The Toronto-Dominion Bank (TD) has offered Callable Contingent Interest Barrier Notes linked to the least performing of the Nasdaq-100 Index®, the Russell 2000®Index and the S&P 500®Index, with a maturity date of June 9, 2031. The Notes will pay a Contingent Interest Payment at a rate of approximately 10.75% per annum if the Closing Value of each Reference Asset is greater than or equal to its Contingent Interest Barrier Value (75.00% of its Initial Value) on the related Contingent Interest Observation Date. If the Closing Value of any Reference Asset is less than its Contingent Interest Barrier Value, no Contingent Interest Payment will be paid.
Key Features and Risks:
- Callable Feature: TD may call the Notes in whole on any Call Payment Date (monthly, commencing on the third Contingent Interest Payment Date) upon at least three Business Days’ prior written notice, regardless of the Closing Values of the Reference Assets. If called, investors will receive the Principal Amount plus any Contingent Interest Payment otherwise due.
- Maturity Payment: If TD does not call the Notes, the payment at maturity will depend on the Final Value of each Reference Asset relative to its Barrier Value (60.00% of its Initial Value). If the Final Value of any Reference Asset is less than its Barrier Value, investors will suffer a percentage loss on their initial investment equal to the percentage decline of the Least Performing Reference Asset.
- Contingent Interest Payment: The Notes do not guarantee the payment of any Contingent Interest Payments or the return of the Principal Amount. Investors are exposed to the market risk of each Reference Asset on each Contingent Interest Observation Date.
- Reference Assets: The Notes are linked to the Nasdaq-100 Index®, the Russell 2000®Index and the S&P 500®Index, which reflect price return, not total return. Investors are exposed to the market risks associated with each Reference Asset, including stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments, and general market factors.
- Liquidity Risk: The Notes are unsecured and not insured or guaranteed by any governmental agency. There may not be an active trading market for the Notes, and secondary market prices may be substantially less than the public offering price.
- Credit Risk: Investors are subject to TD’s credit risk, and any decrease in TD’s credit ratings or increase in the credit spreads charged by the market will likely adversely affect the market value of the Notes.
- Taxation: The U.S. tax treatment of the Notes is uncertain, and the Notes may be treated as prepaid derivative contracts with respect to the Reference Assets. Canadian federal income tax consequences for non-resident holders are also uncertain.
Potential Returns:
- The potential positive return on the Notes is limited to any Contingent Interest Payments paid.
- The return may be less than the return on a conventional debt security of comparable maturity.
- Investors may lose up to their entire investment if the Final Value of any Reference Asset is less than its Barrier Value.
Conclusion:
The Callable Contingent Interest Barrier Notes offer a potentially high return but come with significant risks, including market risk, credit risk, liquidity risk, and uncertainty in taxation. Investors should carefully consider these risks and consult their investment, legal, tax, and accounting advisors before investing.
