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.
2021 that do not have a “delta” of one, the securities should not be subject to withholding under Section 871(m). However,
the IRS could challenge this conclusion. If withholding applies to the securities, we will not be required to pay any additional
amounts with respect to amounts withheld.
In addition, in 2007 the
U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities,
including the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should
be subject to withholding tax, possibly with retroactive effect. You should read carefully the discussion under “United States
Federal Tax Considerations” in this pricing supplement. You should also consult your tax adviser regarding the U.S. federal
tax consequences of an investment in the securities, as well as tax consequences arising under the laws of any state, local or
non-U.S. taxing jurisdiction.
The following table illustrates, for a range of
hypothetical index performances of the lowest performing Index:
The above figures are for purposes of illustration only
and may have been rounded for ease of analysis. The actual amount you receive at stated maturity and the resulting pre-tax total
rate of return will depend on the actual index performance of the lowest performing Index. The performance of the better performing
Index is not relevant to your return on the securities.
Set forth below are four examples of payment at
stated maturity calculations, assuming the hypothetical starting levels and ending levels for each Index as indicated in the examples.
The terms used for purposes of these hypothetical examples do not represent any actual starting level or threshold level. The hypothetical
starting level of 100.00 for each Index has been chosen for illustrative purposes only and does not represent the actual starting
level for either Index. The actual starting level and threshold level for each Index are set forth under “Terms of the Securities”
above. For historical data regarding the actual closing levels of the Indices, see the historical information set forth herein.
These examples are for purposes of illustration only and the values used in the examples may have been rounded for ease of analysis.
Because the hypothetical ending level of the lowest performing
Index is greater than its hypothetical starting level, the maturity payment amount per security would be equal to the original
offering price of $1,000 plus the contingent fixed return.
Because the hypothetical ending level of the lowest performing
Index is greater than its hypothetical starting level, the maturity payment amount per security would be equal to the original
offering price of $1,000 plus the contingent fixed return. Even though the lowest performing Index increased by 30% from
its starting level to its ending level in this example, your return is limited to the contingent fixed return of 13.20%.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Example 3. Maturity payment amount reflects
a return equal to the contingent fixed return even though the hypothetical ending level of the lowest performing Index is less
than its hypothetical starting level:
x
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Nasdaq-100
Index®
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Russell 2000®
Index
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Hypothetical starting level:
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100.00
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100.00
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Hypothetical ending level:
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130.00
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95.00
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Hypothetical threshold level:
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85.00
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85.00
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Hypothetical index performance
(ending level – starting level)/starting level:
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30.00%
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-5.00%
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Step 1: Determine which Index is the lowest
performing Index.
In this example, the Russell 2000®
Index has the lowest index performance and is, therefore, the lowest performing Index.
Step 2: Determine the maturity payment
amount based on the index performance of the lowest performing Index.
Because the hypothetical ending level of
the lowest performing Index is less than its hypothetical starting level, but not by more than 15%, the maturity payment amount
per security would be equal to the original offering price of $1,000 plus the contingent fixed return. Although the lowest
performing Index decreased by 5% from its starting level to its ending level in this example, because the lowest performing Index
has not decreased by more than 15%, you receive the contingent fixed return of 13.20%.
On the stated maturity date, you would
receive $1,132.00 per security.
Example 4. Maturity payment amount is
less than the original offering price:
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Nasdaq-100
Index®
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Russell 2000®
Index
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Hypothetical starting level:
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100.00
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100.00
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Hypothetical ending level:
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125.00
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50.00
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Hypothetical threshold level:
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85.00
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85.00
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Hypothetical index performance
(ending level – starting level)/starting level:
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25.00%
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-50.00%
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Step 1: Determine which Index is the lowest performing Index.
In this example, the Russell 2000® Index has
the lowest index performance and is, therefore, the lowest performing Index.
Step 2: Determine the maturity payment amount based on the index performance
of the lowest performing Index.
Because the hypothetical ending level
of the lowest performing Index is less than its hypothetical starting level by more than 15%, you would lose a portion of the original
offering price of your securities and receive a maturity payment amount per security equal to:
$1,000 + ($1,000
× index performance of lowest performing Index)
$1,000 + ($1,000
× -50.00%) = $500.00
On the stated maturity date, you would receive
$500.00 per security. As this example illustrates, if either Index depreciates by more than 15% from its starting level to its
ending level, you will incur a loss on the securities at maturity, even if the other Index has appreciated or has not declined
below its threshold level.
To the extent that the starting level, threshold
level and ending level of the lowest performing Index differ from the levels assumed above, the results indicated above would be
different.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Additional
Terms of the Securities
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Wells Fargo Finance LLC will issue the securities
as part of a series of senior unsecured debt securities entitled “Medium-Term Notes, Series A,” 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.
Certain Definitions
A “trading day” with respect
to an Index means a day, as determined by the calculation agent, on which (i) the relevant stock exchanges with respect to each
security underlying such Index are scheduled to be open for trading for their respective regular trading sessions and (ii) each
related futures or options exchange with respect to such Index is scheduled to be open for trading for its regular trading session.
The “relevant stock exchange”
for any security underlying an Index means the primary exchange or quotation system on which such security is traded, as determined
by the calculation agent.
The “related futures or options exchange”
for an Index means an exchange or quotation system where trading has a material effect (as determined by the calculation agent)
on the overall market for futures or options contracts relating to such Index.
Calculation Agent
Wells Fargo Securities, LLC, one of our affiliates
and a wholly owned subsidiary of Wells Fargo & Company, will act as calculation agent for the securities and may appoint agents
to assist it in the performance of its duties. Pursuant to a calculation agent agreement, we may appoint a different calculation
agent without your consent and without notifying you.
The calculation agent will determine the maturity
payment amount you receive at stated maturity. In addition, the calculation agent will, among other things:
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determine whether a market disruption
event has occurred;
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determine the closing levels of
the Indices under certain circumstances;
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•
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determine if adjustments are required
to the closing level of an Index under various circumstances; and
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•
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if publication of an Index is
discontinued, select a successor equity index (as defined below) or, if no successor equity index is available, determine the closing
level of that Index.
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All determinations made by the calculation agent
will be at the sole discretion of the calculation agent and, in the absence of manifest error, will be conclusive for all purposes
and binding on us and you. The calculation agent will have no liability for its determinations.
Market Disruption Events
A “market disruption event”
with respect to an Index means any of the following events as determined by the calculation agent in its sole discretion:
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(A)
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The occurrence or existence of
a material suspension of or limitation imposed on trading by the relevant stock exchanges or otherwise relating to securities which
then comprise 20% or more of the level of such 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.
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(B)
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The occurrence or existence of
a material suspension of or limitation imposed on trading by any related futures or options exchange or otherwise in futures or
options contracts relating to such 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.
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(C)
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The occurrence or existence of
any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect
transactions in, or obtain market values for, securities that then comprise 20% or more of the level of such 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.
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(D)
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The occurrence or existence of
any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect
transactions in, or obtain market values for, futures or options contracts relating to such 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.
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(E)
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The
closure on any exchange business day of the relevant stock exchanges on which securities that then comprise 20% or more of the
level of such Index or any successor equity index are traded or any related futures or options exchange with
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Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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respect
to such Index or any successor equity index prior to its scheduled closing time unless the earlier closing time is announced by
the relevant stock exchange or related futures or options exchange, as applicable, at least one hour prior to the earlier of (1)
the actual closing time for the regular trading session on such relevant stock exchange or related futures or options exchange,
as applicable, and (2) the submission deadline for orders to be entered into the relevant stock exchange or related futures or
options exchange, as applicable, system for execution at such actual closing time on that day.
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(F)
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The relevant stock exchange for
any security underlying such Index or successor equity index or any related futures or options exchange with respect to such Index
or successor equity index fails to open for trading during its regular trading session.
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For purposes of determining whether a market disruption
event has occurred with respect to an Index:
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(1)
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the relevant percentage contribution of a security to the level of such 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 such Index or successor equity index, in each case immediately before the occurrence of the market disruption
event;
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(2)
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the “close of trading” on any trading day for such Index or any successor equity
index means the scheduled closing time of the relevant stock exchanges with respect to the securities underlying such 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 such 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 such 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;
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(3)
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the “scheduled closing time” of any relevant stock exchange or related futures
or options exchange on any trading day for such 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
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(4)
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an “exchange business day” means any trading day for such Index or any successor
equity index on which each relevant stock exchange for the securities underlying such Index or any successor equity index and each
related futures or options exchange with respect to such Index or any successor equity index are open for trading during their
respective regular trading sessions, notwithstanding any such relevant stock exchange or related futures or options exchange closing
prior to its scheduled closing time.
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If a market disruption event occurs or is continuing
with respect to an Index on the calculation day, then the calculation day for such Index will be postponed to the first succeeding
trading day for such Index on which a market disruption event for such Index has not occurred and is not continuing; however, if
such first succeeding trading day has not occurred as of the eighth trading day for such Index after the originally scheduled calculation
day, that eighth trading day shall be deemed to be the calculation day for such Index. If the calculation day has been postponed
eight trading days for an Index after the originally scheduled calculation day and a market disruption event occurs or is continuing
with respect to such Index on such eighth trading day, the calculation agent will determine the closing level of such Index on
such eighth trading day in accordance with the formula for and method of calculating the closing level of such 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 such 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. Notwithstanding the postponement of the calculation day for one Index
due to a market disruption event with respect to such Index on the calculation day, the originally scheduled calculation day will
remain the calculation day for the other Index if such other Index is not affected by a market disruption event on such day.
Adjustments to an Index
If at any time the method of calculating an Index
or a successor equity index, or the closing level thereof, is changed in a material respect, or if an Index or a successor equity
index is in any other way modified so that such index does not, in the opinion of the calculation agent, fairly represent the level
of such index had those changes or modifications not been made, then the calculation agent will, at the close of business in New
York, New York, on each date that the closing level of such index is to be calculated, make such calculations and adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order to arrive at a level of an index comparable to such
Index or successor equity index as if those changes or modifications had not been made, and the calculation agent will calculate
the closing level of such Index or successor equity index with reference to such index, as so adjusted. Accordingly, if the method
of calculating an Index or successor equity index is modified so that the level of such index is a fraction or a multiple of what
it would have been if it had not been modified (e.g., due to a split or reverse split in such equity index), then the calculation
agent will
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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adjust such Index or successor equity index in order to arrive at a level of such index as if it had not been modified
(e.g., as if the split or reverse split had not occurred).
Discontinuance of an Index
If a sponsor or publisher of an Index (each, an
“index sponsor”) discontinues publication of an 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 such Index
(a “successor equity index”), then, upon the calculation agent’s notification of that determination to
the trustee and Wells Fargo Finance LLC, the calculation agent will substitute the successor equity index as calculated by the
relevant index sponsor or any other entity and calculate the ending level of such Index as described above. Upon any selection
by the calculation agent of a successor equity index, Wells Fargo Finance LLC will cause notice to be given to holders of the securities.
In the event that an index sponsor discontinues
publication of an Index prior to, and the discontinuance is continuing on, the 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 such
Index in accordance with the formula for and method of calculating such Index last in effect prior to the discontinuance, but using
only those securities that comprised such Index immediately prior to that discontinuance. If a successor equity index is selected
or the calculation agent calculates a level as a substitute for such Index, the successor equity index or level will be used as
a substitute for such Index for all purposes, including the purpose of determining whether a market disruption event exists.
If on the calculation day an index sponsor fails
to calculate and announce the level of an Index, the calculation agent will calculate a substitute closing level of such Index
in accordance with the formula for and method of calculating such Index last in effect prior to the failure, but using only those
securities that comprised such Index immediately prior to that failure; provided that, if a market disruption event occurs
or is continuing on such day with respect to such Index, 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 relevant index sponsor to calculate and announce the level of, an 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 maturity payment amount, calculated as provided herein. The maturity payment
amount will be calculated as though the date of acceleration were the calculation day.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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We obtained all information contained in this
pricing supplement regarding the Nasdaq-100 Index®, including, without limitation, its make-up, method of calculation,
and changes in its components, from publicly available information. That information reflects the policies of, and is subject to
change by, the Nasdaq Stock Market, Inc. (“Nasdaq”). Nasdaq has no obligation to continue to publish, and may
discontinue publication of, the Nasdaq-100 Index® at any time. Neither we nor the agent has independently verified
the accuracy or completeness of any information with respect to the Nasdaq-100 Index® in connection with the offer
and sale of the securities.
The Nasdaq 100-Index® does not
reflect the payment of dividends on the stocks underlying it and therefore the payment on the securities will not produce the same
return you would receive if you were able to purchase the underlying stocks and hold them until maturity.
The Nasdaq-100 Index® is a modified
market capitalization-weighted index of stocks of the 100 largest non-financial companies listed on the Nasdaq Stock Market. The
Nasdaq-100 Index®, which includes companies across a variety of major industry groups, was launched on January 31,
1985, with a base index value of 125.00, as adjusted. Current information regarding the market value of the Nasdaq-100 Index®
is available from Nasdaq as well as numerous market information services.
The Nasdaq-100 Index® share weights
of the component securities of the Nasdaq-100 Index® at any time are based upon the total shares outstanding in
each of those securities and are additionally subject, in certain cases, to rebalancing. Accordingly, each underlying stock’s
influence on the level of the Nasdaq-100 Index® is directly proportional to the value of its Nasdaq-100 Index®
share weight.
In addition, information about
the Nasdaq-100 Index® may be obtained from other sources including, but not limited to, the Nasdaq-100 Index®
sponsor’s website (including information regarding the Nasdaq-100 Index’s sector weightings). We are not incorporating
by reference into this pricing supplement the website or any material it includes. Neither we nor the agent makes any representation
that such publicly available information regarding the Nasdaq-100 Index® is accurate or complete.
Calculation of the Nasdaq-100 Index
At any moment in time, the value of the Nasdaq-100
Index® equals the aggregate value of the then-current Nasdaq-100 Index® share weights of each of
the Nasdaq-100 Index® component securities, which are based on the total shares outstanding of each such Nasdaq-100
Index® component security, multiplied by each such security’s respective last sale price on the Nasdaq Stock
Market (which may be the official closing price published by the Nasdaq Stock Market), and divided by a scaling factor (the “divisor”),
which becomes the basis for the reported Nasdaq-100 Index® value. The divisor serves the purpose of scaling such
aggregate value to a lower order of magnitude which is more desirable for Nasdaq-100 Index® reporting purposes.
Underlying Stock Eligibility Criteria
Initial Eligibility Criteria
To be eligible for initial inclusion in the Nasdaq-100
Index®, a security must meet the following criteria:
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the issuer of the security’s
U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq Global Market (unless the security was dually
listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing);
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a security must be issued by a
non-financial company;
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a security may not be issued by
an issuer currently in bankruptcy proceedings;
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•
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a security must have an average
daily trading volume of at least 200,000 shares (measured annually during the ranking review process described below);
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if the issuer of the security
is organized under the laws of a jurisdiction outside the United States, then that security must have listed options on a recognized
options market in the United States or be eligible for listed-options trading on a recognized options market in the United States
(measured annually during the ranking review process);
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the issuer of the security may
not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being Nasdaq-100
Index® eligible;
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the issuer of the security may
not have annual financial statements with an audit opinion that is currently withdrawn; and
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the security must have “seasoned”
on the Nasdaq, NYSE or NYSE MKT. Generally, a company is considered to be seasoned if it has been listed on a market for at least
three full months (excluding the first month of initial listing).
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Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
|
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Continued Eligibility Criteria
In addition, to be eligible for continued inclusion
in the Nasdaq-100 Index®, the security must meet the following criteria:
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the issuer of the security’s
primary U.S. listing must be exclusively listed on the Nasdaq Global Select Market or the Nasdaq Global Market;
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the security must be issued by
a non-financial company;
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the security may not be issued
by an issuer currently in bankruptcy proceedings;
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the security must have an average
daily trading volume of at least 200,000 shares in the previous three month trading period (measured annually during the ranking
review process);
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if the issuer of the security
is organized under the laws of a jurisdiction outside the United States, then that security must have listed options on a recognized
options market in the United States or be eligible for listed-options trading on a recognized options market in the United States;
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the issuer must have an adjusted
market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the NASDAQ-100 Index®
at each month-end. In the event a company does not meet this criterion for two consecutive month-ends, it will be removed
from the Nasdaq-100 Index® effective after the close of trading on the third Friday of the following month; and
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the issuer of the security may
not have annual financial statements with an audit opinion that is currently withdrawn.
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For the purposes of Nasdaq-100 Index®
eligibility criteria, if the security is a depositary receipt representing a security of a non-U.S. issuer, then references
to the “issuer” are references to the issuer of the underlying security.
These Nasdaq-100 Index® eligibility
criteria may be revised from time to time by Nasdaq without regard to the securities.
Annual Ranking Review
The composition of the Nasdaq-100 Index®
is evaluated on an annual basis, except under extraordinary circumstances that may result in an interim evaluation, as follows
(this evaluation is referred to herein as the “Ranking Review”). Securities listed on the Nasdaq Stock Market that
meet the applicable eligibility criteria are ranked by market value. Nasdaq-100 Index® -eligible securities that
are already in the Nasdaq-100 Index® and whose issuer is ranked in the top 100 eligible companies (based on market
capitalization) are retained in the Nasdaq-100 Index®. A Nasdaq-100® Index issuer that is ranked
101 to 125 is also retained, provided that such issuer was ranked in the top 100 eligible issuers as of the previous Ranking Review
or was added to the Nasdaq-100 Index® subsequent to the previous Ranking Review. Nasdaq-100 Index®
issuers not meeting such criteria are replaced. The replacement securities chosen are those Nasdaq-100 Index® -eligible
securities not currently in the Nasdaq-100 Index® whose issuers have the largest market capitalization. The data
used in the ranking includes end of October market data and is updated for total shares outstanding submitted in a publicly filed
SEC document via EDGAR through the end of November. If a security is a depositary receipt, the total shares outstanding is the
actual depositary shares outstanding as reported by the depositary banks.
Generally, the list of annual additions and deletions
as a result of the annual evaluation is publicly announced via a press release in the early part of December. Replacements are
made effective after the close of trading on the third Friday in December. Moreover, if at any time during the year other than
the Ranking Review, a Nasdaq-100 Index® issuer no longer meets the continued eligibility criteria or is otherwise
determined by Nasdaq to become ineligible for continued inclusion in the Nasdaq-100 Index®, the issuer security
will be replaced with the largest market capitalization security not currently in the Nasdaq-100 Index® and meeting
the Nasdaq-100 Index® initial eligibility criteria listed above. Ordinarily, a security will be removed from the
Nasdaq-100 Index® at its last sale price. If, however, at the time of its removal the security is halted from trading
on its primary listing market and an official closing price cannot readily be determined, the security may, in Nasdaq’s discretion,
be removed at a zero price. The zero price will be applied to the security after the close of the market but prior to the time
the official closing value of the Nasdaq-100 Index® is disseminated, which is ordinarily 5:16:00 p.m. EST.
Index Maintenance
Changes in the price and/or the aggregate value
of the then-current Nasdaq-100 Index® share weights of each of the Nasdaq-100 Index® component securities
driven by corporate events such as stock dividends, stock splits and certain spin-offs and rights issuances are adjusted on the
ex-date. If the change in total shares outstanding arising from other corporate actions is greater than or equal to 10.0%, the
change will be made to the Nasdaq-100 Index® as soon as practicable. Otherwise, if the change in total shares outstanding
is less than 10.0%, then all such changes are accumulated and made effective at one time on a quarterly basis after the close of
trading on the third Friday in each of March, June, September and December. The Nasdaq-100 Index® share weights
for those underlying stocks are derived from each security’s total shares outstanding. The Nasdaq-100 Index® share
weights for those underlying stocks are adjusted by the same percentage amount by which the total shares outstanding have changed
in those Nasdaq-100 Index® securities.
The price of the component security is adjusted
for the amount of the special cash dividend. A dividend is considered special if the information provided by the listing exchange
in their announcement of the ex-date indicates that the dividend is special. A special dividend may also be referred to as extra,
extraordinary, non-recurring, one-time, unusual, etc.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Index Rebalancing
On a quarterly basis coinciding with the quarterly
scheduled Index Share adjustment procedures, the Nasdaq-100 Index® will be rebalanced if it is determined that:
(1) the current weight of the single largest market capitalization component security is greater than 24.0% and (2) the “collective
weight” of those component securities whose individual current weights are in excess of 4.5%, when added together, exceed
48.0% of the Nasdaq-100 Index®. In addition, a special rebalancing of the Nasdaq-100 Index® may be
conducted at any time if it is determined necessary to maintain the integrity of the Nasdaq-100 Index®.
If either one or both of these weight distribution
requirements are met upon quarterly review or it is determined that a special rebalancing is required, a weight rebalancing will
be performed.
First, relating to weight distribution requirement
(1) above, if the current weight of the single largest component security exceeds 24.0%, then the weights of all Large Stocks (those
greater than 1%) will be scaled down proportionately towards 1.0% by enough for the adjusted weight of the single largest component
security to be set to 20.0%.
Second, relating to weight distribution requirement
(2) above, for those component securities whose individual current weights or adjusted weights in accordance with the preceding
step are in excess of 4.5%, if their “collective weight” exceeds 48.0%, then the weights of all Large Stocks will be
scaled down proportionately towards 1.0% by just enough for the “collective weight,” so adjusted, to be set to 40.0%.
The aggregate weight reduction among the Large
Stocks resulting from either or both of the above rescaling will then be redistributed to the Small Stocks (those stocks less than
or equal to 1%) in the following iterative manner.
In the first iteration, the weight of the largest
Small Stock will be scaled upwards by a factor which sets it equal to the average Index weight of 1.0%. The weights of each of
the smaller remaining Small Stocks will be scaled up by the same factor reduced in relation to each stock’s relative ranking
among the Small Stocks such that the smaller the component security in the ranking, the less the scale-up of its weight. This is
intended to reduce the market impact of the weight rebalancing on the smallest component securities in the Nasdaq-100 Index®.
In the second iteration, the weight of the second
largest Small Stock, already adjusted in the first iteration, will be scaled upwards by a factor which sets it equal to the average
index weight of 1.0%. The weights of each of the smaller remaining Small Stocks will be scaled up by this same factor reduced in
relation to each stock’s relative ranking among the Small Stocks such that, once again, the smaller the stock in the ranking,
the less the scale-up of its weight.
Additional iterations will be performed until
the accumulated increase in weight among the Small Stocks exactly equals the aggregate weight reduction among the Large Stocks
from rebalancing in accordance with weight distribution requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once
the final percent weights of each of the component securities are set, the Nasdaq-100 Index® share weights will
be determined anew based upon the last sale prices and aggregate capitalization of the Nasdaq-100 Index® at the
close of trading on the last day in February, May, August and November. Changes to the Nasdaq-100 Index® share weights
will be made effective after the close of trading on the third Friday in March, June, September and December and an adjustment
to the Nasdaq-100 Index® divisor will be made to ensure continuity of the Nasdaq-100 Index®.
Ordinarily, new rebalanced weights will be determined
by applying the above procedures to the current Nasdaq-100 Index® share weights. However, Nasdaq may from time to
time determine rebalanced weights, if necessary, by applying the above procedure to the actual current market capitalization of
the component securities. In such instances, Nasdaq would announce the different basis for rebalancing prior to its implementation.
During at the quarterly rebalancing, data is cutoff
as of the previous month-end and no changes are made to the Nasdaq-100 Index® from that cutoff until the quarterly
share change effective date with the single exception for corporate actions with an ex-date. Nasdaq may, from time to time, exercise
reasonable discretion as it deems appropriate in order to ensure the integrity of the Nasdaq-100 Index®.
License Agreement
Wells Fargo & Company, our
parent company, and Nasdaq have entered into a non-transferable, non-exclusive license agreement providing for a sub-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 NASDAQ-100 Index® in connection with the issuance of the securities.
The license agreement between
Wells Fargo & Company and Nasdaq provides that the following language must be stated in this pricing supplement:
“The securities are not
sponsored, endorsed, sold or promoted by NASDAQ, Inc. or its affiliates (Nasdaq with its affiliates are referred to as the “Corporations”).
The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures
relating to, the securities. The Corporations make no representation or warranty, express or implied to the owners of the
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly,
or the ability of the Nasdaq-100 Index® to track general stock market performance. The Corporations’
only relationship to Wells Fargo & Company and Wells Fargo Finance LLC is in the licensing of the Nasdaq®,
Nasdaq-100®, and Nasdaq-100 Index® registered trademarks and certain trade names of the Corporations
and the use of the Nasdaq-100 Index® which is determined, composed and calculated by Nasdaq without regard to Wells
Fargo & Company, Wells Fargo Finance LLC or the securities. Nasdaq has no obligation to take the needs of Wells Fargo &
Company, Wells Fargo Finance LLC or the owners of the securities into consideration in determining, composing or calculating the
Nasdaq-100 Index®. The Corporations are not responsible for and have not participated in the determination
of the timing of, prices at, or quantities of the securities to be issued or in the determination or calculation of the equation
by which the securities is to be converted into cash. The Corporations have no liability in connection with the administration,
marketing or trading of the securities.
THE CORPORATIONS DO NOT GUARANTEE
THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS
MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY WELLS FARGO & COMPANY, WELLS FARGO FINANCE LLC,
OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.”
Historical Information
We obtained the closing levels of the Nasdaq-100
Index® in the graph below from Bloomberg Financial Markets, without independent verification.
The following graph sets forth daily closing levels
of the Nasdaq-100 Index® for the period from January 1, 2014 to November 7, 2019. The closing level on November
7, 2019 was 8219.646. The starting level of the Nasdaq-100 Index® is the closing level of the Nasdaq-100 Index®
on November 6, 2019, as specified under “Terms of the Securities” above. The historical performance of the Nasdaq-100
Index® should not be taken as an indication of the future performance of the Nasdaq-100 Index® during
the term of the securities.
Nasdaq® and Nasdaq-100 Index® are
registered trademarks of Nasdaq, Inc. and have been licensed to Wells Fargo & Company, our parent company, for use by Wells
Fargo & Company and certain of its affiliated or subsidiary companies (including us).
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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The Russell 2000® Index is an equity
index that is designed to track the performance of the small capitalization segment of the United States equity market. See “Description
of Equity Indices—The Russell Indices” in the accompanying market measure supplement for additional information about
the Russell 2000® Index.
In addition, information about
the Russell 2000® Index may be obtained from other sources including, but not limited to, the Russell 2000®
Index sponsor’s website (including information regarding the Russell 2000® Index’s sector weightings).
We are not incorporating by reference into this pricing supplement the website or any material it includes. Neither we nor the
agent makes any representation that such publicly available information regarding the Russell 2000® Index is accurate
or complete.
Historical Information
We obtained the closing levels of the Russell
2000® Index in the graph below from Bloomberg Financial Markets, without independent verification.
The following graph sets forth daily closing levels
of the Russell 2000® Index for the period from January 1, 2014 to November 7, 2019. The closing level on November
7, 2019 was 1593.990. The starting level of the Russell 2000® Index is the closing level of the Russell 2000®
Index on November 6, 2019, as specified under “Terms of the Securities” above. The historical performance of the Russell
2000® Index should not be taken as an indication of the future performance of the Russell 2000® Index
during the term of the securities.
“Russell 2000®”
and “FTSE Russell” are trademarks of the London Stock Exchange Group companies, and have been licensed to Wells Fargo
& Company, our parent company, for use by Wells Fargo & Company and certain of its affiliated or subsidiary companies
(including us). The securities, based on the performance of the Russell 2000® Index, are not sponsored, endorsed,
sold or promoted by FTSE Russell and FTSE Russell makes no representation regarding the advisability of investing in the securities.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Benefit Plan Investor Considerations
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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 plan’s particular circumstances
before authorizing an investment in the securities. Accordingly, among other factors, the fiduciary should consider whether the
investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and
instruments governing the plan. When we use the term “holder” in this section, we are referring to a beneficial
owner of the securities and not the record holder.
Section 406 of ERISA and Section 4975
of the Code prohibit plans, as well as individual retirement accounts and Keogh plans to which Section 4975 of the Code applies
(also “plans”), from engaging in specified transactions involving “plan assets” with persons who
are “parties in interest” under ERISA or “disqualified persons” under the Code (collectively, “parties
in interest”) with respect to such plan. A violation of those “prohibited transaction” rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless statutory or administrative
exemptive relief is available. Therefore, a fiduciary of a plan should also consider whether an investment in the securities might
constitute or give rise to a prohibited transaction under ERISA and the Code.
Employee benefit plans that are governmental plans,
as defined in Section 3(32) of ERISA, certain church plans, as defined in Section 3(33) of ERISA, and foreign plans,
as described in Section 4(b)(4) of ERISA (collectively, “Non-ERISA Arrangements”), are not subject to the
requirements of ERISA, or Section 4975 of the Code, but may be subject to similar rules under other applicable laws or regulations
(“Similar Laws”).
We and our affiliates may each be considered a
party in interest with respect to many plans. Special caution should be exercised, therefore, before the securities are purchased
by a plan. In particular, the fiduciary of the plan should consider whether statutory or administrative exemptive relief is available.
The U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide
exemptive relief for direct or indirect prohibited transactions resulting from the purchase or holding of the securities. Those
class exemptions are:
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PTCE 96-23, for specified transactions
determined by in-house asset managers;
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PTCE 95-60, for specified transactions
involving insurance company general accounts;
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PTCE 91-38, for specified transactions
involving bank collective investment funds;
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PTCE 90-1, for specified transactions
involving insurance company separate accounts; and
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PTCE 84-14, for specified transactions
determined by independent qualified professional asset managers.
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In addition, Section 408(b)(17) of ERISA
and Section 4975(d)(20) of the Code provide an exemption for transactions between a plan and a person who is a party in interest
(other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets
involved in the transaction or renders investment advice with respect thereto) solely by reason of providing services to the plan
(or by reason of a relationship to such a service provider), if in connection with the transaction of the plan receives no less,
and pays no more, than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA).
Any purchaser or holder of the securities or any
interest in the securities will be deemed to have represented by its purchase and holding that either:
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no portion
of the assets used by such purchaser or holder to acquire or purchase the securities constitutes assets of any plan or Non-ERISA
Arrangement; or
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the purchase
and holding of the securities by such purchaser or holder will not constitute a non-exempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code or similar violation under any Similar Laws.
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Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any plan consult with
their counsel regarding the potential consequences under ERISA and the Code of the acquisition of the securities and the availability
of exemptive relief.
The securities are contractual financial instruments.
The financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute or proxy
for, individualized investment management or advice for the benefit of any purchaser or holder of the securities. The securities
have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives of
any purchaser or holder of the securities.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Each purchaser or holder of the securities acknowledges
and agrees that:
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the purchaser or holder or its fiduciary has made and
shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied and shall not rely
in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (a) the design
and terms of the securities, (b) the purchaser or holder’s investment in the securities, or (c) the exercise of or failure
to exercise any rights we have under or with respect to the securities;
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(ii)
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we and our affiliates have acted and will act solely for
our own account in connection with (a) all transactions relating to the securities and (b) all hedging transactions in connection
with our obligations under the securities;
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(iii)
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any and all assets and positions relating to hedging transactions
by us or our affiliates are assets and positions of those entities and are not assets and positions held for the benefit of the
purchaser or holder;
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(iv)
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our interests may be adverse to the interests of the purchaser
or holder; and
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(v)
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neither we nor any of our affiliates is a fiduciary or
adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information that we
or any of our affiliates may provide is not intended to be impartial investment advice.
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Purchasers of the securities have the exclusive
responsibility for ensuring that their purchase, holding and subsequent disposition of the securities does not violate the fiduciary
or prohibited transaction rules of ERISA, the Code or any Similar Law. Nothing herein shall be construed as a representation that
an investment in the securities would be appropriate for, or would meet any or all of the relevant legal requirements with respect
to investments by, plans or Non-ERISA Arrangements generally or any particular plan or Non-ERISA Arrangement.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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United States Federal Tax Considerations
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The following is a discussion of the material U.S.
federal income and certain estate tax consequences of the ownership and disposition of the securities. It applies to you only if
you purchase a security for cash in the initial offering at the “issue price,” which is the first price at which a
substantial amount of the securities is sold to the public, and hold the security as a capital asset within the meaning of Section
1221 of the Code. It does not address all of the tax consequences that may be relevant to you in light of your particular circumstances
or if you are an investor subject to special rules, such as:
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a financial institution;
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a “regulated investment
company”;
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a tax-exempt entity, including
an “individual retirement account” or “Roth IRA”;
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a dealer or trader subject to
a mark-to-market method of tax accounting with respect to the securities;
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a person holding a security as
part of a “straddle” or conversion transaction or who has entered into a “constructive sale” with respect
to a security;
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a U.S. holder (as defined below)
whose functional currency is not the U.S. dollar; or
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an entity classified as a partnership
for U.S. federal income tax purposes.
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If an entity that is classified as a partnership
for U.S. federal income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner
in such a partnership, you should consult your tax adviser as to your particular U.S. federal tax consequences of holding and disposing
of the securities.
We will not attempt to ascertain whether any of
the issuers of the underlying stocks of the Indices (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, any
alternative minimum tax consequences, the potential application of the Medicare tax on investment income or the consequences to
taxpayers subject to special tax accounting rules under Section 451(b) of the Code. You should consult your tax adviser concerning
the application of U.S. federal income and estate tax laws to your particular situation (including the possibility of alternative
treatments of the securities), as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
Tax Treatment of the Securities
In the opinion of our counsel,
Davis Polk & Wardwell LLP, which is based on current market conditions, a security should be treated as a prepaid derivative
contract that is an “open transaction” for U.S. federal income tax purposes. By purchasing a security, you agree (in
the absence of an administrative determination or judicial ruling to the contrary) to this treatment.
Due to the absence of statutory,
judicial or administrative authorities that directly address the U.S. federal tax treatment of the securities or similar instruments,
significant aspects of the treatment of an investment in the securities are uncertain. We do not plan to request a ruling from
the IRS, and the IRS or a court might not agree with the treatment described below. Accordingly, you should consult your tax adviser
regarding all aspects of the U.S. federal income and estate tax consequences of an investment in the securities. Unless otherwise
indicated, the following discussion is based on the treatment of the securities as prepaid derivative contracts that are “open
transactions.”
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Tax Consequences to U.S. Holders
This section applies only to U.S. holders. You
are a “U.S. holder” if you are a beneficial owner of a security that is, for U.S. federal income tax purposes:
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a citizen or individual resident
of the United States;
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a corporation created or organized
in or under the laws of the United States, any state therein or the District of Columbia; or
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an estate or trust the income
of which is subject to U.S. federal income taxation regardless of its source.
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Tax Treatment Prior to Maturity. You should
not be required to recognize income over the term of the securities prior to maturity, other than pursuant to a sale, exchange
or retirement as described below.
Sale, Exchange or Retirement of the Securities.
Upon a sale, exchange or retirement of the securities, you should recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and your tax basis in the securities that are sold, exchanged or retired. Your tax
basis in the securities should equal the amount you paid to acquire them. This gain or loss should be long-term capital gain or
loss if at the time of the sale, exchange or retirement you held the securities for more than one year, and short-term capital
gain or loss otherwise. Long-term capital gains recognized by non-corporate U.S. holders are generally subject to taxation at reduced
rates. The deductibility of capital losses is subject to certain limitations.
Possible Alternative Tax Treatments of an
Investment in the Securities
Alternative U.S. federal income tax treatments
of the securities are possible that, if applied, could materially and adversely affect the timing and/or character of income, gain
or loss with respect to them. It is possible, for example, that the securities could be treated as debt instruments governed by
Treasury regulations relating to the taxation of contingent payment debt instruments. In that case, regardless of your method of
tax accounting for U.S. federal income tax purposes, you generally would be required to accrue income based on our comparable yield
for similar non-contingent debt, determined as of the time of issuance of the securities, in each year that you held the securities,
even though we are not required to make any payment with respect to the securities prior to maturity. In addition, any gain on
the sale, exchange or retirement of the securities would be treated as ordinary income.
Other possible U.S. federal income tax treatments
of the securities could also affect the timing and character of income or loss with respect to the securities. In 2007, the U.S.
Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments
to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character
of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime;
the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which
the instruments are linked; and whether these instruments are or should be subject to the “constructive ownership”
regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional
interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations
or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of
an investment in the securities, possibly with retroactive effect. You should consult your tax adviser regarding the possible alternative
treatments of an investment in the securities and the issues presented by this notice.
Tax Consequences to Non-U.S. Holders
This section applies only to non-U.S. holders.
You are a “non-U.S. holder” if you are a beneficial owner of a security that is, for U.S. federal income tax
purposes:
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an individual who is classified
as a nonresident alien;
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a foreign corporation; or
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a foreign estate or trust.
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You are not a non-U.S. holder for purposes of this
discussion if you are (i) an individual who is present in the United States for 183 days or more in the taxable year of disposition
or (ii) a former citizen or resident of the United States. If you are or may become such a person during the period in which you
hold a security, you should consult your tax adviser regarding the U.S. federal tax consequences of an investment in the securities.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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Sale, Exchange or Retirement of the Securities.
Subject to the possible application of Section 897 of the Code and the discussion below regarding Section 871(m), you generally
should not be subject to U.S. federal income or withholding tax in respect of amounts paid to you, provided that income in respect
of the securities is not effectively connected with your conduct of a trade or business in the United States.
If you are engaged in a U.S. trade or business,
and if income from the securities is effectively connected with the conduct of that trade or business, you generally will be subject
to regular U.S. federal income tax with respect to that income in the same manner as if you were a U.S. holder, unless an applicable
income tax treaty provides otherwise. If you are such a holder and you are a corporation, you should also consider the potential
application of a 30% (or lower treaty rate) branch profits tax.
Tax Consequences Under Possible Alternative
Treatments. If all or any portion of a security were recharacterized as a debt instrument, subject to the possible application
of Section 897 of the Code and the discussions below regarding FATCA and Section 871(m), any payment made to you with respect to
the security generally should not be subject to U.S. federal withholding or income tax, provided that: (i) income or gain in respect
of the security is not effectively connected with your conduct of a trade or business in the United States, and (ii) you provide
an appropriate IRS Form W-8 certifying under penalties of perjury that you are not a United States person.
Other U.S. federal income tax treatments of the
securities are also possible. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S.
federal income tax treatment of “prepaid forward contracts” and similar instruments. Among the issues addressed in
the notice is the degree, if any, to which income with respect to instruments such as the securities should be subject to U.S.
withholding tax. While the notice requests comments on appropriate transition rules and effective dates, it is possible that any
Treasury regulations or other guidance promulgated after consideration of these issues might materially and adversely affect the
withholding tax consequences of an investment in the securities, possibly with retroactive effect. Accordingly, you should consult
your tax adviser regarding the issues presented by the notice.
Possible Withholding Under Section 871(m) of
the Code. Section 871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”)
generally impose a 30% withholding tax on dividend equivalents paid or deemed paid to non-U.S. holders with respect to certain
financial instruments linked to U.S. equities (“U.S. underlying equities”) or indices that include U.S. underlying
equities. Section 871(m) generally applies to instruments that substantially replicate the economic performance of one or more
U.S. underlying equities, as determined based on tests set forth in the applicable Treasury regulations (a “specified
security”). However, the regulations, as modified by an IRS notice, exempt financial instruments issued prior to January
1, 2021 that do not have a “delta” of one. Based on the terms of the securities and representations provided by us,
our counsel is of the opinion that the securities should not be treated as transactions that have a “delta” of one
within the meaning of the regulations with respect to any U.S. underlying equity and, therefore, should not be specified securities
subject to withholding tax under Section 871(m).
A determination that the securities are not subject
to Section 871(m) is not binding on the IRS, and the IRS may disagree with this treatment. Moreover, Section 871(m) is complex
and its application may depend on your particular circumstances. For example, if you enter into other transactions relating to
a U.S. underlying equity, you could be subject to withholding tax or income tax liability under Section 871(m) even if the securities
are not specified securities subject to Section 871(m) as a general matter. You should consult your tax adviser regarding the potential
application of Section 871(m) to the securities.
In the event withholding applies, we will not be
required to pay any additional amounts with respect to amounts withheld.
U.S. Federal Estate Tax
If you are an individual non-U.S. holder or an
entity the property of which is potentially includible in such an individual’s 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.
Market Linked Securities—Contingent Fixed Return and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the Nasdaq-100 Index® and the Russell 2000® Index due February 11, 2021
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FATCA
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. entity’s jurisdiction may modify these requirements.
This legislation applies to certain financial instruments that are treated as paying U.S.-source interest, dividends or dividend
equivalents or other U.S.-source “fixed or determinable annual or periodical” income (“FDAP income”).
If required under FATCA, withholding applies to payments of FDAP income. While existing Treasury regulations would also require
withholding on payments of gross proceeds of the disposition (including upon retirement) of certain financial instruments treated
as paying U.S.-source interest or dividends, the U.S. Treasury Department has indicated in subsequent proposed regulations its
intent to eliminate this requirement. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations
pending their finalization. If the securities were treated as debt instruments or as subject to Section 871(m), 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.