Britannia International has established the 11th edition of its guaranteed capital equity bond.
This issue of the bond offers growth potential of 35 per cent gross over five years, which is 3.25 per cent lower than the previous issue.
The bond returns investors' original capital whatever happens to the FTSE 100 index during the term. Investments will accrue a fixed rate of interest at 6 per cent gross until the start of the term on January 14, 2003.
To calculate the final returns, the closing level of the index is taken at the start of the term and is measured against the average level of the index during the last 12 months of the term. If the index has risen or has remained at the same level, investors get their original capital plus 35 per cent gross. If the index has fallen, investors will get only their original capital back.
This bond is lower risk compared with the current crop of offshore guaranteed equity bonds that have a five-year term, because it safeguards the original capital whatever happens to the index.
Other products such as Prudential's growth and income plan return the original capital only where the FTSE 100 index remains at a certain level. However, the risk to capital is offset by two income options and higher growth potential of 42 per cent, which is 7 per cent higher than the Britannia International bond.
When choosing between these bonds, investors will need to decide whether it is more important for them to protect their capital at all costs or to receive a high level of income or growth.