CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities Offered   Maximum Aggregate Offering Price   Amount of Registration Fee(1)
Strategic Accelerated Redemption Securities® Linked to an International Equity Basket   $8,349,390.00   $970.20
(1)      Calculated in accordance with Rule 457(r) of the Securities Act of 1933.

 

   

Filed Pursuant to Rule 424(b)(2)

Registration Statement No. 333-184193

(To Prospectus Addendum dated December 24, 2014, Prospectus dated September 28, 2012, Prospectus Supplement dated September 28, 2012 and Product Supplement ETF STR-1 dated April 27, 2015)


834,939 Units

$10 principal amount per unit

Term Sheet No. STR-62

CUSIP No. 25156D647
Pricing Date                                                       May 28, 2015
Settlement Date                                                  June 4, 2015
Maturity Date                                                    June 10, 2016

       

Strategic Accelerated Redemption Securities® Linked to an International Equity Basket

 

§     Automatically callable if the Observation Level of the Basket on any Observation Date, occurring approximately six, nine and twelve months after the pricing date, is at or above the Starting Value

 

§     In the event of an automatic call, the amount payable per unit will be:

 

§   $10.52 if called on the first Observation Date

 

§   $10.78 if called on the second Observation Date

 

§   $11.04 if called on the final Observation Date

 

§     If not called on the first or second Observation Dates, a maturity of approximately one year and one week

 

§     The Basket is composed of the iShares® MSCI EAFE ETF and the iShares® MSCI Emerging Markets ETF (the "Basket Components"). Each Basket Component has an initial weight of 50%

 

§     If not called, 1-to-1 downside exposure to decreases in the Basket with up to 100% of your principal at risk

 

§     All payments are subject to the credit risk of Deutsche Bank AG

 

§     No periodic interest payments

 

§     Limited secondary market liquidity, with no exchange listing

 

 
         

The notes are being issued by Deutsche Bank AG (“Deutsche Bank”) through its London Branch. There are important differences between the notes and a conventional debt security, including different investment risks and certain additional costs. See “Risk Factors” and “Additional Risk Factors” beginning on page TS-7 of this term sheet and “Risk Factors” beginning on page PS-7 of product supplement ETF STR-1.

 

The initial estimated value of the notes as of the pricing date is $9.753 per unit, which is less than the public offering price listed below. See “Summary” on the following page, “Risk Factors” beginning on page TS-7 of this term sheet and “Structuring the Notes” on page TS-17 of this term sheet for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.

 

By acquiring the notes, you will be deemed to agree to be bound by any Resolution Measure imposed by our competent resolution authority. See “Consent to Potential Imposition of Resolution Measures” on page TS-3 of this term sheet.

_________________________

 

None of the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.

__________________________________________________

 

  Per Unit  Total 
Public offering price $10.000  $8,349,390.00 
Underwriting discount $0.125  $104,367.38 
Proceeds, before expenses, to Deutsche Bank $9.875  $8,245,022.62 

 

The notes:

 

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

 

 

 Merrill Lynch & Co.

May 28, 2015

 

 

 
 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Summary

 

The Strategic Accelerated Redemption Securities® Linked to an International Equity Basket, due June 10, 2016 (the “notes”) are our senior unsecured obligations. The notes are not guaranteed or insured by the Federal Deposit Insurance Corporation or secured by collateral. The notes will rank equally with all of our other unsecured and unsubordinated debts except for debts required to be preferred by law. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of Deutsche Bank and to any Resolution Measure (as described herein) imposed by our competent resolution authority. The notes will be automatically called at the applicable Call Amount if the Observation Level of the Market Measure, which is the international equity basket described below (the “Basket”), is equal to or greater than the Call Level on the relevant Observation Date. If your notes are not automatically called, at maturity, you will lose all or a portion of the principal amount of your notes. Payments on the notes, including the amount you receive at maturity or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Basket, subject to our credit risk. See “Terms of the Notes” below.

 

The Basket is composed of the iShares® MSCI EAFE ETF and the iShares® MSCI Emerging Markets ETF (each, a “Basket Component”). On the pricing date, each of the Basket Components was given an initial weight of 50%.

 

On the cover page of this term sheet, we have provided the initial estimated value for the notes. Our initial estimated value of the notes was determined based on our valuation of two theoretical components of the notes: (i) a theoretical bond component and (ii) a theoretical derivative component. The value of the bond component of the notes is calculated based on an internal funding rate, which is determined primarily based on the rates at which our conventional debt securities of comparable maturity may trade, adjusted to account for our funding needs and objectives for the period matching the term of the notes. The value of the derivative component is calculated based on our internal pricing models using relevant parameter inputs.

 

The economic terms of the notes (including the Call Premiums and Call Amounts) are based on the internal funding rate and the economic terms of certain related hedging arrangements. The internal funding rate is typically lower than the rate we would pay when we issue conventional debt securities on equivalent terms. This difference in funding rate, as well as the underwriting discount and the estimated cost of hedging our obligations under the notes (which includes the hedging related charge described below) reduced the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. Due to these factors, the public offering price you pay to purchase the notes is greater than the initial estimated value of the notes. For more information about the initial estimated value and the structuring of the notes, see “Structuring the Notes” on page TS-17.

 

Terms of the Notes Payment Determination
Issuer: Deutsche Bank AG, London Branch

 

Automatic Call Provision:

 

 

Redemption Amount Determination:

 

If the notes are not called, you will receive the Redemption Amount per unit on the maturity date, determined as follows:

 

 

Because the Threshold Value for the notes is equal to the Starting Value, you will lose all or a portion of your investment if the Ending Value is less than the Starting Value.

Principal Amount: $10.00 per unit
Term: Approximately one year and one week, if not called on the first or second Observation Dates
Market Measure: An equally weighted international equity basket composed of the iShares® MSCI EAFE ETF (NYSE Arca Symbol: "EFA") and the iShares® MSCI Emerging Markets ETF (NYSE Arca Symbol: "EEM").
Starting Value: 100.00
Ending Value: The Observation Level of the Market Measure on the final Observation Date.
Observation Level: The value of the Market Measure on the applicable Observation Date, calculated as described on page TS-9.
Observation Dates:

December 4, 2015, March 4, 2016 and June 3, 2016 (the final Observation Date).

The Observation Dates are subject to postponement if a Market Disruption Event occurs, as described on page PS-24 of product supplement ETF STR-1.

Call Level: 100 (100% of the Starting Value)
Call Amounts and Call Premiums (per Unit):

$10.52, representing a Call Premium of $0.52 and a return of 5.20% of the principal amount, if called on the first Observation Date;

 

$10.78, representing a Call Premium of $0.78 and a return of 7.80% of the principal amount, if called on the second Observation Date; and

 

$11.04, representing a Call Premium of $1.04 and a return of 10.40% of the principal amount, if called on the final Observation Date.

 

Call Settlement Dates: Approximately the fifth business day following the applicable Observation Date, subject to postponement as described on page PS-24 of product supplement ETF STR-1; provided however, that the Call Settlement Date related to the final Observation Date will be the maturity date.
Threshold Value: 100.00 (100% of the Starting Value)
Price Multiplier: With respect to each Basket Component, 1, subject to adjustment for certain events relating to that Basket Component described beginning on page PS-28 of product supplement ETF STR-1.
Fees and Charges: The underwriting discount of $0.125 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” on page TS-17.
Calculation Agent: Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) and Deutsche Bank, acting jointly.    

 

 

Strategic Accelerated Redemption Securities® TS-2

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

 

The terms and risks of the notes are contained in this term sheet and in the following:

 

§Product supplement ETF STR-1 dated April 27, 2015:
http://www.sec.gov/Archives/edgar/data/1159508/000095010315003257/crt-dp55586_424b2.pdf

 

§     Prospectus supplement dated September 28, 2012:
http://www.sec.gov/Archives/edgar/data/1159508/000119312512409437/d414995d424b21.pdf

 

§     Prospectus dated September 28, 2012:
http://www.sec.gov/Archives/edgar/data/1159508/000119312512409372/d413728d424b21.pdf

 

§     Prospectus addendum dated December 24, 2014:

http://www.sec.gov/Archives/edgar/data/1159508/000095010314009034/crt_52088.pdf

 

These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or obtained from MLPF&S by calling 1-800-294-1322.

 

Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement ETF STR-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to Deutsche Bank. The trustee has appointed Deutsche Bank Trust Company Americas as its authenticating agent with respect to our Series A global notes.

 

Consent to Potential Imposition of Resolution Measures

 

Under the German Recovery and Resolution Act, which went into effect on January 1, 2015, the notes may be subject to any Resolution Measure by our competent resolution authority under relevant German and/or European law 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 without a Resolution Measure becoming applicable to us. A “Resolution Measure” may include: (i) a write down, including to zero, of any payment (or delivery obligations) on the notes; (ii) a conversion of the notes into ordinary shares or other instruments qualifying as core equity tier 1 capital; and/or (iii) any other resolution measure, including (but not limited to) any transfer of the notes to another entity, the amendment of the terms and conditions of the notes or the cancellation of the notes. By acquiring the notes, you will be deemed to agree:

 

·to be bound by any Resolution Measure,

 

·that you would have no claim or other right against us, the trustee and the paying agent arising out of any Resolution Measure, and

 

·that the imposition of any Resolution Measure will not constitute a default or an event of default under the notes, under the senior indenture or for the purpose of the Trust Indenture Act of 1939, as set forth in the accompanying prospectus addendum dated December 24, 2014.

 

Please read “Risk Factors” in this term sheet and see the accompanying prospectus addendum for further information.

 

   

Strategic Accelerated Redemption Securities® TS-3

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Investor Considerations

 

You may wish to consider an investment in the notes if:   The notes may not be an appropriate investment for you if:

 

§     You anticipate that the Observation Level of the Basket on an Observation Date will be equal to or greater than the Call Level and, in that case, you accept an early exit from your investment.

 

§     You accept that the return on the notes will be limited to the return represented by the applicable Call Premium even if the percentage change in the value of the Basket is significantly greater than the return represented by the applicable Call Premium.

 

§     If the notes are not called, you accept that your investment will result in a loss, which could be significant.

 

§     You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.

 

§     You are willing to forgo dividends or other benefits of owning the Basket Components or the securities held by the Basket Components.

 

§     You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, the internal funding rate and fees and charges on the notes.

 

§    You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.

 

§    You are willing to consent to be bound by any Resolution Measure imposed by our competent resolution authority.

  

 

§    You wish to make an investment that cannot be automatically called prior to maturity.

 

§    You anticipate that the Observation Level will be less than the Call Level on each Observation Date.

 

§    You seek an uncapped return on your investment.

 

§     You seek principal repayment or preservation of capital.

 

§     You seek interest payments or other current income on your investment.

 

§     You want to receive dividends or other distributions paid on the Basket Components or the securities held by the Basket Components.

 

§     You seek an investment for which there will be a liquid secondary market.

 

§    You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.

 

§    You are unwilling to consent to be bound by any Resolution Measure imposed by our competent resolution authority.

 

We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

 

  

Strategic Accelerated Redemption Securities® TS-4

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Examples of Hypothetical Payments

 

The following examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the Call Amount you will receive on the applicable Call Settlement Date or, if not called, the calculation of the Redemption Amount based on the hypothetical terms set forth below. The actual amount you receive and the resulting total rate of return will depend on the actual Observation Levels, Ending Value, whether the notes are called on an Observation Date, and whether you hold the notes to maturity. The following examples do not take into account any tax consequences from investing in the notes. These examples are based on:

 

1)the Starting Value of 100.00;

 

2)the Threshold Value of 100.00;

 

3)the Call Level of 100.00;

 

4)the term of the notes from June 4, 2015 to June 10, 2016 if the notes are not called on the first or second Observation Dates;

 

5)the Call Premium of $0.52 if the notes are called on the first Observation Date, $0.78 if called on the second Observation Date and $1.04 if called on the final Observation Date; and

 

6)Observation Dates occurring on December 4, 2015, March 4, 2016 and June 3, 2016 (the final Observation Date).

 

For hypothetical historical values of the Basket, see “The Basket” section below. For recent actual levels of the Basket Components, see “The Basket Components” section below. The Ending Value will not include any income generated by dividends paid on the Basket Components or the securities held by the Basket Components, which you would otherwise be entitled to receive if you invested in those securities directly. In addition, all payments on the notes are subject to issuer credit risk.

 

Notes Are Called on an Observation Date

 

The notes will be called at $10.00 plus the applicable Call Premium if the Observation Level on one of the Observation Dates is equal to or greater than the Call Level.

 

Example 1 – The Observation Level on the first Observation Date is 110.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $0.52 = $10.52 per unit. After the notes are called, they will no longer remain outstanding and there will not be any further payments on the notes.

 

Example 2 – The Observation Level on the first Observation Date is below the Call Level, but the Observation Level on the second Observation Date is 105.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $0.78 = $10.78 per unit. After the notes are called, they will no longer remain outstanding and there will not be any further payments on the notes.

 

Example 3 – The Observation Levels on the first and second Observation Dates are below the Call Level, but the Observation Level on the third and final Observation Date is 105.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $1.04 = $11.04 per unit.

 

Notes Are Not Called on Any Observation Date

 

Example 4 – The notes are not called on any Observation Date and the Ending Value is less than the Starting Value. The Redemption Amount will be less, and possibly significantly less, than the principal amount. For example, if the Ending Value is 80.00, the Redemption Amount per unit will be:

 

 

 

  

Strategic Accelerated Redemption Securities® TS-5

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

  

Summary of the Hypothetical Examples
  Notes Are Called on an Observation Date Notes Are Not Called on Any
Observation Date
  Example 1 Example 2 Example 3 Example 4
Starting Value 100.00 100.00 100.00 100.00
Call Level 100.00 100.00 100.00 100.00
Threshold Value 100.00 100.00 100.00 100.00
Observation Level on the First Observation Date 110.00 90.00 90.00 88.00
Observation Level on the Second Observation Date N/A 105.00 83.00 78.00
Observation Level on the Final Observation Date N/A N/A 105.00 80.00
Return of the Basket 10.00% 5.00% 5.00% -20.00%
Return of the Notes(1) 5.20% 7.80% 10.40% -20.00%

Call Amount / Redemption Amount per Unit

 $10.52 $10.78 $11.04 $8.00

(1)Represents the total return over the period during which the notes were outstanding before the Call Settlement Date or the Maturity Date, as applicable.

 

 

  

Strategic Accelerated Redemption Securities® TS-6

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

  

Risk Factors

 

There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-7 of product supplement ETF STR-1, page PS-3 of the prospectus supplement and page 2 of the prospectus addendum identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

§If the notes are not automatically called, your investment will result in a loss; there is no guaranteed return of principal.

 

§Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.

 

§Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.
   
§The notes may be written down to zero, be converted into equity or other instruments or become subject to other Resolution Measures. You may lose some or all of your investment if any such measure becomes applicable to us. The imposition of any Resolution Measure does not constitute a default or an event of default under the notes, the senior indenture or for the purpose of the Trust Indenture Act of 1939 or give you any other right to accelerate or terminate the notes. You may have limited or circumscribed rights to challenge any decision of our competent resolution authority to impose any Resolution Measure. Please see “Consent to Potential Imposition of Resolution Measures” in this term sheet and the “Risk Factors” on page 2 of the accompanying prospectus addendum for more information.
   
§Your investment return is limited to the return represented by the applicable Call Premium and may be less than a comparable investment directly in the shares of the Basket Components or securities held by the Basket Components.
   
§The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to an internal funding rate and our pricing models. The internal funding rate is typically lower than the rate we would pay when we issue conventional debt securities of comparable maturity. As a result of this difference, the initial estimated value of the notes would likely be lower if it were based on the rate we would pay when we issue conventional debt securities of comparable maturity. This difference in funding rate, as well as the underwriting discount and the estimated cost of hedging our obligations under the notes (which includes the hedging related charge described below), reduces the economic terms of the notes to you.
   
§Our internal pricing models consider relevant parameter inputs such as expected interest and dividend rates and mid-market levels of price and volatility of the assets underlying the notes or any futures, options or swaps related to such underlying assets. Our pricing models are proprietary and rely in part on certain forecasts about future events, which may prove to be incorrect. Because our pricing models may differ from other financial institutions’ valuation models, and because funding rates taken into account by other financial institutions (including those with similar creditworthiness) may vary materially from the internal funding rate used by us, our initial estimated value of the notes may not be comparable to the initial estimated values of similar notes of other financial institutions.
   
§The public offering price you pay for the notes exceeds the initial estimated value. The difference is due to the inclusion in the public offering price of the underwriting discount and the estimated cost of hedging our obligations under the notes (which includes the hedging related charge described below), all as further described in “Structuring the Notes” on page TS-17. These factors are expected to reduce the price at which you may be able to sell the notes in any secondary market and, together with various credit, market and economic factors over the term of the notes, including changes in the value of the Basket, will affect the value of the notes in complex and unpredictable ways.
   
§The initial estimated value of the notes on the pricing date does not represent the price at which we, MLPF&S, or any of our respective affiliates would be willing to purchase your notes in the secondary market at any time. Assuming no changes in market conditions or our creditworthiness and other relevant factors, the price, if any, at which we, MLPF&S, or any of our respective affiliates would be willing to purchase the notes from you in secondary market transactions, if at all, would generally be lower than both the public offering price and the initial estimated value of the notes on the pricing date. MLPF&S has advised us that any repurchases by them or their affiliates will be made at prices determined by reference to their pricing models and at their discretion. These prices will include MLPF&S’s trading commissions and mark-ups and may differ materially from the initial estimated value of the notes determined by reference to our internal funding rate and pricing models.
   
§A trading market is not expected to develop for the notes. None of us, MLPF&S, or any of our respective affiliates is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.
   
§Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trading in shares of the Basket Components or securities held by the Basket Components), and any hedging and trading activities we, MLPF&S or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you. Our economic interests in determining the initial estimated value of the notes on the pricing date and the price, if any, at which we or our affiliates would be willing to purchase the notes from you in secondary market transactions, are potentially adverse to your interests as an investor in the notes.

 

 

  

Strategic Accelerated Redemption Securities® TS-7

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

 

§Changes in the price of one Basket Component may be offset by changes in the price of the other Basket Component.
   
§The sponsor of the underlying indices described below (each, an “Underlying Index”) may adjust one or both of the Underlying Indices in a way that affects its level or their levels, and has no obligation to consider your interests.
   
§The sponsor and investment advisor of the Basket Components may adjust the Basket Components in a way that could adversely affect the value of the notes and the amount payable on the notes, and these entities have no obligation to consider your interests.
   
§You will have no rights of a holder of the shares of the Basket Components or the securities held by the Basket Components, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
   
§While we, MLPF&S or our respective affiliates may from time to time own shares of the Basket Components, securities held by the Basket Components, or stocks included in the Underlying Indices, other than our ordinary shares, which are held by the iShares® MSCI EAFE ETF or included in the Underlying Index of the iShares® MSCI EAFE ETF, we, MLPF&S and our respective affiliates do not control any company held by any Basket Component or included in any Underlying Index, and are not responsible for any disclosure made by any company.
   
§There are liquidity and management risks associated with the Basket Components.
   
§The performance of each Basket Component and the performance of the related Underlying Index may vary.
   
§Risks associated with each Underlying Index or the securities held by the Basket Components will affect the prices of the Basket Components and hence, the value of the notes.
   
§Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets.
   
§The payment on the notes will not be adjusted for all events that could affect a Basket Component. See “Description of the Notes—Anti-Dilution and Discontinuance Adjustments” beginning on page PS-28 of product supplement ETF STR-1.
   
§There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
   
§The U.S. federal income tax consequences of an investment in the notes are uncertain, and may be adverse to you. See “Summary Tax Consequences” below and “U.S. Federal Income Tax Consequences” beginning on page PS-37 of product supplement ETF STR-1.
   

Additional Risk Factors

 

Because the iShares® MSCI Emerging Markets ETF is a Basket Component, an investment in the notes will involve risks that are associated with investments that are linked to the equity securities of issuers from emerging markets

 

Many of the issuers included in the Underlying Index of the iShares® MSCI Emerging Markets ETF are based in nations that are undergoing rapid institutional change, including the restructuring of economic, political, financial, and legal systems. Such far-reaching changes have resulted in constitutional and social tensions and, in some cases, instability and reaction against market reforms has occurred. The regulatory and tax environments in these nations may be subject to change without review or appeal, and many emerging markets suffer from underdevelopment of their capital markets and their tax systems. In addition, in some of these nations, issuers of the relevant securities face the threat of expropriation of their assets, and/or nationalization of their businesses. It may be more difficult for an investor in these markets to monitor investments in these companies, because these companies may be subject to fewer disclosure requirements than companies in developed markets, and economic and financial data about some of these countries may be unreliable. Political or economic instability could affect the value of the securities and the amount payable to you on the notes.

 

 

  

Strategic Accelerated Redemption Securities® TS-8

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

The Basket

 

The Basket is designed to allow investors to participate in the percentage changes in the prices of the Basket Components from the Starting Value to the Ending Value of the Basket. The Basket Components are described in the section “The Basket Components” below. Each Basket Component was assigned an initial weight on the pricing date, as set forth in the table below.

 

For more information on the calculation of the value of the Basket, please see the section entitled “Description of the Notes—Basket Market Measures” beginning on page PS-32 of product supplement ETF STR-1.

 

On the pricing date, for each Basket Component, the Initial Component Weight, the Closing Market Price, the Component Ratio and the initial contribution to the Basket value were as follows:

 

Basket Component   Bloomberg Symbol   Initial Component Weight   Closing Market Price(1)   Component Ratio(2)   Initial Basket Value Contribution
iShares® MSCI EAFE ETF   EFA   50.00%   67.29   0.74305246   50.00
iShares® MSCI Emerging Markets ETF   EEM   50.00%   41.49   1.20510966   50.00
                Starting Value   100.00
(1)These were the Closing Market Prices of the Basket Components on the pricing date.
(2)Each Component Ratio equals the Initial Component Weight of the relevant Basket Component (as a percentage) multiplied by 100, and then divided by the Closing Market Price of that Basket Component on the pricing date and rounded to eight decimal places.

 

The calculation agent will calculate the value of the Basket on each Observation Date by summing the products of (i) the Closing Market Price, multiplied by its respective Price Multiplier, for each Basket Component on that day and (ii) the Component Ratio applicable to that Basket Component. If a Market Disruption Event occurs with respect to a Basket Component on any scheduled Observation Date, the Closing Market Price of that Basket Component will be determined as more fully described beginning on page PS-33 of product supplement ETF STR-1 in the section entitled “Description of the Notes—Basket Market Measures—Observation Level of the Basket.”

 

The Price Multiplier for each Basket Component was set to 1 on the pricing date, and is subject to adjustment for certain events relating to that Basket Component. See the section entitled “Description of the Notes—Anti-Dilution and Discontinuance Adjustments—Anti-Dilution Adjustments” beginning on page PS-28 of product supplement ETF STR-1.

 

 

  

Strategic Accelerated Redemption Securities® TS-9

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

While actual historical information on the Basket did not exist before the pricing date, the following graph sets forth the hypothetical historical performance of the Basket from January 2008 through April 2015. The graph is based upon actual daily historical prices of the Basket Components, hypothetical Component Ratios based on the Closing Market Prices of the Basket Components as of December 31, 2007, and a Basket value of 100.00 as of that date. The value of the Basket on any day during this period is calculated as if such day were an Observation Date. This hypothetical historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the notes may be. Any hypothetical historical upward or downward trend in the value of the Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase or decrease at any time over the term of the notes.

 

Hypothetical Historical Performance of the Basket

 

 

  

Strategic Accelerated Redemption Securities® TS-10

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

The Basket Components

 

We have derived the following information from publicly available documents prepared by iShares, Inc. (“iShares”), a registered investment company and MSCI Inc. (“MSCI”), the sponsor of the Underlying Indices. We make no representation or warranty as to the accuracy or completeness of the following information. We are not affiliated with either Basket Component, and neither Basket Component will have any obligations with respect to the notes. This term sheet relates only to the notes and does not relate to the shares of either Basket Component or securities included in either of the Underlying Indices described below. Neither we nor MLPF&S has or will participate in the preparation of the publicly available documents described below. Neither we nor MLPF&S has made any due diligence inquiry with respect to either Basket Component in connection with the offering of the notes. There can be no assurance that all events occurring prior to the date of this term sheet, including events that would affect the accuracy or completeness of the publicly available documents described below, that would affect the trading price of the shares of the Basket Components have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning the Basket Components could affect the value of the shares of the Basket Components on each Observation Date and therefore could affect your return on the notes.

 

iShares consists of numerous separate investment portfolios, including the Basket Components. The Basket Components typically earn income dividends from securities included in the applicable Underlying Index. These amounts, net of expenses and taxes (if applicable), are passed along to the Basket Component’s shareholders as “ordinary income.” In addition, each Basket Component realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed to shareholders as “capital gain distributions.” However, because your notes are linked only to the share price of the Basket Components, you will not be entitled to receive income, dividend, or capital gain distributions from the Basket Components or any equivalent payments.

 

Information provided to or filed with the SEC by iShares Trust (the “Trust”) pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located at the SEC’s facilities or through the SEC’s website by reference to SEC file number 333-92935 and 811-09729, respectively. Information provided to or filed with the SEC by iShares pursuant to the Securities Act of 1933 and the Investment Company Act of 1940 can be located at the SEC’s facilities or through the SEC’s website by reference to SEC file number 033-97598 and 811-09102, respectively. We have not independently verified the accuracy or completeness of the information or reports.

 

The iShares® MSCI EAFE ETF

 

The iShares® MSCI EAFE ETF is intended to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australian and Far Eastern developed equities markets, as represented by its Underlying Index, the MSCI EAFE Index. This Basket Component trades on NYSE Arca under the ticker symbol “EFA.”

 

The MSCI EAFE Index. The MSCI EAFE Index is intended to measure equity market performance in developed market countries, excluding the U.S. and Canada. The MSCI EAFE Index is a free float-adjusted market capitalization equity index that aims to capture 85% of the (publicly available) total market capitalization. As further discussed below, component companies are adjusted for available float and must meet objective criteria for inclusion in the MSCI EAFE Index, taking into consideration unavailable strategic shareholdings and limitations to foreign ownership. The MSCI EAFE Index has a base date of December 31, 1969 and an initial value of 100. The MSCI EAFE Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. As of the date of this term sheet, the MSCI EAFE Index consists of companies from the following 21 developed countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

 

The MSCI EAFE Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.

 

The iShares® MSCI Emerging Markets ETF

 

The iShares® MSCI Emerging Markets ETF is intended to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in emerging markets, as represented by its Underlying Index, the MSCI Emerging Markets Index. This Basket Component trades on NYSE Arca under the ticker symbol “EEM.”

 

The MSCI Emerging Markets Index. The MSCI Emerging Markets Index is intended to measure equity market performance in the global emerging markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that aims to capture 85% of the (publicly available) total market capitalization. As further discussed below, component companies are adjusted for available float and must meet objective criteria for inclusion in the MSCI Emerging Markets Index, taking into consideration unavailable strategic shareholdings and limitations to foreign ownership. The MSCI Emerging Markets Index has a base date of December 31, 1987 and an initial value of 100. The MSCI Emerging Markets Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. As of the date of this term sheet, the MSCI Emerging Markets Index consists of the following 23 emerging market country indices: Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey, and the United Arab Emirates.

 

The MSCI Emerging Markets Index is part of the MSCI Regional Equity Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.

 

 

  

Strategic Accelerated Redemption Securities® TS-11

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

  

General – iShares® ETFs

 

Each Basket Component pursues a “representative sampling” indexing strategy in attempting to track the performance of its Underlying Index, and generally does not hold all of the equity securities included in its Underlying Index. Each Basket Component invests in a representative sample of securities that collectively have an investment profile similar to its Underlying Index. Securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and liquidity measures similar to those of its Underlying Index. Each Basket Component generally invests 90% of its assets in securities of its Underlying Index and depositary receipts representing securities in its Underlying Index, and may invest the remainder of its assets in other securities, including securities not represented in its Underlying Index, but which BlackRock Fund Advisors (“BFA”), the investment advisor for each Basket Component, believes will help to track its Underlying Index, futures, options and swaps contracts related to its Underlying Index as well as cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates.

 

Each Underlying Index is a theoretical financial calculation, while each Basket Component is an actual investment portfolio. The performance of each Basket Component and its Underlying Index may vary due to transaction costs, foreign currency valuation, asset valuations, corporate actions (such as mergers and spin-offs), timing variances, and differences between such Basket Component’s portfolio and its Underlying Index resulting from legal restrictions (such as diversification requirements) that apply to such Basket Component but not to its Underlying Index or the use of representative sampling. A figure of 100% would indicate perfect correlation. “Tracking error” is the difference between the performance (return) of the Basket Component’s portfolio and its Underlying Index. Each Basket Component, using a representative sampling indexing strategy, can be expected to have a greater tracking error than a fund using a replication indexing strategy. Replication is an indexing strategy in which a fund invests in substantially all of the securities in its tracked index in approximately the same proportions as in its tracked index.

 

General – MSCI Indices

 

Each Underlying Index is a member of the MSCI Global Investable Market Index family, calculated, maintained and published by MSCI. The current index calculation methodology used to formulate each Underlying Index (the “MSCI Global Investable Market Indices Methodology”) was implemented as of June 1, 2008. The MSCI Global Investable Market Indices Methodology involves the following steps:

 

(i) Defining the Equity Universe. MSCI begins with securities listed in countries included in the MSCI Global Investable Market Indices. As of the date of this term sheet, 23 countries are classified as developed markets and 23 countries as emerging markets. All listed equity securities, including real estate investment trusts and certain income trusts in Canada are eligible for inclusion in the equity universe. Limited partnerships, limited liability companies, and business trusts, which are listed in the U.S. and are not structured to be taxed as limited partnerships, are likewise eligible for inclusion in the equity universe. Conversely, mutual funds, ETFs, equity derivatives and most investment trusts are not eligible for inclusion in the equity universe. Each company and its securities are classified in only one country.

 

(ii) Determining the Market Investable Equity Universe for Each Market. The equity universe in each market is derived by applying certain investability screens, such as minimum market capitalization, free float, liquidity, permitted foreign holding, length of trading and, for securities subject to a foreign ownership limit, proportion of shares still available to foreign investors relative to the maximum allowed (referred to as “foreign room”), to individual companies and securities in the equity universe of that market. Some investability requirements are applied at the individual security level and some at the overall company level, represented by the aggregation of individual securities of the company. As a result, the inclusion or exclusion of one security does not imply the automatic inclusion or exclusion of other securities of the same company. MSCI announced on January 15, 2015 that, effective with the November 2015 semi-annual index review, securities traded outside of their issuer’s country of classification (i.e., “foreign listings”) may become eligible for inclusion in certain MSCI Country Investable Market Indices within the MSCI Global Investable Market Indices.  A MSCI Country Investable Market Index is eligible to include foreign listings if it meets the Foreign Listing Materiality Requirement.  To meet the “Foreign Listing Materiality Requirement,” the aggregate market capitalization of all securities represented by foreign listings should represent at least (i) 5% of the free float-adjusted market capitalization of the relevant MSCI Country Investable Market Index and (ii) 0.05% of the free-float adjusted market capitalization of the MSCI All Country World Index Investable Market Index. MSCI expects that for the November 2015 semi-annual index review, Hong Kong, which is covered by the MSCI EAFE® Index, and China, Peru and Russia (but only selected listings in London and New York), which are covered by the MSCI Emerging Markets Index, will meet the Foreign Listing Materiality Requirement.

 

(iii) Determining Market Capitalization Size-Segments for Each Market. In each market, MSCI creates an Investable Market Index, Standard Index, Large Cap Index, Mid Cap Index and Small Cap Index (the “Size-Segment Indices”). The Standard Index is the aggregation of the Large Cap Index and the Mid Cap Index. The Investable Market Index is the aggregation of the Standard Index and the Small Cap Index. In order to create size components that can be meaningfully aggregated into composites, individual market size segments balance the following two objectives:

 

(a) Achieving global size integrity by ensuring that companies of comparable and relevant sizes are included in a given size segment across all markets in the composite universe.

 

(b) Achieving consistent market coverage by ensuring that each market’s size segment is represented in its proportional weight in the composite universe.

 

 

  

Strategic Accelerated Redemption Securities® TS-12

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

(iv) Applying Final Size-Segment Investability Requirements. In order to enhance the replicability of Size-Segment Indices, additional size-segment investability requirements are set for the Investable Market Indices and the Standard Indices. These investability requirements include minimum free float market capitalization and minimum foreign room. Companies that do not meet these investability screens are not included in any of the indices within the MSCI Global Investable Market Index family.

 

(v) Applying Index Continuity Rules for the Standard Index. In order to achieve index continuity, as well as provide some basic level of diversification within a market index, notwithstanding the effect of other index construction rules, a minimum number of five constituents will be maintained for a developed market Standard Index and a minimum number of three constituents will be maintained for an emerging market Standard Index.

 

Each Underlying Index is market capitalization weighted adjusted by free float, meaning that each component security is included in the index are at the value of their free public float, as measured based on its foreign inclusion factor (the “Foreign Inclusion Factor”). In cases where other foreign investment restrictions exist that materially limit the ability of international investors to freely invest in a particular equity market, sector or security, a limited investability factor may also be applied to the free float to insure that the investability objectives of the indices can be achieved.

 

MSCI defines the Foreign Inclusion Factor of a security as the proportion of shares outstanding that are deemed to be available for purchase in the public equity markets by international investors. To determine the Foreign Inclusion Factor of a security, MSCI considers the limitations on the investment opportunities for international investors including: strategic stakes in a company held by private or public shareholders whose investment objective indicates that the shares held are not likely to be available in the market, limits on the proportion of a security’s share capital authorized for purchase by non-domestic investors or other foreign investment restrictions which materially limit the ability of foreign investors to freely invest in a particular equity market, sector or security.

 

A component security’s Foreign Inclusion Factor is (i) rounded up to the closest 5% for component securities with free float equal to or exceeding 15% or (ii) rounded up to the closest 1% for component securities with free float less than 15%. For example, a component security with a free float of 23.2% will be included in the index at 25% of its market capitalization. Typically, securities with a Foreign Inclusion Factor of 15% or less will not be eligible for inclusion in MSCI’s indices.

 

For a security that is subject to a foreign ownership limit to be included in an MSCI index at its entire free-float adjusted market capitalization, the proportion of shares still available to foreign investors relative to the maximum allowed, the foreign room, must be at least 25%. If a security’s foreign room is less than 25% and equal to or higher than 15%, the foreign inclusion factor for that security will be adjusted downward. Securities will not be eligible for inclusion in the equity universe if the foreign room is less than 15%.

 

Once the Foreign Inclusion Factor has been determined for a security, the security’s total market capitalization is then adjusted by such Foreign Inclusion Factor, resulting in the free float-adjusted market capitalization figure for the security. Market capitalization weighting, combined with a consistent target of capturing 99% of free float-adjusted market capitalization, aims to ensure that each country's weight in the index approximates its weight in the total universe of developed markets and emerging markets.

 

Index Maintenance

 

The MSCI Global Investable Market Indices are maintained with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets. In maintaining the MSCI Global Investable Market Indices, emphasis is also placed on its continuity, replicability and minimizing index turnover. Among other things, maintaining the MSCI Global Investable Market Indices involves making: additions to and deletions from the index, changes in number of shares and changes in Foreign Inclusion Factors as a result of updated free float estimates.

 

MSCI classifies index maintenance in three broad categories. The first consists of ongoing event-related changes, such as mergers and acquisitions, which are generally implemented in the indices at the time of event. The second category consists of quarterly index reviews, aimed at promptly reflecting other significant market events. The third category consists of semi-annual full index reviews that systematically re-assess the various dimensions of the equity universe for all markets simultaneously and are conducted on a fixed semi-annual timetable.

 

Ongoing event-related changes to the indices are the result of mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events. They can also result from capital reorganizations in the form of rights issues, bonus issues, public placements and other similar corporate actions that take place on a continuing basis. These changes are reflected in the MSCI Global Investable Market Indices at the time of the event. All changes resulting from corporate events are announced prior to their implementation, provided all necessary information on the event is available.

 

The quarterly index review process is designed to ensure that the indices continue to be an accurate reflection of evolving equity markets. This is achieved by a timely reflection of significant market driven changes that were not captured in the index at the time of their actual occurrence but are significant enough to be reflected before the next semi-annual index review. Quarterly index reviews may result in additions or deletions due to migration to another Size Segment Index, additions of new investable companies to the Standard Index, deletions of companies from the Investable Market Indices due to low liquidity and changes in Foreign Inclusion Factor and in number of shares. Changes in the number of shares are generally small and result from, for example, exercise of options or warrants, conversion of convertible bonds or other instruments or share buybacks. The implementation of changes resulting from quarterly index reviews occurs as of the close of the last business day of each February and August. The results of the quarterly index reviews are announced at least two weeks prior to their implementation.

 

  

Strategic Accelerated Redemption Securities® TS-13

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

The objective of the semi-annual index review is to systematically reassess the various dimensions of the equity universe for all markets simultaneously. During each semi-annual index review, the equity universe is updated and the minimum size guidelines are recalculated for each segment market. Then, the following index maintenance activities are undertaken for each market: updating the market investable equity universe; recalculating the global minimum size references and global minimum size ranges; reassessing the number of companies in each segment and the market size-segment cutoffs; assigning companies to the size-segments; and assessing conformity with the final size-segment investability requirements. The results of the semi-annual index reviews are announced at least two weeks in advance of their effective implementation dates as of the close of the last business day of May and November.

 

Market Reclassifications

 

During an annual market classification review, MSCI analyzes and seeks feedback on those markets it has placed under review for potential market reclassification, based on extensive discussions with the investment community. MSCI examines each country’s economic development, size, liquidity and market accessibility in order to be classified in a given investment market (i.e. stand-alone, frontier, emerging or developed market). Each June, MSCI communicates its conclusions from discussions with the investment community on the list of countries under review and announces the new list of countries, if any, under review for potential market reclassification in the upcoming cycle.

 

 

  

Strategic Accelerated Redemption Securities® TS-14

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Historical Data of the iShares® MSCI EAFE ETF

 

The following table sets forth the quarterly high and low closing prices of the shares of the iShares® MSCI EAFE ETF from the first quarter of 2008 through the pricing date. The closing prices listed below were obtained from publicly available information at Bloomberg Financial Markets, rounded to two decimal places. The historical closing prices of shares of the iShares® MSCI EAFE ETF should not be taken as an indication of future performance, and we cannot assure you that the price per share of the iShares® MSCI EAFE ETF will not decrease at any time over the term of the notes.

 

    High ($) Low ($)
2008 First Quarter 78.35 68.31
  Second Quarter 78.52 68.10
  Third Quarter 68.04 53.08
  Fourth Quarter 55.88 35.71
       
2009 First Quarter 45.44 31.69
  Second Quarter 49.04 38.57
  Third Quarter 55.81 43.91
  Fourth Quarter 57.28 52.66
       
2010 First Quarter 57.96 50.45
  Second Quarter 58.03 46.29
  Third Quarter 55.42 47.09
  Fourth Quarter 59.46 54.25
       
2011 First Quarter 61.91 55.31
  Second Quarter 63.87 57.10
  Third Quarter 60.80 46.66
  Fourth Quarter 55.57 46.45
       
2012 First Quarter 55.80 49.15
  Second Quarter 55.51 46.55
  Third Quarter 55.15 47.62
  Fourth Quarter 56.88 51.96
       
2013 First Quarter 59.89 56.90
  Second Quarter 63.53 57.03
  Third Quarter 65.05 57.55
  Fourth Quarter 67.06 62.71
       
2014 First Quarter 68.03 62.31
  Second Quarter 70.67 66.26
  Third Quarter 69.25 64.12
  Fourth Quarter 64.51 59.53
       
2015 First Quarter 65.99 58.48
  Second Quarter (through the pricing date) 68.42 64.63

 

Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the shares of the iShares® MSCI EAFE ETF.

 

 

  

Strategic Accelerated Redemption Securities® TS-15

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 


Historical Data of the iShares® MSCI Emerging Markets ETF

 

The following table sets forth the quarterly high and low closing prices of the shares of the iShares® MSCI Emerging Markets ETF from the first quarter of 2008 through the pricing date. The closing prices listed below were obtained from publicly available information at Bloomberg Financial Markets, rounded to two decimal places. The historical closing prices of shares of the iShares® MSCI Emerging Markets ETF should not be taken as an indication of future performance, and we cannot assure you that the price per share of the iShares® MSCI Emerging Markets ETF will not decrease at any time over the term of the notes.

 

    High ($) Low ($)
2008 First Quarter 50.37 42.17
  Second Quarter 51.70 44.43
  Third Quarter 44.43 31.33
  Fourth Quarter 33.90 18.22
       
2009 First Quarter 27.09 19.94
  Second Quarter 34.64 25.65
  Third Quarter 39.29 30.75
  Fourth Quarter 42.07 37.56
       
2010 First Quarter 43.22 36.83
  Second Quarter 43.98 36.16
  Third Quarter 44.77 37.59
  Fourth Quarter 48.58 44.77
       
2011 First Quarter 48.69 44.63
  Second Quarter 50.21 45.50
  Third Quarter 48.46 34.95
  Fourth Quarter 42.80 34.36
       
2012 First Quarter 44.76 38.23
  Second Quarter 43.54 36.68
  Third Quarter 42.37 37.42
  Fourth Quarter 44.35 40.14
       
2013 First Quarter 45.20 41.80
  Second Quarter 44.23 36.63
  Third Quarter 43.29 37.34
  Fourth Quarter 43.66 40.44
       
2014 First Quarter 40.99 37.09
  Second Quarter 43.95 40.82
  Third Quarter 45.85 41.56
  Fourth Quarter 42.44 37.73
       
2015 First Quarter 41.07 37.92
  Second Quarter (through the pricing date) 44.09 40.63

 

Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the shares of the iShares® MSCI Emerging Markets ETF.

 

  

Strategic Accelerated Redemption Securities® TS-16

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Supplement to the Plan of Distribution

 

Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.

 

We will deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.

 

The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.

 

MLPF&S has advised us that they or their affiliates may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these prices will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. At MLPF&S’s discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the estimated value of the notes at the time of repurchase. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Basket, the remaining term of the notes, and our creditworthiness. However, none of us, MLPF&S, or any of our respective affiliates is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S, or any of our respective affiliates will purchase your notes at a price that equals or exceeds the estimated value of the notes at the time of repurchase.

 

MLPF&S has also advised us that, if you hold your notes in a MLPF&S account, the value of the notes shown on your account statement will be based on MLPF&S’s estimate of the value of the notes if MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions and other considerations, as mentioned above, and will include transaction costs. This price may be higher than or lower than the initial estimated value of the notes.

 

The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding Deutsche Bank or for any purpose other than that described in the immediately preceding sentence.

 

Structuring the Notes

 

The notes are our debt securities, the return on which is linked to the performance of the Basket. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. The internal funding rate we use in pricing the market-linked note is typically lower than the rate we would pay when we issue conventional debt securities of comparable maturity. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, resulted in the initial estimated value of the notes on the pricing date being less than their public offering price.

 

Payments on the notes, including the amount you receive at maturity or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Basket. In order to meet these payment obligations, at the time we issue the notes, we expect to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, which may include us, MLPF&S and one of our respective affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Basket Components, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.

 

MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.05 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by us, MLPF&S or any other hedge providers.

 

For further information, see “Risk Factors—General Risks Relating to the Notes” beginning on page PS-7 and “Use of Proceeds and Hedging” on page PS-22 of product supplement ETF STR-1.

 

  

Strategic Accelerated Redemption Securities® TS-17

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

  

Summary Tax Consequences

 

In the opinion of our special tax counsel, Davis Polk & Wardwell LLP, which is based on prevailing market conditions, it is more likely than not that the notes will be treated for U.S. federal income tax purposes as prepaid financial contracts that are not debt. Generally, if this treatment is respected, (i) you should not recognize taxable income or loss prior to the taxable disposition of your notes (including at maturity or pursuant to a call) and (ii) the gain or loss on your notes should be short-term capital gain or loss unless you have held the notes for more than one year, in which case the gain or loss should be long-term capital gain or loss. The Internal Revenue Service (the “IRS”) or a court might not agree with this treatment, however, in which case the timing and character of income or loss on your notes could be materially and adversely affected.

 

In 2007, the U.S. Treasury Department and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether beneficial owners of these instruments should be required to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. persons should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect.

 

You should review carefully the section of the accompanying product supplement entitled “U.S. Federal Income Tax Consequences.” The preceding discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel regarding the material U.S. federal income tax consequences of owning and disposing of the notes.

 

Under current law, the United Kingdom will not impose withholding tax on payments made with respect to the notes.

 

For a discussion of certain German tax considerations relating to the notes, you should refer to the section in the accompanying prospectus supplement entitled “Taxation by Germany of Non-Resident Holders.”

 

You should consult your tax adviser regarding the U.S. federal tax consequences of an investment in the notes (including possible alternative treatments and the issues presented by the 2007 notice), as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

 

Validity of the Notes

 

In the opinion of Davis Polk & Wardwell LLP, as special United States products counsel to the Issuer, when the notes offered by this term sheet 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 notes will be valid and binding obligations of the Issuer, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith) and possible judicial 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 January 1, 2015, filed as an exhibit to the letter 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 notes 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 letter of Davis Polk & Wardwell LLP dated as of January 1, 2015, which has been filed by the Issuer on Form 6-K dated January 5, 2015.

 

Where You Can Find More Information

 

We have filed a registration statement (including a product supplement, a prospectus supplement, a prospectus and a prospectus addendum) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free at 1-800-294-1322.

 

 

  

Strategic Accelerated Redemption Securities® TS-18

 

 

Strategic Accelerated Redemption Securities®

Linked to an International Equity Basket, due June 10, 2016

 

 

 

 

Market-Linked Investments Classification

 

MLPF&S has advised us that it classifies certain market-linked investments (the “Market-Linked Investments”) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.

 

Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.

 

“Strategic Accelerated Redemption Securities®” is a registered service mark of Bank of America Corporation, the parent company of MLPF&S.

 

 

 

  

Strategic Accelerated Redemption Securities® TS-19