Calculation of Registration Fee
|
Title of Each Class of Securities Offered
|
Maximum Aggregate Offering Price(1)
|
Amount of Registration Fee(2)
|
£400,000,000 4.500% Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes
|
$552,680,000
|
$60,297.39
|
Total
|
$552,680,000
|
$60,297.39
|
(1) £400,000,000
aggregate principal amount of Reset Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes will be issued.
The Maximum Aggregate Offering Price is based on the latest pound sterling/U.S. dollar exchange rate of £1.00/U.S. $1.3817,
as announced by the U.S. Federal Reserve Board on March 5, 2021.
(2) Calculated
in accordance with Rule 457(r) under the Securities Act of 1933, as amended.
|
Filed pursuant to Rule 424(b)(5)
Registration No. 333-251220
PROSPECTUS SUPPLEMENT
(to prospectus dated December 9, 2020)
NatWest Group plc
£400,000,000 4.500% Reset Perpetual
Subordinated Contingent Convertible Additional Tier 1 Capital Notes
The £400,000,000 4.500% reset
perpetual subordinated contingent convertible additional tier 1 capital notes (the “Contingent Capital Notes”)
are perpetual securities with no maturity date. From and including March 12, 2021 (the “Issue Date”) to but
excluding September 30, 2028 (the “First Reset Date”) the Contingent Capital Notes will bear interest initially
at a rate equal to 4.500% per annum. From and including the First Reset Date and each fifth anniversary thereafter (each a
“Reset Date”) to but excluding the next succeeding Reset Date, the applicable per annum interest rate will be
equal to the sum of the applicable Reference Bond Rate (as defined herein) on the relevant Reset Determination Date and
3.992%, converted to a quarterly rate in accordance with market convention (rounded to three decimal places, with 0.005 being
rounded down). The interest rate following any Reset Date may be less than the initial interest rate and/or the interest rate
that applies immediately prior to such Reset Date. Subject to the conditions as described further below, we will pay interest
on the Contingent Capital Notes quarterly in arrear on March 31, June 30, September 30 and December 31 of each year (each an
“Interest Payment Date”), commencing on March 31, 2021 (short first coupon).
We may redeem the Contingent Capital Notes,
in whole but not in part, at 100% of their principal amount plus accrued but unpaid interest to but excluding the date fixed for
redemption, excluding any interest which has been cancelled or deemed cancelled in accordance with the terms of the Contingent
Capital Notes (i) upon the occurrence of certain tax events or (ii) upon the occurrence of certain regulatory events, subject,
in each case, to the conditions described in this prospectus supplement. The Contingent Capital Notes will also be redeemable in
whole but not in part, at our option and in our sole discretion on any day falling in the period commencing on (and including)
March 31, 2028 (the “First Call Date”) and ending on (and including) the First Reset Date and on any Reset Date thereafter
at 100% of their principal amount, together with any accrued and unpaid interest on the Contingent Capital Notes, excluding any
interest which has been cancelled or deemed to be cancelled in accordance with the terms of the Contingent Capital Notes, to but
excluding the date fixed for redemption. Any such redemption shall, amongst other requirements, be subject to a requirement to
give notice to the UK Prudential Regulation Authority (“PRA”) and/or such other body having primary supervisory authority
with respect to the prudential regulation of our business to the extent required, as described in this prospectus supplement.
The Contingent Capital Notes will constitute
our direct, unsecured and subordinated obligations, ranking pari passu without any preference among themselves. The rights
and claims of the holders and beneficial owners in respect of, or arising from, the Contingent Capital Notes (including any damages,
if payable) will be subordinated to the claims of our Senior Creditors.
The Contingent Capital Notes are not
intended to be offered, sold or otherwise made available and should not be offered, sold or otherwise made available to retail
clients in the EEA, as defined in the rules set out in Directive 2014/65/EU, or in the United Kingdom as defined in point (8) of
Article 2 of Regulation (EU) No 2017/565 as it forms part of the domestic law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018 (“EUWA”), in each case, as amended or replaced from time to time. Prospective investors are referred
to the section headed “Important Information–Restrictions on Marketing and Sales to Retail Investors”
on page S-4 of this prospectus supplement for further information.
As described in this prospectus supplement,
upon the occurrence of a Conversion Trigger Event (as defined herein), an Automatic Conversion (as defined herein) will occur and
all of our obligations under the Contingent Capital Notes shall be irrevocably and automatically released in consideration of our
issuance and delivery of the Settlement Shares (as defined herein).
Notwithstanding any other agreements,
arrangements, or understandings between us and any holder or beneficial owner of the Contingent Capital Notes, by its acquisition
of the Contingent Capital Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges, accepts, agrees
to be bound by and consents to the exercise of any UK bail-in power (as defined herein) by the relevant UK authority that may result
in (i) the reduction or cancellation of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes;
(ii) the conversion of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes into ordinary
shares or other securities or other obligations of NatWest Group plc or another person; and/or (iii) the amendment of the amount
of interest due on the Contingent Capital Notes, or the dates on which interest becomes payable, including by suspending payment
for a temporary period; which UK bail-in power may be exercised by means of variation of the terms of the Contingent Capital Notes
solely to give effect to the exercise by the relevant UK authority of such UK bail-in power. Each holder and beneficial owner of
the Contingent Capital Notes further acknowledges and agrees that the rights of the holders and/or beneficial owners under the
Contingent Capital Notes are subject to, and will be varied, if necessary, solely to give effect to, the exercise of any UK bail-in
power by the relevant UK authority.
By its acquisition of Contingent Capital
Notes, each holder (including each beneficial holder) of the Contingent Capital Notes, to the extent permitted by the Trust Indenture
Act of 1939 as amended (the “Trust Indenture Act”), waives any and all claims against The Bank of New York Mellon acting
through its London Branch as trustee (the “Trustee”) for, agrees not to initiate a suit against the Trustee in respect
of, and agrees that the Trustee shall not be liable for, any action that the Trustee takes, or abstains from taking, in either
case in accordance with the exercise of the UK bail-in power by the relevant UK authority with respect to the Contingent Capital
Notes.
Application has been made to the London
Stock Exchange plc (the “LSE”) for the Contingent Capital Notes to be admitted to trading on the International Securities
Market (the “ISM”). Admission to trading on the ISM is expected to begin within 30 days of the initial delivery of
the Contingent Capital Notes. The ISM is a market designated for professional investors. Securities admitted to trading on the
ISM are not admitted to the Official List of the UK Financial Conduct Authority. The London Stock Exchange has not approved or
verified the contents of the Admission Particulars.
The Contingent Capital Notes are not deposit
liabilities of NatWest Group plc, or any of its subsidiaries and are not covered by the United Kingdom Financial Services Compensation
Scheme or insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United Kingdom, the
United States or any other jurisdiction.
Investing in the Contingent Capital
Notes involves risks. See “Risk Factors” beginning on page S-30 and as incorporated by reference herein.
Neither the US Securities and Exchange
Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon
the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a
criminal offence.
|
Price
to Public
|
Underwriting
Discount
|
Proceeds
to us
|
Per Contingent Capital Note
|
100%
|
0.675%
|
99.325%
|
Total Contingent Capital Notes
|
£400,000,000
|
£2,700,000
|
£397,300,000
|
The initial price to the public set forth
above does not include accrued interest, if any. Interest on the Contingent Capital Notes will accrue from March 12, 2021 and must
be paid by the purchaser if the Contingent Capital Notes are delivered thereafter.
The Contingent Capital Notes will be issued
in registered form in denominations of £200,000 and integral multiples of £1,000 in excess thereof. We expect that
the Contingent Capital Notes will be ready for delivery through the book-entry facilities of Clearstream Banking, S.A. (“Clearstream,
Luxembourg”) and Euroclear Bank SA/NV (“Euroclear” and together with Clearstream, Luxembourg, the “Clearing
Systems”) on or about March 12, 2021.
Global Co-ordinator
and Sole Bookrunner
NatWest Markets
Joint Lead Managers
Goldman Sachs International
|
RBC Capital Markets
|
Prospectus Supplement dated March 9, 2021
table
of contents
____________________
Page
Prospectus Supplement
NOTICE TO INVESTORS
|
S-1
|
PROHIBITION OF SALES TO UNITED KINGDOM RETAIL INVESTORS
|
S-5
|
PROHIBITION OF SALES TO EEA RETAIL INVESTORS
|
S-6
|
ABOUT THIS PROSPECTUS SUPPLEMENT
|
S-7
|
INCORPORATION OF INFORMATION BY REFERENCE
|
S-7
|
FORWARD-LOOKING STATEMENTS
|
S-9
|
SUMMARY
|
S-10
|
RISK FACTORS
|
S-30
|
RECENT DEVELOPMENTS
|
S-59
|
USE OF PROCEEDS
|
S-60
|
CAPITALIZATION OF THE GROUP
|
S-61
|
DESCRIPTION OF THE CONTINGENT CAPITAL NOTES
|
S-62
|
UK AND US FEDERAL TAX CONSEQUENCES
|
S-101
|
UNDERWRITING/CONFLICTS OF INTEREST
|
S-108
|
LEGAL OPINIONS
|
S-115
|
EXPERTS
|
S-116
|
Prospectus
ABOUT THIS PROSPECTUS
|
1
|
USE OF PROCEEDS
|
1
|
THE ROYAL BANK OF SCOTLAND GROUP PLC
|
1
|
DESCRIPTION OF DEBT SECURITIES
|
2
|
DESCRIPTION OF DOLLAR PREFERENCE SHARES
|
10
|
DESCRIPTION OF DOLLAR PREFERENCE SHARE AMERICAN DEPOSITARY SHARES
|
18
|
DESCRIPTION OF CONTINGENT CONVERTIBLE SECURITIES
|
23
|
DESCRIPTION OF CERTAIN PROVISIONS RELATING TO DEBT SECURITIES AND CONTINGENT CONVERTIBLE SECURITIES
|
29
|
DESCRIPTION OF ORDINARY SHARES
|
35
|
DESCRIPTION OF ORDINARY SHARE AMERICAN DEPOSITARY SHARES
|
41
|
DESCRIPTION OF RIGHTS TO SUBSCRIBE FOR ORDINARY SHARES
|
47
|
PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
|
47
|
LEGAL OPINIONS
|
48
|
EXPERTS
|
48
|
ENFORCEMENT OF CIVIL LIABILITIES
|
49
|
WHERE YOU CAN FIND MORE INFORMATION
|
49
|
INCORPORATION OF DOCUMENTS BY REFERENCE
|
49
|
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
|
50
|
____________________
We have not, and the Underwriters have
not, authorised anyone to provide any information other than that contained or incorporated by reference in this prospectus supplement
and the accompanying prospectus or in any free writing prospectus prepared by us or on our behalf or to which we have referred
you. We and the Underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information
that others may give you. We are not, and the Underwriters are not, making an offer to sell these securities in any state or jurisdiction
where the offer or sale is not permitted. You should assume that the information contained in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein is accurate only as of their respective dates.
NOTICE
TO INVESTORS
Agreements and acknowledgments of
investors, including holders and beneficial owners
Interest Cancellation and Automatic
Conversion
As described in this prospectus supplement,
the terms of the Contingent Capital Notes provide that interest on the Contingent Capital Notes will be due and payable only at
our full discretion, and we will have sole and absolute discretion at all times and for any reason to cancel (in whole or in part)
any interest payment that would otherwise be payable on any Interest Payment Date. As described herein, the terms of the Contingent
Capital Notes also provide for circumstances under which we will be restricted from making an interest payment (in whole or in
part) on the Contingent Capital Notes on an Interest Payment Date, and the interest payable in respect of any such Interest Payment
Date shall be deemed cancelled (in whole or in part) and therefore not due and payable. If we elect to make a payment of a portion,
but not all, of such interest payment, such non-payment shall evidence our exercise of discretion and cancel such interest payment,
or the portion of such interest payment not paid, and accordingly such interest payment, or portion thereof, shall not be or become
due and payable. Interest will only be due and payable on an Interest Payment Date to the extent it is not cancelled or deemed
cancelled in accordance with the terms of the Contingent Capital Notes and as further described herein.
As the Contingent Capital Notes are perpetual
and have no fixed maturity or fixed redemption date, a holder may not receive any payments with respect to the Contingent Capital
Notes as we are not required to pay the principal amount of the Contingent Capital Notes at any time prior to a Winding-up or Administration
Event (as defined herein) and we will have the sole and absolute discretion at all times and for any reason to cancel in whole
any interest payment.
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner acknowledges and agrees that (1) interest is payable solely at our discretion, and
no amount of interest shall become due and payable in respect of the relevant interest period to the extent that it has been cancelled
by us (in whole or in part) at our sole discretion and/or deemed cancelled (in whole or in part); and (2) a cancellation or
deemed cancellation of interest (in each case, in whole or in part) in accordance with the terms of the Indenture and the Contingent
Capital Notes shall not constitute a default in payment or otherwise under the terms of the Contingent Capital Notes or the Indenture
(as defined below). Interest will only be due and payable on an Interest Payment Date to the extent it is not cancelled or deemed
cancelled (in each case, in whole or in part) in accordance with the provisions described herein. Any interest cancelled or deemed
cancelled (in each case, in whole or in part) in the circumstances described above shall not be due and shall not accumulate or
be payable at any time thereafter, and holders and beneficial owners shall have no rights thereto or to receive any additional
interest or compensation as a result of such cancellation or deemed cancellation of interest in respect of the Contingent Capital
Notes. We may use such cancelled payments without restriction to meet our obligations as they fall due.
If a Conversion Trigger Event occurs, then
an Automatic Conversion will occur on the Conversion Date, at which point all of our obligations under the Contingent Capital Notes
shall be irrevocably and automatically released in consideration of our issuance and delivery of the Settlement Shares to the Settlement
Share Depository (or other relevant recipient as described herein), and under no circumstances shall such released obligations
be reinstated. The Settlement Shares shall initially be registered in the name of the Settlement Share Depository (which shall
hold the Settlement Shares on behalf of the holders of the Contingent Capital Notes) or the relevant recipient in accordance with
the terms of the Contingent Capital Notes. As more fully described herein, we may elect, in our sole and absolute discretion that
a Settlement Shares Offer be made by the Settlement Share Depository to all or some of our existing shareholders. The realisable
value of any Settlement Shares received by a holder of the Contingent Capital Notes following an Automatic Conversion may be significantly
less than the Conversion Price (as defined herein) of £1.754 initially and holders of the Contingent Capital Notes could
lose all or part of their investment in the Contingent Capital Notes as a result of the Automatic Conversion.
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner shall be deemed to have (i) agreed to all the terms and conditions of the Contingent Capital
Notes, including, without limitation, those related to (x) Automatic Conversion following the Conversion Trigger Event and
(y) the appointment of the Settlement Share Depository, the issuance of the Settlement Shares to the Settlement Share Depository
(or to the relevant recipient in accordance with the terms of the Contingent Capital Notes) and the potential sale of the Settlement
Shares pursuant
to a Settlement Shares Offer, and acknowledged
that such events in (x) and (y) may occur without any further action on the part of the holders or beneficial owners of the Contingent
Capital Notes or the Trustee, (ii) agreed that effective upon, and following, the Automatic Conversion, no amount shall be due
and payable to the holders or beneficial owners of the Contingent Capital Notes, and our liability to pay any such amounts (including
the principal amount of, or any interest in respect of, the Contingent Capital Notes) shall be automatically released, and the
holders and beneficial owners shall not have the right to give a direction to the Trustee with respect to the Conversion Trigger
Event and any related Automatic Conversion, (iii) waived, to the extent permitted by the Trust Indenture Act, any claim against
the Trustee arising out of its acceptance of its trusteeship under, and the performance of its duties, powers and rights in respect
of, the Indenture and in connection with the Contingent Capital Notes, including, without limitation, claims related to or arising
out of or in connection with the Conversion Trigger Event and/or any Automatic Conversion and (iv) authorised, directed and requested
the Clearing Systems and any direct participant in the Clearing Systems or other intermediary through which it holds such Contingent
Capital Notes to take any and all necessary action, if required, to implement the Automatic Conversion without any further action
or direction on the part of such holder or beneficial owner or the Trustee.
UK bail-in power
Notwithstanding any other agreements, arrangements,
or understandings between us and any holder or beneficial owner of the Contingent Capital Notes, by its acquisition of the Contingent
Capital Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges, accepts, agrees to be bound by and
consents to the exercise of any UK bail-in power (as defined below) by the relevant UK authority that may result in (i) the reduction
or cancellation of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes; (ii) the conversion
of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes into ordinary shares or other securities
or other obligations of NatWest Group plc or another person; and/or (iii) the amendment of the amount of interest due on the Contingent
Capital Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; which UK
bail-in power may be exercised by means of variation of the terms of the Contingent Capital Notes solely to give effect to the
exercise by the relevant UK authority of such UK bail-in power. Each holder and beneficial owner of the Contingent Capital Notes
further acknowledges and agrees that the rights of the holders and/or beneficial owners under the Contingent Capital Notes are
subject to, and will be varied, if necessary, solely to give effect to, the exercise of any UK bail-in power by the relevant UK
authority.
For these purposes, a “UK bail-in
power” is any write-down, conversion, transfer, modification or suspension power existing from time to time under any laws,
regulations, rules or requirements relating to the resolution of banks, banking group companies, credit institutions and/or investment
firms incorporated in the United Kingdom in effect and applicable in the United Kingdom to the Issuer or other members of the Group
(as defined herein), including but not limited to any such laws, regulations, rules or requirements which are implemented, adopted
or enacted in the United Kingdom within the context of the UK resolution regime under the Banking Act 2009, as the same has been
or may be amended from time to time (whether pursuant to the UK Financial Services (Banking Reform) Act 2013, secondary legislation
or otherwise, the “Banking Act”), pursuant to which any obligations of a bank, banking group company, credit institution
or investment firm or any of its affiliates can be reduced, cancelled, modified, transferred and/or converted into shares or other
securities or obligations of the obligor or any other person (or suspended for a temporary period) or pursuant to which any right
in a contract governing such obligations may be deemed to have been exercised. A reference to the “relevant UK authority”
is to any authority with the ability to exercise a UK bail-in power.
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner of the Contingent Capital Notes, to the extent permitted by the Trust Indenture Act of
1939 as amended (the “Trust Indenture Act”), waives any and all claims against the Trustee for, agrees not to initiate
a suit against the Trustee in respect of, and agrees that the Trustee shall not be liable for, any action that the Trustee takes,
or abstains from taking, in either case in accordance with the exercise of the UK bail-in power by the relevant UK authority with
respect to the Contingent Capital Notes.
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner shall also be deemed to have (i) consented to the exercise of any UK bail-in power as it
may be imposed without any prior notice by the relevant UK authority of its decision to exercise such power with respect to the
Contingent Capital Notes and (ii) authorised, directed and requested the Clearing Systems and any direct participant in the Clearing
Systems or other intermediary through which it holds such Contingent Capital Notes to take any and all necessary action, if required,
to implement the exercise of any UK bail-in
power with respect to the Contingent Capital Notes as it may be imposed, without any further action or direction on the part of
such holder or beneficial owner or the Trustee.
IMPORTANT
INFORMATION—Restrictions on Marketing and Sales to Retail Investors
Prohibition on marketing and sales to retail
investors
The Contingent Capital Notes are complex
financial instruments and are not a suitable or appropriate investment for all investors. In some jurisdictions, regulatory authorities
have adopted or published laws, regulations or guidance with respect to the offer or sale of securities such as the Contingent
Capital Notes to retail investors.
In particular, in June 2015, the UK Financial
Conduct Authority (the “FCA”) published the Product Intervention (Contingent Convertible Instruments and Mutual Society
Shares) Instrument 2015 (as amended or replaced from time to time) (the “PI Instrument”). In addition, (i) on January
1, 2018, the provisions of Regulation (EU) No. 1286/2014 on key information documents for packaged and retail and insurance-based
investment products (“PRIIPs Regulation”) became directly applicable in all EEA member states (including the UK) and
(ii) the Markets in Financial Instruments Directive 2014/65/EU (as amended) (“MiFID II”) was required to be implemented
in EEA member states (including the UK) by January 3, 2018. Following the United Kingdom’s departure from the EEA, the PRIIPs
Regulation and Regulation (EU) No 600/2014 form part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (the
“EUWA” and the “UK PRIIPs Regulation” and “UK MiFIR” respectively.) Together with the PI Instrument,
the PRIIPs Regulation, the UK PRIIPs Regulation, MiFID II and UK MiFIR are referred to as the “Regulations”.
The Regulations set out various obligations
in relation to (i) the manufacture and distribution of financial instruments and (ii) the offering, sale and distribution of packaged
retail and insurance-based investment products and certain contingent write down or convertible securities, such as the Contingent
Capital Notes.
Potential investors in the Contingent Capital
Notes should inform themselves of, and comply with, any applicable laws, regulations or regulatory guidance with respect to any
resale of the Contingent Capital Notes (or any beneficial interests therein) including the Regulations.
In addition, in October 2018, the Hong Kong
Monetary Authority (the “HKMA”) issued guidance on enhanced investor protection measures on the sale and distribution
of debt instruments with loss-absorption features and related products (the “HKMA Circular”). Under the HKMA Circular,
debt instruments with loss absorption features, being subject to the risk of being written-down or converted to ordinary shares,
and investment products that invest mainly in, or whose returns are closely linked to the performance of such instruments (together,
“Loss Absorption Products”), are to be targeted in Hong Kong at Professional Investors only and are generally not suitable
for retail investors in either the primary or secondary markets. Potential investors in the Contingent Capital Notes should inform
themselves of, and comply with, any applicable laws, regulations or regulatory guidance with respect to any resale of the Contingent
Capital Notes (or any beneficial interests therein) including the regulations.
The Underwriters (as defined herein) (and/or
their respective affiliates) are required to comply with some or all of the Regulations and the HKMA Circular. By purchasing, or
making or accepting an offer to purchase any Contingent Capital Notes (or a beneficial interest in such Contingent Capital Notes)
from NatWest Group plc and/or the Underwriters, each investor represents, warrants, agrees with and undertakes to NatWest Group
plc and each of the Underwriters that:
|
(1)
|
it is not a retail client in the EEA (as defined in MiFID II) or in the UK (as defined in point (8) of Article 2 of Regulation
(EU) No 2017/565 as it forms part of the domestic law of the UK by virtue of the EUWA);
|
|
(2)
|
if it is in Hong Kong, it is a Professional Investor;
|
|
(3)
|
whether or not it is subject to the Regulations or
the HKMA Circular, it will not:
|
a. sell
or offer the Contingent Capital Notes (or any beneficial interest therein) to retail clients in the EEA (as defined in MiFID II)
or in the UK (as defined in point (8) of Article 2 of Regulation
(EU) No 2017/565 as it forms part
of the domestic law of the UK by virtue of the EUWA) or to retail investors in Hong Kong; or
b. communicate
(including the distribution of this prospectus supplement) or approve an invitation or inducement to participate in, acquire or
underwrite the Contingent Capital Notes (or any beneficial interest therein) where that invitation or inducement is addressed to
or disseminated in such a way that it is likely to be received by a retail client in the EEA or in the United Kingdom (within the
meaning of MiFID II) or in the UK (within the meaning of point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part
of the domestic law of the UK by virtue of the EUWA) or a customer in Hong Kong who is not a Professional Investor; and
(4) it
will at all times comply with all applicable laws, regulations and regulatory guidance (whether inside or outside the EEA or the
United Kingdom or Hong Kong) relating to the promotion, offering, distribution and/or sale of the Contingent Capital Notes (or
any beneficial interests therein), including (without limitation) MiFID II, UK MiFIR, the HKMA Circular and any other applicable
laws, regulations and regulatory guidance relating to determining the appropriateness and/or suitability of an investment in the
Contingent Capital Notes (or any beneficial interests therein) by investors in any relevant jurisdiction.
Each investor further acknowledges that:
(i) the identified target market for the Contingent Capital Notes (for the purposes of the product governance obligations in MiFID
II, or as the case may be the product governance obligations in the Product Intervention and Product Governance Sourcebook in the
FCA Handbook) is eligible counterparties and professional clients; and (ii) no key information document (KID) under the PRIIPs
Regulation or the UK PRIIPs Regulation has been prepared and therefore offering or selling the Contingent Capital Notes or otherwise
making them available to any retail investor in the EEA or as the case may be the UK may be unlawful under the PRIIPs Regulation
or the UK PRIIPs Regulation.
Where acting as agent on behalf of a disclosed
or undisclosed client when purchasing, or making or accepting an offer to purchase, any Contingent Capital Notes (or any beneficial
interests therein) from NatWest Group plc and/or the Underwriters and/or their respective affiliates the foregoing representations,
warranties, agreements and undertakings will be given by and be binding upon both the agent and its underlying client.
The investment activities of certain investors
are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should
consult its legal advisers to determine whether and to what extent: (i) the Contingent Capital Notes are legal investments for
it; (ii) the Contingent Capital Notes can be used as collateral for various types of borrowing; and (iii) other restrictions apply
to its purchase or pledge of any Contingent Capital Notes. Financial institutions should consult their legal advisers or the appropriate
regulators to determine the appropriate treatment of the Contingent Capital Notes under any applicable risk-based capital or similar
rules.
Prior to making an investment decision,
potential investors should consider carefully, in light of their own financial circumstances and investment objectives, all the
information contained in this prospectus supplement or incorporated by reference herein.
For the avoidance of doubt, the restrictions
described above do not affect the distribution of the Contingent Capital Notes in jurisdictions outside of the EEA or the UK, such
as in the United States, provided that any distribution into any jurisdiction of the EEA or into the UK complies with the Regulations.
PROHIBITION
OF SALES TO UNITED KINGDOM RETAIL INVESTORS
The Contingent Capital Notes are not intended
to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the UK. For these purposes: (a) the expression retail investor means a person who is one (or more) of the following: (i) a retail
client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European
Union (Withdrawal) Act 2018 (the “EUWA”); or (ii) a customer within the meaning of the provisions of the Financial
Services and Markets Act 2000 (as amended, the “FSMA”) and any rules or regulations made under the FSMA to implement
Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1)
of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.
Consequently no key information document
required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”)
for offering or selling the Contingent Capital Notes or otherwise making them available to retail investors in the UK has been
prepared and therefore offering or selling the Contingent Capital Notes or otherwise making them available to any retail investor
in the UK may be unlawful under the UK PRIIPs Regulation.
UK MiFIR product governance / Professional
investors and ECPs only target market
Solely for the purposes of each manufacturer’s
product approval process, the target market assessment in respect of the Contingent Capital Notes has led to the conclusion that:
(i) the target market for the Contingent Capital Notes is only eligible counterparties, as defined in the FCA Handbook Conduct
of Business Sourcebook (“COBS”), and professional clients, as defined in Regulation (EU) No 600/2014 as it forms part
of the domestic law of the UK by virtue of the EUWA (“UK MiFIR”); and (ii) all channels for distribution of the Contingent
Capital Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or
recommending the Contingent Capital Notes (a “distributor”) should take into consideration the manufacturer’s
target market assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product Governance Sourcebook
is responsible for undertaking its own target market assessment in respect of the Contingent Capital Notes (by either adopting
or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.
PROHIBITION
OF SALES TO EEA RETAIL INVESTORS
The Contingent Capital Notes are not intended
to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor
in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point
(11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended or superseded, the
“Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point
(10) of Article 4(1) of MiFID II. Consequently, no key information document required by Regulation (EU) No 1286/2014 as amended,
(the “PRIIPs Regulation”) for offering or selling the Contingent Capital Notes or otherwise making them available to
retail investors in the EEA has been prepared and therefore offering or selling the Contingent Capital Notes or otherwise making
them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
MiFID II product governance / professional
investors and eligible counterparties only target market
Solely for the purposes of each manufacturer’s
product approval process, the target market assessment in respect of the Contingent Capital Notes has led to the conclusion that:
(i) the target market for the Contingent Capital Notes is eligible counterparties and professional clients only, each as defined
in MiFID II; and (ii) all channels for distribution of the Contingent Capital Notes to eligible counterparties and professional
clients are appropriate. Any person subsequently offering, selling or recommending the Contingent Capital Notes (a “distributor”)
should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is
responsible for undertaking its own target market assessment in respect of the Contingent Capital Notes (by either adopting or
refining the manufacturers’ target market assessment) and determining appropriate distribution channels.
Singapore Securities and Futures Act
Product Classification
Solely for the purposes of its obligations
pursuant to Sections 309B(1)(a) and 309B(1)(c) of the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”),
we have determined, and hereby notify all relevant persons (as defined in Section 309A of the SFA) that the Contingent Capital
Notes are “prescribed capital markets products” (as defined in the Securities and Futures (Capital Markets Products)
Regulations 2018) and “Excluded Investment Products” (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment
Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
ABOUT THIS
PROSPECTUS SUPPLEMENT
In this prospectus supplement, we use the
following terms:
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“we”, “us”, “our”, “Issuer” and “NatWest Group plc” refer to NatWest
Group plc;
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“Group” refers to NatWest Group plc together with its subsidiaries consolidated in accordance with International
Financial Reporting Standards;
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“NWM Plc” refers to NatWest Markets Plc;
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“SEC” refers to the US Securities and Exchange Commission;
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“pound sterling”, “pounds”, “sterling”, “pence”, “£” and
“p” refer to the currency of the United Kingdom;
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“US dollar”, “dollars” and “$” refer to the currency of the United States; and
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“euro” and “€” refer to the currency of the member states of the European Union (“EU”)
that have adopted the single currency in accordance with the treaty establishing the European Community, as amended.
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INCORPORATION
OF INFORMATION BY REFERENCE
We are subject to the informational requirements
of the U.S. Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and in accordance therewith, we file reports and other information with the SEC. The SEC’s
website, at http://www.sec.gov, and our website, at http://www.natwestgroup.com, contain reports and other information in electronic
form that we have filed. Except for SEC filings incorporated by reference in this prospectus supplement and the accompanying prospectus,
none of the information on or that can be accessed through our website is part of this prospectus supplement or the accompanying
prospectus. You may also request a copy of any filings referred to below (other than exhibits not specifically incorporated by
reference) at no cost, by contacting us at Gogarburn, P.O. Box 1000, Edinburgh EH12 1HQ, Scotland, telephone +44 (0)131 626 0000.
The SEC allows us to incorporate by reference
much of the information we file with them. This means:
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documents incorporated by reference are considered part of this prospectus supplement;
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we can disclose important information to you by referring you to these documents; and
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information that we file with the SEC will automatically update and modify or supersede some of the information included or
incorporated by reference into this prospectus supplement.
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This means that you must look at all of
the SEC filings that we incorporate by reference to determine if any of the statements in this prospectus supplement or in any
document previously incorporated by reference have been modified or superseded. The accompanying prospectus lists documents that
are incorporated by reference into this prospectus supplement. In addition to the documents listed in the accompanying prospectus,
we incorporate by reference the following reports, except for any information contained on websites linked in such reports:
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our announcement on Form 6-K relating to NatWest Group plc’s outcome of the strategic review into Ulster Bank in the
Republic of Ireland, filed with the SEC on February 19, 2021 (File No. 001-10306); and
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our annual report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 5, 2021 (File No. 001-10306)
(the “2020 Annual Report”).
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We also incorporate by reference into this
prospectus supplement and accompanying prospectus any future documents we may file with the SEC under Section 13(a), 13(c), 14
or 15(d) of the Exchange Act from the date of this prospectus supplement until the offering contemplated in this prospectus supplement
is completed. Reports on Form 6-K we may furnish to the SEC after the date of this prospectus supplement (or portions thereof)
are
incorporated by reference in this prospectus
supplement only to the extent that the report expressly states that it (or such portions) is incorporated by reference in this
prospectus supplement.
FORWARD-LOOKING
STATEMENTS
From time to time, we may make statements,
both written and oral, regarding our assumptions, projections, expectations, intentions or beliefs about future events. These statements
constitute “forward-looking statements” for purposes of the Private Securities Litigation Reform Act of 1995. We caution
that these statements may and often do vary materially from actual results. Accordingly, we cannot assure you that actual results
will not differ materially from those expressed or implied by the forward-looking statements. You should read the sections entitled
“Risk Factors” in this prospectus supplement and in our 2020 Annual Report which is incorporated by reference
herein, “Cautionary Statement on Forward-Looking Statements” in the accompanying prospectus and “Forward-Looking
Statements” in our 2020 Annual Report which are incorporated by reference herein.
Any forward-looking statements made herein
or in the documents incorporated by reference herein speak only as of the date they are made. Except as required by the FCA, any
applicable stock exchange or any applicable law, we expressly disclaim any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statement contained in this prospectus supplement or the documents incorporated by reference
herein to reflect any changes in expectations with regard thereto or any new information or any changes in events, conditions or
circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that we have
made or may make in documents we have filed or may file with the SEC.
SUMMARY
The following is a summary of this
prospectus supplement and should be read as an introduction to, and in conjunction with, the remainder of this prospectus supplement,
the accompanying prospectus and any documents incorporated by reference herein and therein. You should base your investment decision
on a consideration of this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein
and therein, as a whole. Words and expressions defined in “Description of the Contingent Capital Notes” below shall
have the same meanings in this summary.
General
Issuer
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NatWest Group plc
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Issue
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£400,000,000 4.500%
reset perpetual subordinated contingent convertible additional tier 1 capital notes (the “Contingent Capital Notes”).
The Contingent Capital Notes will be issued pursuant to a Contingent
Convertible Securities Indenture dated August 10, 2015 (the “Original Indenture”), between us and The Bank of New York
Mellon acting through its London Branch as trustee (the “Trustee”), as amended and supplemented by the Fifth Supplemental
Indenture dated as of August 19, 2020 (the “Fifth Supplemental Indenture”) and supplemented by a seventh supplemental
indenture which is expected to be dated as of the Issue Date (the “Seventh Supplemental Indenture” and, together with
the Original Indenture and the Fifth Supplemental Indenture, the “Indenture”).
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Issue Date
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March 12, 2021.
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Perpetual Securities
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The Contingent Capital Notes are perpetual securities and have no fixed maturity or fixed redemption date.
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Interest Rates
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From and including the Issue Date to but excluding September 30, 2028 (the “First Reset Date”), interest will accrue on the Contingent Capital Notes at an initial rate equal to 4.500% per annum. From and including each Reset Date (as defined below) to but excluding the next succeeding Reset Date, interest will accrue on the Contingent Capital Notes at a rate per annum equal to the sum of the applicable Reference Bond Rate (as defined herein) on the relevant Reset Determination Date (as defined below) and 3.992%, converted to a quarterly rate in accordance with market convention (rounded to three decimal places, with 0.005 being rounded down).
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Business Day Convention / Day Count Fraction
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Actual / Actual (ICMA)
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Reset Date
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The First Reset Date and every fifth anniversary thereafter.
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ISIN
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XS2315966742
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Common Code
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231596674
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Interest Payment Dates
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Subject to the provisions set out below, the Contingent Capital Notes will bear interest from and including the Issue
Date at the rate per annum set forth above, payable quarterly in arrear on March 31, June 30, September 30 and December 31 of
each year (each an “Interest Payment Date”), commencing on March 31, 2021 (short first coupon).
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Reset Determination Date
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The second Business Day (as defined below) immediately preceding each Reset Date.
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Reference Bond Rate
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“Reference Bond Rate” means, with respect to any
Reset Date for which such rate applies and related Reset Determination Date, the gross redemption yield expressed as a percentage
and calculated by the Calculation Agent on the basis set out by the United Kingdom Debt Management Office in the paper "Formulae
for Calculating Gilt Prices from Yields", page 5, Section One: Price/Yield Formulae "Conventional Gilts; Double dated
and Undated Gilts with Assumed (or Actual) Redemption on a Quasi-Coupon Date" (published on 8 June 1998 and updated on 15
January 2002 and 16 March 2005, and as further amended, updated, supplemented or replaced from time to time) or, if such basis
is no longer in customary market usage at such time (as determined by the Issuer in good faith), a gross redemption yield calculated
in accordance with generally accepted market practice at such time as determined and notified in writing to the Calculation Agent
by the Issuer following consultation with an investment bank or financial institution determined to be appropriate by the Issuer
(which, for the avoidance of doubt, could be the Calculation Agent, or another affiliate of the Issuer), on a semi-annual compounding
basis (converted to an annualised yield and rounded up (if necessary) to four decimal places) of the Reset Reference Bond in respect
of that Reset Period, assuming a price for the Reset Reference Bond (expressed as a percentage of its principal amount) equal to
the Reference Bond Price for such Reset Determination Date.
“Initial Interest Rate” means the rate of interest
in respect of the period from (and including) the Issue Date to (but excluding) the First Reset Date, which will be 4.500% per
annum.
“Reference Bond Price” means, with respect to any
Reset Determination Date, (i) the arithmetic average of the Reference Government Bond Dealer Quotations for such Reset Determination
Date, after excluding the highest and lowest such Reference Government Bond Dealer Quotations, or (ii) if fewer than five such
Reference Government Bond Dealer Quotations are received, the arithmetic average of all such quotations (or, alternatively, if
only one Reference Government Bond Dealer Quotation is received, the Reference Bond Price shall be equal to such quotation); provided,
however, that if no Reference Government Bond Dealer Quotations are received, the Subsequent Interest Rate for the relevant Reset
Period shall be equal to the Rate of Interest last determined in relation to the Contingent Capital Notes in respect of the preceding
Reset Period (or, alternatively, in the case of the first Reset Determination Date, the Rate of Interest applicable to the first
Reset Period shall be the Initial Interest Rate).
“Reference Government Bond Dealer” means each of
five banks selected by the Issuer (following, where practicable, consultation with an investment bank or financial institution
of financial repute determined to be appropriate by the Issuer, which for the avoidance of doubt, could be the Calculation Agent),
or the affiliates of such banks, which are (i) primary government securities dealers, and their respective successors, or (ii)
market makers in pricing corporate bond issues.
“Reference Government Bond Dealer Quotations” means,
with respect to each Reference Government Bond Dealer and any Reset Determination Date, the arithmetic average, as determined by
the Calculation Agent, of the bid and offered prices for the Reset Reference Bond (expressed in each case
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as a percentage of its principal amount) as at 11:00 a.m. (London
time) on the Reset Determination Date and, if relevant, on a dealing basis for settlement that is customarily used at such time,
and quoted in writing to the Calculation Agent by such Reference Government Bond Dealer.
“Reset Period” means any period from and including
each Reset Date to but excluding the next succeeding Reset Date.
“Rate of Interest” means the Initial Interest Rate
and/or the relevant Subsequent Interest Rate, as the case may be.
“Subsequent Interest Rate” means the rate of interest
in respect of each Reset Period which shall be a rate per annum equal to the aggregate of the applicable Reference Bond Rate on
the relevant Reset Determination Date and 3.992%, such sum being converted to a quarterly rate in accordance with market convention
(rounded to three decimal places, with 0.005 rounded down).
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Regular Record Date
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The regular record dates for the Contingent Capital Notes will
be the close of business of the relevant Clearing System on the Clearing System Business Day immediately preceding each Interest
Payment Date (or, if the Contingent Capital Notes are held in definitive form, the fifteenth day preceding each Interest Payment
Date (in each case, the “Record Date”).
The term “Business Day” means any day, other than
Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorised or required by law or
regulation to close in the City of New York or in the City of London, England.
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Interest Payments Discretionary
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Interest on the Contingent Capital Notes will be due and payable only at our full discretion and we shall have sole and absolute discretion at all times and for any reason to cancel any interest payment in whole or in part that would otherwise be payable on any Interest Payment Date. If we do not make an interest payment on the relevant Interest Payment Date, or if we elect to make a payment of a portion, but not all, of such interest payment, such non-payment shall evidence our exercise of discretion to cancel such interest payment, or the portion of such interest payment not paid, and accordingly such interest payment, or portion thereof, shall not be or become due and payable.
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Restrictions on Interest Payments
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We shall cancel any interest, or such interest shall be deemed
to be cancelled, on the Contingent Capital Notes (or, as appropriate, any part thereof) which is scheduled to be paid on an Interest
Payment Date if (a) we have an amount of Distributable Items (as defined below) on such scheduled Interest Payment Date that is
less than the sum of (i) all payments (other than redemption payments which do not reduce Distributable Items) made or declared
by us since the end of our latest financial year and prior to such Interest Payment Date on or in respect of any Parity Securities,
the Contingent Capital Notes and any Junior Securities and (ii) all payments (other than redemption payments which do not reduce
Distributable Items) payable by us on such Interest Payment Date (x) on the Contingent Capital Notes and (y) on or in respect of
any Parity Securities or any Junior Securities, in the case of each of (i) and (ii), excluding any payments already accounted for
in determining the Distributable Items; or (b) the Solvency Condition (as described below) is not (or would not be) satisfied in
respect of such amounts payable on such Interest Payment Date.
“Distributable Items” means subject as otherwise
defined in, and/or
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interpreted in accordance with, the Capital Regulations applicable
to us from time to time, the amount of our profits at the end of the latest financial year plus any profits brought forward and
reserves available for that purpose before distributions to holders of the Contingent Capital Notes, any Parity Securities and
Junior Securities, less any losses brought forward, profits which are non-distributable pursuant to the Companies Act 2006 (UK)
(the “Companies Act”) or any other provisions of English law and/or Scots law from time to time applicable to us or
our Memorandum and Articles of Association from time to time (together, the “Articles of Association”) and sums placed
to non-distributable reserves in accordance with the Companies Act or other provisions of English law and/or Scots law from time
to time applicable to us or our Articles of Association, in each case with respect to the specific category of own funds instruments
to which such law or the Articles of Association relate; such profits, losses and reserves being determined on the basis of our
individual accounts and not on the basis of our consolidated accounts.
“Junior Securities” means our ordinary shares or
other securities or other obligations (including any guarantee, credit support or similar undertaking) of ours ranking, or expressed
to rank, junior to the Contingent Capital Notes in a Winding-up or Administration Event (as defined under “—Ranking”
below).
“Parity Securities” means the most senior ranking
class or classes of non-cumulative preference shares in our capital from time to time and any other of our securities or other
securities or other obligations (including any guarantee, credit support or similar undertaking) ranking, or expressed to rank,
pari passu with the Contingent Capital Notes and/or such preference shares following a Winding-up or Administration Event.
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Solvency Condition
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Other than in the event of a Winding-up or Administration Event
or in relation to the cash component of any Alternative Consideration in any Settlement Shares Offer (as such terms are defined
herein), payments in respect of or arising from the Contingent Capital Notes (including any damages for breach of any obligations
thereunder) are, in addition to our right to cancel payments of interest, conditional upon our being solvent at the time when the
relevant payment is due to be made, and no principal, interest or other amount shall be due and payable in respect of, or arising
from, the Contingent Capital Notes, except to the extent that we could make such payment and still be solvent immediately thereafter
(such condition is referred to herein as the “Solvency Condition”).
For the purposes of determining whether the Solvency Condition
is met, we shall be considered to be solvent at a particular point in time if:
(1) we are able to pay our debts as they fall due; and
(2) our Assets are at least equal to our Liabilities.
“Assets” means our unconsolidated gross assets,
as shown in our latest published audited balance sheet, adjusted for subsequent events in such manner as our directors may determine.
“Liabilities” means our unconsolidated gross liabilities,
as shown in our latest published audited balance sheet, adjusted for contingent liabilities and prospective liabilities and for
subsequent events in such manner as our directors may determine.
An officer’s certificate (which shall only be required
if at the relevant time
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we have not satisfied the Solvency Condition and we are relying
on that fact as the basis for not making an interest payment on the Contingent Capital Notes) as to our solvency shall, unless
there is manifest error, be treated and accepted by us, the Trustee and any holder of the Contingent Capital Notes as correct and
sufficient evidence that the Solvency Condition is not satisfied. The Trustee shall be entitled to rely absolutely on such certificate
without liability to any person without any obligation to verify or investigate the accuracy thereof. If we fail to make a payment
because the Solvency Condition is not satisfied, this payment shall not be or become due and payable and shall be deemed cancelled.
Any payment of interest not due by reason of the provisions
described above shall be deemed cancelled. See “—Agreement to Interest Cancellation” and “—Notice
of Interest Cancellation” below.
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Agreement to Interest Cancellation
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By acquiring the Contingent Capital Notes, the holders and beneficial
owners acknowledge and agree that:
(a) interest is payable solely at our discretion, and no amount
of interest shall become due and payable in respect of the relevant interest period to the extent that it has been cancelled (in
whole or in part) by us at our sole discretion and/or deemed cancelled (in whole or in part); and
(b) a cancellation or deemed cancellation of interest (in each
case, in whole or in part) in accordance with the terms of the Indenture and the Contingent Capital Notes shall not constitute
a default in payment or otherwise under the terms of the Contingent Capital Notes or the Indenture.
Interest will only be due and payable on an Interest Payment
Date to the extent it is not cancelled or deemed cancelled (in each case, in whole or in part) in accordance with the provisions
described under “—Interest Payments Discretionary”, “—Restrictions on Interest Payments”
and “—Solvency Condition” above. Any interest cancelled or deemed cancelled (in each case, in whole or
in part) in the circumstances described above shall not be due and shall not accumulate or be payable at any time thereafter, and
holders and beneficial owners shall have no rights thereto or to receive any additional interest or compensation as a result of
such cancellation or deemed cancellation of interest in respect of the Contingent Capital Notes. We may use such cancelled payments
without restriction to meet our obligations as they fall due.
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Notice of Interest Cancellation
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If practicable, we will provide notice of any cancellation or deemed cancellation of interest (in each case, in whole or in part) to the holders of the Contingent Capital Notes through the Clearing Systems (or, if the Contingent Capital Notes are held in definitive form, to the holders of the Contingent Capital Notes directly at their addresses shown on the register for the Contingent Capital Notes) and to the Trustee directly on or prior to the relevant Interest Payment Date. Failure to provide such notice will have no impact on the effectiveness of, or otherwise invalidate, any such cancellation or deemed cancellation of interest (and accordingly, such interest will not be due and payable), or give the holders and beneficial owners of the Contingent Capital Notes any rights as a result of such failure.
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Ranking
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The Contingent Capital Notes will constitute our direct, unsecured and subordinated obligations, ranking pari passu without any preference among themselves.
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The rights and claims of the holders and beneficial owners in
respect of, or arising from, the Contingent Capital Notes (including any damages for breach of any obligations thereunder, if payable)
will be subordinated to the claims of our Senior Creditors.
If:
(1) an order is made, or an effective resolution is passed,
for our winding-up (excluding in any such case a solvent winding-up solely for the purpose of our reconstruction, amalgamation,
reorganisation, merger or consolidation, or the substitution in our place of a Successor in Business, the terms of which have previously
been approved by the Trustee or in writing by holders of not less than 2/3 (two thirds) in aggregate principal amount of the Contingent
Capital Notes); or
(2) an administrator is appointed for us and such administrator
gives notice that it intends to declare and distribute a dividend;
(each, respectively, or together, a “Winding-up or Administration
Event”), then (a) if any such events specified in (1) or (2) above occurs before the date on which the Conversion Trigger
Event occurs, there shall be payable by us in respect of each Contingent Capital Note (in lieu of any other payment by us) such
amount, if any, as would have been payable to a holder or beneficial owner of Contingent Capital Notes if, on the day prior to
the commencement of the Winding-up or Administration Event and thereafter, such holder or beneficial owner of Contingent Capital
Notes were the holder of one of a class of Notional Preference Shares (as defined below) on the assumption that the amount that
such holder or beneficial owner of Contingent Capital Notes was entitled to receive in respect of such Notional Preference Shares,
on a return of assets in such Winding-up or Administration Event, was an amount equal to the principal amount of the relevant Contingent
Capital Note, together with any Accrued Interest (as defined below) and any damages for breach of obligations thereunder (if payable),
regardless of whether the Solvency Condition is satisfied on the date upon which the same would otherwise be due and payable and
(b) if any such events specified in (1) or (2) above occurs on or after the date on which the Conversion Trigger Event occurs but
the Settlement Shares to be issued and delivered to the Settlement Share Depository on the Conversion Date have not been so delivered,
there shall be payable by us in respect of each Contingent Capital Note (in lieu of any other payment by us) such amount, if any,
as would have been payable to the holder or beneficial owner of such Contingent Capital Note in a Winding-up or Administration
Event if the Conversion Date in respect of the Automatic Conversion had occurred immediately before the occurrence of a Winding-up
or Administration Event (and, as a result, such holder or beneficial owner were the holder of such number of our ordinary shares
as such holder or beneficial owner would have been entitled to receive on the Conversion Date, ignoring for this purpose our right
to make an election for a Settlement Shares Offer to be effected), regardless of whether the Solvency Condition is satisfied on
the date upon which the same would otherwise be due and payable.
“secondary non-preferential debts” shall have the
meaning given to it in the Banks and Building Societies (Priorities on Insolvency) Order 2018 and any other law or regulation applicable
to us which is amended by such order, as each may be amended or replaced from time to time.
“Senior Creditors” means our creditors
(i) who are unsubordinated
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creditors, (ii) whose claims are, or are expressed to be, subordinated
(whether only in the event of a Winding-up or Administration Event or otherwise) to the claims of our unsubordinated creditors
but not further or otherwise, (iii) who are creditors in respect of any secondary non-preferential debts, or (iv) who are our subordinated
creditors (whether as aforesaid or otherwise), other than those whose claims rank, or are expressed to rank, pari passu with, or
junior to, the claims of holders of the Contingent Capital Notes and/or pari passu with or junior to any claims ranking pari passu
with the claims of holders of the Contingent Capital Notes, in each case in a Winding-up or Administration Event occurring prior
to any Conversion Trigger Event.
“commencement” means, in relation to our winding-up,
the date on which such winding-up commences, or is deemed to commence, determined in accordance with Section 86 or 129 of the Insolvency
Act 1986.
“Notional Preference Shares” means an actual or
notional class of preference shares in our capital having an equal right to return of assets in a Winding-up or Administration
Event to, and so ranking pari passu with, the most senior class or classes of issued preference shares with non-cumulative dividends
(if any) in our capital from time to time and which have a preferential right to a return of assets in the Winding-up or Administration
Event over, and so rank ahead of, all other classes of issued shares for the time being in our capital but ranking junior to the
claims of Senior Creditors and junior to any notional class of preference shares in our capital which is referenced in any of our
instruments for the purposes of determining a claim in our winding-up or administration, and, as so referenced, (i) is expressed
to have a preferential right to a return of assets in our winding-up or administration over the holders of all other classes of
shares for the time-being in our capital and (ii) is not expressed to rank junior to any other notional class of preference shares
in our capital.
“Successor in Business” means , in relation to the
Issuer, any entity which (i) acquires all or substantially all of the undertaking and/or assets of the Issuer or (ii) acquires
the beneficial ownership of the whole of the issued voting stock and/or share capital of the Issuer or (iii) into which the Issuer
is amalgamated, merged or reconstructed and where the Issuer is not the continuing company.
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Waiver of Right to Set-Off
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By acquiring a Contingent Capital Note, each holder (and the
Trustee acting on behalf of the holders) will be deemed to have waived to the fullest extent permitted by law any right of set-off,
counterclaim or combination of accounts with respect to such Contingent Capital Note or the Indenture (or between our obligations
under or in respect of any Contingent Capital Note and any liability owed by a holder) that they (or the Trustee acting on their
behalf) might otherwise have against us, whether before or during any Winding-up or Administration Event. Notwithstanding the above,
if any such rights and claims of any such holder against us are discharged by set-off, such holder will, immediately pay an amount
equal to the amount of such discharge to us or, in the event of a Winding-Up or Administration Event, the liquidator or administrator
(or other relevant insolvency official), as the case may be, to be held on trust for Senior Creditors, and until such time as payment
is made will hold a sum equal to such amount on trust for Senior Creditors, and accordingly such discharge shall be deemed not
to have taken place.
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First Call Date
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March 31, 2028
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Conversion Trigger Event
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A “Conversion Trigger Event” shall occur at any
point in time at which the CET1 Ratio (as defined below) of the Regulatory Group is less than 7.00%.
Any interest in respect of an Interest Payment Date which falls
on or after the date of the Conversion Trigger Event shall be deemed to have been cancelled upon the occurrence of such Conversion
Trigger Event and shall not become due and payable.
“Capital Regulations” means, at any time, the laws,
regulations, requirements, guidelines and policies relating to capital adequacy and/or minimum requirement for own funds and eligible
liabilities and/or loss absorbing capacity binding on credit institutions (including, without limitation, as to leverage) then
in effect as applicable to us or the Regulatory Group (as defined below) including if and to the extent applicable to us or the
Regulatory Group and without limitation to the generality of the foregoing, any delegated or implementing acts (such as regulatory
technical standards) adopted by the European Commission, including as they form part of the domestic law of the United Kingdom
either on or before 31 December 2020 or by virtue of the EUWA, and as they may be amended or replaced by the laws of England and
Wales from time to time; and any laws or regulations as well as requirements, guidelines and policies adopted by the PRA and/or
any other national or European authority from time to time, in each case to the extent applicable to us or the Regulatory Group
(whether or not such laws, regulations, requirements, guidelines or policies are applied generally or specifically to us or to
the Regulatory Group), in each case relating to capital adequacy and/or minimum requirement for own funds and eligible liabilities
and/or loss absorbing capacity.
“CET1 Capital” means, at any time, the sum, expressed
in pounds sterling, of all amounts that constitute Common Equity Tier 1 Capital of the Regulatory Group, at such time, less any
deductions from Common Equity Tier 1 Capital of the Regulatory Group required to be made, at such time, in each case as calculated
by us on a consolidated and fully loaded basis in accordance with the Capital Regulations applicable to the Regulatory Group as
at that point in time (which calculation shall be binding on the Trustee and the holders of Contingent Capital Notes).
“CET1 Ratio” means the ratio of CET1 Capital to
Risk Weighted Assets expressed as a percentage and on the basis that all measures used in such calculation shall be calculated
on a fully loaded basis.
“Common Equity Tier 1 Capital” shall have the meaning
ascribed to such term in CRD as interpreted and applied in accordance with the Capital Regulations then applicable to the Regulatory
Group.
“CRD” means (i) the CRD Directive and (ii) the CRD
Regulation, to the extent applicable to us or the Regulatory Group.
“CRD Directive” means Directive 2013/36/EU of the
European Parliament and of the Council of June 26, 2013 on access to the activity of credit institutions and the prudential supervision
of credit institutions and investment firms, as amended or replaced from time to time (including as amended by Directive (EU) 2019/878
of the European Parliament and of the Council of 20 May 2019) and/or any Capital Regulations , to the extent that they form part
of the domestic law of the United Kingdom either on or before 31 December 2020 or by virtue of the EUWA, and as they may be
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amended or replaced by the laws of England and Wales from time
to time.
“CRD Regulation” means Regulation (EU) No. 575/2013
of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment
firms amending Regulation (EU) No. 648/2012, as amended or replaced from time to time (including as amended by Regulation (EU)
2019/876 of the European Parliament and of the Council of 20 May 2019, to the extent then in application) and/or any Capital Regulations,
to the extent that they form part of the domestic law of the United Kingdom either on or before 31 December 2020 or by virtue of
the EUWA, and as they may be amended or replaced by the laws of England and Wales from time to time.
“fully loaded” means, in relation to a measure that
is presented or described as being on a “fully loaded basis” that such measure is calculated without applying the transitional
provisions set out in Part Ten of the CRD Regulation, in accordance with the Capital Regulations applicable to the Regulatory Group,
as at the time such measure is calculated.
“PRA” means the Prudential Regulation Authority
or such other governmental authority having primary supervisory authority with respect to the prudential regulation of our business.
“Regulatory Group” means us, our subsidiary undertakings,
participations, participating interests and any subsidiary undertakings, participations or participating interests held (directly
or indirectly) by any of our subsidiary undertakings from time to time and any other undertakings from time to time consolidated
with us for regulatory purposes, in each case in accordance with the rules and guidance of the PRA then in effect.
“Risk Weighted Assets” means, at any time, the aggregate
amount, expressed in pounds sterling, of the risk weighted assets of the Regulatory Group, at such time, as calculated by us on
a consolidated and fully loaded basis in accordance with the Capital Regulations applicable to the Regulatory Group (which calculation
shall be binding on the Trustee and holders of the Contingent Capital Notes) and where the term “risk weighted assets”
means the risk weighted assets or total risk exposure amount, as calculated by us in accordance with the Capital Regulations applicable
to the Regulatory Group as at that point in time.
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Loss Absorption
(Automatic Conversion)
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Upon the occurrence of the Conversion Trigger Event, each Contingent
Capital Note shall, on the Conversion Date, be converted in whole but not in part into ordinary shares credited as fully paid (the
“Settlement Shares”) at the Conversion Price and in accordance with the terms set forth herein. The Settlement Shares
shall be issued and delivered to the Settlement Share Depository (as defined herein) (on behalf of the holders and beneficial owners)
on the Conversion Date (the “Automatic Conversion”), in consideration for which all of our obligations under the Contingent
Capital Notes shall be irrevocably and automatically released, and under no circumstances shall our released obligations be reinstated.
The Contingent Capital Notes are not convertible at the option of the holders or beneficial owners at any time. Automatic Conversion
shall not constitute a default under the Contingent Capital Notes.
On the Conversion Date, the Settlement Shares shall
be issued and delivered by us to the Settlement Share Depository (except as otherwise provided in the supplemental Indenture and
the Contingent Capital Notes) on terms permitting a Settlement Shares Offer and no holder of Contingent
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Capital Notes will have any rights against us with respect to
the repayment of the principal amount of the Contingent Capital Notes or the payment of interest or any other amount on or in respect
of such Contingent Capital Notes, which liabilities shall be automatically released. Accordingly, the principal amount of the Contingent
Capital Notes shall equal zero at all times thereafter (although the Tradable Amount (as defined below) shall remain unchanged).
Any interest in respect of an interest period ending on any Interest Payment Date falling between the Conversion Trigger Event
and the Conversion Date shall be deemed to have been cancelled upon the occurrence of such Conversion Trigger Event and shall not
be due and payable.
Provided that we issue and deliver the Settlement Shares to
the Settlement Share Depository in accordance with the terms of the Contingent Capital Notes as described herein, with effect from
and on the Conversion Date, holders and beneficial owners of the Contingent Capital Notes shall have recourse only to the Settlement
Share Depository for the delivery to them of Settlement Shares, or, if they elect, American Depositary Shares represented by American
Depositary Receipts (“ADSs”) or, if applicable, the Alternative Consideration (as defined herein). Subject to the occurrence
of a Winding-up or Administration Event on or following the Conversion Trigger Event, if we fail to issue and deliver the Settlement
Shares upon Automatic Conversion to the Settlement Share Depository on the Conversion Date, a holder’s or beneficial owner’s
only right under the Contingent Capital Notes will be to claim to have such Settlement Shares so issued and delivered.
The Settlement Shares to be issued and delivered shall (except
where we have been unable to appoint a Settlement Share Depository) initially be registered in the name of the Settlement Share
Depository, which, subject to a Settlement Shares Offer, shall hold such Settlement Shares on behalf of the holders and beneficial
owners of Contingent Capital Notes. By virtue of its holding of any Contingent Capital Note, each holder and beneficial owner of
a Contingent Capital Note shall be deemed to have irrevocably directed us to issue and deliver the Settlement Shares corresponding
to the conversion of its holding of the Contingent Capital Notes to the Settlement Share Depository.
Following the issuance and delivery of the Settlement Shares
to the Settlement Share Depository on the Conversion Date, the Contingent Capital Notes shall remain in existence until the applicable
Cancellation Date (as defined herein) for the sole purpose of evidencing the holder’s or beneficial owner’s right to
receive Settlement Shares, or, if it elects, ADSs or the Alternative Consideration (as defined herein), as the case may be, from
the Settlement Share Depository.
Subject to the conditions described under “Description
of the Contingent Capital Notes—Conversion—Conversion Procedures”, the Settlement Shares, or, if the holder
elects, ADSs or Alternative Consideration (as defined herein) will be delivered to holders of the Contingent Capital Notes on the
Settlement Date and the Contingent Capital Notes shall be cancelled on the Cancellation Date.
“Conversion Date” shall be the date specified in
the Conversion Trigger Notice and shall occur without delay upon, and in any event within one month of, the occurrence of the Conversion
Trigger Event.
“Conversion Trigger Notice” means the delivery by
us of notice to the
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Trustee and the holders of Contingent Capital Notes following
the occurrence of the Conversion Trigger Event without delay after such Conversion Trigger Event (and in any event within such
period as the PRA may require). The date on which the Conversion Trigger Notice shall be deemed to have been given shall be the
date on which it is dispatched by us to the Clearing Systems (or if the Contingent Capital Notes are held in definitive form, to
the holders of the Contingent Capital Notes directly). The Conversion Trigger Notice shall specify (i) that the Conversion Trigger
Event has occurred and the CET1 Ratio resulting in such Conversion Trigger Event, (ii) the Conversion Date, (iii) the then-prevailing
Conversion Price (which Conversion Price shall remain subject to any subsequent anti-dilution adjustment up to the Conversion Date),
(iv) the contact details of any Settlement Share Depository, or, if we have been unable to appoint a Settlement Share Depository,
such other arrangements for the issuance and/or delivery of the Settlement Shares, or, if the holder elects, ADSs or any Alternative
Consideration to the holders of Contingent Capital Notes as we shall consider reasonable in the circumstances, (v) that we have
the option, at our sole and absolute discretion, to elect that a Settlement Shares Offer be conducted and that, if we so elect,
we will issue a Settlement Shares Offer Notice within ten (10) Business Days following the Conversion Date notifying the holders
of the Contingent Capital Notes of our election; and (vi) the Suspension Date and that the Contingent Capital Notes shall remain
in existence for the sole purpose of evidencing the holder’s or beneficial owner’s right to receive Settlement Shares,
or, if the holder elects, ADSs or the Alternative Consideration, as applicable, from the Settlement Share Depository and that the
Contingent Capital Notes may continue to be transferable until the Suspension Date.
“Tradable Amount” is the denomination of each book-entry
interest.
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Conversion Price
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The conversion price per ordinary share in respect of the Contingent Capital Notes (the “Conversion Price”) shall be £1.754, subject to certain anti-dilution adjustments, as described under “Description of the Contingent Capital Notes—Conversion—Anti-dilution Adjustment of the Conversion Price”.
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Agreement with Respect to Automatic Conversion
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By its acquisition of the Contingent Capital Notes, each holder and beneficial owner shall be deemed to have (i) agreed to all the terms and conditions of the Contingent Capital Notes, including, without limitation, those related to (x) Automatic Conversion following the Conversion Trigger Event and (y) the appointment of the Settlement Share Depository, the issuance of the Settlement Shares to the Settlement Share Depository (or to the relevant recipient in accordance with the terms of the Contingent Capital Notes) and the potential sale of the Settlement Shares pursuant to a Settlement Shares Offer, and acknowledged that such events in (x) and (y) may occur without any further action on the part of the holders or beneficial owners of the Contingent Capital Notes or the Trustee, (ii) agreed that effective upon, and following, the Automatic Conversion, no amount shall be due and payable to the holders or beneficial owners of the Contingent Capital Notes, and our liability to pay any such amounts (including the principal amount of, or any interest in respect of, the Contingent Capital Notes) shall be automatically released, and the holders and beneficial owners shall not have the right to give a direction to the Trustee with respect to the Conversion Trigger Event and any related Automatic Conversion, (iii) waived, to the extent permitted by the Trust Indenture Act (as defined herein), any claim against the Trustee arising out of its acceptance of its trusteeship under, and the performance of its duties,
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powers and rights in respect of, the Indenture and in connection with the Contingent Capital Notes, including, without limitation, claims related to or arising out of or in connection with the Conversion Trigger Event and/or any Automatic Conversion and (iv) authorised, directed and requested the Clearing Systems or other intermediary through which it holds such Contingent Capital Notes to take any and all necessary action, if required, to implement the Automatic Conversion without any further action or direction on the part of such holder or beneficial owner or the Trustee.
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Settlement Shares Offer
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In our sole and absolute discretion, within ten (10) Business
Days following the Conversion Date, we may elect that the Settlement Share Depository (or an agent on its behalf) make an offer
of all or some of the Settlement Shares to all or some of our ordinary shareholders upon Automatic Conversion, such offer to be
at a cash price per Settlement Share that will be no less than the Conversion Price subject to certain anti-dilution adjustments,
as described under “Description of the Contingent Capital Notes— Conversion—Anti-dilution Adjustment of the
Conversion Price” (the “Settlement Shares Offer”). Such election shall be made through the delivery of a
“Settlement Shares Offer Notice” to the Trustee directly and to the holders of the Contingent Capital Notes. If so
elected, the Settlement Shares Offer Notice shall specify (i) the period of time for which the Settlement Shares Offer shall be
made (the “Settlement Shares Offer Period”), which shall end no later than forty (40) Business Days after the delivery
of the Settlement Shares Offer Notice, and (ii) the date on which each Clearing System shall suspend all clearance and settlement
of transactions in the Contingent Capital Notes in accordance with its rules and procedures (the “Suspension Date”),
if the Suspension Date has not previously been specified in the Conversion Trigger Notice.
Upon expiry of the Settlement Shares Offer Period, the Settlement
Share Depository will provide notice to the holders of Contingent Capital Notes of the composition of the Alternative Consideration
(and of the deductions to the cash component, if any, of the Alternative Consideration (as set out in the definition of Alternative
Consideration)) per £1,000 Tradable Amount of the Contingent Capital Notes. The Alternative Consideration will be held by
the Settlement Share Depository on behalf of the holders of Contingent Capital Notes and will be delivered to holders of Contingent
Capital Notes pursuant to the procedures set forth under “Description of the Contingent Capital Notes—Conversion—Settlement
Shares Offer” below.
The cash component of any Alternative Consideration shall be
payable by the Settlement Share Depository to the holders of Contingent Capital Notes whether or not the Solvency Condition is
satisfied.
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Agreement with Respect to Any Settlement Shares Offer
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By its acquisition of the Contingent Capital Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges and agrees that if we elect, in our sole and absolute discretion, that a Settlement Shares Offer be conducted by the Settlement Share Depository, such holder and beneficial owner shall be deemed to have: (i) irrevocably consented to any Settlement Shares Offer and, notwithstanding that such Settlement Shares are held by the Settlement Share Depository on behalf of the holders and beneficial owners of the Contingent Capital Notes, to the Settlement Share Depository using the Settlement Shares delivered to it to settle any Settlement Shares Offer; (ii) irrevocably consented to the transfer of the beneficial interest it holds in the Settlement Shares delivered upon Automatic Conversion to the Settlement Share Depository or to one or more purchasers identified by the Settlement Share Depository in
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connection with the Settlement Shares Offer; (iii) irrevocably agreed that we and the Settlement Share Depository may take any and all actions necessary to conduct the Settlement Shares Offer in accordance with the terms of the Contingent Capital Notes; and (iv) irrevocably agreed that none of us, the Trustee or the Settlement Share Depository shall, to the extent permitted by applicable law, incur any liability to the holders or beneficial owners of the Contingent Capital Notes in respect of the Settlement Shares Offer (except for the obligations of the Settlement Share Depository in respect of the holders’ and beneficial owners’ entitlement to, and subsequent delivery of, any Alternative Consideration).
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Agreement with Respect to the Exercise of UK Bail-in Power
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Notwithstanding any other agreements, arrangements, or understandings
between us and any holder or beneficial owner of the Contingent Capital Notes, by its acquisition of the Contingent Capital Notes,
each holder and each beneficial owner of the Contingent Capital Notes acknowledges, accepts, agrees to be bound by and consents
to the exercise of any UK bail-in power (as defined below) by the relevant UK authority that may result in (i) the reduction or
cancellation of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes; (ii) the conversion
of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes into ordinary shares or other securities
or other obligations of ours or another person; and/or (iii) the amendment of the amount of interest due on the Contingent Capital
Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; which UK bail-in
power may be exercised by means of variation of the terms of the Contingent Capital Notes solely to give effect to the exercise
by the relevant UK authority of such UK bail-in power. Each holder and beneficial owner of the Contingent Capital Notes further
acknowledges and agrees that the rights of the holders and/or beneficial owners under the Contingent Capital Notes are subject
to, and will be varied, if necessary, solely to give effect to, the exercise of any UK bail-in power by the relevant UK authority.
For these purposes, a “UK bail-in power” is any
write-down, conversion, transfer, modification or suspension power existing from time to time under any laws, regulations, rules
or requirements relating to the resolution of banks, banking group companies, credit institutions and/or investment firms incorporated
in the United Kingdom in effect and applicable in the United Kingdom to us or other members of the Group, including but not limited
to any such laws, regulations, rules or requirements which are implemented, adopted or enacted in the United Kingdom within the
context of the UK resolution regime under the Banking Act 2009, as the same has been or may be amended from time to time (whether
pursuant to the UK Financial Services (Banking Reform) Act 2013, secondary legislation or otherwise), pursuant to which any obligations
of a bank, banking group company, credit institution or investment firm or any of its affiliates can be reduced, cancelled, modified,
transferred and/or converted into shares or other securities or obligations of the obligor or any other person (or suspended for
a temporary period) or pursuant to which any right in a contract governing such obligations may be deemed to have been exercised.
A reference to the “relevant UK authority” is to any authority with the ability to exercise a UK bail-in power.
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Repayment of Principal and Payment of Interest After Exercise of UK Bail-in Power
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No repayment of the principal amount of the Contingent Capital Notes or payment of interest on the Contingent Capital Notes shall become due and payable after the exercise of any UK bail-in power by the relevant UK
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authority unless, at the time of such repayment or payment, such repayment or payment would be permitted to be made by us under the laws and regulations of the United Kingdom and the European Union applicable to us and the Group.
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Optional Redemption
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The Contingent Capital Notes will, subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions to Redemption, Repurchase, Substitution or Variation” below, be redeemable in whole but not in part, at our option and in our sole discretion on (i) any day falling in the period commencing on (and including) the First Call Date and ending on (and including) the First Reset Date, and (ii) any Reset Date thereafter, in each case at 100% of their principal amount, together with any accrued and unpaid interest on the Contingent Capital Notes, excluding any interest cancelled or deemed cancelled in accordance with the terms of the Contingent Capital Notes (“Accrued Interest”), to but excluding the date fixed for redemption.
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Tax Redemption
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If at any time a Tax Event has occurred, we may, subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions to Redemption, Repurchase, Substitution or Variation” below, at our option and in our sole discretion redeem the Contingent Capital Notes, in whole but not in part, at any time at 100% of their principal amount, together with any Accrued Interest to, but excluding, the date fixed for redemption. See “Description of the Contingent Capital Notes—Redemption, Repurchase, Substitution or Variation—Tax Redemption” in this prospectus supplement and “Description of Contingent Convertible Securities” in the accompanying prospectus.
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Redemption for a Capital Disqualification Event
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If at any time a Capital Disqualification Event occurs, we may,
subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions to Redemption,
Repurchase, Substitution or Variation” below, at our option and in our sole discretion, redeem the Contingent Capital
Notes, in whole but not in part, at any time at 100% of their principal amount together with any Accrued Interest to, but excluding,
the date fixed for redemption.
A “Capital Disqualification Event” shall occur if
we determine that, as a result of any amendment to, or change in the regulatory classification of the Contingent Capital Notes
under, the Capital Regulations (or official interpretation thereof), in any such case becoming effective on or after the Issue
Date, the whole or part of the Contingent Capital Notes are, or are likely to be, excluded from our Tier 1 Capital (as defined
in the Capital Regulations) and/or that of the Regulatory Group.
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Repurchases of the Contingent Capital Notes
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Subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions to Redemption, Repurchase, Substitution or Variation” below, we may at any time and from time to time and to the extent not prohibited by CRD, repurchase beneficially or procure others to repurchase beneficially for our account the Contingent Capital Notes in the open market, by tender or by private agreement, in any manner and at any price or at differing prices.
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Cancellation
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Contingent Capital Notes purchased or otherwise acquired by us may be (i) held, (ii) resold or (iii) at our sole discretion, surrendered to the Trustee for cancellation (in which case all Contingent Capital Notes so surrendered will forthwith be cancelled in accordance with applicable law and thereafter
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may not be reissued or resold).
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Substitution or Variation
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If a Tax Event or a Capital Disqualification Event has occurred,
then we may, subject to the conditions described under “—Pre-conditions to Redemption, Repurchase, Substitution
or Variation” below, but without any requirement for the consent or approval of the holders or beneficial owners of the
Contingent Capital Notes, at any time (whether before or following the First Call Date) either substitute the Contingent Capital
Notes in whole (but not in part) for, or vary the terms of the Contingent Capital Notes so that they remain or, as appropriate,
become, Compliant Securities (as defined below).
Prior to the giving of any notice of substitution or variation
of the Contingent Capital Notes, we shall deliver to the Trustee an officer’s certificate stating that (i) in our belief
a Tax Event or Capital Disqualification Event has occurred and (ii) the terms of the relevant Compliant Securities comply with
the definition thereof. The Trustee is entitled to conclusively rely on and accept such officer’s certificate without any
further inquiry, in which event it shall be conclusive and binding on the Trustee and the holders and beneficial owners of the
Contingent Capital Notes.
“Compliant Securities” means securities issued directly
by us that have terms not materially less favourable to an investor than the terms of the Contingent Capital Notes (as determined
by us in consultation with an Independent Financial Adviser), provided that we have delivered an officer’s certificate to
such effect (including as to such consultation) to the Trustee (upon which the Trustee shall be entitled to conclusively rely on
and accept such certificate without further enquiry and without liability to any person) prior to the substitution or variation
of the Contingent Capital Notes and provided that such substitution or varied securities:
(a) (1) contain terms which comply with the then current requirements
of the Capital Regulations in relation to Tier 1 Capital (as defined in the Capital Regulations); (2) provide for the same interest
rate and Interest Payment Dates from time to time applying to the Contingent Capital Notes; (3) rank pari passu with the ranking
of the Contingent Capital Notes; (4) preserve any existing rights under the Indenture to any accrued interest or other amounts
which have not been either paid or cancelled (but without prejudice to our right to cancel the same under the terms of the Compliant
Securities, if applicable); (5) preserve our obligations (including the obligations arising from the exercise of any right) as
to payments of principal in respect of the Contingent Capital Notes, including (without limitation) as to the timing and amount
of such payments; (6) contain terms providing for the conversion of the Contingent Capital Notes, the cancellation of payments
of interest thereon and/or write-down of the principal of the Contingent Capital Notes only if such terms are not materially less
favourable to an investor than the terms of the Contingent Capital Notes; and (7) qualify as hybrid capital instruments as defined
in section 475C of the Corporation Tax Act 2009, to the extent applicable (or in any equivalent provision in any applicable successor
legislation);
(b) are (1) admitted to trading on the ISM of the LSE or (2)
listed on such other stock exchange as is a Recognised Stock Exchange (as defined below) at that time as selected by us; and
(c) where the Contingent Capital Notes which have been substituted
or
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varied had a published rating (solicited by, or assigned with
our cooperation) from a Rating Agency (as defined below) immediately prior to their substitution or variation, at least two Rating
Agencies have, or where only one Rating Agency has published such a Rating, such Rating Agency has, ascribed, or announced their
intention to ascribe, an equal or higher published rating to the relevant Compliant Securities.
“Recognised Stock Exchange” means a recognised stock
exchange as defined in section 1005 of the UK Income Tax Act 2007 as the same may be amended from time to time and any provision,
statute or statutory instrument replacing the same from time to time.
“Rating Agency” means Moody’s Investors Service,
Inc., S&P Global Ratings Inc., a division of S&P Global Inc., Fitch Ratings, Inc., or any of their affiliates, or any successor.
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Pre-Conditions to Redemption, Repurchase, Substitution or Variation
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Any redemption, repurchase, substitution
or variation of the Contingent Capital Notes by us is subject (except to the extent that the Capital Regulations no longer so require)
to us having met the following conditions:
(1) we have given such notice to the PRA
as the PRA may then require before we become committed to the proposed redemption, repurchase, substitution or variation; and
(2) in the case of any redemption or repurchase,
the PRA having granted permission for us to make any such redemption or repurchase of the Contingent Capital Notes upon a satisfactory
finding that either:
(i) on or before such redemption
or repurchase of any of the Contingent Capital Notes, we replace such Contingent Capital Notes with own funds instruments (as defined
by the Capital Regulations) of an equal or higher quality at terms that are sustainable for our income capacity; or
(ii) we have demonstrated to
the satisfaction of the PRA that our own funds and eligible liabilities (as defined by the Capital Regulations) would following
such redemption or repurchase, exceed the requirements laid down in CRD and Directive 2014/59/EU, as amended or replaced from time
to time (including, without limitation, by Directive (EU) 2019/879), or similar laws in the United Kingdom (including, without
limitation, the Banking Act 2009, as amended) by a margin that the PRA considers necessary; and
(3) no Conversion Trigger Notice has been
delivered; and
(4) in the case of any redemption or repurchase,
the Solvency Condition is satisfied in respect of the relevant payment on the date scheduled for redemption or repurchase; and
(5) we have complied with any alternative
or additional pre-conditions as set out in the Capital Regulations and/or required by the PRA as a prerequisite to its permission
for such redemptions or repurchases, at the time; and
(6) in the case of any substitution or
variation, such substitution or variation being effected in compliance with any applicable regulatory and legal requirements, including
the Trust Indenture Act.
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In addition, as of the date hereof, under
the CRD rules, we may only redeem or repurchase the Contingent Capital Notes before five years after the date of issuance of the
Contingent Capital Notes, provided that (except to the extent that the Capital Regulations no longer so require) the pre-conditions
listed in (2) above and one of following conditions are met:
(a) in the case of redemption due to the
occurrence of a Capital Disqualification Event, as described under “—Redemption for a Capital Disqualification Event”
above (i) the PRA considers such change to be sufficiently certain and (ii) we demonstrate to the satisfaction of the PRA that
the Capital Disqualification Event was not reasonably foreseeable at the time of the issuance of the Contingent Capital Notes;
or
(b) in the case of redemption due to the
occurrence of a Tax Event as described under “—Tax Redemption” above, we demonstrate to the satisfaction
of the PRA that a Tax Event is material and was not reasonably foreseeable at the time of issuance of the Contingent Capital Notes;
or
(c) before or at the same time as such
redemption or repurchase of the Contingent Capital Notes, we replace the Contingent Capital Notes with own funds instruments (as
defined by the Capital Regulations) of an equal or higher quality at terms that are sustainable for its income capacity and the
PRA has permitted that action on the basis of the determination that it would be beneficial from a prudential point of view and
justified by exceptional circumstances; or
(d) the Contingent Capital Notes are repurchased
for market making purposes in accordance with the Capital Regulations.
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Payment of Additional Amounts
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We will pay additional amounts in respect of any withholding or deduction imposed by a Taxing Jurisdiction in respect of payments of interest only (and not principal) on the Contingent Capital Notes subject to certain exceptions as described under “Description of the Contingent Capital Notes—Additional Amounts”.
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Additional Issuances
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We may, from time to time, without the consent of the holders of the Contingent Capital Notes, issue additional Contingent Capital Notes under the Indenture, having the same ranking and same interest rate, interest cancellation terms, redemption terms, conversion price and other terms as the Contingent Capital Notes described in this prospectus supplement, other than the price to the public and issue date of the Contingent Capital Notes offered hereby. Any such additional Contingent Capital Notes, together with the Contingent Capital Notes offered by this prospectus supplement, shall rank equally and rateably with the Contingent Capital Notes in all respects, so that such further Contingent Capital Notes shall be consolidated and form a single series with the Contingent Capital Notes. There is no limitation on the amount of Contingent Capital Notes or other debt securities that we may issue under the Indenture, and there is no restriction on our issuing securities that may have similar, or different conversion trigger event provisions to the Contingent Capital Notes or no conversion trigger events.
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Enforcement Events and Remedies
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There are no events of default under the Contingent Capital Notes. In addition, under the terms of the Indenture neither the Automatic Conversion, the cancellation or deemed cancellation of interest, the exercise of the UK bail-in power by the relevant UK authority nor a write-down of the Contingent Capital Notes upon the occurrence of a Conversion Trigger Event following a Non-Qualifying Takeover Event with respect to the
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Contingent Capital Notes will be an Enforcement Event.
Each of the following is an “Enforcement Event”:
(1) the occurrence of a Winding-up or Administration Event prior
to the occurrence of a Conversion Trigger Event;
(2) non-payment of principal when due as further described below;
or
(3) breach of a Performance Obligation.
The occurrence of a Winding-up or Administration Event prior
to the occurrence of a Conversion Trigger Event
If a Winding-up or Administration Event occurs prior to the
occurrence of a Conversion Trigger Event, subject to the subordination provisions described herein, the principal amount of the
Contingent Capital Notes will become immediately due and payable. For the avoidance of doubt, as the principal amount of the Contingent
Capital Notes will become immediately due and payable upon such a Winding-up or Administration Event, neither the Trustee nor the
holders of the Contingent Capital Notes are required to declare such principal amount to be due and payable.
Non-payment of principal when due
Subject to the satisfaction of any redemption conditions described
herein, if we do not make payment of principal in respect of the Contingent Capital Notes for a period of fourteen (14) calendar
days or more after the date on which such payment is due, then the Trustee, on behalf of the holders and beneficial owners of the
Contingent Capital Notes, may, at its discretion, or shall at the direction of holders of 25% or more of the aggregate principal
amount of outstanding Contingent Capital Notes, subject to any applicable laws, institute proceedings for our winding-up. In the
event of a Winding-up or Administration Event or our liquidation, whether or not instituted by the Trustee, the Trustee may prove
the claims of the holders and beneficial owners of the Contingent Capital Notes and the Trustee in the Winding-up or Administration
Event and/or claim in our liquidation, such claims as set out under “—Ranking” above. For the avoidance
of doubt, the Trustee may not declare the principal amount of any outstanding Contingent Capital Notes to be due and payable and
may not pursue any other legal remedy, including a judicial proceeding for the collection of the sums due and unpaid on the Contingent
Capital Notes.
Breach of a Performance Obligation
In the event of a breach of any term, obligation or condition
binding on us under the Contingent Capital Notes or the Indenture (other than any of our payment obligations under or arising from
the Contingent Capital Notes or the Indenture, including payment of any principal or interest, including any damages awarded for
breach of any obligations) (a “Performance Obligation”); the Trustee may without further notice institute such proceedings
against us as it may think fit to enforce the Performance Obligation, provided that we shall not by virtue of the institution of
any such proceedings be obliged to pay any sum or sums, in cash or otherwise (including any damages for breach of any obligation
under the Contingent Capital Notes) earlier than the same would otherwise have been payable under the Contingent Capital Notes
or the Indenture.
No other remedies
Other than the limited remedies specified above, no remedy against
us shall
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be available to the Trustee (acting on behalf of the holders of the Contingent Capital Notes) or to the holders and beneficial owners of the Contingent Capital Notes, provided that (1) the Trustee shall have such powers as are required to be authorised to it under the Trust Indenture Act (as defined herein) in respect of the rights of the holders and beneficial owners under the provisions of the Indenture, and (2) nothing shall impair the rights of a holder or beneficial owner of the Contingent Capital Notes under the Trust Indenture Act, absent such holder’s or beneficial owner’s consent, to sue for any payment due but unpaid in respect of the Contingent Capital Notes, provided that, in the case of (1) and (2), any payments in respect of, or arising from, the Contingent Capital Notes including any payments or amounts resulting or arising from the enforcement of any rights under the Trust Indenture Act in respect of the Contingent Capital Notes shall be subject to the provisions of the Indenture, including the subordination provisions. For the avoidance of doubt, such limitations shall not apply to our obligations to pay the fees and expenses of, and to indemnify, the Trustee, and the Trustee’s rights to apply money collected to first pay its fees and expenses shall not be subject to the subordination provisions set forth in this prospectus supplement.
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Book-Entry Issuance, Settlement and Clearance
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The Contingent Capital Notes will be issued only in registered
form in minimum denominations of £200,000 and in integral multiples of £1,000 in excess thereof.
The Contingent Capital Notes will be represented by one or more
fully registered global certificates (“Global Certificates”) registered in the name of a nominee of Clearstream Luxembourg
and/or Euroclear. You will hold beneficial interests in the Contingent Capital Notes through Euroclear and Clearstream, Luxembourg
and the Clearing Systems will record your beneficial interest on their books. We will not issue certificated notes except as described
in the accompanying prospectus. Settlement of the Contingent Capital Notes will occur through the Clearing Systems in same day
funds. For information on the Clearing System’s book-entry system, see “Description of Debt Securities—Form
of Debt Securities; Book-Entry System” in the accompanying prospectus.
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Minimum Denomination
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The Contingent Capital Notes will be issued only in registered form in minimum denominations of £200,000 and in integral multiples of £1,000 in excess thereof.
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Listing
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Application has been made to the LSE for the Contingent Capital Notes to be admitted to trading on the ISM.
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Governing Law
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The Contingent Capital Notes and the Indenture will be governed by, and construed in accordance with the laws of New York except that the subordination provisions, the Solvency Condition, and the waiver of the right to set-off by the holders of the Contingent Capital Notes and by the Trustee acting on behalf of the holders with respect to the Contingent Capital Notes will be governed by, and construed in accordance with the laws of Scotland.
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Conflicts of Interest
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NatWest Markets Securities Inc. (“NWMSI”), an affiliate of NatWest Group plc, is a Financial Industry Regulatory Authority (“FINRA”) member and has a “conflict of interest” within the meaning of FINRA Rule 5121. Accordingly, any offers or sales of any Contingent Capital Notes in the United States will be made in compliance with the applicable provisions of FINRA Rule 5121. NWMSI is not permitted to sell Contingent Capital Notes in this offering to an account over which it exercises discretionary
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authority without the prior specific written approval of the account holder.
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Trustee and Principal Paying Agent
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The Bank of New York Mellon, acting through its London Branch, a banking corporation duly organised and existing under the laws of the State of New York, having its Corporate Trust Office at One Canada Square, London E14 5AL, United Kingdom, will act as the trustee and initial principal paying agent for the Contingent Capital Notes.
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Timing of Delivery
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We currently expect delivery of the Contingent Capital Notes to occur on March 12, 2021.
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Use of Proceeds
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We intend to use the net proceeds of the offering for general corporate purposes and to strengthen further our capital base or the capital base of our subsidiaries and/or the Group. See “Use of Proceeds”.
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RISK FACTORS
Prospective investors should consider
carefully the risk factors incorporated by reference into this prospectus supplement and as set out below as well as the other
information set out elsewhere in this prospectus supplement (including any other documents incorporated by reference herein, including
the 2020 Annual Report and any risk factors included therein, and reach their own views prior to making any investment decision
with respect to the Contingent Capital Notes.
Set out below and incorporated by reference
herein are certain risk factors that, if they were to materialise, could have a material adverse effect on the business, operations,
financial condition or prospects of NatWest Group plc and cause NatWest Group plc’s future results to be materially different
from expected results. NatWest Group plc has described only those risks that it considers to be material. There may be additional
risks that NatWest Group plc currently considers not to be material or of which it is not currently aware, and any of these risks
could have the effects set forth above. All of these factors are contingencies which may or may not occur and NatWest Group plc
is not in a position to express a view on the likelihood of any such contingency occurring.
We believe that the factors described
below with respect to the Contingent Capital Notes represent the principal risks inherent in investing in the Contingent Capital
Notes. Each of the risks highlighted could have a material adverse effect on the amount of principal and interest which investors
will receive in respect of the Contingent Capital Notes. In addition, each of the highlighted risks could adversely affect the
trading price and/or liquidity of the Contingent Capital Notes or the rights of investors under the Contingent Capital Notes and,
as a result, investors could lose some or all of their investment. You should consult your own financial, tax and legal advisers
regarding the risks of an investment in the Contingent Capital Notes. As part of making an investment decision, investors should
make sure to thoroughly understand the terms of the Contingent Capital Notes, such as the provisions governing the Automatic Conversion
(including, in particular, the circumstances under which a Conversion Trigger Event may occur), the agreement by investors to be
bound by the exercise of an UK bail-in power by the relevant UK authority, that interest is due and payable only at our discretion
(and in certain circumstances must be cancelled) and that there is no scheduled repayment date for the principal of the Contingent
Capital Notes. Investors should note that they bear NatWest Group plc’s solvency risk, and that the Group is subject to the
resolution framework applicable to financial institutions in the UK. Prospective investors should also read the detailed information
set out elsewhere in this prospectus supplement (including any documents deemed to be incorporated by reference herein) and reach
their own views prior to making any investment decision.
Risks relating to NatWest Group plc
and the Group
For a description of the risks associated
with NatWest Group plc and the Group, including certain risks associated with investments in NatWest Group plc’s securities,
please refer to the “Risk Factors” sections in the 2020 Annual Report, which is incorporated by reference herein.
Risks Relating to the Contingent Capital
Notes
The Contingent Capital Notes are
complex financial instruments that involve a high degree of risk and may not be a suitable investment for all investors.
The Contingent Capital
Notes are complex financial instruments that involve a high degree of risk. As a result, an investment in the Contingent Capital
Notes and the Settlement Shares issuable following the Conversion Trigger Event will involve certain increased risks compared to
other categories of securities. Each potential investor of the Contingent Capital Notes must determine the suitability (either
alone or with the help of a financial adviser) of that investment in light of its own circumstances. In particular, each potential
investor should:
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(i)
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have sufficient knowledge and experience to make a meaningful evaluation of the Contingent Capital
Notes, the merits and risks of investing in the Contingent Capital Notes and the information contained or incorporated by reference
in this prospectus supplement or any applicable supplement to this prospectus supplement;
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(ii)
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have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Contingent Capital Notes and the impact such investment will have on its overall
investment portfolio;
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(iii)
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have sufficient financial resources and liquidity to bear all of the risks of an investment in
the Contingent Capital Notes, including where the currency for principal or interest payments, i.e., pound sterling, is different
from the currency in which such potential investor’s financial activities are principally denominated and the possibility
that the entire principal amount of the Contingent Capital Notes could be lost, including following the exercise by the relevant
UK resolution authority of any resolution powers;
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(iv)
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understand thoroughly the terms of the Contingent Capital Notes, such as the provisions governing
cancellation of interest, Automatic Conversion (including, in particular, the calculation of the CET1 Ratio, as well as under what
circumstances a Conversion Trigger Event will occur), and be familiar with the behaviour of any relevant indices and financial
markets and the resolution regime applicable to the Group, including the possibility that the Contingent Capital Notes may become
subject to write-down or conversion if the resolution powers or UK bail in powers are exercised; and
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(v)
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be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
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Sophisticated investors
generally do not purchase complex financial instruments that bear a high degree of risk as stand-alone investments. They purchase
such financial instruments as a way to enhance yield with an understood, measured, appropriate addition of risk to their overall
portfolios. A potential investor should not invest in the Contingent Capital Notes unless it has the knowledge and expertise (either
alone or with a financial advisor) to evaluate how the Contingent Capital Notes will perform under changing conditions, the resulting
effects on the likelihood of the Automatic Conversion into Settlement Shares and the value of the Contingent Capital Notes, and
the impact this investment will have on the potential investor’s overall investment portfolio. Prior to making an investment
decision, potential investors should consider carefully, in light of their own financial circumstances and investment objectives,
all the information contained in this prospectus supplement and the base prospectus or incorporated by reference herein.
The Contingent Capital Notes have no scheduled maturity
and no fixed redemption date and you do not have the right to cause the Contingent Capital Notes to be redeemed or otherwise accelerate
the repayment of the principal amount of the Contingent Capital Notes except in very limited circumstances.
The Contingent Capital Notes are perpetual
securities and have no fixed maturity date or fixed redemption date and holders and beneficial owners of the Contingent Capital
Notes may not request any redemption of the Contingent Capital Notes at any time. Although under certain circumstances as described
under “Description of the Contingent Capital Notes—Redemption, Repurchase, Substitution or Variation”
we may redeem the Contingent Capital Notes, we are under no obligation to do so and you have no right to call for their redemption.
There is no right of acceleration in the
case of any non-payment of principal of, or interest on, the Contingent Capital Notes or in the case of a failure by us to perform
any other covenant under the Contingent Capital Notes or under the Indenture. Accordingly, we are not required to make any repayment
of the principal amount of Notes at any time or under any circumstances other than in connection with a Winding-up or Administration
Event occurring prior to the occurrence of a Conversion Trigger Event. In a Winding-up or Administration Event you may receive
some of any resulting liquidation proceeds but only following payment in full of all Senior Creditors.
Interest payments on the Contingent
Capital Notes will be due and payable in our sole and absolute discretion and we may cancel interest payments, in whole or in part,
at any time. We may also be prohibited from making interest payments on the Contingent Capital Notes by applicable laws and regulations.
In each case, cancelled interest shall not be due and shall not accumulate or be payable at any time thereafter and you shall have
no rights thereto.
The following risk
factors highlight some of the circumstances in which (i) we may cancel interest payments, or (ii) we may be required to cancel
interest payments, or (iii) interest payments shall be deemed to have been cancelled, with respect to the Contingent Capital Notes.
Interest payments are entirely discretionary
and may be cancelled by us, in whole or in part, at any time.
Interest on the Contingent
Capital Notes will be due and payable only at our full discretion and we shall have sole and absolute discretion at all times and
for any reason to cancel any interest payment in whole or in part that would otherwise be payable on any Interest Payment Date.
Interest will only be due and payable on an Interest Payment Date to the extent it is not cancelled (or deemed cancelled) in accordance
with the terms of the Contingent Capital Notes.
Following cancellation
of any interest payment, we will not be in any way limited or restricted from making any distribution or equivalent payments in
connection with any Parity Securities or Junior Securities, including any dividend payments on our ordinary shares or preference
shares. We may therefore cancel (in whole or in part) any interest payment on the Contingent Capital Notes at our discretion and
may pay dividends on our ordinary shares or preference shares or on other similar securities notwithstanding such cancellation.
In addition, we may without restriction use funds that could have been applied to make such cancelled payments to meet our other
obligations as they become due.
The Contingent Capital
Notes rank senior to our ordinary shares prior to the occurrence of a Conversion Trigger Event (see also “—Our obligations
under the Contingent Capital Notes are unsecured and subordinated and will be further subordinated upon conversion into Settlement
Shares”). It is the current intention of our board of directors that, whenever exercising its discretion to declare ordinary
share dividends, or its discretion to cancel interest on the Contingent Capital Notes, the board of directors will take into account
the relative ranking of these instruments in our capital structure. However, our board of directors may depart from that current
intention at any time in its sole discretion and will not be required to provide holders of the Contingent Capital Notes with prior
notice of such departure.
The terms of the Contingent Capital
Notes and the Indenture may restrict us from making interest payments on the Contingent Capital Notes in certain circumstances.
In addition to our
right to cancel, in whole or in part, interest payments at any time as described above and, subject to the extent permitted in
the following paragraphs in respect of partial interest payments, we shall not make an interest payment on the Contingent Capital
Notes on any Interest Payment Date (and such interest payment shall therefore be deemed to have been cancelled and thus shall not
be due and payable on such Interest Payment Date), if:
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(a)
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we have an amount of Distributable Items on any such scheduled Interest Payment Date that is less
than the sum of (i) all payments (other than redemption payments which do not reduce Distributable Items) made or declared by us
since the end of our latest financial year and prior to such Interest Payment Date on or in respect of any Parity Securities, the
Contingent Capital Notes, and any Junior Securities and (ii) all payments (other than redemption payments which do not reduce Distributable
Items) payable by us on such Interest Payment Date (x) on the Contingent Capital Notes and (y) on or in respect of any Parity Securities
or any Junior Securities, in the case of each of (i) and (ii), excluding any payments already accounted for in determining the
Distributable Items, or
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(b)
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the Solvency Condition is not (or would not be) satisfied in respect of such interest payment.
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Although we may, in
our sole discretion, elect to make a partial interest payment on the Contingent Capital Notes on any Interest Payment Date, we
may only do so to the extent that such partial interest payment may be made without breaching the restrictions in the preceding
paragraphs. In addition, we may elect to make a full or partial interest payment with respect to a Parity Security and/or a Junior
Security without making an interest payment on any or all of the Contingent Capital Notes on any Interest Payment Date.
We will be responsible
for determining compliance with this restriction, and neither the Trustee nor any agent will be required to monitor such compliance
or to perform any calculations in connection therewith.
As a holding company, the level of our
Distributable Items is affected by a number of factors, and insufficient Distributable Items may restrict our ability to make interest
payments on the Contingent Capital Notes.
As a holding company,
the level of our Distributable Items is affected by a number of factors, principally our ability to receive funds, directly or
indirectly, from our operating subsidiaries in a manner which creates Distributable Items. Consequently, our future Distributable
Items, and therefore our ability to make interest
payments, are a function
of our existing Distributable Items, our future profitability and performance and the ability of our operating subsidiaries to
distribute or dividend profits up the Group structure to us. In addition, our Distributable Items will also be reduced by the redemption
of equity instruments and the servicing of other debt and equity instruments and there are no restrictions on our ability to make
payments on, or redemptions of, Parity Securities or Junior Securities even if that results in our Distributable Items not being
sufficient to make a scheduled interest payment on the Contingent Capital Notes.
The ability of our
subsidiaries to pay dividends and our ability to receive distributions and other payments from its investments in other entities
is subject to their performance and to applicable local laws and other restrictions, including their respective regulatory, capital
and leverage requirements, statutory reserves, financial and operating performance and applicable tax laws, and any changes thereto.
These restrictions include, amongst others, the net asset distribution test (as defined below under “—We may be
restricted in making interest payments on the Contingent Capital Notes by the terms of certain of our other outstanding securities,
provisions of our by-laws or the provisions of the Companies Act.”), which applies to us and our other subsidiaries which
are public companies subject to the provisions of the Companies Act. These laws and restrictions could limit the payment of dividends,
distributions and other payments to us by our subsidiaries, which could in time restrict our ability to fund other operations or
to maintain or increase our Distributable Items. The level of our Distributable Items may be further affected by changes to regulations
or the requirements and expectations of applicable regulatory authorities. In particular, local capital or ring-fencing requirements
both inside and outside the United Kingdom could adversely affect our Distributable Items in the future, such as, the UK ring-fencing
requirements which have applied from January 2019 and the implementation of section 165 of the Dodd-Frank Act, including regulatory
capital and internal loss absorbing capacity requirements and buffers applicable to intermediate holding companies (“IHCs”)
in the United States and potential restrictions on such IHCs’ ability to engage in capital distributions, to the extent applicable
to us.
Further, our Distributable
Items may be adversely affected by the performance of our business in general, changes in our organisational structure, factors
affecting our financial position (including capital and leverage), the economic environment in which we operate and other factors
outside of our control. Our Distributable Items are sensitive to the accounting impact of factors including the redemption of preference
shares, restructuring costs and impairment charges and the carrying value of our investments in subsidiaries which are carried
at the lower of cost and their prevailing recoverable amount. Recoverable amounts depend on discounted future cash flows which
can be affected by restructurings (such as the recent implementation of the UK ring-fencing regime) or unforeseen events. Any of
these factors, including restructuring costs, impairment charges and a reduction in the carrying value of our subsidiaries or a
shortage of dividends from them could limit our ability to maintain sufficient Distributable Items to be able to make interest
payments on the Contingent Capital Notes. We shall not make an interest payment on the Contingent Capital Notes on any Interest
Payment Date (and such interest payment shall therefore be deemed to have been cancelled and thus shall not be due and payable
on such Interest Payment Date) if the level of Distributable Items is insufficient to fund that payment.
Interest payments on the Contingent
Capital Notes shall not be made, in whole or in part, to the extent maximum distributable amounts restrictions apply.
We shall not pay any
interest otherwise scheduled to be paid on the Interest Payment Date if and to the extent that the payment of such interest would
cause, when aggregated with other distributions of the kind referred to in Article 141(2) of the CRD Directive as transposed in
the United Kingdom, including through the rules adopted by the PRA from time to time, the Maximum Distributable Amount (as defined
below) if any, then applicable to us, to be exceeded.
Under these rules,
institutions that fail to meet the combined buffer requirements (as defined below under “—Capital, leverage and
loss-absorbing capacity requirements may restrict us from making interest payments on the Contingent Capital Notes to the extent
they result in restrictions on distributions, in which case we will cancel such interest payments, and you may not be able to anticipate
whether or when we will cancel such interest payments.” are subject to restricted “discretionary payments”
(which are defined broadly as payments relating to CET1, variable remuneration or discretionary pension benefits and payments on
additional tier 1 instruments, such as the Contingent Capital Notes). The restrictions will be scaled according to the extent of
the breach of the combined buffer requirement and calculated as the amount of interim or year-end profits of the institution not
yet incorporated in CET1 capital (and which have been generated since the most recent decision on the distribution of profits),
multiplied by a factor ranging from 0 to 0.6 depending on the size of the CET1 capital shortfall against the combined
buffer requirement.
Such calculation will result in a “maximum distributable amount” in each relevant period (a “Maximum Distributable
Amount”). As an example, the scaling is such that in the bottom quartile of the combined buffer requirement, no discretionary
distributions will be permitted to be paid. To limit the amount of historically recognised CET1 included in the Maximum Distributable
Amount, the PRA proposed in its Consultation Paper 17/20 published in October 2020 (“Consultation Paper”) to only include
profits from the past four calendar quarters, net of distributions. PRA policy statements published in December 2020 (PS26/20 and
PS29/20) amended the definition of the maximum distributable amount as proposed in the Consultation Paper. In the event of a breach
of the combined buffer requirement, we will be required to calculate our Maximum Distributable Amount, and as a consequence it
may be necessary for us to reduce discretionary payments to the extent of the breach, including by exercising our discretion to
cancel (in whole or in part) interest payments in respect of the Contingent Capital Notes.
Additionally, under recent reforms, Article
141a of CRD Directive better clarifies, for the purposes of restrictions on distributions, the relationship between the additional
own funds requirements, the minimum own funds requirements and the combined buffer requirement (the so called “stacking order”),
with Article 141 of the CRD Directive having been amended to reflect the stacking order in the calculation of the Maximum Distributable
Amount. Under this new provision, an institution such as ours shall be considered as failing to meet the combined buffer requirement
for the purposes of Article 141 of the CRD Directive where it does not have own funds and eligible liabilities in an amount and
of the quality needed to meet at the same time the combined buffer requirement as well as each of the minimum own funds requirements
(Pillar 1 requirements defined below) and the additional own funds requirements (Pillar 2A requirements defined below). In addition,
Article 16a of the Directive 2014/59/EU of the European Parliament and of the Council establishing a framework for the recovery
and resolution of credit institutions and investment firms of 15 May 2014, as amended as amended or replaced from time to time
(including, without limitation, by Directive (EU) 2019/879) (the “BRRD”) better clarifies the stacking order between
the combined buffer requirement and the minimum requirements for own funds and eligible liabilities (“MREL”) requirement.
Pursuant to this new provision, a resolution authority has the power to prohibit an entity from distributing more than the “maximum
distributable amount for own funds and eligible liabilities” (calculated in accordance with Article 16a(4) of the BRRD (the
“M-MDA”)) where the combined buffer requirement and the MREL requirement are not met. The PRA has already indicated
in Supervisory Statement 16/16 that firms shall not double count CET1 capital towards their MREL requirements and capital buffer
requirements and that it would consider the use of institution specific powers under Section 55 of FSMA to remedy any shortfall,
including potential restrictions on distributions. HM Treasury has therefore indicated that it does not intend to implement Article
16a of the BRRD into domestic law following the United Kingdom’s withdrawal from the European Union. Furthermore, a new Article
141b of the CRD Directive introduced a restriction on distributions in the case of a failure to meet the leverage ratio buffer
requirement, with provision for a new leverage ratio “maximum distributable amount” (“L-MDA”) to be calculated.
The L-MDA requirement will apply only to Globally Systemically Important Banks (“G-SIBs”) and the PRA has indicated
in its Consultation Paper that it does not currently propose to implement the requirement for a G-SIBs leverage ratio buffer.
Furthermore, you will
bear the risk of changes to the Group’s capital, leverage and/or MREL resources in general and, in particular, to the Regulatory
Group’s CET1 Ratio (including changes to its CET1 Capital and Risk Weighted Assets). Further changes to these rules could
result in more CET1 capital required to be held by a financial institution in order to prevent the Maximum Distributable Amount,
M-MDA and/or L-MDA, as applicable, restrictions from applying.
Under the Capital
Regulations, the applicable combined buffer requirements will be positioned above the relevant MREL requirement. An institution
that does not comply with its MREL requirement, therefore, will need to use CET1 that previously counted towards meeting the combined
buffer requirement to make up the shortfall. Accordingly, any failure by us to meet our MREL requirement could negatively impact
our combined buffer requirement and result in, among other things, the imposition of restrictions or prohibitions on discretionary
payments.
Capital, leverage and loss-absorbing
capacity requirements may restrict us from making interest payments on the Contingent Capital Notes to the extent they result in
restrictions on distributions, in which case we will cancel such interest payments, and you may not be able to anticipate whether
or when we will cancel such interest payments.
The capital, resolution
and leverage framework to which we are subject requires us to hold certain levels of capital, including CET1 capital and additional
loss absorbing capacity (MREL). A failure to hold sufficient levels of capital, including CET1 capital, or MREL, as required by
these rules, as may be amended from time to time, may
result in restrictions
on distributions being applied pursuant to which we may be required to cancel interest payments on the Contingent Capital Notes.
We are required, on
a consolidated basis, to hold a minimum amount of regulatory capital of 8% of risk weighted assets of which at least 4.5% must
be CET1 capital and at least 6% must be tier 1 capital (of which a maximum of 1.5% may be comprised of additional tier 1 instruments)
and a maximum of 2% tier 2 instruments (the “Pillar 1 requirements”). In addition, the PRA requires us to hold extra
capital requirements to cover risks not covered or insufficiently covered by the Pillar 1 requirements (the “Pillar 2A requirements”).
Our current Pillar 2A requirement is 3.4% of Risk Weighted Assets as at December 31, 2020, and at least 1.9% of our total Pillar
2A requirements must be met with CET1 capital. We are also required to meet a firm specific Pillar 2B buffer requirement set by
the PRA (“PRA buffer”) which is based on various factors including firm-specific stress test results, credible recovery
and resolution planning, leverage, systemic importance and weaknesses in the firms’ risk management and governance. The PRA
buffer is set at a level which the PRA believes will ensure that a bank can continue to meet minimum Pillar 1 and Pillar 2A requirements
during a stressed period and may also be used to address any significant weaknesses in a firm’s risk management and governance,
and to reflect at Group level the application of the systemic risk buffer to subsidiaries of the Group. The PRA assesses the PRA
buffer applicable to an institution annually (or more often if a firm’s circumstances change). Where the PRA considers there
is an overlap between the combined buffer and the PRA buffer, the PRA buffer will be set as the excess capital required over and
above the combined buffer.
In response to the
economic effect from the Covid-19 pandemic, the PRA announced that it will set Pillar 2A as a nominal amount in the 2020 and 2021
Supervisory Review and Evaluation Process, instead of a percentage of total Risk Weighted Assets and it will continue to regularly
assess the appropriate level of Pillar 2A. In July 2020, the PRA published Policy Statement PS15/20 (Pillar 2A: Reconciling capital
requirements and macroprudential buffers), stating that the PRA will apply a reduction in the variable Pillar 2A capital requirement,
where relevant, on or before 16 December 2020. This is in response to the decision taken by the Bank of England’s Financial
Policy Committee (the “FPC”) to increase the UK countercyclical capital buffer (“CCyB”) rate that it expects
to set in a standard risk environment from 1% to 2%. The reduction will only relate to the 1 percentage point structural increase
in the standard risk environment UK CCyB rate announced by the FPC. Any changes in the UK CCyB rate occasioned by the FPC’s
view of the prevailing risk environment would not be reflected in changes in Pillar 2A requirements. Pursuant to policy statements
published in December 2020 (PS26/20 and PS29/20), in addition to increasing the Pillar 2A composition requirement from 56% CET1
capital to 56.25% CET1 capital, the PRA removed the restriction on firms from making distributions that would cause their CET1
levels to fall into the combined buffer from 11:00 pm on 31 December 2020, but expects that firms provide the PRA with advance
notice of any distribution that would bring a firm’s capital levels into the combined buffer, a requirement consistent with
the Basel Committee on Banking Supervision (“BCBS”) standards.
We are also required
to meet capital buffer requirements that are in addition to the Pillar 1 requirements and Pillar 2 requirements and are required
to be met with CET1 capital (the “CRD buffers”). The combination of the capital conservation buffer (which increased
to 2.5% from 2019) (“CCB”), the CCyB (which will vary over time depending on the effective rates set by regulators
in countries where the Group has relevant credit exposure) and the systemic risk buffer constitutes the “combined buffer
requirement”. The FPC is responsible for determining which institutions should hold the systemic risk buffer, and if so,
how large the buffer should be (up to a maximum of 3%). The PRA, which is responsible for applying the framework set by the FPC
and has indicated that it would keep the policy under review to assess whether any changes would be required due to changes in
the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.
The CCB is a standard buffer of 2.5% of
Risk Weighted Assets designed to provide for losses in the event of stress. The CCyB varies over time; the amount of the buffer
is determined by us as the weighted average of the buffer rates in effect as set by the FPC in respect of the relevant UK credit
risk exposures, and the relevant regulators in the jurisdictions where the Group has relevant credit exposures. The CCyB for the
UK is currently set at 0% as of March 2020. The FPC reviews this rate quarterly in light of the evolution of the overall risk environment
and may elect to increase or decrease this rate at any time. Generally, any increase in the CCyB rate will take effect one year
after the decision to increase it, in order to give institutions time to raise the necessary additional capital if required. A
decrease may take effect immediately. In March 2020, as part of the COVID-19 relief measures, the PRA confirmed that all elements
of banks’ capital and liquidity buffers can be drawn down as necessary to support the economy through the temporary shock.
In addition, on 26 June 2020, the European Parliament passed an amended regulation to the Capital Requirements Regulation (“CRR”)
in response to the COVID-19 pandemic.
NatWest Group applied a number of the CRR
amendments in connection with its reporting for the third quarter. For more information on the impact on capital and leverage of
the CRR amendment and other relief measures, see “Capital, liquidity and funding risk—Key developments”
of the Q3 2020 Interim Report.
Although we are not
currently classified as a G-SIB, it has been classified as an ‘other’ systemically important institution (“O-SII”)
by the PRA. The O-SII buffer is currently set to zero in the UK.
The systemic risk
buffer (“SRB”) came into force for UK ring-fenced banks from August 1, 2019. Although the SRB will apply to the ring-fenced
bank sub-group within the Group, the PRA has included in the Group’s PRA buffer (as defined below) an amount equivalent to
the SRB; an additional capital requirement of 1.7% therefore applies at Group level (reflecting an SRB of 2.0% and that certain
of the Group’s Risk Weighted Assets are held outside the ring-fenced bank sub-group).
In its Consultation
Paper and in PS26/20, the PRA set out its intention to implement the proposals contained in HM Treasury’s draft Financial
Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit)
Regulations 2020 to replace the SRB with an O-SII Buffer. The FPC would set the framework for the O-SII buffer and review it periodically
and the PRA would be able to apply an O-SII buffer to the same set of firms, and at the same level of consolidation, as for the
existing SRB. In addition, the PRA proposed not to introduce an SRB at this time. However, the PRA may consult on introducing one
in future should that be necessary and appropriate.
The PRA has also introduced
requirements in relation to minimum leverage ratios pursuant to which we are required to meet (i) a minimum leverage ratio requirement
set at 3.25% (calculated by dividing a firm’s Tier 1 capital by its total exposure measure (as defined in the Capital Regulations)
(the “PRA Leverage Ratio”), (ii) an additional leverage ratio buffer that is calibrated at 35% of the systemic risk
buffer (“ALRB”) (applicable to the Group from August 1, 2019) and (iii) a countercyclical leverage ratio buffer that
is calibrated at 35% of the CCyB (“CCyLB”). At least 75% of the Tier 1 capital required to meet the PRA Leverage Ratio
must consist of CET1 capital (with the remainder to be met with additional tier 1 capital), while the ALRB and CCyLB must be met
entirely with CET1 capital. As at the date of this prospectus supplement, the leverage ratio framework does not give rise to higher
capital requirements, including regulatory buffer requirements for the Group than the risk-based capital framework.
Failure to meet the
PRA buffer or to satisfy leverage ratios or buffers could result in the imposition of a capital restoration plan. Such capital
restoration plan may impose restrictions on discretionary payments, which may result in in a need for management actions including
the cancellation (in whole or in part) of interest payments in respect of the Contingent Capital Notes.
Changes to the capital
and leverage frameworks may increase our capital requirements and may increase the risk that we will be subject to restrictions
on distributions (resulting in our being required to cancel (in whole or in part) interest payments in respect of the Contingent
Capital Notes. For example, the Basel Committee revised the Basel III capital framework in December 2017 to incorporate a leverage
ratio buffer for G-SIBs (the “Basel III leverage ratio buffer”) that will be set at 50% of the Basel G-SIB buffer (which
has been implemented in the EU as the G-SII buffer) and would restrict a G-SIB from making capital distributions (including interest
payments on additional tier 1 capital instruments, such as the Contingent Capital Notes) if the G-SIB’s Basel III leverage
ratio does not meet or exceed its Basel III leverage ratio buffer. The PRA has indicated in its Consultation Paper that it does
not currently propose to implement this requirement. In June 2018, the FPC announced it intended to conduct a comprehensive review
of the leverage ratio framework in light of the revised international standards, including Basel III and CRD Regulation. In particular,
this review would set out the effect of extending leverage ratio requirements and buffers to PRA-regulated firms. In addition,
our minimum regulatory capital requirements may increase as a result of increased provisioning under stress associated with our
adoption of IFRS 9 as of January 1, 2018, the magnitude of which will depend upon several factors, including the specified stress
scenario. See “—The circumstances surrounding or triggering the Automatic Conversion are inherently unpredictable
and may be caused by factors outside of our control. We have no obligation to operate our business in such a way, or take any mitigating
actions, to maintain or restore our CET1 Ratio to avoid a Conversion Trigger Event and actions it take could result in our CET1
Ratio falling”.
Our capital requirements,
including Pillar 2 requirements, and MREL requirements are, by their nature, calculated by reference to a number of factors any
one of which or combination of which may not be easily
observable or capable
of calculation by investors. Investors may not be able to predict accurately the proximity of the risk of discretionary payments
on the Contingent Capital Notes being prohibited from time to time as a result of the operation of the Maximum Distributable Amount,
M-MDA and/or L-MDA, as applicable, restrictions and other regulatory constraints. In addition, although the PRA has indicated that
a breach of the PRA buffer, unlike a breach of the combined buffer requirement, will not lead to the automatic capital distribution
restrictions resulting from the application of the Maximum Distributable Amount, M-MDA and/or L-MDA, as applicable, rules, if the
PRA determines that a firm has insufficient capital to meet its PRA buffer, it will be subject to enhanced supervisory action and
will be required to prepare a capital restoration plan. In addition, any increases in our PRA buffer requirements would require
us to hold additional CET1 capital and therefore may increase the risk that Maximum Distributable Amount, M-MDA and/or L-MDA, as
applicable, restrictions may apply.
We may be restricted in making interest
payments on the Contingent Capital Notes by the terms of certain of our other outstanding securities, provisions of our by-laws
or the provisions of the Companies Act.
We may be restricted
by the terms of our Parity Securities from making interest payments on the Contingent Capital Notes if we do not make payments
on such Parity Securities, including dividend payments on certain of our preference shares. In certain circumstances, we may have
no choice but to cease payments on such Parity Securities. For example, the Companies Act imposes limitations on distributions
by us to our members (including preference shareholders) if the amount of our net assets is less than the aggregate of our called-up
share capital and undistributable reserves (the “net asset distribution test”). If we are not permitted to make payments
on certain of our preference shares due to a failure of the net asset distribution test, or otherwise, we shall not pay any interest
on the Contingent Capital Notes otherwise scheduled to be paid on an Interest Payment Date.
No interest or other payments shall
be made on the Contingent Capital Notes following the occurrence of a Conversion Trigger Event or of a Winding-up or Administration
Event.
Any interest in respect
of an interest period ending on any Interest Payment Date falling between the Conversion Trigger Event and the Conversion Date
shall be deemed to have been cancelled upon the occurrence of such Conversion Trigger Event and shall not be due and payable.
In addition, following
an Automatic Conversion, no amount shall be due and payable to the holders or beneficial owners of the Contingent Capital Notes,
and our liability to pay any such amounts (including the principal amount of, or any interest in respect of, the Contingent Capital
Notes) shall be automatically released, and the holders and beneficial owners shall not have the right to give a direction to the
Trustee with respect to the Conversion Trigger Event and any related Automatic Conversion.
In the event of a
Winding-up or Administration Event, any accrued but unpaid interest on the Contingent Capital Notes shall be deemed to have been
cancelled upon the occurrence of such Winding-up or Administration Event and shall not become due and payable at any time.
We may be restricted in making interest
payments on the Contingent Capital Notes by our regulators in certain circumstances.
The PRA has wide-ranging
powers under section 55M of the Financial Services and Markets Act 2000 (“FSMA”) (implementing Article 104 of the CRD
Directive) and under section 192C of FSMA (in respect of bank holding companies); for the purpose of the supervisory review and
evaluation process under that directive. These powers include, inter alia, a general power to restrict or prohibit interest
payments to holders of additional tier 1 capital securities, such as the Contingent Capital Notes. There are no ex-ante limitations
on the PRA’s discretion to exercise this power. If the PRA exercises this power, we will exercise our discretion to cancel
(in whole or in part, as required by the PRA) interest payments in respect of the Contingent Capital Notes. Additionally, there
is a new regime for holding companies that substantively control their group to be subject to supervisory approval and consolidated
supervision. Approval must be sought from the PRA by 28 June 2021 and, if approved, holding companies will be subject to direct
supervision to ensure compliance with consolidated or sub-consolidated prudential requirements and the PRA will have additional
powers to enforce compliance.
In addition, pursuant
to the rules transposing Article 63(j) of the BRRD, the PRA has the power to alter the amount of interest payable under debt instruments
issued by banks subject to resolution proceedings and the date on
which the interest
becomes payable under the debt instrument (including the power to suspend payment for a temporary period).
Such powers may be
amended or extended from time to time, or new powers restricting our ability to make interest payments on the Contingent Capital
Notes may come into effect subsequent to the date of this prospectus as a result of changes in the applicable regulatory framework.
For example, amendments were proposed by certain Members of the European Parliament to the CRR that provided for firms benefiting
from any temporary capital and operational relief measures related to COVID-19 to refrain from making any distributions to holders
of AT1 securities. Although these proposals were not adopted, it cannot be ruled out that similar proposals will be introduced
in the future. Speculation around the implementation of such restrictions could have a significant adverse effect on the trading
price of the Contingent Capital Notes and if such proposals are implemented, we may be required to cancel interest payments on
the Contingent Capital Notes.
Failure to meet the requirements of
regulatory stress tests could result in the Group taking steps to improve its capital position and may otherwise adversely affect
the Group.
The Group and certain
of its members are subject to supervisory stress testing exercises in a number of jurisdictions. These exercises are designed to
assess the resilience of banks to adverse economic or financial developments and ensure that they have robust, forward-looking
capital planning processes that account for the risks associated with their business profile. Assessment by regulators is on both
a quantitative and qualitative basis, the latter focusing on the Group’s, or certain of its members’ business model,
data provision, stress testing capability and internal management processes and controls.
Failure to meet requirements
of regulatory stress tests, or the failure by regulators to approve the stress test results and capital plans of the Group or certain
of its members, as applicable, could result in the Group or certain of its members being required to enhance their capital position,
including, for example, an additional PRA buffer which may be set by the PRA in certain circumstances, as set out in the PRA’s
Policy Statement PS17/15 (Assessing capital adequacy under Pillar 2) and the related Statement of Policy (The PRA’s
methodologies for setting Pillar 2 capital). This may result in a need for management actions, such as reducing capital and/or
leverage exposures and/or taking steps to conserve capital, which could include reducing discretionary payments (for example, potentially
exercising our discretion to cancel (in whole or in part) interest payments in respect of the Contingent Capital Notes).
Cancelled interest shall not be due
and shall not accumulate or be payable at any time thereafter or constitute an event of default and you shall have no rights thereto.
If we elect to cancel
any scheduled interest payment or any such interest payment is deemed to be cancelled for any of the reasons described herein,
such interest payment shall not be or become due and shall not accumulate or be payable at any time thereafter and you shall have
no rights thereto or claim against us with respect to such interest amount or be able to accelerate the principal of the Contingent
Capital Notes as a result of such interest cancellation. If we do not make an interest payment on the relevant Interest Payment
Date (or if we elect to make a payment of a portion of, but not all of such interest payment) such non-payment shall evidence the
exercise of our discretion to cancel such interest payment, or the portion of such interest payment not paid. Furthermore, no cancellation
of interest in accordance with the terms of the Contingent Capital Notes or the Indenture shall constitute a default in payment
or otherwise under the terms of the Contingent Capital Notes or the Indenture.
If practicable, we
will provide notice of any cancellation or deemed cancellation of interest (in each case, in whole or in part) to you through the
Clearing Systems (or, if you hold the Contingent Capital Notes in definitive form, directly to the address shown in the register
for the Contingent Capital Notes) and to the Trustee directly on or prior to the relevant Interest Payment Date. However, failure
to provide such notice will not have any impact on the effectiveness of, or otherwise invalidate, any such cancellation of interest,
or give you any rights as a result of such failure.
No cancellation of
interest as described above shall constitute a default in payment or otherwise under the terms of the Contingent Capital Notes
or the Indenture and holders and beneficial owners shall have no rights thereto or to receive any additional interest or compensation
as a result of such cancellation or deemed cancellation. See also “—The Contingent Capital Notes do not contain
events of default and the remedies available to you under the Contingent Capital Notes are limited”.
The Contingent Capital Notes may
be traded with accrued interest, but under certain circumstances described above, such interest may be cancelled and not paid on
the relevant Interest Payment Date.
The Contingent Capital
Notes may trade, and/or the prices for the Contingent Capital Notes may appear, on the ISM of the LSE and in other trading systems
with accrued interest. If this occurs, purchasers of Contingent Capital Notes in the secondary market will pay a price that reflects
such accrued interest upon purchase of the Contingent Capital Notes. However, if a payment of interest on any Interest Payment
Date is cancelled or deemed cancelled (in each case, in whole or in part) as described herein and thus is not due and payable,
purchasers of such Contingent Capital Notes will not be entitled to that interest payment (or if we elect to make a payment of
a portion, but not all, of such interest payment, the portion of such interest payment not paid) on the relevant Interest Payment
Date. This may affect the value of your investment in the Contingent Capital Notes.
The interest rate on the Contingent
Capital Notes will be reset on each Reset Date, which may affect the market value of the Contingent Capital Notes.
From and including
the Issue Date, the Contingent Capital Notes will initially earn interest at a fixed rate of 4.500% per annum to, but excluding,
the First Reset Date. However, from, and including, the First Reset Date and every Reset Date thereafter, the interest rate will
be reset to a rate per annum which will equal to the sum of the applicable Reference Bond Rate (as defined under “Description
of the Contingent Capital Notes—Interest”) as determined by the Calculation Agent on the relevant Reset Determination
Date and 3.992%, converted to a quarterly rate in accordance with market convention (rounded to three decimal places with 0.005
being rounded down). This reset rate following any Reset Date could be less than the initial interest rate and/or the interest
rate that applies immediately prior to such Reset Date, which could affect the amount of any interest payments under the Contingent
Capital Notes and, by extension, could affect the market value of the Contingent Capital Notes.
Our obligations under the Contingent Capital Notes
are unsecured and subordinated and will be further subordinated upon conversion into Settlement Shares.
Our obligations under the Contingent Capital
Notes will be unsecured and subordinated and will rank junior in priority of payment to the current and future claims of all of
our Senior Creditors. If a Winding-up or Administration Event occurs prior to the date on which the Conversion Trigger Event occurs,
we will pay each holder or beneficial owner of the Contingent Capital Notes an amount that would have been payable if, on the day
prior to the commencement of the Winding-up or Administration Event and thereafter, such holder or beneficial owner of the Contingent
Capital Notes had been the holder of one of a class of Notional Preference Shares which are an actual or notional class of preferences
shares in our capital, having an equal right to a return of assets in a Winding-up or Administration Event to, and so ranking pari
passu with, the most senior class or classes of our issued preference shares with non-cumulative dividends, if any, in our
capital from time to time and which have a preferential right to a return of assets in the Winding-up or Administration Event over,
and so rank ahead of, all other classes of issued shares for the time being in our capital but ranking junior to the claims of
Senior Creditors and junior to any notional class of preference shares in our capital which is referenced in any of our instruments
for the purposes of determining a claim in our winding-up or administration, and, as so referenced, (i) is expressed to have a
preferential right to a return of assets in our winding-up or administration over the holders of all other classes of shares for
the time-being in our capital and (ii) is not expressed to rank junior to any other notional class of preference shares in our
capital. If a Winding-up or Administration Event occurs at any time on or after the date on which the Conversion Trigger Event
occurs but the Settlement Shares to be issued and delivered to the Settlement Share Depository on the Conversion Date have not
been so delivered, we will pay such amount, if any, as would have been payable to you in a Winding-up or Administration Event as
if the Conversion Date in respect of the Automatic Conversion had occurred immediately before the occurrence of a Winding-up or
Administration Event (and, as a result, you were the holder of such number of our ordinary
shares as you would have been entitled to receive on the Conversion Date, ignoring for this purpose our right to make an election
for a Settlement Shares Offer to be effected), regardless of whether the Solvency Condition (as described herein) is satisfied
on such date.
Subject to complying with applicable regulatory
requirements, we expect from time to time to incur additional indebtedness or other obligations that will constitute senior and
other subordinated indebtedness that will rank ahead of the Contingent Capital Notes, and the Contingent Capital Notes do not contain
any provisions restricting our ability or our subsidiaries ability to incur such senior or subordinated indebtedness. Although
the Contingent Capital Notes may pay a higher rate of interest than other comparable securities which are not as deeply subordinated,
there
is a real risk that you will lose all or
some of your investment should we become insolvent since our assets would be available to pay such amounts only after all of our
Senior Creditors have been paid in full.
Therefore, if a Winding-up or Administration
Event were to occur, our liquidator or administrator would first apply our assets to satisfy all rights and claims of Senior Creditors.
For the avoidance of doubt, holders of any of our existing or future Tier 2 capital instruments (as described in the Capital Regulations)
will be Senior Creditors. If we do not have sufficient assets to settle claims of such Senior Creditors in full, your claims under
the Contingent Capital Notes will not be settled and, as a result, you will lose the entire amount of your investment in the Contingent
Capital Notes. The Contingent Capital Notes will share equally in payment with claims under Parity Securities if we do not have
sufficient funds to make full payments on all of them, as applicable. As at the date of this prospectus supplement, the claims
of holders of existing series of Contingent Convertible Securities issued by us under the Original Indenture would rank equally
with those of holders of the Contingent Capital Notes in a Winding-up or Administration Event and the claims of holders of future
series of Contingent Convertible Securities issued under the Original Indenture may (subject to the terms thereof) also rank equally
with those of holders of the Contingent Capital Notes. In such a situation, you could lose all or part of your investment.
In addition, you should be aware that following
a Conversion Trigger Event, you will be, effectively, further subordinated as you will be treated as, and subsequently become,
holders of ordinary shares, (or, if we elect that a Settlement Shares Offer be made, and only a portion of the Settlement Shares
are sold, ordinary shares and cash) even if existing subordinated indebtedness and preference shares remain outstanding. There
is a risk that you will lose the entire amount of your investment, regardless of whether or not we have sufficient assets available
to settle what would have been your claims under the Contingent Capital Notes or of securities subordinated to the same or greater
extent as the Contingent Capital Notes, in winding-up proceedings or otherwise.
The Contingent Capital Notes are
our exclusive obligations and we are a holding company reliant on our subsidiaries.
The Contingent Capital
Notes are obligations exclusively of ours and are not guaranteed by any other person. We are a holding company and our principal
source of income is from operating subsidiaries which hold the principal assets of the Group. As a separate legal entity, we rely
on, among other things, interest payments, dividends, distributions and other advances from our subsidiaries in order to be able
to meet our obligations to you. The ability of our subsidiaries and affiliates to pay dividends could be restricted by changes
in regulation, contractual restrictions, exchange controls and other requirements.
In addition, as a
holder of ordinary shares in our subsidiaries, our right to participate in the assets of any subsidiary if such subsidiary is liquidated
will be subject to the prior claims of such subsidiary’s creditors and preference shareholders (save to the extent that we
have other claims that rank ahead of or pari passu with such claims of the subsidiary’s creditors and/or preference
shareholders). Therefore, if any subsidiary of ours were to be wound up, liquidated or dissolved (i) you would have no right to
proceed against the assets of such subsidiary and (ii) the liquidator of such subsidiary would first apply the assets of such subsidiary
to settle the claims of such subsidiary’s creditors and/or preference shareholders which rank ahead of us (in respect of
its holding of ordinary shares of such subsidiary) before we would be entitled to receive any distributions in respect of such
subsidiary’s ordinary shares. Similarly, if any subsidiary of ours was subject to resolution proceedings (i) you would have
no direct recourse against such subsidiary and (ii) you may also be exposed to losses pursuant to the exercise by the relevant
resolution authority of its powers.
We have discretion
as to how we makes our investments in or advances funds to our subsidiaries, including the proceeds of issuances of debt securities
such as the Contingent Capital Notes, and as to how we may structure existing investments and funding in the future. The ranking
of our claims in respect of such investments and funding in the event of the liquidation of a subsidiary, and their treatment in
resolution, will depend in part on the form and structure of any such investments but will generally be subordinated to any depositors
of such subsidiary. The purposes of such investments and funding may include, among other things, the provision of different amounts
or types of capital or funding to particular subsidiaries, including for the purposes of meeting regulatory requirements, such
as capital adequacy requirements and MREL requirements in respect of such subsidiaries, which in most cases will require our claims
to rank below those of ordinary unsecured creditors of the relevant subsidiary.
In addition, the terms
of some loans or investments made by us in capital instruments and MREL instruments issued by our subsidiaries may contain contractual
mechanisms that, upon the occurrence of a trigger related to the
prudential or financial
condition of such subsidiary, would result in a write-down of the claim or a change in the ranking and type of claim that we have
against such subsidiary. Such loans to and investments in our subsidiaries may also be subject to the exercise of the statutory
write-down and conversion of capital instruments power or the bail-in power by the relevant resolution authority or such subsidiaries
of ours may otherwise be subject to resolution proceedings. Any such actions could materially impair our ability to receive payment
from an affected subsidiary and could therefore affect its ability to make payments on the Contingent Capital Notes.
The Contingent Capital Notes may
be subject to Automatic Conversion following the occurrence of a Conversion Trigger Event, in which case the Contingent Capital
Notes will be converted into Settlement Shares and, as a result, you could lose all or part of your investment in the Contingent
Capital Notes.
With respect to the
Contingent Capital Notes, a Conversion Trigger Event shall occur if at any point in time the CET1 Ratio of the Regulatory Group
(which will be calculated on a consolidated and fully loaded basis) is less than 7.00%. For a discussion of the risks associated
with the calculation of our CET1 Ratio see “—Changes to the calculation of CET1 capital and/or risk weighted assets
may negatively affect the Regulatory Group’s CET1 Ratio, thereby increasing the risk of a Conversion Trigger Event which
would lead to the Automatic Conversion, as a result of which your Contingent Capital Notes will automatically be converted into
Settlement Shares”.
Upon the occurrence
of the Automatic Conversion following the Conversion Trigger Event (each as defined under “Description of the Contingent
Capital Notes—Conversion—Automatic Conversion”), the Contingent Capital Notes will be converted into Settlement
Shares on the Conversion Date. Once the Settlement Shares have been issued and delivered to the Settlement Share Depository, all
of our obligations under the Contingent Capital Notes shall be irrevocably and automatically released and under no circumstances
shall such released obligations be reinstated. As a result, you could lose all or part of the value of your investment in the Contingent
Capital Notes, as, following the Automatic Conversion, you will receive only (i) the Settlement Shares or, if you elect, American
Depository Shares represented by American Depository receipts (“ADSs”) (if we do not elect that a Settlement Shares
Offer be made), or (ii) the Alternative Consideration, which shall be composed of Settlement Shares, or, if you elect, ADSs, and/or
cash depending on the results of the Settlement Shares Offer (if we elect that a Settlement Shares Offer be made) and the value
of any Settlement Shares, or, if you elect, ADSs and/or cash received upon Automatic Conversion may have a market value significantly
below the principal amount of the Contingent Capital Notes you hold.
The occurrence of
an Automatic Conversion shall not constitute an event of default or an Enforcement Event under the terms of the Contingent Capital
Notes or the Indenture.
The circumstances surrounding or triggering the
Automatic Conversion are inherently unpredictable and may be caused by factors outside of our control. We have no obligation to
operate our business in such a way, or take any mitigating actions, to maintain or restore our CET1 Ratio to avoid a Conversion
Trigger Event and actions we take could result in our CET1 Ratio falling.
A Conversion Trigger Event will occur at
any time if our fully loaded CET1 Ratio is less than 7.00%. The occurrence of a Conversion Trigger Event and therefore the Automatic
Conversion, is inherently unpredictable and depends on a number of factors, some of which may be outside of our control. A Conversion
Trigger Event could occur at any date, even though we currently publicly report our fully loaded CET1 Ratio only as of each quarterly
period end. The PRA, as part of its supervisory activity, may instruct us to calculate such ratio as of any date, including if
we are subject to recovery and resolution actions by the relevant UK resolution authority (as defined under “Description
of the Contingent Capital Notes—Agreement with respect to the Exercise of the UK bail-in power”), or we might otherwise
at any time calculate such ratio in our own discretion. As such, the Automatic Conversion could occur at any time. Moreover, it
is likely that the relevant UK authority would allow a Conversion Trigger Event to occur rather than to resort to the use of public
funds. A decline or perceived decline in the CET1 Ratio may have a significant adverse effect on the trading price of the Contingent
Capital Notes.
The calculation of the Regulatory Group’s
fully loaded CET1 Ratio could be affected by, among other things, the growth of our business and our future earnings, shock stress
events that have a material negative impact on our capital, declared dividend payments, accounting changes, pension contributions,
regulatory changes (including changes to definitions and calculations of regulatory capital, including CET1 Capital and Risk Weighted
Assets (each of which shall be calculated by us on a fully loaded, consolidated basis and such calculation shall be binding on
the Trustee and on the registered holders of the Contingent Capital Notes)), actions that the Regulatory Group is
required to take at the direction of the
PRA, and the Regulatory Group’s ability to manage Risk Weighted Assets in both our ongoing businesses and those which we
may seek to exit. In addition, the Regulatory Group has capital resources and Risk Weighted Assets denominated in foreign currencies,
and changes in foreign exchange rates will result in changes in the pound sterling equivalent value of foreign currency denominated
capital resources and Risk Weighted Assets. Actions that the Regulatory Group takes, either pursuant to its strategic or restructuring
plan or otherwise, could also affect its CET1 Ratio, including causing it to decline. The Regulatory Group has no obligation to
increase its CET1 Capital, reduce its Risk Weighted Assets or otherwise operate our business in such a way, or take mitigating
actions in order to prevent its CET1 Ratio from falling below 7.00%, or to maintain or increase our CET1 Ratio or to otherwise
consider the interests of the holders of the Contingent Capital Notes in connection with any of its business decisions that might
affect its CET1 Ratio.
Because of the inherent uncertainty regarding
whether a Conversion Trigger Event will occur and there being no affirmative obligation on us or the Regulatory Group to prevent
its occurrence, it will be difficult to predict when, if at all, Automatic Conversion will occur. Accordingly, the trading behaviour
of the Contingent Capital Notes may not necessarily follow the trading behaviour of other types of subordinated debt securities,
including our other subordinated debt securities. Fluctuations in the CET1 Ratio may be caused by changes in the amount of CET1
Capital and Risk Weighted Assets as well as changes to their respective definitions under the capital adequacy standards and guidelines
set by the PRA. Any indication that the Regulatory Group’s CET1 Ratio is moving towards the level which would cause the occurrence
of a Conversion Trigger Event may have an adverse effect on the market price and liquidity of the Contingent Capital Notes. Therefore,
you may not be able to sell your Contingent Capital Notes easily or at prices that will provide you with a yield comparable to
other types of subordinated debt securities, including our other subordinated debt securities. In addition, the risk of Automatic
Conversion could drive down the price of our ordinary shares and have a material adverse effect on the market value of any Settlement
Shares received upon Automatic Conversion.
Changes to the calculation of CET1
capital and/or risk weighted assets may negatively affect the Regulatory Group’s CET1 Ratio, thereby increasing the risk
of a Conversion Trigger Event which would lead to the Automatic Conversion, as a result of which your Contingent Capital Notes
will automatically be converted into Settlement Shares.
We calculate the capital
resources of the Regulatory Group for regulatory purposes on the basis of “common equity tier 1 capital” or “CET1
Capital” and calculate our “risk weighted assets”, which represent assets adjusted for their associated risks,
on the basis set out under CRD, as transposed in the UK. Each of these definitions are calculated in accordance with the capital
adequacy standards and guidelines of the PRA applicable to the Regulatory Group on the relevant date.
The CRD sets out a
minimum pace of introduction of these enhanced capital requirements (which currently means the phase-in arrangement for the regulatory
capital impact of IFRS 9) (the “Transitional Provisions”). The Transitional Provisions are designed to implement certain
CRD requirements in stages over a prescribed period; however, each of the EU Member States and the United Kingdom has the discretion
to accelerate that minimum pace of transition in certain respects. In the United Kingdom, the PRA accelerated the introduction
of certain of the enhanced capital requirements under CRD, thus requiring the Group to meet certain capital targets within certain
prescribed time frames, without having regard to any Transitional Provisions in that respect.
Therefore, for the
purposes of the Contingent Capital Notes, we calculate the CET1 Capital and Risk Weighted Assets of the Regulatory Group without
applying the Transitional Provisions and instead calculate the CET1 Ratio of the Regulatory Group on a “fully loaded”
basis, which is a more stringent basis than under the CRD regime and will lead to the CET1 Ratio as defined for purposes of the
Contingent Capital Notes being lower than it would be were we to calculate the common equity tier 1 ratio applying the Transitional
Provisions to the calculation of common equity CET1 Capital and Risk Weighted Assets of the Regulatory Group.
At December 31, 2020,
the Regulatory Group’s CET1 Ratio, giving full effect to CRD on a fully loaded basis (excluding the IFRS 9 phase-in arrangements)
was 17.5%. The Regulatory Group’s fully loaded CET1 Ratio is a non-IFRS measure, and our interpretation of the CRD and the
PRA rules and the basis of our calculation of this financial measure may be different from those of other financial institutions.
For further information, see the section titled “Capital and Risk Management” of the 2020 Annual Report. Our
estimates are based on a number of assumptions.
The calculation of
the CET1 Ratio may be impacted as a result of further changes to the CRD Directive, The Financial Holding Companies (Approval etc.)
and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020 adopted by the
United Kingdom, or changes to the PRA rules or the way in which the PRA applies these requirements to UK banks, whether through
the implementation of material discretions or as a result of a more material deviation in regulatory alignment between the UK and
the EU..
In addition, regulatory
initiatives may impact the calculation of the Regulatory Group’s Risk Weighted Assets, being the denominator of the CET1
Ratio. For example, the Basel Committee on Banking Supervision has continued its post-crisis work on risk weighted assets and leverage
reform. In December 2017, “Basel III: Finalising post-crisis reforms” was published, setting out the Basel Committee’s
finalisation of the Basel III framework (the “BCBS package”). Broadly, the finalised BCBS package aims to: (i) strengthen
risk sensitivity and comparability in credit risk by adopting minimum “input” floors for certain metrics; (ii) introduce
a standardised approach to credit valuation adjustment risk; (iii) introduce a standardised approach to operational risk; (iv)
provide safeguards against unsustainable levels of leverage by adding a leverage ratio buffer for global systemically important
banks; and (v) ensure that banks’ “output” floors can be calculated as being 72.5% of total Risk Weighted Assets.
The date of implementation for most of the proposed reforms listed above was set at January 1, 2022. However, the Basel Committee
on Banking Supervision has chosen to bring the output floor requirements into force over the course of an added five-year phased
implementation period post January 1, 2022, ending on January 1, 2027. The European Banking Authority published its advice to the
European Commission on the implementation of this framework on August 4, 2019. Its main recommendations include the application
of this framework in full from 2022 on a phased-in basis as presently proposed, the use of the risk weight floor to compute the
full stack of capital requirements, including Pillar 2 requirements and systemic buffers, and taking due account of the new output
floor to be applied at all levels of consolidation. In March 2020, as a result of the COVID-19 pandemic, the implementation of
the reforms has been deferred by one year to 1 January 2023. The accompanying transitional arrangements for the output floor has
also been extended by one year to 1 January 2028. These proposals and resulting changes, if adopted by the PRA either individually
and/or in aggregate, may lead to further unexpected enhanced requirements in relation to the Group’s capital, leverage, liquidity
and funding ratios or alter the way such ratios are calculated.
The calculation of
the CET1 Ratio may also be affected by changes in applicable accounting rules, or by changes to regulatory adjustments which modify
the regulatory capital impact of accounting rules. Accordingly, regulatory changes or accounting changes may have a material adverse
impact on our calculations of regulatory capital, including CET1 Capital and Risk Weighted Assets of the Regulatory Group, and
its fully loaded CET1 Ratio.
Any changes that may
occur in the application of the regulatory framework described above subsequent to the date of this prospectus supplement and/or
any subsequent changes to such rules and other variables may individually and/or in the aggregate negatively affect the calculation
of the Regulatory Group’s fully loaded CET1 Ratio and thus increase the risk of a Conversion Trigger Event, which would lead
to an Automatic Conversion, as a result of which investors could lose all or part of the value of their investment in the Contingent
Capital Notes.
You will have limited rights after the Automatic
Conversion and the issuance of the Settlement Shares to the Settlement Share Depository (or to the relevant recipient in accordance
with terms of the Contingent Capital Notes) will constitute an irrevocable and automatic release of all of our obligations in respect
of the Contingent Capital Notes. We will have absolute discretion in determining whether and how a Settlement Shares Offer will
be conducted or whether to procure that a share sale facility be established and as to the matters which will be considered when
making such determination.
Following an Automatic Conversion, we will
be obligated to issue the Settlement Shares to the Settlement Share Depository (or to the relevant recipient in accordance with
the terms of the Contingent Capital Notes), which will hold the Settlement Shares on your behalf. Once the Settlement Shares are
delivered to the Settlement Share Depository (or to the relevant recipient in accordance with the terms of the Contingent Capital
Notes), all of our obligations under the Contingent Capital Notes will be irrevocably and automatically released in consideration
of such issuance to the Settlement Share Depository (or to the relevant recipient in accordance with the terms of the Contingent
Capital Notes), and under no circumstances will such released obligations be reinstated and you will not be entitled to any form
of compensation in the event of our potential recovery or change in our fully loaded CET1 Ratio after the Conversion Date. With
effect from the Conversion Date, you will have recourse only to the Settlement Share Depository for the delivery to you of Settlement
Shares or, if you elect, ADSs or, if we elect that a Settlement Shares Offer be made, of any Alternative Consideration to which
you are entitled.
If we do not deliver the Settlement Shares
to the Settlement Share Depositary following the Conversion Trigger Event, the only claim you will have against us will be for
specific performance to have such Settlement Shares issued and delivered. Moreover, you will not have any rights against us with
respect to repayment of the principal amount of the Contingent Capital Notes or payment of interest or any other amount on, or
in respect of, the Contingent Capital Notes, in each case that is not due and payable, which liabilities will be automatically
released. Accordingly, the principal amount of the Contingent Capital Notes will equal zero at all times from and after the Conversion
Date and any interest will be cancelled or deemed to have been cancelled at all times thereafter and will not be due and payable,
including any interest in respect of an interest period ending on any Interest Payment Date falling between the date of a Conversion
Trigger Event and the Conversion Date.
In addition, we have not yet appointed
a Settlement Share Depository and we may not be able to appoint a Settlement Share Depository if an Automatic Conversion occurs.
In such case, we will effect, by means we deem reasonable under the circumstances (including, without limitation, issuance of the
Settlement Shares to another nominee or to you directly), the issuance and/or delivery of the Settlement Shares or, if you elect,
ADSs or, if we elect that a Settlement Shares Offer be made, Alternative Consideration, as applicable, to you. Such arrangements
may be disadvantageous to, and more restrictive on, you, such as involving a longer period of time before you receive your Settlement
Shares, or, if you elect, ADSs or Alternative Consideration, as applicable, than would be the case under the arrangements expected
to be entered into with a Settlement Share Depository. Nevertheless, such issuance also will irrevocably and automatically release
all of our obligations under the Contingent Capital Notes as if the Settlement Shares had been issued to the Settlement Share Depository.
Any Settlement Shares Offer shall be made
subject to applicable laws and regulations in effect at the relevant time and shall be conducted, if at all, only to the extent
that we, in our sole and absolute discretion, determine that the Settlement Shares Offer is practicable. We currently expect that
in determining whether or not a Settlement Shares Offer will be conducted and, if one is to be conducted, how and to whom such
Settlement Shares Offer will be made, our board of directors would, in accordance with their duties, have regard to a variety of
matters, including without limitation, the interests of our existing shareholders, taken as a whole, and the potential impact of
a Settlement Shares Offer on our financial stability. Further, neither the occurrence of a Conversion Trigger Event nor following
the occurrence of a Conversion Trigger Event, the election (if any) by us to undertake a Settlement Shares Offer on the terms set
out herein, will preclude us from undertaking a rights issue or other equity issuance at any time on such terms as we deem appropriate,
at our sole discretion, including —for the avoidance of doubt —the offer of our ordinary shares at or below the Conversion
Price. Moreover, there can be no assurance that the Settlement Shares Offer would be conducted on an SEC-registered basis. In addition
to or as an alternative to any Settlement Shares Offer, we may (but are not obliged to) procure that a share sale facility is established
by the Settlement Share Depository or another third party following the Conversion Trigger Event to enable holders of the Contingent
Capital Notes (at their option) to sell any Settlement Shares that they are entitled to receive from the Settlement Share Depository.
If such a share sale facility is established, we may provide a preferential allocation to existing shareholders, where in our sole
discretion we consider it practicable to do so and subject to applicable laws and regulations.
You may receive Alternative Consideration instead
of Settlement Shares or, if you elect, ADSs upon a Conversion Trigger Event and you will not know the composition of any Alternative
Consideration until the end of the Settlement Shares Offer Period.
You may not ultimately
receive Settlement Shares or, if you elect, ADSs upon a Conversion Trigger Event because we may elect, in our sole and absolute
discretion, that a Settlement Shares Offer be conducted by the Settlement Share Depository.
If all of the Settlement
Shares are sold in the Settlement Shares Offer, you shall be entitled to receive, in respect of each Contingent Capital Note and
as determined by us, the pro rata share of the cash proceeds from the sale of the Settlement Shares attributable to such
Contingent Capital Note (less an amount equal to the pro rata share of any taxes and duties (including, without limitation, any
stamp duty, stamp duty reserve tax, or any other capital, issue, transfer, registration, financial transaction or documentary tax
or duty) that may arise or be paid in connection with the issue and delivery of Settlement Shares to the Settlement Share Depository
pursuant to the Settlement Shares Offer). If some but not all of the Settlement Shares are sold in the Settlement Shares Offer,
you shall be entitled to receive, in respect of each Contingent Capital Note, (a) the pro rata share of the cash proceeds
from the sale of the Settlement Shares attributable to such Contingent Capital Note (less an amount equal to the pro rata share
of any taxes and duties (including, without limitation, any stamp duty, stamp duty reserve tax, or any other capital, issue,
transfer, registration,
financial transaction or documentary tax or duty) that may arise or be paid in connection with the issue and delivery of Settlement
Shares to the Settlement Share Depository pursuant to the Settlement Shares Offer) together with (b) the pro rata share
of the Settlement Shares not sold pursuant to the Settlement Shares Offer attributable to such Contingent Capital Note rounded
down to the nearest whole number of Settlement Shares which, if you elect, you may take delivery of in the form of ADSs. If no
Settlement Shares are sold in a Settlement Shares Offer, you will be entitled to receive, in respect of each Contingent Capital
Note, the relevant number of Settlement Shares attributable to such Contingent Capital Note rounded down to the nearest whole number
of Settlement Shares which, if you elect, you may take delivery of in the form of ADSs.
No interest or other
compensation is payable in respect of the period from the Conversion Date to the date of delivery of the cash proceeds from the
sale of the Settlement Shares or the Settlement Shares in the circumstances described above.
Notice of the results
of any Settlement Shares Offer will be provided to you only at the end of the Settlement Shares Offer Period. Accordingly, you
will not know the composition of the Alternative Consideration to which they may be entitled until the end of the Settlement Shares
Offer Period.
Following an Automatic Conversion, the Contingent Capital
Notes will remain in existence until the applicable Cancellation Date for the sole purpose of evidencing your right to receive
Settlement Shares or, if you elect, ADSs, or Alternative Consideration, as applicable, from the Settlement Share Depository (or
the relevant recipient in accordance with the terms of the Contingent Capital Notes), and your rights will be limited accordingly.
Following an Automatic Conversion (and
thus the issuance of the Settlement Shares to the Settlement Share Depository or relevant recipient on the Conversion Date), the
Contingent Capital Notes will remain in existence until the applicable Cancellation Date (at which point the Contingent Capital
Notes will be cancelled) for the sole purpose of evidencing your right to receive Settlement Shares, or, if you elect, ADSs or
the Alternative Consideration, as applicable, from the Settlement Share Depository (or the relevant recipient in accordance with
the terms of the Contingent Capital Notes). If we have been unable to appoint a Settlement Share Depository, we will effect, by
means we deem reasonable under the circumstances (including, without limitation, issuance of the Settlement Shares to another nominee
or to the holders of the Contingent Capital Notes directly), the issuance and/or delivery of the Settlement Shares, or, if you
elect, ADSs or the Alternative Consideration, as applicable, to you. See also “—You will have limited rights after
the Automatic Conversion and the issuance of the Settlement Shares to the Settlement Share Depository (or to the relevant recipient
in accordance with terms of the Contingent Capital Notes) will constitute an irrevocable and automatic release of all of our obligations
in respect of the Contingent Capital Notes. We will have absolute discretion in determining whether and how a Settlement Shares
Offer will be conducted or whether to procure that a share sale facility be established and as to the matters which will be considered
when making such determination”.
Although we currently expect that beneficial
interests in the Contingent Capital Notes will be transferable between the Conversion Date and the Suspension Date and that any
trades in the Contingent Capital Notes would clear and settle through the Clearing Systems in such period, there is no guarantee
that this will be the case. Even if the Contingent Capital Notes are transferable following the Automatic Conversion, there is
no guarantee that an active trading market will exist for the Contingent Capital Notes following the Automatic Conversion. Accordingly,
the price received for the sale of any beneficial interest in any Contingent Capital Note during this period may not reflect the
market price of such Contingent Capital Notes or the Settlement Shares. Furthermore, transfers of beneficial interests in the Contingent
Capital Notes may be restricted following the Conversion Date. For example, if the clearance and settlement of transactions in
the Contingent Capital Notes is suspended by any of the Clearing Systems at an earlier time than currently expected, it may not
be possible to transfer beneficial interests in the Contingent Capital Notes in such Clearing Systems and trading in the Contingent
Capital Notes may cease. The Contingent Capital Notes may also cease to be admitted to and to be traded on the ISM of the LSE before
or after the Suspension Date.
In addition, Clearstream, Luxembourg and
Euroclear will block all positions relating to the Contingent Capital Notes held in the relevant Clearing System which will suspend
all clearance and settlement of transactions in the Contingent Capital Notes on the Suspension Date. As a result, you will not
be able to settle the transfer of any Contingent Capital Notes through the Clearing Systems following the Suspension Date, and
any sale or other transfer of the Contingent Capital Notes that you may have initiated prior to the Suspension Date that is scheduled
to
settle after the Suspension Date will be
rejected by such Clearing System and will not be settled through such Clearing System.
The Contingent Capital Notes may cease
to be admitted to trading on the ISM of the LSE or any other stock exchange on which the Contingent Capital Notes are then listed
or admitted to trading after the Suspension Date.
Moreover, although you will become a beneficial
owner of your pro rata share of Settlement Shares upon the issuance of such Settlement Shares to the Settlement Share Depository
(or the relevant recipient in accordance with the terms of the Contingent Capital Notes) and the Settlement Shares will be registered
in the name of the Settlement Share Depository (or the relevant recipient in accordance with the terms of the Contingent Capital
Notes), you will not be able to sell or otherwise transfer any Settlement Shares until such time as they are delivered to you and
registered in your name.
You must submit a Settlement Notice and may need an account
with a clearing system in order to receive delivery of the Settlement Shares or, if you elect, ADSs or the Alternative Consideration,
as applicable, and you will be required to provide further documentation if such Settlement Notice is delivered after the Notice
Cut-off Date.
In order to obtain delivery of the relevant
Settlement Shares, or, if you elect, ADSs or any Alternative Consideration, as applicable, you (or your nominee, custodian or other
representative) must deliver a Settlement Notice (and the relevant Contingent Capital Notes, if held in definitive form) to the
Settlement Share Depository. The Settlement Notice must contain certain information, including information relating to you, the
Contingent Capital Notes you hold, your CREST or other clearing system account details (assuming the Settlement Shares are a participating
security in a clearing system) and any such other details as may be required by the Settlement Share Depository. Accordingly, in
such cases, you (or your nominee, custodian or other representative) must have an account with the relevant clearing system in
order to receive the Settlement Shares or pro rata Settlement Shares component, as applicable. Where the Contingent Capital
Notes are held through a Clearing System, the Settlement Notice must be given in accordance with the standard procedures of the
Clearing System and in a form acceptable to the Clearing System and the Settlement Share Depository. Moreover, each Settlement
Notice shall be irrevocable and the Settlement Share Depository will determine, in its sole and absolute discretion, whether your
Settlement Notice has been properly completed and delivered, and such determination will be conclusive and binding on you. If you
fail to properly complete and deliver a Settlement Notice (and the relevant Contingent Capital Notes, if held in definitive form)
the Settlement Share Depository will be entitled to treat such Settlement Notice as null and void.
Although the Settlement Share Depository
will continue to hold the relevant Settlement Shares or Alternative Consideration, as applicable, if you fail to properly complete
and deliver a Settlement Notice on or before the Notice Cut-off Date, the relevant Contingent Capital Notes will be cancelled on
the Final Cancellation Date (which will be a date at most twelve (12) Business Days after the Notice Cut-off Date). Moreover, after
the Notice Cut-off Date you will continue to be required to provide a Settlement Notice, as well as evidence of your entitlement
to the relevant Settlement Shares or, if you elect, ADSs or the Alternative Consideration, as applicable. Such evidence must be
satisfactory to the Settlement Share Depository in its sole and absolute discretion in order for you to receive delivery of such
Settlement Shares or, if you elect, ADSs or Alternative Consideration, as applicable.
We will have no liability to you for any
loss resulting from your failure to receive any Settlement Shares or Alternative Consideration, as applicable, or from any delay
in the receipt thereof, in each case as a result of your (or your custodian, nominee, broker or other representative) failing to
duly submit a Settlement Notice (and the relevant Contingent Capital Notes, if held in definitive form) on a timely basis or at
all.
You will not be entitled to any rights with respect
to the Settlement Shares prior to receipt of such Settlement Shares, but will be subject to all changes made with respect to the
Settlement Shares.
The Settlement Share Depository shall hold
the Settlement Shares (and any ADSs or Alternative Consideration, if applicable) on your behalf. The exercise of voting rights
and rights related thereto with respect to any Settlement Shares is only possible after delivery of the Settlement Shares following
the Conversion Date and the registration of the person entitled to the Settlement Shares in our share register as a shareholder
with voting rights in accordance with the provisions of, and subject to the limitations provided in, our articles of association.
For further information, see “Description of the Contingent Capital Notes—Conversion—Conversion Procedures”.
For so long as the Settlement Shares (and
any ADSs or Alternative Consideration, if applicable) are held by the Settlement Share Depository, you will be entitled to direct
the Settlement Share Depository to exercise on your behalf all rights of an ordinary shareholder (including voting rights and rights
to receive dividends), provided, however, that you shall not have any rights to sell or otherwise transfer the Settlement Shares
unless and until such time as the Settlement Shares (and any ADSs or Alternative Consideration if applicable) have been delivered
to you in accordance with “—Settlement Procedures” below.
As the Conversion Price is fixed at the time of pricing
of the issue of the Contingent Capital Notes, you will bear the risk of fluctuation in the value of ordinary shares.
Upon the occurrence of a Conversion Trigger
Event, the Contingent Capital Notes will be automatically converted into Settlement Shares. At the time the Settlement Shares are
issued, the Conversion Price is not likely to reflect the then market price of our ordinary shares, which could be significantly
lower than the Conversion Price. Because a Conversion Trigger Event will occur when our fully loaded CET1 Ratio will have deteriorated,
the Conversion Trigger Event will likely be accompanied by a prior deterioration in the market price of the ordinary shares and/or
ADSs, which may be expected to continue after the occurrence of the Conversion Trigger Event. Therefore, if a Conversion Trigger
Event were to occur, investors would receive Settlement Shares or ADSs (as the case may be) at a time when the market price of
the ordinary shares or ADSs (as the case may be) is diminished. In addition, there may be a delay in receiving your Settlement
Shares following the Conversion Trigger Event, during which time the market price of the ordinary shares and/or ADSs may further
decline.
Furthermore, there may be a delay in you
receiving your Settlement Shares following the Conversion Trigger Event (in particular if we elect that the Settlement Share Depository
make a Settlement Shares Offer, as the Settlement Shares Offer Period may last up to forty (40) Business Days after the delivery
of the Settlement Shares Offer Notice), during which time the market price of the ordinary shares and/or ADSs (as the case may
be) or the exchange rate of sterling against the US dollar may further decline. No interest or other compensation is payable in
the event of a loss by you due to foreign currency conversions. As a result, the realisable value of the Settlement Shares and/or
ADSs (as the case may be) may be well below the Conversion Price.
You will have limited anti-dilution protection.
The number of Settlement
Shares to be issued to the Settlement Share Depository upon an Automatic Conversion will be the aggregate principal amount of the
Contingent Capital Notes outstanding immediately prior to the Automatic Conversion on the Conversion Date divided by the Conversion
Price prevailing on the Conversion Date. Fractions of Settlement Shares will not be delivered to the Settlement Share Depository
following the Automatic Conversion and no cash payment shall be made in lieu thereof.
The Conversion Price
will be adjusted if there is a consolidation, reclassification, redesignation or subdivision of the ordinary shares, an issuance
of ordinary shares in certain circumstances by way of capitalisation of profits or reserves, a rights issue, an Extraordinary Dividend
or an issue of ordinary shares to shareholders as a class by way of rights or other securities allowing you to subscribe for or
purchase, or carrying rights of conversion or exchange into, ordinary shares (but only in the situations and only to the extent
provided in “Description of the Contingent Capital Notes—Conversion—Anti-dilution Adjustment of the Conversion
Price”). These may include any modifications as an Independent Financial Adviser (as defined herein) shall determine
to be appropriate. Any New Conversion Price following a Qualifying Takeover Event (as defined herein) will be similarly adjusted,
subject to any modifications by the Independent Financial Adviser. There is no requirement that there should be an adjustment for
every corporate or other event that may affect the value of the ordinary shares. In particular, there will be no adjustment to
the Conversion Price if a Non-Qualifying Takeover Event occurs, which may occur as a result of an acquisition of us by an entity
that is not an Approved Entity (as defined herein) or as a result of the New Conversion Condition (as defined herein) not being
satisfied. See also “—If a Takeover Event occurs, the Contingent Capital Notes may be convertible into shares in
an entity other than us or may be fully written-down upon the occurrence of a Conversion Trigger Event following a Non-Qualifying
Takeover Event.” Furthermore, the adjustment events that are included are less extensive than those often included in
the terms of other types of convertible securities. Accordingly, the occurrence of events in respect of which no adjustment to
the Conversion Price is made may adversely affect the value of the Contingent Capital Notes.
If a Takeover Event occurs, the Contingent
Capital Notes may be convertible into shares in an entity other than us or may be fully written-down upon the occurrence of a Conversion
Trigger Event following a Non-Qualifying Takeover Event.
If a Qualifying Takeover
Event occurs, the Contingent Capital Notes may become convertible into the Relevant Shares of the Approved Entity at the New Conversion
Price as described under “Description of the Contingent Capital Notes—Conversion—Conversion following the
Occurrence of a Qualifying Takeover Event and write-down following the Occurrence of Non-Qualifying Takeover Event”.
There can be no assurance as to the nature of any such acquirer, or of the risks associated with becoming an actual or potential
shareholder in such acquirer and, accordingly, a Qualifying Takeover Event may have an adverse effect on the value of the Contingent
Capital Notes.
In addition, we and
the Acquirer have certain discretion in determining whether a Qualifying Takeover Event has occurred. A Qualifying Takeover Event
requires the New Conversion Condition to be satisfied. For the New Conversion Condition to be satisfied, we must, not later than
seven calendar days following the occurrence of a Takeover Event where the Acquirer is an Approved Entity, enter into arrangements
to our satisfaction with the Approved Entity pursuant to which the Approved Entity undertakes to deliver the Relevant Shares to
the Settlement Share Depository upon Automatic Conversion of the Contingent Capital Notes. If we and the Approved Entity are unable
to enter into such arrangements within this timeframe, the New Conversion Condition would not be satisfied.
In the case of a Non-Qualifying
Takeover Event, the Contingent Capital Notes will not be subject to Automatic Conversion unless the Conversion Date occurs prior
to the occurrence of the Non-Qualifying Takeover Event. If a Conversion Trigger Event occurs following the Non-Qualifying Takeover
Event (or where the Conversion Date occurs on or after the date of the Non-Qualifying Takeover Event), the outstanding principal
amount of each Contingent Capital Note will be automatically written down to zero and the Contingent Capital Notes will be automatically
cancelled in their entirety. Holders and beneficial owners will be deemed to have irrevocably waived their right to receive repayment
of the aggregate principal amount of the Contingent Capital Notes so written down and all accrued and unpaid interest and any other
amounts payable on the Contingent Capital Notes will be cancelled, as described under “Description of the Contingent Capital
Notes—Conversion—Conversion following the Occurrence of a Qualifying Takeover Event and write-down following the Occurrence
of Non-Qualifying Takeover Event”. There can be no assurance that a Takeover Event will not be a Non-Qualifying Takeover
Event, in which case investors may lose their investment in the Contingent Capital Notes.
As a result of your receiving Settlement
Shares, or, at your election, ADSs, upon a Conversion Trigger Event, you are particularly exposed to changes in the market price
of the ordinary shares or ADSs.
Many investors in convertible or exchangeable
securities seek to hedge their exposure in the underlying equity securities at the time of acquisition of the convertible or exchangeable
securities, often through short selling of the underlying equity securities or through similar transactions. Prospective investors
in the Contingent Capital Notes may look to sell ordinary shares or ADSs (as the case may be) in anticipation of taking a position
in, or during the term of, the Contingent Capital Notes. This could drive down the price of the ordinary shares and/or ADSs. Since
the Contingent Capital Notes will mandatorily convert into a fixed number of Settlement Shares upon a Conversion Trigger Event,
the price of the ordinary shares and/or ADSs may be more volatile if we are trending toward a Conversion Trigger Event. ADSs trade
on the NYSE based on a US dollar price and pay dividends in US dollars.
The Contingent Capital Notes may
be subject to write-down, cancellation or conversion upon the occurrence of the exercise by the relevant UK regulatory authority
of the bail-in or capital instruments write-down and conversion powers, which powers are in addition to the terms of the Contingent
Capital Notes which provide for Automatic Conversion on the occurrence of a Conversion Trigger Event.
The powers to convert,
write-down or cancel the Contingent Capital Notes given to national regulators pursuant to the rules and regulations described
below are in addition to the terms of the Contingent Capital Notes which provide for Automatic Conversion upon the occurrence of
a Conversion Trigger Event.
As the parent company
of a UK bank, we are subject to the Special Resolution Regime (“SRR”) under the Banking Act, that gives wide powers
in respect of UK banks and their parent and other group companies to HM Treasury, the Bank of England, the PRA and the FCA in circumstances
where a UK financial institution, including us or a member of the Group, has encountered or is likely to encounter financial difficulties.
The SRR consists of
five stabilisation options and two insolvency and administration procedures applicable to UK banks which may be commenced by the
relevant resolution authority. The stabilisation options provide for:
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private sector transfer of all or part of the business of the relevant entity;
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transfer of all or part of the business of the relevant entity to a “bridge bank” established
by the Bank of England;
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transfer to an asset management vehicle;
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temporary public ownership (nationalisation) of the relevant entity.
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Each of these stabilisation
options is achieved through the exercise of one or more “stabilisation powers”, which include: (i) the power to make
share transfer orders pursuant to which all or some of the securities issued by a UK bank may be transferred to a commercial purchaser,
a bridge bank or the UK government; (ii) the resolution instrument power which may make provision for bail-in; (iii) the power
to transfer all or some of the property, rights and liabilities of a UK bank to a commercial purchaser or Bank of England entity;
and (iv) the third country instrument powers that recognise the effect of similar special resolution action taken under the law
of a country outside the UK. A share transfer order can extend to a wide range of securities, including shares and bonds issued
by a UK bank or its holding company and warrants for such shares and bonds and could, therefore, apply to the Contingent Capital
Notes. In addition, the Banking Act grants powers to modify contractual arrangements in certain circumstances, powers to suspend
enforcement or termination rights that might be invoked as a result of the exercise of the resolution powers and powers for the
relevant authority to disapply or modify laws (with possible retrospective effect) to enable the powers under the Banking Act to
be used effectively. See further “Risk factors – Financial resilience risk – NatWest Group may become subject
to the application of UK statutory stabilisation or resolution powers which may result in, among other actions, the cancellation,
transfer or dilution of ordinary shares, or the write-down or conversion of certain of the NatWest Group’s securities”
on page 357 of the 2020 Annual Report as referred to in, and incorporated by reference into, this prospectus supplement. The resolution
authorities will likely allow the use of financial public support only as a last resort after having assessed and exploited, to
the maximum extent practicable, the resolution tools, including the bail-in tool and/or the write-down and/or conversion powers.
The bail-in tool covers
bonds and notes issued by the institution subject to resolution measures, but certain defined instruments are excluded from the
scope, such as guaranteed bank deposits and covered bonds. Where the relevant statutory conditions for use of the bail-in tool
have been met, the relevant resolution authority would be expected to exercise these powers without notice to, or the consent of,
you. Any such exercise of the bail-in tool in respect of us and the Contingent Capital Notes may result in the cancellation of
all, or a portion, of the principal amount of, interest on, or any other amounts payable on, the Contingent Capital Notes and/or
the conversion of the Contingent Capital Notes into shares or other notes or other obligations of us or another person, or any
other modification or variation to the terms of the Contingent Capital Notes.
The Banking Act specifies
the order in which the bail-in tool should be applied, reflecting the hierarchy of capital instruments under CRD and otherwise
respecting the hierarchy of claims in an ordinary insolvency.
The bail-in tool contains
an express safeguard (known as “no creditor worse off”) with the aim that shareholders and creditors do not receive
a less favourable treatment than they would have received in ordinary insolvency proceedings. However, even in circumstances where
a claim for compensation is established under the ‘no creditor worse off’ safeguard in accordance with a valuation
performed after the resolution action has been taken, it is unlikely that such compensation would be equivalent to the full losses
incurred by you in the resolution and there can be no assurance that you would recover such compensation promptly.
In addition, the Banking
Act requires the relevant resolution authority to permanently write-down, or convert into equity, tier 1 capital instruments (such
as the Contingent Capital Notes) and tier 2 capital instruments at the point of non-viability of the relevant entity or its group
and before, or together with, the exercise of any stabilisation option (the “PoNV Powers”) (except in the case where
the bail-in tool is to be utilised for other liabilities, in which case such capital instruments would be written down or converted
into equity pursuant to the exercise of the bail-in tool, as described above, rather than the mandatory write-down and conversion
power applicable only to capital instruments). The power has been extended to include internal eligible liabilities (which may
be used independently, or in combination with, a resolution power).
Contingent Capital
Notes may be subject to write-down or conversion into equity on application of such powers (without requiring the consent of such
holders), which may result in such holders losing some or all of their investment. The “no creditor worse off” safeguard
would not apply in relation to an application of such powers to capital instruments in circumstances where resolution powers are
not also exercised.
The determination
that all or part of the principal amount of the Contingent Capital Notes will be subject to the exercise of the bail-in tool or
PoNV Powers may be unpredictable and may be outside of our control. Accordingly, trading behaviour in respect of the Contingent
Capital Notes which are subject to such write-down or conversion powers is not necessarily expected to follow trading behaviour
associated with other types of securities. The exercise of the bail-in tool or PoNV Powers, as the case may be, in respect of us
and/or the Group and the Contingent Capital Notes or any suggestion of any such exercise could materially adversely affect your
rights, the price or value of their investment in the Contingent Capital Notes, the trading liquidity of the Contingent Capital
Notes and/or the ability of us to satisfy our obligations under the Contingent Capital Notes and could lead to you losing some
or all of the value of their investment in such Contingent Capital Notes.
The SRR is designed to be triggered
prior to our insolvency and holders of the Contingent Capital Notes may not be able to anticipate the exercise of any resolution
power (including the UK bail-in tool) by the relevant UK resolution authority.
The resolution powers
conferred by the SRR are intended to be used prior to the point at which any insolvency proceedings with respect to the relevant
entity could have been initiated. The purpose of the resolution powers is to address the situation where all or part of a business
of a relevant entity has encountered, or is likely to encounter, financial difficulties, giving rise to wider public interest concerns.
Although the Banking
Act provides specific conditions to the exercise of any resolution powers and, furthermore, the European Banking Authority’s
guidelines published in May 2015 set out the objective elements for the resolution authorities to apply in determining whether
an institution is failing or likely to fail, it is uncertain how the relevant resolution authority would assess such conditions
in any particular pre-insolvency scenario affecting us and/or other members of the Group and in deciding whether to exercise a
resolution power.
The relevant resolution
authority is also not required to provide any advance notice to you of its decision to exercise any resolution power. Therefore,
you may not be able to anticipate a potential exercise of any such powers nor the potential effect of any exercise of such powers
on us, the Group and the Contingent Capital Notes.
Furthermore, you may
have only very limited rights to challenge and/or seek a suspension of any decision of the relevant resolution authority to exercise
its resolution powers (including the bail-in tool) or to have that decision reviewed by a judicial or administrative process or
otherwise.
Under the terms of the Contingent Capital
Notes, you have agreed to be bound by the exercise of any UK bail-in power by the relevant UK authority.
The PRA requires that, subject to limited
exceptions, unsecured liabilities of a financial institution governed by the laws of a country outside of the UK (which include
the Contingent Capital Notes, the terms of which are governed by New York Law) must contain a contractual acknowledgment whereby
the holders recognise that such liability may be subject to the UK bail-in power and agree to be bound by the exercise of those
powers by the relevant UK authority.
As a result, and notwithstanding any other
agreements, arrangements, or understandings between us and any holder or beneficial owner of the Contingent Capital Notes, by its
acquisition of Contingent Capital Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges, accepts,
agrees to be bound by and consents to the exercise of any UK bail-in power by the relevant UK authority that may result in (i)
the reduction or cancellation of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes; (ii)
the conversion of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes into ordinary shares
or other securities or other obligations of NatWest Group plc or another person; and/or (iii) the amendment of the amount of interest
due on the Contingent Capital Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary
period; which UK bail-in power may be exercised by means of variation of the terms of the Contingent Capital Notes solely to give
effect to the exercise by the relevant UK authority of such UK bail-in power. Each holder and beneficial owner of the Contingent
Capital Notes further
acknowledges and agrees that the rights
of the holders and/or beneficial owners under the Contingent Capital Notes are subject to, and will be varied, if necessary, solely
to give effect to, the exercise of any UK bail-in power by the relevant UK authority.
For these purposes, a “UK bail-in
power” is any write-down, conversion, transfer, modification or suspension power existing from time to time under any laws,
regulations, rules or requirements relating to the resolution of banks, banking group companies, credit institutions and/or investment
firms incorporated in the United Kingdom in effect and applicable in the United Kingdom to NatWest Group plc or other members of
the Group, including but not limited to any such laws, regulations, rules or requirements which are implemented, adopted or enacted
in the United Kingdom within the context of the UK resolution regime under the Banking Act, pursuant to which any obligations of
a bank, banking group company, credit institution or investment firm or any of its affiliates can be reduced, cancelled, modified,
transferred and/or converted into shares or other securities or obligations of the obligor or any other person (or suspended for
a temporary period) or pursuant to which any right in a contract governing such obligations may be deemed to have been exercised.
A reference to the “relevant UK authority” is to any authority with the ability to exercise a UK bail-in power.
Neither a reduction or cancellation, in
part or in full, of the principal amount of or any interest on the Contingent Capital Notes, the conversion thereof into another
security or obligation of NatWest Group plc or another person, as a result of the exercise of the UK bail-in power by the relevant
UK authority with respect of the Contingent Capital Notes will of itself constitute a default or event of default under the terms
of the Contingent Capital Notes or the Indenture.
For more information, see “Description
of the Contingent Capital Notes—Agreement with Respect to the Exercise of UK bail-in power”.
Your rights may be limited in respect
of the exercise of the UK bail-in power by the relevant UK authority.
There may be limited protections, if any,
that will be available to holders of securities subject to the UK bail-in power (including the Contingent Capital Notes) and to
the broader resolution powers of the relevant UK authority. Although we expect, according to the principles of the Banking Act,
that the relevant UK authority would respect creditor hierarchies when exercising its UK bail-in power in respect of the Contingent
Capital Notes and that the noteholders would be treated pari passu with the claims of holders of all our subordinated unsecured
instruments which in each case by law rank, or by their terms are expressed to rank, pari passu with the Contingent Capital
Notes at that time being subjected to the exercise of the UK bail-in power, the rules provide for some exceptions to these principles
which the relevant UK authority may choose to rely upon. In any event, it is expected that our subordinated obligations such as
the Contingent Capital Notes would be subject to the application of the UK bail-in power prior to our senior obligations.
In addition, holders of securities will
have a right to be compensated in the event of the exercise of the UK bail-in power with respect to the Contingent Capital Notes,
based on the principle that such investors should receive no less favourable treatment than they would have received had NatWest
Group plc entered into insolvency immediately before the initial exercise of the resolution powers pursuant to the UK bail-in power.
However, even in circumstances where a claim for compensation is established under the “no creditor worse off” safeguard
in accordance with a valuation performed after the resolution action has been taken, it is unlikely that such compensation would
be equivalent to the full losses incurred by the holders of the Contingent Capital Notes in the resolution and there can be no
assurance that such holders would recover such compensation promptly. In addition, due to the discretion afforded to the Bank of
England, the claims of some creditors whose claims would rank equally with yours may be excluded from being subject to the UK bail-in
tool. The greater number of such excluded creditors there are, the greater the potential impact of the UK bail-in tool on other
creditors who have not been excluded (which may include you). As the implementation of these provisions remains to be tested and
may be further amended, there can be no certainty as to how these legal protections or remedies would be implemented by the relevant
UK authority.
Further, although the Bank of England’s
resolution instrument with respect to the exercise of the UK bail-in tool must set out the provisions allowing for securities to
be transferred, cancelled or modified (or any combination of these), the resolution instrument may make any provision that the
Bank of England considers to be appropriate in exercising its specific powers. Such other provisions are expected to be specific
and tailored to the circumstances that have led to the exercise of the UK bail-in tool under the Banking Act and there is uncertainty
as to the extent to
which usual processes and/or procedures under English law will be available to holders of securities (including
the Contingent Capital Notes) or that the “no creditor worse off” safeguard will be effective if such powers are exercised.
Accordingly, you may have limited or circumscribed rights to challenge any decision of the Bank of England or other relevant UK
authority to exercise its UK bail-in power.
The Resolvability Assessment Framework
could impact market perceptions of us and/or the Group and in turn affect the value of the Contingent Capital Notes.
The Banking Act and
associated FCA and PRA rules contain requirements relating to recovery and resolution plans, early supervisory interventions and
the resolution of firms (including the bail-in tool). The Bank of England and the PRA have published final rules for a resolvability
assessment framework (the “Resolvability Assessment Framework”), with full implementation of the framework required
by 2022, which will require the largest UK banks (including the Group) to carry out realistic assessments of their preparations
for resolution. The new rules of the Resolvability Assessment Framework may affect the way in which we and/or the Group is perceived
by the market, which in turn may affect the value of the Contingent Capital Notes.
Changes in law may adversely affect
your rights under the Contingent Capital Notes or may adversely affect the Group’s business, financial performance and capital
plans.
Changes in law after the date hereof may
affect your rights as a holder of Contingent Capital Notes as well as the market value of the Contingent Capital Notes. A number
of regulators are currently proposing or considering legislation and rule making which may affect the Group’s business, your
rights as a holder of the Contingent Capital Notes and the market value of the Contingent Capital Notes. Such changes in law may
include changes in statutory, tax and regulatory regimes during the life of the Contingent Capital Notes, or changes that could
have a significant impact on the future legal entity structure, business mix (including a potential exit of certain business activities)
and management of the Group, and use of capital and requirements for loss-absorbing capacity within the Group, which may have an
adverse effect on an investment in the Contingent Capital Notes.
Moreover, any change in law or regulation
becoming effective after the Issue Date that would cause whole or part of the Contingent Capital Notes to be excluded (or likely
to be excluded) from Tier 1 Capital would trigger a Capital Disqualification Event, and any change in law or regulation that results
in us having to pay additional amounts to you, or results in certain other tax consequences including (but not limited to) us not
being entitled to claim a deduction for UK tax purposes in respect of interest payments (or the value of such deduction to us being
materially reduced), could trigger a Tax Event, each of which may entitle us to redeem the Contingent Capital Notes, in whole (but
not in part). See “—Subject to certain conditions, including the Solvency Condition and regulatory approvals, we
have the option to redeem the Contingent Capital Notes on certain dates.”
In particular, any developments with respect
to the UK’s relationship with the EU may lead to significant changes to the laws applicable in the UK and may, among other
developments, increase the risk of a Capital Disqualification Event occurring or otherwise adversely affect your rights under the
Contingent Capital Notes. See the section titled “Risk Factors – Economic and political risk – Continuing
uncertainty regarding the effects of the UK’s withdrawal from the European Union may continue to adversely affect NatWest
Group and its operating environment” in the 2020 Annual Report.
Such legislative and regulatory uncertainty
could also affect your ability to accurately value the Contingent Capital Notes and therefore affect the trading price of the Contingent
Capital Notes given the extent and impact on the Contingent Capital Notes that one or more regulatory or legislative changes could
have.
Subject to certain conditions, including
the Solvency Condition and regulatory approvals, we have the option to redeem the Contingent Capital Notes on certain dates.
Subject to the satisfaction of the Solvency
Condition (as described under “Description of the Contingent Capital Notes – Solvency Condition”) on the
relevant redemption date, our having satisfied certain pre-conditions which include, among others, having given any required notice
to the PRA and the PRA granting permission to such redemption (to the extent and in the manner required by the Capital Regulations),
the non-occurrence of a Conversion Trigger Event and compliance by us with any alternative or additional pre-conditions to redemption
set out in the Capital Regulations and/or required by the PRA from time to time, we may opt to redeem all, but not some only, of
the Contingent Capital Notes at their principal amount together with accrued but unpaid interest that
has not otherwise been cancelled or deemed
cancelled upon the occurrence of a Tax Event or a Capital Disqualification Event. If either of these events were to occur at any
time after the Issue Date, it is therefore possible that we would be able to redeem the Contingent Capital Notes at any time after
the Issue Date (which could also be prior to the First Call Date).
In addition, subject to the satisfaction
of the Solvency Condition on the relevant redemption date, our having satisfied certain pre-conditions which include, among others,
having given any required notice to the PRA and the PRA granting permission to such redemption (to the extent and in the manner
required by the Capital Regulations), the non-occurrence of a Conversion Trigger Event and compliance by us with any alternative
or additional pre-conditions to redemption set out in the Capital Regulations and/or required by the PRA from time to time, we
may redeem the Contingent Capital Notes in whole (but not in part) on (i) any day falling in the period commencing on (and including)
the First Call Date and ending on (and including) the First Reset Date or (ii) on any Reset Date thereafter. Our optional redemption
on any such date or the perception that the Contingent Capital Notes may be redeemed in the circumstances noted above, may limit
the market value of the Contingent Capital Notes to the redemption price during the period shortly before the First Call Date.
Moreover, if we redeem the Contingent Capital Notes in any of the circumstances mentioned above, you may not be able to reinvest
the redemption proceeds in securities offering a comparable yield. In addition, any early redemption of the Contingent Capital
Notes may be subject to additional conditions imposed by the PRA, regardless of whether such redemption would be favourable to
you.
We may substitute the Contingent
Capital Notes or vary our terms without holder consent.
If a Tax Event or
a Capital Disqualification Event has occurred, then we may, subject to us having satisfied certain pre-conditions which include,
among others, having given any required notice to the PRA and the PRA granting permission (to the extent and in the manner required
by the Capital Regulations), but without any requirement for your consent or approval of the Contingent Capital Notes, at any time
(whether before, on or following the First Call Date) either substitute all (but not some only) of the Contingent Capital Notes
for, or vary the terms of the Contingent Capital Notes so that they remain or, as appropriate, become, Compliant Notes. In the
case of a substitution or variation of the terms of the Contingent Capital Notes, while the new substituted or modified securities
must have terms that are not materially less favourable to an investor than the Contingent Capital Notes, there can be no assurance
that, whether due to the particular circumstances of each holder of Contingent Capital Notes or otherwise, such substituted or
modified securities will be as favourable to each holder of Contingent Capital Notes in all respects.
The Contingent Capital Notes do not contain events
of default and the remedies available to you under the Contingent Capital Notes are limited.
The terms
of the Contingent Capital Notes do not provide for any events of default. You may not at any time demand repayment or redemption
of your Contingent Capital Notes, although in a Winding-up or Administration Event prior to a Conversion Trigger Event, you will
have a claim for an amount equal to the principal amount of the Contingent Capital Notes plus any accrued interest that has not
otherwise been cancelled subject to the subordination provisions of the Contingent Capital Notes. There is no right of acceleration
in the case of non-payment of principal or interest on the Contingent Capital Notes or of our failure to perform any of our obligations
under or in respect of the Contingent Capital Notes. See “—Cancelled interest shall not be due and shall not accumulate
or be payable at any time thereafter or constitute an event of default and you shall have no rights thereto.”
The sole remedy in the event of any non-payment
of principal under the Contingent Capital Notes subject to certain conditions as described under “Description of the Contingent
Capital Notes—Enforcement Events and Remedies” is that the Trustee, on your behalf may, at its discretion, or shall
at the direction of the holders of 25% or more of the aggregate principal amount of the outstanding Contingent Capital Notes, subject
to applicable laws, institute proceedings for our winding-up. In the event of a Winding-up or Administration Event, whether or
not instituted by the Trustee, the Trustee may evidence any of our obligations arising under the Contingent Capital Notes in any
such Winding-up or Administration Event.
Prior to the occurrence of any Winding-up
or Administration Event, the Contingent Capital Notes will remain subject to (i) Automatic Conversion upon a Conversion Trigger
Event, (ii) the exercise of the UK bail-in power and (iii) a write down of the Contingent Capital Notes upon the occurrence of
a Conversion Trigger Event following a
Non-Qualifying Takeover Event, none of
which constitute an Enforcement Event or a Winding-up or Administration Event under the Indenture. In addition, we
are entitled to cancel any interest payment as described under “Description of the Contingent Capital Notes——Interest
Cancellation” and such cancellation or deemed cancellation (in each case, in whole or in
part) will not constitute an Enforcement Event. If Settlement Shares are not issued and delivered to the Settlement Share Depository
following the Conversion Trigger Event, your only claim will be a claim to have such Settlement Shares issued and delivered,
or claims to participate in our liquidation proceeds.
The remedies under the Contingent Capital
Notes are more limited than those typically available to our unsubordinated creditors. For further detail regarding the limited
remedies of the Trustee and the holders of the Contingent Capital Notes, see “Description of the Contingent Capital Notes—Enforcement
Events and Remedies”.
There is no limit on the amount or
type of further securities or indebtedness that we may issue, incur or guarantee.
There is no restriction
on the amount of securities or other liabilities that we may issue, incur or guarantee and which rank senior to, or pari passu
with, the Contingent Capital Notes. The issue or guaranteeing of any such securities or the incurrence of any such other liabilities
may reduce the amount (if any) recoverable by you during a Winding-up or Administration Event and may limit our ability to meet
our obligations under the Contingent Capital Notes. In addition, the Contingent Capital Notes do not contain any restriction on
our ability to issue securities that may have preferential rights to those of the Contingent Capital Notes or securities with similar,
different or no Conversion Trigger Event provisions.
The market value of the Contingent
Capital Notes may be influenced by unpredictable factors.
Certain factors, many
of which are beyond our control, will influence the value of the Contingent Capital Notes and the price, if any, at which securities
dealers may be willing to purchase or sell the Contingent Capital Notes in the secondary market, including:
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our creditworthiness from time to time;
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supply and demand for the Contingent Capital Notes and the liquidity of the market for AT1 securities
generally;
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investors’ perceptions of the risks relating to AT1 securities, such as the Contingent Capital
Notes;
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economic, financial, political or regulatory events or judicial decisions that affect us or the
financial markets generally, including the introduction of any financial transactions tax; and
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the trading price of our ordinary shares and/or ADSs.
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Accordingly, if you sell your Contingent
Capital Notes in the secondary market, you may not be able to obtain a price equal to the principal amount of the Contingent Capital
Notes or a price equal to the price that you paid for the Contingent Capital Notes.
There is no established trading market
for the Contingent Capital Notes and one may not develop.
The Contingent Capital Notes will have
no established trading market when issued, and although we expect to list the Contingent Capital Notes on the ISM of the LSE, one
may never develop. If a market does develop, it may not be liquid and may be sensitive to changes or volatility in financial markets.
Therefore, investors may not be able to sell their Contingent Capital Notes easily or at prices that will provide them with a yield
comparable to similar investments that have a developed secondary market. This is particularly the case for securities that are
especially sensitive to interest rates, currency or market risks, are designed for specific investment objectives and strategies,
have been structured to meet the investment requirements of limited categories of investors or include features such as the Automatic
Conversion and UK bail-in power. These types of securities would generally have a more limited secondary market and more price
volatility than conventional debt securities. Illiquidity may have a material adverse effect on the market value of the Contingent
Capital Notes.
You may be subject to disclosure
obligations and/or may need approval from our regulator under certain circumstances.
As you may receive Settlement Shares if
a Conversion Trigger Event occurs, an investment in the Contingent Capital Notes may result in your having to comply with certain
disclosure and/or regulatory approval requirements pursuant to applicable laws and regulations following an Automatic Conversion.
For example, pursuant to Chapter 5 of the Disclosure Guidance and Transparency Rules Sourcebook of the FCA Handbook, we (and the
UK Financial Conduct Authority) must be notified by a person when the percentage of voting rights in us controlled by that person
(together with its concert parties), by virtue of direct or indirect holdings of shares aggregated with direct or indirect holdings
of certain financial instruments, reaches or crosses 3% and every percentage point thereafter.
Furthermore, as Settlement Shares represent
voting securities of a parent undertaking of a number of regulated group entities, under the laws of the United Kingdom, the United
States and other jurisdictions, ownership of the Contingent Capital Notes (or the Settlement Shares) above certain levels may require
you to obtain regulatory approval or subject you to additional regulation.
Non-compliance with such disclosure and/or
approval requirements may lead to the incurrence of substantial fines or other criminal and/or civil penalties and/or suspension
of voting rights associated with the Contingent Capital Notes. Accordingly, each potential investor should consult its legal advisers
as to the terms of the Contingent Capital Note, in respect of its existing shareholding and the level of holding it would have
if it receives Settlement Shares following the Conversion Trigger Event.
The Contingent Capital Notes are
not investment grade by some of the rating agencies and are subject to the risks associated with non-investment grade securities.
The Contingent Capital Notes, upon issuance,
will not be considered to be investment grade securities by some of the rating agencies, and as such will be subject to a higher
risk of price volatility than higher-rated securities. Furthermore, deteriorating outlooks for us or the Group, or volatile markets,
could lead to a significant deterioration in market prices of below-investment grade rated securities such as the Contingent Capital
Notes.
Credit ratings may not reflect all risks and a downgrade,
suspension or withdrawal of the rating assigned by any rating agency to the Contingent Capital Notes could cause the liquidity
or market value of the Contingent Capital Notes to decline.
One or more independent credit rating agencies
may assign credit ratings to the Contingent Capital Notes. The ratings may not reflect the potential impact of all risks related
to the structure, market, Automatic Conversion, UK bail-in power, additional factors discussed above and other factors that may
affect the value of the Contingent Capital Notes. A credit rating is not a recommendation to buy, sell or hold securities and may
be revised or withdrawn by the rating agency at any time.
Moreover, the rating agencies that currently,
or may in the future, publish a rating for the Contingent Capital Notes may change the methodologies that they use for analysing
securities with features similar to the Contingent Capital Notes. Such changes in the methodology used by rating agencies may have
a material adverse effect on the Contingent Capital Notes’ ratings.
Upon issuance, the Contingent Capital Notes
will be rated by nationally recognised statistical ratings organisations and may in the future be rated by additional rating agencies.
However, we are under no obligation to ensure the Contingent Capital Notes are rated by any rating agency and any rating initially
assigned to the Contingent Capital Notes may be lowered or withdrawn entirely by a rating agency if, in that rating agency’s
judgement, circumstances relating to the basis of the rating, such as adverse changes to our business, so warrant. If we determine
to no longer maintain one or more ratings, or if any rating agency lowers or withdraws its rating, such event could reduce the
liquidity or market value of the Contingent Capital Notes.
Real or expected downgrades, suspensions
or withdrawals of, or changes in the methodology used to determine, credit ratings assigned to us or the Contingent Capital Notes
could cause the liquidity or trading prices of the Contingent Capital Notes to decline significantly. Additionally, any uncertainty
about the extent of any anticipated changes to the credit ratings assigned to the Contingent Capital Notes may adversely affect
the market value of the Contingent Capital Notes.
Furthermore, as a result of regulations,
if the status of any rating agency rating the Contingent Capital Notes changes, European (including UK) regulated investors may
no longer be able to use the rating for regulatory purposes and the Contingent Capital Notes may have a different regulatory treatment.
This may result in European
(including UK) regulated investors selling
the Contingent Capital Notes which may impact the value of the Contingent Capital Notes and any secondary market.
The credit risk of NatWest Group
plc, its credit ratings, and its credit spreads may adversely affect the value of the Contingent Capital Notes.
Any actual or anticipated
decline in our credit ratings, changes in the market’s view of our creditworthiness or any increase in our credit spreads
charged by the market for taking credit risk are likely to adversely affect the value of the Contingent Capital Notes and cause
the liquidity of the Contingent Capital Notes to decline significantly.
Our credit ratings
are an assessment, by each rating agency, of our ability to pay our obligations, including those under the Contingent Capital Notes.
Any rating assigned to us may be withdrawn entirely by a credit rating agency, may be suspended or may be lowered, if, in that
credit rating agency’s judgement, circumstances relating to the basis of the rating so warrant. Ratings may be impacted by
a number of factors which can change over time, including the credit rating agency’s assessment of: our strategy and management’s
capability; our financial condition including in respect of profitability, asset quality, capital, funding and liquidity; competitive
and economic conditions in our key markets; the level of political support for the industries in which we operate; the implementation
of structural reform; the legal and regulatory frameworks applicable to our legal structure; business activities and the rights
of our creditors; changes in rating methodologies; changes in the relative size of the loss-absorbing buffers protecting bondholders
and depositors; the competitive environment, political and economic conditions in our key markets (including the impact of Brexit
and any further Scottish independence referendum); any reduction of the UK’s sovereign credit rating and market uncertainty.
In addition, credit ratings agencies are increasingly taking into account environmental, social and governance factors, including
climate risk, as part of the credit ratings analysis, as are investors in their investment decisions.
The credit rating
agencies may also revise the ratings methodologies applicable to issuers within a particular industry, or political or economic
region. In particular, following the outcome of the referendum on the UK’s membership of the EU in favour of leaving the
EU, rating agencies downgraded the UK’s credit ratings and/or changed or maintained their outlook for the UK to negative.
Credit agencies also changed their outlook for a number of UK banks (excluding the Group) to negative. If credit rating agencies
perceive there to be adverse changes in the factors affecting our credit rating, including by virtue of changes to applicable ratings
methodologies, the credit rating agencies may downgrade, suspend or withdraw the ratings assigned to us or other Group entities.
Any reductions in our credit ratings or the credit ratings of other Group entities, including, in particular, downgrades below
investment grade, or a deterioration in the capital markets’ perception of our financial resilience could significantly affect
our access to money markets, reduce the size of our deposit base and trigger additional collateral or other requirements in derivatives
contracts and other secured funding arrangements or the need to amend such arrangements, which could adversely affect our cost
of funding and our access to capital markets and could limit the range of counterparties willing to enter into transactions with
us. This could in turn adversely impact our competitive position and threaten our prospects in the short to medium-term. An improvement
in our credit ratings will not necessarily increase the value of the Contingent Capital Notes and will not reduce market risk and
other investment risks related to the Contingent Capital Notes. Credit ratings (i) do not address the price, if any, at which the
Contingent Capital Notes may be resold in the secondary market (which may be substantially less than the original offering price
of the Contingent Capital Notes), and (iii) are not recommendations to buy, sell or hold the Contingent Capital Notes.
You will be responsible for any taxes following
an Automatic Conversion.
Neither we nor any member of the Group
will be liable for any taxes or duties (including, without limitation, any stamp duty, stamp duty reserve tax or any other capital,
issue, transfer, registration, financial transaction or documentary tax or duty) arising on conversion or that may arise or be
paid in connection with the issue and delivery of Settlement Shares and Alternative Consideration, if applicable, following an
Automatic Conversion. You must pay any taxes and duties (including, without limitation, any stamp duty, stamp duty reserve tax
or any other capital, issue, transfer, registration, financial transaction or documentary tax or duty) arising on conversion in
connection with the issue and delivery of Settlement Shares to the Settlement Share Depository on your behalf.
Certain adjustments to the conversion price of convertible
securities pursuant to anti-dilution provisions may cause holders thereof to be deemed to have received a distribution for US federal
income tax purposes.
The conversion price in respect of the
Contingent Capital Notes may be adjusted in certain circumstances pursuant to anti-dilution provisions. Under the US Internal
Revenue Code of 1986, as amended (the “Code”) and applicable Treasury regulations, adjustments that have the effect
of increasing the interests of holders of convertible securities in an issuer’s assets or earnings and profits may, in certain
circumstances, result in a deemed distribution to such holders. Any deemed distribution will generally be taxable as a dividend
as described in “UK and US Federal Tax Consequences—United States—Taxation of the Contingent Capital Notes—Taxation
of Distributions”. US Holders should consult their tax advisers as to the tax consequences of any adjustments to
the conversion price.
FATCA Withholding.
Under certain provisions of the U.S. Internal
Revenue Code of 1986, as amended, and Treasury regulations promulgated thereunder (commonly referred to as "FATCA"),
as well as certain intergovernmental agreements between the United States and certain other countries (including the UK) together
with local country implementing legislation, a 30% withholding tax may be imposed on payments on the Contingent Capital Notes,
Settlement Shares and ADSs if those payments are (i) treated as "foreign passthru payments", and (ii) made to a non-U.S.
person that does not comply with the due diligence, reporting and certification requirements under FATCA. The term "foreign
passthru payments" is not defined yet, and therefore it is not clear whether or to what extent payments on the Contingent
Capital Notes, Settlement Shares and ADSs could become subject to this withholding tax. No FATCA withholding will apply prior to
two years after the date on which final regulations on this issue are published. If withholding is required in respect of this
withholding tax, the Issuer will not be required to pay any additional amounts with respect to any amounts withheld.
Limitation on gross-up obligation under the Contingent
Capital Notes.
Our obligation to pay additional amounts
in respect of any withholding or deduction in respect of taxes under the terms of the Contingent Capital Notes applies only to
payments of interest due and paid under the Contingent Capital Notes and not to payments of principal. As such, we would not be
required to pay any additional amounts under the terms of the Contingent Capital Notes to the extent any withholding or deduction
applied to payments of principal. Accordingly, if any such withholding or deduction were to apply to any payments of principal
under the Contingent Capital Notes, you may receive less than the full amount due under the Contingent Capital Notes, and the market
value of the Contingent Capital Notes may be adversely affected.
Because the Global Certificate is
held by or on behalf of the Clearing Systems, investors will have to rely on the Clearing Systems’ procedures
for transfer, payment and communication with us.
The Contingent Capital
Notes will be represented by a global certificate except in certain limited circumstances described in “Description of
Certain Provisions Relating to Debt Securities and Contingent Convertible Securities” in the accompanying prospectus.
Such global certificate will be deposited with a common depository for Euroclear and/or Clearstream, Luxembourg, and registered
in the name of such depository or its nominee, and beneficial interests in the global certificate will be held through the Clearing
Systems and their respective direct or indirect participants, and such direct and indirect participants will record beneficial
interests on their books. While the Contingent Capital Notes are represented by the global certificate, we will discharge our payment
obligations under the Contingent Capital Notes by making payments to or to the order of the common depository for Euroclear and/or
Clearstream, Luxembourg, for distribution to our account holders. A holder of a beneficial interest in a global certificate must
rely on the procedures of the Clearing Systems to receive payments under the Contingent Capital Notes. We have no responsibility
or liability for the records relating to, or payments made in respect of, beneficial interests in the global certificate. Holders
of beneficial interests in the global certificate may have to rely on the Clearing Systems to exercise their voting rights in any
creditors’ meeting in relation to the Contingent Capital Notes or to appoint appropriate proxies.
In a lawsuit for payment on the Contingent
Capital Notes, holders of the Contingent Capital Notes may bear currency exchange risk.
The Indenture is,
and the Contingent Capital Notes will be, governed by the laws of the State of New York, with certain limited exceptions. A New
York state statute presently in effect would require a New York state court
hearing such a lawsuit
to render its decision or award in sterling. The judgment entered on that award, however, will be denominated in U.S. dollars,
and converted at the exchange rate prevailing on the date of entry of the judgment. Consequently, subject to the limited remedies
provided for in the terms of the Contingent Capital Notes (see “—The Contingent Capital Notes do not contain events
of default and the remedies available to you under the Contingent Capital Notes are limited) in a lawsuit for payment on the
Contingent Capital Notes, if permitted under the Indenture and terms of the Contingent Capital Notes, holders of such Contingent
Capital Notes would bear currency exchange risk until a New York state court judgment is entered, which could be a long time. A
federal court sitting in New York with diversity jurisdiction over a dispute arising in connection with the Contingent Capital
Notes would apply the foregoing New York law.
In courts outside
of New York, investors may not be able to obtain a judgment in a currency other than U.S. dollars. For example, a judgment for
money in an action based on the Contingent Capital Notes in many other U.S. federal or state courts ordinarily would be enforced
in the United States only in U.S. dollars. The date used to determine the rate of conversion of sterling into U.S. dollars would
depend upon various factors, including which court renders the judgment and when the judgment is rendered.
Trading in the
Clearing Systems is subject to minimum denomination requirements.
The Contingent Capital
Notes will be issued only in minimum denominations of £200,000 and integral multiples of £1,000 in excess thereof.
It is possible that the Clearing Systems may process trades which could result in amounts being held in denominations smaller than
the minimum denominations. If Contingent Capital Notes in definitive form are required to be issued in relation to such Contingent
Capital Notes in accordance with the provisions of the global certificate, a holder who does not have at least the minimum denomination
of £200,000 or any integral multiple of £1,000 in excess thereof in its account with the relevant Clearing System at
the relevant time may not receive its entitlement of Contingent Capital Notes in definitive form unless and until such time as
its holding satisfies the requirement of the minimum denomination of £200,000 or any integral multiple of £1,000 in
excess thereof.
Modification, waivers and substitution.
The Indenture provides
that the Trustee may, under certain circumstances, without the consent of the holders agree to any modification to the terms of
the Contingent Capital Notes or the Indenture and/or authorise or waive any proposed breach or breach of the Contingent Capital
Notes or the Indenture and/or agree to our substitution as principal debtor under the Contingent Capital Notes and issuer of Settlement
Shares or an Automatic Conversion under the Indenture. As a result of the above, actions may be taken with respect to the Contingent
Capital Notes with which you may not agree.
RECENT DEVELOPMENTS
On February 6, 2019, NatWest Group plc obtained
shareholder authority to make off-market purchases of its ordinary shares from HM Treasury (part of the UK Government) under the
terms of a directed buyback contract, which authority was renewed at NatWest Group’s Annual General Meeting on April 29,
2020. As at December 31, 2020, the UK Government held 61.9% of the issued ordinary share capital of NatWest Group plc.
On the February 16, 2021, the PRA granted
permission on a consolidated basis for NatWest Group plc to reduce its own funds up to £1,250m CET1, which took effect on
February 16, 2021 and expires on August 16, 2021. In its Budget announcement on March 3, 2021, the UK Government reiterated its
intention to fully dispose of its shareholding in NatWest Group plc and noted that it expects to complete its sales programme by
2025-26, building on prior statements of its intention to sell its shares in NatWest Group plc and prior sales of such shares in
the market.
NatWest Group plc recognises that the exercise
of the authority granted by its shareholders would be dependent on HM Treasury’s intentions and is limited to 4.99% of issued
share capital in any twelve-month period. Any buyback of shares will be as agreed between HM Treasury and us, and will have effect
of reducing our CET1 ratio as well as utilising cash resources.
USE OF PROCEEDS
The net proceeds from the issue of
the Contingent Capital Notes are expected to amount to £397,010,000 after deduction of the underwriting discount and
the other expenses incurred in connection with the issue of the Contingent Capital Notes. We intend to use the net proceeds
of the offering for general corporate purposes and to strengthen further our capital base or the capital base of our
subsidiaries and/or the Group.
CAPITALIZATION
OF THE GROUP
The following table shows the Group’s
issued and fully paid share capital, owners’ equity and indebtedness on an unaudited consolidated basis in accordance with
International Financial Reporting Standards as at December 31, 2020.
|
|
As
at December 31, 2020
|
|
|
Actual
|
|
As
Adjusted(1)
|
|
|
£
million
|
|
£
million
|
Share capital – allotted, called up and fully paid
|
|
|
|
|
|
|
|
|
Ordinary shares of £1.00
|
|
|
12,129
|
|
|
|
12,129
|
|
Retained income and other reserves
|
|
|
31,731
|
|
|
|
32,131
|
|
Owners’ equity
|
|
|
43,860
|
|
|
|
44,260
|
|
Group indebtedness
|
|
|
|
|
|
|
|
|
Trading liabilities – debt securities in issue
|
|
|
1,408
|
|
|
|
1,408
|
|
Other financial liabilities – debt securities in issue
|
|
|
45,015
|
|
|
|
45,015
|
|
Subordinated liabilities(2)
|
|
|
9,962
|
|
|
|
9,962
|
|
Total indebtedness
|
|
|
56,385
|
|
|
|
56,385
|
|
Total capitalisation and indebtedness
|
|
|
100,245
|
|
|
|
100,645
|
|
____________________
|
(1)
|
The ‘As Adjusted’ column reflects the effects of the issue of the Contingent Capital Notes offered hereby.
|
|
(2)
|
Includes Additional Tier 1 securities.
|
Under IFRS, certain preference shares are
classified as debt and are included in subordinated liabilities in the table above.
Other than as disclosed above, the information
contained in the table above has not changed materially since December 31, 2020. See “Recent Developments” for potential
future changes to our capitalisation.
DESCRIPTION
OF THE CONTINGENT CAPITAL NOTES
The following is a summary of certain
terms of the Contingent Capital Notes. It supplements the description of the general terms of the Contingent Convertible Securities
and any series we may issue contained in the accompanying prospectus under the heading “Description of Contingent Convertible
Securities” and “Description of Certain Provisions Relating to Debt Securities and Contingent Convertible Securities”.
If there is any inconsistency between the following summary and the description in the accompanying prospectus, the following summary
governs.
The summary set forth below does not purport
to be complete and is subject to, and qualified in its entirety by reference to, the Contingent Convertible Securities Indenture
dated August 10, 2015 (the “Original Indenture”), between us as Issuer and The Bank of New York Mellon acting through
its London Branch as Trustee, which was filed as exhibit 4.1 to our report on form 6-K filed on August 10, 2015, as amended and
supplemented by the Fifth Supplemental Indenture dated as of August 19, 2020 (the “Fifth Supplemental Indenture”) and
supplemented by a seventh supplemental indenture with respect to the Contingent Capital Notes which we expect to be dated as of
the Issue Date (the “Seventh Supplemental Indenture”). References to the “Indenture” are to the Original
Indenture, as amended and supplemented by the Fifth Supplemental Indenture and as supplemented by the Seventh Supplemental Indenture.
The Seventh Supplemental Indenture will be filed as an exhibit to a report on form 6-K on or about the Issue Date, which will be
incorporated by reference in our registration statement on Form F-3.
The Contingent
Capital Notes constitute a series of Contingent Convertible Securities.
If you purchase the Contingent Capital
Notes, your rights will be determined by the Indenture and the Trust Indenture Act of 1939, as amended (the “Trust Indenture
Act”), unless your Contingent Capital Notes are converted to Settlement Shares after a Conversion Trigger Event as described
under “—Conversion—Automatic Conversion” in which case your rights will be determined in accordance
with the terms of our ordinary shares as described in the accompanying prospectus under “Description of Ordinary Shares”.
You can read the Indenture and the form of Contingent Capital Notes at the location listed under “Where You Can Find More
Information” in the accompanying prospectus.
The Contingent Capital Notes and the Indenture
will be governed by and construed in accordance with the laws of the State of New York and the Trust Indenture Act, except that,
as the Indenture specifies, the subordination provisions and the waiver of the right to set-off by the holders of the Contingent
Capital Notes and by the Trustee acting on behalf of the holders of the Contingent Capital Notes with respect to the Contingent
Capital Notes will be governed by and construed in accordance with the laws of Scotland. The terms of the Contingent Capital Notes
include those stated in the Indenture and any supplements or amendments thereto, and those terms made part of the Indenture by
reference to the Trust Indenture Act.
The Bank of New York Mellon, acting through
its London Branch, will serve as Trustee under the Indenture and will initially act as paying agent for the Contingent Capital
Notes. National Westminster Bank Plc will initially act as Calculation Agent for the Contingent Capital Notes.
The Contingent Capital Notes will be issued
in an aggregate principal amount of up to £400,000,000.
The Contingent Capital Notes are perpetual
instruments with no fixed maturity or fixed redemption date.
General
We will issue the Contingent Capital Notes
in fully registered form in denominations of £200,000 and in integral multiples of £1,000 thereafter (the denomination
of each book-entry interest being the “Tradable Amount” of such book-entry interest). Prior to the Automatic Conversion
(as defined below), the aggregate Tradable Amount of the book-entry interests in each Contingent Capital Note shall be equal to
such Contingent Capital Note’s principal amount. Following the Automatic Conversion, the principal amount of each Contingent
Capital Note shall be zero (as described below under “—Conversion—Conversion Procedures”) but the
Tradable Amount of the book-entry interests in each Contingent Capital Note shall remain unchanged.
Upon issuance, the Contingent Capital Notes
will be represented by one or more Global Certificates. Each such Global Certificates will be deposited with, or on behalf of,
a common depository for Euroclear and/or Clearstream, Luxembourg. You will hold a beneficial interest in the Contingent Capital
Notes through the Clearing Systems and its participants. We expect to deliver the Contingent Capital Notes through the facilities
of the Clearing Systems on the Issue Date. For a more detailed summary of the form of the Contingent Capital Notes and settlement
and clearance arrangements, see “Description of Certain Provisions Relating to Debt Securities and Contingent Convertible
Securities” in the accompanying prospectus.
Payment of principal of and interest, if
any, on the Contingent Capital Notes, so long as the Contingent Capital Notes are represented by Global Certificates, will be made
in immediately available funds. Beneficial interests in the Global Certificates will trade in the same-day funds settlement system
of the Clearing Systems and pay in immediately available funds. Secondary market trading activity in such interests will therefore
settle in same-day funds. Secondary market trading will occur in the ordinary way following the applicable rules and clearing system
operating procedures of Euroclear and/or Clearstream, Luxembourg. We currently expect such trading and settlement to continue in
the period between the Conversion Date and the Suspension Date (each as defined below). Definitive securities will only be issued
in limited circumstances described under “Description of Certain Provisions Relating to Debt Securities and Contingent
Convertible Securities—Issuance of Definitive Securities” in the accompanying prospectus.
Additional Issuances
We may from time to time, without the consent
of the holders of the Contingent Capital Notes, issue additional Contingent Capital Notes under the Indenture, having the same
ranking and same interest rate, interest cancellation terms, redemption terms, conversion price and other terms as the Contingent
Capital Notes described in this prospectus supplement other than the price to the public and issue date as the Contingent Capital
Notes offered hereby. Any such additional Contingent Capital Notes, together with the Contingent Capital Notes offered by this
prospectus supplement, shall rank equally and rateably with such Contingent Capital Notes in all respects, so that any such further
Contingent Capital Notes shall be consolidated and form a single series with the Contingent Capital Notes. There is no limitation
on the amount of Contingent Capital Notes or other debt securities that we may issue under the Indenture, and there is no restriction
on our issuing securities that may have similar or different conversion trigger event provisions to the Contingent Capital Notes
or no conversion trigger events.
Interest
From and including the Issue Date to but
excluding September 30, 2028 (the “First Reset Date”), interest will accrue on the Contingent Capital Notes at an initial
rate equal to 4.500% per annum. The First Reset Date and every fifth anniversary thereafter shall each be a “Reset Date”.
From and including each Reset Date to but excluding the next succeeding Reset Date, interest will accrue on the Contingent Capital
Notes at a rate per annum equal to the sum of the applicable Reference Bond Rate (as defined herein) as determined by the Calculation
Agent on the relevant Reset Determination Date and 3.992%, converted to a quarterly rate in accordance with market convention (rounded
to three decimal places, with 0.005 being rounded down).
“Initial Interest Rate” means
the rate of interest in respect of the period from (and including) the Issue Date to (but excluding) the First Reset Date, which
will be 4.500% per annum.
“Reference Bond Rate” means,
with respect to any Reset Date for which such rate applies and related Reset Determination Date, the gross redemption yield expressed
as a percentage and calculated by the Calculation Agent on the basis set out by the United Kingdom Debt Management Office in the
paper "Formulae for Calculating Gilt Prices from Yields", page 5, Section One: Price/Yield Formulae "Conventional
Gilts; Double dated and Undated Gilts with Assumed (or Actual) Redemption on a Quasi-Coupon Date" (published on 8 June 1998
and updated on 15 January 2002 and 16 March 2005, and as further amended, updated, supplemented or replaced from time to time)
or, if such basis is no longer in customary market usage at such time (as determined by the Issuer in good faith), a gross redemption
yield calculated in accordance with generally accepted market practice at such time as determined and notified in writing to the
Calculation Agent by the Issuer following consultation with an investment bank or financial institution determined to be appropriate
by the Issuer (which, for the avoidance of doubt, could be the Calculation Agent or another affiliate of the Issuer), on a semi-annual
compounding basis (converted to an annualised yield and rounded up (if necessary) to four decimal places) of the Reset Reference
Bond in respect of that
Reset Period, assuming a price for the
Reset Reference Bond (expressed as a percentage of its principal amount) equal to the Reference Bond Price for such Reset Determination
Date.
“Reference Bond Price” means,
with respect to any Reset Determination Date, (i) the arithmetic average of the Reference Government Bond Dealer Quotations for
such Reset Determination Date, after excluding the highest and lowest such Reference Government Bond Dealer Quotations, or (ii)
if fewer than five such Reference Government Bond Dealer Quotations are received, the arithmetic average of all such quotations
(or, alternatively, if only one Reference Government Bond Dealer Quotation is received, the Reference Bond Price shall be equal
to such quotation); provided, however, that if no Reference Government Bond Dealer Quotations are received, the Subsequent Interest
Rate for the relevant Reset Period shall be equal to the Rate of Interest last determined in relation to the Contingent Capital
Notes in respect of the preceding Reset Period (or, alternatively, in the case of the first Reset Determination Date, the Rate
of Interest applicable to the first Reset Period shall be the Initial Interest Rate).
“Reference Government Bond Dealer”
means each of five banks selected by the Issuer (following, where practicable, consultation with an investment bank or financial
institution of financial repute determined to be appropriate by the Issuer, which for the avoidance of doubt, could be the Calculation
Agent), or the affiliates of such banks, which are (i) primary government securities dealers, and their respective successors,
or (ii) market makers in pricing corporate bond issues.
“Reference Government Bond Dealer
Quotations” means, with respect to each Reference Government Bond Dealer and any Reset Determination Date, the arithmetic
average, as determined by the Calculation Agent, of the bid and offered prices for the Reset Reference Bond (expressed in each
case as a percentage of its principal amount) as at 11:00 a.m. (London time) on the Reset Determination Date and, if relevant,
on a dealing basis for settlement that is customarily used at such time, and quoted in writing to the Calculation Agent by such
Reference Government Bond Dealer. “Calculation Agent” means National Westminster Bank Plc or its successor appointed
by us, pursuant to a calculation agent agreement expected to be entered into on March 12, 2021.
“Rate of Interest” shall mean
the Initial Interest Rate and/or the relevant Subsequent Interest Rate, as the case may be.
“Reset Period” means any period
from and including each Reset Date to but excluding the next succeeding Reset Date.
The “Reset Determination Date”
shall be the second Business Day immediately preceding each Reset Date.
“Subsequent Interest Rate”
means the rate of interest in respect of each Reset Period which shall be a rate per annum equal to the aggregate of the applicable
Reference Bond Rate on the relevant Reset Determination Date and %, such sum being converted to a quarterly rate in accordance
with market convention (rounded to three decimal places, with 0.005 rounded down).
Subject to the provisions under
“—Interest Cancellation”, “—Ranking and Liquidation Distribution”,
“—Solvency Condition” and “—Conversion—Automatic Conversion”, from
and including March 12, 2021 (the “Issue Date”) interest on the Contingent Capital Notes, if any, will be payable
quarterly in arrear on March 31, June 30, September 30 and December 31 of each year (each an “Interest Payment
Date”), commencing on March 31, 2021 (short first coupon). The regular record dates for the Contingent Capital Notes will be the close of
business of the relevant Clearing System on the Clearing System Business Day immediately preceding each Interest Payment Date
(or, if the Contingent Capital Notes are held in definitive form, the fifteenth day preceding each Interest Payment Date) (in
each case, the “Record Date”). Payments of interest, if any, so payable, and paid or duly provided for, on any
Interest Payment Date will, be paid to the person shown on the register for the Contingent Capital Notes at the close of
business on the Record Date.
If any scheduled Interest Payment Date
is not a Business Day, we will pay interest on the next Business Day, and no further interest or other payment shall be owed or
made in respect of such delay. If any scheduled redemption date is not a Business Day, payment of interest, if any, and principal
shall be postponed to the next Business Day, but interest on that payment will not accrue during the period from and after any
scheduled redemption date. If any Reset Date is not a Business Day, the Reset Date shall occur on the next Business Day.
Subject as set out above, if any interest
payment is to be made in respect of the Contingent Capital Notes on any date other than an Interest Payment Date, including on
any scheduled redemption date, it shall be calculated by the Calculation Agent on the basis of a year of 365 days and the actual
number of days elapsed in the relevant interest period and rounding the resulting figure to the nearest cent (half a cent being
rounded upwards).
The term “Business Day” means
any day, other than Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorised
or required by law or regulation to close in the City of New York or in the City of London.
The term “Clearing System Business
Day” means a day on which each of Euroclear, and Clearstream, Luxembourg is open for business.
Interest Cancellation
Interest Payments Discretionary
Subject to the solvency condition described
under “—Solvency Condition” below, the availability of Distributable Items (as defined under “—Restrictions
on Interest Payments” below), Automatic Conversion (as described under “—Conversion—Automatic Conversion”)
and a Winding-up or Administration Event (as described under “—Ranking and Liquidation Distribution”),
interest on the Contingent Capital Notes will be due and payable only at our sole discretion and we shall have sole and absolute
discretion at all times and for any reason to cancel any interest payment in whole or in part that would otherwise be payable on
any Interest Payment Date.
If we elect not to make an interest payment
on the relevant Interest Payment Date, or if we elect to make a payment of a portion, but not all, of such interest payment, such
non-payment shall evidence our exercise of discretion to cancel such interest payment, or the portion of such interest payment
not paid, and accordingly such interest payment, or portion thereof, shall not be or become due and payable. Such cancelled interest
shall not accumulate or be due and payable at any time thereafter and the holders and the beneficial owners of the Contingent Capital
Notes shall not have any right to or claim against us with respect to such interest amount. Any such cancellation shall not constitute
a default under the terms of the Contingent Capital Notes or the Indenture and the holders and beneficial owners of the Contingent
Capital Notes shall have no rights thereto or to receive any additional interest or compensation as a result of such cancellation.
Because the Contingent Capital Notes are
intended to qualify as Additional Tier 1 Capital under CRD (as defined therein), we may cancel, in whole or in part, any interest
payment at our discretion and may pay dividends on our ordinary shares or preference shares notwithstanding such cancellation.
In addition, we may use such cancelled payments without restriction to meet our other obligations as they become due.
In addition, the Contingent Capital Notes
will cease to bear interest from, and including, the date of any redemption of the Contingent Capital Notes as described under
“—Redemption, Repurchase, Substitution or Variation” unless payment and performance of all amounts and
obligations due by us in respect of the Contingent Capital Notes is not properly and duly made, in which event interest shall continue
to accrue on the Contingent Capital Notes until payment and performance of all amounts and obligations has been properly and duly
made.
Furthermore, in the event of the Automatic
Conversion of the Contingent Capital Notes upon the occurrence of a Conversion Trigger Event, as described under “—Conversion—Automatic
Conversion” below, or a Winding-up or Administration Event (as defined under “—Ranking and Liquidation
Distribution” below) any accrued but unpaid interest on the Contingent Capital Notes shall be deemed to have been cancelled
upon the occurrence of such Conversion Trigger Event, or a Winding-up or Administration Event, as the case may be, and shall not
become due and payable at any time.
See also “—Agreement to
Interest Cancellation” and “—Notice of Interest Cancellation” below.
Restrictions on Interest Payments
We shall cancel any interest, or such interest
shall be deemed to be cancelled, on the Contingent Capital Notes (or, as appropriate, any part thereof) which is scheduled to be
paid on an Interest Payment Date if:
|
(a)
|
we have an amount of Distributable Items on such scheduled Interest Payment Date that is less than the sum of (i) all payments
(other than redemption payments which do not reduce Distributable Items) made or declared by us since the end of our latest financial
year and prior to such Interest Payment Date on or in respect of any Parity Securities, the Contingent Capital Notes and any Junior
Securities (as defined below) and (ii) all payments (other than redemption payments which do not reduce Distributable Items) payable
by us on such Interest Payment Date (x) on the Contingent Capital Notes and (y) on or in respect of any Parity Securities or any
Junior Securities, in the case of each of (i) and (ii), excluding any payments already accounted for in determining the Distributable
Items; or
|
|
(b)
|
the Solvency Condition (as described under “—Solvency Condition” below) is not (or would not be) satisfied
in respect of such amounts payable on such Interest Payment Date.
|
See also “—Agreement to
Interest Cancellation” and “—Notice of Interest Cancellation” below.
“Distributable Items” means
subject as otherwise defined in, and/or interpreted in accordance with, the Capital Regulations applicable to us from time to time,
the amount of our profits at the end of the latest financial year plus any profits brought forward and reserves available for that
purpose before distributions to holders of the Contingent Capital Notes, any Parity Securities and Junior Securities less any losses
brought forward, profits which are non-distributable pursuant to the Companies Act 2006 (UK) (the “Companies Act”)
or any other provisions of English law and/or Scots law from time to time applicable to us or our Memorandum and Articles of Association
from time to time (together, our “Articles of Association”) and sums placed to non-distributable reserves in accordance
with the Companies Act or other provisions of English law and/or Scots law from time to time applicable to us or our Articles of
Association, in each case with respect to the specific category of own funds instruments to which such law or the Articles of Association
relate; such profits, losses and reserves being determined on the basis of our individual accounts and not on the basis of our
consolidated accounts.
“Capital Regulations” means,
at any time, the laws, regulations, requirements, guidelines and policies relating to capital adequacy and/or minimum requirement
for own funds and eligible liabilities and/or loss absorbing capacity binding on credit institutions (including, without limitation,
as to leverage) then in effect as applicable to us or the Regulatory Group (as defined below) including if and to the extent applicable
to us or the Regulatory Group and without limitation to the generality of the foregoing, any delegated or implementing acts (such
as regulatory technical standards) adopted by the European Commission, including as they form part of the domestic law of the United
Kingdom either on or before 31 December 2020 or by virtue of the EUWA, and as they may be amended or replaced by the laws of England
and Wales from time to time; and any laws or regulations as well as requirements, guidelines and policies adopted by the PRA and/or
any other national or European authority from time to time, in each case to the extent applicable to us or the Regulatory Group
(whether or not such laws, regulations, requirements, guidelines or policies are applied generally or specifically to us or to
the Regulatory Group), in each case relating to capital adequacy and/or minimum requirement for own funds and eligible liabilities
and/or loss absorbing capacity.
“CRD” means (i) the CRD Directive
and (ii) the CRD Regulation, to the extent applicable to us or the Regulatory Group.
“CRD Directive” means Directive
2013/36/EU of the European Parliament and of the Council of June 26, 2013 on access to the activity of credit institutions and
the prudential supervision of credit institutions and investment firms, as amended or replaced from time to time (including as
amended by Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019) and/or any Capital Regulations
, to the extent that they form part of the domestic law of the United Kingdom either on or before 31 December 2020 or by virtue
of the EUWA, and as they may be amended or replaced by the laws of England and Wales from time to time.
“CRD Regulation” means Regulation
(EU) No. 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions
and investment firms amending Regulation (EU) No. 648/2012, as amended or replaced from time to time (including as amended by Regulation
(EU) 2019/876 of the European Parliament and of the Council of 20 May 2019, to the extent then in application) and/or any Capital
Regulations, to the extent that they form part of the domestic law of the United Kingdom either on or before 31 December 2020 or
by virtue of the EUWA, and as they may be amended or replaced by the laws of England and Wales from time to time.
“Junior Securities” means our
ordinary shares or other securities or other obligations (including any guarantee, credit support or similar undertaking) of ours
ranking, or expressed to rank, junior to the Contingent Capital Notes in a Winding-up or Administration Event (as defined under
“—Ranking” below).
“Parity Securities” means the
most senior ranking class or classes of non-cumulative preference shares in our capital from time to time and any other of our
securities or other securities or other obligations (including any guarantee, credit support or similar undertaking) ranking, or
expressed to rank, pari passu with the Contingent Capital Notes and/or such preference shares following a Winding-up or
Administration Event.
“PRA” means the Prudential
Regulation Authority or such other governmental authority having primary supervisory authority with respect to the prudential regulation
of our business.
“Regulatory Group” means us,
our subsidiary undertakings, participations, participating interests and any subsidiary undertakings, participations or participating
interests held (directly or indirectly) by any of our subsidiary undertakings from time to time and any other undertakings from
time to time consolidated with us for regulatory purposes, in each case in accordance with the rules and guidance of the PRA then
in effect.
Agreement to Interest Cancellation
By acquiring the Contingent Capital Notes,
holders and beneficial owners of the Contingent Capital Notes acknowledge and agree that:
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(a)
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interest is payable solely at our discretion, and no amount of interest shall become due and payable in respect of the relevant
interest period to the extent that it has been cancelled (in whole or in part) by us at our sole discretion and/or deemed cancelled
(in whole or in part); and
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(b)
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a cancellation or deemed cancellation of interest (in each case, in whole or in part) in accordance with the terms of the Indenture
and the Contingent Capital Notes shall not constitute a default in payment or otherwise under the terms of the Contingent Capital
Notes or the Indenture.
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Interest will only be due and payable on
an Interest Payment Date to the extent it is not cancelled or deemed cancelled in accordance with the provisions described under
“—Interest Cancellation”, “—Solvency Condition”, “—Ranking and
Liquidation Distribution” and “—Conversion—Automatic Conversion”. Any interest cancelled
or deemed cancelled (in each case, in whole or in part) in the circumstances described herein shall not be due and shall not accumulate
or be payable at any time thereafter, and holders and beneficial owners of the Contingent Capital Notes shall have no rights thereto
or to receive any additional interest or compensation as a result of such cancellation or deemed cancellation. We may use such
cancelled payments without restriction to meet our obligations as they fall due.
Notice of Interest Cancellation
If practicable, we will provide notice
of any cancellation or deemed cancellation of interest (in each case, in whole or in part) to the holders of the Contingent Capital
Notes through the Clearing Systems (or, if the Contingent Capital Notes are held in definitive form, to the holders of the Contingent
Capital Notes directly at their addresses shown on the register for the Contingent Capital Notes) and to the Trustee directly on
or prior to the relevant Interest Payment Date. Failure to provide such notice will have no impact on the effectiveness of, or
otherwise invalidate, any such cancellation or deemed cancellation of interest (and accordingly, such interest will not be due
and payable), or give the holders and beneficial owners of the Contingent Capital Notes any rights as a result of such failure.
Ranking and Liquidation Distribution
The Contingent Capital Notes will constitute
our direct, unsecured and subordinated obligations, ranking pari passu without any preference among themselves. The rights
and claims of the holders and beneficial owners of the Contingent Capital Notes in respect of, or arising from, the Contingent
Capital Notes (including any damages for breach of any obligations thereunder, if payable) will be subordinated to the claims of
our Senior Creditors (as defined below).
If:
(i) an order is made, or an effective resolution is passed, for our winding-up (excluding in each such case, a solvent winding-up solely
for the purposes of our reconstruction, amalgamation, reorganisation, merger or consolidation, or the substitution in our place
of a Successor in Business (as defined below), the terms of which have previously been approved by the Trustee or in writing by
holders of the Contingent Capital Notes of not less than 2/3 (two-thirds) in aggregate principal amount of the Contingent Capital
Notes); or
(ii) an
administrator is appointed for us and such administrator gives notice that it intends to declare and distribute a dividend
(each, respectively, or together, a “Winding-up or Administration
Event”), then (a) if any such events specified in (i) or (ii) above occur before the date on which the Conversion Trigger
Event occurs, there shall be payable by us in respect of each Contingent Capital Note (in lieu of any other payment by us) such
amount, if any, as would have been payable to a holder or beneficial owner of Contingent Capital Notes if, on the day prior to
the commencement of the Winding-up or Administration Event and thereafter, such holder or beneficial owner of Contingent Capital
Notes were the holder of one of a class of Notional Preference Shares (as defined below) on the assumption that the amount that
such holder or beneficial owner of Contingent Capital Notes was entitled to receive in respect of such Notional Preference Shares
on a return of assets in such Winding-up or Administration Event was an amount equal to the principal amount of the relevant Contingent
Capital Note, together with any Accrued Interest (as defined below) and any damages for breach of any obligations thereunder (if
payable), regardless of whether the Solvency Condition is satisfied on the date upon which the same would otherwise be due and
payable and (b) if any such events specified in (i) or (ii) above occurs on or after the date on which the Conversion Trigger Event
occurs but the Settlement Shares to be issued and delivered to the Settlement Share Depository on the Conversion Date have not
been so delivered, there shall be payable by us in respect of each Contingent Capital Note (in lieu of any other payment by us)
such amount, if any, as would have been payable to the holder or beneficial owner of such Contingent Capital Note in a Winding-up
or Administration Event if the Conversion Date in respect of the Automatic Conversion had occurred immediately before the occurrence
of a Winding-up or Administration Event (and, as a result, such holder or beneficial owner were the holder of such number of our
ordinary shares as such holder or beneficial owner would have been entitled to receive on the Conversion Date, ignoring for this
purpose our right to make an election for a Settlement Shares Offer to be effected), regardless of whether the Solvency Condition
is satisfied on the date upon which the same would otherwise be due and payable.
“commencement” means, in relation
to our winding-up, the date on which such winding-up commences, or is deemed to commence, determined in accordance with Section
86 or 129 of the Insolvency Act 1986.
“Notional Preference Shares”
means an actual or notional class of preference shares in our capital having an equal right to return of assets in a Winding-up
or Administration Event to, and so ranking pari passu with, the most senior class or classes of issued preference shares
with non-cumulative dividends (if any) in our capital from time to time and which have a preferential right to a return of assets
in the Winding-up or Administration Event over, and so rank ahead of, all other classes of issued shares for the time being in
our capital but ranking junior to the claims of Senior Creditors and junior to any notional class of preference shares in our capital
which is referenced in any of our instruments for the purposes of determining a claim in our winding-up or administration, and,
as so referenced, (i) is expressed to have a preferential right to a return of assets in our winding-up or administration over
the holders of all other classes of shares for the time-being in our capital and (ii) is not expressed to rank junior to any other
notional class of preference shares in our capital.
“secondary non-preferential debts”
shall have the meaning given to it in the Banks and Building Societies (Priorities on Insolvency) Order 2018 and any other law
or regulation applicable to us which is amended by such order, as each may be amended or replaced from time to time.
“Senior Creditors” means our
creditors (i) who are unsubordinated creditors, (ii) whose claims are, or are expressed to be, subordinated (whether only in the
event of a Winding-up or Administration Event or otherwise) to the claims of our other unsubordinated creditors but not further
or otherwise, (iii) who are creditors in respect of any secondary non-preferential debts, or (iv) who are our subordinated creditors
(whether as aforesaid or otherwise), other than those whose claims rank, or are expressed to rank, pari passu with, or junior
to, the claims of holders of the Contingent Capital Notes and/or pari passu with or junior to any claims ranking pari
passu with the claims of holders of the Contingent Capital Notes, in each case, in a Winding-up or Administration Event occurring
prior to any Conversion Trigger Event.
“Successor in Business” means,
in relation to the Issuer, any entity which (i) acquires all or substantially all of the undertaking and/or assets of the Issuer
or (ii) acquires the beneficial ownership of the whole of the issued voting stock and/or share capital of the Issuer or (iii) into
which the Issuer is amalgamated, merged or reconstructed and where the Issuer is not the continuing company.
As a consequence of these subordination
provisions, if a Winding-up or Administration Event occurs, each holder of Contingent Capital Notes may recover less rateably than
the holders of our unsubordinated liabilities and the holders of certain of our subordinated liabilities. If upon any Winding-up
or Administration Event the amount payable on the Contingent Capital Notes and any claims ranking equally with them are not paid
in full, the Contingent Capital Notes and other claims ranking equally will share rateably in any distribution of our assets in
proportion to the respective amounts to which they are entitled.
In addition, because we are a holding company,
our rights to participate in the assets of any subsidiary if such subsidiary is liquidated will be subject to the prior claims
of its creditors and in the case of bank subsidiaries, their depositors, except to the extent that we may be a creditor with recognised
claims against the subsidiary.
Solvency Condition
Other than in the event of a Winding-up
or Administration Event or in relation to the cash component of any Alternative Consideration in any Settlement Shares Offer (as
such terms are defined below), payments in respect of or arising from the Contingent Capital Notes (including any damages for breach
of any obligations thereunder) are, in addition to our right to cancel payments of interest as described under “—Interest
Cancellation”, conditional upon our being solvent at the time when the relevant payment is due to be made, and no principal,
interest or other amount shall be due and payable in respect of or arising from the Contingent Capital Notes, except to the extent
that we could make such payment and still be solvent immediately thereafter (such condition is referred to herein as the “Solvency
Condition”).
For the purposes of determining whether
the Solvency Condition is met, we shall be considered to be solvent at a particular point in time if:
(i) we are able to pay our debts as they
fall due; and
(ii) our Assets are at least equal to our
Liabilities.
“Assets” means our unconsolidated
gross assets, as shown in our latest published audited balance sheet, adjusted for subsequent events in such manner as our directors
may determine.
“Liabilities” means our unconsolidated
gross liabilities, as shown in the latest published audited balance sheet, adjusted for contingent liabilities and prospective
liabilities and for subsequent events in such manner as our directors may determine.
An officer’s certificate (which shall
only be required if, at the relevant time, we have not satisfied the Solvency Condition and we are relying on that fact as the
basis for not making a payment on the Contingent Capital Notes) as to our solvency shall, unless there is manifest error, be treated
and accepted by us, the Trustee and any holder of the Contingent Capital Notes as correct and sufficient evidence that the Solvency
Condition is not satisfied. The Trustee shall be entitled to rely absolutely on such certificate without liability to any person
without any obligation to verify or investigate the accuracy thereof. If we fail to make a payment because the Solvency Condition
is not satisfied, this payment shall not be or become due and payable and shall be deemed cancelled.
Any payment of interest not due by reason
of the provisions described above shall be deemed cancelled. See also “—Agreement to Interest Cancellation”
and “—Notice of Interest Cancellation” above.
Waiver of Right to Set-Off
By acquiring a Contingent Capital Note,
each holder (and the Trustee acting on behalf of the holders) will be deemed to have waived to the fullest extent permitted by
law any right of set-off, counterclaim or combination of accounts with respect to such Contingent Capital Note or the Indenture
(or between our obligations under or in respect of any Contingent Capital Note and any liability owed by a holder) that they (or
the Trustee acting on their behalf) might otherwise have against us, whether before or during any Winding-up or Administration
Event.
Notwithstanding the above, if any such
rights and claims of any such holder against us are discharged by set-off, such holder will immediately pay an amount equal to
the amount of such discharge to us or, in the event of a Winding-up or Administration Event, our liquidator or administrator (or
other relevant insolvency official), as the case may be, to be held on trust for Senior Creditors, and until such time as payment
is made will hold a sum equal to such amount on trust for Senior Creditors, and accordingly such discharge shall be deemed not
to have taken place.
Additional Amounts
All amounts of principal and interest,
if any, on the Contingent Capital Notes will be paid by us without deduction or withholding for, or on account of, any and all
present and future income, stamp and other taxes, levies, imposts, duties, charges, fees, deductions or withholdings now or hereafter
imposed, levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision or any authority
thereof or therein having the power to tax (the “Taxing Jurisdiction”), unless such deduction or withholding is required
by law.
If deduction or withholding of any such
taxes, levies, imposts, duties, charges, fees, deductions or withholdings shall at any time be required by the Taxing Jurisdiction,
we will pay such additional amounts in respect of the payment of any interest on (but not, for the avoidance of doubt, in respect
of the payment of the principal amount of) the Contingent Capital Notes (“Additional Amounts”) as may be necessary
in order that the net amounts in respect of any interest paid to the holders of Contingent Capital Notes, after such deduction
or withholding, shall equal the amount of any interest which would have been payable in respect of such Contingent Capital Notes
had no such deduction or withholding been required; provided, however, that the foregoing will not apply to any such tax, levy,
impost, duty, charge, fee, deduction or withholding that would not have been payable or due but for the fact that:
(i) the holder or the beneficial owner
of the Contingent Capital Note is a domiciliary, national or resident of, or engaging in business or maintaining a permanent establishment
or physically present in, the Taxing Jurisdiction or otherwise has some connection with the Taxing Jurisdiction other than the
mere holding or ownership of a Contingent Capital Note, or the collection of any payment of (or in respect of) any interest on
the Contingent Capital Notes,
(ii) the Contingent Capital Note is presented
(where presentation is required) for payment more than 30 days after the date payment became due or was provided for, whichever
is later, except to the extent that the holder would have been entitled to such Additional Amount on presenting (where presentation
is required) the Contingent Capital Note for payment at the close of such 30 day period,
(iii) the holder or the beneficial owner
of the Contingent Capital Note or the beneficial owner of any payment of (or in respect of) any interest on such Contingent Capital
Note failed to comply with a request by us or our liquidator or other authorised person addressed to the holder (x) to provide
information concerning the nationality, residence or identity of the holder or such beneficial owner or (y) to make any declaration
or other similar claim, which in the case of (x) or (y), is required or imposed by a statute, treaty, regulation or administrative
practice of the Taxing Jurisdiction as a precondition to exemption or relief from all or part of such deduction or withholding,
(iv) the withholding or deduction is required
to be made pursuant to Sections 1471 through 1474 of the US Internal Revenue Code of 1986, as amended, any agreement with the US
Treasury entered into with respect thereto, any US Treasury regulation issued thereunder or any other official interpretations
or guidance issued with respect thereto; any intergovernmental agreement entered into with respect thereto, or any law, regulation,
or other official interpretation or guidance promulgated pursuant to such an intergovernmental agreement,
(v) any combination of subclauses (i) through
(iv) above,
nor shall Additional Amounts be paid with
respect to a payment of any interest on the Contingent Capital Note to any holder who is a fiduciary or partnership or person other
than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the Taxing Jurisdiction
to be included in the income for tax purposes of a beneficiary or settlor with respect to such fiduciary or a member of such partnership
or a beneficial owner who would not have been entitled to such Additional Amounts, had it been the holder.
Whenever in this prospectus supplement
there is mentioned, in any context, the payment of any interest on, or in respect of, any Contingent Capital Note, such mention
shall be deemed to include mention of the payment of Additional Amounts provided for in this “Additional Amounts” section
to the extent that, in such context,
Additional Amounts are, were or would be
payable in respect thereof pursuant to the provisions of this section and as if express mention of the payment of Additional Amounts
(if applicable) were made in any provisions hereof where such express mention is not made.
The restrictions on interest payments under
“—Interest Cancellation—Restrictions on Interest Payments” and “—Solvency Condition”
shall apply to any Additional Amounts mutatis mutandis.
Redemption, Repurchase, Substitution or Variation
The Contingent Capital Notes are perpetual
securities in respect of which there is no fixed redemption date or maturity date. Holders may not request any redemption of the
Contingent Capital Notes at any time.
Optional Redemption
The Contingent Capital Notes will, subject
to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions to Redemption,
Repurchase, Substitution or Variation” below, be redeemable in whole, but not in part, at our option and in our sole
discretion on (i) any day falling in the period commencing on (and including) the First Call Date and ending on (and including)
the First Reset Date, or (ii) any Reset Date thereafter, in each case at 100% of their principal amount, together with any accrued
and unpaid interest on the Contingent Capital Notes, excluding any interest which has been cancelled or deemed to be cancelled
in accordance with the terms of the Contingent Capital Notes as described under “—Interest Cancellation”
above (“Accrued Interest”) to, but excluding, the date fixed for redemption.
Notice of any optional redemption of the
Contingent Capital Notes will be given to holders not less than 15 nor more than 30 calendar days in advance in accordance with
“—Pre-conditions to Redemption, Repurchase, Substitution or Variation” and “—Notice of
Redemption” below, and to the Trustee at least five (5) Business Days prior to such date, unless a shorter notice period
shall be satisfactory to the Trustee. Except as otherwise provided herein, such notice shall be irrevocable.
Tax Redemption
If at any time a Tax Event has occurred,
we may, subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions
to Redemption, Repurchase, Substitution or Variation” and “—Notice of Redemption” below, at
our option and in our sole discretion redeem the Contingent Capital Notes in whole but not in part at any time at 100% of their
principal amount, together with any Accrued Interest to, but excluding, the date fixed for redemption.
A “Tax Event” will be deemed
to have occurred with respect to the Contingent Capital Notes if, at any time, we shall determine that, as a result of any change
in, or amendment to, the laws or regulations of the UK or any political subdivision or any authority thereof or therein having
power to tax (including any treaty to which the UK or any political subdivision or any authority thereof or therein is a party),
or any change in the official application of such laws or regulations (including a decision of any court or tribunal or the application
by any tax authority), which change or amendment becomes effective or applicable, or, in the case of a change in or amendment to
law, where such change or amendment is enacted by a UK Act of Parliament or by a Statutory Instrument, if such UK Act of Parliament
or Statutory Instruments is enacted, on or after the Issue Date:
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(a)
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in making a payment under the Contingent Capital Notes in respect of interest, we have or will or would on the next Interest
Payment Date become obligated to pay Additional Amounts;
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(b)
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a payment of interest on the next Interest Payment Date in respect of any of the Contingent Capital Notes would be treated
as a “distribution” within the meaning of Section 1000 of the UK Corporation Tax Act 2010 (or any statutory modification
or re-enactment thereof for the time being);
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(c)
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we would not be entitled to claim a deduction in respect of a payment of interest payable on the next Interest Payment Date
in computing our UK taxation liabilities (or the value of such deduction to us would be materially reduced);
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(d)
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as a result of the Contingent Capital Notes being in issue, we would not be able to have losses or deductions (including in
respect of a payment of interest on the Contingent Capital Notes) set against the profits or gains, or profits or gains offset
by losses or deductions, of companies with which we are or would
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otherwise be grouped for applicable UK tax purposes
(whether under the group relief system current as at the date of issue of the Contingent Capital Notes or any similar system or
systems having like effect as may exist from time to time);
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(e)
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a future write-down of the principal amount of the Contingent Capital Notes or conversion of the Contingent Capital Notes into
ordinary shares would result in a UK tax liability, or income, profit or gain being treated for UK tax purposes as accruing, arising
or being received;
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(f)
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the Contingent Capital Notes would no longer be treated as loan relationships for UK tax purposes; or
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(g)
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the Contingent Capital Notes or any part thereof would be treated as a derivative or an embedded derivative for UK tax purposes,
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in each case, the
effect of which cannot be avoided by us taking reasonable steps available to us.
In any case where we determine that, as
a result of a Tax Event, we are entitled to redeem the Contingent Capital Notes, we shall be required to deliver to the Trustee
prior to the giving of any notice of redemption a written legal opinion of independent UK counsel of recognised standing (selected
by us), in a form satisfactory to the Trustee, confirming that the relevant Tax Event has occurred and the effect of such Tax Event
cannot be avoided by us taking reasonable steps available to us.
Redemption Due to a Capital Disqualification
Event
If at any time a Capital Disqualification
Event occurs, we may, subject to the satisfaction of the Solvency Condition and the conditions described under “—Pre-conditions
to Redemption, Repurchase, Substitution or Variation” and “—Notice of Redemption” below, at
our option and in our sole discretion, redeem the Contingent Capital Notes in whole but not in part at any time at 100% of their
principal amount, together with any Accrued Interest to, but excluding, the date fixed for redemption.
A “Capital Disqualification Event”
shall occur if we determine that, as a result of any amendment to, or a change in the regulatory classification of the Contingent
Capital Notes under the Capital Regulations (or official interpretation thereof), in any such case becoming effective on or after
the Issue Date, the whole or part of the Contingent Capital Notes are, or are likely to be, excluded from our Tier 1 Capital (as
defined in the Capital Regulations) or the Tier 1 Capital of the Regulatory Group.
Repurchases
We may at any time and from time to time
and to the extent not prohibited by CRD repurchase beneficially, or procure others to repurchase beneficially for our account,
the Contingent Capital Notes in the open market, by tender or by private agreement in any manner and at any price or at differing
prices. Contingent Capital Notes purchased or otherwise acquired by us may be (i) held, (ii) resold or (iii) at our sole discretion,
surrendered to the Trustee for cancellation (in which case all Contingent Capital Notes so surrendered will forthwith be cancelled
in accordance with applicable law and thereafter may not be reissued or resold). Any such purchases will be subject to the satisfaction
of the Solvency Condition and the conditions set forth under “—Pre-conditions to Redemption, Repurchase, Substitution
or Variation”.
Substitution or Variation
If a Tax Event or a Capital Disqualification
Event has occurred, then we may, subject to the conditions described under “—Pre-conditions to Redemption, Repurchase,
Substitution or Variation” below, but without any requirement for the consent or approval of the holders or beneficial
owners of the Contingent Capital Notes, at any time (whether before or following the First Call Date) either substitute the Contingent
Capital Notes in whole (but not in part) for, or vary the terms of the Contingent Capital Notes so that they remain or, as appropriate,
become, Compliant Securities (as defined below).
Notice of any substitution or variation
of the Contingent Capital Notes due to the occurrence of a Tax Event or Capital Disqualification Event will be given to holders
not less than 15 nor more than 30 calendar days prior to the date of substitution or variation (as applicable) in accordance with
“—Notice” below, and to the Trustee at least five (5) Business Days prior to the date of such notice to
holders, unless a shorter notice period shall be satisfactory to
the Trustee. Such notice shall specify
the date fixed for substitution or, as the case may be, variation of the Contingent Capital Notes and shall, except as otherwise
provided herein, be irrevocable.
Prior to the giving of any notice of substitution
or variation of the Contingent Capital Notes, we shall deliver to the Trustee an officer’s certificate stating that (i) in
our belief a Tax Event or Capital Disqualification Event has occurred and (ii) the terms of the relevant Compliant Securities comply
with the definition thereof. The Trustee is entitled to conclusively rely on and accept such officer’s certificate without
any further inquiry, in which event it shall be conclusive and binding on the Trustee and the holders and beneficial owners of
the Contingent Capital Notes. Subject to receipt of such certificate, the Trustee shall (at our request and expense) use its reasonable
endeavours to co-operate with us to give effect to the substitution or variation, provided that the Trustee shall not be obliged
to co-operate in any such substitution or variation if the securities resulting from such substitution or variation, or the co-operation
in such substitution or variation, would, in the opinion of the Trustee, have the effect of (i) exposing the Trustee to any liability
against which it is not indemnified and/or secured and/or pre-funded to its satisfaction; (ii) changing, increasing or adding to
the obligations or duties of the Trustee; or (iii) removing or amending any protection or indemnity afforded to, or any other provision
in favour of, the Trustee under the Indenture, this prospectus supplement and/or the Contingent Capital Notes. If the Trustee does
not so co-operate as provided above, the Issuer may, subject as provided above, redeem the Contingent Capital Notes as provided
in this section.
“Compliant Securities” means
securities issued directly by us that have terms not materially less favourable to an investor than the terms of the Contingent
Capital Notes (as determined by us in consultation with an Independent Financial Adviser), provided that we have delivered an officer’s
certificate to such effect (including as to such consultation) to the Trustee (upon which the Trustee shall be entitled to conclusively
rely on and accept such certificate without further enquiry and without liability to any person) prior to the substitution or variation
of the Contingent Capital Notes and provided that such substitution or varied securities:
(a) (1) contain terms which comply with
the then current requirements of the Capital Regulations in relation to Tier 1 Capital (as defined in the Capital Regulations);
(2) provide for the same interest rate and Interest Payment Dates from time to time applying to the Contingent Capital Notes; (3)
rank pari passu with the ranking of the Contingent Capital Notes; (4) preserve any existing rights under the Indenture to any accrued
interest or other amounts which have not been either paid or cancelled (but without prejudice to our right to cancel the same under
the terms of the Compliant Securities, if applicable); (5) preserve our obligations (including the obligations arising from the
exercise of any right) as to payments of principal in respect of the Contingent Capital Notes, including (without limitation) as
to the timing and amount of such payments; (6) contain terms providing for the conversion of the Contingent Capital Notes, the
cancellation of payments of interest thereon or write-down of the principal of the Contingent Capital Notes only if such terms
are not materially less favourable to an investor than the terms of the Contingent Capital Notes and (7) qualify as hybrid capital
instruments as defined in section 475C of the Corporation Tax Act 2009, to the extent applicable (or in any equivalent provision
in any applicable successor legislation);
(b) are (1) admitted to trading on the
ISM of the LSE or (2) listed on such other stock exchange as is a Recognised Stock Exchange (as defined below) at that time as
selected by us; and
(c) where the Contingent Capital Notes
which have been substituted or varied had a published rating (solicited by, or assigned with our cooperation) from a Rating Agency
(as defined below) immediately prior to their substitution or variation, each such Rating Agency has ascribed, or announced its
intention to ascribe, an equal or higher published rating to the relevant Compliant Securities.
“Recognised Stock Exchange”
means a recognised stock exchange as defined in section 1005 of the UK Income Tax Act 2007 as the same may be amended from time
to time and any provision, statute or statutory instrument replacing the same from time to time.
“Rating Agency” means Moody’s
Investors Service, Inc., S&P Global Ratings Inc., a division of S&P Global Inc., Fitch Ratings, Inc., or any of their affiliates,
or any successor.
Pre-conditions to Redemption, Repurchase, Substitution
or Variation
Any redemption, repurchase, substitution
or variation of the Contingent Capital Notes by us is subject (except to the extent that the Capital Regulations no longer so require)
to us having met the following conditions:
(1) we have given such notice to the PRA
as the PRA may then require before we become committed to the proposed redemption, repurchase, substitution or variation; and
(2) in the case of any redemption or repurchase,
the PRA having granted permission for us to make any such redemption or repurchase of the Contingent Capital Notes upon a satisfactory
finding that either:
(i) on or before such redemption
or repurchase of any of the Contingent Capital Notes, we replace such Contingent Capital Notes with own funds instruments (as defined
by the Capital Regulations) of an equal or higher quality at terms that are sustainable for our income capacity; or
(ii) we have demonstrated to
the satisfaction of the PRA that our own funds and eligible liabilities (as defined by the Capital Regulations) would following
such redemption or repurchase, exceed the requirements laid down in CRD and Directive 2014/59/EU, as amended or replaced from time
to time (including, without limitation, by Directive (EU) 2019/879), or similar laws in the United Kingdom (including, without
limitation, the Banking Act 2009, as amended) by a margin that the PRA considers necessary; and
(3) no Conversion Trigger
Notice (as defined below) has been delivered; and
(4) in the case of any redemption
or repurchase, the Solvency Condition is satisfied in respect of the relevant payment on the date scheduled for redemption or repurchase;
and
(5) we have complied with
any alternative or additional pre-conditions as set out in the Capital Regulations and/or required by the PRA as a prerequisite
to its permission for such redemptions or repurchases, at the time; and
(6) in the case of any substitution
or variation, such substitution or variation being effected in compliance with any applicable regulatory and legal requirements,
including the Trust Indenture Act.
In addition, as of the date hereof, under
the CRD rules, we may only redeem or repurchase the Contingent Capital Notes before five years after the date of issuance of the
Contingent Capital Notes, provided that (except to the extent that the Capital Regulations no longer so require) the pre-conditions
listed in (2) above and one of following conditions are met:
(a) in the case of redemption
due to the occurrence of a Capital Disqualification Event, as described under “—Redemption Due to a Capital Disqualification
Event” above (i) the PRA considers such change to be sufficiently certain and (ii) we demonstrate to the satisfaction
of the PRA that the Capital Disqualification Event was not reasonably foreseeable at the time of the issuance of the Contingent
Capital Notes; or
(b) in the case of redemption due to the occurrence
of a Tax Event as described under “—Tax Redemption” above, we demonstrate to the satisfaction of the PRA
that a Tax Event is material and was not reasonably foreseeable at the time of issuance of the Contingent Capital Notes; or
(c) before or at the same time as such redemption or
repurchase of the Contingent Capital Notes, we replace the Contingent Capital Notes with own funds instruments (as defined by the
Capital Regulations) of an equal or higher quality at terms that are sustainable for its income capacity and the PRA has permitted
that action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional
circumstances; or
(d)
the Contingent Capital Notes are repurchased for market making purposes in accordance with the Capital Regulations.
Notice of Redemption
If we elect to redeem the Contingent Capital
Notes at our option or due to the occurrence of a Tax Event or a Capital Disqualification Event we will give holders not less than
15 nor more than 30 calendar days’ notice in accordance with “—Notice” below, and to the Trustee
at least five (5) Business Days prior to such date, unless a shorter notice period shall be satisfactory to the Trustee. Except
as otherwise provided herein, such notice shall be irrevocable.
Any redemption notice will state:
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·
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that on the redemption date the redemption price will, subject to the satisfaction of the conditions set forth in the Indenture
as described in this prospectus supplement, and as set forth above, become due and payable upon each Contingent Capital Note being
redeemed and that, subject to certain exceptions, interest will cease to accrue on or after that date;
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·
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the place or places where the Contingent Capital Notes are to be surrendered for payment of the redemption price; and
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·
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the Common Code and/or ISIN number or numbers, if any, with respect to the Contingent Capital Notes being redeemed.
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If we have elected to redeem the Contingent
Capital Notes but the Solvency Condition is not (or would not be) satisfied in respect of the relevant redemption payment immediately
prior to, and immediately following, the date specified for redemption in such notice, the relevant redemption notice shall be
automatically rescinded and shall be of no force and effect and no payment of the redemption amount will be due and payable.
If we have elected to redeem the Contingent
Capital Notes but prior to the payment of the redemption amount with respect to such redemption a Conversion Trigger Event occurs,
the relevant redemption notice shall be automatically rescinded and shall be of no force and effect, no payment of the redemption
amount will be due and payable and an Automatic Conversion shall occur as described under “—Automatic Conversion”
below.
If we have elected to redeem the Contingent
Capital Notes but prior to the payment of the redemption amount with respect to such redemption the relevant UK authority exercises
its UK bail-in power with respect to us, the relevant redemption notice shall be automatically rescinded and shall be of no force
and effect, and no payment of the redemption amount will be due and payable.
If we have elected to redeem the Contingent
Capital Notes, but prior to the date of any such redemption we have not given notice to the PRA and/or the PRA has objected to
or refused to grant us permission, as applicable, to redeem the Contingent Capital Notes (in each case to the extent and in the
manner required by the relevant Capital Regulations), the relevant redemption notice shall be automatically rescinded and shall
be of no force and effect, and no payment of the redemption amount will be due and payable.
If we have elected to redeem the Contingent
Capital Notes, but in respect of any redemption proposed to be made prior to the fifth anniversary of the Issue Date (if and to
the extent then required under the Capital Regulations) (i) in the case of redemption due to the occurrence of a Capital Disqualification
Event, the PRA does not consider such change to be sufficiently certain and/or we have not demonstrated to the satisfaction of
the PRA that the relevant change was not reasonably foreseeable as at the Issue Date or (ii) in the case of redemption due to the
occurrence of a Tax Event, we have not demonstrated to the satisfaction of the PRA that the Tax Event is material and was not reasonably
foreseeable as at the Issue Date; the relevant redemption notice shall be automatically rescinded and shall be of no force and
effect, and no payment of the redemption amount will be due and payable.
If we have elected to redeem the Contingent
Capital Notes, but prior to the payment of the redemption amount with respect to such redemption, we are not in compliance with
any alternative or additional pre-conditions required by the PRA as a pre-requisite to its permission for such redemption, the
relevant redemption notice shall be automatically rescinded and shall be of no force and effect, and no payment of the redemption
amount will be due and payable.
Conversion
Automatic Conversion
Upon the occurrence of the Conversion Trigger
Event, each Contingent Capital Note shall, on the Conversion Date (as defined below), be converted in whole and not in part into
ordinary shares credited as fully paid (the “Settlement Shares”) at the Conversion Price (as defined below under “—Conversion
Price”) and in accordance with the terms set forth herein. The Settlement Shares shall be issued and delivered to the
Settlement Share Depository (as defined below) (on behalf of the holders and beneficial owners) on the Conversion Date (the “Automatic
Conversion”), in consideration for which all of our obligations under the Contingent Capital Notes shall be irrevocably and
automatically released, and under no circumstances shall our released obligations be reinstated.
Once a Contingent Capital Note has been
converted into Settlement Shares, there is no provision for the reconversion of such Settlement Shares back into Contingent Capital
Notes. The Contingent Capital Notes are not convertible at the option of the holders at any time. Automatic Conversion shall not
constitute a default under the Contingent Capital Notes.
If we have been unable to appoint a Settlement
Share Depository, we shall make such other arrangements for the issuance and delivery of the Settlement Shares or of the Alternative
Consideration (as defined below under “—Settlement Procedures”), as applicable, to the holders of the
Contingent Capital Notes as we shall consider reasonable in the circumstances, which may include issuing and delivering the Settlement
Shares or any Alternative Consideration, as applicable, to another independent nominee or to the holders of the Contingent Capital
Notes directly, which issuance and delivery of the Settlement Shares or any Alternative Consideration, as applicable, shall irrevocably
and automatically release all of our obligations under the Contingent Capital Notes as if the Settlement Shares had been issued
and delivered to the Settlement Share Depository, and, in which case, where the context so admits, references in the Contingent
Capital Notes and the Indenture to the issue and delivery of Settlement Shares to the Settlement Share Depository shall be construed
accordingly and apply mutatis mutandis. Where practicable, we shall make such other arrangements to allow holders, if they
so elect, to take delivery of their Settlement Shares in the form of ADSs.
“CET1 Capital” means, at any
time, the sum, expressed in pounds sterling, of all amounts that constitute Common Equity Tier 1 Capital of the Regulatory Group,
at such time, less any deductions from Common Equity Tier 1 Capital of the Regulatory Group required to be made, at such time,
in each case as calculated by us on a consolidated and fully loaded basis in accordance with the Capital Regulations applicable
to the Regulatory Group as at that point in time (which calculation shall be binding on the Trustee and holders of the Contingent
Capital Notes).
“CET1 Ratio” means the ratio
of CET1 Capital to Risk Weighted Assets expressed as a percentage and on the basis that all measures used in such calculation shall
be calculated on a fully loaded basis.
“Common Equity Tier 1 Capital”
shall have the meaning ascribed to such term in CRD (as the same may be amended or replaced from time to time) as interpreted and
applied in accordance with the Capital Regulations then applicable to the Regulatory Group.
The “Conversion Date” shall
be the date specified in the Conversion Trigger Notice and shall occur without delay upon, and in any event within one month of,
the occurrence of the Conversion Trigger Event.
A “Conversion Trigger Event”
shall occur at any point in time at which the CET1 Ratio is less than 7.00%.
“fully loaded” means, in relation
to a measure that is presented or described as being on a “fully loaded basis” that such measure is calculated without
applying the transitional provisions set out in Part Ten of the CRD Regulation, in accordance with the Capital Regulations applicable
to the Regulatory Group, as at the time such measure is calculated.
“Risk Weighted Assets” means,
at any time, the aggregate amount, expressed in pounds sterling, of the risk weighted assets of the Regulatory Group, at such time,
as calculated by us on a consolidated and fully loaded basis in accordance with the Capital Regulations applicable to the Regulatory
Group (which calculation shall be binding on the Trustee and holders of the Contingent Capital Notes) and where the term “risk
weighted assets” means the risk weighted assets or total risk exposure amount, as calculated by us in accordance with the
Capital Regulations applicable to the Regulatory Group as at that point in time.
“Settlement Share Depository”
means a reputable financial institution, depository entity, trust company or similar entity (which in each such case is wholly
independent of us) to be appointed by us on or prior to any date when a function ascribed to the Settlement Share Depository in
the Indenture is required to be performed, to perform such functions and which will be required to undertake, for the benefit of
the holders and beneficial owners of the Contingent Capital Notes, to hold the Settlement Shares (and the Alternative Consideration,
if any) on behalf of such holders and beneficial owners of the Contingent Capital Notes in one or more segregated accounts, unless
otherwise required to be transferred out of such accounts for the purposes of the Settlement Shares Offer on terms consistent with
the Indenture.
Conversion Trigger Notice
Following the occurrence of the Conversion
Trigger Event, we shall deliver notice thereof to the Trustee and the holders of the Contingent Capital Notes (the “Conversion
Trigger Notice”) in accordance with “—Notice” below without delay after such a Conversion Trigger
Event (and in any event within such period as the PRA may require). The date on which the Conversion Trigger Notice shall be deemed
to have been given shall be the date on which it is dispatched by us to the Clearing Systems (or if the Contingent Capital Notes
are held in definitive form, to the holders of the Contingent Capital Notes directly).
Upon our determination that a Conversion
Trigger Event has occurred, we shall immediately inform the PRA and shall, prior to giving a Conversion Trigger Notice, deliver
to the Trustee a certificate stating that a Conversion Trigger Event has occurred, which the Trustee shall accept without any further
enquiry as sufficient evidence of such matters, in which event such certificate will be conclusive and binding on the Trustee,
the holders and beneficial owners of the Contingent Capital Notes.
The Conversion Trigger Notice shall be
in a form acceptable to the Clearing Systems and shall specify (i) that the Conversion Trigger Event has occurred and the CET1
Ratio resulting in such Conversion Trigger Event, (ii) the Conversion Date, (iii) the then-prevailing Conversion Price (which Conversion
Price shall remain subject to any subsequent adjustment as set forth under “—Anti-dilution Adjustment of the Conversion
Price” below up to the Conversion Date), (iv) the contact details of any Settlement Share Depository, or, if we have
been unable to appoint a Settlement Share Depository, such other arrangements for the issuance and/or delivery of the Settlement
Shares, or, if the holder elects, ADSs or any Alternative Consideration to the holders of the Contingent Capital Notes as we shall
consider reasonable in the circumstances, (v) that we have the option, at our sole and absolute discretion, to elect that a Settlement
Shares Offer be conducted and that we will, if we so elect, issue a Settlement Shares Offer Notice within 10 Business Days
following the Conversion Date notifying the Contingent Capital Notes holders of our election, and (vi) the Suspension Date and
that the Contingent Capital Notes shall remain in existence for the sole purpose of evidencing the holder’s or beneficial
owner’s right to receive Settlement Shares, or, if the holder elects, ADSs or the Alternative Consideration, as applicable,
from the Settlement Share Depository and that the Contingent Capital Notes may continue to be transferable until the Suspension
Date.
Notwithstanding anything to the contrary,
once we have delivered a Conversion Trigger Notice following the occurrence of a Conversion Trigger Event, (i) subject to the right
of holders and beneficial owners of the Contingent Capital Notes relating to a breach of Performance Obligation (as defined below)
in the event of a failure by us to issue and deliver any Settlement Shares to the Settlement Share Depository on the Conversion
Date, the Indenture shall impose no duties upon the Trustee whatsoever with regard to an Automatic Conversion upon a Conversion
Trigger Event and the holders and beneficial owners of the Contingent Capital Notes shall have no rights whatsoever under the Indenture
or the Contingent Capital Notes to instruct the Trustee to take any action whatsoever and (ii) as of the date of the Conversion
Trigger Notice, except for any indemnity and/or security provided by any holders and beneficial owners of the Contingent Capital
Notes in such direction or related to such direction, any direction previously given to the Trustee by any holders of the Contingent
Capital Notes shall cease automatically and shall be null and void and of no further effect; except in each case of (i) and (ii)
of this paragraph, with respect to any rights of holders or beneficial owners of the Contingent Capital Notes with respect to any
payments under the Contingent Capital Notes that were unconditionally due and payable prior to the date of the Conversion Trigger
Notice or unless the Trustee is instructed in writing by us to act otherwise.
Our obligations to indemnify the Trustee
in accordance with Section 6.07 of the Original Indenture shall survive any Automatic Conversion.
Settlement Shares
The number of Settlement Shares to be issued
to the Settlement Share Depository on the Conversion Date will be determined by dividing the aggregate principal amount of the
Contingent Capital Notes outstanding immediately prior to the Automatic Conversion on the Conversion Date (the “Outstanding
Amount”) by the Conversion Price prevailing on the Conversion Date. The number of Settlement Shares to be delivered to each
holder shall be rounded down, if necessary, to the nearest whole number of Settlement Shares. Fractions of Settlement Shares will
not be delivered to the Settlement Share Depository following the Automatic Conversion, and no cash payment will be made in lieu
thereof. The number of Settlement Shares to be held by the Settlement Share Depository for the benefit of each holder shall equal
the number of Settlement Shares thus calculated multiplied by a fraction equal to (i) the
Tradable Amount of the book-entry interests
in the Contingent Capital Notes held by such holder on the Conversion Date divided by (ii) the Outstanding Amount rounded down,
if necessary, to the nearest whole number of Settlement Shares.
The Settlement Shares issued upon Automatic
Conversion will be fully paid and non-assessable ordinary share capital and will in all respects rank pari passu with the
ordinary shares in issue on the Conversion Date, except in any such case for any right excluded by mandatory provisions of applicable
law, and provided that any Settlement Shares so issued will not rank for (or, as the case may be, the relevant holder or beneficial
owner shall not be entitled to receive) any rights the Record Date for entitlement to which falls prior to the Conversion Date.
For as long as the Settlement Shares are held by the Settlement Share Depository, each holder and beneficial owner of the Contingent
Capital Notes shall be entitled to direct the Settlement Share Depository to exercise on its behalf all rights of an ordinary shareholder
(including voting rights and rights to receive dividends) except that holders and beneficial owners shall not be able to sell or
otherwise transfer such Settlement Shares unless and until such time as they have been delivered to holders in accordance with
“—Settlement Procedures” below.
Conversion Price
The conversion price per ordinary share
in respect of the Contingent Capital Notes shall be £1.754, subject to certain anti-dilution adjustments described under
“—Anti-dilution Adjustment of the Conversion Price” below (the “Conversion Price”).
Anti-dilution Adjustment of the Conversion
Price
References to the Conversion Price below
shall be deemed to include the Settlement Shares Offer Price. References to the Conversion Price and ordinary shares below shall
be deemed in connection with a Qualifying Takeover Event to include any New Conversion Price and any Relevant Shares, such that
any New Conversion Price shall be subject to price adjustments upon the occurrence of the events below, subject to any modifications
as an Independent Financial Adviser shall determine to be appropriate.
Upon the occurrence of any of the events
described below, the Conversion Price shall be adjusted as follows:
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(i)
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If and whenever there shall be a consolidation, reclassification, redesignation or subdivision in relation to the ordinary
shares which alters the number of ordinary shares in issue, the Conversion Price shall be adjusted by multiplying the Conversion
Price in force immediately prior to such consolidation, reclassification, redesignation or subdivision by the following fraction:
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A
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is the aggregate number of ordinary shares in issue immediately before such consolidation, reclassification, redesignation
or subdivision, as the case may be; and
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B
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is the aggregate number of ordinary shares in issue immediately after, and as a result of, such consolidation, reclassification,
redesignation or subdivision, as the case may be.
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Such adjustment shall become effective
on the date that the consolidation, reclassification, redesignation or subdivision, as the case may be, takes effect.
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(ii)
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If and whenever we shall issue any ordinary shares to our existing shareholders credited as fully paid by way of capitalisation
of profits or reserves (including any share premium account or capital redemption reserve) other than (1) where any such ordinary
shares are or are to be issued instead of the whole or part of a Cash Dividend which our shareholders would or could otherwise
have elected to receive, (2) where our shareholders may elect to receive a Cash Dividend in lieu of such ordinary shares or (3)
where any such ordinary shares are or are expressed to be issued in lieu of a dividend (whether or not a Cash Dividend equivalent
or amount is announced or would otherwise be payable to our shareholders, whether at their election or otherwise), the Conversion
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Price shall be adjusted by multiplying
the Conversion Price in force immediately prior to such issue by the following fraction:
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A
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is the aggregate number of ordinary shares in issue immediately before such issue; and
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B
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is the aggregate number of ordinary shares in issue immediately after such issue.
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Such adjustment shall become
effective on the date of issue of such ordinary shares.
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(iii)
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If and whenever we shall pay any Extraordinary Dividend to our shareholders, the Conversion Price shall be adjusted by multiplying
the Conversion Price in force immediately prior to the Effective Date by the following fraction:
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A
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is the Current Market Price of one ordinary share on the Effective Date; and
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B
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is the portion of the aggregate Extraordinary Dividend attributable to one ordinary share, with such portion being determined
by dividing the aggregate Extraordinary Dividend by the number of ordinary shares entitled to receive the relevant Extraordinary
Dividend. If the Extraordinary Dividend shall be expressed in a currency other than the Relevant Currency, it shall be converted
into the Relevant Currency at the Prevailing Rate on the relevant Effective Date.
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Such adjustment shall become effective
on the Effective Date.
“Effective Date” means, in
respect of this sub-paragraph (iii), the first date on which the ordinary shares are traded ex-the Extraordinary Dividend on the
Relevant Stock Exchange.
“Extraordinary Dividend” means
any Cash Dividend that is expressly declared by us to be a capital distribution, extraordinary dividend, extraordinary distribution,
special dividend, special distribution or return of value to our shareholders as a class, or any analogous or similar term, in
which case the Extraordinary Dividend shall be such Cash Dividend.
“Cash Dividend” means any dividend
or distribution in respect of the ordinary shares which is to be paid or made to our shareholders as a class in cash (in whatever
currency) and however described and whether payable out of share premium account, profits, retained earnings or any other capital
or revenue reserve or account, and including a distribution or payment to our shareholders upon or in connection with a reduction
of capital.
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(iv)
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If and whenever we shall issue ordinary shares to our existing shareholders as a class by way of rights or we or any member
of our Group or (at the direction or request or pursuant to arrangements with us or any member of our Group) any other company,
person or entity shall issue or grant to shareholders as a class by way of rights, any options, warrants or other rights to subscribe
for or purchase our ordinary shares, or any Other Securities which by their terms of issue carry (directly or indirectly) rights
of conversion into, or exchange or subscription for, any of our ordinary shares (or shall grant any such rights in respect of existing
Other Securities so issued), in each case at a price per ordinary share which is less than 95% of the Current Market Price per
ordinary share on the Effective Date, the Conversion Price shall be adjusted by
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multiplying the Conversion Price
in force immediately prior to the Effective Date by the following fraction:
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A
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is the number of ordinary shares in issue on the Effective Date;
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B
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is the number of ordinary shares which the aggregate consideration (if any) receivable for the ordinary shares issued by way
of rights, or for the Other Securities issued by way of rights, or for the options or warrants or other rights issued by way of
rights and for the total number of ordinary shares deliverable on the exercise thereof, would purchase at such Current Market Price
per ordinary share on the Effective Date; and
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C
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is the number of ordinary shares to be issued or, as the case may be, the maximum number of ordinary shares which may be issued
upon exercise of such options, warrants or rights calculated as at the date of issue of such options, warrants or rights or upon
conversion or exchange or exercise of rights of subscription or purchase in respect thereof at the initial conversion, exchange,
subscription or purchase price or rate.
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provided that if, on the
Effective Date, such number of ordinary shares is to be determined by reference to the application of a formula or other variable
feature or the occurrence of any event at some subsequent time, then for the purposes of this sub-paragraph (iv), “C”
shall be determined by the application of such formula or variable feature or as if the relevant event occurs or had occurred as
at the Effective Date and as if such conversion, exchange, subscription, purchase or acquisition had taken place on the Effective
Date.
Such adjustment shall become effective
on the Effective Date.
“Effective Date” means, in
respect of this sub-paragraph (iv), the first date on which the ordinary shares are traded ex-rights, ex-options or ex-warrants
on the Relevant Stock Exchange.
For the purpose of any calculation of the
consideration receivable or price pursuant to sub-paragraph (iv), the following provisions shall apply:
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(i)
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the aggregate consideration receivable or price for ordinary shares issued for cash shall be the amount of such cash;
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(ii)
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(x) the aggregate consideration receivable or price for ordinary shares to be issued or otherwise made available upon the conversion
or exchange of any Other Securities shall be deemed to be the consideration or price received or receivable for any such securities
and (y) the aggregate consideration receivable or price for ordinary shares to be issued or otherwise made available upon the exercise
of rights of subscription attached to any Other Securities or upon the exercise of any options, warrants or rights shall be deemed
to be that part (which may be the whole) of the consideration or price received or receivable for such Other Securities or, as
the case may be, for such options, warrants or rights which are attributed by us to such rights of subscription or, as the case
may be, such options, warrants or rights or, if no part of such consideration or price is so attributed, the Fair Market Value
of such rights of subscription or, as the case may be, such options, warrants or rights as at the relevant Effective Date, plus
in the case of each of (x) and (y) above, the additional minimum consideration receivable or price (if any) upon the conversion
or exchange of such Other Securities, or upon the exercise of such rights of subscription attached thereto or, as the case may
be, upon exercise of such options, warrants or rights and (z) the consideration receivable or price per ordinary share upon the
conversion or exchange of, or upon the exercise of such rights of subscription attached to, such Other Securities or, as the case
may be, upon the exercise of such options, warrants or rights shall be the aggregate consideration or price
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referred
to in (x) or (y) above (as the case may be) divided by the number of ordinary shares to be issued upon such conversion or exchange
or exercise at the initial conversion, exchange or subscription price or rate;
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(iii)
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if the consideration or price determined pursuant to (i) or (ii) above (or any component thereof) shall be expressed in a currency
other than the Relevant Currency, it shall be converted into the Relevant Currency at the Prevailing Rate on the relevant Effective
Date;
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(iv)
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in determining the consideration or price pursuant to the above, no deduction shall be made for any commissions or fees (howsoever
described) or any expenses paid or incurred for any underwriting, placing or management of the issue of the relevant ordinary shares
or Other Securities or options, warrants or rights, or otherwise in connection therewith; and
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(v)
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the consideration or price shall be determined as provided above on the basis of the consideration or price received, receivable,
paid or payable, regardless of whether all or part thereof is received, receivable, paid or payable by or to us or another entity.
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Notwithstanding the foregoing provisions:
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(A)
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where the events or circumstances giving rise to any adjustment to the Conversion Price have already resulted or will result
in an adjustment to the Conversion Price or the events or circumstances giving rise to any adjustment arise by virtue of any other
events or circumstances that have already given or will give rise to an adjustment to the Conversion Price or where more than one
event which gives rise to an adjustment to the Conversion Price occurs within such a short period of time that, in our opinion,
a modification to the adjustment provisions is required to give the intended result, such modification shall be made to the operation
of the adjustment provisions as may be determined in good faith by an Independent Financial Adviser to be in its opinion appropriate
to give the intended result;
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(B)
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such modification will be made as may be determined by an Independent Financial Adviser to be in its opinion appropriate (i)
to ensure that an adjustment to the Conversion Price or the economic effect thereof shall not be taken into account more than once,
(ii) to ensure that the economic effect of an Extraordinary Dividend is not taken into account more than once and (iii) to reflect
any redenomination of our issued ordinary shares for the time being into a new currency;
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(C)
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other than provided under paragraphs (A) and (B) above, if any doubt shall arise as to whether an adjustment falls to be made
to the Conversion Price or as to the appropriate adjustment to the Conversion Price, we may at our discretion appoint an Independent
Financial Adviser, and following consultation between ourselves and such Independent Financial Adviser, a written opinion of such
Independent Financial Adviser in respect thereof shall be conclusive and binding on us and the holders and beneficial owners of
the Contingent Capital Notes, save in the case of manifest error.
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(D)
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no adjustment will be made to the Conversion Price where ordinary shares or Other Securities (including rights, warrants and
options) are issued, offered, exercised, allotted, purchased, appropriated, modified or granted to, or for the benefit of, employees
or former employees (including directors holding or formerly holding executive office or the personal service company of any such
person) or their spouses or relatives, in each case, of us or any of our Subsidiaries or any associated company or to a trustee
or trustees to be held for the benefit of any such person, in any such case pursuant to any share or option scheme;
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(E)
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on any adjustment, if the resultant Conversion Price has more decimal places than the initial Conversion Price, it shall be
rounded to the same number of decimal places as the initial Conversion Price (with 0.005 being rounded down). No adjustment shall
be made to the Conversion Price where such adjustment (rounded down if applicable) would be less than 1% of the Conversion Price
then in effect. Any adjustment not required to be made pursuant to the above, and/or any amount by which the Conversion Price has
been rounded down, shall be carried forward and taken into account in any subsequent adjustment, and such subsequent adjustment
shall be made on the basis that the adjustment not required to be made had been made at the relevant time and/or, as the case may
be, that the relevant rounding down had not been made;
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(F)
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notice of any adjustments to the Conversion Price shall be given by us to holders of the Contingent Capital Notes promptly
after the determination thereof in accordance with “—Notice” below; and
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(G)
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any adjustment to the Conversion Price shall be subject to such Conversion Price not being less than the nominal amount of
an ordinary share at such time (currently £1.00). We undertake that we shall not take any action, and shall procure that
no action is taken, that would otherwise result in an adjustment to the Conversion Price to below such nominal value then in effect.
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References to any issue or offer or grant
to shareholders “as a class” or “by way of rights” shall be taken to be references to an issue or offer
or grant to all or substantially all shareholders, as the case may be, other than shareholders, as the case may be, to whom, by
reason of the laws of any territory or requirements of any recognised regulatory body or any other stock exchange or securities
market in any territory or in connection with fractional entitlements, it is determined not to make such issue or offer or grant.
Conversion Procedures
The procedures following the Automatic
Conversion set forth in this section are subject to change to reflect changes in clearing system practices.
On the Conversion Date, we shall issue
and deliver the Settlement Shares to the Settlement Share Depository (or as otherwise provided by the Indenture and the Contingent
Capital Notes) on terms permitting a Settlement Shares Offer, and, provided the Settlement Shares are so issued and delivered,
no holder of Contingent Capital Notes will have any rights against us with respect to the repayment of the principal amount of
the Contingent Capital Notes or the payment of interest or any other amount on or in respect of such Contingent Capital Notes,
which liabilities shall be automatically released. Accordingly, the principal amount of the Contingent Capital Notes shall equal
zero at all times thereafter (although the Tradable Amount shall remain unchanged). Any interest in respect of an interest period
ending on any Interest Payment Date falling between the Conversion Trigger Event and the Conversion Date shall be deemed to have
been cancelled upon the occurrence of such Conversion Trigger Event and shall not be due and payable.
Provided that we issue and deliver the
Settlement Shares to the Settlement Share Depository in accordance with the terms of the Contingent Capital Notes and the Indenture
as described herein, with effect from and on the Conversion Date, holders and beneficial owners of the Contingent Capital Notes
shall have recourse only to the Settlement Share Depository for the delivery to them of Settlement Shares, or, if they elect, ADSs
or, if applicable, the Alternative Consideration. Subject to the occurrence of a Winding-up or Administration Event on or following
the Conversion Trigger Event, if we fail to issue and deliver the Settlement Shares upon Automatic Conversion to the Settlement
Share Depository on the Conversion Date, a holder’s or beneficial owner’s only right under the Contingent Capital Notes
will be a claim for such Settlement Shares to be issued and delivered, subject to the provisions described under “—Settlement
Procedures” below.
While any Contingent Capital Notes remain
outstanding, we will at all times keep available for issue, free from pre-emptive or other preferential rights, sufficient ordinary
shares to enable the Automatic Conversion of the Contingent Capital Notes to be discharged and satisfied in full. Once the Contingent
Capital Notes have been converted into Settlement Shares, there will be no provision for the reconversion of such Settlement Shares
into Contingent Capital Notes.
The Settlement Shares to be issued and
delivered shall (except where we have been unable to appoint a Settlement Share Depository) initially be registered in the name
of the Settlement Share Depository, which, subject to a Settlement Shares Offer, shall hold such Settlement Shares on behalf of
the holders and beneficial owners of the Contingent Capital Notes. By virtue of its holding of any Contingent Capital Notes, each
holder and beneficial owner of the Contingent Capital Notes shall be deemed to have irrevocably directed us to issue and deliver
the Settlement Shares corresponding to the conversion of its holding of Contingent Capital Notes to the Settlement Share Depository.
Following the issuance and delivery of
the Settlement Shares to the Settlement Share Depository on the Conversion Date, the Contingent Capital Notes shall remain in existence
until the applicable Cancellation Date for the sole purpose of evidencing a holder’s or beneficial owner’s right to
receive Settlement Shares, or, if it elects, ADSs or the Alternative Consideration, as the case may be, from the Settlement Share
Depository.
Subject to the conditions described in
this section, the Settlement Shares, or, if a holder elects, ADSs or Alternative Consideration, if applicable, will be delivered
to holders of the Contingent Capital Notes on the Settlement Date, and the Contingent Capital Notes shall be cancelled on the Cancellation
Date.
Agreement with Respect to Automatic Conversion
The Contingent Capital Notes are not convertible
into Settlement Shares at the option of the holders at any time. Notwithstanding any other provision herein, by its acquisition
of the Contingent Capital Notes, each holder and beneficial owner shall be deemed to have (i) agreed to all the terms and conditions
of the Contingent Capital Notes, including, without limitation, those related to (x) Automatic Conversion following the Conversion
Trigger Event and (y) the appointment of the Settlement Share Depository, the issuance of the Settlement Shares to the Settlement
Share Depository (or to the relevant recipient in accordance with the terms of the Contingent Capital Notes) and the potential
sale of the Settlement Shares pursuant to a Settlement Shares Offer, and acknowledged that such events in (x) and (y) may occur
without any further action on the part of the holders or beneficial owners of the Contingent Capital Notes or the Trustee, (ii)
agreed that effective upon, and following, the Automatic Conversion, no amount shall be due and payable to the holders or beneficial
owners of the Contingent Capital Notes, and our liability to pay any such amounts (including the principal amount of, or any interest
in respect of, the Contingent Capital Notes) shall be automatically released, and the holders and beneficial owners shall not have
the right to give a direction to the Trustee with respect to the Conversion Trigger Event and any related Automatic Conversion,
(iii) waived, to the extent permitted by the Trust Indenture Act, any claim against the Trustee arising out of its acceptance of
its trusteeship under, and the performance of its duties, powers and rights in respect of, the Indenture and in connection with
the Contingent Capital Notes, including, without limitation, claims related to or arising out of or in connection with the Conversion
Trigger Event and/or any Automatic Conversion and (iv) authorised, directed and requested Clearstream, Luxembourg and/or Euroclear
and any direct participant in Clearstream, Luxembourg and/or Euroclear or other intermediary through which it holds such Contingent
Capital Notes to take any and all necessary action, if required, to implement the Automatic Conversion without any further action
or direction on the part of such holder or beneficial owner of the Contingent Capital Notes or beneficial owner or the Trustee.
Settlement Shares Offer
In our sole and absolute discretion within
ten (10) Business Days following the Conversion Date, we may elect that the Settlement Share Depository (or an agent on its behalf)
make an offer of all or some of the Settlement Shares to all or some of our ordinary shareholders upon Automatic Conversion (the
“Settlement Shares Offer”), such offer to be at a cash price per Settlement Share that will be no less than the Conversion
Price and subject to certain anti-dilution adjustments described under “—Anti-dilution Adjustment of the Conversion
Price” (the “Settlement Shares Offer Price”). Such election shall be made through the delivery of a “Settlement
Shares Offer Notice” to the Trustee directly and to the holders of the Contingent Capital Notes in accordance with “—Notice”
below. If so elected, the Settlement Shares Offer Notice shall specify (i) the period of time for which the Settlement Shares Offer
shall be made (the “Settlement Shares Offer Period”), which shall end no later than forty (40) Business Days after
the delivery of the Settlement Shares Offer Notice, and (ii) the date on which each Clearing System shall suspend all clearance
and settlement of transactions in the Contingent Capital Notes in accordance with its rules and procedures (the “Suspension
Date”) if the Suspension Date has not previously been specified in the Conversion Trigger Notice.
We reserve the right, in our sole and absolute
discretion, to elect that the Settlement Share Depository terminate the Settlement Shares Offer at any time during the Settlement
Shares Offer Period. If we make such an election, we will provide at least three (3) Business Days’ notice to the Trustee
and paying agent directly and to the holders of the Contingent Capital Notes via the Clearing Systems. The Settlement Share Depository
may then, in its sole and absolute discretion, take steps to deliver to holders and beneficial owners of the Contingent Capital
Notes the Settlement Shares or, if the holder elects, ADSs at a time that is earlier than the time at which they would have otherwise
received the Alternative Consideration had the Settlement Shares Offer been completed.
Upon expiry of the Settlement Shares Offer
Period, the Settlement Share Depository will provide notice to the holders of the Contingent Capital Notes in accordance with “—Notice”
below of the composition of the Alternative Consideration (and of the deductions to the cash component, if any, of the Alternative
Consideration (as set out in the definition of Alternative Consideration)) per £1,000 Tradable Amount of the Contingent Capital
Notes. The Alternative Consideration will be held by the Settlement Share Depository on behalf of the holders and beneficial owners
of the Contingent Capital Notes and will be delivered to holders and beneficial owners of the Contingent Capital Notes pursuant
to the procedures set forth under “—Settlement Procedures” below.
The cash component of any Alternative Consideration
shall be payable by the Settlement Share Depository to the holders and beneficial owners of the Contingent Capital Notes whether
or not the Solvency Condition is satisfied.
Agreement with respect to any Settlement
Shares Offer
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges and agrees that if we elect, in our sole and
absolute discretion, that a Settlement Shares Offer be conducted by the Settlement Share Depository, such holder and beneficial
owner shall be deemed to have: (i) irrevocably consented to any Settlement Shares Offer and, notwithstanding that such Settlement
Shares are held by the Settlement Share Depository on behalf of the holders and beneficial owners of the Contingent Capital Notes,
to the Settlement Share Depository using the Settlement Shares delivered to it to settle any Settlement Shares Offer; (ii) irrevocably
consented to the transfer of the beneficial interest it holds in the Settlement Shares delivered upon Automatic Conversion to the
Settlement Share Depository or to one or more purchasers identified by the Settlement Share Depository in connection with the Settlement
Shares Offer; (iii) irrevocably agreed that we and the Settlement Share Depository may take any and all actions necessary to conduct
the Settlement Shares Offer in accordance with the terms of the Contingent Capital Notes; and (iv) irrevocably agreed that none
of us, the Trustee or the Settlement Share Depository shall, to the extent permitted by applicable law, incur any liability to
the holders or beneficial owners of the Contingent Capital Notes in respect of the Settlement Shares Offer (except for the obligations
of the Settlement Share Depository in respect of the holders and beneficial owners of the Contingent Capital Notes’ entitlement
to, and subsequent delivery of, any Alternative Consideration).
Settlement Procedures
Delivery of the Settlement Shares or, if
the holder elects, ADSs or Alternative Consideration, as applicable, to the holders and beneficial owners of the Contingent Capital
Notes will be made in accordance with the following procedures. The procedures set forth in this section are subject to change
to reflect changes in clearing system practices.
It is expected that the Settlement Shares
(or the Settlement Shares component, if any, of any Alternative Consideration) will be delivered to holders of the Contingent Capital
Notes in uncertificated form through the dematerialised securities trading system operated by Euroclear UK & Ireland Limited,
known as CREST, unless the Settlement Shares are not a participating security in CREST at the relevant time, in which case the
Settlement Shares (or the Settlement Shares component, if any, of any Alternative Consideration) will be delivered either in the
form of the relevant clearing system in which the Settlement Shares are a participating security or in certificated form. It is
expected that where the Settlement Shares (or the Settlement Shares component, if any, of any Alternative Consideration) are to
be delivered through CREST or such other clearing system in which such Settlement Shares are a participating security, they will
be delivered to the account specified by the holder in the relevant Settlement Notice as described below. It is expected that where
the Settlement Shares (or the Settlement Shares component, if any, of any Alternative Consideration) are to be delivered in certificated
form, the name of the relevant holder (or its nominee) will be entered in our share register, and a certificate in respect thereof
will be dispatched by mail free of charge to the holder or as it may direct in the relevant Settlement Notice as described below.
It is expected that the cash component, if any, of any Alternative Consideration will be delivered through the Clearing Systems
(or, if the Contingent Capital Notes are held in definitive form, to the holders directly at their address shown on the register
for the Contingent Capital Notes) on or around the date on which the Settlement Shares Offer Period ends, subject to the Clearing
System’s procedures in effect at such time.
The Conversion Trigger Notice shall specify
the Suspension Date. On the Suspension Date, the relevant Clearing Systems shall block all positions relating to the Contingent
Capital Notes held in the relevant Clearing Systems, which will suspend all clearance and settlement of transactions in the Contingent
Capital Notes through such Clearing Systems. As a result, holders of the Contingent Capital Notes will not be able to settle the
transfer of any Contingent Capital Notes following the Suspension Date, and any sale or other transfer of the Contingent Capital
Notes that a holder or beneficial owner of the Contingent Capital Notes may have initiated prior to the Suspension Date that is
scheduled to settle after the Suspension Date will be rejected by such Clearing System and will not be settled through such Clearing
System. The Contingent Capital Notes may cease to be admitted to trading on the ISM of the LSE or any other stock exchange on which
the Contingent Capital Notes are then listed or admitted to trading after the Suspension Date.
On the Suspension Date, we shall deliver
a notice in accordance with “—Notice” below to the Trustee and to the holders of the Contingent Capital
Notes (a “Settlement Request Notice”) via each of the Clearing Systems requesting that holders and beneficial owners
of the Contingent Capital Notes complete a notice to be delivered to the Settlement Share Depository, with a copy to the Trustee
(a “Settlement Notice”). The Settlement Request Notice shall specify (i) the date by which the Settlement Notice must
be received by the Settlement Share Depository (the “Notice Cut-off Date”) and (ii) the date on which the Contingent
Capital Notes in relation to which no Settlement Notice has been received by the Settlement Share Depository on or before the Notice
Cut-off Date shall be cancelled, which date may be up to twelve (12) Business Days following the Notice Cut-off Date (the “Final
Cancellation Date”).
In order to obtain delivery of the relevant
Settlement Shares, or, if the holder elects, ADSs or Alternative Consideration, a holder or beneficial owner must deliver its Settlement
Notice to the Settlement Share Depository on or before the Notice Cut-off Date. If such delivery is made after the end of normal
business hours at the specified office of the Settlement Share Depository, such delivery shall be deemed for all purposes to have
been made or given on the following Business Day. The Settlement Notice shall be in the form acceptable to the Clearing Systems
and shall contain: (i) the name of the holder or beneficial owner; (ii) the Tradable Amount of the book-entry interests in the
Contingent Capital Notes held by such holder or beneficial owner on the date of such notice; (iii) the name to be entered in our
share register; (iv) whether Settlement Shares are to be delivered to the holder or beneficial owner or ADS are to be issued on
behalf of the holder or beneficial owner through our ADS facility; (v) the details of the CREST or other clearing system account
(subject to the limitations set out below), details of the registered account in our ADS facility, or, if the Settlement Shares
are not a participating security in CREST or another clearing system, the address to which the Settlement Shares (or the Settlement
Shares component, if any, of any Alternative Consideration) and/or cash (if not expected to be delivered through the Clearing Systems)
should be delivered; and (vi) such other details as may be required by the Settlement Share Depository.
If the Contingent Capital Notes are held
through the Clearing Systems, the Settlement Notice must be given in accordance with the standard procedures of the relevant Clearing
System and in a form acceptable to such Clearing System and the Settlement Share Depository from time to time. If the Contingent
Capital Notes are in definitive form, the Settlement Notice must be delivered to the specified office of the Settlement Share Depository
together with the relevant Contingent Capital Notes.
Subject as provided herein and provided
the Settlement Notice and the relevant Contingent Capital Notes, if applicable when held in definitive form, are delivered on or
before the Notice Cut-off Date, the Settlement Share Depository shall deliver the relevant Alternative Consideration or Settlement
Shares (rounded down to the nearest whole number of Settlement Shares) to, or shall deposit such relevant Settlement Shares with
the ADS Depositary on behalf of, the holder or beneficial owner of the relevant Contingent Capital Notes completing the relevant
Settlement Notice or its nominee in accordance with the instructions given in such Settlement Notice on the applicable Settlement
Date.
Each Settlement Notice shall be irrevocable.
Failure to properly complete and deliver a Settlement Notice and the relevant Contingent Capital Notes, if applicable, may result
in such Settlement Notice being treated by the Settlement Share Depository as null and void. Any determination as to whether any
Settlement Notice has been properly completed and delivered shall be made by the Settlement Share Depository in its sole and absolute
discretion and shall be conclusive and binding on the relevant holder or beneficial owner.
Neither we nor any member of our Group
will pay any taxes or duties (including without limitation, any stamp duty, stamp duty reserve tax or any other capital issue,
transfer, registration, financial transaction or documentary tax or duty) arising upon Automatic Conversion or that may arise or
be paid as a consequence of the issue and delivery of Settlement Shares to the Settlement Share Depository or in connection with
the issue of ADSs. Holders and beneficial owners of the Contingent Capital Notes must pay any taxes or duties (including without
limitation, any stamp duty, stamp duty reserve tax or any other capital issue, transfer, registration, financial transaction or
documentary tax or duty) arising upon Automatic Conversion in connection with the issue and delivery of the Settlement Shares to
the Settlement Share Depository and/or the issue of ADSs, and such holders or beneficial owners of the Contingent Capital Notes
must pay all, if any, such taxes or duties (including without limitation, any stamp duty, stamp duty reserve tax or any other capital
issue, transfer, registration, financial transaction or documentary tax or duty) arising by reference to any disposal or deemed
disposal of such holders’ or beneficial owners’ Contingent Capital Notes or interest therein. Any taxes and duties
(including without limitation, any stamp duty, stamp duty reserve tax or any other capital issue, transfer, registration, financial
transaction or documentary
tax or duty) arising on delivery or transfer
of Settlement Shares to a purchaser in any Settlement Shares Offer shall be payable by the relevant purchaser of those Settlement
Shares.
Except to the extent that a holder or beneficial
owner has elected to receive ADSs, the Settlement Shares (and the Settlement Shares component, if any, of any Alternative Consideration)
will not be available for delivery (i) to, or to a nominee for, any person providing a clearance service within the meaning of
Section 96 of the Finance Act 1986 of the United Kingdom (which would include delivery into Euroclear or Clearstream, Luxembourg,
but not, subject to (iii) below, delivery into CREST) or (ii) to a person, or nominee or agent for a person, whose business is
or includes issuing depository receipts within the meaning of Section 93 of the Finance Act 1986 of the United Kingdom, in each
case at any time prior to the “abolition day” as defined in Section 111(1) of the Finance Act 1990 of the United Kingdom
or (iii) to the CREST account of such a person described in (i) or (ii).
Failure to Deliver a Settlement Notice
If a Settlement Notice and the relevant
Contingent Capital Notes, if applicable, are not delivered to the Settlement Share Depository on or before the Notice Cut-off Date,
the Settlement Share Depository shall continue to hold the relevant Settlement Shares or Alternative Consideration until a Settlement
Notice (and the relevant Contingent Capital Notes, if applicable when held in definitive form) are so delivered. However, the relevant
Contingent Capital Notes shall be cancelled on the Final Cancellation Date and any holder or beneficial owner of the Contingent
Capital Notes delivering a Settlement Notice after the Notice Cut-off Date will have to provide evidence of its entitlement to
the relevant Settlement Shares or, if the holder elects, ADSs or the Alternative Consideration, as applicable, satisfactory to
the Settlement Share Depository in its sole and absolute discretion in order to receive delivery of such Settlement Shares or ADSs
(if so elected to be deposited with the ADS Depositary on its behalf) or Alternative Consideration. We shall have no liability
to any holder or beneficial owner of Contingent Capital Notes for any loss resulting from such holder or beneficial owner not receiving
any Settlement Shares, ADSs or Alternative Consideration or from any delay in the receipt thereof, in each case as a result of
such holder’s or beneficial owner’s failing to duly submit a Settlement Notice and the relevant Contingent Capital
Notes, if applicable, on a timely basis or at all.
Delivery of ADSs
In respect of any Settlement Shares which
holders or beneficial owners elect to be converted into ADSs as specified in the Settlement Notice, the Settlement Share Depository
shall deposit with the ADS Depository the number of Settlement Shares to be issued upon Automatic Conversion of the relevant Contingent
Capital Notes, and the ADS Depository shall issue the corresponding number of ADSs to such holders or beneficial owners (per the
ADS-to-ordinary share ratio in effect on the Conversion Date). Once deposited, the ADS Depository shall be entitled to the economic
rights of a holder or beneficial owner of the Settlement Shares for the purposes of any dividend entitlement and otherwise on behalf
of the ADS holders, and the holder or beneficial owner will become the record holder of the related ADSs for all purposes under
the ADS deposit agreement. However, the issuance of the ADSs by the ADS Depository may be delayed until the depositary bank or
the custodian receives confirmation that all required approvals have been given and that the Settlement Shares have been duly transferred
to the custodian and that all applicable depositary fees and payments have been paid to the ADS Depository. For further information
on the ADSs or the ADS deposit agreement, see “Description of Ordinary Share American Depositary Shares” in
the accompanying prospectus.
For the purposes of these provisions:
“ADS Depository” means The
Bank of New York Mellon, as the depositary under our ordinary share American Depository facility.
“Alternative Consideration”
means, in respect of each Contingent Capital Note and as determined by us (i) if all of the Settlement Shares to be issued and
delivered following Automatic Conversion are sold in the Settlement Shares Offer, the pro rata share of the cash proceeds
from the sale of such Settlement Shares attributable to such Contingent Capital Notes (less an amount equal to the pro rata share
of any taxes and duties (including, without limitation, any stamp duty, stamp duty reserve tax, or any other capital, issue, transfer,
registration, financial transaction or documentary tax or duty) that may arise or be paid in connection with the issue and delivery
of Settlement Shares to the Settlement Share Depository pursuant to the Settlement Shares Offer); (ii) if some but not all of such
Settlement Shares to be issued and delivered upon Automatic Conversion are sold in the Settlement
Shares Offer, (x) the pro rata share
of the cash proceeds from the sale of such Settlement Shares attributable to such Contingent Capital Notes (less an amount equal
to the pro rata share of any taxes and duties (including, without limitation, any stamp duty, stamp duty reserve tax, or any other
capital, issue, transfer, registration, financial transaction or documentary tax or duty) that may arise or be paid in connection
with the issue and delivery of Settlement Shares to the Settlement Share Depository pursuant to the Settlement Shares Offer) and
(y) the pro rata share of such Settlement Shares not sold pursuant to the Settlement Shares Offer attributable to such Contingent
Capital Notes rounded down to the nearest whole number of Settlement Shares; and (iii) if no Settlement Shares are sold in the
Settlement Shares Offer, the relevant number of Settlement Shares that would have been received had we not elected that the Settlement
Share Depository should carry out a Settlement Shares Offer.
“Cancellation Date” means (i)
with respect to any Contingent Capital Notes for which a Settlement Notice is received by the Settlement Share Depository on or
before the Notice Cut-off Date, the applicable Settlement Date and (ii) with respect to any Contingent Capital Notes for which
a Settlement Notice is not received by the Settlement Share Depository on or before the Notice Cut-off Date, the Final Cancellation
Date.
“Settlement Date” means:
(i) with
respect to any Contingent Capital Note in relation to which a Settlement Notice is received by the Settlement Share Depository
on or before the Notice Cut-off Date where we have not elected that the Settlement Share Depository will carry out a Settlement
Shares Offer, the date that is two (2) Business Days after the latest of (x) the Conversion Date, (y) the date on which we announce
that we will not elect for the Settlement Share Depository to carry out a Settlement Shares Offer (or, if no such announcement
is made, the last date on which we are entitled to give a Settlement Shares Offer Notice) and (z) the date on which the relevant
Settlement Notice has been received by the Settlement Share Depository;
(ii) with
respect to any Contingent Capital Notes in relation to which a Settlement Notice is received by the Settlement Share Depository
on or before the Notice Cut-off Date where we have elected that the Settlement Share Depository will carry out a Settlement Shares
Offer, the date that is the later of (x) two (2) Business Days after the day on which the Settlement Shares Offer Period expires
or is terminated and (y) two (2) Business Days after the date on which such Settlement Notice has been so received by the
Settlement Share Depository; and
(iii) with
respect to any Contingent Capital Notes in relation to which a Settlement Notice is not so received by the Settlement Share Depository
on or before the Notice Cut-off Date, the date on which the Settlement Share Depository delivers the relevant Settlement Shares,
ADSs or Alternative Consideration, as applicable, to the relevant holders or beneficial owners of the Contingent Capital Notes.
“Suspension Date” has the meaning
given to that term under “Agreement with Respect to Automatic Conversion —Settlement Shares Offer” above.
Conversion following the Occurrence of a Qualifying
Takeover Event and write-down following the Occurrence of Non-Qualifying Takeover Event
If a Qualifying Takeover Event occurs,
the Contingent Capital Notes shall, where the Conversion Date (if any) falls on or after the New Conversion Condition Effective
Date, be converted on such Conversion Date into Relevant Shares of the Approved Entity, mutatis mutandis as provided under
“—Automatic Conversion” above at a Conversion Price that shall be the New Conversion Price. Such conversion
shall be effected by the delivery by us of such number of Settlement Shares as set forth under “—Automatic Conversion”
above to, or to the order of, the Approved Entity. Such delivery shall irrevocably discharge and satisfy all of our obligations
under the Contingent Capital Notes (but shall be without prejudice to the rights of the Trustee and the holders and beneficial
owners of the Contingent Capital Notes against the Approved Entity in connection with its undertaking to deliver Relevant Shares
as provided in the definition of “New Conversion Condition” below). Such delivery shall be in consideration of the
Approved Entity irrevocably undertaking, for the benefit of the holders and beneficial owners of the Contingent Capital Notes,
to deliver the Relevant Shares to the Settlement Share Depository as aforesaid. For the avoidance of doubt, we may elect that a
Settlement Shares Offer be made by the Settlement Share Depository in respect of the Relevant Shares.
The New Conversion Price shall be subject
to adjustments as described under “—Anti-dilution Adjustment of the Conversion Price” above and in accordance
with the Indenture, with such modifications as an Independent Financial
Adviser acting in good faith shall determine
to be appropriate, and we shall give notice to holders of Contingent Capital Notes of the New Conversion Price and of any such
modifications in accordance with “—Notice” below.
In the case of a Qualifying Takeover Event:
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(1)
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we shall, on or prior to the New Conversion Condition Effective Date, enter into such agreements and arrangements (which may
include supplemental indentures to the Indenture and amendments and modifications to the terms and conditions of the Contingent
Capital Notes and the Indenture) as may be required to ensure that, with effect from the New Conversion Condition Effective Date,
the Contingent Capital Notes shall (following the occurrence of a Conversion Trigger Event) be convertible into, or exchangeable
for, Relevant Shares of the Approved Entity mutatis mutandis in accordance with, and subject to, the provisions under “—Automatic
Conversion” above and in accordance with the Indenture (as each may be so supplemented or amended) at the New Conversion
Price;
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(2)
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subject as set out above, we shall, where the Conversion Date falls on or after the New Conversion Condition Effective Date,
procure the issue and/or delivery of the relevant number of Relevant Shares mutatis mutandis in the manner provided under
“—Automatic Conversion” above and in accordance with the Indenture (as each may be so supplemented or
amended).
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Within 10 days following the occurrence
of a Takeover Event, we shall give notice thereof to the holders and beneficial owners of the Contingent Capital Notes (a “Takeover
Event Notice”), with a copy to the Trustee, in accordance with “—Notice” below.
The Takeover Event Notice shall be in a
form acceptable to the Clearing Systems and shall specify:
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(1)
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the identity of the Acquirer;
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(2)
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whether the Takeover Event is a Qualifying Takeover Event or a Non-Qualifying Takeover Event;
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(3)
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in the case of a Qualifying Takeover Event, the New Conversion Price; and
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(4)
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in the case of a Non-Qualifying Takeover Event, unless the Conversion Date shall have occurred prior to the date of the Non-Qualifying
Takeover Event, that, following such Non-Qualifying Takeover Event, outstanding Contingent Capital Notes shall not be subject to
Automatic Conversion at any time notwithstanding that a Conversion Trigger Event may have occurred or may occur subsequently but
that, instead, upon any subsequent Conversion Trigger Event (or where the Conversion Date occurs on or after the date of a Non-Qualifying
Takeover Event), the outstanding principal amount of each Contingent Capital Note will be automatically written down to zero, the
Contingent Capital Notes will be cancelled, the holders and beneficial owners will be automatically deemed to have irrevocably
waived their right to receive, and no longer have any rights against us with respect to repayment of the aggregate principal amount
of the Contingent Capital Notes so written down and all Accrued Interest and any other amounts payable on the Contingent Capital
Notes shall be automatically cancelled, irrespective of whether such amounts have become due and payable prior to the occurrence
of the Conversion Trigger Event.
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Upon a Conversion Trigger Event occurring
subsequently to a Non-Qualifying Takeover Event, we shall provide a written notice to the Clearing Systems as soon as practicable
regarding the automatic write down to zero of the Contingent Capital Notes for purposes of notifying holders of such occurrence.
We shall also deliver a copy of such notice to the Trustee for information purposes.
“Acquirer” means the person
which, following a Takeover Event, controls us.
“Approved Entity” means a body
corporate that is incorporated or established under the laws of an OECD member state and which, on the occurrence of the Takeover
Event, has in issue Relevant Shares.
“EEA Regulated Market” means
a market as defined by Article 4.1(14) of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial
instruments (as amended from time to time) or similar law in the UK.
The “New Conversion Condition”
shall be satisfied if by not later than seven calendar days following the occurrence of a Takeover Event where the Acquirer is
an Approved Entity, we shall have entered into arrangements to our satisfaction with the Approved Entity pursuant to which the
Approved Entity irrevocably undertakes to the Trustee, for the benefit of the holders and beneficial owners of the Contingent Capital
Notes, to deliver the Relevant Shares to the Settlement Share Depository upon Automatic Conversion.
“New Conversion Condition Effective
Date” means the date with effect from which the New Conversion Condition shall have been satisfied.
“New Conversion Price” means
the amount determined by us in accordance with the following formula:
NCP = ECP ×
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VWAPRS
VWAPOS
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where:
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NCP
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is the New Conversion Price.
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ECP
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is the Conversion Price in effect on the dealing day immediately prior to the New Conversion Condition Effective Date.
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VWAPRS
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means the average of the Volume Weighted Average Price of the Relevant Shares on each of the 10 dealing days ending on the
dealing day prior to the date the Takeover Event shall have occurred (and where references in the definition of “Volume Weighted
Average Price” to “ordinary shares” shall be construed as references to the Relevant Shares, and in the definition
of “dealing day”, references to the “Relevant Stock Exchange” shall be to the primary Regulated Market
on which the Relevant Shares are then listed, admitted to trading or accepted for dealing).
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VWAPOS
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is the average of the Volume Weighted Average Price of our ordinary shares on each of the 10 dealing days ending on the dealing
day prior to the date the Takeover Event shall have occurred.
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“Non-Qualifying Takeover Event”
means a Takeover Event that is not a Qualifying Takeover Event.
“ordinary share capital” has
the meaning provided in Section 1119 of the Corporation Tax Act 2010 and “equity share capital” has the meaning provided
in Section 548 of the Companies Act.
“Prevailing Rate” means, in
respect of any currencies on any day, the spot rate of exchange between the relevant currencies prevailing as at or about 12 noon
(London time) on that date as appearing on or derived from the Relevant Page or, if such a rate cannot be determined at such time,
the rate prevailing as at or about 12 noon (London time) on the immediately preceding day on which such rate can be so determined
or, if such rate cannot be so determined by reference to the Relevant Page, the rate determined in such other manner as an Independent
Financial Adviser shall in good faith prescribe.
“Qualifying Takeover Event”
means a Takeover Event where:
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(i)
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the Acquirer is an Approved Entity;
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(ii)
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the New Conversion Condition is satisfied; and
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(iii)
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the Acquirer and persons “connected” with the Acquirer together have “control” of the Issuer (where
“connected” and “control” have the same meanings as in section 1122 and 1124 of the
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Corporation Tax Act 2010 (to the
extent applicable or in any equivalent provision in any applicable successor legislation)).
“Regulated Market” means an
EEA Regulated Market or another regulated, regularly operating, recognised stock exchange or securities market in the UK or another
OECD member state.
“Relevant Page” means the relevant
page on Bloomberg or such other information service provider that displays the relevant information.
“Relevant Shares” means ordinary
share capital of the Approved Entity that constitutes equity share capital or the equivalent (or depositary or other receipts representing
the same) which is listed and admitted to trading on a Regulated Market.
A “Takeover Event” shall occur
if, at any time after the Issue Date, any person or persons acting in concert (as defined in the Takeover Code of the United Kingdom
Panel on Takeovers and Mergers) acquires control of us.
For the purposes of the definition
of “Takeover Event”, “control” means:
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(a)
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the acquisition or holding of legal or beneficial ownership of more than 50% of our issued ordinary shares; or
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(b)
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the right to appoint and/or remove all or the majority of our members of the Board of Directors, whether obtained directly
or indirectly and whether obtained by ownership of share capital, contract or otherwise,
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and “controlled”
shall be construed accordingly.
Agreement to Write-down in connection with
a Non-Qualifying Takeover Event
By acquiring the Contingent Capital Notes,
each holder and beneficial owner acknowledges and agrees that (i) unless the Conversion Date shall have occurred prior to the date
of any Non-Qualifying Takeover Event, following such Non-Qualifying Takeover Event, the outstanding Contingent Capital Notes shall
not be subject to Automatic Conversion notwithstanding that a Conversion Trigger Event may have occurred or may occur subsequently
but instead, upon the occurrence of any subsequent Conversion Trigger Event (or where the Conversion Date occurs on or after the
date of a Non-Qualifying Takeover Event), the outstanding principal amount of each Contingent Capital Note shall be automatically
written down to zero, the Contingent Capital Notes shall be cancelled, the holders and beneficial owners shall be automatically
deemed to have irrevocably waived their right to receive, and no longer have any rights against us with respect to repayment of
the aggregate principal amount of the Contingent Capital Notes so written down and all Accrued Interest and any other amounts payable
on the Contingent Capital Notes shall be automatically cancelled, irrespective of whether such amounts have become due and payable
prior to the occurrence of the Conversion Trigger Event, and (ii) in connection with the write-down to zero of the Contingent Capital
Notes following the occurrence of a Conversion Trigger Event subsequently to any Non-Qualifying Takeover Event (a) the Trustee
shall not be required to take any further directions from holders or beneficial owners of the Contingent Capital Notes under Section
5.12 (Control by Holders) of the Original Indenture, which section authorises holders of a majority in aggregate outstanding
principal amount of the Contingent Capital Notes to direct certain actions relating to the Contingent Capital Notes; (b) it shall
be deemed to have authorised, directed and requested Clearstream, Luxembourg and/or Euroclear and any direct participant in Clearstream,
Luxembourg and/or Euroclear or other intermediary through which it holds such Contingent Capital Notes to take any and all necessary
action, if required, to implement the write-down to zero of the Contingent Capital Notes, without any further action or direction
on the part of such holders and such beneficial owners of the Contingent Capital Notes or the Trustee; (c) the Indenture shall
impose no additional duties on the Trustee whatsoever in connection with the write-down to zero of the Contingent Capital Notes;
and (d) to the extent permitted by the TIA, each holder and beneficial owner waives any and all claims against the Trustee for,
agrees not to initiate a suit against the Trustee in respect of, and agrees that the Trustee shall not be liable for, any action
taken by the Trustee or which the Trustee abstains from taking.
Availability of Ordinary Shares
If and to the extent permitted by the Capital
Regulations, from time to time and only to the extent that such undertaking would not cause a Capital Disqualification Event to
occur, we shall, notwithstanding any Settlement Shares Offer, at all times keep available for issue, free from pre-emptive or other
preferential rights, sufficient ordinary shares to enable Automatic Conversion of the Contingent Capital Notes to be satisfied
in full.
Agreement with Respect to the Exercise of the UK bail-in
power
Notwithstanding any other agreements, arrangements,
or understandings between us and any holder or beneficial owner of the Contingent Capital Notes, by its acquisition of the Contingent
Capital Notes, each holder and beneficial owner of the Contingent Capital Notes acknowledges, accepts, agrees to be bound by and
consents to the exercise of any UK bail-in power by the relevant UK authority that may result in (i) the reduction or cancellation
of all, or a portion, of the principal amount of, or interest on, the Contingent Capital Notes; (ii) the conversion of all, or
a portion, of the principal amount of, or interest on, the Contingent Capital Notes into ordinary shares or other securities or
other obligations of ours or another person; and/or (iii) the amendment of the amount of interest due on the Contingent Capital
Notes, or the dates on which interest becomes payable, including by suspending payment for a temporary period; which UK bail-in
power may be exercised by means of variation of the terms of the Contingent Capital Notes solely to give effect to the exercise
by the relevant UK authority of such UK bail-in power. Each holder and beneficial owner of the Contingent Capital Notes further
acknowledges and agrees that the rights of the holders and/or beneficial owners under the Contingent Capital Notes are subject
to, and will be varied, if necessary, solely to give effect to, the exercise of any UK bail-in power by the relevant UK authority.
“UK bail-in power” is any write-down,
conversion, transfer, modification or suspension power existing from time to time under any laws, regulations, rules or requirements
relating to the resolution of banks, banking group companies, credit institutions and/or investment firms incorporated in the UK
in effect and applicable in the UK to NatWest Group plc or other members of the Group, including but not limited to any such laws,
regulations, rules or requirements which are implemented, adopted or enacted in the UK within the context of the UK resolution
regime under the Banking Act, pursuant to which any obligations of a bank, banking group company, credit institution or investment
firm or any of its affiliates can be reduced, cancelled, modified, transferred and/or converted into shares or other securities
or other obligations of the obligor or any other person (or suspended for a temporary period) or pursuant to which any right in
a contract governing such obligation may be deemed to have been exercised.
“relevant UK authority” means
any authority with the ability to exercise a UK bail-in power.
For the avoidance of doubt, the potential
Automatic Conversion of the Contingent Capital Notes into ordinary shares, other securities or other obligations in connection
with the exercise of any UK bail-in power by the relevant UK authority is separate and distinct from the Automatic Conversion pursuant
to the terms and conditions of the Contingent Capital Notes following a Conversion Trigger Event.
No payment of principal following any proposed
redemption of the Contingent Capital Notes or payment of interest on the Contingent Capital Notes shall become due and payable
after the exercise of any UK bail-in power by the relevant UK authority unless, at the time that such repayment or payment, respectively,
is scheduled to become due, such repayment or payment would be permitted to be made by us under the laws and regulations of the
United Kingdom and the European Union applicable to us and the Group.
See also “Risk Factors—Risks
relating to the Contingent Capital Notes—Under the terms of the Contingent Capital Notes, you have agreed to be bound
by the exercise of any UK bail-in power imposed by the relevant UK authority”.
Our obligations to indemnify the Trustee
in accordance with Section 6.07 of the Original Indenture shall survive the exercise of the UK bail-in power by the relevant
UK authority with respect to the Contingent Capital Notes.
By its acquisition of the Contingent Capital
Notes, each holder and beneficial owner of Contingent Capital Notes, to the extent permitted by the Trust Indenture Act, waives
any and all claims against the Trustee for, agrees not to initiate a suit against the Trustee in respect of, and agrees that the
Trustee shall not be liable for, any action that the Trustee takes, or abstains from taking, in either case in accordance with
the exercise of the UK bail-in power by the relevant UK authority with respect to the Contingent Capital Notes.
By its acquisition of the Contingent Capital
Notes, each holder of the Contingent Capital Notes acknowledges and agrees that:
(i) the exercise of the UK bail-in power
by the relevant UK authority with respect to the Contingent Capital Notes shall not give rise to a default for purposes of Section 315(b)
(Notice of Default) and Section 315(c) (Duties of the Trustee in Case of Default) of the Trust Indenture Act;
(ii) upon the exercise of any UK bail-in
power by the relevant UK authority, the Trustee shall not be required to take any further directions from holders or beneficial
owners of the Contingent Capital Notes under Section 5.12 (Control by Holders) of the Original Indenture, which section
authorises holders of a majority in aggregate outstanding principal amount of the Contingent Capital Notes to direct certain actions
relating to the Contingent Capital Notes. The Indenture shall impose no duties upon the Trustee whatsoever with respect to the
exercise of any UK bail-in power by the relevant UK authority. Notwithstanding the foregoing, if, following the completion of the
exercise of the UK bail-in power by the relevant UK authority, the Contingent Capital Notes remain outstanding (for example, if
the exercise of the UK bail-in power results in only a partial write-down of the principal of the Contingent Capital Notes), then
the Trustee’s duties under the Indenture shall remain applicable with respect to the Contingent Capital Notes following such
completion to the extent that we and the Trustee agree pursuant to a supplemental indenture, unless we and the Trustee agree that
a supplemental indenture is not necessary; and
(iii) it shall be deemed to have (y) consented
to the exercise of any UK bail-in power as it may be imposed without any prior notice by the relevant UK authority of its decision
to exercise such power with respect to the Contingent Capital Notes and (z) authorised, directed and requested Clearstream, Luxembourg
and/or Euroclear and any direct participant in Clearstream, Luxembourg and/or Euroclear or other intermediary through which it
holds such Contingent Capital Notes to take any and all necessary action, if required, to implement the exercise of any UK bail-in
power with respect to the Contingent Capital Notes as it may be imposed, without any further action or direction on the part of
such holders and such beneficial owners of the Contingent Capital Notes or the Trustee.
Upon the exercise of the UK bail-in power
by the relevant UK authority with respect to the Contingent Capital Notes, we shall provide a written notice to the Clearing Systems
as soon as practicable regarding such exercise of the UK bail-in power for purposes of notifying holders of such occurrence. We
shall also deliver a copy of such notice to the Trustee for information purposes.
Enforcement Events and Remedies
There are no events of default under the
Contingent Capital Notes. In addition, under the terms of the Indenture neither the Automatic Conversion, the cancellation or deemed
cancellation of interest, the exercise of the UK bail-in power by the relevant UK authority, nor a write-down of the Contingent
Capital Notes upon the occurrence of a Conversion Trigger Event following a Non-Qualifying Takeover Event with respect to the Contingent
Capital Notes will be an Enforcement Event.
Enforcement Events
Each of the following events described
in clauses (i), (ii) and (iii) is an “Enforcement Event”:
(i) the
occurrence of a Winding-up or Administration Event prior to the occurrence of a Conversion Trigger Event;
(ii) non-payment
of principal when due as further described in clause (ii) of “—Remedies” below; or
(iii) breach
of a Performance Obligation.
Remedies
(i) The occurrence of a Winding-up or
Administration Event prior to the occurrence of a Conversion Trigger Event. If a Winding-up or Administration Event occurs
prior to the occurrence of a Conversion Trigger Event, subject to the subordination provisions described under “—Ranking
and Liquidation Distribution” above, the principal amount of the Contingent Capital Notes will become immediately due
and payable. For the avoidance of doubt, as the principal amount of the Contingent Capital Notes will become immediately due and
payable upon such
a Winding-up or Administration Event, neither
the Trustee nor the holders of the Contingent Capital Notes are required to declare such principal amount to be due and payable.
(ii) Non-payment of principal when due.
Subject to the satisfaction of any redemption conditions described under “—Redemption, Repurchase, Substitution
or Variation—Pre-conditions to Redemption, Repurchase, Substitution or Variation” above, if we do not make payment
of principal in respect of the Contingent Capital Notes for a period of fourteen (14) calendar days or more after the date on which
such payment is due, then the Trustee, on behalf of the holders and beneficial owners of the Contingent Capital Notes, may, at
its discretion, or shall at the direction of holders of 25% or more of the aggregate principal amount of outstanding Contingent
Capital Notes, subject to any applicable laws, institute proceedings for our winding-up. In the event of a Winding-up or Administration
Event, whether or not instituted by the Trustee, the Trustee may prove the claims of the holders and beneficial owners of the Contingent
Capital Notes and the Trustee in the Winding-up or Administration Event, such claims as set out under “—Ranking
and Liquidation Distribution”. For the avoidance of doubt, the Trustee may not declare the principal amount of any outstanding
Contingent Capital Notes to be due and payable and may not pursue any other legal remedy, including a judicial proceeding for the
collection of the sums due and unpaid on the Contingent Capital Notes.
(iii) Breach of a Performance Obligation.
In the event of a breach of any term, obligation or condition binding on us under the Contingent Capital Notes or the Indenture
(other than any of our payment obligations under or arising from the Contingent Capital Notes or the Indenture, including payment
of any principal or interest, including any damages awarded for breach of any obligations) (a “Performance Obligation”),
the Trustee may without further notice institute such proceedings against us as it may think fit to enforce the Performance Obligation,
provided that we shall not by virtue of the institution of any such proceedings be obliged to pay any sum or sums, in cash or otherwise
(including any damages for breach of any obligations under the Contingent Capital Notes) earlier than the same would otherwise
have been payable under the Contingent Capital Notes or the Indenture, but excluding any payments made to the Trustee acting on
its own account under the Indenture in respect of its costs, expenses, liabilities or remuneration.
For the avoidance of doubt, the breach
by us of any Performance Obligation shall not give the Trustee and/or the holders or beneficial owners of the Contingent Capital
Notes a claim for damages, and, in such circumstances, the sole and exclusive remedy that the Trustee and/or the holders or beneficial
owners of the Contingent Capital Notes may seek under the Contingent Capital Notes and the Indenture is specific performance under
New York law. By its acquisition of the Contingent Capital Notes, each holder and beneficial owner of Contingent Capital Notes
acknowledges and agrees that such holder and beneficial owner will not seek, and will not direct the Trustee to seek, a claim for
damages against us in respect of a breach by us of a Performance Obligation and that the sole and exclusive remedy that such holder
and the Trustee may seek under the Contingent Capital Notes and the Indenture for a breach by us of a Performance Obligation is
specific performance under New York law. See “Risk Factors—Risks relating to the Contingent Capital Notes—
The Contingent Capital Notes do not contain events of default and the remedies available to you under the Contingent Capital Notes
are limited”.
No Other Remedies
Other than the limited remedies specified
above, no remedy against us shall be available to the Trustee (acting on behalf of the holders of the Contingent Capital Notes)
or to the holders and beneficial owners of the Contingent Capital Notes, provided that (1) the Trustee shall have such powers as
are required to be authorised to it under the Trust Indenture Act in respect of the rights of the holders and beneficial owners
under the provisions of the Indenture and (2) nothing shall impair the rights of a holder or beneficial owner of the Contingent
Capital Notes under the Trust Indenture Act, absent such holder’s or beneficial owner’s consent, to sue for any payment
due but unpaid in respect of the Contingent Capital Notes, provided that, in the case of (1) and (2), any payments in respect of,
or arising from, the Contingent Capital Notes including any payments or amounts resulting or arising from the enforcement of any
rights under the Trust Indenture Act in respect of the Contingent Capital Notes shall be subject to the provisions of the Indenture,
including the subordination provisions. For the avoidance of doubt, such limitations shall not apply to our obligations to pay
the fees and expenses of, and to indemnify, the Trustee, and the Trustee’s rights to apply money collected to first pay its
fees and expenses shall not be subject to the subordination provisions set forth in this prospectus supplement.
The Contingent Capital Notes are perpetual
securities in respect of which there is no fixed redemption date or maturity date. Holders and beneficial owners of the Contingent
Capital Notes may not request any redemption of the Contingent Capital Notes at any time.
Trustee’s Duties
If an Enforcement Event has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree
of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or
her own affairs. Holders of not less than a majority in aggregate principal amount of the outstanding Contingent Capital Notes
may on behalf of all holders of the Contingent Capital Notes waive any past Enforcement Event that results from a breach by us
of a Performance Obligation. Holders of a majority of the aggregate principal amount of the outstanding Contingent Capital Notes
may not waive any past Enforcement Events that results from a Winding-up or Administration Event or non-payment of principal when
due.
If an Enforcement Event has occurred and
is continuing, the Trustee will have no obligation to take any action at the direction of any holders of the Contingent Capital
Notes, unless they have offered the Trustee security or indemnity satisfactory to the Trustee in its sole discretion. The holders
of a majority in aggregate principal amount of the outstanding Contingent Capital Notes shall have the right to direct the time,
method and place of conducting any proceeding in the name of and on the behalf of the Trustee for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee with respect to the Contingent Capital Notes. However, this direction
(a) must not be in conflict with any rule of law or the Indenture and (b) must not be unjustly prejudicial to the holders of the
Contingent Capital Notes not taking part in the direction, in the case of either (a) or (b) as determined by the Trustee in its
sole discretion. The Trustee may also take any other action, consistent with the direction, that it deems proper.
By acquiring the Contingent Capital Notes,
the holders and beneficial owners acknowledge and agree that neither an Automatic Conversion, a cancellation or deemed cancellation
of interest, (in each case, in whole or in part) in accordance with the terms of the Indenture and the Contingent Capital Notes,
the exercise of the UK bail-in power by the relevant UK authority nor a write-down of the Contingent Capital Notes upon the occurrence
of a Conversion Trigger Event following a Non-Qualifying Takeover Event with respect to the Contingent Capital Notes will give
rise to a default of the purposes of Section 315(b) (Notice of Default) and Section 315(c) (Duties of the Trustee in
Case of Default) of the Trust Indenture Act.
Notice
All notices regarding the Contingent Capital
Notes will be deemed to be validly given if sent by first-class mail to the holders of the Contingent Capital Notes at their addresses
recorded in the register.
Until such time as any definitive securities
are issued, there may, so long as any Global Certificates representing the Contingent Capital Notes are held in their entirety
through the common depositary for the Clearing Systems, be substituted for such notice by first-class mail the delivery of the
relevant notice to the Clearing Systems for communication by them to their respective account holders, in accordance with the relevant
Clearing System’s applicable procedures. Neither the failure to give any notice to a particular holder, nor any defect in
a notice given to a particular holder, will affect the sufficiency of any notice given to another holder.
Notices to be given by any holders of the
Contingent Capital Notes to the Trustee shall be in writing to the Trustee at its corporate trust office. While any of the Contingent
Capital Notes are represented by Global Certificates, such notice may be given by any holder to the Trustee through the Clearing
Systems in such manner as the relevant Clearing Systems may approve for this purpose.
If and for so long as the Contingent Capital
Notes are admitted to trading on the ISM of the LSE, notices will also be given in accordance with any applicable requirements
of such stock exchange.
Modification and Amendments
We and the Trustee may make certain modifications
and amendments to the Indenture with respect to the Contingent Capital Notes without the consent of the holders of the Contingent
Capital Notes, including, but not limited to, reflect changes to procedures relating to Automatic Conversion, delivery of the Settlement
Shares, ADSs
or Alternative Consideration, as applicable,
and to give effect to any variation to the terms of the Contingent Capital Notes as a result of any exercise of any UK bail-in
power. Other modifications and amendments may be made to the Indenture with the consent of holders of the Contingent Capital Notes
of not less than a majority in aggregate outstanding principal amount of the Contingent Capital Notes that are affected by the
modification or amendment, voting as one class. However, no modifications or amendments may be made without the consent of the
holder of each Contingent Capital Note affected as set forth under “Description of Contingent Convertible Securities —
Modification and Waiver” in the accompanying prospectus.
With respect to Contingent Capital Notes
issued pursuant to the Indenture, any agreements, arrangements or understandings between us and any holder and beneficial owner
of the Contingent Capital Notes with respect to the Contingent Capital Notes must be entered into in accordance with the terms
of the Indenture.
In addition, no supplemental indenture
may, without the consent of each holder of an outstanding Contingent Capital Note affected by such supplemental indenture, make
any change that adversely affects the Automatic Conversion of any of the Contingent Capital Notes.
In addition, the Trustee shall be obliged
to concur with the Issuer in effecting any variations in the circumstances and as otherwise set out in “—Redemption,
Repurchase, Substitution or Variation” or on a Qualifying Takeover Event without the consent of the holders.
In addition to the permitted amendments
described in the preceding paragraph, we and the Trustee may amend or supplement the Indenture or the Contingent Capital Notes
without the consent of any holders of the Contingent Capital Notes to conform the provisions of the Indenture to this “Description
of the Contingent Capital Notes” section in this prospectus.
Notwithstanding the above, no modifications
and amendments to the Indenture or in relation to the Contingent Capital Notes shall become effective unless we shall have given
such notice as is required by, and received such permission from, the PRA as is required by the PRA under the Capital Regulations.
The Trustee is entitled to request and rely on an officer’s certificate from us as to the satisfaction of this condition
precedent to any modification without further enquiry.
Governing Law
The Contingent Capital Notes and the Indenture
will be governed by and construed in accordance with the laws of the State of New York, except that, as the Indenture specifies,
the subordination provisions, the Solvency Condition, and the waiver of the right to set-off by the holders of the Contingent Capital
Notes and by the Trustee acting on behalf of the holders of the Contingent Capital Notes with respect to the Contingent Capital
Notes will be governed by and construed in accordance with the laws of Scotland.
Trustee and Agents
The Trustee for the Contingent Capital
Notes will be The Bank of New York Mellon, acting through its London Branch. The Trustee makes no representations, and shall not
be liable with respect to, the information set forth in this prospectus supplement.
The Bank of New York Mellon acting through
its London Branch will initially act as Paying Agent for the Contingent Capital Notes. National Westminster Bank Plc will initially
act as Calculation Agent for the Contingent Capital Notes. We may appoint additional or successor agents (together, the “Agents”).
We will procure that there will at all
times be a Paying Agent and a Calculation Agent. We may change the Paying Agent without prior notice to the holders and beneficial
owners of the Contingent Capital Notes, and in such an event we may act as Paying Agent. We are entitled to appoint other banks
of international standing as Agents, or, in the case of the Calculation Agent only, we may appoint a financial adviser with appropriate
expertise. Furthermore, we are entitled to terminate the appointment of any Agent. In the event of such termination or such Agent
being unable or unwilling to continue to act as Agent in the relevant capacity, we will appoint another bank of international standing,
or, in the case of the Calculation Agent only, another financial adviser with appropriate expertise as Agent in the relevant capacity.
Such appointment or termination will be published without undue delay in accordance with the Indenture or, should this not be possible,
be published in another appropriate manner.
Subsequent Holders’ Agreement
Holders of the Contingent Capital Notes
that acquire the Contingent Capital Notes in the secondary market shall be deemed to acknowledge, agree to be bound by and consent
to the same provisions specified herein to the same extent as the holders and beneficial owners of the Contingent Capital Notes
that acquire the Contingent Capital Notes upon their initial issuance, including, without limitation, with respect to the acknowledgment
and agreement to be bound by and consent to the terms of the Contingent Capital Notes, including in relation to interest cancellation,
the Automatic Conversion, the UK bail-in power, the Settlement Shares Offer, the write-down of the Contingent Capital Notes upon
the occurrence of a Conversion Trigger Event following a Non-Qualifying Takeover Event and the limitations on remedies specified
in “—Enforcement Events and Remedies” above.
Form of Contingent Capital Notes, Clearance and Settlement
General
The Contingent Capital Notes shall initially
be represented by one or more Global Certificates in registered form, without coupons attached, will be deposited with a common
depositary for Clearstream, Luxembourg and Euroclear and will be registered in the name of such common depositary or its nominee.
Unless and until the Contingent Capital Notes are exchanged in whole or in part for other securities under the terms of the Indenture
or the Global Certificates are exchanged for definitive securities, the Global Certificates may not be transferred except as a
whole by a Clearing System or its common depositary or the common depositary’s nominee to a nominee or a successor of such
Clearing System or its common depositary or the common depositary’s nominee.
So long as a Clearing System, or its respective
common depositary or nominee, is the holder of the Global Certificates, such Clearing System, or its common depositary or nominee,
will be considered the sole holder of such Global Certificates for all purposes under the Indenture. Except as described below
under “—Issuance of Definitive Securities”, no participant, indirect participant or other person will
be entitled to have Contingent Capital Notes registered in its name, receive or be entitled to receive physical delivery of Contingent
Capital Notes in definitive form or be considered the owner or holder of the Contingent Capital Notes under the Indenture. Each
person having an ownership or other interest in the Contingent Capital Notes must rely on the procedures of the relevant Clearing
System, and, if a person is not a participant in such Clearing System, must rely on the procedures of the participant or other
securities intermediary through which that person owns its interest to exercise any rights and obligations of a holder under the
Indentures.
Payments on the Global Debt Security
Payments of any amounts in respect of the
Contingent Capital Notes will be made to beneficial owners of the Contingent Capital Notes in accordance with the rules and procedures
of the relevant Clearing System. Neither we nor the Trustee nor any of our agents will have any responsibility or liability for
any aspect of the records of any securities intermediary in the chain of intermediaries between the Clearing Systems and any beneficial
owner of an interest in Contingent Capital Notes, or the failure of the Clearing Systems or any intermediary to pass through to
any beneficial owner any payments that are made to the Clearing Systems.
Euroclear and Clearstream, Luxembourg
Euroclear has advised us as follows: Euroclear
holds securities for its participants and clears and settles transactions between its participants through simultaneous electronic
book-entry delivery against payment. Euroclear provides various other services, including safekeeping, administration, clearance
and settlement and securities lending and borrowing, and interfaces with domestic markets in several countries. Euroclear is operated
by Euroclear Bank, under contract with Euroclear plc, a UK corporation. Euroclear Bank conducts all operations, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with Euroclear Bank, not Euroclear plc. Euroclear plc establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may include any underwriters for the debt securities or
capital securities, as applicable. Indirect access to Euroclear is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear participant, either directly or indirectly. Securities clearance accounts and cash accounts
with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the
Euroclear System (collectively, the “Euroclear Terms and Conditions”), and applicable law. The Euroclear Terms
and Conditions govern transfers of securities
and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities
in Euroclear.
Clearstream, Luxembourg has advised us
as follows: Clearstream, Luxembourg is incorporated under the laws of The Grand Duchy of Luxembourg as a société
anonyme and is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission
de Surveillance du Secteur Financier). Clearstream, Luxembourg is owned by Deutsche Börse AG, a publicly traded company.
Clearstream, Luxembourg holds securities for its participants and facilitates the clearance and settlement of securities transactions
between its participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Clearstream, Luxembourg provides to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream,
Luxembourg interfaces with domestic markets in several countries.
Clearstream, Luxembourg’s customers
include worldwide securities brokers and dealers, banks, trust companies and clearing corporations and may include professional
financial intermediaries. Its U.S. customers are limited to securities brokers, dealers and banks. Indirect access to the Clearstream,
Luxembourg system is also available to others that clear through Clearstream, Luxembourg customers or that have custodial relationships
with its customers, such as banks, brokers, dealers and trust companies.
Issuance of Definitive Securities
So long as a Clearing System or its common
depositary or the common depositary’s nominee holds Global Certificates in respect of the Contingent Capital Notes, such
Global Certificates will not be exchangeable for definitive securities unless:
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such Clearing System notifies the Trustee that it is unwilling or unable to continue to act as depositary for the Contingent
Capital Notes or such Clearing System ceases to be a clearing agency registered under the Exchange Act; or
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a Winding-up or Administration Event occurs.
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Each person having an ownership or other
interest in the Contingent Capital Notes must rely exclusively on the rules or procedures of the relevant Clearing System, and
any agreement with any direct or indirect participant of such Clearing System or any other securities intermediary through which
that person holds its interest, to receive or direct the delivery of possession of any definitive security.
Definitive Contingent Capital Notes will
be issued in registered form only. To the extent permitted by law, we, the Trustee and any paying agent shall be entitled to treat
the person in whose name any definitive security is registered as its absolute owner.
Payments in respect of definitive securities
will be made to the person in whose name the definitive securities are registered as it appears in the register. Payments will
be made in respect of the Contingent Capital Notes by transfer to the holder’s account in London. Definitive securities should
be presented to the paying agent for redemption.
If we issue definitive Contingent Capital
Notes in exchange for Global Certificates, the Clearing System, as holder of that global security, will surrender it against receipt
of the definitive securities, cancel the book-entry securities, and distribute the definitive securities to the persons and in
the amounts that such Clearing System specifies pursuant to its internal procedures.
If definitive securities are issued in
the limited circumstances described above, those securities (i) will be transferable only on the register for the Contingent Capital
Notes, and (ii) may be transferred in whole or in part in denominations of any whole number of securities upon surrender of the
definitive securities certificates together with the form of transfer endorsed on it, duly completed and executed at the specified
office of a paying agent. If only part of a securities certificate is transferred, a new securities certificate representing the
balance not transferred will be issued to the transferor within three Business Days after the paying agent receives the certificate.
The new certificate representing the balance will be delivered to the transferor by uninsured post at the risk of the transferor,
to the address of the transferor appearing in the records of the paying agent. The new certificate representing the securities
that were transferred will be sent to the transferee within three Business Days after the paying agent
receives the certificate transferred, by
uninsured post at the risk of the holder entitled to the securities represented by the certificate, to the address specified in
the form of transfer.
Certain Defined Terms
In this “Description of the Contingent
Capital Notes” the following terms have the following meanings:
“Banking Act” means the UK
Banking Act of 2009, as the same has been or may be amended from time to time, whether pursuant to the UK Financial Services (Banking
Reform) Act 2013, secondary legislation or otherwise.
“Current Market Price” means,
in respect of an ordinary share at a particular date, the average of the daily Volume Weighted Average Price of an ordinary share
on each of the five (5) consecutive dealing days ending on the dealing day immediately preceding such date; provided that, if at
any time during the said five (5) dealing-day period the Volume Weighted Average Price shall have been based on a price ex-dividend
(or ex-any other entitlement) and during some other part of that period the Volume Weighted Average Price shall have been based
on a price cum-dividend (or cum-any other entitlement), then:
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(i)
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if the ordinary shares to be created, issued, transferred or delivered do not rank for the dividend (or entitlement) in question,
the Volume Weighted Average Price on the dates on which the ordinary shares shall have been based on a price cum-dividend (or cum-
any other entitlement) shall, for the purposes of this definition, be deemed to be the amount thereof reduced by an amount equal
to the Fair Market Value of any such dividend or entitlement per ordinary share as at the date of first public announcement relating
to such dividend or entitlement, in any such case, determined on a gross basis and disregarding any withholding or deduction required
to be made on account of tax, and disregarding any associated tax credit; or
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(ii)
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if the ordinary shares to be created, issued, transferred or delivered do rank for the dividend (or entitlement) in question,
the Volume Weighted Average Price on the dates on which the ordinary shares shall have been based on a price ex-dividend (or ex-
any other entitlement) shall, for the purposes of this definition, be deemed to be the amount thereof increased by an amount equal
to the Fair Market Value of any such dividend or entitlement per ordinary share as at the date of first public announcement relating
to such dividend or entitlement, in any such case, determined on a gross basis and disregarding any withholding or deduction required
to be made on account of tax, and disregarding any associated tax credit;
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and provided further that, if on each
of the said five (5) dealing days the Volume Weighted Average Price shall have been based on a price cum-dividend (or cum-any other
entitlement) in respect of a dividend (or other entitlement) which has been declared or announced but the ordinary shares to be
issued and delivered do not rank for that dividend (or other entitlement), the Volume Weighted Average Price on each of such dates
shall, for the purposes of this definition, be deemed to be the amount thereof reduced by an amount equal to the Fair Market Value
of any such dividend or entitlement per ordinary share as at the date of first public announcement relating to such dividend or
entitlement, in any such case, determined on a gross basis and disregarding any withholding or deduction required to be made on
account of tax, and disregarding any associated tax credit;
and provided further that, if the
Volume Weighted Average Price of an ordinary share is not available on one or more of the said five (5) dealing days (disregarding
for this purpose the proviso to the definition of Volume Weighted Average Price), then the average of such Volume Weighted Average
Prices which are available in that five (5) dealing-day period shall be used (subject to a minimum of two such prices), and if
only one, or no, such Volume Weighted Average Price is available in the relevant period, the Current Market Price shall be determined
in good faith by an Independent Financial Adviser.
“dealing day” means a day on
which the Relevant Stock Exchange or relevant stock exchange or securities market is open for business and on which ordinary shares,
Other Securities, options, warrants or other rights (as the
case may be) may be dealt in (other than
a day on which the Relevant Stock Exchange or relevant stock exchange or securities market is scheduled to or does close prior
to its regular weekday closing time).
“Fair Market Value” means,
with respect to any property on any date, the fair market value of that property as determined by an Independent Financial Adviser
in good faith, provided that (i) the Fair Market Value of a Cash Dividend shall be the amount of such Cash Dividend; (ii) the Fair
Market Value of any other cash amount shall be the amount of such cash; (iii) where Other Securities, options, warrants or other
rights are publicly traded on a stock exchange or securities market of adequate liquidity (as determined in good faith by an Independent
Financial Adviser), the Fair Market Value (a) of such Other Securities shall equal the arithmetic mean of the daily Volume Weighted
Average Prices of such Other Securities and (b) of such options, warrants or other rights shall equal the arithmetic mean of the
daily closing prices of such options, warrants or other rights, in the case of (a) and (b), during the period of five (5) dealing
days on the relevant stock exchange or securities market commencing on such date (or, if later, the first such dealing day such
Other Securities, options, warrants or other rights are publicly traded) or such shorter period as such Other Securities, options,
warrants or other rights are publicly traded; and (iv) where Other Securities, options, warrants or other rights are not publicly
traded on a stock exchange or securities market of adequate liquidity (as aforesaid), the Fair Market Value of such Other Securities,
options, warrants or other rights shall be determined in good faith by an Independent Financial Adviser, on the basis of a commonly
accepted market valuation method and taking account of such factors as it considers appropriate, including the market price per
ordinary share, the dividend yield of an ordinary share, the volatility of such market price, prevailing interest rates and the
terms of such Other Securities, options, warrants or other rights, including as to the expiry date and exercise price (if any)
thereof. Such amounts shall, in the case of (i) above, be translated into the Relevant Currency (if declared, announced, made,
paid or payable in a currency other than the Relevant Currency, and if the relevant dividend is payable at our option or a shareholder
in any currency additional to the Relevant Currency, the relevant dividend shall be treated as payable in the Relevant Currency)
at the rate of exchange used to determine the amount payable to shareholders who were paid or are to be paid or are entitled to
be paid the Cash Dividend in the Relevant Currency; and, in any other case, shall be translated into the Relevant Currency (if
expressed in a currency other than the Relevant Currency) at the Prevailing Rate on that date. In addition, in the case of (i)
and (ii) above, the Fair Market Value shall be determined on a gross basis and disregarding any withholding or deduction required
to be made on account of tax, and disregarding any associated tax credit.
“Independent Financial Adviser”
means an independent financial institution of international repute appointed by us at our own expense.
“ordinary shares” means our
ordinary shares with a nominal value of £1.00 each.
“Other Securities” means any
securities including without limitation, shares in our capital, or options, warrants or other rights to subscribe for or purchase
or acquire shares in our capital (and each an “Other Security”).
“Relevant Currency” means sterling
or, if at the relevant time or for the purposes of the relevant calculation or determination the LSE is not the Relevant Stock
Exchange, the currency in which the ordinary shares or the Relevant Shares (as applicable) are quoted or dealt in on the Relevant
Stock Exchange at such time.
“Relevant Stock Exchange” means
the LSE or, if at the relevant time the ordinary shares are not at that time listed and admitted to trading on the LSE, the principal
stock exchange or securities market on which the ordinary shares are then listed, admitted to trading or quoted or accepted for
dealing.
“Subsidiary” means a subsidiary
or a “subsidiary undertaking” as such terms are defined in Sections 1159 and 1162 of the UK Companies Act.
“Volume Weighted Average Price”
means, in respect of an ordinary share or Other Security on any dealing day, the order book volume-weighted average price of an
ordinary share or Other Security published by or derived (in the case of an ordinary share) from the relevant Bloomberg page or
(in the case of an Other Security (other than ordinary shares), options, warrants or other rights) from the principal stock exchange
or securities market on which such Other Securities, options, warrants or other rights are then listed or quoted or dealt in, if
any, or, in any such case, such other source as shall be determined in good faith to be appropriate by an Independent Financial
Adviser on such dealing day, provided that if on any such dealing day such price is not available or cannot otherwise be determined
as provided above, the Volume Weighted Average Price of an ordinary share, Other Security, option, warrant or other right, as the
case may be, in respect of such dealing day shall be the Volume Weighted Average
Price, determined as provided above, on
the immediately preceding dealing day on which the same can be so determined or determined as an Independent Financial Adviser
might otherwise determine in good faith to be appropriate.
UK AND US
FEDERAL TAX CONSEQUENCES
The following is a summary of material
UK and US federal income tax consequences of the ownership and disposition of the Contingent Capital Notes by a US Holder described
below, that is not connected with us for relevant tax purposes, that holds the Contingent Capital Notes and any Settlement Shares
or ADSs representing a Settlement Share as capital assets and that purchases the Contingent Capital Notes in their initial offering
at their issue price. This discussion is the opinion of Davis Polk & Wardwell London LLP as to the material UK tax and US federal
income tax consequences to the US Holders described herein of owning Contingent Capital Notes. For purposes of this discussion,
a “US Holder” is a person that, for US federal income tax purposes, is a beneficial owner of a Contingent Capital Note,
Settlement Share or ADS representing a Settlement Share and (i) a citizen or individual resident of the United States, (ii) a corporation,
or other entity taxable as a corporation for US federal income tax purposes, created or organised in or under the laws of the United
States, any state thereof or the District of Columbia or (iii) an estate or trust the income of which is subject to US federal
income taxation regardless of its source.
This discussion does not describe all of
the tax consequences that may be relevant to US Holders in light of their particular circumstances, including alternative minimum
tax and Medicare contribution tax consequences, any special tax accounting rules that may apply under Section 451 of the US Internal
Revenue Code of 1986, as amended, or differing tax consequences that may apply to US Holders subject to special rules, such as:
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persons who are resident in the United Kingdom or are temporary non-residents of the United Kingdom for UK tax purposes;
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certain financial institutions;
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dealers or traders in securities that use a mark-to-market method of tax accounting;
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persons holding Contingent Capital Notes, Settlement Shares or ADSs as part of a hedge or other integrated transaction;
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persons whose functional currency is not the US dollar;
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partnerships or other entities or arrangements classified as partnerships for US federal income tax purposes;
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persons carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom or carrying on a
trade, profession or vocation in the United Kingdom through a branch or agency in the United Kingdom; or
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persons holding the Contingent Capital Notes, Settlement Shares or ADSs in connection with a trade or business conducted outside
the United States.
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If a partnership holds a Contingent Capital
Note, Settlement Share or ADS, the US federal income tax treatment of a partner generally will depend upon the status of the partner
and the activities of the partnership. A partnership or partner of a partnership holding a Contingent Capital Note, Settlement
Share or ADS should consult its tax adviser regarding the tax consequences of investing in the Contingent Capital Notes.
The following discussion assumes that we
were not for the taxable year ended December 31, 2020, and will not become in the foreseeable future, a “passive foreign
investment company” for US federal income tax purposes (a “PFIC”). See “United States—Passive
Foreign Investment Company (PFIC) Considerations”.
The statements regarding UK and US tax
laws and practices set out below, including those regarding the UK/US double taxation convention relating to income and capital
gains (the “Treaty”), are based on those laws, practices and conventions as of the date of this prospectus supplement.
They are subject to changes in those laws, practices and conventions, and any relevant judicial decision, which changes may have
retroactive effect. This summary is not exhaustive of all possible tax considerations that may be relevant in the particular circumstances
of
each US Holder. In particular, this summary
does not deal with the tax treatment of the Contingent Capital Notes following any exercise of UK bail-in power or the consequences
of any conversion or write-down following the occurrence of a Takeover Event. You should satisfy yourself as to the tax consequences
in your own particular circumstances of the acquisition, ownership, disposition and, if applicable, any conversion of the Contingent
Capital Notes, Settlement Shares and ADSs.
United Kingdom Tax Considerations
Taxation of Contingent Capital Notes
Payments of Interest
The Contingent Capital Notes issued by
the Issuer which carry a right to interest will constitute “quoted Eurobonds” provided they are and continue to be
listed on a recognised stock exchange (within the meaning of section 1005 of the Income Tax Act 2007 (the “Act”)) or
admitted to trading on a “multilateral trading facility” operated by an EEA or UK regulated recognised stock exchange
(within the meaning of section 987 of the Act). Whilst the Contingent Capital Notes are and continue to be quoted Eurobonds, payments
of interest on the Contingent Capital Notes may be made without withholding or deduction for or on account of UK income tax.
The ISM is a multilateral trading facility
operated by an EEA or UK regulated recognised stock exchange for the purposes of section 987 of the Act.
Under current UK legislation, if the exemption
referred to above does not apply, interest on the Contingent Capital Notes may fall to be paid under deduction of UK income tax
at the basic rate (currently 20 per cent.).
Payments of interest on the Contingent
Capital Notes constitute UK-source income for UK tax purposes and, as such, may be subject to UK tax by direct assessment, irrespective
of the residence of the holder. Where the payments are made without withholding on account of UK tax, the payments will not be
assessed to UK tax if you are not resident in the UK for tax purposes, except if you carry on a trade, profession or vocation in
the UK through a UK branch or agency, or in the case of a corporate US Holder, if you carry on a trade in the UK through a permanent
establishment in the UK in connection with which the payments are received or to which the Contingent Capital Notes are attributable,
in which case (subject to exemptions for payments received by certain categories of agent) tax may be levied on the UK branch,
agency or permanent establishment.
Any
person in the UK paying interest to, or receiving interest on behalf of, certain other persons, may be required to provide information
in relation to the payment (including the name and address of the beneficial owner of the interest, whether or not resident in
the UK) to HM Revenue & Customs (“HMRC”). HMRC may communicate this information to the tax authorities of other
jurisdictions.
Where interest has been paid under deduction
of UK income tax, US Holders who are not resident in the UK for tax purposes may be able to recover all or part of the tax deducted
if there is an appropriate provision in any applicable double taxation treaty.
The references to “interest”
above mean “interest” as understood in UK tax law. The statements above do not take account of any different definitions
of “interest” or “principal” which may prevail under any other law or which may be created by the terms
and conditions of the Contingent Capital Notes or any related documentation.
The above description of the UK withholding
tax position assumes that there will be no substitution of the Issuer and does not consider the tax consequences of any such substitution,
notwithstanding that such substitution may be permitted by the terms and conditions of the Contingent Capital Notes. Any US Holders
who are in doubt as to their own tax position should consult their professional adviser.
Disposal, Redemption and Automatic Conversion
Subject to the provisions set out in the
next paragraph in relation to temporary non-residents, a US Holder will not, upon the disposal, redemption or Automatic Conversion
of a Contingent Capital Note, be liable for UK taxation on gains realised, unless at the time of the disposal, redemption or Automatic
Conversion the US Holder is resident for tax purposes in the UK or carries on a trade, profession or vocation in the UK through
a branch or agency in the
UK or, in the case of a corporate US Holder,
if the US Holder carries on a trade in the UK through a permanent establishment in the UK and the Contingent Capital Note was used
in or for the purposes of the trade, profession or vocation or acquired for use and used by or held for the purposes of that branch
or agency or permanent establishment.
A US Holder who is an individual and who
has ceased to be resident for tax purposes in the UK for a period of five tax years or less and who disposes of a Contingent Capital
Note (including on redemption or in connection with any receipt of Alternative Consideration) during that period may be liable
to UK tax on chargeable gains arising during the period of absence in respect of the disposal or redemption or in connection with
the receipt of Alternative Consideration, subject to any available exemption or relief.
A US Holder who is an individual or other
non-corporation taxpayer will not, upon transfer or redemption of a Contingent Capital Note, recognise any UK income tax charge
on accrued but unpaid payments of interest, unless the US Holder at any time in the relevant tax year was resident for tax purposes
in the UK or carried on a trade in the United Kingdom through a branch or agency to which the Contingent Capital Note is attributable.
Annual Tax Charges
Corporate US Holders who are not resident
for tax purposes in the UK and who do not carry on a trade in the United Kingdom through a permanent establishment in the UK to
which the Contingent Capital Notes are attributable will not be liable to UK tax charges or relief by reference to fluctuations
in exchange rates or in respect of profits, gains and losses arising from the Contingent Capital Notes.
Stamp Duty and Stamp Duty Reserve Tax
The Finance Act 2019 introduced a new regime
for hybrid capital instruments (the “HCI rules”). The HCI rules contain an exemption from all stamp duties on transfer
so that no liability to UK stamp duty or stamp duty reserve tax should arise on the issue or transfer of the Contingent Capital
Notes provided that the Contingent Capital Notes each constitute a “hybrid capital instrument” for the purposes of
the HCI rules and there are no arrangements, the main purpose, or one of the main purposes, of which is to secure a tax advantage.
The Contingent Capital Notes should constitute
“hybrid capital instruments” for the purposes of the HCI rules provided that:
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the Issuer is entitled to defer or cancel a payment of interest under the Contingent Capital Notes;
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the Contingent Capital Notes “have no other significant equity features”; and
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the Issuer has made an election in respect of the Contingent Capital Notes.
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The Contingent Capital Notes would “have
no other significant equity features” provided that:
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the Contingent Capital Notes carry neither significant voting rights in the Issuer nor a right to exercise a dominant influence
over the Issuer;
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any provision in the Contingent Capital Notes for altering the amount of the principal is limited to writedown or conversion
events in certain qualifying cases and that is not a right exercisable by the holders; one of the qualifying cases is where a provision
is included solely because of a need to comply with a regulatory or other legal requirement; and
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any provision for the holder to receive anything other than interest or principal is limited to conversion events in qualifying
cases.
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The Issuer will make a hybrid capital election
in respect of the Contingent Capital Notes pursuant to section 475C of the Corporation Tax Act 2009 and the Contingent Capital
Notes are not being issued in consequence of, or otherwise in connection with, any arrangements, the main purpose, or one of the
main purposes of which, is to
secure a tax advantage. Consequently, the
Issuer expects that the HCI rules should apply to the Contingent Capital Notes such that they would benefit from the exemption
from all stamp duties.
No liability to UK stamp duty or stamp
duty reserve tax will generally arise on a cash redemption of Contingent Capital Notes, provided no issue or transfer of shares
or other securities is effected upon or in connection with such redemption.
No liability to UK stamp duty or stamp
duty reserve tax will arise for a US Holder on the release of Contingent Capital Notes on Automatic Conversion.
No liability to UK stamp duty or stamp
duty reserve tax will arise for a US Holder on the issuance of new ordinary shares in NatWest Group plc by NatWest Group plc to
the US Holders under an Automatic Conversion (subject to the special rules below for shares issued into clearance systems and depositary
receipt systems).
UK stamp duty and stamp duty reserve tax
may be payable in relation to a Settlement Shares Offer.
Taxation of Settlement Shares and
ADSs
Payments of Dividends
Payments of dividends made in respect of
the Settlement Shares or ADSs may be made without withholding or deduction for or on account of UK tax.
Dividends on our ordinary shares would
constitute UK source income for UK tax purposes and, as such, may be subject to UK tax by direct assessment, irrespective of the
residence of the holder. However, dividends in respect of the Settlement Shares or the ADSs will not be assessed to UK tax if you
are not resident in the UK for tax purposes, except if you carry on a trade, profession or vocation in the UK through a UK branch
or agency, or in the case of a corporate US Holder, if you carry on a trade in the UK through a permanent establishment in the
UK in connection with which the payments are received or to which the Settlement Shares or ADSs are attributable, in which case
(subject to exemptions for payments received by certain categories of agent) tax may be levied on the UK branch, agency or permanent
establishment.
Disposal
Subject to the provisions set out in the
next paragraph in relation to temporary non-residents, a US Holder will not, upon disposal of a Settlement Share or ADS, be liable
for UK taxation on gains realised, unless at the time of the disposal the US Holder is resident for tax purposes in the UK or carries
on a trade, profession or vocation in the UK through a branch or agency in the UK or, in the case of a corporate US Holder, if
the US Holder carries on a trade in the UK through a permanent establishment in the UK and the Settlement Share or ADS was used
in or for the purposes of the trade, profession or vocation or acquired for use and used by or held for the purposes of that branch
or agency or permanent establishment.
A US Holder who is an individual and who
has ceased to be resident for tax purposes in the UK for a period of five tax years or less and who disposes of a Settlement Share
or ADS during that period may be liable to UK tax on chargeable gains arising during the period of absence in respect of the disposal,
subject to any available exemption or relief.
Stamp Duty and Stamp Duty Reserve
Tax
UK stamp duty at the rate of 0.5 per cent.
of the amount or value of the consideration given (rounded up to the nearest multiple of £5) is generally payable on an instrument
transferring Settlement Shares.
A charge to UK stamp duty reserve tax will
also generally arise on an unconditional agreement to transfer Settlement Shares (at the rate of 0.5 per cent. of the amount or
value of the consideration payable). However, if within six years of the date of the agreement (or, if the agreement is conditional,
the date on which it becomes unconditional) an instrument of transfer is executed pursuant to the agreement and stamp duty is paid
on that instrument, any stamp duty reserve tax already paid will generally be refunded provided that a claim for payment is made,
and any outstanding liability to stamp duty reserve tax will be cancelled. The purchaser or transferee of the Settlement Shares
will generally be responsible for paying such stamp duty or stamp duty reserve tax. An exemption
from stamp duty is available on an instrument
transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument
that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which
the aggregate consideration exceeds £1,000.
Shares transferred through paperless
means including CREST
Paperless transfers of Settlement Shares,
such as those within CREST, are generally liable to stamp duty reserve tax, rather than stamp duty, at the rate of 0.5 per cent.
of the amount or value of the consideration payable. CREST is obliged to collect stamp duty reserve tax on relevant transactions
settled within the CREST system. The charge is generally borne by the purchaser. Under the CREST system, no stamp duty or stamp
duty reserve tax will arise on a transfer of Settlement Shares into the system unless such a transfer is made for a consideration
in money or money’s worth, in which case a liability to stamp duty reserve tax (usually at a rate of 0.5 per cent.) will
arise.
Shares held through Clearance Systems
or Depositary Receipt Systems (such as ADSs)
Special rules apply where Settlement Shares
are issued or transferred to, or to a nominee or agent for, either a person whose business is or includes issuing depositary receipts
(as would be the case on a delivery of ADSs) or a person providing a clearance service, under which UK stamp duty or stamp duty
reserve tax may be charged at a rate of 1.5 per cent., with subsequent transfers within the clearance service or transfers of depositary
receipts (such as the ADSs) then being free from UK stamp duty or stamp duty reserve tax. However, based on current published HMRC
practice following European Union case law, no SDRT or stamp duty is generally payable on such an issue (as respects SDRT), or
on such a transfer (as respects stamp duty and SDRT) where the transfer is an integral part of an issue of share capital. However,
it should be noted that the 1.5% charge provisions remain part of UK statute and that their disapplication described above is based
upon the provisions of EU law. There is therefore a risk that this could be affected by the UK’s exit from the EU and the
expiry on December 31, 2020 of the related transition period, although it is noted that the 2017 Autumn Budget included a statement
that the government will not reintroduce the 1.5% charge on share issues (and transfers integral to capital raising) into clearance
services and depositary receipt systems following the UK’s exit from the EU and HMRC’s recently published practice
states that the disapplication of the 1.5% charge in accordance with those provisions of EU law will remain the position following
the expiry of the transition or implementation period unless the relevant UK statutory provisions are amended. Specific professional
advice should be sought before incurring a 1.5 per cent. stamp duty or stamp duty reserve tax charge in any circumstances.
United States Federal Income Tax Considerations
Taxation of the Contingent Capital
Notes
Characterisation of the Contingent Capital
Notes
We believe, and the remainder of this discussion
assumes, that the Contingent Capital Notes will be treated as equity for US federal income tax purposes.
Taxation of Distributions
Payments of interest (and Additional Amounts,
if any) will constitute foreign-source dividend income for US federal income tax purposes to the extent paid out of our current
or accumulated earnings and profits, as determined under US federal income tax principles. Because we do not maintain calculations
of our earnings and profits under US federal income tax principles, it is expected that such payments will be reported to US Holders
as dividends. The payments will not be eligible for the dividends-received deduction generally allowed to corporate US Holders.
Subject to applicable limitations, including a requirement that we are not a PFIC, as discussed below, in the taxable year in which
the interest is paid or in the preceding taxable year, interest paid to certain non-corporate US Holders may be taxable at the
favourable rates applicable to long-term capital gain. Non-corporate US Holders should consult their tax advisers to determine
whether they are subject to any special rules that limit their ability to be taxed at these favourable rates.
The amount of any interest payment includible
in income by a US Holder will be a US dollar amount calculated by reference to the relevant exchange rate in effect on the date
of receipt by the US Holder, regardless of whether the payment is in fact converted into US dollars on such date. If the payment
is converted into US dollars on the date of receipt, the US Holder generally should not be required to recognise foreign currency
gain or loss in respect of the
interest income. If the interest payment
is converted into US dollars after the date of receipt, the US Holder may have foreign currency gain or loss, which will be taxed
as US-source ordinary income or loss.
Constructive Distributions
The conversion price in respect of the
Contingent Capital Notes may be adjusted in certain circumstances pursuant to anti-dilution provisions. Under the US Internal Revenue
Code of 1986, as amended (the “Code”), and applicable Treasury regulations, adjustments (or lack thereof) that have
the effect of increasing the interests of holders of convertible securities in an issuer’s assets or earnings and profits
may, in certain circumstances, result in a deemed distribution to such holders. Any deemed distribution will generally be
taxable as a dividend as described above. US Holders should consult their tax advisers as to the tax consequences of any
adjustments to the conversion price.
Sale, Redemption or Other Taxable Disposition
A US Holder will, upon the sale, redemption
or other disposition of a Contingent Capital Note (other than the receipt of Settlement Shares or ADSs upon an Automatic Conversion,
which will be treated as described below), generally recognise capital gain or loss for US federal income tax purposes in an amount
equal to the difference between the amount realised and the US Holder’s tax basis in such Contingent Capital Note (each determined
in US dollars), provided that, in the case of a redemption, the US Holder does not own, and is not deemed to own, any of our ordinary
shares at such time. This capital gain or loss will generally be US-source capital gain or loss and will be long-term capital gain
or loss if the US Holder held the Contingent Capital Note for more than one year. The deductibility of capital losses is subject
to limitations.
Substitution or Variation
In certain circumstances, we may have the
option to substitute all of the Contingent Capital Notes or vary the terms of the Contingent Capital Notes. See “Description
of the Contingent Capital Notes—Redemption Repurchase,
Substitution or Variation—Substitution or Variation.”
Because the terms of any such substituted or modified Contingent Capital Notes are not currently known, US Holders should consult
their tax advisers regarding the tax consequences of any such substitution or variation and of owning or disposing of any substituted
or modified Contingent Capital Notes.
Consequences of an Automatic Conversion
A conversion of Contingent Capital Notes
solely into Settlement Shares or ADSs generally will not be a taxable event for US federal income tax purposes. A US Holder’s
tax basis in, and holding period for, the Settlement Shares or ADSs received upon conversion will generally be the same as the
US Holder’s tax basis in, and holding period of, the Contingent Capital Notes.
Taxation of the Settlement Shares
and ADSs
This discussion, to the extent it relates
to ADSs, is based in part on representations by the ADS Depositary and assumes that each obligation under the ADS deposit agreement
and any related agreement will be performed in accordance with its terms. In general, a US Holder of ADSs will be treated as the
owner of the underlying ordinary shares represented by those ADSs for US federal income tax purposes. Accordingly, no gain or loss
will be recognised if a US Holder receives ADSs instead of Settlement Shares upon conversion, exchanges ADSs for the underlying
ordinary shares represented by those ADSs, or exchanges Settlement Shares for ADSs.
Taxation of Distributions
Distributions paid on Settlement Shares
or ADSs will generally be treated in the manner described above under “—Taxation of the Contingent Capital Notes—Taxation
of Distributions”, except that in the case of distributions on ADSs the date of inclusion in income, and the exchange
rate for purposes of calculating the U.S. dollar value a distribution, will be determined by reference to the date the distribution
is received by the ADS Depository.
Sale or Other Taxable Disposition
A US Holder’s sale or other taxable
disposition of Settlement Shares or ADSs will generally be treated in the manner described above under “—Taxation
of the Contingent Capital Notes—Sale, Redemption or Other Taxable Disposition”.
Passive Foreign Investment Company
(PFIC) Considerations
In general, a foreign corporation will
be a PFIC for any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries
pursuant to applicable “look-through rules”, either (i) at least 75% of its gross income is “passive income”
or (ii) at least 50% of the average quarterly value of its assets is attributable to assets that produce passive income or are
held for the production of passive income. Although interest income is generally passive income, a special rule (under proposed
Treasury regulations that taxpayers can currently rely on) allows banks to treat their banking business income as non-passive.
To qualify for this rule, a bank must satisfy certain requirements regarding its licensing and activities. We believe that we were
not a PFIC for our taxable year ended December 31, 2020, and we do not expect to become a PFIC in the foreseeable future.
However, PFIC status is determined annually
and our PFIC status may be subject to change if we fail to qualify under this special rule for any year in which a US Holder owns
Contingent Capital Notes, Settlement Shares or ADSs. In addition, there is no assurance that the proposed regulations will be finalized
in their current form. If we were a PFIC for any taxable year during which a US Holder owned Contingent Capital Notes, Settlement
Shares or ADSs, the US Holder would generally be subject to adverse US federal income tax consequences and certain reporting obligations.
US Holders should consult their own tax advisers as to the potential application of the PFIC rules to the ownership and disposition
of the Contingent Capital Notes, Settlement Shares or ADSs.
Information Reporting and Backup
Withholding
Payments on, and proceeds from the sale
of, Contingent Capital Notes, Settlement Shares or ADSs that are made within the United States or through certain US-related financial
intermediaries may be subject to information reporting and backup withholding unless (i) the US Holder is an exempt recipient or
(ii) in the case of backup withholding, the US Holder provides a correct taxpayer identification number and certifies that it is
not subject to backup withholding. The amount of any backup withholding from a payment to a US Holder will be allowed as a credit
against the US Holder’s US federal income tax liability and may entitle it to a refund, provided that the required information
is timely furnished to the Internal Revenue Service.
Certain US Holders who are individuals
or specified entities may be required to report information relating to non-US accounts through which the Contingent Capital Notes,
Settlement Shares or ADSs may be held, or relating to any Settlement Shares not held through a financial account. Substantial penalties
may apply if a US Holder fails to meet these reporting obligations. US Holders should consult their tax advisers regarding their
reporting obligations with respect to the Contingent Capital Notes, Settlement Shares and ADSs.
UNDERWRITING/CONFLICTS
OF INTEREST
We and the underwriters for the offering
named below (the “Underwriters”) have entered into an underwriting agreement and a pricing agreement with respect to
the Contingent Capital Notes. Subject to certain conditions, we have agreed to sell to the Underwriters and each Underwriter has
severally agreed to purchase the respective principal amount of the Contingent Capital Notes indicated opposite such Underwriter’s
name in the following table.
|
|
Principal
Amount of Contingent
Capital Notes
|
Underwriters
|
|
Goldman Sachs International
|
|
£60,000,000
|
NatWest Markets plc
|
|
£280,000,000
|
RBC Europe Limited
|
|
£60,000,000
|
Total
|
|
£400,000,000
|
The underwriting agreement and the pricing
agreement provide that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters
have undertaken to purchase all the Contingent Capital Notes offered by this prospectus supplement if any of these Notes are purchased.
Contingent Capital Notes sold by the Underwriters
to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus supplement
and may be offered to certain dealers at such initial public offering price less a selling concession not to exceed 0.405% of the
principal amount of the Contingent Capital Notes. The Underwriters may allow, and dealers may re-allow, a concession on sales to
other dealers not to exceed 0.203% of the principal amount of the Contingent Capital Notes. If all the Contingent Capital Notes
are not sold at the initial public offering price, the Underwriters may change the offering price and the other selling terms.
We have applied for the listing of the
Contingent Capital Notes on the ISM of the LSE. The Contingent Capital Notes are a new issue of securities with no established
trading market. We have been advised by the Underwriters that the Underwriters intend to make a market in the Contingent Capital
Notes, but they are not obligated to do so and may discontinue market-making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Contingent Capital Notes.
The Contingent Capital Notes will settle
through the facilities of the Clearing Systems and its participants. The Common Code for the Contingent Capital Notes is 231596674
and the ISIN is XS2315966742.
Goldman Sachs International, NatWest Markets
plc and RBC Europe Limited are not US registered broker-dealers, and will only effect any offers or sales of any Contingent Capital
Notes in the US through one or more U.S. registered broker-dealers in compliance with the applicable securities laws and the rules
of FINRA.
We estimate that our total expenses for
the offering, excluding underwriting discount, will be approximately £290,000.
We have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended.
It is expected that delivery of the Contingent
Capital Notes will be made against payment on or about the date specified in the last paragraph of the cover page of this prospectus
supplement, which will be the third Business Day following the date of pricing of the Contingent Capital Notes (such settlement
cycle being referred to as “T+3”). Under Rule 15c6-1 under the Securities Exchange Act of 1934, purchases or sales
of securities in the secondary market generally are required to settle within two business days (T+2), unless the parties to any
such transaction expressly agree otherwise. Accordingly, purchasers of the Contingent Capital Notes who wish to trade the Contingent
Capital Notes on the date of this prospectus supplement or the next two succeeding business days, will be required, because the
notes initially will settle within three business days (T+3) in the United States, to specify an alternate settlement cycle at
the time of any such trade to prevent a failed settlement. Purchasers of the Contingent Capital Notes who wish to trade on the
date of this prospectus supplement or the next two succeeding business days should consult their own legal advisers.
Conflicts of Interest
NWMSI, an affiliate of NatWest Group plc,
is a FINRA member and has a “conflict of interest” within the meaning of FINRA Rule 5121. Accordingly, any offers or
sales of any Contingent Capital Notes in the United States will be made in compliance with the applicable provisions of FINRA Rule
5121. NWMSI is not permitted to sell Contingent Capital Notes in this offering to an account over which it exercises discretionary
authority without the prior specific written approval of the account holder.
Some of the Underwriters and their affiliates
have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business
with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the Underwriters and their affiliates may make or hold a broad
array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments
(including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities
may involve securities and/or instruments of ours or our affiliates. Certain of the Underwriters or their affiliates that have
a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies.
Typically, such Underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either
the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Contingent
Capital Notes. Any such short positions could adversely affect future trading prices of the Contingent Capital Notes. The Underwriters
and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of
such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in
such securities and instruments.
In connection with the offering, the Underwriters
are not acting for anyone other than us and will not be responsible to anyone other than us for providing the protections afforded
to their clients nor for providing advice in relation to the offering.
Stabilisation Transactions and Short Sales
In connection with the offering, the Underwriters
may purchase and sell Contingent Capital Notes in the open market. These transactions may include short sales, stabilising transactions
and purchases to cover positions created by short sales. Short sales involve the sale by the Underwriters of a greater aggregate
principal amount of Contingent Capital Notes than they are required to purchase from us in the offering. Stabilising transactions
consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the Contingent
Capital Notes while the offering is in progress, or, for a limited time after the issue date, over-allotment of the Contingent
Capital Notes or transactions with a view to supporting the market price of the Contingent Capital Notes at a level higher than
that which might otherwise prevail. However, there is no obligation or assurance that any Underwriter (or any person acting on
behalf of such Underwriter) will undertake any such stabilisation action. Any such stabilisation action may begin on or after the
date on which adequate public disclosure of the terms of the offer of the Contingent Capital Notes is made, and, if begun, may
be ended at any time, but it must end no later than 30 days after the date on which the Issuer received the proceeds of the issue,
or no later than 60 days after the date of allotment of the relevant Contingent Capital Notes, whichever is the earlier.
The Underwriters may also impose a penalty
bid. This occurs when a particular Underwriter repays to the other Underwriters a portion of the underwriting discount received
by it because the other Underwriters have repurchased Contingent Capital Notes sold by or for the account of such Underwriter in
stabilising or short-covering transactions.
These activities by the Underwriters may
stabilise, maintain or otherwise affect the market price of the Contingent Capital Notes. As a result, the price of the Contingent
Capital Notes may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they
may be discontinued by the Underwriters at any time and stabilising transactions must be brought to an end after a limited period.
These transactions may be effected on the ISM of the LSE, in the over-the-counter market or otherwise.
Selling Restrictions
European Economic Area
This prospectus supplement has been prepared
on the basis that any offer of Contingent Capital Notes in any Member State of the European Economic Area will be made pursuant
to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of the Contingent Capital
Notes. The expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended or superseded).
Each Underwriter, severally and not jointly,
has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make
available any Contingent Capital Notes which are the subject of the offering contemplated by this Prospectus Supplement in relation
thereto to any retail investor in the EEA. For the purposes of this provision the expression “retail investor” means
a person who is one (or more) of the following:
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(i)
|
a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of the Insurance
Distribution Directive (as amended or superseded), where that customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II.
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Canada
The Contingent Capital Notes may be sold
in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in
National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients,
as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of
the Contingent Capital Notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus
requirements of applicable securities laws.
Securities legislation in certain provinces
or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including
any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the
purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser
should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars
of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33-105 Underwriting Conflicts (NI 33-105), the Underwriters are not required to comply with the disclosure requirements of NI 33-105
regarding underwriter conflicts of interest in connection with this offering.
United Kingdom
This prospectus supplement is for distribution
only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii)
are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of
the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to
engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (as amended, the
“FSMA”)) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to
be communicated (all such persons together being referred to as “relevant persons”). This prospectus supplement is
directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment
or investment activity to which this prospectus supplement relates is available only to relevant persons and will be engaged in
only with relevant persons.
This prospectus supplement has been prepared
on the basis that any offer of Contingent Capital Notes in the United Kingdom will be made pursuant to an exemption under the UK
Prospectus Regulation from the requirement to publish a prospectus for offers of the Contingent Capital Notes. The expression “UK
Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018 (“EUWA”).
Each Underwriter has severally and not
jointly represented and agreed that (a) it has only communicated or caused to be communicated and will only communicate or cause
to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA)
received by it in connection with the issue or sale of the Contingent Capital Notes or any investments representing the Contingent
Capital Notes in circumstances in which section 21(1) of the FSMA does not apply to NatWest Group plc, (b) it has complied and
will comply with all the applicable provisions of the FSMA with respect to anything done by it in relation to any Contingent Capital
Notes in, from or otherwise involving the United Kingdom, (c) in connection with any issue of Contingent Capital Notes designated
as Tier 1 Contingent Capital Notes (as defined below), such Underwriter will not indicate to initial investors as part of the marketing
relating to the sale of such Contingent Capital Notes that such Contingent Capital Notes will or are likely to be redeemed, repurchased
or repaid, provided that for the avoidance of doubt the undertaking in this Section 15(c) shall not preclude any Underwriter disclosing
any terms of such Contingent Capital Notes or information consistent with the Prospectus or any other additional information authorized
by the Company to be disclosed. For the purposes of this Section 15(c) Tier 1 Contingent Capital Notes shall mean any Contingent
Capital Note which is specified to be a Tier 1 Contingent Capital Note in the applicable Term Sheet; and (d) without prejudice
to the generality of paragraph (b), it has complied and will comply with COBS 22.3 (Restrictions on the retail distribution of
contingent convertible instruments and CoCo funds) (for so long as in effect, and as may be amended or replaced from time to time)
with such underwriter deemed to be a “ firm” for the purposes of this paragraph (d) if it is not otherwise a “
firm” for the purposes of COBS. For the purposes of this paragraph (d), “ firm” shall have the meaning attributed
to such term in COBS.
In addition, each Underwriter, has severally
and not jointly, represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise
make available any Contingent Capital Notes which are the subject of the offering contemplated by this Prospectus Supplement in
relation thereto to any retail investor in the United Kingdom. For these purposes:
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(a)
|
the expression retail investor means a person who is one (or more) of the following: (i) a retail client, as defined in point
(8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of the domestic law of the UK by virtue of the EUWA; or
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(ii)
|
a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive
(EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation
(EU) No 600/2014 as it forms part of the domestic law of the UK by virtue of the EUWA.
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Republic of Italy
The offering of the Contingent Capital
Notes has not been registered pursuant to Italian securities legislation and, accordingly, no Contingent Capital Notes may be offered,
sold or delivered, nor may copies of this prospectus supplement or of any other document relating to the Contingent Capital Notes
be distributed in the Republic of Italy, except:
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(i)
|
to qualified investors (investitori qualificati), as defined
pursuant to Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the “Financial Services Act”)
and Article 34-ter, first paragraph, letter b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time (Regulation
No. 11971); or (ii) in other circumstances which are exempted from
the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 34-ter of Regulation No. 11971.
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Any offer, sale or delivery of the Contingent
Capital Notes or distribution of copies of this prospectus supplement or any other document relating to the Contingent Capital
Notes in the Republic of Italy under (i) or (ii) above must:
|
(a)
|
be made by an investment firm, bank or financial intermediary permitted
to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190
of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the “Italian
Banking Act”); and
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|
(b)
|
comply with any other applicable laws and regulations or requirement imposed by CONSOB, the Bank of Italy
(including the reporting requirements, where applicable, pursuant to Article 129 of the Banking Act and the implementing guidelines
of the Bank of Italy, as amended from time to time) and/or any other Italian authority.
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Hong Kong
Each underwriter, severally and not jointly,
has acknowledged that:
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(a)
|
it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Contingent Capital Notes
other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong
and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus”
as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning
of that Ordinance; and
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|
(b)
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it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the
purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Contingent Capital
Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than
with respect to Contingent Capital Notes which are or are intended
to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities
and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.
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Japan
The Contingent Capital Notes have not been
and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended; the “FIEA”).
Accordingly, each underwriter, severally and not jointly, has acknowledged that it has not offered or sold and will not offer or
sell any Contingent Capital Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined
under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Control Act (Law No. 228 of 1949, as amended)),
or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except
pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable
laws, regulations and ministerial guidelines of Japan.
Malaysia
Each Underwriter has, severally and not
jointly, acknowledged that no lodgement of the relevant documents with the Securities Commission Malaysia (“ SC”) has
been or will be made and no approval from the SC under the Capital Markets and Services Act 2007 of Malaysia (“ CMSA”)
has been or will be obtained and this prospectus supplement has not been nor will it be registered with the SC as a prospectus
under the CMSA for the offering or issuance of the Contingent Capital Notes on the basis that the Contingent Capital Notes will
be offered or sold exclusively to persons outside Malaysia. Accordingly, each Underwriter has acknowledged that it has not offered
or sold any Contingent Capital Notes or caused such Contingent Capital Notes to be made the subject of an invitation for subscription
or purchase nor will it offer or sell such Contingent Capital Notes or cause such Contingent Capital Notes to be made the subject
of an invitation for subscription or purchase, nor has it circulated or distributed, nor will it circulate or distribute, either
this prospectus supplement or any other document or material in connection with the offer or sale, or invitation for subscription
or purchase, of the Contingent Capital Notes, whether directly or indirectly, to any person in Malaysia.
Singapore
Each underwriter, severally and not jointly,
has acknowledged that this prospectus supplement (together with the accompanying prospectus) has not been registered as a prospectus
with the Monetary Authority of Singapore, and the Contingent Capital Notes will be offered pursuant to exemptions under the Securities
and Futures Act, Chapter 289 of Singapore (the “SFA”). Accordingly, each underwriter, severally and not jointly, has
acknowledged that it has not offered or sold any Contingent Capital Notes or caused such Contingent Capital Notes to be made the
subject of an invitation for subscription
or purchase and will not offer or sell such Contingent Capital Notes or cause such Contingent Capital Notes to be made the subject
of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the
prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase,
of such Contingent Capital Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor
under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A),
and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA.
Where the Contingent Capital Notes are
subscribed or purchased under Section 275 by a relevant person which is:
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(a)
|
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to
hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor;
or
|
|
(b)
|
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of
the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation
or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after
that corporation or that trust has acquired the Contingent Capital Notes pursuant to an offer made under Section 275 except:
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|
(1)
|
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an
offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
|
|
(2)
|
where no consideration is or will be given for the transfer;
|
|
(3)
|
where the transfer is by operation of law; or
|
|
(4)
|
as specified in Section 276(7) of the SFA.
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Singapore Securities and Futures Act Product
Classification—Solely for the purposes of its obligations pursuant to Sections 309B(1)(a) and 309B(1)(c) of the Securities
and Futures Act (Chapter 289 of Singapore) (the “SFA”), we have determined, and hereby notify all relevant persons
(as defined in Section 309A of the SFA) that the Contingent Capital Notes are “prescribed capital markets products”
(as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and “Excluded Investment Products”
(as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations
on Investment Products).
Switzerland
This prospectus supplement and the accompanying
prospectus, as well as any other material relating to the Contingent Capital Notes which are the subject of the offering contemplated
by this prospectus supplement, do not constitute an issue prospectus pursuant to Articles 652a and/or 1156 of the Swiss Code of
Obligations. The Contingent Capital Notes will not be listed on the SIX Swiss Exchange and, therefore, the documents relating to
the Contingent Capital Notes, including, but not limited to, this prospectus supplement, do not claim to comply with the disclosure
standards of the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the
SIX Swiss Exchange. The Contingent Capital Notes are being offered in Switzerland by way of a private placement, i.e., to a small
number of selected investors only, without any public offer and only to investors who do not purchase the Contingent Capital Notes
with the intention to distribute them to the public. The investors will be individually approached by us from time to time. This
prospectus supplement as well as any other material relating to the Contingent Capital Notes is personal and confidential and does
not constitute an offer to any other person. This prospectus supplement may only be used by those investors to whom it has been
handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available
to other persons without our express consent. It may not be used in connection with any other offer and shall in particular not
be copied and/or distributed to the public in (or from) Switzerland.
Taiwan
The Contingent Capital Notes have not been
and will not be registered or filed with, or approved by, the Financial Supervisory Commission of the ROC and/or other regulatory
authority of the ROC pursuant to relevant securities laws and regulations and may not be sold, issued or offered within the ROC
through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of
the ROC or relevant laws and regulations that requires a registration, filing or approval of the Financial Supervisory Commission
of the ROC and/or other regulatory authority of the ROC. No person or entity in the ROC has been authorized to offer or sell the
Contingent Capital Notes in the ROC.
Trading
in Ordinary Shares and American Depositary Shares of NatWest Group PLC by affiliates of NatWest Group PLC
The SEC has granted exemptive relief from
Rules 101 and 102 of Regulation M in connection with certain distributions of securities qualifying as additional tier 1 capital
under CRD. This exemptive relief permits certain transactions in ordinary shares underlying such securities, including ordinary
shares represented by ADSs, by issuers and affiliated purchases, including those acting as distribution participants, during a
distribution of such securities.
As a result, NatWest Group plc and its
affiliates may continue to engage, including during the offering of the Contingent Capital Notes, in one or more market activities
involving NatWest Group plc’s ordinary shares and ADSs. These market activities have occurred and are expected to continue
to occur both outside and inside the United States, solely in the ordinary course of business and not for the purpose of facilitating
the distribution of the Contingent Capital Notes. In addition, NatWest Group plc’s affiliates may, under certain circumstances,
participate in the offering of the Contingent Capital Notes.
LEGAL OPINIONS
Our US counsel, Davis Polk & Wardwell
London LLP, and US counsel for the Underwriters, Milbank LLP, will pass upon certain United States legal matters relating to the
Contingent Capital Notes. Our Scottish solicitors, CMS Cameron McKenna Nabarro Olswang LLP, will pass upon certain matters of Scots
law relating to the issue and sale of the Contingent Capital Notes. Davis Polk & Wardwell London LLP will pass upon certain
tax matters of English law relating to the Contingent Capital Notes.
EXPERTS
The consolidated financial statements of
NatWest Group plc (the “Group”) appearing in the Group’s Annual Report (Form 20-F) for the year ended December
31, 2020, and the effectiveness of the Group’s internal control over financial reporting as of December 31, 2020, have been
audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated financial statements and NatWest Group plc management’s
assessment of the effectiveness of internal control over financial reporting as of December 31, 2020 are incorporated herein by
reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
NatWest Group plc
£400,000,000 4.500% Reset Perpetual
Subordinated Contingent Convertible
Additional Tier 1 Capital Notes
_______________
PROSPECTUS SUPPLEMENT
(to prospectus dated December 9, 2020)
_______________
Global Co-ordinator
and Sole Bookrunner
NatWest Markets
Joint Lead Managers
Goldman Sachs International
|
RBC Capital Markets
|
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