Pricing Supplement No. 344 dated July
31, 2015
To prospectus supplement dated July 31,
2015 and
prospectus dated July 31, 2015,
each as may be amended |
Filed Pursuant to Rule
424(b)(3)
Registration Statement No.
333-206013 |
|
Deutsche Bank AG, London Branch |
20,000,000 DB Commodity Double Short Exchange Traded Notes
due April 1, 2038
20,000,000 DB Commodity Double Long Exchange Traded Notes
due April 1, 2038
20,000,000 DB Commodity Short Exchange Traded Notes due April 1,
2038
20,000,000 DB Commodity Long Exchange Traded Notes due April 1,
2038
We are offering four separate Exchange Traded
Notes (the “securities”). Investors can subscribe to any of the four offerings. The securities do not guarantee any
return of principal at maturity and do not pay any interest during their term. Any payment at maturity or upon a repurchase
at your option is subject to our ability to pay our obligations as they become due.
For each security, investors will receive
a cash payment, if any, at maturity or upon repurchase by Deutsche Bank AG, London Branch linked to the month-over-month performance
of a total return version of a commodity-linked index (“Index”), less an investor fee. For the DB Commodity Double
Short Exchange Traded Notes due April 1, 2038 (“Commodity Double Short ETNs”) and the DB Commodity Short Exchange
Traded Notes due April 1, 2038 (“Commodity Short ETNs,” and together with the Commodity Double Short ETNs, the
“Short ETNs”), the Index is a total return version of the Deutsche Bank Liquid Commodity IndexTM. For the
DB Commodity Double Long Exchange Traded Notes due April 1, 2038 (“Commodity Double Long ETNs”) and the DB Commodity
Long Exchange Traded Notes due April 1, 2038 (“Commodity Long ETNs,” and together with the Commodity Double Long
ETNs, the “Long ETNs”), the Index is a total return version of the Deutsche Bank Liquid Commodity Index – Optimum
YieldTM.
For each security, the return on the Index
is derived by combining the returns on two component indices: the DB 3-Month T-Bill Index and the relevant commodity index. For
the Short ETNs, the relevant commodity index will be the Deutsche Bank Liquid Commodity IndexTM Excess Return (the “DB
benchmark commodity index”). For the Long ETNs, the relevant commodity index will be the Deutsche Bank Liquid Commodity Index–
Optimum YieldTM Excess Return (the “DB optimum yield commodity index” and, together with the DB benchmark
commodity index, the “commodity indices” and each a “commodity index”). The Short ETNs offer investors
short, or inverse, exposure to the DB benchmark commodity index, meaning the value of the Short ETNs will increase with monthly
depreciations and decrease with monthly appreciations of the DB benchmark commodity index. The Long ETNs offer investors long exposure
to the DB optimum yield commodity index, meaning the value of the Long ETNs will increase with monthly appreciations and decrease
with monthly depreciations in the DB optimum yield commodity index. In addition, the Commodity Double Short ETNs and Commodity
Double Long ETNs are two times leveraged with respect to the relevant commodity index and, as a result, will benefit from two times
any beneficial, but will be exposed to two times any adverse, monthly performance of the relevant commodity index.
Each security offers investors exposure
to the month-over-month performance of its respective Index measured from the first calendar day to the last calendar day of each
month. Therefore, the securities may not be suitable for investors seeking an investment with a term greater than the time remaining
to the next monthly reset date and should be used only by knowledgeable investors who understand the potential adverse consequences
of seeking longer-term leveraged or inverse investment results by means of securities that reset their exposure monthly. On a month-to-month
basis, the performance of the Commodity Double Long ETNs and the Commodity Double Short ETNs will be positively affected by two
times any favorable performance and negatively affected by two times any adverse performance of their respective commodity indices.
This leverage feature of the Commodity Double Long ETNs and the Commodity Double Short ETNs, when combined with the monthly application
of the index factor and fee factor and monthly reset of the principal amount (each as described below), is expected to cause the
performance of such securities to differ significantly from the point-to-point performance or inverse performance, as applicable,
of the relevant commodity index. Investors should consider their investment horizon as well as potential trading costs when evaluating
an investment in the securities and should regularly monitor their holdings of the securities to ensure that they remain consistent
with their investment strategies.
Key Terms
Issuer: |
Deutsche Bank AG, London Branch (“Deutsche Bank”). |
Index: |
For the Commodity Double Short ETNs, the
Index is obtained by combining two times the inverse returns on the Deutsche Bank Liquid Commodity IndexTM Excess Return
(the “DB benchmark commodity index”) with the returns on the DB 3-Month T-Bill Index (the “TBill index”).
For the Commodity Double Long ETNs, the
Index is obtained by combining two times the returns on the Deutsche Bank Liquid Commodity Index– Optimum YieldTM
Excess Return (“DB optimum yield commodity index” and, together with the DB benchmark commodity index, the “commodity
indices” and each a “commodity index”) with the returns on the TBill index.
For the Commodity Short ETNs, the Index
is obtained by combining the inverse returns on the DB benchmark commodity index with the returns on the TBill index.
For the Commodity Long ETNs, the Index is
obtained by combining the returns on the DB optimum yield commodity index with the returns on the TBill index.
We
refer to the TBill index and the relevant commodity index each as a “sub-index” and together as “sub-indices.”
|
|
(key terms continued on next page) |
You may lose some or all of your principal
if you invest in the securities. See “Risk Factors” beginning on page PS-21 of this pricing supplement for risks relating
to an investment in the securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of
this pricing supplement or the accompanying prospectus or prospectus supplement. Any representation to the contrary is a criminal
offense.
The estimated value of the securities
on each trading day is their repurchase value on such trading day, which is subject to an investor fee. See “Investor Fee”
under Key Terms.
The securities 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.
We issued
200,000 of each security on the inception date at 100% of the face amount of $25.00 per security, a significant portion of which
were initially held by Deutsche Bank Securities Inc. (“DBSI”). Additional securities have been and may continue to
be offered and sold from time to time, at our sole discretion, through DBSI.
As of July 10, 2015, there were approximately 53,000 Commodity Double Short ETNs, 553,000
Commodity Double Long ETNs, 57,000 Commodity Short ETNs and 92,000 Commodity Long ETNs outstanding. We are under no obligation
to sell additional securities at any time, and if we do sell additional securities, we may limit such sales and stop selling additional
securities at any time. See “Risk Factors — We may issue and sell additional securities from time to time but we are
under no obligation to do so. Any limitation or suspension on the issuance of the securities may materially and adversely affect
the price and liquidity of the securities in the secondary market and may cause the securities to trade at a premium or discount
in relation to their intraday indicative security value.”
We will receive proceeds equal to 100% of
the offering price of securities sold after the inception date. DBSI may charge investors a purchase fee of up to $0.03 per security.
DBSI, a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”), is our affiliate and will receive a portion of the investor fee. Please see “Supplemental
Plan of Distribution (Conflicts of Interest)” in this pricing supplement for more information.
Deutsche Bank Securities
(key
terms continued from previous page) |
Offerings:
|
· |
DB Commodity
Double Short Exchange Traded Notes due April 1, 2038 (“Commodity Double Short ETNs”) |
|
|
The Commodity Double
Short ETNs offer investors exposure to two times the monthly inverse performance of the DB benchmark commodity index plus
the monthly TBill index return, reduced by the investor fee. |
|
· |
DB Commodity Double
Long Exchange Traded Notes due April 1, 2038 (“Commodity Double Long ETNs”) |
|
|
The Commodity Double
Long ETNs offer investors exposure to two times the monthly performance of the DB optimum yield commodity index plus the monthly
TBill index return, reduced by the investor fee. |
|
· |
DB Commodity Short
Exchange Traded Notes due April 1, 2038 (“Commodity Short ETNs”) |
|
|
The Commodity Short
ETNs offer investors exposure to the monthly inverse performance of the DB benchmark commodity index plus the monthly TBill
index return, reduced by the investor fee. |
|
· |
DB Commodity Long
Exchange Traded Notes due April 1, 2038 (“Commodity Long ETNs”) |
|
|
The Commodity Long ETNs offer investors
exposure to the monthly performance of the DB optimum yield commodity index plus the monthly TBill index return, reduced by
the investor fee. |
Initial
Settlement Date: |
May 1, 2008 |
Inception Date: |
April 28, 2008 |
Denominations/Face Amount: |
$25 per security. The
securities have been and may be issued and sold over time at prices based on the indicative value of such securities at such
times, which may be significantly higher or lower than the face amount. |
Payment at Maturity:
|
If your securities have
not previously been repurchased by Deutsche Bank at your election, at maturity, subject to the credit of the Issuer, you will
receive a cash payment per security equal to: |
|
Current
principal amount x applicable index factor on the final valuation date x fee factor on the final valuation date
If
the applicable index factor is zero on any trading day, the repurchase value will equal zero, the securities
will be accelerated and you will lose your entire investment in the securities.
Any
payment at maturity or upon a repurchase at your option is subject to our ability to pay our obligations
as they become due.
|
Repurchase at Your Option:
|
You
may offer a minimum of 5,000 securities or an integral multiple of 5,000 securities in excess thereof to Deutsche Bank
for repurchase for an amount in cash equal to the repurchase value on the applicable valuation date.
DBSI
may charge investors an additional fee of up to $0.03 for each security which is repurchased. See “Repurchase
Procedures” below for additional requirements for offering your securities for repurchase.
|
Repurchase Procedures:
|
To
effect a repurchase, you must irrevocably offer at least 5,000 securities (or an integral multiple of 5,000 securities
in excess thereof) from a single offering to DBSI no later than 10:00 a.m., New York City time, on your desired valuation
date, which must be no later than the final valuation date. The transaction will settle on the repurchase date, which
will be the third business day following the applicable valuation date, subject to postponement in the event of a market
disruption event as described under “Specific Terms of the Securities – Market Disruption Events.”
Because the repurchase value on each trading day will not be calculated and published until the close of trading, you
will not know the applicable repurchase value at the time you exercise your repurchase right on your desired valuation
date and will bear the risk that your securities will decline in value between the time of your exercise and the time
at which the repurchase value is determined.
If
less than 5,000 securities of an offering are outstanding, you will not be able to avail yourself of the repurchase option. |
Repurchase Value:
|
We refer to the amount
per security you will be entitled to receive upon any early repurchase as the repurchase value. The repurchase value reflects
the current principal amount and the performance of the relevant Index from the last monthly reset date to the close of trading
on the applicable valuation date, reduced by the investor fee on such trading day.On each trading day, the repurchase value
will be equal to: |
|
Current principal amount
x applicable index factor on the trading day x fee factor on the trading day |
|
If
the applicable index factor is zero on any trading day, the repurchase value will equal zero, the relevant securities
will be accelerated and you will lose your entire investment in such securities.
Deutsche
Bank will publish the repurchase value for each offering of securities after the close of trading on each trading day
on the following Bloomberg pages:
|
|
Repurchase
Value |
|
|
Commodity Double Short ETNs: |
“DEERP” |
|
|
Commodity Double Long ETNs: |
“DYYRP” |
|
|
Commodity Short ETNs: |
“DDPRP” |
|
|
Commodity Long ETNs: |
“DPURP” |
|
Intraday Indicative Security Value: |
The intraday indicative
security value is meant to approximate the economic value of the securities at any given time during a trading day.
It is calculated using the same formula as the repurchase value, except that instead of using the closing levels of
the sub-indices, the calculation is based on the intraday levels of the sub-indices at the particular time. In calculating
the intraday indicative security value at any given time, the calculation agent will take into account the current principal
amount, the performance of the relevant Index from the last monthly reset date to such time and the deduction of the investor
fee in accordance with the formula set forth below: |
|
Current principal amount × applicable
index factor calculated based on the level of the Index at such time × fee factor for the day on which such time occurs |
|
The
intraday indicative security value is a calculated value and is not the same as the trading price of the securities and
is not a price at which you can buy or sell the securities in the secondary market. The intraday indicative security value
does not take into account the factors that influence the trading price of the securities, such as imbalances of supply
and demand, lack of liquidity and credit considerations. The actual trading price of the securities in the secondary
market may vary significantly from their intraday indicative security value.
Investors
can compare the trading price of the securities against the intraday indicative security value to determine whether the
securities are trading in the secondary market at a premium or a discount to the economic value of the securities at any
given time. Investors are cautioned that paying a premium purchase price over the intraday indicative security value
at any time could lead to the loss of any premium in the event the investor sells the securities when the premium is no
longer present in the marketplace or when the securities are repurchased by us. It is also possible that the securities
will trade in the secondary market at a discount below the intraday indicative security value and that investors would
receive less than the intraday indicative security value if they had to sell their securities in the market at such time.
Deutsche
Bank will publish the intraday indicative security value for each offering of securities every 15 seconds on the following
Bloomberg pages:
|
|
Intraday
Indicative Security Value |
|
|
Commodity Double Short ETNs: |
“DEEIV” |
|
|
Commodity Double Long ETNs: |
“DYYIV” |
|
|
Commodity Short ETNs: |
“DDPIV” |
|
|
Commodity Long ETNs: |
“DPUIV” |
|
Index Factors: |
· |
Index factor for Commodity
Double Short ETNs = 1 + TBill index return – (2 x DB benchmark commodity index return) |
|
· |
Index factor for Commodity Double Long
ETNs = 1 + TBill index return + (2 x DB optimum yield commodity index return) |
|
· |
Index factor for Commodity Short ETNs
= 1 + TBill index return – DB benchmark commodity index return |
|
· |
Index factor for Commodity Long ETNs = 1 + TBill index return
+ DB optimum yield commodity index return |
Sub-Index Returns: |
The DB benchmark commodity
index return and the DB optimum yield commodity index return (each, a “commodity index return”) will be calculated
as follows: |
|
Commodity
index closing level – Commodity index monthly initial level
Commodity
index monthly initial level |
|
For purposes of calculating the intraday
indicative security value, each commodity index return will be determined as described above using the intraday level of the
applicable commodity index. |
|
The TBill index return will be calculated
as follows: |
|
TBill
index closing level – TBill index monthly initial level
TBill
index monthly initial level |
|
For purposes of calculating the intraday
indicative security value, the TBill index return will be determined as described above using the intraday level of the TBill
index. |
Acceleration Upon Zero Repurchase Value: |
If the repurchase value on any trading
day equals zero for a particular offering of securities, those securities will be automatically accelerated on that day for
an amount equal to the zero repurchase value and holders will not receive any payment in respect of their investment. |
Listing: |
The securities in each offering are
listed on NYSE Arca. To the extent there is an active secondary market in any of the securities, we expect that investors
will purchase and sell such securities primarily in this secondary market. The ticker symbols for each offering are as follows:
|
|
· |
Commodity Double Short ETNs:
|
“DEE” |
|
· |
Commodity Double Long ETNs: |
“DYY” |
|
· |
Commodity Short ETNs: |
“DDP” |
|
· |
Commodity Long ETNs: |
“DPU” |
Current Principal Amount: |
For the period from the
inception date to May 31, 2008 (such period, the “initial calendar month”), the current principal amount
was equal to $25.00 per security. For each subsequent calendar month, the current principal amount for each security will
be reset as follows on the monthly reset date: |
|
New current principal amount =
previous current principal amount x applicable index factor on the applicable monthly valuation date x fee factor on
the applicable monthly valuation date |
|
The new current principal
amount will reflect the current principal amount for the immediately preceding calendar month, the performance of the Index
for the particular offering of securities from the immediately preceding monthly reset date to the applicable monthly valuation
date (determined using the closing levels of the sub-indices on such monthly valuation date) and the deduction of the investor
fee on such monthly valuation date. With respect to the Commodity Double Short ETNs and the Commodity Double Long ETNs, the
current principal amount is reset each calendar month to ensure that a consistent degree of leverage is applied to the performance
of the Index. |
Commodity Index Monthly Initial Level: |
For the initial calendar month, the
commodity index monthly initial level equaled: (i) for the DB benchmark commodity index, 697.790394, and (ii) for
the DB optimum yield commodity index, 751.377412, each the commodity index closing level on the inception date. For each subsequent
calendar month, the commodity index monthly initial level will equal the commodity index closing level as of the opening of
trading on the monthly reset date for that calendar month. |
Commodity Index Closing Level: |
The commodity index closing level will
equal: (i) for the DB benchmark commodity index, the closing level of the DB benchmark commodity index as reported on
Bloomberg page “DBLCMACL <Index>”, and (ii) for the DB optimum yield commodity index,
the closing level of the DB optimum yield commodity index as reported on Bloomberg page “DBLCOYER <Index>”,
subject in each case to the occurrence of a market disruption event as described under “Specific Terms of the Securities – Market
Disruption Events”; provided that on any calendar day which is not a day on which the closing level of the commodity
index is published, the commodity index closing level will equal such level on the immediately preceding trading day. |
TBill Index Monthly Initial Level: |
For the initial calendar month, the
TBill index monthly initial level was equal to 234.332714, the TBill index closing level on the inception date. For each subsequent
calendar month, the TBill index monthly initial level will equal the TBill index closing level as of the opening of trading
on the monthly reset date for that calendar month. |
TBill Index Closing Level: |
The closing level of the TBill index
as reported on Bloomberg page “DBTRBL3M <Index>”. |
Monthly Reset Date: |
For each calendar month, the first calendar
day of that month beginning on June 1, 2008 and ending on March 1, 2038. |
Monthly Valuation Date: |
For each monthly reset date, the last
calendar day of the previous calendar month beginning on May 31, 2008 and ending on February 28, 2038. |
Valuation Date: |
In connection with a repurchase, the
trading day on which you deliver an effective notice offering your securities for repurchase by Deutsche Bank. |
Final Valuation Date: |
March 29, 2038 |
Maturity Date: |
April 1, 2038, subject to postponement
in the event of a market disruption event as described under “Specific Terms of the Securities – Market Disruption
Events.” |
Trading Day: |
A trading day is a day on which (i) the
values of the sub-indices are published by Deutsche Bank AG, London Branch, (ii) trading is generally conducted on NYSE
Arca and (iii) trading is generally conducted on the markets on which the futures contracts underlying the relevant commodity
index are traded, in each case as determined by Deutsche Bank, as calculation agent, in its sole discretion. |
CUSIP Numbers: |
· |
Commodity Double Short ETNs: |
25154H 483 |
|
· |
Commodity Double Long ETNs: |
25154H 475 |
|
· |
Commodity Short ETNs |
25154H 467 |
|
· |
Commodity Long ETNs: |
25154H 459 |
Fee Factor: |
On any given day, the fee
factor will be calculated as follows: |
|
1-[investor fee x day count
fraction] |
|
|
Because
the fee factor is a number lower than 1, when applied as a multiple, it will have the effect of lowering the current principal
amount each month and the amount you receive at maturity or upon repurchase.
Because
the investor fee reduces the current principal amount each month and the amount of your return at maturity or upon repurchase,
the applicable index factor must increase by an amount sufficient to offset the investor fee applicable to your securities
in order for you to receive at least the return of your initial investment at maturity or upon repurchase. If the index
factor decreases or does not increase sufficiently, you will receive less than your initial investment at maturity or
upon repurchase.
|
Investor Fee: |
The investor fee is equal to 0.75% per
annum, calculated daily and applied monthly to the current principal amount. The investor fee is the amount that we charge
you for providing exposure to the Index and covers the expected cost of hedging our obligations under the securities as well
as the profit we expect to realize for assuming the related risk. |
Day Count Fraction: |
For each calendar month, the day count
fraction will equal a fraction, the numerator of which is the number of days elapsed from and including the monthly reset
date (or the inception date in the case of the initial calendar month) to and
including the monthly valuation date (or the trading day, valuation date or final valuation date, as applicable) and the denominator
of which is 365. |
Record Date: |
The record date for the payment
at maturity will be the final valuation date, whether or not that day is a business day.
|
ADDITIONAL TERMS SPECIFIC TO THE SECURITIES
You should read this pricing supplement
together with the prospectus dated July 31, 2015, as supplemented by the prospectus supplement dated July 31, 2015 relating to
our Series A global notes of which the securities are a part. You may access these documents on the website of the Securities and
Exchange Commission (the “SEC”) and any further supplements to these documents at www.sec.gov as follows (or if such
address has changed, by reviewing our filings for the relevant date on the SEC website):
| • | Prospectus supplement dated July
31, 2015: |
http://www.sec.gov/Archives/edgar/data/1159508/000095010315006048/crt-dp58161_424b2.pdf
| • | Prospectus dated July 31, 2015: |
http://www.sec.gov/Archives/edgar/data/1159508/000119312515273165/d40464d424b2.htm
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 securities 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 “Risk Factors” in the accompanying prospectus supplement and prospectus, as the securities
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 securities.
TABLE OF CONTENTS
Page
SUMMARY |
PS-1 |
RISK FACTORS |
PS-21 |
THE INDICES |
PS-34 |
VALUATION OF THE SECURITIES |
PS-40 |
SPECIFIC TERMS OF THE SECURITIES |
PS-42 |
CLEARANCE AND SETTLEMENT |
PS-47 |
USE OF PROCEEDS AND HEDGING |
PS-47 |
U.S. FEDERAL INCOME TAX CONSEQUENCES |
PS-49 |
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST) |
PS-52 |
BENEFIT PLAN INVESTOR CONSIDERATIONS |
PS-53 |
LEGAL MATTERS |
PS-55 |
VALIDITY OF THE SECURITIES |
PS-55 |
FORM OF OFFER FOR REPURCHASE |
A-1 |
SUMMARY
The following is a summary of the terms
of the securities, as well as a discussion of risks and other considerations you should take into account when deciding whether
to invest in the securities. The information in this section is qualified in its entirety by the more detailed explanations set
forth elsewhere in this pricing supplement and the accompanying prospectus supplement and prospectus. References to the “prospectus”
mean our accompanying prospectus, dated July 31, 2015, and references to the “prospectus supplement” mean our accompanying
prospectus supplement, dated July 31, 2015, which supplements the prospectus, in each case as may be amended or supplemented from
time to time.
On the inception date, we issued 200,000
of each security and since then, we have issued additional securities. As of July 10, 2015, there were approximately 53,000 Commodity
Double Short ETNs, 553,000 Commodity Double Long ETNs, 57,000 Commodity Short ETNs and 92,000 Commodity Long ETNs outstanding.
Depending on market demand, we may, without your consent, create and issue securities, in addition to those offered by this pricing
supplement, having the same terms and conditions as the securities and we may consolidate the additional securities to form a single
class with the outstanding securities. Any such additional securities may be offered and sold from time to time through DBSI, acting
as our agent, in amounts to be determined solely by us. However, we are under no obligation to sell additional securities at any
time, and if we do sell additional securities we may limit such sales and stop selling additional securities at any time. If we
suspend the issuance of additional securities, the price and liquidity of such securities in the secondary market could be materially
and adversely affected. Unless we indicate otherwise, if we suspend selling additional securities, we reserve the right to resume
selling additional securities at any time, which might result in the reduction or elimination of any premium in the trading price.
See “Risk Factors — We may issue and sell additional securities from time to time but we are under no obligation to
do so. Any limitation or suspension on the issuance of the securities may materially and adversely affect the price and liquidity
of the securities in the secondary market and may cause the securities to trade at a premium or discount in relation to their intraday
indicative security value” and “— You may not be able to purchase or sell your securities in the secondary market
at the intraday indicative security value, and paying a premium purchase price over the intraday indicative security value could
lead to significant losses” in this pricing supplement for more information.
Additionally, the number of securities outstanding
could be reduced at any time due to a repurchase of the securities by Deutsche Bank as described in this pricing supplement. A
suspension of additional issuances of the securities could result in a significant reduction in the number of outstanding securities
if investors subsequently exercise their right to have the securities repurchased by us. Accordingly, the number of outstanding
securities could vary substantially over the term of the securities and adversely affect the liquidity of the securities. See “Risk
Factors — You may not be able to offer your securities for repurchase if the total number of securities outstanding has fallen
to a level that is close to or below 5,000.”
What are the securities and how do they
work?
We are offering four separate Exchange Traded
Notes:
| • | DB Commodity Double Short Exchange Traded Notes due April 1, 2038 (“Commodity Double
Short ETNs”) |
| • | DB Commodity Double Long Exchange Traded Notes due April 1, 2038 (“Commodity Double
Long ETNs”) |
| • | DB Commodity Short Exchange Traded Notes due April 1, 2038 (“Commodity Short ETNs”) |
| • | DB Commodity Long Exchange Traded Notes due April 1, 2038 (“Commodity Long ETNs”) |
We refer to each Exchange Traded Note as
a security. Each of the four offerings of securities are senior unsecured obligations of Deutsche Bank AG, acting through its London
branch. Investors can subscribe to any of the four offerings.
Each security being offered has separate
terms and offers investors a different type of monthly exposure to an Index, which is a total return version of a commodity-linked
index, subject to an investor fee. For the Commodity Double Short ETNs and the Commodity Short ETNs (together, the “Short
ETNs”), the Index is a total return version of the Deutsche Bank Liquid Commodity Index™. For the Commodity
Double Long ETNs and the Commodity Long ETNs (together, the “Long
ETNs”), the Index is a total return version of the Deutsche Bank
Liquid Commodity Index – Optimum Yield™.
The securities do not guarantee any return of principal at maturity and do not pay any interest.
What is the Index?
For the Commodity Double Short ETNs, the
Index is obtained by combining two times the inverse returns on the Deutsche Bank Liquid Commodity IndexTM Excess Return
(the “DB benchmark commodity index”) with the returns on the DB 3-Month T-Bill Index (the “TBill index”).
For the Commodity Double Long ETNs, the
Index is obtained by combining two times the returns on the Deutsche Bank Liquid Commodity Index – Optimum YieldTM
Excess Return (the “DB optimum yield commodity index” and, together with the DB benchmark commodity index, the “commodity
indices” and each a “commodity index”) with the returns on the TBill index.
For the Commodity Short ETNs, the Index
is obtained by combining the inverse returns on the DB benchmark commodity index with the returns on the TBill index.
For the Commodity Long ETNs, the Index is
obtained by combining the returns on the DB optimum yield commodity index with the returns on the TBill index.
We refer to the TBill index and the relevant
commodity index each as a “sub-index” and together as “sub-indices.”
The DB benchmark commodity index and the
DB optimum yield commodity index are both intended to reflect the price changes, positive or negative, in a basket of futures contracts
relating to six commodities: crude oil, heating oil, aluminum, gold, corn and wheat. The commodity indices differ only in the methodology
they use for replacing underlying futures contracts that are near expiration. This difference is described more fully below under
“The Indices.”
The TBill index is intended to approximate
the returns from investing in 3-month United States Treasury bills on a rolling basis.
What exposure do the Commodity Double
Short ETNs offer?
The Commodity Double Short ETNs offer investors
two times leveraged exposure to the inverse monthly performance of the DB benchmark commodity index plus the monthly TBill index
return, reduced by the investor fee.
If the DB benchmark commodity index decreases
over any calendar month (a “beneficial monthly performance”), the return on the Index for the Commodity Double Short
ETNs for that month will increase by two times the movement of the DB benchmark commodity index, plus the monthly TBill
index return. If the DB benchmark commodity index increases over any calendar month (an “adverse monthly performance”),
the return on the Index for that month will decrease by two times the movement of the DB benchmark commodity index, offset
by any monthly TBill index return.
As described under “How is the payment
at maturity or upon repurchase calculated?” below, the Commodity Double Short ETNs will not offer investors
two times leveraged exposure to the inverse performance of the DB benchmark commodity index over an extended time period. While
the Commodity Double Short ETNs are linked to the performance of the DB benchmark commodity index, the Commodity Double Short ETNs
do not track the linear inverse performance of the DB benchmark commodity index because of the manner in which the index return
is calculated. The leverage feature of the Commodity Double Short ETNs, as well as the monthly application
of the index factor and fee factor and monthly reset of the principal amount, will likely cause the performance of the Commodity
Double Short ETNs over time to differ significantly from the point-to-point inverse performance of the DB benchmark commodity
index.
What exposure do the Commodity Double
Long ETNs offer?
The Commodity Double Long ETNs offer investors
two times leveraged exposure to the monthly performance of the DB optimum yield commodity index plus the monthly TBill index return,
reduced by the investor fee.
If the DB optimum yield commodity index
increases over any calendar month (a “beneficial monthly performance”), the return on the Index for the Commodity
Double Long ETNs for that month will increase by two times the movement of the DB optimum yield commodity index, plus the
monthly TBill index return. If the DB optimum yield commodity index decreases over any calendar month (an “adverse
monthly performance”), the
return on the Index for that month will
decrease by two times the movement of the DB optimum yield commodity index, offset by any monthly TBill index return.
As described under “How is the payment
at maturity or upon repurchase calculated?” below, the Commodity Double Long ETNs will not offer investors
two times leveraged exposure to the performance of the DB optimum yield commodity index over an extended time period. While the
Commodity Double Long ETNs are linked to the performance of the DB optimum yield commodity index, the Commodity Double Long ETNs
do not track the linear performance of the DB optimum yield commodity index because of the manner in which the index return is
calculated. The leverage feature of the Commodity Double Long ETNs, as well as the monthly application of the index factor
and fee factor and monthly reset of the principal amount, will likely cause the performance of the Commodity Double Long ETNs over
time to differ significantly from the point-to-point performance of the DB optimum yield commodity index.
What exposure do the Commodity Short
ETNs offer?
The Commodity Short ETNs offer investors
unleveraged exposure to the inverse monthly performance of the DB benchmark commodity index plus the monthly TBill index return,
reduced by the investor fee.
If the DB benchmark commodity index decreases
over any calendar month (a “beneficial monthly performance”), the return on the Index for the Commodity Short ETNs
for that month will increase by the movement of the DB benchmark commodity index, plus the monthly TBill index return. If
the DB benchmark commodity index increases over any calendar month (an “adverse monthly performance”), the return
on the Index for that month will decrease by the movement of the DB benchmark commodity index, offset by any monthly TBill
index return.
What exposure do the Commodity Long ETNs
offer?
The Commodity Long ETNs offer investors
unleveraged exposure to the monthly performance of the DB optimum yield commodity index plus the monthly TBill index return, reduced
by the investor fee.
If the DB optimum yield commodity index
increases over any calendar month (a “beneficial monthly performance”), the return on the Index for the Commodity
Double Long ETNs for that month will increase by the movement of the DB optimum yield commodity index, plus the monthly
TBill index return. If the DB optimum yield commodity index decreases over any calendar month (an “adverse monthly
performance”), the return on the Index for that month will decrease by the movement of the DB optimum yield commodity
index, offset by any monthly TBill index return.
How is the payment at maturity or upon
repurchase calculated?
At maturity or upon an earlier repurchase,
subject to the credit of the Issuer, you will receive a payment per security which will reflect the month-over-month performance
of the Index for the particular offering of securities, reduced by the investor fee. Any payment at maturity or upon earlier repurchase
is subject to our ability to satisfy our obligations as they become due.
Because the current principal amount
is reset each month and is reduced by the investor fee, the securities do not offer a return based on the simple, point-to-point
performance of the relevant Index from the inception date to the final valuation date or date of earlier repurchase. Instead,
the amount you receive at maturity or upon an earlier repurchase will be contingent upon each monthly performance of the relevant
Index during the term of the securities, and will be reduced by the investor fee. Accordingly, even if over the term of the securities,
the relevant Index for your securities has demonstrated an overall beneficial performance for your particular securities (i.e.,
the DB benchmark commodity index decreases for the Short ETNs or the DB optimum yield commodity index increases for the Long ETNs),
there is no guarantee that you will receive at maturity, or upon an earlier repurchase, your initial investment back or any return
on that investment. This is because the amount you receive at maturity (or upon an earlier repurchase) depends on how the relevant
Index has performed in each month prior to maturity (or repurchase) and, consequently, how the current principal amount has been
reset in each month. In particular, significant adverse monthly performances for your securities may not be offset by any beneficial
monthly performances.
If the repurchase value for your securities
decreases to zero on any trading day, the securities will accelerate on that day for an amount equal to the zero repurchase value
and you will not receive any return of your investment.
At maturity, your payment per security,
if any, will be calculated as:
Current principal amount × applicable
index factor on the final valuation date
× fee factor on the final valuation
date
where, |
Current principal amount |
= |
For the period from the inception date to April 30, 2008 (the “initial calendar month”), the current principal amount was equal to $25.00 per security. For each subsequent calendar month, the current principal amount will be reset as follows on the monthly reset date: |
New current principal amount |
= |
Previous current principal amount × applicable index
factor on the applicable monthly
valuation date × fee factor on the
applicable monthly valuation date
|
Index factor |
|
Index factor for Commodity Double Short ETNs: |
= |
1 + TBill index return – (2 × DB benchmark commodity index return) |
|
|
Index factor for Commodity Double Long ETNs: |
= |
1 + TBill index return + (2 × DB optimum yield commodity index return) |
|
|
Index factor for Commodity Short ETNs: |
= |
1 + TBill index return – DB benchmark commodity index return |
|
|
Index factor for Commodity Long ETNs: |
= |
1 + TBill index return + DB optimum yield commodity index return |
where, |
the DB benchmark commodity index return and the DB optimum yield commodity index return (each a “commodity index return”) and the TBill index return will be calculated as follows: |
Commodity index return |
= |
commodity index closing level -
commodity index monthly initial level
commodity index monthly initial
level |
|
TBill index return |
= |
TBill index closing level – TBill index monthly
initial level
TBill index monthly initial level |
|
Fee factor |
= |
On any given day, the fee factor will be calculated as follows: |
|
|
1 – [investor fee x day count fraction] |
where, |
Investor fee |
= |
0.75% per annum |
Day count fraction |
= |
For each calendar month, the day count fraction will equal a fraction, the numerator of which is the number of days elapsed from and including the monthly reset date (or the inception date in the case of the initial calendar month) to and including the monthly valuation date (or the trading day, valuation date or final valuation date, as applicable) and the denominator of which is 365. |
How and why is the current principal
amount reset?
Initially, the current principal amount
was equal to $25 per security. At the start of each subsequent calendar month, the current principal amount will be reset by applying
the index factor and the fee factor for the immediately preceding month to the previous current principal amount.
For example, if for May the current principal
amount is $20 and the index factor on the monthly valuation date is equal to 0.90, the current principal amount for June will equal
$17.99 ($20 times 0.90 times 0.999363 (representing the fees for May)). Subsequently, the index factor and fee factor
for June will be applied to $17.99 to derive the current principal amount for July.
As reset on each monthly reset date, the
current principal amount represents the amount for which Deutsche Bank would repurchase your securities if the valuation date for
the repurchase were the monthly valuation date. During the month, the current principal amount will remain unchanged and the amount
for which Deutsche Bank
would repurchase your securities will depend
upon the current principal amount, the applicable index factor on the applicable valuation date and the fee factor as accrued to
such valuation date.
The current principal amount is reset each
calendar month to ensure that a consistent degree of leverage is applied to any performance of the Index. If the current principal
amount is reduced by an adverse monthly performance, the index factor of any further adverse monthly performance will lead to a
smaller dollar loss when applied to that reduced current principal amount than if the current principal amount were not reduced.
Equally, however, if the current principal amount increases, the dollar amount lost for a certain level of adverse monthly performance
will increase correspondingly.
Resetting the current principal amount also
means that the dollar amount which may be gained from any beneficial monthly performance will be contingent upon the current principal
amount. If the current principal amount increases, then any beneficial monthly performance will result in a gain of a larger dollar
amount than would be the case if the current principal amount were to decrease. Conversely, as the current principal amount is
reduced towards zero, the dollar amount to be gained from any beneficial monthly performance will decrease correspondingly.
The leverage feature of the Commodity Double
Long ETNs and the Commodity Double Short ETNs, when combined with the monthly application of the index factor and fee factor and
monthly reset of the principal amount, will likely cause the performance of such securities to differ significantly from the point-to-point
performance or inverse performance, as applicable, of the relevant commodity index. The Commodity Double Long ETNs and the Commodity
Double Short ETNs are not designed to be long-term investments, may not be suitable for investors seeking an investment with a
term greater than the time remaining to the next monthly reset date and should be used only by knowledgeable investors who understand
the potential adverse consequences of seeking longer-term leveraged or inverse investment results by means of securities that reset
their exposure monthly.
What is the repurchase value of the securities?
We refer to the amount you will be entitled
to receive upon any early repurchase per security as the “repurchase value.” The repurchase value reflects the current
principal amount and the performance of the Index from the last monthly reset date to the close of trading on the applicable valuation
date, reduced by the investor fee on such trading day. On each trading day, the repurchase value will be calculated as follows:
Current principal amount x applicable
index factor on the trading day
x fee factor on the trading day
The calculation agent will publish the daily
repurchase value for each offering of securities on the following Bloomberg pages:
• |
Commodity Double Short ETNs: |
“DEERP” |
• |
Commodity Double Long ETNs: |
“DYYRP” |
• |
Commodity Short ETNs: |
“DDPRP” |
• |
Commodity Long ETNs: |
“DPURP” |
What is the intraday indicative security
value of the securities?
We also calculate and publish during each
trading day an “intraday indicative security value,” which is meant to approximate the economic value of the securities
at any given time during the trading day. It is calculated using the same formula as the repurchase value, except that instead
of using the closing levels of the sub-indices, the calculation is based on the intraday levels of the sub-indices
at the particular time. In calculating the intraday indicative security value at any given time, the calculation agent will take
into account the current principal amount, the performance of the relevant Index from the last monthly reset date to such time
and the deduction of the investor fee in accordance with the formula set forth below:
Current principal amount × applicable
index factor calculated based on the level of the Index at such time × fee factor for the day on which such time occurs
The intraday indicative security value is
not the same as the trading price of the securities and is not a price at which you can buy or sell the securities in the secondary
market. The trading price of the securities at any time may vary significantly from their intraday indicative security value.
Investors can compare the trading price of the securities against the intraday indicative security value to determine whether
the securities are trading in the secondary market at a premium or a discount to the economic value of the securities at any given
time.
Investors are cautioned that paying a premium
purchase price over the intraday indicative security value at any time could lead to the loss of any premium in the event the investor
sells the securities when the premium is no longer present in the marketplace or when the securities are repurchased by us. It
is also possible that the securities will trade in the secondary market at a discount below the intraday indicative security value
and that investors would receive less than the intraday indicative security value if they had to sell their securities in the market
at such time.
We will publish the intraday indicative
security value for each offering of securities every 15 seconds on the following Bloomberg pages:
• |
Commodity Double Short ETNs: |
“DEEIV” |
• |
Commodity Double Long ETNs: |
“DYYIV” |
• |
Commodity Short ETNs: |
“DDPIV” |
• |
Commodity Long ETNs: |
“DPUIV” |
What are the fees and how are they calculated?
The fee factor is calculated daily based
on the investor fee of 0.75% per annum and a day-count fraction measuring the number of days elapsed from and including the
monthly reset date (or the inception date in the case of the first calendar month) to and including the monthly valuation date
(or the trading day, valuation date or final valuation date, as applicable) within a 365 day year. The investor fee constitutes
the amount we charge investors for providing the particular exposure to the Index of your securities, including the expected cost
of hedging our obligations under the securities, as well as the profit we or our affiliates expect to realize in consideration
for assuming the risks inherent in providing such hedge.
If you offer your securities for repurchase
by Deutsche Bank, the fee factor will be applied as accrued to the applicable valuation date from the immediately preceding monthly
reset date. Similarly, at maturity, the amount you receive will be subject to the fee factor as accrued to the final valuation
date from the immediately preceding monthly reset date. Because the fee factor is a number lower than 1, when applied as a multiple,
it will have the effect of lowering the current principal amount each month and the amount you receive at maturity or upon repurchase.
Because the investor fee reduces the
current principal amount each month and the amount of your return at maturity or upon repurchase by Deutsche Bank, the applicable
index factor must increase by an amount sufficient to offset the investor fee applicable to your securities in order for you to
receive at least your initial investment back at maturity or upon repurchase by Deutsche Bank.
If the index factor decreases or does
not increase sufficiently, you will receive less than your initial investment back at maturity or upon repurchase by Deutsche Bank.
The applicable index factor will increase upon decreases of the relevant commodity index for the Short ETNs and upon increases
of the relevant commodity index for the Long ETNs.
If the repurchase value for any
offering of securities decreases to zero on any trading day, such securities will accelerate on that day for an amount equal to
the zero repurchase value and you will lose your entire investment in such securities.
In addition to the investor fee, DBSI may
charge investors in any subsequent distribution a purchase fee of up to $0.03 per security. Furthermore, if you elect to exercise
your repurchase right, DBSI may charge investors a repurchase fee of up to $0.03 for each security that is repurchased.
How do you offer your securities for
repurchase by Deutsche Bank?
To effect a repurchase, you must irrevocably
offer at least 5,000 securities (or an integral multiple of 5,000 securities in excess thereof) from a single offering to DBSI
no later than 10:00 a.m., New York City time, on your desired valuation date, which may be any trading day from and including the
initial settlement date to and including the final valuation date, subject to postponement in the event of a market disruption
event as described under “Specific Terms of the Securities – Market Disruption Events.” Because the repurchase
value on each trading day will not be calculated and published until the close of trading, you will not know the applicable repurchase
value at the time you exercise your repurchase right on your desired valuation date and will bear the risk that your securities
will decline in value between the time of your exercise and the close of trading on the applicable valuation date. Because valuation
dates are subject to postponement in the event of a market disruption event as described under “Specific Terms of the Securities
–- Market Disruption Events,” you may bear
this risk for an extended period of time.
The repurchase date for your securities will be the third business day following the valuation date.
If you wish to offer your securities to
Deutsche Bank for repurchase, you and your broker must follow the following procedures:
| • | your broker must deliver an irrevocable Offer for Repurchase, a form of which is attached as Annex A
to this pricing supplement, to DBSI by 10:00 a.m., New York City time, on your desired valuation date. The applicable repurchase
date will be three business days following the valuation date. You must offer at least 5,000 securities or an integral multiple
of 5,000 securities in excess thereof for repurchase by Deutsche Bank on any repurchase date. You may not combine securities from
separate offerings for the purpose of satisfying the minimum repurchase amount. DBSI must acknowledge receipt from your broker
in order for your offer to be effective; |
| • | your broker must book a delivery vs. payment trade with respect to your securities on the applicable
valuation date at a price equal to the applicable repurchase value, facing DBSI; and |
| • | cause your DTC (as defined below) custodian to deliver the trade as booked for settlement via DTC
at or prior to 10:00 a.m., New York City time, on the repurchase date (the third business day following the valuation date, subject
to postponement in the event of a market disruption event as described under “Specific Terms of the Securities – Market
Disruption Events”). |
Different brokers and DTC participants may
have different deadlines for accepting instructions from their customers. Accordingly, you should consult the brokerage firm or
other DTC participant through which you own your interest in the securities in respect of such deadlines. If DBSI does not receive
your offer for repurchase by 10:00 a.m., New York City time, on your desired valuation date, your notice will not be effective
and we will not accept your offer to repurchase your securities on the repurchase date. Any repurchase instructions that we receive
in accordance with the procedures described above will be irrevocable. We may request that DBSI purchase the securities you offer
to us for repurchase for a cash payment that would otherwise have been payable by us. Any securities purchased by DBSI will remain
outstanding. If less than 5,000 securities of an offering are outstanding, you will not be able to avail yourself of the repurchase
option.
DBSI may charge a fee of up to $0.03 per
security that is repurchased.
How do you sell your securities?
The securities are listed on NYSE Arca.
To the extent there is an active secondary market in any of the securities, we expect that investors will purchase and sell such
securities primarily in this secondary market. A trading market for your securities may not develop, however, and no assurances
can be given as to the continuation of any listing during the term of the securities. We are not required to maintain any listing
of the securities on NYSE Arca or any other exchange. If the securities are delisted or if a sufficiently active secondary market
in the securities does not develop, there likely will not be enough liquidity in the securities to allow you to trade or sell your
securities when you wish to do so or at a price that reflects a liquid market in the securities.
Can the securities be accelerated?
If the repurchase value for your securities
decreases to zero on any trading day, the securities will accelerate on that day for an amount equal to the zero repurchase value
and you will not receive any return of your investment.
How do you determine the number of securities
outstanding at any time?
The number of securities outstanding
at any time, including any securities held by DBSI or other affiliates of ours, for each offering will be published on the following
Bloomberg pages:
• |
Commodity Double Short ETNs: |
“DEESO” |
• |
Commodity Double Long ETNs: |
“DYYSO” |
• |
Commodity Short ETNs: |
“DDPSO” |
• |
Commodity Long ETNs: |
“DPUSO” |
What are the tax consequences of an investment
in the securities?
You should review carefully the section
in this pricing supplement entitled “U.S. Federal Income Tax Consequences.”
Under current law, the United Kingdom will
not impose withholding tax on payments made with respect to the securities.
For a discussion of certain German tax considerations
relating to the securities, 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 securities, as well as tax
consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Hypothetical Examples
The following examples show how the securities
would perform in hypothetical circumstances. These examples highlight the behavior of the securities in different circumstances,
but they are not indicative of actual results. The figures in these examples may have been rounded for convenience. For ease of
presentation, in these examples we have assumed a common commodity index for both the Short ETNs and the Long ETNs. The actual
commodity index for the Short ETNs will be the DB benchmark commodity index and for the Long ETNs it will be the DB optimum yield
commodity index. See “Risk Factors – The Short ETNs and the Long ETNs are linked to different commodity indices”
for more information.
How the monthly performance of your securities affects the
current principal amount
Assumptions:
Commodity index monthly initial level: 100
TBill index monthly initial level: 100
Current principal amount: $25
Day count fraction: 30/365
Using the assumed day count fraction above, the fee factor for all of the following examples would equal: |
Fee factor |
= |
1 – (investor fee x day count fraction) |
|
= |
1 – (0.0075 x (30/365)) |
|
= |
0.999383562 |
Example 1: The commodity index increases over the month |
If, over the hypothetical calendar month, the commodity index increases to 125 and the TBill index increases to 100.2 on the monthly valuation date, the current principal amount would be reset for the following calendar month as follows: |
New current principal amount |
= |
Previous current principal
amount x applicable index factor on the monthly
valuation date
x fee factor on the monthly valuation date |
Commodity Double Short ETNs: |
For the Commodity Double Short ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return – (2 x commodity index return) |
where, |
Commodity index return |
= |
commodity
index closing level – commodity index monthly initial level
commodity
index monthly initial level |
|
TBill index return |
= |
TBill index closing level – TBill
index monthly initial level
TBill
index monthly initial level |
|
|
= |
0.002 |
Index factor |
= |
1 + 0.002 – (2 x 0.25) |
|
= |
0.502 |
Therefore, the new current principal amount for the Commodity Double Short ETNs would equal: |
New current principal amount |
= |
$25 x 0.502 x 0.999383562 |
|
= |
$12.54 |
As such, in this example, because the commodity index increased over the calendar month, the current principal amount for the Commodity Double Short ETNs decreased by twice the monthly increase in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Double Long ETNs: |
For the Commodity Double Long ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return + (2 x commodity index return) |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 + (2 x 0.25) |
|
= |
1.502 |
Therefore, the new current principal amount for the Commodity Double Long ETNs would equal: |
New current principal amount |
= |
$25 x 1.502 x 0.999383562 |
|
= |
$37.53 |
As such, in this example, because the commodity index increased over the calendar month, the current principal amount for the Commodity Double Long ETNs increased by twice the monthly increase in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Short ETNs: |
For the Commodity Short ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return – commodity index return |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 – 0.25 |
|
= |
0.752 |
Therefore, the new current principal amount for the Commodity Short ETNs would equal: |
New current principal amount |
= |
$25 x 0.752 x 0.999383562 |
|
= |
$18.79 |
As such, in this example, because the commodity index increased over the calendar month, the current principal amount for the Commodity Short ETNs decreased by the monthly increase in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Long ETNs: |
For the Commodity Long ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return + commodity index return |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 + 0.25 |
|
= |
1.252 |
Therefore, the new current principal amount for the Commodity Long ETNs would equal: |
New current principal amount |
= |
$25 x 1.252 x 0.999383562 |
|
= |
$31.28 |
As such, in this example, because the commodity index increased over the calendar month, the current principal amount for the Commodity Long ETNs increased by the monthly increase in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Example 2: The commodity index decreases over the month |
If, over the hypothetical calendar month, the commodity index decreases to 75 and the TBill index increases to 100.2 on the monthly valuation date, the current principal amount would be reset for the following calendar month as follows: |
New current principal amount |
= |
Previous current principal
amount x applicable index factor on the monthly
valuation date
x fee factor on the monthly valuation date |
Commodity Double Short ETNs: |
For the Commodity Double Short ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return – (2 x commodity index return) |
where, |
|
|
|
Commodity index return |
= |
commodity
index closing level – commodity index monthly initial level
commodity index
monthly initial level |
|
TBill index return |
= |
TBill index closing level – TBill
index monthly initial level
TBill
index monthly initial level |
|
|
= |
0.002 |
Index factor |
= |
1 + 0.002 – (2 x (– 0.25)) |
|
= |
1.502 |
Therefore, the new current principal amount for the Commodity Double Short ETNs would equal: |
New current principal amount |
= |
$25 x 1.502 x 0.999383562 |
|
= |
$37.53 |
As such, in this example, because the commodity index decreased over the calendar month, the current principal amount for the Commodity Double Short ETNs increased by twice the monthly decrease in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Double Long ETNs: |
For the Commodity Double Long ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return + (2 x commodity index return) |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 + (2 x (– 0.25)) |
|
= |
0.502 |
Therefore, the new current principal amount for the Commodity Double Long ETNs would equal: |
New current principal amount |
= |
$25 x 0.502 x 0.999383562 |
|
= |
$12.54 |
As such, in this example, because the commodity index decreased over the calendar month, the current principal amount for the Commodity Double Long ETNs decreased by twice the monthly decrease in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Short ETNs: |
For the Commodity Short ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return – commodity index return |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 – (– 0.25) |
|
= |
1.252 |
Therefore, the new current principal amount for the Commodity Short ETNs would equal: |
New current principal amount |
= |
$25 x 1.252 x 0.999383562 |
|
= |
$31.28 |
As such, in this example, because the commodity index decreased over the calendar month, the current principal amount for the Commodity Short ETNs increased by the monthly decrease in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Commodity Long ETNs: |
For the Commodity Long ETNs, the index factor would be calculated as follows: |
Index factor |
= |
1 + TBill index return + commodity index return |
Using the commodity index return and TBill index return calculated above, |
Index factor |
= |
1 + 0.002 + (– 0.25) |
|
= |
0.752 |
Therefore, the new current principal amount for the Commodity Long ETNs would equal: |
New current principal amount |
= |
$25 x 0.752 x 0.999383562 |
|
= |
$18.79 |
As such, in this example, because the commodity index decreased over the calendar month, the current principal amount for the Commodity Long ETNs decreased by the monthly decrease in the commodity index, subject to the addition of the increase in the TBill index and the deduction of the investor fee. |
Hypothetical Performance Charts
The following charts set out a range of
hypothetical monthly performances of the relevant commodity index and demonstrate how these performances impact the current principal
amount for each of the four offerings (and ultimately the payment at maturity) and how the potential return on each of the four
offerings relative to a hypothetical initial $25 investment will depend upon the historical levels of the current principal amount
over time. The following charts are based on a hypothetical investment in the securities over a 12 calendar month period with a
commodity index monthly initial level of 100 on day one of the 12 calendar month period and an assumed constant TBill index return
of 0.002 per month. The fee factor is assumed to be 0.999375 (representing 0.75% per annum divided by 12 months) and
is applied to the current principal amount when it is reset on each monthly reset date. For ease of presentation, in these examples
we have assumed a common commodity index for both the Short ETNs and the Long ETNs. The actual commodity index for the Short ETNs
will be the DB benchmark commodity index and for the Long ETNs it will be the DB optimum yield commodity index. See “Risk
Factors – The Short ETNs and the Long ETNs are linked to different commodity indices” for more information. The following
examples are intended to be illustrative and are entirely hypothetical and not indicative of actual results. The figures in these
examples may have been rounded for convenience. The actual term of the securities is approximately 30 years. Over the term of the
securities, the commodity index and the TBill index may display greater variability than is depicted in the hypothetical performance
charts below. This potentially greater variability increases the chance of adverse monthly performances negatively impacting the
current principal amount of the securities. The leverage feature of the Commodity Double Long ETNs and the Commodity Double Short
ETNs, when combined with the monthly application of the index factor and fee factor and monthly reset of the principal amount,
will likely cause the performance of such securities to differ significantly from the point-to-point performance or inverse performance,
as applicable, of the relevant commodity index. It is possible that you could lose your entire investment if your securities
are exposed to severe or repeated adverse monthly performances. Any payment at maturity or upon earlier repurchase is subject to
our ability to satisfy our obligations as they become due.
Example 1 – The Commodity Index Increases
Each Month
Monthly
Performance
of Sub-Indices |
Commodity
Double
Short ETNs |
Commodity
Double
Long ETNs |
Commodity
Short ETNs |
Commodity
Long ETNs |
Com-
modity
Index |
Com-
modity
Index
Return |
TBill
Index
Return |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
100.0 |
– |
– |
– |
– |
$25.00 |
– |
– |
$25.00 |
– |
– |
$25.00 |
– |
– |
$25.00 |
102.5 |
0.0250 |
0.002 |
0.9520 |
$0.0149 |
$23.79 |
1.0520 |
$0.0164 |
$26.28 |
0.9770 |
$0.0153 |
$24.41 |
1.0270 |
$0.0160 |
$25.66 |
105.0 |
0.0244 |
0.002 |
0.9532 |
$0.0142 |
$22.66 |
1.0508 |
$0.0173 |
$27.60 |
0.9776 |
$0.0149 |
$23.85 |
1.0264 |
$0.0165 |
$26.32 |
107.5 |
0.0238 |
0.002 |
0.9544 |
$0.0135 |
$21.61 |
1.0496 |
$0.0181 |
$28.95 |
0.9782 |
$0.0146 |
$23.31 |
1.0258 |
$0.0169 |
$26.98 |
110.0 |
0.0233 |
0.002 |
0.9555 |
$0.0129 |
$20.64 |
1.0485 |
$0.0190 |
$30.34 |
0.9787 |
$0.0143 |
$22.80 |
1.0253 |
$0.0173 |
$27.65 |
112.5 |
0.0227 |
0.002 |
0.9565 |
$0.0123 |
$19.73 |
1.0475 |
$0.0199 |
$31.76 |
0.9793 |
$0.0140 |
$22.32 |
1.0247 |
$0.0177 |
$28.31 |
115.0 |
0.0222 |
0.002 |
0.9576 |
$0.0118 |
$18.88 |
1.0464 |
$0.0208 |
$33.21 |
0.9798 |
$0.0137 |
$21.85 |
1.0242 |
$0.0181 |
$28.98 |
117.5 |
0.0217 |
0.002 |
0.9585 |
$0.0113 |
$18.08 |
1.0455 |
$0.0217 |
$34.70 |
0.9803 |
$0.0134 |
$21.41 |
1.0237 |
$0.0185 |
$29.65 |
120.0 |
0.0213 |
0.002 |
0.9594 |
$0.0108 |
$17.34 |
1.0446 |
$0.0227 |
$36.22 |
0.9807 |
$0.0131 |
$20.98 |
1.0233 |
$0.0190 |
$30.32 |
122.5 |
0.0208 |
0.002 |
0.9603 |
$0.0104 |
$16.64 |
1.0437 |
$0.0236 |
$37.78 |
0.9812 |
$0.0129 |
$20.57 |
1.0228 |
$0.0194 |
$30.99 |
125.0 |
0.0204 |
0.002 |
0.9612 |
$0.0100 |
$15.99 |
1.0428 |
$0.0246 |
$39.38 |
0.9816 |
$0.0126 |
$20.18 |
1.0224 |
$0.0198 |
$31.67 |
127.5 |
0.0200 |
0.002 |
0.9620 |
$0.0096 |
$15.37 |
1.0420 |
$0.0256 |
$41.00 |
0.9820 |
$0.0124 |
$19.81 |
1.0220 |
$0.0202 |
$32.34 |
130.0 |
0.0196 |
0.002 |
0.9628 |
$0.0092 |
$14.79 |
1.0412 |
$0.0267 |
$42.67 |
0.9824 |
$0.0122 |
$19.45 |
1.0216 |
$0.0207 |
$33.02 |
Return
on $25 investment after 12 months: |
-40.85% |
70.67% |
-22.22% |
32.09% |
In this hypothetical example, the commodity
index increases at a constant rate of 2.5% of its initial value each month. As such, the Commodity Double Long ETNs and Commodity
Long ETNs demonstrate a positive return over the 12 month period and the Commodity Double Short ETNs and Commodity Short ETNs demonstrate
a negative return over the 12 month period. This hypothetical example demonstrates that because the index factors are assessed
on monthly performances (i.e., the change from the level at the start of the month to the level at the end of the month), the monthly
commodity index return decreases over time as 2.5% of the initial value of 100 becomes a smaller percentage increase over the commodity
index level at the start of each month. This hypothetical example also demonstrates how the losses on the Commodity Double Short
ETNs are significantly more than the losses on the Commodity Short ETNs, and the gains on the Commodity Double Long ETNs exceed
the gains on the Commodity Long ETNs, due to the effect of the leverage. However, because the current principal amount is reset
each month, the Commodity Double Short ETNs have not suffered a loss equal to two times the simple, point-to-point percentage increase
in the commodity index. Indeed, even though the Commodity Double Long ETNs gained 70.67% based on a 30% increase in the commodity
index, the Commodity Double Short ETNs lost only 40.85%. This is because as the current principal amount is written down by adverse
monthly
performances, it decreases so that any successive
adverse monthly performances (expressed as a percentage) are applied to a smaller amount, resulting in smaller dollar losses even
if the adverse monthly performances are constant.
Example 2 – The Commodity Index
Declines Each Month
Monthly
Performance of Sub-Indices |
Commodity
Double
Short ETNs |
Commodity Double
Long ETNs |
Commodity
Short ETNs |
Commodity Long ETNs |
Com-
modity
Index |
Com-
modity
Index
Return |
TBill
Index
Return |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
100 |
— |
— |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
97.5 |
-0.0250 |
0.002 |
1.0520 |
$0.0164 |
$26.28 |
0.9520 |
$0.0149 |
$23.79 |
1.0270 |
$0.0160 |
$25.66 |
0.9770 |
$0.0153 |
$24.41 |
95 |
-0.0256 |
0.002 |
1.0533 |
$0.0173 |
$27.67 |
0.9507 |
$0.0141 |
$22.60 |
1.0276 |
$0.0165 |
$26.35 |
0.9764 |
$0.0149 |
$23.82 |
92.5 |
-0.0263 |
0.002 |
1.0546 |
$0.0182 |
$29.16 |
0.9494 |
$0.0134 |
$21.44 |
1.0283 |
$0.0169 |
$27.08 |
0.9757 |
$0.0145 |
$23.22 |
90 |
-0.0270 |
0.002 |
1.0561 |
$0.0192 |
$30.78 |
0.9479 |
$0.0127 |
$20.31 |
1.0290 |
$0.0174 |
$27.85 |
0.9750 |
$0.0142 |
$22.63 |
87.5 |
-0.0278 |
0.002 |
1.0576 |
$0.0203 |
$32.53 |
0.9464 |
$0.0120 |
$19.21 |
1.0298 |
$0.0179 |
$28.66 |
0.9742 |
$0.0138 |
$22.03 |
85 |
-0.0286 |
0.002 |
1.0591 |
$0.0215 |
$34.43 |
0.9449 |
$0.0113 |
$18.14 |
1.0306 |
$0.0185 |
$29.52 |
0.9734 |
$0.0134 |
$21.43 |
82.5 |
-0.0294 |
0.002 |
1.0608 |
$0.0228 |
$36.50 |
0.9432 |
$0.0107 |
$17.10 |
1.0314 |
$0.0190 |
$30.43 |
0.9726 |
$0.0130 |
$20.83 |
80 |
-0.0303 |
0.002 |
1.0626 |
$0.0242 |
$38.76 |
0.9414 |
$0.0101 |
$16.09 |
1.0323 |
$0.0196 |
$31.39 |
0.9717 |
$0.0127 |
$20.23 |
77.5 |
-0.0313 |
0.002 |
1.0645 |
$0.0258 |
$41.23 |
0.9395 |
$0.0094 |
$15.11 |
1.0333 |
$0.0203 |
$32.41 |
0.9708 |
$0.0123 |
$19.63 |
75 |
-0.0323 |
0.002 |
1.0665 |
$0.0275 |
$43.95 |
0.9375 |
$0.0089 |
$14.15 |
1.0343 |
$0.0210 |
$33.50 |
0.9697 |
$0.0119 |
$19.02 |
72.5 |
-0.0333 |
0.002 |
1.0687 |
$0.0294 |
$46.94 |
0.9353 |
$0.0083 |
$13.23 |
1.0353 |
$0.0217 |
$34.67 |
0.9687 |
$0.0115 |
$18.41 |
70 |
-0.0345 |
0.002 |
1.0710 |
$0.0314 |
$50.24 |
0.9330 |
$0.0077 |
$12.33 |
1.0365 |
$0.0225 |
$35.91 |
0.9675 |
$0.0111 |
$17.80 |
Return on $25 investment after 12 months: |
100.95% |
-50.66% |
43.64% |
-28.79% |
In this hypothetical example, the commodity
index decreases at a constant rate of 2.5% of its initial value each month. As such, the Commodity Double Short ETNs and Commodity
Short ETNs demonstrate a positive return over the 12 month period and the Commodity Double Long ETNs and Commodity Long ETNs demonstrate
a negative return over the 12 month period. This hypothetical example demonstrates that because the index factors are assessed
on monthly performances (i.e., the change from the level at the start of the month to the level at the end of the month), the absolute
value of the monthly commodity index return increases over time as 2.5% of the initial value of 100 becomes a larger percentage
decrease from the commodity index level at the start of each month. As such, while the Commodity Double Short ETNs lost 40.85%
of the initial $25 investment due to an increase of the commodity index from 100 to 130 in example 1, in this example, the Commodity
Double Long ETNs lost 50.66% of the initial $25 investment due to an equivalent decrease of the commodity index from 100 to 70.
Example 3 – The Commodity Index
Increases in Some Months and Decreases in Others; All Securities Demonstrate a Negative Return
Monthly
Performance
of Sub-Indices |
Commodity
Double
Short ETNs |
Commodity
Double
Long ETNs |
Commodity Short ETNs |
Commodity Long ETNs |
Com-
modity
Index |
Com-
modity
Index
Return |
TBill
Index
Return |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
100 |
– |
– |
– |
– |
$25.00 |
– |
– |
$25.00 |
– |
– |
$25.00 |
– |
– |
$25.00 |
110 |
0.1000 |
0.002 |
0.8020 |
$0.0125 |
$20.04 |
1.2020 |
$0.0188 |
$30.03 |
0.9020 |
$0.0141 |
$22.54 |
1.1020 |
$0.0172 |
$27.53 |
120 |
0.0909 |
0.002 |
0.8202 |
$0.0103 |
$16.42 |
1.1838 |
$0.0222 |
$35.53 |
0.9111 |
$0.0128 |
$20.52 |
1.0929 |
$0.0188 |
$30.07 |
125 |
0.0417 |
0.002 |
0.9187 |
$0.0094 |
$15.08 |
1.0853 |
$0.0241 |
$38.54 |
0.9603 |
$0.0123 |
$19.69 |
1.0437 |
$0.0196 |
$31.37 |
120 |
-0.0400 |
0.002 |
1.0820 |
$0.0102 |
$16.31 |
0.9220 |
$0.0222 |
$35.51 |
1.0420 |
$0.0128 |
$20.51 |
0.9620 |
$0.0189 |
$30.15 |
115 |
-0.0417 |
0.002 |
1.0853 |
$0.0111 |
$17.69 |
0.9187 |
$0.0204 |
$32.60 |
1.0437 |
$0.0134 |
$21.39 |
0.9603 |
$0.0181 |
$28.94 |
110 |
-0.0435 |
0.002 |
1.0890 |
$0.0120 |
$19.25 |
0.9150 |
$0.0186 |
$29.81 |
1.0455 |
$0.0140 |
$22.35 |
0.9585 |
$0.0173 |
$27.72 |
100 |
-0.0909 |
0.002 |
1.1838 |
$0.0142 |
$22.77 |
0.8202 |
$0.0153 |
$24.44 |
1.0929 |
$0.0153 |
$24.41 |
0.9111 |
$0.0158 |
$25.24 |
95 |
-0.0500 |
0.002 |
1.1020 |
$0.0157 |
$25.08 |
0.9020 |
$0.0138 |
$22.03 |
1.0520 |
$0.0160 |
$25.66 |
0.9520 |
$0.0150 |
$24.02 |
90 |
-0.0526 |
0.002 |
1.1073 |
$0.0174 |
$27.75 |
0.8967 |
$0.0123 |
$19.74 |
1.0546 |
$0.0169 |
$27.05 |
0.9494 |
$0.0142 |
$22.79 |
93 |
0.0333 |
0.002 |
0.9353 |
$0.0162 |
$25.94 |
1.0687 |
$0.0132 |
$21.08 |
0.9687 |
$0.0164 |
$26.18 |
1.0353 |
$0.0147 |
$23.58 |
105 |
0.1290 |
0.002 |
0.7439 |
$0.0121 |
$19.28 |
1.2601 |
$0.0166 |
$26.55 |
0.8730 |
$0.0143 |
$22.84 |
1.1310 |
$0.0167 |
$26.65 |
97 |
-0.0762 |
0.002 |
1.1544 |
$0.0139 |
$22.25 |
0.8496 |
$0.0141 |
$22.54 |
1.0782 |
$0.0154 |
$24.61 |
0.9258 |
$0.0154 |
$24.66 |
Return on $25 investment after 12 months: |
-11.01% |
-9.83% |
-1.54% |
-1.38% |
In this hypothetical example, the relevant
commodity index for each offering demonstrates both monthly increases and decreases over the 12 month period. Because the current
principal amount is reset each month, these monthly increases and decreases affect the current principal amount in a different
manner than if the current principal amount were adjusted by measuring the change in the commodity index from its starting level
of 100 to its ending level of 97. While this represents a 3% decrease in the value of the commodity index over the 12 month
period, all securities demonstrate a negative
return on the $25 investment. For the Commodity Double Long ETNs and Commodity Long ETNs, this is because the commodity index had
months of depreciation which decreased the current principal amount despite prior months of appreciation. Conversely, the Commodity
Double Short ETNs and Commodity Short ETNs have provided a negative return because the months of depreciation were insufficient
to offset the prior months of appreciation in the commodity index level. The Commodity Short ETNs displayed a smaller loss on the
initial $25 investment than the Commodity Double Short ETNs because the lack of leverage meant the Commodity Short ETNs lost less
value than the Commodity Double Short ETNs in the months in which the commodity index appreciated. Similarly, the Commodity Long
ETNs displayed a smaller loss than the Commodity Double Long ETNs, because the Commodity Long ETNs lost less value in the months
in which the commodity index depreciated.
Example 4 – The Commodity Index
Increases in Some Months and Decreases in Others; All Securities Demonstrate a Positive Return
Monthly
Performance
of Sub-Indices |
Commodity
Double
Short ETNs |
Commodity
Double
Long ETNs |
Commodity
Short ETNs |
Commodity
Long ETNs |
Com-
modity
Index |
Com-
modity
Index
Return |
TBill
Index
Return |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
100 |
— |
— |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
101 |
0.0100 |
0.002 |
0.9820 |
$0.0153 |
$24.53 |
1.0220 |
$0.0160 |
$25.53 |
0.9920 |
$0.0155 |
$24.78 |
1.0120 |
$0.0158 |
$25.28 |
100 |
0.0099 |
0.002 |
1.0218 |
$0.0157 |
$25.05 |
0.9822 |
$0.0157 |
$25.06 |
1.0119 |
$0.0157 |
$25.06 |
0.9921 |
$0.0157 |
$25.07 |
99 |
-0.0100 |
0.002 |
1.0220 |
$0.0160 |
$25.59 |
0.9820 |
$0.0154 |
$24.60 |
1.0120 |
$0.0159 |
$25.35 |
0.9920 |
$0.0155 |
$24.85 |
100 |
0.0101 |
0.002 |
0.9818 |
$0.0157 |
$25.11 |
1.0222 |
$0.0157 |
$25.13 |
0.9919 |
$0.0157 |
$25.13 |
1.0121 |
$0.0157 |
$25.14 |
101 |
0.0100 |
0.002 |
0.9820 |
$0.0154 |
$24.64 |
1.0220 |
$0.0161 |
$25.66 |
0.9920 |
$0.0156 |
$24.91 |
1.0120 |
$0.0159 |
$25.42 |
99 |
-0.0198 |
0.002 |
1.0416 |
$0.0160 |
$25.65 |
0.9624 |
$0.0154 |
$24.68 |
1.0218 |
$0.0159 |
$25.44 |
0.9822 |
$0.0156 |
$24.96 |
98 |
-0.0101 |
0.002 |
1.0222 |
$0.0164 |
$26.20 |
0.9818 |
$0.0151 |
$24.22 |
1.0121 |
$0.0161 |
$25.73 |
0.9919 |
$0.0155 |
$24.74 |
99 |
0.0102 |
0.002 |
0.9816 |
$0.0161 |
$25.70 |
1.0224 |
$0.0155 |
$24.75 |
0.9918 |
$0.0159 |
$25.50 |
1.0122 |
$0.0156 |
$25.02 |
100 |
0.0101 |
0.002 |
0.9818 |
$0.0158 |
$25.22 |
1.0222 |
$0.0158 |
$25.28 |
0.9919 |
$0.0158 |
$25.28 |
1.0121 |
$0.0158 |
$25.31 |
101 |
0.0100 |
0.002 |
0.9820 |
$0.0155 |
$24.75 |
1.0220 |
$0.0161 |
$25.82 |
0.9920 |
$0.0157 |
$25.06 |
1.0120 |
$0.0160 |
$25.60 |
100 |
-0.0099 |
0.002 |
1.0218 |
$0.0158 |
$25.27 |
0.9822 |
$0.0159 |
$25.34 |
1.0119 |
$0.0159 |
$25.35 |
0.9921 |
$0.0159 |
$25.38 |
99.9 |
-0.0010 |
0.002 |
1.0040 |
$0.0159 |
$25.36 |
1.0000 |
$0.0158 |
$25.33 |
1.0030 |
$0.0159 |
$25.41 |
1.0010 |
$0.0159 |
$25.39 |
Return
on $25 investment after 12 months: |
1.44% |
1.32% |
1.62% |
1.56% |
As in example 3, in this hypothetical example,
the commodity index demonstrates both monthly increases and decreases over the 12 month period. While there was a marginal decrease
in the value of the commodity index over the 12 month period, both the long and short securities demonstrate a positive return
on the $25 investment. For the Commodity Double Long ETNs and Commodity Long ETNs, this is because the commodity index had months
of appreciation which increased the current principal amount despite subsequent months of depreciation and minimal appreciation.
Conversely, the Commodity Double Short ETNs and Commodity Short ETNs have provided a positive return because even though the commodity
index increased in certain months, the months of depreciation in the commodity index level allowed the current principal amount
to increase. The Commodity Short ETNs displayed a greater return on the initial $25 investment than the Commodity Double Short
ETNs despite the lack of leverage because the Commodity Short ETNs lost less value than the Commodity Double Short ETNs in the
months in which the commodity index appreciated. Similarly, the Commodity Long ETNs displayed a greater return than the Commodity
Double Long ETNs because the Commodity Long ETNs lost less value than the Commodity Double Long ETNs in the months in which the
commodity index depreciated.
Example 5 – The Commodity Index
Increases in Some Months and Decreases in Others; The Leveraged Securities Demonstrate a Negative Return
Monthly
Performance
of Sub-Indices |
Commodity Double Short
ETNs |
Commodity Double Long
ETNs |
Commodity
Short ETNs |
Commodity
Long ETNs |
Com-
modity
Index |
Com-
modity
Index
Return |
TBill
Index
Return |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
Index
Factor |
Fees |
Current
Principal
Amount |
100 |
— |
— |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
— |
— |
$25.00 |
75 |
-0.2500 |
0.002 |
1.5020 |
$0.0235 |
$37.53 |
0.5020 |
$0.0078 |
$12.54 |
1.2520 |
$0.0196 |
$31.28 |
0.7520 |
$0.0117 |
$18.79 |
110 |
0.4667 |
0.002 |
0.0687 |
$0.0016 |
$ 2.58 |
1.9353 |
$0.0152 |
$24.26 |
0.5353 |
$0.0105 |
$16.73 |
1.4687 |
$0.0172 |
$27.58 |
115 |
0.0455 |
0.002 |
0.9111 |
$0.0015 |
$ 2.34 |
1.0929 |
$0.0166 |
$26.50 |
0.9565 |
$0.0100 |
$16.00 |
1.0475 |
$0.0181 |
$28.87 |
85 |
-0.2609 |
0.002 |
1.5237 |
$0.0022 |
$ 3.57 |
0.4803 |
$0.0080 |
$12.72 |
1.2629 |
$0.0126 |
$20.19 |
0.7411 |
$0.0134 |
$21.38 |
78 |
-0.0824 |
0.002 |
1.1667 |
$0.0026 |
$ 4.16 |
0.8373 |
$0.0067 |
$10.64 |
1.0844 |
$0.0137 |
$21.88 |
0.9196 |
$0.0123 |
$19.65 |
76 |
-0.0256 |
0.002 |
1.0533 |
$0.0027 |
$ 4.38 |
0.9507 |
$0.0063 |
$10.11 |
1.0276 |
$0.0141 |
$22.47 |
0.9764 |
$0.0120 |
$19.17 |
72 |
-0.0526 |
0.002 |
1.1073 |
$0.0030 |
$ 4.85 |
0.8967 |
$0.0057 |
$ 9.06 |
1.0546 |
$0.0148 |
$23.68 |
0.9494 |
$0.0114 |
$18.19 |
59 |
-0.1806 |
0.002 |
1.3631 |
$0.0041 |
$ 6.61 |
0.6409 |
$0.0036 |
$ 5.80 |
1.1826 |
$0.0175 |
$27.99 |
0.8214 |
$0.0093 |
$14.93 |
55 |
-0.0678 |
0.002 |
1.1376 |
$0.0047 |
$ 7.51 |
0.8664 |
$0.0031 |
$ 5.02 |
1.0698 |
$0.0187 |
$29.92 |
0.9342 |
$0.0087 |
$13.94 |
40 |
-0.2727 |
0.002 |
1.5475 |
$0.0073 |
$11.61 |
0.4565 |
$0.0014 |
$ 2.29 |
1.2747 |
$0.0238 |
$38.12 |
0.7293 |
$0.0064 |
$10.16 |
15 |
-0.6250 |
0.002 |
2.2520 |
$0.0163 |
$26.14 |
-0.2480 |
$0.0000 |
$ 0.00 |
1.6270 |
$0.0388 |
$61.98 |
0.3770 |
$0.0024 |
$ 3.83 |
20 |
0.3333 |
0.002 |
0.3353 |
$0.0055 |
$ 8.76 |
1.6687 |
$0.0000 |
N/A |
0.6687 |
$0.0259 |
$41.42 |
1.3353 |
$0.0032 |
$ 5.11 |
Return
on $25 investment after 12 months: |
-64.96% |
-100% |
65.69% |
-79.56% |
As in example 3 and example 4, in this hypothetical
example the commodity index demonstrates both monthly increases and decreases over the 12 month period. However, in this hypothetical
example, the Commodity Double Long ETNs have lost the entire initial investment amount of $25 due to overall adverse monthly performances.
This demonstrates that once the repurchase value equals zero, the securities will accelerate for the amount equal to the zero repurchase
value and the investor will not receive any further return on their investment. As such, even though the commodity index increased
in the last month of the example, the current principal amount for the Commodity Double Long ETNs did not benefit from the increase
in the commodity index as the securities had accelerated. The Commodity Long ETNs did benefit from the increase in the last month,
since the securities did not accelerate; however, they lost most of their value due to the significant decline in the commodity
index over the 12 month period. The example also demonstrates that despite the commodity index generally trending down over the
12 month period, the Commodity Double Short ETNs lost a considerable amount due to the marked increase in the commodity index from
month 2 to month 3 (75 to 110) and finished the 12 month period with a net loss as the subsequent beneficial monthly performances
(i.e. declines in the commodity index) were insufficient to restore that initial loss. In contrast, the Commodity Short ETNs demonstrated
a positive return over the 12 month period as the lack of leverage meant that they did not suffer from the marked increase in the
commodity index to the same degree as the Commodity Double Short ETNs.
Historical Information
The graphs below show the historical performance
of the four securities being offered for the period from July 9, 2010 to July 9, 2015, the historical performance of each commodity
index for the period from July 9, 2010 to July 9, 2015 and the historical performance of the TBill index for the period from July
9, 2010 to July 9, 2015. The historical performance of each of the four securities shown below reflect the daily repurchase values
of such security calculated on each trading day from July 9, 2010 to July 9, 2015 and do not reflect the actual trading prices
of such security. The graphs below do not represent the actual return you should expect to receive on the securities. Historical
performance of the securities, the commodity indices and the TBill index are not indicative of future performance of the sub-indices
or your investment in the securities. After the close of trading on February 16, 2012, the underlying futures contract on wheat
included in the DB optimum yield commodity index was replaced by the Deutsche Bank Liquid Commodity Index – Optimum Yield
Wheat Basket Index USD Excess Return, which tracks a basket of three futures contracts on wheat, as more fully described below
under “The Indices.” The securities do not guarantee any return of, or on, your initial investment. Any payment
at maturity or upon earlier repurchase is subject to our ability to satisfy our obligations as they become due.
RISK FACTORS
The securities are senior unsecured obligations
of Deutsche Bank AG, acting through its London branch. The securities are riskier than ordinary unsecured debt securities and do
not guarantee a return of principal or pay any interest. The Commodity Double Long ETNs and the Commodity Double Short ETNs may
not be suitable for investors seeking an investment with a term greater than the time remaining to the next monthly reset date,
and should be used only by knowledgeable investors who understand the potential adverse consequences of seeking longer-term leveraged
or inverse investment results by means of securities that reset their exposure monthly. Investing in the securities is not equivalent
to investing directly in the index commodities or the underlying futures contracts.
This section describes the most significant
risks relating to an investment in the securities. We urge you to read the following information about these risks, together
with the other information in this pricing supplement and the accompanying prospectus and prospectus supplement before investing
in the securities.
The
securities do not guarantee any return of principal and you may lose all or a significant portion of your investment in the securities
The
securities do not guarantee any return of principal. The cash payment, if any, on your securities on the maturity date or a repurchase
date will be based on the month-over-month performance of the Index prior to the maturity date or repurchase date and will be reduced
by the investor fee. You may lose all or a significant amount of your investment in the securities if there are repeated or severe
adverse monthly performances in the Index. Moreover, because the investor fee will reduce the amount of your return regardless
of whether the Index increases or decreases, you will lose some or all of your investment at maturity or upon repurchase if the
level of the Index decreases or does not increase sufficiently to offset the negative effect of the investor fee.
The Commodity Double Short ETNs and
the Commodity Double Long ETNs are not designed to be long–term investments
Each of the Commodity Double Short ETNs
and the Commodity Double Long ETNs offers investors exposure to the month-over-month performance of its respective Index measured
from the first calendar day to the last calendar day of each month. Therefore, the Commodity Double Short ETNs and the Commodity
Double Long ETNs may not be suitable for investors seeking an investment with a term greater than the time remaining to the next
monthly reset date and should be used only by knowledgeable investors who understand the potential adverse consequences of seeking
longer-term leveraged or inverse investment results by means of securities that reset their exposure monthly. On a month-to-month
basis, the performance of the Commodity Double Long ETNs and the Commodity Double Short ETNs will be positively affected by two
times any favorable performance and negatively affected by two times any adverse performance of the relevant commodity index. This
leverage feature of the Commodity Double Long ETNs and the Commodity Double Short ETNs, when combined with the monthly application
of the index factor and fee factor and monthly reset of the principal amount, will likely cause the performance of such securities
to differ significantly from the point-to-point performance or inverse performance, as applicable, of the relevant commodity index.
A favorable performance of the relevant commodity index means the relevant commodity index has, in the case of the Commodity Double
Long ETNs, increased or, in the case of the Commodity Double Short ETNs, decreased from its monthly initial level, and an adverse
performance of the relevant commodity index means the relevant commodity index has, in the case of the Commodity Double Long ETNs,
decreased or, in the case of the Commodity Double Short ETNs, increased from its monthly initial level. For example, if over six
months the relevant commodity index appreciated 10%, the repurchase value of the Commodity Double Long ETNs (including 2x leverage)
will not have appreciated 20% and the repurchase value of the Commodity Double Short ETNs (including 2x leverage) will not have
depreciated 20%. Rather, the repurchase value will depend on the month-over-month performances of the relevant Index. Furthermore,
more volatile month-over-month performances of the relevant commodity index will magnify the divergence of the return on the securities
from the performance or inverse performance, as applicable, of the relevant commodity index. As a result, you should consider your
investment horizon as well as your potential trading costs when evaluating an investment in the securities and you should regularly
monitor your holdings of the securities to ensure that they remain consistent with your investment strategies.
Any payment on the securities is subject
to our ability to pay our obligations as they become due
The securities are senior unsecured obligations
of Deutsche Bank AG, and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the
securities depends on our ability to satisfy our obligations as they become due. As a result, our actual and perceived creditworthiness
will affect the market
value of the securities and in the event
we were to default on our obligations you may not receive any amount owed to you under the terms of the securities.
The securities 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.
A
subordination to the claims of other creditors or other Resolution
Measures may become applicable to the securities by operation of law even in the absence of explicit provisions, acknowledgements
or waivers in the terms of the securities
On
May 15, 2014, the European Parliament and the Council of the European Union published a directive for 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. To implement 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. Pursuant to the Resolution Act, the
securities may be subject to the powers exercised by our competent resolution authority to write down, including write down
to zero, the claims for payment in respect of the securities, to convert the securities into ordinary shares or other
instruments qualifying as core equity tier 1 capital, or to apply any other resolution measure including (but not limited to)
a transfer of the securities to another entity, an amendment to the terms and conditions of the securities or a cancellation
of the securities. We refer to each of these measures pursuant to German and European law as applicable to us from time to
time in effect, as a “Resolution Measure.” We expect additional Resolution Measures to become applicable to us
when the European regulation of July 15, 2014 relating to the resolution of credit institutions and certain investment firms
in the framework of a Single Resolution Mechanism and a Single Resolution Fund (commonly referred to as the “SRM
Regulation”) becomes effective on January 1, 2016. On May 26, 2015, the German Federal Government published a draft
bill of a Resolution Mechanism Act (Abwicklungsmechanismusgesetz). One of this law’s primary purposes would be
to conform German law to the SRM Regulation. In addition, the draft bill proposes that in the event of an
insolvency proceeding senior unsecured debt instruments would by operation of law rank junior to all other outstanding
unsecured unsubordinated obligations, but in priority to all contractually subordinated instruments. The proposed
subordination would not apply if the terms of the senior unsecured debt instruments provide that (i) the repayment amount
depends on the occurrence or non-occurrence of a future event, or will be settled in kind, or (ii) the interest amount
depends on the occurrence or non-occurrence of a future event, unless it depends solely on a fixed or variable reference
interest rate and will be settled in cash. Instruments that are typically traded on money markets would not be subject to the
proposed subordination. The proposed order of priorities would apply to insolvency proceedings commenced on or after January
1, 2016. If enacted, the proposed subordination of senior unsecured debt instruments could apply to the securities, which
would most likely result in a larger share of loss being allocated to these instruments in the event of an insolvency
proceeding or the imposition of any Resolution Measures by the competent resolution authority. The final version of the
Resolution Mechanism Act may provide for additional Resolution Measures that may become applicable to us. Furthermore, if we
become subject to German insolvency proceedings, the trustee and the holders of the securities that are subordinated by
operation of law will have no right to file a claim against us unless the competent insolvency court allows the filing of
subordinated claims. A Resolution Measure may apply to us if we become, or are deemed by our competent supervisory authority
to have become, “non-viable” (as defined under the then applicable law) and are unable to continue our regulated
banking activities.
Implementation
of the Resolution Act, the Resolution Mechanism Act and any applicable supervisory law (including the SRM Regulation) may result
in the Resolution Measures becoming applicable by operation of law to the securities. As a result, if a Resolution Measure becomes
applicable to us, the securities may be subject to such Resolution Measures and, by operation of law, written down, converted into
ordinary shares or other instruments qualifying as core equity tier 1 capital, transferred to another entity, amended or cancelled.
The precise effects on the securities that will result from the implementation of the Resolution Act, the Resolution Mechanism
Act and the applicable supervisory law remain uncertain. You should consider the risk that you may lose some or all of your
investment in the securities.
Even if the relevant commodity index
and TBill index at maturity or upon repurchase by Deutsche Bank have moved beneficially relative to their levels at the time you
purchased the securities, you may receive less than your initial investment in the securities
Because the return on your securities
at maturity or upon repurchase is dependent upon the month-over-month performance of the Index prior to the maturity date or
repurchase date, reduced by the investor fee, even if the relevant commodity index and the TBill index at maturity or upon
repurchase have moved beneficially relative to their levels at the time you purchased the securities, there is no guarantee
that you will receive a positive return on, or a full return of, your initial investment. The month-over-month performances
of the sub-indices as reflected in the applicable index factor will need to offset the impact of the investor fee each month
for the current principal amount to increase. Further, even if at maturity or upon a repurchase the relevant commodity index
and TBill index have moved beneficially relative to their levels at the time you purchased the securities, this may not be
enough to offset prior months of adverse monthly performance which could have reduced the current principal amount below its
value at the time you purchased the securities. Similarly, any beneficial movement of the sub-indices during a month will not
be reflected in the current principal amount unless the beneficial movement applies at the end of the month (except to the
extent that the repurchase value reflects intra-month beneficial movements in the applicable index factor).
If you invest in the Commodity Double
Short ETNs or the Commodity Double Long ETNs, any adverse monthly performance will be leveraged, meaning you will lose an amount
from your current principal amount at a rate of 2% for every 1% of adverse performance of the relevant commodity index (subject
to any positive return on the TBill index and the application of the fee factor)
If you invest in the Commodity Double Short
ETNs or the Commodity Double Long ETNs, you are exposed to the risk that adverse monthly performances of the relevant commodity
index will be leveraged. This means that if the relevant commodity index experiences an adverse monthly performance, your current
principal amount will be reduced by an amount equal to 2% for every 1% of adverse performance, subject to any positive return on
the TBill index and the application of the fee factor. While the monthly reset of the current principal amount is designed to reduce
the effect of the leverage on any adverse performance over time, it does not mitigate the effect of the leverage on any single
month’s adverse performance.
If the current principal amount increases,
any subsequent adverse monthly performance will result in a larger dollar reduction from the current principal amount than if the
current principal amount remained constant
If the current principal amount increases,
the dollar amount which you can lose in any single month from an adverse monthly performance will increase correspondingly so that
the dollar amount lost will be greater than if the current principal amount were maintained at a constant level. This means that
if you invest in the Commodity Double Short ETNs or the Commodity Double Long ETNs, you could lose more than 2% of your initial
investment for each 1% of adverse monthly performance of the relevant commodity index. Similarly, if you invest in the Commodity
Short ETNs or Commodity Long ETNs, you could lose more than 1% of your initial investment for each 1% of adverse monthly performance.
If the current principal amount decreases,
any subsequent beneficial monthly performance will result in a smaller dollar increase on the current principal amount than if
the current principal amount remained constant
If the current principal amount decreases,
the dollar amount which you can gain in any single month from a beneficial monthly performance will decrease correspondingly. This
is because the applicable index factor will be applied to a smaller current principal amount. As such, the dollar amount which
you can gain from any beneficial monthly performance will be less than if the current principal amount were maintained at a constant
level. This means that if the current principal amount decreases, it will take larger beneficial monthly performances to restore
the value of your investment back to the amount of your initial investment than would have been the case if the current principal
amount were maintained at a constant level. Further, if you invest in the Commodity Double Short ETNs or the Commodity Double Long
ETNs, you could gain less than 2% of your initial investment for each 1% of beneficial monthly performance.
Increased volatility in the commodity
indices could adversely affect the performance of the securities
The securities are linked to the month-to-month
performance or inverse performance, as applicable, of the relevant commodity index. Because of the monthly reset feature, increased
volatility in the commodity indices is likely to have a negative effect on the value of the securities. Favorable performance of
a commodity index during one month will not necessarily offset adverse performance in a different month, and the principal amount
of the relevant securities could decrease, perhaps significantly, even if the level of such commodity index ultimately moves favorably
or remains the same. The securities are not designed to be long-term investments.
It is possible that your securities
will be accelerated due to a zero repurchase value and your investment will be lost before the scheduled maturity of the securities
Because the current principal amount
is reset each month, adverse monthly performances will be reflected in the current principal amount each month rather than
only upon repurchase or at maturity. If there are severe or repeated adverse monthly performances during the term of the
securities, the repurchase value on any trading day could be reduced to zero. If this occurs, the securities will
automatically accelerate for an amount equal to the zero repurchase value and you will not receive any return of your
investment.
There are restrictions on the minimum
number of securities you may offer to Deutsche Bank for repurchase
You must offer at least 5,000 securities
from a single offering to Deutsche Bank for repurchase at one time on any repurchase date and multiples of 5,000 securities in
excess thereof. The minimum repurchase amount of 5,000 securities and the procedures involved in the offer of any repurchase represent
substantial restrictions on your ability to cause Deutsche Bank to repurchase your securities. For the purpose of satisfying the
minimum repurchase amount, you cannot combine securities from separate offerings. See “Specific Terms of the Securities –
Repurchase Procedures” for more information.
If you wish to offer more than 5,000 securities
for repurchase by Deutsche Bank, you must do so in increments of 5,000 securities. For example, if you hold 11,000 securities from
one offering, you may offer 5,000 or 10,000 securities for repurchase. However, you may not individually offer the entire amount
of your holdings because 11,000 is not an integral multiple of 5,000. If you choose to offer 5,000 or 10,000 securities for repurchase,
you will not be able to offer your remaining securities, 6,000 securities in the prior case or 1,000 securities in the latter case,
for repurchase.
A fee of up to $0.03 per security
may be charged upon a repurchase
DBSI may charge a fee of up to $0.03 per
security upon any repurchase. The imposition of this fee will mean that you will not receive the full amount of the repurchase
value upon a repurchase.
You may not be able to offer your
securities for repurchase if the total number of securities outstanding has fallen to a level that is close to or below 5,000
You must own at least 5,000 securities in
order to require us to repurchase your securities. Accordingly, if the total number of securities outstanding has fallen to a level
that is close to or below 5,000, you may not be able to avail yourself of the repurchase option. Even if we issue securities well
in excess of the approximately 53,000 Commodity Double Short ETNs, 553,000 Commodity Double Long ETNs, 57,000 Commodity Short ETNs
or 92,000 Commodity Long ETNs as of July 10, 2015, the number of securities outstanding at any time may decline to be close to
or less than 5,000 as a result of investors or market makers exercising their repurchase rights. The unavailability of the repurchase
right can result in the securities trading in the secondary market at discounted prices significantly below the intraday indicative
security value. If you had to sell your securities at such a time, you could suffer significant losses.
A repurchase at your option will be
deemed ineffective if the conditions for electing such repurchase right are not met
Your offer to Deutsche Bank to repurchase
your securities on a repurchase date is only valid if DBSI receives your offer for repurchase from your broker by no later than
10:00 a.m., New York City time, on your desired valuation date. If DBSI does not receive your offer for repurchase by 10:00 a.m.,
New York City time, on your desired valuation date, your notice will not be effective and we will not accept your offer to repurchase
your securities on the repurchase date. See “Specific Terms of the Securities — Repurchase Procedures” for more
information.
The
market value of the securities may be influenced by many unpredictable factors
The market value of your securities may
fluctuate between the date you purchase them and the applicable valuation date or the final valuation date. You may also sustain
a significant loss if you sell the securities in the secondary market. Several factors, many of which are beyond our control, will
influence the market value of the securities. We expect that generally the level of the sub-indices will affect the market value
of the securities more than any other factor. Other factors that may influence the market value of the securities include:
| • | the level of the relevant commodity index, which will in turn be affected by interest rates; domestic
and foreign economic and political conditions generally; monetary policies of the Federal Reserve Board; inflation and expectations
concerning inflation; and the commodity markets (in particular, the market for futures contracts on crude oil, heating oil, aluminum,
gold, corn and wheat), which may fluctuate rapidly based on numerous factors including changes in supply and demand relationships,
weather, agricultural, trade, fiscal, monetary and exchange control programs, and geopolitical and economic events, including wars,
acts of terrorism and natural disasters; |
| • | the level of the TBill index, which will in turn be affected by, among other things, government
fiscal policy and monetary policies of the Federal Reserve Board; inflation and expectations concerning inflation; and supply and
demand for Treasury bills; |
| • | the volatility of the relevant commodity index and the TBill index; |
| • | the time remaining to the maturity of the securities; |
| • | supply and demand for the securities, including inventory positions with any market maker or possible
shortages in the event we decide to suspend or permanently discontinue issuances of the securities; |
| • | geopolitical conditions and other economic, financial, political, regulatory or judicial events
that affect the levels of the sub-indices; |
| • | the prevailing interest rates and yields in the market generally; and |
| • | our creditworthiness, including actual or anticipated downgrades in our credit ratings. |
These factors interrelate in complex ways,
and the effect of one factor on the market value of your securities may offset or enhance the effect of another factor.
The prices of the commodities reflected
in the commodity indices are affected by numerous factors
Changes in supply and demand can have significant
adverse effects on the prices of commodities. In addition, commodities tend to be exposed to the risk of fluctuations in currency
exchange rates, volatility from speculative activities and the risk that substitutes for the commodities in their common uses will
become more widely available or comparatively less expensive. Corn and wheat prices are affected by weather, crop yields, natural
disasters, pestilence and technological developments, as well as government policies regarding agriculture, energy, trade, fiscal
and monetary issues, particularly with regard to subsidies and tariffs. In addition, there are many risks specific to the individual
index commodities.
Crude oil: Demand for refined petroleum
products by consumers, as well as the agricultural, manufacturing and transportation industries, affects the price of crude oil.
Crude oil’s end–use as a refined product is often as transport fuel, industrial fuel and in–home heating fuel.
Because the precursors of demand for petroleum products are linked to economic activity, demand will tend to reflect economic conditions.
Demand is also influenced by government regulations, such as environmental or consumption policies. In addition to general economic
activity and demand, prices for crude oil are affected by political events, labor activity and, in particular, direct government
intervention (such as embargos) or supply disruptions in major oil producing regions of the world. Such events tend to affect oil
prices worldwide, regardless of the location of the event. Supply for crude oil may increase or decrease depending on many factors.
These include production decisions by the Organization of Oil and Petroleum Exporting Countries and other crude oil producers.
In the event of sudden disruptions in the supplies of oil, such as those caused by war, natural events, accidents or acts of terrorism,
prices of oil futures contracts could become extremely volatile and unpredictable. Also, sudden and dramatic changes in the futures
market may occur, for example, upon a cessation of hostilities that may exist in countries producing oil, the introduction of new
or previously withheld supplies into the market or the introduction of substitute products or commodities. West Texas Intermediate
light sweet crude oil is also subject to the risk that it has demonstrated a lack of correlation with world crude oil prices due
to structural differences between the U.S. market for crude oil and the international market for crude oil. We can give no assurance
that the settlement price for West Texas Intermediate light sweet crude oil will not be more volatile than world crude oil prices
generally.
Heating oil: Demand for heating oil
depends heavily on the level of global industrial activity and the seasonal temperatures in countries throughout the world. Heating
oil is derived from crude oil and as such, any factors that influence the supply of crude oil may also influence the supply of
heating oil.
Aluminum: Changes in the
levels of global industrial activity and adjustments to inventory in response to changes in economic activity and/or pricing
levels can cause a great deal of volatility in the demand for aluminum. The automobile, packaging and construction sectors
are particularly important to the demand for aluminum. The supply of aluminum is widely spread around the world, and the
principal factor dictating the smelting of such aluminum is the ready availability of inexpensive power. The supply of
aluminum is also affected by current and previous price levels, which will influence investment decisions in new smelters.
Other factors influencing supply include droughts, transportation problems and shortages of power and raw materials.
Gold: Gold prices are affected by
numerous factors, including the relative strength of the U.S. dollar (in which gold prices are generally quoted) to other currencies,
industrial and jewelry demand, expectations with regard to the rate of inflation, interest rates and transactions by central banks
and other governmental or multinational agencies that hold gold. The market for gold bullion is global, and gold prices are affected
by macroeconomic factors such as the structure of and confidence in the global monetary system and gold borrowing and lending rates.
Corn: Corn is primarily used as
a livestock feed but is also processed into food and industrial products, including starches, sweeteners, corn oil, beverage and
industrial alcohol, and fuel ethanol. Demand for corn is influenced by a variety of factors including the level of global livestock
production, the level of human consumption of corn and corn-derived products and, in the case of demand for production into ethanol,
demand for corn as the basis for ethanol. The supply of corn is dominated by the United States, China, Central and South America
and the European Union.
Wheat: Global supply of and demand
for wheat are generally driven by global grain production, population growth and economic activity. Alternative uses for grains
such as energy sources or in manufacturing also drive the prices for grains.
The prices of the commodities reflected
in the commodity indices are subject to emerging markets’ political and economic risks
Crude oil, heating oil, aluminum, gold,
corn and wheat may be produced in emerging market countries which are more exposed to the risk of swift political change and economic
downturns than their industrialized counterparts. Indeed, in recent years, many emerging market countries have undergone significant
political, economic and social change. In many cases, far-reaching political changes have resulted in constitutional and social
tensions, and, in some cases, instability and reaction against market reforms has occurred. There can be no assurance that future
political changes will not adversely affect the economic conditions of an emerging market country. Political or economic instability
may significantly impact the level of the commodity indices and, consequently, adversely affect the return on your investment.
Commodity futures contracts are subject
to uncertain legal and regulatory regimes, which may adversely affect the levels of either commodity index and the value of the
securities
Commodity futures contracts are subject
to legal and regulatory regimes in the United States and, in some cases, in other countries that may change in ways that could
adversely affect our ability to hedge our obligations under the securities and affect the levels of either commodity index. The
effect on the value of the securities of any future regulatory change is impossible to predict, but could be substantial and adverse
to your interest. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted on July 21, 2010,
provided the Commodity Futures Trading Commission (the “CFTC”) with additional authority to establish limits on the
amount of positions that may be held by any person in commodity futures contracts, options on such futures contracts and swaps
that are economically equivalent to such contracts. We may decide, or be forced, to sell a portion, possibly a substantial portion,
of our hedge position in the relevant futures contracts underlying the commodity index. Additionally, other market participants
are subject to the same regulatory issues and may decide, or be required, to sell their positions in such underlying futures contracts.
While the effect of these or other regulatory developments are difficult to predict, if such broad market selling were to occur,
it would likely affect the levels of either commodity index and may adversely affect the value of the securities.
The securities are not regulated by
the Commodity Futures Trading Commission
The net proceeds to be received by us from
the sale of the securities will not be used to purchase or sell any commodity futures contracts or options on futures contracts
for your benefit. An investment in the securities thus
neither constitutes an investment in futures contracts, options on futures
contracts nor a collective investment vehicle that trades in these futures contracts (i.e., the securities will not constitute
a direct or indirect investment by you in the futures contracts), and you will not benefit from the regulatory protections of the
CFTC. Among other things, this means that we are not registered with the CFTC as a futures commission merchant and you will not
benefit from the CFTC’s or any other non-U.S. regulatory authority’s regulatory protections afforded to persons who
trade in futures contracts on a regulated futures exchange through a registered futures commission merchant. For example, the price
you pay to purchase the securities will be used by us for our own purposes and will not be subject to customer funds segregation
requirements provided to customers that trade futures on an exchange regulated by the CFTC.
Unlike an investment in the securities,
an investment in a collective investment vehicle that invests in futures contracts on behalf of its participants may be subject
to regulation as a commodity pool and its operator may be required to be registered with and regulated by the CFTC as a commodity
pool operator, or qualify for an exemption from the registration requirement. Because the securities will not be interests in a
commodity pool, the securities will not be regulated by the CFTC as a commodity pool, we will not be registered with the CFTC as
a commodity pool operator and you will not benefit from the CFTC’s or any non-U.S. regulatory authority’s regulatory
protections afforded to persons who invest in regulated commodity pools.
Historical levels of the sub-indices
should not be taken as an indication of the future performance of the Index during the term of the securities
The actual performance of the sub-indices
over each month during the term of the securities, as well as the amount payable at maturity or upon repurchase by Deutsche Bank,
may bear little relation to the historical calculations of the sub-indices. Publication of the DB optimum yield commodity index
began in May 2006 with a base date of July 31, 1988, publication of the DB benchmark commodity index began in February 2003
with a base date of December 1, 1988 and publication of the TBill index began on February 27, 2008 with a base date of
November 22, 1998.
The Short ETNs and the Long ETNs are
linked to different commodity indices
The Short ETNs are linked to the DB benchmark
commodity index. The Long ETNs are linked to the DB optimum yield commodity index. These indices are identical apart
from the methodology used for replacing underlying futures contracts that are near expiration. This difference is described
more fully below under “The Indices.” Despite their similarity, the two commodity indices are independent and
a beneficial movement in one does not imply a beneficial movement in the other.
The index sponsor may adjust the sub-indices
in ways that affect the level of the sub-indices, and the index sponsor has no obligation to consider your interests
Deutsche Bank, as index sponsor of each
sub-index, determines the composition of the sub-indices and can add to, delete or substitute the components currently composing
the sub-indices or make other changes that could change the levels of the sub-indices. Additionally, the index sponsor may alter,
discontinue or suspend a sub-index. Any of these actions could adversely affect the value of the securities. The index sponsor
has no obligation to consider your interests in revising a sub-index.
Your return will not reflect the return
on a direct investment in any of the index commodities
The return on your securities will not match
the return you would have received had you invested directly in crude oil, heating oil, aluminum, gold, corn or wheat. In particular,
an investment in the securities is reduced by the investor fee which reduces the amount of your return at maturity or upon repurchase
of the securities by Deutsche Bank and the monthly reset of the current principal amount.
The securities may not be a suitable
investment for you
The securities may not be a suitable investment
for you if you are not willing to be exposed to fluctuations in the levels of the sub-indices; you seek a guaranteed return of
principal; you believe the applicable index factor will perform adversely or insufficiently beneficially to offset the impact of
the investor fee during the term of the securities; you seek an investment which measures the simple performance of the index commodities
over a period equivalent to the term of the securities, rather than its month-over-month performance; you prefer the lower risk
and therefore accept the potentially lower but more predictable returns of fixed income investments with comparable maturities
and credit ratings; or you seek current income from your investment.
Changes
in our credit ratings may affect the market value of your securities
Our credit ratings are an assessment of
our ability to pay our obligations, including those on the securities. Consequently, actual or anticipated changes in our credit
ratings may affect the market value of your securities. However, because the return on your securities is dependent upon certain
factors in addition to our ability to pay our obligations on your securities, an improvement in our credit ratings will not reduce
the other investment risks related to your securities or increase the market value of your securities.
You will not receive interest payments
on the securities or have rights in the sub-index components
You will not receive any periodic interest
payments on the securities. As an owner of the securities, you will not have rights that investors in the components of the commodity
indices or TBill index may have. You will receive cash for your securities, if any, and you will have no right to receive delivery
of any of the components of the commodity indices or TBill index.
There may not be an active trading
market in the securities; sales in the secondary market may result in significant losses
Although the securities are listed on NYSE
Arca, a trading market for your securities may not develop and no assurances can be given as to the continuation of any listing
during the term of the securities. We are not required to maintain any listing of the securities on NYSE Arca or any other exchange.
Furthermore, we are under no obligation to issue or sell additional securities at any time. If the securities are delisted or
a sufficiently active secondary market in the securities does not exist, there likely will not be enough liquidity in the securities
to allow you to trade or sell your securities when you wish to do so and the securities may trade at a significant discount to
their intraday indicative security value. In addition, you may be unable to exercise the repurchase option if there is not enough
liquidity in the securities to allow you to purchase additional securities in the secondary market in order to hold the minimum
5,000 securities required for repurchase. Suspension of additional issuances of the securities could further reduce liquidity,
if investors subsequently exercise their right to have the securities repurchased by us.
The Optimum Yield methodology of the
DB optimum yield commodity index may not succeed in reducing negative roll yield, which could decrease the value of the Long ETNs
Roll yield refers to the yield which is
realized as a futures contract which is about to expire (i.e., it requires physical delivery of the commodity in the next month)
is replaced by a futures contract with a longer term expiration (i.e., it requires physical delivery in a later month). If the
forward price curve is in “backwardation,” the prices of futures contracts with shorter-term expirations will be higher
than for futures contracts with longer-term expirations. In these circumstances, absent other factors, the sale of an existing
futures contract would take place at a price that is higher than the price at which the new futures contract is purchased, thereby
creating a positive “roll yield.” The converse of backwardation is “contango” and exists where the prices
are lower for futures contracts with shorter-term expirations than for futures contracts with longer-term expirations. In these
circumstances, absent other factors, the sale of the existing futures contract would take place at a price that is lower than the
price at which the new futures contract is purchased, thereby creating negative “roll yield.” While crude oil and heating
oil futures contracts have historically exhibited consistent periods of backwardation, backwardation will likely not exist in these
markets at all times. Conversely, aluminum, gold, corn and wheat futures contracts have historically traded in contango markets.
However, the current and continued presence of backwarded or contangoed markets for these commodity futures contracts markets is
not assured or certain. The absence of backwardation in the markets for the index commodities could result in negative roll yields.
Negative roll yields will have an adverse
impact on the level of the DB optimum yield commodity index. The DB optimum yield commodity index chooses new underlying commodities’
futures contracts using the Optimum Yield methodology, which attempts to maximize positive roll yield and minimize negative roll
yield. To the extent that the Optimum Yield methodology fails to effectively minimize any negative roll yield, the level of the
DB optimum yield commodity index and the value of the Long ETNs could be adversely affected.
For more information on the Optimum Yield
methodology, please see “The Indices” below.
Suspension or disruptions of market
trading in the index commodities and related futures may adversely affect the value of your securities
Commodity futures markets, such as the
markets on which the futures contracts underlying the commodity indices are traded, are subject to temporary distortions or other
disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators, and government
regulation and intervention. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount
of fluctuation in some
futures contract prices that may occur
during a single business day. These limits are generally referred to as “daily price fluctuation limits” and the
maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit
price.” Once the limit price has been reached in a particular contract, no trades may be made at a price beyond the
limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading in a particular
contract or forcing the liquidation of contracts at potentially disadvantageous times or prices. We have no control over the
imposition or removal of such limits. These circumstances could affect the value of the commodity indices and therefore could
adversely affect the value of your securities.
Postponement of a valuation date may
result in a reduced amount payable at maturity or upon earlier repurchase
As the payment at maturity or upon earlier
repurchase is a function of, among other things, the applicable daily index factor on the final valuation date or applicable valuation
date, as the case may be, the postponement of any valuation date may result in the application of a different applicable daily
index factor and, accordingly, decrease the payment you receive at maturity or upon earlier repurchase.
Concentration risks associated with
the Index may adversely affect the value of your securities
The commodity indices are composed of futures
contracts on six commodities (crude oil, heating oil, aluminum, gold, corn and wheat) and are less diversified than other funds,
investment portfolios or indices investing in or tracking a broader range of products and, therefore, could experience greater
volatility. You should be aware that other commodities indices may be more diversified than the commodity indices in terms of both
the number and variety of futures contracts on commodities. Because your investment in the securities is concentrated in only six
index commodities, you will not benefit, with respect to the securities, from any of the advantages of a diversified investment
and will bear the risks of a concentrated investment.
The correlation among the futures
contracts underlying the commodity indices could change unpredictably
Correlation is the extent to which the values
of the underlying commodity futures contracts increase or decrease to the same degree at the same time. A change in the correlation
among the underlying futures contracts could cause an adverse movement in the level of the commodity indices and the value of the
securities.
The return on your investment could
be significantly less than the return on any individual index commodity
The return on your investment in the securities
could be less than the return on an alternative investment with similar risk characteristics, even if some of the commodity futures
contracts included in a commodity index have generated significant returns. The prices of such futures contracts may move in different
directions at different times compared to each other, and underperformance by one or more contract included in a commodity index
will adversely affect that commodity index’s performance.
Trading by Deutsche Bank and other
transactions by Deutsche Bank and/or its affiliates in instruments linked to the sub-indices or index components may impair the
market value of the securities
As described below under “Use of Proceeds
and Hedging” in this pricing supplement, we, through our affiliates, have entered into and expect to continue to enter into
additional transactions to hedge our obligations under the securities. Such transactions may involve purchases of the futures contracts
underlying a commodity index, options on a commodity index, or other derivative instruments with returns linked to the performance
of the sub-indices or their components and we may adjust our hedge positions by, among other things, purchasing or selling any
of the foregoing. Although they are not intended to, any of these hedging activities may affect the market price of the futures
contracts underlying a commodity index and the levels of the sub-indices and, therefore, the market value of the securities. It
is possible that our hedging activities could produce substantial returns for us even though the market value of the securities
declines.
We may also issue other securities or financial
or derivative instruments with returns linked or related to changes in the performance of any of the foregoing. By introducing
competing products into the marketplace in this manner, we could adversely affect the market value of the securities.
With respect to any of the activities described
above, we have no obligation to take the needs of any buyer, seller or holder of the securities into consideration at any time.
Any of the foregoing activities described
above may reflect trading strategies that differ from, or are in direct opposition to, investors’ trading and investing strategies
relating to the securities.
The liquidity of the market for the
securities may vary materially over time
As of July 10, 2015, there were
approximately 53,000 Commodity Double Short ETNs, 553,000 Commodity Double Long ETNs, 57,000 Commodity Short ETNs and 92,000
Commodity Long ETNs outstanding. Additional securities may be offered and sold from time to time through DBSI, acting as our
agent. Also, the number of securities outstanding could be reduced at any time due to repurchases of the securities by
Deutsche Bank as described in this pricing supplement. Accordingly, the liquidity of the market for the securities could vary
materially over the term of the securities. While you may elect to offer your securities for repurchase by Deutsche Bank
prior to maturity, such repurchase is subject to the restrictive conditions and procedures described elsewhere in this
pricing supplement, including the condition that you must offer at least 5,000 securities per offering or an integral
multiple of 5,000 securities in excess thereof to Deutsche Bank at one time for repurchase on any repurchase date.
You may not be able to purchase or
sell your securities in the secondary market at the intraday indicative security value, and paying a premium purchase price over
the intraday indicative security value could lead to significant losses
The
intraday indicative security value of the securities is not the same as the trading price of such securities in the secondary market.
The intraday indicative security value is meant to approximate the economic value of the securities at any given time. On each
trading day, the calculation agent will publish the intraday indicative security value for each offering of securities every 15
seconds under the Bloomberg symbols DEEIV, DYYIV, DDPIV and DPUIV. In calculating
the intraday indicative security value at any given time, the calculation agent will take into account the current principal amount,
the performance of the relevant Index from the last monthly reset date to such time and the deduction of the investor fee. In addition,
the calculation agent will publish the daily repurchase value once a day for each offering of securities under the Bloomberg symbols
DEERP, DYYRP, DDPRP and DPURP. The daily repurchase value on each trading day is calculated
the same way as the intraday indicative security value, but uses the closing levels of the relevant sub-indices on such trading
day.
The
trading price of the securities at any time is the price that you may be able to sell or purchase the securities in the secondary
market at such time, if one exists. The trading price of the securities at any time may vary significantly from their intraday
indicative security value at such time due to, among other things, imbalances of supply and demand, lack of liquidity, transaction
costs, credit considerations and bid-offer spreads. Paying a premium purchase price over the intraday indicative security value
of the securities could lead to significant losses in the event the investor sells such securities at a time when such premium
is no longer present in the market place or such securities are redeemed, in which case investors will receive a cash payment in
an amount equal to the repurchase value on the applicable valuation date. It is also possible that the securities will trade in
the secondary market at a discount below the intraday indicative security value and that investors would receive less than the
intraday indicative security value if they had to sell their securities in the market at such time.
We may issue and sell additional securities
from time to time but we are under no obligation to do so. Any limitation or suspension on the issuance of the securities may materially
and adversely affect the price and liquidity of the securities in the secondary market and may cause the securities to trade at
a premium or discount in relation to their intraday indicative security value
In our sole discretion, we may decide to
issue and sell additional securities from time to time at a price based on the indicative value of such securities at that time,
which may be significantly higher or lower than the face amount. The price of the securities in any subsequent sale may differ
substantially (higher or lower) from the issue price paid in connection with any other issuance of such securities. Additionally,
any securities held by us or an affiliate in inventory may be resold at then-current market prices or lent to market participants
who may have made short sales of the securities.
However, we are under no obligation to
issue or sell additional securities at any time, and if we do sell additional securities, we may limit such sales and stop selling
additional securities at any time. If we stop selling additional securities for any reason, the price and liquidity of such securities
in the secondary market could be materially and adversely affected, which may cause the securities to trade at a premium or discount
in relation to their intraday indicative security value, but the intraday indicative security value and the daily repurchase value
would not be affected. Furthermore, unless we indicate otherwise, if we suspend selling additional securities, we reserve the
right to resume selling additional securities at any time, which might result in the reduction or elimination of any
premium in the trading
price that may have developed. Therefore, paying a premium purchase price over the intraday indicative security value of the securities
could lead to significant losses.
Suspension of additional issuances of
the securities can also result in a significant reduction in the number of outstanding securities, if investors subsequently
exercise their right to have the securities repurchased by us. If the total number of outstanding securities has fallen to a
level that is close to or below the minimum 5,000 securities required for repurchase, you may not be able to purchase enough
securities to meet the minimum size requirement in order to exercise your repurchase right. The unavailability of the
repurchase right can result in the securities trading in the secondary market at discounted prices below the intraday
indicative security value. Having to sell your securities at a discounted sale price below the intraday indicative security
value of the securities could lead to significant losses. Prior to making an investment in the securities, you should take
into account whether or not the trading price is tracking the intraday indicative security value of the securities.
We or our affiliates may have economic
interests adverse to those of the holders of the securities
Deutsche
Bank and other affiliates of ours have engaged in and expect to engage in trading activities related to the components of the
sub-indices, including trading derivative instruments with returns linked to the performance of the components of the sub-indices,
for their accounts and for other accounts under their management. Such trading activities may not be for the account of holders
of the securities or on their behalf and may present a conflict between the holders’ interest in the securities and the
interests that DBSI and its affiliates will have in their proprietary accounts, in facilitating transactions, including futures,
options and other derivatives transactions, for their customers and in accounts under their management. These trading activities,
if they influence the levels of the sub-indices, could be adverse to the interests of the holders of the securities. Deutsche
Bank and these affiliates may also issue or underwrite or assist unaffiliated entities in the issuance or underwriting of other
securities or financial instruments linked to the sub-indices. To the extent that we or one of our affiliates serves as issuer,
agent or underwriter for such securities or financial instruments, our or their interests with respect to such products may be
adverse to those of the holders of the securities. By introducing competing products into the marketplace in this manner, we or
one or more of our affiliates could adversely affect the value of the securities.
Moreover, DBSI has published and in the future
expects to publish research reports and trading advice with respect to some or all of the components of the sub-indices. This
research and trading advice is modified from time to time without notice and may express opinions or provide recommendations that
are inconsistent with purchasing or holding the securities. The research and trading advice should not be viewed as a recommendation
or endorsement of the securities in any way and investors must make their own independent investigation of the merits of this
investment. Any of these activities by DBSI or its affiliates may affect the market price of the components of the commodity indices
and the levels of the sub-indices and, therefore, the market value of the securities. With respect to any of the activities described
above, neither DBSI nor its affiliates have any obligation to take the needs of any buyer, seller or holder of the securities
into consideration at any time.
The index sponsor may discontinue
the sub-indices and public disclosure of information relating to a sub-index may change over time
The index sponsor is under no obligation
to continue to compile and publish the sub-indices and is not required to compile and publish any successor index if any sub-index
is discontinued. If the index sponsor discontinues or suspends the compilation or publication of a sub-index, it may become difficult
to determine the current principal amount, the market value of the securities or the amount payable at maturity or upon repurchase
by Deutsche Bank. Initially, Deutsche Bank AG, London Branch will serve as the calculation agent for the securities (the “calculation
agent”). In the event the index sponsor discontinues or suspends the compilation or publication of a sub-index, the calculation
agent may designate a successor index selected in its sole discretion (which may, but need not be, an index calculated and maintained
by Deutsche Bank). If the calculation agent determines in its sole discretion that no successor index comparable to the discontinued
sub-index exists, the amount you receive at maturity or upon repurchase by Deutsche Bank will be determined by the calculation
agent in its sole discretion. See “Specific Terms of the Securities – Discontinuance or Modification of the Index”
in this pricing supplement.
The policies of the index sponsor
and any changes thereto that affect the composition and valuation of a sub-index could affect the amount payable on your securities
and their market value
The policies of the index sponsor concerning
the calculation of the level of a sub-index, additions, deletions or substitutions of the components in the sub-indices and the
manner in which changes affecting a sub-index are reflected could affect the level of such sub-index and, therefore, the current
principal amount, the amount payable
on your securities at maturity or upon repurchase by Deutsche Bank and the market value of
your securities prior to maturity.
Additional index components may satisfy
the eligibility criteria for inclusion in any sub-index and the index components currently included in a commodity index may fail
to satisfy such criteria. In addition, the index sponsor may modify the methodology for determining the composition and weighting
of a sub-index, or for calculating the level of a sub-index due to certain fiscal, market, regulatory, juridical or financial
circumstances affecting an underlying commodity, an underlying futures contract or 3-month Treasury bills. The index sponsor may
also discontinue or suspend compilation or publication of a sub-index, in which case it may become difficult to determine the
market value of such sub-index. Any such changes could adversely affect the value of your securities.
If events such as these occur, or if the
level of a sub-index is not available or cannot be calculated because of a market disruption event or for any other reason, the
calculation agent may be required to make a good faith estimate in its sole discretion of the level of such sub-index. The circumstances
in which the calculation agent will be required to make such a determination are described more fully under “Specific Terms
of the Securities – Discontinuance or Modification of the Index” and “– Role of Calculation Agent.”
There are potential conflicts of interest
between you and the calculation agent
We will serve as the calculation agent.
The calculation agent will, among other things, decide the amount of the return paid out to you on the securities at maturity or
upon repurchase by Deutsche Bank. For a more detailed description of the calculation agent’s role, see “Specific Terms
of the Securities – Role of Calculation Agent” in this pricing supplement.
If the index sponsor were to discontinue
or suspend compilation, calculation or publication of either commodity index and the index sponsor does not appoint another entity
to calculate and publish such commodity index, it may become difficult to determine the level of such commodity index. If events
such as these occur, or if the level of a sub-index is not available or cannot be calculated because of a market disruption event
or for any other reason, the calculation agent may be required to make a good faith estimate in its sole discretion of the level
of such sub-index. The circumstances in which the calculation agent will be required to make such a determination are described
more fully under “Specific Terms of the Securities – Role of Calculation Agent” in this pricing supplement.
The calculation agent will exercise its
judgment when performing its functions. For example, the calculation agent may have to determine whether a market disruption event
affecting a commodity index has occurred or is continuing on a valuation date, including the final valuation date. This determination
may, in turn, depend on the calculation agent’s judgment as to whether the event has materially interfered with our ability
to unwind our hedge positions. Since these determinations by the calculation agent may affect the market value of the securities,
the calculation agent may have a conflict of interest if it needs to make any such decision.
If a market disruption event has occurred
or exists on a valuation date or the final valuation date, the calculation agent can postpone the determination of the index factor
for each offering of securities, the maturity date or a repurchase date
The determination of the index factor for
each offering of securities on a monthly valuation date, valuation date or final valuation date, may be postponed if the calculation
agent determines that a market disruption event has occurred or is continuing on such valuation date. In case of such postponement,
the corresponding repurchase date or the maturity date could be postponed accordingly.
If postponement of the determination of
an index factor for a valuation date or the final valuation date, due to a market disruption event occurs, such postponement will
continue until the next trading day on which there is no market disruption, up to ten scheduled trading days. If a market disruption
event causes the postponement of the determination of an index factor for a valuation date or the final valuation date for more
than ten scheduled trading days, the level of the relevant sub-index for the relevant repurchase date or the maturity date, as
applicable, will be determined (or, if not determinable, estimated) by the calculation agent in a manner which it considers commercially
reasonable under the circumstances. See “Specific Terms of the Securities – Market Disruption Events.”
The U.S. federal income tax consequences
of an investment in the securities are uncertain
As of the date of this
pricing supplement, there is no direct legal authority regarding the proper U.S. federal income tax treatment of the securities,
and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant
aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the
securities as prepaid financial contracts that are not debt, as described in the section of this pricing supplement entitled “U.S.
Federal Income Tax Consequences.” If the IRS were successful in asserting an alternative treatment, the tax consequences
of your ownership and disposition of the securities could be materially and adversely affected. In addition, 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 securities,
possibly with retroactive effect.
You should review the discussion under
“U.S. Federal Income Tax Consequences” and consult your tax adviser regarding the U.S. federal tax consequences of
an investment in the securities, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
THE INDICES
The return on the securities is linked to
the performance of a total return version of a commodity-linked index (the “Index”). For the Short ETNs, the Index
is a total return version of the Deutsche Bank Liquid Commodity IndexTM, and the performance of the Index is obtained
by combining the returns on two component indices: the DB 3-Month T-Bill Index (“TBill index”) and the Deutsche Bank
Liquid Commodity IndexTM Excess Return (“DB benchmark commodity index”). For the Long ETNs, the Index is
a total return version of the Deutsche Bank Liquid Commodity Index– Optimum YieldTM, and the performance of the
Index is obtained by combining the returns on two component indices: the TBill index and the Deutsche Bank Liquid Commodity Index–
Optimum YieldTM Excess Return (“DB optimum yield commodity index” and, together with the DB benchmark commodity
index, the “commodity indices”).
The Deutsche Bank Liquid Commodity Index™
Excess Return
The Deutsche Bank Liquid Commodity Index
– Optimum Yield™ Excess Return
The DB benchmark commodity index and DB
optimum yield commodity index differ only in their “roll methodology,” as described further below. All other aspects
of the following description apply to both commodity indices.
Both of the commodity indices are intended
to reflect the performance of a basket of futures contracts (each such futures contract, an “underlying futures contract”)
relating to six commodities. Both of the commodity indices measure the value of this basket by tracking the closing prices of certain
exchange traded contracts for the future delivery of each of these commodities, adjusted to reflect the relative weight of each
commodity in the relevant commodity index. The commodities included in each commodity index are: West Texas Intermediate light
sweet crude oil (“crude oil”), New York Harbor no. 2 heating oil (“heating oil”), high grade primary aluminum
(“aluminum”), gold, corn and wheat (each, an “index commodity”). The relative weight of each index commodity
reflected in the relevant commodity index is variable and is adjusted from time to time.
After the close of trading on February 16,
2012 (the "Effective Date"), the underlying futures contract on wheat included in the DB optimum yield commodity index,
which was traded on the Board of Trade of the City of Chicago, Inc., or its successor (“CBOT”), was replaced by a basket
of three underlying futures contracts on wheat traded on CBOT, the Kansas City Board of Trade (“KCBT”) and the Minneapolis
Grain Exchange, Inc. (“MGEX”), respectively. The performance of this basket of futures contracts on wheat is tracked
by the Deutsche Bank Liquid Commodity Index – Optimum Yield Wheat Basket Index USD Excess Return (Symbol: DBLCOWUE) (the
“wheat basket index”). The wheat basket index is rebalanced annually so that the underlying futures contracts on wheat
traded on CBOT, KCBT and MGEX will be weighted equally on each rebalancing day.
Because each commodity index measures the
value of the index commodities by tracking the prices of underlying futures contracts, the commodity index methodology includes
provisions that provide for the periodic replacement of underlying futures contracts as they approach maturity. This replacement
takes place over a period of time, referred to as the “recomposition period,” to lessen the impact of such replacement
on the markets for the index commodities. Recomposition of each commodity index occurs monthly and the recomposition period normally
lasts for a number of index business days (as defined below). In addition, each commodity index is rebalanced annually on or around
the 6th index business day of November.
Each commodity index is calculated on an
excess return, or unfunded, basis. The DB benchmark commodity index has been calculated back to a base date of December 1, 1988.
On the base date the closing level of the DB benchmark commodity index was 100. The DB optimum yield commodity index has been calculated
back to a base date of July 31, 1988. On the base date the closing level of the DB optimum yield commodity index was 100.
Methodology
Roll methodology for the DB optimum yield
commodity index
The DB optimum yield commodity index uses
a rules-based approach, which we refer to as the “optimum yield” approach, to replace, or roll, each underlying futures
contract as it approaches maturity with a futures contract on the same index commodity having a later maturity date. This replacement
takes place over a period of time in order to lessen the impact on the market for the underlying futures contract. Rather than
select a new futures contract based on a predetermined schedule (e.g., monthly), the DB optimum yield commodity index rolls to
the eligible futures contract which has the same index commodity as the expiring contract and generates the best possible implied
roll yield. In general, as a futures contract approaches its expiration date, its price moves towards
the spot price. In a contangoed market,
assuming the spot price does not change, this results in the futures contract price decreasing and a negative implied roll yield.
The opposite is true in a backwardated market. The DB optimum yield commodity index seeks to maximize the roll benefits in backwardated
markets and minimize the losses from rolling in contangoed markets.
On the first New York business day of each
month (a “verification date”), each underlying futures contract is tested in order to determine whether to continue
including it in the DB optimum yield commodity index. If the underlying futures contract requires delivery of the index commodity
in the next month (the “delivery month”), a new futures contract on the same commodity is selected for inclusion in
the DB optimum yield commodity index. For example, if the first New York business day of the month is November 1, 2009, and
the delivery month of the current underlying futures contract is December 2009, a new futures contract on the same index commodity
with a later delivery month will be selected to replace the current contract.
The new futures contract selected will be
the futures contract with the same index commodity as the expiring contract, which has the best possible implied roll yield based
on the closing price for each eligible futures contract. Eligible futures contracts are those futures contracts having a delivery
month (i) no sooner than the month after the delivery month of the futures contract being replaced, and (ii) no later
than the 13th month after the verification date. For example, if the first New York business day of the month is November 1,
2009 and the delivery month of the current underlying futures contract is December 2009, the delivery month of an eligible new
futures contract must be between January 2010 and January 2011. The implied roll yield of each eligible futures contract is
calculated and the futures contract with the best possible implied roll yield is selected. If two futures contracts have the same
implied roll yield, the futures contract with the minimum number of months prior to the delivery month is selected.
After the new futures contract is selected,
the old futures contract is unwound and a position is established in the new futures contract. Such recomposition occurs over a
period spanning from the 2nd to the 6th index business day of the month (the “recomposition period”).
Roll methodology for the DB benchmark
commodity index
The DB benchmark commodity index does not
use the “optimum yield” approach described above. Instead, it replaces, or rolls, each underlying futures contract
as it approaches maturity with a futures contract on the same index commodity having a later maturity date based upon a pre-determined
schedule. This replacement takes place over a period of time in order to lessen the impact on the market for the underlying futures
contract.
On the first New York business day of each
month, each underlying futures contract is tested in order to determine whether to continue including it in the DB benchmark commodity
index. If the underlying futures contract requires delivery of the index commodity in the next month (the “delivery month”),
a new futures contract on the same commodity is selected for inclusion in the DB benchmark commodity index. For example, if the
first New York business day of the month is May 1, 2008, and the delivery month of the current underlying futures contract
is June 2008, a new futures contract on the same index commodity with a later delivery month will be selected to replace the current
contract.
In the case of underlying crude oil and
heating oil futures contracts, the DB benchmark commodity index replaces the underlying futures contract with a futures contract
on the same index commodity that has an expiration date two months after the month in which the recomposition takes place. In the
case of underlying aluminum, gold, wheat and corn futures contracts, the DB benchmark commodity index replaces the underlying futures
contract with a futures contract on the same index commodity that has an expiration date thirteen months after the month in which
the recomposition takes place.
After the new futures contract is selected,
the old futures contract is unwound and a position is established in the new futures contract. Such recomposition occurs over the
recomposition period.
Calculation of the closing level
The closing level of each commodity index
on any index business day is the sum of the weighted closing prices of the underlying futures contracts for such index business
day, rounded to six decimal places. The “weighted closing price” of an underlying futures contract on a particular
index business day is the product of the weight of such underlying futures contract in the commodity index, which we refer to as
the “instrument amount”, multiplied by the underlying futures contract’s closing price on such day on the relevant
exchange.
The instrument amount of each underlying
futures contract on any index business day that does not fall within a recomposition period and is not a rebalancing day will be
equal to the instrument amount for such underlying futures contract on the previous index business day.
The methodology used to obtain the closing
price for an underlying futures contract varies depending on the index commodity, and is determined as follows:
| • | Crude oil: The closing price on an index business day for an underlying futures contract
relating to crude oil will be its price at the regular close of the principal trading session on such day on the New York Mercantile
Exchange or its successor (“NYMEX”), expressed in U.S. dollars per barrel of crude oil, as published by NYMEX for that
index business day or, if in the determination of the index sponsor a price is not available on such index business day, the price
as published by NYMEX for the immediately preceding index business day for which a price is available. |
| • | Heating oil: The closing price on an index business day for an underlying futures contract
relating to heating oil will be its price at the regular close of the principal trading session on such day on NYMEX, expressed
in U.S. dollars per U.S. gallon of heating oil, as published by NYMEX for that index business day or, if in the determination of
the index sponsor a price is not available on such index business day, the price as published by NYMEX for the immediately preceding
index business day for which a price is available. |
| • | Aluminum: The closing price on an index business day for an underlying futures contract
relating to aluminum will be its price at the regular close of the principal trading session on such day on The London Metal Exchange
Limited or its successor (“LME”), re-expressed in U.S. dollars per metric tonne of aluminum, as published by LME for
that index business day or, if in the determination of the index sponsor a price is not available on such index business day, the
price as published by LME for the immediately preceding index business day for which a price is available. |
| • | Gold: The closing price on an index business day for an underlying futures contract relating
to gold will be its price at the regular close of the principal trading session on such day on the Commodity Exchange Inc., New
York or its successor (“COMEX”), expressed in U.S. dollars per troy ounce of gold, as published by COMEX for that index
business day or, if in the determination of the index sponsor a price is not available on such index business day, the price as
published by COMEX for the immediately preceding index business day for which a price is available. |
| • | Corn: The closing price on an index business day for an underlying futures contract relating
to corn will be its price at the regular close of the principal trading session on such day on CBOT, expressed in U.S. dollars
per bushel of corn, as published by CBOT for that index business day or, if in the determination of the index sponsor a price is
not available on such index business day, the price as published by CBOT for the immediately preceding index business day for which
a price is available. |
| • | Wheat: Prior to the Effective Date, the closing price on an index business day for an underlying
futures contract relating to wheat was its price at the regular close of the principal trading session on such day on CBOT, expressed
in U.S. dollars per U.S. bushel of wheat of the grades deliverable in respect of the relevant underlying futures contract in accordance
with the rules of CBOT, as published by CBOT for that index business day or, if in the determination of the index sponsor a price
is not available on such index business day, the price as published by CBOT for the immediately preceding index business day for
which a price is available. On and after the Effective Date, the closing price on an index business day for an underlying futures
contract on wheat traded on CBOT is replaced by the closing level of the wheat basket index on such day, as published by the index
sponsor of the wheat basket index for that index business day or, if in the determination of the index sponsor a closing level
is not available on such index business day, the closing level as published by the index sponsor of the wheat basket index for
the immediately preceding index business day for which a closing level is available. |
The index sponsor will adjust the closing
price for the relevant underlying futures contract to reflect any corrections to such closing price that have been published by
the relevant exchange prior to 11:00 p.m. (London time) on the trading day immediately following the trading day to which the closing
price relates, or, if the publication time of any such closing price is amended by the relevant exchange, such other time as the
index sponsor may determine and publish as a replacement for 11:00 p.m. (London time).
Determining the instrument amount on
a rebalancing day
The sixth business day of November each
year is a “rebalancing day”, subject to postponement in the event of a market disruption event. On each rebalancing
day, the instrument amount of each underlying futures contract is set equal to the index base weight for each index commodity,
such index base weights being:
| • | in respect of crude oil, 35.00%; |
| • | in respect of heating oil, 20.00%; |
| • | in respect of aluminum, 12.50%; |
| • | in respect of gold, 10.00%; |
| • | in respect of corn, 11.25%; and |
| • | in respect of wheat, 11.25%. |
On each rebalancing
day following the Effective Date, the instrument amount of 11.25% allocated to the underlying futures contract on wheat traded
on CBOT will be reallocated to the wheat basket index. As a result, the effective weight of the underlying futures contract on
wheat traded on each of CBOT, KCBT and MGEX will be 3.75% on such rebalancing day.
Determining the instrument amount during
a recomposition period
During a recomposition period, each commodity
index will reflect any underlying futures contract being replaced as well as any underlying futures contract that is replacing
it, so that each commodity index will reflect two underlying futures contracts on the same index commodity. The instrument amount
of the old futures contract is gradually reduced over the recomposition period and the instrument amount of the new futures contract
is gradually increased so that, throughout the period, the sum of the instrument amounts for the two futures contracts is equal
to the instrument amount of the old futures contract on the day prior to the start of the recomposition period.
“Index business day” means a
day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general
business (including dealings in foreign exchange and foreign currency deposits) in New York City and London, United Kingdom.
Changes in the methodologies of the commodity
indices
The index sponsor employs the methodologies
described above and its application of such methodologies shall be conclusive and binding. While the index sponsor currently employs
the above described methodologies to calculate the commodity indices, no assurance can be given that fiscal, market, regulatory,
juridical or financial circumstances (including, but not limited to, any changes to or any suspension or termination of or any
other events affecting an index commodity or an underlying futures contract) will not arise that would, in the view of the index
sponsor, necessitate a modification of or change to such methodologies and in such circumstances the index sponsor may make any
such modification or change as it determines appropriate. The index sponsor may also make modifications to the terms of either
commodity index in any manner that it may deem necessary or desirable, including (without limitation) to correct any manifest or
proven error or to cure, correct or supplement any defective provision of either commodity index. The index sponsor will publish
notice of any such modification or change and the effective date thereof as set forth below.
Publication of closing levels and adjustments
In order to calculate the level of the underlying,
the index sponsor polls Reuters every 15 seconds to determine the real time price of the underlying futures contracts. The index
sponsor then applies a set of rules to this value to create the indicative levels of the commodity indices. These rules are consistent
with the rules which the index sponsor applies at the end of each trading day to calculate the closing levels of the commodity
indices.
The index sponsor publishes the closing
levels of the commodity indices daily.
The most recent end-of-day closing levels
of the commodity indices are published under their own symbols as of the close of business for the relevant exchanges each trading
day on the consolidated tape, Reuters and/or Bloomberg.
Interruption of index calculation
Force majeure event
Calculation of a commodity index may not
be possible or feasible under certain events or circumstances, including, without limitation, a systems failure, natural or man-made
disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance, that
is beyond the reasonable control of the index sponsor and that the index sponsor determines affects the commodity index or one
of the index commodities. Upon the occurrence of any such force majeure event, the index sponsor may, in its discretion, elect
one (or more) of the following options:
| • | make such determinations and/or adjustments to the terms of the commodity index as it considers
appropriate to determine any closing level on any such appropriate index business day; and/or |
| • | defer publication of the information relating to the commodity index until the next index business
day on which it determines that no force majeure event exists; and/or |
| • | permanently cancel publication of the information relating to the commodity index. |
Index disruption event
Additionally, calculation of a commodity
index may be disrupted by an event that would require the index sponsor to calculate the closing price in respect of an underlying
futures contract on an alternative basis were such event to occur or exist on a day that is a trading day for the underlying futures
contract on the relevant exchange. If such an index disruption event in relation to an underlying futures contract as described
in the prior sentence occurs and continues for a period of five successive trading days on the relevant exchange, the index sponsor
will, in its discretion, either
| • | continue to calculate the relevant closing price for a further period of five successive trading
days on the relevant exchange, or |
| • | if such period extends beyond the five successive trading days, the index sponsor may elect to
replace the affected underlying futures contract and make all necessary adjustments to the methodology and calculation of the commodity
index as it deems appropriate. |
Additionally, Deutsche Bank AG, London Branch,
as calculation agent for the securities, has discretion to determine the level of a commodity index in the event of disruptions
occurring with regard to the futures contracts underlying such commodity index. See “Specific Terms of the Securities –
Market Disruption Events.”
DBLCI™, DBLCI-OY ER™ and
Deutsche Bank Liquid Commodity Index™ are trademarks of Deutsche Bank AG, London Branch, the index sponsor. Any use of these
marks must be with the consent of or under license from the index sponsor.
The DB 3-Month T-Bill Index
The TBill index is intended to approximate
the returns from investing in 3-month United States Treasury bills on a rolling basis.
On any index business day, the closing level
of TBill index is equal to the TBill index closing level on the index business day immediately preceding such index business day
multiplied by the product of (i) the sum of (a) one and (b) the T-bill accrual factor for such index business day
and (ii) the sum of (a) one and (b) the T-bill accrual factor for such index business day raised to the power of
the number of days which are not index business days during the period from (but excluding) the index business day immediately
preceding such index business day to (but excluding) such index business day. Expressed as a formula, the closing level of the
TBill index is equal to:
TRd-1 × (1+TBAFd)
× (1+TBAFd)n
where,
“TR” is the TBill
index closing level on the relevant index business day;
“d” is the relevant
index business day;
“d-1” is the index
business day immediately preceding the relevant index business day;
“TBAFd”
is the T-bill accrual factor for the relevant index business day; and
“n” is the number
of days that are not index business days during the period from (but excluding) the index business day immediately preceding the
relevant index business day to (but excluding) the relevant index business day.
For the purposes of this paragraph:
“T-bill accrual factor” means,
in respect of an index business day, an amount calculated by the index sponsor in accordance with the following formula:
(1 – 91/360 x TBR)(-1/91)
– 1
where,
“TBR” means the closing
three-month Treasury Bill rate appearing on Reuters Page US3MT = RR (or such page or service as may replace Reuters Page US3MT
= RR for the purposes of displaying three-month Treasury Bill rates) in respect of the index business day immediately preceding
such index business day (the “T-bill determination date”) or if such rate is not published in respect of the T-bill
determination date, the closing three-month Treasury Bill rate last published prior to the T-bill determination date.
“Base date” means
November 22, 1998. On the base date the closing level of the TBill index was 100.
VALUATION OF THE SECURITIES
The market value of the securities will
be affected by several factors, many of which are beyond our control. We expect that generally the level of the Index and the spot
and future prices of the index commodities on any day will affect the market value of the securities more than any other factor.
Other factors that may influence the market value of the securities include, but are not limited to, supply and demand for the
securities, including changes in supply related to inventory positions with any market maker and our decisions about whether or
when to issue additional securities, the volatility of the sub-indices, prevailing interest rates, the volatility of securities
markets, the time remaining to the maturity of the securities, economic, financial, political, regulatory or judicial events that
affect the levels of the sub-indices, the general interest rate environment, as well as the perceived creditworthiness of Deutsche
Bank. See “Risk Factors” in this pricing supplement for a discussion of the factors that may influence the market value
of the securities prior to maturity.
Repurchase Value
We refer to the amount you will be entitled
to receive upon any early repurchase per security as the repurchase value. The repurchase value reflects the current principal
amount and the performance of the Index from the last monthly reset date to the close of trading on the applicable valuation date,
reduced by the investor fee on such trading day. On each trading day, the repurchase value will be calculated as follows:
Current principal amount x applicable
index factor on the trading day
x fee factor on the trading day
If the repurchase value on any trading
day equals zero for a particular offering of securities, those securities will be automatically accelerated on that day for an
amount equal to the zero repurchase value and the holders will not receive any payment in respect of their investment.
The calculation agent will publish the daily
repurchase value for each offering of securities on the following Bloomberg pages:
• |
Commodity Double Short ETNs: |
“DEERP” |
• |
Commodity Double Long ETNs: |
“DYYRP” |
• |
Commodity Short ETNs: |
“DDPRP” |
• |
Commodity Long ETNs: |
“DPURP” |
Indicative Indicative Security Value
We also calculate and publish during each
trading day an intraday indicative security value, which is meant to approximate the economic value of the securities at any given
time during the trading day. It is calculated using the same formula as the repurchase value, except that instead of using the
closing levels of the sub-indices, the calculation is based on the intraday levels of the sub-indices at the particular time. In
calculating the intraday indicative security value at any given time, the calculation agent will take into account the current
principal amount, the performance of the relevant Index from the last monthly reset date to such time and the deduction of the
investor fee in accordance with the formula set forth below:
Current principal amount × applicable
index factor calculated based on the level of the Index at such time × fee factor for the day on which such time occurs
The intraday indicative security value is
not the same as the trading price of the securities and is not a price at which you can buy or sell the securities in the secondary
market. The trading price of the securities at any time may vary significantly from their intraday indicative security value.
Investors can compare the trading price of the securities against the intraday indicative security value to determine whether
the securities are trading in the secondary market at a premium or a discount to the economic value of the securities at any given
time. Investors are cautioned that paying a premium purchase price over the intraday indicative security value at any time could
lead to the loss of any premium in the event the investor sells the securities when the premium is no longer present in the marketplace
or when the securities are repurchased by us. It is also possible that the securities will trade in the secondary market at a discount
below the intraday indicative security value and that investors would receive less than the intraday indicative security value
if they had to sell their securities in the market at such time.
We will publish the intraday indicative
security value for each offering of securities every 15 seconds on the following Bloomberg pages:
• |
Commodity Double Short ETNs: |
“DEEIV” |
• |
Commodity Double Long ETNs: |
“DYYIV” |
• |
Commodity Short ETNs: |
“DDPIV” |
• |
Commodity Long ETNs: |
“DPUIV” |
SPECIFIC TERMS OF THE SECURITIES
In this section, references to “holders”
mean those who own the securities registered in their own names, on the books that we or the trustee maintain for this purpose,
and not those who own beneficial interests in the securities registered in street name or in the securities issued in book-entry
form through The Depository Trust Company (“DTC”) or another depositary. Owners of beneficial interests in the securities
should read the section entitled “Description of Notes – Form, Legal Ownership and Denomination of Notes” in
the accompanying prospectus supplement. The accompanying prospectus and prospectus supplement contain a detailed summary of additional
provisions of the securities and of the senior indenture, dated as of November 22, 2006, among Deutsche Bank Aktiengesellschaft,
Law Debenture Trust Company of New York, as trustee (referred to as the trustee), and Deutsche Bank Trust Company Americas, as
paying agent, issuing agent, authenticating agent and registrar, under which the securities will be issued (as may be amended and supplemented from time to time, the “indenture”).
You should read all the provisions of the accompanying prospectus and prospectus supplement, including information incorporated
by reference, and the indenture.
No Interest
We will not make any interest payments during
the term of the securities.
Denomination/Face Amount
The denomination and face amount of each
security is $25. The securities have been and may be issued and sold over time at prices based on the indicative value of such
securities at such times, which may be significantly higher or lower than the face amount.
Payment at Maturity
If you hold your securities to maturity,
subject to the credit of the Issuer, you will receive a payment per security, if any, that will depend on the month-over-month
performance of the Index as reflected in the current principal amount and index factor for the particular offering of securities,
reduced by the investor fee.
If the repurchase value on any trading
day equals zero for a particular offering of securities, those securities will be automatically accelerated on that day for an
amount equal to the zero repurchase value and the holders will not receive any payment in respect of their investment.
At maturity, your payment per security,
if any, will be calculated as:
Current principal amount × applicable
index factor on the final valuation date
× fee factor on the final valuation
date
where, |
Current principal amount |
= |
For the initial calendar month, the current principal amount was equal to $25.00 per security. For each subsequent calendar month, the current principal amount will be reset as follows on the monthly reset date: |
New current principal amount |
= |
Previous current
principal amount × applicable index factor on the applicable monthly
valuation date × fee factor
on the applicable monthly valuation date |
Index factor |
|
Index factor for Commodity Double Short ETNs: |
= |
1 + TBill index return – (2 × DB benchmark commodity index return) |
|
|
Index factor for Commodity Double Long ETNs: |
= |
1 + TBill index return + (2 × DB optimum yield commodity index return) |
|
|
Index factor for Commodity Short ETNs: |
= |
1 + TBill index return – DB benchmark commodity index return |
|
|
Index factor for Commodity Long ETNs: |
= |
1 + TBill index return + DB optimum yield commodity index return |
where, |
the DB benchmark commodity index return and the DB optimum yield commodity index return (each a “commodity index return”) and the TBill index return will be calculated as follows: |
Commodity index return |
= |
Commodity index closing level
– commodity index monthly initial level
Commodity index monthly initial
level |
|
TBill index return |
= |
TBill index closing level –
TBill index monthly initial level
TBill index monthly initial level |
|
Fee factor |
= |
On any given day, the fee factor will be calculated as follows: |
|
|
1 – [investor fee × day count fraction] |
where, |
Investor fee |
= |
0.75% per annum |
Day count fraction |
= |
For each calendar month, the day count fraction will equal a fraction, the numerator of which is the number of days elapsed from and including the monthly reset date (or the inception date in the case of the initial calendar month) to and including the monthly valuation date (or the trading day, valuation date or final valuation date, as applicable) and the denominator of which is 365. |
For the initial calendar month, the commodity
index monthly initial level was equal to 697.790394 for the DB benchmark commodity index and 751.377412 for the DB optimum yield
commodity index, each the commodity index closing level on the inception date. For each subsequent calendar month, the commodity
index monthly initial level will equal the commodity index closing level as of the opening of trading on the monthly reset date
for that calendar month.
For the DB benchmark commodity index, the
commodity index closing level will equal the closing level of the DB benchmark commodity index as reported on Bloomberg page “DBLCMACL
<Index>”, and for the DB optimum yield commodity index, the commodity index closing level will equal the closing
level of the DB optimum yield commodity index as reported on Bloomberg page “DBLCOYER <Index>”, subject
in each case to the occurrence of a market disruption event as described under “Market Disruption Events”; provided
that on any calendar day which is not a day on which the closing level of the commodity index is published, the commodity index
closing level will equal such level on the immediately preceding trading day.
For the initial calendar month, the TBill
index monthly initial level was equal to 234.332714, the TBill index closing level on the inception date. For each subsequent calendar
month, the TBill index monthly initial level will equal the TBill index closing level as of the opening of trading on the monthly
reset date for that calendar month.
The TBill index closing level will equal
the closing level of the TBill index as reported on Bloomberg page “DBTRBL3M<Index>”.
The inception date is April 28, 2008.
The initial calendar month is the period
from the inception date to May 31, 2008.
The monthly reset date, for each calendar
month, is the first calendar day of that month beginning on June 1, 2008 and ending on March 1, 2038.
The monthly valuation date, for each monthly
reset date, is the last calendar day of the previous calendar month beginning on May 31, 2008 and ending on February 28,
2038.
The final valuation date is March 29,
2038.
The maturity date is April 1, 2038,
subject to postponement in the event of a market disruption event as described under “Market Disruption Events.”
The record date for the payment at maturity
will be the final valuation date, whether or not that day is a business day.
A trading day is a day on which (i) the
values of the sub-indices are published by Deutsche Bank AG, London Branch, (ii) trading is generally conducted on NYSE Arca
and (iii) trading is generally conducted on the markets on which the futures contracts underlying the relevant commodity index
are traded, in each case as determined by Deutsche Bank, as calculation agent, in its sole discretion.
A business day is a Monday, Tuesday, Wednesday,
Thursday or Friday on which commercial banks and foreign exchange markets settle payments and are open for general business (including
dealings in foreign exchange and foreign currency deposits) in New York City.
Repurchase at Your Option
Prior to maturity, you may, subject to certain
restrictions, offer for repurchase by Deutsche Bank a minimum of 5,000 securities (or an integral multiple of 5,000 securities
in excess thereof) from a single offering. If you comply with the repurchase procedures described below, Deutsche Bank will be
obligated to repurchase your securities, and on the applicable repurchase date, you will receive in exchange for those securities
you have selected for repurchase a cash payment per security equal to the repurchase value on the applicable valuation date.
On any trading day, the repurchase value
will equal:
Current principal amount × applicable
index factor on the trading day
× fee factor on the trading day
See “Repurchase Procedures”
below for additional requirements for offering your securities for repurchase.
A valuation date is the trading day on which
you deliver an effective notice by 10:00 a.m., New York City time, offering your securities for repurchase by Deutsche Bank.
In the event that payment upon repurchase
by Deutsche Bank is deferred beyond the original repurchase date as provided herein, no interest or other amount will accrue or
be payable with respect to that deferred payment.
The securities are not redeemable at the
option of Deutsche Bank but may be accelerated if the repurchase value equals zero.
Repurchase Procedures
To effect a repurchase, you must irrevocably
offer at least 5,000 securities (or an integral multiple of 5,000 securities in excess thereof) from a single offering to DBSI
no later than 10:00 a.m., New York City time, on your desired valuation date, which must be no later than the final valuation date.
The transaction will settle on the repurchase date, which will be the third business day following the applicable valuation date.
If you wish to offer your securities to
Deutsche Bank for repurchase, you and your broker must follow the following procedures:
| • | your broker must deliver an irrevocable Offer for Repurchase, a form of which is attached as Annex A
to this pricing supplement, to DBSI by 10:00 a.m., New York City time, on your desired valuation date. The applicable repurchase
date will be three business days following the valuation date. You must offer at least 5,000 securities or an integral multiple
of 5,000 securities in excess thereof for repurchase by Deutsche Bank on any repurchase date. You may not combine securities from
separate offerings for the purpose of satisfying the minimum repurchase amount. DBSI must acknowledge receipt from your broker
in order for your offer to be effective; |
| • | your broker must book a delivery vs. payment trade with respect to your securities on the applicable
valuation date at a price equal to the applicable repurchase value, facing DBSI; and |
| • | cause your DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 10:00
a.m., New York City time, on the applicable repurchase date (the third business day following the valuation date, subject to postponement
in the event of a market disruption event as described under “Market Disruption Events”). |
Different brokers and DTC participants may
have different deadlines for accepting instructions from their customers. Accordingly, you should consult the brokerage firm or
other DTC participant through which you own your interest in the securities in respect of such deadlines. If DBSI does not receive
your offer for repurchase by 10:00 a.m., New York City time, on your desired valuation date, your notice will not be effective
and we will not accept your offer to repurchase your securities on the applicable repurchase date. Any repurchase instructions
that we receive in accordance with the procedures
described above will be irrevocable. We may request that DBSI purchase the securities you offer to us for repurchase for a cash
payment that would otherwise have been payable by us. Any securities purchased by DBSI will remain outstanding.
DBSI may charge a fee of up to $0.03 per
security that is repurchased.
Acceleration Upon Zero Repurchase Value
If the repurchase value on any trading day
equals zero for a particular offering of securities, those securities will be automatically accelerated on that day for an amount
equal to the zero repurchase value and the holders will not receive any payment in respect of their investment.
Default Amount on Event of Default Acceleration
If an event of default occurs and the maturity
of the securities is accelerated, we will pay the default amount in respect of each security at maturity. We describe the default
amount below under “—Default Amount.”
For the purpose of determining whether the
holders of our Series A global notes, of which the securities are a part, are entitled to take any action under the indenture,
we will treat the initial principal amount of each security outstanding as the principal amount of that security. Although the
terms of the securities may differ from those of the other Series A global notes, holders of specified percentages in principal
amount of all Series A global notes, together in some cases with other series of our debt securities, will be able to take action
affecting all the Series A global notes, including the securities. This action may involve changing some of the terms that apply
to the Series A global notes, accelerating the maturity of the Series A global notes after a default or waiving some of our obligations
under the indenture.
Default Amount
If an event of default occurs under the
indenture referenced in the accompanying prospectus supplement and the maturity of the securities is accelerated, the amount payable
upon acceleration will be the repurchase value determined by the calculation agent on the next trading day.
Further Issuances
We may, from time to time, without your
consent, create and issue additional securities having the same terms and conditions as the securities offered by this pricing
supplement. Such additional securities will be fungible with the outstanding securities. However, we are under no obligation to
sell additional securities at any time, and if we do sell additional securities, we may limit such sales and stop selling additional
securities at any time. Furthermore, you should be aware that, unless we indicate otherwise, if we suspend selling additional securities,
we reserve the right to resume selling additional securities at any time. See “Risk Factors — There may not be an active
trading market in the securities; sales in the secondary market may result in significant loses” and “— We may
issue and sell additional securities from time to time but we are under no obligation to do so. Any limitation or suspension on
the issuance of the securities may materially and adversely affect the price and liquidity of the securities in the secondary market
and may cause the securities to trade at a premium or discount in relation to their intraday indicative security value.”
Market Disruption Events
A disrupted day is any trading day on which
a market disruption event occurs or is continuing.
With respect to either commodity index,
if any monthly valuation date, valuation date or the final valuation date (each, a “reference date”) is a disrupted
day with regard to any underlying futures contract included in such commodity index (a “disrupted futures contract”),
the calculation agent will calculate the value of such commodity index using closing prices of the underlying futures contracts
included in such commodity index as follows:
| (a) | for all non-disrupted futures contracts, the closing price used by the calculation agent will be
the closing price of the non-disrupted futures contract on the scheduled reference date; and |
| (b) | for all disrupted futures contracts, the closing price used by the calculation agent will be the
closing price of each disrupted futures contract on the next succeeding trading day that is not a disrupted day with regard to
that disrupted futures contract; provided that if the ten successive scheduled trading days immediately following the scheduled
reference date are all disrupted days with regard to the specific disrupted futures contract, the calculation agent will determine,
in its sole discretion, and use, the closing price of such disrupted futures contract on the tenth scheduled trading day immediately
following such reference date, |
notwithstanding that such tenth
scheduled trading day is a disrupted day with regard to such disrupted futures contract.
For the purposes of calculating the relevant
commodity index in the case of a market disruption event, the calculation agent will use the instrument amount for each underlying
futures contract as of the scheduled reference date, even if such reference date is a disrupted day for the relevant underlying
futures contract.
If any reference date is a disrupted day,
no adjustment will be made to the TBill index closing level which is used for that reference date.
If any valuation date or the final valuation
date is a disrupted day and the date as of which the calculation agent determines the closing level of the relevant commodity index
falls less than three business days prior to the scheduled repurchase date corresponding to such valuation date or the maturity
date, as applicable, such scheduled repurchase date or the maturity date, as applicable, will be postponed to the third business
day following the date as of which the calculation agent has determined the closing level of the relevant commodity index for such
valuation date or the final valuation date, as applicable.
Any of the following will be a market disruption
event with respect to any underlying futures contract:
| • | a material limitation, suspension or disruption in the trading of the underlying futures contract
which results in a failure by the trading facility on which the relevant contract is traded to report a daily contract reference
price (the price of the relevant contract that is used as a reference or benchmark by market participants); |
| • | the daily contract reference price for the underlying futures contract is a “limit price”,
which means that the daily contract reference price for such contract has increased or decreased from the previous day’s
daily contract reference price by the maximum amount permitted under the applicable rules or procedures of the relevant trading
facility; |
| • | failure by the index sponsor to publish the closing value of the relevant commodity index or of
the applicable trading facility or other price source to announce or publish the daily contract reference price for the underlying
futures contract; |
| • | any other event, if the calculation agent determines in its sole discretion that the event materially
interferes with our ability or the ability of any of our affiliates to unwind all or a material portion of a hedge with respect
to the securities that we or our affiliates have effected or may effect. |
The following events will not be market
disruption events:
| • | a limitation on the hours or number of days of trading on a trading facility on which the underlying
futures contract is traded, but only if the limitation results from an announced change in the regular business hours of the relevant
market; or |
| • | a decision by a trading facility to permanently discontinue trading in the underlying futures contract. |
Discontinuance or Modification of the
Index
If the index sponsor discontinues compilation
or publication of a sub-index and the index sponsor or any other person or entity (including Deutsche Bank) calculates and publishes
an index that the calculation agent determines is comparable to such discontinued sub-index and approves as a successor index,
then the calculation agent will determine the level of the Index on any relevant date and the amount payable at maturity or upon
repurchase by Deutsche Bank by reference to such successor sub-index for the period following the discontinuation of the sub-index.
If the calculation agent determines that
the publication of a sub-index is discontinued and that there is no applicable successor index, or that the closing level of the
sub-index is not available for any reason other than a market disruption event, on the date on which the level of the sub-index
is required to be determined, or if for any other reason (excluding a market disruption event) the sub-index is not available to
us or the calculation agent on the relevant date, the calculation agent will determine the amount payable by a computation methodology
that the calculation agent determines will as closely as reasonably possible replicate such sub-index.
If the calculation agent determines that
either or both sub-indices, the components underlying either or both sub-indices (the “index components”) or the method
of calculating either or both sub-indices has been changed at any time in any respect – including any addition, deletion
or substitution and any reweighting or rebalancing of index components, and whether the change is made by the index sponsor under
its existing policies or following a
modification of those policies, is due to
the publication of a successor index, is due to events affecting one or more of the index components, or is due to any other reason
– then the calculation agent will be permitted (but not required) to make such adjustments to such sub-index or method of
calculating such sub-index as it believes are appropriate to ensure that the level of such sub-index used to determine the amount
payable on the maturity date or upon repurchase by Deutsche Bank is equitable.
All determinations and adjustments to be
made by the calculation agent with respect to the level of the sub-indices and the amount payable at maturity or upon repurchase
by Deutsche Bank or otherwise relating to the level of the sub-indices may be made in the calculation agent’s sole discretion.
See “Risk Factors” in this pricing supplement for a discussion of certain conflicts of interest which may arise with
respect to the calculation agent.
Manner of Payment and Delivery
Any payment on or delivery of the securities
at maturity will be made to accounts designated by you and approved by us, or at the office of the trustee in New York City, but
only when the securities are surrendered to the trustee at that office. We also may make any payment or delivery in accordance
with the applicable procedures of the depositary.
Role of Calculation Agent
Deutsche Bank AG, London Branch will serve
as the calculation agent. The calculation agent will, in its sole discretion, make all determinations regarding the value of the
securities, including at maturity or upon repurchase by Deutsche Bank, the current principal amount, market disruption events,
business days, trading days, the fee factor, the index factors, the default amount, the closing levels of the sub-indices on any
valuation date, the maturity date, repurchase dates, the amount payable in respect of your securities at maturity or upon repurchase
by Deutsche Bank and any other calculations or determinations to be made by the calculation agent as specified herein. The calculation
agent will rely upon the published levels of the sub-indices, unless a market disruption event occurs in which case it may determine
the closing level of the relevant commodity index as specified herein. If the index sponsor discontinues compilation or publication
of any sub-index, the calculation agent may designate a successor index selected in its sole discretion (which may, but need not
be, an index calculated and maintained by the index sponsor) and shall be solely responsible for determining the value of the securities
based on its calculation of such successor index. Absent manifest error, all determinations of the calculation agent will be final
and binding on you and us, without any liability on the part of the calculation agent. You will not be entitled to any compensation
from us for any loss suffered as a result of any of the above determinations by the calculation agent.
CLEARANCE AND SETTLEMENT
The DTC participants that hold the securities
through DTC on behalf of investors will follow the settlement practices applicable to equity securities in DTC’s settlement
system with respect to the primary distribution of the securities and secondary market trading between DTC participants.
USE OF PROCEEDS AND HEDGING
We will use the net proceeds we receive
from the sale of the securities for the purposes we describe in the attached prospectus under “Use of Proceeds.”
We, through our affiliates, have entered
into and expect to continue to enter into transactions to hedge our obligations under the securities. Such transactions may involve
purchases of the sub-index components or instruments linked to the Index or the sub-indices. From time to time, we may enter into
additional hedging transactions or unwind those hedging transactions previously entered into. In this regard, we may:
| • | acquire or dispose of long or short positions in some or all of the sub-index components; |
| • | acquire or dispose of long or short positions in listed or over-the-counter options, futures, or
other instruments linked to some or all of the sub-index components or the relevant Index or the sub-indices; |
| • | acquire or dispose of long or short positions in listed or over-the-counter options, futures, or
other instruments linked to the level of other similar market indices; or |
| • | engage in any combination of the above activities. |
We or our affiliates may acquire a long
or short position in securities similar to the securities from time to time and may, in our or their sole discretion, hold or resell
those securities.
We or our affiliates may close out our or
their hedge positions on or before the final valuation date. That step may involve sales or purchases of the sub-index components,
listed or over-the-counter options or futures on sub-index components or listed or over-the-counter options, futures, or other
instruments linked to the levels of the relevant Index or the sub-indices, as well as other indices designed to track the performance
of the sub-indices.
The hedging activity discussed above may
adversely affect the levels of the relevant Index or the sub-indices and, as a consequence, the market value of the securities
and the amount payable at maturity or upon repurchase by Deutsche Bank. See “Risk Factors” in this pricing supplement
for a discussion of possible adverse effects related to our hedging activities.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The
following discussion constitutes the full opinion of our special tax counsel, Davis Polk & Wardwell LLP, regarding the material
U.S. federal income tax consequences of ownership and disposition of the securities. It applies to you only if you hold the securities
as capital assets within the meaning of Section 1221 of the Internal Revenue Code (the “Code”).
It does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances,
including alternative minimum tax and “Medicare contribution tax” consequences, and different consequences that may
apply if you are an investor subject to special rules, such as a financial institution, a regulated investment company, a tax-exempt
entity (including an “individual retirement account” or a “Roth IRA”), a dealer in securities, a trader
in securities who elects to apply a mark-to-market method of tax accounting, an entity classified as a partnership for U.S. federal
income tax purposes, or a person holding a security as a part of a “straddle.”
Tax Treatment of the Securities
In the opinion of our
special tax counsel, which is based on prevailing market conditions as of the date of this pricing supplement, it is more likely
than not that the securities will be treated as prepaid financial contracts that are not debt for U.S. federal income tax purposes,
with the consequences described below. We do not plan to request a ruling from the IRS, and the IRS or a court might not agree
with this treatment, in which case the timing and character of income or loss on your securities could be materially and adversely
affected.
This discussion is based
on the Code, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of
the date of this pricing supplement, changes to any of which subsequent to the date hereof may affect the tax consequences described
below, possibly with retroactive effect. It does not address the application of any state, local or non-U.S. tax laws. You should
consult your tax adviser concerning the application of U.S. federal income tax laws to your particular situation (including the
possibility of alternative treatments of the securities), as well as any tax consequences arising under the laws of any state,
local or non-U.S. jurisdictions. Unless otherwise stated, the following discussion is based on the treatment of the securities
as prepaid financial contracts that are not debt.
Tax Consequences to U.S. Holders
You are a “U.S.
holder” if, for U.S. federal income tax purposes, you are a beneficial owner of a security and are: (i) a citizen or resident
of the United States; (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of
the United States, any State therein or the District of Columbia; or (iii) an estate or trust the income of which is subject to
U.S. federal income taxation regardless of its source.
Treatment as a Prepaid
Financial Contract That Is Not Debt
Under this treatment,
you should not recognize taxable income or loss with respect to a security prior to its taxable disposition (including a repurchase
or redemption by us). Upon a taxable disposition of a security, you will recognize gain or loss equal to the difference
between the amount you realize and your tax basis in the security. Your tax basis in the security should equal the amount you paid
to acquire it. Your gain or loss should be capital gain or loss, and should be long-term capital gain or loss if you have held
the security for more than one year. The deductibility of capital losses is subject to limitations.
Uncertainties Regarding
Treatment as a Prepaid Financial Contract That Is Not Debt
Due to the lack of direct
legal authority, even if a security is treated as a prepaid financial contract that is not debt, there remain substantial uncertainties
regarding the tax consequences of owning and disposing of it. For instance, you might be required to include amounts in income
during the term of the security and/or to treat all or a portion of your gain or loss on its taxable disposition as ordinary income
or loss or as short-term capital gain or loss, without regard to how long you have held it. In particular, it is possible that
any replacement of a futures contract underlying the commodity indices, annual rebalancing of the commodity indices, change in
the index methodology or substitution of a successor commodity index could result in a “deemed” taxable exchange, causing
you to recognize gain or loss (subject, in the case of loss, to the possible application of the “wash sale” rules)
as if you had sold or exchanged the security.
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 exchange-traded status of the instruments; the nature of the underlying
property to which the instruments are linked; 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 your investment in a security, possibly with retroactive effect.
Consequences if a Security
Is Treated as a Debt Instrument
If a security is treated
as a debt instrument, your tax consequences will be governed by Treasury regulations relating to the taxation of contingent payment
debt instruments. In that event, even if you are a cash-method taxpayer, in each year that you hold the security you will be required
to accrue into income “original issue discount” based on our “comparable yield” for a similar non-contingent
debt instrument, determined as of the time of issuance of the security, even though we will not be required to make any payment
with respect to the security prior to its maturity or earlier repurchase or redemption by us. In addition, any income you recognize
upon the taxable disposition of the security will be treated as ordinary in character. If you recognize a loss above certain thresholds,
you could be required to file a disclosure statement with the IRS.
Tax Consequences to Non-U.S. Holders
You generally are a “non-U.S. holder”
if, for U.S. federal income tax purposes, you are a beneficial owner of a security and are: (i) a nonresident alien individual;
(ii) an entity treated as a foreign corporation; or (iii) a foreign estate or trust.
This discussion does not describe considerations
applicable to a beneficial owner of a security who is (i) an individual present in the United States for 183 days or more in the
taxable year of disposition of the security or (ii) a former citizen or resident of the United States, if certain conditions apply.
If you are a potential investor to whom such considerations might be relevant, you should consult your tax adviser.
If a security is treated for U.S. federal
income tax purposes as a prepaid financial contract that is not debt, any gain you realize with respect to the security generally
should not be subject to U.S. federal withholding or income tax, unless the gain is effectively connected with your conduct of
a trade or business in the United States. However, as described above under “—Tax Consequences to U.S. Holders—Uncertainties
Regarding Treatment as a Prepaid Financial Contract That Is Not Debt,” 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, among other things, on the degree, if any, to which income realized with respect to
such instruments by non-U.S. persons should be subject to withholding tax. It is possible that any Treasury regulations or other
guidance promulgated after consideration of these issues might require you to accrue income, subject to withholding tax, in each
year that you own the security, possibly on a retroactive basis.
Subject to the discussion below under “—‘FATCA’
Legislation,” if a security is treated as a debt instrument, any income or gain you realize with respect to the security
will not be subject to U.S. federal withholding or income tax if (i) you provide a properly completed Form W-8 appropriate to your
circumstances and (ii) these amounts are not effectively connected with your conduct of a trade or business in the United States.
If you are engaged in a trade or business
in the United States, and income or gain from a security is effectively connected with your conduct of that trade or business (and,
if an applicable treaty so requires, is attributable to a permanent establishment in the United States), you generally will be
taxed in the same manner as a U.S. holder. If this paragraph applies to you, you should consult your tax adviser with respect to
other U.S. tax consequences of the ownership and disposition of the security, including the possible imposition of a 30% branch
profits tax if you are a corporation.
“FATCA” Legislation
Legislation
commonly referred to as “FATCA” generally imposes a withholding tax of 30% on payments to certain non-U.S. entities
(including financial intermediaries) with respect to certain financial
instruments, unless various U.S. information reporting and due diligence requirements have been satisfied. An intergovernmental
agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements. This legislation
generally applies to certain financial instruments issued after June 30, 2014 that are treated as paying U.S.-
source interest or other U.S.-source “fixed
or determinable annual or periodical” income. You should assume that any securities purchased after June 30, 2014 will be
treated as issued on the date you acquire them because there is unlikely to be a practical way to establish the issue date of the
securities you purchase. Accordingly, if the securities were recharacterized as debt instruments, it would be prudent to assume
that for any securities purchased after June 30, 2014 this legislation would apply to any payment of amounts treated as interest
and (with respect to dispositions after December 31, 2016, including retirement at maturity) any payment of gross proceeds of the
disposition of such securities. If withholding applies to the securities, we will not be required to pay any additional amounts
with respect to amounts withheld. Both U.S. and non-U.S. holders should consult their tax advisers regarding the potential application
of FATCA to the securities.
Information Reporting and Backup Withholding
Cash proceeds received
from a disposition of a security may be subject to information reporting, and may also be subject to backup withholding at the
rate specified in the Code unless you provide certain identifying information (such as a correct taxpayer identification number,
if you are a U.S. holder) and otherwise satisfy the requirements of the backup withholding rules. If you are a non-U.S. holder
and you provide a properly completed Form W-8 appropriate to your circumstances, you will generally establish an exemption from
backup withholding. Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited
against your U.S. federal income tax liability, provided the required information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS
OF INTEREST)
We issued 200,000 of each security on the
inception date at 100% of the face amount of $25.00 per security, a significant portion of which were initially held by DBSI..
After the inception date, additional securities have been and may continue to be offered and sold from time to time, at prevailing
prices at the time of sale, through DBSI, acting as our agent, to investors. DBSI in any subsequent distribution may charge a purchase
fee of up to $0.03 per security. We will receive proceeds equal to 100% of the offering price of securities sold after the inception
date. DBSI may also receive a payment from Deutsche Bank of a portion of the investor fee in consideration for its administrative
role in the issuances and repurchases of the securities.
We may deliver securities against payment
therefor on a date that is greater than three business days following the date of sale of any securities. 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
parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to transact in securities that are to be
issued more than three business days after the related trade date will be required to specify alternative settlement arrangements
to prevent a failed settlement.
Broker-dealers may make a market in the
securities, although none of them are obligated to do so and any of them may stop doing so at any time without notice. This prospectus
(including this pricing supplement and the accompanying prospectus supplement and prospectus) may be used by such dealers in connection
with market-making transactions. In these transactions, dealers may resell a security covered by this prospectus that they acquire
from us or other holders after the original offering and sale of the securities, or they may sell a security covered by this prospectus
in short sale transactions.
Broker-dealers and other persons are cautioned
that some of their activities may result in their being deemed participants in the distribution of the securities in a manner that
would render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities
Act of 1933, as amended (the “Securities Act”). Among other activities, broker-dealers and other persons may make short
sales of the securities that would be covered by this prospectus if they or those other persons were to cover such short positions
by borrowing securities from us or our affiliates or by purchasing securities from us or our affiliates, whether or not subject
to our obligation to repurchase such securities at a later date. As a result of these activities, these market participants may
be deemed statutory underwriters. If these activities are commenced, they may be discontinued at any time. A determination of whether
a particular market participant is an underwriter must take into account all the facts and circumstances pertaining to the activities
of the participant in the particular case, and the example mentioned above should not be considered a complete description of all
the activities that would lead to designation as an underwriter and subject a market participant to the prospectus-delivery and
liability provisions of the Securities Act. This prospectus will be deemed to cover any long or short sales of securities by market
participants who cover their long sales or short positions with securities borrowed or acquired from us or our affiliates in the
manner described above.
Deutsche Bank has retained DBSI, a member
of FINRA, to provide certain services relating to the distribution of the securities. The amount of the fees that represent underwriting
compensation will not exceed a total of 8% of the proceeds to us from the securities.
We own, directly or indirectly, all of the
outstanding equity securities of DBSI. The net proceeds received from the sale of the securities will be used, in part, by DBSI
or one of its affiliates in connection with hedging our obligations under the securities. Because DBSI is both our affiliate and
a member of FINRA, any distribution of the securities in which DBSI participates must comply with the requirements of Rule 5121
of FINRA. In accordance with Rule 5121 of FINRA, DBSI may not make sales of the securities to any of its discretionary accounts
without the prior written approval of the customer.
BENEFIT PLAN INVESTOR CONSIDERATIONS
A fiduciary of a pension, profit-sharing
or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
including entities such as collective investment funds, partnerships and separate accounts whose underlying assets include the
assets of such plans (collectively, “ERISA Plans”) should consider the fiduciary standards of ERISA in the context
of the ERISA Plan’s particular circumstances before authorizing an investment in the securities. Among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would
be consistent with the documents and instruments governing the ERISA Plan.
In addition to ERISA’s general fiduciary
standards, Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans, as well as plans (including individual retirement
accounts and Keogh plans) subject to Section 4975 of the Code (together with ERISA Plans, “Plans”), from engaging
in certain transactions involving the “plan assets” of such Plans with persons who are “parties in interest”
under ERISA or “disqualified persons” under Section 4975 of the Code (in either case, “Parties in Interest”)
with respect to such Plans unless exemptive relief is available under a statutory or administrative exemption. Such Parties in
Interest could include, without limitation, us, DBSI, the calculation agent, the paying agent, issuing agent, authenticating agent
and registrar or any of our or their respective affiliates. Parties in Interest that engage in a nonexempt prohibited transaction
may be subject to excise taxes and other penalties and liabilities under ERISA and Section 4975 of the Code. Thus, a plan fiduciary
considering an investment in the securities should also consider whether such investment might constitute or give rise to a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code. For example, the securities might be deemed to represent a
direct or indirect sale of property, extension of credit or furnishing of services between a Party in Interest and an investing
Plan which would be prohibited unless exemptive relief were available under an applicable exemption.
Certain prohibited transaction class exemptions
(“PTCEs”) issued by the U.S. Department of Labor may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the securities. Those class exemptions are PTCE 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for
certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company
separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified asset managers). In addition,
Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code may provide a limited exemption for the purchase and sale of the
securities and related lending transactions, provided that neither the Party in Interest nor any of its affiliates has or exercises
any discretionary authority or control or renders any investment advice with respect to the assets of the Plan involved in the
transaction, and provided further that the Plan pays no more, and receives no less, than adequate consideration in connection
with the transaction (the so-called “service provider exemption”). There can be no assurance that any of these statutory
or class exemptions will be available with respect to transactions involving the securities.
Accordingly, unless otherwise provided
in an applicable supplement, the securities may not be purchased or held by any Plan, any entity whose underlying assets include
“plan assets” by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing “plan assets” of any Plan, unless such purchaser or holder is eligible for exemptive relief, including relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or the service provider exemption.
The fiduciary investment considerations
summarized above generally do not apply to governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as
defined in Section 3(33) of ERISA) and non-U.S. plans (as described in Section 4(b)(4) of ERISA) (collectively, “Non-ERISA
Arrangements”). However, these Non-ERISA Arrangements may be subject to similar provisions under applicable federal, state,
local, non-U.S. or other regulations, rules or laws (“Similar Laws”). The fiduciaries of plans subject to Similar
Laws should also consider the foregoing issues in general terms as well as any further issues arising under any applicable Similar
Laws.
Each purchaser or holder of the securities
or any interest therein shall be deemed to have represented and warranted, on each day such purchaser or holder holds such securities,
that either (a) it is not a Plan or a Non-ERISA Arrangement and it is not purchasing or holding such securities on behalf of or
with “plan assets” of any Plan or Non-ERISA Arrangement or (b) its purchase, holding and disposition of such securities
are eligible for exemptive relief under Section 406 of ERISA and Section 4975 of the Code and will not result in a violation of
any Similar Law.
Due to the complexity of the applicable
rules, it is particularly important that fiduciaries or other persons considering purchasing the securities on behalf of any Plan
or Non-ERISA Arrangement consult with their counsel prior to purchasing the securities.
The securities are contractual financial
instruments. The financial exposure provided by the securities is not a substitute or proxy for, and is not intended as a substitute
or proxy for, individualized investment management or advice for the benefit of any purchaser or holder of the securities. The
securities have not been designed and will not be administered in a manner intended to reflect the individualized needs and objectives
of any purchaser or holder of the securities.
Each purchaser or holder of any securities
acknowledges and agrees that:
| (i) | the purchaser or holder or its fiduciary has made and shall make all investment decisions for
the purchaser or holder and the purchaser or holder has not relied and shall not rely in any way upon us or any of our affiliates
to act as a fiduciary or adviser of the purchaser or holder with respect to (A) the design and terms of the securities, (B) the
purchaser or holder’s investment in the securities, (C) the holding of the securities, or (D) the exercise of or failure
to exercise any rights we or our affiliate have under or with respect to the securities; |
| (ii) | we and our affiliates have acted and will act solely for our own account in connection with
our obligations under the securities; |
| (iii) | any and all assets and positions relating to hedging transactions by us or any of our affiliates
are assets and positions of those entities and are not assets and positions held for the benefit of the purchaser or holder; |
| (iv) | our interests and the interests of our affiliates are adverse to the interests of the purchaser
or holder; and |
| (v) | neither we nor any of our affiliates is a fiduciary or adviser of the purchaser or holder in
connection with any such assets, positions or transactions, and any information that we or any of our affiliates may provide is
not intended to be impartial investment advice. |
Each purchaser and holder of
the securities has exclusive responsibility for ensuring that its purchase, holding and disposition of the securities does
not violate the fiduciary or prohibited transaction rules of ERISA, Section 4975 of the Code or any applicable Similar
Laws. The sale of any securities to any Plan or Non-ERISA Arrangement is in no respect a representation by us or any of our
affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by
Plans or Non-ERISA Arrangements generally or any particular Plan or Non-ERISA Arrangement, or that such an investment is
appropriate for Plans or Non-ERISA Arrangements generally or any particular Plan or Non-ERISA Arrangement.
LEGAL MATTERS
Davis Polk & Wardwell LLP has acted
as special counsel to the agent. Davis Polk & Wardwell LLP has in the past represented the issuer and its affiliates and
continues to represent the issuer and its affiliates on a regular basis and in a variety of matters.
VALIDITY OF THE SECURITIES
In the opinion of Davis Polk & Wardwell
LLP, as special United States products counsel to the issuer, when the securities 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
senior indenture, and delivered against payment as contemplated herein, such securities 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 applications 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 July 31, 2015, 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 senior indenture and the authentication of the securities by the
authenticating agent and the validity, binding nature and enforceability of the senior indenture with respect to the trustee, all
as stated in the opinion of Davis Polk & Wardwell LLP dated July 31, 2015, which has been filed as an exhibit to the registration
statement.
ANNEX A
FORM OF OFFER FOR REPURCHASE
[PART A: TO BE COMPLETED BY THE BENEFICIAL
OWNER]
Dated: [Desired valuation date]
Deutsche Bank Securities Inc., as Repurchase
Agent (“DBSI”)
Fax: 917-338-3849
Re: ETNs linked to the Deutsche Bank Liquid
Commodity Index – Optimum YieldTM or the Deutsche Bank Liquid Commodity IndexTM due April 1, 2038
issued by Deutsche Bank AG (the “ETNs”)
| ¨ | DB Commodity Double Short Exchange Traded
Notes (CUSIP Number: 25154H 483) |
| ¨ | DB Commodity Double Long Exchange Traded
Notes (CUSIP Number: 25154H 475) |
| ¨ | DB Commodity Short Exchange Traded Notes
(CUSIP Number: 25154H 467) |
| ¨ | DB Commodity Long Exchange Traded Notes
(CUSIP Number: 25154H 459) |
(Please check only one offering of ETNs)
The undersigned beneficial owner hereby
irrevocably offers to Deutsche Bank AG (“Deutsche Bank”) the right to repurchase the ETNs in the amounts and on the
date set forth below.
Name of beneficial owner:
Stated principal amount of ETNs offered
for repurchase (you must offer at least 5,000 ETNs or an integral multiple of 5,000 ETNs in excess thereof for repurchase at one
time for your offer to be valid.):
Applicable valuation date: ,
20 (which is the date of this notice)
Applicable repurchase date: ,
20 (which is the third business day following the valuation date)
Contact Name:
Telephone #:
My ETNs are held in the following DTC Participant’s
Account (the following information is available from the broker through which you hold your ETNs):
Name:
DTC Account Number (and any relevant sub-account):
Contact Name:
Telephone Number:
Acknowledgement: In addition to any other
requirements specified in the Pricing Supplement being satisfied, I acknowledge that the ETNs specified above will not be repurchased
unless (i) this offer, as completed and signed by the DTC Participant through which my ETNs are held (the “DTC Participant”),
is delivered to DBSI by 10:00 a.m., New York City time, on the desired valuation date, (ii) the DTC Participant has booked
a “delivery vs. payment” (“DVP”) trade on the applicable valuation date facing DBSI, and (iii) the
DTC Participant instructs DTC to deliver the DVP trade to DBSI as booked for settlement via DTC at or prior to 10:00 a.m., New
York City time, on the applicable repurchase date.
The undersigned acknowledges that Deutsche
Bank and DBSI will not be responsible for any failure by the DTC Participant through which such undersigned’s ETNs are held
to fulfill the requirements for repurchase set forth above.
PART B OF THIS NOTICE IS TO BE COMPLETED
BY THE DTC PARTICIPANT IN WHOSE ACCOUNT THE ETNS ARE HELD AND DELIVERED TO DBSI BY 10:00 A.M., NEW YORK CITY TIME, ON THE DESIRED
VALUATION DATE
BROKER’S CONFIRMATION OF REPURCHASE
[PART B: TO BE COMPLETED BY BROKER]
Dated: [Desired valuation date]
Deutsche Bank Securities Inc., as Repurchase
Agent
Re: ETNs linked to the Deutsche Bank Liquid
Commodity Index – Optimum YieldTM or the Deutsche Bank Liquid Commodity IndexTM due April 1, 2038
issued by Deutsche Bank AG (the “ETNs”)
| ¨ | DB Commodity Double Short Exchange Traded
Notes (CUSIP Number: 25154H 483) |
| ¨ | DB Commodity Double Long Exchange Traded
Notes (CUSIP Number: 25154H 475) |
| ¨ | DB Commodity Short Exchange Traded Notes
(CUSIP Number: 25154H 467) |
| ¨ | DB Commodity Long Exchange Traded Notes
(CUSIP Number: 25154H 459) |
(Please check only one offering of ETNs)
Dear Sirs:
The undersigned holder of the ETNs checked
above hereby irrevocably offers to Deutsche Bank AG the right to repurchase, on the repurchase date of
(which is the third business day following the valuation date), with respect to the stated principal amount of ETNs indicated below
as described in the pricing supplement relating to the ETNs (the “Pricing Supplement”). Terms not defined herein have
the meanings given to such terms in the Pricing Supplement.
The undersigned certifies to you that it
will (i) book a delivery vs. payment trade on the valuation date with respect to the stated principal amount of ETNs specified
below at a price per ETN equal to the repurchase value, facing Deutsche Bank Securities Inc., DTC #0573 and (ii) deliver the
trade as booked for settlement via DTC at or prior to 10:00 a.m., New York City time, on the repurchase date.
Very truly yours,
[NAME OF DTC PARTICIPANT HOLDER]
Contact Name:
Title:
Telephone:
Fax:
E-mail:
Stated principal amount of ETNs offered
for repurchase (you must offer at least 5,000 ETNs or an integral multiple of 5,000 ETNs in excess thereof for repurchase at one
time for your offer to be valid):
DTC # (and any relevant sub-account):
Deutsche Bank AG, London Branch
20,000,000 DB Commodity Double Short
Exchange Traded Notes
due April 1, 2038
20,000,000 DB Commodity Double Long Exchange
Traded Notes
due April 1, 2038
20,000,000 DB Commodity Short Exchange
Traded Notes
due April 1, 2038
20,000,000 DB Commodity Long Exchange
Traded Notes
due April 1, 2038
Pricing supplement dated July 31, 2015
Deutsche Bank Securities
CUSIP Numbers: 25154H 483, 25154H 475, 25154H
467 and 25154H 459
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