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Barclays provides kick-out choice

The Barclays defined returns plan annual kick out February 2010 edition is a six-year FTSE-100 linked structured product with two payment options. Both the AKO 100 option and AKO 90 option return the equivalent of 7.75 per cent a year and have early maturity features.

The early maturity feature can be triggered from year two for the AKO 100 option and from year three for the AKO 90 option. Both options also return investors’ capital in full if early maturity is not triggered, provided the index does not fall by more than 50 per cent by the final day of the term. If this safety net is breached, investors will lose 1 per cent for each 1 per cent fall in the index.

Investors in the AKO 100 option will receive 15.5 per cent growth at the end of year two, provided the index is at or above its initial value. If the index is lower, the product will continue until the end of year three, when 23.25 per cent growth will be payable on the same basis. The potential returns for the following years are 31 per cent, 38.75 per cent or 46.5 per cent respectively.

Investors in the AKO 90 option will receive 23.25 growth at the end of year three, provided the index is at least 90 per cent of its initial value. If the index is lower, the product will roll over to the next year, and so on throughout the term, paying the same level of returns as the AKA 100 option.

IFA website Structured Product Review says this plan is an attractive proposition due to the fixed returns on offer without any need for growth in the index, and even if the index falls by up to 10 per cent where the AKO 90 option is chosen. The firm also says it has an appealing capital protection barrier.

However, the return of capital is not guaranteed and the uncertainty as to when the product will mature not suit all investors.

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