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 The Ending Level Is Less Than The Threshold Level, You Will Receive Less, And Possibly 80% Less, Than The Original Offering Price Of Your Securities At Maturity.
We will not repay you a fixed amount on the securities on the stated maturity date. The maturity payment amount will depend on the direction of and percentage change in the ending level of the Index relative to the starting level and the other terms of the securities. Because the level of the Index will be subject to market fluctuations, the maturity payment amount you receive may be more or less, and possibly significantly less, than the original offering price of your securities.
If the ending level is less than the threshold level, the maturity payment amount that you receive at maturity will be reduced by an amount equal to the decline in the level of the Index to the extent it is below the threshold level (expressed as a percentage of the starting level). The threshold level is 80% of the starting level. As a result, you may receive less, and possibly 80% less, than the original offering price per security at maturity even if the level of the Index is greater than or equal to the starting level or the threshold level at certain times during the term of the securities.
Even if the ending level is greater than the starting level, the amount you receive at stated maturity may only be slightly greater than the original offering price, and your yield on the securities may be less than the yield you would earn if you bought a traditional interest-bearing debt security of Wells Fargo Finance LLC or another issuer with a similar credit rating with the same stated maturity date.
No Periodic Interest Will Be Paid On The Securities.
No periodic payments of interest will be made on the securities. However, if the agreed-upon tax treatment is successfully challenged by the Internal Revenue Service (the “IRS”), you may be required to recognize taxable income over the term of the securities. You should review the section of this pricing supplement entitled “United States Federal Tax Considerations.”
The Securities Are Subject To Credit Risk.
The securities are our obligations, are fully and unconditionally guaranteed by the Guarantor and are not, either directly or indirectly, an obligation of any other third party. Any amounts payable under the securities are subject to creditworthiness and you will have no ability to pursue any securities included in the Index for payment. As a result, our and the Guarantor’s actual and perceived creditworthiness may affect the value of the securities and, in the event we and the Guarantor were to default on the obligations under the securities and the guarantee, you may not receive any amounts owed to you under the terms of the securities.
As A Finance Subsidiary, We Have No Independent Operations And Will Have No Independent Assets.
As a finance subsidiary, we have no independent operations beyond the issuance and administration of our securities and will have no independent assets available for distributions to the holders of our securities if they make claims in respect of such securities in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders will be limited to those available under the related guarantee by the Guarantor and that guarantee will rank pari passu with all other unsecured, unsubordinated obligations of the Guarantor. Holders will have recourse only to a single claim against the Guarantor and its assets under the guarantee. Holders of the securities should accordingly assume that in any such proceedings they would not have any priority over and should be treated pari passu with the claims of other unsecured, unsubordinated creditors of the Guarantor, including holders of unsecured, unsubordinated debt securities issued by the Guarantor.
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, certain events of bankruptcy or insolvency relating to Wells Fargo Finance LLC only, whether voluntary or involuntary, certain situations under which the guarantee ceases to be in full force and effect or if the Guarantor denies or disaffirms its obligations under the guarantee. 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 Debt Securities of Wells Fargo Finance LLC —Events of Default and Covenant Breaches” in the accompanying prospectus.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
Holders Of The Securities Could Be At Greater Risk For Being Structurally Subordinated If Either We Or The Guarantor Convey, Transfer Or Lease All Or Substantially All Of Our Or Its Assets To One Or More Of The Guarantor’s Subsidiaries.
Under the indenture, we may convey, transfer or lease all or substantially all of our assets to one or more of the Guarantor’s subsidiaries. Similarly, the Guarantor may convey, transfer or lease all or substantially all of its assets to one or more of its subsidiaries. In either case, third-party creditors of the Guarantor’s subsidiaries would have additional assets from which to recover on their claims while holders of the securities would be structurally subordinated to creditors of the Guarantor’s subsidiaries with respect to such assets. See “Description of Debt Securities of Wells Fargo Finance LLC—Consolidation, Merger or Sale” in the accompanying prospectus.
The Securities Will Not Have The Benefit Of Any Cross-Default Or Cross-Acceleration With Other Indebtedness Of The Guarantor; Events Of Bankruptcy, Insolvency, Receivership Or Liquidation Relating To The Guarantor And Failure By The Guarantor To Perform Any Of Its Covenants Or Warranties (Other Than A Payment Default Under The Guarantee) Will Not Constitute An Event Of Default With Respect To The Securities.
The securities will not have the benefit of any cross-default or cross-acceleration with other indebtedness of the Guarantor. In addition, events of bankruptcy, insolvency, receivership or liquidation relating to the Guarantor and failure by the Guarantor to perform any of its covenants or warranties (other than a payment default under the guarantee) will not constitute an event of default with respect to the securities.
The Estimated Value Of The Securities On The Pricing Date, Based On WFS’s Proprietary Pricing Models, Will Be Less Than The Original Offering Price.
The original offering price of the securities includes certain costs that are borne by you. Because of these costs, the estimated value of the securities on the pricing date will be less than the original offering price. The costs included in the original offering price relate to selling, structuring, hedging and issuing the 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 rate that is generally lower than our internal funding rate, which is described above under “Estimated Value of the Securities—Determining the estimated value.” If the costs relating to selling, structuring, hedging and issuing the securities were lower, or if the assumed 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 “Estimated Value of the Securities—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 6-month period following the issue date, the secondary market price offered by WFS or any of its affiliates will be increased by an amount reflecting a portion of the costs associated with selling, structuring, hedging and issuing the 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 6-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
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
may be different than if you held your securities at WFS or any of its affiliates, as discussed above under “Estimated Value of the Securities—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 the 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.
|
|
•
|
Index Performance. The value of the securities prior to maturity will depend substantially on the then-current level of the 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 Index at such time is less than, equal to or not sufficiently above the starting level or threshold level.
|
|
|
•
|
Interest Rates. The value of the securities may be affected by changes in the interest rates in the U.S. markets.
|
|
|
•
|
Volatility Of The Index. 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 Index changes.
|
|
|
•
|
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 level of the Index. This difference will most likely reflect a discount due to expectations and uncertainty concerning the level of the Index during the period of time still remaining to the stated maturity date. In general, as the time remaining to maturity decreases, the value of the securities will approach the amount that would be payable at maturity based on the then-current level of the Index.
|
|
|
•
|
Dividend Yields On Securities Included In The Index. The value of the securities may be affected by the dividend yields on securities included in the Index.
|
In addition to the derivative component factors, the value of the securities will be affected by actual or anticipated changes in our and the Guarantor’s creditworthiness. 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 the Index. Because numerous factors are expected to affect the value of the securities, changes in the level of the Index 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.
Your Return On The Securities Could Be Less Than If You Owned Securities Included In The Index.
Your return on the securities will not reflect the return you would realize if you actually owned the securities included in the Index and received the dividends and other payments paid on those securities. This is in part because the maturity payment amount will be determined by reference to the ending level of the Index, which will be calculated by reference to the prices of the securities in the Index without taking into consideration the value of dividends and other payments paid on those securities.
Historical Levels Of The Index Should Not Be Taken As An Indication Of The Future Performance Of The Index During The Term Of The Securities.
The trading prices of the securities included in the Index will determine the maturity payment amount payable to you at maturity. As a result, it is impossible to predict whether the closing level of the Index will fall or rise compared to its starting level. Trading prices of the securities included in the Index 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 Index do not provide an indication of the future performance of the Index.
Changes That Affect The Index May Adversely Affect The Value Of The Securities And The Maturity Payment Amount You Will Receive At Maturity.
The policies of the index sponsor concerning the calculation of the Index and the addition, deletion or substitution of securities comprising the Index and the manner in which the index sponsor takes account of certain changes affecting such securities may affect
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
the level of the Index and, therefore, may affect the value of the securities and the maturity payment amount payable at maturity. The index sponsor may discontinue or suspend calculation or dissemination of the Index or materially alter the methodology by which it calculates the 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 Index.
Actions by any company whose securities are included in the Index may have an adverse effect on the price of its security, the ending level and the value of the securities. Neither we nor the Guarantor are affiliated with any of the companies included in the Index. These unaffiliated companies included in the Index 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.
We And Our Affiliates Have No Affiliation With The Index Sponsor And Have Not Independently Verified Its Public Disclosure Of Information.
We and our affiliates are not affiliated in any way with the index sponsor and have no ability to control or predict its actions, including any errors in or discontinuation of disclosure regarding the methods or policies relating to the calculation of the Index. We have derived the information about the index sponsor and the Index 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 the Index and the index sponsor. The index sponsor is not involved in the offering of the securities made hereby in any way and has no obligation to consider your interests as an owner of the securities in taking any actions that might affect the value of the securities.
The Stated Maturity Date May Be Postponed If The Calculation Day Is Postponed.
The calculation day will be postponed if the originally scheduled calculation day is not a trading day or if the calculation agent determines that a market disruption event has occurred or is continuing on the calculation day. If such a postponement occurs, the stated maturity date will be the later of (i) the initial stated maturity date and (ii) three business days after the calculation day as postponed.
Our And The Guarantor’s 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 and the Guarantor’s 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.
|
|
•
|
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 ending level of the Index and may be required to make other determinations that affect the return you receive on the securities at maturity. In making these determinations, the calculation agent may be required to make discretionary judgments, including determining whether a market disruption event has occurred on the scheduled calculation day, which may result in postponement of the calculation day; determining the ending level of the Index if the calculation day is postponed to the last day to which it may be postponed and a market disruption event occurs on that day; if the Index is discontinued, selecting a successor equity index or, if no successor equity index is available, determining the ending level of the Index; and determining whether to adjust the ending level of the Index on the calculation day in the event of certain changes in or modifications to the 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 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 level of the Index. Our affiliates or any participating
|
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
dealer in the offering of the securities or its affiliates may, at present or in the future, publish research reports on the Index or the companies whose securities are included in the 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 Index or the companies whose securities are included in the Index could adversely affect the level of the Index and, therefore, adversely affect the value of and your return on the securities. You are encouraged to derive information concerning the Index 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 Index or the companies whose securities are included in the Index published on or prior to the pricing date could result in an increase in the level of the Index on the pricing date, which would adversely affect investors in the securities by increasing the level at which the Index must close on the 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 the Index may adversely affect the level of the 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 the 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 the Index and, therefore, 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 the 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 level of the Index. 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 the Index or listed or over-the-counter derivative or synthetic instruments related to the Index 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 the Index, or derivative or synthetic instruments related to the Index or such securities, they may liquidate a portion of such holdings at or about the time of the calculation day or at or about the time of a change in the securities included in the Index. These hedging activities could potentially adversely affect the level of the Index and, therefore, 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 level of the Index. Our affiliates or any participating dealer or its affiliates may engage in trading in the securities included in the Index and other instruments relating to the Index 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 level of the Index and, therefore, 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 and/or distribution expense fee, 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 and/or distribution expense fee for the sale of the securities to you, this projected hedging profit will be in addition to the concession and/or distribution expense fee, 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 regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the IRS. Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the securities as prepaid derivative contracts that are “open transactions” for U.S. federal income tax purposes. If the IRS were successful in asserting an alternative treatment of the securities, the tax consequences of the ownership and disposition of the securities might be materially and adversely affected.
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 light of Treasury regulations, as modified by an IRS notice, that provide a general exemption for financial instruments issued prior to January 1, 2021 that do not have a “delta” of one, as of the date of this preliminary pricing supplement the securities should not be subject to withholding under Section 871(m). However, information about the application of Section 871(m) to the securities will be updated in the final pricing supplement. Moreover, the IRS could challenge a conclusion that the securities should not be subject to withholding
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
under Section 871(m). If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld.
In addition, in 2007 the U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. Any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, including the character and timing of income or loss and the degree, if any, to which income realized by non-U.S. persons should be subject to withholding tax, possibly with retroactive effect. You should read carefully the discussion under “United States Federal Tax Considerations” in this pricing supplement. You should also consult your tax adviser regarding the U.S. federal tax consequences of an investment in the securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
The following table illustrates, for a hypothetical participation rate of 115% (the midpoint of the specified range for the participation rate) and a range of hypothetical ending levels of the Index:
|
|
●
|
the hypothetical percentage change from the hypothetical starting level to the hypothetical ending level;
|
|
|
●
|
the hypothetical maturity payment amount payable at stated maturity per security; and
|
|
|
●
|
the hypothetical pre-tax total rate of return.
|
|
|
|
|
|
|
Hypothetical
ending level
|
Hypothetical
percentage change
from the hypothetical
starting level to the
hypothetical ending level
|
Hypothetical
maturity payment amount
payable at
stated maturity
per security
|
Hypothetical
pre-tax total
rate of return
|
|
175.00
|
75.00%
|
$1,862.50
|
86.25%
|
|
150.00
|
50.00%
|
$1,575.00
|
57.50%
|
|
140.00
|
40.00%
|
$1,460.00
|
46.00%
|
|
130.00
|
30.00%
|
$1,345.00
|
34.50%
|
|
120.00
|
20.00%
|
$1,230.00
|
23.00%
|
|
110.00
|
10.00%
|
$1,115.00
|
11.50%
|
|
105.00
|
5.00%
|
$1,057.50
|
5.75%
|
|
100.00(1)
|
0.00%
|
$1,000.00
|
0.00%
|
|
95.00
|
-5.00%
|
$1,000.00
|
0.00%
|
|
90.00
|
-10.00%
|
$1,000.00
|
0.00%
|
|
80.00
|
-20.00%
|
$1,000.00
|
0.00%
|
|
79.00
|
-21.00%
|
$990.00
|
-1.00%
|
|
75.00
|
-25.00%
|
$950.00
|
-5.00%
|
|
50.00
|
-50.00%
|
$700.00
|
-30.00%
|
|
25.00
|
-75.00%
|
$450.00
|
-55.00%
|
|
(1)
|
The hypothetical starting level of 100.00 has been chosen for illustrative purposes only and does not represent the actual starting level. The actual starting level will be determined on the pricing date and will be set forth under “Terms of the Securities” above. For historical data regarding the actual closing levels of the Index, see the historical information set forth herein.
|
The above figures are for purposes of illustration only and may have been rounded for ease of analysis. The actual amount you receive at stated maturity and the resulting pre-tax rate of return will depend on the actual starting level, ending level and participation rate.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
|
Hypothetical Payments at Stated Maturity
|
Set forth below are three examples of payment at stated maturity calculations, reflecting a hypothetical participation rate of 115% (the midpoint of the specified range for the participation rate) and assuming hypothetical starting levels and ending levels as indicated in the examples. The terms used for purposes of these hypothetical examples do not represent the actual starting level or threshold level. The hypothetical starting level of 100.00 has been chosen for illustrative purposes only and does not represent the actual starting level. The actual starting level and threshold level will be determined on the pricing date and will be set forth under “Terms of the Securities” above. For historical data regarding the actual closing levels of the Index, see the historical information set forth herein. These examples are for purposes of illustration only and the values used in the examples may have been rounded for ease of analysis.
Example 1. Maturity payment amount is greater than the original offering price:
Hypothetical starting level: 100.00
Hypothetical ending level: 110.00
Because the hypothetical ending level is greater than the hypothetical starting level, the maturity payment amount per security would be equal to the original offering price of $1,000 plus a positive return equal to:
|
|
|
$1,000
|
×
|
|
110.00 – 100.00
|
|
× 115%
|
|
= $115.00
|
|
|
|
100.00
|
|
|
On the stated maturity date you would receive $1,115.00 per security.
Example 2. Maturity payment amount is equal to the original offering price:
Hypothetical starting level: 100.00
Hypothetical ending level: 90.00
Hypothetical threshold level: 80.00, which is 80.00% of the hypothetical starting level
Since the hypothetical ending level is less than the hypothetical starting level, but not by more than 20%, you would not lose any of the original offering price of your securities.
On the stated maturity date you would receive $1,000.00 per security.
Example 3. Maturity payment amount is less than the original offering price:
Hypothetical starting level: 100.00
Hypothetical ending level: 50.00
Hypothetical threshold level: 80.00, which is 80% of the hypothetical starting level
Since the hypothetical ending level is less than the hypothetical starting level by more than 20%, you would lose a portion of the original offering price of your securities and receive the maturity payment amount equal to:
|
|
$
1,000 -
|
|
$1,000
|
×
|
|
80.00 – 50.00
|
|
= $700.00
|
|
|
|
100.00
|
|
On the stated maturity date you would receive $700.00 per security.
To the extent that the starting level, ending level and participation rate differ from the values assumed above, the results indicated above would be different.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
|
Additional Terms of the Securities
|
Wells Fargo Finance LLC will issue the securities as part of a series of senior unsecured debt securities entitled “Medium-Term Notes, Series A,” which is more fully described in the prospectus supplement. Information included in this pricing supplement supersedes information in the market measure supplement, prospectus supplement and prospectus to the extent that it is different from that information.
Certain Definitions
A “trading day” means a day, as determined by the calculation agent, on which (i) the relevant stock exchanges with respect to each security underlying the Index are scheduled to be open for trading for their respective regular trading sessions and (ii) each related futures or options exchange is scheduled to be open for trading for its regular trading session.
The “relevant stock exchange” for any security underlying the 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 the 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 the Index.
Calculation Agent
Wells Fargo Securities, LLC, one of our affiliates and a wholly owned subsidiary of Wells Fargo & Company, will act as calculation agent for the securities and may appoint agents to assist it in the performance of its duties. Pursuant to a calculation agent agreement, we may appoint a different calculation agent without your consent and without notifying you.
The calculation agent will determine the maturity payment amount you receive at stated maturity. In addition, the calculation agent will, among other things:
|
|
•
|
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
|
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
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.
|
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 the calculation day, then the 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 the 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 the method of calculating the Index or a successor equity index, or the closing level thereof, is changed in a material
respect, or if the 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 the 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 the Index or successor equity index with reference
to such index, as so adjusted. Accordingly, if the method of calculating the 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 the 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).
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
Discontinuance of the Index
If the sponsor or publisher of the Index (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 agent’s notification of that determination to the trustee and Wells Fargo Finance LLC, the calculation agent will substitute the successor equity index as calculated by the relevant index sponsor or any other entity and calculate the ending level as described above. Upon any selection by the calculation agent of a successor equity index, Wells Fargo Finance LLC will cause notice to be given to holders of the securities.
In the event that the index sponsor discontinues publication of the Index prior to, and the discontinuance is continuing on, the calculation day and the calculation agent determines that no successor equity index is available at such time, the calculation agent will calculate a substitute closing level for 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 the 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 maturity payment amount, calculated as provided herein. The maturity payment amount will be calculated as though the date of acceleration were the calculation day.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
|
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®” 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 Index for the period from January 1, 2014 to November 1, 2019. The closing level on November 1, 2019 was 27347.36. 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.
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 to Wells Fargo & Company, our parent company. The Dow Jones Industrial Average® is a product of S&P Dow Jones Indices and has been licensed to Wells Fargo & Company, our parent company, for use by Wells Fargo & Company and certain of its affiliated or subsidiary companies (including us). The securities 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—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
|
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.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
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;
|
|
|
(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—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
|
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 in the initial offering at the “issue price,” which is the first price at which a substantial amount of the securities is sold to the public, and hold the security as a capital asset within the meaning of Section 1221 of the Code. It does not address all of the tax consequences that may be relevant to you in light of your particular circumstances or if you are an investor subject to special rules, such as:
|
|
•
|
a financial institution;
|
|
|
•
|
a “regulated investment company”;
|
|
|
•
|
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.
We will not attempt to ascertain whether any of the issuers of the underlying stocks of the Index (the “underlying stocks”) is treated as a “U.S. real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code or as a “passive foreign investment company” (“PFIC”) within the meaning of Section 1297 of the Code. If any of the issuers of the underlying stocks were so treated, certain adverse U.S. federal income tax consequences might apply to you, in the case of a USRPHC if you are a non-U.S. holder (as defined below) and in the case of a PFIC if you are a U.S. holder (as defined below), upon the sale, exchange or other disposition of the securities. You should refer to information filed with the Securities and Exchange Commission or another governmental authority by the issuers of the underlying stocks and consult your tax adviser regarding the possible consequences to you if any of the issuers of the underlying stocks is or becomes a USRPHC or PFIC.
This discussion is based on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date of this pricing supplement, changes to any of which subsequent to the date of this pricing supplement may affect the tax consequences described herein, possibly with retroactive effect. This discussion does not address the effects of any applicable state, local or non-U.S. tax laws, any alternative minimum tax consequences, the potential application of the Medicare tax on investment income or the consequences to taxpayers subject to special tax accounting rules under Section 451(b) of the Code. You should consult your tax adviser concerning the application of U.S. federal income and estate tax laws to your particular situation (including the possibility of alternative treatments of the securities), as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
Tax Treatment of the Securities
In the opinion of our counsel, Davis Polk & Wardwell LLP, a security should be treated as a prepaid derivative contract that is an “open transaction” for U.S. federal income tax purposes. By purchasing a security, you agree (in the absence of an administrative determination or judicial ruling to the contrary) to this treatment.
Due to the absence of statutory, judicial or administrative authorities that directly address the U.S. federal tax treatment of the securities or similar instruments, significant aspects of the treatment of an investment in the securities are uncertain. We do not plan to request a ruling from the IRS, and the IRS or a court might not agree with the treatment described below. Moreover, our counsel’s opinion is based on market conditions as of the date of this preliminary pricing supplement and is subject to confirmation in the final pricing supplement. Accordingly, you should consult your tax adviser regarding all aspects of the U.S. federal income and estate tax consequences of an investment in the securities. Unless otherwise indicated, the following discussion is based on the treatment of the securities as prepaid derivative contracts that are “open transactions.”
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
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 therein 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 Prior to Maturity. You should not be required to recognize income over the term of the securities prior to maturity, other than pursuant to a sale, exchange or retirement as described below.
Sale, Exchange or Retirement of the Securities. Upon a sale, exchange or retirement of the securities, you should recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and your tax basis in the securities that are sold, exchanged or retired. Your tax basis in the securities should equal the amount you paid to acquire them. This gain or loss should be long-term capital gain or loss if at the time of the sale, exchange or retirement you held the securities for more than one year, and short-term capital gain or loss otherwise. Long-term capital gains recognized by non-corporate U.S. holders are generally subject to taxation at reduced rates. The deductibility of capital losses is subject to certain limitations.
Possible Alternative Tax Treatments of an Investment in the Securities
Alternative U.S. federal income tax treatments of the securities are possible that, if applied, could materially and adversely affect the timing and/or character of income, gain or loss with respect to them. It is possible, for example, that the securities could be treated as debt instruments governed by Treasury regulations relating to the taxation of contingent payment debt instruments. In that case, regardless of your method of tax accounting for U.S. federal income tax purposes, you generally would be required to accrue income based on our comparable yield for similar non-contingent debt, determined as of the time of issuance of the securities, in each year that you held the securities, even though we are not required to make any payment with respect to the securities prior to maturity. In addition, any gain on the sale, exchange or retirement of the securities would be treated as ordinary income.
Other possible U.S. federal income tax treatments of the securities could also affect the timing and character of income or loss with respect to the securities. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; whether short-term instruments should be subject to any such accrual regime; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. You should consult your tax adviser regarding the possible alternative treatments of an investment in the securities and the issues presented by this notice.
Tax Consequences to Non-U.S. Holders
This section applies only to non-U.S. holders. You are a “non-U.S. holder” if you are a beneficial owner of a security that is, for U.S. federal income tax purposes:
|
|
•
|
an individual who is classified as a nonresident alien;
|
|
|
•
|
a foreign corporation; or
|
|
|
•
|
a foreign estate or trust.
|
You are not a non-U.S. holder for purposes of this discussion if you are (i) an individual who is present in the United States for 183 days or more in the taxable year of disposition or (ii) a former citizen or resident of the United States. If you are or may become such a
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
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.
Sale, Exchange or Retirement of the Securities. Subject to the possible application of Section 897 of the Code and the discussion below regarding Section 871(m), you generally should not be subject to U.S. federal income or withholding tax in respect of amounts paid to you, provided that income in respect of the securities is not effectively connected with your conduct of a trade or business in the United States.
If you are engaged in a U.S. trade or business, and if income from the securities is effectively connected with the conduct of that trade or business, you generally will be subject to regular U.S. federal income tax with respect to that income in the same manner as if you were a U.S. holder, unless an applicable income tax treaty provides otherwise. If you are such a holder and you are a corporation, you should also consider the potential application of a 30% (or lower treaty rate) branch profits tax.
Tax Consequences Under Possible Alternative Treatments. If all or any portion of a security were recharacterized as a debt instrument, subject to the possible application of Section 897 of the Code and the discussions below regarding FATCA and Section 871(m), any payment made to you with respect to the security generally should not be subject to U.S. federal withholding or income tax, provided that: (i) income or gain in respect of the security is not effectively connected with your conduct of a trade or business in the United States, and (ii) you provide an appropriate IRS Form W-8 certifying under penalties of perjury that you are not a United States person.
Other U.S. federal income tax treatments of the securities are also possible. In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. Among the issues addressed in the notice is the degree, if any, to which income with respect to instruments such as the securities should be subject to U.S. withholding tax. While the notice requests comments on appropriate transition rules and effective dates, it is possible that any Treasury regulations or other guidance promulgated after consideration of these issues might materially and adversely affect the withholding tax consequences of an investment in the securities, possibly with retroactive effect. Accordingly, you should consult your tax adviser regarding the issues presented by the notice.
Possible Withholding Under Section 871(m) of the Code. Section 871(m) of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax on dividend equivalents paid or deemed paid to non-U.S. holders with respect to certain financial instruments linked to U.S. equities (“U.S. underlying equities”) or indices that include U.S. underlying equities. Section 871(m) generally applies to instruments that substantially replicate the economic performance of one or more U.S. underlying equities, as determined based on tests set forth in the applicable Treasury regulations (a “specified security”). However, the regulations, as modified by an IRS notice, exempt financial instruments issued prior to January 1, 2021 that do not have a “delta” of one. Based on the terms of the securities and representations provided by us, our counsel is of the opinion that the securities should not be treated as transactions that have a “delta” of one within the meaning of the regulations with respect to any U.S. underlying equity and, therefore, should not be specified securities subject to withholding tax under Section 871(m).
A determination that the securities are not subject to Section 871(m) is not binding on the IRS, and the IRS may disagree with this treatment. Moreover, Section 871(m) is complex and its application may depend on your particular circumstances. For example, if you enter into other transactions relating to a U.S. underlying equity, you could be subject to withholding tax or income tax liability under Section 871(m) even if the securities are not specified securities subject to Section 871(m) as a general matter. You should consult your tax adviser regarding the potential application of Section 871(m) to the securities.
This information is indicative and will be updated in the final pricing supplement or may otherwise be updated by us in writing from time to time. Non-U.S. holders should be warned that Section 871(m) may apply to the securities based on circumstances as of the pricing date for the securities and, therefore, it is possible that the securities will be subject to withholding tax under Section 871(m).
In the event withholding applies, we will not be required to pay any additional amounts with respect to amounts withheld.
U.S. Federal Estate Tax
If you are an individual non-U.S. holder or an entity the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), you should note that, absent an applicable treaty exemption, the securities may be treated as U.S. situs property subject to U.S. federal estate tax. If you are such an individual or entity, you should consult your tax adviser regarding the U.S. federal estate tax consequences of investing in the securities.
Information Reporting and Backup Withholding
Amounts paid on the securities, and the proceeds of a sale, exchange or other disposition of the securities, may be subject to information reporting and, if you fail to provide certain identifying information (such as an accurate taxpayer identification number if you are a U.S. holder) or meet certain other conditions, may also be subject to backup withholding at the rate specified in the Code. If you are a non-U.S. holder that provides an appropriate IRS Form W-8, you will generally establish an exemption from backup withholding. Amounts
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
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. While existing Treasury regulations would also require withholding on payments of gross proceeds of the disposition (including upon retirement) of certain financial instruments treated as paying U.S.-source interest or dividends, the U.S. Treasury Department has indicated in subsequent proposed regulations its intent to eliminate this requirement. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations pending their finalization. If the securities were treated as debt instruments or as subject to Section 871(m), the withholding regime under FATCA would apply to the securities. If withholding applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld. If you are a non-U.S. holder, or a U.S. holder holding securities through a non-U.S. intermediary, you should consult your tax adviser regarding the potential application of FATCA to the securities.
The preceding discussion constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of owning and disposing of the securities.
You should consult your tax adviser regarding all aspects of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
|
Market Linked Securities—Leveraged Upside Participation and Fixed Percentage Buffered Downside
Principal at Risk Securities Linked to the Dow Jones Industrial Average® due December 4, 2025
|
The
material included in this Annex does not constitute terms of the securities. Instead, the securities will have the terms specified
in the preceding preliminary pricing supplement and the accompanying supplements. For purposes of these securities, references
in this Annex to (i) the “applicable preliminary pricing supplement,” the “applicable pricing supplement”
and the “relevant offering materials” mean the preceding preliminary pricing supplement and the accompanying supplements,
(ii) the “applicable issuer” means Wells Fargo Finance LLC, (iii) the credit risk and creditworthiness of the applicable
issuer mean the credit risk and creditworthiness of Wells Fargo Finance LLC, as issuer, and Wells Fargo & Company, as guarantor,
and (iv) the ability of the applicable issuer to make payments on the Market Linked Securities when due, and the consequences
of a default by applicable issuer on its payment obligations, mean the ability of Wells Fargo Finance LLC to make payments on
the securities and of Wells Fargo & Company to pay its obligations under the guarantee, and the consequences of a default
on the obligations under the securities and the guarantee.
Market Linked Securities
Upside Participation and Fixed Percentage Buffered Downside
This material was prepared by Wells Fargo
Securities, LLC, a registered broker- dealer and separate non-bank affiliate of Wells Fargo & Company. This material is not
a product of Wells Fargo & Company research departments. Please see the relevant offering materials for complete product descriptions,
including related risk and tax disclosure.
MARKET LINKED SECURITIES WITH UPSIDE PARTICIPATION AND
FIXED PERCENTAGE BUFFERED DOWNSIDE 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.
Market Linked Securities with Upside Participation
and Fixed Percentage Buffered Downside have complex features and are not suitable for all investors. Before deciding to make an
investment, you should read and understand the applicable preliminary pricing supplement and other related offering documents provided
by the applicable issuer.
|
|
|
Market
Linked Securities with Upside Participation and Fixed Percentage Buffered Downside
|
|
|
Market Linked Securities with Upside Participation
and Fixed Percentage Buffered Downside (“these Market Linked Securities”) offer a return linked to the performance
of a market measure, such as an index, exchange-traded fund or a basket of indices or exchange-traded funds (the “underlying”).
In contrast to a direct investment in the underlying, these Market Linked Securities provide a buffer against a moderate decline
of the underlying as well as the potential to achieve a positive return by participating in any appreciation of the underlying
(on an unleveraged or leveraged basis). However, if the underlying declines in value by more than the buffer, you could incur a
substantial loss on your investment. If the issuer defaults on its payment obligations, you could lose your entire investment.
These Market Linked Securities are designed for
investors who seek exposure to any positive performance of an underlying and a measure of market risk reduction if the underlying
declines. In exchange for these features, you must be willing to forgo interest payments and dividends (in the case of equity underlyings).
You must also be willing to accept the possibility of downside exposure to any decline of the underlying beyond the buffer. The
buffer applies only if you hold these Market Linked Securities at maturity.
These Market Linked Securities are unsecured debt obligations
of the issuer. You will have no ability to pursue the underlying or any assets included in the underlying for payment.
Market Linked Securities – Upside
Participation and Fixed Percentage Buffered Downside | A-2
The charts in this section do not reflect forgone dividend
payments.
Direct investment payoff
For traditional assets, such as stocks,
there is a direct relationship between the change in the level of the asset and the return on the investment. For example, as
the graph indicates, suppose you bought shares of a common stock at $100 per share. If you sold the shares at $120 each, the
return on the investment (excluding any dividend payments) would be $20 per share, or 20%. Similarly, if you sold the shares
after the price decreased to $80 (i.e., a decline of 20%), this would result in a 20% investment loss (excluding
dividends).
Market Linked Securities with Upside Participation
and Fixed Percentage Buffered Downside
These Market Linked Securities offer a return that
is linked to the performance of an underlying but that differs from the return that would be achieved on a direct investment in
the underlying. The return at maturity is based on the performance of an underlying as measured from a specified starting
level to the closing level of the underlying on a calculation day shortly before maturity (the ending
level). If the ending level of the underlying is greater than the starting level, you will receive a payment at maturity
equal to the original offering price plus a return equal to the percentage increase in the underlying from the starting level
to the ending level multiplied by a specified participation rate. If the ending level of the underlying is less than or equal
to the starting level but greater than or equal to the threshold level (i.e., the underlying has not declined by more than the
buffer), you will receive a payment at maturity equal to the original offering price. However, if the ending level of the underlying
is less than the threshold level (i.e., the underlying has declined by more than the buffer), you will receive less than the original
offering price and have 1-to-1 downside exposure to the decrease in the level of the underlying in excess of the buffer. Under
these circumstances, you could incur a substantial loss on your investment.
To understand how these Market Linked Securities
would perform under varying market conditions, consider a hypothetical Market Linked Security with the following terms:
• Participation
rate: 100%. A participation rate determines how much of the appreciation of the
underlying (if any) will be reflected in the payment at maturity on these Market Linked Securities. A participation rate of
100% means that if the underlying appreciates from its starting level to its ending level, you will receive a total return at
maturity equal to 100% of that appreciation. For example, if the underlying appreciates by 10%, you will receive a total
return at maturity of 10% (which is 100% of 10%). For some issuances of these Market Linked Securities, the participation
rate may be greater than 100%, in which case you will participate on a leveraged basis in any appreciation of the
underlying from its starting level to its ending level. For example, if the participation rate is 110% and the underlying
appreciates by 10%, you will receive a total return at maturity of 11% (which is 110% of 10%).
• Buffer:
20%. The buffer offers a measure of downside market risk reduction at maturity as compared
to a direct investment in the underlying. A 20% fixed buffer means that you will be repaid the original offering price at maturity
if the underlying declines by 20% or less from the starting level to the ending level — in other words, if the ending level
is greater than or equal to a threshold level that is equal to 80% of
the starting level. However, if the underlying declines by more than 20%, so that the ending level is less than the threshold
level, you will incur a loss equal to the percentage decline of the underlying in excess of 20%. For example, if the underlying
declines by 30%, the percentage decline of 30% will exceed the 20% buffer by 10% and you will incur a 10% loss at maturity.
A-3 | Market Linked Securities – Upside Participation
and Fixed Percentage Buffered Downside
This
information, including the graph to the left, is hypothetical and is provided for informational purposes only. It is not intended
to represent any specific return, yield, or investment, nor is it indicative of future results. The graph
illustrates the payoff on the hypothetical Market Linked Securities with Upside Participation and Fixed Percentage Buffered Downside
described above for a range of percentage changes in the underlying from the starting level to the ending level.
This hypothetical Market Linked Security could outperform
the underlying if the ending level of the underlying has declined from the starting level. Note that, because the value of the
underlying does not incorporate dividends paid on the underlying, the return on these Market Linked Securities does not compensate
you for any dividends paid on the underlying. All payments on these Market Linked Securities are subject to the ability of the
issuer to make such payments to you when they are due, and you will have no ability to pursue the underlying or any assets included
in the underlying for payment. If the issuer defaults on its payment obligations, you could lose your entire investment.
Market Linked Securities – Upside
Participation and Fixed Percentage Buffered Downside | A-4
Determining payment at maturity
The diagram below illustrates how the cash payment
on the stated maturity date for this hypothetical Market Linked Security would be calculated. The diagram below assumes an original
offering price of $1,000 per security.
A-5 | Market Linked Securities – Upside Participation
and Fixed Percentage Buffered Downside
Estimated value of Market Linked Securities
with Upside Participation and Fixed Percentage Buffered Downside
The original offering price of these Market
Linked Securities will include certain costs that are borne by you. Because of these costs, the estimated value of these
Market Linked Securities on the pricing date will be less than the original offering price. If specified in the applicable
pricing supplement, these costs may include the underwriting discount or commission, the hedging profits of the
issuer’s hedging counterparty (which may be an affiliate of the issuer), and hedging and other costs associated with
the offering and costs relating to the issuer’s funding considerations for debt of this type. See “General risks
and investment considerations” herein and the applicable pricing supplement for more information.
The issuer will disclose the estimated value of these
Market Linked Securities in the applicable pricing supplement. The estimated value of these Market Linked Securities will be determined
by estimating the value of the combination of hypothetical financial instruments that would replicate the payout on these Market
Linked Securities, which combination consists of a non-interest bearing, fixed-income bond and one or more derivative instruments
underlying the economic terms of these Market Linked Securities. You should read the applicable pricing supplement for more information
about the estimated value of these Market Linked Securities and how it is determined.
Market Linked Securities – Upside
Participation and Fixed Percentage Buffered Downside | A-6
|
Which investments are right
for you?
|
It is important to read and understand the applicable
preliminary pricing supplement and other related offering documents and consider several factors before making an investment decision.
An investment in these Market Linked Securities
may help you modify your portfolio’s risk-return profile to more closely reflect your market views. However, at maturity
you may incur a loss on your investment, and you will forgo interest payments and dividend payments (in the case of equity underlyings).
These Market Linked Securities are not suitable for
all investors, but may be suitable for investors aiming to:
|
|
•
|
Supplement their existing investments with the return profile provided by these Market Linked
Securities
|
|
|
•
|
Receive a buffer against a moderate decline in the underlying
|
|
|
•
|
Obtain exposure to an underlying with a different risk/return profile than a direct investment
in that underlying
|
|
|
•
|
Seek the potential to outperform
the underlying in a declining market or, if the participation rate is sufficiently greater than 100%, the potential to outperform
the underlying in an appreciating market
|
You can find a discussion
of risks and investment considerations on the next page and in the preliminary pricing supplement and other related offering documents
for these Market Linked Securities. The following questions, which you should review with your financial advisor, are intended
to initiate a conversation about whether these Market Linked Securities are right for you.
|
|
•
|
Are you comfortable with
the potential loss of a significant portion of your initial investment as a result of a percentage decline of the underlying that
exceeds the buffer?
|
|
|
•
|
What is your time horizon? Do you foresee liquidity needs? Will you be able to hold these investments
until maturity?
|
|
|
•
|
Does protection against moderate market declines take precedence for you over dividend payments
or fixed returns?
|
|
|
•
|
What is your outlook on the market? How confident are you in your portfolio’s ability to
weather a market decline?
|
|
|
•
|
What is your sensitivity to the tax treatment for your investments?
|
|
|
•
|
Are you dependent on your investments for current income?
|
|
|
•
|
Are you willing to accept
the credit risk of the applicable issuer in order to obtain the exposure to the underlying that these Market Linked Securities
provide?
|
Before making an investment decision, please
work with your financial advisor to determine which investment products may be appropriate given your financial situation, investment
goals, and risk profile.
A-7 | Market Linked Securities – Upside Participation
and Fixed Percentage Buffered Downside
|
General risks
and investment considerations
|
These Market Linked Securities have complex features
and are not suitable for all investors. They involve a variety of risks and may be linked to a variety of different underlyings.
Each of these Market Linked Securities and each underlying will have its own unique set of risks and investment considerations.
Before you invest in these Market Linked Securities, you should thoroughly review the relevant preliminary pricing supplement and
other related offering documents for a comprehensive discussion of the risks associated with the investment. The following are
general risks and investment considerations applicable to these Market Linked Securities:
• Principal
and performance risk. These Market Linked Securities are not structured to repay your
full original offering price on the stated maturity date. If the ending level has declined from the starting level by more than
the buffer, the payment you receive at maturity will be less than the original offering price of these Market Linked Securities
and you may incur a substantial loss on your investment.
• Liquidity
risk. These Market Linked Securities are not appropriate for investors who may have liquidity
needs prior to maturity. These Market Linked Securities are not listed on any securities exchange and are generally illiquid instruments.
Neither Wells Fargo Securities nor any other person is required to maintain a secondary market for these Market Linked Securities.
Accordingly, you may be unable to sell your Market Linked Securities prior to their maturity date. If you choose to sell these
Market Linked Securities prior to maturity, assuming a buyer is available, you may receive less in sale proceeds than the original
offering price.
|
|
•
|
Market
value uncertain. These Market Linked Securities
are not appropriate for investors who need their investments to maintain a stable value
during their term. The value of your Market Linked Securities prior to maturity will
be affected by numerous factors, such as performance, volatility and dividend rate, if
applicable, of the underlying; interest rates; the time remaining to maturity; the correlation
among basket components, if applicable; and the applicable issuer’s creditworthiness.
|
• Costs
to investors. The original offering price of these Market Linked Securities will include
certain costs that are borne by you. These costs will adversely affect the economic terms of these Market Linked Securities and
will cause their estimated value on the pricing date to be less than the original offering price. If specified in the applicable
pricing supplement, these costs may include the underwriting discount or commission, the hedging profits of the issuer’s
hedging counterparty (which may be an affiliate of the issuer), hedging and other costs associated with the offering and costs
relating to the issuer’s funding considerations for debt of this type. These costs will adversely affect any secondary market
price for these Market Linked Securities, which may be further reduced by a bid-offer spread. As a result, unless market conditions
and other relevant factors change significantly in your favor following the pricing date, any secondary market price for these
Market Linked Securities is likely to be less than the original offering price.
• Credit
risk. Any investment in these Market Linked Securities is subject to the ability of
the applicable issuer to make payments to you when they are due, and you will have no ability to pursue the underlying or any
assets included in the underlying for payment. If the issuer defaults on its payment obligations, you could lose your
entire investment. In addition, the actual or perceived creditworthiness of the issuer may affect the value of these Market
Linked Securities prior to maturity.
• No
periodic interest or dividend payments. These Market Linked Securities do not typically
provide periodic interest. These Market Linked Securities linked to equity underlyings do not provide for a pass through of any
dividend paid on the equity underlyings.
• Estimated
value considerations. The estimated value of these Market Linked Securities that is disclosed
in the applicable pricing supplement will be determined by the issuer or an underwriter of the offering, which underwriter may
be an affiliate of the issuer and may be Wells Fargo Securities. The estimated value will be based on the issuer’s or the
underwriter’s proprietary pricing models and assumptions and certain inputs that may be determined by the issuer or underwriter
in its discretion. Because other dealers may have different views on these inputs, the estimated value that is disclosed in the
applicable pricing supplement may be higher, and perhaps materially higher, than the estimated value that would be determined
by other dealers in the market. Moreover, you should understand that the estimated value that is disclosed in the applicable pricing
supplement will not be an indication of the price, if any, at which Wells Fargo Securities or any other person may be willing
to buy these Market Linked Securities from you at any time after issuance.
Market Linked Securities – Upside
Participation and Fixed Percentage Buffered Downside | A-8
• Conflicts
of interest. Potential conflicts of interest may exist between you and the applicable
issuer and/or Wells Fargo Securities. For example, the applicable issuer, Wells Fargo Securities or one of their respective affiliates
may engage in business with companies whose securities are included in the underlying, or may publish research on such companies
or the underlying. In addition, the applicable issuer, Wells Fargo Securities or one of their respective affiliates may be the
calculation agent for the purposes of making important determinations that affect the payments on these Market Linked Securities.
Finally, the estimated value of these Market Linked Securities may be determined by the issuer or an underwriter of the offering,
which underwriter may be an affiliate of the issuer and may be Wells Fargo Securities.
• Effects
of trading and other transactions. Trading and other transactions by the applicable issuer,
Wells Fargo Securities or one of their respective affiliates could affect the underlying or the value of these Market Linked Securities.
• Basket
risk. If the underlying is a basket, the basket components may offset each other. Any
appreciation of one or more basket components may be moderated, wholly offset, or more than offset, by depreciation of one or
more other basket components.
• ETF
risk. If the underlying is an exchange-traded fund (ETF), it may underperform the index
it is designed to track as a result of costs and fees of the ETF and differences between the constituents of the index and the
actual assets held by the ETF. In addition, an investment in these Market Linked Securities linked to an ETF involves risks related
to the index underlying the ETF, as discussed in the next risk consideration.
• Index
risk. If the underlying is an index, or an ETF that tracks an index, your return on these
Market Linked Securities may be adversely affected by changes that the index publisher may make to the manner in which the index
is constituted or calculated. Furthermore, if the index represents foreign securities markets, you should understand that foreign
securities markets tend to be less liquid and more volatile than U.S. markets and that there is generally less information available
about foreign companies than about companies that file reports with the U.S. Securities and Exchange Commission. Moreover, if
the index represents emerging foreign securities markets, these Market Linked Securities will be subject to the heightened political
and economic risks associated with emerging markets. If the index includes foreign securities and the level of the index is based
on the U.S. dollar value of those foreign securities, these Market Linked Securities will be subject to currency exchange rate
risk in addition to the other risks described above, as the level of the index will be adversely affected if the currencies in
which the foreign securities trade depreciate against the U.S. dollar.
• Commodity
risk. These Market Linked Securities linked to commodities will be subject to a number
of significant risks associated with commodities. Commodity prices tend to be volatile and may fluctuate in ways that are unpredictable
and adverse to you. Commodity markets are frequently subject to disruptions, distortions, and changes due to various factors,
including the lack of liquidity in the markets, the participation of speculators, and government regulation and intervention.
Moreover, commodity indices may be adversely affected by a phenomenon known as “negative roll yield,” which occurs
when future prices of the commodity futures contracts underlying the index are higher than current prices. Negative roll yield
can have a significant negative effect on the performance of a commodity index. Furthermore, for commodities that are traded in
U.S. dollars but for which market prices are driven by global demand, any strengthening of the U.S. dollar against relevant other
currencies may adversely affect the demand for, and therefore the price of, those commodities.
• Currency
risk. These Market Linked Securities linked to currencies will be subject to a number
of significant risks associated with currencies. Currency exchange rates are frequently subject to intervention by governments,
which can be difficult to predict and can have a significant impact on exchange rates. Moreover, currency exchange rates are driven
by complex factors relating to the economies of the relevant countries that can be difficult to understand and predict. Currencies
issued by emerging market governments may be particularly volatile and will be subject to heightened risks.
• Bond
risk. These Market Linked Securities linked to bond indices or exchange-traded funds
that are comprised of specific types of bonds with different maturities and qualities will be subject to a number of
significant risks associated with bonds. In general, if market interest rates rise, the value of bonds will decline.
In addition, if the market perception of the creditworthiness of the relevant bond issuers falls, the value of bonds will
generally decline.
• Tax
considerations. You should review carefully the relevant preliminary pricing supplement
and other related offering documents and consult your tax advisors regarding the application of the U.S. federal tax laws to your
particular circumstances, as well as any tax consequences arising under the laws of any state, local, or non-U.S. jurisdiction.
A-9 | Market Linked Securities – Upside Participation
and Fixed Percentage Buffered Downside
Always read the preliminary pricing supplement and
other related offering documents.
These Market Linked Securities are offered with
the attached preliminary pricing supplement and other related offering documents. Investors should read and consider these documents
carefully before investing. Prior to investing, always consult your financial advisor to understand the investment structure in
detail.
For more information about these Market Linked
Securities and the structures currently available for investment, contact your financial advisor, who can advise you of whether
or not a particular offering may meet your individual needs and investment requirements.
Wells Fargo Securities is the trade name for
the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities,
LLC, a member of FINRA, NYSE, and SIPC, and Wells Fargo Bank, N.A.
Wells Fargo Advisors is a trade name used by
Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, members SIPC, separate registered broker- dealers
and non-bank affiliates of Wells Fargo & Company.
© 2017 Wells Fargo Securities, LLC. All rights
reserved. IHA-3838925