ROYAL BANK OF CANADA NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BM (NON-VIABILITY CONTINGENT CAPITAL (NVCC)) RATE RESET PREFERRED

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1 TERM SHEET DATED FEBRUARY 25, 2016 A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the final base shelf prospectus, any amendment to the final base shelf prospectus and any applicable shelf prospectus supplement that has been filed, is required to be delivered with this document. This document does not provide full disclosure of all material facts relating to the securities offered. Investors should read the final base shelf prospectus, any amendment and any applicable shelf prospectus supplement for disclosure of those facts, especially risk factors relating to the securities offered, before making an investment decision. Issuer: Issue: Amount: Issue Price: Initial Dividend Rate: Dividends: Royal Bank of Canada (the Bank ). Non-Cumulative 5-Year Rate Reset Preferred Shares, Series BM (Non-Viability Capital (NVCC)) (the Series BM Preferred Shares ). $750 million (30 million Series BM Preferred Shares). $25.00 per Series BM Preferred Share. 5.50% per annum, payable quarterly for the Initial Fixed Rate Period (as defined below). Initial Fixed Rate Period: Fixed, non-cumulative, preferential cash dividends payable quarterly on the 24th day of February, May, August and November at an annual rate of $ per Series BM Preferred Share, for the initial five-year period ending on August 24, 2021 (the Initial Fixed Rate Period ). The first of such dividends, if declared, will be payable on August 24, 2016 and will be $ per Series BM Preferred Share, based on the anticipated closing of the offering on March 7, Subsequent Fixed Rate Periods: For every five-year period after the Initial Fixed Rate Period (a Subsequent Fixed Rate Period ), the Bank will determine on the 30 th day prior to the first day of a Subsequent Fixed Rate Period, the annual fixed dividend rate applicable to that Subsequent Fixed Rate Period (the Annual Fixed Dividend Rate ). The Annual Fixed Dividend Rate will be equal to the 5-year Government of Canada bond yield ( GCAN5YR ) as quoted on Bloomberg (see quote for GCAN5YR <INDEX> ) or comparable sources at 10:00 a.m. (Toronto time) on the 30th day prior to the first

2 day of a Subsequent Fixed Rate Period plus 4.80%. Fixed, non-cumulative, preferential cash dividends payable quarterly on the 24 th day of February, May, August and November, based on the Annual Fixed Dividend Rate. Conversion: Election to Convert: On August 24, 2021 and on August 24 every five years thereafter (each a Series BM Conversion Date ), the holders of Series BM Preferred Shares will have the right to elect to convert (subject to the Automatic Conversion provision described below) any or all of their Series BM Preferred Shares into an equal number of Non-Cumulative Floating Rate Preferred Shares, Series BN (Non-Viability Capital (NVCC)) (the Series BN Preferred Shares ). Election Notice: Holders of Series BM Preferred Shares who elect to convert their shares into Series BN Preferred Shares are required to provide the Bank with written notice (an Election Notice ) on a date not earlier than the 30th day and not later than 5:00 p.m. (Toronto time) on the 15th day preceding the applicable Series BM Conversion Date. Once received by the Bank, an Election Notice is irrevocable. Notice of Series BM Conversion Date and Dividend Rates: Notice of each Series BM Conversion Date and the form of Election Notice will be given by the Bank at least 30 days and not more than 60 days prior to the Series BM Conversion Date. Notice of the Annual Fixed Dividend Rate for the upcoming Subsequent Fixed Rate Period applicable to the Series BM Preferred Shares and the Floating Quarterly Dividend Rate for the next quarter applicable to the Series BN Preferred Shares will be given by the Bank on the 30th day prior to each Series BM Conversion Date. Automatic Conversion and Restrictions on Conversion: Series BN Preferred Shares may, on certain dates after August 24, 2026, be converted into Series BM Preferred Shares at the option of the holders thereof (see Term Sheet for Series BN Preferred Shares attached). If the Bank determines that, after taking into account all Election Notices received by the Bank during the time fixed therefor, there would be less than 1,000,000 Series BM Preferred Shares outstanding

3 on the applicable Series BM Conversion Date, then all outstanding Series BM Preferred Shares will automatically be converted on such Series BM Conversion Date into Series BN Preferred Shares. If (I) the Bank determines that, after taking into account all Election Notices received by the Bank during the time fixed therefor, there would be less than 1,000,000 Series BN Preferred Shares outstanding on a Series BM Conversion Date, or (II) the Bank gives notice of redemption of all outstanding Series BM Preferred Shares then holders of Series BM Preferred Shares will not be entitled to convert their shares into Series BN Preferred Shares. Redemption: The Series BM Preferred Shares will not be redeemable prior to August 24, On August 24, 2021 and on each Series BM Conversion Date thereafter, subject to the provisions of the Bank Act (Canada) and the prior consent of the Superintendent of Financial Institutions (the Superintendent ) on not more than 60 nor less than 30 days notice, the Bank may, at its option, redeem all or any number of the then outstanding Series BM Preferred Shares upon payment of $25.00 in cash for each Series BM Preferred Share so redeemed together with all declared and unpaid dividends to the date fixed for redemption. Conversion Trigger Event: Upon the occurrence of a Trigger Event (as defined below), each outstanding Series BM Preferred Share will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder thereof, into a number of fully-paid and freely-tradable common shares of the Bank ( Common Shares ) determined in accordance with the Conversion Formula set out below (the Conversion ). Trigger Event has the meaning set out in the Office of the Superintendent of Financial Institutions Canada ( OSFI ) Guideline for Capital Adequacy Requirements (CAR), Chapter 2 Definition of Capital, effective January 2013, as such term may be amended or superseded by OSFI from time to time, which term currently provides that each of the following constitutes a Trigger Event: (a) (b) 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 the Series BM Preferred Shares and all other contingent instruments issued by the Bank 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

4 government or political subdivision or agent or agency thereof without which the Bank would have been determined by the Superintendent to be non-viable. Conversion Formula: The Conversion Formula is: (Multiplier x Share Value) Conversion Price = number of Common Shares into which each Series BM Preferred Share shall be converted. The Multiplier is 1.0. The Share Value of a Series BM Preferred Share is $25.00 plus declared and unpaid dividends on such Series BM Preferred Share. The Conversion Price of each Series BM Preferred Share is the greater of (i) a floor price of $5.00, and (ii) the Current Market Price of the Common Shares. Current Market Price of the Common Shares means the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (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 of the Bank. Prohibited Owners: Conversion Risk Factor: Rights on Liquidation: The terms and conditions of the Series BM Preferred Shares will include mechanics to allow the Bank to attempt to facilitate a sale of Common Shares on behalf of those holders of Series BM Preferred Shares who are prohibited pursuant to certain restrictions set out therein or pursuant to the Bank Act (Canada) from taking delivery of Common Shares issued upon a Trigger Event. The net proceeds received from the Bank from the sale of any such Common Shares will be divided among the applicable persons in proportion to the number of Common Shares that would otherwise have been delivered to them upon the Conversion after deducting the costs of sale and any applicable withholding taxes. There is no certainty of the value of the Common Shares received upon conversion. The value of the Common Shares received could be significantly less than face value of the Series BM Preferred Shares. In the event of the liquidation, dissolution or winding-up of the Bank, where a Trigger Event has not occurred, the holders of the Series BM Preferred Shares will be entitled to receive $25.00 per share together with all dividends declared and unpaid to the date of payment before any amount will be paid or any

5 assets of the Bank distributed to the holders of any shares ranking junior to the Series BM Preferred Shares. The holders of the Series BM Preferred Shares will not be entitled to share in any further distribution of the assets of the Bank. If a Trigger Event has occurred, the rights on liquidation described above will not be relevant since all Series BM Preferred Shares will have been converted into Common Shares which will rank on parity with all other Common Shares of the Bank. Priority: Each series of First Preferred Shares of the Bank ranks on parity with First Preferred Shares of every other series and is entitled to preference over the Common Shares and over any other shares of the Bank ranking junior to the First Preferred Shares with respect to the payment of dividends and upon any distribution of assets in the event of liquidation, dissolution or winding-up of the Bank, where a Trigger Event has not occurred. If a Trigger Event occurs, the priority of the Series BM Preferred Shares will not be relevant since all Series BM Preferred Shares will be converted into Common Shares which will rank on parity with all other Common Shares of the Bank. Conversion into Another Series of Preferred Shares: Purchase for Cancellation: Voting Rights: Tax Status: The Bank may at any time, subject to the approval of the Superintendent, give the holders of Series BM Preferred Shares the right, at their option, to convert their Series BM Preferred Shares into a new series of Tier 1 capital preferred shares on a share-for-share basis. Subject to the provisions of the Bank Act (Canada) and the consent of the Superintendent, the Bank will be entitled to purchase Series BM Preferred Shares for cancellation by private contract or in the market or by tender, at the lowest price or prices at which, in the opinion of the board of directors of the Bank, such shares are obtainable. The holders of Series BM Preferred Shares will not be entitled to receive notice of or to attend or to vote at any meeting of the shareholders of the Bank unless and until the first time at which the rights of such holders to any undeclared dividends have been extinguished. In that event, the holders of Series BM Preferred Shares will be entitled to receive notice of, and to attend, meetings of shareholders at which directors are to be elected and will be entitled to one vote for each Series BM Preferred Share held. The voting rights will forthwith cease upon payment by the Bank of the first dividend on the Series BM Preferred Shares to which the holders are entitled subsequent to the time such voting rights first arose. At such time as the rights of holders to any undeclared dividends have again been extinguished, such voting rights will become effective again and so on from time to time. The Bank will elect to pay tax under Part VI.1 of the Income Tax Act (Canada) such that no Part IV.1 tax is payable by purchasers of Series BM Preferred

6 Shares. Business Day: Listing: Eligibility: Form of Offering: Use of Proceeds: Provisional Ratings: Underwriting Basis: Underwriting Fee: If any action or payment is required to be taken or paid by the Bank or any matter, consequence or other thing is provided to occur, in respect of the Series BM Preferred Shares, on a day that is not a business day, then such action or payment will be taken or made and such matter, consequence or other thing will occur on the immediately following business day unless the Bank determines to take such action or make such payment on the immediately preceding business day. Application will be made to list the Series BM Preferred Shares on the TSX. Application will also be made to list the underlying Common Shares that would be issued upon a Conversion on the TSX. Eligible for RRSPs, RESPs, RRIFs, RDSPs, DPSPs and TFSAs. Public offering in all provinces and territories of Canada by way of supplement to a short form base shelf prospectus dated January 21, The proceeds to the Bank from sale of the Series BM Preferred Shares will be added to the Bank s general funds. DBRS: Pfd-2 S&P: P-2 Moody s: Baa2 (hyb) Bought Deal subject to due diligence and conventional bought deal termination provisions to be included in a definitive underwriting agreement. 1.0% to certain specified institutions and 3.0% on all other sales. Expected Closing: On or about March 7, NOT FOR DISTRIBUTION IN THE UNITED STATES The securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ), or any state securities laws. The securities may not be offered or sold within the United States or to or for the account or benefit of U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act.

7 NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BN Issuer: Issue: Dividends: Royal Bank of Canada (the Bank ). Non-Cumulative Floating Rate Preferred Shares, Series BN (Non-Viability Capital (NVCC)) (the Series BN Preferred Shares ). Quarterly Dividend Payments: Non-cumulative, preferential cash dividends payable quarterly on the 24th day of February, May, August and November (the Quarterly Dividend Payment Date ) at the Floating Quarterly Dividend Rate (as defined below). Floating Quarterly Dividend Rate: The Floating Quarterly Dividend Rate for a quarter will be equal to the 3-month Canadian Treasury Bill yield ( T-Bill Rate ) plus 4.80%, on an actual/365 day count basis. The T-Bill Rate will be calculated using the 3-month average results, as reported by the Bank of Canada, for the most recent auction preceding the date on which the Floating Quarterly Dividend Rate for such quarter is determined. Auction results are posted on Reuters page BOCBILL. The Floating Quarterly Dividend Rate for such quarter will be determined on the day that is 30 days prior to the first day of the quarter by the Bank. Conversion: Election to Convert: On August 24, 2026 and on each August 24 every five years thereafter (each a Series BN Conversion Date ), the holders of Series BN Preferred Shares will have the right to elect to convert (subject to Automatic Conversion and Restrictions on Conversion described below) any or all of their Series BN Preferred Shares into an equal number of Non-Cumulative 5-Year Rate Reset Preferred Shares, Series BM (Non-Viability Capital (NVCC)) (the Series BM Preferred Shares ). Election Notice: Holders of Series BN Preferred Shares who elect to convert their Series BN Preferred Shares into Series BM Preferred Shares on a Series BN Conversion Date are required to provide the Bank with written notice (an Election Notice ) on a date not earlier than the 30th day and not later than 5:00 p.m. (Toronto time) on the 15th day preceding the applicable Series BN Conversion Date. Once received by the Bank, an Election Notice is irrevocable.

8 NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BN Notice of Series BN Conversion Date and Dividend Rates: Notice of a Series BN Conversion Date and a form of Election Notice will be given by the Bank at least 30 days and not more than 60 days prior to the Series BN Conversion Date. Notice of the Annual Fixed Dividend Rate for the upcoming Subsequent Fixed Rate Period applicable to the Series BM Preferred Shares and the Floating Quarterly Dividend Rate for the next quarter applicable to the Series BN Preferred Shares will be given by the Bank on the 30th day prior to each Series BN Conversion Date. Automatic Conversion and Restrictions on Conversion: Series BM Preferred Shares may, on certain dates after August 24, 2021, be converted into Series BN Preferred Shares at the option of the holders thereof (see Term Sheet for Series BM Preferred Shares attached). If the Bank determines that, after taking into account all Election Notices received, there would be less than 1,000,000 Series BN Preferred Shares outstanding on the applicable Series BN Conversion Date, then all outstanding Series BN Preferred Shares will automatically be converted on such Series BN Conversion Date into an equal number of Series BM Preferred Shares If (I) the Bank determines that, after taking into account all Election Notices received by the Bank during the time fixed therefor, there would be less than 1,000,000 Series BM Preferred Shares outstanding on the applicable Series BN Conversion Date, or (II) the Bank gives notice of redemption of all outstanding Series BN Preferred Shares, then holders of Series BN Preferred Shares will not be entitled to convert their shares into Series BM Preferred Shares Redemption: On August 24, 2026 and on each Series BN Conversion Date thereafter, subject to the provisions of the Bank Act (Canada) and the prior consent of the Superintendent of Financial Institutions (the Superintendent ), on not more than 60 nor less than 30 days notice, the Bank may, at its option, redeem all or any number of the then outstanding Series BN Preferred Shares upon payment in cash of $25.00 for each share so redeemed together with all declared and unpaid dividends to the date fixed for redemption. On any other date after August 24, 2021 that is not a Series BN Conversion Date, on not more than 60 nor less than 30 days notice, the Bank may, at its option, redeem all or any part of the then outstanding Series BN Preferred Shares upon payment in cash of $25.50 for each share so redeemed together with all declared and unpaid dividends to the date fixed for redemption.

9 NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BN Conversion Trigger Event: Upon the occurrence of a Trigger Event (as defined below), each outstanding Series BN Preferred Share will be automatically and immediately converted, on a full and permanent basis, without the consent of the holder thereof, into a number of fully-paid and freely-tradable common shares of the Bank ( Common Shares ) determined in accordance with the Conversion Formula set out below (the Conversion ). Trigger Event has the meaning set out in the Office of the Superintendent of Financial Institutions Canada ( OSFI ) Guideline for Capital Adequacy Requirements (CAR), Chapter 2 Definition of Capital, effective January 2013, as such term may be amended or superseded by OSFI from time to time, which term currently provides that each of the following constitutes a Trigger Event: Conversion Formula: (a) (b) 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 the Series BN Preferred Shares and all other contingent instruments issued by the Bank 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. The Conversion Formula is: (Multiplier x Share Value) Conversion Price = number of Common Shares into which each Series BN Preferred Share shall be converted. The Multiplier is 1.0. The Share Value of a Series BN Preferred Share is $25.00 plus declared and unpaid dividends on such Series BN Preferred Share. The Conversion Price of each Series BN Preferred Share is the greater of (i) a floor price of $5.00, and (ii) the Current Market Price of the Common Shares. Current Market Price of the Common Shares means the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (the TSX ), if such shares are then listed on the TSX, for the 10 consecutive

10 NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BN trading days ending on the trading day preceding the date of the Trigger Event. If the Common Shares are not then listed on the Toronto Stock Exchange, 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 of the Bank. Prohibited Owners: Conversion Risk Factor: Rights on Liquidation: The terms and conditions of the Series BN Preferred Shares will include mechanics to allow the Bank to attempt to facilitate a sale of Common Shares on behalf of those holders of Series BN Preferred Shares who are prohibited pursuant to certain restrictions set out therein or pursuant to the Bank Act (Canada) from taking delivery of Common Shares issued upon a Trigger Event. The net proceeds received from the Bank from the sale of any such Common Shares will be divided among the applicable persons in proportion to the number of Common Shares that would otherwise have been delivered to them upon the Conversion after deducting the costs of sale and any applicable withholding taxes. There is no certainty of the value of the Common Shares received upon conversion. The value of the Common Shares received could be significantly less than face value of the Series BN Preferred Shares. In the event of the liquidation, dissolution or winding-up of the Bank, where a Trigger Event has not occurred, the holders of the Series BN Preferred Shares will be entitled to receive $25.00 per share together with all dividends declared and unpaid to the date of payment before any amount will be paid or any assets of the Bank distributed to the holders of any shares ranking junior to the Series BN Preferred Shares. The holders of the Series BN Preferred Shares will not be entitled to share in any further distribution of the assets of the Bank. If a Trigger Event has occurred, the rights on liquidation described above will not be relevant since all Series BN Preferred Shares will have been converted into Common Shares which will rank on parity with all other Common Shares of the Bank. Priority: Each series of First Preferred Shares of the Bank ranks on parity with First Preferred Shares of every other series and is entitled to preference over the Common Shares and over any other shares of the Bank ranking junior to the First Preferred Shares with respect to the payment of dividends and upon any distribution of assets in the event of liquidation, dissolution or winding-up of the Bank, where a Trigger Event has not occurred. If a Trigger Event occurs, the priority of the Series BN Preferred Shares described above will not be relevant since all Series BN Preferred Shares will be converted into Common Shares which will rank on parity with all other

11 NON-CUMULATIVE FIRST PREFERRED SHARES SERIES BN Common Shares of the Bank. Conversion into Another Series of Preferred Shares: Purchase for Cancellation: Voting Rights: Tax Status: Business Day: Listing: The Bank may at any time, subject to the approval of the Superintendent, give the holders of Series BN Preferred Shares the right, at their option, to convert their Series BN Preferred Shares into a new series of Tier 1 capital preferred shares on a share-for-share basis. Subject to the provisions of the Bank Act (Canada) and the consent of the Superintendent, the Bank will be entitled to purchase Series BN Preferred Shares for cancellation by private contract or in the market or by tender, at the lowest price or prices at which, in the opinion of the board of directors of the Bank, such shares are obtainable. Holders of Series BN Preferred Shares will not be entitled to receive notice of or to attend or to vote at any meeting of the shareholders of the Bank unless and until the first time at which the rights of such holders to any undeclared dividends have been extinguished. In that event, holders of Series BN Preferred Shares will be entitled to receive notice of, and to attend, meetings of shareholders at which directors are to be elected and will be entitled to one vote for each Series BN Preferred Share held. These voting rights will forthwith cease up on payment by the Bank of the first dividend on the Series BN Preferred Shares to which the holders are entitled subsequent to the time such voting rights first arose. At such time as the rights of holders to any undeclared dividends have again been extinguished, such voting rights will become effective again and so on from time to time. The Bank will elect to pay tax under Part VI.1 of the Income Tax Act (Canada) such that no Part IV.1 tax is payable by purchasers. If any action or payment is required to be taken or paid by the Bank or any matter, consequence or other thing is provided to occur, in respect of the Series BN Preferred Shares, on a day that is not a business day, then such action or payment will be taken or made and such matter, consequence or other thing will occur on the immediately following business day unless the Bank determines to take such action or make such payment on the immediately preceding business day. Application will be made to list the Series BN Preferred Shares on the TSX. Application will also be made to list the underlying Common Shares that would be issued upon a Conversion on the TSX. NOT FOR DISTRIBUTION IN THE UNITED STATES The securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ), or any state securities laws. The securities may not be offered or sold within the United States or to or for the account or benefit of U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act.