Bank of Queensland : Tier 2 Subordinated Instruments Cleansing Notice

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Bank of Queensland Limited

100 Skyring Terrace, Newstead QLD 4006

GPO Box 898, Brisbane 4001

www.boq.com.au

ASX Announcement

Market Announcements Office

Australian Securities Exchange

Level 4, 20 Bridge Street

Sydney NSW 2000

By e-lodgement

19 November 2021

Bank of Queensland Limited ("BOQ") - issue of A$400,000,000 Floating Rate Subordinated Notes due 19 May 2032 ("Subordinated Notes")

Notice under section 708A(12H)(e) of the Corporations Act 2001 (Cth) ("Act") as inserted by ASIC Corporations (Regulatory Capital Securities) Instrument 2016/71 ("Instrument")

1. BOQ will issue the Subordinated Notes today. Offers of the Subordinated Notes do not require disclosure to investors under Part 6D.2 of the Act.
2. The terms and conditions of the Subordinated Notes attached to this notice as Annex A ("Conditions") are set out on pages 73 to 119 of the Information Memorandum relating to BOQ's A$8,000,000,000 Debt Issuance Programme dated 3 November 2021 ("Information Memorandum"), as supplemented by the Pricing Supplement dated 17 November 2021, the form of which is attached to this notice as Annex B ("Pricing Supplement").
3. The Subordinated Notes will be treated as Tier 2 regulatory capital under the capital adequacy framework as implemented in Australia by the Australian Prudential Regulation Authority ("APRA").
4. If APRA determines that BOQ is or would become non-viable, the Subordinated Notes may be:
5. 1. Converted into fully paid ordinary shares in the capital of BOQ; or
   2. immediately and irrevocably Written-off (and rights attaching to the Subordinated Notes terminated) if for any reason Conversion does not occur within five ASX Business Days of APRA notifying BOQ of the determination,

in accordance with the Conditions.

5. In order to enable ordinary shares in the capital of BOQ to be issued on Conversion without disclosure under Chapter 6D of the Act, BOQ has elected to give this notice under section 708A(12H)(e) of the Act as inserted by the Instrument. The Conditions and the information in the attached Schedule are included in, and form part of, this notice.

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1. BOQ confirms that:
2. 1. the information in this notice remains current as at today's date;
   2. this notice complies with section 708A of the Act, as notionally modified by the Instrument; and
   3. this notice complies with the content requirements of section 708A(12I) of the Act as inserted by the Instrument.
3. Unless otherwise defined, capitalised expressions used in this notice have the meanings given to them in the Conditions or Pricing Supplement.

Authorised for release to ASX by the Managing Director and Chief Executive Officer.

Yours faithfully,

Nicholas Allton

Group General Counsel & Company Secretary

Bank of Queensland Limited

NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

This market announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from registration.

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SCHEDULE

1. Effect on BOQ of the offer of the Subordinated Notes

The issuance of the Subordinated Notes is expected to raise Tier 2 regulatory capital to satisfy BOQ's regulatory requirements and maintain the diversity of BOQ's sources and types of capital funding.

The proceeds from the issue of the Subordinated Notes will be used for general corporate purposes. Those proceeds, less the costs of the issue, will be classified as a financial liability in the financial statements of BOQ and will be eligible Tier 2 regulatory capital. The issue of the Subordinated Notes will not have a material impact on BOQ's financial position.

The proceeds of the issue, less the costs of the issue, are expected to increase BOQ's total capital ratio on a Level 2 basis by approximately 89bps.

1. Rights and liabilities attaching to the Subordinated Notes

The rights and liabilities attaching to the Subordinated Notes are set out in the Conditions as supplemented by the Pricing Supplement.

1. Effect on BOQ of the issue of the ordinary shares if the Subordinated Notes are required to be Converted1

A key feature of APRA's requirements for Tier 2 regulatory capital instruments is that they absorb losses at the point of non-viability of the issuer. The Conditions include provisions that require the Subordinated Notes to be Converted into ordinary shares in the capital of BOQ or Written-off on the occurrence of a Non-Viability Trigger Event. A Non-Viability Trigger Event will occur when APRA notifies BOQ in writing that it believes that relevant non-viability circumstances (as described in the definition of "Non-Viability Trigger Event" in the Conditions) subsist, which could occur at any time.

If a Non-Viability Trigger Event occurs and BOQ Converts the Subordinated Notes and issues ordinary shares to Holders (as required under the Conditions), the effect of Conversion on BOQ would be to reduce the financial liability by the principal amount, less any unamortised costs of the issue, of the Subordinated Notes being Converted and increase BOQ's shareholders' equity (ordinary share capital) by a corresponding amount. APRA has not provided extensive guidance as to how it would determine non‑viability. Non-viability could be expected to include serious impairment of BOQ's financial position, concerns about its capital, funding or liquidity levels and/or insolvency. We note that APRA has indicated that it may regard non-viability as occurring before an authorised deposit-taking institution ("ADI") such as BOQ is at risk of becoming insolvent.2

The number of ordinary shares issued on Conversion is variable, but is limited to the Maximum Conversion Number. Limiting the number of ordinary shares which may be issued to the Maximum Conversion Number means that Holders will receive a number of ordinary shares that have a market value that is significantly less than the Outstanding Principal Amount of the Subordinated Notes.

The Maximum Conversion Number is calculated based on a VWAP set to reflect 20% of the Issue Date VWAP. The Maximum Conversion Number may be adjusted to reflect a consolidation, division or reclassification or pro rata bonus issue, of ordinary shares. However, no adjustment will be made to it on account of other transactions which may affect the price of ordinary shares, including for example, rights issues, returns of capital, buy-backs or special dividends.

The Maximum Conversion Number is 5707.7626 BOQ ordinary shares per Subordinated Note (with a nominal value of A$10,000), based on the Issue Date VWAP of A$8.763. If Conversion of any Subordinated Notes does not occur for any reason within five ASX Business Days after the occurrence of the Non-Viability Trigger

1. If, in accordance with the Conditions, BOQ is replaced by an Approved Successor as debtor of the Subordinated Notes and the issuer of ordinary shares, Subordinated Notes may be Converted into fully paid ordinary shares in the capital of an Approved Successor in accordance with the Conditions. This notice also enables ordinary shares in the capital of an Approved Successor which is a NOHC for the purposes of the Banking Act 1959 (Cth) issued on Conversion to be sold without disclosure under Chapter 6D of the Act. Refer to the Conditions and the Instrument for further information.
2. APRA, "Response to Submissions - Loss-Absorbing Capacity" (9 July 2019).
3. Fractions of shares will not be issued in respect of the total number of BOQ ordinary shares to be issued in respect of a holder's aggregate holding of Tier 2 Subordinated Instruments.

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Event, the Subordinated Notes will be Written-off, and all corresponding rights and claims of Holders under the Conditions (including to payments of interest, the repayment of the Outstanding Principal Amount and upon Conversion, the receipt of Ordinary Shares) will be immediately and irrevocably written-off and terminated, with effect on and from the Non-Viability Trigger Event Date in accordance with the Conditions, and investors will lose all or some of their investment and will not receive any compensation.

1. Rights and liabilities attaching to the ordinary shares in the capital of BOQ

BOQ was registered on 2 September 1887 as a public company limited by shares under the Act. BOQ's constitution was most recently amended at the general meeting held on 8 December 2020 ("Constitution", as amended from time to time). The ordinary shares in the capital of BOQ are admitted to trading on ASX. The rights attaching to the ordinary shares in the capital of BOQ are set out in the Act and the Constitution.

In addition, the rights and liabilities attaching to the ordinary shares in the capital of BOQ are described on page 164 of the 2021 BOQ Annual Report4. The Annual Report was released to ASX on 13 October 2021 and may be viewed at www.asx.com.au, and is also available on the BOQ website at http://www.boq.com.au/shareholder.htm.

1. Additional information

Information about the Subordinated Notes is contained in the Conditions and the Pricing Supplement.

BOQ is a disclosing entity for the purposes of the Act and, as a result, is subject to regular reporting and disclosure obligations under the Act and the ASX Listing Rules. In addition, BOQ must notify ASX immediately (subject to certain exceptions) if it becomes aware of information about BOQ that a reasonable person would expect to have a material effect on the price or value of its listed securities, including ordinary shares in the capital of BOQ.

Copies of documents lodged with the Australian Securities and Investments Commission ("ASIC") can be obtained from, or inspected at, an ASIC office and BOQ's ASX announcements may be viewed on www.asx.com.au.

Any person has the right to obtain copies of:

• BOQ's half-yearly and annual financial reports; and
• any continuous disclosure notices given by BOQ after the lodgement of the BOQ's 2021 Annual Report, but before the date of this notice,

from https://www.boq.com.au/Shareholder-centre.

4 If, in accordance with the Conditions, BOQ is replaced by an Approved Successor as debtor of the Subordinated Notes and the issuer of ordinary shares, then on Conversion Holders will be issued with fully paid ordinary shares in the capital of the Approved Successor.

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ANNEX A

Terms and Conditions of the Subordinated Notes

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