Filed Pursuant to Rule 424(b)(2)
Registration No.
333-221324
The
information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement and
the accompanying prospectus supplement and prospectus are not an offer to sell these notes and we are not soliciting an offer
to buy these notes in any jurisdiction where the offer or sale is not permitted.
Subject To Completion, dated September 13, 2018
PRICING SUPPLEMENT No. 22 dated September , 2018
(To Prospectus Supplement dated January 24, 2018
and Prospectus dated April 27, 2018)
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Wells Fargo & Company
Medium-Term Notes, Series T
$
Fixed to Floating Rate Notes
Notes Linked to the 10-Year Constant Maturity Swap Rate
due September 26, 2028
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The notes have a term of ten years. The notes pay interest
quarterly at a rate that will be fixed at 5.00% per annum for the first two years and thereafter at a floating rate that will be
reset each quarter and will be equal to the 10-Year Constant Maturity Swap Rate plus 0.30%. All payments on the notes are subject
to the credit risk of Wells Fargo & Company. If Wells Fargo & Company defaults on its obligations, you could lose some
or all of your investment. The notes will not be listed on any exchange and are designed to be held to maturity.
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Issuer:
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Wells Fargo & Company (“
Wells Fargo
”)
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Original Offering Price:
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$1,000 per note. References in this pricing supplement to a “
note
” are to a note with a principal amount of $1,000.
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Pricing Date:
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September 21, 2018.*
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Issue Date:
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September 26, 2018.* (T+3)
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Stated Maturity Date:
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September 26, 2028.* The notes are not subject to redemption by Wells Fargo or repayment at the option of any holder of the notes prior to the stated maturity date.
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Payment at Maturity:
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A holder will be entitled to receive on the stated maturity date a cash payment in U.S. dollars equal to $1,000 per note, plus any accrued and unpaid interest.
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Interest Payment Dates:
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Each March 26, June 26, September 26 and December 26, commencing December 26, 2018, and at maturity.* Except as described below for the first interest period, on each interest payment date, interest will be paid for the period commencing on and including the immediately preceding interest payment date and ending on and including the day immediately preceding that interest payment date. This period is referred to as an “
interest period
.” The first interest period will commence on and include the issue date and end on and include December 25, 2018. Interest payable with respect to an interest period will be computed on the basis of a 360-day year of twelve 30-day months. If a scheduled interest payment date is not a business day, interest will be paid on the next business day, and interest on that payment will not accrue during the period from and after the scheduled interest payment date.
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Interest Rate:
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The interest rate that will apply during the first eight quarterly interest periods (up to and including the interest period ending September 25, 2020) will be equal to 5.00% per annum. For all interest periods commencing on or after September 26, 2020, the interest rate that will apply during an interest period will be equal to the 10-Year Constant Maturity Swap Rate on the interest determination date for such interest period plus 0.30%. As used herein, “10-Year Constant Maturity Swap Rate” or “10-Year CMS Rate” is the CMS rate, as defined herein and in the accompanying prospectus supplement and using a “designated maturity” of 10 years. See “Investment Description” herein and “Description of Notes—Floating Rate Notes—Base Rates—CMS Rate Notes” in the accompanying prospectus supplement for further information about the manner in which the 10-Year Constant Maturity Swap Rate will be determined.
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Interest Determination
Date:
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The “
interest determination date
” for an interest period commencing on or after September 26, 2020 will be the date that is two U.S. government securities business days prior to the first day of such interest period.
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Calculation Agent:
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Wells Fargo Securities, LLC
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Listing:
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The notes will not be listed on any securities exchange or automated quotation system.
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Denominations:
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$1,000 and any integral multiples of $1,000
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CUSIP Number:
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95001D2X7
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*
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To the extent that we make any change to the expected pricing date or expected issue date, the interest payment dates and stated maturity date may also be changed in our discretion to ensure that the term of the notes remains the same.
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On the date of this preliminary pricing supplement, the estimated value of the notes is approximately $969.92 per note. While the estimated value of the notes on the pricing date may differ from the estimated value set forth above, we do not expect it to differ significantly absent a material change in market conditions or other relevant factors. In no event will the estimated value of the notes on the pricing date be less than $939.92 per note. The estimated value of the notes was determined for us by Wells Fargo Securities, LLC using its proprietary pricing models. It is not an indication of actual profit to us or to Wells Fargo Securities, LLC or any of our other affiliates, nor is it an indication of the price, if any, at which Wells Fargo Securities, LLC or any other person may be willing to buy the notes from you at any time after issuance. See “Investment Description” in this pricing supplement.
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The notes have complex features and investing in the notes involves risks not associated with an investment in conventional debt securities. See “Risk Factors
”
on page PRS-5.
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The notes are unsecured obligations of Wells Fargo & Company, and all payments on the notes are subject to the credit risk of Wells Fargo & Company.
If
Wells Fargo & Company
defaults on its obligations, you could lose some or all of your investment.
The notes are not deposits or other obligations of a depository institution and are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other governmental agency of the United States or any other jurisdiction.
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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined if this pricing supplement or the accompanying prospectus supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Original Offering Price
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Agent Discount
(1)
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Proceeds to Wells Fargo
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Per Note
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$1,000.00
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$10.00
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$990.00
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Total
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(1)
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The agent discount will not be more than $10.00 per note. Wells Fargo Securities, LLC, a wholly owned subsidiary of Wells Fargo & Company, is the agent for the distribution of the notes and is acting as principal. See “Investment Description” in this pricing supplement for further information.
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Wells Fargo Securities
INVESTMENT DESCRIPTION
The Notes Linked to the 10-Year Constant Maturity Swap
Rate due September 26, 2028 are senior unsecured debt securities of Wells Fargo & Company and are part of a series entitled
“Medium-Term Notes, Series T.”
All payments on the notes are subject to the credit
risk of Wells Fargo.
The notes are designed for investors who seek fixed
interest rate payments equal to 5.00% per annum for the first two years and floating interest rate payments based on the 10-Year
Constant Maturity Swap Rate (the “
10-Year CMS Rate
”) thereafter. The 10-Year CMS Rate is, on any U.S. government
securities business day, the fixed rate of interest payable on a U.S. dollar interest rate swap with a 10-year maturity as reported
on Reuters page <ICESWAP1> (or any successor page thereto) as of 11:00 a.m., New York City time, on that day. An interest
rate swap rate, at any given time, generally indicates the fixed rate of interest (paid semi-annually) that a counterparty in the
swaps market would have to pay for a given maturity in order to receive a floating rate (paid quarterly) equal to 3 month LIBOR
for that same maturity. The 10-Year CMS Rate is one of the market-accepted indicators of longer term interest rates. ICE Benchmark
Administration Limited is the benchmark administrator of the 10-Year CMS Rate, and the official name of the 10-Year CMS Rate is
the “10-Year ICE Swap Rate.”
You should read this pricing supplement together with
the prospectus supplement dated January 24, 2018 and the prospectus dated April 27, 2018 for additional information about the notes.
When you read the accompanying prospectus supplement, please note that all references in such supplement to the prospectus dated
November 3, 2017, or to any sections therein, should refer instead to the accompanying prospectus dated April 27, 2018 or to the
corresponding sections of such prospectus, as applicable. Information included in this pricing supplement supersedes information
in the prospectus supplement and prospectus to the extent it is different from that information. Certain defined terms used but
not defined herein have the meanings set forth in the prospectus supplement.
You may access the prospectus supplement and prospectus
on the SEC website
i
www.sec.gov as follows (or if such address has changed,
by reviewing our filings for the relevant date on the SEC website):
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Prospectus Supplement dated January 24, 2018:
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https://www.sec.gov/Archives/edgar/data/72971/000119312518018274/d428281d424b2.htm
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Prospectus dated April 27, 2018:
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https://www.sec.gov/Archives/edgar/data/72971/000119312518136909/d557983d424b2.htm
The original offering price of each note of $1,000
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 original offering price. The costs included in the original 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 (i) the agent discount (if any), (ii) the projected profit that our hedge counterparty (which may
be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the notes and (iii) 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 our conventional debt
of the same maturity, as well as our liquidity needs and preferences. Our funding considerations are reflected in the fact that
we determine the economic terms of the notes based on an assumed funding rate that is generally lower than the interest rates implied
by secondary market prices for our debt obligations and/or by other traded instruments referencing our debt obligations, which
we refer to as our “secondary market rates.” As discussed below, our secondary market rates are used in determining
the estimated value of the notes.
If the costs relating to selling, structuring, hedging
and issuing the notes were lower, or if the assumed 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 estimated value of
the notes as of the pricing date will be set forth in the final pricing supplement.
Determining the
estimated value
Our affiliate, Wells Fargo Securities, LLC (“WFS”),
calculated the estimated value of the notes set forth on the cover page of this pricing supplement based on its proprietary pricing
models. Based on these pricing models and related market inputs and assumptions referred to in this section below, WFS determined
an estimated value for the 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”).
The estimated value of the debt component is based
on a reference interest rate, determined by WFS as of a recent date, that generally tracks our secondary market rates. Because
WFS does not continuously calculate our reference interest rate, the reference interest rate used in the calculation of the estimated
value of the debt component may be higher or lower than our secondary market rates at the time of that calculation. As noted above,
we determine the economic terms of the notes based upon an assumed funding rate that is generally lower than our secondary market
rates. In contrast, in determining the estimated value of the notes, we value the debt component using a reference interest rate
that generally tracks our secondary market rates. Because the reference interest rate is generally higher than the assumed funding
rate, using the reference interest rate to value the debt component generally results in a lower estimated value for the debt component,
which we believe more closely approximates a market valuation of the debt component than if we had used the assumed funding rate.
WFS calculated the estimated value of the derivative
component based on a proprietary derivative-pricing model, which generated a theoretical price for the derivative instruments that
constitute the derivative component based on various inputs, including the “derivative component factors” identified
in “Risk Factors—The Value Of The Notes Prior To Stated Maturity Will Be Affected By Numerous Factors, Some Of Which
Are Related In Complex Ways.” These inputs may be market-observable or may be based on assumptions made by WFS in its discretion.
The estimated value of the notes determined by WFS
is subject to important limitations. See “Risk Factors—The Estimated Value Of The Notes Is Determined By Our Affiliate’s
Pricing Models, Which May Differ From Those Of Other Dealers” and “—Our Economic Interests And Those Of Any Dealer
Participating In The Offering Are Potentially Adverse To Your Interests.”
Valuation of the
notes after issuance
The estimated value of the notes is not an indication
of the price, if any, at which WFS or any other person may be willing to buy the notes from you in the secondary market. The price,
if any, at which WFS or any of its affiliates may purchase the notes in the secondary market will be based upon WFS’s proprietary
pricing models and will fluctuate over the term of the notes due to changes in market conditions and other relevant factors. However,
absent changes in these market conditions and other relevant factors, except as otherwise described in the following paragraph,
any secondary market price will be lower than the estimated value on the pricing date because the secondary market price will be
reduced by a bid-offer spread, which may vary depending on the aggregate principal amount of the notes to be purchased in the secondary
market transaction, and the expected cost of unwinding any related hedging transactions. Accordingly, unless market conditions
and other relevant factors change significantly in your favor, any secondary market price for the notes is likely to be less than
the original offering price.
If WFS or any of its affiliates makes a secondary market
in the notes at any time up to the issue date or during the 6-month period following the issue date, the secondary market price
offered by WFS or any of its affiliates will be increased by an amount reflecting a portion of the costs associated with selling,
structuring, hedging and issuing the notes that are included in the original offering price. Because this portion of the costs
is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this period will
be higher than it would be if it were based solely on WFS’s proprietary pricing models less the bid-offer spread and hedging
unwind costs described above. The amount of this increase in the secondary market price will decline steadily to zero over this
6-month period. If you hold the notes through an account at WFS or any of its affiliates, we expect that this increase will also
be reflected in the value indicated for the notes on your brokerage account statement.
If WFS or any of its affiliates makes a secondary market
in the notes, WFS expects to provide those secondary market prices to any unaffiliated broker-dealers through which the notes are
held and to commercial pricing
vendors. If you hold your notes through an account at a broker-dealer other than WFS or any of its
affiliates, that broker-dealer may obtain market prices for the notes from WFS (directly or indirectly), but could also obtain
such market prices from other sources, and may be willing to purchase the notes at any given time at a price that differs from
the price at which WFS or any of its affiliates is willing to purchase the notes. As a result, if you hold your notes through an
account at a broker-dealer other than WFS or any of its affiliates, the value of the notes on your brokerage account statement
may be different than if you held your notes at WFS or any of its affiliates.
The notes will not be listed or displayed on any securities
exchange or any automated quotation system. Although WFS and/or its affiliates may buy the notes from investors, they are not obligated
to do so and are not required to make a market for the notes. There can be no assurance that a secondary market will develop.
RISK FACTORS
The notes have complex features and investing
in the notes will involve risks. You should carefully consider the risk factors set forth below as well as the other information
contained in the prospectus supplement and prospectus, including the documents they incorporate by reference. You should reach
an investment decision only after you have carefully considered with your advisors the suitability of an investment in the notes
in light of your particular circumstances.
The Amount Of Interest You Receive May Be
Less Than The Return You Could Earn On Other Investments.
Interest rates may change significantly over
the term of the notes, and it is impossible to predict what interest rates will be at any point in the future. Although the interest
rate on the notes will be equal to 5.00% per annum for the first two years and thereafter will be based on the 10-Year CMS Rate,
the interest rate that will apply at any time on the notes may be more or less than other prevailing market interest rates at such
time. As a result, the amount of interest you receive on the notes may be less than the return you could earn on other investments.
The CMS Rate Is Based On A Hypothetical Interest
Rate Swap Referencing 3 Month LIBOR; Uncertainty About The Future Of LIBOR May Adversely Affect The 10-Year CMS Rate And The Value
Of Your Notes.
The 10-Year CMS Rate represents the fixed rate
of interest payable on a hypothetical interest rate swap whose floating leg is based on 3 month LIBOR. On July 27, 2017, the Chief
Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading
or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates
that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether
and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms
to LIBOR may be enacted in the United Kingdom or elsewhere. At this time, no consensus exists as to what rate or rates may become
accepted alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of LIBOR, and therefore,
the value of, and the method of calculating, the 10-Year CMS Rate. Uncertainty as to the nature of alternative reference rates
to LIBOR and as to potential changes or other reforms to LIBOR may adversely affect LIBOR rates, and therefore, the 10-Year CMS
Rate, during the term of the notes, which may adversely affect the value of the notes.
The Notes Are Subject To The Credit Risk Of
Wells Fargo.
The notes are our obligations and are not, either
directly or indirectly, an obligation of any third party. Any amounts payable under the notes are subject to our creditworthiness.
As a result, our actual and perceived creditworthiness may affect the value of the notes and, in the event we were to default on
our obligations, you may not receive any amounts owed to you under the terms of the notes.
An Investment In The Notes May Be More Risky
Than An Investment In Notes With A Shorter Term.
The notes have a term of ten years. By purchasing
notes with a longer term, you will bear greater exposure to fluctuations in interest rates than if you purchased a note with a
shorter term. In particular, you may be negatively affected if interest rates begin to rise because the interest rate applicable
to your notes during a particular interest period may be less than the amount of interest you could earn on other investments available
at such time. In addition, if you tried to sell your notes at such time, the value of your notes in any secondary market transaction
would also be adversely affected.
Holders Of The Notes Have Limited Rights Of
Acceleration.
Payment of principal on the notes may be accelerated
only in the case of payment defaults that continue for a period of 30 days or certain events of bankruptcy or insolvency, whether
voluntary or involuntary. If you purchase the notes, you will have no right to accelerate the payment of principal on the notes
if we fail in the performance of any of our obligations under the notes, other than the obligations to pay principal and interest
on the notes. See “Description of Notes—Events of Default and Covenant Breaches” in the accompanying prospectus
supplement.
Holders Of The Notes Could Be At Greater Risk
For Being Structurally Subordinated If We Convey, Transfer Or Lease All Or Substantially All Of Our Assets To One Or More Of Our
Subsidiaries.
Under the indenture, we may convey, transfer
or lease all or substantially all of our assets to one or more of our subsidiaries. In that event, third-party creditors of our
subsidiaries would have additional assets from which to recover on their claims while holders of the notes would be structurally
subordinated to creditors of our subsidiaries with respect to such assets. See “Description of Notes—Consolidation,
Merger or Sale” in the accompanying prospectus supplement.
The Estimated Value Of The Notes On The Pricing
Date, Based On WFS’s Proprietary Pricing Models, Will Be Less Than The Original Offering Price.
The original offering price of the notes 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 original offering price. The costs included in the original 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 (i) the agent discount (if any), (ii) the projected profit that our hedge counterparty (which may
be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the notes and (iii) hedging
and other costs relating to the offering of the notes. Our funding considerations are reflected in the fact that we determine the
economic terms of the notes based on an assumed funding rate that is generally lower than our secondary market rates. If the costs
relating to selling, structuring, hedging and issuing the notes were lower, or if the assumed 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 Estimated Value Of The Notes Is Determined
By Our Affiliate’s Pricing Models, Which May Differ From Those Of Other Dealers.
The estimated value of the notes was determined
for us by WFS using its proprietary pricing models and related market inputs and assumptions referred to above under “Investment
Description—Determining the estimated value.” Certain inputs to these models may be determined by WFS in its discretion.
WFS’s views on these inputs may differ from other dealers’ views, and WFS’s estimated value of the notes may
be higher, and perhaps materially higher, than the estimated value of the notes that would be determined by other dealers in the
market. WFS’s models and its inputs and related assumptions may prove to be wrong and therefore not an accurate reflection
of the value of the notes.
The Estimated Value Of The Notes Is Not An
Indication Of The Price, If Any, At Which WFS Or Any Other Person May Be Willing To Buy The Notes From You In The Secondary Market.
The price, if any, at which WFS or any of its
affiliates may purchase the notes in the secondary market will be based on WFS’s proprietary pricing models and will fluctuate
over the term of the notes as a result of changes in the market and other factors described in the next risk factor. Any such secondary
market price for the notes will also be reduced by a bid-offer spread, which may vary depending on the aggregate principal amount
of the notes to be purchased in the secondary market transaction, and the expected cost of unwinding any related hedging transactions.
Unless the factors described in the next risk factor change significantly in your favor, any such secondary market price for the
notes is likely to be less than the original offering price.
If WFS or any of its affiliates makes a secondary
market in the notes at any time up to the issue date or during the 6-month period following the issue date, the secondary market
price offered by WFS or any of its affiliates will be increased by an amount reflecting a portion of the costs associated with
selling, structuring, hedging and issuing the notes that are included in the original offering price. Because this portion of the
costs is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this period
will be higher than it would be if it were based solely on WFS’s proprietary pricing models less the bid-offer spread and
hedging unwind costs described above. The amount of this increase in the secondary market price will decline steadily to zero over
this 6-month period. If you hold through an account at WFS or any of its affiliates, we expect that this increase will also be
reflected in the value indicated for the notes on your brokerage account statement. If you hold your notes through an account at
a broker-dealer other than WFS or any of its affiliates, the value of the notes on your brokerage account statement may be different
than if you held your notes at WFS or any of its affiliates, as discussed above under “Investment Description.”
The Value Of The Notes Prior To Stated Maturity
Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the notes prior to stated maturity
will be affected by interest rates at that time and a number of other factors, some of which are interrelated in complex ways.
The effect of any one factor may be offset or magnified by the effect of another factor. The following factors, which we refer
to as the “derivative component factors”, are expected to affect the value of the notes. When we refer to the “
value
”
of your note, we mean the value that you could receive for your note if you are able to sell it in the open market before the stated
maturity date.
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The 10-Year CMS Rate.
The value of the notes prior to maturity will be influenced by the
level of forward rates for the 10-Year CMS Rate at that time.
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Interest Rates.
The value of the notes may be affected by changes in the interest rates
and in the yield curve in the U.S. markets.
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Time Remaining To Maturity.
The value of the notes at any given time prior to maturity will
likely be different from that which would be expected based on the then-current level of the 10-Year CMS Rate. This difference
will most likely reflect a discount due to expectations and uncertainty concerning the level of the 10-Year CMS Rate during the
period of time still remaining to the maturity date. In general, as the time remaining to maturity decreases, the value of the
notes will approach the amount payable at maturity.
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Volatility of the 10-Year CMS Rate.
Volatility is the term used to describe the size and
frequency of fluctuations in the level of the 10-Year CMS Rate. The value of the notes may be affected if the volatility of the
10-Year CMS Rate changes.
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In addition to the derivative component factors,
the value of the notes will be affected by actual or anticipated changes in our creditworthiness, as reflected in our secondary
market rates. You should understand that the impact of one of the factors specified above, such as a change in interest rates,
may offset some or all of any change in the value of the notes attributable to another factor, such as a change in the 10-Year
CMS Rate. Because several factors are expected to affect the value of the notes, changes in the 10-Year CMS Rate may not result
in a comparable change in the value of the notes.
The Notes Will Not Be Listed On Any Securities
Exchange And We Do Not Expect A Trading Market For The Notes To Develop.
The notes will not be listed or displayed on
any securities exchange or any automated quotation system. Although the agent and/or its affiliates may purchase the notes from
holders, they are not obligated to do so and are not required to make a market for the notes. There can be no assurance that a
secondary market will develop. Because we do not expect that any market makers will participate in a secondary market for the notes,
the price at which you may be able to sell your notes is likely to depend on the price, if any, at which the agent is willing to
buy your notes.
If a secondary market does exist, it may be limited.
Accordingly, there may be a limited number of buyers if you decide to sell your notes prior to stated maturity. This may affect
the price you receive upon such sale. Consequently, you should be willing to hold the notes to stated maturity.
Our Economic Interests And Those Of Any Dealer
Participating In The Offering Are Potentially Adverse To Your Interests.
You should be aware of the following ways in which
our economic interests and those of any dealer participating in the distribution of the notes, which we refer to as a “participating
dealer,” are potentially adverse to your interests as an investor in the notes. In engaging in certain of the activities
described below, our affiliates or any participating dealer or its affiliates may take actions that may adversely affect the value
of and your return on the notes, and in so doing they will have no obligation to consider your interests as an investor in the
notes. Our affiliates or any participating dealer or its affiliates may realize a profit from these activities even if investors
do not receive a favorable investment return on the notes.
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The calculation agent is our affiliate and may be required to make discretionary judgments that affect the return you receive on the notes.
WFS, which is our affiliate, will be the calculation agent for the notes. As calculation agent, WFS will determine the 10-Year CMS Rate in the event that the 10-Year CMS Rate is not determined by reference to the Reuters page <ICESWAP1> or reference
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bank quotations. In performing its functions, the fact that WFS is our affiliate may cause it to have economic interests that are adverse to your interests as an investor in the notes, and WFS’s determinations as calculation agent may adversely affect your return on the notes.
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The estimated value of the notes was calculated by our affiliate and is therefore not an
independent third-party valuation.
WFS calculated the estimated value of the notes set forth on the cover page of this
pricing supplement, which involved discretionary judgments by WFS, as described under “Risk Factors—The Estimated Value
Of The Notes Is Determined By Our Affiliate's Pricing Models, Which May Differ From Those Of Other Dealers” above. Accordingly,
the estimated value of the notes set forth on the cover page of this pricing supplement is not an independent third-party valuation.
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A participating dealer or its affiliates may realize hedging profits projected by its proprietary
pricing models in addition to any selling concession, creating a further incentive for the participating dealer to sell the notes
to you.
If any participating dealer or any of its affiliates conducts hedging activities for us in connection with the
notes, that participating dealer or its affiliates will expect to realize a projected profit from such hedging activities and this
projected profit will be in addition to any concession that the participating dealer realizes for the sale of the notes to you.
This additional projected profit may create a further incentive for the participating dealer to sell the notes to you.
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The Resolution Of Wells Fargo Under The Orderly
Liquidation Authority Could Result In Greater Losses For Holders Of The Notes, Particularly If A Single-Point-Of-Entry Strategy
Is Used.
Your ability to recover the full amount that
would otherwise be payable on the notes in a proceeding under the U.S. Bankruptcy Code may be impaired by the exercise by the Federal
Deposit Insurance Corporation (the “
FDIC
”) of its powers under the “orderly liquidation authority”
under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “
Dodd-Frank Act
”).
In particular, the single point of entry strategy described below is intended to impose losses at the top-tier holding company
level in the resolution of a Global Systemically Important Bank (“
G-SIB
”) such as Wells Fargo.
Title II of the Dodd-Frank Act created a new
resolution regime known as the “orderly liquidation authority” to which financial companies, including bank holding
companies such as Wells Fargo, can be subjected. Under the orderly liquidation authority, the FDIC may be appointed as receiver
for a financial company for purposes of liquidating the entity if, upon the recommendation of applicable regulators, the United
States Secretary of the Treasury determines, among other things, that the entity is in severe financial distress, that the entity’s
failure would have serious adverse effects on the U.S. financial system and that resolution under the orderly liquidation authority
would avoid or mitigate those effects. Absent such determinations, Wells Fargo, as a bank holding company, would remain subject
to the U.S. Bankruptcy Code.
If the FDIC is appointed as receiver under the
orderly liquidation authority, then the orderly liquidation authority, rather than the U.S. Bankruptcy Code, would determine the
powers of the receiver and the rights and obligations of creditors and other parties who have transacted with Wells Fargo. There
are substantial differences between the rights available to creditors in the orderly liquidation authority and under the U.S. Bankruptcy
Code, including the right of the FDIC under the orderly liquidation authority to disregard the strict priority of creditor claims
in some circumstances (which would otherwise be respected by a bankruptcy court) and the use of an administrative claims procedure
to determine creditors’ claims (as opposed to the judicial procedure utilized in bankruptcy proceedings). In certain circumstances
under the orderly liquidation authority, the FDIC could elevate the priority of claims if it determines that doing so is necessary
to facilitate a smooth and orderly liquidation without the need to obtain the consent of other creditors or prior court review.
In addition, under the orderly liquidation authority, the FDIC has the right to transfer assets or liabilities of the failed company
to a third party or “bridge” entity.
The FDIC has announced that a “single point
of entry” strategy may be a desirable strategy to resolve a large financial institution such as Wells Fargo in a manner that
would, among other things, impose losses on shareholders, unsecured debt holders (including, in our case, holders of the notes)
and other creditors of the top-tier holding company (in our case, Wells Fargo), while permitting the holding company’s subsidiaries
to continue to operate. In addition, in December 2016, the Board of Governors of the Federal Reserve System (the “
FRB
”)
finalized rules requiring U.S. G-SIBs, including Wells Fargo, to maintain minimum amounts of long-term debt and total loss-absorbing
capacity (TLAC). It is possible that the application of the single point of entry strategy—in which Wells Fargo would be
the only legal entity to enter resolution proceedings—could result in greater losses to holders of the notes than the losses
that would result from the application of a bankruptcy proceeding or a different resolution strategy for Wells Fargo. Assuming
Wells Fargo entered resolution proceedings and that support from Wells Fargo
to its subsidiaries was sufficient to enable the subsidiaries
to remain solvent, losses at the subsidiary level could be transferred to Wells Fargo and ultimately borne by Wells Fargo’s
security holders (including holders of the notes and our other unsecured debt securities), with the result that third-party creditors
of Wells Fargo’s subsidiaries would receive full recoveries on their claims, while Wells Fargo’s security holders (including
holders of the notes) and other unsecured creditors could face significant losses. In that case, Wells Fargo’s security holders
could face significant losses while the third-party creditors of Wells Fargo’s subsidiaries would incur no losses because
the subsidiaries would continue to operate and would not enter resolution or bankruptcy proceedings. In addition, holders of the
notes and other debt securities of Wells Fargo could face losses ahead of our other similarly situated creditors in a resolution
under the orderly liquidation authority if the FDIC exercised its right, described above, to disregard the strict priority of creditor
claims.
The orderly liquidation authority also requires
that creditors and shareholders of the financial company in receivership must bear all losses before taxpayers are exposed to any
losses, and amounts owed by the financial company or the receivership to the U.S. government would generally receive a statutory
payment priority over the claims of private creditors, including senior creditors such as claims in respect of the notes. In addition,
under the orderly liquidation authority, claims of creditors (including holders of the notes) could be satisfied through the issuance
of equity or other securities in a bridge entity to which Wells Fargo’s assets are transferred. If securities were to be
delivered in satisfaction of claims, there can be no assurance that the value of the securities of the bridge entity would be sufficient
to repay all or any part of the creditor claims for which the securities were exchanged.
While the FDIC has issued regulations to implement
the orderly liquidation authority, not all aspects of how the FDIC might exercise this authority are known and additional rulemaking
is possible.
The Resolution Of Wells Fargo In A Bankruptcy
Proceeding Could Also Result In Greater Losses For Holders Of Our Debt Securities, Including The Notes.
As required by the Dodd-Frank Act and regulations
issued by the FRB and the FDIC, we are required to provide to the FRB and the FDIC a plan for our rapid and orderly resolution
in the event of material financial distress affecting Wells Fargo or the failure of Wells Fargo. The strategy described in our
most recently filed resolution plan is a “multiple point of entry” strategy, in which Wells Fargo, Wells Fargo Bank,
National Association (“
WFBNA
”) and Wells Fargo Securities, LLC (“
WFS
”) would each undergo
separate resolution proceedings under the U.S. Bankruptcy Code, the Federal Deposit Insurance Act, and the Securities Investor
Protection Act, respectively. To further the orderly resolution of its businesses and those of its subsidiaries, Wells Fargo may
provide capital and liquidity resources to certain of its major subsidiaries (such as WFBNA and WFS) during any period of distress,
including through the forgiveness of intercompany indebtedness, the making of additional intercompany loans and by other means.
These subsidiaries may enter into separate resolution proceedings even after receiving capital and liquidity resources from Wells
Fargo. It is possible that creditors of some or all of Wells Fargo’s major subsidiaries would receive significant, or even
full, recoveries on their claims while holders of Wells Fargo’s debt securities (including holders of the notes) could face
significant or complete losses. It is also possible that holders of Wells Fargo’s debt securities (including holders of the
notes) could face greater losses than if the multiple point of entry strategy had not been implemented and Wells Fargo had not
provided capital and liquidity resources to major subsidiaries that enter separate resolution proceedings because assets and other
resources provided to those subsidiaries would not be available to pay Wells Fargo’s creditors (including holders of the
notes and Wells Fargo’s other debt securities).
For our next resolution plan submission, we have
made a decision to move to a single point of entry strategy, in which Wells Fargo would be resolved under the U.S. Bankruptcy Code
using a strategy in which only Wells Fargo itself enters proceedings while some or all of its operating subsidiaries are maintained
as going concerns. In this case, the effects on creditors of Wells Fargo would likely be similar to those arising under the orderly
liquidation authority, as described above. We are not obligated to maintain either a single point of entry or multiple point of
entry strategy, and the strategies reflected in our resolution plan submissions are not binding in the event of an actual resolution
of Wells Fargo, whether conducted under the U.S. Bankruptcy Code or by the FDIC under the orderly liquidation authority. To carry
out such a single point of entry strategy, Wells Fargo may seek to recapitalize its subsidiaries or provide them with liquidity
in order to preserve them as going concerns prior to the commencement of Wells Fargo’s bankruptcy proceeding. Moreover, Wells
Fargo could seek to elevate the priority of its guarantee obligations relating to its major subsidiaries’ derivatives contracts
over its other obligations, so that cross-default and early termination rights under derivatives contracts at its subsidiaries
would be stayed under the ISDA Resolution Stay Protocol. This elevation would result in holders of our debt securities (including
the notes) incurring losses ahead of the beneficiaries of those guarantee obligations. It is also possible that holders of our
debt securities (including the notes) could incur losses ahead of other similarly situated creditors.
In response to the regulators’ guidance
and to facilitate the orderly resolution of Wells Fargo using either a single point of entry or multiple point of entry resolution
strategy, on June 28, 2017, Wells Fargo entered into a Support Agreement with WFC Holdings, LLC, an intermediate holding company
and subsidiary of Wells Fargo (the “
IHC
”), and WFBNA, WFS, and Wells Fargo Clearing Services, LLC (“
WFCS
”),
each an indirect subsidiary of Wells Fargo (the “
Support Agreement
”). Pursuant to the Support Agreement, Wells
Fargo transferred a significant amount of its assets, including the majority of its cash, deposits, liquid securities and intercompany
loans (but excluding its equity interests in its subsidiaries and certain other assets), to the IHC and will continue to transfer
those types of assets to the IHC from time to time. In the event of Wells Fargo’s material financial distress or failure,
the IHC will be obligated to use the transferred assets to provide capital and/or liquidity to WFBNA pursuant to the Support Agreement
and to WFS and WFCS through repurchase facilities entered into in connection with the Support Agreement. Under the Support Agreement,
the IHC will also provide funding and liquidity to Wells Fargo through subordinated notes and a committed line of credit, which,
together with the issuance of dividends, is expected to provide Wells Fargo, during business as usual operating conditions, with
the same access to cash necessary to service its debts, pay dividends, repurchase its shares and perform its other obligations
as it would have if it had not entered into these arrangements and transferred any assets. If certain liquidity and/or capital
metrics fall below defined triggers, the subordinated notes would be forgiven and the committed line of credit would terminate,
which could materially and adversely impact Wells Fargo’s liquidity and its ability to satisfy its debts and other obligations,
and could result in the commencement of bankruptcy proceedings by Wells Fargo at an earlier time than might have otherwise occurred
if the Support Agreement were not implemented. Wells Fargo’s and the IHC’s respective obligations under the Support
Agreement are secured pursuant to a related security agreement.
If either resolution strategy proved to be unsuccessful,
holders of our debt securities (including the notes) may as a consequence be in a worse position than if the strategy had not been
implemented. In all cases, any payments to holders of our debt securities are dependent on our ability to make such payments and
are therefore subject to our credit risk.
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a discussion of the material
U.S. federal income and certain estate tax consequences of the ownership and disposition of the notes. It applies to you only if
you purchase a note for cash in the initial offering at the “
issue price
,” which is the first price at which
a substantial amount of the notes is sold to the public, and hold the note as a capital asset within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the “
Code
”). It does not address all of the tax consequences
that may be relevant to you in light of your particular circumstances or if you are an investor subject to special rules, such
as:
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a financial institution;
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a “regulated investment company”;
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a “real estate investment trust”;
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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 notes;
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a person holding a note as part of a “straddle” or conversion transaction or who has entered into a “constructive
sale” with respect to a note;
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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 notes, 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 notes or a partner in
such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing
of the notes to you.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, 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 net 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 the U.S. federal income and estate tax laws to your particular situation, as well as any tax consequences arising
under the laws of any state, local or non-U.S. jurisdiction.
Tax Treatment of the Notes
In the opinion of our counsel, Davis Polk &
Wardwell LLP, the notes should be treated as “variable rate debt instruments” that provide for a single fixed rate
followed by a qualified floating rate (“QFR”) for U.S. federal income tax purposes.
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 note 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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Qualified Stated Interest and Original Issue
Discount
. If a debt instrument’s stated redemption price at maturity exceeds its issue price by an amount that does not
satisfy a de minimis test, the excess will be treated as original issue discount (“
OID
”) for U.S. federal income
tax purposes. Under applicable Treasury Regulations, the “
stated redemption price at maturity
” of a debt instrument
generally will equal the sum of all payments required under the
debt instrument other than payments of qualified stated interest
(“
QSI
”). QSI generally includes stated interest unconditionally payable (other than in debt instruments of the
issuer) at least annually at a single rate.
In order to determine the amount of QSI and OID
(if any) in respect of the notes, an equivalent fixed rate debt instrument must be constructed. The equivalent fixed rate debt
instrument is constructed in the following manner: (i) first, the initial fixed rate is converted to a QFR that would preserve
the fair market value of the notes, and (ii) second, each QFR (including the QFR determined under (i) above) is converted to a
fixed rate substitute (which will generally be the value of that QFR as of the issue date of the notes). Then, the rules described
in the preceding paragraph will apply to the equivalent fixed rate debt instrument to determine the amount of QSI and OID on the
notes. Under these rules, the notes will generally be treated as providing for QSI at a rate equal to the lowest rate of interest
in effect at any time under the equivalent fixed rate debt instrument, and any interest in excess of that rate will generally be
treated as part of the stated redemption price at maturity and, therefore, as giving rise to OID.
QSI on the notes generally will be taxable to
you as ordinary interest income at the time it accrues or is received in accordance with your method of tax accounting. You will
be required to include the OID, if any, in income for federal income tax purposes as it accrues, in accordance with a constant-yield
method based on a compounding of interest. If the notes are not issued with OID, all stated interest on the notes will be treated
as QSI and will be taxable to you as ordinary interest income at the time it accrues or is received in accordance with your method
of tax accounting. If the amount of interest you receive on the notes in a calendar year is greater than the interest assumed to
be paid or accrued under the equivalent fixed rate debt instrument, the excess is treated as additional QSI taxable to you as ordinary
income. Otherwise, any difference will reduce the amount of QSI you are treated as receiving and will therefore reduce the amount
of ordinary income you are required to take into income.
Information regarding the determination of QSI
and the amount of OID, if any, on the notes may be obtained by submitting a written request to us at: Wells Fargo Securities, LLC,
Investment Solutions Group, 375 Park Avenue, New York, NY 10152.
Sale, Exchange or Retirement of the Notes.
Upon a sale, exchange or retirement of the notes, you generally will recognize capital gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (other than amounts attributable to accrued QSI, which will be treated
as a payment of QSI) and your tax basis in the notes. Your tax basis in the notes generally will equal the amount you paid to acquire
them, increased by the amount of OID (if any) previously included in income with respect to the notes and reduced by any payments
other than QSI received. Such gain or loss generally will be long-term capital gain or loss if, at the time of the sale, exchange
or retirement, you held the notes 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.
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 note 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,
(ii) a former citizen or resident of the United States or (iii) a person for whom income or gain in respect of the notes is effectively
connected with the conduct of a trade or business in the United States. If you are or may become such a person during the period
in which you hold a note, you should consult your tax adviser regarding the U.S. federal tax consequences of an investment in the
notes.
Subject to the discussion below concerning FATCA,
you generally will not be subject to U.S. federal income or withholding tax in respect of the notes, provided that:
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you do not own, directly or by attribution, ten percent or more of the total combined voting power of all classes of our stock
entitled to vote;
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you are not a controlled foreign corporation related, directly or indirectly, to us through stock ownership;
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you are not a bank receiving interest under Section 881(c)(3)(A) of the Code; and
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you provide to the applicable withholding agent an appropriate Internal Revenue Service (“
IRS
”) Form W-8
on which you certify under penalties of perjury that you are not a U.S. person.
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U.S. Federal Estate Tax
Individual non-U.S. holders and entities 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)
should consider the U.S. federal estate tax implications of an investment in the notes. Absent an applicable treaty benefit, a
note will be treated as U.S.-situs property subject to U.S. federal estate tax if payments on the note if received by the decedent
at the time of death would have been subject to U.S. federal withholding tax as described above (even if the Form W-8 certification
requirement described above were satisfied and not taking into account an elimination of such U.S. federal withholding tax due
to the application of an income tax treaty). You should consult your tax adviser regarding the U.S. federal estate tax consequences
of an investment in the notes in your particular situation and the availability of benefits provided by an applicable estate tax
treaty, if any.
Backup Withholding and Information Reporting
Information returns generally will be filed with
the IRS with respect to payments of interest (including OID, if any) on the notes and may be filed with the IRS in connection with
the payment of proceeds from a sale, exchange or other disposition of the notes. 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, you may also be
subject to backup withholding at the rate specified in the Code. If you are a non-U.S. holder that provides an appropriate IRS
Form W-8, you will generally establish an exemption from backup withholding. Amounts withheld under the backup withholding rules
are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the relevant
information is timely furnished to the IRS.
FATCA Legislation
Legislation commonly referred to as “
FATCA
”
generally imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with respect
to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied.
An intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
Withholding under these rules (if applicable) applies to payments of amounts treated as interest (including OID, if any) on the
notes and, after 2018, to payments of gross proceeds of the disposition (including upon retirement) of the notes. If withholding
applies to the notes, we will not be required to pay any additional amounts with respect to amounts withheld. Both U.S. and non-U.S.
holders should consult their tax advisers regarding the potential application of FATCA to the notes.
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 notes.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Wells Fargo Securities, LLC, a wholly owned subsidiary
of Wells Fargo & Company, is the agent for the distribution of the notes. The agent may resell the notes to other securities
dealers at the original offering price of the notes less a concession not in excess of $10.00 per note. Such securities dealers
may include Wells Fargo Advisors (the trade name of the retail brokerage business of our affiliates, Wells Fargo Clearing Services,
LLC and Wells Fargo Advisors Financial Network, LLC).
The agent or another affiliate of ours expects
to realize hedging profits projected by its proprietary pricing models to the extent it assumes the risks inherent in hedging our
obligations under the notes. If any dealer participating in the distribution of the notes or any of its affiliates conducts hedging
activities for us in connection with the notes, that dealer or its affiliate will expect to realize a profit projected by its proprietary
pricing models from such hedging activities. Any such projected profit will be in addition to any discount or concession received
in connection with the sale of the notes to you.