Filed Pursuant to Rule 424(b)(2)
File No. 333-221324
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Title of Each Class of
Securities Offered
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Maximum Aggregate
Offering Price
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Amount of
Registration Fee
(1)
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Medium-Term Notes, Series S, Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
®
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$514,000
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$63.99
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(1)
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The total filing fee of $63.99 is calculated in accordance with Rule 457(r) of the Securities Act of 1933 (the “Securities Act”) and will be paid by wire transfer within the time required by Rule 456(b) of the Securities Act.
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PRICING SUPPLEMENT No. 127 dated September 12, 2018
(To Market Measure Supplement dated May 18, 2018,
Prospectus Supplement dated January 24, 2018
and Prospectus dated April 27, 2018)
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Wells Fargo & Company
Medium-Term
Notes, Series S
Equity Index Linked Securities
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Market Linked Securities—Callable
with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the
Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial
Average
®
due September 18, 2023
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Linked to the
lowest performing
of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
(each referred to as an “Index”)
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The securities are redeemable debt securities of Wells Fargo & Company that, unlike ordinary debt securities, do not provide for fixed payments of interest and do not repay a fixed amount of principal at stated maturity. Whether the securities pay a contingent coupon and whether you are repaid the original offering price of your securities at stated maturity (if Wells Fargo & Company does not exercise its redemption right) will depend in each case on the closing level of the lowest performing Index on the relevant calculation day. The lowest performing Index on any calculation day is the Index that has the lowest closing level on that calculation day as a percentage of its starting level
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Contingent Coupon.
The securities will pay a contingent coupon at the applicable contingent coupon rate on a quarterly basis until the earlier of stated maturity or early redemption if,
and only if
, the closing level of the lowest performing Index on the calculation day for that quarter is greater than or equal to its coupon threshold level. However, if the closing level of the lowest performing Index on a calculation day is less than its coupon threshold level, you will not receive any contingent coupon for the relevant quarter. If the closing level of the lowest performing Index is less than its coupon threshold level on every calculation day, you will not receive any contingent coupons throughout the entire term of the securities. The
coupon threshold level
for each Index is equal to 65% of its starting level. The applicable contingent coupon rate that will apply with respect to any calculation day is as follows:
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For the quarterly calculation days scheduled in Year 1:
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6.30% per annum
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For the quarterly calculation days scheduled in Year 2:
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7.30% per annum
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For the quarterly calculation days scheduled in Year 3:
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8.30% per annum
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For the quarterly calculation days scheduled in Year 4:
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9.30% per annum
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For the quarterly calculation days scheduled in Year 5:
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10.30% per annum
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Optional Redemption.
Wells Fargo & Company may, at its option, redeem the securities on any contingent coupon payment date beginning approximately one year after issuance. If Wells Fargo & Company elects to redeem the securities prior to maturity, you will receive the original offering price plus a final contingent coupon payment, if any
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Potential Loss of Principal.
If Wells Fargo & Company does not redeem the securities prior to stated maturity, you will receive the original offering price at stated maturity if,
and only if
, the closing level of the lowest performing Index on the final calculation day is greater than or equal to its downside threshold level. If the closing level of the lowest performing Index on the final calculation day is less than its downside threshold level, you will lose more than 40%, and possibly all, of the original offering price of your securities. The
downside threshold level
for each Index is equal to 60% of its starting level
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If the securities are not redeemed prior to stated maturity, you will have full downside exposure to the lowest performing Index from its starting level if its closing level on the final calculation day is less than its downside threshold level, but you will not participate in any appreciation of any Index and will not receive any dividends on securities included in any Index
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Your return on the securities will depend
solely
on the performance of the Index that is the lowest performing Index on each calculation day. You will not benefit in any way from the performance of the better performing Indices. Therefore, you will be adversely affected if
any
Index performs poorly, even if the other Indices perform favorably
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All payments on the securities are subject to the credit risk of Wells Fargo & Company, and you will have no ability to pursue any securities included in any Index for payment; if Wells Fargo & Company defaults on its obligations, you could lose some or all of your investment
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No exchange listing; designed to be held to maturity
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On the date of this pricing supplement,
the estimated value of the securities is $959.63 per security. The estimated value of the securities was determined for us by Wells
Fargo Securities, LLC using its proprietary pricing models. It is not an indication of actual profit to us or to Wells Fargo Securities,
LLC or any of our other affiliates, nor is it an indication of the price, if any, at which Wells Fargo Securities, LLC or any other
person may be willing to buy the securities from you at any time after issuance. See “Investment Description” in this
pricing supplement.
The securities have complex features
and investing in the securities involves risks not associated with an investment in conventional debt securities. See “Risk
Factors” herein on page PRS-12.
The securities are unsecured obligations
of Wells Fargo & Company, and all payments on the securities are subject to the credit risk of Wells Fargo & Company. If
Wells Fargo & Company defaults on its obligations, you could lose some or all of your investment. The securities are not deposits
or other obligations of a depository institution and are not insured by the Federal Deposit Insurance Corporation, the Deposit
Insurance Fund or any other governmental agency of the United States or any other jurisdiction.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this pricing supplement
or the accompanying market measure supplement, prospectus supplement and prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
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Original Offering Price
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Agent Discount
(1)
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Proceeds to Wells Fargo
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Per Security
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$1,000.00
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$13.75
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$986.25
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Total
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$514,000.00
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$7,067.50
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$506,932.50
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(1)
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Wells Fargo Securities, LLC, a wholly owned subsidiary of Wells Fargo & Company, is the agent
for the distribution of the securities and is acting as principal. See “Investment Description” in this pricing supplement
for further information.
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Wells Fargo Securities
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
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Issuer:
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Wells Fargo & Company (“
Wells Fargo
”).
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Market
Measures:
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The S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
(each referred to as an “
Index
,” and collectively as the “
Indices
”).
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Pricing Date:
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September 12, 2018.
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Issue Date:
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September 17, 2018. (T+3)
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Original
Offering Price:
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$1,000 per security. References in this pricing supplement to a “
security
” are to a security with a face amount of $1,000.
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Contingent
Coupon
Payment:
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On each contingent coupon payment date,
you will receive a contingent coupon payment at a per annum rate equal to the contingent coupon rate if,
and only if
, the
closing level of the lowest performing Index on the related calculation day is greater than or equal to its coupon threshold level.
Each “
contingent coupon payment
,”
if any, will be calculated per security as follows: ($1,000 × applicable contingent coupon rate)/4. Any contingent coupon
payment will be rounded to the nearest cent, with one-half cent rounded upward.
If the closing level of the lowest
performing Index on any calculation day is less than its coupon threshold level, you will not receive any contingent coupon payment
on the related contingent coupon payment date. If the closing level of the lowest performing Index is less than its coupon threshold
level on all quarterly calculation days, you will not receive any contingent coupon payments over the term of the securities.
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Contingent
Coupon
Payment
Dates:
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Quarterly, on the third business day following each calculation day (as each such calculation day may be postponed pursuant to “—Postponement of a Calculation Day” below, if applicable), provided that the contingent coupon payment date with respect to the final calculation day will be the stated maturity date. If a calculation day is postponed with respect to one or more Indices, the related contingent coupon payment date will be three business days after the last calculation day as postponed. If a contingent coupon payment date is postponed, the contingent coupon payment, if any, due on that contingent coupon payment date will be made on that contingent coupon payment date as so postponed with the same force and effect as if it had been made on the originally scheduled contingent coupon payment date, that is, with no additional amount accruing or payable as a result of the postponement.
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Applicable
Contingent
Coupon Rate:
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The “
applicable contingent coupon
rate
” that will apply with respect to any calculation day is as follows:
For the calculation days scheduled to
occur from December 2018 to September 2019: 6.30% per annum
For the calculation days scheduled to
occur from December 2019 to September 2020: 7.30% per annum
For the calculation days scheduled to
occur from December 2020 to September 2021: 8.30% per annum
For the calculation days scheduled to
occur from December 2021 to September 2022: 9.30% per annum
For the calculation days scheduled to
occur from December 2022 to September 2023: 10.30% per annum
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Optional
Redemption:
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Wells Fargo may, at its option, redeem
the securities, in whole but not in part, on any optional redemption date. If Wells Fargo elects to redeem the securities prior
to stated maturity, you will be entitled to receive on the applicable optional redemption date a cash payment per security in U.S.
dollars equal to the original offering price per security plus a final contingent coupon payment, if any.
If Wells Fargo elects to redeem the securities
on an optional redemption date, Wells Fargo will give you notice on or before the calculation day immediately preceding that optional
redemption date. Any redemption of the securities will be at Wells Fargo’s option and will not automatically occur based
on the performance of any Index.
If the securities are redeemed, they will
cease to be outstanding on the applicable optional redemption date and you will have no further rights under the securities after
that date.
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Calculation
Days:
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Quarterly, on the 13
th
day of each March, June, September and December commencing December 2018 and ending June 2023, and the final calculation day, each subject to postponement as described below under “—Postponement of a Calculation Day.” We refer to September 13, 2023 as the “
final calculation day
.”
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Optional
Redemption
Dates:
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Quarterly, beginning approximately one year after the issue date, on the contingent coupon payment dates following each calculation day scheduled to occur from September 2019 to June 2023, inclusive.
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Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
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Stated
Maturity
Date:
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September 18, 2023. If the final calculation day is postponed, the stated maturity date will be the later of (i) September 18, 2023 and (ii) three business days after the last final calculation day as postponed. See “—Postponement of a Calculation Day” below. If the stated maturity date is not a business day, the payment to be made on the stated maturity date will be made on the next succeeding business day with the same force and effect as if it had been made on the stated maturity date. The securities are not subject to repayment at the option of any holder of the securities prior to the stated maturity date.
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Maturity
Payment
Amount:
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If Wells Fargo does not redeem the securities
prior to the stated maturity date, you will be entitled to receive on the stated maturity date a cash payment per security in U.S.
dollars equal to the maturity payment amount (in addition to the final contingent coupon payment, if any). The “
maturity
payment amount
” per security will equal:
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if
the ending level of the lowest performing Index on the final calculation day is greater than or equal to its downside threshold
level: $1,000; or
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if
the ending level of the lowest performing Index on the final calculation day is less than its downside threshold level:
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$1,000 × performance factor of the lowest performing Index on the final calculation day
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If Wells Fargo does not redeem the
securities prior to stated maturity and the ending level of the lowest performing Index on the final calculation day is less than
its downside threshold level, you will lose more than 40%, and possibly all, of the original offering price of your securities
at stated maturity.
Any return on the securities will be
limited to the sum of your contingent coupon payments, if any. You will not participate in any appreciation of any Index, but you
will have full downside exposure to the lowest performing Index on the final calculation day if the ending level of that Index
is less than its downside threshold level.
All calculations with respect to the maturity
payment amount will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., 0.000005 would
be rounded to 0.00001); and the maturity payment amount will be rounded to the nearest cent, with one-half cent rounded upward.
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Lowest
Performing
Index:
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For any calculation day, the “
lowest performing Index
” will be the Index with the lowest performance factor on that calculation day (as such calculation day may be postponed for one or more Indices pursuant to “—Postponement of a Calculation Day” below, if applicable).
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Performance
Factor:
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With respect to an Index on any calculation day, its closing level on such calculation day
divided by
its starting level (expressed as a percentage).
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Closing Level:
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With respect to each Index, the “
closing level
” of that Index on any trading day means the official closing level of that Index reported by the relevant index sponsor on such trading day, as obtained by the calculation agent on such trading day from the licensed third-party market data vendor contracted by the calculation agent at such time; in particular, taking into account the decimal precision and/or rounding convention employed by such licensed third-party market data vendor on such date. Currently, the calculation agent obtains market data from Thomson Reuters Ltd., but the calculation agent may change its market data vendor at any time without notice. The foregoing provisions of this definition of “closing level” are subject to the provisions set forth below under “Additional Terms of the Securities—Market Disruption Events,” “—Adjustments to an Index” and “—Discontinuance of an Index.”
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Starting Level:
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With respect to the S&P 500 Index:
2888.92, its closing level on the pricing date.
With respect to the Russell 2000 Index:
1715.696, its closing level on the pricing date.
With respect to the Dow Jones Industrial
Average: 25998.92, its closing level on the pricing date.
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Ending Level:
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The “
ending level
” of an Index will be its closing level on the final calculation day.
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Coupon
Threshold
Level:
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With respect to the S&P 500 Index:
1877.798, which is equal to 65% of its starting level.
With respect to the Russell 2000 Index:
1115.2024, which is equal to 65% of its starting level.
With respect to the Dow Jones Industrial
Average: 16899.298, which is equal to 65% of its starting level.
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Downside
Threshold
Level:
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With respect to the S&P 500 Index:
1733.352, which is equal to 60% of its starting level.
With respect to the Russell 2000 Index:
1029.4176, which is equal to 60% of its starting level.
With respect to the Dow Jones Industrial
Average: 15599.352, which is equal to 60% of its starting level.
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Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
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Postponement
of a
Calculation
Day:
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If any calculation day is not a trading day with respect to any Index, such calculation day for each Index will be postponed to the next succeeding day that is a trading day with respect to each Index. A calculation day for an Index is also subject to postponement due to the occurrence of a market disruption event with respect to such Index on such calculation day. See “Additional Terms of the Securities—Market Disruption Events.”
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Calculation
Agent:
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Wells Fargo Securities, LLC
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No Listing:
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The securities will not be listed on any securities exchange or automated quotation system.
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Material Tax
Consequences:
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For a discussion of the material U.S. federal income and certain estate tax consequences of the ownership and disposition of the securities, see “United States Federal Tax Considerations.”
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Agent:
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Wells Fargo Securities, LLC, a wholly
owned subsidiary of Wells Fargo & Company. The agent may resell the securities to other securities dealers at the original
offering price of the securities less a concession not in excess of $13.75 per security.
The agent or another affiliate of ours
expects to realize hedging profits projected by its proprietary pricing models to the extent it assumes the risks inherent in hedging
our obligations under the securities. If any dealer participating in the distribution of the securities or any of its affiliates
conducts hedging activities for us in connection with the securities, that dealer or its affiliate will expect to realize a profit
projected by its proprietary pricing models from such hedging activities. Any such projected profit will be in addition to any
discount or concession received in connection with the sale of the securities to you.
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Denominations:
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$1,000 and any integral multiple of $1,000.
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CUSIP:
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95001B6Y5
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Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
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The Principal at Risk Securities Linked to the Lowest
Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023 (the “
securities
”) are senior unsecured debt securities of Wells Fargo that do not provide
for fixed payments of interest, do not repay a fixed amount of principal at stated maturity and are subject to redemption by Wells
Fargo beginning approximately one year after issuance. Whether the securities pay a quarterly contingent coupon and, if the securities
are not previously redeemed by Wells Fargo, whether you are repaid the original offering price of your securities at stated maturity
will depend in each case upon the closing level of the
lowest performing Index
on the relevant calculation day. The lowest
performing Index on any calculation day is the Index that has the lowest closing level on that calculation day as a percentage
of its starting level. The securities provide:
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(i)
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quarterly contingent coupon payments at the applicable contingent coupon rate (6.30% per annum
for year 1, 7.30% per annum for year 2, 8.30% per annum for year 3, 9.30% per annum for year 4 and 10.30% per annum for year 5)
until the earlier of stated maturity or early redemption if,
and only if
, the closing level of the lowest performing Index
on the applicable quarterly calculation day is greater than or equal to 65% of its starting level;
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(ii)
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early redemption
solely
at the option of Wells Fargo beginning approximately one year after
issuance for the original offering price plus a final contingent coupon payment, if any; and
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(iii)
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if Wells Fargo does not redeem the securities prior to stated maturity, either:
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(a)
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repayment of the original offering price if,
and only if
, the closing level of the lowest
performing Index on the final calculation day has not declined by more than 40% from its starting level; or
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(b)
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full exposure to the decline in the level of the lowest performing Index on the final calculation
day from its starting level if the lowest performing Index has declined by more than 40% from its starting level.
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If the closing level of the lowest performing
Index on any quarterly calculation day is less than 65% of its starting level, you will not receive any contingent coupon payment
for that quarter. If the securities are not redeemed prior to stated maturity and the closing level of the lowest performing Index
on the final calculation day has declined by more than 40% from its starting level, you will lose more than 40%, and possibly all,
of the original offering price of your securities at stated maturity. Accordingly, you will not receive any protection if the closing
level of the lowest performing Index on the final calculation day has declined by more than 40% from its starting level.
Any return on the securities will be limited
to the sum of your contingent coupon payments, if any. You will not participate in any appreciation of any Index, but you will
be fully exposed to the decline in the lowest performing Index on the final calculation day if the securities are not redeemed
prior to stated maturity and the closing level of the lowest performing Index on the final calculation day has declined by more
than 40% from its starting level.
All payments on the securities are subject to
the credit risk of Wells Fargo.
Your return on the securities will depend solely
on the performance of the Index that is the lowest performing Index on each calculation day. You will not benefit in any way from
the performance of the better performing Indices. Therefore, you will be adversely affected if any Index performs poorly, even
if the other Indices perform favorably.
The securities are riskier than alternative
investments linked to only one of the Indices or linked to a basket composed of each Index. Unlike those alternative investments,
the securities will be subject to the full risks of each Index, with no offsetting benefit from the better performing Indices.
The securities are designed for investors who understand and are willing to bear this additional risk in exchange for the potential
contingent coupon payments that the securities offer. Because the securities may be adversely affected by poor performance by any
Index, you should not invest in the securities unless you understand and are willing to accept the full downside risks of each
Index.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
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The S&P
500
®
Index is an equity index that is intended to provide an indication of the pattern of common stock price movement
in the large capitalization segment of the United States equity market.
The Russell 2000
®
Index is an equity
index that is designed to reflect the performance of the small capitalization segment of the United States equity market.
The Dow Jones Industrial Average
®
is an equity index that is intended to provide an indication of the pattern of common stock price movement in the United States
equity market.
You should read this pricing supplement together
with the market measure supplement dated May 18, 2018, the prospectus supplement dated January 24, 2018 and the prospectus dated
April 27, 2018 for additional information about the securities. 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 market measure supplement, prospectus supplement and prospectus
to the extent it is different from that information. Certain defined terms used but not defined herein have the meanings set forth
in the prospectus supplement.
You may access the market measure supplement,
prospectus supplement and prospectus on the SEC website www.sec.gov as follows (or if such address has changed, by reviewing our
filing for the relevant date on the SEC website):
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•
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Market Measure Supplement dated May 18, 2018:
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https://www.sec.gov/Archives/edgar/data/72971/000119312518167616/d593569d424b2.htm
|
•
|
Prospectus Supplement dated January 24, 2018:
|
https://www.sec.gov/Archives/edgar/data/72971/000119312518018256/d466041d424b2.htm
|
•
|
Prospectus dated April 27, 2018:
|
https://www.sec.gov/Archives/edgar/data/72971/000119312518136909/d557983d424b2.htm
The S&P
500 Index is a product of S&P Dow Jones Indices LLC (“
SPDJI
”), and has been licensed for use by Wells Fargo &
Company (“
WFC
”). Standard & Poor’s
®
, S&P
®
and S&P 500
®
are registered trademarks of Standard & Poor’s Financial Services LLC (“
S&P
”); Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (“
Dow Jones
”); and these trademarks have been
licensed for use by SPDJI and sublicensed for certain purposes by WFC. The securities are not sponsored, endorsed, sold or promoted
by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability
of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
“Russell 2000
®
” and “FTSE
Russell” are trademarks of the London Stock Exchange Group companies, and have been licensed for use by 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.
Dow Jones Industrial Average
®
is a
registered trademark of Dow Jones Trademark Holdings LLC (“
Dow Jones Holdings
”) and has been licensed for use
by S&P Dow Jones Indices LLC (“
S&P Dow Jones Indices
”) and sublicensed for certain purposes by us. The
Dow Jones Industrial Average is a product of S&P Dow Jones Indices and has been licensed for use by us. The securities are
not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices, Dow Jones Holdings or their respective affiliates, and
neither S&P Dow Jones Indices, Dow Jones Holdings or their respective affiliates make any representation regarding the advisability
of investing in the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
The original offering price of each security of $1,000
includes certain costs that are borne by you. Because of these costs, the estimated value of the securities on the pricing date
is less than the original offering price. The costs included in the original offering price relate to selling, structuring, hedging
and issuing the securities, as well as to our funding considerations for debt of this type.
The costs related to selling, structuring, hedging
and issuing the securities include (i) the agent discount (if any), (ii) the projected profit that our hedge counterparty (which
may be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the securities and
(iii) hedging and other costs relating to the offering of the securities.
Our funding considerations take into account the
higher issuance, operational and ongoing management costs of market-linked debt such as the securities as compared to our conventional
debt of the same maturity, as well as our liquidity needs and preferences. Our funding considerations are reflected in the fact
that we determine the economic terms of the securities based on an assumed funding rate that is generally lower than the interest
rates implied by secondary market prices for our debt obligations and/or by other traded instruments referencing our debt obligations,
which we refer to as our “
secondary market rates
.” As discussed below, our secondary market rates are used in
determining the estimated value of the securities.
If the costs relating to selling, structuring,
hedging and issuing the securities were lower, or if the assumed funding rate we use to determine the economic terms of the securities
were higher, the economic terms of the securities would be more favorable to you and the estimated value would be higher. The estimated
value of the securities as of the pricing date is set forth on the cover page of this pricing supplement.
Determining the estimated value
Our affiliate, Wells Fargo Securities, LLC (“
WFS
”),
calculated the estimated value of the securities set forth on the cover page of this pricing supplement based on its proprietary
pricing models. Based on these pricing models and related market inputs and assumptions referred to in this section below, WFS
determined an estimated value for the securities by estimating the value of the combination of hypothetical financial instruments
that would replicate the payout on the securities, which combination consists of a non-interest bearing, fixed-income bond (the
“
debt component
”) and one or more derivative instruments underlying the economic terms of the securities (the
“
derivative component
”).
The estimated value of the debt component is based
on a reference interest rate, determined by WFS as of a recent date, that generally tracks our secondary market rates. Because
WFS does not continuously calculate our reference interest rate, the reference interest rate used in the calculation of the estimated
value of the debt component may be higher or lower than our secondary market rates at the time of that calculation. As noted above,
we determine the economic terms of the securities based upon an assumed funding rate that is generally lower than our secondary
market rates. In contrast, in determining the estimated value of the securities, we value the debt component using a reference
interest rate that generally tracks our secondary market rates. Because the reference interest rate is generally higher than the
assumed funding rate, using the reference interest rate to value the debt component generally results in a lower estimated value
for the debt component, which we believe more closely approximates a market valuation of the debt component than if we had used
the assumed funding rate.
WFS calculated the estimated value of the derivative
component based on a proprietary derivative-pricing model, which generated a theoretical price for the derivative instruments that
constitute the derivative component based on various inputs, including the “derivative component factors” identified
in “Risk Factors—The Value Of The Securities Prior To Stated Maturity Will Be Affected By Numerous Factors, Some Of
Which Are Related In Complex Ways.” These inputs may be market-observable or may be based on assumptions made by WFS in its
discretion.
The estimated value of the securities
determined by WFS is subject to important limitations. See “Risk Factors—The Estimated Value Of The Securities 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 securities after issuance
The estimated value of the securities is not an indication
of the price, if any, at which WFS or any other person may be willing to buy the securities from you in the secondary market. The
price, if any, at which WFS or any of its affiliates may purchase the securities in the secondary market will be based upon WFS’s
proprietary pricing models and will fluctuate over the term of the securities due to changes in market conditions and other relevant
factors. However, absent changes in these market conditions and other relevant factors, except as otherwise described in the following
paragraph, any secondary market price will be lower than the estimated value on the pricing date because the secondary market price
will be reduced by a bid-offer spread, which may vary depending on the aggregate face amount of the securities to be purchased
in the secondary market transaction, and the expected cost of unwinding any
related hedging transactions. Accordingly, unless market
conditions and other relevant factors change significantly in your favor, any secondary market price for the securities is likely
to be less than the original offering price.
If WFS or any of its affiliates makes a secondary
market in the securities at any time up to the issue date or during the 5-month period following the issue date, the secondary
market price offered by WFS or any of its affiliates will be increased by an amount reflecting a portion of the costs associated
with selling, structuring, hedging and issuing the securities that are included in the original offering price. Because this portion
of the costs is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this
period will be higher than it would be if it were based solely on 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
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
5-month period. If you hold the securities through an account at WFS or any of its affiliates, we expect that this increase
will also be reflected in the value indicated for the securities on your brokerage account statement.
If WFS or any of its affiliates makes a secondary
market in the securities, WFS expects to provide those secondary market prices to any unaffiliated broker-dealers through which
the securities are held and to commercial pricing vendors. If you hold your securities through an account at a broker-dealer other
than WFS or any of its affiliates, that broker-dealer may obtain market prices for the securities from WFS (directly or indirectly),
but could also obtain such market prices from other sources, and may be willing to purchase the securities at any given time at
a price that differs from the price at which WFS or any of its affiliates is willing to purchase the securities. As a result, if
you hold your securities through an account at a broker-dealer other than WFS or any of its affiliates, the value of the securities
on your brokerage account statement may be different than if you held your securities at WFS or any of its affiliates.
The securities will not be listed or displayed
on any securities exchange or any automated quotation system. Although WFS and/or its affiliates may buy the securities from investors,
they are not obligated to do so and are not required to make a market for the securities. There can be no assurance that a secondary
market will develop.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
We have designed the securities for investors who:
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seek an investment with contingent quarterly coupon
payments at the applicable contingent coupon rate (6.30% per annum for year 1, 7.30% per annum for year 2, 8.30% per annum for
year 3, 9.30% per annum for year 4 and 10.30% per annum for year 5), until the earlier of stated maturity or early redemption,
if,
and only if
, the closing level of the lowest performing Index on the applicable quarterly calculation day is greater
than or equal to 65% of its starting level;
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understand that if we do not exercise our redemption
right and the closing level of the lowest performing Index on the final calculation day has declined by more than 40% from its
starting level, they will be fully exposed to the decline in the lowest performing Index from its starting level and will lose
more than 40%, and possibly all, of the original offering price at stated maturity;
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are willing to accept the risk that they may not
receive any contingent coupon payment on one or more, or any, quarterly contingent coupon payment dates over the term of the securities;
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understand that we may redeem the securities prior
to stated maturity at our option beginning approximately one year after issuance and that it is more likely that we will redeem
the securities when it would otherwise be advantageous for you to continue to hold the securities;
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understand that the return on the securities will
depend solely on the performance of the Index that is the lowest performing Index on each calculation day and that they will not
benefit in any way from the performance of the better performing Indices;
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understand that the securities are riskier than
alternative investments linked to only one of the Indices or linked to a basket composed of each Index;
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understand and are willing to accept the full
downside risks of each Index;
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are willing to forgo participation in any appreciation
of any Index and dividends on securities included in the Indices; and
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are willing to hold the securities to maturity.
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The securities are not designed for, and may not
be a suitable investment for, investors who:
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seek a liquid investment or are unable or unwilling
to hold the securities to maturity;
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require full payment of the original offering
price of the securities at stated maturity;
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seek a security with a fixed term;
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are unwilling to purchase securities with an estimated
value as of the pricing date that is lower than the original offering price, as set forth on the cover page;
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are unwilling to accept the risk that the closing
level of the lowest performing Index on the final calculation day may decline by more than 40% from its starting level;
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seek certainty of current income over the term
of the securities;
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seek exposure to the upside performance of any
or each Index;
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seek exposure to a basket composed of each Index
or a similar investment in which the overall return is based on a blend of the performances of the Indices, rather than solely
on the lowest performing Index;
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are unwilling to accept the risk of exposure to
the large and small capitalization segments of the United States equity market;
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are unwilling to accept the credit risk of Wells
Fargo; or
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prefer the lower risk of conventional fixed income
investments with comparable maturities issued by companies with comparable credit ratings.
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Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Determining Payment On A Contingent Coupon Payment Date and at Maturity
|
Unless we have previously redeemed the securities,
on each quarterly contingent coupon payment date, you will either receive a contingent coupon payment or you will not receive a
contingent coupon payment, depending on the closing level of the lowest performing Index on the related quarterly calculation day.
Step 1
: Determine which Index is the lowest
performing Index on the relevant calculation day. The lowest performing Index on any calculation day is the Index with the lowest
performance factor on that calculation day. The performance factor of an Index on a calculation day is its closing level on that
calculation day as a percentage of its starting level (i.e., its closing level on that calculation day
divided by
its starting
level).
Step 2
: Determine whether a contingent
coupon is paid on the applicable contingent coupon payment date based on the closing level of the lowest performing Index on the
relevant calculation day, as follows:
On the stated maturity date, if we have not redeemed
the securities prior to the stated maturity date, you will receive (in addition to the final contingent coupon payment, if any)
a cash payment per security (the maturity payment amount) calculated as follows:
Step 1
: Determine which Index is the lowest
performing Index on the final calculation day. The lowest performing Index on the final calculation day is the Index with the lowest
performance factor on the final calculation day. The performance factor of an Index on the final calculation day is its ending
level as a percentage of its starting level (i.e., its ending level
divided by
its starting level).
Step 2
: Calculate the maturity payment
amount based on the ending level of the lowest performing Index, as follows:
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Hypothetical Payout Profile
|
The following profile illustrates the potential maturity
payment amount on the securities (excluding the final contingent coupon payment, if any) for a range of hypothetical performances
of the lowest performing Index on the final calculation day from its starting level to its ending level, assuming the securities
have not been redeemed prior to the stated maturity date. This graph has been prepared for purposes of illustration only. Your
actual return will depend on the actual ending level of the lowest performing Index on the final calculation day and whether you
hold your securities to stated maturity. The performance of the better performing Indices is not relevant to your return on the
securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
The securities have complex features and investing in
the securities will involve risks not associated with an investment in conventional debt securities. You should carefully consider
the risk factors set forth below as well as the other information contained in this pricing supplement and the accompanying market
measure supplement, prospectus supplement and prospectus, including the documents they incorporate by reference. As described in
more detail below, the value of the securities may vary considerably before the stated maturity date due to events that are difficult
to predict and are beyond our control. You should reach an investment decision only after you have carefully considered with your
advisors the suitability of an investment in the securities in light of your particular circumstances.
If We Do Not Redeem The Securities Prior to
Stated Maturity, You May Lose Some Or All Of The Original Offering Price Of Your Securities At Stated Maturity.
We will not repay you a fixed amount on your securities
at stated maturity. If we do not exercise our right to redeem the securities prior to stated maturity, you will receive a maturity
payment amount that will be equal to or less than the original offering price per security, depending on the ending level of the
lowest performing Index on the final calculation day.
If the ending level of the lowest performing Index
on the final calculation day is less than its downside threshold level, the maturity payment amount will be reduced by an amount
equal to the decline in the level of the lowest performing Index from its starting level (expressed as a percentage of its starting
level). The downside threshold level for each Index is 60% of its starting level. For example, if we do not redeem the securities
prior to stated maturity and the lowest performing Index on the final calculation day has declined by 40.1% from its starting level
to its ending level, you will not receive any benefit of the contingent downside protection feature and you will lose 40.1% of
the original offering price per security. As a result, you will not receive any protection if the level of the lowest performing
Index on the final calculation day declines significantly and you may lose some, and possibly all, of the original offering price
per security at stated maturity, even if the level of the lowest performing Index is greater than or equal to its starting level
or its downside threshold level at certain times during the term of the securities.
Even if the ending level of the lowest performing
Index on the final calculation day is greater than its downside threshold level, the maturity payment amount will not exceed the
original offering price, and your yield on the securities, taking into account any contingent coupon payments you may have received
during the term of the securities, may be less than the yield you would earn if you bought a traditional interest-bearing debt
security of Wells Fargo or another issuer with a similar credit rating.
The Securities Do Not Provide For Fixed Payments
Of Interest And You May Receive No Coupon Payments On One Or More Quarterly Contingent Coupon Payment Dates, Or Even Throughout
The Entire Term Of The Securities.
On each quarterly contingent coupon payment date
you will receive a contingent coupon payment if,
and only if
, the closing level of the lowest performing Index on the related
calculation day is greater than or equal to its coupon threshold level. The coupon threshold level for each Index is 65% of its
starting level. If the closing level of the lowest performing Index on any calculation day is less than its coupon threshold level,
you will not receive any contingent coupon payment on the related contingent coupon payment date, and if the closing level of the
lowest performing Index is less than its coupon threshold level on each calculation day over the term of the securities, you will
not receive any contingent coupon payments over the entire term of the securities.
The Securities Are Subject To The Full Risks
Of Each Index And Will Be Negatively Affected If Any Index Performs Poorly, Even If The Other Indices Perform Favorably.
You are subject to the full risks of each Index.
If any Index performs poorly, you will be negatively affected, even if the other Indices perform favorably. The securities are
not linked to a basket composed of the Indices, where the better performance of some Indices could offset the poor performance
of others. Instead, you are subject to the full risks of whichever Index is the lowest performing Index on each calculation day.
As a result, the securities are riskier than an alternative investment linked to only one of the Indices or linked to a basket
composed of each Index. You should not invest in the securities unless you understand and are willing to accept the full downside
risks of each Index.
Your Return On The Securities Will Depend Solely
On The Performance Of The Index That Is The Lowest Performing Index On Each Calculation Day, And You Will Not Benefit In Any Way
From The Performance Of The Better Performing Indices.
Your return on the securities will depend solely
on the performance of the Index that is the lowest performing Index on each calculation day. Although it is necessary for each
Index to close above its respective coupon threshold level on the relevant calculation day in order for you to receive a quarterly
contingent coupon payment and above its respective downside threshold level on the final calculation day for you to be repaid the
original offering price of your securities at maturity, you will not benefit in any way from the performance of the better performing
Indices. The securities may underperform an alternative investment linked to a basket composed of the Indices, since in such case
the performance of the better performing Indices would be blended with the performance of the lowest performing Index, resulting
in a better return than the return of the lowest performing Index alone.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
You Will Be Subject To Risks Resulting From
The Relationship Between The Indices.
It is preferable from your perspective for the
Indices to be correlated with each other so that their levels will tend to increase or decrease at similar times and by similar
magnitudes. By investing in the securities, you assume the risk that the Indices will not exhibit this relationship. The less correlated
the Indices, the more likely it is that any one of the Indices will be performing poorly at any time over the term of the securities.
All that is necessary for the securities to perform poorly is for one of the Indices to perform poorly; the performance of the
better performing Indices is not relevant to your return on the securities. It is impossible to predict what the relationship between
the Indices will be over the term of the securities. Although each Index represents the United States equity markets, it is important
to understand that they represent different segments of the United States equity markets. The S&P 500 Index represents the
large capitalization segment of the United States equity market, the Dow Jones Industrial Average represents the performance of
30 United States blue chip companies, and the Russell 2000 Index represents the small capitalization segment of the United States
equity market. These different equity markets may not perform similarly over the term of the securities.
You May Be Fully Exposed To The Decline In
The Lowest Performing Index On The Final Calculation Day From Its Starting Level, But Will Not Participate In Any Positive Performance
Of Any Index.
Even though you will be fully exposed to a decline
in the level of the lowest performing Index on the final calculation day if its ending level is below its downside threshold level,
you will not participate in any increase in the level of any Index over the term of the securities. Your maximum possible return
on the securities will be limited to the sum of the contingent coupon payments you receive, if any. Consequently, your return on
the securities may be significantly less than the return you could achieve on an alternative investment that provides for participation
in an increase in the level of any or each Index.
Higher Applicable Contingent Coupon Rates Are
Associated With Greater Risk.
The securities offer contingent coupon payments
at a higher rate, if paid, than the fixed rate we would pay on conventional debt securities of the same maturity. These higher
potential contingent coupon payments are associated with greater levels of expected risk as of the pricing date as compared to
conventional debt securities, including the risk that you may not receive a contingent coupon payment on one or more, or any, contingent
coupon payment dates and the risk that you may lose a substantial portion, and possibly all, of the original offering price per
security at maturity. The volatility of the Indices and the correlation among the Indices are important factors affecting this
risk. Volatility is a measurement of the size and frequency of daily fluctuations in the level of an Index, typically observed
over a specified period of time. Volatility can be measured in a variety of ways, including on a historical basis or on an expected
basis as implied by option prices in the market. Correlation is a measurement of the extent to which the levels of the Indices
tend to fluctuate at the same time, in the same direction and in similar magnitudes. Greater expected volatility of the Indices
or lower expected correlation among the Indices as of the pricing date may result in a higher applicable contingent coupon rate,
but it also represents a greater expected likelihood as of the pricing date that the closing level of at least one Index will be
less than its coupon threshold level on one or more calculation days, such that you will not receive one or more, or any, contingent
coupon payments during the term of the securities, and that the closing level of at least one Index will be less than its downside
threshold level on the final calculation day such that you will lose a substantial portion, and possibly all, of the original offering
price per security at maturity. In general, the higher the applicable contingent coupon rate is relative to the fixed rate we would
pay on conventional debt securities, the greater the expected risk that you will not receive one or more, or any, contingent coupon
payments during the term of the securities and that you will lose a substantial portion, and possibly all, of the original offering
price per security at maturity.
Our Redemption Right May Limit Your Potential
To Receive Contingent Coupon Payments.
We may, at our option, redeem the securities on
any contingent coupon payment date beginning approximately one year after issuance. Although exercise of the redemption right will
be within our sole discretion, we will be more likely to redeem the securities at a time when the lowest performing Index is performing
favorably from your perspective—in other words, at a time when, if the securities were to remain outstanding, it is more
likely that you would have continued to receive contingent coupon payments and been repaid the original offering price at maturity.
Therefore, our redemption right is likely to limit your potential to receive contingent coupon payments if the lowest performing
Index is performing favorably from your perspective. As a result, you may not receive any contingent coupon payments at the higher
applicable contingent coupon rates that apply only after the first year. On the other hand, we will be less likely to redeem the
securities at a time when the lowest performing Index is performing unfavorably from your perspective—in other words, you
are more likely to continue to hold the securities at a time when it is less likely that you will continue to receive contingent
coupon payments and it is less likely that you will be repaid the original offering price at maturity.
If we exercise our redemption right, the term
of the securities may be reduced to as short as approximately one year. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the securities at a comparable return for a similar level of risk in the event we redeem the
securities prior to maturity.
The Securities Are Subject To The Credit Risk
Of Wells Fargo.
The securities are our obligations and are not,
either directly or indirectly, an obligation of any third party. Any amounts payable under the securities are subject to our creditworthiness,
and you will have no ability to pursue any securities included in any Index for payment. As a result, our actual and perceived
creditworthiness may affect the value of the securities and, in the event we were to default on our obligations, you may not receive
any amounts owed to you under the terms of the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Holders Of
The Securities Have Limited Rights Of Acceleration.
Payment of principal on the securities 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 securities, you will have no right to accelerate the payment of principal
on the securities if we fail in the performance of any of our obligations under the securities, other than the obligations to pay
principal and interest on the securities. See “Description of Notes—Events of Default and Covenant Breaches”
in the accompanying prospectus supplement.
Holders Of The Securities 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 securities 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 Securities On The
Pricing Date, Based On WFS’s Proprietary Pricing Models, Is Less Than The Original Offering Price.
The original offering price of the securities
includes certain costs that are borne by you. Because of these costs, the estimated value of the securities on the pricing date
is less than the original offering price. The costs included in the original offering price relate to selling, structuring, hedging
and issuing the securities, as well as to our funding considerations for debt of this type. The costs related to selling, structuring,
hedging and issuing the securities include (i) the agent discount (if any), (ii) the projected profit that our hedge counterparty
(which may be one of our affiliates) expects to realize for assuming risks inherent in hedging our obligations under the securities
and (iii) hedging and other costs relating to the offering of the securities. Our funding considerations are reflected in the fact
that we determine the economic terms of the securities based on an assumed funding rate that is generally lower than our secondary
market rates. If the costs relating to selling, structuring, hedging and issuing the securities were lower, or if the assumed funding
rate we use to determine the economic terms of the securities were higher, the economic terms of the securities would be more favorable
to you and the estimated value would be higher.
The Estimated Value Of The Securities Is Determined
By Our Affiliate’s Pricing Models, Which May Differ From Those Of Other Dealers.
The estimated value of the securities was determined
for us by WFS using its proprietary pricing models and related market inputs and assumptions referred to above under “Investment
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 securities
may be higher, and perhaps materially higher, than the estimated value of the securities that would be determined by other dealers
in the market. 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 securities.
The Estimated Value Of The Securities Is Not
An Indication Of The Price, If Any, At Which WFS Or Any Other Person May Be Willing To Buy The Securities From You In The Secondary
Market.
The price, if any, at which WFS or any of its
affiliates may purchase the securities in the secondary market will be based on WFS’s proprietary pricing models and will
fluctuate over the term of the securities as a result of changes in the market and other factors described in the next risk factor.
Any such secondary market price for the securities will also be reduced by a bid-offer spread, which may vary depending on the
aggregate face amount of the securities to be purchased in the secondary market transaction, and the expected cost of unwinding
any related hedging transactions. Unless the factors described in the next risk factor change significantly in your favor, any
such secondary market price for the securities is likely to be less than the original offering price.
If WFS or any of its affiliates makes a secondary
market in the securities at any time up to the issue date or during the 5-month period following the issue date, the secondary
market price offered by WFS or any of its affiliates will be increased by an amount reflecting a portion of the costs associated
with selling, structuring, hedging and issuing the securities that are included in the original offering price. Because this portion
of the costs is not fully deducted upon issuance, any secondary market price offered by WFS or any of its affiliates during this
period will be higher than it would be if it were based solely on 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 5-month period. If you hold the securities through an account at WFS or any of its affiliates, we expect that this increase
will also be reflected in the value indicated for the securities on your brokerage account statement. If you hold your securities
through an account at a broker-dealer other than WFS or any of its affiliates, the value of the securities on your brokerage account
statement may be different than if you held your securities at WFS or any of its affiliates, as discussed above under “Investment
Description—Valuation of the securities after issuance.”
The Value Of The Securities Prior To Stated
Maturity Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the securities prior to stated
maturity will be affected by the then-current level of each Index, interest rates at that time and a number of other factors, some
of which are interrelated in complex ways. The effect of any one factor may be offset or magnified by the effect of another factor.
The following factors, which we refer to as the “
derivative component factors
,” are expected to affect the value
of the securities. When we refer to the “
value
” of your security, we mean the value you could receive for your
security if you are able to sell it in the open market before the stated maturity date.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
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Performance of the Indices.
The value of the securities prior to maturity will depend substantially on the then-current level of each Index. The price at which
you may be able to sell the securities before stated maturity may be at a discount, which could be substantial, from their original
offering price, if the level of the lowest performing Index at such time is less than, equal to or not sufficiently above its starting
level, its coupon threshold level or its downside threshold level.
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Interest Rates.
The value
of the securities may be affected by changes in the interest rates in the U.S. markets.
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Volatility Of The Indices.
Volatility is the term used to describe the size and frequency of market fluctuations. The value of the securities may be affected
if the volatility of the Indices changes.
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Correlation Among The Indices.
Correlation refers to the extent to which the levels of the Indices tend to fluctuate at the same time, in the same direction and
in similar magnitudes. The correlation among the Indices may be positive, zero or negative. The value of the securities is
likely to decrease if the correlation among the Indices decreases.
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Time Remaining To Maturity.
The value of the securities at any given time prior to maturity will likely be different from that which would be expected based
on the then-current levels of the Indices. This difference will most likely reflect a discount due to expectations and uncertainty
concerning the levels of the Indices during the period of time still remaining to the stated maturity date.
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Dividend Yields On Securities
Included In The Indices.
The value of the securities may be affected by the dividend yields on securities included in the Indices.
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In addition to the derivative component factors,
the value of the securities will be affected by actual or anticipated changes in our creditworthiness, as reflected in our secondary
market rates. The value of the securities will also be limited by our redemption right because if we redeem the securities, you
will not receive the contingent coupon payments that would have accrued, if any, after the early redemption. 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 securities attributable to another factor, such as a change in the level of any or all of the Indices. Because
numerous factors are expected to affect the value of the securities, changes in the level of the Indices may not result in a comparable
change in the value of the securities.
The Securities Will Not Be Listed On Any Securities
Exchange And We Do Not Expect A Trading Market For The Securities To Develop.
The securities will not be listed or displayed
on any securities exchange or any automated quotation system. Although the agent and/or its affiliates may purchase the securities
from holders, they are not obligated to do so and are not required to make a market for the securities. There can be no assurance
that a secondary market will develop. Because we do not expect that any market makers will participate in a secondary market for
the securities, the price at which you may be able to sell your securities is likely to depend on the price, if any, at which the
agent is willing to buy your securities.
If a secondary market does exist, it may be limited.
Accordingly, there may be a limited number of buyers if you decide to sell your securities prior to stated maturity. This may affect
the price you receive upon such sale. Consequently, you should be willing to hold the securities to stated maturity.
Historical Levels Of The Indices Should Not
Be Taken As An Indication Of The Future Performance Of The Indices During The Term Of The Securities.
The trading prices of the securities included
in the Indices will determine the levels of the Indices and, therefore, the amount payable to you at maturity and whether contingent
coupon payments will be made. As a result, it is impossible to predict whether the closing levels of the Indices will fall or rise
compared to their respective starting levels. Trading prices of the securities included in the Indices will be influenced by complex
and interrelated political, economic, financial and other factors that can affect the markets in which those securities are traded
and the values of those securities themselves. Accordingly, any historical levels of the Indices do not provide an indication of
the future performance of the Indices.
Changes That Affect The Indices May Adversely
Affect The Value Of The Securities And The Amount You Will Receive At Stated Maturity.
The policies of an index sponsor concerning
the calculation of the relevant Index and the addition, deletion or substitution of securities comprising such Index and the manner
in which an index sponsor takes account of certain changes affecting such securities may affect the level of such Index and, therefore,
may affect the value of the securities, the amount payable at maturity and whether contingent coupon payments will be made. An
index sponsor may discontinue or suspend calculation or dissemination of the relevant Index or materially alter the methodology
by which it calculates such Index. Any such actions could adversely affect the value of the securities.
We Cannot Control Actions By Any Of The
Unaffiliated Companies Whose Securities Are Included In The Indices.
Actions by any company whose securities are
included in an Index may have an adverse effect on the price of its security, the closing level of such Index on any calculation
day, the ending level of such Index and the value of the securities. We are currently one of the companies included in the S&P
500 Index, but we are not affiliated with any of the other companies included in any Index. These unaffiliated companies will not
be involved in the offering of the securities and will have no obligations with respect to the securities, including any obligation
to take our or your interests into consideration for any reason. These companies will not receive any of the proceeds of the offering
of the securities and will not be responsible for, and will not have participated in, the determination of the timing of, prices
for, or quantities of, the securities to be issued. These companies will not be involved with the administration, marketing or
trading of the securities and will have no obligations with respect to any amounts to be paid to you on the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
We And Our Affiliates Have No Affiliation
With Any Index Sponsor And Have Not Independently Verified Their Public Disclosure Of Information.
We and our affiliates are not affiliated in any
way with any index sponsor and have no ability to control or predict their actions, including any errors in or discontinuation
of disclosure regarding the methods or policies relating to the calculation of the applicable Index. We have derived the information
about the index sponsors and the Indices contained in this pricing supplement and the accompanying market measure supplement from
publicly available information, without independent verification. You, as an investor in the securities, should make your own investigation
into each Index and the index sponsors. The index sponsors are not involved in the offering of the securities made hereby in any
way and have no obligation to consider your interests as an owner of the securities in taking any actions that might affect the
value of the securities.
An Investment In The Securities Is Subject
To Risks Associated With Investing In Stocks With A Small Market Capitalization.
The stocks that constitute the Russell 2000 Index
are issued by companies with relatively small market capitalization. These companies often have greater stock price volatility,
lower trading volume and less liquidity than large capitalization companies. As a result, the Russell 2000 Index may be more volatile
than that of an equity index that does not track solely small capitalization stocks. Stock prices of small capitalization companies
are also generally more vulnerable than those of large capitalization companies to adverse business and economic developments,
and the stocks of small capitalization companies may be thinly traded, and be less attractive to many investors if they do not
pay dividends. In addition, small capitalization companies are typically less well-established and less stable financially than
large capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of those
individuals. Small capitalization companies tend to have lower revenues, less diverse product lines, smaller shares of their target
markets, fewer financial resources and fewer competitive strengths than large capitalization companies. These companies may also
be more susceptible to adverse developments related to their products or services.
A Contingent Coupon Payment Date, An Optional
Redemption Date And The Stated Maturity Date May Be Postponed If A Calculation Day Is Postponed.
A calculation day (including the final calculation
day) with respect to an Index will be postponed if the applicable originally scheduled calculation day is not a trading day with
respect to any Index or if the calculation agent determines that a market disruption event has occurred or is continuing with respect
to that Index on that calculation day. If such a postponement occurs with respect to a calculation day other than the final calculation
day, then the related contingent coupon payment date or optional redemption date, as applicable, will be postponed. If such a postponement
occurs with respect to the final calculation day, the stated maturity date will be the later of (i) the initial stated maturity
date and (ii) three business days after the last final calculation day as postponed.
Our Economic Interests And Those Of Any Dealer
Participating In The Offering Are Potentially Adverse To Your Interests.
You should be aware of the following ways in which
our economic interests and those of any dealer participating in the distribution of the securities, which we refer to as a “
participating
dealer
,” are potentially adverse to your interests as an investor in the securities. In engaging in certain of the activities
described below, our affiliates or any participating dealer or its affiliates may take actions that may adversely affect the value
of and your return on the securities, and in so doing they will have no obligation to consider your interests as an investor in
the securities. Our affiliates or any participating dealer or its affiliates may realize a profit from these activities even if
investors do not receive a favorable investment return on the securities.
|
●
|
We will exercise our rights
under the securities without taking your interests into account.
We may, at our option, redeem the securities on any contingent
coupon payment date beginning approximately one year after issuance. Any redemption of the securities will be at our option and
will not automatically occur based on the performance of any Index. As described under “Risk Factors—Our Redemption
Right May Limit Your Potential To Receive Contingent Coupon Payments” above, we are more likely to redeem the securities
at a time when it would otherwise be advantageous for you to continue to hold the securities, and we are less likely to redeem
the securities at a time when it would otherwise be advantageous to you for us to exercise our redemption right.
|
|
●
|
The calculation agent is
our affiliate and may be required to make discretionary judgments that affect the return you receive on the securities.
WFS,
which is our affiliate, will be the calculation agent for the securities. As calculation agent, WFS will determine the closing
level of each Index on each calculation day, the ending level of each Index and whether you receive a contingent coupon payment
on a contingent coupon payment date and may be required to make other determinations that affect the return you receive on the
securities. In making these determinations, the calculation agent may be required to make discretionary judgments, including determining
whether a market disruption event has occurred with respect to any Index on a scheduled calculation day, which may result in postponement
of that calculation day with respect to that Index; determining the closing level of an Index if a calculation day is postponed
with respect to that Index to the last day to which it may be postponed and a market disruption event occurs with respect to that
Index on that day; if an Index is discontinued, selecting a successor index or, if no successor index is available, determining
the closing level of that Index on any calculation day and the ending level of that Index; and determining whether to adjust the
closing level of an Index on a calculation day in the event of certain changes in or modifications to that Index. In making these
discretionary judgments, the fact that WFS is our affiliate may cause it to have economic interests that are adverse to your interests
as an investor in the securities, and WFS’s determinations as calculation agent may adversely affect your return on the securities.
|
|
●
|
The estimated value of the securities was calculated by our affiliate and is therefore not an independent third-party valuation.
WFS calculated the estimated value of the securities set forth on the cover page of this pricing
|
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
|
|
supplement, which involved discretionary judgments by WFS, as described under “Risk Factors—The Estimated Value Of The Securities Is Determined By Our Affiliate’s Pricing Models, Which May Differ From Those Of Other Dealers” above. Accordingly, the estimated value of the securities set forth on the cover page of this pricing supplement is not an independent third-party valuation.
|
|
●
|
Research reports by our
affiliates or any participating dealer or its affiliates may be inconsistent with an investment in the securities and may adversely
affect the levels of the Indices.
Our affiliates or any participating dealer in the offering of the securities or its
affiliates may, at present or in the future, publish research reports on the Indices or the companies whose securities are included
in an Index. This research is modified from time to time without notice and may, at present or in the future, express opinions
or provide recommendations that are inconsistent with purchasing or holding the securities. Any research reports on the Indices
or the companies whose securities are included in an Index could adversely affect the level of the applicable Index and, therefore,
could adversely affect the value of and your return on the securities. You are encouraged to derive information concerning the
Indices from multiple sources and should not rely on the views expressed by us or our affiliates or any participating dealer or
its affiliates. In addition, any research reports on the Indices or the companies whose securities are included in an Index published
on or prior to the pricing date could result in an increase in the levels of the Indices on the pricing date, which would adversely
affect investors in the securities by increasing the level at which each Index must close on each calculation day (including the
final calculation day) in order for investors in the securities to receive a favorable return.
|
|
●
|
Business activities of our
affiliates or any participating dealer or its affiliates with the companies whose securities are included in an Index may adversely
affect the level of such Index.
Our affiliates or any participating dealer or its affiliates may, at present or in the
future, engage in business with the companies whose securities are included in an Index, including making loans to those companies
(including exercising creditors’ remedies with respect to such loans), making equity investments in those companies or providing
investment banking, asset management or other advisory services to those companies. These business activities could adversely affect
the level of such Index and, therefore, could adversely affect the value of and your return on the securities. In addition, in
the course of these business activities, our affiliates or any participating dealer or its affiliates may acquire non-public information
about one or more of the companies whose securities are included in an Index. If our affiliates or any participating dealer or
its affiliates do acquire such non-public information, we and they are not obligated to disclose such non-public information to
you.
|
|
●
|
Hedging activities by our
affiliates or any participating dealer or its affiliates may adversely affect the levels of the Indices.
We expect to hedge
our obligations under the securities through one or more hedge counterparties, which may include our affiliates or any participating
dealer or its affiliates. Pursuant to such hedging activities, our hedge counterparties may acquire securities included in an Index
or listed or over-the-counter derivative or synthetic instruments related to the Indices or such securities. Depending on, among
other things, future market conditions, the aggregate amount and the composition of such positions are likely to vary over time.
To the extent that our hedge counterparties have a long hedge position in any of the securities included in an Index, or derivative
or synthetic instruments related to the Indices or such securities, they may liquidate a portion of such holdings at or about the
time of a calculation day or at or about the time of a change in the securities included in the Indices. These hedging activities
could potentially adversely affect the levels of the Indices and, therefore, could adversely affect the value of and your return
on the securities.
|
|
●
|
Trading activities by our
affiliates or any participating dealer or its affiliates may adversely affect the levels of the Indices.
Our affiliates
or any participating dealer or its affiliates may engage in trading in the securities included in an Index and other instruments
relating to the Indices or such securities on a regular basis as part of their general broker-dealer and other businesses. Any
of these trading activities could potentially adversely affect the levels of the Indices and, therefore, could adversely affect
the value of and your return on the securities.
|
|
●
|
A participating dealer or
its affiliates may realize hedging profits projected by its proprietary pricing models in addition to any selling concession, creating
a further incentive for the participating dealer to sell the securities to you.
If any participating dealer or any of its
affiliates conducts hedging activities for us in connection with the securities, that participating dealer or its affiliates will
expect to realize a projected profit from such hedging activities. If a participating dealer receives a concession for the sale
of the securities to you, this projected hedging profit will be in addition to the concession, creating a further incentive for
the participating dealer to sell the securities to you.
|
The U.S. Federal Tax Consequences Of An Investment
In The Securities Are Unclear.
There is no direct legal authority as to the proper
U.S. federal tax treatment of the securities, and we do not intend to request a ruling from the Internal Revenue Service (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 described in this pricing supplement under “United States Federal Tax Considerations.”
If the IRS were successful in asserting an alternative treatment, the tax consequences of ownership and disposition of the securities
might be materially and adversely affected.
Non-U.S. holders should note that persons having
withholding responsibility in respect of the securities may withhold on any coupon payment paid to a non-U.S. holder, generally
at a rate of 30%. To the extent that we have withholding responsibility in respect of the securities, we intend to so withhold.
In addition, Section 871(m) of the Internal Revenue
Code of 1986, as amended (the “
Code
”), imposes a withholding tax of up to 30% on “dividend equivalents”
paid or deemed paid to non-U.S. investors in respect of certain financial instruments linked to U.S. equities. In
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
light of Treasury
regulations, as modified by an IRS notice, that provide a general exemption for financial instruments issued in 2018 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.
We will not be required to pay any additional
amounts with respect to amounts withheld.
You should read carefully the discussion under
“United States Federal Tax Considerations” in this pricing supplement and consult your tax adviser regarding the U.S.
federal tax consequences of an investment in the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
If we redeem the securities prior to stated maturity:
If we redeem the securities prior to stated
maturity, you will receive the original offering price of your securities plus a final contingent coupon payment, if any, on the
applicable optional redemption date. In the event we redeem the securities prior to stated maturity, your total return on the securities
will equal any contingent coupon payments received prior to the applicable optional redemption date and the contingent coupon payment
received on such optional redemption date, if any.
If we do not redeem the securities prior to stated
maturity:
If we do not redeem the securities prior to
stated maturity, the following table illustrates, for a range of hypothetical performance factors of the lowest performing Index
on the final calculation day, the hypothetical maturity payment amount payable at stated maturity per security (excluding the final
contingent coupon payment, if any). The performance factor of the lowest performing Index on the final calculation day is its ending
level expressed as a percentage of its starting level (i.e., its ending level
divided by
its starting level).
|
|
Hypothetical performance factor
of lowest performing Index on
final calculation day
|
Hypothetical maturity payment
amount per security
|
175.00%
|
$1,000.00
|
160.00%
|
$1,000.00
|
150.00%
|
$1,000.00
|
140.00%
|
$1,000.00
|
130.00%
|
$1,000.00
|
120.00%
|
$1,000.00
|
110.00%
|
$1,000.00
|
100.00%
|
$1,000.00
|
90.00%
|
$1,000.00
|
80.00%
|
$1,000.00
|
70.00%
|
$1,000.00
|
60.00%
|
$1,000.00
|
59.00%
|
$590.00
|
50.00%
|
$500.00
|
40.00%
|
$400.00
|
30.00%
|
$300.00
|
25.00%
|
$250.00
|
|
|
|
The above figures do not take into account contingent
coupon payments, if any, received during the term of the securities. As evidenced above, in no event will you have a positive rate
of return based solely on the maturity payment amount received at maturity; any positive return will be based solely on the contingent
coupon payments, if any, received during the term of the securities.
The above figures are for purposes of illustration
only and may have been rounded for ease of analysis. If we do not redeem the securities prior to stated maturity, the actual amount
you will receive at stated maturity will depend on the actual ending level of the lowest performing Index on the final calculation
day. The performance of the better performing Indices is not relevant to your return on the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Hypothetical Contingent Coupon Payments
|
Set forth below are two examples that illustrate how
to determine whether a contingent coupon payment will be paid on a quarterly contingent coupon payment date. The examples do not
reflect any specific quarterly contingent coupon payment date. The following examples assume the hypothetical starting level, coupon
threshold level and closing levels for each Index indicated in the examples. The terms used for purposes of these hypothetical
examples do not represent any actual starting level or coupon 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 any Index. The actual
starting level and coupon 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 provided herein. These examples are for
purposes of illustration only and the values used in the examples may have been rounded for ease of analysis. If we were to redeem
the securities on the relevant contingent coupon payment date in either of the examples below, you would receive the original offering
price on the contingent coupon payment date in addition to the contingent coupon payment, if any.
Example 1. The closing level of the lowest
performing Index on the relevant calculation day is greater than or equal to its coupon threshold level. As a result, investors
receive a contingent coupon payment on the applicable quarterly contingent coupon payment date.
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical closing level on relevant calculation day:
|
90.00
|
95.00
|
80.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Performance factor (closing level on calculation day
divided by
starting level):
|
90.00%
|
95.00%
|
80.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the relevant calculation day.
In this example, the Dow Jones Industrial
Average has the lowest performance factor and is, therefore, the lowest performing Index on the relevant calculation day.
Step 2
: Determine whether a contingent
coupon payment will be paid on the applicable quarterly contingent coupon payment date.
Since the hypothetical closing level of the
lowest performing Index on the relevant calculation day is greater than or equal to its coupon threshold level, you would receive
a contingent coupon payment on the applicable contingent coupon payment date. The contingent coupon payment would be determined
as follows: (i) $1,000
multiplied by
applicable contingent coupon rate
divided by
(ii) 4, rounded to the nearest
cent.
For example, with respect to a calculation
day scheduled to occur in year 1, the contingent coupon payment payable on the related contingent coupon payment date would be
equal to $15.75 per security, determined as follows: (i) $1,000
multiplied by
6.30% per annum
divided by
(ii) 4,
rounded to the nearest cent.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Example 2. The closing level of the
lowest performing Index on the relevant calculation day is less than its coupon threshold level. As a result, investors do not
receive a contingent coupon payment on the applicable quarterly contingent coupon payment date.
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical closing level on relevant calculation day:
|
64.00
|
125.00
|
105.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Performance factor (closing level on calculation day
divided by
starting level):
|
64.00%
|
125.00%
|
105.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the relevant calculation day.
In this example, the S&P 500 Index has
the lowest performance factor and is, therefore, the lowest performing Index on the relevant calculation day.
Step 2
: Determine whether a contingent
coupon payment will be paid on the applicable quarterly contingent coupon payment date.
Since the hypothetical closing level of the
lowest performing Index on the relevant calculation day is less than its coupon threshold level, you would not receive a contingent
coupon payment on the applicable contingent coupon payment date. As this example illustrates, whether you receive a contingent
coupon payment on a quarterly contingent coupon payment date will depend solely on the closing level of the lowest performing Index
on the relevant calculation day. The performance of the better performing Indices is not relevant to your return on the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Hypothetical Payment at Stated Maturity
|
Set forth below are four examples of calculations of
the maturity payment amount payable at stated maturity, assuming that we have not redeemed the securities prior to stated maturity
and assuming the hypothetical starting level, coupon threshold level, downside threshold level and ending levels for each Index
indicated in the examples. The terms used for purposes of these hypothetical examples do not represent any actual starting level,
coupon threshold level or downside 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 any Index. The actual starting level, coupon threshold
level and downside 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 provided herein. These examples are for
purposes of illustration only and the values used in the examples may have been rounded for ease of analysis.
Example 1. The ending level of the lowest
performing Index on the final calculation day is greater than its starting level, the maturity payment amount is equal to the original
offering price of your securities at maturity and you receive a final contingent coupon payment:
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical ending level:
|
145.00
|
135.00
|
125.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Hypothetical downside threshold level:
|
60.00
|
60.00
|
60.00
|
Performance factor (ending level
divided by
starting level):
|
145.00%
|
135.00%
|
125.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the final calculation day.
In this example, the Dow Jones Industrial
Average has the lowest performance factor and is, therefore, the lowest performing Index on the final calculation day.
Step 2
: Determine the maturity payment
amount based on the ending level of the lowest performing Index on the final calculation day.
Since the hypothetical ending level of the
lowest performing Index on the final calculation day is greater than its hypothetical downside threshold level, the maturity payment
amount would equal the original offering price. Although the hypothetical ending level of the lowest performing Index on the final
calculation day is significantly greater than its hypothetical starting level in this scenario, the maturity payment amount will
not exceed the original offering price.
In addition to any contingent coupon payments
received during the term of the securities, on the stated maturity date you would receive $1,000 per security as well as a final
contingent coupon payment.
Example 2. The ending level of the lowest
performing Index on the final calculation day is less than its starting level but greater than its downside threshold level and
its coupon threshold level, the maturity payment amount is equal to the original offering price of your securities at maturity
and you receive a final contingent coupon payment:
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical ending level:
|
80.00
|
115.00
|
110.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Hypothetical downside threshold level:
|
60.00
|
60.00
|
60.00
|
Performance factor (ending level
divided by
starting level):
|
80.00%
|
115.00%
|
110.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the final calculation day.
In this example, the S&P 500 Index has
the lowest performance factor and is, therefore, the lowest performing Index on the final calculation day.
Step 2
: Determine the maturity payment
amount based on the ending level of the lowest performing Index on the final calculation day.
Since the hypothetical ending level of the
lowest performing Index is less than its hypothetical starting level, but not by more than 40%, you would be repaid the original
offering price of your securities at maturity.
In addition to any contingent coupon payments
received during the term of the securities, on the stated maturity date you would receive $1,000 per security as well as a final
contingent coupon payment.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Example 3. The ending level of the lowest
performing Index on the final calculation day is less than its starting level and its coupon threshold level but greater than its
downside threshold level and the maturity payment amount is equal to the original offering price of your securities at maturity,
but you will not receive a final contingent coupon payment:
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical ending level:
|
62.00
|
115.00
|
110.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Hypothetical downside threshold level:
|
60.00
|
60.00
|
60.00
|
Performance factor (ending level
divided by
starting level):
|
62.00%
|
115.00%
|
110.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the final calculation day.
In this example, the S&P 500 Index has
the lowest performance factor and is, therefore, the lowest performing Index on the final calculation day.
Step 2
: Determine the maturity payment
amount based on the ending level of the lowest performing Index on the final calculation day.
Since the hypothetical ending level of the
lowest performing Index is less than its hypothetical starting level, but not by more than 40%, you would be repaid the original
offering price of your securities at maturity.
In addition to any contingent coupon payments
received during the term of the securities, on the stated maturity date you would receive $1,000 per security. However, because
the hypothetical ending level of the lowest performing Index is less than its coupon threshold level, you will not receive a final
contingent coupon payment.
Example 4. The ending level of the lowest
performing Index on the final calculation day is less than its downside threshold level, the maturity payment amount is less than
the original offering price of your securities at maturity and you do not receive a final contingent coupon payment:
|
S&P 500
Index
|
Russell 2000
Index
|
Dow Jones
Industrial
Average
|
Hypothetical starting level:
|
100.00
|
100.00
|
100.00
|
Hypothetical ending level:
|
120.00
|
45.00
|
90.00
|
Hypothetical coupon threshold level:
|
65.00
|
65.00
|
65.00
|
Hypothetical downside threshold level:
|
60.00
|
60.00
|
60.00
|
Performance factor (ending level
divided by
starting level):
|
120.00%
|
45.00%
|
90.00%
|
Step 1
: Determine which Index is
the lowest performing Index on the final calculation day.
In this example, the Russell 2000 Index has
the lowest performance factor and is, therefore, the lowest performing Index on the final calculation day.
Step 2
: Determine the maturity payment
amount based on the ending level of the lowest performing Index on the final calculation day.
Since the hypothetical ending level of the
lowest performing Index on the final calculation day is less than its hypothetical starting level by more than 40%, you would lose
a portion of the original offering price of your securities and receive the maturity payment amount equal to $450.00 per security,
calculated as follows:
= $1,000 × performance factor of the lowest
performing Index on the final calculation day
= $1,000 × 45.00%
= $450.00
In addition to any contingent coupon payments received during
the term of the securities, on the stated maturity date you would receive $450.00 per security, but no final contingent coupon
payment.
These examples illustrate that you will not participate
in any appreciation of any Index, but will be fully exposed to a decrease in the lowest performing Index if the ending level of
the lowest performing Index on the final calculation day is less than its downside threshold level, even if the ending levels of
the other Indices have appreciated or have not declined below their respective downside threshold level.
To the extent that the starting level, coupon
threshold level, downside threshold level and ending level of the lowest performing Index differ from the values assumed above,
the results indicated above would be different.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Additional Terms of the Securities
|
Wells Fargo will issue the securities as part
of a series of senior unsecured debt securities entitled “Medium-Term Notes, Series S,” 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 subsidiaries,
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 amount
of the payment you receive upon redemption or at stated maturity and the contingent coupon payments, if any. In addition, the calculation
agent will, among other things:
|
●
|
determine whether a market disruption
event has occurred;
|
|
●
|
determine the closing levels of
the Indices under certain circumstances;
|
|
●
|
determine if adjustments are required
to the closing level of an Index under various circumstances; and
|
|
●
|
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.
|
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:
|
(A)
|
The occurrence or existence of
a material suspension of or limitation imposed on trading by the relevant stock exchanges or otherwise relating to securities which
then comprise 20% or more of the level of 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.
|
|
(B)
|
The occurrence or existence of
a material suspension of or limitation imposed on trading by any related futures or options exchange or otherwise in futures or
options contracts relating to 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.
|
|
(C)
|
The occurrence or existence of
any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect
transactions in, or obtain market values for, securities that then comprise 20% or more of the level of 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.
|
|
(D)
|
The occurrence or existence of
any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect
transactions in, or obtain market values for, futures or options contracts relating to 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.
|
|
(E)
|
The closure on any exchange business
day of the relevant stock exchanges on which securities that then comprise 20% or more of the level of such Index or any successor
equity index are traded or any related futures or options exchange with 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.
|
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
|
(F)
|
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.
|
For purposes of determining whether a market disruption
event has occurred with respect to an Index:
|
(1)
|
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;
|
|
(2)
|
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;
|
|
(3)
|
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
|
|
(4)
|
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.
|
If a market disruption event occurs or is continuing
with respect to an Index on any calculation day, then such 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 a 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 that day 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 a calculation day for an Index due
to a market disruption event with respect to such Index on such calculation day, the originally scheduled calculation day will
remain the calculation day for any Index 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 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, the calculation agent will substitute the successor equity index as calculated by the relevant index
sponsor or any other entity for purposes of calculating the closing level of such Index on any date of determination. Upon
any selection by the calculation agent of a successor equity index, Wells Fargo will cause notice to be given to holders of the
securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
In the event that an index sponsor discontinues
publication of an Index prior to, and the discontinuance is continuing on, a calculation day and the calculation agent determines
that no successor equity index is available at such time, the calculation agent will calculate a substitute closing level for 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 a 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, plus a portion of a
final contingent coupon payment, if any. The maturity payment amount and any final contingent coupon payment will be calculated
as though the date of acceleration were the final calculation day. The final contingent coupon payment, if any, will be prorated
from and including the immediately preceding contingent coupon payment date to but excluding the date of acceleration.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
The S&P 500 Index is an equity index that
is intended to provide an indication of the pattern of common stock price movement in the large capitalization segment of the United
States equity market. Wells Fargo & Company is one of the companies currently included in the S&P 500 Index. See “Description
of Equity Indices—The S&P Indices” in the accompanying market measure supplement for additional information about
the S&P 500 Index.
In addition, information about the S&P 500
Index may be obtained from other sources including, but not limited to, the S&P 500 Index sponsor’s website (including
information regarding the S&P 500 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 S&P 500 Index is accurate or complete.
Historical Information
We obtained the closing levels of the S&P
500 Index in the graph below from Bloomberg Financial Markets, without independent verification.
The following graph sets forth daily closing levels
of the S&P 500 Index for the period from January 1, 2013 to September 12, 2018. The closing level on September 12, 2018 was
2888.92. The historical performance of the S&P 500 Index should not be taken as an indication of the future performance of
the S&P 500 Index during the term of the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
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, 2013 to September 12, 2018. The closing level on September 12, 2018 was
1715.696. 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.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
The Dow Jones Industrial Average
®
|
The Dow Jones Industrial Average is an equity
index that is intended to provide an indication of the pattern of common stock price movement in the United States equity market.
See “Description of Equity Indices—The Dow Jones Industrial Average
SM
” in the accompanying market
measure supplement for additional information about the Dow Jones Industrial Average.
In addition, information about the Dow Jones Industrial
Average may be obtained from other sources including, but not limited to, the Dow Jones Industrial Average sponsor’s website
(including information regarding the Dow Jones Industrial Average’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 Dow Jones Industrial Average is accurate or complete.
Historical Information
We obtained the closing levels of the Dow Jones
Industrial Average in the graph below from Bloomberg Financial Markets, without independent verification.
The following graph sets forth daily closing levels
of the Dow Jones Industrial Average for the period from January 1, 2013 to September 12, 2018. The closing level on September 12,
2018 was 25998.92. The historical performance of the Dow Jones Industrial Average should not be taken as an indication of the future
performance of the Dow Jones Industrial Average during the term of the securities.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
Benefit Plan Investor Considerations
|
Each fiduciary of a pension, profit-sharing
or other employee benefit plan to which Title I of the Employee Retirement Income Security Act of 1974 (“
ERISA
”)
applies (a “
plan
”), should consider the fiduciary standards of ERISA in the context of the 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:
|
●
|
PTCE 96-23,
for specified transactions determined by in-house asset managers;
|
|
●
|
PTCE 95-60,
for specified transactions involving insurance company general accounts;
|
|
●
|
PTCE 91-38,
for specified transactions involving bank collective investment funds;
|
|
●
|
PTCE 90-1,
for specified transactions involving insurance company separate accounts; and
|
|
●
|
PTCE 84-14,
for specified transactions determined by independent qualified professional asset managers.
|
In addition, Section 408(b)(17) of ERISA
and Section 4975(d)(20) of the Code provide an exemption for transactions between a plan and a person who is a party in interest
(other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets
involved in the transaction or renders investment advice with respect thereto) solely by reason of providing services to the plan
(or by reason of a relationship to such a service provider), if in connection with the transaction of the plan receives no less,
and pays no more, than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA).
Any purchaser or holder of the securities or any
interest in the securities will be deemed to have represented by its purchase and holding that either:
|
●
|
no portion
of the assets used by such purchaser or holder to acquire or purchase the securities constitutes assets of any plan or Non-ERISA
Arrangement; or
|
|
●
|
the purchase
and holding of the securities by such purchaser or holder will not constitute a non-exempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code or similar violation under any Similar Laws.
|
Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries
or other persons considering purchasing the securities on behalf of or with “plan assets” of any plan consult with
their counsel regarding the potential consequences under ERISA and the Code of the acquisition of the securities and the availability
of exemptive relief.
The securities are contractual
financial instruments. The financial exposure provided by the securities is not a substitute or proxy for, and is not intended
as a substitute or proxy for, individualized investment management or advice for the benefit of any purchaser or holder of the
securities. The securities have not been designed and will not be administered in a manner intended to reflect the individualized
needs and objectives of any purchaser or holder of the securities.
Each purchaser or holder of
the securities acknowledges and agrees that:
|
(i)
|
the purchaser or holder or its
fiduciary has made and shall make all investment decisions for the purchaser or holder and the purchaser or holder has not relied
and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect
to (a) the design and terms of the securities, (b) the purchaser or 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;
|
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
|
(ii)
|
we and our affiliates have acted
and will act solely for our own account in connection with (a) all transactions relating to the securities and (b) all hedging
transactions in connection with our obligations under the securities;
|
|
(iii)
|
any and all assets and positions
relating to hedging transactions by us or our affiliates are assets and positions of those entities and are not assets and positions
held for the benefit of the purchaser or holder;
|
|
(iv)
|
our interests may be adverse to
the interests of the purchaser or holder; and
|
|
(v)
|
neither we nor any of our affiliates
is a fiduciary or adviser of the purchaser or holder in connection with any such assets, positions or transactions, and any information
that we or any of our affiliates may provide is not intended to be impartial investment advice.
|
Purchasers of the securities have the exclusive responsibility
for ensuring that their purchase, holding and subsequent disposition of the securities does not violate the fiduciary or prohibited
transaction rules of ERISA, the Code or any Similar Law. Nothing herein shall be construed as a representation that an investment
in the securities would be appropriate for, or would meet any or all of the relevant legal requirements with respect to investments
by, plans or Non-ERISA Arrangements generally or any particular plan or Non-ERISA Arrangement.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
United States Federal Tax Considerations
|
The following is a discussion of the material
U.S. federal income and certain estate tax consequences of the ownership and disposition of the securities. It applies to you only
if you purchase a security for cash at its stated principal amount and hold it as a capital asset within the meaning of Section
1221 of the Code. This discussion does not address all of the tax consequences that may be relevant to you in light of your particular
circumstances or if you are a holder subject to special rules, such as:
|
●
|
a financial institution;
|
|
●
|
a “regulated investment
company”;
|
|
●
|
a “real estate investment
trust”;
|
|
●
|
a tax-exempt entity, including
an “individual retirement account” or “Roth IRA”;
|
|
●
|
a dealer or trader subject to
a mark-to-market method of tax accounting with respect to the securities;
|
|
●
|
a person holding a security as
part of a “straddle” or conversion transaction or who has entered into a “constructive sale” with respect
to a security;
|
|
●
|
a U.S. holder (as defined below)
whose functional currency is not the U.S. dollar; or
|
|
●
|
an entity classified as a partnership
for U.S. federal income tax purposes.
|
If an entity that is classified as a partnership
for U.S. federal income tax purposes holds the securities, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. If you are a partnership holding the securities or a partner
in such a partnership, you should consult your tax adviser as to your particular U.S. federal tax consequences of holding and disposing
of the securities.
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 the 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
Due to the absence of statutory, judicial or administrative
authorities that directly address the treatment of the securities or instruments that are similar to the securities for U.S. federal
income tax purposes, no assurance can be given that the IRS or a court will agree with the tax treatment described herein. We intend
to treat a security for U.S. federal income tax purposes as a prepaid derivative contract that provides for a coupon that will
be treated as gross income to you at the time received or accrued in accordance with your regular method of tax accounting. In
the opinion of our counsel, Davis Polk & Wardwell LLP, this treatment of the securities is reasonable under current law; however,
our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld,
and that alternative treatments are possible.
You should consult your tax adviser regarding
the U.S. federal tax consequences of an investment in the securities. Unless otherwise stated, the following discussion is based
on the treatment of the securities as described in the previous paragraph.
Tax Consequences to U.S. Holders
This section applies only to U.S. holders. You
are a “
U.S. holder
” if you are a beneficial owner of a security that is, for U.S. federal income tax purposes:
|
●
|
a citizen or individual resident of the United States;
|
|
●
|
a corporation created or organized in or under the laws of
the United States, any state thereof or the District of Columbia; or
|
|
●
|
an estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source.
|
Tax Treatment of Coupon Payments
. Any coupon
payments on the securities should be taxable as ordinary income to you at the time received or accrued in accordance with your
regular method of accounting for U.S. federal income tax purposes.
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
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. For this
purpose, the amount realized does not include any coupon paid at retirement and may not include sale proceeds attributable to an
accrued coupon, which may be treated as a coupon payment. 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 you have held the securities for more than one year
at the time of the sale, exchange or retirement, and should be short-term capital gain or loss otherwise. The ordinary income treatment
of the coupon payments, in conjunction with the capital loss treatment of any loss recognized upon the sale, exchange or settlement
of the securities, could result in adverse tax consequences to holders of the securities because the deductibility of capital losses
is subject to 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 event, (i) regardless of your regular method of tax accounting, in each year that you held the securities
you generally would be required to accrue income, subject to certain adjustments, based on our comparable yield for similar non-contingent
debt, determined as of the time of issuance of the securities, and (ii) any gain on the sale, exchange or retirement of the securities
would be treated as ordinary income. Even if the securities are treated for U.S. federal income tax purposes as prepaid derivative
contracts rather than debt instruments, the IRS could treat the timing and character of income with respect to coupon payments
in a manner different from that described above.
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 investors in 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; 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; and appropriate transition rules and effective dates. While it is not clear whether the securities would be viewed as similar
to the typical prepaid forward contract described in the notice, 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 trust or estate.
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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
of a security, (ii) a former citizen or resident of the United States or (iii) a person for whom income or gain in respect of the
securities 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 security, you should consult your tax adviser regarding the U.S. federal tax consequences
of an investment in the securities.
Because significant aspects of the tax treatment
of the securities are uncertain, persons having withholding responsibility in respect of the securities may withhold on any coupon
payment paid to you, generally at a rate of 30%. To the extent that we have (or an affiliate of ours has) withholding responsibility
in respect of the securities, we intend to so withhold. In order to claim an exemption from, or a reduction in, the 30% withholding,
you may need to comply with certification requirements to establish that you are not a U.S. person and are eligible for such an
exemption or reduction under an applicable tax treaty. You should consult your tax adviser regarding the tax treatment of the securities,
including the possibility of obtaining a refund of any amounts withheld and the certification requirement described above.
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 in 2018 that
do not have a “delta” of one. Based on the terms of the
Market Linked Securities—Callable with Contingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Lowest Performing of the S&P 500
®
Index, the Russell 2000
®
Index and the Dow Jones Industrial Average
®
due September 18, 2023
|
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, a security may be treated as U.S.-situs property subject to U.S. federal
estate tax. If you are such an individual or entity, you should consult your tax adviser regarding the U.S. federal estate tax
consequences of investing in the securities.
Information Reporting and Backup Withholding
Amounts paid on the securities, and the proceeds
of a sale, exchange or other disposition of the securities, may be subject to information reporting and, if you fail to provide
certain identifying information (such as an accurate taxpayer identification number if you are a U.S. holder) or meet certain other
conditions, may also be subject to backup withholding at the rate specified in the Code. If you are a non-U.S. holder that provides
an appropriate IRS Form W-8, you will generally establish an exemption from backup withholding. Amounts withheld under the backup
withholding rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided
the relevant information is timely furnished to the IRS.
FATCA
Legislation 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 and, after 2018, to payments of gross proceeds of the disposition
(including upon retirement) of certain financial instruments treated as paying U.S.-source interest or dividends. Because the treatment
of the securities is unclear, it is also unclear whether and how the FATCA rules apply to the securities. However, it would be
prudent to assume that withholding agents will treat coupon payments, and potentially other payments, with respect to the securities
as subject to FATCA. 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 TAX CONSEQUENCES OF OWNING AND DISPOSING
OF THE SECURITIES ARE UNCLEAR. YOU SHOULD CONSULT YOUR TAX ADVISER REGARDING THE TAX CONSEQUENCES OF OWNING AND DISPOSING OF THE
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN U.S. FEDERAL OR OTHER TAX LAWS.
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.