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 closing level of the Index from the pricing date to the applicable call date (including the final calculation day). The profile is based on a call premium of 6.00% for the first call date, 12.00% for the second call date,
18.00% for the third call date and 24.00% for the fourth call date and a threshold level equal to 90% of the starting level. 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 level of the Index; 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. 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-14
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 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
|
|
$1,060.00
|
|
6.00%
|
|
5.80%
|
2nd call date
|
|
$1,120.00
|
|
12.00%
|
|
5.69%
|
3rd call date
|
|
$1,180.00
|
|
18.00%
|
|
5.55%
|
4th call date
|
|
$1,240.00
|
|
24.00%
|
|
5.45%
|
(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 levels of the
Index:
|
|
|
the hypothetical percentage change from the starting level to the hypothetical ending level;
|
|
|
|
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 level
|
|
Hypothetical percentage change
from the starting level to the
hypothetical ending level
|
|
Hypothetical payment
at stated maturity per
security
|
|
Hypothetical pre-tax
total rate of return
|
|
Hypothetical pre-tax
annualized rate of
return
(1)
|
2,088.87
|
|
-5.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
1,978.929
|
|
-10.00%
|
|
$1,000.00
|
|
0.00%
|
|
0.00%
|
1,956.94
|
|
-11.00%
|
|
$990.00
|
|
-1.00%
|
|
-0.25%
|
1,759.05
|
|
-20.00%
|
|
$900.00
|
|
-10.00%
|
|
-2.61%
|
1,649.11
|
|
-25.00%
|
|
$850.00
|
|
-15.00%
|
|
-4.02%
|
1,099.41
|
|
-50.00%
|
|
$600.00
|
|
-40.00%
|
|
-12.36%
|
549.70
|
|
-75.00%
|
|
$350.00
|
|
-65.00%
|
|
-24.58%
|
0.00
|
|
-100.00%
|
|
$100.00
|
|
-90.00%
|
|
-49.99%
|
(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 level.
PRS-15
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
Hypothetical Payment at Maturity
|
If the closing level of the Index is less than the starting level on each of the first three 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 level
(i.e., the closing level of the Index 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 any of the first three call
dates and assuming the hypothetical ending levels 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 level is greater than the starting level, 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 level:
2198.81
Hypothetical ending level: 2858.45
Since the hypothetical ending level is greater than the starting level, 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 24.00% of the original offering price per security. Even though the Index appreciated by 30.00% from its starting level to its ending level in
this example, your return is limited to the call premium of 24.00% that is applicable to the final calculation day.
On the
stated maturity date, you would receive $1,240.00 per security.
Example 2. Ending level is less than the starting level but
greater than the threshold level and the payment at maturity is equal to the original offering price:
Starting level:
2198.81
Hypothetical ending level: 2088.87
Threshold level: 1978.929, which is 90% of the starting level
Since the hypothetical ending level is less than the starting level, 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 level is less than the threshold level and the payment at maturity is less than the original offering price:
Starting level: 2198.81
Hypothetical ending level: 1099.41
Threshold level: 1978.929, which is 90% of the starting level
Since the hypothetical ending level is less than the starting level 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 ×
|
|
1978.929 1099.41
|
|
|
|
= $600.00
|
|
|
|
|
2198.81
|
|
|
|
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 level differs from the values assumed above, the results indicated above would be different.
PRS-16
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 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 the closing level of the Index under certain circumstances;
|
|
|
|
determine if adjustments are required to the closing level of the Index under various circumstances; and
|
|
|
|
if publication of the Index is discontinued, select a successor equity index (as defined below) or, if no
successor equity index is available, determine the closing level of the Index.
|
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
exchanges or otherwise relating to securities which then comprise 20% or more of the level of the Index or any successor equity index at any time during the one-hour period that ends at the close of trading on that day, whether by reason of
movements in price exceeding limits permitted by those relevant stock exchanges or otherwise.
|
|
(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 Index or any successor equity index 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, securities that then comprise 20% or more of the level of the Index or any successor equity index on their relevant stock exchanges 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 the Index or any successor equity index 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 on any exchange business day of the relevant stock exchanges on which securities that then
comprise 20% or more of the level of the Index or any successor equity index are traded or any related futures or options exchange prior to its scheduled closing time unless the earlier closing time is announced by the relevant stock exchange or
related futures or options exchange, as applicable, at least one hour prior to the earlier of (1) the actual closing time for the regular trading session on such relevant stock exchange or related futures or options exchange, as applicable, and
(2) the submission deadline for orders to be entered into the relevant stock exchange or related futures or options exchange, as applicable, system for execution at such actual closing time on that day.
|
|
(F)
|
The relevant stock exchange for any security underlying the Index or successor equity index or any related
futures or options exchange fails to open for trading during its regular trading session.
|
PRS-17
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
Additional Terms of the Securities (Continued)
|
For purposes of determining whether a market disruption event has occurred:
|
(1)
|
the relevant percentage contribution of a security to the level of the Index or any successor equity index
will be based on a comparison of (x) the portion of the level of such index attributable to that security and (y) the overall level of the Index or successor equity index, in each case immediately before the occurrence of the market
disruption event;
|
|
(2)
|
the
close of trading
on any trading day for the Index or any successor equity index means
the scheduled closing time of the relevant stock exchanges with respect to the securities underlying the Index or successor equity index on such trading day; provided that, if the actual closing time of the regular trading session of any such
relevant stock exchange is earlier than its scheduled closing time on such trading day, then (x) for purposes of clauses (A) and (C) of the definition of market disruption event above, with respect to any security
underlying the Index or successor equity index for which such relevant stock exchange is its relevant stock exchange, the close of trading means such actual closing time and (y) for purposes of clauses (B) and (D) of the
definition of market disruption event above, with respect to any futures or options contract relating to the Index or successor equity index, the close of trading means the latest actual closing time of the regular trading
session of any of the relevant stock exchanges, but in no event later than the scheduled closing time of the relevant stock exchanges;
|
|
(3)
|
the
scheduled closing time
of any relevant stock exchange or related futures or options
exchange on any trading day for the Index or any successor equity index means the scheduled weekday closing time of such relevant stock exchange or related futures or options exchange on such trading day, without regard to after hours or any other
trading outside the regular trading session hours; and
|
|
(4)
|
an
exchange business day
means any trading day for the Index or any successor equity index
on which each relevant stock exchange for the securities underlying the Index or any successor equity index and each related futures or options exchange are open for trading during their respective regular trading sessions, notwithstanding any such
relevant stock exchange or related futures or options exchange closing prior to its scheduled closing time.
|
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 a 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 Index on such eighth trading day, the calculation agent will determine the closing level of the Index on such eighth trading day in
accordance with the formula for and method of calculating the closing level of the Index last in effect prior to commencement of the market disruption event, using the closing price (or, with respect to any relevant security, if a market disruption
event has occurred with respect to such security, its good faith estimate of the value of such security at the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading
session of such relevant stock exchange) on such date of each security included in the Index. As used herein, closing price means, with respect to any security on any date, the relevant stock exchange traded or quoted price of such
security as of the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading session of such relevant stock exchange.
Adjustments to the Index
If at any time
the sponsor or publisher of the Index (the
index sponsor
) makes a material change in the formula for or the method of calculating the Index, or in any other way materially modifies the Index (other than a modification prescribed
in that formula or method to maintain the Index in the event of changes in constituent stock and capitalization and other routine events), then, from and after that time, the calculation agent will, at the close of business in New York, New York, on
each date that the closing level of the Index is to be calculated, calculate a substitute closing level of the Index in accordance with the formula for and method of calculating the Index last in effect prior to the change, but using only those
securities that comprised the Index immediately prior to that change. Accordingly, if the method of calculating the Index is modified so that the level of the Index is a fraction or a multiple of what it would have been if it had not been modified,
then the calculation agent will adjust the Index in order to arrive at a level of the Index as if it had not been modified.
Discontinuance of the Index
If the index sponsor discontinues publication of the Index, and such index sponsor or another entity publishes a successor or
substitute equity index that the calculation agent determines, in its sole discretion, to be comparable to the Index (a
successor equity index
), then, upon the calculation agents notification of that determination to the
trustee and Wells Fargo, the calculation agent will substitute the successor equity index as calculated by the relevant index sponsor or any other entity for purposes of calculating the closing level of the Index on any date of determination. Upon
any selection by the calculation agent of a successor equity index, Wells Fargo will cause notice to be given to holders of the securities.
PRS-18
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
Additional Terms of the Securities (Continued)
|
In the event that the index sponsor discontinues publication of the Index prior to, and the
discontinuance is continuing on, a calculation day and the calculation agent determines that no successor equity index is available at such time, the calculation agent will calculate a substitute closing level for the Index in accordance with the
formula for and method of calculating the Index last in effect prior to the discontinuance, but using only those securities that comprised the Index immediately prior to that discontinuance. If a successor equity index is selected or the calculation
agent calculates a level as a substitute for the Index, the successor equity index or level will be used as a substitute for the Index for all purposes, including the purpose of determining whether a market disruption event exists.
If on a calculation day the index sponsor fails to calculate and announce the level of the Index, the calculation agent will calculate a
substitute closing level of the Index in accordance with the formula for and method of calculating the Index last in effect prior to the failure, but using only those securities that comprised the Index immediately prior to that failure;
provided
that, if a market disruption event occurs or is continuing on such day, then the provisions set forth above under Market Disruption Events shall apply in lieu of the foregoing.
Notwithstanding these alternative arrangements, discontinuance of the publication of, or the failure by the index sponsor to calculate and
announce the level of, the Index may adversely affect the value of the securities.
Events of Default and Acceleration
If an event of default with respect to the securities has occurred and is continuing, the amount payable to a holder of a security upon any
acceleration permitted by the securities, with respect to each security, will be equal to the 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 closing level of the Index on the date of acceleration is equal to or greater than the starting level, then the amount payable on the securities will be calculated using a call premium that is prorated to the date of
acceleration.
PRS-19
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
The S&P 500 Index is an equity index that is intended to provide an indication of the pattern of common
stock price movement in the large capitalization segment of the United States equity market. Wells Fargo & Company is one of the companies currently included in the S&P 500 Index. See Description of Equity IndicesThe S&P
500
®
Index in the accompanying market measure supplement for additional information about the S&P 500 Index. In addition to the criteria for addition to the S&P 500 Index set
forth in the accompanying market measure supplement, a company must have a primary listing to its common stock on the NYSE, NYSE Arca, NYSE MKT, NASDAQ Global Select Market, NASDAQ Select Market, NASDAQ Capital Market, Bats BZX, Bats BYX, Bats EDGA
or Bats EDGX.
Historical Information
We obtained the closing levels listed below from Bloomberg Financial Markets without independent verification.
The historical performance of the Index should not be taken as an indication of the future performance of the Index during the term of the
securities.
The following graph sets forth daily closing levels of the Index on each day in the period from January 1, 2006 through
November 30, 2016. The closing level on November 30, 2016 was 2198.81.
PRS-20
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
The S&P 500
®
Index (Continued)
|
The following table sets forth the high and low closing levels, as well as end-of-period
closing levels, of the Index for each quarter in the period from January 1, 2006 through September 30, 2016 and for the period from October 1, 2016 to November 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Last
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1307.25
|
|
|
|
1254.78
|
|
|
|
1294.83
|
|
Second Quarter
|
|
|
1325.76
|
|
|
|
1223.69
|
|
|
|
1270.20
|
|
Third Quarter
|
|
|
1339.15
|
|
|
|
1234.49
|
|
|
|
1335.85
|
|
Fourth Quarter
|
|
|
1427.09
|
|
|
|
1331.32
|
|
|
|
1418.30
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1459.68
|
|
|
|
1374.12
|
|
|
|
1420.86
|
|
Second Quarter
|
|
|
1539.18
|
|
|
|
1424.55
|
|
|
|
1503.35
|
|
Third Quarter
|
|
|
1553.08
|
|
|
|
1406.70
|
|
|
|
1526.75
|
|
Fourth Quarter
|
|
|
1565.15
|
|
|
|
1407.22
|
|
|
|
1468.36
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1447.16
|
|
|
|
1273.37
|
|
|
|
1322.70
|
|
Second Quarter
|
|
|
1426.63
|
|
|
|
1278.38
|
|
|
|
1280.00
|
|
Third Quarter
|
|
|
1305.32
|
|
|
|
1106.39
|
|
|
|
1166.36
|
|
Fourth Quarter
|
|
|
1161.06
|
|
|
|
752.44
|
|
|
|
903.25
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
934.70
|
|
|
|
676.53
|
|
|
|
797.87
|
|
Second Quarter
|
|
|
946.21
|
|
|
|
811.08
|
|
|
|
919.32
|
|
Third Quarter
|
|
|
1071.66
|
|
|
|
879.13
|
|
|
|
1057.08
|
|
Fourth Quarter
|
|
|
1127.78
|
|
|
|
1025.21
|
|
|
|
1115.10
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1174.17
|
|
|
|
1056.74
|
|
|
|
1169.43
|
|
Second Quarter
|
|
|
1217.28
|
|
|
|
1030.71
|
|
|
|
1030.71
|
|
Third Quarter
|
|
|
1148.67
|
|
|
|
1022.58
|
|
|
|
1141.20
|
|
Fourth Quarter
|
|
|
1259.78
|
|
|
|
1137.03
|
|
|
|
1257.64
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1343.01
|
|
|
|
1256.88
|
|
|
|
1325.83
|
|
Second Quarter
|
|
|
1363.61
|
|
|
|
1265.42
|
|
|
|
1320.64
|
|
Third Quarter
|
|
|
1353.22
|
|
|
|
1119.46
|
|
|
|
1131.42
|
|
Fourth Quarter
|
|
|
1285.09
|
|
|
|
1099.23
|
|
|
|
1257.60
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1416.51
|
|
|
|
1277.06
|
|
|
|
1408.47
|
|
Second Quarter
|
|
|
1419.04
|
|
|
|
1278.04
|
|
|
|
1362.16
|
|
Third Quarter
|
|
|
1465.77
|
|
|
|
1334.76
|
|
|
|
1440.67
|
|
Fourth Quarter
|
|
|
1461.40
|
|
|
|
1353.33
|
|
|
|
1426.19
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1569.19
|
|
|
|
1457.15
|
|
|
|
1569.19
|
|
Second Quarter
|
|
|
1669.16
|
|
|
|
1541.61
|
|
|
|
1606.28
|
|
Third Quarter
|
|
|
1725.52
|
|
|
|
1614.08
|
|
|
|
1681.55
|
|
Fourth Quarter
|
|
|
1848.36
|
|
|
|
1655.45
|
|
|
|
1848.36
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1878.04
|
|
|
|
1741.89
|
|
|
|
1872.34
|
|
Second Quarter
|
|
|
1962.87
|
|
|
|
1815.69
|
|
|
|
1960.23
|
|
Third Quarter
|
|
|
2011.36
|
|
|
|
1909.57
|
|
|
|
1972.29
|
|
Fourth Quarter
|
|
|
2090.57
|
|
|
|
1862.49
|
|
|
|
2058.90
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
2117.39
|
|
|
|
1992.67
|
|
|
|
2067.89
|
|
Second Quarter
|
|
|
2130.82
|
|
|
|
2057.64
|
|
|
|
2063.11
|
|
Third Quarter
|
|
|
2128.28
|
|
|
|
1867.61
|
|
|
|
1920.03
|
|
Fourth Quarter
|
|
|
2109.79
|
|
|
|
1923.82
|
|
|
|
2043.94
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
2063.95
|
|
|
|
1829.08
|
|
|
|
2059.74
|
|
Second Quarter
|
|
|
2119.12
|
|
|
|
2000.54
|
|
|
|
2098.86
|
|
Third Quarter
|
|
|
2190.15
|
|
|
|
2088.55
|
|
|
|
2168.27
|
|
October 1, 2016 to November 30, 2016
|
|
|
2213.35
|
|
|
|
2085.18
|
|
|
|
2198.81
|
|
PRS-21
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 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-22
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 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-23
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 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 Internal Revenue Code of 1986, as amended (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 any of the
issuers of the underlying stocks of the Index (the
underlying stocks
) is treated as a U.S. real property holding corporation (
USRPHC
) within the meaning of Section 897 of the Code or as a
passive foreign investment company (
PFIC
) within the meaning of Section 1297 of the Code. If any of the issuers of the underlying stocks were so treated, certain adverse U.S. federal income tax consequences might
apply to you, in the case of a USRPHC if you are a non-U.S. holder (as defined below) and in the case of a PFIC if you are a U.S. holder (as defined below), upon the sale, exchange or other disposition of the securities. You should refer to
information filed with the Securities and Exchange Commission or another governmental authority by the issuers of the underlying stocks and consult your tax adviser regarding the possible consequences to you if any of the issuers of the underlying
stocks is or becomes a USRPHC or PFIC.
This discussion is based on the Code, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, all as of the date of this pricing supplement, changes to any of which subsequent to the date of this pricing supplement may affect the tax consequences described herein, possibly with retroactive effect.
This discussion does not address the effects of any applicable state, local or non-U.S. tax laws or the potential application of the alternative minimum tax or of the Medicare tax on investment income. You should consult your tax adviser concerning
the application of U.S. federal income and estate tax laws to your particular situation (including the possibility of alternative treatments of the securities), as well as any tax consequences arising under the laws of any state, local or non-U.S.
jurisdiction.
Tax Treatment of the Securities
In the opinion of our counsel, Davis Polk & Wardwell LLP, which is based on current market conditions, a security should be treated as
a prepaid derivative contract that is an open transaction for U.S. federal income tax purposes. By purchasing a security, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to this treatment.
Due to the absence of statutory, judicial or administrative authorities that directly address the U.S. federal tax treatment of the
securities or similar instruments, significant aspects of the treatment of an investment in the securities are uncertain. We do not plan to request a ruling from the IRS, and the IRS or a court might not agree with the treatment described below.
Accordingly, you should consult your tax adviser regarding all aspects of the U.S. federal income and estate tax consequences
PRS-24
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
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.
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. This gain or loss should be long-term capital gain or loss if at the time of the sale, exchange or retirement you held the securities for more
than one year, and short-term capital gain or loss otherwise. Long-term capital gains recognized by non-corporate U.S. holders are generally subject to taxation at reduced rates. The deductibility of capital losses is subject to certain limitations.
Possible Alternative Tax Treatments of an Investment in the Securities
Alternative U.S. federal income tax treatments of the securities are possible that, if applied, could materially and adversely affect the
timing and/or character of income, gain or loss with respect to them. It is possible, for example, that the securities could be treated as debt instruments governed by Treasury regulations relating to the taxation of contingent payment debt
instruments. In that case, regardless of your method of tax accounting for U.S. federal income tax purposes, you would be required to accrue income based on our comparable yield for similar non-contingent debt, determined as of the time of issuance
of the securities, in each year that you held the securities, even though we are not required to make any payment with respect to the securities prior to maturity. In addition, any gain on the sale, exchange or retirement of the securities would be
treated as ordinary income.
Other possible U.S. federal income tax treatments of the securities could also affect the timing and character
of income or loss with respect to the securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar instruments. The
notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to
these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are
linked; and whether these instruments are or should be subject to the constructive ownership regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest
charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of
an investment in the securities, possibly with retroactive effect. You should consult your tax adviser regarding the possible alternative treatments of an investment in the securities and the issues presented by this notice.
Tax Consequences to Non-U.S. Holders
This
section applies only to non-U.S. holders. You are a
non-U.S. holder
if you are a beneficial owner of a security that is, for U.S. federal income tax purposes:
|
|
|
an individual who is classified as a nonresident alien;
|
|
|
|
a foreign corporation; or
|
PRS-25
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
|
|
|
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, 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 discussion below regarding FATCA, 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. If withholding applies to the securities, we will not be
required to pay any additional amounts with respect to amounts withheld. Accordingly, you should consult your tax adviser regarding the issues presented by the notice.
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 or other U.S.-source fixed or determinable annual or
periodical income (
FDAP income
). If required under FATCA,
PRS-26
Market Linked SecuritiesAuto-Callable with Fixed Percentage Buffered
Downside
Principal at
Risk Securities Linked to the S&P 500
®
Index due December 7, 2020
|
United States Federal Income Tax Considerations (Continued)
|
withholding applies to payments of interest and other 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-27