adjust the
adjustment factor, the value of the securities may be adversely affected.
Our Estimated Value Of The Securities Is Lower Than The Principal Amount Of
The Securities.
Our estimated value is only an estimate using several factors. The principal amount of the securities exceeds our estimated value
because costs associated with selling and structuring the securities, as well as hedging the securities, are included in the principal amount of the securities. See “The Estimated Value of the Securities” in this pricing supplement.
Our Estimated Value Does Not Represent Future Values Of The Securities And May Differ From Others’ Estimates.
Our estimated value of the securities was determined by reference to our internal pricing models when the terms of the securities were set. This estimated
value was based on market conditions and other relevant factors existing at that time and our assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and
assumptions could provide valuations for the securities that are greater than or less than our estimated value. 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 securities could change significantly based on, among other things, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors, which may impact the price, if any, at which
Wells Fargo Securities or any other person would be willing to buy securities from you in secondary market transactions. See “The Estimated Value of the Securities” in this pricing supplement.
PRS-12
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Our Estimated Value Was Not Determined By Reference To Credit Spreads For Our Conventional Fixed-Rate
Debt.
The internal funding rate used in the determination of our estimated value generally represents a discount from the credit spreads for our
conventional fixed-rate debt. If we were to have used the interest rate implied by our conventional fixed-rate credit spreads, we would expect the economic terms of the securities to be more favorable to you. Consequently, our use of an internal
funding rate had an adverse effect on the terms of the securities and could have an adverse effect on any secondary market prices of the securities. See “The Estimated Value of the Securities” in this pricing supplement.
The Securities Will Not Be Listed On Any Securities Exchange And We Do Not Expect A Trading Market For The Securities To Develop.
The securities will not be listed or displayed on any securities exchange or any automated quotation system. Although Wells Fargo Securities and/or its
affiliates may purchase the securities from holders, they are not obligated to do so and are not required to make a market for the securities. There can be no assurance that a secondary market will develop. Because we do not expect that any market
makers will participate in a secondary market for the securities, the price at which you may be able to sell your securities is likely to depend on the price, if any, at which Wells Fargo Securities and/or its affiliates are willing to buy your
securities.
If a secondary market does exist, it may be limited. Accordingly, there may be a limited number of buyers if you decide to sell your
securities prior to stated maturity. This may affect the price you receive upon such sale. Consequently, you should be willing to hold the securities to stated maturity.
Historical Prices Of The Fund Should Not Be Taken As An Indication Of The Future Performance Of The Fund During The Term Of The Securities.
The trading prices of shares of the fund or the securities held by the Fund will determine the redemption amount payable at maturity to you. It is impossible
to predict whether the ending price of the Fund will fall or rise compared to its starting price. Trading prices of shares of the Fund or of the securities held by the Fund will be influenced by complex and interrelated political, economic,
financial and other factors that can affect the markets in which the Fund and those securities comprising the Fund are traded and the values of the Fund and such securities. Accordingly, any historical prices of the Fund or the securities held by
the Fund do not provide an indication of the future performance of the Fund.
An Investment In The Securities Is Subject To Risks Associated With
Investing In Stocks In The Energy Sector.
The stocks included in the Energy Select Sector Index and that are generally tracked by the Fund are stocks
of companies whose primary business is directly associated with the energy sector, including the following two
sub-sectors:
oil, gas and consumable fuels; and energy equipment and services. Because the value
of the securities is linked to the performance of the Fund, an investment in the securities exposes investors to risks associated with investments in the stocks of companies in the energy sector.
Energy companies develop and produce crude oil and natural gas and/or provide drilling and other energy resources production and distribution related
services. Stock prices for these types of companies are mainly affected by the business, financial and operating conditions of the particular company, as well as changes in prices for oil, gas and other types of fuels, which in turn largely depend
on supply and demand for various energy products and services. Some of the factors that may influence supply and demand for energy products and services include: general economic conditions and growth rates; weather conditions; the cost of exploring
for, producing and delivering oil and gas; technological advances affecting energy efficiency and energy consumption; the ability of the Organization of Petroleum Exporting Countries (OPEC) to set and maintain production levels of oil; currency
fluctuations; inflation; natural disasters; civil unrest, acts of sabotage or terrorism; and other regional or global events. The profitability of energy companies may also be adversely affected by existing and future laws, regulations, government
actions and other legal requirements relating to protection of the environment, health and safety matters and others that may increase the costs of conducting their business or may reduce or delay available business opportunities. Increased supply
or weak demand for energy products and services, as well as various developments leading to higher costs of doing business or missed business opportunities, would adversely impact the performance of companies in the energy sector. The value of the
securities may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting the energy sector or one of the
sub-sectors
of the energy
sector than a different investment linked to a more broadly diversified group of issuers. All of these factors could have an adverse effect on the price of the Fund and, therefore, on the value of the securities.
PRS-13
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
The Fund May Not Be Representative Of An Investment In The Energy Sector.
The Fund does not represent a direct investment in the energy sector. The Fund consists of securities of companies whose primary lines of business are
directly associated with the energy sector. As a result, the fund closing price of the Fund will be influenced by a variety of economic, financial and other factors affecting those companies, some of which may be unrelated to the market and other
conditions applicable to the U.S. energy sector. As a result, the performance of the Fund may not perfectly correlate with the performance of the energy sector and the fund closing price of the Fund could decrease even if the performance of the
energy sector as a whole increases.
Changes That Affect The Fund Or The Underlying Index May Adversely Affect The Value Of The Securities And The
Amount You Will Receive At Stated Maturity.
The investment advisor to the Fund, SSgA Funds Management, Inc. ( “SSgA FM”), seeks investment
results that correspond generally to the price and yield performance, before fees and expenses, of the underlying index. Pursuant to its investment strategy or otherwise, SSgA FM may add, delete or substitute the stocks composing the Fund. Any of
these actions could adversely affect the price of the Fund, and, consequently, the value of the securities. In addition, the publisher of the underlying index is responsible for calculating and maintaining the underlying index. The underlying index
publisher may add, delete or substitute the securities composing the underlying index or make other methodological changes required by certain corporate events relating to the securities composing the underlying index. Any of these actions could
adversely affect the value of the underlying index, and, consequently, the price of the Fund and the value of the securities.
We Cannot Control
Actions By Any Of The Unaffiliated Companies Whose Securities Are Included In The Fund Or The Underlying Index.
Actions by any company whose
securities are included in the Fund or the underlying index may have an adverse effect on the price of its security, the ending price and the value of the securities. These companies will not be involved in the offering of the securities and will
have no obligations with respect to the securities, including any obligation to take our or your interests into consideration for any reason. These companies will not receive any of the proceeds of the offering of the securities and will not be
responsible for, and will not have participated in, the determination of the timing of, prices for, or quantities of, the securities to be issued. These companies will not be involved with the administration, marketing or trading of the securities
and will have no obligations with respect to the redemption amount to be paid to you at maturity.
We, Wells Fargo Securities, And Our Respective
Affiliates Have No Affiliation With The Sponsor Of The Fund Or The Publisher Of The Underlying Index And Have Not Independently Verified Their Public Disclosure Of Information.
We, Wells Fargo Securities, and our respective affiliates are not affiliated in any way with the Fund sponsor or the publisher of the underlying index and
have no ability to control or predict their actions, including any errors in or discontinuation of disclosure regarding the methods or policies relating to the management or calculation of the Fund or the underlying index. We have derived the
information about the Fund sponsor, the Fund, the publisher of the underlying index and the underlying index contained herein from publicly available information, without independent verification. You, as an investor in the securities, should make
your own investigation into the Fund, the underlying index and the sponsors. The sponsors are not involved in the offering of the securities made hereby in any way and have no obligation to consider your interest as an owner of securities in taking
any actions that might affect the value of the securities.
You Will Not Have Any Shareholder Rights With Respect To The Shares Of The Fund.
You will not become a holder of shares of the Fund or a holder of securities included in the underlying index as a result of owning a security. You will not
have any voting rights, any right to receive dividends or other distributions or any other rights with respect to such shares or securities. You will have no right to receive delivery of any shares or securities at stated maturity or upon automatic
call.
The Stated Maturity Date May Be Postponed In Certain Circumstances.
The determination of the ending price will be postponed if the originally scheduled calculation day is not a trading day or if the calculation agent
determines that a market disruption event has occurred or is continuing on that day. If such a postponement occurs, the stated maturity date will be postponed until the later of (i) three business days after the ending price is determined and
(ii) the initial stated maturity date.
PRS-14
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
We Or One Of Our Affiliates Will Be The Calculation Agent And, As A Result, Potential Conflicts Of
Interest Could Arise.
We or one of our affiliates will be the calculation agent for purposes of determining, among other things, the starting price
and the ending price, calculating the redemption amount, determining whether adjustments should be made to the ending price, determining whether a market disruption event has occurred and, if publication of the Fund is discontinued, selecting a
successor fund or, if no successor fund is available, determining the closing price and determining whether to adjust the closing price on the calculation date in the event of certain changes in or modifications to the Fund or the underlying index.
Although the calculation agent will exercise its judgment in good faith when performing its functions, potential conflicts of interest may exist between the calculation agent and you.
Our Economic Interests And Those Of Any Dealer Participating In The Offering Of Securities Will Potentially Be Adverse To Your Interests.
You should be aware of the following ways in which our economic interests and those of any dealer participating in the distribution of the securities, which
we refer to as a “participating dealer,” will potentially be adverse to your interests as an investor in the securities. In engaging in certain of the activities described below, our affiliates or any participating dealer or its affiliates
may take actions that may adversely affect the value of and your return on the securities, and in so doing they will have no obligation to consider your interests as an investor in the securities. Our affiliates or any participating dealer or its
affiliates may realize a profit from these activities even if investors do not receive a favorable investment return on the securities.
●
Research reports by our affiliates or any participating dealer or its affiliates
may be inconsistent with an investment in the securities and may adversely affect the price of the Fund.
Our affiliates or any dealer participating in the offering of the securities or its affiliates may, at present or in the future, publish
research reports on the Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index. This research will be modified from time to time without notice and may, at present or in the future, express
opinions or provide recommendations that are inconsistent with purchasing or holding the securities. Any research reports on the Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index could
adversely affect the price of the Fund and, therefore, adversely affect the value of and your return on the securities. You are encouraged to derive information concerning the Fund and the underlying index from multiple sources and should not rely
on the views expressed by us or our affiliates or any participating dealer or its affiliates. In addition, any research reports on the Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index
published on or prior to the pricing date could result in an increase in the price of the Fund on the pricing date, which would adversely affect investors in the securities by increasing the price at which the Fund must close on the calculation date
in order for investors in the securities to receive a favorable return.
●
Business activities of our affiliates or any participating dealer or its
affiliates with the companies whose securities are included in the Fund may adversely affect the price of the Fund.
Our affiliates or any participating dealer or its affiliates may, at present or in the future, engage in
business with the companies whose securities are included in the Fund or the underlying index, including making loans to those companies (including exercising creditors’ remedies with respect to such loans), making equity investments in those
companies or providing investment banking, asset management or other advisory services to those companies. These business activities could adversely affect the price of the Fund and, therefore, adversely affect the value of and your return on the
securities. In addition, in the course of these business activities, our affiliates or any participating dealer or its affiliates may acquire
non-public
information about one or more of the companies whose
securities are included in the Fund or the underlying index. If our affiliates or any participating dealer or its affiliates do acquire such
non-public
information, we and they are not obligated to disclose
such
non-public
information to you.
●
Hedging activities by
our affiliates or any participating dealer or its affiliates may adversely affect the price of the Fund.
We expect to hedge our obligations under the securities through one or more hedge counterparties, which may include our affiliates
or any participating dealer or its affiliates. Pursuant to such hedging activities, our hedge counterparty may acquire shares of the Fund or securities included in the Fund or the underlying index or listed or
over-the-counter
derivative or synthetic instruments related to the Fund or such securities. Depending on, among other things, future market conditions, the aggregate amount and the composition of such
positions are likely to vary over time. To the extent that our hedge counterparty has a long hedge position in shares of the Fund or in any of the securities included in the Fund or the underlying index, or derivative or synthetic instruments
related to the Fund or such securities, they may liquidate a portion of such holdings at or about the time of the calculation date or at or about the time of a change in the securities included in the Fund or the underlying index. These hedging
activities could potentially adversely affect the price of the shares of the Fund and, therefore, adversely affect the value of and your return on the securities.
PRS-15
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
●
Trading activities by our
affiliates or any participating dealer or its affiliates may adversely affect the price of the Fund.
Our affiliates or any participating dealer or its affiliates may engage in trading in shares of the Fund or the
securities included in the Fund or the underlying index and other instruments relating to the Fund or such securities on a regular basis as part of their general broker-dealer and other businesses. Any of these trading activities could potentially
adversely affect the price of the shares of the Fund and, therefore, adversely affect the value of and your return on the securities.
●
A participating dealer or its affiliates may realize hedging profits projected
by its proprietary pricing models in addition to any selling concession or any distribution expense fee, creating a further incentive for the participating dealer to sell the securities to you.
If any participating dealer
or any of its affiliates conducts hedging activities for us in connection with the securities, that participating dealer or its affiliates will expect to realize a projected profit from such hedging activities, and this projected profit will be in
addition to any concession or distribution expense fee that the participating dealer receives for the sale of the securities to you. This additional projected profit may create a further incentive for the participating dealer to sell the securities
to you.
The U.S. Federal Tax Consequences Of An Investment In The Securities Are Unclear.
There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal
Revenue Service. Consequently, significant aspects of the tax treatment of the securities are uncertain, and the Internal Revenue Service or a court might not agree with the treatment of the securities as
pre-paid
cash-settled derivative contracts. If the Internal Revenue Service were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the
securities might be materially and adversely affected. As described below under “United States Federal Income Tax Considerations,” the U.S. Treasury Department and the Internal Revenue Service released a notice requesting comments on
various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the securities, including the character and timing of income or loss and the degree, if any, to which income realized by
non-U.S.
persons should be
subject to withholding tax, possibly with retroactive effect.
Furthermore, Section 871(m) of the Internal Revenue Code imposes a withholding tax of up to
30% on “dividend equivalents” paid to
non-U.S.
investors in respect of certain financial instruments linked to U.S. equities. In light of an IRS notice providing a general exemption for
“non-delta-one”
financial instruments issued in 2017, as of the date of this pricing supplement the securities should not be subject to withholding under Section
871(m). However, the IRS could challenge this conclusion.
Both U.S. and
non-U.S.
persons considering an
investment in the securities should review carefully the section of this pricing supplement entitled “United States Federal Income Tax Considerations” and consult their tax advisers regarding the U.S. federal tax consequences of an
investment in the securities (including possible alternative treatments and the issues presented by the notice), as well as tax consequences arising under the laws of any state, local or
non-U.S.
taxing
jurisdiction.
There Can Be No Assurance That The Canadian Federal Income Tax Consequences Of An Investment In The Securities Will Not Change In The
Future.
There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, or the administrative policies and
assessing practices of the Canada Revenue Agency will not be changed in a manner that adversely affects investors. For a discussion of the Canadian federal income tax consequences of investing in the securities, please read the section entitled
“Certain Canadian Federal Income Tax Considerations” in this pricing supplement as well as the section entitled “Certain Income Tax Consequences—Certain Canadian Income Tax Considerations” in the accompanying prospectus
supplement dated April 30, 2015. You should consult your tax advisor with respect to your own particular situation.
PRS-16
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
HYPOTHETICAL RETURNS
The following table illustrates, for a capped value of 135.00% or $1,350.00 per security, a starting price of 72.90, a participation rate of 170%, a term to
maturity of approximately 3.5 years and a range of hypothetical ending prices of the Fund:
|
|
●
|
|
the hypothetical percentage change from the starting price to the hypothetical ending price;
|
|
|
●
|
|
the hypothetical redemption amount payable at stated maturity per security;
|
|
|
●
|
|
the hypothetical total
pre-tax
rate of return; and
|
|
|
●
|
|
the hypothetical
pre-tax
annualized rate of return.
|
|
|
|
|
|
|
|
|
|
|
|
Hypothetical
Ending
Price
|
|
Hypothetical
Percentage Change
From the Starting
Price to the
Hypothetical Ending Price
|
|
Hypothetical Redemption
Amount Payable At
Stated
Maturity Per
Security
|
|
Hypothetical
Pre-Tax
Total Rate
of Return
|
|
Hypothetical
Pre-Tax
Annualized Rate
of Return
(1)
|
|
|
|
127.58
|
|
75.00%
|
|
$1,350.00
|
|
35.00%
|
|
8.76%
|
|
109.35
|
|
50.00%
|
|
$1,350.00
|
|
35.00%
|
|
8.76%
|
|
98.42
|
|
35.00%
|
|
$1,350.00
|
|
35.00%
|
|
8.76%
|
|
94.77
|
|
30.00%
|
|
$1,350.00
|
|
35.00%
|
|
8.76%
|
|
87.48
|
|
20.00%
|
|
$1,340.00
|
|
34.00%
|
|
8.54%
|
|
80.19
|
|
10.00%
|
|
$1,170.00
|
|
17.00%
|
|
4.54%
|
|
76.55
|
|
5.00%
|
|
$1,085.00
|
|
8.50%
|
|
2.35%
|
|
72.90
(2)
|
|
0.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
|
69.26
|
|
-5.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
|
65.61
|
|
-10.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
|
61.97
|
|
-15.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
|
58.32
|
|
-20.00%
|
|
$950.00
|
|
-5.00%
|
|
-1.46%
|
|
54.68
|
|
-25.00%
|
|
$900.00
|
|
-10.00%
|
|
-2.99%
|
|
36.45
|
|
-50.00%
|
|
$650.00
|
|
-35.00%
|
|
-11.94%
|
|
18.23
|
|
-75.00%
|
|
$400.00
|
|
-60.00%
|
|
-24.55%
|
|
0.000
|
|
-100.00%
|
|
$150.00
|
|
-85.00%
|
|
-47.50%
|
|
(1)
|
The annualized rates of return are calculated on a semi-annual bond equivalent basis with compounding.
|
The above figures are for purposes of illustration only and may have been rounded for
ease of analysis. The actual amount you receive at stated maturity and the resulting
pre-tax
rates of return will depend on the actual ending price.
PRS-17
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
HYPOTHETICAL PAYMENTS AT STATED MATURITY
Set forth below are four examples of payment at stated maturity calculations (rounded to two decimal places), reflecting a capped value of 135.00% or
$1,350.00 per security, a starting price of 72.90, a participation rate of 170% and assuming hypothetical ending prices as indicated in the examples.
Example 1. Redemption amount is greater than the principal amount but less than the capped value:
Hypothetical ending price: $76.55
Since the hypothetical ending price is greater than the starting price, the redemption amount would equal:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,000 +
|
|
|
|
$1,000 x
|
|
|
|
76.55 – 72.90
|
|
|
|
x 170%
|
|
|
|
= $1,085.00
|
|
|
|
|
|
|
|
72.90
|
|
|
|
|
|
|
On the stated maturity date you would receive $1,085.00 per security.
Example 2. Redemption amount is equal to the capped value:
Hypothetical ending price: $109.35
The redemption amount would be equal to the hypothetical capped value since the hypothetical capped value is less than:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,000 +
|
|
|
|
$1,000 x
|
|
|
|
109.35 – 72.90
|
|
|
|
x 170%
|
|
|
|
= $1,850.00
|
|
|
|
|
|
|
|
72.90
|
|
|
|
|
|
|
On the stated maturity date you would receive $1,350.00 per security.
In addition to limiting your return on the securities, the capped value limits the positive effect of the participation rate. If the ending price is greater
than the starting price, you will participate in the performance of the Fund at a rate of 170% up to a certain point. However, the effect of the participation rate will be progressively reduced for ending prices that are greater than approximately
120.59% of the starting price since your return on the securities for any ending price greater than approximately 120.59% of the starting price will be limited to the capped value.
Example 3. Redemption amount is equal to the principal amount:
Hypothetical ending price: $69.26
Threshold price: $61.965, which is 85% of the starting price
Since the hypothetical ending price is less than the starting price, but not by more than 15%, you would not lose any of the principal amount
of your securities.
On the stated maturity date you would receive $1,000.00 per security.
Example 4. Redemption amount is less than the principal amount:
Hypothetical ending price: $36.45
Threshold price: $61.965, which is 85% of the starting price
PRS-18
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Since the hypothetical ending price is less than the starting price by more than 15%, you
would lose a portion of the principal amount of your securities and receive the redemption amount equal to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,000 -
|
|
|
|
$1,000 x
|
|
|
|
61.965 – 36.45
|
|
|
|
|
|
|
|
= $650.00
|
|
|
|
|
|
|
|
72.90
|
|
|
|
|
|
|
On the stated maturity date you would receive $650.00 per security.
To the extent that the actual ending price differs from the values assumed above, the results indicated above would be different.
PRS-19
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
ADDITIONAL TERMS OF THE SECURITIES
Canadian Imperial Bank of Commerce will issue the securities as part of a series of senior unsecured debt securities entitled “Senior Global Medium-Term
Notes (Structured Notes),” which is more fully described in the accompanying prospectus supplement and prospectus. Information included in this pricing supplement supersedes information in the prospectus supplement and prospectus to the extent
that it is different from that information.
Payment of Redemption Amount
In the event that the stated maturity date is not a business day, then the redemption amount will be paid on the next business day (“Following Business
Day Convention”).
Market Disruption Events
If
a market disruption event occurs or is continuing on the calculation date, then the calculation date will be postponed to the first succeeding trading day on which a market disruption event has not occurred and is not continuing; however, if such
first succeeding trading day has not occurred as of the eighth trading day after the originally scheduled calculation date, that eighth trading day shall be deemed to be the calculation date. If the calculation date has been postponed eight trading
days after the originally scheduled calculation date and a market disruption event occurs or is continuing with respect to the Fund on such eighth trading day, the calculation agent will determine the closing price of the Fund on such eighth trading
day based on its good faith estimate of the value of the shares (or other applicable securities) of the Fund as of the close of trading on such eighth trading day. No interest will accrue as a result of delayed payment.
A “market disruption event” means any of the following events as determined by the calculation agent in its sole discretion:
|
|
(A)
|
the occurrence or existence of a material suspension of or limitation imposed on trading by the relevant stock exchange or otherwise relating to the shares (or other applicable securities) of the Fund or any successor
fund on the relevant stock exchange at any time during the
one-hour
period that ends at the close of trading on such day, whether by reason of movements in price exceeding limits permitted by such relevant
stock exchange or otherwise;
|
|
|
(B)
|
the occurrence or existence of a material suspension of or limitation imposed on trading by any related futures or options exchange or otherwise in futures or options contracts relating to the shares (or other
applicable securities) of the Fund or any successor fund on any related futures or options exchange at any time during the
one-hour
period that ends at the close of trading on that day, whether by reason of
movements in price exceeding limits permitted by the related futures or options exchange or otherwise;
|
|
|
(C)
|
the occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market values for, shares (or
other applicable securities) of the Fund or any successor fund on the relevant stock exchange at any time during the
one-hour
period that ends at the close of trading on that day;
|
|
|
(D)
|
the occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market values for, futures or
options contracts relating to shares (or other applicable securities) of the Fund or any successor fund on any related futures or options exchange at any time during the
one-hour
period that ends at the close
of trading on that day;
|
|
|
(E)
|
the closure of the relevant stock exchange or any related futures or options exchange with respect to the Fund or any successor fund prior to its scheduled closing time unless the earlier closing time is announced by
the relevant stock exchange or related futures or options exchange, as applicable, at least one hour prior to the earlier of (1) the actual closing time for the regular trading session on such relevant stock exchange or related futures or
options exchange, as applicable, and (2) the submission deadline for orders to be entered into the relevant stock exchange or related futures or options exchange, as applicable, system for execution at the close of trading on that day;
|
|
|
(F)
|
the relevant stock exchange or any related futures or options exchange with respect to the Fund or any successor fund fails to open for trading during its regular trading session; or
|
|
|
(E)
|
any other event, if the calculation agent determines that the event interferes with our ability or the ability of any of our affiliates to unwind all or a portion of a hedge with respect to the securities that we or our
affiliates have effected or may effect as described below under “Use of Proceeds and Hedging” in this pricing supplement.
|
PRS-20
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
For purposes of determining whether a market disruption event has occurred:
|
|
(1)
|
“close of trading” means the scheduled closing time of the relevant stock exchange with respect to the Fund or any successor fund; and
|
|
|
(2)
|
the “scheduled closing time” of the relevant stock exchange or any related futures or options exchange on any trading day for the Fund or any successor fund means the scheduled weekday closing time of such
relevant stock exchange or related futures or options exchange on such trading day, without regard to after hours or any other trading outside the regular trading session hours.
|
Anti-dilution Adjustments Relating to the Fund; Alternate Calculation
Anti-dilution Adjustments
The calculation agent
will adjust the adjustment factor as specified below if any of the events specified below occurs with respect to the Fund and the effective date or
ex-dividend
date, as applicable, for such event is after the
pricing date and on or prior to the calculation date.
The adjustments specified below do not cover all events that could affect the Fund, and there may
be other events that could affect the Fund for which the calculation agent will not make any such adjustments, including, without limitation, an ordinary cash dividend. Nevertheless, the calculation agent may, in its sole discretion, make additional
adjustments to any terms of the securities upon the occurrence of other events that affect or could potentially affect the market price of, or shareholder rights in, the Fund, with a view to offsetting, to the extent practical, any such change, and
preserving the relative investment risks of the securities. In addition, the calculation agent may, in its sole discretion, make adjustments or a series of adjustments that differ from those described herein if the calculation agent determines that
such adjustments do not properly reflect the economic consequences of the events specified in this pricing supplement or would not preserve the relative investment risks of the securities. All determinations made by the calculation agent in making
any adjustments to the terms of the securities, including adjustments that are in addition to, or that differ from, those described in this pricing supplement, will be made in good faith and a commercially reasonable manner, with the aim of ensuring
an equitable result. In determining whether to make any adjustment to the terms of the securities, the calculation agent may consider any adjustment made by the Options Clearing Corporation or any other equity derivatives clearing organization on
options contracts on the Fund.
For any event described below, the calculation agent will not be required to adjust the adjustment factor unless the
adjustment would result in a change to the adjustment factor then in effect of at least 0.10%. The adjustment factor resulting from any adjustment will be rounded up or down, as appropriate, to the nearest
one-hundred
thousandth.
(A)
Stock Splits and
Reverse Stock Splits
If a stock split or reverse stock split has occurred, then once such split has become effective, the adjustment factor will be
adjusted to equal the
product
of the prior adjustment factor and the number of securities which a holder of one share (or other applicable security) of the Fund before the effective date of such stock split or reverse stock split would have
owned or been entitled to receive immediately following the applicable effective date.
(B)
Stock Dividends
If a dividend or distribution of shares (or other applicable securities) to which the securities are linked has been made by the Fund ratably to all holders
of record of such shares (or other applicable security), then the adjustment factor will be adjusted on the
ex-dividend
date to equal the prior adjustment factor plus the
product
of the prior adjustment
factor and the number of shares (or other applicable security) of the Fund which a holder of one share (or other applicable security) of the Fund before the
ex-dividend
date would have owned or been entitled
to receive immediately following that date; provided, however, that no adjustment will be made for a distribution for which the number of securities of the Fund paid or distributed is based on a fixed cash equivalent value.
(C)
Extraordinary Dividends
If an extraordinary dividend (as defined below) has occurred, then the adjustment factor will be adjusted on the
ex-dividend
date to equal the
product
of the prior adjustment factor and a fraction, the numerator of which is the closing price per share (or other applicable security) of the Fund on the trading day
preceding the
ex-dividend
date, and the denominator of which is the amount by which the closing price per share (or other applicable security) of the Fund on the trading day preceding the
ex-dividend
date exceeds the extraordinary dividend amount (as defined below).
PRS-21
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
For purposes of determining whether an extraordinary dividend has occurred:
|
|
(1)
|
“extraordinary dividend” means any cash dividend or distribution (or portion thereof) that the calculation agent determines, in its sole discretion, is extraordinary or special; and
|
|
|
(2)
|
“extraordinary dividend amount” with respect to an extraordinary dividend for the securities of the Fund will equal the amount per share (or other applicable security) of the Fund of the applicable cash
dividend or distribution that is attributable to the extraordinary dividend, as determined by the calculation agent in its sole discretion.
|
A distribution on the securities of the Fund described below under the section entitled “—Reorganization Events” below that also constitutes an
extraordinary dividend will only cause an adjustment pursuant to that “—Reorganization Events” section.
If the Fund declares or makes a distribution to all holders of the shares (or
other applicable security) of the Fund of any
non-cash
assets, excluding dividends or distributions described under the section entitled “—Stock Dividends” above, then the calculation agent may,
in its sole discretion, make such adjustment (if any) to the adjustment factor as it deems appropriate in the circumstances. If the calculation agent determines to make an adjustment pursuant to this paragraph, it will do so with a view to
offsetting, to the extent practical, any change in the economic position of a holder of the securities that results solely from the applicable event.
|
|
(E)
|
Reorganization Events
|
If the Fund, or any successor fund, is subject to a merger, combination,
consolidation or statutory exchange of securities with another exchange traded fund, and the Fund is not the surviving entity (a “reorganization event”), then, on or after the date of such event, the calculation agent shall, in its sole
discretion, make an adjustment to the adjustment factor or the method of determining the payment at stated maturity or any other terms of the securities as the calculation agent determines appropriate to account for the economic effect on the
securities of such event, and determine the effective date of that adjustment. If the calculation agent determines that no adjustment that it could make will produce a commercially reasonable result, then the calculation agent may deem such event a
liquidation event (as defined below).
Liquidation Events
If the Fund is
de-listed,
liquidated or otherwise terminated (a “liquidation event”), and a successor or
substitute exchange traded fund exists that the calculation agent determines, in its sole discretion, to be comparable to the Fund, then, upon the calculation agent’s notification of that determination to the trustee and the Bank, any
subsequent fund closing price for the Fund will be determined by reference to the fund closing price of such successor or substitute exchange traded fund (such exchange traded fund being referred to herein as a “successor fund”), with such
adjustments as the calculation agent determines are appropriate to account for the economic effect of such substitution on holders of the securities.
If
the Fund undergoes a liquidation event prior to, and such liquidation event is continuing on, the date that any fund closing price of the Fund is to be determined and the calculation agent determines that no successor fund is available at such time,
then the calculation agent will, in its discretion, calculate the fund closing price for the Fund on such date by a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the Fund, provided
that if the calculation agent determines in its discretion that it is not practicable to replicate the Fund (including but not limited to the instance in which the underlying index sponsor discontinues publication of the underlying index), then the
calculation agent will calculate the fund closing price for the Fund in accordance with the formula last used to calculate such fund closing price before such liquidation event, but using only those securities that were held by the Fund immediately
prior to such liquidation event without any rebalancing or substitution of such securities following such liquidation event.
If a successor fund is
selected or the calculation agent calculates the fund closing price as a substitute for the Fund, such successor fund or fund closing price will be used as a substitute for the Fund for all purposes, including for purposes of determining whether a
market disruption event exists. Notwithstanding these alternative arrangements, a liquidation event with respect to the Fund may adversely affect the value of the securities.
PRS-22
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
If any event is both a reorganization event and a liquidation event, such event will be treated as a
reorganization event for purposes of the securities unless the calculation agent makes the determination referenced in the last sentence of the section entitled “—Anti-dilution Adjustments—Reorganization Events” above.
Alternate Calculation
If at any time the method
of calculating the Fund or a successor fund, or the underlying index, is changed in a material respect, or if the Fund or a successor fund is in any other way modified so that the Fund does not, in the opinion of the calculation agent, fairly
represent the price of the securities of the Fund or such successor fund had such changes or modifications not been made, then the calculation agent may, at the close of business in New York City on the date that any fund closing price is to be
determined, make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a closing price of the Fund comparable to the Fund or such successor fund, as the case may be, as if
such changes or modifications had not been made, and calculate the fund closing price and the payment at stated maturity and determine whether the securities are automatically called on any call date with reference to such adjusted closing price of
the Fund or such successor fund, as applicable.
Calculation Agent
We or one of our affiliates will act as calculation agent for the securities and may appoint agents to assist it in the performance of its duties. See
“Risk Factors—We Or One Of Our Affiliates Will Be The Calculation Agent And, As A Result, Potential Conflicts Of Interest Could Arise.” We may appoint a different calculation agent without your consent and without notifying you.
The calculation agent will determine the redemption amount you receive at stated maturity. In addition, the calculation agent will, among other things:
|
|
●
|
|
determine whether a market disruption event has occurred;
|
|
|
●
|
|
determine if adjustments are required to the fund closing price of the Fund under various circumstances; and
|
|
|
●
|
|
if the Fund undergoes a liquidation event, select a successor fund (as defined above) or, if no successor fund is available, determine the fund closing price.
|
All determinations made by the calculation agent will be at the sole discretion of the calculation agent and, in the absence of manifest error, will be
conclusive for all purposes and binding on us and you. All percentages and other amounts resulting from any calculation with respect to the securities will be rounded at the calculation agent’s discretion. The calculation agent will have no
liability for its determinations.
Appointment of Independent Calculation Experts
If a calculation or valuation described above under “Additional Terms of the Securities — Market Disruption Events” or “Additional Terms
of the Securities — Liquidation Events” contemplated to be made by the calculation agent involves the application of material discretion and is not based on information or calculation methodologies compiled or utilized by, or derived from,
independent third party sources, we will appoint one or more calculation experts to confirm such calculation or valuation. Such calculation experts will be independent from us and active participants in the financial markets in the relevant
jurisdiction in which futures or options contracts on the shares of the Fund are traded. Calculation experts will not assume any obligation or duty to, or any relationship of agency or trust for or with, the holders of the securities or us. Holders
of the securities will be entitled to rely on any valuation or calculations made by such calculation experts and such valuations or calculations will (except in the case of manifest error) be final and binding on us, the calculation agent and the
holders of the securities. Calculation experts will not be responsible for good faith errors or omissions in the making of any such valuations or calculations. Calculation experts may, with the consent of us, delegate any of their obligations and
functions to a third party as they deem appropriate, but acting honestly and reasonably at all times. The valuations and calculations of calculation experts will be made available to the holders of the securities upon request.
PRS-23
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Events of Default and Acceleration
If the securities have become immediately due and payable following an event of default (as defined in the section “Description of Senior Debt Securities
– Events of Default” in the accompanying prospectus) with respect to the securities, the amount payable on the securities will be equal to the redemption amount, calculated as though the date of acceleration were the calculation date.
If the securities have become immediately due and payable following an event of default, you will not be entitled to any payments with respect to the
securities in addition to the redemption amount, calculated as set forth in the preceding paragraph. For more information, see “Description of Senior Debt Securities – Events of Default” beginning on page 9 of the accompanying
prospectus.
Withholding
We or the applicable
paying agent will deduct or withhold from a payment on a security any present or future tax, duty, assessment or other governmental charge that we determine is required by law or the interpretation or administration thereof to be deducted or
withheld. Payments on a security will not be increased by any amount to offset such deduction or withholding.
PRS-24
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
THE ENERGY SELECT SECTOR SPDR
®
FUND
All disclosures contained in this pricing supplement regarding the Fund or the underlying index
have been derived from publicly available information without independent verification. This information reflects the policies of, and is subject to change by, the Select Sector SPDR
®
Trust
(the “Trust”), a registered investment company, and SSgA Funds Management, Inc. (“SSgA FM”). The Fund is an exchange-traded fund managed by the Trust. Information provided to or filed with the SEC by the Trust pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940 can be located by reference to SEC file numbers
333-57791
and
811-08837,
respectively, through the
SEC’s website at www.sec.gov. For additional information regarding the Trust or the Fund, please see the Fund’s prospectus. In addition, information may be obtained from other sources including, but not limited to, press releases,
newspaper articles, other publicly disseminated documents and the Trust website at http://www.sectorspdrs.com. None of us, the calculation agent, or Wells Fargo Securities makes any representation that such publicly available documents or any other
publicly available information regarding the Fund is accurate or complete.
General
The Fund is an investment portfolio managed by SSgA FM, the investment adviser to the Fund. The Fund is an exchange-traded fund that trades on the NYSE Arca,
Inc. under the ticker symbol “XLE.”
The Trust is a registered investment company that consists of nine separate investment portfolios (each, a
“Select Sector SPDR
®
Fund”), including the Fund. Each Select Sector SPDR
®
Fund is an index fund that invests in a particular
sector or group of industries represented by a specified Select Sector Index (as defined below). The companies included in each Select Sector Index are selected on the basis of general industry classifications from a universe of companies defined by
the S&P 500
®
Index. The Select Sector Indices upon which the Select Sector SPDR
®
Funds are based together comprise all of the
companies in the S&P 500
®
Index. The investment objective of each Select Sector SPDR
®
Fund is to provide investment results that,
before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in a particular sector or group of industries, as represented by a specified market sector index. It is possible that this
fund may not fully replicate the performance of the underlying index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary circumstances.
Investment Objective
The Fund seeks to provide
investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the oil, gas & consumable fuels and energy equipment & services industries, as
represented by the underlying index. For more information about the underlying index, please see “The Energy Select Sector Index” below.
Holdings Information
As of January 31, 2017, the
Fund included 36 securities. The following table summarizes the Fund’s top holdings in individual securities as of that date.
Top Holdings in
Individual Securities as of January 31, 2017
|
|
|
|
|
Security
|
|
Percentage of Total Holdings
|
|
Exxon Mobil Corp
|
|
15.94%
|
|
Chevron Corp
|
|
14.58%
|
|
Schlumberger Ltd
|
|
8.25%
|
|
EOG Resources
|
|
4.85%
|
|
Pioneer Natural Resources
|
|
4.71%
|
|
Halliburton Co
|
|
3.98%
|
|
Anadarko Petroleum Corporation
|
|
3.07%
|
|
Occidental Petroleum
|
|
3.07%
|
|
ConocoPhillips
|
|
3.03%
|
|
Kinder Morgan Inc.
|
|
2.91%
|
The information above was compiled from the Trust website, without independent verification. Information contained in the Trust
website is not incorporated by reference in, and should not be considered a part of, this document.
PRS-25
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Replication
The Fund employs a replication strategy in seeking to track the performance of the underlying index, which means that the Fund typically invests in
substantially all of the securities represented in such index in approximately the same proportions as such index. Under normal market conditions, the Fund generally invests substantially all, but at least 95%, of its total assets in the securities
comprising such index. The Fund will provide shareholders with at least 60 days’ notice prior to any material change in this 95% investment policy. In addition, the Fund may invest in cash and cash equivalents or money market instruments, such
as repurchase agreements and money market funds (including money market funds advised by SSgA FM). The Board of Trustees of the Trust may change the Fund’s investment strategy and certain other policies without shareholder approval.
There may, however, be instances where SSgA FM will utilize a sampling strategy. Sampling means that SSgA FM will use quantitative analysis to select
securities, including securities in the Energy Select Sector Index, outside of the underlying index and derivatives, that have a similar investment profile as the underlying index in terms of key risk factors, performance attributes and other
characteristics. These include industry weightings, market capitalization, and other financial characteristics of securities.
Correlation
The underlying index is a theoretical financial calculation, while the Fund is an actual investment portfolio. The performance of the Fund’s return may
not match or achieve a high degree of correlation with the return of the underlying index due to operating expenses, transaction costs, cash flows, regulatory requirements and operational inefficiencies.
Disclaimer
“S&P®”, “S&P
500®”, “SPDR®”, “Select Sector SPDR” and “Select Sector SPDRs” are trademarks of Standard & Poor’s Financial Services LLC (“S&P”), an affiliate of The McGraw-Hill Companies, Inc.
(“McGraw-Hill”). The securities are not sponsored, endorsed, sold, or promoted by S&P, McGraw-Hill, the Trust, or SSgA FM. S&P, McGraw-Hill, the Trust, and SSgA FM make no representations or warranties to the owners of the
securities or any member of the public regarding the advisability of investing in the Securities. S&P, McGraw-Hill, the Trust, and SSgA FM have no obligation or liability in connection with the operation, marketing, trading or sale of the
securities.
The Energy Select Sector Index
We have
derived all information contained in this document regarding the Energy Select Sector Index, including, without limitation, its
make-up,
method of calculation and changes in its components, 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.
In July 2012, McGraw-Hill, the owner of the S&P Indices business, and CME Group Inc. (“CME Group”), the 90% owner of the CME Group and Dow
Jones & Company, Inc. joint venture that owns the Dow Jones Indexes business, formed a new joint venture, S&P Dow Jones Indices LLC, which owns the S&P Indices business and the Dow Jones Indexes business, including the Select Sector
Indices.
The constituents included in the Select Sector Indices are selected by the Index Compilation Agent in consultation with S&P Dow Jones
Indices LLC from the universe of companies represented by the S&P 500
®
Index. The composition and weighting of the components included in the Select Sector Indices can be expected to
differ from the composition and weighting of components included in any similar S&P 500
®
sector index that is published and disseminated by S&P Dow Jones Indices LLC. S&P Dow Jones
Indices LLC acts as the index calculation agent in connection with the calculation and dissemination of the Select Sector Indices. S&P Dow Jones Indices LLC’s only relationship to the Index Compilation Agent is the licensing of certain
trademarks and trade names of S&P and of the S&P 500
®
Index which is determined, composed and calculated by S&P Dow Jones Indices LLC without regard to the Index Compilation Agent.
The Energy Select Sector Index is a modified market capitalization-based index, intended to provide an indication of the pattern of common stock price
movements of companies that are components of the S&P 500
®
Index and are involved in the development or production of energy products. Companies in the Energy Select Sector Index develop
and produce crude oil and natural gas and provide drilling and other energy related services. The Energy Select Sector Index is one of the eleven Select Sector
sub-indices
of the S&P 500
®
Index, each of which we refer to as a “Select Sector Index.”
PRS-26
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Construction and Maintenance
The Select Sector Indices are developed, maintained and calculated in accordance with the following criteria:
|
|
●
|
|
Each of the component stocks in the Select Sector Indices (the “Component Stocks”) is a constituent company of the S&P 500
®
Index.
|
|
|
●
|
|
Each stock in the S&P 500
®
Index is allocated to at least one of the Select Sector Indices.
|
|
|
●
|
|
S&P Dow Jones Indices, LLC assigns index constituents to a Select Sector Index based on the constituent’s classification under the Global Industry Classification Standard (“GICS
®
”).
|
|
|
●
|
|
The Select Sector Indices are calculated using the same methodology utilized by S&P Dow Jones Indices LLC in calculating the S&P 500
®
Index. The daily
calculation of a Select Sector Index is computed by dividing the total market value of the companies in that Select Sector Index by a number called the index divisor.
|
|
|
●
|
|
The Select Sector Indices are calculated using a modified “market capitalization” methodology subject to a capping methodology that implements Internal Revenue Code diversification requirements that are
applicable to exchange-traded funds. For reweighting purposes, the Select Sector Indices are rebalanced quarterly after the close of business on the second to last calculation day of March, June, September and December using the following
procedures:
|
|
|
1.
|
The rebalancing reference date is two business days prior to the last calculation day of March, June, September and December.
|
|
|
2.
|
With prices reflected on the rebalancing reference date, and membership, shares outstanding, AWF (capping factor) and IWFs as of the rebalancing effective date, each company is weighted using the modified market
capitalization methodology. Modifications are made as defined below.
|
|
|
3.
|
The Select Sector Indices are first evaluated based on their companies’ modified market capitalization weights to ensure none of the indices breach the maximum allowable limits defined in rules 4 and 7 below. If a
Select Sector Index breaches any of the allowable limits, the companies are reweighted based on their float-adjusted market capitalization weights calculated using the prices as of the rebalancing reference date, and membership, shares outstanding
and IWF’s as of the rebalancing effective date.
|
|
|
4.
|
If any company has a weight greater than 24%, that company has its float-adjusted market capitalization weight capped at 23%. The cap is set to 23% to allow for a 2% buffer. This buffer is needed to ensure that no
company exceeds 25% as of the quarter end diversification requirement date.
|
|
|
5.
|
All excess weight is equally redistributed to all uncapped companies within the relevant Select Sector Capped Index.
|
|
|
6.
|
After this redistribution, if the float-adjusted market capitalization weight of any other company then breaches 23%, the process is repeated iteratively until no company breaches the 23% weight cap.
|
|
|
7.
|
The sum of the companies with weight greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer below the 5% limit.
|
|
|
8.
|
If the rule in step 7 is breached, all the companies are ranked in descending order of their float-adjusted market capitalization weights and the first company that causes the 50% limit to be breached is identified. The
weight of this company is, then, reduced to 4.6%.
|
|
|
9.
|
This excess weight is equally redistributed to all companies with weights below 4.6%. This process is repeated iteratively until step 7 is satisfied.
|
|
|
10.
|
Index share amounts are assigned to each constituent to arrive at the weights calculated above. Since index shares are assigned based on prices one business day prior to rebalancing, the actual weight of each
constituent at the rebalancing differs somewhat from these weights due to market movements.
|
If necessary, the reweighting process may take
place more than once prior to the close on the last business day of March, June, September or December to ensure the Select Sector Indices conform to all diversification requirements.
Historical Data
We obtained the closing prices listed
below from Bloomberg Financial Markets (“Bloomberg”) without independent verification. You can obtain the price of the Fund at any time from Bloomberg under the symbol “XLE” or from the Select Sector SPDR
®
Fund’s website at www.sectorspdr.com. No information contained on the Select Sector SPDR
®
Fund’s website is incorporated by
reference into this pricing supplement.
PRS-27
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
We have not undertaken an independent review or due diligence of the information obtained from Bloomberg. The
historical performance of the Fund should not be taken as an indication of future performance, and no assurances can be given as to the ending price of the Fund. We cannot give you assurance that the performance of the Fund will result in any
positive return on your initial investment.
The following graph sets forth daily closing prices of the Fund for the period from January 1, 2006 to
January 31, 2017. The closing price on January 31, 2017 was 72.90.
The following table sets forth the high and low closing prices, as well as
end-of-period
closing prices, of the Fund for each quarter in the period from January 1, 2006 through December 30, 2016 and from January 2, 2017 through January 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Last
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
57.95
|
|
|
|
51.11
|
|
|
|
54.40
|
|
|
Second Quarter
|
|
|
59.74
|
|
|
|
50.19
|
|
|
|
56.75
|
|
|
Third Quarter
|
|
|
58.84
|
|
|
|
50.90
|
|
|
|
53.45
|
|
|
Fourth Quarter
|
|
|
61.75
|
|
|
|
50.90
|
|
|
|
58.63
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
61.12
|
|
|
|
54.06
|
|
|
|
60.28
|
|
|
Second Quarter
|
|
|
71.14
|
|
|
|
60.87
|
|
|
|
68.99
|
|
|
Third Quarter
|
|
|
75.70
|
|
|
|
65.10
|
|
|
|
74.80
|
|
|
Fourth Quarter
|
|
|
80.55
|
|
|
|
70.70
|
|
|
|
79.35
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
80.44
|
|
|
|
66.95
|
|
|
|
74.06
|
|
|
Second Quarter
|
|
|
90.39
|
|
|
|
75.45
|
|
|
|
88.48
|
|
|
Third Quarter
|
|
|
88.85
|
|
|
|
59.65
|
|
|
|
63.30
|
|
|
Fourth Quarter
|
|
|
62.26
|
|
|
|
39.96
|
|
|
|
47.77
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
51.89
|
|
|
|
38.12
|
|
|
|
42.46
|
|
|
Second Quarter
|
|
|
54.03
|
|
|
|
43.36
|
|
|
|
48.05
|
|
|
Third Quarter
|
|
|
55.89
|
|
|
|
44.52
|
|
|
|
53.92
|
|
|
Fourth Quarter
|
|
|
59.76
|
|
|
|
51.97
|
|
|
|
57.01
|
|
PRS-28
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
60.30
|
|
|
|
53.74
|
|
|
|
57.52
|
|
|
Second Quarter
|
|
|
62.09
|
|
|
|
49.68
|
|
|
|
49.68
|
|
|
Third Quarter
|
|
|
56.31
|
|
|
|
49.38
|
|
|
|
56.06
|
|
|
Fourth Quarter
|
|
|
68.25
|
|
|
|
56.10
|
|
|
|
68.25
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
80.01
|
|
|
|
67.79
|
|
|
|
79.75
|
|
|
Second Quarter
|
|
|
80.48
|
|
|
|
70.93
|
|
|
|
75.35
|
|
|
Third Quarter
|
|
|
79.73
|
|
|
|
58.51
|
|
|
|
58.51
|
|
|
Fourth Quarter
|
|
|
73.04
|
|
|
|
56.52
|
|
|
|
69.13
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
76.23
|
|
|
|
69.44
|
|
|
|
71.75
|
|
|
Second Quarter
|
|
|
72.45
|
|
|
|
61.99
|
|
|
|
66.37
|
|
|
Third Quarter
|
|
|
76.57
|
|
|
|
64.96
|
|
|
|
73.43
|
|
|
Fourth Quarter
|
|
|
75.02
|
|
|
|
68.56
|
|
|
|
71.42
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
80.02
|
|
|
|
72.86
|
|
|
|
79.31
|
|
|
Second Quarter
|
|
|
83.28
|
|
|
|
74.08
|
|
|
|
78.30
|
|
|
Third Quarter
|
|
|
85.33
|
|
|
|
78.86
|
|
|
|
82.91
|
|
|
Fourth Quarter
|
|
|
88.51
|
|
|
|
81.87
|
|
|
|
88.51
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
89.06
|
|
|
|
81.89
|
|
|
|
89.06
|
|
|
Second Quarter
|
|
|
101.29
|
|
|
|
88.45
|
|
|
|
100.10
|
|
|
Third Quarter
|
|
|
100.58
|
|
|
|
90.62
|
|
|
|
90.62
|
|
|
Fourth Quarter
|
|
|
88.77
|
|
|
|
73.36
|
|
|
|
79.16
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
82.29
|
|
|
|
72.86
|
|
|
|
77.58
|
|
|
Second Quarter
|
|
|
82.94
|
|
|
|
74.64
|
|
|
|
75.16
|
|
|
Third Quarter
|
|
|
74.54
|
|
|
|
59.22
|
|
|
|
61.20
|
|
|
Fourth Quarter
|
|
|
71.40
|
|
|
|
58.79
|
|
|
|
60.32
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
63.76
|
|
|
|
51.77
|
|
|
|
61.89
|
|
|
Second Quarter
|
|
|
69.55
|
|
|
|
60.20
|
|
|
|
68.24
|
|
|
Third Quarter
|
|
|
71.84
|
|
|
|
65.16
|
|
|
|
70.61
|
|
|
Fourth Quarter
|
|
|
77.83
|
|
|
|
67.77
|
|
|
|
75.32
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter through January 31, 2017
|
|
|
76.17
|
|
|
|
72.87
|
|
|
|
72.90
|
|
PRS-29
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
USE OF PROCEEDS AND HEDGING
The net proceeds from the sale of the securities will be used as described under “Use of Proceeds” in the accompanying prospectus supplement and the
prospectus and to hedge our market risks associated with our obligation to pay at maturity the redemption amount of the securities.
We may hedge our
obligations under the securities by, among other things, purchasing securities, futures, options or other derivative instruments with returns linked or related to changes in the value of the Fund and/or securities underlying the Fund, and we may
adjust these hedges by, among other things, purchasing or selling securities, futures, options or other derivative instruments at any time. Our cost of hedging will include the projected profit that our counterparty expects to realize in
consideration for assuming the risks inherent in hedging our obligations under the securities. Because hedging our obligations entails risk and may be influenced by market forces beyond our or our counterparty’s control, such hedging may result
in a profit that is more or less than expected, or could result in a loss. It is possible that we could receive substantial returns from these hedging activities while the value of the securities declines.
We expect to hedge our obligations under the securities through one of our affiliates and/or another unaffiliated counterparty.
We have no obligation to engage in any manner of hedging activity and we will do so solely at our discretion and for our own account. No holder of the
securities will have any rights or interest in our hedging activity or any positions we or any unaffiliated counterparty may take in connection with our hedging activity. The hedging activity discussed above may adversely affect the value of the
securities from time to time. See “Risk Factors—The Estimated Value of the Securities Is Not An Indication Of The Price, If Any, At Which Wells Fargo Securities Or Any Other Person May Be Willing To Buy The Securities From You In The
Secondary Market” and “—Our Economic Interests And Those of Any Dealer Participating In The Offering Of Securities Will Potentially Be Adverse To Your Interests,” for a discussion of these adverse effects.
PRS-30
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
THE ESTIMATED VALUE OF THE SECURITIES
The estimated value of the securities 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 securities, valued using our internal funding rate for structured debt described below, and (2) the derivative or derivatives underlying the economic terms of the
securities. The estimated value does not represent a minimum price at which Wells Fargo Securities or any other person would be willing to buy your securities in any secondary market (if any exists) at any time. The internal funding rate used in the
determination of the Bank’s estimated value generally represents a discount from the credit spreads for our conventional fixed-rate debt. The discount is based on, among other things, our view of the funding value of the securities as well as
the higher issuance, operational and ongoing liability management costs of the securities in comparison to those costs for our conventional fixed-rate debt. For additional information, see “Risk Factors—Our Estimated Value Was Not
Determined By Reference To Credit Spreads For Our Conventional Fixed-Rate Debt.” The value of the derivative or derivatives underlying the economic terms of the securities is derived from the Bank’s or a third party hedge provider’s
internal pricing models. 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 Bank’s estimated value of the securities is determined when the terms of the securities are set based on market conditions
and other relevant factors and assumptions existing at that time. See “Risk Factors—Our Estimated Value Does Not Represent Future Values Of The Securities And May Differ From Others’ Estimates.”
The Bank’s estimated value of the securities will be lower than the principal amount of the securities because costs associated with selling, structuring
and hedging the securities are included in the principal amount of the securities. These costs include the selling commissions paid to affiliated or unaffiliated dealers, the projected profits that our hedge counterparties, which may include our
affiliates, expect to realize for assuming risks inherent in hedging our obligations under the securities and the estimated cost of hedging our obligations under the securities. 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. We or one or more of our affiliates will retain any profits realized in hedging our obligations under the
securities. See “Risk Factors—Our Estimated Value of the Securities Is Lower Than The Principal Amount Of The Securities” in this pricing supplement.
PRS-31
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
SUPPLEMENTAL PLAN OF DISTRIBUTION
The securities are being purchased by Wells Fargo Securities as principal, pursuant to a distribution agreement between Wells Fargo Securities and us. We have
agreed to pay certain of Wells Fargo Securities’ expenses in connection with the offering of the securities.
From time to time, Wells Fargo
Securities and its affiliates have engaged, and in the future may engage, in transactions with and performance of services for us for which they have been, and may be, paid customary fees. In particular, Wells Fargo Securities or one of its
affiliates may be our swap counterparty for a hedge relating to our obligations under the securities.
In the future, Wells Fargo Securities and its
affiliates may repurchase and resell the offered securities in market-making transactions, with resales being made at prices related to prevailing market prices at the time of resale or otherwise. Unless you are informed otherwise in the
confirmation of sale, this pricing supplement and the accompanying prospectus supplement and prospectus are being used in connection with the initial distribution of the securities and not in a market-making transaction.
Wells Fargo Securities has committed to purchase all of these securities in the initial public offering of the securities if any are purchased.
Wells Fargo Securities proposes to offer the securities to certain securities dealers, including securities dealers acting as custodians, at the principal
amount of the securities less a concession not in excess of $20.00 per security. Such securities dealers may include WFA (the trade name of the retail brokerage business of Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial
Network, LLC, each an affiliate of Wells Fargo Securities). In addition to the selling concession allowed to WFA, Wells Fargo Securities will pay $0.75 per security of the underwriting discount to WFA as a distribution expense fee for each security
sold by WFA.
The principal amount of the securities includes the underwriting discount received by Wells Fargo Securities and the projected profit that
our hedge counterparties expect to realize in consideration for assuming the risks inherent in hedging our obligations under the securities. We expect to hedge our obligations through an affiliate of Wells Fargo Securities, one of our affiliates
and/or another unaffiliated counterparty. Because hedging our obligations entails risks and may be influenced by market forces beyond the counterparties’ control, such hedging may result in a profit that is more or less than expected, or could
result in a loss. The underwriting discount and projected profit of our hedge counterparties reduce the economic terms of the securities. In addition, the fact that the principal amount includes these items is expected to adversely affect the
secondary market prices of the securities. These secondary market prices are also likely to be reduced by the cost of unwinding the related hedging transaction. See “Use of Proceeds and Hedging” on page
PRS-30.
The securities are a new issue of securities with no established trading market. The securities will not
be listed on a national securities exchange. Wells Fargo Securities may make a market for the securities, as applicable laws and regulations permit, but is not obligated to do so and may discontinue making a market at any time without notice. No
assurance can be given as to the liquidity of any trading market for the securities.
Settlement for the securities will be made in immediately available
funds. The securities will be in the Same Day Funds Settlement System at DTC and, to the extent any secondary market trading in the securities is effected through the facilities of such depositary, such trades will be settled in immediately
available funds.
Canadian Imperial Bank of Commerce has agreed to indemnify Wells Fargo Securities against certain liabilities, including liabilities
under the Securities Act of 1933.
No action has been or will be taken by Canadian Imperial Bank of Commerce, Wells Fargo Securities or any broker-dealer
affiliates of either Canadian Imperial Bank of Commerce or Wells Fargo Securities that would permit a public offering of the securities or possession or distribution of this pricing supplement or the accompanying prospectus and prospectus supplement
in any jurisdiction, other than the United States, where action for that purpose is required. No offers, sales or deliveries of the securities, or distribution of this pricing supplement or the accompanying prospectus supplement and prospectus, may
be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and will not impose any obligations on Canadian Imperial Bank of Commerce, Wells Fargo Securities or any
broker-dealer affiliates of either Canadian Imperial Bank of Commerce or Wells Fargo Securities.
PRS-32
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
For the following jurisdictions, please note specifically:
Argentina
Canadian Imperial Bank of Commerce’s
Senior Global Medium-Term Notes (Structured Notes) program and the related offer of securities and the sale of securities under the terms and conditions provided herein does not constitute a public offering in Argentina. Consequently, no public
offering approval has been requested or granted by the Comisión Nacional de Valores, nor has any listing authorization of the securities been requested on any stock market in Argentina.
Brazil
The securities may not be offered or sold to the
public in Brazil. Accordingly, this pricing supplement and the accompanying prospectus supplement and prospectus have not been submitted to the Comissão de Valores Mobiliáros for approval. Documents relating to this offering may not be
supplied to the public as a public offering in Brazil or be used in connection with any offer for subscription or sale to the public in Brazil.
Chile
The securities have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly in Chile. No
offer, sales or deliveries of the securities, or distribution of this pricing supplement or the accompanying prospectus supplement and prospectus, may be made in or from Chile except in circumstances that will result in compliance with any
applicable Chilean laws and regulations.
Mexico
The securities have not been registered with the National Registry of Securities maintained by the Mexican National Banking and Securities Commission and may
not be offered or sold publicly in Mexico. This pricing supplement and the accompanying prospectus supplement and prospectus may not be publicly distributed in Mexico.
Paraguay
This is a private and personal offering. The
securities offered have not been approved by or registered with the National Securities Commission (Comisión Nacional de Valores) and are not part of a public offering as defined by the Paraguayan Securities Law. The information contained
herein is for informational and marketing purposes only and should not be taken as an investment advice.
Taiwan
The securities may be made available outside Taiwan for purchase by Taiwan residents outside Taiwan but may not be offered or sold in Taiwan.
PRS-33
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
BENEFIT PLAN INVESTOR CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan to which Title I of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), applies (a “plan”), should consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the plan. When we use the term “holder” in this
section, we are referring to a beneficial owner of the securities and not the record holder.
Section 406 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended (the “Code”) prohibit plans, as well as individual retirement accounts and Keogh plans to which Section 4975 of the Code applies (also “plans”), from engaging in specified
transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (collectively, “parties in interest”) with respect to such plan. A violation
of those “prohibited transaction” rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless statutory or administrative exemptive relief is available. Therefore, a
fiduciary of a plan should also consider whether an investment in the securities might constitute or give rise to a prohibited transaction under ERISA and the Code.
Employee benefit plans that are governmental plans, as defined in Section 3(32) of ERISA, certain church plans, as defined in Section 3(33) of
ERISA, and foreign plans, as described in Section 4(b)(4) of ERISA (collectively,
“Non-ERISA
Arrangements”), are not subject to the requirements of ERISA, or Section 4975 of the Code, but
may be subject to similar rules under other applicable laws or regulations (“Similar Laws”).
We and our affiliates may each be considered a
party in interest with respect to many plans. Special caution should be exercised, therefore, before the securities are purchased by a plan. In particular, the fiduciary of the plan should consider whether statutory or administrative exemptive
relief is available. The U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of
the securities. Those class exemptions are:
|
|
●
|
|
PTCE
96-23,
for specified transactions determined by
in-house
asset managers;
|
|
|
●
|
|
PTCE
95-60,
for specified transactions involving insurance company general accounts;
|
|
|
●
|
|
PTCE
91-38,
for specified transactions involving bank collective investment funds;
|
|
|
●
|
|
PTCE
90-1,
for specified transactions involving insurance company separate accounts; and
|
|
|
●
|
|
PTCE
84-14,
for specified transactions determined by independent qualified professional asset managers.
|
In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide an exemption for transactions between a plan and a person who
is a party in interest (other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets involved in the transaction or renders investment advice with respect thereto) solely by reason
of providing services to the plan (or by reason of a relationship to such a service provider), if in connection with the transaction of the plan receives no less, and pays no more, than “adequate consideration” (within the meaning of
Section 408(b)(17) of ERISA).
Any purchaser or holder of the securities or any interest in the securities will be deemed to have represented by its
purchase and holding that either:
● no portion of the assets used by such purchaser
or holder to acquire or purchase the securities constitutes assets of any plan or
Non-ERISA
Arrangement; or
● an administrative or statutory exemption applies to their purchase and holding of the
securities and the purchase and holding of the securities by such purchaser or holder will not constitute a
non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or
a similar violation under any Similar Law.
PRS-34
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
Due to the complexity of these rules and the penalties that may be imposed upon persons involved in
non-exempt
prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing the securities on behalf of or with “plan assets” of any plan consult with their
counsel regarding the potential consequences under ERISA and the Code of the acquisition of the securities and the availability of exemptive relief.
The
securities are contractual financial instruments. The financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy for, individualized investment management or advice for the benefit of
any purchaser or holder of the securities. The securities have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of any purchaser or holder of the securities.
Each purchaser or holder of the securities acknowledges and agrees that:
(i) the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or holder and the
purchaser or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (a) the design and terms of the securities, (b) the purchaser or holder’s
investment in the securities, or (c) the exercise of or failure to exercise any rights we have under or with respect to the securities;
(ii) we and our affiliates have acted and will act solely for our own account in connection with (a) all transactions relating
to the securities and (b) all hedging transactions in connection with our obligations under the securities;
(iii) any and all
assets and positions relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions held for the benefit of the purchaser or holder;
(iv) our interests may be adverse to the interests of the purchaser or holder; and
(v) neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with any such assets,
positions or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
Purchasers
of the securities have the exclusive responsibility for ensuring that their purchase, holding and subsequent disposition of the securities does not violate the fiduciary or prohibited transaction rules of ERISA, the Code or any Similar Laws. Nothing
herein shall be construed as a representation that an investment in the securities would be appropriate for, or would meet any or all of the relevant legal requirements with respect to investments by, plans or
Non-ERISA
Arrangements generally or any particular plan or
Non-ERISA
Arrangement.
PRS-35
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion supplements the discussion in the section called “Certain Income Tax Consequences—United States Taxation” in the
accompanying prospectus supplement, and is subject to the limitations and exceptions set forth therein. Capitalized terms used in this section without definition shall have the respective meanings given such terms in the accompanying prospectus
supplement.
The following summary describes certain U.S. federal income tax consequences relevant to the purchase, ownership, and disposition of the
securities. This summary applies only to holders that acquire their securities in this offering for a price equal to the principal amount, which we understand will be at par, and hold such securities as capital assets, within the meaning of
Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This summary does not apply to any holder that is subject to special rules, such as:
|
|
●
|
|
a dealer in securities,
|
|
|
●
|
|
a trader in securities that elects to use a
mark-to-market
method of accounting for your securities holdings,
|
|
|
●
|
|
a life insurance company,
|
|
|
●
|
|
a
tax-exempt
organization,
|
|
|
●
|
|
a person that owns the notes as part of a straddle or a hedging or conversion transaction for tax purposes,
|
|
|
●
|
|
a person that purchases or sells the notes as part of a wash sale for tax purposes,
|
|
|
●
|
|
a regulated investment company or real estate investment trust,
|
|
|
●
|
|
a U.S. holder (as defined in the accompanying Prospectus Supplement) whose functional currency for tax purposes is not the U.S. dollar,
|
|
|
●
|
|
a U.S. holder subject to the alternative minimum tax, or
|
This discussion is based upon current provisions of the Code, existing and proposed
Treasury Regulations thereunder, current administrative rulings, judicial decisions and other applicable authorities. All of the foregoing are subject to change, which change may apply retroactively and could affect the continued validity of this
summary. This summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the U.S. federal government. This discussion also does not purport to be a complete analysis of all tax
considerations relating to the securities.
You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of
your investment in the securities in your particular circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
If a partnership holds the securities, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the tax
treatment of the partnership. You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the securities if you are a partner in a partnership holding the securities.
General
We will not attempt to ascertain whether any of
the issuers of the shares that constitute the underlying Fund (the shares hereafter referred to as “Underlying Shares”) should be treated as a passive foreign investment company within the meaning of section 1297 of
PRS-36
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
the Code (a “PFIC”). If any of the issuers of Underlying Shares were so treated, certain adverse U.S. federal income tax consequences might apply to a U.S. holder (as defined below)
upon the sale, exchange or retirement of the securities. Potential investors considering an investment in the securities should refer to information filed with the Securities and Exchange Commission or another governmental authority by the issuers
of Underlying Shares and consult their tax advisers regarding the possible consequences to them if any issuer of Underlying Shares is or becomes a PFIC.
As the law applicable to the U.S. federal taxation of instruments such as the securities is technical and complex, the discussion below necessarily represents
only a general summary. The U.S. federal income tax consequences of your investment in the securities are uncertain. No statutory, judicial or administrative authority directly discusses how the securities should be treated for U.S. federal income
tax purposes.
In the opinion of our counsel, Mayer Brown LLP, it would be generally reasonable to treat the securities as
pre-paid
cash-settled derivative contracts. The terms of the securities will provide that you agree to treat the securities in this manner for all U.S. federal income tax purposes.
Unless otherwise stated, the following discussion is based on the characterization described above. The discussion in this section reflects the opinion of
Mayer Brown that there is a significant possibility of a significant loss of principal on an investment in the securities.
Tax Consequences to U.S.
Holders
Subject to the discussion below of Section 1260 of the Code, if you are a U.S. holder, you should generally recognize capital gain or
loss upon the sale, exchange or payment on maturity in an amount equal to the difference between the amount you receive at such time and your tax basis in the securities. In general, your tax basis in the securities will be equal to the price
you paid for them. Such gain or loss should generally be long-term capital gain or loss if you have held your securities for more than one year. Capital gain recognized by an individual U.S. holder is generally taxed at preferential rates where the
property is held for more than one year and is generally taxed at ordinary income rates where the property is held for one year or less. The deductibility of capital losses is subject to limitations. The holding period for securities of a U.S.
holder who acquires the securities upon issuance will generally begin on the date after the issue date (i.e., the settlement date) of the securities. If the securities are held by the same U.S. holder until maturity, that holder’s holding
period will generally include the maturity date. It is possible that the Internal Revenue Service could assert that a U.S. holder’s holding period in respect of the securities should end on the date on which the amount the holder is entitled to
receive upon the stated maturity of the securities is determined, even though the holder will not receive any amounts from us in respect of the securities prior to the stated maturity of the securities. In such case, a U.S. holder may be treated as
having a holding period in respect of the securities that is one year or less even if the holder receives cash upon stated maturity of the securities at a time that is more than one year after the beginning of its holding period.
The constructive ownership rules of Section 1260 of the Code could possibly apply to securities that have a term in excess of one year and reference
a “pass-thru entity” (as defined in Section 1260(c)(2) of the Code). Examples of “pass-thru entities” include (but are not limited to) regulated investment companies (e.g., most exchange-traded funds), real estate
investment trusts, passive foreign investment companies and partnerships. It is not entirely clear how Section 1260 applies to an Index that is wholly or partially comprised of “pass-thru entities.” We generally do not
intend to make an inquiry as to whether the Fund contains any “pass-thru entities”, and it is possible that securities for which the Fund contains a “pass-thru entity” could be wholly or partially subject to Section 1260 of
the Code. If the securities were subject to Section 1260 of the Code, then, among other consequences, all or a portion of any long-term capital gain that you realize upon the sale, redemption or stated maturity of the securities would be
recharacterized as ordinary income (and you would be subject to an interest charge on deferred tax liability with respect to such recharacterized amount) to the extent that such capital gain exceeds the amount of long-term capital gain that you
would have realized had you purchased the actual number of interests in the Fund on the date that you purchased the securities and sold those interests on the date of the sale, redemption or stated maturity of the securities. It is not clear
how this computation would be made if the Fund is partially comprised of “pass-thru entities.” Accordingly, if the Fund contains a “pass-thru entity,” you should consult your tax advisor about the potential application of
Section 1260 of the Code to the securities.
Possible Alternative Tax Treatments of an Investment in the Securities
As noted above, there is no judicial or administrative authority discussing how the securities should be treated for U.S. federal income tax purposes.
Therefore, other treatments would also be reasonable and the Internal Revenue Service might assert that treatment other than that described above is more appropriate.
PRS-37
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
The U.S. Treasury Department and the Internal Revenue Service released a notice that may affect the taxation
of holders of the securities. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether the holder of an instrument such as the securities should be required to accrue ordinary income on a current
basis, and they are seeking taxpayer comments on the subject. The notice also states that the Internal Revenue Service and the Treasury Department are also considering other relevant issues, including whether gain or loss from such instruments
should be treated as ordinary or capital and whether the special constructive ownership rules of Section 1260 of the Code might be applied to such instruments. Similarly, the Internal Revenue Service and the Treasury Department have current
projects open with regard to the tax treatment of
pre-paid
forward contracts and contingent notional principal contracts. While it is not clear whether the securities would be viewed as similar to instruments
discussed in such notice, it is possible that any future guidance could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect.
Similarly, the Internal Revenue Service might assert, and a possible alternative treatment with respect to the securities would be, to treat the securities as
a single debt instrument. Such a debt instrument may be subject to the special tax rules governing contingent payment debt instruments.
If the securities
are subject to such special rules applicable to contingent payment debt instruments, the amount of interest U.S. holders are required to take into account for each accrual period will be determined by constructing a projected payment schedule for
the securities and applying rules similar to those for accruing “original issue discount” or OID on a hypothetical noncontingent debt instrument with that projected payment schedule. In addition to accruing interest income in accordance
with the comparable yield, a U.S. holder will be required to make adjustments if the actual amounts that holder receives in any taxable year differs from the projected payment schedule. These rules could possibly have the effect of requiring U.S.
holders to include amounts in income in respect of the securities prior to receipt of cash attributable to that income.
U.S. holders will recognize gain
or loss on the sale, redemption or maturity of securities treated as contingent payment debt instruments in an amount equal to the difference, if any, between the amount of cash received at that time and their adjusted basis in the securities. In
general, a U.S. holder’s adjusted basis in such securities will equal the amount the holder paid for the securities, increased by the amount of interest that was previously accrued with respect to the securities. Any such gain will generally be
ordinary income and any such loss that will generally be ordinary loss to the extent the interest included as income in the current or previous taxable years, and thereafter will be capital loss.
Information Reporting and Backup Withholding
The
proceeds received from a sale, exchange or retirement of the securities may be subject to information reporting and, if the holder fails to provide certain identifying information (such as an accurate taxpayer identification number in the case of a
U.S. holder) or meet certain other conditions, may also be subject to backup withholding at the rate specified in the Code. A
non-U.S.
holder (or financial institution holding the securities on behalf of the
non-U.S.
holder) that provides the applicable withholding agent with the appropriate Internal Revenue Service Form
W-8
will generally establish an exemption from backup
withholding. Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against the holder’s U.S. federal income tax liability, provided the relevant information is timely furnished to the
Internal Revenue Service.
You are urged to consult your tax advisors concerning the significance, and the potential impact, of the above
considerations.
Additional Information for U.S. Holders.
For information regarding backup withholding and information reporting considerations with respect to the securities, please see the discussion under
“Certain Income Tax Consequences—United States Taxation—U.S. Backup Withholding and Information Reporting” in the accompanying prospectus supplement.
Tax Consequences to
Non-U.S.
Holders
For purposes of this discussion, the term
“non-U.S.
holder” means a beneficial owner of a security that is
not a partnership or other entity treated as a partnership and is not a U.S. holder. If you are a
non-U.S.
holder, you generally will not be subject to U.S. federal income or withholding tax for amounts paid
in respect of the securities, provided that the payment is not effectively connected with your conduct of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale or exchange of the securities or their settlement at maturity may
be subject to U.S. federal income tax if you are a nonresident alien individual and are present in the U.S. for 183 days or more during the taxable year of the settlement at maturity, sale or exchange and certain other conditions are satisfied.
PRS-38
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
If you are engaged in the conduct of a trade or business within the U.S. and if gain realized on the
settlement at maturity, sale or exchange of the securities, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent establishment maintained by the
non-U.S.
holder in the U.S.), you generally will be subject to U.S. federal income tax on such gain on a net income basis in the same manner as if you were a U.S. holder as described under the heading “Tax
Consequences to U.S. Holders,” above. In addition,
non-U.S.
holders that are foreign corporations, may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable
tax treaty) of a portion of their earnings and profits that are withdrawn from the U.S. for the taxable year that are effectively connected with their conduct of a trade or business in the U.S., subject to certain adjustments.
Notwithstanding the above, if we determine that there is a material risk that we will be required to withhold on any payments on the securities, we may
withhold on any such payment to a
non-U.S.
holder at a 30% rate, unless such
non-U.S.
holder has provided to us (i) a valid Internal Revenue Service Form
W-8ECI
or (ii) a valid Internal Revenue Service Form
W-8BEN
or Internal Revenue Service Form
W-8BEN-E
claiming tax treaty benefits that reduce or eliminate withholding. If we elect to withhold and such
non-U.S.
holder has
provided us with a valid Internal Revenue Service Form
W-8BEN
or Internal Revenue Service Form
W-8BEN-E
claiming tax treaty
benefits that reduce or eliminate withholding, we may nevertheless withhold up to 30% on any payments if there is any possible characterization of the payments that would not be exempt from withholding under the treaty.
Section 871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax 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 (such equities and indices, “U.S. Underlying
Equities”). Section 871(m) generally applies to instruments that substantially replicate the economic performance of one or more U.S. Underlying Equities, as determined upon issuance, based on tests set forth in the applicable Treasury
regulations (a “Specified Security”). Specifically, and subject to the 2017 exemption described in the next paragraph, Section 871(m) will apply if, at issuance, a financial instrument either meets (i) a “delta” test, if it
is a “simple” contract, or (ii) a “substantial equivalence” test, if it is a “complex” contract. Section 871(m) provides certain exceptions to this withholding regime, in particular for instruments linked to
certain broad-based indices that meet requirements set forth in the applicable Treasury regulations as well as securities that track such indices.
In
Notice
2016-76
(the “Notice”), the U.S. Treasury Department and the IRS announced that revised regulations under Section 871(m) would exempt financial instruments issued in 2017 that are not
“delta-one.”
Based on the terms of the securities and representations provided by us, our counsel is of the opinion that the securities should not be
“delta-one”
transactions within the meaning of the Notice and, therefore, should not be Specified Securities subject to withholding tax under Section 871(m).
A determination that the securities are not subject to Section 871(m) is not binding on the IRS, and the IRS may disagree with this treatment. Moreover,
Section 871(m) is complex and its application may depend on your particular circumstances. For example, if you enter into other transactions relating to the Fund, you could be subject to withholding tax or income tax liability under Section 871(m)
even if the securities are not Specified Securities subject to Section 871(m) as a general matter. You should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
As discussed above, alternative characterizations of the securities for U.S. federal income tax purposes are possible. Should an alternative characterization,
by reason of change or clarification of the law, by regulation or otherwise, cause payments as to the securities to become subject to withholding tax, we will withhold tax at the applicable statutory rate. Additionally, as discussed above, the
Internal Revenue Service has indicated that it is considering whether income in respect of instruments such as the securities should be subject to withholding tax. Prospective
non-U.S.
holders of the
securities should consult their own tax advisors in this regard.
The gross estate of a
non-U.S.
holder domiciled
outside the United States includes only property situated in the United States. A security may be subject to U.S. federal estate tax if an individual
non-U.S.
holder holds the security at the time of his or
her death. Individual
non-U.S.
holders should consult their tax advisors regarding the U.S. federal estate tax consequences of holding the securities at death.
Additional Information for Investors
For information
regarding the applicability of FATCA to the securities, please see the discussion under “Certain Income Tax Consequences—United States Taxation—Recent Legislative Developments” in the accompanying prospectus supplement. FATCA may
impose a 30% withholding tax on payments of gross proceeds from the sale, exchange or redemption of property that gives rise to U.S.-source dividends or interest. The Internal Revenue Service recently announced in published guidance its intent to
amend the regulations to extend the effective date of withholding on gross proceeds to 1 January 2019. Similarly, the Internal Revenue Service announced its intention to delay the effective date of withholding tax on “foreign passthru
payments” to the later of 1 January 2019 or the date of publication of final U.S. Treasury regulations defining such term.
PRS-39
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Blake, Cassels & Graydon LLP, our Canadian tax counsel, the following summary describes the principal Canadian federal income tax
considerations under the
Income Tax Act
(Canada) (the “Canadian Tax Act”) generally applicable at the date hereof to an investor who acquires beneficial ownership of a security pursuant to this pricing supplement and who for the
purposes of the Canadian Tax Act and at all relevant times: (a) is neither resident nor deemed to be resident in Canada; (b) deals at arm’s length with the Issuer and any transferee resident (or deemed to be resident) in Canada to
whom the investor disposes of the security; (c) does not use or hold the security in, or in the course of, carrying on a business in Canada; (d) is entitled to receive all payments (including any interest and principal) made on the
security, and (e) is not a, and deals at arm’s length with any, “specified shareholder” of the Issuer for purposes of the thin capitalization rules in the Canadian Tax Act (a
“Non-Resident
Holder”). A “specified shareholder” for these purposes generally includes a person who (either alone or together with persons with whom that person is not dealing at
arm’s length for the purposes of the Canadian Tax Act) owns or has the right to acquire or control or is otherwise deemed to own 25% or more of the Issuer’s shares determined on a votes or fair market value basis. Special rules which apply
to
non-resident
insurers carrying on business in Canada and elsewhere are not discussed in this summary.
This
summary is supplemental to and should be read together with the description of material Canadian federal income tax considerations relevant to a
Non-Resident
Holder owning securities under “Certain Income
Tax Consequences—Certain Canadian Income Tax Considerations” in the accompanying prospectus supplement and a
Non-Resident
Holder should carefully read that description as well.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular
Non-Resident
Holder.
Non-Resident
Holders are advised to consult with their own tax advisors with respect to their particular circumstances.
Based on Canadian tax counsel’s understanding of the Canada Revenue Agency’s administrative policies, and having regard to the terms of the
securities, interest payable on the securities should not be considered to be “participating debt interest” as defined in the Canadian Tax Act and accordingly, a
Non-Resident
Holder should not be
subject to Canadian
non-resident
withholding tax in respect of amounts paid or credited or deemed to have been paid or credited by the Issuer on a security as, on account of or in lieu of payment of, or in
satisfaction of, interest.
Non-Resident
Holders should consult their own tax advisors regarding the consequences
to them of a disposition of the securities to a person with whom they are not dealing at arm’s length for purposes of the Canadian Tax Act. In addition, it is not clear whether recent amendments to the Canadian Tax Act originally announced in
the 2016 Canadian Federal Budget could impact the Canadian tax consequences of a transfer or assignment of a security by a
Non-Resident
Holder to a transferee resident in Canada for purposes of the Canadian
Tax Act, and in particular, whether Canadian withholding tax could apply in respect of such a transfer or assignment, regardless of whether such security is an “excluded obligation” as described under “Certain Income Tax
Consequences—Certain Canadian Income Tax Considerations” in the accompanying prospectus supplement.
Non-Resident
Holders should consult with their own tax advisors in this regard.
PRS-40
Market Linked Securities—Leveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Energy Select Sector SPDR® Fund due August 3, 2020
VALIDITY OF THE SECURITIES
In the opinion of Blake, Cassels & Graydon LLP, as Canadian counsel to the Bank, the issue and sale of the securities has been duly authorized by all
necessary corporate action of the Bank in conformity with the Indenture, and when the securities have been duly executed, authenticated and issued in accordance with the Indenture, the securities will be validly issued and, to the extent validity of
the securities is a matter governed by the laws of the Province of Ontario or the federal laws of Canada applicable therein, will be valid obligations of the Bank, subject to applicable bankruptcy, insolvency and other laws of general application
affecting creditors’ rights, equitable principles, and subject to limitations as to the currency in which judgments in Canada may be rendered, as prescribed by the
Currency Act
(Canada), and subject to any
bail-in
conversion requirements under the
Canada Deposit Insurance Corporation Act
(Canada). This opinion is given as of the date hereof and is limited to the laws of the Province of Ontario and the
federal laws of Canada applicable therein. In addition, this opinion is subject to customary assumptions about the Trustee’s authorization, execution and delivery of the Indenture and the genuineness of signature, and to such counsel’s
reliance on the Bank and other sources as to certain factual matters, all as stated in the opinion letter of such counsel dated October 2, 2015, which has been filed as Exhibit 5.2 to the Bank’s Form
6-K
filed with the SEC on October 2, 2015.
In the opinion of Mayer Brown LLP, when the securities have been
duly completed in accordance with the Indenture and issued and sold as contemplated by the prospectus supplement and the prospectus, the securities will constitute valid and binding obligations of the Bank, entitled to the benefits of the Indenture,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. This opinion is given as of the date
hereof and is limited to the laws of the State of New York. This opinion is subject to customary assumptions about the Trustee’s authorization, execution and delivery of the Indenture and such counsel’s reliance on the Bank and other
sources as to certain factual matters, all as stated in the legal opinion dated October 2, 2015, which has been filed as Exhibit 5.1 to the Bank’s Form
6-K
filed on October 2, 2015.
PRS-41
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