Subject
to Completion
.
Dated September 13, 2017
Deutsche Bank
Structured
Investments
|
Deutsche Bank
AG
$ Capped Return Enhanced Notes Linked to the SPDR
®
S&P
®
Regional Banking ETF due
October 3
,
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
®
Regional Banking ETF (the
“
Underlying
”
),
subject to a Maximum Return of 22.10%. 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 October 3, 2018
|
|
·
|
Minimum purchase of $10,000. Minimum denominations of $1,000 (the
“
Face
Amount
”
) and integral multiples thereof.
|
|
·
|
The notes are expected to price on or about September 15, 2017 (the
“
Trade
Date
”
) and are expected to settle on or about September
20, 2017 (the
“
Settlement Date
”
).
|
Key Terms
Issuer:
|
Deutsche Bank AG, London Branch
|
Underlying:
|
SPDR
®
S&P
®
Regional Banking ETF (Ticker: KRE)
|
Issue Price:
|
100% of the Face Amount
|
Upside Leverage Factor:
|
2.00
|
Maximum Return:
|
22.10%. The actual Maximum Return on the notes will be determined on the Trade Date and will not be less than 22.10%. Accordingly, the maximum Payment at Maturity will not be less than $1,221.00 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
.
|
|
|
(
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 approximately $961.10 to $981.10 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
(1)
|
Fees
(1)(2)
|
Proceeds to Issuer
|
Per Note
|
$1,000.00
|
$10.00
|
$990.00
|
Total
|
$
|
$
|
$
|
|
(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 forgo fees
for sales to fiduciary accounts. The total fees represent the amount that the placement agents receive from sales to accounts other
than such fiduciary accounts. The placement agents will receive a fee from the Issuer that will not exceed $10.00 per $1,000 Face
Amount of notes. The fees referenced above do not include additional transaction costs and fees which may be reflected in the price
of the Underlying. Please refer to the section “Selected Risk Considerations” in this pricing supplement for more information.
|
|
(2)
|
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
September , 2017
(
Key Terms continued from previous page
)
|
Initial Price:
|
The closing price of the Underlying on the Trade Date
|
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 Securities — Anti-dilution Adjustments for Funds” in the accompanying product supplement.
|
Trade Date
2
:
|
September 15, 2017
|
Settlement Date
2
:
|
September 20, 2017
|
Averaging Dates
1, 2
:
|
September 24, 2018, September 25, 2018, September 26, 2018, September 27, 2018 and September 28, 2018
|
Maturity Date
1, 2
:
|
October 3, 2018
|
Listing:
|
The notes will not be listed on any securities exchange.
|
CUSIP / ISIN:
|
25155MDV0 / US25155MDV00
|
|
1
|
Subject to adjustment as described under “Description of Securities — Adjustments to Valuation Dates and Payment
Dates” in the accompanying product supplement.
|
|
2
|
In the event that we make any changes to the expected Trade Date or Settlement Date, the Averaging Dates and Maturity Date
may be changed so that the stated term of the notes remains the same.
|
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 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 assume a Maximum Return on the notes of 22.10% and reflect
the Upside Leverage Factor of 2.00. The actual Initial Price and Maximum Return will be determined on the Trade Date. 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 and it has been assumed
that no event affecting the Underlying has occurred during the term of the notes that would cause the calculation agent to adjust
the Share Adjustment Factor. 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%
|
22.10%
|
$1,221.00
|
90.00%
|
22.10%
|
$1,221.00
|
80.00%
|
22.10%
|
$1,221.00
|
70.00%
|
22.10%
|
$1,221.00
|
60.00%
|
22.10%
|
$1,221.00
|
50.00%
|
22.10%
|
$1,221.00
|
40.00%
|
22.10%
|
$1,221.00
|
30.00%
|
22.10%
|
$1,221.00
|
20.00%
|
22.10%
|
$1,221.00
|
11.05%
|
22.10%
|
$1,221.00
|
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 $1,221.00 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 22.10%) = $1,221.00
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 22.10%, resulting in a maximum
Payment at Maturity of $1,221.00 per $1,000 Face Amount of notes. The actual Maximum Return on the notes will be determined on
the Trade Date and will not be less than 22.10%.
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
®
REGIONAL BANKING ETF
—
The return on the notes, which may be positive, zero or negative, is linked to the performance
of the SPDR
®
S&P
®
Regional Banking ETF as described herein. The SPDR
®
S&P
®
Regional Banking 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
®
Regional Banking ETF. SSgA Funds Management, Inc. (the
“
Underlying
Advisor
”
) is the investment adviser of the SPDR
®
S&P
®
Regional Banking ETF. The SPDR
®
S&P
®
Regional Banking ETF seeks to provide
investment results that, before fees and expenses, correspond generally to the total return performance of the S&P
®
Regional Banks Select Industry
TM
Index (the
“
Tracked
Index
”
), which represents the regional banking sub-industry
portion of the U.S. equity market. The SPDR
®
S&P
®
Regional Banking ETF trades on the NYSE Arca
under the ticker symbol “KRE.”
This is only a summary of the SPDR
®
S&P
®
Regional Banking ETF
.
For more information on the SPDR
®
S&P
®
Regional
Banking ETF
,
please see the section entitled “The Select Industry SPDR Exchange Traded Funds — The SPDR
®
S&P
®
Regional Banking ETF” in the accompanying underlying supplement No
.
1 dated August
17
,
2015
.
For more information on the S&P
®
Regional Banks Select Industry
TM
Index
,
please see the section entitled “The S&P Dow Jones Indices —
The S&P Select Industry Indices — The S&P
®
Regional Banks Select Industry
TM
Index
”
in the accompanying underlying supplement No
.
1 dated August
17
,
2015
.
|
|
·
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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.
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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,
we expect that Section 871(m) will 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. If necessary, further
information regarding the potential application of Section 871(m) will be provided in the pricing supplement for the notes. 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 at maturity.
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 22.10% and $1,000 Face Amount of notes. Consequently, assuming the Maximum Return is determined on
the Trade Date to be 22.10%, the maximum Payment at Maturity will be $1,221.00 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 UNDERLYING ARE SUBJECT TO RISKS ASSOCIATED WITH THE BANKING SECTOR
— All or
substantially all of the equity securities held by the Underlying are issued by companies whose primary line of business is directly
associated with the banking sector. The performance of 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 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 Underlying and the price of the Underlying to decline during the term of the notes.
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THERE ARE RISKS ASSOCIATED WITH INVESTMENTS IN SECURITIES WITH CONCENTRATION IN A SINGLE INDUSTRY
— The stocks
included in the Tracked Index and that are generally held by the Underlying are stocks of companies representing the regional
banking sector of the U.S. equity market. The component securities held by the Underlying may be subject to increased price volatility,
as they are concentrated in a single industry and may be more susceptible to economic, market, political or regulatory occurrences
affecting that industry.
These factors could cause or contribute to large movements in the price of the shares of the
Underlying, which may adversely affect the value of the notes.
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THE POLICIES OF THE UNDERLYING ADVISOR AND CHANGES THAT AFFECT THE UNDERLYING OR ITS TRACKED INDEX COULD ADVERSELY AFFECT
THE VALUE OF THE NOTES
— The policies of 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 such
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 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 any of 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
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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.
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. 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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·
|
the occurrence of certain events affecting the Underlying that may or may not require an anti-dilution adjustment;
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·
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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
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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.
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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.
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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.
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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.