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Preliminary Pricing
Supplement STR-107
(To Prospectus dated
April 27, 2016,
Prospectus Supplement
dated July 31, 2015 and
Product Supplement EQUITY
INDICES STR-1
dated August 4, 2015)
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Subject
to Completion
Preliminary
Pricing Supplement dated
January
19, 2017
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Filed
Pursuant to Rule 424(b)(2)
Registration Statement No. 333-206013
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Units
$10 principal amount per unit
CUSIP No.
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Pricing Date*
Settlement Date*
Maturity Date*
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January , 2017
January , 2017
January , 2023
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* Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”)
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Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index
§
Automatically callable if the Observation Level of the Index on any Observation Date,
occurring approximately one year, two years, three years, four years, five years and six years after the pricing date,
is at or above the Starting Value
§
In the event of an automatic call, the amount payable per unit will be:
§
[$11.25 to $11.35] if called on the first Observation Date
§
[$12.50 to $12.70] if called on the second Observation Date
§
[$13.75 to $14.05] if called on the third Observation Date
§
[$15.00 to $15.40] if called on the fourth Observation Date
§
[$16.25 to $16.75] if called on the fifth Observation Date
§
[$17.50 to $18.10] if called on the final Observation Date
§
If not called prior to the final Observation Date, a maturity of approximately six
years
§
If not called, 1-to-1 downside exposure to decreases in the Index, with up to 100%
of your principal at risk
§
All payments are subject to the credit risk of Deutsche Bank AG
§
No periodic interest payments
§
In addition to the underwriting discount set forth below, the notes include a hedging-related
charge of $0.075 per unit. See “Structuring the Notes”
§
Limited secondary market liquidity, with no exchange listing
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The notes are being issued by Deutsche Bank AG (“Deutsche
Bank”) through its London Branch. There are important differences between the notes and a conventional debt security, including
different investment risks and certain additional costs. See “Risk Factors” beginning on page TS-7 of this term sheet,
page PS-7 of product supplement EQUITY INDICES STR-1, page PS-5 of the prospectus supplement and page 13 of the prospectus.
The initial estimated value of the notes as of the pricing
date is expected to be between $9.400 and $9.600 p
er unit, which is less than the public
offering price listed below.
See “Summary” on the following page, “Risk Factors” beginning on
page TS-7 of this term sheet and “Structuring the Notes” on page TS-13 of this term sheet for additional information.
The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.
By acquiring the notes, you will be bound by and deemed irrevocably
to consent to the imposition of any Resolution Measure by the competent resolution authority. See “Consent to Potential Imposition
of Resolution Measures” on page TS-3 of this term sheet.
_________________________
None of the Securities and Exchange Commission (the “SEC”),
any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if
this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.
_________________________
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Per Unit
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Total
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Public offering price
(1)
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$ 10.00
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$
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Underwriting discount
(1)
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$ 0.20
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$
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Proceeds, before expenses, to Deutsche Bank
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$ 9.80
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$
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(1)
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For any purchase of 500,000 units or more in a single transaction by an individual investor
or in combined transactions with the investor's household in this offering, the public offering price and the underwriting discount
will be $9.95 per unit and $0.15 per unit, respectively. See “Supplement to the Plan of Distribution” below.
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The notes:
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Merrill Lynch & Co.
January , 2017
Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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Summary
The Strategic Accelerated Redemption
Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023 (the “notes”) are
our senior unsecured obligations. The notes are not guaranteed or insured by the Federal Deposit Insurance Corporation or secured
by collateral.
The notes will rank equally and
pari passu
with the claims of all our other unsecured and unsubordinated
creditors, subject to any statutory priority regime of the jurisdiction of our incorporation (or, in the case of notes issued
by Deutsche Bank AG through a branch, of the law of the jurisdiction where the branch is established). Any payments due on the
notes, including any repayment of principal, will be subject to the credit risk of Deutsche Bank and to any Resolution Measure
(as described herein) imposed by the competent resolution authority.
The notes will be automatically called at the applicable
Call Amount if the Observation Level of the Market Measure, which is the EURO STOXX 50
®
Index (the “Index”),
is equal to or greater than the Call Level on the relevant Observation Date. If your notes are not automatically called, at maturity,
you will lose all or a portion of the principal amount of your notes. Payments on the notes, including the amount you receive
at maturity or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance
of the Index, subject to our credit risk. See “Terms of the Notes” below.
On the cover page of this term
sheet, we have provided the initial estimated value range for the notes. Our initial estimated value of the notes was determined
based on our valuation of two theoretical components of the notes: (i) a theoretical bond component and (ii) a theoretical derivative
component. The value of the bond component of the notes is calculated based on an internal funding rate, which is determined primarily
based on the rates at which our conventional debt securities of comparable maturity may trade, adjusted to account for our funding
needs and objectives for the period matching the term of the notes. The value of the derivative component is calculated based
on our internal pricing models using relevant parameter inputs.
The economic terms of the notes
(including the Call Premiums and the Call Amounts) are based on the internal funding rate and the economic terms of certain related
hedging arrangements. 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 underwriting discount and the estimated cost of
hedging our obligations under the notes (which includes the hedging related charge described below), will reduce the economic
terms of the notes to you and the initial estimated value of the notes on the pricing date. Due to these factors, the public offering
price you pay to purchase the notes will be greater than the initial estimated value of the notes. The initial estimated value
of the notes calculated on the pricing date will be set forth in the final term sheet made available to investors in the notes.
For more information about the initial estimated value and the structuring of the notes, see “Structuring the Notes”
on page TS-13.
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Terms of the Notes
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Payment Determination
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Issuer:
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Deutsche Bank AG, London Branch
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Automatic Call Provision:
Redemption Amount Determination:
If the notes are not called, you will receive the Redemption
Amount per unit on the maturity date, determined as follows:
Because the Threshold Value for the notes is equal to the
Starting Value, you will lose all or a portion of your investment if the Ending Value is less than the Starting Value.
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Principal Amount:
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$10.00 per unit
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Term:
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Approximately six years, if not called prior to the final Observation Date
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Market Measure:
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The EURO STOXX 50
®
Index (Bloomberg symbol: “SX5E”), a price return index
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Starting Value:
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The closing level of the Market Measure on the pricing date
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Ending Value:
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The Observation Level of the Market Measure on the final Observation Date
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Observation Level:
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The closing level of the Market Measure on the applicable Observation Date
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Observation Dates:
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On or about January , 2018, January , 2019, January , 2020, January
, 2021, January , 2022 and January , 2023 (the final Observation Date), approximately one year, two years, three years, four years,
five years and six years after the pricing date, respectively.
The Observation Dates are subject to postponement if a Market
Disruption Event occurs, as described beginning on page PS-20 of product supplement EQUITY INDICES STR-1.
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Call Level:
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100% of the Starting Value
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Call Amounts and Call Premiums (per Unit):
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[$11.25 to $11.35], representing a Call Premium of [$1.25 to
$1.35] and a return of [12.50% to 13.50%] of the principal amount, if called on the first Observation Date;
[$12.50 to $12.70], representing a Call Premium of [$2.50 to
$2.70] and a return of [25.00% to 27.00%] of the principal amount, if called on the second Observation Date;
[$13.75 to $14.05], representing a Call Premium of [$3.75 to
$4.05] and a return of [37.50% to 40.50%] of the principal amount, if called on the third Observation Date;
[$15.00 to $15.40], representing a Call Premium of [$5.00 to
$5.40] and a return of [50.00% to 54.00%] of the principal amount, if called on the fourth Observation Date;
[$16.25 to $16.75], representing a Call Premium of [$6.25 to
$6.75] and a return of [62.50% to 67.50%] of the principal amount, if called on the fifth Observation Date; and
[$17.50 to $18.10], representing a Call Premium of [$7.50 to
$8.10] and a return of [75.00% to 81.00%] of the principal amount, if called on the final Observation Date.
The actual Call Amounts and Call Premiums will be determined
on the pricing date.
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Call Settlement Dates:
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Approximately the fifth business day following the applicable Observation Date, subject to postponement as described beginning on page PS-20 of product supplement EQUITY INDICES STR-1; provided however, that the Call Settlement Date related to the final Observation Date will be the maturity date.
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Threshold Value:
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100% of the Starting Value
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Fees and Charges:
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The underwriting discount of $0.20 per unit listed on the cover page and the hedging related charge of $0.075 per unit described in “Structuring the Notes” on page TS-13.
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Calculation Agent:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) and Deutsche Bank, acting jointly.
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Strategic Accelerated Redemption Securities
®
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TS-
2
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Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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The terms and risks of the notes are contained in this term sheet
and in the following:
These documents (together, the “Note Prospectus”)
have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated
above or obtained from MLPF&S by calling 1-800-294-1322.
Before you invest, you should read the Note Prospectus, including
this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written
materials you may have received are superseded by the Note Prospectus. 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. Capitalized terms used but not
defined in this term sheet have the meanings set forth in product supplement EQUITY INDICES STR-1. Unless otherwise indicated or
unless the context requires otherwise, all references in this document to “we,” “us,” “our,”
or similar references are to Deutsche Bank.
Consent to Potential Imposition of Resolution
Measures
Under the German
Recovery and Resolution Act, which became effective on January 1, 2015, the notes may be subject to any Resolution Measure by the
competent resolution authority under relevant German and/or European laws or regulations 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. A “
Resolution Measure
”
may include: (i) a write down, including to zero, of any payment (or delivery obligations) on the notes; (ii) a conversion of 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) 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. By acquiring the notes, you will be deemed irrevocably to agree:
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·
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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;
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that you would have no claim or
other right against us arising out of any Resolution Measure; and
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·
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that the imposition of any Resolution
Measure will not constitute a default or an event of default under the notes, under the senior indenture or for the purposes of,
but only to the fullest extent permitted by, the Trust Indenture Act of 1939, as set forth in the accompanying prospectus dated
April 27, 2016.
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Please read
“Risk Factors” in this term sheet and see the accompanying prospectus, including the risk factors beginning on page
13 of such prospectus, for further information.
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Strategic Accelerated Redemption Securities
®
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TS-
3
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Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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Investor Considerations
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You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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§
You anticipate that the Observation Level of the Index on an Observation Date will be equal to or greater than the Call
Level and, in that case, you accept an early exit from your investment.
§
You accept that the return on the notes will be limited to the return represented by the applicable Call Premium even if
the percentage change in the level of the Index is significantly greater than the return represented by the applicable Call Premium.
§
If the notes are not called, you accept that your investment will result in a loss, which could be significant.
§
You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
§
You are willing to forgo dividends or other benefits of owning the stocks included in the Index.
§
You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for
the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, the internal funding
rate and fees and charges on the notes.
§
You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Call
Amount or the Redemption Amount, as applicable.
§
You are willing to consent to be bound by any Resolution Measure imposed by the competent resolution authority.
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You wish to make an investment that cannot be automatically called prior to maturity.
§
You anticipate that the Observation Level of the Index will be less than the Call Level on each Observation Date, including
the final Observation Date.
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You seek an uncapped return on your investment.
§
You seek principal repayment or preservation of capital.
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You seek interest payments or other current income on your investment.
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You want to receive dividends or other distributions paid on the stocks included in the Index.
§
You seek an investment for which there will be a liquid secondary market.
§
You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
§
You are unwilling to consent to be bound by any Resolution Measure imposed by the competent resolution authority.
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We urge you to consult your investment, legal, tax, accounting,
and other advisors before you invest in the notes.
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Strategic Accelerated Redemption Securities
®
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TS-
4
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Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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Examples of Hypothetical Payments
The following examples are for purposes of illustration only.
They are based on
hypothetical
values and show
hypothetical
returns on the notes. They illustrate the calculation
of the Call Amount you will receive on the applicable Call Settlement Date or, if not called, the calculation of the Redemption
Amount, based on the hypothetical terms set forth below.
The actual amount you receive and the resulting total rate of return
will depend on the actual Starting Value, Threshold Value, Call Level, Observation Levels, Call Amounts, Call Premiums, Ending
Value, whether the notes are called on an Observation Date and whether you hold the notes to maturity.
The following examples
do not take into account any tax consequences from investing in the notes. These examples are based on:
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1)
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a Starting Value of 100.00;
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2)
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a Threshold Value of 100.00;
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3)
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a Call Level of 100.00;
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4)
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an expected term of the notes of approximately six years if the notes are not called prior to the final Observation Date;
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5)
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a Call Premium of $1.30 if the notes are called on the first Observation Date, $2.60 if called on the second Observation Date,
$3.90 if called on the third Observation Date, $5.20 if called on the fourth Observation Date, $6.50 if called on the fifth Observation
Date and $7.80 if called on the final Observation Date (the midpoint of the applicable Call Premium ranges); and
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6)
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Observation Dates occurring approximately one year, two years, three years, four years, five years and six years after the
pricing date.
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The
hypothetical
Starting Value of
100.00 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting
Value of the Market Measure. For recent actual levels of the Market Measure, see “The Index” section below. The Index
is a price return index and as such the Ending Value will not include any income generated by dividends paid on the stocks included
in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, all payments
on the notes are subject to issuer credit risk.
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Strategic Accelerated Redemption Securities
®
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TS-
5
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Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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Notes Are Called on an Observation Date
The notes will be called at $10.00 plus the applicable Call Premium
if the Observation Level on one of the Observation Dates is equal to or greater than the Call Level. After the notes are called,
they will no longer remain outstanding and there will not be any further payments on the notes.
Example 1
– The Observation Level on the first Observation
Date is 110.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $1.30 = $11.30 per unit.
Example 2
– The Observation Level on the first Observation
Date is below the Call Level, but the Observation Level on the second Observation Date is 140.00. Therefore, the notes will be
called at $10.00 plus the Call Premium of $2.60 = $12.60 per unit.
Example 3
– The Observation Levels on the first
and second Observation Dates are below the Call Level, but the Observation Level on the third Observation Date is 107.00. Therefore,
the notes will be called at $10.00 plus the Call Premium of $3.90 = $13.90 per unit.
Example 4
– The Observation Levels on the first
to third Observation Dates are below the Call Level, but the Observation Level on the fourth Observation Date is 109.00. Therefore,
the notes will be called at $10.00 plus the Call Premium of $5.20 = $15.20 per unit.
Example 5
– The Observation Levels on the first
to fourth Observation Dates are below the Call Level, but the Observation Level on the fifth Observation Date is 102.00. Therefore,
the notes will be called at $10.00 plus the Call Premium of $6.50 = $16.50 per unit.
Example 6
– The Observation Levels on the first
to fifth Observation Dates are below the Call Level, but the Observation Level on the sixth and final Observation Date is 115.00.
Therefore, the notes will be called at $10.00 plus the Call Premium of $7.80 = $17.80 per unit.
Notes Are Not Called on Any Observation Date
Example 7
– The notes are not called on any Observation
Date and the Ending Value is less than the Starting Value. The Redemption Amount will be less than the principal amount and could
be zero. For example, if the Ending Value is 70.00, the Redemption Amount per unit will be:
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Summary of the Hypothetical Examples
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Notes
Are Called on an Observation Date
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Notes Are Not Called
on Any
Observation Date
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Example
1
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Example
2
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Example
3
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Example
4
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Example
5
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Example
6
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Example
7
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Starting Value
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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Call Level
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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Threshold Value
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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100.00
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Observation Level on the First Observation Date
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110.00
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90.00
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90.00
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90.00
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90.00
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90.00
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90.00
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Observation Level on the Second Observation Date
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N/A
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140.00
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80.00
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80.00
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80.00
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80.00
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80.00
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Observation Level on the Third Observation Date
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N/A
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N/A
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107.00
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85.00
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85.00
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85.00
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85.00
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Observation Level on the Fourth Observation Date
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N/A
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N/A
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N/A
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109.00
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95.00
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95.00
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95.00
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Observation Level on the Fifth Observation Date
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N/A
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N/A
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N/A
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N/A
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102.00
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75.00
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75.00
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Observation Level on the Final Observation Date
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N/A
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N/A
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N/A
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N/A
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N/A
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115.00
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70.00
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Return of the Index
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10.00%
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40.00%
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7.00%
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9.00%
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2.00%
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15.00%
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-30.00%
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Return of the Notes
(1)
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13.00%
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26.00%
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39.00%
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52.00%
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65.00%
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78.00%
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-30.00%
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Call Amount /
Redemption Amount per Unit
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$11.30
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$12.60
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$13.90
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$15.20
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$16.50
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$17.80
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$7.00
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(1)
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Represents the total return over the period during which
the notes were outstanding before the Call Settlement Date or the Maturity Date, as applicable.
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Strategic Accelerated Redemption Securities
®
|
TS-
6
|
Strategic Accelerated Redemption Securities
®
Linked to the EURO STOXX 50
®
Index, due January , 2023
|
|
Risk Factors
There are important differences between
the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below.
You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections
beginning on page PS-7 of product supplement EQUITY INDICES STR-1, page PS-5 of the prospectus supplement and page 13 of the prospectus
identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in
the notes.
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§
|
If the notes are not automatically called, your investment will result in a loss; there is no guaranteed return of principal.
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§
|
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security
of comparable maturity.
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§
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Payments on the notes are subject to our credit risk, and any actual or perceived changes in our creditworthiness are expected
to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.
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§
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The notes may be written down to zero, 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. In a German
insolvency proceeding or in the event of the imposition of Resolution Measures with respect to the Issuer, the Structured Debt
Securities (as defined in the accompanying prospectus) are expected to be among the unsecured unsubordinated obligations that would
bear losses after the Non-Structured Debt Securities (as defined in the accompanying prospectus). 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.
The imposition of any Resolution Measure does not constitute a default or an event of default under the notes, the senior indenture
or for the purposes of, but only to the fullest extent permitted by, the Trust Indenture Act of 1939 or give you any other right
to accelerate or terminate the notes. You may have limited or circumscribed rights to challenge any decision of the competent resolution
authority to impose any Resolution Measure. Please see “Consent to Potential Imposition of Resolution Measures” in
this term sheet and the risk factors beginning on page 13 of the accompanying prospectus for more information.
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§
|
Your investment return is limited to the return represented by the applicable Call Premium and may be less than a comparable
investment directly in the stocks included in the Index.
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§
|
The initial estimated value of the notes is an estimate only, determined as of a particular point in time 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 of comparable maturity. As a result of this difference, the initial estimated value of the notes would
likely be lower if it were based on the rate we would pay when we issue conventional debt securities of comparable maturity. This
difference in funding rate, as well as the underwriting discount and the estimated cost of hedging our obligations under the notes
(which includes the hedging related charge described below), reduces the economic terms of the notes to you.
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§
|
Our internal pricing models consider 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 pricing models are proprietary and rely in part on certain forecasts about future events, which may prove to be incorrect.
Because our pricing models may differ from other financial institutions’ valuation models, and because funding rates taken
into account by other financial institutions (including those with similar creditworthiness) may vary materially from the internal
funding rate used by us, our initial estimated value of the notes may not be comparable to the initial estimated values of similar
notes of other financial institutions.
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§
|
The public offering price you pay for the notes will exceed the initial estimated value. The difference is due to the inclusion
in the public offering price of the underwriting discount and the estimated cost of hedging our obligations under the notes (which
includes the hedging related charge described below), all as further described in “Structuring the Notes” on page TS-12.
These factors are expected to reduce the price at which you may be able to sell the notes in any secondary market and, together
with various credit, market and economic factors over the term of the notes, including changes in the level of the Index, will
affect the value of the notes in complex and unpredictable ways.
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§
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The initial estimated value of the notes on the pricing date does not represent the price at which we, MLPF&S, or any of
our respective 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, MLPF&S, or any of our respective
affiliates would be willing to purchase the notes from you in secondary market transactions, if at all, would generally be lower
than both the public offering price and the initial estimated value of the notes on the pricing date. MLPF&S has advised us
that any repurchases by them or their affiliates will be made at prices determined by reference to their pricing models and at
their discretion. These prices will include MLPF&S’s trading commissions and mark-ups and may differ materially from
the initial estimated value of the notes determined by reference to our internal funding rate and pricing models.
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§
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A trading market is not expected to develop for the notes. None of us, MLPF&S, or any of our respective affiliates is obligated
to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes
at any price in any secondary market.
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§
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Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trading in securities
of companies included in the Index), and any hedging and trading activities we, MLPF&S or our respective affiliates engage
in
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for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with
you. Our economic interests in determining the initial estimated value of the notes on the pricing 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, are potentially
adverse to your interests as an investor in the notes.
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§
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The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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§
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You will have no rights of a holder of the securities included in the Index, and you will not be entitled to receive securities
or dividends or other distributions by the issuers of those securities.
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§
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While we, MLPF&S or our respective affiliates may from time to time own securities of companies included in the Index,
except to the extent that our ordinary shares are included in the Index, we, MLPF&S and our respective affiliates do not control
any other company included in the Index, and have not verified any disclosure made by any other company.
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Your return on the notes may be affected by factors affecting international securities markets, specifically changes in the
Eurozone. In addition, although you will not obtain the benefit of any increase in the value of the euro against the U.S. dollar
which you would have received if you had owned the securities in the Index during the term of your notes, the value of the notes
may be adversely affected by general exchange rate movements in the market.
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There may be potential conflicts of interest involving the calculation agents, one of which is us and one of which is MLPF&S.
We have the right to appoint and remove the calculation agents.
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The U.S. federal income tax consequences of an investment in the notes are uncertain, and may be adverse to you. See “Summary
Tax Consequences” below and “U.S. Federal Income Tax Consequences” beginning on page PS-29 of product supplement
EQUITY INDICES STR-1.
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Other Terms of the Notes
The following definition shall supersede and replace the definition
of “Market Measure Business Day” set forth in product supplement EQUITY INDICES STR-1.
Market Measure Business Day
A “Market Measure Business Day” means a day on which:
(A) the Eurex (or any successor) is open for trading;
and
(B) the Index or any successor
thereto is calculated and published.
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TS-
8
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The Index
We have derived all information contained in this term sheet
regarding the Index, including, without limitation, 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 publicly available information. Such information
reflects the policies of, and is subject to change by, STOXX Limited (“STOXX” or the “Index sponsor”).
The Index was developed by the Index sponsor and is calculated, maintained and published by the Index sponsor. The Index sponsor
has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of the Index sponsor
discontinuing publication of the Index are discussed in the section entitled “Description of the Notes—Discontinuance
of an Index” on page PS-23 of product supplement EQUITY INDICES STR-1. None of us, the calculation agents, or MLPF&S
accepts any responsibility for the calculation, maintenance or publication of the Index or any successor index.
The Index was created by STOXX, which is owned by Deutsche Boerse
AG and SIX Group AG. Publication of the Index began on February 28, 1998, based on an initial index value of 1,000 on December
31, 1991. The Index is published in
The Wall Street Journal
and disseminated on the STOXX website. On March 1, 2010, STOXX
announced the removal of the “Dow Jones” prefix from all of its indices, including the Index.
Index Composition and Maintenance
The Index is composed of
50 component stocks of market sector leaders from within the 19 EURO STOXX
®
Supersector indices, which represent
the Eurozone portion of the STOXX Europe 600
®
Supersector indices. The STOXX Europe 600
®
Supersector
indices contain the 600 largest stocks traded on the major exchanges of 17 European countries. The component stocks have a high
degree of liquidity and represent the largest companies across all market sectors. The Index is calculated in euros.
The composition of the Index
is reviewed annually, based on the closing stock data on the last trading day in August. The component stocks are announced the
first trading day in September. Changes to the component stocks are implemented on the third Friday in September and are effective
the following trading day. Changes in the composition of the Index are made to ensure that the Index includes the 50 market sector
leaders from within the EURO STOXX Index.
The free float factors for
each component stock used to calculate the Index, as described below, are reviewed, calculated and implemented on a quarterly basis
and are fixed until the next quarterly review. Each component’s weight is capped at 10% of the index’s total free float
market capitalization.
The Index is also reviewed
on an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings and bankruptcy)
that affect the Index composition are immediately reviewed. Any changes are announced, implemented and effective in line with the
type of corporate action and the magnitude of the effect.
Calculation of the Index
The Index is calculated with the Laspeyres formula, which measures
the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the Index
value can be expressed as follows:
The “
free float
market capitalization of the Index
” is equal to the sum of the products of the closing price, market capitalization and
free float factor for each component stock as of the time the Index is being calculated.
The
divisor for the Index is adjusted to maintain the continuity of the Index values across changes due to corporate actions. The following
is a summary of the adjustments to any component stock made for corporate actions and the effect of such adjustment on the divisor,
where an index divisor may decrease
(Ñ)
or
increase
(D)
or keep constant
(
n
)
when corporate actions occur for a component stock. Assuming shareholders
receive
“B”
new shares for every
“A”
share held for the following corporate actions:
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Divisor
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Corporate
Action
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Adjustment Formula
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∇
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Cash dividend (applied for return index only)
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adjusted price = closing level – dividend announced by company × (1 – withholding tax)
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Δ
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Special Cash dividend (applied for price return index only)
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adjusted price = closing level – dividend announced by company × (1 – withholding tax)
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■
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Split and Reverse Split
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adjusted price = closing level
× A/B
new number of shares = old number
of shares × B/A
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Δ
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Rights Offering
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adjusted price = (closing level
× A + subscription price × B)/(A + B)
new number of shares = old number
of shares × (A + B)/A
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■
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Stock Dividend
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adjusted price = closing level
× A/(A + B)
new number of shares = old number
of shares × (A + B)/A
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∇
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Stock Dividend of a Different Company Security
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adjusted price = (closing level × A – price of different company security × B)/A
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∇
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Return of Capital and Share Consolidation
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adjusted price = [closing level
– dividend announced by company × (1 – withholding tax)] × A/B
new number of shares = old number
of shares × B/A
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∇
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Repurchase Shares-Self-Tender
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adjusted price = (closing level
– dividend announced by company) × A/B
new number of shares = old number of shares
× B/A
adjusted price =
(price before
tender × old number of shares) – (tender price × number of tendered shares)
new number of shares
new number of shares = old number
of shares – number of tendered shares
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∇
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Spinoff
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adjusted price = (closing level × A – price of spun – off shares × B)/A
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Δ
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Combination Stock
Distribution (Dividend or Split) and Rights Offering
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Shareholders receive
B
new
shares from the distribution and
C
new shares from the rights
offering for every
A
shares held:
if rights are applicable after stock distribution
(one action applicable to other):
adjusted price =
closing level
× A + subscription price × C × (1 + B/A)
(A + B) × (1 +
C/A)
new number of shares = old number of shares
× [(A + B) × (1 + C/A)]/A
if stock distribution is applicable after
rights (one action applicable to other):
adjusted price = closing level
× A + subscription price × C
(A + C) × (1 +
B/A)
new number of shares = old number
of shares × [(A + C) × (1 + B/A)]
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Strategic Accelerated Redemption Securities
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Divisor
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Corporate
Action
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Adjustment Formula
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Δ
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Stock
Distribution and Rights (not mutually applicable)
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adjusted price =
closing level
× A + subscription price × C
A + B + C
new number of shares = old number
of shares × (A + B + C)
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Strategic Accelerated Redemption Securities
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The following graph shows the daily historical performance
of the Index in the period from January 1, 2008 through January 13, 2017. We obtained this historical data from Bloomberg L.P.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On January 13,
2017, the closing level of the Index was 3,324.34.
Historical Performance of the Index
This historical data on the Index is not necessarily indicative
of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level
of the Index during any period set forth above is not an indication that the level of the Index is more or less likely to increase
or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available
sources for the levels of the Index.
License Agreement
We have entered into an agreement with STOXX providing us and
certain of our affiliates or subsidiaries identified in that agreement with a non-exclusive license and, for a fee, with the right
to use the Index, which is owned and published by STOXX, in connection with certain securities, including the notes.
STOXX and its licensors (the “Licensors”) have no
relationship to us, other than the licensing of the Index and the related trademarks for use in connection with the notes.
STOXX and its Licensors do not sponsor, endorse, sell or promote
the notes; recommend that any person invest in the notes; have any responsibility or liability for or make any decisions about
the timing, amount or pricing of the notes; have any responsibility or liability for the administration, management or marketing
of the notes; or consider the needs of the notes or the owners of the notes in determining, composing or calculating the Index
or have any obligation to do so.
STOXX and its Licensors will not have any liability in connection
with the notes. Specifically, STOXX and its Licensors do not make any warranty, express or implied and disclaim any and all warranty
about: the results to be obtained by the notes, the owners of the notes or any other person in connection with the use of the Index
and the data included in the Index; the accuracy or completeness of the Index and its data; and the merchantability and the fitness
for a particular purpose or use of the Index and its data. STOXX and its Licensors will have no liability for any errors, omissions
or interruptions in the Index or its data. Under no circumstances will STOXX or its Licensors be liable for any lost profits or
indirect, punitive, special or consequential damages or losses, even if STOXX or its Licensors knows that they might occur. The
licensing agreement between us and STOXX is solely for our benefit and the benefit of STOXX and not for the benefit of the owners
of the notes or any other third parties.
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Strategic Accelerated Redemption Securities
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®
Index, due January , 2023
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Supplement to the Plan of Distribution
Under our distribution agreement with MLPF&S, MLPF&S
will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated
underwriting discount.
We may deliver the notes against payment therefor in New York,
New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange
Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any
such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than three business days
from the pricing date, purchasers who wish to trade the notes more than three business days prior to the original issue date will
be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the
original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase
the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.
MLPF&S has advised us that they or their affiliates may repurchase
and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated
prices, and these prices will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent
in these market-making transactions; however, it is not obligated to engage in any such transactions. At MLPF&S’s discretion,
for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary
market at a price that may exceed the estimated value of the notes at the time of repurchase. Any price offered by MLPF&S for
the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index,
the remaining term of the notes, and our creditworthiness. However, none of us, MLPF&S, or any of our respective affiliates
is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S, or any of our respective
affiliates will purchase your notes at a price that equals or exceeds the estimated value of the notes at the time of repurchase.
MLPF&S has also advised us that, if you hold your notes in
a MLPF&S account, the value of the notes shown on your account statement will be based on MLPF&S’s estimate of the
value of the notes if MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to
do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions
and other considerations, as mentioned above, and will include transaction costs. This price may be higher than or lower than the
initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these
offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made
available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized
to, rely on the Note Prospectus for information regarding Deutsche Bank or for any purpose other than that described in the immediately
preceding sentence.
An investor’s household, as referenced on the cover of
this term sheet, will generally include accounts held by any of the following, as determined by MLPF&S in its discretion and
acting in good faith based upon information then available to MLPF&S:
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·
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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children
and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not
directly above or below the individual investor;
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·
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial
owners of the vehicle consist solely of the investor or members of the investor’s household as described above; and
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·
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s
household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any
purchases made by a trustee’s personal account.
|
Purchases in retirement accounts will not be considered part
of the same household as an individual investor’s personal or other non-retirement account, except for individual retirement
accounts (“IRAs”), simplified employee pension plans (“SEPs”), savings incentive match plan for employees
(“SIMPLEs”), and single-participant or owners only accounts (i.e., retirement accounts held by self-employed individuals,
business owners or partners with no employees other than their spouses).
Please contact your Merrill Lynch financial advisor if you have
any questions about the application of these provisions to your specific circumstances or think you are eligible.
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TS-
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®
Index, due January , 2023
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Structuring the Notes
The notes are our debt securities, the return on which is linked
to the performance of the Index. As is the case for all of our debt securities, including our market-linked notes, the economic
terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. The internal funding rate we use in
pricing the market-linked note is typically lower than the rate we would pay when we issue conventional debt securities of comparable
maturity. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with
the fees and charges associated with market-linked notes, typically results in the initial estimated value of the notes on the
pricing date being less than their public offering price.
Payments on the notes, including the amount you receive at maturity
or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance of
the Index. In order to meet these payment obligations, at the time we issue the notes, we expect to enter into certain hedging
arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms
of these hedging arrangements are determined by seeking bids from market participants, which may include us, MLPF&S and one
of our respective affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements,
the volatility of the Index, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes
and their initial estimated value depend in part on the terms of these hedging arrangements.
MLPF&S has advised us that the hedging arrangements will
include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S
from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and
losses from these hedging arrangements may be realized by us, MLPF&S or any other hedge providers.
For further information, see “Risk Factors—General
Risks Relating to the Notes” beginning on page PS-7 and “Use of Proceeds and Hedging” on page PS-18 of product
supplement EQUITY INDICES STR-1.
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Strategic Accelerated Redemption Securities
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TS-
14
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Strategic Accelerated Redemption Securities
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Linked to the EURO STOXX 50
®
Index, due January , 2023
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Summary 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 upon an automatic call or 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 advisor 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 in 2017
that are not “delta-one” with respect to underlying securities that could pay U.S.-source dividends for U.S. federal
income tax purposes (each an “
Underlying Security
”).
Based on certain determinations made by us, we expect that Section 871(m) will not apply to the notes with regard to non-U.S. holders.
Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its
application may depend on your particular circumstances, including whether you enter into other transactions with respect to an
Underlying Security. If necessary, further information regarding the potential application of Section 871(m) will be provided in
the pricing supplement for the notes. You should consult your tax adviser regarding the potential application of Section 871(m)
to the notes.
You should review carefully the section of the accompanying product
supplement entitled “U.S. Federal Income Tax Consequences.” The preceding discussion, when read in combination with
that section, constitutes the full opinion of our special tax counsel regarding the material U.S. federal income tax consequences
of owning and disposing of the notes.
Under current law, the United Kingdom will not impose withholding
tax on payments made with respect to the notes.
For a discussion of certain German tax considerations relating
to the notes, you should refer to the section in the accompanying prospectus supplement entitled “Taxation by Germany of
Non-Resident Holders.”
You should consult your tax advisor 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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Strategic Accelerated Redemption Securities
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15
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®
Linked to the EURO STOXX 50
®
Index, due January , 2023
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Where You Can Find More Information
We have filed a registration statement (including a product supplement,
a prospectus supplement and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you
should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete
information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request
by calling MLPF&S toll-free at 1-800-294-1322.
Market-Linked Investments Classification
MLPF&S has advised us that it classifies certain market-linked
investments (the “Market-Linked Investments”) into categories, each with different investment characteristics. The
following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return
Market-Linked Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term
investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of
market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments,
a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset,
you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected,
and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or
part of your investment.
“Strategic Accelerated Redemption Securities
®
”
is a registered service mark of Bank of America Corporation, the parent company of MLPF&S.
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Strategic Accelerated Redemption Securities
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