Pricing Supplement
To underlying supplement No
.
1 dated August 17
,
2015
,
product supplement B
dated July 31
,
2015
,
prospectus supplement
dated July 31
,
2015 and
prospectus dated April
27
,
2016
|
Pricing
Supplement No
.
2861B
Registration
Statement No
.
333
-
206013
Rule
424
(
b
)(
2
)
|
Structured
Investments
|
Deutsche Bank AG
$1
,
095
,
000
Capped Return Enhanced Notes Linked to the SPDR
®
S&P
®
Bank ETF due July 25
,
2018
|
General
|
·
|
The notes are designed
for investors who seek a return at maturity of two times the potential positive performance (if any) of the SPDR
®
S&P
®
Bank ETF (the
“
Underlying
”
),
subject to a Maximum Return of 21.20%. However, if the Final Price is less than the Initial Price, for each $1,000 Face Amount
of notes, investors will lose 1.00% of the Face Amount for every 1.00% by which the Final Price is less than the Initial Price.
The notes do not pay any coupons or dividends and investors should be willing to lose some or all of their investment if the Final
Price is less than the Initial Price. Any payment on the notes is subject to the credit of the Issuer.
|
|
·
|
Senior unsecured obligations
of Deutsche Bank AG due July 25, 2018
|
|
·
|
Minimum purchase of
$10,000. Minimum denominations of $1,000 (the
“
Face Amount
”
)
and integral multiples thereof.
|
|
·
|
The notes priced on
July 7, 2017 (the
“
Trade Date
”
)
and are expected to settle on July 12, 2017 (the
“
Settlement
Date
”
).
|
Key Terms
Issuer:
|
Deutsche Bank AG, London Branch
|
Underlying:
|
SPDR
®
S&P
®
Bank ETF (Ticker: KBE)
|
Issue Price:
|
100% of the Face Amount
|
Upside Leverage Factor:
|
2.00
|
Maximum Return:
|
21.20%. Accordingly, the maximum Payment at Maturity is $1,212.00 per $1,000 Face Amount of notes.
|
Payment at Maturity:
|
·
If the Final Price is greater than the Initial Price
,
you will receive a cash payment at maturity per $1,000 Face Amount of notes calculated as follows:
|
|
|
|
$1,000 + ($1,000 x the
lesser of
(i) Underlying Return x Upside Leverage Factor and (ii) Maximum Return)
|
|
|
|
·
If the Final Price is equal to the Initial Price
,
you will receive a cash payment at maturity equal to the Face Amount per $1,000 Face Amount of notes.
|
|
|
|
·
If the Final Price is less than the Initial Price
,
you will receive a cash payment at maturity per $1,000 Face Amount of notes calculated as follows:
|
|
|
|
$1,000 + ($1,000 x Underlying Return)
|
|
|
|
If the Final Price is less than the Initial Price
,
you will be fully exposed to the negative Underlying Return and
,
for each $1
,
000 Face Amount of notes
,
you will lose 1
.
00% of the Face Amount for every 1
.
00% by which the Final Price is less than the Initial Price
.
In this circumstance
,
you will lose some or all of your investment at maturity
.
Any payment at maturity is subject to the credit of the Issuer
.
|
Underlying Return:
|
The performance of the Underlying from the Initial Price to the Final Price, calculated as follows:
|
|
|
|
Final Price – Initial Price
|
|
Initial Price
|
|
|
|
The Underlying Return may be positive
,
zero or negative
.
|
Initial Price:
|
$44.21, equal to the closing price of the Underlying on the Trade Date
|
|
|
(
Key Terms continued on next page
)
|
|
|
|
Investing in the notes involves a number of risks. See
“
Risk
Factors
”
beginning on page 7 of the accompanying product supplement, page PS-5 of the accompanying prospectus supplement
and page 13 of the accompanying prospectus and
“
Selected Risk Considerations
”
beginning on page 8 of
this pricing supplement.
The Issuer
’
s estimated value of the notes on
the Trade Date is $979.60 per $1,000 Face Amount of notes, which is less than the Issue Price. Please see
“
Issuer
’
s
Estimated Value of the Notes
”
on page 3 of this pricing supplement for additional information.
By acquiring the notes, you will be bound by and deemed irrevocably
to consent to the imposition of any Resolution Measure (as defined below) by the competent resolution authority, which may include
the write down of all, or a portion, of any payment on the notes or the conversion of the notes into ordinary shares or other instruments
of ownership. If any Resolution Measure becomes applicable to us, you may lose some or all of your investment in the notes. Please
see
“
Resolution Measures and Deemed Agreement
”
on page 4 of this pricing supplement for more information.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or passed
upon the accuracy or the adequacy of this pricing supplement or the accompanying underlying supplement, product supplement, prospectus
supplement or prospectus. Any representation to the contrary is a criminal offense.
|
Price
to Public
|
Fees
(1)
|
Proceeds
to Issuer
|
Per
Note
|
$1,000.00
|
$10.00
|
$990.00
|
Total
|
$1,095,000.00
|
$10,950.00
|
$1,084,050.00
|
|
(1)
|
JPMorgan Chase Bank, N.A. and J.P. Morgan Securities
LLC, which we refer to as JPMS LLC, or one of its affiliates will act as placement agents for the notes. The placement agents
will receive a fee from the Issuer of $10.00 per $1,000 Face Amount of notes. Please see “Supplemental Plan of Distribution”
in this pricing supplement for more information about fees.
|
The notes are not deposits or savings accounts and are not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other U
.
S
.
or foreign governmental agency
or instrumentality
.
JPMorgan
Placement Agent
July 7, 2017
(
Key Terms continued from previous page
)
|
|
Final Price:
|
The arithmetic average of the Closing Prices of the Underlying on each of the five Averaging Dates
|
Closing Price:
|
The closing price of one share of the Underlying on the relevant date of calculation
multiplied by
the then-current Share Adjustment Factor, as determined by the calculation agent
|
Share Adjustment Factor:
|
Initially 1.0, subject to adjustment for certain actions affecting the Underlying. See “Description of the Securities — Anti-dilution Adjustments for Funds” in the accompanying product supplement.
|
Trade Date:
|
July 7, 2017
|
Settlement Date:
|
July 12, 2017
|
Averaging Dates
1
:
|
July 16, 2018, July 17, 2018, July 18, 2018, July 19, 2018 and July 20, 2018
|
Maturity Date
1
:
|
July 25, 2018
|
Listing:
|
The notes will not be listed on any securities exchange.
|
CUSIP / ISIN:
|
25155MCF6 / US25155MCF68
|
|
1
|
Subject
to adjustment as described under “Description of Securities — Adjustments to Valuation Dates and Payment Dates”
in the accompanying product supplement.
|
Issuer’s
Estimated Value of the Notes
The Issuer’s estimated value of the notes is equal to the
sum of our valuations of the following two components of the notes: (i) a bond and (ii) an embedded derivative(s). The value of
the bond component of the notes is calculated based on the present value of the stream of cash payments associated with a conventional
bond with a principal amount equal to the Face Amount of notes, discounted at an internal funding rate, which is determined primarily
based on our market-based yield curve, adjusted to account for our funding needs and objectives for the period matching the term
of the notes. The internal funding rate is typically lower than the rate we would pay when we issue conventional debt securities
on equivalent terms. This difference in funding rate, as well as the agent’s commissions, if any, and the estimated cost
of hedging our obligations under the notes, reduces the economic terms of the notes to you and is expected to adversely affect
the price at which you may be able to sell the notes in any secondary market. The value of the embedded derivative(s) is calculated
based on our internal pricing models using relevant parameter inputs such as expected interest and dividend rates and mid-market
levels of price and volatility of the assets underlying the notes or any futures, options or swaps related to such underlying assets.
Our internal pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be
incorrect.
The Issuer’s estimated value of the notes on the Trade
Date (as disclosed on the cover of this pricing supplement) is less than the Issue Price of the notes. The difference between the
Issue Price and the Issuer’s estimated value of the notes on the Trade Date is due to the inclusion in the Issue Price of
the agent’s commissions, if any, and the cost of hedging our obligations under the notes through one or more of our affiliates.
Such hedging cost includes our or our affiliates’ expected cost of providing such hedge, as well as the profit we or our
affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge.
The Issuer’s estimated value of the notes on the Trade
Date does not represent the price at which we or any of our affiliates would be willing to purchase your notes in the secondary
market at any time. Assuming no changes in market conditions or our creditworthiness and other relevant factors, the price, if
any, at which we or our affiliates would be willing to purchase the notes from you in secondary market transactions, if at all,
would generally be lower than both the Issue Price and the Issuer’s estimated value of the notes on the Trade Date. Our purchase
price, if any, in secondary market transactions will be based on the estimated value of the notes determined by reference to (i)
the then-prevailing internal funding rate (adjusted by a spread) or another appropriate measure of our cost of funds and (ii) our
pricing models at that time, less a bid spread determined after taking into account the size of the repurchase, the nature of the
assets underlying the notes and then-prevailing market conditions. The price we report to financial reporting services and to distributors
of our notes for use on customer account statements would generally be determined on the same basis. However, during the period
of approximately six months beginning from the Trade Date, we or our affiliates may, in our sole discretion, increase the purchase
price determined as described above by an amount equal to the declining differential between the Issue Price and the Issuer’s
estimated value of the notes on the Trade Date, prorated over such period on a straight-line basis, for transactions that are individually
and in the aggregate of the expected size for ordinary secondary market repurchases.
Resolution Measures and Deemed Agreement
On May 15, 2014, the European Parliament and the Council of the
European Union adopted a directive establishing a framework for the recovery and resolution of credit institutions and investment
firms (commonly referred to as the
“
Bank Recovery and Resolution
Directive
”
). The Bank Recovery and Resolution Directive
required each member state of the European Union to adopt and publish by December 31, 2014 the laws, regulations and administrative
provisions necessary to comply with the Bank Recovery and Resolution Directive. Germany adopted the Recovery and Resolution Act
(
Sanierungs
-
und Abwicklungsgesetz
, or the
“
Resolution
Act
”
), which became effective on January 1, 2015. The
Bank Recovery and Resolution Directive and the Resolution Act provided national resolution authorities with a set of resolution
powers to intervene in the event that a bank is failing or likely to fail and certain other conditions are met. From January 1,
2016, the power to initiate resolution measures applicable to significant banking groups (such as Deutsche Bank Group) in the European
Banking Union has been transferred to the European Single Resolution Board which, based on the European Union regulation establishing
uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of
a Single Resolution Mechanism and a Single Resolution Fund (the
“
SRM
Regulation
”
), works in close cooperation with the European
Central Bank, the European Commission and the national resolution authorities. Pursuant to the SRM Regulation, the Resolution Act
and other applicable rules and regulations, the notes may be subject to any Resolution Measure by the competent resolution authority
if we become, or are deemed by the competent supervisory authority to have become, “non-viable” (as defined under the
then applicable law) and are unable to continue our regulated banking activities without a Resolution Measure becoming applicable
to us. By acquiring the notes, you will be bound by and deemed irrevocably to consent to the provisions set forth in the accompanying
prospectus, which we have summarized below.
By acquiring the notes, you will be bound by and deemed irrevocably
to consent to the imposition of any Resolution Measure by the competent resolution authority. Under the relevant resolution laws
and regulations as applicable to us from time to time, the notes may be subject to the powers exercised by the competent resolution
authority to: (i) write down, including to zero, any payment (or delivery obligations) on the notes; (ii) convert the notes into
ordinary shares of (a) the Issuer, (b) any group entity or (c) any bridge bank or other instruments of ownership of such entities
qualifying as common equity tier 1 capital; and/or (iii) apply any other resolution measure including, but not limited to, any
transfer of the notes to another entity, the amendment, modification or variation of the terms and conditions of the notes or the
cancellation of the notes. We refer to each of these measures as a
“
Resolution
Measure
.
”
A “group entity” refers to an entity
that is included in the corporate group subject to a Resolution Measure. A “bridge bank” refers to a newly chartered
German bank that would receive some or all of our assets, liabilities and material contracts, including those attributable to our
branches and subsidiaries, in a resolution proceeding.
Furthermore, by acquiring the notes, you:
|
·
|
are deemed irrevocably to have agreed, and you will
agree: (i) to be bound by, to acknowledge and to accept any Resolution Measure and any amendment, modification or variation of
the terms and conditions of the notes to give effect to any Resolution Measure; (ii) that you will have no claim or other right
against us arising out of any Resolution Measure; and (iii) that the imposition of any Resolution Measure will not constitute
a default or an event of default under the notes, under the senior indenture dated November 22, 2006 among us, Law Debenture Trust
Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as issuing agent, paying agent, authenticating agent
and registrar, as amended and supplemented from time to time (the
“
Indenture
”
),
or for the purposes of, but only to the fullest extent permitted by, the Trust Indenture Act of 1939, as amended (the
“
Trust
Indenture Act
”
);
|
|
·
|
waive, to the fullest extent permitted by the Trust
Indenture Act and applicable law, any and all claims against the trustee and the paying agent, the issuing agent and the registrar
(each, an
“
indenture agent
”
)
for, agree not to initiate a suit against the trustee or the indenture agents in respect of, and agree that the trustee and the
indenture agents will not be liable for, any action that the trustee or the indenture agents take, or abstain from taking, in
either case in accordance with the imposition of a Resolution Measure by the competent resolution authority with respect to the
notes; and
|
|
·
|
will be deemed irrevocably to have: (i) consented
to the imposition of any Resolution Measure as it may be imposed without any prior notice by the competent resolution authority
of its decision to exercise such power with respect to the notes; (ii) authorized, directed and requested The Depository Trust
Company (
“
DTC
”
)
and any direct participant in DTC or other intermediary through which you hold such notes to take any and all necessary action,
if required, to implement the imposition of any Resolution Measure with respect to the notes as it may be imposed, without any
further action or direction on your part or on the part of the trustee or the indenture agents; and (iii) acknowledged and accepted
that the Resolution Measure provisions described herein and in the “Resolution Measures” section of the accompanying
prospectus are exhaustive on the matters described herein and therein to the exclusion of any other agreements, arrangements or
understandings between you and the Issuer relating to the terms and conditions of the notes.
|
This is only a summary
,
for more information please
see the accompanying prospectus dated April 27
,
2016
,
including the risk factors beginning on page 13 of such prospectus
.
Additional Terms Specific to the Notes
You should read this pricing supplement together with underlying
supplement No. 1 dated August 17, 2015, product supplement B dated July 31, 2015, the prospectus supplement dated July 31, 2015
relating to our Series A global notes of which these notes are a part and the prospectus dated April 27, 2016. Delaware Trust Company,
which acquired the corporate trust business of Law Debenture Trust Company of New York, is the successor trustee of the notes.
When you read the accompanying underlying supplement, product supplement and prospectus supplement, please note that all references
in such supplements to the prospectus dated July 31, 2015, or to any sections therein, should refer instead to the accompanying
prospectus dated April 27, 2016 or to the corresponding sections of such prospectus, as applicable, unless otherwise specified
or the context otherwise requires. You may access these documents on the website of the Securities and Exchange Commission (the
“
SEC
”
)
at
.
www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant
date on the SEC website):
|
·
|
Underlying supplement No. 1 dated August
17, 2015:
|
http://www.sec.gov/Archives/edgar/data/1159508/000095010315006546/crt_dp58829-424b2.pdf
|
·
|
Product supplement B dated July 31, 2015:
|
http://www.sec.gov/Archives/edgar/data/1159508/000095010315006059/crt_dp58181-424b2.pdf
|
·
|
Prospectus supplement dated July 31, 2015:
|
http://www.sec.gov/Archives/edgar/data/1159508/000095010315006048/crt-dp58161_424b2.pdf
|
·
|
Prospectus dated April 27, 2016:
|
https://www.sec.gov/Archives/edgar/data/1159508/000119312516559607/d181910d424b21.pdf
Our Central Index Key, or CIK, on the SEC website is 0001159508.
As used in this pricing supplement,
“
we
,
”
“
us
”
or
“
our
”
refers to Deutsche Bank AG, including, as the context requires, acting through one of its branches. This pricing supplement, together
with the documents listed above, contains the terms of the notes and supersedes all other prior or contemporaneous oral statements
as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures
for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other
things, the matters set forth in this pricing supplement and in “Risk Factors” in the accompanying product supplement,
prospectus supplement and prospectus, as the notes involve risks not associated with conventional debt securities. We urge you
to consult your investment, legal, tax, accounting and other advisers before deciding to invest in the notes.
You may revoke your offer to purchase the notes at any time
prior to the time at which we accept such offer by notifying the applicable agent
.
We reserve the right to change the terms of
,
or reject any offer
to purchase
,
the notes prior to their issuance
.
We will notify you in the event of any changes to the terms of the notes and you will be asked to accept such changes in connection
with your purchase of any notes
.
You may also choose to reject such
changes
,
in which case we may reject your offer to purchase the
notes
.
Hypothetical Examples
The following table illustrates a range of hypothetical payments
at maturity on the notes. The table and the hypothetical examples below reflect the Maximum Return on the notes of 21.20% and the
Upside Leverage Factor of 2.00. The actual Initial Price is set forth on the cover of this pricing supplement. The table and hypothetical
examples set forth below are for illustrative purposes only. The actual return applicable to a purchaser of the notes will be based
on the Underlying Return, determined using the Closing Prices of the Underlying on the specified Averaging Dates. The numbers appearing
in the table and examples below may have been rounded for ease of analysis. You should consider carefully whether the notes are
suitable to your investment goals.
Hypothetical
Underlying Return
(%)
|
Hypothetical
Return on the Notes
(%)
|
Hypothetical
Payment at Maturity
($)
|
100.00%
|
21.20%
|
$1,212.00
|
90.00%
|
21.20%
|
$1,212.00
|
80.00%
|
21.20%
|
$1,212.00
|
70.00%
|
21.20%
|
$1,212.00
|
60.00%
|
21.20%
|
$1,212.00
|
50.00%
|
21.20%
|
$1,212.00
|
40.00%
|
21.20%
|
$1,212.00
|
30.00%
|
21.20%
|
$1,212.00
|
20.00%
|
21.20%
|
$1,212.00
|
10.60%
|
21.20%
|
$1,212.00
|
10.00%
|
20.00%
|
$1,200.00
|
5.00%
|
10.00%
|
$1,100.00
|
0.00%
|
0.00%
|
$1,000.00
|
-5.00%
|
-5.00%
|
$950.00
|
-10.00%
|
-10.00%
|
$900.00
|
-20.00%
|
-20.00%
|
$800.00
|
-30.00%
|
-30.00%
|
$700.00
|
-40.00%
|
-40.00%
|
$600.00
|
-50.00%
|
-50.00%
|
$500.00
|
-60.00%
|
-60.00%
|
$400.00
|
-70.00%
|
-70.00%
|
$300.00
|
-80.00%
|
-80.00%
|
$200.00
|
-90.00%
|
-90.00%
|
$100.00
|
-100.00%
|
-100.00%
|
$0.00
|
Hypothetical
Examples of Amounts Payable at Maturity
The following hypothetical examples illustrate how the payments
on the notes at maturity set forth in the table above are calculated.
Example 1
:
The Final Price is greater than the Initial Price
,
resulting in
an Underlying Return of 30
.
00%
.
Because the Final Price is greater than the Initial Price and the product of the Underlying Return of 30.00% and the Upside Leverage
Factor is greater than the Maximum Return, the investor receives the Maximum Return on the notes. Accordingly, the investor receives
a Payment at Maturity of $1,212.00 per $1,000 Face Amount of notes, calculated as follows:
$1,000 + ($1,000 x the
lesser of
(i)
Underlying Return x Upside Leverage Factor and (ii) Maximum Return)
$1,000 + ($1,000 x 21.20%) = $1,212.00
Example 2
:
The Final Price is greater than the Initial Price
,
resulting in
an Underlying Return of 5
.
00%
.
Because the Final Price is greater than the Initial Price and the product of the Underlying Return of 5.00% and the Upside Leverage
Factor is less than the Maximum Return, the investor receives a Payment at Maturity of $1,100.00 per $1,000 Face Amount of notes,
calculated as follows:
$1,000 + ($1,000 x the
lesser of
(i)
Underlying Return x Upside Leverage Factor and (ii) Maximum Return)
$1,000 + ($1,000 x 5.00% x 2.00) = $1,100.00
Example 3
:
The Final Price is equal to the Initial Price
,
resulting in an Underlying
Return of 0
.
00%
.
Because the Final Price is equal to the Initial Price, the investor receives a Payment at Maturity of $1,000.00 per $1,000 Face
Amount of notes.
Example 4
:
The Final Price is less than the Initial Price
,
resulting in an
Underlying Return of
-
40
.
00%
.
Because the Final Price is less than the Initial Price, the Underlying Return is negative and the investor receives a Payment at
Maturity of $600.00 per $1,000 Face Amount of notes, calculated as follows:
$1,000 + ($1,000 x Underlying Return)
$1,000 + ($1,000 x -40.00%) = $600.00
Selected Purchase Considerations
|
·
|
CAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to enhance returns by
multiplying
a positive
Underlying Return by the Upside Leverage Factor of 2.00, subject to the Maximum Return on the notes of 21.20%, resulting in a maximum
Payment at Maturity of $1,212.00 per $1,000 Face Amount of notes.
Any payment on the notes is subject to our ability to satisfy
our obligations as they become due
.
|
|
·
|
FULL DOWNSIDE EXPOSURE
— If the Final Price is less than the Initial Price, for each $1,000 Face Amount of notes,
you will lose 1.00% of the Face Amount for every 1.00% by which the Final Price is less than the Initial Price. In this circumstance,
you will lose some or all of your investment in the notes.
|
|
·
|
RETURN LINKED TO THE PERFORMANCE OF THE SPDR
®
S&P
®
BANK ETF
—
The
return on the notes, which may be positive, zero or negative, is linked to the performance of the SPDR
®
S&P
®
Bank ETF as described herein.
The
SPDR
®
S&P
®
Bank
ETF
is an exchange-traded fund managed by SPDR
®
Series Trust, a registered investment company. The SPDR
®
Series Trust consists of numerous separate investment portfolios, including the
SPDR
®
S&P
®
Bank ETF
. SSgA Funds Management, Inc. is the investment adviser of the
SPDR
®
S&P
®
Bank ETF
. The
SPDR
®
S&P
®
Bank ETF
seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance
of the S&P
®
Banks Select Industry
®
Index, which represents the performance of the bank sub-industry
portion of the S&P
®
Total Market Index. The
SPDR
®
S&P
®
Bank ETF
trades on the NYSE Arca under the ticker symbol “KBE.”
This is only a summary
of the SPDR
®
S&P
®
Bank ETF
.
For more information on the SPDR
®
S&P
®
Bank ETF
,
please see the section entitled “The SPDR
®
S&P
®
Bank ETF” in this pricing supplement
.
|
|
·
|
TAX CONSEQUENCES
— In the opinion of our special tax counsel, Davis Polk & Wardwell LLP, which is based on
prevailing market conditions, it is more likely than not that the notes will be treated for U.S. federal income tax purposes as
prepaid financial contracts that are not debt. Generally, if this treatment is respected, (i) you should not recognize taxable
income or loss prior to the maturity or other taxable disposition of your notes and (ii) subject to the potential application of
the “constructive ownership” regime discussed below, the gain or loss on your notes should be capital gain or loss
and should be long-term capital gain or loss if you have held the notes for more than one year. The Internal Revenue Service (the
“
IRS
”) or a court might not agree with this treatment, however, in which case the timing and character of income
or loss on your notes could be materially and adversely affected.
|
Even if the treatment of the notes as prepaid financial
contracts is respected, purchasing a note could be treated as entering into a “constructive ownership transaction”
within the meaning of Section 1260 of the Internal Revenue Code (
“
Section
1260
”
). In that case, all or a portion of any long-term
capital gain you would otherwise recognize upon the taxable disposition of the note would be recharacterized as ordinary income
to the extent such gain exceeded the “net underlying long-term capital gain” as defined in Section 1260. Any long-term
capital gain recharacterized as ordinary income would be treated as accruing at a constant rate over the period you held the note,
and you would be subject to a notional interest charge in respect of the deemed tax liability on the income treated as accruing
in prior tax years. Due to the lack of direct legal authority, our special tax counsel is unable to opine as to whether or how
Section 1260 applies to the notes.
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. The notice focuses in particular on whether beneficial owners of these instruments should be required
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; the relevance of factors such as the nature of the underlying property to
which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. persons
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime discussed above. 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 notes, possibly with retroactive effect.
Withholding under legislation commonly referred to
as “FATCA” might (if the notes were recharacterized as debt instruments) apply to amounts treated as interest paid
with respect to the notes. Notwithstanding anything to the contrary in the section of the accompanying product supplement entitled
“U.S. Federal Income Tax Consequences,” under a recent IRS notice, withholding under FATCA will not apply to payments
of gross proceeds (other than any amount treated as interest) of a taxable disposition, including redemption at maturity, of the
notes. You should consult your tax adviser regarding the potential application of FATCA to the notes.
Section 871(m) of the Code and Treasury regulations
promulgated thereunder (
“
Section 871
(
m
)
”
)
generally impose a 30% withholding tax (unless an income tax treaty applies) on dividend equivalents paid or deemed paid to non-U.S.
holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities. Section 871(m)
provides certain exceptions to this withholding regime, including for instruments linked to certain broad-based indices that meet
requirements set forth in the applicable Treasury regulations (such an index, a
“
Qualified
Index
”
). Additionally, the applicable regulations exclude
from the scope of Section 871(m) instruments issued in 2017 that do not have a delta of one with respect to underlying securities
that could pay U.S.-source dividends for U.S. federal income tax purposes (each an
“
Underlying
Security
”
). Based on certain determinations made by us,
our special tax counsel is of the opinion that Section 871(m) should not apply to the notes with regard to non-U.S. holders. Our
determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application
may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying
Security. You should consult your tax adviser regarding the potential application of Section 871(m) to the notes.
You should review carefully the section of the accompanying
product supplement entitled “U.S. Federal Income Tax Consequences.” The preceding discussion, when read in combination
with that section, constitutes the full opinion of our special tax counsel regarding the material U.S. federal income tax consequences
of owning and disposing of the notes.
Under current law, the United Kingdom will not impose
withholding tax on payments made with respect to the notes.
For a discussion of certain German tax considerations
relating to the notes, you should refer to the section in the accompanying prospectus supplement entitled “Taxation by Germany
of Non-Resident Holders.”
You should consult your tax adviser regarding the
U
.
S
.
federal tax consequences of an investment in the notes
(
including
possible alternative treatments
,
the potential application of the
“
constructive ownership
”
regime and the issues presented by the 2007 notice
),
as well
as tax consequences arising under the laws of any state
,
local or
non-U
.
S
.
taxing jurisdiction
.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the shares of the Underlying or in any of the component securities held
by the Underlying. In addition to these selected risk considerations, you should review the “Risk Factors” sections
of the accompanying product supplement, prospectus supplement and prospectus.
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YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS
— The notes do not guarantee any return of your investment.
The return on the notes at maturity is linked to the performance of the Underlying and will depend on whether, and the extent to
which, the Underlying Return is positive, zero or negative. If the Final Price is less than the Initial Price, for each $1,000
Face Amount of notes, you will lose 1.00% of the Face Amount for every 1.00% by which the Final Price is less than the Initial
Price. In this circumstance, you will lose some or all of your investment in the notes.
Any payment on the notes is subject
to our ability to satisfy our obligations as they become due
.
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THE RETURN ON THE NOTES IS LIMITED
— If the Final Price is greater than the Initial Price, for each $1,000 Face
Amount of notes, you will receive at maturity the Face Amount
plus
an additional amount that will not exceed the
product
of
the Maximum Return of 21.20% and $1,000 Face Amount of notes. Consequently, the maximum Payment at Maturity is $1,212.00
per $1,000 Face Amount of notes, regardless of any increase in the price of the Underlying, which may be significant.
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THE NOTES DO NOT PAY ANY COUPONS
— Unlike ordinary debt securities, the notes do not pay any coupons and do not
guarantee any return of your investment at maturity.
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THE NOTES ARE SUBJECT TO THE CREDIT OF DEUTSCHE BANK AG
— The notes are senior unsecured obligations of Deutsche
Bank AG and are not, either directly or indirectly, an obligation of any third party. Any payment(s) to be made on the notes depends
on the ability of Deutsche Bank AG to satisfy its obligations as they become due. An actual or anticipated downgrade in Deutsche
Bank AG’s credit rating or increase in the credit spreads charged by the market for taking Deutsche Bank AG’s credit
risk will likely have an adverse effect on the value of the notes. As a result, the actual and perceived creditworthiness of Deutsche
Bank AG will affect the value of the notes and, in the event Deutsche Bank AG were to default on its obligations or become subject
to a Resolution Measure, you might not receive any amount(s) owed to you under the terms of the notes and you could lose your entire
investment.
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The Notes May Be Written Down
,
Be Converted Into Ordinary Shares or Other Instruments of Ownership or Become Subject to Other Resolution Measures
.
You May Lose Some or All of Your Investment If Any Such Measure Becomes Applicable to US
— Pursuant to the SRM
Regulation, the Resolution Act and other applicable rules and regulations described above under “Resolution Measures and
Deemed Agreement,” the notes are subject to the powers exercised by the competent resolution authority to impose Resolution
Measures on us, which may include: writing down, including to zero, any claim for payment on the notes; converting the notes into
ordinary shares of (i) the Issuer, (ii) any group entity or (iii) any bridge bank or other instruments of ownership of such entities
qualifying as common equity tier 1 capital; or applying any other resolution measure including, but not limited to, transferring
the notes to another entity, amending, modifying or varying the terms and conditions of the notes or cancelling the notes. The
competent resolution authority may apply Resolution Measures individually or in any combination.
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The German law on the mechanism for the resolution
of banks of November 2, 2015 (
Abwicklungsmechanismusgesetz
, or the
“
Resolution
Mechanism Act
”
) provides that, in a German insolvency
proceeding of the Issuer, certain specifically defined senior unsecured debt instruments would rank junior to, without constituting
subordinated debt, all other outstanding unsecured unsubordinated obligations of the Issuer and be satisfied only if all such other
senior unsecured obligations of the Issuer have been paid in full. This prioritization would also be given effect if Resolution
Measures are imposed on the Issuer, so that obligations under debt instruments that rank junior in insolvency as described above
would be written down or converted into common equity tier 1 instruments
before
any other senior unsecured obligations of
the Issuer are written down or converted. A large portion of our liabilities consist of senior unsecured obligations that either
fall outside the statutory definition of debt instruments that rank junior to other senior unsecured obligations according to the
Resolution Mechanism Act or are expressly exempted from such definition.
Among those unsecured unsubordinated obligations that
are expressly exempted are money market instruments and senior unsecured debt instruments whose terms provide that (i) the repayment
or the amount of the repayment depends on the occurrence or non-occurrence of an event which is uncertain at the point in time
when the senior unsecured debt instruments are issued or is settled in a way other than by monetary payment, or (ii) the payment
of interest or the amount of the interest payments depends on the occurrence or non-occurrence of an event which is uncertain at
the point in time when the senior unsecured debt instruments are issued unless the payment of interest or the amount of the interest
payments solely depends on a fixed or floating reference interest rate and is settled by monetary payment. This order of priority
introduced by the Resolution Mechanism Act would apply in German insolvency proceedings instituted, or when Resolution Measures
are imposed, on or after January 1, 2017 with effect for debt instruments of the Issuer outstanding at that time. In a German insolvency
proceeding or in the event of the imposition of Resolution Measures with respect to the Issuer, the competent regulatory authority
or court would determine which of our senior debt securities issued under the prospectus have the terms described in clauses (i)
or (ii) above, referred to herein as the
“
Structured
Debt Securities
,
”
and which do not, referred to
herein as the
“
Non
-
Structured
Debt Securities
.
”
We expect the notes offered herein
to be classified as Structured Debt Securities, but the competent regulatory authority or court may classify the notes differently.
In a German insolvency proceeding or in the event of the imposition of Resolution Measures with respect to the Issuer, the Structured
Debt Securities are expected to be among the unsecured unsubordinated obligations that would bear losses after the Non-Structured
Debt Securities as described above.
Nevertheless
,
you may lose some or all of your investment in the
notes
if a Resolution Measure
becomes applicable to us
.
Imposition of a Resolution
Measure would likely occur if we become, or are deemed by the competent supervisory authority to have become, “non-viable”
(as defined under the then applicable law) and are unable to continue our regulated banking activities without a Resolution Measure
becoming applicable to us. The Bank Recovery and Resolution Directive and the
Resolution Act are intended to eliminate the need for
public support of troubled banks, and you should be aware that public support, if any, would only potentially be used by the competent
supervisory authority as a last resort after having assessed and exploited, to the maximum extent practicable, the resolution tools,
including the bail-in tool.
By acquiring the notes, you would have no claim or
other right against us arising out of any Resolution Measure and we would have no obligation to make payments under the notes following
the imposition of a Resolution Measure. In particular, the imposition of any Resolution Measure will not constitute a default or
an event of default under the notes, under the Indenture or for the purposes of, but only to the fullest extent permitted by, the
Trust Indenture Act. Furthermore, because the notes are subject to any Resolution Measure, secondary market trading in the notes
may not follow the trading behavior associated with similar types of securities issued by other financial institutions which may
be or have been subject to a Resolution Measure.
In addition, by your acquisition of the notes, you
waive, to the fullest extent permitted by the Trust Indenture Act and applicable law, any and all claims against the trustee and
the indenture agents for, agree not to initiate a suit against the trustee or the indenture agents in respect of, and agree that
the trustee and the indenture agents will not be liable for, any action that the trustee or the indenture agents take, or abstain
from taking, in either case in accordance with the imposition of a Resolution Measure by the competent resolution authority with
respect to the notes.
Accordingly
,
you may have limited or circumscribed rights
to challenge any decision of the competent resolution authority to impose any Resolution Measure
.
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THE ISSUER
’
S ESTIMATED VALUE OF THE NOTES ON
THE TRADE DATE WILL BE LESS THAN THE ISSUE PRICE OF THE NOTES
— The Issuer’s estimated value of the notes on the
Trade Date (as disclosed on the cover of this pricing supplement) is less than the Issue Price of the notes. The difference between
the Issue Price and the Issuer’s estimated value of the notes on the Trade Date is due to the inclusion in the Issue Price
of the agent’s commissions, if any, and the cost of hedging our obligations under the notes through one or more of our affiliates.
Such hedging cost includes our or our affiliates’ expected cost of providing such hedge, as well as the profit we or our
affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge. The Issuer’s estimated
value of the notes is determined by reference to an internal funding rate and our pricing models. The internal funding rate is
typically lower than the rate we would pay when we issue conventional debt securities on equivalent terms. This difference in funding
rate, as well as the agent’s commissions, if any, and the estimated cost of hedging our obligations under the notes, reduces
the economic terms of the notes to you and is expected to adversely affect the price at which you may be able to sell the notes
in any secondary market. In addition, our internal pricing models are proprietary and rely in part on certain assumptions about
future events, which may prove to be incorrect. If at any time a third party dealer were to quote a price to purchase your notes
or otherwise value your notes, that price or value may differ materially from the estimated value of the notes determined by reference
to our internal funding rate and pricing models. This difference is due to, among other things, any difference in funding rates,
pricing models or assumptions used by any dealer who may purchase the notes in the secondary market.
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INVESTING IN THE NOTES IS NOT THE SAME AS INVESTING IN THE SHARES OF THE UNDERLYING OR THE COMPONENT SECURITIES HELD BY
THE UNDERLYING
— The return on the notes may not reflect the return you would have realized if you had directly invested
in the shares of the Underlying or the component securities held by the Underlying. For instance, you will not have voting rights
or rights to receive cash dividends or other distributions or other rights that holders of the shares of the Underlying or the
component securities held by the Underlying would have. In addition, you will not receive more than the Maximum Return regardless
of any potential increase in the price of the Underlying, which could be significant, even though you will be exposed to any decline
in the price of the Underlying at maturity.
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IF THE PRICE OF THE UNDERLYING CHANGES
,
THE VALUE OF YOUR
NOTES MAY NOT CHANGE IN THE SAME MANNER
— Your notes may trade quite differently from the shares of the Underlying and
the component securities held by the Underlying. Changes in the prices of the shares of the Underlying and the component securities
held by the Underlying may not result in comparable changes in the value of your notes.
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NO DIVIDEND PAYMENTS OR VOTING RIGHTS
— As a holder of the notes, you will not have any voting rights or rights
to receive cash dividends or other distributions or other rights that holders of the shares of the Underlying or the component
securities held by the Underlying would have.
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THE
EQUITY SECURITIES HELD BY THE SPDR
®
S&P
®
BANK ETF ARE SUBJECT TO RISKS ASSOCIATED WITH THE BANKING
SECTOR
— All or substantially all of the equity securities held by the SPDR
®
S&P
®
Bank ETF are issued by companies whose primary line of business is directly associated with the banking sector. The performance
of
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companies in the banking sector may be affected by
governmental regulation that may limit the amount and types of loans and other financial commitments that banks can make, the interest
rates and fees they can charge and the amount of capital they must maintain. Profitability is largely dependent on the availability
and cost of capital funds, and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties
of borrowers can negatively impact the banking sector. Banks may also be subject to severe price competition. The regional banking
industry is highly competitive, and thus, failure to maintain or increase market share may adversely affect profitability. These
factors or the absence of such factors could cause a downturn in the bank industries and could cause the value of some or all of
the component securities held by the SPDR
®
S&P
®
Bank ETF and the price of the SPDR
®
S&P
®
Bank ETF to decline during the term of the notes.
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THE POLICIES OF THE INVESTMENT ADVISOR OF THE UNDERLYING AND CHANGES
THAT AFFECT THE UNDERLYING OR ITS TRACKED INDEX COULD ADVERSELY AFFECT THE VALUE OF THE NOTES —
The policies of the investment
advisor of the Underlying (the “
Underlying Advisor
”) concerning the calculation of the Underlying’s net
asset value (“
NAV
”), additions, deletions or substitutions of securities or other assets or financial measures
held by the Underlying, substitution of the Tracked Index and the manner in which changes affecting how the Tracked Index is calculated
are reflected in the Underlying could adversely affect the price of the shares of the Underlying and, therefore, the value of,
and your return on, the notes. The value of, and your return on, the notes could also be adversely affected if the Underlying Advisor
changes its policies, for example, by changing the manner in which the Underlying Advisor calculates the Underlying’s NAV,
or if the Underlying Advisor discontinues or suspends calculation or publication of the Underlying’s NAV, in which case it
may become difficult to determine the value of the notes. If events such as these occur or if the Closing Price of the Underlying
is not available on an Averaging Date because of a market disruption event or for any other reason, the calculation agent, in certain
circumstances, may determine the Closing Price of the Underlying and the Payment at Maturity in a manner it considers appropriate
in its sole discretion.
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The Performance of the Underlying
,
Particularly During Periods of Market Volatility
,
May Not Match
the Performance of THE Tracked INDEX or its Net Asset Value per Share
— The performance of the Underlying may
not match the performance of the Tracked Index due to a number of factors. For instance, the Underlying may not hold all or substantially
all of the securities included in the Tracked Index and the Underlying Advisor may invest a portion of the Underlying’s assets
in securities not included in the Tracked Index. Therefore, the performance of the Underlying is generally linked, in part, to
assets other than the securities included in the Tracked Index. Additionally,
the
performance of the Underlying will reflect transaction costs and fees that are not included in the calculation of the Tracked Index.
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In addition, because the shares of the Underlying are
traded on a securities exchange and are subject to supply and demand, the performance of one share of the Underlying may differ
from the performance of the Tracked Index or the Underlying’s NAV per share. Furthermore, during periods of market volatility,
securities or other assets held by the Underlying may become
unavailable
in the secondary
market due to reduced liquidity or suspensions of, or limitations on, trading, making it difficult for market participants to accurately
calculate the NAV per share of the Underlying and/or create, redeem or hedge shares of the Underlying. In such circumstances, the
prices at which market participants are willing to buy and sell shares of the Underlying may be significantly lower than the Underlying’s
NAV and the liquidity of the shares of the Underlying may be materially and adversely affected. Consequently, the performance of
the Underlying may deviate significantly from the performance of the Tracked Index or the Underlying’s NAV per share. These
circumstances may or may not constitute market disruption events and, in either case, your return on the notes may be determined
based on the price of the shares of the Underlying when it deviates significantly from the performance of the Tracked Index or
the Underlying’s NAV per share. If this occurs, the value of, and your return on, the notes may be materially and adversely
affected.
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ANTI
-
DILUTION PROTECTION IS LIMITED AND THE CALCULATION AGENT
MAY MAKE ADJUSTMENTS IN ADDITION TO
,
OR THAT DIFFER FROM
,
THOSE SET FORTH IN THE ACCOMPANYING PRODUCT SUPPLEMENT
— The calculation agent will make adjustments to the Share Adjustment
Factor, which will initially be set at 1.0, for certain events affecting the shares of the Underlying. The calculation agent is
not required, however, to make such adjustments in response to all events that could affect the shares of the Underlying. If an
event occurs that does not require the calculation agent to make an adjustment, the value of the notes may be materially and adversely
affected. In addition, you should be aware that the calculation agent may, at its sole discretion, make adjustments to the Share
Adjustment
Factor or any other terms of the notes that are in addition to, or that
differ from, those described in the accompanying product supplement to reflect changes occurring in relation to the Underlying
in circumstances where the calculation agent determines that it is appropriate to reflect those changes to ensure an equitable
result. Any alterations to the specified anti-dilution adjustments described in the accompanying product supplement may
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be materially adverse to investors in the notes. You
should read “Description of Securities — Anti-Dilution Adjustments for Funds” in the accompanying product supplement
in order to understand the adjustments that may be made to the notes.
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THERE IS NO AFFILIATION BETWEEN THE UNDERLYING OR THE UNDERLYING STOCK ISSUERS AND US AND WE HAVE NOT PARTICIPATED IN THE
PREPARATION OF
,
OR VERIFIED
,
ANY INFORMATION ABOUT THE UNDERLYING OR THE UNDERLYING STOCK ISSUERS
— We are not affiliated with the Underlying or the
issuers of the component stocks held by the Underlying or included in the Tracked Index (such stocks,
“
Underlying
Stocks
,
”
and the issuers of Underlying Stocks,
“
Underlying
Stock Issuers
”
). However, we or our affiliates may currently,
or from time to time in the future, engage in business with the Underlying Stock Issuers, including extending loans to, making
equity investments in, acting as underwriter in connection with future offerings of the Underlying Stocks by, or providing advisory
services (including merger and acquisition advisory services) to, such Underlying Stock Issuers. In the course of this business,
we or our affiliates may acquire non-public information about the Underlying Stock Issuers and we will not disclose any such information
to you. Nevertheless, neither we nor our affiliates have participated in the preparation of, or verified, any information about
the Underlying Stocks or any of the Underlying Stock Issuers. You, as an investor in the notes, should make your own investigation
into the Underlying Stocks and the Underlying Stock Issuers. Neither the Underlying nor any of the Underlying Stock Issuers is
involved in this offering in any way and none of them has any obligation of any sort with respect to your notes. The Underlying
has no obligation to take your interests into consideration for any reason, including when taking any actions that would require
the calculation agent to adjust the Share Adjustment Factor, which may adversely affect the value of your notes.
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PAST PERFORMANCE OF THE UNDERLYING IS NO GUIDE TO FUTURE PERFORMANCE
— The actual performance of the Underlying
over the term of the notes may bear little relation to the historical closing prices of the Underlying and/or the hypothetical
examples set forth elsewhere in this pricing supplement. We cannot predict the future performance of the Underlying or whether
the performance of the Underlying will result in the return of any of your investment.
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ASSUMING NO CHANGES IN MARKET CONDITIONS AND OTHER RELEVANT FACTORS
,
THE PRICE YOU MAY RECEIVE FOR YOUR NOTES IN SECONDARY MARKET TRANSACTIONS WOULD GENERALLY BE LOWER THAN BOTH THE ISSUE PRICE AND
THE ISSUER
’
S ESTIMATED VALUE OF THE NOTES ON THE TRADE
DATE
— While the payment(s) on the notes described in this pricing supplement is based on the full Face Amount of notes,
the Issuer’s estimated value of the notes on the Trade Date (as disclosed on the cover of this pricing supplement) is less
than the Issue Price of the notes. The Issuer’s estimated value of the notes on the Trade Date does not represent the price
at which we or any of our affiliates would be willing to purchase your notes in the secondary market at any time. Assuming no changes
in market conditions or our creditworthiness and other relevant factors, the price, if any, at which we or our affiliates would
be willing to purchase the notes from you in secondary market transactions, if at all, would generally be lower than both the Issue
Price and the Issuer’s estimated value of the notes on the Trade Date. Our purchase price, if any, in secondary market transactions
would be based on the estimated value of the notes determined by reference to (i) the then-prevailing internal funding rate (adjusted
by a spread) or another appropriate measure of our cost of funds and (ii) our pricing models at that time, less a bid spread determined
after taking into account the size of the repurchase, the nature of the assets underlying the notes and then-prevailing market
conditions. The price we report to financial reporting services and to distributors of our notes for use on customer account statements
would generally be determined on the same basis. However, during the period of approximately six months beginning from the Trade
Date, we or our affiliates may, in our sole discretion, increase the purchase price determined as described above by an amount
equal to the declining differential between the Issue Price and the Issuer’s estimated value of the notes on the Trade Date,
prorated over such period on a straight-line basis, for transactions that are individually and in the aggregate of the expected
size for ordinary secondary market repurchases.
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In addition to the factors discussed above, the value
of the notes and our purchase price in secondary market transactions after the Trade Date, if any, will vary based on many economic
and market factors, including our creditworthiness, and cannot be predicted with accuracy. These changes may adversely affect the
value of your notes, including the price you may receive in any secondary market transactions. Any sale prior to the Maturity Date
could result in a substantial loss to you. The notes are not designed to be short-term trading instruments. Accordingly, you should
be able and willing to hold your notes to maturity.
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THE NOTES WILL NOT BE LISTED AND THERE WILL LIKELY BE LIMITED LIQUIDITY
— The notes will not be listed on any
securities exchange. There may be little or no secondary market for the notes. We or our affiliates intend to act as market makers
for the notes but are not required to do so and may cease such market making activities at any time.
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Even if there is a secondary market, it may not provide
enough liquidity to allow you to sell the notes when you wish to do so or at a price advantageous to you. Because we do not expect
other dealers to make a secondary market for the notes, the price at which you may be able to sell your notes is likely to depend
on the price, if any, at which we or our affiliates are willing to buy the notes. If, at any time, we or our affiliates do not
act as market makers, it is likely that there would be little or no secondary market in the notes. If you have to sell your notes
prior to maturity, you may not be able to do so or you may have to sell them at a substantial loss, even in cases where the price
of the Underlying has increased since the Trade Date.
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MANY ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE OF THE NOTES
— While we expect that, generally, the price
of the Underlying will affect the value of the notes more than any other single factor, the value of the notes prior to maturity
will also be affected by a number of other factors that may either offset or magnify each other, including:
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the expected volatility of the Underlying;
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·
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the time remaining to the maturity of the notes;
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·
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the market prices and dividend rates of the shares of the Underlying and the component securities held by the Underlying;
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·
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the composition of the Underlying;
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·
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the occurrence of certain events affecting the Underlying that may or may not require an anti-dilution adjustment;
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interest rates and yields in the markets generally;
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·
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geopolitical conditions and economic, financial, political, regulatory or judicial events that affect the Underlying, the Tracked
Index or the markets generally;
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supply and demand for the notes; and
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·
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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During the term of the notes, it is possible that their
value may decline significantly due to the factors described above even if the price of the Underlying remains unchanged from the
Initial Price, and any sale prior to the Maturity Date could result in a substantial loss to you. You must hold the notes to maturity
to receive the stated payout from the Issuer.
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TRADING AND OTHER TRANSACTIONS BY US
,
JPMORGAN CHASE &
CO. OR OUR OR ITS AFFILIATES IN THE EQUITY AND EQUITY DERIVATIVE MARKETS MAY IMPAIR THE VALUE OF THE NOTES
— We or our
affiliates expect to hedge our exposure from the notes by entering into equity and equity derivative transactions, such as over-the-counter
options, futures or exchange-traded instruments. We, JPMorgan Chase & Co. or our or its affiliates may also engage in trading
in instruments linked or related to the Underlying on a regular basis as part of our or their general broker-dealer and other businesses,
for proprietary accounts, for other accounts under management or to facilitate transactions for customers, including block transactions.
Such trading and hedging activities may adversely affect the price of the Underlying and, therefore, make it less likely that you
will receive a positive return on your investment in the notes. It is possible that we, JPMorgan Chase & Co. or our or its
affiliates could receive substantial returns from these hedging and trading activities while the value of the notes declines. We,
JPMorgan Chase & Co. or our or its affiliates may also issue or underwrite other securities or financial or derivative instruments
with returns linked or related to the Underlying. To the extent that we, JPMorgan Chase & Co. or our or its affiliates serve
as issuer, agent or underwriter for such securities or financial or derivative instruments, our, JPMorgan Chase & Co.’s
or our or its affiliates’ interests with respect to such products may be adverse to those of the holders of the notes. Introducing
competing products into the marketplace in this manner could adversely affect the price of the Underlying and the value of the
notes. Any of the foregoing activities described in this paragraph may reflect trading strategies that differ from, or are in direct
opposition to, investors’ trading and investment strategies related to the notes.
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WE
,
JPMORGAN CHASE & CO
.
OR OUR OR ITS AFFILIATES MAY PUBLISH RESEARCH
,
EXPRESS OPINIONS
OR PROVIDE RECOMMENDATIONS THAT ARE INCONSISTENT WITH INVESTING IN OR HOLDING THE NOTES
.
ANY SUCH RESEARCH
,
OPINIONS OR RECOMMENDATIONS COULD ADVERSELY AFFECT
THE PRICE OF THE UNDERLYING AND THE VALUE OF THE NOTES
— We, JPMorgan Chase & Co. or our or its affiliates may publish
research from time to time on financial
|
markets and other matters that could adversely affect
the price of the Underlying and the value of the notes, or express opinions or provide recommendations that are inconsistent with
purchasing or holding the notes. Any research, opinions or recommendations expressed by us, JPMorgan Chase & Co. or our or
its affiliates may not be consistent with each other and may be modified from time to time without notice. You should make your
own independent investigation of the merits of investing in the notes and the Underlying.
|
·
|
POTENTIAL CONFLICTS OF INTEREST
— We and our affiliates play a variety of roles in connection with the issuance
of the notes, including acting as calculation agent, hedging our obligations under the notes and determining the Issuer’s
estimated value of the notes on the Trade Date and the price, if any, at which we or our affiliates would be willing to purchase
the notes from you in secondary market transactions. In performing these roles, our economic interests and those of our affiliates
are potentially adverse to your interests as an investor in the notes. The calculation agent will determine, among other things,
all values, prices and levels required to be determined for the purposes of the notes on any relevant date or time. The calculation
agent also has some discretion about certain adjustments to the Share Adjustment Factor and will be responsible for determining
whether a market disruption event has occurred. Any determination by the calculation agent could adversely affect the return on
the notes.
|
|
·
|
THE U
.
S
.
FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN
— There is no direct legal authority regarding
the proper U.S. federal income tax treatment of the notes, and we do not plan to request a ruling from the IRS. Consequently, significant
aspects of the tax treatment of the notes are uncertain, and the IRS or a court might not agree with the treatment of the notes
as prepaid financial contracts that are not debt. If the IRS were successful in asserting an alternative treatment for the notes,
the tax consequences of ownership and disposition of the notes could be materially and adversely affected.
|
Even if the treatment of the notes as prepaid financial
contracts is respected, purchasing a note could be treated as entering into a “constructive ownership transaction.”
In that case, all or a portion of any long-term capital gain you would otherwise recognize on the taxable disposition of the note
would be recharacterized as ordinary income to the extent such gain exceeded the “net underlying long-term capital gain,”
and a notional interest charge would apply with respect to the deemed tax liability that would have been incurred if such income
had accrued at a constant rate over the period you held the note.
As described above under “Tax Consequences,”
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 notes, possibly with retroactive effect. You should review carefully the section of the accompanying product supplement entitled
“U.S. Federal Income Tax Consequences,” and consult your tax adviser regarding the U.S. federal tax consequences of
an investment in the notes (including possible alternative treatments, the potential application of the “constructive ownership”
regime and the issues presented by the 2007 notice), as well as tax consequences arising under the laws of any state, local or
non-U.S. taxing jurisdiction.
Use of Proceeds and Hedging
Part of the net proceeds we receive from the sale of the notes
will be used in connection with hedging our obligations under the notes through one or more of our affiliates. The hedging or trading
activities of our affiliates on or prior to the Trade Date or an Averaging Date could adversely affect the price of the Underlying
and, as a result, could decrease the amount you may receive on the notes at maturity.
The SPDR
®
S&P
®
Bank ETF
We have derived all information contained in this pricing supplement
regarding the SPDR
®
S&P
®
Bank ETF, including, without limitation, information concerning its
make-up, method of calculation and adjustment policy, from publicly available information. We have not participated in the preparation
of, or verified, such information. Such information reflects the policies of, and is subject to change by, SPDR
®
Series Trust and SSgA Funds Management, Inc. The SPDR
®
S&P
®
Bank ETF is an investment portfolio
maintained and managed by SSgA Funds Management, Inc., which is the investment advisor to the SPDR
®
S&P
®
Bank ETF. The SPDR
®
S&P
®
Bank ETF is an exchange-traded fund that trades on the NYSE Arca under
the ticker symbol “KBE.”
SPDR
®
Series Trust is a registered investment
company that consists of numerous separate investment portfolios, including the SPDR
®
S&P
®
Bank
ETF. Information provided to, or filed with, the SEC by SPDR
®
Series Trust pursuant to the Securities Exchange Act
of 1934, as amended, or the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 333–57793
and 811–08839, respectively, through the SEC’s website at
.
http://www.sec.gov.
.
For additional information regarding SPDR
®
Series Trust, SSgA Funds Management, Inc. and the SPDR
®
S&P
®
Bank ETF, please see the SPDR
®
Series Trust’s prospectus.
The SPDR
®
S&P
®
Bank ETF seeks
to provide investment results that correspond generally to the total return performance, before fees and expenses, of the S&P
®
Banks Select Industry
®
Index, which represents the technology sector of the U.S. equity market. In seeking to track
the performance of the S&P
®
Banks Select Industry
®
Index, the SPDR
®
S&P
®
Bank ETF employs a sampling strategy, which means that the SPDR
®
S&P
®
Bank ETF is not required
to purchase all of the securities represented in the S&P
®
Banks Select Industry
®
Index. Instead,
the SPDR
®
S&P
®
Bank ETF may purchase a subset of the securities represented in the S&P
®
Banks Select Industry
®
Index in an effort to hold a portfolio of securities with generally the same risk and return
characteristics of the S&P
®
Banks Select Industry
®
Index. Under normal market conditions, the
SPDR
®
S&P
®
Bank ETF generally invests substantially all, but at least 80%, of its total assets
in the securities composing the S&P
®
Banks Select Industry
®
Index.
The S&P
®
Banks Select Industry
®
Index is a modified equally-weighted index that is designed to measure the performance of the bank sub-industry portion of the
S&P
®
Total Market Index. The S&P
®
Total Market Index offers broad market exposure to companies
of all market capitalization, including all common equities listed on the NYSE (including NYSE Arca), the NYSE MKT, the NASDAQ
Global Select Market, the NASDAQ Select Market and the NASDAQ Capital Market. Only U.S. companies are eligible for inclusion in
the S&P
®
Total Market Index. The companies included in the S&P
®
Banks Select Industry
®
Index are selected on the basis of being classified under the Global Industry Classification Standard (GICS) as Asset Management
& Custody Banks, Diversified Banks, Regional Banks, Other Diversified Financial Services and Thrifts & Mortgage Finance
companies as well as meeting float-adjusted liquidity ratio and float-adjusted market capitalization requirements. The S&P
®
Banks Select Industry
®
Index is reported by Bloomberg under the ticker symbol “SPSIBK.”
This is only
a summary of the S&P
®
Banks Select Industry
®
Index
.
For more information
regarding the composition
,
calculation methodology and adjustment policy for the S&P
®
Banks Select
Industry
®
Index
,
please see the section entitled “The S&P Select Industry Indices —
Methodology of the Select Industry Indices” in the accompanying underlying supplement No
.
1 dated August 17
,
2015
.
Historical Information
The following graph sets forth the historical performance of
the SPDR
®
S&P
®
Bank ETF based on its daily closing prices from July 7, 2012 through July 7, 2017.
The closing price of the Underlying on July 7, 2017 was $ 44.21. We obtained the historical closing prices of the Underlying below
from Bloomberg L.P. and we have not participated in the preparation of, or verified, such information.
The historical closing prices of the Underlying should not
be taken as an indication of future performance and no assurance can be given as to the Closing Price of the Underlying on any
of the Averaging Dates
.
We cannot give you assurance that the performance
of the Underlying will result in the return of any of your initial investment
.
Supplemental Plan of Distribution
JPMorgan Chase Bank, N.A. and JPMS LLC or one of its affiliates,
acting as placement agents for the notes, will receive a fee from the Issuer of $10.00 per $1,000 Face Amount of notes. See “Plan
of Distribution (Conflicts of Interest)” in the accompanying product supplement.
Validity
of the Notes
In the
opinion of Davis Polk & Wardwell LLP, as special United States products counsel to the Issuer, when the notes offered by this
pricing supplement have been executed and issued by the Issuer and authenticated by the authenticating agent, acting on behalf
of the trustee pursuant to the Indenture, and delivered against payment as contemplated herein, such notes will be valid and binding
obligations of the Issuer, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability
(including, without limitation, concepts of good faith, fair dealing and the lack of bad faith) and possible judicial or regulatory
actions giving effect to governmental actions or foreign laws affecting creditors’ rights, provided that such counsel expresses
no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions
expressed above. This opinion is given as of the date hereof and is limited to the laws of the State of New York. Insofar as this
opinion involves matters governed by German law, Davis Polk & Wardwell LLP has relied, without independent investigation, on
the opinion of Group Legal Services of Deutsche Bank AG, dated as of January 1, 2016, filed as an exhibit to the opinion of Davis
Polk & Wardwell LLP, and this opinion is subject to the
same
assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Group Legal Services
of Deutsche Bank AG. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution
and delivery of the Indenture and the authentication of the notes by the authenticating agent and the validity, binding nature
and enforceability of the Indenture with respect to the trustee, all as stated in the opinion of Davis Polk & Wardwell LLP
dated as of January 1, 2016, which has been filed by the Issuer on Form 6-K dated January 4, 2016.
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