Friends Provident International has established an offshore capital-protected bond that could mature in year three of its full investment term of five years and six months.
The capital plus account, which is available to investors with at least the £25,000 minimum, is linked to the FTSE 100 index through the capital plus fund. If, after three years, the index has risen by at least 30 per cent, the product matures early. In this case investors will get 30 per cent growth plus a full capital return. Otherwise, the product will run full term and will pay out 100 per cent of the growth in the index plus a full capital return regardless of index performance.
The returns for early maturity are calculated by comparing the closing level of the index on December 1, 2004 with the closing level on December 1, 2007. If the index has risen by more than 30 per cent, investors will still get 30 per cent growth. The returns of full term will be based upon the level of the index on December 1, 2004 compared with an average produced over the final year of the investment term.
Britannia International's optimum growth bond is a similar FTSE 100-linked product that has an early maturity feature and the same investment term as Friends Provident International's product.
However, the early maturity feature takes place after three years and six months, so that if the index has grown by at least 29 per cent at that point, the product will terminate and investors will get 29 per cent growth plus their original capital. Otherwise the investment will continue and will pay out 130 per cent of any rise in the index.
Comparing the two products in terms of early maturity, the fixed return offered by Friends Provident International after three years is slightly higher than the return Britannia International offers after three and a half years. However, Britannia International makes up for this by offering a 30 per cent higher return than Friends Provident if the investment runs full term.