This offshore product has a term of five years and six months and will return investors capital in full regardless of the performance of the index. If the index rises by 20 per cent, 30 per cent or 40 per cent at any time during the first four years and six months, 20 per cent, 30 per cent or 40 per cent growth respectively will be locked in, so it will become the minimum level of return an investor will get in addition to their original capital.
At the end of the investment term investors will receive the greater of 100 per cent of the growth in the index over the full investment term or the highest locked-in level of growth.
To calculate the returns the closing level of the FTSE 100 index is recorded on July 7, 2005 and compared with a monthly average produced over the final 12 months of the term.
There are currently no similar products in the market so this product may appeal to offshore investors looking for an innovative structured product. Locking in rises in the index is a good feature as they will not lose out if the index rises to the specified levels but subsequently dips.
However, the lock-in feature does not apply during the full investment period it will stop when the 12 month averaging period begins.Although any rises during this period will not be locked in, they will count towards the participation rate in the final returns due to the averaging, which will also lessen the imp[act of market falls during the final year of investment.