Pricing
Supplement
To underlying supplement No
.
1 dated August 17
,
2015
,
product supplement C dated July 31
,
2015
,
prospectus supplement dated July 31
,
2015 and
prospectus dated April 27
,
2016
|
Pricing Supplement No
.
3040C
Registration Statement No
.
333–206013
Rule 424
(
b
)(
2
)
|
The information in this preliminary
pricing supplement is not complete and may be changed
.
This preliminary
pricing supplement and the accompanying underlying supplement
,
product
supplement
,
prospectus supplement and prospectus do not constitute
an offer to sell nor do they seek an offer to buy the notes in any jurisdiction where the offer or sale is not permitted
.
Subject to Completion. Dated February
7, 2018
|
Deutsche Bank
|
|
(i)
Structured
Investments
|
Deutsche
Bank AG
$ Notes Linked to the Bloomberg
Commodity Index
SM
due February 11, 2020
|
General
|
·
|
The notes are designed for investors who seek a return at maturity linked to the performance
of the Bloomberg Commodity Index
SM
(the
“
Underlying
”
).
The Underlying is composed of futures contracts on 22 physical commodities and is designed to be a benchmark for commodities as
an asset class. If the Final Level is greater than the Initial Level, investors will receive a cash payment at maturity per $1,000
Face Amount of notes equal to $960.50 (the “
Minimum Payment Amount
”)
plus
an amount equal to the Face
Amount
multiplied by
the Underlying Return. However, if the Final Level is equal to or less than the Initial Level, investors
will receive only a cash payment at maturity per $1,000 Face Amount of notes equal to the Minimum Payment Amount. Because the Minimum
Payment Amount is less than the Face Amount, investors will lose up to 3.95% of their investment if the Final Level is less than
103.95% of the Initial Level. The notes do not pay any interest or dividends. Any payment on the notes is subject to the credit
of the Issuer.
|
|
·
|
Senior unsecured obligations of Deutsche Bank AG due February 11, 2020
|
|
·
|
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 February 6, 2018 (the
“
Trade
Date
”
) and are expected to settle on or about February
9, 2018 (the
“
Settlement Date
”
).
|
Key Terms
Issuer:
|
Deutsche Bank AG, London Branch
|
Underlying:
|
Bloomberg Commodity Index
SM
(Ticker: BCOM)
|
Issue Price:
|
100% of the Face Amount
|
Minimum Payment Amount:
|
$960.50
|
Payment at Maturity:
|
·
If the Final Level is
greater than
the Initial Level
,
you will receive a cash payment at maturity per $1,000 Face Amount of notes calculated as follows:
|
|
|
|
Minimum Payment Amount + ($1,000 x Underlying Return)
|
|
|
|
·
If the Final Level is
equal to
or
less than
the Initial Level
,
you will receive a cash payment at maturity equal to the Minimum Payment Amount per $1,000 Face Amount of notes.
|
|
|
|
If the Final Level is less than 103.95% of the Initial Level, you will lose up to 3.95% of your investment at maturity. In no case will the Payment at Maturity be less than the Minimum Payment Amount of $960.50 per $1,000 Face Amount of notes. Any payment at maturity, including payment of the Minimum Payment Amount, is subject to the credit of the Issuer
.
|
Underlying Return:
|
The performance of the Underlying from the Initial Level to the Final Level, calculated as follows:
|
|
|
|
Final Level – Initial Level
|
|
Initial Level
|
|
|
|
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 9 of this pricing
supplement
.
The Issuer’s estimated value of the
notes on the Trade Date is approximately $965.00 to $985.00 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
|
$15.00
|
$985.00
|
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 $15.00 per $1,000 Face Amount of notes.
|
|
(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
February , 2018
|
(
Key Terms continued from previous page
)
|
|
|
Initial Level
1
:
|
The closing level of the Underlying on the Trade Date
|
Final Level
1
:
|
The arithmetic average of the closing levels of the Underlying on on each of the five Averaging Dates
|
Trade Date
3
:
|
February 6, 2018
|
Settlement Date
3
:
|
February 9, 2018
|
Averaging Dates
3
:
|
January 31, 2020, February 3, 2020, February 4, 2020, February 5, 2020 and February 6, 2020
|
Maturity Date
2, 3
:
|
February 11, 2020
|
Listing:
|
The notes will not be listed on any securities exchange.
|
CUSIP / ISIN:
|
25155MJM4 / US25155MJM47
|
|
1
|
Subject to adjustment as described under “Description
of Securities — Adjustments to Valuation Dates and Payment Dates” in the accompanying product supplement.
|
|
2
|
Subject to postponement as described under “Description
of Securities — Adjustments to Valuation Dates and Payment Dates” and acceleration as described under “Description
of Securities — Adjustments to Valuation Dates and Payment Dates — Commodity Hedging Disruption Events for Commodity
Based Underlyings or Basket Components” in the accompanying product supplement.
|
|
3
|
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 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 three 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 C 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:
|
https://www.sec.gov/Archives/edgar/data/1159508/000095010315006546/crt_dp58829-424b2.pdf
|
·
|
Product supplement C dated July 31, 2015:
|
https://www.sec.gov/Archives/edgar/data/1159508/000095010315006068/dp58317_424b2-psc.htm
|
·
|
Prospectus supplement dated July 31, 2015:
|
https://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 reflect the Minimum Payment Amount of $960.50. The actual
Initial Level will be determined on the Trade Date. The table and hypothetical examples set forth below are for illustrative purposes
only. The actual return applicable to a purchaser of the notes will be based on whether the Final Level is greater than, equal
to or less than the Initial Level and the Underlying Return. The numbers appearing in the table and examples below may have been
rounded for ease of analysis. You should consider carefully whether the notes are suitable to your investment goals.
Hypothetical
Underlying Return
(%)
|
Hypothetical
Payment at Maturity
($)
|
Hypothetical
Return on the Notes
(%)
|
100.00%
|
$1,960.50
|
96.05%
|
90.00%
|
$1,860.50
|
86.05%
|
80.00%
|
$1,760.50
|
76.05%
|
70.00%
|
$1,660.50
|
66.05%
|
60.00%
|
$1,560.50
|
56.05%
|
50.00%
|
$1,460.50
|
46.05%
|
40.00%
|
$1,360.50
|
36.05%
|
30.00%
|
$1,260.50
|
26.05%
|
20.00%
|
$1,160.50
|
16.05%
|
10.00%
|
$1,060.50
|
6.05%
|
5.00%
|
$1,010.50
|
1.05%
|
3.95%
|
$1,000.00
|
0.00%
|
2.00%
|
$980.50
|
-1.95%
|
0
.
00%
|
$960.50
|
-3.95%
|
-5.00%
|
$960.50
|
-3.95%
|
-
10
.
00%
|
$960.50
|
-3.95%
|
-20.00%
|
$960.50
|
-3.95%
|
-30.00%
|
$960.50
|
-3.95%
|
-40.00%
|
$960.50
|
-3.95%
|
-50.00%
|
$960.50
|
-3.95%
|
-60.00%
|
$960.50
|
-3.95%
|
-70.00%
|
$960.50
|
-3.95%
|
-80.00%
|
$960.50
|
-3.95%
|
-90.00%
|
$960.50
|
-3.95%
|
-100.00%
|
$960.50
|
-3.95%
|
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 Level is greater than the Initial Level
,
resulting in
an Underlying Return of 30
.
00%
.
Because the Final Level is greater than the Initial Level, the investor receives a Payment at Maturity of $1,260.50 per $1,000
Face Amount of notes, calculated as follows:
Minimum Payment Amount + ($1,000 x Underlying
Return)
$960.50 + ($1,000 x 30.00%) = $1,260.50
Example 2
:
The Final Level is greater than the Initial Level
,
resulting in
an Underlying Return of 2
.
00%
.
Even though the Final Level is greater than the Initial Level, because the Underlying Return is only 2.00%, the investor receives
a Payment at Maturity of $980.50 per $1,000 Face Amount of notes, calculated as follows:
Minimum Payment Amount + ($1,000 x Underlying
Return)
$960.50 + ($1,000 x 2.00%) = $980.50
Example 3
:
The Final Level is less than the Initial Level
.
Because the
Final Level is less than the Initial Level, the investor receives only a Payment at Maturity equal to the Minimum Payment Amount
of $960.50 per $1,000 Face Amount of notes.
Selected Purchase Considerations
|
·
|
UNCAPPED APPRECIATION POTENTIAL
— The notes provide the opportunity to participate in any increase in the level
of the Underlying at maturity on an unleveraged basis. If the Final level is greater than the Initial Level, you will receive a
cash payment per $1,000 Face Amount of notes at maturity equal to the Minimum Payment Amount of $960.50
plus
an amount equal
to the Face Amount
multiplied by
the Underlying Return.
Any payment on the notes is subject to our ability to satisfy
our obligations as they become due
.
|
|
·
|
PARTIAL PRESERVATION OF CAPITAL AT MATURITY
— You will receive at maturity at least the Minimum Payment Amount
of $960.50 per $1,000 Face Amount of notes regardless of the performance of the Underlying. Because the Minimum Payment Amount
is less than the Face Amount, you should be willing to lose up to 3.95% of the Face Amount if the Final Level is less than 103.95%
of the Initial Level.
|
|
·
|
RETURN LINKED TO THE PERFORMANCE OF THE Bloomberg Commodity Index
SM
—
The return on the notes is linked to the performance of the Bloomberg Commodity
Index. The Bloomberg Commodity Index is composed of futures contracts (the “
Index Constituents
”) on 22 physical
commodities and is designed to be a benchmark for commodities as an asset class. Because futures contracts specify a certain date
for delivery of the underlying commodity, the futures contracts composing the Underlying will change over time, as expiring contracts
are replaced by contracts with later expiration dates. Consequently, the Underlying reflects the return of the futures contracts
included in the Underlying and also the positive or negative impact of “rolling” hypothetical positions in such contracts
forward as they approach delivery. The component weightings of the Underlying are determined primarily based on liquidity data,
or the relative amount of trading activity of a particular commodity, and dollar-adjusted production data. The component weightings
are also determined by several rules designed to insure diversified commodity exposure.
For more information on the Bloomberg
Commodity Index
SM
, including information concerning its composition, calculation methodology and adjustment policy,
please see the section entitled “The Bloomberg Commodity Index
SM
” in the accompanying underlying supplement
No. 1 dated August 17, 2015
.
|
|
·
|
TREATED AS CONTINGENT PAYMENT DEBT INSTRUMENTS
– Notwithstanding that the notes do not provide for the full repayment
of their principal amount at or prior to maturity, in the opinion of our special tax counsel, Davis Polk & Wardwell LLP, the
notes should be treated for U.S. federal income tax purposes as “contingent payment debt instruments,” with the tax
consequences described under “—CPDI Securities,” on page 56 of the accompanying product supplement. Under this
treatment, regardless of your method of tax accounting, you will be required to accrue interest in each year on a constant yield
to maturity basis at the “comparable yield,” as determined by us, although we will not make any payment on the notes
until maturity. Any income recognized upon a taxable disposition of the notes generally will be treated as interest income and
any loss as ordinary loss to the extent of previous interest inclusions (reduced by the total amount of net negative adjustments
you have previously taken into account as ordinary losses), with the balance treated as capital loss for U.S. federal income tax
purposes.
|
We will indicate how you may contact us to obtain the
comparable yield and the projected payment schedule in the final pricing supplement. Neither the comparable yield nor the projected
payment schedule constitutes a representation by us regarding the actual amount that we will pay on a note.
The discussions above and in the accompanying prospectus
supplement do not address the consequences to taxpayers subject to special tax accounting rules under Section 451(b).
Withholding under legislation commonly referred to
as “FATCA” may apply to amounts treated as interest paid with respect to the notes, as well as to payments of gross
proceeds of a taxable disposition, including redemption at maturity, of a note, unless certain reporting and due diligence requirements
have been satisfied. However, under a recent IRS notice, this regime will not apply to payments of gross proceeds (other than any
amount treated as interest) with respect to dispositions occurring before January 1, 2019. You should consult your tax adviser
regarding the potential application of FATCA 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 concerning the
application of U.S. federal income tax laws to your particular situation, as well as any tax consequences arising under the laws
of any state, local or non-U.S. jurisdictions
.
Selected Risk Considerations
An investment in the notes involves significant risks. Investing
in the notes is not equivalent to investing directly in the futures contracts composing 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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THE NOTES DO NOT GUARANTEE THE REPAYMENT OF THE FULL FACE AMOUNT AT MATURITY
—The notes do not guarantee the repayment
of the full Face Amount at Maturity. If the Final Level is less than the Initial Level, you will receive only a cash payment at
maturity per $1,000 Face Amount of notes equal to the Minimum Payment Amount of $960.50. In this circumstance, you will lose 3.95%
of the Face Amount. Even if the Final Level is greater than the Initial Level, because the Minimum Payment Amount is less than
the Face Amount, you will lose some of your investment unless the Final Level is equal to or greater than 103.95% of the Initial
Level.
Any payment on the notes is subject to our ability to satisfy our obligations as they become due
.
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Your return on the notes will be less than the Underlying Return even if the Final
Level is greater than the Initial Level
– The notes provide the opportunity to participate in any increase in
the level of the Underlying at maturity on an unleveraged basis. However, even if the Final Level is greater than the Initial Level,
because the Minimum Payment Amount is less than the Face Amount by 3.95%, your return on the notes will be less than the Underlying
Return by 3.95%. As a result, you will not receive a positive return on the notes unless the Underlying Return is greater than
3.95%.
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THE NOTES DO NOT PAY ANY INTEREST
— Unlike ordinary debt securities, the notes do not pay any interest.
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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
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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 FUTURES CONTRACTS COMPOSING THE UNDERLYING —
The return
on your notes may not reflect the return you would have realized if you had directly invested in the futures contracts composing
the Underlying.
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IF THE LEVEL OF THE UNDERLYING CHANGES
,
THE VALUE
OF YOUR NOTES MAY NOT CHANGE IN THE SAME MANNER
— Your notes may trade quite differently from the level of the Underlying.
Changes in the level of the Underlying may not result in comparable changes in the value of your notes.
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YOU WILL HAVE NO RIGHTS IN EXCHANGE-TRADED FUTURES CONTRACTS COMPOSING THE UNDERLYING
— As a holder of the notes,
you will not have any rights that holders of exchange-traded futures contracts composing the Underlying may have.
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A COMMODITY HEDGING DISRUPTION EVENT MAY RESULT IN ACCELERATION OF THE NOTES
— If a Commodity Hedging Disruption
Event occurs, we will have the right to accelerate the payment on your notes prior to maturity. The amount due and payable on the
notes upon such early acceleration will be determined in good faith and in a commercially reasonable manner by the calculation
agent, which may be significantly less than the Minimum Payment Amount. In such circumstances, you may receive less than 96.05%
of the Face Amount and you could lose some or a significant portion of your investment.
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COMMODITY FUTURES CONTRACTS ARE SUBJECT TO UNCERTAIN LEGAL AND REGULATORY REGIMES, WHICH MAY ADVERSELY AFFECT THE LEVEL
OF THE UNDERLYING AND THE VALUE OF THE NOTES
— Commodity futures contracts that may compose the Underlying are subject
to legal and regulatory regimes in the United States and, in some cases, in other countries that may change in ways that could
adversely affect our ability to hedge our obligations under the notes and affect the level of the Underlying. The effect on the
value of the notes of any future regulatory change is impossible to predict, but could be substantial and adverse to your interest.
For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted on July 21, 2010, provided the Commodity
Futures Trading Commission with additional authority to establish limits on the amount of positions that may be held by any person
in commodity futures contracts, options on such futures contracts and swaps that are economically equivalent to such contracts.
While the effects of these or other regulatory developments are difficult to predict when adopted, such rules may have the effect
of making the markets for commodities, commodity futures contracts, options on such futures contracts and other related derivatives
more volatile and over time potentially less liquid. The implementation of such rules may lead to a Commodity Hedging Disruption
Event or may increase the likelihood that a Commodity Hedging Disruption Event will occur during the term of the notes. If a Commodity
Hedging Disruption Event does occur, we may, in our sole and absolute discretion, accelerate the payment on your notes early and
pay you an amount determined in good faith and in a commercially reasonable manner by the calculation agent. If the payment on
your notes is accelerated, your investment may result in a loss and you may not be able to reinvest the proceeds in a comparable
investment. Such rules may also force market participants, including us and our affiliates, or such market participants may decide,
to sell their positions in such futures contracts and other instruments subject to such limits. If this broad market selling were
to occur, it would likely lead to declines, possibly significant declines, in the level of the Underlying or the prices of such
futures contracts composing the Underlying and, therefore, the value of the notes.
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There is no assurance that the methodology of the Underlying will result in the
Underlying accurately reflecting the market performance of futures contracts represented by or included in the Underlying
— The methodology and criteria used to determine the composition of the
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Underlying, the weights of the Index Constituents,
and the calculation of the level of the Underlying are designed to enable the Underlying to serve as a measure of the performance
of the commodities markets. It is possible that the methodology and criteria of the Underlying will not accurately reflect the
performance of these commodities and that the trading of, or investments in, products based on or related to the Underlying, such
as the notes, will not correlate with that performance.
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The UNDERLYING tracks commodity futures contracts and does not track the spot prices
of the commodities represented by the UNDERLYING
— The Underlying is composed of exchange-traded futures contracts.
Unlike equities, which typically entitle the holder to a continuing stake in a corporation, a commodity futures contract is typically
an agreement to buy a set amount of an underlying physical commodity at a predetermined price during a stated delivery period.
A futures contract reflects the expected value of the underlying physical commodity upon delivery in the future. In contrast, the
underlying physical commodity’s current or “spot” price reflects the immediate delivery value of the commodity.
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The notes are linked to the Underlying and not to the
spot prices of the commodities represented by the Underlying. An investment in the notes is not the same as buying and holding
the commodities represented by the Underlying. While price movements in the commodities represented by the Underlying may correlate
with changes in the spot prices of the commodities represented by the Underlying, the correlation will not be perfect and price
movements in the spot markets for the commodities represented by the Underlying may not be reflected in the futures market (and
vice versa). Accordingly, an increase in the spot prices of the commodities represented by the Underlying may not result in an
increase in the prices of the commodities represented by the Underlying or the level of the Underlying. The prices of the commodities
represented by the Underlying and the level of the Underlying may decrease while the spot prices for the commodities represented
by the Underlying remain stable or increase, or do not decrease to the same extent.
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UNDERLYING CALCULATION DISRUPTION EVENTS MAY REQUIRE AN ADJUSTMENT TO THE CALCULATION OF THE UNDERLYING
— At any
time during the term of the notes, the daily calculation of the Underlying may be adjusted in the event that the sponsor of the
Underlying (“
Index Sponsor
”) determines that any of the following index calculation disruption events exists:
the termination or suspension of, or material limitation or disruption in the trading of any futures contract used in the calculation
of the Underlying on that day; the settlement price of any futures contract used in the calculation of the Underlying reflects
the maximum permitted price change from the previous day’s settlement price; the failure of an exchange to publish official
settlement prices for any futures contract used in the calculation of the Underlying; or, with respect to any futures contract
used in the calculation of the Underlying that trades on the London Metal Exchange (the “
LME
”), a business day
on which the LME is not open for trading. Any such index calculation disruption events may have an adverse impact on the level
of the Underlying or the manner in which it is calculated. Please see the section entitled “The Bloomberg Commodity Index
SM
”
in the accompanying underlying supplement No. 1 dated August 17, 2015.
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THE INDEX SPONSOR
MAY BE REQUIRED TO REPLACE A DESIGNATED CONTRACT IF
THE EXISTING FUTURES CONTRACT IS TERMINATED OR REPLACED
— One or more
futures contracts
known as designated contracts have been selected as the reference contracts for each underlying physical commodity. See “The
Bloomberg Commodity Index
SM
— Designated Contracts for each Index Commodity” in the accompanying underlying
supplement No. 1 dated August 17, 2015.
Data concerning each designated contract will be used to calculate the Underlying.
The termination or replacement of a futures contract on an established exchange occurs infrequently; if a designated contract were
to be terminated or replaced by an exchange, a comparable futures contract, if available, would be selected by a supervisory committee
appointed by the Index Sponsor to replace that designated contract. The termination or replacement of any designated contract may
have an adverse impact on the level of the Underlying.
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CHANGES THAT AFFECT THE CALCULATION OF THE UNDERLYING MAY ADVERSELY AFFECT THE VALUE OF THE NOTES AND THE AMOUNT YOU WILL
RECEIVE AT MATURITY
— The policies of the Index Sponsor concerning the methodology and calculation of the Underlying,
additions, deletions or substitutions of the commodities included in the Underlying or exchange-traded futures contracts on the
commodities included in the Underlying could affect the level of the Underlying, which could adversely affect the amount payable
on the notes at maturity and the value of the notes prior to maturity. The amount payable on the notes and their value could also
be adversely affected if the Index Sponsor, in its sole discretion, changes these policies, for example, by changing the methodology
for compiling and calculating the Underlying, or if the Index Sponsor discontinues or suspends calculation or publication of the
Underlying, in which case it may become difficult to determine the value of the notes. If events such as these occur, or if the
level of the Underlying is not
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available because of a market disruption event or for
any other reason, the calculation agent will make a good faith estimate in its sole discretion of the level of the Underlying that
would have prevailed in the absence of the market disruption event.
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THE CORRELATION AMONG THE INDEX CONSTITUENTS COULD CHANGE UNPREDICTABLY
— Correlation is the extent to which the
values of the Index Constituents increase or decrease to the same degree at the same time. If the correlation among the Index Constituents
changes, the value of the notes may be adversely affected.
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THE ABSENCE OF BACKWARDATION OR PRESENCE OF CONTANGO IN THE MARKETS FOR FUTURES CONTRACTS INCLUDED IN THE UNDERLYING WILL
ADVERSELY AFFECT THE LEVEL OF THE UNDERLYING
— As the futures contracts included in the Underlying near expiration, they
are replaced by contracts that have a later expiration. Thus, for example, a contract purchased and held in December may specify
a January expiration. As that contract nears expiration, it may be replaced by selling the January contract and purchasing the
contract expiring in March. This process is referred to as “rolling.” Historically, with respect to some futures contracts,
the prices have frequently been higher for contracts with shorter-term expirations than for contracts with longer-term expirations,
which is referred to as “backwardation.” In these circumstances, absent other factors, the sale of the January contract
would take place at a price that is higher than the price at which the March contract is purchased, thereby creating a gain in
connection with rolling. While certain futures contracts included in the Underlying have historically exhibited consistent periods
of backwardation, backwardation will likely not exist in these markets at all times. The absence of backwardation in the markets
for these futures contracts will adversely affect the level of the Underlying and, accordingly, decrease the value of your notes.
Conversely, some futures contracts included in the Underlying have historically exhibited “contango” markets rather
than backwardation. Contango markets are those in which the prices of contracts are higher in the distant delivery months than
in the nearer delivery months due to the costs of long-term storage of a physical commodity prior to delivery or other factors.
The presence of contango in the markets for these futures contracts will adversely affect the level of the Underlying and, accordingly,
decrease the value of your notes.
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The return on your investment could be significantly less than the performance of
the Underlying or certain components of the underlying
— The return on your investment in the notes could be significantly
less than the return on an alternative investment with similar risk characteristics, even if some of the futures contracts reflected
in the Underlying, or the commodities underlying such futures contracts, have generated significant returns. The levels of such
futures contracts and such commodities may move in different directions at different times compared to each other, and underperformance
by one or more of the futures contracts included in the Underlying may reduce the performance of the Underlying as a whole.
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THE PRICES OF COMMODITIES AND COMMODITY FUTURES CONTRACTS ARE HIGHLY VOLATILE AND MAY CHANGE UNPREDICTABLY
— Market
prices of commodities and commodity futures contracts are highly volatile and, in many sectors, have experienced unprecedented
historical volatility in the past few years. Market prices of commodities and commodity futures contracts may fluctuate rapidly
based on numerous factors, including: changes in supply and demand relationships; weather; trends in agriculture; trade, fiscal,
monetary and exchange control programs; domestic and foreign political and economic events and policies; disease, pestilence and
technological developments; changes in interest rates, whether through governmental action or market movements; currency exchange
rates; volatility from speculative activities; the development, availability and/or decrease in the price of substitutes; monetary
and other governmental policies, action and inaction; macroeconomic or geopolitical and military events, including political instability
in some oil-producing countries or other countries in which the production of particular commodities may be concentrated; and natural
or nuclear disasters. These factors may adversely affect the values of the related futures contracts composing the Underlying and,
as a result, the level of the Underlying, the value of the notes, and any payments you may receive in respect of the notes.
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THE MARKETS FOR THE UNDERLYING COMMODITIES SUFFER FROM SYSTEMIC RISKS
— Changes in supply and demand can have
significant effects on the prices of the underlying commodities and their futures contracts. In addition, the underlying commodities
tend to be exposed to the risk of fluctuations in currency exchange rates, volatility from speculative activities and the risk
that substitutes for the underlying commodities in their common uses will become more widely available or comparatively less expensive,
which can affect the value of the futures contracts on the underlying commodities. If one of these events were to cause a
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decrease in the price of one or more of the futures
contracts included in the Underlying, the level of the Underlying and the value of the notes would be adversely affected.
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THE COMMODITY PRICES REFLECTED IN THE UNDERLYING ARE SUBJECT TO EMERGING MARKETS’ POLITICAL AND ECONOMIC RISKS
— The commodities included in the Underlying may be produced in emerging market countries that are more exposed to the risk
of swift political change and economic downturns than their industrialized counterparts. Indeed, in recent years, some emerging
market nations have undergone significant political, economic and social upheaval. In such cases, far-reaching changes have resulted
in constitutional and social tensions and in such cases, instability and reaction against market reforms have occurred. With respect
to any emerging market nation, there is the possibility of nationalization, appropriation or confiscation, political changes, government
regulation and social instability. Future political instability may adversely affect the economic conditions of an emerging market
nation. Political or economic instability is likely to adversely affect the level of the Underlying and, potentially, the return
on your investment and the value of the notes.
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THE LONDON METAL EXCHANGE DOES NOT HAVE DAILY PRICE LIMITS
— The official cash offer prices of certain futures
contracts on exchange-traded physical commodities included in the Underlying are determined by reference to the per unit U.S. dollar
cash offer prices of contracts traded on the LME. The LME is a principals’ market that operates in a manner more closely
analogous to the over-the-counter physical commodity markets than regulated futures markets. For example, there are no daily price
limits on the LME, which would otherwise restrict the extent of daily fluctuations in the prices of LME contracts. In a declining
market, therefore, it is possible that prices would continue to decline without limitation within a particular day or over a period
of days. In addition, a contract may be entered into on the LME calling for delivery on any day from one day to three months following
the date of such contract and for monthly delivery in any of the next 16 to 24 months (depending on the commodity) following such
third month, in contrast to trading on futures exchanges, which call for delivery in stated delivery months. As a result, there
may be a greater risk of a concentration of positions in LME contracts on particular delivery dates, which in turn could cause
temporary aberrations in the prices of LME contracts for certain delivery dates. If such aberrations occur on an Averaging Date,
the per unit U.S. dollar cash offer prices used to determine the official cash offer prices of certain futures contracts on exchange-traded
physical commodities included in the Underlying could be adversely affected, which will have an adverse effect on the Redemption
Amount.
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The Underlying may in the future include contracts that are not currently included
in the Underlying or contracts that are not traded on regulated futures exchanges
— The Underlying was originally
based solely on futures contracts traded on regulated futures exchanges (referred to in the United States as “designated
contract markets”). At present, the Underlying is comprised exclusively of regulated futures contracts. However, the Underlying
may in the future include over-the-counter contracts (such as swaps and forward contracts) traded on trading facilities that are
subject to lesser degrees of regulation or, in some cases, no substantive regulation. As a result, trading in such contracts and
the manner in which prices and volumes are reported by the relevant trading facilities may not be subject to the provisions of
and the protections afforded by the U.S. Commodity Exchange Act or other applicable statutes and related regulations that govern
trading on regulated U.S. futures exchanges or similar statutes and regulations that govern trading on regulated U.K. futures exchanges.
In addition, many electronic trading facilities have only recently initiated trading and do not have significant trading histories.
As a result, the trading of contracts on such facilities and the inclusion of such contracts in the Underlying may be subject to
certain risks not presented by U.S. or U.K. exchange-traded futures contracts, including risks related to the liquidity and price
histories of the relevant contracts.
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IF THE LIQUIDITY OF THE INDEX CONSTITUENTS IS LIMITED, THE VALUE OF THE NOTES WILL LIKELY BE IMPAIRED AND THIS COULD RESULT
IN POTENTIAL CONFLICTS OF INTEREST
— Commodities and derivatives contracts on commodities may be difficult to buy or
sell, particularly during adverse market conditions. Reduced liquidity of the Index Constituents on an Averaging Date would likely
have an adverse effect on the level of the Underlying and, therefore, on the return on your notes. Limited liquidity relating to
the Index Constituents may also result in the Index Sponsor being unable to determine the level of the Underlying using its normal
means. Any resulting discretion by the calculation agent in determining the Final Level could adversely affect the value of the
notes which, in turn, could result in potential conflicts of interest.
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Suspension or Disruptions of Market Trading in CommoditY and Related Futures MARKETS
May Adversely Affect the Value of the notes
— The commodity futures markets are subject to temporary distortions
or other disruptions due to various factors, including the lack of liquidity in the markets, the
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participation of speculators and government regulation
and intervention. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation
in some futures contract prices that may occur during a single business day. These limits are generally referred to as “daily
price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is
referred to as a “limit price.” Once the limit price has been reached in a particular contract, no trades may be made
at a price beyond the limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading
in a particular contract or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances
could adversely affect the level of the Underlying and, therefore, the value of the 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 levels 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 three 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.
|
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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·
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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 level 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 level
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:
|
o
|
the expected volatility of the Underlying;
|
|
o
|
the time remaining to the maturity of the notes;
|
|
o
|
trends of supply and demand for the commodities underlying
the Underlying
|
|
o
|
the volatility of, and correlation among, the prices
of the Index Constituents;
|
|
o
|
the composition of the Underlying;
|
|
o
|
interest rates and yields in the markets generally;
|
|
o
|
geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the Index Constituents or commodities markets generally;
|
|
o
|
supply and demand for the notes; and
|
|
o
|
our creditworthiness, including actual or anticipated
downgrades in our credit ratings.
|
During the term of the notes, it is possible that their
value may decline significantly due to the factors described above even if the level of the Underlying remains unchanged from the
Initial Level, 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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·
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TRADING AND OTHER TRANSACTIONS BY US
,
JPMORGAN CHASE
& CO
.
OR OUR OR ITS AFFILIATES IN THE COMMODITIES AND COMMODITY
DERIVATIVE MARKETS MAY IMPAIR THE VALUE OF THE NOTES
— We or our affiliates expect to hedge our exposure from the notes
by entering into commodity 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 prices of the Index Constituents and/or the level 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 commodity prices. 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 level 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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|
·
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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 LEVEL 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 level 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 will also
be responsible for determining whether a Commodity Hedging Disruption Event and/or a market disruption event has occurred. Any
determination by the calculation agent could adversely affect the return on the notes.
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 level of the Underlying
and, as a result, could decrease the amount you may receive on the notes at maturity.
Historical Information
The following graph sets forth the historical performance of
the Bloomberg Commodity Index
SM
based on its daily closing levels from February 2, 2008 through February 2, 2018. The
closing level of the Underlying on February 2, 2018 was 89.1213. The actual Initial Level will be determined on the Trade Date.
We obtained the historical closing levels of the Underlying below from Bloomberg L.P. and we have not participated in the preparation
of, or verified, such information.
The historical closing levels of the Underlying should not
be taken as an indication of future performance and no assurance can be given as to the closing level 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 investment
.
Supplemental Plan of Distribution
JPMorgan Chase Bank, N.A. and 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 that will not exceed $15.00
per $1,000 Face Amount of notes, but will forgo any fees for sales to certain fiduciary accounts. See “Plan of Distribution
(Conflicts of Interest)” in the accompanying product supplement.
Settlement
We expect to deliver the notes against payment for the notes
on the Settlement Date indicated above, which is expected to be a day that is greater than two business days following the Trade
Date. Under Rule 15c6–1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally will
be required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, if the Settlement
Date is more than two business days after the Trade Date, purchasers who wish to transact in the notes more than two business days
prior to the Settlement Date will be required to specify alternative settlement arrangements to prevent a failed settlement.
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