NBC Deposit Notes NBC Canadian Blue Chip III Deposit Notes Series 58 SALES PERIOD: December 16, 2014 to January 13, 2015 at 4 p.m. ISSUANCE DATE: On or about January 20, 2015 BANK EARLY REDEMPTION: On or about April 22, 2019 MATURITY DATE: On or about July 20, 2023 INVESTMENT HIGHLIGHTS 8.5-year term Principal Protection Principal fully protected at maturity by National Bank of Canada. Variable Return The return at maturity, if any, is linked to the price performance of a Portfolio composed of the common shares of 20 Canadian companies. May be called for redemption by National Bank of Canada four years and three months after the Issuance Date at $133.32 per Deposit Note for an annual compounded rate of return of approximately 7.00% Bank Early Redemption Day. The Share Return is a price return, and will not take into account dividends paid in respect of the Shares (approximately 3.37% annually as of December 8, 2014). Liquidity A daily secondary market is maintained subject to availability and to early trading charges within the first 720 days including and following the Issuance Date, up to $6.00 per Deposit Note. A Holder who sells Deposit Notes prior to maturity may receive less than the Initial Deposit Amount per Deposit Note. Eligibility Eligible for all types of accounts (RRSP, RRIF, DPSP, RESP, RDSP and TFSA). $1,000 minimum subscription (10 Deposit Notes). The Deposit Notes are not conventional fixed income investments. There are risks associated with this investment. Investors should read the Information Statement dated December 16, 2014 for more detailed risk disclosure and complete information Deposit Notes. Please refer to our website for the list of the different terms and conditions, if any, of previous series issued by the Bank. Where an investor purchases Deposit Notes, by phone or in person, the advisor must at the time verbally highlight certain information in respect of the Deposit Notes contained under the heading Oral Disclosure for Sales in Person or by Telephone. FUNDSERV CODE: NBC1636 l Should you have any questions, do not hesitate to contact us.
2 Target Investors Investors looking to participate in the growth of a diversified portfolio composed of the common shares of 20 Canadian companies; Investors looking to diversify their portfolio across different sectors in the Canadian equity markets through large market capitalization companies. Information technology and health care sectors are not represented; Investors seeking protection of their capital at maturity; Investors who, in order to benefit from the Deposit Notes structure and capital protection, are prepared to waive the aggregate dividend yield provided by each Share, representing approximately 28.65% (which represents an annual return of approximately 3.37%) over the term, assumption that the dividend yield remains constant and that the dividends are not reinvested; Investors seeking the potential for higher returns in a low interest rate environment; Investors with a long-term investment horizon who are prepared to hold the Deposit Notes to maturity; Investors who do not need or do not expect certainty of return and can accept seeing the value of their investment in the Deposit Notes diminish over time due to inflation; and Investors who are prepared to assume the risks as described in the "Risk Factors" section of the Information Statement. Portfolio Return Calculation The Deposit Notes provide a return at the 8.5-year term maturity that is linked to the price performance of a Portfolio composed of the common shares of 20 Canadian companies. The Deposit Notes are callable for redemption four years and three months after the Issuance Date at $133.32 per Deposit Note for an annual compounded rate of return of approximately 7.00%. If the Bank does not exercise its right to call the Deposit Notes, the Variable Return at maturity is unlimited. If the Bank, at its sole discretion, exercises this option, Holders will not receive any return based performance of the Portfolio. On the Maturity Payment Date, Holders will be entitled to receive, in respect of each Deposit Note held, repayment of their Initial Deposit Amount. In addition, if the Portfolio Return at maturity is positive, Holders will be entitled to receive a Variable Return equal to the product of $100 and the Portfolio Return. If the Portfolio Return is negative or nil at maturity, no Variable Return will be paid. The Portfolio Return is the arithmetic average of the Share Returns of the 20 Shares over the period starting Issuance Date of the Deposit Notes and ending Valuation Date. The return of each Share, will be that of the Share s percentage gain or loss measured from its closing price Issuance Date to its closing price Valuation Date. The Share Return is a price return, and will not take into account dividends paid in respect of the Shares (which represents an annual return of approximately 3.37% as of December 8, 2014). Portfolio Exposure to 20 Canadian Companies BCE Inc. Power Corporation of Canada Bank of Montreal Rogers Communications Inc., Class B Canadian Imperial Bank of Commerce Canadian National Railway Company Encana Corporation Enbridge Inc. Fortis Inc. Husky Energy Inc. Loblaw Companies Limited The Jean Coutu Group (PJC) Inc., Class A Saputo Inc. Shaw Communications Inc., Class B Sun Life Financial Inc. TELUS Corporation Teck Resources Limited, Class B The Toronto-Dominion Bank Thomson Reuters Corporation TransCanada Corporation Sector Diversification Financial services 25 % Energy 20 % Consumer staples 15 % Telecommunication services 15 % Consumer discretionary 10 % Industrials 5 % Materials 5 % Utilities 5 %
3 Scenario analysis These examples are included for illustration purposes only. The amounts used are hypothetical and are not forecasts or projections of the price performance of the Portfolio or the Deposit Notes. No assurance can be given that the results shown in these examples will be achieved. Hypothetical example of a positive variable return Hypothetical example of a nil Variable Return The following table is based assumption that most of the price returns for the Shares will increase during the 8.5-year term. The following table is based assumption that most of the price returns for the Shares will decrease during the 8.5-year term. Share Issuance Valuation Share Return Common shares of BCE Inc. 48.14 69.47 44.31% Common shares of Bank of Montreal 74.85 101.75 35.94% Imperial Bank of Commerce 95.21 174.12 82.88% National Railway Company 59.97 142.66 137.89% Common shares of Encana Corporation 24.58 45.44 84.87% Common shares of Enbridge Inc. 51.10 125.59 145.77% Common shares of Fortis Inc. 32.08 60.55 88.76% Common shares of Husky Energy Inc. 35.14 120.30 242.35% Common shares of Loblaw Companies Limited 45.58 36.78-19.30% Common shares of The Jean Coutu Group (PJC) Inc. - Class A 21.69 41.54 91.51% Common shares of Power Corporation of Canada 29.79 76.81 157.85% Common shares of Rogers Communications Inc. - Class B 44.66 64.95 45.44% Common shares of Saputo Inc. 55.11 44.93-18.47% Common shares of Shaw Communications Inc. - Class B 25.96 32.45 24.99% Common shares of Sun Life Financial Inc. 35.92 53.65 49.37% Common shares of TELUS Corporation 38.10 72.07 89.16% Common shares of Teck Resources Limited - Class B 24.56 110.99 351.92% Common shares of The Toronto-Dominion Bank 50.86 71.91 41.39% Common shares of Thomson Reuters Corporation 37.10 39.87 7.47% Common shares of TransCanada Corporation 51.30 92.70 80.70% Arithmetic average of the Share Returns 88.24% The Bank exercises its right to redeem NO Maturity Redemption Amount payable $188.24 In this example, the arithmetic average of the Share Returns of the 20 Shares is 88.24%. If the Bank does not exercise its right to call the Deposit Notes prior to maturity, the Variable Return will be $88.24 and the Maturity Redemption Amount payable Maturity Payment Date will be $188.24 (approximately 7.73% compounded annually over 8.5 years). Share Issuance Valuation Share Return Common shares of BCE Inc. 48.14 20.58-57.25% Common shares of Bank of Montreal 74.85 118.49 58.30% Imperial Bank of Commerce 95.21 67.26-29.36% National Railway Company 59.97 29.26-51.21% Common shares of Encana Corporation 24.58 33.62 36.77% Common shares of Enbridge Inc. 51.10 29.08-43.09% Common shares of Fortis Inc. 32.08 15.62-51.31% Common shares of Husky Energy Inc. 35.14 42.92 22.15% Common shares of Loblaw Companies Limited 45.58 60.55 32.85% Common shares of The Jean Coutu Group (PJC) Inc. - Class A 21.69 10.73-50.54% Common shares of Power Corporation of Canada 29.79 21.92-26.41% Common shares of Rogers Communications Inc. - Class B 44.66 32.64-26.92% Common shares of Saputo Inc. 55.11 26.12-52.60% Common shares of Shaw Communications Inc. - Class B 25.96 11.96-53.91% Common shares of Sun Life Financial Inc. 35.92 29.35-18.30% Common shares of TELUS Corporation 38.10 25.57-32.89% Common shares of Teck Resources Limited - Class B 24.56 47.25 92.38% Common shares of The Toronto-Dominion Bank 50.86 18.96-62.72% Common shares of Thomson Reuters Corporation 37.10 31.81-14.25% Common shares of TransCanada Corporation 51.30 25.60-50.09% Arithmetic average of the Share Returns -18.92% The Bank exercises its right to redeem NO Maturity Redemption Amount payable $100.00 In this example, the arithmetic average of the Share Returns of the 20 Shares is -18.92%. If the Bank does not exercise its right to call the Deposit Notes prior to maturity, the Variable Return will be nil and the Maturity Redemption Amount payable Maturity Payment Date will be $100 because the Deposit Notes are principal-protected at maturity.
4 Scenario Analysis These examples are included for illustration purposes only. The amounts used are hypothetical and are not forecasts or projections of the price performance of the Portfolio or the Deposit Notes. No assurance can be given that the results shown in these examples will be achieved. Hypothetical graph showing a scenario of a Bank Early Redemption The following graph is based assumption that most of the price returns for the Shares will increase during the first part of the term and that the Bank will call for redemption, Bank Early Redemption Day, all the Deposit Notes. Portfolio Return Bank Early Redemption Day On the Bank Early Redemption Day, the Bank, at its sole discretion, will be entitled to redeem all of the Deposit Notes then outstanding at a price of $133.32 per Deposit Note (a 33.32% premium over the Initial Deposit Amount), representing an annual compounded rate of return of approximately 7.00% as of the Bank Early Redemption Day. If the Bank, at its sole discretion, exercises this option, Holders will not receive any return based performance of the Portfolio.
5 Risk Factors Prospective investors should carefully consider all of the information set forth in the Information Statement dated December 16, 2014 and, in particular, should evaluate the specific risk factors set forth under Risk Factors for a discussion of certain risks involved in evaluating an investment in the Deposit Notes. Prospective investors that are not prepared to accept the following risks should not invest in the NBC Canadian Blue Chip III Deposit Notes. Such risk factors include, without limitation, the following: Risk factors. Such risk factors include, without limitation, the following: Suitability for investment; Deposit Notes may not be a suitable investment for some investors; Uncertain return until maturity; No guarantee that the Deposit Notes will show any return; Deposit Notes are linked only to the price performance of the Shares; Share Return will not reflect the full appreciation in the Shares when including dividends; Holders have no ownership interest in the Shares; No guarantee of a secondary market and possible illiquidity of any developing secondary market; Return Deposit Notes will be limited upon a Bank Early Redemption; Deposit Notes could be redeemed prior to maturity under a Reimbursement Under Special Circumstances; Postponement of the Valuation Date may affect the payment at maturity; Payments at maturity of the Initial Deposit Amount and of the Variable Return (if any) are unsubordinated and unsecured obligations of the Bank and are dependent upon creditworthiness of the Bank; Deferred Payment; Deposit Notes will not be insured under the Canada Deposit Insurance Corporation Act; Deposit Notes may not be eligible for protection under the Canadian Investor Protection Fund or any other deposit insurance regime; Conflict of interest may affect the Calculation Agent, the Agent and the Market Maker; Hedging transactions may affect the Shares; Deposit Notes are not qualified by prospectus; and Taxation. Canada Revenue Agency is currently reviewing its administrative policies and assessing practices with regard to instruments such as the Deposit Notes. Risks relating to the Shares, including: Trading prices; Exposure to equities; Potential replacement of the Shares; Neither the Bank nor the Agent make any representation or warranty as to the accuracy or completeness of the information regarding the Shares. Investors should read the Information Statement for complete details of risk factors. Suitability Considerations and Guidelines An investment in the NBC Canadian Blue Chip III Deposit Notes, Series 58 is not suitable for all investors and even if suitable, investors should consider what part the NBC Canadian Blue Chip III Deposit Notes, Series 58 should serve in an overall investment plan. The Information Statement includes a summary of various suitability considerations and guidelines. You are encouraged to read the Information Statement carefully. The statements contained herein are based upon information which we believe to be reliable but we cannot represent that they are complete or accurate. The complete information related to this issue of the Deposit Notes will be contained in an Information Statement which will be sent to investors prior to the closing date. Capitalized terms used herein and not otherwise defined have the meaning ascribed thereto in the Information Statement of the Deposit Notes. This memorandum is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy the Deposit Notes referred to herein. The NBC Canadian Blue Chip III Deposit Notes are principal protected at maturity. Variation in the Portfolio Return will have a direct impact return payable. It is possible that no return will be paid. Deposit Notes are not suitable for all types of investors. An investment in the Deposit Notes is subject to a number of risk factors. Potential purchasers should consult the Information Statement before investing in the Deposit Notes. The Deposit Notes will not be insured under the Canada Deposit Insurance Corporation Act. Trademark of National Bank of Canada