The Toronto-Dominion Bank (TD) is offering Callable Contingent Interest Barrier Notes linked to the least performing of the Dow Jones Industrial Average®, the Nasdaq-100 Index®, and the Russell 2000® Index. The Notes will pay a Contingent Interest Rate of approximately 10.00% per annum only if, on the related Contingent Interest Observation Date, the Closing Value of each Reference Asset is greater than or equal to its Contingent Interest Barrier Value (70.00% of its Initial Value). If the Closing Value of any Reference Asset is less than its Contingent Interest Barrier Value on a Contingent Interest Observation Date, no Contingent Interest Payment will accrue or be payable on the related Contingent Interest Payment Date.
Key Features and Risks:
- Callable Feature: TD may call the Notes in whole on any Call Payment Date (monthly, commencing on the sixth 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 elect to call the Notes prior to maturity, the payment at maturity will depend on the Final Value of each Reference Asset relative to its Barrier Value (50.00% of its Initial Value):
- If the Final Value of each Reference Asset is greater than or equal to its Barrier Value: the Principal Amount of $1,000.
- If the Final Value of any Reference Asset is less than its Barrier Value: the sum of (1) $1,000 plus (2) the product of (i) $1,000 times (ii) the Least Performing Percentage Change.
- Risks:
- Loss of Investment: The Notes do not guarantee the return of the Principal Amount, and investors may lose up to their entire investment if the Final Value of any Reference Asset is less than its Barrier Value.
- No Contingent Interest Payment: Investors will not receive a Contingent Interest Payment if the Closing Value of any Reference Asset on the related Contingent Interest Observation Date is less than its Contingent Interest Barrier Value.
- Limited Positive Return: The potential positive return on the Notes is limited to any Contingent Interest Payments paid, regardless of any appreciation of any Reference Asset.
- Reinvestment Risk: TD may elect to call the Notes prior to maturity, and there is no guarantee that investors would be able to reinvest the proceeds at a comparable return for a similar level of risk.
- Market Risk: Investors are exposed to the market risk of each Reference Asset on each Contingent Interest Observation Date (including the Final Valuation Date).
- Small-Capitalization Company Risk: The Notes are subject to risks associated with small-capitalization companies because the Russell 2000® Index includes small-capitalization companies, which often have greater stock price volatility and lower liquidity.
- Estimated Value and Liquidity Risk: The estimated value of the Notes at the time the terms are set is expected to be between $940.00 and $975.00 per Note, and is based on TD’s internal funding rate and pricing models. There may be little or no secondary market for the Notes, and any secondary market prices will likely be 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 Risk: Significant aspects of the tax treatment of the Notes are uncertain, particularly for U.S. holders.
Hypothetical Returns:
- Example 1: TD elects to call the Notes on the first potential Call Payment Date, resulting in a total return of 4.1665% on the Notes.
- Example 2: TD does not elect to call the Notes prior to maturity, the Final Value of each Reference Asset is greater than or equal to its Barrier Value, and the Final Value of any Reference Asset is less than its Contingent Interest Barrier Value, resulting in a total return of 0.8333% on the Notes.
- Example 3: TD does not elect to call the Notes prior to maturity, the Final Value of at least one Reference Asset is less than its Contingent Interest Barrier Value and Barrier Value, resulting in a loss of 60.00% per Note.
Conclusion:
Investors should carefully consider the risks associated with the Notes, particularly the potential for loss of investment, the contingent nature of interest payments, and the complexity of the structure. The Notes are not insured or guaranteed, and investors are exposed to the market risk of each Reference Asset and TD’s credit risk. Additionally, the tax treatment of the Notes is uncertain, particularly for U.S. holders.
