Summary
The Capped Notes Linked to a
Global Equity Index Basket, due December , 2020 (the “notes”) are our senior unsecured debt securities. All payments
on the notes are fully and unconditionally guaranteed by Wells Fargo & Company. The notes and the related guarantee are not
savings accounts, 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. The notes will rank equally with all of our other
unsecured and unsubordinated debt. The guarantee of the notes will rank pari passu with all other unsecured, unsubordinated obligations
of the Guarantor. Any payments due on the notes, including any repayment of principal, will be subject to credit risk. If Wells
Fargo Finance LLC, as issuer, and Wells Fargo & Company, as guarantor, default on their obligations, you could lose some or
all of your investment.
The notes provide you a 1-to-1
return, subject to a cap, if the Ending Value of the Market Measure, which is the global equity index basket described below (the
“Basket”), is greater than its Starting Value. If the Ending Value is equal to or less than the Starting Value but
greater than or equal to the Threshold Value, you will receive the principal amount of your notes. If the Ending Value is less
than the Threshold Value, you will lose a portion, which could be significant, of the principal amount of your notes. Any payments
on the notes will be calculated based on the $10 principal amount per unit and will depend on the performance of the Basket, subject
to our and the Guarantor’s credit risk. See “Terms of the Notes” and “The Basket” below.
The Basket will be comprised
of the EURO STOXX 50® Index and the S&P 500® Index (each, a “Basket Component”).
The EURO STOXX 50® Index will be given an initial weight of 60.00%, and the S&P 500® Index will
be given an initial weight of 40.00%.
The public offering price of
each note of $10 includes certain costs that are borne by you. Because of these costs, the estimated value of the notes on the
pricing date will be less than the public offering price. The costs included in the public offering price relate to selling, structuring,
hedging and issuing the notes, as well as to our funding considerations for debt of this type.
The costs related to selling,
structuring, hedging and issuing the notes include (a) the underwriting discount, (b) the projected profit that our hedge counterparty
(which may be Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), BofAS or one of its affiliates)
expects to realize for assuming risks inherent in hedging our obligations under the notes and (c) hedging and other costs relating
to the offering of the notes.
Our funding considerations take
into account the higher issuance, operational and ongoing management costs of market-linked debt such as the notes as compared
to conventional debt of Wells Fargo & Company of the same maturity, as well as our and our affiliates’ liquidity needs
and preferences. Our funding considerations are reflected in the fact that we determine the economic terms of the notes based
on an assumed rate that is generally lower than our internal funding rate, which is described in “Risk Factors—The
estimated value of the notes is determined by our affiliate’s pricing models, which may differ from those of MLPF&S,
BofAS or other dealers” below and is used in determining the estimated value of the notes.
If the costs relating to selling,
structuring, hedging and issuing the notes were lower, or if the assumed rate we use to determine the economic terms of the notes
were higher, the economic terms of the notes would be more favorable to you and the estimated value would be higher. The initial
estimated value of the notes as of the pricing date will be set forth in the final term sheet made available to investors in the
notes.
Our affiliate, Wells Fargo Securities,
LLC (“WFS”), calculated the range for the initial estimated value of the notes set forth on the cover page of this
term sheet, based on its proprietary pricing models. The range for the initial estimated value reflects terms that are not yet
fixed, as well as uncertainty about market conditions and other relevant factors as of the pricing date. In no event will the
estimated value of the notes on the pricing date be less than the bottom of the range. Based on WFS’s proprietary pricing
models and related market inputs and assumptions, WFS determined an estimated value for the notes by estimating the value of the
combination of hypothetical financial instruments that would replicate the payout on the notes, 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 notes (the “derivative component”). For more information about the initial estimated value
and the structuring of the notes, see “Risk Factors” beginning on page TS-7 of this term sheet and “Structuring
the Notes” on page TS-22 of this term sheet.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Terms of the Notes
|
Redemption Amount Determination
|
Issuer:
|
Wells
Fargo Finance LLC
|
On the maturity date, you will receive a cash payment
per unit determined as follows:
|
Guarantor:
|
Wells
Fargo & Company
|
|
Principal
Amount:
|
$10.00 per unit
|
|
Term:
|
Approximately 13
months
|
Market
Measure:
|
A global equity index
basket comprised of the EURO STOXX 50® Index (Bloomberg symbol: “SX5E”) and the S&P 500®
Index (Bloomberg symbol: “SPX”). Each Basket Component is a price return index.
|
Starting
Value:
|
The Starting Value
will be set to 100.00 on the pricing date.
|
Ending
Value:
|
The average of the
values of the Market Measure on each calculation day occurring during the Maturity Valuation Period, calculated as specified
in “The Basket” on page TS-10 and “Description of LIRNs—Basket Market Measures” beginning on
page PS-23 of product supplement EQUITY INDICES LIRN-1. The scheduled calculation days are subject to postponement in the
event of Market Disruption Events, as described on page PS-25 of product supplement EQUITY INDICES LIRN-1.
|
Threshold
Value:
|
92.50% of the Starting
Value.
|
Participation
Rate:
|
100.00%
|
Capped
Value:
|
[$10.70 to $10.80]
per unit, which represents a return of [7.00% to 8.00%] over the principal amount. The actual Capped Value will be determined
on the pricing date.
|
Maturity
Valuation Period:
|
Five scheduled calculation
days shortly before the maturity date, which will be set forth in the final pricing supplement.
|
Fees
and Charges:
|
The underwriting
discount of $0.20 per unit listed on the cover page and the hedging related charge of $0.075 per unit. See “Structuring
the Notes” on page TS-22.
|
Joint
Calculation Agents:
|
WFS and BofA Securities,
Inc. (“BofAS”), acting jointly.
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The terms and risks of the notes
are contained in this term sheet and in the following:
When you read the accompanying prospectus
supplement, note that all references in such supplement to the prospectus dated April 27, 2018, or to any sections therein, should
refer instead to the accompanying prospectus dated April 5, 2019 or to the corresponding sections of such prospectus, as applicable.
As a result of the completion
of the reorganization of Bank of America’s U.S. broker-dealer business, references to MLPF&S in the accompanying product
supplement EQUITY INDICES LIRN-1, as such references relate to MLPF&S’s institutional services, should now be read as
references to BofAS.
These documents (together, the “Note
Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the
SEC website as indicated above or obtained from MLPF&S or BofAS by calling 1-800-294-1322. Before you invest, you should read
the Note Prospectus, together with this term sheet, for information about us, the Guarantor and this offering. Any prior or contemporaneous
oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms
used but not defined in this term sheet have the meanings set forth in product supplement EQUITY INDICES LIRN-1. When we refer
to “we,” “us” or “our” in this document, we refer only to Wells Fargo Finance LLC and not
to any of its affiliates, including Wells Fargo & Company.
Investor Considerations
You may wish to consider an
investment in the notes if:
|
The notes may not be an appropriate
investment for you if:
|
■ You
anticipate that the value of the Basket will increase moderately from the Starting Value to the Ending Value.
■ You
are willing to risk a loss of principal and return if the value of the Basket decreases from the Starting Value to an
Ending Value that is below the Threshold Value.
■ You
accept that the return on the notes will be capped.
■ You
are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
■ You
are willing to forgo dividends or other benefits of owning the stocks included in the Basket Components.
■ You
are willing to accept a limited market or no market for sales prior to maturity, and understand that the market prices
for the notes, if any, will be affected by various factors, including our and the Guarantor’s actual and perceived
creditworthiness, our assumed rate used to determine the economic terms of the notes and fees and charges on the notes.
■ You
are willing to assume our credit risk, as issuer of the notes, and the Guarantor’s credit risk, as guarantor of
the notes, for all payments under the notes, including the Redemption Amount.
|
■ You
believe that the value of the Basket will decrease from the Starting Value to the Ending Value or that it will not increase
sufficiently over the term of the notes to provide you with your desired return.
■ You
seek 100% principal repayment or preservation of capital.
■ You
seek an uncapped return on your investment.
■ You
seek interest payments or other current income on your investment.
■ You
want to receive dividends or other distributions paid on the stocks included in the Basket Components.
■ You
seek an investment for which there will be a liquid secondary market or you are unwilling to hold the notes to maturity.
■ You
are unwilling to accept the credit risk of Wells Fargo Finance LLC, as issuer, and Wells Fargo & Company, as guarantor,
or unwilling to obtain exposure to the Basket through an investment in the notes.
|
We urge you to consult your investment,
legal, tax, accounting, and other advisors before you invest in the notes.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Hypothetical Payout
Profile
The graph below is based on hypothetical numbers and values.
Capped Notes
|
This
graph reflects the returns on the notes, based on the Threshold Value of 92.50% of the Starting Value, the Participation Rate
of 100% and a Capped Value of $10.75 per unit (the midpoint of the Capped Value range of [$10.70 to $10.80]). The green line reflects
the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the
Basket Components, excluding dividends.
This graph has been prepared for purposes of illustration only.
See below table for a further illustration of the range of hypothetical payments at maturity.
|
Hypothetical
Payments at Maturity
The following table and examples
are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They
illustrate the calculation of the Redemption Amount and total rate of return based on the Starting Value of 100, the Threshold
Value of 92.50, the Participation Rate of 100%, a hypothetical Capped Value of $10.75 (the midpoint of the range for the Capped
Value), a hypothetical public offering price of $10.00 per unit and a range of hypothetical Ending Values. The actual amount
you receive and the resulting total rate of return will depend on the actual Ending Value, Capped Value, the actual price you
pay for the notes and whether you hold the notes to maturity. The following examples do not take into account any tax consequences
from investing in the notes.
For recent hypothetical values of the
Basket, see “The Basket” section below. For recent actual levels of the Basket Components, see “The Basket Components”
section below. Each Basket Component is a price return index and as such the Ending Value will not include any income generated
by dividends paid on the stocks included in any of the Basket Components, which you would otherwise be entitled to receive if
you invested in those stocks directly. In addition, all payments on the notes are subject to credit risk. If Wells Fargo Finance
LLC, as issuer, and Wells Fargo & Company, as guarantor, default on their obligations, you could lose some or all of your
investment.
Ending
Value
|
Percentage
Change from the
Starting Value to the Ending Value
|
Redemption
Amount per
Unit
|
Total
Rate of Return on the
Notes
|
0.00
|
-100.00%
|
$0.75
|
-92.50%
|
50.00
|
-50.00%
|
$5.75
|
-42.50%
|
60.00
|
-40.00%
|
$6.75
|
-32.50%
|
70.00
|
-30.00%
|
$7.75
|
-22.50%
|
80.00
|
-20.00%
|
$8.75
|
-12.50%
|
90.00
|
-10.00%
|
$9.75
|
-2.50%
|
92.50(1)
|
-7.50%
|
$10.00
|
0.00%
|
95.00
|
-5.00%
|
$10.00
|
0.00%
|
98.00
|
-2.00%
|
$10.00
|
0.00%
|
100.00(2)
|
0.00%
|
$10.00
|
0.00%
|
102.00
|
2.00%
|
$10.20
|
2.00%
|
105.00
|
5.00%
|
$10.50
|
5.00%
|
107.50
|
7.50%
|
$10.75(3)
|
7.50%
|
110.00
|
10.00%
|
$10.75
|
7.50%
|
120.00
|
20.00%
|
$10.75
|
7.50%
|
130.00
|
30.00%
|
$10.75
|
7.50%
|
140.00
|
40.00%
|
$10.75
|
7.50%
|
150.00
|
50.00%
|
$10.75
|
7.50%
|
160.00
|
60.00%
|
$10.75
|
7.50%
|
|
(1)
|
The
Threshold Value will be set to 92.50 on the pricing date.
|
|
(2)
|
The
Starting Value will be set to 100.00 on the pricing date.
|
|
(3)
|
The
Redemption Amount per unit cannot exceed the hypothetical Capped Value. Therefore, your
return on the notes for Ending Values greater than 107.50% of the Starting Value will
be limited to the Capped Value.
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Redemption Amount Calculation
Examples
Example 1
|
The Ending Value is 50.00, or 50.00%
of the Starting Value:
|
Starting Value: 100.00
|
Threshold Value: 92.50
|
Ending Value: 50.00
|
|
= $5.75 Redemption Amount
per unit
|
Example 2
|
The Ending Value is 95.00, or 95.00%
of the Starting Value:
|
Starting Value: 100.00
|
Threshold Value: 92.50
|
Ending Value: 95.00
|
Redemption Amount (per
unit) = $10.00, the principal amount, since the Ending Value is less than the Starting Value but equal to or greater
than the Threshold Value.
|
Example 3
|
The Ending Value is 105.00, or 105.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 105.00
|
|
= $10.50 Redemption Amount per unit
|
Example 4
|
The Ending Value is 130.00, or
130.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 130.00
|
|
= $13.00, however, because the Redemption Amount for the notes cannot exceed
the Capped Value, the Redemption Amount will be $10.75 per unit.
|
|
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Market Measure Business Day
The following definition shall supersede
and replace the definition of a “Market Measure Business Day” set forth in product supplement
EQUITY INDICES LIRN-1.
A “Market Measure Business
Day” means a day on which:
|
(A)
|
each of the Eurex (as to the
EURO STOXX 50® Index), and the New York Stock Exchange and The Nasdaq
Stock Market (as to the S&P 500® Index) (or any successor to the foregoing
exchanges) are open for trading; and
|
|
(B)
|
the Basket Components or any
successors thereto are calculated and published.
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The Basket
The Basket is designed to allow
investors to participate in the percentage changes in the levels of the Basket Components from the Starting Value to the Ending
Value of the Basket. The Basket Components are described in the section “The Basket Components” below. Each Basket
Component will be assigned an initial weight on the pricing date, as set forth in the table below.
For more information on the calculation
of the value of the Basket, please see the section entitled “Description of LIRNs—Basket Market Measures” beginning
on page PS-23 of product supplement EQUITY INDICES LIRN-1.
If November 6, 2019 were the pricing
date, for each Basket Component, the Initial Component Weight, the closing level, the hypothetical Component Ratio and the initial
contribution to the Basket value would be as follows:
Basket
Component
|
|
Bloomberg
Symbol
|
|
Initial
Component
Weight
|
|
Closing
Level(1)(2)
|
|
Hypothetical
Component
Ratio(1)(3)
|
|
Initial
Basket
Value
Contribution
|
EURO STOXX
50® Index
|
|
SX5E
|
|
60.00%
|
|
3,688.74
|
|
0.01626572
|
|
60.00
|
S&P
500® Index
|
|
SPX
|
|
40.00%
|
|
3,076.78
|
|
0.01300060
|
|
40.00
|
|
|
|
|
|
|
|
|
Starting Value
|
|
100.00
|
|
(1)
|
The
actual closing level of each Basket Component and the resulting actual Component Ratios
will be determined on the pricing date, subject to adjustment as more fully described
in the section entitled “Description of LIRNs—Basket Market Measures—Determination
of the Component Ratio for Each Basket Component” beginning on page PS-23 of product
supplement EQUITY INDICES LIRN-1 if a Market Disruption Event occurs on the pricing date
as to either Basket Component or if the pricing date is not a Market Measure Business
Day as to either Basket Component.
|
|
(2)
|
These
were the closing levels of the Basket Components on November 6, 2019.
|
|
(3)
|
Each
hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket
Component (as a percentage) multiplied by 100, and then divided by the closing level
of that Basket Component on November 6, 2019 and rounded to eight decimal places.
|
The calculation agents will calculate
the value of the Basket by summing the products of the closing level for each Basket Component on each calculation day during
the Maturity Valuation Period and the Component Ratio applicable to such Basket Component. If a Market Disruption Event occurs
as to either Basket Component on any scheduled calculation day, the closing level of that Basket Component will be determined
as more fully described in the section entitled “Description of LIRNs—Basket Market Measures—Ending Value of
the Basket” beginning on page PS-24 of product supplement EQUITY INDICES LIRN-1.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
While actual historical
information on the Basket will not exist before the pricing date, the following graph sets forth the hypothetical historical performance
of the Basket from January 1, 2009 through November 6, 2019. The graph is based upon actual daily historical levels of the Basket
Components, hypothetical Component Ratios based on the closing levels of the Basket Components as of December 31, 2008, and a
Basket value of 100.00 as of that date. This hypothetical historical data on the Basket is not necessarily indicative of the future
performance of the Basket or what the value of the notes may be. Any hypothetical historical upward or downward trend in the value
of the Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase
or decrease at any time over the term of the notes.
Hypothetical
Historical Performance of the Basket
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The Basket Components
All disclosures contained in this
term sheet regarding the Basket Components, including, without limitation, their make-up, method of calculation, and changes in
their components, have been derived from publicly available sources. That information reflects the policies of, and is subject
to change by, the applicable index sponsor. The consequences of an index sponsor discontinuing publication of a Basket Component
are discussed in the section entitled “Description of LIRNs—Discontinuance of an Index” on page PS-22 of product
supplement EQUITY INDICES LIRN-1. None of us, the Guarantor, the calculation agents, MLPF&S, or BofAS has independently verified
the accuracy or completeness of any information with respect to either Basket Component in connection with the notes, nor accepts
any responsibility for the calculation, maintenance or publication of either Basket Component or any successor index.
In addition, information about
the Basket Components may be obtained from other sources including, but not limited to, the applicable index sponsor’s website
(including information regarding top ten constituents and their respective weightings, sector weightings and country weights).
We are not incorporating by reference into this term sheet any index sponsor’s website or any material it includes. None
of us, the Guarantor or the agent makes any representation that such publicly available information regarding either Basket Component
is accurate or complete.
The EURO STOXX 50®
Index
The EURO STOXX 50®
Index (the “SX5E Index”) is calculated, maintained and published by STOXX Limited (“STOXX”),
the index sponsor, a wholly owned subsidiary of Deutsche Börse AG. Publication of the SX5E Index began on February 26, 1998,
based on an initial index value of 1,000 on December 31, 1991. The SX5E Index is published in The Wall Street Journal and
disseminated on STOXX’s website.
The SX5E Index does not reflect
the payment of dividends on the stocks underlying it and therefore the payment on the notes will not produce the same return you
would receive if you were able to purchase such underlying stocks and hold them until maturity.
Index Composition
The SX5E Index is composed of
50 component stocks of market sector leaders in terms of free-float market capitalization from within the EURO STOXX Supersector
indexes, which includes stocks selected from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain. At any given time, some eligible countries may not be represented in the SX5E
Index. The component stocks have a high degree of liquidity and represent the largest companies across all supersectors as defined
by the Industry Classification Benchmark.
Component Selection. The
composition of the SX5E Index is reviewed by STOXX annually in September. Within each of the 19 EURO STOXX Supersector indexes,
the respective index component stocks are ranked by free-float market capitalization. The largest stocks are added to the selection
list until the coverage is close to, but still less than, 60% of the free-float market capitalization of the corresponding EURO
STOXX Total Market Index Supersector Index. If the next highest-ranked stock brings the coverage closer to 60% in absolute terms,
then it is also added to the selection list. All remaining stocks that are current SX5E Index components are then added to the
selection list. The stocks on the selection list are then ranked by free-float market capitalization. The 40 largest stocks on
the selection list are chosen as index components. The remaining 10 stocks are then selected from the largest current stocks ranked
between 41 and 60. If the number of index components is still below 50, then the largest remaining stocks on the selection list
are added until the SX5E Index contains 50 stocks.
Ongoing Maintenance of Component
Stocks
The component stocks of the SX5E
Index are monitored on an ongoing monthly basis for deletion and quarterly basis for addition. Changes to the composition of the
SX5E Index due to corporate actions (including mergers and takeovers, spin-offs, sector changes and bankruptcy) are announced
immediately, implemented two trading days later and become effective on the next trading day after implementation.
The component stocks of the SX5E
Index are subject to a “fast exit” rule. A component stock is deleted if it ranks 75 or below on the monthly selection
list and it ranked 75 or below on the selection list of the previous month. The highest-ranked non-component stock will replace
the exiting component stock. The SX5E Index is also subject to a “fast entry” rule. All stocks on the latest
selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition on a quarterly basis. A stock
is added if it qualifies for the latest blue-chip selection list generated at the end of February, May, August or November and
if it ranks within the lower buffer (between 1 and 25) on the selection list. If added, the stock replaces the smallest component
stock.
A deleted stock is replaced
immediately to maintain the fixed number of stocks. The replacement is based on the latest monthly selection list. In the
case of a merger or takeover where a component stock is involved, the original component stock is replaced by the new
component stock. In the case of a spin-off, if the original stock was a component stock, then each spin-off stock qualifies
for addition if it lies within the lower buffer (between 1 and 40) on the latest selection list. The largest qualifying
spin-off stock replaces the original component stock, while the next qualifying spin-off stock replaces the lowest ranked
component stock and likewise for other qualifying spin-off stocks.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The free float factors and outstanding
number of shares for each component stock that STOXX uses to calculate the SX5E Index, as described below, are reviewed, calculated
and implemented on a quarterly basis and are fixed until the next quarterly review. Certain extraordinary adjustments to
the free float factors and/or the number of outstanding shares are implemented and made effective more quickly. The timing depends
on the magnitude of the change. Each component’s weight is capped at 10% of the SX5E Index’s total free float market
capitalization. The free float factor reduces the component stock’s number of shares to the actual amount available on the
market. All holdings that are larger than five percent of the total outstanding number of shares and held on a long-term basis
are excluded from the index calculation (including, but not limited to, stock owned by the company itself, stock owned by governments,
stock owned by certain individuals or families, and restricted shares).
Calculation of the SX5E Index
The SX5E Index is calculated
with the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a fixed base
quantity weight. The formula for calculating the SX5E Index value can be expressed as follows:
Index =
|
Free-float
market capitalization of the
SX5E Index
|
Divisor
|
The “free-float market
capitalization of the SX5E Index” is equal to the sum of the products of the closing price, the number of shares, the free
float factor and the weighting cap factor for each component stock as of the time the SX5E Index is being calculated. The component
stocks trade in euros and thus, no currency conversion is required. The cap factor limits the weight of a component within the
SX5E Index to a maximum of 10%.
The SX5E Index is also subject
to a divisor, which is adjusted to maintain the continuity of the SX5E Index values across changes due to corporate actions. The
following is a summary of the adjustments to any component stock made for corporate actions and the effect of such adjustment
on the divisor, where shareholders of the component stock will receive “B” number of shares for every “A”
share held (where applicable).
|
(1)
|
Special cash dividend
|
Cash distributions
that are outside the scope of the regular dividend policy or that the company defines as an extraordinary distribution.
Adjusted price
= closing price – dividend announced by the company * (1 – withholding tax, if applicable)
Divisor: decreases
|
(2)
|
Split and reverse split:
Adjusted price = closing price * A/B
New number of shares = old number of shares * B/A
Divisor: no change
|
|
(3)
|
Rights offering:
Adjusted price = (closing price * A + subscription price * B) / (A + B)
New number of shares = old number of shares * (A + B) / A
Divisor: increases
|
|
(4)
|
Stock dividend:
Adjusted price = closing price * A / (A + B)
New number of shares = old number of shares * (A + B) / A
Divisor: no change
|
|
(5)
|
Stock dividend from treasury stock
(if treated as extraordinary dividend):
Adjusted close = close – close * B / (A + B)
Divisor: decreases
|
|
(6)
|
Stock dividend of another company:
Adjusted price = (closing price * A - price of other company * B) / A
Divisor: decreases
|
|
(7)
|
Return of capital and share consolidation:
Adjusted price = (closing price – capital return announced by company * (1 –
withholding
tax)) * A / B
New number of shares = old number of shares * B / A
Divisor: decreases
|
|
(8)
|
Repurchase shares / self tender:
Adjusted price = ((price before tender * old number of shares) – (tender price
* number of
tendered shares)) / (old number of shares – number of tendered shares)
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
|
|
New
number of shares = old number of shares – number of tendered shares
Divisor: decreases
|
|
(9)
|
Spin-off:
Adjusted price = (closing price * A - price of spin-off shares B) / A
Divisor: decreases
|
|
(10)
|
Combination stock distribution
(dividend or split) and rights offering:
For this corporate action, the following additional assumptions apply:
|
|
•
|
Shareholders
receive B new shares from the distribution and C new shares from the rights offering
for every A shares held
|
|
•
|
If
A is not equal to one, all the following “new number of shares” formulas
need to be divided by A:
|
|
o
|
If
rights are applicable after stock distribution (one action applicable to another):
Adjusted price = (closing price * A + subscription price * C * (1 + B / A)) /
((A + B) * (1 + C / A))
New number of shares = old number of shares * ((A + B) * (1 + C / A)) / A
Divisor: increases
|
|
o
|
If
stock distribution is applicable after rights (one action applicable to another):
Adjusted price = (closing price * A + subscription price * C) / ((A + C) * (1 + B / A))
New number of shares = old number of shares * ((A + C) * (1 + B / A))
Divisor: increases
|
|
o
|
Stock
distribution and rights (neither action is applicable to the other):
Adjusted price = (closing price * A + subscription price * C) / (A + B + C)
New number of shares = old number of shares * (A + B + C) / A
Divisor: increases
|
|
(11)
|
Addition / deletion of a company:
No price adjustments are made. The net change in market capitalization determines the
divisor adjustment.
|
|
(12)
|
Free Float and shares changes:
No price adjustments are made. The net change in market capitalization determines the
divisor adjustment.
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The following graph shows
the daily historical performance of the SX5E Index in the period from January 1, 2009 through November 6, 2019. We obtained this
historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained
from Bloomberg L.P. On November 6, 2019, the closing level of the SX5E Index was 3,688.74.
Historical
Performance of the SX5E Index
This historical data on
the SX5E Index is not necessarily indicative of the future performance of the SX5E Index or what the value of the notes may be.
Any historical upward or downward trend in the level of the SX5E Index during any period set forth above is not an indication
that the level of the SX5E Index is more or less likely to increase or decrease at any time over the term of the notes.
License Agreement
STOXX Limited (“STOXX”)
and its licensors (the “Licensors”) have no relationship to us, other than the licensing of the EURO STOXX 50®
Index and the related trademarks to Wells Fargo & Company, our parent company, for use in connection with the notes.
STOXX and its Licensors do
not: (i) Sponsor, endorse, sell or promote the notes; (ii) recommend that any person invest in the notes; (iii) have
any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes; (iv) have any responsibility
or liability for the administration, management or marketing of the notes; (v) Consider the needs of the notes or the owners of
the notes in determining, composing or calculating the EURO STOXX 50® Index or have any obligation to do so.
STOXX and its Licensors will
not have any liability in connection with the notes. Specifically, STOXX and its Licensors do not make any warranty, express
or implied, and disclaim any and all warranty about: the results to be obtained by the notes, the owner of the notes or any
other person in connection with the use of the EURO STOXX 50® Index and the data included in the EURO STOXX 50®
Index; the accuracy or completeness of the EURO STOXX 50® Index and its data; the merchantability and the
fitness for a particular purpose or use of the EURO STOXX 50® Index and its data.
STOXX and its Licensors will
have no liability for any errors, omissions or interruptions in the EURO STOXX 50® Index or its data. Under no
circumstances will STOXX or its Licensors be liable for any lost profits or indirect, punitive, special or consequential damages
or losses, even if STOXX or its Licensors knows that they might occur.
The licensing agreement between
Wells Fargo & Company and STOXX is solely for their benefit and not for the benefit of the owners of the notes or any other
third parties.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The S&P 500® Index
The S&P 500®
Index is published by S&P Dow Jones and 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. The S&P 500® Index covers approximately
80% of the United States equity market. As of the date of this term sheet, to be added to the S&P 500® Index,
a company must have a market capitalization of $8.2 billion or more. A company meeting the unadjusted company market capitalization
criteria is also required to have a security level float-adjusted market capitalization that is at least $4.1 billion. As of
the date of this term sheet, Wells Fargo & Company, our parent company, is one of the companies included in the S&P 500®
Index.
The S&P 500®
Index does not reflect the payment of dividends on the stocks underlying it and therefore the payment on the notes will not produce
the same return you would receive if you were able to purchase such underlying stocks and hold them until maturity.
Composition of the S&P
500® Index
Changes to the S&P 500®
Index are made on as needed basis, with no annual or semi-annual reconstitution. Constituent changes are typically announced
one to five days before they are scheduled to be implemented.
Additions to the S&P
500® Index
Additions to the S&P 500®
Index are evaluated based on the following eligibility criteria. These criteria are for additions to the S&P 500®
Index, not for continued membership. A stock may be removed from the S&P 500® Index if it violates the
addition criteria and if ongoing conditions warrant its removal as described below under “—Removal from the S&P
500® Index.”
|
•
|
Market
Capitalization. The unadjusted company market capitalization should be within the
specified range applicable to the S&P 500® Index, as noted above.
This range is reviewed from time to time to assure consistency with market conditions.
For spin-offs, membership eligibility is determined using when-issued prices, if available.
|
|
•
|
Liquidity.
Using composite pricing and volume, the ratio of annual dollar value traded (defined
as average closing price over the period multiplied by historical volume) to float-adjusted
market capitalization should be at least 1.00, and the stock should trade a minimum of
250,000 shares in each of the six months leading up to the evaluation date.
|
|
•
|
Domicile.
The company should be a U.S. company, meaning a company that has the following characteristics:
|
|
o
|
the
company should file 10-K annual reports;
|
|
o
|
the
U.S. portion of fixed assets and revenues should constitute a plurality of the total,
but need not exceed 50%. When these factors are in conflict, assets determine plurality.
Revenue determines plurality when there is incomplete asset information. If this criteria
is not met or is ambiguous, S&P Dow Jones may still deem the company to be a U.S.
company for purposes of inclusion in the S&P 500® Index if its primary
listing, headquarters and incorporation are all in the United States and/or “a
domicile of convenience” (Bermuda, Channel Islands, Gibraltar, islands in the Caribbean,
Isle of Man, Luxembourg, Liberia or Panama); and
|
|
o
|
the
primary listing must be on an eligible U.S. exchange as described under “Eligible
Securities” below.
|
In situations where the
only factor suggesting that a company is not a U.S. company is its tax registration in a “domicile of convenience”
or another location chosen for tax-related reasons, S&P Dow Jones normally determines that the company is still a U.S. company.
The final determination of domicile eligibility is made by the S&P Dow Jones’s U.S. index committee.
|
•
|
Public
Float. There should be a public float of at least 50% of the company’s stock.
|
|
•
|
Sector
Classification. The company is evaluated for its contribution to sector balance maintenance,
as measured by a comparison of each GICS® sector’s weight in the
S&P 500® Index with its weight in the S&P Total Market Index,
in the relevant market capitalization range. The S&P Total Market Index is a float-adjusted,
market-capitalization weighted index designed to track the broad equity market, including
large-, mid-, small- and micro-cap stocks.
|
|
•
|
Treatment
of IPOs. Initial public offerings should be traded on an eligible exchange for at
least 12 months before being considered for addition to the S&P 500®
Index. Spin-offs or in-specie distributions from existing constituents do not need to
be seasoned for 12 months prior to their inclusion in the S&P 500®
Index.
|
|
•
|
Financial
Viability. The sum of the most recent four consecutive quarters’ Generally
Accepted Accounting Principles (“GAAP”) earnings (net income excluding
discontinued operations) should be positive as should the most recent quarter. For equity
real
|
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
|
|
estate
investment trusts (“REITs”), financial viability is based on GAAP
earnings and/or Funds From Operations (“FFO”), if reported.
|
|
•
|
Eligible
Securities. Eligible securities are the common stock of U.S. companies with a primary
listing on NYSE, NYSE Arca, NYSE American, Nasdaq Global Select Market, Nasdaq Select
Market, Nasdaq Capital Market, Investors Exchange (IEX), Cboe BZX, Cboe BYX, Cboe EDGA
or Cboe EDGX. Ineligible exchanges include the OTC Bulletin Board and Pink Sheets. Eligible
organizational structures and share types are corporations (including equity and mortgage
REITS) and common stock (i.e., shares). Ineligible organizational structures and
share types include business development companies, limited partnerships, master limited
partnerships, limited liability companies, closed-end funds, exchange-traded funds, exchange-traded
notes, royalty trusts, tracking stocks, preferred and convertible preferred stock, unit
trusts, equity warrants, convertible bonds, investment trusts, rights and American Depositary
Receipts. In addition, as of July 31, 2017, the securities of companies with multiple
share class structures (including companies with listed and unlisted share classes) are
no longer eligible to be added to the S&P 500® Index, but securities
already included in the S&P 500® Index have been grandfathered and
are not affected by this change.
|
Removal from the S&P
500® Index
Removals from the S&P 500®
Index are evaluated based as follows:
|
•
|
Companies
that are involved in mergers, acquisitions or significant restructuring such that they
no longer meet inclusion criteria:
|
|
o
|
Companies
delisted as a result of merger, acquisition or other corporate action are removed at
a time announced by S&P Dow Jones, normally at the close of the last day of trading
or expiration of a tender offer. Constituents that are halted from trading may be kept
in the S&P 500® Index until trading resumes, at the discretion of
S&P Dow Jones. If a stock is moved to the pink sheets or the bulletin board, the
stock is removed.
|
|
o
|
Any
company that is removed from the S&P 500® Index (including discretionary
and bankruptcy/exchange delistings) must wait a minimum of one year from its removal
date before being reconsidered as a replacement candidate.
|
|
•
|
Companies
that substantially violate one or more of the addition criteria.
|
|
o
|
S&P
Dow Jones believes turnover in membership of the S&P 500® Index should
be avoided when possible. At times a stock included in the S&P 500®
Index may appear to temporarily violate one or more of the addition criteria. However,
the addition criteria are for addition to the S&P 500® Index, not
for continued membership. As a result, the S&P 500® Index constituent
that appears to violate criteria for addition to the S&P 500® Index
is not removed unless ongoing conditions warrant its removal. When a stock is removed
from the S&P 500® Index, S&P Dow Jones explains the basis for
the removal.
|
Migration
Current constituents of a S&P
Composite 1500® component index (which includes the S&P 500® Index and other S&P indices)
can be migrated from one S&P Composite 1500® component index to another without meeting the financial viability,
public float and/or liquidity eligibility criteria if the S&P Dow Jones’s U.S. index committee decides that such a move
will enhance the representativeness of the relevant index as a market benchmark.
Companies that are spun-off
from current index constituents do not need to meet the outside addition criteria, but they should have a total market cap representative
of the index to which they are being added.
Calculation of the S&P
500® Index
The S&P 500®
Index is a float-adjusted market capitalization-weighted index. On any given day, the value of the S&P 500®
Index is the total float-adjusted market capitalization of the S&P 500® Index’s constituents divided
by the S&P 500® Index’s divisor. The float-adjusted market capitalization reflects the price of each
stock in the S&P 500® Index multiplied by the number of shares used in the S&P 500®
Index’s value calculation.
Float Adjustment. Float
adjustment means that the number of shares outstanding is reduced to exclude closely held shares from the calculation of the index
value because such shares are not available to investors. The goal of float adjustment is to distinguish between strategic (control)
shareholders, whose holdings depend on concerns such as maintaining control rather than the economic fortunes of the company,
and those holders whose investments depend on the stock’s price and their evaluation of a company’s future prospects.
Generally, these “control holders” include officers and directors, private equity,
venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders
of restricted shares, employee stock ownership plans, employee and family trusts, foundations associated with the company, holders
of unlisted share classes of stock or government entities at all levels (other than government retirement/pension funds) and any
individual person who controls a 5% or greater stake in a company as reported in regulatory filings. Shares that are not considered
outstanding are also not included in the available float. These generally include treasury stock, stock options, equity participation
units, warrants, preferred stock, convertible stock and rights.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
For
each component, S&P Dow Jones calculates an Investable Weight Factor (“IWF”), which represents the portion
of the total shares outstanding that are considered part of the public float for purposes of the S&P 500® Index.
Divisor. Continuity
in index values of the S&P 500® Index is maintained by adjusting its divisor for all changes in its constituents’
share capital after its base date. This includes additions and deletions to the S&P 500® Index, rights issues,
share buybacks and issuances and non-zero price spin-offs. The value of the S&P 500® Index’s divisor
over time is, in effect, a chronological summary of all changes affecting the base capital of the S&P 500®
Index. The divisor of the S&P 500® Index is adjusted such that the index value of the S&P 500®
Index at an instant just prior to a change in base capital equals the index value of the S&P 500® Index
at an instant immediately following that change.
Maintenance of the S&P
500® Index
Changes in response to corporate
actions and market developments can be made at any time. Constituent changes are typically announced one to five days before they
are scheduled to be implemented.
Share
Updates. Changes in a company’s shares outstanding
and IWF due to its acquisition of another public company are made as soon as reasonably possible. At S&P Dow Jones’
discretion, de minimis merger and acquisition share changes are accumulated and implemented with the quarterly share rebalancing.
All other changes of less than 5% are accumulated and made quarterly on the third Friday of March, June, September and December.
5%
Rule. Changes in a company’s total shares outstanding of 5% or more due to public offerings are made as soon as reasonably
possible. Other changes of 5% or more (for example,
due to tender offers, Dutch auctions, voluntary exchange offers, company stock repurchases, private placements, acquisitions of
private companies or non-index companies that do not trade on a major exchange, redemptions, exercise of options, warrants, conversion
of preferred stock, notes, debt, equity participations, at-the-market stock offerings or other recapitalizations) are made weekly,
and are announced on Fridays for implementation after the close of trading the following Friday (one week later). If an exchange
holiday/closure falls on a Friday, the weekly share change announcement will be made the day before the exchange holiday/closure,
and the implementation date will remain after the close of trading the following Friday (i.e., one week later).
If a
5% or more share change causes a company’s IWF
to change by five percentage points or more (for example from 0.80 to 0.85), the IWF is updated at the same time
as the share change. IWF changes resulting from partial tender offers are considered on a case-by-case basis.
For
weekly share reviews involving companies with multiple
share classes, the 5% share change threshold is based on each individual share class rather than total company shares.
Share/IWF
Freeze. A share/IWF freeze period is implemented during each quarterly rebalancing. The freeze period begins after the market
close on the Tuesday preceding the second Friday of each rebalancing month (i.e., March, June, September, and December)
and ends after the market close on the third Friday of a rebalancing month. Pro-forma files are normally released after the market
close on the second Friday, one week prior to the rebalancing effective date. In September, preliminary share and float data are
released on the first Friday of the month, but the share freeze period for September will follow the same schedule as the other
three quarterly share freeze periods. For illustration purposes, if rebalancing pro-forma files are scheduled to be released on
Friday, March 13, the share/IWF freeze period will begin after the close of trading on Tuesday, March 10 and will end after the
close of trading the following Friday, March 20 (i.e., the third Friday of the rebalancing month).
During
the share/IWF freeze period, shares and IWFs are not changed except for certain corporate action events (such as merger activity,
stock splits, rights offerings). Share/IWF changes for index constituents resulting from secondary public offerings that would
otherwise be eligible for next day implementation are instead collected during the freeze period and added to the weekly share
change announcement on the third Friday of the rebalancing month for implementation the following Friday night. There is no weekly
share change announcement on the second Friday of a
rebalancing month.
Corporate
Actions. Corporate actions (such as stock splits, stock dividends, non-zero price spin-offs and rights offerings) are applied
after the close of trading on the day prior to the ex-date.
Other
Adjustments. In cases where there is no achievable
market price for a stock being deleted, it can be removed at a zero or minimal price at the S&P Dow Jones’s U.S.
index committee’s discretion.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The table below summarizes types of index
maintenance adjustments and indicates whether or not a divisor adjustment is required.
Type
of
Corporate Action
|
Comments
|
Divisor
Adjustment?
|
Company
added/deleted
|
Net
change in market value determines divisor adjustment.
|
Yes
|
Change
in shares outstanding
|
Any
combination of secondary issuance, share repurchase or buy back – share counts revised to reflect change.
|
Yes
|
Stock
split
|
Share
count revised to reflect new count. Divisor adjustment is not required since the share count and price changes
are offsetting.
|
No
|
Spin-off
|
The
spin-off is added to the S&P 500® Index on the ex-date at a price of zero.
|
No
|
Change
in IWF
|
Increasing
(decreasing) the IWF increases (decreases) the total market value of the S&P 500® Index. The
divisor change reflects the change in market value caused by the change to an IWF.
|
Yes
|
Special
dividend
|
When
a company pays a special dividend, the share price is assumed to drop by the amount of the dividend; the divisor adjustment
reflects this drop in index market value.
|
Yes
|
Rights
offering
|
Each
shareholder receives the right to buy a proportional number of additional shares at a set (often discounted) price. The
calculation assumes that the offering is fully subscribed. Divisor adjustment reflects increase in market capitalization
measured as the shares issued multiplied by the price paid.
|
Yes
|
Stock splits and stock dividends do not affect
the divisor, because following a split or dividend, both the stock price and number of shares outstanding are adjusted by S&P
Dow Jones so that there is no change in the market value of the relevant component. All stock split and dividend adjustments are
made after the close of trading on the day before the ex-date.
Governance of the
S&P 500® Index
The S&P 500® Index is
maintained by S&P Dow Jones’s U.S. index committee. All index committee members are full-time professional members of
S&P Dow Jones’ staff. The index committee meets monthly. At each meeting, the index committee reviews pending corporate
actions that may affect constituents of the S&P 500® Index, statistics comparing the composition of the S&P
500® Index to the market, companies that are being considered as candidates for addition to the S&P 500®
Index, and any significant market events. In addition, the index committee may revise the S&P 500® Index’s
policy covering rules for selecting companies, treatment of dividends, share counts or other matters.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
The following graph shows the daily historical
performance of the S&P 500® Index in the period from January
1, 2009 through November 6, 2019. We obtained this historical data from Bloomberg L.P. We have not independently verified the
accuracy or completeness of the information obtained from Bloomberg L.P. On November 6, 2019, the closing level of the S&P
500® Index was 3,076.78.
Historical Performance
of the S&P 500® Index
This historical data on the S&P
500® Index is not necessarily indicative of the future performance
of the S&P 500® Index or what the value of the notes may
be. Any historical upward or downward trend in the level of the S&P 500®
Index during any period set forth above is not an indication that the level of the S&P 500®
Index is more or less likely to increase or decrease at any time over the term of the notes.
License Agreement
Wells Fargo &Company, our parent company,
and S&P Dow Jones have entered into a non-transferable, non-exclusive license agreement providing for the license to Wells
Fargo & Company and certain of its affiliated or subsidiary companies (including us), in exchange for a fee, of the right
to use the S&P 500® Index in connection with the issuance of the notes.
The license agreement between Wells Fargo & Company and S&P Dow Jones provides that the following language must be stated in this term sheet:
“The notes are not sponsored, endorsed,
sold or promoted by S&P Dow Jones or its third party licensors. Neither S&P Dow Jones nor its third party licensors makes
any representation or warranty, express or implied, to the owners of the notes or any member of the public regarding the advisability
of investing in securities generally or in the notes particularly or the ability of the S&P 500® Index to track
general stock market performance. S&P Dow Jones’ and its third party licensor’s only relationship to Wells Fargo &
Company is the licensing of certain trademarks and trade names of S&P Dow Jones and the third party licensors and of the S&P
500® Index which is determined, composed and calculated by S&P Dow Jones or its third party licensors without
regard to Wells Fargo & Company or the notes. S&P Dow Jones and its third party licensors have no obligation to take
the needs of Wells Fargo & Company or the owners of the notes into consideration in determining, composing or calculating
the S&P 500® Index. Neither S&P Dow Jones nor its third party licensors is responsible for and has not
participated in the determination of the prices and amount of the notes or the timing of the issuance or sale of the notes or
in the determination or calculation of the equation by which the notes are to be converted into cash. S&P Dow Jones has no
obligation or liability in connection with the administration, marketing or trading of the notes.
NEITHER S&P DOW JONES, ITS AFFILIATES
NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED
THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS)
WITH RESPECT THERETO. S&P DOW JONES, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR
LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MARKS, THE INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES, ITS AFFILIATES
OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT
NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.”
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Supplement to the Plan of Distribution
Under our distribution agreement with BofAS,
BofAS will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less
the indicated underwriting discount.
BofAS has informed us of the information in
the following paragraph. MLPF&S will purchase the notes from BofAS for resale, and will receive a selling concession in connection
with the sale of the notes in an amount up to the full amount of underwriting discount set forth on the cover of this term sheet.
We may deliver the notes against payment therefor
in New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities
Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties
to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than two business
days from the pricing date, purchasers who wish to trade the notes more than two business days prior to the original issue date
will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities
exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place
an order to purchase the notes, you are consenting to MLPF&S and/or one of its affiliates acting as a principal in effecting
the transaction for your account.
BofAS has advised us that MLPF&S, BofAS
or their affiliates may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing
market prices or at negotiated prices determined by reference to their pricing models and at their discretion, and these prices
will include MLPF&S’s and BofAS’s trading commissions and mark-ups or mark-downs. MLPF&S and BofAS may act
as principal or agent in these market-making transactions; however, neither is obligated to engage in any such transactions. BofAS
has informed us that at MLPF&S’s and BofAS’s discretion, assuming no changes in market conditions from the pricing
date, MLPF&S and BofAS may offer to buy the notes in the secondary market at a price that may exceed the initial estimated
value of the notes for a short initial period after the issuance of the notes. Any price offered by MLPF&S or BofAS for the
notes is expected to be based on then-prevailing market conditions and other considerations, including the performance of the
Basket and the remaining term of the notes. However, none of us, the Guarantor, MLPF&S, BofAS, or any of our respective affiliates
is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, the Guarantor, MLPF&S,
BofAS or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value
of the notes.
BofAS has informed us that, as of the date
of this term sheet, it expects that if you hold your notes in a BofAS account, the value of the notes shown on your account statement
will be based on BofAS’s estimate of the value of the notes if BofAS or another of its affiliates were to make a market
in the notes, which it is not obligated to do; and that estimate will be based upon the price that BofAS may pay for the notes
in light of then-prevailing market conditions, and other considerations, as mentioned above, and will include transaction costs.
Any such price may be higher than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in
connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms
of the notes that was made available to investors in connection with their initial offering. Secondary market investors should
not, and will not be authorized to, rely on the Note Prospectus for information regarding Wells Fargo Finance LLC or Wells Fargo & Company or for any purpose other than that described in the immediately preceding sentence.
An investor’s household, as referenced
on the cover of this term sheet, will generally include accounts held by any of the following, as determined by MLPF&S in
its discretion and acting in good faith based upon information then available to MLPF&S:
|
•
|
the
investor’s spouse (including a domestic partner), siblings, parents, grandparents,
spouse’s parents, children and grandchildren, but excluding accounts held by aunts,
uncles, cousins, nieces, nephews or any other family relationship not directly above
or below the individual investor;
|
|
•
|
a
family investment vehicle, including foundations, limited partnerships and personal holding
companies, but only if the beneficial owners of the vehicle consist solely of the investor
or members of the investor’s household as described above; and
|
|
•
|
a
trust where the grantors and/or beneficiaries of the trust consist solely of the investor
or members of the investor’s household as described above; provided that, purchases
of the notes by a trust generally cannot be aggregated together with any purchases made
by a trustee’s personal account.
|
Purchases in retirement accounts will not be considered
part of the same household as an individual investor’s personal or other non-retirement account, except for individual retirement
accounts (“IRAs”), simplified employee pension plans (“SEPs”), savings incentive match plan for employees
(“SIMPLEs”), and single-participant or owners only accounts (i.e., retirement accounts held by self-employed individuals,
business owners or partners with no employees other than their spouses).
Please contact your Merrill financial advisor
if you have any questions about the application of these provisions to your specific circumstances or think you are eligible.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|
Structuring the Notes
The notes are our debt securities, the return
on which is linked to the performance of the Basket. The related guarantees are Wells Fargo & Company’s obligations.
As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our
and the Guarantor’s actual or perceived creditworthiness at the time of pricing. Because of the higher issuance, operational
and ongoing management costs of market-linked notes as compared to conventional debt of Wells Fargo & Company of the same
maturity, as well as our and our affiliates’ liquidity needs and preferences, the assumed rate we use in pricing market-linked
notes is generally lower than our internal funding rate. This relatively lower assumed rate, which is reflected in the economic
terms of the notes, along with other costs relating to selling, structuring, hedging and issuing the notes, results in the initial
estimated value of the notes on the pricing date being less than the public offering price. If the costs relating to selling,
structuring, hedging and issuing the notes were lower, or if the funding rate we use to determine the economic terms of the notes
were higher, the economic terms of the notes would be more favorable to you and the estimated value would be higher.
The Redemption Amount payable at maturity
will be calculated based on the $10 principal amount per unit and will depend on the performance of the Basket. In order to meet
these payment obligations, at the time we issue the notes, we expect to enter into certain hedging arrangements (which may include
call options, put options or other derivatives) with BofAS or one of its affiliates. The terms of these hedging arrangements are
determined by seeking bids from market participants, which may include us, BofAS, MLPF&S and one of our respective affiliates,
and take into account a number of factors, including our and the Guarantor’s creditworthiness, interest rate movements,
the volatility of the Basket Components, the tenor of the notes and the tenor of the hedging arrangements. The economic terms
of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements
will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to BofAS
from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and
losses from these hedging arrangements may be realized by our affiliates, MLPF&S, BofAS or any other hedge providers. Any
profit in connection with such hedging activity will be in addition to any other compensation that our affiliates, the agent and
its affiliates receive for the sale of notes, which creates an additional incentive to sell the notes to you.
For further information, see “Risk Factors—General
Risks Relating to LIRNs” beginning on page PS-7 and “Use of Proceeds and Hedging” on page PS-18 of product supplement
EQUITY INDICES LIRN-1.
Capped Notes
Linked to a Global Equity Index Basket, due December , 2020
|
|