NATIONAL BANK OF CANADA

Transcription

1 Prospectus Supplement To the Short Form Base Shelf Prospectus Dated November 21, 2016 S No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus supplement, together with the short form base shelf prospectus dated November 21, 2016 to which it relates, as amended or supplemented, and each document incorporated by reference into this prospectus supplement or into the short form base shelf prospectus, constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been, and will not be, registered under the Securities Act of 1933 of the United States of America, as amended, or under any state securities laws and, subject to certain exceptions, may not be offered, sold or delivered, directly or indirectly, in the United States of America, its territories or possessions, or for the account or benefit of U.S. persons. Reference is made to Plan of Distribution. Information has been incorporated by reference in this prospectus supplement and the short form base shelf prospectus from documents filed with securities commissions or similar authorities in Canada. Reference is made to Documents Incorporated by Reference. Copies of the documents incorporated herein or therein by reference may be obtained on request without charge from the Investor Relations, National Bank of Canada, National Bank Tower, 600 de La Gauchetière Street West, 7th Floor, Montréal, Québec, H3B 4L2, and are also available electronically at New Issue Prospectus Supplement January 15, 2018 NATIONAL BANK OF CANADA $300,000,000 (12,000,000 Shares) Non-cumulative 5-Year Rate Reset First Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) The holders of Non-cumulative 5-Year Rate Reset First Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (the Series 40 Preferred Shares ) of National Bank of Canada (the Bank ) will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the board of directors of the Bank (the Board of Directors ), for the initial period commencing on the closing date and ending on and including May 15, 2023 (the Initial Fixed Rate Period ), payable quarterly on the fifteenth day of February, May, August and November in each year, at an annual rate equal to $ per share. The initial dividend, if declared, will be payable on May 15, 2018 and will be $ per share, based on the anticipated closing date of January 22, Reference is made to Details of the Offering. For each five-year period after the Initial Fixed Rate Period (each a Subsequent Fixed Rate Period ), the holders of Series 40 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the fifteenth day of February, May, August and November in each year, in the amount per share per annum determined by multiplying the Annual Fixed Dividend Rate (as defined herein) applicable to such Subsequent Fixed Rate Period by $ The Annual Fixed Dividend Rate for any Subsequent Fixed Rate Period will be determined by the Bank on the 30 th day prior to the first day of such Subsequent Fixed Rate Period and will be equal to the sum of the Government of Canada Yield (as defined herein) on the date on which the Annual Fixed Dividend Rate is determined plus 2.58%. Reference is made to Details of the Offering. Option to Convert Into Series 41 Preferred Shares The holders of Series 40 Preferred Shares will have the right, at their option, to convert their shares into Noncumulative Floating Rate First Preferred Shares Series 41 of the Bank (Non-Viability Contingent Capital (NVCC)) (the Series 41 Preferred Shares ), subject to certain conditions, on May 15, 2023 and on May 15 every five years thereafter. The holders of Series 41 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the fifteenth day of February, May, August and November in each year (the initial quarterly dividend period and each subsequent quarterly dividend period is referred to as a Quarterly Floating Rate Period ), in the amount per share determined by multiplying the applicable Floating Quarterly Dividend Rate (as defined herein) by $ The Floating Quarterly Dividend Rate will be equal to the sum of the T-Bill Rate (as defined herein) plus 2.58%, calculated on the basis of the actual number of days elapsed in the applicable Quarterly Floating Rate Period divided by 365,

2 determined on the 30 th day prior to the first day of the applicable Quarterly Floating Rate Period. Reference is made to Details of the Offering. Subject to the provisions of the Bank Act (Canada) (the Bank Act ) and to the prior consent of the Superintendent of Financial Institutions Canada (the Superintendent ) and to the provisions described below under Details of the Offering Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares - Restrictions on Dividends and Retirement of Shares, on May 15, 2023 and on May 15, every five years thereafter, the Bank may redeem all or any part of the then outstanding Series 40 Preferred Shares, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of $25.00 together with all declared and unpaid dividends to the date fixed for redemption. Reference is made to Details of the Offering. The Series 40 Preferred Shares and the Series 41 Preferred Shares do not have a fixed maturity date and are not redeemable at the option of the holders of Series 40 Preferred Shares or Series 41 Preferred Shares. Reference is made to Risk Factors. Effective January 1, 2013 in accordance with capital adequacy requirements adopted by the Office of the Superintendent of Financial Institutions Canada ( OSFI ), non-common capital instruments issued after January 1, 2013, including subordinated debt securities or first preferred shares, must include terms providing for the full and permanent conversion of such securities into common shares upon the occurrence of certain trigger events relating to financial viability (the Non-Viable Capital Contingency Provisions ) in order to qualify as regulatory capital. The terms of the Series 40 Preferred Shares and the Series 41 Preferred Shares provide that such shares will automatically and immediately be converted, on a full and permanent basis, into a specified number of common shares of the Bank (the Common Shares ) upon the occurrence of a Trigger Event (as defined herein). Reference is made to Details of the Offering. The Bank has applied to list the Series 40 Preferred Shares, the Series 41 Preferred Shares and the Common Shares into which such shares may be converted upon the occurrence of a Trigger Event on the Toronto Stock Exchange (the TSX ). Listing will be subject to the Bank fulfilling all of the requirements of the TSX. Price: $25.00 per share to yield initially 4.60% per annum National Bank Financial Inc., CIBC World Markets Inc., BMO Nesbitt Burns Inc., RBC Dominion Securities Inc., Scotia Capital Inc., TD Securities Inc., BFIN Securities LP, Canaccord Genuity Corp., Desjardins Securities Inc., GMP Securities L.P., Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Manulife Securities Incorporated and Raymond James Ltd. (collectively, the Underwriters ), as principals, conditionally offer the Series 40 Preferred Shares, subject to prior sale, if, as and when issued by the Bank and accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under Plan of Distribution and subject to the approval of certain legal matters on behalf of the Bank by McCarthy Tétrault LLP and on behalf of the Underwriters by Torys LLP. S-2

3 National Bank Financial Inc., one of the Underwriters, is a wholly-owned subsidiary of the Bank. Therefore, the Bank is a related and connected issuer of National Bank Financial Inc. under applicable securities legislation. Reference is made to Plan of Distribution. Price to the Public Underwriters Fee(1) Net Proceeds to the Bank(2) Per Series 40 Preferred Share... $25.00 $0.75 $24.25 Total... $300,000,000 $9,000,000 $291,000,000 (1) The underwriting fee is $0.25 for each share sold to certain institutions and $0.75 per share for all other shares sold. The amounts represent the underwriting fee assuming no shares are sold to such institutions. (2) Before deduction of expenses of the issue estimated at $350,000, which, together with the Underwriters fee, are payable by the Bank. In connection with this offering, the Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Series 40 Preferred Shares in accordance with applicable market stabilization rules. Such transactions, if commenced, may be discontinued at any time. The Underwriters may decrease the price at which the Series 40 Preferred Shares are distributed from the initial offering price of $ Reference is made to Plan of Distribution. Subscriptions will be received by the Underwriters subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. It is expected that closing will take place on January 22, 2018 or such later date as may be agreed upon by the Bank and the Underwriters, but in any event not later than February 19, A book-entry only certificate representing the Series 40 Preferred Shares distributed hereunder will be issued in registered form to CDS Clearing and Depository Services Inc. ( CDS ), or its nominee, and will be deposited with CDS or such other person as CDS may appoint as Custodian (as such term is defined in the underwriting agreement referred to under Plan of Distribution ) on closing of this offering. A purchaser of Series 40 Preferred Shares will receive only a customer confirmation from the registered dealer who is a CDS participant and from or through whom the Series 40 Preferred Shares are purchased. See Book-Entry Only Securities in the accompanying short form base shelf prospectus dated November 21, 2016 (the Accompanying Prospectus ). The Bank s head and registered office is located at the National Bank Tower, 600 de La Gauchetière Street West, 4 th Floor, Montréal, Québec, H3B 4L2. S-3

4 Table of Contents Prospectus Supplement Page About this Prospectus Supplement... S-4 Caution Regarding Forward-Looking Statements... S-4 Documents Incorporated by Reference... S-5 Eligibility for Investment... S-6 Prior Sales... S-6 Consolidated Capitalization of the Bank... S-7 Details of the Offering... S-7 Bank Act Restrictions and Approvals... S-16 Earnings Coverage Ratios... S-16 Ratings... S-16 Plan of Distribution... S-17 Certain Canadian Federal Income Tax Considerations... S-18 Use of Proceeds... S-20 Market for Securities... S-21 Transfer Agent and Registrar... S-23 Risk Factors... S-23 Legal Matters... S-26 Statutory Rights of Withdrawal and Rescission... S-26 Certificate of the Underwriters... S-27 About this Prospectus Supplement This document consists of two parts, the first part is this prospectus supplement (the Prospectus Supplement ), which describes the specific terms of this offering. The second part, the Accompanying Prospectus, gives more general information, some of which may not apply to this offering. If information in this Prospectus Supplement is inconsistent with the Accompanying Prospectus, investors should rely on the information in this Prospectus Supplement. This Prospectus Supplement, the Accompanying Prospectus and the documents incorporated by reference into each of them include important information about the Bank, the First Preferred Shares of the Bank being offered and other information investors should know before investing in the Series 40 Preferred Shares and Series 41 Preferred Shares. Caution Regarding Forward-Looking Statements From time to time, the Bank makes written and oral forward-looking statements. Statements of this type are included in this Prospectus Supplement and the Accompanying Prospectus, including those documents incorporated by reference, such as those statements contained in the management s discussion and analysis as contained in the Bank s Annual Report for the year ended October 31, 2017 (the 2017 Annual Report ), and in the Major Economic Trends and the Outlook for National Bank sections of the management s discussion and analysis included in the 2017 Annual Report, in other filings with Canadian securities regulators, and in other communications, for the purpose of describing the economic environment in which the Bank will operate during fiscal 2018 and the objectives it hopes to achieve for that period. These forward-looking statements are made in accordance with current securities legislation in Canada and the United States. They include, among others, statements with respect to the economy particularly the Canadian and U.S. economies market changes, observations regarding the Bank s objectives and its strategies for achieving them, Bank-projected financial returns, and certain risks faced by the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as outlook, believe, anticipate, estimate, project, expect, intend, plan, and similar terms and expressions. By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2018 and how that will affect the Bank s business are among the main factors considered in setting the Bank s strategic priorities and objectives and in determining its financial targets, including provisions for credit losses. In determining its expectations for economic growth, both broadly and in the financial services sector in S-4

5 particular, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. There is a strong possibility that express or implied projections contained in these forward-looking statements will not materialize or will not be accurate. The Bank recommends that readers not place undue reliance on these statements, as a number of factors, many of which are beyond the Bank s control, could cause actual future results, conditions, actions or events to differ significantly from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These factors include credit risk, market risk, liquidity and funding risk, operational risk, regulatory compliance risk, reputation risk, strategic risk and environmental risk (all of which are described in more detail in the Risk Management section beginning on page 51 of the 2017 Annual Report, general economic environment and financial market conditions in Canada, the United States and certain other countries in which the Bank conducts business, including regulatory changes affecting the Bank s business, capital and liquidity; changes in the accounting policies the Bank uses to report its financial condition, including uncertainties associated with assumptions and critical accounting estimates; tax laws in the countries in which the Bank operates, primarily Canada and the United States (including the U.S. Foreign Account Tax Compliance Act (FATCA)); changes to capital and liquidity guidelines and to the manner in which they are to be presented and interpreted; changes to the credit ratings assigned to the Bank, and potential disruptions to the Bank s information technology systems, including evolving cyber attack risk. The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found in the Risk Management section of the 2017 Annual Report. Investors and others who rely on the Bank s forwardlooking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf. The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate for other purposes. Documents Incorporated by Reference This Prospectus Supplement is deemed to be incorporated by reference into the Accompanying Prospectus of the Bank solely for the purpose of the Series 40 Preferred Shares offered hereunder. Other documents are also incorporated or deemed to be incorporated by reference into the Accompanying Prospectus and reference should be made to the Accompanying Prospectus for full particulars. The following documents have been filed with the securities regulatory authorities in each province of Canada and are specifically incorporated by reference into, and form an integral part of, this Prospectus Supplement: (a) the Bank s Annual Information Form dated November 30, 2017; (b) (c) (d) (e) the audited annual consolidated financial statements for the year ended October 31, 2017, which include comparative audited annual consolidated financial statements for the year ended October 31, 2016 together with the management s discussion and analysis as contained in the Bank s 2017 Annual Report; the Independent Auditor s Report issued to the shareholders of the Bank on the audited annual consolidated financial statements as at October 31, 2017 and 2016 and for the years then ended; the Bank s management proxy circular dated February 24, 2017 in connection with the Bank s annual meeting of shareholders held on April 21, 2017; and the template version (as defined in National Instrument General Prospectus Requirements ( NI )) of the term sheet dated January 11, 2018 (the Term Sheet ) regarding the offering of the Series 40 Preferred Shares. Any documents of the type described in Section 11.1 of Form F1 Short Form Prospectus filed by the Bank and any template version of marketing materials (as defined in NI ) filed by the Bank with the securities commissions or similar authorities in Canada after the date of this Prospectus Supplement and prior to the S-5

6 termination of the offering contemplated hereby shall be deemed to be incorporated by reference in this Prospectus Supplement. Any marketing materials, including the Term Sheet, are not part of this Prospectus Supplement to the extent that the contents thereof have been modified or superseded by a statement contained in this Prospectus Supplement or an amendment to this Prospectus Supplement. The Term Sheet reflected an offering amount of $200,000,000 (8,000,000 Series 40 Preferred Shares) and an option granted by the Bank to the Underwriters to purchase up to an additional 4,000,000 additional Series 40 Preferred Shares at the offering price at any time up to two business days prior to closing. The Underwriters exercised this option in full on January 11, Any statement contained in a document incorporated or deemed to be incorporated by reference in this Prospectus Supplement or the Accompanying Prospectus or contemplated in this Prospectus Supplement or the Accompanying Prospectus will be deemed to be modified or superseded for the purposes of this Prospectus Supplement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not to be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Prospectus Supplement. Eligibility for Investment In the opinion of McCarthy Tétrault LLP, counsel to the Bank, and Torys LLP, counsel to the Underwriters, based on the current provisions of the Income Tax Act (Canada) (the Tax Act ) and the regulations thereunder, the Series 40 Preferred Shares, if issued on the date of this Prospectus Supplement, would be, on such date, qualified investments under the Tax Act and the regulations thereunder for a trust governed by a registered retirement savings plan ( RRSP ), a registered retirement income fund ( RRIF ), a registered education savings plan ( RESP ), a deferred profit sharing plan, a registered disability savings plan ( RDSP ) or a tax-free savings account ( TFSA ). Notwithstanding that the Series 40 Preferred Shares may be qualified investments for a trust governed by an RRSP, RRIF, RESP, RDSP or TFSA, the annuitant under an RRSP or RRIF, the subscriber of an RESP or the holder of an RDSP or a TFSA will be subject to a penalty tax with respect to the Series 40 Preferred Shares if the Series 40 Preferred Shares are a prohibited investment for the RRSP, RRIF, RESP, RDSP or TFSA, as the case may be. The Series 40 Preferred Shares will generally not be a prohibited investment provided the annuitant, the subscriber or the holder, as the case may be: (i) deals at arm s length with the Bank for purposes of the Tax Act; and (ii) does not have a significant interest (as defined in the Tax Act) in the Bank. In addition, the Series 40 Preferred Shares will generally not be a prohibited investment for a trust governed by a TFSA, RDSP, RRSP, RRIF or RESP if they are excluded property (as defined in subsection (1) of the Tax Act) for such trusts. Holders of a TFSA or a RDSP, annuitants under an RRSP or RRIF and subscribers of an RESP should consult their own tax advisors regarding whether the Series 40 Preferred Shares will be prohibited investments in their particular circumstances. Prior Sales The following table sets out all of the issuances of First Preferred Shares of the Bank or of any other securities convertible into, or exchangeable for, First Preferred Shares of the Bank, during the 12 months preceding the date of this Prospectus Supplement: S-6

7 Date Issued Securities Issued Issue Price Number of Securities Issued June 13, 2017 Non-cumulative 5-Year Rate Reset First Preferred Shares Series 38 (Non-Viability Contingent Capital (NVCC)) 1 $25.00 per share 16,000,000 shares Notes: (1) Convertible into Non-cumulative Floating Rate First Preferred Shares Series 39 (Non-Viability Contingent Capital (NVCC)) in certain circumstances. Consolidated Capitalization of the Bank The following table sets forth the consolidated capitalization of the Bank as at October 31, 2017, before and after giving effect to (i) the sale by the Bank of the Series 40 Preferred Shares, and (ii) to the redemption by the Bank on November 15, 2017 of all issued and outstanding Non-Cumulative 5-Year Rate Reset Series 28 First Preferred Shares (the Series 28 Preferred Shares ) for $200 million. This table should be read in conjunction with the Bank s audited annual consolidated financial statements for the year ended October 31, 2017 and the Bank s management s discussion and analysis as contained in the Bank s 2017 Annual Report: As adjusted as at As at October 31, 2017 October 31, 2017 (1)(2) ($ millions) ($ millions) Subordinated Debentures Innovative Instruments Shareholders Equity... Preferred... 2,050 2,150 Common... 2,768 2,768 Contributed Surplus Retained Earnings... 7,706 7,697 Accumulated other comprehensive income (loss) Total Shareholders Equity... 12,750 12,841 Total Capitalization 13,528 13,619 Notes: (1) Giving effect to the receipt of anticipated gross proceeds from the sale of the Series 40 Preferred Shares, which increased preferred share capital by $300 million and reduced retained earnings by $9 million. (2) The redemption of the Series 28 Preferred Shares reduced preferred share capital by $200 million. Description of First Preferred Shares as a Class Details of the Offering The First Preferred Shares of each series rank pari passu with the First Preferred Shares of every other series and outstanding First Preferred Shares (including any First Preferred Shares issued hereunder if a trigger event has not occurred as contemplated under the specific Non-Viable Capital Contingency Provisions applicable to such First Preferred Shares) are entitled to preference over the second preferred shares and Common Shares of the Bank and over any other shares ranking junior to the First Preferred Shares with respect to the payment of dividends and in the distribution of property in the event of the Bank s liquidation, dissolution or winding-up. The Series 40 Preferred Shares and the Series 41 Preferred Shares will each be issued as a series of First Preferred Shares of the Bank. Reference is made to the description of the First Preferred Shares of the Bank as a class under the heading Description of First Preferred Shares in the Accompanying Prospectus. The authorized First Preferred Share capital of the Bank consists of an unlimited number of First Preferred Shares without nominal or par value, issuable for a maximum aggregate consideration of $5 billion or the equivalent thereof in foreign currencies. S-7

8 Certain Provisions of the Series 40 Preferred Shares as a Series Definition of Terms Issue Price Dividends The following definitions are relevant to the Series 40 Preferred Shares. Annual Fixed Dividend Rate means, for any Subsequent Fixed Rate Period, the rate (expressed as a percentage rate rounded down to the nearest one hundred-thousandth of one percent (with % being rounded up)) equal to the sum of the Government of Canada Yield on the applicable Fixed Rate Calculation Date plus 2.58%. Bloomberg Screen GCAN5YR Page means the display designated as page GCAN5YR<INDEX> on the Bloomberg Financial L.P. service (or such other page as may replace the GCAN5YR page on that service) for purposes of displaying Government of Canada Bond yields. Fixed Rate Calculation Date means, for any Subsequent Fixed Rate Period, the 30 th day prior to the first day of such Subsequent Fixed Rate Period. Government of Canada Yield on any date means the yield to maturity on such date (assuming semiannual compounding) of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years as quoted as of 10:00 a.m. (Toronto time) on such date and which appears on the Bloomberg Screen GCAN5YR Page on such date; provided that, if such rate does not appear on the Bloomberg Screen GCAN5YR Page on such date, the Government of Canada Yield will mean the average of the yields determined by two registered Canadian investment dealers, other than National Bank Financial Inc., selected by the Bank, as being the yield to maturity on such date (assuming semi-annual compounding) which a Canadian dollar denominated non-callable Government of Canada bond would carry if issued in Canadian dollars at 100% of its principal amount on such date with a term to maturity of five years. Initial Fixed Rate Period means the period commencing on the closing date and ending on and including May 15, Subsequent Fixed Rate Period means for the initial Subsequent Fixed Rate Period, the period commencing May 16, 2023 and ending on and including May 15, 2028, and for each succeeding Subsequent Fixed Rate Period, the period commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period and ending on and including May 15 in the fifth year thereafter. The Series 40 Preferred Shares will have an issue price of $25.00 per share. During the Initial Fixed Rate Period, the holders of the Series 40 Preferred Shares will be entitled to receive fixed quarterly non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, on the fifteenth day of each of February, May, August and November of each year, at an annual rate equal to $ per share. The initial dividend, if declared, will be payable on May 15, 2018 and will be $ per share, based on the anticipated closing date of January 22, During each Subsequent Fixed Rate Period after the Initial Fixed Rate Period, the holders of Series 40 Preferred Shares will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, payable quarterly on the fifteenth day of each of February, May, August and November of each year, in the amount per share per annum determined by multiplying the Annual Fixed Dividend Rate applicable to such Subsequent Fixed Rate Period by $ The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Bank on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and S-8

9 binding upon the Bank and upon all holders of Series 40 Preferred Shares. The Bank will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Series 40 Preferred Shares. If the Board of Directors does not declare a dividend, or any part thereof, on the Series 40 Preferred Shares on or before the dividend payment date for a particular quarter, then the entitlement of the holders of the Series 40 Preferred Shares to receive such dividend, or to any part thereof, for such quarter will be forever extinguished. Reference is also made to Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares - Restrictions on Dividends and Retirement of Shares below and Bank Act Restrictions and Restrictions on Payment of Dividends of the Accompanying Prospectus. Redemption The Series 40 Preferred Shares will not be redeemable prior to May 15, Subject to the provisions of the Bank Act and to the prior consent of the Superintendent and to the provisions described below under the heading Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares - Restrictions on Dividends and Retirement of Shares, on May 15, 2023 and on May 15 every five years thereafter, the Bank may redeem all or any part of the then outstanding Series 40 Preferred Shares, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of $25.00 together with all declared and unpaid dividends to the date fixed for redemption (less any tax required to be deducted and withheld). Notice of any redemption will be given by the Bank at least 30 days and not more than 60 days prior to the date fixed for redemption. If less than all the outstanding Series 40 Preferred Shares are at any time to be redeemed, the shares to be redeemed will be redeemed pro rata, disregarding fractions. Reference is also made to the provisions described in the Accompanying Prospectus under the heading Bank Act Restrictions and Restrictions on Payment of Dividends. The Series 40 Preferred Shares do not have a fixed maturity and are not redeemable at the option of the holders. Reference is made to Risk Factors. Conversion of Series 40 Preferred Shares into Series 41 Preferred Shares Holders of Series 40 Preferred Shares will have the right, at their option, May 15, 2023 and on May 15 every five years thereafter (a Series 40 Conversion Date ), to convert, subject to the restrictions on conversion described below and the payment or delivery to the Bank of evidence of payment of the tax (if any) payable, all or any of their Series 40 Preferred Shares registered in their name into Series 41 Preferred Shares on the basis of one Series 41 Preferred Share for each Series 40 Preferred Share. The conversion of Series 40 Preferred Shares may be effected upon written notice given not earlier than the 30 th day prior to, but not later than 5:00 p.m. (Toronto time) on the 15 th day preceding, a Series 40 Conversion Date. Once received by the Bank, such written notice is irrevocable. The Bank will, at least 30 days and not more than 60 days prior to the applicable Series 40 Conversion Date, give notice in writing to the then registered holders of the Series 40 Preferred Shares of the above-mentioned conversion right. On the Fixed Rate Calculation Date, the Bank will give notice in writing to the then registered holders of the Series 40 Preferred Shares of the Annual Fixed Dividend Rate for the next succeeding Subsequent Fixed Rate Period and the Floating Quarterly Dividend Rate (as defined herein) applicable to the Series 41 Preferred Shares for the next Quarterly Floating Rate Period (as defined herein). Holders of Series 40 Preferred Shares will not be entitled to convert their shares into Series 41 Preferred Shares if the Bank determines that there would remain outstanding on a Series 40 Conversion Date less than 1,000,000 Series 41 Preferred Shares, after having taken into account all Series 40 Preferred Shares tendered for conversion into Series 41 Preferred Shares and all Series 41 Preferred Shares tendered for conversion into Series 40 Preferred Shares. The Bank will give notice in writing thereof to all registered holders of Series 40 Preferred Shares at least seven days prior to the applicable Series 40 Conversion Date. Furthermore, if the Bank determines that there would remain outstanding on a Series 40 Conversion Date less than 1,000,000 Series 40 Preferred Shares, after having taken into account all Series 40 Preferred Shares tendered for conversion into Series 41 Preferred Shares and all Series 41 Preferred Shares tendered for conversion into Series 40 Preferred Shares, then, all of the remaining S-9

10 outstanding Series 40 Preferred Shares will automatically be converted into Series 41 Preferred Shares on the basis of one Series 41 Preferred Share for each Series 40 Preferred Share on the applicable Series 40 Conversion Date, without the consent of the holders, and the Bank will give notice in writing thereof to the then registered holders of such remaining Series 40 Preferred Shares at least seven days prior to the Series 40 Conversion Date. Upon exercise by the holder of this right to convert Series 40 Preferred Shares into Series 41 Preferred Shares, the Bank reserves the right not to issue Series 41 Preferred Shares to any person in certain situations. Reference is made to Details of the Offering - Right Not to Deliver Shares upon Conversion. If the Bank gives notice to the registered holders of the Series 40 Preferred Shares of the redemption of all the Series 40 Preferred Shares, the Bank will not be required to give notice as provided hereunder to the registered holders of the Series 40 Preferred Shares of any dividend rate or of the conversion right of holders of Series 40 Preferred Shares and the right of any holder of Series 40 Preferred Shares to convert such Series 40 Preferred Shares will cease and terminate in that event. Certain Provisions of the Series 41 Preferred Shares as a Series Definition of Terms Issue Price Dividends The following definitions are relevant to the Series 41 Preferred Shares. Floating Quarterly Dividend Rate means, for any Quarterly Floating Rate Period, the rate (expressed as a percentage rate rounded down to the nearest one hundred-thousandth of one percent (with % being rounded up)) equal to the sum of the T-Bill Rate on the applicable Floating Rate Calculation Date plus 2.58%, calculated on the basis of the actual number of days elapsed in such Quarterly Floating Rate Period divided by 365. Floating Rate Calculation Date means, for any Quarterly Floating Rate Period, the 30 th day prior to the first day of such Quarterly Floating Rate Period. Quarterly Commencement Date means the 16 th day of each of February, May, August and November in each year. Quarterly Floating Rate Period means, for the initial Quarterly Floating Rate Period, the period commencing on May 16, 2023 and ending on and including August 15, 2023, and thereafter the period from and including the day immediately following the end of the immediately preceding Quarterly Floating Rate Period to but excluding the next succeeding Quarterly Commencement Date. T-Bill Rate means, for any Quarterly Floating Rate Period, the average yield expressed as a percentage per annum on 90-day Government of Canada Treasury Bills, as reported by the Bank of Canada, for the most recent treasury bills auction preceding the applicable Floating Rate Calculation Date. The Series 41 Preferred Shares will have an issue price of $25.00 per share. The holders of the Series 41 Preferred Shares will be entitled to receive floating rate non-cumulative preferential cash dividends as and when declared by the Board of Directors, subject to the provisions of the Bank Act, payable quarterly on the fifteenth day of each of February, May, August and November of each year, in the amount per share determined by multiplying the applicable Floating Quarterly Dividend Rate by $ The Floating Quarterly Dividend Rate for each Quarterly Floating Rate Period will be determined by the Bank on the 30 th day prior to the first day of each Quarterly Floating Rate Period. Such determination will, in the absence of manifest error, be final and binding upon the Bank and upon all holders of Series 41 Preferred Shares. The Bank will, on the Floating Rate Calculation Date, give written notice of the Floating Quarterly Dividend Rate S-10

11 for the ensuing Quarterly Floating Rate Period to all registered holders of the then outstanding Series 41 Preferred Shares. If the Board of Directors does not declare a dividend, or any part thereof, on the Series 41 Preferred Shares on or before the dividend payment date for a particular Quarterly Floating Rate Period, then the entitlement of the holders of the Series 41 Preferred Shares to receive such dividend, or to any part thereof, for such Quarterly Floating Rate Period will be forever extinguished. Reference is also made to Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares - Restrictions on Dividends and Retirement of Shares below and Bank Act Restrictions and Restrictions on Payment of Dividends of the Accompanying Prospectus. Redemption Subject to the provisions of the Bank Act and to the prior consent of the Superintendent and to the provisions described below under Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares - Restrictions on Dividends and Retirement of Shares, on not more than 60 nor less than 30 days notice, the Bank may redeem all or any part of the then outstanding Series 41 Preferred Shares, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of (i) $25.00 together with all declared and unpaid dividends to the date fixed for redemption (less any tax required to be deducted and withheld) in the case of redemptions on May 15, 2028 and on May 15 every five years thereafter, or (ii) $25.50 together with all declared and unpaid dividends to the date fixed for redemption (less any tax required to be deducted and withheld) in the case of redemptions on any other date after May 15, If less than all the outstanding Series 41 Preferred Shares are at any time to be redeemed, the shares to be redeemed will be redeemed pro rata, disregarding fractions. Reference is also made to the provisions of the Accompanying Prospectus under the heading Bank Act Restrictions and Restrictions on Payment of Dividends. The Series 41 Preferred Shares do not have a fixed maturity date and are not redeemable at the option of the holders. Reference is made to Risk Factors. Conversion of Series 41 Preferred Shares into Series 40 Preferred Shares Holders of Series 41 Preferred Shares will have the right, at their option, on May 15, 2028 and on May 15 every five years thereafter (a Series 41 Conversion Date ), to convert, subject to the restrictions on conversion described below and the payment or delivery to the Bank of evidence of payment of the tax (if any) payable, all or any of their Series 41 Preferred Shares registered in their name into Series 40 Preferred Shares on the basis of one Series 40 Preferred Share for each Series 41 Preferred Share. The conversion of Series 41 Preferred Shares may be effected upon written notice given not earlier than the 30 th day prior to, but not later than 5:00 p.m. (Toronto time) on the 15 th day preceding, a Series 41 Conversion Date. Once received by the Bank, such written notice is irrevocable. The Bank will, at least 30 days and not more than 60 days prior to the applicable Series 41 Conversion Date, give notice in writing to the then holders of the Series 41 Preferred Shares of the above-mentioned conversion right. On the Floating Rate Calculation Date, the Bank will give notice in writing to the then registered holders of Series 41 Preferred Shares of the Floating Quarterly Dividend Rate for the next Quarterly Floating Rate Period and, on the Floating Rate Calculation Date immediately prior to each Series 41 Conversion Date, the Annual Fixed Dividend Rate in respect of the Series 40 Preferred Shares for the next succeeding Subsequent Fixed Rate Period. Holders of Series 41 Preferred Shares will not be entitled to convert their shares into Series 40 Preferred Shares if the Bank determines that there would remain outstanding on a Series 41 Conversion Date less than 1,000,000 Series 40 Preferred Shares, after having taken into account all Series 41 Preferred Shares tendered for conversion into Series 40 Preferred Shares and all Series 40 Preferred Shares tendered for conversion into Series 41 Preferred Shares. The Bank will give notice in writing thereof to all registered holders of the Series 41 Preferred Shares at least seven days prior to the applicable Series 41 Conversion Date. Furthermore, if the Bank determines that there would remain outstanding on a Series 41 Conversion Date less than 1,000,000 Series 41 Preferred Shares, after having taken into account all Series 41 Preferred Shares tendered for conversion into Series 40 Preferred Shares and all Series 40 Preferred Shares tendered for conversion into Series 41 Preferred Shares, then, all, but not S-11

12 part, of the remaining outstanding Series 41 Preferred Shares will automatically be converted into Series 40 Preferred Shares on the basis of one Series 40 Preferred Share for each Series 41 Preferred Share on the applicable Series 41 Conversion Date, without the consent of the holders, and the Bank will give notice in writing thereof to the then registered holders of such remaining Series 41 Preferred Shares at least seven days prior to the Series 41 Conversion Date. Upon exercise by the holder of this right to convert Series 41 Preferred Shares into Series 40 Preferred Shares, the Bank reserves the right not to issue Series 40 Preferred Shares to any person in certain situations. Reference is made to Details of the Offering - Right Not to Deliver Shares upon Conversion. If the Bank gives notice to the registered holders of the Series 41 Preferred Shares of the redemption on a Series 41 Conversion Date of all the Series 41 Preferred Shares, the Bank will not be required to give notice as provided hereunder to the registered holders of the Series 41 Preferred Shares of any dividend rate or of the conversion right of holders of Series 41 Preferred Shares and the right of any holder of Series 41 Preferred Shares to convert such Series 41 Preferred Shares will cease and terminate in that event. Provisions Common to the Series 40 Preferred Shares and the Series 41 Preferred Shares Purchase for Cancellation Subject to the provisions of the Bank Act, the prior consent of the Superintendent and the provisions described below under the heading Restrictions on Dividends and Retirement of Shares, the Bank may at any time purchase for cancellation any of the Series 40 Preferred Shares or any of the Series 41 Preferred Shares in the open market at the lowest price or prices at which in the opinion of the Board of Directors such shares are obtainable. Conversion of Series 40 Preferred Shares and of Series 41 Preferred Shares Upon Occurrence of Non-Viable Contingent Capital Trigger Event Upon the occurrence of a Trigger Event, each outstanding Series 40 Preferred Share and each outstanding Series 41 Preferred Share will automatically and immediately be converted, on a full and permanent basis, into a number of Common Shares equal to (Multiplier x Share Value) Conversion Price (rounding down, if necessary, to the nearest whole number of Common Shares) (a NVCC Automatic Conversion ). For the purposes of the foregoing: Conversion Price means the greater of (i) $5.00, and (ii) the Current Market Price of the Common Shares. The floor price of $5.00 is subject to adjustment in the event of (i) the issuance of Common Shares or securities exchangeable for or convertible into Common Shares to all holders of Common Shares as a stock dividend, (ii) the subdivision, redivision or change of the Common Shares into a greater number of Common Shares, or (iii) the reduction, combination or consolidation of the Common Shares into a lesser number of Common Shares. The adjustment shall be computed to the nearest onetenth of one cent provided that no adjustment of the floor price shall be required unless such adjustment would require an increase or decrease of at least 1% of the floor price then in effect. Current Market Price of the Common Shares means the volume weighted average trading price of the Common Shares on the TSX, if such shares are then listed on the TSX, for the 10 consecutive trading days ending on the trading day preceding the date of the Trigger Event. If the Common Shares are not then listed on the TSX, for the purpose of the foregoing calculation reference shall be made to the principal securities exchange or market on which the Common Shares are then listed or quoted or, if no such trading prices are available, Current Market Price shall be the fair value of the Common Shares as reasonably determined by the Board of Directors. Multiplier means 1.0. Share Value means $25.00 plus declared and unpaid dividends as at the date of the Trigger Event. Trigger Event has the meaning set out in the OSFI Guideline for Capital Adequacy Requirements (CAR), Chapter 2 Definition of Capital, effective November 2017, as such term may be amended or S-12

13 superseded by the OSFI from time to time, which term currently provides that each of the following constitutes a Trigger Event: the Superintendent publicly announces that the Bank has been advised, in writing, that the Superintendent is of the opinion that the Bank has ceased, or is about to cease, to be viable and that, after the conversion of all contingent instruments and taking into account any other factors or circumstances that are considered relevant or appropriate, it is reasonably likely that the viability of the Bank will be restored or maintained; or a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection, or equivalent support, from the federal government or any provincial government or political subdivision or agent or agency thereof without which the Bank would have been determined by the Superintendent to be non-viable. Fractions of Common Shares will not be issued or delivered pursuant to a NVCC Automatic Conversion and no cash payment will be made in lieu of a fractional Common Share. Notwithstanding any other provision of the Series 40 Preferred Shares or the Series 41 Preferred Shares, the conversion of such shares shall not be an event of default and the only consequence of a Trigger Event under the provisions of such shares will be the conversion of such shares into Common Shares. In the event of a capital reorganization, consolidation, merger or amalgamation of the Bank or comparable transaction affecting the Common Shares, the Bank will take necessary action to ensure that holders of Series 40 Preferred Shares and Series 41 Preferred Shares, as applicable, receive, pursuant to a NVCC Automatic Conversion, the number of Common Shares or other securities that such holders would have received if the NVCC Automatic Conversion occurred immediately prior to the record date for such event. Right Not to Deliver Shares upon Conversion Upon (i) exercise by the holder of his right to convert Series 40 Preferred Shares into Series 41 Preferred Shares, (ii) exercise by the holder of his right to convert Series 41 Preferred Shares into Series 40 Preferred Shares, or (iii) a NVCC Automatic Conversion, the Bank reserves the right not to (a) deliver some or all, as applicable, of Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, issuable thereupon to any person whom the Bank or its transfer agent has reason to believe is an Ineligible Person (as defined below) or any person who, by virtue of that conversion or upon a NVCC Automatic Conversion, would become a Significant Shareholder (as defined below), or (b) record in its securities register a transfer or issue of the Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, to any person whom the Bank or its transfer agent has reason to believe is an Ineligible Government Holder based on a declaration submitted to the Bank or its transfer agent by or on behalf of such person. In such circumstances, the Bank will hold, as agent for such persons, the Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, that would have otherwise been delivered to such persons and will attempt to facilitate the sale of such Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, to parties other than the Bank and its affiliates on behalf of such persons through a registered dealer to be retained by the Bank on behalf of such persons. Those sales (if any) may be made at any time and at any price. The Bank will not be subject to any liability for failure to sell such Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, on behalf of such persons or at any particular price on any particular day. The net proceeds received by the Bank from the sale of any such Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, will be divided among the applicable persons in proportion to the number of Series 40 Preferred Shares, Series 41 Preferred Shares or Common Shares, as the case may be, that would otherwise have been delivered to them upon the conversion or upon a NVCC Automatic Conversion after deducting the costs of sale and any applicable withholding taxes. For the purposes of the foregoing: Ineligible Government Holder means any person who is the federal or a provincial government in Canada or agent or agency thereof, or the government of a foreign country or any political subdivision of a foreign country, or any agent or agency of a foreign government, in each case to the extent that the recording in the Bank s securities register of a transfer or issue of any share of the Bank to such person would cause the Bank to contravene the Bank Act. S-13