TD Bank
The purchaser of a Cdn.$100 note is entitled to receive semi-annual partial repayments of 2.25% thereof (ROC distributions), or approximately 13.5% over the term of approximately three years. On maturity, the Note is redeemed for an amount determined as follows:
(a) if the Index Return (on the S&P/TSX 60) is in excess of 4.5%, the redemption amount is equal to the (original) principal amount ($100) plus a 10% participation in that excess;
(b) if the Index Return is equal to or less than 4.5% but better than -30%, the redemption amount is $100; or
(c) if the Index Return is negative and worse than -30%, the redemption amount is based on that negative return (i.e., the redemption amount is less than $70 if the Index Return is worse than -30%) - provided that the amount received on maturity cannot be less than $1.
Canadian taxation
The ROC distributions "should not be included in the Noteholder's income when received but rather, should reduce the Noteholder's adjusted cost base of the Notes." The excess of the redemption amount over the remaining unpaid principal amount (if positive) will be included in income in the year of maturity, and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt."