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, Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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$727,000
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$84.26
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(1)
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The total filing fee of $84.26 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. 759 dated October 26, 2016
(To Product
Supplement No. 2 dated March 18, 2015,
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
ETF Linked Securities
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Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due
October 31, 2018
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n
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Linked to the
iShares
®
MSCI Emerging Markets ETF
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n
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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 at maturity that may be greater than, equal to or less than the original offering price of the securities, depending on the performance of the Fund from its starting price to
its ending price. The payment at maturity will reflect the following terms:
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If the value of the Fund increases, you will receive the original offering price plus 150% participation in the
upside performance of the Fund, subject to a maximum total return at maturity of 14.00% of the original offering price
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n
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If the value of the Fund decreases but the decrease is not more than 25%, you will be repaid the original
offering price
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n
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If the value of the Fund decreases by more than 25%, you will receive less than the original offering price and
have 1-to-1 downside exposure to the decrease in the value of the Fund in excess of the 25% buffer
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n
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Investors may lose up to 75% of the original offering price
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All payments on the securities are subject to the credit risk of Wells Fargo & Company,
and you will have no ability to pursue the shares of the Fund or any securities held by the Fund for payment; if Wells Fargo & Company defaults on its obligations, you could lose some or all of your investment
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n
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No periodic interest payments or dividends
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No exchange listing; designed to be held to maturity
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On the date of this pricing supplement, the estimated value of the securities is $977.98 per 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 Selected Risk Considerations herein on page PRS-10 and Risk Factors in the accompanying product supplement.
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 product supplement, 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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$1,000.00
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Total
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$727,000.00
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$727,000.00
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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
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
The Principal at Risk Securities Linked to the
iShares
®
MSCI Emerging Markets ETF due October 31, 2018 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 original offering price of the securities depending on the performance of the iShares
®
MSCI Emerging Markets ETF (the
Fund
) from its starting price to its ending price. The securities provide:
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(i)
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the possibility of a leveraged return at maturity if the value of the Fund increases from its starting price
to its ending price, provided that the total return at maturity of the securities will not exceed the maximum total return of 14.00% of the original offering price;
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(ii)
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repayment of principal if, and only if, the ending price of the Fund is not less than the starting price by
more than 25%; and
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(iii)
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exposure to decreases in the value of the Fund if and to the extent the ending price is less than the starting
price by more than 25%.
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If the ending price is less than the starting price by more than 25%, you will receive less,
and possibly 75% less, than the original offering price of your securities at maturity.
All payments on the securities are subject to the credit risk of Wells Fargo.
The Fund is an exchange traded fund that seeks to track the MSCI Emerging Markets Index, an equity index that is designed to measure equity
market performance in global emerging markets.
You should read this pricing supplement together with product supplement no. 2 dated
March 18, 2015, 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 product supplement, 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 product supplement.
You may access the product supplement, 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):
iShares
®
is a registered mark of BlackRock Institutional Trust Company, N.A. (
BTC
). The securities are not sponsored, endorsed, sold or promoted by BTC, its affiliate, BlackRock Fund
Advisors (
BFA
) or iShares, Inc. None of BTC, BFA or iShares, Inc. makes any representations or warranties to the holders of the securities or any member of the public regarding the advisability of investing in the securities. None
of BTC, BFA or iShares, Inc. will have any obligation or liability in connection with the registration, operation, marketing, trading or sale of the securities or in connection with Wells Fargo & Companys use of information about the
iShares
®
MSCI Emerging Markets ETF.
PRS-2
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Investment Description (Continued)
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The original offering price of each security of $1,000 includes certain costs that are borne
by you. Because of these costs, the estimated value of the securities on the pricing 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 pricing date is set forth on the
cover page of this pricing supplement.
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 Selected Risk ConsiderationsThe 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 Selected Risk ConsiderationsThe Estimated Value Of The Securities Is Determined By Our Affiliates Pricing Models, Which May Differ From Those Of Other Dealers and Our Economic Interests
And Those Of Any Dealer Participating In The Offering Are Potentially Adverse To Your Interests.
PRS-3
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Investment Description (Continued)
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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 pricing 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 issue
date or during the 3-month period following the 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.
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.
PRS-4
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
We have designed the securities for investors who:
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seek 150% leveraged exposure to the upside performance of the Fund if the ending price is greater than the
starting price, subject to the maximum total return at maturity of 14.00% of the original offering price;
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desire to limit downside exposure to the Fund through the 25% buffer;
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understand that if the ending price is less than the starting price by more than 25%, they will receive less,
and possibly 75% less, than the original offering price per security at maturity;
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are willing to forgo interest payments on the securities and dividends on shares of the Fund; 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 ending price of the Fund may decrease by more than 25% from the
starting price;
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seek uncapped exposure to the upside performance of the Fund;
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seek full return of the original offering price of the securities at stated maturity;
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are unwilling to purchase securities with an estimated value as of the pricing 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 foreign emerging equity markets;
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seek exposure to the Fund 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 Fund generally, or to the
exposure to the Fund 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-5
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Market Measure:
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iShares
®
MSCI Emerging Markets ETF
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Pricing Date:
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October 26, 2016
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Issue Date:
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October 31, 2016 (T+3)
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Original Offering
Price:
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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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Redemption
Amount:
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The
redemption amount
per security will equal:
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if the ending price is greater than the starting price: the lesser of:
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(i) $1,000
plus
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$1,000
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×
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ending price starting price
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× participation rate
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; and
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starting price
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(ii) the capped value;
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if the ending price is less than or equal to the starting price, but greater than or equal to the threshold
price: $1,000; or
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if the ending price is less than the threshold price: $1,000
minus
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$1,000
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×
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threshold price ending price
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starting price
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If the ending price is less than the threshold price, you will receive less, and possibly 75% less, than the
original offering price of your securities at maturity.
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Stated Maturity
Date:
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October 31, 2018. If the calculation day
is postponed, the stated maturity date will be the later of (i) October 31, 2018 and (ii) the third business day after the calculation day as postponed.
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Starting Price:
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$37.40, the fund closing price of the
Fund on the pricing date.
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Ending Price:
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The
ending price
will
be the fund closing price of the Fund on the calculation day.
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Capped Value:
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The
capped value
is
114.00% of the original offering price per security ($1,140.00 per security). As a result of the capped value, the maximum total return at maturity of the securities will be 14.00% of the original offering price.
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Threshold Price:
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The
threshold price
is $28.05, which is 75% of the starting price.
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Participation Rate:
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150%
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Calculation Day:
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October 26, 2018. If such day is not a
trading day, the calculation day will be postponed to the next succeeding trading day. The calculation day is also subject to postponement due to the occurrence of a market disruption event.
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PRS-6
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Terms of the Securities (Continued)
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Calculation Agent:
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Wells Fargo Securities, LLC
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Material Tax
Consequences:
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For a discussion of the material U.S. federal income
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.
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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94986RY88
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PRS-7
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Determining Payment at Stated Maturity
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On the stated maturity date, you will receive a cash payment per security (the redemption amount) calculated
as follows:
PRS-8
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
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Hypothetical Payout Profile
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The following profile is based on a capped value of 114.00% or $1,140.00 per security, a participation rate of
150% and a threshold price equal to 75% of the starting price. This graph has been prepared for purposes of illustration only. Your actual return will depend on the actual ending price and whether you hold your securities to maturity.
PRS-9
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Selected Risk Considerations
|
The securities have complex features and investing in the securities will involve risks not associated with an
investment in conventional debt securities. These risks are explained in more detail in the Risk Factors section in the product supplement. 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. The index underlying the Fund is sometimes referred to as the
underlying index
.
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If The Ending Price Is Less Than The Threshold Price, You Will Receive Less, And Possibly 75% Less, Than
The Original Offering Price Of Your Securities At Maturity.
If the ending price is less than the threshold price, the redemption amount that you receive at stated maturity will be reduced by an amount equal to the decline in the price of the
Fund to the extent it is below the threshold price (expressed as a percentage of the starting price). The threshold price is 75% of the starting price. As a result, you may receive less, and possibly 75% less, than the original offering price per
security at maturity even if the value of the Fund is greater than or equal to the starting price or the threshold price at certain times during the term of the securities.
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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
sections of this pricing supplement and the accompanying product supplement entitled United States Federal Tax Considerations.
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Your Return Will Be Limited By The Capped Value And May Be Lower Than The Return On A Direct Investment In
The Fund.
The opportunity to participate in the possible increases in the price of the Fund through an investment in the securities will be limited because the redemption amount will not exceed the capped value. Furthermore, the effect of the
participation rate will be progressively reduced for all ending prices exceeding the ending price at which the capped value is reached.
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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 the shares of the Fund or any securities held by the Fund
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.
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The Estimated Value Of The Securities On The Pricing 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 pricing 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.
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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.
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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 consideration. 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 consideration
change significantly in your favor, any such secondary market price for the securities is likely to be less than the original offering price.
|
PRS-10
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Selected Risk Considerations (Continued)
|
If WFS or any of its affiliates makes a secondary market in the securities at
any time up to the issue date or during the 3-month period following the 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 price of the Fund at that time, interest rates at that time and a number of other factors, some of which are interrelated in complex ways.
The effect of any one factor may be offset or magnified by the effect of another factor. The following factors, which we refer to as the
derivative component factors
, are expected to affect the value of the securities: Fund
performance; interest rates; volatility of the Fund; time remaining to maturity; dividend yields on the securities included in the Fund; and currency exchange rates. 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. Because numerous factors are expected to affect the value of the securities, changes in the price of the Fund may not result in a
comparable change in the value of the securities.
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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.
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The Amount You Receive On The Securities Will Depend Upon The Performance Of The Fund And Therefore The
Securities Are Subject To The Following Risks, As Discussed In More Detail In The Product Supplement:
|
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|
Your Return On The Securities Could Be Less Than If You Owned The Shares Of The Fund.
Your return on
the securities will not reflect the return you would realize if you actually owned the shares of the Fund because, among other reasons, the redemption amount will be determined by reference only to the closing price of a share of the Fund without
taking into consideration the value of dividends and other distributions paid on such share. In addition, the redemption amount will not be greater than the capped value.
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Historical Prices Of The Fund Or The Securities Included In The Fund Should Not Be Taken As An Indication
Of The Future Performance Of The Fund During The Term Of The Securities.
|
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|
Changes That Affect The Fund Or The Underlying Index May Adversely Affect The Value Of The Securities And
The Amount You Will Receive At Stated Maturity.
|
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|
We Cannot Control Actions By Any Of The Unaffiliated Companies Whose Securities Are Included In The Fund Or
The Underlying Index.
|
|
|
|
We And Our Affiliates Have No Affiliation With The Sponsor Of The Fund Or The Sponsor Of The Underlying
Index And Have Not Independently Verified Their Public Disclosure Of Information.
|
PRS-11
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Selected Risk Considerations (Continued)
|
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|
An Investment Linked To The Shares Of The Fund Is Different From An Investment Linked To The Underlying
Index.
The performance of the shares of the Fund may not exactly replicate the performance of the underlying index because the Fund may not invest in all of the securities included in the underlying index and because the Fund will reflect
transaction costs and fees that are not included in the calculation of the underlying index. The Fund may also hold securities or derivative financial instruments not included in the underlying index. It is also possible that the Fund may not fully
replicate the performance of the underlying index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary circumstances. In addition, because the shares of the Fund are traded on a securities
exchange and are subject to market supply and investor demand, the value of a share of the Fund may differ from the net asset value per share of the Fund. As a result, the performance of the Fund may not correlate perfectly with the performance of
the underlying index, and the return on the securities based on the performance of the Fund will not be the same as the return on securities based on the performance of the underlying index.
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You Will Not Have Any Shareholder Rights With Respect To The Shares Of The Fund.
|
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|
Anti-dilution Adjustments Relating To The Shares Of The Fund Do Not Address Every Event That Could Affect
Such Shares.
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|
An Investment In The Securities Is Subject To Risks Associated With Foreign Securities Markets.
The
Fund includes the stocks of foreign companies and you should be aware that investments in securities linked to the value of foreign equity securities involve particular risks. Foreign securities markets may have less liquidity and may be more
volatile than the U.S. securities markets, and market developments may affect foreign markets differently than U.S. securities markets. Direct or indirect government intervention to stabilize a foreign securities market, as well as
cross-shareholdings in foreign companies, may affect trading prices and volumes in those markets. Also, there is generally less publicly available information about non-U.S. companies that are not subject to the reporting requirements of the
Securities and Exchange Commission, and non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
|
The prices and performance of securities of non-U.S. companies are subject to political, economic, financial, military and
social factors which could negatively affect foreign securities markets, including the possibility of recent or future changes in a foreign governments economic, monetary and fiscal policies, the possible imposition of, or changes in, currency
exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities, the possibility of imposition of withholding taxes on dividend income, the possibility of fluctuations in the rate of exchange
between currencies, the possibility of outbreaks of hostility or political instability and the possibility of natural disaster or adverse public health developments. Moreover, the relevant non-U.S. economies may differ favorably or unfavorably from
the U.S. economy in important respects, such as growth of gross national product, rate of inflation, trade surpluses or deficits, capital reinvestment, resources and self-sufficiency.
In addition, the Fund includes companies in countries with emerging markets. Countries with emerging markets may have
relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more developed countries.
The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions (due to economic dependence upon commodity prices and international trade), and may
suffer from extreme and volatile debt burdens, currency devaluations or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making
prompt liquidation of holdings difficult or impossible at times.
The securities included in the Fund may be listed on a
foreign stock exchange. A foreign stock exchange may impose trading limitations intended to prevent extreme fluctuations in individual security prices and may suspend trading in certain circumstances. These actions could limit variations in the
closing price of the Fund which could, in turn, adversely affect the value of the securities.
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Exchange Rate Movements May Impact The Value Of The Securities.
The securities will be denominated in
U.S. dollars. Since the value of securities included in the Fund is quoted in a currency other than U.S. dollars and, as per the Fund, is converted into U.S. dollars, the amount payable on the securities on the maturity date will depend in part on
the relevant exchange rates.
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The Stated Maturity Date May Be Postponed If The Calculation Day Is Postponed.
The calculation day will
be postponed if the originally scheduled calculation day is not a trading day or if the calculation agent determines that a market disruption event has occurred or is continuing on the calculation day. If such a postponement occurs, the stated
maturity date will be the later of (i) the initial stated maturity date and (ii) three business days after the postponed calculation day.
|
PRS-12
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Selected Risk Considerations (Continued)
|
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|
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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●
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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 ending price of the Fund 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 calculation day, which may result in postponement of the calculation day; determining the ending price of the Fund if the calculation day is postponed to the last day to which it may be postponed and a market disruption event occurs on
that day; adjusting the adjustment factor and other terms of the securities in certain circumstances; if the Fund undergoes a liquidation event, selecting a successor fund or, if no successor fund is available, determining the ending price of the
Fund; and determining whether to adjust the ending price of the Fund on the calculation day in the event of certain changes in or modifications to the Fund or the underlying index. 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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●
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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 Selected Risk
ConsiderationsThe 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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●
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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 price of the Fund.
Our affiliates or any dealer participating in the offering of the securities or its affiliates may, at present or in the future, publish research reports on
the Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index. This research 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 Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index could adversely affect the
price of the Fund and, therefore, adversely affect the value of and your return on the securities. You are encouraged to derive information concerning the Fund from multiple sources and should not rely on the views expressed by us or our affiliates
or any participating dealer or its affiliates. In addition, any research reports on the Fund or the underlying index or the companies whose securities are included in the Fund or the underlying index published on or prior to the pricing date could
result in an increase in the price of the Fund on the pricing date, which would adversely affect investors in the securities by increasing the price at which the Fund must close on the calculation day in order for investors in the securities to
receive a favorable return.
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●
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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 Fund may adversely affect the price of the Fund.
Our affiliates or any participating dealer or its affiliates may, at present or in the future, engage in business with the companies whose securities are
included in the Fund or the underlying index, including making loans to those companies (including exercising creditors remedies with respect to such loans), making equity investments in those companies or providing investment banking, asset
management or other advisory services to those companies. These business activities could adversely affect the price of the Fund and, therefore, adversely affect the value of and your return on the securities. In addition, in the course of these
business activities, our affiliates or any participating dealer or its affiliates may acquire non-public information about one or more of the companies whose securities are included in the Fund or the underlying index. If our affiliates or any
participating dealer or its affiliates do acquire such non-public information, we and they are not obligated to disclose such non-public information to you.
|
PRS-13
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Selected Risk Considerations (Continued)
|
|
●
|
|
Hedging activities by our affiliates or any participating dealer or its affiliates may adversely affect
the price of the Fund.
We expect to hedge our obligations under the securities through one or more hedge counterparties, which may include our affiliates or any participating dealer or its affiliates. Pursuant to such hedging activities, our
hedge counterparties may acquire shares of the Fund, securities included in the Fund or the underlying index or listed or over-the-counter derivative or synthetic instruments related to the Fund or such securities. Depending on, among other things,
future market conditions, the aggregate amount and the composition of such positions are likely to vary over time. To the extent that our hedge counterparties have a long hedge position in shares of the Fund or any of the securities included in the
Fund or the underlying index, or derivative or synthetic instruments related to the Fund or such securities, they may liquidate a portion of such holdings at or about the time of the calculation day or at or about the time of a change in the
securities included in the Fund or the underlying index. These hedging activities could potentially adversely affect the price of the shares of the Fund and, therefore, adversely affect the value of and your return on the securities.
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●
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|
Trading activities by our affiliates or any participating dealer or its affiliates may adversely affect
the price of the Fund.
Our affiliates or any participating dealer or its affiliates may engage in trading in the shares of the Fund or the securities included in the Fund or the underlying index and other instruments relating to the Fund or
such securities on a regular basis as part of their general broker-dealer and other businesses. Any of these trading activities could potentially adversely affect the price of the shares of the Fund and, therefore, adversely affect the value of and
your return on the securities.
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●
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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 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. 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 sections of this pricing supplement and the accompanying product supplement entitled United States Federal Tax Considerations. 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-14
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
The following table illustrates, for a range of hypothetical ending prices of the Fund:
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the hypothetical percentage change from the starting price to the hypothetical ending price;
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the hypothetical redemption amount payable at stated maturity per security;
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the hypothetical total pre-tax rate of return; and
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|
the hypothetical pre-tax annualized rate of return.
|
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Hypothetical
ending price
|
|
Hypothetical
percentage change
from the
starting price to the
hypothetical ending price
|
|
Hypothetical
redemption amount
payable at
stated
maturity
per security
|
|
Hypothetical
pre-tax total
rate of return
|
|
Hypothetical
pre-tax
annualized
rate of return
(1)
|
$65.45
|
|
75.00%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$56.10
|
|
50.00%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$52.36
|
|
40.00%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$48.62
|
|
30.00%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$44.88
|
|
20.00%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$40.89
|
|
9.33%
|
|
$1,140.00
|
|
14.00%
|
|
6.66%
|
$39.27
|
|
5.00%
|
|
$1,075.00
|
|
7.50%
|
|
3.65%
|
$37.40
(2)
|
|
0.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$35.53
|
|
-5.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$33.66
|
|
-10.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$29.92
|
|
-20.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$28.05
|
|
-25.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
$27.68
|
|
-26.00%
|
|
$990.00
|
|
-1.00%
|
|
-0.50%
|
$18.70
|
|
-50.00%
|
|
$750.00
|
|
-25.00%
|
|
-13.88%
|
$9.35
|
|
-75.00%
|
|
$500.00
|
|
-50.00%
|
|
-31.82%
|
$0.00
|
|
-100.00%
|
|
$250.00
|
|
-75.00%
|
|
-58.58%
|
(1)
|
The annualized rates of return are calculated on a semi-annual bond equivalent basis with compounding.
|
The above figures are for purposes of illustration only and may have been rounded for ease of analysis. The actual amount you receive at stated
maturity and the resulting pre-tax rate of return will depend on the actual ending price.
PRS-15
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Hypothetical Payments at Stated Maturity
|
Set forth below are four examples of payment at stated maturity calculations, assuming hypothetical ending
prices as 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. Redemption amount is greater than the original offering price but less than the capped value:
Starting price: $37.40
Hypothetical ending price: $39.27
Since the hypothetical ending price is greater than the starting price, the redemption amount would equal:
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$1,000 +
|
|
|
|
$1,000 ×
|
|
|
|
39.27 37.40
|
|
|
|
× 150%
|
|
|
|
= $1,075.00
|
|
|
|
|
|
|
37.40
|
|
|
|
|
|
|
On the stated maturity date you would receive $1,075.00 per security.
Example 2. Redemption amount is equal to the capped value:
Starting price: $37.40
Hypothetical ending price: $56.10
The redemption amount would be equal to the capped value since the capped value is less than:
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|
|
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|
$1,000 +
|
|
|
|
$1,000 ×
|
|
|
|
56.10 37.40
|
|
|
|
× 150%
|
|
|
|
= $1,750.00
|
|
|
|
|
|
|
37.40
|
|
|
|
|
|
|
On the stated maturity date you would receive $1,140.00 per security.
In addition to limiting your return on the securities, the capped value limits the positive effect of the participation rate. If the ending
price is greater than the starting price, you will participate in the performance of the Fund at a rate of 150% up to a certain point. However, the effect of the participation rate will be progressively reduced for ending prices that are greater
than approximately 109.33% of the starting price since your return on the securities for any ending price greater than approximately 109.33% of the starting price will be limited to the capped value.
Example 3. Redemption amount is equal to the original offering price:
Starting price: $37.40
Hypothetical ending price: $29.92
Threshold price: $28.05, which is 75% of the starting price
Since the hypothetical ending price is less than the starting price, but not by more than 25%, you would not lose any of the
original offering price of your securities.
On the stated maturity date you would receive $1,000 per security.
PRS-16
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
Hypothetical Payments at Stated Maturity (Continued)
|
Example 4. Redemption amount is less than the original offering price:
Starting price: $37.40
Hypothetical ending price: $18.70
Threshold price: $28.05, which is 75% of the starting price
Since the hypothetical ending price is less than the starting price by more than 25%, you would lose a portion of the original
offering price of your securities and receive the redemption amount equal to:
|
|
|
|
|
|
|
|
|
|
|
$1,000
|
|
|
|
$1,000 ×
|
|
28.05 18.70
|
|
|
|
= $750.00
|
|
|
|
|
37.40
|
|
|
|
On the stated maturity date you would receive $750.00 per security.
To the extent that the ending price differs from the values assumed above, the results indicated above would be different.
PRS-17
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
The iShares
®
MSCI Emerging Markets ETF
|
The iShares MSCI Emerging Markets ETF seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the MSCI Emerging Markets Index, an equity index that is designed to measure equity market performance in global emerging markets. See Description of Exchange Traded FundsThe iShares
®
MSCI Emerging Markets ETF in the accompanying market measure supplement for additional information about the iShares MSCI Emerging Markets ETF.
MSCI, Inc. has announced that, effective with the November 2015 semi-annual index review, companies traded outside of their country of
classification (i.e., foreign listed companies) will become eligible for inclusion in the component country indices included in the MSCI Emerging Markets Index. In order for a component country index to be eligible to include foreign
listed companies, it must meet the Foreign Listing Materiality Requirement. To meet the Foreign Listing Materiality Requirement, the aggregate market capitalization of all securities represented by foreign listings should represent at least
(i) 5% of the free float-adjusted market capitalization of the relevant component country index and (ii) 0.05% of the free-float adjusted market capitalization of the MSCI ACWI Investable Market Index (an index that measures equity
performance in both the developed and emerging markets). In connection with the November 2015 semi-annual index review, one of the component country indices included in the MSCI Emerging Markets Index, the MSCI China Index, became eligible to
include foreign listed companies. The newly eligible foreign listed securities were added at half their free float-adjusted market capitalization as part of the November 2015 semi-annual index review, and their remaining free float-adjusted market
capitalization were added as part of the May 2016 semi-annual index review.
The information about the MSCI Emerging Markets Index
contained herein updates the information included in the accompanying market measure supplement. See Description of Equity IndicesThe MSCI Emerging Markets Index
SM
in the
accompanying market measure supplement for additional information about the MSCI Emerging Markets Index.
Historical Information
We obtained the closing prices listed below from Bloomberg Financial Markets without independent verification.
The following graph sets forth daily closing prices of the Fund for the period from January 1, 2006 to October 26, 2016. The closing
price on October 26, 2016 was $37.40. 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.
PRS-18
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
The iShares
®
MSCI Emerging Markets ETF (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, 2006 through September 30, 2016 and for the period from October 1, 2016 to October 26, 2016.
|
|
|
|
|
|
|
|
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High
|
|
Low
|
|
Last
|
2006
|
|
|
|
|
First Quarter
|
|
$33.59
|
|
$30.43
|
|
$33.02
|
Second Quarter
|
|
$37.03
|
|
$27.34
|
|
$31.23
|
Third Quarter
|
|
$33.14
|
|
$29.20
|
|
$32.29
|
Fourth Quarter
|
|
$38.15
|
|
$31.80
|
|
$38.10
|
2007
|
|
|
|
|
First Quarter
|
|
$39.53
|
|
$35.03
|
|
$38.75
|
Second Quarter
|
|
$44.42
|
|
$39.13
|
|
$43.82
|
Third Quarter
|
|
$50.11
|
|
$39.50
|
|
$49.78
|
Fourth Quarter
|
|
$55.64
|
|
$47.27
|
|
$50.10
|
2008
|
|
|
|
|
First Quarter
|
|
$50.37
|
|
$42.17
|
|
$44.79
|
Second Quarter
|
|
$51.70
|
|
$44.43
|
|
$45.19
|
Third Quarter
|
|
$44.43
|
|
$31.33
|
|
$34.53
|
Fourth Quarter
|
|
$33.90
|
|
$18.22
|
|
$24.97
|
2009
|
|
|
|
|
First Quarter
|
|
$27.09
|
|
$19.94
|
|
$24.81
|
Second Quarter
|
|
$34.64
|
|
$25.65
|
|
$32.23
|
Third Quarter
|
|
$39.29
|
|
$30.75
|
|
$38.91
|
Fourth Quarter
|
|
$42.07
|
|
$37.56
|
|
$41.50
|
2010
|
|
|
|
|
First Quarter
|
|
$43.22
|
|
$36.83
|
|
$42.12
|
Second Quarter
|
|
$43.98
|
|
$36.16
|
|
$37.32
|
Third Quarter
|
|
$44.77
|
|
$37.59
|
|
$44.77
|
Fourth Quarter
|
|
$48.58
|
|
$44.77
|
|
$47.62
|
2011
|
|
|
|
|
First Quarter
|
|
$48.69
|
|
$44.63
|
|
$48.69
|
Second Quarter
|
|
$50.21
|
|
$45.50
|
|
$47.60
|
Third Quarter
|
|
$48.46
|
|
$34.95
|
|
$35.07
|
Fourth Quarter
|
|
$42.80
|
|
$34.36
|
|
$37.94
|
2012
|
|
|
|
|
First Quarter
|
|
$44.76
|
|
$38.23
|
|
$42.94
|
Second Quarter
|
|
$43.54
|
|
$36.68
|
|
$39.19
|
Third Quarter
|
|
$42.37
|
|
$37.42
|
|
$41.32
|
Fourth Quarter
|
|
$44.35
|
|
$40.14
|
|
$44.35
|
2013
|
|
|
|
|
First Quarter
|
|
$45.20
|
|
$41.80
|
|
$42.78
|
Second Quarter
|
|
$44.23
|
|
$36.63
|
|
$38.57
|
Third Quarter
|
|
$43.29
|
|
$37.34
|
|
$40.77
|
Fourth Quarter
|
|
$43.66
|
|
$40.44
|
|
$41.77
|
2014
|
|
|
|
|
First Quarter
|
|
$40.99
|
|
$37.09
|
|
$40.99
|
Second Quarter
|
|
$43.95
|
|
$40.82
|
|
$43.23
|
Third Quarter
|
|
$45.85
|
|
$41.56
|
|
$41.56
|
Fourth Quarter
|
|
$42.44
|
|
$37.73
|
|
$39.29
|
2015
|
|
|
|
|
First Quarter
|
|
$41.07
|
|
$37.92
|
|
$40.13
|
Second Quarter
|
|
$44.09
|
|
$39.04
|
|
$39.62
|
Third Quarter
|
|
$39.78
|
|
$31.32
|
|
$32.78
|
Fourth Quarter
|
|
$36.29
|
|
$31.55
|
|
$32.19
|
2016
|
|
|
|
|
First Quarter
|
|
$34.28
|
|
$28.25
|
|
$34.25
|
Second Quarter
|
|
$35.26
|
|
$31.87
|
|
$34.36
|
Third Quarter
|
|
$38.20
|
|
$33.77
|
|
$37.45
|
October 1, 2016 to October 26, 2016
|
|
$38.10
|
|
$36.82
|
|
$37.40
|
PRS-19
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
United States Federal Tax Considerations
|
You should read carefully the discussion under United States Federal Tax Considerations in the
accompanying product supplement and Selected Risk Considerations in this pricing supplement.
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. There is uncertainty regarding this treatment, and the IRS or a court might not agree with it.
Assuming this treatment of the securities is respected and subject to the discussion in United States Federal Tax Considerations in
the accompanying product supplement, the following U.S. federal income tax consequences should result under current law:
|
●
|
|
You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant
to a sale or exchange.
|
|
●
|
|
Upon a sale or exchange of a security (including retirement at maturity), you should recognize gain or loss
equal to the difference between the amount realized and your tax basis in the security. Subject to the discussion below concerning the potential application of the constructive ownership rules under Section 1260 of the Internal
Revenue Code of 1986, as amended (the Code), any gain or loss recognized upon a sale, exchange or retirement of a security should be long-term capital gain or loss if you held the security for more than one year.
|
Even if the treatment of the securities as prepaid derivative contracts that are open transactions is respected, 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 shares of 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. Although the matter is unclear, the net underlying
long-term capital gain may equal the amount of long-term capital gain you would have realized if on the issue date you had purchased shares of the Fund with a value equal to the amount you paid to acquire your securities and subsequently sold
those shares for their fair market value at the time your securities are sold, exchanged or retired (which would reflect the percentage increase, without regard to the participation rate, in the value of the shares of the Fund over the term of the
securities). Alternatively, the net underlying long-term capital gain could be calculated using a number of shares of the Fund that reflects the participation rate used to calculate the payment that you will receive on your securities.
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. You should read
the section entitled United States Federal Tax ConsiderationsTax Consequences to U.S. HoldersPotential Application of Section 1260 of the Code in the accompanying product supplement for additional information and consult
your tax adviser regarding the potential application of the constructive ownership rule.
Subject to the discussion below, if
you are a non-U.S. holder (as defined in the accompanying product supplement) of the securities, you generally should not be subject to U.S. federal withholding or income tax in respect of any amount paid to you with respect to the securities,
provided that (i) income in respect of the securities is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with the applicable certification requirements.
The U.S. Treasury Department finalized the regulations referred to in United States Federal Tax Considerations Tax Consequences to
Non-U.S. Holders Possible Application of Section 871(m) of the Code in the accompanying product supplement, which require withholding on certain dividend equivalent payments to non-U.S. persons. Based on the effective
date in the final regulations, those regulations generally will not apply to the securities assuming there is no significant modification to the securities terms that results in a deemed exchange of the securities for U.S. federal income tax
purposes.
As discussed in the section of the accompanying product supplement entitled United States Federal Tax Considerations
FATCA Legislation, withholding under legislation commonly referred to as FATCA might (if the securities were recharacterized as debt instruments) apply to amounts treated as interest paid with respect to the securities.
However, under an IRS notice, withholding under FATCA will not apply to the payment of gross proceeds (other than any amount treated as interest) with respect to a disposition of the securities. You should consult your tax adviser regarding the
potential application of FATCA 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
PRS-20
Market Linked SecuritiesLeveraged Upside Participation
to a Cap and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the iShares
®
MSCI Emerging Markets ETF due October 31, 2018
|
United States Federal Tax Considerations (Continued)
|
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; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; 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, 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. If withholding tax applies to the securities, we will not be required to pay any additional amounts with respect to amounts so withheld.
You should read the section entitled United States Federal Tax Considerations in the accompanying product supplement. The
preceding discussion, when read in combination with that section, 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-21
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