Pricing
Supplement
To product supplement B dated July 31
,
2015
,
prospectus supplement dated July 31
,
2015
and
prospectus dated April 27
,
2016
|
Pricing Supplement No
.
3031B
Registration Statement No
.
333–206013
Rule 424
(
b
)(
2
)
|
Deutsche Bank
|
|
Structured
Investments
|
Deutsche Bank AG
$2,600,000 Knock
-
Out Notes Linked to the CAC 40
®
Index due August 7, 2019
|
General
|
·
|
The notes are designed for investors who seek a return
at maturity of 1.46 times the potential positive performance (if any) of the CAC 40
®
Index (the
“
Underlying
”
).
If the Final Level is less than the Initial Level but greater than or equal to the Knock-Out Level (75.00% of the Initial Level),
for each $1,000 Face Amount of notes, investors will receive at maturity the Face Amount. However, if the Final Level is less
than the Knock-Out Level, a Knock-Out Event occurs and, 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 Level is less than the Initial Level. The notes do not pay any coupons or dividends
and investors should be willing to lose a significant portion or all of their investment if a Knock-Out Event occurs. Any payment
on the notes is subject to the credit of the Issuer.
|
|
·
|
Senior unsecured obligations of Deutsche Bank AG due
August 7, 2019
|
|
·
|
Minimum purchase of $10,000. Minimum denominations of
$1,000 (the
“
Face Amount
”
)
and integral multiples thereof.
|
|
·
|
The notes priced on February 2, 2018 (the
“
Trade
Date
”
) and are expected to settle on February 7, 2018
(the
“
Settlement Date
”
).
|
Key Terms
Issuer:
|
Deutsche Bank AG, London Branch
|
Underlying:
|
CAC 40
®
Index (Ticker: CAC)
|
Issue Price:
|
100% of the Face Amount
|
Upside Leverage Factor:
|
1.46
|
Knock-Out Event:
|
A Knock-Out Event occurs if the Final Level is less than the Knock-Out Level.
|
Knock-Out Level:
|
4,023.74, equal to 75.00% of the Initial Level.
|
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:
|
|
$1,000 + ($1,000 x Underlying Return x Upside Leverage Factor)
|
|
·
If the Final Level is
less than or equal to
the Initial Level but a Knock
-
Out Event
has not
occurred
(
meaning the Final Level is greater than or equal to the Knock-Out Level
)
,
you will receive a cash payment at maturity equal to the Face Amount per $1,000 Face Amount of notes.
|
|
·
If a Knock-Out Event
has
occurred
(
meaning the Final Level is less than the Knock-Out Level
)
,
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 a Knock
-
Out Event has occurred
,
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 Level is less than the Initial Level
.
In this circumstance
,
you will lose a significant portion 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 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 $975.60 per $1
,
000
Face Amount of notes
,
which is less than the Issue Price
.
Please see
“
Issuer
’
s
Estimated Value of the Notes
”
on page 3 of this pricing supplement
for additional information
.
By acquiring the notes
,
you will be bound by and deemed irrevocably to consent to the imposition of any Resolution Measure
(
as
defined below
)
by the competent resolution authority
,
which may include the write down of all
,
or a portion
,
of any payment on the notes or the conversion of the notes into ordinary shares or other instruments of ownership
.
If any Resolution Measure becomes applicable to us
,
you
may lose some or all of your investment in the notes
.
Please see
“
Resolution Measures and Deemed Agreement
”
on page 4 of this pricing supplement for more information
.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the notes or passed upon the accuracy or the adequacy of this pricing supplement
or the accompanying product supplement, prospectus supplement or prospectus. Any representation to the contrary is a criminal offense.
|
Price to Public
|
Fees
(1)
|
Proceeds to Issuer
|
Per Note
|
$1,000.00
|
$12.50
|
$987.50
|
Total
|
$2,600,000.00
|
$32,500.00
|
$2,567,500.00
|
|
(1)
|
JPMorgan Chase
Bank, N.A. and J.P. Morgan Securities LLC, which we refer to as JPMS LLC, or one of its affiliates will act as placement agents
for the notes. The placement agents will receive a fee from the Issuer of $12.50 per $1,000 Face Amount of notes.
|
Please see “Supplemental
Plan of Distribution” in this pricing supplement for more information about fees.
The notes are not deposits
or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other U
.
S
.
or foreign governmental agency or instrumentality
.
JPMorgan
Placement Agent
February
2, 2018
|
(
Key Terms continued from previous page
)
|
|
|
Initial Level:
|
5,364.98, equal to the closing level of the Underlying on the Trade Date
|
Final Level:
|
The arithmetic average of the closing levels of the Underlying on each of the five Averaging Dates
|
Trade Date:
|
February 2, 2018
|
Settlement Date:
|
February 7, 2018
|
Averaging Dates
1
:
|
July 29, 2019, July 30, 2019, July 31, 2019, August 1, 2019 and August 2, 2019
|
Maturity Date
1
:
|
August 7, 2019
|
Listing:
|
The notes will not be listed on any securities exchange.
|
CUSIP / ISIN:
|
25155MJD4 / US25155MJD48
|
|
1
|
Subject to adjustment as described under “Description
of Securities — Adjustments to Valuation Dates and Payment Dates” in the accompanying product supplement.
|
Issuer
’
s
Estimated Value of the Notes
The Issuer’s estimated value
of the notes is equal to the sum of our valuations of the following two components of the notes: (i) a bond and (ii) an embedded
derivative(s). The value of the bond component of the notes is calculated based on the present value of the stream of cash payments
associated with a conventional bond with a principal amount equal to the Face Amount of notes, discounted at an internal funding
rate, which is determined primarily based on our market-based yield curve, adjusted to account for our funding needs and objectives
for the period matching the term of the notes. The internal funding rate is typically lower than the rate we would pay when we
issue conventional debt securities on equivalent terms. This difference in funding rate, as well as the agent’s commissions,
if any, and the estimated cost of hedging our obligations under the notes, reduces the economic terms of the notes to you and
is expected to adversely affect the price at which you may be able to sell the notes in any secondary market. The value of the
embedded derivative(s) is calculated based on our internal pricing models using relevant parameter inputs such as expected interest
and dividend rates and mid-market levels of price and volatility of the assets underlying the notes or any futures, options or
swaps related to such underlying assets. Our internal pricing models are proprietary and rely in part on certain assumptions about
future events, which may prove to be incorrect.
The Issuer’s estimated value
of the notes on the Trade Date (as disclosed on the cover of this pricing supplement) is less than the Issue Price of the notes.
The difference between the Issue Price and the Issuer’s estimated value of the notes on the Trade Date is due to the inclusion
in the Issue Price of the agent’s commissions, if any, and the cost of hedging our obligations under the notes through one
or more of our affiliates. Such hedging cost includes our or our affiliates’ expected cost of providing such hedge, as well
as the profit we or our affiliates expect to realize in consideration for assuming the risks inherent in providing such hedge.
The Issuer’s estimated value
of the notes on the Trade Date does not represent the price at which we or any of our affiliates would be willing to purchase
your notes in the secondary market at any time. Assuming no changes in market conditions or our creditworthiness and other relevant
factors, the price, if any, at which we or our affiliates would be willing to purchase the notes from you in secondary market
transactions, if at all, would generally be lower than both the Issue Price and the Issuer’s estimated value of the notes
on the Trade Date. Our purchase price, if any, in secondary market transactions will be based on the estimated value of the notes
determined by reference to (i) the then-prevailing internal funding rate (adjusted by a spread) or another appropriate measure
of our cost of funds and (ii) our pricing models at that time, less a bid spread determined after taking into account the size
of the repurchase, the nature of the assets underlying the notes and then-prevailing market conditions. The price we report to
financial reporting services and to distributors of our notes for use on customer account statements would generally be determined
on the same basis. However, during the period of approximately six months beginning from the Trade Date, we or our affiliates
may, in our sole discretion, increase the purchase price determined as described above by an amount equal to the declining differential
between the Issue Price and the Issuer’s estimated value of the notes on the Trade Date, prorated over such period on a
straight-line basis, for transactions that are individually and in the aggregate of the expected size for ordinary secondary market
repurchases.
Resolution
Measures and Deemed Agreement
On May 15, 2014, the European
Parliament and the Council of the European Union adopted a directive establishing a framework for the recovery and resolution
of credit institutions and investment firms (commonly referred to as the
“
Bank
Recovery and Resolution Directive
”
). The Bank Recovery
and Resolution Directive required each member state of the European Union to adopt and publish by December 31, 2014 the laws,
regulations and administrative provisions necessary to comply with the Bank Recovery and Resolution Directive. Germany adopted
the Recovery and Resolution Act (
Sanierungs
-
und Abwicklungsgesetz
, or the
“
Resolution
Act
”
), which became effective on January 1, 2015. The
Bank Recovery and Resolution Directive and the Resolution Act provided national resolution authorities with a set of resolution
powers to intervene in the event that a bank is failing or likely to fail and certain other conditions are met. From January 1,
2016, the power to initiate resolution measures applicable to significant banking groups (such as Deutsche Bank Group) in the
European Banking Union has been transferred to the European Single Resolution Board which, based on the European Union regulation
establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the
framework of a Single Resolution Mechanism and a Single Resolution Fund (the
“
SRM
Regulation
”
), works in close cooperation with the European
Central Bank, the European Commission and the national resolution authorities. Pursuant to the SRM Regulation, the Resolution
Act and other applicable rules and regulations, the notes may be subject to any Resolution Measure by the competent resolution
authority if we become, or are deemed by the competent supervisory authority to have become, “non-viable” (as defined
under the then applicable law) and are unable to continue our regulated banking activities without a Resolution Measure becoming
applicable to us. By acquiring the notes, you will be bound by and deemed irrevocably to consent to the provisions set forth in
the accompanying prospectus, which we have summarized below.
By acquiring the notes, you will
be bound by and deemed irrevocably to consent to the imposition of any Resolution Measure by the competent resolution authority.
Under the relevant resolution laws and regulations as applicable to us from time to time, the notes may be subject to the powers
exercised by the competent resolution authority to: (i) write down, including to zero, any payment (or delivery obligations) on
the notes; (ii) convert the notes into ordinary shares of (a) the Issuer, (b) any group entity or (c) any bridge bank or other
instruments of ownership of such entities qualifying as common equity tier 1 capital; and/or (iii) apply any other resolution
measure including, but not limited to, any transfer of the notes to another entity, the amendment, modification or variation of
the terms and conditions of the notes or the cancellation of the notes. We refer to each of these measures as a
“
Resolution
Measure
.
”
A “group entity” refers to an entity
that is included in the corporate group subject to a Resolution Measure. A “bridge bank” refers to a newly chartered
German bank that would receive some or all of our assets, liabilities and material contracts, including those attributable to
our branches and subsidiaries, in a resolution proceeding.
Furthermore, by acquiring the
notes, you:
|
·
|
are
deemed irrevocably to have agreed, and you will agree: (i) to be bound by, to acknowledge
and to accept any Resolution Measure and any amendment, modification or variation of
the terms and conditions of the notes to give effect to any Resolution Measure; (ii)
that you will have no claim or other right against us arising out of any Resolution Measure;
and (iii) that the imposition of any Resolution Measure will not constitute a default
or an event of default under the notes, under the senior indenture dated November 22,
2006 among us, Law Debenture Trust Company of New York, as trustee, and Deutsche Bank
Trust Company Americas, as issuing agent, paying agent, authenticating agent and registrar,
as amended and supplemented from time to time (the
“
Indenture
”
),
or for the purposes of, but only to the fullest extent permitted by, the Trust Indenture
Act of 1939, as amended (the
“
Trust
Indenture Act
”
);
|
|
·
|
waive,
to the fullest extent permitted by the Trust Indenture Act and applicable law, any and
all claims against the trustee and the paying agent, the issuing agent and the registrar
(each, an
“
indenture
agent
”
) for,
agree not to initiate a suit against the trustee or the indenture agents in respect of,
and agree that the trustee and the indenture agents will not be liable for, any action
that the trustee or the indenture agents take, or abstain from taking, in either case
in accordance with the imposition of a Resolution Measure by the competent resolution
authority with respect to the notes; and
|
|
·
|
will
be deemed irrevocably to have: (i) consented to the imposition of any Resolution Measure
as it may be imposed without any prior notice by the competent resolution authority of
its decision to exercise such power with respect to the notes; (ii) authorized, directed
and requested The Depository Trust Company (
“
DTC
”
)
and any direct participant in DTC or other intermediary through which you hold such notes
to take any and all necessary action, if required, to implement the imposition of any
Resolution Measure with respect to the notes as it may be imposed, without any further
action or direction on your part or on the part of the trustee or the indenture agents;
and (iii) acknowledged and accepted that the Resolution Measure provisions described
herein and in the “Resolution Measures” section of the accompanying prospectus
are exhaustive on the matters described herein and therein to the exclusion of any other
agreements,
|
arrangements or understandings between you and the Issuer relating to the
terms and conditions of the notes.
This is only a summary
,
for more information please see the accompanying prospectus dated April 27
,
2016
,
including the risk factors
beginning on page 13 of such prospectus
.
Additional
Terms Specific to the Notes
You should read this pricing supplement
together with 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 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):
|
·
|
Product
supplement B dated July 31, 2015:
|
https://www.sec.gov/Archives/edgar/data/1159508/000095010315006059/crt_dp58181-424b2.pdf
|
·
|
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 Upside Leverage
Factor of 1.46 and the Knock-Out Level of 75.00% of the Initial Level. The actual Initial Level and Knock-Out Level are set forth
on the cover of this pricing supplement. The table and hypothetical examples set forth below are for illustrative purposes only.
The actual return applicable to a purchaser of the notes will be based on whether or not a Knock-Out Event occurs, which will
depend on whether the Final Level of the Underlying is less than the Knock-Out Level, and the Underlying Return, which will be
based on the performance of the Underlying as measured on the Averaging Dates. The numbers appearing in the table and examples
below may have been rounded for ease of analysis. You should consider carefully whether the notes are suitable to your investment
goals.
Hypothetical
Underlying
Return
(%)
|
Hypothetical
Return on the Notes
(%)
|
Hypothetical
Payment at Maturity
($)
|
100.00%
|
146.00%
|
$2,460.00
|
90.00%
|
131.40%
|
$2,314.00
|
80.00%
|
116.80%
|
$2,168.00
|
70.00%
|
102.20%
|
$2,022.00
|
60.00%
|
87.60%
|
$1,876.00
|
50.00%
|
73.00%
|
$1,730.00
|
40.00%
|
58.40%
|
$1,584.00
|
30.00%
|
43.80%
|
$1,438.00
|
20.00%
|
29.20%
|
$1,292.00
|
15.00%
|
21.90%
|
$1,219.00
|
10.00%
|
14.60%
|
$1,146.00
|
5.00%
|
7.30%
|
$1,073.00
|
0
.
00%
|
0
.
00%
|
$1
,
000
.
00
|
-5.00%
|
0.00%
|
$1,000.00
|
-10.00%
|
0.00%
|
$1,000.00
|
-15.00%
|
0.00%
|
$1,000.00
|
-20.00%
|
0.00%
|
$1,000.00
|
-25.00%
|
0
.
00%
|
$1
,
000
.
00
|
-26.00%
|
-26.00%
|
$740.00
|
-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 Level is greater than the Initial Level
,
resulting
in an Underlying Return of 40
.
00%
.
Because the Final Level is greater than the Initial Level, the investor receives a Payment at Maturity of $1,584.00
per $1,000 Face Amount of notes, calculated as follows:
$1,000 + ($1,000
x Underlying Return x Upside Leverage Factor)
$1,000 + ($1,000
x 40.00% x 1.46) = $1,584.00
Example 2
:
The Final Level is less than the Initial Level but a Knock
-
Out
Event has not occurred
,
resulting in an Underlying Return of
-
10
.
00%
.
Because the Final Level is greater than or equal to the Knock-Out Level, a Knock-Out Event has not occurred. Because
the Final Level is less than the Initial Level but a Knock-Out Event has not occurred, the investor receives a Payment at Maturity
of $1,000.00 per $1,000 Face Amount of notes.
Example 3
:
A Knock
-
Out Event has occurred and the Underlying Return
equals
-
50
.
00%
.
Because the Final Level is less than the Knock-Out Level, a Knock-Out Event has occurred. Because a Knock-Out Event
has occurred and the Underlying Return is -50.00%, the investor receives a Payment at Maturity of $500.00 per $1,000 Face Amount
of notes, calculated as follows:
$1,000 + ($1,000
x Underlying Return)
$1,000 + ($1,000
x -50.00%) = $500.00
Selected Purchase
Considerations
|
·
|
UNCAPPED
APPRECIATION POTENTIAL
— The notes provide the opportunity to enhance returns
by
multiplying
a positive Underlying Return by the Upside Leverage Factor of 1.46.
Any payment on the notes is subject to our ability to satisfy our obligations as they
become due
.
|
|
·
|
LIMITED
PROTECTION AGAINST LOSS
— If the Final Level is less than the Initial Level
but a Knock-Out Event has not occurred, for each $1,000 Face Amount of notes, you will
receive at maturity the Face Amount. However, if a Knock-Out Event has occurred, 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 Level is less than the Initial Level. In this circumstance, you will
lose a significant portion or all of your investment in the notes.
|
|
·
|
RETURN
LINKED TO THE PERFORMANCE OF THE CAC 40
®
Index
—
The CAC 40
®
Index is a free float market capitalization weighted index that represents the
performance of the 40 largest and most actively traded shares listed on the Euronext
Paris. The CAC 40
®
Index is calculated, maintained and published by Euronext
N.V. The CAC 40
®
Index is calculated in euros and is reported by Bloomberg
L.P. under the ticker symbol “CAC.”
This is only a summary of the CAC
40
®
Index
.
For more information on the CAC 40
®
Index
,
including information concerning its composition
,
calculation
methodology and adjustment policy
,
please see
“
The CAC 40
®
Index
”
in this pricing supplement
|
|
·
|
TAX
CONSEQUENCES
— In the opinion of our special tax counsel, Davis Polk &
Wardwell LLP, which is based on prevailing market conditions, it is more likely than
not that the notes will be treated for U.S. federal income tax purposes as prepaid financial
contracts that are not debt
.
Generally, if this treatment is respected, (i) you
should not recognize taxable income or loss prior to the maturity or other taxable disposition
of your notes and (ii) 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.
|
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, which very generally can operate to recharacterize certain long-term
capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition
rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
and adversely affect the tax consequences of an investment in the 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, as well as to the payment of gross proceeds of a taxable disposition, including redemption
at maturity, of a note. 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.
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, a recent IRS notice
excludes from the scope of Section 871(m) instruments issued prior to January 1, 2019 that do not have a delta of one with respect
to underlying securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an “
Underlying
Security
”). Based on certain determinations made by us, our special tax counsel is of the opinion that Section 871(m)
should not apply to the notes with regard to non-U.S. holders. Our determination is not binding on the IRS, and the IRS may disagree
with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including
whether you enter into other transactions with respect to an Underlying Security. You should consult your tax adviser regarding
the potential application of Section 871(m) to the notes.
You should review carefully
the section of the accompanying product supplement entitled “U.S. Federal Income Tax Consequences.” The preceding
discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel regarding the
material U.S. federal income tax consequences of owning and disposing of the notes.
Under current law, the
United Kingdom will not impose withholding tax on payments made with respect to the notes.
For a discussion of
certain German tax considerations relating to the notes, you should refer to the section in the accompanying prospectus supplement
entitled “Taxation by Germany of Non-Resident Holders.”
You should consult
your tax adviser regarding the U.S. federal tax consequences of an investment in the notes (including possible alternative treatments
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 stocks 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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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 based on whether or
not a Knock-Out Event occurs and the Underlying Return. If the Final Level is less than
the Knock-Out Level, a Knock-Out Event occurs and your investment will be fully exposed
to any decline in the level of the Underlying as measured on the Averaging Dates. If
a Knock-Out Event has occurred, 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 Level is less than the Initial
Level. In this circumstance, you will lose a significant portion 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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·
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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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·
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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
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notes. The competent resolution authority may apply Resolution
Measures individually or in any combination.
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
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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 STOCKS COMPOSING THE UNDERLYING
—
The return on the notes may not reflect the return you would have realized if you had
directly invested in the stocks composing the Underlying. For instance, your return on
the notes is based on whether or not a Knock-Out Event occurs, in addition to the performance
of 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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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 stocks composing
the Underlying would have.
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The
Underlying Reflects the Price Return of the Stocks Composing the Underlying
,
Not Their Total Return Including All Dividends and Other Distributions
— The Underlying reflects the changes in the market
prices of the stocks composing the Underlying. The Underlying is not, however, a “total
return” index, which, in addition to reflecting those price returns, would also
reflect the reinvestment of all dividends and other distributions paid on the stocks
composing the Underlying.
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THERE
ARE RISKS ASSOCIATED WITH INVESTMENTS LINKED TO THE VALUES OF EQUITY SECURITIES ISSUED
BY NON
-
U
.
S
.
COMPANIES
— The Underlying includes component stocks that are issued
by companies incorporated outside of the U.S. Because the component stocks also trade
outside the U.S., the notes are subject to the risks associated with non-U.S. securities
markets. Generally, non-U.S. securities markets may be less liquid and more volatile
than U.S. securities markets and market developments may affect non-U.S. securities markets
differently than U.S. securities markets, which may adversely affect the level of the
Underlying and, thus, the value of your notes. Furthermore, there are risks associated
with investments linked to the values of equity securities issued by non-U.S. companies.
There is generally less publicly available information about non-U.S. companies than
about those U.S. companies that are subject to the reporting requirements of the SEC,
and non-U.S. companies are subject to accounting, auditing and financial reporting standards
and requirements that differ from those applicable to U.S. reporting companies. In addition,
the prices of equity securities issued by non-U.S. companies may be adversely affected
by political, economic, financial and social factors that may be unique to the particular
countries in which the non-U.S. companies are incorporated. These factors include the
possibility of recent or future changes in a non-U.S. government’s economic and
fiscal policies (including any direct or indirect intervention to stabilize the economy
and/or securities market of the country of such non-U.S. government), the presence, and
extent, of cross shareholdings in non-U.S. companies, the possible imposition of, or
changes in, currency exchange laws or other non-U.S. laws or restrictions applicable
to non-U.S. companies or investments in non-U.S. securities and the possibility of fluctuations
in the rate of exchange between currencies. Moreover, certain aspects of a particular
non-U.S. economy may differ favorably or unfavorably from the U.S. economy in important
respects, such as growth of gross national product, rate of inflation, capital reinvestment,
resources and self-sufficiency. Specifically, the stocks included in the Underlying are
issued by companies located in countries within the Eurozone, some of which are and have
been experiencing economic stress.
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THE
PERFORMANCE OF THE UNDERLYING WILL NOT BE ADJUSTED FOR CHANGES IN THE EURO RELATIVE TO
THE U
.
S
.
DOLLAR
— The Underlying is composed of stocks denominated in euro. Because
the level of the Underlying is also calculated in euro (and not in U.S. dollars), the
performance of the Underlying will not be adjusted for exchange rate fluctuations between
the U.S. dollar and the euro. Therefore, if the euro strengthens or weakens relative
to the U.S. dollar over the term of the notes, you will not receive any additional payment
or incur any reduction in your return on the notes.
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The
Sponsor of the Underlying May Adjust the Underlying in Ways That Affect the Level of
the Underlying and Has No Obligation to Consider Your Interests
—
The sponsor of the Underlying (the
“
Index
Sponsor
”
) is
responsible for calculating and maintaining the Underlying. The Index Sponsor can add,
delete or substitute the components of the Underlying or make other methodological changes
that could change the level of the Underlying. You should realize that the changing of
such Underlying components may affect the Underlying, as a newly added component may
perform significantly better or worse than the component it replaces. Additionally, the
Index Sponsor may alter, discontinue or suspend calculation or dissemination of the Underlying.
Any of these actions could adversely affect the value of, and your return on, the notes.
The Index Sponsor has no obligation to consider your interests in calculating or revising
the Underlying.
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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 six months beginning from the Trade Date,
we or our affiliates may, in our sole discretion, increase the purchase price determined
as described above by an amount equal to the declining differential between the Issue
Price and the Issuer’s estimated value of the notes on the Trade Date, prorated
over such period on a straight-line basis, for transactions that are individually and
in the aggregate of the expected size for ordinary secondary market repurchases.
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In addition to the factors
discussed above, the value of the notes and our purchase price in secondary market transactions after the Trade Date, if any,
will vary based on many economic and market factors, including our creditworthiness, and cannot be predicted with accuracy. These
changes may adversely affect the value of your notes, including the price you may receive in any secondary market transactions.
Any sale prior to the Maturity Date could result in a substantial loss to you. The notes are not designed to be short-term trading
instruments. Accordingly, you should be able and willing to hold your notes to maturity.
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The
Notes Will Not Be Listed and There Will Likely Be Limited Liquidity
—
The notes will not be listed on any securities exchange. There may be little or no secondary
market for the notes. We or our affiliates intend to act as market makers for the notes
but are not required to do so and may cease such market making activities at any time.
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
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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:
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o
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the
expected volatility of the Underlying;
|
|
o
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the
time remaining to the maturity of the notes;
|
|
o
|
the
market prices and dividend rates of the stocks composing the Underlying;
|
|
o
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the
composition of the Underlying;
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|
o
|
interest
rates and yields in the markets generally;
|
|
o
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geopolitical
conditions and economic, financial, political, regulatory or judicial events that affect
the Underlying or the markets generally;
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o
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supply
and demand for the notes; and
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o
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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 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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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 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 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 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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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
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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 market disruption event has occurred as well as, in some circumstances,
the prices or levels related to the Underlying that affect whether a Knock-Out 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. In addition, 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 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.
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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 CAC 40
®
Index based on its daily closing levels from February 2, 2013 through
February 2, 2018. The closing level of the Underlying on February 2, 2018 was 5,364.98. The graph below also indicates by a broken
line the Knock-Out Level equal to 75.00% of the closing level of the Underlying on February 2, 2018. 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, acting as placement agents for the notes, will receive a fee from the Issuer of $12.50 per
$1,000 Face Amount of notes. 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.
Validity
of the Notes
In the
opinion of Davis Polk & Wardwell LLP, as special United States products counsel to the Issuer, when the notes offered by this
pricing supplement have been executed and issued by the Issuer and authenticated by the authenticating agent, acting on behalf
of the trustee pursuant to the Indenture, and delivered against payment as contemplated herein, such notes will be valid and binding
obligations of the Issuer, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability
(including, without limitation, concepts of good faith, fair dealing and the lack of bad faith) and possible judicial or regulatory
actions giving effect to governmental actions or foreign laws affecting creditors’ rights,
provided
that such counsel
expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on
the conclusions expressed above. This opinion is given as of the date hereof and is limited to the laws of the State of New York.
Insofar as this opinion involves matters governed by German law, Davis Polk & Wardwell LLP has relied, without independent
investigation, on the opinion of Group Legal Services of Deutsche Bank AG, dated as of January 1, 2016, filed as an exhibit to
the opinion of Davis Polk & Wardwell LLP, and this opinion is subject to the same assumptions, qualifications and limitations
with respect to such matters as are contained in such opinion of Group Legal Services of Deutsche Bank AG. In addition, this opinion
is subject to customary assumptions about the trustee’s authorization, execution and delivery of the Indenture and the authentication
of the notes by the authenticating agent and the validity, binding nature and enforceability of the Indenture with respect to
the trustee, all as stated in the opinion of Davis Polk & Wardwell LLP dated as of January 1, 2016, which has been filed by
the Issuer on Form 6–K dated January 4, 2016.
The
CAC 40
®
Index
We
have derived all information contained in this pricing supplement regarding the
CAC
40
®
Index (the “
CAC Index
”)
, including,
without limitation, information concerning its make-up, method of calculation and changes in its components, from publicly available
information. We have not participated in the preparation of, or verified, such information. Such information reflects the policies
of, and is subject to change by,
Euronext N.V. (“
Euronext
”),
the sponsor of the CAC Index. The CAC Index is calculated
, maintained
and published by Euronext. Euronext has no obligation to continue to publish, and may discontinue or suspend the publication of,
the CAC Index at any time.
The CAC Index
is calculated in euros and is reported by Bloomberg L.P. under the ticker symbol “CAC.”
The
CAC Index is a free float market capitalization weighted index that reflects the performance of the 40 largest and most actively
traded shares listed on the Euronext Paris
. Euronext is responsible for the
day-to-day management of the CAC Index and is also responsible for decisions regarding the interpreting the rules governing the
CAC Index. The Conseil Scientifique acts as an independent supervisor of the CAC Index and is responsible for monitoring the selection
of constituents for the CAC Index and ensuring that the index offers a reliable and representative view of the market. The base
date for the CAC Index is December 31, 1987 and the base value of the CAC Index was 1,000.
Index
Eligibility
The universe
of eligible constituents for the CAC Index is defined as companies that have been admitted for listing on Euronext Paris’
regulated market. The CAC Index consists of companies with Euronext Paris as their market of reference, as well as companies with
a market of reference other than Euronext Paris that may qualify for continued inclusion based on:
|
1)
|
the significant presence (relative
to the size of the group) of business assets and/or head-office activities in France,
and/or employment of significant numbers of staff in France;
|
|
2)
|
significant trading volumes on
related derivative instruments in Paris; or
|
|
3)
|
the company’s inclusion
in the universe of eligible constituents for the CAC Index on January 1, 2014, in so
far as criteria (1) and/or (2) above are still applicable.
|
If a company
changes its market of reference to a market of reference other than Euronext Paris as a result of a merger or similar situation,
such company will continue to be eligible for inclusion in the CAC Index. At each annual review, Conseil Scientifique retains
the right to decide on the eligibility of the new entity based on criteria (1) and/or (2) above. If a company changes its market
of reference for other reasons, such company may become ineligible for inclusion in the CAC Index at the next annual review, regardless
of considerations based on criteria (1) and/or (2) above.
In addition,
the shares of the following companies are
excluded
from the CAC Index:
|
·
|
holding
companies of companies admitted to listing on Euronext Paris;
|
|
·
|
companies
whose shares are allocated to the recovery box or penalty bench;
|
|
·
|
shares
quoted in currencies other than euro;
|
|
·
|
shares
not traded continuously;
|
|
·
|
warrants,
rights and other derivative securities.
|
The constituents
of the CAC Index are not required to fulfil a minimum free float criterion.
Index
Composition and Reviews
The
general aim of each quarterly and annual composition and review of the CAC Index is to ensure that the selection and weighting
of the constituents of the CAC Index continues to reflect the underlying market or market segment it represents.
Ranking
Eligible
companies are selected for inclusion in the CAC Index based on a combination of two rankings:
|
·
|
the
value of regulated turnover (the value of turnover traded via the Euronext electronic
order book as well as the value of turnover from off-exchange transactions within the
scope of Euronext’s regulatory environment, such as block trades and the like)
observed over a 12-month period; and
|
|
·
|
the
free float adjusted market capitalization on the Review Cut-Off Date (as defined below).
|
As only one
listing – the most active one – is permitted per company, the listing representing the company’s ordinary shares
is generally used.
Liquidity
Screening
At each annual
review, the shares of a company must have a free float adjusted annual trading velocity of at least 20%. In other words, their
regulated trading volume should represent at least 20% of the free float adjusted total number of shares issued by the company
listed on Euronext Paris, calculated over the course of the full 12-month period relevant for the review. Velocity is calculated
on a daily basis by
dividing
the number of shares traded by the number of shares listed. These daily figures are added
up to calculate the annual velocity. At quarterly reviews, the minimum free float adjusted velocity is 30%, while for current
constituents a minimum of 10% is required.
The free
float percentage that is used in the velocity calculation is based on outstanding capital
less
shareholdings exceeding
5% (except where such interests are held by collective investment schemes, mutual funds, pension funds, certain insiders, government
entities or the company itself) on the Review Cut-Off Date, rounded up to the nearest 5% multiple. However, the free float percentage
used in the velocity calculation shall always be at least 25%.
In order
to preserve a tradable constitution of the CAC Index, Euronext performs an extensive liquidity analysis. This analysis mainly
consists of the trading volume relative to the available share capital observed over the preceding year as well as the last quarter.
In case of a demerger, the velocity prior to such event is assumed to apply for all resulting entities. In case of a merger, Euronext
will take into account the velocity of the merging entities prior to such event as well as the velocity of the merged entity in
deciding whether the company meets the free float velocity threshold.
Quarterly and Annual Review
The CAC Index
is designed to reflect the general trends in the trading of shares listed on Euronext Paris. Changes in the constituents of the
CAC Index are made on a quarterly basis and reflect the changes in size and turnover of the companies eligible for inclusion in
the CAC Index. Euronext and Conseil Scientifique may exceptionally decide to deviate from the outcome of the rankings if this
is in the interest of the users of the CAC Index. Guiding principles for such a decision are tradability of the CAC Index, minimizing
index turnover and representativeness.
The cut-off
date for each periodic review of the CAC Index is after the market close of the last Friday of August (for each annual review),
February, May and November (for each quarterly review) (the
“
Review
Cut
-
Off Date
”
).
The date on which, after the market close, the changes relating to a periodical review are being effectuated in the CAC Index
portfolio is after the market close of the third Friday of September (for each annual review), March, June and December (for each
quarterly review) (the
“
Review Effective Date
”
).
At each peroidic
review, Euronext will propose to the Conseil Scientifique selections and changes to the CAC Index based on a combination of the
rankings on free float adjusted market capitalization and turnover. The 35 highest ranking companies are selected for inclusion
in the CAC Index. A buffer zone, where current constituents have priority over companies that currently do not form part of the
CAC Index, consists of the companies ranked 36
th
through 45
th
.
|
·
|
At
each annual review, the number of shares included in the CAC Index will be updated with
the number of shares listed on the Review Cut-Off Date, taking into account adjustments
due to corporate actions (as described below). All free float factors are updated at
the annual review, with the free float rounded up to the next 5% bracket and determined
on the basis of the information relevant at the Review Cut-Off Date.
|
A maximum weighting
of 15% is applied to each constituent of the CAC Index at the annual review. The assessment and new capping coefficients are based
on the date on which, after the close, the full details are announced regarding the composition of the CAC Index that will come
into effect after the
Review Effective Date. This includes the numbers of shares, free float factors and capping factors of all
companies included in the new CAC Index portfolio (the
“
Review
Composition Announcement Date
”
). Capping factors are
not updated at quarterly reviews for companies that continue to be included in the CAC Index.
|
·
|
At
each quarterly review, both the number of shares included in the CAC Index and the free
float factor will be updated if (i) the free float factor on the Review Cut-Off date
deviates by 10% or more from the free float factor currently applied in the CAC Index
(2 or more bands) and/or (ii) the number of shares listed on the Review Cut-Off Date
deviates by more than 20% from the current number of shares included in the CAC Index.
In case of an update, the new numbers of shares are based on the number of shares listed
on the Review Cut-Off Date, taking into account adjustments due to corporate actions
(as described below). The new free float factors are determined on the basis of the information
relevant at the Review Cut-Off Date.
|
Euronext may decide
not to update the number of shares at a quarterly review for companies after a merger or similar situation. In addition, in the
case where the free float adjusted number of shares changes for companies with a capping factor less than 1, Euronext will recalculate
the capping factor such that the capped free float adjusted number of shares remains unchanged at the quarterly review.
For companies, if any,
to be added to the CAC Index at a quarterly review, the weightings in terms of number of shares in the CAC Index and free float
are determined based on the Review Cut-Off Date, while the capping factor is determined based on the Review Composition Announcement
Date. The weight of companies that are added is subject to a maximum of 15%.
In the event
of a takeover or other exceptional circumstances, Euronext has the right to revise the selection from the time the announcement
is published up to the Review Composition Announcement Date.
Euronext
will not change the outcome of the review for events that happen after the Review Composition Announcement Date. Corporate actions
happening before the Review Effective Date will lead to an update of the new composition that is in line with the treatment described
below.
Index
Calculation
The CAC Index
is calculated on a price return basis. The calculation is based on the current free float adjusted market capitalization (measured
based on outstanding capital
less
shareholdings exceeding 5%, except where such interests are held by collective investment
schemes, mutual funds, pension funds, certain insiders, government entities or the company itself)
divided by
the divisor.
The free float percentages are rounded up to 5% bands. The divisor was determined on the initial capitalization base of the CAC
Index and the base level. The divisor is adapted as a result of corporate actions and composition changes. The base currency of
the CAC Index is euro (
“
Base Currency
”
).
Share prices
that are quoted in other currencies than the Base Currency will be converted to the Base Currency using the last known exchange
rate observed on Reuters. Closing prices will be converted based on the most recent WM/Reuters spot rates, which are published
each business day around 17:00 CET.
The CAC Index
is calculated according to the below formula:
where:
t is
the time of calculation.
N is
the number of constituent equities in the CAC Index.
Q
i,t
is
the number of shares of equity
i
included in the CAC Index on day
t
.
F
i,t
is
the free float factor of equity
i
.
f
i,t
is
the capping factor of equity
i
.
C
i,t
is
the price of equity
i
on day
t
.
X
i,t
is
the current exchange rate on day
t
.
d
t
is the
divisor of the CAC Index on day
t
.
In the event
that part of the constituents of the CAC Index are reserved, suspended from trading or if technical problems prohibit normal trading,
values of the CAC Index will continue to be calculated and published. For those constituent stocks that are not available for
trading, the last known value will be used when determining values of the CAC Index.
Notwithstanding
the previous paragraph, Euronext always retains the right to delay the publication of the opening level of the CAC Index. Furthermore,
Euronext always retains the right to suspend the publication of the level of the CAC Index or to mark the level of the CAC Index
indicative if it believes that circumstances prevent the proper calculation of the CAC Index. If prices are cancelled, the CAC
Index will not be recalculated unless Euronext decides otherwise.
If, after the market opens, the
CAC Index remains in pre-opening during the entire trading session, the reference closing level of the CAC Index will be calculated
on the basis of the most recent traded prices, or the most recent reference price (possibly adjusted to account for corporate
actions, as described below).
Corporate
Actions
The CAC Index
may be adjusted in order to maintain continuity of the level and composition of the CAC Index. The underlying aim is that the
CAC Index continues to reflect as closely as possible the value of the underlying portfolio.
Adjustments
take place in reaction to events that occur with constituents in order to mitigate or eliminate the effect of that event on the
CAC Index.
Removal
of Constituents
A constituent
will be removed from the CAC Index if it has appeared that the liquid trading will be significantly affected due to a takeover,
merger, bankruptcy or has ceased to be a viable constituent as defined by the rules. The constituent in question will either be
removed or will be replaced by the acquiring company. If a company is removed from the CAC Index, the divisor will be adapted
to maintain the level of the CAC Index.
In the event
of a bid in cash, the target company will be removed from the CAC Index. In the event of a merger, acquisition or similar situation
where the bid is made in the form of shares, the target company will be replaced by the company taking over;
provided
that
this company complies with the requirements for inclusion in the CAC Index as described above. The removal or replacement will
take place after the close of the first (full) business day after the offer is declared unconditional or successful. The replacement
of the shares of the relevant constituent of the CAC Index by the shares of the company that continues to be traded will be executed
on the basis of the bid ratio.
In case of
a mixed bid of cash and shares, Euronext will treat the bid as a share bid if the share part amounts to at least 75% of the offer
price, on the day of the publication of the terms of the offer. The replacement of the shares of the relevant constituent of the
CAC Index by the shares of the company that continues to be traded will be executed on the basis of the bid ratio. The divisor
will be adapted only for the cash part of the offer price.
Euronext
reserves the right to apply a specific treatment in non-standard situations including, but not limited to:
|
·
|
competing
bids with differing closing dates or structures; and
|
|
·
|
offers
made without the intention to gain full control.
|
A separate
announcement detailing the specific treatment will be issued timely to the market.
If a constituent
of the CAC Index is suspended, Euronext will consider whether the constituent should be removed or not within five trading days.
If it is decided to maintain the constituent, a further reassessment date will be set. Euronext reserves the right to take action
before that date if new developments give reason to do so.
In case a
constituent of the CAC Index is removed following suspension, it will be removed from the CAC Index as soon as possible and on
a day announced by Euronext. The company will be removed from the CAC Index after the close of the markets, assuming a price of
zero unless Euronext sets a different price, where possible supported by an objective source.
If it has
been announced that a constituent of the CAC Index will be delisted from Euronext, it will be removed from the CAC Index as soon
as possible and on a day announced by Euronext. The company will be removed from the
CAC
Index based on either the last known price established during regular daytime trading or on a price determined by Euronext, whereby
the company may also be removed at a price of zero.
Removing
assuming a price of zero implies no divisor change because of the removal. If another price is set, the divisor will change based
on the removal of the value of that company from the CAC Index portfolio when applying that price.
In the event
that the trading in shares is suspended, the last known price established during regular daytime trading will be used.
Split
Up
/
Spin-Off
In the event
that a company included in the CAC Index is split up, the companies resulting from the split, including the original company where
appropriate, will continue to be included in the CAC Index;
provided
they still qualify as an eligible company in their
own right. The CAC Index may then temporarily consist of fewer, or more, than the standard number of constituents until the next
periodical review takes place.
For purposes
of the CAC Index, a split up is taken to mean a legal demerger, a spin-off or another situation which Euronext deems to be similar.
In case the
shareholder of the company which was originally included in the CAC Index does not automatically receive shares in a company which
is created as a result of the split up, this company is considered to be a newly listed company. The removal of any non-qualifying
company resulting from a split up will take place after the close of the first day of trading in the shares of that company. If
all companies resulting from the split are to be removed, the removal will take place at the close of the last trading day before
the split.
Dividends
The CAC Index
will be adjusted for dividends that are special. The following criteria will be applied to decide whether a dividend should be
considered a special dividend:
|
·
|
the
declaration by a company of a dividend additional to those dividends declared as part
of the company’s normal results and dividend reporting cycle (merely an adjustment
to the timing of the declaration of a company's expected dividend would
not
be
considered as a special dividend circumstance); or
|
|
·
|
the
identification of an element of a dividend paid in line with a company’s normal
results and dividend reporting cycle as an element that is unambiguously additional to
the company’s normal payment.
|
For the purpose
of clarification, no adjustment will be made for the following situations:
|
·
|
payment
of ordinary dividends, irrespective of how they are financed;
|
|
·
|
issue
of redeemable shares or any other entitlement in lieu of an ordinary dividend; or
|
|
·
|
unexpected
increase or decrease, resumption or cessation, or change in frequency to an ordinary
dividend.
|
The adjustment
of the CAC Index takes place by a reduction of the closing price of the share in question. Subsequently the divisor will be adapted
in order to maintain the level of the CAC Index. The adjustments will be based on gross amounts.
Rights
Issues and Other Rights
In the event
of a rights issue, the new shares will be included in the CAC Index on the ex-date of the rights issue and an adjusted closing
price will be applied as calculated by Euronext. The adjustment will be made based on the shares currently in the CAC Index. The
divisor will be adapted in such a way that the level of the CAC Index remains the same.
The new shares
are only added if (i) less than 0.4 share is issued for every share that is currently held and (ii) the new shares are fungible
with the existing line of shares (
e
.
g
., no dividend disadvantage). Otherwise the CAC Index is adjusted based on
the value of the rights only. The CAC Index will be adjusted only if the rights represent a positive value.
The CAC Index
will also be adjusted if a value can be attributed to a subscription right for convertible bonds,
bonds
with warrants or warrants with preferential rights for shareholders or similar situations. If the value cannot be attributed straightforward,
Euronext may also decide to include the detached instrument for one day and adjust the CAC Index at the close based on the closing
price for that subscription right on that day.
Bonus
Issues
,
Stock Splits and Reverse Stock Splits
For bonus
issues, stock splits and reverse stock splits, the number of shares included in the CAC Index will be adjusted in accordance with
the ratio given in the corporate action. The divisor will not be changed because of this. Euronext may regard a bonus issue as
the issue of an entitlement in lieu of an ordinary dividend and therefore treat this in accordance with the adjustment of special
dividends.
Changes
in Number of Shares or Free Float
In between
the reviews the number of shares included in the CAC Index and free float factors will remain unchanged.
Partial
Tender Offers On Own Shares
For partial
tender offers, Euronext will adjust the divisor of the CAC Index if the premium represents more than 5% of the share price of
the close on the penultimate day before the ex-date (the day prior to the last day before the ex-day). The premium is calculated
as the difference between the offered price and the closing price,
multiplied by
the percentage of the share capital targeted
in the offer. If the divisor is adjusted, the number of shares in the CAC Index will be adjusted as well.
License
Agreement
Euronext
N.V. does not sponsor, endorse or have any other involvement in the issue and offering of the notes. Euronext N.V. disclaims
any liability for any inaccuracy in the data on which the CAC Index is based, for any mistakes, errors, or omissions in the calculation
and/or dissemination of the CAC Index, or for the manner in which it is applied in connection with the issue and offering thereof.
“CAC
®
” and “CAC 40
®
” are registered trademarks of Euronext N.V. or its subsidiaries.
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