The timing and amount of the payment you will receive will be determined as follows:
The following profile illustrates the potential payment on the securities for a range of hypothetical
percentage changes in the fund closing price of the Fund from the pricing date to the applicable call date (including the final calculation day). The profile is based on a call premium of 7.20% for the first call date, 14.40% for the second call
date and 21.60% for the final call date and a threshold price equal to 90% of the starting price. This profile has been prepared for purposes of illustration only. Your actual return will depend on (i) whether the securities are automatically
called; (ii) if the securities are automatically called, the actual call date on which the securities are called; (iii) if the securities are not automatically called, the actual ending price of the Fund; and (iv) whether you hold
your securities to maturity or earlier automatic call.
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. Even if the
treatment of the securities as prepaid derivative contracts that are open transactions is respected, a security may be treated as a constructive ownership transaction, with potentially adverse consequences described below
under United States Federal Tax Considerations.
Furthermore, 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 IRS
regulations providing a general exemption for financial instruments issued in 2017 that do not have a delta of one, the securities should not be subject to withholding under Section 871(m). However, the IRS could challenge this
conclusion. If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld.
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. 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-15
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
If the securities are automatically called:
Assuming that the securities are automatically called, the following table illustrates, for each hypothetical call date on which the securities
are automatically called:
|
|
|
the hypothetical payment per security on the related call settlement date;
|
|
|
|
the hypothetical pre-tax total rate of return; and
|
|
|
|
the hypothetical pre-tax annualized rate of return.
|
|
|
|
|
|
|
|
Hypothetical call date on which
securities are automatically called
|
|
Hypothetical payment
per security on related call
settlement date
|
|
Hypothetical pre-tax
total rate of return
|
|
Hypothetical pre-tax
annualized rate of
return
(1)
|
1st call date
|
|
$1,072.00
|
|
7.20%
|
|
6.94%
|
2nd call date
|
|
$1,144.00
|
|
14.40%
|
|
6.77%
|
3rd call date
|
|
$1,216.00
|
|
21.60%
|
|
6.62%
|
(1)
|
The annualized rates of return are calculated with compounding on a semi-annual basis.
|
If the securities are not automatically called:
Assuming that the securities are not automatically called, the following table illustrates, for a range of hypothetical ending prices of the
Fund:
|
|
|
the hypothetical percentage change from the starting price to the hypothetical ending price;
|
|
|
|
the hypothetical payment at stated maturity per security;
|
|
|
|
the hypothetical pre-tax total rate of return; and
|
|
|
|
the hypothetical pre-tax annualized rate of return.
|
|
|
|
|
|
|
|
|
|
Hypothetical
ending price
|
|
Hypothetical percentage change
from the starting price to the
hypothetical ending price
|
|
Hypothetical payment
at stated maturity per
security
|
|
Hypothetical pre-tax
total rate of return
|
|
Hypothetical pre-tax
annualized rate
of
return
(1)
|
$63.29
|
|
-5.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$59.958
|
|
-10.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$59.29
|
|
-11.00%
|
|
$990.00
|
|
-1.00%
|
|
-0.33%
|
$53.30
|
|
-20.00%
|
|
$900.00
|
|
-10.00%
|
|
-3.48%
|
$49.97
|
|
-25.00%
|
|
$850.00
|
|
-15.00%
|
|
-5.34%
|
$33.31
|
|
-50.00%
|
|
$600.00
|
|
-40.00%
|
|
-16.31%
|
$16.66
|
|
-75.00%
|
|
$350.00
|
|
-65.00%
|
|
-32.08%
|
$0.00
|
|
-100.00%
|
|
$100.00
|
|
-90.00%
|
|
-63.69%
|
(1)
|
The annualized rates of return are calculated with compounding on a semi-annual basis.
|
The above figures are for purposes of illustration only and may have been rounded for ease of analysis. The actual amount you will receive upon
an automatic call or at stated maturity and the resulting pre-tax rate of return will depend on (i) whether the securities are automatically called; (ii) if the securities are automatically called, the actual call date on which the
securities are called; and (iii) if the securities are not automatically called, the actual ending price.
PRS-16
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Hypothetical Payment at Maturity
|
If the fund closing price of the Fund is less than the starting price on each of the first two call dates, the
securities will not be automatically called prior to the final calculation day, and you will receive a payment at maturity that will be greater than, equal to or less than the original offering price per security, depending on the ending price
(i.e., the fund closing price of the Fund on the final calculation day). Set forth below are three examples of calculations of the payment at stated maturity, assuming that the securities have not been automatically called on either of the first two
call dates and assuming the hypothetical ending prices indicated in the examples. These examples are for purposes of illustration only and the values used in the examples may have been rounded for ease of analysis.
Example 1. Ending price is greater than the starting price, the securities are automatically called on the final calculation day and the
payment at maturity is equal to the original offering price plus the applicable call premium:
Starting price: $66.62
Hypothetical ending price: $83.28
Since the hypothetical ending price is greater than the starting price, the securities are automatically called on the final
calculation day and you will receive the original offering price of your securities plus a call premium of 21.60% of the original offering price per security. Even though the Fund appreciated by 25.00% from its starting price to its ending price in
this example, your return is limited to the call premium of 21.60% that is applicable to the final calculation day.
On the
stated maturity date, you would receive $1,216.00 per security.
Example 2. Ending price is less than the starting price but greater
than the threshold price and the payment at maturity is equal to the original offering price:
Starting price: $66.62
Hypothetical ending price: $63.29
Threshold price: $59.958, which is 90% of the starting price
Since the hypothetical ending price is less than the starting price, but not by more than 10%, you would not lose any of the
original offering price of your securities.
On the stated maturity date, you would receive $1,000.00 per security.
Example 3. Ending price is less than the threshold price and the payment at maturity is less than the original offering price:
Starting price: $66.62
Hypothetical ending price: $33.31
Threshold price: $59.958, which is 90% of the starting price
Since the hypothetical ending price is less than the starting price by more than 10%, you would lose a portion of the original
offering price of your securities and receive a payment at maturity equal to:
|
|
|
|
|
|
|
|
|
|
|
$1,000
|
|
|
|
$1,000 ×
|
|
$59.958 $33.31
|
|
|
|
= $600.00
|
|
|
|
|
$66.62
|
|
|
|
On the stated maturity date, you would receive $600.00 per security, resulting in a loss of
40.00%.
To the extent that the ending price differs from the values assumed above, the results indicated above would be different.
PRS-17
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
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 whether the securities are automatically called on any of the call dates and the amount of the payment you
receive upon automatic call or at stated maturity. In addition, the calculation agent will, among other things:
|
|
|
determine whether a market disruption event has occurred;
|
|
|
|
determine if adjustments are required to the fund closing price of the Fund under various circumstances; and
|
|
|
|
if the Fund undergoes a liquidation event, select a successor fund (as defined below) or, if no successor fund
is available, determine the fund closing price.
|
All determinations made by the calculation agent will be at the sole
discretion of the calculation agent and, in the absence of manifest error, will be conclusive for all purposes and binding on us and you. 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:
|
(A)
|
The occurrence or existence of a material suspension of or limitation imposed on trading by the relevant stock
exchange or otherwise relating to the shares (or other applicable securities) of the Fund or any successor fund on the relevant stock exchange at any time during the one-hour period that ends at the close of trading on such day, whether by reason of
movements in price exceeding limits permitted by such relevant stock exchange or otherwise.
|
|
(B)
|
The occurrence or existence of a material suspension of or limitation imposed on trading by any related
futures or options exchange or otherwise in futures or options contracts relating to the shares (or other applicable securities) of the Fund or any successor fund on any related futures or options exchange at any time during the one-hour period that
ends at the close of trading on that day, whether by reason of movements in price exceeding limits permitted by the related futures or options exchange or otherwise.
|
|
(C)
|
The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the
ability of market participants in general to effect transactions in, or obtain market values for, shares (or other applicable securities) of the Fund or any successor fund on the relevant stock exchange at any time during the one-hour period that
ends at the close of trading on that day.
|
|
(D)
|
The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the
ability of market participants in general to effect transactions in, or obtain market values for, futures or options contracts relating to shares (or other applicable securities) of the Fund or any successor fund on any related futures or options
exchange at any time during the one-hour period that ends at the close of trading on that day.
|
|
(E)
|
The closure of the relevant stock exchange or any related futures or options exchange with respect to the Fund
or any successor fund prior to its scheduled closing time unless the earlier closing time is announced by the relevant stock exchange or related futures or options exchange, as applicable, at least one hour prior to the earlier of (1) the
actual closing time for the regular trading session on such relevant stock exchange or related futures or options exchange, as applicable, and (2) the submission deadline for orders to be entered into the relevant stock exchange or related
futures or options exchange, as applicable, system for execution at the close of trading on that day.
|
|
(F)
|
The relevant stock exchange or any related futures or options exchange with respect to the Fund or any
successor fund fails to open for trading during its regular trading session.
|
For purposes of determining whether a
market disruption event has occurred:
|
(1)
|
close of trading
means the scheduled closing time of the relevant stock exchange with
respect to the Fund or any successor fund; and
|
PRS-18
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Additional Terms of the Securities (Continued)
|
|
(2)
|
the
scheduled closing time
of the relevant stock exchange or any related futures or options
exchange on any trading day for the Fund or any successor fund means the scheduled weekday closing time of such relevant stock exchange or related futures or options exchange on such trading day, without regard to after hours or any other trading
outside the regular trading session hours.
|
If a market disruption event occurs or is continuing on any calculation day,
then such calculation day will be postponed to the first succeeding trading day on which a market disruption event has not occurred and is not continuing; however, if such first succeeding trading day has not occurred as of the eighth trading day
after the originally scheduled calculation day, that eighth trading day shall be deemed to be the calculation day. If the calculation day has been postponed eight trading days after the originally scheduled calculation day and a market disruption
event occurs or is continuing with respect to the Fund on such eighth trading day, the calculation agent will determine the closing price of the Fund on such eighth trading day based on its good faith estimate of the value of the shares (or other
applicable securities) of the Fund as of the close of trading on such eighth trading day.
Anti-dilution Adjustments Relating to the
Fund; Alternate Calculation
Anti-dilution Adjustments
The calculation agent will adjust the adjustment factor as specified below if any of the events specified below occurs with respect to the Fund
and the effective date or ex-dividend date, as applicable, for such event is after the pricing date and on or prior to the final calculation day.
The adjustments specified below do not cover all events that could affect the Fund, and there may be other events that could affect the Fund
for which the calculation agent will not make any such adjustments, including, without limitation, an ordinary cash dividend. Nevertheless, the calculation agent may, in its sole discretion, make additional adjustments to any terms of the securities
upon the occurrence of other events that affect or could potentially affect the market price of, or shareholder rights in, the Fund, with a view to offsetting, to the extent practical, any such change, and preserving the relative investment risks of
the securities. In addition, the calculation agent may, in its sole discretion, make adjustments or a series of adjustments that differ from those described herein if the calculation agent determines that such adjustments do not properly reflect the
economic consequences of the events specified in this pricing supplement or would not preserve the relative investment risks of the securities. All determinations made by the calculation agent in making any adjustments to the terms of the
securities, including adjustments that are in addition to, or that differ from, those described in this pricing supplement, will be made in good faith and a commercially reasonable manner, with the aim of ensuring an equitable result. In determining
whether to make any adjustment to the terms of the securities, the calculation agent may consider any adjustment made by the Options Clearing Corporation or any other equity derivatives clearing organization on options contracts on the Fund.
For any event described below, the calculation agent will not be required to adjust the adjustment factor unless the adjustment would result in
a change to the adjustment factor then in effect of at least 0.10%. The adjustment factor resulting from any adjustment will be rounded up or down, as appropriate, to the nearest one-hundred thousandth.
|
(A)
|
Stock Splits and Reverse Stock Splits
|
If a stock split or reverse stock split has occurred, then once such split has become effective, the adjustment factor will be
adjusted to equal the
product
of the prior adjustment factor and the number of securities which a holder of one share (or other applicable security) of the Fund before the effective date of such stock split or reverse stock split would have
owned or been entitled to receive immediately following the applicable effective date.
If a dividend or distribution of shares (or other applicable securities) to which the securities are linked has been made by
the Fund ratably to all holders of record of such shares (or other applicable security), then the adjustment factor will be adjusted on the ex-dividend date to equal the prior adjustment factor plus the
product
of the prior adjustment factor
and the number of shares (or other applicable security) of the Fund which a holder of one share (or other applicable security) of the Fund before the ex-dividend date would have owned or been entitled to receive immediately following that date;
provided, however, that no adjustment will be made for a distribution for which the number of securities of the Fund paid or distributed is based on a fixed cash equivalent value.
|
(C)
|
Extraordinary Dividends
|
If an extraordinary dividend (as defined below) has occurred, then the adjustment factor will be adjusted on the ex-dividend
date to equal the
product
of the prior adjustment factor and a fraction, the numerator of which is the closing price per share (or other applicable security) of the Fund on the trading day preceding the ex-dividend date, and the denominator
of which is the amount by which the closing price per share (or other applicable security) of the Fund on the trading day preceding the ex-dividend date exceeds the extraordinary dividend amount (as defined below).
PRS-19
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Additional Terms of the Securities (Continued)
|
For purposes of determining whether an extraordinary dividend has occurred:
|
(1)
|
extraordinary dividend
means any cash dividend or distribution (or portion thereof) that
the calculation agent determines, in its sole discretion, is extraordinary or special; and
|
|
(2)
|
extraordinary dividend amount
with respect to an extraordinary dividend for the securities
of the Fund will equal the amount per share (or other applicable security) of the Fund of the applicable cash dividend or distribution that is attributable to the extraordinary dividend, as determined by the calculation agent in its sole discretion.
|
A distribution on the securities of the Fund described below under the section entitled
Reorganization Events below that also constitutes an extraordinary dividend will only cause an adjustment pursuant to that Reorganization Events section.
If the Fund declares or makes a distribution to all holders of the shares (or other applicable security) of the Fund of any
non-cash assets, excluding dividends or distributions described under the section entitled Stock Dividends above, then the calculation agent may, in its sole discretion, make such adjustment (if any) to the adjustment factor as it
deems appropriate in the circumstances. If the calculation agent determines to make an adjustment pursuant to this paragraph, it will do so with a view to offsetting, to the extent practical, any change in the economic position of a holder of the
securities that results solely from the applicable event.
|
(E)
|
Reorganization Events
|
If the Fund, or any successor fund, is subject to a merger, combination, consolidation or statutory exchange of securities
with another exchange traded fund, and the Fund is not the surviving entity (a
reorganization event
), then, on or after the date of such event, the calculation agent shall, in its sole discretion, make an adjustment to the
adjustment factor or the method of determining the payment at maturity, whether the securities are automatically called on any of the call dates or any other terms of the securities as the calculation agent determines appropriate to account for the
economic effect on the securities of such event, and determine the effective date of that adjustment. If the calculation agent determines that no adjustment that it could make will produce a commercially reasonable result, then the calculation agent
may deem such event a liquidation event (as defined below).
Liquidation Events
If the Fund is de-listed, liquidated or otherwise terminated (a
liquidation event
), and a successor or substitute exchange
traded fund exists that the calculation agent determines, in its sole discretion, to be comparable to the Fund, then, upon the calculation agents notification of that determination to the trustee and Wells Fargo, any subsequent fund closing
price for the Fund will be determined by reference to the fund closing price of such successor or substitute exchange traded fund (such exchange traded fund being referred to herein as a
successor fund
), with such adjustments as
the calculation agent determines are appropriate to account for the economic effect of such substitution on holders of the securities.
If
the Fund undergoes a liquidation event prior to, and such liquidation event is continuing on, the date that any fund closing price of the Fund is to be determined and the calculation agent determines that no successor fund is available at such time,
then the calculation agent will, in its discretion, calculate the fund closing price for the Fund on such date by a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the Fund, provided
that if the calculation agent determines in its discretion that it is not practicable to replicate the Fund (including but not limited to the instance in which the underlying index sponsor discontinues publication of the underlying index), then the
calculation agent will calculate the fund closing price for the Fund in accordance with the formula last used to calculate such fund closing price before such liquidation event, but using only those securities that were held by the Fund immediately
prior to such liquidation event without any rebalancing or substitution of such securities following such liquidation event.
If a
successor fund is selected or the calculation agent calculates the fund closing price as a substitute for the Fund, such successor fund or fund closing price will be used as a substitute for the Fund for all purposes, including for purposes of
determining whether a market disruption event exists. Notwithstanding these alternative arrangements, a liquidation event with respect to the Fund may adversely affect the value of the securities.
If any event is both a reorganization event and a liquidation event, such event will be treated as a reorganization event for purposes of the
securities unless the calculation agent makes the determination referenced in the last sentence of the section entitled Anti-dilution AdjustmentsReorganization Events above.
PRS-20
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Additional Terms of the Securities (Continued)
|
Alternate Calculation
If at any time the method of calculating the Fund or a successor fund, or the underlying index, is changed in a material respect, or if the
Fund or a successor fund is in any other way modified so that the Fund does not, in the opinion of the calculation agent, fairly represent the price of the securities of the Fund or such successor fund had such changes or modifications not been
made, then the calculation agent may, at the close of business in New York City on the date that any fund closing price is to be determined, make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a closing price of the Fund comparable to the Fund or such successor fund, as the case may be, as if such changes or modifications had not been made, and calculate the fund closing price and the payment at maturity
and determine whether the securities are automatically called on any call date with reference to such adjusted closing price of the Fund or such successor fund, as applicable.
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 amount payable on the securities on the maturity date, calculated as provided herein, as though the date of acceleration were the final calculation day;
provided that if the fund closing price of the Fund on the date of acceleration is equal to or greater than the starting price, then the amount payable on the securities will be calculated using a call premium that is prorated to the date of
acceleration.
PRS-21
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
The Energy Select Sector SPDR Fund
|
The Energy Select Sector SPDR Fund is an exchange traded fund that seeks to track the Energy Select Sector
Index, an equity index that is intended to provide investors with a way to track the movements of certain public companies that represent the energy sector of the S&P 500 Index. See Description of Exchange Traded FundsThe Energy
Select Sector SPDR
®
Fund in the accompanying market measure supplement for additional information about the Energy Select Sector SPDR Fund.
Historical Information
We
obtained the closing prices listed below from Bloomberg Financial Markets without independent verification.
The historical performance of
the Fund should not be taken as an indication of the future performance of the Fund during the term of the securities.
The following graph
sets forth daily closing prices of the Fund on each day in the period from January 1, 2007 through July 31, 2017. The closing price on July 31, 2017 was $66.62.
PRS-22
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
The Energy Select Sector SPDR Fund (Continued)
|
The following table sets forth the high and low closing prices, as well as end-of-period
closing prices, of the Fund for each quarter in the period from January 1, 2007 through June 30, 2017 and for the period from July 1, 2017 to July 31, 2017.
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
Last
|
2007
|
|
|
First Quarter
|
|
$61.00
|
|
$54.05
|
|
$60.24
|
Second Quarter
|
|
$71.10
|
|
$60.87
|
|
$69.05
|
Third Quarter
|
|
$75.70
|
|
$65.05
|
|
$74.94
|
Fourth Quarter
|
|
$80.40
|
|
$71.16
|
|
$79.22
|
2008
|
|
|
First Quarter
|
|
$80.40
|
|
$67.27
|
|
$73.80
|
Second Quarter
|
|
$90.25
|
|
$75.10
|
|
$88.36
|
Third Quarter
|
|
$88.97
|
|
$61.65
|
|
$63.77
|
Fourth Quarter
|
|
$62.36
|
|
$40.00
|
|
$47.84
|
2009
|
|
|
First Quarter
|
|
$51.95
|
|
$38.12
|
|
$42.46
|
Second Quarter
|
|
$53.95
|
|
$43.36
|
|
$48.07
|
Third Quarter
|
|
$55.89
|
|
$44.52
|
|
$53.92
|
Fourth Quarter
|
|
$59.76
|
|
$51.97
|
|
$57.01
|
2010
|
|
|
First Quarter
|
|
$60.30
|
|
$53.74
|
|
$57.52
|
Second Quarter
|
|
$62.07
|
|
$49.68
|
|
$49.68
|
Third Quarter
|
|
$56.31
|
|
$49.38
|
|
$56.06
|
Fourth Quarter
|
|
$68.25
|
|
$56.11
|
|
$68.25
|
2011
|
|
|
First Quarter
|
|
$80.01
|
|
$67.78
|
|
$79.81
|
Second Quarter
|
|
$80.44
|
|
$70.99
|
|
$75.35
|
Third Quarter
|
|
$79.79
|
|
$58.59
|
|
$58.59
|
Fourth Quarter
|
|
$73.04
|
|
$56.55
|
|
$69.13
|
2012
|
|
|
First Quarter
|
|
$76.29
|
|
$69.46
|
|
$71.73
|
Second Quarter
|
|
$72.42
|
|
$62.00
|
|
$66.37
|
Third Quarter
|
|
$76.57
|
|
$64.96
|
|
$73.48
|
Fourth Quarter
|
|
$74.94
|
|
$68.59
|
|
$71.44
|
2013
|
|
|
First Quarter
|
|
$79.99
|
|
$72.86
|
|
$79.32
|
Second Quarter
|
|
$83.28
|
|
$74.09
|
|
$78.36
|
Third Quarter
|
|
$85.30
|
|
$78.83
|
|
$82.88
|
Fourth Quarter
|
|
$88.51
|
|
$81.87
|
|
$88.51
|
2014
|
|
|
First Quarter
|
|
$89.06
|
|
$81.89
|
|
$89.06
|
Second Quarter
|
|
$101.29
|
|
$88.45
|
|
$100.10
|
Third Quarter
|
|
$100.58
|
|
$90.62
|
|
$90.62
|
Fourth Quarter
|
|
$88.77
|
|
$73.36
|
|
$79.16
|
2015
|
|
|
First Quarter
|
|
$82.29
|
|
$72.86
|
|
$77.58
|
Second Quarter
|
|
$82.94
|
|
$74.64
|
|
$75.16
|
Third Quarter
|
|
$74.54
|
|
$59.22
|
|
$61.20
|
Fourth Quarter
|
|
$71.40
|
|
$58.78
|
|
$60.55
|
2016
|
|
|
First Quarter
|
|
$63.75
|
|
$51.80
|
|
$61.92
|
Second Quarter
|
|
$69.50
|
|
$60.18
|
|
$68.24
|
Third Quarter
|
|
$71.80
|
|
$65.27
|
|
$70.61
|
Fourth Quarter
|
|
$77.83
|
|
$67.77
|
|
$75.32
|
2017
|
|
|
First Quarter
|
|
$76.17
|
|
$68.24
|
|
$69.90
|
Second Quarter
|
|
$70.90
|
|
$63.95
|
|
$64.92
|
July 1, 2017 to July 31, 2017
|
|
$66.62
|
|
$64.01
|
|
$66.62
|
PRS-23
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Benefit Plan Investor Considerations
|
Each fiduciary of a pension, profit-sharing or other employee benefit plan to which Title I of the Employee
Retirement Income Security Act of 1974 (
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:
|
|
|
PTCE 96-23, for specified transactions determined by in-house asset managers;
|
|
|
|
PTCE 95-60, for specified transactions involving insurance company general accounts;
|
|
|
|
PTCE 91-38, for specified transactions involving bank collective investment funds;
|
|
|
|
PTCE 90-1, for specified transactions involving insurance company separate accounts; and
|
|
|
|
PTCE 84-14, for specified transactions determined by independent qualified professional asset managers.
|
In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide an exemption for
transactions between a plan and a person who is a party in interest (other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets involved in the transaction or renders investment
advice with respect thereto) solely by reason of providing services to the plan (or by reason of a relationship to such a service provider), if in connection with the transaction of the plan receives no less, and pays no more, than adequate
consideration (within the meaning of Section 408(b)(17) of ERISA).
Any purchaser or holder of the securities or any interest in
the securities will be deemed to have represented by its purchase and holding that either:
|
|
|
no portion of the assets used by such purchaser or holder to acquire or purchase the securities constitutes
assets of any plan or Non-ERISA Arrangement; or
|
|
|
|
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.
|
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
PRS-24
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
Benefit Plan Investor Considerations (Continued)
|
holder of the securities. The securities have not been designed and will not be administered
in a manner intended to reflect the individualized needs and objectives of any purchaser or holder of the securities.
Each purchaser or
holder of the securities acknowledges and agrees that:
|
(i)
|
the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or
holder and the purchaser or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (a) the design and terms of the securities, (b) the
purchaser or 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;
|
|
(ii)
|
we and our affiliates have acted and will act solely for our own account in connection with (a) all
transactions relating to the securities and (b) all hedging transactions in connection with our obligations under the securities;
|
|
(iii)
|
any and all assets and positions relating to hedging transactions by us or our affiliates are assets and
positions of those entities and are not assets and positions held for the benefit of the purchaser or holder;
|
|
(iv)
|
our interests may be adverse to the interests of the purchaser or holder; and
|
|
(v)
|
neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with
any such assets, positions or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
|
Purchasers of the securities have the exclusive responsibility for ensuring that their purchase, holding and subsequent disposition of the
securities does not violate the fiduciary or prohibited transaction rules of ERISA, the Code or any Similar 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-25
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
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:
|
|
|
a financial institution;
|
|
|
|
a regulated investment company;
|
|
|
|
a tax-exempt entity, including an individual retirement account or Roth IRA;
|
|
|
|
a dealer or trader subject to a mark-to-market method of tax accounting with respect to the securities;
|
|
|
|
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;
|
|
|
|
a U.S. holder (as defined below) whose functional currency is not the U.S. dollar; or
|
|
|
|
an entity classified as a partnership for U.S. federal income tax purposes.
|
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 the Fund is
treated as a U.S. real property holding corporation (
USRPHC
) within the meaning of Section 897 of the Code. If the Fund were so treated, certain adverse U.S. federal income tax consequences might apply to you, if
you are a non-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 Fund and consult
your tax adviser regarding the possible consequences to you if the Fund is or becomes a USRPHC.
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-26
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
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:
|
|
|
a citizen or individual resident of the United States;
|
|
|
|
a corporation created or organized in or under the laws of the United States, any state therein or the
District of Columbia; or
|
|
|
|
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
|
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. Subject to the discussion below concerning the potential application of the constructive ownership rules under Section 1260 of
the Code, 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.
Potential Application of Section 1260 of the Code.
There is a risk that your purchase of a security may be treated as entry into a
constructive ownership transaction, within the meaning of Section 1260 of the Code, with respect to the Fund. In that case, all or a portion of any long-term capital gain you would otherwise recognize in respect of your securities
would be recharacterized as ordinary income to the extent such gain exceeded the net underlying long-term capital gain. Any long-term capital gain recharacterized as ordinary income under Section 1260 would be treated as accruing at
a constant rate over the period you held your securities, and you would be subject to an interest charge in respect of the deemed tax liability on the income treated as accruing in prior tax years. Due to the lack of governing authority under
Section 1260, our counsel is not able to opine as to whether or how Section 1260 applies to the securities, including how the net underlying long-term capital gain should be computed if Section 1260 does apply. You should
consult your tax adviser regarding the potential application of the constructive ownership rule.
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 described above. 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.
PRS-27
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
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:
|
|
|
an individual who is classified as a nonresident alien;
|
|
|
|
a foreign corporation; or
|
|
|
|
a foreign estate or trust.
|
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.
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 (
U.S.
underlying equities
) or indices that include 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 based
on tests set forth in the applicable Treasury regulations (a
specified security
). However, the regulations exempt financial instruments issued in 2017 that do not have a delta of 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 treated as transactions that have a delta of one within the meaning of the regulations 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 a U.S. underlying equity, you could be subject to withholding tax or income tax liability
PRS-28
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the Energy Select Sector SPDR
®
Fund due August 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
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.
If withholding tax applies to the securities, we will not be required to pay any
additional amounts with respect to amounts so 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 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-29