Filed Pursuant to Rule 424(b)(2)
File No. 333-202840
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Title of Each Class of
Securities Offered
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Maximum Aggregate
Offering Price
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Amount of
Registration Fee
(1)
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Medium-Term Notes, Series K, Principal at Risk Securities Linked to the S&P 500
®
Index
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$819,000
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$94.92
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(1)
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The total filing fee of $94.92 is calculated in accordance with Rule 457(r) of the Securities Act of 1933 (the
Securities Act) and will be paid by wire transfer within the time required by Rule 456(b) of the Securities Act.
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Pricing Supplement No. 806 dated January 17, 2017 (To Market Measure Supplement dated March 18,
2015, Prospectus
Supplement dated March 18, 2015 and Prospectus dated March 18, 2015)
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Wells Fargo & Company
Medium-Term Notes, Series K
Equity Index
Linked Securities
$819,000
Buffered Enhanced
Return Securities
With Capped Upside and Buffered Downside
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(Principal at Risk Securities Linked to the S&P 500
®
Index)
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Unlike ordinary debt securities, the securities do not pay interest or repay a fixed amount of principal at maturity.
Instead, the securities
provide for a payment on the stated maturity date (March 21, 2019) that may be greater than, equal to or less than the $1,000 face amount per security, depending on the performance of the S&P
500
®
Index as measured from the trade date to the determination date (March 18, 2019). If the level of the S&P 500
®
Index
increases, the securities offer 1.5 times participation in that appreciation,
subject to the maximum settlement amount ($1,261.00 for each $1,000 face amount security)
. If the level of the S&P 500
®
Index declines by up to the buffer amount of 15%, you will receive the face amount of your securities. However, if the level of the S&P
500
®
Index declines by more than 15%, you will lose approximately 1.1765% of the face amount of your securities at maturity for every 1% by which the decline is more than 15%. In exchange for
the upside leverage and downside buffer features, you must be willing to forgo (i) a return on the face amount of the securities in excess of the maximum return at maturity of 26.10% (which results from the maximum settlement amount of
$1,261.00 per $1,000 face amount security), (ii) interest on the securities and (iii) dividends paid on the stocks included in the S&P 500
®
Index.
You must also be willing to
accept the risk that, if the level of the S&P 500
®
Index declines by more than 15%, you will lose some, and possibly all, of the face amount of your securities at maturity.
All
payments on the securities are subject to the credit risk of Wells Fargo & Company, and you will have no ability to pursue any securities included in the S&P 500
®
Index for
payment. If Wells Fargo & Company defaults on its obligations, you could lose some or all of your investment.
To determine your payment at
stated maturity, we will calculate the underlier return, which is the percentage increase or decrease in the final underlier level on the determination date from the initial underlier level (set on the trade date). On the stated maturity date, for
each $1,000 face amount security:
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if the underlier return is
positive
(the final underlier level is
greater than
the initial underlier
level), you will receive an amount in cash equal to the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate of 1.5
times
(c) the underlier return,
subject to the maximum settlement amount;
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if the underlier return is
zero
or
negative
but
not below
-15% (the final underlier level is
equal to
or
less than
the initial underlier level but not by more than 15%), you will receive $1,000; or
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if the underlier return is
negative
and is
below
-15% (the final underlier level is
less than
the
initial underlier level by more than 15%), you will lose approximately 1.1765% of the face amount of your securities for every 1% by which the underlier return is below -15%. In this case, you will receive an amount in cash equal to the
sum
of (i) $1,000
plus
(ii) the
product
of (a) approximately 1.1765
times
(b) the
sum
of the underlier return
plus
15%
times
(c) $1,000.
This amount will be less than $1,000 and may
be zero.
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The securities will not be listed on any securities exchange and are designed to be held to maturity.
On the date of this pricing supplement, the estimated value of the securities is $992.57 per $1,000 face amount security. The estimated value of the
securities was determined for us by Wells Fargo Securities, LLC using its proprietary pricing models. It is not an indication of actual profit to us or to Wells Fargo Securities, LLC or any of our other affiliates, nor is it an indication of the
price, if any, at which Wells Fargo Securities, LLC or any other person may be willing to buy the securities from you at any time after issuance. See Investment Description in this pricing supplement.
The securities have complex features and investing in the securities involves risks not associated with an investment in conventional debt securities.
See Risk Factors herein on page PRS-8.
The securities are unsecured obligations of Wells Fargo & Company and all payments
on the securities are subject to the credit risk of Wells Fargo & Company. The securities are not deposits or other obligations of a depository institution and are not insured by the Federal Deposit Insurance Corporation, the Deposit
Insurance Fund or any other governmental agency of the United States or any other jurisdiction.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this pricing supplement or the accompanying market measure supplement, prospectus supplement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Original Offering Price
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Agent Discount
(1)
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Proceeds to Wells Fargo
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Per Security
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$1,000.00
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$0.00
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$1,000.00
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Total
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$819,000.00
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$0.00
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$819,000.00
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(1)
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Wells Fargo Securities, LLC, a wholly owned subsidiary of Wells Fargo & Company, is the agent for the
distribution of the securities and is acting as principal. See Investment Description in this pricing supplement for further information.
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Wells Fargo Securities
Investment Description
The Principal at Risk Securities Linked to the S&P 500
®
Index are senior unsecured debt
securities of Wells Fargo & Company that do not pay interest or repay a fixed amount of principal at maturity. Instead, the securities provide for a payment at maturity that may be greater than, equal to or less than the face amount of
the securities depending on the performance of the S&P 500
®
Index (the
underlier
) from the initial underlier level to the final underlier level. The securities
provide:
(i)
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the possibility of a leveraged return at maturity if the level of the underlier increases from the initial underlier
level to the final underlier level, provided that the potential total return at maturity of the securities will be effectively capped by the maximum settlement amount;
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(ii)
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payment of the face amount at maturity if, and only if, the final underlier level is not less than the initial underlier
level by more than the buffer amount; and
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(iii)
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exposure to the decrease in the level of the underlier from the initial underlier level if the final underlier level is
less than the initial underlier level by more than the buffer amount, with exposure on a leveraged basis to any such decrease in excess of the buffer amount.
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If the final underlier level is less than the initial underlier level by more than the buffer amount, you will lose some, and possibly all, of the
face amount of your securities at maturity
.
All payments on the securities are subject to the credit risk of Wells Fargo.
The underlier
is an equity index that is intended to provide an indication of the pattern of common stock price movement in the large capitalization segment of the United States equity market. Wells Fargo & Company is one of the companies currently
included in the underlier.
You should read this pricing supplement together with the market measure supplement dated March 18, 2015, the
prospectus supplement dated March 18, 2015 and the prospectus dated March 18, 2015 for additional information about the securities. Information included in this pricing supplement supersedes information in the market measure supplement,
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 may access the market measure supplement, 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 original offering price of each security includes certain costs that are borne by you. Because of these costs, the estimated value of the securities
on the trade date is less than the original offering price. The costs included in the original offering price relate to selling, structuring, hedging and issuing the securities, as well as to our funding considerations for debt of this type.
The costs related to selling, structuring, hedging and issuing the securities include (i) the agent discount (if any), (ii) the projected
profit that our hedge counterparty (which may be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the securities and (iii) hedging and other costs relating to the offering of the securities.
Our funding considerations take into account the higher issuance, operational and ongoing management costs of market-linked debt such as the
securities as compared to our conventional debt of the same maturity, as well as our liquidity needs and preferences. Our funding considerations are reflected in the fact that we determine the economic terms of the securities based on an assumed
funding rate that is generally lower than the interest rates implied by secondary market prices for our debt obligations and/or by other traded instruments referencing our debt obligations, which we refer to as our
secondary market
rates
. As discussed below, our secondary market rates are used in determining the estimated value of the securities.
If the costs relating
to selling, structuring, hedging and issuing the securities were lower, or if the assumed funding rate we use to determine the economic terms of the securities were higher, the economic terms of the securities would be more favorable to you and the
estimated value would be higher. The estimated value of the securities as of the trade date is set forth on the cover page of this pricing supplement.
The S&P 500 Index is a product of
S&P Dow Jones Indices LLC (
SPDJI
), and has been licensed for use by Wells Fargo & Company (
WFC
). Standard & Poors
®
, S&P
®
and S&P 500
®
are registered trademarks of Standard & Poors Financial Services LLC (
S&P
); Dow
Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (
Dow Jones
); and these trademarks have been licensed for use by SPDJI and sublicensed for certain
purposes by WFC. The securities are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor
do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
PRS-2
Determining the estimated value
Our affiliate, Wells Fargo Securities, LLC (
WFS
), calculated the estimated value of the securities set forth on the cover page of this
pricing supplement based on its proprietary pricing models. Based on these pricing models and related market inputs and assumptions referred to in this section below, WFS determined an estimated value for the securities by estimating the value of
the combination of hypothetical financial instruments that would replicate the payout on the securities, which combination consists of a non-interest bearing, fixed-income bond (the
debt component
) and one or more derivative
instruments underlying the economic terms of the securities (the
derivative component
).
The estimated value of the debt component
is based on a reference interest rate, determined by WFS as of a recent date, that generally tracks our secondary market rates. Because WFS does not continuously calculate our reference interest rate, the reference interest rate used in the
calculation of the estimated value of the debt component may be higher or lower than our secondary market rates at the time of that calculation. As noted above, we determine the economic terms of the securities based upon an assumed funding rate
that is generally lower than our secondary market rates. In contrast, in determining the estimated value of the securities, we value the debt component using a reference interest rate that generally tracks our secondary market rates. Because the
reference interest rate is generally higher than the assumed funding rate, using the reference interest rate to value the debt component generally results in a lower estimated value for the debt component, which we believe more closely approximates
a market valuation of the debt component than if we had used the assumed funding rate.
WFS calculated the estimated value of the derivative
component based on a proprietary derivative-pricing model, which generated a theoretical price for the derivative instruments that constitute the derivative component based on various inputs, including the derivative component factors
identified in Risk FactorsThe Value Of The Securities Prior To Stated Maturity Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways. These inputs may be market-observable or may be based on assumptions
made by WFS in its discretion.
The estimated value of the securities determined by WFS is subject to important limitations. See Risk
FactorsThe Estimated Value Of The Securities Is Determined By Our Affiliates Pricing Models, Which May Differ From Those Of Other Dealers and Risk FactorsOur Economic Interests And Those Of Any Dealer Participating In
The Offering Are Potentially Adverse To Your Interests.
Valuation of the securities after issuance
The estimated value of the securities is not an indication of the price, if any, at which WFS or any other person may be willing to buy the securities
from you in the secondary market. The price, if any, at which WFS or any of its affiliates may purchase the securities in the secondary market will be based upon WFSs proprietary pricing models and will fluctuate over the term of the
securities due to changes in market conditions and other relevant factors. However, absent changes in these market conditions and other relevant factors, except as otherwise described in the following paragraph, any secondary market price will be
lower than the estimated value on the trade date because the secondary market price will be reduced by a bid-offer spread, which may vary depending on the aggregate face amount of the securities to be purchased in the secondary market transaction,
and the expected cost of unwinding any related hedging transactions. Accordingly, unless market conditions and other relevant factors change significantly in your favor, any secondary market price for the securities is likely to be less than the
original offering price.
If WFS or any of its affiliates makes a secondary market in the securities at any time up to the original issue date or
during the 3-month period following the original issue date, the secondary market price offered by WFS 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 original offering price. Because this portion of the costs is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this period will be higher than
it would be if it were based solely on WFSs 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
3-month period. If you hold the securities through an account at WFS or any 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 WFS or any of its affiliates makes a secondary market in the securities, WFS expects to provide those secondary market prices to any unaffiliated
broker-dealers through which the securities are held and to commercial pricing vendors. If you hold your securities through an account at a broker-dealer other than WFS or any of its affiliates, that broker-dealer may obtain market prices for the
securities from WFS (directly or indirectly), but could also obtain such market prices from other sources, and may be willing to purchase the securities at any given time at a price that differs from the price at which WFS or any of its affiliates
is willing to purchase the securities. As a result, if you hold your securities through an account at a broker-dealer other than WFS 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 WFS or any of its affiliates.
PRS-3
The securities will not be listed or displayed on any securities exchange or any automated quotation
system. Although WFS and/or its affiliates may buy the securities from investors, 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.
Investor Considerations
We have designed the
securities for investors who:
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seek leveraged exposure at the upside participation rate to any upside performance of the underlier, as measured by the
extent (if any) to which the final underlier level is greater than the initial underlier level, subject to the maximum settlement amount;
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desire payment of the face amount at maturity so long as the final underlier level is not less than the initial
underlier level by more than the buffer amount;
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desire to moderate any decline from the initial underlier level to the final underlier level in excess of the buffer
amount through the buffer feature;
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understand that the ability of the buffer feature to moderate any decline in the underlier in excess of the buffer
amount is progressively reduced as the final underlier level declines because they will be exposed on a leveraged basis to any decline in the underlier in excess of the buffer amount;
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understand that if the final underlier level is less than the initial underlier level by more than the buffer amount,
they will be exposed to the decrease in the underlier from the initial underlier level, subject to the buffer feature, and will lose some, and possibly all, of the face amount of the securities;
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are willing to forgo interest payments on the securities and dividends on securities included in the underlier; and
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are willing to hold the securities until maturity.
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The securities are not designed for, and may not be a suitable investment for, investors who:
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seek a liquid investment or are unable or unwilling to hold the securities to maturity;
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are unwilling to accept the risk that the final underlier level may decrease from the initial underlier level by more
than the buffer amount;
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seek uncapped exposure to the upside performance of the underlier;
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seek certainty of receiving the face amount of the securities at stated maturity;
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are unwilling to purchase securities with an estimated value as of the trade date that is lower than the original
offering price, as set forth on the cover page;
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are unwilling to accept the risk of exposure to the United States equity market;
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seek exposure to the underlier but are unwilling to accept the risk/return trade-offs inherent in the payment at stated
maturity for the securities;
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are unwilling to accept the credit risk of Wells Fargo to obtain exposure to the underlier generally, or to the exposure
to the underlier that the securities provide specifically; or
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prefer the lower risk of fixed income investments with comparable maturities issued by companies with comparable credit
ratings.
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PRS-4
Terms of the Securities
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Underlier:
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S&P 500
®
Index
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Trade Date:
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January 17, 2017
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Original Issue Date (settlement date):
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January 24, 2017
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Original Offering Price:
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$1,000 per security.
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Face Amount:
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$1,000 per security. References in this pricing supplement to a
security
are to a security with a face
amount of $1,000.
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Cash Settlement 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
cash settlement amount. The
cash settlement amount
per security will equal:
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if the final underlier level is
greater than
or
equal to
the cap level, the maximum settlement amount;
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if the final underlier level is
greater than
the initial underlier level but
less than
the cap level, the
sum
of
(i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) the upside participation rate
times
(c) the underlier return;
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if the final underlier level is
equal to
or
less than
the initial underlier level but
greater than
or
equal
to
the buffer level, $1,000; or
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if the final underlier level is
less than
the buffer level, the
sum
of (i) $1,000
plus
(ii) the
product
of (a) the buffer rate
times
(b) the
sum
of the underlier return
plus
the buffer amount
times
(c) $1,000.
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If the final underlier level is less than the buffer level, you will lose some, and possibly all, of the face amount
of your securities at maturity.
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All calculations with respect to the cash settlement amount will be rounded to the nearest one hundred-thousandth, with
five one-millionths rounded upward (e.g., 0.000005 would be rounded to 0.00001); and the cash settlement amount will be rounded to the nearest cent, with one-half cent rounded upward.
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Stated Maturity Date:
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The
stated maturity date
is March 21, 2019. If the determination date is postponed, the stated
maturity date will be postponed to the third business day after the determination date as postponed. See Determination Date and Additional Terms of the SecuritiesMarket Disruption Events for information about the
circumstances that may result in a postponement of the determination date. If the stated maturity date is not a business day, any payment required to be made on the securities on the stated maturity date will be made on the next succeeding business
day with the same force and effect as if it had been made on the stated maturity date. A
business day
means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in New York, New York. The securities are not subject to redemption by Wells Fargo or repayment at the option of any holder of the securities prior to the stated maturity date.
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Initial Underlier Level:
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2,267.89, the closing level of the underlier on the trade date.
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Closing Level:
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The
closing level
of the underlier on any trading day means the official closing level of the
underlier reported by the underlier sponsor (as defined below) on such trading day, as obtained by the calculation agent on such trading day from the licensed third-party market data vendor contracted by the calculation agent at such time; in
particular, taking into account the decimal precision and/or rounding convention employed by such licensed third-party market data vendor on such date. Currently, the calculation agent obtains market data from Thomson Reuters Ltd., but the
calculation agent may change its market data vendor at any time without notice. The foregoing provisions of this definition of closing level are subject to the provisions set forth herein under Additional Terms of the
SecuritiesMarket Disruption Events, Adjustments to the Underlier and Discontinuance of the Underlier.
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Final Underlier Level:
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The
final underlier level
will be the closing level of the underlier on the determination
date.
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PRS-5
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Underlier Return:
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The
underlier return
will be the
quotient
of (i) the final underlier level
minus
the
initial underlier level
divided by
(ii) the initial underlier level, expressed as a percentage.
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Maximum Settlement
Amount:
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The
maximum settlement amount
is 126.10% of the face amount per security ($1,261.00 per security). As
a result of the maximum settlement amount, the maximum return on the face amount of the securities at maturity will be 26.10% of the face amount.
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Cap Level:
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The
cap level
is 2,662.50286, which is 117.40% of the initial underlier level.
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Buffer Level:
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1,927.7065, which is equal to 85% of the initial underlier level.
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Buffer Amount:
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15%
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Buffer Rate:
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The
buffer rate
is equal to the initial underlier level divided by the buffer level, or 100% divided
by 85%, which is approximately 1.1765.
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Upside
Participation Rate:
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1.5
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Determination
Date:
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The determination date is March 18, 2019. If the originally scheduled determination date is not a trading day, the
determination date will be postponed to the next succeeding trading day. The determination date is also subject to postponement due to the occurrence of a market disruption event. See Additional Terms of the SecuritiesMarket Disruption
Events.
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Trading Day:
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A
trading day
means a day, as determined by the calculation agent, on which (i) the relevant stock
exchanges with respect to each security underlying the underlier are scheduled to be open for trading for their respective regular trading sessions and (ii) each related futures or options exchange is scheduled to be open for trading for its regular
trading session.
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Relevant Stock Exchange:
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The
relevant stock exchange
for any security underlying the underlier means the primary exchange or
quotation system on which such security is traded, as determined by the calculation agent.
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Related Futures or Options Exchange:
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The
related futures or options exchange
for the underlier means an 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 underlier.
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Calculation Agent:
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Wells Fargo Securities, LLC
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No Listing:
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The securities will not be listed on any securities exchange or automated quotation system.
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Material Tax Consequences:
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For a discussion of the material U.S. federal income and certain estate tax consequences of the ownership and disposition
of the securities, see United States Federal Tax Considerations.
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Agent:
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Wells Fargo Securities, LLC, a wholly owned subsidiary of Wells Fargo & Company. The agent may resell the securities
to other securities dealers at the original offering price of the securities.
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The agent or another affiliate of ours expects to realize hedging profits projected by its proprietary pricing models to
the extent it assumes the risks inherent in hedging our obligations under the securities. If any dealer participating in the distribution of the securities or any of its affiliates conducts hedging activities for us in connection with the
securities, that dealer or its affiliate will expect to realize a profit projected by its proprietary pricing models from such hedging activities. Any such projected profit will be in addition to any discount or concession received in connection
with the sale of the securities to you.
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Denominations:
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$1,000 and any integral multiple of $1,000.
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CUSIP:
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94986R3P4
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PRS-6
Hypothetical Payout Profile
The following profile is based on a maximum settlement amount of 126.10% of the face amount or $1,261.00 per security, an upside participation rate of
1.5, a buffer level equal to 85% of the initial underlier level, a buffer rate of approximately 1.1765 and a buffer amount of 15%. This graph has been prepared for purposes of illustration only. Your actual return will depend on the actual final
underlier level and whether you hold your securities to maturity.
PRS-7
Risk Factors
The securities have complex features and investing in the securities will involve risks not associated with an investment in conventional debt
securities. You should carefully consider the risk factors set forth below as well as the other information contained in this pricing supplement and the accompanying market measure supplement, 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.
You May Lose Up To All Of Your Investment.
We
will not repay you a fixed amount on the securities on the stated maturity date. The cash settlement amount will depend on the direction of and percentage change in the final underlier level relative to the initial underlier level and the other
terms of the securities. Because the level of the underlier will be subject to market fluctuations, the cash settlement amount you receive may be more or less, and possibly significantly less, than the original offering price of your securities.
If the final underlier level is less than the initial underlier level by more than the buffer amount, the cash settlement amount will be less than
the face amount per security and you will be exposed on a leveraged basis to the decline in the underlier beyond the buffer amount. As a result, you may receive less than, and possibly lose all of, the face amount per security at maturity even if
the level of the underlier is greater than or equal to the initial underlier level or the buffer level at certain points during the term of the securities.
Even if the final underlier level is greater than the initial underlier level, the amount you receive at stated maturity may only be slightly greater
than the face 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 Wells Fargo or another issuer with a similar credit rating with the same stated maturity
date.
Your Return Will Be Limited By The Maximum Settlement Amount And May Be Lower Than The Return On A Direct Investment In The Underlier.
Your return on the securities will be subject to a maximum settlement amount. The opportunity to participate in the possible increases in the
level of the underlier through an investment in the securities will be limited because the cash settlement amount will not exceed the maximum settlement amount. Furthermore, the effect of the upside participation rate will be progressively reduced
for all final underlier levels exceeding the final underlier level at which the maximum settlement amount is reached, which we refer to as the cap level.
No Periodic Interest Will Be Paid On The Securities.
No periodic payments of interest will be made on the securities. However, if the agreed-upon tax treatment is successfully challenged by the Internal
Revenue Service (the
IRS
), you may be required to recognize taxable income over the term of the securities. You should review the section of this pricing supplement entitled United States Federal Tax Considerations.
The Securities Are Subject To The Credit Risk Of Wells Fargo.
The securities are our obligations 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 any securities included in the underlier for payment. As a result, our actual and perceived creditworthiness 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 On The Trade Date, Based On WFSs Proprietary Pricing Models, Is Less Than The Original Offering Price.
The original offering
price of the securities includes certain costs that are borne by you. Because of these costs, the estimated value of the securities on the trade date is less than the original offering price. The costs included in the original offering price relate
to selling, structuring, hedging and issuing the securities, as well as to our funding considerations for debt of this type. The costs related to selling, structuring, hedging and issuing the securities include (i) the agent discount (if any),
(ii) the projected profit that our hedge counterparty (which may be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the securities and (iii) hedging and other costs relating to the
offering of the securities. Our funding considerations are reflected in the fact that we determine the economic terms of the securities based on an assumed funding rate that is generally lower than our secondary market rates. If the costs relating
to selling, structuring, hedging and issuing the securities were lower, or if the assumed funding rate we use to determine the economic terms of the securities were higher, the economic terms of the securities would be more favorable to you and the
estimated value would be higher.
PRS-8
The Estimated Value Of The Securities Is Determined By Our Affiliates Pricing Models, Which May
Differ From Those Of Other Dealers.
The estimated value of the securities was determined for us by WFS using its proprietary pricing models and
related market inputs and assumptions referred to above under Investment DescriptionDetermining the estimated value. Certain inputs to these models may be determined by WFS in its discretion. WFSs views on these inputs may
differ from other dealers views, and WFSs estimated value of the securities may be higher, and perhaps materially higher, than the estimated value of the securities that would be determined by other dealers in the market. WFSs
models and its inputs and related assumptions may prove to be wrong and therefore not an accurate reflection of the value of the securities.
The
Estimated Value Of The Securities Is Not An Indication Of The Price, If Any, At Which WFS Or Any Other Person May Be Willing To Buy The Securities From You In The Secondary Market.
The price, if any, at which WFS or any of its affiliates may purchase the securities in the secondary market will be based on WFSs 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 face 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 is likely to be less than the original offering price.
If WFS or any of its affiliates makes a secondary market in the securities at any time up to the original issue date or during the 3-month period
following the original issue date, the secondary market price offered by WFS 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 original offering price. Because this portion of the costs is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this period will be higher than it would be if it were based
solely on WFSs 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 3-month period. If you hold the
securities through an account at WFS or any 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 WFS 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 WFS or any of its affiliates, as discussed above under Investment
Description.
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 level of the underlier 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, which we refer to as the
derivative
component factors
, are expected to affect the value of the securities. When we refer to the
value
of your security, we mean the value that you could receive for your security if you are able to sell it in the open market
before the stated maturity date.
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Underlier Performance.
The value of the securities prior to maturity will depend substantially on the level of
the underlier. 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 original offering price, if the level of the underlier at such time is less than, equal to
or not sufficiently above the initial underlier level.
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Interest Rates.
The value of the securities may be affected by changes in the interest rates in the U.S. markets.
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Volatility Of The Underlier.
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 underlier changes.
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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 level of the underlier. This difference will most likely reflect a discount due to expectations and uncertainty concerning the level of the underlier during the period of time
still remaining to the stated 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 level of the underlier.
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Dividend Yields On The Securities Included In The Underlier.
The value of the securities may be affected by the
dividend yields on securities included in the underlier.
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In addition to the derivative component factors, the value of the
securities will be affected by actual or anticipated changes in our creditworthiness, as reflected in our secondary market rates. 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 level of the underlier. Because several factors are expected to affect the value of the securities, changes in the level of the
underlier may not result in a comparable change
PRS-9
in the value of the securities. We anticipate that the value of the securities will always be at a discount to the maximum settlement amount.
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 the agent 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 the agent is 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.
Your Return On The Securities Could Be Less Than If You Owned Securities Included In The Underlier.
Your return on the securities will not reflect the return you would realize if you actually owned the securities included in the underlier and received
the dividends and other payments paid on those securities. This is in part because the cash settlement amount payable at stated maturity will be determined by reference to the final underlier level, which will be calculated by reference to the
prices of the securities in the underlier without taking into consideration the value of dividends and other payments paid on those securities. In addition, the cash settlement amount will not be greater than the maximum settlement amount.
Historical Levels Of The Underlier Should Not Be Taken As An Indication Of The Future Performance Of The Underlier During The Term Of The Securities.
The trading prices of the securities included in the underlier will determine the cash settlement amount payable at maturity to you. As a
result, it is impossible to predict whether the closing level of the underlier will fall or rise compared to the initial underlier level. Trading prices of the securities included in the underlier will be influenced by complex and interrelated
political, economic, financial and other factors that can affect the markets in which those securities are traded and the values of those securities themselves. Accordingly, any historical levels of the underlier do not provide an indication of the
future performance of the underlier.
Changes That Affect The Underlier May Adversely Affect The Value Of The Securities And The Amount You Will
Receive At Stated Maturity.
The policies of the underlier sponsor concerning the calculation of the underlier and the addition, deletion or
substitution of securities comprising the underlier and the manner in which the underlier sponsor takes account of certain changes affecting such securities may affect the level of the underlier and, therefore, may affect the value of the securities
and the cash settlement amount payable at maturity. The underlier sponsor may discontinue or suspend calculation or dissemination of the underlier or materially alter the methodology by which it calculates the underlier. Any such actions could
adversely affect the value of the securities.
We Cannot Control Actions By Any Of The Unaffiliated Companies Whose Securities Are Included In The
Underlier.
Actions by any company whose securities are included in the underlier may have an adverse effect on the price of its security, the
final underlier level and the value of the securities. We are currently one of the companies included in the underlier. The unaffiliated companies included in the underlier 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 any amounts to be paid to you on the securities.
We And Our Affiliates Have No Affiliation With The Underlier
Sponsor And Have Not Independently Verified Its Public Disclosure Of Information.
We and our affiliates are not affiliated in any way with the
underlier sponsor and have no ability to control or predict its actions, including any errors in or discontinuation of disclosure regarding the methods or policies relating to the calculation of the underlier. We have derived the information about
the underlier sponsor and the underlier contained in this pricing supplement from publicly available information, without independent verification. You, as an investor in the securities, should make your own investigation into the underlier and the
underlier sponsor. The underlier sponsor is not involved in the offering of the securities made hereby in any way and has no obligation to consider your interest as an owner of securities in taking any actions that might affect the value of the
securities.
PRS-10
The Stated Maturity Date Will Be Postponed If The Determination Date Is Postponed.
The determination date will be postponed if the calculation agent determines that a market disruption event has occurred or is continuing on the
determination date or if the originally scheduled determination date is not a trading day. If such a postponement occurs, the stated maturity date will be postponed until three business days after the postponed determination date.
Our Economic Interests And Those Of Any Dealer Participating In The Offering Are Potentially 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
, are potentially 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.
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The calculation agent is our affiliate and may be required to make discretionary judgments that affect the return
you receive on the securities.
WFS, which is our affiliate, will be the calculation agent for the securities. As calculation agent, WFS will determine the final underlier level and may be required to make other determinations that affect the
return you receive on the securities at maturity. In making these determinations, the calculation agent may be required to make discretionary judgments, including determining whether a market disruption event has occurred on the scheduled
determination date, which may result in postponement of the determination date; determining the final underlier level if the determination date is postponed to the last day to which it may be postponed and a market disruption event occurs on that
day; if the underlier is discontinued, selecting a successor underlier or, if no successor underlier is available, determining the final underlier level; and determining whether to adjust the closing level on the determination date in the event of
certain changes in or modifications to the underlier. In making these discretionary judgments, the fact that WFS is our affiliate may cause it to have economic interests that are adverse to your interests as an investor in the securities, and
WFSs determinations as calculation agent may adversely affect your return on the securities.
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The estimated value of the securities was calculated by our affiliate and is therefore not an independent
third-party valuation.
WFS calculated the estimated value of the securities set forth on the cover page of this pricing supplement, which involved discretionary judgments by WFS, as described under Risk FactorsThe Estimated Value
Of The Securities Is Determined By Our Affiliates Pricing Models, Which May Differ From Those Of Other Dealers above. Accordingly, the estimated value of the securities set forth on the cover page of this pricing supplement is not an
independent third-party valuation.
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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 level of the underlier.
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 underlier or the companies whose securities are included in the underlier. This research is 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 underlier or the companies whose securities are included in the underlier could adversely affect the level of the underlier and, therefore, adversely affect the value of and your
return on the securities. You are encouraged to derive information concerning the underlier 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 underlier or the companies whose securities are included in the underlier published on or prior to the trade date could result in an increase in the level of the underlier on the trade date, which would adversely affect
investors in the securities by increasing the level at which the underlier must close on the determination date in order for investors in the securities to receive a favorable return.
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Business activities of our affiliates or any participating dealer or its affiliates with the companies whose
securities are included in the underlier may adversely affect the level of the underlier.
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 underlier, 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 level of the underlier 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 underlier. 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.
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PRS-11
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Hedging activities by our affiliates or any participating dealer or its affiliates may adversely affect the level
of the underlier.
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 counterparties may acquire securities included in the underlier or listed or over-the-counter derivative or synthetic instruments related to the underlier 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 counterparties have a long hedge position in any of the securities included in the underlier, or derivative or synthetic instruments
related to the underlier or such securities, they may liquidate a portion of such holdings at or about the time of the determination date or at or about the time of a change in the securities included in the underlier. These hedging activities could
potentially adversely affect the level of the underlier and, therefore, adversely affect the value of and your return on the securities.
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Trading activities by our affiliates or any participating dealer or its affiliates may adversely affect the level
of the underlier.
Our affiliates or any participating dealer or its affiliates may engage in trading in the securities included in the underlier and other instruments relating to the underlier 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 level of the underlier and, therefore, adversely affect the value of and your return on the securities.
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A participating dealer or its affiliates may realize hedging profits projected by its proprietary pricing models
in addition to any selling concession, 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. If a participating dealer receives a concession for the sale of the securities to you, this projected hedging
profit will be in addition to the concession, creating a further incentive for the participating dealer to sell the securities to you.
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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
IRS. Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the securities as prepaid derivative contracts that are open transactions for U.S.
federal income tax purposes. If the IRS 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. In addition, in 2007
the U.S. Treasury Department and the IRS 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.
Section 871(m) of the Internal Revenue
Code of 1986, as amended (the Code), imposes a withholding tax of up to 30% on dividend equivalents paid or deemed 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, the securities should not be subject to withholding under Section 871(m). However, the IRS could challenge a conclusion that the
securities should not be subject to withholding under Section 871(m). If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld.
You should read carefully the discussion under United States Federal Tax Considerations in this pricing supplement. You should also consult
your tax adviser regarding the U.S. federal tax consequences of an investment in the securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
PRS-12
Determining Payment at Stated Maturity
On the stated maturity date, you will receive a cash payment per security (the cash settlement amount) calculated as follows:
PRS-13
Hypothetical Returns
The following table illustrates, for a range of hypothetical final underlier levels:
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the hypothetical percentage change from the initial underlier level to the hypothetical final underlier level; and
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the hypothetical pre-tax total return.
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Hypothetical underlier return
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Hypothetical pre-tax total
return
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50.00%
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26.10%
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40.00%
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26.10%
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20.00%
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26.10%
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17.40%
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26.10%
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10.00%
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15.00%
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5.00%
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7.50%
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0.00%
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0.00%
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-10.00%
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0.00%
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-15.00%
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0.00%
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-16.00%
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-1.18%
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-25.00%
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-11.76%
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-50.00%
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-41.18%
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-75.00%
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-70.59%
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-100.00%
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-100.00%
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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 return will depend on the actual final underlier level.
If, for example, the underlier
return were determined to be -75.00%, the pre-tax return on your securities at maturity would be approximately -70.59%, as shown in the table above. As a result, if you purchased your securities on the original issue date at the face amount and held
them to the stated maturity date, you would lose approximately 70.59% of your investment. In addition, if the underlier return were determined to be 50.00%, the cash settlement amount that we would deliver on your securities at maturity would be
capped at the maximum settlement amount, and the pre-tax return on your securities would therefore be capped at 26.10%, as shown in the table above. As a result, if you held your securities to the stated maturity date, you would not benefit from any
underlier return in excess of 17.40%.
PRS-14
Additional Terms of the Securities
Wells Fargo will issue the securities as part of a series of senior unsecured debt securities entitled Medium-Term Notes, Series K, which is
more fully described in the prospectus supplement. Information included in this pricing supplement supersedes information in the market measure supplement, prospectus supplement and prospectus to the extent that it is different from that
information.
Calculation Agent
Wells Fargo Securities,
LLC, one of our subsidiaries, will act as initial calculation agent for the securities and may appoint agents to assist it in the performance of its duties. Pursuant to the calculation agent agreement, we may appoint a different calculation agent
without your consent and without notifying you.
The calculation agent will determine the cash settlement amount you receive at stated maturity. In
addition, the calculation agent will, among other things:
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determine whether a market disruption event or non-trading day has occurred;
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determine if adjustments are required to the closing level of the underlier under various circumstances; and
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if publication of the underlier is discontinued, select a successor underlier (as defined below) or, if no successor
underlier is available, determine the closing level of the underlier.
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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. The calculation agent will have no liability for its determinations.
Market Disruption Events
A
market
disruption event
means any of the following events as determined by the calculation agent in its sole discretion:
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(A)
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The occurrence or existence of a material suspension of or limitation imposed on trading by the relevant stock exchanges
or otherwise relating to securities which then comprise 20% or more of the level of the underlier or any successor underlier 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 those relevant stock exchanges or otherwise.
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(B)
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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 underlier or any successor underlier 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.
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(C)
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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, securities that then comprise 20% or more of the level of the underlier or any successor underlier on their relevant stock exchanges at any time during the
one-hour period that ends at the close of trading on that day.
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(D)
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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 the underlier or any successor underlier 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.
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(E)
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The closure on any exchange business day of the relevant stock exchanges on which securities that then comprise 20% or
more of the level of the underlier or any successor underlier are traded or any related futures or options exchange 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 such actual closing time on that day.
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(F)
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The relevant stock exchange for any security underlying the underlier or successor underlier or any related futures or
options exchange fails to open for trading during its regular trading session.
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For purposes of determining whether a market
disruption event has occurred:
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(1)
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the relevant percentage contribution of a security to the level of the underlier or any successor underlier will be
based on a comparison of (x) the portion of the level of such underlier attributable to that security and (y) the overall level of the underlier or successor underlier, in each case immediately before the occurrence of the market
disruption event;
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PRS-15
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(2)
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the
close of trading
on any trading day for the underlier or any successor underlier means the
scheduled closing time of the relevant stock exchanges with respect to the securities underlying the underlier or successor underlier on such trading day; provided that, if the actual closing time of the regular trading session of any such relevant
stock exchange is earlier than its scheduled closing time on such trading day, then (x) for purposes of clauses (A) and (C) of the definition of market disruption event above, with respect to any security underlying the
underlier or successor underlier for which such relevant stock exchange is its relevant stock exchange, the close of trading means such actual closing time and (y) for purposes of clauses (B) and (D) of the definition of
market disruption event above, with respect to any futures or options contract relating to the underlier or successor underlier, the close of trading means the latest actual closing time of the regular trading session of any
of the relevant stock exchanges, but in no event later than the scheduled closing time of the relevant stock exchanges;
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(3)
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the
scheduled closing time
of any relevant stock exchange or related futures or options exchange on
any trading day for the underlier or any successor underlier 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; and
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(4)
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an
exchange business day
means any trading day for the underlier or any successor underlier on which
each relevant stock exchange for the securities underlying the underlier or any successor underlier and each related futures or options exchange are open for trading during their respective regular trading sessions, notwithstanding any such relevant
stock exchange or related futures or options exchange closing prior to its scheduled closing time.
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If a market disruption event
occurs or is continuing on the determination date, then the determination 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 determination date, that eighth trading day shall be deemed to be the determination date. If the determination date has been postponed eight trading days after the
originally scheduled determination date and a market disruption event occurs or is continuing on such eighth trading day, the calculation agent will determine the closing level of the underlier on such eighth trading day in accordance with the
formula for and method of calculating the closing level of the underlier last in effect prior to commencement of the market disruption event, using the closing price (or, with respect to any relevant security, if a market disruption event has
occurred with respect to such security, its good faith estimate of the value of such security at the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading session of
such relevant stock exchange) on such date of each security included in the underlier. As used herein, closing price means, with respect to any security on any date, the relevant stock exchange traded or quoted price of such security as
of the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading session of such relevant stock exchange.
Adjustments to the Underlier
If at any time
the sponsor or publisher of the underlier (the
underlier sponsor
) makes a material change in the formula for or the method of calculating the underlier, or in any other way materially modifies the underlier (other than a
modification prescribed in that formula or method to maintain the underlier in the event of changes in constituent stock and capitalization and other routine events), then, from and after that time, the calculation agent will, at the close of
business in New York, New York, on each date that the closing level of the underlier is to be calculated, calculate a substitute closing level of the underlier in accordance with the formula for and method of calculating the underlier last in effect
prior to the change, but using only those securities that comprised the underlier immediately prior to that change. Accordingly, if the method of calculating the underlier is modified so that the level of the underlier is a fraction or a multiple of
what it would have been if it had not been modified, then the calculation agent will adjust the underlier in order to arrive at a level of the underlier as if it had not been modified.
Discontinuance of the Underlier
If the
underlier sponsor discontinues publication of the underlier, and the underlier sponsor or another entity publishes a successor or substitute equity index that the calculation agent determines, in its sole discretion, to be comparable to the
underlier (a
successor underlier
), then, upon the calculation agents notification of that determination to the trustee and Wells Fargo, the calculation agent will substitute the successor underlier as calculated by the
relevant underlier sponsor or any other entity and calculate the final underlier level as described above. Upon any selection by the calculation agent of a successor underlier, Wells Fargo will cause notice to be given to holders of the securities.
In the event that the underlier sponsor discontinues publication of the underlier prior to, and the discontinuance is continuing on, the
determination date and the calculation agent determines that no successor underlier is available at such time, the calculation agent will calculate a substitute closing level for the underlier in accordance with the formula for and method of
calculating the underlier last in effect prior to the discontinuance, but using only those securities that comprised the underlier immediately prior to that discontinuance. If a successor underlier is selected or the calculation agent calculates a
level as a substitute for the underlier, the successor underlier or level will be used as a substitute for the underlier for all purposes, including the purpose of determining whether a market disruption event exists.
PRS-16
If on the determination date the underlier sponsor fails to calculate and announce the level of the
underlier, the calculation agent will calculate a substitute closing level of the underlier in accordance with the formula for and method of calculating the underlier last in effect prior to the failure, but using only those securities that
comprised the underlier immediately prior to that failure;
provided
that, if a market disruption event occurs or is continuing on such day, then the provisions set forth above under Market Disruption Events shall apply in
lieu of the foregoing.
Notwithstanding these alternative arrangements, discontinuance of the publication of, or the failure by the underlier sponsor
to calculate and announce the level of, the underlier may adversely affect the value of the securities.
Events of Default and Acceleration
If an event of default with respect to the securities has occurred and is continuing, the amount payable to a holder of a security upon any
acceleration permitted by the securities, with respect to each security, will be equal to the cash settlement amount, calculated as provided herein. The cash settlement amount will be calculated as though the date of acceleration were the
determination date.
PRS-17
The S&P 500 Index
The S&P 500 Index is an equity index that is intended to provide an indication of the pattern of common stock price movement in the large
capitalization segment of the United States equity market. Wells Fargo & Company is one of the companies currently included in the S&P 500 Index. See Description of Equity IndicesThe S&P 500
®
Index in the accompanying market measure supplement for additional information about the S&P 500 Index. In addition to the criteria for addition to the S&P 500 Index set forth in
the accompanying market measure supplement, a company must have a primary listing to its common stock on the NYSE, NYSE Arca, NYSE MKT, NASDAQ Global Select Market, NASDAQ Select Market, NASDAQ Capital Market, Bats BZX, Bats BYX, Bats EDGA or Bats
EDGX.
Historical Information
We obtained
the closing levels set forth in the graph below from Bloomberg Financial Markets without independent verification.
The historical performance of the
underlier should not be taken as an indication of the future performance of the underlier during the term of the securities.
The following graph
sets forth the daily closing levels of the underlier for each day in the period from January 1, 2007 through January 17, 2017. The closing level on January 17, 2017 was 2,267.89.
PRS-18
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
(
ERISA
) applies (a
plan
), should consider the fiduciary standards of ERISA in the context of the plans 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 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:
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PTCE 96-23, for specified transactions determined by in-house asset managers;
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PTCE 95-60, for specified transactions involving insurance company general accounts;
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PTCE 91-38, for specified transactions involving bank collective investment funds;
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PTCE 90-1, for specified transactions involving insurance company separate accounts; and
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PTCE 84-14, for specified transactions determined by independent qualified professional asset managers.
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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:
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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
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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 similar violation under any Similar Laws.
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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.
PRS-19
Each purchaser or holder of the securities acknowledges and agrees that:
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(i)
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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
holders investment in the securities, or (c) the exercise of or failure to exercise any rights we have under or with respect to the securities;
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(ii)
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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;
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(iii)
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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;
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(iv)
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our interests may be adverse to the interests of the purchaser or holder; and
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(v)
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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.
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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 Law. 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-20
United States Federal Tax Considerations
The following is a discussion of the material U.S. federal income and certain estate tax consequences of the ownership and disposition of the securities.
It applies to you only if you purchase a security for cash in the initial offering at the issue price, which is the first price at which a substantial amount of the securities is sold to the public, and hold the security as a capital
asset within the meaning of Section 1221 of the Code. It does not address all of the tax consequences that may be relevant to you in light of your particular circumstances or if you are an investor subject to special rules, such as:
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a financial institution;
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a regulated investment company;
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a tax-exempt entity, including an individual retirement account or Roth IRA;
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a dealer or trader subject to a mark-to-market method of tax accounting with respect to the securities;
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a person holding a security as part of a straddle or conversion transaction or who has entered into a
constructive sale with respect to a security;
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a U.S. holder (as defined below) whose functional currency is not the U.S. dollar; or
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an entity classified as a partnership for U.S. federal income tax purposes.
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If an entity that is classified as a partnership for U.S. federal income tax purposes holds the securities, the U.S. federal income tax treatment of a
partner will generally depend on the status of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner in such a partnership, you should consult your tax adviser as to your particular U.S.
federal tax consequences of holding and disposing of the securities.
We will not attempt to ascertain whether any of the issuers of the underlying
stocks of the underlier (the
underlying stocks
) is treated as a U.S. real property holding corporation (
USRPHC
) within the meaning of Section 897 of the Code or as a passive foreign
investment company (
PFIC
) within the meaning of Section 1297 of the Code. If any of the issuers of the underlying stocks were so treated, certain adverse U.S. federal income tax consequences might apply to you, in the
case of a USRPHC if you are a non-U.S. holder (as defined below) and in the case of a PFIC if you are a U.S. holder (as defined below), upon the sale, exchange or other disposition of the securities. You should refer to information filed with the
Securities and Exchange Commission or another governmental authority by the issuers of the underlying stocks and consult your tax adviser regarding the possible consequences to you if any of the issuers of the underlying stocks is or becomes a
USRPHC or PFIC.
This discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury
regulations, all as of the date of this pricing supplement, changes to any of which subsequent to the date of this pricing supplement may affect the tax consequences described herein, possibly with retroactive effect. This discussion does not
address the effects of any applicable state, local or non-U.S. tax laws or the potential application of the alternative minimum tax or of the Medicare tax on investment income. You should consult your tax adviser concerning the application of U.S.
federal income and estate tax laws to your particular situation (including the possibility of alternative treatments of the securities), as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
Tax Treatment of the Securities
In the
opinion of our counsel, Davis Polk & Wardwell LLP, which is based on current market conditions, a security should be treated as a prepaid derivative contract that is an open transaction for U.S. federal income tax purposes. By
purchasing a security, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to this treatment.
Due to
the absence of statutory, judicial or administrative authorities that directly address the U.S. federal tax treatment of the securities or similar instruments, significant aspects of the treatment of an investment in the securities are uncertain. We
do not plan to request a ruling from the IRS, and the IRS or a court might not agree with the treatment described below. Accordingly, you should consult your tax adviser regarding all aspects of the U.S. federal income and estate tax consequences of
an investment in the securities. Unless otherwise indicated, the following discussion is based on the treatment of the securities as prepaid derivative contracts that are open transactions.
PRS-21
Tax Consequences to U.S. Holders
This section applies only to U.S. holders. You are a
U.S. holder
if you are a beneficial owner of a security that is, for U.S. federal
income tax purposes:
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a citizen or individual resident of the United States;
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a corporation created or organized in or under the laws of the United States, any state therein or the District of
Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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Tax Treatment Prior to Maturity
. You should not be required to recognize income over the term of the securities prior to
maturity, other than pursuant to a sale, exchange or retirement as described below.
Sale, Exchange or Retirement of the Securities.
Upon a
sale, exchange or retirement of the securities, you should recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and your tax basis in the securities that are sold, exchanged or retired. Your
tax basis in the securities should equal the amount you paid to acquire them. This gain or loss should be long-term capital gain or loss if at the time of the sale, exchange or retirement you held the securities for more than one year, and
short-term capital gain or loss otherwise. Long-term capital gains recognized by non-corporate U.S. holders are generally subject to taxation at reduced rates. The deductibility of capital losses is subject to certain limitations.
Possible Alternative Tax Treatments of an Investment in the Securities
Alternative U.S. federal income tax treatments of the securities are possible that, if applied, could materially and adversely affect the timing and/or
character of income, gain or loss with respect to them. It is possible, for example, that the securities could be treated as debt instruments governed by Treasury regulations relating to the taxation of contingent payment debt instruments. In that
case, regardless of your method of tax accounting for U.S. federal income tax purposes, you would be required to accrue income based on our comparable yield for similar non-contingent debt, determined as of the time of issuance of the securities, in
each year that you held the securities, even though we are not required to make any payment with respect to the securities prior to maturity. In addition, any gain on the sale, exchange or retirement of the securities would be treated as ordinary
income.
Other possible U.S. federal income tax treatments of the securities could also affect the timing and character of income or loss with
respect to the securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar instruments. The notice focuses in
particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments;
whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; and whether
these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice
requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the
securities, possibly with retroactive effect. You should consult your tax adviser regarding the possible alternative treatments of an investment in the securities and the issues presented by this notice.
Tax Consequences to Non-U.S. Holders
This
section applies only to non-U.S. holders. You are a
non-U.S. holder
if you are a beneficial owner of a security that is, for U.S. federal income tax purposes:
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an individual who is classified as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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You are not a non-U.S. holder for purposes of this discussion if you are (i) an individual who is present in the United States for 183 days or more
in the taxable year of disposition or (ii) a former citizen or resident of the United States. If you are or may become such a person during the period in which you hold a security, you should consult your tax adviser regarding the U.S. federal
tax consequences of an investment in the securities.
PRS-22
Sale, Exchange or Retirement of the Securities.
Subject to the possible application of
Section 897 of the Code and the discussion below regarding Section 871(m), you generally should not be subject to U.S. federal income or withholding tax in respect of amounts paid to you, provided that income in respect of the securities
is not effectively connected with your conduct of a trade or business in the United States.
If you are engaged in a U.S. trade or business, and if
income from the securities is effectively connected with the conduct of that trade or business, you generally will be subject to regular U.S. federal income tax with respect to that income in the same manner as if you were a U.S. holder, unless an
applicable income tax treaty provides otherwise. If you are such a holder and you are a corporation, you should also consider the potential application of a 30% (or lower treaty rate) branch profits tax.
Tax Consequences Under Possible Alternative Treatments.
If all or any portion of a security were recharacterized as a debt instrument, subject to
the possible application of Section 897 of the Code and the discussions below regarding FATCA and Section 871(m), any payment made to you with respect to the security generally should not be subject to U.S. federal withholding or income
tax, provided that: (i) income or gain in respect of the security is not effectively connected with your conduct of a trade or business in the United States, and (ii) you provide an appropriate IRS Form W-8 certifying under penalties of
perjury that you are not a United States person.
Other U.S. federal income tax treatments of the securities are also possible. In 2007, the U.S.
Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar instruments. Among the issues addressed in the notice is the degree, if any, to which
income with respect to instruments such as the securities should be subject to U.S. withholding tax. While the notice requests comments on appropriate transition rules and effective dates, it is possible that any Treasury regulations or other
guidance promulgated after consideration of these issues might materially and adversely affect the withholding tax consequences of an investment in the securities, possibly with retroactive effect. Accordingly, you should consult your tax adviser
regarding the issues presented by the notice.
Possible Withholding Under Section 871(m) of the Code. 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).
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 with respect to any U.S. Underlying Equity 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 underlier or its underlying components, 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.
In the event withholding applies,
we will not be required to pay any additional amounts with respect to amounts withheld.
U.S. Federal Estate Tax
If you are an individual non-U.S. holder or an entity the property of which is potentially includible in such an individuals gross estate for U.S.
federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), you should note that, absent an applicable treaty exemption, the securities may be
treated as U.S. situs property subject to U.S. federal estate tax. If you are such an individual or entity, you should consult your tax adviser regarding the U.S. federal estate tax consequences of investing in the securities.
Information Reporting and Backup Withholding
Amounts paid on the securities, and the proceeds of a sale, exchange or other disposition of the securities, may be subject to information reporting and,
if you fail to provide certain identifying information (such as an accurate taxpayer identification number if you are a U.S. holder) or meet certain other conditions, may also be subject to backup withholding at the rate specified in the Code. If
you are a non-U.S. holder that provides an appropriate IRS Form W-8, you will
PRS-23
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 your U.S. federal
income tax liability, provided the relevant information is timely furnished to the IRS.
FATCA Legislation
Legislation commonly referred to as
FATCA
generally imposes a withholding tax of 30% on payments to certain non-U.S. entities
(including financial intermediaries) with respect to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An intergovernmental agreement between the United States and the
non-U.S. entitys jurisdiction may modify these requirements. This legislation applies to certain financial instruments that are treated as paying U.S.-source interest, dividends or dividend equivalents or other U.S.-source fixed or
determinable annual or periodical income (
FDAP income
). If required under FATCA, withholding applies to payments of FDAP income and, after 2018, to payments of gross proceeds of the disposition (including upon retirement) of
certain financial instruments treated as providing U.S.-source interest or dividends. If the securities were treated as debt instruments, the withholding regime under FATCA would apply to the securities. If withholding applies to the securities, we
will not be required to pay any additional amounts with respect to amounts withheld. If you are a non-U.S. holder, or a U.S. holder holding securities through a non-U.S. intermediary, you should consult your tax adviser regarding the potential
application of FATCA to the securities.
The preceding discussion constitutes the full opinion of Davis Polk & Wardwell LLP regarding the
material U.S. federal tax consequences of owning and disposing of the securities.
You should consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
PRS-24
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