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Sprout AI Inc. — Capital/Financing Update 2021
Dec 1, 2021
48023_rns_2021-11-30_e0d12972-4acd-4243-b567-2d60db7e6ac8.pdf
Capital/Financing Update
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The National Bank of Canada (the “Bank”) short form base shelf prospectus dated July 9, 2020, as amended or supplemented, including by the Amendment No. 1 dated July 29, 2021 (the “Prospectus”), the prospectus supplement thereto dated July 10, 2020, as amended or supplemented (the “Prospectus Supplement”) to which it relates and the pricing supplement No. ACCI2673 dated November 30, 2021 (the “Pricing Supplement”) (together, the “Prospectus”), containing important information relating to the Note Securities described in this document, have been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the Prospectus is required to be delivered with this document. This document does not provide full disclosure of all material facts relating to the Note Securities offered. Prospective investors should read the Prospectus, and any amendment thereto, for disclosure of those facts, especially risk factors relating to the Note Securities offered, before making an investment decision. Capitalized terms used herein and not otherwise defined have the meaning ascribed thereto in the Pricing Supplement, the Prospectus Supplement and the Prospectus. The Note Securities constitute Index Linked Note Securities under the Prospectus. NBC Auto Callable Contingent Income Note Securities (no direct currency exposure; price return) Program.
NBC NOTE SECURITIES
NBC Auto Callable Contingent Income Note Securities (Maturity-Monitored Barrier) linked to the Solactive Canada Insurance AR Index, Class F, due on December 18, 2028
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7-year term Callable monthly
Linked to the
(Starting in June 2022)
Solactive Canada
Insurance AR Index
Potential Coupon Maturity-Monitored
Payments: Barrier:
$5.52 p.a. -40.00%
Paid monthly
ISSUANCE DATE:
December 1, 2021 to December 10, 2021 December 16, 2021
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OFFER PERIOD:
December 1, 2021 to December 10, 2021
INVESTMENT HIGHLIGHTS:
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Reference Portfolio:
Reference Asset ticker Reference Asset Reference Asset name Price Source Closing Level Reference Asset type from Bloomberg Weight Solactive Canada Insurance AR Index SOLCINAR Solactive AG Closing level Index 100% Reference Index: The Reference Asset is the Solactive Canada Insurance AR Index, which aims to track the gross total return performance of the Solactive Canada Insurance Index TR, calculated in CAD, reduced by a synthetic dividend of 120 index points per annum calculated daily in arrears. Barrier: -40.00% Coupon Payment Threshold: -40.00% Coupon Payment Frequency: Monthly, as set forth in Schedule A Call Frequency: Monthly, starting in June 2022, as set forth in Schedule A Call Threshold: 5.00% Participation Factor: 0.00% Currency: Canadian dollars Early Trading Charge: No early trading charge Daily secondary market available under normal market conditions
As of November 22, 2021, the dividends and/or distributions paid on account of all of the issuers or constituents of the TR Index represented an annual indicative yield of approximately 4.07%, representing an aggregate yield of approximately 28.53% over the term of the Note Securities, assuming that the yield remains constant and the dividends and/or distributions are not reinvested. An investment in the Note Securities does not represent a direct or indirect investment in any of the constituent securities that comprise the TR Index. Holders have no right or entitlement to the dividends or distributions paid on such securities.
The performance of the Reference Index will vary higher or lower from the performance of the TR Index over the term of the Note Securities depending on whether the impact of the dividends and other distributions reinvested in the TR Index is greater or less than the impact the Adjusted Return Factor has on the Closing Level over the term of the Note Securities. The Closing Level of the Reference Index on November 22, 2021 was 2,960.99. The Adjusted Return Factor divided by the Closing Level of the Reference Index was therefore equal to 4.05% on November 22, 2021. Over the term of the Note Securities, the sum of the Adjusted Return Factor of 120 points per annum will be approximately 841.20 index points, representing 28.41% of the Closing Level of the Reference Index on November 22, 2021.
- → Should you have any questions, do not hesitate to contact your advisor.
FUNDSERV CODE: NBC22651
Dated November 30, 2021
2
Sample return calculations
The following are hypothetical examples included for illustration purposes only. The amounts and all other variables used are hypothetical and are not forecasts or projections. No assurance can be given that the results shown in these examples will be achieved.
Example 1
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Cash Flow Summary
Sum of Coupon Payments $2.76 (6 Coupon Payments)
Maturity Redemption Payment $50.00
$52.76 (Annual compounded return of
Total Payments
-8.72%)
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Example 2
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Cash Flow Summary
Sum of Coupon Payments $5.98 (13 Coupon Payments)
Maturity Redemption Payment $100.00
$105.98 (Annual compounded return of
Total Payments
0.83%)
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Example 3
| Cash Flow Summary | Cash Flow Summary |
|---|---|
| Sum of Coupon Payments | $5.52 (12 Coupon Payments) |
| Maturity Redemption Payment | $100.00 |
| Total Payments | $105.52 (Annual compounded return of 0.77%) |
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Example 4
| Cash Flow Summary | Cash Flow Summary |
|---|---|
| Sum of Coupon Payments | $5.52 (12 Coupon Payments) |
| Maturity Redemption Payment | $100.00 |
| Total Payments | $105.52 (Annual compounded return of 5.52%) |
Summary of the Offering
| Issuer: | National Bank of Canada |
|---|---|
| Issuer Credit | Long-Term Non Bail-inable Senior Debt rated DBRS: AA (low) / S&P: A / Moody’s: Aa3 / Fitch: AA- |
| Rating: | The Note Securities have not been rated by any rating agencies. |
| Principal Amount: | $100 |
| Minimum Subscription: |
$1,000 (10 Note Securities) |
| Auto Callable | |
| Contingent Income | Maturity-Monitored Barrier |
| Type: | |
| Currency: | Canadian dollars |
| Issuance Date: | December 16, 2021 |
| Final Valuation Date: |
December 11, 2028 |
| Maturity Date: | December 18, 2028 |
| Maturity | The Maturity Redemption Payment per Note Security will be as follows: |
| Redemption Payment: |
(i) if the Reference Portfolio Return is equal to or higher than the Call Threshold on a Call Valuation Date, the Note Securities will be automatically called on the applicable Call Date and the Maturity Redemption Payment will be equal to $100 x [1 + Variable Return]; |
| or | |
| (ii) if the Note Securities are not automatically called and the Reference Portfolio Return is positive on the Final Valuation Date, the |
|
| Maturity Redemption Payment will be equal to $100 x [1 + Variable Return]; or | |
| (iii) if the Note Securities are not automatically called and the Reference Portfolio Return is nil or negative but equal to or higher than the |
|
| Barrier on the Final Valuation Date, the Maturity Redemption Payment will be equal to $100; or | |
| (iv) if the Note Securities are not automatically called and the Reference Portfolio Return is negative and lower than the Barrier on the |
|
| Final Valuation Date, the Maturity Redemption Payment will be equal to $100 x [1 + Reference Portfolio Return]. |
Except for the Coupon Payments during the term of the Note Securities, investors should understand from the foregoing that they will be entitled to a single payment under the Note Securities on either the Maturity Date or a Call Date. If the Note Securities are automatically called the investment in the Note Securities will terminate as of the applicable Call Date and as such, Holders will receive the Maturity Redemption Payment applicable to such Call Date and not the Maturity Redemption Payment that they would have otherwise been entitled to on a subsequent Call Date or on the Maturity Date if the Note Securities had not been called.
Notwithstanding the foregoing, the Maturity Redemption Payment will be subject to a minimum of 1% of the Principal Amount.
| Variable Return: | A percentage calculated as follows: | A percentage calculated as follows: |
|---|---|---|
| (i) | where the Reference Portfolio Return on a given Call Valuation Date or on the Final Valuation Date is less than or equal to the Variable | |
| Return Threshold, the Variable Return will be equal to 0%; or | ||
| (ii) | where the Reference Portfolio Return on a given Call Valuation Date or on the Final Valuation Date is greater than the Variable Return | |
| Threshold, the Variable Return will be equal to the product of (i) the Participation Factor and (ii) the amount by which the Reference | ||
| Portfolio Return exceeds the Variable Return Threshold. | ||
| Participation Factor: |
0.00% | |
| Barrier: | -40.00% |
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| Variable Return Threshold: |
0.00% |
|---|---|
| Reference | On any day, the weighted average return of the Reference Assets calculated as the sum of the Weighted Reference Asset Return of each of the |
| Portfolio Return: | Reference Assets comprising the Reference Portfolio. |
| Weighted Reference Asset Return: |
For each Reference Asset contained in the Reference Portfolio and on any day, the product of (i) the Reference Asset Return and (ii) the Reference Asset Weight. |
| Reference Asset | For each Reference Asset contained in the Reference Portfolio and on any day, a number, expressed as a percentage, calculated as follows: |
| Return: | |
| (Closing Level / Initial Level) – 1 | |
| Initial Level: | The Closing Level on the Issuance Date. |
| Final Level: | The Closing Level on the Call Valuation Date and the Final Valuation Date. |
| Potential Coupon | Provided that the Reference Portfolio Return is equal to or higher than the Coupon Payment Threshold on the applicable Coupon Payment Valuation |
| Payments: | Date, Holders will be entitled to receive Coupon Payments of $0.46 (equivalent to 0.46% of the Principal Amount of each Note Security) on each |
| Coupon Payment Date, as set forth in the Pricing Supplement. | |
| Dealers: | National Bank Financial Inc. (“NBF”) and Desjardins Securities Inc. (the “Dealers”). Desjardins Securities Inc. will act as Independent Dealer. The |
| Dealers will act as agents in connection with the offering and sale of the Note Securities. | |
| Listing and | The Note Securities will not be listed on any securities exchange or quotation system. NBF intends to maintain until the Final Valuation Date (or |
| Secondary Market: | until a Call Valuation Date, if the Note Securities are automatically called (i.e. redeemed) prior to the Maturity Date), under normal market |
| conditions, a daily secondary market for the Note Securities. If the price or the level of a Reference Asset is not published or, in an applicable | |
| case, if trading in a Reference Asset is disrupted or suspended, or if any other Market Disruption Event occurs, NBF will generally deem that normal | |
| market conditions do not exist. NBF may, in its sole discretion, stop maintaining a market for the Note Securities at any time without any prior | |
| notice to Holders. There can be no assurance that a secondary market will develop or, if one develops, that it will be liquid. | |
| In addition, any sale of Note Securities facilitated by NBF may be subject to an early trading charge, deductible from the sale proceeds of the | |
| Note Securities. Holders who have purchased Note Securities using the Fundserv network will be limited to the Fundserv network to sell Note | |
| Securities. Holders will thereby need to initiate an irrevocable request to sell the Note Securities to NBF. Provided the order is received before | |
| 1:00 p.m. (Montreal time), or such other time as may be established by NBF (the “Sale Deadline Time”) on any Business Day, the request will be | |
| treated on the same day. Any request received after such time or on a day that is not a Business Day will be deemed to be a request sent and | |
| received before the Sale Deadline Time on the following Business Day. | |
| Early Trading Charge: |
No early trading charge. |
| Eligibility for Investment: |
Eligible for RRSPs, RRIFs, RESPs, RDSPs, DPSPs and TFSAs. See “Eligibility for Investment” in the Prospectus. |
5
Suitability for Investment
The Note Securities are not suitable for all investors. In determining whether the Note Securities are a suitable investment for you please consider that:
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the Note Securities provide no guaranteed Coupon Payments and if the Reference Portfolio Return is lower than the Coupon Payment Threshold on a Coupon Payment Valuation Date, you will receive no Coupon Payment on the related Coupon Payment Date, and you will receive no Coupon Payments over the term of the Note Securities if this occurs on all Coupon Payment Valuation Dates;
-
the Note Securities provide no protection for your original principal investment and if (i) the Reference Portfolio Return is lower than the Call Threshold on every Call Valuation Date and is lower than the Barrier on the Final Valuation Date, and (ii) the sum of the resulting Maturity Redemption Payment and the aggregate Coupon Payments paid during the term of the Note Securities is less than the Principal Amount, you will receive an amount which is less than your original principal investment over the term of the Note Securities;
-
in a scenario where the Reference Portfolio Return is equal to or higher than the Call Threshold on a Call Valuation Date or positive on the Final Valuation Date, there will be no Variable Return paid if the Reference Portfolio Return on such date is not above the Variable Return Threshold;
-
any positive Reference Portfolio Return in excess of the Variable Return Threshold on a Call Valuation Date or on the Final Valuation Date will be multiplied by a Participation Factor which will result in a Holder receiving less than 100% of such excess positive Reference Portfolio Return, if the Participation Factor is less than 100%;
-
your Note Securities will be redeemed automatically prior to the Maturity Date if on any Call Valuation Date the Reference Portfolio Return is equal to or higher than the Call Threshold;
-
your investment strategy should be consistent with the investment features of the Note Securities;
-
your investment time horizon should correspond with the term of the Note Securities; and
-
your investment will be subject to the risk factors summarized in the section "Risk Factors" in the Pricing Supplement, the Prospectus Supplement and the Prospectus.
Risk Factors
The Note Securities differ from conventional debt and fixed income investments; repayment of the entire Principal Amount is not guaranteed. The Note Securities entail downside risk and are not designed to be alternatives to conventional debt or fixed income investments or money market instruments.
Investing in the Note Securities involves risks that are described under “Risk Factors” in the Prospectus Supplement and the Prospectus, including, without limitation, the section therein entitled “Certain Risk Factors related to the Index Linked Note Securities”. Purchasers are urged to read the information about these risks, together with the other information in the Pricing Supplement, the Prospectus Supplement and the Prospectus, before investing in the Note Securities. Holders who are not prepared to accept the risks described in the Prospectus Supplement and the Prospectus should not invest in the Note Securities.
Use of the Reference Asset
The Reference Index is the intellectual property (including any registered trademarks) of Solactive AG, which is used under license. The Note Securities are not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regards to the results of using the Reference Index and/or Reference Index trade mark or the Reference Index Price at any time or in any other respect.
NOTICE
The Note Securities will not constitute deposits that are insured under the Canada Deposit Insurance Corporation Act or any other deposit insurance regime designed to ensure the payment of all or a portion of a deposit upon insolvency of the deposit taking institution.
Amounts paid to Holders will depend on the performance of the Reference Portfolio. None of the Bank, its affiliates, the Dealers, or any other person or entity guarantees that Holders will receive an amount equal to their original investment in the Note Securities or guarantees that any return will be paid on the Note Securities. Since the Note Securities are not protected and the Principal Amount will be at risk (other than the minimum Maturity Redemption Payment of 1% of the Principal Amount), it is possible that Holders could lose some or substantially all of their original investment in the Note Securities.
For the various risks associated with such an investment, please see the “Risk Factors” section of this document and the “Risk Factors” section in the Pricing Supplement, the Prospectus Supplement and the Prospectus. Any prospective investor must be able to bear the risks involved and must meet the suitability requirements of the Note Securities. Please see the section “Suitability of the Note Securities for Investors” in the Pricing Supplement and the Prospectus Supplement.
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SCHEDULE A
Call Dates, Coupon Payment Dates and Valuation Dates
The following dates are subject to postponement in certain circumstances as described in the Prospectus Supplement and the Prospectus.
| Coupon Payment Valuation Dates/ | Coupon Payment Dates/ | Coupon Payment Valuation Dates/ | Coupon Payment Dates/ |
|
| Call Valuation Dates | Call Dates | Call Valuation Dates | Call Dates | |
| January 10, 2022 | January 17, 2022* | July 9, 2025 | July 16, 2025 | |
| February 9, 2022 | February 16, 2022* | August 11, 2025 | August 18, 2025 | |
| March 9, 2022 | March 16, 2022* | September 9, 2025 | September 16, 2025 | |
| April 8, 2022 | April 18, 2022* | October 8, 2025 | October 16, 2025 | |
| May 9, 2022 | May 16, 2022* | November 7, 2025 | November 17, 2025 | |
| June 9, 2022 | June 16, 2022 | December 9, 2025 | December 16, 2025 | |
| July 11, 2022 | July 18, 2022 | January 9, 2026 | January 16, 2026 | |
| August 9, 2022 | August 16, 2022 | February 9, 2026 | February 17, 2026 | |
| September 9, 2022 | September 16, 2022 | March 9, 2026 | March 16, 2026 | |
| October 7, 2022 | October 17, 2022 | April 9, 2026 | April 16, 2026 | |
| November 8, 2022 | November 16, 2022 | May 11, 2026 | May 19, 2026 | |
| December 9, 2022 | December 16, 2022 | June 9, 2026 | June 16, 2026 | |
| January 9, 2023 | January 16, 2023 | July 9, 2026 | July 16, 2026 | |
| February 9, 2023 | February 16, 2023 | August 10, 2026 | August 17, 2026 | |
| March 9, 2023 | March 16, 2023 | September 9, 2026 | September 16, 2026 | |
| April 10, 2023 | April 17, 2023 | October 8, 2026 | October 16, 2026 | |
| May 9, 2023 | May 16, 2023 | November 6, 2026 | November 16, 2026 | |
| June 9, 2023 | June 16, 2023 | December 9, 2026 | December 16, 2026 | |
| July 10, 2023 | July 17, 2023 | January 11, 2027 | January 18, 2027 | |
| August 9, 2023 | August 16, 2023 | February 8, 2027 | February 16, 2027 | |
| September 11, 2023 | September 18, 2023 | March 9, 2027 | March 16, 2027 | |
| October 6, 2023 | October 16, 2023 | April 9, 2027 | April 16, 2027 | |
| November 8, 2023 | November 16, 2023 | May 10, 2027 | May 17, 2027 | |
| December 11, 2023 | December 18, 2023 | June 9, 2027 | June 16, 2027 | |
| January 9, 2024 | January 16, 2024 | July 9, 2027 | July 16, 2027 | |
| February 9, 2024 | February 16, 2024 | August 9, 2027 | August 16, 2027 | |
| March 11, 2024 | March 18, 2024 | September 9, 2027 | September 16, 2027 | |
| April 9, 2024 | April 16, 2024 | October 8, 2027 | October 18, 2027 | |
| May 9, 2024 | May 16, 2024 | November 8, 2027 | November 16, 2027 | |
| June 10, 2024 | June 17, 2024 | December 9, 2027 | December 16, 2027 | |
| July 9, 2024 | July 16, 2024 | January 10, 2028 | January 17, 2028 | |
| August 9, 2024 | August 16, 2024 | February 9, 2028 | February 16, 2028 | |
| September 9, 2024 | September 16, 2024 | March 9, 2028 | March 16, 2028 | |
| October 8, 2024 | October 16, 2024 | April 7, 2028 | April 17, 2028 | |
| November 8, 2024 | November 18, 2024 | May 9, 2028 | May 16, 2028 | |
| December 9, 2024 | December 16, 2024 | June 9, 2028 | June 16, 2028 | |
| January 9, 2025 | January 16, 2025 | July 10, 2028 | July 17, 2028 | |
| February 10, 2025 | February 18, 2025 | August 9, 2028 | August 16, 2028 | |
| March 10, 2025 | March 17, 2025 | September 11, 2028 | September 18, 2028 | |
| April 9, 2025 | April 16, 2025 | October 6, 2028 | October 16, 2028 | |
| May 9, 2025 | May 16, 2025 | November 8, 2028 | November 16, 2028 | |
| June 9, 2025 | June 16, 2025 | December 11, 2028 | Maturity Date* |
* The Note Securities are not callable on such dates.