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 Index on the related quarterly calculation day, as follows:
On the stated maturity date, you will receive (in addition to the final contingent coupon payment, if any)
a cash payment per security (the redemption amount) calculated as follows:
The following profile illustrates the potential payment at stated maturity on the securities (excluding the
final contingent coupon payment, if any). This graph has been prepared for purposes of illustration only. Your actual return will depend on the actual ending level and whether you hold your securities to stated maturity.
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. 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.
PRS-16
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
The following table illustrates, for a range of hypothetical ending levels of the Index:
|
|
|
the hypothetical percentage change from the starting level to the hypothetical ending level; and
|
|
|
|
the hypothetical redemption amount payable at stated maturity per security (excluding the final contingent
coupon payment, if any).
|
|
|
|
|
|
Hypothetical
ending level
|
|
Hypothetical percentage change from
the starting level to the hypothetical
ending level
|
|
Hypothetical payment at stated
maturity per security
|
2164.346
|
|
75.00%
|
|
$1,000.00
|
1978.830
|
|
60.00%
|
|
$1,000.00
|
1855.154
|
|
50.00%
|
|
$1,000.00
|
1731.477
|
|
40.00%
|
|
$1,000.00
|
1607.800
|
|
30.00%
|
|
$1,000.00
|
1484.123
|
|
20.00%
|
|
$1,000.00
|
1360.446
|
|
10.00%
|
|
$1,000.00
|
1236.769
(1)
|
|
0.00%
|
|
$1,000.00
|
1113.092
|
|
-10.00%
|
|
$1,000.00
|
989.415
|
|
-20.00%
|
|
$1,000.00
|
865.7383
|
|
-30.00%
|
|
$1,000.00
|
853.371
|
|
-31.00%
|
|
$690.00
|
742.061
|
|
-40.00%
|
|
$600.00
|
618.385
|
|
-50.00%
|
|
$500.00
|
494.708
|
|
-60.00%
|
|
$400.00
|
309.192
|
|
-75.00%
|
|
$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 redemption 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. The actual amount you will receive at
stated maturity will depend on the actual ending level.
PRS-17
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Hypothetical Payment at Stated Maturity
|
Set forth below are three examples of calculations of the redemption amount at stated maturity, assuming the
hypothetical ending levels indicated in the examples. These examples are for purposes of illustration only and the values used in the examples may have been rounded for ease of analysis.
Example 1. Ending level is greater than the starting level, and the redemption amount is equal to the original offering price of your
securities at maturity:
Starting level: 1236.769
Hypothetical ending level: 1500.000
Threshold level: 865.7383, which is 70% of the starting level
Since the hypothetical ending level is greater than the threshold level, the redemption amount would equal the original
offering price. Although the hypothetical ending level is significantly greater than the starting level in this scenario, the redemption 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. Ending level is less than the starting level
but greater than the threshold level, and the redemption amount is equal to the original offering price of your securities at maturity:
Starting level: 1236.769
Hypothetical ending level: 900.000
Threshold level: 865.7383, which is 70% of the starting level
Since the hypothetical ending level is less than the starting level, but not by more than 30%, 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.
Example
3. Ending level is less than the threshold level, and the redemption amount is less than the original offering price of your securities at maturity:
Starting level: 1236.769
Hypothetical ending level: 618.385
Threshold level: 865.7383, which is 70% of the starting level
Since the hypothetical ending level is less than the starting level by more than 30%, you would lose a portion of the original
offering price of your securities and receive the redemption amount equal to:
|
|
|
|
|
|
|
|
|
|
|
$1,000
|
|
|
|
$1,000 ×
|
|
1236.769 618.385
|
|
|
|
= $500.00
|
|
|
|
|
1236.769
|
|
|
|
In addition to any contingent coupon payments received during the term of the securities, on
the stated maturity date you would receive $500.00 per security, but no final contingent coupon payment.
These examples illustrate that
you will not participate in any appreciation of the Index, but will be fully exposed to a decrease in the Index if the ending level is less than the threshold level.
To the extent that the ending level differs from the values assumed above, the results indicated above would be different.
PRS-18
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Additional Terms of the Securities
|
Wells Fargo will issue the securities as part of a series of senior unsecured debt securities entitled
Medium-Term Notes, Series K, which is more fully described in the prospectus supplement. Information included in this pricing supplement supersedes information in the prospectus supplement and prospectus to the extent that it is
different from that information.
Calculation Agent
Wells Fargo Securities, LLC, one of our subsidiaries, will act as 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 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 level of the Index under certain circumstances;
|
|
●
|
|
determine if adjustments are required to the closing level of the Index under various circumstances; and
|
|
●
|
|
if publication of the Index is discontinued, select a successor equity index (as defined below) or, if no
successor equity index is available, determine the closing level of the Index.
|
All determinations made by the
calculation agent will be at the sole discretion of the calculation agent and, in the absence of manifest error, will be conclusive for all purposes and binding on us and you. The calculation agent will have no liability for its determinations.
Market Disruption Events
A
market disruption event
means any of the following events as determined by the calculation agent in its sole discretion:
|
(A)
|
The occurrence or existence of a material suspension of or limitation imposed on trading by the relevant stock
exchanges or otherwise relating to securities which then comprise 20% or more of the level of the Index or any successor equity index at any time during the one-hour period that ends at the close of trading on that day, whether by reason of
movements in price exceeding limits permitted by those relevant stock exchanges or otherwise.
|
|
(B)
|
The occurrence or existence of a material suspension of or limitation imposed on trading by any related
futures or options exchange or otherwise in futures or options contracts relating to the Index or any successor equity index on any related futures or options exchange at any time during the one-hour period that ends at the close of trading on that
day, whether by reason of movements in price exceeding limits permitted by the related futures or options exchange or otherwise.
|
|
(C)
|
The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the
ability of market participants in general to effect transactions in, or obtain market values for, securities that then comprise 20% or more of the level of the Index or any successor equity index on their relevant stock exchanges at any time during
the one-hour period that ends at the close of trading on that day.
|
|
(D)
|
The occurrence or existence of any event, other than an early closure, that materially disrupts or impairs the
ability of market participants in general to effect transactions in, or obtain market values for, futures or options contracts relating to the Index or any successor equity index on any related futures or options exchange at any time during the
one-hour period that ends at the close of trading on that day.
|
|
(E)
|
The closure on any exchange business day of the relevant stock exchanges on which securities that then
comprise 20% or more of the level of the Index or any successor equity index are traded or any related futures or options exchange prior to its scheduled closing time unless the earlier closing time is announced by the relevant stock exchange or
related futures or options exchange, as applicable, at least one hour prior to the earlier of (1) the actual closing time for the regular trading session on such relevant stock exchange or related futures or options exchange, as applicable, and
(2) the submission deadline for orders to be entered into the relevant stock exchange or related futures or options exchange, as applicable, system for execution at such actual closing time on that day.
|
|
(F)
|
The relevant stock exchange for any security underlying the Index or successor equity index or any related
futures or options exchange fails to open for trading during its regular trading session.
|
PRS-19
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Additional Terms of the Securities (Continued)
|
For purposes of determining whether a market disruption event has occurred:
|
(1)
|
the relevant percentage contribution of a security to the level of the Index or any successor equity index
will be based on a comparison of (x) the portion of the level of such index attributable to that security and (y) the overall level of the Index or successor equity index, in each case immediately before the occurrence of the market
disruption event;
|
|
(2)
|
the
close of trading
on any trading day for the Index or any successor equity index means
the scheduled closing time of the relevant stock exchanges with respect to the securities underlying the Index or successor equity index on such trading day; provided that, if the actual closing time of the regular trading session of any such
relevant stock exchange is earlier than its scheduled closing time on such trading day, then (x) for purposes of clauses (A) and (C) of the definition of market disruption event above, with respect to any security
underlying the Index or successor equity index for which such relevant stock exchange is its relevant stock exchange, the close of trading means such actual closing time and (y) for purposes of clauses (B) and (D) of the
definition of market disruption event above, with respect to any futures or options contract relating to the Index or successor equity index, the close of trading means the latest actual closing time of the regular trading
session of any of the relevant stock exchanges, but in no event later than the scheduled closing time of the relevant stock exchanges;
|
|
(3)
|
the
scheduled closing time
of any relevant stock exchange or related futures or options
exchange on any trading day for the Index or any successor equity index means the scheduled weekday closing time of such relevant stock exchange or related futures or options exchange on such trading day, without regard to after hours or any other
trading outside the regular trading session hours; and
|
|
(4)
|
an
exchange business day
means any trading day for the Index or any successor equity index
on which each relevant stock exchange for the securities underlying the Index or any successor equity index and each related futures or options exchange are open for trading during their respective regular trading sessions, notwithstanding any such
relevant stock exchange or related futures or options exchange closing prior to its scheduled closing time.
|
If a market
disruption event occurs or is continuing on any calculation day, such calculation day will be postponed to the first succeeding trading day on which a market disruption event has not occurred and is not continuing; however, if such first succeeding
trading day has not occurred as of the eighth trading day after the originally scheduled calculation day, that eighth trading day shall be deemed to be the calculation day. If a calculation day has been postponed eight trading days after the
originally scheduled calculation day and a market disruption event occurs or is continuing on such eighth trading day, the calculation agent will determine the closing level of the Index on such eighth trading day in accordance with the formula for
and method of calculating the closing level of the Index last in effect prior to commencement of the market disruption event, using the closing price (or, with respect to any relevant security, if a market disruption event has occurred with respect
to such security, its good faith estimate of the value of such security at the scheduled closing time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading session of such relevant stock
exchange) on such date of each security included in the Index. As used herein, closing price means, with respect to any security on any date, the relevant stock exchange traded or quoted price of such security as of the scheduled closing
time of the relevant stock exchange for such security or, if earlier, the actual closing time of the regular trading session of such relevant stock exchange.
Adjustments to the Index
If at any time a
sponsor or publisher of the Index (the
index sponsor
) makes a material change in the formula for or the method of calculating the Index, or in any other way materially modifies the Index (other than a modification prescribed in
that formula or method to maintain the Index in the event of changes in constituent stock and capitalization and other routine events), then, from and after that time, the calculation agent will, at the close of business in New York, New York, on
each date that the closing level of the Index is to be calculated, calculate a substitute closing level of the Index in accordance with the formula for and method of calculating the Index last in effect prior to the change, but using only those
securities that comprised the Index immediately prior to that change. Accordingly, if the method of calculating the Index is modified so that the level of the Index is a fraction or a multiple of what it would have been if it had not been modified,
then the calculation agent will adjust the Index in order to arrive at a level of the Index as if it had not been modified.
Discontinuance of the Index
If the index sponsor discontinues publication of the Index, and such index sponsor or another entity publishes a successor or
substitute equity index that the calculation agent determines, in its sole discretion, to be comparable to the Index (a
successor equity index
), then, upon the calculation agents notification of that determination to the
trustee and Wells Fargo, the calculation agent will substitute the successor equity index as calculated by the relevant index sponsor or any other entity for purposes of calculating the closing level of the Index on any date of determination. Upon
any selection by the calculation agent of a successor equity index, Wells Fargo will cause notice to be given to holders of the securities.
PRS-20
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Additional Terms of the Securities (Continued)
|
In the event that the index sponsor discontinues publication of the Index prior to, and the
discontinuance is continuing on, a calculation day and the calculation agent determines that no successor equity index is available at such time, the calculation agent will calculate a substitute closing level for the Index in accordance with the
formula for and method of calculating the Index last in effect prior to the discontinuance, but using only those securities that comprised the Index immediately prior to that discontinuance. If a successor equity index is selected or the calculation
agent calculates a level as a substitute for the Index, the successor equity index or level will be used as a substitute for the Index for all purposes, including the purpose of determining whether a market disruption event exists.
If on a calculation day the index sponsor fails to calculate and announce the level of the Index, the calculation agent will calculate a
substitute closing level of the Index in accordance with the formula for and method of calculating the Index last in effect prior to the failure, but using only those securities that comprised the Index immediately prior to that failure;
provided
that, if a market disruption event occurs or is continuing on such day, then the provisions set forth above under Market Disruption Events shall apply in lieu of the foregoing.
Notwithstanding these alternative arrangements, discontinuance of the publication of, or the failure by the index sponsor to calculate and
announce the level of, the Index may adversely affect the value of the securities.
Events of Default and Acceleration
If an event of default with respect to the securities has occurred and is continuing, the amount payable to a holder of a security upon any
acceleration permitted by the securities, with respect to each security, will be equal to the redemption amount, calculated as provided herein, plus a portion of a final contingent coupon payment, if any. The redemption 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.
PRS-21
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
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 IndicesThe Russell 2000
®
Index in the accompanying market measure supplement for
additional information about the Russell 2000 Index.
Historical Information
We obtained the closing levels of the Index listed below from Bloomberg Financial Markets, without independent verification.
The following graph sets forth daily closing levels of the Index for the period from January 1, 2006 to August 19, 2016. The closing
level on August 19, 2016 was 1236.769. The historical performance of the Index should not be taken as an indication of the future performance of the Index during the term of the securities.
PRS-22
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
The Russell 2000
®
Index (Continued)
|
The following table sets forth the high and low closing levels, as well as end-of-period
closing levels, of the Index for each quarter in the period from January 1, 2006 through June 30, 2016 and for the period from July 1, 2016 to August 19, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Last
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
765.140
|
|
|
|
684.050
|
|
|
|
765.140
|
|
Second Quarter
|
|
|
781.830
|
|
|
|
672.720
|
|
|
|
724.670
|
|
Third Quarter
|
|
|
734.479
|
|
|
|
671.940
|
|
|
|
725.594
|
|
Fourth Quarter
|
|
|
797.732
|
|
|
|
718.352
|
|
|
|
787.664
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
829.438
|
|
|
|
760.063
|
|
|
|
800.710
|
|
Second Quarter
|
|
|
855.092
|
|
|
|
803.218
|
|
|
|
833.699
|
|
Third Quarter
|
|
|
855.774
|
|
|
|
751.544
|
|
|
|
805.450
|
|
Fourth Quarter
|
|
|
845.720
|
|
|
|
735.066
|
|
|
|
766.031
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
753.548
|
|
|
|
643.966
|
|
|
|
687.967
|
|
Second Quarter
|
|
|
763.266
|
|
|
|
686.073
|
|
|
|
689.659
|
|
Third Quarter
|
|
|
754.377
|
|
|
|
657.718
|
|
|
|
679.583
|
|
Fourth Quarter
|
|
|
671.590
|
|
|
|
385.308
|
|
|
|
499.453
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
514.710
|
|
|
|
343.260
|
|
|
|
422.748
|
|
Second Quarter
|
|
|
531.680
|
|
|
|
429.158
|
|
|
|
508.281
|
|
Third Quarter
|
|
|
620.695
|
|
|
|
479.267
|
|
|
|
604.278
|
|
Fourth Quarter
|
|
|
634.072
|
|
|
|
562.395
|
|
|
|
625.389
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
690.303
|
|
|
|
586.491
|
|
|
|
678.643
|
|
Second Quarter
|
|
|
741.922
|
|
|
|
609.486
|
|
|
|
609.486
|
|
Third Quarter
|
|
|
677.642
|
|
|
|
590.034
|
|
|
|
676.139
|
|
Fourth Quarter
|
|
|
792.347
|
|
|
|
669.450
|
|
|
|
783.647
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
843.549
|
|
|
|
773.184
|
|
|
|
843.549
|
|
Second Quarter
|
|
|
865.291
|
|
|
|
777.197
|
|
|
|
827.429
|
|
Third Quarter
|
|
|
858.113
|
|
|
|
643.421
|
|
|
|
644.156
|
|
Fourth Quarter
|
|
|
765.432
|
|
|
|
609.490
|
|
|
|
740.916
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
846.129
|
|
|
|
747.275
|
|
|
|
830.301
|
|
Second Quarter
|
|
|
840.626
|
|
|
|
737.241
|
|
|
|
798.487
|
|
Third Quarter
|
|
|
864.697
|
|
|
|
767.751
|
|
|
|
837.450
|
|
Fourth Quarter
|
|
|
852.495
|
|
|
|
769.483
|
|
|
|
849.350
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
953.068
|
|
|
|
872.605
|
|
|
|
951.542
|
|
Second Quarter
|
|
|
999.985
|
|
|
|
901.513
|
|
|
|
977.475
|
|
Third Quarter
|
|
|
1078.409
|
|
|
|
989.535
|
|
|
|
1073.786
|
|
Fourth Quarter
|
|
|
1163.637
|
|
|
|
1043.459
|
|
|
|
1163.637
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1208.651
|
|
|
|
1093.594
|
|
|
|
1173.038
|
|
Second Quarter
|
|
|
1192.964
|
|
|
|
1095.986
|
|
|
|
1192.964
|
|
Third Quarter
|
|
|
1208.150
|
|
|
|
1101.676
|
|
|
|
1101.676
|
|
Fourth Quarter
|
|
|
1219.109
|
|
|
|
1049.303
|
|
|
|
1204.696
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1266.373
|
|
|
|
1154.709
|
|
|
|
1252.772
|
|
Second Quarter
|
|
|
1295.799
|
|
|
|
1215.417
|
|
|
|
1253.947
|
|
Third Quarter
|
|
|
1273.328
|
|
|
|
1083.907
|
|
|
|
1100.688
|
|
Fourth Quarter
|
|
|
1204.159
|
|
|
|
1097.552
|
|
|
|
1135.889
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
1114.028
|
|
|
|
953.715
|
|
|
|
1114.028
|
|
Second Quarter
|
|
|
1188.954
|
|
|
|
1089.646
|
|
|
|
1151.923
|
|
July 1, 2016 to August 19, 2016
|
|
|
1241.864
|
|
|
|
1139.453
|
|
|
|
1236.769
|
|
PRS-23
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Benefit Plan Investor Considerations
|
Each fiduciary of a pension, profit-sharing or other employee benefit plan to which Title I of the Employee
Retirement Income Security Act of 1974 (
ERISA
) applies (a
plan
), should consider the fiduciary standards of ERISA in the context of the plans particular circumstances before authorizing an investment in
the securities. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
plan. When we use the term
holder
in this section, we are referring to a beneficial owner of the securities and not the record holder.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well as individual retirement accounts and Keogh plans to which
Section 4975 of the Code applies (also
plans
), from engaging in specified transactions involving plan assets with persons who are parties in interest under ERISA or disqualified persons
under the Code (collectively,
parties in interest
) with respect to such plan. A violation of those prohibited transaction rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of
the Code for such persons, unless statutory or administrative exemptive relief is available. Therefore, a fiduciary of a plan should also consider whether an investment in the securities might constitute or give rise to a prohibited transaction
under ERISA and the Code.
Employee benefit plans that are governmental plans, as defined in Section 3(32) of ERISA, certain church
plans, as defined in Section 3(33) of ERISA, and foreign plans, as described in Section 4(b)(4) of ERISA (collectively,
Non-ERISA Arrangements
), are not subject to the requirements of ERISA, or Section 4975 of the
Code, but may be subject to similar rules under other applicable laws or regulations (
Similar Laws
).
We and our
affiliates may each be considered a party in interest with respect to many plans. Special caution should be exercised, therefore, before the securities are purchased by a plan. In particular, the fiduciary of the plan should consider whether
statutory or administrative exemptive relief is available. The U.S. Department of Labor has issued five prohibited transaction class exemptions (
PTCEs
) that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the securities. Those class exemptions are:
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PTCE 96-23, for specified transactions determined by in-house asset managers;
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PTCE 95-60, for specified transactions involving insurance company general accounts;
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PTCE 91-38, for specified transactions involving bank collective investment funds;
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PTCE 90-1, for specified transactions involving insurance company separate accounts; and
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PTCE 84-14, for specified transactions determined by independent qualified professional asset managers.
|
In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide an exemption for
transactions between a plan and a person who is a party in interest (other than a fiduciary who has or exercises any discretionary authority or control with respect to investment of the plan assets involved in the transaction or renders investment
advice with respect thereto) solely by reason of providing services to the plan (or by reason of a relationship to such a service provider), if in connection with the transaction of the plan receives no less, and pays no more, than adequate
consideration (within the meaning of Section 408(b)(17) of ERISA).
Any purchaser or holder of the securities or any interest in
the securities will be deemed to have represented by its purchase and holding that either:
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no portion of the assets used by such purchaser or holder to acquire or purchase the securities constitutes
assets of any plan or Non-ERISA Arrangement; or
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the purchase and holding of the securities by such purchaser or holder will not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or similar violation under any Similar Laws.
|
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.
PRS-24
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
Benefit Plan Investor Considerations (Continued)
|
Each purchaser or holder of the securities acknowledges and agrees that:
|
(i)
|
the purchaser or holder or its fiduciary has made and shall make all investment decisions for the purchaser or
holder and the purchaser or holder has not relied and shall not rely in any way upon us or our affiliates to act as a fiduciary or adviser of the purchaser or holder with respect to (a) the design and terms of the securities, (b) the
purchaser or holders investment in the securities, or (c) the exercise of or failure to exercise any rights we have under or with respect to the securities;
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(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;
|
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(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;
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(iv)
|
our interests may be adverse to the interests of the purchaser or holder; and
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(v)
|
neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in connection with
any such assets, positions or transactions, and any information that we or any of our affiliates may provide is not intended to be impartial investment advice.
|
Purchasers of the securities have the exclusive responsibility for ensuring that their purchase, holding and subsequent disposition of the securities does not
violate the fiduciary or prohibited transaction rules of ERISA, the Code or any Similar Law. Nothing herein shall be construed as a representation that an investment in the securities would be appropriate for, or would meet any or all of the
relevant legal requirements with respect to investments by, plans or Non-ERISA Arrangements generally or any particular plan or Non-ERISA Arrangement.
PRS-25
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
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 Internal Revenue Code of 1986, as
amended (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:
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt entity, including an individual retirement account or Roth IRA;
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●
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a dealer or trader subject to a mark-to-market method of tax accounting with respect to the securities;
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a person holding a security as part of a straddle or conversion transaction or who has entered
into a constructive sale with respect to a security;
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a U.S. holder (as defined below) whose functional currency is not the U.S. dollar; or
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an entity classified as a partnership for U.S. federal income tax purposes.
|
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 or the potential application of the Medicare tax on
investment income. 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:
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a citizen or individual resident of the United States;
|
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●
|
|
a corporation created or organized in or under the laws of the United States, any state thereof or the
District of Columbia; or
|
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|
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
|
PRS-26
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
United States Federal Tax Considerations (Continued)
|
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.
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 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. We will not be
required to pay any additional amounts with respect to amounts withheld. 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
PRS-27
Market Linked SecuritiesContingent Coupon and Contingent Downside
Principal at Risk Securities Linked to the Russell 2000
®
Index due August 26, 2022
|
United States Federal Tax Considerations (Continued)
|
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.
U.S. Federal Estate Tax
If you are an individual non-U.S. holder or an entity the property of which is potentially includible in such an individuals gross estate
for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), you should note that, absent an applicable treaty exemption, 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. entitys jurisdiction may modify these requirements. This legislation generally applies to certain financial instruments that are treated as paying U.S.-source interest or other U.S.-source fixed or determinable
annual or periodical income. While the treatment of the securities is unclear, you should assume that any coupon payment on the securities will be subject to the FATCA rules. It is also possible in light of this uncertainty that an
applicable withholding agent will treat all or a portion of the gross proceeds of a disposition (including upon retirement) of the securities after 2018 as being subject to the FATCA rules. If withholding applies to the securities, we will not
be required to pay any additional amounts with respect to amounts withheld. Both U.S. and non-U.S. holders should consult their tax advisers regarding the potential application of FATCA to the 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.
PRS-28